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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DAN RIVER INC.
(Exact name of registrant as specified in its charter)
GEORGIA 2211 58-1854637
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification Number)
incorporation or organization)
2291 MEMORIAL DRIVE
DANVILLE, VIRGINIA 24541
(804) 799-7000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive officers)
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HARRY L. GOODRICH, ESQ.
DAN RIVER INC.
2291 MEMORIAL DRIVE
DANVILLE, VIRGINIA 24541
(804) 799-7000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
WITH A COPY TO:
JOHN J. KELLEY III LIZANNE THOMAS
KING & SPALDING JONES, DAY, REAVIS & POGUE
191 PEACHTREE STREET 303 PEACHTREE STREET
ATLANTA, GEORGIA 30303-1763 SUITE 3500, SUNTRUST PLAZA
(404) 572-4600 ATLANTA, GEORGIA 30308-3242
(404) 521-3939
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable following the effectiveness of this Registration Statement.
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If any securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(2)
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Common Stock, $0.01 par value.... 4,800,000 $17.38 $83,424,000 $24,611
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(1) This amount is based upon the maximum number of shares anticipated to be
issued pursuant to an Agreement and Plan of Merger dated as of June 28, 1998
between the Registrant and The Bibb Company.
(2) Computed in accordance with Rule 457(f) under the Securities Act of 1933, as
amended, based on the book value as of July 8, 1998 of the securities to be
received by the Registrant in exchange for the securities registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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DAN RIVER INC.
2291 MEMORIAL DRIVE
DANVILLE, VIRGINIA 24541
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July , 1998
Dear Shareholder:
You are invited to attend an important Special Meeting of the shareholders
of Dan River Inc. ("Dan River") to be held on , ,
1998, at 10:00 a.m., local time at the offices of King & Spalding, 50th Floor,
191 Peachtree Street, Atlanta, Georgia.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve the Agreement and Plan of Merger dated as of June 28, 1998
between Dan River and The Bibb Company ("Bibb"), which provides for the
acquisition of Bibb by Dan River (the "Merger Agreement"), and the issuance of
shares of Class A Common Stock, par value $.01, of Dan River (the "Dan River
Class A Common Stock") in connection therewith. Pursuant to the Merger
Agreement, Bibb would be merged with and into Dan River (the "Merger"). Dan
River would be the surviving corporation in the Merger. If the Merger is
consummated, each outstanding share of Common Stock, par value $.01, of Bibb
(the "Bibb Common Stock") (other than treasury shares, shares held by Dan River
and dissenting shares) will be converted into the right to receive, at the
election of the holder thereof, 0.84615 shares of Dan River Class A Common Stock
or cash in an amount equal to $16.50 (the "Merger Consideration"). Elections may
be prorated in order that the total number of stock election shares and cash
election shares will each equal 50% of the total outstanding shares of Bibb
Common Stock immediately prior to the effective time of the Merger. The
accompanying Joint Proxy Statement/Prospectus contains additional information
regarding the proposed acquisition of Bibb by Dan River.
The Merger Agreement and the Merger have been adopted and approved by the
Boards of Directors of Bibb and Dan River. The Merger Agreement and the issuance
of shares of Dan River Class A Common Stock in connection therewith are subject
to the approval by the holders of two thirds of the voting power of the
outstanding Dan River Class A Common Stock and Class B Common Stock, par value
$.01, of Dan River (the "Dan River Class B Common Stock" and together with the
Dan River Class A Common Stock, the "Dan River Common Stock") entitled to vote
at the Special Meeting voting together. In addition, the Merger Agreement is
subject to the approval of a majority of the total votes cast by holders of
outstanding shares of Bibb Common Stock entitled to vote thereon. The Dan River
Board of Directors has received a written opinion dated June 22, 1998 of Bowles
Hollowell Conner & Co., to the effect that, as of the date of such opinion and
based upon and subject to certain matters stated therein, the Merger
Consideration was fair, from a financial point of view, to Dan River. A copy of
such opinion is attached to the Joint Proxy Statement/ Prospectus as Annex B and
should be read carefully in its entirety.
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE PROPOSED MERGER IS IN THE
BEST INTERESTS OF DAN RIVER AND ITS SHAREHOLDERS, HAS ADOPTED AND APPROVED THE
MERGER AGREEMENT AND THE ISSUANCE OF SHARES OF DAN RIVER CLASS A COMMON STOCK IN
CONNECTION THEREWITH AND RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE
THE MERGER AGREEMENT AND THE ISSUANCE OF SHARES OF CLASS A COMMON STOCK OF DAN
RIVER IN CONNECTION THEREWITH.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Joint Proxy Statement/Prospectus. Additional
information regarding Bibb and Dan River also is set forth in the Joint Proxy
Statement/Prospectus and incorporated therein by reference to other documents.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING
EITHER IN PERSON OR BY PROXY. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN
THE ENCLOSED POSTAGE PREPAID ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING, YOU
MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY
CARD. YOUR PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
Sincerely,
Joseph L. Lanier, Jr.
Chairman of the Board and
Chief Executive Officer
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DAN RIVER INC.
2291 MEMORIAL DRIVE
DANVILLE, VIRGINIA 24541
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1998
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Notice is hereby given that a Special Meeting of shareholders of Dan River
Inc. ("Dan River") will be held on , , 1998 at 10:00 a.m.,
local time, at the offices of King & Spalding, 50th Floor, 191 Peachtree Street,
Atlanta, Georgia, for the following purposes:
(1) To consider and vote upon a proposal to approve the Agreement and
Plan of Merger dated as of June 28, 1998 between Dan River and The Bibb
Company ("Bibb"), which provides for the acquisition of Bibb, and the
issuance of shares of Dan River Class A Common Stock in connection
therewith. If the Merger Agreement is approved, Bibb would be merged with
and into Dan River (the "Merger"). The terms of the Merger are described in
the accompanying Joint Proxy Statement/Prospectus.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on , 1998
as the record date for the determination of shareholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof. A
list of shareholders entitled to vote at the Special Meeting will be available
at the Special Meeting for examination by any shareholder.
Your attention is directed to the Joint Proxy Statement/Prospectus
submitted with this Notice.
By order of the Board of Directors
Harry L. Goodrich
Secretary
Danville, Virginia
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
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THE BIBB COMPANY
100 GALLERIA PARKWAY, SUITE 1750
ATLANTA, GEORGIA 30339
July , 1998
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Special Meeting") of The Bibb Company ("Bibb") to be held at the offices of
, Atlanta, Georgia at 10:00 a.m., local time, on , 1998.
At the Special Meeting, you will be asked to consider and take action upon
a proposal to approve an Agreement and Plan of Merger dated as of June 28, 1998
(the "Merger Agreement") between Bibb and Dan River Inc. ("Dan River") pursuant
to which, among other things, (a) Bibb will merge with and into Dan River (the
"Merger") and (b) each outstanding share of common stock, $.01 par value per
share, of Bibb (the "Bibb Common Stock") (other than treasury shares, shares
held by Dan River and dissenting shares) will be converted into the right to
receive, at the election of the holder thereof, 0.84615 shares of Dan River
Class A Common Stock or cash in an amount equal to $16.50 (the "Merger
Consideration"). Elections may be prorated in order that the total number of
stock election shares and cash election shares will each equal 50% of the total
outstanding shares of Bibb Common Stock immediately prior to effective time of
the Merger.
The Merger Agreement and the Merger have been adopted and approved by the
Board of Directors of Bibb and Dan River. The Merger Agreement is subject to the
approval of a majority of the total votes cast by holders of outstanding shares
of Common Stock of Bibb entitled to vote thereon. In addition, the Merger
Agreement and the issuance of shares of Dan River Class A Common Stock in
connection therewith are subject to the approval by the holders of two thirds of
the voting power of the outstanding shares of Class A Common Stock and Class B
Common Stock of Dan River (the "Dan River Common Stock") entitled to vote at the
Dan River Special Meeting voting together. Details of the foregoing matter are
set forth in the accompanying Joint Proxy Statement/Prospectus which you are
urged to review carefully. A copy of the Merger Agreement is also attached to
the Joint Proxy Statement/Prospectus as Appendix A. The Board of Directors of
Bibb has received a written opinion of Houlihan Lokey Howard & Zukin Capital to
the effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the Merger Consideration was fair, from a
financial point of view, to the holders of Bibb Common Stock. A copy of such
opinion is attached to the Joint Proxy Statement/Prospectus as Annex C and
should be read carefully in its entirety.
YOUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED AND APPROVED THE MERGER
PROPOSAL BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT AND HAS DETERMINED THAT THE
MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, BIBB AND ITS STOCKHOLDERS.
ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL OF THE MERGER AGREEMENT.
Details of the background and reasons for the proposed Merger appear in and
are explained in the accompanying Joint Proxy Statement/Prospectus. Additional
information regarding Bibb and Dan River also is set forth in the Joint Proxy
Statement/Prospectus and incorporated therein by reference to other documents.
It is important that you vote your shares whether or not you plan to attend
the Special Meeting. To be sure your vote is counted, we urge you to carefully
review the Joint Proxy Statement/Prospectus and to vote your shares as you
choose. PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING
ENVELOPE AS SOON AS POSSIBLE. You may revoke and change your proxy vote at any
time prior to the Special Meeting, and any such signed, dated and submitted
proxy will supersede any earlier proxy submitted by you. If you attend the
Special Meeting and wish to vote in person, the ballot that you submit at the
Special Meeting will supersede your proxy.
Thank you for your cooperation.
Very truly yours,
MICHAEL L. FULBRIGHT
Chairman, President and Chief
Executive Officer
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THE BIBB COMPANY
100 GALLERIA PARKWAY, SUITE 1750
ATLANTA, GEORGIA 30339
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
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Notice is hereby given that a Special Meeting of stockholders of The Bibb
Company ("Bibb") will be held on , , 1998 at 10:00 a.m.,
local time, at the offices of , for the following purposes:
(1) To consider and vote upon a proposal to approve the Agreement and
Plan of Merger dated as of June 28, 1998 between Dan River Inc. ("Dan
River") and Bibb (the "Merger Agreement") pursuant to which, among other
things, (a) Bibb will merge with and into Dan River (the "Merger") and (b)
each outstanding share of common stock, $.01 par value per share (the
"Common Stock"), of Bibb will be converted into the right to receive, at
the election of the holder thereof, 0.84615 shares of Dan River Class A
Common Stock or cash in an amount equal to $16.50 (the "Merger
Consideration"), subject to proration; and
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on , 1998
as the record date for the determination of stockholders entitled to receive
notice of and to vote at the Special Meeting and at any adjournment thereof. For
a period of at least ten days prior to the meeting a list of stockholders
entitled to vote at the Special Meeting will be available at the offices of
Bibb, 100 Galleria Parkway, Suite 1750, Atlanta, Georgia 30339, for examination
by any stockholder.
The Board of Directors of Bibb (the "Bibb Board") has approved the merger
proposal by unanimous vote of all directors present and has determined that the
Merger is fair to, and in the best interests of, Bibb and its stockholders.
Accordingly, the Bibb Board recommends that you vote FOR approval of the Merger
Agreement.
Details of the proposed Merger and other important information concerning
Bibb and Dan River are more fully described in the accompanying Joint Proxy
Statement/Prospectus. Whether or not you plan to attend the Special Meeting, you
are urged to study the Joint Proxy Statement/Prospectus carefully and then to
complete, sign and date the enclosed proxy.
By order of the Board of Directors,
Charles R. Tutterow
Vice President, Chief Financial
Officer and Secretary
Atlanta, Georgia
, 1998
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
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JOINT PROXY STATEMENT
DAN RIVER INC. THE BIBB COMPANY
SPECIAL MEETING OF SPECIAL MEETING OF
SHAREHOLDERS STOCKHOLDERS
TO BE HELD ON AUGUST , TO BE HELD ON AUGUST ,
1998 1998
DAN RIVER INC.
PROSPECTUS
____________ SHARES OF CLASS A COMMON STOCK
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This Joint Proxy Statement/Prospectus is being furnished to shareholders of
Dan River Inc. ("Dan River") and to stockholders of The Bibb Company ("Bibb") in
connection with the solicitation of proxies on behalf of the Board of Directors
of Dan River for use at the special meeting of shareholders of Dan River (the
"Dan River Special Meeting") and by the Bibb Board of Directors for use at the
special meeting of stockholders of Bibb (the "Bibb Special Meeting" and together
with the Dan River Special Meeting, the "Special Meetings"), each to be held on
August , 1998 and at any adjournments thereof.
At the Dan River Special Meeting, shareholders of Dan River will be asked
to consider and vote upon a proposal to approve the Agreement and Plan of Merger
(the "Merger Agreement") dated as of June 28, 1998, pursuant to which Bibb would
be merged with and into Dan River (the "Merger"), and the issuance of shares of
Class A Common Stock, par value $.01 per share, of Dan River ("Dan River Class A
Common Stock") in connection therewith. At the Bibb Special Meeting,
stockholders of Bibb will be asked to consider and vote on a proposal to approve
the Merger Agreement. The Merger Agreement is attached to this Joint Proxy
Statement/Prospectus as Annex A and is incorporated herein by reference.
If the Merger is consummated, each outstanding share of common stock, par
value $.01 per share, of Bibb (the "Bibb Common Stock") (other than treasury
shares, shares held by Dan River and dissenting shares) will be converted into,
at the election of the holder thereof, cash or shares of Dan River Class A
Common Stock, subject to proration as more fully described herein (the "Merger
Consideration"). This Joint Proxy Statement/Prospectus and the form of proxy for
the Special Meeting will first be sent to shareholders of Dan River and
stockholders of Bibb on or about , 1998.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of Dan
River relating to the issuance of shares of Dan River Class A Common Stock to
stockholders of Bibb pursuant to the terms of the Merger Agreement. Dan River
has filed a Registration Statement on Form S-4 (the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"), with the
Securities and Exchange Commission (the "Commission") covering the shares of Dan
River Class A Common Stock to be issued in connection with the Merger.
THE SHARES OF DAN RIVER CLASS A COMMON STOCK TO BE ISSUED IN THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is , 1998.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
THIS JOINT PROXY STATEMENT/PROSPECTUS AND OTHER STATEMENTS MADE FROM TIME
TO TIME BY DAN RIVER INC. AND THE BIBB COMPANY OR THEIR REPRESENTATIVES CONTAIN
STATEMENTS WHICH MAY CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, IN
U.S.C.A. SECTIONS 77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE
STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF DAN RIVER
INC. AND THE BIBB COMPANY AND MEMBERS OF THEIR RESPECTIVE MANAGEMENT TEAMS, AS
WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED. SUCH FORWARD-LOOKING
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND
UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED
BY SUCH FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO
MANAGEMENT OF DAN RIVER INC. AND THE BIBB COMPANY THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING STATEMENTS INCLUDE,
BUT ARE NOT LIMITED TO, THE RISKS DETAILED HEREIN UNDER THE HEADING "RISK
FACTORS" AND THOSE FACTORS SET FORTH FROM TIME TO TIME IN REPORTS OF DAN RIVER
INC. AND THE BIBB COMPANY FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. DAN
RIVER INC. AND THE BIBB COMPANY UNDERTAKE NO OBLIGATION TO UPDATE OR REVISE
FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF
UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER TIME.
AVAILABLE INFORMATION
Both Dan River and Bibb are subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information filed with
the Commission by Dan River and Bibb can be inspected and copied at the office
of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
or at its Regional Offices located at 7 World Trade Center, Suite 1300, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois, 60661, and copies of such materials can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Copies of documents electronically filed with the
Commission also may be obtained at the Commission's Internet address at
"http://www.sec.gov". Shares of Dan River Class A Common Stock are listed on the
New York Stock Exchange ("NYSE") and copies of documents filed with the
Commission can be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005. Shares of Bibb Common Stock are listed on the
American Stock Exchange ("AMEX") and certain material as to Bibb can be
inspected at the offices of the AMEX, 86 Trinity Place, New York, New York
10006-1881.
Dan River has filed with the Commission the Registration Statement under
the Securities Act. This Joint Proxy Statement/Prospectus does not contain all
of the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. For further information relating to Dan River and the shares of Dan
River Class A Common Stock offered hereby, reference is hereby made to the
Registration Statement, including the exhibits and schedules thereto, which may
be inspected without charge at the office of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of which may be obtained from the
Commission at prescribed rates. Statements contained in this Joint Proxy
Statement/Prospectus as to the contents of any contract or other document
referred to are not necessarily complete and in each instance reference is made
to the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THE OFFER OF
DAN RIVER CLASS A COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY DAN RIVER, BIBB OR ANY OTHER PERSON. THIS JOINT PROXY
STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO PURCHASE DAN RIVER CLASS A COMMON STOCK IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS
NOR ANY DISTRIBUTION OF SUCH DAN RIVER CLASS A COMMON STOCK SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by Dan River
are incorporated by reference into this Joint Proxy Statement/Prospectus:
(i) Dan River's Annual Report on Form 10-K for the fiscal year ended
January 3, 1998 filed on March 24, 1998;
(ii) Dan River's Quarterly Report on Form 10-Q for the quarter ended
April 4, 1998 filed on May 6, 1998;
(iii) Dan River's Current Report on Form 8-K filed on July 7, 1998;
(iv) Dan River's Current Report on Form 8-K/A Amendment No. 1 filed on
April 18, 1997; and
(v) The description of the Dan River Class A Common Stock included in
Dan River's Registration Statement on Form 8-A dated September 26, 1997.
The following documents previously filed with the Commission by Bibb are
incorporated by reference into this Joint Proxy Statement/Prospectus:
(i) Bibb's Annual Report on Form 10-K for the fiscal year ended
January 3, 1998 filed on April 1, 1998;
(ii) Bibb's Quarterly Report on Form 10-Q for the quarter ended April
4, 1998 filed on May 18, 1998;
(iii) Bibb's Current Report on Form 8-K filed on July 6, 1998; and
(iv) The description of the Bibb Common Stock included in Bibb's
Registration Statement on Form 10, filed on October 15, 1997.
In addition, all documents filed by Dan River or Bibb pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Joint Proxy Statement/Prospectus and prior to the date of the Special Meetings
shall be deemed to be incorporated by reference into this Joint Proxy
Statement/Prospectus and to be a part hereof from the date of filing of such
documents.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST, FROM, IN THE CASE OF DAN RIVER, DAN RIVER INC.,
2291 MEMORIAL DRIVE, DANVILLE, VIRGINIA 24541, TELEPHONE NUMBER (804) 799-7122
AND, IN THE CASE OF BIBB, THE BIBB COMPANY, 100 GALLERIA PARKWAY, SUITE 1750,
ATLANTA, GEORGIA 30339, TELEPHONE NUMBER (770) 644-7000. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL MEETINGS, ANY SUCH REQUEST
SHOULD BE MADE BY , 1998.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained in this Joint
Proxy Statement/Prospectus, or in any other subsequently filed document which is
also
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incorporated herein by reference, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part of this Joint Proxy Statement/Prospectus except as so modified or
superseded.
All information contained or incorporated by reference in this Joint Proxy
Statement/Prospectus relating to Dan River has been supplied by Dan River and
all such information relating to Bibb has been supplied by Bibb.
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TABLE OF CONTENTS
PAGE
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Special Note Regarding Forward-Looking Statements........... i
Available Information....................................... i
Incorporation of Certain Documents by Reference............. ii
Summary..................................................... 1
The Parties............................................... 1
Dan River Inc.......................................... 1
The Bibb Company....................................... 1
The Special Meetings...................................... 1
Dan River Special Meeting.............................. 1
The Bibb Special Meeting............................... 2
The Merger................................................ 3
Terms of the Merger Agreement.......................... 3
Effective Time of the Merger and Exchange of
Certificates.......................................... 6
Opinions of Financial Advisors......................... 6
Recommendation of the Dan River Board of Directors..... 6
Recommendation of the Bibb Board of Directors.......... 7
Regulatory Approvals Required.......................... 7
Accounting Treatment................................... 7
Certain Federal Income Tax Consequences................ 7
Appraisal Rights....................................... 7
Interests of Certain Persons in the Merger............. 7
Markets and Market Prices................................. 8
Comparative Per Share Information......................... 9
Selected Historical Financial Data of Dan River........... 10
Selected Historical Financial Data of Bibb................ 12
Summary Unaudited Pro Forma Combined Financial Data of Dan
River.................................................. 14
Pro Forma Capitalization of Dan River..................... 15
Risk Factors................................................ 16
Stock Price Fluctuations.................................. 16
Status of Merger as Tax-Free Reorganization............... 16
Loss of Rights by Bibb Stockholders....................... 16
Termination Payments if Merger Fails to Occur............. 16
Cyclical Nature of Textile Industry....................... 17
Intense Competition....................................... 17
Possible Adverse Effect of Fluctuations in Price and
Availability of Cotton................................. 17
Substantial Capital Requirements.......................... 18
Possible Adverse Effect of Government Policy and Import
Regulations............................................ 18
Substantial Leverage; Ability to Service Debt............. 18
Potential Unforeseen Environmental Liabilities or Costs... 19
The Special Meetings........................................ 20
Dan River Special Meeting................................. 20
The Bibb Special Meeting.................................. 21
The Merger.................................................. 22
Background of the Merger.................................. 22
Terms of the Merger Agreement............................. 25
Effective Time of the Merger and Exchange of
Certificates........................................... 30
Opinion of Dan River's Financial Advisor.................. 30
Recommendation of the Dan River Board of Directors........ 35
Opinion of Bibb's Financial Advisor....................... 35
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PAGE
----
Valuation of Bibb......................................... 36
Valuation of Dan River.................................... 37
Valuation of Dan River Post-Merger........................ 37
Fairness of Consideration................................. 38
Assessment of Bibb's Strategic Alternatives to the
Merger................................................. 38
Recommendation of the Bibb Board of Directors............. 39
Reasons for the Merger.................................... 40
Regulatory Approvals Required............................. 42
Certain Federal Income Tax Consequences................... 42
Resale of Dan River Class A Common Stock.................. 44
Comparison of Rights of Holders of Dan River Class A
Common Stock
and Bibb Common Stock.................................. 44
Appraisal Rights.......................................... 50
Interests of Certain Persons in the Merger................ 53
Unaudited Pro Forma Combined Financial Information of Dan
River..................................................... 55
Unaudited Pro Forma Combined Balance Sheet as of April 4,
1998...................................................... 56
Notes to Unaudited Pro Forma Combined Balance Sheet......... 57
Unaudited Pro Forma Combined Statement of Income
(Pre-Merger)
for the year ended January 3, 1998........................ 59
Unaudited Pro Forma Combined Statement of Income (Merger)
for the year ended January 3, 1998........................ 60
Unaudited Pro Forma Combined Statement of Income
for the three months ended April 4, 1998.................. 61
Experts..................................................... 62
Legal Matters............................................... 62
Shareholder Proposals....................................... 62
Annex A: Agreement and Plan of Merger
Annex B: Fairness Opinion of Bowles, Hollowell, Conner & Co.
Annex C: Fairness Opinion of Houlihan Lokey Howard & Zukin Capital
Annex D: Section 262 of the Delaware General Corporation Law
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SUMMARY
The following is a summary of certain information contained, or
incorporated by reference, elsewhere in this Joint Proxy Statement/Prospectus.
This summary is not intended to be complete and is qualified in its entirety by
reference to, and should be read in conjunction with, the detailed information
and financial statements appearing elsewhere, or incorporated by reference in,
this Joint Proxy Statement/Prospectus.
THE PARTIES
DAN RIVER INC.
Founded in 1882, Dan River is a leading manufacturer and marketer of
textile products for the home fashions and apparel fabrics markets. Dan River
designs, manufactures and markets a coordinated line of value-added home
fashions products consisting of packaged bedroom furnishings such as comforters,
sheets, pillowcases, shams, bed skirts, decorative pillows and draperies. Dan
River also manufactures and markets a broad range of high quality woven cotton
and cotton-blend apparel fabrics and believes that it is the leading supplier,
based on net sales, of men's dress shirting fabrics in North America.
THE BIBB COMPANY
Since its founding in 1876, Bibb and its predecessors have been engaged in
the manufacturing and marketing of textile products. Bibb is a vertically
integrated textile manufacturer that buys basic raw materials, such as cotton,
synthetic fibers, yarns, chemicals, and dyes, and converts them primarily into
finished textile goods ready for marketing. Bibb's principal products include:
sheets and pillowcases; quilted and non-quilted bedspreads, comforters,
slumberbags, draperies and other bedding accessories; and specially-treated
engineered yarns and fabrics for industrial uses, primarily high-pressure
automobile hoses and conveyor belts. Bibb is a leading domestic manufacturer and
marketer of juvenile licensed bedding products, sheets to the hospitality
market, and reinforcing hose yarn.
THE SPECIAL MEETINGS
DAN RIVER SPECIAL MEETING
Time, Date, Place and Purpose. The Dan River Special Meeting will be held
on , , 1998 at 10:00 a.m. local time, at the offices of
King & Spalding, 50th Floor, 191 Peachtree Street, Atlanta, Georgia. At the Dan
River Special Meeting, holders of Dan River Class A Common Stock and Class B
Common Stock, par value $.01, of Dan River (the "Dan River Class B Common Stock"
and together with the Dan River Class A Common Stock, the "Dan River Common
Stock") will be asked to consider and vote upon a proposal to approve the Merger
Agreement and the issuance of shares of Dan River Class A Common Stock in
connection therewith. A copy of the Merger Agreement is attached hereto as Annex
A and is incorporated herein by this reference.
Record Date and Shares Entitled to Vote. Only holders of record of shares
of Dan River Common Stock at the close of business on , 1998 (the "Dan
River Record Date") are entitled to notice of and to vote at the Dan River
Special Meeting. As of such date, there were shares of Dan River
Class A Common Stock issued and outstanding held by approximately
holders of record and 2,062,070 shares of Dan River Class B
Common Stock issued and outstanding and held by eight holders of record. Each
holder of record of Dan River Class A Common Stock on the Dan River Record Date
is entitled to one vote per share on any matter that may properly come before
the Dan River Special Meeting. Each holder of record of Dan River Class B Common
Stock on the Dan River Record Date is entitled to 4.39 votes per share on any
matter that may properly come before the Dan River Special Meeting. With respect
to all matters that properly may come before the Dan River Special Meeting,
holders of shares of Dan River Class A Common Stock and Dan River Class B Common
Stock will vote together as a single voting group.
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Vote Required; Security Ownership of Management. The presence in person or
by proxy of the holders of a majority of the voting power of the outstanding
shares of Dan River Common Stock as of the Dan River Record Date is necessary to
constitute a quorum for the transaction of business at the Dan River Special
Meeting. The affirmative vote of the holders of two thirds of the voting power
of the outstanding Dan River Common Stock entitled to vote at the Dan River
Special Meeting is necessary to approve the Merger Agreement and the issuance of
shares of Dan River Class A Common Stock in connection therewith. As of the Dan
River Record Date, the executive officers and directors of Dan River
beneficially owned an aggregate of 2,473,270 shares of Dan River Common Stock or
approximately 13% of the shares of Dan River Common Stock then outstanding, and
representing approximately 37% of the voting power of Dan River Common Stock.
Solicitation and Revocation of Proxies. A form of proxy is enclosed with
this Joint Proxy Statement/ Prospectus. All shares of Dan River Common Stock
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such shares will be voted FOR
approval of the Merger Agreement, the issuance of shares of Dan River Class A
Common Stock in connection therewith and, in the discretion of the proxy holder,
as to any other matter which may properly come before the Dan River Special
Meeting. See "The Special Meetings -- Dan River Special Meeting -- Solicitation
and Revocation of Proxies."
Any Dan River shareholder that has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) filing with the Secretary of Dan River prior to the Dan
River Special Meeting, at Dan River's principal executive offices, either a
written revocation of such proxy or a duly executed proxy bearing a later date
or (ii) attending the Dan River Special Meeting and voting in person, regardless
of whether a proxy has previously been given. Presence at the Dan River Special
Meeting will not revoke a shareholder's proxy unless such shareholder votes in
person.
THE BIBB SPECIAL MEETING
Time, Date, Place and Purpose. The Bibb Special Meeting will be held on
, 1998 at 10:00 a.m., local time, at the offices of .
At the Bibb Special Meeting, holders of Bibb Common Stock will be asked to
consider and vote upon a proposal to approve the Merger Agreement. A copy of the
Merger Agreement is attached hereto as Annex A and is incorporated herein by
reference.
Record Date and Shares Entitled to Vote. Only holders of record of shares
of Bibb Common Stock at the close of business on (the "Bibb
Record Date") are entitled to notice of and to vote at the Bibb Special Meeting.
As of the Bibb Record Date, there were shares of Bibb Common
Stock issued and outstanding held by approximately holders of
record. Holders of record of Bibb Common Stock on the Bibb Record Date are
entitled to one vote per share on any matter that may properly come before the
Bibb Special Meeting.
Vote Required; Security Ownership of Management. The presence in person or
by proxy of the holders of a majority of the voting power of the outstanding
shares of Bibb Common Stock as of the Bibb Record Date is necessary to
constitute a quorum for the transaction of business at the Bibb Special Meeting.
The affirmative vote of a majority of the total votes cast by holders of
outstanding shares of Bibb Common Stock entitled to vote at the Bibb Special
Meeting is necessary to approve the Merger Agreement. As of the Record Date, the
executive officers and directors of Bibb beneficially owned an aggregate of
shares of Bibb Common Stock (not including shares
of Bibb Common Stock issuable upon the exercise of options outstanding under the
Bibb Option Plans (as hereinafter defined) held by such persons), or
approximately % of the shares of Bibb Common Stock then
outstanding.
Solicitation and Revocation of Proxies. A form of proxy is enclosed with
this Joint Proxy Statement/ Prospectus. All shares of Bibb Common Stock
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such shares will be voted FOR
approval of the Merger Agreement and, in the discretion of the proxy holder, as
to any other matter which may properly come before the Bibb Special Meeting. See
"The Special Meetings -- Bibb Special Meeting -- Solicitation and Revocation of
Proxies."
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Any Bibb stockholder that has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) filing with the Secretary of Bibb prior to the Bibb
Special Meeting, at Bibb's principal executive offices, either a written
revocation of such proxy or a duly executed proxy bearing a later date or (ii)
attending the Bibb Special Meeting and voting in person, regardless of whether a
proxy has previously been given. Presence at the Bibb Special Meeting will not
revoke a stockholder's proxy unless such stockholder votes in person.
THE MERGER
TERMS OF THE MERGER AGREEMENT
General. The Merger Agreement provides that, following approval of the
Merger Agreement by the stockholders of Bibb and the approval of the Merger
Agreement and the issuance of Dan River Class A Common Stock in connection
therewith by the shareholders of Dan River and the satisfaction or waiver of the
other conditions to the Merger, Bibb will be merged with and into Dan River at
the Effective Time (as hereinafter defined) in accordance with the Georgia
General Business Corporation Code ("GBCC") and the General Corporation Law of
the State of Delaware (the "DGCL"). Dan River will be the surviving corporation
in the Merger. As a result of the Merger, the separate corporate existence of
Bibb will cease.
Merger Consideration. Upon consummation of the Merger, each outstanding
share of Bibb Common Stock (other than treasury shares, shares held by Dan River
and dissenting shares) will be converted into the right to receive cash or
shares of Dan River Class A Common Stock. See "The Merger -- Terms of the Merger
Agreement -- Merger Consideration." Each Bibb stockholder will have the
opportunity to indicate, on a form of election (the "Form of Election"), whether
such stockholder wishes to make a Stock Election, a Cash Election or a
Non-Election (as such terms are defined below) for each share of Bibb Common
Stock held by such stockholder. The allocations of cash and/or shares of Dan
River Class A Common Stock that a stockholder of Bibb may receive will depend
upon (i) the stated preference of the Bibb stockholder on the Form of Election
and (ii) the proration procedures to be applied if the Cash Election Shares
exceed the Cash Election Number or the Stock Election Shares exceed the Stock
Election Number (as such terms are defined below).
Stockholders of Bibb who make an effective "Stock Election" will receive
(subject to the proration procedures described below), for each share of Bibb
Common Stock for which such election is made, 0.84615 shares of Dan River Class
A Common Stock (the "Exchange Ratio"). Stockholders of Bibb who make an
effective "Cash Election" will receive (subject to the proration procedures
described below) for each share of Bibb Common Stock for which such election is
made, in cash, an amount equal to $16.50 (the "Cash Consideration"). If a holder
of Bibb Common Stock has no preference as to consideration and makes a "Non-
Election," such stockholder shall receive 0.84615 shares of Dan River Class A
Common Stock, $16.50 in cash or a combination thereof, determined as set forth
below.
In the event that the aggregate number of shares of Bibb Common Stock
covered by Stock Elections (the "Stock Election Shares") exceeds the Stock
Election Number, (i) each Bibb stockholder making an effective Cash Election or
making a Non-Election will receive, for each share of Bibb Common Stock with
respect to which such election is made, cash in the amount of $16.50 and (ii)
each Bibb stockholder making an effective Stock Election will receive, for each
share of Bibb Common Stock for which a Stock Election has been made, (x) a
number of shares of Dan River Class A Common Stock equal to the product of the
Exchange Ratio and a fraction (the "Stock Fraction"), the numerator of which is
the Stock Election Number and the denominator of which is the total number of
Stock Election Shares, and (y) cash in an amount equal to the product of (A)
$16.50 and (B) a fraction equal to one minus the Stock Fraction. The "Stock
Election Number" is equal to 50% of the number of shares of Bibb Common Stock
outstanding immediately prior to the Effective Time.
In the event that the aggregate number of shares of Bibb Common Stock
covered by Cash Elections (the "Cash Election Shares") exceeds the Cash Election
Number, (i) each Bibb stockholder making an effective Stock Election or making a
Non-Election will receive, for each share of Bibb Common Stock with respect to
which such election is made, 0.84615 shares of Dan River Class A Common Stock
and (ii) each stockholder
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making a Cash Election will receive, for each share of Bibb Common Stock for
which a Cash Election has been made or deemed to have been made, (x) cash in an
amount equal to the product of $16.50 and a fraction (the "Cash Fraction"), the
numerator of which is the Cash Election Number and the denominator of which is
the total number of Cash Election Shares, and (y) a number of shares of Dan
River Class A Common Stock equal to the product of the Exchange Ratio and a
fraction equal to one minus the Cash Fraction. The "Cash Election Number" is
equal to 50% of the number of shares of Bibb Common Stock outstanding
immediately prior to the Effective Time less the number of shares of Bibb Common
Stock with respect to which appraisal rights are exercised and the number of
shares of Bibb Common Stock to be exchanged for cash in lieu of fractional
shares.
In the event the number of Stock Election Shares does not exceed the Stock
Election Number and the number of Cash Election Shares does not exceed the Cash
Election Number, stockholders of Bibb who make a Non-Election will receive cash
and Dan River Class A Common Stock on a proportionate basis so that the Stock
Election Number and the Cash Election Number equal their respective percentages
of shares of Bibb Common Stock outstanding as closely as possible.
No fractional shares of Dan River Class A Common Stock will be issued
pursuant to the Merger. In lieu of the issuance of any fractional shares of Dan
River Class A Common Stock, a cash payment determined in accordance with Section
2.2(f) of the Merger Agreement will be paid to holders in respect of any
fractional share of Dan River Class A Common Stock that otherwise would be
issuable.
Election Procedures. Concurrently with the mailing of this Joint Proxy
Statement/Prospectus, a Form of Election will be mailed to each holder of record
of Bibb Common Stock on the Bibb Record Date. To be effective, a Form of
Election must be properly completed, signed and submitted to the Exchange Agent
by the close of business on the last business day prior to the Effective Time
and must be accompanied by the certificates representing the shares of Bibb
Common Stock as to which the election is made (or by an appropriate guarantee of
delivery of such certificates). If a holder of Bibb Common Stock does not submit
a Form of Election which is received by the Exchange Agent prior to the close of
business on the last business day prior to the Effective Time (the "Election
Deadline"), such Bibb stockholder will be deemed to have made a Non-Election.
The Merger Agreement provides that Forms of Election once submitted to the
Exchange Agent are irrevocable. If a Bibb stockholder properly completes, signs
and submits a Form of Election to the Exchange Agent with such stockholder's
certificates representing the shares of Bibb Common Stock as to which such
election is made (or appropriate guarantees of delivery therefor) and the Merger
is consummated, each share of Bibb Common Stock covered by such Form of Election
will be exchanged for the Merger Consideration as indicated on the Form of
Election and in accordance with the Merger Agreement. Once a Bibb stockholder
has so delivered a Form of Election, such stockholder's share certificates
representing the shares of Bibb Common Stock as to which such election is made
will not be returned unless the Merger fails to be consummated. See "The
Merger -- Terms of the Merger Agreement -- Election Procedures."
Options to Purchase Bibb Common Stock. The Merger Agreement provides that,
except as described below, in the case of any option, or part of any option, to
purchase Bibb Common Stock under Bibb's 1997 Omnibus Stock Incentive Plan (the
"Omnibus Plan") that at the Effective Time would under the terms of such option
(after giving effect to any accelerated vesting caused by the Merger) still
constitute an "incentive stock option," each option (or part of any option) to
purchase Bibb Common Stock under the Omnibus Plan, that certain employment
agreement by and between Bibb and Michael L. Fulbright (the "Fulbright
Agreement") and Bibb's Non-Employee Director Stock Plan (the "Director Plan" and
together with the Omnibus Plan and the Fulbright Agreement hereinafter
collectively referred to as the "Bibb Option Plans") which is outstanding and
unexercised (whether or not then exercisable or vested) will be canceled by Bibb
and, in consideration of such cancellation, each holder of such an option will
receive cash and shares of Dan River Class A Common Stock. At the Effective
Time, Dan River shall assume the Omnibus Plan and other options thereunder (or
parts thereof) to purchase Bibb Common Stock. Each such assumed option shall be
converted into an outstanding and exercisable option to purchase Dan River Class
A Common Stock in
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accordance with the terms of the Omnibus Plan and each such assumed option. See
"The Merger -- Terms of the Merger -- Options to Purchase Bibb Common Stock."
Registration Rights. The Merger Agreement provides that promptly following
the Closing Date, Dan River will file a registration statement (a "Shelf
Registration Statement") with the Commission that covers all of the Dan River
Class A Common Stock issued to certain stockholders of Bibb pursuant to the
Merger (the "Registrable Stock"). In addition, if Dan River at any time proposes
to register any of the Class A Common Stock under the Securities Act for sale to
the public, Dan River will promptly give written notice to all such stockholders
of its intention to effect such registration and will include the Registrable
Stock in such registration (a "Piggyback Registration"). See "The
Merger -- Terms of the Merger Agreement -- Registration Rights."
Rights Plan. In September 1997, the Bibb Board of Directors adopted a
stockholder rights plan and in connection therewith entered into a Rights
Agreement, dated September 30, 1997, between Bibb and American Stock Transfer &
Trust Company as rights agent (the "Bibb Rights Agreement"). See "The
Merger -- Comparison of Rights of Holders of Dan River Class A Common Stock and
Bibb Common Stock -- Rights Plan." The Bibb Board of Directors has approved and
Bibb has entered into an amendment to the Bibb Rights Agreement to provide that
neither the approval, execution or delivery of the Merger Agreement, the
announcement thereof, nor the consummation of the transactions contemplated
thereby will result in the Bibb Rights being exercised, distributed or
triggered.
Conditions to the Merger. In addition to approval of the Merger Agreement
by the shareholders of Dan River and the stockholders of Bibb and certain
customary conditions, consummation of the Merger is subject to the satisfaction
or waiver of, among others, the following conditions: (i) that Bibb be in
compliance with the tangible net worth covenant under its senior credit
facility; (ii) that Dan River and Bibb shall have received the written opinion
of King & Spalding and Jones, Day, Reavis & Pogue ("Jones Day"), respectively,
concerning certain federal income tax consequences of the Merger; (iv) that
certain regulatory approvals shall have been granted; and (v) that the
Registration Statement covering the shares of Dan River Class A Common Stock
into which shares of Bibb Common Stock will be converted in the Merger shall be
effective. See "The Merger -- Terms of the Merger Agreement -- Conditions to the
Merger."
Amendment. The Merger Agreement may be amended before adoption of the
Merger Agreement by the Bibb stockholders and the Dan River shareholders with
respect to any of the terms contained therein and, without further approval of
such stockholders and shareholders, may be amended after such approvals, except
as otherwise provided by law. Any amendment to the Merger Agreement must be in
writing and signed by the parties to the Agreement.
Termination. The Merger Agreement may be terminated (i) by mutual
agreement by Dan River and Bibb, (ii) by Dan River or Bibb if, without any
material breach by such terminating party of its obligations under the Merger
Agreement, the Effective Time shall not have occurred on October 15, 1998 or on
or before November 30, 1998 if certain conditions are met, (iii) by Dan River or
Bibb if a court shall have issued a final nonappealable order, injunction,
decree, judgment or ruling or taken any other action restraining, enjoining or
prohibiting the Merger, (iv) by Bibb, if, it shall have received an Acquisition
Proposal (as hereinafter defined), and the Bibb Board of Directors determines
that failure to accept such Acquisition Proposal would result in a breach by the
Bibb Board of Directors of its fiduciary duties under applicable law, (v) Bibb,
if the Merger Agreement has not been approved by the holders of two thirds of
the voting power of the outstanding shares of Dan River Common Stock entitled to
vote at the Dan River Special Meeting or (vi) Dan River, if the Merger Agreement
has not been approved by a majority of the total votes cast by holders of
outstanding shares of Bibb Common Stock entitled to vote at the Bibb Special
Meeting. See "The Merger -- Terms of the Merger Agreement -- Termination."
Fees and Expenses. Bibb may be required to pay the Fee (as hereinafter
defined) if the Merger Agreement is terminated (i) by Dan River or Bibb if,
without any material breach by such terminating party of its obligations under
the Merger Agreement, the Effective Time shall not have occurred on October 15,
1998 or on or before November 30, 1998 if certain conditions are met, including
that Bibb enters into an agreement with respect to a Third Party Acquisition (as
hereinafter defined) or a superior Third Party
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Acquisition occurs within six months of such termination; (ii) by Dan River or
Bibb if the Bibb stockholders do not approve the Merger Agreement and an
Acquisition Proposal shall have been publicly disclosed; (iii) by Bibb if, the
Bibb Board of Directors accepts another Acquisition Proposal; or (iv) by Dan
River if, the Bibb Board of Directors, among other things, withdraws, modifies
or amends in an adverse manner its approval or recommendation of the Merger
Agreement. See "The Merger -- Terms of the Merger Agreement -- Fees and
Expenses."
No Solicitation. The Merger Agreement provides that Bibb and its officers,
directors, employees, representatives and agents shall cease any existing
discussions or negotiations with any parties with respect to any acquisition or
exchange of all or any material portion of the assets of, or any equity interest
in, Bibb or any business combination with or involving any third party. It
further provides that Bibb may furnish information and access to other parties
and participate in discussions and negotiate with such other parties concerning
an Acquisition Proposal (as hereinafter defined) only if certain conditions are
met. See "The Merger -- Terms of the Merger Agreement -- No Solicitation."
EFFECTIVE TIME OF THE MERGER AND EXCHANGE OF CERTIFICATES
Effective Time of the Merger. The Merger will become effective upon the
filing of certificates of merger with the Secretary of State of the State of
Georgia and with the Secretary of State of the State of Delaware (the "Effective
Time").
Exchange of Bibb Stock Certificates. Promptly after the Effective Time,
the Exchange Agent will pay the holder of each certificate representing shares
of Bibb Common Stock surrendered to the Exchange Agent the Merger Consideration
multiplied by the number of shares of Bibb Common Stock formerly represented by
such certificate, and such certificate will forthwith be canceled. See "The
Merger -- Terms of the Merger Agreement -- Effective Time of the Merger and
Exchange of Certificates -- Exchange of Bibb Stock Certificates."
OPINIONS OF FINANCIAL ADVISORS
Dan River's Financial Advisor. Bowles Hollowell Conner & Co. ("Bowles
Hollowell") has delivered a written opinion, dated June 22, 1998, to the Dan
River Board of Directors to the effect that, as of the date of such opinion and
based upon and subject to certain matters stated therein, the Merger
Consideration was fair, from a financial point of view, to Dan River. The full
text of the written opinion of Bowles Hollowell, which sets forth the
assumptions made, matters considered and limitations on the review undertaken,
is attached as Annex B to this Joint Proxy Statement/Prospectus and should be
read carefully in its entirety. See "The Merger -- Opinion of Dan River's
Financial Advisor."
Bibb's Financial Advisor. Houlihan Lokey Howard & Zukin Capital ("Houlihan
Lokey") has delivered a written opinion, dated June 26, 1998, and has
reconfirmed its opinion as of the date of mailing of this Joint Proxy
Statement/Prospectus, to the Bibb Board of Directors to the effect that, as of
the date of such opinion and based upon and subject to certain matters stated
therein, the Merger Consideration was fair from a financial point of view, to
the stockholders of Bibb. The full text of the written opinion of Houlihan
Lokey, which sets forth the assumptions made, matters considered and limitations
on the review undertaken, is attached as Annex C to the Joint Proxy
Statement/Prospectus and should be read carefully in its entirety. See "The
Merger -- Opinion of Bibb's Financial Advisor."
RECOMMENDATION OF THE DAN RIVER BOARD OF DIRECTORS
THE DAN RIVER BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF DAN RIVER AND ITS SHAREHOLDERS, HAS APPROVED THE MERGER
AGREEMENT AND THE ISSUANCE OF SHARES OF DAN RIVER CLASS A COMMON STOCK IN
CONNECTION THEREWITH AND RECOMMENDS THAT DAN RIVER SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE ISSUANCE OF SHARES OF
DAN RIVER CLASS A COMMON STOCK IN CONNECTION THEREWITH.
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RECOMMENDATION OF THE BIBB BOARD OF DIRECTORS
THE BIBB BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF BIBB AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT BIBB STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
MERGER AGREEMENT.
REGULATORY APPROVALS REQUIRED
Under the Merger Agreement, the obligations of both Dan River and Bibb to
consummate the Merger are conditioned upon receipt of all required regulatory
approvals (with limited exceptions). Under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules promulgated
thereunder by the Federal Trade Commission (the "FTC"), the Merger may not be
consummated unless notification has been given and certain information has been
furnished to the FTC and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and the waiting period has expired or been
terminated. Pursuant to the HSR Act, Dan River and Bibb each filed a
notification and report form with the FTC and the Antitrust Division for review
in connection with the Merger on July 2, 1998 and July 1, 1998, respectively.
ACCOUNTING TREATMENT
The Merger will be accounted for under the "purchase" method of accounting
in accordance with generally accepted accounting principles.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is a condition to the consummation of the Merger that Dan River receive
an opinion from its counsel, King & Spalding, based upon certain customary
factual representations by Bibb and Dan River, that the Merger will constitute a
reorganization described in Section 368(a)(1) of the Internal Revenue Code of
1986, as amended (the "Code") and that Bibb receive such an opinion from its
counsel, Jones Day, that the Merger will constitute a reorganization under
Section 368(a)(1) of the Code.
In accordance with those opinions, no gain or loss generally will be
recognized by a holder of Bibb Common Stock who exchanges such stock solely for
Dan River Class A Common Stock pursuant to the Merger. Holders of Bibb Common
Stock who receive solely cash in exchange for such shares will recognize gain or
loss on such exchange. Holders of Bibb Common Stock who receive a combination of
Dan River Class A Common Stock and cash in exchange for their shares will
recognize gain up to the amount of cash received, but will not recognize any
loss on such exchange. Holders of Bibb Common Stock may also recognize gain or
loss by reason of cash received in lieu of fractional shares. See "The
Merger -- Certain Federal Income Tax Consequences."
APPRAISAL RIGHTS
Holders of Dan River Common Stock are not entitled to appraisal rights
under the Georgia Business Corporation Code (the "GBCC") in connection with the
Merger. Stockholders of Bibb who (i) do not vote in favor of the Merger, (ii)
deliver a written demand for an appraisal with Bibb before the vote is taken on
the Merger, and (iii) have otherwise properly complied with the Section 262 of
the DGCL, will be entitled to appraisal rights. See "The Merger -- Appraisal
Rights."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the Merger, Bibb stockholders should be aware that certain
executive officers of Bibb have certain interests that may present them with
potential conflicts of interest with respect to the Merger. See "The
Merger -- Interests of Certain Persons in the Merger."
7
19
MARKETS AND MARKET PRICES
Dan River Class A Common Stock is listed on the NYSE under the symbol
"DRF." As of the Dan River Record Date, there were approximately holders
of record of Dan River Class A Common Stock. Bibb Common Stock is listed on the
American Stock Exchange ("AMEX") under the symbol "BIB". As of the Bibb Record
Date, there were approximately holders of record of Bibb Common Stock.
The following table sets forth for the calendar quarter indicated the high
and low closing prices per share of Dan River Class A Common Stock and Bibb
Common Stock as reported on the NYSE and AMEX, respectively. Since December 29,
1995, no cash dividends have been declared or paid on the Dan River Class A
Common Stock or on the Bibb Common Stock.
DAN RIVER
CLASS A BIBB COMMON
COMMON STOCK STOCK
---------------- --------------
HIGH LOW HIGH LOW
------- ------ ------ -----
1997:
Third Quarter(1)............................................ -- -- $ 7.75 $7.75
Fourth Quarter.............................................. $16.56 $15.00 8.38 6.25
1998:
First Quarter............................................... $19.00 $14.75 $10.63 $7.25
- ---------------
(1) Prior to November 20, 1997, the date of completion of Dan River's initial
public offering of its Class A Common Stock, there was no established public
market for the Dan River Class A Common Stock. Prior to October 4, 1997, the
last day of the third quarter of the 1997 fiscal year of Bibb, there was no
established public market for the Bibb Common Stock.
On (i) June 26, 1998, the last trading date prior to the public
announcement of the Merger and (ii) , 1998, the last trading day
before mailing this Joint Proxy Statement/Prospectus, the closing sale price of
Dan River Class A Common Stock, as reported on the NYSE, was $17.75 and
$ per share, respectively. On such dates, the closing sale price of
Bibb Common Stock, as reported on the AMEX, was $13.81 and $ ,
respectively.
8
20
COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain per share information for Dan River
and Bibb on both historical and pro forma combined bases (giving effect to the
Merger using the "purchase" method of accounting) and certain information on an
equivalent pro forma combined basis for each share of Bibb Common Stock.
PER SHARE OF COMMON STOCK
-------------------------------------------
INCOME (LOSS)
FROM
CONTINUING CASH (END OF PERIOD)
OPERATIONS DIVIDENDS BOOK VALUE
------------- --------- ---------------
Dan River -- Historical
Year ended January 3, 1998............................. $ 0.89 -- $ 8.80
Three months ended April 4, 1998....................... $ 0.28 -- $ 9.09
Dan River -- Pro forma combined
Year ended January 3, 1998............................. $ 0.26 -- $ --
Three months ended April 4, 1998....................... $ 0.17 -- $10.63
Bibb -- Historical
Year ended January 3, 1998............................. $(0.74) -- $ 5.77
Three months ended April 4, 1998....................... $ 0.01 -- $ 5.79
Bibb -- Equivalent pro forma combined per Bibb share(1)
Year ended January 3, 1998............................. $ 0.22 -- $ --
Three months ended April 4, 1998....................... $ 0.14 -- $ 9.00
- ---------------
(1) Equivalent pro forma combined per share information for Bibb is determined
by multiplying the pro forma combined amounts by the Exchange Ratio (.84615)
to represent equivalent per share amounts to stockholders of Bibb.
9
21
SELECTED HISTORICAL FINANCIAL DATA OF DAN RIVER
The selected historical financial data presented below for each of the five
fiscal years in the period ended January 3, 1998 has been derived from the
audited consolidated financial statements of Dan River filed with the
Commission. The selected historical financial data for the three months ended
April 4, 1998 and March 29, 1997 has been derived from unaudited condensed
consolidated financial statements of Dan River filed with the Commission and, in
the opinion of Dan River, reflects all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such data on a basis
consistent with that of the audited data presented herein. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for a full year.
The selected historical financial data presented below should be read in
conjunction with Dan River's historical consolidated financial statements and
the notes thereto which are incorporated herein by reference.
Dan River and its previous parent and sole shareholder, Braelan Corp.
("Braelan"), were organized in 1989 to acquire and operate Dan River Holding
Company and subsidiaries. On December 29, 1995, Braelan was merged with and into
Dan River. Selected historical financial data for periods prior to the merger of
Dan River and Braelan have been restated to reflect the combination.
10
22
SELECTED HISTORICAL FINANCIAL DATA OF DAN RIVER
(UNAUDITED)
THREE MONTHS
ENDED
-------------------- FISCAL YEAR
APRIL 4, MARCH 29, ----------------------------------------------------
1998 1997 1997(1) 1996 1995 1994 1993
-------- --------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales.......................... $120,943 $105,736 $476,448 $379,567 $384,801 $371,534 $317,566
Cost of sales...................... 94,898 85,587 372,165 307,383 306,879 297,460 259,148
Gross profit....................... 26,045 20,149 104,283 72,184 77,922 74,074 58,418
Selling, general and administrative
expenses......................... 13,901 11,861 54,231 45,673 44,860 43,908 38,550
Other operating costs, net(2)...... -- -- 7,012 (428) 8,972 1,534 3,039
Operating income................... 12,144 8,288 43,040 26,939 24,090 28,632 16,829
Other income (expense), net........ 280 40 (290) 485 241 144 505
Interest expense................... 3,820 5,085 21,135 18,168 21,941 20,419 12,691
Income before extraordinary
items............................ 5,402 1,993 13,264 5,686 258 3,525 2,171
Extraordinary item(3).............. -- -- (243) -- -- -- 348
Net income......................... 5,402 1,993 13,021 5,686 258 3,525 2,519
Redeemable preferred stock
dividends........................ -- -- -- -- -- -- 2,091
Net income applicable to common
stock............................ 5,402 1,993 13,021 5,686 258 3,525 428
Earnings per share -- basic:
Income before extraordinary
item........................... 0.29 0.14 0.90 0.40 0.02 0.31 0.01
Net income per share -- basic.... 0.29 0.14 0.89 0.40 0.02 0.31 0.04
Earnings per share -- diluted:
Income before extraordinary
item........................... 0.28 0.14 0.89 0.40 0.02 0.31 0.01
Net income per
share -- diluted............... 0.28 0.14 0.88 0.40 0.02 0.31 0.04
BALANCE SHEET DATA (END OF PERIOD):
Working capital.................... $124,286 $102,317 $123,604 $ 93,291 $109,763 $103,973 $ 94,040
Total assets....................... 399,540 391,101 392,295 321,050 330,944 329,902 289,384
Convertible junior subordinated
notes............................ -- -- -- -- -- 25,220 21,485
Total debt, including current
maturities....................... 139,271 223,859 143,756 169,468 179,703 196,436 170,066
Common stock subject to put
rights........................... -- -- -- 9,726 7,000 7,000 7,000
Shareholders' equity............... 171,163 78,894 165,830 77,898 73,702 46,810 42,493
- ---------------
(1) Fiscal year 1997 (ended January 3, 1998) represents a 53-week period. All
other fiscal years presented represent a 52-week period.
(2) Other Operating Costs, Net includes various non-recurring charges and
credits, the most significant of which relate to fixed asset writedowns,
plant closure costs and a discontinued product line.
(3) The extraordinary item in fiscal year 1993 represented the gain, net of
related income taxes, from the early retirement of certain of Dan River's
credit facilities and term loans out of the proceeds from the issuance and
sale of $120 million original principal amount of Dan River's 10 1/8% Senior
Subordinated Notes due 2003 (the "Dan River Senior Subordinated Notes").
11
23
SELECTED HISTORICAL FINANCIAL DATA OF BIBB
The selected historical financial data presented below for each of the five
fiscal years in the period ended January 3, 1998 has been derived from the
audited financial statements of Bibb filed with the Commission. The selected
historical financial data for the three months ended April 4, 1998 and March 29,
1997 has been derived from unaudited condensed financial statements of Bibb
filed with the Commission and, in the opinion of Bibb, reflects all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such data on a basis consistent with that of the audited data
presented herein. The results of operations for interim periods are not
necessarily indicative of the results to be expected for a full year.
Bibb is a successor to The Bibb Company, a Delaware corporation ("Old
Bibb"), as a result of the merger of Old Bibb with and into Bibb on September
27, 1996 in connection with consummation of a plan of reorganization (the "Bibb
Plan of Reorganization") filed under chapter 11 of title 11 of the United States
Code, 11 U.S.C. sec.sec. 101 et seq. (the "Bankruptcy Code") on July 3, 1996. On
September 12, 1996, the Bankruptcy Court issued an order confirming the Plan of
Reorganization. The Plan of Reorganization was consummated on September 27, 1996
(the "Reorganization Date").
Information for periods subsequent to September 28, 1996 was prepared under
the principles of fresh start reporting and is not comparable to information for
prior periods. Operations for the discontinued apparel and napery businesses of
Bibb subsequent to September 28, 1996 are shown below results from continuing
operations and excludes the results of the terry business. The selected
historical financial data presented below should be read in conjunction with
Bibb's historical financial statements and the notes thereto which are
incorporated herein by reference.
12
24
SELECTED HISTORICAL FINANCIAL DATA OF BIBB
(UNAUDITED)
THREE MONTHS THREE NINE
ENDED MONTHS MONTHS
-------------------- FISCAL ENDED ENDED FISCAL YEAR
APRIL 4, MARCH 29, YEAR DECEMBER 28, SEPTEMBER 28, --------------------------------
1998 1997 1997(1) 1996 1996 1995 1994 1993
-------- --------- --------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales..................... $ 56,825 $ 58,932 $248,836 $ 63,937 | $262,392 $ 389,998 $ 459,192 $487,892
Cost of sales................. 48,958 54,258 222,620 57,252 | 239,724 366,040 432,235 410,713
Gross profit.................. 7,867 4,674 26,216 6,685 | 22,668 23,958 26,957 77,179
Selling and administrative |
expenses.................... 5,682 5,453 23,306 7,428 | 26,002 34,538 41,765 43,134
Nonrecurring charges.......... -- -- 4,133 -- | -- -- -- --
Management fees to |
affiliate(2)................ -- -- -- -- | 1,993 3,368 4,000 4,000
Operating profit (loss)....... 2,185 (779) (1,223) (743) | (5,327) (15,540) (18,808) 30,045
Interest expense.............. 1,740 974 4,743 1,074 | 16,001 27,926 26,379 25,605
Loan fee amortization and |
related expense............. 334 274 1,270 235 | 1,928 2,486 1,795 1,847
Other income (expense)........ -- (95) (162) (109) | 3,319 (1,639) (934) 2,493
Income (loss) before |
discontinued operations, |
reorganization and |
extraordinary items......... 111 (2,122) (7,398) (2,161) | (19,937) (47,591) (47,916) 5,086
Reorganization and |
extraordinary items(3)(4)... -- -- -- -- | 118,148 -- -- (738)
Loss from discontinued |
operations(5)............... -- (69) (20,948) (379) | -- -- --
Net income (loss)(6).......... 111 (2,191) (28,346) (2,540) | 98,211 (47,591) (47,916) 4,348
Net income (loss) per share |
(basic and diluted)(7)...... 0.01 (0.22) (2.82) (0.25) | -- -- --
BALANCE SHEET DATA (END OF |
PERIOD): |
Working capital............... $ 64,393 $ 75,277 $ 67,868 $106,902 | $ -- $(191,131) $(140,375) $ 70,102
Total assets.................. 181,760 187,165 169,351 232,700 | -- 198,638 228,171 238,104
Total debt, less current |
maturities.................. 79,555 52,826 74,898 84,093 | -- -- 11,000 175,353
Stockholders' equity |
(deficit)................... 58,208 84,192 58,097 85,848 | -- (90,627) (42,125) 5,499
- ---------------
(1) Fiscal year 1997 (ended January 3, 1998) represents a 53-week period. All
other fiscal years presented represent a 52-week period.
(2) Prior to February 1, 1996, pursuant to a management services agreement dated
April 1, 1989 (the "Management Services Agreement"), between Bibb and The
NTC Group, Inc. ("NTC"), NTC received fees equal to 2% of Bibb's average
month-end equity book value plus interest-bearing debt. Pursuant to the
Restructuring Agreement among Bibb and its creditors (the "Restructuring
Agreement"), during the period between February 1, 1996 and the
Reorganization Date, NTC was entitled to receive management fees under the
Management Services Agreement equal to $0.1 million per month. Pursuant to
the Bibb Plan of Reorganization, $1.8 million of accrued management fees
were forgiven by NTC as of September 28, 1996, and the Management Services
Agreement was terminated.
(3) In connection with the Bibb Plan of Reorganization, reorganization items
were recorded for professional fees and expenses in the amount of $1.4
million and for adjustments to certain accounts to reflect fair value in the
amount of $7.9 million.
(4) In conjunction with the Bibb Plan of Reorganization, a gain of $111.7
million on the extinguishment of debt was recorded.
(5) Discontinued operations charges of $20.9 million and $0.4 million, were
recorded in fiscal year 1997 and the fourth quarter of 1996, respectively,
as a result of the sale of the napery business to Mount Vernon Mills, Inc.,
and Bibb's intent to exit the apparel business.
(6) Prior to September 28, 1996, Bibb was an "S" corporation under the Code.
Because all items of income, expense and credit of an "S" corporation
generally pass through to its stockholders, Bibb did not pay federal income
taxes or certain state and local income taxes during the period it was an
"S" Corporation. Effective September 28, 1996, Bibb became a "C" corporation
under the Internal Revenue Code and became ineligible to pass through items
of income, expense and credit to its stockholders. For the three months
ended December 28, 1996, and fiscal year ended January 3, 1998, there was no
income tax expense nor benefit recorded.
(7) Per share amounts are not provided for Bibb for periods ended prior to the
three-month period ended December 28, 1996 because they are not meaningful
due to the implementation of fresh start reporting and the substantial
change in the number of shares outstanding subsequent to the consummation of
the Bibb Plan of Reorganization.
13
25
SUMMARY UNAUDITED PRO FORMA COMBINED FINANCIAL DATA OF DAN RIVER
On February 3, 1997 Dan River acquired substantially all of the assets of
The New Cherokee Corporation ("Cherokee"). On November 20, 1997 Dan River
completed an initial public offering of its Class A Common Stock.
The following unaudited pro forma combined financial data of Dan River
gives effect to (i) the acquisition of Cherokee, the initial public offering of
Class A Common Stock and the Merger and financing thereof as if they had
occurred on the first day of the 1997 fiscal year, in the case of the Statement
of Income Data for the year ended January 3, 1998, (ii) the Merger and financing
thereof as if they had occurred on the first day of the period presented, in the
case of the Statement of Income Data for the three months ended April 4, 1998
and (iii) the Merger and the financing thereof as if they had occurred at April
4, 1998, in the case of the Balance Sheet Data. The unaudited pro forma combined
financial data does not purport to reflect the financial position or results of
operations that actually would have resulted had the above transactions occurred
as of the dates indicated or to project the results of operations for any future
period. The unaudited pro forma combined financial data should be read in
conjunction with the historical financial statements of Dan River, Cherokee and
Bibb and in each case the notes thereto which are incorporated herein by
reference. See "Unaudited Pro Forma Combined Financial Data Information of Dan
River," "Selected Historical Financial Data of Dan River" and "Selected
Historical Financial Data of Bibb."
PRO FORMA
-------------------------------
THREE MONTHS
ENDED YEAR ENDED
APRIL 4, 1998 JANUARY 3, 1998
------------- ---------------
(IN THOUSANDS)
STATEMENT OF INCOME DATA:
Net sales................................................... $177,768 $734,494
Cost of sales............................................... 143,856 601,941
Gross profit................................................ 33,912 132,553
Selling, general and administrative expenses................ 18,958 75,786
Amortization of goodwill.................................... 794 3,176
Other operating costs, net.................................. -- 11,145
Operating income............................................ 14,160 42,446
Other income (expense), net................................. 280 (445)
Interest expense............................................ 7,665 29,977
Income from continuing operations........................... 3,973 6,147
BALANCE SHEET DATA (END OF PERIOD):
Working capital............................................. $193,604
Total assets................................................ 678,518
Total debt, including current maturities.................... 316,522
Shareholders equity......................................... 246,603
The pro forma combined financial data above does not include the impact of
certain merger-related cost savings initiatives that Dan River intends to
implement. The additional cost savings, which are expected to total $15.5
million (pre-tax) on an annual basis, include:
- reduced selling, general and administrative expense, principally from the
elimination of overlapping administrative functions;
- manufacturing cost savings from certain plant alignment and capacity
utilization synergies, and manufacturing practices expected to result in
improved operating efficiencies;
- cost savings relating to manufacturing techniques and specifications; and
- savings expected to be realized through volume purchasing of certain raw
materials, such as polyester and packaging materials.
The projected cost savings are based on estimates and assumptions believed
to be reasonable by management. Due to the inherent uncertainty associated
with such estimates and assumptions, there can be no assurance that these
cost savings will actually be realized.
14
26
PRO FORMA CAPITALIZATION OF DAN RIVER
The following table sets forth the historical capitalization of each of Dan
River and Bibb as of April 4, 1998 and the pro forma capitalization of Dan River
adjusted to give effect to the Merger and the financing thereof, as if the
Merger and the financing thereof had occurred at April 4, 1998.
The following table should be read in conjunction with the historical
consolidated financial statements of Dan River and the historical financial
statements of Bibb and in each case the notes thereto which are incorporated
herein by reference. See "Unaudited Pro Forma Combined Financial Information of
Dan River," "Selected Historical Financial Data of Dan River" and "Selected
Historical Financial Data of Bibb."
HISTORICAL PRO FORMA
-------------------- ------------------------
DAN RIVER BIBB ADJUSTMENTS COMBINED
--------- -------- ----------- --------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Current maturities of long-term debt.............. $ 198 $ 5,363 $ (5,363)(1) $ 198
======== ======== ======== ========
LONG-TERM DEBT:
Senior subordinated notes....................... $120,000 $ -- $ -- $120,000
New debt........................................ -- -- 177,251 (1) 177,251
Line of credit.................................. -- 54,871 (54,871)(1) --
Term loan....................................... -- 16,652 (16,652)(1) --
Working capital facility........................ 14,500 -- -- 14,500
Capital lease obligations....................... -- 7,745 (7,745)(1) --
Other long-term debt............................ 4,573 287 (287)(1) 4,573
-------- -------- -------- --------
Total long-term debt.................... 139,073 79,555 97,696 316,324
-------- -------- -------- --------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value, authorized
50,000,000 shares, no shares issued (Dan
River historical); $.01 par value, authorized
5,000,000 shares, no shares issued (Bibb
historical); $.01 par value, authorized
50,000,000 shares, no shares issued (as
adjusted).................................... -- -- -- --
Common stock, Class A, $.01 par value,
authorized 175,000,000 shares, issued and
outstanding 16,774,086 shares (Dan River
historical); $.01 par value, authorized
175,000,000 shares, issued and outstanding
21,134,731 shares (as adjusted).............. 168 -- 44(2) 212
Common stock, Class B, $.01 par value,
authorized 35,000,000 shares, issued and
outstanding 2,062,070 shares (Dan River
historical, and as adjusted)................. 21 -- -- 21
Common stock, $.01 par value, 25,000,000 shares
authorized issued and outstanding 10,061,576
shares (Bibb historical): no shares
authorized (as adjusted)..................... -- 101 (101)(2) --
Additional paid-in capital...................... 139,140 88,882 (13,486)(2) 214,536
Retained earnings (deficit)..................... 31,834 (30,775) 30,775 (2) 31,834
-------- -------- -------- --------
Total shareholders' equity.............. 171,163 58,208 17,232 246,603
-------- -------- -------- --------
Total capitalization.................... $310,236 $137,763 $114,928 $562,927
======== ======== ======== ========
- ---------------
(1) Reflects (i) the refinancing of all Bibb outstanding indebtedness and (ii)
additional financing to fund the cash portion of the buyout of Bibb
outstanding Common Stock and stock options, and other transaction costs. The
new debt is expected to be provided by a combination of bank financing and a
public debt issuance, or solely though bank financing.
(2) Reflects (i) the elimination of Bibb's equity as a result of the Merger and
(ii) the issuance of 4,360,645 shares of Dan River Class A Common Stock in
connection with the Merger which results in additional paid-in capital of
$75.4 million.
15
27
RISK FACTORS
In considering whether to approve the Merger Agreement, the Dan River
shareholders and the Bibb stockholders should carefully consider, in addition to
the other information in this Joint Proxy Statement/ Prospectus, the following
matters.
STOCK PRICE FLUCTUATIONS
The relative stock prices of Dan River Class A Common Stock and the Bibb
Common Stock at the Effective Time of the Merger may vary significantly from the
prices as of the date of execution of the Merger Agreement, the date hereof and
the date on which the Dan River shareholders and the Bibb stockholders vote on
the Merger Agreement due to changes in the business, operations and prospects of
Dan River or Bibb, market assessments of the likelihood that the Merger will be
consummated and the timing hereof, general market and economic conditions and
other factors.
The Exchange Ratio was fixed at 0.84615 at the time of execution of the
Merger Agreement by the parties and is not subject to adjustment. Any increase
or decrease of the market price of the Dan River Class A Common Stock will
correspondingly increase or decrease the value of Merger Consideration to be
received by Bibb stockholders pursuant to the Merger.
Further, there can be no assurance as to the trading volume or price of the
Dan River Class A Common Stock after the Merger. Events outside the control of
Dan River which could adversely affect the market value of Dan River's assets,
as well as the market value of Dan River Class A Common Stock, may occur during
the period from the date of this Joint Proxy Statement/Prospectus to the date
the Merger is consummated or thereafter. All of the Dan River Class A Common
Stock to be issued to the Bibb stockholders, other than affiliates of Bibb, in
connection with the Merger will be freely tradeable. Sales of a substantial
number of shares of Dan River Class A Common Stock by current Bibb stockholders
following consummation of the Merger, or the perception that such sales could
occur, could adversely affect the market price for Dan River Class A Common
Stock after the Merger.
STATUS OF MERGER AS TAX-FREE REORGANIZATION
Counsel to each of Dan River and Bibb are of the opinion that the Merger
will qualify as a tax-free reorganization under Section 368(a)(1) of the Code,
which generally means that the receipt of Dan River Class A Common Stock by a
Bibb stockholder in exchange for his or her Bibb Common Stock will not be a
taxable event. If the Merger were to fail to qualify as a tax-free
reorganization, each Bibb stockholder would recognize gain or loss equal to the
difference between such stockholder's tax basis in the Bibb Common Stock and the
sum of the fair market value of Dan River Class A Common Stock (if any) plus the
amount of cash (if any) received in the Merger. In addition, Bibb would be
treated as recognizing taxable gain or loss at the corporate level on the
transfer of its assets in the Merger. See "The Merger -- Certain Federal Income
Tax Consequences."
LOSS OF RIGHTS BY BIBB STOCKHOLDERS
The rights of the holders of Bibb Common Stock are presently governed by
the DGCL, the Bibb Charter (as hereinafter defined) and the Bibb Bylaws (as
hereinafter defined). After consummation of the merger, the rights of the
holders of Bibb Common Stock that is converted to Dan River Class A Common Stock
will be governed by the GBCC, the Dan River Charter (as hereinafter defined) and
the Dan River Bylaws (as hereinafter defined). Certain differences may reduce
certain existing rights of Bibb stockholders. See "The Merger -- Comparison of
Rights of Holders of Dan River Class A Common Stock and Bibb Common Stock."
TERMINATION PAYMENTS IF MERGER FAILS TO OCCUR
No assurance can be given that the Merger will be consummated. The Merger
Agreement provides for the payment by Bibb of a termination fee of $5,230,000 if
the Merger is terminated by Bibb or Dan River
16
28
under certain circumstances. The obligation to make such payment may adversely
affect the ability of Bibb to engage in another transaction in the event the
Merger is not consummated and may have an adverse impact on the financial
condition of Bibb. See "The Merger -- Terms of Merger Agreement -- Termination"
and "The Merger -- Terms of Merger Agreement -- Fees and Expenses."
CYCLICAL NATURE OF TEXTILE INDUSTRY
Domestic demand for textile products tends to vary with the business cycle
of the U.S. economy. In addition, the popularity, supply and demand for
particular textile products may change significantly from year to year based
upon prevailing fashion trends and other factors. These factors historically
have contributed to fluctuations in the sales and profitability of certain
textile products and in Dan River's results of operations. A decline in the
demand for textile products, an increase in the supply of textile products due
to expansion of capacity within the textile industry, changes in fashion trends
or deteriorating economic conditions could have a material adverse effect on Dan
River's results of operations and financial condition.
INTENSE COMPETITION
The textile industry is highly competitive. Dan River sells its products
primarily to domestic customers and competes with large, vertically integrated
textile manufacturers as well as numerous smaller companies specializing in
limited segments of the market. Competitors are both domestic and foreign, and
include a number of companies that are larger in size and have greater financial
resources than Dan River. Increases in domestic capacity and imports of
foreign-made textile and apparel products are a significant source of
competition for many domestic textile manufacturers, including Dan River.
Competition in the form of imported textile and apparel products, pricing
strategies of domestic competitors and the proliferation of newly styled fabrics
competing for fashion acceptance have been factors affecting Dan River's
business environment. The primary competitive factors in the textile industry
are price, product styling and differentiation, quality, manufacturing
flexibility, delivery time and customer service. The importance of these factors
is determined by the needs of particular customers and the characteristics of
particular products. To the extent that one or more of Dan River's competitors
gains an advantage with respect to any key competitive factor, Dan River's
business could be materially adversely affected. In addition, import protections
afforded to foreign textile manufacturers could make Dan River's products less
competitive and have a material adverse effect on Dan River's results of
operations and financial condition.
POSSIBLE ADVERSE EFFECT OF FLUCTUATIONS IN PRICE AND AVAILABILITY OF COTTON
The primary raw material used by Dan River is cotton. Prior to 1991, from
time to time, domestic cotton prices exceeded world prices, which created a
competitive disadvantage for Dan River and other domestic textile manufacturers,
which are required by law to purchase substantially all of their cotton from
domestic sources. The U.S. government has taken legislative action to improve
the price imbalance, but there can be no assurance that this will continue to be
the case. To the extent that U.S. cotton prices exceed world cotton prices, Dan
River's competitiveness may be materially adversely affected. U.S. cotton prices
are also affected by general economic conditions as well as the demand for U.S.
cotton in world markets and may increase or decrease depending on other market
variables at the time. Prevailing cotton prices significantly impact Dan River's
results of operations, and price increases could have a material adverse effect
on Dan River's results of operations and financial condition. In connection with
its purchase of cotton, Dan River generally covers open order requirements,
which average approximately three months of production, through direct purchases
and hedging transactions, and Dan River may shorten or lengthen that period in
accordance with its perception of the direction of cotton prices. There can be
no assurance that such transactions will not result in higher costs to Dan River
or will protect Dan River from fluctuations in cotton prices. Further, since
cotton is an agricultural product, its supply and quality are subject to forces
of nature. Any material shortage or interruption in the supply, variations in
the quality of cotton by reason of weather, infestations or any other factor
that would result in an increase in the cost of cotton could have a material
adverse effect on Dan River's results of operations and financial condition.
17
29
SUBSTANTIAL CAPITAL REQUIREMENTS
The textile manufacturing industry is capital intensive. In order to
maintain their competitive position, textile manufacturers, including Dan River,
must continually modernize their manufacturing processes, plants and equipment,
which can involve substantial capital investments. Over the last five fiscal
years, Dan River has made capital improvements of approximately $150 million.
Dan River expects to invest approximately $35 million during fiscal 1998 in
capital improvements designed to reduce manufacturing costs, enhance
manufacturing flexibility and improve product quality and responsiveness to
customers. Dan River generally finances its capital improvements with cash from
operations, vendor financing and borrowings under its credit facilities. To the
extent these sources of funds are insufficient to meet Dan River's ongoing
capital improvements requirements, Dan River may be required to seek alternative
sources of financing or curtail or delay capital spending plans. There can be no
assurance that such financing will be available when needed or, if available,
that it will be on terms acceptable to Dan River. Failure to make capital
improvements necessary to continue modernizing Dan River's manufacturing
operations and reduce costs could adversely affect Dan River's competitive
position and have a material adverse effect on Dan River's results of operations
and financial condition.
POSSIBLE ADVERSE EFFECT OF GOVERNMENT POLICY AND IMPORT REGULATIONS
The domestic textile market is subject to various U.S. governmental
policies affecting raw material costs and product supply. In addition, the
policies of foreign governments may, directly or indirectly, affect the domestic
market. Because U.S. textile companies are generally prohibited from importing
cotton, Dan River must purchase substantially all of its cotton in the domestic
market. Prior to 1991, from time to time, price imbalances between world and
domestic cotton prices existed. A series of U.S. legislative initiatives has
resulted in the reduction of Dan River's effective cotton costs to near world
levels. Because the availability and cost of cotton are affected by U.S.
agricultural policies, Dan River may experience increased cotton costs that
cannot be entirely passed on to its customers. The extent of import protection
afforded by the U.S. government to domestic textile producers has been, and is
likely to remain, subject to considerable domestic political deliberation. In
view of the labor cost advantages and the number of foreign producers of textile
products that compete with certain of Dan River's products, substantial
elimination of import protection for domestic textile manufacturers could have a
material adverse effect on Dan River's business. In January 1995, a multilateral
trade organization, the World Trade Organization ("WTO"), was established to
replace the General Agreement on Tariffs and Trade ("GATT"). This new body has
set forth the mechanisms by which world trade in textiles and clothing will be
progressively liberalized with the elimination of quotas and the reduction of
duties. The implementation began in January 1995 with the phasing-out of quotas
and the reduction of duties to take place over a 10-year period. The selection
of products at each phase is made by each importing country and must be drawn
from each of the four main textile groups: tops and yarns, fabrics, made-up
textile products and apparel. The elimination of quotas and the reduction of
tariffs under the WTO may result in increased imports of certain textile
products and apparel into North America. These factors could make Dan River's
products less competitive against low cost imports from developing countries.
NAFTA, which was entered into by Canada, Mexico and the United States and
became effective on January 1, 1994, has created the world's largest free-trade
zone. The agreement contains safeguards that were sought by the U.S. textile
industry, including a rule of origin requirement that products be processed in
one of the three countries in order to benefit from NAFTA. NAFTA will phase out
all trade restrictions and tariffs on textiles and apparel among the three
countries. There can be no assurance that the removal of these barriers to trade
will not have a material adverse effect on Dan River's results of operations and
financial condition.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
Following consummation of the Merger, Dan River will have substantial
indebtedness and significant debt service requirements. As of April 4, 1998, pro
forma for the Merger, Dan River's total indebtedness would have been
approximately $316.5 million. The degree to which Dan River is leveraged will
have important consequences, including the following: (i) the ability of Dan
River to obtain additional financing in
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the future, whether for working capital, capital expenditures, acquisitions or
other purposes, may be impaired; (ii) a substantial portion of Dan River's cash
flow from operations will be required to be dedicated to the payment of
principal and interest on its indebtedness thereby reducing funds available for
other purposes; (iii) Dan River's flexibility in planning for or reacting to
changes in market conditions may be limited; and (iv) Dan River may be more
vulnerable in the event of a downturn in its business. Following the
consummation of the Merger, approximately $ million in aggregate
borrowings will be outstanding under the then existing Dan River credit facility
(the "Credit Facility") and available borrowings thereunder will be $
million. All borrowings under the Credit Facility will mature on .
The ability of Dan River to meet its debt service obligations will depend
on the future operating performance and financial results of Dan River, which
will be subject in part to factors beyond the control of Dan River. Although
management believes that Dan River's cash flow will be adequate to meet its
interest and principal payments, there can be no assurance that Dan River will
continue to generate earnings in the future sufficient to cover its fixed
charges. If Dan River is unable to generate earnings in the future sufficient to
cover its fixed charges and is unable to borrow sufficient funds under either
the Credit Facility or from other sources, it may be required to refinance all
or a portion of its existing debt or to sell all or a portion of its assets.
There can be no assurance that a refinancing would be possible, nor can there be
any assurance as to the timing of any asset sales or the proceeds which Dan
River could realize therefrom. In addition, the terms of the Credit Facility and
the indenture governing the Dan River Senior Subordinated Notes restrict Dan
River's ability to sell assets and the use of the proceeds therefrom.
If for any reason, including a shortfall in anticipated operating results
or proceeds from asset sales, Dan River were unable to meet its debt service
obligations, it would be in default under the terms of its indebtedness. In the
event of such a default, the holders of such indebtedness could elect to declare
all of such indebtedness immediately due and payable, including accrued and
unpaid interest, and to terminate their commitments (if any) with respect to
funding obligations under such indebtedness. In addition, such holders could
proceed against their collateral (if any).
POTENTIAL UNFORESEEN ENVIRONMENTAL LIABILITIES OR COSTS
Dan River is subject to various federal, state and local environmental laws
and regulations limiting the discharge of pollutants and the storage, handling
and disposal of a variety of substances, including some substances which contain
constituents considered hazardous under environmental laws. Dan River's dyeing
and finishing operations result in the discharge of substantial quantities of
wastewater and emissions to the atmosphere. Dan River's operations also are
governed by laws and regulations relating to workplace safety and worker health
which, among other things, establish cotton dust, formaldehyde, asbestos and
noise standards, and regulate the use of hazardous chemicals in the workplace.
Treatment costs of air emissions and wastewater discharges, as well as other
costs of environmental compliance, have increased moderately over the past
several years. There can be no assurance that compliance with environmental or
health and safety laws and regulations will not materially adversely affect Dan
River's operations in the future. In addition, Dan River cannot predict what
environmental or health and safety legislation or regulations will be enacted in
the future or how existing or future laws or regulations will be enforced,
administered or interpreted, nor can it predict the amount of future
expenditures which may be required in order to comply with any such
environmental or health and safety laws or regulations.
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THE SPECIAL MEETINGS
DAN RIVER SPECIAL MEETING
Time, Date, Place and Purpose. The Dan River Special Meeting will be held
on , , 1998, at 10:00 a.m., local time, at the offices
of King & Spalding, 50th Floor, 191 Peachtree Street, Atlanta, Georgia. At the
Dan River Special Meeting, holders of Dan River Common Stock will be asked to
consider and vote upon a proposal to approve the Merger Agreement and the
issuance of shares of Dan River Class A Common Stock in connection therewith.
Record Date and Shares Entitled to Vote. Only holders of record of shares
of Dan River Common Stock at the close of business on the Dan River Record Date
are entitled to notice of and to vote at the Dan River Special Meeting. As of
such date, there were shares of Dan River Class A Common Stock
issued and outstanding held by approximately holders of record
and 2,062,070 shares of Dan River Class B Common Stock issued and outstanding
and held by eight holders of record. Each holder of record of Dan River Class A
Common Stock on the Dan River Record Date is entitled to one vote per share on
any matter that may properly come before the Dan River Special Meeting. Each
holder of record of Dan River Class B Common Stock on the Dan River Record Date
is entitled to 4.39 votes per share on any matter that may properly come before
the Dan River Special Meeting. With respect to all matters that properly may
come before the Dan River Special Meeting, holders of shares of Dan River Class
A Common Stock and Dan River Class B Common Stock will vote together as a single
voting group.
Vote Required; Security Ownership of Management. The presence in person or
by proxy of the holders of a majority of the voting power of the outstanding
shares of Dan River Common Stock as of the Dan River Record Date is necessary to
constitute a quorum for the transaction of business at the Dan River Special
Meeting. The affirmative vote of the holders of two-thirds of the voting power
of the outstanding Dan River Common Stock entitled to vote at the Dan River
Special Meeting is necessary to approve the Merger Agreement and the issuance of
shares of Dan River Class A Common Stock in connection therewith. Abstentions
and broker nonvotes will be counted as shares that are present and entitled to
vote for purposes of determining the presence of a quorum at the Dan River
Special Meeting (assuming, with respect to broker nonvotes, that the beneficial
owner has granted the nominee discretion to vote on at least one matter).
Abstentions and broker nonvotes with respect to the proposal to approve the
Merger Agreement and the issuance of shares of Dan River Class A Common Stock in
connection therewith have the effect of votes against such proposal at the Dan
River Special Meeting.
As of the Dan River Record Date, the executive officers and directors of
Dan River beneficially owned an aggregate of 2,473,270 shares of Dan River
Common Stock or approximately 13% of the shares of Dan River Common Stock then
outstanding, and representing approximately 37% of the voting power of the Dan
River Common Stock.
Solicitation and Revocation of Proxies. A form of proxy is enclosed with
this Joint Proxy Statement/ Prospectus. All shares of Dan River Common Stock
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such shares will be voted FOR
approval of the Merger Agreement, the issuance of shares of Dan River Class A
Common Stock in connection therewith and, in the discretion of the proxy holder,
as to any other matter which may properly come before the Dan River Special
Meeting.
Any Dan River shareholder that has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) filing with the Secretary of Dan River prior to the Dan
River Special Meeting, at Dan River's principal executive offices, either a
written revocation of such proxy or a duly executed proxy bearing a later date
or (ii) attending the Dan River Special Meeting and voting in person, regardless
of whether a proxy has previously been given. Presence at the Dan River Special
Meeting will not revoke a shareholder's proxy unless such shareholder votes in
person.
The cost of soliciting proxies will be borne by Dan River. Proxies may be
solicited by personal interview, mail and telephone. In addition, Dan River may
reimburse brokerage firms and other persons representing
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beneficial owners of shares of Dan River Common Stock for their expenses in
forwarding solicitation materials to beneficial owners. Proxies may also be
solicited by certain of Dan River's executive officers, directors and regular
employees, without additional compensation, personally or by telephone or
facsimile transmission.
THE BIBB SPECIAL MEETING
Time, Date, Place and Purpose. The Bibb Special Meeting will be held on
, 1998 at 10:00 a.m., local time, at the offices of .
At the Bibb Special Meeting, holders of Bibb Common Stock will be asked to
consider and vote upon a proposal to approve the Merger Agreement.
Record Date and Shares Entitled to Vote. Only holders of record of shares
of Bibb Common Stock at the close of business on the Bibb Record Date are
entitled to notice of and to vote at the Bibb Special Meeting. As of the Bibb
Record Date, there were shares of Bibb Common Stock issued and
outstanding held by approximately holders of record. Holders of
record of Bibb Common Sock on the Bibb Record Date are entitled to one vote per
share on any matter that may properly come before the Bibb Special Meeting.
Vote Required; Security Ownership of Management. The presence in person or
by proxy of the holders of a majority of the voting power of the outstanding
shares of Bibb Common Stock as of the Bibb Record Date is necessary to
constitute a quorum for the transaction of business at the Bibb Special Meeting.
The affirmative vote of a majority of the total votes cast by holders of
outstanding shares of Bibb Common Stock entitled to vote at the Bibb Special
Meeting is necessary to approve the Merger Agreement. Abstentions and broker
nonvotes will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum at the Bibb Special Meeting
(assuming, with respect to broker nonvotes, that the beneficial owner has
granted the nominee discretion to vote on at least one matter). Abstentions and
broker nonvotes with respect to the proposal to approve the Merger Agreement
will not count as either votes for or against such proposal at the Bibb Special
Meeting.
As of the Bibb Record Date, the executive officers and directors of Bibb
beneficially owned an aggregate of shares of Bibb Common Stock (not
including shares of Bibb Common Stock issuable upon the exercise of options
outstanding under the Bibb Option Plans held by such persons), or approximately
% of the shares of Bibb Common Stock then outstanding.
Solicitation and Revocation of Proxies. A form of proxy is enclosed with
this Joint Proxy Statement/ Prospectus. All shares of Bibb Common Stock
represented by properly executed proxies will, unless such proxies have been
previously revoked, be voted in accordance with the instructions indicated on
such proxies. If no instructions are indicated, such shares will be voted FOR
approval of the Merger Agreement and, in the discretion of the proxy holder, as
to any other matter which may properly come before the Bibb Special Meeting.
Any Bibb stockholder that has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) filing with the Secretary of Bibb prior to the Bibb
Special Meeting, at Bibb's principal executive offices, either a written
revocation of such proxy or a duly executed proxy bearing a later date or (ii)
attending the Bibb Special Meeting and voting in person, regardless of whether a
proxy has previously been given. Presence at the Bibb Special Meeting will not
revoke a stockholder's proxy unless such stockholder votes in person.
The cost of soliciting proxies will be borne by Bibb. Proxies may be
solicited by personal interview, mail and telephone. In addition, Bibb may
reimburse brokerage firms and other persons representing beneficial owners of
shares of Bibb Common Stock for their expenses in forwarding solicitation
materials to beneficial owners. Proxies may also be solicited by certain of
Bibb's executive officers, directors and regular employees, without additional
compensation, personally or by telephone or facsimile transmission.
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THE MERGER
BACKGROUND OF THE MERGER
In late 1993 and early 1994, Joseph L. Lanier, Jr., Chairman and Chief
Executive Officer of Dan River and Thomas C. Foley, then Chairman of Bibb, had
preliminary discussions concerning Dan River's possible interest in acquiring
Bibb. On August 19, 1994, Dan River and Bibb exchanged confidentiality letters
and exchanged limited confidential information. These discussions terminated in
the spring of 1995, when Mr. Foley indicated that Bibb was not interested at
that time in pursuing a transaction.
On July 3, 1996, Bibb filed for bankruptcy pursuant to a Restructuring
Agreement which provided for a Plan of Reorganization (the "Bibb Plan of
Reorganization"), which was confirmed by the Bankruptcy Court on September 12,
1996. On September 27, 1996, Bibb emerged from bankruptcy.
In early 1997, subsequent to Bibb's emergence from bankruptcy, Mr. Lanier
contacted Michael L. Fulbright, President and Chief Executive Officer of Bibb,
and again indicated an interest in acquiring Bibb, but no substantive
discussions took place. On February 11, 1997, Mr. Fulbright and Mr. Lanier met
in Atlanta to discuss generally the advantages of a possible transaction between
the two companies, including the possibility of a merger. While these
discussions did not lead to any definitive action or proposals at that time, the
parties agreed to continue periodic discussions regarding a possible
transaction. Following a telephone conversation between Mr. Fulbright and Mr.
Lanier on June 3, 1997, Mr. Fulbright forwarded to Mr. Lanier a draft
confidentiality and standstill agreement to be executed between the two
companies prior to the exchange of information. Mr. Lanier advised Mr. Fulbright
that at the time Dan River would not be able to give substantive attention to a
possible acquisition and the parties did not execute such a confidentiality and
standstill agreement at that time.
On June 25, 1997, Bibb executed an engagement letter with Prudential
Securities Incorporated ("Prudential") whereby Bibb engaged Prudential for
advice regarding the implementation of a shareholder rights plan. On September
30, 1997, Bibb's Board of Directors adopted and Bibb entered into the Bibb
Rights Agreement. The engagement letter with Prudential contemplated that Bibb
and Prudential would negotiate an engagement for Prudential to serve as Bibb's
financial advisor in the event of an unsolicited offer to acquire Bibb.
In January 1998, Mr. Fulbright held discussions with the officers of
several public textile companies to discuss a possible business combination or
other strategic transaction with Bibb. On January 15, 1998, Mr. Fulbright and
the Chairman and Chief Executive Officer of a public textile company ("Company
No. 1") met in Atlanta, Georgia. On January 20, 1998, Mr. Fulbright and the
President and Chief Executive Officer of a second public textile company
("Company No. 2") met in Atlanta. On January 22, 1998, Mr. Fulbright and the
Executive Vice President and Chief Financial Officer of a third public textile
company ("Company No. 3") met in Atlanta. In addition, Mr. Fulbright held
discussions with two additional parties regarding their possible interest in
acquiring Bibb's engineered products division.
Soon after these discussions, Bibb and each of the textile companies
executed confidentiality and standstill agreements whereby the parties agreed to
exchange information and to refrain from making unsolicited proposals regarding
Bibb. On January 23, 1998, Bibb and Company No. 2 executed a confidentiality and
standstill agreement. On January 27, 1998, Bibb and Company No. 1 executed a
confidentiality and standstill agreement. On February 2, 1998, Bibb and Company
No. 3 executed a confidentiality and standstill agreement.
On January 26, 1998, Franklin Resources, Inc. a stockholder of Bibb
("Franklin"), filed a Schedule 13D with the Commission stating its view that the
Rights Plan was not in the best interests of the stockholders of Bibb and its
intention to communicate with the management, directors and stockholders of Bibb
to discuss actions to cause Bibb to repeal the declaration of Bibb Rights (as
defined herein) pursuant to the Bibb Rights Agreement and to encourage Bibb to
pursue a strategic sale, merger or other business combination.
Following the execution of the confidentiality and standstill agreements
with Company No. 1 and Company No. 3, Mr. Fulbright met with the senior
management of each of these companies and provided
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business and financial due diligence information on Bibb. On February 4, 1998,
Mr. Fulbright and Charles R. Tutterow, Bibb's Chief Financial Officer, met in
Atlanta with the Chief Executive Officer of Company No. 1. On February 10, 1998,
Mr. Fulbright met in North Carolina with the Chief Executive Officer, Chief
Operating Officer, Executive Vice President and Chief Financial Officer of
Company No. 3. In the course of these discussions, Mr. Fulbright indicated that
interest levels at a per share price for Bibb Common Stock below the mid-teens
would be unacceptable. On February 18, 1998, Mr. Fulbright requested the return
of the information provided to Company No. 3.
In January 1998, Mr. Fulbright and Mr. Lanier resumed discussions regarding
a possible transaction between Bibb and Dan River. On January 20, 1998, Mr.
Lanier forwarded to Mr. Fulbright a revised draft confidentiality and standstill
agreement. Mr. Fulbright, Mr. Lanier, Richard L. Williams and Barry F. Shea met
on February 3, 1998, in Atlanta, to discuss further their respective businesses
and the possibility of a transaction between Bibb and Dan River. By letter dated
February 13, 1998, Mr. Lanier requested comprehensive due diligence materials
from Bibb. Following negotiations on the scope of a confidentiality and
standstill agreement, on February 17, 1998, Bibb and Dan River executed a
confidentiality and standstill agreement which permitted "confidential
proposals" to be made to Bibb for a limited period of time. That same day, Mr.
Fulbright and Messrs. Williams, Shea, Harry L. Goodrich and Thomas L. Muscalino
of Dan River met in Atlanta to discuss business and financial due diligence, and
Mr. Fulbright provided certain non-public financial information on Bibb to Dan
River. On February 18, 1998, Dan River requested additional financial
information on Bibb in order to formulate a valuation range for a proposal to be
made to Bibb.
Consistent with the provisions of the confidentiality and standstill
agreement to which it was subject, on March 5, 1998, Dan River presented a
proposal to Bibb pursuant to which Bibb would be merged into Dan River or a
wholly-owned subsidiary of Dan River. On March 12, 1998, Mr. Fulbright responded
to the March 5, 1998 proposal. In this response, Mr. Fulbright agreed that a
combination of Dan River and Bibb provided strategic and tactical benefits but
concluded that the valuation range per share offered by Dan River was
unacceptable. Mr. Lanier indicated to Mr. Fulbright that Dan River would not be
able to justify a more favorable valuation unless certain additional information
was made available to Dan River concerning Bibb's operations and prospects.
On March 11, 1998, Mr. Fulbright requested the return of the materials
provided to Company No. 1 under the confidentiality and standstill agreement in
the event that Company No. 1 was not willing to pursue discussions regarding a
transaction in accordance with the terms of the confidentiality and standstill
agreement between the parties. On March 23, 1998, Company No. 1 returned to Bibb
materials that had been provided to it. Because there had been no discussions
between Bibb and Company No. 2 for over two months, on April 14, 1998, Mr.
Fulbright requested the return of the information previously provided to Company
No. 2 pursuant to the confidentiality and standstill agreement between the
parties.
On April 3, 1998, Mr. Goodrich, the Vice President, Secretary and General
Counsel of Dan River, representatives of King & Spalding, counsel for Dan River,
representatives of Jones Day, counsel for Bibb, and Mr. Tutterow, the Vice
President, Chief Financial Officer and Secretary of Bibb, held a telephone
conference call to discuss business, legal and financial due diligence
information on Bibb. Shortly thereafter, on April 6, 1998, Mr. Fulbright, Mr.
Lanier and other officers of Dan River met in New York City to discuss valuation
ranges and to exchange further due diligence information between the parties.
By letter dated April 13, 1998, to Mr. Lanier, Mr. Fulbright presented
Bibb's analysis of certain merger considerations to Dan River. On April 15,
1998, Mr. Lanier submitted a revised proposal to Bibb, providing for a price of
$16 per share of Bibb Common Stock, which would be paid 50% to 60% in cash and
40% to 50% in Dan River Class A Common Stock.
By letter dated May 6, 1998, Mr. Fulbright returned the due diligence
information provided to Bibb by Dan River and requested the destruction of the
due diligence information provided to Dan River by Bibb. By letter dated May 7,
1998, Mr. Lanier reiterated his proposal to Mr. Fulbright for the merger of Dan
River and Bibb for an aggregate merger consideration valued at $16 per share of
Bibb Common Stock.
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On May 12, 1998, the Board of Directors of Bibb authorized Mr. Fulbright to
engage Houlihan Lokey to provide financial advisory services to Bibb in
connection with the possible transaction with Dan River, and in particular, to
advise Bibb, if so requested, about the adequacy of any consideration offered in
connection with such business combination and to evaluate the fairness of any
such proposal. In addition, the Board asked Houlihan Lokey to assess whether it
would be in the best interest of Bibb to seek a transaction for the engineered
products division of Bibb (the "EPD") separate from a transaction involving
Bibb. In the course of its analysis, Houlihan Lokey advised that it was unlikely
that a separate transaction for the EPD would maximize stockholder value.
On June 2, 1998, Mr. Fulbright and Mr. Lanier met in Atlanta and discussed
further the possibility of a business combination between Bibb and Dan River,
and discussed specifically valuation issues for such transaction. On June 4,
1998, the Bibb Board of Directors authorized Mr. Fulbright to continue
negotiations with Dan River regarding a business combination between the two
companies. On June 8, 1998, the Dan River Board of Directors met and authorized
Mr. Lanier to proceed with negotiations with Bibb for a business combination on
terms involving merger consideration of $16.50 per share of Bibb Common Stock.
On the same date, Mr. Fulbright forwarded an outline of such a business
combination to Mr. Lanier which would include merger consideration consisting of
approximately half cash and half Dan River Class A Common Stock. On June 11,
1998, the Bibb Board of Directors met, reviewed the pricing and structure of the
proposed merger, and instructed Mr. Fulbright to negotiate a definitive
agreement on that basis.
Bibb's and Dan River's management proceeded with due diligence and
commenced discussions concerning the terms of the proposed transaction,
including negotiation of definitive transaction agreements. Throughout the month
of June, the parties continued their due diligence investigations, and senior
management of Dan River and Bibb and their legal representatives negotiated the
terms of the Merger Agreement. During the same period, representatives of Jones
Day, at the request of Bibb's management, had several conversations with
representatives of Dan River regarding valuation, structure and timing of a
potential transaction. In particular, the parties negotiated the circumstances
giving rise to the break-up fee, the minimum market value of Dan River Class A
Common Stock at which Bibb would be required to go forward with the transaction,
and the nature of certain conditions precedent to closing, particularly with
respect to any material adverse change in Bibb's business after execution of the
Merger Agreement. Mr. Fulbright and Mr. Lanier agreed that the parties would
proceed with a transaction on the basis of an Exchange Ratio of .84615 of a
share of Dan River Class A Common Stock per share of Bibb Common Stock or $16.50
per share in cash, or a combination thereof, subject to the requirement that the
total number of shares of Bibb Common Stock that will be converted into Dan
River Class A Common Stock will equal 50% of the outstanding shares of Bibb
Common Stock prior to the Merger. It was further agreed that the merger qualify
as a tax-free reorganization under the Code.
In the afternoon of June 22, 1998, a special meeting of the Dan River Board
of Directors was held which also was attended by representatives of Bowles
Hollowell and King & Spalding. A representative of King & Spalding summarized
the fiduciary duties to which the directors were subject in their deliberations
and under which their actions would be reviewed and described for the directors
the significant terms of the Merger Agreement. A representative of Bowles
Hollowell presented the Dan River Board of Directors with its financial analyses
on a merger between Dan River and Bibb. The Dan River Board of Directors
approved the Merger and the Merger Agreement and authorized Mr. Lanier to
complete negotiation of and execute the Merger Agreement with Bibb.
On the morning of June 23, 1998, a special meeting of the Bibb Board of
Directors was held, which also was attended by representatives of Houlihan Lokey
and Jones Day and Mr. Tutterow. A representative of Jones Day summarized the
fiduciary duties to which the directors were subject in their deliberations and
under which their actions would be reviewed, and also presented the Board with a
report on certain outstanding issues in the Merger Agreement, including the
circumstances under which the parties could terminate the Merger Agreement, the
material adverse effect condition, the Exchange Ratio, and the tax-free nature
of the transaction. (The Bibb Board of Directors previously had been furnished
with a full copy of the most current draft of the Merger Agreement, and had
reviewed with counsel a summary of significant terms of the Merger Agreement.) A
representative of Houlihan Lokey presented its financial analysis of a merger
between Bibb
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and Dan River. Following a discussion among the board members, the Bibb Board of
Directors asked Mr. Fulbright to continue negotiations with Dan River regarding,
among other things, the break-up fee, Exchange Ratio, the material adverse
effect condition, and the tax-free status of the transaction as set forth in the
draft Merger Agreement presented to the Bibb Board of Directors. Between June 24
and June 26, Mr. Fulbright and Mr. Lanier held several telephone conversations
during which these issues were discussed, and representatives of Jones Day
continued negotiations of the Merger Agreement with representatives of King &
Spalding.
Special meetings of the Bibb Board of Directors were held on June 24, 1998
and June 25, 1998, at which meetings Mr. Fulbright and Mr. Tutterow and
representatives of Jones Day updated the board on the status of negotiations of
the Merger Agreement with Dan River.
At a special meeting of the Bibb Board of Directors held on Friday
afternoon, June 26, 1998, a representative of Jones Day again summarized the
fiduciary duties to which the members of the Bibb Board of Directors were
subject. A representative of Houlihan Lokey reviewed with the Bibb Board of
Directors the financial analyses performed by Houlihan Lokey in connection with
the proposed merger and rendered to the Bibb Board of its oral opinion (which
opinion was confirmed by delivery of a written opinion dated June 26, 1998) to
the effect that, as of the date of such opinion and based upon and subject to
certain matters stated therein, the Merger Consideration was fair, from a
financial point of view, to the Bibb stockholders. A discussion among the
members of the Bibb Board of Directors present at the meeting then ensued
regarding these matters, as well as the resolution of certain issues in the
Merger Agreement. After further deliberation, the members of the Bibb Board of
Directors present (Mr. Irwin Gold, a Bibb director, was not present at the
meeting) unanimously approved the Merger Agreement with Dan River and authorized
Mr. Fulbright to execute the Merger Agreement.
On Sunday, June 28, 1998, Dan River and Bibb each executed and delivered
the Merger Agreement. The execution of the Merger Agreement was announced on the
morning of Monday, June 29, 1998, by issuance of press releases by Bibb and Dan
River.
Bibb did not seek the advice of Prudential in connection with its
discussions with any of Company No. 1, Company No. 2, Company No. 3 or Dan
River, nor did it seek the advice of Houlihan Lokey in connection with any
discussions regarding a transaction involving the entire company other than with
Dan River.
TERMS OF THE MERGER AGREEMENT
General. The Merger Agreement provides that, following approval of the
Merger Agreement by the stockholders of Bibb and the approval of the Merger
Agreement and the issuance of Dan River Class A Common Stock in connection
therewith by the shareholders of Dan River and the satisfaction or waiver of the
other conditions to the Merger, Bibb will be merged with and into Dan River at
the Effective Time in accordance with the GBCC and DGCL. Dan River will be the
surviving corporation in the Merger. As a result of the Merger, the separate
corporate existence of Bibb will cease.
Merger Consideration. Upon consummation of the Merger, each outstanding
share of Bibb Common Stock (other than treasury shares, shares held by Dan River
and dissenting shares) will be converted into the right to receive cash or
shares of Dan River Class A Common Stock. Each Bibb stockholder will have the
opportunity to indicate, on a Form of Election, whether such stockholder wishes
to make a Stock Election, a Cash Election or a Non-Election for each share of
Bibb Common Stock held by such stockholder. The allocations of cash and/or
shares of Dan River Class A Common Stock that a stockholder of Bibb may receive
will depend upon (i) the stated preference of the Bibb stockholder on the Form
of Election and (ii) the proration procedures to be applied if the Cash Election
Shares exceed the Cash Election Number or the Stock Election Shares exceed the
Stock Election Number.
Stockholders of Bibb who make an effective "Stock Election" will receive
(subject to the proration procedures described below), for each share of Bibb
Common Stock for which such election is made, 0.84615 shares of Dan River Class
A Common Stock. Stockholders of Bibb who make an effective "Cash Election" will
receive (subject to the proration procedures described below) for each share of
Bibb Common Stock for
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which such election is made, in cash, an amount equal to $16.50 (the "Cash
Consideration"). If a holder of Bibb Common Stock has no preference as to
consideration and makes a "Non-Election," such stockholder shall receive 0.84615
shares of Dan River Class A Common Stock, $16.50 in cash or a combination
thereof determined as set forth below.
In the event that the aggregate number of shares of Bibb Common Stock
covered by Stock Elections (the "Stock Election Shares") exceeds the Stock
Election Number, (i) each Bibb stockholder making an effective Cash Election or
making a Non-Election will receive, for each share of Bibb Common Stock with
respect to which such election is made, cash in the amount of $16.50 and (ii)
each Bibb stockholder making an effective Stock Election will receive, for each
share of Bibb Common Stock for which a Stock Election has been made, (x) a
number of shares of Dan River Class A Common Stock equal to the product of the
Exchange Ratio and a fraction (the "Stock Fraction"), the numerator of which is
the Stock Election Number and the denominator of which is the total number of
Stock Election Shares, and (y) cash in an amount equal to the product of (A)
$16.50 and (B) a fraction equal to one minus the Stock Fraction. The "Stock
Election Number" is equal to 50% of the number of shares of Bibb Common Stock
outstanding immediately prior to the Effective Time.
In the event that the aggregate number of shares of Bibb Common Stock
covered by Cash Elections (the "Cash Election Shares") exceeds the Cash Election
Number, (i) each Bibb stockholder making an effective Stock Election or making a
Non-Election will receive, for each share of Bibb Common Stock with respect to
which such election is made, 0.84615 shares of Dan River Class A Common Stock
and (ii) each stockholder making a Cash Election will receive, for each share of
Bibb Common Stock for which a Cash Election has been made or deemed to have been
made, (x) cash in an amount equal to the product of $16.50 and a fraction (the
"Cash Fraction"), the numerator of which is the Cash Election Number and the
denominator of which is the total number of Cash Election Shares, and (y) a
number of shares of Dan River Class A Common Stock equal to the product of the
Exchange Ratio and a fraction equal to one minus the Cash Fraction. The "Cash
Election Number" is equal to 50% of the number of shares of Bibb Common Stock
outstanding immediately prior to the Effective Time less the number of shares of
Bibb Common Stock with respect to which appraisal rights are exercised and the
number of shares of Bibb Common Stock to be exchanged for cash in lieu of
fractional shares.
In the event the number of Stock Election Shares does not exceed the Stock
Election Number and the number of Cash Election Shares does not exceed the Cash
Election Number, stockholders of Bibb who make a Non- Election will receive cash
and Dan River Class A Common Stock on a proportionate basis so that the Stock
Election Number and the Cash Election Number equal their respective percentages
of shares of Bibb Common Stock outstanding as closely as possible.
No fractional shares of Dan River Class A Common Stock will be issued
pursuant to the Merger. In lieu of the issuance of any fractional shares of Dan
River Class A Common Stock, a cash payment determined in accordance with Section
2.2(f) of the Merger Agreement will be paid to holders in respect of any
fractional share of Dan River Class A Common Stock that otherwise would be
issuable.
Election Procedures. Concurrently with the mailing of this Joint Proxy
Statement/Prospectus, a Form of Election will be mailed to each holder of record
of Bibb Common Stock on the Bibb Record Date. To be effective, a Form of
Election must be properly completed, signed and submitted to the Exchange Agent
by the close of business on the last business day prior to the Effective Time
and must be accompanied by the certificates representing the shares of Bibb
Common Stock as to which the election is made (or by an appropriate guarantee of
delivery of such certificates). If a holder of Bibb Common Stock does not submit
a Form of Election which is received by the Exchange Agent prior to the Election
Deadline, such Bibb stockholder will be deemed to have made a Non-Election.
The Merger Agreement provides that Forms of Election once submitted to the
Exchange Agent are irrevocable. If a Bibb stockholder properly completes, signs
and submits a Form of Election to the Exchange Agent with such stockholder's
certifications representing the shares of Bibb Common Stock as to which such
election is made (or appropriate guarantees of delivery therefor) and the Merger
is consummated, each share of Bibb Common Stock covered by such Form of Election
will be exchanged for the Merger Consideration as indicated on the Form of
Election and in accordance with the Merger Agreement. Once a Bibb stockholder
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has so delivered a Form of Election, such stockholder's share certificates
representing the shares of Bibb Common Stock as to which such election is made
will not be returned unless the Merger fails to be consummated.
Options to Purchase Bibb Common Stock. The Merger Agreement provides that,
except as described below, in the case of any option, or part of any option, to
purchase Bibb Common Stock under the Omnibus Plan that at the Effective Time
would under the terms of such option (after giving effect to any accelerated
vesting caused by the Merger) still constitute an "incentive stock option," each
option (or part of any option) to purchase Bibb Common Stock under the Bibb
Option Plans which is outstanding and unexercised (whether or not then
exercisable or vested) will be canceled by Bibb and, in consideration of such
cancellation, Dan River will pay promptly after the Effective Time to the holder
of each such option in respect thereof an amount equal to the product of (a) the
Applicable Amount and (b) the number of shares of Bibb Common Stock subject to
such option (the "Option Cancellation Consideration"). The term "Applicable
Amount" means the excess of (i) $16.50 over (ii) the exercise price of such
option. The Option Cancellation Consideration shall consist of a cash component
equal to the Option Cancellation Consideration times 0.5 and a stock component
that will be the number of shares of Dan River Class A Common Stock (rounded to
the next highest whole number in the case of a fractional amount) equal to the
product of the Option Cancellation Consideration times 0.5 divided by $19.50.
At the Effective Time, Dan River shall assume the Omnibus Plan and each
option (or part of any option) to purchase Bibb Common Stock under the Omnibus
Plan that at the Effective Time would under the terms of such option (after
giving effect to any accelerated vesting caused by the Merger) still constitute
an "incentive stock option" and that is otherwise described above. Each such
assumed option shall be converted into an outstanding and exercisable option to
purchase Dan River Class A Common Stock in accordance with the terms of the
Omnibus Plan and each such assumed option. Each such option shall constitute an
option to acquire, on the same terms and conditions (giving effect to any
accelerated vesting caused by the Merger) as were applicable under such assumed
option, a number of shares of Dan River Class A Common Stock equal to the number
of shares of Bibb Common Stock purchasable pursuant to such option multiplied by
the Option Exchange Ratio (as hereinafter defined), at a price per share equal
to the per-share exercise price for the shares of Bibb Common Stock purchasable
pursuant to such option divided by the Option Exchange Ratio; provided, however,
the number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424(a) of the Code; and provided further, that the number of shares
of Dan River Class A Common Stock that may be purchased upon exercise of such
option shall not include any fractional share and, upon exercise of such option,
a cash payment shall be made for any fractional share based upon the closing
price of a share of Dan River Class A Common Stock on the NYSE on the last
trading day immediately preceding the date of exercise. The Option Exchange
Ratio shall be the quotient determined by dividing the closing price of a share
of Bibb Common Stock on the AMEX on the last trading day immediately preceding
the Closing Date by the closing price of a share of Dan River Class A Common
Stock on the NYSE on the last trading day immediately preceding the Closing
Date.
Registration Rights. The Merger Agreement provides that promptly following
the Closing Date, Dan River will file a Shelf Registration Statement with the
Commission that covers all of the Registrable Stock to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act; provided,
that the Holders of the Registrable Stock shall agree (i) to provide required
information requested by Dan River to be included in a registration statement,
(ii) to observe customary "black out" periods during which such Holder will not
sell Registrable Stock under the Shelf Registration Statement and (iii) to pay
such holders pro rata share of the Commission's filing fee for the Shelf
Registration Statement. "Registrable Stock" shall mean the shares of Dan River
Class A Common Stock received by the Holders (as hereinafter defined) pursuant
to the Merger; provided, further, that Dan River shall be permitted to include
shares of Dan River Common Stock held by existing shareholders on the Shelf
Registration Statement. The Holders shall mean those stockholders of Bibb which,
as of the date of the Merger Agreement, beneficially own ten percent or more of
Bibb Common Stock. If Dan River at any time proposes to register any of its
Class A Common Stock under the Securities Act for sale to the public, Dan River
will promptly give written notice to all Holders of its intention to effect such
registration and will include the Registrable Stock in such registration;
provided, however, that if the
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Piggyback Registration is an underwritten registration, and the managing
underwriters advise Dan River that the aggregate number of shares to be included
in such registration exceeds the amount that can be sold without adversely
effecting the proposed distribution, Dan River may limit the number of shares
included in such registration, and holders of registration rights with respect
to Dan River Class A Common Stock prior to the Closing Date will have priority
over the Holders with respect to the number of shares to be included in the
Piggyback Registration. Dan River covenants and agrees that any future grant of
"piggyback" registration rights shall be expressly subject and subordinated to
the rights of registration of the Holders granted pursuant to the Merger
Agreement. The foregoing Dan River obligations shall terminate as of the second
anniversary of the Closing Date.
Rights Plan. In September 1997, the Bibb Board of Directors adopted the
Bibb Rights Agreement. See "-- Comparison of Rights of Holders of Dan River
Class A Common Stock and Bibb Common Stock -- Rights Plan." The Bibb Board of
Directors has approved and Bibb has entered into an amendment to the Bibb Rights
Agreement to provide that neither the approval, execution or delivery of the
Merger Agreement, the announcement thereof, nor the consummation of the
transactions contemplated thereby will result in the Bibb Rights being
exercised, distributed or triggered.
Conditions to the Merger. The obligations of both Dan River and Bibb to
consummate the Merger are subject to the satisfaction of the following
conditions: (i) the adoption of the Merger Agreement by the shareholders of Dan
River and the stockholders of Bibb; (ii) the absence of injunction, writ or
preliminary temporary restraining order or any order of any nature issued by a
court or governmental agency of competent jurisdiction to the effect that the
Merger may not be consummated as provided in the Merger Agreement; provided,
however, that the party invoking this condition shall have complied with its
obligations under Section 5.9 of the Merger Agreement; (iii) the termination or
expiration of the applicable waiting period under the HSR Act; (iv) the
effectiveness of the Registration Statement under the Securities Act and the
absence of (a) any stop order suspending the effectiveness of the Registration
Statement or any proceedings by the Commission (actual or threatened) for such
purpose and (b) the absence of any stop order suspending the effectiveness of
any qualification or registration of the Dan River Class A Common Stock under
the state securities laws by authorities of any such state (actual or
threatened) for such purpose; and (v) the shares of Dan River Class A Common
Stock to be issued pursuant to the Agreement shall have been authorized for
listing on the NYSE, subject to official notice of issuance.
The obligation of Dan River to consummate the Merger is subject to the
satisfaction or waiver of the following conditions: (i) Bibb's representations
and warranties contained in Article III of the Merger Agreement (except for the
representations and warranties contained in Sections 3.8(a), 3.8(b) and 3.15),
which representations and warranties shall be deemed for purposes of Section
6.2(b) of the Merger Agreement not to include any qualification or limitation
with respect to materiality, shall be true and correct as of the Closing Date,
except where the matters in respect of such representations and warranties which
are not true and correct, in the aggregate, has not had or would not have a Bibb
Material Adverse Effect (as defined in the Merger Agreement), with the same
effect as though such representations and warranties were made as of the Closing
Date and the representations and warranties contained in Sections 3.8(a), 3.8(b)
and 3.15 shall be true and correct as of the date of the Merger Agreement,
except where the failure to be so true and correct would not have a Bibb
Material Adverse Effect; (ii) Bibb shall have furnished to Dan River a
certificate of its appropriate officers as to compliance with certain conditions
of the Merger Agreement; (iii) Bibb shall be in compliance with the "Tangible
Net Worth" covenant contained in Section 9.14 of the Credit Agreement as of the
month end immediately preceding the Closing Date and Bibb's chief financial
officer shall certify to such compliance; and (iv) Dan River shall have received
a written opinion of King & Spalding prior to the date the Joint Proxy Statement
is first mailed to Dan River shareholders and reaffirmed as of the Closing Date
to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a)(1) of the Code.
The obligation of Bibb to consummate the Merger also is subject to the
satisfaction of the following conditions: (i) Dan River's representations and
warranties contained in Article IV of the Merger Agreement (except for the
representations and warranties contained in Section 4.8(a) and 4.8(b)), which
representations and warranties shall be deemed for purposes of Section 6.3(b) of
the Merger Agreement not to include any
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qualification or limitation with respect to materiality, shall be true and
correct as of the Closing Date, except where the matters in respect of which
such representations and warranties are not true and correct, in the aggregate,
has not had or would not have a Dan River Material Adverse Effect (as defined in
the Merger Agreement), with the same effect as though such representations and
warranties were made as of the Closing Date and the representations and
warranties contained in Sections 4.8(a) and 4.8(b) shall be true and correct as
of the date of the Merger Agreement, except where the failure to be so true and
correct would not have a Dan River Material Adverse Effect; (ii) Dan River shall
have furnished to Bibb a certificate of its appropriate officers as to
compliance with certain conditions of the Merger Agreement; and (iii) Bibb shall
have received a written opinion of Jones Day prior to the date the Joint Proxy
Statement is first mailed to Bibb stockholders and reaffirmed as of the Closing
Date to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a)(1) of the Code.
Amendment. The Merger Agreement may be amended before adoption of the
Merger Agreement by the Bibb stockholders and the Dan River shareholders with
respect to any of the terms contained therein and, without further approval of
such stockholders and shareholders, may be amended after such approvals, except
as otherwise provided by law. Any amendment to the Merger Agreement must be in
writing and signed by the parties to the Merger Agreement.
Termination. The Merger Agreement may be terminated (i) by mutual written
consent of Dan River and Bibb, (ii) by Dan River or Bibb if, without any
material breach by such terminating party, the Effective Time shall not have
occurred (i) on or before October 15, 1998 or (ii) on or before November 30,
1998 if on or prior to (A) July 10, 1998 Dan River and Bibb have filed the
requisite notification report form required under the HSR Act, (B) on or prior
to July 10, 1998 Dan River has filed the Registration Statement and (C) the
delay in the Effective Time past October 15, 1998, is the result of a review by
the Commission, the Antitrust Division or the FTC; (iii) by Dan River or Bibb if
any court of competent jurisdiction or other governmental body within the United
States shall have issued a final and nonappealable order, injunction, decree,
judgment or ruling or taken any other final and nonappealable action
restraining, enjoining or otherwise prohibiting the Merger; provided, however,
that the party invoking this right shall have complied with its obligations
under Section 5.9 of the Merger Agreement; (iv) by Dan River or Bibb if the
Merger Agreement shall not have been approved and adopted by the requisite
number of Bibb stockholders and Dan River shareholders at the Bibb Special
Meeting and the Dan River Special Meeting, respectively; (v) by Bibb, if it
shall have received an Acquisition Proposal and shall have advised Dan River in
writing that the Bibb Board of Directors, after consultation with and based upon
the advice of independent legal counsel, determined in good faith that failure
to accept such Acquisition Proposal would result in a breach by the Bibb Board
of Directors of its fiduciary duties under applicable law; provided, however,
that simultaneously Bibb shall pay Dan River the Fee; and (vi) by Dan River, if
the Bibb Board of Directors shall have (1) withdrawn, modified or amended in an
adverse manner its approval or recommendation of the Merger Agreement, the
Merger or any other transactions contemplated hereby, (2) approved, endorsed or
recommended to its stockholders an Acquisition Proposal or (3) resolved to do
any of the foregoing.
Fees and Expenses. (a) If:
(i) the Merger Agreement is terminated by Dan River pursuant to
Section 8.1(b) of the Merger Agreement and (A) Bibb shall have failed to
comply in any material respect with any of the material covenants and
agreements contained in the Merger Agreement, or (B) there shall have been
a willful breach by Bibb of a representation or warranty of Bibb contained
in the Merger Agreement as of the date when made (or in the case of any
representations and warranties that are made as of a different date, as of
such different date) and within 6 months after such termination Bibb enters
into an agreement with respect to a Third Party Acquisition or a Third
Party Acquisition occurs that contemplates or includes a direct or indirect
consideration (or implicit valuation) for shares of Bibb Common Stock in
excess of the per share Merger Consideration;
(ii) the Merger Agreement is terminated pursuant to Section 8.1(d) of
the Merger Agreement because the Merger Agreement shall not have been
approved and adopted by the affirmative vote of the requisite number of
stockholders of Bibb and at, on or prior to the time of the Bibb Special
Meeting an
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Acquisition Proposal shall have been publicly disclosed, publicly proposed
or publicly communicated to Bibb; or
(iii) the Merger Agreement is terminated pursuant to Section 8.1(e) or
8.1(f) of the Merger Agreement;
then Bibb shall pay to Dan River, within one business day following the
execution and delivery of such agreement or such occurrence, as the case may be,
or simultaneously with any termination contemplated by Section 8.1(e) of the
Merger Agreement, a fee, in cash of $5.23 million (the "Fee"), provided,
however, that Bibb in no event shall be obligated to pay more than one such fee
with respect to all such agreements and occurrences and such termination.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of Bibb by merger or similar business combination by
any person other than Dan River or any affiliate thereof (a "Third Party"); (ii)
the acquisition by a Third Party of 20% or more of the book or fair market value
of the consolidated assets of Bibb; or (iii) the acquisition by a Third Party of
20% or more of the outstanding shares of Bibb Common Stock.
(b) Except as otherwise specifically provided herein, each party shall bear
its own expenses in connection with the Merger Agreement and the transactions
contemplated hereby.
No Solicitation. The Merger Agreement provides Bibb and its officers,
directors, employees, representatives and agents shall cease any existing
discussions or negotiations with any parties with respect to any acquisition or
exchange of all or any material portion of the assets of, or any equity interest
in, Bibb or any business combination with or involving any third party. The
Merger Agreement further provides that, prior to consummation of the Merger,
Bibb may, directly or indirectly, (1) furnish information and access, if
solicited, pursuant to a confidentiality agreement including terms and
conditions (including a standstill provision) that are no less favorable than
the terms and conditions of the confidentiality agreement entered into between
Bibb and Dan River, and (2) participate in discussions and negotiate with such
person concerning any merger, sale of material portion of the assets, sale of
shares of capital stock or similar transaction involving Bibb or a division
thereof (an "Acquisition Proposal"), in each case only if such person has
submitted a written proposal to the Bibb Board of Directors and the Board by a
majority vote determines in good faith, based upon the advice of outside counsel
to Bibb, that failing to take such action would constitute a breach of the
Board's fiduciary duty under applicable law. The Bibb Board of Directors shall
provide a copy of any such written proposal to Dan River immediately after
receipt thereof, shall notify Dan River immediately if any Acquisition Proposal
(oral or written) is made and shall, in such notice, indicate in reasonable
detail the identity of the offeror and the terms and conditions of any
Acquisition Proposal and shall keep Dan River promptly advised of all
developments which could reasonably be expected to culminate in the Bibb Board
of Directors withdrawing, modifying or amending its recommendation of the Merger
and the other transactions contemplated by the Merger Agreement.
EFFECTIVE TIME OF THE MERGER AND EXCHANGE OF CERTIFICATES
Effective Time of the Merger. The Merger will become effective upon the
filing of certificates of merger with the Secretary of State of the State of
Georgia and with the Secretary of State of the State of Delaware.
Exchange of Bibb Stock Certificates. Promptly after the Effective Time,
the Exchange Agent will pay the holder of each certificate representing shares
of Bibb Common Stock surrendered to the Exchange Agent the Merger Consideration
multiplied by the number of shares of Bibb Common Stock formerly represented by
such certificate, and such certificate will forthwith be canceled.
OPINION OF DAN RIVER'S FINANCIAL ADVISOR
Bowles Hollowell was retained by Dan River to render certain financial
advisory services to Dan River in connection with the Merger. In connection with
such engagement, Dan River requested that Bowles Hollowell evaluate the
fairness, from a financial point of view, to Dan River of the aggregate
consideration to be paid by Dan River in the Merger. On June 22, 1998, in
connection with the evaluation of the proposed Merger
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Agreement by the Dan River Board of Directors, Bowles Hollowell delivered a
written opinion to the Dan River Board of Directors to the effect that, as of
such date and based upon and subject to certain matters stated in such opinion,
the Merger Consideration was fair, from a financial point of view, to Dan River.
In arriving at its opinion, Bowles Hollowell reviewed a then-current draft
(draft of June 18, 1998) of the Merger Agreement (the "draft Merger Agreement"),
the terms of which did not vary materially from the Merger Agreement entered
into by the parties thereto on June 28, 1998, and held discussions with
management of Dan River and management of Bibb concerning the businesses,
operations and prospects of Dan River and Bibb. Bowles Hollowell examined
certain publicly available business and financial information relating to Dan
River and Bibb as well as certain financial forecasts and other data for Dan
River and Bibb which were provided to Bowles Hollowell by the respective
managements of Dan River and Bibb, including information relating to certain
strategic and operating benefits anticipated from the Merger. Bowles Hollowell
reviewed the financial terms of the Merger as set forth in the draft Merger
Agreement in relation to, among other things: current and historical market
prices and trading volumes of the Dan River Class A Common Stock and Bibb Common
Stock; the historical and projected earnings of Dan River and Bibb; and the
capitalization and financial condition of Dan River and Bibb. Bowles Hollowell
considered the financial terms of certain other similar transactions recently
effected which Bowles Hollowell considered relevant to an analysis of the Merger
and analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose businesses
Bowles Hollowell considered comparable to those of Dan River and Bibb. Bowles
Hollowell also evaluated the estimated impact of the Merger on Dan River's
projected earnings per share. Bowles Hollowell noted that its opinion was
necessarily based upon information available and financial, stock market and
other conditions and circumstances existing and disclosed to Bowles Hollowell as
of the date of its opinion.
In rendering its opinion, Bowles Hollowell assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information publicly available or furnished to or otherwise reviewed
by or discussed with Bowles Hollowell. With respect to financial forecasts and
other information provided to or otherwise reviewed by or discussed with Bowles
Hollowell, the managements of Dan River and Bibb advised Bowles Hollowell that
such forecasts and other information were reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
respective managements of Dan River and Bibb as to the future financial
performance of Dan River and Bibb and the strategic and operating benefits
anticipated from the Merger. Bowles Hollowell assumed that the Merger will be
accounted for using the "purchase" method of accounting in accordance with
generally accepted accounting principles and as a tax-free reorganization for
federal income tax purposes. Bowles Hollowell did not express any opinion as to
what the price or value of the Dan River Class A Common Stock actually will be
when issued to Bibb stockholders pursuant to the Merger or the price at which
the Dan River Class A Common Stock will trade subsequent to the Merger. In
addition, Bowles Hollowell did not make or obtain an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of Dan River or
Bibb nor did Bowles Hollowell make any physical inspection of the properties or
assets of Dan River or Bibb. Bowles Hollowell was not requested to, and did not,
participate in the negotiation of the Merger, nor was Bowles Hollowell asked to
consider, and its opinion does not address, the relative merits of the Merger as
compared to any alternative business strategies that might exist for Dan River
or the effect of any other transaction in which Dan River might engage. In
addition, although Bowles Hollowell evaluated the Merger Consideration from a
financial point of view, Bowles Hollowell was not asked to and did not recommend
the specific consideration payable in the Merger.
THE FULL TEXT OF THE WRITTEN OPINION OF BOWLES HOLLOWELL DATED JUNE 22,
1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX B AND IS INCORPORATED
HEREIN BY REFERENCE. DAN RIVER SHAREHOLDERS ARE URGED TO READ THIS OPINION
CAREFULLY IN ITS ENTIRETY. BOWLES HOLLOWELL'S OPINION IS DIRECTED ONLY TO THE
FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT OF VIEW AND HAS BEEN
PROVIDED SOLELY FOR THE USE OF THE DAN RIVER BOARD OF DIRECTORS IN ITS
EVALUATION OF THE MERGER, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY DAN RIVER
SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
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DAN RIVER SPECIAL MEETING. THE SUMMARY OF THE OPINION OF BOWLES HOLLOWELL SET
FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In preparing its opinion to the Dan River Board of Directors, Bowles
Hollowell performed a variety of financial and comparative analyses, including
those described below. The summary of such analyses does not purport to be a
complete description of the analyses underlying Bowles Hollowell's opinion. The
preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. In arriving at its opinion, Bowles Hollowell did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Bowles Hollowell believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
factors, without considering all analyses and factors, could create a misleading
or incomplete view of the processes underlying such analyses and its opinion. In
its analyses, Bowles Hollowell made numerous assumptions regarding certain
matters with respect to Dan River, Bibb, industry performance, general business,
economic, market and financial conditions and other matters, many of which
matters are beyond the control of Dan River and Bibb. The estimates contained in
such analyses are not necessarily indicative of actual values or predictive of
future results or values, which may be significantly more or less favorable than
those suggested by such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty.
The following is a summary of the material analyses performed and many of
the material factors considered by Bowles Hollowell in the preparation of its
opinion and reviewed with the Dan River Board of Directors on June 22, 1998.
Stock Trading History. Bowles Hollowell reviewed the daily trading volume
and closing prices of the Bibb Common Stock and Dan River Class A Common Stock
for the period from December 15, 1997 to June 19, 1998, the last complete
trading day prior to the date that Bowles Hollowell rendered its opinion. During
this period, Bibb Common Stock had a high closing price of $13.13, a low closing
price of $7.13, and a daily average closing price of $9.32. During the same
period, Dan River Class A Common Stock had a high closing price of $21.13, a low
closing price of $14.75, and a daily average closing price of $17.52. The
closing prices of Bibb Common Stock and Dan River Class A Common Stock on June
19, 1998 were $13.13 and $18.50, respectively.
Analysis of Selected Publicly Traded Comparable Companies. Using publicly
available information, including securities analysts' estimates of future
financial results, Bowles Hollowell compared certain financial and operating
information for Bibb with the corresponding financial and operating information
for a group of nine publicly traded companies (the "Comparable Companies")
engaged primarily in businesses which Bowles Hollowell deemed to be relevant for
the purpose of its analysis. The Comparable Companies included Burlington
Industries, Inc., Cone Mills Corp., Crown Crafts, Inc., Dan River Inc., Johnston
Industries, Inc., Pillowtex Corp., Springs Industries, Inc., Thomaston Mills,
Inc. and WestPoint Stevens, Inc.
Bowles Hollowell observed that Bibb's financial performance had improved
substantially compared to prior years' results since initiation of a capital
investment program and Bibb's restructuring pursuant to its voluntary petition
(filed in July 1996) for reorganization under Chapter 11 of the United States
Bankruptcy Court. Given this significant and ongoing improvement in Bibb's
financial performance during 1997 and 1998 and expectations of management for
1999, Bowles Hollowell considered multiples of future projected operating cash
flow (defined as operating income plus depreciation and amortization) to be the
most relevant valuation statistic. Accordingly, Bowles Hollowell obtained
estimates of operating cash flow for the seven of the Comparable Companies for
which published securities analysts' reports were available and calculated the
adjusted market value (defined as market value of equity plus book value of debt
and preferred stock less cash) as a multiple of projected 1998 and 1999
operating cash flow for those Comparable Companies. The multiples based upon
projected 1998 operating cash flow ranged from 5.1x to 9.2x with a median of
6.7x. The multiples based upon projected 1999 operating cash flow ranged from
4.5x to 8.5x with a median of 5.6x.
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Bowles Hollowell calculated these same multiples for Bibb, based on the adjusted
market value of Bibb implied by the Merger, utilizing Bibb management's
projections (reviewed by Dan River management) of Bibb's 1998 and 1999 operating
cash flow adjusted to reflect manufacturing efficiencies anticipated by Bibb and
Dan River management to result from recent Bibb capital expenditures and certain
cost savings estimated by Dan River management to be realized as a result of the
Merger. Comparable operating cash flow multiples for Bibb, based on the adjusted
market value of Bibb implied by the Merger, for 1998 and 1999 were 6.0x and
5.7x, respectively.
Bowles Hollowell also compared certain financial and operating information
for Dan River with the corresponding financial and operating information for the
Comparable Companies, excluding Dan River and including Bibb. Specifically,
Bowles Hollowell calculated Dan River's adjusted market value using a price of
$19.50 for Dan River Class A Common Stock, which is the per share price implied
in the Exchange Ratio. Using this Dan River adjusted market value, Bowles
Hollowell calculated a multiple of operating cash flow for the latest twelve
months and multiples of operating cash flow as projected by securities analysts
for 1998 and 1999. These multiples for Dan River were lower than the median of,
but within the range of, multiples for the peer group. The implied $19.50 price
of Dan River Class A Common Stock as a multiple of earnings per share for the
latest twelve months and as a multiple of estimated 1998 and 1999 earnings per
share was higher than the median of, but within the range of, multiples for the
peer group. The following chart summarizes these multiples.
ADJUSTED MARKET VALUE AS
A MULTIPLE OF: STOCK PRICE(1) AS A MULTIPLE OF:
-------------------------- --------------------------------
LTM(2) 1998E 1999E LTM(2) 1998E 1999E
OCF(3) OCF(3) OCF(3) EPS(4) EPS(4) EPS(4)
------ ------ ------ -------- -------- --------
Comparable Companies(5)
High............................. 18.3x 9.2x 8.5x 33.6x 20.9x 17.4x
Median........................... 9.2 7.5 6.0 13.7 12.5 10.4
Low.............................. 5.7 5.1 4.5 13.0 11.2 6.9
Dan River Inc.................... 6.1x 5.9x 5.3x 15.0x 14.9x 12.6x
- ---------------
(1) Stock prices for Comparable Companies are as of the close of trading on June
19, 1998. A price of $19.50 per share of Dan River Class A Common Stock, as
implied in the Exchange Ratio, is used for purposes of this analysis.
(2) Latest twelve months.
(3) Operating cash flow.
(4) Earnings per share.
(5) Excluding Dan River and including Bibb.
Analysis of Selected Comparable Acquisition Transactions. Bowles Hollowell
also reviewed merger and acquisition activity in the home textiles industry
since 1995. From among the transactions for which sufficient public information
was available, Bowles Hollowell deemed the following five acquisitions (the
"Comparable Acquisitions") to be relevant to its analysis: (i) the acquisition
by Pillowtex Corp. of Fieldcrest Cannon, Inc.; (ii) the acquisition by Johnston
Industries, Inc. of Jupiter National, Inc.; (iii) the acquisition by Crown
Crafts, Inc. of Red Calliope & Associates, Inc.; (iv) the acquisition by Springs
Industries, Inc. of Dundee Mills, Inc.; and (v) the acquisition by Pillowtex
Corp. of Beacon Manufacturing Co.
Bowles Hollowell analyzed adjusted transaction market value (defined as the
total consideration paid, including net debt (debt less cash) assumed at
closing) as a multiple of operating cash flow for the target company in each of
the Comparable Acquisitions. As in the analysis of selected publicly traded
comparable companies, Bowles Hollowell considered multiples of projections of
future operating cash flow, current as of the announcement date for each
transaction, to be the most relevant valuation statistics. The Pillowtex Corp.
("Pillowtex") acquisition of Fieldcrest Cannon, Inc. ("Fieldcrest") was the only
Comparable Acquisition for which projections of future operating cash flow were
available at the time of announcement of the transaction. Bowles Hollowell
calculated the adjusted transaction market value for this transaction as a
multiple of Fieldcrest's estimated next fiscal year operating cash flow,
obtained from a securities analyst's report published
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prior to the announcement of the transaction. This multiple was 7.0x, compared
to a multiple of 7.9x for Bibb, based on the adjusted transaction market value
of Bibb implied by the Merger. Bowles Hollowell also calculated the adjusted
transaction market value for Pillowtex's acquisition of Fieldcrest as a multiple
of Fieldcrest's estimated next fiscal year operating cash flow plus
merger-related cost savings as projected by Pillowtex management at the time of
the deal's announcement. For this transaction, the multiple of adjusted
transaction market value to next fiscal year operating cash flow plus projected
merger-related cost savings was 5.4x. The same multiple for Bibb, based on the
adjusted transaction market value of Bibb implied by the Merger and assuming
certain merger-related cost savings estimated by Dan River management, was 5.7x.
Premiums Paid Analysis. Bowles Hollowell reviewed the premiums paid by the
acquiring company over the target company's stock price prior to announcement of
the transaction in the following three recent textile industry acquisitions that
involved publicly traded target companies: (i) the acquisition by Polymer Group,
Inc. of Dominion Textile, Inc.; (ii) the acquisition by Pillowtex of Fieldcrest;
and (iii) the acquisition by Johnston Industries, Inc. of Jupiter National, Inc.
For the purpose of determining the per share price paid for the target company's
equity, Bowles Hollowell used the announced value of the transaction.
Bowles Hollowell calculated the premium per share paid by the acquiror
compared to the share price of the target company twenty trading days and one
trading day prior to the transaction announcement. The purchase price premiums
over the share price twenty trading days prior to announcement ranged from 34.3%
to 46.9%, with a median of 34.9%. The purchase price premiums over the share
price one trading day prior to announcement ranged from 1.5% to 25.8%, with a
median of 20.3%. Bowles Hollowell also reviewed premiums paid for all publicly
reported acquisitions of controlling interests in 1997 and 1998 to date, as
reported by Securities Data Company. For all reported transactions, the median
purchase price premium over the share price twenty trading days prior to
announcement was 32.8%, and the median purchase price premium over the share
price one trading day prior to announcement was 20.9%. For the purpose of its
analysis, Bowles Hollowell assumed $16.50 per share in total consideration to be
paid to Bibb shareholders and an announcement date of June 22, 1998. Based on
these assumptions, the premium anticipated in the Merger to the closing price of
Bibb Common Stock twenty trading days prior to announcement was 41.9%; the
premium to the closing price of Bibb Common Stock one trading day prior to
announcement was 25.7%.
Discounted Cash Flow Analysis. Bowles Hollowell also performed discounted
cash flow analyses of Bibb and Dan River. These analyses involved discounting
the projected unlevered free cash flows (defined as operating cash flow
available after working capital, capital spending, and tax requirements) at an
appropriate discount rate. Bowles Hollowell utilized financial projections for
Bibb and Dan River, both as stand-alone entities, provided by the management of
each respective company. In addition, Dan River's management reviewed the
projections used to value Bibb. The Bibb projections used in this analysis
included certain merger-related cost savings estimated by Dan River's
management.
Bowles Hollowell calculated Dan River's theoretical weighted average cost
of capital to be 9.84%. Using discount rates reflecting a weighted average cost
of capital ranging from 8.84% to 10.84% and unlevered free cash flow growth
rates beyond 2003 ranging from 2% to 4%, Bowles Hollowell calculated the implied
values of Bibb Common Stock and Dan River Class A Common Stock. The implied
values of Bibb Common Stock ranged from $14.76 to $31.44. The implied values of
Dan River Class A Common Stock ranged from $14.65 to $30.51.
Pro Forma Earnings Analysis. Bowles Hollowell estimated the pro forma
financial results for fiscal years 1998 and 1999 of Dan River following the
Merger. These pro forma financial results are based on the Merger Consideration.
Bowles Hollowell relied upon Dan River management's earnings estimate for 1998
and a securities analyst's earnings estimate for 1999. Bowles Hollowell used the
same projections for Bibb's 1998 and 1999 financial performance as were used in
its discounted cash flow analysis, including certain cost savings anticipated
from the Merger. Bowles Hollowell concluded that the Merger, related financings
and the assumed call of Dan River's existing Senior Subordinated Notes with a $7
million premium would be 12.4% dilutive and 6.4% accretive to Dan River's
standalone earnings per share for fiscal 1998 and 1999, respectively.
Pursuant to the terms of Bowles Hollowell's engagement, Dan River has
agreed to pay Bowles Hollowell for its services in connection with the Merger an
advisory and opinion fee totaling $250,000. Dan River also
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has agreed to reimburse Bowles Hollowell for reasonable travel and other
out-of-pocket expenses incurred by Bowles Hollowell in performing its services,
including the reasonable fees and expenses of its legal counsel, and to
indemnify Bowles Hollowell and related persons against certain liabilities,
including liabilities under the federal securities laws, arising out of Bowles
Hollowell's engagement.
As part of its investment banking business, Bowles Hollowell is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, divestitures, leveraged buyouts and private placements
of debt and equity. Bowles Hollowell's ultimate parent entity is First Union
Corporation. First Union National Bank, an affiliate of Bowles Hollowell and
also a subsidiary of First Union Corporation, provides various financial
services to Dan River, including loan financing through participation in a
syndicated loan facility. Wheat First Union, a division of First Union
Corporation, may, in the ordinary course of business, actively trade the equity
securities of Dan River for its own account or for the account of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
RECOMMENDATION OF THE DAN RIVER BOARD OF DIRECTORS
THE DAN RIVER BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF DAN RIVER AND ITS SHAREHOLDERS, HAS APPROVED THE MERGER
AGREEMENT AND THE ISSUANCE OF SHARES OF DAN RIVER CLASS A COMMON STOCK IN
CONNECTION THEREWITH AND RECOMMENDS THAT DAN RIVER SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE ISSUANCE OF SHARES OF
DAN RIVER CLASS A COMMON STOCK IN CONNECTION THEREWITH.
OPINION OF BIBB'S FINANCIAL ADVISOR
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. The
following is a brief summary and general description of the valuation
methodologies followed by Houlihan Lokey. The summary does not purport to be a
complete statement of the analyses and procedures applied, the judgments made or
the conclusion reached by Houlihan Lokey or a complete description of its
presentation. Houlihan Lokey believes, and so advised the Bibb Board of
Directors that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all factors and analyses, could create an incomplete view of the
process underlying its analyses and opinions.
Bibb retained Houlihan Lokey to render an opinion as to the fairness, from
a financial point of view, of the consideration to be received by the holders of
the common stock of Bibb in the Merger. At the June 23, 1998 meeting of the Bibb
Board of Directors, Houlihan Lokey presented its analysis as hereinafter
described and updated the Bibb Board of Directors with respect to the
discussions and current state of the transaction. At the June 26, 1998 meeting
of the Bibb Board of Directors, Houlihan Lokey presented its oral opinion, and
following the meeting delivered its written opinion, that as of such date and
based on the matters described therein, the Merger Consideration to be received
by the Bibb stockholders is fair from a financial point of view. Houlihan Lokey
has also delivered to the Bibb Board of Directors a written opinion dated the
date of this Joint Proxy Statement/Prospectus which is substantially identical
to its June 26, 1998 opinion.
THE COMPLETE TEXT OF HOULIHAN LOKEY'S OPINION DATED THE DATE OF THIS JOINT
PROXY STATEMENT/PROSPECTUS IS ATTACHED HERETO AS ANNEX C. THE SUMMARY OF THE
OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
OPINION. THE BIBB STOCKHOLDERS ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS
ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE FACTORS CONSIDERED
AND THE ASSUMPTIONS MADE BY HOULIHAN LOKEY.
Houlihan Lokey's opinion to the Bibb Board of Directors addresses only the
fairness from a financial point of view of the consideration to be received by
the Bibb stockholders in the Merger, and does not
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constitute a recommendation to the stockholders as to how such stockholder
should vote at the Bibb Special Meeting. Houlihan Lokey's opinion does not
address Bibb's underlying business decision to effect the Merger.
In connection with the preparation of its opinion, Houlihan Lokey made such
reviews, analyses and inquiries as they deemed necessary and appropriate under
the circumstances. Among other things, Houlihan, Lokey: (i) reviewed Bibb's
annual reports to stockholders and on Form 10-K for the three fiscal years ended
January 3, 1998, the quarterly report on Form 10-Q for the quarter ended April
4, 1998, and the results for the month and year to date period ended June 6,
1998; (ii) reviewed Dan River's annual reports to shareholders and on Form 10-K
for the three fiscal years ended January 3, 1998, the quarterly report on Form
10-Q for the quarter ended April 4, 1998, and the results for the month and year
to date period ended June 6, 1998; (iii) reviewed the Merger Agreement; (iv) met
with certain members of the senior management of Bibb and Dan River to discuss
the operations, financial condition, future prospects and projected operations
and performance of Bibb and Dan River and the combined company; (v) visited
certain facilities and offices of Bibb and Dan River; (vi) reviewed a forecast
prepared by Dan River's management with respect to Dan River for the years
ending approximately December 31, 1998 through 2000 including a recent revision
for fiscal 1998; (vii) reviewed a forecast prepared by Bibb's management with
respect to Bibb for the years ending approximately December 31, 1998 through
1999; (viii) reviewed a forecast prepared by Bibb's senior management with
respect to projected synergies of the combined company based upon fiscal 1998
projections; (ix) reviewed a forecast prepared by Dan River's senior management
with respect to projected fiscal 1998 for the combined company including
synergies; (x) reviewed the historical market prices and trading volume for the
publicly traded securities of Bibb and Dan River; (xi) reviewed publicly
available financial data for certain companies that it deemed comparable to Bibb
and Dan River, and publicly available prices and premiums paid in other
transactions that it considered similar to the Merger; and (xiii) conducted such
other studies, analyses and inquiries as it deemed appropriate.
In assessing the financial fairness of the consideration to be received in
the Merger by Bibb's stockholders, Houlihan Lokey; (i) analyzed the
reasonableness of the trading value of Bibb's publicly traded equity securities;
(ii) valued the common equity of Bibb using widely accepted valuation
methodologies; (iii) analyzed the reasonableness of the trading value of Dan
River's publicly traded Class A Common Stock; (iv) valued the common equity of
Dan River using the same valuation methodologies; (v) valued the common equity
of Dan River after giving effect to the Merger; (vi) analyzed the reasonableness
of the consideration being offered in the Merger; and (vii) reviewed the
valuation implications to Bibb's stockholders of various alternatives to the
Merger.
Houlihan Lokey's fairness analysis involved: (i) determining an appropriate
range of equity value for Bibb and Dan River on a stand-alone basis; (ii)
determining the value of Bibb and Dan River on a combined basis, including the
potential value of cost savings and margin enhancements ("synergies"); (iii)
determining the value of Bibb's interest in Dan River after giving effect to the
Merger including the potential value of synergies; and (iv) comparing the value
of the cash consideration and the common stock interest in Dan River to be
received by the stockholders of Bibb, in the aggregate, to the value of Bibb on
a stand-alone basis. To address these issues, Houlihan Lokey applied the
following valuation methodologies in assessing the fairness of the consideration
to be received by the stockholders of Bibb in the Merger:
VALUATION OF BIBB
Historical Stock Trading Analysis. As part of its analysis Houlihan Lokey
analyzed the trading value of Bibb Common Stock. Houlihan Lokey calculated the
implied price/earnings multiples ("P/E"), total invested capital ("TIC") to
earnings before interest and taxes multiples ("TIC/EBIT") and total invested
capital to earnings before interest, taxes, depreciation and amortization
multiples ("TIC/EBITDA") for Bibb based on its latest 12 month results through
June 6, 1998 and its projected fiscal years ending 1998 and 1999 earnings per
share, EBIT and EBITDA and compared those ratios to comparable publicly traded
companies. Houlihan Lokey also analyzed daily closing stock prices and volumes
from October 3, 1997 to June 26, 1998. As part of this analysis, Houlihan Lokey
also analyzed the amount and nature of equity analyst coverage of Bibb and the
comparable public companies.
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Independent Valuation Analysis. In addition to analyzing recent trading
activity, Houlihan Lokey applied two valuation approaches to arrive at an
independent valuation of Bibb. The first approach, the market multiple approach,
involved the multiplication of various earnings and cash flow measures by
appropriate risk-adjusted multiples. Multiples were determined through an
analysis of certain publicly traded companies, selected on the basis of
operational and economic similarity with the principal business operations of
Bibb. Earnings and cash flow multiples were calculated for the comparative
companies based upon daily trading prices. A comparative risk analysis between
Bibb and the public companies formed the basis for the selection of appropriate
risk adjusted multiples for Bibb. The risk analysis incorporates both
quantitative and qualitative risk factors which relate to, among other things,
the nature of the industry in which Bibb and other comparative companies are
engaged. For purposes of this analysis, Houlihan Lokey selected the following
publicly-traded home furnishings and apparel companies: Dan River, Crown Crafts,
Inc., Fab Industries, Inc., Galey & Lord, Inc., Guilford Mills, Inc., Pillowtex
Corp., Springs Industries, Inc., and WestPoint Stevens, Inc. Houlihan Lokey's
market multiple approach yielded a valuation of Bibb's common stock in the range
of $11.00 to $13.50 per share.
In the discounted cash flow approach, projections for Bibb prepared by
Bibb's management for fiscal 1998 and 1999 were utilized and served as the basis
for projections for fiscal 2000 through 2002 developed by Houlihan Lokey. The
projected cash flows were analyzed on a "debt-free" basis (before cash payments
to equity and interest-bearing debt investors) in order to develop a value
indication for Bibb. A provision for the value of Bibb at the end of the
forecast period, or terminal value, was also made. The present value of the
interim cash flows and the terminal value was determined using a risk-adjusted
rate of return or "discount rate." The discount rate, in turn, was developed
through an analysis of rates of return on alternative investment opportunities
on investments in companies with similar risk characteristics to Bibb. Houlihan
Lokey's discounted cash flow approach yielded a valuation of Bibb's common stock
in the range of $12.90 to $16.88 per share. Based on the market multiple
approach and the discounted cash flow approach, Houlihan Lokey concluded that
the value of the Bibb Common Stock was reasonably stated in the range of $13.00
to $16.00 per share.
VALUATION OF DAN RIVER
For purposes of determining the value of Dan River, Houlihan Lokey analyzed
the trading value of Dan River Common Stock and employed a market multiple
approach and a discounted cash flow approach to arrive at an independent
valuation of Dan River.
Historical Stock Trading Analysis. Houlihan Lokey calculated the implied
P/E, TIC/EBIT and TIC/EBITDA multiples for Dan River based on its latest 12
month results through June 6, 1998 and its projected fiscal years ending 1998
and 1999 earnings per share, EBIT and EBITDA and compared those ratios to
comparable publicly traded companies. Houlihan Lokey also analyzed daily closing
stock prices and volumes from the date of Dan River's initial public offering of
Dan River Class A Common Stock on November 20, 1997 to June 26, 1998 and the
amount and nature of equity analyst coverage of Dan River and the comparable
public companies.
Independent Valuation Analysis. In performing the market multiple approach
for Dan River, Houlihan Lokey utilized the same comparable company analysis it
used for Bibb. Houlihan Lokey's market multiple approach yielded a valuation of
Dan River Class A Common Stock in the range of $19.00 to $23.00 per share.
Houlihan Lokey's discounted cash flow approach yielded a valuation of Dan River
Class A Common Stock in the range of $18.60 to $24.44 per share.
Based on the market multiple approach and the discounted cash flow
approach, Houlihan Lokey concluded that the value of Dan River Class A Common
Stock was reasonably stated in the range of $19.00 to $23.00 per share.
VALUATION OF DAN RIVER POST-MERGER
Upon completion of the Merger, the Bibb stockholders will own approximately
19% of the outstanding common stock of Dan River. Houlihan Lokey considered the
implied total equity value of Dan River upon
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completion of the Merger based on using multiples selected from the publicly
traded comparables and capitalizing earnings, EBIT and EBITDA levels from: (i)
the projected pro forma fiscal 1998 results of the combined company assuming the
projected fourth quarter 1998 cost savings and synergies annualized; (ii) the
projected, pro forma fiscal 1998 results for the combined company assuming the
projected cost savings and synergies for the fourth quarter; and (iii) the
projected pro forma fiscal 1999 results for the combined company assuming a full
year of the projected cost savings and synergies. The projected results for
fiscal 1998 and fiscal 1999 utilized in this analysis were the projections
provided to Houlihan Lokey by the respective senior managements of Bibb and Dan
River and the projected cost savings and synergies were provided by the senior
management of Dan River. In addition, these analyses were adjusted to reflect
the purchase accounting of the Merger. These analyses yielded indications of the
implied post Merger common equity of Dan River to be reasonably stated at $19.00
to $27.00 per share after giving effect to the common shares to be issued in the
Merger.
FAIRNESS OF CONSIDERATION
Acquisition Premium Analysis. Houlihan Lokey analyzed the acquisition
premiums (the difference between the acquisition price and unaffected trading
price) paid in recent acquisitions of publicly traded textile related companies
that occurred between December 1994 and June 1998 with the most relevant and
recent transaction being the acquisition of Fieldcrest Cannon, Inc. by Pillowtex
Corp. in September 1997. Based upon the twenty-day average closing trading price
of the Dan River Class A Common Stock as of June 26, 1998, the consideration to
be received by the common stockholders of Bibb would represent a 28.6 percent
premium to the twenty-day average trading price of the common shares of Bibb as
of June 26, 1998. This implied premium is significant and is in a fair range
with respect to recent strategic acquisitions.
Comparable Transaction Multiples. Houlihan Lokey analyzed the acquisition
multiples paid in publicly disclosed, completed, majority acquisitions of
textile companies. This approach involves multiples of earnings, EBIT, EBITDA
and revenues. Multiples utilized in this approach were determined through an
analysis of transactions involving controlling interests in companies with
operations similar to Bibb's principal business operations. Houlihan Lokey's
study analyzed nine transactions for public and private companies that were
announced and completed between December 1994 and June 1998.
Houlihan, Lokey advised the Board of Directors of Bibb that none of the
transactions reviewed were directly comparable to the Merger although the sale
of Fieldcrest Cannon, Inc. in September 1997 was clearly the most relevant
transaction. As part of this analysis, Houlihan Lokey calculated the multiples
of TIC/Revenues, TIC/EBIT, and TIC/EBITDA. Houlihan, Lokey's analysis indicated
that for the acquisitions of companies with available financial information: (i)
the TIC/Revenues multiples had a median of 0.63; (ii) the TIC/EBIT multiples had
a median of 17.0; and (iii) the TIC/EBITDA multiples had a median multiple of
8.5. The implied TIC/Revenue, TIC/EBIT and TIC/EBITDA multiples for Bibb based
on the value of the consideration offered in the Merger ($16.50) as of June 26,
1998 for the Bibb Common Stock are 1.07, 44.9 and 21.2, respectively, utilizing
the financial results of Bibb for the latest 12 month period ending April 4,
1998, and are still favorable to the median transaction statistics when
projected fiscal 1998 results are utilized. Based on these analyses, Houlihan
Lokey concluded that the value of the consideration offered by Dan River in the
Merger to the common stockholders of Bibb is reasonable and fair from a
financial point of view.
ASSESSMENT OF BIBB'S STRATEGIC ALTERNATIVES TO THE MERGER
In evaluating the fairness of the consideration to be received by the
stockholders of Bibb in the Merger, from a financial point of view, Houlihan
Lokey considered the expected value to Bibb stockholders of completing the
Merger and certain alternatives to the Merger. With regard to each alternative,
Houlihan Lokey's analysis qualitatively considered the valuation implications to
Bibb's common stockholders, the probability of successfully completing the
alternative, and the cost and time to implement. For purposes of this analysis
Houlihan Lokey considered the following strategic alternatives: (i) status quo;
(ii) sale or merger with a strategic buyer; (iii) sale to a financial buyer;
(iv) sale of the business units and (v) the Merger with
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Dan River. Houlihan Lokey noted that of the strategic alternatives considered,
the consideration to be received in the Merger by the Bibb stockholders is fair
from a financial point of view.
Houlihan Lokey has not been requested to, and did not, solicit third party
indications of interest in acquiring all or any part of Bibb.
Houlihan Lokey has relied upon and assumed, without independent
verification, that the financial forecasts and projections provided to it have
been reasonably prepared and reflect the best currently available estimates of
the future financial results and condition of Bibb and Dan River, and that there
has been no material change in the assets, financial condition, business or
prospects of Bibb and Dan River since the date of the most recent financial
statements made available to Houlihan Lokey.
Houlihan Lokey did not independently verify the accuracy and completeness
of the information supplied to it with respect to Bibb and Dan River and does
not assume any responsibility with respect to it. Houlihan Lokey has not made
any independent appraisal of any of the properties or assets of Bibb or Dan
River. Houlihan Lokey did not express any opinion as to what the price or value
of the Dan River Class A Common Stock will be when issued to Bibb stockholders
pursuant to the Merger or the price at which the Dan River Class A Common Stock
will trade subsequent to the Merger. Houlihan Lokey's opinion is necessarily
based on business, economic, market and other conditions as they exist and can
be evaluated by Houlihan Lokey at the date of the opinion.
Houlihan Lokey is a nationally recognized investment banking firm with
special expertise in, among other things, valuing businesses and securities and
rendering fairness opinions. Houlihan Lokey is continually engaged in the
valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, private placements of debt and equity,
corporate reorganizations, employee stock ownership plans, corporate and other
purposes. An affiliate and certain officers of Houlihan, Lokey, Howard & Zukin,
Inc. ("HLHZ") own common stock of Bibb, which common shares in the aggregate
constitute less than one percent of the total issued and outstanding common
shares of Bibb. In addition, Irwin Gold, a Senior Managing Director of HLHZ, is
a member of the Bibb Board of Directors.
Fees and Expenses. Pursuant to an agreement entered into on May 14, 1998,
Houlihan Lokey was retained by Bibb to analyze the fairness of the consideration
to be received in the Merger by the holders of the Bibb Common Stock from a
financial point of view. Bibb has agreed to pay Houlihan Lokey a fee upon the
closing of the Merger of 0.4 percent of the Aggregate Purchase Price (as defined
in the May 14, 1998 retainer agreement between Houlihan Lokey and Bibb) plus
reasonable out-of-pocket expenses incurred in connection with the rendering of a
fairness opinion. Bibb has further agreed to indemnify Houlihan Lokey against
certain liabilities and expenses in connection with the rendering of its
services.
In connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, Houlihan Lokey confirmed the appropriateness of its
reliance on the analyses used to render its June 26, 1998 opinion by performing
procedures to update certain of such analyses and by reviewing the assumptions
upon which such analyses were based and the factors considered in connection
therewith.
RECOMMENDATION OF THE BIBB BOARD OF DIRECTORS
THE BIBB BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF BIBB AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT BIBB STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE
MERGER AGREEMENT.
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REASONS FOR THE MERGER
Dan River's Reasons for the Merger. Dan River's management believes the
Merger has the potential to provide significant incremental sales and operating
profits to Dan River. Further, it believes significant synergies exist between
the operations of Bibb and Dan River which will result in substantial cost
savings, and that the Merger will enhance Dan River's manufacturing operations
and marketing efforts. Principal reasons for the Merger include the following:
- The current and prospective economic and competitive environment facing
the textile industry generally, including the increasing importance of
operational scale and financial resources in maintaining efficiency and
remaining competitive over the long term. Dan River's management believes
that the increased size of its home fashions business resulting from the
Merger will better enable it to compete with large industry participants,
and that Dan River will thus become a more important resource to its
customers.
- Dan River expects to derive significant reductions in the combined
selling, general and administrative expenses of the two companies and
believes that additional savings will result from manufacturing synergies
as the operations of the two companies are aligned.
- The addition of the Bibb manufacturing facilities will not only provide
additional flexibility, efficiency and capacity to Dan River's existing
operations, but will add several new and important product lines, i.e.,
juvenile bedding products for sale to department stores, specialty stores
and mass merchants; institutional bedding products for sale to hotels,
hospitals and the like; and engineered fabrics for sale in the automotive
industry and for other industrial applications.
- While some of Bibb's manufacturing facilities are located in close
geographical proximity to Dan River's existing facilities and thus
provide potential production efficiencies and cost savings, an additional
benefit of the acquisition of the Bibb facilities is to decrease reliance
on a single geographical location and thus provide flexibility in
response to events which might adversely affect operations at any one
location.
- The Merger is also expected to give the opportunity to obtain additional
cost savings through volume purchasing of certain raw materials, such as
polyester and packaging materials.
- The terms of the Merger Agreement, including the proportion of the Merger
Consideration payable in cash and stock and Bowles Hollowell's
presentation to the Dan River Board of Directors on June 22, 1998 and the
opinion of Bowles Hollowell rendered on June 22, 1998, that, as of such
date, the Merger Consideration, was fair, from a financial point of view,
to Dan River.
- Dan River's Board of Directors believes, based on the results of the due
diligence investigation of Bibb conducted by Dan River's management, that
the Merger is in the best interests of Dan River.
Bibb's Reason for the Merger. In reaching its determination, the Bibb
Board consulted with its legal counsel and financial advisor and gave
significant consideration to a number of factors, including without limitation,
the factors referred to below. In view of the wide variety of factors bearing on
its decision, the Bibb Board did not consider it practical to, and did not
attempt to, quantify or otherwise assign relative weights to the factors it
considered in reaching its decision.
The material factors considered by the Bibb Board of Directors were:
- The familiarity of the Bibb Board of Directors with and review of Bibb's
business, operations, financial condition and earnings on an historical
and a prospective basis, and, specifically, the potential financial
improvements and strategic implications which will result from the
Merger.
- The premium of the Merger Consideration to the historical market prices
for the Bibb Common Stock, including the fact that the Merger
Consideration represents a premium of approximately 55% over the market
price of the Bibb Common Stock at the time the Bibb Board of Directors
began to consider alternatives to increase and maximize the value of the
Bibb Common Stock in early 1998. The Merger Consideration per share of
Bibb Common Stock represented a premium 28.6% over the twenty-day
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average closing trading price per share of Bibb Common Stock as of June 26,
1998, the last full trading day prior to the public announcement by Dan River
and Bibb of the execution of the Merger Agreement.
- The process conducted by Bibb's management and its financial advisors in
exploring and determining the potential value which could be realized by
Bibb's stockholders in a business combination transaction including (a)
the contacts between Bibb and certain selected textile companies which
were determined to be the most likely companies to be both interested in
and financially and otherwise capable of engaging in a business
combination transaction with Bibb and (b) the fact that each of such
selected textile companies which expressed interest in a business
combination transaction with Bibb was afforded an opportunity to submit a
proposal for such a transaction. (See "-- Background of the Merger").
- The knowledge of and review by the Bibb Board of Directors, based in part
on presentations by its financial advisors and Bibb's management, of (a)
the business, operations, financial condition and earnings of Dan River
on an historical and a prospective basis and of the combined company on a
proforma basis and (b) the historical stock price performance of the Dan
River Class A Common Stock, the resulting relative interests of Bibb's
stockholders and Dan River's shareholders in the common equity of the
combined company, the potential for increased earnings for Bibb
stockholders as shareholders of the combined company, and Dan River's
market capitalization.
- The current and prospective economic and competitive environment facing
the textile industry generally, including the increasing importance of
operational scale and financial resources in maintaining efficiency and
remaining competitive over the long term. In this regard, the Bibb Board
of Directors noted that the combined company resulting from the Merger
likely would possess the financial resources and economies of scale
necessary to compete more effectively in the textile industry in the
future.
- The presentation to the Bibb Board of Directors on June 26, 1998 and the
opinion of Houlihan Lokey rendered on June 26, 1998, that, as of such
date, the Merger Consideration pursuant to the Merger Agreement was fair
from a financial point of view to the holders of Bibb Common Stock (See
"-- Opinion of Bibb's Financial Advisor").
- The anticipated cost savings, operating efficiencies and opportunities
for revenue enhancement available to the combined company from the
Merger, and the significant experience of the senior management of Dan
River in the consummation of significant acquisition transactions and its
proven record of achieving cost savings, operating efficiencies and
revenue enhancements in connection with the integration of acquired
companies.
- The expectation that the stock consideration to be issued in the Merger
will be tax-free for federal income tax purposes to Bibb's stockholders
(See "-- Certain Federal Income Tax Consequences").
- The terms of the Merger Agreement, including without limitation the form
of consideration, and Bibb's ability, under certain circumstances, to
terminate the Merger Agreement to accept an acquisition proposal deemed
by the Bibb directors to be superior to the Merger upon payment of the
Fee to Dan River, recognizing that the Fee was a condition to Dan River's
willingness to enter into the Agreement.
- The following additional factors which contributed to the conclusion of
the Bibb Board of Directors that the Merger is in the best interests of
Bibb and its stockholders:
(A) the results of the due diligence investigation of Dan River conducted
by Bibb's management;
(B) the assessment of the Bibb Board of Directors, with the assistance of
counsel, concerning the likelihood that Dan River would obtain all
regulatory approvals required for the merger (See "-- Regulatory
Approvals Required"); and
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(C) the general impact that the Merger could be expected to have on the
constituencies served by Bibb, including its customers, employees and
communities including that the combined company could be expected to
offer a more extensive range of products to Bibb's existing customers.
REGULATORY APPROVALS REQUIRED
Under the Merger Agreement, the obligations of both Dan River and Bibb to
consummate the Merger are conditioned upon receipt of all required regulatory
approvals (with certain exceptions). Other than as discussed below, Dan River
and Bibb believe that no such regulatory and other approvals are required.
Under the HSR Act, the Merger may not be consummated unless notification
has been given and certain information has been furnished to the FTC and the
Antitrust Division and the waiting period has expired or been terminated.
Pursuant to the HSR Act, Dan River and Bibb each filed a notification and report
form with the FTC and the Antitrust Division in connection with the Merger on
July 2, 1998 and July 1, 1998, respectively.
Notwithstanding the expiration or termination of the HSR Act waiting
period, at any time before or after consummation of the Merger, the FTC or the
Antitrust Division could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
consummation of the Merger or to cause the divestiture of substantial assets of
Dan River or Bibb. In addition, states and private parties may also bring legal
action under the antitrust laws under certain circumstances. Based on
information available to them, Dan River and Bibb believe that the Merger can be
effected in compliance with federal and state antitrust laws. There can be no
assurance, however, that a challenge to the consummation of the Merger based on
an alleged violation of the antitrust laws will not be made or that, if such a
challenge were made, Dan River and Bibb would prevail or would not be required
to accept certain conditions, possibly including certain divestitures, in order
to consummate the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain United States federal income tax
consequences of the Merger. This discussion is based on the Code, the Treasury
Regulations thereunder, and rulings of the Internal Revenue Service ("IRS") and
the court decisions as of the date hereof, all of which are subject to change
(possibly with retroactive effect).
The tax treatment of each Bibb stockholder will depend in part upon such
stockholder's particular situation. Special tax consequences not described below
may be applicable to particular classes of taxpayers, including financial
institutions, broker-dealers, persons who are not citizens or residents of the
United States or who are legal entities formed under the laws of jurisdictions
outside the United States, and Bibb stockholders who acquired their shares
through the exercise of employee stock options or otherwise as compensation.
This discussion also assumes that the Bibb stockholders hold their Bibb Common
Stock as a capital asset.
This discussion is included for general information purposes only and is
not intended to be legal or tax advice to any particular holder of Dan River
Class A Common Stock or Bibb Common Stock. All Bibb stockholders should consult
with their own tax advisors as to the particular consequences of the Merger to
them, including the applicability and effect of any state, local and foreign tax
laws.
Tax Consequences of the Merger. Bibb and Dan River expect the Merger to
qualify as a "reorganization" for federal income tax purposes so that, as
discussed in greater detail below, the following tax consequences generally will
ensure: (i) no gain or loss will be recognized by any Bibb stockholder who
exchanges Bibb Common Stock solely for Dan River Class A Common Stock; (ii)
holders of Bibb Common Stock who receive solely cash in exchange for such shares
will recognize gain or loss on such exchange; (iii) holders of Bibb Common Stock
who receive a combination of Dan River Class A Common Stock and cash in exchange
for their shares will recognize gain up to the amount of cash received, but will
not recognize any loss on such exchange; and (iv) holders of Bibb Common Stock
may also recognize gain or loss by reason of cash received in lieu of fractional
shares of Dan River Class A Common Stock.
The obligation of Bibb to consummate the Merger is conditioned upon (among
other things) receipt by Bibb of an opinion from its counsel, Jones Day and the
obligation of Dan River to consummate the Merger is
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similarly conditioned on receipt of an opinion from its counsel, King & Spalding
(collectively, the "Tax Opinions"), that, based on their respective reviews of
the Merger Agreement, the Registration Statement, certain other facts and
documents which they have considered relevant, and certain representations made
by Bibb and Dan River, the Merger will constitute a "reorganization" within the
meaning of Section 368(a)(1) of the Code. As such, the Merger will have the
federal income tax consequences set forth below:
(i) The exchange in the Merger of Bibb Common Stock solely for Dan
River Class A Common Stock will not result in the recognition of gain or
loss to the Bibb stockholders with respect to such exchange.
(ii) A Bibb stockholder who exchanges his Bibb Common Stock for a
combination of Dan River Class A Common Stock and cash (other than cash
received in lieu of a fractional share interest in Dan River Class A Common
Stock) will realize gain equal to the excess of the amount of cash plus the
fair market value of the Dan River Class A Common Stock received by such
stockholder over the adjusted tax basis of his Bibb Common Stock, but such
gain will be recognized for federal income tax purposes only to the extent
such gain does not exceed the cash received. In general, this recognized
gain will be taxable to the Bibb stockholders as capital gain, although it
is possible that such gain will be taxable as dividend income to a
particular Bibb stockholder if the cash received by him does not result in
a "meaningful reduction" in the percentage ownership of Dan River Class A
Common Stock that he otherwise would have received (taking into account
both his actual and constructive ownership of Dan River Class A Common
Stock under the constructive ownership rules of Section 318 of the Code). A
Bibb stockholder who receives both Dan River Class A Common Stock and cash
in the Merger will not recognize any loss on the exchange.
(iii) A Bibb stockholder who receives solely cash in exchange for his
Bibb Common Stock will, under the position taken by the IRS in published
rulings, be treated as having exchanged such stock for cash in a redemption
of his Bibb Common Stock subject to Section 302 of the Code, and the Bibb
stockholder generally will recognize capital gain or loss equal to the
difference between the amount of cash received and the stockholder's tax
basis in his Bibb Common Stock.
(iv) A Bibb stockholder who receives cash in the Merger in lieu of a
fractional share interest in Dan River Class A Common Stock will be treated
as having exchanged such fractional share for cash in a redemption subject
to Section 302 of the Code, and the Bibb stockholder generally will
recognize capital gain or loss in such exchange equal to the difference
between the cash received and the portion of such stockholder's tax basis
that is allocable to the fractional share so exchanged.
(v) A Bibb stockholder who perfects his appraisal rights under
Delaware law and who receives payment in cash for the "fair value" of his
Bibb Common Stock will be treated as having exchanged such stock for cash
in a redemption subject to Section 302 of the Code, and the Bibb
stockholder generally will recognize capital gain or loss in such exchange
equal to the difference between the cash received and the tax basis of such
stock.
(vi) In the case of a Bibb stockholder who receives solely Dan River
Class A Common Stock in the Merger, the tax basis of the Dan River Class A
Common Stock received will be the same as the stockholder's tax basis in
the Bibb Common Stock surrendered in exchange therefor. In the case of a
Bibb stockholder who receives both Dan River Class A Common Stock and cash
(other than cash received in lieu of a fractional share interest in Dan
River Class A Common Stock), the tax basis of the Dan River Class A Common
Stock received will equal the stockholder's tax basis in the Bibb Common
Stock exchanged therefor, decreased by the amount of any cash received and
increased by the amount of any gain recognized in the exchange.
(vii) The holding period of the Dan River Class A Common Stock
received by the Bibb stockholders in the Merger will include the holding
period of the Bibb Common Stock surrendered in exchange therefor.
(viii) No gain or loss will be recognized by Dan River or Bibb as a
result of the Merger.
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In rendering their respective tax opinions, King & Spalding and Jones Day
will rely on certain written representations as to factual matters made by
appropriate officers of Dan River and Bibb. One particularly important
representation will be that the aggregate fair market value of the Dan River
stock issued in the Merger will represent a sufficient portion, in the
respective judgments of King & Spalding and Jones Day, of the aggregate value of
the Merger Consideration as of the Effective Time (taking into account any cash
paid in lieu of fractional shares of Dan River Class A Common Stock or paid to
Bibb stockholders who dissent from the Merger) such that the Merger will satisfy
the "continuity of interest" requirement applicable to tax-free reorganizations
under Section 368 of the Code. Such representations are customary for opinions
of this type; however, the tax opinions cannot be relied upon if any such
representation is, or later becomes, inaccurate.
Backup Withholding. Any cash received in the Merger by a Bibb stockholder
may be subject to backup withholding at a rate of 31%. Backup withholding will
not apply, however, to a taxpayer who (i) furnishes a correct taxpayer
identification number ("TIN") and certifies that he or she is not subject to
backup withholding on IRS Form W-9 (or an appropriate substitute form), (ii)
provides a certificate of foreign status on IRS Form W-8 (or an appropriate
substitute form), or (iii) is otherwise exempt from backup withholding. The IRS
may impose a $50 penalty upon any taxpayer who fails to provide the correct TIN,
as required.
THE FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND DOES NOT PURPORT TO BE
A COMPLETE ANALYSIS OF ALL POTENTIAL TAX EFFECTS RELEVANT TO A BIBB
STOCKHOLDER'S DECISION WHETHER TO VOTE IN FAVOR OF THE MERGER. BECAUSE CERTAIN
TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH BIBB STOCKHOLDER, EACH BIBB STOCKHOLDER IS URGED TO
CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES
TO SUCH STOCKHOLDER OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND FOREIGN TAX LAWS.
RESALE OF DAN RIVER CLASS A COMMON STOCK
Shares of Dan River Class A Common Stock to be issued to Bibb stockholders
in connection with the Merger will be freely transferrable under the Securities
Act, except for shares issued to any person or entity who, at the time of the
Merger, may be deemed an "affiliate" of Bibb within the meaning of Rule 145
promulgated under the Securities Act. See "-- Terms of the Merger
Agreement -- Registration Rights." In general, affiliates of Bibb include its
executive officers and directors and any other person or entity who controls, is
controlled by or is under common control with Bibb. Rule 145, among other
things, imposes certain restrictions upon the resale of securities received by
affiliates in connection with certain reclassifications, mergers, consolidations
or asset transfers. These restrictions will consist of volume and manner of sale
restrictions on the resale of shares of Dan River Class A Common Stock issued to
such person and entities. Pursuant to the Merger Agreement, Bibb has agreed to
use its reasonable best efforts to cause each person who it identifies as an
"affiliate" for purposes of Rule 145 to deliver to Dan River, on or prior to the
Effective Time, a written statement to the effect that such person will not
offer to sell, transfer or otherwise dispose of any of the shares of Dan River
Class A Common Stock issued to such person pursuant to the Merger, except in
accordance with the applicable provisions of the Securities Act and the rules
and regulations thereunder. Dan River may place legends on certificates
representing shares of Dan River Class A Common Stock that are issued to Bibb
stockholders in the Merger to restrict such transfers.
COMPARISON OF RIGHTS OF HOLDERS OF DAN RIVER CLASS A COMMON STOCK AND BIBB
COMMON STOCK
Bibb is incorporated under the laws of Delaware. The rights of the
stockholders of Bibb are currently governed by the DGCL, the Restated
Certificate of Incorporation of Bibb (the "Bibb Charter") and the Amended and
Restated Bylaws of Bibb (the "Bibb Bylaws"). Upon consummation of the Merger and
receipt of shares of Dan River Class A Common Stock pursuant to the Merger
Agreement, Bibb stockholders will become shareholders of Dan River, and their
rights thereafter will be governed by the GBCC, the Amended and Restated
Articles of Incorporation of Dan River (the "Dan River Charter"), and the Bylaws
of Dan River (the "Dan River Bylaws"). This summary is qualified in its entirety
by reference to the full text of the Dan River Charter, the Dan River Bylaws,
the GBCC, the Bibb Charter, the Bibb Bylaws and the DGCL.
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The following discussion is intended only to highlight certain material
differences between the rights of corporate shareholders under Georgia law and
Delaware law generally and specifically with respect to shareholders of Dan
River and stockholders of Bibb pursuant to their respective charters and bylaws.
The discussion does not constitute a complete comparison of the differences
between the rights of such holders or the provisions of the GBCC, the DGCL, the
Bibb Charter and the Bibb Bylaws and the Dan River Charter and the Dan River
Bylaws, and Bibb stockholders are referred to the DGCL, the Bibb Charter and the
Bibb Bylaws and the GBCC, the Dan River Charter and the Dan River Bylaws for
more complete information regarding such differences.
Authorized Shares. Under the Dan River Charter, Dan River is authorized to
issue 175,000,000 shares of Dan River Class A Common Stock, 35,000,000 shares of
Dan River Class B Common Stock, 5,000,000 shares of Class C Common Stock, par
value $.01 per share ("Class C Common"), and 50,000,000 shares of Preferred
Stock ("Dan River Preferred"), par value $.01 per share. The powers,
preferences, and rights of the Class A Common, Class B Common, Class C Common,
and Dan River Preferred are identical except that with respect to all matters
upon which shareholders are entitled to vote or give consent, holders of
outstanding shares of Dan River Class A Common Stock and Dan River Class B
Common Stock shall vote together as a single group. Each holder of Dan River
Class A Common Stock shall be entitled to one (1) vote for each share of Dan
River Class A Common Stock held, and each holder of Dan River Class B Common
Stock shall be entitled to four and thirty-nine hundredths (4.39) votes for each
share of Dan River Class B Common Stock held. However, with respect to certain
proposed amendments to the Dan River Charter concerning the powers, rights,
preferences, or limitations of Dan River Class B Common Stock, holders of Dan
River Class A Common Stock and Dan River Class B Common Stock will each be
entitled to one vote for each share of Dan River Class A Common Stock or Dan
River Class B Common Stock held. Holders of Class C Common will not be entitled
to vote or give consent on matters upon which shareholders are entitled to vote
or give consent. Notwithstanding the foregoing, with respect to certain mergers,
consolidations, recapitalizations, or reorganizations of Dan River, or
amendments to the conversion or voting rights of Class C Common, wherein shares
of Class C Common would receive different consideration than shares of Dan River
Class A Common Stock, holders of shares of Class C Common will be entitled to
vote or give consent as a single group. Rights of holders of Dan River Preferred
may have different voting and other rights from all or any of the holders of the
Dan River Class A Common Stock, Dan River Class B Common Stock or Class C
Common, depending on the rights given to holders of Dan River Preferred by the
Dan River Board pursuant to paragraph (c) of Article II of the Dan River
Charter. Under the Bibb Charter, Bibb is authorized to issue 25,000,000 shares
of Common Stock ("Bibb Common"), par value $.01 per share, and 5,000,000 shares
of Preferred Stock ("Bibb Preferred"), par value $.01 per share. No shares of
Bibb Preferred are outstanding. The powers, preferences, and rights of the Bibb
Preferred may differ from those of the Bibb Common Stock depending on the rights
given to holders of Bibb Preferred pursuant to Section 4 of the Bibb Charter.
As of the Dan River Record Date, the executive officers and directors of
Dan River beneficially owned approximately 13% of the shares of Dan River Common
Stock then outstanding, representing approximately 37% of the voting power of
the Dan River Common Stock. Upon consummation of the Merger, the executive
officers and directors of Dan River will own approximately 9% of the shares of
Dan River Common Stock then outstanding, representing approximately 31% of the
voting power of the Dan River Common Stock.
Amendments to Charters and Bylaws. Under the GBCC, significant amendments
to a corporation's articles of incorporation must be approved by the
shareholders after being proposed by the board of directors. Certain amendments
to a corporation's articles of incorporation may be adopted with approval by the
board alone. The Dan River Charter additionally requires an affirmative vote of
the holders of at least 66 2/3% of the outstanding voting power of the Dan River
Class A Common Stock and Dan River Class B Common Stock voting together as a
single voting group to amend, modify, or repeal any provision inconsistent with
Articles III, IV, V, or VI of the Dan River Charter. Under the GBCC and the Dan
River Bylaws, the Dan River Bylaws may be amended or repealed by Dan River's
Board of Directors, subject to the power of the shareholders to amend or repeal
any such change to the Dan River Bylaws. Additionally, under the Dan River
Charter, any provision inconsistent with Articles I or II of the Dan River
Bylaws requires an affirmative vote of the holders of at least 66 2/3% of the
outstanding voting power of the Dan River Class A Common Stock and
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Dan River Class B Common Stock voting together as a single voting group or the
affirmative vote of a majority of the directors then in office. Under the DGCL,
amendments to a corporation's certificate of incorporation must be approved by
the board of directors and by the affirmative vote of the holders of a majority
of the outstanding shares entitled to vote. The DGCL reserves the power to amend
or repeal the bylaws exclusively to the stockholders of the corporation unless
the certificate of incorporation confers such powers upon the directors. The
Bibb Charter provides that the Bylaws may be amended or repealed by a majority
of the stockholders or by the Board of Directors of Bibb, provided that no
amendment adopted by the Board may vary or conflict with any amendment adopted
by the stockholders.
Special Meetings of the Shareholders. Under the GBCC and the Dan River
Bylaws, a special meeting of the shareholders of Dan River may be called by a
majority of the Board of Directors, by the Chairman of the Board of Directors or
by the Chief Executive Officer, but no such special meetings may be called by
any other person or persons. Under the DGCL and the Bibb Bylaws, a special
meeting of the stockholders may be called only by (i) the Chairman or the
President or (ii) the Secretary within 10 calendar days after receipt of the
written request of a majority of the whole Board of Directors or (iii) the Board
of Directors upon the receipt by Bibb of a written request executed by the
holders of not less than a majority of the outstanding shares of Bibb Common
Stock.
Shareholder Nominations. Under the Dan River Bylaws, only persons
nominated in accordance with the procedures set forth therein will be eligible
for election as directors of Dan River. Shareholders are entitled to nominate
persons for election to the Dan River Board of Directors only if a timely notice
in writing is sent to the Secretary of Dan River. To be timely, a shareholder's
notice must be received at the principal executive offices of Dan River not less
than 130 days prior to the date of the meeting at which directors are to be
elected (subject to limited exceptions). Such notice must set forth certain
information, including, among other things, (a) all information relating to the
person nominated that would be required to be disclosed in connection with the
solicitation of proxies for the election of directors pursuant to Regulation
14(A) under the Exchange Act, and (b) with respect to such shareholder giving
such notice, (i) the name and address of such shareholder and (ii) the class and
number of shares of Dan River Common Stock beneficially owned by such
shareholder.
Under the Bibb Bylaws, only persons nominated in accordance with the
procedures set forth therein will be eligible for election as directors.
Stockholders are entitled to nominate persons for election to the Board of
Directors of Bibb only if a timely notice in writing is sent to the Secretary of
Bibb. To be timely, a stockholder's notice must be received at the principal
executive offices of Bibb not less than 60 days prior to the date of the meeting
at which directors are to be elected (subject to limited exceptions). To be in
proper written form, such stockholder's notice must set forth or include (i) the
name and address of the stockholder giving the notice and of the beneficial
owner, if any, on whose behalf the nomination is made; (ii) a representation
that the stockholder giving the notice is a holder of record of stock of Bibb
entitled to vote at such annual meeting and intends to appear in person or by
proxy at the annual meeting to nominate the person or persons specified in the
notice;(iii) the class and number of shares of stock of Bibb owned beneficially
and of record by the stockholder giving the notice and by the beneficial owner,
if any, on whose behalf the nomination is made; (iv) a description of all
arrangements or understandings between or among any of (A) the stockholder
giving the notice, (B) the beneficial owner on whose behalf such notice is
given, (C) each nominee, and (D) any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder giving the notice; (v) such other information regarding each
nominee proposed by the stockholder giving the notice as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Commission under the Exchange Act had the nominee been nominated, or intended to
be nominated, by the Bibb Board of Directors; and (vi) the signed consent of
each nominee to serve as a director of Bibb if so elected.
Shareholder Proposals. Under the Dan River Bylaws, at an annual meeting of
shareholders, only business properly brought before the meeting may be
conducted. For business to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely notice thereof in writing to
the Secretary of Dan River. To be timely, a shareholder's notice must be
received at the principal executive offices of Dan River not less than 130 days
prior to the annual meeting (with limited exceptions). Such notice must set
forth as to each matter the shareholder proposes to bring before the annual
meeting (i) a brief description
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of the business to be brought and the reasons for conducting such business, (ii)
the name and address of such shareholder, (iii) the class and number of shares
of Dan River Common Stock beneficially owned by such shareholder and (iv) any
material interests of the shareholder in such proposed business.
Under the Bibb Bylaws, at an annual meeting of stockholders, only business
properly brought before the meeting may be conducted. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of Bibb. To be
timely, a stockholder's notice must be received at the principal executive
office of Bibb not less than 60 days prior to the annual meeting (with limited
exceptions). Such notice must set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a description in reasonable
detail of the business to be brought and the reasons for conducting such
business; (ii) the name and address of such stockholder, (iii) the class and
number of shares of Bibb Common Stock beneficially owned by such stockholder and
by the beneficial owner, if any, on whose behalf the proposal is made, and (iv)
any material interests of the stockholder and by the beneficial owner, if any,
on whose behalf the proposal is made in such proposed business.
Cumulative Voting. Under the GBCC, cumulative voting in the election of
directors is not permitted unless otherwise provided in the Articles of
Incorporation. The Dan River Charter does not grant cumulative voting rights to
Dan River shareholders. Under the DGCL, cumulative voting in the election of
directors is not mandatory. Neither the Bibb Charter nor the Bibb Bylaws grants
any cumulative voting rights to Bibb stockholders.
Board of Directors. The number of directors constituting the Dan River
Board of Directors is currently five. The Dan River Bylaws provide that the
Board shall have between one and 20 directors. The directors of Dan River are
divided into three classes, with approximately one-third of the directors
elected by the shareholders annually. Consequently, the members of the Dan River
Board of Directors serve staggered three-year terms. Vacancies and newly created
directorships may be filled by the vote of the remaining directors (even though
less than a quorum remains). A member of the Dan River Board of Directors may be
removed only for cause and only at a shareholders' meeting.
The number of directors constituting the Bibb Board of Directors is seven.
The Bibb Charter provides that the Board of Directors shall have between three
and nine directors. Vacancies and newly-created directorships may be filled
solely by the vote of the remaining directors (even though less than a quorum
remains). A member of the Bibb Board of Directors may be removed with or without
cause by a vote of a majority of the whole Bibb Board of Directors or by the
vote of the holders of a majority of the Bibb Common Stock.
Quorum. Under the GBCC, the presence of a majority of the authorized
number of directors is necessary to constitute a quorum. By resolution of the
Dan River Board of Directors, the presence of four directors currently is
required to constitute a quorum. Under the Bibb Bylaws, the presence of a
majority of the directors then in office is necessary to constitute a quorum.
Limitation on Personal Liability of Directors. Under the Dan River
Charter, no director of Dan River will be personally liable to Dan River or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except in limited circumstances. Under the Bibb Charter, no director will be
personally liable to Bibb or its stockholders for monetary damages in his
capacity as a director, except in limited circumstances.
Indemnification of Directors and Officers. Both the GBCC and DGCL permit
indemnification of directors and officers. Under the GBCC, a Georgia corporation
may indemnify an individual who is a party to a proceeding because he or she is
or was a director, against liability incurred in such proceeding, provided that
such individual acted in good faith and reasonably believed (a) in the case of
conduct in his or her official capacity, that such conduct was in the best
interests of the corporation, (b) in all other cases other than a criminal
proceeding, that such conduct was at least not opposed to the best interests of
the corporation, and (c) in the case of a criminal proceeding, that such
individual had no reasonable cause to believe that such conduct was unlawful. A
Georgia corporation may not indemnify a director under the GBCC (i) in
connection with a proceeding by or in the right of the corporation, except for
reasonable expenses incurred by such director in connection with the proceeding,
provided it is determined that such director met the relevant
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standard of conduct set forth above, or (ii) in connection with any proceeding
with respect to conduct for which such director was adjudged liable on the basis
that he or she received an improper personal benefit. Additionally, a Georgia
corporation may, before final disposition of a proceeding, advance funds to pay
for or reimburse the reasonable expenses incurred by a director who is a party
to a proceeding because he or she is a director, provided that such director
delivers to the corporation a written affirmation of his or her good faith
belief that he or she met the relevant standard of conduct or that the
proceeding involves conduct for which such director's liability has been
properly eliminated by action of the corporation, and a written undertaking by
the director to repay any funds advanced if it is ultimately determined that
such director was not entitled to such indemnification.
The GBCC also allows a Georgia corporation to indemnify directors made a
party to a proceeding without regard to the above-referenced limitations, if
authorized by the articles of incorporation or a bylaw, contract, or resolution
duly adopted by a vote of the shareholders of the corporation by a majority of
votes entitled to be cast, excluding shares owned or voted under the control of
the director or directors who are not disinterested. Under the Dan River Bylaws,
Dan River shall indemnify to the fullest extent permitted under the GBCC any
person made a party to a proceeding because he or she is or was a director or
officer of Dan River, if he or she acted in a manner he or she believed in good
faith to be in or not opposed to the best interests of Dan River and, in the
case of any criminal proceeding, if he or she had no reasonable cause to believe
his or her conduct was unlawful. Dan River shall have the power to indemnify to
the fullest extent permitted under the GBCC any person made a party to a
proceeding because he or she is or was an employee or agent of Dan River, if he
or she acted in a manner he or she believed in good faith to be in or not
opposed to the best interests of Dan River and, in the case of any criminal
proceeding, if he or she had no reasonable cause to believe his or her conduct
was unlawful.
Under the DGCL, a corporation may indemnify its directors, officers,
employees or agents, acting in their capacities as such, for expenses,
judgments, fines and settlement amounts actually and reasonably incurred by them
in connection with any action, suit or proceeding in which they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. In
addition, under the DGCL, with respect to any action by or in the right of the
corporation, a corporation may indemnify any of such persons unless such person
is adjudged liable to the corporation, a corporation may advance expenses to
directors, officers and others as long as, in the case of directors and
officers, they undertake to repay the amounts advanced if it is ultimately
determined that the director or officer was not entitled to be indemnified.
Finally, under the DGCL, a corporation must indemnify a director, officer,
employee or agent of a corporation for expenses actually and reasonably incurred
in connection with any action, suit or proceeding as to which such person has
been successful on the merits. Under the Bibb Charter and Bibb Bylaws, Bibb is
required to indemnify, and advance expenses in connection therewith, to the
fullest extent permitted by the DGCL, any person who is involved in any action,
suit or proceeding by reason of the fact that the person is or was a director,
officer, employee, or agent of Bibb, or had agreed to serve at the request of
the Board of Directors as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other entity, whether for
profit or not for profit.
Vote on Extraordinary Corporate Transactions. Delaware law provides that,
unless otherwise specified in a corporation's certificate of incorporation or
unless the provisions of the DGCL discussed below under "-- Business Combination
Restrictions" are applicable, a sale or other disposition of all or
substantially all of the corporation's assets, a merger or consolidation of the
corporation with another corporation or a dissolution of the corporation
requires the affirmative vote of the Board of Directors (except in certain
limited circumstances) plus, with certain exceptions, the affirmative vote of a
majority of the outstanding stock entitled to vote thereon. The foregoing
provisions apply to Bibb and its stockholders. Georgia law is similar to
Delaware law in that, except as described below under "-- Business Combination
Restrictions," a sale or other disposition of all or substantially all of the
corporation's assets, a merger of the corporation with and into another
corporation, a share exchange involving one or more classes or series of the
corporation's shares or a dissolution of the corporation must be adopted by the
Board of Directors plus, with certain exceptions, the affirmative vote of a
majority of all shares of stock entitled to vote thereon. Under the Dan River
Charter, the
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shareholders of Dan River shall not approve any merger, consolidation of Dan
River with or into any other entity or the sale of all or substantially all of
Dan River's assets or a dissolution of Dan River except with the approval of the
holders of two thirds of the voting power of the outstanding Dan River Common
Stock.
Certain Business Combinations. Both the GBCC and DGCL include business
combination statutes which are generally designed to deter hostile takeovers by
protecting minority shareholders in the second stage of freeze-out mergers.
Freeze-out mergers occur when controlling shareholders prevent minority
shareholders from receiving any direct or indirect financial return from the
corporation to persuade them to liquidate their investment in the corporation on
terms favorable to the controlling shareholders. As defined under the GBCC and
DGCL, "business combinations" encompass, among other types of combinations, a
merger of a corporation with any "interested shareholder" or a corporation
associated or affiliated with an "interested shareholder" who was an "interested
shareholder" prior to the transaction. Under Georgia Law, an "Interested
Shareholder" is any person who owns at least ten percent (10%) of the
outstanding voting shares or an affiliate of the corporation owning at least ten
percent (10%) of the outstanding voting shares within the prior two years. Under
the GBCC, certain "business combinations" (including a merger, consolidation,
asset transfer or reclassification of equity Securities) between a Georgia
corporation and an Interested Shareholder, are prohibited for five years from
the time that such Interested Shareholder becomes an Interested Shareholder
unless (i) prior to such time the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
shareholder becoming an Interested Shareholder; (ii) in the transaction which
resulted in the shareholder becoming an Interested Shareholder, the Interested
Shareholder became the beneficial owner of at least 90% of the corporation
outstanding at the time the transaction commenced, excluding shares owned by
directors and officers of the corporation, subsidiaries of the corporation, and
certain employee stock plans of the corporation; or (iii) subsequent to becoming
an Interested Shareholder, such shareholder acquired additional shares resulting
in the Interested Shareholder being the beneficial owner of at least 90% of the
outstanding voting stock of the corporation, excluding shares owned by directors
and officers of the corporation, subsidiaries of the corporation, and certain
employee stock plans of the corporation.
Furthermore, the GBCC provides that a business combination must be either
(i) unanimously approved by the continuing directors provided that the
continuing directors constitute at least three members of the board of directors
at the time of such approval; or (ii) recommended by at least two-thirds of the
continuing directors and approved by a majority of the votes entitled to be cast
by holders of voting shares, other than voting shares beneficially owned by the
Interested Shareholder unless, among other conditions, the Georgia corporation's
common shareholders receive a minimum price (as defined in the GBCC) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for its shares. However, because
the Dan River Bylaws do not currently explicitly provide so, these GBCC
provisions do not apply to business combinations with Interested Shareholders
with respect to Dan River. Delaware Law defines an "Interested Stockholder" as
(i) any person who is the direct or indirect beneficial owner of at least
fifteen percent (15%) of the voting power of any class or series of the then
outstanding stock of the corporation or (ii) an affiliate or associate of the
corporation and within three (3) years of the date in question was the direct or
indirect owner of at least fifteen percent (15%) of the voting power of any
class or series of the then outstanding stock of the corporation. Delaware Law
prohibits a corporation from engaging in any business combination with any
Interested Stockholder for a period of three (3) years following the date that
such stockholder became an interested Stockholder unless sixty-six and
two-thirds percent (66 2/3%) of the voting stock not beneficially owned by the
Interested Stockholder or any affiliate or associate of the Interested
Stockholder is cast in favor of the merger. In general, a Delaware corporation
must specifically elect, through an amendment to its bylaws or certificate of
incorporation, not to be governed by these provisions. Bibb has not made such an
election and therefore, is currently subject to these provisions of the DGCL.
Anti-Takeover Provisions. Certain provisions of the GBCC and the Dan River
Charter and the DGCL and the Bibb Charter may discourage an attempt to acquire
control of Dan River or Bibb, respectively, even when a majority of either
corporation's shareholders determined that such an acquisition was in their best
interests. These provisions also may render the removal of one or all directors
more difficult or deter or delay a
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change of control that the Dan River Board of Directors or Bibb Board of
Directors, respectively, did not approve.
Authorized Preferred Stock. The Dan River Board of Directors may authorize
the issuance of Dan River Preferred at such times, for such purposes and for
such consideration as it may deem advisable without further stockholder
approval. The issuance of Dan River Preferred under certain circumstances may
have the effect of discouraging an attempt by a third party to acquire control
of Dan River by, for example, authorizing the issuance of a series of Dan River
Preferred with the rights and preferences designed to impede the proposed
transaction, or by making it more difficult for a person who has gained a
substantial equity interest in Dan River to obtain control or to exercise
control effectively.
The Bibb Board of Directors may authorize the issuance of Bibb Preferred at
such times, for such purposes and for such consideration as it may deem
advisable without further stockholder approval. The issuance of Bibb Preferred
under certain circumstances may have the effect of discouraging an attempt by a
third party to acquire control of Bibb by, for example, authorizing the issuance
of a series of Bibb Preferred with the rights and preferences designed to impede
the proposed transaction, or by making it more difficult for a person who has
gained a substantial equity interest in Bibb to obtain control or to exercise
control effectively.
Rights Plan. In September 1997, the Bibb Board of Directors adopted a
stockholder rights plan and in connection therewith entered into the Bibb Rights
Agreement. Rights to acquire Series A Junior Participating Preferred Stock
rights (the "Bibb Rights") were declared for the holders of Bibb Common Stock of
record on October 15, 1997, and the Bibb Rights attach to all shares of Bibb
Common Stock then outstanding and issued thereafter. Each Bibb Right entitles
its registered holder to purchase from Bibb, after the Distribution Date (as
defined therein), one-hundredth of a share of Series A Junior Participating
Preferred Stock at an exercise price of $49 subject to adjustment. The Bibb
Rights become exercisable only if a person or group acquires 15% or more of Bibb
Common Stock or commences a tender offer after the consummation of which such
person or group would own 15% or more of the then-outstanding Bibb Common Stock.
The Bibb Rights have certain anti-takeover effects. The Bibb Rights will
cause substantial dilution to a person or group that attempts to acquire, or
merge with, Bibb without conditioning the offer on the Bibb Rights being
rendered unapplicable.
The Bibb Board of Directors has approved and Bibb has entered into an
amendment to the Bibb Rights Agreement to provide that neither the approval,
execution or delivery of the Merger Agreement, the announcement thereof, nor the
consummation of the transactions contemplated thereby will result in the Bibb
Rights being exercised, distributed or triggered.
APPRAISAL RIGHTS
Holders of Dan River Common Stock are not entitled to appraisal rights
under the GBCC in connection with the Merger. Stockholders of Bibb who do not
vote in favor of the Merger, who deliver a written demand for an appraisal with
Bibb before the vote is taken on the Merger, and who have otherwise properly
complied with the Section 262 of the DGCL, will be entitled to appraisal rights.
THIS DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO APPRAISAL
RIGHTS UNDER THE DGCL AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF
SECTION 262 OF THE DGCL ("SECTION 262"), WHICH IS REPRINTED IN ITS ENTIRETY AS
ANNEX D TO THIS JOINT PROXY STATEMENT/PROSPECTUS. ALL REFERENCES IN SECTION 262
AND IN THIS SUMMARY TO A "STOCKHOLDER" OR "HOLDER" ARE TO THE RECORD HOLDER OF
THE SHARES OF BIBB COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE ASSERTED.
Under the DGCL, record holders of Bibb Common Stock who follow the
procedures set forth in Section 262 and who do not vote in favor of the Merger
Agreement will be entitled to have their shares of Bibb Common Stock appraised
by the Delaware Court of Chancery and to receive payment of the "fair value" of
such shares, exclusive of any element of value arising from the accomplishment
or expectation of the Merger, together with a fair rate of interest, if any, as
determined by such court. Such holders are, in such circumstances, entitled to
appraisal rights because they hold stock of constituent corporations to the
Merger, and may be required by the Merger Agreement to accept Merger
Consideration in the form of Cash
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Consideration. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF BIBB COMMON
STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR NOMINEE,
MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE STEPS SUMMARIZED
BELOW PROPERLY AND IN A TIMELY MANNER TO PERFECT THE APPRAISAL RIGHTS PROVIDED
UNDER SECTION 262.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, as in the case of the Bibb Special Meeting, not
less than 20 days prior to the meeting, the corporation must notify each of its
stockholders who was such on the record date for such meeting with respect to
shares for which appraisal rights are available that appraisal rights are
available and include in each such notice a copy of Section 262.
This Joint Proxy Statement/Prospectus constitutes the required notice to
the record holders of Bibb Common Stock and a copy of Section 262 is attached to
this Joint Proxy Statement/Prospectus as Annex D. Any such stockholder who
wishes to exercise such appraisal rights should review the following discussion
and Annex D carefully, because failure to timely and properly comply with the
procedures specified will result in the loss of appraisal rights under the DGCL.
A holder of shares of Bibb Common Stock wishing to exercise his or her
appraisal rights (a) must deliver to the Secretary of Bibb, before the vote on
the Merger Agreement at the Bibb Special Meeting a written demand for appraisal
of his or her shares of Bibb Common Stock and (b) must not vote in favor of the
Merger. A proxy or vote against the Merger shall not constitute a demand. In
addition, mere failure, after the completion of the Merger, to execute and
return a Form of Election to the Exchange Agent does not constitute a demand. A
holder of Bibb Common Stock electing to demand appraisal must do so before the
taking of a vote on the Merger Agreement by a separate written demand that
reasonably informs Bibb of the identity of the record holder of Bibb Common
Stock and of such holder's intention thereby to demand the appraisal of such
holder's Bibb Common Stock. ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE
DELIVERED TO BIBB AT 100 GALLERIA PARKWAY, SUITE 1750, ATLANTA, GEORGIA 30339,
ATTENTION: SECRETARY.
A holder of shares of Bibb Common Stock wishing to exercise his or her
appraisal rights must hold his or her shares of record on the date the written
demand for appraisal is made and must hold his or her shares continuously
through the Effective Time. Accordingly, a record holder of Bibb Common Stock
who is the record holder of Bibb Common Stock on the date the written demand for
appraisal is made, but who thereafter transfers such stock prior to the
consummation of the Merger, will lose any right to appraisal in respect of such
shares.
Only a holder of record of shares of Bibb Common Stock is entitled to
assert appraisal rights for the shares of Bibb Common Stock registered in that
holder's name. A demand for appraisal should be executed by or on behalf of the
holder of record, fully and correctly, as such holder's name appears on such
holder's stock certificates. If the shares of Bibb Common Stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the shares of
Bibb Common Stock are owned of record by more than one person as in a joint
tenancy or tenancy in common, the demand should be executed by or on behalf of
all joint owners. An authorized agent, including one or more joint owners, may
execute a demand for appraisal on behalf of a holder of record; however, the
agent must identify the record owner or owners and expressly disclose the fact
that, in executing the demand, the agent is agent for such owner or owners. A
record holder such as a broker who holds shares of Bibb Common Stock as nominee
for several beneficial owners may exercise appraisal rights with respect to the
shares of Bibb Common Stock held for one or more beneficial owners while not
exercising such rights with respect to the shares of Bibb Common Stock held for
other beneficial owners; in such case, the written demand should set forth the
number of shares of Bibb Common Stock as to which appraisal is sought. When no
number of shares of Bibb Common Stock is expressly mentioned the demand will be
presumed to cover all shares of Bibb Common Stock held in the name of the record
owner.
Stockholders who hold their shares of Bibb Common Stock in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights must
take all necessary steps in order that a demand for appraisal is made by the
record holder of those shares and are urged to consult with their brokers to
determine the appropriate procedures for the making of a demand for appraisal by
the record holder.
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Within ten days after the Effective Time, Dan River must send a notice of
the effectiveness of the merger to each person who has properly asserted
appraisal rights under Section 262 and has not voted in favor of or consented to
the Merger. Within 120 days after the Effective Time, but not thereafter, Dan
River, or any holder of shares of Bibb Common Stock who has complied with the
procedures under Section 262 and who is entitled to appraisal rights under
Section 262, may file a petition in the Delaware Court of Chancery demanding a
determination of the value of the stock of all such stockholders. Dan River is
not under any obligation to file a petition seeking the appraisal of the shares
of Bibb Common Stock. Accordingly, it is the obligation of the stockholders to
initiate all necessary action to perfect their appraisal rights within the time
prescribed in Section 262.
Within 120 days after the Effective Time, any stockholder who has complied
with the requirements for exercise of appraisal rights will be entitled, upon
written request, to receive from Dan River a statement setting forth the
aggregate number of shares of Bibb Common Stock not voted in favor of adoption
of the Merger Agreement and with respect to which demands for appraisal have
been received and the aggregate number of holders of such shares of Bibb Common
Stock. Such statements must be mailed within 10 days after a written request
therefor has been received by Dan River or within 10 days after expiration of
the period for delivery of demands for appraisal under Section 262, whichever is
later.
A holder of shares of Bibb Common Stock will fail to perfect, or
effectively lose, his or her right to appraisal if, among other things, no
petition for appraisal of shares of Bibb Common Stock is filed within 120 days
after the Effective Time, or if the stockholder delivers to Bibb a written
withdrawal of his or her demand for appraisal.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the "fair value" of their shares
of Bibb Common Stock, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be the fair value.
Stockholders considering seeking appraisal should be aware that the fair value
of their shares of Bibb Common Stock as determined under Section 262 could be
more than, the same as or less than the value of the Merger Consideration they
would receive pursuant to the Merger Agreement if they did not seek appraisal of
their shares of Bibb Common Stock and that investment banking opinions as to
fairness from a financial point of view are not necessarily opinions as to fair
value under Section 262. The Delaware Supreme Court has stated that "proof of
value by any techniques or methods which are generally considered acceptable in
the financial community and otherwise admissible in court" should be considered
in appraisal proceedings.
The Delaware Court of Chancery will determine the amount of interest, if
any, to be paid upon the amounts to be received by persons whose shares of Bibb
Common Stock have been appraised. The costs of the action may be determined by
the Delaware Court of Chancery and taxed upon the parties as the Delaware Court
of Chancery deems equitable. The Delaware Court of Chancery may also order that
all or a portion of the expenses incurred by any stockholder in connection with
the appraisal proceeding, including, without limitation, reasonable attorneys'
fees and the fees and expenses of experts utilized in the appraisal proceeding,
be charged pro rata against the value of all of the shares of Bibb Common Stock
entitled to appraisal.
If any holder of shares of Bibb Common Stock who demands appraisal of his
shares under Section 262 fails to perfect, or effectively withdraws or loses,
his right to appraisal, as provided in the DGCL, the shares of Bibb Common Stock
of such stockholder will be deemed to be Non-Election Shares in accordance with
the Merger Agreement. See "-- Terms of the Merger Agreement -- Election
Procedure." A holder may withdraw his demand for appraisal by delivering to Dan
River a written withdrawal of his demand for appraisal and acceptance of the
Merger, except that any such attempt to withdraw made more than 60 days after
the Effective Time will require the written approval of Dan River. Failure to
follow the steps required by Section 262 of the DGCL for perfecting appraisal
rights may result in the loss of such rights (in which event a stockholder will
be treated as a stockholder with Non-Election Shares in accordance with the
Merger Agreement).
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Any holder of shares of Bibb Common Stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Time, be
entitled to vote the shares of Bibb Common Stock subject to such demand for any
purpose or be entitled to the payment of dividends or other distributions on
those shares (except dividends or other distributions payable to holders of
record of shares of Bibb Common Stock as of a date prior to the Effective Time).
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Bibb Board of Directors with
respect to the Merger, one should be aware that certain members of the Bibb
Board of Directors and certain executive officers of Bibb have interests in the
Merger separate from their interests as Bibb stockholders.
As a result of a severance and change in control policy put in place for
certain Bibb "Executive Officers" on January 1, 1998 (the "Executive Officer
Policy") these Bibb Executive Officers may have certain interests that may
present them with potential conflicts of interest with respect to the Merger.
Pursuant to the Executive Officer Policy, an Executive Officer will be paid his
or her monthly base compensation in effect immediately prior to a Change of
Control (as defined in the Executive Officer Policy) multiplied by either twelve
or twenty-four months, plus a payment in lieu of a target incentive payment a
percentage of base compensation, in a lump sum in cash upon the closing of any
transaction which meets the definition of "Change in Control" (as defined in the
Executive Officer Policy). Such payment will be made whether or not the
Executive Officer's employment has terminated and regardless of the reason for
any such termination. In addition, Bibb also adopted on January 1, 1998 a Key
Management Severance Policy (the "Key Management Policy") pertaining to certain
additional executive officers and key employees of Bibb in the event of
termination of employment following a change in control. The anticipated
payments to Bibb's executive officers under the Executive Officer Policy and
under the Key Management Policy, if applicable, as a result of the Merger are as
follows: Mr. Fulbright -- $1,225,000; Mr. Tutterow -- $202,500; Mr. L.C.
Brown -- $156,250; Ms. Jeanne Cumiskey -- $150,000 and Mr. Robert E.
Major -- $175,000.
The Executive Officer Policy provides for a "gross-up" payment if the
Executive Officer is subject to excise taxes under Section 4999 of the Code
(which relates to excess parachute payments under Section 280G of the Code). In
addition, the Executive Officer Policy provides for the payment of accounting
expenses related to any tax or severance agreement benefits for the Executive
Officer and payment of legal fees incurred by the Executive Officer, if needed,
to enforce his or her rights under the agreement.
Mr. Fulbright also is a party to a separate employment agreement with Bibb
(the "Fulbright Agreement"), providing that Bibb will pay Mr. Fulbright 200% of
his annual base salary and continue to provide insurance and other employee
benefits through August 26, 1999 (or cash payments in lieu thereof if
continuation is contrary to the terms of the applicable benefit plans), if Bibb
terminates his employment, other than for cause or due to death or disability,
or if Mr. Fulbright terminates his employment because Bibb fails to observe the
requirements of the employment agreement prior to August 26, 1998; if such
termination occurs after August 26, 1998 but prior to August 26, 1999, the
payment would be 100% of his annual base salary, or if it follows a change in
control which occurs during said period, 200% of his annual base salary. This
amount would be offset against the amounts paid pursuant to the Executive
Officer Policy if paid under the same circumstances.
All stock options granted under the Omnibus Plan and all benefits under The
Bibb Company Executive Deferred Compensation Plan as revised May 12, 1998 will
vest upon consummation of the Merger which will constitute a "Change of Control"
under such plans. The options granted to Mr. Fulbright pursuant to the Fulbright
Agreement also will vest upon consummation of the Merger. Upon consummation of
the Merger, certain of these options to purchase Bibb Common Stock held by
certain members of the Bibb Board of Directors and certain executive officers of
Bibb will be canceled and in consideration therefor, Dan River will pay the
holders of such options the Option Cancellation Amount. In addition, certain
other options held by certain executive officers of Bibb will be assumed by Dan
River and converted into an outstanding and exercisable option to purchase Dan
River Class A Common Stock. See "-- Terms of the Merger Agreement -- Options."
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From and after the Effective Time, Dan River has agreed to indemnify,
defend and hold harmless, to the fullest extent permitted under the DGCL and the
GBCC, the present and former officers and directors of Bibb against all losses,
claims, damages, liabilities, costs or expenses (including attorneys' fees)
arising out of acts or omissions, or alleged acts or omissions, by them in their
capacities as such officers or directors incurring at or prior to the Effective
Time. Such indemnification rights of each Bibb officer and director are in
addition to any other rights that such officers and directors may have under the
Bibb Charter or the Bibb Bylaws, under the GBCC or otherwise. Dan River has also
agreed to purchase directors and officers insurance for the officers and
directors of Bibb for a period of three years from the Effective Time.
An affiliate and certain officers of HLHZ, which is the parent company of
Houlihan Lokey, Bibb's financial advisor, own Bibb Common Stock, which shares of
Common Stock in the aggregate constitute less than one percent of the total
issued and outstanding shares of Bibb Common Stock. In addition, Irwin Gold, a
Senior Managing Director of HLHZ, is a member of the Bibb Board of Directors.
Houlihan Lokey will receive a fee of approximately $1 million upon consummation
of the Merger and will be reimbursed for reasonable out-of-pocket expenses
incurred in connection therewith. See "The Merger -- Opinion of Bibb's Financial
Advisor."
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF DAN RIVER
On February 3, 1997 Dan River acquired substantially all of the assets of
Cherokee for $65 million in cash, subject to a working capital adjustment, and
the assumption of certain operating liabilities. On November 20, 1997 Dan River
completed an initial public offering of its Class A Common Stock.
The Unaudited Pro Forma Combined Statement of Income (Pre-Merger) for the
fiscal year ended January 3, 1998 gives effect to the acquisition of Cherokee
and the initial public offering of Common Stock, as if each had occurred on the
first day of the 1997 fiscal year. The Unaudited Pro Forma Combined Statement of
Income (Merger) for the fiscal year ended January 3, 1998 is based upon the
Unaudited Pro Forma Combined Statement of Income (Pre-Merger) for the same
period and gives effect to the Merger and the financing thereof as if they had
also occurred on the first day of the 1997 fiscal year.
The Unaudited Pro Forma Combined Balance Sheet as of April 4, 1998 gives
effect to the Merger and the financing thereof as if they had occurred at April
4, 1998. The Unaudited Pro Forma Combined Statement of Income for the three
months ended April 4, 1998 gives effect to the Merger and the financing thereof
as if they had occurred on the first day of the period presented.
The Merger has been accounted for under the purchase method of accounting.
The total cost of the Merger has been preliminarily allocated to the assets
acquired and liabilities assumed based upon their respective fair values as
determined through internal estimates that the Company believes are reasonable.
The actual allocation of purchase cost, however, and the resulting effect on
income may differ from the pro forma amounts included herein.
The following unaudited pro forma combined financial information does not
purport to reflect the financial position or results of operations that actually
would have resulted had the above transactions occurred as of the dates
indicated or to project the results of operations for any future period. The
unaudited pro forma combined financial information should be read in conjunction
with the historical financial statements of Dan River, Cherokee and Bibb and in
each case the notes thereto which are incorporated herein by reference.
55
67
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
APRIL 4, 1998
HISTORICAL PRO FORMA
-------------------- ------------------------
DAN RIVER BIBB ADJUSTMENTS COMBINED
--------- -------- ----------- --------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents....................... $ 2,118 $ 110 $ -- $ 2,228
Accounts receivable, net........................ 69,263 34,137 -- 103,400
Inventories..................................... 99,274 58,698 1,276 (1) 159,248
Net assets of discontinued operations........... -- 11,617 -- 11,617
Prepaid expenses and other current assets....... 5,482 3,828 (714)(1) 8,596
Deferred income taxes........................... 7,628 -- -- 7,628
-------- -------- -------- --------
Total current assets.................... 183,765 108,390 562 292,717
Property, plant and equipment, net................ 209,171 70,744 -- 279,915
Goodwill, net..................................... -- -- 95,282 (1) 95,282
Other assets...................................... 6,604 2,626 (2,626)(1) 10,604
4,000 (2)
-------- -------- -------- --------
Total assets............................ $399,540 $181,760 $ 97,218 $678,518
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............ $ 198 $ 5,363 $ (5,363)(2) $ 198
Accounts payable................................ 30,047 25,796 -- 55,843
Accrued compensation and related benefits....... 15,211 5,168 1,000 (1) 21,379
Other accrued expenses.......................... 14,023 7,670 -- 21,693
-------- -------- -------- --------
Total current liabilities............... 59,479 43,997 (4,363) 99,113
Other liabilities:
Long-term debt.................................. 139,073 79,555 97,696 (2) 316,324
Deferred income taxes........................... 20,936 -- (15,780)(1) 5,156
Other liabilities............................... 8,889 -- 2,433 (1) 11,322
Shareholders' equity:
Preferred stock................................. -- -- -- --
Common stock.................................... 189 101 (57)(3) 233
Additional paid-in capital...................... 139,140 88,882 (13,486)(3) 214,536
Retained earnings (deficit)..................... 31,834 (30,775) 30,775 (3) 31,834
-------- -------- -------- --------
Total shareholders' equity.............. 171,163 58,208 17,232 246,603
-------- -------- -------- --------
Total liabilities and shareholders'
equity................................ $399,540 $181,760 $ 97,218 $678,518
======== ======== ======== ========
56
68
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(1) In connection with the Merger, each outstanding share of Bibb Common
Stock will be converted into the right to receive, at the holder's election,
0.84615 shares of Dan River Class A Common Stock or $16.50 in cash. As
necessary, holders' elections will be prorated such that the total number of
stock election shares equals 50% of the total outstanding shares of Bibb Common
Stock. For purposes of the Unaudited Pro Forma Combined Balance Sheet, the fair
market value of Dan River Common Stock is assumed to be $17.30 per share, which
approximates the average closing market price of the stock for the 10 business
days surrounding June 29, 1998, the date the Merger Agreement was announced to
the public.
Also in connection with the Merger, certain nonqualified options to
purchase Bibb Common Stock held by employees and directors of Bibb will be
cancelled, and the holders will receive 50% of the value of their options in
cash, and the remainder in Dan River Class A Common Stock. For purposes of the
options buyout, (i) the value of each option is measured as the difference
between $16.50 and the exercise price and (ii) the value of Dan River Class A
Common Stock is assumed to be $19.50 per share.
ISSUANCE OF DAN RIVER CLASS A COMMON STOCK:
Shares of Bibb Common Stock assumed to be
outstanding........................................... 10,061,576
Percentage of stock election shares (after
proration)............................................ X 50%
----------------
5,030,788
Conversion ratio....................................... X 0.84615
----------------
Total shares of Dan River Class A Common Stock to be
issued to holders of Bibb Common Stock.............. 4,256,801
----------------
Value of outstanding Bibb stock options to be
cancelled............................................. $ 4,049,893
Percentage of value to be paid out in Dan River Class A
Common Stock.......................................... X 50%
----------------
$ 2,024,947
Value of Dan River Class A Common Stock for purposes of
option buyout......................................... $19.50 per share
----------------
Total shares of Dan River Class A Common Stock to be
issued to holders of Bibb options................... 103,844
----------------
Grand total -- Dan River Class A Common Stock assumed
to be issued in connection with the Merger.......... 4,360,645
================
AGGREGATE PURCHASE PRICE: (IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
Amount paid for outstanding Bibb Common Stock:
Cash portion (5,030,788 shares at $16.50 per
share).............................................. $ 83,008
Issuance of Dan River Class A Common Stock (4,256,801
shares at $17.30 per share)......................... 73,643
Buyout of options to purchase Bibb Common Stock:
Cash portion......................................... 2,025
Issuance of Dan River Class A Common Stock (103,844
shares at $17.30 per share)......................... 1,797
Assumed fair value of Bibb incentive stock options that
will be converted to options to acquire Dan River
Class A Common Stock.................................. 2,433
Payments to be made to certain executive officers of
Bibb concurrent with the closing of the Merger
pursuant to the Executive Officer Policy.............. 1,800
Professional fees and other transaction costs.......... 1,500
----------------
Aggregate purchase price............................... $ 166,206
================
57
69
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED)
EXCESS OF COST OVER FAIR MARKET VALUE OF NET ASSETS ACQUIRED: (IN
THOUSANDS)
Aggregate purchase price................................. $166,206
Less net book value of assets acquired................... 58,208
--------
Excess of cost over net book value of assets acquired.... 107,998
Less adjustments to recorded assets and liabilities
acquired at fair market value:
Inventory.............................................. 1,276(a)
Prepaid expenses and other current assets.............. (714)(b)
Other assets........................................... (2,626)(c)
Accrued compensation and related benefits.............. (1,000)(d)
Deferred income taxes.................................. 15,780(e) 12,716
------ --------
Excess of cost over fair market value of net assets
acquired (goodwill).................................... $ 95,282
========
-----------------------
(a) Reflects the adjustments necessary to state inventory at fair market
value.
(b) Reflects the preliminary fair value remeasurement of the pension
asset.
(c) Reflects the write-off of unamortized debt issuance costs related to
Bibb indebtedness that will be refinanced in connection with the
Merger.
(d) Reflects a preliminary estimate of severance costs to be incurred in
connection with the merger pursuant to the Key Management Policy.
(e) Reflects (i) the elimination of the valuation allowance against
deferred tax assets ($16.0 million), which Dan River management
believes will not be needed after the merger, and (ii) a $0.2
million increase in deferred tax liability related to the
differences between the tax basis and adjusted financial statement
values of Bibb assets at an assumed income tax rate of 39%.
(2) Reflects (i) the refinancing of all Bibb outstanding indebtedness, (ii)
additional financing to fund the cash portion of the buyout of Bibb
outstanding Common Stock and stock options, and other transaction costs, and
(iii) the incurrence of related debt issuance costs of $4.0 million. The new
debt is expected to be provided by a combination of bank financing and a
public debt issuance, or solely through bank financing.
(3) Reflects (i) the elimination of Bibb's equity as a result of the Merger and
(ii) the issuance of 4,360,645 shares of Dan River Class A Common Stock in
connection with the Merger which results in additional paid-in capital of
$75.4 million.
58
70
UNAUDITED PRO FORMA COMBINED
STATEMENT OF INCOME (PRE-MERGER)
YEAR ENDED JANUARY 3, 1998
PRO FORMA ADJUSTMENTS
HISTORICAL ----------------------- DAN RIVER
----------------------- CHEROKEE PRO FORMA
DAN RIVER CHEROKEE(1) ACQUISITION OFFERING (PRE-MERGER)
--------- ----------- ----------- -------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales.............................. $476,448 $9,210 $ -- $ -- $485,658
Costs and expenses:
Cost of sales........................ 372,165 7,208 (83)(2) -- 379,321
31 (3)
Selling, general and administrative
expenses.......................... 54,231 1,085 (344)(4) -- 54,980
8 (3)
Other operating costs, net........... 7,012 302 (302)(5) -- 7,012
-------- ------ ----- ------ --------
Operating income....................... 43,040 615 690 44,345
Other income (expense)................. (290) 7 -- -- (283)
Interest expense....................... (21,135) (318) (224)(6) 4,862(7) (16,815)
-------- ------ ----- ------ --------
Income before income taxes and
extraordinary item................... 21,615 304 466 4,862 27,247
Provision for income taxes............. 8,351 -- 299(8) 1,877(6) 10,527
-------- ------ ----- ------ --------
Income before extraordinary item....... $ 13,264 $ 304 $ 167 $2,985 $ 16,720
======== ====== ===== ====== ========
Earnings per share before extraordinary
item:
Basic................................ $ 0.90 $ 0.89
======== ========
Diluted.............................. $ 0.89 $ 0.88
======== ========
Weighted average shares outstanding:
Basic................................ 14,711 18,841
======== ========
Diluted.............................. 14,839 18,968
======== ========
- ---------------
(1) Reflects the operating results of Cherokee for the portion of 1997 prior to
its acquisition on February 3, 1997.
(2) Decrease in depreciation expense based on adjusted fixed asset values and
related estimated remaining useful lives.
(3) Additional costs associated with providing a pension benefit to Cherokee
employees hired by Dan River.
(4) Elimination of certain selling, general and administrative expenses,
including salaries and benefits of certain officers and other employees of
Cherokee who were not employed by Dan River after the acquisition of
Cherokee, and costs associated with Cherokee's marketing offices, which Dan
River vacated shortly after the acquisition of Cherokee.
(5) Elimination of expenses associated with Cherokee's Employee Stock Ownership
Plan, the obligations which were not assumed in connection with the
acquisition of Cherokee.
(6) Net increase in interest expense resulting from the acquisition of Cherokee
(representing the five week period prior to the consummation of the
acquisition of Cherokee on February 3, 1997).
(7) Decrease in interest expense attributable to the assumed repayment of $65
million in borrowings related to the acquisition of Cherokee out of the net
proceeds from the Offering.
(8) Adjustment of pro forma income tax expense to reflect an assumed effective
tax rate of 38.6% of pre-tax income.
59
71
UNAUDITED PRO FORMA COMBINED
STATEMENT OF INCOME (MERGER)
YEAR ENDED JANUARY 3, 1998
DAN RIVER DAN RIVER
PRO FORMA BIBB PRO FORMA PRO FORMA
(PRE-MERGER) HISTORICAL ADJUSTMENTS(6) FOR MERGER
------------ ---------- -------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales................................... $485,658 $248,836 $ -- $734,494
Costs and expenses:
Cost of sales............................. 379,321 222,620 -- 601,941
Selling, general and administrative
expenses............................... 54,980 23,306 (2,500)(1) 75,786
Amortization of goodwill.................. -- -- 3,176(2) 3,176
Other operating costs, net................ 7,012 4,133 -- 11,145
-------- -------- ------- --------
Operating income (loss)..................... 44,345 (1,223) (676) 42,446
Other income (expense), net................. (283) (162) -- (445)
Interest expense............................ (16,815) (6,013)(5) (7,149)(3) (29,977)
-------- -------- ------- --------
Income before income taxes and extraordinary
item...................................... 27,247 (7,398) (7,825) 12,024
Provision for income taxes.................. 10,527 -- (4,650)(4) 5,877
-------- -------- ------- --------
Income (loss) before discontinued operations
and extraordinary item.................... $ 16,720 $ (7,398) $(3,175) $ 6,147
======== ======== ======= ========
Earnings per share from continuing
operations:
Basic..................................... $ 0.89 $ 0.26
======== ========
Diluted................................... $ 0.88 $ 0.26
======== ========
Weighted average shares outstanding:
Basic..................................... 18,841 23,201
======== ========
Diluted................................... 18,968 23,379
======== ========
- ---------------
(1) Reflects the elimination of duplicative Bibb administrative expenses,
principally management compensation and related fringe benefits.
(2) Reflects non-deductible amortization of goodwill based on an estimated life
of 30 years.
(3) Reflects additional interest expense, consisting of the following: (in
thousands)
Interest expense attributable to incremental debt of $92.2
million resulting from the Merger, at annual rates
averaging 8.5%............................................ $7,848
Amortization of debt issuance costs related to debt incurred
to fund the Merger........................................ 571
Reversal of the amortization of debt issuance costs on Bibb
debt that will be refinanced in connection with the
Merger.................................................... (1,270)
------
Net increase in pro forma interest expense.................. $7,149
======
(4) Adjustment of pro forma income tax expense to reflect an assumed effective
tax rate of 38.6%.
(5) Includes interest expense and loan fee amortization and related expense.
(6) The pro forma adjustments do not include the impact of certain
merger-related cost savings initiatives that Dan River intends to implement.
The additional cost savings, which are expected to total $15.5 million
(pre-tax) on an annual basis, include:
- reduced selling, general and administrative expense, principally from the
elimination of overlapping administrative functions;
- manufacturing cost savings from certain plant alignment and capacity
utilization synergies, and manufacturing practices expected to result in
improved operating efficiencies;
- cost savings relating to manufacturing techniques and specifications; and
- savings expected to be realized through volume purchasing of certain raw
materials, such as polyester and packaging materials.
The projected cost savings are based on estimates and assumptions believed
to be reasonable by management. Due to the inherent uncertainty associated
with such estimates and assumptions, there can be no assurance that these
cost savings will actually be realized.
60
72
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
THREE MONTHS ENDED APRIL 4, 1998
HISTORICAL PRO FORMA
------------------- --------------------------
DAN RIVER BIBB ADJUSTMENTS(6) COMBINED
--------- ------- -------------- --------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Net sales...................................... $120,943 $56,825 $ -- $177,768
Costs and expenses:
Cost of sales................................ 94,898 48,958 -- 143,856
Selling, general and administrative
expenses.................................. 13,901 5,682 (625)(1) 18,958
Amortization of goodwill..................... -- -- 794(2) 794
-------- ------- ------- --------
Operating income............................... 12,144 2,185 (169) 14,160
Other income (expense), net.................... 280 -- -- 280
Interest expense............................... (3,820) (2,074)(5) (1,771)(3) (7,665)
-------- ------- ------- --------
Income before income taxes and discontinued
operations................................... 8,604 111 (1,940) 6,775
Provision for income taxes..................... 3,202 -- (400)(4) 2,802
-------- ------- ------- --------
Income from continuing operations.............. $ 5,402 $ 111 $(1,540) $ 3,973
======== ======= ======= ========
Earnings per share from continuing operations:
Basic........................................ $ 0.29 $ 0.17
======== ========
Diluted...................................... $ 0.28 $ 0.17
======== ========
Weighted average shares outstanding:
Basic........................................ 18,838 23,199
======== ========
Diluted...................................... 19,074 23,541
======== ========
- ---------------
(1) Reflects the elimination of duplicative Bibb administrative expenses,
principally management compensation and related fringe benefits.
(2) Reflects non-deductible amortization of goodwill based on an estimated life
of 30 years.
(3) Reflects additional interest expense, consisting of the following:
Interest expense attributable to incremental debt of $92.2
million resulting from the Merger, at annual rates
averaging 8.5%............................................ $1,962
Amortization of debt issuance costs related to debt incurred
to fund the Merger........................................ 143
Reversal of the amortization of debt issuance costs on Bibb
debt that will be refinanced in connection with the
Merger.................................................... (334)
------
Net increase in pro forma interest expense.................. $1,771
======
(4) Adjustment of pro forma income tax expense to reflect an assumed effective
tax rate of 38.6%.
(5) Includes interest expense and loan fee amortization and related expense.
(6) The pro forma adjustments do not include the impact of certain
merger-related cost savings initiatives that Dan River intends to implement.
The additional cost savings, which are expected to total $15.5 million
(pre-tax) on an annual basis, include:
- reduced selling, general and administrative expense, principally from the
elimination of overlapping administrative functions;
- manufacturing cost savings from certain plant alignment and capacity
utilization synergies, and manufacturing practices expected to result in
improved operating efficiencies;
- cost savings relating to manufacturing techniques and specifications; and
- savings expected to be realized through volume purchasing of certain raw
materials, such as polyester and packaging materials.
The projected cost savings are based on estimates and assumptions believed
to be reasonable by management. Due to the inherent uncertainty associated
with such estimates and assumptions, there can be no assurance that these
cost savings will actually be realized.
61
73
EXPERTS
The consolidated financial statements of Dan River incorporated by
reference in Dan River's Annual Report on Form 10-K for the year ended January
3, 1998 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon incorporated by reference therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The financial statements of Bibb at January 3, 1998 and December 28, 1996
and for the year ended January 3, 1998, the three months ended December 28,
1996, the nine months ended September 28, 1996 and the year ended December 30,
1995, included in this Joint Proxy Statement/Prospectus by reference to its
Annual Report on Form 10-K for the year ended January 3, 1998, have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
The financial statements of Cherokee for the three years in the period
ended September 28, 1996 incorporated herein by reference to Dan River's Current
Report on Form 8-K/A Amendment No. 1 filed on April 18, 1997, have been audited
by Pugh & Company, P.C., independent auditors, as set forth in their report
thereon and incorporated herein by reference. Such financial statements are
incorporated herein by reference upon such report given upon the authority of
such firm as experts in accounting and auditing.
LEGAL MATTERS
The legality of the shares of Dan River Class A Common Stock to be issued
pursuant to the terms of the Merger Agreement will be passed upon for Dan River
by King & Spalding, Atlanta, Georgia. Certain legal matters in connection with
the Merger will be passed upon for Bibb by Jones, Day, Reavis & Pogue, Atlanta,
Georgia.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in Dan River's proxy solicitation
materials for its 1999 annual meeting of shareholders, any shareholders proposal
to be considered at such meeting must have been received by Dan River on or
before November 12, 1998. Any such proposal will be subject to the requirements
contained in the Dan River Bylaws relating to shareholders proposals and the
proxy rules under the Exchange Act. See "The Merger -- Comparison of Rights of
Holders of Dan River Class A Common Stock and Bibb Common Stock."
62
74
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
DAN RIVER INC.
AND
THE BIBB COMPANY
DATED AS OF JUNE 28, 1998
75
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGER........................................................ A-1
Section 1.1. Surviving Corporation....................................... A-1
Section 1.2. Effective Time.............................................. A-1
Section 1.3. Articles of Incorporation................................... A-1
Section 1.4. Bylaws...................................................... A-1
Section 1.5. Officers.................................................... A-2
Section 1.6. Directors................................................... A-2
Section 1.7. Tax-Free Reorganization..................................... A-2
ARTICLE II CONVERSION OF SHARES AND TREATMENT OF OPTIONS.................... A-2
Section 2.1. Conversion of Shares in the Merger.......................... A-2
Section 2.2. Exchange of and Payment for Shares of Company Common
Stock....................................................... A-4
Section 2.3. Treatment of the Company Stock Options...................... A-6
Section 2.4. Adjustment Event............................................ A-7
Section 2.5. Appraisal Rights............................................ A-7
Section 2.6. Share Purchase Rights....................................... A-7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... A-7
Section 3.1. Organization................................................ A-7
Section 3.2. Authorization............................................... A-8
Section 3.3. Absence of Restrictions and Conflicts....................... A-8
Section 3.4. Capitalization.............................................. A-8
Section 3.5. Company Subsidiaries........................................ A-9
Section 3.6. Financial Statements........................................ A-9
Section 3.7. SEC Reports................................................. A-9
Section 3.8. Absence of Changes.......................................... A-9
Section 3.9. Absence of Undisclosed Liabilities.......................... A-10
Section 3.10. Litigation.................................................. A-10
Section 3.11. Compliance with Laws........................................ A-10
Section 3.12. Bankruptcy Matters.......................................... A-10
Section 3.13. Taxes....................................................... A-10
Section 3.14. Employee Benefit Plans...................................... A-11
Section 3.15. Material Contracts.......................................... A-12
Section 3.16. Labor Matters............................................... A-13
Section 3.17. Brokers and Finders......................................... A-13
Section 3.18. DGCL Section 203............................................ A-13
Section 3.19. Voting Requirement.......................................... A-13
Section 3.20. Fairness Opinion............................................ A-13
Section 3.21. Rights Agreement Matters.................................... A-13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT......................... A-14
Section 4.1. Organization................................................ A-14
Section 4.2. Authorization............................................... A-14
Section 4.3. Absence of Restrictions and Conflicts....................... A-14
Section 4.4. Capitalization.............................................. A-15
Section 4.5. Parent's Subsidiaries....................................... A-15
Section 4.6. Financial Statements; SEC Filings........................... A-15
Section 4.7. SEC Reports................................................. A-15
Section 4.8. Absence of Changes.......................................... A-16
Section 4.9. Absence of Undisclosed Liabilities.......................... A-16
i
76
PAGE
----
Section 4.10. Litigation.................................................. A-16
Section 4.11. Compliance with Laws........................................ A-16
Section 4.12. Taxes....................................................... A-17
Section 4.13. Employee Benefit Plans...................................... A-17
Section 4.14. Labor Matters............................................... A-17
Section 4.15. Brokers and Finders......................................... A-17
Section 4.16. Ownership of Company Common Stock........................... A-17
Section 4.17. Fairness Opinion............................................ A-17
Section 4.18. Funds....................................................... A-17
Section 4.19. Inconsistencies in Company Representations.................. A-17
ARTICLE V COVENANTS OF PARENT AND THE COMPANY............................... A-18
Section 5.1. Joint Proxy Statement; Registration Statement............... A-18
Section 5.2. HSR Act..................................................... A-18
Section 5.3. Access and Investigation.................................... A-19
Section 5.4. Stockholder Meetings........................................ A-19
Section 5.5. No Solicitation............................................. A-19
Section 5.6. Conduct of Business......................................... A-20
Section 5.7. Consents.................................................... A-21
Section 5.8. Filings..................................................... A-21
Section 5.9. Best Efforts; Further Assurances............................ A-21
Section 5.10. Publicity................................................... A-22
Section 5.11. Notification of Certain Matters............................. A-22
Section 5.12. Indemnification and Insurance............................... A-22
Section 5.13. Parent Common Stock......................................... A-23
Section 5.14. Employee Benefits........................................... A-23
Section 5.15. Affiliate Letters........................................... A-23
Section 5.16. Rights Plan Amendment/Redemption............................ A-24
Section 5.17. Resale Registration......................................... A-24
ARTICLE VI CONDITIONS....................................................... A-24
Section 6.1. Conditions to Each Party's Obligations...................... A-24
Section 6.2. Conditions to Obligations of Parent......................... A-25
Section 6.3. Conditions to Obligations of the Company.................... A-25
ARTICLE VII CLOSING......................................................... A-26
ARTICLE VIII TERMINATION.................................................... A-26
Section 8.1. Termination................................................. A-26
Section 8.2. Effect of Termination....................................... A-27
Section 8.3. Fees and Expenses........................................... A-27
ARTICLE IX MISCELLANEOUS.................................................... A-28
Section 9.1. Survival of Representations and Warranties.................. A-28
Section 9.2. Notices..................................................... A-28
Section 9.3. Waiver and Amendment........................................ A-28
Section 9.4. Entire Agreement............................................ A-29
Section 9.5. Counterparts................................................ A-29
Section 9.6. Applicable Law.............................................. A-29
Section 9.7. Construction................................................ A-29
Section 9.8. Disclosure Letters.......................................... A-29
Section 9.9. Assignment.................................................. A-29
Section 9.10. Severability................................................ A-29
Section 9.11. Specific Performance........................................ A-29
Section 9.12. Company and Parent Knowledge................................ A-30
ii
77
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June 28, 1998,
by and between DAN RIVER INC., a corporation organized and existing under the
laws of the State of Georgia ("Parent"), and THE BIBB COMPANY, a corporation
organized and existing under the laws of the State of Delaware (the "Company").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of each of the Company and
Parent deem it advisable and in the best interests of each corporation and its
respective stockholders, that the Company and Parent combine in order to advance
the long-term business strategies of the Company and Parent;
WHEREAS, the respective Boards of Directors of each of Parent and the
Company have approved in accordance with the Georgia Business Corporation Code
(the "GBCC") and the General Corporation Law of the State of Delaware ("DGCL")
this Agreement and the merger (the "Merger") of the Company with and into Parent
on the terms and conditions contained in this Agreement; and
WHEREAS, for federal income tax purposes it is intended by the parties
hereto that the Merger shall qualify as a "reorganization" within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent and the Company hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. Surviving Corporation. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as hereinafter defined) of
the Merger, the Company shall be merged with and into Parent. As a result of the
Merger, the separate corporate existence of the Company shall cease and Parent
shall continue as the surviving corporation (the "Surviving Corporation").
Section 1.2. Effective Time. If all the conditions set forth in Article
VI have been fulfilled or waived in accordance with the terms of this Agreement
and this Agreement has not been terminated in accordance with Article VIII, the
parties shall cause a certificate of merger as contemplated by Section 251 of
the DGCL (the "Delaware Certificate of Merger") to be properly executed and
filed on the Closing Date (as hereinafter defined) with the Secretary of State
of the State of Delaware and a certificate of merger as contemplated by Section
14-2-1105 of the GBCC (the "Georgia Certificate of Merger") to be properly
executed and filed on the Closing Date with the Secretary of State of the State
of Georgia. The Merger shall become effective as of the time of filing of a
properly executed Delaware Certificate of Merger and a Georgia Certificate of
Merger or at such later time as is set forth in such Certificates of Merger. The
date and time when the Merger becomes effective is referred to as the Effective
Time. The Merger shall have the effects set forth in the applicable provisions
of the GBCC and the DGCL. Without limiting the generality of the foregoing and
subject thereto, at the Effective Time all the property, rights, privileges,
immunities, powers and franchises of the Company, shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company shall become
the debts, liabilities and duties of the Surviving Corporation.
Section 1.3. Articles of Incorporation. The Restated Articles of
Incorporation of Parent as in effect immediately prior to the Effective Time
shall be the Restated Articles of Incorporation of the Surviving Corporation,
until the same shall thereafter be altered, amended or repealed in accordance
with law or such Restated Articles of Incorporation.
Section 1.4. Bylaws. The Bylaws of Parent as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation, until
the same shall thereafter be altered, amended or repealed in accordance with
law, the Restated Articles of Incorporation of the Surviving Corporation or such
Bylaws.
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Section 1.5. Officers. The officers of the Surviving Corporation shall be
the officers of Parent immediately prior to the Effective Time, and such
individuals shall serve until their successors shall have been duly elected and
qualified.
Section 1.6. Directors. The directors of the Surviving Corporation shall
be the directors of Parent immediately prior to the Effective Time.
Section 1.7 Tax-Free Reorganization. The Merger is intended to be a
reorganization within the meaning of Section 368(a)(1) of the Code, and this
Agreement is intended to be a "plan of reorganization" within the meaning of the
regulations promulgated under Section 368(a)(1) of the Code and for the purpose
of qualifying as a tax-free transaction for federal income tax purposes. The
parties hereto will agree to report the Merger as a tax-free reorganization
under the provisions of Section 368(a)(1). Neither of the parties hereto will
take or cause to be taken any action which would prevent the transactions
contemplated by this Agreement from qualifying as a reorganization under Section
368(a)(1).
ARTICLE II
CONVERSION OF SHARES AND TREATMENT OF OPTIONS
Section 2.1. Conversion of Shares in the Merger. At the Effective Time,
by virtue of the Merger and without any action on the part of Parent, the
Company or the holders of any share of common stock, par value $.01 per share,
of the Company (the "Company Common Stock"):
(a) Subject to the other provisions of this Section 2.1, each share of
Company Common Stock issued and outstanding immediately prior to the
Effective Time (excluding any treasury shares, shares held by Parent and
Dissenting Shares (as defined in Section 2.5)) shall be converted into (i)
the right to receive 0.84615 shares (the "Exchange Ratio") of class A
common stock, par value $.01 per share ("Parent Common Stock"), of Parent,
(ii) the right to receive $16.50 in cash, without interest (the "Per Share
Cash Amount"), or (iii) the right to receive a combination of shares of
Parent Common Stock and cash determined in accordance with this Section
2.1. All such shares of Company Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist,
and each certificate previously evidencing any such shares shall thereafter
represent the right to receive the Merger Consideration (as defined in
Section 2.2(b)). The holders of such certificates previously evidencing
such shares of Company Common Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares
of Company Common Stock except as otherwise provided herein or by law. Such
certificates previously evidencing shares of Company Common Stock shall be
exchanged for (i) certificates evidencing whole shares of Parent Common
Stock issued in consideration therefor or (ii) the Per Share Cash Amount
multiplied by the number of shares previously evidenced by the canceled
certificate, in each case in accordance with the allocation procedures of
this Section 2.1 and upon the surrender of such certificates in accordance
with the provisions of Section 2.2, without interest. No fractional shares
of Parent Common Stock shall be issued, and, in lieu thereof, a cash
payment shall be made pursuant to Section 2.2(f).
(b) The number of shares of Company Common Stock to be converted into
the right to receive cash in the Merger shall be equal to 50% of the number
of shares of Company Common Stock outstanding immediately prior to the
Effective Time (the "Cash Election Number") less the sum of (i) the number
of Dissenting Shares, if any, which are not to be treated as Non-Election
Shares pursuant to Section 2.5 and (ii) the number of shares of Company
Common Stock to be exchanged for cash in lieu of fractional shares pursuant
to Section 2.2(f). The number of shares of Company Common Stock to be
converted into the right to receive Parent Common Stock in the Merger shall
be equal to 50% of the number of shares of Company Common Stock outstanding
immediately prior to the Effective Time (the "Stock Election Number").
(c) Subject to the allocation and election procedures set forth in
this Section 2.1, each record holder immediately prior to the Effective
Time of shares of Company Common Stock will be entitled in respect to each
share (i) to elect to receive cash for such share (a "Cash Election"), (ii)
to elect to
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receive Parent Common Stock for such share (a "Stock Election"), or (iii)
to indicate that such record holder has no preference as to the receipt of
cash or Parent Common Stock for such shares (a "Non-Election"). All such
elections shall be made on a form designed for that purpose (a "Form of
Election"). Holders of record of shares of Company Common Stock who hold
such shares as nominees, trustees or in other representative capacities (a
"Representative") may submit multiple Forms of Election, provided that such
Representative certifies that each such Form of Election covers all the
shares of Company Common Stock held by each Representative for a particular
beneficial owner.
(d) If the aggregate number of shares covered by Cash Elections (the
"Cash Election Shares") exceeds the Cash Election Number, all shares of
Company Common Stock covered by Stock Elections (the "Stock Election
Shares") and all shares of Company Common Stock covered by Non-Elections
(the "Non-Election Shares") shall be converted into the right to receive
Parent Common Stock, and the Cash Election Shares shall be converted into
the right to receive Parent Common Stock and cash in the following manner:
each Cash Election Share shall be converted into the right to receive
(i) an amount in cash, without interest, equal to the product of (x) the
Per Share Cash Amount and (y) a fraction (the "Cash Fraction"), the
numerator of which shall be the Cash Election Number and the denominator
of which shall be the total number of Cash Election Shares, and (ii) a
number of shares of Parent Common Stock equal to the product of (x) the
Exchange Ratio and (y) a fraction equal to one minus the Cash Fraction.
(e) If the aggregate number of Stock Election Shares exceeds the Stock
Election Number, all Cash Election Shares and all Non-Election Shares shall
be converted into the right to receive cash, and all Stock Election Shares
shall be converted into the right to receive Parent Common Stock and cash
in the following manner:
each Stock Election Share shall be converted into the right to receive
(i) a number of shares of Parent Common Stock equal to the product of
(x) the Exchange Ratio and (y) a fraction (the "Stock Fraction"), the
numerator of which shall be the Stock Election Number and the
denominator of which shall be the total number of Stock Election Shares,
and (ii) an amount in cash, without interest, equal to the product of
(x) the Per Share Cash Amount and (y) a fraction equal to one minus the
Stock Fraction.
(f) In the event that neither subparagraph (d) nor subparagraph (e)
above is applicable, all Cash Election Shares shall be converted into the
right to receive cash, all Stock Election Shares shall be converted into
the right to receive Parent Common Stock, and all Non-Election Shares shall
be converted into the right to receive Parent Common Stock and the right to
receive cash on a proportionate basis so that the Stock Election Number and
the Cash Election Number equal their respective percentages of the number
of shares of Company Common Stock outstanding as closely as possible.
(g) Parent and the Company will mail a Form of Election to all holders
of record of shares of Company Common Stock as of the record date of the
Company Stockholder Meeting (as hereinafter defined). Elections shall be
made by holders of Company Common Stock by mailing to the Exchange Agent a
Form of Election. To be effective, a Form of Election must be properly
completed, signed and submitted to the Exchange Agent and accompanied by
the certificates representing the shares of Company Common Stock as to
which the election is being made (or by an appropriate guarantee of
delivery of such certificates as set forth in such Form of Election from a
member of any registered national securities exchange or of the National
Association of Securities Dealers, Inc. (the "NASD") or a commercial bank
or trust company having an office or correspondent in the United States,
provided such certificates are in fact delivered by the time set forth in
such guarantee of delivery). Parent will have the discretion, which it may
delegate in whole or in part to the Exchange Agent, to determine whether
Forms of Election have been properly completed, signed and submitted or
revoked and to disregard immaterial defects in Forms of Election. The
decision of Parent (or the Exchange Agent) in such matters shall be
conclusive and binding. Neither Parent nor the Exchange Agent will be under
any obligation to notify any person of any defect in a Form of Election
submitted to the Exchange Agent. The
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Exchange Agent shall also make all computations contemplated by this
Section 2.1 and all such computations shall be conclusive and binding on
the holders of Company Common Stock.
(h) For the purposes hereof, a holder of Company Common Stock who does
not submit a Form of Election which is received by the Exchange Agent prior
to the Election Deadline (as hereinafter defined) shall be deemed to have
made a Non-Election. If Parent or the Exchange Agent shall determine that
any purported Cash Election or Stock Election was not properly made, such
purported Cash Election or Stock Election shall be deemed to be of no force
and effect and the stockholder making such purported Cash Election or Stock
Election shall for purposes hereof, be deemed to have made a Non-Election.
(i) Parent and the Company shall each use its reasonable best efforts
to mail the Form of Election to all persons who become holders of Company
Common Stock during the period between the record date for the Company
Stockholders Meeting (as hereinafter defined) and 10:00 a.m. New York time,
on the date seven calendar days prior to the anticipated Effective Time and
to make the Form of Election available to all persons who become holders of
Company Common Stock subsequent to such day and no later than the close of
business on the business day prior to the Effective Time. A Form of
Election must be received by the Exchange Agent by the close of business on
the last business day prior to the Effective Time (the "Election Deadline")
in order to be effective. All elections will be irrevocable.
(j) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Parent or any
direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
(k) Each share of Parent Common Stock, Class B Stock, Class C Stock
and Preferred Stock (each as hereinafter defined) issued and outstanding
prior to the Effective Time shall remain issued and outstanding after the
Effective Time and represent one share of Parent Common Stock, Class B
Stock, Class C Stock and Preferred Stock, respectively.
Section 2.2. Exchange of and Payment for Shares of Company Common
Stock. (a) Prior to the Effective Time, Parent shall designate a bank or trust
company to act as exchange agent (the "Exchange Agent"), for purposes of making
the exchanges of Company Common Stock for Merger Consideration contemplated
hereby. When and as needed, Parent shall provide the Exchange Agent with
certificates representing the shares of Parent Common Stock issuable pursuant to
Section 2.1 and with sufficient funds to make payments of cash in accordance
with Sections 2.1(a) and 2.2(f) on a timely basis. Parent shall enter into an
exchange agent agreement with the Exchange Agent which shall set forth the
duties, responsibilities and obligations of the Exchange Agent consistent with
the terms of this Agreement.
(b) Parent shall cause the Exchange Agent to mail to each record holder of
shares of Company Common Stock entitled to receive Merger Consideration pursuant
to Section 2.1(a) a form of letter of transmittal (which shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of a certificate or certificates formerly representing shares of
Company Common Stock to the Exchange Agent) and instructions for use in
effecting the surrender to the Exchange Agent of Certificates in exchange for
Merger Consideration. Upon surrender of a Certificate to the Exchange Agent,
together with a letter of transmittal duly executed and completed in accordance
with the instructions thereto, and any other documents reasonably required by
the Exchange Agent or Parent, at the Effective Time the holder of such
Certificate shall be entitled to receive in exchange therefor (A) certificates
evidencing that number of whole shares of Parent Common Stock which such holder
has the right to receive in respect of the shares of Company Common Stock
formerly evidenced by such Certificate in accordance with Section 2.1, (B) cash
to which such holder is entitled to receive in accordance with Section 2.1, (C)
cash in lieu of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.2(f) and (D) any dividends or other distributions
to which such holder is entitled pursuant to Section 2.2(c), (the shares of
Parent Common Stock, dividends, distributions and cash described in clauses (A),
(B), (C) and (D) being collectively, the "Merger Consideration") and the
Certificate so surrendered shall forthwith be canceled. If any Merger
Consideration is to be issued or paid in the name of, a person other than the
person in whose name the Certificate so surrendered in exchange therefor is
registered, it shall be a condition of the payment and
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issuance that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
exchange shall pay any transfer and other taxes required by reason of the
payment of the Merger Consideration in the name of, a person other than the
registered holder of the Certificate so surrendered or shall establish to the
satisfaction of the Exchange Agent and Parent that such tax has been paid or is
not applicable. Until surrendered in accordance with the provisions of this
Section 2.2, each Certificate shall, at and after the Effective Time, represent
for all purposes only the right to receive Merger Consideration. Notwithstanding
the foregoing, neither the Exchange Agent nor any party hereto shall be liable
to a holder of Company Common Stock for Merger Consideration delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws. No interest will be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article II.
(c) No dividends or other distributions that are declared or made after the
Effective Time with respect to shares of Parent Common Stock included in the
Merger Consideration payable to the holders of record thereof after the
Effective Time shall be paid to a Company stockholder entitled to receive
certificates representing Parent Common Stock until such stockholder has
properly surrendered such stockholder's Certificates. Upon such surrender, there
shall be paid to the person in whose name the certificates representing such
shares of Parent Common Stock shall be issued any dividends which shall have
become payable with respect to such Parent Common Stock between the Effective
Time and the time of such surrender, without interest. After such surrender,
there shall also be paid to the stockholder in whose name the certificate
representing such Parent Common Stock shall be issued any dividend on such
Parent Common Stock that shall have a record date subsequent to the Effective
Time and prior to such surrender and a payment date after such surrender;
provided that such dividend payments shall be made on such payment dates. In no
event shall the stockholders entitled to receive such dividends be entitled to
receive interest on such dividends, subject in any case to any applicable
abandoned property, escheat and similar laws.
(d) All rights to receive cash and shares of Parent Common Stock issued
upon conversion of the shares of Company Common Stock pursuant to this Article
II shall be deemed to have been paid or issued, as the case may be, in full
satisfaction of all rights pertaining to such shares of Company Common Stock.
(e) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged in accordance with the
procedures set forth in this Article II.
(f) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates; no
dividend or distribution of Parent on Parent Common Stock shall relate to any
fractional share and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent. Notwithstanding any
other provision of this Agreement, each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock shall receive, upon
surrender of such holder's Certificates in accordance with this Section 2.2, a
cash payment in lieu of such fractional share of Parent Common Stock equal to
the fractional portion of the arithmetic mean of the closing sales price of a
share of Parent Common Stock as reported on the New York Stock Exchange (the
"NYSE"), for each of the ten consecutive trading days ending with the trading
day which occurs five trading days immediately prior to the Closing Date.
(g) From and after the Effective Time, the holders of Certificates shall
cease to have any rights with respect to shares of Company Common Stock
represented thereby except as otherwise provided in this Agreement or by
applicable law.
(h) The Surviving Corporation may require any person claiming a Certificate
to have been lost, stolen or destroyed to provide reasonable indemnification to
the Surviving Corporation to protect it against possible loss prior to the
payment of any Merger Consideration otherwise payable hereunder.
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(i) At any time following six months after the Effective Time, the
Surviving Corporation will be entitled to require the Exchange Agent to deliver
to it any shares of Parent Common Stock or funds (including any interest
received with respect thereto) which had been made available to the Exchange
Agent and which had not been disbursed to holders of Certificates, and
thereafter such holders will be entitled to look solely to the Surviving
Corporation with respect to the Merger Consideration payable or issuable upon
due surrender of their Certificates, without any interest thereon; provided,
however, that neither the Exchange Agent nor any party hereto shall be liable to
a holder of Certificates for any amount required to be paid to a public official
pursuant to any applicable abandoned property, escheat and similar laws.
Section 2.3. Treatment of the Company Stock Options. (a) Except as
described in Section 2.3(b), in the case of any option, or part of any option,
to purchase Company Common Stock under the Company's 1997 Omnibus Stock
Incentive Plan (the "Omnibus Plan") that at the Effective Time would under the
terms of such option (after giving effect to any accelerated vesting caused by
the Merger) still constitute an "incentive stock option," each option (or part
of any option) to purchase Company Common Stock under the Omnibus Plan, that
certain employment agreement by and between the Company and Michael L. Fulbright
(the "Fulbright Agreement") and the Company's Non-Employee Director Stock Plan
(the "Director Plan" and together with the Omnibus Plan and the Fulbright
Agreement hereinafter collectively referred to as the "Company's Option Plans")
which is outstanding and unexercised (whether or not then exercisable or vested)
will be canceled by the Company (pursuant to the proper exercise of such powers
as vested in the Company under the Omnibus Plan, the Fulbright Agreement and the
Director Plan) and, in consideration of such cancellation, Parent will pay
promptly after the Effective Time to the holder of each such option in respect
thereof an amount equal to the product of (a) the Applicable Amount and (b) the
number of shares of Company Common Stock subject to such option (the "Option
Cancellation Consideration"). The term "Applicable Amount" means the excess of
(i) $16.50 over (ii) the exercise price of such option.
The Option Cancellation Consideration shall consist of a cash component and
a stock component. The cash component will be an amount equal to the Option
Cancellation Consideration times 0.5. The stock component will be the number of
shares of Parent Common Stock (rounded to the next highest whole number in the
case of a fractional amount) equal to the product of the Option Cancellation
Consideration times 0.5 divided by $19.50 which Parent Common Stock shall be
issued by Parent subject to such restrictions as Parent deems necessary or
appropriate under applicable securities laws.
(b) At the Effective Time, Parent shall assume the Omnibus Plan and each
option (or part of any option) to purchase Company Common Stock under the
Omnibus Plan that at the Effective Time would under the terms of such option
(after giving effect to any accelerated vesting caused by the Merger) still
constitute an "incentive stock option" and that is otherwise described in
Section 2.3(a). Each such assumed option shall be converted into an outstanding
and exercisable option to purchase Parent Common Stock in accordance with the
terms of the Omnibus Plan and each such assumed option. Each such option shall
constitute an option to acquire, on the same terms and conditions (giving effect
to any accelerated vesting caused by the Merger) as were applicable under such
assumed option, a number of shares of Parent Common Stock equal to the number of
shares of Company Common Stock purchasable pursuant to such option multiplied by
the Option Exchange Ratio (as hereinafter defined), at a price per share equal
to the per-share exercise price for the shares of Company Common Stock
purchasable pursuant to such option divided by the Option Exchange Ratio;
provided, however, the number of shares purchasable pursuant to such option and
the terms and conditions of exercise of such option shall be determined in order
to comply with Section 424(a) of the Code; and provided further, that the number
of shares of Parent Common Stock that may be purchased upon exercise of such
option shall not include any fractional share and, upon exercise of such option,
a cash payment shall be made for any fractional share based upon the closing
price of a share of Parent Common Stock on the NYSE on the last trading day
immediately preceding the date of exercise. The Option Exchange Ratio shall be
the quotient determined by dividing the closing price of a share of Company
Common Stock on the AMEX on the last trading day immediately preceding the
Closing Date by the closing price of a share of Parent Common Stock on the NYSE
of the last trading day immediately preceding the Closing Date.
(c) Parent shall take all corporate action necessary to reserve for
issuance under the Omnibus Plan a sufficient number of shares of Parent Common
Stock for delivery upon exercise of the options described in
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Section 2.3(b). As soon as practicable after the Effective Time, Parent shall
file with the Securities and Exchange Commission (the "Commission") a
registration statement on Form S-8 (or any successor form) or another
appropriate form with respect to the shares of Parent Common Stock subject to
the options converted in accordance with Section 2.3(b) and shall use all
commercially reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
Section 2.4. Adjustment Event. If, between the date of this Agreement and
the Closing, Parent shall have declared a stock split (including a reverse
split) or combination of Parent Common Stock or a dividend payable in Parent
Common Stock, or any other distribution of Parent Common Stock to holders of
Parent Common Stock with respect to their Parent Common Stock (including such a
distribution or dividend made in connection with a recapitalization,
reclassification, merger, consolidation, reorganization or similar transaction),
or otherwise have changed the Parent Common Stock into any other securities,
then the number of shares of Parent Common Stock specified in Section 2.1(a)
shall be correspondingly appropriately adjusted to reflect such stock split,
combination or dividend or other distribution or change of securities.
Section 2.5. Appraisal Rights. To the extent that appraisal rights are
available under Section 262 of DGCL, shares of Company Common Stock that are
issued and outstanding immediately prior to the Effective Time and that have not
been voted for adoption of this Agreement and with respect to which appraisal
rights have been properly demanded in accordance with Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted into the right to receive the
consideration provided for in Section 2.1 hereof at or after the Effective Time
unless and until the holder of such shares becomes ineligible for such
appraisal. If a holder of Dissenting Shares becomes ineligible for such
appraisal, then, as of the Effective Time or the occurrence of such event which
ever later occurs, such holder's Dissenting Shares shall cease to be Dissenting
Shares and shall be converted into and represent the right to receive the Merger
Consideration, as if such shares of Company Common Stock were covered by
Non-Elections. If any holder of Company Common Stock shall assert the right to
be paid the fair value of such Company Common Stock as described above, the
Company shall give Parent notice thereof and Parent shall have the right to
participate in all negotiations and proceedings with respect to any such
demands. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for payment. Payment for Dissenting Shares shall be made as required
by the DGCL.
Section 2.6. Share Purchase Rights. Each reference in this Article II to
a share of Company Common Stock is a reference to such share together with the
Rights (as hereinafter defined), if any, associated with such share.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
With such exceptions as are set forth in a letter (the "Company Disclosure
Letter") delivered by the Company to Parent prior to the date of this Agreement
specifically referring to one or more of the Sections in this Article III, the
Company hereby represents and warrants to Parent:
Section 3.1. Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. The
Company is qualified to transact business, and is in good standing as a foreign
corporation in each jurisdiction where the character of its activities requires
such qualification, except where the failure to so qualify would not,
individually or in the aggregate, have a Company Material Adverse Effect. As
used herein, the term "Company Material Adverse Effect" means any change,
condition, event, occurrence or breach of a representation or warranty which,
individually or in the aggregate, has an adverse effect on the assets, results
of operations, financial condition or business of the Company in an amount that
exceeds $10,000,000. The Company has made available to Parent accurate and
complete copies of its Restated Certificate of Incorporation and Bylaws, as
currently in effect.
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Section 3.2. Authorization. The Company has full corporate power and
authority to execute and deliver this Agreement and, subject to the requisite
approval of the adoption of this Agreement by the holders of Company Common
Stock, to perform its obligations under this Agreement and to consummate the
Merger and the other transactions contemplated by this Agreement. The execution
and delivery of this Agreement by the Company, and the performance by the
Company of its obligations under this Agreement and the consummation of the
Merger and the other transactions provided for by this Agreement have been duly
and validly authorized by all necessary corporate action on the part of the
Company, subject to the requisite approval of the adoption of this Agreement by
the holders of Company Common Stock. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding agreement
of the Company, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency and other similar laws affecting the
enforceability of creditors' rights generally, general equitable principles and
the discretion of courts in granting equitable remedies.
Section 3.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, permit the acceleration of any
obligation under, or give rise to any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of, or
result in the creation of a Lien (as hereinafter defined) on, any property or
asset of the Company pursuant to, (i) any term or provision of the Restated
Certificate of Incorporation or Bylaws of the Company, (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company is a party or by which the
Company or any property or asset of the Company is bound or affected (a "Company
Contract"), (iii) any judgment, decree or order of any court or governmental
authority or agency to which the Company is a party or by which the Company or
any of its properties is bound, or (iv) any statute, law, regulation or rule
applicable to the Company that would, individually or in the aggregate, have in
the case of subsections (ii) through (iv) above, a Company Material Adverse
Effect. Except for compliance with the applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), applicable
state securities laws and the filing of the Delaware Certificate of Merger as
required by the DGCL and the Georgia Certificate of Merger as required by the
GBCC, no consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental agency or public or regulatory
unit, agency, body or authority ("Governmental Entity") with respect to the
Company is required in connection with the execution, delivery or performance of
this Agreement by the Company or the consummation of the transactions
contemplated by this Agreement by the Company, the failure to obtain which
would, individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.4. Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Company Common Stock and (ii) 5,000,000
shares of Company preferred stock, par value $.01 per share (the "Company
Preferred Stock"). As of the date hereof: (i) 10,061,576 shares of Company
Common Stock were issued and outstanding, (ii) no shares of Company Preferred
Stock were issued and outstanding, (iii) 697,000 shares of Company Common Stock
were reserved for issuance pursuant to outstanding options under the Company's
Option Plans and (iv) 250,000 shares of Company Series A Junior Preferred Stock
were authorized for issuance solely pursuant to the exercise of the preferred
stock purchase rights (the "Rights") issued pursuant to the Rights Agreement,
dated September 30, 1997, by and between the Company and American Stock Transfer
and Trust Company (the "Company Rights Agreement"). All outstanding shares of
the Company Common Stock are duly authorized, validly issued, fully paid and
nonassessable and free of pre-emptive rights. There are no outstanding
securities or other instruments convertible into or exchangeable for shares of
capital stock of the Company. There are no outstanding obligations, options or
rights to acquire shares of capital stock of the Company or any securities or
other instruments convertible into or exchangeable for shares of capital stock
of the Company.
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Section 3.5. Company Subsidiaries. The Company does not own an equity
interest in any corporation, partnership, joint venture or other entity.
Section 3.6. Financial Statements. The balance sheets of the Company as
of January 3, 1998 and December 28, 1996 and the related statements of
operations, changes in stockholders' equity (deficit) and cash flows for the
year ended January 3, 1998, the three months ended December 28, 1996, the nine
months ended September 28, 1996 and the year ended December 30, 1995, contained
in the Annual Report on Form 10-K of the Company for the fiscal year ended
January 3, 1998, as filed with the Commission, present fairly, in all material
respects, the financial position of the Company at the respective dates thereof
and the results of operations and cash flows of the Company for the periods
respectively then ended in conformity with generally accepted accounting
principles; and (ii) the unaudited condensed balance sheet of the Company as of
April 4, 1998, and the related unaudited statements of operations, changes in
stockholders' equity and cash flows for the three-month period then ended
included in the Quarterly Report on Form 10-Q for the quarterly period ending
April 4, 1998, as filed with the Commission, have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with Rule 10-01 of Regulation S-X, and accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements (the financial statements described
in (i) and (ii) are herein collectively referred to as the "Company Financial
Statements"). In the opinion of management of the Company, all adjustments
(consisting of normal recurring accruals) considered necessary to present fairly
the Company's financial position as of April 4, 1998 and the results of its
operations and its cash flows for three month periods ended April 4, 1998 and
March 29, 1997, have been included, and certain information and note disclosures
normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to the Commission's rules and regulations. The Company Financial Statements
referred to in this Agreement shall be deemed to include any notes to such
financial statements.
Section 3.7. SEC Reports. Since June 2, 1997, the Company has filed, and
prior to the Effective Time the Company will file, with the Commission all
forms, reports and documents required to be filed by it pursuant to the
Securities Act and the Exchange Act (collectively, the "Company SEC Filings"),
each of which, as of its respective filing date, complied or will comply in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act. None of the Company SEC Filings as of the respective dates on
which they were filed with the Commission contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 3.8. Absence of Changes. Except as disclosed in the Company SEC
Filings filed and publicly available prior to the date hereof (the "Prior
Company SEC Filings") or the Company Financial Statements, and except as
specifically contemplated by this Agreement, since January 3, 1998, the Company
has conducted its businesses in the ordinary course and there has not been: (a)
any change that would, individually or in the aggregate, have a Company Material
Adverse Effect, except for market and economic conditions affecting the textile
industry in general; (b) any condition, event or occurrence which, individually
or in the aggregate, would have a Company Material Adverse Effect, except for
market and economic conditions affecting the textile industry in general; (c)
any damage, destruction or loss (whether or not covered by insurance) with
respect to any assets of the Company which would, individually or in the
aggregate, have a Company Material Adverse Effect; (d) any change by the Company
in the method of accounting or accounting practice of the Company, other than
changes required by generally accepted accounting principles; (e) any
revaluation by the Company of any of its material assets, including but not
limited to writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; (f) any entry by the
Company into, or any amendment or modification to, any Material Contract (as
hereinafter defined); (g) any direct or indirect redemption, purchase or other
acquisition of any shares of Company Common Stock or any declaration, setting
aside or payment of any dividend or other distribution (whether in cash, stock
or property) in respect of the Company Common Stock, (h) any issuance, sale or
other disposition of (1) shares of capital stock of the Company or (2)
securities
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convertible into or exchangeable for, or otherwise evidencing a right to
acquire, shares of capital stock of the Company, other than shares issuable
under options that have been granted under a Company Option Plan; (i) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including
without limitation the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement, or any other increase in the
compensation payable or to become payable to any present or former directors,
officers or key employees of the Company, except for increases in base
compensation in the ordinary course of business consistent with past practice,
or contemplated in any existing employment, consulting or severance agreement or
arrangement entered into with any such present or former directors, officers or
key employees; or (j) any other action which, if it had been taken after the
date hereof, would have required consent of Parent under Section 5.6.
Section 3.9. Absence of Undisclosed Liabilities. There are no liabilities
of the Company of a nature which would be required to be disclosed in financial
statements of the Company prepared in accordance with generally accepted
accounting principles, whether or not accrued and whether or not contingent or
absolute, other than (a) liabilities reflected in the Company Financial
Statements, (b) liabilities disclosed in the Prior Company SEC Filings, (c)
liabilities incurred on behalf of the Company in connection with this Agreement
and the contemplated Merger, and (d) liabilities incurred in the ordinary course
of business consistent with past practice since January 3, 1998, none of which,
individually or in the aggregate, would have a Company Material Adverse Effect.
Section 3.10. Litigation. Except as disclosed in the Prior Company SEC
Filings or in the Company Financial Statements, there are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of the
Company, threatened against the Company or any of its properties or assets
before any domestic or foreign court or governmental or regulatory authority or
body which would, individually or in the aggregate, have a Company Material
Adverse Effect. The Company is not subject to any outstanding order, writ,
injunction or decree which would, individually or in the aggregate, have a
Company Material Adverse Effect.
Section 3.11. Compliance with Laws. All federal, state, local and foreign
governmental approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights ("Permits," including, without limitation,
Permits required under Environmental Laws) necessary for the Company to own,
lease or operate its properties and assets and to carry on its business as now
conducted have been obtained or made, and there has occurred no default under
any such Permit, except for the lack of Permits and for defaults under Permits
which lack or default individually or in the aggregate would not have a Company
Material Adverse Effect. Except as disclosed in the Prior Company SEC Filings,
the Company is in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity, except for non-
compliance which individually or in the aggregate would not have a Company
Material Adverse Effect.
Section 3.12. Bankruptcy Matters. The approval of the United States
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") in the
Chapter 11 bankruptcy case of the Bibb Company (case no. 96-01050) is not
required in connection with the execution, delivery and performance of this
Agreement or the consummation of the Merger and the other transactions
contemplated by this Agreement. The plan of reorganization of the Bibb Company
that was confirmed by the Bankruptcy Court pursuant to 11 U.S.C. sec. 1129 on or
about September 12, 1996 (the "Plan of Reorganization") has been "substantially
consummated" within the meaning of 11 U.S.C. sec. 1127(b). The Company has
delivered to Parent true, correct and complete copies of each of the following
documents, as amended, modified or supplemented to the date of this Agreement,
(i) the Plan of Reorganization, and (ii) the order entered by the Bankruptcy
Court pursuant to 11 U.S.C. sec. 1129 confirming the Plan of Reorganization.
Section 3.13. Taxes. The Company has duly and timely filed or caused to
be filed, or will duly and timely file or cause to be filed, all income Tax
Returns (as hereinafter defined) and all other material Tax Returns required to
be filed at or before the Effective Time, taking into account any extension for
time to file granted to or obtained on behalf of the Company, except where the
failure to file any such Tax Return would not have a Company Material Adverse
Effect. All such Tax Returns (including amendments) are, or will be
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when filed, complete and accurate in all respects, except where such
incompleteness or inaccuracy would not have a Company Material Adverse Effect.
The Company has paid (or there has been paid on its behalf), or has established,
or, with respect to Taxes which are or will be due but not yet payable as of the
Effective Time, will establish, reserves which are adequate for the payment of,
all Taxes (as defined below) for all taxable periods (or portions thereof)
ending on or before the Effective Time except where the failure to establish
such reserves would not have a Company Material Adverse Effect. The Company is
not delinquent in the payment of any Tax, except where such delinquency would
not have a Company Material Adverse Effect. No deficiencies for any Tax have
been proposed, asserted or assessed (tentatively or definitely), in each case by
any taxing authority, against the Company, except where such deficiency would
not have a Company Material Adverse Effect. As of the date of this Agreement,
there are no pending requests for waivers of the time to assess any such Tax. No
employee benefit plan for which the Company files, or is required to file, an
IRS Form 5500 is currently under employee plan examination by the Internal
Revenue Service ("IRS"). The Company has not filed an election under Section
341(f) of the Code to be treated as a consenting corporation. For purposes of
this Agreement, "Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including without limitation all income, gross receipts, excise,
property (including any escheat or other obligation arising under laws governing
unclaimed or abandoned property), sales, use, transfer, license, payroll,
withholding, employment, unemployment compensation, environmental, severance,
occupation, premium, windfall profit, intangible tax, franchise or other taxes
imposed by the United States or any state, local or foreign taxing authority,
including any interest, penalties or additions thereto, and "Tax Returns" shall
mean all returns, reports, schedules and other information filed or required to
be filed with any taxing authority with respect to Taxes.
Section 3.14. Employee Benefit Plans. (a) Executive Compensation
Arrangements. (i) The Company does not have any obligation to any individual
under any employment contract except for the Company's obligation under an
employment contract with Michael L. Fulbright, a current and accurate copy of
which employment agreement has been furnished to Parent.
(ii) No grants or awards have been made under the Omnibus Plan except for
incentive stock option grants made pursuant to the terms of such plan to
purchase 377,000 shares of the Company's Common Stock, and there are no other
outstanding options to purchase shares of Company Common Stock except for the
option granted to M.L. Fulbright to purchase 200,000 shares and the options
described in Section 3.14(a)(iii).
(iii) No stock option grants have been made under the Directors Plan other
than non-incentive stock option grants to purchase 120,000 shares of the
Company's Common Stock.
(iv) There are no more than 78 participants in The Bibb Company Executive
Deferred Compensation Plan, and the Company Financial Statements accurately set
forth the Company's obligations to such participants under the terms of such
plan as revised on May 12, 1998.
(v) There are four executives who are eligible for benefits under The Bibb
Company Severance and Change in Control Policies for Executive Officers, Michael
L. Fulbright, Charles R. Tutterow, R. A. Batsel and L. C. Brown, a current and
accurate copy of such policies have been furnished to Parent, the total
aggregate benefits payable under such policies to such individuals is no more
than $1,798,750 (before taking into account any tax gross up payments) and the
Company does not have any obligation to any individuals to pay any excise taxes
which such individuals might incur under section 4999 of the Code except for
these four individuals.
(vi) There are fifteen individuals eligible for benefits under The Bibb
Company Severance Policy for Key Management, the aggregate benefits payable
under such policy to such individuals is no more than $1,175,790 and a current
and accurate copy of such plan have been furnished to Parent.
(vii) The Company does not have any contractual obligation to pay, or make
available, any benefits to, or on behalf of, any individual to whom options have
been granted under the Omnibus Plan or the Director Plan or who is covered by
The Bibb Company Executive Deferred Compensation Plan, The Bibb Company
Severance Policy for Key Management or The Bibb Company Severance and Change in
Control Policies for Executive Officers other than (A) the benefits called for
under such plans or policies, (B) the compensation
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and benefits for Michael L. Fulbright called for in his employment contract and
(C) the plans or policies which cover substantially all employees of the Company
or substantially all exempt or non-exempt employees of the Company.
(b) Broad Based Employee Benefit Plans. (i) There are three plans or
policies through which the Company provides deferred compensation benefits to
any individuals, The Bibb Company Executive Deferred Compensation Plan, The Bibb
Company Pension Plan and The Bibb Company 401(k) and Retirement Savings Plan,
current and accurate copies of which have been furnished to Parent.
(ii) The only plans or policies through which the Company provides benefits
described in Section 3(1) of ERISA are The Bibb Company Medical and Dental Plan,
Short-Term Disability Plan, Long-Term Disability Plan, Group Life Insurance
Plan, Pre-Tax Premium Plan and Post-Retirement Medical Benefits Plan, current
and accurate copies of which have been furnished to Parent.
(iii) The Company has not failed to satisfy any reporting and disclosure
requirements under ERISA or the Code which would result in a Company Material
Adverse Effect.
(iv) The Company does not have any liability for any transaction with an
employee benefit plan which would constitute a prohibited transaction under
ERISA or the Code or a breach of fiduciary duty under ERISA which would result
in a Company Material Adverse Effect, and the Company does not have any
obligation to indemnify any person for any liability for any such transaction
other than through an agreement dated August 9, and August 13, 1997 with Frank
X. Sheehan, an accurate copy of which has been furnished to Parent, and standard
by-law and officer and director indemnification provisions and policies, none of
which could have a Company Material Adverse Effect.
(v) The liabilities of The Bibb Company Pension Plan on a termination basis
did not exceed the assets of such plan as of December 31, 1997 by more than $8.7
million.
(vi) The assets of each employee benefit plan which are required under
ERISA to be held in trust in fact are held in trust in accordance with such
requirement, and no claims have been made or threatened with respect to the
investment of such assets which would have a Company Material Adverse Effect.
(vii) No employees of the Company are employed subject to a collective
bargaining agreement, and the Company does not have any obligation to make any
contributions or other payments to a multiemployer plan (as defined in ERISA
section 4001(a)(3)).
Section 3.15. Material Contracts. Except for those contracts listed in
the Company Disclosure Letter (except as otherwise set forth herein, true and
complete copies of which contracts have been made available to Parent)
(collectively, the "Material Contracts"), the Company is not a party to any: (i)
contracts with any current officer, director or employee of the Company; (ii)
contracts for the sale of any of the assets of the Company other than contracts
entered into for the sale of inventory in the ordinary course of business; (iii)
contracts containing covenants of the Company not to compete in any line of
business or with any person in any geographical area or covenants of any other
person not to compete with the Company in any line of business or in any
geographical area; (iv) indentures, credit agreements, mortgages, promissory
notes, and all contracts relating to the borrowing of money, in any case related
to borrowings of over $1,000,000; (v) any lease relating to personal property
which involves annual lease payments greater than $120,000; (vi) any lease,
sublease or other agreement under which the Company uses or occupies or has the
right to use or occupy, any real property or facility, which involves annual
lease payments greater than $120,000; (vii) any license agreement which involves
annual payments in excess of $120,000; (viii) any computer services or software
agreement which involves annual payments in excess of $120,000 or which is
otherwise material to the Company; (ix) any agreement or commitment with respect
to the purchase of raw materials or supplies in excess of $1,000,000 which
cannot be performed within nine months or any other agreement or commitment
involving payments or obligations in an amount exceeding $500,000. The Company
has discussed with Parent the Company's purchase orders for raw materials
(including cotton and polyester), supplies, expense items, and equipment, and
the purchase orders from the Company's customers as well as the Company's
acknowledgments of those orders, certain of which purchase orders or
acknowledgments have been made available to Parent. All of the Material
Contracts are in full force and effect and are the legal, valid and
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binding obligations of the Company, enforceable against it in accordance with
their respective terms, subject to applicable bankruptcy insolvency and other
similar laws affecting the enforceability of creditors' rights generally,
general equitable principles and the discretion of courts in granting equitable
remedies. The Company is not in default in any material respect under any
Material Contract nor, to the knowledge of the Company, is any other party to
any Material Contract in default thereunder, which in any case would have a
Company Material Adverse Effect.
Section 3.16. Labor Matters. There are no (A) unfair labor practice
charges, grievances or complaints pending or threatened in writing by or on
behalf of any employee or group of employees of the Company which, if resolved
against the Company would, individually or in the aggregate, have a Company
Material Adverse Effect, or (B) complaints, charges or claims against the
Company pending, or threatened in writing to be brought or filed, with any
governmental entity or arbitrator based on, arising out of, in connection with,
or otherwise relating to the employment or termination of employment of any
individual by the Company which, if resolved against the Company would,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 3.17. Brokers and Finders. Except for Houlihan, Lokey, Howard &
Zukin, Inc. ("Houlihan"), whose fee (which has been previously disclosed to
Parent) the Company shall be solely responsible for, no financial adviser,
broker, agent or finder has been retained by the Company in connection with this
Agreement or any transaction contemplated hereby and no such financial adviser,
broker, agent or finder is entitled to any fee or other compensation on account
of this Agreement or any transaction contemplated hereby.
Section 3.18. DGCL Section 203. The Board of Directors of the Company has
approved the Merger, this Agreement and the transactions contemplated hereby and
has approved the Merger and such approval renders the restrictions on "business
combinations" set forth in Section 203 of the DGCL inapplicable to Parent, this
Agreement, the Merger and the transactions contemplated hereby.
Section 3.19. Voting Requirement. The affirmative vote of the holders of
a majority of the outstanding shares of Company Common Stock in favor of the
adoption of this Agreement is the only vote of the holders of any class or
series of the Company's capital stock necessary to adopt this Agreement and the
transactions contemplated by this Agreement under any applicable law, rule or
regulation or pursuant to the requirements of the Company's Restated Certificate
of Incorporation and By-laws.
Section 3.20. Fairness Opinion. The Company has received the opinion of
Houlihan, financial advisor to the Company, dated the date hereof, to the effect
that the Merger Consideration is fair from a financial point of view to the
holders of shares of Company Common Stock.
Section 3.21. Rights Agreement Matters. The Company's Board of Directors
has approved and the Company has entered into an amendment to the Company's
Rights Agreement so that (i) the approval, execution or delivery of this
Agreement, or the public announcement or consummation of the transactions
contemplated hereby and the other matters provided for herein will not result in
(A) Parent or any of its respective Affiliates or Associates or its permitted
assignees or transferees being an Acquiring Person, (B) the occurrence of a
Distribution Date, a Share Acquisition Date, a Flip-In Event or a Flip-Over
Event or (C) the Rights becoming exercisable (the terms "Acquiring Person,"
"Affiliates," "Associates," "Distribution Date," "Share Acquisition Date,"
"Flip-In Event," and "Flip-Over Event" having the respective meanings ascribed
thereto in the Company Rights Agreement). A true, correct and complete copy of
the Company Rights Agreement (including all amendments thereto) is included in
the Prior Company SEC Filings.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
With such exceptions as are set forth in a letter (the "Parent Disclosure
Letter") delivered by Parent to the Company prior to the date of this Agreement
specifically referring to one or more of the Sections in this Article IV, Parent
hereby represents and warrants to the Company:
Section 4.1. Organization. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia,
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted. Parent
is qualified to transact business, and is in good standing as a foreign
corporation in each jurisdiction where the character of its activities requires
such qualification, except where the failure to so qualify would not,
individually or in the aggregate, have a material adverse effect on the assets,
liabilities, results of operations, financial condition or business of Parent (a
"Parent Material Adverse Effect"). Parent has made available to the Company
accurate and complete copies of its Restated Articles of Incorporation and
Bylaws, as currently in effect.
Section 4.2. Authorization. Parent has full corporate power and authority
to execute and deliver this Agreement and, subject to the requisite approval of
the adoption of this Agreement by the holders of Parent Common Stock, to perform
its obligations under this Agreement and to consummate the Merger and the other
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by Parent, the performance by Parent of its obligations under this
Agreement, and the consummation of the Merger and the other transactions
provided for by this Agreement have been duly and validly authorized by all
necessary corporate action on the part of Parent, subject to the requisite
approval of the adoption of this Agreement by the holders of Parent Common
Stock. This Agreement has been duly executed and delivered by Parent and
constitutes the legal, valid and binding agreement of Parent, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies.
Section 4.3. Absence of Restrictions and Conflicts. The execution,
delivery and performance of this Agreement, the consummation of the Merger and
the other transactions contemplated by this Agreement and the fulfillment of and
compliance with the terms and conditions of this Agreement do not and will not,
with the passing of time or the giving of notice or both, violate or conflict
with, constitute a breach of or default under, permit the acceleration of any
obligation under, or give rise to any right of purchase or sale, or any right of
termination, amendment, acceleration, increased payments or cancellation of, or
result in the creation of a Lien on, any property or asset of Parent or of any
Parent Subsidiary (as hereinafter defined) pursuant to, (i) any term or
provision of the Restated Articles of Incorporation or Bylaws of Parent or the
Parent Subsidiaries, (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or any Parent Subsidiary is a party or by which Parent or any
Parent Subsidiary or any property or asset of Parent or any Parent Subsidiary is
bound or affected ("Parent Contract"), (iii) any judgment, decree or order of
any court of governmental authority or agency to which Parent or any of the
Parent Subsidiaries is a party or by which Parent or the Parent Subsidiaries or
any of their respective properties is bound, or (iv) any statute, law,
regulation or rule applicable to Parent or the Parent Subsidiaries, that would,
individually or in the aggregate, in the case of subsections (ii) through (iv)
above, have a Parent Material Adverse Effect. Except for compliance with the
applicable requirements of the HSR Act, the Securities Act, the Exchange Act,
applicable state securities laws and the filing of the Georgia Certificate of
Merger as required by the GBCC and the Delaware Certificate of Merger as
required by the DGCL and filings with and approval of the NYSE, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental agency or public or regulatory unit, agency, body or
authority with respect to Parent or the Parent Subsidiaries is required in
connection with the execution, delivery or performance of this Agreement by
Parent or the consummation of the transactions contemplated by this Agreement by
Parent, the failure to obtain which would, individually or in the aggregate,
have a Parent Material Adverse Effect.
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Section 4.4. Capitalization. The authorized capital stock of Parent
consists of (i) 175,000,000 shares of Parent Common Stock, (ii) 35,000,000
shares of Class B Common Stock, $.01 par value per share ("Class B Stock"),
(iii) 5,000,000 shares of Class C Common Stock, $.01 par value per share ("Class
C Stock") and (iv) 50,000,000 shares of Preferred Stock, $.01 par value per
share ("Preferred Stock"). As of the date hereof: (i) 16,769,402 shares of
Parent Common Stock were issued and outstanding, (ii) 2,062,070 shares of Class
B Stock were issued and outstanding, (iii) no shares of Class C Stock were
issued and outstanding, (iv) no shares of Preferred Stock were issued and
outstanding and (v) 2,508,400 shares of Parent Common Stock were reserved for
issuance pursuant to outstanding options under the Parent stock option plans.
Each share of the Parent Common Stock and Class B Stock outstanding as of the
date of this Agreement is duly authorized, validly issued, fully paid and
nonassessable and free of pre-emptive rights. There are no outstanding
securities or other instruments convertible into or exchangeable for shares of
capital stock of Parent. There are no outstanding obligations, options or rights
to acquire shares of the Parent's capital stock or any securities or other
instruments convertible into or exchangeable for shares of Parent's capital
stock.
Section 4.5. Parent's Subsidiaries. The Parent Disclosure Letter sets
forth a true and complete list of all corporations, partnerships and other
entities in which Parent owns or controls, directly or indirectly, at least 50%
of the outstanding equity securities (such corporations, partnerships and other
entities being hereinafter referred to as the "Parent Subsidiaries"), the
jurisdiction in which each of the Parent Subsidiaries is incorporated or
organized, and all shares of capital stock or other ownership interests
authorized, issued and outstanding of each of the Parent Subsidiaries.
Section 4.6. Financial Statements; SEC Filings. The consolidated balance
sheets of Parent and the Parent Subsidiaries as of January 3, 1998 and December
28, 1996 and the related consolidated statements of income, shareholders'
equity, and consolidated cash flows for each of the three fiscal years ended
January 3, 1998, December 28, 1996 and December 30, 1995, incorporated by
reference in the Annual Report on Form 10-K of Parent for the fiscal year ended
January 3, 1998, as filed with the Commission present fairly, in all material
respects, the consolidated financial position of Parent and the Parent
Subsidiaries at the respective dates thereof and the consolidated results of
operations and cash flows of Parent and the Parent Subsidiaries for the periods
respectively then ended in conformity with generally accepted accounting
principles; and (ii) the unaudited condensed consolidated balance sheet of the
Company as of April 4, 1998, and the related unaudited condensed consolidated
statements of income, shareholders' equity and cash flows for the three-month
period then ended included in the Quarterly Report on Form 10-Q for the
quarterly period ending April 4, 1998, as filed with the Commission have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with Rule 10-01 of Regulation S-X, and accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management of Parent, all adjustments (consisting of normal recurring
accruals) considered necessary to present fairly the Company's financial
position as of April 4, 1998 and the results of its operations and its cash
flows for the three month periods ended April 4, 1998 and March 29, 1997, have
been included, and certain information and note disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Commission's rules and regulations (collectively, the "Parent Financial
Statements"). The Parent Financial Statements referred to in this Agreement
shall be deemed to include any notes and schedules to such financial statements.
Section 4.7. SEC Reports. Since January 3, 1998, each of Parent and the
Parent Subsidiaries has filed, and prior to the Effective Time the Company will
file, with the Commission all forms, reports and documents required to be filed
by it pursuant to the Securities Act and the Exchange Act (the "Parent SEC
Filings"), each of which, as of its respective filing date, complied or will
comply in all material respects with all applicable requirements of the
Securities Act and the Exchange Act. None of the Parent SEC Filings as of the
respective dates on which they were filed with the Commission contained or will
contain any untrue statement of a material fact or omitted or will omit to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
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Section 4.8. Absence of Changes. Except as disclosed in the Parent SEC
Filings filed and publicly available prior to the date hereof (the "Prior Parent
SEC Filings") or the Parent Financial Statements, and except as specifically
contemplated by this Agreement, since January 3, 1998, Parent and the Parent
Subsidiaries have conducted their respective businesses in the ordinary course
and there has not been: (a) any change that would, individually or in the
aggregate, have a Parent Material Adverse Effect; except for market and economic
conditions affecting the textile industry in general; (b) any condition, event
or occurrence which, individually or in the aggregate, is reasonably likely to
have a Parent Material Adverse Effect, except for market and economic conditions
affecting the textile industry in general; (c) any damage, destruction or loss
(whether or not covered by insurance) with respect to any assets of Parent or
the Parent Subsidiaries which would, individually or in the aggregate, have a
Parent Material Adverse Effect; (d) any change in the method of accounting or
accounting practice of Parent and the Parent Subsidiaries on a consolidated
basis, other than changes required by generally accepted accounting principles;
(e) any revaluation by Parent of any of its material assets, including writing
down the value of inventory or writing off notes or accounts receivable, other
than in the ordinary course of business; (f) any direct or indirect redemption,
purchase or other acquisition of any shares of Parent Common Stock or any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) in respect of the Parent Common Stock; (g)
any issuance, sale or other disposition of (1) shares of capital stock of Parent
or of any Parent Subsidiaries or (2) securities convertible into or exchangeable
for, or otherwise evidencing a right to acquire, shares of capital stock of
Parent or of the Parent Subsidiaries, other than shares issuable under options
that have been granted, but unexercised as of the date hereof; or (h) any
increase in or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including
without limitation the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement, or any other increase in the
compensation payable or to become payable to any present or former directors,
officers or key employees of Parent or the Parent Subsidiaries, except for
increases in base compensation in the ordinary course of business consistent
with past practice, or contemplated in any existing employment, consulting or
severance agreement or arrangement entered into with any such present or former
directors, officers or key employees.
Section 4.9. Absence of Undisclosed Liabilities. There are no liabilities
of Parent or any of the Parent Subsidiaries of any kind whatsoever, whether or
not accrued and whether or not contingent or absolute, that are material to
Parent and the Parent Subsidiaries taken as a whole, other than (a) liabilities
reflected in the Parent Financial Statements, (b) liabilities disclosed in the
Prior Parent SEC Filings, (c) liabilities incurred on behalf of Parent in
connection with this Agreement and the contemplated Merger, and (d) liabilities
incurred in the ordinary course of business consistent with past practice since
January 3, 1998, none of which would, individually or in the aggregate, have a
Parent Material Adverse Effect.
Section 4.10. Litigation. Except as disclosed in the Prior Parent SEC
Filings or in the Parent Financial Statements, there are no claims, actions,
suits, proceedings or investigations pending or, to the knowledge of Parent,
threatened against Parent or any of the Parent Subsidiaries before any domestic
or foreign court or governmental or regulatory authority or body which would,
individually or in the aggregate, have a Parent Material Adverse Effect. Neither
Parent nor any of the Parent Subsidiaries is subject to any outstanding order,
writ, injunction or decree which would, individually or in the aggregate, have a
Parent Material Adverse Effect.
Section 4.11. Compliance with Laws. All Permits, including, without
limitation, Permits required under Environmental Laws necessary for each of the
Parent and the Parent Subsidiaries to own, lease or operate its properties and
assets and to carry on its business as now conducted have been obtained or made,
and there has occurred no default under any such Permit, except for the lack of
Permits and for defaults under Permits which lack or default individually or in
the aggregate would not have a Parent Material Adverse Effect. Except as
disclosed in the Prior Parent SEC Filings, Parent and the Parent Subsidiaries
are in compliance with all applicable statutes, laws, ordinances, rules, orders
and regulations of any Governmental Entity, except for non-compliance which
individually or in the aggregate would not have a Parent Material Adverse
Effect.
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Section 4.12. Taxes. Parent and the Parent Subsidiaries have duly and
timely filed or caused to be filed, or will duly and timely file or cause to be
filed, all income Tax Returns and all other material Tax Returns required to be
filed at or before the Effective Time, taking into account any extension of time
to file granted to or obtained on behalf of Parent and the Parent Subsidiaries,
except where the failure to file any such Tax Return would not have a Parent
Material Adverse Effect. All such Tax Returns (including amendments) are, or
will be when filed, complete and accurate in all respects, except where such
incompleteness or inaccuracy would not have a Parent Material Adverse Effect.
Each of Parent and the Parent Subsidiaries has paid (or there has been paid on
its behalf), or has established, or, with respect to Taxes which are or will be
due but not yet payable as of the Effective Time, will establish, reserves which
are adequate for the payment of, all Taxes for all taxable periods (or portions
thereof) ending on or before the Effective Time except where the failure to
establish such reserves would not have a Parent Material Adverse Effect. Neither
Parent nor any of the Parent Subsidiaries is delinquent in the payment of any
Tax, except where such delinquency would not have a Parent Material Adverse
Effect. No deficiencies for any Tax have been proposed, asserted or assessed
(tentatively or definitely), in each case by any taxing authority, against
Parent or any of the Parent Subsidiaries, except where such deficiency would not
have a Parent Material Adverse Effect. As of the date of this Agreement, there
are no pending requests for waivers of the time to assess any such Tax. No
employee benefit plan for which Parent files, or is required to file, an IRS
Form 5500 is currently under employee plan examination by the IRS. Neither
Parent nor any representative of such benefit Plans has received verbal or
written notification from the IRS of an impending employee plan examination.
Section 4.13. Employee Benefit Plans. The Parent Disclosure Letter
contains a written list of all stock option plans, stock purchase plans, phantom
stock plans, and other incentive or bonus plans, policies or arrangements, and
all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) which are
"qualified" under Section 401(a) of the Code and which cover current employees
of Parent (collectively, the "Parent Plans").
Section 4.14. Labor Matters. There are no (A) unfair labor practice
charges, grievances or complaints pending or threatened in writing by or on
behalf of any employee or group of employees of Parent which, if resolved
against Parent, as the case may be, would, individually or in the aggregate,
have a Parent Material Adverse Effect, or (B) complaints, charges or claims
against Parent pending, or threatened in writing to be brought or filed, with
any governmental entity or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment of
any individual by Parent which, if resolved against Parent would, individually
or in the aggregate, have a Parent Material Adverse Effect.
Section 4.15. Brokers and Finders. Except for Bowles, Hollowell, Conner &
Co. ("Bowles, Hollowell") whose fees Parent shall be solely responsible for, no
financial adviser, broker, agent or finder has been retained by Parent in
connection with this Agreement or any transaction contemplated hereby and no
such financial adviser, broker, agent or finder is entitled to any fee or other
compensation on account of this Agreement or any transaction contemplated
hereby.
Section 4.16. Ownership of Company Common Stock. Immediately prior to
entering into this Agreement and the Merger Agreement, neither Parent nor any of
the Parent Subsidiaries owned directly or indirectly shares of Company Common
Stock.
Section 4.17. Fairness Opinion. Parent has received the opinion of
Bowles, Hollowell financial advisor to Parent, dated the date hereof, to the
effect that the terms of the Merger are fair from a financial point of view to
the holders of shares of Parent Common Stock.
Section 4.18. Funds. Parent, at the Effective Time, will have the funds
necessary to consummate the Merger.
Section 4.19. Inconsistencies in Company Representations. Parent has no
knowledge of any fact which would (i) cause any of the representations or
warranties of the Company contained in Article III to be untrue or incorrect in
any material respect or (ii) make it impossible for the Company to comply in all
material respects with the Company's covenants contained in Article V.
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ARTICLE V
COVENANTS OF PARENT AND THE COMPANY
Section 5.1. Joint Proxy Statement; Registration Statement. (a) Promptly
after the execution of this Agreement, the Company and Parent shall use all
reasonable efforts to prepare and, as soon as is reasonably practicable, file
with the Commission a Joint Proxy Statement (as hereinafter defined), with
respect to the Company Stockholder Meeting and the Parent Shareholder Meeting
(as such terms are defined in Section 5.4), and Parent shall file a registration
statement on Form S-4 (or such other appropriate form as Parent may select)
under the Securities Act for the purpose of registering the Parent Common Stock
issuable pursuant to Article II hereof (the "Registration Statement"), which
shall contain the Joint Proxy Statement. As used herein, the term "Registration
Statement" shall mean such registration statement at the time it becomes
effective and all amendments thereto duly filed. The term "Joint Proxy
Statement" shall mean such Joint Proxy Statement at the time it initially is
mailed to the stockholders of the Company and the shareholders of Parent and all
amendments or supplements thereto, if any, similarly filed and mailed. The
parties shall use all reasonable efforts to have the Registration Statement
declared effective under the Securities Act as promptly as practicable after
filing and, as promptly as practicable after the Registration Statement is
declared effective, shall mail the Joint Proxy Statement and Prospectus that is
a part of the Registration Statement (the "Prospectus") to the stockholders of
the Company and the shareholders of Parent as of the respective record dates for
the Company Stockholder Meeting and the Parent Shareholder Meeting. Parent and
the Company shall also take such actions as reasonably may be required to be
taken under applicable "blue sky" laws in connection with the issuance of the
Parent Common Stock pursuant to the Merger. None of the information provided and
to be provided by Parent and the Company, respectively, for use in the Joint
Proxy Statement or the Registration Statement shall, on the date the
Registration Statement is declared effective, on the date the Joint Proxy
Statement and Prospectus are first mailed to the Company's stockholders and
Parent's shareholders and on the date of the Company Stockholder Meeting and the
Parent Shareholder Meeting, 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 therein, in light of the circumstances under which
they are made, not misleading. Parent and the Company each agree to correct any
information provided by it for use in the Registration Statement, the Joint
Proxy Statement or the Prospectus which shall have become false or misleading in
any material respect and shall take all steps necessary to cause the
Registration Statement, the Joint Proxy Statement or the Prospectus as so
corrected to be filed with the Commission and to be disseminated to the holders
of Company Common Stock and Parent Common Stock, in each case as and to the
extent required by applicable law. The Joint Proxy Statement, the Registration
Statement and the Prospectus shall comply as to form in all material respects
with all applicable requirements of the federal securities laws.
(b) Each of the parties hereto shall notify the other parties hereto
promptly of the receipt by it of any comments of the Commission and of any
request by the Commission for amendments or supplements to the Joint Proxy
Statement or the Registration Statement and will supply the other parties hereto
with copies of all correspondence between it and its representatives, on the one
hand, and the Commission or the members of its staff or any other governmental
official, on the other hand, with respect to the Joint Proxy Statement or the
Registration Statement. The Company and Parent each shall use all reasonable
efforts to respond promptly to any comments made by the Commission or any other
governmental official with respect to the Joint Proxy Statement or the
Registration Statement.
Section 5.2. HSR Act. Each party shall timely and promptly make all
filings which are required under the HSR Act and Parent shall pay the filing
fee. Each party will furnish to the other such necessary information and
reasonable assistance as it may request in connection with its preparation of
such filings. Each party will supply the other with copies of all
correspondence, filings or communications (or memorandum setting forth the
substance thereof) between such party or its representatives and the Federal
Trade Commission, the Antitrust Division of the United States Department of
Justice or any other governmental agency or authority or members of their
respective staffs with respect to this Agreement or the transactions
contemplated hereby. In the event the government makes a second request for
information, the parties agree to submit the required information promptly.
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Section 5.3. Access and Investigation. (a) Between the date of this
Agreement and the Effective Time, upon reasonable notice, each party to this
Agreement will provide each other party and its accountants, counsel and other
authorized representatives reasonable access, during normal business hours and
under reasonable circumstances to any and all of its premises, properties,
contracts, commitments, books, records and other information (including tax
returns filed and those in preparation) and will cause their respective officers
to furnish to the other party and any of such parties representatives all
financial, technical and operating data and other information pertaining to its
business, as may be reasonably requested. Notwithstanding the foregoing, any
such investigation or consultation shall be conducted in such a manner as not to
interfere unreasonably with the business or operations of the other or its
subsidiaries, and no party shall have access to information or documents subject
to the attorney/client privilege to the extent that providing such access would,
in the opinion of counsel to the Company or Parent, as the case may be,
constitute a waiver of such privilege. No investigation pursuant to this Section
5.3 shall affect any representations or warranties of the parties herein or the
conditions to the obligations of the parties hereto.
(b) All information obtained by Parent and the Company pursuant to this
Section 5.3 shall be kept confidential in accordance with the Confidentiality
Agreement, dated February 17, 1998 between Parent and the Company (the
"Confidentiality Agreement").
Section 5.4. Stockholder Meetings. (a) The Company shall take all action
necessary in accordance with applicable law and its Restated Certificate of
Incorporation and By-laws to convene a meeting of its stockholders (the "Company
Stockholder Meeting") for the purpose of obtaining stockholder approval of this
Agreement and the transactions contemplated hereby. The Joint Proxy Statement
shall contain the recommendation of the Board of Directors of the Company that
the stockholders of the Company vote to adopt the Merger Agreement, and the
Company shall use its reasonable best efforts to solicit from stockholders of
the Company proxies in favor of such approval and adoption.
(b) Parent shall take all action necessary in accordance with applicable
law and its Restated Articles of Incorporation and Bylaws to convene a meeting
of its shareholders (the "Parent Shareholder Meeting") for the purpose of
obtaining shareholder approval of this Agreement and the transactions
contemplated hereby. The Joint Proxy Statement shall contain the recommendation
of the Board of Directors of Parent that the shareholders of Parent vote to
adopt the Merger Agreement, and Parent shall use its reasonable best efforts to
solicit from shareholders of Parent proxies in favor of such approval and
adoption.
Section 5.5. No Solicitation. The Company and its officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any acquisition or exchange of all or any material portion of the
assets of, or any equity interest in, the Company or any business combination
with or involving the Company. At any time prior to consummation of the Merger,
the Company may, directly or indirectly, furnish information and access, in each
case only in response to a request for such information or access to any person
made after the date hereof which was not encouraged, solicited or initiated by
the Company or any of its affiliates or any of its or their respective officers,
directors, employees, representatives or agent after the date hereof, pursuant
to appropriate confidentiality agreements containing terms and conditions
(including standstill provisions) that are no less favorable than the terms and
conditions contained in the Confidentiality Agreement, and may participate in
discussions and negotiate with such person concerning any merger, sale of
material portion of assets, sale of shares of capital stock or similar
transaction (including an exchange of stock or assets) involving the Company or
division of the Company (an "Acquisition Proposal"), in each case (whether
furnishing information and access or participating in discussions and
negotiations) only if such person has submitted a written proposal to the Board
of Directors of the Company relating to any such transaction and the Board by a
majority vote determines in good faith, based upon the advice of outside counsel
to the Company, that failing to take such action would constitute a breach of
the Board's fiduciary duty under applicable law. The Board shall provide a copy
of any such written proposal to Parent immediately after receipt thereof, shall
notify Parent immediately if any Acquisition Proposal (oral or written) is made
and shall, in such notice, indicate in reasonable detail the identity of the
offeror and the terms and conditions of any Acquisition Proposal and shall keep
Parent promptly advised of all developments which could reasonably be expected
to culminate in the Board of Directors withdrawing, modifying or amending its
recommendation of the Merger and the other transactions
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contemplated by this Agreement. Except as set forth in this Section 5.5, neither
the Company or any of its affiliates, nor any of its or their respective
officers, directors, employees, representatives or agents, shall, directly or
indirectly, encourage, solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation, partnership,
person or other entity or group (other than Parent, any affiliate or associate
of Parent or any designees of Parent) concerning any Acquisition Proposal or
division of the Company; provided, however, that nothing herein shall prevent
the Board from taking, and disclosing to the Company's stockholders, a position
contemplated by Rules 14d-9 and 14e-2 promulgated under the Exchange Act with
regard to any tender offer; provided, further, that the Board shall not
recommend that the stockholders of the Company tender their shares in connection
with any such tender offer unless the Board by majority vote shall have
determined in good faith, based upon the advice of outside counsel to the
Company, that failing to take such action would constitute a breach of the
Board's fiduciary duty under applicable law. The Company agrees not to release
any third party from, or waive any provisions of, any confidentiality or
standstill agreement to which the Company is a party, unless the Board by
majority vote shall have determined in good faith, based upon the advice of
outside counsel, that failing to release such third party or waive such
provisions would constitute a breach of the fiduciary duties of the Board of
Directors under applicable law.
Section 5.6. Conduct of Business. (a) From the date of this Agreement to
the Effective Time, the Company will, except as required in connection with the
Merger and the other transactions contemplated by this Agreement and except as
otherwise specifically permitted hereunder or disclosed in the Company
Disclosure Letter, or consented to in writing by the Parent:
(i) Carry on its businesses in the ordinary course in substantially
the same manner as previously conducted;
(ii) Neither change nor amend its certificate of incorporation or
bylaws or other constituent documents;
(iii) Other than pursuant to the exercise of stock options granted
under the Company Stock Option Plans and outstanding on the date hereof and
set forth in the Company Disclosure Letter, not issue, sell or grant
options, warrants or rights to purchase or subscribe to, or enter into any
arrangement or contract with respect to the issuance or sale of any of, the
capital stock of the Company or rights or obligations convertible into or
exchangeable for any shares of capital stock of the Company;
(iv) Use their reasonable best efforts to preserve intact the
corporate existence, goodwill and business organization of the Company;
(v) Not declare, set aside or pay any dividend or other distribution
or payment (whether in cash, stock or property) in respect of shares of its
capital stock or other equity securities of the Company owned by any
person;
(vi) Not (A) merge or consolidate with any other person, (B) acquire
any real property, plant or equipment, (C) make any investment in any
corporation, partnership, joint venture or other entity, (D) form any
subsidiary or (E) make any capital expenditures over $100,000 individually,
or $500,000 in the aggregate, except in conformity with the Company's
existing budget, capital improvements plan or property disposition plan
(each of which is attached to the Company Disclosure Letter) (the "Capital
Plans");
(vii) Other than as contemplated by the Capital Plans, not (A) sell
any assets, other than finished goods sold in the ordinary course of
business, or (B) create or assume any mortgage, lien, pledge, security
interest, charge, claim or encumbrance of any nature on any asset other
than in the ordinary course consistent with past practices;
(viii) Not split, combine or reclassify, or take any other similar
action with respect to, any capital stock of the Company, or repurchase,
redeem or otherwise acquire an amount of shares of capital stock of, or
other ownership interests in, the Company;
(ix) Not incur or assume any indebtedness from any third party for
borrowed money or guarantee any such indebtedness other than pursuant to
the Loan and Security Agreement, dated September 12,
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1996, by and among Congress Financial Corporation, the lenders party
thereto and the Company (the "Credit Agreement") and other than in
accordance with the Capital Plans;
(x) Not (A) grant any severance or termination pay to, or enter into
any employment, termination or severance arrangement with, any employee of
the Company, (B) enter into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with
any director, officer or employee of the Company, (C) increase benefits
payable under or add any additional individuals to any existing severance
or termination pay policies or employment agreements, or (D) increase
compensation, bonus or other benefits payable to directors, officers or
employees of the Company, other than, in the case of cash compensation, in
the ordinary course of business consistent with past practice and except
for employment of nonmanagerial personnel under existing Company plans or
policies in the ordinary course of business;
(xi) Not authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the
Company, or any plan of division or share exchange involving the Company;
(xii) Not change any method of accounting or any accounting principle
or practice used by the Company, except for any such change required by
reason of a change in GAAP or Regulation S-X;
(xiii) Not establish any new plan, policy, program or arrangement or
amend or modify any existing plan, policy or arrangement providing benefits
or payments of any kind with respect to any employee or former employee of
the Company, or amend any Company Plan, except for employment of
nonmanagerial personnel under existing Company plans or policies in the
ordinary course of business;
(xiv) Not take any action that would make any representation or
warranty of the Company contained herein to be inaccurate in any material
respect at or as of any time prior to the Effective Time;
(xv) Not enter into any agreement, understanding or commitment that
restrains, limits or impedes the Company's ability to compete with or
conduct any business or line of business;
(xvi) Other than as contemplated by the Capital Plans, not enter into
any contract that would be a Material Contract under Section 3.15 or amend
any existing Material Contract; or
(xvii) Not commit or agree to do any of the foregoing.
(b) Without limiting the generality of the foregoing, the Company will (i)
conduct business in accordance with the Company's customary practices with
respect to the receipt of goods, and the sale and promotion of goods to insure
proper aging and other customary inventory management practices; (ii) use
commercially reasonable efforts to make capital expenditures in respect of the
facilities of the Company in accordance with the Capital Plans; (iii) use its
commercially reasonable efforts to preserve and maintain its existing
relationships with suppliers, customers, licensors and employees and others
having business with the Company; and (iv) cause all purchases of and purchase
orders for merchandise to be documented in accordance with the Company's past
practices.
Section 5.7. Consents. At Parent's request, the Company shall cooperate
fully to obtain all consents and approvals required in connection with, and
waivers of any violations, breaches and defaults that may be caused by, the
consummation of the Merger or the other transactions contemplated by this
Agreement; provided that the obligations of Parent to consummate the Merger
shall not be conditioned on such consents and approvals having been obtained.
Section 5.8. Filings. Parent and the Company shall, as promptly as
practicable, make any required filings, and Parent and the Company shall
promptly make any other required submissions, under any law, statute, order,
rule or regulation with respect to the Merger and shall cooperate with each
other with respect to the foregoing.
Section 5.9. Best Efforts; Further Assurances. (a) Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, and to assist and cooperate with the other parties in doing, all
things necessary,
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proper or advisable (i) to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by this Agreement (including, without limitation, applicable laws
and regulations, including the HSR Act, the DGCL and the GBCC), or (ii) to
remove any judgments, injunctions, orders, decrees or other impediments or
delays, legal or otherwise, to consummate the Merger and the other transactions
contemplated by this Agreement. From the date of this Agreement to the Effective
Time, Parent will use its reasonable best efforts to assist the Company to
preserve intact the goodwill and business of the Company and to preserve the
Company's relationships with its suppliers, customers, licensors and employees;
provided, however, that the foregoing shall not prevent Parent from selling its
goods in the ordinary course of business.
(b) If at any time after the Effective Time any further action is necessary
or desirable to carry out the purposes of this Agreement, the proper officers
and directors of the Surviving Corporation and Parent designated by Parent shall
take, or cause to be taken, all such necessary action.
(c) The Surviving Corporation shall execute and deliver instruments of
assumption to the holders of any debt obligations of, and the lessors of any
real property to, the Company, which debt obligations or leases expressly
require such assumption in order for the Merger to comply with the debt
instrument or lease.
Section 5.10. Publicity. The initial press release(s) with respect to the
execution of this Agreement shall be acceptable to Parent and the Company.
Thereafter, so long as this Agreement is in effect, neither the Company, Parent
nor the Parent Subsidiaries shall issue or cause the publication of any press
release or other announcement with respect to the Merger, this Agreement or the
other transactions contemplated hereby without prior consent of the other party,
except as required by law, or by any listing agreement with a national
securities exchange.
Section 5.11. Notification of Certain Matters. Each of the Company and
Parent will endeavor to give prompt notice to each other of (i) the occurrence,
or failure to occur, of any event which occurrence or failure to occur would be
likely to cause any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time, promptly upon becoming aware of such event, and (ii) any
material failure on its part to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 5.11 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 5.12. Indemnification and Insurance. (a) The articles of
incorporation and bylaws of the Surviving Corporation shall contain the
provisions with respect to indemnification set forth in the Restated Articles of
Incorporation and Bylaws of Parent on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification is
required by law.
(b) From and after the Effective Time, Parent shall indemnify, defend and
hold harmless the present and former officers and directors of the Company
(each, an "Indemnified Party" and, collectively, the "Indemnified Parties")
against all losses, expenses, claims, damages, liabilities or amounts that are
paid in settlement of, with the approval of Parent (which approval shall not
unreasonably be withheld), or otherwise in connection with any claim, action,
suit, proceeding or investigation (a "Claim"), based in whole or in part on the
fact that such person is or was a director or officer of the Company and arising
out of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), in each case to the full extent a corporation is permitted under the
GBCC to indemnify its own directors and officers and Parent shall pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party upon receipt from the Indemnified Party to whom expenses are
advanced of an undertaking to repay such advances if it shall ultimately be
determined in a final adjudication from which there is no right to appeal that
the Indemnified Party is not entitled to indemnification under this Section
5.12.
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(c) Any Indemnified Party wishing to claim indemnification under this
Section 5.12, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify Parent thereof. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) Parent or the Surviving Corporation shall have
the right, from and after the Effective Time, to assume the defense thereof and
Parent shall not be liable to such Indemnified Parties for any legal expenses of
other counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, (ii) the Indemnified Parties
will cooperate in the defense of any such matter and (iii) Parent shall not be
liable for any settlement effected without its prior written consent; and
provided further that Parent shall not have any obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(d) The Parent shall cause to be maintained in effect for three years
following the Closing Date the current policies of directors' and officers'
liability insurance currently maintained by the Company, at no greater than 100%
of the annual premiums for such coverage as of the date hereof, provided that
the Parent may substitute therefor policies of at least the same coverage
containing terms and conditions that are no less advantageous (including,
without limitation, coverage under Parent's existing policies of directors' and
officers' liability insurance). In the event that the premiums for the continued
coverage exceed 100% of the premiums for the coverage as of the date hereof (the
"100% Amount"), Parent shall either substitute coverage meeting the requirements
of the provision in the preceding sentence or continue the existing insurance
but reduce the maximum amount of coverage to that available for premiums equal
to the 100% Amount.
(e) This Section 5.12 shall survive the Closing and is intended to benefit
the Company and each of the Indemnified Parties and his or her heirs and
representatives (each of whom shall be entitled to enforce this Section 5.12
against the Surviving Corporation) and shall be binding on all successors and
assigns of the Surviving Corporation.
Section 5.13. Parent Common Stock. To the extent necessary under
applicable rules and regulations of the NYSE, Parent shall prepare and submit to
the NYSE a listing application covering the Parent Common Stock issuable in
connection with the Merger and shall obtain, prior to the Effective Time,
approval for the listing of such shares upon official notice of issuance.
Section 5.14. Employee Benefits. (a) Parent shall treat employment with
the Company the same as employment with Parent for the Company employees
exclusively for purposes of (i) satisfying any service requirement with respect
to participation in a Parent Plan or with respect to any exclusion for a
pre-existing medical condition,(ii) determining time off for vacation and (iii)
if a Parent Plan is a pension plan (as defined in ERISA Section 3(2)), earning a
nonforfeitable benefit under such plan, except to the extent such treatment in
full would result in an increase or duplication of benefits, in which event such
treatment shall be granted only up to the point of such increase or duplication.
Parent agrees to provide the Company employees with benefits that Parent
reasonably believes, taken as a whole, to be customary in the industry.
(b) The parties hereto acknowledge that nothing herein shall be deemed to
be a commitment on the part of Parent or the Surviving Corporation to provide
employment to any person for any period of time and, except as otherwise
provided in this Section 5.14, nothing herein shall be deemed to prevent Parent
or the Surviving Corporation from amending or terminating any Company plan
expressly identified in Section 3.14 in accordance with its terms; provided,
however, that no such amendment or termination shall have any retroactive effect
unless a retroactive effect is required to satisfy any requirement of applicable
law.
Section 5.15. Affiliate Letters. The Company shall deliver to Parent a
letter identifying all persons who are, at the time the Merger is submitted to a
vote of the stockholders of the Company, "affiliates" of the Company for
purposes of Rule 145 under the Securities Act. The Company shall use its
reasonable best efforts to cause each person who is identified as an "affiliate"
in such letter to deliver to Parent on or prior to the Effective Time a written
statement, in form satisfactory to Parent, that such person will not offer to
sell, transfer or otherwise dispose of any of the shares of Parent Common Stock
issued to such person pursuant to the Merger, except in accordance with the
applicable provisions of the Securities Act and the rules and
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regulations thereunder. Parent shall be entitled to place legends on any
certificates of Parent Common Stock issued to such affiliates to restrict
transfer of such shares as set forth above.
Section 5.16. Rights Plan Amendment/Redemption. The Company covenants and
agrees that it will not amend the Rights Agreement, except as expressly
contemplated by this Agreement. The Company will redeem all outstanding Rights
at a redemption price of $.01 per Right immediately prior to the consummation of
the Merger; the Rights Agreement permits and will permit such redemption.
Section 5.17. Resale Registration. Parent covenants and agrees that
promptly following the Closing Date, Parent shall file a registration statement
(a "Shelf Registration Statement") with the Commission that covers all of the
Registrable Stock (as hereinafter defined) to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act; provided, that
Parent's obligations under this Section 5.17 to register a shareholder's
Registrable Stock shall be subject to (i) such holder providing information
requested by Parent and required by the rules and regulations of the Commission
to be included in a registration statement, (ii) such holder agreeing to
customary "black out" periods during which such holder will not sell Registrable
Stock under the Shelf Registration Statement when it has been notified that
Parent is in possession of material non-public information that is not reflected
in the Shelf Registration Statement and (iii) such holder agreeing to pay its
pro rata share of the Commission's filing fee for the Shelf Registration
Statement. "Registrable Stock" shall mean the shares of Parent Common Stock
received by the Holders (as hereinafter defined) pursuant to the Merger;
provided, further, that Parent shall be permitted to include shares of Parent
Common Stock held by existing shareholders on the Shelf Registration Statement.
The Holders shall mean those stockholders of Bibb which, as of the date of this
Agreement, beneficially own ten percent or more of the Company Common Stock. If
Parent at any time proposes to register any of the Registrable Stock under the
Securities Act for sale to the public for its own account or the account of
other shareholders (a "Piggyback Registration"), Parent will promptly give
written notice to all Holders of its intention to effect such registration and
will include the Registrable Stock in such registration; provided, however, that
if the Piggyback Registration is an underwritten registration, and the managing
underwriters advise Parent that the aggregate number of shares to be included in
such registration exceeds the amount that can be sold without adversely
effecting the proposed distribution, Parent may limit the number of shares
included in such registration, and existing holders of registration rights with
respect to Parent Common Stock will have priority over the Holders with respect
to the number of shares to be included in the Piggyback Registration. Parent's
obligations under this Section 5.17 shall terminate as of the second anniversary
of the Closing Date. Parent further covenants and agrees that it will not grant
"piggyback" registration rights after the date hereof and prior to the second
anniversary of the Closing Date unless such rights are expressly subject and
subordinated to the rights of registration of the Holders granted pursuant to
this Section 5.17.
ARTICLE VI
CONDITIONS
Section 6.1. Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the Merger shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) Company Stockholder Approval. This Agreement shall have been
adopted at the meeting of the Company stockholders duly called and held in
accordance with the DGCL by the holders of a majority of the outstanding
shares of the Company's Common Stock having the right to vote on such
matters.
(b) Parent Shareholder Approval. This Agreement shall have been
adopted at the meeting of Parent shareholders duly called and held in
accordance with the Restated Articles of Incorporation of Parent and the
GBCC by the holders of two-thirds of all votes entitled to be cast on such
matters by all shares entitled to vote on such matters.
(c) HSR Act. The applicable waiting period under the HSR Act shall
have expired or been terminated.
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(d) Injunction. At the Effective Time there shall be no law or
effective injunction, writ or preliminary temporary restraining order or
any order of any nature issued by a court or governmental agency of
competent jurisdiction to the effect that the Merger may not be consummated
as provided in this Agreement; provided, however, that the party invoking
this condition shall have complied with its obligations under Section 5.9.
(e) Registration Statement. The Registration Statement shall be
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceeding for such purpose shall be pending before or threatened by the
Commission. All applicable state securities laws shall have been complied
with in connection with the issuance of Parent Common Stock to be issued
pursuant to the Merger, and no stop order suspending the effectiveness of
any qualification or registration of such Parent Common Stock under such
state securities laws shall have been issued and pending or threatened by
the authorities of any such state.
(f) NYSE Listing. Parent Common Stock to be issued pursuant to this
Agreement shall have been authorized for listing on the NYSE, subject only
to official notice of issuance by Parent.
Section 6.2. Conditions to Obligations of Parent. The obligation of
Parent to consummate the Merger is further subject to the satisfaction or waiver
at or prior to the Closing of the following additional conditions:
(a) Performance of Obligations by the Company. The Company shall have
performed in all material respects all covenants and agreements required to
be performed by it under this Agreement at or prior to the Closing Date.
(b) Representations and Warranties. The representations and
warranties of the Company set forth in Article III of this Agreement
(except for the representations and warranties contained in Sections
3.8(a), 3.8(b) and 3.15), which representations and warranties shall be
deemed for purposes of this Section 6.2(b) not to include any qualification
or limitation with respect to materiality (whether by reference to "Company
Material Adverse Effect" or otherwise), shall be true and correct as of the
Closing Date, except where the matters in respect of which such
representations and warranties are not true and correct, in the aggregate,
has not had or would not have a Company Material Adverse Effect, with the
same effect as though such representations and warranties were made as of
the Closing Date. The representations and warranties contained in Sections
3.8(a), 3.8(b) and 3.15 shall be true and correct as of the date of this
Agreement, except where the failure to be so true and correct would not
have a Company Material Adverse Effect.
(c) Certificates. The Company shall have furnished Parent with a
certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.2(a) and (b).
(d) Company Net Worth. The Company shall be in compliance with the
"Tangible Net Worth" covenant contained in Section 9.14 of the Credit
Agreement (as such Credit Agreement and covenant are in effect as of the
date hereof) as of the month end immediately preceding the Closing Date and
the Company shall have furnished Parent with a certificate of its chief
financial officer as to such compliance.
(e) Tax Opinion. Parent shall have received a written opinion of King
& Spalding, dated on or about the date that is two business days prior to
the date the Joint Proxy Statement is first mailed to Parent shareholders
and reaffirmed as of the Closing Date, in form and substance reasonably
satisfactory to Parent to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a)(1) of the Code. In
rendering such tax opinion, counsel may be entitled to rely upon customary
representations of officers of Parent and the Company.
Section 6.3. Conditions to Obligations of the Company. The obligation of
the Company to consummate the Merger is further subject to the satisfaction or
waiver at or prior to the Closing of the following additional conditions:
(a) Performance of Obligations by Parent. Parent shall have performed
in all material respects all covenants and agreements required to be
performed by it under this Agreement at or prior to the Closing Date.
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(b) Representations and Warranties. The representations and
warranties of Parent set forth in Article IV of this Agreement (except for
the representations and warranties contained in Sections 4.8(a) and
4.8(b)), which representations and warranties shall be deemed for purposes
of this Section 6.3(b) not to include any qualification or limitation with
respect to materiality (whether by reference to "Parent Material Adverse
Effect" or otherwise), shall be true and correct as of the Closing Date,
except where the matters in respect of which such representations and
warranties are not true and correct, in the aggregate, has not had or would
not have a Parent Material Adverse Effect, with the same effect as though
such representations and warranties were made as of the Closing Date. The
representations and warranties contained in Sections 4.8(a) and 4.8(b)
shall be true and correct as of the date of this Agreement except where the
failure to be so true and correct would not have a Parent Material Adverse
Effect.
(c) Certificates. Parent shall have furnished the Company with a
certificate of its appropriate officers as to compliance with the
conditions set forth in Sections 6.3(a) and (b).
(d) Tax Opinion. The Company shall have received a written opinion of
Jones, Day, Reavis & Pogue, dated on or about the date that is two business
days prior to the date the Joint Proxy Statement is first mailed to the
Company stockholders and reaffirmed as of the Closing Date, in form and
substance reasonably satisfactory to the Company to the effect that the
Merger will constitute a reorganization within the meaning of Section
368(a)(1) of the Code. In rendering such tax opinion, counsel may be
entitled to rely upon customary representations of officers of the Company
and Parent.
ARTICLE VII
CLOSING
The consummation of the transactions contemplated by this Agreement is
referred to as the "Closing". The "Closing Date" is the date on which the
Closing occurs. The Closing shall occur as soon as possible following the
Company Stockholder Meeting and the Parent Shareholder Meeting described in
Section 5.4 and in any event within three business days of the satisfaction or
waiver of the conditions set forth in Article VI. The Closing shall take place
at the offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia, or at
such other place as Parent and the Company may mutually agree.
ARTICLE VIII
TERMINATION
Section 8.1. Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the stockholders of the Company and the
shareholders of Parent:
(a) By the mutual written consent of Parent and the Company;
(b) By Parent or the Company if, without any material breach by such
terminating party of its obligations under this Agreement, the Effective
Time shall not have occurred (i) on or before October 15, 1998 or (ii) on
or before November 30, 1998 if on or prior to (A) July 10, 1998 each of
Parent and Company has filed any notification report form required by it to
be filed under the HSR Act, (B) on or prior to July 10, 1998 Parent has
filed with the Commission the Registration Statement and (C) the delay in
the Effective Time past October 15, 1998, is the result of review by the
Commission or the United States Department of Justice or the Federal Trade
Commission of documents filed with them by Parent or the Company or any of
their representatives;
(c) By Parent or the Company if any court of competent jurisdiction or
other governmental body located or having jurisdiction within the United
States shall have issued a final order, injunction, decree, judgment or
ruling or taken any other final action restraining, enjoining or otherwise
prohibiting the Merger and such order, injunction, decree, judgment, ruling
or other action is or shall become final and
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nonappealable; provided, however, that the party invoking this right of
termination shall have complied with its obligations under Section 5.9;
(d) By Parent or the Company, if the Company Stockholder Meeting or
the Parent Shareholder Meeting shall have been held and this Agreement
shall not have been approved and adopted by the affirmative vote of the
requisite number of stockholders of Company or shareholders of Parent;
(e) By the Company, if it shall have received an Acquisition Proposal
and shall have advised Parent in writing that Company's Board of Directors,
after consultation with and based upon the advice of independent legal
counsel, determined in good faith that failure to accept such Acquisition
Proposal would result in a breach by the Board of Directors of the Company
of its fiduciary duties under applicable law; provided, however, that this
Agreement shall not be terminated pursuant to this Section 8.1(e) unless
simultaneously with the termination the Company shall have made the payment
to Parent of the Fee (as hereinafter defined) required to be paid pursuant
to Section 8.3(a).
(f) By Parent, if the Board of Directors of the Company shall have (1)
withdrawn, modified or amended in any adverse respect its approval or
recommendation of this Agreement, the Merger or the other transactions
contemplated hereby, (2) approved, endorsed or recommended to its
stockholders an Acquisition Proposal or (3) resolved to do any of the
foregoing.
Section 8.2. Effect of Termination. In the event of the termination of
this Agreement as provided herein, this Agreement shall forthwith become null
and void, and there shall be no liability on the part of Parent or the Company,
or any of their respective officers, directors, employees, agents or
stockholders, except under Sections 5.3, 8.3 and this Section, all of which
shall survive the termination hereof; provided, however, that nothing herein
shall relieve any party from liability for any willful breach hereof. The
payment of any damages for any such willful breach shall be credited against the
payment of any fee pursuant to Section 8.3
Section 8.3. Fees and Expenses. (a) If:
(i) this Agreement is terminated by Parent pursuant to Section 8.1(b)
and (A) the Company shall have failed to comply in any material respect
with any of the material covenants and agreements contained in this
Agreement, or (B) there shall have been a wilful breach by the Company of a
representation or warranty of the Company contained in this Agreement as of
the date when made (or in the case of any representations and warranties
that are made as of a different date, as of such different date) and within
6 months after such termination the Company enters into an agreement with
respect to a Third Party Acquisition or a Third Party Acquisition occurs
that contemplates or includes a direct or indirect consideration (or
implicit valuation) for shares of Company Common Stock in excess of the per
share Merger Consideration;
(ii) this Agreement is terminated pursuant to Section 8.1(d) because
this Agreement shall not have been approved and adopted by the affirmative
vote of the requisite number of stockholders of the Company and at on or
prior to the time of the Company Stockholder Meeting an Acquisition
Proposal shall have been publicly disclosed, publicly proposed or publicly
communicated to the Company; or
(iii) this Agreement is terminated pursuant to Section 8.1(e) or
8.1(f);
then the Company shall pay to Parent, within one business day following the
execution and delivery of such agreement or such occurrence, as the case may be,
or simultaneously with any termination contemplated by Section 8.1(e) above, a
fee, in cash, of $5.23 million (the "Fee"), provided, however, that the Company
in no event shall be obligated to pay more than one such fee with respect to all
such agreements and occurrences and such termination.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger or similar business
combination by any person other than Parent or any affiliate thereof (a "Third
Party"); (ii) the acquisition by a Third Party of 20% or more of the book or
fair market value of the consolidated assets of the Company; or (iii) the
acquisition by a Third Party of 20% or more of the outstanding shares of Company
Common Stock.
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(b) Except as otherwise specifically provided herein, each party shall bear
its own expenses in connection with this Agreement and the transactions
contemplated hereby.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Survival of Representations and Warranties. None of the
representations and warranties included or provided for herein, or in any
instrument of transfer or other document delivered pursuant hereto, shall
survive the Effective Time. The covenants and agreements of each of the Company
and Parent set forth in this Agreement and the exhibits to this Agreement shall
survive the Closing and shall remain in full force and effect until performed or
satisfied by the applicable party responsible for the same.
Section 9.2. Notices. Each notice, communication and delivery under this
Agreement shall be made in writing and shall be deemed to have been duly given
if delivered by courier or sent by registered or certified mail, postage
prepaid, or by facsimile transmission to the parties at the following addresses
or at such other addresses as shall be specified by the parties by like notice;
provided that a notice of change of address shall be effective only upon receipt
thereof:
If to Parent to:
Dan River Inc.
2291 Memorial Drive
P.O. Box 261
Danville, Virginia 24543
Attention: General Counsel
Fax No.: (804) 799-7276
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: John J. Kelley III, Esq.
Fax No.: (404) 572-5146
If to the Company to:
The Bibb Company
100 Galleria Parkway, 17th Floor
Atlanta, Georgia 30339
Attention: Chairman
Fax No.: (770) 644-7085
With a copy to:
Jones, Day, Reavis & Pogue
3500 SunTrust Plaza
303 Peachtree Street, N.E.
Atlanta, Georgia 30308
Attention: Lizanne Thomas, Esq.
Fax No.: (404) 581-8915
Section 9.3. Waiver and Amendment. Any term or provision of this
Agreement may be waived in writing at any time by the party which is, or whose
stockholders are, entitled to the benefits thereof. This Agreement may be
amended before stockholder adoption of this Agreement with respect to any of the
terms contained herein and, without further approval of such stockholders, may
be amended after stockholder approval of the Merger and this Agreement with
respect to any of the terms contained herein except as
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otherwise provided by law. No such amendment shall be effective unless in a
writing signed by the parties hereto.
Section 9.4. Entire Agreement. This Agreement, the Merger Agreement, and
the Confidentiality Agreement and the documents contemplated hereby and thereby
constitute the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof, and except as provided in Sections 5.3 and
5.12 with respect to the obligations of the Company or Parent thereunder, this
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
Section 9.5. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.6. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia (without regard to
the principles of conflict of laws thereof).
Section 9.7. Construction. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement. When a reference is made
in this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement", "the date hereof", and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to June
28, 1998.
Section 9.8. Disclosure Letters. The Company Disclosure Letter and the
Parent Disclosure Letter are hereby incorporated into this Agreement and are
hereby made a part hereof as if set out in full in this Agreement. Certain
information set forth in the Company Disclosure Letter and the Parent Disclosure
Letter is included solely for informational purposes and may not be required to
be disclosed pursuant to this Agreement. The disclosure of any information shall
not be deemed to constitute an acknowledgment that such information is required
to be disclosed in connection with the representations and warranties made by
the Company or Parent in this Agreement.
Section 9.9. Assignment. This Agreement and all the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any of
their rights hereunder shall be assigned by any of the parties hereto without
the prior written consent of the other parties.
Section 9.10. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
Section 9.11. Specific Performance. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Georgia or in any Georgia state court,
this being in addition to any other remedy to which such party is entitled at
law or in equity. In addition, each of the parties hereto (i) consents to submit
itself to the personal jurisdiction of any Federal court located in the State of
Georgia or any Georgia state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (ii) agrees
that it will not attempt to deny or defeat such
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personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that it will not bring any action relating to this Agreement or any
of the transactions contemplated by this Agreement in any court other than a
Federal or state court sitting in the State of Georgia, and (iv) consents to
service being made through the notice procedures set forth in Section 9.2.
Section 9.12. Company and Parent Knowledge. As used in this Agreement,
the terms "the best knowledge of the Company", "known to the Company" or words
of similar import used herein with respect to the Company shall mean the actual
knowledge of any Company Executive, together with the knowledge a reasonable
business person would have obtained after making reasonable inquiry and after
exercising reasonable diligence with respect to the matters at hand. The
"Company Executives" shall consist of Michael L. Fulbright, Charles R. Tutterow,
Guy Bivens and L.C. Brown. As used in this Agreement, the terms "the best
knowledge of Parent", "known to Parent" or words of similar import used herein
with respect to Parent shall mean the actual knowledge of any Parent Executive,
together with the knowledge a reasonable business person would have obtained
after making reasonable inquiry and after exercising reasonable diligence with
respect to the matters at hand. The "Parent Executives" shall consist of Joseph
L. Lanier, Jr., Barry F. Shea, Harry L. Goodrich, Richard L. Williams, Thomas L.
Muscalino, Mike Beasley, John A. Gillan, Scott D. Batson, John Littleton and
Gregory R. Boozer.
IN WITNESS WHEREOF, this Agreement has been signed by the duly authorized
officers of each of the parties hereto as of the day and year first written
above.
DAN RIVER INC.
By: /s/ J. L. LANIER, JR.
------------------------------------
Name: J. L. Lanier, Jr.
Title: Chairman
THE BIBB COMPANY
By: /s/ MICHAEL L. FULBRIGHT
------------------------------------
Name: Michael L. Fulbright
Title: Chairman and Chief Executive
Officer
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ANNEX B
June 22, 1998
Board of Directors
Dan River Inc.
2291 Memorial Drive
Post Office Box 261
Danville, Virginia 24543
Dear Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to Dan River Inc. ("Dan River") of the consideration to be paid in the
proposed Transaction with The Bibb Company ("Bibb"). For purposes of this
opinion, the "Transaction" means the proposed merger of Dan River and Bibb in
which each outstanding share of common stock, par value $0.01, of Bibb ("Bibb
Common Stock") will be converted into the right to receive, at the election of
the holder thereof, 0.84615 shares of Dan River Class A common stock ("Dan River
Common Stock") or cash in an amount equal to $16.50. The proposed terms of the
Transaction are more fully set forth in the draft Agreement and Plan of Merger
dated June 22, 1998 (the "Agreement").
We have been requested by Dan River to render our opinion with respect to
fairness, from a financial point of view, to Dan River of the consideration to
be paid in the Transaction.
In arriving at our opinion, we have, among other things:
(i) reviewed the financial terms of the Transaction, as set forth in
the draft dated June 22, 1998 of the Agreement;
(ii) reviewed financial and other information that was publicly
available or furnished to us by Bibb and Dan River, including information
provided during discussions with their respective managements;
(iii) reviewed certain financial forecasts and other data provided to
us by the management of Bibb and Dan River relating to their respective
businesses;
(iv) conducted discussions with members of the management of Bibb and
Dan River with respect to their respective businesses and prospects;
(v) conducted discussions with members of the management of Dan River
with respect to Bibb's business, prospects, and financial forecasts;
(vi) conducted discussions with members of the management of Bibb and
Dan River with respect to various strategic and operating benefits
anticipated from the Transaction;
(vii) reviewed the historical stock prices and trading history of the
Bibb Common Stock and Dan River Common Stock and compared such price and
trading history to that of publicly traded companies we deemed relevant;
(viii) compared the financial position and operating results of Bibb
and Dan River with those of publicly traded companies we deemed relevant;
(ix) compared certain financial terms of the Transaction to certain
financial terms of other business combinations we deemed relevant; and
(x) conducted such other financial studies, analyses, and
investigations as we deemed appropriate.
In connection with our review, we have relied upon the accuracy and
completeness of the foregoing financial and other information, and we have not
assumed any responsibility for any independent verification of such information.
We have assumed that the strategic and operating benefits currently contemplated
by the management of Dan River will result from the Transaction. With respect to
Bibb's financial projections, we have assumed that they have been reasonably
prepared and reflect the best current estimates and judgment of Bibb's
management as to the future financial performance of Bibb. With respect to Dan
River's financial projections, we have assumed that they have been reasonably
prepared and reflect the best current estimates and judgment of Dan River's
management as to the future financial performance of Dan River. We assume no
responsibility for and express no view as to such forecasts or the assumptions
upon which they are based. In
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Board of Directors
Dan River Inc.
June 22, 1998
Page 2
arriving at our opinion, we have not conducted any physical inspection of the
properties or facilities of Bibb or Dan River and have not made or obtained any
evaluations or appraisals of the assets or liabilities of Bibb or Dan River.
Further, our opinion is necessarily based on economic, market, financial,
and other conditions and the information made available to us as of the date
hereof. It should be understood that, although subsequent developments may
affect this opinion, we do not have any obligation to update, revise, or
reaffirm this opinion. We are expressing no opinion herein as to the prices at
which the Bibb Common Stock or the Dan River Common Stock will trade at any
time.
In rendering our opinion, we have assumed that the Transaction will be
consummated on the terms described in the Agreement that we reviewed, without
any waiver of any material terms or conditions. Our opinion does not address the
relative merits of the Transaction and the other business strategies considered
by Dan River's Board of Directors, nor does it address Dan River's Board of
Directors' decision to proceed with the Transaction.
Bowles Hollowell Conner & Co. is an investment banking firm that is
involved on an ongoing basis in the valuation of businesses and their securities
in connection with mergers, acquisitions, divestitures, leveraged buyouts, and
private placements of debt and equity securities. We have acted as financial
advisor to Dan River in connection with the Transaction and will receive an
advisory fee in conjunction with rendering this opinion. In addition, Dan River
has agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We would also note for you that Bowles Hollowell
Conner & Co.'s ultimate parent entity is First Union Corporation. First Union
National Bank, an affiliate of Bowles Hollowell Conner & Co. and also a
subsidiary of First Union Corporation, provides various financial services to
Dan River, including loan financing through participation in a syndicated loan
facility headed by Fleet Capital Corporation.
Our engagement and the opinion expressed herein are solely for the benefit
of Dan River and are not on behalf of, and are not intended to confer rights or
remedies upon, Bibb, any shareholders of Bibb or Dan River, or any other person.
Based upon our analysis and subject to the foregoing, it is our opinion
that, as of the date hereof, the consideration to be paid to the shareholders of
Bibb pursuant to the Transaction is fair to Dan River from a financial point of
view.
Sincerely,
BOWLES HOLLOWELL CONNER & CO.
/s/ WILLIAM A. MORRISSETT
--------------------------------------
William A. Morrissett
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ANNEX C
HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL
INVESTMENT BANKERS
June 26, 1998
The Bibb Company
100 Galleria Parkway
17th Floor
Atlanta, GA 30339
Attention: Board of Directors
Gentlemen:
We understand that The Bibb Company (the "Company") is contemplating entering
into an agreement and plan of merger (the "Agreement") with Dan River Inc.
("Parent") providing for, among other things, the merger of the Company with and
into Parent (the "Merger"). As more specifically set forth in the Agreement, at
the effective time of the Merger, holders of each share of issued and
outstanding common stock, par value $.01 per share, of the Company will be
entitled to receive (i) $16.50 in cash, or (ii) .84615 shares of class A common
stock, par value $.01 of Parent, or a combination thereof, subject to pro-ration
and adjustment as provided therein. Such transactions and all related
transactions are referred to collectively herein as the "Transaction".
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the Company.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed the publicly available financial information of the Company and
Parent for recent years and interim periods, including Annual Reports on
Form 10-K of the Company and Parent for the three fiscal years ended
January 3, 1998 and the Quarterly Report on 10-Q of each of the Company
and Parent for the quarter ended April 4, 1998;
2. reviewed a recent draft of the Agreement;
3. met with certain members of the senior management of the Company and
Parent to discuss the operations, financial condition, future prospects
and projected operations and performance of the Company and Parent;
4. visited certain facilities and offices of the Company and Parent;
5. reviewed a forecast prepared by Parent's management with respect to
Parent for the years ending approximately December 31, 1998 through
2000;
6. reviewed a forecast prepared by the Company's management with respect to
the Company for the years ending approximately December 31, 1998 through
1999;
7. reviewed the historical market prices and trading volume for publicly
traded securities for the Company and Parent;
8. reviewed publicly available financial data for certain companies that we
deem comparable to the Company and Parent, and publicly available prices
and premiums paid in other transactions that we deem similar to the
Transaction; and
9. conducted such other studies, analyses and inquiries that we have deemed
appropriate.
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The Board of Directors
The Bibb Company
June 26, 1998
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of the Company and Parent, and that there has been no
material change in the assets, financial condition, business or prospects of the
Company and Parent since the date of the most recent financial statements made
available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and Parent and do not
assume any responsibility with respect to it. We have not made any independent
appraisal of any of the properties or assets of the Company or Parent. Our
opinion is necessarily based on business, economic, market and other conditions
as they exist and can be evaluated by us at the date of this letter.
We have acted as financial advisor to the Company in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. An affiliate of the undersigned
and certain officers of Houlihan, Lokey, Howard & Zukin, Inc. ("HLHZ") own
common stock of the Company, which common shares in the aggregate constitute
less than one percent of the total issued and outstanding common shares of the
Company. In addition a Senior Managing Director of HLHZ is a member of the Board
of Directors of the Company.
It is understood that this letter is for the information of the Company in
connection with its consideration of the Merger, does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed Merger and is not to be quoted or referred to, in whole or in part, in
any registration statement, prospectus or proxy statement, or in any other
document used in connection with the offering or sale of securities, nor shall
this letter be used for any other purposes, without our prior written consent.
Based upon the foregoing, and in reliance thereon, it is our opinion that the
consideration to be received by the Company's common shareholders in the
Transaction is fair from a financial point of view.
HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL
/s/ Houlihan Lokey Howard & Zukin Capital
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111
ANNEX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
SECTION 262 APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
receipt thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not
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more than 10 days prior to the date the notice is given, provided, that if
the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
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(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Part 5 of Article 8 of the Georgia Business Corporation Code states:
14-2-850. Part Definitions. As used in this part, the term:
(1) "Corporation" includes any domestic or foreign predecessor entity
of a corporation in a merger or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
(2) "Director" or "officer" means an individual who is or was a
director or officer, respectively, of a corporation or who, while a
director or officer of the corporation, is or was serving at the
corporation's request as a director, officer, partner, trustee, employee,
or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan, or other entity. A director or
officer is considered to be serving an employee benefit plan at the
corporation's request if his or her duties to the corporation also impose
duties on, or otherwise involve services by, the director or officer to the
plan or to participants in or beneficiaries of the plan. Director or
officer includes, unless the context otherwise requires, the estate or
personal representative of a director or officer.
(3) "Disinterested director" means a director who at the time of a
vote referred to in subsection (c) of Code Section 14-2-853 or a vote or
selection referred to in subsection (b) or (c) of Code Section 14-2-855 or
subsection (a) of Code Section 14-2-856 is not:
(A) A party to the proceeding; or
(B) An individual who is a party to a proceeding having a familial,
financial, professional, or employment relationship with the director
whose indemnification or advance for expenses is the subject of the
decision being made with respect to the proceeding, which relationship
would, in the circumstances, reasonably be expected to exert an
influence on the director's judgment when voting on the decision being
made.
(4) "Expenses" includes counsel fees.
(5) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expenses incurred with respect to a
proceeding.
(6) "Official capacity" means:
(A) When used with respect to a director, the office of director in
a corporation; and
(B) When used with respect to an officer, as contemplated in Code
Section 14-2-857, the office in a corporation held by the officer.
Official capacity does not include service for any other domestic or
foreign corporation or any partnership, joint venture, trust, employee
benefit plan, or other entity.
(7) "Party" means an individual who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.
(8) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
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14-2-851. Authority to indemnify. (a) Except as otherwise provided in
this Code section, a corporation may indemnify an individual who is a party to a
proceeding because he or she is or was a director against liability incurred in
the proceeding if:
(1) Such individual conducted himself or herself in good faith; and
(2) Such individual reasonably believed:
(A) In the case of conduct in his or her official capacity, that
such conduct was in the best interests of the corporation;
(B) In all other cases, that such conduct was at least not opposed
to the best interests of the corporation; and
(C) In the case of any criminal proceeding, that the individual had
no reasonable cause to believe such conduct was unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose he or she believed in good faith to be in the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of subparagraph (a)(1)(B) of this Code section.
(c) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this Code section.
(d) A corporation may not indemnify a director under this Code section:
(1) In connection with a proceeding by or in the right of the
corporation, except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the relevant
standard of conduct under this Code section; or
(2) In connection with any proceeding with respect to conduct for
which he or she was adjudged liable on the basis that personal benefit was
improperly received by him or her, whether or not involving action in his
or her official capacity.
14-2-852. Mandatory indemnification. A corporation shall indemnify a
director who was wholly successful, on the merits or otherwise, in the defense
of any proceeding to which he or she was a party because he or she was a
director of the corporation against reasonable expenses incurred by the director
in connection with the proceeding.
14-2-853. Advance for expenses. (a) A corporation may, before final
disposition of a proceeding, advance funds to pay for or reimburse the
reasonable expenses incurred by a director who is a party to a proceeding
because he or she is a director if he or she delivers to the corporation:
(1) A written affirmation of his or her good faith belief that he or
she has met the relevant standard of conduct described in Code Section
14-2-851 or that the proceeding involves conduct for which liability has
been eliminated under a provision of the articles of incorporation as
authorized by paragraph (4) of subsection (b) of Code Section 14-2-202; and
(2) His or her written undertaking to repay any funds advanced if it
is ultimately determined that the director is not entitled to
indemnification under this part.
(b) The undertaking required by paragraph (2) of subsection (a) of this
Code section must be an unlimited general obligation of the director but need
not be secured and may be accepted without reference to the financial ability of
the director to make repayment.
(c) Authorizations under this Code section shall be made:
(1) By the board of directors:
(A) When there are two or more disinterested directors, by a
majority vote of all the disinterested directors (a majority of whom
shall for such purpose constitute a quorum) or by a
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majority of the members of a committee of two or more disinterested
directors appointed by such a vote; or
(B) When there are fewer than two disinterested directors, by the
vote necessary for action by the board in accordance with subsection (c)
of Code Section 14-2-824, in which authorization directors who do not
qualify as disinterested directors may participate; or
(2) By the shareholders, but shares owned or voted under the control
of a director who at the time does not qualify as a disinterested director
with respect to the proceeding may not be voted on the authorization.
14-2-854. Court-ordered indemnification and advances for expenses. (a) A
director who is a party to a proceeding because he or she is a director may
apply for indemnification or advance for expenses to the court conducting the
proceeding or to another court of competent jurisdiction. After receipt of an
application and after giving any notice it considers necessary, the court shall:
(1) Order indemnification or advance for expenses if it determines
that the director is entitled to indemnification under this part; or
(2) Order indemnification or advance for expenses if it determines, in
view of all the relevant circumstances, that it is fair and reasonable to
indemnify the director or to advance expenses to the director, even if the
director has not met the relevant standard of conduct set forth in
subsections (a) and (b) of the Code Section 14-2-851, failed to comply with
Code Section 14-2-853, or was adjudged liable in a proceeding referred to
in paragraph (1) or (2) of subsection (d) of Code Section 14-2-851, but if
the director was adjudged so liable, the indemnification shall be limited
to reasonable expenses incurred in connection with the proceeding.
(b) If the court determines that the director is entitled to
indemnification or advance for expenses under this part, it may also order the
corporation to pay the director's reasonable expenses to obtain court-ordered
indemnification or advance for expenses.
14-2-855. Determination and authorization of indemnification. (a) A
corporation may not indemnify a director under Code Section 14-2-851 unless
authorized thereunder and a determination has been made for a specific
proceeding that indemnification of the director is permissible in the
circumstances because he or she has met the relevant standard of conduct set
forth in subsection (a) of Code Section 14-2-851.
(b) The determination shall be made:
(1) If there are two or more disinterested directors, by the board of
directors by majority vote of all the disinterested directors (a majority
of whom shall for such purpose constitute a quorum) or by a majority of the
members of a committee of two or more disinterested directors appointed by
such a vote;
(2) By special legal counsel:
(A) Selected in the manner prescribed in paragraph (1); or
(B) If there are fewer than two disinterested directors, selected
by the board of directors (in which selection directors who do not
qualify as disinterested directors may participate); or
(3) By the shareholders, but shares owned by or voted under the
control of a director who at the time does not qualify as a disinterested
director may not be voted on the determination.
(c) Authorization of indemnification or an obligation to indemnify and
evaluation as to reasonableness of expenses shall be made in the manner as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of indemnification
and evaluation as to reasonableness of expenses shall be made by those entitled
under paragraph (3) of subsection (b) of this Code section to select counsel.
14-2-856. Shareholder approved indemnification. (a) If authorized by the
articles of incorporation or a bylaw, contract, or resolution approved or
ratified by the shareholders by a majority of the votes entitled to
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be cast, a corporation may indemnify or obligate itself to indemnify a director
made a party to a proceeding including a proceeding brought by or in the right
of the corporation, without regard to the limitations in other Code sections of
this part, but shares owned or voted under the control of a director who at the
time does not qualify as a disinterested director with respect to any existing
or threatened proceeding that would be covered by the authorization may not be
voted on the authorization.
(b) The corporation shall not indemnify a director under this Code section
for any liability incurred in a proceeding in which the director is adjudged
liable to the corporation or is subjected to injunctive relief in favor of the
corporation:
(1) For any appropriation, in violation of the director's duties, of
any business opportunity of the corporation;
(2) For acts or omissions which involve intentional misconduct or a
knowing violation of law;
(3) For the types of liability set forth in Code Section 14-2-832; or
(4) For any transaction from which he received an improper personal
benefit.
(c) Where approved or authorized in the manner described in subsection (a)
of this Code section, a corporation may advance or reimburse expenses incurred
in advance of final disposition of the proceeding only if:
(1) the director furnishes the corporation a written affirmation of
his or her good faith belief that his or her conduct does not constitute
behavior of the kind described in subsection (b) of this Code section; and
(2) The director furnishes the corporation a written undertaking,
executed personally or on his or her behalf, to repay any advances if it is
ultimately determined that the director is not entitled to indemnification
under this Code section.
14-2-857. Indemnification of officers, employees, and agents. (a) A
corporation may indemnify and advance expenses under this part to an officer of
the corporation who is a party to a proceeding because he or she is an officer
of the corporation:
(1) To the same extent as a director; and
(2) If he or she is not a director, to such further extent as may be
provided by the articles of incorporation, the bylaws, a resolution of the
board of directors, or contract except for liability arising out of conduct
that constitutes:
(A) Appropriation, in violation of his or her duties, of any
business opportunity of the corporation;
(B) Acts or omissions which involve intentional misconduct or a
knowing violation of law;
(C) The types of liability set forth in Code Section 14-2-832; or
(D) Receipt of an improper personal benefit.
(b) The provisions of paragraph (2) of subsection (a) of this Code section
shall apply to an officer who is also a director if the sole basis on which he
or she is made a party to the proceeding is an act or omission solely as an
officer.
(c) An officer of a corporation who is not a director is entitled to
mandatory indemnification under Code Section 14-2-852, and may apply to a court
under Code Section 14-2854 for indemnification or advances for expenses, in each
case to the same extent to which a director may be entitled to indemnification
or advances for expenses under those provisions.
(d) A corporation may also indemnify and advance expenses to an employee or
agent who is not a director to the extent, consistent with public policy, that
may be provided by its articles of incorporation, bylaws, general or specific
action of its board of directors, or contract.
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14-2-858. Insurance. A corporation may purchase and maintain insurance on
behalf of an individual who is a director, officer, employee, or agent of the
corporation or who, while a director, officer, employee, or agent of the
corporation, serves at the corporation's request as a director, officer,
partner, trustee, employee, or agent of another domestic or foreign corporation,
partnership, joint venture, trust, employee benefit plan, or other entity
against liability asserted against or incurred by him or her in that capacity or
arising from his or her status as a director, officer, employee, or agent,
whether or not the corporation would have power to indemnify him or her against
the same liability under this part.
14-2-859. Application of Part. (a) A corporation may, by a provision in
its articles of incorporation or bylaws or in a resolution adopted or a contract
approved by its board of directors or shareholders, obligate itself in advance
of the act or omission giving rise to a proceeding to provide indemnification or
advance funds to pay for or reimburse expenses consistent with this part. Any
such obligatory provision shall be deemed to satisfy the requirements for
authorization referred to in subsection (c) of Code Section 14-2-853 or
subsection (c) of Code Section 14-2-855. Any such provision that obligates the
corporation to provide indemnification to the fullest extent permitted by law
shall be deemed to obligate the corporation to advance funds to pay for or
reimburse expenses in accordance with Code Section 14-2-853 to the fullest
extent permitted by law, unless the provision specifically provides otherwise.
(b) Any provision pursuant to subsection (a) of the Code section shall not
obligate the corporation to indemnify or advance expenses to a director or a
predecessor of the corporation, pertaining to conduct with respect to the
predecessor, unless otherwise specifically provided. Any provision for
indemnification or advance for expenses in the articles of incorporation,
bylaws, or a resolution of the board of directors or shareholders, partners, or,
in the case of limited liability companies, members or managers of a predecessor
of the corporation or other entity in a merger or in a contract to which the
predecessor is a party, existing at the time the merger takes effect, shall be
governed by paragraph (3) of subsection (a) of Code Section 14-2-1106.
(c) A corporation may, by a provision in its articles of incorporation,
limit any of the rights to indemnification or advance for expenses created by or
pursuant to this part.
(d) This part does not limit a corporation's power to pay or reimburse
expenses incurred by a director or an officer in connection with his or her
appearance as a witness in a proceeding at a time when he or she is not a party.
(e) Except as expressly provided in Code Section 14-2-857, this part does
not limit a corporation's power to indemnify, advance expenses to, or provide or
maintain insurance on behalf of an employee or agent.
ARTICLES OF INCORPORATION
The Dan River Charter eliminates, to the fullest extent permitted by
applicable law, the personal liability of directors to Dan River or its
shareholders for monetary damages for breach of duty of care or any other duty
owed to Dan River as a director. The GBCC currently provides that such provision
shall not eliminate or limit the liability of a director (i) for any
appropriation, in violation of his duties, of any business opportunity of Dan
River, (ii) for acts or omissions that involve intentional misconduct or a
knowing violation of law, (iii) for unlawful corporate distributions or (iv) for
any transaction from which the director received an improper personal benefit.
Article VI of the Dan River Bylaws provides that Dan River shall indemnify
to the fullest extent permitted under the GBCC as it presently exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits Dan River to provide broader indemnification rights
than said law permitted Dan River to provide prior to such amendment), any
individual made a party to a proceeding (as defined in the GBCC) because he or
she is or was a director or officer against liability (as director, officer and
liability are defined in the GBCC), incurred in the proceeding, if he or she
acted in a manner he or she believed in good faith to be in or not opposed to
the best interests of Dan River and, in the case of any criminal proceeding, if
he or she had no reasonable cause to believe his or her conduct was unlawful.
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120
Dan River shall have the power to indemnify to the fullest extent permitted
by the GBCC, any individual made a party to a proceeding (as defined in the
GBCC) because he or she is or was an employee or agent of Dan River against
liability (as defined in the GBCC), incurred in the proceeding, if he or she
acted in a manner he or she believed in good faith to be in or not opposed to
the best interests of Dan River and, in the case of any criminal proceeding, if
he or she had no reasonable cause to believe his or her conduct was unlawful.
Dan River shall pay for or reimburse the reasonable expenses incurred by a
director or officer who is a party to a proceeding, and shall have the authority
to pay for or reimburse the reasonable expenses of an employee or agent of Dan
River who is a party to a proceeding, in each case in advance of the final
disposition of a proceeding if:
(a) Such person furnishes Dan River a written affirmation of his or
her good faith belief that he or she has met the standard of conduct set
forth above, and
(b) Such person furnishes Dan River a written undertaking, executed
personally on his or her behalf to repay any advances if it is ultimately
determined that he or she is not entitled to indemnification.
The written undertaking required by paragraph (b) above must be an
unlimited general obligation of such person but need not be secured and may be
accepted without reference to financial ability to make repayment.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in Article
VI shall not be exclusive of any other right that any person may have or
hereafter acquire under any statute, provision of the Dan River Charter,
provision of Dan River Bylaws, agreement, vote of shareholders or disinterested
directors or otherwise.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits
EXHIBIT DESCRIPTION
- ------- -----------
2.1 -- Agreement and Plan of Merger, dated as of June 28, 1998, by
and between Dan River Inc. and the Bibb Company (attached as
Annex A to the Joint Proxy Statement/Prospectus forming a
part of this Registration Statement).
3.1 -- Amended and Restated Articles of Incorporation of Dan River
Inc. (incorporated by reference to Exhibit 3.1 in Amendment
No. 1 to Registration Statement on Form S-1 (File No.
333-36479)).
3.2 -- Bylaws of Dan River Inc. (incorporated by reference to
Exhibit 3.2 in Amendment No. 1 to Registration Statement on
Form S-1 (File No. 333-36479)).
4.1 -- Form of Indenture between Dan River Inc. and Marine Midland
Bank, N.A., as Trustee (including Form of Note)
(incorporated by reference to Exhibit 4 in Dan River's
Report on Form 10-K (File No. 33-70442) for the fiscal year
ended January 1, 1994).
5.1 -- Opinion of King & Spalding regarding the validity of the
securities being registered.
8.1 -- Opinion of King & Spalding regarding certain tax matters.
8.2* -- Opinion of Jones, Day, Reavis & Pogue regarding certain tax
matters.
23.1 -- Consent of King & Spalding (included as part of its opinions
filed as Exhibits 5.1 and 8.1).
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EXHIBIT DESCRIPTION
- ------- -----------
23.2 -- Consent of Ernst & Young LLP, independent auditors.
23.3 -- Consent of Arthur Andersen LLP, independent public
accountants.
23.4 -- Consent of Pugh & Company, P.C., independent auditors.
99.1 -- Form of Dan River Inc. Proxy.
99.2 -- Form of The Bibb Company Proxy.
- ---------------
* To be filed by amendment
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
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The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Danville, State of
Virginia, on July 10, 1998.
DAN RIVER INC.
By: /s/ JOSEPH L. LANIER, JR.
------------------------------------
Joseph L. Lanier, Jr.
Chairman of the Board and
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Joseph L. Lanier, Jr., Richard L. Williams, Barry
F. Shea, Scott D. Batson and Harry L. Goodrich and each of them, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement, and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JOSEPH L. LANIER, JR. Chairman of the Board, Chief July 9, 1998
- ----------------------------------------------------- Executive Officer and Director
Joseph L. Lanier, Jr. (Principal Executive Officer)
/s/ BARRY F. SHEA Vice President -- Chief Financial July 9, 1998
- ----------------------------------------------------- Officer (Principal Financial
Barry F. Shea and
Accounting Officer)
/s/ RICHARD L. WILLIAMS President, Chief Operating July 9, 1998
- ----------------------------------------------------- Officer and Director
Richard L. Williams
/s/ DONALD J. KELLER Director July 9, 1998
- -----------------------------------------------------
Donald J. Keller
/s/ EDWARD J. LILL Director July 9, 1998
- -----------------------------------------------------
Edward J. Lill
/s/ JOHN F. MAYPOLE Director July 9, 1998
- -----------------------------------------------------
John F. Maypole
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