UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Duck Head Apparel Company, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
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[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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4) Date Filed:
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DUCK HEAD APPAREL COMPANY, INC.
1020 BARROW INDUSTRIAL PARKWAY
WINDER, GEORGIA 30680
TELEPHONE (770) 867-3111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
NOVEMBER 8, 2000
TO OUR SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of Shareholders of Duck
Head Apparel Company, Inc., a Georgia corporation ("Duck Head"), will be held at
the Chateau Elan, 100 Rue Charlemagne, Braselton, Georgia, on Wednesday,
November 8, 2000, at 10:00 a.m., local time, for the following purposes:
1. To elect eight directors to serve until the next annual meeting of
shareholders of Duck Head or until their successors have been duly
elected and qualified;
2. To vote on the ratification of the appointment of KPMG LLP as
independent auditors for Duck Head for fiscal 2001; and
3. To act on such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
The Board of Directors of Duck Head recommends that shareholders vote
FOR the nominees for director listed in the Duck Head proxy statement enclosed
with this notice and FOR approval of the proposal described in item 2 above.
Duck Head has fixed the close of business on October 9, 2000 as the
record date for the determination of the shareholders of Duck Head entitled to
receive notice of and to vote at the Annual Meeting. Only shareholders of record
of Duck Head at the close of business on October 9, 2000 will be entitled to
vote at the Annual Meeting and any adjournment or adjournments thereof.
Whether or not you expect to be present at the Annual Meeting, please
complete, date and sign the enclosed form of proxy and return it promptly in the
enclosed envelope, which requires no additional postage if mailed in the United
States.
By Order of the Board of Directors,
/s/ K. Scott Grassmyer
----------------------
K. Scott Grassmyer
October 16, 2000 Secretary
DUCK HEAD APPAREL COMPANY, INC.
1020 Barrow Industrial Parkway
Winder, Georgia 30680
Telephone (770) 867-3111
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 8, 2000
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Duck Head Apparel Company, Inc., a
Georgia corporation ("Duck Head" or the "Company"), to be voted at the Annual
Meeting of Shareholders (the "Annual Meeting") of the Company to be held at
Chateau Elan, 100 Rue Charlemagne, Braselton, Georgia at 10:00 a.m. on
Wednesday, November 8, 2000. The approximate date of first mailing this Proxy
Statement and the accompanying proxy is October 16, 2000.
Only shareholders of record at the close of business on October 9, 2000
are entitled to receive notice of and to vote at the Annual Meeting. As of such
date, there were outstanding 2,407,213 shares of common stock, $.01 par value
(the only voting securities), of the Company. Each share is entitled to one
vote.
Each shareholder described above will be sent this Proxy Statement, the
accompanying Notice of Annual Meeting and a proxy card. Any proxy given pursuant
to this solicitation may be revoked by the person giving it at any time before
it is voted. A proxy may be revoked by (i) delivery to the Secretary of the
Company, at or before the Annual Meeting, of a written notice of revocation
bearing a later date than the proxy, (ii) duly executing a subsequent proxy
relating to the same shares and delivering it to the Secretary of the Company at
or before the Annual Meeting or (iii) attending the Annual Meeting and giving
notice of revocation to the Secretary of the Company or giving notice of
revocation in open meeting prior to the proxy being voted (although attendance
at the Annual Meeting will not in and of itself constitute a revocation of a
proxy). Any written notice revoking a proxy should be sent to: Duck Head Apparel
Company, Inc., Post Office Box 688, 1020 Barrow Industrial Parkway, Winder,
Georgia 30680, Attention: Secretary.
All shares represented by valid proxies received pursuant to the
solicitation and prior to voting at the meeting and not revoked before they are
exercised will be voted, and, if a choice is specified with respect to any
matter to be acted upon, the shares will be voted in accordance with such
specification. If no contrary instructions are indicated, all shares represented
by a proxy will be voted (1) FOR election to the Board of Directors of the
nominees described herein, (2) FOR ratification of the appointment of KPMG LLP
as independent auditors for the Company for fiscal year 2001, and in the
discretion of the proxy holders as to all other matters that may properly come
before the Annual Meeting.
The presence, either in person or by proxy, of the holders of
two-thirds of the outstanding shares of common stock at October 9, 2000 is
necessary to constitute a quorum at the Annual Meeting. Directors will be
elected by a plurality of the votes cast at the Annual Meeting. Shareholders do
not have the right to cumulate their votes with respect to the election of
directors. Abstentions and broker non-votes, which are separately tabulated, are
included in the determination of the number of shares present for quorum
purposes, but have no effect on the votes respecting the matters to be voted
upon at the meeting. Shareholders do not have any dissenters' rights or
appraisal rights with respect to any matter described in this proxy statement.
2
THE SPIN-OFF FROM DELTA WOODSIDE INDUSTRIES, INC.
The business of the Company was originally conducted by the Duck Head
Apparel Company division of Delta Woodside Industries, Inc., a South Carolina
corporation ("Delta Woodside"), whose common stock is traded on the New York
Stock Exchange under the symbol "DLW," and Delta Woodside's subsidiaries. The
Company was formed as an indirect subsidiary of Delta Woodside in December 1999.
In May of 2000, Delta Woodside reorganized its subsidiaries and divisions, and
all of the assets and operations of the Duck Head Apparel Company division were
transferred to the Company, which became a direct subsidiary of Delta Woodside,
or to a subsidiary of the Company. Then on June 30, 2000, Delta Woodside
spun-off the Company by means of a pro rata distribution of all of the
outstanding common stock of the Company to Delta Woodside's stockholders of
record on June 19, 2000 (the "Duck Head distribution"). Also on June 30, 2000,
Delta Woodside similarly spun-off Delta Apparel, Inc., a Georgia corporation
("Delta Apparel"), to which had been transferred the Delta Apparel Company
division of various subsidiaries of Delta Woodside. After the spin-offs, Delta
Woodside's sole operating division was its Delta Mills Marketing Company
division owned and operated by its subsidiary Delta Mills, Inc. ("Delta Mills").
Historical data contained in this proxy statement for the periods prior to June
30, 2000 pertain to the Duck Head Apparel Company division of Delta Woodside and
its subsidiaries or to the Company prior to the spin-off.
ELECTION OF DIRECTORS
(ITEM 1)
The by-laws of the Company provide that the number of Directors to be
elected at any meeting of shareholders may be determined by the Board of
Directors. The Board has determined that eight Directors shall be elected at the
Annual Meeting. The shareholders' common stock may not be voted cumulatively in
the election of Directors.
The following eight persons are nominees for election as Directors at
the Annual Meeting to serve until the next annual meeting of shareholders of the
Company or until their successors are duly elected and qualified. Unless
authority to vote at the election of Directors is withheld, it is the intention
of the persons named in the enclosed form of proxy to nominate and vote for the
persons named below, all of whom are currently Directors of the Company. Each
such person is a citizen of the United States. There are no family relationships
among the Directors and the executive officers of the Company.
Management of the Company believes that all of the nominees will be
available and able to serve as Directors, but in the event any nominee is not
available or able to serve, the shares represented by the proxies will be voted
for such substitute as shall be designated by the Board of Directors.
NAME, AGE & BUSINESS ADDRESS PRINCIPAL OCCUPATION DIRECTOR SINCE
William F. Garrett (59) President and Chief Executive Officer 1998 (1)
1071 Avenue of the Americas of Delta Woodside
New York, NY 10018 Greenville, South Carolina (2)
Mark I. Goldman (48) President, 360 THINC, LTD. 2000
1545 Peachtree St., N.E. Atlanta, Georgia (3)
Suite Five Hundred
Atlanta, GA 30309
C. C. Guy (67) Retired Businessman 1984 (1)
918 Elizabeth Road Shelby, North Carolina (4) (10) (11)
Shelby, NC 28150
Dr. James F. Kane (68) Dean Emeritus of the College of 1986 (1)
1705 College Street Business Administration of the
Columbia, SC 29208 University of South Carolina
Columbia, South Carolina (5) (10) (11)(12)
3
Dr. Max Lennon (60) President of Mars Hill College 1986 (1)
Post Office Box 1775 Mars Hill, North Carolina (6) (10) (11)(12)(13)
Mars Hill, NC 28754
E. Erwin Maddrey, II (59) President of Maddrey & Associates 1984 (1)
233 N. Main St., Suite 200 Greenville, South Carolina (7)(13)
Greenville, SC 29601
Buck A. Mickel (44) President and Chief Executive Officer 1984 (1)
Post Office Box 6721 of RSI Holdings, Inc.
Greenville, SC 29606 Greenville, South Carolina (8) (11)(13)
Robert D. Rockey, Jr. (59) Chairman of the Board, President 1999
1020 Barrow Industrial Pkwy. and Chief Executive Officer of
Winder, GA 30680 Duck Head (9)
<FN>
(1) Includes service as a director of Delta Woodside, a South Carolina
corporation, and Delta Woodside's predecessor by merger, Delta Woodside
Industries, Inc., a Delaware corporation ( "Old Delta Woodside"), or any
predecessor company to Old Delta Woodside.
(2) William F. Garrett served as a divisional Vice President of J. P.
Stevens & Company, Inc. from 1982 to 1984, and as a divisional President of J.
P. Stevens & Company, Inc. from 1984 until 1986, at which time the Delta Mills
Marketing Company division was acquired by a predecessor of Old Delta Woodside.
From 1986 until June 2000 he served as the President of Delta Mills Marketing
Company, a division of a subsidiary of Delta Woodside. Mr. Garrett became
President and Chief Executive Officer of Delta Woodside in June 2000. Delta
Woodside is in the business of manufacturing and selling textile fabric. Mr.
Garrett is also a director of Delta Woodside and Delta Apparel.
(3) Mark I. Goldman was a co-founder of 360 THINC, LTD., an integrated
creative marketing firm, and has been its President since its inception in
February 1995.
(4) C. C. Guy served as Chairman of the Board of Old Delta Woodside or its
predecessors from the founding of Old Delta Woodside's predecessors in 1984
until November 1989. Since before the November 15, 1989 merger (which this
document refers to as the "RSI Merger") of Old Delta Woodside into RSI
Corporation, a South Carolina corporation which changed its name to Delta
Woodside Industries, Inc. and is now Delta Woodside, he has been a director of
RSI Holdings, Inc., and from before the RSI Merger until January 1995 he also
served as President of RSI Holdings, Inc. RSI Holdings, Inc. until 1992 was
engaged in the sale of outdoor power equipment, until 1994 was engaged in the
sale of turf care products, until January 2000 was engaged in the consumer
finance business and currently has ceased business operations but is evaluating
other business opportunities. Prior to November 15, 1989, RSI Holdings, Inc. was
a subsidiary of RSI Corporation. Mr. Guy served from October 1979 until November
1989 as President, Treasurer and a director of RSI Corporation. Prior to the RSI
Merger, RSI Corporation owned approximately 40% of the outstanding shares of
common stock of Old Delta Woodside and, among other matters, was engaged in the
office supply business, as well as the businesses of selling outdoor power
equipment and turf care products. Mr. Guy also serves as a director of Delta
Woodside and Delta Apparel.
(5) Dr. James F. Kane is Dean Emeritus of the College of Business
Administration of the University of South Carolina, having retired in 1993 as
Dean, in which capacity he had served since 1967. He also serves as a director
of Delta Woodside, Delta Apparel and Glassmaster Company.
(6) Dr. Max Lennon was President of Clemson University from March 1986
until August 1994. He was President and Chief Executive Officer of Eastern
Foods, Inc., which was engaged in the business of manufacturing and distributing
food products, from August 1994 until March 1996. He commenced service in March
1996 as President of Mars Hill College. He also serves as a director of Delta
Woodside, Delta Apparel and Duke Power Company.
(7) E. Erwin Maddrey, II was President and Chief Executive Officer of Old
Delta Woodside or its predecessors from the founding of Old Delta Woodside's
predecessors in 1984 until the RSI Merger and he served in these positions with
Delta Woodside from the RSI Merger until June 2000. He is currently the
President of Maddrey & Associates, which oversees its investments and provides
4
consulting services. He also serves as a director of Delta Woodside, Delta
Apparel and Kemet Corporation.
(8) Buck A. Mickel was a Vice President of Old Delta Woodside or its
predecessors from the founding of Old Delta Woodside's predecessors until
November 1989, Secretary of Old Delta Woodside from November 1986 to March 1987,
and Assistant Secretary of Old Delta Woodside from March 1987 to November 1988.
He served as Vice President and a director of RSI Holdings, Inc. from before the
RSI Merger until January 1995 and as Vice President of RSI Holdings, Inc. from
September 1996 until July 1998 and has served as President, Chief Executive
Officer and a director of RSI Holdings, Inc. from July 1998 to the present. He
served as Vice President of RSI Corporation from October 1983 until November
1989. Mr. Mickel also serves as a director of Delta Woodside and Delta Apparel.
(9) Robert D. Rockey, Jr. began service as the chief executive officer of
the Duck Head Apparel Company division of Delta Woodside in March 1999, and was
elected Chairman of the Board, President and Chief Executive Officer of Duck
Head in December 1999. Mr. Rockey served for nearly twenty years with Levi
Strauss & Co. From May 1993 until June 1997, he was President of Levi Strauss
North America, the company's largest operating business. From June 1997 to March
1999, Mr. Rockey ran his own consulting business, serving the retail, textile
and apparel industries.
(10) Member of Audit Committee.
(11) Member of Compensation Committee.
(12) Member of Compensation Grants Committee.
(13) Member of the Corporate Governance Committee.
</FN>
The Company's Directors hold office until the next annual meeting of
shareholders or until their successors are duly elected and qualified.
The Board of Directors of the Company met physically or by telephone
eight times during the fiscal year ended July 1, 2000. During fiscal 2000 the
Audit Committee met twice, the Compensation Committee met once and the
Compensation Grants Committee met once either in person or telephonically. The
Corporate Governance Committee did not meet in fiscal 2000. Each Director
attended or participated in at least 75 percent of the meetings of the Board and
of any committee of which he was a member.
The Audit Committee reviews the Company's annual financial statements
and any reports or other financial information submitted to any governmental
body or the public, makes recommendations to the Board regarding the selection
of the Company's independent public accountants, reviews the independence of
such accountants, approves the scope of the annual audit, approves the fee
payable to the independent accountants, reviews the audit results, reviews the
integrity of the Company's internal and external financial reporting process,
will establish and maintain a code of ethical conduct for the Company's
management and performs other functions set forth in its charter. The
Compensation Committee reviews and submits to the Board of Directors suggested
executive officers' salaries and bonuses. The Compensation Grants Committee
grants awards under the Company's Incentive Stock Award Plan (the "Incentive
Stock Award Plan") and options under the Company's 2000 Stock Option Plan (the
"Stock Option Plan"). The Corporate Governance Committee identifies, interviews
and recommends to the Board candidates for election to the Board. The Corporate
Governance Committee will also review and report to the Board as to various
corporate governance matters.
The Corporate Governance Committee will consider director nominees
recommended by holders of the Company's common stock. Shareholder nominations
must be in writing and otherwise comply with the requirements of the Company's
bylaws. If the election of directors is to take place at an annual meeting of
shareholders, then a shareholder nomination must be received by the Company (A)
no later than 120 days prior to the first anniversary of the previous year's
annual meeting or (B) if there was no annual shareholders meeting the previous
year or the date of the annual shareholders' meeting has been moved more than 30
days from the date of the previous year's meeting then no later than ten days
after notice or public disclosure of the date of the annual meeting is first
given or made to shareholders. If the election of directors is to take place at
a special meeting of shareholders, then a shareholder nomination must be
received by the Company no later than ten days after notice or public disclosure
5
of the date of the special meeting is first given or made to shareholders. The
written nomination must include (a) the name and address of the shareholder who
intends to make the nomination and the name and address of each of his nominees,
(b) the class and number of shares held by the nominator as of the record date
of the meeting and as of the date of the notice (including shares held of record
or beneficially and shares represented by proxy), certain information about
record ownership and a representation that the nominator intends to appear in
person at the meeting to make the nominations, (c) a description of all
arrangements between the nominator and the nominee(s) relating to the
nomination, (d) the same information about the nominee(s) that the Company would
be required to include in a proxy statement under the Securities and Exchange
Commission's proxy rules if the Company were making the nomination, (e) the
written consent of each nominee to serve as a director of the Company and (f)
any other information the Company may reasonably request. Copies of the
Company's bylaws may be obtained by writing or calling the Company at 1020
Barrow Industrial Parkway, Winder, Georgia, 30680, Tel: (770) 867-3111,
attention: Scott Grassmyer, Secretary.
STOCK OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT
The following table sets forth certain information as of October 5,
2000, regarding the beneficial ownership of the Company's common stock by (i)
persons beneficially owning more than five percent of the common stock, (ii) the
directors, (iii) the executive officers named in the Summary Compensation Table
under "Management Compensation", and (iv) all current directors and executive
officers as a group. Unless otherwise noted in the notes to the table, the
Company believes that the persons named in the table have sole voting and
investment power with respect to all shares of common stock of the Company shown
as beneficially owned by them.
Shares
------
Beneficially
------------
Beneficial Owner Owned Percentage
- ---------------- ----- ----------
Reich & Tang Asset Management L. P. (1) 284,300 11.8%
600 Fifth Avenue
New York, New York 10020
Dimensional Fund Advisors Inc. (2) 194,291 8.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
E. Erwin Maddrey, II (3) 347,593 14.4%
233 North Main Street, Suite 200
Greenville, SC 29601
Bettis C. Rainsford (4) 334,218 13.9%
108-1/2 Courthouse Square
Post Office Box 388
Edgefield, SC 29824
Buck A. Mickel (5) (6) 158,742 6.6%
Post Office Box 6721
Greenville, SC 29606
Micco Corporation (6) 124,063 5.2%
Post Office Box 795
Greenville, SC 29602
Minor H. Mickel (6)(7) 157,804 6.6%
415 Crescent Avenue
Greenville, SC 29605
Minor M. Shaw (6)(8) 152,008 6.3%
Post Office Box 795
Greenville, SC 29602
6
Charles C. Mickel (6)(9) 149,694 6.2%
Post Office Box 6721
Greenville, SC 29606
William F. Garrett (10) 17,671 (20)
Mark I. Goldman (11) 0 (20)
C. C. Guy (12) 3,849 (20)
Dr. James F. Kane (13) 4,055 (20)
Dr. Max Lennon (14) 2,881 (20)
Robert D. Rockey, Jr. (15) 100 (20)
13101 Preston Road #312
Dallas, Texas 75240
Michael H. Prendergast (16) 2,120 (20)
K. Scott Grassmyer (17) 16,802 (20)
William B. Mattison, Jr. (18) 2,200 (20)
All current directors and executive officers
as a group (12 Persons) (19) 889,681 37.0%
- -----------------------
(1) Reich & Tang Asset Management L.P. ("Reich & Tang") has not yet filed
with the Securities and Exchange Commission any document related specifically to
its ownership of the securities of the Company. The information set forth above
is based on an amendment to Schedule 13G that was filed with the Securities and
Exchange Commission on February 15, 2000 by Reich & Tang pertaining to its
ownership solely of Delta Woodside common stock and confirmation obtained on
September 20, 2000 from Reich & Tang. However, based on the confirmation
obtained from Reich & Tang, the Company understands that Reich & Tang possesses
the same ownership, voting and dispositive power with respect to the Company's
shares as it does for the shares of Delta Woodside (adjusted to reflect that one
Duck Head share was distributed for every 10 Delta Woodside shares in the
spin-off with cash paid in lieu of fractional shares). In the amendment, Reich &
Tang reported that, with respect to the common stock of Delta Woodside, it has
shared voting power and shared dispositive power with respect to all of the
shares shown. The amendment reported that the shares of Delta Woodside common
stock were held on behalf of certain accounts for which Reich & Tang provides
investment advice and as to which Reich & Tang has full voting and dispositive
power for as long as it retains management of the assets. According to the
amendment, each account has the right to receive and the power to direct receipt
of dividends from, or the proceeds from the sale of, the Delta Woodside shares.
The amendment reported that none of such accounts has an interest with respect
to more than 5% of the outstanding shares of Delta Woodside.
(2) Dimensional Fund Advisors Inc. ("Dimensional") has not yet made a
filing with the Securities and Exchange Commission specifically related to its
ownership of securities of the Company. The information set forth above is based
on an amendment to Schedule 13G that was filed by Dimensional with the
Securities and Exchange Commission on February 3, 2000 with respect to its
ownership of shares of Delta Woodside and on confirmation obtained on September
20, 2000. However, based on the confirmation, the Company understands that
Dimensional possesses the same ownership, voting and dispositive power for the
shares of the Company as it does for those of Delta Woodside (adjusted to
reflect that one Duck Head share was distributed for every 10 Delta Woodside
shares in the spin-off with cash paid in lieu of fractional shares). Dimensional
reported that it had sole voting power and sole dispositive power with respect
to all of the shares. The amendment reports that Dimensional furnishes
investment advice to four investment companies and serves as investment manager
to certain other commingled group trusts and separate accounts, that all of the
shares of Delta Woodside's common stock were owned by such investment companies,
trusts or accounts, that in its role as investment adviser or manager
7
Dimensional possesses voting and/or investment power over the Delta Woodside
shares reported, that Dimensional disclaims beneficial ownership of such
securities and that, to the knowledge of Dimensional, no such investment
company, trust or account client owned more than 5% of the outstanding shares of
Delta Woodside's common stock.
(3) Mr. Maddrey is a director of the Company, Delta Woodside and Delta
Apparel and was the President and Chief Executive Officer of Delta Woodside
until June 2000. The number of shares shown as beneficially owned by Mr. Maddrey
includes 43,147 shares held by the E. Erwin and Nancy B. Maddrey, II Foundation,
a charitable trust, as to which shares Mr. Maddrey holds sole voting and
investment power but disclaims beneficial ownership and approximately 107 shares
allocated to the account of Mr. Maddrey in Delta Woodside's Savings and
Investment Plan (the "Delta Woodside 401(k) Plan"). Mr. Maddrey is fully vested
in the shares allocated to his account in the Delta Woodside 401(k) Plan.
(4) Mr. Rainsford is currently a director of the Company; however, the
Board has not nominated him for reelection at the Annual Meeting. He was a
director of Delta Woodside and Delta Apparel until September 14, 2000 and was
the Executive Vice President, Treasurer and Chief Financial Officer of Delta
Woodside until October 1, 1999. The number of shares shown as beneficially owned
by Mr. Rainsford includes 4,794 shares held by The Edgefield County Foundation,
a charitable trust, as to which shares Mr. Rainsford holds sole voting and
investment power but disclaims beneficial ownership, and approximately 16 shares
allocated to the account of Mr. Rainsford in the Delta Woodside 401(k) Plan. Mr.
Rainsford is fully vested in the shares allocated to his account in the Delta
Woodside 401(k) Plan.
(5) Buck A. Mickel is a director of the Company, Delta Woodside and Delta
Apparel. The number of shares shown as beneficially owned by Buck A. Mickel
includes 34,392 shares directly owned by him, all of the 124,063 shares owned by
Micco Corporation, and 287shares held by him as custodian for a minor. See Note
(6).
(6) Micco Corporation owns 124,063 shares of the Company's common stock.
The shares of common stock of Micco Corporation are owned in equal parts by
Minor H. Mickel, Buck A. Mickel (a director of the Company), Minor M. Shaw and
Charles C. Mickel. Buck A. Mickel, Minor M. Shaw and Charles C. Mickel are the
children of Minor H. Mickel. Minor H. Mickel, Buck A. Mickel, Minor M. Shaw and
Charles C. Mickel are officers and directors of Micco Corporation. Each of Minor
H. Mickel, Buck A. Mickel, Minor M. Shaw and Charles C. Mickel disclaims
beneficial ownership of three quarters of the shares of the Company's common
stock owned by Micco Corporation. Minor H. Mickel directly owns 33,741 shares of
the Company's common stock. Buck A. Mickel, directly or as custodian for a
minor, owns 34,679 shares of the Company's common stock. Charles C. Mickel,
directly or as custodian for his children, owns 25,621 shares of the Company's
common stock. Minor M. Shaw, directly or as custodian for her children, owns
25,049 shares of the Company's common stock. Minor M. Shaw's husband, through an
individual retirement account and as custodian for their children, beneficially
owns approximately 1,448 shares of the Company's common stock, as to which
shares Minor M. Shaw may also be deemed a beneficial owner. Minor M. Shaw
disclaims beneficial ownership with respect to these shares and with respect to
the 274 shares of the Company's common stock held by her as custodian for her
children. The spouse of Charles C. Mickel owns 10 shares of the Company's common
stock, as to which shares Charles C. Mickel may also be deemed a beneficial
owner. Charles C. Mickel disclaims beneficial ownership with respect to these
shares and with respect to the 351 shares of the Company's common stock held by
him as custodian for his children. Buck A. Mickel disclaims beneficial ownership
with respect to the 287 shares of the Company's common stock held by him as
custodian for a minor.
(7) The number of shares shown as beneficially owned by Minor H. Mickel
includes 33,741 shares directly owned by her and all of the 124,063 shares owned
by Micco Corporation. See Note (6).
(8) The number of shares shown as beneficially owned by Minor M. Shaw
includes 25,049 shares owned by her directly or as custodian for her children,
approximately 1,448 shares beneficially owned by her husband through an
individual retirement account or as custodian for their children, and all of the
124,063 shares owned by Micco Corporation. See Note (6).
(9) The number of shares shown as beneficially owned by Charles C. Mickel
includes 25,621 shares owned by him directly or as custodian for his children,
10 shares owned by his wife and all of the 124,063 shares owned by Micco
Corporation. See Note (6).
8
(10) William F. Garrett is a director of the Company, Delta Woodside and
Delta Apparel. The number of shares shown as beneficially owned by Mr. Garrett
includes 208 shares allocated to the account of Mr. Garrett in the Delta
Woodside 401(k) Plan. Mr. Garrett is fully vested in the shares allocated to his
account in the Delta Woodside 401(k) Plan.
(11) Mark I. Goldman is a director of Duck Head.
(12) C. C. Guy is a director of the Company, Delta Woodside and Delta
Apparel. The number of shares shown as beneficially owned by Mr. Guy includes
1,896 shares owned by his wife, as to which shares Mr. Guy disclaims beneficial
ownership.
(13) Dr. James F. Kane is a director of the Company, Delta Woodside and
Delta Apparel.
(14) Dr. Max Lennon is a director of the Company, Delta Woodside and Delta
Apparel.
(15) Mr. Rockey is Chairman of the Board, President and Chief Executive
Officer of Duck Head. Mr. Rockey has the right to acquire up to 1,000,000 Duck
Head shares from Duck Head on December 30, 2000 at a purchase price equal to the
average daily closing stock price for the Duck Head common stock for the period
from June 30, 2000 to December 30, 2000. If Mr. Rockey exercises this right for
the full amount of the shares subject thereto, he would be the beneficial owner
of approximately 29.4% of the then outstanding Duck Head shares, causing all
directors and executive officers as a group beneficially to own approximately
55.5% of the then outstanding Duck Head shares. Excluded from the table are
125,000 shares covered by options granted under the Company's Stock Option Plan
that are not exercisable within 60 days after October 5, 2000 and 75,000 shares
subject to awards under the Company's Incentive Stock Award Plan which will not
vest within 60 days after October 5, 2000.
(16) Michael H. Prendergast is Senior Vice President of Sales of the
Company. Excluded from the table are 20,000 shares covered by options granted
under the Stock Option Plan that are not exercisable within 60 days after
October 5, 2000 and 8,000 shares subject to awards under the Company's Incentive
Stock Award Plan which will not vest within 60 days after October 5, 2000.
(17) K. Scott Grassmyer is Senior Vice President, Chief Financial Officer,
Treasurer and Secretary of the Company. The number of shares beneficially owned
by Mr. Grassmyer includes 21 shares allocated to the account of Mr. Grassmyer in
the Company's Savings and Investment Plan (the "Company 401(k) Plan"). Mr.
Grassmyer is fully vested in the shares allocated to his account in the Company
401(k) Plan. Excluded from the table are 20,000 shares covered by options
granted under the Stock Option Plan that are not exercisable within 60 days
after October 5, 2000 and 8,000 shares subject to awards under the Company's
Incentive Stock Award Plan which will not vest within 60 days after October 5,
2000.
(18) William B. Mattison, Jr. is Senior Vice President of Merchandising of
the Company. Excluded from the table are 20,000 shares covered by options
granted under the Stock Option Plan that are not exercisable within 60 days
after October 5, 2000 and 8,000 shares subject to awards under the Company's
Incentive Stock Award Plan which will not vest within 60 days after October 5,
2000.
(19) Includes all shares deemed to be beneficially owned by any current
director or executive officer. Includes 331 shares held for the directors and
executive officers on October 5, 2000 by the Delta Woodside 401(k) Plan and 21
shares held for the directors and executive officers on October 5, 2000 by the
Company 401(k) Plan. Each participant in each 401(k) Plan has the right to
direct the manner in which the trustee of the plan votes the shares held by the
plan that are allocated to that participant's account. Except for shares as to
which such a direction is made, the shares held by either plan are not voted.
(20) Less than one percent.
CERTAIN OTHER INFORMATION
On April 30, 1999, Micco Corporation, of which Mr. Mickel is an officer,
director and one-fourth owner, pledged 170,000 shares of common stock of Delta
Woodside to First Union National Bank as security for a line of credit in the
amount of $500,000. Additionally, on December 15, 1999, Micco Corporation
pledged an additional 279,234 shares of common stock of Delta Woodside as
9
security for the same line of credit. The bank accepted 44,923 shares of Duck
Head common stock received by Micco Corporation in the spin-off of Duck Head as
collateral for this pledge. Under certain circumstances, the number of shares
pledged by Micco Corporation may be changed. The consent of First Union National
Bank must be obtained in order for Micco Corporation to dispose of these Duck
Head shares or to pledge such shares to any other entity.
On January 6, 1994, Mr. Maddrey pledged 724,987 shares of common stock of
Delta Woodside to the Wachovia Bank, N.A. (f/k/a South Carolina National Bank)
as security for a line of credit in the amount of $5,000,000. This arrangement
is now governed by a Commitment Letter dated December 1, 1999. Under certain
circumstances, the number of shares pledged by Mr. Maddrey to Wachovia Bank,
N.A. may be increased. In the spin-off of Duck Head, Mr. Maddrey received 72,498
Duck Head shares with respect to the pledged Delta Woodside shares. At this time
the bank has not required Mr. Maddrey to delivery to it the stock certificates
for his Duck Head stock.
Except as disclosed in this Proxy Statement, neither the Company nor any
current director or officer of the Company is, or since the beginning of fiscal
year 2000 has been, a party to any contract, arrangement or understanding with
any person with respect to the Company's stock, including but not limited to any
joint venture, loan or option arrangement, put or call, guaranty against loss or
guaranty of profit, division of losses or profits or giving or withholding of a
proxy, except for a contract to which the Company is a party establishing the
transfer agent relationship with the transfer agent for the Company's common
stock.
Set forth below is certain information regarding transactions in the
Company's common stock by the directors nominated by the Board for re-election
at the Annual Meeting and the executive officers of the Company since the
spin-off of the Company from Delta Woodside.
TRANSACTIONS IN COMPANY SECURITIES SINCE JUNE 30, 2000
BY EXECUTIVE OFFICERS AND NOMINEES FOR DIRECTOR (a)
ACQUIRED/ DATE OF AMOUNT
NAME DISPOSED OF (A/D) TRANSACTION (# SHARES)
- ---- ----------------- ----------- ----------
William F. Garrett A(b) 6/30/00 17,671(g)
C.C. Guy A(b) 6/30/00 3,849(h)
Dr. James F. Kane A(b) 6/30/00 4,055
Dr. Max Lennon A(b) 6/30/00 2,881
E. Erwin Maddrey, II A(b) 6/30/00 347,593(i)
Buck A. Mickel A(b) 6/30/00 158,742(j)
Robert D. Rockey, Jr. A(c) 6/30/00 100
A(d) 6/30/00 1,000,000
A(e) 9/8/00 125,000
A(f) 8/1/00 75,000
Mark I. Goldman - - -
Michael H. Prendergast A(b) 6/30/00 120
A(e) 8/1/00 12,000
A(e) 9/8/00 8,000
A(f) 8/1/00 10,000
K. Scott Grassmyer A(b) 6/30/00 1,802(k)
A(c) 7/7/00 1,000
A(c) 7/10/00 2,000
10
Acquired/ Date of Amount
Name Disposed of (A/D) Transaction (# shares)
- ---- ----------------- ----------- ----------
A(c) 7/14/00 5,300
A(c) 7/19/00 2,700
A(c) 7/24/00 2,000
A(e) 8/1/00 12,000
A(e) 9/8/00 8,000
A(f) 8/1/00 10,000
William B. Mattison, Jr. A(c) 6/30/00 200
A(e) 8/1/00 12,000
A(e) 9/8/00 8,000
A(f) 8/1/00 10,000
- -------------------
(a) Duck Head was incorporated on December 10, 1999. Prior to June 30, 2000,
Duck Head was a wholly-owned subsidiary of Delta Woodside, and prior to May
2000, the business of Duck Head was conducted by Delta Woodside and certain
of its subsidiaries other than Duck Head.
(b) These shares were acquired from Delta Woodside in the spin-off of Duck
Head.
(c) These shares were purchased.
(d) Duck Head has granted Mr. Rockey the right to acquire up to 1,000,000 Duck
Head shares on December 30, 2000. See "Management Compensation - Option
Grants in Last Fiscal Year" and "- Employment Contracts and Severance
Arrangements."
(e) Option to acquire Duck Head shares granted pursuant to the Stock Option
Plan. None of these options are currently exercisable. Mr. Rockey's option
vests in full on March 8, 2001. One quarter of each other option vests on
the anniversary of the grant date in each of 2002, 2003, 2004 and 2005.
(f) Incentive Stock Award granted under the Incentive Stock Award Plan. Sixty
percent of Mr. Rockey's award vests on March 8, 2001 if Mr. Rockey remains
an employee of the Company on that date. The remaining forty percent of Mr.
Rockey's award vests on March 8, 2001, if certain performance criteria are
met for the period from July 2, 2000 to March 8, 2001 and if Mr. Rockey
remains an employee of the Company on March 8, 2000. Twenty percent of each
other award vested on August 1, 2000. An additional twenty percent of each
other award vests on the last day of each of fiscal 2001 and 2002 if the
employee continues to be an employee on such date. The remaining forty
percent of each other award vests on the day the Company files its Annual
Report on Form 10-K for fiscal 2002 if certain performance criteria are met
and the employee remains an employee of the Company on that date.
(g) The amount shown includes 208 shares allocated to Mr. Garrett's account in
Delta Woodside's 401(k) Plan, in which Mr. Garrett is fully vested.
(h) The amount shown includes 1,896 shares owned by Mr. Guy's wife. Mr. Guy
disclaims beneficial ownership of these shares.
(i) The amount shown includes 43,147 shares held by the E. Erwin and Nancy B.
Maddrey, II Foundation, a charitable trust, as to which shares Mr. Maddrey
holds sole voting and investment power but disclaims beneficial ownership
and 107 shares allocated to Mr. Maddrey's account in the Delta Woodside
401(k) Plan, in which Mr. Maddrey is fully vested.
(j) The amount shown includes 287 shares held by Mr. Mickel as a custodian for
a minor, as to which shares Mr. Mickel disclaims beneficial ownership, and
124,063 shares owned by Micco Corporation, of which Mr. Mickel is a
director, officer, and 25% shareholder. Mr. Mickel disclaims beneficial
ownership of three-quarters of the shares owned by Micco Corporation.
(k) The amount shown includes 21 shares allocated to Mr. Grassmyer's account in
the Duck Head 401(k) Plan, in which Mr. Grassmyer is fully vested.
11
EXECUTIVE OFFICERS
The following provides certain information regarding the executive officers of
the Company. The business address of each executive officer is Duck Head Apparel
Company, Inc., 1020 Barrow Industrial Parkway, Winder, Georgia 30680.
Name and Age Position
- ------------ --------
Robert D. Rockey, Jr. (59) Chairman of the Board, President and Chief Executive Officer (1)
Michael H. Prendergast (54) Senior Vice President of Sales (2)
K. Scott Grassmyer (39) Senior Vice President, Chief Financial Officer, Secretary
and Treasurer (3)
William B. Mattison, Jr. (56) Senior Vice President of Merchandising (4)
<FN>
- ----------------------
(1) See information under the subheading "Election of Directors." Mr.
Rockey's employment agreement with the Company has a two-year term running from
March 1999. Mr. Rockey has informed the Board of Directors that he intends to
resign as President and Chief Executive Officer of the Company at the end of
such term in March 2001, but is willing to continue to serve thereafter as the
Company's Chairman of the Board. The Board of Directors is currently engaged in
a search for a replacement for Mr. Rockey.
(2) Mr. Prendergast was elected as Duck Head's Senior Vice President of
Sales in December 1999. He was elected in July 1997 to serve as Senior Vice
President of Sales and Marketing of the Duck Head Apparel Company division of
Delta Woodside. Prior to joining the Duck Head Apparel Company division, Mr.
Prendergast was Senior Vice President-Sales at Bugle Boy Industries (an apparel
producer) from 1994 to 1997.
(3) Mr. Grassmyer was elected as Duck Head's Senior Vice President, Chief
Financial Officer, Secretary and Treasurer in December 1999. He was elected in
February 1998 to serve as Senior Vice President and Chief Financial Officer of
the Duck Head Apparel Company division of Delta Woodside. Prior to that time, he
was Chief Financial Officer of the Duck Head Apparel Company division from
August 1992 to February 1998.
(4) Mr. Mattison was elected Senior Vice President of Merchandising for
Duck Head in December 1999. He was elected in July 1999 to serve as Senior Vice
President of Merchandising of the Duck Head Apparel Company division of Delta
Woodside. Prior to joining the Duck Head Apparel Company division, Mr. Mattison
was Vice President of Merchandising at Hagale Industries (an apparel producer)
from 1995 to 1999. Prior to that, Mr. Mattison served for nearly 12 years with
River City Trading Company (an apparel producer), serving as President from 1992
to 1995.
</FN>
The Company's executive officers are appointed by the Board of Directors
and serve at the pleasure of the Board.
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for the fiscal years ended July
1, 2000 and July 3, 1999 respecting the compensation from Delta Woodside or any
of its subsidiaries that was earned by Duck Head's current Chief Executive
Officer and by the other current executive officers of Duck Head who earned
salary and bonus in fiscal 2000 from Delta Woodside or any of its subsidiaries
in excess of $100,000 (the "Named Executives"). Each individual listed in the
table worked exclusively for the Duck Head Apparel Company division of Delta
Woodside during fiscal year 2000 and fiscal year 1999 to the extent that
individual was employed during that period by any member of the Delta Woodside
group of corporations.
12
SUMMARY COMPENSATION TABLE
Long-Term
Compen-
Annual Compensation sation
------------------------------------- -----------------
Awards
------
Other
Annual Securities All Other
Compen- Underlying Compen-
Name and Salary Bonus sation Options sation
Principal Position Year ($)(a) ($)(a)(b) ($((c) (#)(d) ($)
- -----------------------------------------------------------------------------------------------------
Robert D. Rockey, Jr. 2000 500,000 500,000 0 1,000,000(g) 334(i)(l)
Chairman of the Board
President & Chief 1999 153,848 81,731 0 0 0
Executive Officer(e)
Michael H. Prendergast 2000 220,500 27,171 5,011 0 2,515(j)(l)
Senior Vice President
of Sales 1999 217,266 15,000 4,106 0 8,001
K. Scott Grassmyer 2000 128,000 22,528 1,370 0 4,580(k)(l)
Senior Vice President,
Chief Financial 1999 120,914 15,000 1,123 12,000(h) 5,239
Officer, Secretary
William B. Mattison, Jr. 2000 96,154 17,163 0 0 0
Senior Vice President
of Merchandising(f)
- -------------------------
<FN>
(a) The amounts shown in the column include sums the receipt of which has
been deferred pursuant to the Delta Woodside Savings and Investment Plan (the
"Delta Woodside 401(k) Plan") or the Delta Woodside deferred compensation plan.
(b) Amounts in this column are cash bonuses paid to reward performance.
(c) The amounts in this column were paid by Delta Woodside in connection
with the vesting of awards under the Delta Woodside Incentive Stock Award Plan
and were in each case approximately sufficient, after the payment of all
applicable income taxes, to pay the participant's federal and state income taxes
attributable to the vesting of the award.
(d) For purposes of this table, awards under the Delta Woodside Incentive
Stock Award Plan are treated as options.
(e) Mr. Rockey was not employed by Delta Woodside or any of its
subsidiaries until his appointment as President and Chief Executive Officer of
the Duck Head Apparel Company division in March 1999.
(f) Mr. Mattison was not employed by Delta Woodside or any of its
subsidiaries until his appointment as Senior Vice President of Merchandising of
the Duck Head Apparel Company division in July 1999.
(g) See "Option Grants in Last Fiscal Year" below.
(h) During fiscal 1999, Mr. Grassmyer was granted an option covering 12,000
shares under the Delta Woodside Stock Option Plan.
(i) The fiscal 2000 amount represents a $334 Delta Woodside contribution
allocated to Mr. Rockey's account in the Delta Woodside 401(k) Plan.
13
(j) The fiscal 2000 amount represents a $696 Delta Woodside contribution
allocated to Mr. Prendergast's account in the Delta Woodside 401(k) Plan, $282
contributed by Delta Woodside to the Delta Woodside deferred compensation plan
as payment for the amount of Delta Woodside contributions to the Delta Woodside
401(k) Plan for fiscal year 1999 that were not made for Mr. Prendergast because
of Internal Revenue Code contribution limitations, $1,526 contributed by Delta
Woodside to the Delta Woodside 401(k) Plan for Mr. Prendergast with respect to
his compensation deferred under the Delta Woodside 401(k) Plan, and $11 earned
on Mr. Prendergast's deferred compensation at a rate in excess of 120% of the
federal mid-term rate.
(k) The fiscal 2000 amount represents a $539 Delta Woodside contribution
allocated to Mr. Grassmyer's account in the Delta Woodside 401(k) Plan,
$51contributed by Delta Woodside to the Delta Woodside deferred compensation
plan as payment for the amount of Delta Woodside contributions to the Delta
Woodside 401(k) Plan for fiscal year 1999 that were not made for Mr. Grassmyer
because of Internal Revenue Code contribution limitations, $1,654 contributed by
Delta Woodside to the Delta Woodside 401(k) Plan for Mr. Grassmyer with respect
to his compensation deferred under the Delta Woodside 401(k) Plan, $180
contributed to Delta Woodside's deferred compensation plan by Delta Woodside for
Mr. Grassmyer with respect to his compensation deferred under Delta Woodside's
deferred compensation plan and $2,156 earned on Mr. Grassmyer's deferred
compensation at a rate in excess of 120% of the federal mid-term rate.
(l) The Delta Woodside 401(k) Plan allocation shown for the fiscal year was
allocated to the participant's account during that fiscal year, although all or
part of the allocation may have been determined in whole or in part on the basis
of the participant's compensation during the prior fiscal year.
</FN>
The amounts shown in the table above do not include the value of the
provision by Delta Woodside, the Company or their subsidiaries of an apartment,
an automobile or other property for the benefit of any of the Named Executives.
The non-business personal benefit to any Named Executive of these amounts does
not exceed the lesser of $50,000 or 10% of the Named Executive's total salary
and bonus.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table provides information respecting the grant to a Named
Executive during fiscal 2000 of rights to acquire the common stock of the
Company.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants Potential Realizable Value
- ------------------------------------------------------------------------------------ at Exercise Date for Indicated
Number of % of Total Percentage Excess
Securities Options Market of Exercise Date Closing Price
Underlying Granted to Exercise Price on Over Exercise Price (c)
Options Duck Head or Base Date of -----------------------------------
Granted Employees in Price Grant Expiration 0% 5% 10%
Name (#) Fiscal Year ($/Sh) ($/Sh) Date ($) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------
Robert D. 1,000,000(a) 100 (a) (b) 12/30/00 0 $55,550 $111,100
Rockey, Jr.
- ---------------------
<FN>
(a) Mr. Rockey has the right to acquire up to 1,000,000 Duck Head shares from
Duck Head on December 30, 2000 at a purchase price equal to the average
daily closing stock price for the Duck Head common stock for the period
June 30, 2000 to December 30, 2000.
(b) There was no public market for the Duck Head shares on the date of grant,
which preceded the spin-off of Duck Head by Delta Woodside.
(c) The purchase price under Mr. Rockey's right will not be determined until
December 30, 2000, and his right may be exercised only on that date. The
average daily closing price for the Duck Head common stock from June 30,
2000, the date of the Duck Head distribution, to October 5, 2000 is $1.111
per share. The numbers set forth above assume that the average closing
price for the Duck Head common stock from June 30, 2000 to December 30,
2000 is $1.111 and that the closing price on December 30, 2000 exceeds this
amount by the indicated percentage.
</FN>
14
By reason of Section 162(m) of the Internal Revenue Code (which limits the
corporate federal income tax deduction of certain executive officer compensation
paid in excess of $1 million), Duck Head does not believe that it will be able
to deduct any expense attributable to Mr. Rockey's stock purchase right for
federal income tax purposes.
FISCAL YEAR-END OPTION VALUES
The following table provides certain information respecting the fiscal year
end value of any unexercised outstanding options under the Delta Woodside Stock
Option Plan. No options to acquire the Company's common stock were outstanding
during fiscal 2000, and none of the Named Executives exercised options for Delta
Woodside common stock during fiscal 2000.
FISCAL YEAR-END DELTA WOODSIDE OPTION VALUES
Number of Securities Underlying Value of Unexercised
Unexercised In-the-Money Options at
Options at FY-End (#) FY-End ($)(a)
---------------------- -------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Michael H. Prendergast 9,000 0 -- --
K. Scott Grassmyer 12,000 0 -- --
- ----------------------
<FN>
(a) Based on the closing price of Delta Woodside common stock on June
30, 2000 of $2.125 per share, none of the unexercised options was
in-the-money.
</FN>
EMPLOYMENT CONTRACTS AND SEVERANCE ARRANGEMENTS
Robert D. Rockey, Jr. joined the Duck Head Apparel Company division of
Delta Woodside in March 1999 under the terms of a letter dated March 15, 1999,
which was amended on October 19, 1999 and as of March 15, 2000. Under the
letters:
- Mr. Rockey serves as Chairman and Chief Executive Officer of Duck
Head.
- Duck Head has granted to Mr. Rockey the right to purchase from Duck
Head up to 1,000,000 Duck Head shares on the date that is six months
after the Duck Head distribution (December 30, 2000). If the right is
exercised, the price for the shares will be the average daily closing
stock price for the Duck Head common stock for the six-month period
following the Duck Head distribution.
- Mr. Rockey's salary is $500,000 per year. In addition, he was
guaranteed a fiscal year 1999 bonus at the annualized rate of
$500,000. Until the first anniversary of the Duck Head distribution,
he will continue to receive a bonus that is at least at the guaranteed
annualized rate of $500,000. Any bonus plan for any subsequent period
will be set by the Duck Head board of directors.
- Duck Head will pay up to $100,000 per year for the costs of an
automobile, an apartment in the Winder, Georgia area and commuting.
- Mr. Rockey will be granted incentive stock awards under a Duck Head
incentive stock award plan covering the lesser of (a) 75,000 Duck Head
shares or (b) Duck Head shares with a value on the date of grant of
$200,000. These awards will vest to the extent of 60% of the shares
covered thereby on March 8, 2001 if Mr. Rockey is still then employed
by Duck Head and to the extent of up to the remaining 40% of the
shares covered thereby if specified performance criteria through March
8, 2001 are satisfied and he is still employed by Duck Head on that
date. If the number of Duck Head shares covered by the award have a
value of less than $200,000 on the date of grant, the difference
between that value and $200,000, plus a gross-up income tax amount,
will be payable in cash by Duck Head to Mr. Rockey, subject to the
same vesting criteria.
15
- An aggregate of 125,000 Duck Head shares will be reserved for options
to be granted to Mr. Rockey under a Duck Head stock option plan. The
stock options will vest over a period ending March 8, 2001.
- Mr. Rockey will be the beneficiary of $1.0 million life insurance
policy paid for by Duck Head.
Duck Head has assumed Delta Woodside's obligations under these letters in
connection with the Duck Head distribution.
All executive officers of the Company are entitled to participate in the
Company's regular severance plan available to all employees which provides that
any employee, upon termination of his or her employment other than for cause, is
entitled to receive two weeks' base salary plus one week's base salary for each
full year of service with the Company.
On August 24, 2000, the Board adopted a resolution providing that each of
the Named Executives other than Mr. Rockey will be entitled to receive one
year's base salary as severance, in addition to the severance provided by the
Company's regular severance plan, in the event the Company is sold and that
Named Executive does not accept comparable employment with the acquiring
company. Certain other employees of the Company would also be entitled to
additional severance in varying amounts in the event the Company is sold and
such employees do not accept comparable employment with the acquiring company.
DIRECTOR COMPENSATION
Duck Head pays each current director who is not an officer of Duck Head,
other than Mr. Goldman, a fee of $6,667 per year, plus provides each of these
directors approximately $3,333 annually with which shares of Duck Head's common
stock will be purchased. These Duck Head shares may be newly issued or acquired
in the open market for this purpose. Each non-officer director is also paid $500
($750 for the committee chair) for each committee meeting attended, $250 for
each telephonic board and committee meeting in which the director participates
and $500 for each board meeting attended in addition to 4 quarterly board
meetings. Each director is also reimbursed for reasonable travel expenses in
attending each meeting.
Duck Head pays Mr. Goldman a fee of $13,334 per year, plus it provides him
with approximately $6,666 per year with which shares of Duck Head's common stock
will be purchased. Duck Head anticipates that any non-employee director
subsequently added to the Duck Head Board will receive the same directors fees
as Mr. Goldman. Mr. Goldman is and each additional director will be paid the
same meeting fees as are payable to Duck Head's other current directors. Duck
Head anticipates that the fees payable to Duck Head's existing directors other
than Mr. Goldman will increase over a five year period to be the same as the
fees payable to Mr. Goldman and any additional directors.
Until August 1999, Delta Woodside had in place a Directors' Charitable
Giving Program covering each director of Delta Woodside. The seven directors of
Delta Woodside also constituted seven of the directors of the Company in fiscal
2000. Under the program, after the death of a director, Delta Woodside would
make an aggregate donation of $500,000, to be paid in 10 annual installments
commencing no later than six months after the director's death, to one or more
charitable organizations selected by such director. With respect to Max Lennon,
E. Erwin Maddrey, II and Bettis C. Rainsford, the program was to be funded by
life insurance policies owned and to be paid for by Delta Woodside on the lives
of such directors. In August 1999, the program was terminated, and cash in the
amount of the actuarial value of the future donation was donated by Delta
Woodside to the charitable organization or organizations selected by each
director. The amounts so donated to charitable organizations were selected as
follows: $105,000 by Mr. Garrett, $145,000 by Mr. Guy, $170,000 by Dr. Kane,
$105,000 by Dr. Lennon, $100,000 by Mr. Maddrey, $70,000 by Mr. Mickel, and
$62,000 by Mr. Rainsford.
In 1997, Delta Woodside's board of directors adopted and Delta Woodside's
stockholders approved the Delta Woodside long term incentive plan ("LTIP").
Under that plan, award grants could be made to key executives and non-employee
directors of Delta Woodside that, depending on the attainment of certain
performance measurement goals over a three-year period, could translate into
stock options for Delta Woodside's shares being granted to participants in the
plan. In connection with the exercise of any option granted under the plan,
Delta Woodside would pay cash to the participant to offset the income taxes
attributable to the option exercise and to such cash payment, using an assumed
38% income tax rate.
16
No award grants complying with all the terms of the plan were made. Around
the time of adoption of the plan, however, Delta Woodside did identify the
individuals who would be plan participants, determined performance targets for
these individuals and communicated these actions to the affected individuals.
These communications also informed the participants that new three-year
performance goals would be established annually.
To take account of the communications previously made to the plan
participants, the fact that all three-year performance periods contemplated by
the plan would expire following the record date for the spin-offs of Duck Head
and Delta Apparel and the efforts of the key executives and directors on behalf
of Delta Woodside leading up to the spin-offs of Duck Head and Delta Apparel,
Delta Woodside's board (based on resolutions of its compensation grants and
compensation committees) decided that Delta Woodside shares would be issued and
cash would be paid prior to the record date for the Duck Head and Delta Apparel
spin-offs to those individuals who were intended participants in the plan. These
actions, which were reflected in an amendment to the long term incentive plan,
provided that (a) Delta Woodside would issue its shares and make cash payments
to the individuals identified for participation in the plan, (b) as a condition
to receipt of those Delta Woodside shares and that cash, those individuals would
surrender any rights they may have under the plan and (c) no further awards,
options or Delta Woodside shares would be granted or issued under the LTIP.
The number of Delta Woodside shares to be issued and the cash amounts to be
paid were determined by Delta Woodside's compensation grants and compensation
committees and Delta Woodside's board. In determining the number of Delta
Woodside shares to be issued to each participant, Delta Woodside's compensation
grants committee, compensation committee and board used the closing sale price
of Delta Woodside common stock on March 15, 2000 ($1.50 per share).
The table below sets forth the Delta Woodside shares that were issued as
described above and the cash that was paid to the directors of the Company in
connection therewith:
DELTA WOODSIDE LONG TERM INCENTIVE PLAN AWARDS
TO COMPANY DIRECTORS IN LAST FISCAL YEAR
Shares of
Delta Woodside
Name Cash Award Common Stock
- --------------------------------- ----------------- ---------------------
E. Erwin Maddrey, II $190,000.00 206,667
Bettis C. Rainsford (a) $136,800.00 148,800
William F. Garrett $116,280.00 126,480
C.C. Guy $12,397.50 13,485
Dr. James F. Kane $12,397.50 13,485
Dr. Max Lennon $12,255.00 13,330
Buck A. Mickel $12,017.50 13,072
Estate of Buck Mickel (b) $11,780.00 12,813
- ----------------------
(a) Mr. Rainsford is currently a director of the Company; however, the Board
has not nominated him for reelection at the Annual Meeting.
(b) Shares were issued and cash was paid to Minor H. Mickel, as personal
representative of the estate of Buck Mickel (father of Buck A. Mickel).
Buck Mickel was a member of the Delta Woodside board of directors until his
death in 1998 and participated in the early stages of that board's
strategic planning.
17
PERFORMANCE GRAPH
The Company's common stock began trading on the American Stock Exchange on
June 30, 2000, the last trading day of fiscal year 2000. Prior to that date, no
securities of the Company were publicly traded. Accordingly, no performance
graph is included in this Proxy Statement.
NOTWITHSTANDING ANY STATEMENT IN ANY OF THE COMPANY'S PREVIOUS FILINGS
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, INCORPORATING FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT,
IN WHOLE OR IN PART, THE COMPENSATION COMMITTEE REPORT BELOW SHALL NOT BE
INCORPORATED BY REFERENCE INTO ANY SUCH FILING.
REPORT OF THE COMPENSATION COMMITTEE
AND THE COMPENSATION GRANTS COMMITTEE
OF THE BOARD OF DIRECTORS
This report of the Compensation Committee and the Compensation Grants
Committee (collectively, the "Committees") of the Board of Directors of the
Company sets forth the Committees' policies with regard to compensation of the
executive officers of the Company, including the relationship of corporate
performance to executive compensation.
EXECUTIVE COMPENSATION POLICIES
Decisions regarding certain aspects of the compensation of the Company's
executive officers are made by the four member Compensation Committee or the two
member Compensation Grants Committee of the Board. Each Committee member is a
non-employee director. During fiscal year 2000, certain compensation decisions
were made by the comparable committees of the Delta Woodside Board. Currently,
the members of these committees of the Company's Board are identical to the
members of these committees of Delta Woodside's Board. The Committees believe
that their respective compensation practices are designed to attract, retain,
and motivate key Company executives to achieve short-, medium-, and long-term
goals which the Committees believe will enhance the value of the shareholders'
investment in the Company. Generally, these objectives are implemented through:
A. Cash bonuses to reward the achievement of specific performance goals,
B. Grants of stock awards under an incentive stock award plan,
C. Grants of stock options under a stock option plan, and
D. Payment of base salaries at levels that are competitive with those
paid by a peer group of companies.
COMPENSATION OF EXECUTIVE OFFICERS OTHER THAN MR. ROCKEY
The Company's executive officers other than Mr. Rockey, its Chief Executive
Officer (the "Other Officers"), received compensation for fiscal 2000 that
included both fixed and performance-based components. In fiscal 2000, the Other
Officers were Mr. Prendergast, Mr. Grassmyer and Mr. Mattison. The Other
Officers' compensation for fiscal 2000 consisted of the following elements: base
salary, cash bonuses and the vesting of options under the Delta Woodside Stock
Option Plan.
Cash bonuses to the Other Officers were paid based on inventory turns in
excess of specified levels, individual performance against pre-specified
objectives and other performance criteria of the Duck Head Apparel Company
division of Delta Woodside. For fiscal 2000, the total cash bonuses awarded to
the Other Officers above amount to 15% of their combined base salaries.
The Company's new Incentive Stock Award Plan is generally similar to the
Delta Woodside Incentive Stock Award Plan in effect prior to the spin-off of the
Company. Awards that have been made under the new Incentive Stock Award Plan to
the Other Officers since the spin-off have been structured so that sixty percent
of each individual's award vests if he remains in service with the Company
through predetermined dates and up to forty percent of each individual's award
vests if the Company meets specified performance targets respecting cumulative
18
operating profits and he remains an employee of the Company. The number of
shares covered by an award was not determined by specific, non-subjective
criteria, but the determination of such numbers took into account the level and
responsibility of the executive's position, the executive's performance, the
executive's compensation, the assessed potential of the executive, and any other
factors deemed relevant to the accomplishment of the purposes of the plan. The
Committees expect that any future awards under the new plan to Other Officers
will be similarly structured. The Committees believe that the new Company plan
will be an important tool to the achievement of medium-term goals.
Each Other Officer, except Mr. Mattison, participated in the Delta Woodside
Stock Option Plan. The purpose of this plan was to promote the growth and
profitability of Delta Woodside over a longer term by enabling Delta Woodside to
attract and retain key and middle level managers of outstanding competence and
by increasing the personal participation of its executives in Delta Woodside's
performance by providing these executives with an additional equity ownership
opportunity in Delta Woodside. In making option grants to the Other Officers, no
specific, non-subjective criteria were used, but the factors taken into account
included the level and responsibility of the executive's position, the
executive's performance, the executive's compensation, the assessed potential of
the executive, and any other factors that were deemed relevant to the
accomplishment of the purposes of the plan. Each option granted under the plan
to an Other Officer provided that the option would become exercisable in stages
over a period of four years. No new stock option grants were made under the
Delta Woodside Stock Option Plan during fiscal 2000 due to the pendency of the
spin-offs of Delta Apparel and the Company.
The Company's new Stock Option Plan is similar to the Delta Woodside Stock
Option Plan in effect prior to the spin-off of the Company. The Committees
believe that grants that have been made under the new Stock Option Plan to the
Other Officers since the spin-off have been structured similarly to those under
the old Delta Woodside plan, and if the new Stock Option Plan is approved by
shareholders, the Committees currently expect that options granted in the future
under the new plan to the Other Officers will be similar in structure to options
granted under the old Delta Woodside plan.
Section 162(m) of the Internal Revenue Code ("Section 162(m)") imposes
limits on the ability of the Company to claim income tax deductions for
compensation paid to the Named Executives. Section 162(m) generally denies a
corporate income tax deduction for annual compensation in excess of $1,000,000
paid to any of the Named Executives. Certain types of compensation, including
performance-based compensation, are generally excluded from this deduction
limit. The Company's new Stock Option Plan and the Company's new Incentive Stock
Award Plan (with respect to awards based on performance criteria) have been
structured to comply with the requirements of Section 162(m). The Committees
expect that all grants under these plans to the Other Officers will either
comply with the requirements for exemption from the $1,000,000 limit under
Section 162(m) or else will not cause the aggregate non-exempt compensation paid
to any Other Officer to exceed the $1,000,000 limit in any fiscal year.
COMPENSATION PAID TO THE CHIEF EXECUTIVE OFFICER
The compensation of Mr. Rockey, the Company's Chief Executive Officer,
includes both fixed and performance-based components and is subject to the
provisions of letters to Mr. Rockey from Delta Woodside dated March 15, 1999 and
amended on October 19, 1999 and as of March 15, 2000 (the "Employment Letters").
The Company has assumed Delta Woodside's obligations under the Employment
Letters. See "Employment Contracts and Severance Arrangements" above.
The Employment Letters established Mr. Rockey's base salary and his minimum
annual bonuses through the first anniversary of the spin-off of the Company
(which anniversary will be June 30, 2001, the last day of fiscal 2001). Payment
of Mr. Rockey's minimum annual bonus for fiscal 1999 and 2000 was based on his
continued employment with the Company.
Pursuant to the requirements of the Employment Letters, the Company has
granted Mr. Rockey the right to purchase from the Company up to 1,000,000 of its
shares on the date that is six months after the Duck Head distribution (December
30, 2000). The exercise price for these shares will be the average daily closing
price for the Company's common stock for the six month period following the Duck
Head distribution. Also pursuant to the Employment Letters, since the spin-off
Mr. Rockey has been granted incentive stock awards under the Incentive Stock
Award Plan . This award has been structured so that sixty percent of Mr.
Rockey's award will vest if he remains in service with the Company through March
8, 2001, and the remaining forty percent will vest if certain EBIT (earnings
before interest and taxes) targets are met for the period from July 2, 2000 to
March 8, 2001 and Mr. Rockey remains in the employment of the Company. Pursuant
to the Employment Letters, since the spin-off Mr. Rockey has received options to
19
purchase 125,000 Duck Head shares under the Company's Stock Option Plan. These
options have a per share exercise price equal to the market price of a Duck Head
share on the grant date and will vest based on continued service through March
8, 2001.
The Committees expect that (1) the income to Mr. Rockey from any exercise
of his right to acquire 1,000,000 of the Company's shares on December 30, 2000
and the service-based portion of the award made to Mr. Rockey under the
Incentive Stock Award Plan will not qualify for exemption as "performance-based
compensation" from the $1,000,000 limit pursuant to Section 162(m) of the
Internal Revenue Code but (2) the grant that has been made to Mr. Rockey under
the Stock Option Plan and the performance-based portion of the award made to Mr.
Rockey under the Incentive Stock Award Plan will qualify for such exemption.
COMPENSATION COMMITTEE COMPENSATION GRANTS COMMITTEE
Dr. James F. Kane, Chair Dr. James F. Kane, Chair
Dr. Max Lennon Dr. Max Lennon
C.C. Guy
Buck A. Mickel
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The following directors serve on the Compensation Committee of the
Company's board of directors: C.C. Guy, Dr. James F. Kane, Dr. Max Lennon and
Buck A. Mickel. The following directors serve on the Compensation Grants
Committee of the Company's board of directors: Dr. James F. Kane and Dr. Max
Lennon.
C.C. Guy served as Chairman of the Board of Delta Woodside or its
predecessors (and their respective subsidiaries) from the founding of Delta
Woodside's predecessors in 1984 until November 1989. Buck A. Mickel was a Vice
President of Delta Woodside or its predecessors (and their respective
subsidiaries) from the founding of Delta Woodside's predecessors until November
1989, Secretary of Delta Woodside or its predecessors (and their respective
subsidiaries) from November 1986 to March 1987, and Assistant Secretary of Delta
Woodside or its predecessors (and their respective subsidiaries) from March 1987
to November 1988.
RELATED PARTY TRANSACTIONS
RELATIONSHIPS OR TRANSACTIONS WITH DELTA WOODSIDE AND DELTA APPAREL
BOARDS OF DIRECTORS OF DELTA WOODSIDE, DUCK HEAD AND DELTA APPAREL
The following directors of Duck Head are also directors of Delta Woodside
and Delta Apparel: William F. Garrett, C. C. Guy, Dr. James F. Kane, Dr. Max
Lennon, E. Erwin Maddrey, II, and Buck A. Mickel. In the event that any material
issue were to arise between Duck Head, on the one hand, and either Delta
Woodside or Delta Apparel, on the other hand, these directors could be deemed to
have a conflict of interest with respect to that issue. In that circumstance,
Duck Head anticipates that it will proceed in a manner that is determined by a
majority of those members of Duck Head's board of directors who are not also
members of the board of directors of Delta Woodside or the board of directors of
Delta Apparel (as applicable).
PRINCIPAL STOCKHOLDERS
Duck Head and Delta Apparel were spun-off from Delta Woodside by means of a
pro rata distribution on June 30, 2000 of their respective stock to Delta
Woodside's shareholders of record on June 19, 2000 (the "Duck Head distribution"
and the "Delta Apparel distribution" respectively). Therefore, immediately
following the Duck Head distribution, Delta Woodside's principal stockholders
were the same individuals and entities as Duck Head's and Delta Apparel's
principal stockholders, and those principal stockholders had the same respective
percentages of outstanding beneficial ownership in each of Delta Woodside, Duck
Head and Delta Apparel (assuming no acquisitions or dispositions of shares by
those stockholders between the record date for the Duck Head distribution or the
Delta Apparel distribution and the completion of either distribution).
20
AGREEMENTS BETWEEN DELTA WOODSIDE, DUCK HEAD AND DELTA APPAREL
In connection with the spin-offs, Delta Woodside, Duck Head and Delta
Apparel entered into a Distribution Agreement and a Tax Sharing Agreement. The
principal provisions of the Distribution Agreement and the Tax Sharing Agreement
are set forth below.
Distribution Agreement
- ----------------------
Duck Head entered into a distribution agreement with Delta Woodside and
Delta Apparel as of March 15, 2000. The distribution agreement provided for the
procedures for effecting the Duck Head distribution and the Delta Apparel
distribution. For this purpose, as summarized below, the distribution agreement
provided for the principal corporate transactions and procedures for separating
the Delta Apparel Company division's business and the Duck Head Apparel Company
division's business from each other and the rest of Delta Woodside. Also, as
summarized below, the distribution agreement defines the relationships among
Delta Apparel, Delta Woodside and Duck Head after the Duck Head distribution and
the Delta Apparel distribution with respect to, among other things,
indemnification arrangements and employee benefit arrangements.
Intercompany Reorganization
---------------------------
Pursuant to the distribution agreement, Delta Woodside, Duck Head and Delta
Apparel caused the following to be effected:
(a) Delta Woodside and its subsidiaries (other than Delta Mills)
contributed, as contributions to capital, all net debt amounts owed to
any of them by the corporations that conducted the Duck Head Apparel
Company division's business and the Delta Apparel Company division's
business, with the exceptions of (i) the intercompany debt that was
attributable to the portion of the amounts borrowed since January 1,
2000 for use by the Duck Head Apparel Company division's business or
the Delta Apparel Company division's business from Delta Woodside's
credit agreement lender that were repaid to that lender or to Delta
Woodside with borrowings under Duck Head's and Delta Apparel's new
credit facilities (which repayments cancelled such intercompany debt)
and (ii) any amounts owed by Delta Apparel to Delta Mills for yarn
sold by Delta Mills to Delta Apparel, which amounts were to be paid in
the ordinary course of business. These intercompany contributions of
debt did not, however, affect any obligation that Delta Woodside, Duck
Head or Delta Apparel may have under the distribution agreement or the
tax sharing agreement. Prior to completion of the intercompany
reorganization, the Duck Head Apparel Company division's assets were
owned by Delta Woodside and several of its wholly-owned subsidiaries,
and the Delta Apparel Company division's assets were owned by several
of Delta Woodside's wholly-owned subsidiaries.
(b) All the assets used in the operations of the Duck Head Apparel Company
division's business were transferred to Duck Head or a subsidiary of
Duck Head to the extent not already owned by Duck Head or its
subsidiaries.
(c) Duck Head assumed all of the liabilities of the Duck Head Apparel
Company division of Delta Woodside, and caused all holders of
indebtedness for borrowed money that were part of the assumed Duck
Head liabilities and all lessors of leases that were part of the
assumed Duck Head liabilities to agree to look only to Duck Head or a
subsidiary of Duck Head for payment of that indebtedness or lease
(except where Delta Woodside or Delta Apparel, as applicable,
consented to not being released from the obligations).
(d) All the assets used in the operations of the Delta Apparel Company
division's business were transferred to Delta Apparel or a subsidiary
of Delta Apparel to the extent not already owned by Delta Apparel or
its subsidiaries. This transfer included the sale by Delta Mills to
Delta Apparel of the Rainsford plant, located in Edgefield, SC.
(e) Delta Apparel assumed all of the liabilities of the Delta Apparel
Company division of Delta Woodside, and caused all holders of
indebtedness for borrowed money that were part of the assumed Delta
Apparel liabilities and all lessors of leases that were part of the
assumed Delta Apparel liabilities to agree to look only to Delta
Apparel or a subsidiary of Delta Apparel for payment of that
indebtedness or lease (except where Delta Woodside or Duck Head, as
applicable, consented to not being released from the obligations).
21
(f) Delta Woodside caused all holders of indebtedness for borrowed money
and all lessors of leases that were not part of the liabilities
assumed by Duck Head or the liabilities assumed by Delta Apparel to
agree to look only to Delta Woodside or a remaining subsidiary of
Delta Woodside for payment of that indebtedness or lease (except where
Duck Head or Delta Apparel, as applicable, consented to not being
released from the obligations).
Indemnification
---------------
Each of Delta Woodside, Duck Head and Delta Apparel has agreed to indemnify
each other and their respective directors, officers, employees and agents
against any and all liabilities and expenses incurred or suffered that arise out
of or pertain to:
(a) any breach of the representations and warranties made by it in the
distribution agreement;
(b) any breach by it of any obligation under the distribution agreement;
(c) the liabilities assumed or retained by it under the distribution
agreement; or
(d) any untrue statement or alleged untrue statement of a material fact or
omission or alleged omission of a material fact contained in any of
its disclosure documents filed by it with the SEC, except insofar as
the misstatement or omission was based upon information furnished to
the indemnifying party by the indemnified party.
Employee Matters
----------------
Delta Woodside has caused the employees of the Duck Head Apparel Company
division to become employees of Duck Head, Duck Head has assumed the accrued
employee benefits of these employees and Delta Woodside will cause the account
balance of each of these employees in any and all of Delta Woodside's employee
benefit plans (other than the Delta Woodside stock option plan, the Delta
Woodside incentive stock award plan and the Delta Woodside long term incentive
plan, if any) to be transferred to a comparable employee benefit plan of Duck
Head.
Intercompany Accounts
---------------------
Other than any obligations described in or arising under the distribution
agreement or the tax sharing agreement, each of Delta Woodside, Duck Head and
Delta Apparel has represented to each other that it is not aware of any other
intercompany receivable, payable or loan balance that existed as of the time of
the Duck Head distribution and the Delta Apparel distribution between any of
them.
Transaction Expenses
--------------------
Generally, all costs and expenses incurred in connection with the Duck Head
distribution, the Delta Apparel distribution and related transactions shall be
paid by Delta Woodside, Duck Head and Delta Apparel proportionately in
accordance with the respective benefits received by Delta Woodside, Duck Head
and Delta Apparel as determined in good faith by the parties; provided that the
holders of the Delta Woodside shares shall pay their own expenses, if any,
incurred in connection with the Duck Head distribution and the Delta Apparel
distribution.
Tax Sharing Agreement
- ---------------------
Duck Head entered into a tax sharing agreement dated as of June 30, 2000
with Delta Woodside and Delta Apparel that describes, among other things, each
company's rights and obligations relating to tax payments and refunds for
periods before and after the Duck Head distribution and related matters like the
filing of tax returns and the handling of audits and other tax proceedings. The
tax sharing agreement also describes the indemnification arrangements with
respect to tax matters among Duck Head and its subsidiaries (which this document
refers to as the Duck Head tax group), Delta Woodside and its subsidiaries after
the Duck Head distribution and the Delta Apparel distribution (which this
document refers to as the Delta Woodside tax group) and Delta Apparel and its
subsidiaries (which this document refers to as the Delta Apparel tax group).
22
Under the tax sharing agreement, the allocation of tax liabilities and
benefits is generally as follows:
- With respect to federal income taxes:
(a) For each taxable year that ends prior to the Duck Head
distribution, Delta Woodside is responsible for paying any
increase in federal income taxes, and is entitled to receive the
benefit of any refund of or saving in federal income taxes, that
results from any tax proceeding with respect to any returns
relating to federal income taxes of the Delta Woodside
consolidated federal income tax group.
(b) For the taxable period ending on the date of the Duck Head
distribution, Delta Woodside is responsible for paying any
federal income taxes, and is entitled to any refund of or saving
in federal income taxes, with respect to the Delta Woodside
consolidated federal income tax group.
- With respect to state income, franchise or similar taxes, for each
taxable period that ends prior to or on the date of the Duck Head
distribution, each corporation that is a member of the Delta Woodside
tax group, the Duck Head tax group or the Delta Apparel tax group is
responsible for paying any of those state taxes, and any increase in
those state taxes, and is entitled to receive the benefit of any
refund of or saving in those state taxes, with respect to that
corporation (or any predecessor by merger of that corporation) or that
results from any tax proceeding with respect to any returns relating
to those state taxes of that corporation (or any predecessor by merger
of that corporation).
- With respect to federal employment taxes:
(a) Delta Woodside is responsible for the federal employment taxes
payable with respect to the compensation paid, whether before, on
or after the date of the Duck Head distribution, by any member of
the Delta Woodside federal income tax consolidated group for any
period ending prior to or on the date of the Duck Head
distribution or by any member of the Delta Woodside tax group for
any period after that date to all individuals who are past or
present employees of any business of Delta Woodside other than
the business of Duck Head or the business of Delta Apparel.
(b) Duck Head is responsible for the federal employment taxes payable
with respect to the compensation paid, whether before, on or
after the date of the Duck Head distribution, by any member of
the Delta Woodside federal income tax consolidated group for any
period ending prior to or on the date of the Duck Head
distribution or by any member of the Duck Head tax group for any
period after that date to all individuals who are past or present
employees of the business of Duck Head.
(c) Delta Apparel is responsible for the federal employment taxes
payable with respect to the compensation paid, whether before, on
or after the date of the Delta Apparel distribution, by any
member of the Delta Woodside federal income tax consolidated
group for any period ending prior to or on the date of the Delta
Apparel distribution or by any member of the Delta Apparel tax
group for any period after that date to all individuals who are
past or present employees of the business of Delta Apparel.
- With respect to any taxes, other than federal employment taxes,
federal income taxes and state income, franchise or similar taxes:
(a) Delta Woodside is responsible for any of these taxes, regardless
of the time period or circumstance with respect to which the
taxes are payable, arising from or attributable to any business
of Delta Woodside other than the business of Duck Head or the
business of Delta Apparel;
(b) Duck Head is responsible for any of these taxes, regardless of
the time period or circumstance with respect to which the taxes
are payable, arising from or attributable to the business of Duck
Head; and
23
(c) Delta Apparel is responsible for any of these taxes, regardless
of the time period or circumstance with respect to which the
taxes are payable, arising from or attributable to the business
of Delta Apparel.
- The Delta Woodside tax group is responsible for all taxes, and shall
receive the benefit of all tax items, of any member of the Delta
Woodside tax group that relate to any taxable period after the Duck
Head distribution and the Delta Apparel distribution. The Duck Head
tax group is responsible for all taxes, and shall receive the benefit
of all tax items, of any member of the Duck Head tax group that relate
to any taxable period after the Duck Head distribution. The Delta
Apparel tax group is responsible for all taxes, and shall receive the
benefit of all tax items, of any member of the Delta Apparel tax group
that relate to any taxable period after the Delta Apparel
distribution.
Under the tax sharing agreement, the Duck Head tax group and the Delta
Apparel tax group have irrevocably designated Delta Woodside as their agent for
purposes of taking a broad range of actions in connection with taxes for
pre-distribution periods. Those actions include the settlement of tax audits and
other tax proceedings. In addition, the tax sharing agreement provides that all
disagreements and disputes relating to the agreement are to be resolved by Delta
Woodside. These arrangements may result in conflicts of interest among Duck
Head, Delta Woodside and Delta Apparel concerning such matters as whether a tax
relates to the business of Delta Woodside, Duck Head or Delta Apparel. Delta
Woodside might determine that a tax was a liability of Duck Head even though
Duck Head disagreed with that determination.
Under the tax sharing agreement, the Duck Head tax group, the Delta
Woodside tax group and the Delta Apparel tax group have agreed to indemnify one
another against various tax liabilities, generally in accordance with the
allocation of tax liabilities and benefits described above.
OTHER TRANSACTIONS BETWEEN DELTA WOODSIDE, DUCK HEAD AND DELTA APPAREL
Sales between Duck Head, Delta Apparel and Delta Mills of Goods or Manufacturing
- --------------------------------------------------------------------------------
Services
- --------
In the ordinary course of their respective businesses, the Duck Head and
Delta Apparel businesses have purchased fabrics from Delta Mills, the Delta
Apparel business has purchased yarn from Delta Mills, and the Duck Head and
Delta Apparel businesses have produced t-shirts for each other and purchased
t-shirts from each other. The following table shows these transactions for the
last three fiscal years:
(in thousands of dollars)
Fiscal Year
---------------------------------------
1998 1999 2000
---- ---- ----
Delta Apparel business purchases from Delta Mills (1) 17,683 0 0
Duck Head business purchases from Delta Mills 1,824 662 0
Duck Head business purchases from Delta Apparel business 156 481 28
Delta Apparel business purchases from Duck Head business 132 0 0
- --------------------
<FN>
(1) For purposes of this table, yarn produced by the Rainsford plant and used
by the Delta Apparel business, prior to the transfer from Delta Mills to
the Delta Apparel Company division of Delta Woodside in April 1998 of
operational control of the Rainsford plant, is treated as sold by Delta
Mills to the Delta Apparel business, and yarn produced by the Rainsford
plant and used by the Delta Apparel business, after that transfer, is not
treated as sold by Delta Mills to the Delta Apparel business.
</FN>
Effective May 7, 1997, Delta Woodside adopted a written policy statement
governing the pricing of intercompany transactions. Among other things, this
policy statement provides that all intercompany sales and purchases will be
settled at market value and terms. All sales between Delta Mills, the Duck Head
business and the Delta Apparel business listed in the table above were made at
prices deemed by the companies to approximate market value.
24
Duck Head anticipates that future purchases from Delta Mills and Delta
Apparel and future sales to Delta Apparel will not be
material.
Management Services
- -------------------
Delta Woodside provided various services to the operating divisions of its
subsidiaries, including the Delta Mills Marketing Company, Duck Head Apparel
Company and Delta Apparel Company divisions. These services include financial
planning, SEC reporting, payroll, accounting, internal audit, employee benefits
and services, stockholder services, insurance, treasury, purchasing, cotton
procurement, management information services and tax accounting. These services
were charged on the basis of Delta Woodside's cost and allocated to the various
divisions based on employee headcount, computer time, projected sales and other
criteria. During fiscal years 1998, 1999 and 2000, Delta Woodside charged the
Duck Head Apparel Company division $882,000, $777,000 and $0, respectively, for
these services.
OTHER TRANSACTIONS IN CONNECTION WITH THE DUCK HEAD DISTRIBUTION AND THE DELTA
APPAREL DISTRIBUTION
DELTA WOODSIDE'S SEVERANCE PLAN AND OTHER SEVERANCE ARRANGEMENTS
E. Erwin Maddrey, II was a participant in Delta Woodside's severance plan.
Upon the termination of Mr. Maddrey's services as an officer with Delta Woodside
on June 29, 2000, Delta Woodside paid Mr. Maddrey $147,115 of severance in July
of 2000 in accordance with the normal provisions of this plan.
In connection with the termination of Bettis C. Rainsford's employment with
Delta Woodside, Delta Woodside paid to or for Mr. Rainsford severance of
$529,808, which was one and one-half years of his then-current base salary. Of
this amount, $213,462 was paid to the Rainsford Development Corporation, a
company wholly owned by Mr. Rainsford.
On June 29, 2000, William F. Garrett became the President and Chief
Executive Officer of Delta Woodside. In recognition of Mr. Garrett's past
service to Delta Woodside and in order to provide him with an additional
incentive to remain with Delta Woodside, the Delta Woodside board authorized the
payment to him of $100,000 in connection with the Duck Head distribution and the
Delta Apparel distribution and the payment to him of six additional annual
payments of $150,000 each, with the first of these annual payments to be made in
October 2000. Mr. Garrett will forfeit any of these payments remaining to be
made in the event that he voluntarily leaves employment with Delta Woodside or
such employment is terminated by Delta Woodside for cause. Any remaining amounts
payable to him under the arrangement will be paid to him in the event of his
death or disability or in the event there is a change of control of Delta
Woodside and he does not remain with Delta Woodside.
Jane H. Greer was the Vice President and Secretary of Delta Woodside until
June 29, 2000. In connection with her resignation, Delta Woodside paid Ms. Greer
$53,846 of severance in accordance with the normal provisions of Delta
Woodside's severance plan and $400,000 of severance pursuant to the terms of an
employment agreement. Pursuant to amendments to Delta Woodside's Old Stock
Option Plan and her stock options, all of Ms. Greer's outstanding stock options
for Delta Woodside shares (covering an aggregate of 22,500 Delta Woodside
shares) will remain exercisable until their stated expiration dates
notwithstanding the termination of Ms. Greer's employment with Delta Woodside.
In connection with the termination of the LTIP, as described above under
"Management Compensation -- Director Compensation", Ms. Greer was granted 43,028
shares of Delta Woodside common stock and was paid $39,558.
David R. Palmer was the Controller of Delta Woodside until June 29, 2000.
In connection with his resignation, Delta Woodside paid Mr. Palmer $61,250 of
severance pursuant to the terms of an employment agreement. Pursuant to
amendments to Delta Woodside's Old Stock Option Plan and his stock options, all
of Mr. Palmer's unexercisable stock options for Delta Woodside shares (covering
an aggregate of 1,250 Delta Woodside shares) became exercisable in full prior to
the record date for the Duck Head and Delta Apparel distributions, and all of
Mr. Palmer's outstanding stock options for Delta Woodside shares (covering an
aggregate of 5,000 Delta Woodside shares) will remain exercisable until their
stated expiration dates notwithstanding the termination of Mr. Palmer's
employment with Delta Woodside.
Brenda L. Jones was the Assistant Secretary of Delta Woodside until June
2000. In connection with her resignation, Delta Woodside paid Ms. Jones $37,019
of severance in accordance with the normal provisions of Delta Woodside's
25
severance plan and $37,019 pursuant to the terms of an employment agreement.
Pursuant to amendments to Delta Woodside's Old Stock Option Plan and her stock
options, all of Ms. Jones' unexercisable stock options for Delta Woodside shares
(covering an aggregate of 375 Delta Woodside shares) became exercisable in full
prior to the record date for the Duck Head and Delta Apparel distributions, and
all of Ms. Jones' outstanding stock options for Delta Woodside shares (covering
an aggregate of 1,375 Delta Woodside shares) will remain exercisable until their
stated expiration dates notwithstanding the termination of Ms. Jones' employment
with Delta Woodside.
EARLY EXERCISABILITY AND OTHER AMENDMENTS OF DELTA WOODSIDE STOCK OPTIONS
Pursuant to the distribution agreement, Delta Woodside provided the holders
of outstanding options granted under the Delta Woodside stock option plan,
whether or not those options were currently exercisable, with the opportunity to
amend the terms of their Delta Woodside stock options. All holders of
outstanding Delta Woodside stock options entered into the proposed amendments,
which provided that:
(i) all then unexercisable portions of the holder's Delta Woodside stock
options became immediately exercisable in full prior to the record
date (June 19, 2000) for the Duck Head distribution and the Delta
Apparel distribution, which permitted the holder to exercise all or
part of the holder's Delta Woodside stock options prior to the Delta
Apparel record date and the Duck Head record date (and thereby receive
Delta Apparel shares in the Delta Apparel distribution and Duck Head
shares in the Duck Head distribution); and
(ii) any Delta Woodside stock option that remained unexercised as of the
record date for the Duck Head distribution and the Delta Apparel
distribution will remain exercisable for only Delta Woodside shares,
and for the same number of Delta Woodside shares at the same exercise
price, after the Duck Head distribution and the Delta Apparel
distribution as before the Duck Head distribution and the Delta
Apparel distribution (and not for a combination of Delta Woodside
shares, Delta Apparel shares and Duck Head shares).
As a result of these amendments, options for Delta Woodside shares became
exercisable earlier than they otherwise would have for the following directors
and Named Executives of the Company:
Number of Delta Woodside shares covered
by portion of stock options the
Name exercisability of which was accelerated
- ---- ---------------------------------------
William F. Garrett 37,500
Michael H. Prendergast 6,000
K. Scott Grassmyer 9,000
Also, in connection with the Duck Head distribution, Delta Woodside added a
provision to the Delta Woodside stock option plan that provides that no employee
of Duck Head would be deemed to have terminated his or her employment with Delta
Woodside for the purpose of determining whether his or her options would remain
outstanding following such termination solely as a result of the spin-off of
Duck Head from Delta Woodside. This amendment applies to all Delta Woodside
stock options currently held by Mr. Prendergast (under which he can acquire an
aggregate of 9,000 Delta Woodside shares) and Mr. Grassmyer (under which he can
acquire an aggregate of 12,000 Delta Woodside shares).
AMENDMENTS TO DELTA WOODSIDE DEFERRED COMPENSATION PLAN
In connection with the Duck Head and Delta Apparel distributions, each
participant in Delta Woodside's deferred compensation plan was provided with the
opportunity to receive all or part of his or her vested deferred compensation
account in cash in exchange for consenting to an amendment to the deferred
compensation plan. Under the plan amendment, only Duck Head, and not any other
member of Delta Woodside's pre-spin-off group of corporations, is financially
responsible to pay Duck Head employees the benefits to which they are entitled
under the Delta Woodside deferred compensation plan. Each director and officer
of Duck Head who participated in the plan consented to the plan amendment.
Michael H. Prendergast elected to receive all of his vested deferred
compensation and K. Scott Grassmyer elected to receive half of his vested
deferred compensation in connection with consenting to the amendment. No other
director or officer of Duck Head participated in the plan.
26
OTHER RELATED PARTY TRANSACTIONS
LEASES
Corporate Office Space at 233 Hammond Square, Greenville, South Carolina
- ------------------------------------------------------------------------
Until June 30, 2000, Delta Woodside leased its principal corporate office
space and space for its benefits department, purchasing department and financial
accounting department from a corporation (233 North Main, Inc.), one-half of the
stock of which is owned by each of E. Erwin Maddrey, II (a director and
significant stockholder of Duck Head and Delta Woodside and Delta Woodside's
President and Chief Executive Officer until June 29, 2000) and Jane H. Greer
(Delta Woodside's Vice President and Secretary until June 29, 2000). Mr. Maddrey
and Ms. Greer are also the directors and executive officers of 233 North Main,
Inc. The lease of this space was executed effective September 1, 1998, covered
approximately 9,662 square feet at a rental rate of $13.50 per square foot per
year (plus certain other expenses) and had an expiration date of August 2003. In
connection with the Duck Head distribution and the Delta Apparel distribution,
233 North Main, Inc. and Delta Woodside agreed to terminate this lease on June
30, 2000 (the Duck Head and Delta Apparel distribution date) in exchange for the
payment by Delta Woodside to 233 North Main, Inc. of $135,268. Following the
Duck Head and Delta Apparel distribution date, Delta Woodside was permitted to
continue to use the space on an as needed month-to-month basis at the rental
rate of $14.00 per square foot per year (plus certain other expenses); however,
Delta Woodside did not need to use the space after June 30, 2000. In addition to
the $135,268 termination fee, Delta Woodside paid an aggregate of $297,804 in
rent and other expenses under this lease during fiscal 2000.
Office Space in Edgefield, South Carolina
- -----------------------------------------
Until June 30, 2000, Delta Woodside leased office space in Edgefield, South
Carolina from The Rainsford Development Corporation, a corporation wholly owned
by Bettis C. Rainsford (a director and significant stockholder of Duck Head, a
significant stockholder of Delta Woodside, until October 1, 1999, Delta
Woodside's Executive Vice President, Chief Financial Officer and Treasurer and
until September 14, 2000 a director of Delta Woodside). Mr. Rainsford was a
director and executive officer and Brenda L. Jones was an executive officer of
The Rainsford Development Corporation. Ms. Jones was Delta Woodside's Assistant
Secretary until June 2000. In connection with the Duck Head distribution and the
Delta Apparel distribution, The Rainsford Development Corporation and Delta
Woodside agreed to terminate this lease on June 30, 2000 (the Duck Head and
Delta Apparel distribution date) in exchange for the payment by Delta Woodside
to The Rainsford Development Corporation of $33,299.08. In addition to this
termination fee, Delta Woodside paid an aggregate of $55,392 in rent and other
expenses under this lease during fiscal 2000.
Lease of Retail Sales Space by Duck Head in Edgefield, South Carolina
- ---------------------------------------------------------------------
Duck Head leases a building in Edgefield, South Carolina from Bettis C.
Rainsford (a director and significant stockholder of Duck Head, a significant
stockholder of Delta Woodside, until October 1, 1999 Delta Woodside's Executive
Vice President, Chief Financial Officer and Treasurer and until September 14,
2000 a director of Delta Woodside) pursuant to an agreement involving rental
payments equal to 3% of gross sales of the Edgefield store, plus 1% of gross
sales of the store for utilities. Under this lease agreement $10,835 was paid to
Mr. Rainsford during fiscal 2000.
TRANSFERS OF LIFE INSURANCE POLICIES
In February 1991, each of E. Erwin Maddrey, II (a director and significant
stockholder of Duck Head and Delta Woodside and President and Chief Executive
Officer of Delta Woodside until June 29, 2000) and Bettis C. Rainsford (a
director and significant stockholder of Duck Head, a significant stockholder of
Delta Woodside, until October 1, 1999, Delta Woodside's Executive Vice
President, Chief Financial Officer and Treasurer and until September 14, 2000 a
director of Delta Woodside) entered into a stock transfer restrictions and right
of first refusal agreement (a "First Refusal Agreement") with Delta Woodside.
Pursuant to each First Refusal Agreement, each of Mr. Maddrey or Mr. Rainsford
granted Delta Woodside a specified right of first refusal with respect to any
sale of that individual's Delta Woodside shares owned at death for five years
after the individual's death. In connection with the First Refusal Agreements,
27
life insurance policies were established on the lives of Mr. Maddrey and Mr.
Rainsford. Under the life insurance policies on the life of each of them, $30
million was payable to Delta Woodside and $10 million was payable to the
beneficiary or beneficiaries chosen by the individual. Nothing in either First
Refusal Agreement restricted the freedom of Mr. Maddrey or Mr. Rainsford to sell
or otherwise dispose of any or all of his Delta Woodside shares at any time
prior to his death or prevented Delta Woodside from canceling the life insurance
policies payable to it for $30 million on either Mr. Maddrey's or Mr.
Rainsford's life. A First Refusal Agreement terminated if the life insurance
policies payable to the applicable individual's beneficiaries for $10 million
were canceled by reason of Delta Woodside's failure to pay the premiums on those
policies.
In connection with the Duck Head distribution and the Delta Apparel
distribution, Delta Woodside agreed with each of Mr. Maddrey and Mr. Rainsford
to terminate their First Refusal Agreements on June 30, 2000, and to transfer to
each individual the $10 million life insurance policy on his life the proceeds
of which are payable to the beneficiary or beneficiaries he selects. After this
transfer, the recipient individual became responsible for payment of the
premiums on these life insurance policies. Delta Woodside allowed the remaining
$30 million of life insurance payable to Delta Woodside to lapse.
EMPLOYEE BENEFIT SERVICES
Duck Head has engaged Carolina Benefit Services, Inc. to provide payroll
processing and 401(k) plan administration services for Duck Head. Carolina
Benefit Services, Inc. is owned by E. Erwin Maddrey, II (a director and
significant stockholder of Duck Head and Delta Woodside and President and Chief
Executive Officer of Delta Woodside until June 29, 2000) and Jane H. Greer (Vice
President and Secretary of Delta Woodside until June 29, 2000). Mr. Maddrey and
Ms. Greer are also directors and executive officers of Carolina Benefit
Services, Inc.
For the services to be provided by Carolina Benefit Services, Duck Head
will pay fees based on the numbers of employees, 401(k) plan participants and
plan transactions and other items. Duck Head anticipates that on an annual basis
these fees will be approximately $46,000. The initial term of the engagement
will be one year running from June 30, 2000. Duck Head elected to engage
Carolina Benefit Services to provide these services after receiving proposals
from other providers of similar services and determining that Carolina Benefit
Services' proposal was Duck Head's least costly alternative.
MARKETING SERVICES PROVIDED BY 360 THINC, LTD.
Duck Head has entered into a service arrangement with 360 THINC, LTD.
("360"). The president and co-founder of 360 is Mark I. Goldman a director of
Duck Head. Under the terms of the agreement, 360 performs certain specific
marketing related services for Duck Head. The term of the contract is July 6,
2000 through June 30, 2001. After June 30, 2001, the agreement can be terminated
by either party with 90 days written notice.
The agreement requires Duck Head to pay 360 monthly fees totaling $250,000
in fiscal year 2001. Duck Head and 360 have mutually agreed to reduce this fee
by $37,500 in return for an incentive plan that would allow 360 to earn
incentive based compensation of up to $75,000 if Duck Head met certain sales
targets. In addition, Duck Head reimburses 360 for certain expenses and other
projects outside the scope of the base agency fee.
Duck Head paid 360 a total of $204,619 of fees and $13,218 of reimbursable
expenses for services rendered during fiscal year 2000.
OTHER
Any transaction entered into between Duck Head and any officer, director,
principal stockholder or any of their affiliates has been on terms that Duck
Head believes are comparable to those that would be available to Duck Head from
non-affiliated persons.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
There were no late filings of reports for fiscal year 2000 pursuant to
Section 16(a) of the Securities Exchange Act of 1934, as amended.
28
RATIFICATION OF SELECTION OF AUDITORS
(ITEM 2)
The Board of Directors recommends the ratification of the appointment of
KPMG LLP, independent certified public accountants, as auditors for the Company
and its subsidiaries for fiscal year 2001 and to audit and report to the
shareholders upon the financial statements of the Company as of and for the
period ending June 30, 2001.
KPMG LLP currently serves as the Company's independent auditors and was
originally engaged by Delta Woodside on August 19, 1994 to serve as principal
accountants for Delta Woodside's 1995 fiscal year.
Representatives of KPMG LLP will be present at the Annual Meeting and such
representatives will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions that the
shareholders may have. Neither the firm nor any of its members has any relation
with the Company except in the firm's capacity as auditors or as advisors.
The decision of the Board to appoint KPMG LLP was based on the
recommendation of the Audit Committee. The Company expects that, in the future,
the Board will continue to appoint the Company's auditors annually based on the
recommendation of the Audit Committee and subsequently submit the appointment to
the shareholders for ratification.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors was not
aware that any business not described above would be presented for consideration
at the Annual Meeting. If any other business properly comes before the meeting,
it is intended that the shares represented by proxies will be voted with respect
thereto in accordance with the judgment of the person or persons voting them.
FINANCIAL INFORMATION
THE COMPANY'S FISCAL 2000 ANNUAL REPORT IS BEING MAILED TO SHAREHOLDERS ON
OR ABOUT OCTOBER 16, 2000. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY
SHAREHOLDER OF RECORD AS OF OCTOBER 9, 2000, AND TO EACH PERSON TO WHOM THIS
PROXY STATEMENT IS DELIVERED IN CONNECTION WITH THE ANNUAL MEETING OF
SHAREHOLDERS, UPON WRITTEN REQUEST OF SUCH SHAREHOLDER OR PERSON, A COPY OF SUCH
FISCAL 2000 ANNUAL REPORT OR THE COMPANY'S FISCAL 2000 ANNUAL REPORT ON FORM
10-K, INCLUDING FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (BUT
EXCLUDING EXHIBITS), FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH
REQUEST SHOULD BE DIRECTED TO DUCK HEAD APPAREL COMPANY, INC., POST OFFICE BOX
688, 1020 BARROW INDUSTRIAL PARKWAY, WINDER, GEORGIA, 30680, TEL: (770)
867-3111, ATTENTION: K. SCOTT GRASSMYER, SECRETARY.
NOTWITHSTANDING ANY STATEMENT IN ANY OF THE COMPANY'S PREVIOUS FILINGS
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, INCORPORATING FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT,
IN WHOLE OR IN PART, THE AUDIT COMMITTEE REPORT BELOW SHALL NOT BE INCORPORATED
BY REFERENCE INTO ANY SUCH FILING.
The Audit Committee is responsible for the duties set forth in its charter
(which is attached to this proxy statement as APPENDIX 1) but is not responsible
for either the preparation of the financial statements or the auditing of the
financial statements. The Company's management has the responsibility for
preparing the financial statements and implementing internal controls, and the
Company's independent accountants have the responsibility for auditing the
financial statements. The review of the financial statements by the Audit
Committee is not the equivalent of an audit.
29
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Board of Directors adopted a written Audit Committee Charter on
February 17, 2000, a copy of which is included as APPENDIX 1 to this Proxy
Statement. All members of the Audit Committee are independent as defined in
Section 121(A) of the American Stock Exchange's listing standards.
The Audit Committee has reviewed and discussed with the Company's
management and the Company's independent auditors the audited financial
statements of the Company contained in the Company's fiscal 2000 Annual Report.
Without limiting the foregoing, the Audit Committee has also discussed with the
Company's independent auditors the matters required to be discussed pursuant to
SAS 61 (Codification of Statements on Auditing Standards, AU ss. 380).
Based on the review and discussions described in the immediately preceding
paragraph, the Audit Committee recommended to the Board of Directors that the
audited financial statements included in the Company's fiscal 2000 Annual Report
be included in that report, which is incorporated by reference into the
Company's Annual Report on Form 10-K for the fiscal year ended July 1, 2000,
filed with the U.S. Securities and Exchange Commission.
AUDIT COMMITTEE
C.C. Guy, Chair Dr. Max Lennon Dr. James F. Kane
SOLICITATION OF PROXIES
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by mail, proxies may be solicited by
directors, officers and other regular employees of the Company by telephone,
telecopy or personal interview for no additional compensation. Arrangements will
be made with brokerage houses and other custodians, nominees and fiduciaries to
forward solicitation material to beneficial owners of the stock held of record
by such persons and the Company will reimburse such persons for reasonable
out-of-pocket expenses incurred by them in so doing. The Company has engaged
Corporate Investor Communications to assist in these contacts with brokerage
houses, custodians, nominees and fiduciaries for an estimated fee of $2,000 plus
reasonable out-of-pocket expenses.
PROPOSALS OF SECURITY HOLDERS
Any shareholder of the Company who desires to present a proposal at the
2001 Annual Meeting of Shareholders for inclusion in the Company's proxy
statement and form of proxy relating to that meeting must submit such proposal
to the Company at its principal executive offices on or before June 16, 2001.
Pursuant to the requirements of the Company's bylaws, if a shareholder of the
Company desires to present a proposal at the 2001 Annual Meeting of Shareholders
that will not be included in the Company's proxy statement and form of proxy
relating to that meeting, such proposal must be submitted to the Company at its
principal executive offices no later than July 11, 2001 for the proposal to be
considered timely.
The above Notice and Proxy Statement are sent by order of the Board of
Directors.
K. Scott Grassmyer, Secretary
Winder, Georgia
October 16, 2000
30
APPENDIX 1
NOTWITHSTANDING ANY STATEMENT IN ANY OF THE COMPANY'S PREVIOUS FILINGS
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, INCORPORATING FUTURE FILINGS, INCLUDING THIS PROXY STATEMENT,
IN WHOLE OR IN PART, THE AUDIT COMMITTEE CHARTER BELOW SHALL NOT BE INCORPORATED
BY REFERENCE INTO ANY SUCH FILING.
DUCK HEAD APPAREL COMPANY, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
1. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing: the financial reports
and other financial information provided by the Company to any governmental body
and the public; the Company's system of internal controls regarding finance,
accounting and legal compliance and ethics; and the Company's auditing,
accounting and financial reporting procedures generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster compliance with, the Company's policies, procedures and practices
at all levels.
The Audit Committee's primary duties and responsibilities are to:
Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
Review and appraise the audit efforts of the Company's independent
accountants and internal auditing department. The Company's independent
accountants are ultimately accountable to the Audit Committee and the Board
of Directors, as representatives of the Company's shareholders. The Audit
Committee and the Board of Directors have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
outside auditors (subject to ratification of the selection of outside
auditors by the Company's stockholders).
Provide an open avenue of communication among the independent accountants,
financial and senior management, the internal auditing department and the
Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities set forth in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall be an independent director and free from any
relationship that may interfere with the exercise of independent judgment. Each
member of the Committee shall be able to read and understand fundamental
financial statements, including a company's balance sheet, income statement and
cash flow statement or will become able to do so within a reasonable period of
time after his or her appointment to the audit committee. At least one member of
the Committee must have past employment experience in finance or accounting,
requisite professional certification in accounting or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities. In addition, each member of the Committee must satisfy the
restrictions of the American Stock Exchange concerning such membership.
Committee members may enhance their familiarity with finance and accounting by
participating in educational programs conducted by the Company or an outside
consultant.
The members of the Audit Committee shall be elected by the Board at the meeting
of the Board that occurs on the date of the Company's annual stockholders'
meeting, and shall serve until their successors shall be duly elected and
31
qualified. Unless a Chair is elected by the Board, the members of the Committee
may designate a Chair by a majority vote of the full Committee membership.
III. MEETINGS
The Committee shall meet at least four times a year or more frequently as
circumstances dictate. As part of its job to foster open communications, the
Committee should meet at least annually with management, the director of the
internal audit department and the independent accountants in separate executive
sessions to discuss any matters that the Committee or any of these groups or
individuals believes should be discussed privately. In addition, the Committee
or at least its Chair should meet with the independent accountants and
management quarterly to review the Company's financials consistent with IV.4.
(below)
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and reassess the adequacy of this Charter periodically, at least
annually, as conditions dictate.
2. Review the Company's annual financial statements and any reports or other
financial information submitted to any governmental body, or the public,
including any certification, report, opinion or review rendered by the
independent accountants.
3. Review the regular internal reports to management prepared by the internal
auditing department and any letters of the independent accountants to
management, and management's response thereto.
4. Review with financial management and the independent accountants each 10-Q
prior to its filing. The Chair may represent the entire committee for purposes
of this review.
INDEPENDENT ACCOUNTANTS
5. Recommend to the Board of Directors the selection of the outside auditors,
consider the independence and effectiveness of the outside auditors and approve
the fees and other compensation to be paid to the outside auditors. The
Committee shall ensure that it receives from the outside auditors a formal
written statement delineating all relationships between the outside auditors and
the Company, consistent with Independence Standards Board Standard 1. The
Committee shall actively engage in a dialogue with the outside auditors with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the outside auditors. The Committee has the
responsibility to take, or recommend that the Board take, appropriate action to
oversee the independence of the outside auditors.
6. Review and evaluate the performance of the independent accountants and, when
circumstances warrant, recommend to the Board the replacement of the independent
accountants.
7. Periodically consult with the independent accountants out of the presence of
management about internal controls and the fullness and accuracy of the
Company's financial statements.
FINANCIAL REPORTING PROCESS
8. In consultation with the independent accountants and the internal auditors,
review the integrity of the Company's financial reporting processes, both
internal and external.
9. Consider the independent accountants' judgment about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
10. Consider and approve, if appropriate, material changes to the Company's
auditing and accounting principles and practices as suggested by the independent
accountants, management or the internal auditing department.
32
PROCESS IMPROVEMENT
11. Establish regular and separate systems of reporting to the Audit Committee
by each of management, the independent accountants and the internal auditors
regarding any significant judgments made in management's preparation of the
financial statements and the view of each as to the appropriateness of such
judgments.
12. Following completion of the annual audit, review separately with each of
management, the independent accountants and the internal auditing department any
significant difficulties encountered during the course of the audit, including
any restrictions on the scope of the work or access to the required information.
13. Review any significant disagreement among management and the independent
accountants or internal auditing department in connection with the preparation
of the financial statements.
14. Review with the independent accountants, the internal auditing department
and management the extent to which changes or improvements in financial
accounting practices, as previously approved by the Audit Committee, have been
implemented. The appropriate time of this review shall be decided by the
Committee.
ETHICAL AND LEGAL COMPLIANCE
15. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce the Code.
16. Review management's monitoring of the Company's compliance with the
Company's Ethical Code, and ensure that management has the proper review system
in place to ensure that the Company's financial statements, reports and other
financial information disseminated to governmental organizations and the public
satisfy legal requirements.
17. Review the activities, organizational structure and qualifications of the
internal audit department.
18. Review with the Company's counsel legal compliance matters including
corporate securities trading policies.
19. Review with the Company's counsel any legal matter that could have a
material impact on the Company financial statements.
20. Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate.
Adopted by Board of Directors on February 17, 2000.
33
APPENDIX 1
DUCK HEAD APPAREL COMPANY, INC.
[GRAPHIC]
PLEASE SIGN, DETACH
AND RETURN PROXY CARD
IN SUPPLIED ENVELOPE
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
DUCK HEAD APPAREL COMPANY, INC.
ANNUAL MEETING, NOVEMBER 8, 2000
PROXY
PLEASE SIGN ON REVERSE SIDE AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE
The undersigned shareholder of Duck Head Apparel Company, Inc., a Georgia
corporation, hereby constitutes and appoints Robert D. Rockey, Jr., Michael H.
Prendergast, K. Scott Grassmyer and William B. Mattison, Jr., and each of them,
attorneys and proxies on behalf of the undersigned to act and vote at the Annual
Meeting of shareholders to be held at the Chateau Elan, 100 Rue Charlemagne,
Braselton, Georgia, on November 7, 2000 at 10:00 A.M., and any adjournment or
adjournments thereof, and the undersigned instructs said attorneys to vote:
1. ELECTION OF DIRECTORS:
_______ FOR all nominees listed below (except as marked to the contrary
below)
_______ WITHHOLD AUTHORITY to vote all nominees listed below
Messrs. W. F. Garrett, M. I. Goldman, C. C. Guy, J. F. Kane, M. Lennon, E. E.
Maddrey II, B. A. Mickel, R. D. Rockey, Jr.
(INSTRUCTION: To withhold authority to vote for an individual nominee write that
nominee's name in the space provided below.)
________________________________________________________________________________
2. Proposal to ratify selection of KPMG LLP as the independent auditors of
Duck Head Apparel Company, Inc. for fiscal 2001
______ FOR ______ AGAINST ______ ABSTAIN
3. At their discretion upon such other matters as may properly come before
the meeting.
A majority of said attorneys and proxies who shall be present and acting as such
at the meeting or any adjournment or adjournments thereof (or, if only one such
attorney and proxy may be present and acting, then that one) shall have and may
exercise all the powers hereby conferred.
(over)
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DUCK HEAD
APPAREL COMPANY, INC. IF NOT OTHERWISE SPECIFIED. THIS PROXY WILL BE DEEMED TO
GRANT AUTHORITY TO VOTE, AND WILL BE VOTED, FOR ELECTION OF THE DIRECTORS LISTED
ON THE REVERSE SIDE OF THIS PROXY AND FOR APPROVAL OF PROPOSAL 2.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders dated October 16, 2000 and the Proxy Statement furnished
therewith.
Dated this ________________ day of __________________, 2000.
_________________________________ (Seal)
_________________________________ (Seal)
NOTE: Signature should agree with name on stock certificate
as printed thereon. Executors, administrators, trustees and
other fiduciaries should so indicate when signing.
PLEASE DATE, SIGN AND RETURN THIS PROXY. THANK YOU.
APPENDIX 2
DUCK HEAD APPAREL COMPANY, INC.
[GRAPHIC]
PLASE SIGN, DETACH
AND RETURN PROXY CARD
IN SUPPLIED ENVELOPE
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
Voting Instructions
PLEASE SIGN ON REVERSE SIDE AND RETURN
DUCK HEAD APPAREL COMPANY, INC.
ANNUAL MEETING, NOVEMBER 8, 2000
The undersigned participant in the Savings and Investment Plan of Duck Head
Apparel Company, Inc., a Georgia corporation, hereby directs Branch Banking &
Trust Company, trustee of such Plan, to vote the undersigned's proportionate
share of the shares of common stock of Duck Head Apparel Company, Inc. held by
such Plan at the Annual Meeting of shareholders to be held at the Chateau Elan,
100 Rue Charlemagne, Braselton, Georgia, on November 8, 2000 at 10:00 A.M., and
any adjustment or adjournments thereof, as follows:
1. Election of Directors:
_______ FOR all nominees listed below (except as marked to the contrary
below)
_______ WITHHOLD AUTHORITY to vote all nominees listed below
Messrs. W. F. Garrett, M. I. Goldman, C. C. Guy, J. F. Kane, M. Lennon, E. E.
Maddrey II, B. A. Mickel, R. D. Rockey, Jr.
(INSTRUCTION: To withhold authority to vote for an individual nominee write that
nominee's name in the space provided below.)
________________________________________________________________________________
2. Proposal to ratify selection of KPMG LLP as the independent auditors of
Duck Head Apparel Company, Inc. for fiscal 2001
______ FOR ______ AGAINST ______ ABSTAIN
5. At their discretion upon such other matters as may properly come before
the meeting.
(over)
FOLD AND DETACH HERE
- --------------------------------------------------------------------------------
THESE VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
DUCK HEAD APPAREL COMPANY, INC. IF NOT OTHERWISE SPECIFIED, THESE VOTING
INSTRUCTIONS WILL BE DEEMED DIRECTION TO VOTE FOR ELECTION OF THE DIRECTORS
LISTED ON THE REVERSE SIDE OF THESE VOTING INSTRUCTIONS AND FOR APPROVAL OF
PROPOSAL 2.
The undersigned hereby acknowledged receipt of the Notice of Annual Meeting
of Shareholders dated October 16, 2000 and the Proxy Statement furnished
therewith.
Dated this ________ day of _________ 2000
___________________ (Seal)
___________________ (Seal)
NOTE: Please sign exactly as name appears at left.
PLEASE DATE, SIGN AND RETURN THESE VOTING INSTRUCTIONS. THANK YOU.