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SCHEDULE 14A
(Rule 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant []
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[X] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
DELTA APPAREL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BETTIS C. RAINSFORD
(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)(1) and
0-11.
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(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): ............
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(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
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(4) Date Filed: ...........................................................
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BETTIS C. RAINSFORD
108 1/2 COURT HOUSE SQUARE
EDGEFIELD, SC 29824
IMPORTANT MESSAGE REGARDING THE ANNUAL MEETING OF
SHAREHOLDERS OF DELTA APPAREL, INC.
October 30, 2000
Dear Fellow DELTA APPAREL Shareholder:
My name is Bettis C. Rainsford and, as you know by now, I am one of the
largest shareholders of Delta Apparel. I am a co-founder and was the long-time
CFO of Delta Woodside Industries, Inc., the company from which Delta Apparel,
and its sister company, Duck Head Apparel Company, Inc., were spun off earlier
this year.
During recent years, I had become increasingly disappointed with the
performance of Delta Woodside. I was extremely frustrated with what I regarded
as bad management decisions made by the CEO, E. Erwin Maddrey, II. After
discussions with him were unsuccessful, in February 1998, I presented to the
Delta Woodside Board of Directors the first in a series of documents entitled
"Maximizing Shareholder Value," in which I bluntly pointed out the failure of
Delta Woodside to deliver satisfactory results for shareholders, and laid out a
strategy to recover lost ground. During 1998, many of my proposals were adopted,
eliminating divisional operating losses and reducing debt.
THE BOARD'S ILL-ADVISED SPIN OFF STRATEGY
In 1999, when the Board of Directors of Delta Woodside decided to spin off
the apparel divisions, I opposed this strategy as a bad idea that would leave
Delta Woodside shareholders with illiquid, thinly-capitalized companies, trading
at discounts to their inherent values. The Delta Woodside Board acknowledged
that the shares might be deeply discounted, particularly as institutional
shareholders might seek to sell their shares. At the same time, they put in
place a specific credit facility to repurchase shares of the Company. In my
opinion, it would be a violation of the fiduciary duties of the directors of a
company to craft a strategy which they believed would result in discounted
values, with the intention of taking advantage of shareholders by then causing
the company to repurchase the shares at discounted values which resulted from
their own strategy.
Since the spin-off, the market has substantiated my concerns, as your stock
has traded at less than 70% OF TANGIBLE BOOK VALUE!! In addition to the price
discount, there is also very limited liquidity, as is evidenced by the fact that
the average daily trading volume has been only about 4,500 shares, and on half
of the trading days, it has been 2,500 shares or less.
BOARD GRANTS EXCESSIVE COMPENSATION, ADOPTS POISON PILLS
Most of the current directors of Delta Apparel, specifically E. Erwin
Maddrey, II, Buck A. Mickel, Max Lennon, Jim Kane, William F. Garrett and C.C.
Guy, are also directors of Delta Woodside and Duck Head. Acting in their
capacities as directors of the three companies, these men have undertaken a
whole series of actions during the past year which, in my opinion, have caused
shareholders' investments in these companies to be greatly devalued, as follows:
- Adopting a "Dead-Hand" Poison Pill at Delta Apparel,
- Adopting a "Dead-Hand" Poison Pill at Duck Head, and
- Adopting a Poison Pill at Delta Woodside, each of which, in my view,
serves to entrench these interlocked Boards and depress share values.
- Paying the DELTA APPAREL CEO, during the fiscal year 2000, total
compensation of $1,348,286, or about 28% of the net income of your
Company.
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- Paying bonuses to the top 3 DELTA APPAREL EXECUTIVES OF $1,270,180, or
about 27% of the net income of your Company. This was BONUSES ONLY, NOT
SALARY!!
- Informing the Delta Apparel Board that the total bonuses to be paid to
all employees would be in the range of $3 million and that the Delta
Apparel CEO alone would receive 25% of the total bonus pool. He actually
received $908,700 in bonus. Although the Company has not told us how much
in total bonuses was paid (and we ask that they would), you can imagine
the total bonus pool of the Company!!
- Adopting the Stock Option and Incentive Stock Award Plans at DELTA
APPAREL, representing 22.5% OF THE SHARES OF YOUR COMPANY, and NOT
ALLOWING THE PUBLIC SHAREHOLDERS THE OPPORTUNITY TO VOTE ON IT.
- Amending the terms of the option granted to the DUCK HEAD CEO, giving him
the opportunity to purchase ONE MILLION Duck Head shares, or NEARLY 30%
OF THAT COMPANY, at a per share price, if computed today, of only about
13% of that company's net tangible book value per share.
- Adopting the Stock Option and Incentive Stock Award Plans at DUCK HEAD,
representing 22.5% OF THE SHARES OF THAT COMPANY AND DENYING THE PUBLIC
SHAREHOLDERS THE OPPORTUNITY TO VOTE ON THEM. The shares in the Duck Head
Plans, combined with the Duck Head CEO million share option, would
constitute OVER 41% of the equity of that company.
- Adopting, and submitting for shareholder approval, Stock Option and
Incentive Stock Award plans at DELTA WOODSIDE, representing 10% OF THE
SHARES OF THAT COMPANY. Originally, Mr. Garrett, one of the
aforementioned directors, had lobbied me to support the employee stock
plans for 22.5% of the Delta Woodside shares -- the same high level
adopted by the Boards of the two apparel companies.
- Approving a Severance Plan for Employees of DUCK HEAD, which, if
implemented, could cost its public shareholders up to an additional $1
million in severance upon a sale of that company, or about 40% of the
market capitalization of that company at the time the Plan was approved.
- Recently hiring a new President and COO of DUCK HEAD, presumably to share
executive duties with the current CEO, and be paid a per annum salary of
$336,000, plus a guaranteed bonus and stock options.
- Increasing their own compensation as Directors from $30,000 annually
before the spin-off as Delta Woodside directors to what will be increased
in five years to $60,000 annually for combined service in the three
companies.
STOP FURTHER IRRESPONSIBLE ACTIONS BY THE BOARD -- VOTE THE BLUE PROXY
While all of the above actions during the past fifteen months were
undertaken for the benefit of the directors and management, little was done, in
my opinion, for the benefit of the former Delta Woodside shareholders, who have
experienced a horrifying loss in value during recent years.
Given the actions and attitude of the current directors, I believe that
unless these directors are removed and replaced with directors committed to
maximizing shareholder value, shareholders will be locked in, for the
foreseeable future, to holding undervalued shares.
THE NEW NOMINEES' PLEDGE
Several weeks ago, I resolved to attempt to replace the incumbent directors
with new directors who are firmly committed to serving the interests of all
shareholders. I am now soliciting your vote for these nominees.
IF ELECTED, THE NEW NOMINEES HAVE PLEDGED THEMSELVES TO:
- Operate the Company for the benefit of shareholders, while aggressively
focusing on strategies to maximize shareholder value, which may include a
sale, merger, recapitalization or other extraordinary corporate
transaction with respect to the Company;
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- Limit the total bonuses paid to all employees to five percent (5%) of
operating earnings for the year in which the bonus is paid, after giving
effect to operating earnings for the accrual of such bonuses;
- Cancel all unissued stock options, and resolve not to authorize any
additional stock options unless they have been approved by the
shareholders of the Company;
- Undo the scheduled increase in director fees; and
- Undertake such other actions as are in your best interests as
shareholders of Delta Apparel.
THIS PROXY SOLICITATION IS NOT ABOUT OPERATING PERFORMANCE!
I believe that Mr. Humphreys and his management team are doing a good job
in operating the Company. I have known Mr. Humphreys for approximately fourteen
years and think highly of him. For this reason, when I began this Proxy
solicitation, I chose not to run a candidate against him and stated that I
supported his election. Although, as you might expect, Mr. Humphreys is
supporting the current Board, I believe that if my Nominees are elected, he will
choose to continue to work with the Company.
As for me, I know the Delta Apparel business intimately. I have had a
special interest in this business since 1985 when I personally engineered its
acquisition. I believe that the manufacturing assets at Delta Apparel are among
the lowest cost and most productive in the industry and that they produce the
highest quality products in the T-shirt business. I was personally involved in
many of the improvements in these manufacturing assets, including the
acquisition of the knitting, dyeing, finishing and cutting facility and the
construction of the Company's yarn mill. Much of the cost advantage of the
Company is derived from the highly productive sewing facility in Honduras. I was
the one who initiated the move of our sewing operations to Honduras and made the
first trip there to establish the relationship that resulted in the construction
of that plant.
For many years, I was extremely frustrated by what I perceived to be the
Delta Woodside CEO's constant and disruptive interference with this business
that caused it to perform extremely poorly. I am pleased that Mr. Humphreys has
now implemented the operating strategy that I have long advocated for Delta
Apparel. Given our superior manufacturing assets, there is no doubt that our
performance should be at the top of the industry.
Although I have stated that I believe that the management compensation at
Delta Apparel is excessive, I strongly believe in using bonuses and other
incentive-based compensation as a way to attract and retain highly qualified
people. My objection to the Delta Apparel compensation program is simply that it
is excessive by any reasonable standard. It certainly is excessive by standards
that were used at Delta Woodside over the last fifteen years and by comparison
to other companies of similar size in the textile and apparel industries. When
considered along with the other actions by the current board members in the
three companies such as the amendment to the Duck Head CEO's million share
option, it is clear to me that the current Board has lost its sense of what is
reasonable. And, in my opinion, they have certainly forgotten that their first
loyalty is owed to shareholders.
MY HISTORY AS A DIRECTOR OF DELTA APPAREL
Recently the Company sent a letter to shareholders suggesting that I had no
interest in the Company because I had resigned from the Board. Indeed I did
resign, but not because of any lack of interest, but rather because I had
concluded that I could not, in good conscience, continue to work with the other
directors who, in my opinion, had no regard for the interests of the
shareholders. These same directors, acting in their capacity as directors of
Duck Head, deliberated in August 2000 as to what minimum share price they would
accept were that company to be sold. Their consensus view was that only a price
in the range of $8.00 per share would be acceptable, and this at a time when the
shares were trading in the range of $1.00 per share. I believed this to be, at a
minimum, a telling reflection on this Board's low regard for its fiduciary
duties, particularly when combined with the fact that they had saddled that
company with a "dead-hand" poison pill. Thus, I resolved to leave all three
boards for so long as the current directors continued to serve. I did decide to
remain on the Duck Head Board for a short time so that I could assist with any
further discussions regarding the sale of that company.
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The Company has also made a number of spurious allegations about me and my
motives in pursuing this Proxy solicitation. I do not intend to respond with
anything other than facts about the companies and about the actions which these
directors have taken as directors. If they want to take the low road, that is
their choice, but I shall not join them.
YOUR VOTE IS IMPORTANT -- VOTE TO MAXIMIZE SHAREHOLDER VALUE
I believe the choice is clear -- vote for the Nominees that have pledged to
maximize shareholder value. Please vote your BLUE PROXY CARD today and mail it
using the enclosed envelope, even if you have previously signed and sent in a
WHITE card. Only your latest dated proxy card will be counted.
Thank you for your consideration.
Sincerely,
/s/ Bettis C. Rainsford
Bettis C. Rainsford
SIGN, DATE AND RETURN THE BLUE PROXY CARD TODAY.
IMPORTANT!
1. REGARDLESS OF HOW MANY SHARES YOU OWN, YOUR VOTE IS VERY IMPORTANT.
PLEASE SIGN, DATE AND MAIL THE ENCLOSED BLUE PROXY CARD. PLEASE VOTE
EACH BLUE PROXY CARD YOU RECEIVE SINCE EACH ACCOUNT MUST BE VOTED
SEPARATELY. ONLY YOUR LATEST DATED PROXY COUNTS.
2. WE URGE YOU NOT TO SIGN ANY WHITE PROXY CARD SENT TO YOU BY THE
COMPANY, NOT EVEN AS A VOTE OF PROTEST.
3. EVEN IF YOU HAVE SENT A WHITE PROXY CARD TO THE COMPANY, YOU HAVE EVERY
LEGAL RIGHT TO CHANGE YOUR VOTE. YOU MAY REVOKE THAT PROXY, AND VOTE
FOR YOUR BEST INTERESTS BY SIGNING, DATING AND MAILING THE ENCLOSED
BLUE PROXY CARD IN THE ENCLOSED ENVELOPE.
4. IF YOUR SHARES ARE HELD IN THE NAME OF A BANK OR BROKER, PLEASE CONTACT
MORROW & CO., MY PROXY SOLICITOR, WHO WILL ASSIST YOU IN GETTING YOUR
BROKERAGE SHARES VOTED.
IF YOU HAVE ANY QUESTIONS ON HOW TO VOTE YOUR SHARES,
PLEASE CALL MY PROXY SOLICITOR:
MORROW & CO. AT (800) 662-5200.
