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]
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Check the appropriate box:
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[_] 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
Delta Woodside Industries, Inc.
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(Name of Registrant as Specified In Its Charter)
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<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
100 AUGUSTA ROAD (29601)
POST OFFICE BOX 6126
GREENVILLE, SOUTH CAROLINA 29606
TELEPHONE (864) 255-4122
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
NOVEMBER 7, 2000
TO OUR SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of Shareholders of Delta
Woodside Industries, Inc., a South Carolina corporation ("Delta Woodside"), will
be held at the Gunter Theater, 320 South Main Street, Greenville, South
Carolina, on Tuesday, November 7, 2000, at 9:00 a.m., local time, for the
following purposes:
1. To elect six directors to serve until the next annual meeting of
shareholders of Delta Woodside or until their successors have been
duly elected and qualified;
2. To vote on a proposal to approve the Delta Woodside Industries, Inc.
2000 Stock Option Plan pursuant to which options to acquire up to
1,667,000 shares of Delta Woodside's common stock, $0.01 par value per
share, may be granted;
3. To vote on a proposal to approve the new Delta Woodside Industries,
Inc. Incentive Stock Award Plan pursuant to which awards covering up
to 667,000 share of Delta Woodside's common stock, $0.01 par value per
share, may be granted;
4. To vote on the ratification of the appointment of KPMG LLP as
independent auditors for Delta Woodside for fiscal 2001; and
5. 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 Delta Woodside recommends that shareholders vote
FOR the nominees for director listed in the Delta Woodside proxy statement
enclosed with this notice and FOR approval of the proposals described in items 2
through 4 above.
Delta Woodside has fixed the close of business on September 20, 2000 as the
record date for the determination of the shareholders of Delta Woodside entitled
to receive notice of and to vote at the Annual Meeting. Only shareholders of
record of Delta Woodside at the close of business on September 20, 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/ William H. Hardman, Jr.
---------------------------
William H. Hardman, Jr.,
October 6, 2000 Secretary
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
100 Augusta Road (29601)
Post Office Box 6126
Greenville, South Carolina 29606
Telephone (864) 255-4122
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 7, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Delta Woodside Industries, Inc., a South
Carolina corporation ("Delta Woodside" or the "Company"), to be voted at the
Annual Meeting of Shareholders (the "Annual Meeting") of the Company to be held
at the Gunter Theater, 320 South Main Street, Greenville, South Carolina at 9:00
a.m. on Tuesday, November 7, 2000. The approximate date of mailing this Proxy
Statement and the accompanying proxy is Friday, October 6, 2000.
Only shareholders of record at the close of business on September 20, 2000
are entitled to receive notice of and to vote at the Annual Meeting. As of such
date, there were outstanding 24,156,625 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 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: Delta Woodside Industries, Inc., Post Office Box 6126,
Greenville, South Carolina 29606, 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. 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 approval of the Delta Woodside Industries, Inc. 2000
Stock Option Plan (the "New Stock Option Plan"), (3) FOR approval of the Delta
Woodside Industries, Inc. new Incentive Stock Award Plan (the "New Incentive
Stock Award Plan") and (4) 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 a majority of
the outstanding shares of common stock at September 20, 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 in the election of directors. The New Stock Option
Plan and the New Incentive Stock Award Plan will be approved in each case if a
quorum is present, the aggregate number of votes cast on the matter exceeds a
majority of the shares outstanding on September 20, 2000 and the number of votes
cast for the matter exceeds the number of votes cast against the matter.
Abstentions and broker non-votes, which are separately tabulated, are included
in the determination of the number of shares present for quorum purposes.
Abstentions and broker non-votes have no effect on the election of directors if
a quorum is present. Abstentions and broker non-votes do not count as votes cast
in the vote to approve the New Stock Option Plan or the New Incentive Stock
Award Plan; however, if an adequate number of votes are cast, abstentions and
broker non-votes will not otherwise affect the vote to approve the New Stock
Option Plan or the New Incentive Stock Award Plan. Shareholders do not have any
dissenters' rights or appraisal rights with respect to any matter described in
this proxy statement.
1
<PAGE>
THE SPIN-OFFS OF DELTA APPAREL AND DUCK HEAD
Until June 30, 2000, the Company had two apparel businesses and a textile
fabrics business. One of the apparel businesses was conducted by the Company's
Delta Apparel Company division, a vertically integrated supplier of knit
apparel, particularly T-shirts, sportswear and fleece goods. The other apparel
business was conducted by the Company's Duck Head Apparel Company division,
which designed, sourced, produced, marketed and distributed boys' and men's
value-oriented casual sportswear. The textile fabrics business was conducted by
the Company's Delta Mills Marketing Company division, which engages in the
manufacture and sale of a broad range of finished apparel fabrics primarily to
branded apparel manufacturers and resellers and private label apparel
manufacturers.
During fiscal 2000, the Company's board of directors determined that it was
in the best interest of the Company and its shareholders to separate the three
businesses into three independent companies. In May of 2000, the Company
internally reorganized its business operations such that (i) all of the assets
and operations of the Delta Apparel Company division were transferred to a
newly-formed direct subsidiary of the Company named Delta Apparel, Inc. ("Delta
Apparel") or to a subsidiary of Delta Apparel, (ii) all of the assets and
operations of the Duck Head Apparel Company division were transferred to another
newly-formed direct subsidiary of the Company named Duck Head Apparel Company,
Inc. ("Duck Head") or to a subsidiary of Duck Head, and (iii) the Company's
subsidiary Delta Mills, Inc., which includes all of the assets and operations of
the Delta Mills Marketing Company division, became a direct subsidiary of the
Company.
On June 30, 2000, the Company simultaneously spun-off Delta Apparel and
Duck Head. All of the outstanding common stock of Delta Apparel and all of the
outstanding common stock of Duck Head were distributed to the shareholders of
the Company pro rata based on their record ownership on June 19, 2000 of the
Company's common stock.
In connection with the spin-offs, E. Erwin Maddrey, II resigned as
President and Chief Executive Officer of the Company (though he remains a
director of the Company), Jane H. Greer resigned as Vice President and Secretary
of the Company, David R. Palmer resigned as Controller of the Company and Brenda
L. Jones resigned as Assistant Secretary of the Company.
ITEM 1
ELECTION OF DIRECTORS
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 six Directors shall be elected at the
Annual Meeting. The shareholders' common stock may not be voted cumulatively in
the election of Directors.
The following six 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. Except
as otherwise noted below, the business address of each nominee is Delta Woodside
Industries, Inc., 100 Augusta Road (zip code 29601),Post Office Box 6126,
Greenville, South Carolina 29606. 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.
2
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION DIRECTOR SINCE (1)
<S> <C> <C>
William F. Garrett (59) President and Chief Executive Officer 1998
of the Company (2)
C. C. Guy (67) Retired Businessman 1984
Shelby, North Carolina (3) (8) (9)
Dr. James F. Kane (68) Dean Emeritus of the College of 1986
Business Administration of the
University of South Carolina
Columbia, South Carolina (4) (8) (9)(10)
Dr. Max Lennon (60) President of Mars Hill College 1986
Mars Hill, North Carolina (5) (8) (9)(10)(11)
E. Erwin Maddrey, II (59) President of Maddrey & Associates 1984
Greenville, South Carolina (6)(11)
Buck A. Mickel (44) President and Chief Executive Officer 1984
of RSI Holdings, Inc.
Greenville, South Carolina (7) (9)(11)
<FN>
(1) Includes service as a director of the Company'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 the Company. Mr. Garrett became President
and Chief Executive Officer of the Company in June 2000. Mr. Garrett is also a
director of Delta Apparel and Duck Head.
(3) 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
Apparel and Duck Head.
(4) 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 Apparel, Duck Head and Glassmaster Company.
(5) 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
Apparel, Duck Head and Duke Power Company.
3
<PAGE>
(6) 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
consulting services. He also serves as a director of Delta Apparel, Duck Head,
and Kemet Corporation.
(7) 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 Apparel and Duck Head.
(8) Member of Audit Committee.
(9) Member of Compensation Committee.
(10) Member of Compensation Grants Committee.
(11) Member of Corporate Governance Committee.
</FN>
</TABLE>
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
fourteen times during the fiscal year ended June 30, 2000. The Compensation
Committee and the Compensation Grants Committee of the Company met five times,
and the Audit Committee of the Company met three times during the fiscal year.
The Corporate Governance Committee did not meet during the fiscal year. 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, establishes and
maintains 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
existing incentive stock award plan (the "Old Incentive Stock Award Plan") and
the proposed New Incentive Stock Award Plan and options under the Company's
previous stock option plan (the "Old Stock Option Plan") and the proposed New
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. Pursuant to the Company's
bylaws, shareholder nominations must be in writing and must be received by the
Company no later than (i) 120 days prior to the first anniversary of the last
annual meeting if the election is to take place at an annual meeting of
shareholders or (ii) the close of business on the tenth day after notice of the
meeting is first given to shareholders if the election is to take place at a
special meeting of the shareholders. The written nomination must include (a) the
name of the shareholder who intends to make the nomination and the name(s) of
the nominee(s), (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 and certain
information about record ownership, (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
4
<PAGE>
of each nominee to serve as a director of the Company and (f) any other
information the Company may reasonably request. Shareholders must also comply
with the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the rules promulgated thereunder in making director
nominations. Copies of the Company's bylaws may be obtained by writing or
calling the Company at 100 Augusta Road (29601), Post Office Box 6126,
Greenville, South Carolina 29606, Telephone (864) 255-4122, attention: William
H. Hardman, Secretary.
STOCK OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT
The following table sets forth certain information as of September 20,
2000, regarding the beneficial ownership of the Company's common stock by (i)
persons beneficially owning in any case 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.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
BENEFICIAL OWNER OWNED PERCENTAGE
<S> <C> <C>
Reich & Tang Asset Management L. P. (1) 2,893,000 12.0%
600 Fifth Avenue
New York, New York 10020
Franklin Resources, Inc. (2) 2,240,000 9.3%
Franklin Advisory Services, Inc.
Charles B. Johnson
Rupert H. Johnson, Jr.
777 Mariners Island Boulevard
San Mateo, California 94404
Dimensional Fund Advisors Inc. (3) 1,942,920 8.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
E. Erwin Maddrey, II (4) 3,475,936 14.4%
233 North Main Street, Suite 200
Greenville, SC 29601
Bettis C. Rainsford (5) 3,329,700 13.8%
108-1/2 Courthouse Square
Post Office Box 388
Edgefield, SC 29824
Buck A. Mickel (6) (7) 1,587,428 6.6%
Post Office Box 6721
Greenville, SC 29606
Micco Corporation (7) 1,240,634 5.1%
Post Office Box 795
Greenville, SC 29602
5
<PAGE>
Minor H. Mickel (7) (8) 1,578,051 6.5%
415 Crescent Avenue
Greenville, SC 29605
Minor M. Shaw (7) (9) 1,522,847 6.3%
Post Office Box 795
Greenville, SC 29602
Charles C. Mickel (7) (10) 1,496,944 6.2%
Post Office Box 6721
Greenville, SC 29606
William F. Garrett (11) 336,725 1.4%
C. C. Guy (12) 38,499 (19)
James F. Kane (13) 40,559 (19)
Max Lennon (14) 28,815 (19)
William H. Hardman, Jr. (15) 30,541 (19)
Robert W. Humphreys (16) 89,976 (19)
Donald C. Walker (17) 16,475 (19)
All current directors and executive officers
as a group (8 Persons) (18) 5,554,978 23.0%
----------------------
<FN>
(1) This information is based on confirmation obtained on September 20,
2000 and on a Schedule 13F that was filed on August 11, 2000 with the Securities
and Exchange Commission by Reich & Tang Asset Management L. P. ("Reich & Tang")
with respect to the Company's common stock. In their most recent amendment to
Schedule 13G, filed with the Securities and Exchange Commission on February 15,
2000, Reich & Tang reported that, with respect to the Company's common stock, it
had shared voting power and shared dispositive power with respect to all of the
shares shown. The amendment reported that the shares of the Company's common
stock were held on behalf of certain accounts for which Reich & Tang provides
investment advice on a fully discretionary basis. The amendment reported that
none of such accounts has an interest with respect to more than 5% of the
outstanding shares of the Company's common stock.
(2) This information is based on confirmation obtained on September 19,
2000, on a Schedule 13F that was filed on August 2, 2000 with the Securities and
Exchange Commission by Franklin Resources, Inc. ("FRI") and on an amendment to
Schedule 13G filed by FRI with the Securities and Exchange Commission on January
20, 2000 with respect to the Company's common stock. In the amendment, FRI
reported that, with respect to the Company's common stock, the shares shown in
the table above were beneficially owned by one or more investment companies or
other managed accounts that are advised by one or more direct and indirect
investment advisory subsidiaries of FRI. The amendment reported that the
investment advisory subsidiary(ies) have investment and/or voting power over the
securities owned by their investment advisory clients. Accordingly, such
subsidiary(ies) may be deemed to be the beneficial owner of the shares shown in
the table. The amendment reported that Charles B. Johnson and Rupert H. Johnson,
Jr. (the "FRI Principal Shareholders") (each of whom has the same business
address as FRI) each own in excess of 10% of the outstanding common stock and
are the principal shareholders of FRI and may be deemed to be the beneficial
owners of securities held by persons and entities advised by FRI subsidiaries.
The amendment reported that one of the investment advisory subsidiaries,
Franklin Advisory Services, Inc. (whose address is One Parker Plaza, Sixteenth
6
<PAGE>
Floor, Fort Lee, New Jersey 07024), has sole voting and dispositive power with
respect to all of the shares shown. FRI, the FRI Principal Shareholders and the
investment advisory subsidiaries disclaim any economic interest or beneficial
ownership in the shares shown in the table above and are of the view that they
are not acting as a "group" for purposes of the Securities Exchange Act of 1934,
as amended.
(3) This information is based on confirmation obtained on September 19,
2000 and on an amendment to Schedule 13G filed on February 3, 2000 with the
Securities and Exchange Commission by Dimensional Fund Advisors Inc.
("Dimensional") with respect to the Company's common stock. Dimensional reported
in the amendment that it had sole voting power and sole dispositive power with
respect to all of the shares shown. The amendment reports that Dimensional
furnishes investment advice to four investment companies and serves as
investment manager to certain other investment vehicles, including commingled
group trusts, that all of the shares of the Company's common stock were owned by
such investment companies or investment vehicles, that Dimensional disclaims
beneficial ownership of such securities and that, to the knowledge of
Dimensional, no such investment company or investment vehicle client owned more
than 5% of the outstanding shares of the Company's common stock.
(4) Mr. Maddrey is a director of the Company and was its President and
Chief Executive Officer until June 2000. The number of shares shown as
beneficially owned by Mr. Maddrey includes approximately 33,492 shares allocated
to Mr. Maddrey's account in the Company's Employee Stock Purchase Plan, 431,470
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 1,074 shares allocated to the
account of Mr. Maddrey in the Company's Savings and Investment Plan (the "401(k)
Plan"). Mr. Maddrey is fully vested in the shares allocated to his account in
the 401(k) Plan.
(5) This information was provided to the Company by Mr. Rainsford on
October 4, 2000. Mr. Rainsford was a director of the Company until September 14,
2000 and until October 1, 1999 was the Executive Vice President, Treasurer and
Chief Financial Officer of the Company. The number of shares shown as
beneficially owned by Mr. Rainsford includes 35,445 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 167 shares allocated to the account of Mr. Rainsford in the 401(k)
Plan. Mr. Rainsford is fully vested in the shares allocated to his account in
the 401(k) Plan.
(6) Buck A. Mickel is a director of the Company. The number of shares shown
as beneficially owned by Buck A. Mickel includes 343,923 shares directly owned
by him, all of the 1,240,634 shares owned by Micco Corporation, and 2,871shares
held by him as custodian for a minor. See Note (7).
(7) Micco Corporation owns 1,240,634 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 337,417 shares
of the Company's common stock. Buck A. Mickel, directly or as custodian for a
minor, owns 346,794 shares of the Company's common stock. Charles C. Mickel,
directly or as custodian for his children, owns 256,210 shares of the Company's
common stock. Minor M. Shaw, directly or as custodian for her children, owns
267,726 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 14,487 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 2,748 shares of the Company's common stock held by her as
custodian for her children. The spouse of Charles C. Mickel owns 100 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 3,510 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 2,871 shares of the Company's common
stock held by him as custodian for a minor.
(8) The number of shares shown as beneficially owned by Minor H. Mickel
includes 337,417 shares directly owned by her and all of the 1,240,634 shares
owned by Micco Corporation. See Note (7).
7
<PAGE>
(9) The number of shares shown as beneficially owned by Minor M. Shaw
includes 267,726 shares owned by her directly or as custodian for her children,
approximately 14,487 shares beneficially owned by her husband through an
individual retirement account or as custodian for their children, and all of the
1,240,634 shares owned by Micco Corporation. See Note (7).
(10) The number of shares shown as beneficially owned by Charles C. Mickel
includes 256,210 shares owned by him directly or as custodian for his children,
100 shares owned by his wife and all of the 1,240,634 shares owned by Micco
Corporation. See Note (7).
(11) William F. Garrett is President and Chief Executive Officer and a
director of the Company. The number of shares shown as beneficially owned by Mr.
Garrett includes approximately 2,087shares allocated to his account in the
401(k) Plan. Mr. Garrett is fully vested in the shares allocated to his account
in the 401(k) Plan. Included in the table are 95,000 unissued shares covered by
options that are exercisable within 60 days after September 20, 2000. The number
of shares shown as beneficially owned does not include any options or awards
under the Companies New Stock Option Plan and New Incentive Stock Award Plan.
(12) C. C. Guy is a director of the Company. The number of shares shown as
beneficially owned by C. C. Guy includes 18,968 shares owned by his wife, as to
which shares Mr. Guy disclaims beneficial ownership.
(13) Dr. Kane is a director of the Company. The shares shown as
beneficially owned by him are held in a Keogh account or an IRA account.
(14) Dr. Lennon is a director of the Company.
(15) William H. Hardman, Jr. is a Vice President and the Chief Financial
Officer, Secretary and Treasurer of the Company. The number of shares shown as
beneficially owned by Mr. Hardman includes approximately 1,261shares allocated
to his account in the 401(k) Plan. Mr. Hardman is fully vested in the shares
allocated to his account in the 401(k) Plan. Included in the table are 12,500
unissued shares covered by options that are exercisable within 60 days after
September 20, 2000. The number of shares shown as beneficially owned does not
include any options or awards under the Companies New Stock Option Plan and New
Incentive Stock Award Plan.
(16) Mr. Humphreys is President of Delta Apparel and until November 1999
was Vice President-Finance and Assistant Secretary of the Company. The number of
shares shown as beneficially owned by Mr. Humphreys includes approximately 1,137
Delta Woodside shares allocated to Mr. Humphreys' account in the Delta Woodside
401(k) Plan. Mr. Humphreys is fully vested in the shares allocated to his
account in the Delta Woodside 401(k) Plan. It also includes approximately 1,752
Delta Woodside shares allocated to Mr. Humphreys' account in Delta Woodside's
employee stock purchase plan. The number of shares shown in the table includes
an aggregate of 22,500 unissued Delta Woodside shares subject to employee stock
options under Delta Woodside's stock option plan, all of which are currently
exercisable.
(17) Donald C. Walker is a Vice President and the Controller and Assistant
Secretary of the Company. The number of shares shown as beneficially owned by
Mr. Walker includes approximately 664 shares allocated to his account in the
401(k) Plan. Mr. Walker is fully vested in the shares allocated to his account
in the 401(k) Plan. Included in the table are 3,750 unissued shares covered by
options that are exercisable within 60 days after September 20, 2000. The number
of shares shown as beneficially owned does not include any options or awards
under the Companies New Stock Option Plan and New Incentive Stock Award Plan.
(18) Includes all shares deemed to be beneficially owned by any current
director or executive officer. Includes 3,161 shares of the Company's common
stock held for the executive officers on the September 20, 2000 record date for
the Annual Meeting by the 401(k) Plan. Each participant in the 401(k) Plan has
the right to direct the manner in which the trustee of the Plan votes the shares
held by the 401(k) Plan that are allocated to such participant's account. Except
for shares as to which such a direction is made, the shares held by the 401(k)
Plan will not be voted. The number of shares shown in the table includes an
aggregate of 111,250 unissued shares subject to employee stock options held by
executive officers that are or may be exercisable within 60 days or less.
8
<PAGE>
(19) Less than one percent.
</FN>
</TABLE>
EXECUTIVE OFFICERS
The following provides certain information regarding the current executive
officers of the Company.
<TABLE>
<CAPTION>
NAME AND AGE POSITION
<S> <C>
William F. Garrett (59) President and Chief Executive Officer (1)
William H. Hardman, Jr. (59) Vice President, Chief Financial Officer,
Secretary and Treasurer (2)
Donald C. Walker (56) Vice President, Controller
and Assistant Secretary (3)
----------------------------
<FN>
(1) See information under "Election of Directors."
(2) William H. Hardman, Jr. was Vice President of Administration for Delta
Mills Marketing Company, a division of a subsidiary of the Company, from 1986
until June of 2000 when he was elected Vice President, Chief Financial Officer,
Secretary and Treasurer of the Company.
(3) Donald C. Walker was Controller of Delta Mills Marketing Company, a
division of a subsidiary of the Company, from 1987 until June 2000 when he was
elected Vice President, Controller and Assistant Secretary of the Company.
</FN>
</TABLE>
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 certain information for the fiscal years
ended June 30, 2000, July 3, 1999, and June 27, 1998 respecting the compensation
earned by the current Chief Executive Officer and the other current executive
officers who earned salary and bonus in fiscal 2000 in excess of $100,000. Also
included is information about the Company's former Chief Executive Officer and
three other former executive officers who were three of the four most-highly
compensated officers other than the Chief Executive Officer during fiscal 2000
but who were no longer officers as of June 30, 2000. All of the forgoing persons
are referred to collectively as the "Named Executives."
9
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------------------------- -----------------------------
Awards Payouts
------ -------
Other All
Annual Securities Other
Compen- Underlying LTIP Compen-
Name and Salary Bonus sation Options Awards sation
Principal Position Year ($)(a) ($)(a)(b) ($)(c) (#)(d) ($)(e) ($)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
William F. Garrett 2000 420,000 520,000(f) 17,518 0 306,000 34,785(o)(v)
President & Chief 1999 401,539 533,250 19,814 0 0 43,522
Executive Officer 1998 374,423 685,500 16,102 50,000(m) 0 16,163
William H. Hardman, Jr. 2000 176,500 50,000 7,382 0 0 6,179(p)(v)
Vice President, Chief 1999 153,231 92,616 8,350 0 0 7,146
Financial Officer, 1998 146,385 108,992 5,972 3,500(m) 0 3,490
Treasurer & Secretary
Donald C.Walker 2000 89,537 16,000 1,560 0 0 3,546(q)(v)
Vice President, 1999 88,553 34,851 1,765 0 0 3,870
Controller & 1998 85,273 42,798 1,281 750(m) 0 2,214
Assistant Secretary
E. Erwin Maddrey II 2000 499,352 0 11,677 0 500,000 31,248(r)(v)(w)
former President & 1999 476,923 80,962 24,556 0 0 33,607
Chief Executive 1998 500,000 108,243 20,127 20,000(n) 0 36,563
Officer (g)
Bettis C. Rainsford 2000 64,015(k) 0 9,341 0 360,000 593,412(s)(u)(v)
former Executive VP, 1999 376,923(k) 64,758 19,645 0 0 15,866
CFO & Treasurer (h) 1998 450,000(k) 86,579 16,102 16,000(n) 0 16,012
Robert W. Humphreys 2000 311,538 908,700(l) 7,007 0 117,000 6,676(t)(v)
former VP-Finance and 1999 223,077 94,286 14,733 0 0 543,449
Assistant Secretary (i) 1998 192,116 16,231 10,538 0 0 52,616
Jane H. Greer 2000 207,692 0 5,549 0 104,100 2,432(u)(v)
former Vice President 1999 200,000 53,334 12,862 0 0 2,701
& Secretary (j) 1998 173,500 64,915 10,538 0 0 1,893
<FN>
(a) The amounts shown in the column include sums the receipt of which has
been deferred pursuant to the 401(k) Plan or the Company's deferred compensation
plan.
(b) Amounts in this column are cash bonuses paid to reward performance.
Bonuses are recorded in the above table in the year for which they were earned,
though such bonuses are actually paid in the following fiscal year.
(c) The amounts in this column were paid by the Company in connection with
the vesting of awards under the Company's Old 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. Certain service awards vested on the
last day of each of fiscal years 1998 and 1999. The tax assistance related to
the vesting of these awards is earned, and recorded above, in the year vested
though such amounts are actually paid in the fiscal year after the fiscal year
in which they are earned.
10
<PAGE>
(d) For purposes of this table, awards under the Company's Old Incentive
Stock Award Plan are treated as options.
(e) 62% of each award constituted a grant of Common Stock valued at $1.50
per share, the closing price for the Common Stock on March 15, 2000, the date of
Board authorization of issuance. The remainder of each award consisted of cash
to pay expected income taxes on the value of the total award. These awards were
made in connection with the termination of the Company's Long Term Incentive
Plan prior to the spin-offs of Delta Apparel and Duck Head on June 30, 2000.
(f) Includes $100,000 earned by Mr. Garrett in fiscal 2000 but paid in
fiscal 2001 as the first of seven payments constituting a special bonus for
prior service and as an incentive to remain in the employment of the Company. If
Mr. Garrett remains in the service of the Company for the full payment period,
the total bonus will be $1,000,000.
(g) Mr. Maddrey resigned from service as an officer of the Company
effective June 29, 2000. The information in the table includes Mr. Maddrey's
compensation from the Company for all of fiscal 1998, fiscal 1999 and fiscal
2000.
(h) Mr. Rainsford resigned from service as an officer of the Company
effective October 1, 1999. The information in the table includes Mr. Rainsford's
compensation from the Company for all of fiscal 1998, fiscal 1999 and fiscal
2000.
(i) Mr. Humphreys was elected Vice President-Finance and Assistant
Secretary of the Company in May 1998, and he resigned from service as an officer
of the Company in November 1999. In April 1999, Mr. Humphreys was elected
President and chief executive officer of the Delta Apparel Company division of a
subsidiary of the Company. Since December 1999, he has been President and chief
executive officer of Delta Apparel, which was a subsidiary of the Company until
it was spun off in June 2000. The information in the table includes Mr.
Humphreys' compensation for all of fiscal 1998, fiscal 1999 and fiscal 2000.
(j) Jane H. Greer became associated with Old Delta Woodside's predecessors
in July 1986, and was elected a Vice President of Old Delta Woodside in November
1986, in charge of human resources and other related areas, Assistant Secretary
of Old Delta Woodside in November 1987 and Secretary of Old Delta Woodside in
August 1988. She served as Vice President and Secretary of the Company from
November 15, 1989 until June 29, 2000.The information in the table includes Ms.
Greer's compensation from the Company for all of fiscal 1998, fiscal 1999 and
fiscal 2000.
(k) Of this amount $150,000 was paid in each of fiscal 1999 and 1998 and
$37,500 was paid in fiscal 2000 to the Rainsford Development Corporation, a
company wholly owned by Mr. Rainsford.
(l) Mr. Humphrey's fiscal 2000 bonus was paid by Delta Apparel.
(m) During fiscal 1998, Mr. Garrett, Mr. Hardman and Mr. Walker were
granted options for 50,000shares, 3,500 shares and 750 shares, respectively,
under the Company's Old Stock Option Plan.
(n) During fiscal 1998, Mr. Maddrey and Mr. Rainsford were granted awards
covering 20,000 shares and 16,000 shares, respectively, under the Company's Old
Incentive Stock Award Plan.
(o) The fiscal 2000 amount represents a $696 Company contribution allocated
to Mr. Garrett's account in the 401(k) Plan, $3,653 contributed by the Company
to the Company's deferred compensation plan as payment for the amount of Company
contributions to the 401(k) Plan for fiscal year 1999 that were not made for Mr.
Garrett because of Internal Revenue Code contribution limitations, $2,843
contributed by the Company to the 401(k) Plan for Mr. Garrett with respect to
his compensation deferred under the 401(k) Plan, and $27,593 earned on Mr.
Garrett's deferred compensation at a rate in excess of 120% of the Federal
mid-term rate.
(p) The fiscal 2000 amount represents a $696 Company contribution allocated
to Mr. Hardman's account in the 401(k) Plan, $445 contributed by the Company to
the Company's deferred compensation plan as payment for the amount of Company
contributions to the 401(k) Plan for fiscal year 1999 that were not made for Mr.
11
<PAGE>
Hardman because of Internal Revenue Code contribution limitations, $1,580
contributed by the Company to the 401(k) Plan for Mr. Hardman with respect to
his compensation deferred under the 401(k) Plan, and $3,458 earned on Mr.
Hardman's deferred compensation at a rate in excess of 120% of the Federal
mid-term rate.
(q) The fiscal 2000 amount represents a $560 Company contribution allocated
to Mr. Walker's account in the 401(k) Plan, $17 contributed by the Company to
the Company's deferred compensation plan as payment for the amount of Company
contributions to the 401(k) Plan for fiscal year 1999 that were not made for Mr.
Walker because of Internal Revenue Code contribution limitations, $1,089
contributed by the Company to the 401(k) Plan for Mr. Walker with respect to his
compensation deferred under the 401(k) Plan, $363 contributed by the Company to
the Deferred Compensation Plan for Mr. Walker with respect to his compensation
deferred under the Deferred Compensation Plan, and $1,517 earned on Mr. Walker's
deferred compensation at a rate in excess of 120% of the Federal mid-term rate.
(r) The fiscal 2000 amount represents the $28,003 premium paid by the
Company for $10 million of life insurance on the life of Mr. Maddrey, a $696
Company contribution allocated to Mr. Maddrey's account in the 401(k) Plan,
$1,849 contributed by the Company to the Company's deferred compensation plan as
payment for the amount of Company contributions to the 401(k) Plan for fiscal
year 1999 that were not made for Mr. Maddrey because of Internal Revenue Code
contribution limitations, and $700 earned on Mr. Maddrey's deferred compensation
at a rate in excess of 120% of the Federal mid-term rate.
(s) The fiscal 2000 amount represents a $529,808 severance payment
($213,462 of which was paid to the Rainsford Development Corporation, a company
wholly owned by Mr. Rainsford), a $37,500 management fee, a $18,000 non-employee
director's fee, the $6,702 premium paid by the Company for $10 million of life
insurance on the life of Mr. Rainsford, a $696 Company contribution allocated to
Mr. Rainsford's account in the 401(k) Plan, $667 contributed by the Company to
the Company's deferred compensation plan as payment for the amount of Company
contributions to the 401(k) Plan for fiscal year 1999 that were not made for Mr.
Rainsford because of Internal Revenue Code contribution limitations, and $39
earned on Mr. Rainsford's deferred compensation at a rate in excess of 120% of
the Federal mid-term rate.
(t) The fiscal 2000 amount represents a $696 Company contribution allocated
to Mr. Humphreys' account in the 401(k) Plan, $942 contributed by the Company to
the Company's deferred compensation plan as payment for the amount of Company
contributions to the 401(k) Plan for fiscal year 1999 that were not made for Mr.
Humphreys because of Internal Revenue Code contribution limitations, $2,100
contributed by the Company to the 401(k) Plan for Mr. Humphreys with respect to
his compensation deferred under the 401(k) Plan, $532 contributed by the Company
to the deferred compensation plan for Mr. Humphreys with respect to his
compensation deferred under the deferred compensation plan, and $2,407 earned on
Mr. Humphreys' deferred compensation at a rate in excess of 120% of the Federal
mid-term rate.
(u) The fiscal 2000 amount represents a $696 Company contribution allocated
to Ms. Greer's account in the 401(k) Plan, $490 contributed by the Company to
the Company's deferred compensation plan as payment for the amount of Company
contributions to the 401(k) Plan for fiscal year 1999 that were not made for Ms.
Greer because of Internal Revenue Code contribution limitations, $1,077
contributed by the Company to the 401(k) Plan for Ms. Greer with respect to her
compensation deferred under the 401(k) Plan, and $170 earned on Ms. Greer's
deferred compensation at a rate in excess of 120% of the Federal mid-term rate.
(v) The 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.
(w) Until June 2000, the Company paid the premiums due for life insurance
policies that totaled $10 million on each of the life of Mr. Maddrey and the
life of Mr. Rainsford. The proceeds of these policies were payable to the
beneficiary or beneficiaries chosen by Mr. Maddrey or Mr. Rainsford, as the case
may be. These life insurance policies were established in connection with the
First Refusal Agreements described in this Proxy Statement under the heading
"Related Party Transactions."
</FN>
</TABLE>
12
<PAGE>
The amounts shown in the table above do not include reimbursement by the
Company or its subsidiaries for certain automobile expenses, club memberships
and other items. The non-business personal benefit to any Named Executive of
these amounts does not exceed the lesser of $50,000 or 10% of the Named
Executive's total salary and bonus.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides certain information respecting the exercise by
any Named Executive during fiscal 2000 of awards granted under the Company's Old
Incentive Stock Award Plan and options granted under the Company's Old Stock
Option Plan, and the fiscal year end value of any unexercised outstanding awards
and options. For purposes of this table, awards under the Company's Old
Incentive Stock Award Plan are treated as options.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at FY-End at FY-End
Acquired on Value (#) ($)(c)
Exercise Realized ------------------------------ ----------------------------
Name (#)(a) ($)(b) Exercisable Unexercisable Exercisable Unexercisable
--------------- ------------- ------------- ---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
William F.
Garrett 8,000 20,920 95,000 0 0 --
William H.
Hardman, Jr. 3,400 8,891 12,500 0 0 --
Donald C.
Walker 1,000 2,615 3,750 0 0 --
E. Erwin
Maddrey, II 5,378 14,063 0 0 -- --
Bettis C.
Rainsford 4,302 11,250 0 0 -- --
Robert W.
Humphreys 3,227 8,439 22,500 0 0 --
Jane H.
Greer 3,227 8,439 22,500 0 0 --
----------------------------
<FN>
(a) All amounts in this column represent shares acquired by exercise of
incentive stock awards.
(b) Based on the closing price of the Company's common stock on October 1,
1999, the date of vesting of the applicable incentive stock awards, of
$2.625 per share.
(c) Based on the closing sales price of $2.125 per share on June 30, 2000, none
of the unexercised options was in-the-money.
</FN>
</TABLE>
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
In 1997, the Company's board of directors adopted and the Company'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 the Company that, depending on the attainment of certain
performance measurement goals over a three-year period, could translate into
stock options for the Company's shares being granted to participants in the
plan. In connection with the exercise of any option granted under the plan, the
Company 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.
No award grants complying with all the terms of the plan were made. Around
the time of adoption of the plan, however, the Company did identify the
individuals who would be plan participants, determined performance targets for
these individuals and communicated these actions to the affected individuals.
13
<PAGE>
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 Delta
Apparel and Duck Head and the efforts of the key executives and directors on
behalf of the Company leading up to the spin-offs of Delta Apparel and Duck
Head, the Company's board (based on resolutions of its compensation grants and
compensation committees) decided that Company shares would be issued and cash
would be paid prior to the record date for the Delta Apparel and Duck Head
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) the Company would issue Company shares and make cash payments
to the individuals identified for participation in the plan, (b) as a condition
to receipt of those Company shares and that cash, those individuals would
surrender any rights they may have under the plan and (c) no further awards,
options or Company shares would be granted or issued under the LTIP.
The number of Company shares to be issued and the cash amounts to be paid
were determined by the Company's compensation grants and compensation committees
and the Company's board. In determining the number of Company shares to be
issued to each participant, the Company's compensation grants committee,
compensation committee and board used the closing sale price of the Company
common stock on March 15, 2000 ($1.50 per share).
The table below sets forth the Company shares that were thereby issued and
the cash that was thereby paid to the Named Executive Officers.
LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
Number of
Shares Amount of Cash
Name (#) ($)
--------------------------------------- ----------------- ---------------------
William F. Garrett 126, 480 116,280
William H. Hardman, Jr. 0 0
Donald C. Walker 0 0
E. Erwin Maddrey, II 206,667 190,000
Bettis C. Rainsford 148,800 136,800
Robert W. Humphreys 48,380 44,460
Jane H. Greer 43,028 39,558
EMPLOYMENT CONTRACTS AND SEVERANCE ARRANGEMENTS
In recognition of William F. Garrett's past service to the Company and in
order to provide him with an additional incentive to remain with the Company,
the Company's board in March 2000 authorized the payment to him of $100,000 in
connection with the spin-offs of Delta Apparel and Duck Head 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 the Company or such employment is terminated by the Company 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 the Company and he does not remain with the Company.
14
<PAGE>
Unless otherwise provided by agreement, each of the Company's executive
officers is eligible to participate in the Company's severance plan for salaried
employees. In the event a covered employee's employment terminates in specified
circumstances, this plan provides that the employee will receive severance equal
in amount to one week's base salary for each year of service credit, with a
minimum of two weeks' base salary. E. Erwin Maddrey, II was a participant in the
Company's severance plan, and in connection with the termination of his service
as an officer with the Company on June 29, 2000, the Company paid Mr. Maddrey
$147,115 of severance in July 2000 in accordance with the normal provisions of
this plan. Jane H. Greer was a participant in the Company's severance plan, and
in connection with the termination of her service as an officer of the Company
on June 29, 2000, the Company paid Ms. Greer $53,846 of severance in July 2000
in accordance with the normal provisions of this plan.
During fiscal 1999, the Company's Board of Directors began to consider
certain strategic alternatives to enhance shareholder value, some of which might
lead to a change in control of all or a significant part of the Company. In
order to provide an incentive for certain of the Company's key executives to
remain in the Company's employ while such alternatives were examined, the
Company entered into severance agreements in December 1998 with, among others,
Jane H. Greer and Robert W. Humphreys. Pursuant to each of these agreements, the
Company agreed that, if the applicable officer's position were eliminated
because of downsizing, restructuring or a change of control between the date of
the letter and the end of December 2000, the officer would be paid a severance
payment equal to two years' salary at the time of termination, in addition to
the officer's regular severance. Pursuant to this agreement with her, Ms. Greer
was paid $400,000 of severance by the Company in July 2000.
Robert W. Humphreys served as President of Stevcoknit Fabrics Company, the
knit fabrics division of a subsidiary of the Company from January 1987 to May
1998 and served as Vice President-Finance and Assistant Secretary of the Company
from May 1998 until November 1999. In April 1999, Mr. Humphreys was appointed to
the additional position of President and chief executive officer of Delta
Apparel Company, a division of a subsidiary of the Company. In connection with
this new position, the Company agreed in an April 1999 letter that (a) Mr.
Humphreys' salary was $300,000 effective with the pay period beginning April 26,
1999, (b) he was guaranteed a bonus of $300,000 for the 2000 fiscal year if he
remained in his new position during that year, (c) for fiscal 1999 he would be
on the corporate bonus plan for the first ten months, then at the guaranteed
annual $300,000 rate for the eleventh and twelfth months of fiscal 1999, (d) the
Company would pay his travel and lodging expenses for commuting to the
division's headquarters in Duluth, Georgia, (e) if he remained as President and
chief executive officer of the Delta Apparel business as a spun-off separate
public company (if such a spin-off were to occur), he would participate in a
Delta Apparel bonus plan commencing with the 2001 fiscal year and he would be
granted options under a Delta Apparel performance based stock option plan for
shares equal to approximately five percent of the post-spin-off outstanding
shares of Delta Apparel, (f) the December 1998 severance agreement was modified
to provide that the two years' severance amount, based on a $200,000 salary
rate, was earned in fiscal 1999 and he would no longer be entitled to regular
severance and (g) if the restructuring/spin-offs under consideration of the
Delta Apparel business and the Duck Head Apparel business did not occur, he
would be elected as a member of the Company's Board of Directors. Delta Apparel
assumed all of the Company's obligations under this letter in connection with
the spin-off of Delta Apparel.
In connection with the termination of Bettis C. Rainsford's employment with
the Company, the Company 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.
Pursuant to amendments to Delta Woodside's Old Stock Option Plan and her
stock options, all of Jane H. 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.
DIRECTOR COMPENSATION
For fiscal 2000, the Company paid each director who was not an officer of
the Company an annual cash fee of $20,000, plus it provided an annual payment of
approximately $10,000 for each such director with which shares of the Company's
15
<PAGE>
common stock were purchased. Beginning in fiscal 2001, non-employee directors
who are newly appointed or elected for the first time will receive an annual
cash fee of $13,334 and a payment for the purchase of stock of $6,666. Also
beginning in fiscal 2001, continuing non-employee directors will receive an
annual cash fee of $11,200 and a payment to purchase stock of $5,600. The
Company expects that the amounts for continuing non-employee directors will be
increased over five years such that in fiscal 2005, continuing non-employee
directors will receive the same amounts as newly appointed or elected
non-employee directors. The shares purchased may be newly issued or acquired in
the open market for such purpose.
Each director is also reimbursed for his reasonable travel expenses in
attending each meeting. Each non-officer director is 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 four quarterly board meetings
Until August 1999, the Company had in place a Directors' Charitable Giving
Program covering each director of the Company. Under the program, after the
death of a director, the Company 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 the Company 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 the Company 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.
As described above under the subheading "Long-Term Incentive Plan Awards in
Last Fiscal Year", Company shares and cash were paid to the intended
participants in the LTIP in connection with the spin-offs of Delta Apparel and
Duck Head and the termination of the LTIP. The table below sets forth the
Company shares that were thereby issued and the cash that was thereby paid to
the non-employee directors of the Company:
LONG TERM INCENTIVE PLAN AWARDS
TO NON-EMPLOYEE DIRECTORS IN LAST FISCAL YEAR
Shares of
Name Cash Award Common Stock
--------------------------------- ----------------- ---------------------
C.C. Guy $12,397.50 13,485
Dr. James F. Kane $12,397.50 13,485
Max Lennon $12,255.00 13,330
Buck A Mickel $12,017.50 13,072
Estate of Buck Mickel (a) $11,780.00 12,813
(a) 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.
16
<PAGE>
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 FOLLOWING PERFORMANCE GRAPH AND THE COMPENSATION
COMMITTEE REPORT BELOW SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH
FILING.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly change in the
cumulative total stockholder return, assuming dividend reinvestment, on the
Company's common stock with (1) the cumulative total return, assuming dividend
reinvestment, on the Standard & Poor's 500 Stock Index, (2) a peer group,
constructed by the Company, consisting of eight corporations (not including the
Company) that are engaged in the manufacture and sale of textile products and
apparel and (3) a peer group, constructed by the Company consisting of three
corporation (not including the Company) that are engaged in the manufacture and
sale only of textile products.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG DELTA WOODSIDE INDUSTRIES, INC.,
S&P 500 STOCK INDEX & TWO PEER GROUPS
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------------------------------------------
6/95 6/96 6/97 6/98 6/99 6/00
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Delta Woodside Industries, Inc. 100.00 70.26 92.54 72.42 83.48 30.20
S&P 500 100.00 126.00 169.73 220.92 271.19 290.85
Combined Textiles & Apparel Peer Group 100.00 105.97 122.03 112.34 76.67 62.35
Textiles Only Peer Group 100.00 105.55 96.66 104.78 64.28 25.14
</TABLE>
This Performance Graph assumes that $100 was invested in the common stock of
Delta Woodside Industries, Inc. and comparison groups on June 30, 1995 and that
all dividends have been reinvested.
The Combined Textiles & Apparel Peer Group is composed of the following
companies:
Galey & Lord, Inc. Russell Corp. Texfi Industries, Inc.
Guilford Mills, Inc. Salant Corp. Tultex Corp.
Haggar Corp. Springs Industries, Inc.
The Textiles Only Peer Group is composed of the following companies:
Galey & Lord, Inc. Burlington Industries, Inc. Cone Mills Corporation
17
<PAGE>
Historically, the Company has included the Combined Textiles & Apparel Peer
Group because the Company had both a textiles division, the Delta Mills
Marketing Company division, and two apparel divisions, the Delta Apparel Company
and Duck Head Apparel Company divisions. Following the spin-offs of Delta
Apparel and Duck Head, the Company will no longer be engaged in the apparel
business and expects to use the Textiles Only Peer Group going forward.
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. 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 the peer group of companies shown on the Performance Graph above.
Historically, the peer group companies were certain textile and apparel
companies currently listed on the New York Stock Exchange. Going
forward, the peer group companies will be certain textile companies
currently listed on the New York Stock Exchange.
COMPENSATION OF EXECUTIVE OFFICERS OTHER THAN MR. MADDREY
The Company's executive officers other than Mr. Maddrey (the "Other
Officers") received compensation for fiscal 2000 that included both fixed and
performance-based components. The Other Officers' compensation consisted of one
or more of the following elements: base salary, cash bonuses, the vesting of
options under the Old Stock Option Plan, the vesting of awards under the Old
Incentive Stock Award Plan and, as described above under "Management
Compensation - Long-Term Incentive Plan Awards in Last Fiscal Year", the grant
of stock and payment of cash in connection with the termination of the LTIP.
Cash bonuses to Messrs. Garrett, Hardman and Walker were paid based on the
operating earnings in excess of specified returns on capital employed and other
performance criteria of the Delta Mills Marketing Company operating division.
The cash bonus to Mr. Humphreys was paid based on the operating earnings in
excess of specified returns on capital employed and other performance criteria
of the Delta Apparel Company division. This bonus was actually paid in fiscal
2001 to Mr. Humphreys by Delta Apparel based on the performance of the Delta
Apparel Company division in fiscal 2000. For fiscal 2000, the total cash bonuses
awarded to these Other Officers amounted to approximately 96% of their combined
base salaries.
Each Other Officer participated in the Old Incentive Stock Award Plan which
was approved by the shareholders of the Company in November 1990 and amended by
approval of the shareholders in November 1995 and in November 1997. Awards made
under this plan to the Other Officers have been structured so that sixty percent
of each individual's award will vest by remaining in service with the Company
through predetermined anniversary dates and up to forty percent of each
individual's award will vest if the Company meets specified performance targets
18
<PAGE>
respecting cumulative operating profits. While the number of shares covered by
any award to an Other Officer is not determined by specific, non-subjective
criteria, the determination of such number takes 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 that are deemed relevant to the accomplishment of the purposes of the
plan. The Committees believe that this plan is an important tool to the
achievement of medium-term goals. No incentive stock awards were made during
fiscal 2000 due to the pendency of the spin-offs of Delta Apparel and Duck Head.
Awards covering 158,000 shares were made under the Old Incentive Stock Award
Plan on July 6, 2000. As of September 20, 2000, 371,851 shares remain available
for award under the Old Incentive Stock Award Plan.
Each Other Officer also participated in the Old Stock Option Plan which was
approved by the shareholders of the Company in November 1990, amended by
approval of the shareholders in November 1995 and in November 1997, and
terminated in May 2000. The purpose of this plan was to promote the growth and
profitability of the Company over a longer term by enabling the Company to
attract and retain key and middle level managers of outstanding competence and
by increasing the personal participation of its executives in the Company's
performance by providing these executives with an additional equity ownership
opportunity in the Company. 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 became exercisable in stages over a
period of four years. No stock option grants were made during fiscal 2000 due to
the pendency of the spin-offs of Delta Apparel and Duck Head.
Each Other Officer was also a potential participant in the LTIP. As
described above under "Management Compensation - Long-Term Incentive Plan Awards
in Last Fiscal Year", stock was granted and cash was paid to some of the Other
Officers in connection with the termination of the LTIP.
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. Because the Company did not believe that any Named Executive subject to
Section 162(m) would receive in any fiscal year aggregate compensation not
qualifying as performance-based compensation under Section 162(m) that exceeded
$1,000,000, awards made under the Old Incentive Stock Award Plan and the Old
Stock Option Plan did not satisfy all of the requirements to qualify as
performance-based compensation under Section 162(m). The Committees believe that
the reasons, described above under "Management Compensation - Long-Term
Incentive Plan Awards in Last Fiscal Year", supporting the grant of stock and
payment of cash in connection with the termination of the LTIP outweighed the
fact that the Company may, as a result of Section 162(m), be unable to deduct a
portion of those grants and payments for Federal income tax purposes.
COMPENSATION PAID TO E. ERWIN MADDREY, II
E. Erwin Maddrey, II served as the Company's chief executive officer until
his resignation from that position on June 29, 2000 in connection with the
spin-offs of Delta Apparel and Duck Head.
The compensation of the Chief Executive Officer includes both fixed and
performance-based components.
In setting the base salary level for the Chief Executive Officer, the
Compensation Committee considers the possible bonus awards and attempts to set
the base salary level so that total compensation, including bonuses, will be
near to that of the median of Chief Executive Officers of the peer group of
companies. The Compensation Committee determined effective August 31, 1998 to
reduce the salary of Mr. Maddrey in order to cause more of the compensation
package received by him to be affected by the performance of the Company.
19
<PAGE>
Cash bonuses to the Chief Executive Officer have been made based on a
percentage of the total cash bonuses earned by the Company's operating
divisions. The operating division cash bonuses are based on operating earnings
in excess of specified returns on capital employed and other performance
criteria.
The Committee decided, effective in fiscal year 1998, to increase the
proportion of the Chief Executive Officer's compensation that is affected by
performance criteria. To achieve this objective, beginning in fiscal year 1998
Mr. Maddrey participated in the performance-based cash bonus plan described
above and in the Old Incentive Stock Award Plan. No incentive stock awards were
made during fiscal 2000 due to the pendency of the spin-offs of Delta Apparel
and Duck Head. For the reasons set forth above under "Management Compensation -
Long-Term Incentive Plan Awards in Last Fiscal Year", Mr. Maddrey was granted
stock and paid cash in connection with the termination of the LTIP.
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 served on the Compensation Committee of the
Company's Board of Directors during fiscal 2000: C.C. Guy, Dr. James F. Kane,
Dr. Max Lennon and Buck A. Mickel. The following directors served on the
Compensation Grants Committee of the Company's Board of Directors during fiscal
2000: Dr. James F. Kane and Dr. Max Lennon.
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. 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.
RELATED PARTY TRANSACTIONS
RELATIONSHIPS OR TRANSACTIONS WITH DELTA APPAREL AND DUCK HEAD
BOARDS OF DIRECTORS OF THE COMPANY, DELTA APPAREL AND DUCK HEAD
The following directors of the Company are also directors of Delta Apparel
and Duck Head: 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 the Company, on the one hand, and either Delta Apparel or
Duck Head, on the other hand, these directors could be deemed to have a conflict
of interest with respect to that issue.
PRINCIPAL STOCKHOLDERS OF THE COMPANY, DELTA APPAREL AND DUCK HEAD
In the spin-offs of Delta Apparel and Duck Head, the common stock of each
of Delta Apparel and Duck Head was distributed on June 30, 2000 to the Company's
stockholders pro rata based on such stockholders' record ownership on June 19,
2000 of the Company's common stock. Therefore, immediately following the
spin-offs, the Company's principal stockholders were the same individuals and
entities as Delta Apparel's and Duck Head's principal stockholders, and those
principal stockholders had the same respective percentages of outstanding
20
<PAGE>
beneficial ownership in each of Delta Woodside, Delta Apparel and Duck Head
(assuming no acquisitions or dispositions of shares by those stockholders
between the record date for the Delta Apparel and Duck Head spin-offs and the
completion of those spin-offs).
AGREEMENTS BETWEEN THE COMPANY, DELTA APPAREL AND DUCK HEAD
In connection with the spin-offs, the Company, Delta Apparel and Duck Head
entered into a Distribution Agreement and a Tax Sharing Agreement. In addition,
the Company sold its Rainsford Plant to Delta Apparel. The principal provisions
of the Distribution Agreement, the Tax Sharing Agreement and the sale of the
Rainsford Plant are set forth below.
Distribution Agreement
----------------------
The Company entered into a distribution agreement with Delta Apparel and
Duck Head as of March 15, 2000. The distribution agreement provided for the
procedures for effecting the Delta Apparel spin-off (also called in this
document the Delta Apparel distribution) and the Duck Head spin-off (also called
in this document the Duck Head 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 Delta Apparel distribution and the Duck Head distribution with
respect to, among other things, indemnification arrangements and employee
benefit arrangements.
Intercompany reorganization
Pursuant to the distribution agreement, Delta Woodside, Delta Apparel and
Duck Head 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 Delta Apparel
Company division's business and the Duck Head 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 Delta Apparel Company division's
business or the Duck Head 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 Delta Apparel's and
Duck Head'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, Delta Apparel or Duck Head may have under the
distribution agreement or the tax sharing agreement. Prior to
completion of the intercompany reorganization, the Delta Apparel
Company division's assets were owned by several of Delta Woodside's
wholly-owned subsidiaries, and the Duck Head Apparel Company division's
assets were owned by Delta Woodside and several of its wholly-owned
subsidiaries.
(b) 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, which
is described below under the subheading "Sale of the Rainsford Plant".
(c) 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
<PAGE>
(d) 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.
(e) 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).
(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 Delta Apparel or the liabilities assumed by Duck Head to agree to
look only to Delta Woodside or a remaining subsidiary of Delta Woodside
for payment of that indebtedness or lease (except where Delta Apparel
or Duck Head, as applicable, consented to not being released from the
obligations).
Indemnification
Each of Delta Woodside, Delta Apparel and Duck Head 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 Delta Apparel Company
division to become employees of Delta Apparel and the employees of the Duck Head
Apparel Company division to become employees of Duck Head. Delta Apparel and
Duck Head have assumed the accrued employee benefits of their respective
employees, and Delta Woodside has caused the account balance of each of these
employees in any and all of Delta Woodside's employee benefit plans (other than
the Delta Woodside Old Stock Option Plan, the Delta Woodside Old Incentive Stock
Award Plan and the Delta Woodside LTIP, if any) to be transferred to a
comparable employee benefit plan of Delta Apparel or Duck Head, as applicable.
Intercompany Accounts
Until May 6, 2000, the effective date of the transfer of title from Delta
Mills to Delta Apparel of the Rainsford plant (see the subheading "Sale of the
Rainsford Plant" below), yarn produced by the Rainsford plant for use in the
Delta Apparel business was sold by Delta Mills to Delta Apparel. The amounts
owed by Delta Apparel to Delta Mills from these sales, which aggregated $2.8
million at May 6, 2000, have subsequently been paid in full in the ordinary
course of business.
Other than any obligations described in or arising under the distribution
agreement or the tax sharing agreement, each of Delta Woodside, Delta Apparel
and Duck Head 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 Delta Apparel distribution and the Duck Head distribution between any of
them.
22
<PAGE>
Transaction Expenses
Generally, all costs and expenses incurred in connection with the Delta
Apparel distribution, the Duck Head 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 Delta Apparel distribution and the Duck Head
distribution.
Tax Sharing Agreement
---------------------
Delta Woodside entered into a tax sharing agreement dated as of June 30,
2000 with Delta Apparel and Duck Head that describes, among other things, each
company's rights and obligations relating to tax payments and refunds for
periods before and after the Delta Apparel distribution and 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 Delta
Woodside and its subsidiaries after the Delta Apparel distribution and the Duck
Head distribution (which this document refers to as the Delta Woodside tax
group), Delta Apparel and its subsidiaries (which this document refers to as the
Delta Apparel tax group) and Duck Head and its subsidiaries (which this document
refers to as the Duck Head tax group).
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 Delta Apparel
distribution and the Duck Head distribution, Delta Woodside
shall be responsible for paying any increase in federal income
taxes, and shall be 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 Delta Apparel
distribution and the Duck Head distribution, Delta Woodside
shall be responsible for paying any federal income taxes, and
shall be 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 Delta Apparel
distribution and 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 shall be responsible for paying any of those
state taxes, and any increase in those state taxes, and shall be
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 shall be 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
and 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 Delta Apparel
distribution and 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 Delta
Apparel or the business of Duck Head.
23
<PAGE>
(b) Duck Head shall be 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 shall be 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 shall be 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
Delta Apparel or the business of Duck Head;
(b) Duck Head shall be 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
(c) Delta Apparel shall be 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 shall be 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 Delta
Apparel distribution and the Duck Head distribution. The Duck Head tax
group shall be 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 shall be 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 Delta Apparel tax group and the Duck
Head 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 Delta
Woodside, Delta Apparel and Duck Head concerning such matters as whether a tax
relates to the business of Delta Woodside, Delta Apparel or Duck Head. Delta
Woodside might determine that a tax was a liability of Delta Apparel or Duck
Head even though Delta Apparel or Duck Head disagreed with that determination.
Under the tax sharing agreement, the Delta Woodside tax group, the Delta
Apparel tax group and the Duck Head 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.
Sale of the Rainsford Plant
---------------------------
The Rainsford plant in Edgefield, South Carolina, manufactures yarn for use
in knitting operations. In April 1998, control of the operations and management
of the Rainsford plant, but not title to the Rainsford plant, was transferred
24
<PAGE>
from Delta Mills to the Delta Apparel Company division, which converted the
assets to produce yarn products for use in Delta Apparel's products.
Pursuant to the distribution agreement, Delta Mills sold to Delta Apparel
the Rainsford plant and related inventory effective as of May 6, 2000. Delta
Mills and Delta Apparel agreed that the purchase price for these assets would be
the assets' book value as of the effective date of the sale. The purchase price
for the real property, furniture, fixtures and equipment was approximately $12.0
million and the purchase price for the inventory and other tangible personal
property was approximately $1.4 million. This purchase price was paid in cash in
the amount of approximately $12.5 million and by the assumption by Delta Apparel
of certain liabilities aggregating approximately $0.9 million as of the
effective date of the sale. Delta Apparel paid the cash portion of the purchase
price with borrowings under its credit facility. In connection with the closing,
Delta Apparel agreed to assume any environmental liability that may arise with
respect to the Rainsford plant regardless of the time period with respect to
which that liability arises.
Until the effective date of the transfer of title from Delta Mills to Delta
Apparel of the Rainsford plant, all yarn produced by the Rainsford plant for use
in the Delta Apparel business was sold by Delta Mills to Delta Apparel. The
amounts owed by Delta Apparel to Delta Mills from these sales, which aggregated
$2.8 million at May 6, 2000, have been subsequently paid in the ordinary course
of business.
OTHER TRANSACTIONS BETWEEN THE COMPANY, DELTA APPAREL AND DUCK HEAD
Sales to Delta Apparel business and Duck Head business of Goods or Manufacturing
--------------------------------------------------------------------------------
Services
--------
In the ordinary course of their respective businesses, the Delta Apparel
and Duck Head businesses have purchased fabrics from Delta Mills, the Delta
Apparel business has purchased yarn from Delta Mills and the Delta Apparel
business and the Duck Head business 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:
<TABLE>
<CAPTION>
(in thousands of dollars)
Fiscal Year
----------------------------------------
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
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 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 Delta Apparel business.
</FN>
</TABLE>
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 Delta
Apparel business and the Duck Head business listed in the table above were made
at prices deemed by the companies to approximate market value.
25
<PAGE>
Delta Woodside anticipates that any future sales to Duck Head or Delta
Apparel will not be material.
Management Services
-------------------
Delta Woodside has 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
have been 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 Delta
Apparel Company division $1,048,000, $1,135,000 and $0, respectively, for these
services and charged the Duck Head Apparel Company division $882,000, $777,000
and $0, respectively, for these services.
OTHER TRANSACTIONS IN CONNECTION WITH THE DELTA APPAREL DISTRIBUTION AND THE
DUCK HEAD DISTRIBUTION
DELTA WOODSIDE'S SEVERANCE PLAN & OTHER SEVERANCE ARRANGEMENTS
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 Delta Apparel and Duck Head 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
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 Delta Apparel and Duck Head 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 described above, Delta Woodside
provided the holders of outstanding options granted under the Delta Woodside Old
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 Delta Apparel distribution and the Duck Head
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 Delta Apparel distribution and the Duck Head
distribution remain exercisable for only Delta Woodside shares, and for the
same number of Delta Woodside shares at the same exercise price, after the
26
<PAGE>
Delta Apparel distribution and the Duck Head distribution as before the
Delta Apparel distribution and the Duck Head 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 executive officers of Delta Woodside:
Number of Delta Woodside shares covered
by portion of stock options the
Name exercisability of which was accelerated
William F. Garrett 37,500
William H. Hardman, Jr. 2,625
Donald C. Walker 562
David R. Palmer 1,250
Brenda L. Jones 375
Also, in connection with the Delta Apparel distribution and the Duck Head
distribution, Delta Woodside added a provision to the Delta Woodside Old Stock
Option Plan that provides that, so long as a Delta Apparel or Duck Head employee
who holds Delta Woodside stock options remains an employee of Delta Apparel or
Duck Head, respectively, or any of the applicable company's subsidiaries, those
Delta Woodside stock options will remain outstanding until the end of their
stated term. This amendment applies to all Delta Woodside stock options
currently held by Mr. Humphreys (under which he can acquire an aggregate of
22,500 Delta Woodside shares).
AMENDMENTS TO DEFERRED COMPENSATION PLAN
In connection with the Delta Apparel and Duck Head 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 the corporation that employs
the participant, and not any other member of Delta Woodside's pre-spin-off group
of corporations, is responsible in the future for the participant's deferred
compensation. Each director and officer of the Company who participates in the
plan consented to the proposed plan amendment and chose to continue to defer his
or her vested deferred compensation account under the amended plan.
OTHER RELATED PARTY TRANSACTIONS
LEASES
Corporate Office Space at 233 Hammond Square, Greenville, South Carolina
------------------------------------------------------------------------
Until June 30, 2000, the Company 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 the Company and its President and Chief Executive
Officer until June 29, 2000) and Jane H. Greer (the Company'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 Delta Apparel
distribution and the Duck Head distribution, 233 North Main, Inc. and the
Company agreed to terminate this lease on June 30, 2000 (the Delta Apparel and
Duck Head distribution date) in exchange for the payment by the Company to 233
North Main, Inc. of $135,268. Following the Delta Apparel and Duck Head
27
<PAGE>
distribution date, the Company 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, the Company did not need to use the
space after June 30, 2000. In addition to the $135,268 termination fee, the
Company 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, the Company leased office space in Edgefield, South
Carolina from The Rainsford Development Corporation, a corporation wholly owned
by Bettis C. Rainsford (a significant stockholder of the Company and until
October 1, 1999, its Executive Vice President, Chief Financial Officer and
Treasurer and until September 14, 2000 a director of the Company). Mr. Rainsford
was a director and executive officer and Brenda L. Jones was an executive
officer of The Rainsford Development Corporation. Ms. Jones was the Company's
Assistant Secretary until June 2000. In connection with the Delta Apparel
distribution and the Duck Head distribution, The Rainsford Development
Corporation and Delta Woodside agreed to terminate this lease on June 30, 2000
(the Delta Apparel and Duck Head 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, the Company 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 significant stockholder of the Company and until October 1, 1999,
its Executive Vice President, Chief Financial Officer and Treasurer and until
September 14, 2000 a director of the Company) 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, E. Erwin Maddrey, II (a director and significant
stockholder of the Company and until June 29, 2000, its President and Chief
Executive Officer) and Bettis C. Rainsford (a significant stockholder of the
Company and until October 1, 1999, its Executive Vice President, Chief Financial
Officer and Treasurer and until September 14, 2000 a director of the Company)
each entered into a stock transfer restrictions and right of first refusal
agreement (each of which this proxy statement refers to as a "First Refusal
Agreement") with Delta Woodside. Pursuant to their First Refusal Agreements,
each of Mr. Maddrey and Mr. Rainsford granted Delta Woodside a specified right
of first refusal with respect to any sale of his Delta Woodside shares owned at
death for five years after his death. In connection with the First Refusal
Agreements, 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 Delta Apparel distribution and the Duck Head
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.
EXPENSE REIMBURSEMENT AND OTHER COMPENSATION PAYMENTS
As described above under the heading "Management Compensation," part of Mr.
Rainsford's cash compensation with respect to fiscal 2000 was paid to The
Rainsford Development Corporation for Mr. Rainsford's services. The Company
reimbursed The Rainsford Development Corporation for certain travel, secretarial
and other expenses incurred on behalf of the Company. Such reimbursement
28
<PAGE>
amounted to $20,701 in fiscal 2000. The amount of Mr. Rainsford's total cash
compensation was not affected by the fact that part of it was paid to The
Rainsford Development Corporation.
The Company reimbursed Maddrey & Associates, a sole proprietorship of Mr.
Maddrey, for certain travel and other expenses incurred on behalf of the
Company. Such reimbursement amounted to $15, 507 in fiscal 2000.
EMPLOYEE BENEFIT SERVICES
On May 15, 2000, the Company engaged Carolina Benefit Services, Inc. to
provide it with 401(k) plan administration services. Carolina Benefit Services,
Inc. is owned by E. Erwin Maddrey, II (a director and significant stockholder of
the Company and its President and Chief Executive Officer until June 29, 2000)
and Jane H. Greer (the Company's Vice President and Secretary 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, the Company
will pay fees based on the numbers of 401(k) plan participants and plan
transactions and other items. The Company anticipates that on an annual basis
these fees will be approximately $55,000. The initial term of the engagement
will be one year. The Company 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 the
Company's least costly alternative.
Any transaction entered into between the Company and any officer, director,
principal shareholder or any of their affiliates has been and will be on terms
which the Company then believes comparable to those which would be available to
the Company at such time from non-affiliated persons and will be in the future
subject to the approval at the time of a majority of the Company's disinterested
directors.
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.
ITEM 2
APPROVAL OF DELTA WOODSIDE INDUSTRIES, INC.
2000 STOCK OPTION PLAN
The Board of Directors recommends that the shareholders approve the
adoption by the Company of its 2000 Stock Option Plan (the "New Stock Option
Plan"). The Company's Board adopted the New Stock Option Plan, subject to
shareholder approval, on August 24, 2000 at the recommendation of the
Compensation Grants Committee of the Board. If shareholders approve the New
Stock Option Plan, it will be effective as of August 24, 2000. The Board
recommends the New Stock Option Plan because it believes that the New Stock
Option Plan is an effective component of management compensation. The Board
believes that the New Stock Option Plan, by increasing management's potential
ownership of Company stock, will further align the interest of management with
shareholders causing management to seek to maximize shareholder value.
SUMMARY OF THE NEW STOCK OPTION PLAN
Under the New Stock Option Plan, the Board (or a committee of the Board
composed of two or more non-employee directors) will have the discretion to
grant options for up to an aggregate maximum of 1,667,000 shares of the
Company's common stock, $.01 par value per share. As of September 20, 2000,
24,156,625 shares of the Company's common stock were issued and outstanding, and
the closing price of the common stock on that date was $1.375 per share. Shares
issued pursuant to the exercise of options granted under the New Stock Option
Plan would be in addition to such outstanding shares. The shares subject to the
New Stock Option Plan and subject to grants made under the New Stock Option Plan
29
<PAGE>
are subject to typical provisions preventing dilution in the event of any change
in the characteristics of the Company's common stock. The extent and nature of
any adjustments will be determined solely by the Board or administrating
committee.
The purpose of the New Stock Option Plan is to promote the growth and
profitability of the Company and its subsidiaries by increasing the personal
participation of key and middle level executives in the performance of the
Company and its subsidiaries, by enabling the Company and its subsidiaries to
attract and retain key and middle level executives of outstanding competence and
by providing these key and middle level executives with an equity opportunity in
the Company. The New Stock Option Plan provides that it will be administered by
the Board (or a committee of the Board composed of two or more non-employee
directors). The Company expects that the Compensation Grants Committee will
administer the New Stock Option Plan.
Participation in the New Stock Option Plan is determined by the
administrating committee and is limited to those key and middle level executives
of the Company or one of its subsidiaries (who may or may not be officers or
members of the Company's board of directors) who have the greatest impact on the
Company's long-term performance. In making any determination as to the key and
middle level executives to whom options will be granted and the number of shares
that will be subject to each option, the administrating committee is to take
into account, in each case, the level and responsibility of the executive's
position, the executive's performance, the executive's level of compensation,
the assessed potential of the executive and those other factors that the
administrating committee deems relevant to the accomplishment of the purposes of
the plan. Directors who are not also employees of the Company are not eligible
to participate in the New Stock Option Plan. The New Stock Option Plan provides
that no more than 1,250,000 shares may be covered by grants made under the plan
in any calendar year to any particular employee. The Company expects that
approximately 40 persons will be eligible to participate in the New Stock Option
Plan.
In the discretion of the administrating committee, options granted under
the New Stock Option Plan may be "incentive stock options" for federal income
tax purposes. The Company is not allowed a deduction at any time in connection
with, and the participant is not taxed upon either the grant or the exercise of,
an "incentive stock option." The difference between the exercise price of an
incentive stock option and the market value of the shares of common stock at the
date of exercise, however, constitutes a tax preference item for the participant
in the year of exercise for alternative minimum tax purposes. Among other
requirements, the stock acquired by the participant must be held for at least
two years after the option is granted and for at least one year after the option
is exercised for the option to qualify as an incentive stock option. If the
participant satisfies these holding period requirements, the participant will be
taxed only upon any gain realized upon disposition of the stock. The
participant's gain will be equal to the difference between the sales price of
the stock and the exercise price. If an incentive stock option is exercised
after the death of the employee by the estate of the decedent, or by a person
who acquired the right to exercise the option by bequest or inheritance or by
reason of the death of the decedent, none of the holding period requirements
apply.
If the participant fails to satisfy the holding period requirements, the
option will be treated in a manner similar to options that are not incentive
stock options. The participant is generally not taxed upon the grant of an
option that is not an incentive stock option. Upon exercise of the option,
however, the participant recognizes ordinary income equal to the difference
between the fair market value of the shares acquired on the date of exercise and
the exercise price. Subject to Section 162(m) of the Internal Revenue Code
(relating to limitations on corporate income tax deduction of certain executive
compensation in excess of $1 million), generally the Company receives a
deduction for the amount the participant reports as ordinary income arising from
the exercise of the option. Upon a subsequent sale or disposition of the stock,
the holder would be taxable on any excess of the selling price over the fair
market value of the stock at the date of exercise. If the participant fails to
satisfy the holding period requirements with respect to an option that would
otherwise qualify as an incentive stock option, (i) ordinary income to the
participant and, subject to Section 162(m) of the Internal Revenue Code, the
deduction for the Company will arise at the time of the early disposition of the
stock and will equal the excess of (a) the lower of the fair market value of the
shares at the time of exercise or the sales price of the shares at the time of
disposition over (b) the exercise price, and (ii) if the sales price of the
stock at the time of the early disposition exceeds the fair market value of the
shares at the time of exercise, the participant will also recognize capital gain
income equal to that excess.
30
<PAGE>
The Company will attempt, to the maximum extent possible, to structure
grants under the New Stock Option Plan to the Named Executives in a manner that
satisfies the deductibility requirements of Section 162(m) of the Internal
Revenue Code.
The term of each option will be established by the administrating
committee, but will not exceed ten years from the date the option vests for
options not intended to qualify as incentive stock options and ten years from
the date of grant for options intended to qualify as incentive stock options (or
five years in the case of an incentive stock option granted to a person who owns
stock having more than ten percent of the total combined voting power of all
classes of stock of the Company), and the option will be exercisable according
to the schedule that the administrating committee may determine. Upon the
occurrence of any change of control (as defined in the New Stock Option Plan),
all outstanding options, to the extent not vested and/or exercisable, will
become immediately vested and exercisable in their entirety. The recipient of an
option will not pay the Company any amount at the time the option is granted. If
an option expires or terminates for any reason without having been fully
exercised, the unpurchased shares subject to the option will again be available
for the purposes of the New Stock Option Plan.
The price per share at which each option granted under the New Stock Option
Plan may be exercised will be the price set by the administrating committee at
the time of grant based on the criteria adopted by the administrating committee
in good faith; provided, however, in the case of an option intended to qualify
as an incentive stock option, the price per share will not be less than the fair
market value of the stock at the time the option is granted (or 110% of fair
market value if the recipient of an incentive stock option owns stock having
more than ten percent of the total combined voting power of all classes of stock
of the Company). The New Stock Option Plan provides that in no event will the
exercise price per share of an option be less than 50% of the fair market value
per share of the Company's common stock on the date of the option grant.
Options may be exercised by the participant tendering to the Company
payment in cash in full of the exercise price for the shares as to which the
option is exercised plus cash equal to the amount of all federal and state
withholding or other employment taxes applicable to the exercise of the Options,
if any. The administrating committee may determine at the time of grant that the
recipient will be permitted to pay the exercise price in Company shares rather
than in cash. Proceeds received by the Company from the sale of shares pursuant
to exercise of options will be used for general corporate purposes as determined
by the Board.
The New Stock Option Plan may be terminated or amended by the board of
directors (or committee of the Board) at any time, provided that no termination
or amendment of the New Stock Option Plan shall alter or impair rights under
options outstanding prior to such termination or amendment without the consent
of the holders of such options. The Board must obtain the approval of
shareholders for any amendment to the New Stock Option Plan to the extent such
approval is required by applicable law, including without limitation Section
162(m) and the incentive stock option provisions of the Internal Revenue Code,
such as an amendment that would increase the number of shares that may be
covered by options granted under the New Stock Option Plan except pursuant to
the plan's anti-dilution provisions.
The New Stock Option Plan provides that it will terminate on the close of
business on August 24, 2010, and no options will be granted under the plan
thereafter, but termination will not affect any option granted under the plan
before the termination date.
GRANTS UNDER THE NEW STOCK OPTION PLAN
The Company's Compensation Grants Committee has already granted options for
1,546,666 shares of common stock under the New Stock Option Plan, subject to
shareholder approval of the New Stock Option Plan. If the shareholders do not
approve the New Stock Option Plan, these grants will be null and void. The table
below sets forth certain information with respect to these grants.
31
<PAGE>
OPTION GRANTS PURSUANT TO THE
2000 STOCK OPTION PLAN
<TABLE>
<CAPTION>
Dollar Number
Name And Position Value ($) (a) of Shares (b)
------------------------------------------------------ ----------------- ----------------
<S> <C> <C>
William F. Garrett, President, Chief Executive
Officer & a Director 0 675,000
William H. Hardman, Jr., Vice President, Chief
Financial Officer, Secretary & Treasurer 0 66,667
Donald C. Walker, Vice President, Controller &
Assistant Secretary 0 50,000
All Current Executive Officers as a Group (c) 0 791,667
Non-Employee Directors as a Group 0 0
Non-Executive-Officer Employees as a Group 0 754,999
--------------------
<FN>
(a) All options listed have an exercise price of $1.6875 per share. Based on
the closing price of the common stock on September 20, 2000 ($1.375), none
of these options was in-the-money on such date. Each option vests with
respect to one third of the shares listed above on June 30 in each 2001,
2002 and 2003 and each third of that option expires 10 years from the
corresponding vesting date.
(b) One-third of each grant vests in each of fiscal 2001, 2002 and 2003.
(c) Three people.
</FN>
</TABLE>
INTEREST OF CERTAIN PERSONS IN THE NEW STOCK OPTION PLAN; EFFECT ON EXISTING
SHAREHOLDERS
The Company expects that the majority of the options permitted to be
granted under the New Stock Option Plan will be granted to the current executive
officers of the Company, including William F. Garrett, who is also a director of
the Company, William H. Hardman, Jr. and Donald C. Walker. Current shareholders
will experience dilution in their ownership of the Company's common stock to the
extent options granted under the New Stock Option Plan are exercised.
VOTE REQUIRED TO APPROVE THE PLAN
The New Stock Option Plan will be approved if a quorum is present at the
Annual Meeting, the total votes cast (both for and against) exceeds half the
number of shares outstanding on September 20, 2000 and the number of votes cast
in favor of the New Stock Option Plan exceeds the number of votes cast against
the New Stock Option Plan. Abstentions and broker non-votes will count in
determining whether a quorum is present but will not count in determining the
total number of votes cast. If an adequate number of votes are cast, abstentions
and broker non-votes will not otherwise affect the vote to approve the New Stock
Option Plan.
The New Stock Option Plan is being submitted to the shareholders of the
Company for approval because (1) the plan, by its terms, requires such approval
to become effective, (2) the rules of the New York Stock Exchange require such
approval for the shares covered by the plan to be listed, (3) shareholder
approval of the plan is required in order for grants under the plan to be
treated as "performance-based compensation" for purposes of Section 162(m) of
the Internal Revenue Code and therefore excluded from calculating the limit on
executive compensation which is deductible by the Company for federal income tax
purposes imposed by Section 162(m) and (4) shareholder approval of the plan is
32
<PAGE>
required for options to qualify as incentive stock options under Section 422 of
the Internal Revenue Code. If the plan is not approved by the requisite
shareholder vote (described above), it will not become effective and all grants
made under the plan will be null and void.
Approval of the New Stock Option Plan is not contingent on the approval of
any other proposal described in this proxy statement.
THE BOARD OF DIRECTORS, UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
APPROVE THE COMPANY'S 2000 STOCK OPTION PLAN.
ITEM 3
APPROVAL OF DELTA WOODSIDE INDUSTRIES, INC.
INCENTIVE STOCK AWARD PLAN
The Board of Directors recommends that the shareholders approve the
adoption by the Company of its new Incentive Stock Award Plan (the "New
Incentive Stock Award Plan"). The Company's Board adopted the New Incentive
Stock Award Plan, subject to shareholder approval, on August 24, 2000 at the
recommendation of the Compensation Grants Committee of the Board. If
shareholders approve the New Incentive Stock Award Plan, it will be effective as
of August 24, 2000. The Board recommends the New Incentive Stock Award Plan
because it believes that the New Incentive Stock Award Plan is an effective
component of management compensation. The Board believe that the New Incentive
Stock Award Plan, by increasing management's potential ownership of Company
stock, will further align the interest of management with shareholders causing
management to seek to maximize shareholder value.
SUMMARY OF THE NEW INCENTIVE STOCK AWARD PLAN
Under the New Incentive Stock Award Plan, the Board (or a committee of the
Board composed solely of two or more non-employee directors) has the discretion
to grant awards for up to an aggregate maximum of 667,000 shares of the
Company's common stock, $.01 par value per share. As of September 20, 2000,
24,156,625 shares of the Company's common stock were issued and outstanding, and
the closing price of the common stock on that date was $1.375 per share. Shares
issued pursuant to awards granted under the New Incentive Stock Award Plan would
be in addition to such outstanding shares and in addition to shares that could
be issued pursuant to awards that could be granted under the Company's Old
Incentive Stock Award Plan. The shares subject to award under the Incentive
Stock Award Plan are subject to typical provisions preventing dilution in the
event of any change in the characteristics of the Company's common stock. The
extent and nature of any appropriate adjustment will be determined solely by the
Board or administrating committee. The Company expects that the Compensation
Grants Committee of the Board will administer the New Incentive Stock Award
Plan.
The purposes of the New Incentive Stock Award Plan are to establish or
increase the equity ownership of the Company by management and other key
employees of the Company and its subsidiaries through the prospect of stock
ownership.
The New Incentive Stock Award Plan authorizes the administrating committee
to grant to management or other key employees of the Company or any of its
subsidiaries rights to acquire Company shares at a cash purchase price of $.01
per share. Awards may be made to reward past performance or to induce
exceptional future performance. The administrating committee will administer the
New Incentive Stock Award Plan and determine the management or key employees to
whom awards will be granted and the number of shares to be covered by any award.
Directors who are not also employees are not eligible to participate in the
plan. The New Incentive Stock Award Plan provides that no more than 300,000
shares may be covered by awards granted under the plan in any calendar year to
any particular employee. The Company expects that approximately 30 persons will
be eligible to participate in the New Incentive Stock Award Plan.
A participant may receive an incentive stock award only upon execution of
an incentive stock award agreement with the Company. The incentive stock award
agreement sets forth the circumstances under which the award (or portion of the
award) is forfeited. These circumstances may include (i) the termination of
employment of the participant with the Company or any of its subsidiaries, for
any reason other than death, retirement or permanent total disability, prior to
the vesting date for the award (or portion of the award), and (ii) those
33
<PAGE>
additional circumstances (which could include the failure by the Company to meet
specified performance criteria) that may be deemed appropriate by the
administrating committee. The forfeiture circumstances may vary among the shares
covered by an award. In the event an award (or portion of the award) is
forfeited pursuant to the terms of the applicable incentive stock award
agreement, the participant will immediately have no further rights under the
award (or portion of the award) or in the shares covered thereby, and the shares
will again become available for purposes of the New Incentive Stock Award Plan.
Each incentive stock award agreement sets forth the circumstances under
which the award (or portion of the award) will vest. With respect to any award
(or portion of an award) intended to qualify as "performance-based compensation"
under Section 162(m)(4)(C) of the Internal Revenue Code and the regulations
promulgated thereunder, these circumstances will consist of the achievement of
one or more performance-based goals established by the administrating committee
based on one or a combination of the following factors as deemed appropriate by
the administrating committee: total stockholder return; revenues, sales, net
income, EBIT, EBITDA, stock price, and/or earnings per share; return on assets,
net assets, and/or capital; return on stockholders' equity; debt/equity ratio;
working capital; quality; the Company's financial performance or the performance
of the Company's stock versus peers; cost reduction; productivity; or economic
value added. The administrating committee will establish the performance-related
goals for awards intended to qualify as "performance-based compensation" in
writing no later than 90 days after the commencement of the period of service to
which the award relates (and in all events before 25% of the period of service
has elapsed). The vesting circumstances may vary among the shares covered by an
Award. For awards intended to qualify as "performance-based compensation" under
Section 162(m)(4)(C) of the Internal Revenue Code, no shares will be issued
until the applicable committee has previously certified in writing that the
relevant performance-based goal(s) have been met.
Upon the occurrence of any change of control (as defined in the New
Incentive Stock Award Plan), all outstanding awards, to the extent not vested,
will become immediately vested in their entirety.
In the event an award (or portion of the award) vests pursuant to the terms
of the applicable incentive stock award agreement, the Company will issue and
deliver, or cause to be issued and delivered, to the participant or his or her
legal representative, certificate(s) for the number of shares covered by the
vested portion of the award, subject to receipt by the Company of the $.01 per
share cash purchase price. The Company will use the amounts received upon
exercise of awards for general corporate purposes.
The recipient of an award will not pay the Company any amount at the time
of the receipt of the award. Ordinarily, the holder of an award will realize
taxable income, for federal income tax purposes, when the award (or portion of
the award) vests in an amount equal to the excess of the fair market value of
the covered shares on the date the award (or portion of the award) vests over
the $.01 per share cash purchase price. At the same time, subject to Section
162(m) of the Internal Revenue Code, the Company should generally be allowed a
tax deduction equivalent to the holder's taxable income arising from that
vesting. The New Incentive Stock Award Plan provides that, at or about the time
the award (or portion of the award) vests, the Company will pay the participant
cash sufficient to pay the participant's income tax liability associated with
the vesting and receipt of that cash. This cash payment would be taxable as
income to the participant and, subject to Section 162(m), generally deductible
by the Company.
The portion of any incentive stock award that vests or is paid based on a
participant being an employee at specified dates will not satisfy the
requirements of Section 162(m) of the Internal Revenue Code. The Company will
attempt, however, to the maximum extent possible, to structure the portion of
incentive stock awards made to the Named Executives that vests or is paid in
accordance with performance criteria in a manner that satisfies the
deductibility requirements of Section 162(m).
Until the issuance and delivery to the participant of certificate(s) for
shares pursuant to the vesting of an award, the participant has none of the
rights of a stockholder with respect to those shares.
The New Incentive Stock Award Plan provides that the board of directors (or
committee of the Board) may terminate or amend the plan, except that (1)
stockholder approval is required in the event any amendment would (i) increase
the total number of shares covered by the plan (except in connection with the
anti-dilution provisions of the plan) or (ii) change the $0.01 per share cash
purchase price of shares subject to awards under the plan, and (2) no
34
<PAGE>
termination, amendment or modification of the plan will affect any award
previously made to a participant without that participant's consent.
AWARDS UNDER THE NEW INCENTIVE STOCK AWARD PLAN
The Company's Compensation Grants Committee has already granted awards for
all 666,667 shares of common stock issuable under the New Incentive Stock Award
Plan, subject to shareholder approval of the New Incentive Stock Award Plan. If
the shareholders do not approve the New Incentive Stock Award Plan, these grants
will be null and void. The table below sets forth certain information with
respect to these grants.
AWARDS PURSUANT TO THE
NEW INCENTIVE STOCK AWARD PLAN
<TABLE>
<CAPTION>
Dollar Number
Name And Position Value ($)(a) of Shares (b)
------------------------------------------------------ ----------------- ----------------
<S> <C> <C>
William F. Garrett, President, Chief Executive
Officer & a Director 409,500 300,000
William H. Hardman, Jr., Vice President, Chief
Financial Officer, Secretary & Treasurer 44,963 32,940
Donald C. Walker, Vice President, Controller &
Assistant Secretary 24,980 18,300
All Current Executive Officers as a Group (c) 479,443 351,240
Non-Employee Directors as a Group 0 0
Non-Executive-Officer Employees as a Group 430,558 351,427
--------------------
<FN>
(a) The dollar value of the options granted was calculated by multiplying the
number of shares covered by awards times the excess of the fair market
value of the common stock on September 20, 2000 ($1.375) over the exercise
price of $0.01 per share.
(b) One quarter of each grant vests in each of fiscal 2001, 2002, and 2003 if
the employee continues to be an employee on the last day of that fiscal
year. The remaining quarter of each grant vests in fiscal 2004 if certain
performance criteria (which vary between grantees) are met by the end of
fiscal 2003.
(c) Three people.
</FN>
</TABLE>
INTEREST OF CERTAIN PERSONS IN THE NEW INCENTIVE STOCK AWARD PLAN; EFFECT ON
EXISTING SHAREHOLDERS
The majority of the awards under the Incentive Stock Award Plan have been
granted to the current executive officers of the Company, including William F.
Garrett, who is also a director of the Company, William H. Hardman, Jr. and
Donald C. Walker. Current shareholders will experience dilution in their
ownership of the Company's common stock to the extent awards under the New
Incentive Stock Award Plan are exercised.
VOTE REQUIRED TO APPROVE THE PLAN
The New Incentive Stock Award Plan will be approved if a quorum is present
at the Annual Meeting, the total votes cast (both for and against) exceeds half
the number of shares outstanding on September 20, 2000 and the number of votes
cast in favor of the New Incentive Stock Award Plan exceeds the number of votes
35
<PAGE>
cast against the New Incentive Stock Award Plan Abstentions and broker non-votes
will count in determining whether a quorum is present but will not count in
determining the total number of votes cast. If an adequate number of votes are
cast, abstentions and broker non-votes will not otherwise affect the vote to
approve the New Incentive Stock Award Plan.
The New Incentive Stock Award Plan is being submitted to the shareholders
of the Company for approval because of the requirements of the New York Stock
Exchange and in order to comply with Section 162(m) of the Internal Revenue
Code. Shareholder approval of the plan is required in order for grants under the
plan that vest according to performance criteria to be treated as
"performance-based compensation" for purposes of Section 162(m).
"Performance-based compensation" is excluded from calculating the limit on
executive compensation which is deductible by the Company for federal income tax
purposes imposed by Section 162(m). If the plan is not approved by the requisite
shareholder vote (described above), it will not become effective, and all awards
made under the plan will be null and void.
Approval of the New Incentive Stock Award Plan is not contingent on the
approval of any other proposal described in this proxy statement.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
APPROVE THE COMPANY'S NEW INCENTIVE STOCK AWARD PLAN.
ITEM 4
RATIFICATION OF APPOINTMENT OF
KPMG LLP AS INDEPENDENT AUDITORS
The Board of Directors recommends the ratification of the appointment of
KPMG LLP (f/k/a KPMG Peat Marwick 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
engaged by the Company on August 19, 1994, pursuant to approval by the Board of
Directors and subsequent ratification by the shareholders, as principal
accountants for the Company'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 appointment of auditors is approved annually by the Board of Directors
and subsequently submitted to the shareholders for ratification. The decision of
the Board is based on the recommendation of the Audit Committee.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
RATIFY THE APPOINTMENT OF KPMG LLC AS INDEPENDENT AUDITORS.
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.
36
<PAGE>
FINANCIAL INFORMATION
THE COMPANY'S FISCAL 2000 ANNUAL REPORT IS BEING MAILED TO SHAREHOLDERS ON
OR ABOUT OCTOBER 6, 2000. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY
SHAREHOLDER OF RECORD AS OF SEPTEMBER 20, 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 DELTA WOODSIDE INDUSTRIES, INC., POST OFFICE BOX
6126, GREENVILLE, SOUTH CAROLINA 29606, ATTENTION: WILLIAM H. HARDMAN, VICE
PRESIDENT, TREASURER AND 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 A) 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 and monitoring the effectiveness of the internal controls.
The review of the financial statements by the Audit Committee is not the
equivalent of an audit.
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 A to this Proxy
Statement. All members of the Audit Committee are independent as defined in
Section 303.01(B)(2)(a) and (3) of the New York 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.
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). The Audit Committee has received
the written disclosures and the letter from the Company's independent
accountants required by Independence Standards Board Standard No. 1 (titled,
"Independence Discussions with Audit Committees") and has discussed with the
Company's independent auditors such independent auditors' independence.
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
37
<PAGE>
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 8, 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 10, 2001 for the proposal to be
considered timely.
The above Notice and Proxy Statement are sent by order of the Board of
Directors.
William H. Hardman, Secretary
Greenville, South Carolina
October 6, 2000
<PAGE>
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.
DELTA WOODSIDE INDUSTRIES, 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, which 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 to the Company that may interfere with the exercise of his or her
independence from management and the Company. Each member of the Committee shall
be financially literate, as such qualification is interpreted by the Board of
Directors in its business judgment, or must become financially literate within a
reasonable period of time after his or her appointment to the Committee. At
least one member of the Committee must have accounting or related financial
management expertise, as the Board interprets such qualification in its business
judgment. In addition, each member of the Committee must satisfy the
restrictions of the New York 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
39
<PAGE>
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 the outside auditors submit on a periodic basis to
the Committee a formal written statement delineating all relationships between
the outside auditors and the Company. 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 recommend that the Board take
appropriate action in response to the outside auditors' report to satisfy itself
of the outside auditors' independence.
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.
40
<PAGE>
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.
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.
<PAGE>
APPENDIX 2
DELTA WOODSIDE INDUSTRIES, INC.
2000 STOCK OPTION PLAN
Effective as of August 24, 2000
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
2000 STOCK OPTION PLAN
----------------------
1. PURPOSE.
--------
The purpose of the Delta Woodside Industries, Inc. 2000 Stock Option
Plan (the "Plan") is to promote the growth and profitability of Delta Woodside
Industries, Inc. (the "Company") and its subsidiaries from time to time
("Subsidiaries") by increasing the personal participation of key and middle
level executives in the continued growth and financial success of the Company
and the Subsidiaries, by enabling the Company and the Subsidiaries to attract
and retain executives of outstanding competence and by providing such executives
with an equity opportunity in the Company. This purpose will be achieved through
the grant of options ("Options") to purchase shares of the common stock of the
Company ("Shares").
2. ADMINISTRATION.
---------------
The Plan shall be administered by the Company's Board of Directors (the
"Board"); provided, however, that in its discretion, the Board may delegate its
authority under the Plan to a committee of the Board (the "Committee") composed
solely of two or more "Non-Employee Directors" ( as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, or any
applicable successor rule or regulation (the "Exchange Act")).
The Board (or Committee, as applicable) shall have complete and final
authority to: (i) interpret all terms and provisions of the Plan; (ii) select
from the group of key and middle level executives eligible to participate in the
Plan the executives to whom Options will be granted; (iii) subject to the terms
of the Plan, establish the terms and conditions of each Option, including
without limitation the number of Shares subject to the Option, the term of the
Option, and any schedule for or conditions of the exercise of the Option; (iv)
prescribe the form of instrument(s) evidencing Options granted under the Plan;
(v) determine the time or times at which Options will be granted; (vi) make
special grants of Options as the Board (or Committee, as applicable) may
determine to be appropriate; (vii) determine the method of exercise of Options
granted under the Plan; (viii) adopt, amend and rescind general and special
rules for the Plan's administration; and (ix) make all other determinations and
take all other actions necessary or advisable for the administration of the
Plan.
Unless the bylaws or a resolution of the Board provides otherwise, any
action that the Board (or Committee, as applicable) is authorized to take may be
taken without a meeting if all the member of the Board (or Committee, as
applicable) sign a written document authorizing such action.
The Board (or Committee, as applicable) may designate selected Board
members or certain employees of the Company to assist the Board (or Committee,
as applicable) in the administration of the Plan and may grant authority to such
persons to execute documents, including Options, on behalf of the Board (or
Committee, as applicable).
No member of the Board shall be liable for any action taken or
determination made in good faith in connection with the Plan.
<PAGE>
3. ELIGIBILITY AND FACTORS TO BE CONSIDERED IN GRANTING OPTIONS.
-------------------------------------------------------------
Key or middle level executives, whether or not officers or members of
the Board, of the Company and its Subsidiaries who have the greatest impact on
the Company's long-term performance shall be eligible to receive Options under
the Plan. In determining the key and middle level executives to which Options
will be granted and the number of shares subject to each Option, the Board (or
Committee, as applicable) shall take into account the level and responsibility
of the executive's position, the executive's performance, the assessed potential
of the executive and such other factors as the Board (or Committee, as
applicable) may deem relevant to the accomplishment of the purposes of the Plan.
Options may be granted under the Plan only for reasons connected with an
executive's employment with the Company or a Subsidiary.
Directors of the Company or any Subsidiary who are not also employees
of the Company or any of its Subsidiaries are not eligible to participate in the
Plan.
4. SHARES SUBJECT TO THE PLAN.
---------------------------
Subject to the provisions of Section 14, the aggregate number of Shares
with respect to which Options may be granted under the Plan shall not exceed
1,667,000 Shares. If an Option expires, terminates or is surrendered without
having been fully exercised, any Shares subject to the Option with respect to
which the Option was not exercised shall again be available for purposes of this
Plan. The Board (or Committee, as applicable) shall maintain records showing the
cumulative total of all Shares subject to outstanding Options.
5. DESIGNATION OF OPTIONS; NUMBER OF SHARES.
-----------------------------------------
Subject to the terms of the Plan, the Board (or Committee, as
applicable) may, in its sole discretion, grant Options to eligible participants.
In granting Options, the Board (or Committee, as applicable) shall
clearly indicate as to each Option whether the Option is an incentive stock
option ("ISO") or a non-qualified stock option ("NQO"). The Board (or Committee,
as applicable) may grant both ISOs and NQOs to the same executive, provided that
the ISOs and NQOs are granted separately. The Board (or Committee, as
applicable) shall not designate an Option as an ISO unless the terms of the
Option comply with all of the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
Subject to Section 4., the Board (or Committee, as applicable) may
grant Options to eligible participants with respect to such number of Shares as
the Board (or Committee, as applicable), in its sole discretion, may determine;
provided, that no participant may be awarded Options during any calendar year
with respect to an aggregate of more than 1,250,000 shares of common stock
(subject to adjustment under Section 14).
With respect to Options designated as ISOs, the aggregate fair market
value (determined at the Options' respective dates of grant in accordance with
Section 422(c)(7) of the Code) of the Shares with respect to which such Options
are exercisable for the first time by a participant during any calendar year
(under all plans taken into account pursuant to Section 422(d) of the Code)
shall not exceed $100,000.
2
<PAGE>
6. EXERCISE PRICE.
---------------
The price per Share at which each Option may be exercised shall be the
price determined by the Board (or Committee, as applicable) at the time of grant
based on such criteria as may be adopted by the Board (or Committee, as
applicable) in good faith, but in no event shall the exercise price per share of
an Option be less than the par value of a Share or less than fifty percent (50%)
of the fair market value of a Share at the time such Option is granted. In
addition, (i) the exercise price per share for any ISO shall be not less than
the fair market value of a Share (determined in accordance with Section
422(c)(7) of the Code) at the time such Option is granted; (ii) the exercise
price per share for any ISO shall be not less than 110% of the fair market value
of a Share (determined in accordance with Section 422(c)(7) of the Code) at the
time such Option is granted if immediately prior to the grant, the recipient is
a person who beneficially owns (determined in accordance with Section 424 of the
Code) stock having more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company (determined in accordance with Section 424(d) of the
Code) (a "10% Owner"); and (iii) the exercise price per share shall be not less
than the fair market value of a Share at the time the Option is granted for any
grant that is intended to qualify as "performance-based compensation" under
Section 162(m)(4)(C) of the Code and the regulations promulgated thereunder.
7. TERM.
-----
The term of each Option shall be established by the Board (or
Committee, as applicable) but shall not exceed ten (10) years from the date that
the Option vests. In addition, no ISO shall have a term exceeding ten (10) years
from the date of grant, and no ISO granted to a participant who is a 10% Owner
shall have a term exceeding five (5) years from the date of grant.
8. TIME OF GRANT.
--------------
The date of grant of an Option for all purposes shall be the date on
which the Board (or Committee, as applicable) approves the grant of the Option.
Notice of the grant shall be given to each Option recipient (each a "Grantee")
within a reasonable time after the date of grant.
9. TRANSFER.
---------
An Option shall not be transferable by the Grantee except by will or
the laws of descent and distribution. During the Grantee's lifetime, an Option
may only be exercised by the Grantee.
10. EXERCISE.
---------
Subject to the terms of the Plan, an Option may be exercisable at such
time or times after the date of grant and upon such conditions and according to
such schedule as may be determined by the Board (or Committee, as applicable) at
the time of grant. Notwithstanding any other provision of this Plan, in no event
may an Option be exercised after the expiration of its stated term.
4
<PAGE>
Upon any Change of Control, all outstanding Options, to the extent not
vested and/or exercisable, shall become immediately vested and exercisable in
their entirety. "Change of Control" shall mean the occurrence of any one of the
following: (a) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" (within the meaning of Section
13(d) of the Exchange Act) other than one or more wholly-owned Subsidiaries of
the Company; (b) the adoption of a plan relating to the liquidation or
dissolution of the Company; (c) the first day on which a majority of the members
of the Board are not Continuing Directors; or (d) the consummation of any
transaction (including without limitation any merger, share exchange or
consolidation) the result of which is that any "person" (as defined above),
other than an Exempt Person or Exempt Persons, becomes, directly or indirectly,
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that an entity or person shall be deemed to have "beneficial
ownership" of all shares that any such entity or person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) of more than 30% of the outstanding common stock of the Company;
provided that the transactions covered by this clause (d) shall not include the
acquisition by the Company of its common stock; provided further, however, that
if (x) any "person" (as defined above) becomes, directly or indirectly, the
"beneficial owner" (as defined above) of more than 30% of the outstanding common
stock of the Company solely as a result of acquisition by the Company of its
common stock, (y) such "person" thereafter acquires any additional shares of
common stock of the Company and (z) immediately after such acquisition such
"person" is, directly or indirectly, the "beneficial owner" (as defined above)
of 30% or more of the outstanding common stock of the Company, then such
additional acquisition shall constitute a Change of Control.
"Exempt Person" shall mean (a) the Company, (b) any wholly-owned
Subsidiary of the Company, (c) any individual who immediately before the
transaction is an executive officer of the Company, (d) any employee benefit
plan of the Company or any of its wholly-owned Subsidiaries or (e) any entity or
person holding shares of common stock for or pursuant to the terms of any such
plan if such entity or person is not a beneficiary of or participant in such
plan.
"Continuing Directors" shall mean, as of any date, any member of the
Board who (i) was a member of the Board on the date this Plan was adopted by the
Board or (ii) was nominated for election or elected to the Board with the
approval of a majority of the Continuing Directors who were members of the Board
at the time of such nomination or election.
11. METHOD OF EXERCISE.
-------------------
An Option shall be deemed exercised when (i) the Company receives
written notice of the holder's decision to exercise the Option; (ii) the holder
tenders to the Company payment in full in cash (or if the Board (or Committee,
as applicable) so determines at the time of grant, in Shares) the aggregate
exercise price for the Shares with respect to which the Option is to be
exercised; (iii) the holder tenders to the Company payment in full in cash the
amount of all federal and state withholding or other employment taxes applicable
to the taxable income, if any, of the holder resulting from the exercise of the
Option; and (iv) the holder complies with such other reasonable requirements as
the Board (or Committee, as applicable) may establish.
5
<PAGE>
An Option may be exercised for any lesser number of Shares than the
full number for which it could have been exercised. Such a partial exercise
shall not affect the right to exercise the Option from time to time with respect
to the remaining Shares subject to the Option.
12. CANCELLATION AND REPLACEMENT OF OPTIONS.
----------------------------------------
The Board (or Committee, as applicable) may at any time or from time to
time permit a Grantee to voluntarily surrender any outstanding Options where
such surrender is conditioned upon the granting to the Grantee of new Options
for such number of Shares as the Board (or Committee, as applicable) may
determine. The Board (or Committee, as applicable) may require a Grantee to
surrender outstanding Options as a condition precedent to the grant of new
Options to such Grantee.
Subject to the terms of the Plan, the Board (or Committee, as
applicable) shall determine the terms and conditions of any new Options,
including the prices at and periods during which they may be exercised, all of
which may differ from the terms and conditions of the Options surrendered. Any
such new Options shall be subject to the Plan. The grant of new Options in
connection with the surrender of outstanding Options shall be considered, for
purposes of the Plan, as the grant of new Options and not as an alteration,
amendment or modification of the Plan or the Options surrendered.
The Shares subject to any Options surrendered shall no longer be
charged against the aggregate Share limit set forth in Section 4. and shall
again be available for grants of Options under the Plan.
13. TERMINATION OF OPTIONS.
-----------------------
An Option shall be considered terminated in whole or in part to the
extent that, in accordance with the provisions of the Plan, it can no longer be
exercised with respect to Shares subject to the Option. The Shares subject to
any Option, or portion thereof, that terminates shall no longer be charged
against the aggregate Share limit set forth in Section 4. and shall again be
available for the grant of Options under the Plan.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
-------------------------------------------
In the event of any change in the characteristics of the Shares by
reason of a stock dividend, recapitalization, merger, reorganization,
consolidation, stock split, reverse stock split or any other similar event, the
Shares subject to the Plan and the Shares subject to each outstanding Option
shall be correspondingly increased, reduced or changed, such that by exercise of
any outstanding Option, a Grantee will receive, without change in the aggregate
purchase price, securities, as so increased, reduced or changed, comparable to
the securities the Grantee would have received if the Grantee had exercised the
Option prior to such event. In the case of an ISO, the foregoing sentence shall
apply in the event of a merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, if the excess of the aggregate fair
market value of the Shares subject to the Option immediately after such event
over the aggregate exercise price of such Shares is not more than the excess of
the aggregate fair market value of all Shares subject to the Option immediately
prior to such event over the aggregate exercise price of such Shares.
6
<PAGE>
Adjustments under this Section shall be made by the Board (or
Committee, as applicable), whose determination as to the nature and extent of
any adjustments shall be binding and final.
15. COMPLIANCE WITH SECURITIES AND EXCHANGE COMMISSION AND OTHER REQUIREMENTS.
--------------------------------------------------------------------------
No certificates for Shares shall be executed and delivered upon
exercise of any Option unless and until the Company is able to take such action,
if any, as is then required to comply with the Securities Act of 1933, as
amended; the Exchange Act; the South Carolina Uniform Securities Act, as
amended; any other applicable state securities laws and the requirements of any
exchange on which the Shares may be listed.
In the case of the exercise of an Option by a person or estate
acquiring the right to exercise the Option by bequest of inheritance, the Board
(or Committee, as applicable) may require reasonable evidence as to the
ownership of the Option and may require such consent and releases of taxing
authorities as it may deem advisable.
16. NO RIGHT TO EMPLOYMENT.
-----------------------
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, shall confer upon any
participant under this Plan any right to continue in the employ of the Company
or any Subsidiary, or shall in any way affect the right and power of the Company
or any Subsidiary to terminate the employment of any participant at any time
with or without cause, to the same extent as the Company or Subsidiary might
have done if the Plan had not been adopted.
17. NO RIGHTS AS SHAREHOLDER.
-------------------------
No person, estate or other entity shall have any rights as a
shareholder with respect to the Shares obtained as a result of the exercise of
an Option until a certificate or certificates for the Shares have been received.
18. AMENDMENT AND TERMINATION.
--------------------------
The Board may at any time suspend, amend or terminate this Plan. The
Board (or Committee, as applicable) may make such modifications to the terms and
conditions of any Option as it shall deem advisable. No Option shall be granted
during any suspension or after termination of the Plan. Notwithstanding the
foregoing provisions of this Section, no amendment, suspension or termination of
the Plan and no modification of any Option shall, without the consent of the
holder of an Option, alter or impair any rights or obligations under any Option
granted prior to the effective date of the amendment, suspension or termination
of the Plan or of the modification to the Option.
In addition to Board approval of an amendment to the Plan, the Board
shall obtain such consent by the holders of the capital stock of the Company, if
any, as may be required by applicable law, including without limitation Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended,
Sections 162(m) and 421 through 424 of the Internal Revenue Code.
19. USE OF PROCEEDS.
----------------
The proceeds received by the Company from the sale of Shares pursuant
to the exercise of Options shall be used for general corporate purposes as
determined by the Board.
8
<PAGE>
20. INDEMNIFICATION OF BOARD.
-------------------------
In addition to such other rights of indemnification as they may have as
members of the Board, the members of the Board (and the Committee, as
applicable) shall, to the fullest extent permitted by law, be indemnified by the
Company against the reasonable expenses, including attorneys' fees and legal
costs, actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action or omission in
connection with the Plan or any Option, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it has been adjudged in such action, suit or proceeding that such Board or
Committee member is liable for gross negligence or misconduct in the performance
of such member's duties; provided that within 60 days after institution of any
such action, suit or proceeding the Board or Committee member shall in writing
offer the Company the opportunity, at the Company's own expense, to handle and
defend the same.
21. EFFECTIVE DATE OF THE PLAN.
---------------------------
This Plan shall be effective August 24, 2000, subject to subsequent
approval by the requisite shareholder vote no later than the next annual meeting
of the shareholders of the Company. Any Options granted prior to such
shareholder approval shall also be subject to shareholder approval of the Plan.
If the Plan is not approved by the shareholders of the Company, the Plan shall
terminate and any Options granted under the Plan shall expire.
22. DURATION OF THE PLAN.
---------------------
Unless previously terminated by the Board, this Plan shall terminate at
the close of business on August 24, 2010, and no Option may be granted under the
Plan thereafter, but such termination shall not affect any Option granted prior
to termination of the Plan.
23. GOVERNING LAW.
--------------
This Plan shall be governed, interpreted and enforced in accordance
with the laws of South Carolina without regard to choice of law principles.
9
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
STOCK OPTION AGREEMENT
THIS AGREEMENT is made by and between Delta Woodside Industries, Inc.
(the "Company") and ______________________________ (the "Participant") effective
as of the Date of Grant set forth below.
Subject to the Additional Terms and Conditions attached hereto and to
the terms of the Delta Woodside Industries, Inc. 2000 Stock Option Plan, as
amended from time to time (the "Plan"), both of which are incorporated herein by
reference as part of this Agreement, the Company hereby awards as of the Date of
Grant to Participant an option (the "Option"), as described below, to purchase
the Option Shares. Capitalized terms used and not defined or described herein
shall have the meanings set forth in the attached Additional Terms and
Conditions or the Plan.
A. Type of Option: ________________________. [Specify whether the
Option is intended to be an ISO or NQO, either "This Option is intended to be an
"incentive stock option" within the meaning of Section 422 of the Code," or
"This Option is not intended to be an "incentive stock option" within the
meaning of Section 422 of the Code." ISOs and NQOs granted at the same time must
be granted using a separate Stock Option Agreement for each.] [If the Option is
an ISO, include the following language: "The Participant acknowledges that any
Option granted to the Participant that is intended to be an ISO will lose
tax-favored treatment under Section 421 of the Code if the Participant fails to
comply with the holding period requirements of Section 422 of the Code."]
B. Date of Grant: __________________________.
C. Exercise Price: __________ per Share. [No less than 50% of fair
market value of a Share as of the Date of Grant and no less than par value
($.01). No less than fair market value if the Option is an ISO or is intended as
"performance-based compensation" under Code Section 162(m). No less than 110% of
fair market value if the Option is an ISO and the recipient is a 10% Owner
immediately prior to the grant.]
D. Option Shares: __________ Shares.
E. Vesting Schedule: [As determined by the Board or Committee.]
F. Term: __________________. [As determined by the Board or
Committee. If ISOs are awarded, not to exceed ten (10) years from the Date of
Grant and not to exceed five (5) years from the Date of Grant if the recipient
is a 10% Owner immediately prior to the grant.]
G. Expiration of Option Upon Termination of Employment and Death of
Participant. [As determined by the Board or Committee. See Section 10 of the
Plan.]
H. Form of Payment. [Payment must be in cash unless the Board or
Committee permits exercise by transfer of Shares with a fair market value
equal to the aggregate exercise price.]
IN WITNESS WHEREOF, the Company and the Participant have executed this
Agreement as of the date first set forth above.
DELTA WOODSIDE INDUSTRIES, INC. PARTICIPANT
By:________________________________ __________________________
Name:_____________________________ Name:_____________________
Title:______________________________
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
STOCK OPTION AGREEMENT
ADDITIONAL TERMS AND CONDITIONS
1. Exercise.
---------
Subject to the terms of the Plan, an Option may be exercised from time
to time during the Term of the Option with respect to all or a portion of the
Shares with respect to which the Option has vested. A partial exercise shall not
affect the right to exercise the Option from time to time with respect to the
remaining Shares subject to the Option. Notwithstanding any other provision of
this Stock Option Agreement or the Plan, in no event may an Option be exercised
after the expiration of its stated term.
2. METHOD OF EXERCISE.
-------------------
An Option shall be deemed exercised when (i) the Company receives
written notice of the holder's decision to exercise the Option; (ii) the holder
tenders to the Company payment in full in cash (or, if authorized by this Stock
Option Agreement, Shares) the aggregate exercise price for the Shares with
respect to which the Option is to be exercised; (iii) the holder tenders to the
Company payment in full in cash the amount of all federal and state withholding
or other employment taxes applicable to the taxable income, if any, of the
holder resulting from the exercise of the Option; and (iv) the holder complies
with such other reasonable requirements as the Board (or Committee, as
applicable) may establish.
3. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
-------------------------------------------
In the event of any change in the characteristics of the Shares by
reason of a stock dividend, recapitalization, merger, reorganization,
consolidation, stock split, reverse stock split or any other similar event, the
Shares subject to the Plan and the Shares subject to each outstanding Option
shall be correspondingly increased, reduced or changed, such that by exercise of
any outstanding Option, a Grantee will receive, without change in the aggregate
purchase price, securities, as so increased, reduced or changed, comparable to
the securities the Grantee would have received if the Grantee had exercised the
Option prior to such event. In the case of an ISO, the foregoing sentence shall
apply in the event of a merger, consolidation, acquisition of property or stock,
separation, reorganization or liquidation, if the excess of the aggregate fair
market value of the Shares subject to the Option immediately after such event
over the aggregate exercise price of such Shares is not more than the excess of
the aggregate fair market value of all Shares subject to the Option immediately
prior to such event over the aggregate exercise price of such Shares.
Adjustments under this Section shall be made by the Board (or
Committee, as applicable), whose determination as to the nature and extent of
any adjustments shall be binding and final.
4. TRANSFER.
---------
An Option shall not be transferable by the Grantee except by will or
the laws of descent and distribution. During the Grantee's lifetime, an Option
may only be exercised by the Grantee.
3
<PAGE>
5. COMPLIANCE WITH SECURITIES AND EXCHANGE COMMISSION AND OTHER REQUIREMENTS.
--------------------------------------------------------------------------
No certificates for Shares shall be executed and delivered upon
exercise of any Option unless and until the Company is able to take such action,
if any, as is then required to comply with the Securities Act of 1933, as
amended; the Securities Exchange Act of 1934, as amended; the South Carolina
Uniform Securities Act, as amended; any other applicable state securities laws
and the requirements of any exchange on which the Shares may be listed.
In the case of the exercise of an Option by a person or estate
acquiring the right to exercise the Option by bequest of inheritance, the Board
(or Committee, as applicable) may require reasonable evidence as to the
ownership of the Option and may require such consent and releases of taxing
authorities as it may deem advisable.
6. NO RIGHT TO EMPLOYMENT.
-----------------------
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, nor this Stock Option
Agreement shall confer upon any participant under the Plan any right to continue
in the employ of the Company or any Subsidiary, or shall in any way affect the
right and power of the Company or any Subsidiary to terminate the employment of
any participant at any time with or without cause, to the same extent as the
Company or Subsidiary might have done if the Plan had not been adopted.
7. NO RIGHTS AS SHAREHOLDER.
-------------------------
No person, estate or other entity shall have any rights as a
shareholder with respect to the Shares obtained as a result of the exercise of
an Option until a certificate or certificates for the Shares have been received.
8. AMENDMENT AND TERMINATION.
--------------------------
The Board may at any time suspend, amend or terminate the Plan. The
Board (or Committee, as applicable) may make such modifications of the terms and
conditions of any Option as it shall deem advisable. Notwithstanding the
foregoing provisions of this Section, no amendment, suspension or termination of
the Plan and no modification of any Option shall, without the consent of the
holder of an Option, alter or impair any rights or obligations under any Option
granted prior to the effective date of the amendment, suspension or termination
of the Plan or of the modification of the Option.
In addition to Board approval of an amendment to the Plan, the Board
shall obtain such consent by the holders of the capital stock of the Company, if
any, as may be required by applicable law, including without limitation Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended,
Sections 162(m) and 421 through 424 of the Internal Revenue Code.
4
<PAGE>
9. GOVERNING LAW.
--------------
This Stock Option Agreement shall be governed, interpreted and enforced
in accordance with the laws of South Carolina without regard to choice of law
principles.
10. ENTIRE AGREEMENT.
-----------------
This Stock Option Agreement and the Plan, as amended, express the
entire understanding and agreement of the parties hereto with respect to the
grant of the Option evidenced by this Stock Option Agreement.
<PAGE>
APPENDIX 3
DELTA WOODSIDE INDUSTRIES, INC.
INCENTIVE STOCK AWARD PLAN
Effective August 24, 2000
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
INCENTIVE STOCK AWARD PLAN
ARTICLE I
THE PLAN
--------
Sec. 1.1 NAME.
This plan shall be known as the "Incentive Stock Award Plan" (the
"Plan").
Sec. 1.2 PURPOSES
The purposes of the Plan are to establish or increase the equitable
ownership in Delta Woodside Industries, Inc. (the "Company") by employees of the
Company and/or its subsidiaries and to provide incentives to employees of the
Company and/or its subsidiaries through the prospect of such common stock
ownership. By thus achieving ownership or the prospect of ownership of the
Company's common stock by employees, the Company expects to attract, retain and
motivate exceptionally well qualified and competent individuals.
ARTICLE II
PARTICIPANTS
------------
Sec. 2.1 ELIGIBILITY
Any management or other key employee of the Company or any subsidiary
shall be eligible to receive an Incentive Stock Award (an "Award").
ARTICLE III
ADMINISTRATION
--------------
Sec. 3.1 SELECTION OF AWARDS
The Board of Directors (the "Board") of the Company shall have the
authority from time to time to select employees ("Participants") to receive
Awards and the number of shares to be awarded under each such Award. In its
discretion, the Board may delegate its authority under the Plan to a committee
of the Board (the "Committee") composed solely of two or more "Non-Employee
Directors" ( as defined in Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended, or any applicable successor rule or regulation (the
"Exchange Act").
Sec. 3.2 INTERPRETATION OF PLAN
The Board (or Committee, as applicable) shall have full and final
authority to interpret and administer the Plan and to determine and interpret
the terms and conditions of each Incentive Stock Award Agreement.
<PAGE>
ARTICLE IV
SHARES ELIGIBLE TO BE GRANTED UNDER THE PLAN
Sec. 4.1 NUMBER OF SHARES
Subject to the provisions of Section 4.2, the aggregate number of
shares of common stock of the Company which may be awarded under the Plan shall
not exceed 667,000 shares. Such shares may be either shares previously issued
and thereafter acquired by the Company or they may be authorized but unissued
shares. Any shares covered by an Award (or portion thereof) that have been
forfeited pursuant to the provisions of the applicable Incentive Stock Award
Agreement shall again become available for the purposes of the Plan.
Sec. 4.2 ANTI-DILUTION
In the event that the outstanding shares of common stock of the Company
hereafter are changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation, or cash or other
property, by reason of a merger, consolidation, reorganization,
recapitalization, reclassification, combination of shares, stock split, stock
dividend or similar event:
(a) the aggregate number and kind of shares subject to
Awards which shall have been or may thereafter be granted hereunder shall be
adjusted appropriately; and
(b) the new, additional or different shares and securities and
the cash and other property into which the shares subject to outstanding Awards
would have been converted (had the shares covered by such Awards been
outstanding) shall be considered to be property granted by and subject to the
Awards and shall be subject to all of the conditions and restrictions applicable
to such Awards and the shares subject to such Awards.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined solely by the Board (or Committee, as
applicable), and any such adjustment may provide for the elimination of
fractional shares or security interests.
ARTICLE V
AWARD
-----
Sec. 5.1 AWARD GRANT
The Board (or Committee, as applicable) shall determine from time to
time who is to be a Participant and the number of shares to be awarded;
provided, that during any calendar year no Participant may be awarded an
aggregate of more than 300,000 shares of common stock under the Plan. Such
determination shall be recorded in the minutes of the meeting at which such
determination was made.
Page 2 of 7
<PAGE>
Sec. 5.2 INCENTIVE STOCK AWARD AGREEMENT
A Participant shall be entitled to receive an Award only upon execution
of an Incentive Stock Award Agreement with the Company. Such Incentive Stock
Award Agreement shall be substantially in the form attached hereto but may be
modified from time to time by the Board (or Committee, as applicable) consistent
with the terms of this Plan.
Sec. 5.3 CASH PURCHASE PRICE OF STOCK
The cash purchase price to be paid by each Participant in connection
with receiving shares covered by an Award (or portion thereof) that has vested
pursuant to the provisions of an Incentive Stock Award Agreement shall be $0.01
per share and such sum shall be payable prior to issuance to the Participant of
the certificate(s) representing such shares.
Sec. 5.4 FORFEITURE OF AN AWARD (OR PORTION THEREOF)
The Incentive Stock Award Agreement shall set forth the circumstances
under which the Award granted thereby (or portion thereof) shall be forfeited.
These circumstances (i) may include the termination of employment of the
Participant with the Company, or any subsidiary thereof, for any reason other
than death, retirement or permanent total disability, prior to the date set
forth in the Incentive Stock Award Agreement when the Award (or relevant portion
thereof) shall vest, and (ii) may include such additional circumstances as may
be deemed appropriate by the Board (or Committee, as applicable). The forfeiture
circumstances may vary among the shares covered by an Award. In the event an
Award (or portion thereof) shall be forfeited pursuant to the terms of the
applicable Incentive Stock Award Agreement, the Participant shall immediately
have no further rights under such Award (or portion thereof) or in the shares
covered thereby.
Sec. 5.5 VESTING OF AN AWARD (OR PORTION THEREOF)
(a) The Incentive Stock Award Agreement shall set forth the
circumstances under which the Award granted thereby (or portion thereof) shall
vest. With respect to any Award (or portion of an Award) intended to qualify as
"performance-based compensation" under Section 162(m)(4)(C) of the Code and the
regulations promulgated thereunder, (i) these circumstances shall consist of the
achievement of one or more performance-based goals established by the Committee,
and such performance-based goals shall be based on one of, or a combination of,
the following factors, as the Committee deems appropriate: total stockholder
return; revenues, sales, net income, EBIT, EBITDA, stock price, and/or earnings
per share; return on assets, net assets, and/or capital; return on stockholders'
equity; debt/equity ratio; working capital; quality; the Company's financial
performance or the performance of the Company's stock versus peers; cost
reduction; productivity; or economic value added; (ii) the Committee shall
establish the performance-related goals in writing no later than 90 days after
the commencement of the period of service to which the Award relates (and in all
events before 25% of the period of service has elapsed); and (iii) the Award
shall be made by a Committee, which shall consist solely of two or more
directors who are "outside directors" within the meaning of Treasury Regulation
Section 1.162-27(e)(3). The vesting circumstances may vary among the shares
covered by an Award.
Page 3 of 7
<PAGE>
(b) In the event an Award (or portion thereof) shall vest pursuant to
the terms of the applicable Incentive Stock Award Agreement, the Company shall
issue and deliver, or cause to be issued and delivered, to the Participant or
his or her legal representative, free from any legend and any other restriction
(other than those required by federal or state securities laws or any other
applicable law), certificate(s) for the number of shares covered by the vested
portion of the Award, subject to receipt by the Company of the cash purchase
price described in Section 5.3 above. In addition, at or about such time the
Company shall pay the Participant in cash an amount that will be approximately
sufficient, after the payment of all applicable federal and state income taxes,
to pay the federal and state income taxes which the Participant will incur by
virtue of the vesting of such Award (or portion thereof). With respect to any
Award (or portion of an Award) intended to qualify as "performance-based
compensation" under Section 162(m)(4)(C) of the Code and the regulations
promulgated thereunder, no issue of shares, delivery of any certificates or
payments shall occur, however, unless and until a Committee consisting solely of
two or more directors who are "outside directors" within the meaning of Treasury
Regulation Section 1.162-27(e)(3) has previously certified in writing that the
relevant performance-based goal(s) have been met.
(c) No stock certificate shall be delivered to a Participant or his or
her legal representative unless and until the Participant or his or her legal
representative shall have paid to the Company in cash the full amount of all
federal and state withholding or other employment taxes applicable to the
taxable income of such Participant resulting from the vesting of such Award (or
portion thereof).
(d) (i) Upon any Change of Control, all outstanding Awards, to the
extent not vested, shall become immediately vested in their entirety. "Change of
Control"shall mean the occurrence of any one of the following: (a) the sale,
lease, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its subsidiaries taken as a
whole to any "person" (within the meaning of Section 13(d) of the Exchange Act)
other than one or more wholly-owned subsidiaries of the Company; (b) the
adoption of a plan relating to the liquidation or dissolution of the Company;
(c) the first day on which a majority of the members of the Board are not
Continuing Directors; or (d) the consummation of any transaction (including
without limitation any merger, share exchange or consolidation) the result of
which is that any "person" (as defined above), other than an Exempt Person or
Exempt Persons, becomes, directly or indirectly, the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that an entity
or person shall be deemed to have "beneficial ownership" of all shares that any
such entity or person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time) of more than 30% of
the outstanding common stock of the Company; provided that the transactions
covered by this clause (d) shall not include the acquisition by the Company of
its common stock; provided further, however, that if (x) any "person" (as
defined above) becomes, directly or indirectly, the "beneficial owner" (as
defined above) of more than 30% of the outstanding common stock of the Company
solely as a result of acquisition by the Company of its common stock, (y) such
"person" thereafter acquires any additional shares of common stock of the
Company and (z) immediately after such acquisition such "person" is, directly or
indirectly, the "beneficial owner" (as defined above) of 30% or more of the
outstanding common stock of the Company, then such additional acquisition shall
constitute a Change of Control.
Page 4 of 7
<PAGE>
(ii) "Exempt Person" shall mean (a) the Company, (b) any
wholly-owned subsidiary of the Company, (c) any individual who immediately
before the transaction is an executive officer of the Company, (d) any employee
benefit plan of the Company or any of its wholly-owned subsidiaries or (e) any
entity or person holding shares of common stock for or pursuant to the terms of
any such plan if such entity or person is not a beneficiary of or participant in
such plan.
(iii) "Continuing Directors" shall mean, as of any date, any
member of the Board who (i) was a member of the Board on the date this Plan was
adopted by the Board or (ii) was nominated for election or elected to the Board
with the approval of a majority of the Continuing Directors who were members of
the Board at the time of such nomination or election.
Sec. 5.6 NO RIGHTS AS SHAREHOLDER
Until the issuance and delivery to the Participant of certificate(s)
for such shares by reason of the vesting of an Award (or portion thereof) and
payment of the applicable cash purchase price, the Participant shall have none
of the rights of a shareholder with respect to the shares covered by an Award.
ARTICLE VI
STOCK CERTIFICATE
-----------------
Sec. 6.1 STOCK CERTIFICATES
The Company shall not be required to issue or deliver, or cause to be
issued or delivered, any certificate for shares of stock of the Company pursuant
to an Incentive Stock Award Agreement executed hereunder prior to fulfillment of
all of the following conditions:
(a) the admission of such shares to listing on any
over-the-counter markets and stock exchanges on which the Company's stock is
then traded or listed;
(b) the completion of any registration or other qualification
of such shares under any federal or state law or under the rulings or
regulations of the Securities and Exchange Commission or any other governmental
regulatory body, that the Board (or Committee, as applicable) in its sole
discretion deems necessary or advisable;
(c) the obtaining of any approval or other clearance from any
federal or state governmental agency which the Board (or Committee, as
applicable) shall in its sole discretion determine to be necessary or advisable;
and
(d) the lapse of such reasonable period of time following the
vesting of an Award (or portion thereof) as the Board (or Committee, as
applicable) from time to time may establish for reasons of administrative
convenience.
Page 5 of 7
<PAGE>
ARTICLE VII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
-----------------------------------------------
Sec. 7.1 TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board (or Committee, as applicable) may at any time and from time
to time and in any respect amend, modify or terminate the Plan; provided,
however, that no such action of the Board (or Committee, as applicable) without
approval of the shareholders of the Company may:
(a) increase the total number of shares of common stock
covered by the Plan except as contemplated in Section 4.2 hereof; or
(b) change the $0.01 per share cash purchase price under
Section 5.3;
provided further, that no termination, amendment or modification of the Plan
shall in any manner, without the consent of the Participant, affect any Award
previously made to a Participant under the Plan.
ARTICLE VIII
MISCELLANEOUS
-------------
Sec. 8.1 EMPLOYMENT
Nothing in this Plan or in any Award granted hereunder or in any
Incentive Stock Award Agreement relating thereto shall confer upon any employee
the right to continue in the employ of the Company or any subsidiary.
Sec. 8.2 OTHER COMPENSATION PLANS
The adoption of this Plan shall not affect any other existing incentive
or compensation plans of the Company or any subsidiary, nor shall this Plan
preclude the Company from establishing any other forms of incentive or other
compensation for employees of the Company or any subsidiary.
Sec. 8.3 PLAN BINDING ON SUCCESSORS
This Plan shall be binding upon the successors and assigns of the
Company.
Page 6 of 7
<PAGE>
Sec. 8.4 SINGULAR, PLURAL; GENDER; HEADINGS
Whenever used herein, nouns in the singular shall include the plural,
and the masculine pronoun shall include the feminine gender. The headings in
this Plan or any Incentive Stock Award Agreement are and shall be for reference
purposes only and shall not affect the meaning or interpretation hereof or
thereof.
Sec. 8.5 AWARD NOT TRANSFERABLE
A Participant shall have no right to transfer, assign or hypothecate an
Award or, until the portion of an Award covering such shares shall vest, the
shares covered by an Award, other than by will or the laws of descent and
distribution, and the rights of any purported owner, holder, pledgee or any
other person in possession of or claiming any right in such Award or shares
shall at all times be subject to the provisions of this Plan and the applicable
Incentive Stock Award Agreement.
Sec. 8.6 GOVERNING LAW
This Plan shall be governed, interpreted and enforced in accordance
with the laws of South Carolina without regard to choice of law principles.
Page 7 of 7
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
INCENTIVE STOCK AWARD AGREEMENT
THIS AGREEMENT, effective as of _____________________, _______, by and
between Delta Woodside Industries, Inc., a South Carolina corporation (the
"Company"), and __________________________ (the "Participant") evidences the
grant by the Company of an Incentive Stock Award (this "Award") to purchase an
aggregate of ____________ shares of common stock of the Company subject to the
terms of the Company's Incentive Stock Award Plan and this Agreement.
Sec. 1. CASH PURCHASE PRICE
-------------------
The cash purchase price of the common stock subject to this Award is
$0.01 per share.
Sec. 2. ANTI-DILUTION
-------------
In the event that the outstanding shares of common stock of the Company
hereafter are changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation, or cash or other
property, by reason of a merger, consolidation, reorganization,
recapitalization, reclassification, combination of shares, stock split, stock
dividend or similar event, the new, additional or different shares and
securities and the cash and other property into which the shares subject to this
Agreement would have been converted (had the shares covered by this Agreement
been outstanding) shall be considered to be property granted by and subject to
this Agreement and shall be subject to all of the conditions and restrictions
applicable to the Award evidenced by, and the shares subject to, this Agreement.
Sec. 3. RESTRICTIONS ON TRANSFER
------------------------
The Participant may not transfer, assign or hypothecate any of the
Participant's rights under this Agreement or, until the portion of the Award
evidenced hereby covering such shares shall vest, the shares covered by the
Award, other than by will or the laws of descent and distribution, and such
rights shall be exercisable during the Participant's lifetime only by the
Participant.
Sec. 4. FORFEITURE OF AWARD (OR PORTION THEREOF)
----------------------------------------
Upon the occurrence of the following circumstances prior to the vesting
of the Award (or portion thereof, as applicable), the Award (or portion thereof)
of shares set forth in this Agreement shall be forfeit, and the Participant
shall immediately have no further rights under the Award (or portion thereof) or
in the shares covered thereby:
[Insert forfeiture conditions established by the Board (or Committee,
if applicable).]
Page 1 of 3
<PAGE>
Sec. 5. VESTING OF AWARD (OR PORTION THEREOF)
-------------------------------------
Upon the occurrence of the following circumstances, the Award (or
portion thereof, as applicable) of shares set forth in this Agreement shall
vest:
[Insert vesting conditions established by the Board (or Committee, if
applicable).]
Upon the vesting of the Award (or portion thereof) set forth in this
Agreement pursuant to the terms of this Agreement, the Company shall issue and
deliver, or cause to be issued and delivered, to the Participant or his or her
legal representative, free from any legend and any other restriction (other than
those required by federal or state securities laws or any other applicable law),
certificate(s) for the number of shares covered by the vested portion of the
Award, subject to the receipt by the Company of the cash purchase price
described in Section 1 above. In addition, at or about such time the Company
shall pay the Participant in cash an amount that will be approximately
sufficient, after the payment of all applicable federal and state income taxes,
to pay the federal and state income taxes that the Participant will incur by
virtue of the vesting of such Award (or portion thereof).
No stock certificate shall be delivered to the Participant or his or
her legal representative unless and until the Participant shall have paid to the
Company in cash the full amount of all federal and state withholding and other
employment taxes applicable to the taxable income of the Participant resulting
from the vesting of the Participant's Award (or portion thereof).
Sec. 6. NO RIGHTS AS SHAREHOLDER
------------------------
Until the issuance and delivery to the Participant of certificate(s)
for shares by reason of the vesting of the Award evidenced by this Agreement (or
portion thereof) and payment of the applicable cash purchase price, the
Participant shall have none of the rights of a shareholder with respect to the
shares covered by an Award.
Sec. 7. STOCK CERTIFICATES
------------------
The Company shall not be required to issue or deliver, or cause to be
issued or delivered, any certificate for shares of stock of the Company pursuant
to this Agreement, prior to fulfillment of all of the following conditions:
(a) the admission of such shares to listing on any over-the-counter
markets and stock exchanges on which the Company's stock is then traded or
listed;
(b) the completion of any registration or other qualification of such
shares under any federal or state law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body
that the Board of Directors of the Company (or committee thereof, as applicable)
in its sole discretion deems necessary or advisable;
(c) the obtaining of any approval or other clearance from any federal
or state governmental agency that the Company's Board of Directors (or committee
thereof) shall in its sole discretion determine to be necessary or advisable;
and
(d) the lapse of such reasonable period of time following the vesting
of the Award (or portion thereof) set forth in this Agreement as the Company's
Board of Directors (or committee thereof) from time to time establish for
reasons of administrative convenience.
Page 2 of 3
<PAGE>
Sec. 8. ENFORCEMENT
-----------
This Agreement shall be construed, administered and enforced in
accordance with and subject to the terms of the Company's Incentive Stock Award
Plan, the terms of which are hereby incorporated herein by reference, and the
laws of the State of South Carolina, without reference to choice of law
principles.
Sec. 9. INCENTIVE STOCK AWARD PLAN
--------------------------
Participant acknowledges receipt of the Incentive Stock Award Plan (the
"Plan") of the Company. The terms of the Plan are incorporated herein by
reference.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first written above.
DELTA WOODSIDE INDUSTRIES, INC. PARTICIPANT
By:______________________________ __________________________
Name:____________________________ Name:_____________________
Title:___________________________
Page 3 of 3
<PAGE>
APPENDIX 4
FOLD AND DETACH HERE
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DELTA
WOODSIDE INDUSTRIES, 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 PROPOSALS 2, 3 AND
4.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders dated October 6, 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.
<PAGE>
DELTA WOODSIDE INDUSTRIES, INC.
[GRAPHIC]
PLEASE SIGN, DETACH
AND RETURN PROXY CARD
IN SUPPLIED ENVELOPE
FOLD AND DETACH HERE
--------------------------------------------------------------------------------
DELTA WOODSIDE INDUSTRIES, INC.
ANNUAL MEETING, NOVEMBER 7, 2000
PROXY
PLEASE SIGN ON REVERSE SIDE AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE
The undersigned shareholder of Delta Woodside Industries, Inc., a South
Carolina corporation, hereby constitutes and appoints William F. Garrett,
William H. Hardman, Jr. and Donald C. Walker, 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 Gunter Theater, 320 South Main Street,
Greenville, South Carolina, on November 7, 2000 at 9:00 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, C. C. Guy, J. F. Kane, M. Lennon, E. E. Maddrey, II, B.
A. Mickel
(INSTRUCTION: To withhold authority to vote for an individual nominee write that
nominee's name in the space provided below.)
________________________________________________________________________________
2. Proposal to approve the Delta Woodside Industries, Inc. 2000 Stock Option
Plan
______ FOR ______ AGAINST _______ ABSTAIN
3. Proposal to approve the new Delta Woodside Industries, Inc. Incentive Stock
Award Plan
______ FOR ______ AGAINST ______ ABSTAIN
4. Proposal to ratify selection of KPMG LLP as the independent auditors of
Delta Woodside Industries, Inc. for fiscal 2001
______ FOR ______ AGAINST ______ ABSTAIN
5. 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)
<PAGE>
APPENDIX 5
FOLD AND DETACH HERE
--------------------------------------------------------------------------------
THESE VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
DELTA WOODSIDE INDUSTRIES 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
PROPOSALS 2, 3 AND 4.
The undersigned hereby acknowledged receipt of the Notice of annual Meeting
of Shareholders dated October 6, 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.
<PAGE>
DELTA WOODSIDE INDUSTRIES, 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
The undersigned participant in the Savings and Investment Plan of Delta
Woodside Industries, Inc., a South Carolina 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 Delta Woodside Industries,
Inc. held by such Plan at the Annual Meeting of shareholders to be held at the
Gunter Theater, 320 South Main Street, Greenville, South Carolina, on November
7, 2000 at 9:00 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, C. C. Guy, J. F. Kane, M. Lennon, E. E. Maddrey, II, B.
A. Mickel
(INSTRUCTION: To withhold authority to vote for an individual nominee write that
nominee's name in the space provided below.)
________________________________________________________________________________
2. Proposal to approve the Delta Woodside Industries, Inc. 2000 Stock Option
Plan
______ FOR ______ AGAINST _______ ABSTAIN
3. Proposal to approve the new Delta Woodside Industries, Inc. Incentive Stock
Award Plan
______ FOR ______ AGAINST ______ ABSTAIN
4. Proposal to ratify selection of KPMG LLP as the independent auditors of
Delta Woodside Industries, Inc. for fiscal 2001
______ FOR ______ AGAINST ______ ABSTAIN
5. At their discretion upon such other matters as may properly come before
the meeting.
(over)
