<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------
Date of Report (Date of earliest event reported): May 27, 1995
SPRINGS INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
South Carolina 1-5315 57-0252730
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
205 North White Street, Fort Mill, SC 29715
(Address of principal executive offices) (Zip Code)
(803) 547-1500
(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets
On May 27, 1995, Dundee Acquisition Corp., a Georgia corporation
("Subcorp"), which was a wholly-owned subsidiary of Springs Industries, Inc., a
South Carolina corporation ("Springs"), was merged with and into Dundee Mills,
Incorporated, a Georgia corporation ("Dundee"), with Dundee surviving as a
wholly owned subsidiary of Springs. The merger is hereinafter referred to as
the "Merger." Dundee is a leading manufacturer of towels, infant and toddler
bedding, knitted infant apparel and healthcare products.
The Merger was consummated in accordance with the Agreement and Plan
of Merger dated February 6, 1995, as amended on March 7, 1995 (the "Merger
Agreement"), entered into between Springs, Subcorp and Dundee. A copy of the
Merger Agreement is attached as Exhibit 2 hereto and is incorporated by
reference herein. The terms of the Merger are summarized in pages 1 through 49
of the joint Proxy Statement and Prospectus dated April 26, 1995 (the "Proxy
Statement and Prospectus"), a copy of which is attached as Exhibit 20.1 hereto
and is incorporated herein by reference. Both the Merger Agreement and the
Proxy Statement and Prospectus were filed with the Securities and Exchange
Commission on April 27, 1995 pursuant to Rule 424(b)(3) of the Securities Act
of 1933. Capitalized terms used herein and not defined herein shall, unless
otherwise indicated, have the respective meanings provided in the Merger
Agreement and the Proxy Statement and Prospectus.
Through the Merger, Springs acquired all of the capital stock of
Dundee. The description of the Merger in the Proxy Statement and Prospectus
includes the nature and the amount of consideration given, the principle
followed in determining the amount of consideration, the identity of the
persons from whom the capital stock was acquired, and the nature of any
material relationships between such persons and Springs or any of its
affiliates, any director or officer of Springs, or any associate of any such
director or officer.
Immediately prior to the Merger, there were 46,728 outstanding
shares of common stock, par value $25.00, of Dundee ("Dundee Common Stock")
held by approximately 300 record holders.
Upon consummation of the Merger, each share of Dundee Common Stock
was converted into the right to receive either $2,525.00 in cash or 65.58442
shares of Springs Class A Common Stock. Holders of approximately 8,338 shares
of Dundee Common Stock will receive cash in the Merger and approximately 38,334
shares of Dundee Common Stock were converted into the right to receive Springs
Class A Common Stock. Springs will issue approximately 2,514,113 shares of
Springs Class A Common Stock and will pay an aggregate of approximately
$21,179,700 in cash to acquire all of the outstanding Dundee Common Stock.
Holders of six shares of Dundee Common Stock elected to seek appraisal rights
under Georgia law ("Dissenting Shares"). The amount to be paid to the holders
of Dissenting Shares has not yet been determined.
The Company has financed the cash portion of its acquisition of Dundee from
funds made available under a term loan agreement dated as of March 31, 1995,
among Springs, Wachovia Bank of North Carolina, N.A., and Wachovia Bank of
Georgia, N.A., as agent.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired
The financial statements of Dundee filed herewith are listed in
the Index to Financial Statements which appears below. These
Financial Statements, the related Notes to the Financial
Statements and, where applicable, the Report of Independent
Auditors are set forth on pages F-8 through F-23 of the Proxy
Statement and Prospectus, copies of which are attached as
Exhibit 20.2 and incorporated herein by reference.
It is impracticable to include additional interim Condensed
Financial Statements at this time since additional accounting and
financial work are necessary before the information can be
prepared. This information will be filed by August 11, 1995 in
accordance with Item 7(a)(4) of Form 8-K.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Description of the Financial Statements Proxy Statement
--------------------------------------- and Prospectus
Page
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<S> <C>
Audited Financials:
Balance Sheets as of August 31, 1993, F-9
and 1994
For the Years Ended August 31, 1992, 1993, and 1994:
Statements of Operations F-11
Statements of Cash Flows F-12
Statements of Stockholders' Equity F-10
Notes to Financial Statements F-13 through
F-19
REPORT OF INDEPENDENT AUDITORS F-8
Unaudited Financials:
Balance Sheets as of December 31, 1993, F-20
and 1994 (Unaudited)
For the Four Months Ended December 31, 1993,
and 1994 (Unaudited):
Statements of Operation F-21
Statements of Cash Flows F-22
Notes to Financial Statements (Unaudited) F-23
</TABLE>
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(b) Pro Forma Financial Information
The pro forma financial data for the combined operations of
Springs and Dundee filed herewith are listed in the Index to
Pro Forma Financial Data which appears below. This Pro
Forma Financial Data and the related Notes to Pro Forma
Condensed Combined Financial Data (Unaudited) are attached
as Exhibit 99 and incorporated herein by reference.
INDEX TO PRO FORMA FINANCIAL DATA
Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of December 31, 1994
Unaudited Pro Forma Condensed Combined Statement of
Operations for the Year Ended December 31, 1994
Notes to Pro Forma Condensed Combined Financial Data
It is impracticable to include additional interim pro forma
financial information at this time since additional
accounting and financial work are necessary before the
information can be prepared. This information will be filed
by August 11, 1995 in accordance with Item 7(a)(4) of Form
8-K.
(c) Exhibits
<TABLE>
<CAPTION>
Description of Exhibits
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<S> <C>
2.1 Agreement and Plan of Merger dated February 6, 1995, as amended on March 7, 1995, by and among Springs,
Subcorp and Dundee.
20.1 Pages 1 through 49 of the joint Proxy Statement and Prospectus of Springs and Dundee dated April 26,
1995.
20.2 Pages F-8 through F-23 of the joint Proxy Statement and Prospectus of Springs and Dundee dated April
26, 1995.
23. Consent of Ernst & Young LLP
99. Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1994
Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1994
Notes to Pro Forma Condensed Combined Financial Data
</TABLE>
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Springs has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPRINGS INDUSTRIES, INC.
By: /s/ James F. Zahrn
-------------------------
James F. Zahrn
Senior Vice President and
Chief Financial Officer
Dated: June 12, 1995
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EXHIBIT INDEX
Exhibit Page
- ------- ----
2.1 Agreement and Plan of Merger dated February 6, 1995, as --
amended on March 7, 1995, by and among Springs, Subcorp
and Dundee.
20.1 Pages 1 through 49 of the joint Proxy Statement and Prospectus --
of Springs and Dundee dated April 26, 1995.
20.2 Pages F-8 through F-23 of the joint Proxy Statement and --
Prospectus of Springs and Dundee dated April 26, 1995.
23. Consent of Ernst & Young LLP --
99. Unaudited Pro Forma Condensed Consolidated Balance Sheet --
as of December 31, 1994.
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended December 31, 1994.
Notes to Pro Forma Condensed Combined Financial Data.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of February 6, 1995 between
DUNDEE MILLS, INCORPORATED., a Georgia corporation ("Dundee"), DUNDEE
ACQUISITION CORP., a Georgia corporation ("Subcorp"), and SPRINGS INDUSTRIES,
INC. ("Springs"), a South Carolina corporation (the "Agreement").
BACKGROUND STATEMENT
Springs and Dundee desire to effect a business combination of Dundee
and SubCorp pursuant to which Dundee will merge with and into Subcorp, and the
holders of shares of Dundee Common Stock, $25.00 par value ("Dundee Shares"),
will receive shares of Springs Class A Common Stock, par value $.25 per share
("Springs Shares"), in exchange for Dundee Shares, as provided in this
Agreement (the "Merger"), subject to the limited right to make an election to
receive cash. The Merger is intended to be a reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended.
The respective Boards of Directors of Springs, Subcorp and Dundee each has
approved this Agreement and the Merger. The Board of Directors of Dundee has
directed that this Agreement be submitted to the shareholders of Dundee for
their approval.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
ARTICLE 1
THE BUSINESS COMBINATION
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3
hereof), Dundee shall be merged with and into Subcorp in accordance with the
provisions of this Agreement and the Georgia Business Corporation Code, (the
GBCC"), and the separate existence of Dundee shall thereupon cease, and
Subcorp, as the surviving corporation in the Merger (hereinafter sometimes
referred to as the "Surviving Corporation"), shall continue its corporate
existence under the laws of the State of Georgia as a wholly-owned subsidiary
of Springs. The Merger shall have the effects provided under the applicable
laws of the State of Georgia including, but not limited to, Section 14-2-1106
of the GBCC.
1.2 CLOSING. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at
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the offices of Sutherland, Asbill & Brennan, 999 Peachtree Street, N.E.,
Atlanta, Georgia 30309-3996, as soon as possible after all conditions set forth
in Article 5 have been satisfied or waived in writing but in no event later
than the third business day after all such conditions shall have been satisfied
or waived (the "Closing Date.")
1.3 EFFECTIVE TIME OF THE MERGER. If all the conditions set forth in
Article 5 shall have been fulfilled or waived in accordance with this Agreement
and provided that this Agreement has not been terminated pursuant to Article 6,
on the Closing Date the parties shall cause the certificate of merger attached
hereto as Exhibit A (the "Certificate of Merger") to be executed, delivered and
filed with the Secretary of State of Georgia in accordance with the provisions
of the GBCC. The Merger shall become effective at the time of such filing
unless a different effective time is specified in the Certificate of Merger
pursuant to the GBCC (the "Effective Time").
1.4 ARTICLES OF INCORPORATION; BYLAWS. The Articles of Incorporation
and Bylaws of Subcorp as in effect immediately prior to the Effective Time
shall be the Articles of Incorporation and Bylaws of the Surviving Corporation,
until duly amended in accordance with applicable law (subject to Section 4.14
hereof), except that the name of the Surviving Corporation shall be changed to
Dundee Mills, Incorporated.
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the
Effective Time the persons who are directors and officers of Subcorp at the
Effective Time will become the directors and officers of the Surviving
Corporation until such time as they may be replaced in accordance with the
Bylaws of the Surviving Corporation.
ARTICLE 2
CONVERSION AND EXCHANGE OF SHARES; ADDITIONAL ACTION
2.1 CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of any holder thereof:
(a) DUNDEE SHARES. Subject to Section 2.2, each issued and
outstanding Dundee Share (excluding any Dundee Shares held by Springs
or its Subsidiaries), shall automatically be cancelled and
extinguished and shall thereafter be converted into only the right to
receive the consideration for the Merger as set forth in Sections 2.2,
2.3 and 2.4 (the "Merger Consideration").
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(b) TREASURY SHARES. Each Dundee Share held in the treasury of
Dundee shall be automatically cancelled and extinguished, and no
payment shall be made in respect thereof.
(c) SUBCORP COMMON STOCK. Each issued and outstanding share of
Subcorp common stock at the Effective Time shall thereafter represent
one validly issued, fully paid and nonassessable share of common stock
of the Surviving Corporation.
2.2 MERGER CONSIDERATION. The Merger Consideration to be paid for
each Dundee Share shall be equal to Two Thousand Five Hundred Twenty Five
dollars ($2,525.00). The Merger Consideration shall be paid in Springs Shares
as provided in this Section 2.2 and, to the extent applicable, cash pursuant to
Section 2.3 and Section 2.4.
(a) PAYMENT OF MERGER CONSIDERATION. The Merger Consideration to
be paid in Springs Shares shall be determined as follows:
(i) Subject to the limitations set forth in this Section
2.2, each Dundee Share shall be converted into the right to
receive a number of Springs Shares equal to the result of dividing
the Merger Consideration by the Reported Market Price (as
hereinafter defined) of Springs Shares; provided, however, that in
lieu of conversion of Dundee Shares into Springs Shares, holders
of Dundee Shares may elect in accordance with and subject to the
conditions of Section 2.3 (a "Cash Election") to receive payment
of the Merger Consideration in cash.
(ii) The maximum number of Dundee Shares that shall be
converted into the right to receive cash shall be 23,363 Dundee
Shares, less the total number of Dundee Shares as to which the
holders have exercised appraisal rights with respect to the Merger
pursuant to the GBCC ("Dissenting Shares"), which maximum number
of Dundee Shares as to which Cash Elections may be made is
hereinafter referred to as the "Maximum Number of Cash Election
Shares."
(iii) The maximum number of Springs Shares that shall be
issued as Merger Consideration shall be three million Springs
Shares. If the number of Dundee Shares as to which a Cash
Election has not been validly made or as to which a Cash Election
has been validly made but has been withdrawn by the holder or
eliminated or rejected by the Exchange Agent (as hereinafter
defined) would be converted into the right to receive more than
three million Springs Shares, the Exchange Agent shall treat a
number of Dundee Shares as to which Cash Elections have
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not been made (pro rata as nearly as practicable as to each holder
of ten (10) or more such Dundee Shares) as having been subject to
Cash Elections as necessary to reduce the number of Springs Shares
issuable as Merger Consideration to three million Springs Shares.
2.3 LIMITED CASH ELECTION.
(a) Any holder of record of Dundee Shares shall have the right to
make a Cash Election with respect to all or any portion of his Dundee
Shares by surrendering and depositing with Wachovia Bank of North
Carolina, N.A. (the "Exchange Agent") at its office in Winston-Salem,
North Carolina, no later than the close of business on the Expiration
Date (as hereinafter defined) the certificate or certificates
representing such Dundee Shares, properly endorsed for transfer or
with duly executed stock powers attached, accompanied by a duly
executed and properly completed letter of transmittal with respect to
such Cash Election to be provided by Springs. The form of letter of
transmittal with respect to Cash Elections shall be mailed to the
holders of record of Dundee Shares as of the record date for the
meeting of holders of Dundee Shares called to vote on this Agreement
no later than five (5) business days after the date on which the Proxy
Statement (as herein defined) is first mailed to holders of Dundee
Shares. The Exchange Agent shall make available the form of letter of
transmittal with respect to Cash Elections to all persons who become
holders of record of Dundee Shares during the period between such
record date and the Expiration Date. Record holders of Dundee Shares
on deposit with the Exchange Agent pursuant to a Cash Election and not
withdrawn as provided hereby (the "Deposited Shares") shall remain
stockholders of record with respect to such shares until immediately
prior to the Effective Time. For purposes of this Agreement,
"Expiration Date" means the last business day prior to the date on
which the Dundee Stockholders vote upon the approval of the Merger, or
such later date determined by Springs by notice thereof to the
Exchange Agent.
(b) If the number of Deposited Shares exceeds the Maximum Number
of Cash Election Shares, the Exchange Agent shall eliminate from the
Deposited Shares (pro rata as nearly as practicable as to each holder
of ten (10) or more Deposited Shares) the number of Deposited Shares
necessary to reduce the number of Deposited Shares to the Maximum
Number of Cash Election Shares (or the most practicable number thereof
immediately below such number), and such Dundee Shares eliminated from
the Deposited Shares shall be converted into the right to receive the
Merger Consideration in Springs Shares as provided in Section 2.2.
<PAGE> 5
(c) Each holder of Dundee Shares who has made a valid Cash
Election shall have the right at any time prior to the close of
business on the Expiration Date to withdraw the shares deposited by
such stockholder and thereby revoke the Cash Election by giving
written notice of withdrawal to the Exchange Agent prior to the close
of business on the Expiration Date.
(d) The Exchange Agent shall in its sole discretion determine
whether or not Cash Elections have been properly or timely made or
revoked. Neither Springs, Dundee nor the Exchange Agent shall be
under any duty to give notification that any Cash Election has not
been properly or timely made or revoked. If the Exchange Agent
determines that any Cash Election was not properly or timely made or
revoked, the shares subject to this Cash Election shall be treated by
the Exchange Agent as Dundee Shares which were not subject to any Cash
Election, and at the Effective Time such shares shall be converted
into the right to receive Springs Shares pursuant to Section 2.2. The
Exchange Agent may, after consultation with Springs, make such
equitable changes in the procedures set forth herein as are necessary
or desirable to effect fully any Cash Election.
(e) Anything to the contrary notwithstanding in this Section 2.3,
if this Agreement is terminated pursuant to Article 6, any certificate
or certificates representing Dundee Shares that have been deposited
with the Exchange Agent in connection with a Cash Election shall be
promptly returned by the Exchange Agent to the record holder of any
such certificate.
2.4 NO FRACTIONAL SHARES. No scrip or fractional Springs Shares shall
be issued in the Merger upon conversion of Dundee Shares as provided in Section
2.1. Each holder of Dundee Shares who would otherwise have been entitled to
receive a fraction of a Springs Share upon conversion of his Dundee Shares
shall be entitled to receive a cash payment with respect to such fractional
share in an amount equal to the product of the Reported Market Price as defined
below of Springs Shares multiplied by such fractional share. Springs will make
available to the Exchange Agent the funds necessary for the purpose of paying
cash for fractional shares.
2.5 REPORTED MARKET PRICE. As used in this Agreement, the Reported
Market Price for Springs Shares shall be the arithmetic average of the closing
prices for Springs Shares on the New York Stock Exchange ("NYSE") for the ten
(10) trading days immediately preceding the date which is three (3) calendar
days prior to the Closing Date; provided, however, that
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(a) If such average is greater than $38.50, the Reported Market
Price shall be $38.50; and
(b) If such average is less than $33.50, the Reported Market Price
shall be $33.50.
2.6 STOCK TRANSFER BOOKS. From and after the Effective Time, no
transfer of Dundee Shares outstanding prior to the Effective Time shall be
registered on the stock transfer books of the Surviving Corporation. If, after
the Effective Time, certificates for Dundee Shares are presented to the
Surviving Corporation for transfer, such certificates shall be cancelled and
exchanged for the consideration described in Sections 2.2 and 2.4.
2.7 SURRENDER AND EXCHANGE OF CERTIFICATES REPRESENTING DUNDEE SHARES.
(a) EXCHANGE AGENT. Prior to the mailing of the Proxy Statement
to the holders of record of Dundee Shares, Springs shall appoint
Wachovia Bank of North Carolina, N.A. as Exchange Agent pursuant to an
exchange agent agreement reasonably acceptable to Dundee (the
"Exchange Agent Agreement"). At the Effective Time, Springs shall,
pursuant to irrevocable instructions, direct the Exchange Agent to
issue the number of Springs Shares and pay the amounts of cash
provided for in Sections 2.2, 2.3 and 2.4 to which the holders of
Dundee Shares are entitled pursuant to Sections 2.2, 2.3 and 2.4.
(b) SURRENDER OF CERTIFICATES. Promptly after the Effective Time,
Springs shall cause the Exchange Agent to mail and otherwise make
available to each record holder as of the Effective Time of an
outstanding certificate or certificates which immediately prior to the
Effective Time represented Dundee Shares (the "Certificates") and who
has not already properly made (and not withdrawn or revoked) a Cash
Election with respect to the Dundee Shares represented by such
Certificates, a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates
to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefor and conversion
thereof. Upon surrender to the Exchange Agent of the Certificates,
together with such letter of transmittal, or the letter of transmittal
delivered pursuant to Section 2.3 with respect to Deposited Shares, in
each case duly executed, the holder of such Certificates shall be
entitled to receive in exchange therefor (i) the Merger Consideration
as set forth in Section 2.2 and (ii) as to any fractional share, a
check representing the cash consideration to which such holder shall
have become entitled pursuant to Section 2.4, and the Certificates so
<PAGE> 7
surrendered shall forthwith be cancelled. If any portion of the
Merger Consideration to be received upon exchange of a Certificate
(whether a certificate representing Springs Shares or a check
representing cash) is to be issued or paid to a person other than the
person in whose name the Certificate surrendered and exchanged
therefor is registered, it shall be a condition of such issuance and
payment that the Certificate so surrendered shall be properly endorsed
or otherwise is in proper form for transfer and that the person
requesting such exchange shall pay in advance in cash any transfer or
other taxes required by reason of the issuance of a certificate
representing Springs Shares or a check representing cash to such other
person, or establish to the satisfaction of the Exchange Agent that
such tax has been paid or that no such tax is applicable. From the
Effective Time until surrender in accordance with the provisions of
this Section 2.7, each Certificate (other than Certificates
representing treasury shares) shall represent for all purposes only
the right to receive the Merger Consideration. All payments in
respect of Dundee Shares that are made in accordance with the terms
hereof shall be deemed to have been made in full satisfaction of all
rights pertaining to such securities.
(c) LOST CERTIFICATES. In the case of any lost, misplaced, stolen
or destroyed Certificate, the holder thereof may be required, as a
condition precedent to delivery to such holder of the Merger
Consideration, to deliver to Springs an indemnity agreement and bond
in such reasonable sum as Springs may direct as indemnity against any
claim that may be made against the Exchange Agent, Springs or the
Surviving Corporation with respect to the Certificate alleged to have
been lost, misplaced, stolen or destroyed.
(d) NO INTEREST. No interest shall be paid or accrued at any time
on any portion of the Merger Consideration regardless of the cause for
delay in payment of the Merger Consideration.
(e) DIVIDENDS ON SPRINGS SHARES. No holder of a Certificate shall
be entitled to receive any dividend or other distribution from Springs
declared with a record date after the Effective Time until surrender
of such holder's Certificate pursuant to this Section 2.7. Upon such
surrender, there shall be paid to the holder the amount of any
dividends or other distributions (without interest) that theretofore
became payable by Springs, but were not paid by reason of the
foregoing with respect to the number of whole Springs Shares
represented by the certificate or certificates issued upon such
surrender. From and after the Effective Time, Springs shall be
entitled, however, to treat any such Certificate that has not yet been
surrendered for exchange as evidencing the ownership of the aggregate
Merger Consideration
<PAGE> 8
into which the Dundee Shares represented by such Certificate shall
have been converted, notwithstanding any failure to surrender such
Certificate.
2.8 ADJUSTMENTS BECAUSE OF CHANGES IN SPRINGS SHARES. If, between the
date of this Agreement and the Effective Time, the outstanding Springs Shares
shall be changed into a different number of shares or a different class by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
distributed as of a date prior to the Effective Time, or declared with a record
date prior to the Effective Time and a distribution date after the Effective
Time, the Reported Market Price shall be appropriately adjusted.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES BY DUNDEE. All references in
Articles 3 and 4 of this Agreement to Dundee, other than in Sections 3.1(a),
(b) and (c), 4.2 and 4.14, shall be deemed to refer to Dundee and all its
Subsidiaries as hereinafter defined, and all references to the assets,
liabilities, business, financial condition, results of operations or prospects
of Dundee shall be deemed to refer to Dundee and its Subsidiaries, taken as a
whole. Dundee represents and warrants to and agrees with Springs and Subcorp
as of the date of this Agreement and as of the Closing as follows:
(a) ORGANIZATION AND QUALIFICATION. Dundee is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Georgia, has the corporate power and authority to own all of
its properties and assets and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good
standing in the jurisdictions shown on Schedule 3.1(a), which are all
of the jurisdictions in which Dundee owns any real property or has any
place of business or where such qualification is required. The copies
of Dundee's Articles of Incorporation and Bylaws, as amended to date,
which have been delivered to Springs, are complete and correct, and
such instruments, as so amended, are in full force and effect at the
date hereof.
(b) CAPITALIZATION. The authorized capital stock of Dundee
consists of 200,000 Dundee Shares. Except as set forth on Schedule
3.1(b), all of the issued and outstanding Dundee Shares are duly
authorized, validly issued, fully paid and nonassessable, and not
issued in violation of any preemptive rights. As of the date hereof:
(i) 46,728 Dundee Shares are
<PAGE> 9
issued and outstanding and (ii) no Dundee Shares are reserved for
issuance pursuant to any stock incentive plans. Except as set forth
in this Section 3.1(b), there are no shares of capital stock of Dundee
outstanding, and there are no subscriptions, options, convertible
securities, calls, rights, warrants or other agreements, claims or
commitments of any nature whatsoever obligating Dundee to issue,
transfer, deliver or sell or cause to be issued, transferred,
delivered or sold, additional shares of the capital stock or other
securities of Dundee or obligating Dundee to grant, extend or enter
into any such agreement or commitment.
(c) AUTHORITY. Dundee has the corporate power and authority to
execute and deliver this Agreement and, subject to the receipt of the
approval of the Merger by the affirmative vote of the holders of a
majority of the outstanding Dundee Shares, to consummate the
transactions contemplated on the part of Dundee hereby. The execution
and delivery by Dundee of this Agreement and the consummation by
Dundee of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors. Except for the approval of
the Merger by a majority of the holders of Dundee Shares, no other
corporate action on the part of Dundee is necessary to authorize the
execution and delivery of this Agreement by Dundee or the consummation
by Dundee of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Dundee and is a valid, binding and
enforceable agreement of Dundee.
(d) NON-CONTRAVENTION. Except as set forth on Schedule 3.1(d),
the execution and delivery of this Agreement by Dundee do not and,
subject to the adoption of this Agreement by the holders of a majority
of the outstanding Dundee Shares and the expiration of all applicable
waiting periods after the filings required by the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act") referred to in
paragraph (e) below, the consummation by Dundee of the transactions
contemplated hereby does not and will not (i) violate or conflict with
any provision of the Articles or Certificate of Incorporation or
Bylaws of Dundee, or (ii) violate or conflict with, or result (with
the giving of notice or the lapse of time or both) in a violation of
or constitute a default under any provision of, or result in the
acceleration or termination of or entitle any party to accelerate or
terminate (whether after the giving of notice or lapse of time or
both), any obligation or benefit under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other
encumbrance upon any of the material assets or properties of Dundee
pursuant to any provision of, any "Material Contract" (as hereinafter
defined), "Intellectual Property Agreement" (as hereinafter defined),
law, ordinance, regulation, order, arbitration award, judgment or
decree to which Dundee is a party or by
<PAGE> 10
which Dundee or its assets or properties is bound and do not and will
not violate or conflict with any other material restriction of any
kind or character to which Dundee is subject or by which any of its
assets or properties may be bound, and the same does not and will not
constitute an event permitting termination of any Material Contract or
Intellectual Property Agreement to which Dundee is a party. No such
violation, conflict, default, acceleration, termination, entitlement,
creation or imposition of a lien, charge, pledge, security interest or
other encumbrance or event, regardless of whether it is described in
Schedule 3.1(d), shall cause any substantial damage, additional cost
or expense (including any payments or expenses incurred to obtain
consents or waivers) to Dundee, Springs or the Surviving Corporation.
Except for the agreements, statutes and other arrangements noted on
Schedule 3.1(d), to the knowledge of Dundee, Dundee has no reasonable
basis to believe that it will not be able to obtain (without
additional payment or expense) all consents and waivers necessary to
avoid any such violation, acceleration, entitlement to accelerate,
creation or imposition of a lien, charge, pledge, security interest or
other encumbrance, conflict or event.
(e) CONSENTS. Except as set forth in Schedule 3.1(e) and except
for the filing of the Registration Statement (as hereinafter defined)
with the Securities and Exchange Commission (the "SEC") and, to the
extent required, any required filings with or approvals by any state
securities commissions, filings with the Federal Trade Commission (the
"FTC") and the Department of Justice ("Justice") under the HSR Act and
the filing of the Certificate of Merger with the Secretary of State of
Georgia, no consent, authorization, clearance, order or approval of,
or filing or registration with, any executive, judicial or other
public authority, agency, department, bureau, division, unit or court
or other public person or entity (any of which is hereinafter referred
to as a "Governmental Entity") or any other third party is required
for or in connection with the execution and delivery of this Agreement
by Dundee and the consummation by Dundee of the transactions
contemplated hereby.
(f) SUBSIDIARIES. Schedule 3.1(f) sets forth each Subsidiary (as
hereafter defined) of Dundee. Dundee owns, directly or indirectly,
all the outstanding capital stock of each of its Subsidiaries, free
and clear of all liens, charges, pledges, security interests or other
encumbrances, and all such capital stock is duly authorized, validly
issued and outstanding, fully paid and nonassessable, and except as
set forth in Schedule 3.1(f), neither Dundee nor any Subsidiary has
made any material investment in, or material advance of cash or other
extension of credit to, any person, corporation or other entity other
than its Subsidiaries. None
<PAGE> 11
of such Subsidiaries has any commitment to issue or sell any shares of
its capital stock or any securities or obligations convertible into or
exchangeable for, or giving any person (other than Dundee) any right
to acquire from such Subsidiary, any shares of its capital stock, and
no such securities or obligations are outstanding. Each Subsidiary is
a corporation duly organized and validly existing in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority to own all of its properties and assets
and to carry on its business as it is now being conducted. Each
Subsidiary is duly qualified to do business and is in good standing in
the jurisdictions shown on Schedule 3.1(f), which are all
jurisdictions in which each such Subsidiary owns any real property,
has any place of business, or where such qualification is required.
As used in this Agreement, the term "Subsidiary" means, with respect
to any person, corporation or other entity, any corporation or other
organization, whether incorporated or unincorporated, of which at
least a majority of the securities or interests having by the terms
thereof voting power to elect a majority of the board of directors or
others performing similar functions with respect to such corporation
or other organization is at that time directly or indirectly owned or
controlled by such person, corporation or other entity, or by any one
or more of its Subsidiaries, or by such person, corporation or other
entity, and one or more of its Subsidiaries.
(g) FINANCIAL STATEMENTS. Attached hereto as Exhibit B are true
and complete copies of the balance sheets of Dundee as of August 31,
1994, 1993 and 1992 and the related statements of income,
stockholders' equity and cash flows for the years then ended,
including the notes thereto, certified by Ernst & Young, LLC
("Dundee's Auditors") (the "Dundee Audited Financial Statements").
The Dundee Audited Financial Statements and the unaudited balance
sheets of Dundee as of December 31, 1994 and December 31, 1993 and the
related statements of income and cash flows for the four-month periods
then ended attached hereto as Exhibit C (together with the Dundee
Audited Financial Statements, the "Dundee Financial Statements") (i)
have been prepared from, and are in accordance with, the books and
records of Dundee; (ii) present fairly in all material respects the
financial position and results of operations and cash flows of Dundee
as of the dates and for the periods indicated, in each case in
conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except
as stated herein or therein), and (iii) include all adjustments
(consisting only of normal recurring accruals) that are necessary for
the fair presentation of the financial position of Dundee and the
results of its operations and cash flows except as otherwise stated in
the Dundee Financial Statements. The unaudited December 31, 1994 and
December 31, 1993
<PAGE> 12
financial statements are subject to year-end closing adjustments and
do not contain footnote disclosures required by GAAP.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 3.1(h), since August 31, 1994, there has not been: (i) any
material adverse change in the assets, liabilities, business,
financial condition, results of operations or, other than as a result
of a change in general conditions in the textile industry or in the
United States economy, prospects of Dundee; (ii) any damage,
destruction, loss or casualty to property or assets of Dundee, whether
or not covered by insurance, which property or assets are material to
the operations or business of Dundee; (iii) any strike, work stoppage
or slow down or other labor trouble involving Dundee; (iv) any
declaration, setting aside or payment of any dividend or distribution
(whether in cash, capital stock or property) with respect to the
capital stock of Dundee; (v) any redemption or other acquisition by
Dundee of any of the capital stock of Dundee; (vi) any split,
combination, reclassification or other similar change in the
outstanding Dundee Shares; (vii) any transaction outside the ordinary
course of business; or (viii) any agreement to do any of the
foregoing. Except as set forth on Schedule 3.1(h), since August 31,
1994, there has not been any issuance by Dundee of any shares, or
options, calls or commitments relating to shares of its capital stock,
or any securities or obligations convertible into or exchangeable for,
or giving any person any right to acquire from it, any shares of its
capital stock.
(i) GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS. Dundee
is in substantial compliance in all respects with all laws, orders,
regulations, policies and guidelines of all Governmental Entities
applicable to Dundee or any of its businesses or properties and
assets. Dundee has all permits, certificates, licenses, approvals and
other authorizations required in connection with the operation of its
businesses. No notice has been issued and to Dundee's knowledge no
investigation or review is pending or is contemplated or threatened
against Dundee by any Governmental Entity (i) with respect to any
alleged violation by Dundee of any law, order, regulation, policy or
guideline of any Governmental Entity, or (ii) with respect to any
alleged failure to have all permits, certificates, licenses, approvals
and other authorizations required in connection with the operation of
the businesses of Dundee. Dundee is not in violation of any judgment,
decree, injunction, ruling or order of any court, governmental
department, commission, agency or instrumentality, arbitrator or other
person.
<PAGE> 13
(j) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
Schedule 3.1(j) or in the balance sheet as of December 31, 1994
included in the Dundee Financial Statements, Dundee (i) did not have,
as of December 31, 1994, any debts, liabilities or obligations,
whether accrued, absolute, contingent or otherwise and whether due or
to become due (including without limitation any uninsured liabilities
resulting from failure to comply with any law applicable to the
conduct of its business) (ii) has not incurred since December 31,
1994, any such debts, liabilities or obligations (other than debts,
liabilities or obligations incurred in the ordinary and usual course
of business after December 31, 1994), and (iii) has not, since
December 31, 1994, conducted its business otherwise than in the
ordinary and usual course.
(k) TAX MATTERS. Except as set forth in Schedule 3.1(k), Dundee
has properly completed and timely filed in correct form all federal,
state, local, provincial, foreign and other tax returns and reports of
every nature (collectively, "Tax Returns") required to be filed by
Dundee, no extensions of time in which to file any such Tax Returns
are in effect, and all such Tax Returns are true and correct. All
taxes arising under the Internal Revenue Code of 1986, as amended (the
"Code"), or any law, rule, regulation or order promulgated thereunder,
or arising under any federal, state, local or foreign law, rule,
regulation or order including, without limitation any income, profits,
employment, sales, use, occupation, excise, real property, personal
property or ad valorem taxes or any license or franchise fee or tax
(collectively, "Taxes"), currently due and payable by Dundee have been
paid or provided for in the Dundee Financial Statements and are not
delinquent. All Taxes incurred but not yet due have been fully
accrued on the books of Dundee through August 31, 1994 and adequate
reserves have been established therefor. The charges, accruals and
reserves which have been provided in the Dundee Financial Statements
in respect of Taxes for all fiscal periods prior to and ending at
August 31, 1994, are sufficient for the payment of all unpaid taxes,
whether or not disputed, that are accrued or applicable for the period
ended August 31, 1994 and for all years and periods ended prior
thereto. There are no pending claims asserted for Taxes against
Dundee or outstanding agreements or waivers extending the statutory
period of limitation applicable to any tax return of Dundee for any
period. Dundee has not filed a consent to the application of Section
341(f) of the Code. Dundee has made all estimated income tax deposits
and all other required tax payments or deposits and has complied for
all prior periods in all material respects with the tax withholding
provisions of all applicable federal, state, local and other laws.
<PAGE> 14
(l) TITLE TO PROPERTIES. Except as set forth on Schedule 3.1(l),
Dundee has good and marketable title to all properties and assets
reflected in the balance sheet dated December 31, 1994, included in
the Dundee Financial Statements (or acquired after that date) and has
valid leasehold interests in all properties and assets not reflected
on such balance sheet but used by Dundee in its businesses, free and
clear of any title defects, liens, charges, pledges, security
interests, adverse claims, or other encumbrances, except (i) mortgages
and liens securing debt reflected as liabilities on such balance
sheet, (ii) liens for current taxes and assessments not in default,
(iii) mechanics', carriers', workmen's, repairman's, statutory or
common law liens either not delinquent or being contested in good
faith and (iv) liens, mortgages, encumbrances, covenants,
rights-of-way, building or use restrictions, easements, exceptions,
variances, reservations and other matters or limitations of any kind,
if any, which do not have an adverse effect on Dundee's use of the
property affected. No person other than Dundee is entitled to
possession or use of any of the properties of Dundee, whether owned or
leased by Dundee. The real property, buildings, structures and
improvements owned or leased by Dundee conform in all substantial
respects to all applicable laws, ordinances and regulations, including
zoning regulations, none of which would upon consummation of the
Merger adversely interfere with the use of such properties, buildings,
structures or improvements for the purposes for which they are now
utilized. The properties and assets owned or leased by Dundee are
adequate in all material respects for the conduct of its businesses as
presently conducted.
(m) MATERIAL CONTRACTS. Schedule 3.1(m) contains a correct and
complete list of the following (hereinafter referred to as the
"Material Contracts"):
(i) all bonds, interest rate swap agreements, debentures,
loan agreements, notes, mortgages, deeds to secure debt, deeds of
trust, indentures or guaranties to which Dundee is a party or by
which it or its properties or assets are bound;
(ii) all leases (whether capital or operating) under which
Dundee is the lessee or lessor of real or personal property;
(iii) all employment agreements of Dundee; and
(iv) all existing contracts and commitments (other than
those described in subparagraphs (i), (ii) or (iii) and any
"Employee Plans" (as defined in Section 3.1(t)) to which Dundee is
a party or by which any of its properties or assets may be bound
involving an annual
<PAGE> 15
commitment or annual payment by any party thereto of more than
$100,000 individually, or which have a fixed term extending more
than 12 months from the date hereof and which involve an annual
commitment or annual payment by any party thereto of more than
$50,000 individually.
True and complete copies of all Material Contracts, including all
amendments thereto, have been made available to Springs. Except as
set forth on Schedule 3.1(m): (i) all Material Contracts are in full
force and effect and constitute the valid and binding obligations of
the respective parties thereto; (ii) there has not been and there
currently is no default under any Material Contract by any party
thereto; (iii) no event has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any other
event) would constitute a default thereunder by Dundee or (to the
knowledge of Dundee) any other party entitling any party to terminate
a Material Contract; and (iv) the continuation, validity and
effectiveness of all such Material Contracts under the current terms
thereof and the current rights and obligations of Dundee thereunder
will in no way be affected, altered or impaired by the consummation of
the Merger. Except as disclosed in Schedule 3.1(m), there are no
contracts or options to sell or lease any properties or assets of
Dundee other than in the ordinary course of business.
(n) LEGAL PROCEEDINGS. Except as set forth on Schedule 3.1(n),
(i) there is no claim, action, suit, proceeding or investigation
pending or, to the knowledge of Dundee, contemplated or threatened
against Dundee or any of its properties or assets (or any of its
officers or directors in connection with the business of Dundee)
before any arbitrator or Governmental Entity, domestic or foreign,
which in the event of a final adverse determination, considered
individually or in the aggregate with all such other claims, actions,
suits or proceedings, would adversely affect the assets, liabilities,
financial condition, results of operations, business or prospects of
Dundee, or which seeks treble damages, seeks damages in connection
with any of the transactions contemplated by this Agreement or to
prohibit, restrict or delay consummation of the Merger or any of the
conditions to consummation of the Merger or to limit in any material
manner the right of Springs to control the Surviving Corporation or
any aspect of the businesses of Dundee after the Effective Time, nor
is there any judgment, decree, injunction, ruling or order of any
Governmental Entity, arbitrator or any other person outstanding
against Dundee having any such effect; and (ii) Dundee is not a party
to or bound by any judgment, decree, injunction, ruling or order of
any Governmental Entity, arbitrator or any other person against Dundee
which, when considered individually or in the aggregate with all such
other judgments, decrees, injunctions,
<PAGE> 16
rulings or orders, adversely affects the assets, liabilities,
financial condition, results of operations, businesses or prospects of
Dundee.
(o) LABOR RELATIONS. Dundee is in compliance in all substantial
respects with all federal and state laws respecting employment and
employment practices, terms and conditions of employment, wages and
hours, and, to the knowledge of Dundee, is not engaged in any unfair
labor or unlawful employment practice. Except as set forth on
Schedule 3.1(o), to the knowledge of Dundee, there is no unlawful
employment practice discrimination charge pending before the Equal
Employment Opportunity Commission ("EEOC") or any EEOC recognized
state "referral agency." To the knowledge of Dundee, there is no
unfair labor practice charge or complaint against Dundee pending
before the National Labor Relations Board ("NLRB"). There is no labor
strike, dispute, slowdown or stoppage actually pending or, to the best
knowledge of Dundee, threatened against or involving or affecting
Dundee, and no NLRB representation question exists respecting any of
their respective employees. No grievance or arbitration proceeding is
pending and no written claim therefor exists. There is no collective
bargaining agreement that is binding on Dundee. Except for any
Material Contract disclosed pursuant to Section 3.1(m), Dundee is not
a party to or bound by any agreement, arrangement or understanding
with any employee or consultant that cannot be terminated on notice of
ninety (90) or fewer days without liability to Dundee or that entitles
the employees or consultant to receive any salary continuation or
severance payment or retain any specified position with Dundee.
(p) INSIDER INTERESTS. Except as disclosed in the Dundee
Financial Statements or on Schedule 3.1(p) no shareholder, affiliate,
officer or director of Dundee (i) has any agreement with Dundee or any
interest in any property, real or personal, tangible or intangible,
including without limitation trade names or trademarks used in or
pertaining to the businesses of Dundee, except for the normal rights
as a shareholder or (ii) has any claim or cause of action against
Dundee except for accrued compensation and benefits, expenses and
similar obligations incurred in the ordinary course of business
(including reimbursement of medical expenses pursuant to Employee
Plans) with respect to employees of Dundee.
(q) INTELLECTUAL PROPERTY. Schedule 3.1(q) lists all patents,
trademarks, service marks, trade names, copyrights or applications for
the foregoing, and all computer programs, firmware and documentation
relating thereto, and all other intellectual properties other than
trade secrets (which have been separately disclosed to Springs)
(including such trade secrets, the "Intellectual Property") which are
owned or are
<PAGE> 17
used and are necessary for the conduct of the businesses of Dundee,
and all royalty, transfer or similar fees relating thereto. Dundee
owns or has the right to use pursuant to an Intellectual Property
Agreement (as hereinafter defined) all such Intellectual Property.
Schedule 3.1(q) lists all licenses or other agreements (other than
licenses of generally available software programs for personal
computers) pursuant to which Dundee has any right to use or enjoy any
Intellectual Property that is owned by others or pursuant to which
Dundee is under a duty of confidentiality with respect to any
Intellectual Property owned by others (the "Intellectual Property
Agreements"). As to any Intellectual Property owned by Dundee, such
Intellectual Property is owned free and clear of all claims of others,
including employees, former employees or independent contractors of
Dundee, and Dundee has received no notice that the use of such
Intellectual Property in any business of Dundee violates or infringes
upon the claimed rights of others. As to the Intellectual Property
Agreements, (i) all such agreements are in full force and effect, (ii)
neither Dundee nor, to the knowledge of Dundee, any other party
thereto, is in default under any such agreement, (iii) Dundee is not
and will not become obligated to make any additional royalty or
similar payments under any such agreements as a result of the
transactions contemplated by this Agreement, and (iv) the exercise by
Dundee of its rights under any such agreements does not infringe upon
the claimed rights of others. Dundee has not received any notice that
any of the products or services of Dundee, nor any products held for
future sale or license by Dundee, infringes upon the claimed rights of
others. Except as set forth in Schedule 3.1(q), Dundee has not
granted to any person any license or other right to use in any manner
any of the Intellectual Property owned by Dundee has not granted any
sublicense or right to use any Intellectual Property licensed to
Dundee under the Intellectual Property Agreements; and Dundee has not
granted any software licenses or sublicenses that would authorize any
person to use any software licensed or sublicensed thereunder for any
purpose other than uses solely internal to such person.
(r) INSURANCE. Schedule 3.1(r) summarizes the amount and scope of
all insurance policies or contracts providing coverage to Dundee. In
the opinion of the management of Dundee, all such policies or
contracts of insurance are in scope and in an amount usual and
customary for businesses engaged in by Dundee and are sufficient for
compliance with all requirements of law and of all agreements to which
Dundee is a party. All insurance policies pursuant to which any such
insurance is provided are in full force and effect and no notice of
cancellation or termination of any such insurance policies has been
given to Dundee by the carrier of any such
<PAGE> 18
policy. Through the date hereof, all premiums required to be paid in
connection therewith have been paid in full.
(s) PROXY STATEMENT; REGISTRATION STATEMENT. The information with
respect to Dundee and its officers and directors that shall have been
supplied by Dundee or its authorized representatives in writing for
use in the definitive proxy statement that will be distributed to
Shareholders of Dundee in connection with the meeting of such
Shareholders (the "Dundee Shareholders Meeting") to approve the
adoption of this Agreement (the "Proxy Statement") and that will form
a part of the registration statement of Springs under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the
Springs Shares to be issued in the Merger (the "Registration
Statement"), or in the Registration Statement, will not, on the date
or dates the Proxy Statement is first mailed to shareholders of
Dundee, or in the case of the Registration Statement at the time it
becomes effective, and at the Effective Time, as such Proxy Statement
or Registration Statement is then amended or supplemented, contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading or necessary to correct any statement in any earlier filing
with the SEC of such Registration Statement or amendment thereto or
any earlier communication in the preparation of which Dundee
participated (including the Proxy Statement) to shareholders of Dundee
with respect to the Merger.
(t) EMPLOYEE AND FRINGE BENEFIT PLANS.
(i) SCHEDULE OF PLANS. Schedule 3.1(t) to this Agreement
lists each of the following that Dundee or any Dundee Subsidiary
either maintains, is required to contribute to or otherwise
participates in (or at any time during the preceding seven years
maintained, contributed to or otherwise participated in or as to
which Dundee or any of its Subsidiaries has any unsatisfied
material liability or obligation, whether accrued, contingent or
otherwise:
(A) any employee pension benefit plan
("Pension/Profit-Sharing Plan") (as such term is defined in
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), including any pension, profit-sharing,
retirement, thrift or stock bonus plan;
(B) any "multi-employer plan" ("Multi-Employer
Plan") (as such term is defined in ERISA);
<PAGE> 19
(C) any employee welfare benefit plan ("Welfare
Plan") (as such term is defined in ERISA); or
(D) any other commission, bonus or deferred
compensation, stock option, restricted stock, fringe benefit
or retirement plan, program, policy, understanding or
arrangement of any kind whatsoever, whether formal or
informal, not included in the foregoing and providing for
benefits for, or the welfare of, any or all of the current or
former employees or agents of Dundee or any Dundee Subsidiary
or their beneficiaries or dependents or with respect to which
Dundee or a Dundee Subsidiary has any material liability,
including any group health, life insurance, retiree medical,
bonus, incentive or severance arrangement;
(all of the foregoing in items (i), (ii), (iii) and (iv) being
referred to as "Employee Plans"). "ERISA Affiliate" means each
trade or business (whether or not incorporated) which together
with Dundee is treated as a single employer pursuant to Code
Section 414(b), (c), (m) or (o). Dundee has delivered to Springs
(and Schedule 3.1(t) lists each item delivered) copies of the
following: (A) each written Employee Plan, as amended (including
either the original plan or the most recent restatement and all
subsequent amendments); where applicable, (B) the most recent
Internal Revenue Service ("IRS") determination letter issued with
respect to each Pension/Profit-Sharing Plan; (C) the latest
actuarial valuation (if any) for each Pension/Profit-Sharing Plan;
(D) the three most recent annual reports on the Form 5500 series
for each Employee Plan; (E) each trust agreement, insurance
contract or document setting forth any other funding arrangement,
if any, with respect to each Employee Plan; (F) the most recent
ERISA summary plan description or other summary of plan provisions
distributed to participants or beneficiaries for each Employee
Plan; (G) each opinion or ruling from the IRS, the Department of
Labor or the Pension Benefit Guaranty Corporation ("PBGC")
concerning any Employee Plan; and (H) each Registration Statement,
amendment thereto and prospectus relating thereto filed with the
SEC or furnished to participants in connection with any Employee
Plan.
(ii) QUALIFICATION. Except as set forth in Schedule
3.1(t) each Pension/Profit-Sharing Plan: (i) has received a
favorable determination letter from the IRS to the effect that it
is qualified under Code Sections 401(a) and 501, both as to the
original plan and all
<PAGE> 20
restatements or material amendments; (ii) has never been subject
to any assertion by any governmental agency that it is not so
qualified; and (iii) has been operated so that it has always been
so qualified.
(iii) ACCRUALS; FUNDING.
(A) PENSION/PROFIT-SHARING PLANS. Schedule
3.1(t) fully and accurately discloses, as of the end of each
Plan's most recently ended fiscal year (or, each Plan's second
most recently ended fiscal year if the required information is
not yet available for such Plan's most recently ended fiscal
year) (such year end, as applicable, being referred to as the
"Applicable Plan Year-End"), the total assets, and where
applicable the actuarially computed present value of the
accrued benefits or other liabilities or obligations, and the
actuarially computed present value of the vested benefits or
other liabilities or obligations, for each
Pension/Profit-Sharing Plan subject to ERISA Title IV
(including those for retired, terminated or other former
employees and agents) based on the actuarial assumptions set
forth in the plan valuations included as part of Schedule
3.1(t), unless otherwise indicated on such Schedule. None of
the Pension/Profit-Sharing Plans subject to ERISA Title IV has
incurred any "accumulated funding deficiency" (as such term is
defined in ERISA), there is no employer liability with respect
to any of such Plans as determined in accordance with ERISA
Section 4062, and the actuarially computed present value of
the benefits of each such Plan, accrued to the Applicable Plan
Year-End, does not exceed the value of the assets of such
Employee Plan. Schedule 3.1(t) further sets forth as of the
Applicable Plan Year End the actuarially computed present
value of the accrued benefit liabilities of each such
Pension/Profit-Sharing Plan subject to Title IV of ERISA,
determined on the basis of the assumptions prescribed by the
PBGC pursuant to ERISA Section 4044 for use in valuing accrued
benefit liabilities upon a plan termination, and the value of
such benefit liabilities does not exceed the value of the
assets of any such Plan. There have been no material changes
in the financial condition of any of the
Pension/Profit-Sharing Plans since the Applicable Plan
Year-End.
(B) OTHER PLANS. Schedule 3.1(t) fully and
accurately discloses any funding liability under each Employee
Plan not subject to ERISA Title IV, whether insured or
otherwise, specifically setting
<PAGE> 21
forth any liabilities under any retiree medical, dental or
life insurance arrangement and specifically designating any
insured plan which provides for retroactive premium or other
adjustments. The levels of insurance reserves and accrued
liabilities with regard to each such Employee Plan are
reasonable and are sufficient to provide for all incurred but
unreported claims and any retroactive premium adjustments.
(C) CONTRIBUTIONS. Except as fully and
accurately disclosed in Schedule 3.1(t): (I) Dundee and each
Dundee Subsidiary have in all material respects made full and
timely payment of all amounts required to be contributed under
the terms of each Employee Plan and applicable law, or
required to be paid as expenses under such Employee Plan,
including PBGC premiums and amounts required to be contributed
under Code Section 412; and (II) no excise taxes or liens are
assessable against Dundee as a result of any nondeductible or
other contributions made or not made to an Employee Plan or
any other plan of an ERISA Affiliate.
(iv) REPORTING AND DISCLOSURE. Except as fully and
accurately disclosed in Schedule 3.1(t), summary plan descriptions
and all other returns, reports, registration statements,
prospectuses, documents, statements and communications which are
required to have been filed, published or disseminated under ERISA
or other federal law and the rules and regulations promulgated by
the Department of Labor under ERISA and the Treasury Department or
by the SEC with respect to the Employee Plans have been so filed,
published or disseminated.
(v) PROHIBITED TRANSACTIONS; TERMINATIONS; OTHER
REPORTABLE EVENTS. Except as set forth in Schedule 3.1(t):
(A) neither Dundee nor any Dundee Subsidiary, any
Employee Plan, any trust or arrangement created under any of
them, nor any trustee, fiduciary, custodian, administrator or
any person or entity holding or controlling assets of any of
the Employee Plans has engaged in any "prohibited transaction"
(as such term is defined in ERISA or the Code) which could
subject Dundee or a Dundee Subsidiary to any material tax,
penalty or other cost or liability of any kind;
(B) no termination has occurred with respect to
any Employee Plan subject to ERISA since 1991;
<PAGE> 22
(C) no "reportable event" (as such term is
defined in ERISA) (other than a reportable event for which the
statutory notice requirements have been waived by regulation)
has occurred with respect to any Employee Plan subject to
Title IV of ERISA; and
(D) no Internal Revenue Service or Department of
Labor investigation with respect to any Employee Plan is
currently underway or to Dundee's knowlege has been
threatened.
(vi) CLAIMS FOR BENEFITS. Other than claims for benefits
arising in the ordinary course of the administration and operation
of the Employee Plans no claims, investigations or arbitrations
are pending or to Dundee's knowledge threatened against any
Employee Plan or against Dundee, any Dundee Subsidiary, any trust
or arrangement created under or as part of any Employee Plan, any
trustee, fiduciary, custodian, administrator or other person or
entity holding or controlling assets of any Employee Plan, and to
Dundee's knowledge no basis to anticipate any such claim or claims
exists.
(vii) OTHER. Except as fully and completely disclosed in
Schedule 3.1(t), Dundee and each Dundee Subsidiary have fully
complied with all of their obligations under each of the Employee
Plans and with all provisions of ERISA and any and all other law
applicable to the Employee Plans. No written notice has been
received by Dundee of any claim by any participant in the Employee
Plans of any violations of such laws, and to the best knowledge of
Dundee, no such claims are pending or threatened.
(viii) CREATION OF OBLIGATIONS BY REASON OF MERGER. Except
as set forth in Schedule 3.1(t), the execution of or performance
of the transactions contemplated by this Agreement will not
constitute an event under any Employee Plan that will or may
result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect
to any employee, including any obligation to make a payment that
would be nondeductible under Code Section 280G or any other Code
provision.
(ix) NO MULTI-EMPLOYER PLANS. Except as set forth in
Schedule 3.1(t), none of the Employee Plans are Multi-Employer
Plans, and neither Dundee nor to Dundee's knowledge any ERISA
Affiliate has any liability, joint or otherwise, for any
withdrawal liability (potential,
<PAGE> 23
contingent or otherwise) under ERISA Title IV for a complete or
partial withdrawal from any Multi-Employer Plan.
(u) MAJOR CUSTOMERS. Schedule 3.1(u) sets forth (i) the names of
the twenty largest customers of Dundee in each of its four principal
product lines (i.e., retail and institutional towels, baby products
and health care products) based on revenues during the year ended
August 31, 1994; and (ii) the name of each customer of Dundee (a)
described in clause (i), or (b) which during the year ended August 31,
1994, or during the four months ended December 31, 1994, generated
revenue or annualized revenue, respectively, of $300,000 or more, and
in either case as to which Dundee has received notice or otherwise has
a reasonable basis to believe that such customer will terminate or
materially reduce its purchases from Dundee on or before December 31,
1995.
(v) ENVIRONMENTAL. Except as set forth in Schedule 3.1(v):
(i) no generation, storage, presence, contamination,
transport, emission, discharge or "release" (as such term is defined
in 42 U.S.C. Section 9601(22)) of any Hazardous Substance (as defined
below) exists or is occurring (or has existed or occurred) from, under
or upon, any property owned, leased, used or controlled at any time by
Dundee or any predecessor of Dundee;
(ii) there is no past or present action, activity, event,
omission, condition or circumstance (A) that could be reasonably
expected to require Dundee to incur costs of removal, remedial,
response or corrective action (and the terms "removal," "remediation"
and "response" action include the types of activities covered by
CERCLA (as defined below) pursuant to any Environmental Laws (as
defined below) with respect to any Hazardous Substances or Waste (each
as defined below) or (B) that could be reasonably expected to give
rise to any common law or statutory liability (including punitive or
exemplary damages and whether assessed with respect to personal injury
or property damage, negligence, nuisance, trespass, damage to natural
resources or the environment or otherwise) on the part of Dundee;
(iii) Dundee (A) has obtained, maintained and complied with
all permits, registrations, licenses, approvals and other
authorizations (collectively, "Permits") that are required for the
operation of its businesses or the ownership or operation of any of
its properties, and (B), has maintained all records and has made all
filings required by applicable Environmental Laws for Dundee's
operations at past or present operating levels, including all records,
filings and Permits
<PAGE> 24
with respect to treatment, storage, presence, contamination,
generation, transport, emission, discharge or release into the
environment of any substance (including solids, liquids and gases) and
the proper disposal of such materials (including solid waste materials
and petroleum or any fractions or by-products of it);
(iv) without limiting or being limited by the foregoing,
Dundee is (and has been) otherwise in compliance with all
Environmental Laws in respect of any of the properties owned, leased,
used or controlled at any time by Dundee of any of the products,
business operations or other activities of Dundee, and no facts or
circumstances exist that could be reasonably expected to interfere
with Dundee's compliance with Environmental Laws; and
(v) Dundee has not received since December 31, 1991 any
notice of any action, activity, event, pending or threatened
investigation, condition or circumstance covered by any of clauses
(i), (ii), (iii) or (iv) above or otherwise alleging any liability or
potential liability under any Environmental Law, including CERCLA and
OSHA (as defined below).
Schedule 3.1(v) to this Agreement lists: (A) all Permits, regulatory
plans and compliance schedules of Dundee pertaining to its businesses,
together with their expiration and renewal dates (a copy of which
have been delivered by Dundee to Springs) and all environmental audit
reports or site investigations with respect to any facilities or
properties currently or formerly used by Dundee in its businesses; (B)
all Waste dumps and disposal, treatment and storage sites used by
Dundee in connection with its businesses or located on real property
owned, used or leased by Dundee at any time, and the names of the
entities that have been engaged in the handling, transportation and
disposal of waste materials for Dundee; (C) the material safety data
sheets ("MSDS") for each "hazardous chemical" (as such term is defined
under OSHA) produced by (or in products produced by) or used by
Dundee; (D) all "underground storage tanks" (as defined under RCRA)
and the Substances stored in them presently or formerly located on any
real properties currently or formerly owned, leased or operated by
Dundee; (E) all asbestos on property owned, leased or used by Dundee
and (F) Emergency and Hazardous Chemical Inventory Forms for each
"toxic chemical" which Dundee has notice that it is required to
furnish pursuant to the Emergency Planning and Community Right to Know
Act of 1986. "Environmental Laws" means and includes: (i) all
applicable federal, state, or local laws relating to protection,
preservation, or restoration of the environment, prevention or
minimization of pollution, control and tracking of Hazardous
Substances and Wastes, protection of public or employee health
<PAGE> 25
and safety, or similar matters, or the generation, use, collection,
treatment, storage, transportation, recovery, removal, discharge or
disposal of Hazardous Substances (as defined below) and any record
keeping, notification and reporting requirements of them, including
the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), the Resource Conservation and Recovery Act ("RCRA"),
the Clean Air Act, the Federal Water Pollution Control Act, the Toxic
Substances Control Act, the Emergency Planning and Community Right to
Know Act of 1986, the Occupational Safety and Health Act of 1970
("OSHA") and all comparable state and local laws, as amended from time
to time, and (ii) any common law (including common law that may impose
strict liability) that may impose liability or obligations for
injuries or damages due to, or threatened as a result of, the presence
of or exposure to any Hazardous Substance or Waste. "Hazardous
Substance" means and includes: [s] any substance currently or which,
to the knowledge of Dundee, may in the future be listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law
(including any substances defined as "hazardous substances" under
CERCLA), whether by type or by quality, including any material
containing any such substance as a component, petroleum and any
products or fractions thereof; and [t] any toxic or hazardous wastes,
materials, pollutants or substances regulated under any other
applicable law, including any so-called "Super Fund" or "Super Lien"
legislation, now existing or hereafter enacted, relating to
environmental, pollution or similar matters. "Waste" means and
includes any garbage, refuse or waste, whether or not involving
Hazardous Substances.
(w) CONTINUITY OF STOCK OWNERSHIP.
(i) To the best of the knowledge of the executive officers of
Dundee, there is no plan or intention by the holders of Dundee
Shares to sell, exchange, or otherwise dispose of a number of
Springs Shares received in the Merger that would reduce the
ownership of Springs Shares by the holders of Dundee Shares to a
number of Springs Shares having a value, as of the date of the
Merger, of less than 50 percent of the value of all the formerly
outstanding Dundee Shares as of the same date. For purposes of
this representation, Dundee Shares Exchanged for cash pursuant to
Section 2.3, surrendered by dissenters or exchanged for cash in
lieu of fractional Springs Shares will be treated as outstanding
on the date of the Merger. Moreover, Dundee Shares and Springs
Shares held by holders of Dundee Shares and otherwise sold,
redeemed, or disposed of prior or subsequent to the Merger will be
considered in making this representation;
<PAGE> 26
(ii) SubCorp will acquire at least 90 percent of the fair
market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by Dundee immediately prior
to the transaction. For purposes of this representation, amounts
paid by Dundee to dissenters, Dundee assets used to pay its Merger
expenses, and all redemptions and distributions (except for
regular, normal dividends) made by Dundee immediately preceding
the Merger, will be included as assets of Dundee held immediately
prior to the Merger; and
(iii) the liabilities of Dundee to be assumed by Subcorp and
the liabilities to which the assets of Dundee are subject were
incurred by Dundee in the ordinary course of business.
(x) FAIRNESS OPINION. The Board of Directors of Dundee has
received an opinion from The Robinson-Humphrey Company, Inc. as of the
date of this Agreement to the effect that the consideration to be
received by the holders of the Dundee Shares pursuant to the Merger is
fair to such holders from a financial point of view.
(y) BROKERS, FINDERS AND INVESTMENT BANKERS. None of Dundee or
any of its officers, directors or employees have employed any broker,
finder or investment banker or incurred any liability for any
investment banking fees, financial advisory fees, brokerage fees or
finders' fees in connection with the transactions contemplated by this
Agreement, except that Dundee has arrangements with The
Robinson-Humphrey Company, Inc., the complete terms of which have been
disclosed to Springs.
3.2 REPRESENTATIONS AND WARRANTIES BY SPRINGS. Springs represents and
warrants to, and agrees with, Dundee as of the date hereof and as of the
Closing as follows and, as to matters regarding Subcorp, Subcorp represents and
warrants to, and agrees with, Dundee as of the date hereof and as of the
Closing as follows:
(a) ORGANIZATION AND QUALIFICATION, ETC. Springs is a corporation
duly organized, validly existing and in good standing under the laws
of the State of South Carolina, has the corporate power and authority
to own all its properties and assets and to carry on its business as
it is now being conducted. SubCorp is a corporation duly organized
under the laws of the State of Georgia and has the corporate power and
authority to own all its properties and assets and to carry on its
business as it is now being conducted. The copies of Springs's
Articles of Incorporation and Bylaws and Subcorp's Articles of
Incorporation and Bylaws, in each case, as amended
<PAGE> 27
to date, which have been delivered to Dundee, are complete and
correct, and such instruments, as so amended, are in full force and
effect at the date hereof.
(b) CAPITALIZATION. The authorized capital stock of Springs
consists of 40,000,000 Springs Shares, 20,000,000 shares of Class B
Common Stock (the "Springs Class B Shares") and 1,000,000 shares of
$1.00 par value preferred stock (the "Springs Preferred Shares"). As
of December 31, 1994, 9,764,558 Springs Shares were validly issued and
outstanding, fully paid and non-assessable, and 119,585 Springs Shares
were held in the treasury of Springs. As of December 31, 1994,
7,830,375 Springs Class B Common Shares were validly issued and
outstanding, fully paid and non-assessable, and no Springs Class B
Common Shares were held in the treasury of Springs. No Springs
Preferred Shares are issued or outstanding or held in the treasury of
Springs. The authorized capital stock of Subcorp consists of 10,000
shares of common stock of no par value, of which 1,000 shares are
validly issued and outstanding, fully paid and non-assessable.
Springs owns all of the outstanding shares of Subcorp, and no shares
of Subcorp are held in its treasury.
(c) AUTHORITY. Each of Springs and Subcorp has the corporate
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated on the part of Springs and
SubCorp hereby. The execution and delivery by each of Springs and
Subcorp of this Agreement and the consummation by each of Springs and
Subcorp of the transactions contemplated on its part hereby have been
duly authorized by its Board of Directors (or a duly authorized
committee thereof) and by Springs as the sole shareholder of Subcorp.
No other corporate action on the part of Springs or Subcorp is
necessary to authorize the execution and delivery of this Agreement by
Springs or Subcorp or the consummation by Springs or Subcorp of the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by Springs and Subcorp and is a valid, binding
and enforceable agreement of Springs and Subcorp.
(d) NON-CONTRAVENTION. The execution and delivery of this
Agreement by Springs and Subcorp do not and, subject to the expiration
of the applicable waiting periods after the filings required by the
HSR Act referred to in paragraph (e) below, the consummation by
Springs and Subcorp of the transactions contemplated hereby do not and
will not (i) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of Springs or Subcorp or (ii) violate or
conflict with, or result (with the giving of notice or the lapse of
time or both) in a violation of or constitute a default under, any
provision of, or result in the acceleration or termination of or
entitle any party to accelerate or
<PAGE> 28
terminate (whether after the giving of notice or lapse of time or
both) any obligation or benefit under, or result in the creation or
imposition of any lien, charge, pledge, security interest or other
encumbrance upon any of the assets or property of Springs or Subcorp
pursuant to any provision of, any contract, agreement, commitment,
undertaking, arrangement or understanding to which Springs or any of
its Subsidiaries is a party or bound or to which any of their assets
or properties are subject that is (A) described in Item 14(a)(3) of
Springs Annual Report (as hereinafter defined) in response to Items
601(b)(4) and 601(b)(10) of Regulation S-K, (B) described in Item 6(a)
of Part II of the Springs Quarterly Reports (as hereinafter defined)
in response to Items 601(b)(4) and 601(b)(10) of Regulation S-K or (C)
required to be disclosed in Item 21(a) of the Registration Statement
in response to Items 601(b)(4) and 601(b)(10) of Regulation S-K (a
"Springs Material Contract"), or any law, ordinance, regulation,
order, arbitration award, judgment or decree to which Springs or
Subcorp is a party or by which either of them or their respective
assets or properties is bound, and the same does not and will not
constitute an event permitting termination of any Springs Material
Contract, if such violation, conflict, default, acceleration,
termination, entitlement, creation or imposition of a lien, charge,
pledge, security interest or other encumbrance or event would, when
taken together with all other such violations, conflicts, defaults,
accelerations, terminations, entitlements to accelerate, creations and
impositions of liens, charges, pledges, security interests and other
encumbrances and events, affect adversely the assets, liabilities,
financial condition, results of operations, business or prospects of
Springs and its Subsidiaries taken as a whole.
(e) CONSENTS. Except for the filing of the Registration Statement
with the SEC and state securities commissions, filings with the FTC
and Justice as required by the HSR Act, the filing of the Certificate
of Merger with the Secretary of State of Georgia, no consent,
authorization, order or approval, or filing or registration with, any
Governmental Entity is required for or in connection with the
execution and delivery of this Agreement by Springs or Subcorp and the
consummation by Springs and Subcorp of the transactions contemplated
hereby, if the failure to make such filing or registration or to
obtain such consent, authorization, order or approval would have an
adverse effect on the consummation of the Merger.
(f) PERIODIC REPORTS. The information in the Springs's Annual
Report on Form 10-K for the year ended January 1, 1994, including the
proxy statement incorporated by reference therein (the "Springs Annual
Report"), and its Quarterly Reports on Form 10-Q for the first three
quarters of 1994 (the
<PAGE> 29
"Springs Quarterly Reports") (i) were prepared in all material
respects in accordance with the applicable requirements of the
Securities Exchange Act of 1934, as amended, and the Rules and
Regulations thereunder, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(g) FINANCIAL STATEMENTS. Springs has previously furnished Dundee
with a true and complete copy of the consolidated balance sheets of
Springs and its Subsidiaries as of January 1, 1994, January 2, 1993
and December 28, 1991 and the related consolidated statements of
operations, retained earnings and cash flows for the years then ended,
including the notes thereto, certified by Deloitte & Touche,
independent certified public accountants (the "Springs Audited
Financial Statements"). The Springs Audited Financial Statements and
the financial statements included in the Springs Quarterly Reports
(together with the Springs Audited Financial Statements, the "Springs
Financial Statements") have been prepared from, and are in accordance
with, the books and records of Springs and its Subsidiaries and
present fairly in all material respects the consolidated financial
position and consolidated results of operations of Springs and
Springs's Subsidiaries as of the dates and for the periods indicated,
in each case in conformity with generally accepted accounting
principles, consistently applied, except as otherwise stated in such
financial statements (including the notes thereto) and the audit
reports thereon.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since October 1, 1994,
there has not been any material adverse change in the business,
financial condition or results of operations of Springs and its
Subsidiaries, taken as a whole.
(i) PROXY STATEMENT; REGISTRATION STATEMENT. The information with
respect to Springs, its officers and directors and its Subsidiaries
(including SubCorp) that shall have been supplied by Springs or its
authorized representatives in writing for use in the Proxy Statement
or as contained in the Registration Statement, will not, on the date
or dates the Proxy Statement is first mailed to shareholders of
Dundee, or in the case of the Registration Statement at the time it
becomes effective, and at the Effective Time, as such Proxy Statement
or Registration Statement is then amended or supplemented, contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading or necessary to correct statements in any earlier filing
with the SEC of such
<PAGE> 30
Registration Statement or amendment thereto or any earlier
communication in the preparation of which Springs participated
(including the Proxy Statement) to shareholders of Dundee or Springs
with respect to the Merger.
(j) ABSENCE OF UNDISCLOSED LIABILITIES AND AGREEMENTS. Except as
set forth on the balance sheet as of October 1, 1994 included in the
Springs Quarterly Reports, neither Springs nor any of its Subsidiaries
had, as of October 1, 1994 debts, liabilities or obligations, whether
accrued, absolute, contingent or otherwise and whether due or to
become due (including without limitation any uninsured liabilities
resulting from failure to comply with any law applicable to the
conduct of its business) required by generally accepted accounting
principles to be set forth on such balance sheet or disclosed in the
notes thereto.
(k) ACTIVITIES OF SUBCORP. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions
contemplated hereby, Subcorp has neither incurred any obligations or
liabilities nor engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with
any person.
(l) BROKERS, FINDERS AND INVESTMENT BANKERS. None of Springs, any
of its Subsidiaries or any of their respective officers, directors or
employees have employed any broker, finder or investment banker or
incurred any liability for any investment banking fees, financial
advisory fees, brokerage fees or finders' fees in connection with the
transactions contemplated by this Agreement, except that Springs has
arrangements with Goldman, Sachs & Co. and McGrath & Company, the
complete terms of which have been disclosed to Dundee.
(m) GOVERNMENTAL AUTHORIZATION AND COMPLIANCE WITH LAWS. Springs
is in substantial compliance in all respects with all laws, orders,
regulations, policies and guidelines of all Governmental Entities
applicable to Springs or any of its businesses or properties and
assets. Springs has all material permits, certificates, licenses,
approvals and other authorizations required in connection with the
operation of its businesses. No notice has been issued and to
Springs' knowledge no investigation or review is pending or threatened
against Springs by any Governmental Entity (i) with respect to any
alleged violation by Springs of any law, order, regulation, policy or
guidelines of any Governmental entity, or (ii) with respect to any
alleged failure to have all permits, certificates, licenses, approvals
and other authorizations required in connection with the operation of
the business of Springs, except for violations or failures
<PAGE> 31
that, individually or in the aggregate, would not materially and
adversely affect the assets, liabilities, financial condition, results
of operations or business of Springs and its Subsidiaries, taken as a
whole. Springs is not in violation of any judgment, decree,
injunction, ruling or order of any court, governmental department,
commission, agency or instrumentality, arbitrator or other person.
(n) LEGAL PROCEEDINGS. There is no claim, action, suit,
proceeding or investigation pending or, to the knowledge of Springs,
contemplated or threatened against Springs or any of its properties or
assets (or any of its officers or directors in connection with the
business of Springs) before any arbitrator or Governmental Entity,
domestic or foreign, which in the event of a final adverse
determination, considered individually or in the aggregate with all
such other claims, actions, suits or proceedings, would materially and
adversely affect the assets, liabilities, financial condition, results
of operations or business of Springs and its Subsidiaries, taken as a
whole, nor it there any judgment, decree, injunction, ruling or order
of any Governmental Entity, arbitrator or any other person outstanding
against Springs having such effect; and (ii) Springs is not a party to
or bound by any judgment, decree, injunction, ruling or order of any
Governmental Entity, arbitrator or any other person against Springs
which, when considered individually or in the aggregate with all such
other judgments, decrees, injunctions, rulings or orders, adversely
affects the assets, liabilities, financial condition, results of
operations or business of Springs and its Subsidiaries, taken as a
whole.
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 CONDUCT OF BUSINESS. During the period from the date hereof to
the Effective Time (except as required by law, as set forth on Schedule 4.1 and
for the transactions contemplated by this Agreement):
(a) OPERATION BY DUNDEE IN THE ORDINARY COURSE OF BUSINESS.
Dundee shall conduct its operations according to its ordinary and
usual course of business in substantially the same manner as
heretofore conducted and use its best efforts to preserve intact its
business organization, keep available the services of its officers and
employees, and maintain satisfactory relationships with licensors,
suppliers, distributors, customers and others having business
relationships with it. Dundee shall prepare and file all federal,
state, local and foreign returns for Taxes and other tax reports,
filings and amendments thereto required to be
<PAGE> 32
filed by it, and allow Springs, at its request, to review all such
returns, reports, filings and amendments at Dundee's offices prior to
the filing thereof, which review shall not interfere with the timely
filing of such returns.
(b) FORBEARANCES BY DUNDEE. Dundee shall not, without the prior
written consent of Springs, which consent shall not be unreasonably
withheld (and shall be deemed given if no written response shall have
been made within five (5) days after receipt by Springs of a written
request therefor by Dundee):
(i) incur any debt, liability or obligation, direct or
indirect, whether accrued, absolute, contingent or otherwise,
other than current liabilities incurred in the ordinary and usual
course of business, or pay any debt, liability or obligation of
any kind other than such current liabilities and current
maturities of existing long-term debt (including interest when
due) in each case only in accordance with the terms of the
document creating and evidencing such debt, or fail to pay any
debt when due or take or fail to take any action, which taking or
failing to take would permit any debt to be accelerated;
(ii) assume, guarantee, endorse or otherwise become
responsible for the obligations of any other individual, firm or
corporation, or make any loans or advances to any individual, firm
or corporation;
(iii) declare, set aside or pay any dividend (whether in
cash, capital stock or property) with respect to its capital stock
or declare or make any distribution on, redeem, or purchase or
otherwise acquire any Dundee Shares, or split, combine or
otherwise similarly change the outstanding Dundee Shares, or
authorize the creation or issuance of or issue or sell any shares
of its capital stock or any securities or obligations convertible
into or exchangeable for, or giving any person any right to
acquire from it, any shares of its capital stock, or agree to take
any such action;
(iv) mortgage, pledge or otherwise encumber any property or
asset, except in the ordinary and usual course of business;
(v) sell, lease, transfer or dispose of any of its properties
or assets, waive or release any rights or cancel, compromise,
release or assign any indebtedness owed to it or any claims held
by it, except in the ordinary and usual course of business but in
no event shall any such sale or disposition exceed $100,000;
<PAGE> 33
(vi) acquire any subsidiary or make any investment of a
capital nature either by purchase of stock or securities,
contributions to capital, property transfers or otherwise, or by
the purchase of any property or assets of any other individual,
firm or corporation, except in the ordinary and usual course of
business but in no event greater than $100,000;
(vii) fail to perform in all material respects its
obligations under Material Contracts (except those being contested
in good faith) or enter into, assume or amend any contract or
commitment that (A) extends for more than six months after the
date of this Agreement and calls for the payment or receipt of
more than $50,000 by Dundee, or (B) would be a Material Contract
other than, in the case of this clause (B), contracts for the sale
of products entered into in the ordinary and usual course of
business;
(viii) except as set forth on Schedule 4.1(b)(viii) and
except for regularly scheduled increases for non-officer employees
made prior to the Effective Time in accordance, both as to timing
and amount, with normal prior practice, increase in any manner the
compensation or fringe benefits of any of its officers or
employees or pay or agree to pay any bonus or severance pay or
pension or retirement allowance not required by any existing plan
or agreement to any of its officers or employees, or commit itself
to or enter into any employment agreement or any incentive
compensation, deferred compensation, profit sharing, stock option,
stock purchase, savings, consulting, retirement, pension or other
"fringe benefit" plan or arrangement with or for the benefit of
any officer, employee or other person;
(ix) permit any insurance policy naming it as a beneficiary
or a loss payable payee to be cancelled or terminated or any of
the coverage thereunder to lapse, unless Dundee makes reasonable
efforts to obtain simultaneously with such termination or
cancellation replacement policies providing substantially the same
coverage on commercially reasonable terms and, if so available,
such replacement policies shall be maintained in full force and
effect;
(x) amend its Articles of Incorporation or Bylaws;
(xi) enter into any union, collective bargaining or
similar agreement;
<PAGE> 34
(xii) make sales of goods other than in accordance with its
customary practices regarding price and credit or make any
shipment of goods other than in accordance with its customary
practices regarding delivery dates requested by customers; or
(xiii) enter into an agreement or commitment to do any of the
things described in clauses (i) through (xii).
In connection with the continued operation of the businesses of Dundee between
the date of this Agreement and the Effective Time, Dundee shall confer in good
faith on a regular and frequent basis with one or more representatives of
Springs designated in writing to receive reports on operational matters and the
general status of ongoing operations, and Springs shall be entitled to have its
representatives present in the offices, plants and other facilities of Dundee
to monitor its business activities and its compliance with the provisions of
this Agreement. Dundee acknowledges that Springs does not and will not waive
any rights it may have under this Agreement as a result of such consultations
including the requirement that Dundee obtain the written consent of Springs to
certain actions as required by this Section 4.1(b), nor shall Springs be
responsible for any decisions made by Dundee's officers and directors with
respect to matters which are the subject of such consultation.
(c) ACTIONS BY SPRINGS. Springs shall not, without the prior
written consent of Dundee, which consent shall not be unreasonably
withheld (and shall be deemed given if no written response shall have
been made within five (5) days after receipt by Dundee of a written
request therefor by Springs):
(i) declare, set aside or pay any dividend (whether in
cash, capital stock or property) with respect to its capital stock or
declare or make any distribution on any of its capital stock, except
for regular quarterly dividends at a rate not exceeding 125% of the
last such dividend; or
(ii) amend its Articles of Incorporation or Bylaws in any
manner that adversely affects the rights of holders of Springs Shares.
4.2 MEETING OF DUNDEE SHAREHOLDERS.
(a) APPROVAL OF MERGER. Dundee covenants and agrees that its
Board of Directors shall (i) cause the Dundee Shareholders Meeting to
be duly called and held in accordance with Dundee's Articles of
Incorporation, its Bylaws and applicable law as soon as reasonably
practicable to consider and vote upon this Agreement; (ii) recommend
approval of this Agreement to the holders of the Dundee Shares; and
(iii) use its best efforts to cause such meeting to take place and to
<PAGE> 35
obtain the approval by the holders of the Dundee Shares of the Merger
and other transactions contemplated by this Agreement in accordance
with its Articles of Incorporation, Bylaws and the GBCC.
(b) OTHER MATTERS. At the Dundee Shareholders Meeting the holders
of the Dundee Shares will be asked to approve or ratify the following
matters:
(i) all issuances or sales by Dundee of Dundee Shares since
July 1, 1989; and
(ii) the waiver of preemptive rights by holders of Dundee
Shares with respect to all issuances or sales of Dundee Shares by
Dundee since February 1, 1990.
4.3 BEST EFFORTS; FURTHER ASSURANCES; COOPERATION. Subject to the
other provisions in this Agreement, the parties hereto shall each use their
best efforts to perform their respective obligations herein and to take, or
cause to be taken or do, or cause to be done, all things necessary, proper or
advisable under applicable law to obtain all regulatory approvals and satisfy
all conditions to the obligations of the parties under this Agreement and to
cause the Merger and the other transactions contemplated by this Agreement to
be carried out promptly in accordance with the terms hereof and shall cooperate
fully with each other and their respective officers, directors, employees,
agents, counsel, accountants and other designees in connection with any steps
required to be taken as part of their respective obligations under this
Agreement, including without limitation:
(a) REGULATORY ACTION. Subject to the terms and conditions of
Section 4.12, Dundee and Springs shall promptly make their respective
filings and submissions and shall take, or cause to be taken, all
action and do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to (i) comply with the
provisions of the HSR Act and (ii) obtain any other required approval
of any other Governmental Entity with jurisdiction over the
transactions contemplated by this Agreement.
(b) CERTAIN LEGAL PROCEEDINGS. Subject to the terms and
conditions of Section 4.12, in the event any claim, action, suit,
investigation or other proceeding by any Governmental Entity or other
person is commenced which questions the validity or legality of the
Merger or any of the other transactions contemplated hereby or seeks
damages in connection therewith, the parties agree to cooperate and
use their best efforts to defend against such claim, action, suit,
investigation or other proceeding and, if an injunction or other order
is issued in any such action, suit or other proceeding, to use their
best efforts to have such injunction
<PAGE> 36
or other order lifted, and to cooperate reasonably regarding any other
impediment to the consummation of the transactions contemplated by
this Agreement.
(c) NOTICE. Each party shall give prior written notice to the
others of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or
warranty of Dundee, Springs or SubCorp, as the case may be, contained
in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time or that will or
may result in the failure to satisfy any of the conditions specified
in Article 5 and (ii) any failure of Dundee, Springs or SubCorp, as
the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
4.4 INVESTIGATION. Dundee agrees to permit Springs and its authorized
representatives to have or cause them to be permitted to have, after the date
hereof and until the Effective Time, full access to the premises, books and
records of Dundee at reasonable hours, and, subject to Dundee's consent which
shall not be unreasonably withheld, to enter upon any and all of the properties
of Dundee for purposes of testing of the soil, water, groundwater, tanks,
containers, effluent, equipment, building components, raw materials, finished
products and wastes, or conducting such other tests and studies as Springs or
its consultants in their reasonable opinion deem appropriate or necessary, and
the officers of Dundee will furnish Springs with such financial and operating
data and other information with respect to Dundee's business and properties as
Springs shall from time to time reasonably request. Dundee will instruct its
auditing firm to permit Springs and its representatives, including its auditing
firm, to review the work papers of Dundee's Auditors relating to their
examination of the Dundee Audited Financial Statements. No investigation by
Springs heretofore or hereafter made shall affect the representations and
warranties of Dundee, and each such representation and warranty shall survive
any such investigation, subject to Section 7.5. Springs covenants and agrees
to hold all information received by it in connection herewith in accordance
with the Confidentiality Agreement dated January 6, 1995 between Springs and
Dundee (the "Confidentiality Agreement").
4.5 EXPENSES. Except as otherwise provided in this Agreement, if the
Merger is not consummated, all costs and expenses (including any brokerage
commissions or any finder's or investment banker's fees and including
attorney's and accountants' fees) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except that Springs and Dundee shall share equally the costs of
printing the Proxy Statement and Registration Statement
<PAGE> 37
and filing such documents with the SEC and any state securities
commission.
4.6 NO SOLICITATION OF TRANSACTIONS. From the date hereof until the
Effective Time or until this Agreement is terminated or abandoned as provided
in Article 6, Dundee shall not, directly or indirectly, through any officer,
director, agent, shareholder or otherwise, initiate, solicit or knowingly
encourage (including by way of furnishing non-public information or
assistance), or take any other action to facilitate knowingly, any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Competing Transaction (as such term is defined below in this
Section 4.6), or enter into or maintain or continue discussions or negotiate
with any person or entity in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction or
authorize or permit any of the officers, directors or employees of such party
or any of its subsidiaries or any investment banker, financial advisor,
attorney, accountant or other representative retained by such party or any of
such party's subsidiaries to take any such action, and Dundee shall notify
Springs thereof orally (within one business day) and in writing (as promptly as
practicable) of all of the relevant details relating to all inquiries and
proposals which it or any of its Subsidiaries or any such officer, director,
employee, investment banker, financial advisor, attorney, accountant or other
representative may receive relating to any of such matters and if such inquiry
or proposal is in writing, Dundee shall deliver to Springs a copy of such
inquiry or proposal; provided, however, that nothing contained in this Section
4.6 or elsewhere in this Agreement shall prohibit the Board of Directors of
Dundee, as the case may be, from: (i) furnishing information to, or entering
into discussions or negotiations with, any person or entity that makes an
unsolicited written, bona fide proposal, which is not subject to any material
contingencies that the Board of Directors of Dundee determines in good faith
are not reasonably capable of being satisfied (and nothing contained in this
Section 4.6 or elsewhere in this Agreement shall prohibit Dundee from holding
discussions necessary to make this determination), to acquire Dundee pursuant
to a merger, consolidation, share exchange, business combination, tender or
exchange offer or other similar transaction if, and only to the extent that,
(A) the Board of Directors of Dundee, after consultation with and based upon
the advice of independent legal counsel (who may be Dundee's regularly engaged
independent legal counsel), determines in good faith that such action is
necessary for the Board of Directors of Dundee to comply with its fiduciary
duties to shareholders under applicable law and (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, Dundee (I) provides reasonable notice to Springs to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such person or entity and (II) receives from such person or entity an
executed confidentiality agreement in
<PAGE> 38
reasonably customary form on terms not more favorable to such person or entity
than the terms contained in the Confidentiality Agreement; (ii) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer; or (iii) failing to make or withdrawing or modifying its
recommendation referred to in Section 4.2 following the occurrence of a
Competing Transaction if the Board of Directors of Dundee, after consultation
with and based upon the advice of independent legal counsel (who may be
Dundee's regularly engaged independent legal counsel), determines in good faith
that such action is necessary for the Board of Directors of Dundee to comply
with its fiduciary duties to shareholders under applicable law. For purposes
of this Agreement, "Competing Transaction" shall mean any of the following
involving Dundee: (i) any merger, consolidation, share exchange, business
combination, or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 15% or more of the assets of
Dundee, taken as a whole, in a single transaction or series of transactions;
(iii) any tender offer or exchange offer for 15% or more of the outstanding
shares of capital stock of Dundee or the filing of a registration statement
under the Securities Act in connection therewith; (iv) any person having
acquired beneficial ownership or the right to acquire beneficial ownership of,
or any "group" (as such term is defined under Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder) having been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15% or
more of the then outstanding shares of capital stock of Dundee; or (v) any
public announcement of a proposal, plan or intention to do any of the foregoing
or any agreement to engage in any of the foregoing. Nothing in this Section
4.6 shall (i) permit Dundee to terminate this Agreement, (ii) permit Dundee to
enter into any agreement with respect to a Competing Transaction during the
term of this Agreement or (iii) affect any other obligation of Dundee under
this Agreement.
4.7 REGISTRATION STATEMENT AND PROXY STATEMENT. Springs shall, and
Dundee shall cooperate in taking steps to, (i) prepare and file with the SEC as
soon as is practicable the Registration Statement, which shall contain a
preliminary draft of the Proxy Statement, and (ii) use best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable. Promptly after the Registration Statement has been declared
effective by the SEC, Dundee shall mail the Proxy Statement to the holders of
Dundee Shares, and Dundee shall use its best efforts to solicit proxies in
favor of the adoption and approval of this Agreement and the Merger. Springs
shall also take any action required to be taken under state blue sky or
securities laws in connection with the Merger. The Registration Statement and
the Proxy Statement shall conform as to form in all material respects with all
applicable requirements of the federal securities laws and Georgia law.
<PAGE> 39
4.8 NYSE LISTINGS. Springs shall cause the Springs Shares to be
issued in connection with the Merger to be authorized for listing on the New
York Stock Exchange, upon official notice of issuance, prior to the Effective
Time.
4.9 AFFILIATES OF DUNDEE. Dundee will provide Springs with such
information as Springs may reasonably request to determine the identity of
those persons (as defined in Rule 145(e)) who may be deemed "affiliates" of
Dundee under Rule 145 promulgated by the SEC under the Securities Act, and
shall identify those persons whom Dundee believes may be deemed affiliates
thereunder at the time the Merger is submitted to a vote of Dundee's
shareholders. Dundee shall use its best efforts to cause each person who is so
identified as an "affiliate" to deliver to Springs prior to the Closing a
written agreement (an "Affiliate Agreement") providing that such person will
not sell, pledge, transfer or otherwise dispose of the Springs Shares to be
received by such person in the Merger except in compliance with the applicable
provisions of the Securities Act and the rules and regulations thereunder.
Springs shall not be required to maintain the effectiveness of the Registration
Statement under the Securities Act for the purposes of resales of Springs
Shares by "affiliates" or to deliver any certificates evidencing Springs Shares
to any "affiliate" from whom an Affiliate Agreement has not been received
unless any such certificate contains a legend stating in substance that Springs
may refuse to transfer such Springs Shares in the absence of an effective
Registration Statement as to such transfer, or unless Springs receives an
opinion of counsel satisfactory to Springs that registration with respect to
such transfer is not required. Such Affiliate Agreements shall provide that
such "affiliates" agree that during the period of time following the
consummation of the Merger when the Springs Shares of "affiliates" may be sold
without registration only in compliance with Rule 145 there may be placed upon
the certificates representing Springs Shares received by them pursuant to the
Merger, or any substitutions therefor, a legend stating in substance that
Springs may refuse to transfer such shares in violation of the Affiliate
Agreement or in the absence of an effective Registration Statement as to such
transfer, or an opinion of counsel satisfactory to Springs that such
registration is not required.
4.10 RULE 145. Springs covenants for a period of three years
following the Effective Time of the Merger that it will file any reports
required to be filed by it under the Securities Act and the Exchange Act, and
the rules and regulations adopted by the SEC thereunder (or, if Springs is not
required to file such reports, it will, upon the request of any holder of
Springs Shares issued in connection
<PAGE> 40
with the Merger, make publicly available other information so long as it is
necessary to permit sales under Rule 145 under the Securities Act but only if
Springs otherwise makes such information publicly available), that it will take
such further action as any holder of Springs Shares issued in connection with
the Merger may reasonably request, all to the extent required from time to time
to enable such shareholders to sell Springs Shares within the limitation of the
exemptions provided by (i) Rule 145 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the SEC.
4.11 PUBLIC ANNOUNCEMENTS. The timing and content of all
announcements regarding any aspect of this Agreement or the Merger to the
financial community, government agencies, employees or the general public shall
be mutually agreed upon in advance unless Springs or Dundee is advised by
counsel that any such announcement or other disclosure not mutually agreed upon
in advance is required to be made by law or applicable NYSE rules and then only
after making a reasonable attempt to comply with provisions of this Section
4.11.
4.12 ANTITRUST CHALLENGES. In the event a suit is instituted
challenging the Merger as violative of the antitrust laws, each of Springs and
Dundee will use its best efforts to defend against such suit. Springs and
Dundee will use their best efforts to take such action as may be required by
any federal or state court of the United States, in any suit brought by a
private party or Governmental Entity challenging the Merger as violative of the
antitrust laws, in order to avoid the entry of, or to effect the dissolution
of, any injunction, temporary restraining order or other order which has the
effect of preventing the consummation of the Merger; provided, however, that
Springs shall not be required to agree to any divestiture by Springs or Dundee
or any of Springs' Subsidiaries of any shares of capital stock or of any
business, properties or assets of Springs or Dundee or any of Springs'
Subsidiaries, or the imposition of any material limitation on the ability of
Springs to conduct such business or to own or exercise control of such stock,
business, properties or assets.
4.13 EMPLOYEE MATTERS.
(a) EMPLOYEE BENEFITS AND AGREEMENTS. Springs shall provide the
employees of Dundee as of the Effective Time with employee benefit
plans that are in the aggregate not materially less favorable to such
employees than the Employee Plans provided by Dundee and shall give
each Dundee employee credit for employment with Dundee for purposes of
eligibility to participate in, vesting and payment of benefits under
such plans; provided, however, that, except as otherwise specifically
provided in subsection (b), nothing in this Agreement shall be deemed
to require Springs to cause to be continued any employee's employment,
responsibilities or officer title for any definite period.
(b) EMPLOYMENT. Springs will cause the Surviving Corporation to
agree to employ each of the Dundee employees
<PAGE> 41
listed on Schedule 4.13(b) for the number of months following the
Closing set forth beside his name on Schedule 4.13(b) (the "Initial
Term") for compensation at the annual rate set forth beside the
employee's name on Schedule 4.13(b); provided, however, that either
Springs or any such employee shall be entitled to terminate the
employment of such employee effective at upon the completion of his
Initial Term, after not less than two weeks notice to the other party,
and upon such termination the terminated employee shall receive a one
time payment equal to the amount set forth beside his name on Schedule
4.13(b). No such employee shall be required by Springs to relocate
during his Initial Term without such employee's consent. Such
employment shall be in such executive capacity and with such title as
Springs shall determine. In addition, Springs shall offer to employ
Lowell Belk until December 31, 1997 at total annual compensation of at
least $118,000, provided that he agrees to relocate his office to
Lancaster, S.C. at the request of Springs.
(c) Springs agrees that upon any termination or suspension of
further benefits accruals under Dundee's qualified pension plans, any
funds held in trust for the pension plans will be credited to the
accounts of pension plan participants of those plans in those or other
qualified employee benefit plans as Springs may determine subject to
any applicable ERISA requirements.
(d) Springs agrees to guarantee Dundee's obligations under the
Dundee Mills Supplemental Executive Retirement Plan following the
Closing.
4.14 INDEMNIFICATION.
(a) ARTICLES OF INCORPORATION; BYLAWS. At the Effective Time, the
Articles of Incorporation and Bylaws of Dundee will contain provisions
relating to limitation of liability and indemnification which shall be
continued in the Articles of Incorporation and Bylaws of the Surviving
Corporation. Springs agrees that these provisions of the Articles of
Incorporation and Bylaws of the Surviving Corporation will be deemed
to have been duly adopted by Dundee and will be complied with by the
Surviving Corporation. From and after the Effective Time, Springs
will not take any action, nor permit any action to be taken, which
would change or amend the provisions of the Articles of Incorporation
or Bylaws of the Surviving Corporation in effect at the Effective Time
relating to limitation of liability or indemnification, prior to the
expiration of all statutes of limitation applicable to events
occurring on or prior to the Effective Time, in any manner that would
adversely affect the rights thereunder of individuals who at or prior
to the Effective Time were entitled to the benefits of such
provisions.
<PAGE> 42
(b) REORGANIZATION, ETC. In the event the Surviving Corporation
or any of its successors or assigns (i) reorganizes or consolidates
with or merges into or enters into another business combination
transaction with any other person or entity and is not the resulting,
continuing or surviving corporation or entity of such consolidation,
merger or transaction or (ii) liquidates, dissolves or transfers all
or substantially all of its properties and assets to any person or
entity, then, and in each such case, proper provision will be made so
that the successors and assigns of the Surviving Corporation assume
the obligations set forth in this Section 4.14.
4.15 ACCOUNTANTS' LETTERS. Each of Dundee and Springs agrees to
use its best efforts to obtain and deliver to the other letters of Springs
Auditors and Dundee's Auditors, dated the date of the Proxy
Statement/Prospectus included within the Registration Statement, the effective
date of the Registration Statement and the Closing Date (or such other dates
reasonably acceptable to the parties) with respect to certain financial
statements and other financial information included in the Registration
Statement, which letters shall be in form reasonably satisfactory to the
addressee.
4.16 FINANCIAL STATEMENTS OF DUNDEE. Dundee shall cause to be
prepared and delivered to Springs as soon as practicable after they have been
prepared (but in no event later than February 15, 1994) unaudited balance
sheets of Dundee as of December 31, 1994 and December 31, 1993 and the related
unaudited statements of income, stockholders equity and cash flows, including
the notes thereto. Such financial statements shall be in conformity with GAAP
in all respects and shall otherwise meet the requirements for Dundee Financial
Statements in Section 3.1(g), and shall be prepared in such manner and include
such information necessary in order to satisfy Springs' disclosure requirements
under the United States securities laws as determined by Springs in its
reasonable judgment.
4.17 SPRINGS ACTIONS. Following the Effective Time, Springs shall
not take any action that would disqualify, or fail to take any action necessary
to preserve, the Merger as a reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended.
ARTICLE 5
CONDITIONS TO THE MERGER
5.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing of each of the following conditions:
<PAGE> 43
(a) DUNDEE SHAREHOLDER APPROVAL. This Agreement and the Merger
shall have been approved at the Dundee Shareholders Meeting duly
called and held in accordance with Dundee's Articles of Incorporation
and Bylaws and the GBCC, by the holders of a majority of the Dundee
Shares outstanding and entitled to vote thereon.
(b) HSR ACT. All applicable waiting periods under the HSR Act
shall have expired or been terminated.
(c) TAX EFFECT OF MERGER. Dundee and Springs shall each have
received a written opinion of Sutherland, Asbill & Brennan, in form
reasonably satisfactory to Dundee and Springs (the "Tax Opinion"), to
the effect that to the extent the Merger Consideration is comprised of
Springs Shares, the Merger shall be treated as a tax-free
reorganization under the applicable provisions of the Code. In
connection with the Tax Opinion, Sutherland, Asbill & Brennan shall be
entitled to make factual assumptions as are customary in similar tax
opinions, and such factual assumptions shall be confirmed by
certificates executed by responsible officers of Dundee and Springs.
Sutherland, Asbill & Brennan may also rely on all representations,
warranties, covenants and agreements of the parties contained in this
Agreement or any Schedule hereto.
(d) REGISTRATION STATEMENT. The Registration Statement shall be
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall be in effect and no
proceedings for such purpose, or under the proxy rules of the SEC
pursuant to the Exchange Act and with respect to the transactions
contemplated hereby, shall be pending before or threatened by the SEC.
(e) NYSE LISTING. The Springs Shares to be issued in the Merger
shall have been authorized for listing on the NYSE upon official
notice of issuance.
5.2 CONDITIONS TO OBLIGATIONS OF SPRINGS AND SUBCORP. Consummation of
the Merger is subject to the fulfillment to the reasonable satisfaction of
Springs, prior to or at the Closing, of each of the following conditions:
(a) CONSENTS, AUTHORIZATIONS, ETC. All consents, authorizations
and approvals required under the items listed on Schedule 3.1(e) shall
have been obtained or made.
(b) INJUNCTION, ETC. The consummation of the Merger will not
violate the provisions of any injunction, order, judgment, decree, law
or regulation applicable or effective with respect to Springs, SubCorp
or their respective officers and directors. No suit or proceeding
shall have been instituted by any person, or, to the knowledge of
Springs,
<PAGE> 44
shall have been threatened by any Governmental Entity, which seeks
(i) to prohibit, restrict or delay consummation of the Merger or to
limit in any material respect the right of Springs to control any
material aspect of the business of Springs and its Subsidiaries or
Dundee and its Subsidiaries after the Effective Time, or (ii) to
subject Springs or Dundee or their respective directors or officers to
material liability on the ground that it or they have breached any law
or regulation or otherwise acted improperly in relation to the
transactions contemplated by this Agreement; provided, however, that
in the case of (ii) above, Springs shall have made a good faith
determination that a substantial basis exists which would support a
finding of such liability against the officers and directors of
Dundee or Springs.
(c) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Dundee contained in this Agreement shall have been true
and correct in all respects at the date hereof and shall also be true
and correct in all respects at and as of the Effective Time, except
for changes contemplated in this Agreement, with the same force and
effect as if made at and as of the Effective Time, except in either
case as such representations and warranties by their terms relate only
to periods of time prior to the Effective Time, or except where the
failure of any representation and warranty to be true and correct
would not have a material adverse effect on the assets, liabilities,
financial condition, results of operations, business or prospects of
Dundee; and Dundee shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement
to be performed or complied with by it at or prior to the Effective
Time.
(d) AFFILIATE AGREEMENTS. There shall have been delivered to
Springs Affiliate Agreements as described in Section 4.9.
(e) CERTIFICATE. Dundee shall have delivered to Springs a
certificate, dated as of the Effective Time, of the Chief Executive
Officer and the Chief Financial Officer of Dundee to the effect that
(i) they are familiar with the provisions of this Agreement and (ii)
to the best of their knowledge the conditions specified in paragraph
(c) of this Section 5.2 have been satisfied. Such certificate shall
also specify the number of issued and outstanding shares of Dundee
Common Stock and shall certify that to the best of their knowledge
there has been no violation by Dundee of Sections 4.1 or 4.6 hereof.
(f) OPINION AND CONFIRMATION OF DUNDEE'S COUNSEL.
(i) Springs and Subcorp shall have received an opinion or
opinions, dated as of the Effective Time, of
<PAGE> 45
King & Spalding in form and substance and with such exceptions and
limitations as shall be reasonably satisfactory to Springs,
substantially to the effect that:
(A) Dundee is a corporation incorporated, validly
existing and in good standing under the laws of the State of
Georgia, and has the corporate power and authority to own its
properties and assets and to conduct its business as it is
described in the Registration Statement.
(B) The authorized capital stock of Dundee
consists of 200,000 Dundee Shares. As of the date of such
opinion, there are 46,728 Dundee Shares issued and
outstanding. Dundee owns all of the outstanding shares of
capital stock of its Subsidiaries.
(C) Dundee has the corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated on the part of Dundee. The
Agreement has been duly adopted by the Board of Directors of
Dundee and duly approved by its shareholders, duly executed
and delivered by Dundee, and is a valid and binding agreement
of Dundee enforceable in accordance with its terms, subject
to: (i) bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting creditors' rights generally; and
(ii) general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at
law, provided that no opinion is expressed with respect to the
enforceability of Sections 4.6, 6.2 or 6.4.
(D) Neither the execution nor delivery by Dundee
of this Agreement nor the performance of its obligations
hereunder will (with the passage of time or the giving of
notice or both): (i) constitute a violation of, constitute a
default or require any payment under, permit a termination of,
or result in the creation or imposition of any security
interest, lien or other encumbrance or adverse claim against,
or upon any of the property of, Dundee or any of its
Subsidiaries under (I) any term or provision of the Articles
of Incorporation or Bylaws of Dundee, (II) any contract,
agreement, commitment, undertaking, arrangement, or
understanding (including without limitation those imposing any
rights of first refusal or transfer restrictions) to which
Dundee or any of its Subsidiaries is a party or bound or to
<PAGE> 46
which any of its properties is subject, that is listed on
Schedule 3.1(n) or that is known to such counsel, (III) any
permit, judgment, decree or order of any Governmental Entity
that is listed on Schedule 3.1(e) or that is known to such
counsel or (IV) any applicable law which in the experience of
such counsel is normally applicable to transactions of the
type contemplated by this Agreement; or (ii) create or cause
the acceleration of the maturity of, any indebtedness,
obligation, or liability of Dundee that is listed on Schedule
3.1(n) or that is known to such counsel.
(E) Except for the filing of the Certificate of
Merger with the Secretary of State of Georgia, each consent,
authorization, order and approval of, and filing and
registration with, any Governmental Entity required to be made
or obtained by Dundee for the execution and delivery of this
Agreement and the other documents and agreements contemplated
hereby and the consummation of the transactions contemplated
by this Agreement have been made or obtained.
(F) The Proxy Statement sent by Dundee to its
shareholders for purposes of the Dundee Shareholders Meeting
held pursuant to Section 5.2 of this Agreement complied as to
form in all material respects with the requirements of Georgia
law.
(G) The Shareholders of Dundee have duly approved
or ratified the matters described in Section 4.2(b)(i) and
(ii) and a disinterested committee of the Board of Directors
of Dundee has duly authorized and approved the payments to
officers of Dundee as set forth on Schedule 4.1(b)(viii)
pursuant to Section 14-2-862 of the Georgia Business
Corporation Code.
(H) The Directors of Dundee have taken action with
respect to the Dundee Mills Supplemental Executive Retirement
Plan that has the effect of preventing a Change in Control (as
defined in Section 1.5 of such plan) from being considered to
have occurred by reason of the Merger.
(I) Upon the filing of the Certificate of Merger
with the Secretary of State of Georgia in accordance with
Section 1.3 of the Agreement, the Merger shall become
effective in accordance with the GBCC;
<PAGE> 47
(J) Each of Dundee's Subsidiaries listed on
Schedule 3.1(f) is a corporation incorporated, validly
existing under the laws of its jurisdiction of incorporation
and has the corporate power and authority to own all of its
properties and assets and to carry on its business as it is
described in the Proxy Statement.
(ii) Springs and Subcorp shall have received confirmation,
dated as of the Effective Time, from King & Spalding,
substantially to the effect that:
(A) Such counsel has participated in the
preparation and review of the Registration Statement and the
Proxy Statement. From time to time such counsel has had
discussions with officers, directors and employees of Dundee
and the independent accountants who examined certain
consolidated financial statements of Dundee and its
Subsidiaries and, based thereon, no facts have come to such
counsel's attention which lead such counsel to believe that
the Registration Statement or the Proxy Statement (except for
the financial statements, schedules and other financial and
statistical information included therein, as to which such
counsel need express no opinion) or any amendment or
supplement thereto, at the time they were mailed to the
shareholders of Dundee and at the time of the Dundee
Shareholders Meeting, contained any untrue statement of a
material fact regarding Dundee and its Subsidiaries or omitted
to state a material fact regarding Dundee and its Subsidiaries
required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under
which they were made, not misleading. Such counsel has not,
however, independently verified, is not passing upon, and does
not assume any responsibility for the accuracy, completeness
or fairness of the statements contained in the Registration
Statement and the Proxy Statement;
(B) To the knowledge of such counsel there is no
litigation or other proceeding against Dundee or any its
Subsidiaries, or its properties and assets, pending or overtly
threatened by a written communication to Dundee, that would be
required to be disclosed pursuant to the requirements of Item
103 of Regulation S-K if Dundee were subject thereto.
Such opinion may be limited to the laws of the State of Georgia
and the federal laws of the United States of
<PAGE> 48
America and, except as set forth in Section 6.2(f)(i)(E), may
exclude the applicability and effect of any antitrust and unfair
competition laws. In rendering such opinions such counsel may
rely upon opinions of other counsel and may rely upon certificates
of public officials and officers of Dundee as to factual matters
and shall be under no obligation to make any independent
investigation as to factual matters.
(g) LETTERS FROM ACCOUNTANTS. Springs shall have received the
letters of Ernst & Young contemplated by Section 4.15.
(h) CERTAIN ANTITRUST MATTERS. No proceeding shall be pending or
threatened with respect to the transactions hereunder and no order,
decree or judgement shall have been entered or issued, which, in any
such case, would require any divestiture by Springs or Dundee or any
of Springs' or Dundee's Subsidiaries of any shares of capital stock or
of any business, properties or assets of Springs or Dundee or any of
Dundee's or Springs' Subsidiaries, or the imposition of any material
limitation on the ability of Springs to conduct its business or to own
or exercise control of such stock, business, properties or assets.
(i) SERP DETERMINATION. The Board of Directors of Dundee shall
have determined that, for purposes of the Dundee Mills Supplemental
Executive Retirement Plan, no Change in Control (as defined in Section
1.5 of such plan) will be considered to have occurred by reason of the
Merger.
(j) APPRAISAL RIGHTS. Appraisal rights under the GBCC shall have
been perfected by holders of not more than eight (8) percent of the
outstanding Dundee Shares.
(k) ADDITIONAL CERTIFICATES, ETC. Dundee shall have furnished to
Springs such additional certificates, opinions and other documents as
Springs may have reasonably requested as to any of the conditions set
forth in Sections 5.1 and 5.2.
(l) CERTAIN SHAREHOLDER ACTION. The shareholders of Dundee shall
have duly approved or ratified the matters described in Section
4.2(b).
(m) FILING DEFICIENCIES. Dundee shall have cured all deficiences
with respect to the filing of required forms or documents and
satisfied all related obligations (including late fees or penalties)
with respect to the HSR Act and all Dundee pension plans, all at no
material expense to Dundee.
(n) SHAREHOLDER LOANS. All of the loans made by Dundee to Dundee
Shareholders set forth on Schedule 5.2(n) shall have
<PAGE> 49
been repaid in full with interest in accordance with their terms.
(o) IDB FINANCINGS. Dundee and its counsel shall have taken all
action necessary to preserve the tax exempt status of the Industrial
Revene Bonds set forth on Schedule 3.1(e).
5.3 CONDITIONS TO OBLIGATIONS OF DUNDEE. Consummation of the Merger
is subject to the fulfillment to the reasonable satisfaction of Dundee, prior
to or at the Effective Time, of each of the following conditions:
(a) CONSENTS, AUTHORIZATIONS, ETC. All consents, authorizations,
orders and approvals of, and filings and registrations with, any
Governmental Entity, (other than the filing of the Certificate of
Merger with the Secretary of State of Georgia) which are required for
or in connection with the execution and delivery of this Agreement by
Springs and SubCorp and the consummation by Springs and SubCorp of the
transactions contemplated hereby shall have been obtained or made.
(b) INJUNCTION, ETC. The consummation of the Merger will not
violate the provisions of any injunction, order, judgment, decree, law
or regulation applicable or effective with respect to Dundee or its
officers or directors.
(c) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Springs and Subcorp contained in this Agreement shall
have been true and correct in all respects at the date hereof and
shall also be true and correct in all respects at and as of the
Effective Time, except for changes contemplated in this Agreement,
with the same force and effect as if made at and as of the Effective
Time or except as such representations and warranties by their terms
relate only to periods of time prior to the Effective Time or except
where the failure of any representation or warranty to be correct
would not have a material adverse effect on the ability of Springs to
consummate the Merger or would not have a material adverse effect on
the consolidated assets, liabilities, financial condition, results of
operation, business or prospects of Springs and its subsidiaries,
taken as a whole; and Springs shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the
Effective Time.
(d) SPRINGS SHARES. The Springs Shares issued to the shareholders
of Dundee pursuant to the Merger shall, upon consummation of the
Merger, be validly authorized and issued, fully paid and
nonassessable.
<PAGE> 50
(e) CERTIFICATE. Springs shall have delivered to Dundee a
certificate, dated as of the Effective Time, of the Chief Executive
Officer or a senior executive officer of Springs to the effect that
(i) he is familiar with the provisions of this Agreement and (ii) to
the best of his knowledge the conditions specified in paragraph (c) of
this Section 5.3 have been satisfied.
(f) OPINION AND CONFIRMATION OF SPRINGS'S AND SUBCORP'S COUNSEL.
(i) Dundee shall have received an opinion, dated as of
the Effective Time, of Sutherland, Asbill & Brennan, counsel to
Springs and Subcorp, in form and substance and with such
exceptions and limitations as shall be reasonably satisfactory to
Dundee, substantially to the effect that:
(A) Springs is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of South Carolina and has the corporate power and
authority to own its properties and assets and to conduct its
business as it is described in the Registration Statement.
(B) SubCorp is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Georgia and has corporate power and authority to own
its properties and assets and to carry on its business as it
is described in the Registration Statement.
(C) The authorized capital stock of Springs
consists of 40,000,000 Springs Shares, 20,000,000 shares of
Class B Common Stock and 1,000,000 shares of Springs Preferred
Stock. As of the date of such opinion there are _____________
Springs Shares, ____ shares of Springs Class B shares and
_____ shares of Preferred Stock issued and outstanding. The
issued and outstanding Springs Shares are duly authorized,
validly issued, fully paid and non-assessable.
(D) Each of Springs and Subcorp has the corporate
power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated on the part of
Springs and SubCorp. Each of Springs and Subcorp has taken
all necessary corporate action to authorize the execution and
delivery of this Agreement and the consummation by it of the
transactions contemplated hereby. The Agreement has been duly
adopted by the respective Boards of Directors of Springs and
SubCorp, executed
<PAGE> 51
and delivered by each of Springs and Subcorp and is a valid
and binding agreement of Springs and SubCorp and enforceable
in accordance with its terms, subject to (i) bankruptcy,
insolvency, reorganization, moratorium, or other similar laws
affecting creditors' rights generally; and (ii) general
principles of equity, regardless of whether enforceability is
considered in a proceeding in equity or at law, provided that
no opinion is expressed with respect to the enforceability of
Sections 4.6, 6.2 or 6.4.
(E) Except for the filing of the Certificate of
Merger with the Secretary of State of Georgia, each consent,
authorization, order and approval of, and filing and
registration with, any Governmental Entity required to be made
or obtained by each of Springs and Subcorp for the execution
and delivery of this Agreement and the other documents and
agreements contemplated hereby and the consummation of the
transactions contemplated by this Agreement have been made or
obtained.
(F) The Springs Shares issued to the shareholders
of Dundee shall, upon consummation of the Merger, be validly
authorized and issued, fully paid and nonassessable.
(G) Neither the execution nor delivery of this
Agreement by each of Springs and Subcorp and the performance
by Springs and Subcorp of their respective obligations
hereunder will constitute a violation of (i) any term or
provision of the respective Articles of Incorporation or
Bylaws of Springs or SubCorp, (ii) any permit, judgment,
decree or order of any Governmental Entity known to such
counsel or (iii) any applicable law which in such counsel's
experience is normally applicable to transactions of the type
contemplated by the this Agreement.
(H) The Registration Statement with respect to
the distribution of Springs Shares to the shareholders of
Dundee pursuant to this Agreement complied as to form in all
material respects with the requirements of the federal
securities laws.
(I) Upon the filing of the Certificate of Merger
with the Secretary of State of Georgia in accordance with
Section 1.3 of this Agreement, the Merger shall become
effective in accordance with the GBCC.
<PAGE> 52
(ii) Dundee shall have received confirmation, dated as of the
Effective Time, from Sutherland, Asbill & Brennan, substantially
to the effect that:
(A) Such counsel has participated in the
preparation and review of the Registration Statement and the
Proxy Statement. From time to time such counsel has had
discussions with officers, directors and employees of Springs
and the independent accountants who examined certain financial
statements of Springs and its Subsidiaries and, based thereon,
no facts have come to such counsel's attention which leads
such counsel to believe that the Registration Statement or
Proxy Statement (except for the financial statements,
schedules and other financial and statistical information
included therein, as to which such counsel need express no
opinion) or any amendment or supplement thereto contained, at
the time they were mailed to the holders of Dundee Shares and
at the time of the Dundee Shareholders Meeting, any untrue
statement of a material fact regarding Springs or omitted to
state a material fact regarding Springs required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Such counsel has not, however, independently
verified, and is not passing upon, and does not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained the Registration Statement and the
Proxy Statement.
(B) The Registration Statement has become
effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement has
been issued and insofar, as such counsel knows, no proceeding
for that purpose has been instituted or is pending or
contemplated.
Such opinion may be limited to the laws of the State of Georgia,
the corporation law of the State of South Carolina and the federal
laws of the United States of America and, except as set forth in
Section 5.3(f)(i)(E), may exclude the applicability and effect of
any antitrust and unfair competition laws. In rendering such
opinions such counsel may rely upon opinions of C. Powers Dorsett,
General Counsel of Springs, and other counsel and may rely upon
certificates of public officials and officers of Springs, SubCorp
or any of Springs's other Subsidiaries as to factual matters and
shall be under no
<PAGE> 53
obligation to make any independent investigation as to factual
matters.
(g) LETTERS FROM ACCOUNTANTS. Dundee shall have received the
letters of Deloitte & Touche contemplated by Section 4.15.
(h) TAX ADVICE. Dundee shall not have been advised by King &
Spalding that in its opinion the Merger shall not be treated as a
tax-free reorganization under the applicable provisions of the Code to
the extent the Merger Consideration consists of Springs Shares.
(i) INVESTMENT BANKER'S OPINION. The Robinson-Humphrey Company,
Inc. shall have delivered to Dundee its written opinion, dated
approximately the date of mailing of the Proxy Statement, that the
consideration to be received by the holders of the Dundee Shares
pursuant to the Merger is fair to such holders from a financial point
of view and shall have consented to the inclusion of a copy of such
opinion in the Proxy Statement.
(j) ADDITIONAL CERTIFICATES, ETC. Springs shall have furnished to
Dundee such additional certificates, opinions and other documents as
Dundee may have reasonably requested as to any of the conditions set
forth in Sections 5.1 and 5.3.
ARTICLE 6
TERMINATION AND ABANDONMENT
6.1 TERMINATION AND ABANDONMENT. This Agreement and the Merger may be
terminated and abandoned at any time prior to the Effective Time:
(a) By mutual action of the Board of Directors of Springs and
Dundee, whether before or after any action by shareholders.
(b) By Springs:
(i) if any event shall have occurred as a result of which
any condition set forth in Section 5.2 is no longer capable of
being satisfied; or
(ii) if there has been a breach by Dundee of any
representation or warranty contained in this Agreement which would
have or would be reasonably likely to have a material adverse
effect on the assets, liabilities, financial condition, results of
operations, business or prospects of Dundee and its Subsidiaries
taken as a
<PAGE> 54
whole, or there has been a material breach of any of the covenants
or agreements set forth in this Agreement on the part of Dundee,
which breach is not curable, or, if curable, is not cured within
30 days after written notice of such breach is given by Springs to
Dundee.
(c) By Springs in the event that:
(i) Dundee (or its Board of Directors) shall have authorized,
recommended, proposed or publicly announced its intention to enter
into a Competing Transaction which has not been consented to in
writing by Springs;
(ii) The Board of Directors of Dundee shall have withdrawn or
materially modified its authorization, approval or recommendation
to the holders of Dundee Shares with respect to the Merger or this
Agreement in a manner adverse to Springs or shall have failed to
make such favorable recommendation; or
(iii) Any person, entity or "group" (as that term is used in
Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) (other than Springs or any of its
affiliates) shall have (A) commenced or publicly proposed to
commence a tender offer or exchange offer for at least 15 percent
of the then total outstanding Dundee Shares, (B) acquired more
than 15 percent of the then total outstanding Dundee Shares or (C)
solicited and received proxies or consents sufficient to permit it
to elect directors nominated by it to a majority of the members of
Dundee's Board of Directors or to block approval of the Merger and
the transactions contemplated by this Agreement by the holders of
Dundee Shares.
(d) By Dundee:
(i) if any event shall have occurred as a result of which any
condition set forth in Section 5.3 is no longer capable of being
satisfied.
(ii) if there has been a breach by Springs or SubCorp of any
representation or warranty contained in this Agreement which would
have or would be reasonably likely to have a material adverse
effect on the ability of Springs or SubCorp to consummate the
Merger, or there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of
Springs or SubCorp, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such breach is
given by Dundee to Springs.
<PAGE> 55
(e) By Springs or Dundee if there shall have occurred (i) any
general suspension of, or limitation on, trading in securities
generally on the NYSE continuing for a period of 15 days, or (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States continuing for a period of 15
days.
(f) By either Springs or Dundee if (i) any event shall have
occurred as a result of which any condition set forth in Section 5.1
is no longer capable of being satisfied or (ii) the Merger shall not
have been consummated by July 31, 1995; provided, however, that the
terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner which proximately
contributed to the failure of any such condition to be satisfied or
the failure to consummate the Merger.
6.2 SPECIFIC PERFORMANCE. The parties acknowledge that the rights
of each party to consummate the transactions contemplated hereby are
special, unique, and of extraordinary character, and that, in the event that
either violates or fails and refuses to perform any covenant made by it herein,
the other party or parties will be without adequate remedy at law. Each party
agrees, therefore, that, in the event that it violates or fails and refuses to
perform any covenant made by it herein, the other party or parties so long as
it or they are not in breach hereof, may, in addition to any remedies at law,
institute and prosecute an action in a court of competent jurisdiction to
enforce specific performance of such covenant or seek any other equitable
relief.
6.3 RIGHTS AND OBLIGATIONS UPON TERMINATION. If this Agreement is
terminated and abandoned as provided herein, each party will redeliver all
documents, work papers, and other materials of any party relating to the
transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same, except to the extent
previously delivered to third parties in connection with the transactions
contemplated hereby, and all information received by any party hereto with
respect to the business of any other party shall not at any time be used for
the advantage of, or disclosed to third parties by, such party to the detriment
of the party furnishing such information; provided, however that this Section
6.3 shall not apply to any documents, work papers, material, or information
which is a matter of public knowledge or which heretofore has been or hereafter
is published in any publication for public distribution or filed as public
information with any governmental agency.
6.4 CERTAIN FEES AND EXPENSES. Dundee acknowledges that Springs has
spent, and will be required to spend, substantial time and effort in examining
the business, properties, affairs, financial condition and prospects of Dundee
and its Subsidiaries, and has incurred, and will continue to incur, substantial
fees and
<PAGE> 56
expenses in connection with such examination, the preparation of this Agreement
and the accomplishment of the transactions contemplated hereunder, and will be
unable to evaluate and, possibly, make investments in or acquire other entities
due to the limited number of personnel available for such purpose and the
constraints of time. Therefore, to induce Springs to enter this Agreement:
(a) EXPENSES. In the event that Springs terminates this Agreement
pursuant to Section 6.1 (b) by reason of the failure to meet the
condition of Section 5.2(c) due to Dundee's knowing and intentional
misrepresentation or knowing and intentional breach of warranty or
breach of any covenant or agreement, then Dundee shall pay Springs on
demand, in same day funds, the Expenses. For purposes of this Section
6.4, "Expenses" shall include all reasonable out-of-pocket expenses
and fees (including, without limitation, fees and expenses payable to
all investment banking firms and their respective agents and counsel,
and all fees of counsel, accountants, experts and consultants to
Springs) actually incurred by Springs or on its behalf in connection
with the Merger and all transactions contemplated by this Agreement;
and
(b) FEE. If this Agreement is terminated pursuant to:
(i) Section 6.1(b) by reason of the failure to meet the
condition of Section 5.2(c) due to Dundee's knowing and
intentional misrepresentation or knowing and intentional breach of
warranty or breach of any covenant or agreement and (A) Dundee
shall have had contacts about or entered into negotiations
relating to a Competing Transaction during the period from the
date of this Agreement through the date of termination of this
Agreement; and (B) within one year after the date of such
termination a Competing Transaction shall have been consummated
involving a person with whom Dundee has had such negotiations or
contacts;
(ii) Section 6.1(f) because this Agreement does not receive
the requisite vote of the holders of Dundee Shares and at the time
of such vote, there existed a Competing Transaction; or
(iii) Section 6.1(c)(i) or (ii).
then Dundee shall pay to Springs in addition to the Expenses a Fee in
the amount of three million dollars ($3,000,000) (the "Fee"), not as a
penalty but as full and complete liquidated damages; provided,
however, that no amount shall be paid pursuant to this Section 6.4(b)
if Springs shall be in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement. The
Fee
<PAGE> 57
shall be payable to Springs notwithstanding that any action taken by
the Board of Directors of Dundee which may give rise to the obligation
to pay the Fee may have been taken in accordance with the fiduciary
duties of the Board of Directors.
(c) PAYMENT. Any payment required pursuant to this Section 6.4
shall be made as promptly as practicable, but in no event later than
five business days after termination of this Agreement and shall be
made by wire transfer of immediately available funds to an account
designated by the Springs; provided, however, that any payment
required pursuant to subsection (b)(i) of this Section 6.4 shall be
made as promptly as practicable, but in no event later than five
business days after the occurrence of the Competing Transaction. In
the event that Springs is entitled to the Expenses or the Fee, Dundee
shall also pay to Springs interest at the rate of 8 1/2% per year on
any amounts that are not paid when due, plus all costs and expenses in
connection with or arising out of the enforcement of the obligation of
Dundee to pay the Expenses, the Fee or such interest.
(d) EFFECT OF PAYMENT. Except as provided in Section 6.5, upon
payment of the Expenses and, if applicable, the Fee, this Agreement
shall terminate with no further liability of Dundee or Springs at law
or equity resulting therefrom.
6.5 EFFECT OF TERMINATION. In the event of a termination and
abandonment of this Agreement pursuant to Section 6.1 above, this Agreement
shall forthwith become void and have no further effect, without any liability
on the part of any party hereto or its respective officers, directors or
stockholders, other than the provisions of Section 4.4, 4.5, 4.11, 6.3, 6.4 and
this Section 6.5. Notwithstanding the foregoing, nothing contained in this
Section 6.5 shall relieve any party from liability for any breach of this
Agreement, and any such termination shall be without prejudice to the rights of
any party hereto arising out of the willful breach by any other party of any
covenant or agreement contained in this Agreement.
ARTICLE 7
GENERAL PROVISIONS
7.1 WAIVER OF CERTAIN CONDITIONS. Any party may, at its option,
waive in writing any or all of the conditions herein contained to which its
obligations hereunder are subject, except that the conditions contained in
Section 5.1, Section 5.2(a) (with respect to consents and authorizations,
orders and approvals of, and filings and registrations with, any Governmental
Entity) and
<PAGE> 58
- -(b) (first sentence) and Section 5.3(a) and -(b) may not be so waived.
7.2 NOTICES. All notices and other communications under this
Agreement shall be in writing and may be given by any of the following methods:
(i) personal delivery; (ii) facsimile transmission; (iii) registered or
certified mail, postage prepaid, return receipt requested; or (iv) overnight
delivery service requiring acknowledgment of receipt. Notices shall be sent to
the appropriate party at its address or facsimile number given below (or at
such other address or facsimile number for such party as shall be specified by
notice given hereunder):
If to Springs and any SubCorp, to:
Springs Industries, Inc.
205 North White Street
P. O. Box 70
Fort Mill, S.C. 29715
Fax No. 803-547-3766
Attention: Walter Y. Elisha
Chairman of the Board
and Chief Executive Officer
and
C. Powers Dorsett
Vice President/General Counsel
and Secretary
with a copy to:
Sutherland, Asbill & Brennan
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Fax No. (404) 853-8806
Attention: George L. Cohen
If Dundee, to:
Dundee Mills, Incorporated
P. O. Box E
Griffin, Georgia 30224-0199
Fax No: (404) 412-5656
Attention: John T. Newton
Chairman
<PAGE> 59
with a copy to:
King & Spalding
42nd Floor
191 Peachtree Street, N.E.
Fax No: (404) 572-5146
Attention: Edward J. Hawie
All such notices and communications shall be deemed received upon (i) actual
receipt thereof by the addressee, (ii) actual delivery thereof to the
appropriate address as evidenced by an acknowledged receipt, or (iii) in the
case of a facsimile transmission, upon transmission thereof by the sender and
telephonic confirmation of receipt. In the case of notices sent by facsimile
transmission, the sender shall contemporaneously mail a copy of the notice to
the addressee at the address provided for above. However, such mailing shall
in no way alter the time at which the facsimile notice is deemed received.
7.3 TABLE OF CONTENTS; HEADINGS. The Table of Contents, cross
reference pages and headings contained herein are for convenience of reference
only, do not constitute a part of this Agreement, and shall not be deemed to
limit or affect any of the provisions hereof.
7.4 VARIATION AND AMENDMENT. Before or after the approval of this
Agreement by the holders of Dundee Shares, this Agreement may be varied or
amended at any time without action by the holders of Dundee Shares by action of
the respective Boards of Directors of Dundee, Springs and Subcorp; provided,
however, that any variance or amendment made after approval of the Merger by
the holders of Dundee Shares that (i) reduces the Merger Consideration or
changes the form of the Merger Consideration or (ii) changes any of the terms
and conditions of this Agreement if such change would adversely affect the
holders of Dundee Shares shall be subject to the further approval of the
holders of Dundee Shares. Any variation, modification or amendment to this
Agreement must be made in writing and executed by each of the parties hereto.
7.5 NO SURVIVAL OF REPRESENTATIONS OR WARRANTIES. None of the
representations or warranties made in Article 3 of this Agreement shall survive
the Effective Time.
7.6 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement shall be settled by arbitration in accordance with
the then-prevailing Commercial Arbitration Rules of the American Arbitration
Association. Such arbitration shall be held in Atlanta, Georgia before a panel
of three (3) arbitrators, one selected by Springs and SubCorp, one selected by
Dundee and the third selected by mutual agreement of the first two arbitrators.
Each arbitrator shall be independent
<PAGE> 60
and impartial. Judgment upon any award rendered by the arbitrators may be
entered into any court of competent jurisdiction. The determination of which
party (or combination of them) bears the costs and expenses incurred, including
reasonable attorneys fees, in connection with any such arbitration proceeding
shall be determined by the arbitrators.
7.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law of public
policy, all other terms and provisions of this Agreement will nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated by this Agreement are consummated to the
extent possible.
7.8 WAIVER. The failure of any party hereto at any time or times to
require performance of any provision hereof shall in no manner affect the right
to enforce the same. No waiver by any party of any condition, or the breach of
any term, provision, warranty, representation, agreement or covenant contained
in this Agreement or the other agreements contemplated hereby, whether by
conduct or otherwise, in any one or more instances shall be deemed or construed
as a further or continuing waiver of any such condition or breach or a waiver
of any other condition or of the breach of any other term, provision, warranty,
representation, agreement or covenant herein or therein contained.
7.9 NO THIRD PARTY BENEFICIARIES; ASSIGNMENT. This Agreement shall
inure to the benefit of the parties and their respective successors and
permitted assignees. Except as set forth in Sections 4.10, 4.13, 4.14 and
4.17, nothing in this Agreement shall create or be deemed to create any third
party beneficiary rights in any person or entity, including, without
limitation, employees not a party to this Agreement. Except for assignments to
wholly-owned subsidiaries (direct or indirect) of Springs, in which event
Springs shall remain liable for the performance of this Agreement, no transfer
or assignment (including by operation of law) of this Agreement or of any
rights or obligations under this Agreement may be made by any party without the
prior written consent of the other parties and any attempted transfer or
assignment without that required consent shall be void. No transfer or
assignment by a party of its rights under this Agreement shall relieve it of
any of its obligations to the other parties under this Agreement.
<PAGE> 61
7.10 TIME OF THE ESSENCE; COMPUTATION OF TIME. Time is of the
essence of each and every provision of this Agreement. Whenever the last day
for the exercise of any right or the discharge of any duty under this Agreement
shall fall upon Saturday, Sunday or a public or legal holiday, the party having
such right or duty shall have until 5:00 p.m. Atlanta, Georgia time on the next
succeeding regular business day to exercise such right or to discharge such
duty.
7.11 COUNTERPARTS. This Agreement may be executed by each party upon
a separate copy, and in such case one counterpart of this Agreement shall
consist of enough of such copies to reflect the signatures of all of the
parties. This Agreement may be executed in two or more counterparts, each of
which shall be an original, and each of which shall constitute one and the same
agreement. Any party may deliver an executed copy of this Agreement and of any
documents contemplated hereby by facsimile transmission to another party and
such delivery shall have the same force and effect as any other delivery of a
manually signed copy of this Agreement or of such other documents.
7.12 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia, without giving
effect to the conflicts of law principles thereof.
7.13 ENTIRE AGREEMENT. This Agreement (with its Schedules) together
with the Confidentiality Agreement, contain, and is intended as, a complete
statement of all the terms of the arrangements among the parties with respect
to the matters provided for, supersedes any previous agreements and
understandings between the parties with respect to those matters and cannot be
changed or terminated orally.
<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, and their corporate seals affixed, as of the date first above
written.
DUNDEE MILLS, INCORPORATED
<TABLE>
<S> <C>
[Corporate Seal]
By: /s/John T. Newton
-------------------------------
Attest:
/s/Douglas R. Tingle
- ------------------------------
, Secretary
SPRINGS INDUSTRIES, INC.
[Corporate Seal]
By: /s/Walter Y. Elisha
-------------------------------
Attest:
/s/C. Powers Dorsett
- ------------------------------
, Secretary
DUNDEE ACQUISITION CORP.
[Corporate Seal]
By: /s/Thomas P. O'Connor
-------------------------------
Attest:
/s/C. Powers Dorsett
- ------------------------------
, Secretary
</TABLE>
<PAGE> 63
DESCRIPTION OF EXHIBITS
AND SCHEDULES TO AGREEMENT
AND PLAN OF MERGER
LIST OF EXHIBIT
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
A Certificate of Merger with Respect to the Merger of
Dundee Mills, Incorporated with and into Dundee Acquisition
Corp.
B Audited Financial Statements of Dundee Mills, Incorporated
as of August 31, 1993 and August 31, 1994
</TABLE>
LIST OF SCHEDULES
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- -----------
<S> <C>
3.1(a) Jurisdictions in which Qualified to do Business and in
Good Standing
3.1(b) Capitalization
3.1(d) Non-Contravention
3.1(e) Consents
3.1(f) Subsidiaries
3.1(h) Certain Changes or Events Since August 31, 1994
3.1(j) Liabilities Not Disclosed on Balance Sheet of December 31, 1994
3.1(k) Tax Matters
3.1(l) Title to Properties
3.1(m) Material Contracts
3.1(n) Legal Proceedings
3.1(o) Labor Relations
3.1(p) Insider Interests
3.1(q) Intellectual Property
3.1(r) Insurance
3.1(t) Employee and Fringe Benefit Plans
3.1(u) Major Customers
3.1(v) Environmental
4.1 Forbearance by Dundee
4.1(b)(viii) Additional Compensation to Certain Individuals
4.13(b) Employment Matters
5.2(n) Shareholder Loans
</TABLE>
Springs agrees to furnish a copy of any omitted Exhibit or Schedule to the
Commission upon request.
<PAGE> 1
EXHIBIT 20.1
SUMMARY
The following summary is intended to highlight certain information
contained elsewhere in this Proxy Statement and Prospectus. This summary is not
a complete statement of all material information presented elsewhere herein and
is qualified in its entirety by the more detailed information contained
elsewhere herein and in the accompanying exhibits and the documents referred to
herein. Shareholders are urged to read this Proxy Statement and Prospectus and
the accompanying exhibits in their entirety. As used in this Proxy Statement and
Prospectus, the terms "Springs" and "Dundee" refer to such corporations,
respectively, and, except where the context otherwise requires, such entities
and their respective subsidiaries. All information concerning Springs included
in the Proxy Statement and Prospectus has been provided by Springs, and all
information concerning Dundee included in this Proxy Statement and Prospectus
has been provided by Dundee. Unless otherwise defined herein, capitalized terms
used in this summary have the respective meanings ascribed to them elsewhere in
this Proxy Statement and Prospectus.
THE COMPANIES
Springs Industries, Inc., a South Carolina corporation ("Springs") is a
diversified textile and home furnishings manufacturer and finisher, serving a
variety of markets. Springs' principal business is concentrated in two segments.
In its home furnishings business segment, Springs manufactures, purchases for
resale and markets domestic bedding and bath products and decorative window
products. In its specialty fabrics business segment, Springs manufactures,
purchases for resale and markets a broad range of fabrics for industrial,
apparel and specialty end uses. Dundee Acquisition Corp., a Georgia corporation
("Subcorp"), is a newly formed subsidiary of Springs organized for the purpose
of effecting the Merger. The principal executive offices of Springs and Subcorp
are located at 205 North White Street, Fort Mill, South Carolina 29715, and the
telephone number is (803) 547-1500.
Dundee Mills, Incorporated, a Georgia corporation ("Dundee") is a leading
manufacturer of towels, infant and toddler bedding, knitted infant apparel, and
baby and healthcare products. The business of Dundee is divided into three
primary divisions: terry towel products, baby and healthcare products, and
broadcloth fabric. The principal executive offices of Dundee are located at 301
Railroad Avenue, Griffin, Georgia 30224, and the telephone number is (404)
227-5581.
THE MEETING
The Meeting will be held on May 25, 1995 at 10:00 a.m. local time at
Griffin Technical Institute, 501 Varsity Road, Griffin, Georgia 30223. The
purposes of the Meeting are to consider and vote upon a proposal to approve the
Merger Agreement and to consider and vote upon a proposal to approve and ratify
the terms and conditions of issuances by Dundee of Dundee common stock, $25.00
par value ("Dundee Common Stock") during 1990-1994.
Only holders of record of Dundee Common Stock at the close of business on
April 25, 1995 (the "Record Date") will be entitled to notice of and to vote at
the Meeting. At the close of business on such date, there were 46,728 shares of
Dundee Common Stock outstanding. The affirmative votes of a majority of the
outstanding shares of Dundee Common Stock will be necessary for approval of the
Merger Agreement, and for approval and ratification of the terms and conditions
of issuances by Dundee of Dundee Common Stock during 1990-1994. See "The
Meeting."
The directors and one officer of Dundee have entered into agreements (i)
granting proxies to Springs under which Springs may vote certain shares of
Dundee Common Stock owned or controlled by such persons in favor of the Merger
at the Meeting and against any other acquisition of Dundee requiring shareholder
approval, and (ii) granting options at a cash price of $2,525.00 per share to
Springs to purchase such shares exercisable upon the occurrence of certain
events. These agreements cover approximately 23.5% of the outstanding Dundee
Common Stock. See "The Merger -- Option and Proxy Agreements." As of March 1,
1995, executive officers and directors of Dundee and their affiliates held in
the aggregate approximately 25.6% of the then outstanding Dundee Common Stock.
See "Dundee Voting Stock and Principal Holders."
1
<PAGE> 2
Representatives of Dundee's independent auditors, Ernst & Young LLP, will
be present at the Meeting to respond to appropriate questions and will have the
opportunity to make a statement if they desire to do so.
No vote of the shareholders of Springs is required to approve the Merger
Agreement.
REASONS FOR THE MERGER; RECOMMENDATION OF DUNDEE'S BOARD OF DIRECTORS
Dundee's Board of Directors has unanimously approved the Merger and has
determined that the Merger is fair to, and in the best interests of, Dundee and
its shareholders. Accordingly, Dundee's Board of Directors unanimously
recommends that Dundee's shareholders vote FOR approval of the Merger Agreement.
In approving the Merger Agreement, Dundee's directors considered, among other
things, Dundee's financial condition, the financial terms and tax consequences
of the Merger, and a report and opinion from The Robinson-Humphrey Company, Inc.
("Robinson-Humphrey") regarding the fairness, from a financial point of view, of
the consideration to be received in the Merger by the shareholders of Dundee.
See "The Merger -- Dundee Reasons for the Merger; Recommendation of the Board of
Directors of Dundee" and "The Merger -- Opinion of Dundee's Financial Advisor."
THE MERGER
Under the terms of the Merger Agreement, Dundee will merge with Subcorp and
will thus become a wholly-owned subsidiary of Springs. After the Merger, either
Subcorp will remain as the surviving corporation in the Merger or,
alternatively, if 80% or more of the outstanding shares of Dundee Common Stock
is converted into Springs Class A Common Stock, $.25 par value ("Springs Class A
Stock") in the Merger, Springs may, at its option, cause Subcorp to merge with
and into Dundee, thus leaving Dundee as the surviving corporation in the Merger.
Subject to the approval of the shareholders of Dundee and the satisfaction or
waiver of conditions precedent to the Merger but no later than the third
business day thereafter (the "Closing Date"), the Merger will become effective
at the time that a certificate of merger is filed with the Secretary of State of
the State of Georgia, unless a different effective time is specified in the
certificate of merger (the "Effective Time"). If Subcorp is the surviving
corporation in the Merger, at the Effective Time and by reason of the Merger,
Subcorp will change its corporate name from "Dundee Acquisition Corp." to
"Dundee Mills, Incorporated." Assuming that the Merger Agreement is approved at
the Meeting and all other conditions to the Merger are satisfied or waived, it
is anticipated that the Effective Time will occur on the date of the Meeting, or
as soon thereafter as practicable.
MERGER CONSIDERATION
Amount and Payment. At the Effective Time, each outstanding share of
Dundee Common Stock, with certain exceptions, will be converted into and
exchanged for the right to receive an amount of Springs Class A Stock equal in
value to $2,525.00 (subject to variation based on market prices) or cash in that
amount, at the shareholder's election (a "Cash Election") and subject to certain
limitations (such shares of Springs Class A Stock and cash being hereinafter
referred to as the "Merger Consideration"). Dundee shareholders may elect to
convert a portion of their holdings of Dundee Common Stock into cash and the
remaining portion into Springs Class A Stock. In order to assure that the Merger
will qualify as a tax-free reorganization, the maximum number of shares of
Dundee Common Stock that can be converted into the right to receive cash is
23,363 shares of Dundee Common Stock less the total number of shares of Dundee
Common Stock as to which the holders have exercised dissenters' rights with
respect to the Merger pursuant to Georgia law (the "Maximum Number of Cash
Election Shares"). If Cash Elections are properly made with respect to more than
the Maximum Number of Cash Election Shares, a number of shares of Dundee Common
Stock held by holders of ten or more Cash Election shares shall be treated pro
rata as if they have not been subject to Cash Elections, as necessary to reduce
the number of shares as to which Cash Elections have been made to the Maximum
Number of Cash Election Shares (or the most practicable number immediately below
such number). FOR A DISCUSSION OF THE PROCEDURES TO FOLLOW IN MAKING A CASH
ELECTION SEE "THE MERGER -- CASH ELECTION PROCEDURE." A Dundee shareholder who
makes a Cash Election will, subject to certain limitations, fix the amount of
consideration to be received for each share of Dundee Common Stock at $2,525.00
per share. A person making a Cash Election, to the extent cash is received, will
not be subject to the risk of
2
<PAGE> 3
declines in the market value of Springs Class A Stock but will not have the
opportunity to profit from any increases in the market value of Springs Class A
Stock. The Merger is expected to qualify as a reorganization under the Internal
Revenue Code of 1986, as amended, and thus a Dundee shareholder will not be
subject to income taxation on the Merger Consideration if the shareholder's
Merger Consideration is received solely in Springs Class A Common Stock, but
will be subject to income taxation on any gain realized to the extent the Merger
Consideration is received in cash. See "The Merger -- Tax Consequences."
The maximum number of shares of Springs Class A Stock into which shares of
Dundee Common Stock will be converted in the Merger will be 3,000,000 shares. If
Dundee shareholders not making Cash Elections or exercising dissenters' rights
would otherwise be entitled to receive a total of more than 3,000,000 shares of
Springs Class A Stock, a number of shares of Dundee Common Stock held by holders
of ten or more shares shall be treated pro rata as having been subject to Cash
Elections, as necessary to reduce the number of shares of Springs Class A Stock
issued in the Merger to 3,000,000. If the maximum number of shares of Springs
Class A Stock is issued, the 3,000,000 shares would represent approximately
23.5% of the shares of Springs Class A Stock expected to be outstanding after
the Merger, and approximately 14.6% of the aggregate number of shares of Springs
Class A Stock and Springs Class B Common Stock, $.25 par value ("Springs Class B
Stock") expected to be outstanding after the Merger (based on the number of
outstanding shares of Springs Class A Stock and Springs Class B Stock on March
6, 1995 plus the maximum number of shares of Springs Class A Stock to be issued
in the Merger). See "The Merger -- Limitation on Springs Class A Stock." As of
March 6, 1995, these 3,000,000 shares would have represented approximately 6.8%
of the voting power of all outstanding Springs voting securities, or a higher
percentage in voting on certain matters. See "Springs Capital Stock."
The conversion ratio of Dundee Common Stock into Springs Class A Stock will
be based upon the average of the closing prices per share of Springs Class A
Stock on the New York Stock Exchange ("NYSE") for the ten trading days
immediately preceding the date which is three calendar days prior to the Closing
Date (the "Reported Market Price"). If the Reported Market Price is $33.50 or
more but not more than $38.50, the conversion ratio of Dundee Common Stock into
Springs Class A Stock shall be equal to:
$2,525.00
----------
Reported Market Price
and shares of Springs Class A Stock issued in exchange for Dundee Common Stock
will have a market value of $2,525.00 per share of Dundee Common Stock, based on
the Reported Market Price.
If the Reported Market Price of Springs Class A Stock is less than $33.50,
the conversion ratio shall be equal to:
<TABLE>
<C> <S>
$2,525.00 or 75.37313 shares of
- ---------- Springs Class A Stock
$33.50 per share of Dundee Common Stock
</TABLE>
and shares of Springs Class A Stock issued in exchange for Dundee Common Stock
will have a market value less than $2,525.00 per share of Dundee Common Stock,
based on the Reported Market Price.
If the Reported Market Price of Springs Class A Stock exceeds $38.50, the
conversion ratio shall be equal to:
<TABLE>
<C> <S>
$2,525.00 or 65.58442 shares of
- ---------- Springs Class A Stock
$38.50 per share of Dundee Common Stock
</TABLE>
and shares of Springs Class A Stock issued in exchange for Dundee Common Stock
will have a market value greater than $2,525.00 per share of Dundee Common
Stock, based on the Reported Market Price. See "-- Market Prices and Per Share
Merger Consideration."
No fractional shares of Springs Class A Stock will be issued in the Merger.
The value of any such fractional shares will be paid by Springs in cash. See
"The Merger -- Fractional Shares."
3
<PAGE> 4
The maximum number of shares of Dundee Common Stock that can be converted
into the right to receive cash is 23,363 shares, or approximately 50% of the
outstanding shares of Dundee Common Stock. The following chart illustrates the
amount of cash that would be received by a holder of 100 shares of Dundee Common
Stock making a Cash Election for all 100 shares under different Cash Election
scenarios, taking into account the impact of any proration among shareholders if
Cash Elections are made for more than the Maximum Number of Cash Election
Shares:
<TABLE>
<CAPTION>
AS TO HOLDER OF 100 SHARES OF DUNDEE COMMON
PERCENTAGE OF ALL STOCK
SHARES OF ---------------------------------------------
DUNDEE COMMON STOCK CASH ELECTION CASH ELECTION CASH
SUBJECT TO CASH ELECTIONS SHARES SHARES ACCEPTED(A) RECEIVED
- ------------------------- ------------- ------------------ --------
<S> <C> <C> <C>
25%........................................... 100 100 $252,500
50%........................................... 100 100 252,500
75%........................................... 100 66 166,650
100%.......................................... 100 49 123,725
</TABLE>
- ---------------
(a) The Merger Agreement provides that, in the event Cash Elections are made for
more than the Maximum Number of Cash Election Shares, holders of ten or more
Cash Election shares will be subject to proration. This illustration assumes
that a total of 363 shares of Dundee Common Stock subject to Cash Elections
are held by holders making Cash Elections as to fewer than ten shares, and
are thus not subject to proration. Shares as to which Cash Elections are not
accepted because of proration will be converted into Springs Class A Stock
under the terms of the Merger Agreement. The number of shares of Springs
Class A Stock received will vary based upon the Reported Market Price.
If none of the holders of Dundee Common Stock make Cash Elections, some of
the Dundee Common Stock will be converted into cash (because a maximum of
3,000,000 shares of Springs Class A Stock can be issued in the Merger) and the
number of shares of Dundee Common Stock converted into cash will vary based on
the Reported Market Price. For instance, if the Reported Market Price is $38.50
or more, a maximum of 2,999,962 shares of Springs Class A Stock could be issued,
and 986 shares of Dundee Common Stock (or 2.1% of such shares) would be
converted into cash at $2,525 per share (for an aggregate of $2,489,650). If the
Reported Market Price is $33.50 or less, a maximum of 2,999,926 shares of
Springs Class A Stock could be issued, and 6,927 shares of Dundee Common Stock
(or 14.8% of such shares) would be converted into cash at $2,525 per share (for
an aggregate of $17,490,675).
Cash Election Procedure. Dundee shareholders who desire to receive cash
for some or all of their shares of Dundee Common Stock must complete the Cash
Election Form (the "Cash Election Form") contained in the enclosed Letter of
Transmittal (the "Letter of Transmittal"). TO RECEIVE CASH IN EXCHANGE FOR ANY
SHARES OF DUNDEE COMMON STOCK, THE LETTER OF TRANSMITTAL CONTAINING A COMPLETED
CASH ELECTION FORM, ALONG WITH ALL CERTIFICATES REPRESENTING SHARES OF DUNDEE
COMMON STOCK HELD BY THE SHAREHOLDER MAKING THE CASH ELECTION, MUST BE RECEIVED
BY WACHOVIA BANK OF NORTH CAROLINA, N.A. (THE "EXCHANGE AGENT"), PRIOR TO THE
CLOSE OF BUSINESS ON MAY 24, 1995. SEE "THE MERGER -- CASH ELECTION PROCEDURE."
Non-Cash Election Shares. Each holder of record of Dundee Common Stock at
the Effective Time who has not made or has revoked a Cash Election will be
entitled to receive shares of Springs Class A Stock in exchange for such shares
of Dundee Common Stock. See "The Merger -- Exchange of Certificates for Non-Cash
Election Shares."
DISSENTERS' RIGHTS
Each holder of Dundee Common Stock who dissents from the Merger is entitled
to the rights and remedies of dissenting shareholders provided in the applicable
Georgia statutes, subject to compliance with the procedures set forth therein. A
copy of such statutory provisions, as in effect on the date of this Proxy
Statement and Prospectus, is attached to this Proxy Statement and Prospectus as
Exhibit C, and a summary thereof is set forth under "The Meeting -- Rights of
Dissenting Shareholders." Springs will not be obligated to complete the Merger
if holders of more than 8% of the outstanding shares of Dundee Common Stock
exercise their dissenters' rights.
4
<PAGE> 5
CERTAIN TERMS OF THE MERGER
Conditions to the Merger. The obligations of Springs, Dundee and Subcorp
to consummate the Merger are subject to the prior satisfaction of various
conditions, including, among others, (a) approval of the Merger Agreement by
Dundee's shareholders; (b) holders of not more than 8% of the outstanding shares
of Dundee Common Stock having exercised dissenters' rights under Georgia law;
(c) Dundee having taken corporate action to assure that all shares of Dundee
Common Stock issued by Dundee since July 1, 1989 were validly issued, fully paid
and nonassessable and that no preemptive rights exist with respect to such
issuances; (d) Springs' Registration Statement for the Springs Class A Stock to
be issued in the Merger having become effective under the Securities Act and no
stop order having been issued or become pending or threatened; (e) Dundee and
Springs each having received a satisfactory opinion from Sutherland, Asbill &
Brennan, counsel for Springs, as to the tax consequences of the Merger; and (f)
the shares of Springs Class A Stock to be issued in the Merger having been
authorized for listing on the NYSE upon official notice of issuance. In
addition, neither Springs nor Dundee is obligated to complete the Merger unless
certain additional conditions have been satisfied. See "The Merger -- Conditions
to the Merger."
Termination. The Merger Agreement may be terminated prior to the filing of
the certificate of merger in certain circumstances, including (a) by mutual
action of the Springs and Dundee Boards of Directors; (b) by Springs or Dundee
if any of certain conditions to their respective obligations has not been
satisfied or waived (or by its nature cannot be cured or eliminated) prior to
the Closing Date; (c) by Springs or Dundee if any general suspension of, or
limitation on, trading on the NYSE has continued for a period of 15 days or a
bank moratorium in the United States has continued for a period of 15 days; or
(d) if the Merger has not been consummated by July 31, 1995. See "The
Merger -- Effective Time and Termination."
Under certain circumstances, if the Merger Agreement is terminated, Dundee
may be obligated to pay Springs liquidated damages in the amount of $3,000,000
plus Springs' out-of-pocket expenses reasonably incurred in connection with the
Merger. See "The Merger -- Effective Time and Termination."
TAX CONSEQUENCES
No ruling of the Internal Revenue Service is being sought in connection
with the Merger, but it is anticipated that the Merger will not result in a
taxable transaction for a holder of shares of Dundee Common Stock if the
shareholder's Merger Consideration is received solely in the form of Springs
Class A Stock, but the holder will be subject to income taxation on any gain
realized to the extent the Merger Consideration is received in cash. The
parties' obligation to consummate the Merger is subject to receipt of a
satisfactory opinion from Sutherland, Asbill & Brennan as to the federal income
tax consequences to Dundee and its shareholders as described above. See "The
Merger -- Tax Consequences."
COMPARISON OF SHAREHOLDER RIGHTS
If the Merger is consummated, holders of shares of Dundee Common Stock will
become holders of Springs Class A Stock, which will result in their rights as
shareholders being governed by South Carolina law. A discussion of the material
differences between the rights of holders of Dundee Common Stock and holders of
Springs Class A Stock is set forth in "Comparison of Rights of Holders of
Springs Class A Stock and Holders of Dundee Common Stock."
MARKET PRICES AND PER SHARE MERGER CONSIDERATION
Springs Class A Stock is quoted on the NYSE under the symbol "SMI." There
is no public trading market for Dundee Common Stock. The following table shows
the last sale price per share of Springs Class A Stock as reported by the NYSE
(a) on January 12, 1995, the last trading day prior to the announcement of the
letter of intent between Springs and Dundee with respect to the Merger, (b) on
February 6, 1995, the last trading day prior to the announcement of the
execution of the Merger Agreement and (c) on April 24, 1995. The table also
indicates, as of such dates, the market value of the Merger Consideration on an
equivalent per share basis of Dundee Common Stock based on the market value of
Springs Class A Stock on such dates (assuming that the Effective Time occurred
on each date and that the Reported Market Price of Springs
5
<PAGE> 6
Class A Stock used in computing the Merger Consideration and the market value of
Springs Class A Stock were the same on each date). For purposes of comparison,
the table also shows comparable information based on illustrative Reported
Market Prices of Springs Class A Stock ranging from $40.00 per share (above the
Reported Market Price at the top of the "collar" of $38.50) to $32.00 (below the
Reported Market Price at the bottom of the "collar" of $33.50).
<TABLE>
<CAPTION>
EQUIVALENT MARKET VALUE OF
MERGER CONSIDERATION
PER SHARE OF DUNDEE COMMON STOCK
--------------------------------
SPRINGS CLASS A
STOCK
MARKET VALUE --------------------
OF SPRINGS STOCK CASH
CLASS A STOCK SHARES VALUE VALUE
------------- -------- --------- ---------
<S> <C> <C> <C> <C>
Shareholder receiving 100% Springs Class A Stock:
Closing Price on January 12, 1995............ $39.250 65.58442 $2,574.19 n/a
Closing Price on February 6, 1995............ 36.625 68.94198 2,525.00 n/a
Closing Price on April 24, 1995.............. 38.750 65.58442 2,541.40 n/a
Illustrative Price (above collar)............ 40.00 65.58442 2,623.38 n/a
Illustrative Price (maximum collar price).... 38.50 65.58442 2,525.00 n/a
Illustrative Price (middle of collar)........ 35.00 72.14286 2,525.00 n/a
Illustrative Price (minimum collar price).... 33.50 75.37313 2,525.00 n/a
Illustrative Price (below collar)............ 32.00 75.37313 2,411.94 n/a
Shareholder receiving 100% cash:.................. n/a n/a n/a $2,525.00
</TABLE>
DUNDEE SHAREHOLDERS ARE URGED TO OBTAIN CURRENT QUOTES FOR SPRINGS CLASS A
STOCK.
OPINION OF DUNDEE'S FINANCIAL ADVISOR
Robinson-Humphrey has rendered an opinion to Dundee that, based on and
subject to the procedures, matters and limitations described in its opinion and
such other matters as it considers relevant, as of the date of its opinion, the
consideration to be received in the Merger is fair, from a financial point of
view, to the shareholders of Dundee. The opinion of Robinson-Humphrey is
attached as Exhibit B to this Proxy Statement and Prospectus. Dundee
shareholders are urged to read the opinion in its entirety for a description of
the procedures followed, matters considered, and limitations on the review
undertaken therewith. See "The Merger -- Opinion of Dundee's Financial Advisor."
CONFLICTS OF INTEREST
Certain members of Dundee's management and Board of Directors have
interests in the Merger in addition to their interests as shareholders of Dundee
generally. Those interests relate to, among other things, provisions in the
Merger Agreement regarding retention compensation (totalling approximately $2.2
million), continuation of employment, severance benefits (totalling a maximum of
approximately $2.6 million), indemnification, and the condition to the Merger
that Dundee take corporate action to validate issuances of Dundee Common Stock
since July 1, 1989. See "The Merger -- Conflicts of Interest."
GOVERNMENTAL AND REGULATORY REQUIREMENTS
Springs and Dundee are not aware of any governmental or regulatory
requirements for consummation of the Merger other than compliance with
applicable federal and state securities laws and the expiration or the
termination of the waiting periods applicable to the Merger under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the rules and regulations thereunder. Under the HSR Act, certain acquisition
transactions, such as the Merger, may not be consummated unless required
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC")
and the specified waiting period requirements have been satisfied. On February
8, 1995 and March 7, 1995, respectively, Springs and Dundee each filed with
6
<PAGE> 7
the Antitrust Division and the FTC a Notification and Report Form with respect
to the Merger. The FTC granted early termination of the applicable waiting
period for the Merger on March 27, 1995. See "The Merger -- Governmental and
Regulatory Requirements."
RATIFICATION OF CERTAIN ISSUANCES OF DUNDEE COMMON STOCK
The holders of Dundee Common Stock will also act upon a proposal to ratify
issuances of an aggregate of 2,261 shares of Dundee Common Stock at an average
price of $963 per share during 1990-1994. Springs' obligation to consummate the
Merger is conditioned on action by Dundee assuring that such shares were validly
issued, fully paid and nonassessable and that no preemptive rights exist with
respect to the issuance of such shares. A special committee (the "Special
Committee") of the Board of Directors of Dundee has ratified such issuances and
the terms and conditions thereof and has determined that such shares were issued
to officers and employees of Dundee who were afforded an opportunity to purchase
such shares as part of their compensation and that such issuances qualify for an
exemption from preemptive rights for issuances as compensation to officers and
employees if the terms and conditions of the issuances are approved and ratified
by a majority vote of Dundee's shareholders. No member of the Special Committee
obtained any shares in such issuances. The Special Committee has unanimously
approved and ratified the terms and conditions of such sales and issuances and
recommends that Dundee shareholders vote FOR the approval and ratification of
the terms and conditions of such issuances so as to establish that no preemptive
rights exist with respect thereto. Approval and ratification of the terms and
conditions of such issuances will require the affirmative votes of a majority of
the outstanding shares of Dundee Common Stock. See "Ratification of Certain
Issuances of Dundee Common Stock."
7
<PAGE> 8
SELECTED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The following tables set forth selected financial data for Springs and
Dundee. Such information should be read in conjunction with Springs' audited
consolidated financial statements and notes and its Management's Discussion and
Analysis of Financial Condition and Results of Operations incorporated by
reference herein, Dundee's audited financial statements and notes contained
elsewhere herein and the unaudited interim financial information of Dundee and
its Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this Proxy Statement and Prospectus. Information for
Springs and Dundee for each of their fiscal years from 1990 through 1994 is
derived from the Springs and Dundee audited financial statements. Unaudited
interim financial data for Dundee includes all adjustments that Dundee considers
necessary for a fair presentation of the operating results for such interim
periods (all of which were of a normal recurring nature). Results for the
interim periods are not necessarily indicative of results for the full year. See
"Dundee Selected Financial Data."
<TABLE>
<CAPTION>
FOR OR AT THE END OF FISCAL YEARS(A)
------------------------------------------------------------------
1990 1991 1992(B) 1993 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
SPRINGS
STATEMENT OF OPERATIONS DATA:
Net sales..................... $1,877,978 $1,890,406 $1,975,692 $2,022,816 $2,068,911
Net income (loss)............. (6,833)(c) 27,097 44,530 (25,287)(d) 62,227
Earnings (loss) per common
share....................... (.39)(c) 1.53 2.50 (1.42)(d) 3.50
Weighted average number of
common shares............... 17,672 17,710 17,805 17,825 17,793
Dividends per common share:
Class A..................... 1.20 1.20 1.20 1.20 1.20
Class B..................... 1.08 1.08 1.08 1.08 1.08
BALANCE SHEET DATA:
Working capital............... 356,535 329,700 328,189 353,529 373,048
Total assets.................. 1,201,128 1,251,298 1,250,303 1,292,131 1,289,043
Total long-term debt
(excluding current
portion).................... 260,423 287,837 273,551 293,028 265,384
Shareholders' equity.......... 560,914 568,850 588,058 543,193 584,091
</TABLE>
<TABLE>
<CAPTION>
FOR OR AT THE
FOUR MONTHS ENDED
FOR OR AT THE END OF FISCAL YEARS ENDED AUGUST 31, DECEMBER 31,
-------------------------------------------------------------- -------------------------
1990(E) 1991 1992 1993 1994 1993 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
DUNDEE
STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 223,455 $ 242,386 $ 247,728 $ 263,363 $ 266,814 $ 85,107 $ 90,363
Net income (loss)................ 9,697 134 6,452 870 (1,501)(f) (241)(f) 1,065
Earnings (loss) per common
share.......................... 203.66 2.80 137.50 18.60 (32.00)(f) (5.14)(f) 22.77
Weighted average number of common
shares......................... 48 48 47 47 47 47 47
Dividends per common share....... 30.00 30.00 30.00 30.00 30.00 4.00 4.00
BALANCE SHEET DATA:
Working capital.................. 80,199 79,293 93,085 88,424 82,728 84,864 81,251
Total assets..................... 148,194 167,837 186,151 175,562 169,007 171,981 164,942
Total long-term debt (excluding
current portion)............... 13,060 26,615 42,670 28,670 23,715 24,670 19,715
Shareholders' equity............. 121,751 121,417 124,300 123,925 120,736 123,495 121,528
</TABLE>
- ---------------
(a) The fiscal years of Springs end on the Saturday nearest December 31.
Selected Financial Data of Springs includes financial information relating
to certain asset acquisitions accounted for by Springs as purchases from
their dates of acquisition in April 1991, August 1992 and October 1992.
Selected Financial Data of Springs also includes Springs' former subsidiary
Clark-Schwebel Distribution Corp. until the date of its sale in June 1994.
(b) Springs' 1992 fiscal year contained fifty-three weeks.
(c) Includes a $70.0 million charge ($43.9 million after tax, or $2.46 per
share) for restructuring.
(d) Includes a $72.5 million charge, net of income taxes, or $4.07 per share for
the cumulative effect of adoption of SFAS Nos. 106 and 109.
(e) Includes information as to certain acquisitions accounted for as purchases
from their dates of acquisition in January 1990 and May 1990.
(f) Includes a charge of $0.2 million, or $4.12 per share, for the adoption of
SFAS No. 109.
8
<PAGE> 9
SUMMARY PRO FORMA FINANCIAL DATA (UNAUDITED)
The following tables set forth certain unaudited pro forma condensed
combined financial data regarding the financial position and results of
operations of Springs and Dundee upon completion of the Merger, which will be
accounted for as a purchase by Springs in accordance with generally accepted
accounting principles.
This pro forma condensed combined financial data is based on various
assumptions and estimates in arriving at the pro forma adjustments which give
effect to the Merger as if the Merger had occurred as of the beginning of the
period presented or as of the balance sheet date, should be read in conjunction
with the Pro Forma Condensed Combined Financial Data and the notes thereto
included in this Proxy Statement and Prospectus as required by the rules and
regulations of the SEC, and is provided for comparative purposes only. This pro
forma financial information does not purport to be indicative of the results
which actually would have been obtained if the Merger had been effected on the
date indicated or of results which may be obtained in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------
SCENARIO A(A) SCENARIO B(B)
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
SPRINGS AND DUNDEE PRO FORMA
CONDENSED COMBINED (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Net sales......................................................... $ 2,340,981 $ 2,340,981
Net income........................................................ 65,817 63,735
BALANCE SHEET DATA:
Total assets...................................................... 1,456,208 1,456,208
Total long-term debt (excluding current portion).................. 302,587 344,090
Shareholders' equity.............................................. 684,591 643,088
</TABLE>
- ---------------
(a) Scenario A assumes a Reported Market Price of $33.50 and conversion of 100%
of the outstanding shares of Dundee Common Stock into the maximum number of
shares of Springs Class A Stock issuable in the Merger (3,000,000 shares).
(b) Scenario B assumes a Reported Market Price of $38.50 and conversion of 50%
of the outstanding shares of Dundee Common Stock into the minimum number of
shares of Springs Class A Stock issuable in the Merger (1,532,380 shares).
9
<PAGE> 10
COMPARATIVE PER SHARE DATA
The following table sets forth certain data per share of Springs Class A
Stock, per share of Dundee Common Stock and per share pro forma combined after
giving effect to the Merger. For purposes of this presentation, the Dundee
Historical and Pro Forma results for the year ended December 31, 1994 include
the results for Dundee's August 31, 1994 fiscal year with the addition of
results for the period from September 1 through December 31, 1994 and the
deduction of the results for the similar period in 1993. This data should be
read in conjunction with the consolidated financial statements of Springs and
the notes thereto incorporated herein by reference, the financial statements of
Dundee and the notes thereto included herein, and the Pro Forma Condensed
Combined Financial Data and the notes thereto included herein. Equivalent pro
forma combined per share information is calculated by applying an assumed
conversion ratio of (a) under Scenario A, 75.37313 and (b) under Scenario B,
65.58442, shares of Springs Class A Stock for each share of Dundee Common Stock
(based on the minimum and maximum possible Reported Market Price, respectively)
to the pro forma combined per share data such that the equivalent pro forma
combined per share amounts are expressed per share of Dundee Common Stock.
<TABLE>
<CAPTION>
PRO FORMA COMBINED EQUIVALENT PRO FORMA
(PER SPRINGS CLASS A COMBINED
SHARE) (PER DUNDEE SHARE)
-------------------------- -------------------------
SPRINGS DUNDEE SCENARIO SCENARIO SCENARIO SCENARIO
HISTORICAL HISTORICAL A(A) B(B) A(A) B(B)
---------- ---------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
COMPARATIVE PER SHARE DATA:
Earnings (loss) per common
share:
Year ended December 31,
1994...................... $ 3.50 $ (4.14) $3.17 $3.30 $ 238.93 $ 216.43
Dividends per share:
Year ended December 31,
1994...................... 1.20(c) 30.00 1.20(c) 1.20(c) 90.45 78.70
Book value per common share as
of:
December 31, 1994........... 33.20 2,600.75 33.24 33.62 2,505.40 2,204.95
</TABLE>
- ---------------
(a) Scenario A assumes a Reported Market Price of $33.50 and conversion of 100%
of the outstanding shares of Dundee Common Stock into the maximum number of
shares of Springs Class A Stock issuable in the Merger (3,000,000 shares).
(b) Scenario B assumes a Reported Market Price of $38.50 and conversion of 50%
of the outstanding shares of Dundee Common Stock into the minimum number of
shares of Springs Class A Stock issuable in the Merger.
(c) Represents dividends per share of Springs Class A Stock.
10
<PAGE> 11
THE MEETING
GENERAL
This Proxy Statement and Prospectus is being furnished to the holders of
Dundee Common Stock in connection with the solicitation by the Dundee Board of
Directors of proxies for use at the Meeting. At the Meeting, Dundee shareholders
will be asked to consider and vote upon proposals (i) to approve the Merger
Agreement, pursuant to which Dundee will merge with Subcorp, and (ii) to approve
and ratify the terms and conditions of issuances by Dundee of Dundee Common
Stock during 1990-1994 issued as compensation to officers and employees of
Dundee. If the Merger is consummated, each outstanding share of Dundee Common
Stock, with certain exceptions, will be converted into and exchanged for the
right to receive an amount of Springs Class A Stock equal in value to $2,525.00
(subject to variation based on market prices) or cash in that amount, at the
shareholder's election (a "Cash Election") and subject to certain limitations
(such shares of Springs Class A Stock and cash being referred to as the "Merger
Consideration"). The Meeting will be held on May 25, 1995 at 10:00 a.m., local
time, at Griffin Technical Institute, 501 Varsity Road, Griffin, Georgia 30223.
Springs' obligation to consummate the Merger is conditioned upon, among other
things, Dundee shareholder approval of the Merger Agreement, and Dundee
corporate action (including shareholder approval) approving and ratifying the
terms and conditions of issuances by Dundee of Dundee Common Stock during
1990-1994 so as to assure that such shares were validly issued, fully paid and
nonassessable and that no preemptive rights exist with respect to such
issuances, both of which are being submitted to the Dundee shareholders at the
Meeting. See "Ratification of Certain Issuances of Dundee Common Stock."
RECORD DATE AND SHARES ENTITLED TO VOTE
The Board of Directors of Dundee has established the close of business on
April 25, 1995 (the "Record Date") as the date for determining the Dundee
shareholders entitled to notice of and to vote at the Meeting. Only holders of
record of shares of Dundee Common Stock as of the Record Date will be entitled
to vote at the Meeting. As of the Record Date, there were 46,728 shares of
Dundee Common Stock issued and outstanding, held by approximately 290 holders of
record. Holders of record of Dundee Common Stock on the Record Date are entitled
to one vote per share on any matter that may properly come before the Meeting.
VOTE REQUIRED; SECURITY OWNERSHIP OF MANAGEMENT
The presence in person or by proxy of the holders of a majority of the
shares of Dundee Common Stock outstanding as of the Record Date is necessary to
constitute a quorum for the transaction of business at the Meeting. The
affirmative votes of a majority of the outstanding shares of Dundee Common Stock
will be necessary for approval of the Merger Agreement and for approval and
ratification of the terms and conditions of issuances by Dundee of Dundee Common
Stock during 1990-1994. Abstentions and broker non-votes will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum at the Meeting (assuming, with respect to broker non-votes,
that the beneficial owner has granted the nominee discretion to vote on at least
one matter). Abstentions and broker non-votes will not count as either votes for
or against any proposals at the Meeting.
As of the Record Date, the executive officers and directors of Dundee
beneficially owned an aggregate of 11,944 shares of Dundee Common Stock, or
approximately 25.6% of the shares of Dundee Common Stock then outstanding. At
the time that the Merger Agreement was executed, each director and one officer
of Dundee delivered a proxy in favor of Springs authorizing Springs to vote all
shares beneficially owned or controlled by such person in favor of approving the
Merger Agreement. Each executive officer of Dundee has advised Dundee that he
intends to vote his shares for approval of the Merger Agreement, and each
director and executive officer of Dundee has advised Dundee that he intends to
vote his shares for approval and ratification of the terms and conditions of
issuances by Dundee of Dundee Common Stock during 1990-1994.
11
<PAGE> 12
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is enclosed with this Proxy Statement and Prospectus. All
shares of Dundee Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated on such proxies. If no instructions are indicated,
such shares will be voted FOR the approval of the Merger Agreement and FOR
approval and ratification of the terms and conditions of issuances by Dundee of
Dundee Common Stock during 1990-1994, and, in the discretion of the proxy
holder, as to any procedural or other matters that may properly come before the
Meeting. As of the date of this Proxy Statement and Prospectus, Dundee is
unaware of any other matter to be presented at the Meeting.
DUNDEE SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY TO DUNDEE IN THE ENCLOSED POSTAGE-PAID
ENVELOPE, EVEN IF THEY ARE PLANNING TO ATTEND THE MEETING. FAILURE TO RETURN
YOUR PROPERLY EXECUTED PROXY OR TO VOTE AT THE MEETING WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE APPROVAL OF THE MERGER AGREEMENT AND AGAINST THE APPROVAL
AND RATIFICATION OF THE TERMS AND CONDITIONS OF CERTAIN PAST ISSUANCES OF DUNDEE
COMMON STOCK.
Any Dundee shareholder who has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) delivering to the Secretary of Dundee prior to the Meeting
either a written revocation of such proxy or a duly executed proxy bearing a
later date or (ii) attending the Meeting and voting in person, regardless of
whether a proxy has previously been given. A proxy will not be revoked for death
or intervening incapacity of the shareholder executing the proxy unless, before
the vote, notice of such death or incapacity is filed with the Secretary of
Dundee. Presence at the Meeting will not revoke a shareholder's proxy unless the
shareholder votes in person.
Solicitations of proxies will be made by mail, but also may be made by
telephone, telegram or in person by the directors, officers and employees of
Dundee, who will receive no additional compensation for such solicitation, but
may be reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
DUNDEE SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS. DUNDEE STOCK CERTIFICATES SHOULD BE FORWARDED TO WACHOVIA BANK OF
NORTH CAROLINA, N.A. ONLY WITH THE LETTER OF TRANSMITTAL INCLUDED WITH THIS
PROXY STATEMENT AND PROSPECTUS. SEE "THE MERGER -- CASH ELECTION PROCEDURE" AND
"THE MERGER -- EXCHANGE OF CERTIFICATES FOR NON-CASH ELECTION SHARES" FOR
INFORMATION ABOUT RETURNING YOUR SHARE CERTIFICATES.
RIGHTS OF DISSENTING SHAREHOLDERS
Each record holder of Dundee Common Stock is entitled to dissent from the
Merger and obtain payment of the Fair Value of his shares of Dundee Common Stock
pursuant to Article 13 of the Georgia Business Corporation Code (the "GBCC"), a
copy of which is attached hereto as Exhibit C. The term "Fair Value" means the
value of shares of Dundee Common Stock immediately prior to the effectuation of
the Merger, exclusive of any appreciation or depreciation in anticipation of the
Merger, as defined in Article 13 of the GBCC. The Fair Value of the Dundee
Common Stock may be more or less than the consideration that a holder of such
stock would be entitled to receive in the Merger. The following is a summary of
the procedures to be followed by record holders of Dundee Common Stock who wish
to dissent from the Merger.
Pursuant to Section 14-2-1321 of the GBCC, any record holder who wishes to
assert dissenters' rights (i) must deliver to Dundee prior to the shareholders'
vote on the Merger written notice of his intent to demand payment for his shares
if the Merger is effectuated, (ii) must not vote his shares in favor of the
12
<PAGE> 13
Merger, and (iii) must file a payment demand and deposit his shares with Dundee
in accordance with the terms set forth in the notice of approval of the Merger
described below.
Only a holder of record of shares of Dundee Common Stock is entitled to
assert dissenters' rights for the shares of Dundee Common Stock registered in
that holder's name. A record holder who wishes to dissent from the Merger must
dissent with respect to all shares he owns or over which he has power to direct
the vote, except that a record holder who is a nominee for several beneficial
shareholders may dissent with respect to the shares held for one or more
beneficial owners while not exercising such dissenters' rights with respect to
the shares of Dundee Common Stock held for other beneficial owners. In such
case, the notice provided to Dundee by the nominee pursuant to Section 14-2-1321
of the GBCC shall set forth the name and address of each person on whose behalf
the nominee asserts dissenters' rights. SHAREHOLDERS WHO HOLD THEIR SHARES OF
DUNDEE COMMON STOCK IN BROKERAGE ACCOUNTS OR OTHER NOMINEE FORMS AND WHO WISH TO
EXERCISE DISSENTERS' RIGHTS SHOULD CONSULT WITH THEIR BROKERS TO DETERMINE THE
APPROPRIATE PROCEDURES FOR THE MAKING OF DEMAND FOR APPRAISAL BY SUCH NOMINEE.
Any record holder who does not timely and completely comply with the
provisions of Article 13 of the GBCC will be bound by the terms of the Merger
Agreement and will be entitled to receive Springs Class A Stock or cash, or a
combination thereof, as applicable, as provided in the Merger Agreement.
Within ten days of the later of the effectuation of the Merger or receipt
of a payment demand, either Subcorp or Dundee, as the surviving corporation in
the Merger (the "Surviving Corporation"), will give written notice to each
record holder of Dundee Common Stock who has perfected dissenters' rights and
will make a written offer to pay each dissenter a specified price deemed by the
Surviving Corporation to be the Fair Value of such shares, plus accrued
interest. The offer of payment will be accompanied by financial information
concerning Dundee, a statement of the Surviving Corporation's estimate of the
Fair Value and an explanation as to how the interest was calculated. If a
dissenter accepts the Surviving Corporation's offer by written notice within 30
days after the offer or is deemed to have accepted the Surviving Corporation's
offer by failing to respond within 30 days, the Surviving Corporation will pay
the Fair Value within 60 days of the making of such offer or the consummation of
the Merger, whichever is later. Upon payment of the agreed value, the dissenter
shall cease to have any interest in such shares of Dundee Common Stock.
If the Surviving Corporation fails to make such written offer, or if it
makes the offer and a dissenter believes that the amount offered is less than
the Fair Value of his shares or that the interest due is incorrectly calculated,
the dissenter may notify the Surviving Corporation in writing of his own
estimate of the Fair Value of his shares and amount of interest due.
If the Surviving Corporation and a dissenting record holder do not agree to
the Fair Value of such dissenter's shares, the Surviving Corporation may file a
petition in the Superior Court of Spalding County, Georgia to determine the Fair
Value of the shares and accrued interest within 60 days of receiving the payment
demand. If the Surviving Corporation fails to commence the proceeding within the
60-day period, it must pay the dissenter the amount demanded. Each record holder
whose demand remains unsettled shall be made a party to the proceeding and shall
be entitled to judgment for the amount which the court finds to be the Fair
Value of his shares, plus interest to the date of judgment. The Court may
appoint one or more appraisers to receive evidence and recommend a decision on
the question of Fair Value.
The Court shall determine all costs of the proceeding, including the
compensation of appraisers appointed by the Court, but not including fees and
expenses of attorneys and experts of the parties. Such costs shall be assessed
against the Surviving Corporation, except that the Court may assess the costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds any dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment. The court also may assess the fees and
expenses of attorneys and experts for the parties in amounts the court finds
equitable, (i) against the Surviving Corporation, if the court finds the
Surviving Corporation did not substantially comply with the requirements of the
GBCC, or (ii) against either the Surviving Corporation or a dissenter, in favor
of any other party, if the court finds such party acted arbitrarily, vexatiously
or not in good faith with respect to the rights provided by Article 13 of the
GBCC. If the court finds that the services of attorneys for any dissenter
substantially benefitted other similarly situated dissenters, and that the fees
for such services should not be assessed against
13
<PAGE> 14
the Surviving Corporation, then the court may award such attorneys' reasonable
fees to be paid out of the amounts awarded to those dissenters who were
benefitted.
The foregoing does not purport to be a complete statement of the
proceedings to be followed by Dundee shareholders desiring to exercise
dissenters' rights of appraisal. Because exercise of such rights requires strict
adherence to the statutory provisions referred to above, each Dundee shareholder
who may desire to exercise such rights should adhere to the provisions of such
laws and consult with such holder's legal, financial and tax advisors.
Springs will not be required to consummate the Merger if holders of more
than 8% of the outstanding shares of Dundee Common Stock elect to exercise
dissenter's rights pursuant to the GBCC.
Springs shareholders will not have dissenters' rights in connection with
the Merger.
THE MERGER
This section of the Proxy Statement and Prospectus describes certain
aspects of the Merger. It does not purport to be complete and is qualified in
its entirety by reference to the Merger Agreement, which is attached to this
Proxy Statement and Prospectus as Exhibit A and is incorporated herein by
reference. Capitalized terms used herein without definition have the meaning
attributed thereto in the Merger Agreement. Shareholders are urged to read
carefully this Proxy Statement and Prospectus and the Merger Agreement in their
entirety.
BACKGROUND
Since the 1960's, executives of Springs and Dundee have communicated on an
occasional basis about the possibility of a business combination between the two
companies. During the last approximately ten years, Mr. John T. Newton, Chairman
of the Board of Dundee, and Mr. Walter Y. Elisha, Chairman of the Board and
Chief Executive Officer of Springs, have had several informal discussions
concerning possible joint ventures or the acquisition of Dundee by Springs.
During this period, Dundee opted to remain independent.
During 1992, several conversations and meetings occurred between
representatives of Springs and Dundee. On July 24, 1992, Mr. Elisha and Mrs.
Crandall Bowles, Executive Vice President of Springs, met with Mr. J. Henry
Walker, III, President and Chief Executive Officer of Dundee, to discuss a
possible acquisition of Dundee by Springs. On November 17, 1992, Mr. Walker and
Mr. M.J. Yates, Vice President of Dundee, met with Mr. Elisha and Mrs. Bowles
and toured certain of Springs' facilities in South Carolina.
In July 1993, Mr. Elisha contacted Mr. Newton again about the possible
acquisition of Dundee by Springs. On July 19, 1993, Mr. Elisha and Mrs. Bowles
met with Mr. Newton and Mr. Walker in Griffin, Georgia to discuss the potential
acquisition without making a specific proposal. The Board of Directors of Dundee
on July 22, 1993 resolved to decline to enter into formal negotiations with
Springs concerning the sale of Dundee because the Board concluded that Dundee
could successfully compete in the textile industry as an independent towel
manufacturer. In the latter part of 1994, several directors suggested that
Dundee management consider possible alternatives for providing Dundee
shareholders with greater liquidity. See "-- Dundee Reasons for the Merger;
Recommendation of the Board of Directors of Dundee."
On January 3, 1995, Mr. Newton called Mr. Elisha and asked if Springs would
consider acquiring Dundee. On the morning of January 5, Mr. Newton and Mr.
Elisha had a second telephone conversation concerning a possible transaction. On
the afternoon of January 5, Mr. Newton, Mr. David G. Newton, Vice President of
Dundee, Mr. Elisha, Mrs. Bowles, and Mr. J. Spratt White, Senior Vice President
of Springs, met in Atlanta to discuss the possibility of Springs acquiring
Dundee.
On January 7, certain directors and officers of Dundee met with Dundee's
legal advisors, King & Spalding, concerning the proposed Merger. The following
day, officers and directors of both Springs and Dundee met at the offices of
Springs' legal advisors, Sutherland, Asbill & Brennan, to negotiate a letter of
intent (the "Letter of Intent"), pursuant to which Springs would exchange
Springs Class A Stock and cash for
14
<PAGE> 15
Dundee Common Stock and Dundee would be merged with a wholly owned subsidiary of
Springs. The Letter of Intent was signed by Messrs. John Newton and Elisha on
January 8, 1995.
On January 12, 1995, the Board of Directors of Dundee met to consider the
Letter of Intent. At that meeting, the Board approved the Letter of Intent and
appointed a special committee of outside directors (the "Special Committee") to
act solely on certain matters relating to the Merger as to which certain other
directors of Dundee may have had an interest. In particular, the Special
Committee was authorized by the Board of Directors to (i) consider the retention
of a financial advisor to prepare a fairness opinion, (ii) consider the payment
of certain compensation to certain officers of Dundee in connection with the
proposed Merger, and (iii) review and take appropriate action with respect to
the terms and conditions of certain past issuances of Dundee Common Stock. See
"-- Conflicts of Interest" and "Ratification of Certain Issuances of Dundee
Common Stock." The members of the Board of Directors who served on the Special
Committee were Harvey M. Cheatham, A. Felton Jenkins, Jr. and Tim M. Woodall.
The parties issued a press release announcing the Letter of Intent on January
13, 1995. On January 18, the Special Committee retained The Robinson-Humphrey
Company, Inc. ("Robinson-Humphrey") as the financial advisor to Dundee's Board
of Directors.
Beginning January 9, 1995, Dundee and Springs conducted due diligence
investigations of each other and Springs' attorneys provided Dundee with a draft
of a proposed merger agreement on January 17, 1995. Thereafter, representatives
of Springs and Dundee held detailed negotiations about the Merger Agreement. The
maximum amount of cash consideration available to Dundee shareholders in the
Merger was constrained by tax rules to assure the tax-free exchange features of
the transaction. The limit on the number of shares of Springs Class A Stock
available to Dundee shareholders in the Merger was imposed by Springs in its
negotiations with Dundee.
During the period from public announcement of the Letter of Intent on
January 13, 1995 through the execution of the definite Merger Agreement on
February 6, 1995, no entity submitted a competing acquisition proposal to
Dundee. However, Dundee received an inquiry during that period from a private
investment firm specializing in management leveraged buyouts. Dundee took no
action to encourage or discourage the presentation of a definitive proposal from
such firm in compliance with a non-solicitation obligation contained in the
Letter of Intent with Springs, and no such proposal was ever received.
On February 2, 1995, the Board of Directors of Dundee held a special
meeting to consider the proposed terms of the transaction. At such meeting,
members of Dundee's management, together with Dundee's legal and financial
advisors, discussed the strategic rationale for the Merger, financial and
valuation analyses of the transaction, the proposed terms of the Merger and the
potential benefits and disadvantages of the proposed transaction to Dundee and
its shareholders. Robinson-Humphrey discussed the basis for its opinion that the
Merger was fair to the holders of Dundee Common Stock from a financial point of
view. At this meeting, the Board of Dundee approved the proposed terms of the
Merger, subject to the review of a definitive Merger Agreement.
On February 2, 1995, at a special meeting, the Board of Directors of
Springs unanimously approved the terms of the Merger and a form of the Merger
Agreement and authorized the officers of Springs to execute the Merger
Agreement.
On February 6, 1995, the Board of Directors of Dundee held a special
meeting, which its legal advisors attended, and reviewed in detail the terms of
the Merger Agreement. The Board of Directors of Dundee then unanimously adopted
the Merger Agreement, resolved that the Merger Agreement and the actions
contemplated thereby should be submitted to the shareholders of Dundee for
approval with the Board's recommendation, and authorized the Chairman of the
Board and the Secretary to execute the Merger Agreement, which was executed by
Springs and Dundee on that day. As authorized by the Board of Directors, on
March 6, 1995, the Special Committee of the Board of Directors of Dundee by
unanimous written consent approved and ratified the terms and conditions of
issuances by Dundee of Dundee Common Stock during 1990-1994 to officers and
employees of Dundee, and recommended that the terms and conditions of such
issuances be submitted to the shareholders of Dundee for approval.
15
<PAGE> 16
The directors and one officer of Dundee have entered into agreements
granting proxies to Springs under which Springs may vote at the Meeting certain
shares of Dundee Common Stock owned or controlled by such persons in favor of
the Merger and against any other acquisition of Dundee requiring shareholder
approval, and granting options at a cash price of $2,525.00 per share to Springs
to purchase such shares exercisable upon the occurrence of certain events. These
agreements cover approximately 23.5% of the outstanding Dundee Common Stock. See
"-- Option and Proxy Agreements." As of March 1, 1995, executive officers and
directors of Dundee and their affiliates held in the aggregate approximately
25.6% of the then outstanding Dundee Common Stock. See "Dundee Voting Stock and
Principal Holders."
DUNDEE REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF
DUNDEE
Dundee's Board of Directors believes that the Merger is in the best
interests of Dundee and its shareholders. As the home furnishings industry has
become more integrated, certain of the largest companies in the industry
manufacture both terry bath products and bedding products, many styles and
components of which are coordinated. However, Springs presently does not
manufacture towels and offers only a limited selection of terry products, and
Dundee has no products in the bedding segment of the market other than infant
and toddler bedding products. Accordingly, the Board believes that the
businesses of the companies are highly compatible and that a business
combination of Dundee and Springs will allow the combined entity to achieve an
improved competitive position under current market conditions. Springs is a
publicly traded company, which will provide Dundee shareholders who receive
Springs Class A Stock greater liquidity than they presently have with Dundee
Common Stock and an equity interest in a larger company. Additionally, the price
per share offered for the Dundee Common Stock represents a substantial premium
over the price for the stock in recent transactions of which Dundee is aware.
At its February 2 and February 6, 1995 meetings, the Dundee Board
determined that, taking into account the potential benefits of the combination
of Dundee and Springs, the Merger is advisable and in the best interests of
Dundee and its shareholders, and unanimously approved the Merger and the Merger
Agreement. The Board of Directors unanimously recommends that holders of Dundee
Common Stock vote FOR approval of the Merger Agreement.
In reaching its conclusion, the Dundee Board considered the factors set
forth above and: (i) the opinion of Robinson-Humphrey that the Merger is fair to
the holders of Dundee Common Stock, from a financial point of view, (ii) the
existing and historical financial condition, results of operations, assets,
liabilities, management, operations and business of each company, as well as
assessments of the earnings potential and future values of Dundee and Springs,
both separately and as a combined entity, (iii) the nonfinancial terms of the
Merger, including the opportunity for shareholders to receive a tax-free
exchange of Dundee Common Stock for Springs Class A Stock for federal income tax
purposes, (iv) the fact that no other entity had submitted a definitive
acquisition proposal following announcement of the Letter of Intent, (v) certain
financial information concerning publicly traded companies deemed similar to
Dundee and Springs as prepared and analyzed by Robinson-Humphrey, and (vi) the
consideration paid in comparable transactions in the home furnishings industry
as compiled by Robinson-Humphrey. See "-- Opinion of Dundee's Financial
Advisor." In making its decision, the Dundee Board also considered as negative
factors that subsequent to the Merger Dundee would lose its independence and
identity as a separate corporate entity and that by virtue of the Merger and the
characteristics of Springs' capital structure, the Dundee shareholders would
have a minority voting interest in the combined enterprise. See "Springs Capital
Stock -- Voting Rights." There were no other material factors considered by the
Dundee Board in reaching its conclusion.
FOR THE REASONS SET FORTH ABOVE, DUNDEE'S BOARD OF DIRECTORS VOTED
UNANIMOUSLY TO APPROVE THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF DUNDEE COMMON STOCK VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
OPINION OF DUNDEE'S FINANCIAL ADVISOR
Robinson-Humphrey has delivered a written opinion to the Board of Directors
of Dundee that the purchase price to be received by the shareholders of Dundee
pursuant to the Merger is fair, from a financial
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<PAGE> 17
point of view, to the shareholders of Dundee. No limitations were imposed by the
Board of Directors upon Robinson-Humphrey in rendering its opinion, except that
Dundee did not request Robinson-Humphrey to solicit, and Robinson-Humphrey did
not solicit, any indications of interest from any third party with respect to
acquiring all or a portion of the Dundee Common Stock, nor did Robinson-Humphrey
determine or recommend the amount of the Merger Consideration.
The full text of the opinion of Robinson-Humphrey, dated April 25, 1995,
which sets forth the assumptions made, matters considered and limits on the
review undertaken, is attached to this Proxy and Registration Statement as
Exhibit B. Shareholders are urged to read this opinion in its entirety.
Robinson-Humphrey's opinion does not constitute a recommendation to any
shareholder as to how such shareholder should vote at the Meeting. The summary
of the opinion of Robinson-Humphrey set forth herein is qualified in its
entirety by reference to the full text of the opinion.
In rendering its opinion, Robinson-Humphrey, among other things, (i)
reviewed the Merger Agreement, (ii) reviewed financial and other information
furnished by Dundee and Springs or their representatives with respect to the
business, operations and prospects of Dundee and Springs, (iii) had discussions
with the managements of Springs and Dundee concerning their historical and
current businesses and operations and overall industry conditions, (iv) compared
the financial terms of the Merger with the terms of certain other recent
transactions that Robinson-Humphrey deemed relevant and (v) undertook such other
studies, analyses, and investigations as Robinson-Humphrey deemed appropriate,
but did not make an independent valuation or appraisal of the assets of Springs
or Dundee.
Robinson-Humphrey assumed, without independent verification, the accuracy
and completeness of the financial and other information furnished by Dundee and
Springs used by Robinson-Humphrey in arriving at its opinion. With respect to
information relating to the prospects of Dundee and Springs, Robinson-Humphrey
assumed that such information reflects the best currently available estimates
and judgment of management of Dundee and Springs as to the future financial
prospects of Dundee and Springs. In arriving at its opinion, it has not
conducted a physical inspection of the properties and facilities of Dundee or
Springs and has not made nor obtained any evaluations or appraisals of the
assets or liabilities of Dundee or Springs. Its opinion is necessarily based
upon market, economic and other conditions as they existed on, and could be
evaluated as of, the date of its opinion letter. Robinson-Humphrey also relied
upon the assurances of management that they were unaware of any facts that would
make the information provided incomplete or misleading. Robinson-Humphrey has
assumed that the Merger would be consummated as described in the Merger
Agreement.
In connection with rendering its written opinion, Robinson-Humphrey
performed certain financial and comparative analyses, including those described
below, which were all material analyses performed by Robinson-Humphrey in
connection with rendering its opinion. The preparation of a fairness opinion
involves various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular
circumstances. In arriving at its fairness opinion, Robinson-Humphrey made
qualitative judgments as to the significance and relevance of each analysis and
factor. The following is a brief summary of such analysis.
Comparable Company Analysis. Using publicly available information,
Robinson-Humphrey compared selected financial data of Dundee and Springs with
similar data of selected companies engaged in the business of manufacturing home
furnishings. Specifically, Robinson-Humphrey included in its review The Bibb
Company; Crown Craft, Inc.; Culp Inc.; Dan River, Inc.; Fieldcrest Cannon, Inc.;
Pillowtex Corp.; Quaker Fabric Corp.; Thomaston Mills, Inc.; WestPoint Stevens
Inc.; and Springs (the "Comparable Companies"). Robinson-Humphrey selected the
Comparable Companies because they are all manufacturers of textile home
furnishings and are therefore subject to similar economic, business and
competitive conditions as Dundee. These are all the companies of which
Robinson-Humphrey was aware for which textile home furnishings comprise a major
portion of revenues. The Bibb Company and Dan River, Inc. are the only
Comparable Companies whose stock is not publicly traded, and they were selected
for the purpose of analyzing their income statements and balance sheets.
Robinson-Humphrey calculated, among other things, current market price as a
multiple of the latest reported twelve months ("LTM") earnings per share
("EPS"), and estimated EPS for the calendar years 1994 and 1995. The EPS
estimates were based on the mean of publicly available
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<PAGE> 18
earnings estimates made by research analysts as provided by First Call Investor
Service, except for estimates for Culp Inc., Quaker Fabric Corp. and WestPoint
Stevens Inc., which were Robinson-Humphrey research estimates. Robinson-Humphrey
also compared historical sales, gross margins, operating margins and net
margins. In making its presentation, Robinson-Humphrey noted that the operating
margin of Dundee was lower than the average for the Comparable Companies and the
operating margin of Springs was higher than that of Dundee.
Additionally, Robinson-Humphrey compared the Comparable Companies' market
capitalization plus debt minus cash and cash equivalents ("Firm Value") as a
multiple of revenues, earnings before interest and taxes plus depreciation and
amortization expenses ("EBITDA") and operating income. Robinson-Humphrey
determined that these multiples of Firm Value to (i) LTM revenues ranged from
0.49x to 1.01x (with a mean of 0.68x), (ii) LTM EBITDA ranged from 4.8x to 7.3x
(with a mean of 5.9x) and (iii) LTM operating income ranged from 7.0x to 10.8x
(with a mean of 8.7x). Robinson-Humphrey also determined that the multiples of
market value to book value ranged from 0.92x to 3.77x, with a mean of 1.35x.
Robinson-Humphrey calculated similar values for Dundee assuming the
purchase price set forth in the Merger Agreement and determined that the
multiples of Firm Value to LTM revenues for Dundee was 0.54x, the Firm Value to
LTM EBITDA was 11.4x and that the ratio of equity value to book value at
December 31, 1994 was .97x. Robinson-Humphrey indicated that the multiple of
Firm Value to operating income was a meaningful valuation measure. However, the
multiple of Firm Value to LTM operating income for Dundee did not produce a
meaningful number for purposes of the analysis. Robinson-Humphrey indicated that
the results of comparing the mean multiples calculated for the Comparable
Companies to similar multiples calculated for the Merger supported
Robinson-Humphrey's opinion of fairness. In particular, Robinson-Humphrey
emphasized that the multiple of Firm Value to LTM EBITDA is an important
indicator of the fairness of the transaction and that this multiple for the
Merger of 11.4x is higher than the equivalent measure for the Comparable
Companies of 5.9x.
Comparable Transaction Analysis. Using publicly available information,
Robinson-Humphrey analyzed the transaction value and imputed transaction
multiples on selected acquisitions in the textile industry (collectively, the
"Acquisition Comparables") during the period from January 1992 through February
1995. The Acquisition Comparables were selected because they were all the
acquisitions in the textile industry as to which public information deemed
reliable and comprehensive by Robinson-Humphrey was available. The Acquisition
Comparables include the following acquisitions involving companies in the
textile industry: JPS Automotive Products Corp. by Foamex International Inc.;
Decorative Prints Division of Burlington Industries by Galey & Lord Industries,
Inc.; Rayonese Textile Inc. by Culp, Inc.; Alladin Mills, Inc. by Mohawk
Industries, Inc.; Perfect Fit Industries, Inc. by Foamex L.P.; Rossville
Companies, Inc. by Culp, Inc.; Amoskeag Co. by Fieldcrest Cannon, Inc.; Hanes
Holding Co. by Leggett & Platt, Inc.; Vintage Yarns, Inc. by Unifi, Inc.;
Carriage Industries, Inc. by Dixie Yarns, Inc.; Horizon Industries, Inc. by
Mohawk Industries, Inc.; and Salem Carpet Mills, Inc. by Shaw Industries, Inc.
Robinson-Humphrey compared the Firm Value as a multiple of sales, EBITDA and
earnings before interest and taxes ("EBIT"). The multiples of Firm Value to
sales, EBITDA and EBIT for the Acquisition Comparables were between the
following ranges: (i) sales ranged from 0.3x to 1.9x (with a mean of 0.87x);
(ii) EBITDA ranged from 4.4x to 11.3x (with a mean of 7.3x) and (iii) EBIT
ranged from 6.6x to 18.1x (with a mean of 10.7x). The multiples of equity value
to book value ranged from 1x to 5.6x, with a mean of 3.57x for the Acquisition
Comparables.
Robinson-Humphrey compared the multiples calculated for the Acquisition
Comparables to similar multiples calculated for the Merger, and determined that
the multiple of Firm Value to EBITDA, which Robinson-Humphrey emphasized as an
important indicator of the fairness of the transaction, for the Merger is 11.4x,
much higher than the equivalent multiple for the Acquisition Comparables, which
was 7.3x.
No company, transaction or business used by Robinson-Humphrey in the
comparable company and comparable transactions analyses as a comparison should
be viewed as nearly identical to Dundee, Springs, Subcorp or the Merger.
Accordingly, an analysis of the results of the foregoing is not entirely
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics and other
factors that could affect the acquisition or public trading value of the
Comparable Companies or the business segment or company to which they are
compared.
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<PAGE> 19
Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted
cash flow analysis as of August 31, 1994, assuming, among other things, discount
rates ranging from 10.41% to 12.91% and terminal multiples of EBITDA ranging
from 6.0x to 8.0x. This analysis resulted in a range of equity value of Dundee
of approximately $51,000,000 to $85,000,000. Robinson-Humphrey focused its
analysis on a discount rate of 11.41% and a multiple of 7.0x, which resulted in
an estimated equity value of approximately $68,000,000. Robinson-Humphrey
indicated that the results of the discounted cash flow analysis supported its
opinion of fairness, because the range of equity values of Dundee from this
analysis was lower than the purchase price of Dundee in the Merger.
Pro Forma Merger Analysis. Robinson-Humphrey analyzed certain pro forma
effects resulting from the Merger, including, among other things, the impact of
the Merger on the projected EPS of Springs for the 1995 and 1996 fiscal years.
Based on the projected estimates of EPS for Springs made by the Research
Department of Robinson-Humphrey and the projected estimates of earnings for
Dundee made by the management of Dundee, the results of the pro forma merger
analysis suggest that the Merger would dilute Springs' EPS in each year
analyzed. The actual results achieved by the combined company may vary from the
projected results and the variations may be material.
The summary of the analysis performed by Robinson-Humphrey set forth above
does not purport to be a complete description thereof. Robinson-Humphrey
believes that its analyses and the summary set forth above must be considered as
a whole and that selecting portions of its analysis or of the above summary,
without considering all factors and analyses, could create an incomplete view of
the processes underlying the analysis performed by Robinson-Humphrey and its
opinion. In performing its analysis, Robinson-Humphrey made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of Springs or Dundee.
The analyses performed by Robinson-Humphrey are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Additionally, analyses relating to
the values of businesses do not purport to be appraisals.
Robinson-Humphrey is an investment banking firm which is regularly engaged
in the valuation of securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements, and valuations for estate, corporate and other
purposes. The Special Committee of Dundee's Board of Directors decided to retain
Robinson-Humphrey based upon its expertise as a financial advisor in mergers and
acquisitions of companies in the textile industry, and its knowledge of the
textile industry generally.
Pursuant to the terms of an engagement letter dated January 18, 1995,
Dundee has agreed to pay Robinson-Humphrey for its services in connection with
the Merger a retainer of $25,000, which was paid at the time of the execution of
the engagement letter, and a fee of $150,000 upon rendering a written fairness
opinion. If, during the term of Robinson-Humphrey's engagement or within twelve
months following the termination of such engagement, a sale of Dundee to Springs
or any other party occurs in which the consideration paid exceeds the
consideration proposed in the letter of intent between Springs and Dundee, then
Dundee will pay Robinson-Humphrey an additional fee equal to 2.5% of such excess
amount. Dundee has also agreed to reimburse Robinson-Humphrey for its reasonable
out-of-pocket expenses up to $15,000 and to indemnify Robinson-Humphrey against
certain liabilities, including liabilities under the federal securities laws.
SPRINGS REASONS FOR THE MERGER
The Springs Board of Directors, at its meeting on February 2, 1995,
considered the Merger Agreement and related matters. The determination by
Springs' Board of Directors that the proposed Merger was in the best interests
of Springs and its shareholders was based on the following material factors: (a)
Springs' interest in expanding its lines of products through the acquisition of
a company which produces terry towels; (b) Dundee's significant and growing
presence in the terry towel market; (c) Dundee's terry manufacturing expertise;
(d) the benefits to both Springs and Dundee expected to be derived from the
combination of their
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businesses; and (e) the benefits to both Springs and its customers expected to
result from Springs' ability to offer terry towels in coordination with its
other bed and bath products.
THE MERGER AGREEMENT
The Merger Agreement provides that following its approval by the holders of
Dundee Common Stock, and the satisfaction or waiver of all other conditions to
the Merger, Dundee will be merged with Subcorp and will thus become a
wholly-owned subsidiary of Springs. After the Merger, Subcorp will remain as the
Surviving Corporation in the Merger or, alternatively, if 80% or more of the
outstanding Dundee Common Stock is converted into Springs Class A Stock in the
Merger, Springs may, at its option, cause Subcorp to merge with and into Dundee,
thus leaving Dundee as the Surviving Corporation in the Merger. Subject to the
approval of the shareholders of Dundee and the satisfaction or waiver of
conditions precedent to the Merger but no later than the third business day
thereafter (the "Closing Date"), the Merger will occur when a duly executed
certificate of merger is filed by Dundee and Subcorp with the Secretary of State
of the State of Georgia (unless the certificate of merger specifies a later
effective time) (the "Effective Time"). It is expected that the Effective Time
will occur on the date of the Meeting, or as soon as practicable thereafter. If
Subcorp is the Surviving Corporation, at the Effective Time and by reason of the
Merger, Subcorp will change its corporate name from "Dundee Acquisition Corp."
to "Dundee Mills, Incorporated."
Pursuant to the Merger Agreement, each issued and outstanding share of
Dundee Common Stock, excluding (a) any such shares held in the treasury of
Dundee, (b) any such shares held by Springs or its subsidiaries, and (c) any
such shares as to which the holders thereof have validly elected to pursue their
dissenters' rights under the GBCC, shall automatically be cancelled and
extinguished and shall thereafter be converted into only the right to receive
shares of Springs Class A Stock or, pursuant to a Cash Election and subject to
certain limitations, the right to receive $2,525.00 in cash. See " -- Merger
Consideration."
Under the Merger Agreement, each share of Dundee Common Stock held in the
treasury of Dundee or held by Springs or any of its subsidiaries shall be
automatically cancelled and extinguished, and no payment shall be made in
respect thereof. Any shares as to which the record holders thereof have validly
elected to pursue their dissenters' rights shall also be automatically cancelled
and extinguished, and shall thereafter represent the right to receive the Fair
Value of such shares. In addition, each issued and outstanding share of common
stock of Subcorp will continue to represent either one validly issued, fully
paid and nonassessable share of Subcorp, as the Surviving Corporation in the
Merger, or if Dundee is the Surviving Corporation, shall be converted into one
validly issued, fully paid and nonassessable share of Dundee Common Stock.
MERGER CONSIDERATION
At the Effective Time, each outstanding share of Dundee Common Stock will
be converted into the right to receive the Merger Consideration consisting of an
amount of Springs Class A Stock equal in value to $2,525.00 (subject to
variation based on market prices) based on the conversion ratio described below,
or cash in that amount, at the option of the Dundee shareholder and subject to
certain limitations. Dundee shareholders may elect to convert a portion of their
holdings of Dundee Common Stock into cash and the remaining portion into Springs
Class A Stock. The conversion of shares of Dundee Common Stock into Springs
Class A Stock is determined as follows:
If the average of the closing prices per share for Springs Class A
Stock on the New York Stock Exchange (the "NYSE") for the ten trading days
immediately preceding the date which is three calendar days prior to the
Closing Date (the "Reported Market Price") is $33.50 or more, but not more
than $38.50, the conversion ratio shall be equal to:
$2,525.00
----------
Reported Market Price
and shares of Springs Class A Stock issued in exchange for Dundee Common
Stock will have a market value of $2,525.00 per share of Dundee Common
Stock, based on the Reported Market Price.
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If the Reported Market Price of Springs Class A Stock is less than
$33.50, the conversion ratio shall be equal to:
<TABLE>
<C> <S>
$2,525.00 or 75.37313 shares of
- ---------- Springs Class A Stock
$33.50 per share of Dundee Common Stock
</TABLE>
and shares of Springs Class A Stock issued in exchange for Dundee Common
Stock will have a market value less than $2,525.00 per share of Dundee
Common Stock, based on the Reported Market Price.
If the Reported Market Price of Springs Class A Stock exceeds $38.50,
the conversion ratio shall be equal to:
<TABLE>
<C> <S>
$2,525.00 or 65.58442 shares of
- ---------- Springs Class A Stock
$38.50 per share of Dundee Common Stock
</TABLE>
and shares of Springs Class A Stock issued in exchange for Dundee Common
Stock will have a market value greater than $2,525.00 per share of Dundee
Common Stock, based on the Reported Market Price.
After the per share purchase price for Dundee Common Stock was agreed upon
through negotiation, the formulation of the conversion ratio was determined in
an effort to ensure that in most circumstances a Dundee shareholder would
receive approximately $2,525.00 in value of Springs Class A Stock for each share
of Dundee Common Stock. Dundee shareholders are protected from market risk in
the conversion ratio for up to an 8.53% decline in the market price per share of
Springs Class A Stock from the closing market price at the date of the Merger
Agreement ($36.625), and a 13.55% decline based on the market price of Springs
Class A Stock as of April 24, 1995 ($38.75).
LIMITATION ON CASH ELECTIONS
In order to assure that the Merger will qualify as a tax-free
reorganization, the maximum number of shares of Dundee Common Stock that may be
converted into cash is 23,363 shares less the total number of shares of Dundee
Common Stock as to which the record holders thereof shall have exercised
dissenters' rights pursuant to the GBCC (the "Maximum Number of Cash Election
Shares"). If the number of shares of Dundee Common Stock on deposit with
Wachovia Bank of North Carolina, N.A. (the "Exchange Agent") pursuant to a Cash
Election and not withdrawn as provided by the Merger Agreement (the "Deposited
Shares") at the close of business on May 24, 1995, the last business day before
the Meeting (the "Expiration Date") exceeds the Maximum Number of Cash Election
Shares, the Exchange Agent shall eliminate from the Deposited Shares (pro rata
as nearly as practicable as to each holder of ten or more Deposited Shares) the
number of Deposited Shares necessary to reduce the total number of Deposited
Shares to the Maximum Number of Cash Election Shares (or the most practicable
number thereof immediately below such number). As a result, Dundee shareholders
electing to receive cash may receive a combination of cash and Springs Class A
Stock rather than all cash in exchange for their Deposited Shares.
LIMITATION ON SPRINGS CLASS A STOCK
The maximum number of shares of Springs Class A Stock into which shares of
Dundee Common Stock will be converted in the Merger will be 3,000,000 shares. If
Dundee shareholders not making Cash Elections or exercising dissenters' rights
would otherwise be entitled to receive a total of more than 3,000,000 shares of
Springs Class A Stock, a number of shares of Dundee Common Stock (pro rata as
nearly as practicable as to each holder of ten or more shares) will be treated
pro rata as having been subject to Cash Elections, as necessary to reduce the
number of shares of Springs Class A Stock issued in the Merger to 3,000,000. If
the maximum number of shares of Springs Class A Stock is issued, the 3,000,000
shares would represent approximately 23.5% of the shares of Springs Class A
Stock expected to be outstanding after the Merger, and approximately 14.6% of
the aggregate number of shares of Springs Class A Stock and Springs Class B
Common Stock, $.25 par value ("Springs Class B Stock") expected to be
outstanding after the Merger (based on the number of outstanding shares of
Springs Class A Stock and Springs Class B Stock on March 6,
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<PAGE> 22
1995 plus the maximum number of shares of Springs Class A Stock issuable in the
Merger). As of March 6, 1995, these 3,000,000 shares would have represented
approximately 6.8% of the voting power of all outstanding Springs voting
securities, or a higher percentage in voting on certain matters. See "Springs
Capital Stock."
CASH ELECTION PROCEDURE
Shareholders wishing to make a Cash Election for some or all of their
shares must complete and submit the Cash Election Form contained in the Letter
of Transmittal accompanying this Proxy Statement and Prospectus. The Letter of
Transmittal must be sent to the Exchange Agent at the address shown on the
Letter of Transmittal. The Letter of Transmittal must be accompanied by the
certificate or certificates, properly endorsed for transfer or with duly
executed stock transfer powers, representing all of the shares of Dundee Common
Stock held by the Dundee shareholder making the Cash Election, even if the Cash
Election is not being made for all of the shares represented by the holder's
share certificates. Those shares as to which a Cash Election has not been made
will be converted into Springs Class A Stock in accordance with the terms of the
Merger Agreement (see "-- Merger Consideration"). TO RECEIVE CASH IN EXCHANGE
FOR ANY SHARES OF DUNDEE COMMON STOCK, THE LETTER OF TRANSMITTAL, CONTAINING THE
COMPLETED CASH ELECTION FORM, MUST BE RECEIVED BY THE EXCHANGE AGENT NO LATER
THAN THE CLOSE OF BUSINESS ON THE EXPIRATION DATE (MAY 24, 1995). The Exchange
Agent will make the Letter of Transmittal available to all persons who become
holders of record of Dundee Common Stock during the period between the Record
Date and the Expiration Date. SHAREHOLDERS SHOULD NOT SEND THE LETTER OF
TRANSMITTAL OR ANY CERTIFICATES REPRESENTING SHARES OF DUNDEE COMMON STOCK TO
DUNDEE.
It is not necessary for a Dundee shareholder to vote in favor of the Merger
in order to make a valid Cash Election. Record holders of Deposited Shares shall
remain the shareholders of record with respect to such shares until the
Effective Time. Each holder of Dundee Common Stock who has made a valid Cash
Election has the right at any time prior to the close of business on the
Expiration Date to withdraw such shareholder's Deposited Shares and thereby
revoke the Cash Election by giving notice of withdrawal to the Exchange Agent
prior to the close of business on the Expiration Date.
The Exchange Agent shall in its sole discretion determine whether or not
Cash Elections have been properly or timely made or revoked. Neither Springs,
Dundee, Subcorp nor the Exchange Agent shall be under any duty to give
notification that any Cash Election has not been properly or timely made or
revoked. If the Exchange Agent determines that any Cash Election was not
properly or timely made or revoked or if any Cash Election is properly revoked
or is eliminated from deposit as described above, the shares subject to such
Cash Election shall be treated by the Exchange Agent as shares of Dundee Common
Stock which were not subject to any Cash Election and at the Effective Time such
shares shall be converted into the right to receive Springs Class A Stock. The
Exchange Agent shall make all computations as to proration, and any such
computations shall be conclusive and binding on the holders of Dundee Common
Stock. The Exchange Agent may, after consultation with Springs, make such
equitable changes in the procedures set forth in the Merger Agreement regarding
Cash Elections as are necessary or desirable to effect fully any Cash Election.
EXCHANGE OF CERTIFICATES FOR NON-CASH ELECTION SHARES
On and after the Effective Time, each outstanding certificate which prior
to the Effective Time represented, in whole or in part, Dundee Common Stock as
to which a Cash Election has not been made or has been revoked or shares as to
which the holder has exercised dissenters' rights (collectively, "Non-Cash
Election Shares") will be deemed to evidence the right to receive the Merger
Consideration payable with respect to such Dundee Common Stock, in the form of
whole shares of Springs Class A Stock or cash (or both), as provided in the
Merger Agreement. See "-- Fractional Shares." A Dundee shareholder who wishes to
receive Springs Class A Stock rather than cash for his or her shares of Dundee
Common Stock should complete the enclosed Letter of Transmittal (without
completing the Cash Election Form, if no cash is desired) and send it together
with all of his or her share certificates representing Dundee Common Stock,
properly endorsed for transfer or with duly executed stock transfer powers, to
the Exchange Agent at the address shown on the Letter of Transmittal. While it
is not necessary to return Dundee share certificates and
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<PAGE> 23
the Letter of Transmittal to the Exchange Agent by the Expiration Date if no
Cash Election is being made, it is acceptable to do so.
If any Springs Class A Stock certificate is to be issued in a name other
than that of the registered owner of Dundee Common Stock being exchanged
therefor, the person requesting the issuance must pay in advance in cash all
applicable transfer and other taxes before Springs will be obligated to issue
the certificate, unless that person establishes to the satisfaction of the
Exchange Agent that any such taxes have been paid or that no such tax is
applicable.
FRACTIONAL SHARES
No fractional shares of Springs Class A Stock will be issued in the Merger.
Each holder of Dundee Common Stock who would otherwise be entitled to a
fractional share of Springs Class A Stock as part of the Merger Consideration
will, upon surrender of such holder's Dundee share certificate, receive from
Springs a cash payment (without interest) equal to the fractional share to which
such holder would otherwise be entitled multiplied by the Reported Market Price
of Springs Class A Stock used in computing the Merger Consideration.
CONDITIONS TO THE MERGER
Dundee and Springs are not obligated to complete the Merger unless a number
of conditions are satisfied, including the following: (a) Dundee shareholders
shall have approved the Merger Agreement; (b) Springs' Registration Statement
for the Springs Class A Stock to be issued in the Merger shall have become
effective under the Securities Act and no stop order shall have been issued or
be pending or threatened; (c) the waiting period applicable to the Merger under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") shall
have expired or have been terminated; (d) Dundee and Springs shall each have
received a satisfactory opinion from Sutherland, Asbill & Brennan, counsel for
Springs, that the Merger constitutes a reorganization under the Internal Revenue
Code of 1986, as amended (the "Code"); and (e) the shares of Springs Class A
Stock to be issued in the Merger shall have been authorized for listing on the
NYSE upon official notice of issuance. In addition, the obligation of each of
Springs and Dundee to consummate the Merger is subject to the conditions that
the other party shall have performed its agreements and covenants under the
Merger Agreement in all material respects; that the other party's
representations and warranties, subject to certain exceptions, shall be true and
correct at the Effective Time (except where the failure of any representation
and warranty to be true and correct would not have a material adverse effect on
the party making it); and that the other party shall have delivered certain
opinions of counsel, letters from accountants and certain additional conditions,
including conditions which are customary in transactions similar to the Merger,
as set forth in the Merger Agreement.
The obligations of Springs and Subcorp to consummate the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
additional conditions: (a) dissenters' rights with respect to the Merger must
not have been exercised by holders of more than 8% of the outstanding shares of
Dundee Common Stock; (b) appropriate agreements must be obtained from all
affiliates of Dundee agreeing to applicable resale restrictions with respect to
Springs Class A Stock received pursuant to the Merger; (c) the Board of
Directors of Dundee must have determined that no change in control will be
considered to have occurred by reason of the Merger under the Dundee Mills
Supplemental Executive Retirement Plan; (d) Dundee shall have taken all
corporate action necessary to establish that all issuances by Dundee of Dundee
Common Stock since July 1, 1989 were validly issued, fully paid and
nonassessable and that no preemptive rights exist with respect to such
issuances; (e) Dundee must have cured all filing deficiencies and satisfied all
related obligations with respect to the HSR Act and Dundee pension plans at no
material expense to Dundee; (f) loans made by Dundee to Dundee shareholders must
have been repaid in full; and (g) Dundee and its counsel must have taken all
action necessary to preserve the tax exempt status of certain industrial revenue
bonds.
23
<PAGE> 24
EFFECTIVE TIME AND TERMINATION
If the Merger is approved by the shareholders of Dundee and all other
conditions of the Merger are satisfied or waived (see "-- Conditions to the
Merger"), the Merger will become effective when Subcorp and Dundee file a
certificate of merger with the Secretary of State of the State of Georgia in
accordance with the GBCC unless a later time is specified in the certificate of
merger. The Merger Agreement provides that Subcorp and Dundee will make this
filing as soon as practicable after all of the conditions to completion of the
Merger are satisfied or waived. The parties anticipate that the Effective Time
will occur promptly following the Meeting.
The Merger Agreement may be terminated at any time prior to the Effective
Time: (a) by Springs and Dundee upon mutual action of their respective Boards of
Directors; (b) by either Springs or Dundee if (i) any event has occurred as a
result of which any condition to its respective obligation to consummate the
Merger is no longer capable of being satisfied (so long as, in certain
circumstances, the terminating party has not contributed to the failure of any
such condition to be satisfied), (ii) any general suspension of, or limitation
on, trading on the NYSE has continued for a period of 15 days or a bank
moratorium in the United States has continued for a period of 15 days, or (iii)
the Merger has not been consummated by July 31, 1995; (c) by Springs if (i)
Dundee has breached any representation or warranty contained in the Merger
Agreement which would be reasonably likely to have a material adverse effect on
Dundee, (ii) Dundee has materially breached any of its covenants or agreements
in the Merger Agreement which breach is not curable (or, if curable, is not
cured within 30 days after written notice from Springs), (iii) Dundee (or its
Board of Directors) has authorized, recommended, proposed or publicly announced
its intention to enter into a "Competing Transaction" not consented to by
Springs, (iv) Dundee's Board of Directors has withdrawn or materially modified
its authorization, approval or recommendation of the Merger or the Merger
Agreement in a manner adverse to Springs, or (v) a party other than Springs has
announced, commenced or consummated the acquisition of at least 15 percent of
the outstanding Dundee Common Stock or has received proxies or consents
sufficient to elect a majority of Dundee's Board of Directors or block approval
of the Merger; or (d) by Dundee if (i) Springs or Subcorp has breached any
representation or warranty contained in the Merger Agreement which would be
reasonably likely to have a material adverse effect on the ability of Springs or
Subcorp to consummate the Merger or (ii) Springs or Subcorp has materially
breached any of its covenants or agreements in the Merger Agreement which breach
is not curable (or, if curable, is not cured within 30 days after written notice
from Dundee).
As used in the Merger Agreement, "Competing Transaction" means any
acquisition of 15% or more of the stock or assets of Dundee, or a merger,
consolidation or other business combination involving Dundee, or the public
announcement of a proposal, plan or intention to effect such a transaction, or
any agreement to effect such a transaction.
The Merger Agreement also provides that if Springs terminates the Merger
Agreement because of a knowing and intentional misrepresentation or a knowing
and intentional breach of warranty or breach of any covenant by Dundee, Dundee
shall be liable to Springs, among other things, for all investment banking,
legal, accounting, expert and consulting fees and other out-of-pocket expenses
reasonably incurred by Springs in connection with the Merger. In addition, the
Merger Agreement requires Dundee to pay Springs a fee of $3,000,000 in the event
that the Merger Agreement is terminated because: (a) the condition that Dundee's
representations and warranties contained in the Merger Agreement be true and
correct in all respects (except where the failure of any representation and
warranty to be true and correct would not have a material adverse effect on
Dundee) is not satisfied due to Dundee's knowing and intentional
misrepresentation or knowing and intentional breach of warranty or breach of any
covenant or agreement and (i) Dundee has had contacts about or entered into
negotiations relating to a Competing Transaction during the period from the date
of the Merger Agreement through the date of termination and (ii) Dundee
consummates a Competing Transaction within one year after the date of
termination with a party with whom Dundee had such negotiations or contacts; (b)
the Merger Agreement does not receive the requisite vote of the holders of
Dundee Common Stock and at the time of such vote there existed a Competing
Transaction; (c) Dundee authorizes, recommends proposes or publicly announces
its intention to enter into a Competing Transaction not consented to by Springs;
or (d) Dundee's Board of Directors withdraws or materially modifies its
authorization, approval or recommenda-
24
<PAGE> 25
tion of the Merger or the Merger Agreement in a manner adverse to Springs,
unless in any such case Springs has materially breached any of its
representations, warranties, covenants or agreements under the Merger Agreement.
AMENDMENT
The Merger Agreement provides that it may be amended by the parties at any
time before or after approval thereof by the shareholders of Dundee, but that
after such approval no amendment shall be made (a) which reduces the Merger
Consideration or changes the form of the Merger Consideration to be received by
Dundee's shareholders pursuant to the Merger Agreement or (b) changes any of the
terms and conditions of the Merger Agreement if such change would adversely
affect the holders of Dundee Common Stock, unless the further approval of the
holders of Dundee Common Stock is obtained.
REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS
The Merger Agreement contains certain representations, warranties,
covenants and agreements by Dundee and Springs regarding, among other things,
the businesses, capital structure, assets and liabilities of Dundee and Springs
and the accuracy and completeness of information supplied in connection with the
Merger. The Merger Agreement also contains covenants of Dundee with respect to
the conduct of its business prior to the Closing Date, including covenants that
it will not (a) issue any shares of its capital stock (or related rights) or pay
any dividend, (b) sell or transfer any asset to a third party or incur any debt
or mortgage or encumber assets, except in the ordinary course of business and
within specified limits, (c) change the salaries, benefits or employment
contracts of employees of Dundee or its subsidiaries, or (d) amend its Articles
of Incorporation or Bylaws.
In addition, Dundee has agreed not to, directly or indirectly, (a) solicit,
initiate or knowingly encourage any inquiries or the making of proposals from
anyone other than Springs that constitutes or may reasonably be expected to lead
to any Competing Transaction, (b) enter into or maintain or continue discussions
or negotiate with a party other than Springs in furtherance of such inquiries or
to obtain a Competing Transaction, or (c) agree to or endorse any Competing
Transaction or authorize or permit any of the officers, directors or employees
of such party or any of its subsidiaries or any advisors to or representatives
of such party to take any such action. Dundee has also agreed to use its best
efforts to obtain the approval by Dundee's shareholders of the Merger and the
transactions contemplated by the Merger Agreement. However, the Merger Agreement
provides that neither the Board of Directors nor the officers of Dundee shall be
required to take or omit to take any action, with respect to disclosures in this
Proxy Statement and Prospectus or their recommendation to Dundee's shareholders
regarding the Merger, which the Board determines in good faith, based on the
advice of Dundee's counsel, could be held to violate their fiduciary duties to
Dundee's shareholders.
GOVERNMENTAL AND REGULATORY REQUIREMENTS
Springs and Dundee are not aware of any governmental or regulatory
requirements for consummation of the Merger other than compliance with
applicable federal and state securities laws and the expiration or the
termination of the waiting periods applicable to the Merger under the HSR Act
and the rules and regulations thereunder. Under the HSR Act, certain acquisition
transactions, such as the Merger, may not be consummated unless required
information has been furnished to the Antitrust Division of the Department of
Justice (the "Antitrust Division") and the Federal Trade Commission (the "FTC")
and the specified waiting period requirements have been satisfied. On February
8, 1995 and March 7, 1995, respectively, Springs and Dundee each filed with the
Antitrust Division and the FTC a Notification and Report Form with respect to
the Merger. The FTC granted early termination of the waiting period for the
Merger effective March 27, 1995.
Notwithstanding the termination or expiration of the waiting period, at any
time before or after the Effective Time, the Antitrust Division or the FTC could
take actions under the antitrust laws as either of them deem necessary and
desirable in the public interest, including seeking to enjoin the Merger, or
seeking divestitures of substantial assets of Springs or Dundee. In addition, in
appropriate circumstances, state officials and private parties may also bring
legal actions under the antitrust laws. Under the Merger Agreement, in the
25
<PAGE> 26
event a suit is instituted challenging the Merger as violative of the antitrust
laws, Springs and Dundee have agreed to use their best efforts to resist or
resolve such a suit. If injunctive relief is sought or obtained in a challenge
to the Merger, the Merger Agreement could be terminated or the consummation of
the Merger could be delayed and, under certain circumstances, such delay could
result in consummation of the Merger being postponed to a date substantially
beyond the date of the Meeting. If the Merger is not consummated by July 31,
1995, the Merger Agreement could be terminated by Springs or Dundee.
EXPENSES
Except as otherwise provided in the Merger Agreement, if the Merger is not
consummated, Dundee and Springs shall each bear its own expenses related to the
Merger, except that the cost of printing this Proxy Statement and Prospectus and
filing fees under federal and state securities laws shall be borne equally.
RESALE OF SPRINGS CLASS A STOCK
The shares of Springs Class A Stock to be issued to Dundee shareholders in
connection with the Merger have been registered under the Securities Act.
Accordingly, such shares will be freely transferable under the Securities Act,
except for shares issued to any person who may be deemed to be an "affiliate" of
Dundee within the meaning of Rule 145 promulgated under the Securities Act
(collectively, "Dundee Affiliates"). The shares of Springs Class A Stock
received by Dundee Affiliates may not be sold without registration of such
shares for resale under the Securities Act or the availability of an exemption
(including the limited exemption provided by Rule 145) from such registration.
Dundee has agreed to use its best efforts to cause each person who Springs
believes may be deemed a Dundee Affiliate to execute and deliver to Springs an
agreement covering the foregoing restrictions on transfer and certain other
rights and obligations of such person with respect to the shares of Dundee
Common Stock and Springs Class A Stock.
CONFLICTS OF INTEREST
In considering the Merger, holders of Dundee Common Stock should be aware
that the directors and certain members of Dundee management have interests in
the Merger in addition to their interests as shareholders of Dundee generally,
as described below.
The Merger Agreement provides for continued employment and severance
benefits for fifteen officers of Dundee. Six of the current officers of Dundee
will be employed by the Surviving Corporation for an initial term of six months
and an additional eight officers will be employed for an initial term of nine
months. After such initial period, either the Surviving Corporation or such
employee may terminate such employment, and upon such termination the terminated
employee shall be entitled to one year's compensation as a severance benefit. If
all of such Dundee officers left the employ of the Surviving Corporation after
the initial term, the Surviving Corporation would make severance payments
aggregating $2,591,675 to such persons. The following executive officers who are
entitled to such severance payments also serve as directors and would be
entitled to the amounts of severance set forth below after an initial term of
six months: John T. Newton: $242,000; J. Henry Walker, III: $309,000; R. Wayne
Boyd: $265,000; and Howard B. Gossett, Jr.: $180,000. Additionally, the
following executive officers, who are directors, would be entitled to the
following amounts of severance after an initial term of nine months: David G.
Newton: $182,000; and J. Gilliam Cheatham: $102,000. Non-director executive
officers of Dundee would be entitled to the amounts of severance set forth below
after the initial terms indicated: M. J. Yates: $142,000 (after six months);
Douglas R. Tingle: $171,600 (after nine months); and V. Larry Perkins: $149,500
(after nine months).
The Special Committee of Dundee's Board of Directors was appointed, in
part, to consider the payment of special compensation to certain executive
officers of Dundee. The Special Committee believes that the group of executives
who will receive such compensation is one of Dundee's most valuable assets and
that their expertise, hard work and determination are major reasons Springs
desires to acquire Dundee pursuant to the Merger. Additionally, the Special
Committee believes that the executives receiving such compensation are essential
to the consummation of the Merger and that the Surviving Corporation needs to
retain the management skills of these executives to ensure its continued
success. Accordingly, the Special Committee
26
<PAGE> 27
has determined that immediately prior to the consummation of the Merger, nine
executive officers of Dundee will be entitled to receive payments aggregating
$2,168,000. The following executive officers also serve as directors of Dundee
and will be entitled to receive the amounts set forth below: John T. Newton:
$368,000; J. Henry Walker, III: $232,000; R. Wayne Boyd: $203,000; Howard B.
Gossett, Jr.: $140,000; David G. Newton: $300,000; and J. Gilliam Cheatham:
$102,000. The following non-director executive officers will be entitled to
receive the amounts set forth below: M. J. Yates: $112,000; Douglas R. Tingle:
$396,000; and V. Larry Perkins: $315,000.
For information concerning the interests of certain officers and directors
of Dundee in certain issuances of shares of Dundee Common Stock during
1990-1994, see "Ratification of Certain Issuances of Dundee Common Stock."
The members of the Board of Directors who served on the Special Committee
of the Board of Directors were Harvey M. Cheatham, A. Felton Jenkins, Jr. and
Tim M. Woodall. No member of the Special Committee was an officer or employee of
Dundee or a purchaser of any of the shares of Dundee Common Stock issued during
1990-1994, or otherwise had any financial interest (except Mr. Cheatham's
interest as a shareholder of Dundee generally) in any of the matters acted upon
by the Special Committee. Each member of the Special Committee received $20,000
for his services in connection with the Merger.
Finally, pursuant to the Merger Agreement, Springs has agreed that all
rights to indemnification and all limitations of liabilities set forth in the
Articles of Incorporation and Bylaws of Dundee will be continued in the Articles
of Incorporation and Bylaws of the Surviving Corporation. Springs has agreed not
to take any action or allow any action to be taken relating to limitation of
liability or indemnification, prior to the expiration of all applicable statutes
of limitation, that would adversely affect the rights of the individuals who are
entitled to the benefits of such provisions. Further, Springs has agreed to make
proper provision to ensure that its successors and assigns assume these
obligations.
OPTION AND PROXY AGREEMENTS
As required by Springs as a condition to entering into the Merger
Agreement, all of the directors and one of the officers of Dundee have entered
into agreements granting proxies to Springs to vote certain shares of Dundee
Common Stock owned or controlled by such persons in favor of the Merger and the
transactions contemplated by the Merger Agreement and against any other merger,
sale of assets or other business combination between Dundee and any other person
or entity, and granting options at a cash exercise price of $2,525.00 per share
to Springs to purchase such shares, exercisable upon the occurrence of certain
events. These agreements cover 10,981 shares of Dundee Common Stock, or
approximately 23.5% of such shares entitled to vote at the Meeting.
TAX CONSEQUENCES
The following is a summary of certain anticipated federal income tax
consequences of the Merger. Due to the complexity and changing nature of federal
income tax laws, and considering that each shareholder's individual
circumstances affect the tax consequences of the Merger to such shareholder, the
following is not intended to and does not constitute a complete description of
all possible federal tax consequences to the shareholders of Dundee. The federal
income tax consequences to any particular shareholder may be affected by matters
not described herein. Moreover, this discussion does not address the state and
local income tax consequences, if any, of the Merger. EACH SHAREHOLDER IS
THEREFORE ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES OF THE MERGER TO HIM OR HER.
Neither Dundee nor Springs has sought or intends to seek a ruling from the
Internal Revenue Service concerning the federal income tax consequences of the
Merger. Consummation of the Merger is conditioned upon the receipt by Springs
and Dundee as of the Closing Date of an opinion from Sutherland, Asbill &
Brennan that the Merger constitutes a reorganization under the Code such that a
Dundee shareholder will not be subject to income taxation on the Merger
Consideration if the shareholder's Merger Consideration is received solely in
Springs Class A Common Stock, but will be subject to income taxation on any gain
realized to the extent the Merger Consideration is received in cash. In
rendering their opinion, Sutherland, Asbill &
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<PAGE> 28
Brennan will make certain factual assumptions and will rely upon certain
representations of Springs and Dundee. One such assumption/representation is
that, to the best of the knowledge of the executive officers of Dundee, there is
no plan or intention by the shareholders of Dundee to sell, exchange, or
otherwise dispose of a number of shares of Springs Class A Stock received in the
Merger that would reduce the Dundee shareholders' ownership of Springs Class A
Stock to a number of shares having a value, as of the Effective Date, of less
than 50% of the value of all of the formerly outstanding shares of Dundee Common
Stock as of the Effective Date.
Assuming the Merger is treated as a reorganization for federal income tax
purposes, the Merger will have the following, among other, tax consequences to
the shareholders of Dundee.
No gain or loss will be recognized by a holder of Dundee Common Stock whose
shares are exchanged solely for Springs Class A Stock, except with respect to
cash received in lieu of a fractional share of Springs Class A Stock.
A holder of Dundee Common Stock who receives both Springs Class A Stock and
cash as Merger Consideration will recognize gain, if any, realized on the
exchange, but in an amount which is not in excess of the amount of cash
received. The gain recognized should generally be treated as gain from the
exchange of property and, assuming that the shares of Dundee Common Stock of
such shareholder are held as capital assets, would be capital gain. In certain
unusual circumstances, a Dundee shareholder who is considered to own
constructively Dundee stock which is held by another Dundee shareholder and
exchanged for Springs Class A Stock in the Merger might be required to treat any
gain recognized as a dividend. No loss will be recognized by a holder of Dundee
Common Stock who receives both Springs Class A Stock and cash as Merger
Consideration.
A holder of Dundee Common Stock who receives solely cash as Merger
Consideration, or a dissenting shareholder, should generally recognize gain or
loss, measured by the difference between the amount of cash received and the
basis of the shares of Dundee Common Stock exchanged therefor. Assuming that the
shares of Dundee Common Stock are held as capital assets, such gain or loss
would be treated as capital gain or loss. In certain unusual circumstances, a
Dundee shareholder who receives solely cash, but who is considered to own
constructively Dundee Common Stock which is held by another Dundee shareholder
and exchanged for Springs Class A Stock in the Merger, might be required to
treat the amount of cash received as a dividend.
Any Dundee shareholder who receives cash in lieu of a fractional share of
Springs Class A Stock will be treated as if a fractional share had been
distributed to him in the Merger and then redeemed by Springs. Such shareholder
will recognize gain or loss, measured by the difference between the amount of
cash received and the basis of the Dundee Common Stock allocable to such
fractional share. Such gain or loss will be capital gain or loss provided that
the shareholder's shares of Dundee Common Stock are held as capital assets.
The basis of the Springs Class A Stock received by a holder of Dundee
Common Stock will be the same as the basis of the Dundee Common Stock
surrendered in exchange therefor (excluding any basis allocable to fractional
shares of Springs Class A Stock for which cash is received), minus any amount of
cash Merger Consideration received by the shareholder, plus any amount which is
treated as gain or as a dividend to the shareholder.
A Dundee shareholder's holding period with respect to any Springs Class A
Stock received in the Merger will include the period during which the shares of
Dundee Common Stock surrendered in exchange therefor were held, provided that
such shares of Dundee Common Stock were held as capital assets at the Effective
Time.
No gain or loss will be recognized by Springs, Dundee or Subcorp by reason
of the Merger.
ACCOUNTING TREATMENT
The Merger will be accounted for by Springs as a purchase. Under purchase
accounting, Springs will allocate the total cost of acquiring the Dundee Common
Stock, based on the relationship of the total amount of cash paid and the market
value of Springs Class A Stock issued in the Merger to the fair value of the
assets and liabilities acquired. Springs anticipates that the consideration paid
for the Dundee Common Stock will not
28
<PAGE> 29
exceed the fair value of the assets and liabilities acquired. Consequently,
Springs does not expect to record any goodwill in connection with the Merger.
RATIFICATION OF CERTAIN ISSUANCES OF DUNDEE COMMON STOCK
Historically, shareholders who wished to dispose of some or all of their
Dundee Common Stock have contacted Dundee to locate a prospective purchaser for
such shares, because there has been no established trading market for Dundee
Common Stock. Frequently, Dundee facilitated such transactions by negotiating a
price with the seller and delivering its check to the seller against delivery of
the certificates representing the Dundee Common Stock. In addition, Dundee
acquired 1,365 shares of Dundee Common Stock which were owned by The Hartwell
Mills when it was purchased by Dundee on June 4, 1990.
Dundee has treated all such reacquired shares as treasury shares, and
Dundee's management made shares so acquired available for purchase by selected
officers and employees (or their designated family members) as part of their
compensation. The shares acquired in the Hartwell Mills transaction were valued
by a special committee of the Board of Directors of Dundee at the time of such
acquisition at a slight premium over recent transactions in Dundee Common Stock.
These shares were reissued at such valuation, and other shares reacquired by
Dundee were reissued at the average price per share then being paid by Dundee
for its stock. Dundee utilized such opportunities to enable officers and
employees to obtain or increase their equity interest in the company and offered
this opportunity as an incident of employment and as compensation because Dundee
did not have a formal employee stock option plan or employee stock purchase
program.
During 1990-1994, Dundee used this procedure to acquire and reissue an
aggregate of 2,261 shares of Dundee Common Stock at an average price of $963 per
share to a total of 47 officers and employees (including, in several instances,
family designees of officers or employees). No individual officer or employee
(together with his family designees, if any) purchased more than an aggregate of
331 shares during such period. The dates, aggregate number of shares reissued,
and price per share of all such issuances are set forth below:
<TABLE>
<CAPTION>
DATE AND PRICE OF ISSUANCE SHAREHOLDER SHARES
- --------------------------- ------------------------------------------------ ------
<S> <C> <C>
August 28, 1990 ($650) David D. Blalock, Jr............................ 50
R. Wayne Boyd*+................................. 100
John Bray....................................... 50
Howard B. Gossett, Jr.*+........................ 50
Betty Gossett*+................................. 50
Clarence J. McMerty............................. 50
Jack Mundy...................................... 50
David J. Taylor................................. 50
Douglas R. Tingle*.............................. 100
J. Henry Walker, III*+.......................... 100
October 31, 1990 ($650) Neal E. Baldwin................................. 30
Doug Brown...................................... 7
Wayne Brown..................................... 10
William E. Head................................. 5
Harry Kierbow................................... 15
David Lamb...................................... 20
V. Larry Perkins*............................... 10
James W. Roddy.................................. 10
Robert Scroggins................................ 50
J. Kenneth Stanz, Jr............................ 5
J. Frank Stewart................................ 25
Jeff Stewart.................................... 5
Hubert Sullins.................................. 50
Robert Sullins.................................. 8
Frank Westmoreland.............................. 13
M. J. Yates*.................................... 50
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
DATE AND PRICE OF ISSUANCE SHAREHOLDER SHARES
- --------------------------- ------------------------------------------------ ------
<S> <C> <C>
December 10, 1990 ($650) Henry Barton.................................... 10
Gordon H. Brown................................. 10
Everett Chalkley................................ 5
J. Gilliam Cheatham*+........................... 45
John H. Cheatham, III........................... 20
Leila Cheatham*+................................ 145
Howard B. Gossett, Jr.*+........................ 6
James A. Graham................................. 25
Robert Housworth................................ 5
David G. Newton*+............................... 125
John T. Newton*+................................ 106
Leila Von Stein*+............................... 15
Douglas R. Tingle*.............................. 6
J. Henry Walker, III*+.......................... 6
July 7, 1993 ($1,500) Neal E. Baldwin................................. 5
Gordon H. Brown................................. 5
James A. Graham................................. 5
Harry Kierbow................................... 5
David Lamb...................................... 5
William M. McSwain, Sr.......................... 5
Herbert B. Perkins.............................. 5
James W. Roddy.................................. 5
J. Frank Stewart................................ 5
August 2, 1993 ($1,500) David D. Blalock, Jr............................ 20
R. Wayne Boyd*+................................. 25
John Bray....................................... 20
J. Gilliam Cheatham*+........................... 25
John H. Cheatham, III........................... 25
Ken Gossage..................................... 2
Howard B. Gossett, Jr.*+........................ 25
William E. Head................................. 2
Francis S. Hedges............................... 5
John M. Jago.................................... 10
Christine R. Lanigan............................ 10
Clarence J. McMerty............................. 20
Walter J. McMullen.............................. 10
David G. Newton*+............................... 25
John T. Newton*+................................ 25
Mark A. Peek.................................... 10
V. Larry Perkins*............................... 25
J. Kenneth Stanz, Jr............................ 5
David J. Taylor................................. 20
Douglas R. Tingle*.............................. 25
J. Henry Walker, III*+.......................... 25
M. J. Yates*.................................... 5
July 28, 1994 ($1,650) David D. Blalock, Jr............................ 10
Howard B. Gossett, Jr.*+........................ 15
Francis S. Hedges............................... 5
Christine R. Lanigan............................ 10
Clarence J. McMerty............................. 20
David G. Newton*+............................... 25
John T. Newton*+................................ 175
David J. Taylor................................. 10
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
DATE AND PRICE OF ISSUANCE SHAREHOLDER SHARES
- --------------------------- ------------------------------------------------ ------
<S> <C> <C>
Douglas R. Tingle*.............................. 10
J. Henry Walker, III*+.......................... 50
October 10, 1994 ($1,650) David G. Newton*+............................... 5
October 11, 1994 ($1,650) John T. Newton, Jr.*+........................... 25
</TABLE>
- ---------------
* Each of these individuals served as an executive officer of Dundee, or was a
designee of an executive officer, at the time of the issuance.
+ Each of these individuals served as a director of Dundee, or was a designee of
a director, at the time of the issuance, except Mr. Gossett who is currently a
director of Dundee but was not a director at the time of the issuance.
As a condition to closing the Merger, Springs has required that Dundee take
corporate action to assure that the shares of Dundee Common Stock issued during
1990-1994 were validly issued, fully paid and nonassessable and that no
preemptive rights exist with respect to such issuances. Under the GBCC, such
reissuances should have been but were not formally authorized or approved by the
directors of Dundee, and such reissuances would have given rise to preemptive
rights on the part of Dundee shareholders to purchase proportional amounts of
such shares upon their reissuance, unless an exception to statutory preemptive
rights was applicable.
The Special Committee was authorized by the Board of Directors of Dundee to
take certain action with respect to the Merger, including approval of certain
matters in which directors of Dundee had an interest other than their interests
as shareholders of Dundee generally. The Special Committee has reviewed and
approved the terms and conditions associated with the issuances of Dundee Common
Stock described above, has ratified these issuances, and has determined that, in
the light of the circumstances prevailing at the time of such issuances, the
transactions were fair to Dundee and constituted issuances as compensation to
officers and employees of Dundee so as to qualify for a statutory exception to
preemptive rights, if the holders of a majority of the shares of Dundee Common
stock entitled to vote thereon approve or ratify the terms and conditions of
such issuances. No member of the Special Committee received any shares in such
issuances. The Special Committee unanimously recommends that Dundee shareholders
vote FOR the approval and ratification of the terms and conditions of such
issuances so as to establish that preemptive rights do not exist with respect
thereto.
Approval and ratification of the terms and conditions of such issuances
will require the affirmative votes of a majority of the outstanding shares of
Dundee Common Stock.
DUNDEE COMMON STOCK PRICES AND DIVIDEND POLICIES
Dundee is privately held and there is no established market for the Dundee
Common Stock. In recent stock transactions, Dundee has purchased and sold shares
of Dundee Common Stock for $1,650 per share. There can be no assurances,
however, that Dundee would continue to purchase or sell shares at such price. As
of March 1, 1995, there were approximately 290 holders of Dundee Common Stock.
During the last two years, the Dundee Board of Directors has paid a dividend
each quarter and at the end of the fiscal year, which have aggregated $30 per
share in each fiscal year.
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<PAGE> 32
DUNDEE SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)
The selected financial information for Dundee for the periods presented are
derived from the audited financial statements of Dundee except that the selected
financial information as of December 31, 1993 and 1994 and for the four month
periods then ended are derived from unaudited financial statements of Dundee. In
the opinion of management, such unaudited financial statements include all
adjustments (consisting of only normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations for the
periods presented. The results of operations for the four month period ended
December 31, 1994 are not necessarily indicative of Dundee's results of
operations for the entire year. This information should be read in conjunction
with "Dundee Management's Discussion and Analysis of Financial Condition and
Results of Operations" and with Dundee's financial statements and the related
notes thereto included elsewhere in this Proxy Statement and Prospectus.
<TABLE>
<CAPTION>
FOR OR AT THE
FOR OR AT THE END OF THE FISCAL YEARS ENDED AUGUST FOUR MONTHS ENDED
31, DECEMBER 31,
---------------------------------------------------- -----------------------
1990(A) 1991 1992 1993 1994 1993 1994
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.................. $223,455 $242,386 $247,728 $263,363 $266,814 $ 85,107 $ 90,363
Net income (loss).......... 9,697 134 6,452 870 (1,501)(b) (241)(b) 1,065
Earnings (loss) per common
share.................... 203.66 2.80 137.50 18.60 (32.00)(b) (5.14)(b) 22.77
Weighted average number of
common shares............ 48 48 47 47 47 47 47
Dividends per common
share.................... 30.00 30.00 30.00 30.00 30.00 4.00 4.00
BALANCE SHEET DATA:
Working capital............ 80,199 79,293 93,085 88,424 82,728 84,864 81,251
Total assets............... 148,194 167,837 186,151 175,562 169,007 171,981 164,942
Total long-term debt
(excluding current
portion)................. 13,060 26,615 42,670 28,670 23,715 24,670 19,715
Shareholders' equity....... 121,751 121,417 124,300 123,925 120,736 123,495 121,528
</TABLE>
- ---------------
(a) Includes information as to certain acquisitions accounted for as purchases
from the dates of acquisition in January 1990 and May 1990.
(b) Includes a charge of $0.2 million or $4.12 per share for the adoption of
SFAS No. 109.
32
<PAGE> 33
DUNDEE MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BACKGROUND
Dundee was founded on February 11, 1888, as the Kincaid Manufacturing
Company. The company was chartered under the laws of the State of Georgia as
Georgia Cotton Mills in 1911, and on August 28, 1942, the company's charter was
amended to change its name to Dundee Mills, Incorporated.
The following discussion and analysis is intended to assist in
understanding Dundee's results of operations and changes in financial position.
This discussion should be read in conjunction with the information under "Dundee
Selected Financial Data" and "Business of Dundee," as well as Dundee's financial
statements, including notes thereto, included elsewhere in this Proxy Statement
and Prospectus.
RESULTS OF OPERATIONS
Four Months Ended December 31, 1994 Compared to Four Months Ended December 31,
1993.
Net sales for the four months ended December 31, 1994 increased to $90.4
million, an increase of 6.2% compared to the same period during the prior year.
Net sales in the towel division increased $3.1 million, or 5.5%, due primarily
to higher average selling prices. Net sales in the baby products and healthcare
division increased $1.4 million, or 5.3%, over the comparable period in fiscal
1993 due primarily to price increases. Net sales in the broadcloth fabric
division increased $1.2 million, or 79.3%, over the comparable period in fiscal
1993 primarily because of a large one-time order. Management believes that the
baby products and healthcare division will continue to realize increased net
sales; however, unit sales in the towel division will probably not increase
without additional expenditures for manufacturing equipment.
Total gross profit was $13.1 million, or 14.5% of net sales, compared to
$10.9 million, or 12.8% of net sales, during the same period in fiscal 1993.
Gross profit increased principally in the towel division during the four months
ended December 31, 1994 primarily because of decreased manufacturing costs and
an increase in average selling prices compared to the same period in 1993.
Selling, general and administrative expenses were $10.1 million, or 11.1%
of net sales, compared to $9.2 million, or 10.8% of net sales, for the same
period in fiscal 1993. The increase resulted primarily from higher expenditures
relating to the development of management information systems ("MIS"), which are
being developed both to control the flow of in-process production and to apply
goods to customer orders. Further development of MIS capability has been
curtailed pending consummation of the Merger. Following consummation of the
Merger, additional costs may be incurred to integrate Dundee's data into
Springs' reporting system.
Profit before taxes was $1.8 million, or 2.0% of net sales, compared to a
loss of $70,000, or 0.1% of net sales, for the same period during the prior
year. Dundee's net income was $1.1 million compared to a loss of $241,000 for
the same period during the prior year.
Fiscal Year Ended August 31, 1994 Compared to Fiscal Year Ended August 31,
1993.
Net sales increased 1.3% during fiscal 1994 to $266.8 million. Net sales in
the towel division increased $12.5 million, or 7.8%, due primarily to expanded
production capacity, and net sales in the baby products and healthcare division
decreased $4.1 million, or 4.5%, primarily because of erosion of the market for
cloth diapers. The broadcloth fabric division's net sales decreased $2.2
million, or 26.3%, primarily because of the loss of a major customer. Dundee's
specialty fabrics division was discontinued in fiscal 1994, resulting in a
decrease in net sales of $2.8 million.
Total gross profit was $32.0 million, or 12.0% of net sales, compared to
$34.8 million, or 13.2% of net sales, during fiscal 1993. Gross profit decreased
primarily because Dundee reduced its average selling prices in the towel
division in an effort to reduce inventory and sold increased amounts of towel
division merchandise at close-out or off-quality prices. Gross profit in the
broadcloth fabric division decreased in fiscal 1994 because of
33
<PAGE> 34
a decline in sales of broadcloth fabric. These decreases were partially offset
by an increase in gross profit in the baby products and healthcare division
primarily because of favorable purchases of raw materials.
Selling, general and administrative expenses remained relatively flat at
$29.8 million, or 11.2% of net sales, compared to $29.1 million, or 11.0% of net
sales, in fiscal 1993. Interest expense decreased to $1.8 million from $2.3
million in fiscal 1993 as Dundee reduced its debt by $6.2 million to $31.9
million. The net loss before the cumulative effect of an accounting change was
$1.3 million compared to net income of $870,000 for fiscal 1993. Effective
September 1, 1993, Dundee adopted SFAS No. 109, "Accounting for Income Taxes."
The cumulative effect of this change in Dundee's method for accounting for
income taxes was to increase the net loss in fiscal 1994 by $193,000 to $1.5
million.
Fiscal Year Ended August 31, 1993 Compared to Fiscal Year Ended August 31,
1992.
Net sales were $263.4 million in fiscal 1993, an increase of approximately
6.3% from net sales of $247.7 million in fiscal 1992. Increased production
capacity enabled Dundee to increase net sales by $9.4 million, or 6.2%, in the
towel division. Higher volume of shipments to customers enabled Dundee to
increase net sales by $7.0 million, or 8.4%, in the baby products and healthcare
division. Net sales of other products decreased by $727,000 in fiscal 1993.
Total gross profit decreased to $34.8 million, or 13.2% of net sales, in
fiscal 1993 from $43.2 million, or 17.5% of net sales, in fiscal 1992. The
decrease in total gross profit reflects a decrease in gross profit in the towel
division resulting primarily from retailer demand for darker shades of towels
requiring more dye, and for quicker delivery of smaller cartons requiring more
handling. In addition, in the baby products and healthcare division, gross
profit decreased in fiscal 1993 due primarily to competitive pricing pressures.
Selling, general and administrative expenses were $29.1 million, or 11.0%
of net sales, in fiscal 1993 compared to $27.5 million, or 11.1% of net sales,
in fiscal 1992. The higher expenses in fiscal 1993 resulted primarily from an
increase in MIS development expenditures aimed at improving Dundee's forecasting
and scheduling systems.
Profit before income taxes was $1.5 million, or 0.6% of net sales, a
decrease of approximately $8.9 million, or 85.5%, compared to $10.4 million, or
4.2% of net sales, in fiscal 1992. Net income was $870,000, or 0.3% of net
sales, in fiscal 1993 compared to $6.5 million, or 2.6% of net sales, in fiscal
1992.
Liquidity and Capital Resources
Net cash provided by operating activities for the fiscal years ended August
31, 1994, 1993, and 1992 totaled $19.8 million, $15.1 million, and $7.2 million,
respectively. Net cash provided by operating activities during the four months
ended December 31, 1994, and December 31, 1993, amounted to $2.6 million and
$6.0 million, respectively.
In fiscal 1994, Dundee created a model inventory target that called for
reducing inventory levels from the prior fiscal year. The target accounted for
desired customer service levels, replenishment cycles, and financial resources
committed to inventory. Dundee reached this target in fiscal 1994.
Due to the seasonality of Dundee's business, which results in decreased
order volume in the second fiscal quarter, December 31 inventories are typically
higher than August 31 inventories.
Dundee finances its capital requirements through an unsecured revolving
bank line of credit. Dundee also has been able to obtain funding for major
expenditures through industrial revenue bonds, which are issued by local
development authorities. The industrial revenue bonds bear interest at a
floating rate, which averaged 4.05% at March 1, 1995.
During fiscal 1994, Dundee issued two new series of industrial revenue
bonds aggregating $10.3 million, which effectively refinanced two series of
bonds issued in 1990. At August 31, 1994, Dundee had outstanding letters of
credit from a bank totaling $12.1 million relating to industrial revenue bonds
and had pledged land, buildings and equipment with a net book value of
approximately $10.9 million as collateral.
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<PAGE> 35
The revolving line of credit provides Dundee with unsecured borrowing
capacity of up to $25 million. At March 1, 1995, the outstanding borrowings
under this line were approximately $18 million. Pursuant to an interest rate
swap agreement, the interest rate on borrowings up to $16 million under the line
of credit is effectively fixed at 6.1% and the interest rate on borrowings in
excess of $16 million is LIBOR plus 0.35%, which was 6.475% at March 1, 1995.
Dundee is required to make quarterly payments to its lender of a 1/4% annual
commitment fee on the average unused amount of the commitment. Dundee's
management believes that Dundee's available borrowings and future cash flows
from operating activities will be sufficient to fund its future cash needs.
Expenditures for the purchases of property and equipment in fiscal years
1994, 1993, and 1992 were $8.1 million, $3.4 million, and $18.4 million,
respectively. In fiscal 1992, 84.5% of Dundee's total capital expenditures were
made to purchase land, complete construction and begin production at the
Hartwell Finishing Plant. In 1994, of the $8.1 million spent on property, plant,
and equipment, over 50% was spent to provide new finishing equipment at the
Lowell Bleachery and to augment the spinning equipment at the Hartwell
Manufacturing Plant. Dundee has planned capital expenditures of $3.8 million for
fiscal 1995, approximately 25% of which is for projects designed to allow Dundee
to more efficiently utilize utilities and assist in meeting environmental
compliance schedules.
SEASONALITY
Dundee's sales are affected by the seasonal nature of the business of its
primary customers who are in retail sales and the hospitality industry.
Accordingly, Dundee experiences its highest levels of cash flow during its first
quarter, when retailers are preparing for holiday sales. Dundee's lowest cash
flow levels generally occur during its second fiscal quarter, when retailers
clear inventory and recreational travel is down.
COST OF RAW MATERIAL
Dundee's financial performance is closely tied to the cost of raw
materials, primarily cotton. Competitive pressures have limited and may in the
future limit the ability of Dundee to raise prices to reflect the increased cost
of raw materials. Dundee enters into forward contracts with cotton merchants to
purchase cotton at specified prices for future delivery. Dundee takes these
fixed prices into account in determining its pricing for finished products.
Dundee does not hedge its cost of cotton through purchasing futures or options
in the commodities market.
35
<PAGE> 36
BUSINESS OF SPRINGS
Springs began its operations in 1888 and is a diversified home furnishings
and textile manufacturer and finisher operating 39 manufacturing facilities in
nine U.S. states. Springs also has minority interests in industrial fabrics
businesses in Europe and Asia. Twenty-four manufacturing facilities are located
in South Carolina, where Springs is the state's largest manufacturing employer.
Four manufacturing facilities are located in North Carolina, three in Georgia,
two each in Alabama and California, and one each in Pennsylvania, Tennessee,
Wisconsin and Nevada. Sales, distribution and administrative offices are located
throughout the U.S. and Canada. Springs employs approximately 20,100 people.
The textile manufacturing industry in the United States has, in recent
years, undergone a series of corporate restructurings and consolidations.
Through both internal development and acquisitions of complementary businesses,
Springs has emerged as one of the most significant textile manufacturers in the
United States. Among the factors contributing to Springs' industry position are
its highly automated manufacturing facilities, its well known brands and its
commitment to fashion design and diverse product offerings in the home
furnishings field.
Springs' operations are conducted in two segments: home furnishings and
specialty fabrics.
HOME FURNISHINGS
Home furnishings is the larger segment of Springs' business, with sales of
$1.460 billion in 1994 and operating income of $97.5 million. In the home
furnishings segment, Springs manufactures, purchases for resale and markets
finished products, including sheets, pillowcases, bedspreads, comforters, shower
curtains, bath rugs and other bath products and juvenile novelties. Also in this
segment, Springs manufactures, purchases for resale and markets decorative
window products, including drapery hardware, vertical and horizontal blinds and
pleated and other window shades.
Springs' bedding and bath products are sold to a wide range of customers
and are varied in design, styling and color to appeal to a broad spectrum of
consumers. Springs' Wamsutta(R) bed and bath products are targeted to the
premium segment of the market. Springmaid(R) sheets and related bed and bath
fashions are aimed at the middle to upper range of the consumer market and are
sold primarily to major department and specialty stores. Springs markets bed and
bath products under many license agreements, including licenses with The Walt
Disney Company, Bill Blass, Ltd., and Liz Claiborne, Inc. Springs'
Performance(TM) brand bed and bath products are sold primarily to mass merchants
and to catalog operations.
During 1992, the Company acquired the marketing and distribution operations
of C.S. Brooks Canada, Inc. and the Griffiths-Kerr division of Finlayson
Enterprises, Ltd., both located in Canada, in a continuing effort to better
serve Canadian home furnishings customers and to expand the Company's presence
in the Canadian market. The Company markets bed and bath products in Canada
under the trademarks Wabasso(R) and Texmade(R) in addition to its U.S. brand
names.
Springs' Bath Fashions Division offers a wide range of bath products. These
products include tufted bath rugs, shower curtains, towels and other bath
accessories.
Springs' Window Fashions Division manufactures and markets drapery hardware
and window treatment products. Drapery hardware is marketed under the Graber(R)
trademark, and vertical and horizontal blinds are marketed under the Graber(R)
and Bali(R) trademarks. Pleated shades are marketed under the FashionPleat(R)
and CrystalPleat(R) trademarks. Private labels also are used for all products.
Springs recently announced the execution of a letter of intent with Dawson
Home Fashions, Inc. ("Dawson") providing for the cash purchase by Springs of
substantially all of Dawson's assets. Dawson, based in New York City, is a major
producer and marketer of shower curtains, coordinated accessories and other bath
products and has annual sales of approximately $90 million.
36
<PAGE> 37
SPECIALTY FABRICS
The specialty fabrics segment manufactures, finishes, purchases for resale
and markets a wide variety of fabrics, with sales of $608.8 million in 1994 and
operating income of $38.3 million. Specialty fabrics products include finished
fabrics for industrial, apparel and specialty end uses.
Springs' subsidiary, Clark-Schwebel, Inc., is the world's leading producer
of woven fiber glass fabrics and also manufactures fabrics made from Kevlar(R)
yarn. Customers of Clark-Schwebel, Inc. include producers of electronic circuit
boards, aircraft, boats and protective apparel such as anti-ballistic vests and
helmets.
The specialty fabrics segment produces and markets other finished fabrics
in a broad range of colors, weights, fibers, finishes and printed designs and
sells them principally to manufacturers of apparel and decorative home
furnishings, and to retailers of home sewing fabrics under the trademarks
Springmaid(R), Wamsutta(R) and Ultrasuede(R) and under private labels. This
segment also produces and sells protective and fire retardant fabrics for
industrial and commercial applications and manufactures and markets solid color
and printed fabric for wall panels and furniture fabrics for the office
furnishings market.
RECENT OPERATING RESULTS
For the quarter ended April 1, 1995, Springs' net sales were $483.1
million, down slightly from net sales of $485.2 million in the comparable
quarter of 1994. Excluding net sales attributable to Springs' former subsidiary
Clark-Schwebel Distribution Corp., which was sold by Springs in June 1994, first
quarter net sales were up 4% from the first quarter of 1994. Net income for the
first quarter of 1995 increased 70% to $9.9 million, as compared with net income
of $5.8 million for the first quarter of 1994. Net income per share for the 1995
quarter increased 67% to $0.55 per share, as compared with $0.33 per share for
the 1994 quarter. Consolidated operating income was $23.1 million for the first
quarter of 1995, an increase of 26% over the first quarter of 1994. This growth
in operating income was attributable primarily to sales growth and improved
margins in Springs' home furnishings segment. In view of recent upward trends in
the costs of raw materials, Springs expects its earnings to grow at a more
moderate pace during the second quarter of 1995.
37
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BUSINESS OF DUNDEE
Dundee is a leading manufacturer of towels, infant and toddler bedding,
knitted infant apparel and healthcare products. The business of Dundee is
divided into three primary divisions: terry towel products, baby and healthcare
products, and broadcloth fabric. The principal executive offices of Dundee are
located at 301 Railroad Avenue, Griffin, Georgia, 30224.
TOWELS
Sales of Dundee's towel division comprise approximately two thirds of the
company's total sales and approximately 14% of the towels sold in the United
States. The division is divided into two groups, retail towels and institutional
towels. The towel division of Dundee is vertically integrated.
Retail. Dundee manufactures solid color, embellished and printed towels
that are sold in the middle to upper middle price range. The towels are sold
directly to major department stores and mass merchandisers throughout the United
States.
Institutional. This group sells towels to institutional customers,
primarily in the hospitality and healthcare industries, and traditionally has
been Dundee's strongest. Dundee holds approximately 40% of the domestic market
for sales to hotels, motels, hospitals and convalescent homes. Sales to
institutional customers are made through distributors.
BABY PRODUCTS/HEALTHCARE
The baby products/healthcare division produces approximately 30% of
Dundee's sales through the manufacture of infant and toddler bedding and the
manufacture of infant apparel, diapers and bibs and similar products for
incontinent adults.
Baby Products. Dundee manufactures bedding, diapers and knitted apparel
products for infants and toddlers. The baby products group of the company
purchases unfinished fabrics from which it produces sheets, comforters, dust
ruffles, bumper pads and receiving blankets for infants. Additionally, Dundee
purchases yarn to knit undershirts, caps, booties and gowns for infants.
Approximately 80% of these baby products are sold to ten customers, which are
mass merchandisers. Sales of baby products are approximately 85% of Dundee's
sales in the baby products/healthcare division.
Important to the baby products group are license agreements with The Walt
Disney Company that grant Dundee the non-exclusive right to use Disney
characters with both its infant and toddler bedding and apparel products. Dundee
holds licenses to distribute these products in the United States, Central
America, Mexico and Singapore. Sales of products using Disney characters
comprise approximately 28% of Dundee's sales of baby products.
Healthcare. Adult incontinent products, such as adult diapers, bibs and
draw sheets, are sold through distributors to institutional customers, which are
primarily hospitals and convalescent homes.
BROADCLOTH FABRIC
Broadcloth fabric is manufactured at the company's plant in Dadeville,
Alabama. Broadcloth fabric is used in food distribution and as backing for
upholstery and other fabric. This product is sold by an independent sales agent
of Dundee. Sales of broadcloth fabric are approximately 2% of the Company's
total sales.
ORGANIZATION AND EMPLOYEES
Dundee employed approximately 3,740 employees at March 1, 1995,
approximately 2,100 of whom are located in Griffin, Georgia. Eighteen of these
employees, located throughout the United States and in Canada, comprise Dundee's
sales and merchandising group, which is headquartered in New York City. Each
sales and merchandising representative concentrates on a specific product
division of Dundee. The employees are not represented by a collective bargaining
unit. Management of Dundee considers relations with its employees to be good.
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<PAGE> 39
PROPERTIES
Dundee owns 13 manufacturing plants in Georgia, six of which are located in
Griffin, and one in Alabama. These facilities range in size from approximately
19,000 to 670,000 square feet. Additionally, Dundee leases 13 properties which
are used for office space for sales representatives, warehouse storage and
outlet stores. These properties are leased generally for terms of two to ten
years, with varying renewal options.
SPRINGS MANAGEMENT AND PRINCIPAL SHAREHOLDERS
Springs' 1994 Annual Report on Form 10-K, which is incorporated herein by
reference, including information incorporated in the Form 10-K by reference to
Springs' Proxy Statement for its 1995 annual meeting, contains information about
Springs' directors and executive officers, their business history, stock
ownership, compensation and direct or indirect interests in certain transactions
with Springs, information about the principal holders of Springs Class A Stock
and Springs Class B Stock and additional financial information not contained in
this Proxy and Registration Statement.
39
<PAGE> 40
DUNDEE VOTING STOCK AND PRINCIPAL HOLDERS
The following table sets forth, as of March 1, 1995, certain information
with respect to ownership of the outstanding Dundee Common Stock, by (i) all
persons known by Dundee to own beneficially more than 5% of the outstanding
Dundee Common Stock, (ii) each director of Dundee, (iii) each executive officer
of Dundee, and (iv) all directors and executive officers of Dundee, as a group.
<TABLE>
<CAPTION>
NAME OF SHARES OF DUNDEE COMMON PERCENT
BENEFICIAL OWNER STOCK BENEFICIALLY OWNED(A) OF CLASS
- -------------------------------------------------------- --------------------------- --------
<S> <C> <C>
Trust Company Bank(b)................................... 5,624 12.0
Trust and Investment Services
P.O. Box 4655
Atlanta, GA 30302
The Newton Family Partnership........................... 3,828 8.2
c/o John T. Newton
Dundee Mills, Incorporated
301 Railroad Avenue
Griffin, GA 30224
435 Associates, Ltd.(c)................................. 3,149 6.7
c/o Harvey M. Cheatham
P.O. Box 88185
Atlanta, GA 30356
Kendall J. Zeliff, Jr.(d)............................... 2,380 5.1
1100 Peachtree Street, NE
Suite 2050
Atlanta, GA 30309
DIRECTORS:
Harvey M. Cheatham(e)................................... 3,712 7.9
P.O. Box 88185
Atlanta, GA 30356
John T. Newton(f)....................................... 4,326 9.3
Dundee Mills, Incorporated
301 Railroad Avenue
Griffin, GA 30224
J. Gilliam Cheatham(g).................................. 1,435 3.1
David G. Newton(h)...................................... 1,340 2.9
J. Henry Walker, III.................................... 506 1.1
R. Wayne Boyd........................................... 185 *
Howard B. Gossett, Jr................................... 49 *
EXECUTIVE OFFICERS:
Douglas R. Tingle(i).................................... 216 *
M. J. Yates(j).......................................... 90 *
V. Larry Perkins........................................ 85 *
All executive officers and directors as a group (10
persons).............................................. 11,944 25.6
</TABLE>
- ---------------
* Less than 1%
(a) Unless otherwise indicated, the named beneficial owner has sole voting power
and investment power with respect to all shares of Dundee Common Stock
listed.
(b) Includes an aggregate of 4,416 shares as to which Trust Company Bank has
sole voting and investment power under the terms of five separate trusts,
wills and agreements, and an aggregate of 1,208 shares as to
40
<PAGE> 41
which Trust Company Bank has shared investment power under the terms of
four separate trusts and wills.
(c) Harvey M. Chatham, who serves as a member of the Board of Directors of
Dundee, has sole voting and investment power over these shares.
(d) Mr. Zeliff has sole voting and investment power over such shares as trustee
under nine separate trusts.
(e) Includes 313 shares owned by a partnership in which Harvey M. Cheatham has
shared voting and investment power and 3,149 shares owned by 435
Associates, Ltd. in which he has sole voting and investment power.
(f) Includes 3,828 shares owned by The Newton Family Partnership, in which John
T. Newton has shared voting power and investment power, and 173 shares
owned by his wife.
(g) Includes 615 shares owned by J. Gilliam Cheatham as custodian for his
children.
(h) Includes 1,150 shares owned by a trust under which David G. Newton has
shared voting and investment power and 50 shares owned by him as custodian
for his niece and nephew.
(i) Includes 6 shares owned by Douglas R. Tingle as custodian for his children.
(j) Includes 25 shares owned by M. J. Yates' wife.
COMPARISON OF RIGHTS OF HOLDERS OF SPRINGS CLASS A STOCK
AND HOLDERS OF DUNDEE COMMON STOCK
The following summary compares certain rights of Dundee shareholders under
the Georgia Business Corporation Code (the "GBCC") and Dundee's Articles of
Incorporation and Bylaws with the rights of Springs shareholders under the South
Carolina Business Corporation Act ("SCBCA") and the Springs Articles of
Incorporation and Bylaws.
Dundee is incorporated under the laws of the State of Georgia. Springs is
incorporated under the laws of the State of South Carolina. Both Georgia and
South Carolina have adopted a form of the Revised Model Business Corporation
Act, and as a result the corporate codes of both states are similar in many
respects. Dundee shareholders, whose rights as shareholders are currently
governed by Georgia law and Dundee's Articles of Incorporation and Bylaws, will
become, upon consummation of the Merger and to the extent they receive shares of
Springs Class A Stock (referred to in this section as "Class A Stock"),
shareholders of Springs, and their rights will be governed by South Carolina law
and Springs' Articles of Incorporation and Bylaws.
The following summary does not purport to be a complete statement of the
rights of Springs shareholders under the SCBCA and Springs' Articles of
Incorporation and Bylaws as compared to the rights of Dundee shareholders under
Dundee's Articles of Incorporation and Bylaws and the GBCC, to which
shareholders are referred.
VOTING RIGHTS
Under Springs' Articles of Incorporation, every holder of Class A Stock is
entitled to one vote, in person or by proxy, for each share held of record, with
cumulative voting rights in the election of directors. Holders of Springs voting
preferred stock, if any, are also entitled to one vote per share. Holders of
Springs Class B Stock (referred to in this section as "Class B Stock") are
entitled to four votes per share with cumulative voting rights, except that in
certain circumstances the voting power of the Class B Stock is reduced. Such
circumstances include (a) votes with respect to business combinations involving
a person or entity controlling or under common control with Springs, in which
event Class B Stock is entitled to only one vote per share, and (b) amendments
to Springs' Articles of Incorporation that would (i) increase or decrease the
number of authorized shares or the par value of Class A or Class B Stock; (ii)
adversely alter or change the powers, preferences, relative voting power or
special rights of Class A or Class B Stock; or (iii) require class voting under
the SCBCA, in which event the affirmative vote of the holders of the affected
class, voting separately as a class, is required to approve the amendment.
Springs' Articles of Incorporation provide for cumulative voting with
respect to the election of directors. Cumulative voting in the election of
directors permits a shareholder to cast the number of votes equal to the
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number of votes per share (one as to Class A Stock and four as to Class B Stock)
times the number of his shares, multiplied by the number of directors to be
elected. A shareholder may give one nominee all of these votes or may distribute
the votes among the nominees as he desires. Under Springs' Bylaws, a director
cannot be removed from office by the shareholders if the votes cast against his
removal would be sufficient to elect him if then cumulatively voted at an
election of the entire Board of Directors or of the class of directors of which
he is a part.
Dundee's Articles of Incorporation provide for a single class of common
stock, Dundee Common Stock, holders of which are entitled under the GBCC to one
vote per share. Preferred stock is also authorized under Dundee's Articles of
Incorporation, having no voting rights except upon Dundee's failure to pay
dividends or if Dundee's current liabilities exceed 90% of its commercial
assets.
LIABILITY OF DIRECTORS
Both the GBCC and the SCBCA allow a corporation to limit the personal
liability of directors with certain exceptions. Springs' Articles of
Incorporation provide that no director of the corporation shall have personal
liability to the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director unless and to the extent that such elimination
or limitation of personal liability is prohibited by the laws of the State of
South Carolina. Under South Carolina law, such limitation does not eliminate or
limit the liability of a director of Springs for (a) misappropriation of
business opportunities; (b) acts or omissions not in good faith or which involve
gross negligence, intentional misconduct or a knowing violation of law; (c)
unlawful payment of a dividend or an unlawful stock purchase or redemption; or
(d) any transaction involving improper personal benefits to the director.
Although permitted by the GBCC, Dundee's Articles of Incorporation do not
attempt to limit the personal liability of its directors.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under the SCBCA, a corporation may indemnify its officers, directors,
employees and agents, and in certain circumstances, must indemnify its officers
and directors, made party to a proceeding against liability incurred in the
proceeding if the person: (a) conducted himself in good faith; (b) reasonably
believed, in the case of conduct in his official capacity with the corporation,
that his conduct was in its best interest and, in all other cases, that his
conduct was at least not opposed to its best interest; and (c) in the case of
any criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. A South Carolina corporation may not indemnify a director (i) in
connection with a proceeding by or in the right of the corporation in which the
director was adjudged liable to the corporation or (ii) in connection with any
other proceeding charging improper personal benefit to him, whether or not
involving action in his official capacity, in which he was adjudged liable on
the basis that personal benefit was improperly received by him. Indemnification
permitted under the SCBCA in connection with a proceeding by or in the right of
the corporation is limited to reasonable expenses incurred in connection with
the proceeding.
Springs' Bylaws contain provisions for the indemnification of Springs'
officers and directors to the fullest extent provided by the SCBCA. Springs'
Bylaws also permit Springs to indemnify, or advance expenses in connection with
a proceeding that may be the subject of indemnification to, a non-officer or
non-director agent or employee of Springs to the extent and on such terms as the
Board of Directors of Springs determines from time to time.
The GBCC permits a corporation to indemnify directors and officers in
substantially the same way as the SCBCA. Pursuant to the GBCC, Dundee's Bylaws
provide for indemnification of directors and officers to the fullest extent
permitted by the GBCC.
DIRECTORS
Springs' Bylaws provide for a Board of Directors consisting of a minimum of
three and a maximum of fifteen directors, the exact number being fixed and
determined from time to time by the Board or by resolution
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of the shareholders. Directors are elected at the annual meeting of shareholders
and serve until the next annual meeting or any special meeting of the
shareholders called earlier for the purpose of electing directors, or, if
earlier, upon the director's death, resignation or removal. Directors can be
removed from office only by a vote of the shareholders. As explained above under
"-- Voting Rights," Springs' Articles of Incorporation provide for cumulative
voting.
Dundee's Bylaws provide for a Board of Directors consisting of a minimum of
seven and a maximum of eleven directors. The number of directors is to be fixed
by the shareholders at each annual meeting. Dundee's Articles of Incorporation
do not provide for cumulative voting with respect to the election of directors.
Any vacancy on Springs' Board of Directors, including a vacancy resulting
from an increase in the number of directors, may be filled by the shareholders
at an annual meeting or a special meeting called for that purpose or by a
majority of the remaining directors, even if the directors remaining in office
constitute less than a quorum of the Board. A director so elected serves until
the next annual meeting of the shareholders or any special meeting called for
the purpose of electing directors, or until his earlier death, resignation or
removal. Any vacancy on Dundee's Board of Directors may only be filled by the
remaining directors, and the director so elected serves for the unexpired term.
DIVIDENDS AND DISTRIBUTIONS
Unless provided otherwise by its Articles of Incorporation, a South
Carolina corporation or a Georgia corporation may pay dividends or make other
distributions with respect to its shares if after the dividend or distribution
the corporation has the ability to pay its debts as they become due and has net
assets in excess of all senior claims upon dissolution. Dundee's Articles of
Incorporation do not limit its ability to pay dividends or make other
distributions on common stock except that outstanding preferred stock, if any,
has a preference as to dividends.
Springs' Articles of Incorporation provide that each share of Springs Class
A Stock and Springs Class B Stock is equal with respect to rights to
distributions (including dividend distributions) other than cash dividends and
dividends or other distributions payable in Springs stock. If cash dividends are
declared by Springs' Board of Directors on Springs Class B Stock, Springs must
declare dividends on each share of Springs Class A Stock in an amount equal to
at least 110% of the per share amount declared on each share of Springs Class B
Stock. In the event of a dividend or other distribution payable in Springs
stock, only shares of Class A Stock can be distributed with respect to Class A
Stock and only shares of Class B Stock can be distributed with respect to Class
B Stock. Payment of dividends on both Springs Class A Stock and Springs Class B
Stock is subject to the dividend preference of outstanding preferred stock, if
any.
SPECIAL SHAREHOLDER MEETINGS; ACTION WITHOUT A MEETING
As permitted by South Carolina law, Springs' Bylaws provide that a special
meeting of shareholders may be called by the Board of Directors, the Chairman of
the Board, or upon the written request of the holders of at least 10% of the
outstanding votes entitled to be cast on the issue to be considered at the
special meeting. Springs' Bylaws require that written notice of the date, time,
place and purpose of any special meeting be given to shareholders.
Georgia law provides that a special meeting of shareholders of a
corporation with more than 100 shareholders of record may be called by the Board
of Directors or any person authorized to do so by the Articles of Incorporation
or Bylaws, and a meeting must be called by the corporation upon the written
request of the holders of at least 25% (or any greater or lesser percentage as
may be provided in the articles of incorporation or bylaws) of the outstanding
shares entitled to vote on the issue to be considered at the special meeting.
Dundee's Bylaws provide that a special meeting may be called by the written
request of the holders of at least 25% of the outstanding shares of Dundee
Common Stock and by the Board of Directors, the Chairman of the Board or the
President. Dundee's Bylaws require that written notice of the time, place and
object of all special meetings be given to shareholders.
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Under both Georgia and South Carolina law, shareholders may act without a
meeting by unanimous written consent.
PREEMPTIVE RIGHTS
Under the SCBCA, shareholders of a South Carolina corporation have a
preemptive right to acquire proportional amounts of the corporation's unissued
shares except to the extent the corporation's Articles of Incorporation
otherwise provide. Springs' Articles of Incorporation provide that holders of
shares of stock of any class or series are not entitled to any preemptive rights
to subscribe for, or purchase, any shares of stock of any class or series, or
any bond, debentures or other securities of Springs.
Under the GBCC, so long as Dundee's Articles of Incorporation do not
contain a provision negating preemptive rights, Dundee shareholders have
preemptive rights to acquire proportional amounts of Dundee's unissued or
treasury shares upon the decision of the Board of Directors to issue them. No
preemptive rights would exist, however, under the GBCC as to (a) shares issued
as a share dividend, (b) fractional shares, (c) shares issued to effect a merger
or share exchange, (d) shares issued as compensation (or to satisfy conversion
or option rights created to provide compensation) to directors, officers, agents
or employees of Dundee upon terms and conditions approved or ratified by the
affirmative vote of the holders of a majority of the shares entitled to vote
thereon, (e) shares issued under bankruptcy reorganization, (f) shares sold
otherwise than for money, if deemed by the Board of Directors in good faith to
be advantageous to Dundee's business, or (g) shares released from preemptive
rights by waiver by the Dundee shareholders.
SHAREHOLDER INSPECTION RIGHTS
Under both the SCBCA and the GBCC, any shareholder may inspect and copy
certain corporate records regardless of the shareholder's purpose, and may also
inspect and copy the corporation's accounting records, the record of
shareholders, excerpts from meetings of the Board of Directors (or any committee
thereof), minutes of shareholder meetings, and any action taken by the Board of
Directors or shareholders by written consent, if the shareholder's demand is
made in good faith and for a proper purpose; provided, however, that such rights
may be limited by a Georgia corporation for shareholders owning 2% or less of
the outstanding shares. The SCBCA also allows shareholders holding at least one
percent of any class of shares to conduct an inspection of a corporation's tax
returns.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
Under South Carolina law generally, an amendment to a corporation's
articles of incorporation must be approved by: (a) two-thirds of the votes
entitled to be cast on the amendment, regardless of the class or voting group to
which the shares belong, and (b) two-thirds of the votes entitled to be cast on
the amendment within each voting group entitled to vote as a separate voting
group on the amendment. The holders of the outstanding shares of a class are
entitled to vote as a separate voting group (if shareholder voting is otherwise
required under the SCBCA) on a proposed amendment to Springs' Articles of
Incorporation if the amendment would result in certain fundamental changes to
the rights and preferences of that class. However, under Springs' Articles of
Incorporation, provisions in Springs' Articles of Incorporation relating to
special voting requirements for certain business combinations may be amended
only upon the vote of at least 75% of the outstanding shares entitled to vote,
voting together as a single class.
Both South Carolina law and Georgia law permit the following provisions of
a corporation's articles of incorporation to be amended by action of the Board
of Directors without shareholder approval: (a) changes in the issued and
unissued shares of an outstanding class of shares into a greater number of whole
shares, if the corporation has only that class of shares outstanding, (b) minor
changes to the corporate name and (c) certain minor technical amendments.
A South Carolina corporation's board of directors may amend the
corporation's bylaws unless the articles of incorporation or bylaws reserve the
power to the shareholders and except that certain types of provisions may be
amended or repealed only by the shareholders under South Carolina law. Springs'
Bylaws permit amendment of the Bylaws by either the shareholders or the Board of
Directors.
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Under Georgia law generally, an amendment to a corporation's articles of
incorporation must be approved by a majority of the votes entitled to be cast on
the amendment by each voting group entitled to vote on the amendment. Classes of
shares are entitled to vote as groups under substantially the same circumstances
as under South Carolina law. As permitted by Georgia law, Dundee's Bylaws may
only be amended or added to at any regular or special meeting of shareholders by
a vote of two-thirds of the stock represented at the meeting.
APPRAISAL RIGHTS
Under the SCBCA, shareholders who comply with the procedures for enforcing
appraisal rights may exercise such rights, under certain circumstances, upon the
merger of a corporation, the consummation of a plan of share exchange to which
the corporation is the acquired party, the sale or other disposition of all or
substantially all of the corporation's assets other than in the usual and
regular course of business, upon certain fundamental amendments to the articles
of incorporation, the approval of a control share acquisition, and as provided
by the articles of incorporation, bylaws or resolution of the board of
directors.
Under the GBCC as applicable to Dundee, shareholders who comply with the
procedures for enforcing appraisal rights may exercise such rights, under
certain circumstances, upon the merger of a corporation, the consummation of a
plan of share exchange to which the corporation is the acquired party, the sale
or other disposition of all or substantially all the corporation's assets, upon
certain fundamental amendments to the articles of incorporation, and as provided
by the articles of incorporation, bylaws or resolution of the board of
directors.
ANTI-TAKEOVER PROVISIONS
Springs' Articles of Incorporation and South Carolina law have implemented
certain measures which could have the effect of discouraging takeover attempts
not supported by Springs' Board of Directors. These provisions are discussed
below.
A special vote of Springs' shareholders is required to approve certain
mergers, consolidations, sales of assets and other transactions with any
Interested Shareholder (as defined below) or any Affiliate (as defined in Rule
12b-2 of the Exchange Act) of any Interested Shareholder. Such a "business
combination" may only be consummated if either (a) such business combination is
approved by the affirmative vote of holders of at least 75% of the voting power
of Springs' outstanding voting stock, (b) such business combination has been
approved by a majority of the Continuing Directors (as defined below) then in
office or (c) all provisions of the "fair market value" provision set forth in
Article 7(c) of Springs' Articles of Incorporation have been met. An "Interested
Shareholder" means any person (other than Springs or any subsidiary of Springs)
who (i) is the beneficial owner of more than 10% of the voting stock of Springs,
(ii) is an Affiliate of Springs and at any time within two years prior to the
date in question beneficially owned Springs voting stock having 10% or more of
the voting power of all then outstanding voting stock, or (iii) is an assignee
of or has otherwise succeeded to any shares of voting stock which were at any
time within the two-year period immediately prior to the date in question
beneficially owned by an Interested Shareholder, if such assignment or
succession occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act.
"Continuing Director" means any member of the Board of Directors who (i) was a
member of the Board of Directors on March 1, 1987, (ii) is unaffiliated with the
Interested Shareholder in question and who was a member of the Board of
Directors prior to the time that such Interested Shareholder became an
Interested Shareholder, and (iii) was nominated or elected by a majority of
Continuing Directors then on the Board of Directors. These special voting
requirements are designed to give minority shareholders a voice in approving any
merger or similar transaction following a takeover or change in control. This
right may be taken into account by shareholders in acting upon a tender offer,
and it may discourage unfriendly takeovers and make more difficult the removal
of management.
South Carolina law contains additional provisions that are similar to (but
differ in some respects from) the special voting requirements for certain
business combinations in Springs' Articles of Incorporation. These provisions
impose super majority voting requirements or a fair pricing procedure for
certain business
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combinations with a 10% or greater shareholder unless a "fair price" is met and
also contain provisions restricting the voting rights of persons who, through
certain acquisitions ("control share acquisitions"), are able to exercise
control over certain South Carolina corporations. A South Carolina corporation
must specifically elect, through an amendment to its Bylaws or Articles of
Incorporation, not to be governed by these provisions. Springs has not made such
an election with respect to either the fair price or the control share
acquisition provisions of South Carolina law, and thus both apply to Springs.
Georgia law also contains certain elective provisions that are similar to
(but differ in some respects from) the special voting requirements for certain
business combinations in Springs' Articles of Incorporation, and which impose
additional restrictions on a corporation's ability to engage in a business
combination with a substantial shareholder. These provisions do not apply to a
Georgia corporation unless it has affirmatively elected to be subject to them in
its articles of incorporation or bylaws. Dundee has not elected to be subject to
these provisions.
SHAREHOLDER APPROVAL OF MERGERS AND ASSET SALES
In general, unless the articles of incorporation require a greater or
smaller vote (in no event less than a majority) or the board of directors
requires a greater vote, the SCBCA requires a merger of a South Carolina
corporation to be approved by two-thirds of the total votes entitled to be cast
and two-thirds of the votes within any separate class or other voting group that
is entitled to vote separately on the matter.
Unless the articles of incorporation specify otherwise, however, the board
of directors does not need to submit a plan of merger to the shareholders of the
surviving corporation if: (a) the articles of incorporation of the surviving
corporation will not differ, with certain exceptions, from its articles of
incorporation before the merger, (b) each shareholder of the surviving
corporation whose shares were outstanding immediately before the effective date
of the merger will hold the same number of shares, with identical designations,
preferences, limitations and relative rights, immediately after the merger, (c)
the number of voting shares outstanding immediately after the merger, plus the
number of voting shares issuable as a result of the merger (either by the
conversion of securities issued pursuant to the merger or the exercise of rights
and warrants issued pursuant to the merger), will not exceed by more than 20%
the total number of voting shares of the surviving corporation outstanding
immediately before the merger, and (d) the number of shares that entitle their
holders to participate without limitation in distributions ("participating
shares") outstanding immediately after the merger, plus the number of
participating shares issuable as a result of the merger (either by the
conversion of securities issued pursuant to the merger or the exercise of rights
and warrants issued pursuant to the merger), will not exceed by more than 20%
the total number of participating shares of the surviving corporation
outstanding immediately before the merger.
In general, unless the articles of incorporation, bylaws, or the board of
directors requires a greater vote, the GBCC requires a merger of a Georgia
corporation to be approved by the holders of a majority of (a) all votes
entitled to be cast on the plan by all shares entitled to vote on the plan,
voting as a single voting group, and (b) all votes entitled to be cast by
holders of the shares of each voting group entitled to vote separately on the
plan as a voting group pursuant to the corporation's articles of incorporation.
Under Georgia law, unless the articles of incorporation specify otherwise,
the board of directors need not submit a plan of merger to the shareholders of
the surviving corporation if (a) the articles of incorporation of the surviving
corporation will not differ, with certain exceptions, from its articles before
the merger, (b) each shareholder of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger will hold the
same number of shares, with identical designations, preferences, limitations and
relative rights, immediately after the merger, and (c) the number and kind of
shares outstanding immediately after the merger, plus the number and kind of
shares issuable as a result of the merger and by the conversion of securities
issued pursuant to the merger or the exercise of rights and warrants issued
pursuant to the merger, will not exceed the total number and kind of shares of
the surviving corporation authorized by its articles of incorporation
immediately before the merger.
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SPRINGS CAPITAL STOCK
The authorized capital stock of Springs consists of 40,000,000 shares of
Class A Common Stock, $.25 par value (referred to in this section as "Class A
Stock"), 20,000,000 shares of Class B Common Stock, $.25 par value (referred to
in this section as "Class B Stock") and 1,000,000 shares of Voting Preferred
Stock, $1.00 par value (of which no shares have been issued or are outstanding).
A total of 9,772,307 shares of Class A Stock and 7,830,375 shares of Class B
Stock were outstanding on March 6, 1995. Substantially all of the shares of
Class B Stock are held by Anne Springs Close, members of her family (including
two of her children, Crandall Close Bowles and Leroy S. Close, who are directors
of Springs) and certain of their affiliates and related parties. The shares of
Class B Stock held by the Close family and their affiliates and related parties
represented approximately 75.3% of the voting power of all Springs voting
securities outstanding as of March 6, 1995, subject to the limitations with
respect to the voting rights of Class B Stock discussed below.
VOTING RIGHTS
Holders of Class A Stock are entitled to cast one vote for each share held
in matters upon which shareholders are entitled to vote. Holders of Class B
Stock are entitled to cast four votes for each share held in all matters upon
which shareholders are entitled to vote, except that with respect to shareholder
approval of a "Business Combination," as defined in Article 7 of Springs'
Articles of Incorporation, involving an "Interested Shareholder," as defined in
Article 7, or a person or entity controlling or under common control with an
Interested Shareholder, holders of Class B Stock are entitled to cast only one
vote per share. Any such Business Combination must be approved by the
affirmative vote of the holders of at least 75% of Springs outstanding voting
stock.
Holders of Class A Stock and Class B Stock also have cumulative voting
rights in the election of directors. Cumulative voting in the election of
directors would permit a shareholder to cast a number of votes equal to the
number of votes per share (one as to Class A Stock and four as to Class B Stock)
times the number of his shares, multiplied by the number of directors to be
elected. A shareholder may give one nominee all of these votes or may distribute
the votes among the nominees as he desires.
Both classes vote together on all matters as a single class, except with
respect to (a) any amendment to Springs' Articles of Incorporation adversely
changing the powers, preferences or special rights of a class, which would
require the separate approval of a majority of the votes of the class affected
as well as the approval of two-thirds of the votes of both classes voting
together, and (b) such other matters as may require class voting under the South
Carolina Business Corporation Act.
Under a South Carolina statute regulating control share acquisitions, a
person who acquires shares under certain circumstances in certain South Carolina
corporations (including Springs), which, when aggregated with all other shares
with respect to which such person has voting control, would result in such
person having voting control over the stock of such corporation within certain
ranges (one-fifth to one-third, one-third to a majority or a majority or more)
(a "control share acquisition"), will not be able to vote any of such shares
unless and until voting rights have been granted by resolution adopted by
majority vote of the disinterested shareholders. If such voting rights are
granted and the acquiring shareholder thereby holds a majority of voting power
for the election of directors, all other shareholders have dissenters' rights to
receive "fair value" for their shares, which shall not be less that the highest
price per share paid by the acquiring shareholder for the shares in the control
share acquisition.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each share of Class A Stock and Class B Stock is equal in respect to rights
to distributions (including dividend distributions) in stock or property (other
than cash) of Springs. In the case of cash dividends, other than distributions
upon liquidation of Springs, the Board of Directors must declare dividends on
each share of Class A Stock of at least 110% of the amount, if any, declared per
share of Class B Stock. The Board of Directors, however, is not obligated to
declare any dividends on Class A Stock or Class B Stock. Dividends payable on
Class A Stock and Class B Stock will depend upon the earnings of Springs, its
financial condition
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and other relevant factors. Neither Class A Stock nor Class B Stock has any
cumulative dividend rights. Each class has the same rights regarding
distributions upon liquidation of Springs.
In the case of stock dividends, or other distributions payable on Class A
Stock and Class B Stock in capital stock of Springs, including distributions
pursuant to stock splits or divisions of Class A Stock or Class B Stock, only
Class A Stock will be distributed with respect to Class A Stock and only Class B
Stock will be distributed with respect to Class B Stock. Neither Class A Stock
nor Class B Stock will be split, divided or combined, nor may stock dividends be
distributed, unless the other class is also split, divided or combined, or a
stock dividend on the other class is distributed, at a rate per share that would
maintain the same relative dividend rate and voting and other rights of the two
classes.
CONVERTIBILITY OF CLASS B STOCK
Class B Stock is convertible at all times, and without cost to the
shareholder (except any transfer taxes which may be payable if certificates are
to be issued in a name other than in which the certificate surrendered is
registered), into Class A Stock on a one-for-one basis. Therefore, holders of
Class B Stock desiring to sell all or part of their equity interest represented
by their shares of Class B Stock may convert those shares into an equal number
of shares of Class A Stock and sell the shares of Class A Stock in the public
market. If the number of outstanding shares of Class B Stock falls below 16.66%
of the number of all outstanding shares of Class A Stock and Class B Stock taken
together, the outstanding shares of Class B Stock will be automatically
converted into shares of Class A Stock on a one-for-one basis without further
action or notice. Class A Stock is not exchangeable for or convertible into
Class B Stock.
RESTRICTIONS ON TRANSFER OF CLASS B STOCK
Class B Stock may be transferred only (i) to other "beneficial owners," as
defined in Article 7 of the Articles of Incorporation, of Class B Stock, or (ii)
at the death of the shareholder pursuant to will or by intestate succession.
Accordingly, there is not a trading market for Class B Stock.
OTHER INFORMATION REGARDING CLASS A STOCK AND CLASS B STOCK
Springs may not issue any additional Class B Stock except in connection
with stock splits, stock dividends and other like distributions. The Board of
Directors possesses the power to issue shares of authorized but unissued Class A
Stock without further shareholder action.
Class A Stock and Class B Stock have no sinking fund provisions and do not
carry any preemptive rights enabling a holder to subscribe for or receive shares
of stock of Springs of any class or any other securities convertible into share
of stock of Springs.
Springs Class A Stock is listed on the New York Stock Exchange. The
transfer agent for Springs Class A Stock is Wachovia Bank of North Carolina,
N.A., Winston-Salem, North Carolina.
LEGAL MATTERS
The legality of the Springs Class A Stock offered hereby and certain other
legal matters will be passed upon for Springs by Sutherland, Asbill & Brennan,
Atlanta, Georgia.
EXPERTS
The financial statements of Springs at December 31, 1994 and January 1,
1994 and for each of the three years in the period ended December 31, 1994
incorporated in this Proxy Statement and Prospectus by reference from the
Springs 1994 Form 10-K, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
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The financial statements of Dundee at August 31, 1993 and 1994 and for each
of the three years in the period ended August 31, 1994 included in this Proxy
Statement and Prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
OTHER MATTERS
Management of Dundee is not aware of any other matters to come before the
Meeting. If any procedural or other matter should properly come before the
Meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment on such matters.
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EXHIBIT 20.2
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Dundee Mills, Incorporated
We have audited the accompanying balance sheets of Dundee Mills,
Incorporated as of August 31, 1993 and 1994, and the related statements of
stockholders' equity, operations, and cash flows for each of the three years in
the period ended August 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Dundee Mills, Incorporated
at August 31, 1993 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended August 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in Note 5 to the financial statements, in 1994 the Company
changed its method of accounting for income taxes.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Atlanta, Georgia
October 7, 1994,
except for Note 9, as
to which the date is
February 6, 1995
F-8
<PAGE> 2
DUNDEE MILLS, INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31,
---------------------------------
1993 1994
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 2,495,268.68 $ 6,533,690.46
Trade accounts receivable, less allowance for doubtful
accounts of $100,000.00 in 1993 and in 1994............. 45,357,408.89 49,943,523.66
Inventories (Note 2):
Finished and greige goods............................... 50,657,859.36 38,239,796.55
Stock in process........................................ 3,289,606.46 2,762,933.08
Raw materials........................................... 2,587,268.91 1,553,286.33
Supplies and noncloth inventory items................... 4,304,435.83 4,171,561.33
--------------- ---------------
60,839,170.56 46,727,577.29
Refundable income taxes.................................... 401,974.64 822,511.46
Other current assets....................................... 922,498.81 896,944.09
--------------- ---------------
Total current assets......................................... 110,016,321.58 104,924,246.96
Property, plant, and equipment on the basis of cost (Note 4):
Land....................................................... 1,829,689.38 1,680,124.35
Buildings and improvements................................. 50,594,087.41 51,091,820.45
Machinery and equipment.................................... 61,775,953.75 64,168,257.08
Furniture and fixtures..................................... 3,558,988.59 3,522,591.26
--------------- ---------------
117,758,719.13 120,462,793.14
Less allowances for depreciation and amortization.......... 56,002,044.00 61,832,495.00
--------------- ---------------
Total property, plant and equipment.......................... 61,756,675.13 58,630,298.14
Other assets (Note 3)........................................ 2,622,490.64 3,594,331.24
Deferred income taxes (Note 5)............................... -- 723,333.00
Intangibles.................................................. 1,166,267.82 1,134,532.82
--------------- ---------------
$175,561,755.17 $169,006,742.16
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable..................................... $ 6,391,686.52 $ 7,976,235.18
Salaries, wages and commissions............................ 2,130,016.92 2,329,155.57
Withholding and payroll taxes.............................. 1,204,916.66 1,141,346.48
Employees' savings accounts................................ 582,117.85 534,948.07
Deferred income taxes (Note 5)............................. -- 338,054.00
Local taxes................................................ 533,866.21 482,498.61
Other liabilities.......................................... 1,305,125.92 1,194,100.75
Current portion of long-term debt (Note 4)................. 9,445,000.00 8,200,000.00
--------------- ---------------
Total current liabilities.................................... 21,592,730.08 22,196,338.66
Long-term debt, less current portion (Note 4)................ 28,670,000.00 23,715,000.00
Deferred income taxes (Note 5)............................... 217,000.00 --
Supplemental executive retirement plan liability (Note 6).... 1,157,520.00 2,359,557.00
Stockholders' equity:
Common stock, par value $25.00 a share:
Authorized -- 200,000 shares; 46,946 shares issued in
1993, 46,775 shares issued in 1994.................... 1,173,650.00 1,169,375.00
Retained earnings.......................................... 122,750,855.09 119,566,471.50
--------------- ---------------
123,924,505.09 120,735,846.50
--------------- ---------------
$175,561,755.17 $169,006,742.16
============== ==============
</TABLE>
See accompanying notes.
F-9
<PAGE> 3
DUNDEE MILLS, INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------------- --------------- ---------------
<S> <C> <C> <C>
Balance at September 1, 1991................... $1,200,000.00 $120,216,993.39 $121,416,993.39
Net income................................... -- 6,452,497.45 6,452,497.45
Cash dividends ($30 per share)............... -- (1,411,665.00) (1,411,665.00)
Purchase of common stock..................... (29,375.00) (2,128,615.00) (2,157,990.00)
------------- --------------- ---------------
Balance at August 31, 1992..................... 1,170,625.00 123,129,210.84 124,299,835.84
Net income................................... -- 869,567.25 869,567.25
Cash dividends ($30 per share)............... -- (1,405,448.00) (1,405,448.00)
Purchase of common stock..................... (7,200.00) (445,750.00) (452,950.00)
Sale of common stock......................... 10,225.00 603,275.00 613,500.00
------------- --------------- ---------------
Balance at August 31, 1993..................... 1,173,650.00 122,750,855.09 123,924,505.09
Net loss..................................... -- (1,500,651.59) (1,500,651.59)
Cash dividends ($30 per share)............... -- (1,406,307.00) (1,406,307.00)
Purchase of common stock..................... (12,525.00) (813,675.00) (826,200.00)
Sale of common stock......................... 8,250.00 536,250.00 544,500.00
------------- --------------- ---------------
Balance at August 31, 1994..................... $1,169,375.00 $119,566,471.50 $120,735,846.50
============ ============== ==============
</TABLE>
See accompanying notes.
F-10
<PAGE> 4
DUNDEE MILLS, INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------------------------
1992 1993 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales............................ $247,728,410.96 $263,362,974.73 $266,813,950.08
Cost of goods sold................... 204,490,367.06 228,522,047.06 234,826,693.41
--------------- --------------- ---------------
43,238,043.90 34,840,927.67 31,987,256.67
Expenses:
Selling............................ 13,601,205.24 14,040,155.50 14,266,890.75
General and administrative......... 13,928,773.31 15,054,508.25 15,499,209.91
--------------- --------------- ---------------
27,529,978.55 29,094,663.75 29,766,100.66
--------------- --------------- ---------------
15,708,065.35 5,746,263.92 2,221,156.01
Other income......................... 1,245,071.54 1,411,608.65 679,376.50
--------------- --------------- ---------------
16,953,136.89 7,157,872.57 2,900,532.51
Other deductions:
Interest........................... 2,839,752.79 2,341,570.42 1,785,305.21
Other.............................. 3,672,886.65 3,301,734.90 3,011,366.89
--------------- --------------- ---------------
6,512,639.44 5,643,305.32 4,796,672.10
--------------- --------------- ---------------
Income (loss) before income taxes and
cumulative effect of accounting
change............................. 10,440,497.45 1,514,567.25 (1,896,139.59)
Income taxes (credit) (Note 5)....... 3,988,000.00 645,000.00 (588,696.00)
--------------- --------------- ---------------
Income (loss) before cumulative
effect of accounting change........ 6,452,497.45 869,567.25 (1,307,443.59)
Cumulative effect of
accounting change (Note 5)......... -- -- (193,208.00)
--------------- --------------- ---------------
Net income (loss).................... $ 6,452,497.45 $ 869,567.25 $ (1,500,651.59)
============== ============== ==============
Weighted average number of shares
outstanding........................ 46,927 46,751 46,895
============== ============== ==============
Per share data:
Income (loss) before cumulative
effect of accounting change..... $ 137.50 $ 18.60 $ (27.88)
Cumulative effect of accounting
change.......................... -- -- (4.12)
--------------- --------------- ---------------
Net income (loss) per common share... $ 137.50 $ 18.60 $ (32.00)
============== ============== ==============
</TABLE>
See accompanying notes.
F-11
<PAGE> 5
DUNDEE MILLS, INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------------------
1992 1993 1994
-------------- -------------- ---------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................... $ 6,452,497.45 $ 869,567.25 $ (1,500,651.59)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Cumulative effect of accounting change... -- -- 193,208.00
Depreciation and amortization............ 12,969,248.00 12,628,976.50 11,418,045.00
Other noncash charges.................... 306,740.00 -- --
Provision for deferred income taxes...... (226,000.00) (762,000.00) (1,390,593.00)
Gain on sale of property, plant
and equipment......................... (681,194.37) -- --
Changes in operating assets and
liabilities:
Trade accounts receivable............. (923,848.69) 14,813.59 (4,586,114.77)
Inventories........................... (10,707,980.75) 530,613.78 14,111,593.27
Refundable income taxes............... 472,266.40 (401,974.64) (182,110.82)
Other current assets.................. 667,380.51 129,327.34 25,556.22
Prepaids and deposits................. (232,168.76) 53,101.52 (1,017,323.60)
Trade accounts payable................ (2,199,045.25) 731,333.58 1,584,548.66
Other current liabilities............. 1,301,098.93 104,366.11 (73,994.08)
Other non-current liabilities......... -- 1,157,520.00 1,202,037.00
-------------- -------------- ---------------
Net cash provided by operating
activities............................... 7,198,993.47 15,055,645.03 19,784,200.29
INVESTING ACTIVITIES
Purchases of property, plant and
equipment................................ (18,358,529.43) (3,405,064.14) (8,052,819.51)
Proceeds from sale of property, plant, and
equipment................................ 1,048,563.50 -- 149,565.00
Payments received on notes receivable...... 28,110.68 41,198.23 45,483.00
-------------- -------------- ---------------
Net cash used in investing activities...... (17,281,855.25) (3,363,865.91) (7,857,771.51)
FINANCING ACTIVITIES
Principal payments on revolving line of
credit and long-term debt................ (2,445,000.00) (11,445,000.00) (16,530,000.00)
Proceeds from revolving line of credit and
long-term debt........................... 19,000,000.00 -- 10,330,000.00
Purchases of common stock.................. (2,157,990.00) (452,950.00) (826,200.00)
Dividends paid............................. (1,411,665.00) (1,405,448.00) (1,406,307.00)
Proceeds from sale of common stock......... -- 613,500.00 544,500.00
-------------- -------------- ---------------
Net cash provided by (used in) financing
activities............................... 12,985,345.00 (12,689,898.00) (7,888,007.00)
-------------- -------------- ---------------
Net increase (decrease) in cash and cash
equivalents.............................. 2,902,483.22 (998,118.88) 4,038,421.78
Cash and cash equivalents at beginning of
year..................................... 590,904.34 3,493,387.56 2,495,268.68
-------------- -------------- ---------------
Cash and cash equivalents at end of year... $ 3,493,387.56 $ 2,495,268.68 $ 6,533,690.46
============= ============= ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Income taxes............................... $ 3,501,527.00 $ 2,084,919.00 $ 1,131,300.00
============= ============= ==============
Interest................................... $ 2,639,788.00 $ 2,431,977.00 $ 1,947,176.38
============= ============= ==============
Noncash investing activity:
Deposits applied to the purchase of
machinery and equipment............... $ 3,499,818.57 $ -- $ 362,011.50
============= ============= ==============
</TABLE>
See accompanying notes.
F-12
<PAGE> 6
DUNDEE MILLS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1994
1. SUMMARY OF ACCOUNTING POLICIES
Industry Segment
Dundee Mills, Incorporated (the Company) is a leading manufacturer of
towels, bedding, knitted infant wear, baby and health products.
Accounts Receivable
The Company manufactures and sells textile products to companies in
diversified industries. The Company performs periodic credit evaluations of its
customers' financial condition and generally does not require collateral.
Receivables generally are due within 60 days. Credit losses have been within
management's expectations.
Inventories
Raw materials and raw material content, manufacturing costs and finishing
costs of cloth inventory items are valued at the lower of cost, as determined by
the last-in, first-out method, or market. Other inventories are valued at the
lower of cost, as determined by the first-in, first-out method, or market.
Property, Plant and Equipment
The Company provides depreciation for both book and tax purposes
principally using accelerated methods.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Intangibles
The cost of intangible assets, principally cost in excess of net assets
acquired, are amortized over forty years using the straight-line method.
Accumulated amortization amounted to $103,139.00 and $134,874.00 at August 31,
1993 and 1994, respectively.
Revenue Recognition
In general, the Company recognizes revenue on product sales when the units
are shipped.
Net Income (Loss) Per Common Share
Net income (loss) per common share is based on the weighted average number
of shares of common stock outstanding during each year.
Reclassifications
Certain 1992 and 1993 balances have been reclassified to conform with the
1994 classification.
2. INVENTORIES
Inventories valued at cost as determined by the last-in, first-out method
amounted to $56,534,734.73 and $42,556,015.96 in 1993 and 1994, respectively.
Inventories valued at cost as determined by the first-in, first-out method
amounted to $4,304,435.83 and $4,171,561.33 in 1993 and 1994, respectively. If
the first-in, first-
F-13
<PAGE> 7
DUNDEE MILLS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
out (FIFO) method of inventory accounting had been used by the Company for all
inventories, inventories would have been $17,253,002.00 and $19,083,565.10
higher than reported in 1993 and 1994, respectively.
3. OTHER ASSETS
Other assets are comprised of the following:
<TABLE>
<CAPTION>
AUGUST 31,
---------------------------------
1993 1994
------------- -------------
<S> <C> <C>
Cash surrender value of life insurance......... $2,067,010.51 $2,675,500.84
Prepaid pension asset.......................... 409,558.00 456,380.00
Deposits on machinery.......................... -- 362,011.50
Other.......................................... 145,922.13 100,438.90
------------- -------------
$2,622,490.64 $3,594,331.24
============ ============
</TABLE>
4. LONG-TERM DEBT
Long-term debt is as follows:
<TABLE>
<CAPTION>
AUGUST 31,
---------------------------------
1993 1994
-------------- --------------
<S> <C> <C>
Industrial revenue bonds payable in annual
principal payments of $55,000.00 on June 1,
1997 and $110,000.00 beginning June 1, 1998,
with interest payments due monthly at an
adjustable rate................................ $ 385,000.00 $ 385,000.00
Industrial revenue bonds payable in ten annual
principal payments of $200,000.00 beginning
June 1, 1991, with interest payments due
monthly at an adjustable rate.................. 1,400,000.00 1,200,000.00
Industrial revenue bonds payable in twelve annual
principal payments of $175,000.00 beginning May
1, 1998, with interest payments due monthly at
an adjustable rate............................. -- 2,100,000.00
Industrial revenue bonds payable in ten annual
principal payments of $300,000.00 beginning
June 1, 1991, with interest payments due at an
adjustable rate. This debt was retired during
1994........................................... 2,100,000.00 --
Industrial revenue bonds payable in eleven annual
principal payments of $685,000.00 beginning May
1, 1998 and lump sum payment of $695,000.00 on
May 1, 2009, with interest payments due monthly
at an adjustable rate.......................... -- 8,230,000.00
Industrial revenue bonds payable in ten annual
principal payments of $890,000.00 beginning
June 1, 1991, with interest payments due
monthly at an adjustable rate. This debt was
retired during 1994............................ 6,230,000.00 --
Revolving credit agreement, interest payments due
monthly........................................ 28,000,000.00 20,000,000.00
-------------- --------------
38,115,000.00 31,915,000.00
Less amounts due within one year................. 9,445,000.00 8,200,000.00
-------------- --------------
$28,670,000.00 $23,715,000.00
============= =============
</TABLE>
F-14
<PAGE> 8
DUNDEE MILLS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The revolving credit agreement ("RCA") provides the Company with unsecured
borrowings, under a revolving credit note ("RCN"), of up to $35,000,000.00
($20,000,000.00 outstanding at August 31, 1994). The RCA also provides for
quarterly payments of a 1/4% annual commitment fee on the average unused amount
of the commitment.
The Company is party to an interest rate swap with a decreasing notional
amount equal to the outstanding balance of the RCN which changed the floating
interest rate exposure on the RCN to a fixed interest rate exposure. Under this
swap agreement, the Company pays a fixed interest rate of 6.1% and receives the
3 month LIBOR rate reset quarterly (3.31% and 4.56% at August 31, 1993 and 1994,
respectively) on the notional amount. This interest rate swap expires in
December 1996.
The RCN matured on August 31, 1994. In accordance with the RCA,
$15,000,000.00 of the RCN is eligible for a five year "term out" provision. The
term out provision may be initiated, at the option of the Company by executing a
term note. Upon execution of the term note, the Company would be required to
make twenty quarterly principal payments of $750,000.00 each, commencing
December 31, 1994, with interest due at varying dates depending on one of three
variable interest charge methods (prime rate minus one-half percent per annum;
LIBOR for interest periods of 30, 60 or 90 days, plus an additional one-half
percent per annum; or the secondary C/D rate for interest periods of 30, 60 or
90 days, plus an additional five-eighths percent per annum) selected by the
Company in accordance with the terms of the note. The Company is currently
negotiating a new RCA with its lender.
During fiscal year 1994, the Company issued two new series of industrial
revenue bonds aggregating $10,330,000.00. These industrial revenue bonds
effectively refinanced two of the 1990 series industrial revenue bonds totaling
$8,330,000.00 at August 31, 1993. At August 31, 1994, the Company had
outstanding letters of credit in the amount of $12,132,995.00 from a bank
pertaining to all industrial revenue bonds outstanding and has pledged land,
buildings and equipment with a net book value of approximately $10,927,230.00 as
collateral. The adjustable rate industrial revenue bonds bear interest at a
floating rate determined by the Remarketing Agents as defined in the respective
Indentures of Trust (approximately 2.7% and 3.25% at August 31, 1993 and 1994,
respectively).
The revolving credit agreement and industrial revenue bonds contain various
restrictions relating to, among other things, net working capital, debt to
equity and fixed charges ratios and maintenance of net worth of at least
$100,000,000.00. At August 31, 1993 and 1994, the Company was not in compliance
with the fixed charges coverage ratio. However, the Company has obtained waivers
on this covenant from its lender through September 1, 1995.
Maturities of long-term debt are as follows: $8,200,000.00 in 1995;
$8,200,000.00 in 1996; $4,255,000.00 in 1997; $1,170,000.00 in 1998;
$1,170,000.00 in 1999; and $8,920,000.00 thereafter.
The fair value of the Company's long-term debt was estimated using
discounted cash flow analyses, based on the Company's current incremental
borrowing rates for similar types of borrowing arrangements. Based on these
analyses, the fair value of the Company's long-term debt does not significantly
differ from its carrying value.
5. INCOME TAXES
Effective September 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes" ("SFAS 109"). Although permitted under the new rules, prior year's
financial statements have not been restated.
The cumulative effect of adopting SFAS 109 as of September 1, 1993 was to
reduce net income by $193,208.00 ($4.12 per common share). The current year
effect of adopting SFAS 109 was not material.
F-15
<PAGE> 9
DUNDEE MILLS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of income tax expense (benefit) for the years ended August
31, excluding the cumulative effect of change in accounting principles, are as
follows:
<TABLE>
<CAPTION>
1992 1993 1994
(DEFERRED (DEFERRED (LIABILITY
METHOD) METHOD) METHOD)
------------- ------------- --------------
<S> <C> <C> <C>
Current:
Federal............................... $3,637,000.00 $1,259,000.00 $ 805,757.00
State................................. 577,000.00 148,000.00 (3,860.00)
------------- ------------- --------------
4,214,000.00 1,407,000.00 801,897.00
Deferred benefit...................... (226,000.00) (762,000.00) (1,390,593.00)
------------- ------------- --------------
$3,988,000.00 $ 645,000.00 $ (588,696.00)
============ ============ =============
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The Company's deferred
tax liabilities and assets as of August 31, 1994 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Supplemental executive retirement plan.............................. $ 896,632.00
Alternative minimum tax carryforward................................ 805,757.00
Bad debt reserve.................................................... 38,000.00
Net operating loss carryforward..................................... 25,600.00
Fixed assets........................................................ 125.00
-------------
Total deferred tax assets............................................. 1,766,114.00
Deferred tax liabilities:
Inventory........................................................... 1,207,411.00
Pension............................................................. 173,424.00
-------------
Total deferred tax liabilities........................................ 1,380,835.00
-------------
Net deferred tax assets............................................... $ 385,279.00
============
</TABLE>
No valuation allowance was provided for deferred tax assets as realization
of such assets is more likely than not.
Deferred income tax benefit under the provisions of APB No. 11 resulted
from the following:
<TABLE>
<CAPTION>
1992 1993
------------ ------------
<S> <C> <C>
Supplemental Executive Retirement Plan.................. $(226,000.00) $(440,000.00)
Alternative minimum tax carryforward.................... -- (273,000.00)
Pension................................................. -- (253,000.00)
Fixed assets............................................ -- 133,000.00
Tax accruals............................................ -- 58,000.00
Other................................................... -- 13,000.00
------------ ------------
$(226,000.00) $(762,000.00)
=========== ===========
</TABLE>
F-16
<PAGE> 10
DUNDEE MILLS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The reasons for the difference between total tax expense and the amount
computed by applying the statutory Federal income tax rate to income before
income taxes were as follows:
<TABLE>
<CAPTION>
1992 1993 1994
------------- ----------- ------------
<S> <C> <C> <C>
Tax at statutory rates...................... $3,549,769.00 $514,953.00 $(644,688.00)
State income taxes net of Federal benefit... 351,785.00 49,941.00 (75,845.00)
Non-deductible insurance premiums........... -- -- 113,888.00
Depreciation................................ 63,700.00 63,700.00 --
Other items................................. 22,746.00 16,406.00 17,949.00
------------- ----------- ------------
$3,988,000.00 $645,000.00 $(588,696.00)
============ ========== ===========
</TABLE>
6. BENEFIT PLANS
Two Company sponsored qualified noncontributory defined benefit pension
plans cover substantially all employees. In addition, an unfunded nonqualified
defined benefit plan covers certain management personnel. For both the qualified
and nonqualified plans, benefits are based on years of service and the
employee's three highest years of compensation during the last five years of
employment. In addition, contributions are intended to provide not only for
benefits attributed to service to date but also for those expected to be earned
in the future. For the qualified plans, the Company's funding policy is to
contribute annually such amounts as are necessary to provide assets sufficient
to meet the benefits to be paid to the plans' members and to keep the plans
actuarially sound. The non-qualified plan is unfunded.
A summary of the components of net periodic pension cost for the qualified
pension plans for the years ended August 31, 1992, 1993 and 1994 is as follows:
<TABLE>
<CAPTION>
1992 1993 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Service cost -- benefits earned
during the period................. $ 1,119,585.00 $ 1,247,993.00 $ 1,136,026.00
Interest cost on projected benefit
obligation........................ 2,842,088.00 3,015,717.00 2,931,874.00
Actual return on plan assets........ (3,773,255.00) (3,233,107.00) (3,409,306.00)
Net amortization and deferral....... 415,630.00 (364,791.00) (425,040.00)
-------------- -------------- --------------
Total pension expense............... $ 604,048.00 $ 665,812.00 $ 233,554.00
============= ============= =============
</TABLE>
The following table sets forth the funded status of the qualified plans and
amounts recognized in the balance sheet.
<TABLE>
<CAPTION>
AUGUST 31,
---------------------------------
1993 1994
-------------- --------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $32,419,070.00 in 1993 and $32,021,509.00 in 1994.... $33,166,017.00 $32,710,266.00
============= =============
Projected benefit obligation................................. $39,025,796.00 $38,914,007.00
Plan assets at fair value.................................... 43,754,950.00 42,944,999.00
-------------- --------------
Funded status -- plan assets in excess of projected benefit
obligation................................................. $ 4,729,154.00 $ 4,030,992.00
============= =============
</TABLE>
F-17
<PAGE> 11
DUNDEE MILLS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AUGUST 31,
---------------------------------
1993 1994
-------------- --------------
<S> <C> <C>
Comprised of:
Prepaid pension expense.................................... $ 462,965.00 $ 509,787.00
Unrecognized net gain...................................... 2,063,467.00 1,588,552.00
Unrecognized prior service cost............................ (157,394.00) (169,285.00)
Unrecognized net gain at September 1, 1987, net of
amortization............................................ 2,360,116.00 2,101,938.00
-------------- --------------
$ 4,729,154.00 $ 4,030,992.00
============= =============
</TABLE>
Substantially all of the plans' assets at August 31, 1994 are invested in
United States Government Agency securities, insurance contracts and general
obligation and revenue bonds of municipalities and political subdivisions.
A summary of the components of net periodic cost for the nonqualified
pension plan for the years ended August 31, 1993 and 1994 is as follows:
<TABLE>
<CAPTION>
1993 1994
------------- -------------
<S> <C> <C>
Service cost -- benefits earned during the period...... 343,716.00 322,448.00
Interest cost on projected benefit obligation.......... 423,306.00 489,091.00
Net amortization and deferral.......................... 390,498.00 390,498.00
------------- -------------
Total pension expense.................................. $1,157,520.00 $1,202,037.00
============ ============
</TABLE>
The following table sets forth the amounts recognized in the balance sheet
for the nonqualified plan.
<TABLE>
<CAPTION>
AUGUST 31,
-------------------------------
1993 1994
-------------- --------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $4,042,715.00 in 1993 and
$4,533,661.00 in 1994........................... $ 4,100,117.00 $ 4,616,763.00
============= =============
Projected benefit obligation......................... $ 6,003,837.00 $ 6,663,943.00
Plan assets at fair value............................ -- --
-------------- --------------
Funded status -- projected benefit obligation in
excess of plan assets.............................. $(6,003,837.00) $(6,663,943.00)
============= =============
Comprised of:
Accrued pension expense............................ $(1,157,520.00) $(2,359,557.00)
Unrecognized net loss.............................. (289,201.00) (137,768.00)
Unrecognized net loss at September 1, 1993, net of
amortization.................................... (4,557,116.00) (4,166,618.00)
-------------- --------------
$(6,003,837.00) $(6,663,943.00)
============= =============
</TABLE>
Assumptions used in accounting for the pension plans were:
<TABLE>
<CAPTION>
1992 1993 1994
---- ---- ----
<S> <C> <C> <C>
Weighted-average discount rates............................... 8% 8% 8.25%
Rates of increase in compensation levels...................... 6% 6% 5.25%
Expected long-term rates of return on assets.................. 8% 8% 8%
</TABLE>
During 1993, the Company began sponsoring a defined contribution profit
sharing plan for substantially all salaried and hourly employees. Voluntary
employee contributions are based upon a percentage of each employee's
compensation. The Company matches a percentage, as defined, of each eligible
employee's
F-18
<PAGE> 12
DUNDEE MILLS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
voluntary contributions up to a specified limit. The cost of the plan was
$276,923.26 and $318,872.07 for the years ended August 31, 1993 and 1994,
respectively.
7. PURCHASE COMMITMENTS
To ensure procurement of raw cotton inventory, it is the Company's policy
to execute non-cancellable purchase contracts with certain vendors. Such
contracts allow for the future delivery to the Company of raw cotton inventory
at current market prices. As of August 31, 1994, the Company is obligated to
purchase 117,064 bales of cotton through July 1995 at an aggregate cost
approximating $41,610,000.00 with a market value in excess of commitment value.
In connection with the raw cotton purchase contracts, the Company is potentially
exposed should a vendor fail to deliver the product. In this event, the Company
would be required to replace such amount of raw cotton at the current market
price, which may be higher or lower than the existing commitment.
8. PREFERRED STOCK
There are 9,000 authorized shares of preferred stock ($100 par value), 7%
cumulative, none of which were outstanding at August 31, 1994.
9. SUBSEQUENT EVENT
On February 6, 1995, the Board of Directors of the Company approved a
Merger Agreement, subject to shareholder approval, in which Springs Industries,
Inc. would exchange common stock and cash for all of the issued and outstanding
common stock of the Company. Upon approval of the merger by the shareholders,
the Company will pay $2,168,000 to certain officers of the Company.
F-19
<PAGE> 13
DUNDEE MILLS, INCORPORATED
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
1993 1994
--------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 2,750,688.27 $ 2,360,074.09
Trade accounts receivable, less allowance for doubtful
accounts of $100,000.00 in 1993 and in 1994........... 44,818,586.04 45,276,315.51
Inventories:
Finished and greige goods................................ 46,919,642.73 43,460,623.96
Stock in process......................................... 3,306,828.00 2,924,909.00
Raw materials............................................ 2,898,938.00 2,973,216.00
Supplies and noncloth inventory items.................... 4,304,435.83 4,350,628.33
--------------- ---------------
57,429,844.56 53,709,377.29
Refundable income taxes.................................. 1,318,534.64 --
Other current assets..................................... 804,279.58 845,066.12
--------------- ---------------
Total current assets....................................... 107,121,933.09 102,190,833.01
Property, plant, and equipment on the basis of cost:
Land..................................................... 1,829,689.38 1,698,389.95
Buildings and improvements............................... 50,594,086.41 51,434,650.45
Machinery and equipment.................................. 63,663,524.37 65,998,812.84
Furniture and fixtures................................... 3,609,791.54 3,857,435.37
--------------- ---------------
119,697,091.70 122,989,288.61
Less allowances for depreciation and amortization........ 59,804,569.00 65,334,195.00
--------------- ---------------
Total property, plant and equipment........................ 59,892,522.70 57,655,093.61
Other assets............................................... 3,363,771.34 3,035,231.43
Deferred income taxes...................................... 447,492.00 937,225.00
Intangibles................................................ 1,155,689.82 1,123,954.82
--------------- ---------------
$171,981,408.95 $164,942,337.87
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................... $ 8,060,279.46 $ 8,238,054.98
Salaries, wages and commissions.......................... 1,855,569.95 1,238,794.63
Withholding and payroll taxes............................ 827,503.09 979,990.07
Deferred income taxes.................................... 989,275.00 605,419.00
State and local taxes.................................... 41,589.75 553,830.19
Other liabilities........................................ 1,038,590.92 1,123,344.75
Current portion of long-term debt........................ 9,445,000.00 8,200,000.00
--------------- ---------------
Total current liabilities.................................. 22,257,808.17 20,939,433.62
Long-term debt, less current portion....................... 24,670,000.00 19,715,000.00
Supplemental executive retirement plan liability........... 1,558,199.00 2,759,557.00
Stockholders' equity:
Common stock, par value $25.00 a share:
Authorized -- 200,000 shares 46,946 shares issued in
1993, 46,728 shares issued in 1994.................. 1,173,650.00 1,168,200.00
Retained earnings........................................ 122,321,751.78 120,360,147.25
--------------- ---------------
123,495,401.78 121,528,347.25
--------------- ---------------
$171,981,408.95 $164,942,337.87
============== ==============
</TABLE>
See accompanying notes.
F-20
<PAGE> 14
DUNDEE MILLS, INCORPORATED
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOUR MONTHS ENDED
DECEMBER 31,
-------------------------------
1993 1994
-------------- --------------
<S> <C> <C>
Net sales...................................................... $85,107,326.17 $90,362,986.91
Cost of goods sold............................................. 74,231,672.50 77,263,043.26
-------------- --------------
10,875,653.67 13,099,943.65
Expenses:
Selling...................................................... 4,550,116.55 4,759,339.81
General and administrative................................... 4,608,310.78 5,315,873.60
-------------- --------------
9,158,427.33 10,075,213.41
-------------- --------------
1,717,226.34 3,024,730.24
Other income................................................... 137,676.39 426,876.17
-------------- --------------
1,854,902.73 3,451,606.41
Other deductions:
Interest..................................................... 601,320.66 547,088.41
Other........................................................ 1,323,358.38 1,109,512.25
-------------- --------------
1,924,679.04 1,656,600.66
-------------- --------------
(Loss) income before income taxes and cumulative effect of
accounting change............................................ (69,776.31) 1,795,005.75
Income taxes (credit).......................................... (21,665.00) 729,803.00
-------------- --------------
(Loss) income before cumulative effect of accounting change.... (48,111.31) 1,065,202.75
Cumulative effect of accounting change......................... (193,208.00) --
-------------- --------------
Net (loss) income.............................................. $ (241,319.31) $ 1,065,202.75
============= =============
Weighted average number of shares outstanding.................. 46,946 46,791
============= =============
Per share data:
(Loss) income before cumulative effect of accounting
change.................................................... $ (1.02) $ 22.77
Cumulative effect of accounting change....................... (4.12) --
-------------- --------------
Net (loss) income per common share............................. $ (5.14) $ 22.77
============= =============
Dividends paid................................................. $ 4.00 $ 4.00
============= =============
</TABLE>
See accompanying notes.
F-21
<PAGE> 15
DUNDEE MILLS, INCORPORATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOUR MONTHS ENDED
DECEMBER 31,
-----------------------------
1993 1994
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income................................................ $ (241,319.31) $1,065,202.75
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Cumulative effect of accounting change......................... 193,208.00 --
Depreciation and amortization.................................. 3,813,103.00 3,512,277.81
Provision for deferred income tax.............................. (463,531.00) 53,473.00
Changes in operating assets and liabilities:
Trade accounts receivable................................... 538,822.85 4,667,208.15
Inventories................................................. 3,409,326.00 (6,981,800.00)
Refundable income taxes..................................... (678,134.00) 822,511.46
Other current assets........................................ 118,219.23 51,877.97
Prepaids and deposits....................................... (741,280.70) 559,100.00
Trade accounts payable...................................... 1,668,592.94 261,819.80
Other current liabilities................................... (1,992,789.85) (1,786,089.84)
Supplemental executive retirement plan liability............ 400,679.00 400,000.00
------------- -------------
Net cash provided by operating activities........................ 6,024,896.16 2,625,581.10
INVESTING ACTIVITIES
Purchases of property, plant and equipment....................... (1,581,692.57) (2,526,495.47)
------------- -------------
Net cash used in investing activities............................ (1,581,692.57) (2,526,495.47)
FINANCING ACTIVITIES
Principal payments on revolving line of credit and long-term
debt........................................................... (4,000,000.00) (4,000,000.00)
Purchases of common stock........................................ -- (135,102.00)
Dividends paid................................................... (187,784.00) (187,100.00)
Proceeds from sale of common stock............................... -- 49,500.00
------------- -------------
Net cash used in financing activities............................ (4,187,784.00) (4,272,702.00)
------------- -------------
Net increase (decrease) in cash and cash equivalents............. 255,419.59 (4,173,616.37)
Cash and cash equivalents at beginning of year................... 2,495,268.68 6,533,690.46
------------- -------------
Cash and cash equivalents at end of year......................... $2,750,688.27 $2,360,074.09
============ ============
</TABLE>
See accompanying notes.
F-22
<PAGE> 16
DUNDEE MILLS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included.
The sales of Dundee are affected by the seasonal nature of the business of
its primary customers, who are in retail sales and the hospitality industry.
Accordingly, Dundee experiences its highest levels of sales during its first
fiscal quarter, when retailers are preparing for holiday sales. Dundee's lowest
sales levels generally occur during its second fiscal quarter, when retailers
clear inventory and recreational travel is down. Therefore, operating results
for the four month period ended December 31, 1994, are not necessarily
indicative of the results that may be expected for the year ended August 31,
1995.
2. INCOME TAXES
Effective September 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method required by
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes" ("SFAS 109"). Although permitted under the new rules, prior year's
financial statements have not been restated.
The cumulative effect of adopting SFAS 109 as of September 1, 1993 was to
reduce net income by $193,208.00 ($4.12 per common share).
3. LONG TERM DEBT
The Company amended its revolving credit agreement, effective as of August
31, 1994, (the "Amended RCA") to provide for unsecured borrowings, under a
revolving credit note ("RCN"), of up to $25,000,000.00. The commitment is,
however, reduced by each payment made by the Company, unless the Company
notifies the lender to the contrary. The commitment shall be reduced by the
amount of such repayment, unless notification is given, until the commitment is
reduced to $10,000,000.00. The RCN matures on August 31, 1997. Under the Amended
RCA, $15,000,000.00 of the RCN is eligible for conversion to a five-year term
loan. The term conversion provision may be initiated by the Company upon
maturity, and the Company would be required to make twenty equal quarterly
principal payments commencing September 30, 1997.
The Amended RCA provides for interest at the prime rate minus one-half
percent per annum or LIBOR for interest periods of 30, 60 or 90 days, plus an
additional 35/100 percent per annum. However, Dundee is party to an interest
rate swap with a decreasing notional amount equal to the outstanding balance of
the RCN which changed the floating interest rate exposure on the RCN to a fixed
interest rate exposure. Under this swap agreement, the Company pays a fixed
interest rate of 6.1% and receives the 3 month LIBOR rate reset quarterly (6.5%
at December 31, 1994) on the notional amount. This interest rate swap expires in
December 1996.
The amount of $8,000,000.00 has been included in current liabilities at
December 31, 1994 since the Company intends to repay that amount in the next
twelve month period.
4. SUBSEQUENT EVENT
On February 6, 1995, the Board of Directors of the Company approved a
Merger Agreement, subject to shareholder approval, in which Springs Industries,
Inc. would exchange common stock and cash for all of the issued and outstanding
common stock of the Company. Upon approval of the merger by the shareholders,
the Company will pay $2,168,000 to certain officers of the Company.
F-23
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements of
Springs Industries, Inc. (Form S-8 No. 33-46261) pertaining to the Springs
Industries, Inc. 1991 Restricted Stock Plan for Outside Directors and (Form S-8
No. 33-46260) pertaining to the Springs Industries, Inc. 1991 Incentive Stock
Plan, of our report dated October 7, 1994, except for Note 9 as to which the
date is February 6, 1995, with respect to the financial statements of Dundee
Mills, Incorporated, included in the Form 8-K dated June 12, 1995, of Springs
Industries, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Atlanta, Georgia
June 9, 1995
<PAGE> 1
EXHIBIT 99
SPRINGS INDUSTRIES, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL DATA (UNAUDITED)
The following unaudited pro forma balance sheet and statement of
operations reflect the combined financial position and results of operations of
Springs and Dundee. The information contained therein has been derived from
historical data included in the Springs and Dundee financial statements, and
should be read in conjunction therewith. The pro forma balance sheet at
December 31, 1994 assumes that the acquisition of Dundee occurred on that date.
The pro forma statement of operations assumes that the acquisition of Dundee was
completed on January 2, 1994.
The pro forma adjustments related to the Merger reflected in the following
balance sheet and statement of operations reflect the application of purchase
accounting and are based on the actual number of shares of Dundee Common Stock
converted into cash of 8,388 and the actual number of shares converted into
stock of 38,334. The conversion of 38,334 shares of outstanding Dundee Common
Stock into Springs Class A Common Stock is based on the maximum Reported Market
Price under the Merger Agreement, which is $38.50 per share, or 65.58442
shares. The fair value of the number of shares of Springs Class A Common Stock
issued reflects a fair value of $39.125 per share at the date of acquisition.
The six shares of Dundee Common Stock which elected to seek appraisal rights
have been treated as having received cash.
The pro forma financial information is not necessarily indicative of the
results which actually would have occurred had the transaction been in effect on
the date and for the period indicated or which may result in the future.
Further, the pro forma financial information does not reflect the potential
acquisition by Springs of substantially all of the assets of Dawson Home
Fashions, Inc., which would not have a material effect on Springs.
<PAGE> 2
SPRINGS INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
SPRINGS DUNDEE INCREASE PRO FORMA
(HISTORICAL) (HISTORICAL) (DECREASE) COMBINED
------------ ------------ ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 769 $ 2,360 $ (1,438)(a)(n) $ 1,691
Accounts receivable................... 312,739 45,276 -- 358,015
Inventories........................... 264,161 53,709 22,175(b) 340,045
Other................................. 39,335 845 (5,446)(a)(c)(d) 34,734
------------ ------------ ----------- ----------
Total current assets.......... 617,004 102,190 15,291 734,485
------------ ------------ ----------- ----------
Property, plant and equipment........... 1,253,060 122,989 (78,801)(e)(o) 1,297,248
Accumulated depreciation.............. (697,810) (65,334) 65,334(e) (697,810)
------------ ------------ ----------- ----------
Property, plant, and equipment,
net.............................. 555,250 57,655 (13,467)(o) 599,438
------------ ------------ ----------- ----------
Other assets and deferred charges....... 116,789 5,097 1,971(c)(f) 123,857
------------ ------------ ----------- ----------
Total......................... $ 1,289,043 $164,942 $ 3,795 $1,457,780
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current
maturities of long-term debt....... $ 32,418 $ 8,200 $ -- $ 40,618
Accounts payable and accrued
liabilities........................ 211,538 12,739 2,503(c)(g) 226,780
------------ ------------ ----------- ----------
Total current liabilities..... 243,956 20,939 2,503 267,398
------------ ------------ ----------- ----------
Noncurrent liabilities:
Long-term debt........................ 265,384 19,715 21,195(o) 306,294
Long-term benefit plans and deferred
compensation....................... 144,967 2,760 4,304(h) 152,031
Deferred income taxes and other
deferred credits................... 50,645 -- (1,044)(c) 49,601
------------ ------------ ----------- ----------
Total noncurrent
liabilities................. 460,996 22,475 24,455 507,926
------------ ------------ ----------- ----------
Shareholders' equity:
Class A common stock ($0.25 par
value)............................. 2,471 -- 629(o) 3,100
Class B common stock ($0.25 par
value)............................. 1,958 -- -- 1,958
Dundee common stock ($25.00 par
value)............................. -- 1,168 (1,168)(m) --
Additional paid-in capital............ 11,413 97,736(o) 109,149
Retained earnings..................... 568,403 120,360 (120,360)(m) 568,403
Treasury stock, at cost............... (2,602) -- -- (2,602)
Currency translation adjustment....... 2,448 -- -- 2,448
------------ ------------ ----------- ----------
Shareholders' equity............... 584,091 121,528 (23,163) 682,456
------------ ------------ ----------- ----------
Total......................... $ 1,289,043 $164,942 $ 3,795 $1,457,780
========= ========= ========= =========
</TABLE>
See accompanying notes to Pro Forma Condensed Combined Financial Statements.
<PAGE> 3
SPRINGS INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994*
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
SPRINGS DUNDEE INCREASE PRO FORMA
(HISTORICAL) (HISTORICAL) (DECREASE) COMBINED
------------ ------------ --------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................................ $ 2,068,911 $272,070 $ -- $2,340,981
------------ ------------ --------- ----------
Cost of goods sold..................... 1,632,489 237,858 (7,598)(i) 1,862,749
Selling, general and administrative
expenses............................ 300,580 30,683 3(j) 331,266
------------ ------------ --------- ----------
Operating income.................... 135,842 3,529 7,595 146,966
Interest expense....................... 29,253 1,731 1,431(k) 32,415
Other (income) expense................. (123) 1,829 -- 1,706
------------ ------------ --------- ----------
Income before income taxes............... 106,712 (31) 6,164 112,845
Income tax provision..................... 44,485 163 2,438(l) 47,086
------------ ------------ --------- ----------
Net income (loss)........................ $ 62,227 $ (194) $ 3,726 $ 65,759
========= ========= ======== =========
Net income per share..................... $ 3.50 $ 3.24
========= =========
</TABLE>
* For purposes of this presentation, the Dundee Historical and Pro Forma results
for the year ended December 31, 1994 include the results for Dundee's August
31, 1994 fiscal year with the addition of results for the period from
September 1 through December 31, 1994 and the deduction of the results for the
similar period in 1993.
See accompanying notes to Pro Forma Condensed Combined Financial Statements.
<PAGE> 4
SPRINGS INDUSTRIES, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(UNAUDITED)
The following pro forma adjustments (in thousands) have been applied to the
unaudited pro forma condensed combined balance sheet and the unaudited pro
forma condensed combined statement of operations of Springs Industries, Inc.
and Dundee Mills, Incorporated to give effect to the Merger as if it had
occurred on December 31, 1994 and January 2, 1994, respectively:
(a) Reflects the collection before the Effective Time by Dundee of
notes receivable in the amount of $730 from Dundee shareholders
in accordance with the Merger Agreement.
(b) Represents an increase of $22,175 to restate Dundee's LIFO
inventory to fair value.
(c) Reflects deferred taxes associated with pro forma adjustments
and the reclassification of deferred taxes to conform with
Springs' presentation, as follows: other current assets
decreased $10,390, other assets and deferred charges decreased
$936, accounts payable and accrued liabilities decreased $605,
and deferred income taxes and other deferred credits decreased
$1,044.
(d) Reflects the fair value of Dundee's forward cotton purchase
contracts in the amount of $5,674.
(e) Reflects the elimination of $65,334 of Dundee's property and
accumulated depreciation to reflect net book value.
(f) Reflects the fair value of $4,031 for excess funding in the
qualified defined benefit plans and elimination of $1,124 of
certain Dundee intangible assets.
(g) Reflects various accruals of $3,108 including transaction costs.
(h) Reflects the fair value of the benefit obligation for a
nonqualified defined benefit pension plan in the amount of
$4,304.
(i) Reflects the reduction of depreciation expense in the amount of
$7,598 due to conforming changes in depreciation methods and
depreciable lives.
(j) Reflects the discontinuation of amortization expense relating to
certain eliminated intangible assets of Dundee and the
elimination of amortization (income) expense associated with
nonqualified and qualified defined benefit pension plans (net
expense $3).
(k) Reflects additional interest expense of $1,431 associated with
long-term debt incurred to complete the Merger.
(l) Reflects the income tax expense at statutory federal and state
rates of $2,438 associated with pro forma statements of
operations adjustments.
(m) Reflects the removal of the stockholders' equity balances of
Dundee.
(n) Reflects the payment of $2,168 in management retention
compensation to be paid by Dundee immediately prior to the
Effective Date of the Merger, as permitted by the Merger
Agreement.
<PAGE> 5
(o) The allocation of Merger Consideration is summarized below (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Springs Class A Common Stock issued............. $ 98,365
Additional long-term debt to fund cash portion
of Merger Consideration....................... 21,195
----------
Total Merger Consideration............ 119,560
----------
Less:
Fair value of net assets acquired other than
property and equipment..................... 75,372
Historical book value of property and
equipment acquired......................... 57,655
----------
Total................................. 133,027
----------
Difference...................................... $(13,467)
========
</TABLE>
The Springs Class A Common Stock issued would have a par value total of
$629, and additional paid in capital would increase by $97,736 based on
the fair value of Springs Class A Common Stock of $39.125 at the date of
acquisition.
