DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Distribution Agreement"), dated as of
March 15, 2000, is entered into by and among DELTA WOODSIDE INDUSTRIES, INC., a
South Carolina corporation ("Delta Woodside"), DH APPAREL COMPANY, INC., a
Georgia corporation to be renamed Duck Head Apparel Company, Inc. ("Duck Head"),
and DELTA APPAREL, INC., a Georgia corporation ("Delta Apparel").
WHEREAS, the respective Boards of Directors of Delta Woodside, Duck Head
and Delta Apparel have approved the transactions contemplated by this
Distribution Agreement, upon the terms and subject to the conditions set forth
herein, as being in the best interests of Delta Woodside, Duck Head and Delta
Apparel, respectively;
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein the parties hereto
agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Definitions. (a) As used herein, the following terms have the following
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meanings:
"Action" means any claim, suit, action, arbitration, inquiry, investigation
or other proceeding of any nature (whether criminal, civil, legislative,
administrative, regulatory, prosecutorial or otherwise) by or before any
arbitrator or Governmental Entity.
"Affiliate" means, with respect to any Person, any other Person, directly
or indirectly, controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, the term "control" (including the
correlative terms "controlling", "controlled by" and "under common control
with") means the direct or indirect possession of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise. For purposes of this
Distribution Agreement, no member of one Group shall be treated as an Affiliate
of any member of another Group.
"Business" means the Delta Woodside Business, the Duck Head Business or the
Delta Apparel Business, as the context may indicate.
"Business Day" means any day other than a Saturday, Sunday or one on which
banks are authorized or required by law to close in Greenville, South Carolina.
"Contract" shall mean any note, bond, mortgage, indenture, lease, contract,
agreement, obligation, understanding, commitment or other similar arrangement,
whether written or oral.
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"Defense Materials" means, with respect to any Group, any and all written
or oral information (including, without limitation, any and all (A) written or
electronic communications, (B) documents (including electronic versions
thereof), (C) factual and legal analyses and memoranda, (D) interview reports
and reports of experts, consultants or investigators, (E) meetings in person or
by telephone and e-mail or other forms of electronic communication, and (F)
records, reports or testimony regarding those communications, documents,
memoranda or meetings) (i) within the custody or control, within the meaning of
Rule 34 of the Federal Rules of Civil Procedure, of or reasonably accessible by
that Group or its Representatives and (ii) directly or indirectly arising out of
or relating to, the preparation or litigation of any Action in which Delta
Woodside, Duck Head and/or Delta Apparel have a common interest.
"Delta Apparel Board" means the Board of Directors of Delta Apparel.
"Delta Apparel Business" means the businesses and operations of the Delta
Apparel Group, whether conducted prior to, at or after the Effective Time, which
include the manufacturing, marketing and sale of knit apparel.
"Delta Apparel Common Stock" means the common stock, par value $0.01 per
share, of Delta Apparel.
"Delta Apparel Disclosure Documents" means the Delta Apparel Information
Statement, the Delta Apparel Form 10 and each other report or filing made by
Delta Apparel under the Securities Act or the Exchange Act or with the American
Stock Exchange in connection with the matters contemplated by any of the
Distribution Documents, in each case as amended or supplemented.
"Delta Apparel Employees" means those individuals listed on the payroll
records of any member of the Delta Apparel Group after the Effective Time, or
who are identified as a Delta Apparel Employee on the Delta Apparel Disclosure
Schedule, and shall not include individuals who are Delta Woodside Employees or
Duck Head Employees.
"Delta Apparel Employee Group" means all Delta Apparel Employees and Delta
Apparel Retirees and their respective beneficiaries.
"Delta Apparel Form 10" means the registration statement on Form 10 that
Delta Apparel has filed with the SEC to register the Delta Apparel Common Stock
under the Exchange Act in connection with the Distribution, as that registration
statement may be amended from time to time.
"Delta Apparel Group" means, on and after the Effective Time, Delta Apparel
and the Subsidiaries of Delta Apparel, including all predecessors (other than
any member of the Delta Woodside Group or any member of the Duck Head Group) and
successors to each of those Persons.
"Delta Apparel Group Liabilities" means, except as otherwise specifically
provided in any Distribution Document, all Liabilities, whether arising before,
at or after the Effective Time, (i) of
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or in any way relating, in whole or in part, to any member of the Delta Apparel
Group (other than any Liabilities arising primarily from the conduct of or in
connection with, in whole or in part, the Delta Woodside Business or the Duck
Head Business) or (ii) arising from the conduct of, in connection with or in any
way relating to, in whole or in part, the Delta Apparel Business, or the
ownership or use of assets or property in connection with the Delta Apparel
Business or (iii) arising under Contracts included in the Delta Apparel Assets
(including any Liabilities under such Contracts resulting from the consummation
of the transactions contemplated by this Distribution Agreement) or (iv) of
Delta Apparel arising under any of the Distribution Documents. Notwithstanding
the foregoing, "Delta Apparel Group Liabilities" shall exclude (i) all
Liabilities for Taxes of any member of the Delta Apparel Group (because the Tax
Sharing Agreement will govern those Liabilities) and (ii) all Liabilities for
the fees, costs, expenses and transfer taxes (and other similar fees and
expenses), or portion thereof, that a specific provision of this Distribution
Agreement imposes on Delta Woodside or Duck Head. Without limiting the
generality of the foregoing, Delta Apparel Group Liabilities include all
liabilities that may arise under or in connection with that certain litigation
captioned Xxxxxx et al. v. Caldor, Inc. et al. that is pending in the Supreme
Court of the State of New York in New York County, New York.
"Delta Apparel Information Statement" means the information statement,
substantially complying with the disclosure items of Schedule 14C of the
Exchange Act, that Delta Apparel will file as an exhibit to the Delta Apparel
Form 10 and send to each Delta Woodside Stockholder of record as of the Record
Date in connection with the Distribution.
"Delta Apparel Material Adverse Effect" shall be deemed to occur if the
aggregate consequences of all breaches and inaccuracies of covenants and
representations of Delta Apparel, when read without any exception or
qualification for a Delta Apparel Material Adverse Effect, are reasonably likely
to have a material adverse effect on Delta Apparel's ability to consummate the
transactions contemplated by this Distribution Agreement or on the business,
operations or financial condition of Delta Apparel and its Subsidiaries, Delta
Woodside and its Subsidiaries (excluding the Duck Head Group and the Delta
Apparel Group) or Duck Head and its Subsidiaries taken as a whole.
"Delta Apparel Retirees" means those individuals who were employed in the
Delta Apparel Business immediately before those individuals' retirement or other
termination of employment or who are identified as Delta Apparel Retirees on the
Delta Apparel Disclosure Schedule.
"Delta Apparel Share" means a share of the Delta Apparel Common Stock.
"Delta Woodside Board" means the Board of Directors of Delta Woodside.
"Delta Woodside Business" means the businesses and operations of the Delta
Woodside Group (but excluding the Delta Apparel Business and the Duck Head
Business), whether conducted prior to, at or after the Effective Time, which
include the manufacturing, marketing and sale of woven textile products.
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"Delta Woodside Common Stock" means the common stock, par value $0.01 per
share, of Delta Woodside.
"Delta Woodside Disclosure Documents" means each report or filing made by
Delta Woodside under the Exchange Act in connection with the matters
contemplated by any of the Distribution Documents, any information in the Duck
Head Information Statement, the Duck Head Form 10, the Delta Apparel Information
Statement or the Delta Apparel Form 10 that is provided by Delta Woodside or its
Representatives (other than a matter relating to the Duck Head Group or the
Delta Apparel Group) and each other report or filing made by Delta Woodside
under the Securities Act or the Exchange Act in connection with the matters
contemplated by any of the Distribution Documents, in each case as amended or
supplemented.
"Delta Woodside Employees" means those individuals listed on the payroll
records of any member of the Delta Woodside Group after the Effective Time, or
who are identified as a Delta Woodside Employee on the Delta Woodside Disclosure
Schedule, and shall not include individuals who are Delta Apparel Employees or
Duck Head Employees.
"Delta Woodside Employee Group" means all Delta Woodside Employees and
Delta Woodside Retirees and their respective beneficiaries.
"Delta Woodside Group" means, on and after the Effective Time, Delta
Woodside and the Subsidiaries of Delta Woodside, including all predecessors and
successors to each of those Persons (other than any member of the Delta Apparel
Group or the Duck Head Group).
"Delta Woodside Group Liabilities" means, except as otherwise specifically
provided in any Distribution Document, all Liabilities, whether arising before,
at or after the Effective Time, (i) of or in any way relating, in whole or in
part, to any member of the Delta Woodside Group (other than any Liabilities
arising primarily from the conduct of or in connection with, in whole or in
part, the Duck Head Business or the Delta Apparel Business) or (ii) arising from
the conduct of, in connection with or in any way relating to, in whole or in
part, the Delta Woodside Business, or the ownership or use of assets or property
in connection with the Delta Woodside Business or (iii) arising under Contracts
under which any of Delta Woodside or any of its Subsidiaries has any Liability
and that are not included in the Delta Apparel Assets or the Duck Head Assets
(including any Liabilities under such Contracts resulting from the consummation
of the transactions contemplated by this Distribution Agreement) or (iv) of
Delta Woodside arising under any of the Distribution Documents. Notwithstanding
the foregoing, "Delta Woodside Group Liabilities" shall exclude (i) all
Liabilities for Taxes of any member of the Delta Woodside Group (because the Tax
Sharing Agreement will govern those Liabilities) and (ii) all Liabilities for
the fees, costs, expenses and transfer taxes (and other similar fees and
expenses), or portion thereof, that a specific provision of this Distribution
Agreement imposes on Duck Head or Delta Apparel.
"Delta Woodside Material Adverse Effect" shall be deemed to occur if the
aggregate consequences of all breaches and inaccuracies of covenants and
representations of Delta Woodside,
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when read without any exception or qualification for a Delta Woodside Material
Adverse Effect, are reasonably likely to have a material adverse effect on Delta
Woodside's ability to consummate the transactions contemplated by this
Distribution Agreement or on the business, operations or financial condition of
Delta Woodside and its Subsidiaries (excluding the Duck Head Group and the Delta
Apparel Group), Duck Head and its Subsidiaries or Delta Apparel and its
Subsidiaries, taken as a whole.
"Delta Woodside Retirees" means those individuals who were employed in the
Delta Woodside Business immediately before those individuals' retirement or
other termination of employment or who are identified as Delta Woodside Retirees
on the Delta Woodside Disclosure Schedule.
"Delta Woodside Share" means a share of the Delta Woodside Common Stock.
"Delta Woodside Stockholders" means the holders of the Delta Woodside
Common Stock.
"Distribution" means the distribution by Delta Woodside, pursuant to the
terms and subject to the conditions of this Distribution Agreement, of all of
the outstanding Duck Head Shares and all of the outstanding Delta Apparel Shares
to the Delta Woodside Stockholders of record as of the Record Date.
"Distribution Agent" means First Union National Bank or its successor.
"Distribution Agent Agreement" means an agreement to be entered into prior
to the Effective Time by the Distribution Agent with respect to the
Distribution.
"Distribution Date" means the Business Day on which the Distribution is
effected.
"Distribution Documents" means this Distribution Agreement, the Tax Sharing
Agreement, and the exhibits and schedules to those agreements.
"Duck Head Board" means the Board of Directors of Duck Head.
"Duck Head Business" means the businesses and operations of the Duck Head
Group, whether conducted prior to, at or after the Effective Time, which include
the manufacturing, marketing and sale of apparel bearing the Duck Head
trademark.
"Duck Head Common Stock" means the common stock, par value $0.01 per share,
of Duck Head.
"Duck Head Disclosure Documents" means the Duck Head Information Statement,
the Duck Head Form 10 and each other report or filing made by Duck Head under
the Securities Act or the Exchange Act or with the American Stock Exchange in
connection with the matters contemplated by any of the Distribution Documents,
in each case as amended or supplemented.
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"Duck Head Employees" means those individuals listed on the payroll records
of any member of the Duck Head Group after the Effective Time, or who are
identified as a Duck Head Employee on the Duck Head Disclosure Schedule, and
shall not include individuals who are Delta Woodside Employees or Delta Apparel
Employees.
"Duck Head Employee Group" means all Duck Head Employees and Duck Head
Retirees and their respective beneficiaries.
"Duck Head Form 10" means the registration statement on Form 10 that Duck
Head has filed with the SEC to register the Duck Head Common Stock under the
Exchange Act in connection with the Distribution, as that registration statement
may be amended from time to time.
"Duck Head Group" means, on and after the Effective Time, Duck Head and the
Subsidiaries of Duck Head, including all predecessors (other than any member of
the Delta Woodside Group or any member of the Delta Apparel Group) and
successors to each of those Persons.
"Duck Head Group Liabilities" means, except as otherwise specifically
provided in any Distribution Document, all Liabilities, whether arising before,
at or after the Effective Time, (i) of or in any way relating, in whole or in
part, to any member of the Duck Head Group (other than any Liabilities arising
primarily from the conduct of or in connection with, in whole or in part, the
Delta Woodside Business or the Delta Apparel Business) or (ii) arising from the
conduct of, in connection with or in any way relating to, in whole or in part,
the Duck Head Business, or the ownership or use of assets or property in
connection with the Duck Head Business or (iii) arising under Contracts included
in the Duck Head Assets (including any Liabilities under such Contracts
resulting from the consummation of the transactions contemplated by this
Distribution Agreement) or (iv) of Duck Head arising under any of the
Distribution Documents. Notwithstanding the foregoing, "Duck Head Group
Liabilities" shall exclude (i) all Liabilities for Taxes of any member of the
Duck Head Group (because the Tax Sharing Agreement will govern those
Liabilities) and (ii) all Liabilities for the fees, costs, expenses and transfer
taxes (and other similar fees and expenses), or portion thereof, that a specific
provision of this Distribution Agreement imposes on Delta Woodside or Delta
Apparel.
"Duck Head Information Statement" means the information statement,
substantially complying with the disclosure items of Schedule 14C of the
Exchange Act, that Duck Head will file as an exhibit to the Duck Head Form 10
and send to each Delta Woodside Stockholder of record as of the Record Date in
connection with the Distribution.
"Duck Head Material Adverse Effect" shall be deemed to occur if the
aggregate consequences of all breaches and inaccuracies of covenants and
representations of Duck Head, when read without any exception or qualification
for a Duck Head Material Adverse Effect, are reasonably likely to have a
material adverse effect on Duck Head's ability to consummate the transactions
contemplated by this Distribution Agreement or on the business, operations or
financial condition
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of Duck Head and its Subsidiaries, Delta Woodside and its Subsidiaries
(excluding the Duck Head Group and the Delta Apparel Group) or Delta Apparel and
its Subsidiaries taken as a whole.
"Duck Head Retirees" means those individuals who were employed in the Duck
Head Business immediately before those individuals' retirement or other
termination of employment or who are identified as Duck Head Retirees on the
Duck Head Disclosure Schedule.
"Duck Head Share" means a share of the Duck Head Common Stock.
"Effective Time" means the time immediately before the close of business on
the Distribution Date.
"Governmental Entity" means any government or any state, department or
other political subdivision thereof, or any governmental body, agency, authority
(including, but not limited to, any central bank or taxing authority) or
instrumentality (including, but not limited to, any court, tribunal or grand
jury) exercising executive, prosecutorial, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Group" means, as the context requires, the Delta Woodside Group, the Duck
Head Group or the Delta Apparel Group.
"Knowledge," "best knowledge" or any similar formulation of "knowledge"
shall mean the knowledge of Delta Woodside's, Duck Head's or Delta Apparel's
respective executive officers with respect to Delta Woodside, Duck Head and
Delta Apparel, respectively.
"Liabilities" means any and all claims, debts, liabilities, assessments,
fines, penalties, damages, losses, disgorgements and obligations, of any kind,
character or description (whether fixed, absolute, contingent, matured, not
matured, liquidated, unliquidated, accrued, not accrued, known, unknown, direct,
indirect, derivative or otherwise), whenever and however arising, whether or not
the same would be required by generally accepted accounting principles to be
reflected in financial statements or disclosed in the notes thereto, including,
but not limited to, all costs and expenses relating thereto (including, but not
limited to, all expenses of investigation, all attorneys' fees and all
out-of-pocket expenses in connection with any Action or threatened Action).
"Person" means an individual, corporation, limited liability company,
limited liability partnership, partnership, association, trust or other entity
or organization, including a Governmental Entity.
"Record Date" means the date determined by the Delta Woodside Board (or by
a committee of that board or any other Person acting under authority duly
delegated to that committee or Person by the Delta Woodside Board or a committee
of that board) as the record date for determining the Delta Woodside
Stockholders of record entitled to receive the Distribution.
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"Representatives" means, with respect to any party hereto, such party's
directors, officers, employees, agents, consultants, attorneys and advisors.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other Persons performing
similar functions are at the time directly or indirectly owned by that Person.
"Tax" has the meaning assigned to that term in the Tax Sharing Agreement.
"Tax Sharing Agreement" means the Tax Sharing Agreement to be dated as of
the Distribution Date among Delta Woodside, Duck Head and Delta Apparel.
"Welfare Benefits" means medical, surgical or hospital care or benefits, or
benefits in the event of sickness, accident, disability, death or unemployment,
or vacation benefits, apprenticeship or other training programs, or day care
centers, scholarship funds or prepaid legal services; provided that Welfare
Benefits do not include pensions on retirement or death or insurance to provide
those pensions.
(b) Each of the following terms is defined in the Section (or Article) set
forth opposite that term:
Term Section (or Article)
Alchem 2.1
BNY 4.2
COBRA Coverage 8.8
Code 4.10
Consent 4.4
Damages 14.1
Delta Apparel 401(k) Plan 8.3
Delta Apparel Assets 2.1
Delta Apparel Benefit Plans 6.9
Delta Apparel Disclosure Schedule Article 6
Delta Apparel Financing 2.2
Delta Apparel Interim Financial Statements 6.5
Delta Apparel Obligations 2.1
Delta Apparel Permits 6.12
Delta Apparel Preferred Stock 6.2
Delta Consolidated 2.1
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Delta Merchandising 2.1
Delta Xxxxx 2.1
Delta Xxxxx Credit Agreement 4.2
Delta Woodside 401(k) Plan 8.3
Delta Woodside Benefit Plans 4.9
Delta Woodside Credit Agreement 4.2
Delta Woodside Disclosure Schedule Article 4
Delta Woodside Interim Financial Statements 4.5
Delta Woodside Permits 4.12
Delta Woodside Preferred Stock 4.2
Delta Woodside SEC Reports 4.5
Delta Woodside Stock Options 4.2
DHAC 2.1
Duck Head 401(k) Plan 8.3
Duck Head Assets 2.1
Duck Head Benefit Plans 5.9
Duck Head Disclosure Schedule Article 5
Duck Head Financing 2.2
Duck Head Interim Financial Statements 5.5
Duck Head Obligations 2.1
Duck Head Permits 5.12
Duck Head Preferred Stock 5.2
Environmental Law 4.16
ERISA 4.9
Exchange Act 4.4
GAAP 4.5
GECC 4.2
Hazardous Substance 4.16
Intercompany Reorganization 2.1
IRS 4.10
Lien 4.4
New Delta Woodside Financing 9.7
Permitted Acquisition Proposal 9.6
Rainsford Plant Purchase 2.1
Securities Act 4.4
Violation 4.4
WARN Act 8.11
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ARTICLE 2
PRE-DISTRIBUTION TRANSACTIONS
2.1 Effectuation of Intercompany Reorganization. No later than the
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Effective Time, Delta Woodside, Duck Head and Delta Apparel shall have caused,
to the extent within their respective powers, the following (collectively, the
"Intercompany Reorganization") to have been effected:
(a) Delta Woodside shall contribute and shall cause Alchem and each other
subsidiary (other than Delta Xxxxx, Inc.) that is a creditor with respect to
intercompany debt to contribute, as contributions to capital, to one or more
direct or indirect subsidiaries of Delta Woodside all net debt amounts owed to
Delta Woodside, Alchem or such creditor subsidiary by each of Delta Consolidated
Corporation ("Delta Consolidated"), Delta Merchandising, Inc. ("Delta
Merchandising"), Duck Head Apparel Company, Inc. ("DHAC"), International Apparel
Marketing Corporation ("IAMC"), Cargud, S.A. ("Cargud"), Armonia Textil, S.A.
("Armonia") and Delta Apparel Honduras, S.A. ("Delta Honduras"), and make other
contributions of intercompany debt to one or more direct or indirect
subsidiaries of Delta Woodside, so that, with respect to all such contributions
of intercompany debt, all intercompany debt owed by Duck Head or any of its
subsidiaries (except, if any, by Duck Head or any of its subsidiaries to Duck
Head or any of its subsidiaries) or by Delta Apparel or any of its subsidiaries
(except, if any, by Delta Apparel or any of its subsidiaries to Delta Apparel or
any of its subsidiaries) shall no longer exist as of the Effective Time, with
the exceptions of
(i) with respect to Duck Head, the lesser of (A) the intercompany debt
that is attributable to amounts borrowed since January 1, 2000 from GECC
under the Delta Woodside Credit Agreement for use in the Duck Head Apparel
Company division's business and that have not been not repaid with funds
provided by the Duck Head Apparel Company division or (B) the aggregate
amount that will be borrowed by Duck Head under the Duck Head Financing at
the closing of the Duck Head Financing to repay GECC under the Delta
Woodside Credit Agreement or to pay to Delta Woodside (which borrowing and
payments will cancel the intercompany debt described in clause (A)); and
(ii) with respect to Delta Apparel, (A) the lesser of (1) the
intercompany debt that is attributable to amounts borrowed since January 1,
2000 from GECC under the Delta Woodside Credit Agreement for use in the
Delta Apparel Company division's business and that have not been not repaid
with funds provided by the Delta Apparel Company division or (2) the
aggregate amount that will be borrowed by Delta Apparel under the Delta
Apparel Financing at the closing of the Delta Apparel Financing to repay
GECC under the Delta Woodside Credit Agreement or to pay to Delta Woodside
(which borrowing and payments will cancel the intercompany debt described
in clause (1)) and (B) any amounts owed by Delta Apparel to the Delta
Woodside Group for yarn sold by the Delta Woodside Group to Delta Apparel,
which amounts shall be paid in the ordinary course of business;
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provided, however, that any and all obligations and liabilities that arise under
this Distribution Agreement or the Tax Sharing Agreement remain and will remain
in existence.
(b) Alchem Capital Corporation ("Alchem") shall transfer, as a contribution
to capital, to DHAC all of the outstanding capital stock of Delta Consolidated
and Delta Merchandising.
(c) DHAC shall transfer, as a contribution to capital, to Delta
Consolidated all of the outstanding capital stock of Delta Apparel Honduras,
S.A. that is beneficially owned by DHAC. Each of Delta Woodside, Alchem, Delta
Consolidated and Cargud, S.A. shall sell to a director of Delta Apparel, to be
designated by Delta Apparel, the one share of Delta Apparel Honduras, S.A. that
is owned by such selling corporation (provided that each such director enters
into a sale agreement with Delta Apparel with respect to such share that is
satisfactory to Delta Apparel).
(d) Delta Woodside shall cause title to all assets used in the operation of
the Delta Apparel Company division of various subsidiaries of Delta Woodside and
all assets that pertain to such operation or to such assets (collectively, the
"Delta Apparel Assets"), other than any intellectual property assets owned by
Alchem that are part of the Delta Apparel Assets, any Delta Apparel Assets
already owned by Delta Consolidated, the assets owned by Delta Apparel Honduras,
S.A., the assets owned by Delta Apparel and the Rainsford Plant located in
Edgefield, SC, to be transferred to Delta Consolidated. In order to accomplish
this, among other matters, DHAC shall transfer to Delta Consolidated, as a
contribution to capital, all assets owned by DHAC that are part of the Delta
Apparel Assets.
(e) DHAC shall transfer, as a contribution to capital, to Delta Apparel all
of the outstanding capital stock of Delta Consolidated.
(f) Delta Consolidated shall merge with and into Delta Apparel, with Delta
Apparel to be the surviving corporation in the merger.
(g) Delta Xxxxx, Inc. ("Delta Xxxxx") shall sell to Delta Apparel, and
Delta Apparel shall purchase from Delta Xxxxx, the Xxxxxxxxx Plant, located in
Edgefield, SC, for a purchase price equal to the book value of the purchased
assets, which Delta Woodside and Delta Apparel believe equals the fair market
value of those assets (the "Rainsford Plant Purchase").
(h) Delta Apparel (either directly or through Delta Consolidated) shall
assume all of the Liabilities of the Delta Apparel Company division of various
subsidiaries of Delta Woodside, including without limitation the Delta Apparel
Group Liabilities (collectively, the "Delta Apparel Obligations"), and shall
cause all holders of indebtedness for borrowed money that are part of the Delta
Apparel Obligations and all lessors of leases that are part of the Delta Apparel
Obligations to release all obligors (other than any member of the Delta Apparel
Group) of such indebtedness and under such leases and to release all related
liens covering the property of any Person other than a
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member of the Delta Apparel Group (except where Delta Woodside or Duck Head, as
applicable, consents to not being released from the obligations).
(i) Delta Woodside shall cause those individuals who are employed by the
Delta Apparel Company division of various subsidiaries of Delta Woodside to
become employees of Delta Apparel, Delta Apparel shall assume the accrued
employee benefits of such employees and Delta Woodside shall cause the account
balance of each such employee in any and all of Delta Woodside's employee
benefit plans (other than the Delta Woodside Stock Option Plan, the Delta
Woodside Incentive Stock Award Plan and the Delta Woodside Long Term Incentive
Plan, if any) to be transferred to a comparable employee benefit plan of Delta
Apparel.
(j) DHAC shall transfer, as a contribution to capital, to Duck Head all of
the outstanding capital stock of Delta Merchandising and Cargud, S.A.
(k) Delta Woodside shall cause title to all assets used in the operation of
the Duck Head Apparel Company division of various subsidiaries of Delta Woodside
and all assets that pertain to such operation or to such assets (collectively,
the "Duck Head Assets"), other than the intellectual property assets owned by
Alchem that are part of the Duck Head Assets, the Duck Head Assets already owned
by Duck Head, the Duck Head Assets owned by Delta Consolidated or Delta Apparel,
the Duck Head Assets owned by Cargud, S.A. (or any other Costa Rican corporation
that is a direct or indirect subsidiary of DHAC) and the Distribution Facility,
located in Winder, GA, that is owned by Delta Woodside and is part of the Duck
Head Assets, to be transferred to Duck Head. In order to accomplish this, among
other matters, DHAC shall transfer to Duck Head, as a contribution to capital,
all assets owned by DHAC that are part of the Duck Head Assets.
(l) Duck Head shall assume all of the Liabilities of the Duck Head Apparel
Company division of Delta Woodside and various subsidiaries of Delta Woodside,
including without limitation the Duck Head Group Liabilities (collectively, the
"Duck Head Obligations"), and shall cause all holders of indebtedness for
borrowed money that are part of the Duck Head Obligations and all lessors of
leases that are part of the Duck Head Obligations to release all obligors (other
than any member of the Duck Head Group) of such indebtedness and under such
leases and to release all related liens covering the property of any Person
other than a member of the Duck Head Group (except where Delta Woodside or Delta
Apparel, as applicable, consents to not being released from the obligations).
(m) Delta Woodside shall cause those individuals who are employed by the
Duck Head Apparel Company division of Delta Woodside and various subsidiaries of
Delta Woodside to become employees of Duck Head, Duck Head shall assume the
accrued employee benefits of such employees and Delta Woodside shall cause the
account balance of each such employee in any and all of Delta Woodside's
employee benefit plans (other than the Delta Woodside Stock Option Plan, the
Delta Woodside Incentive Stock Award Plan and the Delta Woodside Long Term
Incentive Plan, if any) to be transferred to a comparable employee benefit plan
of Duck Head.
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(n) Delta Woodside shall cause all holders of indebtedness for borrowed
money that are not part of the Duck Head Obligations or the Delta Apparel
Obligations and all lessors of leases that are not part of the Duck Head
Obligations or the Delta Apparel Obligations to release all obligors (other than
any member of the Delta Woodside Group) of such indebtedness and under such
leases and to release all related liens covering the property of any Person
other than a member of the Delta Woodside Group (except where Duck Head or Delta
Apparel, as the case may be, consents to not being released from the
obligations).
(o) Delta Apparel shall transfer to Duck Head all of the Duck Head Assets
of Delta Apparel that, immediately prior to the merger described in paragraph
(f) above, were those of the Duck Head Apparel division of Delta Consolidated,
and Duck Head shall assume all of Delta Apparel's obligations relating to such
assets and the portion of the business of Delta Apparel that, immediately prior
to the merger described in paragraph (f) above, was the business of the Duck
Head Apparel division of Delta Consolidated, in exchange for a purchase price
(including assumed liabilities) equal to the fair market value of the purchased
assets.
(p) DHAC and IAMC shall merge with and into Alchem, with Alchem to be in
each case the surviving corporation in the merger.
(q) Alchem shall transfer to Delta Apparel, as a contribution to capital,
all intellectual property assets, if any, owned by Alchem that are part of the
Delta Apparel Assets.
(r) Alchem shall transfer to Duck Head, as a contribution to capital, all
intellectual property assets owned by Alchem that are part of the Duck Head
Assets.
(s) Alchem shall merge with and into Delta Woodside, with Delta Woodside to
be the surviving corporation in the merger.
(t) Delta Woodside shall transfer to Duck Head the Distribution Facility,
located in Winder, GA, that is owned by Delta Woodside and is part of the Duck
Head Assets.
(u) Duck Head shall be renamed "Duck Head Apparel Company, Inc."
2.2 Duck Head Financing and Delta Apparel Financing.
------------------------------------------------
(a) Prior to the Effective Time, Duck Head shall have obtained credit
facilities (the "Duck Head Financing") that Duck Head believes will be
sufficient to satisfy its reasonably anticipated working capital needs.
(b) Prior to the Effective Time, Delta Apparel shall have obtained credit
facilities (the "Delta Apparel Financing") that Delta Apparel believes will be
sufficient to pay the cash portion of the purchase price in the Rainsford Plant
Purchase and to satisfy Delta Apparel's reasonably anticipated working capital
needs.
13
ARTICLE 3
THE DISTRIBUTION
3.1 Cooperation Before the Distribution.
------------------------------------
(a) Duck Head.
----------
(i) Delta Woodside and Duck Head have prepared, and Duck Head has
filed with the SEC, the Duck Head Form 10, which includes as an exhibit the
Duck Head Information Statement. The Duck Head Information Statement sets
forth disclosure concerning Duck Head and the Distribution. Delta Woodside
and Duck Head shall use all commercially reasonable efforts to cause the
Duck Head Form 10 (together with the Duck Head Information Statement
attached as an exhibit) to become effective under the Exchange Act as soon
as practicable. After the Duck Head Form 10 (together with the Duck Head
Information Statement attached as an exhibit) has become effective, Delta
Woodside shall mail the Duck Head Information Statement as promptly as
practicable to the Delta Woodside Stockholders of record as of the Record
Date.
(ii) As promptly as practicable, Duck Head shall prepare, file and
pursue an application to permit the listing of shares of the Duck Head
Common Stock on the American Stock Exchange.
(b) Delta Apparel.
--------------
(i) Delta Woodside and Delta Apparel have prepared, and Delta Apparel
has filed with the SEC, the Delta Apparel Form 10, which includes as an
exhibit the Delta Apparel Information Statement. The Delta Apparel
Information Statement sets forth disclosure concerning Delta Apparel and
the Distribution. Delta Woodside and Delta Apparel shall use all
commercially reasonable efforts to cause the Delta Apparel Form 10
(together with the Delta Apparel Information Statement attached as an
exhibit) to become effective under the Exchange Act as soon as practicable.
After the Delta Apparel Form 10 (together with the Delta Apparel
Information Statement attached as an exhibit) has become effective, Delta
Woodside shall mail the Delta Apparel Information Statement as promptly as
practicable to the Delta Woodside Stockholders of record as of the Record
Date.
(ii) As promptly as practicable, Delta Apparel shall prepare, file and
pursue an application to permit the listing of shares of the Delta Apparel
Common Stock on the American Stock Exchange.
(c) Plans. Delta Woodside, Duck Head and Delta Apparel shall cooperate in
------
preparing and filing with the SEC and causing to become effective any
registration statements or amendments
14
thereto that are necessary or appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by the
Distribution Documents.
(d) Blue Sky Laws. Delta Woodside, Duck Head and Delta Apparel shall take
--------------
all actions as may be necessary or appropriate under the securities or blue sky
laws of states or other political subdivisions of the United States in
connection with the transactions contemplated by the Distribution Documents.
3.2 Delta Woodside Board Action. The Delta Woodside Board shall, in its
-----------------------------
discretion, establish (or delegate authority to establish) the Record Date and
the Distribution Date and any appropriate procedures in connection with the
Distribution.
3.3 The Distribution. Subject to the terms and conditions set forth or
------------------
described in this Distribution Agreement, (i) on or before the Distribution
Date, Delta Woodside shall deliver or cause to be delivered to the Distribution
Agent for the benefit of the Delta Woodside Stockholders of record on the Record
Date, a stock certificate or certificates, endorsed by Delta Woodside in blank,
representing all of the then outstanding shares of Duck Head Common Stock, (ii)
on or before the Distribution Date, Delta Woodside shall deliver or cause to be
delivered to the Distribution Agent for the benefit of the Delta Woodside
Stockholders of record on the Record Date, a stock certificate or certificates,
endorsed by Delta Woodside in blank, representing all of the then outstanding
shares of Delta Apparel Common Stock, (iii) the Distribution shall be effective
as of the Effective Time, (iv) Delta Woodside and Duck Head shall instruct the
Distribution Agent to distribute to, or make book-entry credits for, on or as
soon as practicable after the Distribution Date, each Delta Woodside Stockholder
of record as of the Record Date one Duck Head Share for every ten Delta Woodside
Shares so held (subject to Section 3.5), and (v) Delta Woodside and Delta
Apparel shall instruct the Distribution Agent to distribute to, or make
book-entry credits for, on or as soon as practicable after the Distribution
Date, each Delta Woodside Stockholder of record as of the Record Date one Delta
Apparel Share for every ten Delta Woodside Shares so held (subject to Section
3.5). Duck Head agrees to (x) provide all certificates for Duck Head Shares that
Delta Woodside shall require (after giving effect to Sections 3.4 and 3.5) in
order to effect the Distribution and (y) take all necessary actions to adopt a
stock transfer and registration system for Duck Head effective as of the
Distribution Date. Delta Apparel agrees to (x) provide all certificates for
Delta Apparel Shares that Delta Woodside shall require (after giving effect to
Sections 3.4 and 3.5) in order to effect the Distribution and (y) take all
necessary actions to adopt a stock transfer and registration system for Delta
Apparel effective as of the Distribution Date.
3.4 Stock Dividends.
----------------
(a) Duck Head. On or before the Distribution Date, Duck Head shall issue to
----------
Delta Woodside as a stock dividend the number of additional shares of Duck Head
Common Stock that, together with the shares of Duck Head Common Stock already
held by Delta Woodside, will provide Delta Woodside with the number of shares of
Duck Head Common Stock that is required to effect the Distribution, as certified
by the Distribution Agent.
15
(b) Delta Apparel. On or before the Distribution Date, Delta Apparel shall
--------------
issue to Delta Woodside as a stock dividend the number of additional shares of
Delta Apparel Common Stock that, together with the shares of Delta Apparel
Common Stock already held by Delta Woodside, will provide Delta Woodside with
the number of shares of Delta Apparel Common Stock that is required to effect
the Distribution, as certified by the Distribution Agent.
3.5 Fractional Shares. No certificate or scrip representing fractional
-------------------
shares of Duck Head Common Stock or Delta Apparel Common Stock will be issued in
the Distribution. In lieu of any such fractional share, each holder of Delta
Woodside Shares who otherwise would be entitled to a fractional share of Duck
Head Common Stock or Delta Apparel Common Stock shall be entitled to receive
promptly from the Distribution Agent a cash payment, without any interest,
representing such holder's proportionate interest in the net proceeds from the
sale or sales by the Distribution Agent on behalf of all such holders of the
aggregate fractional shares of Duck Head Common Stock and Delta Apparel Common
Stock, as applicable, pursuant to this Section 3.5 and the terms of the
Distribution Agent Agreement, after making appropriate deductions of the amount
required, if any, to be withheld for United States federal income tax purposes.
The Distribution Agent shall determine, in its sole discretion, when, how,
through which broker-dealer and at what price such sale(s) shall be made. All
cash in lieu of fractional Duck Head Shares or fractional Delta Apparel Shares
to be paid pursuant to this Section 3.5, if unclaimed at the first anniversary
of the Effective Time, shall be released and paid by the Distribution Agent to
Duck Head (in the case of the sale of fractional Duck Head Shares) and Delta
Apparel (in the case of the sale of fractional Delta Apparel Shares), after
which time persons entitled thereto may look, subject to applicable escheat and
other similar laws, only to the Duck Head or Delta Apparel, respectively, for
payment thereof. Delta Woodside, Duck Head and Delta Apparel will instruct the
Distribution Agent to do the following, as soon as practicable (subject to the
provisions set forth above) after the Effective Time: (a) to determine the
number of whole shares and fractional shares of Duck Head Common Stock and Delta
Apparel Common Stock allocable to each Delta Woodside Stockholder of record as
of the Record Date who, as a result of the Distribution, would own a fractional
share of Duck Head Common Stock or Delta Apparel Common Stock, as applicable,
(b) to aggregate all fractional shares of Duck Head Common Stock and all
fractional shares of Delta Apparel Common Stock held by those holders, and (c)
to sell the whole shares attributable to the aggregate of those fractional
shares, in one or more open market transactions, in each case at the then
prevailing market prices, and to cause to be distributed to each such holder, in
lieu of any fractional share, without interest, that holder's ratable share of
the proceeds of that sale, after making appropriate deductions of the amount
required, if any, to be withheld for United States federal income tax purposes.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF DELTA WOODSIDE
Delta Woodside represents and warrants to Duck Head and Delta Apparel that,
except as disclosed in the Delta Woodside Disclosure Schedule that has been
delivered to Duck Head and
16
Delta Apparel prior to the execution of this Distribution Agreement (the "Delta
Woodside Disclosure Schedule") or as contemplated by this Distribution
Agreement, as of immediately prior to the Effective Time the following will be
true and accurate:
4.1 Organization . Delta Woodside is a corporation duly organized and
------------
validly existing under the laws of the State of South Carolina.
4.2 Capitalization. (a) The authorized capital stock of Delta Woodside
---------------
consists of 50,000,000 shares of Delta Woodside Common Stock and 10,000,000
shares of Preferred Stock, $250,000,000 maximum par value per share (the "Delta
Woodside Preferred Stock"). As of the date hereof, 23,307,645 shares of Delta
Woodside Common Stock and no shares of Delta Woodside Preferred Stock are issued
and outstanding, and all such issued and outstanding shares of Delta Woodside
Common Stock were validly issued and are fully paid and nonassessable. As of the
date hereof, except for stock options to acquire an aggregate of 376,818 shares
of Delta Woodside Common Stock (collectively, the "Delta Woodside Stock
Options"), and except as contemplated by this Distribution Agreement, there are
no options, warrants, calls or other rights, agreements or commitments currently
outstanding obligating Delta Woodside to issue, deliver or sell shares of its
capital stock, or obligating Delta Woodside to grant, extend or enter into any
such option, warrant, call or other such right, agreement or commitment.
(b) All the outstanding shares of capital stock of each of Alchem, Delta
Consolidated, Delta Merchandising and DHAC are validly issued, fully paid and
nonassessable and are owned by Delta Woodside or by a wholly-owned Subsidiary of
Delta Woodside, free and clear of any Liens (other than Liens on the capital
stock of certain Subsidiaries of Delta Woodside granted in favor of General
Electric Capital Corporation ("GECC") in connection with the Credit Agreement to
which GECC, Delta Woodside and various Subsidiaries of Delta Woodside are
parties (the "Delta Woodside Credit Agreement") or granted in favor of BNY
Financial Corporation ("BNY"), as Collateral Agent, in connection with the
Credit Agreement to which Delta Xxxxx, BNY and Bank of America, N.A., as
Administrative Agent, are parties (the "Delta Xxxxx Credit Agreement")). All of
the outstanding shares of capital stock of each of Duck Head and Delta Apparel
are owned by Delta Woodside, free and clear of any Liens (other than Liens
granted in favor of GECC in connection with the Delta Woodside Credit Agreement,
which will be released prior to the Effective Time). There are no existing
options, warrants, calls or other rights, agreements or commitments of any
character relating to the sale, issuance or voting of any shares of the issued
or unissued capital stock of any of Alchem, Delta Consolidated, Delta
Merchandising or DHAC that have been issued, granted or entered into by Delta
Woodside or any of its Subsidiaries.
4.3 Authority Relative to this Distribution Agreement. Delta Woodside has
---------------------------------------------------
the necessary corporate power and authority to execute and deliver this
Distribution Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Distribution Agreement and the consummation
of the transactions contemplated hereby by Delta Woodside have been duly and
validly authorized and approved by Delta Woodside's Board of Directors and no
other corporate proceedings on the part of Delta Woodside are necessary to
authorize or approve this
17
Distribution Agreement or to consummate the transactions contemplated hereby.
This Distribution Agreement has been duly executed and delivered by Delta
Woodside, and, assuming the due authorization, execution and delivery by Duck
Head and Delta Apparel, constitutes the valid and binding obligation of Delta
Woodside enforceable against Delta Woodside in accordance with its terms except
as such enforceability may be limited by general principles of equity or
principles applicable to creditors' rights generally.
4.4 No Conflicts, Required Filings and Consents. (a) None of the execution
---------------------------------------------
and delivery of this Distribution Agreement by Delta Woodside, the consummation
by Delta Woodside of the transactions contemplated hereby or compliance by Delta
Woodside with any of the provisions hereof will (i) conflict with or violate the
Articles of Incorporation or By-laws of Delta Woodside or the comparable
organizational documents of any of Alchem, Delta Consolidated, Delta
Merchandising or DHAC, (ii) subject to receipt or filing of the required
Consents (as defined herein) referred to in Section 4.4(b), conflict with or
violate any statute, ordinance, rule, regulation, order, judgment or decree
applicable to Delta Woodside or any of Delta Woodside's Subsidiaries (other than
a member of the Duck Head Group or a member of the Delta Apparel Group), or by
which any of them or any of their respective properties or assets may be bound
or affected, or (iii) subject to receipt or filing of the required Consents
referred to in Section 4.4(b), result in a violation or breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any lien, charge,
security interest, pledge, or encumbrance of any kind or nature (any of the
foregoing being a "Lien") on any of the property or assets of Delta Woodside or
any of Delta Woodside's Subsidiaries (other than a member of the Duck Head Group
or a member of the Delta Apparel Group) (any of the foregoing referred to in
clause (ii) or this clause (iii) being a "Violation") pursuant to, any note,
bond, mortgage, indenture, Contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Delta Woodside or any of
Delta Woodside's Subsidiaries (other than a member of the Duck Head Group or a
member of the Delta Apparel Group) is a party or by which Delta Woodside or any
of Delta Woodside's Subsidiaries (other than a member of the Duck Head Group or
a member of the Delta Apparel Group) or any of their respective properties may
be bound or affected, except in the case of the foregoing clause (ii) or (iii)
for any such Violations that would not have a Delta Woodside Material Adverse
Effect.
(b) None of the execution and delivery of this Distribution Agreement by
Delta Woodside, the consummation by Delta Woodside of the transactions
contemplated hereby or compliance by Delta Woodside with any of the provisions
hereof will require any consent, waiver, license, approval, authorization, order
or permit of, or registration or filing with or notification to (any of the
foregoing being a "Consent"), any Governmental Entity, except for (i) compliance
with any applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), (ii) compliance with any applicable requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iii) certain
state takeover, securities, "blue sky" and environmental statutes, (iv) such
filings as may be required in connection with the taxes described in Section
15.12 (b), and (v) Consents the failure of which to obtain or make would not
have a Delta Woodside Material Adverse Effect.
18
4.5 Reports and Financial Statements. (a) Delta Woodside has filed with the
---------------------------------
SEC all forms, reports, schedules, registration statements and definitive proxy
statements (the "Delta Woodside SEC Reports") required to be filed by it with
the SEC since July 3, 1999, including without limitation those required to be
filed in connection with the Distribution. As of their respective dates, the
Delta Woodside SEC Reports complied as to form in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Delta
Woodside SEC Reports. As of their respective dates, the Delta Woodside SEC
Reports 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 light of the circumstances under which they were made,
not misleading.
(b) The consolidated balance sheets as of July 3, 1999 and June 27, 1998
and the related consolidated statements of earnings, stockholders' equity and
cash flows for each of the three years in the period ended July 3, 1999
(including the related notes and schedules thereto) of Delta Woodside contained
in the Form 10-K of Delta Woodside for the year ended July 3, 1999 present
fairly, in all material respects, the consolidated financial position and the
consolidated results of operations and cash flows of Delta Woodside and its
consolidated subsidiaries as of the dates or for the periods presented therein
in conformity with United States generally accepted accounting principles
("GAAP") applied on a consistent basis during the periods involved except as
otherwise noted therein, including in the related notes.
(c) The consolidated balance sheets and the related consolidated statements
of earnings and cash flows (including, in each case, the related notes thereto)
of Delta Woodside contained in the Form 10-Q of Delta Woodside for the quarterly
period ended January 1, 2000 (the "Delta Woodside Interim Financial Statements")
have been prepared in accordance with the requirements for interim financial
statements contained in Regulation S-X, which do not require all the information
and footnotes necessary for a fair presentation of financial position, results
of operations and cash flows in conformity with GAAP. The Delta Woodside Interim
Financial Statements reflect all adjustments necessary to present fairly in
accordance with GAAP (except as indicated), in all material respects, the
consolidated financial position, results of operations and cash flows of Delta
Woodside for all periods presented therein.
4.6 Information. None of the information supplied or to be supplied by
------------
Delta Woodside or its Representatives for inclusion or incorporation by
reference in the Duck Head Information Statement or the Delta Apparel
Information Statement will or did, at the time of their distribution to the
Delta Woodside Stockholders as of the Record Date or the time of the
effectiveness of the Duck Head Form 10 or the Delta Apparel Form 10 with the
SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
4.7 Litigation. Except as disclosed in the Delta Woodside SEC Reports, as
-----------
of the date hereof, there is no suit, action or proceeding pending or, to the
knowledge of Delta Woodside, threatened
19
against or affecting Delta Woodside or any of its Subsidiaries, nor is there any
judgment, decree, injunction or order of any Governmental Entity or arbitrator
outstanding against Delta Woodside or any of its Subsidiaries, that is
reasonably expected to have a Delta Woodside Material Adverse Effect or to
prevent or materially delay the consummation of the transactions contemplated in
this Distribution Agreement.
4.8 Absence of Certain Changes or Events. Except as disclosed in the Delta
-------------------------------------
Woodside SEC Reports or as contemplated by this Distribution Agreement, since
January 1, 2000, Delta Woodside has conducted its business only in the ordinary
course and there has not been any change that would have a Delta Woodside
Material Adverse Effect, other than changes relating to or arising from general
economic conditions.
4.9 Employee Benefit Plans. Except as disclosed in the Delta Woodside SEC
------------------------
Reports or the Delta Woodside Disclosure Schedule, there are no (a) employee
benefit or compensation plans, agreements or arrangements, including "employee
benefit plans," as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and including, but not limited to,
plans, agreements or arrangements relating to former employees, including, but
not limited to, retiree medical plans or life insurance, maintained by Delta
Woodside or any of its Subsidiaries (other than a member of the Duck Head Group
or a member of the Delta Apparel Group) or (b) collective bargaining agreements
to which Delta Woodside or any of its Subsidiaries (other than a member of the
Duck Head Group or a member of the Delta Apparel Group) is a party
(collectively, the "Delta Woodside Benefit Plans"), other than plans, agreements
or arrangements that, in the aggregate, are not material to Delta Woodside and
its Subsidiaries (other than members of the Duck Head Group or members of the
Delta Apparel Group) as a whole. Delta Woodside and its Subsidiaries (other than
members of the Duck Head Group or members of the Delta Apparel Group) have
complied with the terms of all Delta Woodside Benefit Plans, except for such
noncompliance that would not have a Delta Woodside Material Adverse Effect, and
no default exists with respect to the obligations of Delta Woodside or any of
its Subsidiaries (other than members of the Duck Head Group or members of the
Delta Apparel Group) under such Delta Woodside Benefit Plans that would have a
Delta Woodside Material Adverse Effect. Since July 3, 1999, there have been no
disputes, grievances subject to any grievance procedure, unfair labor practice
proceedings, arbitration or litigation (or, to the knowledge of Delta Woodside,
threatened proceedings or grievances) under such Delta Woodside Benefit Plans,
that have not been finally resolved, settled or otherwise disposed of, nor is
there any default, or any condition that, with notice or lapse of time or both,
would constitute such a default, under any such Delta Woodside Benefit Plan, by
Delta Woodside or its Subsidiaries (excluding members of the Duck Head Group and
members of the Delta Apparel Group) or, to the best knowledge of Delta Woodside,
any other party thereto, other than disputes, grievances, arbitration,
litigation, proceedings, threatened proceedings or grievances, defaults or
conditions that would not have a Delta Woodside Material Adverse Effect. Since
July 3, 1999, there have been no strikes, lockouts or work stoppages or
slowdowns, or to the best knowledge of Delta Woodside, labor jurisdictional
disputes or labor organizing activity occurring or threatened with respect to
the business or operations of Delta Woodside or its Subsidiaries (excluding
members of the Duck Head Group and members of the Delta Apparel Group) that have
had or would have a Delta Woodside Material Adverse Effect.
20
4.10 ERISA. All Delta Woodside Benefit Plans are in compliance with the
------
applicable provisions of ERISA, the Internal Revenue Code of 1986, as amended
(the "Code"), all other applicable laws and all applicable collective bargaining
agreements, in each case, to the extent applicable, except where such failures
to administer or comply would not have a Delta Woodside Material Adverse Effect.
Each of the Delta Woodside Benefit Plans that is intended to meet the
requirements of Section 401(a) of the Code has been determined by the Internal
Revenue Service ("IRS") to be "qualified," within the meaning of such Section of
the Code and Delta Woodside does not know of any circumstance likely to result
in revocation of such determination. No Delta Woodside Benefit Plan is subject
to Title IV of ERISA or Section 412 of the Code. Neither Delta Woodside nor any
of its Subsidiaries (excluding members of the Duck Head Group and member of the
Delta Apparel Group) (i) has made a complete or partial withdrawal, within the
meaning of Section 4201 of ERISA, from any multiemployer plan or (ii) currently
is a sponsor of or contributes to a multiemployer plan. Neither Delta Woodside
nor any of its Subsidiaries (excluding members of the Duck Head Group and
members of the Delta Apparel Group) has maintained a plan subject to Title IV of
ERISA at any time within the last five years. Except as disclosed in the Delta
Woodside SEC Reports or in the Delta Woodside Disclosure Schedule, neither the
execution and delivery of this Distribution Agreement nor the consummation of
the transactions contemplated hereby will (i) materially increase any benefits
otherwise payable under any Delta Woodside Benefit Plan or (ii) result in the
acceleration of the time of payment or vesting of any such benefits to any
material extent.
4.11 Taxes. Delta Woodside and its Subsidiaries (excluding members of the
------
Duck Head Group and members of the Delta Apparel Group) have duly filed all
foreign, federal, state and local income, franchise, excise, real and personal
property and other tax returns and reports (including, but not limited to, those
filed on a consolidated, combined or unitary basis) required to have been filed
by Delta Woodside and its Subsidiaries (excluding members of the Duck Head Group
and members of the Delta Apparel Group) prior to the Distribution Date, except
for such returns or reports the failure to file which would not have a Delta
Woodside Material Adverse Effect. All of the foregoing returns and reports are
true and correct in all material respects, and Delta Woodside and its
Subsidiaries (excluding members of the Duck Head Group and members of the Delta
Apparel Group) have paid, or prior to the Effective Time will pay, all taxes,
interest and penalties shown on such returns or reports as being due or (except
to the extent the same are contested in good faith) claimed to be due to any
federal, state, local or other taxing authority. Delta Woodside and its
Subsidiaries (other than any member of the Duck Head Group or the Delta Apparel
Group) have paid and will pay all installments of estimated taxes due on or
before the Effective Time, except for any failure to do so that would not have a
Delta Woodside Material Adverse Effect. All taxes and state assessments and
levies that Delta Woodside and its Subsidiaries (excluding members of the Duck
Head Group and members of the Delta Apparel Group) are required by law to
withhold or collect have been withheld or collected and have been paid to the
proper governmental authorities or are held by Delta Woodside for such payment,
except for any failure to do so that would not have a Delta Woodside Material
Adverse Effect. Except as disclosed in the Delta Woodside Disclosure
21
Schedule, as of the date hereof, all deficiencies proposed as a result of any
audits have been paid or settled.
4.12 Compliance with Applicable Laws. Delta Woodside and its Subsidiaries
---------------------------------
(excluding members of the Duck Head Group and members of the Delta Apparel
Group) hold all permits, licenses, variances, exemptions, orders and approvals
of all Governmental Entities necessary for them to own, lease or operate their
properties and assets and to carry on their businesses substantially as now
conducted (the "Delta Woodside Permits"), except for such permits, licenses,
variances, exemptions, orders and approvals the failure of which to hold would
not have a Delta Woodside Material Adverse Effect. Delta Woodside and its
Subsidiaries (excluding members of the Duck Head Group and members of the Delta
Apparel Group) are in compliance with all applicable laws and the terms of Delta
Woodside Permits, except for such failures so to comply that would not have a
Delta Woodside Material Adverse Effect.
4.13 No Voting Requirement. No vote of the holders of any class or series
-----------------------
of Delta Woodside's capital stock is necessary to approve this Distribution
Agreement and the transactions contemplated by this Distribution Agreement.
4.14 Brokers. No broker or finder is entitled to any broker's or finder's
--------
fee in connection with the transactions contemplated by this Distribution
Agreement based upon arrangements made by or on behalf of Delta Woodside.
4.15 Undisclosed Liabilities. Except as disclosed in Delta Woodside's
-------------------------
Quarterly Report on Form 10-Q for the fiscal quarter ended January 1, 2000 (or
in any subsequently filed Delta Woodside SEC Reports), neither Delta Woodside
nor any of its Subsidiaries (excluding members of the Duck Head Group and
members of the Delta Apparel Group) has any liabilities or any obligations of
any nature whether or not accrued, contingent or otherwise, that would be
required by GAAP to be reflected on a consolidated balance sheet of Delta
Woodside and its Subsidiaries (including the notes thereto) (excluding members
of the Duck Head Group and members of the Delta Apparel Group), except for
liabilities or obligations incurred in the ordinary course of business since
January 1, 2000 that would not have a Delta Woodside Material Adverse Effect or
contemplated to be incurred by this Distribution Agreement.
4.16 Environmental Matters. Except as disclosed in the Delta Woodside SEC
-----------------------
Reports or as would not reasonably be expected to have a Delta Woodside Material
Adverse Effect: (i) to the best knowledge of Delta Woodside no real property
currently or formerly owned or operated by Delta Woodside or any current
Subsidiary (excluding members of the Duck Head Group and members of the Delta
Apparel Group) is contaminated with any Hazardous Substances (as defined below)
to an extent or in a manner or condition now requiring remediation under any
Environmental Law (as defined below); (ii) no judicial or administrative
proceeding is pending or to the best knowledge of Delta Woodside threatened
against Delta Woodside or any of its Subsidiaries (excluding members of the Duck
Head Group and members of the Delta Apparel Group) relating to liability for any
off-site disposal or contamination; and (iii) Delta Woodside and its
Subsidiaries (excluding members
22
of the Duck Head Group and members of the Delta Apparel Group) have not received
any claims or notices alleging liability under any Environmental Law, and Delta
Woodside has no knowledge of any circumstances that could result in such claims.
"Environmental Law" means any applicable federal, state or local law,
regulation, order, decree or judicial opinion or other agency requirement having
the force and effect of law and relating to noise, odor, Hazardous Substance or
the protection of the environment. "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF DUCK HEAD
Duck Head represents and warrants to Delta Woodside and Delta Apparel that,
except as disclosed in the Duck Head Disclosure Schedule that has been delivered
to Delta Woodside and Delta Apparel prior to the execution of this Distribution
Agreement (the "Duck Head Disclosure Schedule") or as contemplated by this
Distribution Agreement, as of immediately prior to the Effective Time the
following will be true and accurate:
5.1 Organization and Qualification. Duck Head is a corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the State of
Georgia. Each of Duck Head and each of its Subsidiaries has the requisite
corporate power and authority to carry on its business as it is now being
conducted and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not have a Duck Head
Material Adverse Effect.
5.2 Capitalization. (a) The authorized capital stock of Duck Head consists
---------------
of 9,000,000 shares of Duck Head Common Stock and 2,000,000 shares of Preferred
Stock, $0.01 par value per share (the "Duck Head Preferred Stock"). As of the
date hereof, 100 shares of Duck Head Common Stock and no shares of Duck Head
Preferred Stock were issued and outstanding, and all such issued and outstanding
shares of Duck Head Common Stock were validly issued and are fully paid and
nonassessable. As of the date hereof, except for a right held by Xxxxxx X.
Xxxxxx, Xx. to acquire 1,000,000 shares of Duck Head Common Stock and an
agreement to grant to Xx. Xxxxxx incentive stock awards and stock options to
acquire shares of Duck Head Common Stock, and except as contemplated by this
Distribution Agreement, there were no options, warrants, calls or other rights,
agreements or commitments currently outstanding obligating Duck Head to issue,
deliver or sell shares of its capital stock, or obligating Duck Head to grant,
extend or enter into any such option, warrant, call or other such right,
agreement or commitment.
(b) All the outstanding shares of capital stock of each Subsidiary of Duck
Head are validly issued, fully paid and nonassessable and are owned by Duck Head
or by a wholly-owned Subsidiary
23
of Duck Head, free and clear of any Liens (except Liens granted to GECC in
connection with the Delta Woodside Credit Facility, which will be released prior
to the Effective Time). There are no existing options, warrants, calls or other
rights, agreements or commitments of any character relating to the sale,
issuance or voting of any shares of the issued or unissued capital stock of any
of the Subsidiaries of Duck Head that have been issued, granted or entered into
by Duck Head or any of its Subsidiaries.
5.3 Authority Relative to This Distribution Agreement. Duck Head has the
----------------------------------------------------
necessary corporate power and authority to execute and deliver this Distribution
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Distribution Agreement and the consummation of the
transactions contemplated hereby by Duck Head have been duly and validly
authorized and approved by Duck Head's Board of Directors and no other corporate
proceedings on the part of Duck Head are necessary to authorize or approve this
Distribution Agreement or to consummate the transactions contemplated hereby.
This Distribution Agreement has been duly executed and delivered by Duck Head,
and, assuming the due authorization, execution and delivery by Delta Woodside
and Delta Apparel, constitutes the valid and binding obligation of Duck Head
enforceable against Duck Head in accordance with its terms except as such
enforceability may be limited by general principles of equity or principles
applicable to creditors' rights generally.
5.4 No Conflicts, Required Filings and Consents. (a) None of the execution
---------------------------------------------
and delivery of this Distribution Agreement by Duck Head, the consummation by
Duck Head of the transactions contemplated hereby or compliance by Duck Head
with any of the provisions hereof will (i) conflict with or violate the Articles
of Incorporation or By-laws of Duck Head or the comparable organizational
documents of any of Duck Head's Subsidiaries, (ii) subject to receipt or filing
of the required Consents referred to in Section 5.4(b), result in a Violation of
any statute, ordinance, rule, regulation, order, judgment or decree applicable
to Duck Head or any of Duck Head's Subsidiaries, or by which any of them or any
of their respective properties or assets may be bound or affected, or (iii)
subject to receipt or filing of the required Consents referred to in Section
5.4(b), result in a Violation pursuant to, any note, bond, mortgage, indenture,
Contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Duck Head or any of Duck Head's Subsidiaries is a party or
by which Duck Head or any of Duck Head's Subsidiaries or any of their respective
properties may be bound or affected, except in the case of the foregoing clause
(ii) or (iii) for any such Violations that would not have a Duck Head Material
Adverse Effect.
(b) None of the execution and delivery of this Distribution Agreement by
Duck Head, the consummation by Duck Head of the transactions contemplated hereby
or compliance by Duck Head with any of the provisions hereof will require any
Consent of any Governmental Entity, except for (i) compliance with any
applicable requirements of the Securities Act and the Exchange Act, (ii) certain
state takeover, securities, "blue sky" and environmental statutes, (iii) such
filings as may be required in connection with the taxes described in Section
15.12(b), and (iv) Consents the failure of which to obtain or make would not
have a Duck Head Material Adverse Effect.
5.5 Reports and Financial Statements. (a) Duck Head has filed with the SEC
---------------------------------
the Duck Head
24
Form 10, and the Duck Head Form 10 will be the only registration statement
required to be filed by it with the SEC in connection with the Distribution. As
of its effective date, the Duck Head Form 10 complied as to form in all material
respects with the requirements of the Exchange Act and the applicable rules and
regulations of the SEC. As of its effective date and as of the date that the
Duck Head Information Statement is distributed to the Delta Woodside
Stockholders as of the Record Date, the Duck Head Form 10 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 light of the
circumstances under which they were made, not misleading.
(b) The combined balance sheets as of July 3, 1999 and June 27, 1998 and
the related combined statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended July 3, 1999 (including the
related notes and schedules thereto) of Duck Head that are contained in the Duck
Head Information Statement present fairly, in all material respects, the
combined financial position and the combined results of operations and cash
flows of Duck Head and its consolidated Subsidiaries as of the dates or for the
periods presented therein in conformity with GAAP applied on a consistent basis
during the periods involved except as otherwise noted therein, including in the
related notes.
(c) The combined balance sheets and the related statements of earnings and
cash flows (including, in each case, the related notes thereto) of Duck Head
that are contained in the Duck Head Information Statement for the six months
ended January 1, 2000 (the "Duck Head Interim Financial Statements") have been
prepared in accordance with the requirements for interim financial statements
contained in Regulation S-X, which do not require all the information and
footnotes necessary for a fair presentation of financial position, results of
operations and cash flows in conformity with GAAP. The Duck Head Interim
Financial Statements reflect all adjustments necessary to present fairly in
accordance with GAAP (except as indicated), in all material respects, the
combined financial position, results of operations and cash flows of Duck Head
for all periods presented therein.
(d) The combined pro forma balance sheet as of January 1, 2000 and the
related combined pro forma statements of operations for the year ended July 3,
1999 and the six months ended January 1, 2000 (including the related notes and
schedules thereto) of Duck Head contained in the Duck Head Information Statement
have been prepared in accordance with the requirements for pro forma financial
statements contained in Regulation S-X, which do not require all the information
and footnotes necessary for a fair presentation of financial position or results
of operations in conformity with GAAP, and reflect all adjustments necessary to
present fairly in accordance with GAAP (except as indicated), in all material
respects, the combined pro forma financial position and results of operations of
Duck Head as of the dates and for the periods presented therein.
5.6 Information. None of the information supplied or to be supplied by Duck
------------
Head or its Representatives for inclusion or incorporation by reference in the
Duck Head Form 10 or the Duck Head Information Statement will or did, at the
time of its distribution to the Delta Woodside
25
Stockholders as of the Record Date or the time of the effectiveness of the Duck
Head Form 10 with the SEC, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Duck Head Form 10 and the Duck Head
Information Statement comply as to form in all material respects with the
applicable provisions of the Securities Act and the Exchange Act and the rules
and regulations thereunder, except that no representation is made by Duck Head
with respect to statements made or incorporated by reference therein based on
information supplied by Delta Woodside or Delta Apparel for inclusion or
incorporation by reference therein.
5.7 Litigation. Except as disclosed in the Duck Head Disclosure Statement,
-----------
as of the date hereof, there is no suit, action or proceeding pending or, to the
knowledge of Duck Head, threatened against or affecting Duck Head or any of its
Subsidiaries, nor is there any judgment, decree, injunction or order of any
Governmental Entity or arbitrator outstanding against Duck Head or any of its
Subsidiaries, that is reasonably expected to have a Duck Head Material Adverse
Effect or to prevent or materially delay the consummation of the transactions
contemplated in this Distribution Agreement.
5.8 Absence of Certain Changes or Events. Except as disclosed in the Duck
--------------------------------------
Head Information Statement or as contemplated by this Distribution Agreement,
since January 1, 2000, Duck Head has conducted its business only in the ordinary
course, and there has not been any change that would have a Duck Head Material
Adverse Effect, other than changes relating to or arising from general economic
conditions.
5.9 Employee Benefit Plans. Except as disclosed in the Duck Head
-------------------------
Information Statement or the Duck Head Disclosure Schedule, there are no (a)
employee benefit or compensation plans, agreements or arrangements, including
"employee benefit plans," as defined in Section 3(3) of ERISA, and including,
but not limited to, plans, agreements or arrangements relating to former
employees, including, but not limited to, retiree medical plans or life
insurance, maintained by Duck Head or any of its Subsidiaries or (b) collective
bargaining agreements to which Duck Head or any of its Subsidiaries is a party
(collectively, the "Duck Head Benefit Plans"), other than plans, agreements or
arrangements that, in the aggregate, are not material to Duck Head and its
Subsidiaries as a whole. Duck Head and its Subsidiaries have complied with the
terms of all Duck Head Benefit Plans, except for such noncompliance that would
not have a Duck Head Material Adverse Effect, and no default exists with respect
to the obligations of Duck Head or any of its Subsidiaries under such Duck Head
Benefit Plans that would have a Duck Head Material Adverse Effect. Since July 3,
1999, there have been no disputes, grievances subject to any grievance
procedure, unfair labor practice proceedings, arbitration or litigation (or, to
the knowledge of Duck Head, threatened proceedings or grievances) under such
Duck Head Benefit Plans, that have not been finally resolved, settled or
otherwise disposed of, nor is there any default, or any condition that, with
notice or lapse of time or both, would constitute such a default, under any such
Duck Head Benefit Plans, by Duck Head or its Subsidiaries or, to the best
knowledge of Duck Head, any other party thereto, other than disputes,
grievances, arbitration, litigation, proceedings, threatened proceedings or
grievances,
26
defaults or conditions that would not have a Duck Head Material Adverse Effect.
Since July 3, 1999, there have been no strikes, lockouts or work stoppages or
slowdowns, or to the best knowledge of Duck Head, labor jurisdictional disputes
or labor organizing activity occurring or threatened with respect to the
business or operations of Duck Head or its Subsidiaries that have had or would
have a Duck Head Material Adverse Effect.
5.10 ERISA. All the Duck Head Benefit Plans are in compliance with the
------
applicable provisions of ERISA, the Code, all other applicable laws and all
applicable collective bargaining agreements, in each case, to the extent
applicable, except where such failures to administer or comply would not have a
Duck Head Material Adverse Effect. Each of the Duck Head Benefit Plans that is
intended to meet the requirements of Section 401(a) of the Code has been or will
be determined by the IRS to be "qualified," within the meaning of such Section
of the Code and Duck Head does not know of any circumstances likely to result in
revocation of such determination. No Duck Head Benefit Plan is subject to Title
IV of ERISA or Section 412 of the Code. Neither Duck Head nor any of its
Subsidiaries (i) has made a complete or partial withdrawal, within the meaning
of Section 4201 of ERISA, from any multiemployer plan or (ii) currently is a
sponsor of or contributes to a multiemployer plan. Neither Duck Head nor any of
its Subsidiaries has maintained a plan subject to Title IV of ERISA at any time
within the last five years. Except in their capacities as shareholders of Delta
Woodside and except as disclosed in the Duck Head Information Statement or in
the Duck Head Disclosure Schedule, neither the execution and delivery of this
Distribution Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any material payment (including, without limitation,
severance, unemployment compensation or golden parachute) becoming due to any
director or executive officer of Duck Head, (ii) materially increase any
benefits otherwise payable under any Duck Head Benefit Plan or (iii) result in
the acceleration of the time of payment or vesting of any such benefits to any
material extent.
5.11 Taxes. Duck Head and its Subsidiaries have duly filed all foreign,
------
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports (including, but not limited to, those filed on
a consolidated, combined or unitary basis) required to have been filed by Duck
Head and its Subsidiaries prior to the date hereof, except for such returns or
reports the failure to file which would not have a Duck Head Material Adverse
Effect. All of the foregoing returns and reports are true and correct in all
material respects, and Duck Head and its Subsidiaries have paid or, prior to the
Effective Time will pay, all taxes, interest and penalties shown on such returns
or reports as being due or (except to the extent the same are contested in good
faith) claimed to be due to any federal, state, local or other taxing authority.
Duck Head and its Subsidiaries have paid and will pay all installments of
estimated taxes due on or before the Effective Time, except for any failure to
do so that would not have a Duck Head Material Adverse Effect. All taxes and
state assessments and levies that Duck Head and its Subsidiaries are required by
law to withhold or collect have been withheld or collected and have been paid to
the proper governmental authorities or are held by Duck Head for such payment,
except for any failure to do so that would not have a Duck Head Material Adverse
Effect. Duck Head and its Subsidiaries have paid or made adequate provision in
the financial statements of Duck Head for all taxes payable in respect of all
periods ended on or prior to January 1, 2000, except for such taxes that would
not have a Duck Head
27
Material Adverse Effect. As of the date hereof, all deficiencies proposed as a
result of any audits have been paid or settled.
5.12 Compliance with Applicable Laws. Duck Head and its Subsidiaries hold
--------------------------------
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for them to own, lease or operate their
properties and assets and to carry on their businesses substantially as now
conducted (the "Duck Head Permits"), except for such permits, licenses,
variances, exemptions, orders and approvals the failure of which to hold would
not have a Duck Head Material Adverse Effect. Duck Head and its Subsidiaries are
in compliance with all applicable laws and the terms of Duck Head Permits,
except for such failures so to comply that would not have a Duck Head Material
Adverse Effect.
5.13 Brokers. No broker or finder is entitled to any broker's or finder's
--------
fee in connection with the transactions contemplated by this Distribution
Agreement based upon arrangements made by or on behalf of Duck Head.
5.14 Undisclosed Liabilities. Except as disclosed in the Duck Head
-------------------------
Information Statement, neither Duck Head nor any of its Subsidiaries has any
liabilities or any obligations of any nature whether or not accrued, contingent
or otherwise, that would be required by GAAP to be reflected on a consolidated
balance sheet of Duck Head and its Subsidiaries (including the notes thereto),
except for liabilities or obligations incurred in the ordinary course of
business since January 1, 2000 that would not have a Duck Head Material Adverse
Effect or contemplated to be incurred by this Distribution Agreement.
5.15 Environmental Matters. Except as disclosed in the Duck Head SEC
-----------------------
Reports or as would not reasonably be expected to have a Duck Head Material
Adverse Effect: (i) to the best knowledge of Duck Head no real property
currently or formerly owned or operated by Duck Head or any current Subsidiary
is contaminated with any Hazardous Substances to an extent or in a manner or
condition now requiring remediation under any Environmental Law; (ii) no
judicial or administrative proceeding is pending or to the best knowledge of
Duck Head threatened against Duck Head or its Subsidiaries relating to liability
for any off-site disposal or contamination; and (iii) Duck Head and its
Subsidiaries have not received any claims or notices alleging liability under
any Environmental Law, and Duck Head has no knowledge of any circumstance that
could result in such claims.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF DELTA APPAREL
Delta Apparel represents and warrants to Delta Woodside and Duck Head that,
except as disclosed in the Delta Apparel Disclosure Schedule that has been
delivered to Delta Woodside and Duck Head prior to the execution of this
Distribution Agreement (the "Delta Apparel Disclosure Schedule") or as
contemplated by this Distribution Agreement, as of immediately prior to the
Effective Time the following will be true and accurate:
28
6.1 Organization and Qualification. Delta Apparel is a corporation duly
---------------------------------
organized, validly existing and in good standing under the laws of the State of
Georgia. Each of Delta Apparel and each of its Subsidiaries has the requisite
corporate power and authority to carry on its business as it is now being
conducted and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not have a Delta
Apparel Material Adverse Effect.
6.2 Capitalization. (a) The authorized capital stock of Delta Apparel
---------------
consists of 7,500,000 shares of Delta Apparel Common Stock and 2,000,000 shares
of Preferred Stock, $0.01 par value per share (the "Delta Apparel Preferred
Stock"). As of the date hereof, 100 shares of Delta Apparel Common Stock and no
shares of Delta Apparel Preferred Stock were issued and outstanding, and all
such issued and outstanding shares of Delta Apparel Common Stock were validly
issued and are fully paid and nonassessable. As of the date hereof, except as
contemplated by this Distribution Agreement, there were no options, warrants,
calls or other rights, agreements or commitments currently outstanding
obligating Delta Apparel to issue, deliver or sell shares of its capital stock,
or obligating Delta Apparel to grant, extend or enter into any such option,
warrant, call or other such right, agreement or commitment.
(b) All the outstanding shares of capital stock of each Subsidiary of Delta
Apparel are validly issued, fully paid and nonassessable and are owned by Delta
Apparel or by a wholly-owned Subsidiary of Delta Apparel (except for certain
shares of the preferred stock of Delta Apparel Honduras, S.A. that are held by
directors of Delta Apparel as a result of Honduran law requirements), free and
clear of any Liens (except Liens granted to GECC in connection with the Delta
Woodside Credit Facility). There are no existing options, warrants, calls or
other rights, agreements or commitments of any character relating to the sale,
issuance or voting of any shares of the issued or unissued capital stock of any
of the Subsidiaries of Delta Apparel that have been issued, granted or entered
into by Delta Apparel or any of its Subsidiaries.
6.3 Authority Relative to This Distribution Agreement. Delta Apparel has
----------------------------------------------------
the necessary corporate power and authority to execute and deliver this
Distribution Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Distribution Agreement and the consummation
of the transactions contemplated hereby by Delta Apparel have been duly and
validly authorized and approved by Delta Apparel's Board of Directors and no
other corporate proceedings on the part of Delta Apparel are necessary to
authorize or approve this Distribution Agreement or to consummate the
transactions contemplated hereby. This Distribution Agreement has been duly
executed and delivered by Delta Apparel, and, assuming the due authorization,
execution and delivery by Delta Woodside and Duck Head, constitutes the valid
and binding obligation of Delta Apparel enforceable against Delta Apparel in
accordance with its terms except as such enforceability may be limited by
general principles of equity or principles applicable to creditors' rights
generally.
29
6.4 No Conflicts, Required Filings and Consents. (a) None of the execution
---------------------------------------------
and delivery of this Distribution Agreement by Delta Apparel, the consummation
by Delta Apparel of the transactions contemplated hereby or compliance by Delta
Apparel with any of the provisions hereof will (i) conflict with or violate the
Articles of Incorporation or By-laws of Delta Apparel or the comparable
organizational documents of any of Delta Apparel's Subsidiaries, (ii) subject to
receipt or filing of the required Consents referred to in Section 6.4(b), result
in a Violation of any statute, ordinance, rule, regulation, order, judgment or
decree applicable to Delta Apparel or any of Delta Apparel's Subsidiaries, or by
which any of them or any of their respective properties or assets may be bound
or affected, or (iii) subject to receipt or filing of the required Consents
referred to in Section 6.4(b), result in a Violation pursuant to, any note,
bond, mortgage, indenture, Contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Delta Apparel or any of
Delta Apparel's Subsidiaries is a party or by which Delta Apparel or any of
Delta Apparel's Subsidiaries or any of their respective properties may be bound
or affected, except in the case of the foregoing clause (ii) or (iii) for any
such Violations that would not have a Delta Apparel Material Adverse Effect.
(b) None of the execution and delivery of this Distribution Agreement by
Delta Apparel, the consummation by Delta Apparel of the transactions
contemplated hereby or compliance by Delta Apparel with any of the provisions
hereof will require any Consent of any Governmental Entity, except for (i)
compliance with any applicable requirements of the Securities Act and the
Exchange Act, (ii) certain state takeover, securities, "blue sky" and
environmental statutes, (iii) such filings as may be required in connection with
the taxes described in Section 15.12(b), and (iv) Consents the failure of which
to obtain or make would not have a Delta Apparel Material Adverse Effect.
6.5 Reports and Financial Statements. (a) Delta Apparel has filed with the
---------------------------------
SEC the Delta Apparel Form 10, and the Delta Apparel Form 10 will be the only
registration statement required to be filed by it with the SEC in connection
with the Distribution. As of its effective date, the Delta Apparel Form 10
complied as to form in all material respects with the requirements of the
Exchange Act and the applicable rules and regulations of the SEC. As of its
effective date and as of the date that the Delta Apparel Information Statement
is distributed to the Delta Woodside Stockholders as of the Record Date, the
Delta Apparel Form 10 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 light of the circumstances under which they were
made, not misleading.
(b) The combined balance sheets as of July 3, 1999 and June 27, 1998 and
the related combined statements of earnings, stockholders' equity and cash flows
for each of the three years in the period ended July 3, 1999 (including the
related notes and schedules thereto) of Delta Apparel that are contained in the
Delta Apparel Information Statement present fairly, in all material respects,
the combined financial position and the combined results of operations and cash
flows of Delta Apparel and its consolidated Subsidiaries as of the dates or for
the periods presented therein in conformity with GAAP applied on a consistent
basis during the periods involved except as otherwise noted therein, including
in the related notes.
30
(c) The combined balance sheets and the related statements of earnings and
cash flows (including, in each case, the related notes thereto) of Delta Apparel
that are contained in the Delta Apparel Information Statement for the six months
ended January 1, 2000 (the "Delta Apparel Interim Financial Statements") have
been prepared in accordance with the requirements for interim financial
statements contained in Regulation S-X, which do not require all the information
and footnotes necessary for a fair presentation of financial position, results
of operations and cash flows in conformity with GAAP. The Delta Apparel Interim
Financial Statements reflect all adjustments necessary to present fairly in
accordance with GAAP (except as indicated), in all material respects, the
combined financial position, results of operations and cash flows of Delta
Apparel for all periods presented therein.
(d) The combined pro forma balance sheet as of January 1, 2000 and the
related combined pro forma statements of operations for the year ended July 3,
1999 and the six months ended January 1, 2000 (including the related notes and
schedules thereto) of Delta Apparel contained in the Delta Apparel Information
Statement have been prepared in accordance with the requirements for pro forma
financial statements contained in Regulation S-X, which do not require all the
information and footnotes necessary for a fair presentation of financial
position or results of operations in conformity with GAAP, and reflect all
adjustments necessary to present fairly in accordance with GAAP (except as
indicated), in all material respects, the combined pro forma financial position
and results of operations of Delta Apparel as of the dates and for the periods
presented therein.
6.6 Information. None of the information supplied or to be supplied by
------------
Delta Apparel or its Representatives for inclusion or incorporation by reference
in the Delta Apparel Form 10 or the Delta Apparel Information Statement will or
did, at the time of its distribution to the Delta Woodside Stockholders as of
the Record Date or the time of the effectiveness of the Delta Apparel Form 10
with the SEC, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The Delta Apparel Form 10 and the Delta Apparel Information
Statement comply as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder, except that no representation is made by Delta Apparel
with respect to statements made or incorporated by reference therein based on
information supplied by Delta Woodside or Duck Head for inclusion or
incorporation by reference therein.
6.7 Litigation. Except as disclosed in the Delta Apparel Disclosure
-----------
Statement, as of the date hereof, there is no suit, action or proceeding pending
or, to the knowledge of Delta Apparel, threatened against or affecting Delta
Apparel or any of its Subsidiaries, nor is there any judgment, decree,
injunction or order of any Governmental Entity or arbitrator outstanding against
Delta Apparel or any of its Subsidiaries, that is reasonably expected to have a
Delta Apparel Material Adverse Effect or to prevent or materially delay the
consummation of the transactions contemplated in this Distribution Agreement.
31
6.8 Absence of Certain Changes or Events. Except as disclosed in the Delta
-------------------------------------
Apparel Information Statement or as contemplated by this Distribution Agreement,
since January 1, 2000, Delta Apparel has conducted its business only in the
ordinary course, and there has not been any change that would have a Delta
Apparel Material Adverse Effect, other than changes relating to or arising from
general economic conditions.
6.9 Employee Benefit Plans. Except as disclosed in the Delta Apparel
-------------------------
Information Statement or the Delta Apparel Disclosure Schedule, there are no (a)
employee benefit or compensation plans, agreements or arrangements, including
"employee benefit plans," as defined in Section 3(3) of ERISA, and including,
but not limited to, plans, agreements or arrangements relating to former
employees, including, but not limited to, retiree medical plans or life
insurance, maintained by Delta Apparel or any of its Subsidiaries or (b)
collective bargaining agreements to which Delta Apparel or any of its
Subsidiaries is a party (collectively, the "Delta Apparel Benefit Plans"), other
than plans, agreements or arrangements that, in the aggregate, are not material
to Delta Apparel and its Subsidiaries as a whole. Delta Apparel and its
Subsidiaries have complied with the terms of all Delta Apparel Benefit Plans,
except for such noncompliance that would not have a Delta Apparel Material
Adverse Effect, and no default exists with respect to the obligations of Delta
Apparel or any of its Subsidiaries under such Delta Apparel Benefit Plans that
would have a Delta Apparel Material Adverse Effect. Since July 3, 1999, there
have been no disputes, grievances subject to any grievance procedure, unfair
labor practice proceedings, arbitration or litigation (or, to the knowledge of
Delta Apparel, threatened proceedings or grievances) under such Delta Apparel
Benefit Plans, that have not been finally resolved, settled or otherwise
disposed of, nor is there any default, or any condition that, with notice or
lapse of time or both, would constitute such a default, under any such Delta
Apparel Benefit Plans, by Delta Apparel or its Subsidiaries or, to the best
knowledge of Delta Apparel, any other party thereto, other than disputes,
grievances, arbitration, litigation, proceedings, threatened proceedings or
grievances, defaults or conditions that would not have a Delta Apparel Material
Adverse Effect. Since July 3, 1999, there have been no strikes, lockouts or work
stoppages or slowdowns, or to the best knowledge of Delta Apparel, labor
jurisdictional disputes or labor organizing activity occurring or threatened
with respect to the business or operations of Delta Apparel or its Subsidiaries
that have had or would have a Delta Apparel Material Adverse Effect.
6.10 ERISA. All the Delta Apparel Benefit Plans are in compliance with the
------
applicable provisions of ERISA, the Code, all other applicable laws and all
applicable collective bargaining agreements, in each case, to the extent
applicable, except where such failures to administer or comply would not have a
Delta Apparel Material Adverse Effect. Each of the Delta Apparel Benefit Plans
that is intended to meet the requirements of Section 401(a) of the Code has been
or will be determined by the IRS to be "qualified," within the meaning of such
Section of the Code and Delta Apparel does not know of any circumstances likely
to result in revocation of such determination. No Delta Apparel Benefit Plan is
subject to Title IV of ERISA or Section 412 of the Code. Neither Delta Apparel
32
nor any of its Subsidiaries (i) has made a complete or partial withdrawal,
within the meaning of Section 4201 of ERISA, from any multiemployer plan or (ii)
currently is a sponsor of or contributes to a multiemployer plan. Neither Delta
Apparel nor any of its Subsidiaries has maintained a plan subject to Title IV of
ERISA at any time within the last five years. Except in their capacities as
shareholders of Delta Woodside and except as disclosed in the Delta Apparel
Information Statement or in the Delta Apparel Disclosure Schedule, neither the
execution and delivery of this Distribution Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any material payment
(including, without limitation, severance, unemployment compensation or golden
parachute) becoming due to any director or executive officer of Delta Apparel,
(ii) materially increase any benefits otherwise payable under any Delta Apparel
Benefit Plan or (iii) result in the acceleration of the time of payment or
vesting of any such benefits to any material extent.
6.11 Taxes. Delta Apparel and its Subsidiaries have duly filed all foreign,
------
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports (including, but not limited to, those filed on
a consolidated, combined or unitary basis) required to have been filed by Delta
Apparel and its Subsidiaries prior to the date hereof, except for such returns
or reports the failure to file which would not have a Delta Apparel Material
Adverse Effect. All of the foregoing returns and reports are true and correct in
all material respects, and Delta Apparel and its Subsidiaries have paid or,
prior to the Effective Time will pay, all taxes, interest and penalties shown on
such returns or reports as being due or (except to the extent the same are
contested in good faith) claimed to be due to any federal, state, local or other
taxing authority. Delta Apparel and its Subsidiaries have paid and will pay all
installments of estimated taxes due on or before the Effective Time, except for
any failure to do so that would not have a Delta Apparel Material Adverse
Effect. All taxes and state assessments and levies that Delta Apparel and its
Subsidiaries are required by law to withhold or collect have been withheld or
collected and have been paid to the proper governmental authorities or are held
by Delta Apparel for such payment, except for any failure to do so that would
not have a Delta Apparel Material Adverse Effect. Delta Apparel and its
Subsidiaries have paid or made adequate provision in the financial statements of
Delta Apparel for all taxes payable in respect of all periods ended on or prior
to January 1, 2000, except for such taxes that would not have a Delta Apparel
Material Adverse Effect. As of the date hereof, all deficiencies proposed as a
result of any audits have been paid or settled.
6.12 Compliance with Applicable Laws. Delta Apparel and its Subsidiaries
---------------------------------
hold all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for them to own, lease or operate their
properties and assets and to carry on their businesses substantially as now
conducted (the "Delta Apparel Permits"), except for such permits, licenses,
variances, exemptions, orders and approvals the failure of which to hold would
not have a Delta Apparel Material Adverse Effect. Delta Apparel and its
Subsidiaries are in compliance with all applicable laws and the terms of Delta
Apparel Permits, except for such failures so to comply that would not have a
Delta Apparel Material Adverse Effect.
6.13 Brokers. No broker or finder is entitled to any broker's or finder's
--------
fee in connection with the transactions contemplated by this Distribution
Agreement based upon arrangements made by or on behalf of Delta Apparel.
33
6.14 Undisclosed Liabilities. Except as disclosed in the Delta Apparel
-------------------------
Information Statement, neither Delta Apparel nor any of its Subsidiaries has any
liabilities or any obligations of any nature whether or not accrued, contingent
or otherwise, that would be required by GAAP to be reflected on a consolidated
balance sheet of Delta Apparel and its Subsidiaries (including the notes
thereto), except for liabilities or obligations incurred in the ordinary course
of business since January 1, 2000 that would not have a Delta Apparel Material
Adverse Effect or contemplated to be incurred by this Distribution Agreement.
6.15 Environmental Matters. Except as disclosed in the Delta Apparel SEC
-----------------------
Reports or as would not reasonably be expected to have a Delta Apparel Material
Adverse Effect: (i) to the best knowledge of Delta Apparel no real property
currently or formerly owned or operated by Delta Apparel or any current
Subsidiary is contaminated with any Hazardous Substances to an extent or in a
manner or condition now requiring remediation under any Environmental Law; (ii)
no judicial or administrative proceeding is pending or to the best knowledge of
Delta Apparel threatened against Delta Apparel or its Subsidiaries relating to
liability for any off_site disposal or contamination; and (iii) Delta Apparel
and its Subsidiaries have not received any claims or notices alleging liability
under any Environmental Law, and Delta Apparel has no knowledge of any
circumstance that could result in such claims.
ARTICLE 7
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Distribution. The
------------------------------------------------------------------
respective obligations of each party to effect the Distribution shall be subject
to the fulfillment (or waiver by all parties) at or prior to the Effective Time
of the following conditions:
(a) All Consents from Governmental Entities and other third parties
that in any case are required to be received prior to the Effective Time
with respect to the transactions contemplated hereby shall have been
received other than those Consents the absence of which would not have a
Delta Woodside Material Adverse Effect, a Duck Head Material Adverse Effect
or a Delta Apparel Material Adverse Effect;
(b) Without limiting the generality of paragraph (a) above, the Duck
Head Form 10 shall have been declared effective by the SEC and the Delta
Apparel Form 10 shall have been declared effective by the SEC;
(c) The Intercompany Reorganization shall have been completed;
(d) The Duck Head Financing shall have been completed;
34
(e) The Delta Apparel Financing shall have been completed;
(f) The New Delta Woodside Financing shall have been completed;
(g) Each of the Board of Directors of Delta Woodside and the Board of
Directors of Duck Head shall have received an opinion, addressed and
satisfactory to it, in its sole discretion, from an independent solvency
firm selected by such Board, and shall otherwise be satisfied in its sole
discretion, as to matters relating to the solvency and adequacy of capital
of Duck Head after giving effect to the consummation of the transactions
contemplated by this Distribution Agreement;
(h) Each of the Board of Directors of Delta Woodside and the Board of
Directors of Delta Apparel shall have received an opinion, addressed and
satisfactory to it, in its sole discretion, from an independent solvency
firm selected by such Board, and shall otherwise be satisfied in its sole
discretion, as to matters relating to the solvency and adequacy of capital
of Delta Apparel after giving effect to the consummation of the
transactions contemplated by this Distribution Agreement; and
(i) The consummation of the Distribution shall not be restrained,
enjoined or prohibited by any order, judgment, decree, injunction or ruling
of a court of competent jurisdiction; provided, however, that the parties
shall comply with the provisions of Sections 9.4, 10.4 and 11.4 and shall
further use their respective best efforts to cause any such order,
judgment, decree, injunction or ruling to be vacated or lifted.
7.2 Conditions to Obligation of Delta Woodside to Effect the Distribution.
-----------------------------------------------------------------------
The obligation of Delta Woodside to effect the Distribution shall be subject to
the fulfillment at or prior to the Effective Time of the additional conditions,
unless waived by Delta Woodside, that
(a) Duck Head and Delta Apparel shall have performed in all material
respects their respective agreements contained in this Distribution
Agreement required to be performed at or prior to the Effective Time and
the representations and warranties of Duck Head and Delta Apparel contained
in this Distribution Agreement shall be true, except as contemplated by
this Distribution Agreement and except for inaccuracies in representations
and warranties and failures to perform their respective agreements that in
the aggregate do not constitute a Delta Woodside Material Adverse Effect, a
Duck Head Material Adverse Effect or a Delta Apparel Material Adverse
Effect; and Delta Woodside shall have received a certificate of the Chief
Executive Officer of each of Duck Head and Delta Apparel to that effect;
and
(b) The Delta Woodside Board, in its sole discretion, shall have
determined to effect the Distribution.
7.3 Conditions to Obligations of Duck Head to Effect the Distribution. The
------------------------------------------------------------------
obligation of Duck Head to effect the Distribution shall be subject to the
fulfillment at or prior to the Effective Time of the additional condition,
35
unless waived by Duck Head, that Delta Woodside and Delta Apparel shall have
performed in all respects their respective agreements contained in this
Distribution Agreement required to be performed at or prior to the Effective
Time and the representations and warranties of Delta Woodside and Delta Apparel
contained in this Distribution Agreement shall be true, except as contemplated
by this Distribution Agreement and except for inaccuracies in representations
and warranties and failures to perform its agreements that in the aggregate do
not constitute a Delta Woodside Material Adverse Effect, a Duck Head Material
Adverse Effect or a Delta Apparel Material Adverse Effect; and Duck Head shall
have received a certificate of the Chief Executive Officer of each of Delta
Woodside and Delta Apparel to that effect.
7.4 Conditions to Obligations of Delta Apparel to Effect the Distribution.
-----------------------------------------------------------------------
The obligation of Delta Apparel to effect the Distribution shall be subject to
the fulfillment at or prior to the Effective Time of the additional condition,
unless waived by Delta Apparel, that Delta Woodside and Duck Head shall have
performed in all respects their respective agreements contained in this
Distribution Agreement required to be performed at or prior to the Effective
Time and the representations and warranties of Delta Woodside and Duck Head
contained in this Distribution Agreement shall be true, except as contemplated
by this Distribution Agreement and except for inaccuracies in representations
and warranties and failures to perform its agreements that in the aggregate do
not constitute a Delta Woodside Material Adverse Effect, a Duck Head Material
Adverse Effect or a Delta Apparel Material Adverse Effect; and Delta Apparel
shall have received a certificate of the Chief Executive Officer of each of
Delta Woodside and Duck Head to that effect.
ARTICLE 8
EMPLOYMENT MATTERS
8.1 Stock Options.
--------------
(a) Prior to the Effective Time, Delta Woodside shall provide holders of
Delta Woodside Stock Options, whether or not then exercisable or vested, the
opportunity to amend the terms of their respective Delta Woodside Stock Options
to provide that (i) all unexercisable portions of such Delta Woodside Stock
Options shall become immediately exercisable in full on a date that is not later
than five (5) business days prior to the Record Date and (ii) if the holder
elects not to exercise all or part of the holder's Delta Woodside Stock Options
prior to the Record Date, such unexercised Delta Woodside Stock Options shall
remain exercisable for the same number of Delta Woodside Shares at the same
exercise price after the Distribution as before the Distribution (and for no
other securities), notwithstanding the occurrence of the Distribution. Delta
Woodside shall amend the Delta Woodside Stock Option Plan to accomplish the
provisions of this paragraph (a), if it deems such amendment advisable.
(b) Prior to the Effective Time, Delta Woodside shall amend the Delta
Woodside Stock Option Plan to provide that, so long as a Duck Head employee who
holds Delta Woodside Stock Options remains an employee of Duck Head or any of
its subsidiaries, those Delta Woodside Stock Options will remain outstanding
36
until the end of their stated term (with the termination of such employment with
Duck Head or any of its subsidiaries to be treated in the same manner as a
termination of employment with Delta Woodside or any of its subsidiaries would
have been) and so long as a Delta Apparel employee who holds Delta Woodside
Stock Options remains an employee of Delta Apparel or any of its subsidiaries,
those Delta Woodside Stock Options will remain outstanding until the end of
their stated term (with the termination of such employment with Delta Apparel or
any of its subsidiaries to be treated in the same manner as a termination of
employment with Delta Woodside or any of its subsidiaries would have been).
(c) Notwithstanding anything to the contrary herein, if it is determined
that compliance with paragraph (a) or (b) of this Section 8.1 may cause any
individual subject to Section 16 of the Exchange Act to become subject to the
profit recovery provisions thereof, the parties hereto will cooperate, including
by providing alternate arrangements, so as to achieve the intent of the
foregoing together with minimizing or not giving such profit recovery.
8.2 Employees.
----------
(a) Duck Head shall, or shall cause a member of the Duck Head Group to,
assume, honor and be bound by any employment and/or severance agreements between
or among each Duck Head Employee and any member of the Delta Woodside Group, the
Duck Head Group and/or the Delta Apparel Group.
(b) Delta Apparel shall, or shall cause a member of the Delta Apparel Group
to, assume, honor and be bound by any employment and/or severance agreements
between or among each Delta Apparel Employee and any member of the Delta
Woodside Group, the Duck Head Group and/or the Delta Apparel Group.
(c) Delta Woodside shall, or shall cause a member of the Delta Woodside
Group to, assume, honor and be bound by any employment and/or severance
agreements between or among any Delta Woodside Employee and any member the Delta
Woodside Group, the Duck Head Group and/or the Delta Apparel Group.
8.3. Qualified Defined Contribution Plans.
-------------------------------------
(a) No member of the Duck Head Group or the Delta Apparel Group shall have
any obligation to make contributions to the Delta Woodside Industries, Inc.
Savings and Investment Plan (the "Delta Woodside 401(k) Plan") in respect of any
member of the Duck Head Employee Group or the Delta Apparel Employee Group or
otherwise after the Effective Time, except for accrued but unpaid employee and
employer contributions, if any, relating to that employee's compensation earned
before the Effective Time.
(b) Effective not later than the Effective Time, Duck Head shall, or shall
cause a member of the Duck Head Group to, adopt or designate a defined
contribution plan intended to qualify under Section 401(a) and Section 401(k) of
37
the Code (the "Duck Head 401(k) Plan"). Members of the Duck Head Employee Group
shall be vested in their benefits under and eligible to participate in the Duck
Head 401(k) Plan on and after the Effective Time to the same extent that those
members were vested in their benefits under and eligible to participate in the
Delta Woodside 401(k) Plan immediately before the Effective Time.
(c) Effective not later than the Effective Time, Delta Apparel shall, or
shall cause a member of the Delta Apparel Group to, adopt or designate a defined
contribution plan intended to qualify under Section 401(a) and Section 401(k) of
the Code (the "Delta Apparel 401(k) Plan"). Members of the Delta Apparel
Employee Group shall be vested in their benefits under and eligible to
participate in the Delta Apparel 401(k) Plan on and after the Effective Time to
the same extent that those members were vested in their benefits under and
eligible to participate in the Delta Woodside 401(k) Plan immediately before the
Effective Time.
(d) As soon as practicable after the adoption or designation of the Duck
Head 401(k) Plan, Delta Woodside shall cause to be transferred to the Duck Head
401(k) Plan cash or, to the extent provided below, other assets as the parties
may agree, having a fair market value equal to the aggregate value of the
account balances in the Delta Woodside 401(k) Plan, and any allocable portion of
any suspense account, as of the date of the plan asset transfer for each member
of the Duck Head Employee Group. The plan asset transfer contemplated by this
paragraph (d) shall include any notes evidencing loans to members of the Duck
Head Employee Group from their account balances, securities, Delta Woodside
Shares, if any, Duck Head Shares, if any, and Delta Apparel Shares, if any, held
in any such member's account and the balance in cash, and shall also include all
qualified domestic relations orders, within the meaning of Section 414(p) of the
Code, applicable to members of the Duck Head Employee Group. The transfer of
assets contemplated by this paragraph (d) shall be made only after Duck Head has
supplied to Delta Woodside a written representation from Duck Head (with
appropriate indemnities) to the effect that the Duck Head 401(k) Plan has been
established in accordance with the Code and ERISA, and an agreement that Duck
Head has requested or will request a determination letter from the IRS and will
make any and all changes to the Duck Head 401(k) Plan necessary to receive a
favorable determination letter.
(e) As soon as practicable after the adoption or designation of the Delta
Apparel 401(k) Plan, Delta Woodside shall cause to be transferred to the Delta
Apparel 401(k) Plan cash or, to the extent provided below, other assets as the
parties may agree, having a fair market value equal to the aggregate value of
the account balances in the Delta Woodside 401(k) Plan, and any allocable
portion of any suspense account, as of the date of the plan asset transfer for
each member of the Delta Apparel Employee Group. The plan asset transfer
contemplated by this paragraph (e) shall include any notes evidencing loans to
members of the Delta Apparel Employee Group from their account balances,
securities, Delta Woodside Shares, if any, Duck Head Shares, if any, and Delta
Apparel Shares, if any, held in any such member's account and the balance in
cash, and shall also include all qualified domestic relations orders, within the
meaning of Section 414(p) of the Code, applicable to members of the Delta
Apparel Employee Group. The transfer of assets contemplated by this paragraph
38
(e) shall be made only after Delta Apparel has supplied to Delta Woodside a
written representation from Delta Apparel (with appropriate indemnities) to the
effect that the Delta Apparel 401(k) Plan has been established in accordance
with the Code and ERISA, and an agreement that Delta Apparel has requested or
will request a determination letter from the IRS and will make any and all
changes to the Delta Apparel 401(k) Plan necessary to receive a favorable
determination letter.
(f) In any event, the transfer of plan assets provided for in paragraphs
(d) and (e) above shall occur such that each participant in the Delta Woodside
401(k) Plan immediately prior to the transfer of assets would receive a benefit
immediately after the transfer of assets (if the Delta Woodside 401(k) Plan, the
Duck Head 401(k) Plan and the Delta Apparel 401(k) Plan were then terminated)
that would be equal to or greater than the benefit such participant would have
received immediately before the transfer of assets (if the Delta Woodside 401(k)
Plan had then terminated).
(g) Delta Woodside, Duck Head and Delta Apparel shall cooperate with each
other during the period beginning on the date hereof and ending on the date that
the assets are transferred to the trust maintained under the Duck Head 401(k)
Plan or Delta Apparel 401(k) Plan, as applicable, to ensure the ongoing
operation and administration of the Delta Woodside 401(k) Plan, the Duck Head
401(k) Plan and the Delta Apparel 401(k) Plan with respect to the members of the
Delta Woodside Employee Group, the Duck Head Employee Group and the Delta
Apparel Employee Group. After those transfers of assets, (i) Duck Head shall
assume all of the Delta Woodside Group Liabilities under the Delta Woodside
401(k) Plan with respect to each member of the Duck Head Employee Group and the
Delta Woodside Group shall have no further liability, under this Distribution
Agreement or otherwise, to any member of the Duck Head Group or any member of
the Duck Head Employee Group under the Delta Woodside 401(k) Plan other than
liability arising out of any breach of fiduciary duties or any non-exempt
prohibited transaction occurring before that transfer of assets and liabilities,
and (ii) Delta Apparel shall assume all of the Delta Woodside Group Liabilities
under the Delta Woodside 401(k) Plan with respect to each member of the Delta
Apparel Employee Group and the Delta Woodside Group shall have no further
liability, under this Distribution Agreement or otherwise, to any member of the
Delta Apparel Group or any member of the Delta Apparel Employee Group under the
Delta Woodside 401(k) Plan other than liability arising out of any breach of
fiduciary duties or any non-exempt prohibited transaction occurring before that
transfer of assets and liabilities.
8.4. Welfare Benefit Plans.
----------------------
(a) (i) Effective as of the Effective Time, no member of the Duck Head
Employee Group or the Delta Apparel Employee Group shall be eligible to
participate in any "Employee Welfare Benefit Plan" (within the meaning of
Section 3(1) of ERISA) sponsored by Delta Woodside or any member of the Delta
Woodside Group and neither Delta Woodside nor any member of the Delta Woodside
Group shall have any liability after the Effective Time for Welfare Benefits
(within the contemplation of Section 3(1) of ERISA) of any member of the Duck
Head Employee Group or the Delta Apparel Employee Group.
39
(ii) Delta Woodside shall be responsible for all Welfare Benefits payable
to or in respect of each member of the Delta Woodside Employee Group regardless
of whether the event(s) giving rise to payment of those benefits occurred
before, on or after the Effective Time.
(b) (i) Effective as of the Effective Time, Duck Head shall establish or
designate one or more Employee Welfare Benefit Plans covering members of the
Duck Head Employee Group as Duck Head, in its sole discretion, shall determine.
(ii) Except as set forth in Section 8.4(d), Duck Head shall be responsible
for all Welfare Benefits payable after the Effective Time to or in respect of
each member of the Duck Head Employee Group including, without limitation,
post-employment medical, dental and life insurance benefits, if any.
(c) (i) Effective as of the Effective Time, Delta Apparel shall establish
or designate one or more Employee Welfare Benefit Plans covering members of the
Delta Apparel Employee Group as Delta Apparel, in its sole discretion, shall
determine.
(ii) Except as set forth in Section 8.4(d), Delta Apparel shall be
responsible for all Welfare Benefits payable after the Effective Time to or in
respect of each member of the Delta Apparel Employee Group including, without
limitation, post-employment medical, dental and life insurance benefits, if any.
(d) Expenses incurred by each member of the Duck Head Employee Group or the
Delta Apparel Employee Group under Delta Woodside's medical and dental plans
during the calendar year that includes the Effective Time shall be taken into
account for purposes of satisfying deductible and coinsurance requirements and
satisfaction of out-of-pocket provisions of the Duck Head Group's or the Delta
Apparel Group's, as applicable, medical and dental plans for that year. Duck
Head shall be liable, and shall to the extent necessary reimburse Delta
Woodside, for all medical or dental claims incurred before the Effective Time by
any member of the Duck Head Employee Group and for life insurance claims in
respect of any member of the Duck Head Employee Group who dies on or before the
Effective Time. Delta Apparel shall be liable, and shall to the extent necessary
reimburse Delta Woodside, for all medical or dental claims incurred before the
Effective Time by any member of the Delta Apparel Employee Group and for life
insurance claims in respect of any member of the Delta Apparel Employee Group
who dies on or before the Effective Time. For purposes of this Section 8.4, a
medical or dental claim shall be deemed "incurred" when the relevant service is
provided or item is purchased.
8.5 Directors. Delta Woodside shall retain all liabilities and related
----------
assets, if any, existing as of the Effective Time relating to any director of
Delta Woodside with respect to his service as a director of Delta Woodside.
40
8.6 Deferred Compensation.
----------------------
(a) All deferred compensation liabilities to the extent applicable to any
member of the Duck Head Employee Group, and any assets allocable to those
liabilities, shall be transferred to and assumed by Duck Head as of the
Effective Time, and all deferred compensation liabilities to the extent
applicable to any member of the Delta Apparel Employee Group, and any assets
allocable to those liabilities, shall be transferred to and assumed by Delta
Apparel as of the Effective Time.
(b) Delta Woodside shall retain all deferred compensation liabilities, and
any assets allocable to those liabilities, to the extent applicable to any
member of the Delta Woodside Employee Group under the Delta Woodside Deferred
Compensation Plan.
8.7 Employee Benefit Transition Services. Pursuant to and on the terms and
-------------------------------------
conditions set forth in Schedule 8.7 hereto, each party agrees to provide
certain administrative services to the other parties in respect of the members
of the Delta Woodside Employee Group, the Duck Head Employee Group and the Delta
Apparel Employee Group, including but not limited to payroll services, record
keeping services and claims processing services and for the applicable period
set forth in that Schedule. The administrative services contemplated by this
Section 8.7 shall not affect the allocation of liabilities and obligations as
set forth in this Article 8.
8.8 COBRA.
------
(a) As of the Effective Time, Duck Head shall, or shall cause a member of
the Duck Head Group to, assume Delta Woodside's obligations and responsibilities
under ERISA Title I, Subtitle 8, Part 6 and Code Section 4980B ("COBRA
Coverage") to each member of the Duck Head Employee Group.
(b) As of the Effective Time, Delta Apparel shall, or shall cause a member
of the Delta Apparel Group to, assume Delta Woodside's obligations and
responsibilities to provide COBRA Coverage to each member of the Delta Apparel
Employee Group.
(c) Delta Woodside shall, or shall cause a member of the Delta Woodside
Group to, retain the obligation and responsibility to provide COBRA Coverage to
each member of the Delta Woodside Employee Group.
8.9 Third Party Beneficiaries. No provision of this Distribution Agreement
--------------------------
(including without limitation this Article 8) shall (a) create any third party
beneficiary rights in any Person (including any beneficiary or dependent
thereof) in respect of continued employment or resumed employment with the Delta
Woodside Group, the Duck Head Group or the Delta Apparel Group, (b) create any
rights that do not already exist in any Person in respect of any benefits that
may be provided, directly or indirectly, under any employee benefit plan or
benefit arrangement sponsored or to be sponsored by any member of the Delta
Woodside Group, the Duck Head Group or the Delta Apparel Group, or (c) otherwise
establish or create any rights that do not already exist on the part of any
41
third party. 8.10 No Right to Continued Employment. Nothing in this Article 8
shall confer any right to continued employment before or after the Effective
Time on any member of the Delta Woodside Employee Group, the Duck Head Employee
Group or the Delta Apparel Employee Group.
8.11 WARN Act.
---------
(a) Delta Woodside shall be responsible for providing any notification that
may be required under the Workers Adjustment and Retraining Notification Act
("WARN Act") with respect to any member of the Delta Woodside Employee Group on
or after the Effective Time.
(b) Duck Head shall be responsible for providing any notification that may
be required under the WARN Act with respect to any member of the Duck Head
Employee Group on or after the Effective Time.
(c) Delta Apparel shall be responsible for providing any notification that
may be required under the WARN Act with respect to any member of the Delta
Apparel Employee Group on or after the Effective Time.
ARTICLE 9
ADDITIONAL AGREEMENTS OF DELTA WOODSIDE
9.1 Access to Information. From the date hereof through the Effective Time,
----------------------
Delta Woodside and its Subsidiaries shall afford to Duck Head and Delta Apparel
and their respective accountants, counsel and other representatives full and
reasonable access (subject, however, to existing confidentiality and similar
non_disclosure obligations and the preservation of attorney/client and work
product privileges) during normal business hours (and at such other times as the
parties may mutually agree) to its properties, books, contracts, commitments,
records and personnel and, during such period, shall furnish promptly to Duck
Head and Delta Apparel (i) a copy of each report, schedule and other document
filed or received by it pursuant to the requirements of federal securities laws,
and (ii) all other information concerning its business, properties and personnel
as Duck Head or Delta Apparel may reasonably request.
9.2 Preparation of the Duck Head Form 10, Duck Head Information Statement,
-----------------------------------------------------------------------
Delta Apparel Form 10 and Delta Apparel Information Statement. Delta Woodside
----------------------------------------------------------------
will assist Duck Head to comply with Duck Head's obligations under Section 10.2
and will assist Delta Apparel to comply with Delta Apparel's obligations under
Section 11.2. Delta Woodside will cooperate and furnish promptly (a) all
information requested by Duck Head or otherwise required for inclusion in the
Duck Head Form 10 or the Duck Head Information Statement and (b) all information
requested by Delta Apparel or otherwise required for inclusion in the Delta
Apparel Form 10 or the Delta Apparel Information Statement. If at any time prior
42
to the Effective Time any event or circumstance relating to Delta Woodside or
any of its Subsidiaries, or their respective officers or directors, should be
discovered by Delta Woodside that should be set forth in an amendment or a
supplement to the Duck Head Form 10, the Duck Head Information Statement, the
Delta Apparel Form 10 or the Delta Apparel Information Statement, Delta Woodside
shall promptly inform Duck Head or Delta Apparel, as applicable, thereof and
take appropriate action in respect thereof.
9.3 Public Announcements. So long as this Distribution Agreement is in
----------------------
effect, Delta Woodside agrees to use its reasonable efforts to consult with Duck
Head and Delta Apparel before issuing any press release or otherwise making any
public statement with respect to the transactions contemplated by this
Distribution Agreement.
9.4 Efforts; Consents. (a) Subject to the terms and conditions herein
-------------------
provided, Delta Woodside agrees to use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Distribution Agreement and to cooperate with
Duck Head and Delta Apparel in connection with the foregoing. Without limiting
the generality of the foregoing, Delta Woodside shall make or cause to be made
all required filings with or applications to Governmental Entities (including
under the Securities Act and the Exchange Act) to be made by it, and use its
best efforts to (i) obtain all necessary waivers of any Violations and other
Consents of all Governmental Entities and other third parties necessary for the
parties to consummate the transactions contemplated hereby, (ii) oppose, lift or
rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
and (iii) fulfill all conditions to this Distribution Agreement.
(b) Delta Woodside shall promptly provide Duck Head and Delta Apparel
copies of (i) all filings made by Delta Woodside with any Governmental Entity in
connection with this Distribution Agreement and the transactions contemplated
hereby, and (ii) any inquiry or request for information (including notice of any
oral request for information), pleading, order or other document Delta Woodside
receives from any Governmental Entity with respect to the matters referred to in
this Section 9.4.
9.5 Notice of Breaches. Delta Woodside shall give prompt notice to Duck
-------------------
Head and Delta Apparel of (i) any representation or warranty made by it
contained in this Distribution Agreement that has become untrue or inaccurate in
any material respect, or (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Distribution Agreement; provided, however, that such
notification shall not excuse or otherwise affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Distribution Agreement.
9.6 Acquisition Proposals Respecting the Duck Head Group or the Delta
----------------------------------------------------------------------
Apparel Group. The parties agree that, prior to the Effective Time, Delta
---------------
Woodside, its Subsidiaries and their respective Representatives (including,
without limitation, any investment banker, attorney or accountant retained by
Delta Woodside or any of its Subsidiaries) may initiate, continue, solicit and
43
encourage, directly or indirectly, any inquiries and the making of any proposal
or offer to Delta Woodside and/or any of its Subsidiaries, and engage in any
negotiations concerning, and provide any confidential information or data to,
and have any discussions with, any Person, with respect to a merger,
consolidation or similar transaction involving, or any sale of all or any
significant portion of the assets or any equity securities of, the Delta
Woodside Group, the Duck Head Group or the Delta Apparel Group, singly or
together (any such proposal or offer being hereinafter referred to as an
"Permitted Acquisition Proposal"), and otherwise knowingly facilitate any effort
or attempt to make or implement a Permitted Acquisition Proposal and enter into
any agreement or understanding with any other Person with the intent to effect
any Permitted Acquisition Proposal. Delta Woodside will notify Duck Head and
Delta Apparel of any written Permitted Acquisition Proposals or oral Permitted
Acquisition Proposals made to the Chief Executive Officer of Delta Woodside.
Following receipt of a Permitted Acquisition Proposal, Delta Woodside's Board of
Directors may elect to terminate this Distribution Agreement as provided in
Section 13.1 or to modify the terms of the Distribution and this Distribution
Agreement to permit consummation of the Permitted Acquisition Proposal and
thereby to delete from the Distribution shares of Duck Head Common Stock or
shares of Delta Apparel Common Stock. If Duck Head and Delta Apparel consent to
such modification, the parties shall amend this Distribution Agreement
accordingly, and shall (if still practicable), subject to the other provisions
of this Distribution Agreement, as so modified, use their respective best
efforts to cause the Distribution to be consummated.
9.7 Completion of Financing. No later than the Effective Time, Delta
--------------------------
Woodside or one or more of its Subsidiaries (other than the Duck Head Group and
the Delta Apparel Group) shall have incurred or repaid such indebtedness and
entered into such credit facilities or amendments to credit facilities, if any,
as shall be necessary for Delta Woodside to be able to consummate the
transactions contemplated by this Distribution Agreement (the "New Delta
Woodside Financing").
9.8 Other Securities Law Actions. Delta Woodside shall prepare and file
-------------------------------
with the SEC and cause to become effective any registration statements or
amendments thereto that are necessary or appropriate to reflect the
establishment of or amendments to any employee benefit and other plans of the
Delta Woodside Group contemplated by this Distribution Agreement. Delta Woodside
shall take all actions as may be necessary or appropriate under the securities
or blue sky laws of states or other political subdivisions of the United States
in connection with the transactions contemplated by this Distribution Agreement.
9.9 Delta Woodside Group Liabilities. Except as specifically set forth in
----------------------------------
any of the Distribution Documents, from and after the Effective Time, Delta
Woodside shall, and shall use its reasonable best efforts to cause its
Subsidiaries to, pay, perform and discharge in due course all of the Delta
Woodside Group Liabilities for which such entity is liable
44
ARTICLE 10
ADDITIONAL AGREEMENTS OF DUCK HEAD
10.1 Access to Information. From the date hereof through the Effective
-----------------------
Time, Duck Head and its Subsidiaries shall afford to Delta Woodside and Delta
Apparel and their respective accountants, counsel and other representatives full
and reasonable access (subject, however, to existing confidentiality and similar
non_disclosure obligations and the preservation of attorney/client and work
product privileges) during normal business hours (and at such other times as the
parties may mutually agree) to its properties, books, contracts, commitments,
records and personnel and, during such period, shall furnish promptly to Delta
Woodside and Delta Apparel (i) a copy of each report, schedule and other
document filed or received by it pursuant to the requirements of federal
securities laws, and (ii) all other information concerning its business,
properties and personnel as Delta Woodside or Delta Apparel may reasonably
request.
10.2 Preparation of Duck Head Form 10 and Duck Head Information Statement.
----------------------------------------------------------------------
To the extent not already accomplished, Duck Head will, as soon as practicable
following the date of this Distribution Agreement, prepare and file the Duck
Head Form 10 and a preliminary Duck Head Information Statement with the SEC and
will use all reasonable efforts to respond to any comments of the SEC or its
staff and to cause the Duck Head Form 10 to be declared effective by the SEC and
the Duck Head Information Statement to be mailed to the Delta Woodside
Stockholders as promptly as practicable after responding to all such comments to
the satisfaction of the SEC or its staff. Duck Head will provide Delta Woodside
and Delta Apparel with a copy of the Duck Head Form 10 and the preliminary Duck
Head Information Statement and all modifications thereto prior to filing or
delivery to the SEC and will consult with Delta Woodside and Delta Apparel in
connection therewith. Duck Head will notify Delta Woodside and Delta Apparel
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Duck Head
Form 10 or the Duck Head Information Statement or for additional information and
will supply Delta Woodside and Delta Apparel with copies of all correspondence
between Duck Head or any of its Representatives, on the one hand, and the SEC or
its staff, on the other hand, with respect to the Duck Head Form 10, the Duck
Head Information Statement or the Distribution. Duck Head will cooperate and
furnish promptly all information requested by Delta Woodside or Delta Apparel or
otherwise required for inclusion in any Delta Woodside Disclosure Document or
the Delta Apparel Form 10 or the Delta Apparel Information Statement, as the
case may be. If at any time prior to the Effective Time there shall occur any
event that should be set forth in an amendment or supplement to the Duck Head
Form 10 or the Duck Head Information Statement, Duck Head will promptly, as
appropriate, file with the SEC or prepare and mail to the Delta Woodside
Stockholders such an amendment or supplement. If at any time prior to the
Effective Time any event or circumstance relating to Duck Head, or its officers
or directors, should be discovered by Duck Head that should be set forth in an
amendment or a supplement to any Delta Woodside Disclosure Document or the Delta
Apparel Form 10 or the Delta Apparel Information Statement, Duck Head shall
promptly inform Delta Woodside or Delta Apparel (as the case may be) thereof and
take appropriate action in respect thereof.
45
10.3 Public Announcements. So long as this Distribution Agreement is in
----------------------
effect, Duck Head agrees to use its reasonable efforts to consult with Delta
Woodside and Delta Apparel before issuing any press release or otherwise making
any public statement with respect to the transactions contemplated by this
Distribution Agreement. Prior to the Effective Time, Duck Head shall not issue
any press release or otherwise make any public statement without the consent of
Delta Woodside.
10.4 Efforts; Consents. (a) Subject to the terms and conditions herein
-------------------
provided, Duck Head agrees to use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Distribution Agreement and the Distribution
and to cooperate with Delta Woodside and Delta Apparel in connection with the
foregoing. Without limiting the generality of the foregoing, Duck Head shall
make or cause to be made all required filings with or applications to
Governmental Entities (including under the Securities Act and the Exchange Act)
to be made by it, and use its best efforts to (i) obtain all necessary waivers
of any Violations and other Consents of all Governmental Entities and other
third parties, necessary for the parties to consummate the transactions
contemplated hereby, (ii) oppose, lift or rescind any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated hereby, and (iii) fulfill all
conditions to this Distribution Agreement.
(b) Duck Head shall promptly provide Delta Woodside and Delta Apparel
copies of (i) all filings made by Duck Head with any Governmental Entity in
connection with this Distribution Agreement and the transactions contemplated
hereby, and (ii) any inquiry or request for information (including notice of any
oral request for information), pleading, order or other document Duck Head
receives from any Governmental Entity with respect to the matters referred to in
this Section 10.4.
10.5 Notice of Breaches. Duck Head shall give prompt notice to Delta
--------------------
Woodside and Delta Apparel of (i) any representation or warranty made by it
contained in this Distribution Agreement that has become untrue or inaccurate in
any material respect, or (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Distribution Agreement; provided, however, that such
notification shall not excuse or otherwise affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Distribution Agreement.
10.6 Effectuation of Intercompany Reorganization and Duck Head Financing.
----------------------------------------------------------------------
Duck Head shall perform all actions necessary or appropriate, and within its
power, to accomplish the Intercompany Reorganization, as contemplated by Section
2.1, and the Duck Head Financing, as contemplated by Section 2.2.
10.7 AMEX Listing. As promptly as practicable, Duck Head shall prepare,
-------------
file and pursue an application to permit the listing of the Duck Head Common
Stock on the AMEX, and such listing shall be completed by the Effective Time.
46
10.8 Other Securities Law Actions. Duck Head shall prepare and file with
-------------------------------
the SEC and cause to become effective any registration statements or amendments
thereto that are necessary or appropriate to reflect the establishment of or
amendments to any employee benefit and other plans of the Duck Head Group
contemplated by this Distribution Agreement. Duck Head shall take all actions as
may be necessary or appropriate under the securities or blue sky laws of states
or other political subdivisions of the United States in connection with the
transactions contemplated by this Distribution Agreement.
10.9 Duck Head Common Stock. Duck Head agrees to provide to the
--------------------------
Distribution Agent all certificates for shares of Duck Head Common Stock that
shall be required in order to consummate the transactions contemplated by this
Distribution Agreement.
10.10 Duck Head Group Liabilities. Except as specifically set forth in any
----------------------------
of the Distribution Documents, from and after the Effective Time, Duck Head
shall, and shall use its reasonable best efforts to cause its Subsidiaries to,
pay, perform and discharge in due course all of the Duck Head Group Liabilities
for which such entity is liable.
ARTICLE 11
ADDITIONAL AGREEMENTS OF DELTA APPAREL
11.1 Access to Information. From the date hereof through the Effective
-----------------------
Time, Delta Apparel and its Subsidiaries shall afford to Delta Woodside and Duck
Head and their respective accountants, counsel and other representatives full
and reasonable access (subject, however, to existing confidentiality and similar
non-disclosure obligations and the preservation of attorney/client and work
product privileges) during normal business hours (and at such other times as the
parties may mutually agree) to its properties, books, contracts, commitments,
records and personnel and, during such period, shall furnish promptly to Delta
Woodside and Duck Head (i) a copy of each report, schedule and other document
filed or received by it pursuant to the requirements of federal securities laws,
and (ii) all other information concerning its business, properties and personnel
as Delta Woodside or Duck Head may reasonably request.
11.2 Preparation of Delta Apparel Form 10 and Delta Apparel Information
---------------------------------------------------------------------
Statement. To the extent not already accomplished, Delta Apparel will, as soon
----------
as practicable following the date of this Distribution Agreement, prepare and
file the Delta Apparel Form 10 and a preliminary Delta Apparel Information
Statement with the SEC and will use all reasonable efforts to respond to any
comments of the SEC or its staff and to cause the Delta Apparel Form 10 to be
declared effective by the SEC and the Delta Apparel Information Statement to be
mailed to the Delta Woodside Stockholders as promptly as practicable after
responding to all such comments to the satisfaction of the SEC or its staff.
Delta Apparel will provide Delta Woodside and Duck Head with a copy of the Delta
Apparel Form 10 and the preliminary Delta Apparel Information Statement and all
modifications thereto prior to filing or delivery to the SEC and will consult
with Delta Woodside and Duck Head in connection therewith. Delta Apparel will
notify Delta Woodside and Duck Head promptly of the receipt of any comments from
47
the SEC or its staff and of any request by the SEC or its staff for amendments
or supplements to the Delta Apparel Form 10 or the Delta Apparel Information
Statement or for additional information and will supply Delta Woodside and Duck
Head with copies of all correspondence between Delta Apparel or any of its
Representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Delta Apparel Form 10, the Delta Apparel Information
Statement or the Distribution. Delta Apparel will cooperate and furnish promptly
all information requested by Delta Woodside or Duck Head or otherwise required
for inclusion in any Delta Woodside Disclosure Document or the Duck Head Form 10
or the Duck Head Information Statement, as the case may be. If at any time prior
to the Effective Time there shall occur any event that should be set forth in an
amendment or supplement to the Delta Apparel Form 10 or the Delta Apparel
Information Statement, Delta Apparel will promptly, as appropriate, file with
the SEC or prepare and mail to the Delta Woodside Stockholders such an amendment
or supplement. If at any time prior to the Effective Time any event or
circumstance relating to Delta Apparel, or its officers or directors, should be
discovered by Delta Apparel that should be set forth in an amendment or a
supplement to any Delta Woodside Disclosure Document or the Duck Head Form 10 or
the Duck Head Information Statement, Delta Apparel shall promptly inform Delta
Woodside or Duck Head (as the case may be) thereof and take appropriate action
in respect thereof.
11.3 Public Announcements. So long as this Distribution Agreement is in
----------------------
effect, Delta Apparel agrees to use its reasonable efforts to consult with Delta
Woodside and Duck Head before issuing any press release or otherwise making any
public statement with respect to the transactions contemplated by this
Distribution Agreement. Prior to the Effective Time, Delta Apparel shall not
issue any press release or otherwise make any public statement without the
consent of Delta Woodside.
11.4 Efforts; Consents. (a) Subject to the terms and conditions herein
-------------------
provided, Delta Apparel agrees to use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Distribution Agreement and the Distribution
and to cooperate with Delta Woodside and Duck Head in connection with the
foregoing. Without limiting the generality of the foregoing, Delta Apparel shall
make or cause to be made all required filings with or applications to
Governmental Entities (including under the Securities Act and the Exchange Act)
to be made by it, and use its best efforts to (i) obtain all necessary waivers
of any Violations and other Consents of all Governmental Entities and other
third parties, necessary for the parties to consummate the transactions
contemplated hereby, (ii) oppose, lift or rescind any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated hereby, and (iii) fulfill all
conditions to this Distribution Agreement.
(b) Delta Apparel shall promptly provide Delta Woodside and Duck Head
copies of (i) all filings made by Delta Apparel with any Governmental Entity in
connection with this Distribution Agreement and the transactions contemplated
hereby, and (ii) any inquiry or request for information (including notice of any
oral request for information), pleading, order or other document Delta Apparel
receives from any Governmental Entity with respect to the matters referred to in
this Section 11.4.
48
11.5 Notice of Breaches. Delta Apparel shall give prompt notice to Delta
-------------------
Woodside and Duck Head of (i) any representation or warranty made by it
contained in this Distribution Agreement that has become untrue or inaccurate in
any material respect, or (ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Distribution Agreement; provided, however, that such
notification shall not excuse or otherwise affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Distribution Agreement.
11.6 Effectuation of Intercompany Reorganization and Delta Apparel
---------------------------------------------------------------------
Financing. Delta Apparel shall perform all actions necessary or appropriate, and
----------
within its power, to accomplish the Intercompany Reorganization, as contemplated
by Section 2.1, and the Delta Apparel Financing, as contemplated by Section 2.2.
11.7 AMEX Listing. As promptly as practicable, Delta Apparel shall prepare,
-------------
file and pursue an application to permit the listing of the Delta Apparel Common
Stock on the AMEX, and such listing shall be completed by the Effective Time.
11.8 Other Securities Law Actions. Delta Apparel shall prepare and file
-------------------------------
with the SEC and cause to become effective any registration statements or
amendments thereto that are necessary or appropriate to reflect the
establishment of or amendments to any employee benefit and other plans of the
Delta Apparel Group contemplated by this Distribution Agreement. Delta Apparel
shall take all actions as may be necessary or appropriate under the securities
or blue sky laws of states or other political subdivisions of the United States
in connection with the transactions contemplated by this Distribution Agreement.
11.9 Delta Apparel Common Stock. Delta Apparel agrees to provide to the
-----------------------------
Distribution Agent all certificates for shares of Delta Apparel Common Stock
that shall be required in order to consummate the transactions contemplated by
this Distribution Agreement.
11.10 Delta Apparel Group Liabilities. Except as specifically set forth in
--------------------------------
any of the Distribution Documents, from and after the Effective Time, Delta
Apparel shall, and shall use its reasonable best efforts to cause its
Subsidiaries to, pay, perform and discharge in due course all of the Delta
Apparel Group Liabilities for which such entity is liable
49
ARTICLE 12
ACCESS TO INFORMATION
12.1 Provision of Corporate Records. Immediately before or as soon as
----------------------------------
practicable after the Effective Time, each Group shall provide to the applicable
other Group all documents, contracts, books, records and data (including, but
not limited to, minute books, stock registers, stock certificates, documents of
title and documents in electronic format) in its possession relating primarily
to the other Group or its business and affairs; provided that if any of those
documents, contracts, books, records or data relate to more than one Group or
the businesses and operations of more than one Group, each Group shall provide
to the other applicable Group when and if requested true and complete copies
(including, if requested, versions of these documents in electronic format) of
those documents, contracts, books, records or data.
12.2 Access to Information. After the Effective Time, each Group shall
-----------------------
promptly provide reasonable access during normal business hours to each of the
other Groups and its Representatives to all documents, contracts, books,
records, Defense Materials, computer data and other data in that Group's
possession relating to the other applicable Group or its business and affairs
(other than data and information subject to an attorney/client or other
privilege that is not subject to the provisions of any joint defense arrangement
between the relevant member or members of one Group and the relevant member or
members of another Group), to the extent that such access is reasonably
requested by the other Group, including, but not limited to, for audit,
accounting, litigation, disclosure and reporting purposes.
12.3 Future Litigation and Other Proceedings. Each Group shall use all
-------------------------------------------
commercially reasonable efforts to make its directors, officers, employees and
representatives available as witnesses to another Group and its accountants,
counsel and other designated representatives, upon reasonable written request.
Additionally, each Group shall otherwise cooperate with the other Groups, to the
extent reasonably required in connection with any Action arising out of any
Group's business and operations in which the requesting party may be involved.
12.4 Reimbursement. Except and to the extent that any member of one Group
--------------
is obligated to indemnify any member of the other Group under Article 14 for
that cost or expense, each Group providing information or witnesses to the other
Group, or otherwise incurring any expense in connection with cooperating, under
this Agreement shall be entitled to receive from the recipient thereof, upon the
presentation of invoices therefor, payment for all reasonable out-of-pocket
costs and expenses as may reasonably be incurred in providing such information,
witnesses or cooperation.
12.5 Retention of Records. Except as otherwise required by law or agreed to
---------------------
in writing, each party shall retain, and shall cause the members of its Group to
retain, all information relating to any other Group's business and operations in
accordance with the past practice of that party. Notwithstanding the foregoing,
any party may destroy or otherwise dispose of any of that information at any
time, provided that, for a period of six years after the Effective Time, before
destruction or disposal of information that such party consciously knows relates
50
to any other Group's business and operations, (i) that party shall use its best
efforts to provide not less than 90 days' prior written notice to the other
party, specifying the information proposed to be destroyed or disposed of, and
(ii) if the recipient of that notice shall request in writing before the
scheduled date for destruction or disposal that any of the information proposed
to be destroyed or disposed of be delivered to that requesting party, the party
proposing the destruction or disposal shall promptly deliver to that requesting
party, at the expense of the requesting party, the information that was
requested.
12.6 Confidentiality. Each party shall hold and shall cause its
----------------
Representatives to hold in strict confidence all information (other than any
information relating primarily to the business or affairs of that party)
concerning another party (or the Group of which it forms a part) unless and to
the extent that (i) that party is compelled to disclose that information by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law or (ii) that information can be shown to have been (A) in
the public domain through no fault of that party, (B) lawfully acquired after
the Effective Time on a non-confidential basis or (C) acquired or developed
independently by that party after the Effective Time without violating this
Section 12.6 or any other confidentiality agreement with the other party.
Notwithstanding the foregoing, a party may disclose that information to its
Representatives so long as those Representatives are informed by that party of
the confidential nature of that information and are directed by that party to
treat that information confidentially. Each party shall be responsible for any
breach of such direction or of this Section by any of its Representatives. If a
party or any of its Representatives becomes legally compelled to disclose any
documents or information subject to this Section 12.6, that party shall promptly
notify the other party so that the other party may seek a protective order or
other remedy or waive that party's compliance with this Section 12.6. If no such
protective order or other remedy is obtained or waiver granted, that party will
furnish only the portion of the information that it is advised by counsel is
legally required and will exercise all commercially reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded that
information. Without prejudice to the rights and remedies of any party to this
Distribution Agreement, if any party breaches or threatens to breach any
provision of this Section 12.6, the affected party shall be entitled to
equitable relief by way of an injunction without the requirement for the posting
of bond.
12.7 Inapplicability of Article to Tax Matters. Notwithstanding anything to
------------------------------------------
the contrary in this Article 12, this Article 12 shall not apply to information,
records and other matters relating to Taxes, all of which shall be governed by
the Tax Sharing Agreement.
ARTICLE 13
TERMINATION, AMENDMENT AND WAIVER
13.1 Termination. This Distribution Agreement may be terminated at any time
------------
prior to the Effective Time by Delta Woodside for any reason.
51
13.2 Effect of Termination. In the event of termination of this
-------------------------
Distribution Agreement by Delta Woodside, as provided in Section 13.1, this
Distribution Agreement shall forthwith become void and there shall be no
liability hereunder on the part of any of Delta Woodside, Duck Head or Delta
Apparel or their respective officers or directors; provided that Sections 13.2
and 15.11 shall survive the termination.
13.3 Amendment. This Distribution Agreement may be amended by the parties
----------
hereto at any time. This Distribution Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
13.4 Waiver. At any time prior to the Effective Time, the parties hereto
-------
may, to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement on
the part of a party hereto to any such extension or to any waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party. No
delay on the part of any party hereto in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any waiver on the
part of any party hereto of any right, power or privilege hereunder operate as a
waiver of any other right, power or privilege hereunder, nor will any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege hereunder. Unless otherwise provided, the rights and remedies herein
provided are cumulative and are not exclusive of any rights or remedies that the
parties may otherwise have at law or in equity.
ARTICLE 14
INDEMNIFICATION
14.1 Indemnification by Delta Woodside. From and after the Effective Time,
----------------------------------
Delta Woodside shall indemnify and hold harmless, to the full extent permitted
by law, each member of the Duck Head Group and each member of the Delta Apparel
Group, and each present and former director, officer, employee and agent of any
member of the Duck Head Group and/or the Delta Apparel Group, against any and
all liabilities and expenses, including reasonable attorneys' fees, fines,
losses, claims, damages, liabilities, costs, expenses, judgments and amounts
paid in settlement (collectively, "Damages"), incurred or suffered by such
member of the Duck Head Group or member of the Delta Apparel Group, or such
director, officer, employee or agent, as the case may be, whether or not in
connection with any threatened, pending or completed Action (and whether
asserted or commenced prior to or after the Effective Time), and Delta Woodside
shall advance expenses to each such indemnified Person, arising out of or
pertaining to:
52
(a) any breach of the representations and warranties made by Delta
Woodside in Article 4 (which representations and warranties shall not
expire for purposes of this Article 14, notwithstanding any other provision
of this Distribution Agreement to the contrary);
(b) the breach by any member of the Delta Woodside Group of any
obligation under (i) this Distribution Agreement or (ii) any of the other
Distribution Documents, other than the Tax Sharing Agreement;
(c) any and all Delta Woodside Group Liabilities; or
(d) any untrue statement or alleged untrue statement of a material
fact contained in any Delta Woodside Disclosure Document, or any omission
or alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as those Damages are caused by any
such untrue statement or omission or alleged untrue statement or omission
that was based upon information furnished to Delta Woodside by any member
of the Duck Head Group or any member of the Delta Apparel Group expressly
for use therein.
14.2 Indemnification by Duck Head. From and after the Effective Time, Duck
-----------------------------
Head shall indemnify and hold harmless, to the full extent permitted by law,
each member of the Delta Woodside Group and each member of the Delta Apparel
Group, and each present and former director, officer, employee and agent of any
member of the Delta Woodside Group and/or the Delta Apparel Group, against any
and all Damages incurred or suffered by such member of the Delta Woodside Group
or member of the Delta Apparel Group, or such director, officer, employee or
agent, as the case may be, whether or not in connection with any threatened,
pending or completed Action (and whether asserted or commenced prior to or after
the Effective Time), and Duck Head shall advance expenses to each such
indemnified Person, arising out of or pertaining to:
(a) any breach of the representations and warranties made by Duck Head
in Article 5 (which representations and warranties shall not expire for
purposes of this Article 14, notwithstanding any other provision of this
Distribution Agreement to the contrary);
(b) the breach by any member of the Duck Head Group of any obligation
under (i) this Distribution Agreement or (ii) any of the other Distribution
Documents, other than the Tax Sharing Agreement;
(c) any and all Duck Head Group Liabilities; or
(d) any untrue statement or alleged untrue statement of a material
fact contained in any Duck Head Disclosure Document, or any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as those Damages are caused by any
such untrue statement or omission or alleged untrue statement or omission
that was based upon information furnished to Duck Head by any member of the
Delta Woodside Group or any member of the Delta Apparel Group expressly for
use therein.
53
14.3 Indemnification by Delta Apparel. From and after the Effective Time,
---------------------------------
Delta Apparel shall indemnify and hold harmless, to the full extent permitted by
law, each member of the Delta Woodside Group and each member of the Duck Head
Group, and each present and former director, officer, employee and agent of any
member of the Delta Woodside Group and/or the Duck Head Group, against any and
all Damages incurred or suffered by such member of the Delta Woodside Group or
member of the Duck Head Group, or such director, officer, employee or agent, as
the case may be, whether or not in connection with any threatened, pending or
completed Action (and whether asserted or commenced prior to or after the
Effective Time), and Delta Apparel shall advance expenses to each such
indemnified Person, arising out of or pertaining to:
(a) any breach of the representations and warranties made by Delta
Apparel in Article 6 (which representations and warranties shall not expire
for purposes of this Article 14, notwithstanding any other provision of
this Distribution Agreement to the contrary);
(b) the breach by any member of the Delta Apparel Group of any
obligation under (i) this Distribution Agreement or (ii) any of the other
Distribution Documents, other than the Tax Sharing Agreement;
(c) any and all Delta Apparel Group Liabilities; or
(d) any untrue statement or alleged untrue statement of a material
fact contained in any Delta Apparel Disclosure Document, or any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as those Damages are caused by any
such untrue statement or omission or alleged untrue statement or omission
that was based upon information furnished to Delta Apparel by any member of
the Delta Woodside Group or any member of the Duck Head Group expressly for
use therein.
14.4 Third-Party Rights; Insurance Proceeds; Tax Benefits; Mitigation.
-----------------------------------------------------------------
(a) No insurer or any other third party shall be (i) entitled by reason of
this Article 14 to a benefit (as a third-party beneficiary or otherwise) that it
would not be entitled to receive in the absence of Section 14.1, 14.2 or 14.3,
(ii) relieved by reason of this Article 14 of the responsibility to pay any
claim to which it is obligated or (iii) entitled to any subrogation right with
respect to any obligation under Section 14.1, 14.2 or 14.3.
(b) The amount that any indemnifying party is or may be required to pay to
any indemnified Person pursuant to this Article 14 (i) shall be reduced
(including retroactively) by (A) any insurance proceeds or other amounts
actually recovered by or on behalf of such indemnified Person in reduction of
the related Damages and (B) any Tax benefits realized or realizable by such
54
indemnified Person based on the present value thereof by reason of such loss and
(ii) shall be increased by any Tax liability incurred by such indemnified Person
based on such indemnity payment. If an indemnified Person shall have received
the payment required by this Distribution Agreement from an indemnifying party
in respect of Damages and shall subsequently actually receive insurance
proceeds, Tax benefits or other amounts in respect of such Damages as specified
above, then such indemnified Person shall pay to such indemnifying party a sum
equal to the amount of such insurance proceeds, Tax benefits or other amounts
actually received. The indemnified Person shall take all reasonable steps to
mitigate all Damages, including availing itself of any defenses, limitations,
rights of contribution, claims against third parties and other rights at law (it
being understood that any reasonable out-of-pocket costs paid to third parties
in connection with such mitigation shall constitute Damages), and shall provide
such evidence and documentation of the nature and extent of any Damages as may
be reasonably requested by the indemnifying party.
(c) In addition to any adjustments required pursuant to paragraph (b)
above, if the amount of any Damages shall, at any time subsequent to the payment
required by this Distribution Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the indemnified Person to the
indemnifying party.
14.5 Indemnification Procedures.
---------------------------
(a) In the event of any Action (whether asserted or commenced prior to or
after the Effective Time) as to which indemnification will be sought pursuant to
Section 14.1, 14.2 or 14.3, the indemnifying party shall be entitled to
participate in and, to the extent that it may wish, to assume the defense
thereof with counsel selected by the indemnifying party and reasonably
acceptable to the indemnified Person; provided that the indemnified Person shall
have the right to participate in those proceedings and to be represented by
counsel of its own choosing at the indemnified Person's sole cost and expense;
provided, however, that, if any indemnified Person (or group of indemnified
Persons) reasonably believes that, as a result of an actual or potential
conflict of interest, it is advisable for such indemnified Person (or group of
indemnified Persons) to be represented by separate counsel or if the
indemnifying party shall fail to assume responsibility for such defense, such
indemnified Person (or group of indemnified Persons) will act in good faith with
respect to such Action and may retain counsel satisfactory to such indemnified
Person (or group of indemnified Persons) who will represent such indemnified
Person or Persons, and the indemnifying party shall pay all reasonable fees and
expenses of such counsel promptly as statements therefor are received. The
indemnified Persons and the indemnifying party shall use their respective best
efforts to assist in the vigorous defense of any such matter. The indemnifying
party shall not be liable for any settlement effected without its written
consent, which consent shall not be unreasonably withheld. The indemnifying
party may settle or compromise the Action without the prior written consent of
the indemnified Person so long as any settlement or compromise of the Action
includes an unconditional release of the indemnified Person from all claims that
are the subject of that Action, provided, however, that the indemnifying party
may not agree to any such settlement or compromise that includes any remedy or
relief (other than monetary damages for which the indemnifying party shall be
responsible under this Article) applying to or against the indemnified Person,
without the prior written consent of the indemnified Person (which consent shall
55
not be unreasonably withheld). Notwithstanding the other provisions of this
Article, the indemnifying party shall have no obligation under this Article to
any indemnified Person when and if a court of competent jurisdiction shall
ultimately determine, in a decision constituting a final determination, that
such indemnified Person is not entitled to indemnification hereunder.
(b) Any indemnified Person wishing to claim indemnification under this
Article, upon learning of any such Action, shall promptly notify the
indemnifying party thereof in writing and shall deliver to the indemnifying
party an undertaking to repay any amounts advanced pursuant to this Article when
and if a court of competent jurisdiction shall ultimately determine, in a
decision constituting a final determination, that such indemnified Person is not
entitled to indemnification hereunder. The failure of the indemnified Person to
give notice as provided in this paragraph (b) or paragraph (f) below shall not
relieve the indemnifying party of its obligations under this Article, except to
the extent that the indemnifying party is prejudiced by the failure to give
notice. The indemnified Persons may as a group retain only one law firm pursuant
to the preceding paragraph (a) to represent them at the expense of the
indemnifying party with respect to any such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more indemnified Persons in which case
the indemnified Persons may retain, at the expense of the indemnifying party,
such number of additional counsel as are reasonably necessary to eliminate all
such conflicts.
(c) This Article shall survive the Effective Time and the Distribution, is
intended to benefit each indemnified Person and their respective successors,
heirs, personal representatives and assigns (each of whom shall be entitled to
enforce this Article), and shall be binding on all successors and assigns of the
indemnifying party.
(d) In the event any indemnifying party or any of its successors or assigns
(i) consolidates with or merges into any other entity and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers all or substantially all of its assets to any entity, then,
and in each such case, proper provision shall be made so that the successors and
assigns of the indemnifying party assume the obligations of the indemnifying
party set forth in this Article.
(e) Each of the parties hereto agrees vigorously to defend against any
Action in which such party is named as a defendant and that seeks to enjoin,
restrain or prohibit the transactions contemplated hereby or seeks damages with
respect to such transactions.
(f) If any indemnified Person determines that it is or may be entitled to
indemnification by any party under this Article 14 (other than in connection
with any Action), the indemnified Person shall promptly deliver to the
indemnifying party a written notice specifying, to the extent reasonably
practicable, the basis for the indemnified Person's claim for indemnification
and the amount for which the indemnified Person reasonably believes it is
entitled to be indemnified.
56
(g) In the event of payment by an indemnifying party to any indemnified
Person in connection with any claim, such indemnifying party shall be subrogated
to and shall stand in the place of such indemnified Person as to any events,
circumstances or Persons in respect of which such indemnified Person may have
any right or claim relating to such claim. Such indemnified Person shall
cooperate with such indemnifying party in a reasonable manner, and at the cost
and expense of such indemnifying party, in prosecuting any subrogated right or
claim.
(h) The remedies provided in this Article 14 shall be cumulative and shall
not preclude assertion by any indemnified Person of any other rights or the
seeking of any and all other remedies against any indemnifying party.
14.6 Contribution. If for any reason the indemnification provided for in
-------------
Section 14.1, 14.2 or 14.3 is unavailable to any indemnified Person, or
insufficient to hold the indemnified Person harmless, then the indemnifying
party shall contribute to the amount paid or payable by that indemnified Person
as a result of those Damages in that proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and of the
indemnified Person, on the other hand, respecting those Damages, which relative
fault shall be determined by reference to the Business and Group to which the
relevant actions, conduct, statements or omissions are primarily related, as
well as any other relevant equitable considerations.
ARTICLE 15
GENERAL PROVISIONS
15.1 Intercompany Accounts. Except for any amounts owed by Delta Apparel to
----------------------
the Delta Woodside Group for yarn sold by the Delta Woodside Group to Delta
Apparel, which amounts shall be paid in the ordinary course of business, and
except for obligations arising under this Distribution Agreement or the Tax
Sharing Agreement, each of the parties hereto represents to each of the other
parties hereto that it is not aware of any intercompany receivable, payable or
loan balance that will exist as of the Effective Time, following completion of
the Intercompany Reorganization, between any member of its Group and any member
of either of the other two Groups.
15.2 Existing Arrangements. Except for the Distribution Documents and
-----------------------
except as otherwise contemplated by any Distribution Document, all prior
executory agreements and arrangements, including those relating to goods, rights
or services provided or licensed, between any member(s) of any Group and any
member(s) of any other Group shall be terminated effective as of the Effective
Time, if not previously terminated. No such agreements or arrangements shall be
in effect after the Effective Time unless embodied in the Distribution
Documents.
15.3 Intellectual Property Rights and Licenses. No Group shall have any
--------------------------------------------
right or license in or to any technology, software, intellectual property
(including, without limitation, any trademark, service xxxx, patent or
copyright), know-how or other proprietary right owned, licensed or used by any
other Group.
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15.4 Further Assurances and Consents. In addition to the actions
------------------------------------
specifically provided for elsewhere in this Distribution Agreement and the other
Distribution Documents, each of the parties to this Distribution Agreement shall
use all commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things, reasonably necessary,
proper or advisable under applicable laws, regulations and agreements or
otherwise to consummate and make effective the transactions contemplated by this
Distribution Agreement and the other Distribution Documents, including, but not
limited to, using all commercially reasonable efforts to obtain any Consents and
approvals and to make any filings and applications necessary or desirable in
order to consummate the transactions contemplated by this Distribution Agreement
and the other Distribution Documents; provided that no party to this
Distribution Agreement shall be obligated to pay any consideration for any
consent or approval (except for filing fees and other similar charges) to any
third party from whom a consent or approval is requested or to take any action
or omit to take any action if the taking of or the omission to take that action
would be unreasonably burdensome to that party, its Group or its Group's
business.
15.5 Notices. All notices or other communications under this Distribution
--------
Agreement shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by telecopy (with
confirmation of receipt), or by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to Delta Woodside:
Delta Woodside Industries, Inc.
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
Telecopy No.: (000) 000-0000
If to Duck Head:
Duck Head Apparel Company, Inc.
0000 Xxxxxx Xxxxxxxxxx Xxxxxxx
X.X. Xxx 000
Xxxxxx, Xxxxxxx 00000
Attention: President
Telecopy No.: (000) 000-0000
58
If to Delta Apparel:
Delta Apparel, Inc.
0000 Xxxxxxxxxxxx Xxxx.
Xxxxx 000
Xxxxxx, Xxxxxxx 00000
Attention: President
Telecopy No.: (000) 000-0000
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
15.6 Specific Performance. The parties hereto agree that irreparable damage
---------------------
would occur in the event that any of the provisions of this Distribution
Agreement were not performed in accordance with its specific terms or were
otherwise breached. Accordingly, each party shall be entitled, without posting
any bond, to an injunction or injunctions to prevent breaches of this
Distribution Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which it is entitled under
this Distribution Agreement, at law or in equity.
15.7 Entire Agreement. This Distribution Agreement (together with the
------------------
Distribution Documents and the other documents and instruments referred to
herein) constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof.
15.8 Assignments; Parties in Interest. Prior to the Effective Time, neither
---------------------------------
this Distribution Agreement nor any of the rights, interests or obligations
hereunder may be assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other parties.
Subject to the preceding and succeeding sentences, this Distribution Agreement
shall be binding upon and inure solely to the benefit of each of the parties
hereto and their respective successors and assigns. Nothing in this Distribution
Agreement, express or implied, is intended to or shall confer upon any Person
not a party hereto any right, benefit or remedy of any nature whatsoever under
or by reason of this Distribution Agreement, including to confer third party
beneficiary rights, except as specifically set forth in Article 14 in respect of
any indemnified Person and except for the provisions of Section 3.5.
15.9 Governing Law. This Distribution Agreement shall be governed in all
--------------
respects by the laws of the State of South Carolina (without giving effect to
the provisions thereof relating to conflicts of law).
15.10 Headings; Disclosure. The descriptive headings herein are inserted
----------------------
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Distribution Agreement. Any
disclosure by Delta Woodside, Duck Head or Delta Apparel in any portion of its
respective disclosure schedule shall be deemed disclosure in each other portion
of such disclosure schedule.
59
15.11 Expenses. Except as specifically provided otherwise in any of the
---------
Distribution Documents, whether or not the Distribution is consummated, all
costs and expenses incurred in connection with the preparation, execution and
delivery of the Distribution Documents and the consummation of the transactions
contemplated hereby and thereby (including, without limitation, (x) the fees and
expenses of all counsel, accountants and financial and other advisors of all
Groups in connection therewith, and all expenses in connection with preparing,
filing and printing the Disclosure Documents and (y) any fees and expenses
incurred to repay any indebtedness, but not to incur any indebtedness (which
shall be paid by the party incurring such indebtedness)) shall be paid by Delta
Woodside, Duck Head and Delta Apparel proportionately in accordance with the
respective benefits received by Delta Woodside, Duck Head and Delta Apparel as
determined in good faith by the parties; provided that the holders of the Delta
Woodside Shares shall pay their own expenses, if any, incurred in connection
with the Distribution.
15.12 Tax Sharing Agreement; Certain Transfer Taxes.
----------------------------------------------
(a) Except to the extent that a provision of this Distribution Agreement
expressly indicates otherwise, this Distribution Agreement shall not govern any
Tax matters, and any and all Liabilities relating to Taxes shall be governed
exclusively by the Tax Sharing Agreement.
(b) Notwithstanding the Tax Sharing Agreement, all transfer, documentary,
sales, use, stamp and registration taxes and fees (including filing fees and any
penalties and interest) incurred in connection with any of the transactions
described in this Distribution Agreement (including without limitation the
Intercompany Reorganization) shall be borne and paid by Delta Woodside, Duck
Head and Delta Apparel proportionately in accordance with the respective
benefits received by Delta Woodside, Duck Head and Delta Apparel as determined
in good faith by the parties. The party or parties that is or are required by
applicable law to file any Return (as defined in the Tax Sharing Agreement) or
make any payment with respect to any of those taxes shall do so, and the other
party or parties shall cooperate with respect to that filing or payment as
necessary. The non-paying party or parties shall promptly reimburse the paying
party in accordance with this Section 15.12, as appropriate, after it or they
receive(s) notice of the payment of those taxes.
15.13 Jurisdiction. Any Action seeking to enforce any provision of, or
-------------
based on any matter arising out of or in connection with, any of the
Distribution Documents or any of the transactions contemplated by any of the
Distribution Documents shall be brought exclusively in the United States
District Court for the District of South Carolina or any South Carolina State
court sitting in Greenville County, and each of the parties hereby consents to
the exclusive jurisdiction of those courts (and of the appropriate appellate
courts therefrom) in any such Action and irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such Action in any of those courts or that any such
Action that is brought in any of those courts has been brought in an
inconvenient forum. Process in any such Action may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of process
on that party as provided in Section 15.5 shall be deemed effective service of
process on that party.
60
15.14 Counterparts. This Distribution Agreement may be executed in two or
-------------
more counterparts which together shall constitute a single agreement.
15.15 Severability. If any provision of this Distribution Agreement is
-------------
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other provisions of this Distribution Agreement shall nevertheless
remain in full force and effect so long as the economics or legal substance of
the transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon determination that any term or other provision hereof
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Distribution Agreement so as to effect
the original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
61
IN WITNESS WHEREOF, Delta Woodside, Duck Head and Delta Apparel have caused
this Distribution Agreement to be signed by their respective officers thereunto
duly authorized all as of the date first written above.
DELTA WOODSIDE INDUSTRIES, INC.
By: /s/ E. Xxxxx Xxxxxxx, XX
--------------------------------
Title: President & CEO
DH APPAREL COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
--------------------------------
Title: Chairman, President & CEO
DELTA APPAREL, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Title: President & CEO
