It promises to be a stormy AGM on November 8 at Duck Head Apparel, the recent spin-off from Delta Woodside. The company is in the middle of a boardroom spat, with management and one of its largest shareholders battling for supremacy.

In a rebuttal of yesterday's news that Delta executives were being backed up by proxy advisory firm, Institutional Shareholder Services (ISS), Bettis C Rainsford announced today that Proxy Monitor, another advisory company, has recommended that investors support the Rainsford director nominees and the shareholder proposal contained in the Rainsford proxy statement for the Duck Head Apparel annual meeting.

Mr Rainsford is leading a solicitation effort in opposition to the current board. He was a co-founder and the long-time CFO of Delta Woodside Industries, the company from which Duck Head was spun off earlier this year.

Proxy Monitor has recommended a vote for the election of the Rainsford director nominees and for the approval of the Rainsford shareholder proposal to direct the Duck Head board to cause Duck Head to take all actions necessary to cancel the right previously granted to Robert Rockey, the compny's chairman, to purchase one million shares of company stock at a price that is currently below market value. Proxy Monitor recommended that investors execute their votes on the Rainsford blue proxy card.

"We are pleased that Proxy Monitor, a reputable and independent proxy advisor, supports our nominees and shareholder proposal," said Mr Rainsford.

Shareholders advised to vote against management
In its report, Proxy Monitor recommends a vote against the incumbent management directors. It said: "The board's spin-off strategy, adoption of a "dead hand" poison pill, rejection of 200 per cent premium offer, and the excessive compensation awards leads us to the conclusion that the board has forgotten that its first duty is to shareholders."

Proxy Monitor continued: "Clearly, executing a spin-off, knowing that the shares might be deeply discounted as a result, with the intent of repurchasing the issued shares at that low price, is fundamentally unfair to shareholders. Although the board may not have initiated the spin-off for the purpose of taking advantage of shareholders, the result of this strategy is, in our judgement, contrary to shareholders' best interests."

Rainsford also acknowledged, as the company had announced yesterday, that a competing advisory service, ISS, had recommended the current directors. "Frankly, I was astounded by this action. How a service supposedly dedicated to serving the best interests of institutional shareholders could support directors optioning away 41 per cent of the equity of Duck Head at 13 per cent of its tangible book value is beyond my comprehension. How much of a give-away would it take to cause them to recommend against current directors? Would 49 per cent do it or would it take 70 per cent or 90 per cent?

"Another indication of the superficiality of this recommendation is the fact that ISS has apparently bought the company's story that a 'turnaround' is in progress. Sales for the fiscal year ended July 1, 2000, the first full year of Mr Rockey's administration, decreased by 25 per cent from the prior year.

"In the quarter ended September 30, 2000, sales decreased by 18 per cent from the prior year's quarter. Does this sound like a 'turnaround'? As for earnings, before one gets too excited about the recently-announced earnings of the first fiscal quarter, I would be curious to know how much of these earnings are due to the timely release of inventory reserves, of which the company has many? I believe the ISS analyst clearly has missed the mark on this one."

Rainsford questions directors' motives
Mr Rainsford referred to the news published yesterday that directors would retain an investment banking firm to provide independent advice in an effort to maximise shareholder value. The company further announced that it would institute a share repurchase programme for up to $3m of its outstanding shares. The timing and form of the share repurchase program would be determined by the board after consultation with its advisors.

Mr Rainsford noted that the company determined to take such actions without calling a meeting of the board. He said: "I am a member of the current board and have received no notice of any board meeting to consider such matters. He went on to accuse the management of playing "fast and loose with the rules of corporate governance".

"I believe the announcement of their intention to hire an investment banking firm is solely because they were afraid that they would lose the vote at the annual meeting if they did not take action. Furthermore, their announcement that they are going to repurchase shares, while a good move to support shareholder value, is a clear indication that they are following through on their pre-conceived plan to take advantage of shareholders by buying in shares at the deeply discounted values resulting from their own ill-advised spin-off," he said.

He also accused the company of optioning away over 41 per cent of the company's equity and paying the Delta Apparel CEO about 28 per cent of the net income of the company.

In closing, Mr Rainsford said: "The fact is that none of the above actions, by themselves, would have been sufficient to cause me to initiate this costly, time-consuming and emotionally-draining proxy solicitation. However, when all of the actions of these directors are considered - the whole litany of them - all devoted to serving the management and directors with practically nothing done to serve the former Delta Woodside shareholders who have seen their shareholder value shrink horribly in recent years, I decided that it was critical to lay the issues before you and provide you with an opportunity to vote. This is the one time in the life of a corporation that you get your say."

Yesterday, Delta's advisory company, ISS, recommended that its subscribers vote against Mr Rainsford's proposal to limit the amount of employee bonuses: "While we note that the total cash compensation paid to Delta Apparel's officers appears to be somewhat higher than that paid to the company's competitors, we recognise that the company's performance over the past year appears to have warranted rewarding management."