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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
[Fee Required]
For the fiscal year ended June 28, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from __________________ to _____________________
COMMISSION FILE NO. 0-8544
SPEIZMAN INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 56-0901212
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
508 West Fifth Street, Charlotte, North Carolina 28202
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(Address of principal executives offices) (Zip Code)
Registrant's telephone number, including area code: (704) 372-3751
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing such
requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K.|_|
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of September 12, 1997, was $23,253,474 based on the last
sale price of $7.19 per share reported by the NASDAQ National Market System on
that date.
As of September 12, 1997, there were 3,235,266 shares of the
registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on November 19, 1997 are incorporated herein by
reference into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Speizman Industries, Inc. (the "Company") is the leading distributor of new
sock knitting machines in the United States. It distributes technologically
advanced sock knitting machines manufactured by Lonati, S.p.A., Brescia, Italy
("Lonati"), which the Company believes is the world's largest manufacturer of
hosiery knitting equipment. It also distributes Lonati sock and sheer hosiery
knitting machines in Canada and in Mexico. In addition, through sales
arrangements with other European textile machinery manufacturers, the Company
distributes other sock knitting machines, knitting machines for underwear and
other knitted fabrics and other equipment related to the manufacture of socks,
sheer hosiery and other textile products, principally in the United States and
Canada. The Company also sells dyeing and finishing equipment for the textile
industry. The Company sells textile machine parts and used textile equipment in
the United States and in a number of foreign countries.
ALL REFERENCES HEREIN ARE TO THE COMPANY'S 52-OR-53 WEEK FISCAL YEAR ENDING
ON THE SATURDAY CLOSEST TO JUNE 30. FISCAL 1997, 1996, 1995, AND 1994, EACH
CONTAINED 52 WEEKS AND ENDED ON JUNE 28, 1997, JUNE 29, 1996, JULY, 1, 1995 AND
JULY 2, 1994. FISCAL 1993 CONTAINED 53 WEEKS AND ENDED ON JULY 3, 1993. UNLESS
THE CONTEXT OTHERWISE REQUIRES, THE TERM THE "COMPANY" AS USED HEREIN INCLUDES
SPEIZMAN INDUSTRIES, INC.
The Company and Lonati entered into their present agreement for the sale of
Lonati machines in the United States in January 1992 (the "Lonati Agreement").
The Company and Lonati also entered into a similar agreement relating to the
Company's distribution of Lonati sock and sheer hosiery knitting machines in
Canada in January 1992 and in Mexico in January 1997. The company has
distributed Lonati double cylinder machines in the United States continuously
since 1982. The Company began distributing Lonati single cylinder machines in
1989.
Pursuant to the Lonati Agreement, Lonati has appointed the Company as
Lonati's exclusive agent in the United States for the sale of its range of
single and double cylinder sock knitting machines and related spare parts as of
the date of the Lonati Agreement. Under the Lonati Agreement, the Company also
serves as the distributor of such equipment in the United States. Although the
Lonati Agreement does not establish the Company as the exclusive distributor of
Lonati sock machines in the United States, the Company in fact has exclusively
distributed Lonati double cylinder sock machines continuously since 1982 and
Lonati single cylinder sock knitting machines since 1989. The Lonati Agreement
extended to December 31, 1995 and continues from year to year thereafter,
although it may be terminated on 90 days written notice at any year end or
without notice in the event of a breach. The Company and Lonati also entered
into a similar agreement relating to the Company's distribution of Lonati sock
and sheer hosiery knitting machines in Canada in January 1992 and in Mexico in
January 1997.
The Lonati Agreement contains certain covenants and conditions relating to
the Company's sale of Lonati machines, including, among others, requirements
that the Company, at its own expense, promote the sale of Lonati machines and
assist Lonati in maintaining its competitive position, maintain an efficient
sales staff, provide for the proper installation and servicing of the machines,
maintain an adequate inventory of parts and pay for all costs of advertising the
machines. The Company is prohibited during the term of the Lonati Agreement from
distributing any machines or parts that compete with Lonati machines and parts.
The Company believes that it is and will remain in compliance in all material
respects with such covenants. The cost to the Company of Lonati machines, as
well as the delivery schedule of these machines, are totally at the discretion
of Lonati. The Lonati Agreement allows Lonati to sell machines directly to the
sock manufacturer with any resulting commission paid to the Company determined
on a case by case basis.
The Lonati single cylinder machines distributed by the Company are for the
knitting of athletic socks. The Lonati double cylinder machines are for the
knitting of dress and casual socks. The Lonati machines are electronic,
high-speed, and have computerized controls. Lonati single cylinder machines are
capable of knitting pouch heel and toe, reciprocated heel and toe and tube
socks. These and other features allow the rapid change of sock design, style and
size, result in increased production volume and efficiency and simplify the
servicing of the machines. The Company
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distributes these sock knitting machines as well as Lonati sheer hosiery
knitting machines in Canada and in Mexico. In addition, the Company distributes
the knitting machines, described below, manufactured by Santoni, S.r.l. Brescia,
Italy ("Santoni"), one of Lonati's subsidiaries, in the United States, Canada
and Mexico. Sales by the Company in the United States, Canada and Mexico of
machines manufactured by Lonati, S.p.A., generated the following percentages of
the Company's net revenues: 60.1% in fiscal 1997, 46.2% in fiscal 1996 and 44.4%
in fiscal 1995. In addition, sales of Santoni machines in the United States,
Canada and Mexico generated 7.0%, 4.8% and 9.3% of the Company's net revenues in
fiscal 1997, 1996 and 1995, respectively.
In addition to the Lonati machines, the Company distributes new knitting and
other machines and equipment under written agreements and other arrangements
with the manufacturers. The following table sets forth certain information
concerning certain of these additional distribution arrangements:
<TABLE>
<CAPTION>
Manufacturer Machine Territory
<S> <C> <C>
Santoni, S.r.l., Circular knitting machines for underwear, United States, Canada and
Brescia, Italy men's socks and women's sheer hosiery and Mexico
surgical support hose
Conti Complett, S.p.A., Sock toe closing machines and sock United States and Canada
Milan, Italy turning devices
Sperotto Rimar, S.p.A., Fabric processing and finishing machines United States
Malo, Italy
Corino Macchine, S.r.l., Fabric handling equipment United States and Canada
Alba, Italy
Fimatex, Turning devices for sock machines United States
Scandicci, Italy
Orizio Paolo, S.p.A., Fabric knitting machines United States
Brescia, Italy
Tonello, S.r.l., Garment wet processing equipment United States, Canada and Mexico
Sarcedo, Italy
</TABLE>
There can be no assurance that the Company will not encounter significant
difficulties in any attempt to enforce any provision of the Lonati Agreement (or
any other agreement with a foreign manufacturer), or any agreement that may
arise in connection with the placement and confirmation of orders for the
machines manufactured by Lonati (or any other foreign manufacturer) or obtain an
adequate remedy for a breach of any such provision, due principally to the fact
that Lonati (or any other foreign manufacturer) is a foreign company.
USED MACHINES, PARTS AND LIQUIDATIONS
The Company sells used machinery and parts to the textile industry. The
Company carries significant amounts of machinery and parts inventories to meet
customers' requirements and to assure itself of an adequate supply of used
machinery. The Company acts as a liquidator of textile mills and as a broker in
the purchase and sale of such mills.
MARKETING AND SALES
The Company markets and sells knitting machines and related equipment
primarily by maintaining frequent contacts with customers and understanding of
its customers' individual business needs. Salespersons will set up competitive
trials in a customer's plant and allow the customer to use the Company's machine
in its own work environment alongside competing machines for two weeks to three
months. The Company also offers customers the
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<PAGE>
opportunity to send their employees to the Company for training courses on
the operation and service of the machines and, depending on the number of
machines purchased and the number of employees to train, may offer such training
courses at the customer's facility. In addition, the Company exhibits its
equipment at trade shows and uses its private showroom to demonstrate new
machines. These marketing strategies are complemented by the Company's
commitment to service and continuing education. The Company also produces, at
its own expense, training videos for its major lines of equipment. At September
8, 1997, the Company employed approximately 11 salespersons and 30 technical
representatives. In addition to its sales staff, the Company uses over 40
commission sales agents in a number of foreign countries in connection with its
sales of used machines.
The terms of new machine sales generally are individually negotiated
including both the purchase price, payment terms and delivery schedule. The
Company is usually required to purchase imported machines with a letter of
credit in favor of the manufacturer delivered not less than 15 days prior to the
machine's shipment to the customer's plant. Generally, the letter of credit must
be payable 60 days or longer from the date of the on-board bill of lading and
upon presentation of the bill of lading. The period from shipment by the
manufacturer to installation in the customer's plant is generally 30-60 days.
The Company encourages trade-ins of older equipment, which reduces the
customer's initial capital outlay. The Company believes that its trade-in policy
has increased sales of certain of the Company's new equipment lines.
Substantially all of the machines sold by the Company are drop-shipped from
the foreign manufacturer by container or air freight directly to the customer's
plant using the Company's freight forwarder to coordinate shipment. Title is
taken at the European port, and the Company insures the machines for 110% of
cost.
Because a substantial portion of the Company's revenues are derived from
sales of machines and equipment imported from abroad, these sales may be subject
to import controls, duty and currency fluctuations. The majority of the
Company's purchases of Italian machines for sale in the United States are
denominated in Italian lira. Generally, the Company has been able to adjust
sales prices or purchase lira hedging contracts to compensate for anticipated
dollar fluctuations. However, international currency fluctuations that result in
substantial price level changes could impede import sales and substantially
impact profits. The Company is not able to assess the quantitative effect such
international price level changes could have upon the Company's operations. All
of the Company's export sales originating from the United States are made in
U.S. dollars. Substantially all of the sales of the Company's United Kingdom
subsidiary are denominated in pounds sterling.
The Company also markets used machines through its employees and outside
commission salespersons. The Company markets its used machines in the United
States and in a number of foreign countries. The Company uses trade advertising
extensively and frequently distributes lists throughout the industry of used
machines that the Company has for sale. Additionally, the Company updates its
Internet web site listing used machines available for sale.
The Company exports certain new and used machines and parts for sale in
Canada, Mexico and a number of other foreign countries. See Note 1 of Notes to
Consolidated Financial Statements for certain financial information concerning
the Company's foreign sales in fiscal 1997, 1996 and 1995.
CUSTOMERS
The Company's customers consist primarily of the major sock manufacturers in
the United States and Canada. In fiscal 1997, the Company's two largest
customers, Manufactuier De Bas Iris Hosiery, Inc. (Canada) and Sara Lee Company,
accounted for 10.5% and 9.9%, respectively, of the Company's revenues. In fiscal
1996, the Company's two largest customers, Renfro Corporation and Manufacturier
De Bas Iris Hosiery, Inc. (Canada), accounted for 8.8% and 5.8%, respectively,
of the Company's revenues. In fiscal 1995, the Company's two largest customers,
Renfro Corporation and Kayser-Roth Corporation, accounted for 7.3% and 5.2%,
respectively, of the Company's net revenues. Generally, the customers
contributing the most to the Company's net revenues vary from year to year. The
Company believes that the loss of any principal customer could have a material
adverse effect on the Company.
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<PAGE>
BACKLOG
The Company's backlog of unfilled orders for new and used machines was $16.8
million at June 28, 1997 as compared to $19.3 million at June 29, 1996 and $4.1
million at July 1, 1995. Management believes that all the Company's unfilled
orders at June 28, 1997 will be filled by the end of fiscal 1998. The period of
time required to fill orders varies depending on the machine ordered.
COMPETITION
The sock knitting machine industry is competitive. Lonati single cylinder
machines compete primarily with machines manufactured by an Italian and a Czech
company and Lonati double cylinder machines compete primarily with machines
manufactured by an Italian company acquired in 1993 by Lonati but not
represented by the Company. Lonati machines compete, to a lesser extent, with
machines manufactured by a number of other foreign companies of varying sizes
and with companies selling used machines. The principal competitive factors in
the distribution of sock knitting machines are technology, price, service, and
allowance of trade-ins and delivery. Management believes that its competitive
advantages are the technological advantages of the Lonati machines, the
Company's commitment to customer service and the Company's allowance of
trade-ins of used machines on new Lonati machines. Management believes that it
is at a short term competitive disadvantage if a potential customer's decision
will be based primarily on price since, generally, the purchase price of Lonati
machines is higher than that of competing machines.
In its sale of new equipment in addition to Lonati machines, the Company
competes with a number of foreign and domestic manufacturers and distributors of
new and used machines. In its sale of such other machines and equipment, certain
of the Company's competitors may have substantially greater resources than the
Company.
Domestic and foreign sales of used sock and sheer hosiery knitting machines
is fragmented and highly competitive. The Company competes with a number of
domestic and foreign companies that sell used machines as well as domestic and
foreign manufacturers that have used machines for sale as a result of trade-ins.
In the United States, the Company has one primary competitor in its sale of used
sock knitting machines. The principal competitive factors in the Company's
domestic and foreign sales of used machines are price and availability of
machines that are in demand. Although the Company is the exclusive distributor
of parts for a number of the machines it distributes, it competes with firms
that manufacture and distribute duplicates of such parts. In addition, the
Company competes with a number of distributors and manufacturers in its other
parts sales.
REGULATORY MATTERS
The Company is subject to various federal, state and local statutes and
regulations relating to the protection of the environment and safety in the work
place. The failure by the Company to comply with any of such statutes or
regulations could result in significant monetary penalties, the cessation of
certain of its operations, or both. Management believes that the Company's
current operations are in compliance with applicable environmental and work
place safety statutes and regulations in all material respects. The Company's
compliance with these statutes and regulations has not materially affected its
business; however, the Company cannot predict the future effects of compliance
with such statutes or regulations.
EMPLOYEES
As of July 28, 1997, the Company had 83 full-time employees. The Company's
employees are not represented by a labor union, and the Company has never
suffered an interruption of business as a result of a labor dispute. The Company
considers its relations with its employees to be good.
ACQUISITION OF WINK DAVIS EQUIPMENT COMPANY, INC.
On August 1, 1997, the Company acquired all of the outstanding common stock
of Wink Davis Equipment Company, Inc. ("Wink Davis"), pursuant to a Stock
Purchase Agreement dated July 31, 1997. The Company paid $9.5 million in cash
with additional conditional payments of up to an aggregate of $1.5 million in
cash to certain former
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<PAGE>
shareholders over a five-year period based on certain pre-tax earnings
calculations. The purchase was financed with a new credit facility with
NationsBank entered into August 1, 1997. This facility replaces a former loan
agreement originally due to expire October 31, 1999. This facility provides up
to $37.0 million comprised of (a) a $7.0 million term loan with quarterly
principal payments of $250,000 beginning December 31, 1997, the balance due July
31, 2000; and (b) up to $30.0 million for letters of credit, including up to
$8.5 million in revolving funds. Amounts outstanding under the line of credit
bear interest at the greater of prime plus 1% or the Federal Funds Effective
Rate plus 1.5% for base rate loans and the 30, 60 or 90 day LIBOR rate plus 2%
for LIBOR loans. In connection with this line of credit, the Company granted a
security interest in accounts receivable and inventory.
Wink Davis is based in Atlanta, Georgia and distributes laundry equipment
and parts, principally in the southeastern United States and in the Chicago,
Illinois area. Wink Davis has exclusive distributorships for certain territories
with the following suppliers: Pellerin Milnor for washer extractor equipment and
Chicago Dryer for commercial dryers. Wink Davis also sells laundry machine parts
and offers various equipment repair services. In addition, Wink Davis has
distributorships with other suppliers of laundry-related equipment. Both of
these distributorships are renewed on an annual basis; however, Wink Davis has
in fact maintained relationships with both suppliers for over 25 years.
The primary customers include, but are not limited to, hotels, hospitals,
prisons and other institutional laundry service providers. Net revenues of Wink
Davis for the twelve months ended June 30, 1997 are approximately $32.6 million.
At September 8, 1997, Wink Davis employed 94 people, including 11 sales persons
and 43 technical representatives.
Since the acquisition occurred August 1, 1997, the results of operations of
Wink Davis have not been included in the Company's consolidated financial
statements.
ITEM 2. PROPERTIES.
The Company's headquarters, in which its administrative offices, machinery
rebuilding facilities and a substantial portion of its warehouse space are
located, is in Charlotte, North Carolina in an approximately 89,000 square foot
building that is leased from a partnership owned by Robert S. Speizman and his
brother. The City of Charlotte has designated this building an "historic
landmark," and, as a result, modifications to the building require prior
approval of the Charlotte-Mecklenburg Historic Landmark Commission. The term of
the lease extends to March 31, 1998. The annual rent thereunder was $168,400
from January 1, 1993 to March 31, 1995 and $311,500 from April 1995 through
March 1996. Annual rent is $356,000 from April 1996 through March 1998. The
Company also leases approximately 41,000 square feet of additional warehouse
space for approximately $116,000 per year under a lease agreement that expires
December 1997, approximately 20,000 square feet of additional warehouse space
under a lease that expires December 1997 for an annual rental of $48,000, 45,000
square feet of additional warehouse space under a lease that expires in March
1998 for an annual rental of $112,000, and approximately 10,000 square feet of
additional warehouse space on a month-to-month basis for $100 per month, all in
Charlotte, North Carolina. The Company leases approximately 250 square feet of
office space, in which the headquarters of its Canadian subsidiary are located,
in Montreal, Canada, for approximately $315 per month.
Wink Davis leases properties from a partnership owned by C. Alexander Davis, a
former shareholder and current President of Wink Davis, and his brother. The
table below summarizes the key components of each lease:
<TABLE>
<CAPTION>
Lease Origination Monthly Rental Rental Square
Location Use Date Lease Term Rate Footage
<S> <C> <C> <C> <C> <C>
Atlanta, Georgia Corporate office July 30, 1997 24 months $ 7,651 23,700
and warehouse
Charlotte, North Sales Office and July 30, 1997 24 months $ 2,012 6,045
Carolina warehouse
Wooddale, Illinois Sales Office and July 30, 1997 24 months $ 6,099 6,500
warehouse
Chester, Virginia Sales Office and July 30, 1997 24 months $ 1,982 6,000
warehouse
</TABLE>
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ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders during
the fourth quarter of fiscal 1997.
EXECUTIVE OFFICERS OF REGISTRANt
The following table sets forth certain information regarding the executive
officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
<S> <C> <C>
Robert S. Speizman............. 57 Chairman of the Board, President and Director
Josef Sklut.................... 68 Vice President-Finance, Secretary, Treasurer and Director
C. Alexander Davis............. 49 President, Wink Davis Equipment Company, Inc.
</TABLE>
Robert S. Speizman has served as President of the Company since November
1976. From 1969 to October 1976, Mr. Speizman served as Executive Vice President
of the Company. Mr. Speizman has been a director of the Company since 1967 and
Chairman of the Board of Directors since July 1987.
Josef Sklut has served as Vice President-Finance of the Company since 1978,
as Secretary of the Company since 1977, as Treasurer of the Company since 1969
and as a director of the Company since 1977.
C. Alexander Davis has served as President, Wink Davis Equipment Company,
Inc., since August 1, 1997, as Executive Vice President, Wink Davis Equipment
Co., Inc., from 1973 to July 31, 1997 and as a director of Wink Davis Equipment
Company, Inc., from 1973 to July 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock has been included for quotation on the NASDAQ
National Market System under the NASDAQ symbol "SPZN" since October 1993. The
following table sets forth, for the periods indicated, the high and low sale
prices as reported by the NASDAQ National Market System.
FISCAL 1996 HIGH LOW
---- ---
First Quarter (ended September 30, 1995) .. 5.12 3.50
Second Quarter (ended December 30, 1995)... 3.88 2.62
Third Quarter (ended March 30, 1996)....... 4.50 2.50
Fourth Quarter (ended June 29, 1996)....... 5.62 3.50
FISCAL 1997
First Quarter (ended September 28, 1996) .. 5.75 3.75
Second Quarter (ended December 28, 1996)... 6.88 4.38
Third Quarter (ended March 29, 1997)....... 7.13 4.50
Fourth Quarter (ended June 28, 1997)....... 6.25 3.88
As of June 28, 1997, there were approximately 271 stockholders of record of
the Common Stock.
The Company has never declared or paid any dividends on its Common Stock.
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Future cash dividends, if any, will be at the discretion of the Company's
Board of Directors and will depend upon, among other things, future earnings,
operations, capital requirements, surplus, restrictive covenants in agreements
to which the Company may be subject, general business conditions and such other
factors as the Board of Directors may deem relevant. The Company's present
credit facility contains certain financial and other covenants that could limit
the Company's ability to pay cash dividends on its capital stock.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------
June 28, June 29, July 1, July 2, July 3,
1997 1996 1995 1994 1993
(IN THOUSANDS, EXCEPT NET INCOME PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues ................................. $ 79,103 $ 46,280 $ 61,597 $ 69,526 $ 39,552
Cost of sales ................................ 65,935 40,547 53,986 60,004 32,635
-------- -------- -------- -------- --------
Gross profit ................................. 13,168 5,733 7,611 9,522 6,917
Selling, general and administrative expenses . 8,855 6,577 5,478 4,350 3,651
-------- -------- -------- -------- --------
Operating income (loss) ...................... 4,313 (844) 2,133 5,172 3,266
Interest (income) expense, net ............... (18) (43) (15) 6 186
-------- -------- -------- -------- --------
Income (loss) before taxes on income ......... 4,331 (801) 2,148 5,166 3,080
Taxes (benefit) on income .................... 1,645 (228) 854 1,869 661
-------- -------- -------- -------- --------
Net income (loss) ............................ 2,686 (573) 1,294 3,297 2,419
Preferred stock dividends .................... -- -- 41 -- --
-------- -------- -------- -------- --------
Net income (loss) applicable to common stock.. $ 2,686 $ (573) $ 1,294 $ 3,256 $ 2,419
======== ======== ======== ======== ========
PER SHARE DATA:
Net income (loss) per share .................. $ .80 $ (.17) $ .40 $1.12 $ 1.03
Weighted average number of shares ............ 3,354 3,284 3,271 2,905 2,360
BALANCE SHEET DATA:
Working capital .............................. $ 18,741 $ 16,313 $ 17,613 $ 16,579 $ 4,553
Total assets ................................. 43,174 36,149 35,704 30,160 18,145
Short-term debt .............................. -- -- -- -- 175
Long-term debt, including current maturity ... 112 148 147 293 1,060
Stockholders' equity ......................... 20,938 18,203 18,782 17,483 5,137
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Company's revenues are generated primarily from its distribution of
textile equipment, principally knitting machines and dyeing and finishing
equipment, to manufacturers of textile products and, to a lesser extent, from
the sale of parts used in such equipment and the sale of used textile equipment.
RESULTS OF OPERATIONS
YEAR ENDED JUNE 28, 1997 COMPARED TO YEAR ENDED JUNE 29, 1996
NET REVENUES. Net revenues in fiscal 1997 were $79.1 million as compared to
$46.3 million in fiscal 1996, an increase of $32.8 million or 70.9%. This
increase is due to a combination of price and volume increases. This increase
reflects a $32.2 million increase in sales of hosiery equipment, a $0.7 million
increase in sales of dyeing and finishing equipment, a $0.6 million increase in
sales of garment wet processing equipment, a $1.2 million increase in parts and
other sales activities partially offset by a $1.9 million decrease in sales of
sweater manufacturing and related equipment. The market for hosiery equipment
is influenced by the retail sector, changes in technology and general economic
conditions affecting the Company's customers.
COST OF SALES. In fiscal 1997, cost of sales was $65.9 million as compared
to $40.5 million in fiscal 1996, an increase of $25.4 million or 62.6%. Cost of
sales as a percent of revenue decreased to 83.4% in fiscal 1997 from 87.6% in
fiscal 1996. This decrease results from increased demand for hosiery equipment
resulting in increased sales prices and increased field service efficiency
arising from increased volume. Management cannot predict whether these increased
gross profit margins will continue in the future as they are dependent on the
market for hosiery equipment.
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<PAGE>
SELLING EXPENSES. Selling expenses increased to $5.8 million in fiscal 1997
from $4.7 million in fiscal 1996, an increase of 23.6%. The increase results
from overall increased selling activity, including salaries, sales commissions,
exhibition expenses and letter of credit expenses. These increases are partially
offset by elimination of expenses of the CopyGuard division, which was disposed
in fiscal 1996.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for
fiscal 1997 totaled $3.0 million, an increase of $1.1 million from $1.9 million
in fiscal 1996. The increase results primarily from additional salaries and
management bonuses.
INTEREST INCOME. Interest income is expressed net of interest expense. In
fiscal 1997, interest income exceeded interest expense by $18,000. Net interest
income was $43,000 in fiscal 1996.
TAXES (BENEFIT) ON INCOME (LOSS). The provision for income taxes in fiscal
1997 is $1,645,000 or 38.0% of income before taxes. In fiscal 1996 the provision
for income taxes is a tax benefit of $228,000 or 28.5% of loss before taxes. The
higher effective tax rate in fiscal 1997 results from the combined effects of
non-deductible entertainment and life insurance expenses and U.S. profits taxed
at rates higher than foreign tax rates.
NET INCOME (LOSS). Net income for fiscal 1997 increased to $2.7 million
compared to a net loss of $0.6 million for fiscal 1996. Net income per share
increased to $0.80 per share in fiscal 1997 compared to a net loss per share of
$0.17 for fiscal 1996.
YEAR ENDED JUNE 29, 1996 COMPARED TO YEAR ENDED JULY 1, 1995
NET REVENUES. Net revenues in fiscal 1996 were $46.3 million as compared to
$61.6 million in fiscal 1995, a decrease of $15.3 million, or 24.9%. This
decrease reflects a $11.3 million decline in sales of hosiery equipment, a $7.3
million decline in sales of sweater manufacturing and related equipment, a $0.5
million decline in parts and other sales activities partially offset by a $3.8
million increase in sales of knitted fabric machines. The Company's backlog of
unfilled orders for new and used machines at June 29, 1996, was $19.3 million as
compared to $4.1 million at July 1, 1995. The improved level of backlog in 1996
results from substantially increased demand for sock knitting machines.
COST OF SALES. In fiscal 1996, cost of sales was $40.5 million as compared
to $54.0 million in fiscal 1995, a decrease of $13.5 million, or 24.9%, matching
the relative decline in revenues. Cost of sales as a percent of revenues was
87.6% in fiscal 1996, unchanged from fiscal 1995.
SELLING EXPENSES. Selling expenses increased to $4.7 million in fiscal 1996
from $3.6 million in fiscal 1995, an increase of 31.2%. A significant element of
the increase was disposal of the CopyGuard sales division. During the third
quarter of fiscal 1996, management decided to dispose of the Company's CopyGuard
division. CopyGuard was developing a computer-generated matrix to invisibly mark
garments to prevent counterfeiting. However, its continuing cash requirements
were diverting funds from the Company's core business while prospects of
bringing the system to market, successfully, were diminishing. Although the
system developed by CopyGuard functioned successfully from a technical point of
view, the system had not proven to be commercially feasible for the prospective
users. Other elements in the increase were salespersons' salaries and
commissions, warehouse and office space costs, travel, insurance,
telecommunications, and insurance, partially offset by a decrease in letter of
credit expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
totaled $1,878,000, down by $17,000 from $1,895,000 in fiscal 1995. This small
decrease resulted from declines in salaries and bonuses and bad debt provisions,
partially offset by increases in professional fees and in life insurance
expenses.
INTEREST INCOME. Interest income is expressed net of interest expense. In
fiscal 1996, interest income exceeded interest expense by $43,000. Net interest
income was $15,000 in fiscal 1995.
TAXES (BENEFIT) ON INCOME (LOSS). The provision for income taxes in fiscal
1996 is a tax benefit of $228,000 on the $801,000 loss from operations, or 28.5%
of the loss. In the prior year, the tax provision was 39.8% of income before
8
<PAGE>
taxes. The current year effective rate reflects the combined effects of
non-deductible entertainment and life insurance expenses.
NET INCOME (LOSS). Net income applicable to common stock declined from $1.3
million in fiscal 1995 to a loss of $0.6 million. Net loss per share in fiscal
1996 was $0.17. This compares to $0.40 per share net income in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Note regarding Private Securities Litigation Reform Act: Statements made by
the Company which are not historical facts are forward looking statements that
involve risks and uncertainties. Actual results could differ materially from
those expressed or implied in forward looking statements. All such forward
looking statements are subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. Important factors that could cause
financial performance to differ materially from past results and from those
expressed and implied in this document include, without limitation, the risks of
acqusition of businesses (including limited knowledge of the businesses acquired
and misrepresentations by sellers) availability of financing, competition,
management's ability to manage growth, loss of customers, and a variety of other
factors.
The Company's operations require a substantial line of letters of credit to
cover its customers' orders. At June 28, 1997, the Company's credit facility
provides for an overall facility of $ 25.0 million for letters of credit,
including up to $4.0 million in revolving funds. This facility, originally due
to expire on October 31, 1999, has been refinanced in conjunction with the
purchase of all of the outstanding common stock of Wink Davis Equipment Company.
The Company entered into a new credit facility on August 1, 1997. This
facility provides up to $37.0 million comprised of (a) a $7.0 million term loan
with quarterly principal payments of $250,000 beginning December 31, 1997, the
balance due July 31, 2000; and (b) up to $30.0 million for letters of credit,
including up to $8.5 million in revolving funds. Amounts outstanding under the
line of credit bear interest at the greater of prime plus 1% or the Federal
Funds Effective Rate plus 1.5% for base rate loans and the 30, 60 or 90 day
LIBOR rate plus 2% for LIBOR loans. In connection with this line of credit, the
Company granted a security interest in accounts receivable and inventory.
Working capital at June 28, 1997 was $18.7 million as compared to $ 16.3
million at June 29, 1996, an increase of $2.4 million. Operating activities in
fiscal 1997 used $3.4 million in funds. In fiscal 1996, such activities provided
$6.4 million in funds. This decrease in cash flow from operations resulted
primarily from substantial increases in accounts receivable and inventory. In
fiscal 1997, investing activities used $820,000 as compared to usage of $812,000
in the prior year. As a result cash and cash equivalents decreased by $4.2
million to total 3.8 million at June 28, 1997 as compared to $8.0 million at
June 29, 1996.
SEASONALITY AND OTHER FACTORS
There are certain seasonal factors that may affect the Company's business.
Traditionally, manufacturing businesses in Italy close for the month of August,
and the Company's customers close for one week in July. Consequently, no
shipments or deliveries, as the case may be, of machines distributed by the
Company that are manufactured in Italy are made during these periods which fall
in the Company's first quarter. In addition, manufacturing businesses in Italy
generally close for two weeks in December, during the Company's second quarter.
Fluctuations of customer orders or other factors may result in quarterly
variations in net revenues from year to year.
EFFECTS OF INFLATION AND CHANGING PRICES
Management believes that inflation has not had a material effect on the
Company's operations.
A substantial portion of the Company's machine and spare part purchases are
denominated and payable in Italian lira. Currency fluctuations of the lira could
result in substantial price level changes and therefore impede or promote
import/export sales and substantially impact profits. However, to reduce
exposure to adverse foreign currency fluctuations during the period from
customer orders to payment for goods sold, the Company enters into forward
9
<PAGE>
exchange contracts. The Company is not able to assess the quantitative effect
that such currency fluctuations could have upon the Company's operations. There
can be no assurance that fluctuations in foreign currency exchange rates will
not have a significant adverse effect on future operations.
DISCLOSURE ABOUT FOREIGN CURRENCY RISK
A significant number of the Company's purchases of machinery for resale is
denominated in Italian Lira. In the ordinary course of business, the Company
enters into foreign exchange forward contracts to mitigate the effect of foreign
currency movements between the Italian Lira and the US dollar from the time of
placing the Company's purchase order until final payment for the purchase is
made. The contracts have maturity dates that do not exceed 12 months.
Substantially all of the increase or decrease of the Lira denominated purchased
price is offset by the gains and losses of the foreign exchange contract. The
unrealized gains and losses on these contracts are deferred and recognized in
the results of operations in the period in which the hedged transaction is
consummated.
At June 28, 1997, the Company had contracts maturing through April 1998 to
purchase approximately 27.4 billion Lira for approximately $16.2 million, which
approximates the spot rate on that date.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by this Item 8
appear on Pages F-1 through F-13 and S-1 through S-2 of this Annual Report on
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The response to this Item 10 is set forth in part under the caption
"Executive Officers of the Registrant" in Part I of this Annual Report on Form
10-K and the remainder is set forth in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held November 19, 1997 (the "1997 Proxy
Statement") under the sections captioned "Election of Directors," "Certain
Information Regarding the Board of Directors" and "Compliance with Section 16(a)
of the Securities Exchange Act of 1934," which sections are incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The response to this Item 11 is set forth in the 1997 Proxy Statement under
the section captioned "Executive Compensation and Related Information," which
section, other than the subsections captioned "Report of the Compensation
Committee and the Stock Option Committee on Executive Compensation" and
"Comparative Performance Graph," is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The response to this Item 12 is set forth in the 1997 Proxy Statement under
the section captioned "Stock Ownership of Certain Beneficial Owners and
Management," which section is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The response to this Item 13 is set forth in the 1997 Proxy Statement under
the section captioned "Certain Transactions," which section is incorporated
herein by reference.
10
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are included as part of the Annual Report on
Form 10-K:
1. FINANCIAL STATEMENTS:
Page
Report of Independent Certified Public Accountants..................... F-1
Consolidated Balance Sheets - June 28, 1997 and June 29, 1996.......... F-2
Consolidated Financial Statements for each of the three years in the
periods ended June 28, 1997, June 29, 1996 and July 1, 1995:
Consolidated Statements of Operations.................................. F-3
Consolidated Statements of Stockholders' Equity........................ F-4
Consolidated Statements of Cash Flows.................................. F-5
Summary of Accounting Policies......................................... F-6
Notes to Consolidated Financial Statements............................. F-8
2. FINANCIAL STATEMENT SCHEDULES:
Report of Independent Certified Public Accountants...................... S-1
Schedule II - Valuation and Qualifying Accounts......................... S-2
11
<PAGE>
3. EXHIBITS:
The Exhibits filed as part of this Annual Report on Form 10-K are listed on
the Exhibit Index immediately preceding such Exhibits, and are incorporated
herein by reference.
(b) Reports on Form 8-K
On August 14, 1997, the Company filed a Current Report on Form 8-K
pursuant to Item 2 thereof reporting that on August 1, 1997, the Company
purchased all of the outstanding common stock of Wink Davis Equipment Co., Inc.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 131 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SPEIZMAN INDUSTRIES, INC.
Date: September 25, 1997
By: /s/ Robert S. Speizman
___________________________
Robert S. Speizman, President
Pursuant to the requirements of the Securities Act of 1933, this has
been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Robert S. Speizman
_____________________________ President and Director September 25, 1997
Robert S. Speizman (Principal Executive Officer)
/s/ Josef Sklut
_____________________________ Vice President-Finance, Secretary, September 25, 1997
Josef Sklut Treasurer and Director
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Steven P. Berkowitz
_____________________________ Director September 22, 1997
Steven P. Berkowitz
/s/ William Gorelick
_____________________________ Director September 22, 1997
William Gorelick
/s/ Scott C. Lea
_____________________________ Director September 25, 1997
Scott C. Lea
</TABLE>
13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Speizman Industries, Inc.
We have audited the accompanying consolidated balance sheets of SPEIZMAN
INDUSTRIES, INC. AND SUBSIDIARIES as of June 28, 1997 and June 29, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended June 28, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of SPEIZMAN INDUSTRIES,
INC. AND SUBSIDIARIES at June 28, 1997 and June 29, 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended June 28, 1997, in conformity with generally accepted accounting
principles.
Charlotte, North Carolina BDO Seidman, LLP
September 9, 1997
F-1
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 28, June 29,
1997 1996
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents.................................$ 3,832,534 $ 7,981,723
Accounts receivable (Notes 2 and 6) ....................... 21,075,138 12,160,449
Inventories (Notes 3 and 6) ............................... 12,970,134 11,639,552
Prepaid expenses and other current assets ................. 2,988,786 2,340,111
------------ ------------
TOTAL CURRENT ASSETS ................................... 40,866,592 34,121,835
------------ ------------
Property and Equipment : (Notes 4 and 7)
Leasehold improvements .................................... 750,140 550,684
Machinery and equipment ................................... 1,770,886 1,208,508
Furniture, fixtures and transportation equipment .......... 1,078,429 1,218,570
------------ ------------
3,599,455 2,977,762
Less accumulated depreciation and amortization ............ (1,811,183) (1,525,058)
------------ ------------
NET PROPERTY AND EQUIPMENT ............................. 1,788,272 1,452,704
------------ ------------
Other ......................................................... 518,957 574,685
------------ ------------
$ 43,173,821 $ 36,149,224
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Accounts payable .......................................... $ 19,075,766 $ 14,864,567
Customers' deposits ....................................... 1,380,621 2,723,466
Accrued expenses .......................................... 1,667,621 209,881
Current maturities of long-term debt (Note 7) ............. 1,769 11,051
------------ ------------
TOTAL CURRENT LIABILITIES .............................. 22,125,777 17,808,965
Long-Term Debt (Note 7) ....................................... 110,344 137,334
------------ ------------
TOTAL LIABILITIES ...................................... 22,236,121 17,946,299
------------ ------------
Commitments and Contingencies (Notes 4, 9, 10, 11 and 12)
Stockholders' Equity (Notes 8 and 9):
Common Stock - par value $.10; authorized 20,000,000
shares, issued 3,262,866, outstanding 3,235,266; and
authorized 6,000,000 shares, issued 3,236,199,
outstanding 3,208,599 ............................... 326,287 323,620
Additional paid-in capital ................................ 12,512,299 12,459,965
Retained earnings ......................................... 8,209,911 5,524,360
Foreign currency translation adjustment ................... (11,000) (5,223)
------------ ------------
Total .................................................. 21,037,497 18,302,722
Treasury stock, at cost, 27,600 common shares ............. (99,797) (99,797)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY ............................. 20,937,700 18,202,925
------------ ------------
$ 43,173,821 $ 36,149,224
============ ============
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated financial statements.
F-2
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended
------------------------------------------
June 28, June 29, July 1,
1997 1996 1995
NET REVENUES (Note 1)........... $79,103,225 $ 46,279,969 $ 61,596,833
---------- ------------ ----------
COSTS AND EXPENSES:
Cost of sales................. 65,934,696 40,546,962 53,986,242
Selling expenses.............. 5,810,360 4,699,280 3,582,719
General and administrative
expenses.................... 3,045,269 1,878,193 1,894,915
----------- ---------- -----------
Total costs and expenses... 74,790,325 47,124,435 59,463,876
----------- ---------- -----------
4,312,900 (844,466) 2,132,957
INTEREST (INCOME) EXPENSE, net
of interest income of $113,137,
$126,522 and $101,562........ (17,651) (43,400) (14,858)
--------- --------- -------------
NET INCOME (LOSS) BEFORE TAXES.. 4,330,551 (801,066) 2,147,815
TAXES (BENEFIT) ON INCOME
(Note 5)..................... 1,645,000 (228,000) 854,000
------------- ---------- -------------
NET INCOME (LOSS).............. $2,685,551 $(573,066) $1,293,815
========== ========== ===============
NET INCOME (LOSS) PER SHARE.... $0.80 $(0.17) $0.40
========== ========== ==============
Weighted average number of
common and equivalent
shares....................... 3,353,786 3,283,828 3,271,464
========== ========== ==============
See accompanying summary of accounting policies and notes
to consolidated financial statements.
F-3
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Foreign
Additional Currency
Common Common Paid-In Retained Translation Treasury Stockholders'
Shares Stock Capital Earnings Adjustment Stock Equity
------ ---------- ----------- -------- ---------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 2, 1994....... 3,234,949 $ 323,495 $ 12,455,590 $ 4,803,611 $ - $ (99,797) $17,482,899
Net income................. - - 1,293,815 - - 1,293,815
Exercise of stock options... 1,250 125 4,375 - - - 4,500
Foreign currency translation
adjustment.............. - - - - 731 - 731
---------- ------------ --------- ----------- --------- --------- ----------
BALANCE, JULY 1, 1995 3,236,199 323,620 12,459,965 6,097,426 731 (99,797) 18,781,945
Net Loss.................... - - - ( 573,066) - - (573,066)
Foreign currency translation
adjustment.............. - - - - (5,954) - (5,954)
--------- --------- ---------- ------------ ------ --------- ---------
BALANCE, JUNE 29, 1996 3,236,199 323,620 12,459,965 5,524,360 (5,223) (99,797) 18,202,925
Net income................. - - - 2,685,551 - - 2,685,551
Exercise of stock options... 26,667 2,667 52,334 - - - 55,001
Foreign currency translation
adjustment.............. - - - - (5,777) - (5,777)
--------- ----------- ---------- ------------ --------- ---------- -------
BALANCE, JUNE 28, 1997..... 3,262,866 $ 326,287 $12,512,299 $ 8,209,911 $ (11,000) $ (99,797) $20,937,700
========= ========= ========== ========== ========== ========= ==========
</TABLE>
See accompanying summary of accounting policies and notes
to consolidated financial statements.
F-4
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
-----------------------------
June 28, June 29, July 1,
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .................................. $ 2,685,551 $ (573,066) $ 1,293,815
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ...................... 484,152 173,336 166,965
Provision for losses on accounts receivable ........ 214,521 113,500 171,477
Provision for inventory obsolescence ............... 154,133 139,436 200,000
Provision for deferred income taxes ................ (121,000) (58,000) (75,000)
Provision for deferred compensation ................ (25,220) 6,782 (6)
Foreign currency translation adjustment ............ (5,777) (5,954) 731
(Increase) decrease in:
Accounts receivable .............................. (9,129,210) 3,804,734 (1,079,970)
Inventories ...................................... (1,484,715) 1,649,026 (6,331,178)
Prepaid expenses ................................. (701,675) 159,244 (1,176,461)
Other assets ..................................... 229,728 (69,076) 43,662
Increase (decrease) in:
Accounts payable ............................. 4,211,199 (192,360) 5,015,062
Accrued expenses and customers' deposits...... 114,895 1,214,580 (623,547)
----------- ----------- -----------
Net cash provided by (used in) operating activities (3,373,418) 6,362,182 (2,394,450)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ............................. (846,845) (1,159,659) (520,274)
Proceeds from property and equipment disposals..... 27,125 347,557 59,377
----------- ----------- -----------
Net cash used in investing activities............... 43,949 (812,102) (460,897)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long term debt................. (11,052) (5,216) (145,958)
Issuance of common stock upon exercise of stock
options .......................................... 55,001 -- 4,500
----------- ----------- -----------
Net cash provided by (used in) financing
activities ..................................... 43,949 (5,216) (141,458)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ................................... (4,149,189) 5,544,864 (2,996,805)
CASH AND CASH EQUIVALENTS, at beginning of year..... 7,981,723 2,436,859 5,433,664
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, at end of year ......... $ 3,832,534 $ 7,981,723 $ 2,436,859
============ ============ ============
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-5
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Speizman Industries, Inc. (the
"Company") include all of its subsidiaries, all of which are majority owned. All
material intercompany transactions (domestic and foreign) have been eliminated.
The financial statements of the Company's United Kingdom subsidiary are
translated from pounds sterling to U.S. dollars in accordance with generally
accepted accounting principles.
REVENUE RECOGNITION
The major portion of the Company's revenues consists of sales and
commissions on sales of machinery and equipment. The profit derived therefrom is
recognized in full at the time of shipment.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with an original maturity of three months or less
to be cash equivalents. The carrying amount of cash and cash equivalents
approximates fair value because of the short-term maturity of these instruments.
INVENTORIES
Inventories are carried at the lower of cost or market. Cost is computed,
in the case of machines, on an identified cost basis and, in the case of other
inventories, on an average cost basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets by the straight-line method for
financial reporting purposes and by accelerated methods for income tax purposes.
FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign currency contracts to reduce the foreign
currency exchange risks. Foreign currency hedging contracts obligate the Company
to buy a specified amount of a foreign currency at a fixed price in specific
future periods. Realized and unrealized gains and losses are recognized in net
income in the period of the underlying transaction. As of June 28, 1997, the
Company had contracts maturing through April 1998 to purchase approximately 27.4
billion Lira for approximately $16.2 million, which approximates the spot rate
on that date.
TAXES ON INCOME
The Company has adopted the FAS Statement No. 109, "Accounting for Income
Taxes". Accordingly, deferred tax liabilities or assets at the end of each
period are determined using the tax rate expected to be in effect when taxes are
actually paid or recovered. Income tax expense will increase or decrease in the
same period in which a change in tax rates is enacted.
INCOME PER SHARE
Income per share is computed on the weighted average number of common and
equivalent shares outstanding during the period. Common equivalent shares
include those common shares, which would be issued upon the exercise of the
stock options, when dilutive, net of shares assumed to have been repurchased
with the proceeds.
FISCAL YEAR
The Company maintains its accounting records on a 52-53 week fiscal year.
The fiscal year ends on the Saturday closest to June 30. Years ending June 28,
1997, June 29, 1996 and July 1, 1995 included 52 weeks.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-6
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES - (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued FAS No.
128, "Earnings per Share", which established new standards for computations of
earnings per share. Statement No. 128 will be effective for periods ending after
December 15, 1997 and will require presentation of: (1) "Basic Earnings per
Share", computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding during the period and (2)
"Diluted Earnings per Share", which gives effect to all dilutive potential
common shares that were outstanding during the period, by increasing the
denominator to include the number of additional common shares that would have
been outstanding if the dilutive potential common shares had been issued. Had
FAS 128 been effective for the years ended June 28, 1997 and June 29, 1996,
basic and diluted earnings per share would have been as follows:
June 28, 1997 June 29, 1996
Basic earnings per share.............. $0.83 $(0.17)
Diluted earnings pe share............. $0.82 $(0.17)
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME (SFAS
130), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.
SFAS 130 is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Because of the recent issuance of this standard,
management has been unable to fully evaluate the impact, if any, the standard
may have on future financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementations of this
standard.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, Disclosures about SEGMENTS OF AN ENTERPRISE and RELATED INFORMATION, (SFAS
131) which supersedes SFAS No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A
BUSINESS ENTERPRISE. SFAS 131 establishes standards for the way that public
companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
SFAS 131 is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Because of the recent issuance of this standard,
management has been unable to fully evaluate the impact, if any, it may have on
future financial statement disclosures. Results of operations and financial
position, however, will be unaffected by implementation of this standard.
F-7
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS AND CREDIT RISK CONCENTRATION
The Company is engaged in the distribution of machinery for the textile
industry. With operations in the United States, Canada and the United Kingdom,
the Company primarily sells to customers located within the United States.
Export sales from the United States were approximately $12,433,000, $7,196,000
and $8,547,000 during fiscal 1997, 1996 and 1995, respectively. There were no
export sales by the Canadian operations. Sales of the Company's United Kingdom
subsidiary amounted to approximately $1,901,000 in 1997, essentially all of
which were to customers in the United Kingdom. This operation was closed
during fiscal 1997 with no significant current or on-going impact to the
Company's operations.
Financial instruments which potentially subject the Company to credit
risk consist principally of temporary cash investments and trade receivables.
The Company places its temporary cash investments with high credit quality
financial institutions and, by policy, limits the amount of credit exposure to
any one financial institution.
The Company reviews a customer's credit history before extending credit.
An allowance for doubtful accounts is established based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
To reduce credit risk the Company generally requires a down payment on large
equipment orders.
A substantial amount of the Company's revenues are generated from the
sale of sock knitting and other machines manufactured by Lonati, S.p.A. and one
of its wholly owned subsidiaries (Santoni). Sales by the Company in the United
States and Canada of machines manufactured by Lonati, S.p.A., generated the
following percentages of the Company's net revenues: 60.1% in 1997, 46.2% in
1996 and 44.4% in 1995. In addition, sales of Santoni machines in the United
States and Canada generated 7.0%, 4.8% and 9.3% of the Company's net revenues in
fiscal 1997, 1996 and 1995, respectively. In 1997, approximately 11% and 10% of
revenues consisted of sales to the Company's two largest customers. In 1996,
approximately 9% and 6% of revenues consisted of sales to the Company's two
largest customers. In 1995, approximately 7% and 5% of revenues consisted of
sales to the Company's two largest customers. Generally, the customers
contributing the most to the Company's net revenues vary from year to year.
NOTE 2 -- ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
June 28, 1997 June 29, 1996
Trade $ 21,549,61 $12,420,405
Less allowance for doubtful accounts (474,477) (259,956)
---------- ------------
Net accounts receivable $ 21,075,138 $12,160,449
=========== ============
NOTE 3 -- INVENTORIES
Inventories are summarized as follows:
June 28, 1997 June 29, 1996
Machines
New $ 3,961,362 $ 1,645,825
Used 4,807,479 6,565,310
Parts and supplies 4,201,293 3,428,310
------------- -----------
Total 12,970,134 $11,639,552
============= ===========
NOTE 4 -- LEASES
The Company conducts its operations from leased facilities which include
both offices and warehouses. Its primary operating facility is leased from a
partnership in which Mr. Robert S. Speizman, the Company's president, has a 50%
interest. The lease extends through March 1998. Lease payments to the
partnership approximated $356,000, $323,000, and $204,000 in fiscal years 1997,
1996 and 1995, respectively.
The Company leases furniture and fixtures under noncancelable capital
lease agreements which expire at various dates through 1998.
F-8
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Capitalized leases included in property and equipment are summarized as
follows:
<TABLE>
<CAPTION>
June 28, 1997 June 29, 1996
-------------- --------------
<S> <C> <C>
Furniture, fixtures and transportation equipment $ 6,568 $ 105,264
Less accumulated amortization..................................... (2,069) (89,037)
-------------- --------------
Net leased property............................................... $ 4,499 $ 16,227
============== ==============
</TABLE>
As of June 28, 1997, future net minimum lease payments under capital
leases and future minimum rental payments required under operating leases that
have initial or remaining noncancelable terms in excess of one year are as
follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------- ---------
<S> <C> <C>
1998.............................................................. $ 2,180 $ 605,193
1999.............................................................. - 181,102
2000.............................................................. - 69,719
2001.............................................................. - 4,936
2002.............................................................. - 4,936
Beyond............................................................ - 9,873
-------------- ----------
Total minimum lease payments ................................ $ 2,180 $ 875,759
========
Less amount representing interest............................ (411)
-----------
Present value of net minimum lease payments $ 1,769
==========
</TABLE>
Total rent expense for operating leases approximated $1,021,600, $791,400
and $515,800 for fiscal years 1997, 1996 and 1995, respectively.
NOTE 5 -- TAXES ON INCOME
Provisions for federal and state income taxes in the consolidated
statements of operations are made up of the following components:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal...................................... $ 1,482,000 $ (70,000) $ 673,000
Foreign...................................... 2,000 (85,000) 74,000
State........................................ 282,000 (15,000) 182,000
------------ ------------ ---------
1,766,000 (170,000) 929,000
------------ ------------ ---------
Deferred:
Federal...................................... (87,000) (50,000) $ (54,000)
State........................................ (34,000) (8,000) (21,000)
------------ ------------ ---------
(121,000) (58,000) (75,000)
------------ ------------ ---------
Total taxes (benefit) on income.................. $ 1,645,000 $ (228,000) $ 854,000
========= ============ =========
</TABLE>
Deferred tax benefits and liabilities are provided for the temporary
differences between the book and tax bases of assets and liabilities. Deferred
tax assets (liabilities) are reflected in the consolidated balance sheets as
follows:
<TABLE>
<CAPTION>
June 28, 1997 June 29, 1996
<S> <C> <C>
Net current assets................................................ $ 383,000 $ 436,000
Net noncurrent assets (liabilities)............................... 152,000 (22,000)
----------- -----------
$ 535,000 $ 414,000
=========== ===========
</TABLE>
F-9
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Principal items making up the deferred income tax assets (liabilities)
are as follows:
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------
June 28, June 29,
1997 1996
<S> <C> <C>
Inventory valuation reserves................................. $ 162,000 $ 191,000
Depreciation................................................. (107,000) (78,000)
Deferred charges............................................. 107,000 69,000
Capitalized leases........................................... - 4,000
Inventory capitalization .................................... 191,000 130,000
Accounts receivable reserves................................. 182,000 97,000
Other......................................................... - 1,000
----------- ----------
Net deferred tax asset................................... $ 535,000 $ 414,000
========== =========
</TABLE>
The Company's effective income tax rates were different than the U.S.
Federal statutory tax rate for the following reasons:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory tax rate................................... 34.0% 34.0% 34.0%
State income taxes, net of Federal income tax benefit 4.3 3.6 3.5
Non-deductible expenses........................................... 1.5 (5.3) 1.7
Foreign tax rates................................................. (0.8) (4.9) 1.2
Net tax effect of prior year adjustments.......................... - 2.5 -
Other............................................................. (1.0) (1.4) (0.6)
----- ----- -----
Effective tax rate................................................ 38.0% 28.5% 39.8%
==== ==== ====
</TABLE>
NOTE 6 -- LINE OF CREDIT
The Company has a credit facility with NationsBank, expiring October
31, 1999. This facility provides $25.0 million including up to a maximum of $4.0
million for direct borrowings, with the balance available for the issuance of
documentary letters of credit. Amounts outstanding under the line of credit bear
interest at the greater of prime plus 1% or the Federal Funds Effective Rate
plus 1.5% for base rate loans and the 30, 60 or 90 day LIBOR rate plus 2.0% for
LIBOR loans. In connection with this line of credit, the Company granted a
security interest in accounts receivable and inventory, as defined in the loan
agreement. (See Note 12)
This credit facility contains certain covenants that require, among
other things, the Company to maintain levels of current assets to current
liabilities, total liabilities to net worth, working capital, tangible net
worth, restrictions on dividends and certain fixed charge coverage. As of June
28, 1997, the Company was in compliance with such covenants.
This credit facility was refinanced on August 1, 1997 in conjunction
with the purchase of Wink Davis Equipment Company. (See Note 13)
NOTE 7 -- LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
June 28, 1997 June 29, 1996
Total Current Total Current
<S> <C> <C> <C> <C>
Capital lease obligations (Note 4) $ 1,769 $ 1,769 $ 12,821 $ 11,051
Other.......................................... 110,344 - 135,564 -
------- ------------ -------- ---------
Total.......................................... 112,113 $ 1,769 148,385 $ 11,051
=========== =========
Current maturities............................. ( 1,769) (11,051)
--------- --------
$ 110,344 $ 137,334
======= =======
</TABLE>
Annual maturities of long-term debt are 1998, $1,769; 1999, $0; 2000,
$0; 2001, $0; 2002, $0; thereafter, $110,344.
F-10
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 8 -- STOCK OPTIONS
The Company has reserved 125,000, 250,000, 145,000 and 145,000 shares
of Common Stock under four employee stock plans, adopted in 1981, 1991, 1995 and
1996, respectively. As of June 28, 1997, options to purchase 11,522, 165,403,
145,000 and 145,000 were outstanding under the 1981, 1991, 1995 and 1996 Plans,
respectively. Each option granted under the 1981, 1991 and 1995 Plans becomes
exercisable in cumulative increments of 20%, 50%, 80% and 100% on the first,
second, third and fourth anniversaries of the date of grant respectively. Each
option granted under the 1996 Plan becomes exercisable in cumulative increments
of 50 and 100% on the first and second anniversaries of the date of grant
respectively. All options, subject to certain exceptions with regard to
termination of employment and the percentage of outstanding shares of common
stock owned, must be exercised within ten (10) years from the date of the grant.
The option price under the 1981 and 1991 Plans, subject to certain exceptions,
may not be less than 100% of the fair market value per share of Common Stock on
the date of the grant of the option or 110% of such value for persons who
control 10% or more of the voting power of the Company's stock on the date of
the grant. The option price under the 1995 and 1996 Plans is not limited and may
be less than 100% of the fair market value on the date of the grant. A summary
of employee stock option transactions and other information for 1997, 1996, and
1995 follows:
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------------------------------------------
Weighted Weighted Weighted
June 28, Average June 29, Average July 1, Average
1997 Price/Sh. 1996 Price/Sh. 1995 Price/Sh.
<S> <C> <C> <C> <C> <C> <C>
Shares under option, beginning of year 334,092 $3.13 150,429 $3.15 124,957 $2.71
Options granted................................ 159,500 6.00 183,663 3.10 29,722 4.84
Options exercised.............................. (26,667) 2.06 - - (1,250) 1.88
Options expired................................ - - - - (3,000) 1.88
----------- --------- ----------- ------- ---------- -----
Shares under option, end of year............... 466,925 $ 4.17 334,092 $ 3.13 150,429 $ 3.15
=========== ========= =========== ====== =========== ======
Options exercisable............................ 141,668 117,086 78,521
=========== =========== ===========
Prices of options exercised.................... $2.063 - $.75 to
- $1.875
Prices of options outstanding, end of year $.75 to $.75 to $.75 to
$6.00 $5.50 $5.50
</TABLE>
The Company has reserved 15,000 shares of Common Stock under a
non-employee directors stock option plan adopted in 1995. Each option granted
under the Plan becomes exercisable in cumulative increments of 50% and 100% on
the first and second anniversaries of the date of the grant, respectively, and
subject to certain exceptions must be exercised within ten (10) years from the
date of the grant. The option price equals the fair market value per share of
Common Stock on the date of the grant. Options to purchase 6,000 shares were
granted and outstanding at the end of the year at a price of $2.875 to $5.4375.
A summary of non-employee directors stock option and other information
for 1997 and 1997 follows:
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------
Weighted Weighted
June 28, Average June 29, Average
1997 Price/Sh. 1996 Price/Sh.
<S> <C> <C>
Shares under option, beginning of year....................... 3,000 $2.88 - $ -
Options granted.............................................. 3,000 5.44 3,000 2.88
Options exercised............................................ - - - -
Options expired.............................................. - - - -
----------- ------- ------------- -------
Shares under option, end of year............................. 6,000 $ 4.16 3,000 $ 2.88
=========== ========= ============= ========
Options exercisable.......................................... 1,500 -
=========== =============
Prices of options exercised.................................. - -
Prices of options outstanding, end of year .................. $2.875 to $2.875
$5.4375
</TABLE>
F-11
<PAGE>
SPEIZMAN INDUSTRIES INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for the
stock option plans. The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants: expected lives of 9.2 years, expected
volatility of 0.578, risk-free interest rate of 6.5% and dividend yield of
0.0%.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. Had
compensation cost for the Company's stock option plans been determined based on
the fair value at the grant date for awards consistent with the provisions of
SFAS No. 123, the Company's net earnings and earnings per share would have been
changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended Year Ended
June 28, 1997 June 29, 1996
<S> <C> <C>
Pro forma net income ......................................... $ 2,512,366 $ (627,969)
Pro forma earnings per share ................................. $ 0.75 $ (0.19)
</TABLE>
The following table summarizes information about stock options
outstanding at June 28, 1997:
RANGE OF EXERCISE PRICES $0.75 to $6.00
Outstanding options
Number outstanding at June 28, 1997 472,925
Weighted average remaining contractual life (years) 7.8
Weighted average exercise price $ 4.17
Exercisable options
Number outstanding at June 28, 1997 143,168
Weighted average exercise price $ 3.06
The Weighted-average fair value of options granted during the year was
$4.47.
NOTE 9 -- STOCK REDEMPTION AGREEMENT
The Company has an agreement with its principal holder whereby, upon
his death, the Company is obligated to redeem a portion of the stock in the
Company held by the estate. The redemption price for common stock is to be the
fair market value of common stock, less 5%, plus any accrued dividends. In no
case will the Company pay out more than the amount of life insurance proceeds
received by the Company as a result of the death of the stockholder.
At June 28, 1997, there were 635,649 common shares covered by the above
agreement. The face value of life insurance carried by the Company under this
agreement amounts to $1,150,000.
NOTE 10 -- DEFERRED COMPENSATION PLANS
The Company has deferred compensation agreements with two employees
providing for payments amounting to $2,056,680 upon retirement and from
$1,546,740 to $2,181,600 upon death prior to retirement. One agreement, as
modified, has been in effect since 1972 and the second agreement was effective
October 1989. Both agreements provide for monthly payments on retirement or
death benefits over fifteen year periods. Both agreements are funded under trust
agreements whereby the Company pays to the trust amounts necessary to pay
premiums on life insurance policies carried to meet the obligations under the
deferred compensation agreements.
Charges to operations applicable to those agreements were approximately
$48,885, $53,885 and $43,885 for the fiscal years 1997, 1996 and 1995,
respectively.
NOTE 11 -- EMPLOYEES' RETIREMENT PLAN
The Company adopted a 401(k) retirement plan, effective October 1,
1989, for all qualified employees of the Company to participate in the plan.
Employees may contribute a percentage of their pretax eligible compensation to
the plan, and the Company matches 50% (25% prior to September 13, 1996) of each
employee's contribution up to 4% of pretax eligible compensation. The Company's
matching contributions totaled approximately $47,000, $21,000 and $17,000 in
fiscal years 1997, 1996 and 1995, respectively.
NOTE 12 -- COMMITMENTS AND CONTINGENCIES
The Company had outstanding commitments backed by letters of credit of
approximately $16,631,000 and $13,244,000 at June 28, 1997 and June 29, 1996,
respectively, relating to the purchase of machine inventory for delivery to
customers.
F-12
<PAGE>
SPEIZMAN INDUSTRIES INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has not obtained product liability insurance to date due to
the prohibitive cost of such insurance. The nature and extent of distributor
liability for product defects is uncertain. The Company has not engaged in
manufacturing activities since 1990, and management presently believes that
there is no material risk of loss to the Company from product liability claims
against the Company as a distributor.
NOTE 13 -- SUBSEQUENT EVENT
On August 1, 1997, the Company purchased all of the outstanding common
stock of Wink Davis Equipment Company, Inc. ("Wink Davis"), pursuant to a Stock
Purchase Agreement dated July 31, 1997. The Company paid $9.5 million. There is
an additional conditional payment of up to $1.5 million in cash over a five-year
period based on certain pre-tax earnings calculations. Wink Davis is based in
Atlanta, Georgia and distributes laundry equipment and parts, principally in the
southeastern United States, as well as in the Chicago, Illinois area. The
acquisition has been accounted for by the purchase method at August 1, 1997.
Since the acquisition was accounted for at August 1, 1997, the results of
operations of Wink Davis have not been included in the Company's consolidated
financial statements. Net revenues of Wink Davis for the twelve months ended
June 30, 1997 were approximately $32.6 million.
NOTE 14 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------------------
June 28, June 29, July 1,
1997 1996 1995
<S> <C> <C> <C>
Cash paid during year for:
Interest................................................... $ 101,315 $ 81,578 $ 86,704
Income taxes............................................... 1,440,696 120,086 524,464
</TABLE>
F-13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
SPEIZMAN INDUSTRIES, INC.
The audits referred to in our report dated September 9, 1997, relating to the
consolidated financial statements of Speizman Industries, Inc. and subsidiaries
which is contained in Item 8 of this Form 10-K included the audit of the
financial statement schedule listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based upon our audits.
In our opinion, such consolidated financial statement schedule presents fairly,
in all material respects, the information set forth therein.
Charlotte, North Carolina BDO Seidman, LLP
September 9, 1997
S-1
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Charged to Charged to Deductions Balance
beginning costs and other from at end
Description of period expenses accounts reserves of period
<S> <C> <C> <C> <C> <C>
Fiscal year ended July 1, 1995:
Reserve for doubtful accounts ..........$ 69,701 $171,477 $ - $ 34,020 $207,158
Reserve for inventory obsolescence .....$611,031 $200,000 $ - $215,041 $595,990
Fiscal year ended June 29, 1996:
Reserve for doubtful accounts ..........$207,158 $113,500 $ - $ 60,702 $259,956
Reserve for inventory obsolescence .....$595,990 $139,436 $ - $226,456 $508,970
Fiscal year ended June 28, 1997:
Reserve for doubtful accounts ..........$259,956 $233,671 $ - $ 19,150 $474,477
Reserve for inventory obsolescence .....$508,970 $154,133 $ - $241,629 $421,474
S-2
<PAGE>
<PAGE>
SPEIZMAN INDUSTRIES, INC.
INDEX TO EXHIBITS
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION OF EXHIBIT PAGE NO.
------ ---------------------- --------
<S> <C>
3.1 Certificate of Incorporation of Speizman Industries, Inc. (the
"Company"). (Incorporated by reference to Exhibit 3.1 contained
in the Company's Registration Statement on Form S-1 (the "1993
Form S-1"), registration number 33-69748, filed with the
Securities and Exchange Commission (the "Commission") on
September 30, 1993, and amendments thereto.)
3.2 Certificate of Amendment to Certificate of Incorporation of the
Company, dated December 4, 1978. (Incorporated by reference to
Exhibit 3.2 contained in the 1993 Form S-1.)
3.3 Certificate of Amendment to Certificate of Incorporation of the
Company, dated February 8, 1993. (Incorporated by reference to
Exhibit 3.3 contained in the 1993 Form S-1.)
3.4 Certificate of Amendment of Certificate of Incorporation of the
Company, dated January 31, 1997.
3.5 Bylaws of the Company, as amended November 7, 1978. (Incorporated
by reference to Exhibit 3.6 contained in the 1993 Form S-1.)
4.1 Certificate of Incorporation of the Company as currently in effect
(included as Exhibits 3.1 through 3.5). (Incorporated by reference
to Exhibit 4.1 contained in the 1993 Form S-1.)
4.2 Bylaws of the Company, as amended November 7, 1978. (Incorporated
by reference to Exhibit 4.2 contained in the 1993 Form S-1.)
4.3 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.3 contained in the 1993 Form S-1.)
10.1 Agency Agreement between the Company and Lonati, S.r.l., Brescia,
Italy ("Lonati"), dated January 2, 1992, relating to the Company's
distribution of machines in the United States. (Incorporated by
reference to Exhibit 10.1 contained in the 1993 Form S-1.)
10.2 Agency Agreement between the Company and Lonati, dated January 2,
1992, relating to the Company's distribution of machines in Canada.
(Incorporated by reference to Exhibit 10.2 contained in the 1993
Form S-1.)
10.3 Distribution Agreement by and between Company and Lonati, dated
January 2, 1997, relating to the Company's distribution of
circular knitting machines, ladies and men in Mexico.
10.4 Agency Agreement between the Company and Santoni, S.r.l., Brescia,
Italy ("Santoni"), dated January 2, 1992 ("Santoni Agreement").
(Incorporated by reference to Exhibit 10.3 contained in the 1993
Form S-1.)
10.5 Letter from Santoni relating to the Santoni Agreement, dated June
8, 1992. (Incorporated by reference to Exhibit 10.4 contained in
the 1993 Form S-1.)
10.6 Letter Agreement between the Company and Santoni relating to the
Santoni Agreement, dated July 21, 1993. (Incorporated by reference
to Exhibit 10.5 contained in the 1993 Form S-1.)
10.7 Distributorship Agreement between the Company and Conti Complett,
S.p.A., Milan, Italy, dated October 2, 1989. (Incorporated by
reference to Exhibit 10.8 contained in the Company's Annual Report
on Form 10-K for the fiscal year ended July 2, 1994, File No.
0-8544, filed with the Commission on September 30, 1994 (the "1994
Form 10-K").)
10.8 Letter from Orizio Paolo, S.p.A., Brescia, Italy, dated July 18,
1995, appointing Company as its exclusive distributor.
(Incorporated by reference to Exhibit 10.15 contained in the
Company's Annual Report on Form 10-K for the fiscal year ended July
1, 1995, File No. 0-8544, filed with the Commission on September
29, 1995 (the "1995 Form 10-K").)
10.9 Independent Distributor Agreement between the Company and Orizio
Paolo, S.p.A., dated August 1, 1995. (Incorporated by reference to
Exhibit 10.15.1 contained in the Company's Annual Report on Form
10-K for fiscal year ended June 29, 1996, File No. 0-8544, filed
with the Commission on September 25, 1996 (the "1996 Form 10-K").)
10.10 Split Dollar Insurance Agreement, dated January 15, 1992, between
the Company and Richard A. Bigger, Jr., Successor Trustee of the
Robert S. Speizman Irrevocable Insurance Trust. (Incorporated by
reference to Exhibit 10.13 contained in the 1993 Form S-1.)
<PAGE>
10.11 First Amendment to Split Dollar Insurance Agreement, dated
September 4, 1996, between the Company and Richard A. Bigger,
Jr., Successor Trustee of the Robert S. Speizman Irrevocable
Insurance Trust. (Incorporated by reference to Exhibit 10.16.1
contained in the Company's 1996 Form 10-K.)
10.12 Lease Agreement between the Company and Speizman Brothers
Partnership, dated as of December 12, 1990. (Incorporated by
reference to Exhibit 10.14 contained in the 1993 Form S-1.)
10.18 Lease Amendment and Extension Agreement between the Company and
Speizman Brothers Partnership dated April 1, 1995. (Incorporated by
reference to Exhibit 10.18 contained in the Company's 1995 Form
10-K.)
10.13 Second Lease Amendment and Extension Agreement between the Company
and Speizman Brothers Fifth Street Partnership (formerly Speizman
Brothers Partnership), dated April 1, 1996. (Incorporated by
reference to Exhibit 10.18.1 contained in the Company's 1996 Form
10-K.)
10.14 Deed of Lease between Speizman Canada, Inc., and Metro II & III,
undated, as renewed by letter agreement, dated February 17, 1992.
(Incorporated by reference to Exhibit 10.19 contained in the 1993
Form S-1.)
10.15 Letter Agreement extending lease between Speizman Canada, Inc., and
Metro II & III, dated October 21, 1994. (Incorporated by reference
to Exhibit 10.20 contained in the Company's 1995 Form 10-K.)
10.16 Memorandum of Agreement of Extension of Lease between Speizman
Canada, Inc., and Metro II & III, dated November 21, 1995.
(Incorporated by reference to Exhibit 10.20.1 contained in the
Company's 1996 Form 10-K.)
10.17 Memorandum of Agreement of Extension of Lease between Speizman
Canada, Inc., and Metro II & III, dated January 29, 1997.
10.18 Agreement of Lease between the Company and LBA Properties, Inc.,
dated June 2, 1994. (Incorporated by reference to Exhibit 10.17.1
contained in the Company's 1994 Form 10-K.)
10.19 Lease Agreement between the Company and B.F. Knott, dated May 12,
1993. (Incorporated by reference to Exhibit 10.18 contained in
the Company's 1994 Form 10-K.)
10.20 Modification and Extension of Lease between the Company and B.F.
Knott, dated March 29, 1994. (Incorporated by reference to Exhibit
10.18.1 contained in the Company's 1994 Form 10-K.)
10.21 Modification and Extension of Lease between the Company and B.F.
Knott, dated October 17, 1994. (Incorporated by reference to
Exhibit 10.24 contained in the Company's 1995 Form 10-K.)
10.22 Modification and Extension of Lease between the Company and B.F.
Knott, dated February 13, 1995. (Incorporated by reference to
Exhibit 10.25 contained in the Company's 1995 Form 10-K.)
10.23 Modification and Extension of Lease between the Company and
Berryhill Investment Company, LLC, dated September 27, 1995.
(Incorporated by reference to Exhibit 10.25.1 contained in the
Company's 1996 Form 10-K.)
10.24 Lease Agreement between the Company and Daniel H. Porter, dated
August 17, 1995. (Incorporated by reference to Exhibit 10.26
contained in the Company's 1995 Form 10-K.)
10.25 Extension of Lease Agreement between the Company and Daniel H.
Porter, dated May 14, 1997.
10.26 Lease Agreement between the Company and Kathryn B. Godley, dated
March 5, 1996. (Incorporated by reference to Exhibit 10.27
contained in the Company's 1996 Form 10-K.)
10.27 Lease Agreement between the Company and Hans L. Lengers, LLC,
dated February 15, 1996. (Incorporated by reference to Exhibit
10.28 contained in the Company's 1996 Form 10-K.)
10.28* 1981 Incentive Stock Option Plan of the Company. (Incorporated by
reference to Exhibit 10.19 contained in the 1993 Form S-1.)
10.29* 1991 Incentive Stock Option Plan and Amendment to 1981 Incentive
Stock Option Plan of the Company. (Incorporated by reference to
Exhibit 10.20 contained in the 1993 Form S-1.)
10.30* 1991 Incentive Stock Option Plan, as Amended and Restated
Effective September 20, 1993, of the Company. (Incorporated by
reference to Exhibit 10.21 contained in the 1993 Form S-1.)
10.31* Speizman Industries, Inc. Nonqualified Stock Option Plan as
amended on October 4, 1996. (Incorporated by reference to Exhibit
99.1 to the Company's Registration Statement on Form S-8,
registration no. 333-23503, filed with the Commission on March
18, 1997.)
10.32* Speizman Industries, Inc. 1995 Stock Option Plan. (Incorporated
by reference to Exhibit 4 to the Company's Registration Statement
on Form S-8, registration number 333-06287, filed with the
Commission on June 19, 1996.)
<PAGE>
10.33* Restated Deferred Compensation Agreement, dated May 22, 1989,
between the Company and Josef Sklut, as amended by Amendment to
Deferred Compensation Agreement, dated December 30, 1992 (the
"Deferred Compensation Agreement"). (Incorporated by reference to
Exhibit 10.27 contained in the 1993 Form S-1.)
10.34* Restated Trust Agreement, dated May 22, 1989, between the Company
and First Citizens Bank and Trust Company, as amended by First
Amendment to Trust Agreement dated December 30, 1992, relating to
the Deferred Compensation Agreement. (Incorporated by reference to
Exhibit 10.28 contained in the 1993 Form S-1.)
10.35* Executive Bonus Plan of the Company, adopted February 2, 1990, as
amended March 5, 1990. (Incorporated by reference to Exhibit 10.29
contained in the 1993 Form S-1.)
10.36* Executive Bonus Plan of the Company, adopted July 20, 1993.
(Incorporated by reference to Exhibit 10.30 contained in the 1993
Form S-1.)
10.37* Resolutions of the Company's Board of Directors dated November 15,
1995, extending Executive Bonus Plan adopted July 20, 1993.
(Incorporated by reference to Exhibit 10.34 contained in the
Company's 1995 Form 10-K).
10.38 Redemption Agreement between the Company and Robert S. Speizman,
dated May 31, 1974, as amended by Modified Redemption Agreement,
dated April 14, 1987, Second Modified Redemption Agreement, dated
September 30, 1991, and Third Modified Redemption Agreement, dated
as of July 14, 1993. (Incorporated by reference to Exhibit 10.34
contained in the 1993 Form S-1.)
10.39 Fourth Modified Redemption Agreement between the Company and
Robert S. Speizman, dated September 14, 1994. (Incorporated by
reference to Exhibit 10.36 contained in the Company's 1995 Form
10-K).
10.40 NationsBank of North Carolina, National Association $12,000,000
Credit Facility for Speizman Industries, Inc., dated April 19,
1994. (Incorporated by reference to Exhibit 10.45 contained in the
1994 Form 10-K.)
10.41 1995 Consolidated Amendment Agreement to Loan Agreement and
Related Documents dated May, 1995. (Incorporated by reference to
Exhibit 10.38 contained in the Company's 1995 Form 10-K).
10.42 1995 Second Consolidated Amendment Agreement to Loan Agreement
and Related Documents, dated September 1, 1995. (Incorporated by
reference to Exhibit 10.43 contained in the Company's 1996 Form
10-K.)
10.43 1995 Third Consolidated Amendment Agreement to Loan Agreement and
Related Documents, dated October 31, 1995. (Incorporated by
reference to Exhibit 10.44 contained in the Company's 1996 Form
10-K.)
10.44 1996 First Consolidated Amendment Agreement to Loan Agreement and
Related Documents, dated May 15, 1996. (Incorporated by reference
to Exhibit 10.45 contained in the Company's 1996 Form 10-K.)
10.45 1996 Second Consolidated Amendment Agreement to Loan Agreement
and Related Documents, dated June 26, 1996. (Incorporated by
reference to Exhibit 10.46 contained in the Company's 1996 Form
10-K.)
10.46 1996 Third Consolidated Amendment Agreement to Loan Agreement and
Related Documents, dated August 26, 1996. (Incorporated by
reference to Exhibit 10.47 contained in the Company's 1996 Form
10-K.)
10.47 Nationsbank $25,000,000 amended and restated credit facility,
dated December 19, 1996.
10.48 Nationsbank $37,000,000 amended and restated credit facility,
dated July 31, 1997.
10.49 Stock Purchase Agreement, dated as of July 31, 1997, by and among
Speizman Industries, Inc. and Wink Davis, Jr., C. Alexander
Davis, Wingfield Austin Davis IIII, Taylor Ferrell Davis, Allison
Davis Jabaley, Matthew Worley Davis, Amy Butler Davis and Kyle
Alexander Davis. (Incorporated by reference to Exhibit 3
contained in the Company's Current Report on Form 8-K, File No.
0-8544, filed on August 14, 1997.)
10.50 Dealer Agreement by and between Pellerin Milnor Corporation and
Wink Davis Equipment Company, Inc. ("Wink Davis"), dated July 1,
1989, relating to the Company's distribution of machines
primarily in the southeastern United States and the Chicago,
Illinois area.
10.51 Distributor Agreement by and between Chicago Dryer Corporation
("CDC") and Wink Davis, dated January 1, 1994, relating to the
distribution of certain items of CDC'S commercial laundry
equipment.
<PAGE>
10.52 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis, dated
July 31, 1997 relating to the Atlanta, Georgia area.
10.53 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Charlotte, North Carolina
area.
10.54 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Wooddale, Illinois area.
10.55 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Chester, Virginia area.
10.56 Earnout Agreement by and among Speizman Industries, Inc. and C.
Alexander Davis, Amy Butler Davis, Taylor Ferrell Davis and Kyle
Alexander Davis, dated July 31, 1997.
11 Statement re: Computation of Net Income per Share
21 List of Subsidiaries
23 Consent of BDO Seidman
27 Financial Data Schedule
* Represents a management contract or compensatory plan or arrangement of the Registrant.
</TABLE>
<PAGE>
EXHIBIT 3.4
State of Delaware
Office of the Secretary of State
- -----------------------------------------------------------------------------
I, Edward J. Freel, Secretary of State of the State of Delaware, do
hereby certify the attached is a true and correct copy of the Certificate of
Amendment of "Speizman Industries, Inc.", filed in this office on the twelfth
day of February, A.D. 1997, at 9 o'clock A.M.
A certified copy of this certificate has been forward to the New Castle
County Recorder of Deeds for Recording.
/s/ Edward J. Freel
Edward J. Freel, Secretary of State
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SPEIZMAN INDUSTRIES, INC.
The undersigned, a corporation organized and existing under the laws of
the State of Delaware, does hereby certify as follows:
1. The name of the corporation is SPEIZMAN INDUSTRIES, INC.
2. The Certificate of Incorporation of the corporation is hereby amended by
deleting Article Fourth (A) in its entirety and substituting the following
in lieu thereof:
FOURTH: (A) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is
20,025,000, of which 25,000 shares shall be Preferred Stock,
par value $100 per share (hereinafter the "Preferred Stock"),
and 20,000,000 shares shall be Common Stock, par value $.10
per share (hereinafter the "Common Stock").
3. The foregoing amendment was duly adopted by the Board of Directors and
stockholders of the corporation in accordance with Section 242 of the
General Corporation Law.
IN WITNESS WHEREOF, the corporation has caused this Certificate of
Amendment to be executed on its behalf by Robert S. Speizman, its President and
Chairman of the Board of Directors, and attested by Josef Sklut, its Secretary,
this 31st day of January, 1997, hereby declaring and certifying that this is the
act and deed of the corporation and that the facts stated herein are true.
SPEIZMAN INDUSTRIES, INC.
[CORPORATE SEAL] By: /s/ Robert S. Speizman
Robert S. Speizman, President
and Chairman of the Board
ATTEST:
/s/ Josef Sklut
Josef Sklut, Secretary
EXHIBIT 10.3
[LONATI LETTERHEAD]
Brescia, January 2nd, 1997
DISTRIBUTOR AGREEMENT
This Agreement is made on this 2nd day of January 1997, by and between LONATI
S.p.A.. - Via S. Polo, 11 - 25123 BRESCIA (Italy) ("LONATI") and SPEIZMAN
INDUSTRIES, INC. - 508 West 5th Street - CHARLOTTE, North Carolina 28231, USA
("SPEIZMAN").
The parties agree as follows:
1. AGENCY.
LONATI hereby appoints SPEIZMAN as it exclusive agent in MEXICO ("the
Territory") for the sale of its present range of circular knitting machines,
ladies and men (the "Products").
2. TERM.
The term of this Agreement will last from today through December 31st, 1999 and
will continue from year to year thereafter. It may be cancelled by either party
at any year end on ninety (90) days written notice to the other party.
A. This Agreement may be terminated by either party, without advance notice,
upon the breach of this Agreement by the other party, or upon the
bankruptcy of the other party.
3. RESPONSIBILITIES OF SPEIZMAN.
A. SPEIZMAN will promote, at its own expense, the sale of Lonati's products in
the Territory, to assist LONATI in maintaining its competitive position in
the Territory, both among existing customers and potential customers.
B. SPEIZMAN will provide an efficient sales organization employed by it to
promote the sale of LONATI products.
C. SPEIZMAN will provide a proper technical service.
D. SPEIZMAN will provide to maintain an efficient commercial organization in
Mexico City and will have a salesman visiting all the customers at least 4
times per year.
<PAGE>
E. SPEIZMAN will establish at its own expenses a stock of spare parts in such
quantity to satisfy the reasonably expected needs of its customers.
F. SPEIZMAN will not act either directly or by means of a third party on
behalf of any other firm in competition with LONATI for the new Products
during the terms of this Agreement.
G. SPEIZMAN will pay all the costs for participation in trade shows in the
Territory and will pay for all the costs for advertising on the Products
in the Territory.
4. RESPONSIBILITIES OF LONATI.
A. LONATI will furnish SPEIZMAN with reasonable quantities of sales
literature and will provide price quotations with delivery schedules.
B. LONATI hereby grants to SPEIZMAN the non-transferable license to use
LONATI's trademarks and trade names only and exclusively in the promotion
and marketing of the Products in the Territory. However, LONATI's
trademarks and trade names and the goods will thereof remain the property
of LONATI, and SPEIZMAN will have no right to such trade names and
trademarks except as provided herein. Upon termination or cancellation of
this Agreement, SPEIZMAN will cease any use of LONATI's trademarks and
trade names.
5. PURCHASE ORDERS.
SPEIZMAN will promptly transmit to LONATI all purchase orders received by
SPEIZMAN for the Products. LONATI will accept or reject each order placed by
SPEIZMAN within ten (10) days after receipt thereof, and will give prompt notice
of such acceptance or rejection to SPEIZMAN.
6. COMPENSATION.
A. SPEIZMAN will act as a distributor and LONATI will provide a net price-list
FOB Brescia. Payment will be made by SPEIZMAN with an irrevocable Letter of
Credit to be opened 30 days before previous shipment date and payable at 90
days from Bill of Lading.
B. All spare parts manufactured by LONATI for sale in the territory will only
be sold to SPEIZMAN and not directly to any customers, except for customers
upon mutual agreement of the parties. In case of direct sales of
spare-parts, LONATI will pay a ten percent (10%) commission to SPEIZMAN on
the net value of each invoice for such sale.
C. In case of reduction of prices to customers, or of sales made directly by
LONATI to customers, the commission rate will be discussed in advance
between the parties, case
<PAGE>
by case. LONATI will provide SPEIZMAN with copies of its records showing
the calculations of commissions due to SPEIZMAN.
7. TRIAL MACHINES.
LONATI will deliver trial machines to potential customers who show a strong
interest in buying them, under the following conditions:
A. LONATI will pay freight charges from LONATI's plant to the customer's
plant.
B. SPEIZMAN will pay freight charges from customer's plant to LONATI's plant,
for those machines which are not accepted.
C. All installation and service expenses for trial machines are at SPEIZMAN's
charges.
D. SPEIZMAN will also pay the cost of transporting machines rejected by one
customer to the plant of another customer within MEXICO.
E. However, all machines must be returned within one hundred twenty (120) days
from the delivery, unless other written terms have been agreed upon. The
parties will review this policy and amend it if necessary in the light of
future experiences.
8. INSTALLATION.
All expenses for installation of machines sold by LONATI under the conditions
"delivered and installed" will be at LONATI's expenses. If SPEIZMAN buys
machines ex-works by LONATI, then SPEIZMAN is responsible for all delivery and
installation as well as transportation charges.
A. Should SPEIZMAN purchase machines ex-works LONATI, and need assistance of
LONATI's technicians for the installations, then all travel and living
expenses plus daily pocket money will be at SPEIZMAN's charge.
9. PATENT RIGHTS AND INFRINGEMENTS.
It will be the responsibility of LONATI to obtain and maintain any patents,
trademarks or other similar protection of the machines and spare-parts, and
LONATI will - at its own expenses- protect such rights, and will hold SPEIZMAN
harmless from any infringement claim.
10. RIGHTS AFTER TERMINATION.
Upon termination of this Agreement, for whatsoever cause:
A. SPEIZMAN will be entitled to all commissions due it with respect to orders
accepted by LONATI before termination, such commissions to be paid as
provided in this Agreement.
<PAGE>
B. SPEIZMAN will have no rights to any commissions for orders not accepted by
LONATI before termination.
C. SPEIZMAN will immediately cease using the name "LONATI" and will promptly
return all trial machines, sales literature and other items owned by LONATI
to LONATI's designee in MEXICO.
11. APPLICABLE LAW.
This contract is subject to Italian law.
12. ASSIGNABILITY.
This Agreement is personal to both SPEIZMAN and LONATI and may not be assigned
by either party without the prior written consent of the other party.
13. ENTIRE DOCUMENT.
This Agreement is intended by the parties as a final expression of their
agreement and supersedes all prior agreements concerning the subject matter
hereof.
14. AMENDMENT.
Any amendment to this Agreement must be in writing and signed by both parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written, pursuant to authority duly given.
/s/ Robert S. Speizman, President /s/
SPEIZMAN INDUSTRIES, INC. LONATI S.p.A.
EXHIBIT 10.17
MEMORANDUM OF AGREEMENT OF EXTENTION OF LEASE MADE AND ENTERED INTO
THE CITY OF AND DISTRICT OF MONTREAL, ON THIS 29TH DAY OF JANUARY 1997.
- --------------------------------------------------------------------------------
BETWEEN: METRO II & III (G.P.), general partnership, duly authorized to act on
behalf of the owners of the building herein below described, having
its place of business at 8300 Pie IX, Montreal, Province of Quebec,
H1Z 4E8, herein acting and represented by Mr. Jordan Aberman, duly
authorized for these purposes,
(hereinafter referred to as "Lessor")
AND: SPEIZMAN CANADA INC., legal person duly incorporated having its head
office at 800 Place Victoria, Suite 4702, Montreal, Province of Quebec
and a place of business at 5205 Metropolitian East, Suite 3,
St-Leonard, Province of Quebec, H1R 1Z7, herein acting and represented
by Robert S. Speizman, its President, duly authorized by virtue of a
resolution of its Board of Directors, a certified extract of which is
annexed to these present;
(hereinafter referred to as "Lessee")
WHEREAS the Lessor is acting on behalf of the owners of that certain building
bearing civic address 5205 Metropolitan East, St-Leaonard, Province of Quebec
("Building");
WHEREAS in virtue of a lease starting March 1, 1989 ("Lease") the Lessee leased
those certain premises bearing civic address 5205 Metropolitan East, Suite "3",
St-Leonard, Province of Quebec, having approximately TWO HUNDRED AND FIFTY
square feet (250 sq.ft.) ("Leased Premises"), for the period of THREE (3) years;
WHEREAS the Lessee and the Lessor did extend the Lease for a further period of
THREE (3) years by agreement dated February 17, 1992, for a further period of
ONE (1) year by agreement dated October 21, 1994 and for a period of ONE (1)
year by agreement dated November 21, 1995;
WHEREAS the Lease and the agreements dated February 17, 1992, October 21, 1994
and November 21, 1995 are hereinafter called the Lease;
WHEREAS both the Lessor and the Lessee wish to extend the Lease for a further
term of ONE (1) year under the following terms and conditions:
1
<PAGE>
THEREFORE THE PARTIES AGREE AS FOLLOWS:
1. This Memorandum of Agreement is made upon and subject to the same terms and
conditions as set forth in the Lease including the rental rate which shall
be at THREE HUNDRED AND FIFTEEN DOLLARS ($315.00), plus G.S.T. and Q.S.T.
and any applicable taxes, gross per month, save and except for Lessee's
portion of the non-residential municipal surtax.
2. The term of the Lease which presently expires on the last day of February
1997 shall be extended from the first day of March 1997 and shall expire on
the last day of February, 1998, unless sooner terminated in the manner set
forth in the Lease;
3. The Lessee accepts the Leased Premises in the present state and condition.
4. Except as herein before specifically modified, supplemented and amended,
and as so modified, supplemented and amended, the Lease shall remain in
full force and effect.
5. The Parties have requested that this Memorandum of Agreement be prepared in
the English language. Les parties ont demande que la presente convention
soit redigee en anglais.
- --------------------------------------------------------------------------------
IN WITNESS HEHREOF, THE LESSEE AND THE LESSOR HAVE DULY SIGNED AND EXECUTED
THESE PRESENTS ON THE DATE HEREINABOVE MENTIONED.
METRO II & III (G.P.)
Per: /s/ Jordan Aberman /s/ Helene Mallette
- -------------------------------------- -----------------------------------
Jordan Aberman Witness
SPEIZMAN CANADA INC.
Per: /s/ Robert S. Speizman /s/ Josef Sklut
- ---------------------------------------- -----------------------------------
Robert S. Speizman Witness
2
<PAGE>
CERTIFIED EXTRACT FROM THE SIGNED RESOLUTIONS OF THE BOARD OF DIRECTORS OF
SPEIZMAN CANADA INC.
- --------------------------------------------------------------------------------
BE IT RESOLVED
1. That Mr. Robert S. Speizman be and is hereby authorized to sign the Amendment
of Lease between the Corporation and Metro II & III (G.P.) regarding he Leased
Premises located at 5205 Metropolitan East, Suite 3, in the City of St-Leonard,
Province of Quebec.
CERTIFIED TRUE COPY OF THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF SPEIZMAN
CANADA INC. DULY ADOPTED AND REMAINING IN FULL FORCE AND EFFECT, UNAMENDED.
Montreal, this 29th day of January, 1997.
x /s/ Robert S. Speizman
- ------------------------------------------
Name: Robert S. Speizman
Function: President
3
EXHIBIT 10.25
COMMERCIAL LEASE - RENEWAL
This lease is made between Daniel H. Porter
8620 Wilkinson Blvd.
Charlotte, NC 28214
herein called Lessor and Speizman Industries, Inc.
508 West 5th Street
Charlotte, NC 28202
herein called Lessee.
Lessee hereby offers to lease from Lessor the premises situated at 8600
Wilkinson Blvd., Charlotte, NC 28214, upon the following terms and conditions:
Lessee will lease the premises for a term of eight (8) months, commencing May 1,
1997 and terminating December 31, 1997 for monthly rental of $4,000.00 payable
by the tenth day of each month for that month's rental, during the term of this
Lease.
A security bond of $8,000.00 paid in advance for the predecessor lease on these
same premises is acknowledged by the Lessor.
The Lessee shall be responsible for damages to building or fixtures caused by
Lessee. Lessee shall be responsible for normal light bulb replacement and
plumbing repairs necessary as a result of negligence. Lessee shall replace any
light or plumbing fixtures damaged as a result of negligence. Lessor will
replace or repair light and plumbing fixtures as necessary other than damaged by
negligence.
Lessee shall be responsible for all utility and water bills.
Lessee shall be responsible for maintaining the alarm system. Lessor will answer
alarm calls.
Lessee will be responsible for all content insurance. Lessor will carry fire
insurance on the building.
Lessor will maintain the yard.
SIGNED THIS 14TH DAY OF MAY, 1997.
By:/s/ Josef Sklut, VP-Finance By:/s/ Daniel H. Porter_________
Lessee Lessor
Exhibit 10.47
NATIONSBANK, N.A.
$25,000,000 AMENDED AND RESTATED CREDIT FACILITY
FOR
SPEIZMAN INDUSTRIES, INC.
DECEMBER 19, 1996
i
<PAGE>
PAGE
TABLE OF CONTENTS
ARTICLE I
Definitions
1.1. "ACCOUNTS"......................................2
1.2. "ACCOUNT DEBTOR"................................2
1.3. "ACCOUNTING TERMS AND DETERMINATIONS............2
1.4. "ADVANCE".......................................2
1.5. "ADVANCE ACCOUNT"...............................2
1.6. "AGREEMENT".....................................3
1.7. "APPLICABLE MARGIN".............................3
1.8. "AUTHORIZED REPRESENTATIVE".....................3
1.9. "BASE RATE".....................................3
1.10. "BASE RATE LOAN"................................3
1.11. "BORROWER'S ACCOUNT"............................3
1.12. "BORROWING BASE"................................3
1.13. "BORROWING BASE CERTIFICATE"....................3
1.14. "BORROWING NOTICE"..............................3
1.15. "BUSINESS DAY"..................................4
1.16. "CAPITAL EXPENDITURES"..........................4
1.17. "CASH COLLATERAL"...............................4
1.18. "CASH COLLATERAL DOCUMENTS".....................4
1.19. "CLOSING DATE"..................................4
1.20. "CODE"..........................................4
1.21. "COMMITTED AMOUNT"..............................4
1.22. "COMMON STOCK"..................................4
1.23. "CONSOLIDATED CURRENT ASSETS"...................4
1.24. "CONSOLIDATED CURRENT LIABILITIES"..............4
1.25. "CONSOLIDATED FIXED CHARGE RATIO"...............5
1.26. "CONSOLIDATED FIXED CHARGES"....................5
1.27. "CONSOLIDATED NET INCOME".......................5
1.28. "CONSOLIDATED TANGIBLE NET WORTH"...............5
1.29. "CONSOLIDATED TOTAL LIABILITIES"................6
1.30. "CONSOLIDATED WORKING CAPITAL"..................6
1.31. "DEBIT BALANCE" ................................6
1.32. "DEFAULT".......................................6
1.33. "DOLLARS".......................................6
1.34. "EBIT"..........................................6
1.35. "EBITDA"........................................6
1.36. "ELIGIBLE ACCOUNTS".............................6
1.37. "ELIGIBLE INVENTORY"............................7
1.39. "ENVIRONMENTAL LAWS"............................7
1.40. "ERISA".........................................7
1.41. "EURODOLLAR RATE"...............................7
1.42. "EURODOLLAR RATE LOAN"..........................7
1.43. "EURODOLLAR RESERVE PERCENTAGE".................8
ii
<PAGE>
PAGE
1.44. "EVENT OF DEFAULT"..............................8
1.45. "FEDERAL FUNDS EFFECTIVE RATE"..................8
1.46. "FISCAL YEAR"...................................8
1.47. "FISCAL YEAR END"...............................8
1.48. "FOUR-QUARTER PERIOD"...........................8
1.49. "GUARANTORS"....................................8
1.50. "GUARANTY"......................................8
1.51. "HAZARDOUS MATERIAL"............................9
1.52. "INDEBTEDNESS"..................................9
1.53. "INDEBTEDNESS FOR MONEY BORROWED"...............9
1.54. "INTERBANK OFFERED RATE"........................9
1.55. "INTEREST PERIOD"...............................9
1.56. "INVENTORY"....................................10
1.57. "L/C CREDIT"...................................10
1.58. "L/C DOCUMENTS"................................10
1.59. "LETTERS OF CREDIT"............................11
1.60. "LETTER OF CREDIT FACILITY"....................11
1.61. "LETTER OF CREDIT FACILITY AMOUNT".............11
1.62. "LETTER OF CREDIT FACILITY TERMINATION DATE"...11
1.63. "LETTER OF CREDIT TERMINATION DATE"............11
1.64. "LIABILITIES"..................................11
1.65. "LIBOR BUSINESS DAY"...........................11
1.66. "LIEN".........................................11
1.67. "LINE OF CREDIT LOAN"..........................12
1.68. "LOAN" OR "LOANS"..............................12
1.69. "LOAN DOCUMENTS"...............................12
1.70. "NOTE".........................................12
1.71. "PERMITTED LIENS"..............................12
1.72. "PERSON........................................12
1.73. "PLAN".........................................12
1.74. "PRIME RATE"...................................12
1.75. "REGULATION D".................................13
1.76. "REGULATORY CHANGE"............................13
1.77. "REIMBURSEMENT OBLIGATION".....................13
1.78. "SECURITY AGREEMENT"...........................13
1.79. "SUBSIDIARY" AND "SUBSIDIARIES"................13
1.80. "TERMINATION DATE".............................13
ARTICLE II
The Line of Credit Loan
2.1. Commitment.....................................13
2.2. Advances and Rate Selection....................14
2.3. Payment of Interest............................15
2.4. Payment of Principal...........................15
2.5. Manner of Payment..............................16
2.6. Payment........................................16
2.7. Payments on Business Days......................16
2.8. Borrower's Account.............................16
2.9. Note...........................................16
iii
<PAGE>
PAGE
2.10. Conversions and Elections of Subsequent
Interest Periods...............................16
2.11. Loan Fee.......................................17
2.12. Security.......................................17
ARTICLE III
The Letter of Credit Facility
3.1. Letters of Credit..............................17
3.2. Repayment......................................18
3.3. Indemnification................................18
3.4. Administrative Fees............................19
3.5. Conditions to Issuance of Letters of Credit....19
ARTICLE IV
Yield Protection and Illegality
4.1. Additional Costs...............................19
4.2. Suspension of Loans............................21
4.3. Illegality.....................................21
4.4. Compensation...................................22
4.5. Alternate Interest Rate........................22
4.6. Taxes..........................................22
ARTICLE V
Representations and Warranties
5.1. Incorporation..................................23
5.2. Power and Authority............................24
5.3. Financial Condition............................24
5.4. Title to Assets................................24
5.5. Litigation.....................................25
5.6. Taxes..........................................25
5.7. Contract or Restriction Affecting Borrower.....25
5.8. Governmental Approval..........................25
5.9. No Untrue Statements...........................25
5.10. Solvency.......................................25
5.11. Hazardous Material.............................26
5.12. Margin Stock...................................26
5.13. ERISA Matters..................................26
5.14. No Default.....................................26
5.15. Existing Indebtedness..........................26
5.16. Survival of Warranties and Representations.....26
ARTICLE VI
Conditions of Closing
iv
<PAGE>
PAGE
6.1. Legal Opinions.................................27
6.2. Closing Documents..............................27
ARTICLE VI Affirmative Covenants
7.1. Financial Reports and Other Data...............29
7.2. Maintain Security Interest.....................30
7.3. Taxes and Liens................................30
7.4. Business and Existence.........................30
7.5. Insurance; Payment of Premiums.................30
7.6. Maintain Property..............................31
7.7. Books of Record and Account....................31
7.8. Payment of Indebtedness........................31
7.9. Right of Inspection............................31
7.10. Observe All Laws...............................31
7.11. Covenants Extending to Subsidiaries............31
7.12. Officer's Knowledge of Default.................31
7.13. Suits or Other Proceedings.....................31
7.14. Notice Regarding Hazardous Material or
Environmental Complaint........................32
7.15. Environmental Indemnification..................32
7.16. Further Assurances.............................32
7.17. ERISA Requirement..............................32
7.18. Continued Operations...........................32
7.19. Collateral Audit...............................32
7.20. New Subsidiaries...............................33
ARTICLE VIII
Negative Covenants of Borrower
8.1. Current Ratio..................................33
8.2. Liabilities to Net Worth.......................33
8.3. Consolidated Working Capital...................33
8.4. Consolidated Tangible Net Worth................33
8.5. Consolidated Fixed Charge Ratio................33
8.6. Mortgages, Liens, Etc..........................34
8.7. Indebtedness...................................35
8.8. Name Change, Merger, Sale of Assets,
Dissolution, Etc...............................35
8.9. Change in Control..............................35
8.10. Compliance with ERISA; Funding of Plans........35
8.11. Investments....................................36
8.12. Investments in or Loans to Subsidiaries........36
ARTICLE IX
Events of Default
9.1. Payment of Liabilities.........................36
9.2. Payment of Other Obligations...................36
9.3. Representation or Warranty.....................36
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PAGE
9.4. Selected Covenants.............................36
9.5. Other Loan Documents...........................36
9.6. Other Covenants................................36
9.7. Liquidation or Dissolution.....................37
9.8. Involuntary Proceedings........................37
9.9. Order of Dissolution; Forfeiture Action........37
9.10. Judgment.......................................37
ARTICLE X
Miscellaneous
10.1. Waiver of Default; Cumulative Remedies.........38
10.2. Amendments.....................................38
10.3. Notices........................................39
10.4. Survival of Agreements.........................39
10.5. Governing Law..................................39
10.6. Enforceability of Agreement....................39
10.7. Expenses; Indemnity............................40
10.8. Liens; Set Off.................................40
10.9. Execution of Counterparts......................40
10.10. Entirety..............................................40
10.11. Binding Effect........................................40
EXHIBIT A ..............................................A-1
EXHIBIT B ..............................................B-1
EXHIBIT C ..............................................C-1
EXHIBIT D Certificate as to Authorized Representative..D-1
EXHIBIT E Form of Borrowing Notice.....................E-1
EXHIBIT F Notice as to Selection or Conversion of
Interest Rates...............................F-1
EXHIBIT G Form of Guaranty.............................G-1
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AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, made and entered into as of
December 19, 1996, by and between SPEIZMAN INDUSTRIES, INC., a Delaware
corporation (herein called the "Borrower"), and NATIONSBANK, N.A., a national
banking association and successor to NationsBank of North Carolina, National
Association (herein called the "Lender");
W I T N E S S E T H:
WHEREAS, Borrower and Lender have previously entered into a Loan
Agreement dated as of April 19, 1994, as amended by 1995 Consolidated Amendment
Agreement to Loan Agreement and Other Documents dated as of May 31, 1995, 1995
Second Consolidated Amendment to Loan Agreement and Other Documents dated as of
September 1, 1995, 1995 Third Consolidated Amendment Agreement to Loan Agreement
and Related Documents dated as of October 31, 1995, 1996 First Consolidated
Amendment Agreement to Loan Agreement and Related Documents dated as of May 15,
1996, 1996 Second Consolidated Amendment Agreement to Loan Agreement and Related
Documents dated as of June 26, 1996, and 1996 Third Consolidated Amendment
Agreement to Loan Agreement and Related Documents and Modification Agreement
dated as of November 1, 1996 (collectively, the "Original Loan Agreement");
WHEREAS, the Borrower desires to obtain from the Lender a credit
facility in the maximum aggregate principal amount at any time outstanding of up
to $25,000,000, of which (i) up to $25,000,000 may be allocated for the issuance
of documentary letters of credit to support the Borrower's purchase and
importing of (x) pre-sold textile machinery in the ordinary course of its
business and (y) in certain cases, equipment to be held as inventory for sale,
(ii) up to $500,000 may be allocated for the issuance of standby letters of
credit, as provided herein, and (iii) up to $4,000,000 may be allocated to
borrowings for the Borrower's short term operating needs, all upon the terms and
conditions herein provided;
WHEREAS, this Amended and Restated Loan Agreement and the Loan
Documents, as defined herein, amended in connection herewith do not effect any
refinancing or extinguishment of the indebtedness and obligations evidenced by
the Original Loan Agreement and the Loan Documents and is not a novation, but is
a restatement and amendment in their entirety of such Original Loan Agreement
and such Loan Documents; and
WHEREAS, the Lender is willing to issue a line of credit loan and make
available letters of credit to the Borrower from time to time in its discretion
upon the terms and conditions set forth herein;
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NOW, THEREFORE, it is agreed as follows:
ARTICLE I
Definitions
For purposes of this Agreement, in addition to the definitions set
forth above, the following terms shall have the following meanings:
1.1. "ACCOUNTS" means accounts, general intangibles, chattel paper,
instruments and documents, whether now owned or hereafter acquired by the
Borrower. "General Intangibles" shall mean all intangible personal property of
the Borrower of every kind and nature (other than accounts, chattel paper,
documents and instruments) including, without limitation, choses in action,
causes of action, corporate or other business records, inventions, designs,
patents, patent applications, trademarks, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, tax refund claims, computer
programs, and any guarantee claims, security interests or other security held by
or granted to the Borrower to secure payment by an Account Debtor of any of the
Accounts.
1.2. "ACCOUNT DEBTOR" means any Person who is or who may become
obligated to the Borrower under or on account of an Account.
1.3. "ACCOUNTING TERMS AND DETERMINATIONS." Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a consistent basis with that applied in the audited consolidated financial
statements of the Borrower and its Subsidiaries referred to in Section 4.3
hereof.
1.4. "ADVANCE" means any borrowing under the Line of Credit Loan
consisting of a Base Rate Loan or a Eurodollar Rate Loan, as the case may be.
1.5. "ADVANCE ACCOUNT" means an account on the books of the Lender in
which
(i) each Advance by the Lender shall be debited
thereto by recording therein on the date of such Advance a
debit entry in the amount of such Advance; and
(ii) each payment made to the Lender for credit to
the Advance Account shall be credited thereto by recording
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therein on the date paid to the Lender a credit entry in the
amount of such payment.
1.6. "AGREEMENT" means this Amended and Restated Loan Agreement, as
the same may be amended, modified or supplemented from time to time as herein
permitted.
1.7. "APPLICABLE MARGIN" means for purposes of calculating the
applicable interest rate for the Interest Period for any Eurodollar Rate Loan,
2.0%.
1.8. "AUTHORIZED REPRESENTATIVE" means any of the Chairman, Vice
Chairmen, President, Executive Vice Presidents or Vice Presidents of the
Borrower and, with respect to financial matters, the Treasurer or chief
financial officer of the Borrower or any other person expressly designated by
the Board of Directors of the Borrower (or the appropriate committee thereof) as
an Authorized Representative of the Borrower, as set forth from time to time in
a certificate in the form attached hereto as Exhibit D and incorporated herein
by reference.
1.9. "BASE RATE" means, for any Base Rate Loan, the rate of interest
equal to the sum of (x) the greater of (i) Prime Rate or (ii) the Federal Funds
Effective Rate plus one-half percent and (y) one percent (1%), each change in
such Base Rate to be effective as of the effective date of any change in the
Prime Rate or the Federal Funds Effective Rate giving rise thereto.
1.10. "BASE RATE LOAN" means any Line of Credit Loan for which the
rate of interest is determined by reference to the Base Rate.
1.11. "BORROWER'S ACCOUNT" means the account maintained by the
Borrower with the Lender pursuant to which proceeds of Advances are deposited.
1.12. "BORROWING BASE" means the sum as of the date of determination
of (i) Eligible Accounts multiplied by 80% and (ii) the lesser of (x) Eligible
Inventory multiplied by 30% or (y) $2,000,000, and (iii) L/C Credit multiplied
by 50%, and (iv) Cash Collateral multiplied by 100%, all determined pursuant to
the Borrowing Base Certificate, provided that the sum of the calculations in
(ii) and (iii) shall be subject to the maximum of $12,500,000.
1.13. "BORROWING BASE CERTIFICATE" means a certificate in the form
attached hereto as Exhibit A and incorporated herein by reference.
1.14. "BORROWING NOTICE" means the notice delivered by an Authorized
Representative in connection with an Advance under the Line of Credit Loan, in
the form attached hereto as Exhibit E and incorporated herein by reference.
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1.15. "BUSINESS DAY" means a day upon which the Lender is open for the
transaction of commercial business with the general public in Charlotte, North
Carolina.
1.16. "CAPITAL EXPENDITURES" means all expenditures made and
liabilities incurred (including obligations under capital leases) for the
acquisition of assets which are not, in accordance with generally accepted
accounting principles, treated as expense items in the year made or incurred or
as a prepaid expense applicable to a future year or years.
1.17. "CASH COLLATERAL" means cash, certificates of deposit or other
cash equivalents acceptable to Lender and on deposit with and held by Lender
subject to a perfected first lien as security for the obligations of the
Borrower.
1.18. "CASH COLLATERAL DOCUMENTS" means all assignments, pledge
accounts, security agreements and other collateral documents executed and
delivered from time to time by the Borrower to Lender to establish Cash
Collateral.
1.19. "CLOSING DATE" means the date this Agreement is executed by the
Borrower and the Lender.
1.20. "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time, including any rules and regulations (whether final, temporary
or proposed) promulgated thereunder or under any predecessor statute and
remaining in effect.
1.21. "COMMITTED AMOUNT" means the principal amount of $4,000,000
which the Lender has agreed to lend the Borrower on a revolving credit basis and
is evidenced by the Note, subject at any time to reduction as provided in
Section 2.1 of this Agreement.
1.22. "COMMON STOCK" means the common stock, par value $.10 per share,
of the Borrower.
1.23. "CONSOLIDATED CURRENT ASSETS" means, as at the time any
determination thereof is to be made, all assets or resources of Borrower and its
Subsidiaries on a consolidated basis which are classified as current assets in
accordance with generally accepted accounting principles applied on a consistent
basis.
1.24. "CONSOLIDATED CURRENT LIABILITIES" means, as at the time any
determination thereof is to be made, the amount of all liabilities of Borrower
and its Subsidiaries on a consolidated basis (including all indebtedness payable
on demand or maturing not more than one year from the date of computation and
the current portion of Indebtedness having a maturity date in excess of one
year) which are classified as current liabilities in accordance with generally
accepted accounting principles applied on a consistent basis.
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1.25. "CONSOLIDATED FIXED CHARGE RATIO" means, with respect to the
Borrower and its Subsidiaries for the Four-Quarter Period ending on the date of
computation thereof, the ratio of (a) EBITDA plus, to the extent deducted in
arriving at EBITDA, lease, rental and all other payments made in respect of or
in connection with operating leases and less Capital Expenditures to (b)
Consolidated Fixed Charges during each Four-Quarter Period.
1.26. "CONSOLIDATED FIXED CHARGES" means, with respect to Borrower and
its Subsidiaries, for the periods indicated, the sum of, without duplication,
(i) the total amount of interest paid or due and payable by the Borrower and its
Subsidiaries (as determined in accordance with generally accepted accounting
principles and as reflected on the financial statements delivered pursuant to
Section 7.1 hereof), plus (ii) to the extent deducted in arriving at EBITDA,
lease, rental and all other payments made in respect of or in connection with
operating leases, plus (iii) taxes on income, plus (iv) the current portion of
Indebtedness having a maturity date in excess of one year, plus (v) all
dividends and other distributions paid during such period (regardless of when
declared) on any shares of capital stock of the Borrower then outstanding, all
determined on a consolidated basis in accordance with generally accepted
accounting principles applied on a consistent basis and as reflected on the
financial statements delivered pursuant to Section 7.1 hereof.
1.27. "CONSOLIDATED NET INCOME" means, for the period during which any
determination thereof is to be made, the gross revenues of Borrower and its
Subsidiaries on a consolidated basis less all operating and non-operating
expenses of Borrower and its Subsidiaries on a consolidated basis including
taxes on income, all determined in accordance with generally accepted accounting
principles applied on a consistent basis; but excluding as income: (i) gains on
the sale, conversion or other disposition of capital assets, (ii) gains on the
acquisition, retirement, sale or other disposition of capital stock and other
securities of Borrower or any Subsidiary, (iii) gains on the collection of
proceeds of life insurance policies, (iv) any write-up of any asset, and (v) any
other gain or credit of an extraordinary nature as determined in accordance with
generally accepted accounting principles applied on a consistent basis.
1.28. "CONSOLIDATED TANGIBLE NET WORTH" means, as at the time any
determination thereof is to be made, the depreciated book value amount of all
assets of Borrower and its Subsidiaries (on a consolidated basis and excluding
intercompany items), with no adjustment due to revaluation, depreciation,
reserves or otherwise, less (i) the book amount of all items treated as
intangible assets under generally accepted accounting principles, such as
(without limitation) goodwill (whether representing the excess of cost over book
value of assets acquired or otherwise), capitalized expenses, leasehold
improvements, patents, trademarks, trade names, copyrights, franchises,
licenses, and deferred charges, such as
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(without limitation) unamortized costs and costs of research and development;
(ii) treasury stock; (iii) all reserves, including without limitation reserves
for liabilities, fixed or contingent, depreciation, depletion, obsolescence,
amortization, deferred income taxes, insurance, inventory valuation, and all
other appropriations of retained earnings; and (iv) Consolidated Total
Liabilities.
1.29. "CONSOLIDATED TOTAL LIABILITIES" means, as at the time any
determination thereof is to be made, the aggregate amount of all liabilities
(i.e., claims of creditors that are to be satisfied by the disbursement or
utilization of corporate resources) of Borrower and its Subsidiaries on a
consolidated basis, all determined in accordance with generally accepted
accounting principles applied on a consistent basis, and including specifically
all Indebtedness of Borrower and its Subsidiaries and all subordinated debt.
1.30. "CONSOLIDATED WORKING CAPITAL" means, as at the time any
determination thereof is to be made, the excess, if any, of Consolidated Current
Assets over Consolidated Current Liabilities.
1.31. "DEBIT BALANCE" means an amount equal to the excess, if any, of
all debit entries over all credit entries recorded pursuant to Section 2.1.
hereof in the Advance Account of the Lender up to and including the date of
computation.
1.32. "DEFAULT" means any event, occurrence or condition which, with
the giving of notice, lapse of time, or both, would constitute an Event of
Default.
1.33. "DOLLARS" means dollars constituting legal tender for the
payment of public and private debts in the United States of America.
1.34. "EBIT" for any period shall mean an amount equal to Consolidated
Net Income for such period, plus the following, to the extent deducted in
computing such Consolidated Net Income for such period: (i) taxes on income, and
(ii) interest expense, in each case as shown on the financial statements
delivered pursuant to Section 7.1 hereof.
1.35. "EBITDA" for any period shall mean EBIT for such period plus the
following, to the extent deducted in computing Consolidated Net Income for such
period: depreciation and amortization, in each case as shown on the financial
statements delivered pursuant to Section 7.1 hereof.
1.36. "ELIGIBLE ACCOUNTS" means those Accounts which have been in
existence for not more than 90 days from the date of original invoice as issued
by the Borrower and deemed "Eligible Accounts" by the Lender in its discretion
as determined pursuant to the Borrowing Base Certificate; provided there shall
be excluded
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from Accounts the following: intercompany or interaffiliate Accounts; foreign
Accounts (i.e., Accounts with an Account Debtor located outside the U.S. or
Canada); general provisions for credit memos; Accounts which relate to consigned
Inventory; and any account with an Account Debtor with respect to which 25% or
more of the outstanding balance of Accounts of such Account Debtor has been in
existence for longer than 90 days from the date of original invoice.
1.37. "ELIGIBLE INVENTORY" means only that Inventory owned by the
Borrower, which is deemed "Eligible Inventory" by the Lender in its discretion
as determined pursuant to the Borrowing Base Certificate, and excluding all work
in process and consigned Inventory.
1.38. "EQUIPMENT" means any and all of the Borrower's furnishings,
fixtures and equipment, wherever located, whether now owned or hereafter
acquired, together with all increases, parts, fittings, accessories, equipment,
and special tools now or hereafter affixed to any part thereof or used in
connection therewith, and all products, additions, substitutions, accessions,
and all cash and non-cash proceeds, including proceeds from insurance, thereof
and thereto.
1.39. "ENVIRONMENTAL LAWS" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation
and Recovery Act, the Toxic Substances Act, as amended, the Clean Air Act, as
amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien"
law or any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
1.40. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, including any rules and regulations
promulgated thereunder.
1.41. "EURODOLLAR RATE" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + Applicable
Rate 1- Eurodollar Reserve Percentage Margin
1.42. "EURODOLLAR RATE LOAN" means a Loan for which the rate of
interest is determined by reference to the Eurodollar Rate.
1.43. "EURODOLLAR RESERVE PERCENTAGE" means, for any day, that
percentage (expressed as a decimal) which is in effect from time to time under
Regulation D or any successor regulation, as the maximum reserve requirement
(including any basic, supplemental,
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emergency, special, or marginal reserves) applicable with respect to
Eurocurrency liabilities as that term is defined in Regulation D (or against any
other category of liabilities that includes deposits by reference to which the
interest rate of Eurodollar Rate Loans is determined), whether or not the Lender
has any Eurocurrency liabilities subject to such requirements, without benefits
of credits or proration, exceptions or offsets that may be available from time
to time to the Lender. The Eurodollar Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurodollar Reserve
Percentage."
1.44. "EVENT OF DEFAULT" shall have the meaning specified in Article
IX hereof.
1.45. "FEDERAL FUNDS EFFECTIVE RATE" for any day, as used herein,
means the rate per annum (rounded upward to the nearest 1/100 of 1%) announced
by the Federal Reserve Bank of New York (or any successor) on such day as being
the weighted average of the rates on overnight Federal funds transactions
arranged by Federal funds brokers on the previous trading day, as computed and
announced by such Federal Reserve Bank (or any successor) in substantially the
same manner as such Federal Reserve Bank computes and announces the weighted
average it refers to as the "Federal Funds Effective Rate" as of the date of
this Agreement; provided, if such Federal Reserve Bank (or its successor) does
not announce such rate on any day, the "Federal Funds Effective Rate" for such
day shall be the Federal Funds Effective Rate for the last day on which such
rate was announced.
1.46. "FISCAL YEAR" means the period from the end of the Borrower's
preceding Fiscal Year End to the next following Fiscal Year End.
1.47. "FISCAL YEAR END" means the Saturday nearest June 30 of each
year.
1.48. "FOUR-QUARTER PERIOD" means a period of four full consecutive
quarterly fiscal periods, taken together as one accounting period.
1.49. "GUARANTORS" means all now or hereafter existing domestic
Subsidiaries of the Borrower.
1.50. "GUARANTY" means collectively each Guaranty Agreement to be
executed by a Guarantor (whether dated as of the Closing Date or delivered after
the Closing Date in accordance with Section 7.20 hereof and whether executed
individually or jointly and severally with other Guarantors) in favor of the
Lender substantially in the form attached hereto as Exhibit G and incorporated
herein by reference, as the same may be modified, amended or supplemented from
time to time as therein provided.
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1.51. "HAZARDOUS MATERIAL" means and includes any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Laws
now or hereafter in effect.
1.52. "INDEBTEDNESS" means with respect to any Person, all its
Indebtedness for Money Borrowed, all indebtedness of such person for the
acquisition of property, indebtedness secured by any Lien on the property of
such person whether or not such indebtedness is assumed, all liability of such
person by way of endorsements (other than for collection or deposit of
negotiable instruments in the ordinary course of business), all contingent
obligations and all capitalized leases and other items which in accordance with
generally accepted accounting principles are classified as liabilities on a
balance sheet.
1.53. "INDEBTEDNESS FOR MONEY BORROWED" means, for any Person, (i) all
indebtedness, obligations and liabilities of such person for money borrowed
which are evidenced by bonds, debentures, notes or other similar instruments and
(ii) all capitalized leases which have been capitalized in accordance with
generally accepted accounting principles.
1.54. "INTERBANK OFFERED RATE" means, with respect to any Eurodollar
Rate Loan for the Interest Period applicable thereto, the average (rounded
upward to the nearest one-sixteenth (1/16) of one percent) per annum rate of
interest determined by the office of the Lender (each such determination to be
conclusive and binding) as of two Business Days prior to the first day of such
Interest Period, as the effective rate at which deposits in immediately
available funds in Dollars are being, have been, or would be offered or quoted
by the Lender to major banks in the applicable interbank market for Eurodollar
deposits at any time during the Business Day which is the second Business Day
immediately preceding the first day of such Interest Period, for a term
comparable to such Interest Period and in the amount of the Eurodollar Rate
Loan. If no such offers or quotes are generally available for such amount, then
the Lender shall be entitled to determine the Eurodollar Rate by estimating in
its reasonable judgment the per annum rate (as described above) that would be
applicable if such quote or offers were generally available.
1.55. "INTEREST PERIOD" for each Eurodollar Rate Loan means a period
commencing on the date such Eurodollar Rate Loan is made or converted and each
subsequent period commencing on the last day of the immediately preceding
Interest Period for such Eurodollar Rate Loan, and ending, at the Borrower's
option, on the date one, two or three months thereafter as notified to the
Lender by the Authorized Representative three (3) LIBOR Business Days prior to
the beginning of such Interest Period; provided, that,
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(i) if the Authorized Representative fails to notify the
Lender of the length of an Interest Period three (3) LIBOR Business
Days prior to the first day of such Interest Period, the Loan for which
such Interest Period was to be determined shall be deemed to be a Base
Rate Loan;
(ii) if an Interest Period for a Eurodollar Rate Loan would end on
a day which is not a LIBOR Business Day such Interest Period shall be
extended to the next LIBOR Business Day (unless such extension would
cause the applicable Interest Period to end in the succeeding calendar
month, in which case such Interest Period shall end on the next
preceding LIBOR Business Day);
(iii) any Interest Period which begins on the last LIBOR Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last LIBOR Business Day of a calendar month;
(iv) no Interest Period shall extend past the Termination Date;
(v) on any day, with respect to all Line of Credit Loans, there
shall be not more than four (4) Interest Periods in effect.
1.56. "INVENTORY" means any and all goods, merchandise and other
personal property, including, without limitation, goods in transit, wheresoever
located and whether now owned or hereafter acquired by the Borrower which is or
may at any time be held for sale or lease, furnished under any contract of
service or held as raw materials, work-in-process, or supplies or materials used
or consumed in the Borrower's business, including, without limitations, all such
property the sale or other disposition of which has given rise to Accounts and
which has been returned to or repossessed or stopped in transit by the Borrower.
1.57. "L/C CREDIT" means the credit to the Borrowing Base established
by Lender equal to 50% of the face amount of Letters of Credit issued under the
Letter of Credit Facility for presold textile machinery to credit approved
customers of Borrower. In each case, the eligibility of the Letter of Credit for
inclusion in computing L/C Credit shall be determined by Lender.
1.58. "L/C DOCUMENTS" means, collectively, the Applications and
Agreements for Documentary Letters of Credit and any other documents executed by
Borrower in favor of Lender relating to the issuance of the Letters of Credit
(including such documents relating to letters of credit outstanding on the
Closing Date and any supplements or amendments thereto.
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1.59. "LETTERS OF CREDIT" means, individually and collectively, the
Letters of Credit to be issued under the Letter of Credit Facility pursuant to
Article III hereof, including such Letters of Credit issued pursuant to the
Original Loan Agreement and outstanding on the Closing Date.
1.60. "LETTER OF CREDIT FACILITY" means the facility described in
Article III hereof providing for the issuance by the Lender for the account of
the Borrower of the Letters of Credit from time to time in its discretion.
1.61. "LETTER OF CREDIT FACILITY AMOUNT" means the maximum aggregate
face amount available of Letters of Credit which may be issued under the Letter
of Credit Facility , which is $25,000,000, and of which up to $500,000 is for
standby letters of credit.
1.62. "LETTER OF CREDIT FACILITY TERMINATION DATE" means October 31,
1999.
1.63. "LETTER OF CREDIT TERMINATION DATE" means, as to each Letter of
Credit, the first to occur of the expiration or termination date specified
therein which shall not be later than ninety days following the Letter of Credit
Facility Termination Date.
1.64. "LIABILITIES" mean all obligations and Indebtedness of any and
every kind and nature (including, without limitation, interest, charges,
expenses, attorneys' fees and other sums chargeable to Borrower by the Lender)
and future advances made to or for the benefit of Borrower, whether arising
under this Agreement, or arising under the Note, the L/C Documents or any of the
other Loan Documents or acquired by the Lender from any other source, whether
heretofore, now or hereafter owing, arising, due, or payable from Borrower to
the Lender and howsoever evidenced, created, incurred, acquired or owing,
whether primary, secondary, direct, contingent, fixed, or otherwise, including
obligations of performance.
1.65. "LIBOR BUSINESS DAY" means a Business Day on which the relevant
international financial markets are open for the transaction of the business
contemplated by this Agreement in London, England and Charlotte, North Carolina.
1.66. "LIEN" means any interest in property securing any obligation
owed to, or a claim by, a person other than the owner of the property, including
but not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes.
1.67. "LINE OF CREDIT LOAN" means any loan evidenced by the Note and
as described in Article II hereof providing for Loans to the Borrower by the
Lender.
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1.68. "LOAN" OR "LOANS" means any of the Line of Credit Loans.
1.69. "LOAN DOCUMENTS" means, collectively, this Agreement, the Note,
the Security Agreement, the Guaranty, if any, the L/C Documents and all
agreements, instruments and documents (and with respect to this Agreement and
such other agreements, instruments and documents, any amendments or supplements
thereto or modifications thereof), delivered to the Lender, with respect to this
Agreement, or with respect to the transactions contemplated by this Agreement or
any other Loan Document.
1.70. "NOTE" means the amended and restated promissory note of the
Borrower in the original principal amount of $4,000,000.00 evidencing the Line
of Credit Loan and substantially in the form attached hereto as Exhibit B and
incorporated herein by reference.
1.71. "PERMITTED LIENS" means (i) liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for sums
not overdue or being contested in good faith; (ii) liens incurred in the
ordinary course of business in connection with worker's compensation,
unemployment insurance or other forms of governmental insurance or benefits, or
to secure performance of tenders, statutory obligations, leases and contracts
(other than for Indebtedness) entered into in the ordinary course of business or
to secure obligations on surety or appeal bonds; (iii) rights of lessees under
leases made in the ordinary course of business under which Borrower or any
Subsidiary is lessor; and (iv) liens in respect of final judgments or awards or
attachments remaining undischarged or unstayed for not longer than 60 days from
the making thereof.
1.72. "PERSON" means an individual, partnership, limited liability
company, corporation, trust, unincorporated organization, association, joint
venture or a government or agency or political subdivision thereof.
1.73. "PLAN" means any employee benefit or other plan established or
maintained or to which contributions have been made by the Borrower or any
Subsidiary and which is covered by Title IV of ERISA or to which Section 412 of
the Code applies.
1.74. "PRIME RATE" means the rate of interest per annum announced by
the Lender from time to time to be its prime rate. The Prime Rate is one of
several rate indexes used by the Lender in calculating interest on loans to its
customers and is not necessarily the best or lowest rate of interest offered by
the Lender.
1.75. "REGULATION D" means Regulation D of the Board of Governors of
the Federal Reserve System (or any successor thereto) as the same may be amended
or supplemented from time to time.
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1.76. "REGULATORY CHANGE" means any change effective after the Closing
Date in United States federal or state laws or regulations (including Regulation
D and capital adequacy regulations) or foreign laws or regulations or the
adoption or making after such date of any interpretations, directives or
requests applying to a class of banks, which includes the Lender, under any
United States federal or state or foreign laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof or compliance by the
Lender with any request or directive regarding capital adequacy, including with
respect to "highly leveraged transactions," whether or not having the force of
law, whether or not failure to comply therewith would be unlawful and whether or
not published or proposed prior to the date hereof.
1.77. "REIMBURSEMENT OBLIGATION" shall mean at any time, the
obligation of the Borrower with respect to any Letter of Credit to reimburse the
Lender for amounts theretofore paid by the Lender pursuant to a drawing under
such Letter of Credit.
1.78. "SECURITY AGREEMENT" means the Security Agreement dated as of
December 19, 1996, between the Borrower and the Lender.
1.79. "SUBSIDIARY" AND "SUBSIDIARIES" means any corporation of which
more than 50% of the voting stock of any class at any time is owned or
controlled, directly or indirectly, by the Borrower.
1.80. "TERMINATION DATE" means October 31, 1999.
ARTICLE II
The Line of Credit Loan
2.1. Commitment. The Lender agrees, upon the terms and conditions set
forth herein, to make Advances to the Borrower under the Line of Credit Loan
during the period from the date of this Agreement until the Termination Date up
to an aggregate amount not exceeding $4,000,000; provided (i) that immediately
after giving effect to each Advance, the Debit Balance shall not exceed either
the Committed Amount or the excess of the Borrowing Base over the face amount of
Letters of Credit outstanding; (ii) no Advance shall be made if, after giving
effect to such Advance, the sum of the Debit Balance and the face amount of
Letters of Credit outstanding exceeds $25,000,000; (iii) that the Lender shall
not be required to make Advances while any Default exists hereunder and (iv)
during a period of at least thirty (30) consecutive days during each 12 month
period after the date hereof there shall be no amounts outstanding under the
Note. Each Advance shall be in the amount of $50,000 or any integral multiple
thereof, or if applicable the balance of the Committed Amount, and shall be
debited by the Lender
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to the Advance Account. Within such limits, the Borrower may borrow,
repay and reborrow hereunder, on a Business Day in the case of a Base Rate Loan
and on a LIBOR Business Day in the case of a Eurodollar Rate Loan, from the date
hereof until, but (as to borrowings and reborrowings) not including, the
Termination Date; provided, however, that (x) no Eurodollar Rate Loan shall be
made which has an Interest Period that extends beyond the Termination Date and
(y) each Eurodollar Rate Loan may, subject to the provisions of Section 2.10, be
repaid only on the last day of the Interest Period with respect thereto, all in
accordance with the terms of this Agreement. The Borrower agrees that if at any
time the outstanding balance under the Note shall exceed (x) the Committed
Amount or (y) the excess of the Borrowing Base over the face amount of Letters
of Credit outstanding, the Borrower shall immediately reduce such outstanding
balance to the extent of such excess. Borrowings and payments of principal
hereunder are to be made no later than 2:00 P.M. Charlotte, North Carolina time
on the date of such borrowing or payment. The proceeds of the Line of Credit
Loan shall be used for working capital.
2.2. Advances and Rate Selection. (i) An Authorized Representative
shall give the Lender (1) at least three (3) LIBOR Business Days' irrevocable
telephonic notice of each Eurodollar Rate Loan (whether representing an
additional borrowing hereunder or the conversion of borrowing hereunder from
Base Rate Loans to Eurodollar Rate Loans or the continuation of borrowing
hereunder of Eurodollar Rate Loans) prior to 10:30 A.M., Charlotte, North
Carolina time; and (2) irrevocable telephonic notice of each Base Rate Loan
representing an additional borrowing hereunder or the conversion of borrowing
hereunder from Eurodollar Rate Loans to Base Rate Loans prior to 10:30 A.M.
Charlotte, North Carolina time on the day of such proposed Base Rate Loan. Each
such Borrowing Notice, which shall be effective upon receipt by the Lender,
shall specify the amount of the Advance, the type (Base or Eurodollar) of Loan,
the date of the Advance and, if a Eurodollar Rate Loan, the Interest Period to
be used in the computation of interest. The Authorized Representative shall
provide the Lender written confirmation of each such telephonic notice on the
same day by telefacsimile transmission in the form of a Borrowing Notice, for
additional Advances, or in the form attached hereto as Exhibit F and
incorporated herein by reference as to selection or conversion of interest rates
as to outstanding Loans, in each case with appropriate insertions, but failure
to provide such confirmation shall not affect the validity of such telephonic
notice. The duration of the initial Interest Period for each Loan that is a
Eurodollar Rate Loan shall be as specified in the initial Borrowing Notice. The
Borrower shall have the option to elect the duration of subsequent Interest
Periods and to convert the Loans in accordance with Section 2.10 hereof. If the
Lender does not receive a notice of election of duration of an Interest Period
or to convert by the time prescribed hereby and by Section 2.10 hereof, the
Borrower shall be deemed to have elected to convert such Line of Credit Loan to
(or continue such Line of Credit Loan
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as) a Base Rate Loan until the Borrower notifies the Lender in accordance
herewith and with Section 2.10.
(ii) Not later than 3:00 P.M., Charlotte, North Carolina time on the
date specified for each Advance of a Line of Credit Loan, the Lender shall,
subject to the terms and conditions of this Agreement, make the amount of the
Line of Credit Loans available to the Borrower by delivery of the proceeds
thereof to the Borrower's Account or otherwise as shall be directed in the
applicable Borrowing Notice by the Authorized Representative.
2.3. Payment of Interest. (a) The Borrower shall pay interest to the
Lender on the outstanding and unpaid principal amount of each Loan made by the
Lender for the period commencing on the date of such Loan until such Loan shall
be due at the Eurodollar Rate or the Base Rate, as elected or deemed elected by
the Borrower or otherwise applicable to such Loan as herein provided; provided,
however, that if any amount shall not be paid when due (at maturity, by
acceleration or otherwise), all amounts outstanding hereunder shall bear
interest thereafter (i) in the case of a Eurodollar Rate Loan, at a rate of
interest per annum which shall be four percent (4%) above the Eurodollar Rate
for such Eurodollar Rate Loan until the end of the Interest Period during which
such payment was due, and thereafter at a rate of interest per annum which shall
be four percent (4%) above the Base Rate, and (ii) in the case of a Base Rate
Loan, at a rate of interest per annum which shall be four percent (4%) above the
Base Rate, or (in each case) the maximum rate permitted by applicable law,
whichever is lower, from the date such amount was due and payable until the date
such amount is paid in full.
(b) Interest on the outstanding principal balance of each Loan shall
be computed on the basis of a year of 360 days and calculated for the actual
number of days elapsed. Interest on each Loan shall be paid (a) monthly in
arrears on the last Business Day of each month, commencing December 31, 1996, on
each Base Rate Loan, (b) on the last day of the applicable Interest Period for
each Eurodollar Rate Loan, and (c) upon payment in full of the principal amount
of such Loan.
2.4. Payment of Principal. The principal amount of the Debit Balance
shall be due and payable to the Lender in full on the Termination Date, or
earlier as herein expressly provided. The principal amount of Base Rate Loans
may be prepaid in whole or in part at any time. The principal amount of
Eurodollar Rate Loans may only be prepaid at the end of the applicable Interest
Period, unless the Borrower shall pay to the Lender the amount, if any, required
under Section 4.4 hereof.
2.5. Manner of Payment. Each payment of principal (including any
prepayment), interest and any other amount required to be paid to the Lender
with respect to the Line of Credit Loan pursuant to the Loan Documents, shall be
made to the Lender at its
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principal office in Charlotte, North Carolina in Dollars and in immediately
available funds on or before 2:00 p.m., Charlotte, North Carolina time on the
date such payment is due. In case any such payment is not so made
("non-conforming payment"), the Lender may, but shall not be obligated to, upon
three days prior written notice to the Borrower, debit the amount of such
payment from any one or more ordinary deposit accounts of the Borrower with the
Lender.
2.6. Payment. In the event that any payment of interest, principal of,
prepayment or other fee, or other amount owing hereunder with respect to the
Line of Credit Loan is not made within 15 days of the date when due, or is made
in the form of a non-conforming payment, such amount shall continue as an
obligation of the Borrower hereunder and shall bear interest from the due date
thereof until paid in full at the respective rates of interest per annum
specified in Section 2.3(a) in respect of late payments of interest, from the
date such amount was due until paid in full. Notwithstanding the foregoing,
failure to make any payment when due in the manner provided in the immediately
preceding paragraph shall constitute an Event of Default hereunder.
2.7. Payments on Business Days. In the event that any payment
hereunder or under the Note becomes due and payable on a day other than a
Business Day, then such due date shall be extended to the next succeeding
Business Day unless provided otherwise under clause (ii) under the definition of
"Interest Period"; provided that interest shall continue to accrue during the
period of any such extension.
2.8. Borrower's Account. The Borrower shall continuously maintain the
Borrower's Account for the purposes herein contemplated.
2.9. Note. Line of Credit Loans made by the Lender shall be evidenced
by, and be repayable with interest in accordance with the terms of, the Note
payable to the order of the Lender in the amount of the Committed Amount, which
Note shall be dated the Closing Date and shall be duly executed and delivered by
the Borrower.
2.10. Conversions and Elections of Subsequent Interest Periods.
Provided that no Default or Event of Default shall have occurred and be
continuing and subject to the limitations set forth below and in Sections
4.1(b), 4.2 and 4.3 hereof, the Borrower may:
(a) upon notice to the Lender on or before 10:30 A.M. Charlotte, North
Carolina time on any Business Day convert all or a part of Eurodollar Rate Loans
to Base Rate Loans on the last day of the Interest Period for such Eurodollar
Rate Loans; and
(b) on three (3) LIBOR Business Days' notice to the Lender on or
before 10:30 A.M. Charlotte, North Carolina time:
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(i) elect a subsequent Interest Period for all or a
portion of Eurodollar Rate Loans to begin on the last day of
the current Interest Period for such Eurodollar Rate Loans; or
(ii) convert Base Rate Loans to Eurodollar Rate
Loans on any LIBOR Business Day.
Notice of any such elections or conversions shall specify the effective
date of such election or conversion and, with respect to Eurodollar Rate Loans,
the Interest Period to be applicable to the Loan as continued or converted. Each
election and conversion pursuant to this Section 2.10 shall be subject to the
limitations on Eurodollar Rate Loans set forth in the definition of "Interest
Period" herein and in Sections 2.1 and 2.2 and Article IV hereof.
2.11. Loan Fee. Prior to or simultaneously with the Closing Date, the
Borrower shall have paid to the Lender a loan fee equal to $75,000.
2.12. Security. As security for the full and timely payment of the
principal of and interest on the Note, the Borrower shall on the Closing Date
deliver to the Lender (x) the Security Agreement conveying to the Lender a
valid, perfected first priority lien on the Accounts, Inventory and Equipment
and (y) the Cash Collateral Documents. From time to time the Borrower will
deliver such Cash Collateral Documents as shall be necessary to convey to the
Lender a valid, perfected first priority lien on the Cash Collateral.
ARTICLE III
The Letter of Credit Facility
3.1. Letters of Credit. From time to time the Borrower may request
that the Lender issue Letters of Credit for the benefit of the Borrower to
facilitate the purchase of pre-sold textile machinery. In addition, the Borrower
may request the issuance of Letters of Credit to facilitate the purchase of
textile machinery to be held by the Borrower as inventory for sale; provided,
the maximum aggregate face amount of Letters of Credit which may be outstanding
in respect of such textile machinery held as inventory for sale may not exceed
$3,500,000. In addition, the Borrower may request the issuance of standby
letters of credit to facilitate the purchase by the Borrower of machine parts to
support the Borrower's sale of sock knitting machinery; provided the maximum
aggregate face amount of such standby letters of credit which may be outstanding
may not exceed $500,000. The Lender shall have no commitment to issue any such
Letter of Credit and its decision to issue any Letter of Credit shall be in its
sole and absolute discretion. The aggregate maximum principal face amount of
Letters of Credit which may be outstanding at any one time shall not exceed
$25,000,000 less the principal amount outstanding under the Line of Credit Loan
at the time of issuance of a Letter of Credit; provided
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no Letter of Credit will be issued if (i) after such issuance, the aggregate
amount of Letters of Credit issued and outstanding shall exceed the excess of
the Borrowing Base over the principal amount outstanding under the Line of
Credit Loan or (ii) any Default exists hereunder. The Borrower shall execute the
Lender's customary applications and other documentation (including reimbursement
agreements) in connection with each request for, or issuance of, a Letter of
Credit. The fees to be charged by the Lender for issuance of each Letter of
Credit, the duration of each Letter of Credit, the collateral therefor, the
beneficiaries thereof and other related terms and conditions will be negotiated
and agreed upon by the Borrower and Lender at the time of the issuance of each
Letter of Credit. Further no Letters of Credit will be issued having a term
extending beyond the date 90 days following the Letter of Credit Facility
Termination Date.
3.2. Repayment. The Borrower hereby unconditionally agrees to pay to
the Lender on demand all amounts required to pay all amounts drawn or drafts
purporting to be drawn under the Letters of Credit, and any and all expenses of
every kind incurred by the Lender in connection with the Letters of Credit and
in any event and without demand to place in the Lender's possession sufficient
funds to pay all debts and liabilities arising under any Letter of Credit. Such
payment by the Borrower shall be made, if not demanded earlier, immediately
after (and before 4:00 p.m. Charlotte, North Carolina time on the same Business
Day as) the Lender gives the Borrower notice of such drawing under a Letter of
Credit. The Borrower's obligations to pay the Lender under this Section, and the
Lender's right to receive the same, shall be absolute and unconditional and
shall not be affected by any circumstance whatsoever. Notwithstanding anything
to the contrary in any L/C Document, the Borrower agrees to pay the Lender
interest on any amounts not paid when due hereunder at the Prime Rate plus four
percent (4%), or the maximum rate as may be permitted by applicable law,
whichever is lower. The Lender may charge any account the Borrower may have with
it for any and all amounts the Lender pays under the Letter of Credit, plus
commissions, charges and expenses as from time to time agreed to by the Lender
and the Borrower.
3.3. Indemnification. Without duplication of any other provision
hereof, the Borrower hereby indemnifies and holds harmless the Lender from and
against any and all claims and damages, losses, liabilities, costs or expenses
which the Lender may incur (or which may be claimed against the Lender) by any
person by reason of or in connection with the issuance or transfer of or payment
or failure to pay under any Letter of Credit; provided that the Borrower shall
not be required to indemnify the Lender for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, (i) caused
by the willful misconduct or gross negligence of the party to be indemnified or
(ii) caused by the Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly
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complying with the terms and conditions of such Letter of Credit, unless such
payment is prohibited by any law, regulation, court order or decree. The
agreements of this Section shall survive repayment of all Reimbursement
Obligations hereunder.
3.4. Administrative Fees. The Borrower shall pay to the Lender
administrative and other fees, if any, in connection with the Letters of Credit
in such amounts and at such times as the Lender and the Borrower shall agree
from time to time.
3.5. Conditions to Issuance of Letters of Credit. Without limitation
in any manner of the sole discretion of the Lender to issue any Letter of
Credit, the Lender will not issue any Letter of Credit hereunder prior to the
satisfaction of the following conditions:
(i) the Lender shall have received a notice
and application from the Borrower in form and substance
satisfactory to the Lender requesting issuance of a
Letter of Credit;
(ii) at the time of each issuance of each
Letter of Credit, no Default or Event of Default shall
have occurred and be continuing;
(iii) if such Letter of Credit relates to the
purchase by Borrower of textile machinery to be held as
inventory for sale, the aggregate face amount of Letters of
Credit respecting textile machinery to be held as inventory
for sale, including the face amount of the proposed Letter of
Credit, does not exceed $3,500,000; and
(iv) immediately after giving effect to the
issuance of the requested Letter of Credit, the aggregate face
amount of Letters of Credit issued, outstanding and undrawn,
or drawn and not reimbursed, hereunder plus the principal
amount outstanding under the Line of Credit Loan shall not
exceed $25,000,000.
ARTICLE IV
Yield Protection and Illegality
4.1. Additional Costs. (a) The Borrower shall promptly pay to the
Lender for the account of the Lender from time to time, such amounts resulting
from any Regulatory Change as the Lender may determine to be necessary to
compensate it for any costs incurred by the Lender which it determines are
attributable to its making or maintaining any Line of Credit Loan or its
obligation to make any Line of Credit Loans, or the Lender's issuance or
maintenance of any Letter of Credit issued hereunder, or any reduction in any
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amount receivable by the Lender under this Agreement, the Note, or the Letters
of Credit, including reductions in the rate of return on Lender's capital (such
increases in costs and reductions in amounts receivable and returns being herein
called "Additional Costs"). Such Additional Costs may result from any Regulatory
Change which: (i) changes the basis of taxation of any amounts payable to Lender
under this Agreement, the Note or any L/C Document (other than taxes imposed on
the income of Lender by any jurisdiction in which the principal office or the
applicable lending office of Lender is located); or (ii) imposes or modifies any
reserve, special deposit, or similar requirements relating to any extensions of
credit or other assets of, or any deposits with or other liabilities of Lender
(other than any such reserve, deposit or requirement reflected in the Eurodollar
Rate); or (iii) has or would have the effect of reducing the rate of return on
capital of the Lender to a level below that which the Lender could have achieved
but for such Regulatory Change (taking into consideration the Lender's policies
with respect to capital adequacy); or (iv) imposes any other condition affecting
this Agreement, the Note or the issuance or maintenance of, or any Letters of
Credit (or any of such extensions of credit or liabilities). The Lender will
notify the Borrower of any event occurring after the date hereof which would
entitle it to compensation pursuant to this Section as promptly as practicable
after it obtains knowledge thereof and determines to request such compensation.
(b) Without limiting the effect of the foregoing provisions of this
Section 4.1, in the event that, by reason of any Regulatory Change, the Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
the Lender which includes deposits by reference to which the interest rate on
Eurodollar Rate Loans is determined as provided in this Agreement or a category
of extensions of credit or other assets of any Lender which includes Eurodollar
Rate Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if the Lender so
elects by notice to the Borrower, the obligation hereunder of the Lender to make
and continue, and to convert Base Rate Loans into, Eurodollar Rate Loans that
are the subject of such restrictions shall be suspended until the date such
Regulatory Change ceases to be in effect and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for outstanding Eurodollar Rate
Loans convert such Eurodollar Rate Loans into Base Rate Loans.
(c) Determinations by the Lender for purposes of this Section of the
effect of any Regulatory Change on its costs of making or maintaining, or being
committed to make the Line of Credit Loan or the issuance or maintenance of any
Letter of Credit issued hereunder, or on amounts receivable by it in respect of
such loan or Letters of Credit, and of the additional amounts required to
compensate the Lender in respect of any Additional Costs, shall
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be conclusive absent manifest error, provided that such determinations are made
on a reasonable basis. The Lender shall furnish to the Borrower an explanation
of the Regulatory Change and calculations, in reasonable detail, setting forth
the Lender's determination of any such Additional Costs.
4.2. Suspension of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate for
any Eurodollar Rate Loan for any Interest Period, the Lender determines (which
determination made on a reasonable basis shall be conclusive absent manifest
error) that:
(a) quotations of interest rates for the relevant deposits
referred to in the definition of Eurodollar Rate in Article I hereof
are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for such
Eurodollar Rate Loan as provided in this Agreement; or
(b) the relevant rates of interest referred to in the
definition of "Eurodollar Rate" in Article I hereof upon the basis of
which the Eurodollar Rate for such Interest Period is to be determined
do not adequately reflect the cost to the Lender of making or
maintaining such Eurodollar Rate Loan for such Interest Period or such
Eurodollar Rate Loan (which determination shall be made on a reasonable
basis by the Lender, and the Person making such determination shall
furnish the Authorized Representative evidence of the facts leading to
such determination);
then the Lender shall give the Authorized Representative prompt notice thereof,
and so long as such condition remains in effect, the Lender shall be under no
obligation to make Eurodollar Rate Loans that are subject to such condition, or
to convert Loans into Eurodollar Rate Loans, and the Borrower shall on the last
day(s) of the then current Interest Period(s) for outstanding Eurodollar Rate
Loans, as applicable, convert such Eurodollar Rate Loans into Base Rate Loans.
The Lender shall give the Authorized Representative notice describing in
reasonable detail any event or condition described in this Section 4.2 promptly
following the determination by the Lender that the availability of Eurodollar
Rate Loans is, or is to be, suspended as a result thereof.
4.3. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Lender to honor its
obligation to make or maintain Eurodollar Rate Loans hereunder, then the Lender
shall promptly notify the Borrower thereof and the Lender's obligation to make
or continue Eurodollar Rate Loans, or convert Base Rate Loans into Eurodollar
Rate Loans, shall be suspended until such time as such Lender may again make and
maintain Eurodollar Rate Loans, and such Lender's outstanding Eurodollar Rate
Loans shall be converted into Base Rate Loans in accordance with Section 2.10
hereof.
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4.4. Compensation. The Borrower shall promptly pay to the Lender, upon
the request of the Lender, such amount or amounts as shall be sufficient (in the
reasonable determination of Lender) to compensate it for any loss, cost or
expense incurred by it as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Rate
Loan on a date other than the last day of the Interest Period for such
Eurodollar Rate Loan, including without limitation any conversion
required pursuant to this Article IV; or
(b) any failure by the Borrower to borrow a Eurodollar Rate
Loan on the date for such borrowing specified in the relevant Borrowing
Notice or interest rate selection notice under Article II hereof;
such compensation to include, without limitation, an amount equal to the excess,
if any, of (i) the amount of interest which would have accrued on the principal
amount so paid, prepaid or converted or not borrowed for the period from the
date of such payment, prepayment or conversion or failure to borrow or convert
to the last day of the then current Interest Period for such Loan (or, in the
case of a failure to borrow or convert, the Interest Period for such Loan which
would have commenced on the date scheduled for such borrowing or conversion) at
the applicable rate of interest for such Eurodollar Rate Loan provided for
herein over (ii) the Eurodollar Rate (as reasonably determined by the Lender)
for Dollar deposits of amounts comparable to such principal amount and
maturities comparable to such period. A determination of the Lender as to the
amounts payable pursuant to this Section 4.4 shall be conclusive, provided that
such determinations are made on a reasonable basis. The Lender, when requesting
compensation under this Section 4.4, shall furnish to the Authorized
Representative calculations in reasonable detail setting forth the Lender's
determination of the amount of such compensation.
4.5. Alternate Interest Rate. In the event the Lender suspends the
making of any Eurodollar Rate Loan pursuant to this Article IV any Eurodollar
Rate Loan shall bear interest at the Base Rate until the Lender once again makes
available the applicable Eurodollar Rate Loan. Notwithstanding the provisions of
Section 2.3(b), interest shall be payable to the Lender at the time and manner
as if the Lender were making available Eurodollar Rate Loans.
4.6. Taxes. All payments by the Borrower of principal of, and interest
on, the Line of Credit Loan and all other amounts payable hereunder shall be
made free and clear of and without deduction for any present or future excise,
stamp or other taxes, fees, duties, levies, imposts, charges, deductions,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding (i) franchise taxes, (ii) any taxes other
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than withholding taxes and taxes that would be imposed as a result of a
connection between the Lender and the jurisdiction imposing such taxes (other
than a connection arising solely by virtue of the activities of the Lender
pursuant to or in respect of this Agreement or any other Loan Document) and
(iii) any taxes imposed on or measured by the Lender's assets, net income,
receipts or branch profits (such non-excluded items being collectively called
"Taxes"). In the event that any withholding or deduction from any payment to be
made by the Borrower hereunder is required in respect of any Taxes pursuant to
any applicable law, rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Lender an official receipt
or other documentation satisfactory to the Lender evidencing
such payment to such authority; and
(c) pay to the Lender for the account of the Lender such
additional amount or amounts as is necessary to ensure that the net
amount actually received by the Lender will equal the full amount the
Lender would have received had no such withholding or deduction been
required.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Lender, for the account of the Lender,
the required receipts or other required documentary evidence, the Borrower shall
indemnify the Lender for any incremental Taxes, interest or penalties that may
become payable by the Lender as a result of any such failure. For purposes of
this Section 4.6, a distribution hereunder by the Lender to or for the account
of the Lender shall be deemed a payment by the Borrower.
ARTICLE V
Representations and Warranties
In order to induce the Lender to enter into this Agreement and to
disburse the Line of Credit Loan and issue the Letters of Credit, Borrower
represents and warrants to the Lender as follows:
5.1. Incorporation. Borrower and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation (except that Speizman Europe is presently
undergoing dissolution in the United Kingdom), and has the corporate power to
own its properties and to carry on its business as now being conducted, and is
duly qualified as a foreign corporation to do business in every jurisdiction in
the United States of America in which the nature of its business makes such
qualification necessary and the failure to be so qualified would result in a
material adverse effect on the
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business, properties or condition (financial or other) of the Borrower, and is
in good standing in such jurisdictions. Borrower does not have any Subsidiaries
except as set forth in the financial statements and notes thereto described in
Section 5.3.
5.2. Power and Authority. Borrower is duly authorized under all
applicable provisions of law to execute and deliver the Note and to execute,
deliver and perform this Agreement and the Security Agreement, and all corporate
action on its part (and any shareholder action) required for the lawful
execution, delivery and performance thereof has been duly taken; and this
Agreement, the Security Agreement and the Note, upon the due execution and
delivery thereof, will be the valid and enforceable instruments and obligations
of Borrower in accordance with their terms. Neither the execution of this
Agreement or the Security Agreement nor the creation or issuance of the Note,
nor the fulfillment of or compliance with their provisions and terms, will
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a violation of or default under any law, regulation, order, writ
or decree applicable to or binding upon Borrower or any Subsidiary, or any of
their properties, or the Articles of Incorporation or Bylaws of Borrower or any
Subsidiary, or any agreement or instrument to which Borrower or any Subsidiary
is now a party or by which any of them or their properties may be bound.
5.3. Financial Condition. Each of (i) the consolidated balance sheet
of Borrower and its Subsidiaries for the Fiscal Year ended as of June 29, 1996,
and the related consolidated statements of income, retained earnings and changes
in cash flow for the year then ended, certified by BDO Seidman, certified public
accountants, and (ii) the unaudited consolidated balance sheet of Borrower and
its Subsidiaries for the three month period ended September 28, 1996, and the
related consolidated statements of income, retained earnings and changes in cash
flow for the period then ended, copies of all of which have been furnished to
the Lender, are correct and complete and fairly present the financial condition
of Borrower and its Subsidiaries as at the dates of said balance sheets and the
results of their operations for said periods. Borrower does not have any
material direct liabilities or contingent obligations as of the date of this
Agreement which are not provided for or reflected in such balance sheets or
referred to in notes thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis maintained throughout the periods involved. There has been no material
adverse change in the business, properties or condition, financial or otherwise,
of Borrower or any Subsidiary since June 29, 1996.
5.4. Title to Assets. The Borrower has good and marketable title to
its properties and assets, including the properties and assets reflected in the
financial statements and notes thereto described in Section 5.3, and all such
properties and assets are free and clear of all Liens of any kind except (i) as
disclosed in
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the financial statements and notes thereto described in Section 5.3
and (ii) Permitted Liens.
5.5. Litigation. Except as disclosed in Borrower's litigation
certificate, there are no pending or threatened orders, claims, actions,
investigations or proceedings before or by any court, arbitrator or governmental
or administrative body, agency or official which may materially adversely affect
the properties, business or condition, financial or otherwise, of Borrower or
any Subsidiary thereof or in any way adversely affect or call into question the
power and authority of the Borrower to enter into or perform this Agreement, the
Security Agreement or the Note.
5.6. Taxes. The Borrower and its Subsidiaries have filed all income
tax returns required to be filed by them and all taxes shown thereon have been
paid, and no controversy in respect of additional income taxes, state or
Federal, of Borrower or any Subsidiary thereof is pending, or to the knowledge
of Borrower, threatened. The Federal and state income taxes of Borrower and its
Subsidiaries have been examined and reported on or closed by applicable statutes
for all Fiscal Years to and including the Fiscal Year which ended in June 1990,
and adequate reserves have been established for the payment of all such taxes
for periods ended subsequent to the Fiscal Year which ended in June 1990.
5.7. Contract or Restriction Affecting Borrower. Neither Borrower nor
any Subsidiary is a party to or bound by any contract or Agreement or subject to
any charter or other corporate restrictions which adversely affects the
business, properties, or condition, financial or otherwise, of Borrower or any
Subsidiary.
5.8. Governmental Approval. No written approval of any Federal, state
or local governmental authorities is necessary to carry out the terms of this
Agreement or the other Loan Documents, and no consents or approvals are required
in the making or performance of this Agreement or the other Loan Documents.
5.9. No Untrue Statements. Neither this Agreement, the other Loan
Documents nor any other agreements, reports, schedules, certificates or
instruments heretofore or simultaneously with the execution of this Agreement
delivered to the Lender contains any misrepresentation or untrue statement of
material fact or omits to state any material fact necessary to make any of such
agreements, reports, schedules, certificates or instruments not misleading.
5.10. Solvency. Borrower is now, and after giving effect to the Line
of Credit Loan and issuance of the Letters of Credit, will be, solvent.
5.11. Hazardous Material. Neither Borrower nor to Borrower's best
knowledge any previous owner or operator of any real property currently owned or
operated by Borrower (collectively, the "Current Property"), has generated,
stored, or disposed of any Hazardous
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Material on any portion of the Current Property, or transferred any Hazardous
Material from the Current Property to any other location in violation of any
applicable Environmental Laws which has not been fully remedied. Neither
Borrower nor any Subsidiary thereof has been notified of any action, suit,
proceeding or investigation which calls into question compliance by the Borrower
or any of its Subsidiaries with any Environmental Laws or which seeks to
suspend, revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous Material.
5.12. Margin Stock. None of the proceeds of the Line of Credit Loan
will be used, directly or indirectly, for the purpose of purchasing or carrying
any margin stock or for the purpose of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry margin stock or for any other
purpose which might constitute the Line of Credit Loan a "purpose credit" within
the meaning of said Regulation U or Regulation X (12 C.F.R. Parts 221 and 224)
of the Federal Reserve Board.
5.13. ERISA Matters. None of the Plans maintained at any time by
Borrower or any Subsidiary thereof or the trusts created thereunder has engaged
in a prohibited transaction (as defined in ERISA) which could subject any such
Plan or trust to a material tax or penalty on prohibited transactions imposed
under the Code or ERISA; neither Borrower nor any Subsidiary thereof has
incurred any accumulated funding deficiency, whether or not waived; nor has
there been any Reportable Event (as defined in ERISA), or other event or
condition, which presents a material risk of termination of any such Plan by the
Pension Benefit Guaranty Corporation.
5.14. No Default. Neither the Borrower nor any Subsidiary is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Agreement or instrument to which it is
a party relating to any Indebtedness for Money Borrowed, the effect of which
default would cause such obligation under the Agreement or instrument to become
due prior to its stated maturity.
5.15. Existing Indebtedness. Borrower is not in default with respect
to any of its existing Indebtedness.
5.16. Survival of Warranties and Representations. Borrower covenants,
warrants and represents to the Lender that all representations and warranties of
Borrower contained in this Agreement and the other Loan Documents shall be true
at the time of Borrower's execution of this Agreement and the other Loan
Documents, and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto.
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ARTICLE VI
Conditions of Closing
The obligation of the Lender to make the Line of Credit Loan and issue
any Letters of Credit is subject to the continuing accuracy of all
representations and warranties of Borrower contained herein and in the other
Loan Documents and the performance or fulfillment of all conditions and
agreements by Borrower contained herein and therein, including the following:
6.1. Legal Opinions. On the Closing Date, the Lender shall have
received the favorable opinion of Odom & Groves, P.C., counsel for the Borrower
to the effect set forth in Exhibit C attached hereto and incorporated herein by
reference.
6.2. Closing Documents. Borrower shall deliver or cause to be
delivered to the Lender on or prior to the Closing Date each of the following,
in form and substance satisfactory to the Lender and its special counsel:
(a) the executed Note and executed counterparts of this
Agreement, the Cash Collateral Documents and the Security
Agreement;
(b) Uniform Commercial Code financing statements
covering the property described in the Security Agreement;
(c) resolutions of the Board of Directors of the Borrower
certified by the Secretary of the Borrower as of the Closing Date,
approving the transactions contemplated by this Agreement, and
approving the form of this Agreement, the Security Agreement, the Note
and the Loan Documents, and authorizing execution, delivery and
performance thereof;
(d) resolutions of the Boards of Directors of each of the
Guarantors certified by the Secretary of each respective Guarantor as
of the Closing Date, approving the form of the Guaranty and authorizing
the execution, delivery and performance thereof;
(e) specimen signatures of all officers of Borrower
executing any of the Loan Documents, certified by an officer
of Borrower;
(f) copy of a Good Standing Certificate of the State of
Delaware concerning the Borrower and the Articles of Incorporation of
Borrower certified by the Secretary of State of Delaware to be a true
and correct copy as currently in effect and a copy of the Bylaws
certified by the Secretary of the Borrower to be a true and correct
copy as currently in effect;
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(g) certificate of a recent date of the Secretary of
State of North Carolina as to the authority of the Borrower to
do business in North Carolina and the good standing of the
Borrower;
(h) evidence of insurance in form and amounts
satisfactory to the Lender, and meeting the requirements of
Section 7.4 hereof;
(i) a certificate of the chief financial officer of the
Borrower to the effect that no litigation or proceedings are pending or
threatened which might reasonably be expected to adversely affect the
Borrower's ability to perform its obligations under this Agreement or
operation of the Borrower's business;
(j) a Borrowing Base Certificate, dated as of
December 13, 1996, completed and executed by the chief
financial officer of Borrower;
(k) a certificate of the chief financial officer of the
Borrower that the Borrower is in full compliance with the terms of
Sections 8.1, 8.2, 8.3, 8.4 and 8.5 hereof;
(l) evidence all existing liens and financing statements in
favor of Persons other than the Lender and covering the collateral for
the Line of Credit Loan and the obligations in respect of the Letters
of Credit have been cancelled or released; and
(m) such other documents, instruments and certificates
as the Lender may reasonably request.
ARTICLE VII
Affirmative Covenants
Borrower covenants that, so long as any portion of the Note remains
unpaid or any amount is owed by Borrower to Lender in respect of any Letter of
Credit, unless the Lender otherwise consents in writing, it will:
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7.1. Financial Reports and Other Data.
(a) As soon as practicable and in any event within forty-five
(45) days after the end of each fiscal quarter, other than the last
quarter of each Fiscal Year, deliver, or cause to be delivered, to the
Lender (i) a consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries, and related consolidated and
consolidating statements of income and retained earnings and cash flow
for such quarter and for the period from the beginning of the then
current Fiscal Year to the end of such quarter, all in reasonable
detail and certified by the chief financial officer of the Borrower to
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, subject only to changes
resulting from normal year-end adjustments; and (ii) computations
demonstrating compliance with the provisions of Sections 8.1, 8.2, 8.3,
8.4 and 8.5 hereof;
(b) As soon as practicable and in any event within ninety (90)
days after the end of each Fiscal Year, deliver to the Lender (i)
consolidated and consolidating balance sheets of Borrower and its
Subsidiaries as at the end of such Fiscal Year, and related
consolidated and consolidating statements of income, retained earnings
and cash flow for such Fiscal Year, setting forth in each case in
comparative form figures from the annual audit for the preceding Fiscal
Year, all in reasonable detail and satisfactory in scope to the Lender
and certified by and containing (as to the consolidated statements) an
unqualified opinion, without exception not satisfactory to the Lender,
of independent certified public accountants acceptable to the Lender,
(ii) a copy of any letter or report provided by such accountants to
Borrower or members of Borrower's management in connection with or as a
result of such audit relating to such Borrower's operations or
management of its financial affairs, (iii) a certificate of the duly
authorized financial officer of Borrower containing computations in
reasonable detail evidencing compliance with Sections 8.1, 8.2, 8.3,
8.4 and 8.5 hereof;
(c) Together with each delivery of those items required by
clause (a) and (b) above, Borrower shall deliver to the Lender a
certificate setting forth (i) that to the best of its knowledge,
Borrower and its Subsidiaries have kept, observed, performed and
fulfilled each and every Agreement binding on them contained in this
Agreement and the other Loan Documents, and is not at the time in
default of the keeping, observance, performance or fulfillment of any
of the terms, provisions and conditions hereof or thereof, and (ii)
that no Default or Event of Default has occurred, or specifying all
such defaults and events of which they may have knowledge;
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(d) Deliver to Lender the following: (i) Every two weeks,
beginning December 27, 1996, a completed Borrowing Base Certificate;
and, if requested by the Lender, (ii) on or before the tenth day
following the end of each fiscal quarter (or on a more frequent basis
if requested by Lender) an accounts receivable aging report as of the
end of the immediately preceding fiscal quarter; each in form and
substance satisfactory to the Lender;
(e) With reasonable promptness, deliver such additional
financial or other data as the Lender may reasonably request.
The Lender is hereby authorized to deliver a copy of any financial statements or
any other information relating to the business, operations or financial
condition of any Borrower and its Subsidiaries which may be furnished to it or
come to its attention pursuant to this Agreement or otherwise, to any regulatory
body or agency having jurisdiction over the Lender or to any person which shall,
or shall have the right or obligation to, succeed to all or any part of the
Lender's interest in the Note and the Loan Documents.
7.2. Maintain Security Interest. Promptly notify the Lender of the
acquisition of any real property and execute a deed of trust and security
Agreement and related Uniform Commercial Code financing statement covering such
real property.
7.3. Taxes and Liens. Promptly pay, or cause to be paid, (i) all
taxes, assessments and other governmental charges which may lawfully be levied
or assessed upon the income or profits of Borrower, or upon any property, real,
personal or mixed, belonging to Borrower, or upon any part thereof, (ii) any
lawful claims for labor, material and supplies which, if unpaid, might become a
Lien or charge against any such property and (iii) any and all amounts required
to be paid to all Federal, state, local and other taxing authorities in respect
of employee withholdings.
7.4. Business and Existence. Do or cause to be done all things
necessary to preserve and to keep in full force and effect its corporate
existence and rights and its franchises, trade names, service marks, patents,
trademarks, permits, know-how, trade secrets and other proprietary rights which
are reasonably necessary for the continuance of its business.
7.5. Insurance; Payment of Premiums. At its sole cost and expense,
keep and maintain its properties insured with nationally reputable companies for
their full insurable value against loss or damage by fire, theft, explosion,
sprinklers and all other hazards and risks ordinarily insured against under
extended coverage policies in use in the jurisdiction where such properties are
located. In addition, Borrower shall obtain and maintain in full force and
effect policies of liability insurance, workers' compensation insurance and
business interruption insurance with
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nationally reputable companies in amounts at least equal to that carried by
persons in a similar size of business.
7.6. Maintain Property. Maintain its properties in good order and
repair and, from time to time, make all needful and proper repairs, renewals,
replacements, additions and improvements thereto, so that the business carried
on may be properly and advantageously conducted at all times in accordance with
prudent business management.
7.7. Books of Record and Account. Keep and cause each Subsidiary to
keep, proper books of record and accounts in which full, true and correct
entries, shall be made of its transactions in accordance with generally accepted
accounting principles applied on a consistent basis.
7.8. Payment of Indebtedness. Pay when due (or within applicable grace
periods) all Indebtedness due third persons, except when the amount thereof is
being contested in good faith by appropriate proceedings and with adequate
reserves therefor being set aside on the books of Borrower.
7.9. Right of Inspection. Permit any person designated by the Lender
to visit and inspect any of the properties, corporate books and financial
reports of Borrower, and to discuss its affairs, finances and accounts with its
principal officers and independent certified public accountants, all at such
reasonable times and as often as the Lender may reasonably request, including an
annual collateral audit of the Borrower by Lender at the expense of Borrower.
7.10. Observe All Laws. Conform to and duly observe all laws with
respect to the conduct of its business.
7.11. Covenants Extending to Subsidiaries. Cause each of its
Subsidiaries to do with respect to itself, its business and its assets, each of
the things required of Borrower in Sections 7.2 through 7.9, inclusive.
7.12. Officer's Knowledge of Default. Upon an officer of Borrower
obtaining knowledge of any Default or Event of Default hereunder or under any
other obligation of Borrower or any Subsidiary, cause such officer to promptly
deliver to the Lender a certificate specifying the nature thereof, the period of
existence thereof, and what action Borrower proposes to take with respect
thereto.
7.13. Suits or Other Proceedings. Upon an officer of Borrower
obtaining knowledge of any material litigation, dispute or proceedings being
instituted or threatened against Borrower, or any attachment, levy, execution or
other process being instituted against any assets of Borrower, promptly deliver
to the Lender a
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certificate stating the nature and status of such litigation, dispute,
proceeding, levy, execution or other process.
7.14. Notice Regarding Hazardous Material or Environmental Complaint.
Give to Lender immediate written notice of any complaint, order, directive,
claim, citation or notice by any governmental authority or any person with
respect to the use, generation, storage, transportation or disposal of Hazardous
Material by Borrower. Borrower shall promptly comply with its obligations under
law with regard to such matters.
7.15. Environmental Indemnification. Defend, indemnify and hold Lender
harmless from and against any and all claims, losses, liabilities, damages and
expenses (including, without limitation, cleanup costs and reasonable attorneys'
fees including those arising by reason of any of the aforesaid or an action
against Borrower under this indemnity) arising directly or indirectly from, out
of or by reason of the handling, storage, treatment, emission or disposal of any
Hazardous Material by or in respect of Borrower or any Subsidiary.
7.16. Further Assurances. At its cost and expense, upon request of the
Lender, duly execute and deliver or cause to be duly executed and delivered, to
the Lender such further instruments, documents, certificates, financing and
continuation statements, and do and cause to be done such further acts that may
be reasonably necessary or advisable in the opinion of the Lender to carry out
more effectively the provisions and purposes of this Agreement and the other
Loan Documents.
7.17. ERISA Requirement. Comply with all requirements of ERISA
applicable to it and furnish to the Lender as soon as possible (i) a certificate
describing in reasonable detail any Reportable Event (as defined in ERISA) with
respect to any Plan that has occurred and any action which Borrower proposes to
take with respect thereto, (ii) a copy of any notice that Borrower or any
Subsidiary may receive from the Pension Benefit Guaranty Corporation relating to
the intention of the Pension Benefit Guaranty Corporation to terminate any Plan
or Plans or to appoint a trustee to administer any such Plan, and (iii) a
certificate setting forth details as to any failure to make a required
installment or other payment with respect to a Plan and the action that Borrower
or any Subsidiary proposes to take with respect thereto.
7.18. Continued Operations. Continue at all times to conduct its
business and engage principally in the same line or lines of business
substantially as heretofore conducted.
7.19. Collateral Audit. Cause to be delivered to Lender within sixty
(60) days of request by Lender, a collateral audit from an auditing firm
acceptable to the Lender indicating
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collateral values of the collateral securing the Loan and the
Letters of Credit satisfactory to the Lender.
7.20. New Subsidiaries. Promptly after the formation or acquisition of
any domestic Subsidiary subsequent to the Closing Date, cause to be delivered to
the Lender a Guaranty in the form of Exhibit G hereto and a resolution of the
Board of Directors of such Subsidiary, certified by the Secretary thereof,
approving the form of the Guaranty and authorizing the execution, delivery and
performance of such Guaranty.
ARTICLE VIII
Negative Covenants of Borrower
Borrower covenants and agrees that from the date hereof until payment
in full of the principal and interest on the Note and all amounts owing by the
Borrower to Lender in respect of any Letter of Credit are paid in full, unless
the Lender shall otherwise consent in writing, it will not, nor will it permit
any Subsidiary to, either directly or indirectly:
8.1. Current Ratio. Permit the ratio of Consolidated Current Assets to
Consolidated Current Liabilities at any time to be less than 1.7 to 1.0.
8.2. Liabilities to Net Worth. Permit the ratio of Consolidated Total
Liabilities to Consolidated Tangible Net Worth at any time to exceed 1.25 to
1.0.
8.3. Consolidated Working Capital. Cause, suffer or permit
Consolidated Working Capital to be less than $12,000,000 at any time.
8.4. Consolidated Tangible Net Worth. Cause, suffer or permit
Consolidated Tangible Net Worth at any time to be less than (i) $15,000,000 at
March 30, 1996 (the "Initial Date") and until (but excluding) the last day of
the fiscal quarter immediately following the fiscal quarter in which the Initial
Date occurs, and (ii) as at the last day of the fiscal quarter immediately
following the fiscal quarter in which the Initial Date occurs and with each
succeeding fiscal quarter of the Borrower (each such fiscal quarter in which
such last day occurs being a "Prior Period") and until (but excluding) the last
day of the fiscal quarter of the Borrower immediately following the Prior
Period, the sum of (A) the amount of Consolidated Tangible Net Worth required to
be maintained pursuant to this Section 8.4 during the Prior Period plus (B) an
amount equal to fifty percent (50%) of Consolidated Net Income of the Borrower
and its Subsidiaries (without deduction for any negative Consolidated Net
Income) during the Prior Period.
8.5. Consolidated Fixed Charge Ratio. Cause, suffer or permit at any
time during any Four-Quarter Period of the Borrower,
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the Consolidated Fixed Charge Ratio for such Four-Quarter Period to be less than
the ratio indicated:
Four-Quarter Period Ending
On Last Day of Ratio
Fourth fiscal quarter of 0.85 to 1.01
1996 Fiscal Year
First fiscal quarter of 1.0 to 1.02
1997 Fiscal Year
All fiscal quarters Thereafter 1.25 to 1.03
In calculating compliance with this Section, there shall be
excluded from the calculation the charge incurred during the third
fiscal quarter of 1996 of $531,790, before income tax provision of
$199,000, from the write-off of the Copyguard technology.
1 For purposes of determining the Consolidated Fixed Charge
Ratio for the period ending during this quarter, all elements
of the Consolidated Fixed Charge Ratio shall be determined
based on the third and fourth fiscal quarters of 1996.
2 For purposes of determining the Consolidated Fixed Charge
Ratio for the period ending during this quarter, all elements
of the Consolidated Fixed Charge Ratio shall be determined
based on the third and fourth fiscal quarters of 1996 and the
first fiscal quarter of 1997.
3 For purposes of determining the Consolidated Fixed Charge
Ratio for the period ending these quarters, all elements of
the Consolidated Fixed Charge Ratio shall be determined based
on the three immediately preceding fiscal quarters and such
quarter.
For purposes of computing the Fixed Charge Coverage Ratio for
all periods during the 1996 Fiscal Year, (i) up to $1,000,000 in
inventory to operating lease conversions shall be excluded and (ii) for
all periods after March 1, 1996, any new machinery purchases converted
to leases will be included as capital expenditures."
8.6. Mortgages, Liens, Etc. Incur, create, assume or permit to exist
any Lien of any kind upon any of their respective properties or assets of any
character, including without limitation interests under conditional sales or
other title retention agreements, except (i) Permitted Liens; (ii) Liens
existing as of the date hereof and disclosed in the financial statements and
notes thereto described in Section 5.3; and (iii) Liens securing indebtedness
permitted under Section 8.7(iii).
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8.7. Indebtedness. Create, assume, incur, or in any manner be or
become liable in any manner to any person or persons directly or indirectly for
any Indebtedness, other than:
(i) The credit provided for herein; or
(ii) Lease obligations incurred in the ordinary
course of business of up to, in the aggregate, $600,000 in any
fiscal year; or
(iii) Indebtedness incurred to Persons other than the
Lender in the ordinary course of business, provided the maximum
aggregate principal amount outstanding of all such Indebtedness shall
not exceed $1,000,000 at any time; or
(iv) Other Indebtedness to the Lender.
8.8. Name Change, Merger, Sale of Assets, Dissolution, Etc. Change its
name, enter into any transaction of merger or consolidation, or transfer, sell,
assign, lease or otherwise dispose of any of its material properties or assets,
or substantially all its properties or assets, or any stock or any Indebtedness
of any Subsidiary, or any assets or properties necessary for the proper conduct
of its business, or change the nature of its business, or wind up, liquidate or
dissolve, or agree to any of the foregoing, or permit any Subsidiary to do so,
except that any Subsidiary may dissolve or transfer all or a substantial part of
its properties and assets to, or may merge into, Borrower or any other
Subsidiary.
8.9. Change in Control. Become a party to or the subject of any
Agreement, transaction or related series of transactions (i) pursuant to or as a
result of which any person or group of persons acting in concert, other than
Robert S. Speizman, the current owner, acquires voting control, directly or
indirectly, whether by tender offer or in one or more negotiated block or market
transactions, of not less than twenty percent (20%) of the issued and
outstanding capital stock of any class of Borrower or (ii) to which Section
368(a) of the Code applies and which involves not less than twenty percent (20%)
of the issued and outstanding capital stock of any class of Borrower.
8.10. Compliance with ERISA; Funding of Plans. Engage in any
transaction in connection with which Borrower or any related person would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code; terminate any Plan in a manner, or
take any other action with respect to any such Plan, which would result in any
liability of Borrower or any Subsidiary to the Pension Benefit Guaranty
Corporation; as of any Plan year, permit to exist any accumulated funding
deficiency (as defined in Section 412 of the Code); or contribute or be
obligated to contribute to any multi-employer Plan.
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8.11. Investments. Make any investments in any Person (including
Subsidiaries) or purchase or otherwise acquire any capital stock, properties,
substantially all the assets or obligations of, or any other equity interest in,
any Person (including Subsidiaries)in excess of (in the aggregate) $1,000,000.
8.12 Investments in or Loans to Subsidiaries. Make any loan to any
Subsidiary or any investments in any Subsidiary or purchase or otherwise acquire
any capital stock or properties of any Subsidiary, except to the extent
permitted by Section 8.11. The Lender acknowledges the existence of a loan from
the Borrower to Speizman Europe in the outstanding amount, as of the Closing
Date, of approximately $778,000 and the equity interest of the Borrower in
Speizman Europe.
ARTICLE IX
Events of Default
If any one or more of the following events (herein called "Events of
Default") shall occur:
9.1. Payment of Liabilities. If Borrower defaults in the payment of
all or any payment of principal or interest on the Note when due and payable or
declared due and payable or any amount owing in respect of a Letter of Credit
when due and payable; or
9.2. Payment of Other Obligations. If Borrower (i) defaults in payment
of principal of or interest on any other Indebtedness beyond any period of grace
provided with respect thereto, or (ii) defaults in the performance of any other
Agreement, covenant, term or condition contained in any Agreement under which
any such Indebtedness is created if the effect of such performance default
described in this clause (ii) is to cause, or permit the holder or holders of
such obligation (or a trustee in behalf of such holder or holders) to cause,
such obligation to become due prior to its stated maturity; or
9.3. Representation or Warranty. If any representation, warranty,
statement, report or certification made by Borrower herein or in any other Loan
Document shall be false or misleading in any material respect on the date as of
which made; or
9.4. Selected Covenants. If Borrower defaults in the performance or
observance of any Agreement or covenant contained in Sections 7.12, 7.13 or 7.14
or Article VIII hereof; or
9.5. Other Loan Documents. The occurrence of any Event of Default as
defined in any of the other Loan Documents; or
9.6. Other Covenants. If Borrower defaults in the performance or
observance of any other Agreement, covenant, term or
36
<PAGE>
condition binding on it contained herein other than as set forth in Section 9.4
above or in any other of the other Loan Documents and such default shall not
have been remedied within thirty (30) days, or lesser period set forth in such
Agreement or documents, after the earlier to occur of Borrower becoming aware of
such default or written notice thereof specifying the default shall have been
received by Borrower from the Lender; or
9.7. Liquidation or Dissolution. Liquidation or dissolution of
Borrower, or suspension of the business of Borrower, or filing by Borrower of a
voluntary petition or an answer seeking reorganization, arrangement,
readjustment of its debts or for any other relief under the Bankruptcy Code, as
amended, or under any other insolvency act or law, state or federal, now or
hereafter existing, or any other action of Borrower indicating its consent to,
approval of, or acquiescence in, any such petition or proceeding; the
application by Borrower for, or the appointment by consent or acquiescence of, a
receiver, a trustee or a custodian of Borrower or for all or a substantial part
of its property; the making by Borrower of an assignment for the benefit of
creditors; the inability of Borrower or the admission by Borrower in writing of
its inability to pay its debts as they mature; or
9.8. Involuntary Proceedings. Filing of an involuntary petition
against Borrower or any Subsidiary in bankruptcy or seeking reorganization,
arrangement, readjustment of its or their debts or for any other relief under
the Bankruptcy Code, as amended, or under any other insolvency act or law, state
or federal, now or hereafter existing; or the involuntary appointment of a
receiver, a trustee or a custodian of Borrower or any Subsidiary or for all or a
substantial part of its or their property; the issuance of a warrant of
attachment, execution or similar process against any substantial part of the
property of Borrower or any Subsidiary, and the continuance of any of such
foregoing events for thirty (30) days undismissed or undischarged; or
9.9. Order of Dissolution; Forfeiture Action. If (i) any order is
entered in any proceedings against Borrower decreeing the dissolution or
split-up of Borrower, and such order remains in effect for more than sixty (60)
days; or (ii) any charges (whether by indictment, information or other criminal
process) are instituted against Borrower under any criminal statute, state or
federal, for which seizure or forfeiture of assets is a potential penalty or
remedial measure; or
9.10. Judgment. If a final judgment, which with other outstanding
final judgments against Borrower and its Subsidiaries, if any, exceeds
applicable insurance coverage by an aggregate of $50,000 shall be rendered
against Borrower or any Subsidiary, and if within thirty (30) days after entry
thereof such judgment shall not have been discharged or execution thereof stayed
pending
37
<PAGE>
appeal, or if within thirty (30) days after the expiration of any such stay such
judgment shall not have been discharged;
then, at any time thereafter, if such Event of Default or any other
Event of Default shall not have been waived,
(a) the Lender may, at its option, (i) declare the Note and all other
liabilities owing by the Borrower to the Lender thereunder or in respect of any
Letter of Credit to be forthwith due and payable, whereupon (or otherwise upon
the occurrence of any event described in Section 9.7 or 9.8 hereof whether or
not such declaration shall be made) the Note and any other such liabilities
shall forthwith become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are expressly waived, anything contained
herein or in the other Loan Documents to the contrary notwithstanding and (ii)
refuse to issue any additional Letters of Credit and enforce its rights against
the Borrower under the documents relating to the Letters of Credit. After any
such acceleration, the Lender may immediately do all other things provided for
by law or by this Agreement or by the other Loan Documents; and
(b) the Borrower shall, upon demand of the Lender, deposit cash with
the Lender in an amount equal to the sum of (i) the aggregate amount remaining
undrawn under all Letters of Credit plus (ii) Reimbursement Obligations then
outstanding, as collateral security for the repayment of any future drawings or
payments under such Letters of Credit, and the Borrower shall forthwith deposit
and pay such amounts and such amounts shall be held by the Lender and subject to
a lien and security interest in favor of the Lender and pursuant to the terms of
the applicable L/C Documents.
ARTICLE X
Miscellaneous
10.1. Waiver of Default; Cumulative Remedies. The Lender may, by
written notice to the Borrower, at any time and from time to time, waive any
default in the performance or observance of any condition, covenant or other
term hereof or any Event of Default which shall have occurred hereunder and its
consequences. Any such waiver shall be for such period and subject to such
conditions as shall be specified in any such notice. No failure to exercise and
no delay in exercising, on the part of the Lender, any right, power or privilege
hereunder, or other conduct, custom or course of dealing, shall operate as a
waiver or amendment of any such right, power or privilege; nor shall 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.
10.2. Amendments. The Lender and the Borrower may from time to time,
enter into written agreements supplemental hereto for the
38
<PAGE>
purpose of adding any provisions to this Agreement or the other Loan Documents
or changing in any manner the rights of the Lender or of the Borrower hereunder.
Any such written supplemental Agreement shall be binding upon the Borrower, the
Lender and the holders of the Note.
10.3. Notices. All notices, requests and demands to or upon the
respective parties hereto under this Agreement and all other Loan Documents
shall be deemed to have been given or made (i) three (3) Business Days next
following the date when deposited in the mail, postage prepaid by registered or
certified mail, return receipt requested, or (ii) one (1) Business Day following
the date when deposited for shipment, transmittal charges prepaid, with a
recognized courier service providing overnight courier service to the
appropriate destination, or (iii) on the date when transmitted by telefacsimile
device, if received before 5:00 p.m. on the date of such telefacsimile and such
date is a Business Day, otherwise the next Business Day, in any case addressed
as follows or to such other address as may be hereafter designated in writing by
the respective parties:
The Borrower: Speizman Industries, Inc.
508 West 5th Street
Charlotte, North Carolina 28231
Telefacsimile: 704-376-3153
Attention: Robert S. Speizman
The Lender: NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Telefacsimile: 704-386-1270
Attention: J. Timothy Martin
except in cases where it is expressly herein provided that such notice, request
or demand is not effective until received by the party to whom it is addressed
(in which case the same shall be effective upon receipt).
10.4. Survival of Agreements. All agreements, representations and
warranties made herein shall survive the delivery of the Note and the making of
the Loan hereunder and the provisions of Sections 7.15 and 10.7 shall survive
final repayment of the Note in full and expiration or termination of this
Agreement.
10.5. Governing Law. This Agreement and the other Loan Documents shall
be deemed to be contracts made under, and for all purposes shall be governed by
and construed in accordance with, the internal laws of the State of North
Carolina.
10.6. Enforceability of Agreement. Should any one or more of the
provisions of this Agreement or the other Loan Documents be
39
<PAGE>
determined to be illegal or unenforceable as to one or more of the parties, all
other provisions nevertheless shall remain effective and binding on the parties
hereto.
10.7. Expenses; Indemnity. Borrower agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay all reasonable
out-of-pocket expenses (including without limitation attorneys' fees and
disbursements) incurred by Lender in connection with this Agreement, the other
Loan Documents and any and all amendments, modifications and supplements thereof
or thereto. Borrower further agrees to indemnify and save harmless Lender from
and against any and all losses, liabilities and damages and expenses (including,
without limitation, attorneys' fees and disbursements) in connection therewith
or incurred thereby as a result of any of the transactions contemplated hereby,
except as a result of the gross negligence or willful misconduct of the Lender.
10.8. Liens; Set Off. Borrower hereby grants to the Lender a
continuing lien for the obligations evidenced by the Note or in respect of any
Letter of Credit or hereby upon any and all monies, securities and other
property of the Borrower and the proceeds thereof, now or hereafter held or
received by or in transit to, the Lender from or for Borrower, and also upon any
and all deposits (general or special) and credits of Borrower against the
Lender, at any time existing. Upon the occurrence of an Event of Default
hereunder, the Lender is hereby authorized, without notice to Borrower, to set
off, appropriate and apply any and all monies, securities and other properties
of Borrower hereafter held or received by or in transit to the Lender from or
for Borrower, against any of such obligations.
10.9. Execution of Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument.
10.10. Entirety. The Loan Documents embody the entire Agreement
between the parties and supersede all prior agreements and understandings, if
any, relating to the subject matter hereof and thereof.
10.11. Binding Effect. The Loan Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors,
assigns and legal representatives; provided, however, that Borrower may not,
without the prior written consent of Lender, assign any rights, powers, duties
or obligations thereunder.
10.12. Waiver of Jury Trial.
(A) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES
AND CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT
40
<PAGE>
OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE
COUNTY OF MECKLENBURG, STATE OF NORTH CAROLINA, UNITED STATES OF
AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
BORROWER EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER
IT AND ITS PROPERTY BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR
PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND
UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT,
ACTION OR PROCEEDING.
(B) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER
PROVIDED IN SECTION 10.3, OR BY ANY OTHER METHOD OF SERVICE PROVIDED
FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NORTH CAROLINA.
(C) NOTHING CONTAINED IN SUBSECTION (A) HEREOF SHALL PRECLUDE
THE LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION
WHERE THE BORROWER OR ANY OF THE BORROWER'S PROPERTY OR ASSETS MAY BE
FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY
SUCH JURISDICTION, THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY
SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF
JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS
WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW.
(D) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN
THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER AND THE
LENDER HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY
SUCH ACTION OR PROCEEDING.
41
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed under seal by their duly authorized officers, all
as of the day and year first above written.
ATTEST: SPEIZMAN INDUSTRIES, INC.
/s/ Josef Sklut By: /s/ Robert S. Speizman
- ------------------------- ----------------------------
_______ Treasurer _______ President
(Corporate Seal)
NATIONSBANK, N.A.
By: /s/ Joseph R. Netzel
-----------------------
Vice President
42
<PAGE>
EXHIBIT 10.48
NATIONSBANK, N.A.
$37,000,000 AMENDED AND RESTATED CREDIT FACILITY
FOR
SPEIZMAN INDUSTRIES, INC.
JULY 31, 1997
Document Number: 141995.8 7/31/97
<PAGE>
PAGE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
Definitions
<S> <C> <C>
1.1. "ACCOUNTS" ................................. 2
1.2. "ACCOUNT DEBTOR" ........................... 2
1.3. "ACCOUNTING TERMS AND DETERMINATIONS ....... 2
1.4. "ADVANCE" .................................. 2
1.5. "ADVANCE ACCOUNT" .......................... 3
1.6. "AGREEMENT" ................................ 3
1.7. "APPLICABLE MARGIN" ........................ 3
1.8. "AUTHORIZED REPRESENTATIVE" ................ 3
1.9. "BASE RATE" ................................ 3
1.10. "BASE RATE LOAN" ........................... 3
1.11. "BORROWER'S ACCOUNT" ....................... 3
1.12. "BORROWING BASE" ........................... 3
1.13. "BORROWING BASE CERTIFICATE" ............... 3
1.14. "BORROWING NOTICE" ......................... 4
1.15. "BUSINESS DAY" ............................. 4
1.16. "CAPITAL EXPENDITURES" ..................... 4
1.17. "CASH COLLATERAL" .......................... 4
1.18. "CASH COLLATERAL DOCUMENTS" ................ 4
1.19. "CLOSING DATE" ............................. 4
1.20. "CODE" ..................................... 4
1.21. "COLLATERAL ASSIGNMENTS" ................... 4
1.22. "COMMITTED AMOUNT" ......................... 4
1.23. "COMMON STOCK" ............................. 4
1.24. "CONSOLIDATED CURRENT ASSETS" .............. 4
1.25. "CONSOLIDATED CURRENT LIABILITIES" ......... 5
1.26. "CONSOLIDATED FIXED CHARGE RATIO" .......... 5
1.27. "CONSOLIDATED FIXED CHARGES" ............... 5
1.28. "CONSOLIDATED NET INCOME" .................. 5
1.29. "CONSOLIDATED TANGIBLE NET WORTH" .......... 6
1.30. "CONSOLIDATED TOTAL LIABILITIES" ........... 6
1.31. "CONSOLIDATED WORKING CAPITAL" ............. 6
1.32. "DEBIT BALANCE" ............................ 6
1.33. "DEFAULT" .................................. 6
1.34. "DOLLARS" .................................. 6
1.35. "EBIT" ..................................... 6
1.36. "EBITDA" ................................... 7
1.37. "ELIGIBLE ACCOUNTS" ........................ 7
1.38. "ELIGIBLE INVENTORY" ....................... 7
1.39. "ENVIRONMENTAL LAWS" ....................... 7
1.40. "EQUIPMENT" ................................ 7
1.41. "ERISA" .................................... 7
1.42. "EURODOLLAR RATE" .......................... 8
1.43. "EURODOLLAR RATE LOAN" ..................... 8
1.44. "EURODOLLAR RESERVE PERCENTAGE" ............ 8
ii
<PAGE>
Page
1.46. "EVENT OF DEFAULT" ......................... 8
1.47. "EXCESS CASH FLOW" ......................... 8
1.48. "FEDERAL FUNDS EFFECTIVE RATE" ............. 8
1.49. "FISCAL YEAR" .............................. 8
1.50. "FISCAL YEAR END" .......................... 9
1.51. "FOUR-QUARTER PERIOD" ...................... 9
1.52. "GUARANTORS" ............................... 9
1.53. "GUARANTY" ................................. 9
1.54. "HAZARDOUS MATERIAL" ....................... 9
1.55. "INDEBTEDNESS" ............................. 9
1.56. "INDEBTEDNESS FOR MONEY BORROWED" .......... 9
1.57. "INTERBANK OFFERED RATE" ................... 9
1.58. "INTEREST PERIOD" .......................... 10
1.59. "INVENTORY" ................................ 10
1.60. "L/C CREDIT" ............................... 11
1.61. "L/C DOCUMENTS" ............................ 11
1.62. "LETTERS OF CREDIT" ........................ 11
1.63. "LETTER OF CREDIT FACILITY" ................ 11
1.64. "LETTER OF CREDIT FACILITY AMOUNT" ......... 11
1.65. "LETTER OF CREDIT FACILITY TERMINATION DATE" 11
1.66. "LETTER OF CREDIT TERMINATION DATE" ........ 11
1.67. "LIABILITIES" .............................. 11
1.68. "LIBOR BUSINESS DAY" ....................... 12
1.69. "LIEN" ..................................... 12
1.70. "LINE OF CREDIT LOAN" ...................... 12
1.71. "LOAN" OR "LOANS" .......................... 12
1.72. "LOAN DOCUMENTS" ........................... 12
1.73. "NET PROCEEDS" ............................. 12
1.74. "NOTE" ..................................... 12
1.75. "NOTES" .................................... 13
1.76. "PERMITTED LIENS" .......................... 13
1.77. "PERSON .................................... 13
1.78. "PLAN" ..................................... 13
1.79. "PRIME RATE" ............................... 13
1.80. "RATE HEDGING OBLIGATIONS" ................. 13
1.81. "REGULATION D" ............................. 14
1.82. "REGULATORY CHANGE" ........................ 14
1.83. "REIMBURSEMENT OBLIGATION" ................. 14
1.84. "SECURITY AGREEMENT" ....................... 14
1.85. "SWAP AGREEMENT" ........................... 14
1.86. "STOCK PLEDGE AGREEMENT" ................... 14
1.87. "SUBSIDIARY" AND "SUBSIDIARIES" ............ 14
1.88. "TERM LOAN" ................................ 14
1.89. "TERM NOTE" ................................ 14
1.90. "TERMINATION DATE" ......................... 15
iii
<PAGE>
ARTICLE II
The Line of Credit Loan and The Term Loan
Page
2.1. The Line of Credit Loan Commitment ..................... 15
2.2. Advances and Rate Selection ............................ 16
2.3. Payment of Interest .................................... 17
2.4. Payment of Principal of Line of Credit Loan;
Permanent Reduction in Committed Amount ................ 17
2.5. Manner of Payment ...................................... 18
2.6. Payment ................................................ 19
2.7. Payments on Business Days .............................. 19
2.8. Borrower's Account ..................................... 19
2.9. Notes .................................................. 19
2.10. Conversions and Elections of Subsequent Interest Periods 19
2.11. Fees ................................................... 20
2.12. Security ............................................... 20
ARTICLE III
The Letter of Credit Facility
3.1. Letters of Credit .......................... 21
3.2. Repayment .................................. 21
3.3. Indemnification ............................ 22
3.4. Administrative Fees ........................ 22
3.5. Conditions to Issuance of Letters of Credit 22
ARTICLE IV
Yield Protection and Illegality
4.1. Additional Costs ............................... 23
4.2. Suspension of Loans ............................ 24
4.3. Illegality ..................................... 25
4.4. Compensation ................................... 25
4.5. Alternate Interest Rate ........................ 26
4.6. Taxes .......................................... 26
ARTICLE V
Representations and Warranties
5.1. Incorporation ............................ 27
5.2. Power and Authority ...................... 27
5.3. Financial Condition ...................... 28
5.4. Title to Assets .......................... 29
5.5. Litigation ............................... 29
5.6. Taxes .................................... 29
5.7. Contract or Restriction Affecting Borrower 29
iv
<PAGE>
Page
5.8. Governmental Approval .................... 29
5.9. No Untrue Statements ..................... 30
5.10. Solvency ................................. 30
5.11. Hazardous Material ....................... 30
5.12. Margin Stock ............................. 30
5.13. ERISA Matters ............................ 30
5.14. No Default ............................... 30
5.15. Existing Indebtedness .................... 31
5.16. Survival of Warranties and Representations 31
ARTICLE VI
Conditions of Closing
6.1. Legal Opinions ........................... 31
6.2. Closing Documents ........................ 31
ARTICLE VII
Affirmative Covenants
7.1. Financial Reports and Other Data ..... 34
7.2. Maintain Security Interest ........... 35
7.3. Taxes and Liens ...................... 35
7.4. Business and Existence ............... 36
7.5. Insurance; Payment of Premiums ....... 36
7.6. Maintain Property .................... 36
7.7. Books of Record and Account .......... 36
7.8. Payment of Indebtedness .............. 36
7.9. Right of Inspection .................. 36
7.10. Observe All Laws ..................... 36
7.11. Covenants Extending to Subsidiaries .. 36
7.12. Officer's Knowledge of Default ....... 37
7.13. Suits or Other Proceedings ........... 37
7.14. Notice Regarding Hazardous Material or
Environmental Complaint .............. 37
7.15. Environmental Indemnification ........ 37
7.16. Further Assurances ................... 37
7.17. ERISA Requirement .................... 37
7.18. Continued Operations ................. 38
7.19. Collateral Audit ..................... 38
7.20. New Subsidiaries ..................... 38
7.21. Swap Agreements ...................... 38
7.22. Ownership of Real Property ........... 38
v
<PAGE>
ARTICLE VIII
Negative Covenants of Borrower
Page
8.1. Current Ratio ........................................ 39
8.2. Leverage Ratio ....................................... 39
8.3. Consolidated Working Capital ......................... 39
8.4. Consolidated Tangible Net Worth ...................... 39
8.5. Consolidated Fixed Charge Ratio ...................... 40
8.6. Mortgages, Liens, Etc ................................ 40
8.7. Indebtedness ......................................... 40
8.8. Name Change, Merger, Sale of Assets, Dissolution, Etc 40
8.9. Change in Control .................................... 41
8.10. Compliance with ERISA; Funding of Plans .............. 41
8.11. Investments .......................................... 41
8.12. Investments in or Loans to Subsidiaries .............. 41
ARTICLE IX
Events of Default
9.1. Payment of Liabilities ................ 41
9.2. Payment of Other Obligations .......... 42
9.3. Representation or Warranty ............ 42
9.4. Selected Covenants .................... 42
9.5. Other Loan Documents .................. 42
9.6. Other Covenants ....................... 42
9.7. Liquidation or Dissolution ............ 42
9.8. Involuntary Proceedings ............... 43
9.9. Order of Dissolution; Forfeiture Action 43
9.10. Judgment .............................. 43
ARTICLE X
Miscellaneous
10.1. Waiver of Default; Cumulative Remedies 44
10.2. Amendments ........................... 44
10.3. Notices .............................. 44
10.4. Survival of Agreements ............... 45
10.5. Governing Law ........................ 45
10.6. Enforceability of Agreement .......... 45
10.7. Expenses; Indemnity .................. 45
10.8. Liens; Set Off ....................... 46
10.9. Execution of Counterparts ............ 46
10.10. Entirety ............................. 46
10.11. Binding Effect ....................... 46
10.12. Waiver of Jury Trial ................. 46
vi
<PAGE>
Page
EXHIBIT A Borrowing Base Certificate .................... A-1
EXHIBIT B-1 Amended and Restated Promissory Note .......... B-1
EXHIBIT B-2 Term Note ..................................... B-2
EXHIBIT C Form of Opinion of Counsel for Borrower
and Guarantor ......................... C-1
EXHIBIT D Notice of Appointment (or Revocation) of
Authorized Representative ............. D-1
EXHIBIT E Form of Borrowing Notice-Revolving Credit Loans E-1
EXHIBIT F Interest Rate Section Notice .................. F-1
EXHIBIT G Form of Guaranty .............................. G-1
EXHIBIT H Form of Security Agreement .................... H-1
EXHIBIT I Form of Stock Pledge Agreement ................ I-1
vii
</TABLE>
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, made and entered into as of
July 31, 1997, by and between SPEIZMAN INDUSTRIES, INC., a Delaware corporation
(herein called the "Borrower"), and NATIONSBANK, N.A., a national banking
association and successor to NationsBank of North Carolina, National Association
(herein called the "Lender");
W I T N E S S E T H:
WHEREAS, Borrower and Lender have previously entered into a Loan
Agreement dated as of April 19, 1994, as amended by 1995 Consolidated Amendment
Agreement to Loan Agreement and Other Documents dated as of May 31, 1995, 1995
Second Consolidated Amendment to Loan Agreement and Other Documents dated as of
September 1, 1995, 1995 Third Consolidated Amendment Agreement to Loan Agreement
and Related Documents dated as of October 31, 1995, 1996 First Consolidated
Amendment Agreement to Loan Agreement and Related Documents dated as of May 15,
1996, 1996 Second Consolidated Amendment Agreement to Loan Agreement and Related
Documents dated as of June 26, 1996, 1996 Third Consolidated Amendment Agreement
to Loan Agreement and Related Documents, Modification Agreement dated as of
November 1, 1996, and an Amended and Restated Loan Agreement dated as of
December 19, 1996 (collectively, the "Original Loan Agreement");
WHEREAS, the Borrower has entered into a Stock Purchase Agreement (the
"Purchase Agreement") dated as of July 31, 1997 with the holders of all of the
capital stock of Wink Davis Equipment Co., Inc. ("WD") to acquire all of the
outstanding capital stock of WD;
WHEREAS, the Borrower desires to obtain from the Lender a credit
facility in the maximum aggregate principal amount at any time outstanding of up
to $37,000,000, of which (i) up to $30,000,000 may be allocated for the issuance
of documentary letters of credit to support the Borrower's purchase and
importing of (x) pre-sold textile machinery in the ordinary course of its
business and (y) in certain cases, equipment to be held as inventory for sale
and, within such $30,000,000, up to $8,500,000 may be allocated to borrowings
for the Borrower's short term operating needs under a revolving line of credit,
and up to $500,000 may be allocated for the issuance of standby letters of
credit, as provided herein, and (ii) up to $7,000,000 may be allocated as a term
loan to acquire all of the outstanding capital stock of WD, all upon the terms
and conditions herein provided;
WHEREAS, this Amended and Restated Loan Agreement and the Loan
Documents, as defined herein, amended in connection herewith do not effect any
refinancing or extinguishment of the indebtedness and obligations evidenced by
the Original Loan Agreement and the Loan
<PAGE>
Documents and is not a novation, but is a restatement and amendment in their
entirety of such Original Loan Agreement and such Loan Documents in order to
reflect the increase in credit extended by Lender and other amendments set
forth herein; and
WHEREAS, the Lender is willing to issue a line of credit loan and make
available letters of credit to the Borrower from time to time in its discretion
upon the terms and conditions set forth herein;
NOW, THEREFORE, it is agreed as follows:
ARTICLE I
Definitions
For purposes of this Agreement, in addition to the definitions set
forth above, the following terms shall have the following meanings:
1.1. "Accounts" means accounts, general intangibles, chattel paper,
instruments and documents, whether now owned or hereafter acquired by the
Borrower or WD. "General Intangibles" shall mean all intangible personal
property of the Borrower or WD of every kind and nature (other than accounts,
chattel paper, documents and instruments) including, without limitation, choses
in action, causes of action, corporate or other business records, inventions,
designs, patents, patent applications, trademarks, trade names, trade secrets,
goodwill, copyrights, registrations, licenses, franchises, tax refund claims,
computer programs, and any guarantee claims, security interests or other
security held by or granted to the Borrower or WD to secure payment by an
Account Debtor of any of the Accounts.
1.2. "Account Debtor" means any Person who is or who may become
obligated to the Borrower or WD under or on account of an Account.
1.3. "Accounting Terms and Determinations." Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a consistent basis with that applied in the audited consolidated financial
statements of the Borrower and its Subsidiaries referred to in Section 5.3
hereof.
1.4. "Advance" means any borrowing under the Line of Credit Loan
consisting of a Base Rate Loan or a Eurodollar Rate Loan, as the case may be.
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1.5. "Advance Account" means an account on the books of the Lender in
which
(i) each Advance by the Lender shall be debited thereto
by recording therein on the date of such Advance a debit entry in the
amount of such Advance; and
(ii) each payment made to the Lender for credit to the
Advance Account shall be credited thereto by recording therein on the
date paid to the Lender a credit entry in the amount of such payment.
1.6. "Agreement" means this Amended and Restated Loan Agreement, as
the same may be amended, modified or supplemented from time to time as herein
permitted.
1.7. "Applicable Margin" means for purposes of calculating the
applicable interest rate for the Interest Period for any Eurodollar Rate Loan,
2.0%.
1.8. "Authorized Representative" means any of the Chairman, Vice
Chairmen, President, Executive Vice Presidents or Vice Presidents of the
Borrower and, with respect to financial matters, the Treasurer or chief
financial officer of the Borrower or any other person expressly designated by
the Board of Directors of the Borrower (or the appropriate committee thereof) as
an Authorized Representative of the Borrower, as set forth from time to time in
a certificate in the form attached hereto as Exhibit D and incorporated herein
by reference.
1.9. "Base Rate" means, for any Base Rate Loan, the rate of interest
equal to the sum of (x) the greater of (i) Prime Rate or (ii) the Federal Funds
Effective Rate plus one-half percent and (y) one percent (1%), each change in
such Base Rate to be effective as of the effective date of any change in the
Prime Rate or the Federal Funds Effective Rate giving rise thereto.
1.10. "Base Rate Loan" means any Loan for which the rate of interest
is determined by reference to the Base Rate.
1.11. "Borrower's Account" means the account maintained by the
Borrower with the Lender pursuant to which proceeds of Advances are deposited.
1.12. "Borrowing Base" means the sum as of the date of determination
of (i) Eligible Accounts multiplied by 80% and (ii) Eligible Inventory
multiplied by 30%, and (iii) L/C Credit multiplied by 50%, and (iv) Cash
Collateral multiplied by 100%, all determined pursuant to the Borrowing Base
Certificate.
1.13. "Borrowing Base Certificate" means a certificate in the form
attached hereto as Exhibit A and incorporated herein by reference.
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1.14. "Borrowing Notice" means the notice delivered by an Authorized
Representative in connection with an Advance under the Line of Credit Loan, in
the form attached hereto as Exhibit E and incorporated herein by reference.
1.15. "Business Day" means a day upon which the Lender is open for the
transaction of commercial business with the general public in Charlotte, North
Carolina.
1.16. "Capital Expenditures" means all expenditures made and
liabilities incurred (including obligations under capital leases) for the
acquisition of assets which are not, in accordance with generally accepted
accounting principles, treated as expense items in the year made or incurred or
as a prepaid expense applicable to a future year or years.
1.17. "Cash Collateral" means cash, certificates of deposit or other
cash equivalents acceptable to Lender and on deposit with and held by Lender
subject to a perfected first lien as security for the obligations of the
Borrower.
1.18. "Cash Collateral Documents" means all assignments, pledge
accounts, security agreements and other collateral documents executed and
delivered from time to time by the Borrower to Lender to establish Cash
Collateral.
1.19. "Closing Date" means the date this Agreement is executed by the
Borrower and the Lender.
1.20. "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, including any rules and regulations (whether final, temporary
or proposed) promulgated thereunder or under any predecessor statute and
remaining in effect.
1.21. "Collateral Assignments" means the Collateral Assignment of
Leases from Borrower and WD in favor of Lender dated July 31, 1997, and all
amendments and supplements thereto.
1.22. "Committed Amount" means the principal amount of $8,500,000
which the Lender has agreed to lend the Borrower on a revolving credit basis and
is evidenced by the Note, subject (i) at any time to reduction as provided in
Section 2.1 of this Agreement and (ii) to scheduled permanent reductions as
provided in Section 2.4.
1.23. "Common Stock" means the common stock, par value $.10 per share,
of the Borrower.
1.24. "Consolidated Current Assets" means, as at the time any
determination thereof is to be made, all assets or resources of Borrower and its
Subsidiaries on a consolidated basis which are classified as current assets in
accordance with generally accepted accounting principles applied on a consistent
basis.
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1.25. "Consolidated Current Liabilities" means, as at the time any
determination thereof is to be made, the amount of all liabilities of Borrower
and its Subsidiaries on a consolidated basis (including all indebtedness payable
on demand or maturing not more than one year from the date of computation and
the current portion of Indebtedness having a maturity date in excess of one
year) which are classified as current liabilities in accordance with generally
accepted accounting principles applied on a consistent basis.
1.26. "Consolidated Fixed Charge Ratio" means, with respect to the
Borrower and its Subsidiaries for the Four-Quarter Period ending on the date of
computation thereof, the ratio of (a) EBITDA plus, to the extent deducted in
arriving at EBITDA, lease, rental and all other payments made in respect of or
in connection with operating leases and less Capital Expenditures to (b)
Consolidated Fixed Charges during each Four-Quarter Period.
1.27. "Consolidated Fixed Charges" means, with respect to Borrower and
its Subsidiaries, for the periods indicated, the sum of, without duplication,
(i) the total amount of interest paid or due and payable by the Borrower and its
Subsidiaries (as determined in accordance with generally accepted accounting
principles and as reflected on the financial statements delivered pursuant to
Section 7.1 hereof), plus (ii) to the extent deducted in arriving at EBITDA,
lease, rental and all other payments made in respect of or in connection with
operating leases, plus (iii) taxes on income, plus (iv) payments made during the
last twelve months on Indebtedness having a maturity date in excess of one year
(including any payments made during the last twelve months which were required
by Section 2.4's provisions regarding scheduled reductions in the Committed
Amount) and scheduled payments on the Term Note, plus (v) all dividends and
other distributions paid during such period (regardless of when declared) on any
shares of capital stock of the Borrower then outstanding, all determined on a
consolidated basis in accordance with generally accepted accounting principles
applied on a consistent basis and as reflected on the financial statements
delivered pursuant to Section 7.1 hereof.
1.28. "Consolidated Net Income" means, for the period during which any
determination thereof is to be made, the gross revenues of Borrower and its
Subsidiaries on a consolidated basis less all operating and non-operating
expenses of Borrower and its Subsidiaries on a consolidated basis including
taxes on income, all determined in accordance with generally accepted accounting
principles applied on a consistent basis; but excluding as income: (i) gains on
the sale, conversion or other disposition of capital assets, (ii) gains on the
acquisition, retirement, sale or other disposition of capital stock and other
securities of Borrower or any Subsidiary, (iii) gains on the collection of
proceeds of life insurance policies, (iv) any write-up of any asset, and (v) any
other gain or credit of an extraordinary nature as determined in
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accordance with generally accepted accounting principles applied on a
consistent basis.
1.29. "Consolidated Tangible Net Worth" means, as at the time any
determination thereof is to be made, the depreciated book value amount of all
assets of Borrower and its Subsidiaries (on a consolidated basis and excluding
intercompany items), with no adjustment due to revaluation, depreciation,
reserves or otherwise, less (i) the book amount of all items treated as
intangible assets under generally accepted accounting principles, such as
(without limitation) goodwill (whether representing the excess of cost over book
value of assets acquired or otherwise), capitalized expenses, leasehold
improvements, patents, trademarks, trade names, copyrights, franchises,
licenses, and deferred charges, such as (without limitation) unamortized costs
and costs of research and development; (ii) treasury stock; (iii) all reserves,
including without limitation reserves for liabilities, fixed or contingent,
depreciation, depletion, obsolescence, amortization, deferred income taxes,
insurance, inventory valuation, and all other appropriations of retained
earnings; and (iv) Consolidated Total Liabilities.
1.30. "Consolidated Total Liabilities" means, as at the time any
determination thereof is to be made, the aggregate amount of all liabilities
(i.e., claims of creditors that are to be satisfied by the disbursement or
utilization of corporate resources) of Borrower and its Subsidiaries on a
consolidated basis, all determined in accordance with generally accepted
accounting principles applied on a consistent basis, and including specifically
all Indebtedness of Borrower and its Subsidiaries and all subordinated debt.
1.31. "Consolidated Working Capital" means, as at the time any
determination thereof is to be made, the excess, if any, of Consolidated Current
Assets over Consolidated Current Liabilities.
1.32. "Debit Balance" means an amount equal to the excess, if any, of
all debit entries over all credit entries recorded pursuant to Section 2.1.
hereof in the Advance Account of the Lender up to and including the date of
computation.
1.33. "Default" means any event, occurrence or condition which, with
the giving of notice, lapse of time, or both, would constitute an Event of
Default.
1.34. "Dollars" means dollars constituting legal tender for the
payment of public and private debts in the United States of America.
1.35. "EBIT" for any period shall mean an amount equal to Consolidated
Net Income for such period, plus the following, to the extent deducted in
computing such Consolidated Net Income for such period: (i) taxes on income, and
(ii) interest expense, in each
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case as shown on the financial statements delivered pursuant to Section 7.1
hereof.
1.36. "EBITDA" for any period shall mean EBIT for such period plus the
following, to the extent deducted in computing Consolidated Net Income for such
period: depreciation and amortization, in each case as shown on the financial
statements delivered pursuant to Section 7.1 hereof.
1.37. "Eligible Accounts" means those Accounts which have been in
existence for not more than 90 days from the date of original invoice as issued
by the Borrower or WD, as applicable and deemed "Eligible Accounts" by the
Lender in its discretion, as determined pursuant to the Borrowing Base
Certificate; provided there shall be excluded from Accounts the following:
intercompany or interaffiliate Accounts; foreign Accounts (i.e., Accounts with
an Account Debtor located outside the U.S. or Canada); general provisions for
credit memos; Accounts which relate to consigned Inventory; and any account with
an Account Debtor with respect to which 25% or more of the outstanding balance
of Accounts of such Account Debtor has been in existence for longer than 90 days
from the date of original invoice.
1.38. "Eligible Inventory" means only that Inventory owned by the
Borrower or WD, as applicable, which is deemed "Eligible Inventory" by the
Lender in its discretion, as determined pursuant to the Borrowing Base
Certificate, and excluding all work in process and consigned Inventory.
1.39. "Environmental Laws" means, collectively, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation
and Recovery Act, the Toxic Substances Act, as amended, the Clean Air Act, as
amended, the Clean Water Act, as amended, any other "Superfund" or "Superlien"
law or any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material, as now or at any time hereafter in effect.
1.40. "Equipment" means any and all of the Borrower's or WD's
furnishings, fixtures and equipment, wherever located, whether now owned or
hereafter acquired, together with all increases, parts, fittings, accessories,
equipment, and special tools now or hereafter affixed to any part thereof or
used in connection therewith, and all products, additions, substitutions,
accessions, and all cash and non-cash proceeds, including proceeds from
insurance, thereof and thereto.
1.41. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, including any rules and regulations
promulgated thereunder.
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1.42. "Eurodollar Rate" means the interest rate per annum calculated
according to the following formula:
Eurodollar = Interbank Offered Rate + Applicable
Rate 1- Eurodollar Reserve Percentage Margin
1.43. "Eurodollar Rate Loan" means a Loan for which the rate of
interest is determined by reference to the Eurodollar Rate.
1.44. "Eurodollar Reserve Percentage" means, for any day, that
percentage (expressed as a decimal) which is in effect from time to time under
Regulation D or any successor regulation, as the maximum reserve requirement
(including any basic, supplemental, emergency, special, or marginal reserves)
applicable with respect to Eurocurrency liabilities as that term is defined in
Regulation D (or against any other category of liabilities that includes
deposits by reference to which the interest rate of Eurodollar Rate Loans is
determined), whether or not the Lender has any Eurocurrency liabilities subject
to such requirements, without benefits of credits or proration, exceptions or
offsets that may be available from time to time to the Lender. The Eurodollar
Rate shall be adjusted automatically on and as of the effective date of any
change in the Eurodollar Reserve Percentage.
1.45 "Existing Subsidiaries" means Sock & Hosiery Equipment Sales,
Inc. and Speizman Industries Europe.
1.46. "Event of Default" shall have the meaning specified in Article
IX hereof.
1.47. "Excess Cash Flow" means for any Fiscal Year EBITDA for the
Fiscal Year less, to the extent paid or accrued during such Fiscal Year, the
following: interest expense, current maturities of Indebtedness for Money
Borrowed, taxes and dividends.
1.48. "Federal Funds Effective Rate" for any day, as used herein,
means the rate per annum (rounded upward to the nearest 1/100 of 1%) announced
by the Federal Reserve Bank of New York (or any successor) on such day as being
the weighted average of the rates on overnight Federal funds transactions
arranged by Federal funds brokers on the previous trading day, as computed and
announced by such Federal Reserve Bank (or any successor) in substantially the
same manner as such Federal Reserve Bank computes and announces the weighted
average it refers to as the "Federal Funds Effective Rate" as of the date of
this Agreement; provided, if such Federal Reserve Bank (or its successor) does
not announce such rate on any day, the "Federal Funds Effective Rate" for such
day shall be the Federal Funds Effective Rate for the last day on which such
rate was announced.
1.49. "Fiscal Year" means the period from the end of the Borrower's
preceding Fiscal Year End to the next following Fiscal Year End.
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1.50. "Fiscal Year End" means the Saturday nearest June 30 of each
year.
1.51. "Four-Quarter Period" means a period of four full consecutive
quarterly fiscal periods, taken together as one accounting period.
1.52. "Guarantors" means all now or hereafter existing Subsidiaries of
the Borrower, including WD.
1.53. "Guaranty" means collectively each Guaranty Agreement executed,
or to be executed, by a Guarantor (whether dated as of the Closing Date or
delivered after the Closing Date in accordance with Section 7.20 hereof and
whether executed individually or jointly and severally with other Guarantors) in
favor of the Lender substantially in the form attached hereto as Exhibit G and
incorporated herein by reference, as the same may be modified, amended or
supplemented from time to time as therein provided.
1.54. "Hazardous Material" means and includes any hazardous, toxic or
dangerous waste, substance or material, the generation, handling, storage,
disposal, treatment or emission of which is subject to any Environmental Laws
now or hereafter in effect.
1.55. "Indebtedness" means with respect to any Person, all its
Indebtedness for Money Borrowed, all indebtedness of such person for the
acquisition of property, indebtedness secured by any Lien on the property of
such person whether or not such indebtedness is assumed, all liability of such
person by way of endorsements (other than for collection or deposit of
negotiable instruments in the ordinary course of business), all contingent
obligations and all capitalized leases and other items which in accordance with
generally accepted accounting principles are classified as liabilities on a
balance sheet.
1.56. "Indebtedness for Money Borrowed" means, for any Person, (i) all
indebtedness, obligations and liabilities of such person for money borrowed
which are evidenced by bonds, debentures, notes or other similar instruments and
(ii) all capitalized leases which have been capitalized in accordance with
generally accepted accounting principles.
1.57. "Interbank Offered Rate" means, with respect to any Eurodollar
Rate Loan for the Interest Period applicable thereto, the average (rounded
upward to the nearest one-sixteenth (1/16) of one percent) per annum rate of
interest determined by the office of the Lender (each such determination to be
conclusive and binding) as of two Business Days prior to the first day of such
Interest Period, as the effective rate at which deposits in immediately
available funds in Dollars are being, have been, or would be offered or quoted
by the Lender to major banks in the applicable
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interbank market for Eurodollar deposits at any time during the Business Day
which is the second Business Day immediately preceding the first day of such
Interest Period, for a term comparable to such Interest Period and in the amount
of the Eurodollar Rate Loan. If no such offers or quotes are generally available
for such amount, then the Lender shall be entitled to determine the Eurodollar
Rate by estimating in its reasonable judgment the per annum rate (as described
above) that would be applicable if such quote or offers were generally
available.
1.58. "Interest Period" for each Eurodollar Rate Loan means a period
commencing on the date such Eurodollar Rate Loan is made or converted and each
subsequent period commencing on the last day of the immediately preceding
Interest Period for such Eurodollar Rate Loan, and ending, at the Borrower's
option, on the date one, two or three months thereafter as notified to the
Lender by the Authorized Representative three (3) LIBOR Business Days prior to
the beginning of such Interest Period; provided, that,
(i) if the Authorized Representative fails to notify the
Lender of the length of an Interest Period three (3) LIBOR Business
Days prior to the first day of such Interest Period, the Loan for which
such Interest Period was to be determined shall be deemed to be a Base
Rate Loan;
(ii) if an Interest Period for a Eurodollar Rate Loan would end on
a day which is not a LIBOR Business Day such Interest Period shall be
extended to the next LIBOR Business Day (unless such extension would
cause the applicable Interest Period to end in the succeeding calendar
month, in which case such Interest Period shall end on the next
preceding LIBOR Business Day);
(iii) any Interest Period which begins on the last LIBOR Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last LIBOR Business Day of a calendar month;
(iv) no Interest Period shall extend past the Termination Date;
(v) on any day, with respect to all Loans, there shall be not
more than four (4) Interest Periods in effect.
1.59. "Inventory" means any and all goods, merchandise and other
personal property, including, without limitation, goods in transit, wheresoever
located and whether now owned or hereafter acquired by the Borrower or WD which
is or may at any time be held for sale or lease, furnished under any contract of
service or held as raw materials, work-in-process, or supplies or materials used
or consumed in the Borrower's or WD's business, including, without limitations,
all such property the sale or other disposition of
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which has given rise to Accounts and which has been returned to or repossessed
or stopped in transit by the Borrower or WD.
1.60. "L/C Credit" means the credit to the Borrowing Base established
by Lender equal to the face amount of Letters of Credit issued under the Letter
of Credit Facility for presold textile machinery to credit approved customers of
Borrower. In each case, the eligibility of the Letter of Credit for inclusion in
computing L/C Credit shall be determined by Lender.
1.61. "L/C Documents" means, collectively, the Applications and
Agreements for Documentary Letters of Credit and any other documents executed by
Borrower in favor of Lender relating to the issuance of the Letters of Credit
(including such documents relating to letters of credit outstanding on the
Closing Date and any supplements or amendments thereto.
1.62. "Letters of Credit" means, individually and collectively, the
Letters of Credit to be issued under the Letter of Credit Facility pursuant to
Article III hereof, including such Letters of Credit issued pursuant to the
Original Loan Agreement and outstanding on the Closing Date.
1.63. "Letter of Credit Facility" means the facility described in
Article III hereof providing for the issuance by the Lender for the account of
the Borrower of the Letters of Credit from time to time in its discretion.
1.64. "Letter of Credit Facility Amount" means the maximum aggregate
face amount available of Letters of Credit which may be issued under the Letter
of Credit Facility , which is $30,000,000, and of which up to $500,000 is for
standby letters of credit.
1.65. "Letter of Credit Facility Termination Date" means July 31,
2000.
1.66. "Letter of Credit Termination Date" means, as to each Letter of
Credit, the first to occur of the expiration or termination date specified
therein which shall not be later than ninety days following the Letter of Credit
Facility Termination Date.
1.67. "Liabilities" mean all obligations and Indebtedness of any and
every kind and nature of the Borrower to Lender (including, without limitation,
interest, charges, expenses, attorneys' fees and other sums chargeable to
Borrower by the Lender) and future advances made to or for the benefit of
Borrower, whether arising under this Agreement, or arising under the Notes, the
L/C Documents or any of the other Loan Documents or acquired by the Lender from
any other source, whether heretofore, now or hereafter owing, arising, due, or
payable from Borrower to the Lender and howsoever evidenced, created, incurred,
acquired or owing, whether primary, secondary, direct, contingent, fixed, or
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otherwise, including obligations of performance, and including all liabilities
of Borrower to Lender or any affiliate of Lender which arise under a Swap
Agreement.
1.68. "LIBOR Business Day" means a Business Day on which the relevant
international financial markets are open for the transaction of the business
contemplated by this Agreement in London, England and Charlotte, North Carolina.
1.69. "Lien" means any interest in property securing any obligation
owed to, or a claim by, a person other than the owner of the property, including
but not limited to the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt or a
lease, consignment or bailment for security purposes.
1.70. "Line of Credit Loan" means any loan evidenced by the Line of
Credit Note and as described in Article II hereof providing for Line of Credit
Loans to the Borrower by the Lender.
1.71. "Loan" or Loans" means any of the Line of Credit Loans or Term
Loan.
1.72. "Loan Documents" means, collectively, this Agreement, the Notes,
the Collateral Assignment, the Stock Pledge Agreement, the Security Agreement,
the Guaranty, the L/C Documents and all agreements, instruments and documents
(and with respect to this Agreement and such other agreements, instruments and
documents, any amendments or supplements thereto or modifications thereof),
delivered to the Lender, with respect to this Agreement, or with respect to the
transactions contemplated by this Agreement or any other Loan Document.
1.73. "Net Proceeds" means (i) with respect to the issuance of equity
or Indebtedness, cash payments received therefrom as and when received, net of
all bona fide legal, accounting, banking, underwriting, title and recording fees
and expenses, commissions, discounts and other issuance expenses incurred in
connection therewith and all taxes required to be paid or accrued as a
consequence of such transaction, and (ii) with respect to the sale, lease or
other disposition of assets (except inventory in the ordinary course of
business) or the taking of any asset by eminent domain, the amount of cash plus
the fair market value of other property received in such transaction, net of all
bona fide legal, title and recording fees and expenses incurred in connection
therewith and all taxes paid as a consequence of such transaction and all
Indebtedness required to be repaid as a result of such disposition to the extent
paid by Borrower or any of its Subsidiaries, as applicable.
1.74. "Note" means the amended and restated promissory note of the
Borrower in the original principal amount of $8,500,000 evidencing the Line of
Credit Loan and substantially in the form
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attached hereto as Exhibit B-1 and incorporated herein by reference.
1.75. "Notes" means, collectively, the Note and the Term Note.
1.76. "Permitted Liens" means (i) liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for sums
not overdue or being contested in good faith; (ii) liens incurred in the
ordinary course of business in connection with worker's compensation,
unemployment insurance or other forms of governmental insurance or benefits, or
to secure performance of tenders, statutory obligations, leases and contracts
(other than for Indebtedness) entered into in the ordinary course of business or
to secure obligations on surety or appeal bonds; (iii) rights of lessees under
leases made in the ordinary course of business under which Borrower or any
Subsidiary is lessor; and (iv) liens in respect of final judgments or awards or
attachments remaining undischarged or unstayed for not longer than 60 days from
the making thereof.
1.77."Person" means an individual, partnership, limited liability
company, corporation, trust, unincorporated organization, association, joint
venture or a government or agency or political subdivision thereof.
1.78. "Plan" means any employee benefit or other plan established or
maintained or to which contributions have been made by the Borrower or any
Subsidiary and which is covered by Title IV of ERISA or to which Section 412 of
the Code applies.
1.79. "Prime Rate" means the rate of interest per annum announced by
the Lender from time to time to be its prime rate. The Prime Rate is one of
several rate indexes used by the Lender in calculating interest on loans to its
customers and is not necessarily the best or lowest rate of interest offered by
the Lender.
1.80. "Rate Hedging Obligations" means any and all obligations of the
Borrower or any of its Subsidiaries, whether absolute or contingent and
howsoever and whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions therefor),
under (a) any and all agreements, devices or arrangements designed to protect at
least one of the parties thereto from the fluctuations of interest rates,
exchange rates or forward rates applicable to such party's assets, liabilities
or exchange transactions, including, but not limited to, Dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts, warrants and those commonly known as
interest rate "swap" agreements; and (b) any and
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all cancellations, buybacks, reversals, terminations or assignments of any of
the foregoing.
1.81. "Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System (or any successor thereto) as the same may be amended
or supplemented from time to time.
1.82. "Regulatory Change" means any change effective after the Closing
Date in United States federal or state laws or regulations (including Regulation
D and capital adequacy regulations) or foreign laws or regulations or the
adoption or making after such date of any interpretations, directives or
requests applying to a class of banks, which includes the Lender, under any
United States federal or state or foreign laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof or compliance by the
Lender with any request or directive regarding capital adequacy, including with
respect to "highly leveraged transactions," whether or not having the force of
law, whether or not failure to comply therewith would be unlawful and whether or
not published or proposed prior to the date hereof.
1.83. "Reimbursement Obligation" shall mean at any time, the
obligation of the Borrower with respect to any Letter of Credit to reimburse the
Lender for amounts theretofore paid by the Lender pursuant to a drawing under
such Letter of Credit.
1.84. "Security Agreement" means the Amended and Restated Security
Agreement dated as of July 31, 1997, between the Borrower and WD and the Lender
and all amendments and supplements thereto.
1.85. "Swap Agreement" means one or more agreements with respect to
Indebtedness evidenced by any or all of the Notes on terms mutually acceptable
to the Borrower and the Lender, which agreements create Rate Hedging
Obligations.
1.86. "Stock Pledge Agreement" means the Stock Pledge Agreement dated
as of July 31, 1997, between the Borrower and the Lender, and all amendments and
supplements thereto.
1.87. "Subsidiary" and "Subsidiaries" means any corporation of which
more than 50% of the voting stock of any class at any time is owned or
controlled, directly or indirectly, by the Borrower, including WD.
1.88. "Term Loan" means the loan evidenced by the Term Note and as
described in Article II hereof providing for a term Loan to the Borrower by the
Lender.
1.89. "Term Note" means the promissory note of the Borrower in the
original principal amount of $7,000,000 evidencing
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the Term Loan and substantially in the form attached hereto as Exhibit B-2 and
incorporated herein by reference. means July 31, 2000. "TERMINATION DATE"
1.90. "TERMINATION DATE" means July 31, 2000.
ARTICLE II
The Line of Credit Loan and The Term Loan
2.1. (a) THE LINE OF CREDIT LOAN COMMITMENT . The Lender agrees, upon
the terms and conditions set forth herein, to make Advances to the Borrower
under the Line of Credit Loan during the period from the date of this Agreement
until the Termination Date up to an aggregate amount not exceeding $8,500,000;
provided (i) that immediately after giving effect to each Advance, the Debit
Balance shall not exceed either the Committed Amount or the excess of the
Borrowing Base over the face amount of Letters of Credit outstanding and the
principal balance of the Term Loan; (ii) no Advance shall be made if, after
giving effect to such Advance, the sum of the Debit Balance and the face amount
of Letters of Credit outstanding exceeds $30,000,000; and (iii) that the Lender
shall not be required to make Advances while any Default exists hereunder. Each
Advance shall be in the amount of $50,000 or any integral multiple thereof, or
if applicable the balance of the Committed Amount, and shall be debited by the
Lender to the Advance Account. Within such limits, the Borrower may borrow,
repay and reborrow hereunder, on a Business Day in the case of a Base Rate Loan
and on a LIBOR Business Day in the case of a Eurodollar Rate Loan, from the date
hereof until, but (as to borrowings and reborrowings) not including, the
Termination Date; provided, however, that (x) no Eurodollar Rate Loan shall be
made which has an Interest Period that extends beyond the Termination Date and
(y) each Eurodollar Rate Loan may, subject to the provisions of Section 2.10, be
repaid only on the last day of the Interest Period with respect thereto, all in
accordance with the terms of this Agreement. The Borrower agrees that if at any
time the outstanding balance under the Note shall exceed (x) the Committed
Amount or (y) the excess of the Borrowing Base over the face amount of Letters
of Credit outstanding and the principal balance of the Term Loan, the Borrower
shall immediately reduce such outstanding balance to the extent of such excess.
Borrowings and payments of principal hereunder are to be made no later than 2:00
P.M. Charlotte, North Carolina time on the date of such borrowing or payment.
The proceeds of the Line of Credit Loan shall be used for working capital for
the Borrower and its Subsidiaries and up to $3,500,000 to acquire WD.
(b) The Term Loan. Subject to the terms and conditions of this
Agreement, the Lender agrees to make a term loan of $7,000,000 to the Borrower,
such loan to be evidenced by the Term Note. The proceeds of the Term Note shall
be used to acquire all of the outstanding capital stock of WD. The principal
balance outstanding
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under the Term Note shall bear interest at the Eurodollar Rate or Base Rate as
provided herein.
The principal indebtedness evidenced by the Term Note shall be
repayable in eleven consecutive quarterly payments on the last Business Day of
each of the months of March, June, September and December, commencing December
31, 1997. The first eleven quarterly payments shall be in the amount of
$250,000. One final payment shall be due on July 31, 2000 in an amount equal to
the unpaid principal balance and all accrued interest on the Term Loan.
The principal indebtedness evidenced by the Term Note shall also be
prepaid annually on June 30 of each year, commencing June 30, 1998, in an amount
equal to 25% of Excess Cash Flow determined for the immediately preceding Fiscal
Year. All such prepayments shall be applied to principal installments due under
the Term Note in inverse order of their maturities.
The Borrower agrees that if at any time the outstanding balance under
the Term Note shall exceed the excess of the Borrowing Base over the sum of (x)
the face amount of Letters of Credit outstanding, (y) the Reimbursement
Obligations and (z) the Committed Amount, the Borrower shall immediately reduce
such outstanding balance to the extent of such excess.
2.2. ADVANCES AND RATE SELECTION. (i) An Authorized Representative
shall give the Lender (1) at least three (3) LIBOR Business Days' irrevocable
telephonic notice of each Eurodollar Rate Loan (whether representing an
additional borrowing hereunder under the Line of Credit Loan or the conversion
of borrowing hereunder from Base Rate Loans to Eurodollar Rate Loans or the
continuation of borrowing hereunder of Eurodollar Rate Loans) prior to 10:30
A.M., Charlotte, North Carolina time; and (2) irrevocable telephonic notice of
each Base Rate Loan representing an additional borrowing hereunder under the
Line of Credit Loan or the conversion of borrowing hereunder from Eurodollar
Rate Loans to Base Rate Loans prior to 10:30 A.M. Charlotte, North Carolina time
on the day of such proposed Base Rate Loan. Each such Borrowing Notice, which
shall be effective upon receipt by the Lender, shall specify the amount of the
Advance, if applicable, the type (Base or Eurodollar) of Loan, the date of the
Advance, if applicable, and, if a Eurodollar Rate Loan, the Interest Period to
be used in the computation of interest. The Authorized Representative shall
provide the Lender written confirmation of each such telephonic notice on the
same day by telefacsimile transmission in the form of a Borrowing Notice, for
additional Advances, or in the form attached hereto as Exhibit F and
incorporated herein by reference as to selection or conversion of interest rates
as to outstanding Loans, in each case with appropriate insertions, but failure
to provide such confirmation shall not affect the validity of such telephonic
notice. The duration of the initial Interest Period for each Loan that is a
Eurodollar Rate Loan shall be as specified in the initial Borrowing Notice in
the case of Line of Credit Loans,
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and the Interest Rate Selection Notice in the case of the Term Loan. The
Borrower shall have the option to elect the duration of subsequent Interest
Periods and to convert the Loans in accordance with Section 2.10 hereof. If the
Lender does not receive a notice of election of duration of an Interest Period
or to convert by the time prescribed hereby and by Section 2.10 hereof, the
Borrower shall be deemed to have elected to convert such Line of Credit Loan or
Term Loan, as the case may be, to (or continue such Line of Credit Loan or Term
Loan, as the case may be, as) a Base Rate Loan until the Borrower notifies the
Lender in accordance herewith and with Section 2.10.
(ii) Not later than 3:00 P.M., Charlotte, North Carolina time on the
date specified for each Advance of a Line of Credit Loan, the Lender shall,
subject to the terms and conditions of this Agreement, make the amount of the
Line of Credit Loans available to the Borrower by delivery of the proceeds
thereof to the Borrower's Account or otherwise as shall be directed in the
applicable Borrowing Notice by the Authorized Representative.
2.3. PAYMENT OF INTEREST. (a) The Borrower shall pay interest to the
Lender on the outstanding and unpaid principal amount of each Loan made by the
Lender for the period commencing on the date of such Loan until such Loan shall
be due at the Eurodollar Rate or the Base Rate, as elected or deemed elected by
the Borrower or otherwise applicable to such Loan as herein provided; provided,
however, that if any amount shall not be paid when due (at maturity, by
acceleration or otherwise), all amounts outstanding hereunder shall bear
interest thereafter (i) in the case of a Eurodollar Rate Loan, at a rate of
interest per annum which shall be two percent (2%) above the Eurodollar Rate for
such Eurodollar Rate Loan until the end of the Interest Period during which such
payment was due, and thereafter at a rate of interest per annum which shall be
two percent (2%) above the Base Rate, and (ii) in the case of a Base Rate Loan,
at a rate of interest per annum which shall be two percent (2%) above the Base
Rate, or (in each case) the maximum rate permitted by applicable law, whichever
is lower, from the date such amount was due and payable until the date such
amount is paid in full.
(b) Interest on the outstanding principal balance of each Loan shall be
computed on the basis of a year of 360 days and calculated for the actual number
of days elapsed. Interest on each Loan shall be paid (a) monthly in arrears on
the last Business Day of each month, commencing the last Business Day of August
1997, on each Base Rate Loan, (b) on the last day of the applicable Interest
Period for each Eurodollar Rate Loan, and (c) upon payment in full of the
principal amount of such Loan.
2.4. PAYMENT OF PRINCIPAL OF LINE OF CREDIT LOAN; PERMANENT REDUCTION
IN COMMITTED AMOUNT. (a) The principal amount of the Debit Balance shall be due
and payable to the Lender in full on the Termination Date, or earlier as herein
expressly provided. The
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principal amount of Base Rate Loans may be prepaid in whole or in part
at any time. The principal amount of Eurodollar Rate Loans may only be prepaid
at the end of the applicable Interest Period, unless the Borrower shall pay to
the Lender the amount, if any, required under Section 4.4 hereof.
(b) The Committed Amount shall be subject to permanent reduction, and
principal payments on the Line of Credit Note shall be required to effectuate
such reduction, as follows:
(i) The Committed Amount shall be reduced by the following
amounts on the following dates (and principal payments in such amounts
shall be due on such dates):
Date Amount of Reduction
July 31, 1998 $1,000,000.00
July 31, 1999 $2,500,000.00
(ii) The Committed Amount shall also be permanently reduced by
an amount equal to one hundred percent (100%) of the Net Proceeds
received by the Borrower in connection with issuance of equity or
Indebtedness and one hundred percent (100%) of the Net Proceeds
received by the Borrower in connection with the sale, lease or other
disposition of assets (except inventory in the ordinary course of
business) in excess of $50,000, in the aggregate, during any Fiscal
Year. Each such reduction shall be effective no later than thirty (30)
Business Days after receipt of such Net Proceeds. The Borrower shall
deliver written notice of such reduction not less than three (3)
Business Days' prior to such reduction, which notice shall include a
certificate of an Authorized Representative setting forth in reasonable
detail the calculations utilized in computing the amount of Net
Proceeds and the amount of such commitment reduction.
(iii) All mandatory reductions made hereunder shall be applied
to permanently reduce the Committed Amount. Each reduction of the
Committed Amount shall be accompanied by payment of the Line of Credit
Loan to the extent that the principal amount of the Line of Credit Loan
exceeds the Committed Amount after giving effect to such reduction,
together with accrued and unpaid interest on the amounts prepaid. No
such reduction shall result in the payment of any Eurodollar Rate Loan
other than on the last day of the Interest Period of such Eurodollar
Rate Loan unless such prepayment is accompanied by amounts due, if any,
under Section 4.4.
2.5. MANNER OF PAYMENT. Each payment of principal (including any
prepayment), interest and any other amount required to be paid to the Lender
with respect to the Loans pursuant to the Loan Documents, shall be made to the
Lender at its principal office in
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Charlotte, North Carolina in Dollars and in immediately available funds on or
before 2:00 p.m., Charlotte, North Carolina time on the date such payment is
due. In case any such payment is not so made ("non-conforming payment"), the
Lender may, but shall not be obligated to, upon three days prior written notice
to the Borrower, debit the amount of such payment from any one or more ordinary
deposit accounts of the Borrower with the Lender.
2.6. PAYMENT. In the event that any payment of interest, principal of,
prepayment or other fee, or other amount owing hereunder with respect to the any
of the Loans is not made within 15 days of the date when due, or is made in the
form of a non-conforming payment, such amount shall continue as an obligation of
the Borrower hereunder and shall bear interest from the due date thereof until
paid in full at the respective rates of interest per annum specified in Section
2.3(a) in respect of late payments of interest, from the date such amount was
due until paid in full. Notwithstanding the foregoing, failure to make any
payment when due in the manner provided in the immediately preceding paragraph
shall constitute an Event of Default hereunder.
2.7. PAYMENTS ON BUSINESS DAYS. In the event that any payment
hereunder or under any of the Notes becomes due and payable on a day other than
a Business Day, then such due date shall be extended to the next succeeding
Business Day unless provided otherwise under clause (ii) under the definition of
"Interest Period"; provided that interest shall continue to accrue during the
period of any such extension.
2.8. BORROWER'S ACCOUNT. The Borrower shall continuously maintain the
Borrower's Account for the purposes herein contemplated.
2.9. NOTES. Line of Credit Loans made by the Lender shall be evidenced
by, and be repayable with interest in accordance with the terms of, the Note
payable to the order of the Lender in the amount of the Committed Amount, which
Note shall be dated the Closing Date and shall be duly executed and delivered by
the Borrower. The Term Loan shall be evidenced by and repayable in accordance
with the terms of the Term Note.
2.10. CONVERSIONS AND ELECTIONS OF SUBSEQUENT INTEREST PERIODS.
Provided that no Default or Event of Default shall have occurred and be
continuing and subject to the limitations set forth below and in Sections
4.1(b), 4.2 and 4.3 hereof, the Borrower may:
(a) upon notice to the Lender on or before 10:30 A.M. Charlotte, North
Carolina time on any Business Day convert all or a part of Eurodollar Rate Loans
to Base Rate Loans on the last day of the Interest Period for such Eurodollar
Rate Loans; and
(b) on three (3) LIBOR Business Days' notice to the Lender on or
before 10:30 A.M. Charlotte, North Carolina time:
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(i) elect a subsequent Interest Period for all or a
portion of Eurodollar Rate Loans to begin on the last day of
the current Interest Period for such Eurodollar Rate Loans; or
(ii) convert Base Rate Loans to Eurodollar Rate Loans
on any LIBOR Business Day.
(c) No Interest Rate Period shall extend beyond the Termination Date.
Notice of any such elections or conversions shall specify the effective
date of such election or conversion and, with respect to Eurodollar Rate Loans,
the Interest Period to be applicable to the Loan as continued or converted. Each
election and conversion pursuant to this Section 2.10 shall be subject to the
limitations on Eurodollar Rate Loans set forth in the definition of "Interest
Period" herein and in Sections 2.1 and 2.2 and Article IV hereof.
2.11. FEES
(a) UNUSED FEE. The Borrower agrees to pay to the Lender an unused fee
equal to 3/8% (.375%) multiplied by the average daily amount by which the Letter
of Credit Facility Amount exceeds the sum of (i) outstandings under the Line of
Credit Loan plus (ii) the aggregate of the undrawn amount of Letters of Credit
and outstanding Reimbursement Obligations. Such fees shall commence to accrue as
of the date hereof and shall be due in arrears on the last Business Day of each
March, June, September and December commencing September 30, 1997.
(b) LOAN FEE. In consideration of making available the credit
facilities available under this Agreement, the Borrower agrees to pay the Lender
a loan underwriting fee equal to the amount set forth in the Fee Letter between
Borrower and Lender dated July 30, 1997, such fee to be due and payable in full
on the Closing Date.
2.12. SECURITY. As security for the full and timely payment of the
principal of and interest on the Notes, the Borrower shall on the Closing Date
deliver to the Lender (i) the Security Agreement conveying to the Lender a
valid, perfected first priority lien on the Accounts, Inventory and Equipment,
(ii) the Cash Collateral Documents, (iii) the Guaranty, (iv) the Stock Pledge
Agreement and (v) the other Loan Documents. From time to time the Borrower will
deliver such Cash Collateral Documents as shall be necessary to convey to the
Lender a valid, perfected first priority lien on the Cash Collateral.
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ARTICLE III
The Letter of Credit Facility
3.1. LETTERS OF CREDIT. From time to time the Borrower may request
that the Lender issue Letters of Credit for the benefit of the Borrower to
facilitate the purchase of pre-sold textile machinery. In addition, the Borrower
may request the issuance of Letters of Credit to facilitate the purchase of
textile machinery to be held by the Borrower as inventory for sale; provided,
the maximum aggregate face amount of Letters of Credit which may be outstanding
in respect of such textile machinery held as inventory for sale may not exceed
$3,500,000. In addition, the Borrower may request the issuance of standby
letters of credit to facilitate WD's supply arrangement with Pellerin Milnor
Corporation; provided the maximum aggregate face amount of such standby letters
of credit which may be outstanding may not exceed $500,000. The Lender shall
have no commitment to issue any such Letter of Credit and its decision to issue
any Letter of Credit shall be in its sole and absolute discretion. The aggregate
maximum principal face amount of Letters of Credit which may be outstanding at
any one time shall not exceed $30,000,000 (subject to reduction as provided
below) (such amount in effect at any time the "Maximum Amount") less the
principal amount outstanding under the Line of Credit Loan at the time of
issuance of a Letter of Credit; provided no Letter of Credit will be issued if
(i) after such issuance, the aggregate amount of Letters of Credit issued and
outstanding shall exceed the excess of the Borrowing Base over the sum of (x)
the principal amount outstanding under the Line of Credit Loan and (y) the
principal amount outstanding under the Term Loan or (ii) any Default exists
hereunder. The Borrower shall execute the Lender's customary applications and
other documentation (including reimbursement agreements) in connection with each
request for, or issuance of, a Letter of Credit. The fees to be charged by the
Lender for issuance of each Letter of Credit, the duration of each Letter of
Credit, the collateral therefor, the beneficiaries thereof and other related
terms and conditions will be negotiated and agreed upon by the Borrower and
Lender at the time of the issuance of each Letter of Credit. Further no Letters
of Credit will be issued having a term extending beyond the date 90 days
following the Letter of Credit Facility Termination Date.
The Maximum Amount shall be reduced by the following amounts on the
following dates:
Date Amount of Reduction
July 31, 1998 $1,000,000
July 31, 1999 $2,500,000
3.2. REPAYMENT. The Borrower hereby unconditionally agrees to pay to
the Lender on demand all amounts required to pay all
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amounts drawn or drafts purporting to be drawn under the Letters of Credit, and
any and all expenses of every kind incurred by the Lender in connection with the
Letters of Credit and in any event and without demand to place in the Lender's
possession sufficient funds to pay all debts and liabilities arising under any
Letter of Credit. Such payment by the Borrower shall be made, if not demanded
earlier, immediately after (and before 4:00 p.m. Charlotte, North Carolina time
on the same Business Day as) the Lender gives the Borrower notice of such
drawing under a Letter of Credit. The Borrower's obligations to pay the Lender
under this Section, and the Lender's right to receive the same, shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever. Notwithstanding anything to the contrary in any L/C Document, the
Borrower agrees to pay the Lender interest on any amounts not paid when due
hereunder at the Prime Rate plus three percent (3%), or the maximum rate as may
be permitted by applicable law, whichever is lower. The Lender may charge any
account the Borrower may have with it for any and all amounts the Lender pays
under the Letter of Credit, plus commissions, charges and expenses as from time
to time agreed to by the Lender and the Borrower.
3.3. INDEMNIFICATION. Without duplication of any other provision
hereof, the Borrower hereby indemnifies and holds harmless the Lender from and
against any and all claims and damages, losses, liabilities, costs or expenses
which the Lender may incur (or which may be claimed against the Lender) by any
person by reason of or in connection with the issuance or transfer of or payment
or failure to pay under any Letter of Credit; provided that the Borrower shall
not be required to indemnify the Lender for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, (i) caused
by the willful misconduct or gross negligence of the party to be indemnified or
(ii) caused by the Lender's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
of such Letter of Credit, unless such payment is prohibited by any law,
regulation, court order or decree. The agreements of this Section shall survive
repayment of all Reimbursement Obligations hereunder.
3.4. ADMINISTRATIVE FEES. The Borrower shall pay to the Lender
administrative and other fees, if any, in connection with the Letters of Credit
in such amounts and at such times as the Lender and the Borrower shall agree
from time to time.
3.5. CONDITIONS TO ISSUANCE OF LETTERS OF CREDIT. Without limitation
in any manner of the sole discretion of the Lender to issue any Letter of
Credit, the Lender will not issue any Letter of Credit hereunder prior to the
satisfaction of the following conditions:
(i) the Lender shall have received a
notice and application from the Borrower in form and
substance
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satisfactory to the Lender requesting issuance of
a Letter of Credit;
(ii) at the time of each issuance of each
Letter of Credit, no Default or Event of Default shall have
occurred and be continuing;
(iii) if such Letter of Credit relates to
the purchase by Borrower of textile machinery to be held as
inventory for sale, the aggregate face amount of Letters of
Credit respecting textile machinery to be held as inventory
for sale, including the face amount of the proposed Letter of
Credit, does not exceed $3,500,000; and
(iv) immediately after giving effect to the issuance
of the requested Letter of Credit, the aggregate face amount
of Letters of Credit issued, outstanding and undrawn, or drawn
and not reimbursed, hereunder plus the principal amount
outstanding under the Line of Credit Loan shall not exceed
$30,000,000.
ARTICLE IV
Yield Protection and Illegality
4.1. ADDITIONAL COSTS. (a) The Borrower shall promptly pay to the
Lender for the account of the Lender from time to time, such amounts resulting
from any Regulatory Change as the Lender may determine to be necessary to
compensate it for any costs incurred by the Lender which it determines are
attributable to its making or maintaining any Loan or its obligation to make any
Loans, or the Lender's issuance or maintenance of any Letter of Credit issued
hereunder, or any reduction in any amount receivable by the Lender under this
Agreement, the Notes, or the Letters of Credit, including reductions in the rate
of return on Lender's capital (such increases in costs and reductions in amounts
receivable and returns being herein called "Additional Costs"). Such Additional
Costs may result from any Regulatory Change which: (i) changes the basis of
taxation of any amounts payable to Lender under this Agreement, the Notes or any
L/C Document (other than taxes imposed on the income of Lender by any
jurisdiction in which the principal office or the applicable lending office of
Lender is located); or (ii) imposes or modifies any reserve, special deposit, or
similar requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of Lender (other than any such reserve,
deposit or requirement reflected in the Eurodollar Rate); or (iii) has or would
have the effect of reducing the rate of return on capital of the Lender to a
level below that which the Lender could have achieved but for such Regulatory
Change (taking into consideration the Lender's policies with respect to capital
adequacy); or (iv) imposes any other condition affecting this Agreement, the
Notes or the issuance or maintenance of, or any
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Letters of Credit (or any of such extensions of credit or liabilities). The
Lender will notify the Borrower of any event occurring after the date hereof
which would entitle it to compensation pursuant to this Section as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation.
(b) Without limiting the effect of the foregoing provisions of this
Section 4.1, in the event that, by reason of any Regulatory Change, the Lender
either (i) incurs Additional Costs based on or measured by the excess above a
specified level of the amount of a category of deposits or other liabilities of
the Lender which includes deposits by reference to which the interest rate on
Eurodollar Rate Loans is determined as provided in this Agreement or a category
of extensions of credit or other assets of any Lender which includes Eurodollar
Rate Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if the Lender so
elects by notice to the Borrower, the obligation hereunder of the Lender to make
and continue, and to convert Base Rate Loans into, Eurodollar Rate Loans that
are the subject of such restrictions shall be suspended until the date such
Regulatory Change ceases to be in effect and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for outstanding Eurodollar Rate
Loans convert such Eurodollar Rate Loans into Base Rate Loans.
(c) Determinations by the Lender for purposes of this Section of the
effect of any Regulatory Change on its costs of making or maintaining, or being
committed to make any Loan or the issuance or maintenance of any Letter of
Credit issued hereunder, or on amounts receivable by it in respect of such loan
or Letters of Credit, and of the additional amounts required to compensate the
Lender in respect of any Additional Costs, shall be conclusive absent manifest
error, provided that such determinations are made on a reasonable basis. The
Lender shall furnish to the Borrower an explanation of the Regulatory Change and
calculations, in reasonable detail, setting forth the Lender's determination of
any such Additional Costs.
4.2. SUSPENSION OF LOANS. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate for
any Eurodollar Rate Loan for any Interest Period, the Lender determines (which
determination made on a reasonable basis shall be conclusive absent manifest
error) that:
(a) quotations of interest rates for the relevant deposits
referred to in the definition of Eurodollar Rate in Article I hereof
are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining the rate of interest for such
Eurodollar Rate Loan as provided in this Agreement; or
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(b) the relevant rates of interest referred to in the
definition of "Eurodollar Rate" in Article I hereof upon the basis of
which the Eurodollar Rate for such Interest Period is to be determined
do not adequately reflect the cost to the Lender of making or
maintaining such Eurodollar Rate Loan for such Interest Period or such
Eurodollar Rate Loan (which determination shall be made on a reasonable
basis by the Lender, and the Person making such determination shall
furnish the Authorized Representative evidence of the facts leading to
such determination);
then the Lender shall give the Authorized Representative prompt notice thereof,
and so long as such condition remains in effect, the Lender shall be under no
obligation to make Eurodollar Rate Loans that are subject to such condition, or
to convert Loans into Eurodollar Rate Loans, and the Borrower shall on the last
day(s) of the then current Interest Period(s) for outstanding Eurodollar Rate
Loans, as applicable, convert such Eurodollar Rate Loans into Base Rate Loans.
The Lender shall give the Authorized Representative notice describing in
reasonable detail any event or condition described in this Section 4.2 promptly
following the determination by the Lender that the availability of Eurodollar
Rate Loans is, or is to be, suspended as a result thereof.
4.3. ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Lender to honor its
obligation to make or maintain Eurodollar Rate Loans hereunder, then the Lender
shall promptly notify the Borrower thereof and the Lender's obligation to make
or continue Eurodollar Rate Loans, or convert Base Rate Loans into Eurodollar
Rate Loans, shall be suspended until such time as such Lender may again make and
maintain Eurodollar Rate Loans, and such Lender's outstanding Eurodollar Rate
Loans shall be converted into Base Rate Loans in accordance with Section 2.10
hereof.
4.4. COMPENSATION. The Borrower shall promptly pay to the Lender, upon
the request of the Lender, such amount or amounts as shall be sufficient (in the
reasonable determination of Lender) to compensate it for any loss, cost or
expense incurred by it as a result of:
(a) any payment, prepayment or conversion of a Eurodollar Rate
Loan on a date other than the last day of the Interest Period for such
Eurodollar Rate Loan, including without limitation any conversion
required pursuant to this Article IV; or
(b) any failure by the Borrower to borrow a Eurodollar Rate
Loan on the date for such borrowing specified in the relevant Borrowing
Notice or interest rate selection notice under Article II hereof;
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such compensation to include, without limitation, an amount equal to the excess,
if any, of (i) the amount of interest which would have accrued on the principal
amount so paid, prepaid or converted or not borrowed for the period from the
date of such payment, prepayment or conversion or failure to borrow or convert
to the last day of the then current Interest Period for such Loan (or, in the
case of a failure to borrow or convert, the Interest Period for such Loan which
would have commenced on the date scheduled for such borrowing or conversion) at
the applicable rate of interest for such Eurodollar Rate Loan provided for
herein over (ii) the Eurodollar Rate (as reasonably determined by the Lender)
for Dollar deposits of amounts comparable to such principal amount and
maturities comparable to such period. A determination of the Lender as to the
amounts payable pursuant to this Section 4.4 shall be conclusive, provided that
such determinations are made on a reasonable basis. The Lender, when requesting
compensation under this Section 4.4, shall furnish to the Authorized
Representative calculations in reasonable detail setting forth the Lender's
determination of the amount of such compensation.
4.5. ALTERNATE INTEREST RATE. In the event the Lender suspends the
making of any Eurodollar Rate Loan pursuant to this Article IV any Eurodollar
Rate Loan shall bear interest at the Base Rate until the Lender once again makes
available the applicable Eurodollar Rate Loan. Notwithstanding the provisions of
Section 2.3(b), interest shall be payable to the Lender at the time and manner
as if the Lender were making available Eurodollar Rate Loans.
4.6. TAXES. All payments by the Borrower of principal of, and
interest on, the Loans and all other amounts payable hereunder shall be made
free and clear of and without deduction for any present or future excise,
stamp or other taxes, fees, duties, levies, imposts, charges, deductions,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, but excluding (i) franchise taxes, (ii) any taxes other than
withholding taxes and taxes that would be imposed as a result of a connection
between the Lender and the jurisdiction imposing such taxes (other than a
connection arising solely by virtue of the activities of the Lender pursuant to
or in respect of this Agreement or any other Loan Document) and (iii) any taxes
imposed on or measured by the Lender's assets, net income, receipts or branch
profits (such non-excluded items being collectively called "Taxes"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
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(b) promptly forward to the Lender an official receipt
or other documentation satisfactory to the Lender evidencing such
payment to such authority; and
(c) pay to the Lender for the account of the Lender such
additional amount or amounts as is necessary to ensure that the net
amount actually received by the Lender will equal the full amount the
Lender would have received had no such withholding or deduction been
required.
If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Lender, for the account of the Lender,
the required receipts or other required documentary evidence, the Borrower shall
indemnify the Lender for any incremental Taxes, interest or penalties that may
become payable by the Lender as a result of any such failure. For purposes of
this Section 4.6, a distribution hereunder by the Lender to or for the account
of the Lender shall be deemed a payment by the Borrower.
ARTICLE V
Representations and Warranties
In order to induce the Lender to enter into this Agreement and to
disburse the Line of Credit Loan, to make the Term Loan, and issue the Letters
of Credit, Borrower represents and warrants to the Lender as follows:
5.1. INCORPORATION. Borrower and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation (except that Speizman Industries Europe is
presently undergoing dissolution in the United Kingdom), and has the corporate
power to own its properties and to carry on its business as now being conducted,
and is duly qualified as a foreign corporation to do business in every
jurisdiction in the United States of America in which the nature of its business
makes such qualification necessary and the failure to be so qualified would
result in a material adverse effect on the business, properties or condition
(financial or other) of the Borrower, and is in good standing in such
jurisdictions. Borrower does not have any Subsidiaries except for WD and the
Existing Subsidiaries.
5.2. POWER AND AUTHORITY. Borrower is duly authorized under all
applicable provisions of law to execute and deliver the Notes and to execute,
deliver and perform this Agreement and the Security Agreement and other Loan
Documents to which it is a party, and all corporate action on its part (and any
shareholder action) required for the lawful execution, delivery and performance
thereof has been duly taken; and this Agreement, the Security Agreement, the
Notes and such Loan Documents, upon the due execution and delivery thereof, will
be the valid and enforceable instruments and
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obligations of Borrower in accordance with their terms. Neither the
execution of this Agreement or the Security Agreement or such other Loan
Documents nor the creation or issuance of the Notes, nor the fulfillment of or
compliance with their provisions and terms, will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a violation of
or default under any law, regulation, order, writ or decree applicable to or
binding upon Borrower or any Subsidiary, or any of their properties, or the
Articles of Incorporation or Bylaws of Borrower or any Subsidiary, or any
agreement or instrument to which Borrower or any Subsidiary is now a party or by
which any of them or their properties may be bound.
5.3. FINANCIAL CONDITION. Each of (i) the consolidated balance sheet
of Borrower and its Subsidiaries for the Fiscal Year ended as of June 29, 1996,
and the related consolidated statements of income, retained earnings and changes
in cash flow for the year then ended, certified by BDO Seidman, certified public
accountants, and (ii) the unaudited consolidated balance sheet of Borrower and
its Subsidiaries for the nine month period ended March 29, 1997, and the related
consolidated statements of income, retained earnings and changes in cash flow
for the period then ended, copies of all of which have been furnished to the
Lender, are correct and complete and fairly present the financial condition of
Borrower and its Subsidiaries as at the dates of said balance sheets and the
results of their operations for said periods. Borrower does not have any
material direct liabilities or contingent obligations as of the date of this
Agreement which are not provided for or reflected in such balance sheets or
referred to in notes thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis maintained throughout the periods involved. There has been no material
adverse change in the business, properties or condition, financial or otherwise,
of Borrower or any Subsidiary since June 29, 1996.
Each of (i) the consolidated balance sheet of WD and its Subsidiaries
for the Fiscal Year ended as of December 31, 1996, and the related consolidated
statements of income, retained earnings and changes in cash flow for the year
then ended, certified by Habit, Arogeti and Wynne, P.C., certified public
accountants, and (ii) the unaudited consolidated balance sheet of WD and its
Subsidiaries for the five month period ended May 31, 1997, and the related
consolidated statements of income, retained earnings and changes in cash flow
for the period then ended, copies of all of which have been furnished to the
Lender, are, to the Borrower's best knowledge, correct and complete and fairly
present the financial condition of WD and its Subsidiaries as at the dates of
said balance sheets and the results of their operations for said periods. To the
best of Borrower's knowledge, WD does not have any material direct liabilities
or contingent obligations as of the date of this Agreement which are not
provided for or reflected in such balance sheets or referred to in notes
thereto. To the best
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of Borrower's knowledge, such financial statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis maintained throughout the periods involved. To the best of
Borrower's knowledge, there has been no material adverse change in the business,
properties or condition, financial or otherwise, of WD or any Subsidiary since
December 31, 1996.
5.4. TITLE TO ASSETS. The Borrower has good and marketable title to
its properties and assets, including the properties and assets reflected in the
financial statements and notes thereto described in Section 5.3, and all such
properties and assets are free and clear of all Liens of any kind except (i) as
disclosed in the financial statements and notes thereto described in Section 5.3
and (ii) Permitted Liens. Neither Borrower nor any Subsidiary owns any real
property.
5.5. LITIGATION. Except as disclosed in Schedule 5.5 hereto, there are
no pending or threatened orders, claims, actions, investigations or proceedings
before or by any court, arbitrator or governmental or administrative body,
agency or official which may materially adversely affect the properties,
business or condition, financial or otherwise, of Borrower or any Subsidiary
thereof or in any way adversely affect or call into question the power and
authority of the Borrower to enter into or perform this Agreement, the Security
Agreement, the Note or any Loan Document or any Subsidiary to enter into any
Loan Document.
5.6. TAXES. The Borrower and its Subsidiaries (including, to the
Borrower's knowledge, WD) have filed all income tax returns required to be filed
by them and all taxes shown thereon have been paid, and no controversy in
respect of additional income taxes, state or Federal, of Borrower or any
Subsidiary thereof is pending, or to the knowledge of Borrower, threatened. The
Federal and state income taxes of Borrower have been examined and reported on or
closed by applicable statutes for all Fiscal Years to and including the Fiscal
Year which ended in June 1990, and adequate reserves have been established for
the payment of all such taxes for periods ended subsequent to the Fiscal Year
which ended in June 1990.
5.7. CONTRACT OR RESTRICTION AFFECTING BORROWER. Neither Borrower nor
any Subsidiary is a party to or bound by any contract or Agreement or subject to
any charter or other corporate restrictions which adversely affects the
business, properties, or condition, financial or otherwise, of Borrower or any
Subsidiary.
5.8. GOVERNMENTAL APPROVAL. No written approval of any Federal, state
or local governmental authorities is necessary to carry out the terms of this
Agreement or the other Loan Documents, and no consents or approvals are required
in the making or performance of this Agreement or the other Loan Documents.
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5.9. NO UNTRUE STATEMENTS. Neither this Agreement, the other Loan
Documents nor any other agreements, reports, schedules, certificates or
instruments heretofore or simultaneously with the execution of this Agreement
delivered to the Lender contains any misrepresentation or untrue statement of
material fact or omits to state any material fact necessary to make any of such
agreements, reports, schedules, certificates or instruments not misleading.
5.10. SOLVENCY. Borrower and each Subsidiary are now, and after giving
effect to the Line of Credit Loan and issuance of the Letters of Credit, will
be, solvent.
5.11. HAZARDOUS MATERIAL. Neither Borrower or any Subsidiary
(including, to the Borrower's knowledge, WD) nor to Borrower's best knowledge
any previous owner or operator of any real property currently owned or operated
by Borrower or any Subsidiary (collectively, the "Current Property"), has
generated, stored, or disposed of any Hazardous Material on any portion of the
Current Property, or transferred any Hazardous Material from the Current
Property to any other location in violation of any applicable Environmental Laws
which has not been fully remedied. Neither Borrower nor any Subsidiary thereof
has been notified of any action, suit, proceeding or investigation which calls
into question compliance by the Borrower or any of its Subsidiaries with any
Environmental Laws or which seeks to suspend, revoke or terminate any license,
permit or approval necessary for the generation, handling, storage, treatment or
disposal of any Hazardous Material.
5.12. MARGIN STOCK. None of the proceeds of the Loans will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
stock or for the purpose of reducing or retiring any Indebtedness which was
originally incurred to purchase or carry margin stock or for any other purpose
which might constitute the Line of Credit Loan a "purpose credit" within the
meaning of said Regulation U or Regulation X (12 C.F.R. Parts 221 and 224) of
the Federal Reserve Board.
5.13. ERISA MATTERS. Except as described in Schedule 5.13 hereof, none
of the Plans maintained at any time by Borrower or any Subsidiary thereof or the
trusts created thereunder has engaged in a prohibited transaction (as defined in
ERISA) which could subject any such Plan or trust to a material tax or penalty
on prohibited transactions imposed under the Code or ERISA; neither Borrower nor
any Subsidiary thereof has incurred any accumulated funding deficiency, whether
or not waived; nor has there been any Reportable Event (as defined in ERISA), or
other event or condition, which presents a material risk of termination of any
such Plan by the Pension Benefit Guaranty Corporation.
5.14. NO DEFAULT. Neither the Borrower nor any Subsidiary is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any Agreement or instrument to which it is
a party relating to any Indebtedness
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for Money Borrowed, the effect of which default would cause such obligation
under the Agreement or instrument to become due prior to its stated
maturity.
5.15. EXISTING INDEBTEDNESS. Neither Borrower nor any Subsidiary is in
default with respect to any of its existing Indebtedness.
5.16. SURVIVAL OF WARRANTIES AND REPRESENTATIONS. Borrower covenants,
warrants and represents to the Lender that all representations and warranties of
Borrower contained in this Agreement and the other Loan Documents shall be true
at the time of Borrower's execution of this Agreement and the other Loan
Documents, and shall survive the execution, delivery and acceptance thereof by
the parties thereto and the closing of the transactions described therein or
related thereto.
ARTICLE VI
Conditions of Closing
The obligation of the Lender to make the Line of Credit Loan or Term
Loan and issue any Letters of Credit is subject to the continuing accuracy of
all representations and warranties of Borrower contained herein and in the other
Loan Documents and the performance or fulfillment of all conditions and
agreements by Borrower contained herein and therein, including the following:
6.1. LEGAL OPINIONS. On the Closing Date, the Lender shall have
received the favorable opinion of Kilpatrick Stockton, L.L.P., counsel for the
Borrower and WD to the effect set forth in Exhibit C attached hereto and
incorporated herein by reference.
6.2. CLOSING DOCUMENTS. Borrower shall deliver or cause to be
delivered to the Lender on or prior to the Closing Date each of the following,
in form and substance satisfactory to the Lender and its special counsel:
(a) the executed Notes and executed counterparts of this
Agreement, the Guaranty, the Collateral Assignments, the Cash
Collateral Documents, the Stock Pledge Agreement and the Security
Agreement;
(b) Uniform Commercial Code financing statements
covering the property described in the Security Agreement, Stock
Pledge Agreement and the Collateral Assignments;
(c) resolutions of the Board of Directors of the Borrower
certified by the Secretary of the Borrower as of the Closing Date,
approving the transactions contemplated by this Agreement, and
approving the form of this Agreement, the Security Agreement, the Notes
and the Loan Documents, and authorizing execution, delivery and
performance thereof;
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(d) resolutions of the Boards of Directors of each of the
Guarantors certified by the Secretary of each respective Guarantor as
of the Closing Date, approving the form of the Guaranty and Security
Agreement and authorizing the execution, delivery and performance
thereof;
(e) specimen signatures of all officers of Borrower or
any Subsidiary executing any of the Loan Documents, certified by an
officer of Borrower;
(f) (a) copy of a Good Standing Certificate of the State of
Delaware concerning the Borrower and the Articles of Incorporation of
Borrower certified by the Secretary of State of Delaware to be a true
and correct copy as currently in effect and a copy of the Bylaws
certified by the Secretary of the Borrower to be a true and correct
copy as currently in effect and (b) copy of a Good Standing Certificate
of the State of Georgia concerning WD and the Articles of Incorporation
of WD certified by the Secretary of State of Georgia to be a true and
correct copy as currently in effect and a copy of the Bylaws certified
by the Secretary of WD to be a true and correct copy as currently in
effect;
(g) certificate of a recent date of the Secretary of
State of North Carolina as to the authority of the Borrower to do
business in North Carolina and the good standing of the Borrower;
(h) evidence of insurance in form and amounts
satisfactory to the Lender, and meeting the requirements of Section
7.5 hereof;
(i) (a) a certificate of the chief financial officer of the
Borrower to the effect that no litigation or proceedings are pending or
threatened which might reasonably be expected to adversely affect the
Borrower's ability to perform its obligations under this Agreement or
operation of the Borrower's business and (b) a certificate of the chief
financial officer of WD to the effect that no litigation or proceedings
are pending or threatened which might reasonably be expected to
adversely affect WD's ability to perform its obligations under the
Guaranty Agreement or operation of WD's business;
(j) a Borrowing Base Certificate, dated as of July 31, 1997,
completed and executed by the chief financial officer of Borrower which
Borrowing Base Certificate shall indicate at least $2,000,000 in
availability at the Closing Date over the sum of (i) outstanding
undrawn Letters of Credit and outstanding Reimbursement Obligations,
(ii) the principal balance of the Term Loan and (iii) the principal
balance of the Line of Credit Loan;
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(k) a certificate of the chief financial officer of the
Borrower that the Borrower is in full compliance with the terms of
Sections 8.1, 8.2, 8.3, 8.4 and 8.5 hereof;
(l) evidence all existing liens and financing statements in
favor of Persons other than the Lender and covering the collateral for
the Loans and the obligations in respect of the Letters of Credit have
been cancelled or released;
(m) evidence the acquisition of WD will be completed
simultaneously with the making of the Loans;
(n) Landlord waivers in form satisfactory to Lender by
the landlords of each leased facility of Borrower or any Subsidiary;
(o) the consolidated financial statements of the Borrower and
its Subsidiaries for the Fiscal Year 1996, including balance sheets,
income and cash flow statements, audited by independent public
accountants acceptable to Lender and prepared in conformity with
generally accepted accounting principles, and consolidated financial
statements of the Borrower for the fiscal quarter ended March 29, 1997
and of WD for the month ended May 31, 1997;
(p) evidence there shall not have occurred a material adverse
change since the Borrower's or WD's most recent annual financial
statements in the business, assets, operations, condition (financial or
otherwise) or prospects of the Borrower and its Subsidiaries and WD, or
in the facts and information regarding such entities as represented to
Lender to date;
(q) evidence of the absence of any action, suit, investigation
or proceeding pending or threatened in any court or before any
arbitrator or governmental authority that purports to affect the
Borrower or its Subsidiaries, or any transaction contemplated hereby,
or that could have a material adverse effect on the Borrower and its
Subsidiaries or any transaction contemplated hereby or on the ability
of the Borrower and its Subsidiaries to perform their obligations under
the documents to be executed in connection with this Agreement;
(r) the Borrower and its Subsidiaries shall be in
compliance with all their existing financial obligations;
(s) receipt and review, with results satisfactory to the
Lender and its special counsel, of information regarding litigation,
tax, accounting, labor, insurance, pension liabilities (actual or
contingent), real estate leases, material contracts, debt agreements,
property ownership, and contingent liabilities of the Borrower and its
Subsidiaries;
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(t) the Lender having completed a field examination of
WD's receivables and inventory and concluded that the same are
satisfactory; and
(u) such other documents, instruments and certificates
as the Lender may reasonably request.
ARTICLE VII
Affirmative Covenants
Borrower covenants that, so long as any portion of the Notes remains
unpaid or any amount is owed by Borrower to Lender in respect of any Letter of
Credit, unless the Lender otherwise consents in writing, it will:
7.1. Financial Reports and Other Data
(a) As soon as practicable and in any event within forty-five
(45) days after the end of each fiscal quarter, other than the last
quarter of each Fiscal Year, deliver, or cause to be delivered, to the
Lender (i) a consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries, and related consolidated and
consolidating statements of income and retained earnings and cash flow
for such quarter and for the period from the beginning of the then
current Fiscal Year to the end of such quarter, all in reasonable
detail and certified by the chief financial officer of the Borrower to
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, subject only to changes
resulting from normal year-end adjustments; and (ii) computations
demonstrating compliance with the provisions of Sections 8.1, 8.2, 8.3,
8.4 and 8.5 hereof;
(b) As soon as practicable and in any event within ninety (90)
days after the end of each Fiscal Year, deliver to the Lender (i)
consolidated and consolidating balance sheets of Borrower and its
Subsidiaries as at the end of such Fiscal Year, and related
consolidated and consolidating statements of income, retained earnings
and cash flow for such Fiscal Year, setting forth in each case in
comparative form figures from the annual audit for the preceding Fiscal
Year, all in reasonable detail and satisfactory in scope to the Lender
and certified by and containing (as to the consolidated statements) an
unqualified opinion, without exception not satisfactory to the Lender,
of independent certified public accountants acceptable to the Lender,
(ii) a copy of any letter or report provided by such accountants to
Borrower or members of Borrower's management in connection with or as a
result of such audit relating to such Borrower's operations or
management of its financial affairs, (iii) a certificate of the duly
authorized financial officer of Borrower containing
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computations in reasonable detail evidencing compliance with Sections 8.1, 8.2,
8.3, 8.4 and 8.5 hereof;
(c) Together with each delivery of those items required by
clause (a) and (b) above, Borrower shall deliver to the Lender a
certificate setting forth (i) that to the best of its knowledge,
Borrower and its Subsidiaries have kept, observed, performed and
fulfilled each and every Agreement binding on them contained in this
Agreement and the other Loan Documents, and is not at the time in
default of the keeping, observance, performance or fulfillment of any
of the terms, provisions and conditions hereof or thereof, and (ii)
that no Default or Event of Default has occurred, or specifying all
such defaults and events of which they may have knowledge;
(d) Deliver to Lender the following: (i) Every two weeks,
beginning August 15, 1997, a completed Borrowing Base Certificate; and,
if requested by the Lender, (ii) on or before the tenth day following
the end of each fiscal quarter (or on a more frequent basis if
requested by Lender) an accounts receivable aging report as of the end
of the immediately preceding fiscal quarter; each in form and substance
satisfactory to the Lender;
(e) With reasonable promptness, deliver such additional
financial or other data as the Lender may reasonably request.
The Lender is hereby authorized to deliver a copy of any financial statements or
any other information relating to the business, operations or financial
condition of any Borrower and its Subsidiaries which may be furnished to it or
come to its attention pursuant to this Agreement or otherwise, to any regulatory
body or agency having jurisdiction over the Lender or to any person which shall,
or shall have the right or obligation to, succeed to all or any part of the
Lender's interest in any of the Notes and the Loan Documents.
7.2. MAINTAIN SECURITY INTEREST. Promptly notify the Lender of the
acquisition of any real property and execute a deed of trust and security
Agreement and related Uniform Commercial Code financing statement covering such
real property.
7.3. TAXES AND LIENS. Promptly pay, or cause to be paid, (i) all
taxes, assessments and other governmental charges which may lawfully be levied
or assessed upon the income or profits of Borrower, or upon any property, real,
personal or mixed, belonging to Borrower, or upon any part thereof, (ii) any
lawful claims for labor, material and supplies which, if unpaid, might become a
Lien or charge against any such property and (iii) any and all amounts required
to be paid to all Federal, state, local and other taxing authorities in respect
of employee withholdings.
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7.4. BUSINESS AND EXISTENCE. Do or cause to be done all things
necessary to preserve and to keep in full force and effect its corporate
existence and rights and its franchises, trade names, service marks, patents,
trademarks, permits, know-how, trade secrets and other proprietary rights which
are reasonably necessary for the continuance of its business.
7.5. INSURANCE; PAYMENT OF PREMIUMS. At its sole cost and expense,
keep and maintain its properties insured with nationally reputable companies for
their full insurable value against loss or damage by fire, theft, explosion,
sprinklers and all other hazards and risks ordinarily insured against under
extended coverage policies in use in the jurisdiction where such properties are
located. In addition, Borrower shall obtain and maintain in full force and
effect policies of liability insurance, workers' compensation insurance and
business interruption insurance with nationally reputable companies in amounts
at least equal to that carried by persons in a similar size of business.
7.6. MAINTAIN PROPERTY. Maintain its properties in good order and
repair and, from time to time, make all needful and proper repairs, renewals,
replacements, additions and improvements thereto, so that the business carried
on may be properly and advantageously conducted at all times in accordance with
prudent business management.
7.7. BOOKS OF RECORD AND ACCOUNT. Keep and cause each Subsidiary to
keep, proper books of record and accounts in which full, true and correct
entries, shall be made of its transactions in accordance with generally accepted
accounting principles applied on a consistent basis.
7.8. PAYMENT OF INDEBTEDNESS. Pay when due (or within applicable grace
periods) all Indebtedness due third persons, except when the amount thereof is
being contested in good faith by appropriate proceedings and with adequate
reserves therefor being set aside on the books of Borrower.
7.9. RIGHT OF INSPECTION. Permit any person designated by the Lender
to visit and inspect any of the properties, corporate books and financial
reports of Borrower, and to discuss its affairs, finances and accounts with its
principal officers and independent certified public accountants, all at such
reasonable times and as often as the Lender may reasonably request, including an
annual collateral audit of the Borrower by Lender at the expense of Borrower.
7.10. OBSERVE ALL LAWS. Conform to and duly observe all laws with
respect to the conduct of its business.
7.11. COVENANTS EXTENDING TO SUBSIDIARIES. Cause each of its
Subsidiaries to do with respect to itself, its business and its
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assets, each of the things required of Borrower in Sections 7.2 through 7.10,
inclusive.
7.12. OFFICER'S KNOWLEDGE OF DEFAULT. Upon an officer of Borrower
obtaining knowledge of any Default or Event of Default hereunder or under any
other obligation of Borrower or any Subsidiary, cause such officer to promptly
deliver to the Lender a certificate specifying the nature thereof, the period of
existence thereof, and what action Borrower proposes to take with respect
thereto.
7.13. SUITS OR OTHER PROCEEDINGS. Upon an officer of Borrower
obtaining knowledge of any material litigation, dispute or proceedings being
instituted or threatened against Borrower or any Subsidiary, or any attachment,
levy, execution or other process being instituted against any assets of Borrower
or any Subsidiary, promptly deliver to the Lender a certificate stating the
nature and status of such litigation, dispute, proceeding, levy, execution or
other process.
7.14. NOTICE REGARDING HAZARDOUS MATERIAL OR ENVIRONMENTAL COMPLAINT.
Give to Lender immediate written notice of any complaint, order, directive,
claim, citation or notice by any governmental authority or any person with
respect to the use, generation, storage, transportation or disposal of Hazardous
Material by Borrower or any Subsidiary. Borrower shall promptly comply with its
obligations under law with regard to such matters.
7.15. ENVIRONMENTAL INDEMNIFICATION. Defend, indemnify and hold Lender
harmless from and against any and all claims, losses, liabilities, damages and
expenses (including, without limitation, cleanup costs and reasonable attorneys'
fees including those arising by reason of any of the aforesaid or an action
against Borrower under this indemnity) arising directly or indirectly from, out
of or by reason of the handling, storage, treatment, emission or disposal of any
Hazardous Material by or in respect of Borrower or any Subsidiary.
7.16. FURTHER ASSURANCES. At its cost and expense, upon request of the
Lender, duly execute and deliver or cause to be duly executed and delivered, to
the Lender such further instruments, documents, certificates, financing and
continuation statements, and do and cause to be done such further acts that may
be reasonably necessary or advisable in the opinion of the Lender to carry out
more effectively the provisions and purposes of this Agreement and the other
Loan Documents.
7.17. ERISA REQUIREMENT. Comply with all requirements of ERISA
applicable to it and furnish to the Lender as soon as possible (i) a certificate
describing in reasonable detail any Reportable Event (as defined in ERISA) with
respect to any Plan that has occurred and any action which Borrower proposes to
take with respect thereto, (ii) a copy of any notice that Borrower or
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any Subsidiary may receive from the Pension Benefit Guaranty Corporation
relating to the intention of the Pension Benefit Guaranty Corporation to
terminate any Plan or Plans or to appoint a trustee to administer any such
Plan, and (iii) a certificate setting forth details as to any failureto make a
required installment or other payment with respect to a Plan and the
action that Borrower or any Subsidiary proposes to take with respect thereto.
7.18. CONTINUED OPERATIONS. Continue at all times to conduct its
business and engage principally in the same line or lines of business
substantially as heretofore conducted.
7.19. COLLATERAL AUDIT. Cause to be delivered to Lender within sixty
(60) days of request by Lender, a collateral audit from an auditing firm
acceptable to the Lender indicating collateral values of the collateral securing
the Loans and the obligations representing the Letters of Credit satisfactory to
the Lender.
7.20. NEW SUBSIDIARIES. Promptly after the formation or acquisition of
any Subsidiary subsequent to the Closing Date, cause to be delivered to the
Lender a Guaranty in the form of Exhibit G hereto and a Stock Pledge Agreement
in the form of Exhibit I hereto, a Security Agreement in the form of Exhibit H
hereto and a resolution of the Board of Directors of such Subsidiary, certified
by the Secretary thereof, approving the form of the Guaranty, Security Agreement
and Stock Pledge Agreement and authorizing the execution, delivery and
performance of such Guaranty, Security Agreement and Stock Pledge Agreement,
along with an opinion letter of counsel for the Subsidiary covering such matters
as the Lender may reasonably request. In the event any Existing Subsidiaries
ever has total assets in excess of $250,000, the provisions of this Section 7.20
shall be applicable to such entity.
7.21. SWAP AGREEMENTS. On or before the date 60 days from the Closing
Date the Borrower shall enter into one or more Swap Agreements with the Lender
in a minimum aggregate notional amount of $5,000,000 containing terms and
conditions acceptable to the Lender.
7.22. OWNERSHIP OF REAL PROPERTY. Within thirty days following the
acquisition by Borrower or any Subsidiary of any real property, Borrower will
cause to be delivered to Lender a deed of trust or mortgage on such real
property conveying to Lender a first priority lien on such real property subject
to no encumbrances not acceptable to Lender, together with such surveys, title
insurance policies and other standard real estate documentation as Lender may
reasonably request.
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ARTICLE VIII
Negative Covenants of Borrower
Borrower covenants and agrees that from the date hereof until payment
in full of the principal and interest on the Notes and all amounts owing by the
Borrower to Lender in respect of any Letter of Credit are paid in full, unless
the Lender shall otherwise consent in writing, it will not, nor will it permit
any Subsidiary to, either directly or indirectly:
8.1. CURRENT RATIO. Permit the ratio of Consolidated Current Assets to
Consolidated Current Liabilities at any time to be less than 1.5 to 1.0.
8.2. LEVERAGE RATIO. Permit the ratio of (x) Indebtedness for Money
Borrowed of the Borrower and Subsidiaries, all determined on a consolidated
basis to (y) EBITDA to exceed the following at the measuring dates listed below:
Measuring Dates are
Fiscal Quarters Ending During
The Following Periods Ratio
Closing Date to last day 2.25 to 1.00
preceding Fiscal Year End 1998
Fiscal Year End 1998 to last day 2.00 to 1.00
preceding Fiscal Year End 1999
Fiscal Year End 1999 to last day 1.75 to 1.00
preceding Fiscal Year End 2000
All periods thereafter 1.50 to 1.00
8.3. CONSOLIDATED WORKING CAPITAL. Cause, suffer or permit
Consolidated Working Capital to be less than $15,000,000 at any time.
8.4. CONSOLIDATED TANGIBLE NET WORTH. Cause, suffer or permit
Consolidated Tangible Net Worth at any time to be less than (i) $14,500,000 at
June 30, 1997 (the "Initial Date") and until (but excluding) the last day of the
fiscal quarter immediately following the fiscal quarter in which the Initial
Date occurs, and (ii) for each subsequent period consisting of the period from
(and including) the last day of a fiscal quarter to the day preceding the last
day of the next fiscal quarter of the Borrower (each such period a "Measuring
Period"), the sum of (A) the amount of Consolidated Tangible Net Worth required
to be maintained pursuant to this Section 8.4 during the prior Measuring Period
(using $14,500,000 for the period beginning June 30, 1997) plus (B) an amount
equal to fifty percent (50%) of Consolidated Net Income of
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the Borrower and its Subsidiaries (without deduction for any negative
Consolidated Net Income) during the prior Measuring Period and (C) 100% of the
Net Proceeds of all issuances of equity by the Borrower since June 30, 1997.
8.5. CONSOLIDATED FIXED CHARGE RATIO. Cause, suffer or permit at any
time during any Four-Quarter Period of the Borrower, the Consolidated Fixed
Charge Ratio for such Four-Quarter Period to be less than 1.15 to 1.0.
In calculating compliance with this Section, there shall be excluded
from the calculation the charge incurred during the third fiscal quarter of 1996
of $531,790, before income tax provision of $199,000, from the write-off of the
Copyguard technology.
8.6. MORTAGES, LIENS, ETC. Incur, create, assume or permit to exist
any Lien of any kind upon any of their respective properties or assets of any
character, including without limitation interests under conditional sales or
other title retention agreements, except (i) Permitted Liens; (ii) Liens
existing as of the date hereof and disclosed in the financial statements and
notes thereto described in Section 5.3; and (iii) Liens securing indebtedness
permitted under Section 8.7(iii).
8.7. INDEBTEDNESS. Create, assume, incur, or in any manner be or
become liable in any manner to any person or persons directly or indirectly for
any Indebtedness, other than:
(i) The credit provided for herein; or
(ii) Lease obligations incurred in the ordinary course
of business of up to, in the aggregate, $600,000 in any fiscal year;
or
(iii) Indebtedness incurred to Persons other than the
Lender in the ordinary course of business, provided the maximum
aggregate principal amount outstanding of all such Indebtedness shall
not exceed $1,000,000 at any time; or
(iv) Other Indebtedness to the Lender.
8.8. NAME CHANGE, MERGER, SALE OF ASSETS, DISSOLUTION, ETC. Change
its name, enter into any transaction of merger or consolidation, or transfer,
sell, assign, lease or otherwise dispose of any of its material properties or
assets, or substantially all its properties or assets, or any stock or any
Indebtedness of any Subsidiary, or any assets or properties necessary for the
proper conduct of its business, or change the nature of its business, or wind
up, liquidate or dissolve, or agree to any of the foregoing, or permit any
Subsidiary to do so, except that any Subsidiary may dissolve or transfer all or
a substantial part of its properties and assets to, or may merge into, Borrower
or any other Subsidiary.
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8.9. CHANGE IN CONTROL. Become a party to or the subject of any
Agreement, transaction or related series of transactions (i) pursuant to or as a
result of which any person or group of persons acting in concert, other than
Robert S. Speizman, the current owner, acquires voting control, directly or
indirectly, whether by tender offer or in one or more negotiated block or market
transactions, of not less than twenty percent (20%) of the issued and
outstanding capital stock of any class of Borrower or (ii) to which Section
368(a) of the Code applies and which involves not less than twenty percent (20%)
of the issued and outstanding capital stock of any class of Borrower.
8.10. COMPLIANCE WITH ERISA; FUNDING OF PLANS. Engage in any
transaction in connection with which Borrower or any related person would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code; terminate any Plan in a manner, or
take any other action with respect to any such Plan, which would result in any
liability of Borrower or any Subsidiary to the Pension Benefit Guaranty
Corporation; as of any Plan year, permit to exist any accumulated funding
deficiency (as defined in Section 412 of the Code); or contribute or be
obligated to contribute to any multi-employer Plan.
8.11. INVESTMENTS. Other than its initial investment in WD effective
at the closing of the acquisition of WD, make any investments in any Person
(including Subsidiaries) or purchase or otherwise acquire any capital stock,
properties, substantially all the assets or obligations of, or any other equity
interest in, any Person (including Subsidiaries)in excess of (in the aggregate)
$1,000,000.
8.12. INVESTMENTS IN OR LOANS TO SUBSIDIARIES. Make any loan to any
Subsidiary or any investments in any Subsidiary or purchase or otherwise acquire
any capital stock or properties of any Subsidiary, except to the extent
permitted by Section 8.11. The Lender acknowledges the existence of a loan from
the Borrower to Speizman Industries Europe in the outstanding amount, as of the
Closing Date, of approximately $250,000 and the equity interest of the Borrower
in Speizman Industries Europe.
ARTICLE IX
Events of Default
If any one or more of the following events (herein called "Events of
Default") shall occur:
9.1. PAYMENT OF LIABILITIES. If Borrower defaults in the payment of
all or any payment of principal or interest on either of the Notes when due and
payable or declared due and payable or any amount owing in respect of a Letter
of Credit when due and payable; or
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9.2. PAYMENT OF OTHER OBLIGATIONS. If Borrower (i) defaults in payment
of principal of or interest on any other Indebtedness beyond any period of grace
provided with respect thereto, or (ii) defaults in the performance of any other
Agreement, covenant, term or condition contained in any Agreement under which
any such Indebtedness is created if the effect of such performance default
described in this clause (ii) is to cause, or permit the holder or holders of
such obligation (or a trustee in behalf of such holder or holders) to cause,
such obligation to become due prior to its stated maturity; or
9.3. REPRESENTATION OR WARRANTY. If any representation, warranty,
statement, report or certification made by Borrower or any Subsidiary herein or
in any other Loan Document shall be false or misleading in any material respect
on the date as of which made; or
9.4. SELECTED COVENANTS. If Borrower defaults in the performance or
observance of any Agreement or covenant contained in Sections 7.12, 7.13 or 7.14
or Article VIII hereof; or
9.5. OTHER LOAN DOCUMENTS. The occurrence of any Event of Default as
defined in any of the other Loan Documents; or
9.6. OTHER COVENANTS. If Borrower defaults in the performance or
observance of any other agreement, covenant, term or condition binding on it
contained herein other than as set forth in Section 9.4 above or in any other of
the other Loan Documents and such default shall not have been remedied within
thirty (30) days, or lesser period set forth in such agreement or documents,
after the earlier to occur of Borrower becoming aware of such default or written
notice thereof specifying the default shall have been received by Borrower from
the Lender; or
9.7. LIQUIDATION OR DISSOLUTION. Liquidation or dissolution of
Borrower or any Subsidiary, or suspension of the business of Borrower or any
Subsidiary, or filing by Borrower or any Subsidiary of a voluntary petition or
an answer seeking reorganization, arrangement, readjustment of its debts or for
any other relief under the Bankruptcy Code, as amended, or under any other
insolvency act or law, state or federal, now or hereafter existing, or any other
action of Borrower or any Subsidiary indicating its consent to, approval of, or
acquiescence in, any such petition or proceeding; the application by Borrower or
any Subsidiary for, or the appointment by consent or acquiescence of, a
receiver, a trustee or a custodian of Borrower or any Subsidiary or for all or a
substantial part of its property; the making by Borrower or any Subsidiary of an
assignment for the benefit of creditors; the inability of Borrower or any
Subsidiary or the admission by Borrower or any Subsidiary in writing of its
inability to pay its debts as they mature; or
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9.8. INVOLUNTARY PROCEEDINGS. Filing of an involuntary petition
against Borrower or any Subsidiary in bankruptcy or seeking reorganization,
arrangement, readjustment of its or their debts or for any other relief under
the Bankruptcy Code, as amended, or under any other insolvency act or law, state
or federal, now or hereafter existing; or the involuntary appointment of a
receiver, a trustee or a custodian of Borrower or any Subsidiary or for all or a
substantial part of its or their property; the issuance of a warrant of
attachment, execution or similar process against any substantial part of the
property of Borrower or any Subsidiary, and the continuance of any of such
foregoing events for thirty (30) days undismissed or undischarged; or
9.9. ORDER OF DISSOLUTION; FORFEITURE ACTION. If (i) any order is
entered in any proceedings against Borrower or any Subsidiary decreeing the
dissolution or split-up of Borrower or any Subsidiary, and such order remains in
effect for more than sixty (60) days; or (ii) any charges (whether by
indictment, information or other criminal process) are instituted against
Borrower or any Subsidiary under any criminal statute, state or federal, for
which seizure or forfeiture of assets is a potential penalty or remedial
measure; or
9.10. JUDGMENT. If a final judgment, which with other outstanding
final judgments against Borrower and its Subsidiaries, if any, exceeds
applicable insurance coverage by an aggregate of $50,000 shall be rendered
against Borrower or any Subsidiary, and if within thirty (30) days after entry
thereof such judgment shall not have been discharged or execution thereof stayed
pending appeal, or if within thirty (30) days after the expiration of any such
stay such judgment shall not have been discharged;
then, at any time thereafter, if such Event of Default or any other Event of
Default shall not have been waived,
(a) the Lender may, at its option, (i) declare the Notes and all other
liabilities owing by the Borrower or any Subsidiary to the Lender thereunder or
in respect of any Letter of Credit to be forthwith due and payable, whereupon
(or otherwise upon the occurrence of any event described in Section 9.7 or 9.8
hereof whether or not such declaration shall be made) the Notes and any other
such liabilities shall forthwith become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are expressly waived,
anything contained herein or in the other Loan Documents to the contrary
notwithstanding and (ii) refuse to issue any additional Letters of Credit and
enforce its rights against the Borrower under the documents relating to the
Letters of Credit. After any such acceleration, the Lender may immediately do
all other things provided for by law or by this Agreement or by the other Loan
Documents; and
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(b) the Borrower shall, upon demand of the Lender, deposit cash with
the Lender in an amount equal to the sum of (i) the aggregate amount remaining
undrawn under all Letters of Credit plus (ii) Reimbursement Obligations then
outstanding, as collateral security for the repayment of any future drawings or
payments under such Letters of Credit, and the Borrower shall forthwith deposit
and pay such amounts and such amounts shall be held by the Lender and subject to
a lien and security interest in favor of the Lender and pursuant to the terms of
the applicable L/C Documents.
ARTICLE X
Miscellaneous
10.1. WAIVER OF DEFAULT; CUMULATIVE REMEDIES. The Lender may, by
written notice to the Borrower, at any time and from time to time, waive any
default in the performance or observance of any condition, covenant or other
term hereof or any Event of Default which shall have occurred hereunder and its
consequences. Any such waiver shall be for such period and subject to such
conditions as shall be specified in any such notice. No failure to exercise and
no delay in exercising, on the part of the Lender, any right, power or privilege
hereunder, or other conduct, custom or course of dealing, shall operate as a
waiver or amendment of any such right, power or privilege; nor shall 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.
10.2. AMENDMENTS. The Lender and the Borrower may from time to time,
enter into written agreements supplemental hereto for the purpose of adding any
provisions to this Agreement or the other Loan Documents or changing in any
manner the rights of the Lender or of the Borrower hereunder. Any such written
supplemental Agreement shall be binding upon the Borrower, the Lender and the
holders of the Notes.
10.3. NOTICES. All notices, requests and demands to or upon the
respective parties hereto under this Agreement and all other Loan Documents
shall be deemed to have been given or made (i) three (3) Business Days next
following the date when deposited in the mail, postage prepaid by registered or
certified mail, return receipt requested, or (ii) one (1) Business Day following
the date when deposited for shipment, transmittal charges prepaid, with a
recognized courier service providing overnight courier service to the
appropriate destination, or (iii) on the date when transmitted by telefacsimile
device, if received before 5:00 p.m. on the date of such telefacsimile and such
date is a Business Day, otherwise the next Business Day, in any case addressed
as follows or to such other address as may be hereafter designated in writing by
the respective parties:
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The Borrower: Speizman Industries, Inc.
508 West 5th Street
Charlotte, North Carolina 28231
Telefacsimile: 704-376-3153
Attention: Robert S. Speizman
The Lender: NationsBank, N.A.
101 North Tryon Street, 15th Floor
Mail Code: NC1-008-15-003
Charlotte, North Carolina 28255
Telefacsimile: 704-386-8694
Attention: Dawn Long
with copy to: NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Telefacsimile: 704-386-1270
Attention: J. Timothy Martin
except in cases where it is expressly herein provided that such notice, request
or demand is not effective until received by the party to whom it is addressed
(in which case the same shall be effective upon receipt).
10.4. SURVIVAL OF AGREEMENTS. All agreements, representations and
warranties made herein shall survive the delivery of the Note and the making of
the Loan hereunder and the provisions of Sections 7.15 and 10.7 shall survive
final repayment of the Notes in full and expiration or termination of this
Agreement.
10.5. GOVERNING LAW. This Agreement and the other Loan Documents shall
be deemed to be contracts made under, and for all purposes shall be governed by
and construed in accordance with, the internal laws of the State of North
Carolina.
10.6. ENFORCEABILITY OF AGREEMENT. Should any one or more of the
provisions of this Agreement or the other Loan Documents be determined to be
illegal or unenforceable as to one or more of the parties, all other provisions
nevertheless shall remain effective and binding on the parties hereto.
10.7. EXPENSES; INDEMNITY. Borrower agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay all reasonable
out-of-pocket expenses (including without limitation attorneys' fees and
disbursements) incurred by Lender in connection with this Agreement, the other
Loan Documents and any and all amendments, modifications and supplements thereof
or thereto or the enforcement by the Lender of the terms and provisions hereof.
Borrower further agrees to indemnify and save harmless Lender from and against
any and all losses, liabilities and damages and expenses (including, without
limitation, attorneys' fees and
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disbursements) in connection therewith or incurred thereby as a result of any of
the transactions contemplated hereby, except as a result of the gross negligence
or willful misconduct of the Lender.
10.8. LIENS; SET OFF. Borrower hereby grants to the Lender a
continuing lien for the obligations evidenced by the Notes or in respect of any
Letter of Credit or hereby upon any and all monies, securities and other
property of the Borrower and the proceeds thereof, now or hereafter held or
received by or in transit to, the Lender from or for Borrower, and also upon any
and all deposits (general or special) and credits of Borrower against the
Lender, at any time existing. Upon the occurrence of an Event of Default
hereunder, the Lender is hereby authorized, without notice to Borrower, to set
off, appropriate and apply any and all monies, securities and other properties
of Borrower hereafter held or received by or in transit to the Lender from or
for Borrower, against any of such obligations.
10.9. EXECUTION OF COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument.
10.10. ENTIRETY. The Loan Documents embody the entire Agreement
between the parties and supersede all prior agreements and understandings, if
any, relating to the subject matter hereof and thereof.
10.11. BINDING EFFECT. The Loan Documents shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors,
assigns and legal representatives; provided, however, that Borrower may not,
without the prior written consent of Lender, assign any rights, powers, duties
or obligations thereunder.
10.12. WAIVER OF JURY TRIAL
(a) THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE
INSTITUTED IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF
MECKLENBURG, STATE OF NORTH CAROLINA, UNITED STATES OF AMERICA AND, BY
THE EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER EXPRESSLY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE IN, OR TO THE EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY
BY, ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE
BORROWER HEREBY IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO
THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR
PROCEEDING.
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(b) THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER
PROVIDED IN SECTION 10.3, OR BY ANY OTHER METHOD OF SERVICE PROVIDED
FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NORTH CAROLINA.
(c) NOTHING CONTAINED IN SUBSECTION (a) HEREOF SHALL PRECLUDE
THE LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION
WHERE THE BORROWER OR ANY OF THE BORROWER'S PROPERTY OR ASSETS MAY BE
FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE APPLICABLE LAWS OF ANY
SUCH JURISDICTION, THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN RESPECT OF ANY
SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE OF
JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER COURT OR COURTS
WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW.
(d) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS OR REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN
THE FUTURE BE DELIVERED IN CONNECTION THEREWITH, THE BORROWER AND THE
LENDER HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY
SUCH ACTION OR PROCEEDING.
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IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be duly executed under seal by their duly authorized officers, all
as of the day and year first above written.
ATTEST: SPEIZMAN INDUSTRIES, INC.
/s/ JOSEF SKLUT By: /s/ROBERT SPEIZMAN
________________________ _______________________________
Treasurer President
(Corporate Seal)
NATIONSBANK, N.A.
By: /s/ J. TIMOTHY MARTIN
___________________________________
Senior Vice President
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EXHIBIT 10.50
Milnor(R)
[LOGO]
Dealer
Agreement
B22FM90001
90017
<PAGE>
AGREEMENT made this 1st day of July, 1989 by and between PELLERIN MILNOR
CORPORATION, a Louisianan Corporation, with principal offices at 700 Jackson
Street, Kenner, Louisana, United States of America (hereinafter referred to as
"MILNOR"), and
WINK DAVIS EQUIPMENT COMPANY, INC.
with principal offices at 800 Miami Circle N.E., Atlanta GA 30324
(hereinafter referred to as "DEALER").
WITNESSETH
WHEREAS, MILNOR is a manufacturer of heavy duty commercial laundry machinery as
set forth in Exhibit A attached hereto and made a part hereof (hereinafter
referred to as "MACHINES"), and
WHEREAS, DEALER desires to be appointed by MILNOR as dealer of MACHINES in the
area of Primary Responsibility as set forth in Exhibit B attached hereto and
made a part hereof (hereinafter referred to as the "REGION"), and
WHEREAS, DEALER desires to be further appointed by MILNOR as Exclusive Dealer of
certain model MACHINES in a certain part of the REGION as set forth in Exhibit C
attached hereto and made a part hereof, and
WHEREAS, DEALER desires to be further appointed by MILNOR as Nonexclusive Dealer
of certain model MACHINES in a certain part of the REGION as set forth in
Exhibit D attached hereto and made a part hereof, and
WHEREAS, MILNOR desires to obtain in the REGION outstanding distribution of
MACHINES and to arrange for satisfactory warranty service, installation service
and after-sale service for MACHINES in the REGION:
NOW THEREFORE, the parties hereto agree as follows:
1. APPOINTMENT
(a) MILNOR hereby appoints DEALER as Dealer of MACHINES in the REGION and
DEALER accepts such appointment subject to the terms and conditions
hereinafter set forth The parties agree that within DEALER'S REGION,
DEALER shall have the responsibility (alone in regard to the models of
MACHINES and area specified in Exhibit C) to promote sales of MACHINES
and to develop and strengthen MILNOR's market position as measured by
sales within the REGION.
(b) DEALER is granted an exclusive dealership for the specific models of
MACHINES defined in Exhibit C and a Non-Exclusive dealership for the
specific models of MACHINES defined in Exhibit D, subject to all the
provisions and restrictions contained in this AGREEMENT.
(c) DEALER takes cognizance of the fact that MILNOR has no control over
the resale of MACHINES sold to other dealers and to jobbers, and that
MILNOR is not responsible for any actions of such dealers and jobbers
in the resale of MACHINES.
(d) MILNOR has the right to submit bids or sell, either directly or
indirectly through any other person, MACHINES destined for shipment to
or use in the REGION, if the MACHINES are purchased by or for use of
any agency, department, or bureau of the U.S. Government or with funds
provided by any agency of the U.S. Government. For purposes of this
AGREEMENT, agency is defined to include any executive department,
military department, government corporation, government controlled
corporation, or other establishment in the executive department of the
U.S. Government, or any regulatory agency.
(e) Notwithstanding any other provisions of this AGREEMENT, MILNOR has the
right to sell MACHINES directly to any National Account as specified
in Exhibit "E" attached hereto and made a part thereof. For MACHINES
destined to be sold to and/or used by any National Account as
specified in Exhibit "E", DEALER agrees to supervise the installation
of any such MACHINES
Page No. 1
<PAGE>
(including start up and check out), at MILNOR's request, for the
percent of MILNOR's Suggested List Price shown on Exhibit "E" for that
specific National Account.
(f) DEALER recognizes that MILNOR does now and/or may in the future
manufacture equipment to be sold under trade or other names or brands
different from the MILNOR name and the manufacture and sales of such
equipment and/or parts is not subject to the terms of this AGREEMENT,
nor does this AGREEMENT grant DEALER any right to sell such equipment
and/or parts.
2. BEST EFFORTS
DEALER shall, to the satisfaction of MILNOR and at its own expense, use its best
efforts to promote the sale of MACHINES in the REGION, which efforts shall
include but not be limited to the following:
(a) Providing an adequate sales force employed by DEALER to actively,
aggressively and successfully promote the sale of MACHINES.
(b) Taking such steps as will ensure that MACHINES sold in the REGION are
installed and operating to the satisfaction of the ultimate purchaser.
Such steps include but are not limited to the following:
(i) Providing prompt and effective pre-sale engineering services
to help the customer select the proper MILNOR - and ancillary
- equipment, by size and type, and determining all special
requirements or specifications needed to assure that the
equipment will adequately perform the work task for which it
is being acquired.
(ii) Inspecting the site upon which it is proposed to install
MACHINE(s). Making valid and meaningful recommendations for
proper site requirements - including (but not limited to)
foundations (should be totally familiar with foundation
requirements for rotating machinery), electrical services, hot
and cold water supplies, steam supply (if applicable),
drainage, ventilation, working area, etc.
(iii) Providing installation supervision - or its equivalent - to
insure that MACHINE(s) is properly installed so as to permit
it to function as intended.
(iv) Checking out all MACHINE functions after installation.
Verifying that MACHINE(s) is performing as intended by MILNOR
and as designed by MILNOR, making any reasonable necessary
adjustment to insure this.
(v) Providing start up assistance including operator orientation
and training during initial start up.
(vi) Providing adequate, prompt, competent, no-charge, after-sale
warranty labor service for a period of not less than 90 days
after each new MACHINE is placed in service. This warranty
must be communicated to each buyer of MACHINE sold by DEALER.
It is the specific and sole responsibility of DEALER to
provide this warranty labor for each MACHINE sold, for not
less than 90 days, and at no charge to either MILNOR or to the
customer.
(vii) Providing adequate, prompt and competent aftersale
non-warranty maintenance service, both by maintaining adequate
local stocks of authentic MILNOR spare parts, and by making
available sufficient skilled maintenance mechanics to be able
to respond to a service call request within a maximum of 48
hours from the time a customer makes such request. It is of
paramount importance to this contract that every machine be
returned to full service in a minimum of time and at a minimum
of expense in keeping with the nature of the required
maintenance.
(viii) When formally requested, sending at least one competent
maintenance mechanic to an official MILNOR SERVICE SCHOOL.
MILNOR agrees that such schools shall not last longer than one
week and not to make such a formal request more often than
once every 18 months.
Page No. 2
<PAGE>
(c) Providing appropriate promotional campaigns to stimulate the sale of
MACHINES, participating in major local and/or regional exhibitions
related to laundry, drycleaning, textile, and other industries which
customarily use laundry equipment.
(d) At DEALER's expense, listing the MILNOR tradename in the Yellow Pages
of major telephone directories (authorized by the telephone companies)
within DEALER's REGION, and listing DEALER's name as "authorized
dealer" in conjunction with or beneath the MILNOR tradename,
trademarks, and/or logo.
(e) When formally requested, sending at least one competent salesman to an
official MILNOR SALES SCHOOL. MILNOR agrees that such schools shall
not last longer than one week and not to make such a formal request
more often than once every 18 months.
(f) Providing to MILNOR on May 1 of each year annual forecasts of sales of
MACHINES by model in the REGION for the 12 months beginning the
following June 1. These forecasts shall reasonably reflect DEALER's
anticipated sale of MACHINES within the REGION and shall be considered
by MILNOR along with past history and future potential of the REGION
in establishing the sales goals for the twelve months following
June 1.
(g) Accepting annual sales goals provided by MILNOR for sales of MACHINES
within the REGION. Credit against these sales goals is not given for
sales outside the REGION.
(h) Promptly filling out and returning the lead followup report sent by
MILNOR bi-monthly, providing MILNOR the information necessary to
evaluate the results of its ongoing advertising campaigns and to
thereby improve them for the mutual benefit of DEALER and MILNOR.
3. NOTICE OF SALE TO ULTIMATE PURCHASER
In order to allow MILNOR to expeditiously advise the ultimate user of MACHINES
of any safety information that may be developed and in order to adequately
assesss the impact of MILNOR's advertising on the various markets, DEALER shall
communicate promptly to MILNOR immediately after it sells any MACHINE to an
ultimate purchaser; (1) the name and address of the ultimate purchaser; (2)
address of installation site; (3) purpose or classification of work; and (4)
type of such customer, or user.
4. SERVICE
It is of the essence of this AGREEMENT that the reputation for quality service
that MILNOR enjoys be rigidly maintained by DEALER. Consequently, DEALER agrees
to do everything in its power to maintain such reputation which shall include
but not be limited to the following:
(a) DEALER shall to the satisfaction of MILNOR provide and maintain at its
own expense an efficient installation and maintenance service on all
MACHINES, both in and out of warranty, in accordance with the service
manuals issued by MILNOR from time to time. DEALER shall see that all
necessary repairs to and replacement of parts of MACHINES are promptly
and properly made.
(b) DEALER shall service all MACHINES in the REGION at DEALER's normal
rates and schedule(s) whether or not such machines were actually sold
by DEALER. MILNOR shall exercise reasonable efforts to obtain from the
company which sold such MACHINES a Service Availability fee of five
percent (5%) of the List Price of such MACHINES for the DEALER,
provided DEALER advises MILNOR of the serial numbers of such MACHINES
within two years of the manufacture date of such machines. MILNOR
shall have no obligation nor liability to DEALER beyond that of
exercising said reasonable efforts. However, DEALER shall have no
obligation to service MACHINES sold by another MILNOR dealer who (at
the time service is required) is authorized to service that part of
the REGION where the MACHINE is installed nor shall any service
availability fee be due on such MACHINES.
(c) DEALER acknowledges that its service capabilities are adequate only
within the REGION, and consequently agrees to pay to MILNOR a Service
Availability fee of five percent (5%) of the list price of any MACHINE
sold by DEALER that is initially installed in the United States or
Cananda
Page No. 3
<PAGE>
but outside of the REGION, or seven and one half percent (7 1/2%) of
the list Price of any machine sold by DEALER that is initially
installed in any country except the United States and Canada. MILNOR
agrees to forward this Service Availability fee to the MILNOR dealer
into whose Area of Primary Responsibility the MACHINE is installed to
insure that such dealer will make service available for the user of
such MACHINES.
5. SPARE PARTS
(a) MILNOR shall advise DEALER of the inventory of spare parts required to
service MACHINES both in and out of warranty, and DEALER agrees to
maintain such inventory. Only MILNOR spare parts shall be used by
DEALER to service and maintain MACHINES in warranty. DEALER may use
MILNOR spare parts, or their approved functional equivalents, to
service and maintain MACHINES out of warranty.
(b) DEALER shall order, and MILNOR pursuant to each order shall supply to
DEALER EX-FACTORY Kenner, ordered spare parts both in and out of
warranty in accordance with the prices in effect at the date of
shipment. Paragraph 12 shall apply to such orders.
(c) MILNOR shall not knowingly sell parts at wholesale prices to any
entity in the REGION other than an authorized MILNOR dealer or any
entity listed in Exhibit F.
(d) DEALER takes cognizance of the fact that MILNOR may, at its option,
also sell replacement parts to a former MILNOR dealer, within twelve
months from the date of termination of such dealer and agrees to be
bound by the same conditions in the event that this AGREEMENT is
terminated for any reason.
6. TERM
This AGREEMENT shall automatically terminate on the date set forth in Exhibit G
which can be extended only by mutual written agreement of the parties. DEALER
shall not be excused from performing any obligations arising under this
AGREEMENT which it incurred prior to the termination of this AGREEMENT even if
notice of termination has been given. The execution of this AGREEMENT by MILNOR
shall in no way be construed as a continuing obligation on the part of MILNOR to
retain DEALER as a dealer or otherwise beyond the term of this AGREEMENT.
7. TERMINATION
(a) In any one or more of the following events this AGREEMENT shall
automatically terminate without any necessity for notice or any
opportunity to cure such termination and will be effective immediately
upon the occurence of such events; and MILNOR has the right not to
deliver any or all of DEALER's unfilled orders;
The DEALER (being an individual) shall die; or (being a partnership or
corporation) shall be dissolved, liquidated or cease to exist at law;
or become insolvent (in either the equity or bankruptcy sense); commit
an act of bankruptcy; make an assignment for the benefit of creditors;
call a meeting of creditors; appoint a committee of creditors or a
liquidating agent; offer a composition or extension to creditors; make
a bulksale; send a notice of an intended bulk sale; or in the event a
proceeding in bankruptcy or any proceeding, suit or action (at law, in
equity or under any of the provisions of a Bankruptcy Act or
amendments thereto), for reorganization, composition, extension,
arrangement, receivership, liquidation or dissolution has been
commenced by or against the DEALER; or in the event an application for
the appointment, or the appointment in any jurisdiction at law or in
equity is made, of a receiver of the DEALER or any of the property of
the DEALER; or in the event a final unappealed judgment shall be
recovered, or a warrant of attachment or an injunction or governmental
tax lien, or levy shall be issued against the DEALER and shall remain
unsatisfied for thirty (30) days, or if a substantial portion of the
property of the DEALER shall be sold or offered for sale pursuant to
the enforcement of a judgment of a court.
Page No. 4
<PAGE>
(b) MILNOR has the right to terminate this AGREEMENT at any time upon
thirty (30) days notice to DEALER in any one of the following events:
(i) DEALER has failed to purchase a minimum requirement of MACHINES
as determined by MILNOR in its sole discretion.
(ii) DEALER has, in the sole opinion of MILNOR, to supply adequate
installation, warranty, or after-sale service;
(iii) DEALER has failed, in the opinion of MILNOR, to
adequately advertise and promote MACHINES in the REGION;
(iv) DEALER is more than thirty (30) days delinquent in the payment of
any invoice;
(v) DEALER has failed, in the opinion of MILNOR, to perform any other
term or provision of this AGREEMENT;
(vi) The management, key employees or major stockholders of DEALER
change by reason of death, disability, retirement, termination or
otherwise.
(c) Upon termination of this AGREEMENT, pursuant to sub-paragraphs (a) or
(b) of this Paragraph, DEALER shall not be relieved from performing
any of its obligations arising under this AGREEMENT which it incurred
prior to the date of termination even if notice of termination has
been given. MILNOR, at its option, may fill all orders for MACHINES
placed by DEALER and accepted by MILNOR prior to such termination; and
MILNOR may also fill, at its option, orders for replacement parts as
are placed by DEALER and accepted by MILNOR, within twelve months from
the date of termination. The right to terminate this AGREEMENT shall
be in addition to the other rights and remedies that MILNOR may have
under this AGREEMENT.
8. ORDERS
The terms and provisions of the AGREEMENT shall be deemed to govern any
order submitted by DEALER to MILNOR for MACHINES.
If DEALER cancels an order, MILNOR may demand that DEALER pay the
reasonable cost and expenses of MILNOR incurred in connection with such
order prior to receipt of notice of cancellation, and any other damages
suffered by MILNOR as a result of such cancellation.
9. ACCEPTANCE OF ORDERS
An order shall only be deemed accepted by MILNOR upon delivery of the
ordered MACHINES to the originating carrier. Any acknowledgement or other
separate correspondence or communication shall not constitute acceptance of
any order.
10. DELIVERY
MILNOR shall make reasonable effort to fill each order of DEALER. MILNOR
may, in its sole discretion, allocate MACHINES among MILNOR dealers in the
event of shortage or otherwise. Each shipment of MACHINES pursuant to the
terms of this AGREEMENT shall be deemed to be sold under a separate
contract. In the event of any default of MILNOR in any such shipment, such
default shall not be deemed to substantially impair the value of this
AGREEMENT and shall not affect DEALER's obligation to accept and pay for
any other delivery of MACHINES by MILNOR. If any delivery of MACHINES is
delayed beyond the estimated delivery date, DEALER's sole remedy and relief
under this AGREEMENT shall be to cancel the particular order pursuant to
which delivery was to be made. Such right of cancellation may only be
exercised if shipment is not made within sixty (60) days after the
estimated date of shipment. MILNOR shall not be liable for any failure or
delay in manufacture, delivery or shipment caused by an event beyond its
reasonable control, including, but not limited to, strike, slowdowns, fire,
flood, explosion, other casualty or disaster, or governmental regulations,
orders or restrictions. DEALER expressly assumes all risk of loss to
MACHINES being shipped to DEALER once the MACHINES have been deposited with
the carrier.
Page No. 5
<PAGE>
11. PRICE
The price for MACHINES shall be EX-FACTORY according to the current MILNOR
pricing policies as may or may not be updated from time to timme at
MILNOR's sole discretion. Cost of Loading, Freight, and Insurance from
EX-FACTORY shall be borne by DEALER.
12. CREDIT TERMS
(a) Payment terms will be sight draft bill of lading.
(b) MILNOR will attempt in the future to extend to DEALER more favorable
terms of payment, provided that such terms shall be approved by
MILNOR's management, financial advisors and insurers. Any more
favorable terms granted by MILNOR are revocable by MILNOR without
notice to DEALER.
(c) Notwithstanding any more favorable credit terms granted to DEALER in
any course of dealing, regardless of the length of time dealing
thereunder, MILNOR has the right to demand payment in advance, at any
time prior to shipment, without prior notice to DEALER, on any order,
and on such terms and conditions as MILNOR deems necessary in its sole
discretion. In the event payment in whole or in part, in advance is
demanded by MILNOR and not complied with by DEALER, MILNOR, at its
option, may deem such order cancelled. All checks, bills of exchange
or other commercial paper received as payment in advance by MILNOR
shall be deemed accepted subject to collection.
(d) Notwithstanding any more favorable credit terms granted to DEALER,
regardless of the length of dealing thereunder, or any demand for
payment in advance of shipment, MILNOR has the additional right to
demand payment of all sums outstanding by DEALER, prior to accepting
and/or shipping any orders placed by DEALER.
13. WARRANTY
(a) MILNOR's warranty to DEALER And Purchaser will be as described in
Exhibit H attached and made a part hereof.
(b) MILNOR disclaims any warranty of merchantablity as defined in the
Uniform Commerical Code or any other warranty implied by Louisiana
law; and, except for the above limited express warranties, MILNOR
makes no representation, agreement, guarantee or warranty, express or
implied or inferable from any course of dealing or usage of trade,
extending beyond the description of the products and parts herein
involved.
(c) These warranties are expressly in lieu of all other warranties,
express or implied; and MILNOR neither assumes nor authorizes DEALER
or any representative or other person to assume for MILNOR any other
liability in connection with the sale of MACHINES.
(d) If DEALER makes any warranty or representation to any other person or
party inconsistent with or in addition to the warranty stated above,
DEALER shall, at its own expense, defend and hold MILNOR harmless from
any claim thereon of any nature whatsoever.
(e) In the event any of the MACHINES and spare parts sold pursuant to this
AGREEMENT are found to be non-conforming or defective, MILNOR shall
not be liable to DEALER or any third party for any consequential,
incidental or special damages. MILNOR's liability under this contract
is expressly limited to the return of the purchase price paid by
DEALER for such MACHINES or spare parts.
Page No. 6
<PAGE>
14. MILNOR'S TRADENAMES AND TRADEMARKS
(a) DEALER recognizes that MILNOR is the sole owner of the tradenames,
trademarks or logos used by MILNOR in the marketing of MACHINES. DEALER may
use the tradenames, trademarks or logos used by MILNOR as applied to
MACHINES and shall display such marks and/or names only in such form or
manner as shall maintain the quality and integrity thereof. The MILNOR
marks and names are not to be used in the name under which the DEALER's
business is conducted. If such marks or names are used in any sign or
advertising display, by DEALER, DEALER will, on termination of this
AGREEMENT, or upon request of MILNOR discontinue the use of such marks
and/or names in such sign or advertising display and thereafter will not
use, either directly or indirectly in connection with its business, such
phrase or any other name, title, expression so nearly resembling the same
as could be likely to lead to confusion or uncertainty, or to deceive the
public.
(b) DEALER shall be entitled to use the MILNOR trademark in its advertising in
conjunction with the words "authorized dealer" and in accordance with other
standards established by MILNOR. Upon request or upon termination of this
AGREEMENT, DEALER shall immediately discontinue all permitted uses of
MILNOR tradenames, trademarks, or logos included but not limited to use on
business cards, stationary, advertising or vehicles. In the event DEALER
does not immediately discontinue use of MILNOR tradenames, trademarks or
logos upon request of MILNOR and MILNOR is required to institute legal
proceedings to compel DEALER to discontinue such use, MILNOR will be
entitled to recover from DEALER all costs, attorney's fees, or other
expenses associated with such legal proceedings, in addition to any other
damages to which MILNOR is entitled recovery.
(c) The use by DEALER of tradenames, trademarks, or logos of MILNOR inures to
the benefit of MILNOR, and any good will arising from such use by DEALER
shall revert to MILNOR without compensation to DEALER in the event that
this AGREEMENT is terminated for any reason. Nothing in this AGREEMENT
shall be construed as granting to DEALER any rights whatsoever under any
patents or trademarks that are either now, or may in the future be, owned
or controlled by MILNOR other than those rights regularly given any other
purchasers of patented or trademarked articles.
15. NO AGENCY RELATIONSHIP
It is understood and agreed that DEALER is an independent contractor with
respect to MILNOR. This AGREEMENT does not constitute DEALER the agent or
the legal representative of MILNOR for any purpose whatsoever. DEALER is
not granted any right or authority to assume or to create any
responsibility, express or implied, on behalf of or in the name of MILNOR,
or to bind MILNOR in any manner or thing whatsoever. DEALER shall, in all
of its advertising, sales contracts, and in its dealings with all others
relative to the MACHINES, make it clear that DEALER is trading in said
MACHINES for DEALER's own account, and not as an agent of MILNOR. DEALER
represents that it will not make any statement or take any action which may
indicate to third parties that DEALER is an agent of MILNOR.
16. CONFIDENTIALITY
DEALER shall not intentionally disclose and shall take reasonable
precautions to avoid unintentional disclosure of confidential or
proprietary information concerning MILNOR or its processes, inventions,
formulae, prices, customers or suppliers, or any other trade secret or
confidential or proprietary information made known to or learned by DEALER,
unless expressly assented to in writing by MILNOR.
Page No. 7
<PAGE>
17. NOTICES
Any notice or communication required or permitted to be given hereunder
shall be in writing and shall be deemed given upon the mailing thereof,
postage prepaid, by certified or registered mail, or upon the transmission
of a telegram or telex addressed to the parties at their addresses first
above set forth, or at such other address as either party shall designate
to the other in writing.
18. ASSIGNMENT
The AGREEMENT constitutes a personal contract, and DEALER shall not
transfer or assign same or any part thereof without the consent of MILNOR,
nor shall this AGREEMENT, nor any rights herein conferred be pledged in any
manner whatsoever by DEALER.
19. FORCE MAJEURE
MILNOR shall not be responsible or liable in any way for its failure to
perform its obligations hereunder during any period in which such
performance is prevented or hindered by Acts of God, fire, flood, war,
embargo, strikes, labor disturbances, riots, and law, rules, regulations,
delays in production or any other reason beyond the control of MILNOR.
20. GOVERNING LAW
The construction and performance of this AGREEMENT shall be governed by,
interpreted under, and construed according to the laws of the State of
Louisiana.
It is understood, however, that this AGREEMENT is designated for use
wherever MILNOR may desire to sell MACHINES, and that any provision herein
which in anywise contravenes the laws of any state or jurisdiction, shall
be deemed not to be a part of this AGREEMENT. If any provision of this
AGREEMENT shall be held invalid under certain circumstances, the remainder
of the AGREEMENT, and the application of the provision in circumstances
other than as to which it is held invalid, shall not be affected thereby.
21. NO WAIVER OF BREACHES
The failure of either party at any time to require performance by or seek
any other remedy from the other party of any provision hereof shall in no
way affect the full right to require such performance at any time
thereafter. Nor shall the waiver by either party of a breach of any
provision hereof be taken or held to be a waiver of any succeeding breach
of such provision or as a waiver of the provision itself.
22. TAXES
DEALER shall pay all excise taxes, duties, and tariffs or sales taxes that
may be required to be paid by MILNOR by any statute, ordinance or
regulation of the U.S. Government, any state, county or local government,
any municipal government, or foreign government. In the event that MILNOR
is required to or does pay any of such taxes, the DEALER, upon being
informed of such payment, shall at once repay the amount hereof to MILNOR.
23. ENTIRE AGREEMENT
This AGREEMENT represents the entire AGREEMENT between the parties hereto
relative to the subject matter hereof, and may not be altered, amended or
modified except by a writing signed by both of the parties hereto. There
are no oral representations or other agreements between the parties
affecting this AGREEMENT or related to the selling or service of MACHINES.
This AGREEMENT supersedes all previous agreements between the parties.
Page No. 8
<PAGE>
24. DEALER represents and warrants that under the laws of the state in which
DEALER is organized, the person signing this AGREEMENT has been duly
authorized to bind DEALER to this AGREEMENT.
25. This AGREEMENT shall not become effective until and unless signed by the
President or Vice President of MILNOR.
26. DEALER certifies in executing this AGREEMENT that MACHINES are for resale;
that it holds, and will maintain for the life of this AGREEMENT and any
extensions thereof, an active registration or resale number and that it
will account to the appropriate state for any retailer's occupation tax due
as a result of the sale of MACHINES and parts thereof at retail.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT, with an
effective date of July 1, 1989
ATTEST: PELLERIN MILNOR CORPORATION
/s/ <illegible> By: /s/ James C. Moran
- --------------------- -------------------------
James C. Moran
Date: July 31, 1989
WINK DAVIS EQUIPMENT COMPANY, INC.
ATTEST: By: /s/ Wink A. Davis, Jr.
-------------------------
/s/ Vivian J. Tiffer Wink A. Davis, Jr.
- ----------------------
Vivian J. Tiffer Date: 7-10-89
<PAGE>
EXHIBIT B OF DEALER AGREEMENT
B22FM90001/90017
I. THE FOLLOWING COUNTIES OF THE STATE OF FLORIDA:
Alachua, Baker, Bradford, Brevard, Citrus, Clay, Columbia, DeSota, Dixie,
Duval, Flagler, Gadsden, Gilchrist, Hamilton, Hardee, Hernando, Highlands,
Hillsborough, Indian River, Jefferson, Lafayette, Lake, Leon, Levy,
Madison, Manatee, Marion, Nassau, Okeechobee, Orange, Osceola, Pasco,
Pinellas, Polk, Putnam, St. Johns, St. Lucie, Sarasota, Seminole, Sumter,
Suwanee, Taylor, Union Volusia, and Wakulla.
II. THE STATE OF GEORGIA
III. THE FOLLOWING COUNTIES OF THE STATE OF TENNESSEE:
Anderson, Bedford, Bledsoe, Blount, Bradley, Campbell, Cannon, Carter,
Claiborne, Clay, Cocke, Coffee, Cumberland, Davidson, DeKalb, Fentress,
Franklin, Giles, Grainger, Greene, Grundy, Hamblen, Hamilton, Hancock,
Hawkins, Jackson, Jefferson, Johnson, Knox, Lincoln, Loudon, McMinn, Macon,
Marion, Marshal, Maury, Meigs, Monroe, Montgomery, Moore, Morgan, Overton,
Pickett, Polk, Putnam, Rhea, Roane, Robertson, Rutherford, Scott,
Sequatchie, Sevier, Smith, Sullivan, Sumner, Trousdale, Unicoi, Union, Van
Buren, Warren, Washington, White, Williamson, and Wilson.
IV. THE STATE OF SOUTH CAROLINA
V. THE STATE OF NORTH CAROLINA
VI. THE FOLLOWING COUNTIES OF THE STATE OF ILLINOIS:
Boone, Bureau, Carroll, Cook, DeKalb, DuPage, Grundy, Henry, Jo Daviess,
Kane, Kankakee, Kendall, Lake, LaSalle, Lee, McHenry, Ogie, Putnam,
Stephenson, Whiteside, Winnebago and Will.
VII. THE FOLLOWING COUNTY OF THE STATE OF INDIANA:
Lake
<PAGE>
EXHIBIT B OF DEALER AGREEMENT
B22FM90001/90017
VIII. THE STATE OF VIRGINIA
IX. THE DISTRICT OF COLUMBIA
X. THE FOLLOWING COUNTIES OF THE STATE OF MARYLAND:
Anne Arundel, Baltimore, Baltimore City, Calvert, Caroline, Carroll,
Charles, Dorchester, Frederick, Hartford, Howard, Kent, Montgomery, Prince
Georges's Queen Anns, St. Mary's, Somerset, Talbot, Wicomico and Worcester.
XI. THE FOLLOWING COUNTY OF THE STATE OF WEST VIRGINA:
Jefferson
Exhibit Effective as of April 1, 1995
PELLERIN MILNOR CORPORATION
By: /s/ James C. Moran
----------------------------
Date: April 14, 1995
WINK DAVIS EQUIPMENT COMPANY, INC.
By: /s/ Wink A. Davis, Jr.
----------------------------
Date: 3/28/95
<PAGE>
EXHIBIT C OF DEALER AGREEMENT
B22FM90001/90017
REGION MACHINES
I. THE FOLLOWING COUNTIES OF THE STATE OF FLORIDA:
Commercial Laundry
Alachua, Baker, Bradford, Brevard, Citrus, washer-extractors in
Clay, Columbia, Desota, Dixie, Duval, capacities of 30 pound
Flager, Gadsden, Gilchrist, Hamilton, and larger (not coin
Hardee, Hernando, Highlands, Hillsborough, operated) and continuous
Indian River, Jefferson, Lafayette, Lake, tunnel washers, presses,
Leon, Levy, Madison, Manatee, Marion, Nassau, and dryers.
Okeechobee, Orange, Osceola, Pasco, Pinellas,
Polk, Putnam, St. Johns, St. Lucie Sarasota,
Seminole, Sumter, Suwannee, Taylor, Union,
Volusia, and Wakulla.
II. THE STATE OF GEORGIA
III. THE FOLLOWING COUNTIES OF THE STATE OF TENNESSEE:
Anderson, Bedford, Bledsoe, Blount, Bradley, Campbell, Cannon, Carter,
Claiborne, Clay, Cocke, Coffee, Cumberland, Davidson, DeKalb, Fentress,
Franklin, Giles, Grainger, Greene, Grundy, Hamblen, Hamilton, Hancock,
Hawkins, Jackson, Jefferson, Johnson, Knox, Lincoln, Loudon, McMinn, Macon,
Marion, Marshal, Maury, Meigs, Monroe, Montgomery, Moore, Morgan, Overton,
Pickett, Polk, Putnam, Rhea, Roane, Robertson, Rutherford, Scott,
Sequatchie, Sevier, Smith, Sullivan, Sumner, Trousdale, Unicoi, Union, Van
Buren, Warren, Washington, White, Williamson, and Wilson.
IV. THE STATE OF SOUTH CAROLINA
V. THE STATE OF NORTH CAROLINA
VI. THE FOLLOWING COUNTIES OF THE STATE OF ILLINOIS:
Boone, Bureau, Carroll, Cook, DeKalb, DuPage, Grundy, Henry, Jo Daviess,
Kane, Kankakee, Kendall, Lake, LaSalle, Lee, McHenry, Ogie, Putnam,
Stephenson, Whiteside, Winnebago and Will.
VII. THE FOLLOWING COUNTY OF THE STATE OF INDIANA:
Lake
-continued-
<PAGE>
EXHIBIT C OF DEALER AGREEMENT
B22FM90001/90017
I. STATE OF VIRGINIA
II. DISTRICT OF COLUMBIA
III. THE FOLLOWING COUNTIES OF THE STATE OF MARYLAND
Anne Arundel, Baltimore, Baltimore City, Calvert, Caroline, Carroll,
Charles, Dorchester, Frederick, hartford, Howard, Kent, Montgomery,
Prince George's, Queen Anns, St. Mary's, Somerset, Talbot, Wicomico,
Worcester.
IV. THE FOLLOWING COUNTY OF THE STATE OF WEST VIRGINIA:
Jefferson
Exhibit Effective as of April 1, 1995
PELLERIN MILNOR CORPORATION
By: /s/ [illegible]
---------------------------------
Date: April 14, 1995
---------------------
WINK DAVIS EQUIPMENT COMPNAY, INC.
By: /s/ [illegible]
---------------------------------
Date: 3/18/95
----------------
<PAGE>
EXHIBIT E OF DEALER AGREEMENT
B22FM90001/90017
NATIONAL ACCOUNT PERCENT OF
LIST PRICE
1. AMERICAN LINEN SUPPLY 5%
2. ANGELICA RENTAL SERVICES GROUP 5%
3. ARAMARK SERVICES 5%
4. BEVERLY ENTERPRISES,INC. 5%
5. BUDGETEL 5%
6. CARLSON HOSPITALITY (RADISSON-FOUR SEASONS) 5%
7. CHOICE HOTELS 5%
8. CINTAS CORPORATION 5%
9. CONTINENTAL DESIGN/INTERSTATE HOTELS 5%
10. DOUBLE TREE HOTELS, CP HOTELS 5%
11. EXTENDED STAY AMERICA 5%
12. G & K SERVICES, INC. 5%
13. GOOD SAMARITAN HOMES 5%
14. GRANCARE 5%
15. HEALTH CARE & RETIREMENT CORP. OF AMERICA (HCR) 5%
16. HILTON & HILTON INTERNATIONAL 5%
17. JOHN Q. HAMMONS HOTELS 5%
18. INTEGRATED HEALTH SYSTEM 5%
19. LEE COMPANY 5%
20. MARRIOTT INTERNATIONAL, HOST MARRIOTT 5%
21. MORGAN SERVICES 5%
22. OCEAN PROPERTIES 5%
23. OMNI SERVICES, INC. (RENTAL UNIFORM SERVICES) 5%
24. PRIME HOSPITALITY CORP. (AMERITELS) 5%
25. PROMUS (HARRAHS, HAMPTON, EMBASSY) 5%
26. PRUDENTIAL OVERALL SUPPLY 5%
27. RENAISSANCE INTERNATIONAL (STOUFFER HOTELS) 5%
28. RICHFIELD MGT. CO./RBA 5%
29. SERVICEMASTER 5%
30. STEINER CORPORRATION 5%
31. UNIFIRST CORPORATION 5%
32. UNITOG COMPANY 5%
33. VENCOR- (HILLHAVEN) 5%
34. WYNDHAM HOTEL 5%
Exhibit Effective as of January 1, 1997
PELLERIN MILNOR CORPORATION
By:
---------------------------------
Date:
----------------------
WINK DAVIS EQUIPMENT COMPANY, INC.
By: /s/ Wink A. Davis, Jr.
--------------------------------
Date: 2/10/97
--------------------
<PAGE>
EXHIBIT G OF DEALER AGREEMENT
B22FM90001/90017
1: January 31, 1998
Exhibit Effective as of January 1, 1997
PELLERIN MILN0R CORPORATION
By:
---------------------------------
Date:
----------------------
WINK DAVIS EQUIPMENT COMPANY, INC.
By:
---------------------------------
Date:
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CHICAGO(R)
[LOGO]
AMERICA'S FIRST CHOICE FOR FLATWORK FINISHERS
DISTRIBUTOR
AGREEMENT
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CHICAGO DRYER COMPANY
AUTHORIZED DISTRIBUTOR AGREEMENT
This Agreement is made as of the 1st day of January, 1994 by and between Chicago
Dryer Company, a corporation organized and existing under the laws of the State
of Illinois (hereinafter called "CDC"), having its principal place of business
at 2200 North Pulaski Road, Chicago, Illinois 60639, U.S.A. and
Wink Davis Wquipment Co., Inc., a
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Distributor's Full Legal Name and D/B/A If Different from Legal Name
__________________________________________________________________ of the State
corporation, partnership or sole proprietorship
of GA (hereinafter called "Distributor"), having its principal place of
business at
800 Miami Circle NE - Suite 220 Atlanta GA 30324
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Street Address City/Town State Zip
BACKGROUND
A. Chicago(R) is a registered trademark pertaining to commercial laundry
equipment offered by CDC. The Chicago name has a worldwide reputation for high
quality products, corporate integrity and customer service. CDC desires to
protect and build upon the Chicago name by appointing a network of authorized
distributors meeting CDC's high standards.
B. Distributor desires to be appointed by CDC as an authorized CDC
distributor for certain items of CDC's commercial laundry equipment, and CDC is
willing to so appoint Distributor, upon the terms and conditions hereinafter set
forth. Accordingly, in consideration of the foregoing and the mutual covenants
and undertakings hereinafter set forth, the parties hereby agree as follows:
AGREEMENTS
1. APPOINTMENT, PRODUCTS AND TERRITORY.
A. CDC hereby appoints Distributor as an authorized CDC distributor for
those CDC products designated on Exhibit "A" attached hereto and made a part
hereof (hereinafter called "the Products"). Distributor's appointment shall not
be applicable to any other products marketed by CDC, unless otherwise agreed by
CDC hereafter, in writing.
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B. Distributor's appointment hereunder is applicable in the geographic
territory designated on Exhibit "A" (hereinafter called the "Territory"). As
used herein, the term "outside sale" shall denote any sale of the Products by an
authorized CDC distributor for installation outside of it appointed territory,
and the term "approved outside sale" shall denote any such sale which has been
approved in advance by CDC. Distributor shall refrain from making or offering to
make any outside sales, other than approved outside sales. CDC's approval in any
particular instance shall not be binding upon it in subsequent instances.
C. Distributor's appointment hereunder is non-exclusive. Nothing contained
herein shall preclude CDC from appointing other distributors, either within or
outside the Territory, from selling the Products directly to end users within or
outside the Territory, or otherwise marketing the Products as it sees fit.
D. Distributor understands and acknowledges that it is CDC's objective to
appoint only those distributors deemed by CDC to meet its qualification, and
that the total number of distributors so appointed by CDC be no greater than
that deemed by CDC to be sufficient to serve the market for the Products. In
order to ensure CDC's ability to accomplish such objective, Distributor shall
refrain from selling the Products to any subdistributors and shall sell the
Products only to end users, unless otherwise agreed by CDC in writing.
2. NOTIFICATION REQUIREMENTS.
Within ten (10) business days of any sale of the Products by Distributor,
Distributor shall notify CDC in writing as to (i) the name and address of the
purchaser, (ii) the address of the installation site, and (iii) the purpose and
type of work for which the Products will be used by the purchaser. Distributor
understands and acknowledges that such information shall enable CDC to: (i)
communicate promptly with end users of the Products from time to time with
respect to product safety information (including any product recalls) and any
other information with respect to the Products as CDC may deem necessary or
desirable; and (ii) make a meaningful assessment as to the impact of its
promotional efforts in various geographic and customer markets.
3. OPERATING RESPONSIBILITIES.
Distributor, at all times, during the term of this Agreement, shall satisfy
each of the following responsibilities:
A. Distributor shall use its best efforts to stimulate and increase
interest in the Products and consistently shall promote the sale of the Products
to its customers within the Territory.
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B. Distributor shall maintain an office and warehouse in the Territory
which shall be open and staffed adequately during normal business hours.
C. Distributor shall maintain sales and service forces sufficient to cover
the needs of the entire Territory and to promote the sale and support of the
Products in a vigorous and successful manner. All of Distributor's sales
personnel shall be thoroughly knowleageable concerning the Products and their
specifications, features and benefits. Distributor shall conduct any training of
its personnel necessary to impart such knowledge, shall satisfy the requirements
of section 3D hereof and otherwise shall cooperate fully with CDC in any Product
education programs which CDC may establish.
D. Distributor shall perform timely and accurate presale engineering
analyses to assist its customers in selecting the proper CDC Products (as well
as ancillary equipment) with regard to size, type and utility usage. Distributor
additionally shall determine any special requirements necessary to ensure that
the items purchased will perform their intended functions in a satisfactory
manner. Distributor shall determine local code requirements and ensure that the
Products meet such requirements before sale and installation.
E. Distributor shall make reliable recommendations for proper site
requirements, including but not limited to, recommendations as to Product size
and capacity, electrical service, steam supply, gas supply, air supply,
drainage, ventilation, make up air, exhaust systems, adequate floor support,
noise containment, and adequate working and service space. Distributor shall
inspect the recommended site on one or more occasions (as necessary) prior to
installation of the Products to ensure that such recommendations are proper.
F. Subsequent to installation of the Products at the subject site,
Distributor shall make any adjustments and/or corrections necessary for proper
operation, and shall verify that all Products are installed and functioning as
designed and intended by CDC, in a safe and efficient manner and to the
satisfaction of the end user.
G. Distributor shall deliver the product instruction and parts manual to
the end user. Distributor shall stress to the end user the importance of
following safe operation and service procedures and the neciessity of providing
proper training and supervision of all end user personnel who may work with the
Products. Distributor shall complete and transmit promptly to CDC, any
"check-off" forms or other documents as CDC may provide relating to the
performance by Distributor of its obligation hereunder.
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H. Distributor shall refrain from making any false, misleading or
disparaging representations concerning CDC or the Products, shall make no
representations regarding the specifications, features or benefits of the
Products, other than those approved in writing or published by CDC, and shall
refrain from any other trade practices which may have a negative impact upon the
reputation of CDC or the Products.
I. In addition to any other notification requirements hereunder,
Distributor shall notify CDC promptly if it becomes aware of any charges,
complaints or claims by third parties concerning CDC or the Products, so as to
enable CDC to address such matters in a timely fashion.
J. Distributor shall take prompt follow-up action with respect to any sales
leads as it may obtain from CDC, and advise CDC on a regular basis as to the
status of such leads as well as the general acceptance of the Products within
the Territory.
K. Distributor shall keep CDC informed of local market trends, including
such information regarding marketing efforts, sales and pricing of competitors
as it lawfully may obtain from independent sources other than such competitors.
L. To the extent not otherwise required herein, Distributor shall comply
with all applicable Federal, State and local laws and regulations in performing
its responsibilities hereunder and in any of its dealing with the Product.
4. PURCHASE FORECASTS AND GOALS.
A. Distributor shall provide CDC, no later than November 15th during each
year in which this Agreement is in force, with a good faith forecast of its
anticipated purchases of the Products, by model, within the Territory, for the
twelve month period beginning the immediately following January 1st.
B. CDC shall establish annual goals for Distributor's purchases of the
Products, (the "Annual Goals") considering such factors as Distributor's
forecasts (which shall not be binding on CDC), the past sales history of the
Products within the Territory, CDC's perception of the sales potential within
such Territory, and any other factors which it deems relevant to such
determination. The Annual Goals applicable to the Calendar year (or remaining
portion thereof) during which this Agreement is executed by the parties shall be
provided by CDC to Distributor prior to or at the time of such execution. Annual
Goals for subsequent calendar years shall be communicated by CDC to Distributor
in writing no later than December 15th during each year in which this Agreement
is in force, covering the twelve (12) month period beginning the immediately
following January 1st.
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5. PRICES AND OTHER TERMS AND CONDITIONS OF SALE.
A. The prices charged by CDC to Distributor for purchases hereunder shall
be those set forth in CDC's published Price List (hereinafter called "The Price
List"), in effect upon the date of CDC's written acceptance of Distributor's
order, less a distributor discount (the "Distributor Discount"). The Distributor
Discount is specified on Exhibit "A" hereto. CDC shall have the right to change
any or all of the prices in the Price List and/or to change the Distributor
Discount at any time, upon written notice to Distributor. Any new Price List
issued to Distributor by CDC shall be operative automatically as of the
effective date stated thereon, and shall supersede all prior Price Lists.
B. The prices set forth in the Price List do not include taxes of any
nature. Distributor shall be responsible for the payment of all applicable
sales, use, excise or other taxes, unless Distributor provides CDC with tax
exemption certificates satisfactory to CDC and the appropriate taxing
authorities.
C. Each of CDC's standard "Conditions of Sale" as set forth in the Price
List in effect from time to time (the "Additional Terms") shall be deemed a part
of this Agreement. Unless otherwise specifically agreed by CDC in writing, all
transactions between CDC and Distributor relating in any manner to this
Agreement or the Products shall be governed entirely by the terms and conditions
set forth in this Agreement (including the Additional Terms in effect from time
to time), in CDC invoices, credit applications, executed security agreements and
other documents generated by CDC's credit department. Any additional or
different terms or conditions contained in Distributor's purchase orders or
other business forms shall be deemed objected to by CDC on a continuous basis
and shall be of no force or effect whatsoever, notwithstanding any failure by
CDC to communicate further objections thereto. In the event of any conflict
between the terms and conditions of this Agreement and the other CDC documents
identified above, the terms of this Agreement shall control.
D. Distributor shall be free to resell the Products at prices which it
determines at its sole discretion.
6. FINANCIAL AND PAYMENT REQUIREMENTS.
A. Distributor represents and warrants to CDC that Distributor is in a good
and substantial financial condition and is able to pay all invoices when due.
Distributor shall, from time to time, furnish any financial statements or
additional information as may be requested by CDC for the purpose of determining
Distributor's current financial condition.
B. CDC shall determine, at its sole discretion, whether to extend credit to
Distributor and the limits on any credit so
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extended. If in CDC's judgment, Distributor does not qualify for initial or
continuing credit, CDC may, at its sole discretion, refuse to make further sales
to Distributor or may elect to condition further sales upon payment by certified
or cashier's check, confirmation of check clearance prior to shipment, wire
transfer, letter of credit (in form acceptable to CDC), or any other payment
method prescribed by CDC. CDC shall be entitled to change credit limits,
required payment methods or other financial requirements at any time.
C. Distributor shall pay all CDC invoices when due and shall make no
deductions from such payments unless previously authorized by a CDC credit
memorandum. CDC may accept any partial payment without prejudice to its right to
recover any remaining balance, notwithstanding any endorsement or statement on
any check or other writing accompanying any payment characterizing such payment
as an accord and satisfaction, payment in full or the like.
D. Unless otherwise expressly agreed by CDC in writing, Distributor shall
refrain from granting any security interest with respect to the Products to any
third party or permitting any third party lien to attach to any of the Products
purchased from CDC, until Distributor has paid CDC in full for same. To secure
any indebtedness of Distributor to CDC arising hereunder, Distributor hereby
grants to CDC a security interest in all of the Products purchased by
distributor and all proceeds (including insurance proceeds) thereof. At CDC's
request, Distributor shall execute any Uniform Commercial Code financing
statements and any other documents, in form satisfactory to CDC, deemed
necessary or desirable by CDC in order to evidence and/or perfect such security
interest. CDC, at its option, shall be entitled to file a photographic or other
reproduction of this Agreement in lieu of a financing statement. In addition to
all of CDC's other rights and remedies under this Agreement, CDC shall have any
greater or additional rights and remedies of a secured party under the Uniform
Commercial Code.
7. ORDERS AND SHIPMENTS.
A. Each of Distributor's orders is subject to CDC's acceptance. No purchase
order of Distributor shall be deemed accepted by CDC unless and until CDC
acknowledges such purchase order in writing or ships Products against same.
B. CDC shall endeavor to ship accepted orders within a reasonable time.
However, shipping or delivery dates set forth in any CDC order acknowledgment or
other document shall be deemed to be estimates only. CDC, IN NO EVENT, SHALL BE
LIABLE TO DISTRIBUTOR FOR DAMAGES, REIMBURSEMENT OR OTHER PAYMENTS OF ANY KIND
BECAUSE OF ANY FAILURE TO FILL ORDERS, DELAYS IN SHIPMENT OR DELIVERY, OR ANY
ERROR IN THE FILLING OF ORDERS, REGARDLESS OF THE CAUSE THEREFOR.
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C. If any of the Products are in short supply or if CDC elects, at its sole
discretion, to discontinue marketing any of the Products, it may allocate the
available supply among its customers on a case-by-case basis, in a manner which
it deems equitable under the particular circumstances.
8. WARRANTY AND SERVICE MATTERS.
A. CDC affords a one-year parts warranty to end users of the Products, but
affords no warranty with respect to labor. To the extent requested by CDC,
Distributor shall perform labor required for the servicing of the Products
installed within the Territory, regardless of whether the sale has been made by
Distributor, by another authorized CDC distributor as an approved outside sale,
or by CDC directly. Such labor either shall be performed without charge,
pursuant to such labor warranty(ies) as Distributor may afford to its customers,
or at reasonable and competitive charges for any labor not performed under
warranty. All such charges shall be negotiated directly between Distributor and
end users. CDC in no event shall be liable to Distributor for any such labor
charges, and shall have no liability or responsibility under any such
Distributor warranties.
B. Notwithstanding the provisions of subsection A hereof, Distributor shall
notify CDC before making major product repairs or undertaking repetitive service
calls. In any such instance, the parties mutually shall agree upon the course of
action to be taken.
C. Subject to the requirements of subsection D hereof, in any instance in
which Distributor, at CDC's request, services a Product installed within the
Territory which has been sold (i) by CDC directly to an end user or (ii) by
another authorized CDC distributor as an approved outside sale, Distributor's
account with CDC shall be credited in an amount equal to five (5%) percent of
CDC's list price for the Product in question (the "Service Fee"), and the
account of the selling distributor shall be debited in the amount of the Service
Fee. Distributor's account shall be debited in like manner for the Service Fee
in any instance in which another authorized CDC distributor services Products
sold by Distributor for installation outside the Territory.
D. Notwithstanding any other provision of this Agreement, Distributor's
entitlement to the Service Fee with respect to Products which have been sold
within the Territory by other authorized CDC distributors as approved outside
sales, shall be conditioned upon CDC having knowledge of the location and serial
numbers of the subject Products no later than one (1) year from the date of
factory shipment.
E. Distributor shall provide competent, prompt and courteous servicing to
end users within the Territory, shall maintain adequate supplies of authentic
CDC spare parts (or parts precisely
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equivalent in specifications and quality), and shall make available skilled
maintenance mechanics who shall promptly respond to service call requests.
Distributor shall cause its service personnel to participate in CDC sponsored
training schools at the CDC factory or Distributor's place of business to ensure
that such service personnel are properly trained to service the Products in the
most efficient way possible to minimize cost and down time to the end user.
F. CDC affords no express warranties with respect to the Products other
than the aforesaid end user parts warranty, and all implied warranties,
INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NON-INFRINGEMENT, hereby are excluded.
9. PRODUCT RETURNS.
Distributor shall refrain from returning any CDC Products or parts to CDC
without CDC's prior written authorization. If such authorization is granted,
Distributor shall comply with all return procedures prescribed by CDC.
10. TRADEMARK MATTERS.
A. Nothing contained herein shall constitute a grant to Distributor of any
assignment, license or right to use any of CDC's trademarks or tradenames,
except to advise customers and potential customers that it is authorized to sell
the Products.
B. Distributor shall refrain from using any CDC trademarks, tradenames or
any variation thereof in Distributor's corporate or tradename or otherwise
engage in any activities which may impair CDC's rights in such trademarks or
tradenames.
11. DURATION OF AGREEMENT/TERMINATION.
A. This Agreement shall be in effect for a period of one year from the date
hereof unless terminated sooner in accordance with section 11B hereof or unless
extended for an additional period by a written instrument executed by both
parties. NEITHER PARTY SHALL BE OBLIGATED TO EXTEND THE DURATION OF THIS
AGREEMENT UPON THE EXPIRATION OF THE INITIAL TERM OR ANY EXTENSION TERM.
B. Either party may terminate this Agreement during the initial term or any
extension term at will, with or without cause, upon thirty (30) days prior
written notice to the other party, except that CDC may elect, at its option, to
terminate this Agreement immediately upon written notice to Distributor under
any of the following circumstances:
(i) Any change in Distributor's ownership or a material change in
management of Distributor.
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(ii) The insolvency of, or the institution of bankruptcy,
reorganization or similar proceedings by or against Distributor or any of
its principal owners; or
(iii) The conviction of Distributor or any of its principal owners of
any felony; or
(iv) Distributor's submission to CDC of any false or fraudulent
document, statement or information; or
(v) Any failure of Distributor to cooperate with CDC in connection
with any product safety matters; or
(vi) Any delinquency by Distributor of more than thirty (30) days in
the payment of any CDC invoice.
C. If this Agreement is terminated with advance notice, any orders for the
Products submitted by Distributor during such notice period which are accepted
by CDC shall be paid for by Distributor by certified or cashier's check in
advance of shipment notwithstanding any credit terms previously made available
by CDC.
D. CDC will fill orders for replacement parts as may be placed by
Distributor for a period of twelve months from the effective date of
termination. Any parts shipments during such period shall be subject to the same
advance payment requirements as are set forth in subsection C hereof.
E. Notwithstanding the foregoing, if CDC elects to terminate this Agreement
without advance notice in accordance with any of the grounds set forth in
subsections B(i) through (vi) hereof, CDC shall be entitled to cancel all or any
portion of any then pending Product orders of Distributor.
F. Within ten (10) days after the effective date of any termination hereof,
Distributor shall return to CDC all catalogs, price lists, technical and service
manuals, advertising materials and any other printed materials relating to the
Products theretofore provided to Distributor by CDC without charge. Subsequent
to such effective termination date, Distributor shall not hold itself out in any
manner (whether by sign, display, advertising or otherwise) as an authorized CDC
distributor. Except as otherwise provided herein, no termination of this
Agreement shall affect any rights or obligations of either party hereunder
accruing prior to the effective date of termination.
12. CONFIDENTIALITY
Any and all information obtained by Distributor during the term of this
Agreement relating in any manner to the Products or any other matters regarding
the business of CDC (collectively the "Information") shall be maintained by
Distributor in confidence and
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shall not be disclosed to any other person or entity with the exception of:
A. Disclosures to any of Distributor's employees having a need to know the
same in order to enable Distributor to perform its obligations hereunder, and
who are advised by Distributor of the confidential nature of the Information; or
B. Information which is in the public domain at the time of disclosure to
Distributor or thereafter becomes a part of the public domain through no fault
of Distributor.
13. INDEMNITY
Distributor hereby agrees to indemnify, defend and hold harmless CDC, any
and all of its parent, subsidiary, affiliated and predecessor companies, and the
shareholders, officers, directors, employees, agents, successors and assigns of
all such entities, of and from any and all claims, causes of action,
liabilities, losses, damages, attorneys' fees and other expenses whatsoever,
resulting directly or indirectly from any acts or omissions of Distributor, its
employees or agents, or sub-contractors.
14. INSURANCE
Distributor shall maintain, at its expense, comprehensive general liability
insurance (and any additional insurance reasonably requested by CDC) from
carriers and in amounts acceptable to CDC. Distributor shall provide written
verification of such coverage if requested by CDC.
15. EXCUSED NON-PERFORMANCE
Each party shall be excused from any failure or delay in performance (other
than a failure to make any payment required hereunder) resulting from
circumstances beyond its reasonable control, including but not limited to,
accident, acts of nature, inability to obtain Products or raw materials from
usual sources of supply, transit failure or delay, labor disputes, governmental
laws, regulations or other restrictions, war or civil disturbance. Any party so
excused shall resume performance promptly upon cessation of the circumstances
resulting in the failure or the delay.
16. DAMAGE EXCLUSIONS
APART FROM ANY OTHER PROVISION IN THIS AGREEMENT EXCLUDING OR LIMITING THE
LIABILITY OF EITHER PARTY, AND EXCEPT AS OTHERWISE PROVIDED IN SECTION 13
HEREOF, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES, BY REASON OF ANY MATTERS RELATING
DIRECTLY OR
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INDIRECTLY TO THIS AGREEMENT OR ANY OTHER ASPECT OF THE PARTIES' BUSINESS
RELATIONSHIP.
17. RELATIONSHIP OF THE PARTIES.
The relationship between CDC and Distributor is that of buyer and seller
only. Distributor under no circumstances shall be considered an employee, agent,
franchisee, partner or joint venturer of or with CDC. Distributor shall be
deemed an independent contractor at all times, and shall have no express or
implied right or authority to assume or create any obligation on behalf of CDC.
18. MUTUAL RELEASE
In consideration of their mutual execution of this Agreement, CDC and
Distributor agree to and do hereby release each other of and from all claims,
causes of action, obligations and liabilities whatsoever, arising by reason of
any matter, cause or thing prior to the date of this Agreement, with the sole
exception of CDC's right to be paid by Distributor for any outstanding balance
relating to purchases made prior to the date of this Agreement. This mutual
release does not apply to any product warranties or manufacturer product
liability.
[ILLEGIBLE] INITIAL
[ILLEGIBLE] INITIAL
19. ASSIGNMENT
Distributor may not assign any rights or delegate any obligations under
this Agreement without CDC's prior written consent. Subject to these
restrictions, the provisions of this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and permitted assigns.
20. SEVERABILITY
Any judicial determination that a portion of this Agreement is unlawful or
unenforceable shall not affect the validity or enforceability of the remaining
provisions.
21. ENTIRE AGREEMENT
This Agreement constitutes the final and entire Agreement between the
parties pertaining in any manner to its subject matter, supersedes all prior
oral or written agreements between them concerning same, and may not be amended,
supplemented or otherwise changed in any manner, except by an instrument signed
by both parties. Notwithstanding the foregoing, this Agreement shall not
supersede or otherwise impair any security agreements or other documents as may
have been executed previously by the parties relating to Distributor's financial
obligations to CDC. IT IS THE DESIRE AND INTENTION OF THE PARTIES THAT THE
EXPRESS PROVISIONS OF THIS AGREEMENT NOT BE SUBJECT TO VARIATION BY IMPLIED
COVENANTS OF ANY KIND.
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22. EXECUTION AND APPLICABLE LAW
This Agreement shall become effective only upon its execution by
Distributor in the State of Illinois or elsewhere, and its subsequent execution
by CDC in the State of Illinois, and shall be governed and construed in all
respects in accordance with the internal laws of the State of Illinois,
excluding Illinois' conflicts of law principles.
23. FORUM FOR DISPUTES AND CONSENT TO JURISDICTION
Any litigation which Distributor may desire to institute against CDC
pertaining in any manner to any breach or termination of this Agreement or any
other aspect of the parties' business relationship must be filed by Distributor
before a state or federal court of competent jurisdiction in Illinois.
Distributor hereby consents irrevocably to the jurisdiction of the state or
federal courts in Illinois over its person in the event that CDC elects to
institute litigation against Distributor in Illinois relating to any such
matters. In such event, service of process may be made upon Distributor as
provided by Illinois law, or shall be considered effective if sent by certified
or registered mail, return receipt requested, postage prepaid.
IN WITNESS WHEREOF, the parties have executed this Agreement in
counterparts as of the date and year stated above, each of which shall be deemed
enforceable without production of the others.
DISTRIBUTOR
Wink Davis Equipment Co., Inc.
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Distributor's Full Legal Name and D/B/A If Different from
Legal Name
A Corp of the State of: GA
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Corporation, Partnership
or Sole Proprietorship
By: /s/ Wink Davis, Jr. Wink Davis, Jr
------------------------- --------------------------------
Signature Printed or Typed Name
Title:-----------------------
Corporate Officer (indicate
office), Paqrtner, Proprietor
CHICAGO DRYER COMPANY
By: /s/ Thomas M. Egelrecht
--------------------------
Title: Sales Director
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EXHIBIT "A" TO AUTHORIZED DISTRIBUTOR AGREEMENT
BETWEEN CHICAGO DRYER COMPANY AND
Wink Davis Equipment Co., Inc.
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Distributor's Full Legal Name and D/B/A
If different from Legal Name
APPLICABLE PRODUCTS
All Products
DISTRIBUTOR'S APPOINTED TERRITORY
Georgia, Virginia, North Carolina, South Carolina, Tennessee (east of and
including Lincoln, Marshall, Rutherford, Davidson, Robertson, and Montgomery
counties), Florida ( west of and including Gadsen and Wakulla Counties; north of
and including Sarasota, De Soto, Highlands, Okeechobee, and St. Lucie Counties),
Illinois ( north of and including Kankakee, Grundy, La Salle, Marshall, Stark,
Henry, and Mercer Counties), Indiana ( Lake County).
DISTRIBUTOR DISCOUNT
Distributor shall be entitled to a discount of 35% from the prices set
forth from time to time in CDC's published Price List, subject to the
modification provisions of section 6A hereof.
This Exhibit is effective as of January 1, 1994 and supersedes any prior
Exhibits concerning the subject matter hereof.
CHICAGO DRYER COMPANY
By: /s/Thomas M. [ILLEGIBLE] Wink Davis Equipment Co., Inc
-------------------------- ------------------------------
Distributor's Full Legal Name
And D/B/A If Different from
Legal Name
Title: Sales Director By: /s/ ILLEGIBLE
------------------------
Title: Pres.
EXHIBIT 10.52
ATLANTA COMMERCIAL BOARD OF RELEATORS
STANDARD COMMERCIAL LEASE AGREEMENT
MAY 1994
THIS AGREEMENT is made by and among Davis Brothers Venture (hereinafter called
"Landlord"), and Wink Davis Equipment Company, Inc. (hereinafter called
"Tenant"), and _________________________ (hereinafter called "Broker").
WITNESSETH:
PREMISES
1. Landlord, for and in consideration of the rents, covenants,
agreements, and stipulations hereinafter mentioned, provided for and contained
herein to be paid, kept and performed by Tenant, leases and rents unto Tenant,
and Tenant hereby leases and takes upon the terms and conditions which
hereinafter appear, the following described property (hereinafter called the
"Premises", to wit:
800 MIAMI CIRCLE, NE, SUITE 220 PLUS ATTACHED WAREHOUSE, ATLANTA, GEORGIA
and being known as _________________________________________________. No
easement for light or air is included in the Premises.
TERM
2. The Tenant shall have and hold the Premises for a term of 24 months
beginning on the 31st day of July, 1997, and ending on the 30th day of July,
1999, at midnight, unless sooner terminated as hereinafter provided.
RENTAL
3. Tenant agrees to pay Landlord at the address of Landlord as stated
in this Lease, without demand, deduction or setoff, an annual rental of $91,812
payable in equal monthly installments of $7,651 in advance on the first day of
each calendar month during the term hereof. Upon the execution of this Lease,
Tenant shall pay to Landlord the first full month's rent due hereunder. Rental
for any period during the term hereof which is for less than one month shall be
a prorated portion of the monthly rental due.
LATE CHARGES
4. If Landlord fails to receive all or any portion of a rent payment
within ten (10) days after it becomes due, Tenant shall pay Landlord, as
additional rental, a late charge equal to ten percent (10%) of the overdue
amount. The parties agree that such late charges represents a fair and
reasonable estimate of the costs Landlord will incur by reason of such late
payment.
SECURITY DEPOSIT
5. Tenant shall deposit with Landlord upon execution of this Lease $ -
as a security deposit which shall be held by Landlord, without liability to
Tenant for any interest thereon , as security for the full and faithful
performance by Tenant of each and every term, covenant and condition of this
Lease of Tenant. If any of the rents or other charges or sums payable by Tenant
to Landlord shall be overdue and unpaid or should Landlord make payments on
behalf of Tenant, or should Tenant fail to perform any of the terms of this
Lease, then Landlord may, at its option, appropriate and apply the security
deposit, or so much thereof as may be necessary to compensate Landlord toward
the payment of the rents, charges or other sums due from Tenant, or towards any
loss, damage or expense sustained by Landlord resulting from such default on the
part of Tenant; and in such event Tenant shall upon demand restore the security
deposit to the original sum deposited. In the event Tenant furnishes Landlord
with proof that all utility bills have been paid through the date of Lease
termination, and performs all of Tenants other obligations under this Lease, the
security deposit shall be returned in full to Tenant within thirty (30) days
after the date of the expiration or sooner termination of the term of this Lease
and the surrender of the Premises by Tenant in compliance with the provisions of
this Lease.
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UTILITY BILLS
6. Tenant shall pay all utility bills, including, but not limited to
water, sewer, gas, electricity, fuel, light and heat bills for the Premises, and
Tenant shall pay all charges for garbage collection or other sanitary services.
COMMON AREAS COSTS; RULES AND REGULATIONS
7. If the Premises are part of a larger building or group of buildings,
Tenant shall pay as additional rental monthly, in advance, its pro rata share of
common area maintenance costs as hereinafter more particularly set forth in the
Special Stipulations. The Rules and Regulations attached hereto are made a part
of this Lease. Tenant agrees to perform and abide by those Rules and Regulations
and such other Rules and Regulations as may be made from time to time by
Landlord.
USE OF PREMISES
8. The Premises shall be used for conducting the business of
distributor, sales and services of laundry equipment purposes only and no other.
The Premises shall not be used for any illegal purposes, nor in any manner to
create any nuisance or trespass, nor in any manner to vitiate the insurance or
increase the rate of insurance on the Premises.
ABANDONMENT OF THE PREMISES
9. Tenant agrees not to abandon or vacate the Premises during the term
of this Lease and agrees to use the Premises for the purposes herein leased
until the expiration hereof.
TAX AND INSURANCE ESCALATION
10. Tenant shall pay upon demand by Landlord as additional rental
during the term of this Lease, and any extension or renewal thereof, the amount
by which all taxes (including but not limited to, ad valorem taxes, special
assessments and any other governmental charges) on the Premises for each tax
year exceed all taxes on the Premises for the tax year 1996. In the event the
Premises are less than the entire property assessed for such taxes for any such
tax year, then the tax for any such year applicable to the Premises shall be
determined by proration on the basis that the rentable floor area of the
Premises bears to the rentable floor area of the entire property assessed. If
the final year of the Lease fails to coincide with the tax year, then any excess
for the tax year during which the term ends shall be reduced by the pro rata pat
of such tax year beyond the Lease term. If such taxes for the year in which the
Lease terminates are not ascertainable before payment of the last month's
rental, then the amount of such taxes assessed against the Property for the
previous tax year shall be used as a basis for determining the pro rata share,
if any, to be paid by Tenant for that portion of the last Lease year. Tenant
shall further pay, upon demand, its pro rata share of the excess cost of fire
and extended coverage insurance including any and all public liability insurance
on the building over the cost for the first year of the Lease term for each
subsequent year during the term of this Lease. Tenant's pro rata portion of
increased taxes or share of excess cost of fire and extended coverage and
liability insurance, as provided herein, shall be payable within fifteen (15)
days after receipt of notice from Landlord as to the amount due.
INDEMNITY; INSURANCE
11. Tenant agrees to and hereby does indemnify and save Landlord
harmless against all claims for damages to persons or property by reason of
Tenant's use or occupancy of the Premises, and all expenses incurred by Landlord
because thereof, including attorney's fees and court costs. Supplementing the
foregoing and in addition thereto, Tenant shall during the term of this Lease
and any extension or renewal thereof, and at Tenant's expense, maintain in full
force and effect comprehensive general liability insurance with limits of
$500,000.00 per person and $1,000,000.00 per incident, and property damage
limits of $100,000.00, which insurance shall contain a special endorsement
recognizing and insuring any liability accruing to Tenant under the first
sentence of this paragraph 11, and naming Landlord as additional insured. Tenant
shall provide evidence of such insurance to Landlord prior to the commencement
of the term of this Lease. Landlord and Tenant each hereby release and relieve
the other, and waive its right of recovery, for loss or damage arising out of or
incident to the perils insured against which perils occur in, on or about the
Premises, whether due to the negligence of Landlord or Tenant or their Brokers,
employees, contractors and/or invitees, to the extent that such loss or damage
is within the policy limits of said comprehensive general liability insurance.
Landlord and Tenant shall, upon obtaining the policies of
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insurance required, give notice to the insurance carrier or carriers that
the foregoing mutual waiver of subrogation is contained in this Lease.
REPAIRS BY LANDLORD
12. Landlord agrees to keep in good repair the roof, foundations and
exterior walls of the Premises (exclusive of all glass and exclusive of all
exterior doors) and underground utility and sewer pipes outside the exterior
walls of the building, except repairs rendered necessary by the negligence or
intentional wrongful acts of Tenant, its brokers, employees or invitees. If the
Premises are part of a larger building or group of buildings, then to the extent
that the grounds are common areas, Landlord shall maintain the grounds
surrounding the building, including paving, the mowing of grass, care of shrubs
and general landscaping. Tenant shall promptly report in writing to Landlord any
defective condition known to it which Landlord is required to repair and failure
so to report such conditions shall make Tenant responsible to Landlord for any
liability incurred by Landlord by reason of such conditions.
REPAIRS BY TENANT
13. Tenant accepts the Premises in their present condition and as
suited for the uses intended by Tenant. Tenant shall, throughout the initial
term of this Lease, and any extension or renewal thereof, at its expense,
maintain in good order and repair the Premises, including the building, heating
and air conditioning equipment (including but not limited to replacement of
parts, compressors, air handling units and heating units) and other improvements
located thereon, except those repairs expressly required to be made by Landlord
hereunder. Unless the grounds are common areas of a building(s) larger than the
Premises, Tenant further agrees to care for the grounds around the building,
including paving, the mowing of grass, care of shrubs and general landscaping.
Tenant agrees to return the Premises to Landlord at the expiration, or prior to
termination of this Lease, in as good condition and repair as when first
received, natural wear and tear, damage by storm, fire, lightning, earthquake or
other casualty alone excepted.
ALTERATIONS
14. Tenant shall not make any alterations, additions, or improvements
to the Premises without Landlord's prior written consent. Tenant shall promptly
remove any alterations, additions, or improvements constructed in violation of
this Paragraph 14 upon Landlord's written request. All approved alterations,
additions, and improvements will be accomplished in a good and workmanlike
manner, in conformity with all applicable laws and regulations, and by a
contractor approved by Landlord, free of any liens or encumbrances. Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) at the termination of this Lease and to
restore the Premises to its prior condition, all at Tenant's expense. All
alterations, additions or improvements which Landlord has not required Tenant to
remove shall become Landlord's property and shall be surrendered to Landlord
upon the termination of this Lease, except that Tenant may remove any of
Tenant's machinery or equipment which can be removed without material damage to
the Premises. Tenant shall repair, at Tenant's expense, any damage to the
Premises caused by the removal of any such machinery or equipment.
REMOVAL OF FIXTURES
15. Tenant may (if not in default hereunder) prior to the expiration of
this Lease, or any extension or renewal thereof, remove all fixtures and
equipment which it has placed in the Premises, provided Tenant repairs all
damage to the Premises caused by such removal.
DESTRUCTION OF OR DAMAGE TO PREMISES
16. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction and rental shall be accounted for as between Landlord and Tenant as
of that date. If the Premises are damaged but not wholly destroyed by any such
casualties, rental shall abate in such proration as use of the Premises has been
destroyed and Landlord shall restore the Premises to substantially the same
condition as before damage as speedily as is practicable, whereupon full rental
shall recommence.
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GOVERNMENTAL ORDERS
17. Tenant agrees, at its own expense, to comply promptly with all
requirements of any legally constituted public authority made necessary by
reason of Tenant's occupancy of the Premises. Landlord agrees to comply promptly
and with any such requirements if not made necessary by reason of Tenant's
occupancy. It is mutually agreed, however, between Landlord and Tenant, that if
in order to comply with such requirements, the cost to Landlord or Tenant, as
the case may be, shall exceed a sum equal to one year's rent, then Landlord or
Tenant who is obligated to comply with such requirements may terminate this
Lease by giving written notice of termination to the other party by certified
mail, which termination shall become effective sixty (60) days after receipt of
such notice and which notice shall eliminate the necessity of compliance with
such requirements by giving such notice unless the party giving such notice of
termination shall, before termination becomes effective, pay to the party giving
notice all cost of compliance in excess of one year's rent, or secure payment of
said sum in manner satisfactory to the party giving notice.
CONDEMNATION
18. If the whole of the Premises, or such portion thereof as will make
the Premises unusable for the purposes herein leased, are condemned by any
legally constituted authority for any public use or purposes, then in either of
said events the term hereby granted shall cease from the date when possession
thereof is taken by public authorities, and rental shall be accounted for as
between Landlord and Tenant as of said date. Such termination, however, shall be
without prejudice to the rights of either Landlord or Tenant to recover
compensation and damage caused by condemnation from the condemnor. It is further
understood and agreed that neither the Tenant nor Landlord shall have any rights
in any award made to the other by any condemnation authority notwithstanding the
termination of the Lease as herein provided. Broker may become a party to the
condemnation proceeding for the purpose of enforcing his rights under this
paragraph.
ASSIGNMENT AND SUBLETTING
19. Tenant shall not, without the prior written consent of Landlord,
which shall not be unreasonably withheld, assign this Lease or any interest
hereunder, or sublet the Premises or any part thereof, or permit the use of the
Premises by any party other than the Tenant. Consent to any assignment or
sublease shall not impair this provision and all later assignments or subleases
shall be made likewise only on the prior written consent of Landlord. The
assignee of Tenant, at the option of Landlord, shall become liable to Landlord
for all obligations of Tenant hereunder, but no sublease or assignment by Tenant
shall relieve Tenant of any liability hereunder.
EVENTS OF DEFAULT
20. The happening of any one or more of the following events
(hereinafter any one of which may be referred to as an "Event of Default")
during the term of this Lease, or any renewal or extension thereof, shall
constitute a breach of this Lease on the part of the Tenant: (A) Tenant fails to
pay the rental as provided for herein; (B) Tenant abandons or vacates the
Premises; (C) Tenant fails to comply with or abide by and perform any other
obligation imposed upon Tenant under this Lease; (D) Tenant is adjudicated
bankrupt; (E) a permanent receiver is appointed for Tenant's property and such
receiver is not removed within sixty (60) days after written notice from
Landlord to Tenant to obtain such removal; (F) Tenant, either voluntarily or
involuntarily, takes advantage of any debt or relief proceedings under the
present or future law, whereby the rent or any part thereof is, or is proposed
to be reduced or payment thereof deferred; (G) Tenant makes an assignment for
benefit of creditors; or (H) Tenant's effects are levied upon or attached under
process against Tenant, which is not satisfied or dissolved within thirty (30)
days after written notice from Landlord to Tenant to obtain satisfaction
thereof.
REMEDIES OF DEFAULT
21. Upon the occurrence of an Event of Default, Landlord, in addition
to any and all other rights or remedies it may have at law or in equity, shall
have the option of pursuing any one or more of the following remedies:
(A) Landlord may terminate this Lease by giving notice of
termination, in which event this Lease shall expire and terminate on the date
specified in such notice of termination, with the
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same force and effect as though the date so specified were the date herein
originally fixed as the termination date of the term of this Lease, and all
rights of Tenant under this Lease and in and to the Premises shall expire and
terminate, and Tenant shall remain liable for all obligations under this Lease
arising up to the date of such termination and Tenant shall surrender the
Premises to Landlord on the date specified in such notice;
(B) Landlord may terminate this Lease as provided in paragraph
21(A) hereof and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, including, without limitation, a sum which, at the date of
such termination, represents the then value of the excess, if any, of (i) the
monthly rental and additional rent for the period commencing with the day
following the date of such termination and ending with the date hereinbefore set
for the expiration of the full term hereby granted, or (ii) the aggregate
reasonable rental value of the Premises (less reasonable brokerage commissions,
attorneys' fees and other costs relating to the reletting of the Premises) for
the same period, all of which excess sum shall be deemed immediately due and
payable;
(C) Landlord may, without terminating this Lease, declare
immediately due and payable all monthly rental and additional rent due and
coming due under this Lease for the entire remaining term hereof, together with
all other amounts previously due, at once; provided, however, that such payment
shall not be deemed a penalty or liquidated damages but shall merely constitute
payment in advance of rent for the remainder of said term; upon making such
payments, Tenant shall be entitled to receive from Landlord all rents received
by Landlord from other assignees, tenants and subtenants on account of the
Premises during the term of this Lease, provided that the monies to which Tenant
shall so become entitled shall in no event exceed the entire amount actually
paid by Tenant to Landlord pursuant to this clause (C) less all costs, expenses
and attorneys' fees of Landlord incurred in connection with the reletting of the
Premises; or
(D) Landlord may, from time to time without terminating this
Lease, and without releasing Tenant in whole or in part from Tenant's obligation
to pay monthly rental and additional rent and perform all of the covenants,
conditions and agreements to be performed by Tenant as provided in this Lease,
make such alterations and repairs as may be necessary in order to relet the
Premises, and, after making such alterations and repairs, Landlord may, but
shall not be obligated to, relet the Premises or any part thereof for such term
or terms (which may be for a term extending beyond the term of this Lease) at
such rental or rentals and upon such other terms and conditions as Landlord in
its sole discretion may deem advisable or acceptable; upon each reletting, all
rents received by Landlord from such reletting shall be applied first, to the
payment of any indebtedness other than rent due hereunder from Tenant to
Landlord, second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorneys' fees, and of costs of such alterations
and repairs, third, to the payment of the monthly rental and additional rent due
and unpaid hereunder, and the residue, if any, shall be held by Landlord and
applied against payments of future monthly rental and additional rent as the
same may become due and payable hereunder; in no event shall Tenant be entitled
to any excess rental received by Landlord over and above charges that Tenant is
obligated to pay hereunder, including monthly rental and additional rent; if
such rentals received from such reletting during any month are less than those
to be paid during the month by Tenant hereunder, including monthly rental and
additional rent, Tenant shall pay any such deficiency to Landlord, which
deficiency shall be calculated and paid monthly; Tenant shall also pay Landlord
as soon as ascertained and upon demand all costs and expenses incurred by
Landlord in connection with such reletting and in making any alterations and
repairs which are not covered by the rentals received from such reletting;
notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous breach.
Tenant acknowledges that the Premises are to be used for commercial purposes,
and Tenant expressly waives the protections and rights set forth in Official
Code of Georgia Annotated Section 44-7-52.
EXTERIOR SIGNS
22. Tenant shall place no signs upon the outside walls or roof of the
Premises except with the written consent of the Landlord. Any and all signs
placed on the Premises by Tenant shall be maintained in compliance with
governmental rules and regulations governing such signs, and Tenant shall be
responsible to Landlord for any damage caused by installation, use or
maintenance of said signs, and all damage incident to such removal.
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LANDLORD'S ENTRY OF PREMISES
23. Landlord may card the Premises "For Rent" or "For Sale" ninety (90)
days before the termination of this Lease. Landlord may enter the Premises at
reasonable hours to exhibit the Premises to prospective purchasers or tenants,
to inspect the Premises to see that Tenant is complying with all of its
obligations hereunder, and to make repairs required of Landlord under the terms
hereof or to make repairs to Landlord's adjoining property, if any.
EFFECT OF TERMINATION OF LEASE
24. No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
SUBORDINATION
25. At the option of Landlord, Tenant agrees that this Lease shall
remain subject and subordinate to all present and future mortgages, deeds to
secure debt or other security instruments (the "Security Deeds") affecting the
Building or the Premises, and Tenant shall promptly execute and deliver to
Landlord such certificate or certificates in writing as Landlord may request,
showing the subordination of the Lease to such Security Deeds, and in default of
Tenant so doing, Landlord shall be and is hereby authorized and empowered to
execute such certificate in the name of and as the act and deed of Tenant, this
authority being hereby declared to be coupled with an interest and to be
irrevocable. Tenant shall upon request from Landlord at any time and from time
to time execute, acknowledge and deliver to Landlord a written statement
certifying as follows: (A) that this Lease is unmodified and in full force and
effect (or if there has been modification thereof, that the same is in full
force and effect as modified and stating the nature thereof); (B) that to the
best of its knowledge there are no uncured defaults on the part of Landlord (or
if any such default exists, the specific nature and extent thereof); (C) the
date to which any rent and other charges have been paid in advance, if any; and
(D) such other matters as Landlord may reasonably request. Tenant irrevocably
appoints Landlord as its attorney-in-fact, coupled with an interest, to execute
and deliver, for and in the name of Tenant, any document or instrument provided
for in this paragraph.
QUIET ENJOYMENT
26. So long as Tenant observes and performs the covenants and
agreements contained herein, it shall at all times during the Lease term
peacefully and quietly have and enjoy possession of the Premises, but always
subject to the terms hereof.
NO ESTATE IN LAND
27. This Lease shall create the relationship of Landlord and Tenant
between the parties hereto. No estate shall pass out of Landlord. Tenant has
only a usufruct not subject to levy and sale, and not assignable by Tenant
except by Landlord's consent.
HOLDING OVER
28. If Tenant remains in possession of the Premises after expiration of
the term hereof, with Landlord's acquiescence and without any express agreement
of the parties, Tenant shall be a tenant at will at the rental rate which is in
effect at end of this Lease and there shall be no renewal of this Lease by
operation of law. If Tenant remains in possession of the Premises after
expiration of the term hereof without Landlord's acquiescence, Tenant shall be a
tenant at sufferance and commencing on the date following the date of such
expiration, the monthly rental payable under Paragraph 3 above shall for each
month, or fraction thereof during which Tenant so remains in possession of the
Premises, be twice the monthly rental otherwise payable under Paragraph 3 above.
ATTORNEYS' FEES
29. In the event that any action or proceeding is brought to enforce
any term, covenant or condition of this Lease on the part of Landlord or Tenant,
the prevailing party in such litigation shall be entitled to recover reasonable
attorneys' fees to be fixed by the court in such action or proceeding, in an
amount at least equal to fifteen percent of any damages due from the
non-prevailing party. Furthermore, Landlord and Tenant agree to pay the
attorneys' fees and expenses of (A) the other party to this Lease (either
Landlord or Tenant) if it is made a party to litigation because of its being a
party to this Lease and when it has not engaged in any wrongful conduct itself,
and (B) Broker if Broker is made a party to
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litigation because of its being a party to this Lease and when Broker is not
engaged in any wrongful conduct itself.
RIGHTS CUMULATIVE
30. All rights, powers and privileges conferred hereunder
upon parties hereto shall be cumulative and not restrictive of those given
by law.
WAIVER OF RIGHTS
31. No failure of Landlord to exercise any power given Landlord
hereunder or to insist upon strict compliances by Tenant of its obligations
hereunder and no custom or practice of the parties at variance with the terms
hereof shall constitute a waiver of Landlord's right to demand exact compliance
with the terms hereof.
[NUMBERS 32 THROUGH 35 OMITTED.]
ENVIRONMENTAL LAWS
36. Landlord represent to the best of its knowledge and belief, (A) the
Premises are in compliance with all applicable environmental laws, and (B) there
are not excessive levels (as defined by the Environmental Protection Agency) of
radon, toxic waste or hazardous substances on the Premises. Tenant represents
and warrants that Tenant shall comply with all applicable environmental laws and
that Tenant shall not permit any of his employees, brokers, contractors or
subcontractors, or any person present on the Premises to generate, manufacture,
store, dispose or release on, about, or under the Premises any toxic waste or
hazardous substances which would result in the Premises not complying with any
applicable environmental laws.
TIME OF ESSENCE
37. Time is of the essence of this Lease.
DEFINITIONS
38. "Landlord" as used in this Lease shall include the undersigned, its
heirs, representatives, assigns and successors in title to the Premises,
"Tenant" shall include the undersigned and its heirs, representatives, assigns
and successors, and if this Lease shall be validly assigned or sublet, shall
include also Tenant's assignees or subtenants as to the Premises covered by such
assignment or sublease. "Broker" shall include the undersigned, its successors,
assigns, heirs and representatives. "Landlord", "Tenant" and "Broker" include
male and female, singular and plural, corporation, partnership or individual, as
may fit the particular parties.
NOTICES
39. All notices required or permitted under this Lease shall be in
writing and shall be personally delivered or sent by U.S. Certified Mail, return
receipt requested, postage prepaid. Broker shall be copied with all required or
permitted notices. Notices to Tenant shall be delivered or sent to the address
shown below, except that upon Tenant's taking possession of the Premises, then
the Premises shall be Tenant's address for notice purposes. Notices to Landlord
and Broker shall be delivered or sent to the addresses hereinafter stated, to
wit:
Landlord: Davis Brothers Venture
ATTN: Alex Davis
800 Miami Circle NE, Suite 220
Atlanta, GA 30324
Tenant: Wink Davis Equipment Co., Inc.
800 Miami Circle NE, Suite 220
Atlanta, GA 30324
Broker:
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All notices shall be effective upon delivery. Any party may change his notice
address upon written notice to the other parties.
ENTIRE AGREEMENT
40. This Lease contains the entire agreement of the parties hereto, and
no representations, inducements, promises or agreements, oral or otherwise,
between the parties, not embodied herein, shall be of any force or effect. No
subsequent alteration, amendment, change or addition to this Lease, except as to
changes or additions to the Rules and Regulations described in paragraph 7,
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
Landlord or Tenant.
SPECIAL STIPULATIONS
41. Any special stipulations are set forth in the attached Exhibit
______. Insofar as said Special Stipulations conflict with any of the foregoing
provisions, said Special Stipulations shall control.
Tenant acknowledges that Tenant has read and understands the terms of this Lease
and has received a copy of it.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and seals,
in triplicate.
LANDLORD:
/s/ C. Alexander Davis
Date and time executed by Landlord:
TENANT:
/s/ Wink A. Davis, Jr.
Date and time executed by Landlord:
BROKER:
------------------------------------
Date and time executed by Landlord:
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EXHIBIT 10.53
ATLANTA COMMERCIAL BOARD OF RELEATORS
STANDARD COMMERCIAL LEASE AGREEMENT
MAY 1994
THIS AGREEMENT is made by and among Davis Brothers Venture (hereinafter called
"Landlord"), and Wink Davis Equipment Company, Inc. (hereinafter called
"Tenant"), and _________________________ (hereinafter called "Broker").
WITNESSETH:
PREMISES
1. Landlord, for and in consideration of the rents, covenants,
agreements, and stipulations hereinafter mentioned, provided for and contained
herein to be paid, kept and performed by Tenant, leases and rents unto Tenant,
and Tenant hereby leases and takes upon the terms and conditions which
hereinafter appear, the following described property (hereinafter called the
"Premises", to wit:
650 PRESSLEY ROAD, CHARLOTTE, NC
and being known as ______________________________________________________. No
easement for light or air is included in the Premises.
TERM
2. The Tenant shall have and hold the Premises for a term of 24 months
beginning on the 31st day of July, 1997, and ending on the 30th day of July,
1999, at midnight, unless sooner terminated as hereinafter provided.
RENTAL
3. Tenant agrees to pay Landlord at the address of Landlord as stated
in this Lease, without demand, deduction or setoff, an annual rental of $24,145
payable in equal monthly installments of $2,012.08 in advance on the first day
of each calendar month during the term hereof. Upon the execution of this Lease,
Tenant shall pay to Landlord the first full month's rent due hereunder. Rental
for any period during the term hereof which is for less than one month shall be
a prorated portion of the monthly rental due.
LATE CHARGES
4. If Landlord fails to receive all or any portion of a rent payment
within ten (10) days after it becomes due, Tenant shall pay Landlord, as
additional rental, a late charge equal to ten percent (10%) of the overdue
amount. The parties agree that such late charges represents a fair and
reasonable estimate of the costs Landlord will incur by reason of such late
payment.
SECURITY DEPOSIT
5. Tenant shall deposit with Landlord upon execution of this Lease $ -
as a security deposit which shall be held by Landlord, without liability to
Tenant for any interest thereon , as security for the full and faithful
performance by Tenant of each and every term, covenant and condition of this
Lease of Tenant. If any of the rents or other charges or sums payable by Tenant
to Landlord shall be overdue and unpaid or should Landlord make payments on
behalf of Tenant, or should Tenant fail to perform any of the terms of this
Lease, then Landlord may, at its option, appropriate and apply the security
deposit, or so much thereof as may be necessary to compensate Landlord toward
the payment of the rents, charges or other sums due from Tenant, or towards any
loss, damage or expense sustained by Landlord resulting from such default on the
part of Tenant; and in such event Tenant shall upon demand restore the security
deposit to the original sum deposited. In the event Tenant furnishes Landlord
with proof that all utility bills have been paid through the date of Lease
termination, and performs all of Tenants other obligations under this Lease, the
security deposit shall be returned in full to Tenant within thirty (30) days
after the date of the expiration or sooner termination of the term of this Lease
and the surrender of the Premises by Tenant in compliance with the provisions of
this Lease.
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UTILITY BILLS
6. Tenant shall pay all utility bills, including, but not limited to
water, sewer, gas, electricity, fuel, light and heat bills for the Premises, and
Tenant shall pay all charges for garbage collection or other sanitary services.
COMMON AREAS COSTS; RULES AND REGULATIONS
7. If the Premises are part of a larger building or group of buildings,
Tenant shall pay as additional rental monthly, in advance, its pro rata share of
common area maintenance costs as hereinafter more particularly set forth in the
Special Stipulations. The Rules and Regulations attached hereto are made a part
of this Lease. Tenant agrees to perform and abide by those Rules and Regulations
and such other Rules and Regulations as may be made from time to time by
Landlord.
USE OF PREMISES
8. The Premises shall be used for conducting the business of
distributor, sales and services of laundry equipment purposes only and no other.
The Premises shall not be used for any illegal purposes, nor in any manner to
create any nuisance or trespass, nor in any manner to vitiate the insurance or
increase the rate of insurance on the Premises.
ABANDONMENT OF THE PREMISES
9. Tenant agrees not to abandon or vacate the Premises during the term
of this Lease and agrees to use the Premises for the purposes herein leased
until the expiration hereof.
TAX AND INSURANCE ESCALATION
10. Tenant shall pay upon demand by Landlord as additional rental
during the term of this Lease, and any extension or renewal thereof, the amount
by which all taxes (including but not limited to, ad valorem taxes, special
assessments and any other governmental charges) on the Premises for each tax
year exceed all taxes on the Premises for the tax year 1996. In the event the
Premises are less than the entire property assessed for such taxes for any such
tax year, then the tax for any such year applicable to the Premises shall be
determined by proration on the basis that the rentable floor area of the
Premises bears to the rentable floor area of the entire property assessed. If
the final year of the Lease fails to coincide with the tax year, then any excess
for the tax year during which the term ends shall be reduced by the pro rata pat
of such tax year beyond the Lease term. If such taxes for the year in which the
Lease terminates are not ascertainable before payment of the last month's
rental, then the amount of such taxes assessed against the Property for the
previous tax year shall be used as a basis for determining the pro rata share,
if any, to be paid by Tenant for that portion of the last Lease year. Tenant
shall further pay, upon demand, its pro rata share of the excess cost of fire
and extended coverage insurance including any and all public liability insurance
on the building over the cost for the first year of the Lease term for each
subsequent year during the term of this Lease. Tenant's pro rata portion of
increased taxes or share of excess cost of fire and extended coverage and
liability insurance, as provided herein, shall be payable within fifteen (15)
days after receipt of notice from Landlord as to the amount due.
INDEMNITY; INSURANCE
11. Tenant agrees to and hereby does indemnify and save Landlord
harmless against all claims for damages to persons or property by reason of
Tenant's use or occupancy of the Premises, and all expenses incurred by Landlord
because thereof, including attorney's fees and court costs. Supplementing the
foregoing and in addition thereto, Tenant shall during the term of this Lease
and any extension or renewal thereof, and at Tenant's expense, maintain in full
force and effect comprehensive general liability insurance with limits of
$500,000.00 per person and $1,000,000.00 per incident, and property damage
limits of $100,000.00, which insurance shall contain a special endorsement
recognizing and insuring any liability accruing to Tenant under the first
sentence of this paragraph 11, and naming Landlord as additional insured. Tenant
shall provide evidence of such insurance to Landlord prior to the commencement
of the term of this Lease. Landlord and Tenant each hereby release and relieve
the other, and waive its right of recovery, for loss or damage arising out of or
incident to the perils insured against which perils occur in, on or about the
Premises, whether due to the negligence of Landlord or Tenant or their Brokers,
employees, contractors and/or invitees, to the extent that such loss or damage
is within the policy limits of said
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comprehensive general liability insurance. Landlord and Tenant shall, upon
obtaining the policies of insurance required, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.
REPAIRS BY LANDLORD
12. Landlord agrees to keep in good repair the roof, foundations and
exterior walls of the Premises (exclusive of all glass and exclusive of all
exterior doors) and underground utility and sewer pipes outside the exterior
walls of the building, except repairs rendered necessary by the negligence or
intentional wrongful acts of Tenant, its brokers, employees or invitees. If the
Premises are part of a larger building or group of buildings, then to the extent
that the grounds are common areas, Landlord shall maintain the grounds
surrounding the building, including paving, the mowing of grass, care of shrubs
and general landscaping. Tenant shall promptly report in writing to Landlord any
defective condition known to it which Landlord is required to repair and failure
so to report such conditions shall make Tenant responsible to Landlord for any
liability incurred by Landlord by reason of such conditions.
REPAIRS BY TENANT
13. Tenant accepts the Premises in their present condition and as
suited for the uses intended by Tenant. Tenant shall, throughout the initial
term of this Lease, and any extension or renewal thereof, at its expense,
maintain in good order and repair the Premises, including the building, heating
and air conditioning equipment (including but not limited to replacement of
parts, compressors, air handling units and heating units) and other improvements
located thereon, except those repairs expressly required to be made by Landlord
hereunder. Unless the grounds are common areas of a building(s) larger than the
Premises, Tenant further agrees to care for the grounds around the building,
including paving, the mowing of grass, care of shrubs and general landscaping.
Tenant agrees to return the Premises to Landlord at the expiration, or prior to
termination of this Lease, in as good condition and repair as when first
received, natural wear and tear, damage by storm, fire, lightning, earthquake or
other casualty alone excepted.
ALTERATIONS
14. Tenant shall not make any alterations, additions, or improvements
to the Premises without Landlord's prior written consent. Tenant shall promptly
remove any alterations, additions, or improvements constructed in violation of
this Paragraph 14 upon Landlord's written request. All approved alterations,
additions, and improvements will be accomplished in a good and workmanlike
manner, in conformity with all applicable laws and regulations, and by a
contractor approved by Landlord, free of any liens or encumbrances. Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) at the termination of this Lease and to
restore the Premises to its prior condition, all at Tenant's expense. All
alterations, additions or improvements which Landlord has not required Tenant to
remove shall become Landlord's property and shall be surrendered to Landlord
upon the termination of this Lease, except that Tenant may remove any of
Tenant's machinery or equipment which can be removed without material damage to
the Premises. Tenant shall repair, at Tenant's expense, any damage to the
Premises caused by the removal of any such machinery or equipment.
REMOVAL OF FIXTURES
15. Tenant may (if not in default hereunder) prior to the expiration of
this Lease, or any extension or renewal thereof, remove all fixtures and
equipment which it has placed in the Premises, provided Tenant repairs all
damage to the Premises caused by such removal.
DESTRUCTION OF OR DAMAGE TO PREMISES
16. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction and rental shall be accounted for as between Landlord and Tenant as
of that date. If the Premises are damaged but not wholly destroyed by any such
casualties, rental shall abate in such proration as use of the Premises has been
destroyed and Landlord shall restore the Premises to substantially the same
condition as before damage as speedily as is practicable, whereupon full rental
shall recommence.
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GOVERNMENTAL ORDERS
17. Tenant agrees, at its own expense, to comply promptly with all
requirements of any legally constituted public authority made necessary by
reason of Tenant's occupancy of the Premises. Landlord agrees to comply promptly
and with any such requirements if not made necessary by reason of Tenant's
occupancy. It is mutually agreed, however, between Landlord and Tenant, that if
in order to comply with such requirements, the cost to Landlord or Tenant, as
the case may be, shall exceed a sum equal to one year's rent, then Landlord or
Tenant who is obligated to comply with such requirements may terminate this
Lease by giving written notice of termination to the other party by certified
mail, which termination shall become effective sixty (60) days after receipt of
such notice and which notice shall eliminate the necessity of compliance with
such requirements by giving such notice unless the party giving such notice of
termination shall, before termination becomes effective, pay to the party giving
notice all cost of compliance in excess of one year's rent, or secure payment of
said sum in manner satisfactory to the party giving notice.
CONDEMNATION
18. If the whole of the Premises, or such portion thereof as will make
the Premises unusable for the purposes herein leased, are condemned by any
legally constituted authority for any public use or purposes, then in either of
said events the term hereby granted shall cease from the date when possession
thereof is taken by public authorities, and rental shall be accounted for as
between Landlord and Tenant as of said date. Such termination, however, shall be
without prejudice to the rights of either Landlord or Tenant to recover
compensation and damage caused by condemnation from the condemnor. It is further
understood and agreed that neither the Tenant nor Landlord shall have any rights
in any award made to the other by any condemnation authority notwithstanding the
termination of the Lease as herein provided. Broker may become a party to the
condemnation proceeding for the purpose of enforcing his rights under this
paragraph.
ASSIGNMENT AND SUBLETTING
19. Tenant shall not, without the prior written consent of Landlord,
which shall not be unreasonably withheld, assign this Lease or any interest
hereunder, or sublet the Premises or any part thereof, or permit the use of the
Premises by any party other than the Tenant. Consent to any assignment or
sublease shall not impair this provision and all later assignments or subleases
shall be made likewise only on the prior written consent of Landlord. The
assignee of Tenant, at the option of Landlord, shall become liable to Landlord
for all obligations of Tenant hereunder, but no sublease or assignment by Tenant
shall relieve Tenant of any liability hereunder.
EVENTS OF DEFAULT
20. The happening of any one or more of the following events
(hereinafter any one of which may be referred to as an "Event of Default")
during the term of this Lease, or any renewal or extension thereof, shall
constitute a breach of this Lease on the part of the Tenant: (A) Tenant fails to
pay the rental as provided for herein; (B) Tenant abandons or vacates the
Premises; (C) Tenant fails to comply with or abide by and perform any other
obligation imposed upon Tenant under this Lease; (D) Tenant is adjudicated
bankrupt; (E) a permanent receiver is appointed for Tenant's property and such
receiver is not removed within sixty (60) days after written notice from
Landlord to Tenant to obtain such removal; (F) Tenant, either voluntarily or
involuntarily, takes advantage of any debt or relief proceedings under the
present or future law, whereby the rent or any part thereof is, or is proposed
to be reduced or payment thereof deferred; (G) Tenant makes an assignment for
benefit of creditors; or (H) Tenant's effects are levied upon or attached under
process against Tenant, which is not satisfied or dissolved within thirty (30)
days after written notice from Landlord to Tenant to obtain satisfaction
thereof.
REMEDIES OF DEFAULT
21. Upon the occurrence of an Event of Default, Landlord, in addition
to any and all other rights or remedies it may have at law or in equity, shall
have the option of pursuing any one or more of the following remedies:
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(A) Landlord may terminate this Lease by giving notice of
termination, in which event this Lease shall expire and terminate on the date
specified in such notice of termination, with the same force and effect as
though the date so specified were the date herein originally fixed as the
termination date of the term of this Lease, and all rights of Tenant under this
Lease and in and to the Premises shall expire and terminate, and Tenant shall
remain liable for all obligations under this Lease arising up to the date of
such termination and Tenant shall surrender the Premises to Landlord on the date
specified in such notice;
(B) Landlord may terminate this Lease as provided in paragraph
21(A) hereof and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, including, without limitation, a sum which, at the date of
such termination, represents the then value of the excess, if any, of (i) the
monthly rental and additional rent for the period commencing with the day
following the date of such termination and ending with the date hereinbefore set
for the expiration of the full term hereby granted, or (ii) the aggregate
reasonable rental value of the Premises (less reasonable brokerage commissions,
attorneys' fees and other costs relating to the reletting of the Premises) for
the same period, all of which excess sum shall be deemed immediately due and
payable;
(C) Landlord may, without terminating this Lease, declare
immediately due and payable all monthly rental and additional rent due and
coming due under this Lease for the entire remaining term hereof, together with
all other amounts previously due, at once; provided, however, that such payment
shall not be deemed a penalty or liquidated damages but shall merely constitute
payment in advance of rent for the remainder of said term; upon making such
payments, Tenant shall be entitled to receive from Landlord all rents received
by Landlord from other assignees, tenants and subtenants on account of the
Premises during the term of this Lease, provided that the monies to which Tenant
shall so become entitled shall in no event exceed the entire amount actually
paid by Tenant to Landlord pursuant to this clause (C) less all costs, expenses
and attorneys' fees of Landlord incurred in connection with the reletting of the
Premises; or
(D) Landlord may, from time to time without terminating this
Lease, and without releasing Tenant in whole or in part from Tenant's obligation
to pay monthly rental and additional rent and perform all of the covenants,
conditions and agreements to be performed by Tenant as provided in this Lease,
make such alterations and repairs as may be necessary in order to relet the
Premises, and, after making such alterations and repairs, Landlord may, but
shall not be obligated to, relet the Premises or any part thereof for such term
or terms (which may be for a term extending beyond the term of this Lease) at
such rental or rentals and upon such other terms and conditions as Landlord in
its sole discretion may deem advisable or acceptable; upon each reletting, all
rents received by Landlord from such reletting shall be applied first, to the
payment of any indebtedness other than rent due hereunder from Tenant to
Landlord, second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorneys' fees, and of costs of such alterations
and repairs, third, to the payment of the monthly rental and additional rent due
and unpaid hereunder, and the residue, if any, shall be held by Landlord and
applied against payments of future monthly rental and additional rent as the
same may become due and payable hereunder; in no event shall Tenant be entitled
to any excess rental received by Landlord over and above charges that Tenant is
obligated to pay hereunder, including monthly rental and additional rent; if
such rentals received from such reletting during any month are less than those
to be paid during the month by Tenant hereunder, including monthly rental and
additional rent, Tenant shall pay any such deficiency to Landlord, which
deficiency shall be calculated and paid monthly; Tenant shall also pay Landlord
as soon as ascertained and upon demand all costs and expenses incurred by
Landlord in connection with such reletting and in making any alterations and
repairs which are not covered by the rentals received from such reletting;
notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous breach.
Tenant acknowledges that the Premises are to be used for commercial purposes,
and Tenant expressly waives the protections and rights set forth in Official
Code of Georgia Annotated Section 44-7-52.
EXTERIOR SIGNS
22. Tenant shall place no signs upon the outside walls or roof of the
Premises except with the written consent of the Landlord. Any and all signs
placed on the Premises by Tenant shall be maintained in compliance with
governmental rules and regulations governing such signs, and Tenant shall
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be responsible to Landlord for any damage caused by installation, use or
maintenance of said signs, and all damage incident to such removal.
LANDLORD'S ENTRY OF PREMISES
23. Landlord may card the Premises "For Rent" or "For Sale" ninety (90)
days before the termination of this Lease. Landlord may enter the Premises at
reasonable hours to exhibit the Premises to prospective purchasers or tenants,
to inspect the Premises to see that Tenant is complying with all of its
obligations hereunder, and to make repairs required of Landlord under the terms
hereof or to make repairs to Landlord's adjoining property, if any.
EFFECT OF TERMINATION OF LEASE
24. No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
SUBORDINATION
25. At the option of Landlord, Tenant agrees that this Lease shall
remain subject and subordinate to all present and future mortgages, deeds to
secure debt or other security instruments (the "Security Deeds") affecting the
Building or the Premises, and Tenant shall promptly execute and deliver to
Landlord such certificate or certificates in writing as Landlord may request,
showing the subordination of the Lease to such Security Deeds, and in default of
Tenant so doing, Landlord shall be and is hereby authorized and empowered to
execute such certificate in the name of and as the act and deed of Tenant, this
authority being hereby declared to be coupled with an interest and to be
irrevocable. Tenant shall upon request from Landlord at any time and from time
to time execute, acknowledge and deliver to Landlord a written statement
certifying as follows: (A) that this Lease is unmodified and in full force and
effect (or if there has been modification thereof, that the same is in full
force and effect as modified and stating the nature thereof); (B) that to the
best of its knowledge there are no uncured defaults on the part of Landlord (or
if any such default exists, the specific nature and extent thereof); (C) the
date to which any rent and other charges have been paid in advance, if any; and
(D) such other matters as Landlord may reasonably request. Tenant irrevocably
appoints Landlord as its attorney-in-fact, coupled with an interest, to execute
and deliver, for and in the name of Tenant, any document or instrument provided
for in this paragraph.
QUIET ENJOYMENT
26. So long as Tenant observes and performs the covenants and
agreements contained herein, it shall at all times during the Lease term
peacefully and quietly have and enjoy possession of the Premises, but always
subject to the terms hereof.
NO ESTATE IN LAND
27. This Lease shall create the relationship of Landlord and Tenant
between the parties hereto. No estate shall pass out of Landlord. Tenant has
only a usufruct not subject to levy and sale, and not assignable by Tenant
except by Landlord's consent.
HOLDING OVER
28. If Tenant remains in possession of the Premises after expiration of
the term hereof, with Landlord's acquiescence and without any express agreement
of the parties, Tenant shall be a tenant at will at the rental rate which is in
effect at end of this Lease and there shall be no renewal of this Lease by
operation of law. If Tenant remains in possession of the Premises after
expiration of the term hereof without Landlord's acquiescence, Tenant shall be a
tenant at sufferance and commencing on the date following the date of such
expiration, the monthly rental payable under Paragraph 3 above shall for each
month, or fraction thereof during which Tenant so remains in possession of the
Premises, be twice the monthly rental otherwise payable under Paragraph 3 above.
ATTORNEYS' FEES
29. In the event that any action or proceeding is brought to enforce
any term, covenant or condition of this Lease on the part of Landlord or Tenant,
the prevailing party in such litigation shall be entitled to recover reasonable
attorneys' fees to be fixed by the court in such action or proceeding, in an
amount at least equal to fifteen percent of any damages due from the
non-prevailing party. Furthermore,
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Landlord and Tenant agree to pay the attorneys' fees and expenses of (A) the
other party to this Lease (either Landlord or Tenant) if it is made a party to
litigation because of its being a party to this Lease and when it has not
engaged in any wrongful conduct itself, and (B) Broker if Broker is made a party
to litigation because of its being a party to this Lease and when Broker is not
engaged in any wrongful conduct itself.
RIGHTS CUMULATIVE
30. All rights, powers and privileges conferred hereunder upon
parties hereto shall be cumulative and not restrictive of those given by law.
WAIVER OF RIGHTS
31. No failure of Landlord to exercise any power given Landlord
hereunder or to insist upon strict compliances by Tenant of its obligations
hereunder and no custom or practice of the parties at variance with the terms
hereof shall constitute a waiver of Landlord's right to demand exact compliance
with the terms hereof.
[NUMBERS 32 THROUGH 35 OMITTED.]
ENVIRONMENTAL LAWS
36. Landlord represent to the best of its knowledge and belief, (A) the
Premises are in compliance with all applicable environmental laws, and (B) there
are not excessive levels (as defined by the Environmental Protection Agency) of
radon, toxic waste or hazardous substances on the Premises. Tenant represents
and warrants that Tenant shall comply with all applicable environmental laws and
that Tenant shall not permit any of his employees, brokers, contractors or
subcontractors, or any person present on the Premises to generate, manufacture,
store, dispose or release on, about, or under the Premises any toxic waste or
hazardous substances which would result in the Premises not complying with any
applicable environmental laws.
TIME OF ESSENCE
37. Time is of the essence of this Lease.
DEFINITIONS
38. "Landlord" as used in this Lease shall include the undersigned, its
heirs, representatives, assigns and successors in title to the Premises,
"Tenant" shall include the undersigned and its heirs, representatives, assigns
and successors, and if this Lease shall be validly assigned or sublet, shall
include also Tenant's assignees or subtenants as to the Premises covered by such
assignment or sublease. "Broker" shall include the undersigned, its successors,
assigns, heirs and representatives. "Landlord", "Tenant" and "Broker" include
male and female, singular and plural, corporation, partnership or individual, as
may fit the particular parties.
NOTICES
39. All notices required or permitted under this Lease shall be in
writing and shall be personally delivered or sent by U.S. Certified Mail, return
receipt requested, postage prepaid. Broker shall be copied with all required or
permitted notices. Notices to Tenant shall be delivered or sent to the address
shown below, except that upon Tenant's taking possession of the Premises, then
the Premises shall be Tenant's address for notice purposes. Notices to Landlord
and Broker shall be delivered or sent to the addresses hereinafter stated, to
wit:
Landlord: Davis Brothers Venture
ATTN: Alex Davis
800 Miami Circle NE, Suite 220
Atlanta, GA 30324
Tenant: Wink Davis Equipment Co., Inc.
800 Miami Circle NE, Suite 220
Atlanta, GA 30324
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Broker:
All notices shall be effective upon delivery. Any party may change his notice
address upon written notice to the other parties.
ENTIRE AGREEMENT
40. This Lease contains the entire agreement of the parties hereto, and
no representations, inducements, promises or agreements, oral or otherwise,
between the parties, not embodied herein, shall be of any force or effect. No
subsequent alteration, amendment, change or addition to this Lease, except as to
changes or additions to the Rules and Regulations described in paragraph 7,
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
Landlord or Tenant.
SPECIAL STIPULATIONS
41. Any special stipulations are set forth in the attached Exhibit
______. Insofar as said Special Stipulations conflict with any of the foregoing
provisions, said Special Stipulations shall control.
Tenant acknowledges that Tenant has read and understands the terms of this Lease
and has received a copy of it.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and seals,
in triplicate.
LANDLORD:
/s/ C. Alexander Davis
Date and time executed by Landlord:
TENANT:
/s/ Wink A. Davis, Jr.
Date and time executed by Landlord:
BROKER:
------------------------------------
Date and time executed by Landlord:
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EXHIBIT 10.54
ATLANTA COMMERCIAL BOARD OF RELEATORS
STANDARD COMMERCIAL LEASE AGREEMENT
MAY 1994
THIS AGREEMENT is made by and among Davis Brothers Venture (hereinafter called
"Landlord"), and Wink Davis Equipment Company, Inc. (hereinafter called
"Tenant"), and _________________________ (hereinafter called "Broker").
WITNESSETH:
PREMISES
1. Landlord, for and in consideration of the rents, covenants,
agreements, and stipulations hereinafter mentioned, provided for and contained
herein to be paid, kept and performed by Tenant, leases and rents unto Tenant,
and Tenant hereby leases and takes upon the terms and conditions which
hereinafter appear, the following described property (hereinafter called the
"Premises", to wit:
760 CREEL DRIVE, WOODDALE, IL
and being known as __________________________________________________. No
easement for light or air is included in the Premises.
TERM
2. The Tenant shall have and hold the Premises for a term of 24 months
beginning on the 31st day of July, 1997, and ending on the 30th day of July,
1999, at midnight, unless sooner terminated as hereinafter provided.
RENTAL
3. Tenant agrees to pay Landlord at the address of Landlord as stated
in this Lease, without demand, deduction or setoff, an annual rental of $73,191
payable in equal monthly installments of $6,099.25 in advance on the first day
of each calendar month during the term hereof. Upon the execution of this Lease,
Tenant shall pay to Landlord the first full month's rent due hereunder. Rental
for any period during the term hereof which is for less than one month shall be
a prorated portion of the monthly rental due.
LATE CHARGES
4. If Landlord fails to receive all or any portion of a rent payment
within ten (10) days after it becomes due, Tenant shall pay Landlord, as
additional rental, a late charge equal to ten percent (10%) of the overdue
amount. The parties agree that such late charges represents a fair and
reasonable estimate of the costs Landlord will incur by reason of such late
payment.
SECURITY DEPOSIT
5. Tenant shall deposit with Landlord upon execution of this Lease $ -
as a security deposit which shall be held by Landlord, without liability to
Tenant for any interest thereon , as security for the full and faithful
performance by Tenant of each and every term, covenant and condition of this
Lease of Tenant. If any of the rents or other charges or sums payable by Tenant
to Landlord shall be overdue and unpaid or should Landlord make payments on
behalf of Tenant, or should Tenant fail to perform any of the terms of this
Lease, then Landlord may, at its option, appropriate and apply the security
deposit, or so much thereof as may be necessary to compensate Landlord toward
the payment of the rents, charges or other sums due from Tenant, or towards any
loss, damage or expense sustained by Landlord resulting from such default on the
part of Tenant; and in such event Tenant shall upon demand restore the security
deposit to the original sum deposited. In the event Tenant furnishes Landlord
with proof that all utility bills have been paid through the date of Lease
termination, and performs all of Tenants other obligations under this Lease, the
security deposit shall be returned in full to Tenant within thirty (30) days
after the date of the expiration or sooner termination of the term of this Lease
and the surrender of the Premises by Tenant in compliance with the provisions of
this Lease.
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UTILITY BILLS
6. Tenant shall pay all utility bills, including, but not limited to
water, sewer, gas, electricity, fuel, light and heat bills for the Premises, and
Tenant shall pay all charges for garbage collection or other sanitary services.
COMMON AREAS COSTS; RULES AND REGULATIONS
7. If the Premises are part of a larger building or group of buildings,
Tenant shall pay as additional rental monthly, in advance, its pro rata share of
common area maintenance costs as hereinafter more particularly set forth in the
Special Stipulations. The Rules and Regulations attached hereto are made a part
of this Lease. Tenant agrees to perform and abide by those Rules and Regulations
and such other Rules and Regulations as may be made from time to time by
Landlord.
USE OF PREMISES
8. The Premises shall be used for conducting the business of
distributor, sales and services of laundry equipment purposes only and no other.
The Premises shall not be used for any illegal purposes, nor in any manner to
create any nuisance or trespass, nor in any manner to vitiate the insurance or
increase the rate of insurance on the Premises.
ABANDONMENT OF THE PREMISES
9. Tenant agrees not to abandon or vacate the Premises during the term
of this Lease and agrees to use the Premises for the purposes herein leased
until the expiration hereof.
TAX AND INSURANCE ESCALATION
10. Tenant shall pay upon demand by Landlord as additional rental
during the term of this Lease, and any extension or renewal thereof, the amount
by which all taxes (including but not limited to, ad valorem taxes, special
assessments and any other governmental charges) on the Premises for each tax
year exceed all taxes on the Premises for the tax year 1996. In the event the
Premises are less than the entire property assessed for such taxes for any such
tax year, then the tax for any such year applicable to the Premises shall be
determined by proration on the basis that the rentable floor area of the
Premises bears to the rentable floor area of the entire property assessed. If
the final year of the Lease fails to coincide with the tax year, then any excess
for the tax year during which the term ends shall be reduced by the pro rata pat
of such tax year beyond the Lease term. If such taxes for the year in which the
Lease terminates are not ascertainable before payment of the last month's
rental, then the amount of such taxes assessed against the Property for the
previous tax year shall be used as a basis for determining the pro rata share,
if any, to be paid by Tenant for that portion of the last Lease year. Tenant
shall further pay, upon demand, its pro rata share of the excess cost of fire
and extended coverage insurance including any and all public liability insurance
on the building over the cost for the first year of the Lease term for each
subsequent year during the term of this Lease. Tenant's pro rata portion of
increased taxes or share of excess cost of fire and extended coverage and
liability insurance, as provided herein, shall be payable within fifteen (15)
days after receipt of notice from Landlord as to the amount due.
INDEMNITY; INSURANCE
11. Tenant agrees to and hereby does indemnify and save Landlord
harmless against all claims for damages to persons or property by reason of
Tenant's use or occupancy of the Premises, and all expenses incurred by Landlord
because thereof, including attorney's fees and court costs. Supplementing the
foregoing and in addition thereto, Tenant shall during the term of this Lease
and any extension or renewal thereof, and at Tenant's expense, maintain in full
force and effect comprehensive general liability insurance with limits of
$500,000.00 per person and $1,000,000.00 per incident, and property damage
limits of $100,000.00, which insurance shall contain a special endorsement
recognizing and insuring any liability accruing to Tenant under the first
sentence of this paragraph 11, and naming Landlord as additional insured. Tenant
shall provide evidence of such insurance to Landlord prior to the commencement
of the term of this Lease. Landlord and Tenant each hereby release and relieve
the other, and waive its right of recovery, for loss or damage arising out of or
incident to the perils insured against which perils occur in, on or about the
Premises, whether due to the negligence of Landlord or Tenant or their Brokers,
employees, contractors and/or invitees, to the extent that such loss or damage
is within the policy limits of said
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comprehensive general liability insurance. Landlord and Tenant shall, upon
obtaining the policies of insurance required, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is contained
in this Lease.
REPAIRS BY LANDLORD
12. Landlord agrees to keep in good repair the roof, foundations and
exterior walls of the Premises (exclusive of all glass and exclusive of all
exterior doors) and underground utility and sewer pipes outside the exterior
walls of the building, except repairs rendered necessary by the negligence or
intentional wrongful acts of Tenant, its brokers, employees or invitees. If the
Premises are part of a larger building or group of buildings, then to the extent
that the grounds are common areas, Landlord shall maintain the grounds
surrounding the building, including paving, the mowing of grass, care of shrubs
and general landscaping. Tenant shall promptly report in writing to Landlord any
defective condition known to it which Landlord is required to repair and failure
so to report such conditions shall make Tenant responsible to Landlord for any
liability incurred by Landlord by reason of such conditions.
REPAIRS BY TENANT
13. Tenant accepts the Premises in their present condition and as
suited for the uses intended by Tenant. Tenant shall, throughout the initial
term of this Lease, and any extension or renewal thereof, at its expense,
maintain in good order and repair the Premises, including the building, heating
and air conditioning equipment (including but not limited to replacement of
parts, compressors, air handling units and heating units) and other improvements
located thereon, except those repairs expressly required to be made by Landlord
hereunder. Unless the grounds are common areas of a building(s) larger than the
Premises, Tenant further agrees to care for the grounds around the building,
including paving, the mowing of grass, care of shrubs and general landscaping.
Tenant agrees to return the Premises to Landlord at the expiration, or prior to
termination of this Lease, in as good condition and repair as when first
received, natural wear and tear, damage by storm, fire, lightning, earthquake or
other casualty alone excepted.
ALTERATIONS
14. Tenant shall not make any alterations, additions, or improvements
to the Premises without Landlord's prior written consent. Tenant shall promptly
remove any alterations, additions, or improvements constructed in violation of
this Paragraph 14 upon Landlord's written request. All approved alterations,
additions, and improvements will be accomplished in a good and workmanlike
manner, in conformity with all applicable laws and regulations, and by a
contractor approved by Landlord, free of any liens or encumbrances. Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) at the termination of this Lease and to
restore the Premises to its prior condition, all at Tenant's expense. All
alterations, additions or improvements which Landlord has not required Tenant to
remove shall become Landlord's property and shall be surrendered to Landlord
upon the termination of this Lease, except that Tenant may remove any of
Tenant's machinery or equipment which can be removed without material damage to
the Premises. Tenant shall repair, at Tenant's expense, any damage to the
Premises caused by the removal of any such machinery or equipment.
REMOVAL OF FIXTURES
15. Tenant may (if not in default hereunder) prior to the expiration of
this Lease, or any extension or renewal thereof, remove all fixtures and
equipment which it has placed in the Premises, provided Tenant repairs all
damage to the Premises caused by such removal.
DESTRUCTION OF OR DAMAGE TO PREMISES
16. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction and rental shall be accounted for as between Landlord and Tenant as
of that date. If the Premises are damaged but not wholly destroyed by any such
casualties, rental shall abate in such proration as use of the Premises has been
destroyed and Landlord shall restore the Premises to substantially the same
condition as before damage as speedily as is practicable, whereupon full rental
shall recommence.
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GOVERNMENTAL ORDERS
17. Tenant agrees, at its own expense, to comply promptly with all
requirements of any legally constituted public authority made necessary by
reason of Tenant's occupancy of the Premises. Landlord agrees to comply promptly
and with any such requirements if not made necessary by reason of Tenant's
occupancy. It is mutually agreed, however, between Landlord and Tenant, that if
in order to comply with such requirements, the cost to Landlord or Tenant, as
the case may be, shall exceed a sum equal to one year's rent, then Landlord or
Tenant who is obligated to comply with such requirements may terminate this
Lease by giving written notice of termination to the other party by certified
mail, which termination shall become effective sixty (60) days after receipt of
such notice and which notice shall eliminate the necessity of compliance with
such requirements by giving such notice unless the party giving such notice of
termination shall, before termination becomes effective, pay to the party giving
notice all cost of compliance in excess of one year's rent, or secure payment of
said sum in manner satisfactory to the party giving notice.
CONDEMNATION
18. If the whole of the Premises, or such portion thereof as will make
the Premises unusable for the purposes herein leased, are condemned by any
legally constituted authority for any public use or purposes, then in either of
said events the term hereby granted shall cease from the date when possession
thereof is taken by public authorities, and rental shall be accounted for as
between Landlord and Tenant as of said date. Such termination, however, shall be
without prejudice to the rights of either Landlord or Tenant to recover
compensation and damage caused by condemnation from the condemnor. It is further
understood and agreed that neither the Tenant nor Landlord shall have any rights
in any award made to the other by any condemnation authority notwithstanding the
termination of the Lease as herein provided. Broker may become a party to the
condemnation proceeding for the purpose of enforcing his rights under this
paragraph.
ASSIGNMENT AND SUBLETTING
19. Tenant shall not, without the prior written consent of Landlord,
which shall not be unreasonably withheld, assign this Lease or any interest
hereunder, or sublet the Premises or any part thereof, or permit the use of the
Premises by any party other than the Tenant. Consent to any assignment or
sublease shall not impair this provision and all later assignments or subleases
shall be made likewise only on the prior written consent of Landlord. The
assignee of Tenant, at the option of Landlord, shall become liable to Landlord
for all obligations of Tenant hereunder, but no sublease or assignment by Tenant
shall relieve Tenant of any liability hereunder.
EVENTS OF DEFAULT
20. The happening of any one or more of the following events
(hereinafter any one of which may be referred to as an "Event of Default")
during the term of this Lease, or any renewal or extension thereof, shall
constitute a breach of this Lease on the part of the Tenant: (A) Tenant fails to
pay the rental as provided for herein; (B) Tenant abandons or vacates the
Premises; (C) Tenant fails to comply with or abide by and perform any other
obligation imposed upon Tenant under this Lease; (D) Tenant is adjudicated
bankrupt; (E) a permanent receiver is appointed for Tenant's property and such
receiver is not removed within sixty (60) days after written notice from
Landlord to Tenant to obtain such removal; (F) Tenant, either voluntarily or
involuntarily, takes advantage of any debt or relief proceedings under the
present or future law, whereby the rent or any part thereof is, or is proposed
to be reduced or payment thereof deferred; (G) Tenant makes an assignment for
benefit of creditors; or (H) Tenant's effects are levied upon or attached under
process against Tenant, which is not satisfied or dissolved within thirty (30)
days after written notice from Landlord to Tenant to obtain satisfaction
thereof.
REMEDIES OF DEFAULT
21. Upon the occurrence of an Event of Default, Landlord, in addition
to any and all other rights or remedies it may have at law or in equity, shall
have the option of pursuing any one or more of the following remedies:
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(A) Landlord may terminate this Lease by giving notice of
termination, in which event this Lease shall expire and terminate on the date
specified in such notice of termination, with the same force and effect as
though the date so specified were the date herein originally fixed as the
termination date of the term of this Lease, and all rights of Tenant under this
Lease and in and to the Premises shall expire and terminate, and Tenant shall
remain liable for all obligations under this Lease arising up to the date of
such termination and Tenant shall surrender the Premises to Landlord on the date
specified in such notice;
(B) Landlord may terminate this Lease as provided in paragraph
21(A) hereof and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, including, without limitation, a sum which, at the date of
such termination, represents the then value of the excess, if any, of (i) the
monthly rental and additional rent for the period commencing with the day
following the date of such termination and ending with the date hereinbefore set
for the expiration of the full term hereby granted, or (ii) the aggregate
reasonable rental value of the Premises (less reasonable brokerage commissions,
attorneys' fees and other costs relating to the reletting of the Premises) for
the same period, all of which excess sum shall be deemed immediately due and
payable;
(C) Landlord may, without terminating this Lease, declare
immediately due and payable all monthly rental and additional rent due and
coming due under this Lease for the entire remaining term hereof, together with
all other amounts previously due, at once; provided, however, that such payment
shall not be deemed a penalty or liquidated damages but shall merely constitute
payment in advance of rent for the remainder of said term; upon making such
payments, Tenant shall be entitled to receive from Landlord all rents received
by Landlord from other assignees, tenants and subtenants on account of the
Premises during the term of this Lease, provided that the monies to which Tenant
shall so become entitled shall in no event exceed the entire amount actually
paid by Tenant to Landlord pursuant to this clause (C) less all costs, expenses
and attorneys' fees of Landlord incurred in connection with the reletting of the
Premises; or
(D) Landlord may, from time to time without terminating this
Lease, and without releasing Tenant in whole or in part from Tenant's obligation
to pay monthly rental and additional rent and perform all of the covenants,
conditions and agreements to be performed by Tenant as provided in this Lease,
make such alterations and repairs as may be necessary in order to relet the
Premises, and, after making such alterations and repairs, Landlord may, but
shall not be obligated to, relet the Premises or any part thereof for such term
or terms (which may be for a term extending beyond the term of this Lease) at
such rental or rentals and upon such other terms and conditions as Landlord in
its sole discretion may deem advisable or acceptable; upon each reletting, all
rents received by Landlord from such reletting shall be applied first, to the
payment of any indebtedness other than rent due hereunder from Tenant to
Landlord, second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorneys' fees, and of costs of such alterations
and repairs, third, to the payment of the monthly rental and additional rent due
and unpaid hereunder, and the residue, if any, shall be held by Landlord and
applied against payments of future monthly rental and additional rent as the
same may become due and payable hereunder; in no event shall Tenant be entitled
to any excess rental received by Landlord over and above charges that Tenant is
obligated to pay hereunder, including monthly rental and additional rent; if
such rentals received from such reletting during any month are less than those
to be paid during the month by Tenant hereunder, including monthly rental and
additional rent, Tenant shall pay any such deficiency to Landlord, which
deficiency shall be calculated and paid monthly; Tenant shall also pay Landlord
as soon as ascertained and upon demand all costs and expenses incurred by
Landlord in connection with such reletting and in making any alterations and
repairs which are not covered by the rentals received from such reletting;
notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous breach.
Tenant acknowledges that the Premises are to be used for commercial purposes,
and Tenant expressly waives the protections and rights set forth in Official
Code of Georgia Annotated Section 44-7-52.
EXTERIOR SIGNS
22. Tenant shall place no signs upon the outside walls or roof of the
Premises except with the written consent of the Landlord. Any and all signs
placed on the Premises by Tenant shall be maintained in compliance with
governmental rules and regulations governing such signs, and Tenant shall
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be responsible to Landlord for any damage caused by installation, use or
maintenance of said signs, and all damage incident to such removal.
LANDLORD'S ENTRY OF PREMISES
23. Landlord may card the Premises "For Rent" or "For Sale" ninety (90)
days before the termination of this Lease. Landlord may enter the Premises at
reasonable hours to exhibit the Premises to prospective purchasers or tenants,
to inspect the Premises to see that Tenant is complying with all of its
obligations hereunder, and to make repairs required of Landlord under the terms
hereof or to make repairs to Landlord's adjoining property, if any.
EFFECT OF TERMINATION OF LEASE
24. No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
SUBORDINATION
25. At the option of Landlord, Tenant agrees that this Lease shall
remain subject and subordinate to all present and future mortgages, deeds to
secure debt or other security instruments (the "Security Deeds") affecting the
Building or the Premises, and Tenant shall promptly execute and deliver to
Landlord such certificate or certificates in writing as Landlord may request,
showing the subordination of the Lease to such Security Deeds, and in default of
Tenant so doing, Landlord shall be and is hereby authorized and empowered to
execute such certificate in the name of and as the act and deed of Tenant, this
authority being hereby declared to be coupled with an interest and to be
irrevocable. Tenant shall upon request from Landlord at any time and from time
to time execute, acknowledge and deliver to Landlord a written statement
certifying as follows: (A) that this Lease is unmodified and in full force and
effect (or if there has been modification thereof, that the same is in full
force and effect as modified and stating the nature thereof); (B) that to the
best of its knowledge there are no uncured defaults on the part of Landlord (or
if any such default exists, the specific nature and extent thereof); (C) the
date to which any rent and other charges have been paid in advance, if any; and
(D) such other matters as Landlord may reasonably request. Tenant irrevocably
appoints Landlord as its attorney-in-fact, coupled with an interest, to execute
and deliver, for and in the name of Tenant, any document or instrument provided
for in this paragraph.
QUIET ENJOYMENT
26. So long as Tenant observes and performs the covenants and
agreements contained herein, it shall at all times during the Lease term
peacefully and quietly have and enjoy possession of the Premises, but always
subject to the terms hereof.
NO ESTATE IN LAND
27. This Lease shall create the relationship of Landlord and Tenant
between the parties hereto. No estate shall pass out of Landlord. Tenant has
only a usufruct not subject to levy and sale, and not assignable by Tenant
except by Landlord's consent.
HOLDING OVER
28. If Tenant remains in possession of the Premises after expiration of
the term hereof, with Landlord's acquiescence and without any express agreement
of the parties, Tenant shall be a tenant at will at the rental rate which is in
effect at end of this Lease and there shall be no renewal of this Lease by
operation of law. If Tenant remains in possession of the Premises after
expiration of the term hereof without Landlord's acquiescence, Tenant shall be a
tenant at sufferance and commencing on the date following the date of such
expiration, the monthly rental payable under Paragraph 3 above shall for each
month, or fraction thereof during which Tenant so remains in possession of the
Premises, be twice the monthly rental otherwise payable under Paragraph 3 above.
ATTORNEYS' FEES
29. In the event that any action or proceeding is brought to enforce
any term, covenant or condition of this Lease on the part of Landlord or Tenant,
the prevailing party in such litigation shall be entitled to recover reasonable
attorneys' fees to be fixed by the court in such action or proceeding, in an
amount at least equal to fifteen percent of any damages due from the
non-prevailing party. Furthermore,
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Landlord and Tenant agree to pay the attorneys' fees and expenses of (A) the
other party to this Lease (either Landlord or Tenant) if it is made a party to
litigation because of its being a party to this Lease and when it has not
engaged in any wrongful conduct itself, and (B) Broker if Broker is made a party
to litigation because of its being a party to this Lease and when Broker is not
engaged in any wrongful conduct itself.
RIGHTS CUMULATIVE
30. All rights, powers and privileges conferred hereunder upon
parties hereto shall be cumulative and not restrictive of those given by law.
WAIVER OF RIGHTS
31. No failure of Landlord to exercise any power given Landlord
hereunder or to insist upon strict compliances by Tenant of its obligations
hereunder and no custom or practice of the parties at variance with the terms
hereof shall constitute a waiver of Landlord's right to demand exact compliance
with the terms hereof.
[NUMBERS 32 THROUGH 35 OMITTED.]
ENVIRONMENTAL LAWS
36. Landlord represent to the best of its knowledge and belief, (A) the
Premises are in compliance with all applicable environmental laws, and (B) there
are not excessive levels (as defined by the Environmental Protection Agency) of
radon, toxic waste or hazardous substances on the Premises. Tenant represents
and warrants that Tenant shall comply with all applicable environmental laws and
that Tenant shall not permit any of his employees, brokers, contractors or
subcontractors, or any person present on the Premises to generate, manufacture,
store, dispose or release on, about, or under the Premises any toxic waste or
hazardous substances which would result in the Premises not complying with any
applicable environmental laws.
TIME OF ESSENCE
37. Time is of the essence of this Lease.
DEFINITIONS
38. "Landlord" as used in this Lease shall include the undersigned, its
heirs, representatives, assigns and successors in title to the Premises,
"Tenant" shall include the undersigned and its heirs, representatives, assigns
and successors, and if this Lease shall be validly assigned or sublet, shall
include also Tenant's assignees or subtenants as to the Premises covered by such
assignment or sublease. "Broker" shall include the undersigned, its successors,
assigns, heirs and representatives. "Landlord", "Tenant" and "Broker" include
male and female, singular and plural, corporation, partnership or individual, as
may fit the particular parties.
NOTICES
39. All notices required or permitted under this Lease shall be in
writing and shall be personally delivered or sent by U.S. Certified Mail, return
receipt requested, postage prepaid. Broker shall be copied with all required or
permitted notices. Notices to Tenant shall be delivered or sent to the address
shown below, except that upon Tenant's taking possession of the Premises, then
the Premises shall be Tenant's address for notice purposes. Notices to Landlord
and Broker shall be delivered or sent to the addresses hereinafter stated, to
wit:
Landlord: Davis Brothers Venture
ATTN: Alex Davis
800 Miami Circle NE, Suite 220
Atlanta, GA 30324
Tenant: Wink Davis Equipment Co., Inc.
800 Miami Circle NE, Suite 220
Atlanta, GA 30324
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Broker:
All notices shall be effective upon delivery. Any party may change his notice
address upon written notice to the other parties.
ENTIRE AGREEMENT
40. This Lease contains the entire agreement of the parties hereto, and
no representations, inducements, promises or agreements, oral or otherwise,
between the parties, not embodied herein, shall be of any force or effect. No
subsequent alteration, amendment, change or addition to this Lease, except as to
changes or additions to the Rules and Regulations described in paragraph 7,
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
Landlord or Tenant.
SPECIAL STIPULATIONS
41. Any special stipulations are set forth in the attached Exhibit
______. Insofar as said Special Stipulations conflict with any of the foregoing
provisions, said Special Stipulations shall control.
Tenant acknowledges that Tenant has read and understands the terms of this Lease
and has received a copy of it.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and seals,
in triplicate.
LANDLORD:
/s/ C. Alexander Davis
Date and time executed by Landlord:
TENANT:
/s/ Wink A. Davis, Jr.
Date and time executed by Landlord:
BROKER:
------------------------------------
Date and time executed by Landlord:
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EXHIBIT 10.55
ATLANTA COMMERCIAL BOARD OF RELEATORS
STANDARD COMMERCIAL LEASE AGREEMENT
MAY 1994
THIS AGREEMENT is made by and among Davis Brothers Venture (hereinafter called
"Landlord"), and Wink Davis Equipment Company, Inc. (hereinafter called
"Tenant"), and _________________________ (hereinafter called "Broker").
WITNESSETH:
PREMISES
1. Landlord, for and in consideration of the rents, covenants,
agreements, and stipulations hereinafter mentioned, provided for and contained
herein to be paid, kept and performed by Tenant, leases and rents unto Tenant,
and Tenant hereby leases and takes upon the terms and conditions which
hereinafter appear, the following described property (hereinafter called the
"Premises"), to wit:
1804 COYOTE DRIVE, CHESTER, VA
and being known as _____________________________________________________. No
easement for light or air is included in the Premises.
TERM
2. The Tenant shall have and hold the Premises for a term of 24 months
beginning on the 31st day of July, 1997, and ending on the 30th day of July,
1999, at midnight, unless sooner terminated as hereinafter provided.
RENTAL
3. Tenant agrees to pay Landlord at the address of Landlord as stated
in this Lease, without demand, deduction or setoff, an annual rental of $23,781
payable in equal monthly installments of $1,981.75 in advance on the first day
of each calendar month during the term hereof. Upon the execution of this Lease,
Tenant shall pay to Landlord the first full month's rent due hereunder. Rental
for any period during the term hereof which is for less than one month shall be
a prorated portion of the monthly rental due.
LATE CHARGES
4. If Landlord fails to receive all or any portion of a rent payment
within ten (10) days after it becomes due, Tenant shall pay Landlord, as
additional rental, a late charge equal to ten percent (10%) of the overdue
amount. The parties agree that such late charges represents a fair and
reasonable estimate of the costs Landlord will incur by reason of such late
payment.
SECURITY DEPOSIT
5. Tenant shall deposit with Landlord upon execution of this Lease $ -
as a security deposit which shall be held by Landlord, without liability to
Tenant for any interest thereon , as security for the full and faithful
performance by Tenant of each and every term, covenant and condition of this
Lease of Tenant. If any of the rents or other charges or sums payable by Tenant
to Landlord shall be overdue and unpaid or should Landlord make payments on
behalf of Tenant, or should Tenant fail to perform any of the terms of this
Lease, then Landlord may, at its option, appropriate and apply the security
deposit, or so much thereof as may be necessary to compensate Landlord toward
the payment of the rents, charges or other sums due from Tenant, or towards any
loss, damage or expense sustained by Landlord resulting from such default on the
part of Tenant; and in such event Tenant shall upon demand restore the security
deposit to the original sum deposited. In the event Tenant furnishes Landlord
with proof that all utility bills have been paid through the date of Lease
termination, and performs all of Tenants other obligations under this Lease, the
security deposit shall be returned in full to Tenant within thirty (30) days
after the date of the expiration or sooner termination of the term of this Lease
and the surrender of the Premises by Tenant in compliance with the provisions of
this Lease.
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UTILITY BILLS
6. Tenant shall pay all utility bills, including, but not limited to
water, sewer, gas, electricity, fuel, light and heat bills for the Premises, and
Tenant shall pay all charges for garbage collection or other sanitary services.
COMMON AREAS COSTS; RULES AND REGULATIONS
7. If the Premises are part of a larger building or group of buildings,
Tenant shall pay as additional rental monthly, in advance, its pro rata share of
common area maintenance costs as hereinafter more particularly set forth in the
Special Stipulations. The Rules and Regulations attached hereto are made a part
of this Lease. Tenant agrees to perform and abide by those Rules and Regulations
and such other Rules and Regulations as may be made from time to time by
Landlord.
USE OF PREMISES
8. The Premises shall be used for conducting the business of
distributor, sales and services of laundry equipment purposes only and no other.
The Premises shall not be used for any illegal purposes, nor in any manner to
create any nuisance or trespass, nor in any manner to vitiate the insurance or
increase the rate of insurance on the Premises.
ABANDONMENT OF THE PREMISES
9. Tenant agrees not to abandon or vacate the Premises during the term
of this Lease and agrees to use the Premises for the purposes herein leased
until the expiration hereof.
TAX AND INSURANCE ESCALATION
10. Tenant shall pay upon demand by Landlord as additional rental
during the term of this Lease, and any extension or renewal thereof, the amount
by which all taxes (including but not limited to, ad valorem taxes, special
assessments and any other governmental charges) on the Premises for each tax
year exceed all taxes on the Premises for the tax year 1996. In the event the
Premises are less than the entire property assessed for such taxes for any such
tax year, then the tax for any such year applicable to the Premises shall be
determined by proration on the basis that the rentable floor area of the
Premises bears to the rentable floor area of the entire property assessed. If
the final year of the Lease fails to coincide with the tax year, then any excess
for the tax year during which the term ends shall be reduced by the pro rata pat
of such tax year beyond the Lease term. If such taxes for the year in which the
Lease terminates are not ascertainable before payment of the last month's
rental, then the amount of such taxes assessed against the Property for the
previous tax year shall be used as a basis for determining the pro rata share,
if any, to be paid by Tenant for that portion of the last Lease year. Tenant
shall further pay, upon demand, its pro rata share of the excess cost of fire
and extended coverage insurance including any and all public liability insurance
on the building over the cost for the first year of the Lease term for each
subsequent year during the term of this Lease. Tenant's pro rata portion of
increased taxes or share of excess cost of fire and extended coverage and
liability insurance, as provided herein, shall be payable within fifteen (15)
days after receipt of notice from Landlord as to the amount due.
INDEMNITY; INSURANCE
11. Tenant agrees to and hereby does indemnify and save Landlord
harmless against all claims for damages to persons or property by reason of
Tenant's use or occupancy of the Premises, and all expenses incurred by Landlord
because thereof, including attorney's fees and court costs. Supplementing the
foregoing and in addition thereto, Tenant shall during the term of this Lease
and any extension or renewal thereof, and at Tenant's expense, maintain in full
force and effect comprehensive general liability insurance with limits of
$500,000.00 per person and $1,000,000.00 per incident, and property damage
limits of $100,000.00, which insurance shall contain a special endorsement
recognizing and insuring any liability accruing to Tenant under the first
sentence of this paragraph 11, and naming Landlord as additional insured. Tenant
shall provide evidence of such insurance to Landlord prior to the commencement
of the term of this Lease. Landlord and Tenant each hereby release and relieve
the other, and waive its right of recovery, for loss or damage arising out of or
incident to the perils insured against which perils occur in, on or about the
Premises, whether due to the negligence of Landlord or Tenant or their Brokers,
employees, contractors and/or invitees, to the extent that such loss or damage
is within the policy limits of said
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comprehensive general liability insurance. Landlord and Tenant shall, upon
obtaining the policies of insurance required, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is contained
in this Lease.
REPAIRS BY LANDLORD
12. Landlord agrees to keep in good repair the roof, foundations and
exterior walls of the Premises (exclusive of all glass and exclusive of all
exterior doors) and underground utility and sewer pipes outside the exterior
walls of the building, except repairs rendered necessary by the negligence or
intentional wrongful acts of Tenant, its brokers, employees or invitees. If the
Premises are part of a larger building or group of buildings, then to the extent
that the grounds are common areas, Landlord shall maintain the grounds
surrounding the building, including paving, the mowing of grass, care of shrubs
and general landscaping. Tenant shall promptly report in writing to Landlord any
defective condition known to it which Landlord is required to repair and failure
so to report such conditions shall make Tenant responsible to Landlord for any
liability incurred by Landlord by reason of such conditions.
REPAIRS BY TENANT
13. Tenant accepts the Premises in their present condition and as
suited for the uses intended by Tenant. Tenant shall, throughout the initial
term of this Lease, and any extension or renewal thereof, at its expense,
maintain in good order and repair the Premises, including the building, heating
and air conditioning equipment (including but not limited to replacement of
parts, compressors, air handling units and heating units) and other improvements
located thereon, except those repairs expressly required to be made by Landlord
hereunder. Unless the grounds are common areas of a building(s) larger than the
Premises, Tenant further agrees to care for the grounds around the building,
including paving, the mowing of grass, care of shrubs and general landscaping.
Tenant agrees to return the Premises to Landlord at the expiration, or prior to
termination of this Lease, in as good condition and repair as when first
received, natural wear and tear, damage by storm, fire, lightning, earthquake or
other casualty alone excepted.
ALTERATIONS
14. Tenant shall not make any alterations, additions, or improvements
to the Premises without Landlord's prior written consent. Tenant shall promptly
remove any alterations, additions, or improvements constructed in violation of
this Paragraph 14 upon Landlord's written request. All approved alterations,
additions, and improvements will be accomplished in a good and workmanlike
manner, in conformity with all applicable laws and regulations, and by a
contractor approved by Landlord, free of any liens or encumbrances. Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) at the termination of this Lease and to
restore the Premises to its prior condition, all at Tenant's expense. All
alterations, additions or improvements which Landlord has not required Tenant to
remove shall become Landlord's property and shall be surrendered to Landlord
upon the termination of this Lease, except that Tenant may remove any of
Tenant's machinery or equipment which can be removed without material damage to
the Premises. Tenant shall repair, at Tenant's expense, any damage to the
Premises caused by the removal of any such machinery or equipment.
REMOVAL OF FIXTURES
15. Tenant may (if not in default hereunder) prior to the expiration of
this Lease, or any extension or renewal thereof, remove all fixtures and
equipment which it has placed in the Premises, provided Tenant repairs all
damage to the Premises caused by such removal.
DESTRUCTION OF OR DAMAGE TO PREMISES
16. If the Premises are totally destroyed by storm, fire, lightning,
earthquake or other casualty, this Lease shall terminate as of the date of such
destruction and rental shall be accounted for as between Landlord and Tenant as
of that date. If the Premises are damaged but not wholly destroyed by any such
casualties, rental shall abate in such proration as use of the Premises has been
destroyed and Landlord shall restore the Premises to substantially the same
condition as before damage as speedily as is practicable, whereupon full rental
shall recommence.
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GOVERNMENTAL ORDERS
17. Tenant agrees, at its own expense, to comply promptly with all
requirements of any legally constituted public authority made necessary by
reason of Tenant's occupancy of the Premises. Landlord agrees to comply promptly
and with any such requirements if not made necessary by reason of Tenant's
occupancy. It is mutually agreed, however, between Landlord and Tenant, that if
in order to comply with such requirements, the cost to Landlord or Tenant, as
the case may be, shall exceed a sum equal to one year's rent, then Landlord or
Tenant who is obligated to comply with such requirements may terminate this
Lease by giving written notice of termination to the other party by certified
mail, which termination shall become effective sixty (60) days after receipt of
such notice and which notice shall eliminate the necessity of compliance with
such requirements by giving such notice unless the party giving such notice of
termination shall, before termination becomes effective, pay to the party giving
notice all cost of compliance in excess of one year's rent, or secure payment of
said sum in manner satisfactory to the party giving notice.
CONDEMNATION
18. If the whole of the Premises, or such portion thereof as will make
the Premises unusable for the purposes herein leased, are condemned by any
legally constituted authority for any public use or purposes, then in either of
said events the term hereby granted shall cease from the date when possession
thereof is taken by public authorities, and rental shall be accounted for as
between Landlord and Tenant as of said date. Such termination, however, shall be
without prejudice to the rights of either Landlord or Tenant to recover
compensation and damage caused by condemnation from the condemnor. It is further
understood and agreed that neither the Tenant nor Landlord shall have any rights
in any award made to the other by any condemnation authority notwithstanding the
termination of the Lease as herein provided. Broker may become a party to the
condemnation proceeding for the purpose of enforcing his rights under this
paragraph.
ASSIGNMENT AND SUBLETTING
19. Tenant shall not, without the prior written consent of Landlord,
which shall not be unreasonably withheld, assign this Lease or any interest
hereunder, or sublet the Premises or any part thereof, or permit the use of the
Premises by any party other than the Tenant. Consent to any assignment or
sublease shall not impair this provision and all later assignments or subleases
shall be made likewise only on the prior written consent of Landlord. The
assignee of Tenant, at the option of Landlord, shall become liable to Landlord
for all obligations of Tenant hereunder, but no sublease or assignment by Tenant
shall relieve Tenant of any liability hereunder.
EVENTS OF DEFAULT
20. The happening of any one or more of the following events
(hereinafter any one of which may be referred to as an "Event of Default")
during the term of this Lease, or any renewal or extension thereof, shall
constitute a breach of this Lease on the part of the Tenant: (A) Tenant fails to
pay the rental as provided for herein; (B) Tenant abandons or vacates the
Premises; (C) Tenant fails to comply with or abide by and perform any other
obligation imposed upon Tenant under this Lease; (D) Tenant is adjudicated
bankrupt; (E) a permanent receiver is appointed for Tenant's property and such
receiver is not removed within sixty (60) days after written notice from
Landlord to Tenant to obtain such removal; (F) Tenant, either voluntarily or
involuntarily, takes advantage of any debt or relief proceedings under the
present or future law, whereby the rent or any part thereof is, or is proposed
to be reduced or payment thereof deferred; (G) Tenant makes an assignment for
benefit of creditors; or (H) Tenant's effects are levied upon or attached under
process against Tenant, which is not satisfied or dissolved within thirty (30)
days after written notice from Landlord to Tenant to obtain satisfaction
thereof.
REMEDIES OF DEFAULT
21. Upon the occurrence of an Event of Default, Landlord, in addition
to any and all other rights or remedies it may have at law or in equity, shall
have the option of pursuing any one or more of the following remedies:
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(A) Landlord may terminate this Lease by giving notice of
termination, in which event this Lease shall expire and terminate on the date
specified in such notice of termination, with the same force and effect as
though the date so specified were the date herein originally fixed as the
termination date of the term of this Lease, and all rights of Tenant under this
Lease and in and to the Premises shall expire and terminate, and Tenant shall
remain liable for all obligations under this Lease arising up to the date of
such termination and Tenant shall surrender the Premises to Landlord on the date
specified in such notice;
(B) Landlord may terminate this Lease as provided in paragraph
21(A) hereof and recover from Tenant all damages Landlord may incur by reason of
Tenant's default, including, without limitation, a sum which, at the date of
such termination, represents the then value of the excess, if any, of (i) the
monthly rental and additional rent for the period commencing with the day
following the date of such termination and ending with the date hereinbefore set
for the expiration of the full term hereby granted, or (ii) the aggregate
reasonable rental value of the Premises (less reasonable brokerage commissions,
attorneys' fees and other costs relating to the reletting of the Premises) for
the same period, all of which excess sum shall be deemed immediately due and
payable;
(C) Landlord may, without terminating this Lease, declare
immediately due and payable all monthly rental and additional rent due and
coming due under this Lease for the entire remaining term hereof, together with
all other amounts previously due, at once; provided, however, that such payment
shall not be deemed a penalty or liquidated damages but shall merely constitute
payment in advance of rent for the remainder of said term; upon making such
payments, Tenant shall be entitled to receive from Landlord all rents received
by Landlord from other assignees, tenants and subtenants on account of the
Premises during the term of this Lease, provided that the monies to which Tenant
shall so become entitled shall in no event exceed the entire amount actually
paid by Tenant to Landlord pursuant to this clause (C) less all costs, expenses
and attorneys' fees of Landlord incurred in connection with the reletting of the
Premises; or
(D) Landlord may, from time to time without terminating this
Lease, and without releasing Tenant in whole or in part from Tenant's obligation
to pay monthly rental and additional rent and perform all of the covenants,
conditions and agreements to be performed by Tenant as provided in this Lease,
make such alterations and repairs as may be necessary in order to relet the
Premises, and, after making such alterations and repairs, Landlord may, but
shall not be obligated to, relet the Premises or any part thereof for such term
or terms (which may be for a term extending beyond the term of this Lease) at
such rental or rentals and upon such other terms and conditions as Landlord in
its sole discretion may deem advisable or acceptable; upon each reletting, all
rents received by Landlord from such reletting shall be applied first, to the
payment of any indebtedness other than rent due hereunder from Tenant to
Landlord, second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorneys' fees, and of costs of such alterations
and repairs, third, to the payment of the monthly rental and additional rent due
and unpaid hereunder, and the residue, if any, shall be held by Landlord and
applied against payments of future monthly rental and additional rent as the
same may become due and payable hereunder; in no event shall Tenant be entitled
to any excess rental received by Landlord over and above charges that Tenant is
obligated to pay hereunder, including monthly rental and additional rent; if
such rentals received from such reletting during any month are less than those
to be paid during the month by Tenant hereunder, including monthly rental and
additional rent, Tenant shall pay any such deficiency to Landlord, which
deficiency shall be calculated and paid monthly; Tenant shall also pay Landlord
as soon as ascertained and upon demand all costs and expenses incurred by
Landlord in connection with such reletting and in making any alterations and
repairs which are not covered by the rentals received from such reletting;
notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous breach.
Tenant acknowledges that the Premises are to be used for commercial purposes,
and Tenant expressly waives the protections and rights set forth in Official
Code of Georgia Annotated Section 44-7-52.
EXTERIOR SIGNS
22. Tenant shall place no signs upon the outside walls or roof of the
Premises except with the written consent of the Landlord. Any and all signs
placed on the Premises by Tenant shall be maintained in compliance with
governmental rules and regulations governing such signs, and Tenant shall
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be responsible to Landlord for any damage caused by installation, use or
maintenance of said signs, and all damage incident to such removal.
LANDLORD'S ENTRY OF PREMISES
23. Landlord may card the Premises "For Rent" or "For Sale" ninety (90)
days before the termination of this Lease. Landlord may enter the Premises at
reasonable hours to exhibit the Premises to prospective purchasers or tenants,
to inspect the Premises to see that Tenant is complying with all of its
obligations hereunder, and to make repairs required of Landlord under the terms
hereof or to make repairs to Landlord's adjoining property, if any.
EFFECT OF TERMINATION OF LEASE
24. No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
SUBORDINATION
25. At the option of Landlord, Tenant agrees that this Lease shall
remain subject and subordinate to all present and future mortgages, deeds to
secure debt or other security instruments (the "Security Deeds") affecting the
Building or the Premises, and Tenant shall promptly execute and deliver to
Landlord such certificate or certificates in writing as Landlord may request,
showing the subordination of the Lease to such Security Deeds, and in default of
Tenant so doing, Landlord shall be and is hereby authorized and empowered to
execute such certificate in the name of and as the act and deed of Tenant, this
authority being hereby declared to be coupled with an interest and to be
irrevocable. Tenant shall upon request from Landlord at any time and from time
to time execute, acknowledge and deliver to Landlord a written statement
certifying as follows: (A) that this Lease is unmodified and in full force and
effect (or if there has been modification thereof, that the same is in full
force and effect as modified and stating the nature thereof); (B) that to the
best of its knowledge there are no uncured defaults on the part of Landlord (or
if any such default exists, the specific nature and extent thereof); (C) the
date to which any rent and other charges have been paid in advance, if any; and
(D) such other matters as Landlord may reasonably request. Tenant irrevocably
appoints Landlord as its attorney-in-fact, coupled with an interest, to execute
and deliver, for and in the name of Tenant, any document or instrument provided
for in this paragraph.
QUIET ENJOYMENT
26. So long as Tenant observes and performs the covenants and
agreements contained herein, it shall at all times during the Lease term
peacefully and quietly have and enjoy possession of the Premises, but always
subject to the terms hereof.
NO ESTATE IN LAND
27. This Lease shall create the relationship of Landlord and Tenant
between the parties hereto. No estate shall pass out of Landlord. Tenant has
only a usufruct not subject to levy and sale, and not assignable by Tenant
except by Landlord's consent.
HOLDING OVER
28. If Tenant remains in possession of the Premises after expiration of
the term hereof, with Landlord's acquiescence and without any express agreement
of the parties, Tenant shall be a tenant at will at the rental rate which is in
effect at end of this Lease and there shall be no renewal of this Lease by
operation of law. If Tenant remains in possession of the Premises after
expiration of the term hereof without Landlord's acquiescence, Tenant shall be a
tenant at sufferance and commencing on the date following the date of such
expiration, the monthly rental payable under Paragraph 3 above shall for each
month, or fraction thereof during which Tenant so remains in possession of the
Premises, be twice the monthly rental otherwise payable under Paragraph 3 above.
ATTORNEYS' FEES
29. In the event that any action or proceeding is brought to enforce
any term, covenant or condition of this Lease on the part of Landlord or Tenant,
the prevailing party in such litigation shall be entitled to recover reasonable
attorneys' fees to be fixed by the court in such action or proceeding, in an
amount at least equal to fifteen percent of any damages due from the
non-prevailing party. Furthermore,
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Landlord and Tenant agree to pay the attorneys' fees and expenses of (A) the
other party to this Lease (either Landlord or Tenant) if it is made a party to
litigation because of its being a party to this Lease and when it has not
engaged in any wrongful conduct itself, and (B) Broker if Broker is made a party
to litigation because of its being a party to this Lease and when Broker is not
engaged in any wrongful conduct itself.
RIGHTS CUMULATIVE
30. All rights, powers and privileges conferred hereunder upon parties
hereto shall be cumulative and not restrictive of those given by law.
WAIVER OF RIGHTS
31. No failure of Landlord to exercise any power given Landlord
hereunder or to insist upon strict compliances by Tenant of its obligations
hereunder and no custom or practice of the parties at variance with the terms
hereof shall constitute a waiver of Landlord's right to demand exact compliance
with the terms hereof.
[NUMBERS 32 THROUGH 35 OMITTED.]
ENVIRONMENTAL LAWS
36. Landlord represent to the best of its knowledge and belief, (A) the
Premises are in compliance with all applicable environmental laws, and (B) there
are not excessive levels (as defined by the Environmental Protection Agency) of
radon, toxic waste or hazardous substances on the Premises. Tenant represents
and warrants that Tenant shall comply with all applicable environmental laws and
that Tenant shall not permit any of his employees, brokers, contractors or
subcontractors, or any person present on the Premises to generate, manufacture,
store, dispose or release on, about, or under the Premises any toxic waste or
hazardous substances which would result in the Premises not complying with any
applicable environmental laws.
TIME OF ESSENCE
37. Time is of the essence of this Lease.
DEFINITIONS
38. "Landlord" as used in this Lease shall include the undersigned, its
heirs, representatives, assigns and successors in title to the Premises,
"Tenant" shall include the undersigned and its heirs, representatives, assigns
and successors, and if this Lease shall be validly assigned or sublet, shall
include also Tenant's assignees or subtenants as to the Premises covered by such
assignment or sublease. "Broker" shall include the undersigned, its successors,
assigns, heirs and representatives. "Landlord", "Tenant" and "Broker" include
male and female, singular and plural, corporation, partnership or individual, as
may fit the particular parties.
NOTICES
39. All notices required or permitted under this Lease shall be in
writing and shall be personally delivered or sent by U.S. Certified Mail, return
receipt requested, postage prepaid. Broker shall be copied with all required or
permitted notices. Notices to Tenant shall be delivered or sent to the address
shown below, except that upon Tenant's taking possession of the Premises, then
the Premises shall be Tenant's address for notice purposes. Notices to Landlord
and Broker shall be delivered or sent to the addresses hereinafter stated, to
wit:
Landlord: Davis Brothers Venture
ATTN: Alex Davis
800 Miami Circle NE, Suite 220
Atlanta, GA 30324
Tenant: Wink Davis Equipment Co., Inc.
800 Miami Circle NE, Suite 220
Atlanta, GA 30324
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Broker:
All notices shall be effective upon delivery. Any party may change his notice
address upon written notice to the other parties.
ENTIRE AGREEMENT
40. This Lease contains the entire agreement of the parties hereto, and
no representations, inducements, promises or agreements, oral or otherwise,
between the parties, not embodied herein, shall be of any force or effect. No
subsequent alteration, amendment, change or addition to this Lease, except as to
changes or additions to the Rules and Regulations described in paragraph 7,
shall be binding upon Landlord or Tenant unless reduced to writing and signed by
Landlord or Tenant.
SPECIAL STIPULATIONS
41. Any special stipulations are set forth in the attached Exhibit
______. Insofar as said Special Stipulations conflict with any of the foregoing
provisions, said Special Stipulations shall control.
Tenant acknowledges that Tenant has read and understands the terms of this Lease
and has received a copy of it.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and seals,
in triplicate.
LANDLORD:
/s/ C. Alexander Davis
Date and time executed by Landlord:
TENANT:
/s/ Wink A. Davis, Jr.
Date and time executed by Landlord:
BROKER:
------------------------------------
Date and time executed by Landlord:
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EXHIBIT 10.56
EARNOUT AGREEMENT
THIS EARNOUT AGREEMENT (the " Agreement"), is made and entered into this
31st day of July, 1997 by and among SPEIZMAN INDUSTRIES, INC. (the " Buyer") and
C. ALEXANDER DAVIS, AMY BUTLER DAVIS, TAYLOR FERRELL DAVIS and KYLE ALEXANDER
DAVIS ("hereinafter collectively referred to as the "AD Shareholders"). C.
Alexander Davis is hereinafter individually referred to as "AD". Capitalized
terms used but not defined herein have the meanings set forth in the Purchase
Agreement which is defined hereinbelow.
WITNESSETH:
WHEREAS, the parties hereto have entered into with others that certain
Stock Purchase Agreement dated as of the date hereof (the "Purchase Agreement");
WHEREAS, it is a condition to the AD Shareholders' execution of the
Purchase Agreement that the Buyer contemporaneously execute this Agreement; and
WHEREAS, this Agreement sets forth the terms and conditions upon which the
Buyer will, under certain circumstances, pay to the AD Shareholders earnout
considerations specified in Section 2.2(c) of the Purchase Agreement as part of
the Purchase Price to be paid the AD Shareholders for' their Shares.
NOW, THEREFORE, for and in consideration of the AD Shareholders selling
their shares to Buyer and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer agrees to pay the portion of
the Purchase Price specified in Section 2.2(c) of the Purchase Agreement to AD
Shareholders as follows:
1. Definitions. As used herein, the following terms have the following
meanings:
a. "Additional Earnout Consideration" means an amount equal to fifteen
percent (15%) of EBT or Annualized EBT, as the cases may be, for the fourth
Twelve - Month Period and ten percent (10%) of EBT for the fifth
Twelve-Month Period, except as otherwise provided in Section 4 herinbelow.
b. "Annualized EBT" means the EBT for any elapsed portion of a
Twelve - Month Period (such elapsed portion determined as the period
commencing on the date on which such Twelve - Month period begins and
ending on the effective date of the Fundamental Corporate Event) multiplied
by a fraction, the numerator of which is the total number of days in such
Twelve- Month period and the denominator of which is the number of days in
such elapsed portion of the Twelve - Month Period.
<PAGE>
c. "Company" means Wink Davis Equipment Co., Inc.
d. "Earnout Consideration" means an amount equal to fifty percent
(50%) of all EBT in excess of (i) One Million One Hundred Thousand Dollars
($1,100,000) for the first Twelve- Month period or (ii) One Million Two
Hundred Thousand Dollars ($1,200,000) for each successive Twelve - Month
Period described in Section 2 herinbelow, but such amount shall not exceed
in the aggregate One Million Five Hundred Thousand Dollars ($1,500,000).
e. "EBT" means with respect to the Company for any period the sum of
(i) Net Income and (ii) federal, state and local income taxes, in each of
the Company, for such period, computed and calculated in accordance with
GAAP.
f. "Fundamental Corporate Event" means (i) any purchase by a Person
not affiliated with the Buyer of more than fifty percent (50%) of the
equity securities of the Company (whether by merger, recapitization,
consolidation, reorganization or otherwise), (ii) the sale of all or
substantially all of the Company's assets to a Person not affiliated with
the Buyer or (iii) the sale by Buyer to a party not affiliated with the
Buyer of fifty percent (50%) or more of the shares of the Company held by
it as of the date hereof .
g. "GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time, consistently applied by the
Company.
h. "Interest Rate" means 12.0% per annum calculated on the basis of
actual days elapsed in a 365-day year.
i. "Net Income" means as to the Company, for any period, the net
income (or loss) of the Company for such period, determined in accordance
with GAAP. In determining Net Income, interest charges shall be limited to
those fairly and appropriately allocable to the Company in the discretion
of Buyer which discretion shall be exercised in good faith.
j. "Payment Date" means any date upon which a portion of Earnout
Consideration or Additional Earnout Consideration is payable as set forth
in Sections 2, 3 and 4 herinbelow or, if any such day is not a business
day, the next succeeding business day.
k. "Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trust, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
l. "Sharing Percentages" means those percentages set forth on Exhibit
"A" attached hereto and incorporated herein by reference.
m. "Twelve - Month Period" means the period commencing August 1, 1997
and ending June 30, 1998 or any one or more of the four (4) consecutive
Twelve (12) month periods the
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first of which commences on July 1, 1998, and in the case of Section 4c,
"Twelve - Month Period" also means the twelve (12) - month period ending on
July 31, 1997, as the case may be.
2. Payments of Earnout Consideration. The Earnout Consideration shall
become due and payable as set forth in this Section 2 only in the event that the
Company produces EBT in excess of One Million One Hundred Thousand Dollars
($1,100,000) for the first Twelve - Month Period or One Million Two Hundred
Thousand Dollars ($1,200,000) in any one or more of the successive Twelve -
Month periods, and the Earnout Consideration shall be payable for each Twelve -
Month Period. In the event that the Earnout Consideration becomes due and
payable for any such Twelve - Month Period as described in the immediately
preceding sentence, then the Buyer shall pay the Earnout Consideration as a
portion of the Purchase Price in cash, bank cashier's check or by wire transfer
to the AD Shareholders in accordance with respective Sharing Percentages within
ten (10) days after the Company's determination of EBT for such Twelve - Month
period but in no event later than sixty (60) days after expiration of the
applicable Twelve - Month Period.
3. Payment of Additional Earnout Considerations. The Additional Earnout
Consideration shall become due and payable as set forth in this Section 3 only
in the event that Earnout Considerations of an aggregate of One Million Five
Hundred Dollars ($1,500,000) was due and payable under Section 2 for any or all
of the first three consecutive Twelve - Month periods. In the event that
Additional Earnout Consideration becomes due and payable as described in the
immediately preceding sentence, then the Buyer Shall pay to AD Additional
Earnout Consideration as a portion of the Purchase Price for each of the fourth
and fifth Twelve - Month Periods in cash, bank cashier's check or by wire
transfer no later than sixty (60) days after expiration of the fourth and fifth
Twelve - Month periods, respectively.
4. Payment Upon Fundamental Corporate Event. In the event that a
Fundamental Corporate Event occurs prior to the expiration of the fifth Twelve -
Month period, then the Earnout Consideration in the amount set forth in the next
sentence shall become due and payable, as a portion of the Purchase Price, by
the Buyer in cash, bank cashier's check or by wire transfer to the AD
Shareholders contemporaneously with the occurrence of such Fundamental Corporate
Event as provided in this Section 4. The amount of Earnout Consideration payable
to the AD Shareholders in accordance with their respective Sharing Percentages
shall be equal to One Million Five Hundred Thousand Dollars ($1,500,000) less
any amount of Earnout Consideration paid to the AD Shareholders prior to the
occurrence of the Fundamental Corporate Event. In the case of Additional Earnout
Consideration in the event that a Fundamental Corporate Event occurs, AD shall
have the right to elect to (i) have the terms of Section 3 and continue to apply
or (ii) waive payment of Additional Earnout Consideration under Section 3 and
receive Earnout Consideration as a portion of the Purchase Price
contemporaneously with the occurrence of such Fundamental Corporate Event in
accordance with the terms of this Section 4 as set forth herinbelow:
a. In the event the Fundamental Corporate Event occurs during the
fifth Twelve - Month period, and Additional Earnout Consideration is
otherwise due and payable per the terms of the first sentence of Section 3
hereinabove, Additional Earnout Consideration for such fifth Twelve - Month
Period shall be equal to ten percent (10%) of, at AD's election, (i) the
Annualized EBT for
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the elapsed portion of such fifth Twelve-Month Period or (ii) if the
elapsed portion of such fifth Twelve-Month Period is less than two (2) full
months, the EBT for the fourth Twelve-Month Period;
b. In the event the Fundamental Corporate Event occurs in the fourth
Twelve-Month Period, and Additional Earnout Consideration is otherwise due
and payable per the terms of the first sentence of Section 3 hereinabove,
the amount of the Additional Earnout Consideration due and payable shall be
(i) fifteen percent (15%) of the EBT for the third Twelve-Month Period and
(ii) ten percent (10%) of, at AD's election, (x) the Annualized EBT for the
elapsed portion of such fourth Twelve-Month Period or (y) if the elapsed
portion of such fourth Twelve-Month Period is less than two full months,
the EBT for the third Twelve-Month Period; or
c. In the event the Fundamental Corporate Event occurs in the first,
second or third Twelve-Month Period, the amount of Additional Earnout
Consideration due and payable shall be (i) fifteen percent (15%) of the EBT
for the Twelve-Month Period immediately preceding the Twelve-Month Period
in which the Fundamental Corporate Event occurs and (ii) ten percent (10%)
of, at AD's election, (x) the Annualized EBT of the elapsed portion of the
Twelve-Month Period in which the Fundamental Corporate Event occurs or (y)
if the elapsed portion of such Twelve-Month Period is less than two (2)
full months, the EBT for the Twelve-Month Period described in (i) in this
subsection c.
5. Interest. To the extent that the Buyer does not make a payment of any
portion of the Earnout Consideration or Additional Earnout Consideration on the
Payment Date, such unpaid amount shall bear interest at the Interest Rate from
and after the Payment Date to the date on which such unpaid amount (or a portion
thereof) is paid. AD Shareholders may pursue any and all available remedies, at
law, equity or both, in the event of a default by the Company of any of its
obligation under the terms of this Agreement, and the Buyer shall pay all costs
of collection, including, but not limited to, reasonable attorney's fees and
costs, incurred by the AD Shareholders to collect any amounts due by or through
an attorney at law.
6. Financial Statements. The Company shall no later than sixty (60) days
following the end of each Twelve-Month Period provide to each of the AD
Shareholders financial statements of the Company (including a balance sheet and
related statements of income, changes in stockholders' equity and cash flow) for
such Twelve-Month Period together with the Company's calculation of EBT, Earnout
Consideration and/or Additional Earnout Consideration due and payable under this
Agreement. In the event of a Fundamental Corporate Event, the Company shall
timely provide such financial statements to each of the AD Shareholders for the
relevant Twelve-Month Periods.
7. Entire Agreement and Modification. This Agreement represents the entire
agreement between the parties relevant to the Earnout Consideration and
Additional Earnout Consideration and the other matters relating thereto set
forth in this Agreement. This Agreement may not be amended except by a written
agreement executed by the parties to be charged with the amendment.
8. Assignment and Successors. No party may assign any of its rights under
this Agreement without the prior written consent of the other parties hereto.
This Agreement shall be
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binding upon and shall inure to the benefit of the parties hereto, their heirs,
personal representatives, successors and assigns.
9. Governing Law. This Agreement shall be construed under and shall be
governed by the law of North Carolina, and any dispute or matter involving this
Agreement or the terms hereof shall be exclusively adjudicated in a court of
competent jurisdiction in the State of North Carolina.
10. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement shall remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree shall remain in
full force and effect to the extent not held invalid or unenforceable.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth hereinabove.
SPEIZMAN INDUSTRIES, INC.
By: /s/ Robert S. Speizman
-----------------------------------
Name: Robert S. Speizman
------------------------------
Title: Pres
-----------------------------
/s/ C. Alexander Davis
--------------------------------------
C. ALEXANDER DAVIS
/s/ Amy Butler Davis Atty in Fact
--------------------------------------
AMY BUTLER DAVIS
/s/ Taylor Ferrell Davis Atty in Fact
--------------------------------------
TAYLOR FERRELL DAVIS
5
<PAGE>
/s/ Kyle Alexander Davis Atty in Fact
--------------------------------------
KYLE ALEXANDER DAVIS
EXHIBIT "A"
Sharing Percentages
AD Sharing
Shareholders Percentage
------------ ----------
C. Alexander Davis 68.916%
Amy Butler Davis 10.362%
Taylor Ferrell Davis 10.361%
Kyle Alexander Davis 10.361%
-------
100.00%
Exhibit 11
NET INCOME PER SHARE
The following table presents the information needed to compute primary income
per common share:
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
June 28, June 29, July 1,
1997 1996 1995
<S> <C> <C> <C>
Net income (loss) applicable to common stock ..... $ 2,685,551 $ (573,066) $ 1,293,815
=========== =========== ===========
Weighted average shares outstanding .............. 3,228,764 3,208,599 3,208,599
Add: Exercise of options reduced by the number of
shares purchased with proceeds ................. 125,022 75,229 62,865
----------- ----------- -----------
Adjusted weighted average shares outstanding ..... 3,353,786 3,283,828 3,271,464
=========== =========== ===========
Net income (loss) per share ...................... $ 0.80 $ (0.17) $ 0.40
=========== =========== ===========
</TABLE>
<PAGE>
Exhibit 21
List of Subsidiaries
Wink Davis Equipment Company, Inc., Georgia
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
2-77747 and No. 33-43042 of Speizman Industries, Inc. on Form S-8 of our report
dated September 9, 1997, appearing in this Annual Report on Form 10-K of
Speizman Industries, Inc. for the year ended June 28, 1997.
Charlotte, North Carolina BDO Seidman, LLP
September 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jun-28-1997
<PERIOD-START> Jun-30-1996
<PERIOD-END> Jun-28-1997
<CASH> 3,832,534
<SECURITIES> 0
<RECEIVABLES> 21,549,615
<ALLOWANCES> (474,477)
<INVENTORY> 12,970,134
<CURRENT-ASSETS> 40,866,592
<PP&E> 3,599,455
<DEPRECIATION> 1,811,183
<TOTAL-ASSETS> 43,173,821
<CURRENT-LIABILITIES> 22,125,777
<BONDS> 0
0
0
<COMMON> 326,287
<OTHER-SE> 20,611,413
<TOTAL-LIABILITY-AND-EQUITY> 43,173,821
<SALES> 79,103,225
<TOTAL-REVENUES> 79,103,225
<CGS> 65,934,696
<TOTAL-COSTS> 74,790,325
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (17,651)
<INCOME-PRETAX> 4,330,551
<INCOME-TAX> 1,645,000
<INCOME-CONTINUING> 2,685,551
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,685,551
<EPS-PRIMARY> 0.80
<EPS-DILUTED> 0.80
</TABLE>
