<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant []
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
SPEIZMAN INDUSTRIES, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
(Set forth the amount of which the filing fee is calculated and state how
it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing party:
4) Date filed:
<PAGE>
SPEIZMAN INDUSTRIES, INC.
508 West Fifth Street
Charlotte, North Carolina 28231
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 1997
To the Stockholders of Speizman Industries, Inc.:
The Annual Meeting of Stockholders of Speizman Industries, Inc. (the
"Company") will be held on Wednesday, November 19, 1997, at 11:00 a.m., at the
principal executive offices of the Company located at 508 West Fifth Street,
Charlotte, North Carolina, for the following purposes:
1. To elect a Board of Directors of five directors to serve until the
next annual meeting of stockholders and until their successors are
elected and qualified;
2. To approve the Speizman Industries, Inc. Nonqualified Stock Option
Plan (the "Plan"), as amended to increase the maximum number of
shares of the Company's common stock, par value $0.10 per share
("Common Stock"), available for issuance thereunder to 450,000 from
290,000 and to limit to 100,000 the number of shares of Common
Stock that are subject to options under the Plan which can be
granted to executive officers of the Company during a 12-month
period;
3. To ratify the appointment of BDO Seidman, LLP as the Company's
independent certified public accountants for the fiscal year ending
June 27, 1998; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing proposals are more fully described in the Proxy Statement
accompanying this notice. The Board of Directors has fixed the close of business
on October 10, 1997 as the record date for the meeting. Only stockholders of
record as of such date will be entitled to notice of and to vote at the meeting
or any adjournment thereof.
Regardless of whether you expect to attend the annual meeting, you are
requested to complete, date and sign the accompanying proxy and return it
promptly in the envelope provided. No postage is required for mailing in the
United States. Your prompt response will assure that a quorum is present at the
meeting and save the Company the expense of further solicitation of proxies.
By order of the Board of Directors,
JOSEF SKLUT
SECRETARY
Charlotte, North Carolina
October 22, 1997
IT IS IMPORTANT THAT YOU RETURN THE ACCOMPANYING PROXY. IF YOU DO NOT
RETURN THE ACCOMPANYING PROXY TO US, OR OTHERWISE COMMUNICATE WITH US, FOR A
FIVE-YEAR PERIOD, NORTH CAROLINA LAW REQUIRES US TO TREAT ALL SHARES OF COMMON
STOCK HELD IN YOUR NAME AS ABANDONED PROPERTY WHICH MUST BE TURNED OVER TO THE
STATE TREASURER'S OFFICE. IT IS ALSO IMPORTANT THAT WE HAVE YOUR CORRECT
ADDRESS. THE ADDRESS TO WHICH THESE PROXY MATERIALS WERE MAILED IS THE ADDRESS
THAT WE HAVE ON FILE FOR YOU. IF YOU WOULD LIKE TO MAKE A CORRECTION TO THIS
ADDRESS, PLEASE CONTACT MR. JOSEF SKLUT, 508 W. FIFTH STREET, CHARLOTTE, NORTH
CAROLINA 28202, (704) 372-3751.
<PAGE>
SPEIZMAN INDUSTRIES, INC.
508 West Fifth Street
Charlotte, North Carolina 28202
PROXY STATEMENT
PROXY SOLICITATION AND GENERAL INFORMATION
This Proxy Statement is furnished to the stockholders of Speizman
Industries, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company (the "Board of
Directors") for use at the Annual Meeting of Stockholders of the Company to be
held on November 19, 1997, at 11:00 a.m., at the principal executive offices of
the Company located at 508 West Fifth Street, Charlotte, North Carolina, and at
any adjournment thereof (the "Meeting"). This Proxy Statement and the
accompanying proxy were first mailed to the Company's stockholders on or about
October 22, 1997.
Only stockholders of record at the close of business on October 10, 1997
(the "Record Date"), will be entitled to notice of and to vote at the Meeting.
As of the close of business on the Record Date, 3,307,156 shares of the
Company's common stock, par value $.10 per share ("Common Stock"), having one
vote each, were issued and outstanding.
The accompanying proxy is for use at the Meeting if a stockholder does not
attend the Meeting in person or wishes to have his shares voted by proxy even if
he attends the Meeting. If the enclosed proxy is properly executed and returned
in time to be voted at the Meeting, the shares of Common Stock represented
thereby will be voted in accordance with the directions given therein. In the
absence of directions to the contrary, the shares of Common Stock so represented
will be voted FOR the nominees for election as directors named in this Proxy
Statement, FOR the approval of the Speizman Industries, Inc. Nonqualified Stock
Option Plan, as amended, and FOR the ratification of BDO Seidman, LLP as the
Company's independent certified public accountants for the fiscal year ending
June 27, 1998. Any stockholder giving a proxy may revoke it at any time before
it is exercised by filing with the Secretary of the Company a written revocation
or an executed proxy having a later date, or by attending the Meeting and
electing to vote in person.
The Company will bear the entire cost of the solicitation of proxies,
including the reimbursement of brokers, banks and other record holders of shares
of Common Stock for their expenses in forwarding proxy materials to the
beneficial owners of such shares. Following the original solicitation of proxies
by mail, proxies may be solicited by officers and employees of the Company by
telephone, facsimile, telegraph or in person. Such officers and employees will
not be additionally compensated for soliciting proxies. In addition, the Company
has retained Corporate Investor Communications, Inc. to assist in the
solicitation of proxies for a fee of approximately $4,000, plus reimbursement of
expenses.
A majority of the outstanding shares of Common Stock must be represented at
the Meeting in person or by proxy to constitute the quorum needed for the
transaction of business at the Meeting. Shares that are withheld as to voting
with respect to one or more of the nominees for election as a director and
abstentions and broker non-votes will be counted for the purpose of determining
the existence of a quorum.
A plurality of the votes cast by the holders of the shares of Common Stock
present in person or represented by proxy at the Meeting is required for the
election of directors. The approval of the Company's Nonqualified Stock Option
Plan, as amended, requires the affirmative vote of a majority of such shares.
The ratification of the appointment of independent auditors requires the
affirmative vote of a majority of the votes cast at the Meeting. With respect to
the election of directors, votes may be cast in favor of, or withheld as to, one
or more of the nominees for election as director. With respect to the other
proposals to be voted on, votes may be cast in favor of or against a proposal or
stockholders may abstain from voting. With respect to the approval of the
Company's Nonqualified Stock Option Plan, as amended, abstentions and broker
non-votes will have the same effect as a vote against such proposal. Abstentions
and broker non-votes will have no effect on the vote with respect to the
election of directors or the ratification of the independent auditors. Votes at
the Meeting will be tabulated by the Company's transfer agent as independent
voting inspector.
1
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ALL REFERENCES IN THIS PROXY STATEMENT TO FISCAL YEARS ARE TO THE COMPANY'S
52- OR 53-WEEK FISCAL YEAR ENDING ON THE SATURDAY CLOSEST TO JUNE 30. FISCAL
1994, 1995, 1996 AND 1997 EACH CONTAINED 52 WEEKS AND ENDED ON JULY 2, 1994,
JULY 1, 1995, JUNE 29, 1996, AND JUNE 28, 1997, RESPECTIVELY. FISCAL 1993
CONTAINED 53 WEEKS AND ENDED ON JULY 3, 1993. FISCAL 1998 WILL CONTAIN 52 WEEKS
AND WILL END ON JUNE 27, 1998.
PROPOSAL 1:
ELECTION OF DIRECTORS
GENERAL
The Board of Directors has nominated the five persons named below for
election as directors at the Meeting to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. The Company's
Bylaws provide that the Board of Directors shall consist of one or more
directors and that the Board of Directors has the power to determine the number
of directors (when not determined by the stockholders) and to fill vacancies on
the Board of Directors. The number of directors is presently fixed at five. Each
of the five nominees named below is presently serving as a director and has
consented to have his name appear as a nominee in this Proxy Statement and to
serve as a director of the Company if elected. Should any nominee become unable
to serve as a director, shares of Common Stock represented at the Meeting by
valid proxies may be voted for the election of such substitute nominee(s) as may
be designated by the Board of Directors. The Board of Directors has no reason to
believe that any nominee will be unable to serve as a director.
The following information is provided concerning the five nominees for
election as directors of the Company:
<TABLE>
<S> <C>
Robert S. Speizman Mr. Speizman, 57, 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 Mr. Sklut, 68, 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.
Steven P. Berkowitz Mr. Berkowitz, 56, has served as a director of the Company since February 1992. Mr. Berkowitz
has served as Chairman of the Board of Directors of the Marwen Foundation, a nonprofit
foundation, since December 1987. Mr. Berkowitz served as President and a director of the
Center for Contemporary Art, Ltd., an art gallery owned by him, from September 1987 to
January 1996. From 1968 to September 1988, Mr. Berkowitz served as Chief Executive Officer,
President and Chairman of the Board of Directors of Silvestri Corporation, a company owned by
him that imported and distributed decorative accessories and Christmas decorations.
William Gorelick Mr. Gorelick, 62, has served as a director of the Company since March 1993. From May 1956 to
June 1991, Mr. Gorelick was employed by Capitol Finance Group, Inc., a consumer finance
company, and its subsidiary companies, and served these companies in various capacities
including as a director, Treasurer, Secretary, Vice President and President. Since April
1991, Mr. Gorelick has served as President and/or a director of CPP Holdings, Inc. and its
subsidiary company, Capitol Premium Plan, Inc., an insurance premium finance company in which
he has a substantial interest. Since November 1991, Mr. Gorelick has held a substantial
interest in, and has served as President, Treasurer, director and/or partner of, Title
Insurance Services Corporation, Atlantic Title Insurance Company and Atlantic Assurance
Company. These companies underwrite title insurance policies and sell appraisal and abstract
services to consumer lenders. In addition, Mr. Gorelick is a partner in several real estate
partnerships.
Scott C. Lea Mr. Lea, 65, has served as a director of the Company since May 1993. Mr. Lea also serves as a
director of Lance, Inc. and in April 1996 was elected Chairman of the Board of Directors of
Lance, Inc. Mr. Lea was a private investor from January 1992 to March 1996. From January 1972
to December 1991, Mr. Lea was employed by Rexham Industries (formerly Rexham Corp.), a
manufacturer of packaging, technical coatings and laminates. While at Rexham, Mr. Lea served
in various capacities, including as President, Chief Executive Officer and a director from
September 1974 to April 1989, and as Chairman of the Board of Directors from April 1989 to
December 1991.
</TABLE>
2
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BOARD COMMITTEES AND MEETINGS
In fiscal 1997, the Board of Directors held three meetings and took action
by unanimous written consent 10 times. The Board of Directors presently has an
Audit Committee, a Compensation Committee and a Stock Option Committee, but has
no standing nominating committee. The Audit Committee is responsible for
recommending independent auditors, reviewing with the independent auditors the
scope and results of the audit engagement, establishing and monitoring the
Company's financial policies and control procedures, reviewing and monitoring
the provision of non-audit services by the Company's independent auditors and
reviewing all conflict of interest situations. The Compensation Committee is
responsible for determining the salaries, bonuses and all other compensation,
other than pursuant to the Company's equity-based plans, of the executive
officers of the Company. The Stock Option Committee is responsible for
administering the Company's equity-based plans including, to the extent
applicable or allowable with regard to a plan or an option thereunder, the
designation of persons to whom options may be granted, the type and time of an
option and the number of shares of Common Stock subject thereto. The Stock
Option Committee, the Audit Committee and the Compensation Committee are each
presently comprised of Mr. Berkowitz, Mr. Gorelick and Mr. Lea. Mr. Lea is the
Chairman of the Audit Committee, Mr. Berkowitz is the Chairman of the
Compensation Committee and Mr. Gorelick is Chairman of the Stock Option
Committee. In fiscal 1997, the Audit Committee, the Stock Option Committee and
the Compensation Committee each held one meeting, and the Stock Option Committee
took action by unanimous written consent one time. In fiscal 1997, all of the
directors attended all of the meetings of the Board of Directors and the above
committees on which they serve.
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of the Company is paid
$1,000 for each meeting of the Board of Directors that he attends and is
reimbursed for out-of-pocket expenses incurred in connection with attending the
meeting.
Under the Company's Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"), each non-employee director of the Company, as defined in the
Directors' Plan, is automatically granted a nonqualified stock option to
purchase 1,000 shares of Common Stock on December 1st of each year, beginning
December 1, 1995. Such options become exercisable in cumulative increments of
50% and 100% beginning on the first and second anniversaries, respectively, of
the date of grant, if the non-employee director remains a non-employee director
on such dates. Options granted under the Directors' Plan expire 10 years from
the date of grant and within limited periods of time, as specified in the
Directors' Plan, following such time as a director ceases to be a non-employee
director within the meaning of such plan. The exercise price for all options
granted under the Directors' Plan is the fair market value on the date of grant.
Such options are treated as nonqualified stock options for federal income tax
purposes. Under the Directors' Plan, on December 1, 1996, Mr. Berkowitz, Mr.
Gorelick and Mr. Lea were each granted an option to purchase 1,000 shares of
Common Stock having an exercise price of $5.625 per share.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES
NAMED ABOVE.
PROPOSAL 2:
APPROVAL OF THE SPEIZMAN INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN, AS AMENDED
AMENDMENTS TO THE PLAN
In September 1997, the Board of Directors approved certain amendments to
the Company's Nonqualifed Stock Option Plan (the "Plan"), subject to stockholder
approval of the Plan, as amended. Except for these amendments, the Plan, as
initially approved by the Board of Directors on September 21, 1995 (subject to
stockholder approval which was obtained on November 16, 1995) and as amended by
the Board on October 4, 1996 (subject to stockholder approval which was obtained
on November 19, 1996) will remain in effect. The proposed amendments are
summarized below. The full text of the Plan, as amended, is set forth as Exhibit
A to this Proxy Statement. The amendments to the Plan increase the number of
shares of Common Stock reserved for issuance thereunder to 450,000 from 290,000
and establish an annual per participant limit of 100,000 shares of Common Stock
subject to an option granted under the Plan to any named executive officer
during a 12-month period. The Plan, as so amended, is being submitted to the
stockholders at the Meeting for their approval.
The amendment to the Plan increasing the number of shares of Common Stock
that may be issued thereunder is necessary to enable the continued use of the
Plan for its stated purposes. As of October 10, 1997, no shares of Common Stock
remained available for issuance under the Plan. Shares have been used under the
Plan to date to grant nonqualified stock options principally to Mr. Speizman and
two of his sons, both of whom are employees of the Company. The Board of
3
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Directors believes that the Plan as it has been implemented to date has been of
benefit to the Company and its stockholders and that by increasing these key
employees' proprietary interest in the Company it has also increased their
personal interest in the Company's success. The Board of Directors further
believes that the best interest of the Company and its stockholders will be
served if the Company is in a position to continue to offer equity-based
compensation to its key employees. The Board of Directors believes that
equity-based compensation awards create this incentive by providing the
recipient with an opportunity to acquire or increase a proprietary interest in
the Company and thereby providing a means to participate in the future growth of
the Company.
In 1993, the United States Congress adopted Section 162(m) of the Internal
Revenue Code of 1986, as amended, (the "Code"), which provision places limits on
the Company's ability to deduct certain compensation in excess of $1,000,000 for
any taxable year paid to its executive officers ("Section 162(m)"). The amounts
includible in an executive officer's compensation upon the exercise of
nonqualified stock options is subject to this limitation. However, there is one
exception to this limitation for "performance based" compensation that has been
disclosed to and approved by stockholders prior to payment of the awards. Final
federal income tax regulations were promulgated in December 1995, which provide
guidelines for compliance with this exception to the deduction limitation rules.
The amendment to the Plan to establish an annual limit on the number of
shares of Common Stock subject to options which can be granted under the Plan to
named executive officers was approved by the Board of Directors in response to
Section 162(m) in order for compensation attributable to stock options granted
under the Plan to be "performance based" compensation exempt from the
limitations of Section 162(m).
BENEFITS UNDER THE PLAN
The following table sets forth certain information concerning options that
are outstanding under the Plan as of October 10, 1997. No option has been
granted under the Plan to date to any non-employee director of the Company.
NEW PLAN BENEFITS
SPEIZMAN INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION DOLLAR VALUE (1) NQSOS (2)
<S> <C> <C>
Robert S. Speizman, President.......................................................... $448,250 121,000
Josef Sklut, Vice President-Finance.................................................... 97,125 19,500
Executive Group........................................................................ 545,375 140,500
Non-Executive Officer Employee Group (3)............................................... 643,625 149,500
</TABLE>
(1) Represents the excess of the fair market value of the Common Stock on
October 10, 1997 of $8.75 per share over the exercise price of the option
multiplied by the number of shares of Common Stock subject to such option.
(2) The weighted average exercise price of such options is $4.65.
(3) Includes options to purchase an aggregate of 142,500 shares of Common Stock
granted to two of Mr. Speizman's sons, both of whom are employees of the
Company.
No determination has been made with respect to any awards which may be made
under the Plan in the future. However, the Company anticipates that it will
continue, as it has in the past, to award equity-based compensation principally
to the employees of the Company most directly responsible for the Company's net
revenues which have been, and the Company believes will continue to be, Mr.
Speizman and two of his sons, Bryan Speizman and Mark Speizman.
DESCRIPTION OF PLAN
The following description of the Plan is merely a summary of some of its
terms and provisions, is not intended to be a complete description of the Plan,
and is qualified in its entirety by reference to the full text of the Plan
attached hereto as Exhibit A. If any part of the description of the Plan
contained herein states anything different from the formal legal documents
governing the Plan, the formal legal Plan documents will be considered correct.
The Plan is not generally subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended. The Plan is not a qualified
plan under Section 401 of the Code.
4
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NATURE AND PURPOSE
The Plan provides for the grant of nonqualified stock options and is
designed, for the benefit of the Company, to attract and retain for the Company
personnel of exceptional ability, to motivate such personnel through added
incentives to make a maximum contribution to greater profitability, to develop
and maintain a highly competent management team and to be competitive with other
companies with respect to executive compensation.
ADMINISTRATION
The Plan is administered by the Stock Option Committee or such other
committee as may be appointed by the Board of Directors to administer the Plan.
Members of the Stock Option Committee, or such other committee, are appointed by
the Board of Directors from among its members who are "non-employee directors"
as required under Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to serve at the pleasure of the Board of
Directors, and may be removed by the Board of Directors in its discretion. The
Stock Option Committee has the exclusive right to interpret, construe, and
administer the Plan and to select the persons eligible to receive options. The
Stock Option Committee will determine the number of shares of Common Stock
subject to an option granted under the Plan and the form, terms, conditions and
duration of each option. The Stock Option Committee's decisions will be
conclusive, final and binding upon all parties.
The Stock Option Committee is given broad discretion under the Plan to make
adjustments to options outstanding under the Plan upon any extraordinary event
affecting the Company or its financial condition or performance, including, for
example, a recapitalization or merger transaction or a change in control or
potential change in control of the Company. See
" -- Securities to be Offered" and " -- Effects of Change in Control" below.
In addition, the Stock Option Committee has full power and authority to
determine whether, to what extent and under what circumstances any option under
the Plan may be canceled or suspended.
SECURITIES TO BE OFFERED
The Company was originally authorized to issue up to 145,000 shares of
Common Stock under the Plan. In October 1996, the Board amended the Plan to
increase the maximum number of shares of Common Stock available for issuance
thereunder to 290,000 subject to stockholder approval which was obtained in
November 1996. Under the Plan as amended, the Company will be authorized to
issue up to 450,000 shares of Common Stock. The Common Stock subject to an
option under the Plan will be made available from the authorized and unissued
shares of Common Stock. The last sale price of the Common Stock on October 10,
1997 as reported on The Nasdaq Stock Market was $8.75 per share.
To the extent any shares of Common Stock subject to options under the Plan
are not delivered or purchased, or are reacquired by the Company, such shares
will not be charged against the aggregate number of shares available for options
under the Plan and may again be granted under the Plan. This would occur, for
example, upon the termination, expiration, or cancellation of an option.
Proportionate and equitable adjustments will be made by the Stock Option
Committee upon the occurrence of certain events that result in changes in the
outstanding shares of Common Stock of the Company or that result in exchanges of
shares of Common Stock for a different number or class of Common Stock or other
securities of the Company or another corporation. These events include without
limitation a reorganization or recapitalization of the Company or
reclassification of its shares, stock split-up, stock dividend, or consolidation
of shares of Common Stock of the Company, merger, consolidation, or sale of
assets of the Company, or any distribution to stockholders other than a cash
dividend. Under such circumstances, adjustments may be made by the Stock Option
Committee in the limitation on the aggregate number of shares of Common Stock
that may be awarded under the Plan, the number and class of shares that may be
subject to an option, the purchase price for shares of Common Stock under
outstanding options under the Plan and the terms, conditions or restrictions of
any option or agreement evidencing an option, including the price payable for
the acquisition of Common Stock.
The Stock Option Committee is also authorized to make adjustments in
performance-based criteria or in the terms and conditions of options under the
Plan in recognition of unusual or nonrecurring events affecting the Company or
its financial statements or changes in applicable laws, regulations, or
accounting principles. The Stock Option Committee may also correct any defects
or omissions or reconcile any inconsistencies in the Plan or any agreement
evidencing an option under the Plan in the manner and to the extent it shall
deem desirable to carry it into effect. Moreover, the Stock Option Committee
may, in its discretion, make such adjustments in the terms of options under the
Plan as it deems appropriate if the Company assumes any outstanding employee
benefit awards or the right or obligation to grant future such options in
connection with the acquisition of any other entity.
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ELIGIBLE PARTICIPANTS
The Stock Option Committee has the exclusive right to determine those
persons eligible to participate in the Plan and shall select the persons
eligible to receive awards. Subject to the foregoing, any employee of the
Company, as well as any other person, including directors, may participate in
the Plan if the Stock Option Committee determines such participation is in the
best interest of the Company, subject to any limitations as may be provided by
applicable law or the Stock Option Committee. As of October 10, 1997, the
Company had approximately 175 full-time employees, including 90 employees of
Wink Davis Equipment Co., Inc., a wholly-owned subsidiary of the Company as of
such date, one part-time employee and three directors who are not also employees
of the Company.
AWARD AGREEMENTS
Each option granted will be evidenced by a written agreement setting forth
the terms and conditions of the option. Each such agreement will also be subject
to and incorporate the applicable terms and conditions of the Plan and any other
terms and conditions, not inconsistent with the Plan, required by the Stock
Option Committee.
NONQUALIFIED STOCK OPTIONS
The options that may be granted under the Plan are nonqualified stock
options. The Company may grant such options to eligible participants to purchase
shares of Common Stock at such time or times as determined by the Stock Option
Committee.
The exercise price of an option under the Plan will be as established by
the Stock Option Committee in the agreement evidencing the award. Such exercise
price will not be limited under the Plan and may be less than 100% of the fair
market value at the time of grant. Thus, discounted stock options providing for
an exercise price of less than the fair market value of the Stock at the date of
the award may be granted as options under the Plan.
An option under the Plan will be exercisable in full or in part from time
to time as specified by the Stock Option Committee or in the corresponding award
agreement. Upon termination of employment of the optionee, the option will lapse
and cease to be exercisable three months following such termination of
employment.
An option may also be subject to such other terms and conditions, not
inconsistent with the Plan, as determined by the Stock Option Committee and
specified in the award agreement.
EFFECTS OF CHANGE IN CONTROL
The Stock Option Committee is granted broad discretion under the Plan to
deal with options under the Plan upon an acceleration event, which will be
deemed to occur in the event of a change in control or a potential change in
control of the Company, as defined in the Plan. For these purposes, a "change in
control" will be deemed to have occurred if (a) any person, including a group,
but not the Company or any subsidiary or employee benefit plan thereof, makes a
tender or exchange offer for shares of the Stock pursuant to which any shares of
the Stock are purchased, or such person, together with its affiliates and
associates, becomes the beneficial owner of at least 20% of the Stock, or (b)
the stockholders of the Company approve a definitive agreement or plan to merge
the Company with or into another corporation, to sell or otherwise dispose of
all or substantially all of its assets, or to liquidate the Company, or (c)
during any period of 24 consecutive months the incumbent directors at the
beginning of such period cease for any reason other than death to constitute at
least a majority of the Board of Directors, provided that a director will be
deemed to be an incumbent director if such director, although not a director at
the beginning of such 24-month period, was elected by, or on the recommendation
of or with the approval of, at least two-thirds of the directors then qualified
as incumbent directors. A "potential change in control" is defined in the Plan
to mean (y) the approval by stockholders of the Company of an agreement by the
Company, the consummation of which would result in a change in control of the
Company, as described above, or (z) the acquisition of direct or indirect
beneficial ownership by any person (as described above) of securities of the
Company representing 5% or more of the combined voting power of the Company's
outstanding securities and the adoption by the Board of Directors of a
resolution to the effect that a potential change in control of the Company has
occurred for the purposes of the Plan. A "Board-approved change in control" will
be deemed to have occurred if the offer, acquisition, or transaction in question
is approved by a majority of the directors serving as members of the Board of
Directors at the time of the potential change in control or change in control.
Upon the occurrence of an acceleration event, the Stock Option Committee
will be authorized to take such action as it determines to be necessary or
advisable, and fair and equitable to participants, with respect to options under
the Plan. The Stock Option Committee's action may include without limitation,
establishing, amending or waiving the forms, terms, conditions, and duration of
an option and the corresponding award agreement, so as to provide the earlier,
later, extended, or
6
<PAGE>
additional times for exercise or payments, differing methods for calculating
payments, alternate forms and amounts of payment and accelerated release of
restrictions, or other modifications.
Upon the occurrence of an acceleration event, the Stock Option Committee in
its discretion may declare any and all then outstanding options not previously
exercisable and vested as immediately exercisable and fully vested, in whole or
in part. In the event of a change in control, the Stock Option Committee in its
discretion may cash out the value of all outstanding options in each case to the
extent vested, on the basis of the change in control price as of the date such
change in control or such potential change in control is determined to have
occurred or such other date as the Stock Option Committee may determine prior to
the change in control, less the option price (as established in the
corresponding award agreement). For this purpose, "change in control price"
means the highest price per share of the Common Stock paid in any transaction
reported on any exchange on which the Common Stock is traded or on The Nasdaq
Stock Market if the Common Stock is then traded thereon, or paid or offered in
any bona fide transaction related to a potential or actual change in control of
the Company at any time during the 60-day period immediately preceding, the
occurrence of the change in control, or, where applicable, the occurrence of the
potential change in control event, in each case as determined by the Stock
Option Committee.
AMENDMENT AND TERMINATION
The Plan will continue in effect until terminated by the Company as
provided in the Plan.
Upon the recommendation of the Stock Option Committee, or otherwise, the
Board of Directors may amend the Plan. To the extent required by Rule 16b-3
under the Exchange Act, no amendment to the Plan may be made without approval by
the Company's stockholders that would make certain changes, including altering
the group of persons eligible to participate in the Plan, increasing the maximum
number of shares of Common Stock available for options under the Plan (except as
otherwise provided in the Plan), limiting or restricting the powers of the Stock
Option Committee in administering the Plan, materially increasing the benefits
accruing to participants under the Plan, materially modifying the requirements
of eligibility for participation in the Plan or changing the amendment
provisions of the Plan.
Notwithstanding the foregoing, no amendment to or discontinuation of the
Plan or any provision thereof may adversely affect any option previously granted
to a participant under the Plan, without the written consent of such
participant. The Stock Option Committee is empowered to determine whether an
amendment or discontinuation adversely affects any existing award.
Notwithstanding the foregoing, the Stock Option Committee retains the power to
annul any award if the participant is terminated for cause as determined by the
Stock Option Committee and provide for the forfeiture of shares of Common Stock
or other gain under an award as determined by the Stock Option Committee for
competing against the Company. If an acceleration event (change in control or
potential change in control) has occurred, no amendment or termination will
impair the rights of any person with respect to an outstanding award as
discussed under "Effects of Change in Control" above.
RESALE RESTRICTIONS
Resale restrictions on shares of Common Stock purchased under the Plan may
be imposed by virtue of the provisions of the Plan and the applicable award
agreement and/or by application of federal and state securities laws.
TAX EFFECTS
Options granted under the Plan will be treated as nonqualified stock
options for federal income tax purposes. The following discussion of the federal
income tax consequences of options under the Plan is intended only as a summary
of the present federal income tax treatment of options under the Plan. The
federal income tax laws pertaining to the Plan are highly technical, and such
laws are subject to change at any time. Some variations on the federal income
tax effects of Plan participation described below may occur with respect to
participation by persons subject to Section 16(b) of the Exchange Act.
Under the Code, an optionee granted an option under the Plan will realize
no taxable income upon receipt of the option but will be deemed to have realized
ordinary taxable income equal to the excess of the fair market value of the
stock acquired at the time of the exercise of the option over the option price
paid.
The Company will be entitled to a deduction for federal income tax purposes
in the year the optionee must report the income in an amount equal to the
ordinary income realized by the optionee as a result of the exercise of his
option. The Company is required to withhold tax on the amount of income realized
by the optionee upon exercise of the option.
An optionee's tax basis in shares acquired upon the exercise of an option
will be the fair market value of such shares used to determine the amount of
ordinary taxable income reported by the optionee with respect to the exercise of
the option. Upon any sale of such shares of Common Stock, the optionee's gain or
loss will therefore equal the difference between the
7
<PAGE>
sale price and such tax basis. Any such gain or loss will be short-term or
long-term capital gain or loss, depending on whether the shares have been held
for more than the long-term capital gain holding period. In general, when an
option is exercised by the exchange of previously acquired stock, the optionee
receives a tax-free exchange and basis carryover for old shares for an
equivalent number of new shares. The basis for any additional shares will equal
the sum of the amount included in gross income by reason of the exercise of the
option, plus any amount of cash paid by the optionee upon the exercise of the
option.
The Plan authorizes the acceleration of the exercisability and vesting of
options in the event of a change in control or potential change in control of
the Company, as defined in the Plan. Such acceleration may give rise to
"parachute payments" under the Code, which may subject the recipient thereof to
a 20% excise tax and which may not be deductible by the Company for federal
income tax purposes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PLAN, AS
AMENDED.
PROPOSAL 3:
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
reappointed, subject to stockholder ratification, the firm of BDO Seidman, LLP
as the Company's independent certified public accountants for fiscal 1998. If
the stockholders do not ratify the appointment of BDO Seidman, LLP, the Board of
Directors will reconsider its appointment upon the recommendation of the Audit
Committee.
A representative of BDO Seidman, LLP is expected to be present at the
Meeting. Such representative will have the opportunity to make a statement if he
desires to do so and will be available to respond to appropriate stockholder
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF BDO SEIDMAN, LLP.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of the Record Date (or such
different date as is indicated below) by (i) each director of the Company and
each nominee for election as a director, (ii) each person that is known by the
Company to beneficially own more than 5% of the outstanding shares of Common
Stock, (iii) each executive officer of the Company who beneficially owns Common
Stock and (iv) all directors and executive officers of the Company as a group.
The stockholders named below have sole voting and investment power with respect
to the shares of Common Stock shown as beneficially owned by them, except as
expressly disclosed to the contrary.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT OF SHARES
NAME OWNED OUTSTANDING
<S> <C> <C>
Robert S. Speizman............................................................ 804,685(1) 24.0%
Josef Sklut................................................................... 41,850(2) 1.2
Steven P. Berkowitz........................................................... 49,700(3) 1.4
William Gorelick.............................................................. 16,500(4) *
Scott C. Lea.................................................................. 6,500(5) *
Dimensional Fund Advisors Inc................................................. 179,800(6) 5.5
Heartland Advisors, Inc....................................................... 310,600(7) 9.5
All executive officers and directors as a group (6 persons)................... 919,235 26.7
</TABLE>
*Less than 1%
(1) Includes 26,650 shares of Common Stock held by Mr. Speizman's spouse as
custodian for one of his children, as to which he disclaims beneficial
ownership, and an aggregate 144,560 shares of Common Stock subject to
options that are presently exercisable or become exercisable in December
1997. Mr. Speizman's address is 508 West Fifth Street, Charlotte, North
Carolina 28202.
(2) Includes 600 shares of Common Stock owned of record by Mr. Sklut's spouse,
as to which he disclaims beneficial ownership, and an aggregate 38,750
shares of Common Stock subject to options that are presently exercisable or
become exercisable in December 1997.
(3) Includes 2,000 shares of Common Stock held by Mr. Berkowitz's spouse and 500
shares of Common Stock held by Mr. Berkowitz as custodian for one of his
children, as to all of which he disclaims beneficial ownership, and an
aggregate
8
<PAGE>
of 1,500 shares of Common Stock subject to options that are presently
exercisable or become exercisable in December 1997.
(4) Includes an aggregate of 1,500 shares of Common Stock subject to options
that are presently exercisable or become exercisable in December 1997.
(5) Represents shares of Common Stock owned by a revocable trust of which Mr.
Lea and certain of his family members are beneficiaries and an aggregate of
1,500 shares of Common Stock subject to options that are presently
exercisable or become exercisable in December 1997.
(6) In a Schedule 13G/A filed by Dimensional Fund Advisors Inc. ("Dimensional"),
a registered investment advisor, with the Securities and Exchange Commission
on February 13, 1997, Dimensional reported that it beneficially owned
179,800 shares of Common Stock, all of which shares are held in portfolios
of DFA Investment Dimensions Group Inc., a registered open-end investment
company, or in series of The DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and the DFA Participating Group
Trust, investment vehicles of qualified employees benefit plans, for all of
which Dimensional serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares of Common Stock. Dimensional
reported that it had sole dispositive power with respect to all such shares
and sole voting power with respect to 122,900 of such shares. Persons who
are officers of Dimensional also serve as officers of DFA Investment
Dimensions Group, Inc., (the "Fund") and The DFA Investment Trust Company
(the "Trust"), each an open-end management investment company registered
under the Investment Company Act of 1940. In their capacities as officers of
the Fund and the Trust, these persons vote 29,200 additional shares which
are owned by the Fund and 27,700 shares which are owned by the Trust, which
shares are included in the 179,800 shares of Common Stock with respect to
which Dimensional has sole dispositive power. The address of Dimensional is
1299 Ocean Avenue, 11th Floor, Santa Monica, California 90401.
(7) In a Schedule 13G/A filed by Heartland Advisors, Inc. ("Heartland"), a
registered investment advisor, with the Securities and Exchange Commission
on February 14, 1997, Heartland reported that it beneficially owned 310,600
shares of Common Stock and that it had sole dispositive power with respect
to all such shares and sole voting power with respect to 301,000 of such
shares. Heartland's address is 790 North Milwaukee Street, Milwaukee,
Wisconsin 53202.
9
<PAGE>
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for fiscal 1995, 1996
and 1997 with respect to the compensation awarded to or earned by the Company's
executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS/SARS COMPENSATION
<S> <C> <C> <C> <C> <C>
Robert S. Speizman,
President.......................................... 1997 $323,346 $ 515,521 82,500/0 $71,102(2)
1996 245,000 0 91,663/0 76,390(2)
1995 245,000 187,252 22,222/0 60,664(2)
Josef Sklut,
Vice President-Finance,
Secretary and Treasurer............................ 1997 122,462 103,104 5,000/0 1,932(3)
1996 108,462 0 14,500/0 1,085(3)
1995 98,000 37,450 7,500/0 980(3)
</TABLE>
(1) Represents amounts paid under the Company's Executive Bonus Plan, originally
adopted by the Board of Directors in February 1990 and most recently amended
in November 1996. The Company's President and Vice President-Finance are the
only participants under this plan. Under this plan, for fiscal 1995 and
1996, the Company's President and Vice President-Finance received cash
bonuses equal to 5% and 1%, respectively, of the first $1.0 million of the
Company's consolidated income before taxes and before executive officer
bonuses, and 10% and 2%, respectively, of such income over $1.0 million,
provided that no such bonuses were payable to the extent that their accrual
would decrease the Company's income before taxes to less than $500,000.
Under this plan as amended by the Board of Directors in November 1996, for
fiscal 1997 and subsequent years, the Company's President and Vice
President-Finance receive cash bonuses equal to 10% and 2%, respectively, of
the Company's consolidated income before taxes and before executive officer
bonuses, provided that such bonuses are payable for a particular fiscal year
only in the event that the Company's consolidated income before taxes and
executive officer bonuses for such year exceeds 10% of the Company's
stockholders' equity as of the end of the immediately preceding fiscal year.
(2) Represents the Company's contribution of $1,602, $2,310 and $4,023 in fiscal
1995, 1996 and 1997, respectively, to the account of Mr. Speizman under the
Company's 401(k) Profit Sharing Plan and payments of aggregate premiums of
$59,062, $74,080 and $67,079 in fiscal 1995, 1996 and 1997, respectively, on
split dollar life insurance policies on the life of Mr. Speizman.
(3) Represents contributions by the Company to the account of Mr. Sklut under
the Company's 401(k) Profit Sharing Plan.
OPTION TABLES
The following table sets forth certain information with respect to options
granted to the Company's executive officers in fiscal 1997 under the Company's
Nonqualified Stock Option Plan (the "Plan").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
PERCENT OF
TOTAL POTENTIAL REALIZABLE
OPTIONS/ VALUE AT ASSUMED
SARS ANNUAL RATES OF
GRANTED TO STOCK PRICE
OPTIONS/ EMPLOYEES EXERCISE APPRECIATION FOR
SARS IN FISCAL OR BASE OPTION TERM
NAME GRANTED YEAR(2) PRICE EXPIRATION DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Robert S. Speizman(1)................... 82,500 51.7% $ 6.00 December 12, 2006 $311,303 $788,902
Josef Sklut(1).......................... 5,000 3.1 6.00 December 12, 2006 18,867 47,812
</TABLE>
10
<PAGE>
(1) Represents options granted under the Plan. The exercise price of the options
granted under the Plan in fiscal 1997 was the fair market value of the
Common Stock on the date of grant. The options have a date of grant of
December 1996 and become exercisable in cumulative increments of 50% and
100% on the first and second anniversaries, respectively, of the date of
grant so long as employment with the Company continues. The options granted
terminate 10 years from the date of grant and within a limited period
following a termination of employment as specified in the related option
agreement. The options granted are not intended to qualify as "incentive
stock options" under Section 422 of the Code. Pursuant to the Plan, the
Stock Option Committee of the Board of Directors may, among other things, in
its discretion and in accordance with the terms thereof, (i) in the event of
a change of control as defined therein, accelerate the exercisability of,
and authorize cash settlement payments in respect of, outstanding options
under the Plan and (ii) allow payment of the exercise price of an option to
be made in Common Stock.
(2) Options to purchase an aggregate of 159,500 shares of Common Stock were
granted to employees of the Company in fiscal 1997 under the Plan, of which
54.8% were granted to Mr. Speizman and Mr. Sklut. Of the options granted to
employees of the Company in fiscal 1997, options to purchase an aggregate of
70,000 shares of Common Stock were granted to Mark A. Speizman and Bryan D.
Speizman, who are children of Robert S. Speizman and employees of the
Company.
The following table sets forth certain information with respect to options
exercised during fiscal 1997 and the value of unexercised options to purchase
shares of Common Stock held by the Company's executive officers at the end of
fiscal 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
AT FISCAL FISCAL YEAR-END
SHARES YEAR-END (1)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Robert S. Speizman...................................... 26,667 $ 91,668(2) 77,270/166,941 $106,092/163,942
Josef Sklut............................................. 0 0 41,650/20,350 138,359/30,831
</TABLE>
(1) Represents the excess of the fair market value of the Common Stock on June
28, 1997 of $5.375 over the weighted average exercise price of the options
outstanding multiplied by the number of shares of Common Stock subject to
such options.
(2) Represents the excess of the fair market value of the Common Stock on the
date of exercise of $5.50 over the exercise price of the options exercised
multiplied by the number of shares of Common Stock subject to such options.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT ARRANGEMENTS AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Company currently has no employment agreement with either Mr. Speizman
or Mr. Sklut and has no plan or arrangement with either such executive officer
which are activated upon resignation, termination or retirement of any such
executive officer upon a change in control of the Company.
The Company and Mr. Sklut are parties to a deferred compensation agreement
dated February 9, 1972, as amended, that provides, subject to certain
exceptions, for the Company's payment to Mr. Sklut of certain amounts upon the
termination of his employment, as follows: (i) 180 monthly payments of $8,648 to
Mr. Sklut or his designated beneficiary if Mr. Sklut continues in the employment
of the Company until he reaches the age of 70 years and retires, (ii) 180
monthly payments of up to $9,342 to Mr. Sklut's designated beneficiary if Mr.
Sklut dies while employed by the Company before he reaches the age of 70 and
(iii) 180 monthly payments of up to $8,648 to Mr. Sklut or his designated
beneficiary if Mr. Sklut's employment is terminated (including a termination by
reason of disability) before he reaches the age of 70 other than by his
voluntary action, his death or discharge for fraudulent actions. No payments
will be made to Mr. Sklut under this agreement in the event his employment is
terminated as a result of his voluntary resignation or discharge by the Company
for fraudulent actions.
11
<PAGE>
The Company is a party to a trust agreement under which the Company has
agreed to maintain, and pay all premiums on, a life insurance policy and an
annuity contract on Mr. Sklut. The trust owns and is the beneficiary under both
the life insurance policy and annuity contract, and the trustee has agreed to
use the cash surrender value or proceeds, as the case may be, to make the
required payments under the deferred compensation agreement. In the event the
available funds are not adequate to make such required payments, the deficiency
will be paid by the Company to Mr. Sklut, and in the event such funds exceed the
required payments, such excess will be paid by the trustee to the Company.
Management believes that the cash surrender value or the proceeds, as the case
may be, are adequate to fund the required payments to Mr. Sklut under the
deferred compensation agreement. The Company paid aggregate premiums of $40,131,
$50,131 and $45,131 on the life insurance policy and annuity contract in fiscal
1995, 1996 and 1997, respectively.
Pursuant to the Company's Nonqualified Stock Option Plan, the Stock Option
Committee of the Board of Directors (which administers such plan) may, in its
discretion, and in accordance with the terms of such plan, in the event of a
change in control as defined therein, accelerate the exercisability of, and
authorize cash settlement payments in respect of, outstanding options under such
plan.
REPORT OF THE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE ON EXECUTIVE
COMPENSATION
The Company's compensation program for its executive officers is
administered by the Compensation Committee and the Stock Option Committee of the
Company's Board of Directors. The present members of each of these committees
are Mr. Berkowitz, Mr. Gorelick and Mr. Lea. Mr. Berkowitz is the Chairman of
the Compensation Committee and Mr. Gorelick is the Chairman of the Stock Option
Committee. None of these committee members has ever been an officer or employee
of the Company.
COMPENSATION POLICY
The present compensation policies of the Compensation Committee and the
Stock Option Committee regarding executive officer compensation are designed
principally to (i) motivate the Company's executive officers to improve the
measure of the Company's financial performance selected by the Compensation
Committee, as well as stockholder return on the Common Stock, and (ii) establish
a relationship between executive officer compensation on the one hand and such
Company performance and stockholder return on the other hand. These two
committees, in implementing these policies, provide the Company's executive
officers, in addition to base salaries, short-term and long-term incentive
opportunities, consisting of annual cash bonuses based on the selected measure
of the Company's financial performance and options granted under the Company's
stock option plans, respectively. The Compensation Committee believes that the
Company's Executive Bonus Plan described below motivates executive officers to
improve such financial performance and the Stock Option Committee believes that
the Company's stock option plans described below motivate the executive officers
to improve the stockholder return on the Common Stock.
TAX CONSIDERATIONS
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code of 1986, as amended, which provision places limits on the
Company's ability to deduct certain compensation in excess of $1,000,000 for any
taxable year paid to its executive officers ("Section 162(m)"). The amounts
includible in an executive officer's compensation upon the exercise of
nonqualified stock options is subject to this limitation. However, there is one
exception to this limitation for "performance based" compensation that has been
disclosed to and approved by stockholders prior to payment of the awards. The
targeted cash compensation of each of the Company's executive officers for
fiscal 1998 is below the $1,000,000 threshold. In addition, the Board of
Directors has amended the Plan, subject to stockholder approval of the Plan as
amended, so that options granted under the Plan will meet the requirement of
being performance based. As a result, the Committee believes that Section 162(m)
will not reduce the tax deduction available to the Company for fiscal 1998. The
Committee believes in retaining flexibility to recognize an executive officer's
contribution beyond the deductibility limits if this serves the best interests
of the Company and its stockholders. The Company believes that in fiscal 1997,
all of the compensation paid to the executive officers qualified for deduction
pursuant to Section 162(m).
BASE SALARIES
In October 1996, due principally to improved operating results for the
first quarter of fiscal 1997 as compared to the first quarter of fiscal 1996,
the Compensation Committee increased the base annual salaries of Mr. Speizman
and Mr. Sklut from $245,000 to $350,000 and from $115,000 to $125,000,
respectively. In addition, due to continued improvement in operating results
during fiscal 1997 as compared to fiscal 1996 and the increase in customer
orders during fiscal 1997 as compared to
12
<PAGE>
fiscal 1996, the Compensation Committee increased the base annual salaries of
Mr. Speizman and Mr. Sklut from $350,000 to $367,500 and from $125,000 to
$137,500, respectively, effective July 1997.
ANNUAL INCENTIVE OPPORTUNITIES -- EXECUTIVE BONUS PLAN
The Compensation Committee believes that the compensation of the Company's
executive officers should be significantly influenced by the Company's financial
performance and that the Company's consolidated income before taxes and before
executive officer bonuses is an appropriate measure of such financial
performance for purposes of executive officer incentive compensation
determinations because it most nearly reflects the results of the diverse
responsibilities and efforts of the Company's executive officers. The
Compensation Committee further believes that providing significant opportunities
for incentive compensation based on increases in such income focuses
management's attention on this measure of the Company's financial performance.
Accordingly, in fiscal 1991, the Board of Directors adopted the Company's
Executive Bonus Plan. The Compensation Committee amended this plan in November
1996 for fiscal 1997 and subsequent years due to the Company's improved
operating results. Under this plan as amended, the Company's President and Vice
President-Finance receive cash bonuses equal to 10% and 2%, respectively, of the
Company's consolidated income before taxes and before executive officer bonuses
provided that if such income for a particular year does not exceed 10% of the
Company's stockholder's equity as of the end of the immediately preceding fiscal
year, no bonuses will be paid under the Plan. The Company's stockholders' equity
was $18,202,925 and $20,937,700 as of June 29, 1996 and June 28, 1997,
respectively.
LONG-TERM INCENTIVE OPPORTUNITIES -- STOCK OPTION PLANS
To encourage a long-term focus by executive officers, the Company provides
incentives through its Nonqualified Stock Option Plan (the "Plan") which is
administered by the Stock Option Committee of the Board of Directors. The
exercise price of the options granted to executive officers to date has been the
fair market value of the Common Stock on the date of grant. Such options granted
during fiscal 1997 become exercisable in cumulative increments of 50% and 100%
on the first and second anniversaries of the date of grant, respectively. As a
result, the value of the options granted depends on stock price appreciation.
The Board of Directors believes that use of such equity-based incentives
reinforces the identification of management with the long-term interests of the
Company's stockholders and motivates management to improve the Company's
performance. In fiscal 1997, the Stock Option Committee granted options to
purchase 82,500 and 5,000 shares of Common Stock to Mr. Speizman and Mr. Sklut,
respectively. The number of shares of Common Stock subject to the option granted
to each such executive officer was based on the Committee's assessment, on a
subjective basis, of each officer's relative contribution to, and efforts on
behalf of, the Company and the impact of such contributions and efforts on the
Company's results. The Committee did not consider the size of previous option
grants and the number of shares of Common Stock subject to options held by each
such executive officer. The Committee does not have a specific time during the
year when it grants options.
PRESIDENT
For fiscal 1997, the Company increased the annual base salary of Mr.
Speizman, President, from $245,000 to $350,000 in October 1996 and from $350,000
to $367,500 effective July 1997 based on the reasons set forth above. In
addition, the Compensation Committee amended the Company's Executive Bonus Plan
pursuant to which Mr. Speizman received a cash bonus of $515,521 for fiscal
1997. The Stock Option Committee granted options to purchase an aggregate of
82,500 shares of Common Stock to Mr. Speizman in fiscal 1997 based on the
reasons set forth above.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
<S> <C>
STEVEN P. BERKOWITZ, CHAIRMAN STEVEN P. BERKOWITZ
WILLIAM GORELICK WILLIAM GORELICK, CHAIRMAN
SCOTT C. LEA SCOTT C. LEA
</TABLE>
13
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on the Common Stock for the Company's last five fiscal years with the cumulative
total return of companies listed on the CRSP Total Returns Index for Nasdaq
Stock Market (U.S. and Foreign Companies) ("Nasdaq Market Index") and of the
companies named below, including the Company, with the Standard Industrial
Classification code 508, Wholesale Trade -- Machinery, Equipment and Supplies
that were included in the CRSP Total Returns Index for NASDAQ Stocks (U.S. and
Foreign Companies) at any time during the five-year measurement period (the
"Peer Group Index"). The comparison assumes the investment of $100 in the Common
Stock, in the Nasdaq Market Index and in the Peer Group Index on June 27, 1992
and the reinvestment of all dividends (the Company paid no dividends during the
periods shown). The stockholder return of each of the companies in the Peer
Group Index has been weighed according to market capitalization at the beginning
of each measurement period.
[Performance Graph Goes Here]
NOTE: Since the Company's fiscal year-end is not a trading day, the
preceding trading day was used for purposes of calculating the performance
graph.
The Peer Group Index consists of the following companies: AGCO Corp.,
Abatix Environmental Corp., AERO Systems, Inc., Bernstein/Leibstone Associates,
Inc., Bio-Logic Systems Corp., CTC Communications Corp., Cedar Group, Inc.,
China Resources Development, Inc., Computer Telephone Corp., Conseco Industries,
Ltd., Consolidated Stainless, Inc., Dataflex Corp., Ezcony Interamerica, Inc.,
Hi-Rise Recycling Systems, Inc., Hirsch International Corp., IIC Industries,
Inc., Industrial Holdings, Inc., International Container Systems, Inc., Jayark
Corp., Kellstrom Industries, Inc., Lawson Products, Inc., Micro Bio-Medics,
Inc., Micros-to-Mainframes, Inc., Nyer Medical Group, Inc., Oce van der Grinten
N.V., Officeland, Inc., Omni U.S.A., Inc., Omnicorp Limited, Orthomet, Inc.,
PerfectData, Inc., Quality Systems, Inc., RSI Holdings, Inc., Robec, Inc.,
Speizman Industries, Inc., Stewart & Stevenson Services, Inc., Strategic
Distribution Inc., Tech Data Corp., Transnet Corp., The W.W. Williams Company
and Willis Lease Finance Corp. With regard to the Peer Group Index, the capital
stock of the Company's direct competitors is not publicly traded. As a result,
there is no publicly available information concerning the total stockholder
return for such competitors and they are not included in the Peer Group Index.
14
<PAGE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings made by the Company under those
statutes, the preceding Report of the Compensation Committee and Stock Option
Committee on Executive Compensation and the Comparative Performance Graph will
not be incorporated by reference into any of those prior filings, nor will such
report or graph be incorporated by reference into any future filings made by the
Company under those statutes.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its headquarters in Charlotte, North Carolina from a
partnership owned by Robert S. Speizman and Lawrence J. Speizman, Robert S.
Speizman's brother, under a lease agreement entered into in 1990 that originally
extended to March 1995. This lease agreement was amended in April 1995 to extend
the lease agreement to March 1996 and was amended again in April 1996 to extend
the lease agreement to March 1998. The building in which the headquarters are
located is approximately 89,000 square feet. The Company paid rent of
approximately $25,960 per month from April 1995 to March 1996 and paid or will
pay rent of $29,669 per month from April 1996 to March 1998. The Company is
required to bear the cost of taxes ($12,340 for fiscal 1997), maintenance and
insurance on the building.
The Company and Robert S. Speizman are parties to a redemption agreement
dated May 31, 1974, as amended, that provides for the Company's redemption of
the Common Stock owned by Mr. Speizman at his death. The agreement gives to Mr.
Speizman's legal representatives the option, for a two-year period following his
death, to require the Company to purchase such Common Stock at 95% of its "fair
market value," as defined in the agreement, provided that the aggregate purchase
price paid for Mr. Speizman's Common Stock may not exceed the excess of the
proceeds of certain life insurance policies obtained by the Company remaining
after repayment of any loans obtained by the Company under such insurance
policies. The agreement provides that the Company will maintain life insurance
on Mr. Speizman's life in the aggregate amount of $1.15 million to fund its
obligations thereunder. The Company paid aggregate premiums of approximately
$15,000 in fiscal 1997 on these life insurance policies and, as of June 28,
1997, had no loans under any such policy.
Two of Mr. Speizman's children, Bryan D. Speizman and Mark A. Speizman, and
Mr. Speizman's son-in-law, P. Donald Mullen, are all employed by the Company
and, during fiscal 1997, received aggregate cash compensation from the Company
of $778,697, including an aggregate of $580,855 in sales commissions. In
addition, in December 1996, each of Bryan Speizman and Mark Speizman received an
option to purchase 35,000 shares of Common Stock having an exercise price of
$6.00 per share and becoming exercisable in two equal annual increments
commencing on the first anniversary of the date of grant. From time to time
during fiscal 1997, the Company paid certain personal expenses on behalf of
Robert Speizman, Bryan Speizman and Mark Speizman. Amounts owed to the Company
under these arrangements bear interest at 7%. During fiscal 1997, the largest
aggregate amount of such indebtedness outstanding, including accrued interest,
was $293,623 as of June 28, 1997 ($225,326 of which was owed by Mr. Speizman and
the remainder of which was owed by Bryan and Mark Speizman). Mr. Speizman repays
his indebtedness through bi-weekly payroll deductions of $1,058 and additional
cash payments from time to time in varying amounts. Bryan and Mark Speizman
repay this indebtedness through aggregate monthly payroll deductions of $100 and
additional cash payments from time to time in varying amounts. The Company
anticipates that such arrangements will continue in fiscal 1998.
TRANSACTIONS RELATED TO ACQUISITION OF WINK DAVIS EQUIPMENT CO., INC.
On August 1, 1997, the Company purchased all of the outstanding shares of
the common stock of Wink Davis Equipment Co., Inc. ("Wink Davis") from the
shareholders of Wink Davis pursuant to a Stock Purchase Agreement dated July 31,
1997. The Company is operating, and intends to continue to operate, Wink Davis
as a wholly-owned subsidiary of the Company. Pursuant to such Stock Purchase
Agreement, among other things, Wink Davis entered into a five-year employment
agreement (the "Employment Agreement") with C. Alex Davis. Pursuant to the
Employment Agreement, Mr. Davis is employed as President of Wink Davis and
receives a minimum base annual salary of $237,500. In addition, pursuant to the
Employment Agreement, among other things, Wink Davis has agreed to pay, during
the term of such agreement, one-half of the premiums on life insurance on the
life of Mr. Davis, and one-half of the premiums on disability insurance for Mr.
Davis, both providing for payments in an amount equal to the aggregate salary
that would be payable to Mr. Davis pursuant to such Employment Agreement during
the remaining term thereof. If the employment of Mr. Davis is terminated other
than for cause, as defined in the Employment Agreement, or upon his death or
disability, Wink Davis will be obligated to pay Mr. Davis his aggregate base
annual salary for the remainder of the term thereof subject to offset for cash
compensation from other employment. Pursuant to the Stock Purchase Agreement, on
August 1, 1997, the Company paid to Mr. Davis and his three children an
aggregate of $3.5 million for the shares of the common stock of Wink Davis owned
by them. In addition,
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such persons have received or have the right to receive up to an aggregate
additional amount of $500,000, of which $143,000 has already been paid and
$357,000 is currently held in escrow, with the amount received to be determined
principally by the collection by Wink Davis of certain accounts receivable and
the sale by Wink Davis of the assets of a division of Wink Davis. The Company is
also a party to an agreement with Mr. Davis and his three children related to
the Company's acquisition of Wink Davis pursuant to which the Company agreed to
pay such persons certain additional earnout consideration equal to a specified
annual percentage of the pre-tax earnings of Wink Davis in excess of a specified
minimum and not to exceed an aggregate of $1.5 million over a five-year period.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors, executive officers and persons who own more than 10% of the
outstanding shares of the Company's Common Stock file with the Securities and
Exchange Commission certain reports relating to their ownership of Common Stock
and changes in such ownership. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during fiscal 1997 all such
Section 16(a) filing requirements were complied with, except that Mr. Berkowitz
inadvertently omitted to report two transactions (purchases of 2,000 and 500
shares of Common Stock by Mr. Berkowitz's wife and Mr. Berkowitz as custodian
for one of his children, respectively) in March 1996. Mr. Berkowitz reported
such transactions on a Form 4 filed in October 1997 upon his discovery of such
omission.
DATE FOR RECEIPT OF PROPOSALS
In order for stockholder proposals to be included in the proxy materials
for the Company's annual meeting of stockholders for the fiscal year ending June
27, 1998, any such proposal must be received by the Company at its executive
offices not later than June 24, 1998 and meet all other applicable requirements
for inclusion therein.
OTHER BUSINESS
The Board of Directors is not aware of any other matter to come before the
Meeting. However, if any such matter does come before the Meeting which requires
a vote of the stockholders, it is the intention of the persons named in the
enclosed proxy to vote the shares of Common Stock represented thereby in
accordance with the recommendations of the Company's management and their
judgment on such matter.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended June
28, 1997 will be provided free of charge to stockholders upon written request
directed to: Speizman Industries, Inc., 508 West Fifth Street, Charlotte, North
Carolina 28202, Attention: Josef Sklut, Secretary.
By order of the Board of Directors,
JOSEF SKLUT
SECRETARY
Charlotte, North Carolina
October 22, 1997
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EXHIBIT A
SPEIZMAN INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN
EFFECTIVE AS OF SEPTEMBER 21, 1995
AS AMENDED ON OCTOBER 4, 1996 AND
ON SEPTEMBER 29, 1997
ARTICLE I -- GENERAL PROVISIONS
1.1 The Plan is designed, for the benefit of the Company, to attract and
retain for the Company personnel of exceptional ability, to motivate
such personnel through added incentives to make a maximum contribution
to the Company, to develop and maintain a highly competent management
team and to be competitive with other companies with respect to
executive compensation.
1.2 Awards under the Plan may be made to Participants in the form of
nonqualified stock options.
1.3 The Plan shall be effective September 21, 1995 (the "Effective Date"),
subject to the approval of the stockholders of the Company. Options may
be granted prior to such approval, but such Options shall be contingent
upon such approval being obtained and, in addition to any other terms
thereof or restrictions thereon under the Plan or an Award Agreement,
may not be exercised or transferred prior to such approval.
ARTICLE II -- DEFINITIONS
Except where the context otherwise indicates, the following definitions
apply:
2.1 "Acceleration Event" means the occurrence of an event defined in
Article XIII of the Plan.
2.2 "Act" means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended. All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to time
be amended or renumbered.
2.3 "Award Agreement" means the written agreement evidencing an Option
granted to a Participant.
2.4 "Board" means the Board of Directors of Speizman Industries, Inc.
2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. All citations to sections of the Code are to such
sections as they may from time to time be amended or renumbered.
2.6 "Committee" means the Stock Option Committee of the Board or such other
committee consisting of two or more members as may be appointed by the
Board to administer this Plan pursuant to Article III. To the extent
required by Rule 16b-3 under the Act, the Committee shall consist of
individuals who are members of the Board and Non-Employee Directors
(except as otherwise permitted under Rule 16b-3 under the Act).
Committee members may also be appointed for such limited purposes as
may be provided by the Board.
2.7 "Company" means Speizman Industries, Inc., a Delaware corporation, and
its successors and assigns. The term "Company" shall include any
corporation which is a member of a controlled group of corporations (as
defined in Section 414(b) of the Code, as modified by Section 415(h) of
the Code) which includes the Company; any trade or business (whether or
not incorporated) which is under common control (as defined in Section
414(c) of the Code, as modified by Section 415(h) of the Code) with the
Company; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Section 414(m) of
the Code) which includes the Company; and any other entity required to
be aggregated with the Company pursuant to regulations under Section
414(o) of the Code. With respect to all purposes of the Plan,
including, but not limited to, the establishment, amendment,
termination, operation and administration of the Plan, Speizman
Industries, Inc. shall be authorized to act on behalf of all other
entities included within the definition of "Company."
2.8 "Disability" means a disability as determined under procedures
established by the Committee or in any Option.
2.9 "Non-Employee Director" shall have the meaning set forth in Rule 16b-3
under the Act.
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2.10 "Eligible Participant" means any employee of the Company, as shall be
determined by the Committee, as well as any other person, including
directors, whose participation the Committee determines is in the best
interest of the Company, subject to limitations as may be provided by
the Code, the Act or the Committee.
2.11 "Fair Market Value" means, if the Stock is listed for trading on any
national securities exchange, the last sale price regular way of the
Stock on the date of reference, or, if no sale of the Stock takes
place on such date, the average of the closing high bid and low asked
prices regular way of the Stock on such date, in either case on such
exchange. If the Stock is not listed for trading on a national
securities exchange, but is listed on The Nasdaq Stock Market, then
"fair market value" means the last sale price of the Stock on the date
of reference, or, if no sale of the Stock takes place on such date,
the average of the closing high bid and low asked prices of the Stock
on such date, in either case as reported by The Nasdaq Stock Market.
The Committee may establish an alternative method of determining Fair
Market Value.
2.12 "Option" means a nonqualified stock option to purchase Stock granted
under Article IV of the Plan.
2.13 "Option Grant Date" means, as to any Option:
(a) the date on which the Committee grants the Option by entering into
an Award Agreement with the Participant;
(b) the date the Participant receiving the Option becomes an employee
of the Company, to the extent employment status is a condition of the
grant or a requirement of the Code or the Act; or
(c) such other date as the Committee may designate.
2.14 "Participant" means an Eligible Participant to whom an Option has been
granted and who has entered into an Award Agreement evidencing the
Option.
2.15 "Plan" means the Speizman Industries, Inc. Nonqualified Stock Option
Plan set forth herein, as amended from time to time.
2.16 "Stock" means shares of the common stock, par value $.10 per share, of
Speizman Industries, Inc., as may be adjusted pursuant to the
provisions of Section 3.14.
2.17 "Termination of Employment" means the discontinuance of employment of
a Participant with the Company for any reason. The determination of
whether a Participant has discontinued employment shall be made by the
Committee in its discretion. In determining whether a Termination of
Employment has occurred, the Committee may provide that service as a
consultant or service with a business enterprise in which the Company
has a significant ownership interest shall be treated as employment
with the Company. The Committee shall have the discretion, exercisable
either at the time an Option is granted or at the time the Participant
terminates employment, to establish as a provision applicable to the
exercise of one or more Options that during the limited period of
exercisability following Termination of Employment, the Option may be
exercised not only with respect to the number of shares of Stock for
which it is exercisable at the time of the Termination of Employment
but also with respect to one or more subsequent installments for which
the Option would have become exercisable had the Termination of
Employment not occurred.
ARTICLE III -- ADMINISTRATION
3.1 This Plan shall be administered by the Committee. A Committee member
who is not a Non-Employee Director, with respect to action to be taken
by the Committee, shall not be able to participate in the decision to
the extent prescribed by Rule 16b-3 under the Act. The Committee, in
its discretion, may delegate to one or more of its members such of its
powers as it deems appropriate. The Committee also may limit the power
of any member to the extent necessary to comply with Rule 16b-3 under
the Act or any other law. Members of the Committee shall be appointed
originally, and as vacancies occur, by the Board, to serve at the
pleasure of the Board. The Board may serve as the Committee, if by the
terms of the Plan all Board members are otherwise eligible to serve on
the Committee.
3.2 The Committee shall meet at such times and places as it determines. A
majority of its members shall constitute a quorum, and the decision of
a majority of those present at any meeting at which a quorum is present
shall constitute the decision of the Committee. A memorandum signed by
all of its members shall constitute the decision of the Committee
without necessity, in such event, for holding an actual meeting.
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3.3 The Committee shall have the exclusive right to interpret, construe and
administer the Plan, to select the persons who are eligible to receive
an Option, and to act in all matters pertaining to the granting of an
Option and the contents of the Award Agreement evidencing the Option,
including without limitation the determination of the number of Options
and the form, terms, conditions and duration of each Option, and any
amendment thereof consistent with the Plan. All acts, determinations
and decisions of the Committee made or taken pursuant to grants of
authority under the Plan or with respect to any questions arising in
connection with the administration and interpretation of the Plan,
including the severability of any and all of the provisions hereof,
shall be conclusive, final and binding upon all Participants, Eligible
Participants and their beneficiaries.
3.4 The Committee may adopt such rules, regulations and procedures of
general application for the administration of this Plan, as the
Committee deems appropriate.
3.5 Without limiting the foregoing Sections 3.1, 3.2, 3.3 and 3.4, and
notwithstanding any other provisions of the Plan, the Committee is
authorized to take such action as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to an
Option in the event of an Acceleration Event as defined in Article V.
Such action may include, but shall not be limited to, establishing,
amending or waiving the forms, terms, conditions and duration of an
Option and the corresponding Award Agreement so as to provide for
earlier, later, extended or additional times for exercise or payments,
differing methods for calculating payments, alternate forms and amounts
of payment, an accelerated release of restrictions or other
modifications. The Committee may take such actions pursuant to this
Section 3.5 by adopting rules and regulations of general applicability
to all Participants or to certain categories of Participants, by
including, amending or waiving terms and conditions in an Option and
the corresponding Award Agreement, or by taking action with respect to
individual Participants.
3.6 In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee
shall be indemnified by the Company against reasonable expenses,
including attorney's fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be
a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against
all amounts paid by them in settlement thereof, provided such
settlement is approved by independent legal counsel selected by the
Company, or paid by them in satisfaction of a judgment or settlement in
any such action, suit or proceeding, except as to matters as to which
the Committee member has been negligent or engaged in misconduct in the
performance of his duties; provided, that within 60 days after
institution of any such action, suit or proceeding, a Committee member
shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
3.7 The Committee may require each person purchasing shares of Stock
pursuant to an Option to represent to and agree with the Company in
writing that he is acquiring the shares of Stock without a view to
distribution thereof. The certificates for such shares of Stock may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
3.8 The Committee shall be authorized to make adjustments in performance
based criteria or in the terms and conditions of Options in recognition
of unusual or nonrecurring events affecting the Company or its
financial statements or changes in applicable laws, regulations or
accounting principles. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award
Agreement in the manner and to the extent it shall deem desirable to
carry it into effect. In the event the Company shall assume outstanding
employee benefit awards or the right or obligation to make future such
awards in connection with the acquisition of another corporation or
business entity, the Committee may, in its discretion, make such
adjustments in the terms of Options under the Plan as it shall deem
appropriate.
3.9 The Committee shall have full power and authority to determine whether,
to what extent and under what circumstances, any Option shall be
canceled or suspended. In particular, but without limitation, all
outstanding Options to any Participant may be canceled if the
Participant (a) without the consent of the Committee, while employed by
the Company or after termination of such employment, becomes associated
with, employed by, renders services to, or owns any interest in, other
than any insubstantial interest, as determined by the Committee, any
business that is in competition with the Company or with any business
in which the Company has a substantial interest as determined by the
Committee; or (b) is terminated for cause as determined by the
Committee.
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3.10 The aggregate number of shares of Stock which are available for
issuance pursuant to Options granted under the Plan shall be 450,0001
or any larger number that, subsequent to the date this Plan is
adopted, may be authorized for issuance by the Company. Such shares of
Stock shall be made available from authorized and unissued shares. If,
for any reason, any shares of Stock awarded or subject to purchase
under the Plan are not delivered or purchased, or are reacquired by
the Company, for reasons including, but not limited to, expiration or
cancellation of an Option or any other termination of an Option
without payment being made in the form of Stock, such shares of Stock
shall not be charged against the aggregate number of shares of Stock
available for Options under the Plan, and may again be available for
grants of Options under the Plan.
3.11 The Company shall not be required to issue or deliver any certificates
for shares of Stock prior to:
(a) the listing of such shares on any stock exchange on which the
Stock may then be listed; and
(b) the completion of any registration or qualification of such shares
of Stock under any federal or state law, or any ruling or regulation
of any government body which the Company shall, in its discretion,
determine to be necessary or advisable.
3.12 All certificates for shares of Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and
other requirements of the Securities and Exchange Commission, any
stock exchange upon which the Stock is then listed and any applicable
federal or state laws, and the Committee may cause a legend or legends
to be placed on any such certificates to make appropriate reference to
such restrictions. In making such determination, the Committee may
rely upon an opinion of counsel for the Company.
3.13 Except as provided otherwise in the Plan or in an Award Agreement, no
Participant awarded an Option shall have any right as a stockholder
with respect to any shares of Stock covered by such Option prior to
the date of issuance to him or her of a certificate or certificates
for such shares of Stock.
3.14 If any reorganization, recapitalization, reclassification, stock
split-up, stock dividend, or consolidation of shares of Stock, merger
or consolidation of the Company or sale or other disposition by the
Company of all or a portion of its assets, any other change in the
Company's corporate structure, or any distribution to stockholders
other than a cash dividend results in the outstanding shares of Stock,
or any securities exchanged therefor or received in their place, being
exchanged for a different number or class of shares of Stock or other
securities of the Company, or for shares of Stock or other securities
of any other corporation, or new, different or additional shares or
other securities of the Company or of any other corporation being
received by the holders of outstanding shares of Stock, then equitable
adjustments shall be made by the Committee in:
(a) the limitation on the aggregate number of shares of Stock that may
be issued as set forth in Section 3.10 of the Plan;
(b) the number and class of Stock that may be subject to a grant of an
Option and which have not been issued or transferred under an
outstanding Option;
(c) the purchase price to be paid per share of Stock under outstanding
Options; and
(d) the terms, conditions or restrictions of any Option and Award
Agreement.
1 On October 4, 1996, the Board amended the Plan to increase the aggregate
number of shares of Stock available for issuance pursuant to Options granted
under the Plan to 290,000 from 145,000, subject to the approval of the
Stockholders which was obtained on November 19, 1996. On September 29, 1997,
the Board amended the Plan to increase the number of shares of Stock available
for issuance pursuant to Options granted under the Plan to 450,000 from
290,000, subject to the approval of the Stockholders.
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ARTICLE IV -- OPTIONS
4.1 Options to purchase shares of Stock may be granted to Eligible
Participants at such time or times determined by the Committee,
following the Effective Date, subject to the terms and conditions set
forth in this Article IV.
4.2 Each Option shall be evidenced by a written Award Agreement which shall
be subject to and incorporate, by reference or otherwise, the
applicable terms and conditions of the Plan, and any other terms and
conditions not inconsistent with the Plan as may be imposed by the
Committee, including any provisions as to continued employment as
consideration for the grant or exercise of the Option and any
provisions which may be advisable to comply with applicable laws,
regulations or rulings of any governmental authority. THE MAXIMUM
NUMBER OF SHARES OF STOCK SUBJECT TO OPTIONS WHICH CAN BE GRANTED UNDER
THE PLAN DURING A 12-MONTH PERIOD TO A PERSON WHO IS A NAMED EXECUTIVE
OFFICER SHALL BE 100,000 SHARES. FOR PURPOSES OF THE PLAN, A NAMED
EXECUTIVE OFFICER IS A PERSON WHO AS OF THE DATE OF GRANT IS DETERMINED
BY THE COMMITTEE TO BE ONE OF THE GROUP OF "COVERED EMPLOYEES" UNDER
CODE SECTION 162(M) AND THE REGULATIONS THEREUNDER.2
4.3 The Option price per share of Stock shall be established in the Award
Agreement and may be less than 100% of the Fair Market Value at the
Option Grant Date.
4.4 The Option may be exercised in full or in part from time to time within
such period as may be specified by the Committee or in the Award
Agreement; provided, however, that in any event the Option shall lapse
and cease to be exercisable three months following the Participant's
Termination of Employment.
4.5 An Option shall not be transferable by the Participant other than by
will or by the laws of descent and distribution, or, to the extent
otherwise allowed by Rule 16b-3 under the Act or other applicable law,
pursuant to a qualified domestic relations order as defined by the Code
and the Employee Retirement Income Security Act, as amended, and the
rules thereunder, and shall be exercisable during the lifetime of the
Participant only by him or by his guardian or legal representative.
Unless otherwise provided by the Committee or specified in an Award
Agreement, transfer restrictions shall only apply to the extent
required by federal or state securities laws. If any Participant makes
such a transfer in violation hereof, any obligation of the Company
shall forthwith terminate.
4.6 Shares of Stock purchased upon exercise of an Option shall be paid for
in such amounts, at such times and upon such terms as shall be
determined by the Committee, subject to limitations set forth in the
corresponding Award Agreement. Without limiting the foregoing, the
Committee may establish payment terms for the exercise of Options which
permit the Participant to deliver shares of Stock, or other evidence of
ownership of Stock satisfactory to the Company, with a Fair Market
Value equal to the Option price as payment.
4.7 No cash dividends shall be paid on shares of Stock subject to
unexercised Options. The Committee may provide, however, that a
Participant to whom an Option has been granted which is exercisable in
whole or in part at a future time for shares of Stock shall be entitled
to receive an amount per share equal in value to the cash dividends, if
any, paid per share on issued and outstanding Stock, as of the dividend
record dates occurring during the period between the date of the grant
and the time each such share of Stock is delivered pursuant to exercise
of such Option. Such amounts (herein called "dividend equivalents")
may, in the discretion of the Committee, be:
(a) paid in cash or Stock either from time to time prior to, or at the
time of the delivery of, such Stock, or upon expiration of the Option
if it shall not have been fully exercised; or
(b) converted into contingently credited shares of Stock, with respect
to which dividend equivalents may accrue, in such manner, at such
value, and deliverable at such time or times, as may be determined by
the Committee.
Such Stock, whether delivered or contingently credited, shall be
charged against the limitations set forth in Section 3.10.
4.8 The Committee, in its sole discretion, may authorize payment of
interest equivalents on dividend equivalents which are payable in cash
at a future time.
2 On September 29, 1997, the Board of Directors amended the Plan to limit the
number of shares of Stock subject to Options which can be granted under the
Plan during a 12-month period to a person who is a Named Executive Officer,
subject to the approval of the Plan, as amended, by the Stockholders.
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4.9 In the event of Disability or death, the Committee, with the consent
of the Participant or his legal representative, may authorize payment,
in cash or in Stock, or partly in cash and partly in Stock, as the
Committee may direct, of an amount equal to the difference at the time
between the Fair Market Value of the Stock subject to an Option and
the option price in consideration of the surrender of the Option.
4.10 The Company may make such provisions and take such steps as it may
deem necessary or appropriate for the withholding of any taxes which
the Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to
withhold in connection with any Option or the exercise thereof,
including, but not limited to, withholding the issuance of Stock
pursuant to exercise of the Option until the Participant reimburses
the Company for the amount the Company is required to withhold with
respect to such taxes or canceling any portion of the Option or
another Option granted under the Plan in an amount sufficient to
reimburse the Company for the amount the Company is required to so
withhold.
4.11 If a Participant is required to pay to the Company an amount with
respect to income and employment tax withholding obligations in
connection with exercise of an Option, the Committee, in its
discretion and subject to such rules as it may adopt, may permit the
Participant to satisfy the obligation, in whole or in part, by making
an irrevocable election that a portion of the total Fair Market Value
of the shares of Stock subject to the Option be paid in the form of
cash in lieu of the issuance of Stock and that such cash payment be
applied to the satisfaction of the withholding obligations. The amount
to be withheld shall not exceed the statutory minimum federal and
state income and employment tax liability arising from the Option
exercise transaction. Notwithstanding any other provision of the Plan,
any election under this Section 4.11 shall be effective only if it
satisfies the applicable requirements of Rule 16b-3 of the Act.
4.12 The Committee may permit the voluntary surrender of all or a portion
of any Option granted under the Plan to be conditioned upon the
granting to the Participant of a new Option for the same or a
different number of shares of Stock as the Option surrendered, or may
require such surrender as a condition precedent to a grant of a new
Option to such Participant. Subject to the provisions of the Plan,
such new Option shall be exercisable at such price, during such period
and on such other terms and conditions as are specified by the
Committee at the time the new Option is granted. Upon surrender, the
Options surrendered shall be canceled and the shares of Stock
previously subject to them shall be available for the grant of other
Options.
ARTICLE V -- ACCELERATION EVENTS
5.1 For the purposes of the Plan, an Acceleration Event shall occur in the
event of a "Potential Change in Control," or "Change in Control" or a
"Board-Approved Change in Control," as those terms are defined below.
5.2 A "Change in Control" shall be deemed to have occurred if:
(a) Any "Person" as defined in Section 3(a)(9) of the Act, including a
"group" (as that term is used in Sections 13(d)(3) and 14(d)(2) of the
Act), but excluding the Company and any employee benefit plan sponsored
or maintained by the Company, including any trustee of such plan acting
as trustee, who:
(i) makes a tender or exchange offer for any shares of the Company's
Stock (as defined below) pursuant to which any shares of the Company's
Stock are purchased (an "Offer"); or
(ii) together with its "affiliates" and "associates" (as those terms
are defined in Rule 12b-2 under the Act) becomes the "Beneficial Owner"
(within the meaning of Rule 13d-3 under the Act) of at least 20% of the
Company's Stock (an "Acquisition");
(b) The stockholders of the Company approve a definitive agreement or
plan to merge or consolidate the Company with or into another
corporation, to sell or otherwise dispose of all or substantially all
of its assets, or to liquidate the Company (individually, a
"Transaction"); or
(c) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for any
reason other than death to constitute at least a majority thereof;
provided, however, that a director who was not a director at the
beginning of such 24 month period shall be deemed to have satisfied
such 24 month requirement, and be an Incumbent Director, if such
director was elected by, or on the recommendation of or with the
approval of, at least two-thirds of the
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<PAGE>
directors who then qualified as Incumbent Directors either actually,
because they were directors at the beginning of such 24 month period,
or by prior operation of this Section 5.2(c).
5.3 A "Board-Approved Change in Control" shall be deemed to have occurred
if the Offer, Acquisition or Transaction, as the case may be, is
approved by a majority of the Directors serving as members of the Board
at the time of the Potential Change in Control or Change in Control.
5.4 A "Potential Change in Control" means the happening of any one of the
following:
(a) The approval by stockholders of an agreement by the Company, the
consummation of which would result in a Change in Control of the
Company, as defined in Section 5.2; or
(b) The acquisition of Beneficial Ownership, directly or indirectly, by
any entity, person or group, other than the Company or any Company
employee benefit plan, including any trustee of such plan acting as
such trustee, of securities of the Company representing five percent or
more of the combined voting power of the Company's outstanding
securities and the adoption by the Board of a resolution to the effect
that a Potential Change in Control of the Company has occurred for the
purposes of this Plan.
5.5 Upon the occurrence of an Acceleration Event, the Committee in its
discretion may declare that any or all then outstanding Options, that
are not already exercisable and fully vested, shall become immediately
exercisable and fully vested in whole or in part.
5.6 In the event of a Change in Control, the Committee may, in its
discretion, cash out the value of all outstanding Options, to the
extent vested, on the basis of the "Change in Control Price" (as
defined in Section 5.7) as of the date such Change in Control or such
Potential Change in Control is determined to have occurred or such
other date as the Committee may determine prior to the Change in
Control, less the Option price (as established in the corresponding
Award Agreements).
5.7 For purposes of Section 5.6, "Change in Control Price" means the
highest price per share of Stock paid in any transaction reported on
the exchange on which the Stock is then traded, or paid or offered in
any bona fide transaction related to a Potential or actual Change in
Control of the Company at any time during the 60 day period immediately
preceding the occurrence of the Change in Control, or, where
applicable, the occurrence of the Potential Change in Control event, in
each case as determined by the Committee.
ARTICLE VI -- AMENDMENT AND TERMINATION
6.1 The Board, upon recommendation of the Committee, or otherwise, at any
time and from time to time, may amend or terminate the Plan. To the
extent required by Rule 16b-3 under the Act, no amendment, without
approval by the Company's stockholders, shall:
(a) alter the group of persons eligible to participate in the Plan;
(b) except as otherwise provided herein, increase the maximum number of
shares of Stock or Options that are available for award under the Plan;
(c) limit or restrict the powers of the Committee with respect to the
administration of this Plan;
(d) materially increase the benefits accruing to Participants under
this Plan;
(e) materially modify the requirements as to eligibility for
participation in this Plan; or
(f) change any of the provisions of this Article VI.
6.2 No amendment to or discontinuance of this Plan or any provision thereof
by the Board or the stockholders of the Company shall, without the
written consent of the Participant, adversely affect, as shall be
determined by the Committee, any Option theretofore granted to such
Participant under this Plan; provided, however, the Committee retains
the right and power to:
(a) annul any Option if the Participant is terminated for cause as
determined by the Committee; and
(b) provide for the forfeiture of shares of Stock or other gain under
an Option, as determined by the Committee, in the event the Participant
competes against the Company.
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<PAGE>
6.3 If an Acceleration Event has occurred, no amendment or termination
shall impair the rights of any person with respect to an outstanding
Option as provided in Article V.
ARTICLE VII -- MISCELLANEOUS PROVISIONS
7.1 Nothing in the Plan or any Option granted hereunder shall confer upon
any Participant any right to continue in the employ of the Company, or
to serve as a director thereof, or interfere in any way with the right
of the Company to terminate his or her employment at any time. Unless
specifically provided otherwise, no Option granted under the Plan shall
be deemed salary or compensation for the purpose of computing benefits
under any employee benefit plan or other arrangement of the Company for
the benefit of its employees unless the Company shall determine
otherwise. No Participant shall have any claim to an Option until it is
actually granted under the Plan. To the extent that any person acquires
a right to receive payments from the Company under the Plan, such right
shall, except as otherwise provided by the Committee, be no greater
than the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general funds of
the company, and no special or separate fund shall be established and
no segregation of assets shall be made to assure payment of such
amounts, except as otherwise provided by the Committee.
7.2 The Plan and the grant of Options hereunder shall be subject to all
applicable federal and state laws, rules, and regulations and to such
approvals by any United States government or regulatory agency as may
be required. Any provision herein relating to compliance with Rule
16b-3 under the Act shall not be applicable with respect to
participation in the Plan by Participants who are not subject to
Section 16(b) of the Act.
7.3 The terms of the Plan shall be binding upon the Company and its
successors and assigns.
7.4 This Plan and all actions taken hereunder shall be governed by the laws
of the State of North Carolina.
7.5 The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver shares of Stock or
payments in lieu of or with respect to Options granted hereunder;
provided, however, that, unless the Committee otherwise determines with
the consent of the affected Participant, the existence of such trusts
or other arrangements is consistent with the "unfunded" status of the
Plan.
7.6 Each Participant exercising an Option hereunder agrees to give the
Committee prompt written notice of any election made by such
Participant under Section 83(b) of the Code, or any similar provision
thereof.
7.7 If any provision of this Plan or an Award Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Award Agreement under any law deemed
applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws or if it cannot be
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award
Agreement, it shall be stricken and the remainder of the Plan or the
Award Agreement shall remain in full force and effect.
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APPENDIX
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SPEIZMAN INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON NOVEMBER 19, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE UNDERSIGNED HEREBY APPOINTS ROBERT S. SPEIZMAN AND JOSEF SKLUT, AND EACH
OF THEM, AS ATTORNEYS AND PROXIES, EACH WITH FULL POWER OF SUBSTITUTION, AND
HEREBY AUTHORIZES THEM TO REPRESENT AND TO VOTE, AS DIRECTED BELOW, ALL THE
SHARES OF COMMON STOCK OF SPEIZMAN INDUSTRIES, INC. (THE "COMPANY") HELD OF
RECORD BY THE UNDERSIGNED AT THE CLOSE OF BUSINESS ON OCTOBER 10, 1997, AT THE
ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY TO BE HELD ON NOVEMBER 19, 1997 AT
11:00 A.M. AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY LOCATED AT 508 WEST
FIFTH STREET, CHARLOTTE, NORTH CAROLINA, OR ANY ADJOURNMENT THEREOF. THE
UNDERSIGNED HEREBY DIRECTS THAT SUCH SHARES BE VOTED AS FOLLOWS:
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS: [] FOR ALL NOMINEES [] WITHHOLD AUTHORITY [] WITHHOLD AUTHORITY TO
LISTED BELOW TO VOTE FOR ALL NOMINEES VOTE FOR THOSE NOMINEES
WRITTEN IN THE SPACE
PROVIDED BELOW; AND FOR ALL
OTHER NOMINEES
</TABLE>
NOMINEES: ROBERT S. SPEIZMAN, JOSEF SKLUT, STEVEN P. BERKOWITZ, WILLIAM GORELICK
AND SCOTT C. LEA.
INSTRUCTION -- TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW:
2. APPROVAL OF THE SPEIZMAN INDUSTRIES, INC. NONQUALIFIED STOCK OPTION PLAN,
AS AMENDED.
<TABLE>
<S> <C> <C>
FOR [] AGAINST [] ABSTAIN []
</TABLE>
<PAGE>
3. RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING JUNE
27, 1998.
<TABLE>
<S> <C> <C>
FOR [] AGAINST [] ABSTAIN []
</TABLE>
4. THE PROXIES ARE AUTHORIZED TO VOTE THE SHARES REPRESENTED BY THIS PROXY IN
ACCORDANCE WITH THEIR JUDGMENT ON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY, IF SIGNED
AND RETURNED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES NAMED IN ITEM 1 AND
FOR ITEMS 2 AND 3.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICERS. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
DATED: , 1997
SIGNATURE
SIGNATURE IF HELD JOINTLY
PLEASE COMPLETE, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY IN
THE ENCLOSED ENVELOPE