- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
<TABLE>
<CAPTION>
<S> <C> <C> <C>
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
[Fee Required]
For the fiscal year ended July 3, 1999
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
For the transition period from __________________ to _____________________
COMMISSION FILE NO. 0-8544
</TABLE>
SPEIZMAN INDUSTRIES, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
DELAWARE 56-0901212
- - ---------------------------------------------------------- ---------------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
701 Griffith Road, Charlotte, North Carolina 28217
- - ---------------------------------------------------------- ---------------------------------------------
(Address of principal executives offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (704) 559-5777
Securities registered pursuant to Section 12(b) of the Act:
NONE
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
----------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing such
requirements for the past 90 days.
Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. |_|
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of September 13, 1999, was $16,849,809 based on the last
sale price of $5.22 per share reported by the NASDAQ National Market System on
that date.
As of September 13, 1999, there were 3,228,706 shares of the
registrant's Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on November 18, 1999 are incorporated herein by
reference into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Speizman Industries, Inc. and subsidiaries (collectively the "Company") is a
major distributor operating through four companies: Speizman Industries, Inc.
("Speizman" or "Speizman Industries"), Wink Davis Equipment Co., Inc. ("Wink
Davis"), Todd Motion Controls, Inc. ("TMC") and Speizman Yarn Equipment, Inc.
("Speizman Yarn"). Speizman distributes sock knitting machines, other knitting
equipment and related parts. Wink Davis sells commercial and industrial laundry
equipment, including the distribution of machines and parts as well as
installation and after sales service. TMC manufactures automated boarding,
finishing and packaging equipment used in the sock knitting industry. TMC's
products are sold through Speizman's distribution network. Speizman Yarn
distributes equipment and related parts used in the yarn processing industry.
ALL REFERENCES HEREIN ARE TO THE COMPANY'S 52-OR-53 WEEK FISCAL YEAR ENDING
ON THE SATURDAY CLOSEST TO JUNE 30. THE FISCAL YEARS 1995 THROUGH 1998 EACH
CONTAINED 52 WEEKS AND ENDED ON JUNE 27, 1998, JUNE 28, 1997, JUNE 29, 1996 AND
JULY, 1, 1995. FISCAL 1999 CONTAINED 53 WEEKS AND ENDED ON JULY 3, 1999.
SPEIZMAN INDUSTRIES
Speizman Industries is the leading distributor of new sock knitting machines
in the United States. It distributes technologically advanced sock knitting
machines manufactured by Lonati, S.p.A., Brescia, Italy ("Lonati"), which
Speizman Industries believes is the world's largest manufacturer of hosiery
knitting equipment. It also distributes Lonati sock and sheer hosiery knitting
machines in Canada. In addition, through sales arrangements with other European
textile machinery manufacturers, Speizman distributes other sock knitting
machines, knitting machines for underwear and other knitted fabrics and other
equipment related to the manufacture of socks, sheer hosiery and other textile
products, principally in the United States and Canada. Speizman sells textile
machine parts and used textile equipment in the United States and in a number of
foreign countries.
Speizman Industries and Lonati entered into their present agreement for the
sale of Lonati machines in the United States in January 1992 (the "Lonati
Agreement"). Speizman and Lonati also entered into a similar agreement relating
to Speizman Industries' distribution of Lonati sock and sheer hosiery knitting
machines in Canada in January 1992 and in Mexico in 1997. Speizman Industries
has distributed Lonati double cylinder machines in the United States
continuously since 1982. Speizman began distributing Lonati single cylinder
machines in 1989.
Pursuant to the Lonati Agreement, Lonati has appointed Speizman Industries
as Lonati's distributor and exclusive agent in the United States for the sale of
its range of single and double cylinder sock knitting machines and related spare
parts. Although the Lonati Agreement does not establish Speizman Industries as
the exclusive distributor of Lonati sock machines in the United States, Speizman
in fact has exclusively distributed Lonati double cylinder sock machines
continuously since 1982 and Lonati single cylinder sock knitting machines since
1989. The Lonati Agreement extended to December 31, 1995 and continues from year
to year thereafter, although it may be terminated on 90 days written notice at
any year end or without notice in the event of a breach. Speizman and Lonati
also entered into a similar agreement relating to Speizman Industries'
distribution of Lonati sock and sheer hosiery knitting machines in Canada in
January 1992.
The Lonati Agreement contains certain covenants and conditions relating to
Speizman Industries' sale of Lonati machines, including, among others,
requirements that Speizman Industries, at its own expense, promote the sale of
Lonati machines and assist Lonati in maintaining its competitive position,
maintain an efficient sales staff, provide for the proper installation and
servicing of the machines, maintain an adequate inventory of parts and pay for
all costs of advertising the machines. Speizman is prohibited during the term of
the Lonati Agreement from distributing any machines or parts that compete with
Lonati machines and parts. Speizman believes that it is and will remain in
compliance in all material respects with such covenants. The cost to Speizman of
Lonati machines, as well as the delivery schedule of these machines, are totally
at the discretion of Lonati. The Lonati Agreement allows Lonati to sell machines
directly to the sock manufacturer with any resulting commission paid to Speizman
determined on a case by case basis.
1
<PAGE>
The Lonati single cylinder machines distributed by Speizman Industries are
for the knitting of athletic socks. The Lonati double cylinder machines are for
the knitting of dress and casual socks. The Lonati machines are electronic,
high-speed, and have computerized controls. Lonati single cylinder machines are
capable of knitting pouch heel and toe, reciprocated heel and toe and tube
socks. These and other features allow the rapid change of sock design, style and
size, result in increased production volume and efficiency and simplify the
servicing of the machines. Lonati single cylinder machines are also available in
a closed toe model which enables hosiery manufacturers to automate their
production processes by knitting in the toe as opposed to manually seaming. This
procedure not only results in a higher quality product but manufacturers also
benefit from lower costs. Speizman Industries distributes these sock knitting
machines as well as Lonati sheer hosiery knitting machines in Canada and in
Mexico. In addition, Speizman distributes the knitting machines, described
below, manufactured by Santoni, S.r.l. Brescia, Italy ("Santoni"), one of
Lonati's subsidiaries, in the United States, Canada and Mexico. The most popular
Santoni products are large diameter circular knitting machines utilizing new
technology in the production of seamless undergarments, action wear and
swimsuits. Sales by Speizman Industries in the United States, Canada and Mexico
of new machines manufactured by Lonati, S.p.A., generated the following
percentages of Speizman's net revenues: 22.5% in fiscal 1999, 41.1% in fiscal
1998 and 60.1% in fiscal 1997. In addition, sales of Santoni machines in the
United States, Canada and Mexico generated 20.3%, 5.3% and 7.0% of Speizman
Industries' net revenues in fiscal 1999, 1998 and 1997, respectively.
In addition to the Lonati machines, Speizman Industries distributes new
knitting and other machines and equipment under written agreements and other
arrangements with the manufacturers. The following table sets forth certain
information concerning certain of these additional distribution arrangements:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MANUFACTURER MACHINE TERRITORY
------------------------------------------------------------------------------------------------------------------
Santoni, S.r.l., Circular knitting machines for seamless United States, Canada and
Brescia, Italy undergarments, action wear, swimsuits, men's Mexico
socks and women's sheer hosiery and surgical
support hose
Conti Complett, S.p.A., Sock toe closing machines and sock turning devices United States and Canada
Milan, Italy
Dinema, Data collection United States and Canada
Brescia, Italy
Marchisio, Fabric knitting machines United States and Canada
Brescia, Italy
Mecmor, Fabric knitting machines United States and Canada
Varese, Italy
Vignoni, Fabric knitting machines United States and Canada
Cividino, Italy
------------------------------------------------------------------------------------------------------------------
</TABLE>
There can be no assurance that Speizman will not encounter significant
difficulties in any attempt to enforce any provisions of the agreements with
foreign manufacturers, or any agreement that may arise in connection with the
placement and confirmation of orders for the machines manufactured by foreign
manufacturers or obtain an adequate remedy for a breach of any such provision,
due principally to the fact that they are foreign companies.
Speizman Industries sells used machinery and parts to the textile industry.
Speizman Industries carries significant amounts of machinery and parts
inventories to meet customers' requirements and to assure itself of an adequate
supply of used machinery. Speizman acts as a liquidator of textile mill
equipment and as a broker in the purchase and sale of such equipment.
SALES AND MARKETING
Speizman Industries markets and sells knitting machines and related
equipment primarily by maintaining frequent contacts with customers and
understanding of its customers' individual business needs. Salespersons will set
up competitive trials in a customer's plant and allow the customer to use
Speizman's machine in its own work environment alongside competing machines for
two weeks to three months. Speizman Industries also offers customers
2
<PAGE>
the opportunity to send their employees to Speizman Industries for training
courses on the operation and service of the machines and, depending on the
number of machines purchased and the number of employees to train, may offer
such training courses at the customer's facility. In addition, Speizman
Industries exhibits its equipment at trade shows and uses its private showroom
to demonstrate new machines. These marketing strategies are complemented by
Speizman's commitment to service and continuing education. Speizman Industries
also produces, at its own expense, training videos for its major lines of
equipment. At September 4, 1999, Speizman employed 10 salespersons and 32
technical representatives. In addition to its sales staff, Speizman Industries
uses several commission sales agents in a number of foreign countries in
connection with its sales of used machines.
The terms of new machine sales generally are individually negotiated
including the purchase price, payment terms and delivery schedule. Speizman
Industries is usually required to purchase imported machines with a letter of
credit in favor of the manufacturer delivered not less than about 15 days prior
to the machine's shipment to the customer's plant. Generally, the letter of
credit must be payable 60 days or longer from the date of the on-board bill of
lading and upon presentation of the bill of lading. The period from shipment by
the manufacturer to installation in the customer's plant is generally 30-60
days.
Speizman encourages trade-ins of older equipment, which reduces the
customer's initial capital outlay. Speizman Industries believes that its
trade-in policy has increased sales of certain of Speizman Industries' new
equipment lines.
Substantially all of the new machines sold by Speizman Industries are
drop-shipped from the foreign manufacturer by container or air freight directly
to the customer's plant using Speizman's freight forwarder to coordinate
shipment. Title is taken at the European port, and Speizman insures the machines
for 110% of cost.
Because a substantial portion of Speizman Industries' revenues are derived
from sales of machines and equipment imported from abroad, these sales may be
subject to import controls, duty and currency fluctuations. The majority of
Speizman Industries' purchases of Italian machines for sale in the United States
are denominated in Italian lira. Generally, Speizman has been able to adjust
sales prices or purchase lira hedging contracts to compensate for anticipated
dollar fluctuations. However, international currency fluctuations that result in
substantial price level changes could impede import sales and substantially
impact profits. Speizman is not able to assess the quantitative effect such
international price level changes could have upon Speizman Industries'
operations. All of Speizman Industries' export sales originating from the United
States are made in U.S. dollars.
Speizman Industries also markets used machines through its employees and
outside commission salespersons. Speizman Industries markets its used machines
in the United States and in a number of foreign countries. Speizman uses trade
advertising extensively and frequently distributes lists throughout the industry
of used machines that Speizman Industries has for sale. Additionally, Speizman
utilizes its Internet web site for listing used machines available for sale.
Speizman Industries exports certain new and used machines and parts for sale
in Canada, Mexico and a number of other foreign countries. See Note 1 of Notes
to Consolidated Financial Statements for certain financial information
concerning Speizman Industries' foreign sales in fiscal 1999, 1998 and 1997.
CUSTOMERS
Speizman Industries' customers consist primarily of the major sock
manufacturers in the United States and Canada. In fiscal 1999, no single
customer represented over 10% of the Company's revenues. In fiscal 1998,
Speizman Industries' largest customer accounted for 11.7% of the Company's
revenues. In fiscal 1997, Speizman Industries' largest customer accounted for
10.5% of Speizman Industries' revenues. Generally, the customers contributing
the most to Speizman Industries' net revenues vary from year to year. Speizman
Industries believes that the loss of any principal customer could have a
material adverse effect on Speizman Industries.
COMPETITION
The sock knitting machine industry is competitive. Lonati single cylinder
machines compete primarily with machines manufactured by an Italian and a Czech
company and Lonati double cylinder machines compete primarily with machines
manufactured by an Italian company acquired in 1993 by Lonati but not
represented by Speizman Industries. Lonati machines compete, to a lesser extent,
with machines manufactured by a number of other foreign companies of varying
sizes and with companies selling used machines. The principal competitive
factors in the
3
<PAGE>
distribution of sock knitting machines are technology, price, service, and
allowance of trade-ins and delivery. Management believes that its competitive
advantages are the technological advantages of the Lonati machines, Speizman
Industries' commitment to customer service and Speizman Industries' allowance of
trade-ins of used machines on new Lonati machines. Management believes that it
is at a short term competitive disadvantage if a potential customer's decision
will be based primarily on price since, generally, the purchase price of Lonati
machines is higher than that of competing machines.
In its sale of new equipment in addition to Lonati machines, Speizman
Industries competes with a number of foreign and domestic manufacturers and
distributors of new and used machines. In its sale of such other machines and
equipment, certain of Speizman Industries' competitors may have substantially
greater resources than Speizman Industries.
Domestic and foreign sales of used sock and sheer hosiery knitting machines
are fragmented and highly competitive. Speizman Industries competes with a
number of domestic and foreign companies that sell used machines as well as
domestic and foreign manufacturers that have used machines for sale as a result
of trade-ins. In the United States, Speizman Industries has one primary
competitor in its sale of used sock knitting machines. The principal competitive
factors in Speizman Industries' domestic and foreign sales of used machines are
price and availability of machines that are in demand. Although Speizman
Industries is the exclusive distributor of original equipment manufacturer
("OEM's") parts for a number of the machines it distributes, it competes with
firms that manufacture and distribute duplicates of such parts. In addition,
Speizman Industries competes with a number of distributors and manufacturers in
its other parts sales.
WINK DAVIS
Wink Davis, based in Atlanta, Georgia, distributes commercial laundry
equipment and parts and provides related service. Wink Davis was acquired by
Speizman on August 1, 1997. Wink Davis sells to a wide variety of customers. A
large share of these customers maintain on premise laundries ("OPL's"). OPL's
are commonly found in hotels, nursing homes and other institutions that perform
their laundry services in-house. Some larger installations of equipment are
found in hospitals, prisons and linen processing plants. The largest portion of
Wink Davis' sales are generated from its distributorships with both
Pellerin-Milnor (washer extractor equipment manufacturers based in Kenner, LA)
and Chicago Dryer (commercial ironer/folder manufacturers based in Chicago, IL).
Wink Davis represents both of these companies in Georgia, South Carolina, North
Carolina, Virginia, middle and eastern Tennessee, Maryland, Washington, D.C.,
northern and central Florida, and the Chicago, Illinois areas.
The Pellerin Milnor agreement appoints Wink Davis as the exclusive agent
within its territories. In some instances, a customer's purchase order may be
taken in one agent's territory, but the equipment is actually delivered to a
territory served by a different Pellerin Milnor agent. In these instances,
Pellerin-Milnor grants the sale to the territory in which the purchase order was
taken. The dealer servicing the territory in which the equipment is installed
receives a commission for which that dealer must assume responsibility for
installing the equipment. Historically, these sales involving two separate
Pellerin-Milnor dealers have been infrequent and management feels this issue
does not significantly improve or hurt its operations. The Chicago Dryer
agreement does not appoint Wink Davis as the exclusive agent within its
territories. Both the Pellerin-Milnor and Chicago Dryer agreements are renewed
on an annual basis and may be terminated in the event of a breach. Wink Davis
has continuously represented both manufacturers for most of its current
territories since 1972. Since 1980, Pellerin-Milnor has presented its annual top
distributor award to Wink Davis for all but three years. There can be no
assurance that the loss of one or both of these distributorships would not have
a materially adverse impact to Wink Davis' operations.
The Pellerin Milnor and Chicago Dryer agreements contain certain covenants
and conditions relating to Wink Davis' sales of these products, including, among
other things, that Wink Davis, at its own expense, promote the sale of the
manufacturers' machines and assist the manufacturers in maintaining their
competitive positions, maintain an efficient sales staff, provide for the proper
installation, maintenance and servicing of the machines, maintain adequate
inventory of parts and pay for all costs of advertising the machines. Wink Davis
believes that it is and will remain in compliance in all material respects with
such covenants.
Additionally, Wink Davis, under written agreements and other arrangements with
OEMs, distributes other laundry related equipment. The following table sets
forth, in alphabetical order, certain information concerning the additional
distribution agreements:
4
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MANUFACTURER MACHINE TERRITORY
- - ----------------------------------------------------------------------------------------------------------------------
Ajax Manufacturing, Laundry and Dry Cleaning Presses Southeastern U.S. & Chicago, IL areas
Cincinnati, OH
American Dryer, Commercial Dryers Southeastern U.S. & Chicago, IL areas
Fall River, MA
Cissell Manufacturing, Commercial Dryers, laundry and dry Southeastern U.S. & Chicago, IL areas
Louisville, KY cleaning pressing equipment
Consolidated Laundry Machinery, Commercial Dryers Southeastern U.S. & Chicago, IL areas
Los Angeles, CA
Energenics Corp., Lint collectors and automatic cart Southeastern U.S. & Chicago, IL areas
Naples, FL wash systems
Forenta, Inc., Laundry and Dry Cleaning Presses Southeastern U.S. & Chicago, IL areas
Morrisville, TN
Huebsch Originators, Commercial Dryers Southeastern U.S. & Chicago, IL areas
Ripon, WI
Unipress, Inc., Laundry and Dry Cleaning Presses Southeastern U.S. & Chicago, IL areas
Tampa, FL
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SALES AND MARKETING
Wink Davis' primary products include washers, dryers, ironers and other
finishing equipment. Some of the larger installations include continuous batch
washers ("CBW's"), large dryers, pressing and folding equipment and conveyor
systems resulting in the laundering process being substantially automated. The
majority of the sales consist of washers, with less than 165 pound capacity per
load ("white machines"), and corresponding dryers. CBW systems or tunnels are
highly customized with a variety of features depending on the unique needs and
constraints of each customer. Sales orders are generated through a variety of
methods including repeat business referrals, cold calls and unsolicited
telephone orders. Typical sales terms on larger contracts require 15% down with
the balance due 10 days after delivery. At September 4, 1999, Wink Davis
employed approximately 11 sales persons and 41 technical representatives.
Most used equipment in smaller facilities has little value and there is
little demand for that type of used laundry equipment. Accordingly, Wink Davis
rarely accepts trade-ins of low capacity used equipment, nor do they purchase
used equipment of that nature. Some used CBW units can be rebuilt at a
substantial reduction in price to new units. Wink Davis does occasionally find
sales opportunities of this type. Many large orders, especially those at new
construction sites, require newly designed or modified electrical, plumbing,
construction or other work at the customer site. Wink Davis often subcontracts
these tasks for the customer in conjunction with the sale. Wink Davis has a
staff of CAD operators, and service personnel who assist and support outside
contractors to ensure that the facilities are properly prepared prior to the
delivery of equipment. Wink Davis personnel install the equipment and provide
training for the customers' operators. Smaller white sales generally require
less support and frequently consist of matching the specifications of the newly
ordered machine to the existing site.
Additionally, Wink Davis provides repair and maintenance services to OPL
facilities. Customers' OPL facilities are typically operated and managed by the
property, maintenance or janitorial staffs. These staffs are often small with
broad areas of responsibilities and limited technical expertise, especially for
specific maintenance and repair issues of the laundry equipment. Accordingly,
Wink Davis provides a full range of repair and maintenance services. Each sales
office is staffed by four or more technicians. Each technician travels to the
customer's site in a maintenance van, fully stocked with the most commonly
needed parts. Upon notification, Wink Davis will dispatch and commonly have a
technician addressing the problem within 24 hours. If additional parts are
required, they may be ordered from the main Atlanta warehouse or shipped
directly from the manufacturer.
CUSTOMERS
5
<PAGE>
Wink Davis has over 4,000 customers ranging in size from single washing
machine facilities to large laundry systems in hospitals or linen supply houses.
Customers purchasing laundry machines typically continue their association with
Wink Davis through purchase of repair parts or through service calls for
equipment repairs. No customer represents more than 10% of Wink Davis' business.
Accordingly, the loss of any single customer would not materially affect the
operations of Wink Davis.
COMPETITION
The laundry equipment business is very competitive. Wink Davis competes
directly with several other distributors representing other OEMs. Wink Davis
believes the products they represent are of equal quality. In some instances,
Wink Davis may be at a price disadvantage when a customer considers price only.
Many sales of white machines are price sensitive, however this varies by region.
The purchase decision on larger installations is less price sensitive as these
customers are more concerned about production output and quality, and the
seller's ability to efficiently service the machines being purchased. Wink Davis
maintains a well-trained staff of technicians covering all geographic areas of
distribution. Management believes this staff is more comprehensive than any
maintained by the competition.
TMC
TMC assembles automated boarding and finishing equipment for the sock
manufacturing industry. Management believes significant potential exists for
automating finishing operations in mills that specialize in high volume
production which is sold through large discount retail chains. Typically, this
denotes athletic socks, but may also include single-color dress socks.
The current technology for athletic sock knitting operations is considered
highly automated and capital intensive. Raw material on yarn cones directly
feeds a machine which knits the entire product. A second off line operation
closes the toe using automated turners and toe closing equipment. Finishing
processes, unlike knitting operations, are significantly labor intensive.
Through a series of steps, socks are boarded, trimmed, paired and bagged.
TMC's machine significantly automates this process. In addition to boarding,
trimming, pairing and bagging, the equipment can also insert j-hooks (a small
plastic hanger for a display case), transfer print and board.
PRODUCTION
The production process is basically assembly. Many of the electronic,
pneumatic, and structural parts are standard items available from various
distributors. A significant portion of the hardware and structural components
are custom designed and ordered. As of September 4, 1999, TMC employed 10 direct
assemblers, 5 indirect laborers, and 2 persons in research and development. All
assembly is done at TMC's leased facility on Patterson Avenue in Winston-Salem,
NC. TMC is also developing packaging applications for use outside the hosiery
industry.
RESEARCH AND DEVELOPMENT
TMC has 2 employees in research and development, including William Todd, the
former owner and current Vice President. Key components of the product have been
patented and several other patents are pending. Currently, the research and
development staff is developing equipment for additional hosiery manufacturing
functions and other packaging applications, possibly outside the hosiery
industry.
SALES AND MARKETING
TMC was acquired by Speizman on February 6, 1998. Prior to the acquisition,
equipment was sold directly through TMC's sales force. After the acquisition,
all sales are now made through Speizman Industries' sales force. The customer
base for TMC's product significantly overlaps with the customer base for hosiery
knitting machinery.
COMPETITION
Competition consists of domestic and foreign manufacturers of similar
equipment. Such competitors consist of both large and small firms, many of which
compete intensely with TMC.
SPEIZMAN YARN
6
<PAGE>
Speizman Yarn distributes yarn processing equipment and parts and provides
related services. Speizman Yarn was incorporated in August 1998 when the Company
was granted the distribution rights of Fratelli Marzoli & C. SpA ("Marzoli") and
Vouk SpA Officine Meccasnotessili ("Vouk"). Vouk is a wholly-owned subsidiary of
Marzoli. The Company has exclusive North American distribution rights of these
companies' products through December 31, 2000.
In additionally, the Speizman Yarn, under written and other arrangements with
OEM's distributes other textile equipment. The following table sets forth
certain information concerning the additional distribution agreements.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MANUFACTURER MACHINE TERRITORY
- - ----------------------------------------------------------------------------------------------------------------------
Margasa Proycetos E Ingeniera Textile, S.L. Preparatory machinery for cotton spinning United States and Canada
Barcelona, Spain systems
Meccanica Carresi S.r.L. Preparatory machinery for worsted, semi- United States and Canada
Arezzo, Italy worsted or woolen spinning systems
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SALES AND MARKETING
Speizman Yarn's primary products include yarn processing equipment and parts
and related service. The Company's primary suppliers are Marzoli and Vouk, both
Italian corporations. Prior to granting the distribution rights to Speizman
Yarn, Marzoli distributed directly in North America through a wholly-owned
subsidiary.
CUSTOMERS
There are a limited number of yarn processing companies in the United
States. Yarn processing equipment requires a large capital investment. Yarn
processing entails conversion of raw bales of cotton into yarn and thread on
cones which are then sold to textile knitters and weavers. This process involves
opening, carding, drawing, combing, roving and spinning. Substantially all of
the Company's customers complete all of these processes. The cost of a new
production line for all of these processes currently exceeds several million
dollars. Many customers with existing plants typically replace selected
components of the process at a time.
The Company's customers, i.e. yarn processors, are currently facing
difficult business conditions due to foreign competition.
COMPETITION
Competition in the yarn processing equipment industry is intense. Most
manufacturers are located in Europe. Many of these manufacturers sell direct,
without a national distributor such as Speizman Yarn. Different manufacturers
are typically known for specific strengths in specific processes. Both Marzoli
and Vouk offer equipment for all processes and therefore may have a competitive
advantage when the customer is purchasing a complete line. However, the Company
may face intense competition when bidding on a particular part of the processing
line.
REGULATORY MATTERS
The Company is subject to various federal, state and local statutes and
regulations relating to the protection of the environment and safety in the work
place. The failure by the Company to comply with any of such statutes or
regulations could result in significant monetary penalties, the cessation of
certain of its operations, or both. Management believes that the Company's
current operations are in compliance with applicable environmental and work
place safety statutes and regulations in all material respects. The Company's
compliance with these statutes and regulations has not materially affected its
business; however, the Company cannot predict the future effects of compliance
with such statutes or regulations.
EMPLOYEES
As of September 4, 1999, the Company had 216 full-time employees. The
Company's employees are not represented by a labor union, and the Company has
never suffered an interruption of business as a result of a labor dispute.
The Company considers its relations with its employees to be good.
7
<PAGE>
BACKLOG
The Company's backlog of unfilled orders for new and used machines was $53.6
million, $24.5 million and $16.8 million at July 3, 1999, June 27, 1998 and June
28, 1997, respectively. Management believes that all Speizman Industries'
unfilled orders at July 3, 1999 will be filled by the end of fiscal 2000. The
period of time required to fill orders varies depending on the machine ordered.
ITEM 2. PROPERTIES.
The Company leases all of its real property. Significant leases are
summarized in the table below:
<TABLE>
<CAPTION>
LEASE MONTHLY APPROXIMATE
LEASE ORIGINATION TERM RENTAL RENTAL SQUARE
USE LOCATION DATE (MONTHS) RATE FOOTAGE
- - --------------------------------------------------------------------------------------------------------------------------
Properties used primarily by Speizman:
<S> <C> <C> <C>
Warehousing Charlotte, NC April 1, 1999 Monthly $ 6,527 21,000 (a)
Executive, administrative, Charlotte, NC October 1, 1997 180 $ 54,923 122,052 (b)
machinery rebuilding and
warehousing
Warehousing Charlotte, NC September 1, 1999 3 $ 9,375 45,000
Warehousing Charlotte, NC - Monthly $ 4,000 20,000
Properties used primarily by Wink Davis:
Administrative, sales office Atlanta, GA August 1, 1999 24 $ 7,893 23,700 (c)
and warehouse
Sales office and warehouse Wooddale, IL August 1, 1999 24 $ 6,099 6,500 (c)
Sales office and warehouse Charlotte, NC August 1, 1999 24 $ 2,012 6,045 (c)
Sales office and warehouse Chester, VA August 1, 1999 24 $ 1,982 6,000 (c)
Properties used primarily by TMC:
Research and development Winston-Salem, NC February 6, 1998 24 $ 2,120 6,000 (d)
and administration
Machine assembly Winston-Salem, NC September 1, 1996 24 $ 5,890 35,340
</TABLE>
(a) This property is leased from a partnership owned by Robert S. Speizman and
his brother. The City of Charlotte has designated this building an
"historic landmark" and, as a result, modifications to the building require
prior approval of the Charlotte-Mecklenburg Historic Landmark Commission.
(b) The Company's headquarters are leased from a limited liability company
owned by Robert S. Speizman, his wife and their children. The Company
relocated its executive, administrative, machinery rebuilding and a
substantial portion of its warehousing to this location in the spring of
1999.
(c) These properties are leased from a partnership owned by C. Alexander Davis,
a former shareholder and current President of Wink Davis, and his brother.
(d) This property is leased from William H. Todd, a former shareholder and
current VP-Research and Development of TMC, and his wife.
ITEM 3. LEGAL PROCEEDINGS.
The Company is the defendant in a lawsuit brought by Bluegrass Hosiery,
Inc., now pending in a Kentucky Federal Court, in which Bluegrass alleges that
the Company breached a contract in which it sold machines to Bluegrass, and
seeking damages, including punitive damages, in an unspecified amount. The
Company vigorously denies the allegations. The Company filed a motion to dismiss
the case on procedural grounds, because it could have brought the same claims in
an earlier pending action in North Carolina which has now been settled. The
District Court allowed the motion, but Bluegrass has appealed the dismissal to
the Federal Sixth Circuit Court of Appeals, which has not yet acted.
The Company firmly believes that the District Court acted correctly in
dismissing the case on procedural grounds, and that it also has a strong case on
the merits, even if the Circuit Court should reverse the dismissal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the Company's security holders during
the fourth quarter of fiscal 1999.
8
<PAGE>
EXECUTIVE OFFICERS OF REGISTRANT
The following table sets forth certain information regarding the executive
officers of the Company:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
Robert S. Speizman............. 59 Chairman of the Board, President and Director
C. Alexander Davis............. 51 President, Wink Davis Equipment Company, Inc.
Bryan D. Speizman ............. 34 Senior Vice President, Non-Hosiery
Mark A. Speizman .............. 28 Senior Vice President, Hosiery
James H. McCorkle, III ........ 37 Chief Financial Officer, Secretary and Treasurer
</TABLE>
Robert S. Speizman has served as President of the Company since November
1976. From 1969 to October 1976, Mr. Speizman served as Executive Vice President
of the Company. Mr. Speizman has been a director of the Company since 1967 and
Chairman of the Board of Directors since July 1987.
C. Alexander Davis has served as President, Wink Davis Equipment Company,
Inc., since August 1, 1997, as Executive Vice President, Wink Davis Equipment
Company, Inc., from 1973 to July 31, 1997 and as a director of Wink Davis
Equipment Company, Inc., from 1973 to July 31, 1997.
Bryan D. Speizman, son of Robert S. Speizman, began serving as Senior Vice
President, Non-Hosiery in July 1997 and served as a sales representative of the
Company from 1990 to June 1997.
Mark A. Speizman, son of Robert S. Speizman, began serving as Senior Vice
President, Hosiery in July 1997 and served as a sales representative of the
Company from 1990 to June 1997.
James H. McCorkle, III began serving as Chief Financial Officer, Secretary
and Treasurer in December 1998 and served as Controller of the Company from 1995
to November 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock has been included for quotation on the NASDAQ
National Market System under the NASDAQ symbol "SPZN" since October 1993. The
following table sets forth, for the periods indicated, the high and low sale
prices as reported by the NASDAQ National Market System.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL 1998 HIGH LOW
---- ---
First Quarter (ended September 27, 1997) .................................... 9.50 4.88
Second Quarter (ended December 27, 1997)..................................... 9.19 5.38
Third Quarter (ended March 28, 1998)......................................... 7.25 5.38
Fourth Quarter (ended June 27, 1998)......................................... 7.13 5.00
FISCAL 1999
First Quarter (ended October 3, 1998) ....................................... 5.25 3.63
Second Quarter (ended January 2, 1999)....................................... 6.00 3.63
Third Quarter (ended April 3, 1999).......................................... 5.75 3.63
Fourth Quarter (ended July 3, 1999).......................................... 4.13 3.13
</TABLE>
As of July 3, 1999, there were approximately 227 stockholders of record of
the Common Stock.
The Company has never declared or paid any dividends on its Common Stock.
Future cash dividends, if any, will be at the discretion of the Company's
Board of Directors and will depend upon, among other things, future earnings,
operations, capital requirements, surplus, restrictive covenants in agreements
to which the Company may be subject, general business conditions and such other
factors as the Board of Directors may deem relevant. The Company's present
credit facility contains certain financial and other covenants that could limit
the Company's ability to pay cash dividends on its capital stock.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.
9
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------
July 3, June 27, June 28, June 29, July 1,
1999 1998 (a) 1997 1996 1995
---- -------- ---- ---- ----
(IN THOUSANDS, EXCEPT NET EARNINGS (LOSS) PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................. $ 101,412 $ 90,886 $ 79,103 $ 46,280 $ 61,597
Cost of sales................................. 85,564 74,034 65,935 40,547 53,986
-------- --------- --------- --------- ---------
Gross profit.................................. 15,848 16,852 13,168 5,733 7,611
Selling, general and administrative expenses.. 15,124 12,658 8,855 6,577 5,478
-------- --------- --------- --------- ---------
Operating income (loss)....................... 724 4,194 4,313 ( 844) 2,133
Interest (income) expense, net................ 1,103 988 ( 18) ( 43) (15)
-------- --------- --------- --------- ---------
Income (loss) before taxes on income.......... (379) 3,206 4,331 (801) 2,148
Taxes (benefit) on income .................... (126) 1,273 1,645 (228 854
-------- --------- --------- --------- ---------
Net income (loss)............................. $ (253) $ 1,933 $ 2,686 $ (573) $ 1,294
============ ======= ========= ========= ========
PER SHARE DATA:
Basic earnings (loss) per share............... $ (0.08) $ 0.59 $ 0.83 $ (0.18) $ 0.40
Diluted earnings (loss) per share............. (0.08) 0.56 0.80 (0.18) 0.40
Weighted average shares outstanding - basic .. 3,274 3,284 3,229 3,209 3,209
Weighted average shares outstanding - diluted 3,274 3,426 3,353 3,209 3,272
BALANCE SHEET DATA:
Working capital............................... $ 16,058 $ 20,210 $ 18,741 $ 16,313 $17,613
Total assets.................................. 56,456 51,925 43,174 36,149 35,704
Short-term debt............................... 4,900 4,000 - - -
Long-term debt, including current maturity.... 7,196 9,561 112 148 147
Stockholders' equity.......................... 22,577 23,207 20,938 18,203 18,782
- - --------------
</TABLE>
(a) On August 1, 1997, the Company acquired Wink Davis. On February 6, 1998, the
Company acquired TMC.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
NOTE REGARDING PRIVATE SECURITIES LITIGATION REFORM ACT
Statements made by the Company which are not historical facts are forward
looking statements that involve risks and uncertainties. Actual results could
differ materially from those expressed or implied in forward looking statements.
All such forward looking statements are subject to the safe harbor created by
the Private Securities Litigation Reform Act of 1995. Important factors that
could cause financial performance to differ materially from past results and
from those expressed and implied in this document include, without limitation,
the risks of acquisition of businesses (including limited knowledge of the
businesses acquired and misrepresentations by sellers) availability of
financing, competition, management's ability to manage growth, loss of
customers, and a variety of other factors.
GENERAL
The Company's revenues are generated primarily from its distribution of
textile equipment (principally knitting equipment and, to a lesser extent, from
the sale of parts used in such equipment and the sale of used equipment) and
commercial laundry equipment and services (principally commercial washers and
dryers and, to a lessor extent, the sale of parts used in such equipment and
related services). The Company began operating in the laundry equipment and
services segment with the purchase of Wink Davis on August 1, 1997.
RESULTS OF OPERATIONS
YEAR ENDED JULY 3, 1999 COMPARED TO YEAR ENDED JUNE 27, 1998
NET REVENUES. Net revenues increased to approximately $101.4 million for the
year ended July 3, 1999, an increase of $10.5 million (or 11.6%) from the prior
year. Revenues substantially increased in the knitted fabric line, yarn
processing line and Wink Davis. Knitted fabric sales increased by $15.5 million
due primarily to sales of equipment for producing seamless garments. Yarn
processing revenues totaled $7.8 million; the line began operations in the
current fiscal year. Wink Davis, which had twelve months operations in the
current year as compared to only eleven in the prior year, had increased
revenues of $4.6 million. These increases were offset by decreased revenues of
hosiery equipment. Hosiery revenues decreased by approximately $18.1 million,
primarily due to lower demand for open toe
10
<PAGE>
equipment.
COST OF SALES. Cost of sales as a percentage of revenues increased
unfavorably to 84.4% of revenues for the current fiscal year as compared to
81.5% in the prior year. The increase is due to generally lower margins on
hosiery and yarn processing equipment. Hosiery margins decreased due to lower
demand for the open toe equipment being sold by the company in fiscal 1999. Many
customers delayed major purchases of new equipment in anticipation of new closed
toe technology. This technology was actually introduced early in fiscal 2000.
Gross margins on yarn processing equipment were also generally lower than the
Company's historical product lines. These yarn processing sales were on
backorder at the time Speizman assumed operations.
SELLING EXPENSES. Selling expenses increased by $780,000 (or 11.2%) to $7.7
million in fiscal 1999 as compared to $6.9 million in the prior fiscal year. The
increase is primarily due to additional sales expenses of yarn processing
equipment, which began operations in August 1999 and, to a lesser extent, sales
expenses of TMC. These increases were offset by lower commissions relating to
decreased volumes of hosiery equipment sales.
GENERAL AND ADMINISTRATIVE. General and administrative expenses totaled
approximately $7.4 million, an increase of $1,686,000 (or 29.5%) from the prior
year. One significant reason for the increase is inclusion of a full year's
operations for the Company's subsidiaries. TMC had twelve months operations in
fiscal 1999 as compared to only four months of fiscal 1998. Similarly, Speizman
Yarn commenced operations beginning on August 1, 1998 in the current fiscal
year. Other increases were due to higher salary expenses and bad debts offset
partially by no bonuses for fiscal 1999.
INTEREST EXPENSE. In fiscal 1999, interest expense was approximately
$1,103,000 million as compared to about $988,000 in the prior year. The increase
is due to higher balances on the Company's line of credit and interest expenses
on the recently added obligation under capital lease.
TAXES (BENEFIT) ON INCOME (LOSS). The benefit for income taxes was $126,000
for the current year, a rate of 33.3% of the net loss as compared to the 1998
effective rate of 39.7%.
NET LOSS. Net loss for the year was $253,000 or $0.08 per share basic and
diluted. In the prior year, net income was $1,933,000 or $0.59 per share basic
and $0.56 per share diluted.
YEAR ENDED JUNE 27, 1998 COMPARED TO YEAR ENDED JUNE 28, 1997
NET REVENUES. Net revenues in fiscal 1998 were $90.9 million as compared to
$79.1 million in fiscal 1997, an increase of $11.8 million or 14.9%. This
increase is primarily due to the acquisition of Wink Davis on August 1, 1997.
Wink Davis recognized revenues in fiscal 1998 of $23.7 million. Additional
components of the increase include $2.0 million increase from sales of TMC
products (acquired on February 6, 1998) and an increase of $0.7 million in parts
sales, offset by an $10.8 million decrease in hosiery related equipment, a $1.6
million decrease in knitted fabric equipment and a decrease of $2.2 million in
products no longer represented, including sweater, and garment wet processing
equipment.
COST OF SALES. In fiscal 1998 cost of sales were $74.0 million an increase
of $8.1 million from $65.9 million in fiscal 1997. Cost of sales as a percentage
of revenues decrease to 81.5% in fiscal 1998 as compared to 83.3% in fiscal
1997. This decrease results from higher margins on hosiery related parts and
equipment and the exclusion of lower margin liquidations of products
discontinued in 1997. This decrease in cost of sales as a percentage of revenues
was slightly offset by lower margins on Wink Davis sales.
SELLING EXPENSES. Selling expenses increased to $6.9 million in fiscal 1998
as compared to $5.7 million in fiscal 1997. This net increase of $1.1 million
results from increased selling expenses of $1.8 million at Wink Davis and TMC,
offset by decreases of $443,000 in textile equipment related salaries and
commissions and other decreases in letter of credit expenses, professional fees,
advertising and other expense decreases generally related to lower overall sales
volume of textile machinery.
GENERAL AND ADMINISTRATIVE. General and administrative expense increased in
fiscal 1998 to $5.7 million from $3.0 million in fiscal 1997. This increase
results primarily from additional administrative expenses of $1.7 million of
Wink Davis and TMC, and amortization expenses of $405,000.
11
<PAGE>
INTEREST EXPENSE. Interest expense is expressed net of interest income. In
fiscal 1998, net interest expense was $1.0 million. This significant increase in
interest expense is related directly to the debt funded acquisitions of Wink
Davis and TMC and capitalized leases.
TAXES (BENEFIT) ON INCOME (LOSS). The provision for income taxes in fiscal
1998 is $1,273,000 or 39.7% of income before taxes. The provision for income
taxes in fiscal 1997 is $1,645,000 or 38.0% of income before taxes.
NET INCOME (LOSS). Net income for fiscal 1998 decreased to $1.9 million
compared to net income of $2.7 million for fiscal 1997. Basic earnings per share
decreased to $0.59 and diluted earnings per share decreased to $0.56. In fiscal
1997, basic earnings per share was $0.83 and diluted earnings per share was
$0.80.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a credit facility with Bank of America, opened on August 1,
1997, in conjunction with the purchase of Wink Davis, amended on February 6,
1998, in conjunction with the purchase of TMC and expiring on July 31, 2000.
This facility furnished term loan financing for these acquisitions and also
provides a line of credit for direct borrowings and issuance of documentary
letters of credit. The line of credit provides up to $38.3 million, subject to
current collateral balances, including up to a maximum of $8.5 million for
direct borrowings, with the balance available for documentary letters of credit
and term debt. Amounts outstanding under the line of credit bear interest at the
greater of prime plus 1.0% or the Federal Funds Rate plus 1.5% for base rate
loans and the Eurodollar Rate plus 2.0% for Eurodollar loans. In connection with
this line of credit, the Company granted a security interest in accounts
receivable and inventory, as defined in the loan agreement.
Working capital at July 3, 1999 was $16.0 million as compared to $20.2
million at June 27, 1998 a decrease of $4.2 million. Operating activities in
fiscal 1999 provided $3.0 million in cash. In fiscal 1998, operating activities
used $1.3 million of cash. In fiscal 1999, $2.7 million of funds were used by
investing activities, primarily related to the new office and warehouse space.
Financing activities used $1.8 million, primarily related to debt payments and
purchases of treasury stock. In fiscal 1998, significant funds were used in
investing activities, primarily the purchases of Wink Davis and TMC for $9.5
million and $1.8 million respectively. Funds for these acquisitions were
provided from financing activities, primarily through the issuance of $8.3
million in long term notes and $4.0 million of borrowings on the revolving line
of credit.
SEASONALITY AND OTHER FACTORS
There are certain seasonal factors that may affect the Company's business.
Traditionally, manufacturing businesses in Italy close for the month of August,
and the Company's domestic hosiery customers close for one week in July.
Consequently, no shipments or deliveries, as the case may be, of machines
distributed by the Company that are manufactured in Italy are made during these
periods which fall in the Company's first quarter. In addition, manufacturing
businesses in Italy generally close for two weeks in December, during the
Company's second quarter. Fluctuations of customer orders or other factors may
result in quarterly variations in net revenues from year to year.
EFFECTS OF INFLATION AND CHANGING PRICES
Management believes that inflation has not had a material effect on the
Company's operations.
DISCLOSURE ABOUT FOREIGN CURRENCY RISK
Generally, the Company's purchases of foreign manufactured machinery for
resale are denominated in Italian lira. In the ordinary course of business, the
Company enters into foreign exchange forward contracts to mitigate the effect of
foreign currency movements between the Italian lira and the U.S. dollar from the
time of placing the Company's purchase order until final payment for the
purchase is made. The contracts have maturity dates that do not generally exceed
12 months. Substantially all of the increase or decrease of the lira denominated
purchase price is offset by the gains and losses of the foreign exchange
contract. The unrealized gains and losses on these contracts are deferred and
recognized in the results of operations in the period in which the hedged
transaction is consummated.
A substantial portion of the Company's textile machine and spare part
purchases are denominated and payable in Italian lira. Currency fluctuations of
the lira could result in substantial price level changes and therefore impede or
12
<PAGE>
promote import/export sales and substantially impact profits. However, to reduce
exposure to adverse foreign currency fluctuations during the period from
customer orders to payment for goods sold, the Company enters into forward
exchange contracts. The Company is not able to assess the quantitative effect
that such currency fluctuations could have upon the Company's operations. There
can be no assurance that fluctuations in foreign currency exchange rates will
not have a significant adverse effect on future operations.
At July 3, 1999, the Company had contracts maturing through June 2000 to
purchase approximately 93.2 billion lira for approximately $49.3 million, which
approximates the spot rate on that date.
YEAR 2000 COMPLIANCE
Many computer systems and other electronic equipment with embedded
microprocessors were designed to recognize only the last two digits of the year.
With the arrival of the Year 2000 ("Y2K"), these systems and microprocessors may
encounter operating problems due to their inability to distinguish years after
1999 from years preceding 1999. As a result, the Company has been identifying,
rectifying or replacing computer systems or other electronic component that are
not Y2K compliant. Examples of equipment the company has been analyzing include
its primary accounting system, other information systems and various support
equipment, the products distributed by the company and other products and
services procured by the Company.
The Company has reviewed its primary information system. In the fall of 1998
the Company upgraded this system by increasing two digit date fields to four
digits. Costs incurred in this project were not significant. Presently, all
subsidiaries (Wink Davis, TMC and Speizman Yarn) and Speizman Industries use
this system for all primary accounting functions. All known issues in the
primary accounting system relating to Y2K have been resolved. In the spring of
1999 Wink Davis was converted to this information system from their previous
system which was not Y2K compliant. At the time of the purchase of Wink Davis on
August 1, 1997, management planned to integrate Wink Davis' information system
into the existing system used by Speizman Industries. This integration project,
which was not accelerated due to the Y2K issue, cost approximately $ 125,000.
These costs were expensed in fiscal 1999.
The Company does use various other information systems and electronic
support equipment such as telephone and voice mail systems, computer programs
and computer equipment. The Company is currently in the process of making these
non-critical systems Y2K compliant and the Company anticipates that this will be
done by the end of November 1999. These systems will be upgraded through a
combination of modifications done by Company staff and various software patches
from major vendors of telecommunications equipment. Costs incurred in these
projects are not expected to be significant.
A substantial portion of the equipment distributed by the Company has
computerized controls and features. However, to the Company's knowledge, no
operating features are dependent on time or date functions. Additionally, the
Company has received similar assurances from its major suppliers.
The Company is reliant on material vendors, suppliers and customers to
ensure that the Company for a number of critical operations. We are unable to
control the actions of others with respect to their Year 2000 compliance.
However, our material suppliers and service providers are large companies within
their industries and have much at stake in ensuring their own compliance. We
have questioned significant third parties regarding compliance and to date have
not been advised of any major non-compliance issues. Non-compliance by any of
these companies could have a materially adverse impact on the Company. We will
continue this process and in the Fall of 1999 the Company will develop
appropriate contingency plans.
The estimates and conclusions in this description of the Y2K issue contain
forward-looking statements and are based on management's estimates of future
events.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (SFAS No. 133), as amended by SFAS
No. 137, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. Management is
presently assessing the impact of the adoption of SFAS No. 133 on its
consolidated financial statements.
13
<PAGE>
In May, 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, REPORTING ON THE COSTS AT START-UP ACTIVITIES. SOP
98-5 requires that entities expense start-up costs and organization costs as
they are incurred. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. Management does not anticipate SOP 98-5 having a material
impact on its consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Included in Management's Discussion and Analysis of Financial Condition and
Results of Operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by this Item 8
appear on Pages F-1 through F-16 and S-1 through S-2 of this Annual Report on
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The response to this Item 10 is set forth in part under the caption
"Executive Officers of the Registrant" in Part I of this Annual Report on Form
10-K and the remainder is set forth in the Company's Proxy Statement for the
Annual Meeting of Stockholders to be held November 18, 1999 (the "1999 Proxy
Statement") under the sections captioned "Election of Directors," "Certain
Information Regarding the Board of Directors" and "Compliance with Section 16(a)
of the Securities Exchange Act of 1934," which sections are incorporated herein
by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The response to this Item 11 is set forth in the 1999 Proxy Statement under
the section captioned "Executive Compensation and Related Information," which
section, other than the subsections captioned "Report of the Compensation
Committee and the Stock Option Committee on Executive Compensation" and
"Comparative Performance Graph," is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The response to this Item 12 is set forth in the 1999 Proxy Statement under
the section captioned "Stock Ownership of Certain Beneficial Owners and
Management," which section is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The response to this Item 13 is set forth in the 1999 Proxy Statement under
the section captioned "Certain Transactions," which section is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are included as part of the Annual Report on
Form 10-K:
<TABLE>
<CAPTION>
1. FINANCIAL STATEMENTS:
Page
----
<S> <C>
Report of Independent Certified Public Accountants ............................................... F-1
Consolidated Balance Sheets - July 3, 1999 and June 27, 1998...................................... F-2
Consolidated Financial Statements for each of the three years in the periods ended July 3, 1999,
June 27, 1998 and June 28, 1997:
Consolidated Statements of Operations ...................................................... F-3
14
<PAGE>
Consolidated Statements of Stockholders' Equity ............................................ F-4
Consolidated Statements of Cash Flows ...................................................... F-5
Summary of Accounting Policies ................................................................... F-6
Notes to Consolidated Financial Statements ....................................................... F-8
2. FINANCIAL STATEMENT SCHEDULES:
Page
----
Report of Independent Certified Public Accountants................................................ S-1
Schedule II - Valuation and Qualifying Accounts................................................... S-2
</TABLE>
3. EXHIBITS:
The Exhibits filed as part of this Annual Report on Form 10-K are listed on
the Exhibit Index immediately preceding such Exhibits, and are incorporated
herein by reference.
(b) Reports on Form 8-K
none.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 131 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SPEIZMAN INDUSTRIES, INC.
Date: September 30, 1999
By: /s/ Robert S. Speizman
------------------------------------
Robert S. Speizman, President
Pursuant to the requirements of the Securities Act of 1933, this has
been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Robert S. Speizman Chairman of the Board, President September 30, 1999
- - ------------------------------------ and Director (Principal Executive
Robert S. Speizman Officer)
/s/ Josef Sklut Director September 30, 1999
- - ------------------------------------
Josef Sklut
/s/ Steven P. Berkowitz Director October 1, 1999
- - ------------------------------------
Steven P. Berkowitz
/s/ William Gorelick Director September 30, 1999
- - ------------------------------------
William Gorelick
/s/ Scott C. Lea Director October 1, 1999
- - ------------------------------------
Scott C. Lea
</TABLE>
16
<PAGE>
[BDO SEIDMAN LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Speizman Industries, Inc.
We have audited the accompanying consolidated balance sheets of
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES as of July 3, 1999 and June
27, 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the
period ended July 3, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES at July 3, 1999 and June 27,
1998, and the results of their operations and their cash flows for each
of the three years in the period ended July 3, 1999, in conformity with
generally accepted accounting principles.
Charlotte, North Carolina BDO Seidman, LLP
August 30, 1999
F-1
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 3, June 27,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents.................................................. $ 642,167 $ 2,193,329
Accounts receivable (Notes 1, 2 and 7)..................................... 21,138,563 19,817,834
Inventories (Notes 3 and 7)................................................ 16,360,366 15,934,745
Prepaid expenses and other current assets.................................. 6,140,919 3,381,855
------------- -------------
TOTAL CURRENT ASSETS.................................................... 44,282,015 41,327,763
------------ ------------
Property and Equipment: (Notes 5 and 7)
Building and leasehold improvements........................................ 4,449,204 2,487,275
Machinery and equipment.................................................... 1,610,559 1,825,959
Furniture, fixtures and transportation equipment........................... 1,726,918 1,341,728
----------- ------------
7,786,681 5,654,962
Less accumulated depreciation and amortization............................. (1,972,975) (1,685,147)
---------- -----------
NET PROPERTY AND EQUIPMENT.............................................. 5,813,706 3,969,815
---------- ------------
Other long-term assets........................................................ 689,902 517,352
Goodwill, net of accumulated amortization (Notes 4 and 14)..................... 5,670,410 6,110,410
---------- -----------
$ 56,456,033 $ 51,925,340
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current:
Note payable - bank line of credit (Note 7) ............................... $ 4,900,000 $ 4,000,000
Accounts payable........................................................... 15,069,201 10,809,976
Customers' deposits........................................................ 5,280,271 2,158,512
Accrued expenses........................................................... 1,434,229 2,188,557
Current maturities of long-term liabilities (Note 5 and 8)................. 1,540,273 1,960,817
------------- -----------
TOTAL CURRENT LIABILITIES............................................... 28,223,974 21,117,862
Long-term debt (Note 8)........................................................ 3,800,000 5,725,000
Obligation under capital lease (Notes 5 and 8) ................................ 1,855,341 1,875,612
----------- -----------
TOTAL LIABILITIES....................................................... $ 33,879,315 $ 28,718,474
----------- ----------
Commitments and Contingencies (Notes 1, 5, 10, 11, 12, 13 and 14)
Stockholders' Equity (Notes 9 and 10):
Common Stock - par value $.10; authorized 20,000,000
shares, issued 3,369,506, outstanding 3,228,706; and
issued 3,357,406, outstanding 3,319,806, respectively .................. 336,951 335,741
Additional paid-in capital................................................. 12,935,886 12,889,546
Retained earnings.......................................................... 9,890,704 10,143,226
------------ -----------
Total................................................................... 23,163,541 23,368,513
Treasury stock, at cost, 140,800 shares and 37,600 shares.................. (586,823) (161,647)
------------ -----------
TOTAL STOCKHOLDERS' EQUITY.............................................. 22,576,718 23,206,866
---------- ----------
$ 56,456,033 $ 51,925,340
========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-2
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------------------------
July 3, June 27, June 28,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUES (Note 1)........................................ $ 101,412,128 $ 90,886,285 $ 79,103,225
----------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales............................................ 85,563,543 74,033,817 65,934,696
Selling expenses......................................... 7,724,174 6,944,079 5,810,360
General and administrative expenses...................... 7,399,792 5,713,697 3,045,269
------------- ----------- -----------
Total costs and expenses............................. 100,687,509 86,691,593 74,790,325
----------- ---------- ----------
724,619 4,194,692 4,312,900
INTEREST (INCOME) EXPENSE, net of interest
income of $91,586, $102,968 and $113,137 ................ 1,103,141 988,377 (17,651)
----------- ----------- ----------
NET INCOME (LOSS) BEFORE TAXES............................... (378,522) 3,206,315 4,330,551
TAXES (BENEFIT) ON INCOME (Note 6) (126,000) 1,273,000 1,645,000
----------- ---------- -----------
NET INCOME (LOSS)............................................ $ (252,522) $ 1,933,315 $ 2,685,551
============ ========== ===========
Earnings (loss) per share:
Basic ................................................... $ (0.08) $ 0.59 $ 0.83
Diluted ................................................. (0.08) 0.56 0.80
Weighted average shares outstanding:
Basic ................................................... 3,274,435 3,284,278 3,228,745
Diluted ................................................. 3,274,435 3,425,899 3,353,419
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-3
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Additional Other
Common Common Paid-In Retained Comprehensive Treasury Stockholders
Shares Stock Capital Earnings Income Stock Equity
----------- ---------- ----------- -------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1996 3,236,199 $ 323,620 $12,459,965 $ 5,524,360 $ (5,223) $ (99,797) $18,202,925
Net income................. - - - 2,685,551 - - 2,685,551
Exercise of stock options... 26,667 2,667 52,334 - - - 55,001
Foreign currency translation
adjustment.............. - - - - (5,777) - (5,777)
--------- --------- ----------- ----------- - ------- - -------- -----------
BALANCE, JUNE 28, 1997 3,262,866 326,287 12,512,299 8,209,911 (11,000) (99,797) 20,937,700
Net income................. - - - 1,933,315 - - 1,933,315
Exercise of stock options... 94,540 9,454 275,547 - - - 285,001
Purchase of treasury stock . - - - - - (61,850) (61,850)
Foreign currency translation
adjustment.............. - - - - 11,000 - 11,000
Tax effect of exercise of
stock options........... - - 101,700 - - - 101,700
--------- --------- ----------- ----------- ------- -------- -----------
BALANCE, JUNE 27, 1998 3,357,406 335,741 12,889,546 10,143,226 - (161,647) 23,206,866
Net loss - - - (252,522) - - (252,522)
Exercise of stock options 12,100 1,210 46,340 - - - 47,550
Purchase of treasury stock - - - - - (425,176) (425,176)
--------- ---------- ----------- ----------- ---------- ---------- -----------
BALANCE, JULY 3, 1999 3,369,506 $ 336,951 $ 12,935,886 $ 9,890,704 $ - $ (586,823) $22,576,718
========= =========== ============ =========== ========== ========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-4
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------------
July 3, June 27, June 28,
1999 1998 1997
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) ......................................... $ (252,522) $ 1,933,315 $ 2,685,551
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Gain (loss) on disposal of fixed assets ................... 3,560 (4,980) -
Depreciation and amortization ............................. 1,366,938 1,193,295 484,152
Provision for losses on accounts receivable................ 394,127 189,545 214,521
Provision for inventory obsolescence....................... 400,000 275,000 154,133
Provision for deferred income taxes........................ (366,000) (187,000) (121,000)
Provision for deferred compensation........................ (91,344) 379 (25,220)
Foreign currency translation adjustment.................... - 11,000 (5,777)
(Increase) decrease in:
Accounts receivable.................................... (1,714,856) 5,304,947 (9,129,210)
Inventories............................................ (825,621) (337,132) (1,484,715)
Prepaid expenses and other current assets.............. (2,653,614) 613,281 (471,947)
Increase (decrease) in:
Accounts payable....................................... 4,259,225 (9,302,942) 4,211,199
Accrued expenses and customers' deposits............... 2,458,775 (985,393) 114,895
------------- -------------- -------------
Net cash provided by (used in) operating activities........ 2,978,668 (1,296,685) (3,373,418)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Wink Davis Equipment Company, Inc. ......... - (9,467,677) -
Acquisition of Todd Motion Controls, Inc. ................. - (1,841,304) -
Capital expenditures....................................... (2,976,464) ( 470,221) (846,845)
Proceeds from property and equipment disposals............. 290,075 76,304 27,125
------------- ------------- -------------
Net cash used in investing activities.................. (2,686,389) (11,702,898) (819,720)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit agreement ................ 900,000 4,000,000 -
Principal payments on long term debt....................... (2,365,815) (1,162,773) (11,052)
Issuance of common stock upon exercise of stock options.... 47,550 285,001 55,001
Purchase of treasury stock ................................ (425,176) (61,850) -
Proceeds from issuance of long term notes due to bank ..... - 8,300,000 -
------------- ------------- -------------
Net cash provided by (used in) financing activities.... (1,843,441) 11,360,378 43,949
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.......................................... (1,551,162) ( 1,639,205) (4,149,189)
CASH AND CASH EQUIVALENTS, at beginning of year.............. 2,193,329 3,832,534 7,981,723
------------- ------------ -------------
CASH AND CASH EQUIVALENTS, at end of year.................... $ 642,167 $ 2,193,329 $ 3,832,534
============ ============ ===========
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-5
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of Speizman Industries, Inc. and
subsidiaries (collectively the "Company") include all of its subsidiaries, all
of which are wholly owned. All material intercompany transactions (domestic and
foreign) have been eliminated. The financial statements of the Company's United
Kingdom subsidiary were translated from pounds sterling to U.S. dollars in
accordance with generally accepted accounting principles. The United Kingdom
subsidiary was liquidated on June 28, 1997. Wink Davis Equipment Company, Inc.
("Wink Davis") was acquired on August 1, 1997. Todd Motion Controls, Inc.
("TMC") was acquired on February 6, 1998. Speizman Yarn Equipment Co., Inc.
("Speizman Yarn") began operations on August 1, 1998.
REVENUE RECOGNITION
The major portion of the Company's revenues consists of sales and
commissions on sales of machinery and equipment. The profit derived therefrom is
recognized in full at the time of shipment.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with an original maturity of three months or less
to be cash equivalents. The carrying amount of cash equivalents approximates
fair value due to the short-term maturity of these instruments.
INVENTORIES
Inventories are carried at the lower of cost or market. Cost is computed,
in the case of machines, on an identified cost basis and, in the case of other
inventories, on an average cost basis.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed over
the estimated useful lives of the assets by the straight-line method for
financial reporting purposes and by accelerated methods for income tax purposes.
FOREIGN EXCHANGE CONTRACTS
The Company enters into foreign currency contracts to reduce the foreign
currency exchange risks. Foreign currency hedging contracts obligate the Company
to buy a specified amount of a foreign currency at a fixed price in specific
future periods. Realized and unrealized gains and losses are recognized in net
income in the period of the underlying transaction. As of July 3, 1999, the
Company had contracts maturing through June 2000 to purchase approximately 93.2
billion Lira for approximately $49.3 million, which approximates the spot rate
on that date.
TAXES ON INCOME
Deferred tax assets or liabilities at the end of each period are
determined using the tax rate expected to be in effect when taxes are actually
paid or recovered. Income tax expense will increase or decrease in the same
period in which a change in tax rates is enacted.
INCOME (LOSS) PER SHARE
Basic net income per share includes no dilution and is calculated by
dividing net income by the weighted average number of common shares outstanding
for the period. Diluted net income per share reflects the potential dilution of
securities that could share in the net income of the Company which consists of
stock options (using the treasury stock method).
FISCAL YEAR
The Company maintains its accounting records on a 52-53 week fiscal year.
The fiscal year ends on the Saturday closest to June 30. The year ending July 3,
1999 included 53 weeks. Years ending June 27, 1998 and June 28, 1997 included 52
weeks.
F-6
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES - (CONTINUED)
ADVERTISING
The Company expenses advertising costs as incurred. Total advertising
expense approximated $145,000, $97,000 and $95,000 for fiscal years 1999, 1998
and 1997, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial instruments of the Company include long-term debt and line of
credit agreements. Based upon the current borrowing rates available to the
Company, estimated fair values of these financial instruments approximate their
recorded carrying amounts.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications were made to the prior years' financial
statements to conform to the current year presentation.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (SFAS No. 133), as amended by SFAS
No. 137, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. This statement is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. Management is
presently assessing the impact of the adoption of SFAS No. 133 on its
consolidated financial statements.
In May, 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, REPORTING ON THE COSTS AT START-UP
ACTIVITIES. SOP 98-5 requires that entities expense start-up costs and
organization costs as they are incurred. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. Management does not anticipate SOP 98-5
having a material impact on its consolidated financial statements.
F-7
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS AND CREDIT RISK CONCENTRATION
The Company is engaged in the distribution of machinery for the textile
and commercial laundry industries. With operations in the United States, Canada,
Mexico and formerly the United Kingdom, the Company primarily sells to customers
located within the United States. Export sales from the United States were
approximately $13,941,000, $15,992,000 and $12,433,000 during fiscal 1999, 1998
and 1997, respectively. There were no export sales by the Canadian operations or
the commercial laundry operations.
Financial instruments which potentially subject the Company to credit
risk consist principally of temporary cash investments and trade receivables.
The Company places its temporary cash investments with high credit quality
financial institutions and, by policy, limits the amount of credit exposure to
any one financial institution.
The Company reviews a customer's credit history before extending credit.
An allowance for doubtful accounts is established based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
To reduce credit risk the Company generally requires a down payment on large
equipment orders.
A substantial amount of the Company's revenues are generated from the
sale of sock knitting and other machines manufactured by Lonati, S.p.A. and one
of its wholly owned subsidiaries (Santoni). Sales by the Company in the United
States and Canada of machines manufactured by Lonati, S.p.A., generated the
following percentages of the Company's net revenues: 22.5% in 1999, 41.1% in
1998 and 60.1% in 1997. In addition, sales of Santoni machines in the United
States and Canada generated 20.3%, 5.3%, and 7.0% of the Company's net revenues
in fiscal 1999, 1998 and 1997, respectively. In 1999, there were no sales to
customers in excess of 10% of revenues. In 1998, sales to one customer
approximated 12% of revenues. In 1997, approximately 11% and 10% of revenues
consisted of sales to the Company's two largest customers. Generally, the
customers contributing the most to the Company's net revenues vary from year to
year.
<TABLE>
<CAPTION>
NOTE 2 -- ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
July 3, 1999 June 27, 1998
------------ -------------
<S> <C> <C>
Trade receivables................................................. $ 21,784,879 $ 20,671,045
Less allowance for doubtful accounts.............................. (646,316) (853,211)
------------ ----------
Net accounts receivable........................................... $ 21,138,563 $ 19,817,834
============ ==========
NOTE 3 -- INVENTORIES
Inventories are summarized as follows:
July 3, 1999 June 27, 1998
------------ -------------
Machines
New.......................................................... $ 4,049,057 $ 3,051,280
Used......................................................... 6,213,301 6,414,845
Parts and supplies................................................ 6,098,008 6,468,620
----------- -----------
Total ........................................................... $ 16,360,366 $15,934,745
========== ==========
</TABLE>
NOTE 4 - GOODWILL
Goodwill is calculated as the excess of the cost of purchased businesses
over the value of their underlying net assets and is amortized on a
straight-line basis over fifteen years. Goodwill is net of accumulated
amortization of $767,500 at July 3, 1999 and $327,500 at June 27, 1998.
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
F-8
<PAGE>
NOTE 5 -- LEASES
The Company conducts its operations from leased real properties, which
include offices, warehouses and a manufacturing facility.
The former primary operating facility of the textile operations and
corporate offices is leased from a partnership in which Mr. Robert S. Speizman,
the Company's President, has a 50% interest. In April 1999, the Company
relocated these functions to a newly renovated facility. Warehouse space at the
former location continues to be leased on a monthly basis pending completion
(projected as December 1999) of additional warehouse space at the new facility.
Lease payments to the partnership approximated $336,000, $356,000 and $356,000
in fiscal years 1999, 1998 and 1997, respectively.
In April 1999, several textile machinery warehouses and the corporate
offices were located into a new facility. This new facility is leased from The
Speizman LLC, a limited liability company owned by Mr. Speizman, his wife and
their children. This lease, which extends through October 2012, has been
accounted for as a capital lease. Lease payments to the LLC, net of sublease
payments received in 1998 from the former lessor, approximated $659,000 in
fiscal 1999 and $307,000 in fiscal 1998.
SFAS No. 13, ACCOUNTING FOR LEASES, states that if the fair value of the
land is 25% or more of the total fair value, the land and building elements
should be accounted for separately. Accordingly, the company recognizes two
components of this lease. The portion of the lease payments applicable to the
land is treated as an operating lease. Under SFAS No. 13, the annual rental rate
attributable to the land is calculated using the fair value of the land at the
Company's incremental borrowing rate. The remaining portion of the minimum lease
payments are attributed to the building component. The building component is
treated as a capital lease with an imputed interest rate based on the fair value
of the building, lease term and the allocated building component of the lease
payments. The capital lease components applicable to the building are:
<TABLE>
<CAPTION>
<S> <C>
Lease term........................................................ 180 months
Allocated value of the building ................................. $ 1,900,000
Portion of monthly lease payments allocated to building ......... $ 40,500
Imputed interest rate............................................. 25%
</TABLE>
The Speizman LLC is adding an additional 100,000 square feet of warehouse
space to the facilities currently being leased. This construction is expected to
be completed in December 1999. Speizman Industries, Inc. expects to lease this
property also, at which time the Company will consolidate the remaining textile
equipment warehouses to this single location.
The primary operating facility and certain sales offices of the laundry
equipment and services operations are leased from a partnership in which Mr. C.
Alexander Davis, President of Wink Davis, has a 50% interest. The leases extend
through 2001. Lease payments to the partnership were approximately $216,000 and
$216,000 in fiscal 1999 and 1998, respectively.
As of July 3, 1999, future net minimum lease payments under capital and
operating leases that have initial or remaining noncancelable term in excess of
one year are as follows:
F-9
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
<TABLE>
<CAPTION>
Capital Operating
Lease Leases
--------- ---------
<S> <C> <C> <C>
2000 ........................................................... $486,000 $ 684,588
2001 ........................................................... 486,000 404,102
2002 ........................................................... 486,000 255,740
2003 ........................................................... 486,000 165,705
2004 ........................................................... 486,000 115,339
Beyond 4,050,000 364,936
--------- ---------
Total minimum lease payments ................................ $ 6,480,000 $1,990,410
=========
Less amount representing interest............................ (4,604,386)
-----------
Present value of net minimum lease payments (see Note 8)..... 1,875,614
===========
The following summarizes property held under capital leases:
Capital
Lease
--------
Building ......................................................... $ 1,900,000
Less accumulated depreciation ................................... ( 75,586)
-------------
$ 1,824,414
=============
</TABLE>
Total rent expense for operating leases approximated $1,634,000,
$1,369,000 and $1,022,000 in fiscal years 1999, 1998 and 1997, respectively.
NOTE 6-- TAXES (BENEFIT) ON INCOME
Provisions (benefit) for federal and state income taxes in the
consolidated statements of operations are made up of the following components:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Current:
<S> <C> <C> <C>
Federal...................................... $ 158,000 $ 1,206,000 $ 1,482,000
State........................................ 82,000 251,000 282,000
Foreign...................................... - 3,000 2,000
------------ ------------ ------------
240,000 1,460,000 1,766,000
------------ ------------ ------------
Deferred:
Federal...................................... (325,000) (152,000) (87,000)
State........................................ (41,000) (35,000) (34,000)
------------ ------------ ------------
(366,000) (187,000) (121,000)
------------ ------------ ------------
Total taxes (benefit) on income.................. $ (126,000) $ 1,273,000 $ 1,645,000
============- -=========== ===========
Deferred tax benefits and liabilities are provided for the temporary
differences between the book and tax bases of assets and liabilities. Deferred
tax assets (liabilities) are reflected in the consolidated balance sheets as
follows:
July 3, 1999 June 27, 1998
------------ -------------
Net current assets................................................ $ 866,000 $ 647,000
Net noncurrent assets............................................. 294,000 147,000
------------ ----------
$ 1,160,000 $ 794,000
============ ============
</TABLE>
F-10
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Principal items making up the deferred income tax assets (liabilities)
are as follows:
<TABLE>
<CAPTION>
Year Ended
--------------------------------
July 3, June 27,
1999 1998
---------- ---------
<S> <C> <C>
Inventory valuation reserves................................. $ 271,000 $ 195,000
Depreciation................................................. (206,000) (110,000)
Deferred compensation........................................ 280,000 -
Deferred charges and other................................... 34,000 161,000
Inventory capitalization .................................... 400,000 224,000
Accounts receivable reserves................................. 238,000 324,000
Net operating loss carryforwards............................. 143,000 -
---------- ---------
Net deferred tax asset................................... $1,160,000 $ 794,000
========== =========
</TABLE>
Deferred taxes include a net operating loss carry forward of approximately
$385,000 which may be utilized to offset future taxable income. Utilization of
these carryforwards is limited to approximately $90,000 per year and these
carryforwards expire in 2019.
The Company's effective income tax rates are different than the U.S.
Federal statutory tax rate for the following reasons:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
U.S. Federal statutory tax rate................................... 34.0% 34.0% 34.0%
State income taxes, net of federal income tax benefit............. (6.0) 5.1 4.3
Non-deductible expenses........................................... (31.1) 1.2 1.5
Foreign tax rates................................................. - - (0.8)
Effective change in tax regulation................................ 33.0 - -
Other............................................................. 3.4 (0.6) (1.0)
----- ---- -----
Effective tax rate................................................ 33.3% 39.7% 38.0%
==== ==== ====
</TABLE>
NOTE 7 -- LINE OF CREDIT
The Company has a credit facility with Bank of America, opened on
August 1, 1997, in conjunction with the purchase of Wink Davis, amended on
February 6, 1998, in conjunction with the purchase of TMC and expiring on July
31, 2000. This facility furnished term loan financing for these acquisitions and
also provides a line of credit for direct borrowings and issuance of documentary
letters of credit. The credit facility provides up to $38.3 million, subject to
current collateral balances, including up to a maximum of $8.5 million for
direct borrowings, with the balance available for documentary letters of credit
and term debt. Amounts outstanding under the line of credit bear interest at the
greater of prime plus 1.0% or the Federal Funds Rate plus 1.5% for base rate
loans and the Eurodollar Rate plus 2.0% for Eurodollar loans. At July 3, 1999,
the Company had borrowed $4,900,000 under this line of credit. $4,000,000 was
fixed under a 30-day Eurodollar facility expiring July 28, 1999 bearing interest
of 7.14%. The remaining $900,000 bears interest of 9.0%.
The credit facility contains certain covenants that require, among other
things, the Company to maintain levels of current assets to current liabilities,
working capital, tangible net worth, restrictions on dividends, and certain
fixed charge coverage. The credit facility is secured by accounts receivable and
inventory.
F-11
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 8 -- LONG-TERM DEBT
Long-term debt consists primarily of a term loan with Bank of America and
an obligation under capital lease with the Speizman LLC.
The term loan with Bank of America provided $8.3 million used for
financing the acquisitions of Wink Davis and TMC. The repayment schedule
requires quarterly principal payments of $380,000, a single annual prepayment
calculated as a percentage of the prior year's adjusted earnings, and the
balance due on the loan's expiration date, July 31, 2000. The Company expects to
refinance the loan prior to the expiration date.
The term loan agreement permits the Company to select either a base
interest rate or a Eurodollar interest rate plus 2.0%. The base interest is the
greater of prime plus 1.0% or the Federal Funds Effective Rate plus 1.5%. At
July 3, 1999, $5,300,000 of the term loan was borrowed under the Eurodollar
selection bearing interest at 7.096% and the balance of $20,000 was borrowed
under the base rate selection bearing interest at 9.0%.
The term loan agreement requires that the Company enter an interest rate
swap agreement for a portion of the outstanding principal. The swap agreement is
an interest rate hedge which, in effect, converts the interest rate from a
variable to a fixed rate over a three-month period. At July 3, 1999, $5,300,000
was fixed at an interest rate of 7.096% through September 10, 1999.
The obligation under the capital lease represents the building component
of the Company's lease of its corporate offices and textile machinery
warehouses. The obligation is based on allocated monthly principal and interest
payments of $40,500, for fifteen years ending October 2012 at an imputed
interest rate of 25%.
Long-term debt consists of:
<TABLE>
<CAPTION>
July 3, 1999 June 27, 1998
----------------------------------------------------
Total Total
----- -----
<S> <C> <C>
Term loan...................................... $ 5,320,000 $ 7,670,000
Obligation under capital lease (see Note 5).... 1,875,614 1,891,429
--------- -----------
Total.......................................... 7,195,614 9,561,429
Current maturities............................. (1,540,273) (1,960,817)
---------- ----------
$ 5,655,341 $ 7,600,612
============ ===========
Annual maturities of long-term debt (assuming no debt refinancing)
excluding capital lease obligations are:
2000 ................................... $ 1,520,000
2001 ................................... 3,800,000
---------
$ 5,320,000
==========
</TABLE>
F-12
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 9 -- STOCK OPTIONS
The Company has reserved 125,000, 250,000 and 450,000 shares of Common
Stock under employee stock plans adopted in 1981, 1991 and 1995, respectively.
As of July 3, 1999, options to purchase 4,000, 77,885 and 358,500 were
outstanding under the 1981, 1991 and 1995 Plans, respectively. Currently,
outstanding options become exercisable in two to four years from the grant date.
All options, subject to certain exceptions with regard to termination of
employment and the percentage of outstanding shares of common stock owned, must
be exercised within ten (10) years of the grant date. The option price under the
1981 and 1991 Plans, subject to certain exceptions, may not be less than 100% of
the fair market value per share of Common Stock on the date of the grant of the
option or 110% of such value for persons who control 10% or more of the voting
power of the Company's stock on the date of the grant. The option price under
the 1995 Plan is not limited and may be less than 100% of the fair market value
on the date of the grant. A summary of employee stock option transactions and
other information for 1999, 1998, and 1997 follows:
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------------------------------------------
Weighted Weighted Weighted
July 3, Average June 27, Average June 28, Average
1999 Price/Sh. 1998 Price/Sh. 1997 Price/Sh.
----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares under option, beginning of year.... 460,385 $4.81 466,925 $4.17 334,092 $3.13
Options granted........................... - - 88,000 6.31 159,500 6.00
Options exercised......................... (12,100) 3.93 (94,540) 3.01 (26,667) 2.06
Options expired........................... (7,900) 4.90 - - - -
------ ---- ----------- ------- ----------- --------
Shares under option, end of year.......... 440,385 $ 4.83 460,385 $ 4.81 466,925 $ 4.17
======= ==== =========== ====== =========== ======
Options exercisable....................... 379,803 236,410 141,668
======= =========== ===========
Prices of options exercised............... $3.00 to $.75 to $2.063
$4.50 $5.50
Prices of options outstanding, end of $.75 to $.75 to $.75 to
year...................................... $6.31 $6.31 $6.00
</TABLE>
The Company has reserved 15,000 shares of Common Stock under a
non-employee directors stock option plan adopted in 1995. Each option granted
under the Plan becomes exercisable in cumulative increments of 50% and 100% on
the first and second anniversaries of the date of the grant, respectively, and
subject to certain exceptions must be exercised within ten (10) years from the
date of the grant. The option price equals the fair market value per share of
Common Stock on the date of the grant. Options to purchase 12,000 shares were
granted and outstanding at the end of the year at a price of $2.88 to $6.13.
A summary of non-employee directors stock option and other information
for 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------------------------------
Weighted Weighted Weighted
July 3, Average June 27, Average June 28, Average
1999 Price/Sh. 1998 Price/Sh. 1997 Price/Sh.
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shares under option, beginning of year.... 9,000 $ 4.81 6,000 $ 4.16 3,000 $ 2.88
Options granted........................... 3,000 6.00 3,000 6.13 3,000 5.44
Options exercised......................... - - - - - -
Options expired........................... - - - - - -
- ------ -------- ---- ------- ------
Shares under option, end of year.......... 12,000 $ 5.11 9,000 $ 4.81 6,000 $ 4.16
====== ===== ======== ====== ====== ======
Options exercisable....................... 7,500 4,500 1,500
===== ======== =======
Prices of options exercised............... - - -
Prices of options outstanding, end of
year...................................... $2.88 to $2.88 to $2.88 to
$6.13 $6.13 $5.44
</TABLE>
F-13
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company has adopted the disclosure only provisions of Statement of
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION
(SFAS No. 123). Accordingly, no compensation cost has been recognized for the
stock option plans. The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants: expected lives of 10.0 years, expected
volatility of 0.574, risk-free interest rate of 6.5% and dividend yield of 0.0%.
The Black-Scholes option valuation model was developed for estimating the
fair value of traded options that have no vesting restrictions and are fully
transferable. Because option valuation models require the use of subjective
assumptions and changes in these assumptions can materially impact the fair
value of the options and the Company's options do not have the characteristics
of traded options, the option valuation models do not necessarily provide a
reliable measure of the fair value of its options. The estimated fair value of
stock options granted during fiscal 1998 and 1997 was $4.69 and $4.46 per share,
respectively.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. Had
compensation cost for the Company's stock option plans been determined based on
the fair value at the grant date for awards consistent with the provisions of
SFAS No. 123, the Company's net earnings and earnings per share would have been
changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Year Ended Year Ended
July 3, 1999 June 27, 1998
------------ -------------
<S> <C> <C>
Pro forma net income (loss) ........................ $(646,994) $1,480,353
Pro forma basic earnings (loss) per share ........... $(0.20) $0.45
Pro forma diluted earnings (loss) per share ........ (0.20) 0.43
The following table summarizes information about stock options outstanding at July 3, 1999:
Range of exercise prices $0.75 to $6.31
Outstanding options
Number outstanding............................................. 452,385
Weighted average remaining contractual life (years)............ 6.2
Weighted average exercise price................................ $4.84
Exercisable options
Number outstanding............................................. 387,303
Weighted average exercise price................................ $4.72
</TABLE>
NOTE 10 -- STOCK REDEMPTION AGREEMENTS
The Company has an agreement with its principal stockholder whereby, upon
his death, the Company is obligated to redeem a portion of the stock in the
Company held by his estate. The redemption price for common stock is to be the
fair market value of common stock, less 5%, plus any accrued dividends. In no
case will the Company pay out more than the amount of life insurance proceeds
received by the Company as a result of the death of the stockholder, nor will
the Company redeem a number of shares that would reduce the principal holder's
estate's percentage of the outstanding common stock of the Company to less than
16%.
At July 3, 1999, there were 334,000 common shares covered by the above
agreement. The face value of life insurance carried by the Company under this
agreement amounts to $1,150,000.
F-14
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 11 -- DEFERRED COMPENSATION PLANS
The Company has deferred compensation agreements with three employees
providing for payments amounting to $3,371,580 upon retirement and from
$1,546,740 to $2,181,600 upon death prior to retirement. One agreement, as
modified, has been in effect since 1972, the second agreement was effective
October 1989 and the third agreement effective June 1999. The earliest of the
agreements matured in December 1998. The agreements provide for monthly payments
on retirement or death benefits over fifteen year periods. The agreements are
funded under trust agreements whereby the Company pays to the trust amounts
necessary to pay premiums on life insurance policies carried to meet the
obligations under the deferred compensation agreements.
Charges to operations applicable to those agreements were approximately
$113,000, $50,000 and $49,000 for the fiscal years 1999, 1998 and 1997,
respectively.
NOTE 12 -- EMPLOYEES' RETIREMENT PLAN
The Company adopted a 401(k) retirement plan, effective October 1, 1989,
for all qualified employees of the Company to participate in the plan. Employees
may contribute a percentage of their pretax eligible compensation to the plan,
and the Company matches 50% (25% prior to September 13, 1996) of each employee's
contribution up to 4% of pretax eligible compensation. The Company's matching
contributions totaled approximately $160,000, $107,000 and $47,000 in fiscal
years 1999, 1998 and 1997, respectively.
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
The Company had outstanding commitments backed by letters of credit of
approximately $11,825,000 and $8,220,000 at July 3, 1999 and June 27, 1998,
respectively, relating to the purchase of machine inventory for delivery to
customers.
In the normal course of business, the Company is often named in various
lawsuits. The Company vigorously defends such lawsuits, none of which are
expected to have a material impact on operations, either individually or in the
aggregate.
NOTE 14 - BUSINESS ACQUISITIONS AND EXPANSION
On August 1, 1997, the Company acquired all of the outstanding stock of
Wink Davis, a Georgia corporation. The acquisition was accounted for as a
purchase and accordingly, Wink Davis' results for the eleven months since the
date of acquisition are included in the consolidated financial statements for
the year ended June 27, 1998. The aggregate purchase price was approximately
$9,468,000. There is a possible additional conditional payment of up to $1.5
million in cash over a five-year period based on certain pre-tax earnings
calculations. The aggregate purchase price, which was financed through available
cash resources, borrowings on the revolving line of credit and issuance of a
term loan, has been allocated to the assets acquired based upon their respective
fair market values. The excess of the purchase price over assets acquired
(goodwill) approximated $4,344,000 and is being amortized over fifteen years.
On February 6, 1998, the Company acquired all of the outstanding stock of
TMC, a North Carolina corporation. For financial statement purposes the
acquisition was accounted for as a purchase and, accordingly, TMC's results are
included in the consolidated financial statements since the date of acquisition.
The aggregate purchase price was approximately $1,841,000. The aggregate
purchase price, which was financed through available cash resources, borrowings
on the revolving line of credit and issuance of a term loan, has been allocated
to the assets acquired based upon their respective fair market values. The
excess of the purchase price over assets acquired (goodwill) approximated
$2,094,000 and is being amortized over fifteen years.
F-15
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
On August 1, 1998, the Company was granted the exclusive United States
and Canadian distribution rights of the Marzoli product line manufactured by
Fratelli Marzoli & C. SpA, an Italian corporation. As part of its agreement with
Fratelli Marzoli & C. SpA, the Company assumed the operations of the current
offices, showrooms and personnel. Fratelli Marzoli & C. SpA manufactures
equipment used in the yarn processing industry. Prior to the Company's receipt
of distribution rights, Fratelli Marzoli & Co. SpA distributed its products in
the United States through its wholly-owned subsidiary, Marzoli International,
Inc., a domestic corporation based in Spartanburg, South Carolina.
NOTE 15 - SEGMENT INFORMATION
During fiscal 1999, the Company adopted Standard of Financial Accounting
Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE and RELATED
INFORMATION (SFAS No. 131). SFAS No. 131 establishes standards for the way that
public companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. SFAS No. 131
defines operating segments as components of a company about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. Adoption of SFAS No. 131 did not alter the Company's reportable
segments.
The Company operates primarily in two segments of business, textile
equipment and laundry equipment and services. Prior to the acquisition of Wink
Davis on August 1, 1997, the Company operated only in the textile segment. TMC
is included in the textile equipment classification. The table below summarizes
financial data by segment.
<TABLE>
<CAPTION>
July 3, 1999 June 27, 1998
------------ -------------
<S> <C> <C>
Total revenues for the year ended
Textile equipment $ 73,140,182 $67,229,741
Laundry equipment and services 28,271,946 23,656,544
------------- ------------
$ 101,412,128 $ 90,886,285
============= ============
Depreciation and amortization
Textile equipment $ 920,770 $ 705,153
Laundry equipment and services 446,168 488,142
------------- ------------
$ 1,366,938 $ 1,193,295
============= ============
Income before interest and taxes for the year ended
Textile equipment $ 631,887 $ 3,915,662
Laundry equipment and services 92,732 81,720
------------- ------------
$ 724,619 $ 3,997,382
============= ============
Total assets as of
Textile equipment $ 42,554,774 $40,635,527
Laundry equipment and services 13,901,259 11,289,813
------------- ------------
$ 56,456,033 $51,925,340
============= ============
</TABLE>
NOTE 16 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------------
July 3, June 27, June 28,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash paid during year for:
Interest (including capitalized interest of $392,098
and $118,119 in 1999 and 1998, respectively)............... $ 1,686,815 $ 1,091,973 $ 101,315
Income taxes............................................... 758,212 1,381,196 1,440,696
</TABLE>
A capital lease obligation of $1,900,000 was incurred in 1998 when the
Company entered into a lease for its corporate offices and warehouses.
F-16
<PAGE>
[BDO SEIDMAN LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Speizman Industries, Inc.
The audits referred to in our report dated August 30, 1999, relating to the
consolidated financial statements of Speizman Industries, Inc. and subsidiaries
which is contained in Item 8 of this Form 10-K included the audit of the
financial statement schedule listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based upon our audits.
In our opinion, such financial statement schedule presents fairly, in all
material respects, the information set forth therein.
Charlotte, North Carolina BDO Seidman, LLP
August 30, 1999
S-1
<PAGE>
SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- - -------- -------- -------- -------- -------- --------
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND OTHER FROM AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS RESERVES OF PERIOD
- - ----------- --------- -------- -------- -------- ---------
Fiscal year ended June 28, 1997:
Reserve for doubtful accounts.......... $259,956 $233,671 $ - $ 19,150 $474,477
-------- ------- --------- -------- -------
Reserve for inventory obsolescence..... $508,970 $154,133 $ - $241,629 $421,474
------- ------- --------- - ------- - -------
Fiscal year ended June 27, 1998:
Reserve for doubtful accounts.......... $474,477 $247,631 $ 189,189 (a) $ 58,086 $853,211
------- ------- -------- -------- -------
Reserve for inventory obsolescence..... $421,474 $275,000 $ - $189,288 $507,186
------- ------- --------- ------- -------
Fiscal year ended July 3, 1999:
Reserve for doubtful accounts.......... $853,211 $394,127 $ - $601,022 $646,316
------- ------- --------- ------- -------
Reserve for inventory obsolescence..... $507,186 $400,000 $ - $171,670 $735,516
------- ------- --------- ------- -------
- - --------------------
</TABLE>
(a) Purchase price adjustment for Wink Davis.
S-2
<PAGE>
SPEIZMAN INDUSTRIES, INC.
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
3.1 Certificate of Incorporation of Speizman Industries, Inc. (the
"Company"). (Incorporated by reference to Exhibit 3.1 contained
in the Company's Registration Statement on Form S-1 (the "1993
Form S-1"), registration number 33-69748, filed with the
Securities and Exchange Commission (the "Commission") on
September 30, 1993, and amendments thereto.)
3.2 Certificate of Amendment to Certificate of Incorporation of the
Company, dated December 4, 1978. (Incorporated by reference to
Exhibit 3.2 contained in the 1993 Form S-1.)
3.3 Certificate of Amendment to Certificate of Incorporation of the
Company, dated February 8, 1993. (Incorporated by reference to
Exhibit 3.3 contained in the 1993 Form S-1.)
3.4 Certificate of Amendment of Certificate of Incorporation of the
Company, dated January 31, 1997.
3.5 Bylaws of the Company, as amended November 7, 1978. (Incorporated
by reference to Exhibit 3.6 contained in the 1993 Form S-1.)
4.1 Certificate of Incorporation of the Company as currently in
effect (included as Exhibits 3.1 through 3.5). (Incorporated by
reference to Exhibit 4.1 contained in the 1993 Form S-1.)
4.2 Bylaws of the Company, as amended November 7, 1978. (Incorporated
by reference to Exhibit 4.2 contained in the 1993 Form S-1.)
4.3 Specimen Common Stock Certificate. (Incorporated by reference to
Exhibit 4.3 contained in the 1993 Form S-1.)
10.1 Agency Agreement between the Company and Lonati, S.r.l., Brescia,
Italy ("Lonati"), dated January 2, 1992, relating to the
Company's distribution of machines in the United States.
(Incorporated by reference to Exhibit 10.1 contained in the 1993
Form S-1.)
10.2 Agency Agreement between the Company and Lonati, dated January 2,
1992, relating to the Company's distribution of machines in
Canada. (Incorporated by reference to Exhibit 10.2 contained in
the 1993 Form S-1.)
10.3 Distribution Agreement by and between Company and Lonati, dated
January 2, 1997, relating to the Company's distribution of
circular knitting machines, ladies and men in Mexico.
(Incorporated by reference to Exhibit 10.3 contained in the
Company's Annual Report on Form 10-K for the fiscal year ended
June 28, 1998, File No. 0-8544, filed with the Commission on
September 25, 1998 (the "1998 Form 10-K").)
10.4 Agency Agreement between the Company and Santoni, S.r.l.,
Brescia, Italy ("Santoni"), dated January 2, 1992 ("Santoni
Agreement"). (Incorporated by reference to Exhibit 10.3 contained
in the 1993 Form S-1.)
10.5 Letter from Santoni relating to the Santoni Agreement, dated June
8, 1992. (Incorporated by reference to Exhibit 10.4 contained in
the 1993 Form S-1.)
10.6 Letter Agreement between the Company and Santoni relating to the
Santoni Agreement, dated July 21, 1993. (Incorporated by
reference to Exhibit 10.5 contained in the 1993 Form S-1.)
10.7 Distributorship Agreement between the Company and Conti Complett,
S.p.A., Milan, Italy, dated October 2, 1989. (Incorporated by
reference to Exhibit 10.8 contained in the Company's Annual
Report on Form 10-K for the fiscal year ended July 2, 1994, File
No. 0-8544, filed with the Commission on September 30, 1994 (the
"1994 Form 10-K").)
10.8 Exclusive Distributor Agreement between Speizman Yarn and Marzoli
International, dated on or about July 15, 1998.
10.9 Addendum to the Exclusive Distributor Agreement between Speizman
Yarn and Marzoli International, dated June 6, 1999.
10.10 Letter Agreement between Speizman Yarn Equipment, Inc. and
Margasa, dated June 15, 1999.
10.11 Letter Agreement between Speizman Yarn Equipment, Inc. and
Meccanica Carresi, dated June 15, 1999.
10.12 Split Dollar Insurance Agreement, dated January 15, 1992, between
the Company and Richard A. Bigger, Jr., Successor Trustee of the
Robert S. Speizman Irrevocable Insurance Trust. (Incorporated by
reference to Exhibit 10.13 contained in the 1993 Form S-1.)
10.13 First Amendment to Split Dollar Insurance Agreement, dated
September 4, 1996, between the Company and Richard A. Bigger,
Jr., Successor Trustee of the Robert S. Speizman Irrevocable
Insurance Trust. (Incorporated by reference to Exhibit 10.16.1
contained in the Company's 1996 Form 10-K.)
10.14 Lease Agreement between the Company and Speizman Brothers
Partnership, dated as of December 12, 1990. (Incorporated by
reference to Exhibit 10.14 contained in the 1993 Form S-1.)
10.15 Lease Amendment and Extension Agreement between the Company and
Speizman Brothers Partnership dated April 1, 1995. (Incorporated
by reference to Exhibit 10.18 contained in the Company's 1995
Form 10-K.)
<PAGE>
10.16 Second Lease Amendment and Extension Agreement between the
Company and Speizman Brothers Fifth Street Partnership (formerly
Speizman Brothers Partnership), dated April 1, 1996.
(Incorporated by reference to Exhibit 10.18.1 contained in the
Company's 1996 Form 10-K.)
10.17 Third Lease Amendment and Extension Agreement between the Company
and Speizman Brothers Fifth Street Partnership, dated April 1,
1998. (Incorporated by reference to Exhibit 10.16 contained in
the Company's 1998 Form 10-K.)
10.18 Letter agreement between the Company and Speizman Brothers Fifth
Street Partnership, dated April 30, 1999.
10.19 Lease Agreement by and between The Speizman LLC and Speizman
Industries, Inc., dated as of October 29, 1997. (Incorporated by
reference to Exhibit 10.17 contained in the Company's 1998 Form
10-K.)
10.20 First Amendment to Lease Agreement by and between The Speizman
LLC and Speizman Industries, Inc., dated as of October 29, 1997,
and executed July 22, 1998. (Incorporated by reference to Exhibit
10.18 contained in the Company's 1998 Form 10-K.)
10.21 Lease Agreement between the Company and The Speizman LLC
regarding the 100,000 metal warehouse, dated June 23, 1999.
10.22 Deed of Lease between Speizman Canada, Inc., and Metro II & III,
undated, as renewed by letter agreement, dated February 17, 1992.
(Incorporated by reference to Exhibit 10.19 contained in the 1993
Form S-1.)
10.23 Letter Agreement extending lease between Speizman Canada, Inc.,
and Metro II & III, dated October 21, 1994. (Incorporated by
reference to Exhibit 10.20 contained in the Company's 1995 Form
10-K.)
10.24 Memorandum of Agreement of Extension of Lease between Speizman
Canada, Inc., and Metro II & III, dated November 21, 1995.
(Incorporated by reference to Exhibit 10.20.1 contained in the
Company's 1996 Form 10-K.)
10.25 Memorandum of Agreement of Extension of Lease between Speizman
Canada, Inc., and Metro II & III, dated January 29, 1997.
(Incorporated by reference to Exhibit 10.17 contained in the
Company's Annual Report on Form 10-K for fiscal year ended June
27, 1997, File No. 0-8544, filed with the Commission on September
26, 1997 (the "1997 Form 10-K").)
10.26 Memorandum of Agreement of Extension of Lease between Speizman
Canada, Inc., and Metro II & III, dated September 23, 1997.
(Incorporated by reference to Exhibit 10.23 contained in the
Company's 1998 Form 10-K.)
10.27 Lease Renewal Agreement between Speizman Canada, Inc. and Metro
II & III, dated January 11, 1999. (Incorporated by reference to
Exhibit 10(d) contained in the Company's Quarterly Report on Form
10-Q for quarter ended January 2, 1999, File No. 0-8544, filed
with the Commission on February 16, 1999 (the "January 2, 1999
Form 10-Q").)
10.28 Letter agreement between Speizman Canada, Inc. and Metro II and
III, dated July 13, 1999, terminating the Canada lease.
10.29 Lease Agreement between the Company and Daniel H. Porter, dated
August 17, 1995. (Incorporated by reference to Exhibit 10.26
contained in the Company's 1995 Form 10-K.)
10.30 Extension of Lease Agreement between the Company and Daniel H.
Porter, dated May 14, 1997. (Incorporated by reference to Exhibit
10.25 contained in the Company's 1997 Form 10-K.)
10.31 Lease Agreement between the Company and Kathryn B. Godley, dated
March 5, 1996. (Incorporated by reference to Exhibit 10.27
contained in the Company's 1996 Form 10-K.)
10.32 Lease Amendment and Extension between the Company and Kathryn B.
Godley, dated August 16, 1999.
10.33 Lease Agreement between the Company and Hans L. Lengers, LLC,
dated February 15, 1996. (Incorporated by reference to Exhibit
10.28 contained in the Company's 1996 Form 10-K.)
10.34* 1981 Incentive Stock Option Plan of the Company. (Incorporated by
reference to Exhibit 10.19 contained in the 1993 Form S-1.)
10.35* 1991 Incentive Stock Option Plan and Amendment to 1981 Incentive
Stock Option Plan of the Company. (Incorporated by reference to
Exhibit 10.20 contained in the 1993 Form S-1.)
10.36* 1991 Incentive Stock Option Plan, as Amended and Restated
Effective September 20, 1993, of the Company. (Incorporated by
reference to Exhibit 10.21 contained in the 1993 Form S-1.)
10.37* Speizman Industries, Inc. 1995 Stock Option Plan. (Incorporated
by reference to Exhibit 4 to the Company's Registration Statement
on Form S-8, registration number 333-06287, filed with the
Commission on June 19, 1996.)
10.38* Speizman Industries, Inc. Nonqualified Stock Option Plan as
amended on October 4, 1996. (Incorporated by reference to Exhibit
99.1 to the Company's Registration Statement on Form S-8,
registration no. 333-23503, filed with the Commission on March
18, 1997.)
10.39* Speizman Industries, Inc. Nonqualified Stock Option Plan as
amended on September 29, 1997. (Incorporated by reference to
Exhibit 99.1 to the Company's Registration Statement on Form S-8,
registration no. 333-46769, filed with the Commission on February
24, 1998.)
10.40* Restated Deferred Compensation Agreement, dated May 22, 1989,
between the Company and Josef Sklut, as
<PAGE>
amended by Amendment to Deferred Compensation Agreement, dated
December 30, 1992 (the "Deferred Compensation Agreement").
(Incorporated by reference to Exhibit 10.27 contained in the 1993
Form S-1.)
10.41* Restated Trust Agreement, dated May 22, 1989, between the Company
and First Citizens Bank and Trust Company, as amended by First
Amendment to Trust Agreement dated December 30, 1992, relating to
the Deferred Compensation Agreement. (Incorporated by reference
to Exhibit 10.28 contained in the 1993 Form S-1.)
10.42* Deferred Compensation Agreement between the Company and James H.
McCorkle, III, dated June 14, 1999.
10.43* Trust Agreement between the Company and First Citizens Bank and
Trust Company, dated June 14, 1999.
10.44* Executive Bonus Plan of the Company, adopted February 2, 1990, as
amended March 5, 1990. (Incorporated by reference to Exhibit
10.29 contained in the 1993 Form S-1.)
10.45* Executive Bonus Plan of the Company, adopted July 20, 1993.
(Incorporated by reference to Exhibit 10.30 contained in the 1993
Form S-1.)
10.46* Resolutions of the Company's Board of Directors dated November
15, 1995, extending Executive Bonus Plan adopted July 20, 1993.
(Incorporated by reference to Exhibit 10.34 contained in the
Company's 1995 Form 10-K.)
10.47 Redemption Agreement between the Company and Robert S. Speizman,
dated May 31, 1974, as amended by Modified Redemption Agreement,
dated April 14, 1987, Second Modified Redemption Agreement, dated
September 30, 1991, and Third Modified Redemption Agreement,
dated as of July 14, 1993. (Incorporated by reference to Exhibit
10.34 contained in the 1993 Form S-1.)
10.48 Fourth Modified Redemption Agreement between the Company and
Robert S. Speizman, dated September 14, 1994. (Incorporated by
reference to Exhibit 10.36 contained in the Company's 1995 Form
10-K).
10.49 NationsBank of North Carolina, National Association $12,000,000
Credit Facility for Speizman Industries, Inc., dated April 19,
1994. (Incorporated by reference to Exhibit 10.45 contained in
the 1994 Form 10-K.)
10.50 1995 Consolidated Amendment Agreement to Loan Agreement and
Related Documents dated May, 1995. (Incorporated by reference to
Exhibit 10.38 contained in the Company's 1995 Form 10-K)
10.51 1995 Second Consolidated Amendment Agreement to Loan Agreement
and Related Documents, dated September 1, 1995. (Incorporated by
reference to Exhibit 10.43 contained in the Company's 1996 Form
10-K.)
10.52 1995 Third Consolidated Amendment Agreement to Loan Agreement and
Related Documents, dated October 31, 1995. (Incorporated by
reference to Exhibit 10.44 contained in the Company's 1996 Form
10-K.)
10.53 1996 First Consolidated Amendment Agreement to Loan Agreement and
Related Documents, dated May 15, 1996. (Incorporated by reference
to Exhibit 10.45 contained in the Company's 1996 Form 10-K.)
10.54 1996 Second Consolidated Amendment Agreement to Loan Agreement
and Related Documents, dated June 26, 1996. (Incorporated by
reference to Exhibit 10.46 contained in the Company's 1996 Form
10-K.)
10.55 1996 Third Consolidated Amendment Agreement to Loan Agreement and
Related Documents, dated August 26, 1996. (Incorporated by
reference to Exhibit 10.47 contained in the Company's 1996 Form
10-K.)
10.56 NationsBank $25,000,000 Amended and Restated Credit Facility,
dated December 19, 1996. (Incorporated by reference to Exhibit
10.47 contained in the Company's 1997 Form 10-K.)
10.57 NationsBank $37,000,000 Amended and Restated Credit Facility,
dated July 31, 1997. (Incorporated by reference to Exhibit 10.48
contained in the Company's 1997 Form 10-K.)
10.58 NationsBank Letter increasing Term Loan by $1.3 million, dated
February 4, 1998. (Incorporated by reference to Exhibit 10.55
contained in the Company's 1998 Form 10-K.)
10.59 1998 First Amendment Agreement to $37,000,000 Amended and
Restated Loan Agreement and Term Note dated as of February 6,
1998. (Incorporated by reference to Exhibit 10(a) contained in
the Company's January 2, 1999 Form 10-Q.)
10.60 1998 Second Amendment Agreement to $37,000,000 Amended and
Restated Loan Agreement and Term Note dated as of December 30,
1998. (Incorporated by reference to Exhibit 10(b) contained in
the Company's January 2, 1999 Form 10-Q.)
10.61 1999 First Amendment Agreement to $37,000,000 Amended and
Restated Loan Agreement and Term Note dated as of May 17, 1999.
10.62 1999 Second Amendment Agreement to $37,000,000 Amended and
Restated Loan Agreement and Term Note dated as of August 27,
1999.
10.63 1999 Third Amendment Agreement to $37,000,000 Amended and
Restated Loan Agreement and Term Note dated as of September 27,
1999.
10.64 Stock Purchase Agreement, dated as of July 31, 1997, by and among
Speizman Industries, Inc. and Wink Davis, Jr., C. Alexander
Davis, Wingfield Austin Davis IIII, Taylor Ferrell Davis, Allison
Davis Jabaley, Matthew Worley Davis, Amy Butler Davis and Kyle
Alexander Davis. (Incorporated by reference to Exhibit 3
contained in the Company's Current Report on Form 8-K, File No.
0-8544, filed on August 14, 1997.)
10.65 Dealer Agreement by and between Pellerin Milnor Corporation and
Wink Davis Equipment Company, Inc. ("Wink Davis"), dated July 1,
1989, relating to the Company's distribution of machines
primarily in the southeastern United States and the Chicago,
Illinois area. (Incorporated by reference to Exhibit 10.50
contained in
<PAGE>
the Company's 1997 Form 10-K.)
10.66 Distributor Agreement by and between Chicago Dryer Corporation
("CDC") and Wink Davis, dated January 1, 1994, relating to the
distribution of certain items of CDC's commercial laundry
equipment. (Incorporated by reference to Exhibit 10.51 contained
in the Company's 1997 Form 10-K.)
10.67 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Atlanta, Georgia area.
(Incorporated by reference to Exhibit 10.52 contained in the
Company's 1997 Form 10-K.)
10.68 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Charlotte, North Carolina
area. (Incorporated by reference to Exhibit 10.53 contained in
the Company's 1997 Form 10-K.)
10.69 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Wooddale, Illinois area.
(Incorporated by reference to Exhibit 10.54 contained in the
Company's 1997 Form 10-K.)
10.70 Atlanta Commercial Board of Realtors Standard Commercial Lease
Agreement by and among Davis Brothers Venture and Wink Davis,
dated July 31, 1997 relating to the Chester, Virginia area.
(Incorporated by reference to Exhibit 10.55 contained in the
Company's 1997 Form 10-K.)
10.71 Letter Agreement by the Company and Wink Davis relating to the
Charlotte, North Carolina, Richmond, Virginia and Chicago,
Illinois locations, dated August 10, 1999.
10.72 Earnout Agreement by and among Speizman Industries, Inc. and C.
Alexander Davis, Amy Butler Davis, Taylor Ferrell Davis and Kyle
Alexander Davis, dated July 31, 1997. (Incorporated by reference
to Exhibit 10.56 contained in the Company's 1997 Form 10-K.)
10.73 Stock Purchase Agreement, dated as of February 6, 1998, by and
among Speizman Industries, Inc. and William H. Todd, Leon
Locklear, Marion C. Todd and Joseph L. Collins. (Incorporated by
reference to Exhibit 10.64 contained in the Company's 1998 Form
10-K.)
10.74 Lease Agreement by and between William H. Todd and wife, Jo Anne
Todd and Todd Motion Controls, Inc., dated February 6, 1998, for
the Reynolda facility. (Incorporated by reference to Exhibit
10.65 contained in the Company's 1998 Form 10-K.)
10.75 Agreement to Lease between Todd Motion Controls, Inc. and Douglas
I. Cook, et al., dated September 1, 1996, for the Patterson
Avenue facility. (Incorporated by reference to Exhibit 10.66
contained in the Company's 1998 Form 10-K.)
10.76 Agreement to Lease between Todd Motion Controls, Inc. and Douglas
I. Cook, et al., dated September 3, 1999, for the Patterson
Avenue facility.
21 List of Subsidiaries
23 Consent of BDO Seidman
27 Financial Data Schedule
* Represents a management contract or compensatory plan or arrangement of the
Registrant.
SPEIZMAN YARN MACHINES AGREEMENT
TO BE THE EXCLUSIVE DISTRIBUTOR FOR
MARZOLI IN THE UNITED STATES AND CANADA
1. Speizman Yarn Machines will become the exclusive distributor for all
Marzoli and Vouk products in the United States and Canada. Speizman
would not purchase shares of Marzoli International. Speizman is buying
certain assets and assuming certain commitments as outlined below.
2. Sales of machines, sales of spare parts, technical assistance (both
mechanical and electronic) for customers in the territory, advertising,
local exhibitions not including international exhibitions, financing of
customers, responsibility for collections of accounts.
3. Speizman will pay for the transportation of machines to the show and
return to Italy. Marzoli should pay the expenses for the erection
people who come from Italy to set up for the show.
4. For the time being, Speizman will purchase the parts and machines CIF
Charleston, South Carolina, or CIF Canadian port, payable against a
60-day irrevocable letter of credit from shipment. In the future, in
order to be more price competitive, Speizman may want to buy these
machines crated sea shipment FOB Vouk and Marzoli's plant. However, for
the first few deals, I think it would safer for both of us to continue
with the CIF Charleston, South Carolina or Canadian port. Included in
the CIF price, Marzoli and Vouk agree to pay for the cost of the
assembly and start-up technicians.
5. Speizman will be responsible for training mill personnel, either with
its own technicians or by paying for such technicians to come from
Marzoli or Vouk. Speizman will send technicians to Marzoli and Vouk for
training. Marzoli and Vouk agree to give the people that we send for
training someone who can speak English to help instruct them. The
Customer and/or Speizman will pay for transportation, salary, food and
lodging for these technicians. Marzoli and Vouk will pay for the
lunches. Marzoli and Vouk commit to have people available at the time
that these technicians come to devote their full attention to training
them.
6. Speizman will be responsible for maintaining an acceptable of spare
parts, both mechanical and electric, as well as electronic, in the U.S.
and Canadian offices. Speizman may, from time to time, buy parts
domestically if the prices are much cheaper in the U.S. than they are
from Italy, particularly if this expedite shipment of the parts and
they are comparable to the parts supplied from Italy.
7. Speizman will promote the sale of equipment through direct sales with
sales representatives and trade magazines in their territory. If a
customer in the territory purchases a Marzoli or Vouk machine from
Speizman and ships them to Mexico,
Page 1/3
<PAGE>
Speizman will make the sale. If a U.S. or Canadian customer goes to
Mexico and buys a Marzoli or Vouk machine, then Speizman will not
receive credit for the sale.
8. Marzoli and Speizman agree to the following disposition of the assets
currently at Marzoli USA:
A. All personnel. Effective August 1, 1998, Speizman Yarn Machines will
be responsible for the salaries, commissions and all expenses of all
personnel currently employed by Marzoli USA. Speizman will have the
exclusive right to hire and dismiss all personnel in the USA and
Canadian operations.
B. All current office equipment owned by Marzoli International will be
reviewed by both Marzoli Italy and Speizman and Speizman will pay a
fair price based on current market condition for that equipment which
Speizman will need to continue the operation of Marzoli USA.
C. Spare parts inventory. Speizman agrees at the time of signing of
this contract, to pay Marzoli $150,000 for the spare parts that are
currently in Spartanburg. As soon as the sale of parts at their cost
value of $150,000 is exceeded through sales cost, Speizman will pay for
the other parts that are currently in inventory as they are sold on a
monthly basis through 12/31/99. In December 1999, Speizman and Marzoli
will determine if the parts that have not been sold will either be sent
back to Marzoli or thrown away. Those parts that are still active as
determined by Speizman and Marzoli will be purchase at their agreed
upon price by Speizman and Marzoli.
9. Showroom installation. Speizman would not be able to effectively sell
machines without this showroom installation. As soon as Marzoli and
Vouk present their latest technology, Speizman would agree to the
following:
A. Marzoli will fax Speizman the price that Marzoli must net for the
current showroom equipment. Speizman is responsible for adding any
profit that they might make to these prices.
B. As Marzoli and Vouk introduce new pieces of equipment to their
product range, they will fax Speizman their new prices of each piece of
equipment. Marzoli and Vouk will inform Speizman to begin selling part
of the old line and what price they want to net for each piece of
equipment in the old line. After Speizman sells the equipment and
collects the money, Speizman will forward the money to Marzoli and
Vouk.
This will be done on piece at a time rather than all at one
time. This process will continue on a revolving basis. Speizman will
commit to pay for the cost of the new
Page 2/3
<PAGE>
equipment for the USA showroom with equal monthly payments at LIBOR
plus 1% interest on the unpaid balance over a 36-month period.
10. Marzoli agrees to pay the IRS the $120,000 due the IRS before removing
the funds from the current Marzoli U.S. company.
11. Speizman Yarn Machines will be responsible for the leasing of the
building as well as all of the apartments. At Speizman's expense and
risk, Speizman will try to sublet the current building and move the
facility to Charlotte if it is possible without disrupting the current
personnel.
12. PRICING. Marzoli agrees to sell Speizman Industries Marzoli and Vouk
equipment, CIF Charleston, South Carolina, with the installation and
erection group from Italy, included in the price. Marzoli and Speizman
will agree upon prices based in market conditions to sell the Vouk and
Marzoli equipment in the USA and Canada.
As mentioned above in Item, it would be best for the first few sales to
continue with the practice of selling the equipment of Speizman
purchasing the equipment CIF Charleston or Canadian port. After we both
understand our pricing and cost better, I believe it would be more
efficient for Speizman to buy the machines crated for sea shipment FOB
the Marzoli or Vouk factories. We could then add in a rate which you
would give us for the erection team for each deal.
13. The contract both Marzoli and Vouk will be valid from July 15, 1998 and
will expire on December 31, 2000.
F.LLI MARZOLI C. S.P.A. /s/ Robert S. Speizman, President
- - ---------------------------------
- - ---------------------------------
Page 3/3
ADDENDUM TO THE SPEIZMAN
YARN MACHINES AGREEMENT TO BE THE EXCLUSIVE
DISTRIBUTOR FOR MARZOLI IN THE UNITED STATES AND CANADA
(Original agreement signed and dated on or about July 15, 1998)
1. Speizman Industries, Inc./Speizman Yarn Equipment, Inc. (Speizman) will
retain the exclusive right to sell all spare parts in the United States
and Canada. Speizman will maintain the inventory reporting system so
that consignment spare parts are segregated from new spare part
purchases. Reports on spare part sales will be submitted monthly to
Marzoli International, Inc. (Marzoli).
2. Speizman will assume the right to sell Marzoli and Vouk machines in the
United States and Canada as the exclusive agent of Marzoli-Italy,
Vouk-Italy and Marzoli International. Marzoli-Italy and Vouk-Italy will
submit quotations for new machinery directly to the customer with a
commission percentage included for Speizman Yarn Equipment. The
commission percentage will be subject to negotiation with Speizman Yarn
Equipment, Inc. on a case by case, i.e. quote by quote, customer by
customer basis and shall be neither fixed nor guaranteed until the
final selling price is negotiated with the customer. Sales will be
received and recorded in the accounts of Marzoli International.
Commission will be earned upon receipt of the signed sales orders and
commissions will be paid to Speizman within 30 days after receipt of
full payment from the customer and in no case will Speizman's
commission be less than 3%.
3. The following expenses will be paid for by Marzoli:
o Rent of office/warehouse space at 100 Corporate Drive,
Spartanburg, SC.
o Utilities and other operating costs of rental space.
o Cost to administer the payroll and management of the facility either
as payroll costs or contract costs.
o Marzoli agrees to assume the lease at 100 Corporate Drive,
Spartanburg, SC at the end of the distributorship contract.
4. Speizman will be responsible for the cost of salesmen and all related
costs.
5. Speizman will be responsible for the cost of all personnel currently on
the Speizman payroll and any other personnel added in the future.
6. An invoice will be issued once a month for services rendered by
Marzoli. A base monthly amount of $31,000 will be due and payable to
Marzoli no later than the 15th of the month. The base amount will be
for technician services performed for that month and will be adjusted
either up or down for the actual amounts incurred for the prior month.
7. Marzoli and Vouk agree to leave the price of their spare parts to
Speizman unchanged until the end of the contract, barring any major
devaluation of the lira or other economic catastrophe.
<PAGE>
8. Marzoli agrees to assume booth rental costs of the ATME show in
Greenville, SC (October 23-27, 2000). Marzoli will reimburse to
Speizman $121,894 for deposits already paid and pay the remaining
balance of $121,894.
Marzoli, spa Speizman Industries, Inc.
/s/ Attilio Camozzi /s/ Robert S. Speizman
- - -------------------------- -----------------------------
Attilio Camozzi, President Robert S. Speizman, President
Dated 6/9/99
SPEIZMAN YARN EQUIPMENT, INC.
100 Corporate Drive, Suite A
P. O. Box 6351
Spartanburg, SC 29304 USA
June 15, 1999
Mr. Jordi Marlasca Martin
Margasa
Concordia, 12
08290 Cerdanyola del Valles, Spain
Dear Mr. Martin:
This letter will constitute our agreement for Speizman Yarn Equipment, Inc.
("Speizman") to act as the exclusive distributor for your equipment in the
United States and Canada, as follows:
1. APPOINTMENT: TERRITORY. You hereby appoint Speizman as the exclusive
distributor for Margasa Waste Recycling Equipment for textile and
related equipment in the United States of America and Canada, and their
territories and possessions. Speizman hereby accepts such appointment
and agrees to represent your interests in accordance with the terms of
this agreement.
2. TERM. The term of this agreement will last from this date until June
30, 2001. Thereafter, the term will be automatically extended for
successive one year periods, unless and until either party cancels this
agreement on six month's written notice to the other party.
3. DISTRIBUTOR. Speizman agrees to act as the exclusive distributor within
the territory for the said equipment manufactured by you. It will
purchase the equipment from you for resale on its own account. For each
purchase, Speizman will open an irrevocable letter of credit with a
United States bank, payable 60 days after issuance of an on-board bill
of lading, F.A.S., Spanish port.
4. RESPONSIBILITIES OF SPEIZMAN. Speizman will actively promote the sale
of your equipment within the territory.
<PAGE>
A. Speizman will be responsible for delivering and installing the
equipment, paying any clearance fees, insurance and duties.
B. Speizman will be responsible for training personnel and advertising
within the territory.
C. Speizman will maintain a reasonable amount of spare parts in the
territory.
5. YOUR RESPONSIBILITIES. Your responsibilities include the following:
A. You will supply equipment that meets the electrical and safety
standards of the United States and Canada.
B. You will have available English speaking people in your technical,
commercial and parts departments to communicate directly with
Speizman employees.
C. You will have technical personnel available to come to the territory
to teach Speizman technicians as well as its customers how to
install, service and maintain your equipment.
D. You will indemnify and hold Speizman harmless from and against all
claims that the equipment infringes any United States or Canadian
patent, including reasonable attorney's fees and expenses; provided,
however, that Speizman will give you prompt written notice of any
such claim, will not settle such claim without your prior consent,
and will cooperate with you in defense or settlement thereof,
without expense to Speizman.
6. EXHIBITIONS. Speizman agrees to pay for the floor space rental for your
equipment at local exhibitions within the territory. You agree to pay
for the floor space rental, as well as the expense of erection,
delivery and installation of your equipment at international
exhibitions which are held within the territory. "Local exhibitions"
include only those which deal with only potential customers from the
United States and Canada. "International exhibitions' all other textile
exhibitions which include potential customers from outside the
territory.
7. NOTICES. Any notice required to be given under this agreement will be
sent by the most expeditious means available paid by sender, to the
addresses shown at the beginning of this letter agreement, or to such
other address as either party may hereinafter designate in writing by
the same method of notice.
8. ASSIGNMENT. Neither party may assign its rights or obligations under
this agreement without the prior written consent of the other party.
9. INDEPENDENT CONTRACTORS. Nothing in this agreement will be construed to
create an agency agreement between the parties. Speizman is an
independent contractor, and accordingly, neither party will be liable
for any debts, accounts, obligations or other
<PAGE>
liabilities or torts of the other party, or its agents or employees,
except as this agreement may otherwise expressly provide.
10. CONSTRUCTION. This agreement will be construed in accordance with the
laws of North Carolina, United States of America. The parties
acknowledge the jurisdiction of courts sitting therein to resolve any
disputes which may arise hereunder.
If any provision of this agreement is found to be unenforceable, the validity of
the other provisions will not be affected. This letter contains the entire
agreement of the parties. It may be modified only by a written agreement signed
by each party. The waiver by either party of any breach by the other party of
any provision herein will not be deemed to be a waiver of any later or other
breach of this agreement.
We look forward to working with you and to a successful venture together. If the
foregoing accurately represents our mutual intent, please sign and return the
enclosed copy of this letter.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
AGREED AND ACCEPTED: Sincerely yours,
MARGASA PROYECIOS E. Ingenieria Textil, SL SPEIZMAN YARN EQUIPMENT, INC.
By: s/s Jordi Marlasca Martin By: /s/ Robert S. Speizman, President
-------------------------- ---------------------------------
Date: 23/06/99 Date: 6/28/99
</TABLE>
SPEIZMAN YARN EQUIPMENT, INC.
100 Corporate Drive, Suite A
P. O. Box 6351
Spartanburg, SC 29304 USA
June 15, 1999
Mr. Alessandro Badiali
Meccanica Carresi
Via Argine Arno, 28/e
52028 Terranuova Bracciolini
(Arezzo)
ITALY
Dear Mr. Badiali:
This letter will constitute our agreement for Speizman Yarn Equipment, Inc.
("Speizman") to act as the exclusive distributor for your equipment in the
United States and Canada, as follows:
1. APPOINTMENT: TERRITORY. You hereby appoint Speizman as the exclusive
distributor for Meccanica Carresi for textile and related equipment in
the United States of America and Canada, and their territories and
possessions. Speizman hereby accepts such appointment and agrees to
represent your interests in accordance with the terms of this
agreement.
2. TERM. The term of this agreement will last from this date until
December 31, 1999. Thereafter, the term will be automatically extended
for successive one year periods, unless and until either party cancels
this agreement on six month's written notice to the other party.
3. DISTRIBUTOR. Speizman agrees to act as the exclusive distributor within
the territory for the said equipment manufactured by you. It will
purchase the equipment from you for resale on its own account. For each
purchase, Speizman will open an irrevocable letter of credit with a
United States bank, payable 60 days after issuance of an on-board bill
of lading, F.A.S., Italian port.
4. RESPONSIBILITIES OF SPEIZMAN. Speizman will actively promote the sale
of your equipment within the territory.
<PAGE>
A. Speizman will be responsible for delivering and installing the
equipment, paying any clearance fees, insurance and duties.
B. Speizman will be responsible for training personnel and advertising
within the territory.
C. Speizman will maintain a reasonable amount of spare parts in the
territory.
5. YOUR RESPONSIBILITIES. Your responsibilities include the following:
A. You will supply equipment that meets the electrical and safety
standards of the United States and Canada.
B. You will have available English speaking people in your technical,
commercial and parts departments to communicate directly with
Speizman employees.
C. You will have technical personnel available to come to the territory
to teach Speizman technicians as well as its customers how to
install, service and maintain your equipment.
D. You will indemnify and hold Speizman harmless from and against all
claims that the equipment infringes any United States or Canadian
patent, including reasonable attorney's fees and expenses; provided,
however, that Speizman will give you prompt written notice of any
such claim, will not settle such claim without your prior consent,
and will cooperate with you in defense or settlement thereof,
without expense to Speizman.
6. EXHIBITIONS. Speizman agrees to pay for the floor space rental for your
equipment at local exhibitions within the territory. You agree to pay
for the floor space rental, as well as the expense of erection,
delivery and installation of your equipment at international
exhibitions which are held within the territory. "Local exhibitions"
include only those which deal with only potential customers from the
United States and Canada. "International exhibitions' all other textile
exhibitions which include potential customers from outside the
territory.
7. NOTICES. Any notice required to be given under this agreement will be
sent by the most expeditious means available paid by sender, to the
addresses shown at the beginning of this letter agreement, or to such
other address as either party may hereinafter designate in writing by
the same method of notice.
8. ASSIGNMENT. Neither party may assign its rights or obligations under
this agreement without the prior written consent of the other party.
9. INDEPENDENT CONTRACTORS. Nothing in this agreement will be construed to
create an agency agreement between the parties. Speizman is an
independent contractor, and accordingly, neither party will be liable
for any debts, accounts, obligations or other
<PAGE>
liabilities or torts of the other party, or its agents or employees,
except as this agreement may otherwise expressly provide.
10. CONSTRUCTION. This agreement will be construed in accordance with the
laws of North Carolina, United States of America. The parties
acknowledge the jurisdiction of courts sitting therein to resolve any
disputes which may arise hereunder.
If any provision of this agreement is found to be unenforceable, the validity of
the other provisions will not be affected. This letter contains the entire
agreement of the parties. It may be modified only by a written agreement signed
by each party. The waiver by either party of any breach by the other party of
any provision herein will not be deemed to be a waiver of any later or other
breach of this agreement.
We look forward to working with you and to a successful venture together. If the
foregoing accurately represents our mutual intent, please sign and return the
enclosed copy of this letter.
AGREED AND ACCEPTED: Sincerely yours,
MECCANICA CARRESI SPEIZMAN YARN EQUIPMENT, INC.
By: /s/ Alessandro Badiali By: /s/ Robert S. Speizman, President
------------------------ ---------------------------------
Date July 15, 1999
[ SPEIZMAN INDUSTRIES LETTERHEAD ]
April 30, 1999
Speizman Brothers Partnership
c/o Speizman Industries, Inc.
701 Griffith Road
Charlotte, NC 28217
ATTN: Mr. Robert Speizman
Dear Bob:
As you know, we are in the process of moving our offices and warehouse space
from the 508 W. Fifth Street location to 701 Griffith Road. As we vacate
portions of the building, we will pay rent on a pro rata share of space still
occupied.
I have attached a copy of the payment schedule based on agreed upon dates for
vacating areas of the building. We appreciate your patience in working with us
as we endeavor to make this move as smooth as possible.
Sincerely,
SPEIZMAN INDUSTRIES, INC.
/s/ James H. McCorkle, III
James H. McCorkle, III
Chief Financial Officer
JHM,III:dr
Enclosure
<PAGE>
SPEIZMAN BROTHERS PARTNERSHIP
508 W. FIFTH STREET
CHARLOTTE, NC
<TABLE>
<CAPTION>
RENT SCHEDULE
<S> <C> <C> <C>
- - ------------------------------------ -------------------- --------------------------------
RENT AMOUNT % OF TOTAL SQUARE FOOTAGE
- - ------------------------------------ -------------------- --------------------------------
April 1999 $29,668.57 100.0%
- - ------------------------------------ -------------------- --------------------------------
May 1999 19,6779.00 66.7%
- - ------------------------------------ -------------------- --------------------------------
June 1999 19,6779.00 66.7%
- - ------------------------------------ -------------------- --------------------------------
July 1999 17,207.77 58.0%
- - ------------------------------------ -------------------- --------------------------------
August 1999 17,207.77 58.0%
- - ------------------------------------ -------------------- --------------------------------
September 1999 10,384.00 35.0%
- - ------------------------------------ -------------------- --------------------------------
October - December 1999 (est.) 6,527.09 22.0%
- - ------------------------------------ -------------------- --------------------------------
</TABLE>
NORTH CAROLINA
LEASE AGREEMENT
---------------
COUNTY OF MECKLENBURG
THIS LEASE AGREEMENT is executed effective as of June 23, 1999, by and
between THE SPEIZMAN LLC, a North Carolina limited liability company, ("Lessor")
and SPEIZMAN INDUSTRIES, INC., a North Carolina Corporation, ("Lessee").
1. LEASE OF THE PREMISES. Upon the terms and conditions contained
herein, Lessor hereby leases to Lessee, and Lessee hereby leases and lets from
Lessor, the premises consisting of a new metal building of about 100,400 square
feet, and improvements associated therewith, on the land previously leased by
the Lessor to the Lessee by Lease dated October 29, 1997, as amended, located at
701 Griffith Road, Charlotte, North Carolina and more particularly described on
Exhibit "A" attached hereto and incorporated herein by reference (the
"Premises"). Provided, however, that upon Lessor's satisfaction of its lender's
obligations for releasing Tracts 2 and 3 of the Premises or any portion thereof
or the approximately 2.0 acre tract shown on Exhibit "B" to the Deed of Trust in
favor of such Lender from the lien in favor of West Coast Life Insurance Company
of even date herewith (as evidenced in the Deed of Trust and Security Agreement
securing said lien), Lessee shall be obligated to enter into an amendment of
this Lease deleting all or any portion of such property, as applicable, from
this Lease, without modification of rent or any other term of this Lease.
2. TERM. The term of this Lease shall commence as of the date hereof
and shall end on September 30, 2012; provided, however, that if Lessee remains
in possession of the Premises after expiration of the term hereof, with Lessor's
acquiescence and without any express agreement of the parties, Lessee shall be a
tenant at will at the rental rate then in effect at the end of the term.
Provided, further, that if Lessee remains in possession of the Premises after
expiration of the terms hereof without Lessor's acquiescence, Lessee shall be a
tenant at sufferance and commencing on the date following the date of expiration
of the term, the monthly rental payable under paragraph 3 hereof shall be, for
each month or fraction thereof during which Lessee remains in possession of the
Premises, 200% of the monthly rental otherwise payable under paragraph 3 hereof.
Provided, finally, that in any event of holding over after the end of the term
of the Lease, there shall be no renewal or extension of the Lease by operation
of law or otherwise.
3. RENT. Lessee shall pay to Lessor as rental for the Premises the sum
of Thirty-Three Thousand Eight Hundred Eighty-Five and no/100's Dollars
($33,885.00 per month, payable on or before the fifth (5th) day of each calendar
month during the term thereof. To the extent the first or last month of the term
of this Lease is less than a full calendar month, rental for such month shall be
prorated on a daily basis. Provided, however, that the monthly rental payable
hereunder shall be increased (but not decreased) each November 1 by any change
in the Consumer Price Index, Urban Wage Earners and Clerical Workers (CPI-W,
1982-84=100) ("Index") by multiplying the then in effective monthly rental by
the value of said Index for the month two months prior to the then present
November 1 (or nearest available month) and dividing the product by the value of
said Index for the month two months prior to the then previous November 1 (or
nearest available month). In the event that the Index ceases to be published,
there shall be substituted for the Index the measure published by the U.S.
Department of Labor which most nearly approximates the Index.
<PAGE>
4. CONDITION OF THE PREMISES. Lessee acknowledges that it has inspected
the Premises and accepts same in their present condition and state of repair.
Lessee acknowledges that neither Lessor nor any of Lessor's officers or agents
have made any representation or warranty regarding the condition or state of
repair of the Premises or the suitability of the Premises for Lessee's intended
use.
5. USE OF THE PREMISES. Lessee agrees to use the Premises solely for
light manufacturing, offices and a distribution facility, or such other uses as
may be permitted by I-2 zoning or such other future zoning as may affect the
Premises. Lessee shall not use the Premises in any manner that causes damage to
the Premises (exclusive of ordinary wear and tear) or which creates waste or a
nuisance. Lessee shall use the Premises in compliance, in all material respects,
with applicable laws and governmental regulations, ordinances, building and
zoning codes.
6. ALTERATIONS. Without the prior written consent of Lessor and
Lessor's lender, if any, Lessee shall not make any material alterations to the
Premises, save and except minor nonstructural alterations which are not of a
permanent nature and which do not injure or damage the Premises or decrease the
value thereof. In the event that any alterations or improvements to the Premises
are required to comply with any applicable laws, regulations or ordinances
affecting the Premises, Lessee shall give to Lessor prompt notice of such
requirement and shall promptly proceed to make such improvements or alterations
as required.
7. FIXTURES. Upon termination of this Lease, Lessee may remove any of
Lessee's trade fixtures from the Premises, excluding the basic building systems
such as air conditioning, heating, electricity, ventilation, lighting and
plumbing, and Lessee shall be responsible for repairing any damage to the
Premises caused by such removal.
8. MAINTENANCE AND REPAIRS. Except as expressly provided otherwise in
this Lease, Lessor shall be responsible for maintaining the exterior walls, roof
(including roof leak repairs) and other structural components of the building
situated on the Premises, along with basic systems for electricity, air
conditioning, heat, water and plumbing, in a normal, reasonable and habitable
condition and state of repair, consistent in all respects with the condition and
state of repair existing at the commencement of this Lease, ordinary wear and
tear excepted. Lessee shall pay normal operating expenses with respect to the
Premises, including costs for ordinary maintenance of the electrical, heat, air
conditioning, and water and plumbing systems which are necessary for the normal
and customary operation thereof, but Lessee shall not be responsible for any
repairs, replacements or overhauls of such systems. Lessee shall maintain the
exterior grounds of the Premises in a neat and orderly condition, and shall
furnish all light bulbs for use on or in respect of the Premises.
9. INSURANCE.
(a) CASUALTY INSURANCE. During the term of this Lease,
Lessee shall maintain and keep in full force and
effect, at its cost, a standard comprehensive fire
and extended coverage policy of insurance with
respect to the Premises naming Lessor and Lessee as
insured as their interests appear, and providing a
minimum aggregate limit on coverage of not less than
the full insurable value of the improvements thereon.
Such policy shall provide coverage
2
<PAGE>
against casualties and perils normally covered by a
standard fire and extended coverage insurance policy
for similar properties, shall provide for loss of
rents coverage, and shall be in such amounts and
coverages as are required by any lender of Lessor.
Lessee shall have the responsibility to determine
whether to maintain casualty insurance with respect
to Lessee's personalty and business interruption
insurance for Lessee's own benefit.
(b) LIABILITY INSURANCE. During the term of this Lease,
Lessee shall maintain and keep in full force and
effect, at its cost, a standard commercial general
policy of liability insurance insuring both Lessor
and Lessee against liabilities customarily insured
against under such policies arising out of the use of
the Premises. Such insurance shall provide an
aggregate limit on coverage of not less than
$2,000,000 per occurrence, $4,000,000 aggregate
general limit per policy year, and $2,000,000
property damage or such amounts as are required by
any lender of Lessor.
(c) CERTIFICATE OF INSURANCE. Lessee shall furnish to
Lessor, upon request, (i) a certificate of insurance
showing such insurance to be in full force and
effect, and (ii) proof that the premiums necessary to
keep said insurance in full force and effect have
been timely paid.
(d) INSURANCE COMPANIES AND CANCELLATION. Insurance
required hereunder shall be maintained with sound and
reputable insurance companies reasonably satisfactory
to the parties or as required by any lender of
Lessor, and no such policy shall be cancelable or
subject to reduction of coverage except after thirty
(30) days prior written notice to the party not
responsible for the maintenance of such insurance and
Lessor's lender, provided that Lessee may satisfy its
obligations hereunder, in whole or in part, by means
of a so-called blanket policy or under a
self-insurance program should Lessee prove to Lessor
and Lessor's lender that its tangible net worth is
greater than $100,000,000.00.
(e) WAIVER OF SUBROGATION. Lessor and Lessee hereby waive
any and all rights of recovery against the other, and
against the officers, directors, employees, agents
and representatives of the other, for loss or damage
suffered by such waiving party with respect to any
events or circumstances relating to the Premises to
the extent such loss or damage is covered by
applicable insurance; provided, the insurance company
actually makes payment on the policy. The insuring
party shall, prior to obtaining the policies of
insurance required hereunder, give notice to the
insurance carrier that the foregoing mutual waiver of
subrogation is contained in this Lease and shall
request such insurance carrier to issue a customary
endorsement to the policy to permit such waiver of
subrogation to the extent necessary in order to
prevent such waiver from invalidating any such
applicable insurance.
10. TAXES. Lessee shall pay all real property taxes and special
assessments applicable (and any penalties for late payment associated therewith)
to the Premises during the term of this
3
<PAGE>
Lease no later than the due date as shown on the bill therefor, whether such
bill is received directly from the taxing authority or Lessor. Such taxes shall
be prorated between Lessor and Lessee for any partial year of the Lease term on
a prorata daily basis. Such tax payment shall be made by Lessee within twenty
(20) days after notice thereof to Lessee (but in any event, before same shall
become delinquent), provided, however, to the extent not previously paid, upon
termination of this Lease Lessee shall pay to Lessor its prorata share of any
such unpaid real estate taxes applicable to the term of this Lease based on the
last available tax statement. Lessee shall be solely responsible for paying any
taxes or governmental assessments levied upon Lessee's personal or business
property.
11. UTILITIES. Lessee shall be responsible for the payment of all
utility service charges utilized on or with respect to the Premises during the
term of this Lease, including, without limitation, electricity, gas, water,
sewage, trash pickup and telephone service.
12. INDEMNIFICATION. Lessee agrees to indemnify and hold Lessor
harmless from and against claims, liabilities, damages, costs and expenses
(including reasonable attorneys fees) incurred by or asserted against Lessor as
a result of Lessee's use of the Premises during the term of this Lease.
13. DAMAGE OR DESTRUCTION OF THE PREMISES. Subject to the terms of the
lien of any first lien mortgage, deed of trust or other first lien security
interest in the Premises, in the event the Premises are damaged or destroyed by
vandalism, fire, storm, wind or other casualty, the insurance proceeds from the
casualty insurance maintained pursuant to the terms hereof shall be utilized to
repair, as soon as practical, the damaged portion of the Premises so as to
restore the Premises to a condition substantially the same in all material
respects as the condition existing immediately before such casualty to the
extent of net insurance proceeds available to Lessor for repair. The rent
payable pursuant to this Lease for the period during which such damaged
condition continues shall be reasonably and equitably abated in proportion to
the degree to which Lessee's use of the Premises is impaired.
14. RIGHT OF ENTRY. At all times during the term of this Lease, Lessor
and Lessor's officers, agents and representatives shall have the right to enter
into and upon the Premises for purposes of inspecting the same.
15. CONDEMNATION. In the event all or any part of the Premises are
taken under power of eminent domain, the rental provided hereunder shall be
reduced in proportion to which the value of the property taken bears to the
whole value of the Premises immediately prior to such condemnation. After any
such taking, if the residue of the Premises is reasonably inadequate for
Lessee's intended use thereof as contemplated hereby, Lessee shall have the
option to terminate this Lease by giving written notice thereof to Lessor. All
damages awarded and condemnation proceeds received shall be payable to Lessor,
provided that Lessee may make a separate claim for its undepreciated leasehold
improvements, moving expenses or the like so long as such claim does not reduce
any potential claim of Lessor.
16. FAILURE BY LESSEE TO PAY EXPENSES. In the event Lessee fails to pay
any cost or expense with respect to the Premises required to be paid by Lessee
hereunder, Lessor shall have the option, in its discretion, to pay such cost or
expense and recover the same from Lessee as additional rent which sum shall be
payable with interest thereon at the rate of eight percent (8%) per
4
<PAGE>
annum, within ten (10) days after demand by Lessor.
17. ASSIGNMENT OR SUBLETTING. Lessee shall not assign, transfer, or
mortgage this Lease, nor shall Lessee sublease all or any part of the Premises
without Lessor's prior written consent. In the event of any assignment, transfer
or subletting, Lessee shall remain primarily liable for all obligations under
the Lease (except as may be expressly agreed by the parties and consented to by
Lessor's lender).
18. ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. During the term of this Lease, Lessee
shall comply with all applicable Environmental Laws
(as hereinafter defined) and shall not place or
store, handle or dispose of any Hazardous Substances
(as hereinafter defined) in, on or under the Premises
except as permitted by applicable law and appropriate
governmental authorities. If requested by Lessor,
Lessee shall furnish Lessor with copies of all
environmental permits, if any, required by
governmental authorities with competent jurisdiction
with respect to the Premises or Lessee's operations
at the Premises. During the term of this Lease,
Lessee shall promptly notify Lessee in the event of
Lessee's discovery of, or Lessee's receipt of notice
concerning, any Hazardous Substances which are
located on or under or adjacent to, or are being or
have been released from, the Premises.
(b) INDEMNIFICATION. Lessee hereby indemnifies Lessor and
holds Lessor harmless from and against all loss,
liability, damage, expense, claim, cost, fine or
penalty, including costs of investigation and
remediation, suffered or incurred by Lessor as a
result of (i) the violation by Lessee (or Lessee's
subtenants or assignees, or the agents, contractors,
customers or employees of same during the term of the
Lease of any Environmental Law, (ii) any Hazardous
Substances placed or disposed of on or under the
Premises or any adjacent premises by Lessee, its
agents, contractors, customers, employees (or
Lessee's subtenants or assignees, or the agents,
contractors, customers or employees of same) during
the term of this Lease, or (iii) any exacerbation
during the term of this Lease of any existing
environmental condition by Lessee, its agents,
contractors, customers, employees (or Lessee's
subtenants or assignees, or the agents, contractors,
customers or employees of same). The foregoing
indemnities shall survive and remain in effect
following the termination of this Lease. Lessor's
remedies hereunder against Lessee are not exclusive
of common law and statutory remedies otherwise
available to Lessor, and shall not be affected in any
way if the liability or claim for which
indemnification is sought arises by reason of strict
liability. Lessor acknowledges that an above-ground
diesel storage tank exists and is operated by Lessee
on the Premises.
(c) DEFINITIONS.
------------
(i) "Remediation," for purposes of this Lease,
shall mean all direct and
5
<PAGE>
indirect costs (including costs by way of
reimbursement of any regulatory agency)
reasonably incurred in connection with or
arising out of the investigation and
remediation of any of the matters covered by
the foregoing indemnities, including by way
of illustration and without limitation,
reasonable attorney's fees, investigation
costs, penalties, fines and interest imposed
by any regulatory authority, reasonable
investigative fees and consulting fees,
testing, costs of removal of contaminated
materials, transportation of contaminated
materials, and landfill or other off-site
disposal costs, reasonable costs of
replacement of contaminated materials
removed, reasonable costs of restoring the
Premises to substantially the condition
existing as of the date hereof, reasonable
costs of on-site treatment of contaminated
soil and groundwater, and reasonable costs of
digging wells and future monitoring.
(ii) The term "Hazardous Substances" is defined
for purposes of this Lease as that term is
defined under the Comprehensive Environmental
Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. Sections 9601 et
seq.) ("CERCLA"), and any implementing
regulations, and, in addition as including
any petroleum, crude oil or any fractions
thereof or any other substance or material
classified as toxic, hazardous or extremely
hazardous under any applicable federal, state
or local law, ordinance or requirement or any
governmental authority with competent
jurisdiction.
(iii) The term "Environmental Laws" is defined for
purposes of this Lease as meaning CERCLA, the
Resource Conservation and Recovery Act (42
U.S.C. Sections 6901 et seq.), and any other
federal, state or local law, statute,
ordinance, regulation or rule (A) concerning
hazardous, toxic or dangerous wastes,
substances or materials, or (B) pertaining to
the protection of the environment.
19. EVENTS OF DEFAULT. Any of the following shall be deemed an event of
default by Lessee under this Lease:
(a) Failure by Lessee to timely pay any installment of
rent or any other monetary obligation under this
Lease as and when due and payable;
(b) The breach by Lessee of any other term or provision
of this Lease, and the continuance thereof for a
period of ten (10) days after receipt by Lessee of
written notice thereof from Lessor, provided if such
breach is not reasonably capable of being cured
within such 10-day period, Lessee shall not be in
default hereunder to the extent it proceeds and
continues to proceed in good faith to cure such
breach as soon as reasonably practical;
(c) Lessee (i) making a general assignment for the
benefit of creditors, (ii) generally not paying its
debts as they become due, (iii) admitting in writing
6
<PAGE>
an inability to pay its debts as they become due,
(iv) filing a voluntary petition in bankruptcy, (v)
becoming insolvent, or (vi) filing a petition seeking
for itself any reorganization, arrangement,
composition, or readjustment of its debts or other
similar relief from its creditors generally; or
(d) An order or decree being entered by a court of
competent jurisdiction (i) adjudging Lessee as
bankrupt or insolvent, (ii) appointing a trustee,
receiver, liquidator, custodian or other similar
official for Lessee, or (iii) ordering the winding up
or liquidation of Lessee's affairs.
20. REMEDIES. Upon the occurrence of any event of default as provided
herein which is continuing, Lessor shall have the right to:
(a) Terminate this Lease and enter into and upon the
Premises, retake possession thereof and expel Lessee
therefrom, and to recover from Lessee all costs and
expenses (including reasonable attorneys' fees)
incurred by Lessor in connection with retaking
possession of the Premises;
(b) Recover from Lessee, upon demand, all rent or other
sums due or to become due to Lessor under the terms
of this Lease; provided, however, in the event Lessor
relets the Premises during the term hereof, Lessor
shall give credit to Lessee for the rent and other
sums actually collected by Lessor with respect to the
term of such Lease coinciding with the term of this
Lease, less any costs and expenses incurred by Lessor
in reletting the Premises; or
(c) Without terminating this Lease, Lessor may exercise
its options under subparagraphs (a) and (b) above
simultaneously.
(d) Exercise any other right or remedy available
hereunder or otherwise available at law or in equity.
Lessor may pursue any one or more of the foregoing remedies,
and pursuit of any of the foregoing remedies shall not prejudice the rights of
Lessor to pursue any other remedies.
21. QUIET ENJOYMENT. Provided Lessee performs its obligations and
covenants contained herein, Lessor covenants that Lessee shall peaceably and
quietly have, hold and enjoy the Premises during the term hereof free from
interference from Lessor and all persons claiming by or through Lessor.
22. SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE.
(a) Lessee's rights shall be subject to any bona fide
mortgage, deed of trust or other security interest
which is now or may hereafter be placed upon the
Premises by Lessor. Lessee shall, if requested by
Lessor or Lessor's lender, execute a separate
agreement reflecting such subordination and, further,
shall be obligated to execute such documentation as
may facilitate Lessor's sale or refinancing of the
Premises, including but not limited to an estoppel
7
<PAGE>
certificate substantially in the form attached hereto
as Exhibit "B" or a subordination, attornment and
non-disturbance agreement substantially in the form
attached hereto as Exhibit "C".
(b) In the event of a sale, assignment or transfer by
Lessor of its interest in the Premises or in this
Lease (whether by sale, default, foreclosure or
otherwise) to a successor in interest who expressly
assumes the obligations of Lessor under this Lease,
Lessor shall thereupon be released and discharged
from its obligations and covenants under this Lease,
except those obligations that have accrued prior to
such sale, assignment or transfer. Lessor's
assignment of this Lease, or any or all of its rights
in this Lease, shall not affect Lessee's obligations
hereunder, and Lessee shall attorn and look to the
assignee as Lessor, provided Lessee has first
received written notice of such assignment. Provided,
further, however, that in the event that a lender of
Lessor, its successors or assigns shall become the
owner of the Premises through foreclosure or other
similar judicial process, then, in that event, the
lender, its successors or assigns shall have the
right to cancel this Lease upon ninety (90) days
written notice to Lessee.
(c) Whether in connection with a sale or refinancing or
otherwise, Lessee shall be obligated to execute and
deliver to Lessor or its lender, an estoppel
certificate substantially in the form attached hereto
as Exhibit "B" or such other documentation as
reasonably may be requested by Lessor or its lender,
within fifteen (15) days of receipt of a written
request therefor.
23. LENDER'S NOTICE AND RIGHT TO CURE. Lessee agrees to be bound by and
to act in accordance with the provisions of paragraph 4 of Exhibit "C" of the
Lease, the same being incorporated herein as if fully set forth.
24. LESSOR'S DEFAULT. In the event of a default by Lessor under this
Lease, Lessee agrees that, in all events, Lessor's liability shall be limited to
the actual equity interest of Lessor in the Premises for the satisfaction of
Lessee's remedies under this Lease.
25. MISCELLANEOUS.
(a) FEES OF LEGAL COUNSEL. In the event either party to
this agreement shall employ legal counsel to protect
its rights hereunder or to enforce any term or
provision hereof, the party prevailing in any such
action shall have the right to recover from the other
party all of its reasonable attorneys' fees and
expenses incurred in relation to such claims.
(b) FURTHER ASSURANCES. The parties agree that from time
to time hereafter, upon request, each of them will
execute, acknowledge and deliver such other
instruments and documents and take such further
action as may be reasonably necessary to carry out
the intent of this agreement.
(c) MODIFICATION. Except as otherwise provided herein, no
term or provision
8
<PAGE>
contained herein may be modified, amended or waived
except by written agreement or consent signed by the
party to be bound thereby.
(d) BINDING EFFECT AND BENEFIT. This agreement shall
inure to the benefit of, and shall be binding upon,
the parties hereto, and their respective successors
and permitted assigns. Otherwise, this agreement
shall not create any rights for the benefit of any
third party.
(e) HEADINGS AND CAPTIONS. Subject headings and captions
are included for convenience purposes only and shall
not affect the interpretation of this agreement.
(f) NOTICE. All notices, requests, demands and other
communications permitted or required hereunder shall
be in writing, and shall either be (i) delivered in
person, (ii) delivered by express mail or other
overnight delivery service providing receipt of
delivery, (iii) mailed by certified mail or
registered mail, postage prepaid, return receipt
requested, or (iv) sent by telex, telegraph or other
facsimile transmission as follows:
If to Lessee, addressed or delivered in person to:
(mailing address)
Speizman Industries, Inc.
P. O. Box 242108
Charlotte, NC 28224
(delivery address)
Speizman Industries, Inc.
701 Griffith Road
Charlotte, NC 28217
With copy to:
Garth K. Dunklin
Odom & Groves, P.C.
P. O. Box 32248
Charlotte, NC 28232-2248
If to Lessor, addressed or delivered in person to:
The Speizman LLC
c/o Robert S. Speizman
(mailing address)
Speizman Industries, Inc.
P. O. Box 242108
Charlotte, NC 28224
9
<PAGE>
(delivery address)
Speizman Industries, Inc.
701 Griffith Road
Charlotte, NC 28217
or to such other address as either party may
designate by notice. Any such notice or communication
shall be deemed to have been made when actually
received by the addressee, pursuant to (f)(i) above
or one (1) business day after initiation of delivery
pursuant to (f)(ii)-(iv) above.
(g) SEVERABILITY. If any portion of this agreement is
held invalid, illegal, or unenforceable, such
determination shall not impair the enforceability of
the remaining terms and provisions herein.
(h) WAIVER. No waiver of a breach or violation of any
term or provision of this agreement shall operate or
be construed as a waiver of any subsequent breach or
limit or restrict any right or remedy otherwise
available.
(i) RIGHTS AND REMEDIES CUMULATIVE. The rights and
remedies expressed herein are cumulative and not
exclusive of any rights and remedies otherwise
available.
(j) GENDER AND PRONOUNS. Throughout this agreement, the
masculine shall include the feminine and neuter and
the singular shall include the plural and vice versa
as the context requires.
(k) ENTIRE AGREEMENT. This document constitutes the
entire agreement of the parties with respect to the
lease of the Premises and supersedes any and all
other prior agreements, oral or written, with respect
to the subject matter contained herein.
(l) GOVERNING LAW. This agreement shall be subject to and
governed by the laws of the State of North Carolina.
(m) INCORPORATION BY REFERENCE. All exhibits and
documents referred to in this agreement shall be
deemed incorporated herein by any reference thereto
as if fully set out.
(n) COUNTERPARTS. This agreement may be executed in two
or more counterparts each of which shall be deemed an
original, but all of which together shall constitute
one and the same instrument.
(o) AUTHORITY. Each individual signing this agreement in
a representative capacity acknowledges and represents
that he/she is duly authorized to execute this
agreement in such capacity in the name of, and on
behalf of, the designated corporation or other
entity.
10
<PAGE>
(p) JOINT PREPARATION. This agreement shall be deemed to
have been prepared jointly by the parties hereto, and
any uncertainty or ambiguity existing herein shall
not be interpreted against any party by reason of its
drafting of this agreement, but shall be interpreted
according to the application of the rules of
interpretation for arm's length agreements.
(q) MEMORANDUM OF LEASE. Upon request by either party, a
memorandum of this lease in customary form shall be
executed and delivered between Lessor and Lessee and
either party shall have the right to record such
memorandum of lease in the appropriate real estate
recording offices in the county where the Premises
are located. Provided, however, that the recordation
of said memorandum shall be subject to paragraph 22
hereof and Lessee does hereby agree to cooperate in
releasing any said memorandum in furtherance thereof.
IN WITNESS WHEREOF, the parties have executed this agreement effective
as of the day and year aforesaid.
LESSOR:
THE SPEIZMAN LLC
/s/ Robert S. Speizman [SEAL]
---------------------------------
Robert S. Speizman, Manager
LESSEE:
SPEIZMAN INDUSTRIES, INC.
/s/ Robert S. Speizman
---------------------------------
By: Robert S. Speizman
Title: President
Attest:
/s/ Dana G. Russell
- - --------------------------
Assistant Secretary
[Corporate Seal]
11
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public, do hereby certify that Robert S. Speizman
personally appeared before me this day and acknowledged that he is the manager
of The Speizman LLC, a North Carolina limited liability company, and further
acknowledged the due execution of this instrument on behalf of and as the
authorized act and deed of such limited liability company.
Witness my hand and official stamp or seal, this the 23rd day of June, 1999.
/s/ L. Gail Gormly
------------------------------
Notary Public
My commission expires: 11-11-2000
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, a Notary Public of the County and State aforesaid, certify that
Robert S. Speizman personally came before me this day and acknowledged that he
is the President of Speizman Industries, Inc. and that by authority duly given
and as the act of the corporation, the foregoing instrument was signed in its
name, sealed with its corporate seal and attested by its Assistant Secretary.
Witness my hand and official stamp or seal, this the 23rd day of June, 1999.
/s/ L. Gail Gormly
------------------------------
Notary Public
My commission expires: 11-11-2000
12
METRO II & III (G.P.)
July 13th, 1999
SPEIZMAN CANADA INC.
800, Place Victoria
Suite 4702
Montreal QC H44Z 1H6
Attention: Mr. Jim McCorkle, Chief Financial Officer
- - -----------------------------------------------------
Subject: Termination of the lease dated March 1st, 1999 and renewed until
February 28th, 2000, for the Leased Premises at 5205
Metroplitain east, Suite B, in the City of Saint-Leonard,
Province of Quebec
- - --------------------------------------------------------------------------------
Dear Sir:
Further to our telephone conversation of yesterday, we hereby confirm our
agreement:
1) your corporation shall vacate the leased premises no later than
September 30th, 1999;
2) your corporation shall pay to the Landlord, Metro II & III
(G.P.), the rent and all other sums due under the lease until
December 31st, 1999; and
3) the lease, as extended until February 28th, 2000, shall be
terminated and resiliated, as of December 31st, 1999.
Please indicate your agreement with the foregoing by signing this present letter
and returning one (1) copy per facsimile at your earliest convenience.
Sincerely,
METRO II & III (G.P.)
/s/ Jordan Aberman
- - --------------------------------------------------------------------------------
We, the undersigned, Speizman Canada Inc., hereby agree with the terms of this
letter. Signed and accepted at Charlotte, NC (USA), on this 14 day of the month
of July, 1999
/s/ Jim McCorkle
- - -------------------------
Per: Mr. Jim McCorkle
LEASE AMENDMENT AND EXTENSION
BETWEEN KATHRYN B. GODLEY ("LESSOR")
AND
SPEIZMAN INDUSTRIES, INC. ("LESSEE")
THE LEASE DATED MARCH 5, 1996 BY AND BETWEEN KATHRYN B. GODLEY, LESSOR, AND
SPEIZMAN INDUSTRIES, INC., LESSEE, IS HEREBY AMENDED BY MUTUAL AGREEMENT OF THE
PARTIES TO EXTEND THE TERM OF THE LEASE IN FULL FORCE AND EFFECT UNTIL DECEMBER
31, 1999. ALL OTHER TERMS AND PROVISIONS SHALL REMAIN AS STATED.
ACCEPTED:
LESSOR: LESSEE:
KATHRYN B. GODLEY SPEIZMAN INDUSTRIES, INC.
/S/ KATHRYN B. GODLEY BY: /S/ JAMES H. MCCORKLE, III
- - --------------------- ------------------------------
ITS: CFO
DATE: 8-16-99 DATE: 8-10-99
STATE OF NORTH CAROLINA
DEFERRED COMPENSATION AGREEMENT
COUNTY OF MECKLENBURG
This Deferred Compensation Agreement is made this 14th day of June,
1999, by and between SPEIZMAN INDUSTRIES, INC., a Delaware corporation with its
principal office at Charlotte, North Carolina, hereafter referred to as the
CORPORATION, and JAMES H. McCORKLE of Mecklenburg County, North Carolina,
hereinafter referred to as the EXECUTIVE.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the EXECUTIVE has been in the employ of the CORPORATION for
several years;
NOW, THEREFORE, in consideration of services performed in the past and
to be performed in the future, as well as the mutual promises and covenants
herein contained, it is agreed as follows:
1. EMPLOYMENT.
-----------
The CORPORATION agrees to employ the EXECUTIVE as the CORPORATION may
from time to time determine. The EXECUTIVE will be required to comply with such
rules and regulations as are applicable to the specific performance of the
EXECUTIVE'S usual and customary corporate responsibilities. The EXECUTIVE will
continue in the employ of the CORPORATION in such capacity and with such duties
and responsibilities as may be assigned to him, and with such compensation as
may be determined from time to time by the Board of Directors of the
CORPORATION.
2. DEFERRED COMPENSATION.
----------------------
If the EXECUTIVE continues in the employment of the CORPORATION until
he attains the age of sixty-five (65), which date is hereby established as
October 2, 2027, he may retire from active service and the CORPORATION will pay
to him one hundred eighty (180) monthly installments of $7,305 each until he
attains the age of eighty (80) years, or until his death, whichever first
occurs. The first monthly installment will be due the first day of the month
following his retirement. If the EXECUTIVE dies after age sixty-five (65) but
before age eighty (80) and while receiving the foregoing monthly payment, there
will be payable a like sum in monthly installments of $7,305 each to such
individuals or trusts as the EXECUTIVE may have designated in writing, as filed
with and approved by the CORPORATION, until the expiration of fifteen (15) years
next following the date of the retirement of the EXECUTIVE. In the absence of
any effective designation of beneficiary any such amounts becoming due and
payable upon the death of the EXECUTIVE will be payable to his duly qualified
executor or administrator.
-1-
<PAGE>
3. DEATH.
------
If the EXECUTIVE dies while employed by the CORPORATION at any time
after the date of this Agreement but before his attaining the age of sixty-five
(65) years, the CORPORATION will pay the sum per month specified below for the
year of decease for a period of one hundred and eighty (180) months to such
individuals or trusts as the EXECUTIVE may have designated in writing, as filed
with and approved by the CORPORATION. The said monthly payments will begin the
first day of the month following the month in which the EXECUTIVE dies. In the
absence of any effective designation of beneficiary any such amounts becoming
due and payable upon the death of the EXECUTIVE will be payable to his duly
qualified executor or administrator. The sum payable per month, as provided
above, is as follows:
SCHEDULE OF DEATH BENEFITS
--------------------------
YEAR OF DEATH MONTHLY INSTALLMENTS
------------- --------------------
1999 THROUGH 2027 $9,270
Any excess death benefit available on account of any insurance
purchased on the life of the EXECUTIVE will be paid to the EXECUTIVE's
beneficiary.
If the EXECUTIVE dies within two (2) years after the execution of this
Agreement, and if his death is a result of suicide, then, and in such event, the
death benefit provided by this section will not be payable.
4. DISABILITY.
-----------
If during the period of active service before October 2, 2027,
EXECUTIVE becomes totally and permanently disabled, which disability renders him
unable to perform his duties in a manner satisfactory to the CORPORATION, the
CORPORATION by a resolution duly adopted by its Board of Directors may terminate
the active service of the EXECUTIVE. In the event of such disability and
termination of active service, the CORPORATION will pay the EXECUTIVE the lesser
of sixty percent (60%) of his monthly salary just before his disability, or
$8,000 per month, such payments to commence after a ninety (90) day waiting
period, and payable monthly thereafter until the EXECUTIVE reaches age
sixty-five (65) or October 2, 2027. If the EXECUTIVE reaches age 65 while
disabled the CORPORATION will abide by the provisions of Article 2 of this
Agreement. If the EXECUTIVE dies between the time he becomes disabled and the
date he reaches age sixty-five (65) the CORPORATION will abide by the provisions
of Article 3.
5. RESIGNATION, ETC.
-----------------
If the EXECUTIVE voluntarily resigns or otherwise voluntarily
terminates his employment with the CORPORATION, or if he is discharged for
fraudulent actions, before October 2, 2027, this Agreement will terminate upon
the date of such resignation, other voluntary termination of employment or
discharge, and no other benefits or payments of any kind are to be made
hereunder.
-2-
<PAGE>
A. If the employment of the EXECUTIVE terminates before
October 2, 2027, other than by his voluntary action, his disability, his death
or his discharge for fraudulent actions, then this Agreement will terminate upon
the date of such termination of employment, and the CORPORATION will pay to the
EXECUTIVE as severance compensation in the amount outlined in the following
schedule, predicated on the year in which severance occurs. These amounts will
be paid to the EXECUTIVE in one hundred eighty (180) monthly installments
commencing with the first day of the month following the month in which such
severance occurs:
SCHEDULE OF SEVERANCE PAYMENTS
YEAR OF TERMINATION MONTHLY INSTALLMENTS
1999 $ 8
2000 17
2001 101
2002 198
2003 301
2004 408
2005 520
2006 638
2007 762
2008 892
2009 1,028
2010 1,216
2011 1,442
2012 1,693
2013 1,962
2014 2,245
2015 2,543
2016 2,855
2017 3,180
2018 3,519
2019 3,863
2020 4,234
2021 4,621
2022 5,026
2023 5,448
2024 5,888
2025 6,345
2026 6,820
2027 7,305
-3-
<PAGE>
If the EXECUTIVE should die after such involuntary severance but before
the completion of the monthly payments provided for in this Article, the
remaining installments will be paid to such individual or individuals or Trusts
as the EXECUTIVE may have designated in writing, as filed with and approved by
the CORPORATION. In the absence of any effective designation of beneficiary, any
such amount will be payable to the duly qualified Executor or Administrator of
the EXECUTIVE.
6. LIMITATIONS ON BENEFITS.
------------------------
Neither the EXECUTIVE nor any beneficiary under this Agreement will
have any power or right to transfer, assign, anticipate, mortgage, commute, or
otherwise encumber in advance any of the benefits payable hereunder, nor will
said benefits be subject to seizure for the payment of any debt or judgment of
any of them, or be transferable by operation of law in the event of bankruptcy,
insolvency or otherwise. If the foregoing restriction is violated, all benefits
will cease and terminate.
7. OTHER BENEFITS.
---------------
Nothing contained in this Agreement will be construed to alter, abridge
or in any manner affect the rights and privileges of the EXECUTIVE to
participate in any Pension, Profit Sharing, or other qualified Retirement Plan
which the CORPORATION may now or hereafter have.
8. BINDING AGREEMENT.
------------------
This Agreement will be binding upon and inure to the benefit of the
EXECUTIVE and his personal representatives, and the CORPORATION, and any
successor organization which succeeds to substantially all of its assets and
business.
9. NOTICE.
-------
Any notice or communication required of either party with respect to
the Agreement will be made in writing and may either be delivered personally or
sent by first class mail to the parties at the addresses set out below:
A. To CORPORATION:
SPEIZMAN INDUSTRIES, INC.
701 Griffith Road
Charlotte, NC 28217
P.O. Box 242108
Charlotte, NC 28224
ATTN: Robert S. Speizman, President
-4-
<PAGE>
B. To EXECUTIVE:
James H. McCorkle
7708 Covey Chase Drive
Charlotte, NC 28210
Each party will have the right by written notice to change the place to which
any notice may be addressed.
10. NOT AN EMPLOYMENT CONTRACT.
---------------------------
This Agreement will not be deemed to constitute a contract of
employment between the parties hereto, nor will any provision hereof restrict
the right of the CORPORATION to discharge the EXECUTIVE, or restrict the right
of the EXECUTIVE to terminate his employment.
11. TRADE SECRETS.
---------------
EXECUTIVE agrees that CORPORATION's relation with its customers is one
of its most valuable assets, and that the identity, equipment needs, new product
developments, and the like of both CORPORATION and its customers is of a
confidential nature. Such information is herein called "trade secrets".
Trade secrets include documents supplied to EXECUTIVE by CORPORATION, or
prepared by EXECUTIVE as a consequence of the duties of his employment by
CORPORATION, including customer lists, sales records, and trade secrets as
otherwise defined by law. Therefore, in consideration of the premises, and of
CORPORATION's need to protect its trade secrets, the parties agree as follows:
A. EXECUTIVE agrees to retain in strict confidence and not to
use without the written consent of CORPORATION any trade secrets received by
EXECUTIVE pursuant to his employment by CORPORATION, other than for the purposes
of carrying out his duties as its employee.
B. If EXECUTIVE leaves the employment of CORPORATION for any
reason whatsoever, he agrees that he will not engage in the activity of selling
any equipment which is the same as or similar to the equipment sold by the
CORPORATION during his term of employment, in competition with the sales
activities of CORPORATION, within a radius of 150 miles of CORPORATION's office
in Charlotte, North Carolina for a period of three (3) years after any
termination of EXECUTIVE's employment with corporation.
C. The parties acknowledge that any breach of the covenants
contained in this paragraph 11 would entail irreparable injury to the good will
of CORPORATION and would jeopardize its competitive position in its market
place. Accordingly, EXECUTIVE agrees that any breach on his part of the matters
hereinabove undertaken to be observed and performed by him would entitle
CORPORATION as a matter of right to a restraining order and/or an injunction to
-5-
<PAGE>
restrain him from the breach of the said undertaking and to other equitable
relief to prevent any such actual intended or likely breach, as well as its
remedies available at law, including the right to suspend or terminate any
monthly payment that may otherwise be due under this Agreement. EXECUTIVE
consents that CORPORATION may instruct any insurance company or trustee issuing
or holding any insurance policy related to this Agreement to suspend or
terminate any payment that otherwise may be due, on account of a breach of this
paragraph 11.
IN WITNESS WHEREOF, the parties have executed this Agreement pursuant
to authority duly given.
(CORPORATE SEAL) SPEIZMAN INDUSTRIES, INC.
By: /s/ Robert S. Speizman, President
-----------------------------------
ATTEST: ROBERT S. SPEIZMAN
President
/s/ Dana Russell
- - ------------------------------
Assistant Secretary /s/ James H. McCorkle
---------------------------------------
JAMES H. McCORKLE
-6-
STATE OF NORTH CAROLINA
TRUST AGREEMENT
COUNTY OF MECKLENBURG
This Trust Agreement is made this 14th day of June, 1999, by and
between SPEIZMAN INDUSTRIES, INC., a Delaware corporation with its principal
office at Charlotte, North Carolina, hereafter referred to as SPEIZMAN, and
FIRST CITIZENS BANK & TRUST CO. of Raleigh, North Carolina, hereafter referred
to as TRUSTEE.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, SPEIZMAN has entered into a Deferred Compensation Agreement
with JAMES H. McCORKLE (the "EXECUTIVE") dated June 14, 1999, providing for
certain benefits as provided in such agreement, a copy of which is annexed as
Exhibit "A";
NOW, THEREFORE, the parties agree as follows:
1. New Policies.
-------------
A. A new life insurance policy, naming the TRUSTEE as owner
and beneficiary, will be delivered to the TRUSTEE by Manulife Insurance Company
on the date of the execution of this Agreement, as follows:
INSURED EXECUTIVE INSURER POLICY #
----------------- ------- --------
James H. McCorkle Manulife 55-687-396
B. SPEIZMAN agrees to make all premium payments required to
maintain the new life insurance policy in full force and effect for as long as
the EXECUTIVE remains in the employ of SPEIZMAN.
2. Retirement.
-----------
In accordance with paragraph 2 of Exhibit "A", if the EXECUTIVE
continues in the employment of SPEIZMAN until he attains the age of sixty-five
(65) (or earlier retirement age if approved in writing by SPEIZMAN), then the
TRUSTEE will surrender the policy, when the EXECUTIVE so retires, to the
insurance company for the cash value thereof. The TRUSTEE will invest the
proceeds and make the payments, from either the principal or income thereof, as
provided in paragraph 2 of said Agreement. If the proceeds of the said policy,
along with the income arising therefrom, are not sufficient to comply with the
terms of the said paragraph 2, then SPEIZMAN will pay to the TRUSTEE such
amounts as may be required to fulfill the terms of paragraph 2 as and when
needed by the TRUSTEE for the above purpose. If the proceeds of the insurance
policy and all income arising therefrom exceed the amounts provided for in
paragraph 2, then any balance remaining will be paid to SPEIZMAN at the
conclusion of the term provided in paragraph 2. However, if SPEIZMAN is
<PAGE>
no longer in existence, then such balance will be paid to the EXECUTIVE, or his
beneficiary or executor if he is deceased, at the conclusion of the fifteen (15)
year term provided in said paragraph 2.
3. Death.
------
If the EXECUTIVE dies while employed by SPEIZMAN but before age
sixty-five (65) (or earlier retirement approved by SPEIZMAN in writing), then
the TRUSTEE will collect the proceeds of the policy on the life of the deceased,
invest same, and make the payments from either principal or interest, provided
for in paragraph 3 of Exhibit "A". If the proceeds of the policy and all income
arising therefrom exceed the amounts provided for in paragraph 3, then any
balance shall be paid to SPEIZMAN. However, if SPEIZMAN is no longer in
existence, then such balance shall be paid to the EXECUTIVE's beneficiary or
executor, if he is deceased, at the conclusion of the fifteen (15) year term
provided in said paragraph 3.
4. Disability.
-----------
The TRUSTEE will not be required to make any payments whatsoever with
reference to disability as provided in paragraph 4 of Exhibit "A". The
CORPORATION will make such disability payments. However, if the EXECUTIVE
attains age sixty-five (65) (or if SPEIZMAN, in writing, approves of earlier
retirement), while the EXECUTIVE is disabled, then the TRUSTEE will comply with
the provisions of paragraph 2 of this Agreement. If the EXECUTIVE dies between
the time he becomes disabled and the date he reaches age sixty-five (65), then
the TRUSTEE will comply with the provisions of paragraph 3 of this Agreement.
5. Termination of Agreement.
-------------------------
With reference to paragraph 5 of Exhibit "A", it is understood:
A. If the EXECUTIVE voluntarily resigns, or is discharged for
fraudulent actions before his date of retirement as provided in the first
sentence of said paragraph 5, then the policy on the life of such EXECUTIVE will
be reassigned by the TRUSTEE to SPEIZMAN.
B. If employment is terminated under circumstances provided in
the remainder of paragraph 5 of Exhibit "A", then the TRUSTEE will surrender the
life insurance policy to the insurance company, receive and invest the proceeds,
and from principal or income make the severance payments provided in the
schedule of severance payments, including death benefits, as provided in
paragraph 5 of Exhibit "A", whichever is applicable, and to the extent that
funds are available from the above source. If funds are insufficient then
SPEIZMAN will pay the remainder of the required payments. Any funds remaining
from the above source, after compliance with such schedule, will be returned to
SPEIZMAN, and if SPEIZMAN is no longer in existence, then any balance will be
paid to EXECUTIVE, or his beneficiary or executor if he is deceased.
2
<PAGE>
6. Trustee's Responsibilities.
---------------------------
A. The TRUSTEE has no responsibility or liability whatsoever
to anyone with reference to the type and plan of life insurance issued by
Manulife Insurance Company.
B. The TRUSTEE has no responsibility or liability whatsoever
to anyone for any damage or loss whatsoever arising out of the investments made
in or by the insurer or its successors.
C. In addition to all powers granted by law, including those
powers granted to trustees in North Carolina general statutes, ss. 32-27 (except
G.S. ss. 32-27(29)), in effect at the signing of this Agreement, which powers
are herein incorporated by reference, the TRUSTEE and any successor will have
broad powers, without resort to any court for further order or authority, to
invest in all forms of assets that are suitable for a reasonably prudent
trustee, subject to the approval of the EXECUTIVE and of SPEIZMAN. In addition
to and not in limitation of those powers, the TRUSTEE is authorized to determine
what is principal, and what is income, and allocate receipts and expenditures as
between principal and income in its discretion, regardless of whether any
receipt is credited or expenditure charged contrary to the provisions of Chapter
37 of the general statutes, and to determine whether or not to establish
depreciation or amortization reserves.
D. If the TRUSTEE stops payments to the EXECUTIVE pursuant to
SPEIZMAN's instructions under paragraph 11C of Exhibit A, then it will resume
such payments only upon written instructions from SPEIZMAN, or from a court of
competent jurisdiction.
7. Compensation.
-------------
As compensation for its services, the TRUSTEE will receive the
commissions stipulated in its regularly adopted schedule of compensation in
effect and applicable at the time of the performance of such services. The
TRUSTEE's minimum annual charge will be $100 for services pursuant to this
Agreement. Such compensation will be paid by SPEIZMAN; however, if SPEIZMAN
fails to pay it, then the TRUSTEE will be entitled to draw its commission from
proceeds of policies and funds held by it for the benefit of the EXECUTIVE.
SPEIZMAN agrees to indemnify TRUSTEE and hold TRUSTEE harmless against any and
all losses, claims, damages, liabilities, and expenses, including reasonable
costs of investigation and counsel fees incurred by the TRUSTEE, in connection
with its acceptance of its appointment as TRUSTEE hereunder.
8. Discontinuance of Speizman.
---------------------------
If SPEIZMAN is ordered liquidated through bankruptcy or receivership,
or if SPEIZMAN ceases doing business, or if SPEIZMAN notifies the TRUSTEE that
it is no longer financially able to pay the premiums on the life insurance
policy on the life of the EXECUTIVE, then in any such event, the TRUSTEE will
surrender the policy to the insurer and make payments to the EXECUTIVE as
provided in paragraph 5B above.
3
<PAGE>
9. Protection of Trustee.
----------------------
In performing any of its duties hereunder, the TRUSTEE will not incur
any liabilities to anyone for any damage, losses, or expenses, except for
willful default or negligence, and it will accordingly not incur any such
liabilities with respect (i) to any action taken or omitted in good faith upon
advice of counsel satisfactory to it given with respect to any questions
relating to the duties and responsibilities of the TRUSTEE under this Agreement,
or (ii) to any action taken or omitted in reliance upon any instrument, not only
as to its due execution and the validity and effectiveness of its provisions,
but also as to the truth and accuracy of any information contained therein,
which the TRUSTEE will in good faith believe to be genuine, to have been signed
or presented by a proper person or persons and to conform with the provisions of
this Agreement.
10. Arbitration.
------------
In the event of any dispute between the parties hereto or with a
beneficiary, the TRUSTEE will take no action with regard to the matter thus
disputed until final determination thereof shall have been made, and the parties
and any beneficiary will proceed expeditiously to arrive at a final
determination of such dispute. If the parties and any beneficiaries are unable
to resolve any dispute arising from the construction of this Agreement and its
performance, then it is understood and agreed that any party hereto or a
beneficiary may submit such dispute for arbitration by the American Arbitration
Association, and the arbitration award will be binding upon all parties and
beneficiaries. The TRUSTEE's share of any arbitration expenses will be paid from
the fund in its possession that arises from surrender of the policy on the life
of EXECUTIVE which may be involved in this dispute. If any insurance policy or
annuity contract on the life of the EXECUTIVE involved in a dispute has not been
surrendered, then the TRUSTEE's share of arbitration costs shall be paid by
SPEIZMAN.
11. Notices.
--------
All notices, requests and other communications hereunder will be in
writing and will be delivered by hand or mailed by first class registered or
certified mail, return receipt requested,
A. To SPEIZMAN:
SPEIZMAN INDUSTRIES, INC.
701 Griffith Road
Charlotte, NC 28217
P.O. Box 242108
Charlotte, NC 28224
ATTN: Robert S. Speizman, President
4
<PAGE>
B. To the TRUSTEE:
FIRST CITIZENS BANK & TRUST COMPANY
Corporate Trust Department
CTW09
P.O. Box 27131
Raleigh, NC 27611-7131
ATTN: ___________________________
Any party may change the address to which notices are to be sent to it by giving
written notice of such change of address to the other party in the manner above
provided for giving notice.
12. Indemnification.
----------------
SPEIZMAN, and its successors and assigns, does hereby agree to
indemnify and save the TRUSTEE harmless from any liability it may incur by
reason of its entering into this Trust Agreement, and further, SPEIZMAN and its
successors and assigns, does hereby agree to indemnify and save the TRUSTEE
harmless from any liability arising out of the administration of the Trust
pursuant to the terms of the Deferred Compensation Agreement. However, such duty
of indemnity will not arise in the case of willful misconduct or gross
negligence of the TRUSTEE.
13. Construction.
-------------
No modification or waiver of the provisions of this Agreement will be
effective unless made in writing and signed by the party to be charged
therewith, nor will any waiver be applicable except in the specific instance for
which given. This Agreement is binding upon and will inure to the benefit of the
parties hereto, their successors and assigns, and the EXECUTIVE, his heirs,
assigns and personal representatives.
IN WITNESS WHEREOF, the parties have executed this Agreement pursuant
to authority duly given.
(CORPORATE SEAL) SPEIZMAN INDUSTRIES, INC.
By: /s/ Robert S. Speizman
----------------------------
ATTEST: ROBERT S. SPEIZMAN
President
Dana Russell
- - -----------------------------
Assistant Secretary
(CORPORATE SEAL) FIRST CITIZENS BANK & TRUST CO.
By: /s/ Betty J. Welch
-----------------------------
ATTEST:
Title: Vice President
---------------------------
(Illegible) trustee
- - -----------------------------
Secretary
5
1999 FIRST AMENDMENT AGREEMENT TO
$37,000,000 AMENDED AND RESTATED LOAN AGREEMENT AND TERM NOTE
THIS AMENDMENT AGREEMENT, made and entered into as of this 17th day of
May, 1999, by and between SPEIZMAN INDUSTRIES, INC., a Delaware corporation (the
"Borrower"), WINK DAVIS EQUIPMENT CO., INC., a Georgia corporation ("WD"), TODD
MOTION CONTROLS, INC., a North Carolina corporation ("TMC") and NATIONSBANK,
N.A., a national banking association (the"Lender");
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to the $37,000,000 Amended and Restated Loan
Agreement, dated as of July 31, 1997, as amended by 1998 First Amendment
Agreement thereto dated as of February 6, 1998 and 1998 First Amendment
Agreement dated as of December 30, 1998, between the Borrower and the Lender
(collectively the "Loan Agreement"), arrangements were made for the extension by
the Lender to the Borrower of credit on the terms and conditions set forth in
such Loan Agreement;
WHEREAS, under the Loan Agreement, the Borrower obtained a Credit
Facility in the maximum aggregate principal amount at any time outstanding of up
to $37,000,000, of which (i) up to $30,000,000 may be allocated under a "Letter
of Credit Facility" for the issuance of documentary Letters of Credit to support
the Borrower's purchase and importing of (x) presold textile machinery in the
ordinary course of its business and (y) in certain cases, equipment to be held
as inventory for sale and, within such $30,000,000, up to $8,500,000 may be
allocated to borrowings for the Borrower's short term operating needs under a
Revolving Line of Credit, and up to $500,000 may be allocated for the issuance
of Standby Letters of Credit, as provided in such Loan Agreement, and (ii) up to
$7,000,000, as subsequently increased to $8,050,000 by Note Modification
Agreement dated February 6, 1998, may be allocated as a term loan, all upon the
terms and conditions provided in the Loan Agreement;
WHEREAS, under the Loan Agreement, the Borrower has issued to the
Lender its Amended and Restated Revolving Credit Note dated July 31, 1997 in the
principal amount of $8,500,000 (the "Revolving Credit Note");
WHEREAS, under the Loan Agreement, the Borrower has issued to the
Lender its Term Note dated July 31, 1997 in the original principal amount of
$7,000,000, as subsequently increased to $8,050,000 by Note Modification
Agreement dated February 6, 1998 (the "Term Note");
WHEREAS, collateral for the indebtedness and obligations of the
Borrower in respect of the Loan Agreement, the Revolving Credit Note and the
Letter of Credit Facility is provided under the Amended and Restated Security
Agreement dated July 31, 1997 between the Borrower, WD and the Lender and a
Security Agreement dated as of February 6, 1998 between TMC and the Lender
(collectively, the "Security Agreement");
WHEREAS, the Borrower has requested that the Lender agree to certain
modifications to the Loan Agreement and a waiver of the violation of certain
covenants of the Loan Agreement;
<PAGE>
NOW, THEREFORE, in consideration of the premises and mutual covenants
and conditions herein set forth, it is hereby agreed as follows:
1. Terms. All terms used herein without definition, unless the context
clearly requires otherwise, shall have the meanings provided therefor in the
Loan Agreement.
2. Amendment to Loan Agreement.
(1) Section 1.12 of the Loan Agreement (entitled "Borrowing Base")
is rewritten in its entirety to read as follows:
"1.12. "Borrowing Base" means the sum as of the date
of determination of (i) Eligible Accounts multiplied by 80%
and (ii) Eligible Inventory multiplied by 30%, and (iii) L/C
Credit multiplied by 50%, and (iv) Cash Collateral multiplied
by 100%, all determined pursuant to the Borrowing Base
Certificate."
3. Waiver. The Lender hereby waives, for the period ended April 3,
1999, any Default arising or occurring by reason of the failure of the Borrower
to comply with Sections 8.2 and 8.5 of the Loan Agreement. The foregoing waiver
shall be effective only for the period ended April 3, 1999. This waiver is
effective only for the specific purpose and duration set forth herein. Except as
expressly stated herein, no other terms and conditions of the Loan Agreement are
waived.
4. Amendment Fee. Upon request of Lender, the Borrower agrees to pay
to the Lender a waiver and amendment fee in an amount to be agreed upon in
connection with the waiver and amendment set forth herein.
5. Representations and Warranties. Each of the Borrower, WD and TMC
hereby jointly and severally represents and warrants that:
(1) The representations and warranties contained in Article V of the
Loan Agreement are hereby made by the Borrower on and as of the date
hereof except the representations of Sections 5.3 and 5.4 shall refer
to the most recent financial statements delivered under Section 7.1 of
the Loan Agreement.
(2) There has been no material change, and there exists no known
prospective change, in the condition, financial or otherwise, of the
Borrower, WD or TMC since the date of the most recent financial reports
received by the Lender, other than changes in the ordinary course of
business, none of which has been a materially adverse change;
2
<PAGE>
(3) The business and properties of the Borrower, WD or TMC are not,
and since the date of the most recent financial reports thereof
received by Lender have not, been materially adversely affected as the
result of any fire, explosion, earthquake, chemical spill, accident,
strike, lockout, combination of workmen, flood, embargo, riot, or
cancellation or loss of any major contracts;
(4) No event has occurred and no condition exists which, either
prior to or upon the consummation of the transactions contemplated
hereby, constitutes an Event of Default under the Loan Agreement,
either immediately or with the lapse of time or the giving of notice,
or both;
(5) The property which is collateral for the indebtedness of the
Borrower, WD or TMC to the Lender under the Security Agreement and
other collateral documents of the Borrower, WD or TMC in favor of the
Lender are subject to no liens or encumbrances except Permitted Liens;
(6) The execution, delivery and performance by the Borrower, WD or
TMC of its obligations under this Amendment Agreement will not cause a
violation or default under any indenture, loan agreement, or other
agreement of, or applicable to, the Borrower, WD or TMC; and
(7) Each of the Borrower, WD and TMC has the requisite corporate
power and authority to execute, deliver and perform this Amendment
Agreement; each of such documents has been duly authorized, executed
and delivered; and each of such documents constitutes a valid, binding
and enforceable instrument, obligation or agreement of the Borrower, WD
or TMC, in accordance with its respective terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors'
rights generally.
6. Effectiveness of Documents. The terms and conditions hereof shall
not be effective until each of the following are delivered to the
Lender:
(1) Amendment Agreement. Two fully executed originals of this
Amendment Agreement.
(2) No Litigation Certificate. Certificate of the chief financial
officer of the Borrower to the effect that no litigation or proceedings
are pending or threatened which might reasonably be expected to
materially adversely affect the Borrower's, TMC's or WD's ability to
perform its obligations under this Amendment Agreement or any Loan
Document or operation of the Borrower's, TMC's or WD's business.
(3) Other Documents, Etc. Such other documents, instruments and
certificates as the Lender may reasonably request.
3
<PAGE>
7. Miscellaneous.
(1) This Amendment Agreement sets forth the entire understanding and
agreement of the parties hereto in relation to the subject matter
hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition,
representation or warranty, express or implied, not herein set forth
shall bind any party hereto, and none of them has relied on any such
promise, condition, representation or warranty. Each of the parties
hereto acknowledges that, except as in this Amendment Agreement
otherwise expressly stated, no representations, warranties, or
commitments, express or implied, have been made by any other party to
the other regarding the subject matter hereof. None of the terms or
conditions of this Amendment Agreement may be changed, modified, waived
or canceled, orally or otherwise, except in a writing, signed by the
party to be charged therewith, specifying such change, modification,
waiver or cancellation of such terms or conditions, or of any preceding
or succeeding breach thereof, unless expressly so stated.
(2) Except as hereby specifically amended, modified, or
supplemented, the Loan Agreement, the Loan Documents and all other
agreements, documents, and instruments related thereto are hereby
confirmed and ratified in all respects and shall remain in full force
and effect according to their respective terms.
(3) This Amendment Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which
together shall constitute one and the same instrument.
(4) This Amendment Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of North Carolina.
(5) Upon request of the Lender, each of the parties hereto will duly
execute and deliver or cause to be duly executed and delivered to the
Lender such further instruments and do and cause to be done such
further acts that may be reasonably necessary or proper in the opinion
of the Lender to carry out more effectively the provisions and purposes
hereof, including documents deemed necessary by the Lender to more
fully evidence the obligations of Borrower, TMC or WD to Lender and
protect and perfect the collateral therefor.
(6) The Borrower agrees to pay all reasonable costs and expenses of
the Lender in connection with the preparation, execution and delivery
of the documents executed in connection with this Amendment Agreement,
including without limitation, the reasonable fees and out-of-pocket
expenses of special counsel to the Lender.
(7) Each of WD and TMC (collectively the "Guarantors") as guarantors
under, in the case of WD, a Guaranty Agreement dated July 31, 1997 from
the WD in favor of the Lender and, in the case of TMC, a Guaranty
Agreement dated February 6, 1998, of TMC in
4
<PAGE>
favor of the Lender, hereby joins in this Amendment Agreement to join
in the terms hereof and evidence its consent to the terms and
conditions hereof.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date hereof by the Company and the Lender.
ATTEST: SPEIZMAN INDUSTRIES, INC.
/s/ James H. McCorkle, III By: /s/ Robert S. Speizman
- - ------------------------------- -------------------------------
__________ Secretary Name: Robert S. Speizman
Title: President
ATTEST: WINK DAVIS EQUIPMENT CO., INC.
/s/ Dana Russell By: /s/ James H. McCorkle, III
- - ------------------------------- -------------------------------
Assistant Secretary Name: James H. McCorkle, III
Title: Vice President
ATTEST: TODD MOTION CONTROLS, INC.
/s/ James H. McCorkle, III By: /s/ Robert S. Speizman
- - ------------------------------- -------------------------------
__________ Secretary Name: Robert S. Speizman
Title: President
NATIONSBANK, N.A.
By: /s/ E. Phifer Helms
-------------------------------
Name: E. Phifer Helms
Title: Senior Vice President
5
1999 SECOND AMENDMENT AGREEMENT TO
$37,000,000 AMENDED AND RESTATED LOAN AGREEMENT AND TERM NOTE
THIS AMENDMENT AGREEMENT, made and entered into as of this 27th day of
August, 1999, by and between SPEIZMAN INDUSTRIES, INC., a Delaware corporation
(the "Borrower"), WINK DAVIS EQUIPMENT CO., INC., a Georgia corporation ("WD"),
TODD MOTION CONTROLS, INC., a North Carolina corporation ("TMC") and BANK OF
AMERICA, N.A. d/b/a NATIONSBANK, N.A., successor to NATIONSBANK, N.A., a
national banking association (the "Lender");
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to the $37,000,000 Amended and Restated Loan
Agreement dated as of July 31, 1997 between Borrower and Lender, as amended by
1998 First Amendment Agreement thereto dated as of February 6, 1998 and 1998
Second Amendment Agreement dated as of December 30, 1998 and 1999 First
Amendment Agreement thereto dated as of May 17, 1999, among the Borrower, WD,
TMC and the Lender (collectively the "Loan Agreement"), arrangements were made
for the extension by the Lender to the Borrower of credit on the terms and
conditions set forth in such Loan Agreement;
WHEREAS, under the Loan Agreement, the Borrower obtained a Credit
Facility in the maximum aggregate principal amount at any time outstanding of up
to $37,000,000, of which (i) up to $30,000,000 may be allocated under a "Letter
of Credit Facility" for the issuance of documentary Letters of Credit to support
the Borrower's purchase and importing of (x) presold textile machinery in the
ordinary course of its business and (y) in certain cases, equipment to be held
as inventory for sale and, within such $30,000,000, up to $8,500,000 may be
allocated to borrowings for the Borrower's short term operating needs under a
Revolving Line of Credit, and up to $500,000 may be allocated for the issuance
of Standby Letters of Credit, as provided in such Loan Agreement, and (ii) up to
$7,000,000, as subsequently increased to $8,050,000 by Note Modification
Agreement dated February 6, 1998, may be allocated as a term loan, all upon the
terms and conditions provided in the Loan Agreement;
WHEREAS, under the Loan Agreement, the Borrower has issued to the
Lender its Amended and Restated Revolving Credit Note dated July 31, 1997 in the
principal amount of $8,500,000 (the "Revolving Credit Note");
WHEREAS, under the Loan Agreement, the Borrower has issued to the
Lender its Term Note dated July 31, 1997 in the original principal amount of
$7,000,000, as subsequently increased to $8,050,000 by Note Modification
Agreement dated February 6, 1998 (the "Term Note");
WHEREAS, collateral for the indebtedness and obligations of the
Borrower in respect of the Loan Agreement, the Revolving Credit Note and the
Letter of Credit Facility is provided under the Amended and Restated Security
Agreement dated July 31, 1997 between the Borrower, WD and the Lender and a
Security Agreement dated as of February 6, 1998 between TMC and the Lender
(collectively, the "Security Agreement");
<PAGE>
WHEREAS, the Borrower has requested that the Lender agree to certain
modifications to the Loan Agreement to (i) increase the Committed Amount under
the Revolving Line of Credit from $6,000,000 to $10,000,000 on a temporary basis
and (ii) temporarily modify the Borrowing Base;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and conditions herein set forth, it is hereby agreed as follows:
1. Terms. All terms used herein without definition, unless the context
clearly requires otherwise, shall have the meanings provided therefor in the
Loan Agreement.
2. Amendment to Loan Agreement.
(A) Section 1.12 of the Loan Agreement (entitled "Borrowing Base")
is rewritten in its entirety to read as follows:
"1.12. "Borrowing Base" means the sum as of the date
of determination of (i) Eligible Accounts multiplied by 80%
and (ii) Eligible Inventory multiplied by 30%, and (iii) L/C
Credit multiplied by 50%, and (iv) Cash Collateral multiplied
by 100% and (v) if such date of determination occurs between
the period August 12, 1999 and October 31, 1999, $2,000,000,
all determined pursuant to the Borrowing Base Certificate."
(B) Section 2.4(b) of the Loan Agreement is hereby amended to
provide for a temporary increase in the Committed Amount to $10,000,000
by adding the following subparagraph (iv) as follows:
"(iv) Notwithstanding the foregoing, the Committed
Amount shall be $10,000,000 during the period August 12, 1999
to October 31, 1999, subject to such permanent reductions as
may be required hereunder during such period. At November 1,
1999 and thereafter, the Committed Amount shall be permanently
reduced to $6,000,000, less any other permanent reductions
which may otherwise be required hereunder."
(C) Section 3.1 of the Loan Agreement is hereby amended to add the
following sentence following the last paragraph thereof:
"Notwithstanding the foregoing, at November 1, 1999 and
thereafter, the Maximum Amount shall be $27,500,000."
(D) Each of the Borrower, WD and TMC hereby agrees and confirms that
all liens and security interests securing the indebtedness evidenced by
the Note shall cover all additional indebtedness created under the Note
and that the liens and security interests created under the Loan
Documents, including the Security Agreement and the Cash Collateral
Documents, shall cover all indebtedness evidenced by the Note as
increased by
<PAGE>
this Amendment Agreement. The Borrower further agrees and confirms that
this Amendment Agreement shall constitute a modification to the
Revolving Credit Loan and the Note and not a novation thereof.
3. Representations and Warranties. Each of the Borrower, WD and TMC
hereby jointly and severally represents and warrants that:
(A) There has been no material change, and there exists no known
prospective change, in the condition, financial or otherwise, of the
Borrower, WD or TMC since the date of the most recent financial reports
received by the Lender, other than changes in the ordinary course of
business, none of which has been a materially adverse change;
(B) The business and properties of the Borrower, WD or TMC are not,
and since the date of the most recent financial reports thereof
received by Lender have not, been materially adversely affected as the
result of any fire, explosion, earthquake, chemical spill, accident,
strike, lockout, combination of workmen, flood, embargo, riot, or
cancellation or loss of any major contracts;
(C) No event has occurred and no condition exists which, either
prior to or upon the consummation of the transactions contemplated
hereby, constitutes an Event of Default under the Loan Agreement,
either immediately or with the lapse of time or the giving of notice,
or both;
(D) The property which is collateral for the indebtedness of the
Borrower, WD or TMC to the Lender under the Security Agreement and
other collateral documents of the Borrower, WD or TMC in favor of the
Lender are subject to no liens or encumbrances except Permitted Liens;
(E) The execution, delivery and performance by the Borrower, WD or
TMC of its obligations under this Amendment Agreement will not cause a
violation or default under any indenture, loan agreement, or other
agreement of, or applicable to, the Borrower, WD or TMC; and
(F) Each of the Borrower, WD and TMC has the requisite corporate
power and authority to execute, deliver and perform this Amendment
Agreement; each of such documents has been duly authorized, executed
and delivered; and each of such documents constitutes a valid, binding
and enforceable instrument, obligation or agreement of the Borrower, WD
or TMC, in accordance with its respective terms, except as enforcement
thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting enforcement of creditors'
rights generally.
4. Effectiveness of Documents. The terms and conditions hereof shall
not be effective until each of the following are delivered to the Lender:
<PAGE>
(A) Amendment Agreement. Three (3) fully executed originals of this
Amendment Agreement.
(B) Resolutions of Borrower. Resolutions of the Borrower, WD and TMC
certified by its secretary or assistant secretary of each as of the
date hereof, approving and adopting this Amendment Agreement and the
other documents to be executed by the Borrower, WD and TMC.
(C) Opinions. An opinion of counsel to the Borrower, WD and TMC
covering the matters covered by its prior opinion on the Loan
Agreement.
(D) Certificate of Authority. Certificate of a recent date of the
Secretary of State of North Carolina as to the authority of the
Borrower, WD and TMC to do business in North Carolina and the good
standing of the Borrower, WD and TMC.
(E) No Litigation Certificate. Certificate of the chief financial
officer of the Borrower, WD and TMC to the effect that no litigation or
proceedings are pending or threatened which might reasonably be
expected to materially adversely affect the Borrower's, TMC's or WD's
ability to perform its obligations under this Amendment Agreement or
any Loan Document or operation of the Borrower's, TMC's or WD's
business. The Borrower, WD and TMC shall also deliver no litigation
certificates for the two prior amendments to the Agreement.
(F) Other Documents, Etc. Such other documents, instruments and
certificates as the Lender may reasonably request.
5. Miscellaneous.
(A) This Amendment Agreement sets forth the entire understanding and
agreement of the parties hereto in relation to the subject matter
hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition,
representation or warranty, express or implied, not herein set forth
shall bind any party hereto, and none of them has relied on any such
promise, condition, representation or warranty. Each of the parties
hereto acknowledges that, except as in this Amendment Agreement
otherwise expressly stated, no representations, warranties, or
commitments, express or implied, have been made by any other party to
the other regarding the subject matter hereof. None of the terms or
conditions of this Amendment Agreement may be changed, modified, waived
or canceled, orally or otherwise, except in a writing, signed by the
party to be charged therewith, specifying such change, modification,
waiver or cancellation of such terms or conditions, or of any preceding
or succeeding breach thereof, unless expressly so stated.
(B) Except as hereby specifically amended, modified, or
supplemented, the Loan Agreement, the Loan Documents and all other
agreements, documents, and
<PAGE>
instruments related thereto are hereby confirmed and ratified in all
respects and shall remain in full force and effect according to their
respective terms.
(C) This Amendment Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which
together shall constitute one and the same instrument.
(D) This Amendment Agreement shall be governed by and construed and
interpreted in accordance with the laws of the State of North Carolina.
(E) Upon request of the Lender, each of the parties hereto will duly
execute and deliver or cause to be duly executed and delivered to the
Lender such further instruments and do and cause to be done such
further acts that may be reasonably necessary or proper in the opinion
of the Lender to carry out more effectively the provisions and purposes
hereof, including documents deemed necessary by the Lender to more
fully evidence the obligations of Borrower, TMC or WD to Lender and
protect and perfect the collateral therefor.
(F) The Borrower agrees to pay all reasonable costs and expenses of
the Lender in connection with the preparation, execution and delivery
of the documents executed in connection with this Amendment Agreement,
including without limitation, the reasonable fees and out-of-pocket
expenses of special counsel to the Lender.
(G) Each of WD and TMC (collectively the "Guarantors") as guarantors
under, in the case of WD, a Guaranty Agreement dated July 31, 1997 from
the WD in favor of the Lender and, in the case of TMC, a Guaranty
Agreement dated February 6, 1998, of TMC in favor of the Lender, hereby
joins in this Amendment Agreement to join in the terms hereof and
evidence its consent to the terms and conditions hereof.
[Signatures appear on following page]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date hereof by the Company and the Lender.
ATTEST: SPEIZMAN INDUSTRIES, INC.
/s/ James H. McCorkle, III By: /s/ Robert S. Speizman
- - ----------------------------- ------------------------------
__________ Secretary Name: Robert S. Speizman
Title: President
ATTEST: WINK DAVIS EQUIPMENT CO., INC.
/s/ Dana Russell By: /s/ James H. McCorkle, III
- - ----------------------------- ------------------------------
Assistant Secretary Name: James H. McCorkle, III
Title: Vice President
ATTEST: TODD MOTION CONTROLS, INC.
/s/ James H. McCorkle, III By: /s/ Robert S. Speizman
- - ----------------------------- ------------------------------
__________ Secretary Name: Robert S. Speizman
Title: President
BANK OF AMERICA, N.A.
d/b/a NATIONSBANK, N.A.
successor to NATIONSBANK, N.A.
By:______________________________
Name:____________________________
Title:_____________________________
1999 THIRD AMENDMENT AGREEMENT TO
$37,000,000 AMENDED AND RESTATED LOAN AGREEMENT AND TERM NOTE
THIS AMENDMENT AGREEMENT, made and entered into as of this 27th day of
September, 1999, by and between SPEIZMAN INDUSTRIES, INC., a Delaware
corporation (the "Borrower"), WINK DAVIS EQUIPMENT CO., INC., a Georgia
corporation ("WD"), TODD MOTION CONTROLS, INC., a North Carolina corporation
("TMC") and BANK OF AMERICA, N.A. d/b/a NATIONSBANK, N.A., successor to
NATIONSBANK, N.A., a national banking association (the "Lender");
W I T N E S S E T H:
--------------------
WHEREAS, pursuant to the $37,000,000 Amended and Restated Loan
Agreement dated as of July 31, 1997 between Borrower and Lender, as amended by
1998 First Amendment Agreement thereto dated as of February 6, 1998, 1998 Second
Amendment Agreement dated as of December 30, 1998, 1999 First Amendment
Agreement thereto dated as of May 17, 1999 and 1999 Second Amendment Agreement
thereto dated as of August 27, 1999, among the Borrower, WD, TMC and the Lender
(collectively the "Loan Agreement"), arrangements were made for the extension by
the Lender to the Borrower of credit on the terms and conditions set forth in
such Loan Agreement;
WHEREAS, under the Loan Agreement, the Borrower obtained a Credit
Facility in the maximum aggregate principal amount at any time outstanding of up
to $37,000,000, of which (i) up to $30,000,000 may be allocated under a "Letter
of Credit Facility" for the issuance of documentary Letters of Credit to support
the Borrower's purchase and importing of (x) presold textile machinery in the
ordinary course of its business and (y) in certain cases, equipment to be held
as inventory for sale and, within such $30,000,000, up to $8,500,000 may be
allocated to borrowings for the Borrower's short term operating needs under a
Revolving Line of Credit, and up to $500,000 may be allocated for the issuance
of Standby Letters of Credit, as provided in such Loan Agreement, and (ii) up to
$7,000,000, as subsequently increased to $8,050,000 by Note Modification
Agreement dated February 6, 1998, may be allocated as a term loan, all upon the
terms and conditions provided in the Loan Agreement;
WHEREAS, under the Loan Agreement, the Borrower has issued to the
Lender its Amended and Restated Revolving Credit Note dated July 31, 1997 in the
principal amount of $8,500,000 (the "Revolving Credit Note");
WHEREAS, under the Loan Agreement, the Borrower has issued to the
Lender its Term Note dated July 31, 1997 in the original principal amount of
$7,000,000, as subsequently increased to $8,050,000 by Note Modification
Agreement dated February 6, 1998 (the "Term Note");
<PAGE>
WHEREAS, collateral for the indebtedness and obligations of the
Borrower in respect of the Loan Agreement, the Revolving Credit Note and the
Letter of Credit Facility is provided under the Amended and Restated Security
Agreement dated July 31, 1997 between the Borrower, WD and the Lender and a
Security Agreement dated as of February 6, 1998 between TMC and the Lender
(collectively, the "Security Agreement");
WHEREAS, the Borrower has requested that the Lender agree to certain
modifications to the Loan Agreement to increase the Committed Amount under the
Revolving Line of Credit from $10,000,000 to $11,500,000 on a temporary basis;
NOW, THEREFORE, in consideration of the premises and mutual covenants
and conditions herein set forth, it is hereby agreed as follows:
1. Terms. All terms used herein without definition, unless the context
clearly requires otherwise, shall have the meanings provided therefor in the
Loan Agreement.
2. Amendment to Loan Agreement.
(A) Section 2.4(b) of the Loan Agreement is hereby amended to
provide for a temporary increase in the Committed Amount to $11,500,000
by amending subparagraph (iv) to read as follows:
"(iv) Notwithstanding the foregoing, the Committed
Amount shall be $10,000,000 during the period August 12, 1999
to September 17, 1999 and $11,500,000 during the period
September 18, 1999 to October 31, 1999, subject to such
permanent reductions as may be required hereunder during such
period. At November 1, 1999 and thereafter, the Committed
Amount shall be permanently reduced to $6,000,000, less any
other permanent reductions which may otherwise be required
hereunder."
(B) Each of the Borrower, WD and TMC hereby agrees and
confirms that all liens and security interests securing the
indebtedness evidenced by the Note shall cover all additional
indebtedness created under the Note and that the liens and security
interests created under the Loan Documents, including the Security
Agreement and the Cash Collateral Documents, shall cover all
indebtedness evidenced by the Note as increased by this Amendment
Agreement. The Borrower further agrees and confirms that this Amendment
Agreement shall constitute a modification to the Revolving Credit Loan
and the Note and not a novation thereof.
3. Representations and Warranties. Each of the Borrower, WD and TMC
hereby jointly and severally represents and warrants that:
(A) The representations and warranties contained in Article V
of the Loan Agreement are hereby made by the Borrower on and as of the
date hereof except the representations of Sections 5.3 and 5.4 shall
refer to the most recent financial statements delivered under Section
7.1 of the Loan Agreement.
<PAGE>
(B) There has been no material change, and there exists no
known prospective change, in the condition, financial or otherwise, of
the Borrower, WD or TMC since the date of the most recent financial
reports received by the Lender, other than changes in the ordinary
course of business, none of which has been a materially adverse change;
(C) The business and properties of the Borrower, WD or TMC are
not, and since the date of the most recent financial reports thereof
received by Lender have not, been materially adversely affected as the
result of any fire, explosion, earthquake, chemical spill, accident,
strike, lockout, combination of workmen, flood, embargo, riot, or
cancellation or loss of any major contracts;
(D) No event has occurred and no condition exists which,
either prior to or upon the consummation of the transactions
contemplated hereby, constitutes an Event of Default under the Loan
Agreement, either immediately or with the lapse of time or the giving
of notice, or both;
(E) The property which is collateral for the indebtedness of
the Borrower, WD or TMC to the Lender under the Security Agreement and
other collateral documents of the Borrower, WD or TMC in favor of the
Lender are subject to no liens or encumbrances except Permitted Liens;
(F) The execution, delivery and performance by the Borrower,
WD or TMC of its obligations under this Amendment Agreement will not
cause a violation or default under any indenture, loan agreement, or
other agreement of, or applicable to, the Borrower, WD or TMC; and
(G) Each of the Borrower, WD and TMC has the requisite
corporate power and authority to execute, deliver and perform this
Amendment Agreement; each of such documents has been duly authorized,
executed and delivered; and each of such documents constitutes a valid,
binding and enforceable instrument, obligation or agreement of the
Borrower, WD or TMC, in accordance with its respective terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting enforcement
of creditors' rights generally.
4. Effectiveness of Documents. The terms and conditions hereof shall
not be effective until each of the following are delivered to the Lender:
(A) Amendment Agreement. Three (3) fully executed originals of
this Amendment Agreement.
(B) Resolutions of Borrower. Resolutions of the Borrower, WD
and TMC certified by its secretary or assistant secretary of each as of
the date hereof, approving and adopting this Amendment Agreement and
the other documents to be executed by the Borrower, WD and TMC.
<PAGE>
(C) Opinions. An opinion of counsel to the Borrower, WD and
TMC covering the matters covered by its prior opinion on the Loan
Agreement.
(D) Certificate of Authority. Certificate of a recent date of
the Secretary of State of North Carolina as to the authority of the
Borrower, WD and TMC to do business in North Carolina and the good
standing of the Borrower, WD and TMC.
(E) No Litigation Certificate. Certificate of the chief
financial officer of the Borrower, WD and TMC to the effect that no
litigation or proceedings are pending or threatened which might
reasonably be expected to materially adversely affect the Borrower's,
TMC's or WD's ability to perform its obligations under this Amendment
Agreement or any Loan Document or operation of the Borrower's, TMC's or
WD's business.
(F) Other Documents, Etc. Such other documents, instruments
and certificates as the Lender may reasonably request.
5. Miscellaneous.
(A) This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the
subject matter hereof and supersedes any prior negotiations and
agreements among the parties relative to such subject matter. No
promise, condition, representation or warranty, express or implied, not
herein set forth shall bind any party hereto, and none of them has
relied on any such promise, condition, representation or warranty. Each
of the parties hereto acknowledges that, except as in this Amendment
Agreement otherwise expressly stated, no representations, warranties,
or commitments, express or implied, have been made by any other party
to the other regarding the subject matter hereof. None of the terms or
conditions of this Amendment Agreement may be changed, modified, waived
or canceled, orally or otherwise, except in a writing, signed by the
party to be charged therewith, specifying such change, modification,
waiver or cancellation of such terms or conditions, or of any preceding
or succeeding breach thereof, unless expressly so stated.
(B) Except as hereby specifically amended, modified, or
supplemented, the Loan Agreement, the Loan Documents and all other
agreements, documents, and instruments related thereto are hereby
confirmed and ratified in all respects and shall remain in full force
and effect according to their respective terms.
(C) This Amendment Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which
together shall constitute one and the same instrument.
(D) This Amendment Agreement shall be governed by and
construed and interpreted in accordance with the laws of the State of
North Carolina.
<PAGE>
(E) Upon request of the Lender, each of the parties hereto
will duly execute and deliver or cause to be duly executed and
delivered to the Lender such further instruments and do and cause to be
done such further acts that may be reasonably necessary or proper in
the opinion of the Lender to carry out more effectively the provisions
and purposes hereof, including documents deemed necessary by the Lender
to more fully evidence the obligations of Borrower, TMC or WD to Lender
and protect and perfect the collateral therefor.
(F) The Borrower agrees to pay all reasonable costs and
expenses of the Lender in connection with the preparation, execution
and delivery of the documents executed in connection with this
Amendment Agreement, including without limitation, the reasonable fees
and out-of-pocket expenses of special counsel to the Lender.
(G) Each of WD and TMC (collectively the "Guarantors") as
guarantors under, in the case of WD, a Guaranty Agreement dated July
31, 1997 from the WD in favor of the Lender and, in the case of TMC, a
Guaranty Agreement dated February 6, 1998, of TMC in favor of the
Lender, hereby joins in this Amendment Agreement to join in the terms
hereof and evidence its consent to the terms and conditions hereof.
[Signatures appear on following page]
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date hereof by the Company and the Lender.
ATTEST: SPEIZMAN INDUSTRIES, INC.
/s/ James H. McCorkle, III By: /s/ Robert S. Speizman
- - ----------------------------- ------------------------------
__________ Secretary Name: Robert S. Speizman
Title: President
ATTEST: WINK DAVIS EQUIPMENT CO., INC.
/s/ Dana Russell By: /s/ James H. McCorkle, III
- - ----------------------------- ------------------------------
Assistant Secretary Name: James H. McCorkle, III
Title: Vice President
ATTEST: TODD MOTION CONTROLS, INC.
/s/ James H. McCorkle, III By: /s/ Robert S. Speizman
- - ----------------------------- ------------------------------
__________ Secretary Name: Robert S. Speizman
Title: President
BANK OF AMERICA, N.A.
d/b/a NATIONSBANK, N.A.
successor to NATIONSBANK, N.A.
By:______________________________
Name:____________________________
Title:_____________________________
[ WINK DAVIS EQUIPMENT COMPANY LETTERHEAD]
M E M O R A N D U M
- - -------------------
DATE: August 10, 1999
TO: Bob Speizman
FROM: Alex Davis
SUBJECT: Real Estate Leases
- - --------------------------------------------------------------------------------
Dear Bob,
Confirming our telephone conversation this morning, Wink and I will hold the
lease rates as they are for the Charlotte, Richmond and Chicago locations
through July 31,2001. We understand that you will be vacating the Charlotte
property later this year.
We offer the Miami Circle property for an additional two-year lease period
(until July 31, 2001) at the rate of $5.00 per square foot. Wink Davis is
occupying 23,700 square feet of this building and using a $5.00 per square foot
figure, the monthly rental would move to $9,875. You would have the right to
terminate this two-year lease after one year providing you could give us six
months notice.
If this is as you expected and is acceptable, please let me know and I will be
glad to prepare a lease renewal.
Sincerely yours,
/s/ Alex Davis
Alex Davis
CAD/lk
Acceptance initialed by RSS (8/10/99).
[THE MERIDIAN REALTY GROUP LETTERHEAD]
AGREEMENT TO LEASE
This writing shall serve as an agreement between Todd Motion Controls, Inc.,
5511 Reynolda Road, Winston-Salem, North Carolina 27106, Lessee, and Douglas L.
Cook, authorized as Lessor, c/o Mr. Bill Wall, P.O. Box 4042, Winston-Salem,
North Carolina 2105 to lease thru the agency of The Meridian Realty Group, Inc.,
a certain portion of the warehouse and grounds located at 4290 North Patterson
Avenue, Winston-Salem, North Carolina, as shown on attachment "A".
The lease term shall commence September 1, 1998 for twelve (12) months, thru
August 31, 1999, with an option to renew for a consecutive term of twelve (12)
months upon two (2) months notice, prior to the expiration of the current term,
to the Lessor's agent. Either party shall have the option to cancel the lease
upon a six (6) month written notice after a period of six (6) months occupancy
with notice to Lessor's agent, Robert H. Hoffman, The Meridian Realty Group,
Inc.
Lessor shall maintain, at this expense, fire and extended property insurance for
the building and the Lessee shall maintain, at his expense, liability and
property insurance for the stored property.
The Lessee will protect and save the Lessors harmless and does hereby indemnify
the Lessors against all claims for damages either to persons or property of
whatever kind or nature arising in any manner out of or on account of its use of
the leased premises or on account of any condition of the premises for which the
Lessee is responsible under the terms hereof. Lessee will notify Lessors of any
exterior or structural defect in the lease premises of which it is aware which
may cause injury to any person or property so that Lessors may take whatever
action that may be necessary to correct the same.
Rental for the subject leased space shall be $2.00 per square foot, annually on
35,340 building square feet (shown on attachment "A"), for $5,890.00 per month.
With the rental due the 1st of each month and all made WITHOUT FURTHER NOTICE
payable to Cooks Warehouse, c/o Mr. Bill Wall as addressed above.
Any increase in the buildings annual insurance rate, above that at the beginning
date of this lease, which increase is caused by the Lessees activities, within
the subject building shall be the expense of the Lessee.
<PAGE>
The Lessee shall have the privilege and responsibility of removing, at the
termination of his lease occupancy, any and all equipment, wiring material,
etc., which he has installed in the building including any walls, except for the
bathroom area which shall remain a part of the building.
Signatures below acknowledge the understanding and agreement of the terms set
forth above.
TODD MOTION CONTROL, INC., LESSEE
By: /s/ William H. Todd, Vice President Date: 9/3/98
--------------------------------------
By: /s/ Doug Cook Date: 8/25/99
--------------------------------------
By: /s/ Robert H. Hoffman Date: 8/25/99
--------------------------------------
<PAGE>
[THE MERIDIAN REALTY GROUP LETTERHEAD]
Dear Bill: VIA FAX
As you can see the attached lease expires August 31, 1999. However, it contains
an option for you to continue in occupancy at the same rate for 12 more months.
In order for this to be done I need your signature below and fax it back to me
right away. (This notification was due by July 1, 1999). Call me if you have any
questions.
By: /s/ Robert Hoffman
---------------------------------------------
The Meridian Realty Group, Inc., Lessor, Agent
Dear Bob:
This notification shall exercise the option to extend Todd Motion Controls Inc.
occupancy at 4290 N. Patterson Avenue as authorized by the attached lease.
Todd Motion Controls Inc., Lessee
By: /s/ William H. Todd
--------------------------------------
William H. Todd, Vice President
Date 8/23/99
EXHIBIT 21
LIST OF SUBSIDIARIES
Wink Davis Equipment Company, Inc., Georgia
Todd Motion Controls, Inc., Winston-Salem, North Carolina
EXHIBIT 23
[BDO Seidman Letterhead]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 2-77747 and No. 33-43042 of Speizman Industries, Inc. on Form S-8 of our
report dated August 30, 1999, appearing in this Annual Report on Form 10-K of
Speizman Industries, Inc. for the year ended July 3, 1999.
Charlotte, North Carolina BDO Seidman, LLP
August 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Jul-03-1999
<PERIOD-START> Jun-28-1998
<PERIOD-END> Jul-03-1999
<CASH> 642,167
<SECURITIES> 0
<RECEIVABLES> 21,784,879
<ALLOWANCES> 646,316
<INVENTORY> 16,360,366
<CURRENT-ASSETS> 44,282,015
<PP&E> 7,786,681
<DEPRECIATION> (1,972,975)
<TOTAL-ASSETS> 56,456,033
<CURRENT-LIABILITIES> 28,223,974
<BONDS> 0
0
0
<COMMON> 336,951
<OTHER-SE> 22,239,767
<TOTAL-LIABILITY-AND-EQUITY> 56,456,033
<SALES> 101,412,128
<TOTAL-REVENUES> 101,412,128
<CGS> 85,563,543
<TOTAL-COSTS> 100,687,509
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,103,141
<INCOME-PRETAX> (378,522)
<INCOME-TAX> (126,000)
<INCOME-CONTINUING> (252,522)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (252,522)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
