-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ErWg8ujpSiEWZZGqTPCvsZY5bBLCCzxrr7SJxHY7CWpAupuK8E4dc4h77yRboJQm JeGzEFxne07lZuf9PRkdsQ== 0000950168-99-002547.txt : 19991018 0000950168-99-002547.hdr.sgml : 19991018 ACCESSION NUMBER: 0000950168-99-002547 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19990703 FILED AS OF DATE: 19991001 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPEIZMAN INDUSTRIES INC CENTRAL INDEX KEY: 0000092827 STANDARD INDUSTRIAL CLASSIFICATION: 5084 IRS NUMBER: 560901212 STATE OF INCORPORATION: DE FISCAL YEAR END: 0629 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-08544 FILM NUMBER: 99721898 BUSINESS ADDRESS: STREET 1: 508 W. 5TH STREET CITY: CHARLOTTE STATE: NC ZIP: 28231 BUSINESS PHONE: 7043723751 MAIL ADDRESS: STREET 1: 508 W. 5TH STREET CITY: CHARLOTTE STATE: NC ZIP: 28231 10-K 1 SPEIZMAN INDUSTRIES - - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-K
|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
SPEIZMAN INDUSTRIES, INC. - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter)
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)
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. 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 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:
------------------------------------------------------------------------------------------------------------------ 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 ------------------------------------------------------------------------------------------------------------------
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 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 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
- - ---------------------------------------------------------------------------------------------------------------------- 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 - - ----------------------------------------------------------------------------------------------------------------------
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 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 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.
- - ---------------------------------------------------------------------------------------------------------------------- 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 - - ----------------------------------------------------------------------------------------------------------------------
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 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:
LEASE MONTHLY APPROXIMATE LEASE ORIGINATION TERM RENTAL RENTAL SQUARE USE LOCATION DATE (MONTHS) RATE FOOTAGE - - -------------------------------------------------------------------------------------------------------------------------- Properties used primarily by Speizman: 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
(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 EXECUTIVE OFFICERS OF REGISTRANT The following table sets forth certain information regarding the executive officers of the Company:
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
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.
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
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
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) 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 - - --------------
(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 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 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 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 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:
1. FINANCIAL STATEMENTS: Page ---- 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 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
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 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.
Signatures Title Date ---------- ----- ---- /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
16 [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 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
July 3, June 27, 1999 1998 ---- ---- 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 ========== ==========
See accompanying summary of accounting policies and notes to consolidated financial statements. F-2 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended ------------------------------------------------------------- July 3, June 27, June 28, 1999 1998 1997 ---- ---- ---- 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
See accompanying summary of accounting policies and notes to consolidated financial statements. F-3 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Accumulated Additional Other Common Common Paid-In Retained Comprehensive Treasury Stockholders Shares Stock Capital Earnings Income Stock Equity ----------- ---------- ----------- -------- ------ ---------- ----------- 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 ========= =========== ============ =========== ========== ========== ===========
See accompanying summary of accounting policies and notes to consolidated financial statements. F-4 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended ----------------------------------------------------- July 3, June 27, June 28, 1999 1998 1997 ------------- ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: 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 ============ ============ ===========
See accompanying summary of accounting policies and notes to consolidated financial statements. F-5 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 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 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.
NOTE 2 -- ACCOUNTS RECEIVABLE Accounts receivable are summarized as follows: July 3, 1999 June 27, 1998 ------------ ------------- 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 ========== ==========
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 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:
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%
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 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Capital Operating Lease Leases --------- --------- 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 =============
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:
1999 1998 1997 ---- ---- ---- Current: 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 ============ ============
F-10 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Principal items making up the deferred income tax assets (liabilities) are as follows:
Year Ended -------------------------------- July 3, June 27, 1999 1998 ---------- --------- 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 ========== =========
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:
1999 1998 1997 ---- ---- ---- 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% ==== ==== ====
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 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:
July 3, 1999 June 27, 1998 ---------------------------------------------------- Total Total ----- ----- 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 ==========
F-12 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:
Year Ended --------------------------------------------------------------------------------------- Weighted Weighted Weighted July 3, Average June 27, Average June 28, Average 1999 Price/Sh. 1998 Price/Sh. 1997 Price/Sh. ----------- ----------- ----------- 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
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:
Year Ended -------------------------------------------------------------------------------- Weighted Weighted Weighted July 3, Average June 27, Average June 28, Average 1999 Price/Sh. 1998 Price/Sh. 1997 Price/Sh. -------- --------- -------- --------- -------- --------- 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
F-13 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:
Year Ended Year Ended July 3, 1999 June 27, 1998 ------------ ------------- 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
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 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 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.
July 3, 1999 June 27, 1998 ------------ ------------- 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 ============= ============
NOTE 16 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Year Ended --------------------------------------------------------- July 3, June 27, June 28, 1999 1998 1997 ---- ---- ---- 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
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 [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 SPEIZMAN INDUSTRIES, INC. AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
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 ------- ------- --------- ------- ------- - - --------------------
(a) Purchase price adjustment for Wink Davis. S-2 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.) 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 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 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. EX-10 2 EXHIBIT 10.8 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 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 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 EX-10 3 EXHIBIT 10.9 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. 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 EX-10 4 EXHIBIT 10.10 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. 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 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, 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
EX-10 5 EXHIBIT 10.11 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. 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 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 EX-10 6 EXHIBIT 10.18 [ 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 SPEIZMAN BROTHERS PARTNERSHIP 508 W. FIFTH STREET CHARLOTTE, NC
RENT SCHEDULE - - ------------------------------------ -------------------- -------------------------------- 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% - - ------------------------------------ -------------------- --------------------------------
EX-10 7 EXHIBIT 10.21 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. 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 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 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 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 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 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 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 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 (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 (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 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 EX-10 8 EXHIBIT 10.28 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 EX-10 9 EXHIBIT 10.32 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 EX-10 10 EXHIBIT 10.42 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- 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- 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- 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- 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- 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- EX-10 11 EXHIBIT 10.43 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 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 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 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 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 EX-10 12 EXHIBIT 10.61 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; 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 (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 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 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 EX-10 13 EXHIBIT 10.62 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"); 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 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: (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 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] 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:_____________________________ EX-10 14 EXHIBIT 10.63 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"); 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. (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. (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. (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] 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:_____________________________ EX-10 15 EXHIBIT 10.71 [ 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). EX-10 16 EXHIBIT 10.76 [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. 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 -------------------------------------- [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 EX-21 17 EXHIBIT 21 EXHIBIT 21 LIST OF SUBSIDIARIES Wink Davis Equipment Company, Inc., Georgia Todd Motion Controls, Inc., Winston-Salem, North Carolina EX-23 18 EXHIBIT 23 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 EX-27 19 FDS --
5 Year Jul-03-1999 Jun-28-1998 Jul-03-1999 642,167 0 21,784,879 646,316 16,360,366 44,282,015 7,786,681 (1,972,975) 56,456,033 28,223,974 0 0 0 336,951 22,239,767 56,456,033 101,412,128 101,412,128 85,563,543 100,687,509 0 0 1,103,141 (378,522) (126,000) (252,522) 0 0 0 (252,522) (0.08) (0.08)
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