SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Section 240.14a-11(c) or Section 240.14a-12
SPEIZMAN INDUSTRIES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculate dand state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
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PRELIMINARY COPY
SPEIZMAN INDUSTRIES, INC.
508 West Fifth Street
Charlotte, North Carolina 28202
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 19, 1996
---------------------------------------------
To the Stockholders of Speizman Industries, Inc.:
The Annual Meeting of Stockholders of Speizman Industries, Inc. (the
"Company") will be held on Tuesday, November 19, 1996, at 11:00 a.m., at the
offices of the Company, 508 West Fifth Street, Charlotte, North Carolina for the
following purposes:
1. To elect a Board of Directors of five directors to serve until
the next annual meeting of stockholders and until their
successors are elected and qualified;
2. To approve an amendment to the Speizman Industries, Inc.
Nonqualified Stock Option Plan (the "Plan") to increase the
maximum number of shares of the Company's common stock, par
value $0.10 per share, available for issuance thereunder from
145,000 to 290,000 and to make certain other changes to the Plan
in accordance with recent amendments to Rule 16b-3 under
the Securities Exchange Act of 1934, as amended;
3. To adopt an amendment to the Company's Certificate of
Incorporation, to increase the authorized number of shares of the
Company's Common Stock, par value $0.10 per share, from
6,000,000 to 20,000,000;
4. To ratify the appointment of BDO Seidman, LLP as the Company's
independent certified public accountants for the fiscal
year ending June 28, 1997; and
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record as of the close of business on September
30, 1996 will be entitled to notice of and to vote at the meeting or any
adjournment thereof.
By order of the Board of Directors,
JOSEF SKLUT
Secretary
Charlotte, North Carolina
October ___, 1996
YOUR VOTE IS IMPORTANT
REGARDLESS OF WHETHER YOU EXPECT TO ATTEND THE ANNUAL MEETING OF
STOCKHOLDERS, YOU ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ACCOMPANYING
PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED. NO POSTAGE IS REQUIRED
FOR MAILING IN THE UNITED STATES. YOUR PROMPT RESPONSE WILL ASSURE THAT A QUORUM
IS PRESENT AT THE MEETING AND SAVE THE COMPANY THE EXPENSE OF FURTHER
SOLICITATION OF PROXIES.
PRELIMINARY COPY
SPEIZMAN INDUSTRIES, INC.
508 West Fifth Street
Charlotte, North Carolina 28202
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PROXY STATEMENT
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PROXY SOLICITATION AND GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Speizman Industries, Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of Stockholders of
the Company to be held on November 19, 1996, at 11:00 a.m., at the offices of
the Company, 508 West Fifth Street, Charlotte, North Carolina, and at any
adjournment thereof (the "Meeting"). This Proxy Statement and the enclosed proxy
were first mailed to the Company's stockholders on or about October ___, 1995.
Only stockholders of record at the close of business on September 30,
1996 (the "Record Date"), will be entitled to notice of and to vote at the
Meeting. On the Record Date, 3,262,866 shares of the Company's common stock, par
value $.10 per share ("Common Stock"), having one vote each, were issued and
outstanding.
The accompanying proxy is for use at the Meeting if a stockholder does
not attend the Meeting in person or wishes to have his shares voted by proxy
even if he attends the Meeting. All shares of Common Stock represented at the
Meeting by valid proxies received pursuant to this solicitation and not revoked
before they are exercised will be voted in accordance with the directions given
therein. If no such directions are given, the shares of Common Stock so
represented will be voted FOR the nominees for election as directors named in
this Proxy Statement, FOR the approval of the proposed amendments to the
Speizman Industries, Inc. Nonqualified Stock Option Plan, FOR the adoption of
the proposed amendment to the Company's Certificate of Incorporation and FOR the
ratification of BDO Seidman, LLP as the Company's independent certified public
accountants for the fiscal year ending June 28, 1997. Any stockholder giving a
proxy may revoke it at any time before it is exercised by filing with the
Secretary of the Company a written revocation or an executed proxy having a
later date, or by attending the Meeting and electing to vote in person.
The Company will bear the entire cost of the solicitation of proxies,
including the reimbursement of brokers, banks and other record holders of shares
of Common Stock for their expenses in forwarding proxy materials to the
beneficial owners of such shares. Following the original solicitation of proxies
by mail, proxies may be solicited by officers and employees of the Company by
telephone, facsimile, telegraph or in person. Such officers and employees will
not be additionally compensated for soliciting proxies. In addition, the Company
has retained Corporate Investor Communications, Inc. to assist in the
solicitation of proxies for a fee of approximately $4,000, plus reimbursement of
expenses.
A majority of the outstanding shares of Common Stock must be
represented at the Meeting in person or by proxy to constitute the quorum needed
for the transaction of business at the Meeting. Shares that are withheld as to
voting with respect to one or more of the nominees for election as a director,
abstentions and broker non-votes will be counted for the purpose of determining
the existence of a quorum.
A plurality of the votes cast by the holders of the shares of Common
Stock present in person or represented by proxy at the Meeting is required for
the election of directors. The approval of the proposed amendments to the
Company's Nonqualified Stock Option Plan requires the affirmative vote of the
holders of a majority of such shares. The approval of the proposed amendment to
the Company's Certificate of Incorporation requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock. The
ratification of the appointment of independent auditors requires the affirmative
vote of a majority of the votes cast at the Meeting. With respect to the
election of directors, votes may be cast in favor of, or withheld as to, one or
more of the nominees for election as director. With respect to the other matters
to be voted on, votes may be cast in favor of or against a matter or
stockholders may abstain from voting. Votes that are withheld in the election of
directors will have no effect on the outcome of such election. With regard to
the proposed amendments to the Company's Nonqualified Stock Option Plan
and the proposed amendment to the Company's Certificate of Incorporation,
abstentions and broker non-votes will have the same effect as votes against
either such proposal. Abstentions and broker non-votes will have no effect on
the vote with respect to the election of directors or the ratification of the
independent auditors. Votes at the Meeting will be tabulated by the Company's
transfer agent as independent voting inspector.
All references in this Proxy Statement to fiscal years are to the
Company's 52- or 53-week fiscal year ending on the Saturday closest to June 30.
Fiscal 1994, and 1995 and 1996 each contained 52 weeks and ended on July 2,
1994, July 1, 1995 and June 29, 1996, respectively. Fiscal 1993 contained 53
weeks and ended on July 3, 1993. Fiscal 1997 contains 52 weeks and will end on
June 28, 1997.
2
ELECTION OF DIRECTORS
The Board of Directors has nominated the five persons named below for
election as directors at the Meeting to serve until the next annual meeting of
stockholders and until their successors are elected and qualified. The Company's
Bylaws provide that the Company's Board of Directors shall consist of one or
more directors and that the Board of Directors has the power to determine the
number of directors (when not determined by the stockholders) and to fill
vacancies on the Board of Directors. The number of directors is presently fixed
at five. Each of the five nominees named below is presently serving as a
director and has consented to have his name appear as a nominee in this Proxy
Statement and to serve as a director of the Company if elected. Should any
nominee become unable to serve as a director, shares of Common Stock represented
at the Meeting by valid proxies may be voted for the election of such substitute
nominee(s) as may be designated by the Board of Directors. The Board of
Directors has no reason to believe that any nominee will be unable to serve as a
director.
The following information is provided concerning the five nominees for
election as directors of the Company:
Robert S. Speizman Mr. Speizman, 56, has served as
President of the Company since November 1976.
From 1969 to October 1976, Mr. Speizman served as
Executive Vice President of the Company. Mr.
Speizman has been a director of the Company since
1967 and Chairman of the Board of Directors since
July 1987.
Josef Sklut Mr. Sklut, 67, has served as Vice
President-Finance of the Company since 1978, as
Secretary of the Company since 1977, as Treasurer
of the Company since 1969 and as a director of
the Company since 1977.
Steven P. Berkowitz Mr. Berkowitz, 55, has served as a
director of the Company since February 1992. Mr.
Berkowitz has served as President and a director
of the Center for Contemporary Art, Ltd., an art
gallery owned by him, since September 1987. In
addition, Mr. Berkowitz has served as Chairman of
the Board of Directors of the Marwen Foundation,
a nonprofit foundation, since December 1987. From
1968 to September 1988, Mr. Berkowitz served as
Chief Executive Officer, President and Chairman
of the Board of Directors of Silvestri
Corporation, a company owned by him that imported
and distributed decorative accessories and
Christmas decorations.
William Gorelick Mr. Gorelick, 61, has served as a
director of the Company since March 1993. From
May 1956 to June 1991, Mr. Gorelick was employed
by Capitol Finance Group, Inc., a consumer
finance company, and its subsidiary companies,
and served these companies in various capacities
including as a director, Treasurer, Secretary,
Vice President and President. Since April 1991,
Mr. Gorelick has served as President and/or a
director of CPP Holdings, Inc. and its subsidiary
company, Capitol Premium Plan, Inc., an insurance
premium finance company in which he has a
substantial interest. Since November 1991, Mr.
Gorelick has held a substantial interest in, and
has served as President, Treasurer, director
and/or partner of, Title Insurance Services
Corporation, Atlantic Title Insurance Company and
Atlantic Assurance Company. These companies
underwrite title insurance policies and sell
appraisal and abstract services to consumer
lenders. In addition, Mr. Gorelick is a partner
in several real estate partnerships.
Scott C. Lea Mr. Lea, 64, has served as a director of
the Company since May 1993. Mr. Lea also serves
as a director of Lance, Inc. and in April 1996
was elected Chairman of the Board of Directors of
Lance, Inc. Mr. Lea was a private investor from
January 1992 to March 1996. From September 1974
to December 1991, Mr. Lea was employed by Rexham
Industries (formerly Rexham Corp.), a
manufacturer of packaging, technical coatings and
laminates. While at Rexham, Mr. Lea served in
various capacities, including as President, Chief
Executive Officer and a director from
3
September 1974 to April 1989, and as Chairman of
the Board of Directors from April 1989 to
December 1991.
All directors of the Company are elected annually to serve until the
next annual stockholders' meeting following their election and until their
successors are elected and qualified. The Company's executive officers are
elected annually by the Board of Directors to serve until their successors are
elected and qualified. The Company is not a party to an employment agreement
with either of its executive officers. There are no family relationships among
any of the directors and executive officers of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES NAMED ABOVE.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
In fiscal 1996, the Board of Directors held four meetings and took
action by unanimous written consent six times. The Board of Directors presently
has an Audit Committee, a Compensation Committee and a Stock Option Committee,
but has no standing nominating committee. The Audit Committee is responsible for
recommending independent auditors, reviewing with the independent auditors the
scope and results of the audit engagement, establishing and monitoring the
Company's financial policies and control procedures, reviewing and monitoring
the provision of non-audit services by the Company's independent auditors and
reviewing all conflict of interest situations. The Compensation Committee is
responsible for determining the salaries, bonuses and all other compensation,
other than pursuant to the Company's equity-based plans, of the executive
officers of the Company. The Stock Option Committee is responsible for
administering the Company's equity-based plans including, to the extent
applicable or allowable with regard to a plan or an option thereunder, the
designation of persons to whom options may be granted, the type and time of an
option and the number of shares of Common Stock subject thereto. The Stock
Option Committee, the Audit Committee and the Compensation Committee are each
presently comprised of Mr. Berkowitz, Mr. Gorelick and Mr. Lea. Mr. Lea is the
Chairman of the Audit Committee, Mr. Berkowitz is the Chairman of the
Compensation Committee and Mr. Gorelick is Chairman of the Stock Option
Committee. In fiscal 1996, the Audit Committee and the Compensation Committee
each held one meeting, and the Stock Option Committee held two meetings. In
fiscal 1996, all of the directors attended all of the meetings of the Board of
Directors and the above committees on which they serve except for Mr. Gorelick,
who was unable to attend one meeting of the Board of Directors, and the meeting
of the Audit Committee and of the Compensation Committee, and Mr. Lea, who was
unable to attend one meeting of the Board of Directors.
4
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of the Record Date (or such
different date as is indicated below) by (i) each director of the Company and
each nominee for election as a director who beneficially owns Common Stock, (ii)
each person that is known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (iii) each executive officer of the Company
and (iv) all directors and executive officers of the Company as a group. The
stockholders named below have sole voting and investment power with respect to
the shares of Common Stock shown as beneficially owned by them, except as
expressly disclosed to the contrary.
SHARES BENEFICIALLY PERCENT OF SHARES
NAME OWNED OUTSTANDING
---- --------------- -----------
Robert S. Speizman 731,603(1) 21.9
Josef Sklut 44,750(2) 1.3
Steven P. Berkowitz 46,200(3) 1.4
William Gorelick 20,500(4) *
Scott C. Lea 5,500(5) *
Dimensional Fund Advisors Inc. 180,400(6) 5.6
Heartland Advisors, Inc. 344,600(7) 10.7
All executive officers and directors
as a group (5 persons) 848,553 25.3
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* Less than 1%
(1) Includes 26,650 shares of Common Stock held by Mr. Speizman's spouse as
custodian for one of his children, as to which he disclaims beneficial
ownership, and 69,304 shares of Common Stock subject to options that are
presently exercisable or become exercisable in December 1996. Mr.
Speizman's address is 508 West Fifth Street, Charlotte, North Carolina
28202.
(2) Includes 600 shares of Common Stock owned of record by Mr. Sklut's spouse,
as to which he disclaims beneficial ownership, and 41,650 shares of Common
Stock subject to options that are presently exercisable or become
exercisable in December 1996.
(3) Includes 500 shares of Common Stock subject to an option that becomes
exercisable in December 1996.
(4) Includes 5,000 shares of Common Stock owned by Mr. Gorelick's spouse and
500 shares of Common Stock subject to an option that becomes exercisable in
December 1996.
(5) Represents shares of Common Stock owned by a revocable trust of which
Mr. Lea and his family members are beneficiaries and 500 shares of Common
Stock subject to an option that becomes exercisable in December 1996.
(6) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 180,400 shares of
Common Stock as of June 30, 1996, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of The DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and the DFA Participating
Group Trust, investment vehicles of qualified employees benefit plans, for
all of which Dimensional serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares of Common Stock.
Dimensional has sole dispositive power with respect to all such shares and
sole voting power with respect to 122,900 of such shares. Persons who are
officers of Dimensional also serve as officers of DFA Investment Dimensions
Group, Inc., (the "Fund") and The DFA Investment Trust Company (the
"Trust"), each an open-end management investment company registered under
the Investment Company Act of 1940. In their capacities as officers of the
Fund and the Trust, these persons vote 28,600 additional shares which are
owned by the Fund and 28,900 shares
5
which are owned by the Trust, which shares are included in the 180,400
shares of Common Stock with respect to which Dimensional has sole
dispositive power. The address of Dimensional is 1299 Ocean Avenue, 11th
Floor, Santa Monica, California 90401.
(7) As of September 30, 1996, Heartland Advisors, Inc. ("Heartland"),
beneficially owned 344,600 shares of Common Stock. Heartland has sole
dispositive power with respect to all such shares and sole voting power
with respect to 333,000 of such shares. Heartland's address is 790 North
Milwaukee Street, Milwaukee, Wisconsin 53202.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for fiscal 1994,
1995 and 1996 with respect to the compensation awarded to or earned by the
Company's executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION
($) ($)(1) (#) ($)
- ---------------------------- ------ ------- -------- ------------ -------------
Robert S. Speizman,
President 1996 245,000 0 91,663/0 76,390(2)
1995 245,000 187,252 22,222/0 60,664(2)
1994 244,988 530,208 0/0 61,035(2)
Josef Sklut,
Vice President-Finance,
Secretary and Treasurer 1996 108,462 0 14,500/0 1,085(3)
1995 98,000 37,450 7,500/0 980(3)
1994 98,000 106,041 0/0 980(3)
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(1) Represents amounts paid under the Company's Executive Bonus Plan,
originally adopted by the Board of Directors in February 1990. Under
the plan, for the periods presented, the Company's President and Vice
President-Finance received a cash bonus equal to 5% and 1%,
respectively, of the first $1.0 million of the Company's consolidated
income before taxes and before executive officer bonuses, and 10% and
2%, respectively, of such income over $1.0 million. No such bonuses are
payable under the plan to the extent that their accrual would decrease
the Company's income before taxes to less than $500,000. No bonuses
were payable under the Plan for fiscal 1996.
(2) Represents the Company's contribution of $2,248, $1,602 and $2,310 in
fiscal 1994, 1995 and 1996 respectively, to the account of Mr. Speizman
under the Company's 401(k) Profit Sharing Plan and payments of
aggregate premiums of $58,787, $59,062 and $74,080 in fiscal 1994, 1995
and 1996 respectively, on split dollar life insurance policies on the
life of Mr. Speizman (the increase in the amount of premiums paid in
fiscal 1996 was not attributable to an increase in the amount of the
policies).
(3) Represents contributions by the Company to the account of Mr. Sklut
under the Company's 401(k) Profit Sharing Plan.
6
OPTION TABLES
The following table sets forth certain information with respect to
options granted to the Company's executive officers in fiscal 1996 under the
Company's 1991 Incentive Stock Option Plan (the "1991 Plan") and NonQualified
Stock Option Plan (the "Plan").
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
PERCENT OF
TOTAL POTENTIAL REALIZABLE
OPTIONS/ VALUE AT ASSUMED
SARS ANNUAL RATES OF STOCK
OPTIONS/ GRANTED TO EXERCISE PRICE APPRECIATION
SARS EMPLOYEES OR BASE FOR OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION -----------------------
NAME (#) YEAR (3) ($/SH) DATE 5%($) 10%($)
- ---- ------- ---------- --------- ----------------- ----- -------
Robert S.Speizman(1) 33,333 18.1% 3.3000 November 16, 2000 30,391 67,155
Robert S.Speizman(1) 19,830 10.8% 3.4375 February 26, 2001 18,833 41,616
Robert S.Speizman(2) 38,500 21.0% 3.0000 November 16, 2005 72,637 184,077
Josef Sklut (2) 14,500 7.9% 3.0000 November 16, 2005 27,357 69,328
- ------------
(1) Represents options granted under the 1991 Plan. The exercise price of the
options granted under the 1991 Plan is the fair market value of the Common
Stock on the date of grant or 110% of such value for persons who control
10% of the outstanding Common Stock on that date. The options have a date
of grant of November 1995 and February 1996 and become exercisable in
cumulative increments of 20%, 50%, 80% and 100% on the first, second, third
and fourth anniversaries, respectively, of the date of grant so long as
employment with the Company continues. The options are intended to qualify
as "incentive stock options" under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
(2) Represents options granted under the Plan. The exercise price of the
options granted under the Plan in fiscal 1996 was the fair market value of
the Common Stock on the date of grant. The options have a date of grant of
November 1995 and become exercisable in cumulative increments of 20%, 50%,
80% and 100% on the first, second, third and fourth anniversaries,
respectively, of the date of grant so long as employment with the Company
continues. The options granted are not intended to qualify as "incentive
stock options" under Section 422 of the Code. Pursuant to the Plan, the
Stock Option Committee of the Board of Directors may, among other things,
in its discretion and in accordance with the terms thereof, (i) in the
event of a change of control as defined therein, accelerate the
exercisability of, and authorize cash settlement payments in respect of,
outstanding options under the Plan and (ii) allow payment of the exercise
price of an option to be made in Common Stock.
(3) Options to purchase an aggregate of 183,663 shares of Common Stock were
granted to employees of the Company in fiscal 1995 under the 1991 Plan and
the Plan, of which 57.8% were granted to Mr. Speizman and Mr. Sklut. Of the
options granted to employees of the Company in fiscal 1996, an option to
purchase 36,250 shares of Common Stock was granted to each of Bryan D.
Speizman and Mark A. Speizman, both of whom are sons of Robert S.
Speizman and employees of the Company.
The following table sets forth certain information with respect to the
value of unexercised options to purchase shares of Common Stock held by the
Company's executive officers at the end of fiscal 1996. No options were
exercised by these individuals during fiscal 1996.
7
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR- AT FISCAL YEAR-
END (#) END ($)(1)
--------------- ---------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ----- --------------- ---------------
Robert S. Speizman 67,981/120,397 92,914/128,123
Josef Sklut 36,500/20,500 97,566/21,750
- ---------------
(1) Represents the excess of the fair market value of the Common Stock on
June 29, 1996 of $4.50 over the weighted average exercise price of the
options outstanding multiplied by the number of shares of Common Stock
subject to such options.
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of the Company is
paid $1,000 for each meeting of the Board of Directors that he attends and is
reimbursed for out-of-pocket expenses incurred in connection with attending the
meeting.
Under the Company's Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"), each non-employee director of the Company, as defined in the
Directors' Plan, is automatically granted a nonqualified stock option to
purchase 1,000 shares of the Common Stock on December 1st of each year,
beginning December 1, 1995. Such options become exercisable in cumulative
increments of 50% and 100% beginning on the first and second anniversaries,
respectively, of the date of grant, if the non-employee director remains a
non-employee director on such dates. Options granted under the Directors' Plan
expire 10 years from the date of grant and within limited periods of time, as
specified in the Directors' Plan, following such time as a director ceases
to be a non-employee director within the meaning of such plan. The exercise
price for all options granted under the Directors' Plan is the fair market
value on the date of grant. Such options are treated as nonqualified stock
options for federal income tax purposes. Under the Directors' Plan, on
December 1, 1995, Mr. Berkowitz, Mr. Gorelick and Mr. Lea were each granted an
option to purchase 1,000 shares of Common Stock having an exercise price of
$2.875 per share.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMLOYMENT ARRANGEMENTS AND
CHANGE-IN-CONTROL ARRANGEMENTS
The Company currently has no employment agreement with either
Mr. Speizman or Mr. Sklut and has no plan or arrangement with either
such executive officer which are activated upon resignation, termination or
retirement of any such executive officer upon a change in control of the
Company.
The Company and Mr. Sklut are parties to a deferred compensation
agreement dated February 9, 1972, as amended, that provides, subject to certain
exceptions, for the Company's payment to Mr. Sklut of certain amounts upon the
termination of his employment, as follows: (i) 180 monthly payments of $8,648 to
Mr. Sklut or his designated beneficiary if Mr. Sklut continues in the employment
of the Company until he reaches the age of 70 years and retires, (ii) 180
monthly payments of up to $9,342 to Mr. Sklut's designated beneficiary if Mr.
Sklut dies while employed by the Company before he reaches the age of 70 and
(iii) 180 monthly payments of up to $8,648 to Mr. Sklut or his designated
beneficiary if Mr. Sklut's employment is terminated (including a termination by
reason of disability) before he reaches the age of 70 other than by his
voluntary action, his death or discharge for fraudulent actions. No payments
will be made to Mr. Sklut under this agreement in the event his employment is
terminated as a result of his voluntary resignation or discharge by the Company
for fraudulent actions.
The Company is a party to a trust agreement under which the Company
has agreed to maintain, and pay all premiums on, a life insurance policy and an
annuity contract on Mr. Sklut. The trust owns and is the beneficiary under both
the life insurance policy and annuity contract, and the trustee has agreed to
use the cash surrender value or proceeds, as the case may be, to make the
required payments under the deferred compensation agreement. In the event the
available funds are not adequate to make such required payments, the deficiency
will be paid by the Company to Mr. Sklut, and in the event such funds exceed the
required payments, such excess will be paid by the trustee to the Company.
Management believes that the cash surrender value or the proceeds, as the case
may be, are adequate to fund the required payments to Mr. Sklut under the
deferred compensation agreement. The Company paid aggregate premiums of $40,131
in each of fiscal 1994 and 1995 and $50,131 in fiscal 1996 on the life insurance
policy and annuity contract.
Pursuant to the Company's Nonqualified Stock Option Plan, the Stock
Option Committee of the Board of Directors (which administers such plan) may,
in its discretion, and in accordance with the terms of such plan, in the event
of a change in control as defined therein, accelerate the exercisability of,
and authorize cash settlement payments in respect of, outstanding options
under such plan.
8
REPORT OF THE COMPENSATION COMMITTEE AND STOCK OPTION COMMITTEE ON EXECUTIVE
COMPENSATION
The Company's compensation program for its executive officers is
administered by the Compensation Committee and the Stock Option Committee of the
Company's Board of Directors. The present members of each of these committees
are Mr. Berkowitz, Mr. Gorelick and Mr. Lea. Mr. Berkowitz is the Chairman of
the Compensation Committee and Mr. Gorelick is the Chairman of the Stock
Option Committee. None of these committee members has ever been an officer
or employee of the Company.
9
Compensation Policy
The present compensation policies of the Compensation Committee and
the Stock Option Committee regarding executive officer compensation are designed
principally to (i) motivate the Company's executive officers to improve the
measure of the Company's financial performance selected by the Compensation
Committee, as well as stockholder return on the Common Stock, and (ii) establish
a relationship between executive officer compensation on the one hand and such
Company performance and stockholder return on the other hand. These two
committees, in implementing these policies, provide the Company's executive
officers, in addition to base salaries, short-term and long-term incentive
opportunities, consisting of annual cash bonuses based on the selected measure
of the Company's financial performance and options granted under the Company's
stock option plans, respectively. The Compensation Committee believes that the
Company's Executive Bonus Plan described below motivates executive officers to
improve such financial performance and the Stock Option Committee believes that
the Company's stock option plans described below motivate the executive officers
to improve the stockholder return on the Common Stock.
The Compensation Committee has reviewed its compensation policies with
respect to the Company's executive officers and determined that Section 162(m)
of the Internal Revenue Code of 1986, as amended, should have no impact on such
policies in fiscal 1997, since no executive officer is expected to receive
compensation in such fiscal year in excess of the $1.0 million threshold.
Section 162(m) limits a company's ability to deduct annual compensation in
excess of $1.0 million.
Base Salaries
Prior to November, 1995, at which time Mr. Sklut's base salary was
increased as discussed below, base salaries for the Company's executive officers
had not been significantly increased since fiscal 1991, although the annual
incentive compensation of the Company's executive officers has varied
substantially from year to year during this period. Even though the Company's
results of operations in fiscal 1996 were disappointing, the Committee increased
the annual base salary of Mr. Sklut from $98,000 to $115,000 effective November
1995 due to the fact that Mr. Sklut's salary had not been increased
significantly since fiscal 1991. Mr. Speizman's base salary has not been
significantly increased since fiscal 1991.
Annual Incentive Opportunities - Executive Bonus Plan
The Compensation Committee believes that the compensation of the
Company's executive officers should be significantly influenced by the Company's
financial performance and that the Company's consolidated income before taxes
and before executive officer bonuses is an appropriate measure of such financial
performance for purposes of executive officer incentive compensation
determinations because it most nearly reflects the results of the diverse
responsibilities and efforts of the Company's executive officers. The
Compensation Committee further believes that providing significant opportunities
for incentive compensation based on increases in such income focuses
management's attention on this measure of the Company's financial performance.
Accordingly, in fiscal 1991, the Board of Directors adopted the Company's
Executive Bonus Plan. The Compensation Committee approved the continuation of
this plan for fiscal 1996. Under this plan, the Company's President and Vice
President-Finance receive cash bonuses equal to 5% and 1%, respectively, of the
first $1.0 million of the Company's consolidated income before taxes and before
executive officer bonuses, and 10% and 2%, respectively, of such income over
$1.0 million. No such bonuses are payable under this plan to the extent that
their accrual would decrease the Company's income before taxes to less than
$500,000. Due to the Company's results, no bonuses were payable under this Plan
in fiscal 1996.
10
Long-Term Incentive Opportunities - Stock Option Plans
To encourage a long-term focus by executive officers, the Company
provides incentives through its 1991 Incentive Stock Option Plan (the "1991
Plan") and Nonqualified Stock Option Plan (the "Plan"). Both of these plans are
administered by the Stock Option Committee of the Board of Directors. The
exercise price of the options granted to executive officers to date has been the
fair market value of the Common Stock on the date of grant (or 110% of such
value for incentive stock options granted to Mr. Speizman under the 1991 Plan)
and such options granted become exercisable in cumulative increments of 20%,
50%, 80% and 100% on the first, second, third and fourth anniversaries of the
date of grant, respectively. As a result, the value of the options granted
depends on stock price appreciation. The Board of Directors believes that use
of such equity-based incentives reinforces the identification of management with
the longer term interests of the Company's stockholders and motivates management
to improve the Company's performance. In fiscal 1996, the Stock Option
Committee granted options to purchase 91,663 and 14,500 shares of Common Stock
to Mr. Speizman and Mr. Sklut, respectively. The number of shares of Common
Stock subject to the option granted to each such executive officer was based on
the Committee's assessment, on a subjective basis, of each officer's relative
contribution to, and efforts on behalf of, the Company and the impact of such
contributions and efforts on the Company's results. The Committee did not
consider the size of previous option grants and the number of shares of Common
Stock subject to options held by each such executive officer. The Committee does
not have a specific time during the year when it grants options.
President
For fiscal 1996, the Company paid Mr. Speizman, President, $245,000 as
his annual base salary. Mr. Speizman's base salary has not been significantly
increased since fiscal 1991. Due to the Company's results, Mr. Speizman did not
receive a cash bonus under the Company's Executive Bonus Plan for fiscal 1996.
The Stock Option Committee granted options to purchase an aggregate of 91,663
shares of Common Stock to Mr. Speizman in fiscal 1996 based on the reasons set
forth above.
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
----------------------- -----------------------
STEVEN P. BERKOWITZ, Chairman STEVEN P. BERKOWITZ
WILLIAM GORELICK WILLIAM GORELICK, Chairman
SCOTT C. LEA SCOTT C. LEA
11
COMPARATIVE PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder
return on the Common Stock for the Company's last five fiscal years with the
cumulative total return of companies listed on the CRSP Total Return Index for
Nasdaq Stock Market (U.S. Companies) ("Nasdaq Market Index") and of the
companies named below, including the Company, with the Standard Industrial
Classification code 508, Wholesale Trade - Machinery, equipment and supplies
that were included in the CRSP Index for NASDAQ Stocks (U.S. and Foreign
Companies) at any time during the five-year measurement period (the "Peer Group
Index"). The comparison assumes the investment of $100 in the Common Stock, in
the Nasdaq Market Index and in the Peer Group Index on June 29, 1991 and the
reinvestment of all dividends (the Company paid no dividends during the periods
shown). The stockholder return of each of the companies in the Peer Group Index
has been weighted according to market capitalization at the beginning of each
measurement period.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SPEIZMAN INDUSTRIES, INC,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
JUNE 29, 1991 TO JUNE 29, 1996
Symbol Index Description 6/29/91 6/27/92 7/03/93 7/02/94 7/01/95 6/29/96
(Square) Speizman Industries, Inc. 100 400 1,433 1,133 683 600
(Line) Nasdaq Market Index 100 117 151 153 204 261
(Diamond) Peer Group Index 100 106 165 173 160 170
NOTE: Since the Company's fiscal year-end is not a trading day, the preceding
trading day was used for purposes of calculating the performance graph.
The Peer Group Index consists of the following companies: AGCO Corp.,
Abatix Environmental Corp., AERO Systems, Inc., Bernstein/Leibstone Associates,
Inc., Bio-Logic Systems Corp., Cedar Group, Inc., China Resources Development,
Inc., Computer Telephone Corp., Conseco Industries, Ltd., Consolidated
Stainless, Inc., Dataflex Corp., Ezcony Interamerica, Inc., Hi-Rise Recycling
Systems, Inc., Hirsch International Corp., IIC Industries, Inc., Industrial
Holdings, Inc., Information Solutions, Inc., International Airline Support
Group, Inc., International Container Systems, Inc., Jayark Corp., Kellstrom
Industries, Inc., Lawson Products, Inc., Micro Bio-Medics, Inc.,
Micros-to-Mainframes, Inc., Nyer Medical Group, Inc., Oce-van der Grinten N.V.,
Officeland, Inc., Omni U.S.A., Inc., Omnicorp Limited, Orthomet, Inc.,
PerfectData, Inc., Quality Systems, Inc., RSI Holdings, Inc., Robec, Inc.,
Speizman Industries, Inc., Stewart & Stevenson Services, Inc., Strategic
Distribution Inc., Tech Data Corp., Transnet Corp. and The W.W. Williams
Company.
The Common Stock has been listed on The Nasdaq Stock Market since
January 24, 1992. Prior to January 24, 1992, it was quoted over-the-counter in
the "pink sheets" of the National Daily Quotation System published by the
National Quotation Bureau, Inc. As a result, the relevance of the comparison of
the stockholder return on the Common Stock to that of the companies listed on
the Nasdaq Market Index may be limited for the periods prior to January 24,
1992. With regard to the Peer Group Index, the capital stock of the Company's
direct competitors is not publicly traded. As a result, there is no publicly
available information concerning the total stockholder return for such
competitors and they are not included in the Peer Group Index.
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate future filings made by the
Company under those statutes, the preceding Report of the Compensation
Committee and Stock Option Committee on Executive Compensation and the
Comparative Performance Graph will not be incorporated by reference into any
of those prior filings, nor will such report or graph be incorporated by
reference into any future filings made by the Company under those statutes.
12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its headquarters in Charlotte, North Carolina from
a partnership owned by Robert S. Speizman and Lawrence J. Speizman, Robert S.
Speizman's brother, under a lease agreement entered into in 1990 that originally
extended to March 1995. This lease agreement was amended in April 1995 to extend
the lease agreement to March 1996 and was amended again in April 1996 to extend
the lease agreement to March 1998. The building in which the headquarters are
located is approximately 89,000 square feet. The Company paid rent of
approximately $25,960 per month from April 1995 to March 1996 and paid or will
pay rent of $29,669 per month from April 1996 to March 1998. The Company is
required to bear the cost of taxes ($12,128 for fiscal 1996), maintenance and
insurance on the building.
The Company and Robert S. Speizman are parties to a redemption
agreement dated May 31, 1974, as amended, that provides for the Company's
redemption of the Common Stock owned by Mr. Speizman at his death. The agreement
gives to Mr. Speizman's legal representatives the option, for a two-year period
following his death, to require the Company to purchase such Common Stock at 95%
of its "fair market value," as defined in the agreement, provided that the
aggregate purchase price paid for Mr. Speizman's Common Stock may not exceed the
excess of the proceeds of certain life insurance policies obtained by the
Company remaining after repayment of any loans obtained by the Company under
such insurance policies. Prior to September 1994, this agreement provided for
the deduction of additional amounts from the proceeds of such life insurance
policies prior to any redemption of Mr. Speizman's Common Stock thereunder
relating to, among other things, management transition as a result of Mr.
Speizman's death ($200,000) and payment of amounts owed by the Company to Mr.
Speizman. The redemption agreement was amended in September 1994 principally to
eliminate such provisions. The agreement provides that the Company will maintain
life insurance on Mr. Speizman's life in the aggregate amount of $1.15 million
to fund its obligations thereunder. The Company paid aggregate premiums of
approximately $23,000 in fiscal 1996 on these life insurance policies and, as of
June 29, 1996, had no loans under any such policy.
From time to time during fiscal 1996, the Company paid certain
personal expenses on behalf of Robert S. Speizman and Bryan D. Speizman and Mark
A. Speizman, sons of Mr. Speizman who are employees of the Company. Amounts owed
to the Company under these arrangements bear interest at 7%. During fiscal 1996,
the largest aggregate amount of such indebtedness outstanding was $198,699 in
April 1996 ($182,085 of which was owed by Mr. Speizman and the remainder of
which was owed by Bryan and Mark Speizman). As of June 29, 1996, the aggregate
amount of such indebtedness, including accrued interest, was $188,696 ($177,618
of which was owed by Mr. Speizman and the remainder of which was owed by Bryan
and Mark Speizman). Mr. Speizman repays his indebtedness through bi-weekly
payroll deductions of $1,058 and additional cash payments from time to time in
varying amounts. Bryan and Mark Speizman repay this indebtedness through monthly
payroll deductions of $1,208 and $733, respectively, and additional cash
payments from time to time in varying amounts. The Company anticipates that such
arrangements will continue in fiscal 1997.
APPROVAL OF AMENDMENTS TO SPEIZMAN INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN
AMENDMENT TO THE PLAN
On October 4, 1996, the Board of Directors amended the Company's
Nonqualified Stock Option Plan (the "Plan") to increase the maximum number of
shares of Common Stock that may be issued thereunder from 145,000 to 290,000,
subject to the approval of the stockholders. The Board of Directors also amended
the Plan to make certain changes to the Plan in accordance with recent
amendments to Rule 16b-3 under the Securities Exchange Act of 1934, as
amended. As a result of such amendments, the definition of a "disinterested
person" has been removed from Rule 16b-3 and the amended rule now exempts
from Section 16(b) of the Securities Exchange Act of 1934, as amended, any
transaction involving a grant from the issuer if the transaction is approved
by the board of directors or by a committee of the board of directors composed
solely of two (2) or more "non-employee directors," as such term is defined
in the amended rule. With the exception of the increase in the maximum
number of shares issuable under the Plan and the change of references from
"Disinterested Persons" to "Non-Employee Directors," the provisions of the Plan,
as amended, are unchanged. These amendments to the Plan are being submitted to
the stockholders at the Meeting for their approval.
The amendment to the Plan increasing the number of shares of Common
Stock that may be issued thereunder is necessary to enable the continued use of
the Plan for its stated purposes. As of September 30, 1996, only 14,500 shares
of Common Stock remained available for issuance under the Plan, an amount that
the Board of Directors believes is insufficient for such continued use. Shares
have been used under the Plan to date to grant nonqualified stock options
principally to Mr. Speizman and two of his sons, both of whom are employees
of the Company, as well as to Mr. Sklut. The Company believes that the Plan as
it has been implemented to date has been of benefit to the Company and its
stockholders and that by providing or increasing key employees' proprietary
interest in the Company it has also increased their personal interest in the
Company's success. The Company further believes that the best interest of the
Company and its stockholders will be served if the Company is in a position to
continue to offer equity-based compensation to its key employees and others.
The ability to offer stock through options has been and will continue to be a
necessary and beneficial method by which the Company can retain the services of
employees. The Board of Directors believes that equity-based compensation
awards create this incentive by providing the recipient with an opportunity to
acquire or increase a proprietary interest in the Company and thereby providing
a means to participate in the future growth of the Company.
BENEFITS UNDER THE PLAN
The following table sets forth certain information concerning options
that are outstanding under the Plan as of September 30, 1996. No option has
been granted under the Plan to date to any non-employee director of the
Company.
NEW PLAN BENEFITS
SPEIZMAN INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN
DOLLAR NUMBER OF
NAME AND POSITION VALUE (1) NQSOS (2)
- ----------------- --------- ---------
Robert S. Speizman
President............................... 91,438 38,500
Josef Sklut
Vice President - Finance................ 34,437 14,500
Executive Group........................... 125,875 53,000
Non-Executive Officer Employee Group(3)... 184,063 77,500
- -----------------
13
(1) Represents the excess of the fair market value of the Common Stock on
September 30, 1996 of $5.375 per share over the exercise price of
the option multiplied by the number of shares of Common Stock subject
to such option.
(2) The weighted average exercise price of such options is $3.00.
(3) Includes options to purchase an aggregate of 72,500 shares of Common
Stock granted two of Mr. Speizman's sons, both of whom are employees of
the Company.
No determination has been made with respect to any awards which
may be made under the Plan in the future. Such future awards will be determined
in accordance with the terms of the Plan, which are described below.
Consequently, it is not possible to determine the benefits or amounts that will
be received by or allocated to any executive officers or employees of the
Company or other persons pursuant to the Plan in the future. However, the
Company anticipates that it will continue, as it has in the past, to award
equity-based compensation principally to the employees of the Company most
directly responsible for the Company's net revenues. In 1996, these employees
were Mr. Speizman and two of his sons, Bryan Speizman and Mark Speizman.
DESCRIPTION OF PLAN
The following description of the Plan is merely a summary of some of
its terms and provisions, is not intended to be a complete description of the
Plan, and is qualified in its entirety by reference to the full text of the
Plan, a copy of which may be obtained, without charge, upon written or oral
request by contacting the President, 508 West Fifth Street, Charlotte, North
Carolina 28231. If any part of the description of the Plan contained herein
states anything different from the formal legal documents governing the Plan,
the formal legal Plan documents will be considered correct.
The Plan is not generally subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended. The Plan is not a qualified
plan under Section 401 of the Internal Revenue Code of 1986, as amended (the
"Code").
Nature and Purpose
The Plan provides for the grant of nonqualified stock options and is
designed, for the benefit of the Company, to attract and retain for the Company
personnel of exceptional ability, to motivate such personnel through added
incentives to make a maximum contribution to greater profitability, to develop
and maintain a highly competent management team and to be competitive with other
companies with respect to executive compensation.
Administration
The Plan is administered by the Stock Option Committee or such other
committee as may be appointed by the Board of Directors to administer the Plan.
Members of the Stock Option Committee, or such other committee, are appointed by
the Board of Directors from among its members who are "non-employee directors"
as required under Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to serve at the pleasure of the Board of
Directors, and may be removed by the Board of Directors in its discretion. The
Stock Option Committee has the exclusive right to interpret, construe, and
administer the Plan and to select the persons eligible to receive awards. The
Stock Option Committee will determine the number of shares of Common Stock
subject to an option granted under the Plan and the form, terms, conditions and
duration of each option. The Stock Option Committee's decisions will be
conclusive, final and binding upon all parties.
The Stock Option Committee is given broad discretion under the Plan to
make adjustments to options outstanding under the Plan upon any extraordinary
event affecting the Company or its financial condition or performance,
including, for example, a recapitalization or merger transaction or a change in
control or potential change in control of the Company. See " -- Securities to be
Offered" and " -- Effects of Change in Control" below.
14
In addition, the Stock Option Committee has full power and authority
to determine whether, to what extent and under what circumstances any option
under the Plan may be canceled or suspended.
Securities to be Offered
The Company was originally authorized to issue up to 145,000 shares of
Common Stock under the Plan. Under the Plan as amended, the Company will be
authorized to issue up to 290,000 shares of Common Stock. The Common Stock
subject to an option under the Plan will be made available from the authorized
and unissued shares of Common Stock. The last sale price of the Common Stock on
September 30, 1996 as reported on The Nasdaq Stock Market was $5.375 per share.
To the extent any shares of Common Stock subject to options under the
Plan are not delivered or purchased, or are reacquired by the Company, such
shares will not be charged against the aggregate number of shares available for
options under the Plan and may again be granted under the Plan. This would
occur, for example, upon the termination, expiration, or cancellation of an
option.
Proportionate and equitable adjustments will be made by the Stock
Option Committee upon the occurrence of certain events that result in changes in
the outstanding shares of Common Stock of the Company or that result in
exchanges of shares of Common Stock for a different number or class of Common
Stock or other securities of the Company or another corporation. These events
include without limitation a reorganization or recapitalization of the Company
or reclassification of its shares, stock split-up, stock dividend, or
consolidation of shares of Common Stock of the Company, merger, consolidation,
or sale of assets of the Company, or any distribution to stockholders other than
a cash dividend. Under such circumstances, adjustments may be made by the Stock
Option Committee in the limitation on the aggregate number of shares of Common
Stock that may be awarded under the Plan, the number and class of shares that
may be subject to an option, the purchase price for shares of Common Stock under
outstanding options under the Plan and the terms, conditions, or restrictions of
any option or agreement evidencing an option, including the price payable for
the acquisition of Common Stock.
The Stock Option Committee is also authorized to make adjustments in
performance-based criteria or in the terms and conditions of options under the
Plan in recognition of unusual or nonrecurring events affecting the Company or
its financial statements or changes in applicable laws, regulations, or
accounting principles. The Stock Option Committee may also correct any defects
or omissions or reconcile any inconsistencies in the Plan or any agreement
evidencing an option under the Plan in the manner and to the extent it shall
deem desirable to carry it into effect. Moreover, the Stock Option Committee
may, in its discretion, make such adjustments in the terms of options under the
Plan as it deems appropriate if the Company assumes any outstanding employee
benefit awards or the right or obligation to grant future such options in
connection with the acquisition of any other entity.
Eligible Participants
The Stock Option Committee has the exclusive right to determine those
persons eligible to participate in the Plan and shall select the persons
eligible to receive awards. Subject to the foregoing, any employee of the
Company, as well as any other person, including directors, may participate in
the Plan if the Stock Option Committee determines such participation is in the
best interest of the Company, subject to any limitations as may be provided by
applicable law or the Stock Option Committee. As of September 30, 1996, the
Company had approximately 89 full-time employees, 1 part-time employee and three
directors who are not also employees of the Company.
15
Award Agreements
Each option granted will be evidenced by a written agreement setting
forth the terms and conditions of the option. Each such agreement will also be
subject to and incorporate the applicable terms and conditions of the Plan and
any other terms and conditions, not inconsistent with the Plan, required by the
Stock Option Committee.
Nonqualified Stock Options
The options that may be granted under the Plan are nonqualified stock
options. The Company may grant such options to eligible participants to purchase
shares of Common Stock at such time or times as determined by the Stock Option
Committee.
The exercise price of an option under the Plan will be as established
by the Stock Option Committee in the agreement evidencing the award. Such
exercise price will not be limited under the Plan and may be less than 100% of
the fair market value at the time of grant. Thus, discounted stock options
providing for an exercise price of less than the fair market value of the Stock
at the date of the award may be granted as options under the Plan.
An option under the Plan will be exercisable in full or in part from
time to time as specified by the Stock Option Committee or in the corresponding
award agreement. Upon termination of employment of the optionee, the option will
lapse and cease to be exercisable three months following such termination of
employment.
An option may also be subject to such other terms and conditions, not
inconsistent with the Plan, as determined by the Stock Option Committee and
specified in the award agreement.
Effects of Change in Control
The Stock Option Committee is granted broad discretion under the Plan
to deal with options under the Plan upon an acceleration event, which will be
deemed to occur in the event of a change in control or a potential change in
control of the Company, as defined in the Plan. For these purposes, a "change in
control" will be deemed to have occurred if (a) any person, including a group,
but not the Company or any subsidiary or employee benefit plan thereof, makes a
tender or exchange offer for shares of the Stock pursuant to which any shares of
the Stock are purchased, or such person, together with its affiliates and
associates, becomes the beneficial owner of at least 20% of the Stock, or (b)
the stockholders of the Company approve a definitive agreement or plan to merge
the Company with or into another corporation, to sell or otherwise dispose of
all or substantially all of its assets, or to liquidate the Company, or (c)
during any period of 24 consecutive months the incumbent directors at the
beginning of such period cease for any reason other than death to constitute at
least a majority of the Board of Directors, provided that a director will be
deemed to be an incumbent director if such director, although not a director at
the beginning of such 24-month period, was elected by, or on the recommendation
of or with the approval of, at least two-thirds of the directors then qualified
as incumbent directors. A "potential change in control" is defined in the Plan
to mean (y) the approval by stockholders of the Company of an agreement by the
Company, the consummation of which would result in a change in control of the
Company, as described above, or (z) the acquisition of direct or indirect
beneficial ownership by any person (as described above) of securities of the
Company representing 5% or more of the combined voting power of the Company's
outstanding securities and the adoption by the Board of Directors of a
resolution to the effect that a potential change in control of the Company has
occurred for the purposes of the Plan. A "Board-approved change in control" will
be deemed to have occurred if the offer, acquisition, or transaction in question
is approved by a majority of the directors serving as members of the Board of
Directors at the time of the potential change in control or change in control.
Upon the occurrence of an acceleration event, the Stock Option
Committee will be authorized to take such action as it determines to be
necessary or advisable, and fair and equitable to participants, with respect to
options under the Plan. The Stock Option Committee's action may include without
limitation, establishing, amending or
16
waiving the forms, terms, conditions, and duration of an option and
the corresponding award agreement, so as to provide for earlier, later,
extended, or additional times for exercise or payments, differing methods for
calculating payments, alternate forms and amounts of payment and accelerated
release of restrictions, or other modifications.
Upon the occurrence of an acceleration event, the Stock Option
Committee in its discretion may declare any and all then outstanding options not
previously exercisable and vested as immediately exercisable and fully vested,
in whole or in part. In the event of a change in control, the Stock Option
Committee in its discretion may cash out the value of all outstanding options in
each case to the extent vested, on the basis of the change in control price as
of the date such change in control or such potential change in control is
determined to have occurred or such other date as the Stock Option Committee may
determine prior to the change in control, less the option price (as established
in the corresponding Award Agreement). For this purpose, "change in control
price" means the highest price per share of the Common Stock paid in any
transaction reported on any exchange on which the Common Stock is traded or on
The Nasdaq Stock Market if the Common Stock is then traded thereon, or paid or
offered in any bona fide transaction related to a potential or actual change in
control of the Company at any time during the 60-day period immediately
preceding, the occurrence of the change in control, or, where applicable, the
occurrence of the potential change in control event, in each case as determined
by the Stock Option Committee.
Amendment and Termination
The Plan will continue in effect until terminated by the Company as
provided in the Plan.
Upon the recommendation of the Stock Option Committee, or otherwise,
the Board of Directors may amend the Plan. To the extent required by Rule 16b-3
under the Exchange Act, no amendment to the Plan may be made without approval by
the Company's stockholders that would make certain changes, including altering
the group of persons eligible to participate in the Plan, increasing the maximum
number of shares of Common Stock available for options under the Plan (except as
otherwise provided in the Plan), limiting or restricting the powers of the Stock
Option Committee in administering the Plan, materially increasing the benefits
accruing to participants under the Plan, materially modifying the requirements
of eligibility for participation in the Plan or changing the amendment
provisions of the Plan.
Notwithstanding the foregoing, no amendment to or discontinuation of
the Plan or any provision thereof may adversely affect any option previously
granted to a participant under the Plan, without the written consent of such
participant. The Stock Option Committee is empowered to determine whether an
amendment or discontinuation adversely affects any existing award.
Notwithstanding the foregoing, the Stock Option Committee retains the power to
annul any award if the participant is terminated for cause as determined by the
Stock Option Committee and provide for the forfeiture of shares of Common Stock
or other gain under an award as determined by the Stock Option Committee for
competing against the Company. If an acceleration event (change in control or
potential change in control) has occurred, no amendment or termination will
impair the rights of any person with respect to an outstanding award as
discussed under "Effects of Change in Control" above.
RESALE RESTRICTIONS
Resale restrictions on shares of Common Stock purchased under the Plan
may be imposed by virtue of the provisions of the Plan and the applicable award
agreement and/or by application of federal and state securities laws.
TAX EFFECTS
Options granted under the Plan will be treated as nonqualified stock
options for federal income tax purposes. The following discussion of the federal
income tax consequences of options granted under the Plan is intended only as a
summary of the present federal income tax treatment of options under the Plan.
The federal income tax laws pertaining to the Plan are highly technical, and
such laws are subject to change at any time. Some
17
variations on the federal income tax effects of Plan participation described
below may occur with respect to participation by persons subject to
Section 16(b) of the Exchange Act.
Under the Code, an optionee granted an option under the Plan will
realize no taxable income upon receipt of the option but will be deemed to have
realized ordinary taxable income equal to the excess of the fair market value of
the stock acquired at the time of the exercise of the option over the option
price paid.
The Company will be entitled to a deduction for federal income tax
purposes in the year the optionee must report the income in an amount equal to
the ordinary income realized by the optionee as a result of exercise of his
option. The Company is required to withhold tax on the amount of income realized
by the optionee upon exercise of the option.
An optionee's tax basis in shares acquired upon the exercise of an
option will be the fair market value of such shares used to determine the amount
of ordinary taxable income reported by the optionee with respect to the exercise
of the option. Upon any sale of such shares of Common Stock, the optionee's gain
or loss will therefore equal the difference between the sale price and such tax
basis. Any such gain or loss will be short-term or long-term capital gain or
loss, depending on whether the shares have been held for more than the long-term
capital gain holding period. In general, when an option is exercised by the
exchange of previously acquired stock, the optionee receives a tax-free exchange
and basis carryover for old shares for an equivalent number of new shares. The
basis for any additional shares will equal the sum of the amount included in
gross income by reason of the exercise of the option, plus any amount of cash
paid by the optionee upon the exercise of the option.
The Plan authorizes the acceleration of the exercisability and vesting
of options in the event of a change in control or potential change in control of
the Company, as defined in the Plan. Such acceleration may give rise to
"parachute payments" under the Code, which may subject the recipient thereof to
a 20% excise tax and which may not be deductible by the Company for federal
income tax purposes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSED
AMENDMENTS TO THE PLAN.
18
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE
THE AUTHORIZED COMMON STOCK
GENERAL
On October 4, 1996, the Board of Directors approved a proposed
amendment (the "Certificate Amendment") to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
20,000,000 from 6,000,000, and directed that the Certificate Amendment be
submitted to the stockholders of the Company at the Meeting for their adoption.
The Certificate Amendment would amend subparagraph (A) of Article Fourth of the
Certificate of Incorporation to read as follows:
The total number of shares of all classes of stock which the Corporation
shall have authority to issue is 20,025,000, of which 25,000 shares shall
be Preferred Stock, par value $100 per share (hereinafter the "Preferred
Stock"), and 20,000,000 shares shall be Common Stock, par value $0.10 per
share (hereinafter the "Common Stock").
The Board's reasons for proposing the Certificate Amendment and other
information relevant to this proposal are discussed below.
The stockholders are being asked to approve the Certificate Amendment.
The authorized but unissued shares of Common Stock would be available for
issuance from time to time for such purposes and for such consideration as the
Board of Directors may determine to be appropriate without further action by the
stockholders, except for those instances in which applicable law or rules of The
Nasdaq Stock Market require stockholder approval.
PURPOSE AND EFFECT OF THE AMENDMENT
The Board of Directors believes that it is in the Company's best
interests to increase the number of authorized shares of Common Stock in order
to have additional authorized but unissued shares available for issuance to meet
business needs as they arise without the expense and delay of a special meeting
of stockholders. The Board of Directors believes that the availability of such
shares will provide the Company with the flexibility to issue Common Stock for
proper corporate purposes which may be identified by the Board of Directors in
the future. For example, such shares may be issued in the event the Board of
Directors determines that it is necessary or appropriate to permit a future
stock dividend or stock split, to raise additional capital, to acquire another
corporation or its business or assets, to establish a strategic relationship
with a corporate partner or to issue shares under management incentive or
employee benefit plans. The Board of Directors has not authorized or taken any
action with respect to the issuance of any such shares and has no present
agreement, arrangement or understanding with respect to the issuance of any such
shares. The Board does not intend to authorize the issuance of any such shares
except upon terms the Board deems to be in the best interests of the Company.
If the Certificate Amendment is approved by the stockholders, the
Board of Directors does not intend to solicit further stockholder approval prior
to the issuance of any additional shares of Common Stock, except as may be
required by applicable law or the rules of The Nasdaq Stock Market. The increase
in authorized Common Stock will not have any immediate effect on the rights of
the existing stockholders. To the extent that the additional authorized shares
are issued in the future, they will decrease the existing stockholders'
percentage equity ownership and, depending on the price at which they are
issued, could be dilutive to the existing stockholders. Holders of the Company's
securities have no statutory preemptive rights with respect to issuances of
Common Stock.
The Company last increased the number of authorized shares of Common
Stock in January 1996 from 3,000,000 to 6,000,000.
19
Of the 6,000,000 currently authorized shares of Common Stock,
3,262,866 shares were issued and outstanding as of September 30, 1996 and an
aggregate of 348,592 shares of Common Stock were reserved for issuance as
follows: 334,092 shares were reserved for issuance upon exercise of outstanding
options and 14,500 shares were reserved for future grants under the Company's
Nonqualified Stock Option Plan.
The Company intends to apply to the The Nasdaq Stock Market for the
listing of any additional shares of Common Stock if and when such shares are to
be issued.
POTENTIAL ANTI-TAKEOVER EFFECT
The increase in the authorized number of shares of Common Stock and
the subsequent issuance of such shares could have the effect of delaying or
preventing a change-of-control of the Company without further action by the
stockholders. Shares of authorized and unissued Common Stock could (within the
limits imposed by applicable law) be issued in one or more transactions that
would make a change-of-control of the Company more difficult, and therefore less
likely. Any such issuance of additional stock could have the effect of diluting
the earnings per share and book value per share of outstanding shares of Common
Stock, and such additional shares could be used to dilute the stock ownership or
voting rights of a person seeking to obtain control of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's directors, executive officers and persons who own more than 10% of the
outstanding shares of the Company's Common Stock file with the Securities and
Exchange Commission certain reports relating to their ownership of Common Stock
and changes in such ownership. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during fiscal 1996, all
such Section 16(a) filing requirements were complied with, except that Mr.
Speizman and Mr. Sklut each inadvertently failed to report one transaction (an
option grant) in fiscal 1995. Each such executive officer reported such
transaction on a Form 5 for fiscal 1996.
RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors, upon the recommendation of the Audit
Committee, has reappointed, subject to stockholder ratification, the firm of BDO
Seidman, LLP as the Company's independent certified public accountants for
fiscal 1997. If the stockholders do not ratify the appointment of BDO Seidman,
LLP, the Board of Directors will reconsider its appointment upon the
recommendation of the Audit Committee.
A representative of BDO Seidman, LLP is expected to be present at the
Meeting. Such representative will have the opportunity to make a statement if he
desires to do so and will be available to respond to appropriate stockholder
questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF BDO SEIDMAN, LLP.
20
DATE FOR RECEIPT OF PROPOSALS
In order for stockholder proposals to be included in the proxy
materials for the Company's annual meeting of stockholders for the year ending
June 28, 1997, any such proposal must be received by the Company at its
executive offices not later than June 23, 1997 and meet all other applicable
requirements for inclusion therein.
OTHER BUSINESS
The Board of Directors is not aware of any other matter to come before
the Meeting. However, if any such matter does come before the Meeting which
requires a vote of the stockholders, it is the intention of the persons named in
the enclosed proxy to vote the shares of Common Stock represented thereby in
accordance with the recommendations of the Company's management and their
judgment on such matter.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
June 29, 1996 will be provided free of charge to stockholders upon written
request directed to: Speizman Industries, Inc., 508 West Fifth Street,
Charlotte, North Carolina 28202, Attention: Josef Sklut, Secretary.
By order of the Board of Directors,
JOSEF SKLUT
Secretary
Charlotte, North Carolina
October ___, 1996
21
*******************************************************************************
PRELIMINARY COPY
APPENDIX
SPEIZMAN INDUSTRIES, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON NOVEMBER 19, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Robert S. Speizman and Josef Sklut,
and each of them, as attorneys and proxies, each with full power of
substitution, and hereby authorizes them to represent and to vote, as directed
below, all the shares of common stock of Speizman Industries, Inc. (the
"Company") held of record by the undersigned on September 30, 1996, at the
Annual Meeting of Stockholders of the Company to be held on November 19, 1996 at
11:00 a.m. at the offices of the Company, 508 West Fifth Street, Charlotte,
North Carolina, or any adjournment thereof. The undersigned hereby directs that
such shares be voted as follows:
1. ELECTION OF DIRECTORS: [ ] FOR All Nominees [ ] WITHHOLD Authority [ ]WITHHOLD Authority To Vote For
Listed Below To Vote For All Nominees Those Nominees Written in the Space
Provided Below; and FOR All Other
Nominees
NOMINEES: Robert S. Speizman, Josef Sklut, Steven P. Berkowitz, William Gorelick
and Scott C. Lea.
INSTRUCTION - To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below:
- --------------------------------------------------------------------------------
2. Approval of amendments to the Speizman Industries, Inc. Nonqualified Stock
Option Plan (the "Plan") to increase the maximum number of shares of the
Company's Common Stock, par value $0.10 per share, available for issuance
thereunder from 145,000 to 290,000 and to make certain other changes to the
Plan in accordance with recent amendments to Rule 16b-3 under the Securities
Exchange Act of 1934, as amended.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Adoption of amendment to the Company's Certificate of Incorporation
increasing the authorized number of shares of the Company's Common Stock, par
value $0.10 per share, from 6,000,000 to 20,000,000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. Ratification of the appointment of BDO Seidman, LLP as the Company's
independent certified public accountants for the fiscal year ending June 28,
1997.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
5. The proxies are authorized to vote the shares represented by this proxy in
accordance with their judgment on such other business as may properly come
before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY, IF
SIGNED AND RETURNED, WILL BE VOTED FOR THE ELECTION OF THE NOMINEES NAMED IN
ITEM 1 AND FOR ITEMS 2, 3 AND 4.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officers. If a partnership, please sign in partnership name by authorized
person.
DATED:_____________________, 1996
_________________________________
Signature
_________________________________
Signature if held jointly
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE
*******************************************************************************
APPENDIX
SPEIZMAN INDUSTRIES, INC.
NONQUALIFIED STOCK OPTION PLAN
EFFECTIVE AS OF SEPTEMBER 21, 1995
AS AMENDED ON OCTOBER 4, 1996 (SUBJECT TO STOCKHOLDER APPROVAL)
ARTICLE I - GENERAL PROVISIONS
1.1 The Plan is designed, for the benefit of the Company, to attract and
retain for the Company personnel of exceptional ability, to motivate
such personnel through added incentives to make a maximum contribution
to the Company, to develop and maintain a highly competent management
team and to be competitive with other companies with respect to
executive compensation.
1.2 Awards under the Plan may be made to Participants in the form of
nonqualified stock options.
1.3 The Plan shall be effective September 21, 1995 (the "Effective Date"),
subject to the approval of the stockholders of the Company. Options may
be granted prior to such approval, but such Options shall be contingent
upon such approval being obtained and, in addition to any other terms
thereof or restrictions thereon under the Plan or an Award Agreement,
may not be exercised or transferred prior to such approval.
ARTICLE II - DEFINITIONS
Except where the context otherwise indicates, the following definitions
apply:
2.1 "Acceleration Event" means the occurrence of an event defined in
Article XIII of the Plan.
2.2 "Act" means the Securities Exchange Act of 1934, as now in effect or as
hereafter amended. All citations to sections of the Act or rules
thereunder are to such sections or rules as they may from time to time
be amended or renumbered.
2.3 "Award Agreement" means the written agreement evidencing an Option
granted to a Participant.
2.4 "Board" means the Board of Directors of Speizman Industries, Inc.
2.5 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. All citations to sections of the Code are to such
sections as they may from time to time be amended or renumbered.
2.6 "Committee" means the Stock Option Committee of the Board or such other
committee consisting of two or more members as may be appointed by the
Board to administer this Plan pursuant to Article III. To the extent
required by Rule 16b-3 under the Act, the Committee shall consist of
individuals who are members of the Board and Non-Employee Directors
(except as otherwise permitted under Rule 16b-3 under the Act).
Committee members may also be appointed for such limited purposes as
may be provided by the Board.
2.7 "Company" means Speizman Industries, Inc., a Delaware corporation, and
its successors and assigns. The term "Company" shall include any
corporation which is a member of a controlled group of corporations (as
defined in Section 414(b) of the Code, as modified by Section 415(h) of
the Code) which includes the Company; any trade or business (whether or
not incorporated) which is under common control (as defined in Section
414(c) of the Code, as modified by Section 415(h) of the Code) with the
Company; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Section 414(m) of
the Code) which includes the Company; and any other entity required to
be aggregated with the Company pursuant to regulations under Section
414(o) of the Code. With respect to all purposes of the Plan,
including, but not limited to, the establishment, amendment,
termination, operation and administration of the Plan, Speizman
Industries, Inc. shall be authorized to act on behalf of all other
entities included within the definition of "Company."
2.8 "Disability" means a disability as determined under procedures
established by the Committee or in any Option.
2.9 "Non-Employee Director" shall have the meaning set forth in Rule 16b-3
under the Act.
2.10 "Eligible Participant" means any employee of the Company, as shall be
determined by the Committee, as well as any other person, including
directors, whose participation the Committee determines is in the best
interest of the Company, subject to limitations as may be provided by
the Code, the Act or the Committee.
2.11 "Fair Market Value" means, if the Stock is listed for trading on any
national securities exchange, the last sale price regular way of the
Stock on the date of reference, or, if no sale of the Stock takes place
on such date, the average of the closing high bid and low asked prices
regular way of the Stock on such date, in either case on such exchange.
If the Stock is not listed for trading on a national securities
exchange, but is listed on The Nasdaq Stock Market, then "fair market
value" means the last sale price of the Stock on the date of reference,
or, if no sale of the Stock takes place on such date, the average of
the closing high bid and low asked prices of the Stock on such date, in
either case as reported by The Nasdaq Stock Market. The Committee may
establish an alternative method of determining Fair Market Value.
2
2.12 "Option" means a nonqualified stock option to purchase Stock granted
under Article IV of the Plan.
2.13 "Option Grant Date" means, as to any Option:
(a) the date on which the Committee grants the Option by entering
into an Award Agreement with the Participant;
(b) the date the Participant receiving the Option becomes an
employee of the Company, to the extent employment status is a
condition of the grant or a requirement of the Code or the
Act; or
(c) such other date as the Committee may designate.
2.14 "Participant" means an Eligible Participant to whom an Option has been
granted and who has entered into an Award Agreement evidencing the
Option.
2.15 "Plan" means the Speizman Industries, Inc. Nonqualified Stock Option
Plan set forth herein, as amended from time to time.
2.16 "Stock" means shares of the common stock, par value $.10 per share, of
Speizman Industries, Inc., as may be adjusted pursuant to the
provisions of Section 3.14.
2.17 "Termination of Employment" means the discontinuance of employment of a
Participant with the Company for any reason. The determination of
whether a Participant has discontinued employment shall be made by the
Committee in its discretion. In determining whether a Termination of
Employment has occurred, the Committee may provide that service as a
consultant or service with a business enterprise in which the Company
has a significant ownership interest shall be treated as employment
with the Company. The Committee shall have the discretion, exercisable
either at the time an Option is granted or at the time the Participant
terminates employment, to establish as a provision applicable to the
exercise of one or more Options that during the limited period of
exercisability following Termination of Employment, the Option may be
exercised not only with respect to the number of shares of Stock for
which it is exercisable at the time of the Termination of Employment
but also with respect to one or more subsequent installments for which
the Option would have become exercisable had the Termination of
Employment not occurred.
3
ARTICLE III - ADMINISTRATION
3.1 This Plan shall be administered by the Committee. A Committee member
who is not a Non-Employee Director, with respect to action to be taken
by the Committee, shall not be able to participate in the decision to
the extent prescribed by Rule 16b-3 under the Act. The Committee, in
its discretion, may delegate to one or more of its members such of its
powers as it deems appropriate. The Committee also may limit the power
of any member to the extent necessary to comply with Rule 16b-3 under
the Act or any other law. Members of the Committee shall be appointed
originally, and as vacancies occur, by the Board, to serve at the
pleasure of the Board. The Board may serve as the Committee, if by the
terms of the Plan all Board members are otherwise eligible to serve on
the Committee.
3.2 The Committee shall meet at such times and places as it determines. A
majority of its members shall constitute a quorum, and the decision of
a majority of those present at any meeting at which a quorum is present
shall constitute the decision of the Committee. A memorandum signed by
all of its members shall constitute the decision of the Committee
without necessity, in such event, for holding an actual meeting.
3.3 The Committee shall have the exclusive right to interpret, construe and
administer the Plan, to select the persons who are eligible to receive
an Option, and to act in all matters pertaining to the granting of an
Option and the contents of the Award Agreement evidencing the Option,
including without limitation the determination of the number of Options
and the form, terms, conditions and duration of each Option, and any
amendment thereof consistent with the Plan. All acts, determinations
and decisions of the Committee made or taken pursuant to grants of
authority under the Plan or with respect to any questions arising in
connection with the administration and interpretation of the Plan,
including the severability of any and all of the provisions hereof,
shall be conclusive, final and binding upon all Participants, Eligible
Participants and their beneficiaries.
3.4 The Committee may adopt such rules, regulations and procedures of
general application for the administration of this Plan, as the
Committee deems appropriate.
3.5 Without limiting the foregoing Sections 3.1, 3.2, 3.3 and 3.4, and
notwithstanding any other provisions of the Plan, the Committee is
authorized to take such action as it determines to be necessary or
advisable, and fair and equitable to Participants, with respect to an
Option in the event of an Acceleration Event as defined in Article V.
Such action may include, but shall not be limited to, establishing,
amending or waiving the forms, terms, conditions and duration of an
Option and the corresponding Award Agreement so as to provide for
earlier, later, extended or additional times for exercise or payments,
differing methods for calculating payments, alternate forms and amounts
of payment, an accelerated release of restrictions or other
modifications. The Committee may take such actions pursuant to this
Section 3.5 by adopting rules and regulations of
4
general applicability to all Participants or to certain categories of
Participants, by including, amending or waiving terms and conditions in
an Option and the corresponding Award Agreement, or by taking action
with respect to individual Participants.
3.6 In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee
shall be indemnified by the Company against reasonable expenses,
including attorney's fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be
a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against
all amounts paid by them in settlement thereof, provided such
settlement is approved by independent legal counsel selected by the
Company, or paid by them in satisfaction of a judgment or settlement in
any such action, suit or proceeding, except as to matters as to which
the Committee member has been negligent or engaged in misconduct in the
performance of his duties; provided, that within 60 days after
institution of any such action, suit or proceeding, a Committee member
shall in writing offer the Company the opportunity, at its own expense,
to handle and defend the same.
3.7 The Committee may require each person purchasing shares of Stock
pursuant to an Option to represent to and agree with the Company in
writing that he is acquiring the shares of Stock without a view to
distribution thereof. The certificates for such shares of Stock may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
3.8 The Committee shall be authorized to make adjustments in performance
based criteria or in the terms and conditions of Options in recognition
of unusual or nonrecurring events affecting the Company or its
financial statements or changes in applicable laws, regulations or
accounting principles. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award
Agreement in the manner and to the extent it shall deem desirable to
carry it into effect. In the event the Company shall assume outstanding
employee benefit awards or the right or obligation to make future such
awards in connection with the acquisition of another corporation or
business entity, the Committee may, in its discretion, make such
adjustments in the terms of Options under the Plan as it shall deem
appropriate.
3.9 The Committee shall have full power and authority to determine whether,
to what extent and under what circumstances, any Option shall be
canceled or suspended. In particular, but without limitation, all
outstanding Options to any Participant may be canceled if the
Participant (a) without the consent of the Committee, while employed by
the Company or after termination of such employment, becomes associated
with, employed by, renders services to, or owns any interest in, other
than any insubstantial interest, as determined by the Committee, any
business that is in competition with the Company or with any
5
business in which the Company has a substantial interest as determined
by the Committee; or (b) is terminated for cause as determined by the
Committee.
3.10 The aggregate number of shares of Stock which are available for
issuance pursuant to Options granted under the Plan shall be 290,0001
or any larger number that, subsequent to the date this Plan is adopted,
may be authorized for issuance by the Company. Such shares of Stock
shall be made available from authorized and unissued shares. If, for
any reason, any shares of Stock awarded or subject to purchase under
the Plan are not delivered or purchased, or are reacquired by the
Company, for reasons including, but not limited to, expiration or
cancellation of an Option or any other termination of an Option without
payment being made in the form of Stock, such shares of Stock shall not
be charged against the aggregate number of shares of Stock available
for Options under the Plan, and may again be available for grants of
Options under the Plan.
3.11 The Company shall not be required to issue or deliver any certificates
for shares of Stock prior to:
(a) the listing of such shares on any stock exchange on which the
Stock may then be listed; and
(b) the completion of any registration or qualification of such
shares of Stock under any federal or state law, or any ruling
or regulation of any government body which the Company shall,
in its discretion, determine to be necessary or advisable.
3.12 All certificates for shares of Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and
other requirements of the Securities and Exchange Commission, any stock
exchange upon which the Stock is then listed and any applicable federal
or state laws, and the Committee may cause a legend or legends to be
placed on any such certificates to make appropriate reference to such
restrictions. In making such determination, the Committee may rely upon
an opinion of counsel for the Company.
3.13 Except as provided otherwise in the Plan or in an Award Agreement, no
Participant awarded an Option shall have any right as a shareholder
with respect to any shares of Stock covered by such Option prior to the
date of issuance to him or her of a certificate or certificates for
such shares of Stock.
________
1 On October 4, 1996, the Board amended the Plan to increase the
aggregate number of shares of Stock available for issuance
pursuant to Options granted under the Plan to 290,000 from
145,000, subject to the approval of the Stockholders.
6
3.14 If any reorganization, recapitalization, reclassification, stock
split-up, stock dividend, or consolidation of shares of Stock, merger
or consolidation of the Company or sale or other disposition by the
Company of all or a portion of its assets, any other change in the
Company's corporate structure, or any distribution to stockholders
other than a cash dividend results in the outstanding shares of Stock,
or any securities exchanged therefor or received in their place, being
exchanged for a different number or class of shares of Stock or other
securities of the Company, or for shares of Stock or other securities
of any other corporation, or new, different or additional shares or
other securities of the Company or of any other corporation being
received by the holders of outstanding shares of Stock, then equitable
adjustments shall be made by the Committee in:
(a) the limitation on the aggregate number of shares of Stock that
may be issued as set forth in Section 3.10 of the Plan;
(b) the number and class of Stock that may be subject to a grant
of an Option and which have not been issued or transferred
under an outstanding Option;
(c) the purchase price to be paid per share of Stock under
outstanding Options; and
(d) the terms, conditions or restrictions of any Option and Award
Agreement.
ARTICLE IV - OPTIONS
4.1 Options to purchase shares of Stock may be granted to Eligible
Participants at such time or times determined by the Committee,
following the Effective Date, subject to the terms and conditions set
forth in this Article IV.
4.2 Each Option shall be evidenced by a written Award Agreement which shall
be subject to and incorporate, by reference or otherwise, the
applicable terms and conditions of the Plan, and any other terms and
conditions not inconsistent with the Plan as may be imposed by the
Committee, including any provisions as to continued employment as
consideration for the grant or exercise of the Option and any
provisions which may be advisable to comply with applicable laws,
regulations or rulings of any governmental authority.
4.3 The Option price per share of Stock shall be established in the Award
Agreement and may be less than 100% of the Fair Market Value at the
Option Grant Date.
4.4 The Option may be exercised in full or in part from time to time within
such period as may be specified by the Committee or in the Award
Agreement; provided, however, that in any event the Option shall lapse
and cease to be exercisable three months following the Participant's
Termination of Employment.
7
4.5 An Option shall not be transferable by the Participant other than by
will or by the laws of descent and distribution, or, to the extent
otherwise allowed by Rule 16b-3 under the Act or other applicable law,
pursuant to a qualified domestic relations order as defined by the Code
and the Employee Retirement Income Security Act, as amended, and the
rules thereunder, and shall be exercisable during the lifetime of the
Participant only by him or by his guardian or legal representative.
Unless otherwise provided by the Committee or specified in an Award
Agreement, transfer restrictions shall only apply to the extent
required by federal or state securities laws. If any Participant makes
such a transfer in violation hereof, any obligation of the Company
shall forthwith terminate.
4.6 Shares of Stock purchased upon exercise of an Option shall be paid for
in such amounts, at such times and upon such terms as shall be
determined by the Committee, subject to limitations set forth in the
corresponding Award Agreement. Without limiting the foregoing, the
Committee may establish payment terms for the exercise of Options which
permit the Participant to deliver shares of Stock, or other evidence of
ownership of Stock satisfactory to the Company, with a Fair Market
Value equal to the Option price as payment.
4.7 No cash dividends shall be paid on shares of Stock subject to
unexercised Options. The Committee may provide, however, that a
Participant to whom an Option has been granted which is exercisable in
whole or in part at a future time for shares of Stock shall be entitled
to receive an amount per share equal in value to the cash dividends, if
any, paid per share on issued and outstanding Stock, as of the dividend
record dates occurring during the period between the date of the grant
and the time each such share of Stock is delivered pursuant to exercise
of such Option. Such amounts (herein called "dividend equivalents")
may, in the discretion of the Committee, be:
(a) paid in cash or Stock either from time to time prior to, or at
the time of the delivery of, such Stock, or upon expiration of
the Option if it shall not have been fully exercised; or
(b) converted into contingently credited shares of Stock, with
respect to which dividend equivalents may accrue, in such
manner, at such value, and deliverable at such time or times,
as may be determined by the Committee.
Such Stock, whether delivered or contingently credited, shall be
charged against the limitations set forth in Section 3.10.
4.8 The Committee, in its sole discretion, may authorize payment of
interest equivalents on dividend equivalents which are payable in cash
at a future time.
4.9 In the event of Disability or death, the Committee, with the consent of
the Participant or his legal representative, may authorize payment, in
cash or in Stock, or partly in cash and partly in Stock, as the
Committee may direct, of an amount equal to the difference
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at the time between the Fair Market Value of the Stock subject to an
Option and the option price in consideration of the surrender of the
Option.
4.10 The Company may make such provisions and take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the
Company is required by any law or regulation of any governmental
authority, whether federal, state or local, domestic or foreign, to
withhold in connection with any Option or the exercise thereof,
including, but not limited to, withholding the issuance of Stock
pursuant to exercise of the Option until the Participant reimburses the
Company for the amount the Company is required to withhold with respect
to such taxes or canceling any portion of the Option or another Option
granted under the Plan in an amount sufficient to reimburse the Company
for the amount the Company is required to so withhold.
4.11 If a Participant is required to pay to the Company an amount with
respect to income and employment tax withholding obligations in
connection with exercise of an Option, the Committee, in its discretion
and subject to such rules as it may adopt, may permit the Participant
to satisfy the obligation, in whole or in part, by making an
irrevocable election that a portion of the total Fair Market Value of
the shares of Stock subject to the Option be paid in the form of cash
in lieu of the issuance of Stock and that such cash payment be applied
to the satisfaction of the withholding obligations. The amount to be
withheld shall not exceed the statutory minimum federal and state
income and employment tax liability arising from the Option exercise
transaction. Notwithstanding any other provision of the Plan, any
election under this Section 4.11 shall be effective only if it
satisfies the applicable requirements of Rule 16b-3 of the Act.
4.12 The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan to be conditioned upon the granting
to the Participant of a new Option for the same or a different number
of shares of Stock as the Option surrendered, or may require such
surrender as a condition precedent to a grant of a new Option to such
Participant. Subject to the provisions of the Plan, such new Option
shall be exercisable at such price, during such period and on such
other terms and conditions as are specified by the Committee at the
time the new Option is granted. Upon surrender, the Options surrendered
shall be canceled and the shares of Stock previously subject to them
shall be available for the grant of other Options.
ARTICLE V - ACCELERATION EVENTS
5.1 For the purposes of the Plan, an Acceleration Event shall occur in the
event of a "Potential Change in Control," or "Change in Control" or a
"Board-Approved Change in Control," as those terms are defined below.
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5.2 A "Change in Control" shall be deemed to have occurred if:
(a) Any "Person" as defined in Section 3(a)(9) of the Act,
including a "group" (as that term is used in Sections 13(d)(3)
and 14(d)(2) of the Act), but excluding the Company and any
employee benefit plan sponsored or maintained by the Company,
including any trustee of such plan acting as trustee, who:
(i) makes a tender or exchange offer for any shares of
the Company's Stock (as defined below) pursuant to
which any shares of the Company's Stock are purchased
(an "Offer"); or
(ii) together with its "affiliates" and "associates" (as
those terms are defined in Rule 12b-2 under the Act)
becomes the "Beneficial Owner" (within the meaning of
Rule 13d-3 under the Act) of at least 20% of the
Company's Stock (an "Acquisition");
(b) The stockholders of the Company approve a definitive agreement
or plan to merge or consolidate the Company with or into
another corporation, to sell or otherwise dispose of all or
substantially all of its assets, or to liquidate the Company
(individually, a "Transaction"); or
(c) When, during any period of 24 consecutive months during the
existence of the Plan, the individuals who, at the beginning
of such period, constitute the Board (the "Incumbent
Directors") cease for any reason other than death to
constitute at least a majority thereof; provided, however,
that a director who was not a director at the beginning of
such 24 month period shall be deemed to have satisfied such
24 month requirement, and be an Incumbent Director, if such
director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who
then qualified as Incumbent Directors either actually, because
they were directors at the beginning of such 24 month period,
or by prior operation of this Section 5.2(c).
5.3 A "Board-Approved Change in Control" shall be deemed to have occurred
if the Offer, Acquisition or Transaction, as the case may be, is
approved by a majority of the Directors serving as members of the Board
at the time of the Potential Change in Control or Change in Control.
5.4 A "Potential Change in Control" means the happening of any one of the
following:
(a) The approval by stockholders of an agreement by the Company,
the consummation of which would result in a Change in Control
of the Company, as defined in Section 5.2; or
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(b) The acquisition of Beneficial Ownership, directly or
indirectly, by any entity, person or group, other than the
Company or any Company employee benefit plan, including any
trustee of such plan acting as such trustee, of securities of
the Company representing five percent or more of the combined
voting power of the Company's outstanding securities and the
adoption by the Board of a resolution to the effect that a
Potential Change in Control of the Company has occurred for
the purposes of this Plan.
5.5 Upon the occurrence of an Acceleration Event, the Committee in its
discretion may declare that any or all then outstanding Options, that
are not already exercisable and fully vested, shall become immediately
exercisable and fully vested in whole or in part.
5.6 In the event of a Change in Control, the Committee may, in its
discretion, cash out the value of all outstanding Options, to the
extent vested, on the basis of the "Change in Control Price" (as
defined in Section 5.7) as of the date such Change in Control or such
Potential Change in Control is determined to have occurred or such
other date as the Committee may determine prior to the Change in
Control, less the Option price (as established in the corresponding
Award Agreements).
5.7 For purposes of Section 5.6, "Change in Control Price" means the
highest price per share of Stock paid in any transaction reported on
the exchange on which the Stock is then traded, or paid or offered in
any bona fide transaction related to a Potential or actual Change in
Control of the Company at any time during the 60 day period immediately
preceding the occurrence of the Change in Control, or, where
applicable, the occurrence of the Potential Change in Control event, in
each case as determined by the Committee.
ARTICLE VI - AMENDMENT AND TERMINATION
6.1 The Board, upon recommendation of the Committee, or otherwise, at any
time and from time to time, may amend or terminate the Plan. To the
extent required by Rule 16b-3 under the Act, no amendment, without
approval by the Company's stockholders, shall:
(a) alter the group of persons eligible to participate in the
Plan;
(b) except as otherwise provided herein, increase the maximum
number of shares of Stock or Options that are available for
award under the Plan;
(c) limit or restrict the powers of the Committee with respect to
the administration of this Plan;
(d) materially increase the benefits accruing to Participants
under this Plan;
(e) materially modify the requirements as to eligibility for
participation in this Plan; or
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(f) change any of the provisions of this Article VI.
6.2 No amendment to or discontinuance of this Plan or any provision thereof
by the Board or the stockholders of the Company shall, without the
written consent of the Participant, adversely affect, as shall be
determined by the Committee, any Option theretofore granted to such
Participant under this Plan; provided, however, the Committee retains
the right and power to:
(a) annul any Option if the Participant is terminated for cause as
determined by the Committee; and
(b) provide for the forfeiture of shares of Stock or other gain
under an Option, as determined by the Committee, in the event
the Participant competes against the Company.
6.3 If an Acceleration Event has occurred, no amendment or termination
shall impair the rights of any person with respect to an outstanding
Option as provided in Article V.
ARTICLE VII - MISCELLANEOUS PROVISIONS
7.1 Nothing in the Plan or any Option granted hereunder shall confer upon
any Participant any right to continue in the employ of the Company, or
to serve as a director thereof, or interfere in any way with the right
of the Company to terminate his or her employment at any time. Unless
specifically provided otherwise, no Option granted under the Plan shall
be deemed salary or compensation for the purpose of computing benefits
under any employee benefit plan or other arrangement of the Company for
the benefit of its employees unless the Company shall determine
otherwise. No Participant shall have any claim to an Option until it is
actually granted under the Plan. To the extent that any person acquires
a right to receive payments from the Company under the Plan, such right
shall, except as otherwise provided by the Committee, be no greater
than the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general funds of
the company, and no special or separate fund shall be established and
no segregation of assets shall be made to assure payment of such
amounts, except as otherwise provided by the Committee.
7.2 The Plan and the grant of Options hereunder shall be subject to all
applicable federal and state laws, rules, and regulations and to such
approvals by any United States government or regulatory agency as may
be required. Any provision herein relating to compliance with Rule
16b-3 under the Act shall not be applicable with respect to
participation in the Plan by Participants who are not subject to
Section 16(b) of the Act.
7.3 The terms of the Plan shall be binding upon the Company and its
successors and assigns.
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7.4 This Plan and all actions taken hereunder shall be governed by the laws
of the State of North Carolina.
7.5 The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver shares of Stock or
payments in lieu of or with respect to Options granted hereunder;
provided, however, that, unless the Committee otherwise determines with
the consent of the affected Participant, the existence of such trusts
or other arrangements is consistent with the "unfunded" status of the
Plan.
7.6 Each Participant exercising an Option hereunder agrees to give the
Committee prompt written notice of any election made by such
Participant under Section 83(b) of the Code, or any similar provision
thereof.
7.7 If any provision of this Plan or an Award Agreement is or becomes or is
deemed invalid, illegal or unenforceable in any jurisdiction, or would
disqualify the Plan or any Award Agreement under any law deemed
applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws or if it cannot be
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award
Agreement, it shall be stricken and the remainder of the Plan or the
Award Agreement shall remain in full force and effect.
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