Earnout Agreement

EXHIBIT 10.56


EARNOUT AGREEMENT


THIS EARNOUT AGREEMENT (the " Agreement"), is made and entered into this 31st day of July, 1997 by and among SPEIZMAN INDUSTRIES, INC. (the " Buyer") and C. ALEXANDER DAVIS, AMY BUTLER DAVIS, TAYLOR FERRELL DAVIS and KYLE ALEXANDER DAVIS ("hereinafter collectively referred to as the "AD Shareholders"). C. Alexander Davis is hereinafter individually referred to as "AD". Capitalized terms used but not defined herein have the meanings set forth in the Purchase Agreement which is defined hereinbelow.


WITNESSETH:


WHEREAS, the parties hereto have entered into with others that certain Stock Purchase Agreement dated as of the date hereof (the "Purchase Agreement");


WHEREAS, it is a condition to the AD Shareholders' execution of the Purchase Agreement that the Buyer contemporaneously execute this Agreement; and


WHEREAS, this Agreement sets forth the terms and conditions upon which the Buyer will, under certain circumstances, pay to the AD Shareholders earnout considerations specified in Section 2.2(c) of the Purchase Agreement as part of the Purchase Price to be paid the AD Shareholders for' their Shares.


NOW, THEREFORE, for and in consideration of the AD Shareholders selling their shares to Buyer and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer agrees to pay the portion of the Purchase Price specified in Section 2.2(c) of the Purchase Agreement to AD Shareholders as follows:


1. Definitions. As used herein, the following terms have the following meanings:


a. "Additional Earnout Consideration" means an amount equal to fifteen
percent (15%) of EBT or Annualized EBT, as the cases may be, for the fourth
Twelve - Month Period and ten percent (10%) of EBT for the fifth
Twelve-Month Period, except as otherwise provided in Section 4 herinbelow.


b. "Annualized EBT" means the EBT for any elapsed portion of a
Twelve - Month Period (such elapsed portion determined as the period
commencing on the date on which such Twelve - Month period begins and
ending on the effective date of the Fundamental Corporate Event) multiplied
by a fraction, the numerator of which is the total number of days in such
Twelve- Month period and the denominator of which is the number of days in
such elapsed portion of the Twelve - Month Period.


c. "Company" means Wink Davis Equipment Co., Inc.


d. "Earnout Consideration" means an amount equal to fifty percent
(50%) of all EBT in excess of (i) One Million One Hundred Thousand Dollars
($1,100,000) for the first Twelve- Month period or (ii) One Million Two
Hundred Thousand Dollars ($1,200,000) for each successive Twelve - Month
Period described in Section 2 herinbelow, but such amount shall not exceed
in the aggregate One Million Five Hundred Thousand Dollars ($1,500,000).


e. "EBT" means with respect to the Company for any period the sum of
(i) Net Income and (ii) federal, state and local income taxes, in each of
the Company, for such period, computed and calculated in accordance with
GAAP.


f. "Fundamental Corporate Event" means (i) any purchase by a Person
not affiliated with the Buyer of more than fifty percent (50%) of the
equity securities of the Company (whether by merger, recapitization,
consolidation, reorganization or otherwise), (ii) the sale of all or
substantially all of the Company's assets to a Person not affiliated with
the Buyer or (iii) the sale by Buyer to a party not affiliated with the
Buyer of fifty percent (50%) or more of the shares of the Company held by
it as of the date hereof .


g. "GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time, consistently applied by the
Company.


h. "Interest Rate" means 12.0% per annum calculated on the basis of
actual days elapsed in a 365-day year.


i. "Net Income" means as to the Company, for any period, the net
income (or loss) of the Company for such period, determined in accordance
with GAAP. In determining Net Income, interest charges shall be limited to
those fairly and appropriately allocable to the Company in the discretion
of Buyer which discretion shall be exercised in good faith.


j. "Payment Date" means any date upon which a portion of Earnout
Consideration or Additional Earnout Consideration is payable as set forth
in Sections 2, 3 and 4 herinbelow or, if any such day is not a business
day, the next succeeding business day.


k. "Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint
stock companies, joint ventures, associations, companies, trust, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.


l. "Sharing Percentages" means those percentages set forth on Exhibit
"A" attached hereto ...