- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended October 29, 1995
Commission File No. 0-12781
CULP, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1001967
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or other organization)
101 S. Main St., High Point, North Carolina 27261-2686
(Address of principal executive offices) (zip code)
(910) 889-5161
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to the filing requirements for at
least the past 90 days.
YES X NO
Common shares outstanding at October 29, 1995: 11,219,016
Par Value: $.05
<PAGE>
- -------------------------------------------------------------------------------
INDEX TO FORM 10-Q
October 29, 1995
Part I - Financial Information. Page
- ------------------------------------------ -------
Item 1. Financial Statements:
Statements of Income--Three and Six Months Ended I-1
October 29, 1995 and October 30, 1994
Balance Sheets--October 29, 1995, October 30, 1994, I-2
and April 30, 1995
Statements of Cash Flows---Six Months I-3
ended October 29, 1995 and October 30, 1994
Statements of Shareholders' Equity I-4
Notes to Financial Statements I-5
Sales by Business Unit I-9
Export and Foreign Sales by Geographic Area I-10
Sales by Business Unit - Trend Analysis I-11
Item 2. Management's Discussion and Analysis of Financial I-12
Condition and Results of Operation
Part II - Other Information
- -------------------------------------
Item 1. Legal Proceedings II-1
Item 2. Changes in Securities II-1
Item 3. Default Upon Senior Securities II-1
Item 4. Submission of Matters to a Vote of Security Holders II-1
Item 5. Other Information II-2
Item 6. Exhibits and Reports on Form 8-K II-2-II-6
Signatures II-7
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED INCOME STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994
(Amounts in Thousands, Except for Per Share Data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
October 29, October 30, % Over
1995 1994 (Under) 1996 1995
<S> <C> <C> <C> <C> <C>
Net sales 90,672 78,445 15.6 % 100.0 % 100.0 %
Cost of sales 74,565 64,272 16.0 % 82.2 % 81.9 %
Gross profit 16,107 14,173 13.6 % 17.8 % 18.1 %
Selling, general and
administrative expenses 9,675 8,363 15.7 % 10.7 % 10.7 %
Income from operations 6,432 5,810 10.7 % 7.1 % 7.4 %
Interest expense 1,388 1,144 21.3 % 1.5 % 1.5 %
Interest income 0 (24) (100.0)% 0.0 % (0.0)%
Other expense (income), net 219 190 15.3 % 0.2 % 0.2 %
Income before income taxes 4,825 4,500 7.2 % 5.3 % 5.7 %
Income taxes * 1,825 1,700 7.4 % 37.8 % 37.8 %
Net income 3,000 2,800 7.1 % 3.3 % 3.6 %
Average shares outstanding 11,211 11,205 0.1 %
Net income per share $0.27 $0.25 8.0 %
Dividends per share $0.0275 $0.025 10.0 %
SIX MONTHS ENDED (UNAUDITED)
Amounts Percent of Sales
October 29, October 30, % Over
1995 1994 (Under) 1996 1995
Net sales 163,029 144,794 12.6 % 100.0 % 100.0 %
Cost of sales 134,724 119,521 12.7 % 82.6 % 82.5 %
Gross profit 28,305 25,273 12.0 % 17.4 % 17.5 %
Selling, general and
administrative expenses 18,129 15,932 13.8 % 11.1 % 11.0 %
Income from operations 10,176 9,341 8.9 % 6.2 % 6.5 %
Interest expense 2,685 2,221 20.9 % 1.6 % 1.5 %
Interest income 0 (47) (100.0)% 0.0 % (0.0)%
Other expense (income), net 326 367 (11.2)% 0.2 % 0.3 %
Income before income taxes 7,165 6,800 5.4 % 4.4 % 4.7 %
Income taxes * 2,650 2,550 3.9 % 37.0 % 37.5 %
Net income 4,515 4,250 6.2 % 2.8 % 2.9 %
Average shares 11,209 11,202 0.1 %
Net income per share $0.40 $0.38 5.3 %
Dividends per share $0.055 $0.05 10.0 %
</TABLE>
* Percent of sales column is calculated as a % of income before income taxes.
I-1
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED BALANCE SHEETS
OCTOBER 29, 1995, OCTOBER 30, 1994 AND APRIL 30, 1995
(Unaudited, Amounts in Thousands)
<TABLE>
<CAPTION>
Amounts Increase
October 29, October 30, (Decrease) * April 30,
1995 1994 Dollars Percent 1995
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash investments 930 257 673 261.9 % 1,393
Accounts receivable 46,930 42,727 4,203 9.8 % 44,252
Inventories 49,632 42,504 7,128 16.8 % 45,771
Other current assets 3,415 2,510 905 36.1 % 3,194
Total current assets 100,907 87,998 12,909 14.7 % 94,610
Restricted investments 0 1,624 (1,624) (100.0)% 795
Property, plant & equipment, net 73,876 68,848 5,028 7.3 % 75,805
Goodwill 23,189 18,725 4,464 23.8 % 22,600
Other assets 2,432 1,209 1,223 101.2 % 1,189
Total assets 200,404 178,404 22,000 12.3 % 194,999
Current Liabilities
Current maturities of long-term debt 11,555 6,008 5,547 92.3 % 11,555
Accounts payable 30,175 28,685 1,490 5.2 % 32,250
Accrued expenses 11,075 8,688 2,387 27.5 % 11,532
Income taxes payable 1,729 1,653 76 4.6 % 661
Total current liabilities 54,534 45,034 9,500 21.1 % 55,998
Long-term debt 65,137 63,462 1,675 2.6 % 62,187
Deferred income taxes 5,382 3,477 1,905 54.8 % 5,418
Total liabilities 125,053 111,973 13,080 11.7 % 123,603
Shareholders' equity 75,351 66,431 8,920 13.4 % 71,396
Total liabilities and
stockholders' equity 200,404 178,404 22,000 12.3 % 194,999
Shares outstanding 11,219 11,205 14 0.1 % 11,205
</TABLE>
* Derived from audited financial statements.
I-2
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED OCTOBER 29, 1995 AND OCTOBER 30, 1994
(Unaudited, Amounts in Thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Amounts
October 29, October 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income 4,515 4,250
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation 6,138 5,340
Amortization of intangible assets 358 298
Provision for deferred income taxes (36) (272)
Changes in assets and liabilities:
Accounts receivable (2,678) (5,984)
Inventories (3,861) (5,908)
Other current assets (221) (11)
Other assets (1,309) (470)
Accounts payable (2,075) (901)
Accrued expenses (457) 530
Income taxes payable 1,068 1,017
Net cash provided by (used in) operating activities 1,442 (2,111)
Cash flows from investing activities:
Capital expenditures (5,090) (10,184)
Purchases of restricted investments 0 (46)
Proceeds from sale of restricted investments 795 1,345
Business acquired 0 0
Net cash provided by (used in) investing activities (4,295) (8,885)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 6,000 8,000
Principal payments on long-term debt (3,050) (92)
Net increase (decrease) in bank overdrafts 0 1,120
Dividends paid (617) (560)
Proceeds from sale of common stock 57 92
Net cash provided by (used in) financing activities 2,390 8,560
Increase (decrease) in cash and cash investments (463) (2,436)
Cash and cash investments at beginning of period 1,393 2,693
Cash and cash investments at end of period 930 257
</TABLE>
I-3
<PAGE>
Culp, Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Capital
Contributed Total
Common Stock in Excess Retained Shareholders'
Shares Amount of Par Value Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance, May 1, 1994 11,177,353 $ 558 $ 16,487 $ 45,604 $ 62,649
Cash dividends (1,120) (1,120)
($.10 per share)
Net income 9,775 9,775
Common stock issued in
connection with stock
option plan 27,413 2 90 92
Balance, April 30, 1995 11,204,766 $ 560 $ 16,577 $ 54,259 $ 71,396
Cash dividends (617) (617)
($.055 per share)
Net income 4,515 4,515
Common stock issued in
connection with stock
option plan 14,250 1 56 57
Balance, October 29, 1995 11,219,016 $ 561 $ 16,633 $ 58,157 $ 75,351
</TABLE>
I-4
<PAGE>
Culp, Inc.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
The financial information included herein is unaudited; however,
such information reflects all adjustments which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods.
Certain amounts for fiscal year 1995 have been
reclassified to conform with the fiscal year 1996 presentation. Such
reclassifications had no effect on net income as previously
reported. All such adjustments are of a normal recurring nature.
The results of operations for the six months ended October 29, 1995
are not necessarily indicative of the results to be expected for the
full year.
=======================================================
2. Accounts Receivable
The company factors a portion of its accounts receivable,
on a nonrecourse basis. The factoring arrangements are used solely for
credit purposes, and not for borrowing purposes.
A summary of accounts receivable follows (dollars in thousands):
<TABLE>
<CAPTION>
- -- -----------------------------------------------------------------------------------------------------------
October 29, 1995 April 30, 1995
- -- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Customers $ 46,767 $ 44,014
Factors 1,029 1,314
Allowance for doubtful accounts (513) (739)
Reserve for returns and allowances (353) (337)
- -- -----------------------------------------------------------------------------------------------------------
$ 46,930 $ 44,252
</TABLE>
=========================================================
3. Inventories
Inventories are carried at the lower of cost of market.
Cost is determined for substantially all inventories using the LIFO
(last-in, first-out) method.
A summary of inventories follows (dollars in thousands):
<TABLE>
<CAPTION>
- -- -----------------------------------------------------------------------------------------------------------
October 29, 1995 April 30, 1995
- -- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 30,714 $ 25,385
Work-in-process 3,680 3,465
Finished goods 18,706 19,834
- -- -----------------------------------------------------------------------------------------------------------
Total inventories valued at FIFO cost 53,100 48,684
Adjustments of certain inventories to the LIFO cost method (3,468) (2,913)
- -- -----------------------------------------------------------------------------------------------------------
$ 49,632 $ 45,771
</TABLE>
========================================================
I-5
<PAGE>
Culp, Inc.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
4. Accounts Payable:
A summary of accounts payable follows (dollars in thousands):
<TABLE>
<CAPTION>
- -- -----------------------------------------------------------------------------------------------------------
October 29, 1995 April 30, 1995
- -- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank overdraft $ -0- $ -0-
Accounts payable-trade 24,279 22,647
Accounts payable-capital expenditures 5,896 9,603
- -- -----------------------------------------------------------------------------------------------------------
$ 30,175 $ 32,250
</TABLE>
=========================================================
5. Accrued Expenses
A summary of accrued expenses follows (dollars in thousands):
<TABLE>
<CAPTION>
- -- -----------------------------------------------------------------------------------------------------------
October 29, 1995 April 30, 1995
- -- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Compensation and benefits $4,763 $ 5,252
Acquisition costs 1,189 1,595
Other 5,123 4,685
- -- -----------------------------------------------------------------------------------------------------------
$ 11,075 $ 11,532
</TABLE>
========================================================
6. Long-term Debt
A summary of long-term debt follows (dollars in thousands).
<TABLE>
<CAPTION>
- -- -----------------------------------------------------------------------------------------------------------
October 29, 1995 April 30, 1995
- -- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Industrial Revenue Bonds $ 15,737 $ 15,787
Revolving Credit Line 16,000 10,000
Term Loan 38,500 41,500
Subordinated note payable 1,000 1,000
Convertible note payable 5,455 5,455
- -- -----------------------------------------------------------------------------------------------------------
$ 76,692 $ 73,742
Less current maturities (11,555) (11,555)
- -- -----------------------------------------------------------------------------------------------------------
$ 65,137 $ 62,187
</TABLE>
I-6
<PAGE>
Culp, Inc.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
The company has a loan agreement with two banks, which provides for
a $44,000,000 seven-year term loan and a $33,500,000 revolving credit
line. The revolving credit line has a six-year term, or can be
terminated by either of the participating banks upon a thirteen-month
notice to the company.
In connection with the purchase of Rayonese Textile Inc., the
company issued a convertible note payable of $5,455,000 bearing
interest at 6.0%. The note is payable on March 6, 1998 or upon 45
days notice to the company by the holders starting on March 6, 1996
and is secured by the stock and assets of Rayonese. Due to the holders'
45-day notice provision, the convertible note is classified as a
current maturity in the accompanying consolidated financial statements.
At the option of the holder after March 6, 1996, the note is convertible
into the company's common stock at a conversion price of $12.50
per share. The note is not redeemable at the option of the company.
The company's loan agreements require, among other things, that
the company maintain certain financial ratios. At October 29, 1995, the
company was in compliance with these required covenants.
At October 29, 1995, the company had five interest rate swap
agreements with two banks in order to reduce its exposure to floating
interest rates on a portion of its variable rate borrowings.
The following table summarizes certain data regarding the interest
rate swaps:
notional amount interest rate expiration date
$ 3,300,000
6.4% July 1996
900,000
7.6% July 1996
15,000,000
7.3% April 2000
5,000,000 6.9% June 2002
5,000,000 6.6% July 2002
The estimated amount at which the company could have terminated
these agreements as of October 29, 1995 is approximately $685,000. Net
amounts paid under these agreements increased interest expense for
the six months ended Octoer 29, 1995 and October 30, 1994 by
approximately $79,000 and $85,000, respectively. Management believes
the risk of incurring losses resulting from the inability of the
bank to fulfill its obligation under the interest rate swap
agreements to be remote and that any losses incurred would be
immaterial.
========================================================
7. Acquisition
On March 6, 1995, the company acquired Rayonese Textile
Inc. (Rayonese), a manufacturer of home furnishings fabrics based near
Montreal, Canada. The transaction has a preliminary estimated value
of approximately $10.5 million and included the purchase of 100% of the
Rayonese common stock and the assumption of Rayonese's funded debt.
The acquisition was accounted for as a purchase, and accordingly,
the purchase price has been allocated to the assets acquired and the
liabilities assumed based on their estimated fair values at the
date of acquisition.
I-7
<PAGE>
Culp, Inc.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
The preliminary estimated fair values of assets and retained
liabilities acquired are summarized below:
<TABLE>
<CAPTION>
- -- -----------------------------------------------------------------------------------------------------------
March 6, 1995
- -- -----------------------------------------------------------------------------------------------------------
<S> <C>
Accounts receivable, net $ 2,195
Inventories 1,878
Other current assets 39
Property, plant and equipment 3,965
Goodwill 5,034
Accounts payable and accrued expenses (2,656)
$ 10,455
</TABLE>
========================================================
8. Cash Flow Information
Payments for interest and income taxes during the period were
(dollars in thousands)
<TABLE>
<CAPTION>
- -- -----------------------------------------------------------------------------------------------------------
1996 1995
- -- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest $ 2,870 $ 2,071
Income taxes 1,582 1,533
</TABLE>
========================================================
9. Foreign Exchange Forward Contracts
The company generally enters into foreign exchange forward and
option contracts as a hedge against its exposure to currency
fluctuations on firm commitments to purchase certain machinery and
equipment and raw materials. The company does not engage in
foreign currency speculation. Machinery and equipment and raw material
purchases hedged by foreign exchange forward or option contracts are
valued by using the exchange rate of the applicable foreign exchange
forward or option contract. At October 29, 1995, the company had no
foreign exchange forward or option contracts outstanding.
I-8
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
SALES BY BUSINESS UNIT
FOR THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 1995
AND OCTOBER 30, 1994
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
October 29, October 30, % Over
Business Units 1995 1994 (Under) 1996 1995
<S> <C> <C> <C> <C> <C>
Upholstery Fabrics
Flat Wovens
Culp Textures 22,715 22,834 (0.5)% 25.1 % 29.1 %
Rossville/Chromatex 17,960 15,758 14.0 % 19.8 % 20.1 %
40,675 38,592 5.4 % 44.9 % 49.2 %
Velvets/Prints 32,081 26,439 21.3 % 35.4 % 33.7 %
72,756 65,031 11.9 % 80.2 % 82.9 %
Mattress Ticking 17,916 * 13,414 33.6 % 19.8 % 17.1 %
90,672 78,445 15.6 % 100.0 % 100.0 %
SIX MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
October 29, October 30, % Over
Business Units 1995 1994 (Under) 1996 1995
Upholstery Fabrics
Flat Wovens
Culp Textures 40,299 42,447 (5.1)% 24.7 % 29.3 %
Rossville/Chromatex 33,318 30,898 7.8 20.4 % 21.3
73,617 73,345 0.4 % 45.2 % 50.7 %
Velvets/Prints 55,604 47,083 18.1 % 34.1 % 32.5 %
129,221 120,428 7.3 % 79.3 % 83.2 %
Mattress Ticking 33,808 * 24,366 38.8 % 20.7 % 16.8 %
163,029 144,794 12.6 % 100.0 % 100.0 %
</TABLE>
* Includes Rayonese shipments of $2,053 for the three months and $3,822 for
the six months. The percent increase in sales without Rayonese was 20.0% for
the three months and 17.4% for the six months. On a consolidated basis,
without Rayonese shipments, the percent sales increase for the three months
was 13.0% and for the six months was 10.0%.
I-9
<PAGE>
CULP, INC. FINANCIAL INFORMATION RELEASE
EXPORT AND FOREIGN SALES BY GEOGRAPHIC AREA
FOR THREE MONTHS AND SIX MONTHS ENDED OCTOBER 29, 1995
AND OCTOBER 30, 1994
(Amounts in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
October 29, October 30, % Over
Geographic Area 1995 1994 (Under) 1996 1995
<S> <C> <C> <C> <C> <C>
North America (Excluding USA) 6,223 4,184 48.7 % 31.8 % 28.7 %
Europe 4,297 3,892 10.4 % 22.0 % 26.7 %
Middle East 3,437 1,905 80.4 % 17.6 % 13.1 %
Far East & Asia 3,079 2,086 47.6 % 15.7 % 14.3 %
South America 397 876 (54.7)% 2.0 % 6.0 %
All other areas 2,127 1,652 28.8 % 10.9 % 11.3 %
19,560 * 14,595 34.0 % 100.0 % 100.0 %
SIX MONTHS ENDED (UNAUDITED)
Amounts Percent of Total Sales
October 29, October 30, % Over
Geographic Area 1995 1994 (Under) 1996 1995
North America (Excluding USA) 10,790 7,793 38.5 % 31.7 % 30.3 %
Europe 7,482 6,890 8.6 % 22.0 % 26.8 %
Middle East 5,549 2,768 100.5 % 16.3 % 10.8 %
Far East & Asia 4,841 4,131 17.2 % 14.2 % 16.1 %
South America 843 1,184 (28.8)% 2.5 % 4.6 %
All other areas 4,499 2,938 53.1 % 13.2 % 11.4 %
34,004 * 25,704 32.3 % 100.0 % 100.0 %
</TABLE>
* Includes Rayonese shipments of $2,053 for the three months and $3,822 for
the six months. The percent increase in sales without Rayonese was 20.0% for
the three months and 17.4% for the six months.
I-10
<PAGE>
Culp, Inc.
SALES BY BUSINESS UNIT - TREND ANALYSIS
1994 vs 1995 vs 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1995 Fiscal 1996
Business Units Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL Q1 Q2 Q3 Q4 TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Upholstery Fabrics
Flat Wovens
Culp Textures 17,444 20,073 19,673 21,127 78,317 19,613 22,834 20,940 21,738 85,125 17,584 22,715 40,299
Rossville/Chromatex 0 0 14,330 16,717 31,047 15,140 15,758 16,397 16,470 63,765 15,358 17,960 33,318
17,444 20,073 34,003 37,844 109,364 34,753 38,592 37,337 38,208 148,890 32,942 40,675 0 0 73,617
Velvets/Prints 20,888 24,518 23,714 27,916 97,036 20,644 26,439 28,307 31,413 106,803 23,523 32,081 55,604
38,332 44,591 57,717 65,760 206,400 55,397 65,031 65,644 69,621 255,693 56,465 72,756 0 0 129,221
Mattress Ticking 8,251 9,395 9,531 11,472 38,649 10,952 13,414 12,147 15,820 52,333 15,892 17,916 33,808
46,583 53,986 67,248 77,232 245,049 66,349 78,445 77,791 85,441 308,026 72,357 90,672 0 0 163,029
Percent increase(decrease) from prior year:
Business Units
Upholstery Fabrics
Flat Wovens
Culp Textures (6.5) (5.2) 3.8 0.3 (1.9) 12.4 13.8 6.4 2.9 8.7 (10.3) (0.5) (5.1)
Rossville/Chromatex N/A N/A N/A N/A N/A 100.0 100.0 14.4 (1.5) 105.4 1.4 14.0 7.8
(6.5) (5.2) 79.4 79.7 37.0 99.2 92.3 9.8 1.0 36.1 (5.2) 5.4 0.4
Velvets/Prints 7.4 16.5 10.0 8.3 10.5 (1.2) 7.8 19.4 12.5 10.1 13.9 21.3 18.1
0.6 5.7 42.5 40.4 23.1 44.5 45.8 13.7 5.9 23.9 1.9 11.9 7.3
Mattress Ticking 7.5 10.4 27.6 21.2 16.7 32.7 42.8 27.4 37.9 35.4 45.1 33.6 38.8
1.7 6.4 40.2 37.2 22.0 42.4 45.3 15.7 10.6 25.7 9.1 15.6 12.6
</TABLE>
I-11
<PAGE>
1
- ------------------------------------------------------------------------------
The following analysis of the financial condition and results of operations
should be read in conjunction with the Financial Statements and Notes thereto
included elsewhere in this report.
Overview
For the three months ended October 29, 1995, net sales were $90.7 million, up
16% from $78.4 million in the year-earlier period. Net income for the quarter
was $3.0 million, or $0.27 per share, compared with $2.8 million, or $0.25 per
share, for the second quarter of fiscal 1995. Of the increase of $12.3 million
in sales, $2.1 million was attributable to the contribution from Rayonese
Textile, which was acquired during the fourth quarter of fiscal 1995 (see text
below). The increase in sales, excluding that contribution, primarily reflected
higher shipments of upholstery fabrics and mattress ticking to U.S.-based
manufacturers and increased exports of upholstery fabrics. These same trends
contributed to a gain in sales for the six months ended October 29, 1995 to
$163.0 million, up 13% from $144.8 million in the first half of fiscal 1995. The
company experienced a general slowing in demand from U.S.- based customers
earlier in the year, but the pattern during the second quarter was more
favorable. Although there remains some concern about the trend in consumer
purchases of home furnishings over the next several quarters, the prevailing
level of home mortgage rates appears to support a positive outlook for the
industry. The current momentum in the company's incoming orders remains
generally positive.
Rayonese Textile Inc. Acquisition
On March 6, 1995, the company completed the acquisition of Rayonese Textile Inc.
The transaction has a preliminary estimated value of approximately $10.5 million
and includes the purchase of 100% of the Rayonese common stock and the
assumption of Rayonese's funded debt. The acquisition is described in more
detail elsewhere in this report and in the company's filing with the Securities
and Exchange Commission on Form 8-K filed December 23, 1994. Also see footnote 7
to the Consolidated Financial Statements.
I-12
<PAGE>
2
- -----------------------------------------------------------------------------
Analysis of Operations
The table below sets forth certain items in the Statements of Income as a
percentage of net sales. Income taxes are expressed as a percentage of income
before income taxes.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 29 October 30 October 29 October 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 82.2 81.9 82.6 82.5
------------------------------------------------
Gross profit 17.8 18.1 17.4 17.5
Selling, general and
administrative expenses 10.7 10.7 11.1 11.0
------------------------------------------------
Income from operations 7.1 7.4 6.2 6.5
Interest expense 1.5 1.5 1.6 1.5
Interest income 0.0 0.0 0.0 0.0
Other expense (income), net 0.2 0.2 0.2 0.3
------------------------------------------------
Income before
income taxes 5.3 5.7 4.4 4.7
Income taxes (*) 37.8 37.8 37.0 37.5
-----------------------------------------------
Net Income 3.3% 3.6% 2.8% 2.9%
===============================================
</TABLE>
(*) Calculated as a percent of income before income taxes
Three And Six Months Ended October 29, 1995 Compared With Three Months And Six
Months Ended October 30, 1994
Sales by major business unit and export and foreign sales by geographic area for
the three and six months are set forth in separate schedules on pages I-9 and
I-10.
I-13
<PAGE>
3
- -----------------------------------------------------------------------------
Sales of upholstery fabrics for the second quarter were up $7.7 million (12%)
from a year ago. Although sales of flat wovens increased somewhat for the second
quarter, sales of these fabrics were essentially unchanged for the first half
from a year ago. Sales of velvets/prints were up 21% for the second quarter,
continuing the positive trend from earlier in the year. The gain in sales of
mattress ticking for the second quarter primarily reflected higher shipments to
existing accounts and to a lesser degree, a contribution of $2.1 million from
Rayonese Textile, which was acquired on March 6, 1995. However, the U. S.
bedding and home textiles markets have softened significantly since early
August. This retail weakness is resulting in a sharply slower rate of growth in
our mattress ticking business unit, which includes Rayonese. The company
believes this softness is temporary and that business conditions will turn more
positive in early 1996. Exports and international sales, consisting primarily of
upholstery fabrics, increased to $19.6 million, up 34% from $14.6 million in the
year-earlier period and a gain of 36% from the $14.4 million in the first
quarter of fiscal 1996. Sales of Rayonese Textile are foreign sales and added to
the increase on a year-to-year basis for the second quarter and first half. The
base of the company's international customers is continuing to broaden, and,
with the exception of South America, sales to each major geographic area were up
through the first six months.
Gross profit decreased as a percentage of net sales for the second quarter and
first half due principally to higher prices for raw materials, a trend which
began during the second half of fiscal 1995. The company has been able to offset
some of the higher costs through increased operating efficiency as well as by
raising prices. During the second quarter, a 2% price increase became effective
for most of the company's fabrics and mattress ticking.
Selling, general and administrative expenses rose slightly as a percentage of
net sales for the first six months. Although the company is continuing to
emphasize cost-containment programs, planned increases in expenses related to
the design of new fabrics and to the company's marketing resources accounted for
the higher ratio of expenses.
Net interest expense for the second quarter increased to $1.4 million compared
with $1.1 million in the year-earlier period. The increase for the second
quarter as well as the first half principally reflects the additional borrowings
related to the acquisition of Rayonese Textile and, to a lesser degree, higher
interest rates over the past year.
I-14
<PAGE>
4
- ------------------------------------------------------------------------------
Other expense (income), net decreased for the first six months of fiscal 1996
due to a $100,000 credit from the favorable settlement of an environmental
matter with the former owner of one of the company's facilities.
The effective tax rate for the first six months declined to 37.0% compared to
37.5% last year. The lower tax rate for the first half was primarily due to a
higher percentage of income being derived from international operations, which
are taxed at a lower rate.
Liquidity and Capital Resources
The company continues to maintain a sound financial position. Funded long- and
short-term debt increased to $76.7 million at the close of the second quarter,
up from $72.9 million at the close of fiscal 1995. As a percentage of total
capital (funded debt plus total shareholders' equity), the company's funded debt
amounted to 50.4% as of October 29, 1995, down slightly from the end of fiscal
1995. The company's current ratio as of October 29, 1995 was 1.9 compared with
1.7 as of April 30, 1995. Shareholders' equity increased to $75.4 million as of
October 29, 1995, compared with $71.4 million at the end of fiscal 1995.
The company typically generates the majority of its cash from operating
activities during the second fiscal half. During the first six months of fiscal
1996, the cash flow from operations totaled $1.4 million. Borrowings of $6.0
million under a revolving credit agreement were used to fund operations during
the first six months.
The company's borrowings are through financing arrangements with two banks which
provide for a term loan of $44.0 million and a revolving credit line of $33.5
million. As of October 29, 1995, the company had $17.5 million in borrowings
available under the revolving credit agreement.
During the second quarter, the company's Board of Directors approved an increase
in the capital expenditure budget for fiscal 1996 from $11.0 million to $15.5
million. The increase was due to the decision to accelerate two expansion
projects originally planned for fiscal 1997. Capital spending during the first
six months totaled $5.1 million. The company believes that cash flows from
operations and funds available under existing credit facilities
I-15
<PAGE>
5
- -----------------------------------------------------------------------------
will be sufficient to fund capital expenditures as well as financing needs
related to operations during the remainder of fiscal 1996.
Inflation
The company has experienced increases in raw material costs and the expense of
other operating items. Although a price increase was implemented during the
second quarter, competitive conditions have not allowed the company to fully
offset these higher costs, a condition which has led to a slight decline in
operating profit margins. The company believes inflationary pressure will impact
profitability to a lesser degree during the remainder of fiscal 1996.
I-16
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
- -------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings that are required to be disclosed under
this item.
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of the company was held in High Point,
North Carolina on September 19, 1995. Of the 11,209,641 shares of common
stock outstanding on the record date, 9,969,954 shares were present in
person or by proxy.
At the annual meeting, shareholders voted on:
a) ratifying the appointment of KPMG Peat Marwick LLP as the
independent auditors of the company for the current fiscal year;
and
b) the election of three directors: Howard L. Dunn, Jr., Earl N.
Phillips, Jr., and Bland W. Worley.
A. PROPOSAL TO RATIFY THE ELECTION OF KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS OF THE COMPANY FOR FISCAL YEAR 1995.
For: 9,940,234
Against: 22,238
Abstain: 7,481
Broker Non-Votes: 0
B. PROPOSAL FOR ELECTION OF DIRECTORS:
Howard L. Dunn, Jr. Bland W. Worley
For: 9,758,798 For: 9,916,323
Authority Withheld: 211,156 Authority Withheld: 53,631
Broker Non Votes: 0 Broker Non Votes: 0
Earl N. Phillips, Jr.
For: 9,702,916
Authority Withheld: 267,038
Broker Non Votes: 0
II-1
<PAGE>
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C>
(a) The following exhibits are filed as part of this report
or incorporated by reference herein.
3(i) Articles of Incorporation of the company, as amended,
were filed as Exhibit 3(i) to the company's Form 10-Q for
the quarter ended January 29, 1995, filed March 15, 1995,
and are incorporated herein by reference.
3(ii) Restated and Amended Bylaws of the company, as amended,
were filed as Exhibit 3(b) to the company's Form 10-K for
the year ended April 28, 1991, filed July 25, 1991, and
are incorporated herein by reference.
10(a) Loan Agreement dated December 1, 1988 with Chesterfield
County, South Carolina relating to Series 1988 Industrial
Revenue Bonds in the principal amount of $3,377,000 and
related Letter of Credit and Reimbursement Agreement
dated December 1, 1988 with First Union National Bank
of North Carolina were filed as Exhibit 10(n) to the
company's Form 10-K for the year ended April 29, 1989,
and are incorporated herein by reference.
10(b) Loan Agreement dated November 1, 1988 with the
Alamance County Industrial Facilities and Pollution
Control Financing Authority relating to Series A and B
Industrial Revenue Refunding Bonds in the principal
amount of $7,900,000, and related Letter of Credit and
Reimbursement Agreement dated November 1, 1988 with
First Union National Bank of North Carolina were filed as
exhibit 10(o) to the company's Form 10-K for the year
ended April 29, 1990, and are incorporated herein by
reference.
10(c) Loan Agreement dated January 5, 1990 with the with the
Guilford County Industrial Facilities and Pollution Control
Financing Authority, North Carolina, relating to Series
1989 Industrial Revenue Bonds in the principal amount of
II-2
<PAGE>
$4,500,000, and related Letter of Credit and
Reimbursement Agreement dated January 5, 1990 with First
Union National Bank of North Carolina was filed as
Exhibit 10(d) to the company's Form 10-K for the year
ended April 19, 1990, filed on July 15, 1990, and is
incorporated herein by reference.
10(d) Loan Agreement dated as of December 1, 1993 between
Anderson County, South Carolina and the company
relating to $6,580,000 Anderson County, South Carolina
Industrial Revenue Bonds (Culp, Inc. Project) Series 1993,
and related Letter of Credit and Reimbursement Agreement
dated as of December 1, 1993 by and between the
company and First Union National Bank of North Carolina
were filed as Exhibit 10(o) to the Company's Form 10-Q
for the quarter ended January 30, 1994, filed March 16,
1994, and is incorporated herein by reference.
10(e) Severance Protection Agreement, dated September 21,
1989, was filed as Exhibit 10(f) to the company's Form
10-K for the year ended April 29, 1990, filed on July 25
1990, and is incorporated herein by reference.
10(f) Lease Agreement, dated January 19, 1990, with Phillips
Interests, Inc. was filed as Exhibit 10(g) to the company's
Form 10-K for the year ended April 29, 1990, filed on July
25, 1990, and is incorporated herein by reference.
10(g) Lease Agreement, dated September 6, 1988, with
Partnership 74 was filed as Exhibit 10(h) to the company's
Form 10-K for the year ended April 28, 1991, filed on July
25, 1990, and is incorporated herein by reference.
10(h) Amendment and Restatement of the Employees's
Retirement Builder Plan of the company dated May 1,
1981 with amendments dated January 1, 1990 and
January 8, 1990 were filed as Exhibit 10(p) to the
company's Form 10-K for the year ended May 3, 1992,
filed on August 4, 1992, and is incorporated herein by
reference.
10(i) First Amendment of Lease Agreement dated July 27, 1992
with Partnership 74 Associates was filed as Exhibit 10(n)
to the company's Form 10-K for the year ended May 2,
1993, filed on July 29, 1993, and is incorporated herein by
reference.
II-3
<PAGE>
10(j) 1993 Stock Option Plan was filed as Exhibit 10(o) to the
company's Form 10-K for the year ended May 2, 1993,
filed on July 29, 1993, and is incorporated herein by
reference.
10(k) First Amendment to Loan Agreement dated as of December
1, 1993 by and between The Guilford County Industrial
Facilities and Pollution Control Financing Authority and
the company, and related Reimbursement and Security
Agreement dated as of December 1, 1993 between the
company and Wachovia Bank of North Carolina, National
Association was filed as Exhibit 10(p) to the company's
Form 10-Q, filed on March 15, 1994, and is incorporated
herein by reference.
10(l) First Amendment to Loan Agreement dated as of December
16, 1993 by and between The Alamance County Industrial
Facilities and Pollution Control Financing Authority and
the company, and related First Amendment to Letter of
Credit and Reimbursement Agreement dated as of
December 16, 1993 between First Union National Bank of
North Carolina and the company was filed as Exhibit 10(q)
to the company's Form 10-Q filed, filed on March 15,
1994, and is incorporated herein by reference.
10(m) First Amendment to Loan Agreement dated as of December
16, 1993 by and between Chesterfield County, South
Carolina and the company, and related First Amendment
to Letter of Credit and Reimbursement Agreement dated as
of December 16, 1993 by and between First Union
National Bank of North Carolina and the company was
filed as Exhibit 10(r) to the company's Form 10-Q, filed on
March 15, 1994, and is incorporated herein by reference.
10(n) Interest Rate Swap Agreements between company and
NationsBank of Georgia (formerly The Citizens and
Southern National Bank) dated July 14, 1989 were filed as
Exhibit 10(t) to the company's Form 10-K, filed on July
27, 1994, and are incorporated herein by reference.
10(o) Amendment to Lease dated as of November 4, 1994, by
and between the company and RDC, Inc. was filed as
Exhibit 10(w) to the company's Form 10-Q, for the quarter
ended January 29, 1995, filed on March 15, 1995, and is
incorporated herein by reference.
II-4
<PAGE>
10(p) Amendment to Lease Agreement dated as of December 14,
1994, by and between the company and Rossville
Investments, Inc. (formerly known as A & E Leasing, Inc.).
was filed as Exhibit 10(y) to the company's Form 10-Q, for
the quarter ended January 29, 1995, filed on March 15,
1995, and is incorporated herein by reference.
10(q) Interest Rate Swap Agreement between company and First
Union National Bank of North Carolina dated April 17,
1995, was filed as Exhibit 10(aa) to the company's Form
10-K for the year ended April 30, 1995, filed on July 26,
1995, and is incorporated herein by reference.
10(r) Performance-Based Stock Option Plan, dated June 21,
1994, was filed as Exhibit 10(bb) to the company's Form
10-K for the year ended April 30, 1995, filed on July 26,
1995, and is incorporated herein by reference.
10(s) Interest Rate Swap Agreement between company and First
Union National Bank of North Carolina, dated May 31,
1995 was filed as exhibit 10(w) to the company's Form
10-Q for the quarter ended July 30, 1995, filed on
September 12, 1995, and is incorporated herein by
reference.
10(t) Interest Rate Swap Agreement between company and First
Union National Bank of North Carolina, dated July 7, 1995
was filed as exhibit 10(x) to the company's Form 10-Q for
the quarter ended July 30, 1995, filed on September 12,
1995, and is incorporated herein by reference.
10(u) 1995 Amended and Restated Credit Agreement by and
among Culp, Inc., First Union National Bank of North
Carolina and Wachovia Bank of North Carolina, N.A.,
dated July 1, 1995 was filed as exhibit 10(y) to the
company's Form 10-Q for the quarter ended July 30, 1995,
filed on September 12, 1995, and is incorporated herein by
reference.
10(v) Copy of Second Amendment of Lease Agreement dated June
15, 1994 with Partnership 74 Associates.
10(w) Copy of Lease Agreement dated November 1, 1993 by and
between the company and Chromatex, Inc.
10(x) Copy of Lease Agreement dated November 1, 1993 by and
between the company and Chromatex Properties, Inc.
II-5
<PAGE>
10(y) Copy of Amendment to Lease Agreement dated May 1,
1994 by and between the company and Chromatex
Properties, Inc.
10(z) Copy of Canada-Quebec Subsidiary Agreement on Industrial
Development (1991), dated January 4, 1995.
27 Financial Data Schedule.
</TABLE>
(B) REPORTS ON FORM 8-K:
The following report on Form 8-K was filed during the period covered by
this report:
(1) Form 8-K dated August 11, 1995, included under Item 5, Other Events,
disclosure of the company's press release for quarterly earnings and
the company's Financial Information Release relating to the
financial information for the first quarter ended July 30, 1995.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CULP, INC.
(Registrant)
Date: December 12, 1995 By: s/s Franklin N. Saxon
--------------------- -------------------------------
Franklin N. Saxon
Vice President and
Chief Financial Officer
(Authorized to sign on behalf
of the registrant and also
signing as principal
accounting officer)
Date: December 12, 1995 By: s/s Stephen T. Hancock
---------------------- -------------------------------
Stephen T. Hancock
General Accounting Manager
(Chief Accounting Officer)
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit Article
<C> <C>
10(v) Second Amendment of Lease Agreement dated June 15, 1994
with Partnership 74 Associates
10(w) Lease Agreement dated November 1, 1993 by and between the
company and Chromatex, Inc.
10(x) Lease Agreement dated November 1, 1993 by and between the
company and Chromatex Properties, Inc.
10(y) Amendment to Lease Agreement dated May 1,
1994 by and between the company and
Chromatex Properties, Inc.
10(z) Canada-Quebec Subsidiary Agreement on Industrial
Development (1991), dated January 4, 1995.
</TABLE>
NORTH CAROLINA
SECOND AMENDED MEMORANDUM OF LEASE
ALAMANCE COUNTY
THIS SECOND AMENDED MEMORANDUM OF LEASE is executed this 15th day of
June, 1994, under the pursuant to the terms and provisions of North Carolina
General Statue ss.47-117 ff. between PARTNERSHIP 74 ASSOCIATES, a North Carolina
general partnership (the "Landlord") and CULP, INC.
(the "Tenant").
WITNESSETH:
WHEREAS, the Landlord and Tenant are parties to a lease agreement dated
September 6, 1988, (the "Lease") a Memorandum of which is recorded in Book 555,
Page 528, Alamance County Registry and an amendment which is recorded in Book
781, Page 488, Alamance County Registry; and
WHEREAS, the Landlord and Tenant have entered into a First Amendment to
Lease dated July 27, 1992 and a Second Amendment to Lease dated June 15, 1994,
which amends certain provisions of the lease:
THEREFORE, the parties amend the Memorandum of Lease as follows:
1. The term of the Lease, including extensions and renewals,
continues until September 30, 2011.
2. The provisions set forth in the written lease agreement between the
parties dated September 6, 1988, as amended on July 27, 1992 and as amended on
June 15, 1994, are hereby incorporated by reference in this Second Amended
Memorandum of Lease.
LANDLORD:
PARTNERSHIP 74 ASSOCIATES, a North Carolina
general partnership
By: Robert G. Culp, III (SEAL)
Robert G. Culp, III
Managing General Partner
TENANT:
CULP, INC.
By: Franklin N. Saxon (SEAL)
Franklin N. Saxon
Vice President
<PAGE>
<PAGE>
LEASE AGREEMENT
THIS INDENTURE OF LEASE, made and entered into by and
between CHROMATEX, INC., a corporation organized and existing under
the laws of the State of New Jersey (hereinafter referred to as the
"Lessor"), and CULP, INC., a corporation organized and existing
under the laws of the State of North Carolina (hereinafter referred
to as the "Lessee").
W I T N E S S E T H:
THAT FOR AND IN CONSIDERATION of the payment of the rent
and mutual covenants herein contained, Lessor does hereby lease,
demise, and let unto Lessee and Lessee does hereby hire and take
from Lessor the real property described on the attached Exhibit A,
located in Luzenne County, Pennsylvania.
The property described on the attached Exhibit A is
herein referred to as the "Premises."
1. TERM AND OPTION TO RENEW. The term of this lease
shall be for a period of three (3) years, commencing on November 1,
1993 and terminating on October 31, 1996 at 12:00 P.M.
Lessee shall have options to extend this lease for four
(4) additional terms of three (3) years each, which options must be
exercised by Lessee in writing at least six (6) months prior to the
expiration of the term preceding the term for which the option is
being exercised. Notice of exercise of an option shall be
effective when received or when deposited in the United States
Mail, postage prepaid, correctly addressed and sent certified,
return receipt requested. If Lessee exercises the first three (3)
year option, the rent payable and the other terms of the lease
shall be the same as during the initial term of the lease.
If the option to exercise the Lease for the second three
(3) year period beginning six (6) years from the date of this Lease
is exercised, the rent beginning on the date which is six (6) years
after the date of this Lease (the "First Adjustment Date"), shall
be increased in a proportion reflecting the total increase in the
Consumer Price Index for the preceding six-year period, which
increase shall be calculated as follows: multiply the initial
<PAGE>
rental rate by a fraction, the numerator of which is the Consumer
Price Index, United States -- All Items for All Urban Consumers for
November 1, 1999 and the denominator of which is such index figure
on the same basis for November 1, 1993.
If the Lessee exercises its option for the third three
(3) year option period beginning nine (9) years from the date of
this Lease, the rent payable for such three (3) year period
beginning on the date which is nine (9) years from the date of this
Lease (the "Second Adjustment Date"), and effective for the
succeeding three (3) year period, shall be increased in a
proportion reflecting the total increase in the Consumer Price
Index for the preceding three-year period, which increase shall be
calculated as follows: multiply the rental rate beginning on the
First Adjustment Date by a fraction, the numerator of which is the
Consumer Price Index, United States -- All Items for All Urban
Consumers for November 1, 2002 and the denominator of which is such
index figure on the same basis for November 1, 1999.
If the Lessee exercises its option for the fourth three
(3) year option period beginning 12 years from the date of this
lease, the rent payable for such three year period beginning on the
date which is twelve (12) years from the date of this lease (the
"third adjustment date"), and effective for the succeeding three
(3) year period, shall be increased in the-proportion reflecting
the total increase in the Consumer's Price Index for the preceding
three (3) year period, which increase shall be calculated as
follows: multiply the rental rate beginning on the Second
Adjustment Date by a fraction, the numerator of which is the
Consumer's Price Index, United States--all items for all urban
consumers for November 1, 2005 and the denominator of which is such
index figure on the same basis for November 1, 2002.
2. RENT. Lessee shall pay rent of Twelve Thousand Five
Hundred Dollars ($12,500.00) a month to Lessor for the term of this
lease. The first installment of rent shall be paid on the
commencement date hereof, and shall be payable on the 1st day of
each month during the term of this lease.
<PAGE>
3. QUIET POSSESSION. Lessor warrants and covenants that
it has full legal rights to lease the Premises and that Lessee, on
payment of the rent herein provided and performing the covenants
and conditions herein contained, shall have quiet and peaceful
possession of the Premises during the lease term and any renewals
or extensions thereof.
4. CONDITIONS OF PREMISES. Lessee hereby acknowledges
that it has inspected and is acquainted with the Premises and
hereby accepts the same in their present condition.
5. REPAIR. Lessor shall keep the roof, outside walls
and foundations of the building on the Premises in a good state of
repair at its expense, except for damage caused by Lessee;
provided, however, Lessor shall have no liability whatsoever for
any failure or delay in making repairs if such failure or delay is
due in whole or in part to any cause beyond its reasonable control,
unless it is guilty of gross negligence or willful misconduct.
Should Lessor fail to make any such repair, Lessee may, at its
election, but shall not be obligated so to do, by giving Lessor not
less than 30 days notice in writing of its intent so to do, make
such repairs, provided the cost thereof does not exceed the lesser
of $15,000 or the amount of rent payable during the remainder of
the term hereof; and any amounts paid by Lessee for such purposes
shall be deemed an advance payment of the monthly installment or
installments of rent next becoming due and shall offset the same.
Lessee shall, at its expense, keep all other aspects of the
premises, heating and air conditioning in a reasonably good state
of repair and agrees that it will quit and peaceably surrender the
Premises, heating and air conditioning to Lessor in a good and
substantial state of repair upon termination hereof, whether by
lapse of time or otherwise, normal wear and tear and damage by fire
or other casualty excepted.
6. REMODELING. Lessee shall not make any improvements,
remodeling, alterations or structural changes to the Premises
without the written consent of Lessor, which consent shall not be
unreasonably withheld.
<PAGE>
7. INSURANCE. Lessee, at its expense, shall carry such
fire and casualty insurance on the Premises in amounts as is
necessary to provide full replacement and cost coverage and from
companies licensed in Pennsylvania. Lessor and Lessee further
mutually agree to waive any and all claims which one may have
against the other for any losses paid to them under a policy or
policies insuring the Premises or its contents and will obtain
waivers of subrogation from their respective insurers. Lessor
shall be named as an additional insured on such policy or policies.
The above policy may be furnished by Lessee under any blanket
policy carried by Lessee or by separate policy. Lessee shall prior
to the beginning of the term of this lease, provide Lessor with
evidence that such insurance is in effect. The evidence of
insurance provided by Lessor to Lessee shall contain a provision
that such insurance shall not be canceled without at least ten (10)
days prior written notice being furnished by the insurer to Lessor.
Lessee shall also carry, at its own expense, such insurance on the
contents of the building as Lessee deems necessary.
8. LIABILITY INSURANCE. Lessee agrees, at its own
expense, to carry comprehensive General Liability Insurance in an
amount not less than $1,000,000.00 for injuries to any one person,
not less than $2,000,000.00 for injuries to more than one person,
and $1,000,000.00 for property damage arising out of any one
occurrence issued by a company licensed in Pennsylvania and to have
Lessor named as an additional insured on such policy or policies.
Lessee shall, prior to the beginning of the term of this lease,
provide Lessor with proof that such insurance is in effect. The
evidence of insurance provided by Lessor to Lessee shall contain a
provision that such insurance shall not be canceled without at
least ten (10) days prior written notice being furnished by the
insurer to Lessor. Lessee hereby assumes all risk and liability
which, but for this paragraph, might be imposed upon Lessor for
loss of life or injury to persons or property as the result of
Lessor's interest in the Premises, the terms of this lease, for the
manifest condition of the Premises, or from the maintenance,
<PAGE>
repair, lack of maintenance, lack of repair, alteration, remodeling
or construction on the Premises, and agrees to indemnify and save
harmless Lessor from such liability. Notwithstanding the
foregoing, Lessee shall not be liable for nor indemnify nor save
Lessor harmless from liability for the acts or omissions of Lessor
or its agents, contractors or employees, and Lessor shall indemnify
and save Lessee harmless from such liability. Lessee shall keep
such other insurance, including fire and other property insurance
on its equipment and inventory, as it may deem necessary.
9. INDEMNIFICATION OF LESSOR. Lessee will indemnify
Lessor and save it harmless from and against any and all claims,
actions, damages, liability and expense in connection with loss of
life, personal injury and/or property damage arising out of any
occurrence in, upon or at the leased Premises; or the occupancy or
use by Lessee of the leased Premises or any part thereof or
occasioned wholly or in part by any act or omission of Lessee, its
agents, contractors, licensees, invitees, employees or servants.
Notwithstanding the foregoing, Lessee shall not be liable for nor
indemnify nor save Lessor harmless from liability for the acts or
omissions of Lessor or its agents, contractors or employees, and
Lessor shall indemnify and save Lessee harmless from such
liability. The parties mutually agree that this paragraph shall
not grant an insurer the right of subrogation waived as required by
Paragraph 7 hereof.
10. EQUIPMENT REMOVAL. Lessee shall have the right to
install, own, and maintain any fixtures, furniture, equipment or
other personal property on the Premises which it deems necessary to
use in the operation of its business, and Lessor agrees that upon
expiration of this lease, Lessee may remove the same provided such
removal can be effected without damage to the Premises or any
damage to the Premises by such removal is repaired by Lessee at its
expense.
11. UTILITIES. All utilities shall be furnished and
paid for by Lessee.
<PAGE>
12. USE OF PREMISES. Lessor agrees that Lessee may use
the Premises for any lawful purpose. Lessee agrees that it will
not occupy or use the Premises nor permit the same to be used or
occupied for any business that is unlawful, and that it will comply
with and abide by all lawful requirements of Municipal, State, and
Federal authorities respecting the manner in which it uses the
Premises.
13. ASSIGNMENT AND SUBLETTING. Lessee shall have the
right to sublet any or all of the Premises, however the subletting
of any space shall not relieve Lessee from its obligations
hereunder.
14. EVENTS OF DEFAULT. Each of the following shall be
an event of default hereunder:
a. Default in the payment of rent or other payments
due hereunder which default continues for a period of ten (10) days
after receipt of written notice of such default by Lessee;
b. If Lessee shall fail to perform or observe any
other covenant or condition of this lease to be performed or
observed by Lessee, and such failure continues for a period of
thirty (30) days after receipt of written notice thereof by Lessee;
provided that, if such default cannot be cured in thirty (30) days,
Lessee shall not be in default if Lessee commences cure in such
period and thereafter pursues the same diligently to completion;
c. If Lessee abandons or vacates the Premises;
d. If Lessee should make an assignment for the
benefit of creditors;
e. Provided Lessee does not contest or
unsuccessfully contest the same, the filing, execution or
occurrence of:
i. a petition in bankruptcy by or against Lessee
ii. a petition or answer seeking a
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or other relief of the same or different
kind under any provision of the Bankruptcy Act;
<PAGE>
iii. adjudication of Lessee as a bankrupt or
insolvent;
iv. a petition or other proceeding by or
against Lessee for, or the appointment of, a trustee receiver,
guardian, conservator or liquidator of Lessee with respect to all or a
substantial part of its property or the leased Premises;
v. a petition or other proceeding by or
against Lessee for its dissolution or liquidation, or the taking or
possession of the property of Lessee by any governmental authority
in connection with the dissolution or liquidation of Lessee other
than as a result of a tax-free reorganization as said term is
defined by the Internal Revenue Code; or
vi. the taking by any person, firm, or
corporation of the leasehold created hereby or any part thereof by
execution, attachment or other process of law or equity except as
otherwise provided herein.
15. REMEDIES ON DEFAULT. Upon an occurrence of an event
of default, Lessor may, at its election, in addition to any other
remedy or right provided herein or by law, immediately or at any
time after the occurrence of any event of default, and without
notice or demand but with such due process of law as is required,
enter upon the Premises or any part thereof and upon such entry
this lease shall terminate; provided however, no such entry,
resumption or possession, termination, or any reletting of the
Premises shall be deemed to be an acceptance or surrender of this
lease or a waiver of the rights of Lessor hereunder unless Lessor
so elects. Acceptance of payment of rentals by Lessor after such
entry or termination shall not be considered a confirmation or
renewal of this lease.
16. RELETTING. Upon termination of this lease as above
provided, Lessor shall use reasonable efforts to relet the
Premises. Lessor shall be deemed to have used reasonable efforts
if it leases the whole or any part of the premises, separately or
with other premises for any period equal to or less than, or
extending beyond, the remainder of the original term; for any
<PAGE>
commercially reasonable sum or to any tenant or for any use it
reasonably deems satisfactory or appropriate, and refusal to let to
any use not expressly permitted under any paragraph or section of
this lease shall not be, deemed to be an unreasonable act on behalf
of Lessor. Any rentals collected by Lessor upon such reletting
shall first be applied to the reasonable expenses incurred by
Lessor in such reletting (not including costs of refitting or new
construction) and then to offset the liability of Lessee hereunder;
provided, however, Lessor shall be entitled to retain without
liability to Lessee any sums in excess of the liability of Lessee
to Lessor.
17. EMINENT DOMAIN. The parties mutually agree that in
the event the whole or any part of the Premises shall be taken for
any public or quasi-public use under any statute, or by right of
eminent domain, or by private purchase and conveyance in lieu
thereof, or in connection therewith, any compensation shall be paid
to Lessor and Lessee separately, as their respective interests and
rights are established, and in the event Lessee determines that the
leased property remaining after such taking or conveyance is
insufficient to continue its business, this agreement shall
terminate at the exclusive judgment and determination of Lessee.
Lessor agrees that if Lessee elects to continue this agreement
after such a partial taking or conveyance, Lessor shall repair and
restore the premises as nearly as possible to the condition that
existed prior to such taking and a pro rata abatement of rent for
the balance of the term of this agreement shall be effective as of
the date of such taking. The parties further mutually agree that
in the event of a substantial taking during the last six (6) months
of the term hereof, Lessor shall have no obligation to restore
unless Lessee has exercised any remaining extension option and has
waived its right to terminate hereunder, and in any event, Lessor
shall not be required to expend an amount for the restoration which
is greater than the compensation award it receives.
<PAGE>
18. HOLDOVER TENANCY. In the event Lessee continues to
occupy the Premises upon termination hereof, whether by lapse of
time or otherwise, such tenancy shall be deemed to be a tenancy
from month to month and either party may terminate the same by
giving the other thirty (30) days written notice of termination.
19. NOTICE. All notices or communications required or
permitted to be given hereunder shall be in writing and shall be
mailed or delivered to the respective addresses set forth below, or
to such other address as may be designated in writing by the party
to receive such notice.
To Lessor as follows:
Mr. Ronald W. Satterfield
Chromatex, Inc.
P. 0. Box 40
Rossville, Georgia 30741
With a copy to:
John C. Mooney, Esquire
Heiskell, Donelson, Bearman, Adams,
Williams & Caldwell, P.C.
1800 Republic Centre
Chattanooga, Tennessee 37450-1800
To Lessee as follows:
Mr. Frank Saxon
P. 0. Box 2686
101 South Main Street
High Point, North Carolina 27261
With a copy to:
Hank Ralston, Esquire
Robinson, Bradshaw & Hinson, P.A.
1900 Independence Center
101 North Tryon Street
Charlotte, North Carolina 28246
20. SEPARABILITY. The parties mutually agree that each
and every covenant and agreement contained in this agreement shall
for all purposes be construed to be a separate and independent
covenant and agreement, and a breach of any covenant or agreement
herein by either party shall in no way or manner discharge or
relieve the other party from its obligation to perform each and
every covenant and agreement herein. The parties further mutually
agree that if any provision hereof or any remedy herein provided
for shall be invalid under any applicable law, such provision shall
be inapplicable and deemed omitted but the remaining provisions
<PAGE>
hereof, in accordance with the manifest intent hereof shall be
valid and enforceable to the fullest extent permitted by law.
21. WAIVER. Either party may, in its discretion, from
time to time in writing, signed by the party to be charged grant
indulgences, extensions, dispensations or other privileges to the
other with respect to any requirement or provision of this
agreement, but no such indulgence, extension, dispensation, waiver
or omission of either party shall, or shall be construed to have
affected any implied amendment hereto or to have established a
custom or practice binding such party or to be a waiver of any
requirement or provision in the future or an acquiescence to any
future default, nor prevent the strict enforcement of any provision
hereto at any other time.
22. INSPECTION. Lessor or Lessor's agents shall have
the right to enter upon the Premises at all reasonable times to
examine the same; provided, however, such examination and
inspection of the Premises shall be done in a manner which will not
interfere with the business of Lessee and, except in emergencies,
shall be allowed only after reasonable advance notice and only
during regular business hours. During the last ninety (90) days of
the term of this agreement, Lessor shall be permitted to affix a
"For Lease" or "For Sale" sign on the Premises and to show the same
to prospective purchasers or tenants provided such placing and
showing shall not interfere with the business of Lessee.
23. ENTIRE AGREEMENT. This lease contains the entire
agreement of the parties hereto and no representations,
inducements, promises or agreements, oral or otherwise, between the
parties not embodied herein, shall be of any force or effect.
24. APPLICABLE LAW. It is mutually agreed that this
agreement shall be construed in accordance with the laws of the
State of Pennsylvania.
25. CAPTIONS. The captions are inserted herein only as
a convenience and for reference and in no way define, limit, or
describe the scope of this agreement nor the intent of any
provisions hereof.
<PAGE>
26. TAXES. Lessee shall pay all real property taxes on
the Premises. For the first year of the Lease, Lessee shall pay
only the portion of the taxes for 1993 for November and December of
1993 and the balance of 1993 property taxes shall be paid by
Lessor. The amount payable for such taxes for 1993 shall be
payable by Lessee to Lessor and Lessor shall pay the taxing
authorities for 1993 taxes prior to delinquency. Such taxes for
1993 shall be paid by Lessee to Lessor on or before December 15,
1993. The amount payable for taxes for all of the years of the
leases which shall include the option period if the lease is
extended shall be paid by Lessee to Lessor by December 15th of each
year except that the taxes payable by Lessee for the last year of
the lease which shall be property taxes for ten (10) months of such
year shall be paid on or before the last date of the lease, and
Lessor shall pay the taxing authority for the taxes prior to
delinquency.
27. SUCCESSORS AND ASSIGNS. The covenants,
stipulations, agreements, and conditions herein shall inure to the
benefit of and shall be binding upon the successors and assigns of
the respective parties hereto, subject to all the terms, conditions
and contingencies herein set forth. Provided, however, that this
lease cannot be assigned by Lessee without the prior written
consent of Lessor, which consent shall not be unreasonably
withheld. Furthermore, in the event of an assignment, Lessee shall
continue to be liable pursuant to the terms of this lease.
28. DAMAGES TO PREMISES. If all or a portion of the
Premises are rendered untenable or damaged by any casualty, the
damage shall be repaired forthwith by and at the expense of Lessor.
Except as set forth herein below, until such repairs are completed,
the rent shall be abated in proportion to the part of the Premises
which is unusable by Tenant in the conduct of business.
No damages, compensation or claims shall be payable by
Lessor for inconvenience, loss of business or annoyance arising
from any repair or restoration of any portion of the Premises.
Lessor shall use its best efforts to effect such repair or
<PAGE>
restoration promptly and in such a manner as to not unreasonably
interfere with Lessor's use and occupancy.
A total destruction of the Premises in the last two (2)
years of the lease term shall automatically terminate this Lease
Agreement unless Lessee exercises at least one (l) remaining
extension option within sixty (60) days after such destruction.
Lessor shall not be required to expend more for the
restoration of the damage to the premises than the amount of
insured proceeds received by Lessor.
Lessor shall not be obligated to repair any damage to any
portion of Lessee's personal property located on the Premises.
29. OFF-SET STATEMENTS AND MORTGAGE SUBORDINATION.
Within fifteen (15) days after a request therefor by either party,
or in the event that upon any sale, assignment or hypothecation of
the Premises by Lessor or Lessee an off-set statement shall be
required from the other party, said party agrees to deliver a
certificate to any proposed mortgagee, purchaser or assignee, or to
Lessor or Lessee, certifying (if such be the case) that this Lease
is in full force and effect and that there are no defenses or off-
sets thereto, or stating those claimed by Lessee or Lessor.
Lessee shall, upon the request of the Lessor, in writing,
subordinate this Lease and the lien hereof from time to time to the
lien of any future mortgage to a bank, insurance company or similar
financial institution, irrespective of time of execution or time of
recording of such mortgage or mortgages, provided the holder of
such mortgage shall enter into an agreement with Tenant, in
recordable form, which, in substance, shall provide that, in the
event of foreclosure or other right asserted under the mortgage by
the holder or assignee thereof, this Lease and the right of Lessee
hereunder shall continue in full force and effect and shall not be
terminated or disturbed except in accordance with the provision of
this Lease. Such mortgage holder shall further agree to make
casualty insurance proceeds available for restoration, as required
hereunder. Lessee shall, if requested by the holder of any such
mortgage, be a party to said agreement, and shall agree in
<PAGE>
substance that if the mortgagee or other person claiming under such
mortgage shall succeed to the interest of Lessor, Lessee shall
recognize and attorn to such mortgagee or person as its Landlord
under the terms of this Lease. Lessee agrees that Lessee shall,
upon the request of Lessor, execute, acknowledge and deliver any
and all instruments necessary to effectuate, or to give notice of
such subordination. The word "mortgage" as used herein includes
mortgages, deeds of trust, similar instruments and modifications,
consolidations, extensions, renewals, replacements of substitutions
therefor.
30. HAZARDOUS MATERIAL. With respect to any Hazardous
Materials which Lessee, its agent or, employees, may use, handle,
store or generate in the conduct of Lessee's business at the
Demised Premises, Lessee covenants and agrees that:
a. it will comply with all applicable Environmental
Laws which relate to the treatment, storage, transportation and
handling of Hazardous Materials.
b. it will in no event permit or cause any disposal
of any Hazardous Materials in, on or about the Demised Premises and
in particular will not deposit any Hazardous Materials in, on or
about the floor of the Building or in any drainage system or in the
trash containers which are customarily used for the disposal of
solid waste;
c. with respect to any off-site disposal, shipment,
storage, recycling or transportation of any Hazardous Materials, it
will properly package the Hazardous Materials and shall cause to be
executed, duly filed and retained all records required by
applicable Environmental Laws;
d. it will at all reasonable times after prior
written notice during reasonable hours, permit Lessor or its agents
or employees to enter the Demised Premises to inspect the same for
compliance with the terms of this Section; and
e. upon the termination of this Lease, it will, at
its expense, remove all Hazardous Materials from the Demised
<PAGE>
Premises which were placed on the Demised Premises by Lessee and
otherwise comply with all applicable Environmental Laws.
In the event that Lessee fails to comply with any of the
provisions contained in this Section, Lessee agrees to hold
harmless and indemnify Lessee from and against any and all claims,
loss, costs, damages and expenses, including reasonable attorneys'
fees, which may arise in connection therewith. The obligations of
Lessee under the terms of the previous sentence shall not be
effective, however, in the event that any such non-compliance
results from, or to the extent such non-compliance is attributable
to, the acts, omissions or negligence of Lessor or Lessor's agents,
employees or contractors. The terms of this Section shall
expressly survive the expiration or earlier termination of this
Lease.
"Environmental Laws" means any and all federal, state,
local or municipal environmental, land use, zoning, health,
chemical use, safety and sanitation laws, rules, orders,
regulations, statutes, ordinances, codes, decrees or requirements
of any governmental authority regulating, relating to or imposing
liability or standards of conduct concerning any Hazardous
Material, as not or may at any time hereafter be in effect relating
to the protection of the environment and/or governing the use,
storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Materials, including,
without limitation, the Clean Water Act (also known as the Federal
Water Pollution Control Act) ("FWPCA"), 33 U.S.C. Section 1251 et
seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section
2601 et seq., the Clean Air Act ("C"), 42 U.S.C. Section 7401 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act
("FIFRA"), 7 U.S.C. Section 136 et seq., the Safe Drinking Water
Act ("SDWA"), 42 U.S.C. Section 300f et seq., the Surface Mining
Control and Reclamation Act ("SMCRA"), 30 U.S.C. Section 1201 et
seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the
Superfund Amendment and Reauthorization Act of 1986 ("SARA"),
<PAGE>
Public Law 99-499, 100 Stat. 1613, the Emergency Planning and
Community Right to Know Act ("EPCA"), 42 U.S.C. Section 1101 et
seq., the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. Section 6901 et seq., the Occupational Safety and Health Act
as amended ("OSHA") 29 U.S.C. Sections 655 and 657, any other
Environmental Law together with amendments thereto, regulations
promulgated thereunder and all substitutions thereof, rules,
regulations, policies, guidelines, interpretations, decisions and
directives of federal, state and local governmental agencies and
authorities with respect thereto.
"Hazardous Material" means, without limitation, any
flammables, explosives, radioactive materials, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum, petroleum
products, methane, hazardous materials, hazardous wastes, hazardous
or toxic substances or related materials as defined in CERCLA, the
Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), the RCRA, the TSCA, or any other
Environmental Law or the regulations promulgated thereunder and
substitutions thereof as are now or hereafter in effect. Such term
also means any other waste, substance or material that exhibits any
of the characteristics enumerated in 40 C.f.R. Sections 261.20-
261.24, inclusive, and those extremely hazardous substances listed
under Section 302 of SARA that are present in threshold planning or
reportable quantities as defined under SARA and toxic or hazardous
chemical substances that are present in quantities that exceed
exposure standards as those terms are defined under Sections 6
and/or 8 of OSHA, Radon and any asbestos or asbestos-containing
substances whether or not the same are defined as hazardous, toxic,
dangerous waste, a dangerous substances or dangerous material or
gas in any Environmental Law.
<PAGE>
31. ATTORNEYS' FEES. If any party to this Lease
Agreement must engage the services of an attorney to enforce the
provisions of this Agreement, the attorneys' fees of the prevailing
party shall be paid by the non-prevailing party.
IN TESTIMONY WHEREOF, the Lessor and Lessee have executed
this Lease Agreement on this the 1st day of November, 1993.
CHROMATEX, INC.
By: (Signature of Ronald W. Satterfield)
LESSOR
CULP, INC.
By: (Signature of Franklin M. Saxon)
VP & CFO LESSEE
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, Kimberly A. Langstaff, a Notary Public in
and for the State and County aforesaid, personally appeared
Ronald W. Satterfield, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon
oath, acknowledged himself to be the Executive Vice President of
Chromatex, Inc., the within named bargainor, a corporation, and
that he as such Executive Vice President, being duly authorized so
to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as
such Executive Vice President.
WITNESS my hand and seal at office, on this the 1st day
of November, 1993.
Kimberly A. Langstaff
Notary Public
My Commission Expires: 11/5/97
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, Kimberly A. Langstaff, a Notary Public in
and for the State and County aforesaid, personally appeared
Franklin N. Saxon, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon
oath, acknowledged himself to be the Vice President & CFO of
Culp, Inc., the within named bargainor, a corporation, and that he
as such Vice President & CFO, being duly authorized so to do,
executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as
such Vice President & CFO.
WITNESS my hand and seal at office, on this the 1st day
of November, 1993.
Kimberly A. Langstaff
Notary Public
My Commission Expires: 11/5/97
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
A11 those pieces or parcels of land located in Valmont
lndustrial Park, Hazle Township, Luzerne County, Commonwealth of
Pennsylvania, bounded and described as follows, to wit:
PARCEL ONE
BEGINNING at a point in the eastern side of a sixty (60')
wide road, known as Jaycee Drive, said point being the following
three (3) courses and distances from the set stone marking the
northwest corner of Mary Kunkle Tract: (1) South Eighty-Four
degrees One minute West (S. 84- 01'W) Two Hundred Sixty-Four and
Three-Hundredths (264.03) feet; (2) South Thirty-Six degrees
Fifteen minutes West (S. 36-15'W) Seven Hundred Eighteen and
Twenty-Four Hundredths (718.24') feet; (3) South Fifty-Three
degrees Forty-Five minutes East (S. 53-45'E) Thirty (30') feet to
the place of BEGINNING.
THENCE South Fifty-Three degrees Forty-Five minutes East
(S. 53-45'E) through and along a north line of lands, now or late
of Greater Hazleton Community-Area New Development Organization,
Inc. Four Hundred Seventy-Five 475') feet to a corner of lands,
now or late of Greater Hazleton Community-Area New Development
Organization, Inc.;
THENCE South Thirty Six degrees Fifteen minutes West
(S.36- 15'W) along line between lands, now or late of Greater
Hazleton Community-Area New Development Organization, Inc. and
Oakmount, Inc. formerly the Valmont Golf Association, Inc. Five
Hundred Fifty (550') feet to a common corner between lands, now or
late of Greater Hazleton Community-Area New Development Organiza-
tion, Inc. and said Oakmount, Inc., formerly the Valmont Golf
Association, Inc.;
THENCE North Fifty-Three degrees Forty-Five minutes West
(N. 53 45'W) through lands, now or late of Greater Hazleton
Community-Area New Development Organization, Inc. and line dividing
Site 26 and 27, Four Hundred Seventy-Five (475') feet to the East
side of above mentioned Sixty (60') foot wide road, known as Jaycee
Drive;
THENCE North Thirty-Six degrees Fifteen minutes East (N.
36-15'E) along east side of said Sixty (60') foot wide road, known
as Jaycee Drive Five Hundred Fifty (550') feet to the place of
BEGINNING.
CONTAINING Six (6) acres more or less excepting therefrom a
right-of-way granted to the Hazleton City Authority on July 14,
1964 for a 12" water transmission line across the northerly portion
of the above described parcel of land. The aforesaid right-of-way
is more particularly set forth in a Grant of Easement dated the
14th day of July, 1964, between the Greater Hazleton Community-area
New Development Organization, Inc. and the Hazleton City Authority,
which Grant of Easement is recorded in the Recorder of Deeds Office
in and for Luzerne County in Deed Book 1549, Page 814, and which
Grant provides, inter alia, on Page 815 of Deed Book 1549, as
follows; "The above described line being the center line for a
permanent right-of-way Or a uniform width Or twelve (12' feet, six
(6) feet on either side of the center line****".
CONTAINING a one-story general purpose industrial
building.
<PAGE>
PARCEL TWO
BEGINNING at a point in the eastern right-of-way of
Jaycee Drive, being the Northwest corner of lands, now or late of
All-Steel Equipment, Inc. and the Southwest corner of lands, now or
formerly Wallace Metal Products, Inc.
THENCE along the Northern line of lands, now or late of
All-Steel Equipment, Inc. South fifty-three degrees forty-five
minutes East (S. 53- 45'E) for a distance of one thousand feet
(1,000.00') to a point in the P.P. & L. Co. right-of-way;
THENCE along the West right-of-way line of the P.P. & L.
Co. South thirty-six degrees fifteen minutes West (S. 36- 15'W) for
a distance of forty feet (40') to a point;
THENCE through the lands, now or late of All-Steel
Equipment, Inc., North fifty-three degrees forty-five minutes West
(N.53- 45'W) for a distance of one thousand feet (1,000.00') to a
point in the East right-of-way of Jaycee Drive;
THENCE along the east side of Jaycee Drive North Thirty-
Six degrees fifteen minutes East (N.36- 15'E) for a distance of
forty feet (40.00') to a point and the place of beginning.
CONTAINING Ninety-Two one-hundredths (0.92) acres.
PARCELS ONE AND TWO BEING the same premises conveyed to the Valmont
Group, a General Partnership composed of Alan H. Cherenson, Stanley
Siegel, Charles Gochenaur, Alan Shulman, James Cochrane and Joseph
D. Byrnes, Co-partners, by deed of Greater Hazleton Community-Area
New Development Organization, Inc., dated July 11, 1978 and
recorded July 11, 1978 in Luzerne County Deed Book Volume 1961 at
page 277 and re-recorded on January 19, 1979 in Deed Book Volume
1980 at page 19. AND THE SAID Charles Gochenaur assigned all of
his right, title and interest as partner in and to The Valmont
Group to the remaining partners by Assignment of Interest in
Partnership dated January 31, 1986.
ASSESSMENT PLATE 26-2-1314-2-D3-D1-D2-1
Map n/k/a Pin NO. T7S7-B1-L4
EXCEPTING OUT OF THE PROPERTY GRATED HEREIN the following parcel,
which The Valmont Group (with the consent of Chromatex, Inc.)
conveyed or are about to conveyed to Hazle Township by deed
recorded or about to be recorded in the office for the recording of
deeds in Luzerne County:
ALL THAT CERTAIN lot or piece of ground
situate in the Township of Hazle, County of
Luzerne and Commonwealth of Pennsylvania,
bounded and described as follows, to wit:
STARTING at a point on the southerly
right-of-way line of Jaycee Drive, said point
also being the northeast corner of lands of
Chromatex Incorporated;
THENCE along said lands South fifty-
three degrees, forty-five minutes East
(S53-45'E) four hundred forty-three and twen-
ty-four one-hundredths (443.24') feet to a
point, the PLACE OF BEGINNING.
THENCE continuing along said lands South
fifty-three degrees, forty-five minutes East
(S53-45E) thirty-one and seventy-six one-
hundreds (31.76') feet to a point;
THENCE along said lands South thirty-six
degrees, fifteen minutes West (S36-15'W)
ninety and twenty-three one-hundredths
(90.23') feet to a point;
<PAGE>
THENCE through the lands of Chromatex
Incorporated North three degrees, fifty-six
minutes, forty-three seconds East
(N03-56'43"E) fifty-nine and forty-three one-
hundredths (59.43') feet to a point;
THENCE through lands of the same North
thirty-six degrees, fifteen minutes East
(N36-15'E) forty (40.00') feet to a point,
the PLACE OF BEGINNING.
CONTAINING: 2,068.05 square feet.
BEING PART OF PARCEL ONE conveyed to the
Grantors herein by Deed dated January 18,
1979 and recorded in the Office of the Re-
corder of Deeds in and for Luzerne County on
January 19, 1979 in Deed Book 1980, page 19.
The Property Identification Number of the
above-described parcel is T7 001 004.
<PAGE>
LEASE AGREEMENT
THIS INDENTURE OF LEASE, made and entered into by and
between CHROMATEX PROPERTIES, INC., a corporation organized and
existing under the laws of the State of Pennsylvania (hereinafter
referred to as the "Lessor"), and CULP, INC., a corporation
organized and existing under the laws of the State of North
Carolina (hereinafter referred to as the "Lessee").
W I T N E S S E T H:
THAT FOR AND IN CONSIDERATION of the payment of the rent
and mutual covenants herein contained, Lessor does hereby lease,
demise, and let unto Lessee and Lessee does hereby hire and take
from Lessor the following described real property located in
Luzenne County, Pennsylvania more particularly being described as
follows to wit:
BEGINNING at a Brownstone Monument, said point
being common to the Henry Rope, Nicholas Rope
and John Kunkle Warrants;
THENCE along the northerly line of lands now
or formerly Can-Do, Inc. (N 84-18-30 E) for a
distance of (754.38) feet to a point on the
westerly line of a right of way known as
Kiwanis Boulevard;
THENCE along the westerly line of said right
of way (S 23-44-40 W) for a distance of
(633.58) feet to a point of intersection of
the westerly line of said Kiwanis Boulevard
and the northerly line of a right of way known
as Rotary Drive;
THENCE along the northerly line of said Rotary
Drive (S 84-09-00 W) for a distance of
(1026.65) feet to a point, said point being
the southeast corner of Site (12);
THENCE along the easterly line of said site (N
05-51-00 W) for a distance of (585 . 17) feet to
a point on the northerly line of lands now or
formerly Can-Do, Inc.;
THENCE along the northerly line of said lands
(N 84-12-00 E) for a distance of (585 . 17) feet
to a Brownstone Monument and the PLACE OF
BEGINNING.
The above described property is herein referred to as the
"Premises."
1. TERM AND OPTION TO RENEW. The term of this lease
shall be for a period of five (5) years, commencing on November 1,
1993 and terminating on October 31, 1998 at 12:00 P.M.
<PAGE>
Lessee shall have options to extend this lease for three
(3) additional terms of five (5) years each, which options must be
exercised by Lessee in writing at least six (6) months prior to the
expiration of the term preceding the term for which the option is
being exercised. Notice of exercise of an option shall be
effective when received or when deposited in the United States
Mail, postage prepaid, correctly addressed and sent certified,
return receipt requested. If Lessee exercises the first (5)
year option, the rent payable and the other terms of the lease
shall be the same as during the initial term of the lease.
If the option to exercise the Lease for the second five
(5) year period beginning ten (10) years from the date of this
Lease is exercised, the rent beginning on the date which is eleven
years after the date of this Lease (the "First Adjustment Date"),
shall be increased in a proportion reflecting the total increase in
the Consumer Price Index for the preceding ten-year period, which
increase shall be calculated as follows: multiply the initial
rental rate by a fraction, the numerator of which is the Consumer
Price Index, United States -- All Items for All Urban Consumers for
November 1, 2003 and the denominator of which is such index figure
on the same basis for November 1, 1993.
If the Lessee exercises its option for the third five (5)
year option period beginning fifteen (15) years from the date of
this Lease, the rent payable for such five (5) year period
beginning on the date which is fifteen (15) years from the date of
this Lease (the "Second Adjustment Date"), and effective for the
succeeding five (5) year period, shall be increased in a proportion
reflecting the total increase in the Consumer Price Index for the
preceding five-year period, which increase shall be calculated as
follows: multiply the rental rate beginning on the First
Adjustment Date by a fraction, the numerator of which is the
Consumer Price Index, United States -- All Items for All Urban
Consumers for November 1, 2008 and the denominator of which is such
index figure on the same basis for November 1, 2003.
<PAGE>
2. RENT. Lessee shall pay rent of Sixteen Thousand
Forty One and 67/100 Dollars ($16,041.67) a month to Lessor for the
term of this lease. The first installment of rent shall be paid on
the commencement date hereof, and shall be payable on the 1st day
of each month during the term of this lease.
3. QUIET POSSESSION. Lessor warrants and covenants that
it has full legal rights to lease the Premises and that Lessee, on
payment of the rent herein provided and performing the covenants
and conditions herein contained, shall have quiet and peaceful
possession of the Premises during the lease term and any renewals
or extensions thereof.
4. CONDITIONS OF PREMISES. Lessee hereby acknowledges
that it has inspected and is acquainted with the Premises and
hereby accepts the same in their present condition.
5. REPAIR. Lessor shall keep the roof, outside walls
and foundations of the building on the Premises in a good state of
repair at its expense, except for damage caused by Lessee;
provided, however, Lessor shall have no liability whatsoever for
any failure or delay in making repairs if such failure or delay is
due in whole or in part to any cause beyond its reasonable control,
unless it is guilty of gross negligence or willful misconduct.
Should Lessor fail to make any such repair, Lessee may, at its
election, but shall not be obligated so to do, by giving Lessor not
less than 30 days notice in writing of its intent so to do, make
such repairs, provided the cost thereof does not exceed the lesser
of $15,000 or the amount of rent payable during the remainder of
the term hereof; and any amounts paid by Lessee for such purposes
shall be deemed an advance payment of the monthly installment or
installments of rent next becoming due and shall offset the same.
Lessee shall, at its expense, keep all other aspects of the
premises, heating and air conditioning in a reasonably good state
of repair and agrees that it will quit and peaceably surrender the
Premises, heating and air conditioning to Lessor in a good and
substantial state of repair upon termination hereof, whether by
<PAGE>
lapse of time or otherwise, normal wear and tear and damage by fire
or other casualty excepted.
6. REMODELING. Lessee shall not make any improvements,
remodeling, alterations or structural changes to the Premises
without the written consent of Lessor, which consent shall not be
unreasonably withheld.
7. INSURANCE. Lessee, at its expense, shall carry such
fire and casualty insurance on the Premises in amounts as is
necessary to provide full replacement and cost coverage and from
companies licensed in Pennsylvania. Lessor and Lessee further
mutually agree to waive any and all claims which one may have
against the other for any losses paid to them under a policy or
policies insuring the Premises or its contents and will obtain
waivers of subrogation from their respective insurers. Lessor
shall be named as an additional insured on such policy or policies.
The above policy may be furnished by Lessee under any blanket
policy carried by Lessee or by separate policy. Lessee shall prior
to the beginning of the term of this lease, provide Lessor with
evidence that such insurance is in effect. The evidence of
insurance provided by Lessor to Lessee shall contain a provision
that such insurance shall not be canceled without at least ten (10)
days prior written notice being furnished by the insurer to Lessor.
Lessee shall also carry, at its own expense, such insurance on the
contents of the building as Lessee deems necessary.
8. LIABILITY INSURANCE. Lessee agrees, at its own
expense, to carry comprehensive General Liability Insurance in an
amount not less than $1,000,000.00 for injuries to any one person,
not less than $2,000,000.00 for injuries to more than one person,
and $1,000,000.00 for property damage arising out of any one
occurrence issued by a company licensed in Pennsylvania and to have
Lessor named as an additional insured on such policy or policies.
Lessee shall, prior to the beginning of the term of this lease,
provide Lessor with proof that such insurance is in effect. The
evidence of insurance provided by Lessor to Lessee shall contain a
provision that such insurance shall not be canceled without at
<PAGE>
least ten (10) days prior written notice being furnished by the
insurer to Lessor. Lessee hereby assumes all risk and liability
which, but for this paragraph, might be imposed upon Lessor for
loss of life or injury to persons or property as the result of
Lessor's interest in the Premises, the terms of this lease, for the
manifest condition of the Premises, or from the maintenance,
repair, lack of maintenance, lack of repair, alteration, remodeling
or construction on the Premises, and agrees to indemnify and save
harmless Lessor from such liability. Notwithstanding the
foregoing, Lessee shall not be liable for nor indemnify nor save
Lessor harmless from liability for the acts or omissions of Lessor
or its agents, contractors or employees, and Lessor shall indemnify
and save Lessee harmless from such liability. Lessee shall keep
such other insurance, including fire and other property insurance
on its equipment and inventory, as it may deem necessary.
9. INDEMNIFICATION OF LESSOR. Lessee will indemnify
Lessor and save it harmless from and against any and all claims,
actions, damages, liability and expense in connection with loss of
life, personal injury and/or property damage arising out of any
occurrence in, upon or at the leased Premises; or the occupancy or
use by Lessee of the leased Premises or any part thereof or
occasioned wholly or in part by any act or omission of Lessee, its
agents, contractors, licensees, invitees, employees or servants.
Notwithstanding the foregoing, Lessee shall not be liable for nor
indemnify nor save Lessor harmless from liability for the acts or
omissions of Lessor or its agents, contractors or employees, and
Lessor shall indemnify and save Lessee harmless from such
liability. The parties mutually agree that this paragraph shall
not grant an insurer the right of subrogation waived as required by
Paragraph 7 hereof.
10. EQUIPMENT REMOVAL. Lessee shall have the right to
install, own, and maintain any fixtures, furniture, equipment or
other personal property on the Premises which it deems necessary to
use in the operation of its business, and Lessor agrees that upon
expiration of this lease, Lessee may remove the same provided such
<PAGE>
removal can be effected without damage to the Premises or any
damage to the Premises by such removal is repaired by Lessee at its
expense.
11. UTILITIES. All utilities shall be furnished and
paid for by Lessee.
12. USE OF PREMISES. Lessor agrees that Lessee may use
the Premises for any lawful purpose. Lessee agrees that it will
not occupy or use the Premises nor permit the same to be used or
occupied for any business that is unlawful, and that it will comply
with and abide by all lawful requirements of Municipal, State, and
Federal authorities respecting the manner in which it uses the
Premises.
13. ASSIGNMENT AND SUBLETTING. Lessee shall have the
right to sublet any or all of the Premises, however the subletting
of any space shall not relieve Lessee from its obligations
hereunder.
14. EVENTS OF DEFAULT. Each of the following shall be
an event of default hereunder:
a. Default in the payment of rent or other payments
due hereunder which default continues for a period of ten (10) days
after receipt of written notice of such default by Lessee;
b. If Lessee shall fail to perform or observe any
other covenant or condition of this lease to be performed or
observed by Lessee, and such failure continues for a period of
thirty (30) days after receipt of written notice thereof by Lessee;
provided that, if such default cannot be cured in thirty (30) days,
Lessee shall not be in default if Lessee commences cure in such
period and thereafter pursues the same diligently to completion;
c. If Lessee abandons or vacates the Premises;
d. If Lessee should make an assignment for the
benefit of creditors;
e. Provided Lessee does not contest or
unsuccessfully contest the same, the filing, execution or
occurrence of:
<PAGE>
i. a petition in bankruptcy by or against
Lessee;
ii. a petition or answer seeking a
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or other relief of the same or different
kind under any provision of the Bankruptcy Act;
iii. adjudication of Lessee as a bankrupt or
insolvent;
iv. a petition or other proceeding by or
against Lessee for, or the appointment of, a trustee receiver,
guardian, conservator or liquidator of Lessee with respect to all
or a substantial part of its property or the leased Premises;
v. a petition or other proceeding by or
against Lessee for its dissolution or liquidation, or the taking or
possession of the property of Lessee by any governmental authority
in connection with the dissolution or liquidation of Lessee other
than as a result of a tax-free reorganization as said term is
defined by the Internal Revenue Code; or
vi. the taking by any person, firm, or
corporation of the leasehold created hereby or any part thereof by
execution, attachment or other process of law or equity except as
otherwise provided herein.
15. REMEDIES ON DEFAULT. Upon an occurrence of an event
of default, Lessor may, at its election, in addition to any other
remedy or right provided herein or by law, immediately or at any
time after the occurrence of any event of default, and without
notice or demand but with such due process of law as is required,
enter upon the Premises or any part thereof and upon such entry
this lease shall terminate; provided however, no such entry,
resumption or possession, termination, or any reletting of the
Premises shall be deemed to be an acceptance or surrender of this
lease or a waiver of the rights of Lessor hereunder unless Lessor
so elects. Acceptance of payment of rentals by Lessor after such
entry or termination shall not be considered a confirmation or
renewal of this lease.
<PAGE>
16. RELETTING. Upon termination of this lease as above
provided, Lessor shall use reasonable efforts to relet the
Premises. Lessor shall be deemed to have used reasonable efforts
if it leases the whole or any part of the premises, separately or
with other premises for any period equal to or less than, or
extending beyond, the remainder of the original term; for any
commercially reasonable sum or to any tenant or for any use it
reasonably deems satisfactory or appropriate, and refusal to let to
any person or for any use the Lessor deems objectionable, or for
any use not expressly permitted under any paragraph or section of
this lease shall not be deemed to be an unreasonable act on behalf
of Lessor. Any rentals collected by Lessor upon such reletting
shall first be applied to the reasonable expenses incurred by
Lessor in such reletting (not including costs of refitting or new
construction) and then to offset the liability of Lessee hereunder;
provided, however, Lessor shall be entitled to retain without
liability to Lessee any sums in excess of the liability of Lessee
to Lessor.
17. EMINENT DOMAIN. The parties mutually agree that in
the event the whole or any part of the Premises shall be taken for
any public or quasi-public use under any statute, or by right of
eminent domain, or by private purchase and conveyance in lieu
thereof, or in connection therewith, any compensation shall be paid
to Lessor and Lessee separately, as their respective interests and
rights are established, and in the event Lessee determines that the
leased property remaining after such taking or conveyance is
insufficient to continue its business, this agreement shall
terminate at the exclusive judgment and determination of Lessee.
Lessor agrees that if Lessee elects to continue this agreement
after such a partial taking or conveyance, Lessor shall repair and
restore the premises as nearly as possible to the condition that
existed prior to such taking and a pro rata abatement of rent for
the balance of the term of this agreement shall be effective as of
the date of such taking. The parties further mutually agree that
in the event of a substantial taking during the last six (6) months
<PAGE>
of the term hereof, Lessor shall have no obligation to restore
unless Lessee has exercised any remaining extension option and has
waived its right to terminate hereunder, and in any event, Lessor
shall not be required to expend an amount for the restoration which
is greater than the compensation award it receives.
18. HOLDOVER TENANCY. In the event Lessee continues to
occupy the premises upon termination hereof, whether by lapse of
time or otherwise, such tenancy shall be deemed to be a tenancy
from month to month and either party may terminate the same by
giving the other thirty (30) days written notice of termination.
19. NOTICE. All notices or communications required or
permitted to be given hereunder shall be in writing and shall be
mailed or delivered to the respective addresses set forth below, or
to such other address as may be designated in writing by the party
to receive such notice.
To Lessor as follows:
Mr. Ronald W. Satterfield
Chromatex Properties, Inc.
P. O. Box 40
Rossville, Georgia 30741
With a copy to:
John C. Mooney, Esquire
Heiskell, Donelson, Bearman, Adams,
Williams & Caldwell, P.C.
1800 Republic Centre
Chattanooga, Tennessee 37450-1800
To Lessee as follows:
Mr. Frank Saxon
P. 0. Box 2686
101 South Main Street
High Point, North Carolina 27261
With a copy to:
Hank Ralston, Esquire
Robinson, Bradshaw & Hinson, P.A.
1900 Independence Center
101 North Tryon Street
Charlotte, North Carolina 28246
20. SEPARABILITY. The parties mutually agree that each
and every covenant and agreement contained in this agreement shall
for all purposes be construed to be a separate and independent
covenant and agreement, and a breach of any covenant or agreement
herein by either party shall in no way or manner discharge or
<PAGE>
relieve the other party from its obligation to perform each and
every covenant and agreement herein. The parties further mutually
agree that if any provision hereof or any remedy herein provided
for shall be invalid under any applicable law, such provision shall
be inapplicable and deemed omitted but the remaining provisions
hereof, in accordance with the manifest intent hereof shall be
valid and enforceable to the fullest extent permitted by law.
21. WAIVER. Either party may, in its discretion, from
time to time in writing, signed by the party to be charged grant
indulgences, extensions, dispensations or other privileges to the
other with respect to any requirement or provision of this
agreement, but no such indulgence, extension, dispensation, waiver
or omission of either party shall, or shall be construed to have
affected any implied amendment hereto or to have established a
custom or practice binding such party.or to be a waiver of any
requirement or provision in the future or an acquiescence to any
future default, nor prevent the strict enforcement of any provision
hereto at any other time.
22. INSPECTION. Lessor or Lessor's agents shall have
the right to enter upon the Premises at all reasonable times to
examine the same; provided, however, such examination and
inspection of the Premises shall be done in a manner which will not
interfere with the business of Lessee and, except in emergencies,
shall be allowed only after reasonable advance notice and only
during regular business hours. During the last ninety (90) days of
the term of this agreement, Lessor shall be permitted to affix a
"For Lease" or "For Sale" sign on the Premises and to show the same
to prospective purchasers or tenants provided such placing and
showing shall not interfere with the business of Lessee.
23. ENTIRE AGREEMENT. This lease contains the entire
agreement of the parties hereto and no representations,
inducements, promises or agreements, oral or otherwise, between the
parties not embodied herein, shall be of any force or effect.
<PAGE>
24. APPLICABLE LAW. It is mutually agreed that this
agreement shall be construed in accordance with the laws of the
State of Pennsylvania.
25. CAPTIONS. The captions are inserted
a convenience and for reference and in no way define, limit, or
describe the scope of this agreement nor the intent of any
provisions hereof.
26. TAXES. Lessee shall pay all real property taxes on
the Premises. For the first year of the Lease, Lessee shall pay
only the portion of the taxes for 1993 for November and December of
1993 and the balance of 1993 property taxes shall be paid by
Lessor. The amount payable for such taxes for 1993 shall be
payable by Lessee to Lessor and Lessor shall pay the taxing
authorities for 1993 taxes prior to delinquency. Such taxes for
1993 shall be paid by Lessee to Lessor on or before December 15,
1993. The amount payable for taxes for all of the years of the
leases which shall include the option period if the lease is
extended shall be paid by Lessee to Lessor by December 15th of each
year except that the taxes payable by Lessee for the last year of
the lease which shall be property taxes for ten (10) months of such
year shall be paid on or before the last date of the lease, and
Lessor shall pay the taxing authority for the taxes prior to
delinquency.
27. SUCCESSORS AND ASSIGNS. The covenants,
stipulations, agreements, and conditions herein shall inure to the
benefit of and shall be binding upon the successors and assigns of
the respective parties hereto, subject to all the terms, conditions
and contingencies herein set forth. Provided, however, that this
lease cannot be assigned by Lessee without the prior written
consent of Lessor, which consent shall not be unreasonably
withheld. Furthermore, in the event of an assignment, Lessee shall
continue to be liable pursuant to the terms of this lease.
28. DAMAGES TO PREMISES. If all or a portion of the
Premises are rendered untenable or damaged by any casualty, the
damage shall be repaired forthwith by and at the expense of Lessor.
<PAGE>
Except as set forth herein below, until such repairs are completed,
the rent shall be abated in proportion to the part of the Premises
which is unusable by Tenant in the conduct of business.
No damages, compensation or claims shall be payable by
Lessor for inconvenience, loss of business or annoyance arising
from any repair or restoration of any portion of the Premises.
Lessor shall use its best efforts to effect such repair or
restoration promptly and in such a manner as to not unreasonably
interfere with Lessor's use and occupancy.
A total destruction of the Premises in the last two (2)
years of the lease term shall automatically terminate this Lease
Agreement unless Lessee exercises at least one (l) remaining
extension option within sixty (60) days after such destruction.
Lessor shall not be required to expend more for the
restoration of the damage to the premises than the amount of
insured proceeds received by Lessor.
Lessor shall not be obligated to repair any damage to any
portion of Lessee's personal property located on the Premises.
29. OFF-SET STATEMENTS AND MORTGAGE SUBORDINATION.
Within fifteen (15) days after a request therefor by either party,
or in the event that upon any sale, assignment or hypothecation of
the Premises by Lessor or Lessee an off-set statement shall be
required from the other party, said party agrees to deliver a
certificate to any proposed mortgagee, purchaser or assignee, or to
Lessor or Lessee, certifying (if such be the case) that this Lease
is in full force and effect and that there are no defenses or off-
sets thereto, or stating those claimed by Lessee or Lessor.
Lessee shall, upon the request of the Lessor, in writing,
subordinate this Lease and the lien hereof from time to time to the
lien of any future mortgage to a bank, insurance company or similar
financial institution, irrespective of time of execution or time of
recording of such mortgage or mortgages, provided the holder of
such mortgage shall enter into an agreement with Tenant, in
recordable form, which, in substance, shall provide that, in the
event of foreclosure or other right asserted under the mortgage by
<PAGE>
the holder or assignee thereof, this Lease and the right of Lessee
hereunder shall continue in full force and effect and shall not be
terminated or disturbed except in accordance with the provision of
this Lease. Such mortgage holder shall further agree to make
casualty insurance proceeds available for restoration, as required
hereunder. Lessee shall, if requested by the holder of any such
mortgage, be a party to said agreement, and shall agree in
substance that if the mortgagee or other person claiming under such
mortgage shall succeed to the interest of Lessor, Lessee shall
recognize and attorney to such mortgagee or person as its Landlord
under the terms of this Lease. Lessee agrees that Lessee shall,
upon the request of Lessor, execute, acknowledge and deliver any
and all instruments necessary to effectuate, or to give notice of
such subordination. The word "mortgage" as used herein includes
mortgages, deeds of trust, similar instruments and modifications,
consolidations, extensions, renewals, replacements of substitutions
therefor.
30. HAZARDOUS MATERIAL. With respect to any Hazardous
Materials which Lessee, its agent or, employees, may use, handle,
store or generate in the conduct of Lessee's business at the
Demised Premises, Lessee covenants and agrees that:
a. it will comply with all applicable Environmental
Laws which relate to the treatment, storage, transportation and
handling of Hazardous Materials.
b. it will in no event permit or cause any disposal
of any Hazardous Materials in, on or about the Demised Premises and
in particular will not deposit any Hazardous Materials in, on or
about the floor of the Building or in any drainage system or in the
trash containers which are customarily used for the disposal of
solid waste;
c. with respect to any off-site disposal, shipment,
storage, recycling or transportation of any Hazardous Materials, it
will properly package the Hazardous Materials and shall cause to be
executed, duly filed and retained all records required by
applicable Environmental Laws;
<PAGE>
d. it will at all reasonable times after prior
written notice during reasonable hours, permit Lessor or its agents
or employees to enter the Demised Premises to inspect the same for
compliance with the terms of this Section; and
e. upon the termination of this Lease, it will, at
its expense, remove all Hazardous Materials from the Demised
Premises which were placed on the Demised Premises by Lessee and
otherwise comply with all applicable Environmental Laws.
In the event that Lessee fails to comply with any of the
provisions contained in this Section, Lessee agrees to hold
harmless and indemnify Lessee from and against any and all claims,
loss, costs, damages and expenses, including reasonable attorneys'
fees, which may arise in connection therewith. The obligations of
Lessee under the terms of the previous sentence shall not be
effective, however, in the event that any such non-compliance
results from, or to the extent such non-compliance is attributable
to, the acts, omissions or negligence of Lessor or Lessor's agents,
employees or contractors. The terms of this Section shall
expressly survive the expiration or earlier termination of this
Lease.
"Environmental Laws" means any and all federal, state,
local or municipal environmental, land use, zoning, health,
chemical use, safety and sanitation laws, rules, orders,
regulations, statutes, ordinances, codes, decrees or requirements
of any governmental authority regulating, relating to or imposing
liability or standards of conduct concerning any Hazardous
Material, as not or may at any time hereafter be in effect relating
to the protection of the environment and/or governing the use,
storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Materials, including,
without limitation, the Clean Water Act (also known as the Federal
Water Pollution Control Act) ("FWPCA"), 33 U.S.C. Section 1251 et
seq., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section
2601 et seq., the Clean Air Act (C) Section 7401 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act
<PAGE>
("FIFRA"), 7 U.S.C. Section 136 et seq., the Safe Drinking Water
Act ("SDWA"), 42 U.S.C. Section 300f et seq., the Surface Mining
Control and Reclamation Act ("SMCRA"), 30 U.S.C. Section 1201 et
seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et seq., the
Superfund Amendment and Reauthorization Act of 1986 ("SARA"),
Public Law 99-499, 100 Stat. 1613, the Emergency Planning and
Community Right to Know Act ("EPCA"), 42 U.S.C. Section 1101 et
seq., the Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. Section 6901 et seq., the Occupational Safety and Health Act
as amended ("OSHA") 29 U.S.C. Sections 655 and 657, any other
Environmental Law together with amendments thereto, regulations
promulgated thereunder and all substitutions thereof, rules,
regulations, policies, guidelines, interpretations, decisions and
directives of federal, state and local governmental agencies and
authorities with respect thereto.
"Hazardous Material" means, without limitation, any
flammables, explosives, radioactive materials, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum, petroleum
products, methane, hazardous materials, hazardous wastes, hazardous
or toxic substances or related materials as defined in CERCLA, the
Hazardous Materials Transportation Act, as amended (49 U.S.C.
Sections 1801, et seq.), the RCRA, the TSCA, or any other
Environmental Law or the regulations promulgated thereunder and
substitutions thereof as are now or hereafter in effect. Such term
also means any other waste, substance or material that exhibits any
of the characteristics enumerated in 40 C.f.R. Sections 261.20-
261.24, inclusive, and those extremely hazardous substances listed
under Section 302 of SARA that are present in threshold planning or
reportable quantities as defined under SARA and toxic or hazardous
chemical substances that are present in quantities that exceed
exposure standards as those terms are defined under Sections 6
and/or 8 of OSHA, Radon and any asbestos or asbestos-containing
substances whether or not the same are defined as hazardous, toxic,
<PAGE>
dangerous waste, a dangerous substances or dangerous material or
gas in any Environmental Law.
31. ATTORNEYS' FEES. If any party to this Lease
Agreement must engage the services of an attorney to enforce the
provisions of this Agreement, the attorneys' fees of the prevailing
party shall be paid by the non-prevailing party.
IN TESTIMONY WHEREOF, the Lessor and Lessee have executed
this Lease Agreement on this the 1st day of November, 1993.
CHROMATEX PROPERTIES, INC.
By: (Signature of Ronald W. Satterfield)
LESSOR
CULP, INC.
By Franklin M. Saxon
LESSEE
Vice President & CFO
<PAGE>
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, Kimberly A. Langstaff, a Notary Public in
and for the State, and County aforesaid I, personally appeared
Ronald W. Satterfild, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon
oath, acknowledged himself to be the Executive Vice President of
Chromatex Properties, Inc., the within name bargainor, a
corporation, and that he as such Executive Vice President, being
duly authorized so to do, executed the foregoing instrument for the
purposes therein con,ained, by signing the name of the corporation
by himself as such Executive Vice President.
WITNESS my hand and seal at office, on this the 1st day
of November, 1993.
Kimberly A. Langstaff
Notary Public
My Commission Expires: 11/5/97
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, Kimberly A. Langstaff, a Notary Public in
and for the State and County aforesaid I , personally appeared
Franklin M. Saxon, With whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon
oath, acknowledged himself to be the Vice President & CFO of
Culp, Inc., the wihin named bargainor, a cororation, and that he
as such Vice President & CFO, being duly authorized so to do,
executed the foregoing instrument for the purposes thereln
contained, by signing the name of the corporation by himself as
such Vice President & CFO.
WITNESS my hand and seal at office, on this the 1st day
of November, 1993.
Kimberly A. Langstaff
Notary Public
My Commission Expires: 11/5/97
<PAGE>
AMENDMENT TO LEASE AGREEMENT
THIS AMENDMENT TO INDENTURE OF LEASE is hereby made to be effective on
May 1, 1994 by and between CHROMATEX PROPERTIES, INC., a corporation
organized and existing under the laws of the State of Pennsylvania,
hereinafter referred to as the "Lessor" and CULP, INC., a corporation
organized and existing under the laws of the State of North Carolina,
hereinafter referred to as the "Lessee".
W I T N E S S E T H:
THAT WHEREAS, Lessor and Lessee entered into a Lease Agreement dated
November 1, 1993; and
WHEREAS, Lessor has made certain improvements to the "Premises" as defined
in the original Lease Agreement; and
WHEREAS, Lessee has agreed to increase its rent payment to Lessor for 54
months beginning May 1, 1994 in order to pay Lessor for the improvements
made to the Premises; and
WHEREAS, all other terms of the Lease Agreement dated November 1, 1993
are to remain the same except that Paragraph 2 of the original Lease
Agreement shall be amended to read as provided in this amendment to the
lease agreement.
NOW, THEREFORE, for and in consideration of the Premises and for other
good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the
<PAGE>
parties do hereby agree to amend Paragraph 2 of the original Lease
Agreement between Lessor and Lessee dated November 1, 1993 to read as
follows:
2. RENT. Lessee shall pay rent of Sixteen Thousand Forty-one and 67/100
Dollars ($16,041.67) a month to Lessor for the term of this lease. The
first installment of rent shall be paid on the commencement date hereof,
and shall be payable on the 1st day of each month during the term of
this lease. Provided, however that for 54 months beginning May 1, 1994
Lessee shall pay rent of Seventeen Thousand Eight Hundred Thirty-three
and 67/100 Dollars ($17,833.67) to Lessor. In the event Lessee exercises
any one or more of its options to renew the lease, the rent payable for
such option periods shall be the same as provided in the original Lease
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed the Amendment to
the Lease Agreement as of the first day of May, 1994.
CHROMATEX PROPERTIES, INC.
By: (Signature of Ronald W. Satterfield)
Ronald W. Satterfield)
Executive Vice President
LESSOR
CULP, INC.
By (Signature of Franklin N. Saxon)
(Franklin N. Saxon)
Vice President and CFO
LESSEE
<PAGE>
CANADA-QUEBEC SUBSIDIARY AGREEMENT
ON INDUSTRIAL DEVELOPMENT (1991)
Project No.:
Attention:
Subject: Capital project for the expansion and modernization
of your facility located at St.Jerome, Quebec
Dear Sirs:
In response to your application for financial assistance dated 4 January
1995, the Government of Canada, as represented by the Minister responsible for
Industry Canada, and the Government of Quebec, represented by the Minister of
Industry, Commerce, Science and Technology("the Ministers") hereby offers a
repayable contribution under the Canada-Quebec Subsidiary Agreement on
Industrial Development (1991) to Rayonese Textile Inc. (the Applicant) for
the execution of the project described in Schedule A (the project).
1. The agreement
1.1 This letter of offer, including schedules A, B and C constitutes the
full agreement between the parties once the Applicant has met the
conditions of paragraph 9.2 hereof.
2. The project
2.1 The Applicant shall
.1 complete the project no later than 30 April, 1998.
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
3. The contribution
3.1 Subject to the other provisions of this agreement,the Minister agrees
to pay to the Applicant the lesser of:
.1 a sum not to exceed 3,618,000 $; or
.2 20% of the eligible capital costs authorized in Schedule A.
3.2 The Minister will not contribute to any costs incurred by the
Applicant prior to 4 Jan. 1995.
3.3 In accordance with the provisions of the Canada-Quebec Subsidiary
Agreement on Industrial Development (1991), the Government of Canada
and the Government of Quebec will each pay their share of the total
contribution, namely fifty percent (50%) each.
4. Representations and undertakings by the Applicant
4.1 Rayonese Textile,Inc.(company name) is an entity duly established
under the Canada Business Corporations Act, is in good standing with
the rules by which it is governed, and is not subject to any
commitment or prohibition that would be violated by the execution of
the project.
5. Payment conditions
5.1 On submission of a documented claim by the Applicant, the Minister
will disburse the contribution in installments covering at least six
(6) months of work and representing at least 20% on the eligible
capital costs incurred and paid by the applicant. The total amount
of the instalments shall not exceed 90% of the authorized contribution.
5.2 The outstanding balance of the contribution will be paid at the
completion date of the project.
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
6. Conditions related to the disbursement of the contribution
6.1 Financing and Net worth
6.1.1 The applicant agrees to present proof, to the Minister's
satisfaction, that he has obtained the financing for the project
as described in Annex A.
6.1.2 The applicant undertakes to present proof, to the Minister's
satisfaction, that it has a minimum net worth of $6,700,000
prior to the second disbursement of the contribution, and that
it will maintain this net worth for the duration of this
contract.
6.2 The Minister will disburse the contribution to the Applicant
.1 once he is satisfied that the potential adverse environmental
effects of the project are negligible, and
.2 once the Applicant has demonstrated that it has adopted
and applied, in relation to the project, the environmental
protection measures that are satisfactory to all the regulatory
agencies with authority over the Applicant or the project, or
both.
6.3 Prior to the initial disbursement, the applicant must submit a
corporate guarantee executed by its parent, Culp Inc., in
substantially the same form as appears in Annex C attached hereto.
7. Other government assistance
7.1 The Applicant states that it has neither requested nor received any
other financial assistance from the federal, provincial or municipal
government for the purposes of the project.
7.2 The Applicant agrees to disclose without delay, and in all cases no
later than the moment that such assistance is received, any other
assistance granted for the purposes of the project, and the Applicant
acknowledges that the Minister may reduce the amount of the
contribution under this agreement by as much as the amount of the
additional assistance expected or received.
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
8. Repayment
8.1 If the results are conclusive, the Applicant shall repay the
contribution to the Minister in five annual, equal, consecutive
instalments.
8.2 The first instalment is due and payable one year after the date
of the last disbursement and subsequent instalments are due and
payable at intervals of twelve months thereafter.
8.3 Repayments of the contribution shall be made directly to each
government in proportion to its share of the contribution.
9. General conditions
9.1 By accepting this offer, the Applicant certifies that, except as
previously declared to the Ministers, it has made no contractual
commitment concerning the project prior to submitting the application
for financial assistance.
9.2 A copy of this offer, duly signed, including the initialed schedules
which are an integral part hereof, must be returned within 60 days of
its date of issue to the address shown below. The offer shall become
null and void after the said 60 days.
For further information, please contact H. Gilles Lefabyre,
the designated spokesperson, by telephone at (514)283-3667/283-5103; or in
writing, at the following address:
Industry Canada
5, Place Ville-Marie
7th floor
Montreal (Quebec)
H3B 2G2
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
Yours truly,
Denise Boudrias Michel La Salle
Co-Chairmen of the Management Committee
We have read the terms and conditions set out in this offer and the
schedules, and we hereby accept the offer.
Accepted on 19 .
Rayonese Textile, Inc.
(company name)
By Franklin N. Saxon
(signature)
Company seal
Vice President and Chief Financial Officer
(title)
p.s. The applicant must initial all pages of this offer and the
attached schedules
Enclosures
Schedule A -- Project description and funding
Schedule B -- General conditions, representations and warranties
Schedule C --
<PAGE>
CANADA-QUEBEC SUBSIDIARY AGREEMENT
ON INDUSTRIAL DEVELOPMENT (1991)
Project No.:
SCHEDULE A
PROJECT DESCRIPTION AND FUNDING
PURPOSE OF PROJECT
The purpose of this project is to increase productivity and product
quality. The total eligible cost of the project is estimated at $18,090,000.
$, broken down as follows:
Adjustable Other
Building Costs Costs
Enlargement of Building $1,500,000
Equipment
28 Loans $15,330,000 $4,320,00
2 Compressors 660,000
1 Slasher 600,000
$16,590,000 $4,320,000
Total $18,090,000 $4,320,000
Total Cost of Project $22,410,000
FINANCING
Long term debt $16,119,000
Working Capital 2,673,000
Subsidiary Agreement 3,618,000
TOTAL $22,410,000
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
SCHEDULE B
CANADA-QUEBEC SUBSIDIARY AGREEMENT
ON INDUSTRIAL DEVELOPMENT (1991)
Project No:
GENERAL CONDITIONS, UNDERTAKINGS AND REPRESENTATIONS
1. Definitions
Unless the context dictates otherwise, the following terms have the stated
meaning for the purposes of this agreement:
1.1 "Project": the work to be undertaken as per the Applicant's request
and summarized in Schedule A.
1.2 "Application": means the written request by the Applicant to the
Minister for financial assistance for the project under this agreement
(SAID 91) and any other document provided subsequently by the
Applicant or its representative.
1.3 "Parties": means the Minister and the Applicant.
1.4 "Eligible capital costs": means reasonable costs which are directly
related to the project and are entered in the Applicant's capital
accounts in accordance with the standards of the Canadian Institute of
Chartered Accountants (CICA).
1.5 "Starting date of project": means the date on which the work
actually begins.
1.6 "Completion date of the project": means the date on which:
.1 all the assets for which the Ministers have contributed or
agreed to contribute funding are used in the facility and will
continue to be so used for the foreseeable future;
.2 the facility or the part of the facility for which the
assistance specified in the letter of offer was provided, has
been utilized for not less than 30 consecutive working days in
the provision of marketable services or the production of
marketable goods in commercial quantities; and
Initials: Co-chairman of the Management Committee
Applicant
<PAGE>
Project No.:
1.7 "Net worth" means the total of:
a) the share capital of the applicant, or the proprietor's or
partner's capital accounts;
b) the earned surplus, contributed surplus or other surplus account
of the applicant;
c) the deficit accounts of the applicant;
d) loans from shareholders to the applicant that are subordinated
to all other liabilities for the duration of the contract;
e) subject to the consent of the Ministers, all loans provided to
the applicant, other than shareholder loans, that are
subordinated to all other liabilities for the duration of the
contract, less any amounts included in a) and e) above which,
in the opinion of the Ministers, unreasonably inflate the net
worth.
2. Duration of the agreement
2.1 The effective date of the agreement is the date on which the Minister
receives a duly completed and signed copy hereof.
2.2 This agreement shall terminate on the later of the two dates below:
.1 36 months after the project completion date, to the satisfaction
of the Ministers; or
.2 when the sums owed to the government under this agreement have
been paid in full.
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
3. Disbursement
3.1 The Applicant must submit a claim in writing for each instalment of the
contribution. In support of each claim, it shall submit supporting
documentation in respect of the major costs claimed, a copy of its latest
audited annual financial statements and, where requested, an auditor's
certificate or other documents showing compliance with the terms and
conditions of payment.
3.2 No claim for payment from the Applicant shall be accepted more than
twelve (12) months after the project completion date.
4. Reports
4.1 The Applicant shall promptly provide the Ministers with all the reports
he requests on the progress and results of the project.
4.2 The Applicant shall give any authorized representative reasonable
access to its premises, books and other records for the purposes of
inspecting and evaluating the progress and the results of the project.
4.3 As soon as possible after the end of each financial year, as long as
the agreement is in force, the Applicant shall provide the Ministers with
a copy of its audited annual financial statements and its interim
half-yearly financial statements as promptly as possible.
5. Undertakings by the Applicant
5.1 For the duration of this agreement, the Applicant commits to
.1 take every necessary measure to maintain its corporate existence and
legal competence and to inform the Minister of any failure to do so;
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
.2 take every necessary measure to carry out the project successfully
and in compliance with the time frame and costs agreed, in workmanlike
fashion and employing qualified personnel;
.3 co-operate fully with the Ministers, and more specifically, provide,
immediately and free of charge, all pertinent information relating to
the project and the Applicant which the Ministers may request;
.4 immediately advise the Minister of any fact or event which is liable
to compromise the success of the project immediately or in the long
term;
.5 obtain and maintain in effect, while the agreement is in force, an
insurance policy, satisfactory to the Minister, on the assets
acquired for the purposes of the project; the Applicant shall, in the
event of loss, notify the Minister in writing within 30 days following
the said loss that the insurance settlement will be assigned, in a
delay judged reasonable by the Ministers, to the reconstruction or
repair of the assets necessary for the project, failing which, the
Applicant shall reimburse the contribution received.
5.2 For the duration of this agreement, the Applicant undertakes not to
.1 amend the project with respect to its ownership, cost, funding,
scope, date of completion, location or any other aspect, without
the Minister's prior written consent;
.2 take actions or make any decisions that might compromise the
success of the project or the Applicant's financial viability;
.3 sell or otherwise dispose of assets necessary for carrying out
or operating the project, or cease to use any asset which has
been paid for in part through financial assistance under this
agreement, without the prior written consent of the Ministers;
.4 move the assets to be used for the project off the premises
described herein.
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
6. Default
6.1 While the provisions of this agreement are in effect, any of the
following events, without being restrictive, shall constitute default:
.1 the Applicant becomes bankrupt or insolvent, is placed under
receivership, or files for protection under any statute relating
to bankrupt or insolvent debtors;
.2 an order is made or a resolution passed for the winding up of
the Applicant, or the Applicant is dissolved;
.3 in the opinion of the Ministers, the Applicant has ceased to do
business in Quebec, its business operations have been suspended,
it has transferred its activities outside Quebec, or it has
disposed of assets for which funding was granted hereunder;
.4 the Applicant has submitted false or misleading information
which played a significant role in the Minister's decision to
grant the assistance;
.5 in the opinion of the Ministers, a material adverse change has
occurred in the Applicant's corporate risk;
.6 the Applicant has failed to abide by a major undertaking set
out in this agreement;
.7 in the opinion of the Ministers, the Applicant has made a
significant change to the project without obtaining his prior
written consent;
.8 the Applicant made unauthorized substantial contractual
commitments prior to the date on which the Ministers received
its application for assistance;
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
.9 in the opinion of the Ministers, the Applicant has failed to
carry out the project promptly and, among other things, has not
met the deadlines specified herein, except where, in the
Minister's opinion, the circumstances of such a situation were
beyond the Applicant's control;
.10 the Applicant has not met the terms and conditions of repayment
set forth in the letter of offer;
.11 the total eligible costs is inferior to $ 10 million at the
completion date of the project.
6.2 In the event of default or, if the Minister deems that default is
likely to occur, he may exercise any or all of the following
measures:
.1 suspend the contribution for an indefinite period;
.2 demand the immediate total or partial repayment, with or without
interest, of any contribution received by the Applicant;
.3 cancel the full amount or a part of the contribution;
.4 apply an interest rate equivalent to the higher of the
prevailing Bank of Canada rate, plus 3%, or the prevailing fixed
rate of the Societe de developpement industriel du Quebec, on
any late payment as of the date on which any such amount
becomes due and payable.
.5 demand that the Applicant transfers to the Ministers all rights
and privileges arising in connection with the work carried out;
.6 ask the Applicant to provide any and all guarantees and security
that he deems appropriate in respect of his present or potential
claim and to draw up at its own expense all the necessary
documents for this purpose within five days of his request.
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
7. Quebec and Canadian goods and services
7.1 When purchasing goods or services for use in the project, the
Applicant shall use Quebec and Canadian carriers, suppliers,
manufacturers and subcontractors to the extent that such goods and
services are available and competitively priced.
8. Other terms and conditions
8.1 No member of the Parliament of Canada or the National Assembly of
Quebec shall be admitted to any share or part of the agreement or to
any benefit arising therefrom.
8.2 This agreement shall not be assigned without the prior written consent
of the Ministers.
8.3 The proposed project shall comply with all applicable federal and
provincial laws and regulations, in particular those relating to the
environment.
8.4 The Applicant agrees to indemnify and save harmless the parties, their
officers, servants and agents against any and all claims and demands
by third parties arising out of the implementation of the project.
The parties acknowledge further that nothing in this agreement shall
be construed as creating a partnership, joint venture or agency
relationship between the government and the Applicant.
8.5 If any amendment becomes necessary during the term of this contract,
the Applicant shall make a written request to the Ministers to that
effect. In turn, the Ministers shall inform the Applicant of his
decision in writing.
8.6 The Applicant undertakes to inform the Ministers without delay of any
change or event that may have a significant effect on the costs,
timetable or nature of the project.
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
Project No.:
8.7 The Applicant has the legal competence and authority to operate its
business and to sign this letter of offer.
8.8 This agreement is subject to and shall be construed in accordance
with the laws of the province of Quebec, and the parties hereto
acknowledge the jurisdiction of the Superior Court and the appeal
courts of Quebec for the resolution of any disputes arising from the
agreement.
9. Contract language
9.1 Les parties aux presentes acceptent que ce contrat de meme que tous
les documents, y compris les avis s'y rattachant, soient rediges en
francais seulement.
The parties hereto agree that this agreement and all other documents
relating hereto, including related notices, be written in French only.
10. Announcements and ceremonies
10.1 The Applicant hereby agrees that, unless otherwise indicated, a public
announcement may be made by the Ministers, or on their behalf, giving
the Applicant's name, address and type of business, the estimated cost
of the project, the amount and form of assistance, and a brief
description of the project.
10.2 The Ministers shall inform the Applicant promptly in writing of the
date on which the public announcement is to be made, and the
Applicant shall maintain the confidentiality of this agreement until
such date;
10.3 The Applicant shall notify the Ministers in writing, at least 14 days
in advance, of any official ceremony organized in connection with the
project.
10.4 The Applicant hereby consents to the participation by the Ministers or
their representatives in any official ceremony.
Initials: Co-Chairman of the Management Committee
Applicant
<PAGE>
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