SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended April 28, 1996
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)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.05/Share
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation SK is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[(Check Mark)]
As of July 11, 1996, 11,302,613 shares of common stock were outstanding.
The aggregate market value of the voting stock held by non-affiliates of the
registrant on that date was $95,546,810 based on the closing sales price of such
stock as quoted through the National Association of Securities Dealers, Inc.
Automated Quotation System (NASDAQ), assuming, for purposes of this report, that
all executive officers and directors of the registrant are affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Part II
Portions of the company's Annual Report to Shareholders for the fiscal year
ended April 28, 1996 are incorporated by reference into Items 5, 6, 7 and 8.
Part III
The company's Proxy Statement dated July 19, 1996 in connection with its
Annual Meeting of Shareholders to be held on September 17, 1996 is incorporated
by reference into Items 10, 11, 12 and 13.
Exhibits listed beginning on page 23
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CULP, INC.
FORM 10-K REPORT
TABLE OF CONTENTS
Item No.
Page
PART I
1. Business
General Development.........................................4
Industry Segment............................................4
Products....................................................5
Manufacturing...............................................5
Product Design and Styling..................................6
Sales and Distribution......................................7
Sources and Availability of Raw Materials...................7
Patents, Trademarks and Licenses............................8
Customers...................................................8
Backlog.....................................................8
Competition.................................................8
Research and Development....................................9
Governmental Regulations....................................9
Employees...................................................9
Foreign and Domestic Operations
and International Sales....................................9
Seasonality................................................10
Inflation..................................................10
2. Properties......................................................11
3. Legal Proceedings...............................................12
4. Submission of Matters to a Vote of
Security Holders...............................................12
PART II
5. Market for the Registrant's Common Stock
and Related Stockholder Matters.................................12
6. Selected Financial Data.........................................12
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7. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............12
8. Consolidated Financial Statements and Supplementary Data...13
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure....................13
PART III
10. Directors and Executive Officers of the
Registrant................................................13
11. Executive Compensation ....................................13
12. Security Ownership of Certain
Beneficial Owners and Management..........................14
13. Certain Relationships and Related
Transactions..............................................14
PART IV
14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K ...................................15
Documents filed as part of this report.....................15
Exhibits...................................................16
Reports on Form 8-K .......................................21
Financial Statement Schedules .............................21
Signatures ................................................22
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PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT
THE COMPANY. Culp, Inc. (the company) manufactures and markets upholstery
fabrics and mattress tickings primarily for use in the furniture, bedding and
institutional furnishings (contract) industries. The company's products are
marketed throughout the United States by its own sales staff and internationally
by a combination of a small internal sales staff and a network of outside sales
agents. The company ships directly to customers from its manufacturing
facilities. In addition, under its National Warehouse Program, the company
inventories popular patterns of its fabrics in its regional distribution
facilities for immediate delivery to customers. The company's executive offices
are located in High Point, North Carolina, and its ten (10) manufacturing
facilities are located in, or near, Burlington and Stokesdale, North Carolina,
Anderson and Pageland, South Carolina, West Hazleton, Pennsylvania, Rossville,
Georgia and St. Jerome, Canada. The company was organized as a North Carolina
corporation in 1972.
CAPITAL EXPENDITURES. During the year ended April 28, 1996, the company
spent approximately $14.4 million in capital expenditures. These included
planned expenditures of approximately $8.5 million relating to continued
expansion of vertical integration and yarn manufacturing, expansion of weaving
capacity, and additional hardware purchases in connection with upgrading the
company's information systems. The acquisition of Rayonese Textile Inc.
(completed in March of 1995) included a plan for $6 million of additional
capital expenditures to substantially increase jacquard weaving capacity at the
Rayonese plant, of which $2.5 million was incurred in fiscal 1996. Additionally,
during fiscal 1996, the company increased its capital spending plans by $3.4
million from the planned amount of $11.0 million in order to accelerate two
projects previously scheduled for fiscal 1997. These projects involve expanding
the company's production capacity for its jacquard and wet prints product lines.
The company's capital expenditure budget for fiscal 1997 is approximately $16.5
million. Capital expenditures are being funded by internally generated funds and
bank borrowings.
INDUSTRY SEGMENT
The company operates in one segment and is principally involved in the
designing, manufacturing and marketing of upholstery fabrics and mattress
ticking used in the home and commercial furnishings (contract) industry on a
world-wide basis.
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PRODUCTS
The company's products include principally upholstery fabrics and mattress
ticking. The company is expanding its production of home textile fabrics,
including fabrics used in comforters and bedspreads, but these products did not
constitute a material part of the company's business in fiscal 1996.
UPHOLSTERY FABRICS. The company derives the majority of its revenues from
the sale of upholstery fabrics primarily to the residential and commercial
(contract) furniture markets. Sales of upholstery fabrics were 81% of sales in
fiscal 1996, 83% in 1995 and 84% in 1994. The company has emphasized fabrics and
patterns that have broad appeal at promotional to medium prices, generally
ranging from $2.25 per yard to $7.00 per yard.
Principal types of upholstery fabrics sold include flat wovens (both
jacquard and dobby constructions) velvets (woven, tufted and flocks), and prints
(jacquards and dobby overprints).
MATTRESS TICKING. The company manufactures mattress ticking (fabric used
for covering mattresses and box springs) for sale to bedding manufacturers.
Sales of mattress ticking constituted 19% of sales in fiscal 1996, 17% in 1995
and 16% in 1994.
MANUFACTURING
GENERAL. The company manufactures substantially all of the products it
sells. Manufactured fabrics constituted approximately 99% of sales in fiscal
1996, 1995 and 1994.
CULP WEAVING. The Culp Weaving operation has two manufacturing plants. Its
largest facility, located in Graham, North Carolina, houses upholstery jacquard
weaving looms, ticking jacquard weaving looms, a package dye house and yarn
preparation equipment. The second Culp Weaving plant, located in Pageland, South
Carolina, manufactures flat woven dobby fabrics.
UPHOLSTERY PRINTS. The Upholstery Prints plant, near Burlington, North
Carolina, uses a heat-transfer printing process to print primarily flocked
upholstery fabrics and to print paper for heat-transfer upholstery fabrics and
mattress ticking. This plant also uses a wet printing process for velvet
fabrics. In addition, Upholstery Prints produces tufted velvets and operates
finishing ranges for back-coating and print preparation of fabric and several
surface-finishing lines for its tufted velvet fabrics. The plant also houses a
distribution facility which distributes upholstery fabrics to "direct ship"
customers and to the company's regional distribution facilities for fabrics from
the Upholstery Prints and Culp Woven Velvets facilities.
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CULP FINISHING. The Culp Finishing plant, located in Burlington, North
Carolina, contains finishing ranges for finishing woven upholstery fabrics. The
plant also houses significant distribution facilities, which handle distribution
of upholstery fabrics to "direct-ship" customers and to the company's regional
distribution facilities for the Culp Weaving facilities.
CULP WOVEN VELVETS. The Culp Woven Velvets plant, in Anderson, South
Carolina, contains weaving machines for the production of woven velvets. In
addition, the plant houses yarn preparation equipment, a finishing range and
surface finishing equipment.
CULP TICKING. The Culp Ticking plant, in Stokesdale, North Carolina,
produces mattress ticking. It utilizes both pigment and heat-transfer printing
methods to print ticking material. The plant contains a rotary screen print
operation, heat-transfer equipment and a finishing range. In addition, the plant
houses finished goods for distribution of mattress ticking.
ROSSVILLE. The Rossville plant, located in Rossville, Georgia, is part of
the Rossville/Chromatex business unit, which was acquired by the company in
November 1993. This facility contains yarn preparation equipment, dobby looms,
and finishing equipment, all of which are used to produce flat woven dobby
fabric. This plant also contains its own distribution and shipping facilities.
CHROMATEX. The Chromatex plant is located in West Hazleton, Pennsylvania,
and it comprises the remainder of the Rossville/Chromatex business unit. This
plant produces jacquard upholstery fabrics, and it contains all of the yarn
preparation equipment, looms, finishing equipment and distribution facilities
used by the Rossville/Chromatex business unit for woven jacquard fabrics.
RAYONESE. The Rayonese plant is owned by the company's subsidiary, Rayonese
Textile Inc., and is located in St. Jerome, Canada. Rayonese was acquired by the
company in March 1995. This plant produces comforter fabrics, upholstery fabrics
and mattress ticking and also contains yarn spinning equipment. The plant also
contains its own distribution facilities.
PRODUCT DESIGN AND STYLING
The company has a staff of designers that specializes in development of new
patterns for upholstery fabrics and mattress tickings. The company also
purchases some fabric designs from independent artists. The company believes
styling and design are key elements to its success and has increased
significantly the number of people and other resources dedicated to this area in
recent years. The company's design staff works closely with marketing personnel
to identify and respond to market trends.
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SALES AND DISTRIBUTION
UPHOLSTERY FABRICS. The company markets upholstery fabrics in the United
States through two primary methods: (i) a "direct-ship" operation from its
fabric-manufacturing facilities and (ii) a National Warehouse Program whereby
inventory is stocked in regional distribution facilities located in High Point,
North Carolina, Tupelo, Mississippi and Los Angeles, California. The
"direct-ship" program permits customers to arrange for direct shipments from the
company's manufacturing facilities. This method generally permits lower pricing,
but requires longer delivery times than the National Warehouse Program, which is
dependent upon maintenance of current pattern inventories. The company closely
monitors current demand in each distribution territory and believes it is
therefore able to respond quickly to the needs of customers. The company
receives higher prices for products sold through its National Warehouse Program
to compensate it for the cost of maintaining inventories and local distribution
facilities. In addition, the company markets contract upholstery fabric lines. A
small sales staff is responsible for sales and marketing of products for the
company's "direct ship" program.
RAYONESE. Rayonese has its own sales staff and distribution facilities
(both upholstery and ticking).
MATTRESS TICKING. The company distributes mattress ticking from its
facility in Stokesdale, North Carolina, and from the company's Los Angeles,
California warehouse.
INTERNATIONAL SALES. In addition to its U. S. operations, the company sells
and distributes upholstery fabrics and mattress ticking in many countries
abroad. International sales are handled both by the company's internal sales
staff and independent sales agents. The largest volume of international sales
during fiscal 1996 was to North America. In the year ended April 28, 1996,
international sales outside of the U.S., including sales to exporters, totaled
$77,397,000, or approximately 22% of the company's net sales.
International sales were $57,971,000, or approximately 19% of net sales, in
fiscal 1995 and $44,038,000, or approximately 18% of net sales, in fiscal 1994.
Additional information relating to international sales may be found in note
14 of the company's consolidated financial statements, included in the Annual
Report to Shareholders.
SOURCES AND AVAILABILITY OF RAW MATERIALS
The company purchases various types of primarily man-made yarns, greige
goods and fibers for the manufacture of upholstery fabrics and mattress ticking.
Future price levels of raw materials will depend upon supply and demand
conditions and general inflation. Generally, the company has not had significant
difficulty in obtaining raw materials.
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PATENTS, TRADEMARKS, AND LICENSES
The company believes that its patents, trademarks and licenses are not
material to its business.
CUSTOMERS
The company is not dependent upon a single customer or a group of
customers, the loss of which would have a materially adverse effect upon the
business of the company. No single customer accounted for more than 10% of the
company's net sales in fiscal 1996. The company sells upholstery fabrics
primarily to domestic upholstered furniture manufacturers, institutional
furnishings manufacturers and foreign distributors and manufacturers of
upholstered furniture. The company markets its mattress ticking principally to
bedding manufacturers. The company's domestic customers are distributed
throughout the nation; however, its greatest sales are in areas where there is a
heavy concentration of furniture manufacturing.
BACKLOG
Because a large portion of the company's customers have an opportunity to
cancel orders, it is difficult to predict the amount of the backlog that is
"firm." Many customers may cancel orders before goods are placed into
production, and some may cancel at a later time. In addition, the company
markets a significant portion of its sales through its National Warehouse
Program from in-stock order positions. On April 28, 1996, the portion of the
backlog with confirmed shipping dates prior to June 3, 1996 was $34,467,000.
COMPETITION
The upholstery fabrics market is highly fragmented and competitive and no
one firm dominates the United States market. The company believes its principal
upholstery fabrics competitors are the Burlington House Fabrics division of
Burlington Industries, Inc., Joan Fabrics Corporation, Malden Mills, Inc., the
Mastercraft Division of Collins & Aikman Company, Microfibers, Inc., and Quaker
Fabric Corporation.
The mattress ticking market is concentrated in a few relatively large
suppliers. The company believes its principal mattress ticking competitors are
Blumenthal Print Works, Inc., Burlington Industries, Inc., and Tietex, Inc.
Competition for the company's products is based primarily on design,
quality, timing of delivery, service, and price. Some of the company's
competitors have greater resources than the company. Although U.S. statistics
for the upholstery fabric and mattress ticking markets are not generally
available, the company believes it is the largest supplier of upholstery fabrics
to the furniture trade and one of the three largest suppliers of mattress
ticking to the bedding trade. To date, the company has experienced no
significant competition from imports.
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RESEARCH AND DEVELOPMENT
The company's only material research and development is done in the product
design and styling area previously described in this report under the subheading
"Product Design and Styling".
GOVERNMENTAL REGULATIONS
The company is subject to various federal and state laws and regulations,
including the Occupational Safety and Health Act and federal and state
environmental laws. Rayonese is subject to similar laws and regulations in
Canada. The company is not aware of any material violation of such laws and
regulations. Continued compliance is not expected to have a material effect upon
capital expenditures, earnings or the competitive position of the company.
EMPLOYEES
At April 28, 1996 the company had 2,966 employees. A small portion
(approximately 15%) of the company's work force is represented by a union. This
includes all of the hourly employees at the Chromatex facility and all of the
hourly employees at the Rayonese facility. The company is not aware of any
attempt to organize any more of its employees and believes its employee
relations are good.
FOREIGN AND DOMESTIC OPERATIONS AND INTERNATIONAL SALES
Information concerning the company's U.S. operations and international
sales is included in this report under the subheading "Sales and Distribution".
Rayonese Textile Inc., which was acquired in March 1995, is located in St.
Jerome, Canada, and constitutes the company's only operation outside of the U.S.
During fiscal 1996, Rayonese had revenues of approximately $12,256,000, of which
$4,548,000 were intercompany shipments. This compares to the 56 days that the
company owned Rayonese during fiscal 1995, for which Rayonese had revenues of
approximately $2,272,000, of which $894,000 were intercompany shipments.
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SEASONALITY
The company's business is only slightly seasonal, with increased sales
during the second and fourth quarters of each year. This seasonality results
primarily from one-week closings of the company's manufacturing facilities, and
the facilities of most of its customers, during the first and third quarters for
the July 4th and Christmas holiday weeks.
INFLATION
The extent to which the company has been affected by inflation is discussed
in Item 7. Management's Discussion and Analysis of Financial Conditions and
Results of Operations under the caption "Inflation."
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ITEM 2. PROPERTIES
As of April 28, 1996, the company operated in ten (10) manufacturing
facilities, three (3) additional distribution facilities and a corporate
headquarters. One (l) of the manufacturing facilities, two (2) of the
distribution facilities and the corporate headquarters are leased from entities
related to the company or its shareholders and directors. The related party
leases are described in Item 13 of this report.
Following is a summary of the company's principal administrative,
manufacturing and distribution facilities as of April 28, 1996.
Principal Total Area Expiration
Location Use (Sq. Ft.) Date (l)
High Point, NC (2) Corporate 33,440 2015
headquarters
High Point, NC (2) Distribution 65,000 2003
Los Angeles, CA(4) Distribution 45,000 2002
Tupelo, MS (2) Distribution 35,000 2002
Burlington, NC (2) Manufacturing 242,000 2009
Anderson, SC (3) Manufacturing 99,000 N/A
Burlington, NC (3) Manufacturing 302,000 N/A
and distribution
Graham, NC (3) Manufacturing 341,000 N/A
Stokesdale, NC (3) Manufacturing 140,000 N/A
and distribution
Pageland, SC (3) Manufacturing 96,000 N/A
Rossville, GA (4) Manufacturing 396,000 2001
and distribution
W. Hazleton, PA (4) Manufacturing 100,000 2013
and distribution
W. Hazleton, PA (4) Manufacturing 110,000 2008
St. Jerome, Canada (3) Manufacturing 202,000 N/A
and distribution
(l) Includes all options to renew
(2) Leased from related party
(3) Owned by the company
(4) Leased from unrelated party
The company also leases showrooms in Tupelo, Mississippi and High Point, North
Carolina.
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The company believes its manufacturing and distribution facilities, and its
equipment, are generally in excellent condition, suitable and adequate for its
current operations. The company's productive capacity has expanded to meet
growing needs.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings to which the company, or its subsidiaries,
is a party or of which any of their property is the subject that are required to
be disclosed under this item.
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of shareholders during the fourth
quarter ended April 28, 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON
STOCK AND RELATED STOCKHOLDER MATTERS
Information with respect to the market for the company's common stock and
related shareholder matters is included in the company's Annual Report to
Shareholders for the year ended April 28, 1996, in the Consolidated Statements
of Shareholders' Equity (dividend information), in the Selected Quarterly Data
under the caption "Stock Data," in the Selected Annual Data under the caption
"Stock Data," and on the back cover page, in the Corporate Directory, under the
caption "Stock Listing," which information is herein incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
This information is included in the company's above referenced Annual
Report to Shareholders, under the caption "Selected Annual Data," and is herein
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations is included in the company's above referenced Annual Report to
Shareholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations", and is herein incorporated by
reference.
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ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data are included
in the company's above referenced Annual Report to Shareholders, and are herein
incorporated by reference. Item 14 of this report contains specific page number
references to the consolidated financial statements and supplementary data
included in the Annual Report.
EXCEPT FOR SUCH PORTIONS OF THE COMPANY'S ANNUAL REPORT TO
SHAREHOLDERS FOR THE YEAR ENDED APRIL 28, 1996 THAT ARE EXPRESSLY
INCORPORATED BY REFERENCE INTO THIS REPORT, SUCH REPORT IS NOT TO
BE DEEMED FILED AS PART OF THIS FILING.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
During the two years ended April 28, 1996 and any subsequent interim
periods, there were no changes of accountants and/or disagreements on any
matters of accounting principles or practices or financial statement
disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to executive officers and directors of the company
is included in the company's definitive Proxy Statement to be filed on or about
July 19, 1996 pursuant to Regulation 14A of the Securities and Exchange
Commission, under the caption "Nominees, Directors and Executive Officers" and
"Reports Of Securities Ownership", which information is herein incorporated by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is included in the
company's definitive Proxy Statement to be filed on or about July 19, 1996
pursuant to Regulation 14A of the Securities and Exchange Commission, under the
caption "Executive Compensation", which information is herein incorporated by
reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information with respect to the security ownership of certain beneficial
owners and management is included in the company's definitive Proxy Statement to
be filed on or about July 19, 1996, pursuant to Regulation 14A of the Securities
and Exchange Commission, under the caption "Voting Securities", which
information is herein incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions
is included in the company's definitive Proxy Statement to be filed on or about
July 19, 1996, pursuant to Regulation 14A of the Securities and Exchange
Commission, under the subcaption "Certain Relationships and Related
Transactions", which information is herein incorporated by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
a) Documents Filed as Part of this Report:
1. Consolidated Financial Statements
The following consolidated financial statements of Culp, Inc. from the
company's Annual Report to Shareholders for the year ended April 28, 1996, are
incorporated by reference into this report.
Page of Annual
Report to
Shareholders
Item [Exhibit 13(a)]
Balance sheets - April 28, 1996 and......................10
April 30, 1995
Statements of Income -
for the years ended April 28, 1996,
April 30, 1995 and May 1, 1994 .........................11
Statements of Shareholders' Equity -
for the years ended April 28, 1996,
April 30, 1995 and May 1, 1994 .........................12
Statements of Cash Flows -
for the years ended April 28, 1996,
April 30, 1995 and May 1, 1994 .........................13
Notes to Financial Statements ...........................14
Report of independent auditors for the years
ended April 28, 1996, April 30, 1995
and May 1, 1994.........................................21
2. Financial Statement Schedules
All financial statement schedules are omitted because they are not
applicable, or not
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required, or because the required information is included in the consolidated
financial statements or notes thereto.
With the exception of portions expressly incorporated by reference into
this report in Items 5, 6, 7 and 8, the company's Annual Report to Shareholders
for the year ended April 28, 1996 is not to be deemed filed as a part of this
report.
3. Exhibits
The following exhibits are attached at the end of this report, or
incorporated by reference herein. Management contracts, compensatory plans, and
arrangements are marked with an asterisk (*).
(a) The following exhibits are filed as part of this report or incorporated by
reference.
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.
4(a) Form of Common Stock Certificate of the company was filed as Exhibit
4(a) to Amendment No. 1 to the company's registration statement No.
2-85174, filed on August 30, 1983, and is 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
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for the year ended April 29, 1990, and are incorporated herein by
reference.
10(c) Loan Agreement dated January, 1990 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 $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) Management Incentive Plan of the company, dated August 1986 and amended
July 1989, filed as Exhibit 10(o) 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(h) 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(i) Amendment and Restatement of the Employees's Retirement Builder
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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(j) 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.
10(k) Second Amendment of Lease Agreement dated April 16, 1993, with
Partnership 52 Associates was filed as Exhibit 10(1) 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(l) 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(m) 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 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(n) 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 was filed as Exhibit 10(q) to the
company's Form 10-Q, filed on March 15, 1994, and is incorporated
herein by reference.
10(o) First Amendment to Loan Agreement dated as of December 16, 1993 by and
between Chesterfield County, South 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(p) 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.
10(q) Amendment to Lease Agreement dated as of December 14, 1994, by and
between the company and Rossville Investments, Inc. (formerly
-18-
<PAGE>
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(r) 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(s) 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(t) 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(u) 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(v) Second Amendment of Lease Agreement dated June 15, 1994 with
Partnership 74 Associates was filed as Exhibit 10(v) to the company's
Form 10-Q for the quarter ended October 29, 1995, filed on December 12,
1995, and is incorporated herein by reference.
10(w) Lease Agreement dated November 1, 1993 by and between the company and
Chromatex, Inc. was filed as Exhibit 10(w) to the company's Form 10-Q
for the quarter ended October 29, 1995, filed on December 12, 1995, and
is incorporated herein by reference.
10(x) Lease Agreement dated November 1, 1993 by and between the company and
Chromatex Properties, Inc. was filed as Exhibit 10(x) to the company's
Form 10-Q for the quarter ended October 29, 1995, filed on December 12,
1995, and is incorporated herein by reference.
-19-
<PAGE>
10(y) Amendment to Lease Agreement dated May 1, 1994 by and between the
company and Chromatex Properties, Inc. was filed as Exhibit 10(y) to
the company's Form 10-Q for the quarter ended October 29, 1995, filed
on December 12, 1995, and is incorporated herein by reference.
10(z) Canada-Quebec Subsidiary Agreement on Industrial Development (1991),
dated January 4, 1995, was filed as Exhibit 10(z) to the company's Form
10-Q for the quarter ended October 29, 1995, filed on December 12,
1995, and is incorporated herein by reference.
10(aa) Loan Agreement between Chesterfield County, South Carolina and the
company dated as of April 1, 1996 relating to Tax Exempt Adjustable
Mode Industrial Development Bonds (Culp, Inc. Project) Series 1996 in
the aggregate principal amount of $6,000,000.
10(bb) 1996 Amended and Restated Credit Agreement dated as of April 1, 1996 by
and among the company, First Union National Bank of North Carolina and
Wachovia Bank of North Carolina, N.A.
13(a) Copy of the company's 1996 Annual Report to Shareholders, for the
year ended April 28, 1996, furnished for information only except with
respect to those portions incorporated by reference into this report.
22 List of subsidiaries of the company.
24(a) Consent of Independent Public Auditors in connection with the
registration statements of Culp, Inc. on Form S-8 (File Nos. 33-13310,
33-37027, 33-80206 and 33-62843), dated March 20, 1987, September
18, 1990, June 13, 1994, and September 21, 1995.
25(a) Power of Attorney of Andrew W. Adams, dated June 14, 1996
25(b) Power of Attorney of Judith C. Walker, dated June 16, 1996.
25(c) Power of Attorney of Howard L. Dunn, Jr., dated June 16, 1996.
25(d) Power of Attorney of Baxter P. Freeze, dated June 18, 1996.
25(e) Power of Attorney of Earl M. Honeycutt, dated June 16, 1996.
25(f) Power of Attorney of Patrick H. Norton, dated June 17, 1996.
25(g) Power of Attorney of Earl N. Phillips, Jr., dated June 17, 1996.
-20-
<PAGE>
25(h) Power of Attorney of Bland W. Worley, dated June 18, 1996.
27 Financial Data Schedule
b) Reports on Form 8-K:
The company filed the following report on Form 8-K during the quarter ended
April 28, 1996:
(l) Form 8-K dated February 9, 1996, included under Item 5, Other
Events, disclosure of the company's press release for quarterly
earnings and Financial Information Release relating to financial
information for the quarter ended January 28, 1996.
c) Exhibits:
The exhibits to this Form 10-K are filed at the end of this Form 10-K
immediately preceded by an index. A list of the exhibits begins on page 23-under
the subheading "Exhibits Index".
d) Financial Statement Schedules:
See Item 14(a)(2)
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, CULP, INC. has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 25th day of July, 1996.
CULP, INC.
By: /s/ Robert G. Culp, III
Robert G. Culp, III
(Chairman and Chief Executive Officer)
By: /s/ Franklin N. Saxon
Franklin N. Saxon
(Vice President and Chief
Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 25th day of July, 1996.
/s/ Robert G. Culp, III /s/ Franklin N. Saxon
Robert G. Culp, III Franklin N. Saxon
(Chairman of the (Director)
Board of Directors)
/s/ Earl N. Phillips, Jr.* /s/ Judith C. Walker *
Earl N. Phillips, Jr. Judith C. Walker
(Director) (Director)
/s/ Howard L. Dunn, Jr.* /s/ Baxter P. Freeze *
Howard L. Dunn, Jr. Baxter P. Freeze
(Director) (Director)
/s/ Andrew W. Adams* /s/ Patrick H. Norton*
Andrew W. Adams Patrick H. Norton
(Director) (Director)
/s/ Earl M. Honeycutt* /s/ Bland W. Worley*
Earl M. Honeycutt Bland W. Worley
(Director) (Director)
* By Franklin N. Saxon, Attorney-in-Fact, pursuant to Powers of Attorney filed
with the Securities and Exchange Commission.
-22-
<PAGE>
EXHIBITS INDEX
Exhibit No. Exhibit
10(aa) Loan Agreement between Chesterfield County, South Carolina and the
company dated as of April 1, 1996 relating to Tax Exempt Adjustable
Mode Industrial Development Bonds (Culp, Inc. Project) Series 1996
in the aggregate principal amount of $6,000,000.
10(bb) 1996 Amended and Restated Credit Agreement dated as of April 1,
1996 by and among the company, First Union National Bank of North
Carolina and Wachovia Bank of North Carolina, N.A.
13(a) Copy of the company's 1996 Annual Report to Shareholders, for the
year ended April 28, 1996, furnished for information only except
with respect to those portions incorporated by reference into this
report.
22 List of subsidiaries of the company.
24(a) Consent of Independent Public Auditors in connection with the
registration statements of Culp, Inc. on Form S-8 (File Nos.
33-13310, 33-37027, 33-80206 and 33-62843), dated March 20, 1987,
September 18, 1990, June 13, 1994 and September 21, 1995.
25(a) Power of Attorney of Andrew W. Adams, dated June 14, 1996
25(b) Power of Attorney of Judith C.Walker, dated June 16, 1996.
25(c) Power of Attorney of Howard L. Dunn, Jr., dated June 16, 1996.
25(d) Power of Attorney of Baxter P. Freeze, dated June 18, 1996.
25(e) Power of Attorney of Earl M. Honeycutt, dated June 16, 1996.
25(f) Power of Attorney of Patrick H. Norton, dated June 17, 1996.
25(g) Power of Attorney of Earl N. Phillips, Jr., dated June 17, 1996.
25(h) Power of Attorney of Bland W. Worley, dated June 18, 1996.
27 Financial Data Schedule
-23-
Exhibit 10(aa)
LOAN AGREEMENT
between
CHESTERFIELD COUNTY, SOUTH CAROLINA
and
CULP, INC.
Dated as of April 1, 1996
Relating to
Tax-Exempt Adjustable Mode
Industrial Development Revenue Bonds
(Culp, Inc. Project)
Series 1996
in the aggregate principal amount of $6,000,000
CERTAIN RIGHTS OF THE ISSUER UNDER THIS AGREEMENT HAVE BEEN ASSIGNED TO, AND ARE
SUBJECT TO A SECURITY INTEREST IN FAVOR OF FIRST-CITIZENS BANK & TRUST COMPANY,
AS TRUSTEE UNDER AN INDENTURE OF TRUST, DATED AS OF THE DATE FIRST ABOVE
WRITTEN, AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME. INFORMATION CONCERNING
SUCH SECURITY INTEREST MAY BE OBTAINED FROM THE TRUSTEE AT 2917 HIGHWOODS
BOULEVARD, RALEIGH, NORTH CAROLINA 27604, ATTENTION:
CORPORATE TRUST DEPARTMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions.................................................................-2-
Section 1.2. Rules of Construction.......................................................-4-
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations by the Issuer...............................................-5-
Section 2.2. Representations by the Company..............................................-6-
ARTICLE III
ACQUISITION OF THE PROJECT
Section 3.1. Agreement to Undertake and Complete the
Project.....................................................................-8-
Section 3.2. Disbursements from the Initial Fund.........................................-8-
Section 3.3. Establishment of Completion Date and
Certificate as to Completion................................................-9-
Section 3.4. Closeout of Initial Fund; Disposition of
Balance in Initial Fund....................................................-10-
Section 3.5. Company Required to Pay Costs in Event
Initial Fund Insufficient..................................................-10-
Section 3.6. Company and Issuer Representatives and
Successors.................................................................-10-
Section 3.7. Investment of Moneys in Funds..............................................-11-
Section 3.8. Plans and Specifications...................................................-11-
ARTICLE IV
ISSUANCE OF THE BONDS
Section 4.1. Agreement to Issue the Bonds...............................................-12-
Section 4.2. No Third-Party Beneficiary.................................................-12-
ARTICLE V
LOAN; PAYMENT PROVISIONS
Section 5.1. Loan of Proceeds...........................................................-12-
Section 5.2. Amounts Payable............................................................-13-
Section 5.3. Unconditional Obligations..................................................-14-
Section 5.4. Prepayments................................................................-14-
-i-
<PAGE>
Page
Section 5.5. Credits Against Payments...................................................-14-
Section 5.6. Credit Facility and Alternate Credit
Facility...................................................................-15-
Section 5.7. Interest Rate Determination Method.........................................-15-
Section 5.8. Company Approval of Indenture..............................................-15-
ARTICLE VI
MAINTENANCE AND TAXES
Section 6.1. Company's Obligations to Maintain and
Repair.....................................................................-15-
Section 6.2. Taxes and Other Charges....................................................-15-
ARTICLE VII
INSURANCE, EMINENT DOMAIN AND DAMAGE AND DESTRUCTION
Section 7.1. Insurance..................................................................-16-
Section 7.2. Provisions Respecting Eminent Domain.......................................-16-
Section 7.3. Damage and Destruction.....................................................-16-
ARTICLE VIII
SPECIAL COVENANTS
Section 8.1. Access to the Property and Inspection......................................-16-
Section 8.2. Financial Statements.......................................................-16-
Section 8.3. Further Assurances and Corrective
Instruments................................................................-17-
Section 8.4. Recording and Filing; Other Instruments....................................-17-
Section 8.5. Exclusion from Gross Income for Federal
Income Tax Purposes of Interest on the Bonds...............................-17-
Section 8.6. Indemnity Against Claims...................................................-18-
Section 8.7. Release and Indemnification................................................-18-
Section 8.8. Compliance with Laws.......................................................-19-
Section 8.9. Non-Arbitrage Covenant.....................................................-19-
Section 8.10. Notice of Determination of Taxability......................................-19-
Section 8.11. No Purchase of Bonds by Company or
Issuer.....................................................................-20-
Section 8.12. Maintenance of Corporate Existence.........................................-20-
Section 8.13. Duties and Obligations.....................................................-21-
Section 8.14. Undertaking to Provide Continuing
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-21-
ARTICLE IX
ASSIGNMENT, LEASE AND SALE
-ii-
<PAGE>
Page
Section 9.1. Restrictions on Transfer of Issuer's
Rights.....................................................................-21-
Section 9.2. Assignment by the Issuer...................................................-21-
Section 9.3. Assignment, Lease or Sale of Project or
Assignment of Agreement by Company.........................................-22-
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1. Events of Default Defined..................................................-22-
Section 10.2. Remedies on Default........................................................-23-
Section 10.3. Application of Amounts Realized in
Enforcement of Remedies....................................................-24-
Section 10.4. No Remedy Exclusive........................................................-24-
Section 10.5. Agreement to Pay Attorneys' Fees and
Expenses...................................................................-24-
Section 10.6. Issuer and Company to Give Notice of
Default....................................................................-24-
ARTICLE XI
PREPAYMENTS; PURCHASE OF BONDS
Section 11.1. Optional Prepayments.......................................................-25-
Section 11.2. Mandatory Prepayment Upon a
Determination of Taxability................................................-25-
Section 11.3. Optional Purchase of Bonds.................................................-26-
Section 11.4. Relative Priorities........................................................-26-
Section 11.5. Prepayment to Include Fees and Expenses....................................-26-
Section 11.6. Purchase of Bonds..........................................................-26-
ARTICLE XII
MISCELLANEOUS
Section 12.1. Amounts Remaining in Funds.................................................-27-
Section 12.2. No Implied Waiver..........................................................-27-
Section 12.3. Issuer Representative......................................................-27-
Section 12.4. Company Representative.....................................................-28-
Section 12.5. Notices....................................................................-28-
Section 12.6. Issuer, Directors, Attorneys, Officers,
Employees and Agents of Issuer Not Liable..................................-28-
Section 12.7. No Liability of Issuer; No Charge
Against Issuer's Credit....................................................-28-
Section 12.8. If Performance Date Not a Business Day.....................................-29-
Section 12.9. Binding Effect.............................................................-29-
Section 12.10. Severability...............................................................-29-
Section 12.11. Amendments, Changes and Modifications......................................-29-
-iii-
<PAGE>
Page
Section 12.12. Execution in Counterparts..................................................-29-
Section 12.13. Applicable Law.............................................................-29-
Exhibit A - Description of the Project..........................................................................A-1
Exhibit B - Form of Requisition and Certificate.................................................................B-1
Exhibit C - Form of Promissory Note.............................................................................C-1
</TABLE>
-iv-
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of April 1, 1996, is made and
entered into by and between CHESTERFIELD COUNTY, SOUTH CAROLINA (the "Issuer"),
a political subdivision duly organized and existing under the Constitution and
laws of the State of South Carolina (the "State"), and CULP, INC. (the
"Company"), a North Carolina corporation;
W I T N E S S E T H:
WHEREAS, the Issuer is a body corporate and politic and a
political subdivision of the State and is authorized pursuant to the Title 4,
Chapter 29 of the Code of Laws of South Carolina, as amended (the "Act"), to
make loans to private persons for the acquisition, construction, and equipping
of manufacturing facilities for industry in Chesterfield County, South Carolina
and to issue its bonds from time to time for such purpose; and
WHEREAS, in order to further the purposes of the Act, the
Issuer will issue and sell its Tax-Exempt Adjustable Mode Industrial Revenue
Bonds (Culp, Inc. Project) Series 1996 in an aggregate principal amount of
$6,000,000 (the "Bonds"); and
WHEREAS, the proceeds from the sale of Bonds will be used to
make a loan (the "Loan") to the Company to finance, or to reimburse to the
Company, a portion of the cost of the acquisition and installation of equipment
in an existing manufacturing facility in Chesterfield County owned by the
Company (the "Project"); and
WHEREAS, the Issuer intends to issue the Bonds under an
Indenture of Trust dated as of even date herewith between First-Citizens Bank &
Trust Company (the "Trustee") and the Issuer (the "Indenture") and to assign to
the Trustee as security for the Bonds certain of the Issuer's rights under this
Agreement and the Company's Note of even date herewith, in the form attached
hereto as Exhibit C; and
WHEREAS, the Issuer and the Company desire to set forth
certain terms and conditions with respect to the issuance of the Bonds;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants hereinafter contained, the parties hereto covenant, agree and
bind themselves as follows;
<PAGE>
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1. Definitions. In addition to the words and terms
elsewhere defined in this Agreement, the following words and terms as used
herein shall have the following meanings unless the context or use clearly
indicates another or different meaning or intent, and any other words and terms
defined in the Indenture shall have the same meanings when used herein as
assigned in the Indenture unless the context or use clearly indicates another or
different meaning or intent:
"Acquisition", when used with reference to the Project, means
acquisition, construction, installation and equipping.
"Agreement" shall mean this Loan Agreement between the Issuer
and the Company and any modifications, alterations and supplements hereto made
in accordance with the provisions hereof and of the Indenture.
"Bond Documents" means, collectively, the Bonds, this
Agreement, the Note, the Indenture, the Credit Facility, the Credit Agreement,
the Placement Agreement, the Remarketing Agreement and the Offering Memorandum.
"Bond Proceeds" means the principal of the Bonds and any
investment earnings thereon while on deposit in the Initial Fund.
"Company Representative" means any one of the persons at the
time designated to act on behalf of the Company by written certificate furnished
to the Issuer and the Trustee containing the specimen signatures of such persons
and signed on behalf of the Company by the President or any Vice President of
the Company.
"Completion Date" means, with respect to the Project, the date
on which the Company Representative delivers a completion certificate to the
Trustee pursuant to Section 3.3.
"Cost(s) of the Project", "Cost" or "Costs" means all costs
and allowances which the Issuer or the Company may properly pay or accrue for
the Project and which, under generally accepted accounting principles, are
chargeable to the capital account of the Project or could be so charged either
with a proper election to capitalize such costs or, but for a proper election,
to expense such costs, including (without limitation) the following costs:
(a) fees and expenses incurred in preparing the plans and
specifications for the Project (including any preliminary study or planning or
any aspect thereof); any labor, services, materials and supplies used or
furnished in site improvement and construction; any equipment for the Project;
and any acquisition necessary to provide utility services or other services,
including trackage to provide the Project with public transportation
-2-
<PAGE>
facilities, roadways, parking lots, water supply, sewage and waste disposal
facilities; and all real and tangible personal property deemed necessary by the
Company and acquired in connection with the Project;
(b) fees for architectural, engineering, supervisory and
consulting services;
(c) any fees and expenses incurred in connection with
perfecting and protecting title to the Project and any fees and expenses
incurred in connection with preparing, recording or filing such documents,
instruments or financing statements as either the Company or the Issuer may deem
desirable to perfect or protect the rights of the Issuer or the Trustee under
the Bond Documents;
(d) any legal, accounting or financing advisory fees and
expenses, including, without limitation, fees and expenses of Bond Counsel and
counsel to the Issuer, the Company, the Credit Issuer, the Placement Agent, the
Remarketing Agent or the Trustee, any fees and expenses of the Issuer, Trustee,
Remarketing Agent, Placement Agent, Credit Issuer, Tender Agent, Paying Agent or
any rating agency, filing fees, and printing and engraving costs, incurred in
connection with the authorization, issuance, sale and purchase of the Bonds, and
the preparation of the Bond Documents and all other documents in connection with
the authorization, issuance and sale of the Bonds;
(e) interest to accrue on the Bonds during construction
of the Project;
(f) any administrative or other fees charged by the Issuer or
reimbursement thereto of expenses in connection with the Project until the
Completion Date; and
(g) any other costs and expenses relating to the Project which
could constitute costs or expenses for which the Issuer may expend Bond proceeds
under the Act.
"Eminent Domain" means the taking of title to, or the
temporary use of, the Project or any part thereof pursuant to eminent domain or
condemnation proceedings, or by any settlement or compromise of such
proceedings, or any voluntary conveyance of the Project or any part thereof
during the pendency of, or as a result of a threat of, such proceedings.
"Event of Default" shall have the meaning set forth in Section
10.1.
"Governing Body" means the board, commission, council or other
body in which the general legislative powers of the Issuer are vested.
"Issuer Representative" means any one of the persons at the
time designated to act on behalf of the Issuer by written
-3-
<PAGE>
certificate furnished to the Company and the Trustee containing the specimen
signatures of such persons and signed on behalf of the Issuer by the Chairman or
Vice Chairman of the Chesterfield County Council.
"Net Proceeds", when used with respect to any proceeds of
insurance or proceeds resulting from Eminent Domain, means the gross proceeds
therefrom less all expenses (including attorneys' fees) incurred in realization
thereof.
"Offering Memorandum" means the Preliminary Offering
Memorandum and the final Offering Memorandum prepared and used in connection
with the initial placement of the Bonds on the Issue Date.
"Plans and Specifications" shall mean the plans and
specifications used in the Acquisition of the Project, as the same may be
revised from time to time by the Company in accordance with Section 3.8.
"Project" means the project more fully described in Exhibit A
hereto, as the same may at any time exist.
"Remarketing Agreement" means the Remarketing and Interest
Services Agreement, dated as of April 1, 1996, between the Company and the
Remarketing Agent.
"Tax Regulations" means the applicable treasury regulations
promulgated under the Code or under Section 103 of the Internal Revenue Code of
1954, as amended, whether at the time proposed, temporary, final or otherwise.
Section 1.2. Rules of Construction. Unless the context clearly
indicates to the contrary, the following rules shall apply to the construction
of this Agreement:
(a) Capitalized terms used but not defined in this
Agreement shall have the meaning ascribed to them in the Indenture.
(b) Words importing the singular number shall include
the plural number and vice versa.
(c) The table of contents, captions and headings herein are
solely for convenience of reference only and shall not constitute a part of this
Agreement nor shall they affect its meaning, construction or effect.
(d) Words of the masculine gender shall be deemed and
construed to include correlative words of the feminine and neuter genders, and
words of the neuter gender shall be deemed and construed to include correlative
words of the masculine and feminine genders.
-4-
<PAGE>
(e) All references in this Agreement to particular Articles or
Sections are references to Articles and Sections of this Agreement, unless
otherwise indicated.
ARTICLE II
REPRESENTATIONS
Section 2.1. Representations by the Issuer. The Issuer
represents and warrants as follows:
(a) The Issuer is a duly constituted public body corporate and
politic of the State.
(b) Under the provisions of the Act, the Issuer is authorized
to execute and to enter into this Agreement and to undertake the transactions
contemplated herein and to carry out its obligations hereunder.
(c) The Issuer has all requisite power, authority and legal
right to execute and deliver the Bond Documents to which it is a party and all
other instruments and documents to be executed and delivered by the Issuer
pursuant thereto, to perform and observe the provisions thereof and to carry out
the transactions contemplated by the Bond Documents. All corporate action on the
part of the Issuer which is required for the execution, delivery, performance
and observance by the Issuer of the Bond Documents has been duly authorized and
effectively taken, and such execution, delivery, performance and observation by
the Issuer do not contravene applicable law or any contractual restriction
binding on or affecting the Issuer.
(d) The Issuer has duly approved the issuance of the Bonds and
the loan of the proceeds thereof to the Company for the Acquisition of the
Project; no other authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required as a
condition to the performance by the Issuer of its obligations under any Bond
Documents.
(e) This Agreement is, and each other Bond Document to which
the Issuer is a party when delivered will be, legal valid and binding special
obligations of the Issuer enforceable against the Issuer in accordance with its
terms.
(f) There is no default of the Issuer in the payment of the
principal of or interest on any of its indebtedness for borrowed money or under
any instrument or instruments or agreements under and subject to which any
indebtedness for borrowed money has been incurred which does or could affect the
validity and enforceability of the Bond Documents or the ability of the Issuer
to perform its obligations thereunder, and no event has occurred and is
continuing under the provisions of any such instrument or
-5-
<PAGE>
agreement which constitutes or, with the lapse of time or the giving of notice,
or both, would constitute such a default.
(g) With respect to the Bonds, there are no other obligations
of the Issuer that have been, are being or will be sold (i) at substantially the
same time, (ii) under a common plan of marketing, and (iii) at substantially the
same rate of interest.
(h) There is pending or, to the knowledge of the undersigned
officers of the Issuer, threatened no action or proceeding before any court,
governmental agency or arbitrator (i) to restrain or enjoin the issuance or
delivery of the Bonds or the collection of any revenues pledged under the
Indenture, (ii) in any way contesting or affecting the authority for the
issuance of the Bonds or the validity of any of the Bond Documents, or (iii) in
any way contesting the existence or powers of the Issuer.
(i) In connection with the authorization, issuance and sale of
the Bonds, the Issuer has complied with all provisions of the Constitution and
laws of the State, including the Act.
(j) The Issuer has not assigned or pledged and will not assign
or pledge its interest in this Agreement for any purpose other than to secure
the Bonds under the Indenture. The Bonds constitute the only bonds or other
obligations of the Issuer in any manner payable from the revenues to be derived
from this Agreement, and except for the Bonds, no bonds or other obligations
have been or will be issued on the basis of this Agreement.
(k) The Issuer is not in default under any of the provisions
of the laws of the State, where any such default would affect the issuance,
validity or enforceability of the Bonds or the transactions contemplated by this
Agreement or the Indenture.
Section 2.2. Representations by the Company. The Company
represents and warrants as follows:
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of North Carolina, is
in good standing under the laws of the State, and has corporate and other legal
power and authority to enter into and to perform the agreements and covenants on
its part contained in the Bond Documents to which it is a party, and has duly
authorized the execution, delivery and performance of the Bond Documents to
which it is a party and has duly approved the Bond Documents.
(b) The execution and delivery of the Bond Documents to which
it is a party, consummation of the transactions contemplated hereby and thereby
and by the Bond Documents to which it is not a party, and the fulfillment of or
compliance with the terms and conditions hereof and thereof will not conflict
with or constitute a breach of or a default under the Company's articles of
incorporation or bylaws or any agreement or instrument to which the
-6-
<PAGE>
Company is a party or any existing law, administrative regulation, court order
or consent decree to which the Company is subject, or by which it or any of its
property is bound.
(c) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or
body, pending or threatened against or affecting the Company or any of its
officers, nor to the best knowledge of the Company is there any basis therefor,
wherein an unfavorable decision, ruling or finding would materially adversely
affect the transactions contemplated by this Agreement or that would adversely
affect, in any way, the validity or enforceability of any of the Bond Documents
or any other agreement or instrument to which the Company is a party and that is
to be used or contemplated for use in the consummation of the transactions
contemplated hereby.
(d) No further authorizations, consents or approvals of
governmental bodies or agencies are required in connection with the execution
and delivery by the Company of this Agreement or the other Bond Documents to
which the Company is a party or in connection with the carrying out by the
Company of its obligations under this Agreement or the other Bond Documents to
which the Company is a party.
(e) The financing of the Project as provided under this
Agreement, and commitments therefor made by the Issuer have induced the Company
to expand or locate its operations in the jurisdiction of the Issuer.
(f) The Company anticipates that upon completion of the
Acquisition of the Project, the Company will operate the Project as a "project"
within the meaning of the Act until the Bonds have been paid in full.
(g) The Project is of the type authorized and permitted by the
Act, and the Project is substantially the same in all material respects to that
described in the notice of public hearing published on December 19, 1995.
(h) The Project will be acquired and installed and will be
operated by the Company in such manner as to conform with all applicable zoning,
planning, building, environmental and other regulations of the governmental
authorities having jurisdiction over the Project.
(i) The Company will cause all of the proceeds of the Bonds to
be applied solely to the payment of Costs of the Project.
(j) The Company has taken no action, and has not omitted to
take any action, which action or omission to take action would in any way affect
or impair the excludability of interest on the Bonds from gross income of the
Holders thereof for federal income tax purposes.
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(k) The Company presently in good faith estimates the Cost of
the Project to equal or exceed the original principal amount of the Bonds.
(l) The Project will be located wholly within Chesterfield
County, South Carolina.
ARTICLE III
ACQUISITION OF THE PROJECT
Section 3.1. Agreement to Undertake and Complete the Project.
The Company covenants and agrees to undertake and complete the Acquisition of
the Project. Upon written request of the Issuer or the Trustee, the Company
agrees to make available to the Issuer and the Trustee (for review and copying)
all the then current Plans and Specifications for the Project.
The Company agrees to cause the Project to be completed as
soon as may be practicable and to cause all proceeds of the Bonds, including
investment earnings, to be expended no later than three years from the Issue
Date. For Costs of the Project incurred prior to receipt by the Issuer of the
proceeds of the Bonds, the Company agrees to advance all funds necessary for
such purpose. Such advances may be reimbursed from the Initial Fund to the
extent permitted by Section 3.2.
The Company shall obtain or cause to be obtained all necessary
permits and approvals for the Acquisition, operation and maintenance of the
Project.
Section 3.2. Disbursements from the Initial Fund. In the
Indenture, the Issuer has authorized and directed the Trustee to use the moneys
in the Initial Fund for payment or reimbursement to the Company of the Costs of
the Project.
Each payment for a Cost of the Project shall be made only upon
the receipt by the Trustee and, upon written request therefor, the Issuer of a
requisition and certificate, substantially in the form attached hereto as
Exhibit B and signed by the Company Representative, certifying:
(a) the requisition and certificate number;
(b) the payee, which may be the Issuer or the Trustee for the
payment of the fees and expenses of the Issuer or the Trustee, as the case may
be, and which may be the Company in the case of (i) work performed by the
Company's personnel, or (ii) payments advanced by the Company for the Project;
(c) the amount to be paid;
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(d) that the payment is due, is a proper charge against the
Initial Fund, and has not been the basis for any previous withdrawal from the
Initial Fund;
(e) that all funds being requisitioned shall be used in
compliance with the Code and the Tax Regulations promulgated thereunder, and
that substantially all such funds shall be used for the acquisition,
construction or installation of property of a character subject to the allowance
for depreciation as prescribed by Section 144(a)(1)(A) of the Code and the Tax
Regulations promulgated thereunder. The Company agrees, however, that it will
not request any such disbursement which, if paid, would result in (i) less than
substantially all (at least ninety-five percent (95%)) of the proceeds of the
Bonds being used to provide land or property subject to the allowance for
depreciation under Section 167 of the Code, constituting the Project, (ii) less
than all of the proceeds of the Bonds being used to provide the Project under
the Act, or (iii) the inclusion of the interest on any of the Bonds in the gross
income of any Holder for purposes of federal income taxation (as long as such
Holder is not a "related person" or a "substantial user" of the Project as such
terms are used in Section 144 of the Code); and
(f) that no Event of Default, as defined in Section 10.1 of
this Agreement, has occurred which has not been waived and that the Company is
not aware of any then existing event or condition which, with the passage of
time, would constitute an Event of Default under Section 10.1.
Interest on the Bonds and all legal, consulting and issuance
expenses shall be set forth separately in any requisition and certificate
requesting payment therefor. Such requisitions and certificates shall be
consecutively numbered. Upon request, the Company shall furnish the Issuer or
the Trustee with copies of invoices or other appropriate documentation
supporting payments or reimbursements requested pursuant to this Section. The
Issuer and the Trustee may rely conclusively upon any statement made in any such
requisition and certificate.
Section 3.3. Establishment of Completion Date and Certificate
as to Completion. The Completion Date shall be the date on which the Company
Representative signs and delivers to the Trustee a certificate stating that,
except for amounts retained by the Trustee for Costs of the Project not then due
and payable, or the liability for which the Company is, in good faith,
contesting or disputing, (a) the Project has been completed to the satisfaction
of the Company, and all labor, services, materials and supplies used in such
Acquisition have been paid for, and (b) the Project is suitable and sufficient
for the efficient operation as a "project" (as defined in the Act).
Notwithstanding the foregoing, such certificate may state that
it is given without prejudice to any rights against third
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parties which exist at the date of such certificate or which may subsequently
come into being.
Section 3.4. Closeout of Initial Fund; Disposition of Balance
in Initial Fund. All moneys and any unliquidated investments remaining in the
Initial Fund on the Completion Date and after payment in full of the Costs of
the Project (except for costs not then due and payable for the payment of which
the Trustee shall have retained amounts as hereinafter provided) shall, as soon
as practicable after the Completion Date, and no later than ninety days
thereafter, at the direction of the Company, be delivered to the Trustee for
deposit in the Surplus Fund. The Trustee shall, at the direction of the Company
Representative, retain moneys in the Initial Fund for payment of Costs of the
Project not then due and payable. Any balance of such retained funds remaining
after full payment of such Costs of the Project shall at the direction of the
Company be delivered to the Trustee for deposit in the Surplus Fund to be
applied to the redemption of Bonds in accordance with the terms of the
Indenture.
Section 3.5. Company Required to Pay Costs in Event Initial
Fund Insufficient. If the moneys in the Initial Fund available for payment of
the Costs of the Project should not be sufficient to make such payments in full,
the Company agrees to pay directly (or to deposit moneys in the Initial Fund for
the payment of) such costs of completing the Project as may be in excess of the
moneys available therefor in the Initial Fund. THE ISSUER DOES NOT MAKE ANY
WARRANTY OR REPRESENTATION (EITHER EXPRESS OR IMPLIED) THAT THE MONEYS DEPOSITED
INTO THE INITIAL FUND AND AVAILABLE FOR PAYMENT OF THE COSTS OF THE PROJECT,
UNDER THE PROVISIONS OF THIS AGREEMENT, WILL BE SUFFICIENT TO PAY ALL OF THE
COSTS OF THE PROJECT. If, after exhausting the moneys in the Initial Fund for
any reason (including, without limitation, losses on investments made by the
Trustee under the Indenture), the Company pays, or deposits moneys in the
Initial Fund for the payment of, any portion of the Costs of the Project
pursuant to the provisions of this Section, the Company shall not be entitled to
any reimbursement therefor from the Issuer or from the Trustee, nor shall it be
entitled to any diminution of the amounts payable under Section 5.2.
Section 3.6. Company and Issuer Representatives and
Successors. At or prior to the initial sale of the Bonds, the Company and the
Issuer shall appoint a Company Representative and an Issuer Representative,
respectively, for the purpose of taking all actions and delivering all
certificates required to be taken and delivered by the Company Representative
and the Issuer Representative under the provisions of this Agreement. The
Company and the Issuer, respectively, may appoint alternate Company
Representatives and alternate Issuer Representatives to take any such action or
make any such certificate if the same is not taken or made by the Company
Representative or the Issuer Representative. In the event any of such persons,
or any successor appointed pursuant to the provisions of this Section, should
resign or become
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unavailable or unable to take any action or deliver any certificate provided for
in this Agreement, another Company Representative or alternate Company
Representative, or another Issuer Representative or alternate Issuer
Representative, shall thereupon be appointed by the Company or the Issuer,
respectively. If the Company or the Issuer fails to make such designation within
ten (10) days following the date when the then incumbent Company Representative
or Issuer Representative resigns or becomes unavailable or unable to take any
such actions, the President or any Vice President of the Company, or the
Chairman of the Chesterfield County Council, shall serve as the Company
Representative or the Issuer Representative, respectively.
Whenever the provisions of this Agreement require the
Company's approval or require the Issuer or the Trustee to take some action at
the request or direction of the Company, the Company Representative shall make,
in writing, such approval or such request or direction unless otherwise
specified in this Agreement. The Company shall have no complaint against the
Issuer or the Trustee as a result of any action so taken with the written
approval of or at the written direction of the Company Representative.
Section 3.7. Investment of Moneys in Funds. The Trustee may
invest or reinvest any moneys held pursuant to the Indenture to the extent
permitted by Section 4.7 of the Indenture and by law (but subject to the
provisions of Section 8.9(a) hereof), in Permitted Investments, as defined in
the Indenture, as directed by a Company Representative.
Any such securities may be purchased at the offering or market
price thereof at the time of such purchase.
The Trustee may make any and all such investments through its
own bond department or trust investments department. Any interest accruing on or
profit realized from the investment of any moneys held as part of the Initial
Fund shall be credited to the Initial Fund, and any loss resulting from such
investment shall be charged to the Initial Fund. Any interest accruing on or
profit realized from the investment of any moneys held as a part of the Bond
Fund shall be credited to the Bond Fund, and any loss resulting from such
investment shall be charged to the Bond Fund. Neither the Issuer nor the Trustee
shall be liable for any loss resulting from any such investments, provided the
Trustee has performed its respective obligations under Section 4.7 of the
Indenture in accordance with Section 7.1(b) of the Indenture. For the purposes
of this Section, any interest-bearing deposits, including certificates of
deposit, issued by or on deposit with the Trustee shall be deemed to be
investments and not deposits.
Section 3.8. Plans and Specifications. The Company shall
maintain a set of Plans and Specifications at the Project which shall be
available to the Issuer and the Trustee for inspection and examination during
the Company's regular business
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hours. The Issuer, the Trustee and the Company agree that the Company may
supplement, amend and add to the Plans and Specifications, and that the Company
shall be authorized to omit or make substitutions for components of the Project,
without the approval of the Issuer and the Trustee, provided that no such change
shall be made which, after giving effect to such change, would cause any of the
representations and warranties set forth in Section 2.2 hereof to be false or
misleading in any material respect, or would result in a violation of the
covenant set forth in Section 8.5. If any such change would render materially
incorrect or inaccurate the description of the initial components of the Project
as set forth in Exhibit A to this Agreement, the Company shall deliver to the
Issuer and the Trustee an opinion of Bond Counsel to the effect that such change
will not cause the interest on the Bonds to be includable in the gross income of
the owners thereof for federal income tax purposes, and thereafter, the Company
and the Issuer shall amend such Exhibit A to reflect such change. No approvals
of the Issuer and the Trustee shall be required for the Acquisition of the
Project or for the solicitation, negotiation, award or execution of contracts
relating thereto.
ARTICLE IV
ISSUANCE OF THE BONDS
Section 4.1. Agreement to Issue the Bonds. To provide funds
for the Acquisition of the Project, the Issuer agrees that it will sell, issue
and deliver the Bonds in the aggregate principal amount of $6,000,000 to the
initial purchasers thereof and will cause the proceeds of the Bonds to be
applied as provided in Section 4.5 of the Indenture.
Section 4.2. No Third-Party Beneficiary. It is specifically
agreed between the parties executing this Agreement that it is not intended by
any of the provisions of any part of this Agreement to establish in favor of the
public or any member thereof, other than as expressly provided herein or as
contemplated in the Indenture, the rights of a third-party beneficiary
hereunder, or to authorize anyone not a party to this Agreement to maintain a
suit for personal injuries or property damage pursuant to the terms or
provisions of this Agreement. The duties, obligations and responsibilities of
the parties to this Agreement with respect to third parties shall remain as
imposed by law.
ARTICLE V
LOAN; PAYMENT PROVISIONS
Section 5.1. Loan of Proceeds. The Issuer agrees, upon the
terms and conditions contained in this Agreement and the Indenture, to lend to
the Company the proceeds received by the
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Issuer from the sale of the Bonds. The loan shall be made by depositing the
accrued interest, if any, from the initial sale of the Bonds into the Bond Fund
and the remainder of said proceeds in the Initial Fund in accordance with
Section 4.5 of the Indenture. Such proceeds shall be disbursed to or on behalf
of the Company as provided in Section 3.2. The Company's obligation to repay the
loan shall be evidenced by a Promissory Note, the form of which is attached
hereto as Exhibit C, dated the Issue Date.
Section 5.2. Amounts Payable. The Company hereby agrees to pay
the Note and repay the loan made pursuant to this Agreement by making the
following payments:
(a) The Company shall pay to the Trustee in immediately
available funds for the account of the Issuer for deposit into the Bond Fund on
or before any Interest Payment Date for the Bonds or any other date that any
payment of interest, premium, if any, or principal is required to be made in
respect of the Bonds pursuant to the Indenture, until the principal of, premium,
if any, and interest on the Bonds shall have been fully paid or provision for
the payment thereof shall have been made in accordance with the Indenture, a sum
which, together with any Eligible Funds available for such payment in the Bond
Fund, will enable the Trustee to pay the amount payable on such date as
principal of (whether at maturity or upon redemption or acceleration or
otherwise), premium, if any, and interest on the Bonds as provided in the
Indenture; provided, however, that the obligation of the Company to make any
payment hereunder shall be deemed satisfied and discharged to the extent of the
corresponding payment made by the Credit Issuer under the Credit Facility.
It is understood and agreed that the Note and all payments
payable by the Company under this subsection are assigned by the Issuer to the
Trustee for the benefit of the Holders. The Company assents to such assignment.
The Issuer hereby directs the Company and the Company hereby agrees to pay to
the Trustee at the principal corporate trust office of the Trustee all payments
payable by the Company pursuant to the Note and this subsection.
(b) The Company will also pay the reasonable fees and expenses
of the Issuer, the Trustee, the Tender Agent, the Paying Agent, the Placement
Agent, the Remarketing Agent and the Registrar under the Indenture and all other
amounts which may be payable to the Trustee, Paying Agent, Registrar or the
Tender Agent under Section 7.2 of the Indenture, and the reasonable fees and
expenses of the Remarketing Agent, such fees and expenses to be paid when due
and payable by the Company directly to the Trustee, Tender Agent, Paying Agent,
Registrar and Remarketing Agent, respectively, for their own account.
(c) The Company will also pay when due and payable the
reasonable fees and expenses of the Issuer related to the issuance of the Bonds,
including without limitation, attorneys' fees and expenses.
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(d) The Company covenants, for the benefit of the Holders, to
pay or cause to be paid, to the Paying Agent, such amounts as shall be necessary
to enable the Paying Agent to pay the Purchase Price of Bonds delivered to the
Tender Agent or the Remarketing Agent, as the case may be, for purchase, all as
more particularly described in Section 2.6 of the Indenture; provided, however,
that the obligation of the Company to make any such payment under this
subsection shall be reduced by the amount of moneys available for such payment
described in Section 2.6(g)(i) and (ii) of the Indenture; and provided, further,
that the obligation of the Company to make any payment under this subsection
shall be deemed to be satisfied and discharged to the extent of the
corresponding payment made by the Credit Issuer under the Credit Facility.
(e) In the event the Company shall fail to make any of the
payments required in this Section, the item or installment so in default shall
continue as an obligation of the Company until the amount in default shall have
been fully paid.
Section 5.3. Unconditional Obligations. The obligation of the
Company to make the payments required by Section 5.2 shall be absolute and
unconditional. The Company shall pay all such amounts without abatement,
diminution or deduction (whether for taxes or otherwise) regardless of any cause
or circumstance whatsoever including, without limitation, any defense, set-off,
recoupment or counterclaim that the Company may have or assert against the
Issuer, the Trustee or any other Person.
Section 5.4. Prepayments. The Company may prepay all or any
part of the amounts required to be paid by it under Section 5.2, at the times
and in the amounts provided in Article XI for redemption of the Bonds, and in
the case of mandatory redemptions of the Bonds, the Company shall cause to be
furnished to the Issuer such amounts on or prior to the applicable redemption
dates. Prepayment of amounts due hereunder pursuant to this Section shall be
deposited in the Bond Fund.
Section 5.5. Credits Against Payments. To the extent that
principal of or premium, if any, or interest on the Bonds shall be paid, there
shall be credited against payments required by Section 5.2, an amount equal to
the principal of or premium, if any, or interest on the Bonds so paid. If the
principal of and premium, if any, and interest on the Bonds shall have been paid
sufficiently that payment of the Bonds shall have occurred in accordance with
Article V of the Indenture, then the obligations of the Company pursuant to
Section 5.2, ipso facto, shall be deemed to have been paid in full, and the
Company's obligations under Section 5.2 and this Agreement shall be discharged.
Notwithstanding the foregoing to the extent that principal of or premium, if
any, or interest on the Bonds is paid from drawings under the Credit Facility,
there shall be credited against the unpaid loan payments required by Section 5.2
hereof, an amount
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equal to the principal of or premium, if any, or interest on the Bonds so paid.
Section 5.6. Credit Facility and Alternate Credit Facility.
The Company shall provide for the payment of amounts payable pursuant to Section
5.2(a) and (d) herein, by the delivery to the Trustee on the Issue Date of the
Original Credit Facility. The Company shall be entitled to terminate the Credit
Facility as provided therein and in the Indenture and shall be entitled to
provide an Alternate Credit Facility under certain circumstances as provided in
the Indenture.
Section 5.7. Interest Rate Determination Method. The Company
is hereby granted the right to designate from time to time changes in the
Interest Rate Determination Method (as defined in the Indenture) in the manner
and to the extent set forth in Section 2.4 of the Indenture.
Section 5.8. Company Approval of Indenture. A copy of the
Indenture has been submitted to the Company for its examination and review. By
its execution of this Agreement, the Company acknowledges that it has approved,
has agreed to and is bound by the provisions of the Indenture. The Company
agrees that the Trustee shall be entitled to enforce and to benefit from the
terms and conditions of this Agreement that relate to it notwithstanding the
fact that it is not a signatory hereto.
ARTICLE VI
MAINTENANCE AND TAXES
Section 6.1. Company's Obligations to Maintain and Repair. The
Company agrees that during the term of this Agreement it will keep and maintain
the Project in good condition, repair and working order, ordinary wear and tear
excepted, at its own cost, and will make or cause to be made from time to time
all necessary repairs thereto (including external and structural repairs) and
renewals and replacements thereto.
Section 6.2. Taxes and Other Charges. The Company will
promptly pay and discharge or cause to be promptly paid and discharged, as the
same become due, all taxes, assessments, governmental charges or levies and all
utility and other charges incurred in the operation, maintenance, use, occupancy
and upkeep of the Project imposed upon it or in respect of the Project before
the same shall become in default, as well as all lawful claims which, if unpaid,
might become a lien or charge upon such property and assets or any part thereof,
except such that are contested in good faith by the Company for which the
Company has maintained adequate reserves satisfactory to the Credit Issuer, or
in the absence of any Credit Issuer, satisfactory to the Issuer and the Trustee.
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ARTICLE VII
INSURANCE, EMINENT DOMAIN AND DAMAGE AND DESTRUCTION
Section 7.1. Insurance. The Company will during the term of
this Agreement and at all times while any Bonds are outstanding continuously
insure the Project against such risks as are customarily insured against by
businesses of like size and type, paying as the same become due all premiums in
respect thereof. In addition the Company shall comply, or cause compliance, with
applicable worker's compensation laws of the State.
Section 7.2. Provisions Respecting Eminent Domain. In case of
any damage to or destruction of all or any part of the Project exceeding
$50,000, the Company shall give prompt written notice thereof to the Issuer and
the Trustee. In case of a taking or proposed taking of all or any part of the
Project or any right therein by Eminent Domain, the party upon which notice of
such taking is served shall give prompt written notice to the other and to the
Trustee. Each such notice shall describe generally the nature and extent of such
damage, destruction, taking, loss, proceedings or negotiations.
Section 7.3. Damage and Destruction. If at any time while any
of the Bonds are Outstanding, the Project, or any portion thereof, shall be
damaged or destroyed by fire, flood, windstorm or other casualty, or title to,
or the temporary use of, the Project, or any portion thereof, shall have been
taken by the power of Eminent Domain, the Company (unless it shall have
exercised its option to prepay all of the Bonds) shall cause the Net Proceeds
from insurance or condemnation or an amount equal thereto to be used for the
repair, reconstruction, restoration or improvement of the Project.
Notwithstanding the above, so long as the Credit Facility is outstanding, the
Company shall comply with the terms of the Credit Agreement related to the use
of insurance proceeds.
ARTICLE VIII
SPECIAL COVENANTS
Section 8.1. Access to the Property and Inspection. The Issuer
and the Trustee, and their respective agents and employees, shall have the
right, at all reasonable times during normal business hours of the Company upon
the furnishing of reasonable notice to the Company under the circumstances, to
enter upon and examine and inspect the Project and to examine and copy the books
and records of the Company insofar as such books and records relate to the
Project or the Bond Documents.
Section 8.2. Financial Statements. The Company shall, upon
request, deliver to the Trustee and the Issuer as soon as practicable and in any
event within 120 days after the end of each
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fiscal year of the Company, the financial reports of the Company for such fiscal
year.
Section 8.3. Further Assurances and Corrective Instruments.
(a) Subject to the provisions of the Indenture, the Issuer and
the Company agree that they will, from time to time, execute, acknowledge and
deliver, or cause to be executed, acknowledged and delivered, such supplements
and amendments hereto and such further instruments as may reasonably be required
for carrying out the intention or facilitating the performance of this
Agreement.
(b) The Company shall cause this Agreement to be kept recorded
and filed in such manner and in such places as may be required by law to fully
preserve and protect the security of the Holders and the rights of the Trustee
and to perfect the security interest created by the Indenture.
Section 8.4. Recording and Filing; Other Instruments.
(a) The Company covenants that it will cause continuation
statements to be filed as required by law in order fully to preserve and to
protect the rights of the Trustee or the Issuer in the assignment of certain
rights of the Issuer under this Agreement and otherwise under the Indenture. The
Company covenants that it will cause Counsel to render an opinion to the Issuer
and to the Trustee not earlier than 60 nor later than 30 days prior to each
anniversary date occurring at five-year intervals after the issuance of the
Bonds to the effect that all Financing Statements, notices and other instruments
required by applicable law, including this Agreement, have been recorded or
filed or re-recorded or refiled in such manner and in such places required by
law in order to fully preserve and protect the rights of the Trustee in the
assignment of certain rights of the Issuer under this Agreement and otherwise
under the Indenture.
(b) The Company and the Issuer shall execute and deliver all
instruments and shall furnish all information and evidence deemed necessary or
advisable in order to enable the Company to fulfill its obligations as provided
in subsection (a) of this Section. The Company shall file and re-file and record
and rerecord or shall cause to be filed and re-filed and recorded and rerecorded
all instruments required to be filed and re-filed and recorded or re-recorded
and shall continue or cause to be continued the liens of such instruments for so
long as any of the Bonds shall be Outstanding.
Section 8.5. Exclusion from Gross Income for Federal Income
Tax Purposes of Interest on the Bonds. The Company covenants and agrees that it
has not taken and will not take or cause to be taken, and has not omitted and
will not omit or cause to be omitted, any action which results in interest paid
on the
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Bonds being included in gross income of the Holders of the Bonds for the
purposes of federal income taxation.
The Company covenants and agrees that it will take or cause to
be taken all required actions necessary to preserve the exclusion from gross
income for federal income tax purposes of interest on the Bonds; and the Issuer
covenants and agrees that it will take or cause to be taken all required actions
to preserve the exclusion from gross income for federal income tax purposes of
interest on the Bonds.
Section 8.6. Indemnity Against Claims. The Company will pay
and discharge and will indemnify and hold harmless the Issuer and the Trustee
from any taxes, assessments, impositions and other charges in respect of the
Project. If any such claim is asserted, or any such lien or charge upon
payments, or any such taxes, assessments, impositions or other charges, are
sought to be imposed, the Issuer will give prompt written notice to the Company
and the Trustee; provided, however, that the failure to provide such notice will
not relieve the Company of the Company's obligations and liability under this
Section and will not give rise to any claim against or liability of the Issuer.
The Company shall have the sole right and duty to assume, and shall assume, the
defense thereof, with counsel acceptable to the person on behalf of which the
Company undertakes a defense, with full power to litigate, compromise or settle
the same in its sole discretion.
Section 8.7. Release and Indemnification. The Company shall at
all times protect, indemnify and hold the Issuer, the members of the Governing
Body, and the attorneys, agents and employees of the Issuer and the Trustee and
its officers, attorneys, agents and employees harmless against any and all
liability, losses, damages, costs, expenses, taxes, causes of action, suits,
claims, demands and judgments of any nature arising from or in connection with
the Project or the financing of the Project, including, without limitation, all
claims or liability resulting from, arising out of or in connection with the
acceptance or administration of the Bond Documents or the trusts thereunder or
the performance of duties under the Bond Documents or any loss or damage to
property or any injury to or death of any person that may be occasioned by any
cause whatsoever pertaining to the Project or the use thereof, including without
limitation any lease thereof or assignment of its interest in this Agreement,
such indemnification to include the reasonable costs and expenses of defending
itself or investigating any claim of liability and other reasonable expenses and
attorneys' fees incurred by the Issuer, its directors, members, officers,
attorneys, agents and employees and the Trustee and its officers, attorneys,
agents and employees in connection therewith, provided that the benefits of this
Section shall not inure to any person other than the Issuer, its directors,
members, officers, attorneys, agents and employees and the Trustee and its
officers, attorneys, agents and employees, and provided further that such loss,
damage, death, injury, claims, demands or causes shall not have resulted from
the gross negligence or willful misconduct of,
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the Issuer or such directors, member, officer, attorneys, agent or employee or
the Trustee or its officers, attorneys, agents or employees. The obligations of
the Company under this Section shall survive the termination of this Agreement
and the Indenture. Notwithstanding any other provision of this Agreement or the
Indenture to the contrary, the Company agrees (i) not to assert any claim or
institute any action or suit against the Trustee or its employees arising from
or in connection with any investment of funds made by the Trustee in good faith
as directed by a Company Representative, and (ii) to indemnify and hold the
Trustee and its employees harmless against any liability, losses, damages,
costs, expenses, causes of action, suits, claims, demands and judgment of any
nature arising from or in connection with any such investment.
Section 8.8. Compliance with Laws. The Company agrees to
comply with all applicable zoning, planning, building, environmental and other
regulations of the governmental authorities having jurisdiction of the Project
during the Company's operation of the Project.
Section 8.9. Non-Arbitrage Covenant.
(a) The Company and the Issuer covenant that they will (i) not
take any action or make any investment or use of the proceeds of the Bonds that
would cause the Bonds to be "arbitrage bonds" within the meaning of Section 148
of the Code and (ii) comply with the requirements of Section 148 of the Code.
(b) In the event that all of the proceeds of the Bonds,
including the investment proceeds thereof, are not expended by the date which is
six (6) months following the Issue Date, or if for any other reason a rebate is
payable to the United States pursuant to Section 148 of the Code, the Company
shall calculate, or cause to be calculated, the Rebate Amount (as defined in the
Indenture). The Company agrees to pay the amount so calculated, together with
supporting documentation, to the Trustee so as to permit the Trustee to pay such
rebate to the United States at the times required by the Code. The amount paid
by the Company to the Trustee shall be deposited into the Rebate Fund. The
Company shall maintain or cause to be maintained records of the determinations
of the rebate, if any, pursuant to this Section until six (6) years after the
retirement of the Bonds. This Section shall be construed in accordance with
Section 148(f) of the Code, including, without limitation, any applicable tax
regulations promulgated under the Code. Nothing contained in this Agreement or
in the Indenture shall be interpreted or construed to require the Issuer to pay
any applicable rebate, such obligation being the sole responsibility of the
Company.
Section 8.10. Notice of Determination of Taxability. Promptly
after the Company first becomes aware of any Determination of Taxability or an
event that could trigger a Determination of Taxability, the Company shall give
written notice thereof to the Issuer, the Remarketing Agent and the Trustee.
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Section 8.11. No Purchase of Bonds by Company or Issuer.
During the time a Credit Facility is in effect neither the Company, the Issuer
nor any affiliates of any of them shall purchase any of the Bonds from the
Remarketing Agent except under the circumstances under which the Remarketing
Agent may remarket Bonds to the Company or the Issuer as provided in Section
2.7(d) of the Indenture.
Section 8.12. Maintenance of Corporate Existence.
So long as a Credit Facility is in effect the Company agrees
that it will maintain its corporate existence, will not dissolve or otherwise
dispose of all or substantially all of its assets and will not consolidate with
or merge into another corporation or permit one or more other corporations to
consolidate with or merge into it, except either with the consent of the Credit
Issuer or as provided in the original Credit Agreement; if a Credit Facility is
not in effect, the Company agrees that it will continue to be a corporation
either organized under the laws of or duly qualified to do business as a foreign
corporation in the State, will maintain its corporate existence, will not
dissolve or otherwise dispose of all or substantially all of its assets and will
not consolidate with or merge into another corporation or permit one or more
corporations to consolidate with or merge into it; provided, that the Company
may, without violating the foregoing, consolidate with or merge into another
corporation, or permit one or more corporations to consolidate with or merge
into it, or transfer all or substantially all of its assets to another such
corporation (and thereafter dissolve or not dissolve, as the Company may elect)
if the corporation surviving such merger or resulting from such consolidation,
or the corporation to which all or substantially all of the assets of the
Company are transferred, as the case may be:
(i) is a corporation organized under the laws of the United
States of America, or any state, district or territory thereof, and qualified to
do business in the State;
(ii) shall expressly in writing assume all of the obligations
of the Company contained in this Agreement;
(iii) has a consolidated tangible net worth (after giving
effect to such consolidation, merger or transfer) of not less than the
consolidated tangible net worth of the Company and its consolidated subsidiaries
immediately prior to such consolidation, merger or transfer; and
(iv) provided that no Event of Default has occurred and
is continuing hereunder.
The term "consolidated tangible net worth," as used in this Section, shall mean
the difference obtained by subtracting total consolidated liabilities (not
including as a liability any capital or surplus item) from total consolidated
tangible assets of the Company and all of its consolidated subsidiaries,
computed in
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accordance with generally accepted accounting principles. Prior to any such
consolidation, merger or transfer the Trustee shall be furnished a certificate
from the chief financial officer of the Company or his/her deputy stating that
in the opinion of such officer none of the covenants in this Agreement will be
violated as a result of said consolidation, merger or transfer.
Section 8.13. Duties and Obligations. The Company covenants
and agrees that it will fully and faithfully perform all the duties and
obligations that the Issuer has covenanted and agreed in the Indenture to cause
the Company to perform and any duties and obligations that the Company is
required in the Indenture to perform. The foregoing shall not apply to any duty
or undertaking of the Issuer that by its nature cannot be delegated or assigned.
Section 8.14. Undertaking to Provide Continuing Disclosure.
The Issuer covenant to comply with Section 11-2-85 of the Code of Laws of South
Carolina, 1976, as amended. The Company covenants to furnish all information
requested by the Issuer to comply with such Section. Notwithstanding any
provisions in the Indenture to the contrary, no conversion to a Money Market
Rate or a Long-Term Rate shall be permitted unless the Trustee, the Issuer and
the Remarketing Agent shall have received, at least two (2) Business Days prior
to the proposed Conversion Date, a copy of a continuing disclosure agreement
imposing upon the Company, the Trustee or any other responsible party to comply
with the regulations of SEC Rule 15c-12, as it may be amended or supplemented
from time to time, with respect to the Bonds, together with such disclosure
documents as the Remarketing Agent shall require in order to comply with such
Rule.
ARTICLE IX
ASSIGNMENT, LEASE AND SALE
Section 9.1. Restrictions on Transfer of Issuer's Rights. The
Issuer agrees that, except for the assignment of its rights under this Agreement
to the Trustee pursuant to the Indenture, it will not during the term of this
Agreement sell, assign, transfer or convey its interests in this Agreement
except as provided in Section 9.2.
Section 9.2. Assignment by the Issuer. It is understood,
agreed and acknowledged that the Issuer, as security for payment of the
principal of and premium, if any, and interest on the Bonds, will assign to the
Trustee pursuant to the Indenture, among other things, certain of its rights,
title and interests in and to this Agreement (reserving its rights, however,
pursuant to sections of this Agreement providing that notices, reports and other
statements be given to the Issuer and that consents be obtained from the Issuer
and also reserving its rights to reimbursement and payment of costs and expenses
under Sections
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5.2(b) and (c), its right of access under Section 8.1, and its rights to
indemnification and non-liability under Sections 8.6, 8.7, 12.6 and 12.7, all of
this Agreement). The Company consents to such assignment and agrees that the
Trustee shall be entitled to enforce this Agreement directly against the Company
as a third party beneficiary hereof.
Section 9.3. Assignment, Lease or Sale of Project or
Assignment of Agreement by Company. With the prior written consent of the
Trustee, the Issuer and if a Credit Facility is then in effect, the issuer of
such Credit Facility (a) the rights of the Company under this Agreement may be
assigned by the Company and (b) the Project may be leased or sold as a whole or
in part by the Company; provided, however, that (i) no such assignment, lease or
sale shall relieve the Company from primary liability for any of its obligations
hereunder, and in the event of any assignment, lease or sale, the Company shall
continue to remain primarily liable for payments to be made pursuant to the Note
and hereunder and for the performance and observance of the other agreements on
its part herein provided to be performed and observed by it to the same extent
as though no assignment, lease or sale had been made, (ii) each lessee,
purchaser or assignee of the Company's interest in this Agreement shall assume
the obligations of the Company hereunder to the extent of the interest assigned,
leased or sold, and the Company shall, not more than 60 nor less than 30 days
prior to the effective date of any such assignment, lease or sale, furnish or
cause to be furnished to the Issuer and the Trustee a true and complete copy of
each such assignment, lease or purchase contract and assumption of obligations
and (iii) prior to any lease or sale, the Company shall have caused to be
delivered to the Issuer and the Trustee an opinion of Bond Counsel to the effect
that such leasing or sale will not cause interest on the Bonds to be includable
in the gross income of the owners thereof for purposes of federal income
taxation.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.1. Events of Default Defined. The term "Event of
Default" shall mean any one or more of the following events:
(a) Failure by the Company to make any payments required to be
paid pursuant to Section 5.2(a) or to pay the Purchase Price of Bonds as
required pursuant to Section 5.2(d) herein;
(b) The occurrence of an Event of Default under the Indenture;
(c) Any representation by or on behalf of the Company
contained in this Agreement or in any instrument furnished in compliance with or
in reference to this Agreement or the Indenture
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proves false or misleading in any material respect as of the date of the making
or furnishing thereof;
(d) Failure by the Company to observe or perform any of its
other covenants, conditions, payments or agreements under this Agreement for a
period of 30 days after written notice, specifying such failure and requesting
that it be remedied, is given to the Company by the Issuer or the Trustee;
(e) The Company shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, assignee,
sequestrator, trustee, liquidator or similar official of the Company or of all
or a substantial part of its property, (ii) admit in writing its inability, or
be generally unable, to pay its debts as such debts become due, (iii) make a
general assignment for the benefit of its creditors, (iv) commence a voluntary
case under the Federal Bankruptcy Code (as now or hereafter in effect), (v) file
a petition seeking to take advantage of any other federal or state law relating
to bankruptcy, insolvency, reorganization, arrangement, winding-up or
composition or adjustment of debts, (vi) fail to controvert in a timely or
appropriate manner, or acquiesce in writing to, any petition filed against the
Company in an involuntary case under said Federal Bankruptcy Code, or (vii) take
any corporate action for the purpose of effecting any of the foregoing;
(f) A proceeding or case shall be commenced, without the
application or consent of the Company, in any court of competent jurisdiction,
seeking (i) the liquidation, reorganization, arrangement, dissolution,
winding-up or composition or adjustment of debts of the Company, (ii) the
appointment of a trustee, receiver, custodian, assignee, sequestrator,
liquidator or similar official of the Company or of all or any substantial part
of its assets, or (iii) similar relief in respect of the Company under any law
relating to bankruptcy, insolvency, reorganization, arrangement, winding-up or
composition or adjustment of debts and such proceeding or case shall continue
undismissed, or an order, judgment or decree approving or ordering any of the
foregoing shall be entered and continue unstayed and in effect, for a period of
90 days from the commencement of such proceeding or case or the date of such
order, judgment or decree, or an order for relief against the Company shall be
entered in an involuntary case under said Federal Bankruptcy Code;
(g) If a Credit Facility is in effect, the Trustee shall have
received a written notice from the Credit Issuer of the occurrence and
continuance of an "Event of Default" (as defined in the Credit Agreement); or
(h) If a Credit Facility is in effect, the Trustee shall have
received a written notice from the Credit Issuer that amounts which may be drawn
upon under the Credit Facility with respect to interest (other than interest
corresponding to the principal amount
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of Bonds which have been redeemed) will not be reinstated following any drawing
for such interest.
Section 10.2. Remedies on Default. Upon the occurrence of an
Event of Default under this Agreement, the Trustee, as assignee of the Issuer,
but only if acceleration of the principal amount of the Bonds has been declared
pursuant to Section 6.2 of the Indenture, shall take any one or more of the
following remedial steps:
(a) By written notice declare all payments hereunder
immediately due and payable, whereupon the same shall become immediately due and
payable without presentment, demand, protest or any other notice whatsoever, all
of which are hereby expressly waived by the Company.
(b) Take whatever other action at law or in equity may appear
necessary or desirable to collect the amounts payable pursuant hereto then due
and thereafter to become due or to enforce the performance and observance of any
obligation, agreement or covenant of the Company under this Agreement, including
the making of any drawing under the Credit Facility.
In the enforcement of the remedies provided in this Section,
the Issuer and the Trustee may treat all reasonable expenses of enforcement,
including, without limitation, legal, accounting and advertising fees and
expenses, as additional amounts payable by the Company then due and owing.
Section 10.3. Application of Amounts Realized in Enforcement
of Remedies. Any amounts collected pursuant to action taken under Section 10.2
shall be paid to the Trustee and applied in accordance with Section 6.7 of the
Indenture.
Section 10.4. No Remedy Exclusive. No remedy herein conferred
upon or reserved to the Issuer is intended to be exclusive of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy given under this Agreement or now
or hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon an Event of Default under this
Agreement shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient.
Section 10.5. Agreement to Pay Attorneys' Fees and Expenses.
Upon the occurrence of an Event of Default under this Agreement, if the Issuer
or the Trustee employs attorneys or incurs other expenses for the collection of
amounts payable hereunder or for the enforcement of the performance or
observance of any covenants or agreements on the part of the Company herein
contained, whether or not suit is commenced, the Company agrees that it will on
demand therefor pay to the Issuer or the Trustee or
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any combination thereof, as the case may be, the reasonable fees of such
attorneys and such other reasonable expenses so incurred by the Issuer or the
Trustee.
Section 10.6. Issuer and Company to Give Notice of Default.
The Issuer and the Company severally covenant that they will, at the expense of
the Company, promptly give to the Trustee, the Tender Agent, the Remarketing
Agent, the Paying Agent and the Credit Issuer, and to each other, written notice
of any Event of Default under this Agreement of which they shall have actual
knowledge or written notice, but the Issuer shall not be liable for failing to
give such notice.
ARTICLE XI
PREPAYMENTS; PURCHASE OF BONDS
Section 11.1. Optional Prepayments.
(a) The Company shall have, and is hereby granted, the option
to prepay the unpaid principal amount hereunder and under the Note in whole,
together with interest thereon to the date of redemption of the Bonds, at any
time by taking, or causing the Issuer to take, the actions required by the
Indenture for the redemption of all Bonds then outstanding, upon the occurrence
of any of the events set forth in Section 2.18(b) of the Indenture.
(b) The Company shall have, and is hereby granted, the option
to prepay all or any portion of the unpaid balance hereunder and under the Note,
together with interest thereon to the date of redemption of the Bonds, at any
time by taking, or causing the Issuer to take, the actions required by the
Indenture (i) to discharge the lien thereof through the redemption, or provision
for payment of redemption of all Bonds then outstanding or (ii) to effect the
redemption, or provision for payment or redemption, of less than all Bonds then
outstanding, pursuant to Section 2.18(a) of the Indenture.
(c) To make a prepayment pursuant to this Section, the Company
shall give written notice to the Issuer, the Trustee and the Registrar which
shall specify therein (i) the date of the intended prepayment, which shall not
be less than 45 days from the date any Bonds are to be redeemed from such
prepayment, and (ii) the principal amount to be prepaid and the date or dates on
which the prepayment is to occur. All such prepayments shall be in the amount of
the unpaid amount hereunder and under the Note if made pursuant to Section
11.1(a) or in the amount of an Authorized Denomination if made pursuant to
Section 11.1(b) and the Company shall furnish additional funds, if necessary, to
make such prepayments in such amounts. In addition, the Company shall make such
additional payments as shall be necessary to pay any redemption premium on the
Bonds in connection with such redemption.
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Section 11.2. Mandatory Prepayment Upon a Determination of
Taxability. In the event of a Determination of Taxability, the Company shall
forthwith, and in any event within 45 days of any such Determination of
Taxability, pay the entire unpaid principal balance hereunder and under the Note
plus accrued interest thereon to the date of payment, provided, that, if the
Company delivers to the Trustee the opinion of Bond Counsel described in Section
2.18(c) of the Indenture, which opinion states that interest on the Bonds will
not be includable in the gross income of the owners thereof if less than all of
the Bonds are redeemed, then the Company shall prepay the Loan in the amount
necessary to redeem the amount of Bonds stated in such opinion.
The Company hereby agrees to give prompt written notice to the
Issuer and the Trustee of (a) the occurrence of an event that gives or may give
rise to a Determination of Taxability or (b) its receipt of any oral or written
advice from the Internal Revenue Service that an event giving rise to a
Determination of Taxability shall have occurred.
Section 11.3. Optional Purchase of Bonds. Subject to the terms
of the Indenture regarding the use of Eligible Funds, the Company may at any
time, and from time to time, furnish moneys to the Tender Agent accompanied by a
notice directing such moneys to be applied to the purchase of Bonds delivered
for purchase pursuant to the terms thereof, which Bonds shall be delivered to
the Trustee for cancellation in accordance with Section 2.8 of the Indenture.
The Company shall deliver to the Remarketing Agent and the Credit Issuer a copy
of any such notice.
Section 11.4. Relative Priorities. The obligations of the
Company under Section 11.2 shall be and remain superior to the rights,
obligations and options of the Company under Section 11.1.
Section 11.5. Prepayment to Include Fees and Expenses. Any
prepayment under this Article shall also include any expenses of prepayment, as
well as all expenses and costs provided for herein.
Section 11.6. Purchase of Bonds.
(a) In consideration of the issuance of the Bonds by the
Issuer, but for the benefit of the Holders, the Company has agreed, and does
hereby covenant, to cause the necessary arrangements to be made and to be
thereafter continued whereby the Holders from time to time may deliver, or may
be required to deliver Bonds for purchase and whereby such Bonds shall be so
purchased. In furtherance of the foregoing covenant of the Company, the Issuer,
at the request of the Company, has set forth in the Bonds the terms and
conditions relating to the delivery of Bonds by the Holders thereof for
purchase, has set forth in the Indenture the duties and responsibilities of the
Tender Agent with respect to the purchase of Bonds, and of the Remarketing Agent
with respect to the remarketing of Bonds and has therein provided for the
appointment
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of the Tender Agent and Remarketing Agent. The Company hereby authorizes and
directs the Tender Agent and the Remarketing Agent to purchase, offer, sell and
deliver Bonds in accordance with the provisions of the Indenture.
Without limiting the generality of the foregoing covenant of
the Company, and in consideration of the Issuer's having set forth in the Bonds
and the Indenture the aforesaid provisions, the Company covenants, for the
benefit of the Holders, to provide for arrangements to pay, or cause to be paid,
such amounts as shall be necessary to effect the payment of the Purchase Price
of Bonds delivered for purchase, all as more particularly described in the
Indenture.
(b) Notwithstanding the provisions of subsection (a) of this
Section, the obligations of the Company under subsection (a) of this Section
with respect to the purchase of Bonds shall be terminated on the date the Bonds
begin to bear interest at the Fixed Rate in accordance with the Indenture.
(c) In furtherance of the obligations of the Company under
subsection (a) of this Section, the Company shall provide for the payment of its
obligations under said subsection (a) by the delivery of the Original Credit
Facility simultaneously with the original delivery of the Bonds. In order to
implement such undertaking of the Company, the Issuer, at the direction of the
Company, has set forth in the Indenture the terms and conditions relating to
drawings under the Credit Facility to provide moneys for the purchase of Bonds.
The Company hereby authorizes and directs the Trustee to draw moneys under the
Credit Facility in accordance with the provisions of the Indenture to the extent
necessary to provide moneys payable under Section 2.7 of the Indenture if and
when due.
(d) The Issuer shall have no obligation or responsibility,
financial or otherwise, with respect to the purchase of Bonds or the making or
continuation of arrangements therefor other than as expressly set forth in
subsection (a) of this Section, except that the Issuer shall generally cooperate
with the Company, the Tender Agent and the Remarketing Agent as contemplated in
Section 2.7 of the Indenture.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Amounts Remaining in Funds. Subject to the
provisions of Article V of the Indenture and as provided in Article IV of the
Indenture, it is agreed by the parties hereto that amounts remaining in the Bond
Fund, Initial Fund or Bond Purchase Fund upon expiration or earlier termination
of this Agreement, as provided in this Agreement, after payment in full of the
Bonds (or provision for payment thereof having been made in
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accordance with the provisions of the Indenture) and all other amounts owing
under the Indenture, shall be paid to the Credit Issuer (if a Credit Facility is
in effect and there is any amount then owing by the Company to the Credit
Issuer) and otherwise shall belong to and be paid to the Company by the Trustee.
Section 12.2. No Implied Waiver. In the event any provision of
this Agreement should be breached by either party and thereafter waived by the
other party, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach thereunder or hereunder.
Section 12.3. Issuer Representative. Whenever under the
provisions of this Agreement the approval of the Issuer is required or the
Issuer is required to take some action at the request of the Company, such
approval shall be made or such action shall be taken by the Issuer
Representative; and the Company and the Trustee shall be authorized to rely on
any such approval or action.
Section 12.4. Company Representative. Whenever under the
provisions of this Agreement the approval of the Company is required or the
Company is required to take some action at the request of the Issuer, such
approval shall be made or such action shall be taken by the Company
Representative; and the Issuer, the Tender Agent, the Remarketing Agent, the
Paying Agent and the Trustee shall be authorized to rely on any such approval or
action.
Section 12.5. Notices. Notice under this Agreement shall be
given in accordance with Section 9.4 of the Indenture.
Section 12.6. Issuer, Directors, Attorneys, Officers,
Employees and Agents of Issuer Not Liable. To the extent permitted by law, no
recourse shall be had for the enforcement of any obligation, promise or
agreement of the Issuer contained herein or in the other Bond Documents to which
the Issuer is a party or for any claim based hereon or thereon or otherwise in
respect hereof or thereof against any director, officer, agent, attorney or
employee, as such, in his/her individual capacity, past, present or future, of
the Issuer or of any successor entity, either directly or through the Issuer or
any successor entity whether by virtue of any constitutional provision, statute
or rule of law, or by the enforcement of any assessment or penalty or otherwise.
No personal liability whatsoever shall attach to, or be incurred by, any
director, officer, agent, attorney or employee as such, past, present or future,
of the Issuer or any successor entity, either directly or through the Issuer or
any successor entity, under or by reason of any of the obligations, promises or
agreements entered into between the Issuer and the Company, whether herein
contained or to be implied herefrom as being supplemental hereto; and all
personal liability of that character against every such director, officer,
agent, attorney and employee is, by the execution of this Agreement and as a
condition of, and as part of the consideration for, the execution of this
Agreement, expressly waived and released.
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Notwithstanding any other provision of this Agreement, the
Issuer shall not be liable to the Company or the Trustee or any other person for
any failure of the Issuer to take action under this Agreement unless the Issuer
(a) is requested in writing by an appropriate person to take such action, (b) is
assured of payment of, or reimbursement for, any reasonable expenses in such
action, and (c) is afforded, under the existing circumstances, a reasonable
period to take such action. In acting under this Agreement, or in refraining
from acting under this Agreement, the Issuer may conclusively rely on the advice
of its counsel.
Section 12.7. No Liability of Issuer; No Charge Against
Issuer's Credit. Any obligation of the Issuer created by, arising out of, or
entered into in contemplation of this Agreement, including the Bonds, shall not
impose a debt or pecuniary liability upon the Issuer, the State or any political
subdivision thereof or constitute a charge upon the general credit or taxing
powers of any of the foregoing. Any such obligation shall be payable solely out
of the revenues and any other moneys derived hereunder and under the Indenture
and the Credit Facility, except (as provided in the Indenture and in this
Agreement) to the extent it shall be paid out of moneys attributable to the
proceeds of the Bonds or the income from the temporary investment thereof.
The principal of, premium, if any, and interest on the Bonds
shall be payable solely from the funds pledged for their payment in accordance
with the Indenture and from payments made pursuant to the Credit Facility.
Section 12.8. If Performance Date Not a Business Day. If the
last date for performance of any act or the exercising of any right, as provided
in this Agreement, shall not be a Business Day, such payment may be made or act
performed or right exercised on the next succeeding Business Day.
Section 12.9. Binding Effect. This Agreement shall inure to
the benefit of and shall be binding upon the Issuer, the Company, and their
respective successors and assigns. No assignment of this Agreement by the
Company shall relieve the Company of its obligations hereunder.
Section 12.10. Severability. In the event any provision of
this Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 12.11. Amendments, Changes and Modifications.
Subsequent to the issuance of the Bonds and prior to payment of the Bonds, this
Agreement may not be effectively amended, changed, modified, altered or
terminated except in accordance with the Indenture.
Section 12.12. Execution in Counterparts. This Agreement may
be executed in several counterparts, each of which, taken
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together, shall be an original and all of which shall constitute but one and the
same instrument.
Section 12.13. Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State.
[The remainder of this page is left blank intentionally]
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IN WITNESS WHEREOF, the Issuer and the Company have caused
this Agreement to be executed in their respective legal names and their
respective corporate seals to be hereunto affixed, and the signatures of duly
authorized persons to be attested, all as of the date first above written.
CHESTERFIELD COUNTY, SOUTH CAROLINA
By: _________________________________
Name: _________________________________
Title: _________________________________
[SEAL]
ATTEST:
- ----------------------
Clerk, Chesterfield County
Council
CULP, INC.
By: ___________________________________
Franklin N. Saxon
Vice President
[SEAL]
ATTEST:
- ---------------------
______ Secretary
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EXHIBIT A
DESCRIPTION OF THE PROJECT
The Project shall consist of the purchase of machinery, apparatus and
equipment for the upgrading and modernization of an existing manufacturing
facility located in Pageland, Chesterfield County, South Carolina.
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EXHIBIT B
$__________________ No. _____________
REQUISITION AND CERTIFICATE
______________, 19___
First-Citizens Bank & Trust Company
2917 Highwoods Boulevard
Raleigh, North Carolina 27604
Attention: Corporate Trust Department
Ladies and Gentlemen:
On behalf of Culp, Inc. (the "Company"), I hereby requisition from the funds
representing the proceeds of the sale of the Tax-Exempt Adjustable Mode
Industrial Development Revenue Bonds (Culp, Inc. Project) Series 1996, issued by
Chesterfield County, South Carolina (the "Issuer"), and dated April 1, 1996 (the
"Bonds"), which funds are held by you in the Chesterfield County, South Carolina
( Culp, Inc. Project) Initial Fund in accordance with the Indenture of Trust,
dated as of April 1, 1996 (the "Indenture"), from the Issuer to you the sum of
$_________________ to be paid to the person or persons indicated below:
(1) $__________________ for __________________________
--------------------------------------------------
--------------------------------------------------
payable to _________________________________, and
(2) $__________________ for __________________________
--------------------------------------------------
--------------------------------------------------
payable to ______________________________________.
I hereby certify that (a) the obligation to make such payment
was incurred by the Issuer or the Company in connection with the Acquisition (as
defined in the Agreement, of even date with the Indenture, between the Issuer
and the Company, hereinafter referred to as the "Agreement") of the Project
(referred to in the Agreement), is a proper charge against the Costs of the
Project (as defined in the Agreement), and has not been the basis for any prior
requisition which has been paid; (b) neither the Company nor, to the best of the
Company's knowledge, the Issuer has received written notice of any lien, right
to lien or attachment upon, or claim affecting the right of such payee to
receive payment of, any of the money payable under this requisition to any of
the persons, firms or corporations named herein, or if any notice of any such
lien, attachment or claim has been received such lien, attachment
B-1
<PAGE>
or claim has been released or discharged or will be released or discharged upon
payment of this requisition; (c) this requisition contains no items representing
payment on account of any retained percentages which the Issuer or the Company
is entitled to retain at this date; (d) the payment of this requisition will not
result in less than substantially all (95%) or more) of the proceeds of the
Bonds to be expended under this requisition and under all prior requisitions
having been used for the acquisition and installation of real property or
property of a character subject to the allowance for depreciation under the
Internal Revenue Code of 1986, as amended; and (e) no "Event of Default" (as
defined in the Agreement), or event which after notice or lapse of time or both
would constitute such an "Event of Default" has occurred and not been waived.
The following paragraph is to be completed when any
requisition and certificate includes any item for payment for labor or to
contractors, builders or materialmen.
I hereby certify that insofar as the amount covered by the
above requisition includes payments to be made for labor or to contractors,
builders or materialmen, including materials or supplies, in connection with the
Acquisition of the Project, (i) all obligations to make such payment have been
properly incurred, (ii) any such labor was actually performed and any such
materials or supplies were actually furnished or installed in or about the
Project and are a proper charge against the Costs of the Project, and (iii) such
materials or supplies either are not subject to any lien or security interest
or, if the same are so subject, such lien or security interest will be released
or discharged upon payment of this requisition.
--------------------------------------
Company Representative
B-2
<PAGE>
EXHIBIT C
AFTER THE ENDORSEMENT AS HEREON PROVIDED AND PLEDGE OF THIS NOTE, THIS NOTE MAY
NOT BE ASSIGNED, PLEDGED, ENDORSED OR OTHERWISE TRANSFERRED EXCEPT TO AN
ASSIGNEE OR SUCCESSOR OF THE TRUSTEE IN ACCORDANCE WITH THE INDENTURE, BOTH
REFERRED TO HEREIN.
$___________________ __________________, 199__
PROMISSORY NOTE
FOR VALUE RECEIVED, Culp, Inc., a corporation duly formed and
existing under the laws of the State of North Carolina (the "Company"), by this
promissory note hereby promises to pay to the order of Chesterfield County,
South Carolina (the "Issuer") the principal sum of Six Million Dollars
($6,000,000 together with interest on the unpaid principal amount hereof, from
the Issue Date (as defined in the Indenture referenced below) until paid in
full, at a rate per annum equal to the rate of interest borne by the Bonds (as
hereinafter defined), premium, if any, on the Bonds and Purchase Price (as
defined in the Indenture). All such payments of principal, interest, premium and
Purchase Price shall be made in funds which shall be immediately available on
the due date of such payments and in lawful money of the United States of
America at the principal corporate trust office of First-Citizens Bank & Trust
Company, Raleigh, North Carolina, or its successor as trustee under the
Indenture.
The principal amount, interest, premium, if any, and Purchase Price
shall be payable on the dates and in the amount, that principal of, interest on
the Bonds, premium, if any, and Purchase Price are payable, subject to
prepayment as hereinafter provided.
The Company shall receive a credit for the amounts due and payable
hereunder to the extent that payments are made by the Credit Issuer (as defined
in the Indenture) pursuant to drawings under the Credit Facility (as defined in
the Indenture).
This promissory note is the "Note" referred to in the Loan Agreement,
dated as of April 1, 1996 (the "Agreement") between the Company and the Issuer,
the terms, conditions and provisions of which are hereby incorporated by
reference.
This Note and the payments required to be made hereunder are
irrevocably assigned, without recourse, representation or warranty, and pledged
to First-Citizens Bank & Trust Company under the Indenture of Trust, dated as of
April 1, 1996 (the "Indenture"), by and between the Issuer and First-Citizens
Bank & Trust Company, as Trustee, and such payments will be made directly to the
Trustee for the account of the Issuer pursuant to such assignment. Such
assignment is made as security for the payment of $6,000,000 in aggregate
principal amount of Tax-Exempt Adjustable Mode Industrial
C-1
<PAGE>
Development Revenue Bonds (Culp, Inc. Project) Series 1996 (the "Bonds"), issued
by the Issuer pursuant to the Indenture. All the terms conditions and provisions
of the Indenture and the Bonds are hereby incorporated as a part of this Note.
The Company may at its option, and may under certain circumstances be
required to, prepay together with accrued interest, all or any part of the
amount due on this Note, as provided in the Agreement.
Presentation, demand, protest and notice of dishonor are hereby
expressly waived by the Company.
The Company hereby promises to pay reasonable costs of collection and
reasonable attorneys' fees in case of default on this Note.
This Note shall be governed by, and construed in accordance with, the
laws of the State of South Carolina.
CULP, INC.
[SEAL] By: ________________________________
Franklin N. Saxon
Vice President
ATTEST:
- ---------------------------
_________ Secretary
C-2
<PAGE>
ENDORSEMENT
Pay to the order of First-Citizens Bank & Trust Company, without
recourse, as Trustee under the Indenture referred to in the within mentioned
Agreement, as security for such Bonds issued under such Indenture. This
endorsement is given without any warranty as to the authority or genuineness of
the signature of the maker of the Note.
CHESTERFIELD COUNTY, SOUTH CAROLINA
By: _____________________________
Name: _____________________________
Title: _____________________________
Dated: April 1, 1996
Exhibit 10(bb)
1996 AMENDED AND RESTATED
$91,936,418.54 CREDIT FACILITY
TO
CULP, INC.
BY
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
AND
WACHOVIA BANK OF NORTH CAROLINA, N.A.
April 1, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Definitions.................................................................................2
SECTION 2. Commitment and Security....................................................................13
2.1. Commitment.................................................................................13
2.2. Security...................................................................................14
SECTION 3. Loans Evidenced by Term Notes..............................................................14
3.1. Term Loans.................................................................................14
3.2. Term Notes.................................................................................14
3.3. Repayment of Term Loans....................................................................14
3.4. Optional and Mandatory Prepayment of Term Loans............................................15
SECTION 4. Loans Evidenced by Revolving Credit Notes..................................................16
4.1 Revolving Loans............................................................................16
4.2. Payments of Interest and Principal.........................................................17
4.3. Termination or Reduction of Revolving Credit
Commitments................................................................................18
4.4. Bankers' Acceptances.......................................................................19
4.5. Letters of Credit..........................................................................21
SECTION 5. The Notes..................................................................................26
5.1. Computation of Interest....................................................................26
5.2. Payments...................................................................................26
5.3. Facility Fee...............................................................................27
5.4. Default Rate of Interest...................................................................27
5.5. Late Charge................................................................................27
SECTION 6. Use of Proceeds............................................................................27
SECTION 7. Representations and Warranties.............................................................28
7.1. Incorporation..............................................................................28
7.2. Power and Authority........................................................................28
7.4. Title to Assets............................................................................29
7.6. Contingent Liabilities.....................................................................29
7.7. Taxes......................................................................................30
7.8. Contract or Restriction Affecting Borrower.................................................30
7.9. [INTENTIONALLY LEFT BLANK].................................................................30
7.10. Permits and Licenses.......................................................................30
7.11. Trademarks, Franchises and Licenses........................................................30
7.12. [INTENTIONALLY LEFT BLANK].................................................................30
7.13. [INTENTIONALLY LEFT BLANK].................................................................30
7.14. ERISA......................................................................................30
7.15. Environmental Matters......................................................................31
7.16. No Default.................................................................................31
SECTION 8. Conditions.................................................................................31
8.1. Conditions of Closing......................................................................31
8.2. Conditions to Each Extension of Credit.....................................................32
(i)
<PAGE>
SECTION 9. Affirmative Covenants......................................................................32
9.1. Financial Reports and Other Data...........................................................32
9.2. Taxes and Liens............................................................................34
9.3. Business and Existence.....................................................................34
9.4. Insurance on Properties....................................................................34
9.5. Maintain Property..........................................................................35
9.6. Right of Inspection........................................................................35
9.7. [INTENTIONALLY LEFT BLANK].................................................................35
9.8. Covenant Extended to Subsidiaries..........................................................35
9.9. Borrower's Knowledge of Default............................................................35
9.10. Suits or Other Proceedings.................................................................35
9.11. Observe All Laws...........................................................................35
9.12. Compliance with Laws; Governmental Approvals...............................................35
9.13. ERISA......................................................................................36
9.14. Payment of Obligations.....................................................................36
9.15. [RESERVED].................................................................................36
9.16. Tangible Shareholders' Equity..............................................................36
9.17. [RESERVED].................................................................................37
9.18. [RESERVED].................................................................................37
9.19. Operating Cash Flow to Interest Expense....................................................37
9.20. Consolidated Funded Debt to Total Capitalization...........................................37
9.21. Environmental Provisions and Indemnity.....................................................37
9.22. [INTENTIONALLY LEFT BLANK].................................................................38
9.23. [INTENTIONALLY LEFT BLANK].................................................................38
9.24. [INTENTIONALLY LEFT BLANK].................................................................38
SECTION 10. Negative Covenants of Borrower.............................................................38
10.1. Limitations on Liens.......................................................................39
10.2. Guarantee..................................................................................39
10.3. [RESERVED].................................................................................39
10.5. Sale of Assets, Dissolution, etc...........................................................39
10.6. [INTENTIONALLY LEFT BLANK].................................................................40
10.7. Loans and Investments......................................................................40
10.8. Fiscal Year................................................................................40
10.9. [RESERVED]..............................................................................................40
10.10. Rental Obligations.........................................................................40
10.11. Prepayments................................................................................40
10.12. ...........................................................................................40
SECTION 11. Events of Default..........................................................................41
11.1. Definition.................................................................................41
11.2. Remedies...................................................................................43
SECTION 12. The Agent..................................................................................44
12.1. Appointment................................................................................44
12.2. Nature of Duties...........................................................................44
12.3. Lack of Reliance on the Agent..............................................................44
12.4. Certain Rights of the Agent................................................................45
12.5. Reliance...................................................................................45
12.6. Indemnification............................................................................45
(ii)
<PAGE>
12.7. The Agent in its Individual Capacity.......................................................46
12.8. Holders....................................................................................46
12.9. Reimbursement..............................................................................46
12.10. Defaults...................................................................................47
12.12. Resignation or Removal of Agent............................................................47
12.13. Annual Fee.................................................................................48
SECTION 13. Miscellaneous..............................................................................48
13.1. Amendments and Waivers.....................................................................48
13.2. Ratable Sharing of Set-Offs, Payments......................................................49
13.3. Successors and Assigns.....................................................................50
13.4. Confidentiality............................................................................53
13.5. Unavailability of Adjusted LIBOR Rate......................................................53
13.6. Increased Costs............................................................................53
13.7. Headings; Table of Contents................................................................54
13.8. Lawful Charges.............................................................................54
13.9. Conflict of Terms..........................................................................54
13.10. Notices....................................................................................54
13.11. Survival of Agreements.....................................................................55
13.12. Governing Law..............................................................................55
13.13. Enforceability of Agreement................................................................55
13.14. Stamp or Other Tax.........................................................................55
13.15. Counterparts and Effectiveness.............................................................56
13.16. Fees and Expenses..........................................................................56
13.17. Liens; Set Off by Banks....................................................................56
13.18. Loan Documents.............................................................................56
13.19. Entire Agreement...........................................................................56
13.20. Survival of Certain Provisions Upon Termination............................................56
13.21. Accounting Terms and Computations..........................................................57
13.22. Obligations Several........................................................................57
SECTION 14. Pledge of Bonds............................................................................57
14.1. The Pledge.................................................................................57
14.2. Remedies Upon Default......................................................................58
14.3. Valid Perfected First Lien.................................................................59
14.4. Release of Pledged Bonds...................................................................59
</TABLE>
(iii)
<PAGE>
1996 AMENDED AND RESTATED CREDIT AGREEMENT
THIS 1996 AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 1,
1996 (the "Credit Agreement" or "Agreement"), is made by and among CULP, INC., a
North Carolina corporation (herein called the "Borrower"), FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, a national banking association ("First Union"), WACHOVIA
BANK OF NORTH CAROLINA, N.A., a national banking association ("Wachovia") (First
Union and Wachovia being referred to collectively herein as the "Banks"), and
FIRST UNION, acting in the manner and to the extent described in Section 12
hereof (in such capacity, the "Agent").
RECITALS
A. The Borrower and First Union were parties to a 1988 Credit
Agreement, dated as of November 11, 1988 (the "1988 Credit Agreement"), pursuant
to which First Union extended certain loans to the Borrower (collectively
referred to as the "Original Loan").
B. Subsequently, the Borrower and First Union executed the following
amendments to the 1988 Credit Agreement (whereby the Original Loan was amended):
an Amendment to 1988 Credit Agreement, dated as of October 30, 1989; a Second
Amendment to 1988 Credit Agreement, dated as of January 26, 1990; a Third
Amendment to 1988, Credit Agreement, dated as of February 6, 1990; a Fourth
Amendment to 1988 Credit Agreement, dated as of November 27, 1990; a Fifth
Amendment to 1988 Credit Agreement, dated as of August 19, 1991; a Sixth
Amendment to 1988 Credit Agreement, dated as of October 24, 1991 and Amendment A
to the Credit Agreement dated September 1, 1992.
C. The Borrower, First Union and Wachovia entered into a 1993 Amended
and Restated Credit Agreement dated January 28, 1993 (the "1993 Credit
Agreement"), which 1993 Credit Agreement amended and restated the 1988 Credit
Agreement, as amended, in its entirety and further amended the Original Loan.
The 1993 Credit Agreement was amended by a First Amendment to 1993 Amended and
Restated Credit Agreement dated August 3, 1993, and a Second Amendment to 1993
Amended and Restated Credit Agreement dated November 1, 1993.
D. The Borrower, First Union and Wachovia entered into a 1994 Amended
and Restated Credit Agreement dated April 15, 1994 (the "1994 Credit
Agreement"), which 1994 Credit Agreement amended and restated the 1993 Credit
Agreement, as amended, in its entirety and further amended the Original Loan.
The 1994 Credit Agreement has been amended by a First Amendment to 1994 Amended
and Restated Credit Agreement dated April 30, 1994; a Second Amendment to
Amended and Restated Credit Agreement dated July 13, 1994; a Third Amendment to
1994 Amended and Restated Credit Agreement dated November 1, 1994; and a Fourth
Amendment to 1994 Amended and Restated Credit Agreement dated March 6,
<PAGE>
1995.
E. The Borrower, First Union and Wachovia entered into a 1995 Amended
and Restated Credit Agreement dated July 1, 1995 (as amended and modified, the
"1995 Credit Agreement"), which 1995 Credit Agreement amended and restated the
1994 Credit Agreement, as amended, in its entirety and further amended the
Original Loan.
F. The Borrower, First Union and Wachovia desire to restate the 1995
Credit Agreement, as amended and modified, so that the parties' agreement
regarding the Borrower's indebtedness and obligations will be contained in one
restated agreement.
G. The parties intend that this Agreement shall restate, supersede and
replace in its entirety the 1995 Credit Agreement and all amendments and
modifications relating thereto. This Agreement is not intended to and does not
represent the making of new loans from the Banks to the Borrower, is not a
novation, and the loans described hereunder shall continue to be secured by and
enjoy the benefits of all of the Loan Documents not amended or replaced hereby
or hereunder.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, each of the Banks
and the Agent hereby agree as follows:
SECTION 1. Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"Accepted Drafts" means such term as defined in Section 4.4.
"Accepting Bank" means such terms as defined in Section 4.4.
"Acts" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601 et seq. ; the Toxic
Substances Control Act, 15 U.S.C. Sec. 2601 et seq.; the Resource Conservation
and Recovery Act, 42 U.S.C. Sec. 6901 et seq.; the Clean Air Act, 42 U.S.C. Sec.
7401 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. Sec. 201 et
seq.; the Emergency Planning and Community Right-to- Know Act, 42 U.S.C. Sec.
11001 et seq.; and all other federal, state or local laws or rules and the
regulations adopted and publications promulgated pursuant thereto, all as
amended from time to time, regulating environmental matters.
"Adjusted LIBOR Rate" means a rate per annum (rounded upwards, if
necessary, to the next higher 1/100 of 1%) determined pursuant to the following
formula:
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<PAGE>
Adjusted LIBOR Rate = LIBOR BASE RATE
----------------------------
1 - LIBOR RESERVE PERCENTAGE
"Agreement" means this 1996 Credit Agreement between the Borrower, the
Banks and the Agent, as it may be amended, modified, supplemented or restated
from time to time.
"Applicable Margin" or "Applicable Percentage" means (i) the marginal
rate of interest which shall be paid by Borrower in addition to the Prime Rate
or the Adjusted LIBOR Rate, as the case may be, or (ii) the applicable Letter of
Credit Fee, which in each case coincides to the ratio of Consolidated Funded
Debt to Operating Cash Flow for Borrower (calculated quarterly with respect to
the immediately preceding four calendar quarters), as specifically set forth in
a separate letter agreement dated as of the date hereof between the Borrower and
the Banks as such letter may be amended, restated, modified or supplemented from
time to time.
"BA Obligations" means, at any time, the sum of (i) the maximum
aggregate amount which is, or at any time thereafter may become, payable by an
Accepting Bank under all Accepted Drafts then outstanding, plus (ii) the
aggregate amount of reimbursement obligations owing to an Accepting Bank on a
matured Accepted Draft and not theretofore reimbursed.
"Bankers' Acceptance" means an Accepted Draft hereunder.
"Bond Documents" means the Indentures and those other documents
executed in connection with the bonds and obligations relating to the VRDN
Programs as referenced in the respective Indentures.
"Business Day" means a banking business day of both Banks in High
Point, North Carolina.
"Canada" means 3096726 Canada Inc., a Canadian corporation and a
wholly-owned Subsidiary of the Borrower.
"Capital Asset" means any asset that would, in accordance with
generally accepted accounting principles in the United States, be required to be
classified and accounted for as a capital asset.
"Capital Expenditures" means, for any period, the aggregate cost
(including repairs, replacements and improvements), less the amount of trade-in
allowances included in such cost, of all Capital Assets acquired by the Borrower
and any Subsidiary during such period, plus all Capital Lease Obligations of the
Borrower and any Subsidiary incurred during the relevant period.
"Capital Lease" means, as to the Borrower and its Subsidiaries, any
lease of any property (whether real, personal
-3-
<PAGE>
or mixed) that would, in accordance with generally accepted accounting
principles in the United States, be required to be classified and accounted for
as a capital lease on a balance sheet of the lessee.
"Capital Lease Obligations" means, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder that would, in accordance
with generally accepted accounting principles in the United States, appear on a
balance sheet as liability of such lessee in respect of such Capital Lease.
"Closing Date" means April 15, 1994.
"Commitment" or "Commitments" means, collectively, the Revolving Credit
Commitments and the LOC Commitments.
"Consolidated Adjusted Current Liabilities" means the amount of all
liabilities of the Borrower and its Subsidiaries which by their terms are
payable within one year (including all indebtedness payable on demand or
maturing not more than one year from the date of computation and the current
portion of long term debt, but excluding the outstanding principal amount of the
Revolving Credit Notes, except to the extent that such outstanding principal
amount exceeds the amount of the Revolving Credit Commitments as they will stand
one year in the future), all determined in accordance with generally accepted
accounting principles in the United States.
"Consolidated Current Assets" means cash and all other assets or
resources of the Borrower and its Subsidiaries which are expected to be realized
in cash, sold in the ordinary course of business, or consumed within one year,
all determined in accordance with generally accepted accounting principles in
the United States.
"Consolidated Funded Debt" means all indebtedness for money borrowed of
the Borrower and its Subsidiaries, whether direct or contingent, as determined
in accordance with generally acceptable accounting principles in the United
States, including (without limitation) Capital Lease Obligations, the deferred
purchase price of any property or asset or indebtedness evidenced by a
promissory note, bond, guaranty or similar written obligation for the payment of
money (including, but not limited to, conditional sales or similar title
retention agreements); minus amounts of restricted investments relating to
industrial revenue bond financing ("IRB").
"Consolidated Tangible Shareholders' Equity" of the Borrower and its
Subsidiaries shall mean at any time as of which the amount thereof is to be
determined, the sum of the following in respect of, the Borrower and its
Subsidiaries (on a consolidated basis and excluding intercompany items):
-4-
<PAGE>
(i) the amount of issued and outstanding share
capital, plus
(ii) the amount of additional paid-in capital,
retained earnings (or, in the case of a
deficit, minus the amount of such deficit),
minus
(iii) the sum of the following (without duplication
or deductions in respect of items already
deducted in arriving at surplus and retained
earnings): (a) all reserves, except legal
reserves and other contingency reserves
(i.e., reserves not allocated by specific
purposes and not deducted from assets) which
are properly treated as appropriations or
surplus or retained earnings; (b) the book
value of all assets which would be treated as
intangibles under generally accepted
accounting principles in the United States
including, without limitation, capitalized
expenses, goodwill, trademarks, trade names,
franchises, copyrights, patents and
unamortized debt discount and expense; and
(c) any treasury stock.
"Consolidated Total Liabilities" means the sum of the aggregate amount
of all liabilities of the Borrower and its Subsidiaries, all determined in
accordance with generally accepted accounting principles in the United States
plus all guaranties of the obligations of third parties other than Subsidiaries;
provided, however, that for the purposes of this definition, the amount of the
Consolidated Funded Debt of the Borrower and its Subsidiaries relating to
industrial revenue bond financing, and the amount of all guaranties of the
Borrower and its Subsidiaries in connection with such financing, shall be deemed
reduced by the amount of any, unspent project funds held in trust for use in any
industrial revenue bond project.
"Current Maturities" means, at any time, the aggregate amount of all
payments coming due and payable by the Borrower within the next twelve months in
respect of indebtedness that by its terms matures more than one year from the
date of creation thereof.
"Default" means any occurrence, event, condition or omission that, with
the giving of notice or the passage of time, or both, would constitute an Event
of Default if the Borrower did not correct the same within the permitted time
period, if any.
"Environmental Indemnity Agreement" means that certain Certificate and
Agreement Regarding Environmental Matters dated
-5-
<PAGE>
as of April 15, 1994, among the Borrower, the Agent and the Banks, as amended,
modified, restated or replaced from time to time.
"Environmental Reports" means written reports as delivered to the Banks
prior to the Closing Date, relating to environmental matters, including, without
limitation, full information as to the presence of Hazardous Substances, with
respect to certain of the Real Property, such reports to be in form and
substance satisfactory to the Agent.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" shall have the meaning specified in Section 11.1
hereof.
"Existing Letters of Credit" means those Letters of Credit outstanding
on the Restatement Date and identified on Exhibit 9.
"Extension of Credit" means, as to any Bank, the making of a Loan
(including a Tender Advance) by such Bank, or the issuance or acceptance of
Bankers' Acceptances by such Bank, or the issuance of, or participation in, a
Letter of Credit by such Bank.
"Federal Funds Effective Rate" means, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve Bank of New York, as published by the Federal Reserve Bank of New York
on the next succeeding Business Day or, if such rate is not so released for any
day which is a Business Day, the arithmetic average (rounded upwards to the next
1/100th of 1%), as determined by the Agent, of the quotations for the day of
such transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
"FIRPTA Affidavit" means the affidavit of Borrower, satisfactory to the
Banks, that Borrower is not a "foreign person" as contemplated by Section 1445
of the Internal Revenue Code of 1986.
"First Union Revolving Credit Commitment" means the commitment of First
Union to make revolving loans to the Borrower pursuant to Section 4 hereof.
"First Union Revolving Credit Note" means the amended and restated
promissory note evidencing the First Union Revolving Loan, substantially in the
form of Exhibit 2-A hereto, with appropriate insertions of amount and date as
such promissory note may be amended, restated, modified or supplemented from
time to time.
-6-
<PAGE>
"First Union Revolving Loan" means the Revolving Loan made by First
Union to the Borrower pursuant to Section 4 hereof.
"First Union Term Loan" means the Term Loan of the principal amount
indicated on Annex 1 hereto from First Union to the Borrower pursuant to Section
3 hereof.
"First Union Term Note" means the amended and restated promissory note
evidencing the First Union Term Loan, substantially in the form of Exhibit 1-A
hereto, with appropriate insertions of amount and date as such promissory note
may be amended, restated, modified or supplemented from time to time.
"Fiscal Month" means a fiscal month of the Borrower, which is a 4- or
5-week period. The first Fiscal Month of each Fiscal Quarter is a 5-week period
and the other two Fiscal Months in each Fiscal Quarter are 4-week periods.
"Fiscal Quarter" means a fiscal quarter of the Borrower which is a
13-week period, the first of which begins on the first day of the Borrower's
fiscal year.
"Fiscal Year" means the fiscal year of the Borrower, which ends on the
Sunday closest to April 30 of each calendar year.
"Governmental Authorities" means collectively, the United States of
America, the State of North Carolina, the State of South Carolina and any other
political subdivision, agency, commission, bureau, court or any public or
quasi-public instrumentality exercising jurisdiction over Borrower or any
portion of the Mortgaged Property.
"Governmental Requirements" means all laws, ordinances, decisions,
judgements, decrees, rules, orders, writs, injunctions, permits, and regulations
of any Governmental Authority applicable to, or the decisions or orders of any
courts having jurisdiction over, Borrower or any portion of the Mortgaged
Property, now or hereinafter in force, including but not limited to all land
use, zoning, subdivision, building, setback, health, traffic flood control fire
safety, Hazardous Substances, underground storage tanks, handicap and other
applicable codes, rules, regulations and ordinance and the Americans with
Disabilities Act of 1990 (Public Law 101-336, 42 U.S.C. ss.12101).
"Hazardous Substances" means petroleum, petroleum byproducts
(including, but not limited to, crude oil, diesel oil, fuel oil, gasoline,
lubrication oil, oil refuse, oil mixed with other waste, oil sludge, and all
other liquid hydrocarbons, regardless of specific gravity), natural or synthetic
gas products and/or any hazardous, dangerous or toxic substance, material waste,
pollutant or contaminate defined as such in (or for the purposes of) the Acts.
The term Hazardous Substances shall include,
-7-
<PAGE>
without limitation, substances now or hereinafter defined as "hazardous
substances", "toxic substances," "hazardous materials" or "contaminated waste"
or similar terms in the Acts.
"Indenture" means any of those trust agreements and indentures of trust
pursuant to which bonds have been issued in connection with VRDN Programs
supported by Letters of Credit issued hereunder or subject hereto, as amended
and modified from time to time.
"Interest Expense" means, with respect to the Borrower and its
Subsidiaries on a consolidated basis for any period, the sum of gross interest
expense of the Borrower and its Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting principles
in the United States, plus capitalized interest of the Borrower and its
Subsidiaries on a consolidated basis.
"Interest Rate Agreement" shall mean any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, currency hedge
agreement or other similar agreement or arrangement designed to protect the
Borrower against fluctuations in interest rates or currency exchange rates,
including, without limitation, any "swap agreement" as defined in 11 U.S.C.
ss.101(55).
"Issuing Bank" means either Bank, as the Borrower may request from time
to time.
"Letter of Credit" means the Existing Letters of Credit and any letter
of credit issued by the Issuing Bank pursuant to the terms hereof, as such
Letters of Credit may be amended, modified, extended, renewed or replaced from
time to time.
"LIBOR Base Rate" means that rate per annum at which, in the good faith
opinion of the Agent, United States Dollars in the amount of the principal
balance of the applicable outstanding indebtedness and for a maturity equal to
one Fiscal Month are currently being offered on the London Interbank market to
major top credit quality banks, for immediate settlement, at 11:00 a.m.
London time.
"LIBOR Rate Loan" means a loan bearing interest based upon the Adjusted
LIBOR Rate.
"LIBOR Reserve Percentage" means the daily reserve percentage required
of national banks on "Eurocurrency liabilities" pursuant to Regulation D of the
Board of Governors of the Federal Reserve System. For purposes of calculation of
the LIBOR Reserve Percentage, the reserve requirement shall be as set forth in
Regulation D without benefit of or credit for prorations, exemptions or offsets
under Regulation D and further, without regard to whether the applicable Bank
elects to actually
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fund the loan with "Eurocurrency liabilities. The Agent may elect from time to
time, to waive application of the LIBOR Reserve Percentage on specified
maturities with the approval of each Bank.
"LOC Commitment" means the commitment of the Issuing Banks to issue
Letters of Credit and with respect to each Bank, the commitment of such Bank to
purchase participation interests in the Letters of Credit up to such Bank's LOC
Committed Amount as specified in Annex I, as such amount may be reduced from
time to time in accordance with the provisions hereof.
"LOC Commitment Percentage" means, for each Bank, the percentage
identified as its Commitment Percentage on Annex I.
"LOC Committed Amount" means, collectively, the aggregate amount of all
of the LOC Commitments of the Banks to issue and participate in Letters of
Credit as referenced in Section 4.5 and, individually, the amount of each Bank's
LOC Commitment as specified in Annex I.
"LOC Documents" means, with respect to any Letter of Credit, such
Letter of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (i) the rights and obligations of
the parties concerned or at risk or (ii) any collateral security for such
obligations.
"LOC Obligations" means, at any time, the sum of (i) the maximum amount
which is, or at any time thereafter may become, available to be drawn under
Letters of Credit then outstanding, assuming compliance with all requirements
for drawings referred to in such Letters of Credit plus (ii) the aggregate
amount of all drawings under Letters of Credit honored by the Issuing Bank but
not theretofore reimbursed.
"Loan Documents" means this Agreement, the Notes and all other
documents, agreements or instruments which evidence or secure the Loans or which
are exhibits to this Agreement, including, but not limited to, the LOC
Documents, FIRPTA Affidavit, Environmental Indemnity Agreement and Environmental
Reports delivered to the Agent and the Banks in connection with the 1994 Credit
Agreement. In addition, "Loan Documents" shall refer to any Interest Rate
Agreement that may exist between the Borrower and any of the Banks.
"Loans" means the Term Loans, the Revolving Loans and Tender Advances,
collectively. "Loan" means one of the Term Loans, Revolving Loans or Tender
Advances, as appropriate.
"Net Income" means, for any period, the net income (or loss)
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of the Borrower and its Subsidiaries on a consolidated basis for such period,
determined in accordance with generally accepted accounting principles in the
United States.
"Notes" means the collective reference to the Revolving Credit Notes
and the Term Notes.
"Obligations" means, collectively, Loans, BA Obligations and LOC
Obligations.
"Operating Cash Flow" (or "EBITDA") means, for any period of four
consecutive quarters, Net Income for such period plus the sum of the following
consolidated expenses of the Borrower and its Subsidiaries for such period, to
the extent included in the calculation of such Net Income: (i) depreciation
expense, (ii) amortization of intangible assets, (iii) Interest Expense for such
period and (iv) income taxes for such period, all determined in accordance with
generally accepted accounting principles in the United States.
"Participation Interest" means the purchase by a Bank of a
participation interest in Letters of Credit as provided in Section 4.5(c), or in
Revolving Loans as provided in Section 13.2.
"Permitted Encumbrances" shall mean and include:
(a) those liens and encumbrances listed on Exhibit 4
hereof;
(b) liens granted to financial institutions in connection with
the Borrower's tax exempt bond financing arrangements listed on Exhibit
6 attached hereto and any extensions, modifications, refinancings,
refundings or replacements, thereto or thereof;
(c) (i) liens securing non interest-bearing purchase money
obligations payable over a term of no more than two (2) years given to
vendors of equipment and (ii) other liens securing purchase-money
obligations not exceeding $1,000,000 in the aggregate at any one time;
(d) liens on the accounts receivable, general intangibles,
documents, contract rights, instruments, chattel paper and cash and
noncash proceeds thereof, including returned, rejected or repossessed
goods related thereto and billed and held inventory, of the Borrower or
its Subsidiaries granted in connection with factoring arrangements;
provided, however, that all such factoring arrangements shall be
without recourse and the Borrower shall not incur any Consolidated
Funded Debt in connection therewith;
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(e) liens granted from time to time pursuant to the
prior written consent of the Banks;
(f) liens for taxes, assessments or similar
governmental charges not in default or being contested in
good faith;
(g) worker's, mechanic's and materialmen's liens and similar
liens incurred in the ordinary course of business remaining
undischarged for not longer than 45 days from the attachment thereof,
and easements which are not substantial in character and do not
materially detract from the value or interfere with the intended use of
the properties subject thereto and affected thereby;
(h) attachments remaining undischarged for not longer
than 10 days from the making thereof;
(i) liens in respect of final judgments or awards remaining
undischarged for not longer than 10 days from the making thereof,
unless execution on such judgment shall have been stayed pending
appeal; and
(j) liens in respect of pledges or deposits under worker's
compensation laws, unemployment insurance or similar legislation and in
respect of pledges or deposits to secure bids, tenders, contracts
(other than contracts for the payment of money) leases or statutory
obligations, or in connection with surety, appeal and similar bonds
incidental to the conduct of litigation.
"Person" means an individual, partnership, corporation, trust,
unincorporated organization, association, joint venture or a government or
agency or political subdivision thereof.
"Pledge Obligations" means such term as defined in Section
14.1.
"Pledged Bonds" means those bonds under VRDN Programs supported by
Letters of Credit issued hereunder or subject hereto which have been purchased
with proceeds from a drawing under a Letter of Credit hereunder and not
remarketed or redeemed.
"Pledged Collateral" means such term as defined in Section
14.1.
"Prime Rate" shall be that rate announced by First Union from time to
time as its Prime Rate (which is one of several interest rates used by First
Union) as that rate may change from time to time, with said changes to occur at
the opening of business on the date the Prime Rate changes. First Union lends at
rates both above and below the Prime Rate and such rate is not represented or
intended to be the lowest or most favorable rate
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of interest offered by First Union.
"Prime Rate Loan" means a loan bearing interest based upon the Prime
Rate.
"Rayonese" means Rayonese Textile Inc., a Canadian corporation.
"Rayonese Acquisition" means the acquisition of the stock of Rayonese
by Canada pursuant to the Share Purchase Agreement dated as of December 22, 1994
between Canada and certain shareholders of Rayonese.
"Real Property" means any real property owned or leased by Borrower or
any of its Subsidiaries.
"Required Banks" means at any time prior to the occurrence of an Event
of Default, termination of the Commitments hereunder and acceleration pursuant
to Section 11.2 hereof, Persons having at least 60% of the aggregate Revolving
Credit Commitments, and at any time thereafter Persons holding 60% of the
Obligations outstanding hereunder (taking into account participation interests
therein); provided that for so long as First Union or Wachovia shall not have
assigned all or any of its rights and obligations under this Agreement and the
Notes pursuant to Section 13.3(c) hereof, "Required Banks" shall mean such Bank
(Wachovia and/or First Union) and the foregoing requisite Persons.
"Restatement Date" means the date of this Amended and Restated Credit
Agreement.
"Revolving Credit Commitments" means the aggregate of the First Union
Revolving Credit Commitment and the Wachovia Revolving Credit Commitment,
collectively. "Revolving Credit Commitment" means either the First Union
Revolving Credit Commitment or the Wachovia Revolving Credit Commitment,
individually, as appropriate.
"Revolving Credit Notes" means the First Union Revolving Credit Note
and the Wachovia Revolving Credit Note, collectively. "Revolving Credit Note"
means either the First Union Revolving Credit Note or the Wachovia Revolving
Credit Note, individually, as appropriate.
"Revolving Loans" means the First Union Revolving Loan and the Wachovia
Revolving Loan, collectively. "Revolving Loan" means either the First Union
Revolving Loan or the Wachovia Revolving Loan, individually, as appropriate.
"Revolving Loan Interest Rate" has the meaning set forth in Section 4.2
hereof.
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"Revolving Loan Maturity Date" shall mean March 1, 2001.
"Revolving Loan Termination Date" means, as to either of the Revolving
Credit Commitments, the date on which the termination of all or a portion of
such Revolving Credit Commitment, pursuant to Section 4.3 hereof, becomes
effective.
"Subsidiary" or "Subsidiaries" means any corporation of which more than
50% of voting stock at any time is owned or controlled directly or indirectly by
the Borrower.
"Tender Advance" means such term as defined in Section 4.5(c).
"Tender Drawing" means a drawing under a Letter of Credit made to
repurchase bonds upon an elective tender by a bondholder on account of an
inability or failure by the remarketing agent therefor to remarket the bonds
which are the subject of the elective tender.
"Term Loan Interest Rate" has the meaning set forth in Section 3.3
hereof.
"Term Loans" means the First Union Term Loan and the Wachovia Term
Loan, collectively. "Term Loan" means either the First Union Term Loan or the
Wachovia Term Loan, individually, as appropriate.
"Term Loan Maturity Date" shall mean March 1, 2001.
"Term Notes" means the First Union Term Note and the Wachovia Term
Note, collectively. "Term Note" means either the First Union Term Note or the
Wachovia Term Note, individually, as appropriate.
"Total Capitalization" is defined as Consolidated Funded Debt plus
Consolidated Tangible Shareholders' Equity.
"Trustee" means those trustees under Indentures relating to bonds
issued in connection with VRDN Programs supported by Letters of Credit issued
hereunder or subject hereto.
"VRDN Program" means those variable rate demand note or bond programs
relating to industrial development revenue bonds or similar tax-advantaged
obligations of benefit to the Borrower and supported by Letters of Credit
existing or issued hereunder.
"Wachovia Revolving Credit Commitment" means the commitment of Wachovia
to make revolving loans to the Borrower pursuant to Section 4 hereof.
"Wachovia Revolving Credit Note" means the promissory note evidencing
the Wachovia Revolving Loan, substantially in the form
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of Exhibit 2-B hereto, with appropriate insertions of amount and date as such
promissory note may be amended, restated, modified or supplemented from time to
time.
"Wachovia Revolving Loan" means the revolving credit loan made by
Wachovia to the Borrower pursuant to Section 4 hereof.
"Wachovia Term Loan" means the term loan of the principal amount
indicated on Annex I hereto from Wachovia to the Borrower pursuant to Section 2
hereof.
"Wachovia Term Note" means the promissory note evidencing the Wachovia
Term Loan, substantially in the form of Exhibit 1-B hereto, with appropriate
insertions of amount and date as such promissory note may be amended, restated,
modified or supplemented from time to time.
"Working Capital" means Consolidated Current Assets less Consolidated
Adjusted Current Liabilities.
SECTION 2. Commitment and Security.
2.1. Commitment. Each of the Banks severally agrees, upon the terms and
conditions of this Agreement, to make Loans to the Borrower for the period and
in the amounts herein set forth, so long as no Default or Event of Default
exists under this Agreement.
2.2. Security. Each of the Banks hereby agrees to release, and hereby
does release, the liens and security interests in their favor with respect to
the Borrower's (i) equipment, inventory, accounts and fixtures as described in
and as granted pursuant to the Security Agreement dated as of April 15, 1994,
between the Borrower and the Agent for the benefit of the Banks and (ii) liens
on the Mortgaged Property, as such relate to the Term Loans and the Revolving
Loans under the 1994 Credit Agreement. Each of the Banks further agrees, as
issuer of various letters of credit issued for the account of the Borrower in
support of industrial revenue bonds or qualified tax-exempt variable demand rate
notes or similar programs, to release their liens with respect to the real and
personal property of the Borrower (other than in the bonds or variable demand
rate notes which might be repurchased with the proceeds of a draw under the
letter of credit relating thereto, which security interests shall be retained
and not released hereby) where such liens run solely in its favor as issuer of
the letter of credit and not also in favor of the bondholders or noteholders.
Each of the Banks hereby authorizes and directs the Agent to execute such
instruments of release and to take such other action as may be necessary to give
effect to the provisions of this Section 2.2.
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SECTION 3. Loans Evidenced by Term Notes.
3.1. Term Loans. Each Bank hereby severally agrees, on the terms and
conditions of this Agreement and in reliance upon the representations and
warranties made hereunder, to make a Term Loan to the Borrower in the principal
amount indicated on Annex I attached hereto. The aggregate principal amount of
the Term Loans as of the date hereof is THIRTY-SIX MILLION DOLLARS
($36,000,000). The Term Loans shall be evidenced by the Term Notes, and the
proceeds of the Term Loans have been advanced to the Borrower by the Banks.
3.2. Term Notes. On the date hereof, the Borrower shall execute and
deliver to each Bank an amended, restated and substituted Term Note payable to
the order of such Bank for the full amount of such Bank's Term Loan.
3.3. Repayment of Term Loans. Each of the Term Loans shall bear
interest at the Borrower's option at a rate per annum equal to (i) the Prime
Rate or (ii) the Adjusted LIBOR Rate, in either case plus the Applicable Margin.
The rate selected by the Borrower as provided in this Section 3.3 is
sometimes herein referred to as the "Term Loan Interest Rate."
Interest accruing with respect to the Term Loans shall be paid each
Fiscal Month of the Borrower to the Agent for the ratable benefit of the Banks.
The Agent shall exercise its best efforts to submit an invoice to the Borrower
for a Fiscal Month's interest payment by the fourth Business Day of the next
succeeding month; provided, however, that no failure on the part of the Agent to
so deliver such invoice by such date will relieve the Borrower of its obligation
to make such interest payment for such Fiscal Month. Each such invoice shall
state the amount payable to each of the Banks under such invoice. The amount so
accruing will be payable on the tenth Business Day of each Fiscal Month,
following the date hereof, and continuing until payment in full of the Term
Notes. The Agent is hereby authorized by the Borrower (but only on or after the
tenth Business Day of such Fiscal Month of the Borrower) to debit an account of
the Borrower (for the benefit of the Banks) with either of the Banks as
designated by the Borrower in an amount equal to the amount then due and payable
under this Section 3.3 by the Borrower to the Banks for such Fiscal Month. No
late charge will be assessed against the Borrower with respect to any payment
due hereunder until after the fifteenth day after the due date therefor.
From time to time, the Borrower will select the applicable Term Loan
Interest Rate based on quotes from the Agent. The Adjusted LIBOR Rate will be a
fixed rate for one Fiscal Month. This rate option may be designated as of the
first Business Day of a Fiscal Month, and such rates shall be effective as of
the
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first day of the Fiscal Month and shall be in effect through the final day
of the Fiscal Month. If the Term Loan Interest Rate is being calculated based on
the Prime Rate, the rate shall adjust daily as changes occur in the Prime Rate.
On or before 11:00 a.m. (Charlotte, North Carolina time) on the first
Business Day of each Fiscal Month at the Borrower's request, the Agent shall
notify the Borrower of the Term Loan Interest Rate options, and the Borrower may
before 12:00 noon on such day designate to the Agent the applicable Term Loan
Interest Rate which shall apply for such Fiscal Month. If the Borrower fails to
designate an applicable Term Loan Interest Rate by 12:00 noon on such date, each
of the Term Notes will bear interest for such Fiscal Month at the lower of the
Term Loan Rate options on such date.
The aggregate principal amount of the Term Loans shall be due and
payable and shall be repaid by the Borrower to the Agent for the ratable benefit
of the Banks in fifty-nine (59) consecutive monthly installments, each in the
amount of Five Hundred Thousand Dollars ($500,000.00), each such payment being
due and payable on the tenth Business Day of each Fiscal Month for which such
payment is due, commencing on April 12, 1996, and one installment in the amount
of Six Million Five Hundred Thousand Dollars ($6,500,000.00), due and payable on
March 1, 2001. The final maturity date of each of the Term Notes is March 1,
2001.
3.4. Optional and Mandatory Prepayment of Term Loans.
(a) Optional Prepayments. The Borrower shall have the right at
any time, or from time to time, upon at least one (1) days' prior
notice to the Agent, to prepay to the Agent the Term Loans in whole or
in part, without premium or penalty; provided, however, that (i) each
partial prepayment of the Term Loans shall be in the aggregate
principal amount of at least $100,000; (ii) interest on the amount
prepaid, accrued to the date of prepayment, shall be paid on such date
of prepayment; and (iii) each such prepayment shall be applied, pro
rata, to the First Union Term Note and to the Wachovia Term Note.
(b) Mandatory Prepayments. The Borrower will make prepayment
on the Term Loan and the Revolving Loans hereunder as hereafter
provided in an amount equal to 100% of the net proceeds received on the
loan, sale or placement of indebtedness permitted pursuant to Section
10.12(3). Upon the loan, sale or placement of any such indebtedness,
prepayment shall first be made on the Term Loan until the Term Loan is
paid in full, and then the Revolving Credit Commitments shall be
permanently reduced in the amount of the excess. To the extent that
outstanding Revolving Loans exceed the Revolving Credit Commitments
after giving effect
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to any such reduction in the Revolving Credit Commitments, the Borrower
will immediately make payment on the Revolving Loans in the amount of
the difference. Each such prepayment hereunder shall be made promptly
after, but in any event within three (3) Business Days of, receipt by
the Borrower of the net proceeds therefrom.
(c) Application. Any prepayments of the principal amounts of
the Term Loans shall be applied, pro rata between each of the Banks, to
the scheduled payments on the Term Loan in the inverse order of
maturity.
SECTION 4. Loans Evidenced by Revolving Credit Notes.
4.1 Revolving Loans. Each of the Banks severally agrees, upon the terms
and conditions set forth herein, and only so long as no Default or Event of
Default exists hereunder, to make loans to the Borrower under the Revolving
Credit Notes on a pro rata basis up to the amount of such Bank's Revolving
Credit Commitment (as specified on Annex I hereto) during the period from the
Restatement Date until the applicable Revolving Loan Termination Date. As to
each of the Revolving Credit Commitments, during the period from the Restatement
Date to the Revolving Loan Termination Date applicable to such Revolving Loan,
the Borrower may use such Revolving Loan by borrowing, paying or repaying the
principal amount thereof, and reborrowing, paying or repaying the principal
amount thereof, all in accordance with the terms and conditions of this
Agreement; provided, however, that the outstanding principal amount of the
Revolving Credit Notes shall not at any time exceed the aggregate amount of the
Revolving Credit Commitments less the amount of Accepted Drafts (as hereinafter
defined) then outstanding; and provided, further, that the amount advanced by a
Bank pursuant to this Section 4.1 shall not exceed such Bank's Revolving Credit
Commitment at any time. The Revolving Credit Notes, when duly executed and
delivered by the Borrower, shall represent the obligations of the Borrower to
pay the amounts of the Revolving Loans or the aggregate unpaid principal amount
of all Revolving Loans made by the Banks, and interest due thereon. Borrowings
under the Revolving Loans may be made on any Business Day (but not more
frequently than three times during each calendar week) and are to be made in
amounts of not less than $400,000 and in integral amounts of $100,000. The
Borrower shall make requests for advances under the Revolving Loans by giving
the Agent oral or written notice of the amount of such desired borrowing and the
date the funds are to be received by the Borrower on or before 10:30 a.m. of the
date such funds are to be received. The Agent shall promptly advise each Bank of
the information contained in such notice and its proportionate share of such
borrowing. No later than 12:00 noon on the date specified in such notice, each
Bank shall make available to the Agent, in immediately available funds, its
proportionate share of such borrowings.
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4.2. Payments of Interest and Principal. Loans made under the Revolving
Credit Notes shall bear interest at the Borrower's option at a rate per annum
equal to: (i) the Prime Rate or (ii) the Adjusted LIBOR Rate, in either case
plus the Applicable Margin.
The rate selected by the Borrower as provided in this Section 4.2 is
sometimes herein referred to as the "Revolving Loan Interest Rate."
Interest accruing with respect to the Revolving Loans shall be paid
each Fiscal Month of the Borrower to the Agent for the ratable benefit of the
Banks. The Agent shall exercise its best efforts to submit an invoice to the
Borrower for a Fiscal Month's interest payment by the fourth Business Day of the
next succeeding month (but after the end of the Borrower's previous Fiscal
Month); provided, however, that no failure on the part of the Agent to so
deliver such invoice by such date will relieve the Borrower of its obligation to
make such interest payment for such Fiscal Month. Each such invoice shall state
the amount payable to each of the Banks under such invoice. The amount so
accruing will be payable on the tenth Business Day of each Fiscal Month,
commencing on the first such interest payment date following the date of the
first Revolving Loan, and continuing until payment in full of the Revolving
Credit Notes. The Agent is hereby authorized by the Borrower (but only on or
after the tenth Business Day of such Fiscal Month of the Borrower) to debit an
account of the Borrower (for the benefit of the Banks) with either of the Banks
as designated by the Borrower in an amount equal to the amount then due and
payable under this Section 4.2 by the Borrower to the Banks for such Fiscal
Month. No late charge will be assessed against the Borrower with respect to any
payment due hereunder until after the fifteenth day after the due date therefor.
Borrower shall immediately pay to the Agent, for the pro rata benefit of the
Banks, on the date the Revolving Credit Notes become due and payable, the entire
outstanding principal amount of the Revolving Loans, together with the accrued
interest thereon through and including such date. The Borrower may make payments
of principal on the Revolving Loans at any time and from time to time, provided
that such payments must be in amounts of not less than $100,000 and in integral
amounts of $100,000, and provided further that the Borrower may not make either
a borrowing under Section 4.1 hereof or a payment of principal pursuant to this
Section 4.2 more often than three times during any calendar week.
From time to time Borrower will select the applicable Revolving Loan
Interest Rate based on quotes from the Agent. The Adjusted LIBOR Rate will be a
fixed rate for one Fiscal Month. This rate option may be designated as of the
first Business Day of a Fiscal Month and such rates shall be effective as of the
first day of the Fiscal Month and shall be in effect through the final day of
the Fiscal Month. If the Revolving Loan Interest
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Rate is being calculated based on the Prime Rate, the rate shall adjust daily as
changes occur in the Prime Rate.
On or before 11:00 a.m. (Charlotte, North Carolina time) on the first
Business Day of each Fiscal Month at the Borrower's request, the Agent shall
notify the Borrower of the Revolving Loan Interest Rate options, and the
Borrower may before 12:00 noon on such day designate to the Agent the applicable
Revolving Loan Interest Rate which shall apply to such Fiscal Month. If the
Borrower fails to designate an applicable Revolving Loan Interest Rate by 12:00
noon on such date, the Revolving Credit Notes will bear interest for such Fiscal
Month at the lower of the Revolving Loan Rate options on such date.
4.3. Termination or Reduction of Revolving Credit Commitments. Borrower
shall have the right, upon written notice (effective upon receipt) to the Agent
and each of the Banks, to terminate, or from time to time, to reduce, the
Revolving Credit Commitments without premium or penalty, except as provided
below. Any such reduction in the Revolving Credit Commitments shall in turn
reduce, pro rata, the amount of the First Union Revolving Credit Commitment and
the Wachovia Revolving Credit Commitment. Each partial reduction of the
Revolving Credit Commitments shall be in an aggregate amount equal to $1,000,000
or any integral multiple thereof. Each such reduction shall be accompanied by
prepayment of the Revolving Credit Notes (each such payment being applied, pro
rata, to the First Union Revolving Credit Note and the Wachovia Revolving Credit
Note), together with accrued interest thereon, to the extent that the aggregate
principal amount thereof then outstanding exceeds the Revolving Credit
Commitments as so reduced. Any such prepayments shall be made to the Agent, for
the ratable benefit of the Banks. In any event, all Revolving Credit Commitments
will terminate on March 1, 2001, at which time the Revolving Credit Notes shall
be due and payable in full.
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4.4. Bankers' Acceptances.
(a) Drafts. Subject to the terms and conditions hereof and in
its sole discretion, either Bank may accept (in which case such Bank
shall be referred to herein as an "Accepting Bank"), for the account of
the Borrower and at the Borrower's request and without regard to the
amount of the Accepting Bank's Revolving Credit Commitment, such drafts
as the Borrower may from time to time designate (such drafts, upon
being accepted by either such Bank, are referred to herein as "Accepted
Drafts"); provided, however, that the Borrower shall not request either
Bank to accept a draft if (i) the amount of such draft is less than
$1,000,000 or is not in an integral multiple of $1,000,000; (ii) upon
such Bank's acceptance of such draft the aggregate stated amount of
outstanding Accepted Drafts would exceed the lesser of $33,500,000 or
the then aggregate amount of the Revolving Credit Commitments; (iii)
upon the Bank's acceptance of such draft the sum of the outstanding
aggregate principal amount of the Revolving Loans plus the aggregate
stated amount of outstanding Accepted Drafts would exceed the lesser of
$33,500,000 or the then aggregate amount of the Revolving Credit
Commitments; (iv) the date the draft is to mature is later than either
(A) a Revolving Loan Termination Date on which all of such Bank's
Revolving Loans will terminate or (B) ninety (90) days after the date
the draft is presented to such Bank for acceptance; or (v) a Default or
an Event of Default has occurred and is continuing. All such drafts
requested pursuant to this Section 4.1 shall be substantially in the
customary form of the Accepting Bank. The Accepting Bank shall
promptly, upon the acceptance of a draft, notify the Agent and the
other Bank of such Accepted Draft, specifying the date, amount and
maturity thereof. The Accepting Bank shall also notify the Agent and
the other Bank at such time as such Accepted Draft has matured and been
paid in full by the Borrower.
(b) Request for a Draft. Whenever the Borrower desires the
acceptance of a draft it shall, in addition to providing such documents
as the Accepting Bank may require, including a detailed statement
describing the transaction, if any, to be financed by the draft,
deliver the draft and accompanying information to the Accepting Bank no
later than 11:00 A.M. (Charlotte, North Carolina time) at least two (2)
Business Days in advance of the proposed date of acceptance.
(c) Repayment. The Borrower shall pay to the Accepting Bank,
in United States currency same-day-available funds, the amount of each
Accepted Draft on or prior to its date of maturity. In the event that
the Borrower fails to make timely such payment, the Accepting Bank may,
on the Borrower's behalf, request a Loan under the Revolving Loans in
the amount of such Accepted Draft by notice to the Agent,
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and such request for a Loan by the Accepting Bank shall be deemed to
have been made by the Borrower pursuant to Section 4.1 hereof,
whereupon the Banks shall, subject to the conditions set forth in this
Agreement, honor such request and disburse such Loan to the Accepting
Bank for and on behalf of the Borrower. For purposes of the immediately
preceding sentence, however, the failure of the Borrower to pay to the
Accepting Bank the amount of the Accepted Draft on or prior to its date
of maturity shall not be considered a Default or Event of Default. The
Borrower hereby irrevocably appoints such Accepting Bank as its
attorney-in-fact for and on behalf of the Borrower to request such
Loan. The power-of-attorney granted by this Section is coupled with an
interest and is irrevocable as long as the Revolving Credit Commitments
are outstanding.
(d) Acceptance Rate. The Borrower agrees to pay the Accepting
Bank, on demand, interest in respect of each Accepted Draft at a rate
equal to the rate for bankers' acceptances of a term of 30, 60 or 90
days and of the proposed draft amount quoted by the Accepting Bank to
the Borrower at the time of acceptance of the Accepted Draft and all
reasonable out-of-pocket expenses incurred by such Bank in connection
with the Accepted Draft. Because the Accepting Bank's rate for bankers'
acceptances is subject to frequent change, any quotation of such a rate
by the Accepting Bank to the Borrower shall not be valid if the
Borrower does not present the Accepting Bank with a draft for
acceptance immediately upon such quotation.
(e) Compliance with Laws. The Borrower agrees to comply with
all requirements of law in connection with the transaction financed by
an Accepted Draft and shall perform such transaction in accordance with
the description of the transaction, if any, submitted by the Borrower
to the Accepting Bank upon the Borrower's request for acceptance of a
draft.
(f) Termination of Revolving Credit Commitment.
Notwithstanding anything to the contrary herein, upon the acceleration
of any of the Borrower's obligations hereunder after an Event of
Default or upon the termination of a Revolving Credit Commitment
hereunder, an amount equal to the aggregate amount of the outstanding
Accepted Drafts shall, at the Accepting Bank's option and without
demand upon or further notice to the Borrower, be deemed (as between
such Bank and the Borrower) to have been paid or disbursed by the Bank
under the Accepted Drafts (notwithstanding that such amounts may not in
fact have been so paid or disbursed), and a Loan to the Borrower in the
amount of such Accepted Drafts to have been made and accepted, which
Loan shall be due and payable as provided herein.
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(g) Notwithstanding the foregoing, the Bankers Acceptances
option described in this Section 4.4 shall be available to the Borrower
only in the event that, and so long as, the ratio of Consolidated
Funded Debt to Operating Cash Flow shall be no greater than 2.25 to
1.0.
4.5. Letters of Credit.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Issuing Bank may reasonably require, the Issuing Bank shall issue,
and the Banks shall participate in, Letters of Credit for the account
of the Borrower from time to time upon request from the Restatement
Date until the Revolving Loan Maturity Date in a form acceptable to the
Issuing Bank; provided, however, that (i) the aggregate amount of LOC
Obligations shall not at any time exceed TWENTY-TWO MILLION FOUR
HUNDRED THIRTY-SIX THOUSAND FOUR HUNDRED EIGHTEEN AND 54/100 DOLLARS
($22,436,418.54) (the "LOC Committed Amount"). Letters of Credit will
be issued solely for the purpose of supporting industrial development
revenue bonds or similar tax-advantaged programs for the benefit of the
Borrower. Except as otherwise expressly agreed upon by all the Banks,
Letters of Credit shall not have an original expiry date later than the
Revolving Loan Maturity Date. Each Letter of Credit shall comply with
the related LOC Documents. The issuance and expiry date of each Letter
of Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted to the Issuing Bank, with a copy to
the Agent, at least three (3) Business Days prior to the requested date
of issuance. The Issuing Bank will, at least quarterly and more
frequently upon request, provide to the Agent for dissemination to the
Banks a detailed report specifying the Letters of Credit which are then
issued and outstanding and any activity with respect thereto which may
have occurred since the date of the prior report, and including
therein, among other things, the account party, the beneficiary, the
face amount, expiry date as well as any payments or expirations which
may have occurred. The Issuing Bank will further provide to the Agent
promptly upon request copies of the Letters of Credit, and the Agent
shall provide to the other Banks promptly upon request copies of the
Letters of Credit.
(c) Reimbursement.
(i) Drawings other than Tender Drawings. The
Borrower hereby agrees to pay to the Issuing Bank:
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(A) except as set forth in subsection (ii)
hereof applicable to Tender Drawings that are paid from the
proceeds of a Tender Advance made pursuant to subsection (b)
hereof, immediately after (and on the same Business Day as)
any amount is drawn under a Letter of Credit, a sum (and
interest on such amount as provided in subsection (iii)
hereof) equal to the amount so drawn; and
(B) any and all expenses incurred by the
Issuing Bank in enforcing any rights under this Agreement.
(ii) Tender Drawings.
(A) In the case of a Tender Drawing, subject
to the conditions in Section 8.2 for an Extension of Credit
hereunder, then unless the Borrower shall have given notice of
its election to reimburse the Issuing Bank in immediately
available funds for the full amount of the Tender Drawing
prior to the end of the Business Day thereof, the proceeds of
the amount of each Tender Drawing (other than a Tender Drawing
upon conversion of the interest rate on the underlying bonds
to a fixed rate, and other than the portion of the Tender
Drawing representing interest accrued on the underlying bond
which shall not be subject to repayment with the proceeds of a
Tender Advance hereunder) shall, as provided in subsection (c)
hereof, constitute an advance made by the Issuing Bank to the
Borrower on the date and in the amount of such drawing, each
such advance being referred to as a "Tender Advance". Where
availability exists under the Revolving Credit Commitment, the
Issuing Bank may request a Revolving Loan advance under
Section 4.1 to repay the Tender Advance. Where the Issuing
Bank does not request a Revolving Loan advance in accordance
with the terms hereof or where availability does not exist
under the Revolving Credit Commitment or Revolving Loan
advances may not be made, the Tender Advance shall remain
outstanding in accordance with terms hereof. Any amounts drawn
to pay the portion of the purchase price of the underlying
bonds constituting accrued interest shall be reimbursed as
provided in subsection (i) hereof and shall not be reimbursed
from the proceeds of a Tender Advance.
(B) Acceptance by the Borrower of each
Tender Advance shall constitute a representation and warranty
by the Borrower as of the date thereof that the conditions of
Section 8.2 to each Extension of Credit have been satisfied.
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(iii) Unreimbursed Drawings. The Borrower shall pay
to the Issuing Bank upon demand interest at a per annum rate equal to
the Prime Rate plus two percent (2%) on any and all amounts (other than
Tender Advances referred to in subsection (ii) hereof) unpaid by the
Borrower when due hereunder (in the case of amounts in respect of
interest, to the maximum extent permitted by law) commencing the day
after such amounts first became due until payment is made. The
Borrower's reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of any rights of
set-off, counterclaim or defense to payment the Borrower may claim or
have against the Issuing Bank, the Agent, the Banks, the beneficiary of
the Letter of Credit drawn upon or any other Person, including without
limitation any defense based on any failure of the Borrower to receive
consideration or the legality, validity, regularity or unenforceability
of the Letter of Credit. The Issuing Bank will promptly notify the
other Banks of the amount of any unreimbursed drawing and each Bank
shall promptly pay to the Agent for the account of the Issuing Bank in
Dollars and in immediately available funds, the amount of such Bank's
LOC Commitment Percentage of such unreimbursed drawing. Such payment
shall be made on the day such notice is received by such Bank from the
Issuing Bank if such notice is received at or before 2:00 P.M.
(Charlotte, North Carolina time), otherwise such payment shall be made
at or before 12:00 Noon (Charlotte, North Carolina time) on the
Business Day next succeeding the day such notice is received. If such
Bank does not pay such amount to the Issuing Bank in full upon such
request, such Bank shall, on demand, pay to the Agent for the account
of the Issuing Bank interest on the unpaid amount during the period
from the date of such drawing until such Bank pays such amount to the
Issuing Bank in full at a rate per annum equal to, if paid within two
(2) Business Days of the date of drawing, the Federal Funds Rate and
thereafter at a rate equal to the Prime Rate. Each Bank's obligation to
make such payment to the Issuing Bank, and the right of the Issuing
Bank to receive the same, shall be absolute and unconditional, shall
not be affected by any circumstance whatsoever and without regard to
the termination of this Credit Agreement or the Commitments hereunder,
the existence of a Default or Event of Default or the acceleration of
the Obligations hereunder and shall be made without any offset,
abatement, withholding or reduction whatsoever.
(d) Tender Advances.
(i) The Issuing Bank hereby agrees, on the terms and
conditions of this Agreement, to make Tender Advances to the Borrower
for the purpose of paying Tender Drawings arising from time to time
during the period from the Restatement Date to the Revolving Loan
Termination Date.
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The Bank agrees that upon any Tender Drawing under a Letter of Credit
the Issuing Bank shall, without any notice or other action on the part
of the Borrower but subject to satisfaction of the conditions of
Section 8.2 hereof, make a Tender Advance in an amount equal to such
Tender Drawing, the proceeds of which shall automatically be applied by
the Issuing Bank to the payment in full of the Tender Drawing. The
Borrower hereby agrees to pay to the Issuing Bank the aggregate unpaid
principal amount of the Tender Advances together with all accrued and
unpaid interest thereon as provided in subparagraph 4.5(d)(iii) below.
The Tender Advances may, but need not, be made against and evidenced by
such promissory notes or instruments as the Issuing Bank may deem
appropriate. Where a Tender Advance is evidenced by a promissory note
or other instrument, the Borrower authorizes the Issuing Bank to
endorse on any schedule which may be attached thereto the amount of
each Tender Advance made by the Issuing Bank to the Borrower hereunder,
the date of the Tender Advance and the amount of each payment or
prepayment of principal of such Tender Advance received by the Issuing
Bank; provided, however, that any failure by the Issuing Bank to make
any such endorsement shall not limit, modify or affect the obligations
of the Borrower hereunder or under any promissory note or instrument
relating thereto in respect of such Tender Advances.
(ii) The Borrower hereby promises to pay to the
Issuing Bank interest at a rate per annum equal to the rate selected by
the Borrower and applicable to Revolving Loans under Section 4.2 hereof
for the period commencing on the date of such Tender Advance to, but
excluding, the date such Tender Advance is paid in full. Accrued
interest on each Tender Advance shall be payable (A) on the dates
provided for payment of interest on Revolving Loans in Section 4.2
hereof, (B) upon the payment or prepayment thereof, and (C) on the
Revolving Loan Termination Date.
(iii) Each Tender Advance shall be payable on the
earlier of (A) the date of remarketing of the underlying bonds relating
to such Tender Advance, or (B) the Revolving Loan Termination Date. All
Tender Advances may be prepaid in whole or in part (in multiples of
$5,000) at any time by the Borrower on one (1) Business Day's notice
stating the amount to be prepaid (which if in part shall be $5,000 or a
whole multiple thereof), and at any time on behalf of the Borrower on
one (1) Business Day's notice from the Borrower directing the Issuing
Bank to deliver a specified principal amount of pledged bonds held by
the Issuing Bank or its designated pledge agent for remarketing
pursuant to the terms of the Indenture relating thereto. Each such
notice of prepayment shall be irrevocable and shall specify the Tender
Advance to be prepaid and the amount of the Tender Advance to be
prepaid and the date of prepayment (which date
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shall be a Business Day). Upon payment to the Issuing Bank of amounts
hereunder in payment or prepayment on the Tender Advances, together
with accrued interest thereon, the Issuing Bank shall release from the
pledge and security interest relating thereto a principal amount of
Pledged Bonds (consisting of the underlying Bonds relating to such
Tender Advance) equal to the amount of such payment or prepayment.
(e) Participations. Each Bank, with respect to the Existing
Letters of Credit, hereby purchases a participation interest in such
Existing Letters of Credit and with respect to Letters of Credit issued
on or after the Restatement Date, upon issuance of a Letter of Credit,
shall be deemed to have purchased without recourse a risk participation
from the Issuing Bank in such Letter of Credit, and in each case in any
Tender Advances relating thereto and in the other obligations arising
thereunder and any collateral relating thereto, in each case in an
amount equal to its LOC Commitment Percentage of the obligations under
such Letter of Credit and shall absolutely, unconditionally and
irrevocably assume, as primary obligor and not as surety, and be
obligated to pay to the Issuing Bank therefor and discharge when due,
its LOC Commitment Percentage of the obligations arising under such
Letter of Credit (including, for purposes hereof, Tender Advances).
Without limiting the scope and nature of each Bank's participation in
any Letter of Credit and in Tender Advances relating thereto, to the
extent that the Issuing Bank has not been reimbursed as required
hereunder or under any such Letter of Credit (or, in the case of a
Tender Advance, in accordance with the terms hereof), each such Bank
shall pay to the Issuing Bank its LOC Commitment Percentage of such
unreimbursed drawing (or Tender Advance) in same day funds on the day
of notification by the Issuing Bank of an unreimbursed drawing pursuant
to the provisions of subsection (d) hereof. The obligation of each Bank
to so reimburse the Issuing Bank shall be absolute and unconditional
and shall not be affected by the occurrence of a Default, an Event of
Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of the Borrower to
reimburse the Issuing Bank under any Letter of Credit, together with
interest as hereinafter provided.
(f) Modification, Extension. The issuance of any supplement,
modification, amendment, renewal, or extension to any Letter of Credit
shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Issuing Bank may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as published
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as of the date of issue by the International Chamber of Commerce (the
"UCP"), in which case the UCP may be incorporated therein and deemed in
all respects to be a part thereof.
(h) Letter of Credit Fees.
(i) Letter of Credit Fee. In consideration of the
issuance of Letters of Credit hereunder, the Borrower agrees to pay a
fee (the "Letter of Credit Fee") equal to the Applicable Percentage per
annum on the average daily maximum amount available to be drawn under
each such Letter of Credit from the date of issuance to the date of
expiration. The Borrower agrees to pay to the Issuing Bank for its own
account, without sharing by the other Banks such additional fee, if
any, as may from time to time be agreed upon by the Borrower and the
Issuing Bank. The Letter of Credit Fee shall be payable to the Agent
annually in advance on April 1, of each year. The Agent shall pay over
to the Banks (including the Issuing Bank) their respective ratable
share of the Letter of Credit Fee promptly upon receipt.
(ii) Issuing Bank Fees. In addition to the Letter of
Credit Fees payable pursuant to subsection (i) hereof, the Borrower
agrees to pay to the Issuing Bank for its own account, without sharing
by the other Banks such additional fee, if any, as may from time to
time be agreed upon by the Borrower and the Issuing Bank and also
customary charges from time to time of the Issuing Bank, with respect
to the issuance, amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit
(collectively, the "Issuing Bank Fees").
(i) Existing Reimbursement Agreement. Reference is hereby made
to that $4,500,000 Guilford County, North Carolina, Industrial
Facilities and Pollution Control Financing Authority Industrial
Development Revenue Bonds (Culp, Inc. Project) Series 1988, to the
Existing Letter of Credit relating thereto as referenced on Exhibit 9,
and to the Reimbursement Agreement dated as of December 1, 1993 between
Wachovia Bank of North Carolina, N.A. and the Borrower, as amended (the
"Existing Reimbursement Agreement"). Plans have been made to replace
the foregoing letter of credit with a new Letter of Credit issued by
Wachovia under this Credit Agreement, but until such time as the new
Letter of Credit has been issued hereunder and the foregoing Existing
Letter of Credit has been terminated and surrendered, the Existing
Reimbursement Agreement shall remain in effect, provided, however, that
the provisions of such Reimbursement Agreement which contrast with or
are in conflict with the provisions of this Agreement shall be deemed
amended and modified to conform with the provisions of this Agreement.
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SECTION 5. The Notes.
5.1. Computation of Interest. Interest on each of the Revolving Credit
Notes and the Term Notes (the "Notes") shall be computed on the actual number of
days elapsed, based on a year of 360 days.
5.2. Payments. All payments (including prepayments) made by the
Borrower on account of principal, interest and fees shall be made at the office
of the Agent referred to in Section 13.10 hereof, for the benefit of the Banks
as appropriate, prior to 11:00 a.m., Charlotte, North Carolina time on the date
of payment in immediately available funds and, when due or upon instruction from
the Borrower, may be made by debit to the Borrower's account with the Agent (for
the benefit of the Banks) or with either Bank as contemplated herein. Promptly
upon receipt of any such payments the Agent shall remit each Bank's pro rata
portion thereof to such Bank in immediately available funds or credit such
amounts to an account which such Bank then maintains with the Agent.
5.3. Facility Fee. The Borrower shall pay a facility fee equal to
$100,500 (0.30%) per annum in respect of the Revolving Credit Commitments. Such
fee shall be paid annually to the Agent for the ratable benefit of the Banks
(based upon the Revolving Credit Commitments of each Bank), the first such
annual payment being due on April 1, 1996 and subsequent annual payments being
due on the anniversary dates thereof. The Agent shall submit an invoice to the
Borrower with respect to each annual payment due hereunder, and each such
invoice shall state the amount payable to each of the Banks under such invoice.
In the event of the termination of the Revolving Credit Commitments pursuant to
the second paragraph of Section 4.3 hereof, such fee shall be payable only with
respect to that portion of a twelve-month period during which the Revolving
Credit Commitments are in effect, and each Bank shall refund to the Borrower
such Bank's pro rata share of any such excess facility fee payment. In the event
of a reduction in the Revolving Credit Commitments at the election of the
Borrower pursuant to the first paragraph of Section 4.3 hereof, no part of, the
facility fee paid by the Borrower for the year in which the notice of such a
reduction is given shall be refunded, but the amount of the facility fee shall
be adjusted as of the next anniversary date of the Closing Date after such
reduction to an amount that bears the same proportion (0.30%) to the total
Revolving Credit Commitments following such reduction as $100,500 bears to the
total Revolving Credit Commitments as of the date hereof.
5.4. Default Rate of Interest. Upon the occurrence of and during the
continuance of an Event of Default, the principal amount outstanding under the
Notes shall, at the option of the Required Banks (but only upon and after
written notice to the
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Borrower of the Required Bank's exercise of their rights under this Section
5.4), bear interest at a rate per annum equal to the Prime Rate plus 2% (the
"Default Rate"). Upon the occurrence and during the continuance of an Event of
Default by reason of the failure by the Borrower to pay to the Accepting Bank
any amounts due the Accepting Bank pursuant to Section 4.4(c) hereof, such
amounts shall bear interest from the date due until paid at the rate per annum
equal to the Default Rate.
5.5. Late Charge. A late charge of four percent (4%) of each payment
past due for more than fifteen (15) days shall be added to the amount due with
respect to such payment.
SECTION 6. Use of Proceeds. The proceeds of the Revolving Loans shall be used by
the Borrower for Capital Expenditures, for normal working capital requirements
and to repay from time to time Accepted Drafts. The proceeds of the Term Loans,
other than the proceeds made available by the Banks pursuant to the Third
Amendment, shall be used by the Borrower to refinance and restructure existing
indebtedness of the Borrower to First Union and Wachovia and for ongoing
corporate purposes.
SECTION 7. Representations and Warranties. In order to induce each of the Banks
to enter into this Agreement and to make the Extensions of Credit herein
provided for, the Borrower, as of the date hereof, represents and warrants to
the Banks (which representations and warranties shall survive the delivery of
the documents mentioned herein and the making of the initial Extensions of
Credit contemplated hereby) as follows:
7.1. Incorporation. Borrower and each Subsidiary are corporations duly
organized, existing and in good standing under the laws of their respective
Jurisdictions of incorporation, and have the corporate power to own their
respective properties and to carry on their respective businesses as now being
conducted, and, to the best of their knowledge, are duly qualified as foreign
corporations to do business in every jurisdiction in which the nature of their
respective businesses makes such qualification necessary (except such
jurisdictions, if any, in which the failure to be so qualified will not have a
material adverse effect on their respective businesses) and are in good standing
in such jurisdictions. Exhibit 3 contains a complete list of all of the
Borrower's Subsidiaries and all of the Borrower's investments in other Persons.
7.2. Power and Authority. Borrower is duly authorized under all
applicable provisions of law to execute and deliver this Agreement, the Notes
and the other Loan Documents and to execute, deliver and perform under this
Agreement, and all corporate action on its part required for the lawful
execution, delivery and performance thereof has been duly taken; and this
Agreement, the Notes and the other Loan Documents upon due execution and
delivery thereof, will be the valid and enforceable instruments
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and obligations of Borrower in accordance with their terms. Neither the
execution of this Agreement nor the creation or issuance of the Notes or the
other Loan Documents, nor the fulfillment of or compliance with their provisions
and terms, will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a violation of or default under any applicable law,
regulation, writ or decree or the articles of incorporation or bylaws of
Borrower or any subsidiary, or any agreement or instrument to which Borrower or
any Subsidiary is now a party, or create any lien, charge or encumbrance upon
any of the property or assets of Borrower or any Subsidiary except for the liens
created pursuant to the Loan Documents.
7.3. Financial Condition. The consolidated balance sheet of Borrower
and its Subsidiaries for the Fiscal Year ended as of April 30, 1995, and the
related consolidated statements of income and retained earnings and consolidated
statements of cash flow for the year then ended, certified by independent public
accountants, copies of which have been furnished to the Banks, are correct,
complete and fairly present the financial condition of Borrower and its
Subsidiaries as at the date of said balance sheet and the results of their
operations for such period. The interim consolidated balance sheet and interim
consolidated statement of income and retained earnings and statements of cash
flow as of or for the period ended January 28, 1996, prepared by the chief
financial officer of the Borrower, copies of which have been furnished to the
Banks, are true and correct and present fairly, subject to normal recurring
year-end adjustments, the financial condition of Borrower and its Subsidiaries
as of such date and the results of their operations for such period. The
Borrower and its Subsidiaries do not have any material direct or contingent
liabilities as of the date of this Agreement which are not provided for or
reflected in the consolidated balance sheets dated January 28, 1996, or referred
to in notes thereto or set forth in Exhibit 4 hereto. All such financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States applied on a consistent basis throughout the
period involved. There has been no material adverse change in the business,
properties, or condition, financial or otherwise, of Borrower or any Subsidiary
since January 28, 1996. No statement contained in this Agreement or in any
schedule or exhibit hereto or in any certificate delivered (or to be delivered)
pursuant hereto contains (or will contain) any material misstatement of fact or
omit (or will omit) to state a material fact or any fact necessary to make the
statement contained therein not materially misleading.
7.4. Title to Assets. Borrower and its Subsidiaries have good and
marketable title to their respective properties and assets, both real and
personal property, including the properties and assets reflected in the
financial statements and notes thereto described in Section 7.3 (the "Financial
Statements"),
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except for such assets as have been disposed of since the date of the Financial
Statements in the ordinary course of business or as are no longer useful in the
conduct of their respective businesses, and all such properties and assets are
free and clear of all liens, mortgages, pledges, encumbrances or charges of any
kind except for Permitted Encumbrances.
7.5. Absence of Pending Actions. There are no suits or proceedings
pending before any court, quasi-judicial or administrative body or regulatory
agency or, to the knowledge of Borrower, threatened against or affecting
Borrower or the Real Property, or involving the validity or enforceability of
the Loan Documents or relating to Borrower's actual use of the Real Property or
involving any risk of a judgment or a liability the likely outcome of which
would have a material adverse effect on the financial condition, business or
properties of Borrower or Borrower's ability to perform its obligations under
the Loan Documents, or any Lease respecting the Real Property, except as
described in Exhibit 4 hereto.
7.6. Contingent Liabilities. The Borrower, and its, Subsidiaries have
not guaranteed any obligations of others and are not, to the best of their
knowledge, contingently liable in any manner, direct or indirect, except as
otherwise permitted under Section 10.2 hereof or as disclosed in the Financial
Statements or Exhibit 4 hereto.
7.7. Taxes. Borrower and its Subsidiaries have filed all tax returns
required to be filed by them and all taxes due with respect thereto have been
paid, and, except as described in Exhibit 4 hereto, no material controversy in
respect of additional taxes, state, federal or foreign, of Borrower or its
Subsidiaries is pending, or, to the knowledge of Borrower, threatened. The
federal and state income taxes of Borrower and its Subsidiaries have been
examined and reported on or closed by applicable statutes for all Fiscal Years
to and including the Fiscal Year ending April 30, 1993, and adequate reserves
have been established for the payment of all such taxes for periods ended
subsequent to April 30, 1993.
7.8. Contract or Restriction Affecting Borrower. Neither the Borrower
nor its Subsidiaries are parties to, nor are legally bound by any contract or
agreement, or subject to any charter or other corporate restrictions, or subject
to the renegotiation of any contract which does or may materially and adversely
affect the business, properties or condition, financial or otherwise, of
Borrower or its Subsidiaries, except as disclosed or reflected in the Financial
Statements or on Exhibit 4.
7.9. [INTENTIONALLY LEFT BLANK]
7.10. Permits and Licenses. Borrower has obtained, or will obtain, all
required federal, state and local permits, licenses,
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approvals and authorizations, including those required by the Federal
Environmental Protection Agency and any state or local authority charged with
the enforcement or regulation of environmental and land use matters, and has
complied in all material respects, or will comply in all material respects, with
all building, safety, division, zoning, land use and other requirements of any
state, municipal or other governmental authority, pertaining to the construction
or operation of the Improvements.
7.11. Trademarks, Franchises and Licenses. Borrower and its
Subsidiaries own, possess, or have the right to use all necessary patents,
licenses, franchises, trademarks, trademark rights, trade names, trade name
rights and copyrights to conduct their respective businesses as now conducted,
without known conflict with any patent, license, franchise, trademark, trade
name, or copyright of any other Person.
7.12. [INTENTIONALLY LEFT BLANK]
7.13. [INTENTIONALLY LEFT BLANK]
7.14. ERISA. Borrower and each Subsidiary are in compliance in all
material respects with all material requirements of ERISA applicable to it, and
no Reportable Event (as defined in ERISA) has occurred and is continuing with
respect to any Plan (as defined in ERISA).
7.15. Environmental Matters. Except as set forth in
Exhibit 4:
(a) the Real Property of Borrower and each Subsidiary is in
compliance in all material respects with all Acts that are applicable
to the Borrower, and the Borrower and each Subsidiary have obtained and
currently maintain all licenses, permits and approvals required with
respect to Hazardous Substances and are in compliance in all material
respects with all such licenses, permits and approvals;
(b) as of this date, none of the Real Property has been used
to illegally treat, store or dispose of Hazardous Substances, and no
Hazardous Substances are illegally located on, in or under any of the
Real Property or used or emitted in connection therewith, except to the
extent that Borrower has fully disclosed to the Banks in writing the
existence, extent and nature of any such Hazardous Substances on, in or
under any of the Real Property or used or emitted in connection
therewith;
(c) to the best of Borrower's knowledge and belief, no portion
of any of the Real Property is part of a flood plain or flood hazard
area or protected wetlands, except to the extent that Borrower has
fully disclosed to the Banks in
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writing the existence, extent and nature of such flood plain, flood
hazard area or wetlands; and
(d) Borrower has notified the Banks of Borrower's receipt of
any citations, orders, notices, consent agreements, lawsuits, claims,
or similar communication from a Governmental Authority or third party
alleging a violation of any Acts (including allegations of a violation
of the common law).
7.16. No Default. Neither the Borrower nor any Subsidiary is in default
in the performance, observance or fulfillment of any of its material
obligations, covenants or conditions contained in any agreement or instrument to
which it is a party.
SECTION 8. Conditions.
8.1. Conditions of Closing. The obligation of the Banks to make the
Loans herein provided for is subject to the continuing accuracy of all
representations and warranties of the Borrower herein (except to the extent such
representations and warranties shall become inaccurate solely as a result of
subsequent occurrences permitted under this Agreement or otherwise disclosed to
the Banks) and the performance of all agreements by Borrower contained herein,
including the following:
(a) Legal Opinions. On the date hereof, and to the extent required by
the Banks upon any further closing hereunder, the Banks shall have received the
favorable opinion of Robinson, Bradshaw & Hinson, P.A., counsel for Borrower,
addressed to the Banks, in form and substance satisfactory to the Banks.
(b) Closing Documents. Borrower shall have delivered to
the Banks on or prior to the date hereof:
(i) the executed Term Notes and Revolving Credit Notes
and executed counterparts of this Agreement;
(ii) corporate resolutions of the Board of Directors of the
Borrower, in form satisfactory to the Banks, approving this Agreement,
the Notes and the other Loan Documents and the transactions
contemplated thereby and authorizing execution, delivery and
performance thereof; and
(iii) a copy of the Borrower's articles of incorporation and
bylaws certified by the Secretary or Assistant Secretary of the
Borrower to be true and correct copies as currently in effect.
8.2. Conditions to Each Extension of Credit. The obligation of the
Banks to make any Extension of Credit hereunder is subject to satisfaction of
the following conditions on the date of the making thereof:
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(a) Representations and Warranties. The representations and
warranties made by the Borrower herein or in any certificate furnished
to the Banks in connection herewith shall be true and correct in all
material respects on and as of such date (except as to those matters
which by there terms relate to a prior period).
(b) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing on such date or after
giving effect to the Extension of Credit to be made thereby.
Each acceptance by the Borrower of an Extension of Credit hereunder shall be
deemed to constitute a representation and warranty by the Borrower as of the
date of the Extension of Credit that the foregoing conditions have been
satisfied.
SECTION 9. Affirmative Covenants. Borrower covenants that, so long as any
portion of the indebtedness evidenced by the Notes or any other obligation
hereunder remains unpaid and unless the Banks otherwise consent in writing, it
will:
9.1. Financial Reports and Other Data.
(a) As soon as practicable and in any event within 45 days
after the end of each of the first three Fiscal Quarters of Borrower,
deliver to each of the Banks (i) a consolidated and, if requested by
the Banks, a consolidating balance sheet of Borrower and its
Subsidiaries as at the end of such Fiscal Quarter, and related
statements of income and retained earnings and statements of cash flow
for such Fiscal Quarter and for the period from the beginning of the
current Fiscal Year to the end of such Fiscal Quarter, setting forth in
comparative form figures for the corresponding periods in the preceding
Fiscal Year, all in reasonable detail and certified by either the chief
executive officer or the chief financial officer of Borrower to have
been prepared in accordance with generally accepted accounting
principles in the United States applied on a consistent basis, subject
only to changes resulting from normal, recurring year-end adjustments
and (ii) a Form 10-Q as filed by the Borrower with the Securities and
Exchange Commission with respect to such Fiscal Quarter.
(b) As soon as practicable and in any event within 120 days
after the end of each Fiscal Year, deliver to each of the Banks (i) a
consolidated and a consolidating balance sheet of Borrower and its
Subsidiaries as at the end of such Fiscal Year, and related statements
of income and retained earnings and statements of cash flow for such
Fiscal Year, setting forth in each case in comparative form
corresponding figures from the preceding annual audit, all in
reasonable
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detail, and certified by and containing an opinion, reasonably
acceptable to the Banks, from a firm of nationally recognized
independent certified public accountants, and (ii) a Form 10-K as filed
by the Borrower with the Securities and Exchange Commission with
respect to such Fiscal year.
(c) Furnish, at the reasonable request of either of the Banks,
opinions of legal counsel, independent public accountants and officers'
certificates satisfactory to such Bank, regarding matters incident to
this Agreement. Upon delivery of the financial statements as required
in Sections 9.1(a) and (b), the Borrower will furnish the Banks, with a
certificate in the form of Exhibit 5 attached hereto as of the end of
the preceding Fiscal Quarter, signed by Borrower's chief executive
officer or chief financial officer. In addition, the Borrower shall
give each of the Banks prompt written notice of a default or failure of
performance under any material agreement or contract to which either
the Borrower or a Subsidiary is a party or by which it is bound.
(d) Promptly deliver to each of the Banks a copy of all (i)
proxy materials submitted to the shareholders of the Borrower, (ii)
reports and registration statements (including, without limitation,
forms 10-K and 10-Q as required above) furnished to the Securities and
Exchange Commission, or any governmental authority which is substituted
therefor, or with any national securities exchange, and (iii) all
reports relating to any "Reportable Event" as defined under ERISA.
(e) With reasonable promptness, deliver such additional
financial or other data as either of the Banks may from time to time
reasonably request. Each of the Banks is hereby authorized (but only if
required to do so) to deliver a copy of any financial statements or
other information relating to the business operations or financial
condition of the Borrower and its Subsidiaries which may be furnished
to it or come to its attention pursuant to this Agreement or otherwise,
to any regulatory body or agency having jurisdiction over such Bank.
9.2. Taxes and Liens. Promptly pay, or cause to be paid, all taxes,
assessments or other governmental charges which may lawfully be levied or
assessed upon the income or profits of Borrower, or any Subsidiary, or upon any
property, real, personal or mixed, belonging to Borrower or any Subsidiary, or
upon any part thereof, and also any lawful claims for labor, material and
supplies which, if unpaid, might become a lien or charge against any such
property; provided, however, neither the Borrower nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim so long as (i)
the Borrower contests the
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amount to be paid; (ii) the amount contested is $10,000 or more; (iii) the
Borrower or such Subsidiary shall first deposit with the Agent for the benefit
of the Banks a bond or other security satisfactory to the Agent on behalf of the
Banks in the amount being contested and (iv) the Borrower shall thereafter
diligently proceed to cause such lien, encumbrance or charge to be removed and
discharged.
9.3. Business and Existence. Do or cause to be done all things
necessary to preserve and to keep in full force and effect its corporate
existence; and, if the failure to do or cause to be done so would have a
material adverse effect upon its business, do or cause to be done all things
necessary to preserve and to keep in full force and effect its rights in any
franchises, trade names, patents, trademarks and permits; and continue to engage
principally in the business currently conducted by the Borrower.
9.4. Insurance on Properties. Keep its business and properties insured
at all times with responsible insurance companies and carry such types and
amounts of insurance as are reasonably acceptable to the Banks and as are
usually carried by corporations engaged in the same or similar businesses
similarly situated and upon the request of either of the Banks furnish such Bank
a certificate as to such insurance and such other information or documentation
as may be required by the Agent or the Banks.
During the term of the Loans, the premium on each insurance policy
described above shall be prepaid and the policy term renewed annually in the
same form and with at least the same coverage as the preceding year, with the
Agent on behalf of the Banks to receive evidence of renewal satisfactory to the
Agent on, behalf of the Banks at least thirty (30) days prior to expiration.
Further, no such policy shall be subject to cancellation, nonrenewal or
reduction of coverage unless the insurer has given the Banks at least thirty
(30) days' prior written notice of such action.
9.5. Maintain Property. Maintain those of its properties necessary for
the conduct of its business in good order and repair, and, from time to time,
make all needful repairs, renewals, replacements, additions and improvements
thereto.
9.6. Right of Inspection. Permit any person designated by either Bank,
at such Bank's expense, to visit and inspect any of the properties, corporate
books and financial reports of Borrower and its Subsidiaries and to discuss
their affairs, finances and accounts with their principal officers, all at such
reasonable times and as often as such Bank may reasonably request.
9.7. [INTENTIONALLY LEFT BLANK]
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9.8. Covenant Extended to Subsidiaries. Cause each Subsidiary to do
with respect to itself, its business and its assets, each of the things required
of Borrower in Section 9.2 through 9.6, inclusive.
9.9. Borrower's Knowledge of Default. Immediately give notice to each
of the Banks of the occurrence of any Default or Event of Default hereunder,
specifying the nature thereof, the period of existence thereof and what action
Borrower proposes to take with respect thereto.
9.10. Suits or Other Proceedings. Upon Borrower's obtaining knowledge
thereof, immediately give to each of the Banks written notice (i) of any
litigation, dispute or proceeding involving a claim for $500,000 or more,
instituted against Borrower or any Subsidiary, (ii) of all pending litigations,
disputes and proceedings instituted against the Borrower or a Subsidiary if all
such claims aggregate $500,000 or more, or (iii) of any attachment, levy,
execution, or other process being instituted against any assets of Borrower or
any Subsidiary with respect to a claim of $250,000 or more.
9.11. Observe All Laws. Conform to and duly observe and cause each
Subsidiary to conform to and duly observe in all material respects all laws,
regulations and other valid requirements of any regulatory authority with
respect to the conduct of its business which are known or should be known to the
Borrower.
9.12. Compliance with Laws; Governmental Approvals. Upon the occurrence
of an Event of Default, or if the Banks reasonably believe that Borrower is not
in material compliance with the same, and upon Banks' request, Borrower will
furnish evidence satisfactory to the Banks that the Real Property and
improvements thereon are currently in compliance in all material respects and
will comply in all material respects with all Governmental Requirements and with
all covenants, conditions, easements and restrictions to which the Real Property
and improvements thereon are subject. Borrower will observe, conform and comply
in every material respect with all Governmental Requirements relative to the
construction and operation of the Improvements and the conduct of its business.
The Borrower will be required to comply with and obtain and at all times keep,
in full force and effect such governmental approvals as may be necessary to
comply with the Governmental Requirements relating to the Real Property and its
occupancy.
9.13. ERISA. Comply with and cause each Subsidiary to comply with all
requirements of ERISA applicable to it, including the prompt payment of all
liabilities and obligations arising under any Plan (as defined in ERISA), and
furnish to each of the Banks as soon as possible, and in any event within thirty
(30) days after the Borrower or duly appointed administrator of a Plan
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knows that any Reportable Event (as defined in ERISA) with respect to such Plan
has occurred, an Officer's Certificate setting forth details as to such
Reportable Event or any action which the Borrower proposes to take with respect
thereto, together with a copy of the notice of such Reportable Event given to
the Pension Benefit Guaranty Corporation or a statement that said notice will be
filed with the annual report to the United States Department of Labor with
respect to such Plan if such filing has been authorized.
9.14. Payment of Obligations. Pay and cause each Subsidiary to pay,
when due, all its material obligations and liabilities, except where the same
(other than Consolidated Funded Debt) may be contested in good faith by
appropriate proceedings diligently prosecuted and appropriate reserves for the
accrual of same are maintained.
9.15. [RESERVED]
9.16. Consolidated Tangible Shareholders' Equity. Maintain Consolidated
Tangible Shareholders' Equity of not less than $53,000,000 from and after
January 28, 1996 through that date which is one day prior to the last day of the
Borrower's Fiscal Year ending in 1997 and on the last day of the Fiscal Year
ending in 1997 and each subsequent Fiscal Year of the Borrower (the "Computation
Date") and continuing in each period from the applicable Computation Date
through that date which is one day prior to the end of the next Fiscal Year, the
Borrower shall maintain Consolidated Tangible Shareholders' Equity of not less
than the previous period's required Consolidated Tangible Shareholders' Equity
plus fifty percent (50%) of Net Income (excluding for purposes of this Section
9.16 any net loss) of the Borrower for the Fiscal Year ending on such
Computation Date (hereinafter referred to as the "Required Tangible
Shareholders' Equity"); provided, that in the event for any Computation Date
the Borrower's Consolidated Tangible Shareholders' Equity on such Computation
Date exceeds the Required Tangible Shareholders' Equity on such Computation Date
by more than $6,000,000, the Required Tangible Shareholders' Equity shall be
increased for the period beginning on such Computation Date to that amount which
is $6,000,000 less than the Borrower's Consolidated Tangible Shareholders'
Equity on such Computation Date.
9.17. [RESERVED]
9.18. [RESERVED]
9.19. Operating Cash Flow to Interest Expense. Maintain a ratio of (x)
Operating Cash Flow less Capital Expenditures for such period, to (y) Interest
Expense for such period, of at least 2.5 to 1.0 for each Fiscal Quarter.
9.20. Consolidated Funded Debt to Total Capitalization.
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Maintain a ratio of Consolidated (a) Funded Debt to (b) Total Capitalization
plus the amount of unamortized goodwill arising from the acquisition by Borrower
of certain assets of Rossville Companies, Inc., Chromatex, Inc. and Rossville
Velours, Inc. pursuant to a transaction that closed on November 1, 1993, not in
excess of 1 to 1.82 (55%) for each Fiscal Quarter.
9.21. Environmental Provisions and Indemnity.
(a) Borrower will promptly notify the Banks of any change in
the nature or extent of (i) any Hazardous Substances maintained on, in
or under the Real Property or used or emitted in connection therewith
and (ii) any wetlands located on the Real Property.
(b) Borrower will at all times while Agent has any interest in
or lien on the Real Property, operate the Real Property in material
compliance with the Acts (including any required remediation with
respect to Hazardous Substances) and will insure that the Real Property
continues to be in material compliance with all applicable federal,
state and local, environmental laws, statutes, ordinances and
regulations, including but not limited to the Acts.
(c) Borrower will notify Agent immediately upon receipt by
Borrower of any citations, orders, notices, consent agreements,
lawsuits, claims, or similar communication from a Governmental
Authority or third party alleging a violation of any Act or a violation
of the common law as it may relate to Hazardous Substances or wetlands.
(d) Borrower will obtain and maintain all licenses, permits
and approvals required with respect to the existence, extent and nature
of any Hazardous Substances on, in or under the Real Property or used
or emitted in connection therewith and will remain in compliance in all
material respects with all such licenses, permits and approvals.
(e) Borrower will furnish to Agent promptly upon receipt
copies of any and all environmental assessments, reports, studies,
audits or approvals performed with respect to the Real Property or any
portion thereof.
(f) Borrower shall indemnify and hold the Agent and each of
the Banks and each of their respective directors, officers,
shareholders and employees harmless from and against any and all
damages, penalties, fines, claims, liens, suits, liabilities, costs
(including clean-up costs) judgments and expenses (including reasonable
attorney's, consultants' or experts' fees and expenses) of every kind
and nature suffered by or asserted against either of the Banks as a
direct or indirect result of (i) any warranty, representation, covenant
or portion thereof made by Borrower
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in this Section 9.21 or Section 7.15 being false or untrue in any
respect or, any requirement under any Act, which requires the
elimination or removal of any Hazardous Substances by either of the
Banks, Borrower or any transferee of Borrower or such Bank, (ii) any
default by the Borrower in the observance or performance of the
covenants and agreements contained in this Section 9.21, or (iii) as a
result of any requirement under any Act or any agreement to which
Borrower is a party or by which is bound; or (iv) which are imposed on
Borrower, the Banks or any other party having an interest in the Real
Property by any court or regulatory agency, in connection with the
elimination, storage, handling, treatment or removal of any Hazardous
Substances; provided, however, that Borrower's obligation to indemnify
and hold harmless as set forth above shall not exist with respect to
any matter which can be attributed solely to actions of the Banks or to
circumstances which come into existence after Borrower has ceased to
occupy and control any such Real Property.
(g) Borrower's obligations hereunder to the Banks shall not be
limited to any extent by the terms of the Loan Documents and, as to any
act or occurrence prior to payment in full and satisfaction of the Loan
Documents which gives rise to liability hereunder, shall continue,
survive and remain in full force and effect notwithstanding payment in
full and satisfaction of the Loan Documents or foreclosure under the
Loan Documents, or delivery of a deed in lieu of foreclosure.
9.22. [INTENTIONALLY LEFT BLANK]
9.23. [INTENTIONALLY LEFT BLANK]
9.24. [INTENTIONALLY LEFT BLANK]
SECTION 10. Negative Covenants of Borrower. Borrower covenants and agrees that
from the date hereof until payment in full of the principal and interest on the
Notes and other obligations hereunder, unless each of the Banks shall otherwise
have consented prior thereto in writing, it will not, nor will it permit any
Subsidiary to, either directly or indirectly:
10.1. Limitations on Liens. Incur, create, assume or, permit to exist
any mortgage, pledge, security interest, encumbrance, lien or charge of any
kind, or permit any Subsidiary to incur, create, assume or permit to exist any
mortgage, pledge, security interest, encumbrance, lien or charge of any kind,
upon any of item property or assets of any character now owned or hereafter
acquired including those arising under conditional sales or other title
retention agreements except for Permitted Encumbrances and liens arising under
the Loan Documents and except for consensual liens securing non interest-bearing
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purchase money obligations, payable over a term not to exceed two (2) years,
given to vendors of equipment.
10.2. Guarantee. Guarantee, assume, endorse or otherwise become or
remain directly or contingently liable in connection with the obligations of any
other Person, excluding any Subsidiary, or permit any Subsidiary to guarantee,
assume, endorse or otherwise become or remain directly or contingently liable in
connection with the obligations of any other Person, excluding the Borrower,
other than:
(i) the endorsement of negotiable instruments in the
ordinary course of business for deposit or
collection;
(ii) guaranties by the Borrower or any of its Subsidiaries
of or with respect to industrial revenue bonds and
obligations listed on Exhibit 6 hereof and any
extensions, modifications, refinancings, refundings
or replacements thereto or thereof; and
(iii) other guaranties not exceeding $2,000,000 in the
aggregate.
10.3. [RESERVED]
10.4. Consolidation or Merger. Enter into any transaction of merger or
consolidation except that (i) another corporation may be merged into Borrower or
a Subsidiary provided that no Default shall exist hereunder immediately before
or following such merger, and (ii) a Subsidiary may merge into Borrower or
another Subsidiary.
10.5. Sale of Assets, Dissolution, etc. During any Fiscal Year
transfer, sell, assign, lease or otherwise dispose of, or permit any Subsidiary
to transfer, sell, assign, lease or otherwise dispose of, more than $5,000,000
in fair market value of its properties or assets except in the ordinary course
of business, or any of its accounts, notes, franchises or contract rights, or
any stock or any indebtedness of any Subsidiary or any assets or properties
necessary for the proper conduct of its business, or change the nature of its
business, or wind up, liquidate or dissolve, or agree to do any of the
foregoing, or permit any Subsidiary to do so, except that any Subsidiary may
dissolve or transfer all or any mart of its properties and assets to Borrower or
another Subsidiary.
10.6. [INTENTIONALLY LEFT BLANK]
10.7. Loans and Investments. Make any investment, loan or advance of
money, credit or property to any Person or Persons if, after giving effect to
such investment, loan or advance, the
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aggregate amount of all outstanding investments, loans or advances made by the
Borrower and its Subsidiaries since the date of this Agreement and that remain
outstanding would exceed $5,000,000. The Borrower shall make no investments in
or advances to any Subsidiary; provided, however, that the Borrower may make
investments in and advances to Canada and Rayonese in an amount not to exceed
$25,000,000 at any time outstanding, to purchase equipment to be used by
Rayonese in its operations and to provide working capital to Canada and
Rayonese.
10.8. Fiscal Year. Change the date of its Fiscal Year end
from the Sunday closest to April 30.
10.9. [RESERVED]
10.10. Rental Obligations. Incur, create, assume or permit to exist
during any Fiscal Year, in respect of leases of real or personal property,
rental obligations or other commitments thereunder by Borrower and any of its
Subsidiaries or make any direct or indirect payment, whether as rent or
otherwise, for fixed or minimum rentals, percentage rentals, property taxes, or,
insurance premiums, if the amount paid in or payable with respect to any such
Fiscal Year exceeds $4,000,000.
10.11. Prepayments. Retire or prepay prior to its stated maturity any
Consolidated Funded Debt (other than (i) non interestbearing purchase money
obligations payable over a period not to exceed two (2) years, given to vendors
of equipment, and (ii) certain subordinated indebtedness evidenced by a
promissory note dated December 14, 1994 in the principal amount of $1,000,000
payable by the Borrower to Rossville Investments, Inc. having a term of
repayment in excess of one year, including any renewals, other than indebtedness
to either of the Banks arising hereunder or obligations under industrial revenue
bonds, or pay rental obligations more than 30 days in advance of the time for
payment called for in the lease.
10.12. Other Indebtedness. Incur any additional Consolidated Funded
Debt other than
(1) indebtedness existing as of the Closing Date and
any refinancings, refundings or extensions thereof,
(2) non interest-bearing purchase money obligations payable
over a period not to exceed two (2) years given to vendors of
equipment, and
(3) unsecured indebtedness for borrowed money in an aggregate
amount of up to $50,000,000 outstanding at any time, provided that the
agreement or indenture pursuant to which such indebtedness is issued or
otherwise governed shall have been approved by the Required Banks, such
approval not to be unreasonably withheld (it being
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understood that the Required Banks will approve such debt if the terms,
covenants and conditions governing such debt are no more restrictive
than those contained in this Agreement), and provided further that (i)
upon the incurrence thereof the Borrower shall promptly make the
mandatory prepayment on the Term Loan required by Section 3.4(b) hereof
and (ii) to the extent that the net proceeds of such debt exceed the
outstanding principal balance of the Term Loan on the date such
proceeds are received by the Borrower, the aggregate Revolving Credit
Commitments of the Banks will be reduced by the amount of such excess.
SECTION 11. Events of Default.
11.1. Definition. An "Event of Default" shall exist if any
of the following shall occur:
(a) Payment of Principal. The Borrower fails to make any
payment of principal on any of the Obligations hereunder (including the
Revolving Loans, the Term Loan, the Tender Advances, the BA Obligations
and the LOC Obligations) within 15 days of the date such payment is
due; or
(b) Payment of Interest and other amounts. The Borrower fails
to make any payment of interest on any of the Obligations hereunder
(including the Revolving Loans, the Term Loan, the Tender Advances, the
BA Obligations and the LOC Obligations) or fees or other amounts owing
hereunder within 15 days of the date such payment is due; or
(c) Payment of Other Obligations. The Borrower or any
Subsidiary defaults in the payment of principal or interest on any
other Consolidated Funded Debt (other than the indebtedness to either
of the Banks arising hereunder), or on any indebtedness incurred by
reason of restrictive investments relating to industrial revenue bond
financing, beyond any period of grace provided with respect thereto, or
in the performance of any other agreement, term or conditions contained
in any agreement under which any such obligation is created, if the
effect of such default is to cause such obligation to become due prior
to its stated maturity; or
(d) Representation of Warranty. Any representation made by
Borrower herein, or in any schedule, exhibit or certificate furnished
in connection with or pursuant to this Agreement or any of the Bond
Documents to which the Borrower is a party shall be false, misleading
or incomplete in any material respect on the date as of which made; or
(e) Financial Covenants. The Borrower or any Subsidiary
defaults in the performance or observance of any agreement or covenant
contained in Sections 9.15 through
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9.20, and Section 10 hereof, unless such default is waived by the
Required Banks within ten (10) days after the Borrower acquires
knowledge thereof; or
(f) Other Covenants. The Borrower or any Subsidiary defaults
in the performance or observance of any agreement, covenant, term or
condition binding on it contained herein or in any instrument securing
or guaranteeing any of the Notes and such default shall not have been
remedied or waived by the Required Banks within thirty (30) days (or
any shorter period set forth herein or in such agreement or document)
after written notice shall have been received by it from either of the
Banks; or
(g) Liquidation or Dissolution. The commencement of the
liquidation or dissolution of the Borrower, or suspension of the
business of the Borrower or filing by either the Borrower or a
Subsidiary of a voluntary petition in bankruptcy or a voluntary
petition or an answer seeking reorganization, arrangement, readjustment
of its debts or for any other relief under the Bankruptcy Reform Act of
1978, as amended (the "Bankruptcy Code"), or under any other insolvency
act or law, state or Federal, now or hereafter existing, or any other
action of either Borrower or any Subsidiary indicating its consent to,
approval of, or acquiescence in any such petition or proceeding, or the
application by either the Borrower or any Subsidiary for (or the
consent or acquiescence to) the appointment of a receiver or a trustee
of either the Borrower or any Subsidiary or an assignment for the
benefit of creditors, the inability of either the Borrower or any
Subsidiary or the admission by either the Borrower or any Subsidiary in
writing of its inability to pay its debts as they mature; or
(h) Bankruptcy, etc. The filing of an involuntary petition
against either the Borrower or any Subsidiary in bankruptcy or seeking
reorganization, arrangement, readjustment of its debts or for any other
relief under the Bankruptcy Code or under any other insolvency act or
law, state or Federal, now or hereafter existing, or the involuntary
appointment of a receiver or trustee of either the Borrower or any
Subsidiary or for all or a material part of its property and the
continuance of any of such action for sixty (60) days undismissed or
undischarged; or the issuance of an order for attachment, execution or
similar process against any material part of the property of either the
Borrower or any Subsidiary and the continuance of any such order for
ten (10) days undismissed or undischarged; or
(i) Order of Dissolution. The entry of an order in any
proceedings against the Borrower or any Subsidiary decreeing the
dissolution or split-up of the Borrower or any Subsidiary; or
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(j) Judgment. The entry of a final judgment against the
Borrower or a Subsidiary, which with other outstanding final judgments
against the Borrower or any Subsidiary exceeds an aggregate of $25,000,
if within twenty (20) days after entry thereof such judgment shall not
have been discharged or execution thereof stayed pending appeal, or if
within ten (10) days after the expiration of any such stay such
judgment shall not have been discharged; or
(k) Bond Documents. The occurrence of an event of default
under any of the Bond Documents.
11.2. Remedies. If an Event of Default occurs, the Agent shall upon the
direction of the Required Banks (subject to the provisions of Section 13.3(d)
hereof) take any or all of the following action, by notice to the Borrower:
(i) terminate the Commitments, whereupon they shall
immediately terminate;
(ii) declare the Obligations (together with accrued interest
thereon) and all other amounts due hereunder to be, and whereupon they
shall become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Borrower;
(iii) direct the Borrower to immediately pay to the Agent cash
collateral in an amount equal to 100% of the BA Obligations and LOC
Obligations then outstanding as security for the payment thereof;
(iv) direct the Issuing Bank to (A) declare all Tender
Advances and all other amounts due in connection therewith and all
interest accrued thereon to be immediately due and payable, and upon
such declaration the same shall become and be immediately due and
payable, without presentment, protest or other notice of any kind, all
of which are hereby waived by the Borrower, (B) notify the Trustees of
such occurrence and thereby require each Trustee immediately to declare
the principal of all bonds then outstanding and the interest accrued
thereon immediately due and payable in accordance with the terms of the
respective Indenture, and (C) pursue all other remedies available to it
by contract, at law or in equity.
(v) exercise and enforce such further rights and remedies as may be
available under or in connection with this Agreement or any of the other Loan
Documents, including, without limitation, rights and remedies relating to
Pledged Bonds set out in Section 14 hereof;
provided, however, that notwithstanding the foregoing, if any
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Event of Default specified in clause (g), (h) or (i) of Section 11.1 occurs,
then without notice to the Borrower or any other act by the Agent or the Banks,
the Commitments shall automatically and immediately terminate, and the
Obligations (together with accrued interest thereon) and all other amounts due
hereunder shall be and become immediately due and payable without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Borrower.
SECTION 12. The Agent.
12.1. Appointment. The Banks hereby designate and appoint First Union
as Agent to act as specified herein. Each Bank hereby irrevocably authorizes,
and each holder of any Note or other Obligation hereunder by the acceptance of
such Note or Obligation shall be deemed irrevocably to authorize, the Agent to
take such action on its behalf under the provisions of this Agreement, to
exercise such powers and to perform such duties hereunder as are specifically
delegated to or required of the Agent by the terms hereof and such other powers
as are reasonably incidental thereto. Each Bank agrees that no Bank shall have
any right individually to seek or to enforce the provisions of any of the Loan
Documents or to realize upon the security granted by any mortgage or security
agreement, it being understood and agreed that such rights and remedies may be
exercised solely by the Agent for the benefit of the Banks upon the terms of the
mortgages or security agreement, if any.
12.2. Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement. Neither the
Agent, nor any of its officers, directors, employees or agents, shall be liable
to the Banks for any action taken or omitted by them as such hereunder or in
connection herewith, unless caused by their gross negligence or willful
misconduct. The duties of the Agent shall be mechanical and administrative in
nature; the Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Bank; and nothing in this Agreement, express or
implied, is intended to or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement except as expressly set forth herein.
12.3. Lack of Reliance on the Agent. Independently and without reliance
upon the Agent, each Bank, to the extent it has deemed and shall deem
appropriate, has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of the Borrower in
connection with the making and the continuance of Extensions of Credit hereunder
and the taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of the Borrower and, except as expressly
provided in this Agreement, the Agent shall have no duty or responsibility,
either initially or on a continuing basis, to provide any Bank with any credit
or other
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information with respect thereto, whether coming into its possession before the
making of Extensions of Credit, or at any time or times thereafter. The Agent
shall not be responsible to any Bank for any recitals, statements, information,
representations or warranties herein or in any other Loan Documents or in any
document, certificate or other writing delivered in connection herewith or
therewith or for the execution, collectability, priority or sufficiency of this
Agreement or the financial condition of the Borrower, or any other Person or be
required to make any inquiry concerning either the performance or observance of
any of the terms, provisions or conditions of this, Agreement or the financial
condition of the Borrower, or any other Person or the existence or possible
existence of any Default or Event of Default.
12.4. Certain Rights of the Agent. If the Agent shall request
instructions from the Banks with respect to any act or action (including failure
to act) in connection with this Agreement, the Agent shall be entitled to
refrain from such act or taking such action unless and until the Agent shall
have received instructions from the Required Banks; and the Agent shall incur no
liability to any Person by reason of so refraining. The Agent shall be fully
justified in failing or refusing to take any action hereunder (i) if such action
would, in the opinion of the Agent, as the case may be, be contrary to law or
the terms of this Agreement, (ii) if it shall not receive such advice or
concurrence of the Required Banks as it deems appropriate or (iii) if it shall
not first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Without limiting the foregoing, no Bank
shall have any right of action whatsoever against the Agent (absent the Agent's
gross negligence or willful misconduct) as a result of the Agent's acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks.
12.5. Reliance. The Agent shall be entitled to rely, and shall be fully
protected in relying, upon any note, writing, resolution, notice, statement,
certificate, telex, teletype or telecopier message, order or other documentary,
teletransmission or telephone message believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person. The Agent may
consult with legal counsel (including counsel for the Borrower), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
12.6. Indemnification. To the extent the Agent is not reimbursed and
indemnified by or on behalf of the Borrower, the Banks will reimburse and
indemnify the Agent, in proportion to their Revolving Credit Commitments
hereunder (prior to the
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occurrence of an Event of Default and acceleration pursuant to Section 11.2
hereof of the Obligations and other amounts due hereunder) and in proportion to
the principal amounts due and owing each Bank from time to time hereunder (after
the occurrence of an Event of Default and acceleration pursuant to Section 11.2
hereof of the Obligations and other amounts due hereunder), for and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including counsel fees and expenses) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against the Agent in performing its duties hereunder or in any
way relating to or arising out of this Agreement; provided, however, that no
Bank shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, audits, costs, expenses or
disbursements, finally determined by a court of competent jurisdiction and not
subject to any appeal, to be resulting from the Agent's gross negligence or
willful misconduct.
12.7. The Agent in its Individual Capacity. With respect to its
obligations to make Extensions of Credit under this Agreement, and with respect
to Extensions of Credit made by it and the Notes issued to it, the Agent shall
have the same rights and powers as any other Bank or holder of a Note and may
exercise the same as though it were not performing the agency duties specified
herein; and the term "Banks," "Holders of Notes" or any similar terms shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity.
12.8. Holders. The Agent may deem and treat the payee of any Note or
holder of any Obligation as the owner thereof for all purposes hereof unless and
until a written notice of the assignment, transfer or endorsement thereof, as
the case may be, shall have been filed with the Agent. Any request, authority or
consent of any Person or entity who, at the time of making such request or
giving such authority or consent, is the holder of any Note or other Obligation
shall be conclusive and binding on any subsequent holder, transferee, assignee
or endorsee, as the case may be, of such Note or other Obligation or of any
Notes issued in exchange therefor.
12.9. Reimbursement. Each of the Banks agrees to reimburse the Agent
for such Bank's pro rata share (based on their respective Revolving Credit
Commitments prior to the occurrence of an Event of Default and acceleration
pursuant to Section 11.2 hereof of the Notes and other amounts due hereunder,
and based on the principal amounts due and owing each Bank from time to time
hereunder from and after the occurrence of an Event of Default and acceleration
pursuant to Section 11.2 hereof of the Notes and other amounts due hereunder) of
the Agent's expenses to the extent the Agent is not reimbursed by the Borrower
upon demand. If any amounts so paid to the Agent by the Banks are subsequently
paid to the Agent by the Borrower or by a representative or
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successor in interest of the Borrower, the Agent shall promptly upon its receipt
of any such amounts distribute the same to the Banks on the same basis as such
amounts were originally paid by the Banks to the Agent. In no event shall the
Banks be responsible for the normal overhead costs and expenses incident to the
performance by the Agent of its agency duties hereunder.
12.10. Defaults. The Agent shall not be deemed to have knowledge of the
occurrence of a Default or an Event of Default (other than the non-payment of
principal of or interest on the Loans or commitment or facilities fee due
hereunder) unless the Agent has received notice from a Bank or the Borrower
specifying such Default or Event of Default and stating that such notice is a
"Notice of Default." In the event that the Agent receives such a notice of the
occurrence of a Default or an Event of Default, the Agent shall give prompt
notice thereof to the Banks. The Agent shall give each Bank prompt notice of
each non-payment of principal of or interest on the Loans or commitment or
facilities fee due hereunder, whether or not it has received any notice of the
occurrence of such non-payment. The Agent shall (subject to Section 13.1 hereof)
take such action with respect to such Default or Event of Default as shall be
directed by the Banks pursuant to Section 11.2, provided that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the beet
interests of the Banks.
12.11. Failure to Act. Except for action expressly required of the
Agent hereunder or under the other Loan Documents, the Agent shall in all cases
be fully justified in failing or refusing to act hereunder and thereunder unless
it shall receive further assurances to its satisfaction by the Banks of their
indemnification obligations under Section 12.6 of this Agreement against any and
all liability and expense which may be incurred by the Agent by reason of
taking, continuing to take, or failing to take any such action.
12.12. Resignation or Removal of Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Banks and the Borrower and the Agent may be
removed at any time with or without cause by the Required Banks. Upon any such
resignation or removal, the Required Banks shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Banks and shall have accepted such appointment within 30 days after the
retiring Agent's notice of resignation or the Required Banks' removal of the
retiring Agent, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent. Any successor Agent shall be a bank which has a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent
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hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or removal
hereunder as Agent, the provisions of this Section 12 shall continue in effect
for its benefit in respect of any actions taken or omitted to be taken by it
while it was acting as the Agent hereunder.
12.13. Annual Fee. The Borrower shall pay to the Agent a fee in the
amount of $12,500 per annum, which shall be payable annually in advance on April
1 of each year (with, in the case of such fee payable on April 1, 1996, proper
credit being given for the annual fee paid on November 15, 1995).
SECTION 13. Miscellaneous.
13.1. Amendments and Waivers. (a) Any provision of this, Agreement, the
Notes or any other Loan Documents may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the Required
Banks (and, if the rights or duties of the Agent are affected thereby, by the
Agent); provided that no such amendment or waiver shall, for so long as First
Union and Wachovia are the only Banks hereunder, be effective unless signed by
both First Union and Wachovia and in no event shall any such amendment or
waiver, unless signed by all the Banks, (i) change the Commitment of any Bank or
subject any Bank to any additional obligation, (ii) change the principal of or
rate of interest on any Obligation or any fees hereunder, (iii) change the date
fixed for any payment of principal of or interest on any Obligation or any fees
hereunder, (iv) change the amount of principal, interest or fees due on any date
fixed for the payment thereof, (v) change the percentage of the Commitments or
of the aggregate unpaid principal amount of the Notes or other Obligations, or
the number of Banks, which shall be required for the Banks or any of them to
take any action under this Section or any other provision of this Agreement,
(vi) change the manner of application of any payments made under this Agreement
or the Notes, (vii) release or substitute all or any substantial part of the
collateral (if any) held as security for the Obligations, or (viii) release any
guaranty given to support payment of the Obligations.
(b) The Borrower will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the
provisions of this Agreement unless each Bank shall be informed thereof
by the Borrower and shall be afforded an opportunity of considering the
same and shall be supplied by the Borrower with sufficient information
to enable it to make an informed decision with respect thereto.
Executed or true and correct copies of any waiver or consent effected
pursuant to the provisions of
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this Agreement shall be delivered by the Borrower to each Bank
forthwith following the date on which the same shall have been executed
and delivered by the Bank. The Borrower will not, directly or
indirectly, pay or cause to be paid any renumeration, whether by way of
supplemental or additional interest, fee or otherwise, to any Bank as
consideration for or as an inducement to the entering into by such Bank
of any waiver or amendment of any of the terms and provisions of this
Agreement unless such renumeration is concurrently paid, on the same
terms, ratably to each Bank. Further, the Borrower agrees that it will
not pay any fee or other remuneration to any Bank or any affiliate of a
Bank unless such fees or remuneration are shared ratably with the other
Banks hereunder, except for (i) fees and other amounts which are
specifically payable to a Bank hereunder for its own account (such as
fees and expenses payable to the Agent pursuant to 12.13 and to the
Issuing Bank pursuant to Section 4.5(g) hereof), and (ii) placement and
remarketing fees payable in connection with VRDN Programs, but only
where such fees are disclosed to the Agent and the other Banks.
13.2. Ratable Sharing of Set-Offs, Payments. Each Bank agrees that if,
prior to the occurrence of Event of Default and acceleration pursuant to Section
11.2 hereof, it shall, by exercising any right of set-off or counterclaim or
otherwise, or by receipt of any funds from the Borrower or any other source for
application to the obligations of the Borrower under this Agreement, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to the Obligations held by it hereunder which is greater than the
proportion received by the other Bank in respect of the aggregate amount of all
principal and interest due with respect to the Obligations held by such other
Bank hereunder, the Bank receiving such proportionately greater payment shall
purchase (to the extent of such proportionately greater payment) such
participations in the Obligations held by the other Bank, and such other
adjustments shall be made, as may be required, so that all such payments of
principal and interest with respect to the Obligations held by the Banks shall
be shared by the Banks pro rata (based upon all amounts due to the Banks
hereunder, including without limitation under the Notes and under Section 4.4
hereof). Each Bank hereby agrees that if, from and after the occurrence of an
Event of Default and acceleration pursuant to Section 11.2 hereof, it shall by
exercising any right of set-off or counterclaim or otherwise or by receipt of
any funds from the Borrower or any other source for application to the
obligations of the Borrower pursuant to this Agreement, receive payment of a
proportion of the aggregate amount of principal and interest due with respect to
the Obligations held by it and other amounts due it hereunder (including without
limitation amounts due it pursuant to Section 4.4 hereof) which is greater than
the proportion received by the other Bank in respect of the aggregate
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amount of all principal and interest due with respect to the Obligations held by
such other Bank and other amounts due it hereunder, the Bank receiving such
proportionately greater payment shall purchase (to the extent of such
proportionately greater payment) such participation in the Obligations held by
and other amounts due hereunder (including without limitation those due under
Section 4.4 hereof) to the other Bank and such other adjustments shall be made
as may be required, so that all such payments of principal and interest to the
Banks with respect to the Obligations held by and other amounts due hereunder
shall be shared by the Banks pro rata (based upon all amounts due to the Banks
hereunder, including without limitation under the Notes and under Section 4.4
hereof). Notwithstanding any contrary provision of this Section, however, (i)
nothing in this Section shall impair the right of any Bank prior to the
occurrence of an Event of Default, to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of any amounts due by the Borrower to such Bank under the provisions of
Section 4.4 hereof, (ii) nothing in this Section shall impair the right of any
Bank to exercise at any time any right of set-off or counterclaim it may have
and to apply the amount subject to such exercise to the payment of indebtedness
of the Borrower other than its indebtedness under the Notes or this Agreement,
and (iii) if all or any portion of such payment received by the purchasing Bank
is thereafter recovered from such purchasing Bank, such purchase from the other
Bank shall be rescinded and such other Bank shall repay to the purchasing Bank
the purchase price of such participation to the extent of such recovery together
with an amount equal to such other Bank's ratable share (according to the
proportion of (x) the amount of such other Bank's required repayment to (y) the
total amount so recovered from the purchasing Bank) any interest or other amount
paid or payable by the purchasing Bank in respect of the total amount so
recovered. The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a Note or other
Obligation or other amounts due hereunder, acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of it
participation were a direct creditor of the Borrower in the amount of such
participation. Each Bank further agrees that, after the occurrence of an Event
of Default and acceleration pursuant to Section 11.2 hereof, proceeds from any
property securing the Obligations shall be applied pro rata to the indebtedness
(if any) owing to each Bank under Interest Rate Agreements between Borrower and
such Bank only at such time after all of the principal and interest with respect
to the Notes and other Obligations and other amounts due to each Bank hereunder
(including, without limitation, those due under Section 4.4 hereof) shall have
been paid in full.
13.3. Successors and Assigns. (a) The provisions of this
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Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement.
(b) Either Bank may at any time sell to one or more Persons
(each a "Participant") participating interests in any Loan or
Obligation owing to such Bank, and the Note held by such Bank, the
Commitments of such Bank or any other interest of such Bank hereunder.
In the event of any such sale by a Bank of a participating interest to
a Participant, such Bank's obligations under this Agreement shall
remain unchanged, such Bank shall remain solely responsible for the
performance thereof, such Bank shall remain the holder of any such
Obligation for all purposes under this Agreement, and the Borrower and
the Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this
Agreement. In no event shall a Bank that sells a participation be
obligated to the Participant to take or refrain from taking any action
hereunder except that such Bank may agree that it will not (except as
provided below), without the consent of the Participant, agree to (i)
the change of any date fixed for the payment of principal of or
interest on the related Obligation or for the payment of other amounts
due hereunder, (ii) the change of the amount of any principal, interest
or fees due on any date fixed for the payment thereof with respect to
the related Obligation or other amounts due hereunder or (iii) any
change in the rate at which either interest is payable thereon or (if
the Participant is entitled to any part thereof) commitment or
facilities fee is payable hereunder from the rate at which the
Participant is entitled to receive interest, facilities fee or
commitment fee (as the case may be) in respect of such participation.
Each Bank selling a participating interest in any Obligation, Note,
Commitment or other interest under this Agreement shall, within ten
Business Days of such sale, provide the Borrower and the Agent with
written notification stating that such sale has occurred and
identifying the Participant and the interest purchased by such
Participant.
(c) Any Bank may at any time, with the prior consent of
Borrower whose consent shall not be unreasonably withheld, assign to a
bank or financial institution (an "Assignee") all, or a proportionate
part of all, of its rights and obligations under, this Agreement and
the Notes, and such Assignee shall assume all such rights and
obligations pursuant to an Assignment and Acceptance in the form
attached hereto as Exhibit 7, executed by such Assignee, such
transferor Bank and the Agent (and, prior to the occurrence of an Event
of Default, if the Assignee is not then a Bank, by the Borrower);
provided that (i) no
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interest may be sold by a Bank pursuant to this paragraph (c) unless
the Assignee shall agree to assume ratably equivalent portions of the
transferor Bank's Commitments and (ii) no interest less than $5,000,000
may be sold by a Bank pursuant to this paragraph (c). Upon (A)
execution of the Assignment and Acceptance by such transferor Bank,
such Assignee, the Agent and (if applicable) the Borrower, (B) delivery
of an executed copy of the Assignment and Acceptance to the Borrower
and the Agent, and (C) payment by such Assignee to such transferor Bank
of an amount equal to the purchase price agreed between such transferor
Bank and such Assignee, such Assignee shall for all purposes be a Bank
party to this Agreement and shall have the rights and obligations of a
Bank under this Agreement to the same extent as if it were an original
party thereto with Commitments as set forth in such instrument of
assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent
or action by the Borrower, the other Bank or the Agent shall be
required. Upon the consummation of any transfer to an Assignee pursuant
to this paragraph (c) and upon request by such Assignee, the transferor
Bank, the Agent and the Borrower shall make appropriate arrangements so
that, if required, a new Note is issued to each of such Assignee and
such transferor Bank.
(d) In the event of a disagreement between the Banks as to
whether the Obligations and other amounts due hereunder should after
the occurrence of an Event of Default hereunder be accelerated by the
Agent or whether the Agent should proceed to foreclose against and sell
collateral security, if any, pursuant to the provisions of Section 11.2
hereof, the Bank or Banks desiring not to accelerate or to foreclose
(the "Non-Electing Bank(s)") shall have the right to acquire all the
rights and obligations under this Agreement and the Notes, of the other
Banks(s) (the "Electing Bank(s)"). To facilitate the right granted
pursuant to this Section, the Agent shall, upon receipt of notice from
any Electing Bank(s) requesting that it accelerate or foreclose
pursuant to Section 11.2 hereof and prior to such acceleration or
foreclosure, provide the Non-Electing Bank(s) notice thereof, whereupon
the Non-Electing Bank(s) shall have a period of time not exceeding
fifteen (15) days (except if such Non-Electing Bank is First Union,
First Union shall have thirty (30) days) within which to elect by
Notice to the Agent and the Electing Bank(s) to purchase the rights and
obligations of the Electing Bank(s). Such purchase shall occur on the
date (which shall be a Business Day) set forth in such notice not later
than ten (10) days from the date of such notice. Such purchase shall be
evidenced by an Assignment and Acceptance in the form of Exhibit 7. If
there are two or more Non-Electing Banks, the Non-Electing Banks shall
be entitled to purchase the rights
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and, obligations of the Electing Banks in proportion to their
Commitments or, if the Commitments have then been terminated, in
proportion to the outstanding principal amounts of the Obligations then
held by such Non-Electing Banks.
(e) Subject to the provisions of Section 13.4, the Borrower
authorizes each Bank to disclose to any Participant, Assignee or other
transferee (each a "Transferee") and any prospective Transferee any and
all financial and other information in such Bank's possession
concerning the Borrower which has been delivered to such Bank by the
Borrower pursuant to this Agreement or which has been delivered to such
Bank by the Borrower in connection with such Bank's credit evaluation
prior to entering into this Agreement.
13.4. Confidentiality. Each Bank agrees to exercise its best efforts to
keep any information delivered or made available by the Borrower to it which is
clearly indicated to be confidential information, confidential from anyone other
than persons employed or retained by such Bank who are or are expected to become
engaged in evaluating, approving, structuring or administering the Loans;
provided, however, that nothing herein shall prevent any Bank from disclosing
such information (i) to the other Bank, (ii) upon the order of any court or
administrative agency, (iii) upon the request or demand of any regulatory agency
or authority having jurisdiction over such Bank, (iv) which has been publicly
disclosed, (v) to the extent reasonably required in connection with any
litigation to which the Agent, either Bank or their respective affiliates may be
a party, (vi) to the extent reasonably required in connection with the exercise
of any remedy hereunder, (vii) to such Bank's legal counsel and independent
auditors and (viii) to any actual or proposed Participant, Assignee or other
Transferee of all or part of its rights hereunder which has agreed in writing to
be bound by the provisions of this Section 13.4.
13.5. Unavailability of Adjusted LIBOR Rate. If, with respect to any
Fiscal Month in which the Agent is requested by Borrower to provide an interest
rate quote for a Term Loan Interest Rate or Revolving Loan Interest Rate based
on the Adjusted LIBOR Rate and the Agent, in its sole opinion, determines that
such a quote cannot be made because the LIBOR Base Rate is not available, then
in that event, the Term Loan Interest Rate and Revolving Loan Interest Rate
based on the Adjusted LIBOR Rate shall be suspended until such time as the Agent
shall have concluded that the LIBOR Base Rate is available.
13.6. Increased Costs. If, at any time after the date hereof, and from
time to time, any Bank determines that the adoption or modification of any
applicable law, rule or regulation regarding such Bank's required levels of
reserves,
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insurance or capital (including any allocation of capital requirements or
conditions), or similar requirements, or any interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation administration or compliance of such Bank with any of
such requirements, has or would have the effect of (i) increasing such Bank's
costs relating to the Loans hereunder, or (ii) reducing the yield or rate of
return of such Bank on the Loans hereunder, to a level below that such Bank
could have achieved but for the adoption or modification of any such
requirements, Borrower shall, within fifteen (15) days of any request by the
Agent or such Bank, pay to the Agent such additional amounts as (in such Banks
sole judgment, after good faith and reasonable computations, which
determinations shall be conclusive absent manifest error) will compensate such
Bank for such increase in costs or reduction in yield or rate of return of such
Bank. No failure by the Agent or any Bank to demand payment of any additional
amounts payable hereunder shall constitute a waiver of such Bank's right to
demand payment of any amounts arising at any subsequent time. Nothing herein
contained shall be construed or so operate as to require Borrower to pay any
interest, fees, costs or charges greater than is permitted by applicable law.
13.7. Headings; Table of Contents. The section and other headings
contained in this Agreement and the Table of Contents which precedes this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
13.8. Lawful Charges. It is the intent of the parties that the rate of
interest and all other charges due from the Borrower be lawful, and if, for any
reason, payment of a portion of interest or charges as required by this
Agreement or the Notes or in connection with Accepted Drafts would exceed the
limit established by applicable law, then the obligation to pay interest or
charges shall automatically be reduced to such limit and if any amounts in
excess of such limits shall have been paid, then such amounts shall be applied
to the unpaid principal amount of the Notes or refunded so that under no
circumstances shall interest or charges required hereunder exceed the maximum
rate allowed by law.
13.9. Conflict of Terms. The provisions of the Notes and the other Loan
Documents are incorporated in this Agreement by this reference thereto. Except
as otherwise provided in this Agreement, if any provision contained in this
Agreement is in conflict with or inconsistent with any provision of the Notes or
the other Loan Documents, the provision contained in this Agreement shall
control.
13.10. Notices. All notices, requests and demands to or upon the
respective parties hereto shall be deemed to have been
-56-
<PAGE>
given or made, in the case of telegraphic, telecopy, telex or cable
communication, when the same is telegraphed, telecopied and the telecopy is
confirmed by telephone or return telecopy, telexed and confirmed by telex
answerback, or delivered to the cable company, respectively, when sent by a
reputable overnight courier, when the same is delivered to the applicable
address described below, and when mailed, when deposited in the mail, postage
prepaid, or, in the case of telegraphic notice, when delivered to the telegraph
company, addressed as follows or to such other address as may be hereafter
designated in writing by the respective parties hereto:
The Borrower: Culp, Inc.
101 S. Main Street
Post Office Box 2686
High Point, North Carolina 27261-2686
Attention: Franklin N. Saxon
Vice President and Chief Financial
Officer
Telecopy No. 910/887-7089
First Union
or the Agent: First Union National Bank of North
Carolina
300 N. Greene Street
P.O. Box 21965
Greensboro, North Carolina 27420
Attention: Kent Phillips
Vice President
Telecopy No. 910/378-4043
Copy to: First Union National Bank of North
Carolina
201 South College Street
Charlotte, North Carolina 28288-0656
Attention: Pat McCormick
Telecopy No. 704/374-4820
Wachovia: Wachovia Bank of North Carolina
200 North Main Street
Post Office Box 631
High Point, North Carolina 27261
Attention: Pete T. Callahan
Vice President
Telecopy No. 910/887-1962
13.11. Survival of Agreements. All agreements, representations and
warranties made herein shall survive the delivery of the Notes and the other
Loan Documents.
13.12. Governing Law. This Agreement and the Notes issued hereunder
shall be governed by and construed in accordance with the laws of the State of
North Carolina.
-57-
<PAGE>
13.13. Enforceability of Agreement. Should any one or more of the
provisions of this Agreement, the Notes or the other Loan Documents be
determined to be illegal or unenforceable as to one or more of the parties, all
other provisions nevertheless shall remain effective and binding on the parties
hereto.
13.14. Stamp or Other Tax. Should any stamp or excise tax become
payable under the laws of the United States or North, Carolina, or a subdivision
thereof or municipality therein in respect of this Agreement or the Notes or any
modification hereof or thereof, Borrower shall pay the same (including interest
and penalties if any) and shall hold each of the Banks harmless with respect
thereto.
13.15. Counterparts and Effectiveness. This Agreement may be executed
by the parties hereto in any number of counterparts and each counterpart shall
be deemed to be an original but all shall constitute together but one and the
same Agreement.
13.16. Fees and Expenses. Whether or not any loans are made hereunder,
the Borrower agrees to pay, or reimburse each of the Banks, for actual
out-of-pocket expenses, including reasonable counsel fees, incurred by such Bank
in connection with the preparation, execution, amendment, administration of this
Agreement, the Notes and the other Loan Documents, and, with respect to
enforcement of this Agreement, the Notes and the other Loan Documents,
reasonable attorneys fees.
13.17. Liens; Set Off by Banks. The Borrower hereby grants to each Bank
a continuing lien for the Notes and all other indebtedness of Borrower to such
Bank upon any and all monies, securities and other property of Borrower and its
Subsidiaries and the proceeds thereof, now or hereafter held or received by, or
in transit to such Bank from or for Borrower, and also upon any and all deposits
(general or special) and credits of Borrower and its Subsidiaries, if any,
against such Bank, at any time existing. Upon the occurrence of any Event of
Default as specified above, each such Bank is hereby authorized at any time and
from time to time, without prior notice to Borrower and its Subsidiaries, to set
off, appropriate and apply any and all items herein referred to against all
indebtedness or obligations of Borrower to such Bank, whether under this
Agreement, the Notes or otherwise, whether now existing or hereafter arising.
13.18. Loan Documents. Any individual or collective reference to any of
the Loan Documents in any of the other Loan Documents to which the Borrower or
any of its Subsidiaries is a party shall mean, unless otherwise specifically
provided, such Loan Document as amended by this Agreement, and as it is further
amended, restated, supplemented or modified from time to time and any substitute
or replacement therefor or renewals thereof, including without limitation, all
references to the 1994 Amended
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<PAGE>
and Restated Credit Agreement, which shall mean the 1995 Amended and Restated
Credit Agreement as amended and restated hereby.
13.19. Entire Agreement. This Agreement constitutes the entire
Agreement between the parties pertaining to its subject matter and supersedes
all prior and contemporaneous agreements and understandings of the parties in
connection with it, including without limitation that certain commitment letter
agreement between the Borrower and First Union dated February 24, 1994.
13.20. Survival of Certain Provisions Upon Termination. Upon
termination of this Agreement, the provisions of the Sections of this Agreement,
together with the definitions of the capitalized terms used therein, shall
remain in full force and effect to the extent that such sections are
incorporated by reference in any other agreement, instrument or document between
the Borrower and the Agent or the Banks or either of them, acting in any
capacity, or between the Borrower and any third party. Upon termination of this
Agreement, the indemnity provisions of Section 9.21 shall remain in full force
and effect.
13.21. Accounting Terms and Computations. Whenever any accounting term
shall be used in this Agreement or the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for
purposes of this Agreement, such accounting term, determination or computation
shall, to the extent applicable and except as otherwise specified in this
Agreement, be defined or made (as the case may be) in accordance with those
principles of accounting set forth in pronouncements of the Financial Accounting
Standards Board or The American Institute of Certified Public Accountants or
which have other authoritative support and are applicable in the circumstances
as of the date of application, as such principles are from time to time
supplemented or amended; provided, however, that there shall be no instance of
upward revaluation of assets; provided, further, however, that if any change in
generally accepted accounting principles from those applied in the preparation
of the financial reports referred to in Section 9.1(a) and (b) hereof is
occasioned by the promulgation of rules or regulations by the Financing
Accounting Standards Board, or The American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions), the
effective date of which change is after the date of said financial statements,
and such change results in a change in the method of calculation of financial
covenants, standards or terms found in this Agreement, the parties hereto agree
to enter into good faith negotiations in order to amend such provisions so as to
reflect, such change as if such change had not been made; and provided, further,
however, that until such time as the parties agree upon such amendments, such
financial covenants, standards and terms shall be construed and calculated as
though
-59-
<PAGE>
such change had not taken place.
13.22. Obligations Several. The obligation of each Bank hereunder is
several, and neither the Agent nor any Bank shall be responsible for the
obligation or the commitment of any other Bank.
SECTION 14. Pledge of Bonds.
14.1. The Pledge. The Borrower hereby pledges, assigns, hypothecates,
transfers, and delivers to each Issuing Bank all of its right, title and
interest to, and hereby grants to each Issuing Bank a first lien on, and
security interest in, all right, title and interest of the Borrower in and to
the following (hereinafter collectively called the "Pledged Collateral"):
(i) all Pledged Bonds purchased with a drawing under
a Letter of Credit of such Issuing Bank;
(ii) all income, earnings, profits, interest, premium
or other payments in whatever form in respect of the Pledged
Bonds;
(iii) all proceeds (cash and non-cash) arising out of the
sale, exchange, collection, enforcement or other disposition of all or
any portion of the Pledged Bonds.
The Pledged Collateral shall serve as security for the payment and performance
when due of any and all duties, debts, liabilities and obligations of the
Borrower (either directly, as maker, or indirectly, as guarantor, surety,
endorser or otherwise) to the Issuing Bank, whether now or hereafter existing,
howsoever arising or incurred or evidenced under this Agreement or under the
reimbursement note or other instrument, including without limitation all LOC
Obligations and Tender Advances owing to such Issuing Bank (hereinafter
collectively called the "Pledge Obligations"). The Borrower shall deliver, or
cause to be delivered, the Pledge Bonds to the Issuing Bank or to a pledge agent
designated by the Issuing Bank immediately upon receipt thereof.
14.2. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing, the Issuing Bank, upon direction by the Agent in
accordance with Section 11.2, may without demand of performance or other demand,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Borrower or any other person
(all and each of which demands, advertisements and/or notices are hereby
expressly waived), forthwith collect, receive appropriate and realize upon the
Pledged Collateral, or any part thereof, and/or may forthwith sell, assign, give
option or options to purchase, contract to sell or otherwise dispose of and
-60-
<PAGE>
deliver said Pledged Collateral, or any part thereof, in one or more parcels at
public or private sale or sales, at any exchange, broker's board or at any of
the Issuing Bank's offices or elsewhere upon such terms and conditions as it may
deem advisable and at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk, with the right to the
Issuing Bank upon any such sale or sales, public or private, to purchase the
whole or any part of said Pledged Collateral so sold, free of any right or
equity of redemption in the Borrower, which right or equity is hereby expressly
waived or released. The Issuing Bank shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care, safekeeping or otherwise of any and all of the Pledged
Collateral or in any way relating to the rights of the Issuing Bank hereunder,
including reasonable attorney's fees and legal expenses, to the payment in whole
or in part of the Pledge Obligations in such order as the Issuing Bank may
elect, the Borrower remaining liable for any deficiency remaining unpaid after
such application, and only after so applying such net proceeds and after the
payment by the Issuing Bank of any other amount required by any provision of
law, including, without limitation, Section 9-504(1)(c) of the Uniform
Commercial Code, need the Issuing Bank account for the surplus, if any, to the
Borrower. The Borrower agrees that the Issuing Bank need not give more than ten
days notice of the time and place of any public sale or of the time after which
a private sale or other intended disposition is to take place and that such
notice is reasonable notification of such matters. No notification need be given
to the Borrower if it has signed after Default a statement renouncing or
modifying any right to notification of sale or other intended disposition. In
addition to the rights and remedies granted to the Issuing Bank in this
Agreement and in any other instrument or agreement securing, evidencing or
relating to any of the Pledge Obligations, the Issuing Bank shall have all the
rights and remedies of a secured party under the Uniform Commercial Code in
effect in the State of North Carolina at that time.
If the Issuing Bank sells any of the Pledged Collateral pursuant to
this Section 14.2, the Issuing Bank agrees that it will reinstate the Letter of
Credit relating thereto in an amount sufficient to cover all the principal and
interest components in accordance with the terms and requirements of the Letter
of Credit and Indenture relating thereto.
14.3. Valid Perfected First Lien. The Borrower covenants that the
pledge, assignment and delivery of the Pledged Collateral hereunder will create
a valid, perfected, first priority security interest in all right, title or
interest of the Borrower in or to such Pledged Collateral, and the proceeds
thereof, subject to no prior pledge, lien, mortgage, hypothecation, security
interest, charge, option or encumbrance
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<PAGE>
or to any agreement purporting to grant to any third party a security interest
in the property or assets of the Borrower which would include the Pledged
Collateral. The Borrower covenants and agrees that it will defend the Issuing
Bank's right, title and security interest in and to the Pledged Collateral and
the proceeds thereof against the claims and demands of all persons whomsoever.
14.4. Release of Pledged Bonds. Pledged Bonds shall be released from
the security interest created hereunder upon satisfaction of the Pledge
Obligations with respect to such Pledged Bonds and receipt by the Trustee of
notification from the Issuing Bank of the reinstatement of the respective Letter
of Credit as provided in the respective Indenture.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, Borrower and each of the Banks have caused this
Agreement to be duly executed by their duly authorized officers, all as of the
day and year first above written.
CULP, INC.
[CORPORATE SEAL] By:
President
ATTEST:
(Assistant Secretary)
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, for itself and
as Agent
By:
President
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
By:
President
<PAGE>
LETTER AGREEMENT
April 1, 1996
Re: 1996 Amended and Restated Credit Agreement dated as of April 1, 1996,
by and among Culp, Inc. ("Borrower"), a North Carolina corporation,
First Union National Bank of North Carolina ("First Union"), a national
banking association, and Wachovia Bank of North Carolina, N.A.,
("Wachovia") (First Union and Wachovia being referred to as the
"Banks") a national banking association, and First Union, as the Agent
("Agent") for the Banks
Ladies and Gentlemen:
The undersigned parties hereby acknowledge and agree that all
references to the Senior Credit Agreement contained in the Bond Documents (as
defined below) shall mean that certain 1996 Amended and Restated Credit
Agreement dated as of April 1, 1996, by and among the Borrower, the Banks and
the Agent, as amended, modified, supplemented or restated from time to time. For
purposes of this Letter Agreement, "Bond Documents" shall mean all, of the
documents, as they may be amended, modified, supplemented or restated from time
to time, executed in connection with each of the following bond transactions:
1. $7,900,000 Alamance County, North Carolina, Industrial
Revenue Bonds, Series A and B (Culp, Inc. Project)
(1988) (Liens held by First Union as Letter of Credit
Issuer).
2. $3,377,000 Chesterfield County, South Carolina,
Industrial Revenue Bonds, Series 1988 (Culp, Inc.
Project) (Liens held by First Union as Letter of Credit
Issuer).
3. $4,500,000 Guilford County, North Carolina, Industrial
Development Revenue Bonds, Series 1989 (Culp, Inc.
Project) (Liens held by Wachovia as Letter of Credit
Issuer and by First Citizens Bank & Trust Company as
Trustee).
4. $6,580,000 Anderson County, South Carolina, Industrial
Revenue Bonds, Series 1993 (Culp, Inc. Project) (Liens
held by First Union as Letter of Credit Issuer).
5. $6,000,000 Chesterfield County, South Carolina, Tax-
Exempt Adjustable Mode Industrial Development Revenue
Bonds (Culp, Inc. Project), Series 1996.
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<PAGE>
IN WITNESS WHEREOF, the undersigned parties have hereby executed this
Letter Agreement as of the date hereof.
CULP, INC.
By:
Title:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, for itself and
as Agent
By:
Title:
WACHOVIA BANK OF NORTH CAROLINA,
N.A.
By:
Title:
<PAGE>
Annex I
<TABLE>
<CAPTION>
Commitment Amount Commitment Amount Commitment Amount Percentage of
Name of Banks Term Loans Revolving Loans Letters of Credit Aggregate Commitments
------------- -------------------- ----------------- ----------------- -----------------------
<S> <C> <C> <C> <C>
First Union National $21,600,000 $20,100,000 $13,461,851.12 60.0%
Bank of North Carolina
300 N. Greene Street
P.O. Box 21965
Greensboro, NC 27420
Wachovia Bank of North $14,400,000 $13,400,000 $8,974,567.42 40.0%
Carolina, N.A.
200 North Main Street
Post Office Box 631
High Point, NC 27261
$36,000,000 $33,500,000 $22,436,418.54 100.0%
</TABLE>
<PAGE>
Exhibit 1-A
THIRD AMENDED AND RESTATED TERM NOTE
$21,600,000 High Point, North Carolina
April 1, 1996
FOR VALUE RECEIVED, CULP, INC., a North Carolina corporation (herein
called the "Borrower"), promises to pay to the order of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA (the "Bank"), or order, at the office of FIRST UNION
NATIONAL BANK OF NORTH CAROLINA at High Point, North Carolina, in lawful money
of the United States of America, the principal amount of Twenty-One Million Six
Hundred Thousand Dollars ($21,600,000), such principal amount to be payable in
Fifty-Nine (59) consecutive equal monthly installments of $300,000.00, payable
on the tenth Business Day of each Fiscal Month of the Borrower commencing April
12, 1996 and (ii) one final installment of $3,900,000 payable on March 1, 2001,
together with interest on the unpaid principal amount, such interest payments
beginning on the tenth Business Day of the first Fiscal Month of the Borrower
following the date hereof, as provided in the 1996 Amended and Restated Credit
Agreement between the Borrower, the Bank (for itself and as Agent) and Wachovia
Bank of North Carolina, N.A., dated as of April 1, 1996 (as amended, restated,
modified or supplemented, the "Credit Agreement").
This Note is the First Union Term Note referred to in the Credit
Agreement and is entitled to the benefits thereof and may be prepaid in whole or
in part as provided therein. This Note is a replacement of, and evidences the
same indebtedness as, that Second Amended and Restated First Union Term Note
dated July 1, 1995. Capitalized terms used herein without definition have the
meanings specified in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, or in any other document or instrument
delivered in connection therewith, all amounts then remaining unpaid on this
Note may be declared to be immediately due and payable as provided in the Credit
Agreement.
<PAGE>
In the event the indebtedness evidenced or secured hereby be collected
by or through an attorney at law after maturity, the holder shall be entitled to
collect reasonable attorney's fees. Demand, presentment, protest, notice of
protest, and notice of dishonor are hereby waived by all parties bound hereon.
CULP, INC.
[CORPORATE SEAL] By:
President
ATTEST:
Secretary
<PAGE>
Exhibit 1-B
THIRD AMENDED AND RESTATED TERM NOTE
$14,400,000 High Point, North Carolina
April 1, 1996
FOR VALUE RECEIVED, CULP, INC., a North Carolina corporation (herein
called the "Borrower"), promises to pay to the order of WACHOVIA BANK OF NORTH
CAROLINA, N.A. (the "Bank"), or order, at the office of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA (as the Bank's Agent and for the benefit of the Bank) at
High Point, North Carolina, in lawful money of the United States of America, the
principal amount of FOURTEEN MILLION FOUR HUNDRED THOUSAND DOLLARS
($14,400,000), such principal amount to be payable in Fifty-Nine (59)
consecutive equal monthly installments of $200,000.00, payable on the tenth
Business Day of each Fiscal Month of the Borrower commencing April 12, 1996 and
(ii) one final installment of $2,600,000 payable on March 1, 2001, together with
interest on the unpaid principal amount, such interest payments beginning on the
tenth Business Day of the first Fiscal month of the Borrower following the date
hereof, as provided in the 1996 Amended and Restated Credit Agreement between
the Borrower, the Bank and First Union National Bank of North Carolina for
itself and as Agent, dated as of April 1, 1996 (as amended, restated, modified
or, supplemented, the "Credit Agreement").
This Note is the Wachovia Term Note referred to in the Credit Agreement
and is entitled to the benefits thereof and may be prepaid in whole or in part
as provided therein. This Note is a replacement of, and evidences the same
indebtedness as, that Second Amended and Restated Wachovia Term Note dated July
1, 1995. Capitalized terms used herein without definition have the meanings
specified in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, or in any other document or instrument
delivered in connection therewith, all amounts then remaining unpaid on this
Note may be declared to be immediately due and payable as provided in the Credit
Agreement.
<PAGE>
In the event the indebtedness evidenced or secured hereby be collected
by or through an attorney at law after maturity, the holder shall be entitled to
collect reasonable attorney's fees. Demand, presentment, protest, notice of
protest, and notice of dishonor are hereby waived by all parties bound hereon.
CULP, INC.
[CORPORATE SEAL] By:
President
ATTEST:
Secretary
<PAGE>
Exhibit 2-A
FOURTH AMENDED AND RESTATED REVOLVING CREDIT NOTE
$20,100,000 High Point, North Carolina
April 1, 1996
FOR VALUE RECEIVED, CULP, INC., a North Carolina corporation (herein
called the "Borrower"), promises to pay to the order of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA (the "Bank"), or order, on the Revolving Loan Termination
Date (as defined in the 1996 Amended and Restated Credit Agreement dated as of
the date hereof between the Borrower, the Bank (for itself and as Agent) and
Wachovia Bank of North Carolina, N.A. (as amended, restated, modified or
supplemented, the "Credit Agreement")), at the office of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, High Point, North Carolina, in lawful money of the
United States of America, the principal amount of Twenty Million One Hundred
Thousand and No/100 Dollars ($20,100,000). This Revolving Credit Note shall bear
interest on the outstanding principal balance from time to time as provided in
the Credit Agreement and interest shall be payable at the times set forth in the
Credit Agreement.
Notwithstanding the foregoing, the Borrower shall be liable for payment
to the Bank only for such principal amount of the First Union Revolving Loan (as
defined in the Credit Agreement) as is outstanding, together with interest at
the rate per annum as aforesaid on the principal amount outstanding from the
date of advance.
This Note is the First Union Revolving Credit Note referred to in the
Credit Agreement and is entitled to the benefits thereof and may be prepaid in
whole or in part as provided therein. This Note is a replacement of, and
evidences the same indebtedness as, that Third Amended and Restated First Union
Revolving Credit Note dated July 1, 1995. Capitalized terms used herein without
definition have the meanings specified in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, or in any other document or instrument
delivered in connection therewith, all amounts then remaining unpaid on this
Note may be declared to be immediately due and payable as provided in the Credit
Agreement.
<PAGE>
In the event the indebtedness evidenced or secured hereby be collected
by or through an attorney at law after maturity, the holder shall be entitled to
collect reasonable attorneys' fees. Demand, presentment, protest, notice of
protest, and notice of dishonor are hereby waived by all parties bound hereon.
CULP, INC.
[CORPORATE SEAL] By:
President
ATTEST:
Secretary
<PAGE>
Exhibit 2-B
FOURTH AMENDED AND RESTATED REVOLVING CREDIT NOTE
$13,400,000 High Point, North Carolina
April 1, 1996
FOR VALUE RECEIVED, CULP, INC., a North Carolina corporation (herein
called the "Borrower"), promises to pay to the order of WACHOVIA BANK OF NORTH
CAROLINA, N.A. (the "Bank"), or order, on the Revolving Loan Termination Date
(as defined in the 1996 Amended and Restated Credit Agreement dated as of the
date hereof between the Borrower, the Bank and First Union National Bank of
North Carolina (for itself and as Agent) (as amended, restated, modified or
supplemented, the "Credit Agreement")), at the office of FIRST UNION NATIONAL
BANK OF NORTH CAROLINA (as the Bank's Agent and for the benefit of the Bank),
High Point, North Carolina, in lawful money of the United States of America, the
principal amount of Thirteen Million Four Hundred Thousand and No/100 Dollars
($13,400,000). This Revolving Credit Note shall bear interest on the outstanding
principal balance from time to time as provided in the Credit Agreement and
interest shall be payable at the times set forth in the Credit Agreement.
Notwithstanding the foregoing, the Borrower shall be liable for payment
to the Bank only for such principal amount of the Wachovia Revolving Loan (as
defined in the Credit Agreement) as is outstanding, together with interest at
the rate per annum as aforesaid on the principal amount outstanding from the
date of advance.
This Note is the Wachovia Revolving Credit Note referred to in the
Credit Agreement and is entitled to the benefits thereof and may be prepaid in
whole or in part as provided therein. This Note is a replacement of, and
evidences the same indebtedness as, that Third Amended and Restated Wachovia
Revolving Credit Note dated July 1, 1995. Capitalized terms used herein without
definition have the meanings specified in the Credit Agreement.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, or in any other document or instrument
delivered in connection therewith, all amounts then remaining unpaid on this
Note may be declared to be immediately due and payable as provided in the Credit
Agreement.
<PAGE>
In the event the indebtedness evidenced or secured hereby be collected
by or through an attorney at law after maturity, the holder shall be entitled to
collect reasonable attorneys' fees. Demand, presentment, protest, notice of
protest, and notice of dishonor are hereby waived by all parties bound hereon.
CULP, INC.
[CORPORATE SEAL] By:
President
ATTEST:
Secretary
<PAGE>
Exhibit 3
SUBSIDIARIES
1. Culp International, Inc.
2. Guilford Printers, Inc.
3. 3096726 Canada Inc.
4. Rayonese Textile Inc.
<PAGE>
Exhibit 5
[a form of quarterly officers certificates in form and substance to be agreed
upon by the Borrower and the Banks, which shall be designed to set forth the
calculation of financial information required to be reported by the Borrower to
the Banks and to demonstrate the Borrower's compliance with the financial
covenants set forth in this Agreement]
<PAGE>
Exhibit 6
1. $7,900,000 Alamance County, North Carolina, Industrial
Revenue Bonds, Series A and B (Culp, Inc. Project) (1988)
(Liens held by First Union National Bank of North Carolina
as Letter of Credit Issuer).
2. $3,377,000 Chesterfield County, South Carolina, Industrial
Revenue Bonds, Series 1988 (Culp, Inc. Project) (Liens held
by First Union National Bank of North Carolina as Letter of
Credit Issuer).
3. $4,500,000 Guilford County, North Carolina, Industrial
Development Revenue Bonds, Series 1989 (Culp, Inc. Project)
(Liens held by Wachovia Bank of North Carolina, N.A. as
Letter of Credit Issuer and by First Citizens Bank & Trust
Company as, Trustee).
4. $6,580,000 Anderson County, South Carolina, Industrial
Revenue Bonds, Series 1993 (Culp, Inc. Project) (Liens held
by First Union National Bank of North Carolina as Letter of
Credit Issuer).
5. $6,000,000 Chesterfield County, South Carolina, Tax-Exempt
Adjustable Mode Industrial Development Revenue Bonds (Culp,
Inc. Project), Series 1996.
<PAGE>
Exhibit 7
ASSIGNMENT AND ACCEPTANCE
Dated __________ ___, _____
Reference is made to the 1996 Amended and Restated Credit Agreement
dated as of April 1, 1996 (the "Credit Agreement") among CULP, INC. a North
Carolina corporation (the "Borrower"), the BANKS (as defined in the Credit
Agreement) and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Agent (the
"Agent"). Terms defined in the Credit Agreement are used herein with the same
meaning.
______________________ (the "Assignor") and ________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a ____% interest in and
to all of the Assignor's rights and obligations under the Credit Agreement as of
the Effective Date (as defined below) (including, without limitation, a ______%
interest (which on the Effective Date hereof is $__________) in the Assignor's
Revolving Credit Commitment and at interest (which on the Effective Date hereof
is $___________ in the Loans and, other amounts owing to the Assignor and at
interest in the Note[s] held by the Assignor (which on the Effective Date hereof
is $_____________)).
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other instrument or
document furnished pursuant thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit Agreement, any
other Loan Document or any other instrument or document furnished pursuant
thereto, other than that it is the legal and beneficial owner of the interest
being assigned by it hereunder, that such interest is free and clear of any
adverse claim and that as of the date hereof its Revolving Credit Commitment
(without giving effect to assignments thereof which have not yet become
effective) is $_____________ and the aggregate outstanding principal amount of
Loans and other amounts owing to it (without giving effect to assignments
thereof which have not yet become effective) is $___________ (Loans of
$_____________ and other amounts [specify] of $_________; (ii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement, any other Loan
Document or any other instrument or document furnished pursuant thereto;
<PAGE>
and (iii) attaches the Note[s] referred to in paragraph 1 above and requests
that the Agent exchange such Note[s] for [a new Note dated in the principal
amount of payable to the order of the Assignee] (new Notes as follows: a Note
dated ___________, _____ in the principal amount of $______________ payable to
the order of the Assignor and a Note dated in the principal amount of $_________
payable to the order of the Assignee].
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 7.1 thereof (or any more recent financial statements of the Borrower
delivered pursuant to Section 9.1 thereof) and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iii) confirms that it is a bank or financial
institution; (iv) appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their, terms all of the obligation which by the terms of the Credit
Agreement are required to be performed by it as a Bank; (vi) specifies as its
address for notices the office set forth beneath its name on the signature pages
hereof; (vii) represents and warrants that the execution, delivery and
performance of this Assignment and Acceptance are within its corporate powers
and have been duly authorized by all necessary corporate action, and (viii)
attaches the forms prescribed by the Internal Revenue Service of the United
States certifying as to the Assignee's status for purposes of determining
exemption from United States withholding taxes with respect to all payments to
be made to the Assignee under the Credit Agreement and the Notes or such other
documents as are necessary to indicate that all such payments are subject to
such taxes at a rate reduced by an applicable tax treaty].*
4. The Effective Date for this Assignment and Acceptance shall be (the
"Effective Date"). Following the execution of this Assignment and Acceptance, it
will be delivered to the Agent for execution and acceptance by the Agent [and to
the Borrower for execution by the Borrower]**.
- --------
* If the Assignee is organized under the laws of a jurisdiction outside
the United States.
** Before the occurrence of an Event of Default, if the Assignee is not
a Bank prior to the Effective Date.
<PAGE>
5. Upon such execution and acceptance by the Agent [and execution by
the Borrower], from and after the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent rights and obligations have
been transferred to it by this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and (ii) the Assignor shall, to the extent its
rights and obligations have been transferred to the Assignee by this Assignment
and Acceptance, relinquish its rights (other than under Section 13.14 and
Section 13.16 of the Credit Agreement) and be released from its obligations
under the Credit Agreement.
6. Upon such execution and acceptance by the Agent (and execution by
the Borrower]**, from and after the Effective Date, the Agent shall make all
payments in respect of the interest assigned hereby to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in payments for
periods prior to such acceptance by the Agent directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of North Carolina.
[NAME OF ASSIGNOR]
By:
Title:
[NAME OF ASSIGNEE]
By:
Title:
Lending Office:
[Address]
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By:
Title:
[NAME OF BORROWER]***
- --------
** Before the occurrence of an Event of Default, if the Assignee is not
a Bank prior to the Effective Date.
*** Before the occurrence of an Event of Default, if the Assignee is
not a Bank prior to the Effective Date.
<PAGE>
By:
Title:
<PAGE>
Exhibit 9
Underlying VRDN Obligation Existing Letter of Credit
$7,900,000 Alamance County Industrial Wachovia Bank of North
Facilities and Pollution Control Carolina, N.A. Irrevocable
Financing Authority Industrial Letter of Credit No. LC 968-
Revenue Refunding Bonds (Culp, Inc. 068486 issued April 1, 1996 in
Project) Series A and B the initial stated amount of
$2,890,863.01
$3,377,000 Chesterfield County, South Wachovia Bank of North
Carolina Industrial Revenue Bonds Carolina, N.A. Irrevocable
(Culp, Inc. Project) Series 1988 Letter of Credit No. LC 968-
068488 issued April 1, 1996 in
the initial stated amount of
$2,363,057.53
$4,500,000 Guilford County Industrial Wachovia Bank of North
Facilities and Pollution Control Carolina, N.A. Irrevocable
Financing Authority Industrial Letter of Credit No. LC 968-
Development Revenue Bonds (Culp, Inc. 041786 issued December 1, 1993
Project) Series 1989 in the initial stated amount of
$3,978,000.00
$6,580,000 Anderson County, South Wachovia Bank of North
Carolina Industrial Revenue Bonds, Carolina, N.A. Irrevocable
(Culp, Inc. Project) Series 1993 Letter of Credit No. LC 968-
068487 issued April 1, 1996 in
the initial stated amount of
$6,984,493.00
$6,000,000 Chesterfield County, South Wachovia Bank of North
Carolina Tax-Exempt Adjustable Mode Carolina, N.A. Irrevocable
Industrial Development Revenue Bonds Letter of Credit No. LC 968-
(Culp, Inc. Project) Series 1996 068485 issued April 1, 1996 in
the initial stated amount of
$6,300,000.00
<PAGE>
<PAGE>
CULP
1996
ANNUAL
REPORT
(Photo depicting the world with various Culp products appears here.)
<PAGE>
Culp
(Photo of fabrics samples, a chair and pillows appears here)
CULP'S TEAM OF 3,000 ASSOCIATES COMPRISES A FULLY INTEGRATED MARKETER OF FABRICS
FOR THE FURNITURE, BEDDING AND INSTITUTIONAL FURNISHINGS INDUSTRIES ON A
WORLDWIDE BASIS. CULP OPERATES 10 MANUFACTURING PLANTS WITH A COMBINED TOTAL OF
2.2 MILLION SQUARE FEET IN NORTH AND SOUTH CAROLINA, GEORGIA, PENNSYLVANIA AND
CANADA. CULP PROVIDES REGIONAL DISTRIBUTION FACILITIES IN AREAS WHERE
CONSIDERABLE FURNITURE MANUFACTURING IS CONCENTRATED INCLUDING HIGH POINT, NORTH
CAROLINA; TUPELO, MISSISSIPPI; AND LOS ANGELES, CALIFORNIA. CULP'S COMMON SHARES
ARE TRADED ON THE NASDAQ STOCK MARKET (NATIONAL MARKET) UNDER THE SYMBOL CULP.
<PAGE>
Culp's International Markets
Culp's fabrics are used worldwide by an ever-broadening variety of
customers. Residential furniture and bedding remain the company's largest
end-use markets, but institutional furnishings ("contract"), juvenile furniture,
outdoor furniture and bed furnishings are among the newer markets which are
accounting for an increasing proportion of total sales.
Culp now ranks as the largest supplier of upholstery fabrics to a global
array of furniture manufacturers and overseas fabric distributors. The company
provides the broadest product line of upholstery fabrics, including flat wovens
(jacquard and dobby), velvets (woven, tufted and flock) and prints (overprinted
jacquards). Culp's hallmark is providing innovative fabric designs at good
values with a consistently high level of customer service.
In mattress ticking, Culp ranks as one of the top three suppliers to the
highly concentrated bedding industry. The company markets worldwide a broad
range of heat-transfer, pigment-printed and damask tickings. Through creative
designs utilizing various fabrics and colors, Culp has helped promote the use of
covers with a more "fashion-conscious" look to differentiate mattress lines at
retail.
(Photo of fabrics samples appears here)
2
<PAGE>
Highlights
Net sales for fiscal 1996 reached a new high of $351.7 million. Net income also
set a new annual record of $11.0 million, or $0.98 per share, up 13% from $0.87
per share in fiscal 1995. Fiscal 1996 represented the seventh consecutive year
of higher net income.
Net sales of $102.2 in the fourth quarter of fiscal 1996 marked the first time
Culp has surpassed $100 million in any quarter. Net income of $4.1 million in
the fourth quarter represented the fourteenth consecutive quarter of higher
earnings in comparison to the comparable period in the prior year.
The acquisition of Rayonese Textile Inc. in March 1995 expanded Culp's customer
base and enhanced the company's capacity for manufacturing wide and narrow
jacquard fabrics used for mattress ticking, comforters and upholstery fabrics.
International sales accounted for $77 million, or 22% of net sales, up from 19%
in fiscal 1995. Shipments were made to customers in more than 50 countries
during fiscal 1996.
In June 1996 the Board increased the regular quarterly cash dividend for the
seventh consecutive year. The current indicated annual rate of $0.13 per share
represents an 18% increase over the previous annualized payout.
Capital expenditures for fiscal 1996 totaled $14 million. Major initiatives
included expanding capacity for jacquard and wet print product lines as well as
completing the expansion project at Rayonese related to the installation of
high-speed, air-jet jacquard weaving machines.
The company's financial position remained sound at the close of fiscal 1996 with
a funded debt-to-capital ratio of 49%. Book value increased to a new high of
$7.21 per share.
The price of Culp's shares rose 33% during 1996, representing a 28.6% compound
return to shareholders over the past five years.
FIVE-YEAR
(AMOUNTS IN THOUSANDS, FISCAL FISCAL PERCENT GROWTH
EXCEPT PER SHARE DATA) 1996 1995 CHANGE RATE
STATEMENTS OF INCOME
Net sales $ 351,667 308,026 14.2% 15.1%
Gross profit 62,538 54,681 14.4 18.2
Income from operations 23,470 21,249 10.5 35.9
Net income 10,980 9,775 12.3 30.5
Average shares outstanding 11,234 11,203 0.3 0.8
PER SHARE
Net income $ 0.98 0.87 12.6% 29.4%
Cash dividends 0.11 0.10 10.0 19.6
Book value 7.21 6.37 13.2 10.1
Year-end stock price 13.00 9.7 33.3 28.6
BALANCE SHEET
Working capital $ 56,953 38,612 47.5% 11.9%
Total assets 211,644 194,999 8.5 19.0
Funded debt 76,791 72,947 5.3 33.0
Shareholders' equity 81,446 71,396 14.1 11.2
RATIOS
Gross profit margin 17.8% 17.8%
Operating income margin 6.7 6.9
Net profit margin 3.1 3.2
Return on average equity 14.4 14.6
Funded debt to equity 94.3 102.2
Current ratio 2.2% 1.7%
NET
INCOME
PER
SHARE
(Bar graph appears here with the following plot points.)
92 93 94 95 96
$0.27 $0.41 $0.69 $0.87 $0.98
COMPARISON
OF TOTAL
RETURN TO
SHAREHOLDERS
(Bar graph appears here with the following plot points.)
<TABLE>
<CAPTION>
91 92 93 94 95 96
<S> <C> <C> <C> <C> <C> <C>
Culp 100 143 200 325 276 368
Media General Textile Mfg. 100 148 160 147 142 144
NASDAQ 100 121 139 155 180 257
</TABLE>
3
<PAGE>
Letter to Shareholders
Fiscal 1996 was a year of rewarding progress. Sales rose to a new high
of $352 million, and net income increased 13% to $0.98 per share, also a record.
Sales and net income were up in each quarter versus the comparable year-earlier
periods; and in the fourth quarter, we achieved the milestone of surpassing $100
million in net sales for the first time ever for a three-month period. Our stock
price at the end of the year was up 33% from the close at the end of fiscal
1995. That gain contrasted with essentially no change in the market value of a
peer group of other companies in the home furnishings industry. Now, we
recognize that looking at stock prices, especially at two points in time just 12
months apart, does not always provide a valid measure of one's underlying
corporate performance. We are pleased, however, that the market has recognized
the progress we have made.
Yes, these financial highlights present a gratifying backdrop. But
remember that fiscal 1996 was not a turnaround year for Culp. It actually marked
the seventh year in which we have attained higher net income in an industry
which historically has shown a more cyclical than consistent pattern of growth.
In fact, many of our competitors experienced a difficult year. Consumer spending
on furniture and other home furnishings is still subject to a host of variables
including interest rates, employment levels and the buoyancy of the overall
economy. None of these we can control. What we can influence are issues such as
fabric design, customer service, product quality and manufacturing efficiency.
By executing our strategy to make continued progress in each of these vital
areas, we have gained market share, increased the company's profitability and
experienced a broadening recognition of Culp's prospects by Wall Street. What
lies ahead? That is always the tough question to answer, but we have challenged
ourselves to sustain the outstanding record Culp has attained.
This annual report provides a timely opportunity to review with you not
only the past year but also the steps we are taking to follow our vision for
Culp as one of the preeminent marketers of upholstery fabrics and mattress
ticking worldwide. Our message here is not intended to repeat the discussion
starting on page 23 about the significant operational and financial developments
during fiscal 1996. We did benefit from the inclusion for a full year of
Rayonese Textile which was acquired during the fourth quarter of fiscal 1995.
The major portion of the increase in sales for the year, however, reflected
growth in existing lines of upholstery fabrics and mattress ticking. Shipments
to customers based in the United States rose 10% while international sales
increased 34% and provided a key impetus to our corporate progress.
(Photo of a chair and pillow appear here)
The insertion of the word "worldwide" in our corporate description for
Culp is intentional. Residential and commercial furnishings are global
industries, and we have literally redefined the company's mission statement to
encompass this perspective. The financial results of broadening our corporate
profile is clear. For fiscal 1996, international sales accounted for $77
million, or 22%, of net sales, up from 19% in fiscal 1995. Culp's
4
<PAGE>
international shipments, principally upholstery fabrics, have risen more than
tenfold since fiscal 1990. Without those incremental sales, we would still have
compiled a well above-average record and would rank as one of the top marketers
of upholstery fabrics and mattress ticking in the United States. But the
contribution from higher sales to customers outside the United States has
markedly accelerated our progress and enabled us to achieve a stronger
competitive posture.
NET SALES
(Bar graph appears here with the following plot points.)
92 93 94 95 96
$191,311 $200,783 $245,049 $308,026 $351,667
NET INCOME
(Bar graph appears here with the following plot points.)
92 93 94 95 96
$2,973 $4,501 $7,665 $9,775 $10,980
What is driving our growth in sales? A critical underpinning is our
ability to provide value to customers. Value is a deceptively simple word that
may be one of the more complex terms any corporation has to comprehend.
Customers provide the true definition of value, not us. Whatever blend of
quality, service and price an account demands, we must strive to provide value
by delivering the required blend, regardless of the geographical location of the
customers we are servicing. Our success in building Culp's global presence
relates directly to our continuous quality improvement process that remains a
cornerstone of our corporate culture. We were far from the first company to
adopt this approach, but the tangible returns realized thus far have reinforced
teamwork throughout the Culp organization. The meaningful gains we have
accomplished in product quality not only indicate that we are headed in the
right direction, but also highlight that the drive to deliver value is an
ongoing journey.
One element of value that is important for every customer we serve today
involves the physical delivery of our fabrics and mattress ticking. The
logistics of completing international deliveries within our objective of OTET
("on-time, every time") demands a sophisticated information system. Our
proprietary Culp Link software allows customers and sales agents as distant as
Australia, Belgium and Poland to check the status of orders and deliveries on a
real-time basis. Culp Link also provides the ability to review the accounting
status of any account, as well as check the exact status of any shipment with
individual identification of each roll and color specification. Shipments to
international accounts involve longer distances, but the same framework which
has allowed us to form working partnerships with many of the leading
manufacturers of furniture and bedding in the United States is proving to be
very effective in serving international customers.
Apart from the absolute growth in international shipments, the
geographical expansion of our customer base stands as firm evidence of our
success on a worldwide basis. Our initial shipments several years ago outside
the United States were logically into the nearby North American markets of
Canada and Mexico. During fiscal 1996, however, those two nations combined
represented less than one-third of the company's shipments outside of the United
States. Europe is now our largest market for exports outside of North America,
and we have established a growing presence in the Middle East, Asia and the
Pacific Rim. We fully intend to broaden the geographical diversity of our
customer base. We are continuing to add new customers, are considering
establishing sales offices in selected overseas locations, and plan to introduce
new products as part of an aggressive plan to capitalize on the potential we
have identified.
To some, Culp's proven ability to prosper in international markets must
appear an anomaly within the overall textile industry. Two vital points
distinguish us from other companies caught in stiff competition with offshore
manufacturers. First,
(Photo of Rob Culp and Howard Dunn appears here.)
Rob Culp
Howard Dunn
5
<PAGE>
weaving and printing upholstery fabrics and mattress ticking is more capital
intensive than other textile niches, particularly those that involve sewing and
garment-finishing steps. Second, customers value the creative designs and
finishes on our decorative fabrics as essential components of their product
planning and marketing programs.
Our efforts to deliver innovative, appealing designs involve much more
than just investing more dollars in additional equipment. Culp has the latest
CAD (computer-aided design) workstations which facilitate the process of
creating desirable patterns. High-resolution images of prototype designs present
concepts to customers much fasterNand much less expensivelyNthan the
conventional practice of producing a proposed design on a sample swatch of
fabric. Designers are encouraged to experiment and to invite customers into the
process at a much earlier stage than practically possible in the past. This
involvement can help establish strong, long-lasting customer relationships; but
the step demands a recognition that the development of new designs has to be
linked integrally with practical manufacturing considerations. We have worked
hard to establish this internal coordination, and the progress to date
encouraged us to more than double the company's design staff during the last
several years.
The same technological advances which support our design of new fabrics
have led us to move aggressively in pursuing new marketing opportunities. Having
the flexibility to generate new designs quickly is aided by our ability to
control resources in most every major discipline in fabric and yarn
manufacturing. In addition to being well established in jacquard and dobby woven
fabrics, we have expertise in woven and tufted velvets, as well as wet and
heat-transfer printing. This versatility plays directly to customer demands for
new fabrics, as customer preferences can change dramatically, even over a few
seasons. Being able to identify these shifts in the market has been helped
considerably by our formation of four distinct business units over two years
ago. By targeting our efforts based on major types of fabrics instead of by
customer categories, we have built an organization far more responsive to swings
in demand. We know that a Culp team focused on creative applications of their
assigned product lines has frequently served a key role in motivating customers
to try new placements for furniture and bedding. Because design is such an
integral aspect of our business, change truly is one constant we have to be able
to accept and use to our advantage. Having these four operational units has
proven to be an effective way of realizing overall corporate growth within such
a dynamic environment.
Culp's strong balance sheet ensures our ability to continue making the
capital investments necessary to extend our competitive leadership. Capital
spending in fiscal 1996 totaled $14.4 million, and represented only 55% of
operating cash flow (net income plus depreciation, amortization and deferred
income taxes) for the year. Plans for fiscal 1997 include capital spending of
$16.5 million. The focus of this spending has increasingly shifted over the past
couple of years toward expanding capacity rather than modernizing existing
equipment. An example of that emphasis is the $6 million invested
RETURN
ON AVERAGE
EQUITY
(Bar graph appears here with the following plot points.)
92 93 94 95 96
6.0% 8.6% 13.1% 14.6% 14.4%
CLOSING
STOCK
PRICE
(Bar graph appears here with the following plot points.)
92 93 94 95 96
$5.23 $7.20 $11.63 $9.75 $13.00
6
<PAGE>
at Rayonese Textile during fiscal 1995 and 1996 to install highly efficient,
air-jet jacquard looms, planned specifically for fabrics used for mattress
ticking, comforters, and overprinted jacquard fabrics.
We are pleased that the company's performance for fiscal 1996 led the
Board to approve an 18% increase in the quarterly cash dividend in June 1996.
This marked the seventh consecutive year in which the quarterly cash dividend
has been raised. Our goal is to manage Culp's resources in a manner which allows
this record to be extended. The initial indications for fiscal 1997 are colored
in part by the strong finish we experienced in our business in fiscal 1996. The
pace of incoming orders has remained positive well into the first quarter.
Although we must acknowledge that there are conflicting projections about the
economy and interest rates, the sentiment among manufacturers and retailers of
home furnishings seems generally optimistic at this time.
Our task, as always, is not to get entangled in the near term but to
focus on the longer term growth of Culp. The team of 3,000 associates under the
Culp banner has accomplished much over the past several years and certainly
seems eager for the challenges that we know lie ahead. We appreciate the earnest
efforts of each individual and join them in expressing thanks to our customers
for the opportunity to serve them. An increasing worldwide presence, a renewed
emphasis on developing innovative new fabrics and designs and a sound
organization all encourage us about our ability to meet the market's needs ever
more competently in the future.
Sincerely,
(Signature of Robert G. Culp, III) (Signature of Howard L. Dunn, Jr.)
Robert G. (Rob) Culp, III Howard L. Dunn, Jr.
Chairman and Chief Executive Officer President and Chief Operating Officer
7
<PAGE>
Financial Statements
8
<PAGE>
To the Shareholders of Culp, Inc.:
We have changed our process for distributing information about Culp's
quarterly progress during the year. We want to keep you informed about the
Company's performance but believe that the most timely and cost-effective
approach is to mail an update only to those requesting the information.
We have made this decision for two reasons. One is the rising cost of
producing and mailing quarterly reports. The other is the recognition that many
investors now have access to the news wires and computerized data bases that
report Culp's results on the same day that we release them to the media.
If you wish to be mailed a copy of Culp's three quarterly news releases
during 1997, simply complete and return the attached postcard.
Please send me a copy of Culp's 1997 quarterly news releases.
Name_______________________________________________________
Address_____________________________________________________
____________________________________________________________
City_______________________________State__________Zip_________
<PAGE>
Place
Stamp
Here
Culp, Inc.
101 South Main Street
High Point, NC 27261
<PAGE>
10 CONSOLIDATED BALANCE SHEETS
11 CONSOLIDATED STATEMENTS OF INCOME
12 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
13 CONSOLIDATED STATEMENTS OF CASH FLOWS
14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21 REPORT OF INDEPENDENT AUDITORS
22 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
23 MANAGEMENT'S DISCUSSION AND ANALYSIS
26 SELECTED QUARTERLY DATA
27 SELECTED ANNUAL DATA
28 CORPORATE AND SHAREHOLDER INFORMATION
9
<PAGE>
Consolidated
Balance Sheets
<TABLE>
<CAPTION>
APRIL 28, 1996 AND APRIL 30, 1995 (DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA) 1996 1995
<S> <C> <C>
ASSETS
current assets:
cash and cash investments $ 498 1,393
accounts receivable 52,038 44,252
inventories 47,395 45,771
other current assets 4,191 3,194
total current assets 104,122 94,610
restricted investments 5,250 795
property, plant and equipment, net 76,961 75,805
goodwill 22,871 22,600
other assets 2,440 1,189
total assets $211,644 194,999
LIABILITIES AND SHAREHOLDERS' EQUITY
current liabilities:
current maturities of long-term debt $ 7,100 11,555
accounts payable 27,308 32,250
accrued expenses 12,564 11,532
income taxes payable 197 661
total current liabilities 47,169 55,998
long-term debt 74,941 62,187
deferred income taxes 8,088 5,418
total liabilities 130,198 123,603
commitments and contingencies (note 11)
shareholders' equity:
preferred stock, $.05 par value, authorized 10,000,000 shares 0 0
common stock, $.05 par value, authorized 40,000,000 shares,
issued and outstanding 11,290,300 at April 28, 1996 and
11,204,766 at April 30, 1995 565 560
capital contributed in excess of par value 16,878 16,577
retained earnings 64,003 54,259
total shareholders' equity 81,446 71,396
total liabilities and shareholders' equity $211,644 194,999
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
10
<PAGE>
Consolidated
Statements of Income
<TABLE>
<CAPTION>
FOR THE YEARS ENDED APRIL 28, 1996, APRIL 30, 1995, AND MAY 1, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1996 1995 1994
<S> <C> <C> <C>
net sales $ 351,667 308,026 245,049
cost of sales 289,129 253,345 202,426
gross profit 62,538 54,681 42,623
selling, general and administrative expenses 39,068 33,432 27,858
income from operations 23,470 21,249 14,765
interest expense 5,316 4,715 2,515
interest income (92) (64) (79)
other expense 956 1,082 350
income before income taxes 17,290 15,516 11,979
income taxes 6,310 5,741 4,314
net income $ 10,980 9,775 7,665
net income per share $ 0.98 0.87 0.69
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
11
<PAGE>
Consolidated
Statements of Shareholders' Equity
<TABLE>
<CAPTION>
CAPITAL
FOR THE YEARS ENDED APRIL 28, 1996, COMMON COMMON CONTRIBUTED TOTAL
APRIL 30, 1995, AND MAY 1, 1994 STOCK STOCK IN EXCESS OF RETAINED SHAREHOLDERS'
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) SHARES AMOUNT PAR VALUE EARNINGS EQUITY
<S> <C> <C> <C> <C> <C>
balance, May 2, 1993 7,259,161 $ 362 15,333 38,826 54,521
cash dividends ($0.08 per share) (887) (887)
net income 7,665 7,665
common stock issued in connection
with stock option plan, including
$484 of tax benefit 212,140 11 1,339 1,350
three-for-two stock split 3,706,052 185 (185) --
balance, May 1, 1994 11,177,353 558 16,487 45,604 62,649
cash dividends ($0.10 per share) (1,120) (1,120)
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 ($0.11 per share) (1,236) (1,236)
net income 10,980 10,980
common stock issued in connection
with stock option plan 85,534 5 301 306
balance, April 28, 1996 11,290,300 $ 565 16,878 64,003 81,446
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
12
<PAGE>
Consolidated
Statements of Cash Flows
<TABLE>
<CAPTION>
FOR THE YEARS ENDED APRIL 28, 1996, APRIL 30, 1995, AND MAY 1, 1994
(DOLLARS IN THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
cash flows from operating activities:
net income $ 10,980 9,775 7,665
adjustments to reconcile net income to net cash
provided by operating activities:
depreciation 12,348 11,257 8,497
amortization of intangible assets 748 628 344
provision for deferred income taxes 2,210 1,373 1,118
changes in assets and liabilities, net of effects
of businesses acquired:
accounts receivable (7,786) (5,515) (1,839)
inventories (1,624) (7,281) (4,330)
other current assets (537) (310) (304)
other assets (103) (518) (389)
accounts payable (1,077) 159 (420)
accrued expenses 1,032 2,180 539
income taxes payable (464) 25 (401)
net cash provided by operating activities 15,727 11,773 10,480
cash flows from investing activities:
capital expenditures (14,385) (18,058) (16,764)
purchase of restricted investments (6,019) (57) (3,593)
purchase of investments to fund deferred compensation liability (1,286) -- --
sale of restricted investments 1,564 2,185 670
businesses acquired -- (10,455) (38,205)
net cash used in investing activities (20,126) (26,385) (57,892)
cash flows from financing activities:
proceeds from issuance of long-term debt 19,854 23,455 49,203
principal payments on long-term debt (11,555) (11,275) (14,223)
dividends paid (1,236) (1,120) (887)
proceeds from common stock issued 306 92 1,350
change in accounts payable - capital expenditures (3,865) 2,160 7,443
net cash provided by financing activities 3,504 13,312 42,886
decrease in cash and cash investments (895) (1,300) (4,526)
cash and cash investments, beginning of year 1,393 2,693 7,219
cash and cash investments, end of year $ 498 1,393 2,693
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
13
<PAGE>
Notes
To Consolidated Financial Statements
1 General and Summary of Significant Accounting Policies
PRINCIPLES OF CONSOLIDATION--The consolidated financial statements include the
accounts of the company and its subsidiary, which is wholly-owned. All
significant intercompany balances and transactions are eliminated in
consolidation.
DESCRIPTION OF BUSINESS--The company manufactures and markets upholstery fabrics
and mattress ticking internationally for the furniture, bedding, and related
industries, with the majority of its business conducted in the United States.
FISCAL YEAR --The company's fiscal year is the 52 or 53 week period ending on
the Sunday closest to April 30. Fiscal years 1996, 1995 and 1994 included 52
weeks.
STATEMENTS OF CASH FLOWS--For purposes of reporting cash flows, the company
considers all highly liquid debt instruments purchased with a maturity of three
months or less to be cash investments.
ACCOUNTS RECEIVABLE --Substantially all of the company's accounts receivable are
due from manufacturers and distributors in the markets noted above. The company
grants credit to customers, a substantial number of which are located in the
United States. Management performs credit evaluations of the company's customers
and generally does not require collateral.
INVENTORIES --Principally all inventories are valued at the lower of last-in,
first-out (LIFO) cost or market. Information related to the first-in, first-out
(FIFO) method may be useful in comparing operating results to those of companies
not on LIFO. The LIFO valuation method decreased net income $66,000 ($.01 per
share) in 1996, had no effect on net income in 1995, and decreased net income
$73,000 ($.01 per share) in 1994 compared with the FIFO method.
RESTRICTED INVESTMENTS--Restricted investments were purchased with proceeds from
industrial revenue bond issues and are invested pending application of such
proceeds to project costs or repayment of the bonds. The investments are stated
at cost which approximates market value.
PROPERTY, PLANT AND EQUIPMENT --Property, plant and equipment is recorded at
cost. Depreciation is generally computed using the straight-line method over the
estimated useful lives of the respective assets. Major renewals and betterments
are capitalized. Maintenance, repairs and minor renewals are expensed as
incurred. When properties are retired or otherwise disposed of, the related cost
and accumulated depreciation are removed from the accounts. Amounts received on
disposal less the book value of assets sold are charged or credited to income.
FOREIGN CURRENCY TRANSLATION--The United States dollar is the functional
currency for the company's Canadian subsidiary. Translation gains or losses for
this subsidiary are reflected in net income.
GOODWILL AND OTHER INTANGIBLE ASSETS--Goodwill, which represents the unamortized
excess of the purchase price over the fair values of the net assets acquired, is
being amortized using the straight-line method over 40 years. The company
assesses the recoverability of goodwill by determining whe ther the amortization
of the balance over its remaining life can be recovered through undiscounted
future operating cash flows of the acquired businesses. The assessment of the
recoverability of goodwill will be impacted if estimated cash flows are not
achieved.
Other intangible assets are included in other assets and consist principally
of debt issue costs. Amortization is computed using the straight-line method
over the respective terms of the debt agreements.
INCOME TAXES --Deferred taxes are recognized for the temporary differences
between the financial statement carrying amounts and the tax bases of the
company's assets and liabilities and operating loss and tax credit carryforwards
at income tax rates expected to be in effect when such amounts are realized or
settled. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.
No provision is made for income taxes which may be payable if undistributed
income of the company's Canadian subsidiary were to be paid as dividends to the
company, since the company intends that such earnings will continue to be
invested. At April 28, 1996 the amount of such undistributed income was $1.5
million. Foreign tax credits may be available as a reduction of United States
income taxes in the event of such distributions.
REVENUE RECOGNITION --Revenue is recognized when products are shipped to
customers. Provision is made currently for estimated product returns, claims and
allowances.
FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amount of cash and cash
investments, accounts receivable, other current assets, accounts payable and
accrued expenses approximates fair value because of the short maturity of these
financial instruments.
The fair value of the company's long-term debt is estimated by discounting the
future cash flows at rates currently offered to the company for similar debt
instruments of comparable maturities. The fair value of the company's long-term
debt approximates the carrying value of the debt due to the variable interest
rates on the majority of long-term debt at April 28, 1996.
14
<PAGE>
INTEREST RATE SWAP AGREEMENTS --Interest rate swap agreements generally involve
the exchange of fixed and floating rate interest payment obligations without the
exchange of the underlying principal amounts. These agreements are used to
effectively fix the interest rates on certain variable rate borrowings. Net
amounts paid or received are reflected as adjustments to interest expense.
FORWARD CONTRACTS--Gains and losses related to qualifying hedges of firm
commitments are deferred and included in the measurement of the related foreign
currency transaction when the hedged transaction occurs.
PER SHARE DATA --Primary income per share is computed by dividing net income by
the weighted average number of common shares outstanding during each year, as
restated for stock splits (11,234,363 in 1996, 11,203,160 in 1995, and
11,075,988 in 1994). The effect of stock options on the calculation is not
materially dilutive.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATION--Certain items in the 1995 consolidated financial statements
have been reclassified to conform with the presentation adopted in the current
year. The reclassifications did not impact net income as previously reported.
2 Acquisitions
On March 6, 1995, the company acquired Rayonese Textile Inc. (Rayonese), a
manufacturer of home furnishings fabrics based near Montreal, Canada. The
transaction was valued at approximately $10.5 million and included the purchase
of 100% of the Rayonese common stock and the assumption of Rayonese's funded
debt. Goodwill on the transaction was approximately $5 million, which is being
amortized on the straight-line method over 40 years. The acquisition was
accounted for as a purchase, and accordingly, the net assets and operations of
Rayonese have been included in the company's consolidated financial statements
since March 6, 1995.
On November 2, 1993, the company purchased the operations and assets
relating to an upholstery fabric business operating as Rossville Mills,
Chromatex and Rossville Velours (Rossville/Chromatex). The transaction was
valued at approximately $39.3 million and involved the purchase of assets for
cash, the repayment of Rossville/ Chromatex debt and the assumption of certain
liabilities. Goodwill on the transaction was approximately $18.9 million, which
is being amortized on the straight-line method over 40 years. The acquisition
was accounted for as a purchase, and accordingly, the net assets and operations
of Rossville/Chromatex have been included in the company's consolidated
financial statements since November 1, 1993.
3 Accounts Receivable
A summary of accounts receivable follows:
(DOLLARS IN THOUSANDS) 1996 1995
customers $ 53,321 44,014
factors 71 1,314
allowance for doubtful accounts (1,016) (739)
reserve for returns and allowances (338) (337)
$ 52,038 44,252
15
<PAGE>
4 Inventories
A summary of inventories follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1996 1995
inventories on the FIFO cost method
<S> <C> <C>
raw materials $ 29,150 25,385
work-in-process 5,067 3,465
finished goods 16,708 19,834
total inventories on the FIFO cost method 50,925 48,684
adjustments of certain inventories to the LIFO cost method (3,530) (2,913)
$ 47,395 45,771
</TABLE>
5 Property, Plant and Equipment
A summary of property, plant and equipment follows:
(DOLLARS IN THOUSANDS) depreciable lives (in years) 1996 1995
land and improvements 10 $ 1,765 958
buildings and improvements 7-40 13,529 12,793
leasehold improvements 7-10 1,320 1,242
machinery and equipment 3-12 109,906 101,427
office furniture and equipment 3-10 12,152 12,020
capital projects in progress 8,517 6,047
147,189 134,487
accumulated depreciation (70,228) (58,682)
$ 76,961 75,805
6 Goodwill
A summary of goodwill follows:
(DOLLARS IN THOUSANDS) 1996 1995
goodwill $ 24,218 23,337
accumulated amortization (1,347) (737)
$ 22,871 22,600
7 Accounts Payable
A summary of accounts payable follows:
(DOLLARS IN THOUSANDS) 1996 1995
accounts payable--trade $21,570 22,647
accounts payable--capital expenditures 5,738 9,603
$27,308 32,250
16
<PAGE>
8 Accrued Expenses
A summary of accrued expenses follows:
(DOLLARS IN THOUSANDS) 1996 1995
compensation and benefits $ 8,153 6,497
other 4,411 5,035
$12,564 11,532
9 Income Taxes
A summary of income taxes follows:
(DOLLARS IN THOUSANDS) 1996 1995 1994
current
federal $3,345 3,473 2,420
state 700 699 383
Canadian 0 0 0
4,045 4,172 2,803
deferred
federal 1,422 1,374 1,279
state 145 195 232
Canadian 698 0 0
2,265 1,569 1,511
$6,310 5,741 4,314
Income before income taxes related to the Company's Canadian operation for the
year ended April 28, 1996 was $2,100,000. In the prior year, income before
income taxes from this operation was not significant.
The following schedule summarizes the principal differences between income
taxes at the federal income tax rate and the effective income tax rate reflected
in the consolidated financial statements:
1996 1995 1994
federal income tax rate 34.2% 34.1% 34.0%
state income taxes, net of
federal income tax benefit 3.4 3.8 3.8
exempt income of foreign sales
corporation (1.7) (1.5) (1.4)
other .6 0.6 (0.4)
36.5% 37.0% 36.0%
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities consist of the following:
(DOLLARS IN THOUSANDS) 1996 1995
deferred tax liabilities:
property, plant and equipment, net $(7,328) (5,625)
goodwill (720) (432)
employee benefits (295) (249)
other (142) (139)
total deferred tax liabilities (8,485) (6,445)
deferred tax assets:
accounts receivable 474 357
inventories 148 81
compensation 960 475
liabilities and reserves 782 922
alternative minimum tax 0 699
gross deferred tax assets 2,364 2,534
valuation allowance 0 0
total deferred tax assets 2,364 2,534
$(6,121) (3,911)
Deferred taxes are classified in the accompanying consolidated Balance Sheet
captions as follows:
(DOLLARS IN THOUSANDS) 1996 1995
other current assets $ 1,967 1,507
deferred income taxes (8,088 (5,418)
$ (6,121) (3,911)
The company believes that it is more likely than not that the results of future
operations will generate sufficient taxable income to realize the remaining
deferred tax assets.
Income taxes paid, net of income tax refunds, were $4,623,000 in 1996;
$4,071,000 in 1995; and $3,113,000 in 1994.
17
<PAGE>
10 Long-term Debt
A summary of long-term debt follows:
(DOLLARS IN THOUSANDS) 1996 1995
industrial revenue bonds and
other obligations $ 22,241 15,787
revolving credit line 23,300 10,000
term loan 35,500 41,500
subordinated note payable 1,000 1,000
convertible note payable 0 5,455
82,041 73,742
current maturities (7,100) (11,555)
$ 74,941 62,187
The company has an unsecured loan agreement with two banks, which provides for a
$36,000,000 five-year term loan and a $33,500,000 revolving credit line, which
also has a five-year term. The term loan requires monthly installments of
$500,000, and a final payment of $6,500,000 on March 1, 2001. The revolving
credit line requires payment of an annual facility fee in advance.
Additionally, the term loan and the credit line require payment of interest
on any outstanding borrowings at an interest rate based on a spread over the
one month LIBOR (this LIBOR rate at April 28, 1996 was 5.4%).
The industrial revenue bonds (IRB) are collateralized by restricted
investments of $5,250,000 and letters of credit for $22,436,000 at April 28,
1996. Substantially all of the bonds are due in one-time payments at various
dates from 2008 to 2013, with interest at variable rates at approximately 60% of
the prime rate (prime at April 28, 1996 was 8.25%).
In connection with the Rossville/Chromatex acquisition (note 2), the company
has a subordinated note payable to the former owners with interest based on a
spread over the one month LIBOR. The note is payable on November 1, 1996.
In connection with the purchase of Rayonese Textile Inc. (note 2), the
company issued a convertible note payable of $5,455,000. The note was payable on
March 6, 1998 or upon 45 days notice to the company by the holders starting on
March 6, 1996. The holders gave 45 days notice, and the company repaid the note
payable in March 1996.
The company's loan agreements require, among other things, that the company
maintain certain financial ratios. At April 28, 1996, the company was in
compliance with these required financial covenants.
At April 28, 1996, 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
$ 2,300,000 6.4% July 1996
$ 150,000 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 terminate these agreements as of
April 28,1996 is approximately $220,000. Net amounts paid under these agreements
increased interest expense by approximately $290,000 in 1996; $138,000 in 1995;
and $227,000 in 1994. 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.
The principal payment requirements of long-term debt during the next five
years are: 1997--$7,100,000; 1998--$6,100,000; 1999--$6,275,000;
2000--$6,200,000; and 2001--$5,154,000, excluding payments, if any, on the
revolving credit line for its five year term. The term loan and revolving credit
facilities expire on March 1, 2001, at which time a final payment of $6,500,000
is due for the term loan and any outstanding borrowings on the revolver are due.
These final payments at the expiration date are not included in the scheduled
payments above.
Interest paid during 1996, 1995 and 1994 totalled $5,365,000, $4,668,000,
and $2,254,000, respectively.
18
<PAGE>
11 Commitments and Contingencies
The company leases certain office, manufacturing and warehouse facilities and
transportation and other equipment under noncancellable operating leases. Lease
terms related to real estate range from five to ten years with renewal options
for additional periods ranging from five to fifteen years. The leases generally
require the company to pay real estate taxes, maintenance, insurance and other
expenses. Rental expense for operating leases, net of sublease income, was
$3,502,000 in 1996; $2,486,000 in 1995; and $2,021,000 in 1994. Future minimum
rental commitments for noncancellable operating leases are $2,874,000 in 1997;
$2,466,000 in 1998; $1,458,000 in 1999; $1,221,000 in 2000; $727,000 in 2001;
and $5,242,000 in later years.
The company is involved in several legal proceedings and claims which have
arisen in the ordinary course of its business. These actions, when ultimately
concluded and settled, will not, in the opinion of management, have a material
adverse effect upon the financial position, results of operations or liquidity
of the company.
The company has outstanding capital expenditure commitments of $1,521,000 as
of April 28, 1996.
12 Stock Option Plans
The company has a stock option plan under which options to purchase common stock
may be granted to officers, directors and key employees. At April 28, 1996,
984,187 shares of common stock were authorized for issuance under the plan.
Options are granted under the plan at an option price not less than fair market
value at the date of grant. Options are generally exercisable one year after the
date of grant and generally expire beginning ten years after the date of grant.
At April 28, 1996, 371,437 shares were exercisable and 540,750 shares were
available for future grants. At April 30, 1995, 369,721 shares were exercisable
and 614,000 shares were available for future grants.
Stock option activity under this plan is summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES NUMBER OF SHARES NUMBER OF SHARES OUTSTANDING OPTION PRICE
GRANTED CANCELLED/EXPIRED EXERCISED AT YEAR-END PER SHARE
<C> <C> <C> <C> <C> <C>
1994 98,269 0 (288,855) 385,884 $2.82-$14.03
1995 97,250 0 (27,413) 455,721 $2.82-$14.03
1996 83,250 (10,000) (85,534) 443,437 $2.82-$14.03
</TABLE>
During fiscal 1995, the company adopted a performance-based stock option plan
which provided for the one-time grant to officers and certain senior managers of
options to purchase 121,000 shares of the company's common stock at $.05 (par
value) per share. Coincident with the adoption of this plan, the company's 1993
stock option plan was amended to reduce the number of shares issuable under that
plan by 121,000 shares. Options under the plan are exercisable the earlier of
January 1, 2003 or approximately 45 days after the end of fiscal 1997 if the
company achieves an annual compound rate of growth in its primary earnings per
share of 17% during the three-year period ending April 28, 1997. At April 28,
1996, 114,000 options were outstanding.
13 Defined Contribution Plan
The company has a defined contribution plan which covers substantially all
employees and provides for participant contributions on a pre-tax basis and
discretionary matching contributions by the company which are determined
annually. Company contributions to the plan were $791,000 in 1996; $771,000 in
1995; and $574,000 in 1994.
19
<PAGE>
14 International Sales
International sales, of which 90% were denominated in U.S. dollars, accounted
for 22% of net sales in 1996, 19% in 1995, and 18% in 1994, and are summarized
by geographic area as follows:
(DOLLARS IN THOUSANDS) 1996 1995 1994
Europe $18,927 19,177 17,334
North America
(excluding USA) 23,528 16,707 12,128
Asia and Pacific Rim 12,124 8,969 5,529
South America 2,753 3,749 1,248
Middle East 15,609 6,081 1,740
All other areas 4,456 3,288 6,059
$77,397 57,971 44,038
15 Related Party Transactions
A director of the company is also an officer and director of a major customer of
the company. The amount of sales to this customer was approximately $27,739,000
in 1996; $20,484,000 in 1995; and $15,464,000 in 1994. The amount due from this
customer at April 28, 1996 was approximately $2,608,000 and at April 30, 1995
was approximately $2,443,000.
A director of the company is also a director of the company's lead bank, an
officer and director of one of the company's factors, and an officer and
director of the lessor of the company's office facilities in High Point. The
amount of factor commissions paid to this factor was approximately $28,000 in
1996; $55,000 in 1995; and $158,000 in 1994, and the amount due from the factor
at April 28, 1996 and April 30, 1995 was $67,000 and $808,000, respectively. The
amount of interest and other fees paid to the bank was approximately $2,580,000
in 1996; $2,039,000 in 1995; and $1,555,000 in 1994, and the loans payable to
the bank and amounts guaranteed through letters of credit by the bank at April
28, 1996 and April 30, 1995 aggregated $48,402,000 and $42,862,000,
respectively. Rent expense for the company's office facilities in High Point was
approximately $421,000 in 1996; $435,000 in 1995; and $427,000 in 1994.
Rents paid to entities owned by certain shareholders and officers of the
company and their immediate families were $680,000 in 1996; $670,000 in 1995;
and $630,000 in 1994.
16 Foreign Exchange Forward Contracts
The company generally enters into foreign exchange forward contracts as a hedge
against its exposure to currency fluctuations on firm commitments to purchase
certain machinery and equipment and raw materials. Machinery and equipment and
raw material purchases hedged by foreign exchange forward contracts are valued
by using the exchange rate of the applicable foreign exchange forward contract.
The company had approximately $1,924,000 and $6,056,000 of outstanding foreign
exchange forward contracts as of April 28, 1996 and April 30, 1995, respectively
(primarily denominated in German marks and Australian shillings). The contracts
outstanding at April 28, 1996 mature at various dates in fiscal 1997. The fair
values of these contracts were $1,850,000 and $6,553,000 at April 28, 1996 and
April 30, 1995, respectively. Fair values were estimated by obtaining quotes
from banks assuming all contracts were purchased on April 28, 1996 and April 30,
1995, respectively.
20
<PAGE>
Report of Independent Auditors
To the Board of Directors and Shareholders of Culp, Inc.:
We have audited the accompanying consolidated balance sheets of Culp, Inc.
and subsidiary as of April 28, 1996 and April 30, 1995, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the years in the three-year period ended April 28, 1996. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Culp, Inc.
and subsidiary as of April 28, 1996 and April 30, 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended April 28, 1996, in conformity with generally accepted accounting
principles.
(signature of KPMG Peat Marwick LLP appears here)
Greensboro, North Carolina
May 29, 1996
21
<PAGE>
Management's Responsibility
For Financial Statements
The management of Culp, Inc. is responsible for the accuracy and consistency
of all the information contained in this Annual Report, including the financial
statements. These statements have been prepared to conform with generally
accepted accounting principles. The preparation of financial statements and
related data involves estimates and the use of judgment.
Culp, Inc. maintains internal accounting controls designed to provide
reasonable assurance that the financial records are accurate, that the assets of
the company are safeguarded, and that the financial statements present fairly
the financial position and results of operations of the company.
KPMG Peat Marwick LLP, the company's independent auditors, conducts an audit
in accordance with generally accepted auditing standards and provides an opinion
on the financial statements prepared by management. Their report for 1996
appears on the preceding page.
The Audit Committee of the Board of Directors reviews the scope of the audit
and the findings of the independent auditors. The internal auditor and the
independent auditors meet with the Audit Committee to discuss audit and
financial reporting issues. The Committee also reviews the company's principal
accounting policies, significant internal accounting controls, the Annual Report
and annual SEC filings (Form 10-K and Proxy Statement).
(signature of Robert G. Culp, III appears here)
Robert G. Culp, III
Chairman and Chief Executive Officer
(signature of Franklin N. Saxon appears here)
Franklin N. Saxon
Senior Vice President and Chief Financial Officer
May 29, 1996
RETURN ON AVERAGE TOTAL CAPITAL
(bar chart appears here, plot points are below)
92 93 94 95 96
6.0% 7.4% 9.2% 9.6% 9.5%
CAPITAL EXPENDITURES
(bar chart appears here, plot points are below)
92 93 94 95 96
$12,396 $11,938 $16,764 $18,058 $14,385
CAPITAL EXPENDITURES AS A PERCENT OF CASH FLOWS
(bar chart appears here, plot points are below)
92 93 94 95 96
126.7% 101.8% 95.1% 78.4% 54.7%
INTERNATIONAL SALES
(bar chart appears here, plot points are below)
92 93 94 95 96
$37,913 $41,471 $44,038 $57,971 $77,397
22
<PAGE>
Management's Discussion & Analysis
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.
GENERAL--The company's business, which is linked to the demand for upholstery
fabrics and mattress ticking, is cyclical in nature and can be significantly
affected by changes in overall economic conditions. The company believes the key
economic indicators influencing demand for its products are housing starts,
sales of existing homes, the level of consumer confidence, population
demographics, trends in disposable income and prevailing interest rates for home
mortgages. Industry-wide demand for upholstery fabrics and mattress ticking is
directly determined by consumer purchases of upholstered furniture and bedding
(mattresses and box springs). Although the majority of the company's sales
continues to be derived from sales to U.S.-based manufacturers, international
sales are increasing as a percentage of total shipments. The company believes
that most of its upholstery fabrics and mattress ticking sold internationally is
used in the manufacture of furniture and bedding which is marketed outside the
United States.
OVERVIEW--For the fiscal year ended April 28, 1996, net sales were $351.7
million, up 14% from $308.0 million in fiscal 1995. For the year, sales of
upholstery fabrics increased 11% and accounted for 81% of the company's net
sales. Sales of mattress ticking, including sales for Rayonese, contributed the
balance of net sales and rose 29% from the prior year. The gain in sales
reflected higher shipments of upholstery fabrics and mattress ticking to
U.S.-based manufacturers as well as increased international shipments.
principally of upholstery fabrics. Net income for fiscal 1996 increased to $11.0
million, or $0.98 per share, up from $9.8 million, or $0.87 per share, for
fiscal 1995. The company's business ended fiscal 1996 on a generally strong note
with a 19.6% increase in sales in the fourth quarter. Although the pace of
incoming orders remains positive, there are conflicting projections about the
economy and interest rates over the remainder of the company's fiscal 1997 year.
The company's managerial focus continues to be extending the longer term gains
realized in market share and corporate profitability.
RECENT ACQUISITIONS--On March 6, 1995, the company completed the acquisition of
Rayonese Textile Inc. ("Rayonese"). The transaction was valued at approximately
$10.5 million and included the purchase of 100% of the common stock of Rayonese
and the assumption of that company'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. See also
footnote 2 to the Consolidated Financial Statements.
As of November 1, 1993, the company completed the purchase of the upholstery
fabric business operating as Rossville Mills, Chromatex, and Rossville Velours.
The transaction was valued at $39.3 million and involved the purchase of assets
for cash and the assumption of certain liabilities related to the business. The
assets acquired are principally located in Rossville, Georgia and West Hazelton,
Pennsylvania. The acquisition is described in more detail elsewhere in this
report and in the company's filings with the Securities and Exchange Commission
on form 8-K filed November 16, 1993, and amendments to that filing on Form 8-K/A
filed January 15, 1994, and July 15, 1994. See also footnote 2 to the
consolidated financial statements.
ANALYSIS OF OPERATIONS--The table below sets forth certain items in the
Consolidated Statements of Income as a percentage of net sales. Income taxes are
expressed as a percentage of income before income taxes.
1996 1995 1994
Net sales 100.0% 100.0% 100.0%
Cost of sales 82.2 82.2 82.6
Gross profit 17.8 17.8 17.4
Selling, general and administrative
expenses 11.1 10.9 11.4
Income from operations 6.7 6.9 6.0
Interest expense 1.5 1.5 1.0
Interest income 0.0 0.0 0.0
Other expense 0.3 0.4 0.1
Income before income taxes 4.9 5.0 4.9
Income taxes (*) 36.5 37.0 36.0
Net income 3.1% 3.2% 3.1%
(*) Calculated as a percent of income before income taxes
FISCAL 1996 COMPARED WITH FISCAL 1995--The following table sets forth the
company's sales divided into various categories, including in each case the
percentage change in the category's sales from fiscal 1995 to fiscal 1996. The
first major division is between the company's major product categories,
Upholstery Fabrics and Mattress Ticking. Additionally, sales are broken down by
the company's four business units: Culp Textures, Rossville/Chromatex and
Velvets/Prints, which produce upholstery fabrics, and Culp Home Fashions, which
produces primarily mattress ticking.
(DOLLARS IN THOUSANDS) AMOUNTS PERCENT
PRODUCT CATEGORY/BUSINESS UNIT 1996 1995 CHANGE
Upholstery Fabrics
Culp Textures $ 84,384 85 125 (0.9)%
Rossville/Chromatex 74,203 63,765 16.4 %
158,587 148,890 6.5 %
Velvets/Prints 125,70 106,803 17.7 %
284,28 255,693 11.2 %
Mattress Ticking
Culp Home Fashions 67,379 52,333 28.8 %
$351,667 308,026 14.2 %
23
<PAGE>
The company's sales of upholstery fabrics increased $28.6 million, or 11.2%.
Sales from the Rossville/Chromatex and Velvets/Prints business units were up
significantly from last year while sales of the Culp Textures business unit were
down slightly. The gain of $15.0 million in sales of mattress ticking reflected
higher shipments to existing accounts and the additional sales from Rayonese.
Sales of mattress ticking for fiscal 1996 included $7.7 million from Rayonese
which was acquired on March 6, 1995. Rayonese contributed $1.4 million to sales
for the portion of fiscal 1995 in which it was included in the company's
results. International sales, consisting primarily of upholstery fabrics,
increased to $77.4 million, up 34% from fiscal 1995. International shipments
accounted for 22% of the company's sales for fiscal 1996, up from 19% in fiscal
1995. The base of the company's international customers continued to broaden,
with sales to over 50 countries during fiscal 1996.
Gross profit for fiscal 1996 increased by $7.9 million and remained constant
as a percentage of net sales at 17.8%. The cost of most raw materials generally
rose throughout fiscal 1996, and the company was unable to offset very much of
the impact of these increases through higher prices. During the latter part of
the year, the company began experiencing some easing in the rate of increase in
the cost of raw materials. A continuation of this trend could help the company's
profitability in future periods.
Selling, general and administrative expenses increased as a percentage of
net sales for fiscal 1996. Although the company is continuing to emphasize
cost-containment programs, planned increases in expenses related to the design
of new fabrics and higher selling commissions related to international sales led
to the higher ratio of expenses to net sales.
Interest expense for fiscal 1996 rose 12.7% to $5.3 million. The increase
principally reflected additional borrowings related to funding the acquisition
of Rayonese, capital expenditures and an increased level of working capital
needed to support increased sales. The company experienced generally lower
prevailing interest rates during fiscal 1996. The effective tax rate for fiscal
1996 decreased slightly to 36.5% compared with 37.0% in fiscal 1995.
FISCAL 1995 COMPARED WITH FISCAL 1994--The following table sets forth the
company's sales divided into various categories, including in each case the
percentage change in the category's sales from fiscal 1994 to fiscal 1995. The
first major division is between the company's major product categories,
Upholstery Fabrics and Mattress Ticking. Additionally, sales are broken down by
the company's four business units: Culp Textures, Rossville/Chromatex and
Velvets/Prints, which produce upholstery fabrics, and Culp Home Fashions, which
produces primarily mattress ticking.
(DOLLARS IN THOUSANDS) AMOUNTS PERCENT
PRODUCT CATEGORY/BUSINESS UNIT 1995 1994 CHANGE
Upholstery Fabrics
Culp Textures $ 85,125 78,317 8.7 %
Rossville/Chromatex 63,76 531,047 N/A
148,890 109,364 36.1 %
Velvets/Prints 106,80 97,036 10.1 %
255,69 206,400 23.9%
Mattress Ticking
Culp Home Fashions 52,333 38,649 35.4 %
$308,026 245,049 25.7 %
The increase of $49.3 million in upholstery fabrics was attributable
primarily to the incremental sales of $32.8 million contributed by
Rossville/Chromatex acquired on November 1, 1993. Excluding that contribution,
the company's sales of upholstery fabrics increased $16.5 million, or 8.0%.
Shipments of each business unit within upholstery fabrics were up for the year.
The sales gain in mattress ticking primarily reflected higher shipments to
existing accounts and, to a lesser degree, to the success of programs to broaden
the customer base. Sales of mattress ticking for fiscal 1995 included $1.4
million from Rayonese, which was acquired on March 6, 1995. International sales,
consisting primarily of upholstery fabrics, increased to $58.0 million, up 32%
from fiscal 1994. This category of sales represented 19% of total sales in
fiscal 1995 and 18% of total sales in fiscal 1994.
Gross profit for fiscal 1995 increased both in absolute dollars and as a
percentage of net sales. The Rossville/Chromatex and Culp Home Fashions business
units contributed significantly to those gains. Culp Textures and Velvets/Prints
were up, although not as significantly. The company experienced increased raw
material prices during fiscal 1995 which were not passed along to customers
through price increases. Selling, general and administrative expenses declined
as a percentage of net sales for fiscal 1995.
Interest expense for fiscal 1995 increased 88% to $4.7 million. The increase
principally reflected the full-year inclusion of the bank borrowings and
financing provided by the seller related to the acquisition of
Rossville/Chromatex and increased capital expenditures. Significantly higher
prevailing interest rates also contributed to the increase in interest expense
for the year.
Other expense for fiscal 1995 increased to $1.1 million compared with
$350,000 in fiscal 1994. The principal factors contributing to the increased
expense were amortization of goodwill related to the Rossville/Chromatex
acquisition and to higher debt issue costs.
The effective tax rate for fiscal 1995 increased to 37.0% compared with
36.0% in fiscal 1994. The increase was primarily due to the significantly higher
level of pretax income for fiscal 1995.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES--The company maintained a sound financial
position during fiscal 1996. Funded debt (which includes long-and short-term
debt less restricted investments) increased 5.3% to $76.8 million at the close
of fiscal 1996, up from $72.9 million a year earlier. As a percentage of total
capital (funded debt plus shareholders' equity), the company's debt declined to
48.5% as of April 28, 1996 compared with 50.5% as of April 30, 1995. The
company's current ratio at the close of fiscal 1996 increased to 2.2 compared
with 1.7 a year earlier. Shareholders' equity increased 14.1% to $81.4 million
as of April 28, 1996 compared with $71.4 million as of April 30, 1995.
Cash flows from operating activities totaled $15.7 million for fiscal 1996.
The primary factor contributing to operating cash flows was cash from earnings
(net income plus depreciation, amortization, and deferred income taxes) of $26.3
million. An increase of $7.8 million in accounts receivable and $1.6 million in
inventories offset a portion of these sources of operating cash flows. The funds
from operations and financing activities were used to fund capital expenditures
for fiscal 1996 of $14.4 million compared with $18.1 million for fiscal 1995.
The company's borrowings are through financing arrangements with two banks
that provide for a $36.0 million term loan and a $33.5 million revolving credit
facility and letters of credit on its IRB's. As of April 28, 1996, the company
had $10.2 million in borrowings available under the revolving credit facility.
In April 1996, the company amended its loan agreements to provide for certain
less stringent financial covenants including the provision for all borrowings
under the agreement to be unsecured.
The company's Board of Directors has approved a capital expenditure budget
of $16.5 million for fiscal 1997. The company believes that cash flows from
operations and funds available under existing credit facilities and new IRB's,
where available, will be sufficient to fund capital expenditures and working
capital requirements during fiscal 1997.
At April 28, 1996, the company had five interest rate swap agreements with
two banks to reduce its exposure to floating interest rates on a portion of its
variable rate borrowings. The effect of these contracts is to "fix" the interest
rate payable on approximately 43% of the company's bank borrowings at a weighted
average rate of 7.1%. The company also enters into foreign exchange forward
contracts to hedge against currency fluctuations with respect to firm
commitments to purchase machinery, equipment and certain raw materials when
those commitments are denominated in foreign currencies. See footnotes 10 and 16
to the company's consolidated financial statements.
NEW ACCOUNTING PRONOUNCEMENTS--The Financial Accounting Standards Board has
issued Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," which permits a change from the intrinsic value
based method of accounting for stock options (Accounting Principles Board
Opinion No. 25) to a fair value based method for employee stock option and
similar equity investments.
As an alternative, the Statement allows the continued use of the intrinsic
value based method accompanied with pro forma disclosures of the fair value
based method. The company plans to adopt this alternative.
Other than the disclosure required by SFAS No. 123, the implementation of
new accounting standards will not have a material impact on the company's
financial statements in 1997.
INFLATION--The company has experienced higher costs of raw materials over the
past two fiscal years. Other operating expenses such as for manufacturing
supplies and spare parts also rose over this period, putting pressure on the
company's profitability. Competitive conditions did not allow the company to
offset very much of these increases through higher prices for its products. Some
easing in the cost of raw materials has begun to occur.
FORWARD-LOOKING INFORMATION--This annual report to shareholders and the
company's annual report on Form 10-K contain forward-looking statements that are
inherently subject to risks and uncertainties. Factors that could influence the
matters discussed in the forward-looking statements include the level of housing
starts and existing home sales, consumer confidence, and trends in disposable
income. Decreases in these economic indicators could have a negative effect on
the company's business and its prospects. Likewise, increases in interest rates,
particularly home mortgage rates, and increases in consumer debt or the general
rate of inflation, could affect the company adversely.
EBITDA
MARGIN
(Bar chart appears here, plot points are below)
92 93 94 95 96
6.6% 7.4% 9.5% 10.4% 10.1%
CASH DIVIDENDS PER SHARE
(Bar chart appears here, plot points are below)
92 93 94 95 96
$0.049 $0.064 $0.080 $0.100 $0.110
25
<PAGE>
Selected
Quarterly Data
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL FISCAL FISCAL FISCAL
1996 1996 1996 1996 1995 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS) 4TH QUARTER 3RD QUARTER 2ND QUARTER 1ST QUARTER 4TH QUARTER 3RD QUARTER
INCOME STATEMENT DATA (4) (5)
<S> <C> <C> <C> <C> <C> <C>
net sales $ 102,162 86,476 90,672 72,357 85,441 77,791
cost of sales 82,957 71,447 74,565 60,159 69,039 64,785
gross profit 19,205 15,029 16,107 12,198 16,402 13,006
SG & A expenses 11,300 9,639 9,675 8,454 9,205 8,295
income from operations 7,905 5,390 6,432 3,744 7,197 4,711
interest expense 1,352 1,279 1,388 1,297 1,374 1,120
interest income (92) 0 0 0 (3) (14)
other expense 365 266 219 107 470 245
income before income taxes 6,280 3,845 4,825 2,340 5,356 3,360
income taxes 2,230 1,430 1,825 825 1,931 1,260
net income 4,050 2,415 3,000 1,515 3,425 2,100
EBITDA (6) $ 10,814 8,450 9,494 6,852 9,917 7,523
depreciation 3,070 3,140 3,071 3,067 3,020 2,897
cash dividends 310 309 309 308 280 280
weighted average shares outstanding 11,284 11,211 11,211 11,207 11,205 11,205
PER SHARE DATA (3) (4) (5)
net income $ 0.36 0.22 0.27 0.14 0.31 0.19
cash dividends 0.0275 0.0275 0.0275 0.0275 0.025 0.025
book value 7.21 6.89 6.72 6.48 6.37 6.09
BALANCE SHEET DATA (4) (5)
working capital $ 56,953 52,266 46,373 45,069 38,612 46,399
property, plant and equipment 76,961 73,356 73,876 75,744 75,805 69,373
total assets 211,644 197,704 200,404 192,725 194,999 179,138
capital expenditures 6,675 2,620 2,084 3,006 4,452 3,422
long-term debt 74,941 68,112 65,137 67,662 62,187 65,711
funded debt (1) 76,791 79,667 76,692 79,217 72,947 70,209
shareholders' equity 81,446 77,623 75,351 72,624 71,396 68,251
capital employed (7) 158,237 157,290 152,043 151,841 144,343 138,460
RATIOS & OTHER DATA (4) (5)
gross profit margin 18.8% 17.4% 17.8% 16.9% 19.2% 16.7%
operating income margin 7.7 6.2 7.1 5.2 8.4 6.1
net profit margin 4.0 2.8 3.3 2.1 4.0 2.7
EBITDA margin 10.6 9.8 10.5 9.5 11.6 9.7
effective income tax rate 35.5 37.2 37.8 35.3 36.1 37.5
funded debt-to-total capital ratio (1) 48.5 50.6 50.4 52.2 50.5 50.7
working capital turnover 5.3 5.3 5.4 5.4 5.6 5.5
days sales in receivables 46 43 47 45 47 44
inventory turnover 6.8 5.7 6.0 5.1 6.1 6.0
STOCK DATA (3)
stock price
high $ 13.25 11.50 11.00 10.00 9.75 10.50
low 10.00 9.50 9.00 7.75 8.50 8.75
close 13.00 10.00 9.75 7.75 9.75 9.50
P/E ratio (2)
high 13.5 12.2 12.1 11.2 11.2 12.3
low 10.2 10.1 9.9 8.7 9.7 10.3
trading volume (shares) 1,325 1,142 1,011 1,454 1,617 1,886
<CAPTION>
FISCAL FISCAL
1995 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS) 2ND QUARTER 1ST QUARTER
INCOME STATEMENT DATA (4) (5)
<S> <C> <C>
net sales 78,445 66,349
cost of sales 64,272 55,249
gross profit 14,173 11,100
SG & A expenses 8,363 7,569
income from operations 5,810 3,531
interest expense 1,144 1,077
interest income (24) (23)
other expense 190 177
income before income taxes 4,500 2,300
income taxes 1,700 850
net income 2,800 1,450
EBITDA (6) 8,500 6,112
depreciation 2,718 2,622
cash dividends 280 280
weighted average shares outstanding 11,205 11,198
PER SHARE DATA (3) (4) (5)
net income 0.25 0.13
cash dividends 0.025 0.025
book value 5.93 5.70
BALANCE SHEET DATA (4) (5)
working capital 42,964 43,164
property, plant and equipment 68,848 66,535
total assets 178,404 164,585
capital expenditures 5,031 5,153
long-term debt 63,462 64,187
funded debt (1) 67,846 66,493
shareholders' equity 66,431 63,912
capital employed (7) 134,277 130,405
RATIOS & OTHER DATA (4) (5)
gross profit margin 18.1% 16.7%
operating income margin 7.4 5.3
net profit margin 3.6 2.2
EBITDA margin 10.8 9.2
effective income tax rate 37.8 37.0
funded debt-to-total capital ratio (1) 50.5 51.0
working capital turnover 5.8 5.7
days sales in receivables 50 42
inventory turnover 6.2 5.8
STOCK DATA (3)
stock price
high 9.25 12.50
low 7.50 7.25
close 8.75 8.75
P/E ratio (2)
high 11.2 17.0
low 9.1 9.8
trading volume (shares) 3,702 2,956
</TABLE>
(1) FUNDED DEBT INCLUDES LONG- AND SHORT-TERM DEBT, LESS RESTRICTED INVESTMENTS.
(2) P/E RATIOS BASED ON TRAILING 12-MONTH INCOME PER SHARE.
(3) SHARE AND PER SHARE DATA ADJUSTED FOR STOCK SPLITS, EXCEPT FOR TRADING
VOLUME.
(4) ROSSVILLE/CHROMATEX INCLUDED IN CONSOLIDATED RESULTS FROM ITS NOVEMBER 1,
1993 ACQUISITION BY CULP.
(5) RAYONESE INCLUDED IN CONSOLIDATED RESULTS FROM ITS MARCH 6, 1995 ACQUISITION
BY CULP.
(6) EBITDA REPRESENTS EARNINGS BEFORE INTEREST, INCOME TAXES, DEPRECIATION AND
AMORTIZATION.
(7) CAPITAL EMPLOYED INCLUDES FUNDED DEBT AND SHAREHOLDERS' EQUITY.
26
<PAGE>
Selected
Annual Data
<TABLE>
<CAPTION>
PERCENT FIVE-YEAR
FISCAL FISCAL FISCAL FISCAL FISCAL CHANGE GROWTH
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS) 1996 1995 1994 1993 1992 1996/1995 RATE
INCOME STATEMENT DATA (4) (5)
<S> <C> <C> <C> <C> <C> <C> <C>
net sales $ 351,667 308,026 245,049 200,783 191,311 14.2% 15.1%
cost of sales 289,129 253,345 202,426 168,599 161,204 14.1 14.5
gross profit 62,538 54,681 42,623 32,184 30,107 14.4 18.2
S G & A expenses 39,068 33,432 27,858 24,203 24,597 16.9 12.2
income from operations 23,470 21,249 14,765 7,981 5,51 10.5 35.9
interest expense 5,316 4,715 2,515 1,409 1,421 12.7 27.9
interest income (92) (64) (79) (29) (136) 43.8 --
other expense 956 1,082 350 1 288 (11.6) 26.8
income before income taxes 17,290 15,516 11,979 6,600 3,937 11.4 35.8
income taxes 6,310 5,741 4,314 2,099 964 9.9 49.4
net income 10,980 9,775 7,665 4,501 2,973 12.3 30.5
EBITDA(6) $ 35,610 32,052 23,256 14,933 12,562 11.1 26.0
depreciation 12,348 11,257 8,497 6,724 7,085 9.7 14.8
cash dividends 1,236 1,120 887 696 533 10.4 20.5
weighted average shares outstanding 11,234 11,203 11,076 10,875 10,827 0.3 0.8
PER SHARE DATA (3) (4) (5)
net income $ 0.98 0.87 0.69 0.41 0.27 12.6% 29.4%
cash dividends 0.11 0.10 0.08 0.064 0.049 10.0 19.6
book value 7.21 6.37 5.60 5.01 4.66 13.2 10.1
BALANCE SHEET DATA (4) (5)
working capital $ 56,953 38,612 37,949 34,942 26,665 47.5% 11.9%
property, plant and equipment 76,961 75,805 64,004 44,529 39,315 1.5 17.5
total assets 211,644 194,999 164,948 106,548 93,195 8.5 19.0
capital expenditures 14,385 18,058 16,764 11,938 12,396 (20.3) 5.2
businesses acquired 0 10,455 38,205 0 0 0 --
long-term debt 74,941 62,187 58,512 23,147 14,082 20.5 34.8
funded debt (1) 76,791 72,947 58,639 26,582 16,817 5.3 33.0
shareholders' equity 81,446 71,396 62,649 54,521 50,651 14.1 11.2
capital employed (7) 158,237 144,343 121,288 81,103 67,468 9.6 19.0
RATIOS & OTHER DATA (4) (5)
gross profit margin 17.8% 17.8% 17.4% 16.0% 15.7%
operating income margin 6.7 6.9 6.0 4.0 2.9
net profit margin 3.1 3.2 3.1 2.2 1.6
EBITDA margin 10.1 10.4 9.5 7.4 6.6
effective income tax rate 36.5 37.0 36.0 31.8 24.5
funded debt-to-total capital
ratio (1) 48.5 50.5 48.3 32.8 24.9
return on average total capital 9.5 9.6 9.2 7.4 6.0
return on average equity 14.4 14.6 13.1 8.6 6.0
working capital turnover 5.3 5.6 5.7 5.4 5.7
days sales in receivables 46 47 43 43 43
inventory turnover 6.0 6.0 6.3 6.4 7.0
STOCK DATA (3)
stock price
high $ 13.25 12.50 17.33 7.33 5.59
low 7.75 7.25 5.67 3.60 3.28
close 13.00 9.75 11.63 7.20 5.23
P/E ratio (2)
high 13.5 14.3 25.1 17.7 20.4
low 7.9 8.3 8.2 8.7 11.9
trading volume (shares) 4,932 10,161 11,178 2,646 1,497
</TABLE>
(1) - (7) SEE SELECTED QUARTERLY DATA TABLE FOOTNOTE.
27
<PAGE>
Corporate
Directory
Robert G. Culp, III
Chairman of the Board and Chief Executive Officer;
Director (E,N)
Howard L. Dunn, Jr.
President and Chief Operating Officer; Director (E)
Andrew W. Adams
Senior Vice President of Corporate Development; Director (E)
Franklin N. Saxon
Senior Vice President and Chief Financial Officer, Treasurer, Secretary;
Director (E)
Kenneth M. Ludwig
Senior Vice President-Human Resources; Assistant Secretary
Baxter P. Freeze, Sr.
Director (A,C); Retired President, Chairman of the Board,
Commonwealth Hosiery Mills, Inc., Randleman, NC
Earl M. Honeycutt
Director (A,C); Retired President, Amoco Fabrics and Fibers Company,
Atlanta, GA
Bland W. Worley
Director (A,C,N); Retired Chairman of the Board and Chief Executive
Officer, BarclaysAmericanCorporation,
Charlotte, NC
Patrick H. Norton
Director (N); Senior Vice President, Sales and Marketing;
La-Z-Boy Chair Company, Monroe, MI
Judith C. Walker
Director
Charlotte, NC
Earl N. Phillips, Jr.
Director; Co-Founder and President, First Factors Corporation, High
Point, NC
BOARD COMMITTEES:
A-AUDIT
C-COMPENSATION
E-EXECUTIVE
N-NOMINATING
Shareholder
Information
TRANSFER AGENT
Wachovia Bank of North Carolina, N.A.
Corporate Trust Department
P. O. Box 3001
Winston-Salem, North Carolina 27102
(800) 633-4236
GENERAL COUNSEL
Robinson, Bradshaw & Hinson, PA
Charlotte, NC 28246
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
Greensboro, NC 27401
MARKET MAKERS
Herzog, Heine, Geduld, Inc.
Interstate/Johnson Lane
Mayer & Schweitzer, Inc.
Nash Weiss/Div. of Shatkin Inv.
Neuberger & Berman
Raymond, James & Associates
Robinson-Humphrey Co., Inc.
Sherwood Securities Corp.
Troster Singer Corp.
Wheat First Securities, Inc.
STOCK LISTING
Culp, Inc. common stock is traded on the Nasdaq Stock Market (National Market)
under the symbol CULP. As of April 28, 1996, the company had approximately 2,800
shareholders based on the number of holders of record and an estimate of the
number of individual participants represented by security position listings.
CORPORATE HEADQUARTERS
Culp, Inc.
101 South Main Street
Post Office Box 2686
High Point, NC 27261
(910) 889-5161
FORM 10K, OTHER INVESTOR INFORMATION
If you would like a copy of the Form 10K (Annual Report filed with the
Securities and Exchange Commission) or other information about Culp, please
contact Frank Saxon at the address listed above or at telephone number (910)
888-6266.
ANNUAL MEETING
Shareholders are cordially invited to attend the
company's annual meeting to be held
Tuesday, September 17, 1996 at 9:00 AM in
the Radisson Hotel,
135 South Main Street,
High Point,
North Carolina.
28
<PAGE>
(Full page photo of fabric appears here)
<PAGE>
CULP, INC.
101 SOUTH MAIN STREET
POST OFFICE BOX 2686
HIGH POINT
NORTH CAROLINA 27261
(910) 889-5161
PHOTOGRAPHY: STEVE KNIGHT; OFFICE CHAIR PHOTO COURTESY OF MILLER DESK INC.
EXHIBIT 22
LIST OF SUBSIDIARIES OF CULP, INC.
GUILFORD PRINTERS, INC.
INCORPORATED IN NORTH CAROLINA
CULP INTERNATIONAL, INC.
INCORPORATED IN VIRGIN ISLANDS
3096726 CANADA INC.
INCORPORATED UNDER LAWS OF CANADA
RAYONESE TEXTILE INC.
INCORPORATED UNDER LAWS OF CANADA
EXHIBIT 24(a)
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Culp, Inc.:
We consent to incorporation by reference in the registration statement
numbers 33-13310, 33-37027, 33-80206 and 33-62843 on Form S-8 of Culp, Inc.
of our report dated May 29, 1996, relating to the consolidated balance sheets
of Culp, Inc. and subsidiary as of April 28, 1996 and April 30, 1995, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the years in the three-year period ended April 28, 1996, which
report is incorporated by reference in the April 28, 1996 annual report on
Form 10-K of Culp, Inc.
KPMG PEAT MARWICK LLP
Greensboro, North Carolina
July 24, 1996
EXHIBIT 25(a)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of CULP, INC., a
North Carolina corporation, hereby constitutes and appoints FRANKLIN N. SAXON
the true and lawful agent and attorney-in-fact to sign for the undersigned as a
director of the Corporation the Corporation's Annual Report on Form 10-K for the
year ended April 28, 1996 to be filed with the Securities and Exchange
Commission, Washington, D. C., under the Securities Exchange Act of 1934, as
amended, and to sign any amendment or amendments to such Annual Report, hereby
ratifying and confirming all acts taken by such agent and attorney-in-fact, as
herein authorized.
/s/ Andrew W. Adams
Andrew W. Adams
Date: June 14,1996
Exhibit 25(b)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of CULP, INC.,
a North Carolina corporation, hereby constitutes and appoints FRANKLIN N. SAXON
the true and lawful agent and attorney-in-fact to sign for the undersigned as a
director of the Corporation the Corporation's Annual Report on Form 10-K for the
year ended April 28, 1996 to be filed with the Securities and Exchange
Commission, Washington, D. C., under the Securities Exchange Act of 1934, as
amended, and to sign any amendment or amendments to such Annual Report, hereby
ratifying and confirming all acts taken by such agent and attorney-in-fact, as
herein authorized.
/s/ Judith C. Walker
Judith C. Walker
Date: June 16, 1996
Exhibit 25(c)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of CULP, INC.,
a North Carolina corporation, hereby constitutes and appoints FRANKLIN N. SAXON
the true and lawful agent and attorney-in-fact to sign for the undersigned as a
director of the Corporation the Corporation's Annual Report on Form 10-K for the
year ended April 28, 1996 to be filed with the Securities and Exchange
Commission, Washington, D. C., under the Securities Exchange Act of 1934, as
amended, and to sign any amendment or amendments to such Annual Report, hereby
ratifying and confirming all acts taken by such agent and attorney-in-fact, as
herein authorized.
/s/ Howard L. Dunn, Jr.
Howard L. Dunn, Jr.
Date: June 16, 1996
Exhibit 25(d)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of CULP, INC.,
a North Carolina corporation, hereby constitutes and appoints FRANKLIN N. SAXON
the true and lawful agent and attorney-in-fact to sign for the undersigned as a
director of the Corporation the Corporation's Annual Report on Form 10-K for the
year ended April 28, 1996 to be filed with the Securities and Exchange
Commission, Washington, D. C., under the Securities Exchange Act of 1934, as
amended, and to sign any amendment or amendments to such Annual Report, hereby
ratifying and confirming all acts taken by such agent and attorney-in-fact, as
herein authorized.
/s/ Baxter P. Freeze
Baxter P. Freeze
Date: June 18, 1996
Exhibit 25(e)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of CULP, INC.,
a North Carolina corporation, hereby constitutes and appoints FRANKLIN N. SAXON
the true and lawful agent and attorney-in-fact to sign for the undersigned as a
director of the Corporation the Corporation's Annual Report on Form 10-K for the
year ended April 28, 1996 to be filed with the Securities and Exchange
Commission, Washington, D. C., under the Securities Exchange Act of 1934, as
amended, and to sign any amendment or amendments to such Annual Report, hereby
ratifying and confirming all acts taken by such agent and attorney-in-fact, as
herein authorized.
/s/ Earl M. Honeycutt
Earl M. Honeycutt
Date: June 16, 1996
Exhibit 25(f)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of CULP, INC.,
a North Carolina corporation, hereby constitutes and appoints FRANKLIN N. SAXON
the true and lawful agent and attorney-in-fact to sign for the undersigned as a
director of the Corporation the Corporation's Annual Report on Form 10-K for
the year ended April 28, 1996 to be filed with the Securities and Exchange
Commission, Washington, D. C., under the Securities Exchange Act of 1934, as
amended, and to sign any amendment or amendments to such Annual Report, hereby
ratifying and confirming all acts taken by such agent and attorney-in-fact, as
herein authorized.
/s/ Patrick H. Norton
Patrick H. Norton
Date: June 17, 1996
Exhibit 25(g)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of CULP, INC.,
a North Carolina corporation, hereby constitutes and appoints FRANKLIN N. SAXON
the true and lawful agent and attorney-in-fact to sign for the undersigned as a
director of the Corporation the Corporation's Annual Report on Form 10-K for the
year ended April 28, 1996 to be filed with the Securities and Exchange
Commission, Washington, D. C., under the Securities Exchange Act of 1934, as
amended, and to sign any amendment or amendments to such Annual Report, hereby
ratifying and confirming all acts taken by such agent and attorney-in-fact, as
herein authorized.
/s/ Earl N. Phillips, Jr.
Earl N. Phillips, Jr.
Date: June 17, 1996
Exhibit 25(h)
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned director of CULP, INC.,
a North Carolina corporation, hereby constitutes and appoints FRANKLIN N. SAXON
the true and lawful agent and attorney-in-fact to sign for the undersigned as a
director of the Corporation the Corporation's Annual Report on Form 10-K for the
year ended April 28, 1996 to be filed with the Securities and Exchange
Commission, Washington, D. C., under the Securities Exchange Act of 1934, as
amended, and to sign any amendment or amendments to such Annual Report, hereby
ratifying and confirming all acts taken by such agent and attorney-in-fact, as
herein authorized.
/s/ Bland W. Worley
Bland W. Worley
Date: June 18, 1996
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