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 27, 1997
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
incorporation or other organization) Identification No.)
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.[]
As of July 8, 1997, 12,643,728 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 $165,275,478 based on the closing sales price of
such stock as quoted through the New York Stock Exchange Automated Quotation
System (NYSE), 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 27, 1997 are incorporated by reference into Items 5,6,7 and 8.
PART III
The Company's Proxy Statement dated August 1, 1997 in connection with
its Annual Meeting of Shareholders to be held on September 16, 1997 is
incorporated by reference into Items 10, 11, 12 and 13.
EXHIBITS INDEX BEGINS ON PAGE 26
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CULP, INC.
FORM 10-K REPORT
TABLE OF CONTENTS
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Item No. Page
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PART I
1. Business
General Development.................................................................................4
Business ...........................................................................................4
Business Units .....................................................................................5
Capital Expenditures................................................................................6
Industry Segment....................................................................................7
Industry Overview...................................................................................7
Products............................................................................................8
Manufacturing......................................................................................10
Product Design and Styling.........................................................................11
Distribution.......................................................................................11
Sources and Availability of Raw Materials..........................................................12
Competition........................................................................................12
Environmental and Other Regulations................................................................12
Employees..........................................................................................13
Customers and Sales................................................................................14
Backlog............................................................................................14
2. Properties..............................................................................................15
3. Legal Proceedings.......................................................................................16
4. Submission of Matters to a Vote of Security Holders....................................................16
PART II
5. Market for the Registrant's Common Stock
and Related Stockholder Matters.......................................................................16
6. Selected Financial Data.................................................................................16
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........................................................16
8. Consolidated Financial Statements and Supplementary Data................................................16
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure................................................................17
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PART III
10. Directors and Executive Officers of the
Registrant............................................................................................17
11. Executive Compensation..................................................................................17
12. Security Ownership of Certain
Beneficial Owners and Management......................................................................17
13. Certain Relationships and Related
Transactions..........................................................................................17
PART IV
14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K...............................................................................18
Documents filed as part of this report..................................................................18
Exhibits................................................................................................19
Reports on Form 8-K.....................................................................................24
Financial Statement Schedules...........................................................................24
Signatures .............................................................................................25
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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
(residential, commercial and juvenile) and bedding industries on a worldwide
basis. The Company's executive offices are located in High Point, North
Carolina.. The Company was organized as a North Carolina corporation in 1972.
BUSINESS
Culp believes it is the largest manufacturer and marketer of furniture
upholstery fabrics in the world and is a leading global producer of mattress
fabrics (known as mattress ticking). The Company's fabrics are used principally
in the production of residential and commercial furniture and bedding products,
including sofas, recliners, chairs, loveseats, sectionals, sofa-beds, office
seating, panel systems and mattress sets. Culp markets one of the broadest
product lines in its industry, with a wide range of fabric constructions,
patterns, colors, textures and finishes. This breadth is made possible by Culp's
extensive manufacturing capabilities that include a variety of weaving, printing
and finishing operations and the ability to produce various yarns and unfinished
base fabrics (known as greige goods) used in its products. Culp's staff of over
50 designers uses Computer Aided Design (CAD) systems to develop the Company's
own patterns and styles. Culp's product line currently includes more than 2,000
upholstery fabric patterns and 600 mattress ticking styles. Although Culp
markets fabrics at most price levels, the Company has emphasized fabrics that
have a broad appeal in the "good" and "better" price categories of furniture and
bedding.
Culp markets its products worldwide, with sales to customers in over
fifty (50) countries. The Company's international sales have increased from
$44.0 million in fiscal 1994 to $101.6 million in fiscal 1997. Although
shipments to U.S.-based customers continue to account for most of the Company's
sales, Culp's success in building a global presence has led to an increasing
proportion of sales to international accounts (25.5% of net sales for fiscal
1997). The Company's network of 30 international sales agents represents Culp's
products in major furniture and bedding markets outside the United States.
Culp has eleven (11) manufacturing facilities, with a combined total of
2.3 million square feet, that are located in North Carolina (5), South Carolina
(2), Pennsylvania (2), Georgia (1) and Quebec, Canada (1). The Company's
distribution system is designed to offer customers fast, responsive delivery.
Products are shipped directly to customers from the Company's manufacturing
facilities, as well as from three regional distribution facilities strategically
located in High Point, North Carolina, Los Angeles, California, and Tupelo,
Mississippi, which are areas of high concentration of furniture manufacturing.
In addition, the Company maintains an inventory of upholstery fabrics at a
warehouse facility in Grand Rapids, Michigan to supply large commercial
furniture manufacturers in that area.
Culp's position as a leading global marketer of upholstery fabrics and mattress
ticking has been achieved through internal expansion and strategic acquisitions.
The most recent acquisitions include
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Rossville/Chromatex in fiscal 1994 and Rayonese in fiscal 1995. Each of these
acquisitions has been successfully integrated into the Company's operations and
has contributed to Culp's growth.
BUSINESS UNITS
Culp's organization encompasses four business units: (i) Culp Textures,
(ii) Rossville/Chromatex, (iii) Velvets/Prints and (iv) Culp Home Fashions. Each
of these business units is accorded considerable autonomy and is responsible for
designing, manufacturing and marketing its respective product lines.
Considerable synergies exist among the business units, including the sharing of
common raw materials made internally, such as polypropylene yarns, certain dyed
and spun yarns, greige goods and printed heat-transfer paper. Products
manufactured at one business unit's facility are commonly transferred to another
business unit's facility for additional value-added processing steps. For
example, jacquard greige goods manufactured at Rayonese (part of Culp Home
Fashions) are shipped to a Velvets/Prints' facility where printed fabrics are
produced using various printing and finishing equipment. The following table
sets forth certain information for each of the Company's business units
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CULP'S BUSINESS UNITS
MAJOR FISCAL 1997 PERCENT OF FISCAL
PRODUCT CATEGORY BUSINESS UNIT NET SALES 1997 SALES PRODUCT LINES (BASE CLOTH, IF APPLICABLE)
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Upholstery
Fabrics Culp Textures $88.2 million 22.1% Woven jacquards
Woven dobbies
Rossville/Chromatex $79.5 million 20.0% Woven jacquards
Woven dobbies
Velvets/Prints $156.5 million 39.2% Wet prints (flock)
Heat-transfer prints (jacquard, flock)
Woven velvet
Tufted velvets (woven polyester)
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Mattress Ticking Culp Home Fashions $74.7 million 18.7% Woven jacquards
Heat-transfer prints (jacquard,
knit, sheeting)
Pigment prints (jacquard, knit,
sheeting, non-woven)
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CULP TEXTURES. Culp Textures manufactures and markets jacquard and
dobby woven fabrics used primarily for residential and commercial furniture.
Culp Textures' manufacturing facilities are located in Burlington and Graham,
North Carolina and Pageland, South Carolina. Culp Textures has become
increasingly vertically integrated, complementing its extensive weaving
capabilities with the ability to extrude, dye and texturize yarn. Many of the
designs marketed by Culp Textures feature intricate, complicated patterns such
as floral and abstract designs. Culp Textures accounts for the majority of the
Company's sales to the commercial furniture market. The Company maintains an
inventory at a third-party warehouse in Grand Rapids, Michigan to supply fabrics
marketed by Culp Textures to large commercial furniture manufacturers on a "just
in time" basis.
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ROSSVILLE/CHROMATEX. Rossville/Chromatex was acquired in fiscal 1994
and includes manufacturing facilities in Rossville, Georgia and West Hazelton,
Pennsylvania. This acquisition expanded the Company's capacity for jacquard and
dobby woven fabrics marketed principally for residential furniture. Although
Rossville/Chromatex markets fabrics to many of the same customers served by Culp
Textures, the patterns produced by Rossville/Chromatex have generally featured
more textured and chenille yarns. Rossville/Chromatex has been particularly
successful in spinning its own novelty yarns to produce textured fabrics that
embody "country" patterns.
VELVETS/PRINTS. Velvets/Prints, Culp's largest business unit,
manufactures and markets a broad range of printed and velvet fabrics. These
include wet-printed designs on flock-base fabrics, heat-transfer prints on
jacquard and flock-base fabrics, woven velvets and tufted velvets. These fabrics
typically offer manufacturers richly colored patterns and textured surfaces.
Recent product development improvements in manufacturing processes have
significantly enhanced the quality of printed flock fabrics which are
principally used for residential furniture. These fabrics are also used for
other upholstered products such as baby car seats. These fabrics are
manufactured at Burlington, North Carolina and Anderson, South Carolina, and
will be manufactured at Lumberton, North Carolina when that facility is
operational. A portion of the Company's current capital expenditures are
directed toward expanding its capacity for printed fabrics. The Company's new
wet-printing facility in Lumberton, North Carolina will produce fabrics to be
marketed by the Velvets/Prints business unit. Culp has installed in Burlington
the Company's first flock coating line (which produces flock-base or greige
goods) to further vertically integrate its production of wet-printed flock
fabrics. This operation began production in the fourth quarter of fiscal 1997.
CULP HOME FASHIONS. Culp Home Fashions principally markets mattress
ticking to bedding manufacturers. These fabrics encompass woven jacquard ticking
as well as heat-transfer and pigment-printed ticking on a variety of base
fabrics, including jacquard, knit, poly/cotton sheeting and non-woven materials.
Culp Home Fashions has successfully blended its diverse printing and finishing
capabilities with its access to a variety of base fabrics to offer innovative
designs to bedding manufacturers for mattress products. Printed jacquard fabrics
represent Culp Home Fashions' fastest growing product line, offering customers
better values with designs and textures of more expensive fabrics. Jacquard
greige goods printed by Culp Home Fashions are provided by the business unit's
Rayonese facility and Culp Textures jacquard weaving facility. The expansion of
the Rayonese capacity has been an important factor in the ability of this
business unit to increase its market share. Moreover, the additional Rayonese
capacity has allowed the Company to increase vertical integration by supplying
narrow-width jacquard greige goods to the Velvets/Prints business unit for the
production of printed jacquard upholstery fabrics. Culp Home Fashions'
manufacturing facilities are located in Stokesdale, North Carolina and St.
Jerome, Quebec.
CAPITAL EXPENDITURES
Over the past six fiscal years, the Company has invested over $100
million in capital expenditures to expand its manufacturing capacity, install
more efficient production equipment and vertically integrate its operations.
These expenditures have included, among other things, the installation of narrow
and wide-width weaving machines and additional printing equipment to support the
growth in woven and printed upholstery fabrics and mattress ticking. The Company
spent approximately $27.0 million in capital expenditures during fiscal 1997. A
substantial portion of fiscal 1997's expenditures
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were targeted to expand the Company's printing capacity to support sales growth
in wet-printed flock fabrics and to vertically integrate the production of
unprinted flock greige goods. As a result of expenditures to date, the Company
believes it has been able to support a substantially higher level of sales, as
well as lower its production costs and enhance its overall relative competitive
position.
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 furniture (residential, commercial and juvenile) and bedding
industries on a world-wide basis.
INDUSTRY OVERVIEW
Culp markets products worldwide to manufacturers and distributors that
operate in three principal markets and several specialty markets:
RESIDENTIAL FURNITURE. This market includes upholstered furniture sold
to consumers. Products include sofas, recliners, chairs, loveseats, sectionals
and sofa-beds.
COMMERCIAL FURNITURE. This market includes upholstered office seating
and panel systems sold primarily to be used in offices and institutional
settings.
BEDDING. This market includes mattresses and box springs.
SPECIALTY MARKETS. This category represents several other markets,
including juvenile furniture (baby car seats and baby items), "top of the bed"
(comforters and bedspreads), outdoor furniture, recreational vehicle seating,
automotive aftermarket (slip-on seat covers) and retail fabric stores.
The upholstery fabric manufacturing industry is fragmented. Although
several major firms compete in this market, no one firm is dominant. Conversely,
the mattress ticking industry is concentrated among relatively few large
suppliers. According to Furniture/Today, a leading trade publication, annual
sales of upholstery fabrics in the United States for residential applications
are approximately $2 billion. A recent survey conducted for Culp by an
independent international consulting firm estimated annual sales of upholstery
fabrics outside the United States to be more than $4 billion.
Trends in upholstery fabrics and mattress ticking demand generally
parallel trends in demand for consumer purchases of furniture and bedding.
Factors influencing consumer purchases of home furnishings include the number of
household formations, growth in the general population, the demographic profile
of the population, consumer confidence, employment levels, the amount of
disposable income, consumer debt levels, housing starts and existing home sales.
The long-term trend in U.S. demand for furniture and bedding has been one of
moderate growth, although there have been some occasional, temporary periods of
modest downturns in sales due principally to changes in economic conditions.
The Company believes that demographic trends are supporting long-term
growth in the U.S. residential furniture and bedding industries. In particular,
as "baby boomers" (people born between 1946
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and 1964) mature to the 35-to-64 year age group over the next decade, they will
be reaching their highest earning power. This age group includes the largest
consumers of residential furniture. Furthermore, statistics show that the
average size of new homes has increased in recent years, which generally results
in increased purchases of furnishings per home.
There is an established trend toward consolidation in the furniture
industry at all levels. Furniture/Today has reported that the ten largest U.S.
furniture manufacturers accounted for approximately 38% of the total industry
sales in 1996, up from a 23% share eleven years earlier. This trend is likely to
continue due to several factors, including the need to invest significant
capital to maintain modern manufacturing and distribution facilities and to
supply the furniture needs of increasingly large furniture retailers. The
Company believes that, as this trend continues, opportunities may increasingly
exist for large upholstery fabric manufacturers capable of supplying the product
requirements of large furniture manufacturers on a timely basis.
Although the demand for home furnishings in more developed
international geographic regions such as Western Europe is relatively mature,
major areas such as Eastern Europe, the Middle East and Asia-Pacific are
experiencing significant increases in sales of furniture and home furnishings.
Consumers in these areas are attracted to designs that mirror American tastes,
and U.S.-based manufacturers such as Culp have been able to capitalize on this
preference. Production costs of fabrics involve a relatively low labor
component, which provides an advantage for a Company with modern, efficient
manufacturing equipment and systems. The large size of the furniture and bedding
markets within the United States has led to a fabric manufacturing industry that
features ready access to a broad range of raw materials, large manufacturers
with lower costs resulting from economies of scale and the ready availability of
new designs and patterns. The Company believes that these characteristics enable
Culp to compete effectively in international markets.
PRODUCTS
The Company's products include principally upholstery fabrics and
mattress ticking.
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 1997, 81% in 1996, and 83% in 1995. 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.
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 1997, 19% in 1996,
and 17% in 1995.
The Company has emphasized fabrics and patterns which have broad appeal
at prices generally ranging from $1.20 to $7.00 per yard.
The Company's upholstery fabrics and mattress ticking can each be
broadly grouped under the three main categories of wovens, prints and velvets.
The following table indicates the product lines
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within each of these categories, a brief description of their characteristics
and identification of their principal end-use markets.
CULP FABRIC CATEGORIES
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UPHOLSTERY FABRICS CHARACTERISTICS PRINCIPAL MARKETS
WOVENS:
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Jacquards Elaborate, complex designs such as florals and tapestries in Residential furniture
traditional, transitional and contemporary styles. Woven on Commerical furniture
intricate looms using a wide variety of synthetic and natural
yarns.
Dobbies Geometric designs such as plaids, stripes and solids Residential furniture
in Residential furniture traditional and country Commerical furniture
styles. Woven on less complicated Commercial
furniture looms using a variety of weaving
constructions and primarily synthetic yarns.
PRINTS:
Wet prints Contemporary patterns with deep, rich colors on a nylon flock Residential furniture
base fabric for a very soft texture and excellent wearability. Juvenile furniture
Produced by screen printing directly onto the base fabric.
Heat-transfer prints Sharp, intricate designs on flock or jacquard base fabrics. Residential furniture
Plush feel (flocks), deep colors (jacquards) and excellent Juvenile furniture
wearability. Produced by using heat and pressure to transfer
color from printed paper onto base fabric.
VELVETS:
Woven velvets Basic designs such as plaids and semi-plains in traditional and Residential furniture
contemporary styles with a plush feel. Woven with a short-cut
pile using various weaving methods and synthetic yarns.
Tufted velvets Lower cost production process of velvets in which synthetic Residential furniture
yarns are punched into a base polyester fabric for texture.
Similar designs as woven velvets.
MATTRESS TICKING CHARACTERISTICS PRINCIPAL MARKETS
WOVENS:
Jacquards Florals and other intricate designs. Woven on complex looms Bedding
using a wide variety of synthetic and natural yarns.
PRINTS:
Heat-transfer prints Sharp, detailed designs. Produced by using heat and pressure to Bedding
transfer color from printed paper onto base fabrics, including
woven jacquards, knits and poly/cotton sheetings.
Pigment prints Variety of designs produced economically by screen printing Bedding
pigments onto a variety of base fabrics, including jacquards,
knits, poly/cotton sheeting and non-wovens.
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Although fabrics marketed for upholstery applications and those used
for mattress ticking may have similar appearances, mattress ticking must be
manufactured on weaving and printing equipment in wider widths to accommodate
the physical size of box springs and mattresses. The Company's products include
all major types of coverings, except for leather, that manufacturers use today
for furniture and bedding. The Company also markets fabrics for certain
specialty markets, but these do not currently represent a material portion of
the Company's business.
MANUFACTURING
Substantially all of the upholstery fabric and mattress ticking
currently marketed by Culp is produced at the Company's eleven manufacturing
facilities. These plants encompass a total of 2.3 million square feet and
include yarn extrusion, spinning, dyeing and texturizing equipment, narrow and
wide-width jacquard looms, dobby and woven velvet looms, tufting machines,
printing equipment for pigment, heat-transfer and wet printing, as well as
fabric finishing equipment. Culp is actively pursuing ISO certification for its
manufacturing facilities. ISO certification is an international recognition of a
Company's ability to deliver high quality products and services. Culp's
facilities at Stokesdale, North Carolina, which produces mattress ticking, and
at Anderson, South Carolina, which produces woven velvet upholstery fabric, were
awarded ISO-9002 certification during fiscal 1997. Additionally, the Company's
facility at Pageland, South Carolina, which produces jacquard and dobby
upholstery fabric, was awarded ISO-9002 certification in fiscal 1998 prior to
the filing of this report. The Company expects to complete the ISO certification
process at additional facilities in the near future.
The Company's woven fabrics are made from various types of synthetic
and natural yarn, such as polypropylene, polyester, acrylic, rayon, nylon or
cotton. The Company currently extrudes and spins a portion of its own needs for
yarn and purchases the remainder from outside suppliers. Although the Company
believes it will to continue to rely on suppliers for the majority of its yarn
requirements, the percentage of internally generated yarn is expected to
increase as additional extrusion equipment for polypropylene yarn is added over
the next two years. Yarn is woven into various fabrics on jacquard, dobby or
velvet weaving equipment. Once the weaving is completed, the fabric can be
printed or finished using a variety of processes. Culp purchases a significant
amount of greige goods (unfinished, uncolored base fabrics) from other suppliers
to be printed at the Company's plants, but has increased its internal production
capability for jacquard greige goods. The acquisition of Rayonese in fiscal 1995
increased the Company's capacity to produce its own jacquard greige goods. Culp
has installed additional airjet weaving machines at Rayonese to significantly
increase its capacity for jacquard greige goods.
During the fourth quarter of fiscal 1997, the Company installed its
first flock coating line to produce flock greige goods to be used primarily as
the base cloth for wet and heat-transfer-printed flock products. Flock fabrics
are produced by the application of very short nylon fibers onto a poly/cotton
woven base fabric to create a velvet effect. During the flock coating process,
the fibers are bonded onto the base fabric with an adhesive substance by
utilizing an electrostatic charging procedure which causes the fibers to
vertically align with the base fabric.
Tufted velvet fabrics are produced by tufting machines which insert an
acrylic or polypropylene yarn through a polyester woven base fabric creating
loop pile surface material which is then sheared to create a velvet surface.
Tufted velvet fabrics are typically lower-cost fabrics utilized in the Company's
lower-priced product mix.
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The Company's printing operations include pigment and heat-transfer
methods, as well as wet printing. The Company also produces its own printed
heat-transfer paper, another component of vertical integration. Wet printing is
the most recent addition to the Company's printing capabilities, and the Company
purchased a plant in Lumberton, North Carolina in January 1997 to approximately
double its wet-printing capacity.
PRODUCT DESIGN AND STYLING
Although design trends within the Company's markets are generally not
subject to radical change, the introduction of new fabrics and designs is an
important aspect of Culp's service to its customers. Accordingly, Culp's success
is largely dependent on the Company's ability to market fabrics with appealing
designs and patterns. Culp has a staff of over 50 designers involved in the
design and development of new patterns and styles, including designers with
experience in designing products for specific international markets. Culp uses
CAD systems in the development of new fabrics which assists the Company in
providing a very flexible design program. These systems have enabled the
Company's designers to experiment with new ideas and involve customers more
actively in the process. The use of CAD systems also has supported the Company's
emphasis on integrating manufacturing considerations into the early phase of a
new design. The completion of a new design center in fiscal 1998 will enable
most of the Company's designers to be located in the same facility to facilitate
the sharing of design ideas and CAD and other technologies. The new design
center should enhance the Company's merchandising and marketing efforts by
providing an environment in which customers can be shown new products as well as
participate in product development initiatives.
The process of developing new designs involves maintaining an awareness
of broad fashion and color trends both in the United States and internationally.
These concepts are blended with input from the Company's customers to develop
new fabric designs and styles. Most of these designs are introduced by Culp at
major trade conferences that occur twice a year in the United States (January
and July) and annually in several major international markets.
DISTRIBUTION
The majority of the Company's products are shipped directly from its
manufacturing facilities. This "direct ship" program is primarily utilized by
large manufacturers. Generally, small and medium-size residential furniture
manufacturers use one of the Company's three regional distribution facilities
which have been strategically positioned in areas which have a high
concentration of residential furniture manufacturers - High Point, North
Carolina, Los Angeles, California and Tupelo, Mississippi. In addition, the
Company maintains an inventory of upholstery fabric at a warehouse in Grand
Rapids, Michigan to supply large commercial furniture manufacturers in that area
on a "just in time" basis. The Company closely monitors demand in each
distribution territory to decide which patterns and styles to hold in inventory.
These products are available on demand by customers and are usually shipped
within 48 hours of receipt of an order. Substantially all of the Company's
shipments of mattress ticking are made from its manufacturing facilities in
Stokesdale, North Carolina and St.
Jerome, Quebec, Canada.
In international markets, Culp sells primarily to distributors that
maintain inventories of upholstery fabrics for resale to furniture
manufacturers. The Company plans to explore the establishment of distribution
facilities in certain areas outside the United States to support increasing
international sales. SOURCES AND AVAILABILITY OF RAW MATERIALS
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Raw materials account for more than half of the Company's total
production costs. The Company purchases various types of synthetic and natural
yarns (polypropylene, polyester, acrylic, nylon, rayon and cotton), various
types of greige goods (poly/cotton wovens and flocks, polyester wovens,
poly/rayon and poly/cotton jacquard wovens, polyester knits, poly/cotton
sheeting and non-wovens), polypropylene resins, nylon flock fibers, rayon
staple, latex adhesives, dyes and chemicals from a variety of suppliers. The
Company has made a significant investment in becoming more vertically integrated
and producing more of its jacquard greige goods, polypropylene yarns, package
dyed yarns and printed heat-transfer paper internally. As a result, a larger
portion of its raw materials are comprised of more basic commodities such as
rayon staple, undyed yarns, polypropylene resin chips, certain polyester warp
yarns, unprinted heat-transfer paper and unflocked poly/cotton base fabric. Most
of the Company's raw materials are available from more than one primary source,
and prices of such materials fluctuate depending upon current supply and demand
conditions and the general rate of inflation. Many of the Company's basic raw
materials are petrochemical products or are produced from such products, and
therefore the Company's raw material costs are particularly sensitive to changes
in petrochemical prices. Generally, the Company has not had significant
difficulty in obtaining raw materials.
The Company currently relies on one supplier for most of its flock
greige goods. Due to the limited supply of flock greige goods, there can be no
assurance that the Company will be able to obtain sufficient quantities of flock
greige goods at economical prices if its existing supply is interrupted. In
addition, although the Company began operating its own flock coating
manufacturing line to produce flock greige goods during the fourth quarter of
fiscal 1997, the manufacturing process for this fabric differs substantially
from the weaving and other processes used in producing the Company's other
fabrics. Accordingly, unforeseen technological difficulties or other matters
could materially delay the Company's production of flock greige goods.
COMPETITION
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, Microfibres, Inc., and Quaker Fabric Corporation. Conversely,
the mattress ticking market is concentrated in a few relatively large suppliers.
The Company believes its principal mattress ticking competitors are Bekaert
Textiles B.V., Blumenthal Print Works, Inc., Burlington House Fabrics division
of Burlington Industries, Inc. and Tietex, Inc. Although the Company believes it
is the largest supplier of furniture upholstery fabrics and a leading supplier
of mattress ticking to the bedding industry, some of the Company's competitors
are larger overall and have greater financial resources than the Company.
Competition for the Company's products is based primarily on price, design,
quality, timing of delivery and service.
ENVIRONMENTAL AND OTHER 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, as well as similar laws
-12-
<PAGE>
governing its Rayonese facility in Canada. The Company periodically reviews its
compliance with such laws and regulations in an attempt to minimize the risk of
material violations.
The Company's operations involve a variety of materials and processes
that are subject to environmental regulation. Under current law, environmental
liability can arise from previously owned properties, leased properties and
properties owned by third parties, as well as from properties currently owned
and leased by the Company. Environmental liabilities can also be asserted by
adjacent landowners or other third parties in toxic tort litigation.
In addition, under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"), and analogous
state statutes, liability can be imposed for the disposal of waste at sites
targeted for cleanup by federal and state regulatory authorities. Liability
under CERCLA is strict as well as joint and several. The Company has accrued
reserves for environmental matters based on information presently available.
Based on this information and the Company's established reserves, the Company
does not believe that environmental matters will have a material adverse effect
on either the Company's financial condition or results of operations. However,
there can be no assurance that the costs associated with environmental matters
will not increase in the future.
In its pre-acquisition examination of its new Lumberton facility, the
Company discovered certain chlorinated solvents in the soil and groundwater
which are believed to have originated from an adjacent property. The Company and
the then owner of the Lumberton facility agreed to exclude the area of the
property known to be affected from the property that the Company acquired. The
Company has not been and believes that it will not be deemed a responsible party
with respect to such known contamination and accordingly that such contamination
will not have a material adverse effect on the Company's operations or financial
condition, although there can be no assurance that other portions of the
Lumberton property may not become affected in the future or that other
environmental issues may not arise.
In 1992, the Company discovered soil and groundwater contamination at
its Stokesdale, North Carolina facility, which had been purchased in 1986
pursuant to an agreement in which the seller of the facility indemnified the
Company against environmental contamination on the property. The Company has
taken action to remediate the contamination of this facility and reached a
monetary settlement in 1995 with the former owner of the property under the
former owner's indemnification obligations to the Company. In addition, the
United States Environmental Protection Agency has obtained a judgment against
the owner and lessor of the Company's plant in West Hazelton, Pennsylvania
relating to remediation of soil and groundwater contamination at the West
Hazelton facility. No claim has been asserted against the Company in connection
with the judgment or the contamination at the West Hazelton facility, and the
Company is fully indemnified against any such claims by the owner of that
facility and the related corporation from which the Company purchased the assets
located at the facility.
EMPLOYEES
As of April 27, 1997, the Company had 3,146 employees. All of the
hourly employees at the Company's facility in West Hazelton, Pennsylvania and
all of the hourly employees at the Rayonese facility in Canada (approximately
15% of the Company's workforce) are represented by a union. The collective
bargaining agreement with respect to the hourly employees at the Pennsylvania
plant expires in 1999. Additionally, the collective bargaining agreement with
respect to the Rayonese hourly employees expires in
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<PAGE>
1999. The Company is not aware of any efforts to organize any more of its
employees and believes its relations with its employees are good.
CUSTOMERS AND SALES
Culp's size, broad product line, diverse manufacturing base and
effective distribution system enable it to market products to over 2,000
customers. Major customers are leading manufacturers of upholstered furniture,
including Bassett, Furniture Brands International (Broyhill, Thomasville and
Lane), Lifestyles International (Berkline, Universal, Benchcraft, Drexel,
Henredon and others), Flexsteel, La-Z-Boy and LADD (Clayton Marcus, Barclay,
Pennsylvania House and American Drew). Representative customers for the
Company's fabrics for commercial furniture include Herman Miller, HON Industries
and Steelcase. In the mattress ticking area, Culp's customer base includes
leading bedding manufacturers such as Sealy, Serta, Simmons and Spring Air.
Culp's customers also include many small and medium-size furniture and bedding
manufacturers. In international markets, Culp sells upholstery fabrics primarily
to distributors that maintain inventories for resale to furniture manufacturers.
The following table sets forth the Company's net sales by geographic
area by amount and percentage of total net sales for the three most recent
fiscal years.
<TABLE>
<CAPTION>
NET SALES BY GEOGRAPHIC AREA
(dollars in thousands)
FISCAL 1997 FISCAL 1996 FISCAL 1995
----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
United States..................$297,308 74.5% $274,270 78.0% $250,055 81.2%
-------- ----- -------- ----- -------- -----
North America (excluding
U.S.).......................... 27,479 6.9 23,528 6.7 16,707 5.4
Europe......................... 25,245 6.3 18,927 5.4 19,177 6.2
Middle East.................... 23,505 5.9 15,609 4.4 6,081 2.0
Asia and Pacific Rim........... 19,646 4.9 12,124 3.4 8,969 2.9
South America.................. 2,604 0.7 2,753 0.8 3,749 1.2
All other areas................ 3,092 0.8 4,456 1.3 3,288 1.1
------ -------- ------ --- ----- ---
Subtotal....................... 101,571 25.5 77,397 22.0 57,971 18.8
------- ------- ------ ---- ------ ----
Total..........................$398,879 100.0% $351,667 100.0% $308,026 100.0%
======== =========== ======== ====== ======== ======
</TABLE>
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 Regional Warehouse System
from in-stock order positions. On April 27, 1997, the portion of the backlog
with confirmed shipping dates prior to June 2, 1997 was $30.3 million, and on
April 28, 1996, the portion of the backlog with confirmed shipping dates prior
to June 3, 1996 was $34.5 million.
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<PAGE>
ITEM 2. PROPERTIES
The Company's headquarters are located in High Point, North Carolina,
and the Company currently operates eleven (11) manufacturing facilities and
three (3) regional distribution facilities. The Company has an agreement to
warehouse inventory at a regional distribution facility in Grand Rapids,
Michigan operated by a third party. The following is a summary of the Company's
principal administrative, manufacturing and distribution facilities. The
manufacturing facilities are organized by business unit.
<TABLE>
<CAPTION>
APPROX.
TOTAL AREA EXPIRATION
LOCATION PRINCIPAL USE (SQ. FT.) OF LEASE (1)
- -------- ------------- -------- ------------
<S> <C> <C> <C>
o HEADQUARTERS AND DISTRIBUTIONS
CENTERS:
High Point, North Carolina Corporate headquarters 33,000 2015
High Point, North Carolina Regional distribution 65,000 2008
Los Angeles, California (3) Regional distribution 45,000 1997
Tupelo, Mississippi Regional distribution 35,000 2002
o CULP TEXTURES:
Graham, North Carolina (2) Manufacturing 341,000 N/A
Burlington, North Carolina (2) Manufacturing and distribution 302,000 N/A
Pageland, South Carolina (2) Manufacturing 96,000 N/A
o ROSSVILLE/CHROMATEX:
Rossville, Georgia (4) Manufacturing and distribution 396,000 1998
West Hazelton, Pennsylvania Manufacturing 110,000 2013
West Hazelton, Pennsylvania Manufacturing and distribution 100,000 2008
o VELVETS/PRINTS:
Burlington, North Carolina Manufacturing and distribution 275,000 2021
Lumberton, North Carolina (2) Manufacturing 107,000 N/A
Anderson, South Carolina (2) Manufacturing 99,000 N/A
o CULP HOME FASHIONS:
Stokesdale, North Carolina (2) Manufacturing and distribution 140,000 N/A
St. Jerome, Quebec, Canada (2) Manufacturing and distribution 202,000 N/A
-------------------------------------------
</TABLE>
(1) Includes all options to renew
(2) Owned by the Company
(3) The Company has a lease which expires in 2007 (including all options to
renew) for a 35,000 square foot building in Los Angeles, California, and
will be used as a regional distribution facility.
(4) The Company has a lease which expires in 2018 (including all options to
renew) for a 290,000 square foot facility in Chattanooga, Tennessee and
will be used as a manufacturing and distribution facility.
-15-
<PAGE>
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 27, 1997.
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 27, 1997, 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," in the Corporate Directory, under the caption "Stock
Listing" on the back cover page, 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.
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.
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<PAGE>
EXCEPT FOR SUCH PORTIONS OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED APRIL 27, 1997 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 27, 1997 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 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 pursuant to Regulation
14A of the Securities and Exchange Commission, under the caption "Executive
Compensation," which information is herein incorporated by reference.
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 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
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.
-17-
<PAGE>
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.
and subsidiary from the Company's Annual Report to Shareholders for the year
ended April 27, 1997, are incorporated by reference into this report.
<TABLE>
<CAPTION>
Page of Annual
Report to
Shareholders
Item [Exhibit 13(a)]
<S> <C>
Consolidated Balance sheets - April 27, 1997 and...............................................12
April 28, 1996
Consolidated Statements of Income -
for the years ended April 27, 1997,
April 28, 1996 and April 30, 1995............................................................13
Consolidated Statements of Shareholders' Equity -
for the years ended April 27, 1997,
April 28, 1996 and April 30, 1995............................................................14
Consolidated Statements of Cash Flows -
for the years ended April 27, 1997,
April 28, 1996 and April 30, 1995............................................................15
Consolidated Notes to Financial Statements.....................................................16
Report of Independent Auditors ................................................................24
</TABLE>
2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules are omitted because they are
not applicable, or not required, or because the required information is included
in the consolidated financial statements or notes thereto.
-18-
<PAGE>
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 (*).
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 was
filed as Exhibit 10(n) to the Company's Form 10-K for the
year ended April 29, 1989, and is 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, was filed as exhibit 10(o) to the Company's
Form 10-K for the year ended April 29, 1990, and is
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, 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, was 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.
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<PAGE>
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 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(l) 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.
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<PAGE>
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 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 28, 1996, 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 28, 1996, 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.
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<PAGE>
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.
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 was filed as
Exhibit 10(aa) to the Company's Form 10-K for the year
ended April 28, 1996, and is incorporated herein by
reference.
10(bb) Loan Agreement between the Alamance County Industrial
Facilities and Pollution Control Financing Authority,
North Carolina and the Company, dated December 1, 1996,
relating to Tax Exempt Adjustable Mode Industrial
Development Revenue Bonds, (Culp, Inc. Project Series
1996) in the aggregate amount of $6,000,000 was filed as
Exhibit 10(cc) to the Company's Form 10-Q for the quarter
ended January 26, 1997, and is incorporated herein by
reference.
10(cc) Loan Agreement between Luzerne County, Pennsylvania and
the Company, dated as of December 1, 1996, relating to
Tax-Exempt Adjustable Mode Industrial Development Revenue
Bonds (Culp, Inc. Project) Series 1996 in the aggregate
principal amount of $3,500,000 was filed as Exhibit
10(dd) to the Company's Form 10-Q for the quarter ended
January 26, 1997, and is incorporated herein by
reference.
10(dd) Second Amendment to Lease Agreement between Chromatex
Properties, Inc. and the Company, dated April 17, 1997.
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<PAGE>
10(ee) Lease Agreement between Joseph E. Proctor (doing business
as JEPCO) and the Company, dated April 21, 1997.
10(ff) $125,000,000 Revolving Loan Facility dated April 23, 1997
by and among the Company and Wachovia Bank of Georgia,
N.A., as agent, and First Union National Bank of North
Carolina, as documentation agent.
10(gg) Revolving Line of Credit for $4,000,000 dated April 23,
1997 by and between the Company and Wachovia Bank of
North Carolina, N.A.
10(hh) Reimbursement and Security Agreement between Culp, Inc.
and Wachovia Bank of North Carolina, N.A., dated as of
April 1, 1997, relating to $3,337,000 Principal Amount,
Chesterfield County, South Carolina Industrial Revenue
Bonds (Culp, Inc. Project) Series 1988.
Additionally, there are Reimbursement and Security
Agreements between Culp, Inc. and Wachovia Bank of North
Carolina, N.A., dated as of April 1, 1997 in the
following amounts and with the following facilities:
$7,900,000 Principal Amount, Alamance County Industrial
Facilities and Pollution Control Financing Authority
Industrial Revenue Refunding Bonds (Culp, Inc. Project)
Series A and B.
$4,500,000 Principal Amount, Guilford County Industrial
Facilities and Pollution Control Financing Authority
Industrial Development Revenue Bonds (Culp, Inc. Project)
Series 1989.
$6,580,000 Principal Amount, Anderson County South
Carolina Industrial Revenue Bonds (Culp, Inc. Project)
Series 1993.
$6,000,000 Principal Amount, Chesterfield County, South
Carolina Tax-Exempt Adjustable Mode Industrial
Development Revenue Bonds (Culp, Inc. Project) Series
1996.
$6,000,000 Principal Amount, The Alamance County
Industrial Facilities and Pollution Control Financing
Authority Tax-exempt Adjustable Mode Industrial
Development Revenue Bonds (Culp, Inc. Project) Series
1996.
$3,500,000 Principal Amount, Luzerne County Industrial
Development Authority Tax-Exempt Adjustable Mode
Industrial Development Revenue Bonds (Culp, Inc. Project)
Series 1996.
13(a) Copy of the Company's 1997 Annual Report to Shareholders,
for the year ended April 27, 1997, furnished for
information only except with respect to those portions
incorporated by reference into this report.
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<PAGE>
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, 33-62843, and
333-27519), dated March 20, 1987, September 18, 1990,
June 13, 1994, September 22, 1995, and May 21, 1997.
25(a) Power of Attorney of Harry R. Culp, dated June 2, 1997
25(b) Power of Attorney of Howard L. Dunn, Jr., dated June 20,
1997
25(c) Power of Attorney of Baxter P. Freeze., dated June 3,
1997
25(d) Power of Attorney of Earl M. Honeycutt, dated June 2,
1997.
25(e) Power of Attorney of Patrick H. Norton, dated June 16,
1997.
25(f) Power of Attorney of Earl N. Phillips, Jr., dated June 1,
1997
25(g) Power of Attorney of Bland W. Worley., dated June 4,
1997.
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 27, 1997:
(1) Form 8-K dated February 4, 1997, included under Item 5, Other
Events, included the Company's press release for quarterly
earnings and the Financial
Information Release relating to certain financial information for
the quarter ended January 26, 1997.
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 28 under
the subheading "Exhibits Index".
D) FINANCIAL STATEMENT SCHEDULES:
See Item 14(a) (2)
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<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, 1997.
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
(Sr. 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
- -------------------------.
/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/ Harry R. Culp *
Earl N. Phillips, Jr. Harry R. Culp
(Director) (Director)
/s/ Howard L. Dunn, Jr.* /s/ Baxter P. Freeze *
Howard L. Dunn, Jr. Baxter P. Freeze
(Director) (Director)
/s/ Earl M. Honeycutt* /s/ Bland W. Worley *
Earl M. Honeycutt Bland W. Worley
(Director) (Director)
/s/ Patrick H. Norton*
Patrick H. Norton
(Director)
* By Franklin N. Saxon, Attorney-in-Fact, pursuant to Powers of Attorney
filed with the Securities and Exchange Commission.
-25-
<PAGE>
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
<S> <C>
10(dd) Second Amendment to Lease Agreement between Chromatex Properties, Inc. and the
Company, dated April 17, 1997.
10(ee) Lease Agreement between Joseph E. Proctor (doing business as JEPCO) and the
Company, dated April 21, 1997.
10(ff) $125,000,000 Revolving Loan Facility dated April 23, 1997 by and among the
Company and Wachovia Bank of Georgia, N.A., as agent, and First Union National
Bank of North Carolina, as documentation agent.
10(gg) Revolving Line of Credit for $4,000,000 dated April 23, 1997 by and between the
Company and Wachovia Bank of North Carolina, N.A.
10(hh) Reimbursement and Security Agreement between Culp, Inc. and Wachovia Bank of North
Carolina, N.A., dated as of April 1, 1997, relating to $3,337,000 Principal Amount,
Chesterfield County, South Carolina Industrial Revenue Bonds (Culp, Inc. Project)
Series 1988.
Additionally, there are Reimbursement and Security Agreements between Culp, Inc. and
Wachovia Bank of North Carolina, N.A., dated as of April 1, 1997 in the following
amounts and with the following facilities:
$7,900,000 Principal Amount, Alamance County Industrial Facilities and Pollution
Control Financing Authority Industrial Revenue Refunding Bonds (Culp, Inc. Project)
Series A and B.
$4,500,000 Principal Amount, Guilford County Industrial Facilities and Pollution
Control Financing Authority Industrial Development Revenue Bonds (Culp, Inc.
Project) Series 1989.
$6,580,000 Principal Amount, Anderson County South Carolina Industrial Revenue Bonds
(Culp, Inc. Project) Series 1993.
$6,000,000 Principal Amount, Chesterfield County, South Carolina Tax-Exempt
Adjustable Mode Industrial Development Revenue Bonds (Culp, Inc. Project) Series
1996.
$6,000,000 Principal Amount, The Alamance County Industrial Facilities and Pollution
Control Financing Authority Tax-exempt Adjustable Mode Industrial Development
Revenue Bonds (Culp, Inc. Project) Series 1996.
$3,500,000 Principal Amount, Luzerne County Industrial Development Authority
Tax-Exempt Adjustable Mode Industrial Development Revenue Bonds (Culp, Inc. Project)
Series 1996.
13(a) Copy of the Company's 1997 Annual Report to Shareholders, for the year ended April
27, 1997, 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,
33-62843, and 333-27519), dated March 20, 1987, September 18, 1990, June 13, 1994,
September 22, 1995, and May 21, 1997.
25(a) Power of Attorney of Harry R. Culp, dated June 2, 1997
25(b) Power of Attorney of Howard L. Dunn, Jr. dated June 20, 1997.
25(c) Power of Attorney of Baxter P. Freeze., dated June 3, 1997
25(d) Power of Attorney of Earl M. Honeycutt, dated June 3, 1997.
25(e) Power of Attorney of Patrick H. Norton, dated June 2, 1997.
25(f) Power of Attorney of Earl N. Phillips, Jr., dated June 1, 1997
25(g) Power of Attorney of Bland W. Worley, dated June 4, 1997.
</TABLE>
SECOND AMENDMENT TO LEASE AGREEMENT
THIS SECOND AMENDMENT TO LEASE AGREEMENT, is hereby made by and between
CHROMATEX PROPERTIES, INC., a corporation organized and existing under the laws
of the State of Pennsylvania, hereinafter referred to as the "Lessor" and CULP,
INC., a corporation organized and existing under the laws of the State of North
Carolina, hereinafter referred to as the "Lessee".
W I T N E S S E T H:
THAT WHEREAS, Lessor and Lessee entered into a Lease dated November 1,
1993, herein referred to as the "Lease Agreement"; and
WHEREAS, the Lease Agreement was amended effective May 1, 1994; and
WHEREAS, Lessor will make certain improvements to the Premises which
have been requested by Lessee; and
WHEREAS, Lessee agrees to pay additional rent and also agrees to
exercise the first five year option included in Paragraph 1 of the Lease
Agreement; and
WHEREAS, Lessor and Lessee desire to enter into this Second Amendment
to the Lease Agreement.
NOW, THEREFORE, for and in consideration of the premises and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties do hereby agree as follows:
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1. Lessor will expand the Premises at Lessor's expense in accordance
with the proposal dated March 26, 1997 by Hazle Builders, Inc.
2. The term of the Lease Agreement is hereby extended for an additional
five (5) years with such extension to cover the period from November 1, 1998
through October 31, 2003. This extension shall eliminate the first five (5) year
option for Lessee to renew the Lease.
3. Lessee shall continue to have two options to extend the Lease
Agreement for five (5) years each as provided in the Lease Agreement dated
November 1, 1993. Provided, however, that the rent shall be computed for such
option periods as provided in the Lease Agreement and based on a base period
rental.
4. Paragraph 2 of the Lease Agreement is hereby amended to read as
follows:
2. Lessee shall continue to pay rental of Seventeen Thousand
Eight Hundred Thirty-three and 67/100 Dollars ($17,833.67) a month through June
30, 1997 with the last installment of Seventeen Thousand Eight Hundred
Thirty-three and 67/100 Dollars ($17,833.67) being due on June 1, 1997.
Beginning with the rental payment due on July 1, 1997 through the rental payment
due on October 1, 1998, Lessee shall pay Lessor a rental of Nineteen Thousand
Eight Hundred Eight and 67/100 Dollars ($19,808.67) per month. For the rental
payments due on November 1, 1998 through payment due on October 1, 2003, Lessee
shall pay Lessor rental payments of Eighteen Thousand Sixteen and 67/100 Dollars
($18,016.67) per month.
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5. All other terms of the Lease Agreement shall remain the same.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to the Lease Agreement to be effective as of the 17th day of April,
1997.
CHROMATEX PROPERTIES, INC.
s/s By: Ronald W. Satterfield
Executive Vice President
LESSOR
CULP, INC.
s/s By: Franklin N. Saxon
Vice President and
Chief Financial Officer
LESSEE
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LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made and entered into as of April 21,
1997 by and between JOSEPH E. PROCTOR (the "Landlord"), a resident of Hamilton
County, Tennessee doing business as "JEPCO Industrial Warehouses," and CULP
INC., a North Carolina corporation (the "Tenant").
B A C K G R O U N D
I. Landlord is the owner of that certain approximately 42.39 acre
parcel of land (the "Land") located at the northeastern intersection of Hamill
Road and Carondalet Avenue in Chattanooga, Hamilton County, Tennessee and more
particularly described in Exhibit A attached hereto and made a part hereof.
B. An approximately 14.7 acre portion of the Land is more particularly
described in Exhibit A-1 attached hereto (the "Leased Land"). Located on the
Land are: a building containing approximately 75,000 sq.ft. ("Building 1"), a
building containing approximately 62,500 sq.ft. ("Building 2"), a building
containing approximately 153,000 sq.ft. ("Building 3"), and related
improvements. The locations of Building 1, Building 2, and Building 3 on the
Leased Land are generally shown in Exhibit B attached hereto and made a part
hereof. In addition, Landlord will construct on the Land a building containing
approximately 27,500 sq.ft. ("Office Building") at a location reasonably
acceptable to Tenant (all such buildings are collectively referred to herein as
the "Buildings"). The Leased Land, the Buildings, and the related improvements
are collectively referred to herein as the "Premises."
C Landlord has agreed to lease the Premises to Tenant, and Tenant has
agreed to lease the Premises from Landlord, upon all of the terms set forth in
this Lease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are acknowledged, Landlord and Tenant hereby agree, for
themselves and their respective heirs, devisees, personal representatives, and
successors and assigns, as follows:
1. PREMISES LEASED. Landlord hereby leases to Tenant, and Tenant leases
from Landlord, the Premises, on the terms and conditions set forth in this
Lease. Landlord covenants, represents and warrants that the Premises will be
constructed and upfitted in accordance with the specifications set forth in
Exhibit C attached hereto and made a part hereof.
2. TERM OF LEASE. The initial term of this Lease shall be for a period
of Ten (10) years, commencing on May 1, 1998 (the "Commencement Date") and
terminating at midnight on April 30, 2008
<PAGE>
("Initial Term").
At the end of the Initial Term, Tenant is hereby granted two (2)
successive options to extend the Term of this Lease for additional periods of
five (5) years each (each, a "Renewal Period"), provided that Tenant gives
Landlord written notice of its exercise of the option at least ninety (90) days
prior to the end of the Initial Term. If Tenant properly exercises the option(s)
for the Renewal Period(s), all terms and conditions of this Lease shall continue
in full force and effect. All references to the "Term" of this Lease shall,
unless the context shall clearly indicate a different meaning, be deemed to
constitute a reference to the properly exercised Renewal Period(s).
3. RENT. Tenant shall pay Landlord for the Premises annual rent in the
amount of Eight Hundred Sixty-Eight Thousand Eight Hundred Dollars
($868,800.00), payable in equal monthly installments of Seventy-Two Thousand
Four Hundred Dollars ($72,400.00) in advance on the first day of each calendar
month during the Term.
If the Term commences on a day other than the first day of a calendar
month, rent for the first partial month shall be prorated on a daily basis and
paid on the date of commencement. Payments of rent pursuant to this Section 3
shall be by check mailed or delivered to Landlord at the address for notices set
forth in Section 21 below.
Notwithstanding Landlord's delivery of the Premises to Tenant pursuant
to Section 5 below, Tenant's obligation to pay rent hereunder shall not commence
until the Commencement Date.
4. USE OF PREMISES. The Premises may be used by Tenant for
manufacturing, industrial, warehousing, and ancillary uses. Tenant shall comply
with all applicable laws, ordinances, rules and regulations of local, state and
federal governments, and any other public authority having jurisdiction over the
Premises.
5. POSSESSION. Landlord shall deliver possession of the Premises to
Tenant based on the following schedule:
Building On or Before
Building 1 December 1, 1997
Building 2 December 1, 1997
Building 3 October 1, 1997
Office Building January 1, 1998
Landlord shall deliver possession any and all remaining portions of the Premises
on or before January 1, 1998.
Notwithstanding the schedule set forth in this Section 5,
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Landlord agrees that upon the execution of this Lease, Tenant shall have access
to the Premises (including the Buildings) in order to install such electrical
and plumbing systems (including piping) and equipment that Tenant shall require;
provided, however, that Tenant shall not unreasonably disturb existing tenants,
if any, in any Building; provided, further, that Tenant shall not unreasonably
disturb the construction and upfitting to be performed by Landlord in accordance
with the specifications set forth in Exhibit C attached hereto.
6. ALTERATIONS AND IMPROVEMENTS. Tenant may make alterations or
improvements in or to the Premises only with the Landlord's consent, which shall
not be unreasonably withheld or delayed. Tenant agrees not to permit any
mechanic's or materialman's lien to be filed against the Premises for work
claimed to have been done for, or materials claimed to have been furnished to,
Tenant, and if any such lien is filed, it shall be promptly discharged by
Tenant.
7. FIXTURES AND PERSONAL PROPERTY. All trade fixtures, equipment or
other personal property installed in or attached to the Premises by or at the
expense of Tenant shall be and remain the property of Tenant, and Tenant shall
have the right to remove the same at any time during the Term; provided,
however, that Tenant shall not remove any such fixture or personal property if
the removal will cause substantial damage to the Premises; provided, further,
that if Tenant is permitted to remove any such fixture or personal property,
then Tenant shall repair any damage to the Premises caused by such removal to
Landlord's reasonable satisfaction.
8. TAXES. Tenant shall pay prior to delinquency all real estate,
personalty and ad valorem taxes and assessments imposed or assessed upon the
Premises, including any taxes or assessments imposed or assessed upon Tenant's
stock or merchandise, furniture, fixtures, equipment, supplies or other personal
property situated within the Premises. Landlord shall deliver to Tenant, within
thirty (30) days' of receipt, any real estate tax bills received by Landlord
pertaining to the Premises, and Tenant shall pay the taxes as provided above;
provided, however, the failure of Landlord to deliver any such tax bill shall
not relieve Tenant of the obligation of taxes hereunder. Within thirty (30) days
of its payment of all taxes and assessments imposed or assessed upon the
Premises, Tenant shall furnish Landlord with evidence of such payment.
Notwithstanding the foregoing, Tenant shall not be deemed in default for
nonpayment of taxes if it is in good faith contesting the validity or amount
thereof in compliance with all applicable laws, and the enforcement of any lien
therefor is suspended or stayed during such contest, and Landlord agrees to
cooperate with Tenant in any such contest. Taxes for the year in which the Term
commences or expires (or otherwise terminates) shall be prorated.
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<PAGE>
Notwithstanding Landlord's delivery of the Premises to Tenant pursuant
to Section 5 above, Tenant's obligation to pay taxes hereunder shall not
commence until the Commencement Date.
9. MAINTENANCE AND REPAIR. Landlord shall maintain and repair the
structural portions of the Buildings (including foundations, roofs and exterior
walls), except for any damage due to Tenant's misconduct or negligence. Tenant
shall maintain and repair all other portions of the Premises, except for
ordinary wear and tear and damage due to casualties, and except for any damage
due to Landlord's misconduct or negligence. Landlord agrees to cooperate with
Tenant to exercise any rights which Landlord may have with respect to any
warranties, guaranties, and similar rights relating to any portion of the
Premises (e.g. HVAC systems). Landlord shall be responsible for any structural
alteration of the Premises required to comply with legal requirements, and
Tenant shall be responsible for any non-structural alteration for this purpose.
10. UTILITIES. Tenant shall pay all charges for utilities used on the
Premises, including but not limited to electricity, gas, water, sewer, air
conditioning and heat.
11. INSURANCE. Tenant shall, during the Term, obtain and maintain in
force the following policies of insurance:
(a) Casualty insurance on the Buildings covering all
casualties included under standard insurance industry practices within
the classification "Fire and Lightening, Extended Coverage, Vandalism
and Malicious Mischief" in an amount equal to not less than one hundred
percent (100%) of the replacement value of each Building (including the
fixtures). Notwithstanding Landlord's delivery of the Premises to
Tenant pursuant to Section 5 above, Tenant's obligation under this
Section 11(a) shall not commence until the Commencement Date;
(b) Casualty insurance on Tenant's property (including
fixtures, leasehold improvements and equipment) located in the
Premises; and
(c) Comprehensive public liability insurance covering death,
bodily injury and property damage in the amount of at least Two Million
and No/100 Dollars ($2,000,000.00) per occurrence/aggregate. Tenant's
liability insurance shall name Landlord as an additional insured and
shall include contractual liability consistent with standard ISO
provisions. Tenant's obligation under this Section 11(b) shall commence
upon its taking possession of any Building under Section 5 above.
12. TENANT DEFAULT. If Tenant continues in default in the payment of
rent or other sum of money becoming due under this
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Lease for a period of fifteen (15) days after written notice of such default has
been given to Tenant, or if Tenant defaults in the performance of any other of
the terms, conditions or covenants contained in this Lease (including but not
limited to the obligation to pay taxes and to maintain insurance) and does not
remedy such default within twenty (20) days after written notice of such default
has been given to Tenant (or such longer period of time, not to exceed sixty
(60) days, as may be reasonably necessary to cure such breach if such breach is
not susceptible of being cured within twenty (20) days; provided, however, that
Tenant shall act diligently and in good faith to cure such breach), or if Tenant
becomes bankrupt or insolvent, or files any debtor proceedings, or files in any
court pursuant to any statute, either of the United States or any State a
petition in bankruptcy or insolvency or for reorganization, or files or has
filed against it a petition for the appointment of a receiver or trustee for all
or substantially all of the assets of Tenant and such petition is not vacated or
set aside within sixty (60) days, or if Tenant makes an assignment for the
benefit of creditors, or petitions for or enters into an arrangement, then in
any event Landlord shall have the right to terminate and cancel this Lease. In
the event of any termination by Landlord, whether before or after reentry,
Landlord may recover from Tenant damages permitted under applicable law and
pursuant to Tenant's obligations hereunder. Landlord will make reasonable
efforts to mitigate damages.
13. LANDLORD DEFAULT. In the event of a breach of an obligation,
representation, warranty or covenant of Landlord under this Lease, which breach
has not been cured within twenty (20) days (or such longer period of time, not
to exceed sixty (60) days, as may be reasonably necessary to cure such breach if
such breach is not susceptible of being cured within twenty (20) days; provided,
however, that Landlord shall act diligently and in good faith to cure such
breach) after notice from Tenant to Landlord, Tenant shall have the right, at
its election then or thereafter in addition to and not in lieu of any other
remedy Tenant may have hereunder, or at law or in equity, to (a) cure of such
breach and offset the cost against rent due; (b) sue for and receive any damages
sustained by Tenant as a result of said breach by Landlord; or (c) terminate
this Lease.
14. DAMAGE BY CASUALTY OR FIRE. Tenant shall promptly notify Landlord
of any damage to the Premises caused by fire or other casualty.
(a) If any Building is rendered substantially untenantable by
fire or other casualty, either Landlord or Tenant may elect, by giving
the other party written notice within thirty (30) days of the fire or
casualty, to terminate this Lease with respect to the damaged
Building(s) as of the date of the casualty.
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<PAGE>
(b) If (i) any Building is damaged by fire or other casualty
but is not rendered substantially untenantable, or (ii) any Building is
damaged by fire or other casualty and is rendered substantially
untenantable, but this Lease is not terminated pursuant to subsection
(a) above, then Landlord shall, upon receipt of the insurance proceeds,
promptly and diligently repair and restore the damaged portions (other
than any leasehold improvements and personal property installed by
Tenant), to substantially the same condition as existed immediately
prior to the casualty. Tenant shall disburse the insurance proceeds to
Landlord as the restoration work progresses, upon the written request
of Landlord accompanied by such affidavits, invoices and lien waivers
as would be required by a prudent construction lender. Upon completion
of the restoration work, and the receipt by Tenant of a certificate of
substantial completion signed by Landlord and the supervising
architect, and certificates of occupancy issued by the appropriate
governmental authorities, the remainder of the insurance proceeds shall
be disbursed to Tenant. Rent shall abate during any such period of
damage or repair. Notwithstanding the foregoing, if the damage occurs
during the last twelve (12) months of the Term, then either party
hereto shall have the right to terminate this Lease with respect to the
damaged Building(s) as of the date of the casualty by giving written
notice of termination to the other party within thirty (30) days after
the fire or casualty.
15. CONDEMNATION.
(a) In this Lease, the following terms shall have the meanings
set forth herein:
(i) "Condemnation" shall mean the actual or constructive
taking by a governmental or quasi-governmental authority
by means of eminent domain, condemnation, or deed or
agreement in lieu thereof, or otherwise.
(ii) "Building Space" shall mean space in a Building.
(iii) "Non-Building Space" shall mean space other than
Building Space.
(iv) "Major Condemnation" shall mean (A) the
Condem-nation of any part of the Building Space IF AND
ONLY IF Tenant reasonably determines that such
Condemnation will materially affect Tenant's operations
at the Premises, or (B) a Condemnation of the
Non-Building Space which either denies Tenant direct
access to all state maintained roads adjacent to the
Premises for more than thirty (30) days or
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<PAGE>
reduces the number of parking spaces in the Premises to
ten percent (10%) less than the number of spaces required
at the time of issuance of the building permit for
construction of the Building Improvements.
(v) "Minor Condemnation" shall mean any Condemnation
other than a Major Condemnation.
(b) If, at any time during the Term, a Major Condemnation
shall occur, Tenant shall have the option to cancel this Lease upon
written notice to Landlord within sixty (60) days after the occurrence
of the Major Condemnation, and upon such notification this Lease shall
terminate and expire, and rent and all charges due under this Lease
shall be apportioned and paid to the later of (i) the date of
termination or (ii) the last day of occupancy by Tenant.
(c) In the event of the occurrence of a Minor Condemnation or
a major Condemnation not resulting in a cancellation of this Lease,
rent and all charges due under this Lease shall be reduced (i) pro rata
based on the square footage of space taken (in the event of
Condemnation of Building Space) or (ii) pro rata based on the area of
Land taken (in the event of Condemnation of Non-Building Space IF AND
ONLY IF Tenant reasonably determines that such Condemnation will
materially affect Tenant's operations at the Premises).
(d) The proceeds of any condemnation award for the Premises
shall be the property of Landlord, but the proceeds of any condemnation
award for the leasehold interest and the improvements located on the
Premises that have been installed by Tenant shall be the property of
Tenant. Landlord shall have no interest in any award to Tenant for
relocation expenses or for the taking of Tenant's fixtures or other
personal property within the Premises.
(e) In the event of a Condemnation not resulting in the
termination of this Lease, Landlord shall proceed with reasonable
diligence to repair and restore the Premises as nearly as possible to
its condition immediately prior to the Condemnation. Rent shall abate
during any such period of repair and restoration on a pro rata basis as
set forth in subsection (c) above.
16. SURRENDER OF PREMISES. Tenant shall, upon the expiration or other
termination of the Term, surrender the Premises to Landlord in good order,
condition and state of repair, excepting ordinary wear and tear; and damage due
to fire or other casualty.
17. WAIVER. The failure of either party to exercise any of
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its rights or to insist upon the strict performance of any of the terms of this
Lease shall not constitute a waiver by such party, and the exercise by either
party of any right expressly provided in this Lease shall not be a waiver of any
other right of that party.
18. ASSIGNMENT, MORTGAGE, AND SUBLETTING. Tenant may not assign this
Lease or sublet the Premises or any part thereof except with the prior consent
of Landlord, which consent shall not be unreasonably withheld or delayed;
provided, that, Landlord may require the proposed assignee to execute a written
agreement to evidence its assumption of Tenant's obligations hereunder. In the
event of any assignment, Tenant shall not be relieved of its obligations
hereunder unless Landlord's consent so stated.
19. WARRANTIES AND QUIET ENJOYMENT. Landlord represents and warrants
that he owns the Premises in fee simple, that he has the right to enter into
this Lease of the Premises, that Tenant's anticipated uses of the Premises as
set forth in Section 4 above is permitted under applicable laws and private
restrictions, if any, and that upon Tenant paying the rent and other amounts
provided in this Lease and observing and performing the terms, covenants, and
conditions hereof, Tenant may have quiet and uninterrupted enjoyment and
possession of the Premises during the Term.
20. INDEMNIFICATION; WAIVER OF SUBROGATION.
(a) Tenant agrees to pay and to protect, defend, indemnify,
and hold harmless Landlord from and against all liability, damages, and
costs (including but not limited to reasonable attorney's fees actually
incurred) from causes of action, suits, claims, demands, and judgments
arising out of Tenant's actions or negligence in connection with its
occupancy of the Premises.
(b) Notwithstanding anything else to the contrary contained in
this Lease, Tenant shall not be responsible or liable to Landlord for
any event, act or omission to the extent covered by insurance required
to be obtained and actually maintained by Tenant with respect to the
Premises and its use and occupancy thereof or the proceeds of any other
insurance obtained and maintained by Tenant with respect to the
Premises and its use and occupancy thereof.
21. NOTICES. All notices required or permitted to be given by any party
hereto upon any other party shall be deemed given if such notice is personally
delivered or deposited in the United States mail, registered or certified mail,
return receipt requested, postage prepaid, and addressed as follows:
To Landlord: Mr. Joseph E. Proctor
P.O. Box 72702
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42nd and Devine
Chattanooga, Tennessee 37407
with a Fred Hanzelik, Esq.
copy to: Hanzelik and Associates
Chattanooga Bank Building, Suite 500
737 Market Street
Chattanooga, Tennessee 37402
To Tenant: Culp, Inc.
P.O. Box 2686
101 South Main Street
High Point, North Carolina 27261-2686
Attn: Mr. Franklin N. Saxon
with a Robinson, Bradshaw & Hinson, P.A.
copy to: 1900 Independence Center
101 North Tryon Street
Charlotte, North Carolina 28246
Attn: Henry H. Ralston, Esq.
Either party may change its address by giving the other party written notice of
the new address in the manner specified above not less than fifteen (15) days
before the effective date of the change.
22. SECURITY DEPOSIT. As security for the performance of its
obligations under this Lease, Tenant, upon its execution of this Lease, has paid
to Landlord a security deposit ("Security Deposit") in the amount of
Seventy-Five Thousand Dollars ($75,000.00). The Security Deposit may be applied
by Landlord to cure any default (beyond any applicable cure period) of Tenant
under this Lease, and upon notice by Landlord of such application, Tenant shall
replenish the Security Deposit in full by promptly paying to Landlord the amount
so applied. Within forty-five (45) days after the termination of this Lease
(other than a wrongful termination by Tenant), Landlord shall return to Tenant
the balance, if any, of the Security Deposit.
23. HOLDING OVER. If Tenant retains possession of the Premises or any
part thereof after the expiration or other termination of this Lease, Tenant's
holding over shall constitute a renewal of this Lease for a period of one (1)
year on the same terms and conditions hereof.
24. EARLY TERMINATION. Tenant acknowledges that Landlord has or will
have expended significant effort and expenses to induce Tenant to enter into
this Lease for the Premises, and both Landlord and Tenant contemplate that
Tenant will lease the Premises for at least ten (10) years. In the event that
this Lease for the Premises shall be terminated for any reason (except due to
Landlord's default hereunder) prior to the expiration of the Initial Term,
Tenant agrees to pay to Landlord an early
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termination fee calculated in accordance with the following formula:
Number of months remaining
in the Initial Term X One Million Dollars
--------------------------- ($1,000,000.00)
120 (12 months per year X
10 years of Initial Term)
25. SEVERABILITY. If any of the terms and conditions of this Lease, or
the application thereof, shall to any extent be held invalid or unenforceable,
the remaining terms and conditions of this Lease, shall not be affected thereby,
and shall continue to be binding upon the parties hereto.
26. RIGHT OF FIRST REFUSAL. An approximately 2.8 acre portion of the
Land (the "Option Land") is more particularly described in Exhibit A-2 attached
hereto and is marked in blue on Exhibit B attached hereto. If, at any time
during the Term, Landlord constructs one or more buildings on the Option Land,
and intends to make an offer to lease such premises to a third party, Landlord
shall first give Tenant written notice of the square footage, availability date
and terms of the offer Landlord intends to make. Tenant shall have thirty (30)
days after receipt of any such notice to elect to lease all or any portion of
such space on the terms offered. If Tenant rejects any such offer, or fails to
respond to any such offer within said thirty (30) day period, Landlord shall be
free to lease the offered space upon the same terms and conditions as those
contained in Landlord's notice. If Landlord changes the terms and conditions on
which Landlord is offering any such space, Landlord shall resubmit such offer to
Tenant, which shall have thirty (30) days in which to accept any new offer. If
Tenant accepts any such offer, the space offered shall be added to the Premises
at the rental set forth in Landlord's offer on the same terms and conditions set
forth in Landlord's offer. In the event Tenant leases such space, Tenant's
obligation to pay rent on such space shall commence upon delivery of said space
finished as specified in Landlord's offer.
27. MEMORANDUM OF LEASE. Upon either party's request, Landlord and
Tenant shall execute a memorandum of this Lease in the form attached hereto as
Exhibit D to be recorded in the Hamilton County Register's Office.
28. GOVERNING LAW. This Lease shall be governed by and construed in
accordance with the laws of the State of Tennessee.
29. ATTORNEY'S FEES. If either Landlord or Tenant shall engage legal
counsel for the enforcement of any of the terms of this Lease, the defaulting
party shall be responsible for and shall promptly pay to the prevailing party
reasonable attorney's fees and other expenses, including without limitation,
court costs and fees, actually incurred by the prevailing party as a result of
the default.
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30. MODIFICATION. This Lease sets forth the promises, agreements,
conditions and understandings between Landlord and Tenant relative to the
Premises. No subsequent alterations, amendments, charges or additions to this
Lease shall be effective against either party unless reduced to writing and
executed by Landlord and Tenant.
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IN WITNESS WHEREOF, the parties hereto have cause this Lease to be duly
executed as of the date first above written.
LANDLORD: ____________________________
JOSEPH E. PROCTOR
TENANT: CULP, INC., a North Carolina corporation
By: _______________________
Its: _______________________
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Exhibit A
to Lease Agreement
Legal Description of Land
All that certain parcel of land located in Hamilton County, Tennessee
and more particularly described as follows:
BEING all of Lot No. 1 as shown on that Corrective Plat Part of East
End Land Company's Addition No. 1 as recorded in Plat Book 46 at Page 174 of the
Hamilton County Register's Office; and
BEING all of Tract 1 and Tract 2 as shown on that map of Mercer
Reynolds Resubdivision of the Old East End Land Co. Add. as recorded in Plat
Book 29 at Page 25 of the Hamilton County Register's Office.
$125,000,000
CREDIT AGREEMENT
dated as of
April 23, 1997
among
CULP, INC.
The Banks Listed Herein
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Documentation Agent
<PAGE>
TABLE OF CONTENTS
CREDIT AGREEMENT
Page
ARTICLE I
DEFINITIONS......................................................... 1
SECTION 1.01. Definitions.................................................... 1
SECTION 1.02. Accounting Terms and Determinations............................ 17
SECTION 1.03. References..................................................... 17
SECTION 1.04. Use of Defined Terms........................................... 17
SECTION 1.05. Terminology; Headings.......................................... 17
ARTICLE II
THE CREDITS......................................................... 18
SECTION 2.01. Commitments to Lend Syndicated Loans........................... 18
SECTION 2.02. Method of Borrowing............................................ 19
SECTION 2.03. Money Market Loans............................................. 22
SECTION 2.04. Notes.......................................................... 26
SECTION 2.05. Maturity of Loans.............................................. 26
SECTION 2.06. Interest Rates................................................. 27
SECTION 2.07. Fees........................................................... 30
SECTION 2.08. Optional Termination or Reduction of
Commitments............................................ 31
SECTION 2.09. Mandatory Reduction and Termination of
Commitments............................................ 31
SECTION 2.10. Optional Prepayments........................................... 32
SECTION 2.11. Mandatory Prepayments.......................................... 32
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SECTION 2.12. General Provisions as to Payments.............................. 33
SECTION 2.13. Computation of Interest and Fees............................... 35
ARTICLE III
CONDITIONS TO BORROWINGS............................................... 36
SECTION 3.01. Conditions to First Borrowing.................................. 36
SECTION 3.02. Conditions to All Borrowings................................... 37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES............................. 38
SECTION 4.01. Corporate Existence and Power.................................. 38
SECTION 4.02. Corporate and Governmental Authorization;
No Contravention....................................... 39
SECTION 4.03. Binding Effect................................................. 39
SECTION 4.04. Financial Information.......................................... 39
SECTION 4.05. No Litigation.................................................. 39
SECTION 4.06. Compliance with ERISA.......................................... 40
SECTION 4.07. Compliance with Laws; Payment of Taxes......................... 40
SECTION 4.08. Subsidiaries................................................... 40
SECTION 4.09. Investment Company Act......................................... 41
SECTION 4.10. Public Utility Holding Company Act............................. 41
SECTION 4.11. Ownership of Property; Liens................................... 41
SECTION 4.12. No Default..................................................... 41
SECTION 4.13. Full Disclosure................................................ 41
SECTION 4.14. Environmental Matters.......................................... 41
SECTION 4.15. Capital Stock.................................................. 42
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SECTION 4.16. Margin Stock................................................... 42
SECTION 4.17. Insolvency..................................................... 42
SECTION 4.18. Insurance...................................................... 43
SECTION 5.01. Information.................................................... 43
SECTION 5.02. Inspection of Property, Books and Records...................... 45
SECTION 5.03. Maintenance of Existence....................................... 46
SECTION 5.04. Dissolution.................................................... 46
SECTION 5.05. Consolidations, Mergers and Sales of Assets.................... 46
SECTION 5.06. Use of Proceeds................................................ 46
SECTION 5.07. Compliance with Laws; Payment of Taxes......................... 47
SECTION 5.08. Insurance...................................................... 47
SECTION 5.09. Change in Fiscal Year.......................................... 47
SECTION 5.10. Maintenance of Property........................................ 47
SECTION 5.11. Environmental Notices.......................................... 48
SECTION 5.12. Environmental Matters.......................................... 48
SECTION 5.13. Environmental Release.......................................... 48
SECTION 5.14. Transactions with Affiliates................................... 48
SECTION 5.15. Loans or Advances.............................................. 48
SECTION 5.16. Investments.................................................... 49
SECTION 5.17. Priority Debt.................................................. 49
SECTION 5.18. Restrictions on Ability of Subsidiaries
to Pay Dividends....................................... 51
SECTION 5.19. Interest Coverage.............................................. 51
SECTION 5.20. Ratio of Total Debt to Total Capitalization.................... 51
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SECTION 5.21. Debt/EBITDA Ratio.............................................. 51
SECTION 5.22. Acquisitions................................................... 51
ARTICLE VI
DEFAULTS........................................................... 51
SECTION 6.01. Events of Default.............................................. 51
SECTION 6.02. Notice of Default.............................................. 54
ARTICLE VII
THE AGENT.......................................................... 55
SECTION 7.01. Appointment; Powers and Immunities............................. 55
SECTION 7.02. Reliance by Agent.............................................. 56
SECTION 7.03. Defaults....................................................... 56
SECTION 7.04. Rights of Agent as a Bank and its Affiliates................... 56
SECTION 7.05. Indemnification................................................ 57
SECTION 7.06 CONSEQUENTIAL DAMAGES.......................................... 57
SECTION 7.07. Payee of Note Treated as Owner................................. 57
SECTION 7.08. Nonreliance on Agent and Other Banks........................... 58
SECTION 7.09. Failure to Act................................................. 58
SECTION 7.10. Resignation or Removal of Agent................................ 58
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION............................. 59
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair................................... 59
SECTION 8.02. Illegality..................................................... 59
SECTION 8.03. Increased Cost and Reduced Return.............................. 60
<PAGE>
SECTION 8.04. Base Rate Loans or Other Fixed Rate Loans
Substituted for Affected Fixed Rate Loans.............. 62
SECTION 8.05. Compensation................................................... 62
SECTION 8.06. Failure to Pay in Foreign Currency............................. 63
SECTION 8.07. Judgment Currency.............................................. 63
ARTICLE IX
MISCELLANEOUS....................................................... 64
SECTION 9.01. Notices........................................................ 64
SECTION 9.02. No Waivers..................................................... 64
SECTION 9.03. Expenses; Documentary Taxes.................................... 64
SECTION 9.04. Indemnification................................................ 65
SECTION 9.05 Setoff; Sharing of Setoffs..................................... 65
SECTION 9.06. Amendments and Waivers......................................... 66
SECTION 9.07. No Margin Stock Collateral..................................... 67
SECTION 9.08. Successors and Assigns......................................... 67
SECTION 9.09. Confidentiality................................................ 70
SECTION 9.10. Representation by Banks........................................ 71
SECTION 9.11. Obligations Several............................................ 71
SECTION 9.12. Georgia Law.................................................... 71
SECTION 9.13. Severability................................................... 71
SECTION 9.14. Interest....................................................... 71
SECTION 9.15. Interpretation................................................. 72
SECTION 9.16. Waiver of Jury Trial; Consent to
Jurisdiction........................................... 72
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SECTION 9.17. Counterparts................................................... 73
SECTION 9.18. Source of Funds -- ERISA....................................... 73
SECTION 9.19. Replacement of Banks........................................... 73
EXHIBIT A-1 Form of Syndicated Dollar Loan Note
EXHIBIT A-2 Form of Foreign Currency Loan Note
EXHIBIT A-3 Form of Money Market Loan Note
EXHIBIT B Form of Opinion of Counsel for the Borrower
EXHIBIT C Form of Opinion of Special Counsel for the Agent
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Notice of Borrowing
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Closing Certificate
EXHIBIT H Form of Officer's Certificate
EXHIBIT I Form of Money Market Quote Request
EXHIBIT J Form of Money Market Quote
Schedule 4.08 Subsidiaries
Schedule 5.15 Loans and Advances existing on the Closing Date
Schedule 5.16 Investments existing on the Closing Date
Schedule 5.17 Debt of Subsidiaries existing on the Closing Date
<PAGE>
CREDIT AGREEMENT
AGREEMENT dated as of April 23, 1997 among CULP, INC., the BANKS listed
on the signature pages hereof, WACHOVIA BANK OF GEORGIA, N.A., as Agent and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as Documentation Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this Section 1.01
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:
"Acquisition" means the acquisition by the Borrower or any of its
Subsidiaries of all or substantially all of the assets or stock of any Person.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.06(c).
"Affiliate" of any relevant Person means (i) any Person that directly,
or indirectly through one or more intermediaries, controls the relevant Person
(a "Controlling Person"), (ii) any Person (other than the relevant Person or a
Subsidiary of the relevant Person) which is controlled by or is under common
control with a Controlling Person, or (iii) any Person (other than a Subsidiary
of the relevant Person) of which the relevant Person owns, directly or
indirectly, 20% or more of the common stock or equivalent equity interests. As
used herein, the term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means Wachovia Bank of Georgia, N.A., a national banking
association organized under the laws of the United States of America, in its
capacity as agent for the Banks hereunder, and its successors and permitted
assigns in such capacity.
<PAGE>
"Agent's Letter Agreement" means that certain letter agreement, dated
as of December 13, 1996, between the Borrower and the Agent relating to the
structure of the Loans, and certain fees from time to time payable by the
Borrower to the Agent, together with all amendments and supplements thereto.
"Agreement" means this Credit Agreement, together with all amendments
and supplements hereto.
"Applicable Margin" has the meaning set forth in Section 2.06(a).
"Assignee" has the meaning set forth in Section 9.08(c).
"Assignment and Acceptance" means an Assignment and Acceptance executed
in accordance with Section 9.08(c) in the form attached hereto as Exhibit D.
"Authority" has the meaning set forth in Section 8.02.
"Bank" means each bank listed on the signature pages hereof as having a
Commitment, and its successors and assigns.
"Base Rate" means for any Base Rate Loan for any day, the rate per
annum equal to the higher as of such day of (i) the Prime Rate, and (ii)
one-half of one percent above the Federal Funds Rate. For purposes of
determining the Base Rate or the Federal Funds Rate for any day, changes in the
Prime Rate shall be effective on the date of each such change.
"Base Rate Loan" means a Loan which bears or is to bear interest at a
rate based upon the Base Rate, and is to be made as a Base Rate Loan pursuant to
the applicable Notice of Borrowing, Section 2.02(f), or Article VIII, as
applicable.
"Restricted Investments" means "restricted investments" consisting of
bond proceeds held in escrow by the bond trustee in connection with industrial
development revenue bonds.
"Borrower" means Culp, Inc., a North Carolina corporation, and its
successors and permitted assigns.
"Borrowing" means a borrowing hereunder consisting of Loans made to the
Borrower (i) at the same time by all of the
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Banks, in the case of a Syndicated Borrowing, or (ii) separately by one or more
Banks, in the case of a Money Market Borrowing, in each case pursuant to Article
II. A Borrowing is a "Base Rate Borrowing" if such Loans are Base Rate Loans or
a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans. A Syndicated
Borrowing is a "Syndicated Dollar Borrowing" if it is a Base Rate Borrowing or a
Euro-Dollar Borrowing and a "Foreign Currency Borrowing" if such Loans are
Foreign Currency Loans. A Borrowing is a "Money Market Borrowing" if such Loans
are made pursuant to Section 2.03 or a "Syndicated Borrowing" if such Loans are
made pursuant to Section 2.01.
"Capital Stock" means any nonredeemable capital stock of the Borrower
or any Consolidated Subsidiary (to the extent issued to a Person other than the
Borrower), whether common or preferred.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. ss. 9601 et. seq. and its implementing regulations
and amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section 8.02.
"Chattanooga Sale/Leaseback Transaction" means a transaction whereby
the Borrower would: (i) convey to The Industrial Development Board of the City
of Chattanooga (the "Issuer) certain items of machinery, equipment and related
personal property owned (or to be owned) by the Borrower in connection with the
business currently conducted at its Rossville, Georgia plant (the "Project");
(ii) lease back the Project from the Issuer for payments in a nominal amount in
lieu of ad valorem taxes for a period ending December 31, 2000; (iii) have the
right to terminate the lease at any time upon written notice; (iv) have the
option to purchase the Project upon any lease termination (whether at maturity
or upon early termination by the Borrower) for a purchase price of $1; and (v)
limit the Project to assets with a cost basis not to exceed $20,000,000 in the
aggregate.
"Closing Certificate" has the meaning set forth in Section 3.01(e).
3
<PAGE>
"Closing Date" means April 23, 1997.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
"Commitment" means, with respect to each Bank, (i) the amount set forth
opposite the name of such Bank on the signature pages hereof, and (ii) as to any
Bank which enters into any Assignment and Acceptance (whether as transferor Bank
or as Assignee thereunder), the amount of such Bank's Commitment after giving
effect to such Assignment and Acceptance, in each case as such amount may be
reduced from time to time pursuant to Sections 2.08 and 2.09.
"Commitment Reduction Date" means each of April 23, 1998, April 23,
1999, April 23, 2000 and April 23, 2001.
"Compliance Certificate" has the meaning set forth in Section 5.01(c).
"Consolidated Net Interest Expense" for any period means interest,
whether expensed or capitalized, in respect of Debt of the Borrower or any of
its Consolidated Subsidiaries outstanding during such period, net of any
interest income attributable to Restricted Investments.
"Consolidated Net Income" means, for any period, the Net Income of the
Borrower and its Consolidated Subsidiaries determined on a consolidated basis,
but excluding (i) extraordinary items and other non-recurring items and (ii) any
equity interests of the Borrower or any Subsidiary in the unremitted earnings of
any Person that is not a Subsidiary.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, would be consolidated
with those of the Borrower in its consolidated financial statements as of such
date.
"Consolidated Total Assets" means, at any time, the total assets of the
Borrower and its Consolidated Subsidiaries, determined on a consolidated basis,
as set forth or reflected on the most recent consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries, prepared in accordance with GAAP.
4
<PAGE>
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Culp Family" means Robert G. Culp, III, his spouse, his mother, his
siblings, his lineal descendants, and any trusts established for the benefit of
any of them.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under capital leases,
(v) all obligations of such Person to reimburse any bank or other Person in
respect of amounts payable under a banker's acceptance, (vi) all Redeemable
Preferred Stock of such Person (in the event such Person is a corporation),
(vii) all obligations of such Person to reimburse any bank or other Person in
respect of amounts paid or to be paid under a letter of credit or similar
instrument, (viii) all Debt of others secured by a Lien on any asset of such
Person, whether or not such Debt is assumed by such Person, (ix) all obligations
of such Person with respect to interest rate protection agreements, foreign
currency exchange agreements or other hedging arrangements (valued as the
termination value thereof computed in accordance with a method approved by the
International Swap Dealers Association and agreed to by such Person in the
applicable hedging agreement, if any), and (x) all Debt of others Guaranteed by
such Person.
"Debt/EBITDA Ratio" means at any time the ratio of (i) Total Debt to
(ii) EBITDA.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day, the sum of
2% plus the then highest interest rate (including the Applicable Margin) which
may be applicable to any Loans
5
<PAGE>
hereunder (irrespective of whether any such type of Loans are actually
outstanding hereunder).
"Dollar Equivalent" means the Dollar equivalent of the amount of a
Foreign Currency Loan, determined by the Agent on the basis of its spot rate for
the purchase of the appropriate Foreign Currency with Dollars.
"Dollars" or "$" means dollars in lawful currency of the United States
of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Georgia are authorized by law to close.
"EBIT" means at any time the sum of the following, determined on a
consolidated basis for the Borrower and its Consolidated Subsidiaries, at the
end of each Fiscal Quarter, for the Fiscal Quarter just ended and the 3
immediately preceding Fiscal Quarters: (i) Consolidated Net Income; plus (ii)
Consolidated Net Interest Expense; plus (iii) taxes on income.
"EBITDA" means at any time the sum of the following, determined on a
consolidated basis for the Borrower and its Consolidated Subsidiaries, at the
end of each Fiscal Quarter, for the Fiscal Quarter just ended and the 3
immediately preceding Fiscal Quarters (and with respect to any Acquisition which
is made during such 4 Fiscal Quarter Period, the Consolidated Subsidiary
acquired in such Acquisition shall be included as if it had been a Consolidated
Subsidiary prior to the commencement of such 4 Fiscal Quarter Period): (i) EBIT;
plus (ii) depreciation; plus (iii) amortization; plus (iv) other non-cash
charges.
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of the Borrower or any Subsidiary required by any Environmental
Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not
6
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entered upon consent or written agreements with an Environmental Authority or
other entity arising from or in any way associated with any Environmental
Requirement, whether or not incorporated in a judgment, decree or order.
"Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.
"Environmental Notices" means notice from any Environmental Authority
or by any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any, violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to the Borrower, any Subsidiary
or the Properties, including but not limited to any such requirement under
CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Euro-Dollar Loan" means a Loan which bears or is to bear interest at a
rate based upon the London Interbank Offered
7
<PAGE>
Rate, and to be made as a Euro-Dollar Loan pursuant to the applicable Notice of
Borrowing.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.06(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Domestic Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day, and
(ii) if such rate is not so published for any day, the Federal Funds Rate for
such day shall be the average rate charged to the Agent on such day on such
transactions, as determined by the Agent.
"Fiscal Month" means any fiscal month of the Borrower.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower, ending on the
Sunday closest to April 30 of each year.
"Fixed Rate Borrowing" means a Euro-Dollar Borrowing, a Money Market
Borrowing or a Foreign Currency Borrowing, or any or all of them, as the context
shall require.
"Fixed Rate Loans" means Euro-Dollar Loans, Money Market Loans, Foreign
Currency Loans or any or all of them, as the context shall require.
"Foreign Currencies" means, individually and collectively, as the
context shall require, each of the following, if offered and subject to
availability: (i) British pounds sterling, French francs, Canadian dollars,
Federal Republic of Germany deutschemarks, Italian lira and Japanese yen;
8
<PAGE>
and (ii) at the option of the Banks, any other currency which is freely
transferable and convertible into Dollars; provided, however, that no such other
currency under this clause (ii) shall be included as a Foreign Currency
hereunder, or included in a Notice of Borrowing, unless (x) a Borrower has first
submitted a request to the Agent and the Banks that it be so included, and (y)
the Agent and the Banks, in their sole discretion, have agreed to such request.
"Foreign Currency Borrowing" has the meaning set forth in the
definition of "Borrowing".
"Foreign Currency Business Day" shall mean any Domestic Business Day,
excluding one on which trading is not carried on by and between banks in
deposits of the applicable Foreign Currency in the applicable interbank market
for such Foreign Currency.
"Foreign Currency Loan" means a Loan to be made in a Foreign Currency
pursuant to the applicable Notice of Borrowing.
"Foreign Currency Loan Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A-2, evidencing the obligation of the
Borrower to repay the Foreign Currency Loans, together with all amendments,
consolidations, modifications, renewals and supplements thereto.
"GAAP" means generally accepted accounting principles applied on a
basis consistent with those which, in accordance with Section 1.02, are to be
used in making the calculations for purposes of determining compliance with the
terms of this Agreement.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to provide collateral security, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in
9
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whole or in part), provided that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. ss. 6901 et seq. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in
any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation or (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.
"IBOR" has the meaning set forth in Section 2.05(e).
"Interest Period" means: (1) with respect to each Euro-Dollar Borrowing
and Foreign Currency Borrowing, subject to paragraph (c) below, the period
commencing on the date of such Borrowing and ending on the numerically
corresponding day in the first, second, third or sixth month thereafter, as the
Borrower may elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Euro-Dollar Business Day or Foreign Currency Business
Day, as the case may be, shall be extended to the next succeeding
Euro-Dollar Business Day or Foreign Currency Business Day, as the case
may be, unless such Euro-Dollar Business Day or Foreign Currency
Business Day, as the case may be, falls in another calendar month, in
which case such Interest Period shall, subject to paragraph (c) below
end on the next preceding Euro-Dollar Business Day or Foreign Currency
Business Day, as the case may be;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day or Foreign Currency Business Day, as the case may be, of a
calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall
end on the last
10
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Euro-Dollar Business Day or Foreign Currency Business Day, as the case
may be, of the appropriate subsequent calendar month; and
(c) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
(2) With respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Domestic Business Day shall be extended to the next
succeeding Domestic Business Day; and
(b) no Interest Period which begins before the Termination
Date and would otherwise end after the Termination Date may be
selected.
(3) With respect to each Money Market Borrowing, the period commencing on the
date of such Borrowing and ending on the Stated Maturity Date or such other date
or dates as may be specified in the applicable Money Market Quote; provided
that:
(a) any Interest Period (subject to clause (b) below) which
would otherwise end on a day which is not a Domestic Business Day shall
be extended to the next succeeding Domestic Business Day; and
(b) no Interest Period may be selected which begins before the
Termination Date and would otherwise end after the Termination Date.
"Investment" means any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise; provided, however, that the term Investment shall not
include an Acquisition.
"Joint Venture" means any Person in which the Borrower and one or more
other Persons makes an Investment for a limited purpose operation and which does
not constitute a Subsidiary.
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"Lending Office" means, as to each Bank, its office located at its
address set forth on the signature pages hereof (or identified on the signature
pages hereof as its Lending Office) or such other office as such Bank may
hereafter designate as its Lending Office by notice to the Borrower and the
Agent. Each Bank may designate a Lending Office for Syndicated Dollar Loans and
a different Lending Office for Foreign Currency Loans, and the term "Lending
Office" shall in such case mean either such Lending Office, as the context shall
require.
"Lien" means, with respect to any asset, any mortgage, deed to secure
debt, deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Loan" means a Base Rate Loan, Euro-Dollar Loan, Money Market Loan,
Syndicated Dollar Loan, Foreign Currency Loan or Syndicated Loan, and "Loans"
means Base Rate Loans, Euro-Dollar Loans, Money Market Loans, Syndicated Dollar
Loans, Foreign Currency Loans, Syndicated Loans or any or all of them, as the
context shall require.
"Loan Documents" means this Agreement, the Notes, any other document
evidencing, relating to or securing the Loans, and any other document or
instrument delivered from time to time in connection with this Agreement, the
Notes or the Loans, as such documents and instruments may be amended or
supplemented from time to time.
"London Interbank Offered Rate" has the meaning set forth in Section
2.06(c).
"Margin Stock" means "margin stock" as defined in Regulations G, T, U
or X.
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"Material Adverse Effect" means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the
financial condition, operations, business or properties of the Borrower and its
Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the
Agent or the Banks under the Loan Documents, or the ability of the Borrower to
perform its obligations under the Loan Documents to which it is a party, as
applicable, or (c) the legality, validity or enforceability of any Loan
Document.
"Money Market Borrowing Date" has the meaning specified in Section
2.03.
"Money Market Loan" means a Loan which bears or is to bear interest at
a rate determined pursuant to Section 2.03 and to be made as a Money Market Loan
pursuant thereto.
"Money Market Loan Notes" means the promissory notes of the Borrower,
substantially in the form of Exhibit A-3, evidencing the obligation of the
Borrower to repay the Money Market Loans, together with all amendments,
consolidations, modifications, renewals and supplements thereto.
"Money Market Quote" has the meaning specified in Section 2.03.
"Money Market Quote Request" has the meaning specified in Section
2.03(b).
"Money Market Rate" has the meaning specified in Section
2.03(c)(ii)(C).
"Moody's" means Moody's Investor Service, Inc.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Net Income" means, as applied to any Person for any period, the
aggregate amount of net income of such Person, after taxes, for such period, as
determined in accordance with GAAP.
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"Notes" means the Syndicated Dollar Loan Notes, the Money Market Loan
Notes, the Foreign Currency Loan Notes, or any or all of them, as the context
shall require.
"Notice of Borrowing" has the meaning set forth in Section 2.02(a).
"Officer's Certificate" has the meaning set forth in Section 3.01(f).
"Participant" has the meaning set forth in Section 9.08(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Performance Pricing Determination Date" has the meaning set forth in
Section 2.06(a).
"Person" means an individual, a corporation, a partnership, limited
liability corporation, an unincorporated association, a trust or any other
entity or organization, including, but not limited to, a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding 5 plan years made contributions.
"Prime Rate" refers to that interest rate so denominated and set by WBG
from time to time as an interest rate basis for borrowings. The Prime Rate is
but one of several interest rate bases used by WBG. WBG lends at interest rates
above and below the Prime Rate.
"Properties" means all real property owned, leased or otherwise used or
occupied by the Borrower or any Subsidiary, wherever located.
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"Redeemable Preferred Stock" of any Person means any preferred stock
issued by such Person which is at any time prior to the Termination Date either
(i) mandatorily redeemable (by sinking fund or similar payments or otherwise) or
(ii) redeemable at the option of the holder thereof.
"Refunding Loan" means a new Syndicated Loan made on the day on which
an outstanding Syndicated Loan is maturing or a Base Rate Borrowing is being
converted to a Fixed Rate Borrowing, if and to the extent that the proceeds
thereof are used entirely for the purpose of paying such maturing Loan or Loan
being converted, excluding any difference between the amount of such maturing
Loan or Loan being converted and any greater amount being borrowed on such day
and actually either being made available to the Borrower pursuant to Section
2.02(c) or remitted to the Agent as provided in Section 2.12, in each case as
contemplated in Section 2.02(d).
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Required Banks" means at any time Banks having at least 66 2/3% of the
aggregate amount of the Commitments or, if
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the Commitments are no longer in effect, Banks holding at least 66 2/3% of the
aggregate outstanding principal amount of the sum of the (i) Syndicated Loans
and (ii) Money Market Loans.
"Reuters Screen" shall mean, when used in connection with any
designated page and the London Interbank Offered Rate or IBOR, the display page
so designated on the Reuter Monitor Money Rates Service (or such other page as
may replace that page on that service for the purpose of displaying rates
comparable to the London Interbank Offered Rate or IBOR).
"S&P" means Standard & Poor's Rating Group, a division of McGraw-Hill,
Inc.
"Special Purchase Money Liens" means Liens which: (i) are incurred in
connection with the purchase of looms; (ii) secure Debt consisting only of the
deferred purchase price of such looms, and no other Debt, which deferred
purchase price Debt (x) is non-interest bearing and (y) is payable in no more
than 2 years from the date of purchase; and (iii) encumber only on the looms so
purchased, and not on any other assets.
"Stated Maturity Date" means, with respect to any Money Market Loan,
the Stated Maturity Date therefor specified by the Bank in the applicable Money
Market Quote.
"Stockholders' Equity" means, at any time, the shareholders' equity of
the Borrower and its Consolidated Subsidiaries, as set forth or reflected on the
most recent consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries prepared in accordance with GAAP, but excluding any Redeemable
Preferred Stock of the Borrower or any of its Consolidated Subsidiaries.
Shareholders' equity generally would include, but not be limited to (i) the par
or stated value of all outstanding Capital Stock, (ii) capital surplus, (iii)
retained earnings, and (iv) various deductions such as (A) purchases of treasury
stock, (B) valuation allowances, (C) receivables due from an employee stock
ownership plan, (D) employee stock ownership plan debt guarantees, and (E)
translation adjustments for foreign currency transactions.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
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"Syndicated Dollar Loan Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit "A-1", evidencing the obligation of the
Borrower to repay the Syndicated Dollar Loans, together with all amendments,
consolidations, modifications, renewals, and supplements thereto.
"Syndicated Dollar Loan" means a Loan made in Dollars, which shall be
either a Base Rate Loan or a Euro-Dollar Loan.
"Syndicated Loans" means Syndicated Dollar Loans and Foreign Currency
Loans.
"Taxes" has the meaning set forth in Section 2.12(c).
"Telerate" means, when used in connection with any designated page and
IBOR, the display page so designated on the Dow Jones Telerate Service (or such
other page as may replace that page on that service for the purpose of
displaying rates comparable to IBOR).
"Termination Date" means whichever is applicable of (i) April 22, 2002,
(ii) the date the Commitments are terminated pursuant to Section 6.01 following
the occurrence of an Event of Default, or (iii) the date the Borrower terminates
the Commitments entirely pursuant to Section 2.08.
"Third Parties" means all lessees, sublessees, licensees and other
users of the Properties, excluding those users of the Properties in the ordinary
course of the Borrower's business and on a temporary basis.
"Total Debt" means at any date, without duplication, the sum of the
following, determined on a consolidated basis for the Borrower and its
Consolidated Subsidiaries: (i) all obligations for borrowed money; (ii) all
obligations as lessee under capital leases; (iii) all obligations with respect
to industrial revenue bonds (or letters of credit issued as an enhancement
thereto), excluding, however, Restricted Investments; and (iv) all Debt of the
types described in clauses (i), (ii) and (iii) of others Guaranteed by the
Borrower or any Consolidated Subsidiary.
"Total Capitalization" means at any date the sum of: (i) Stockholders'
Equity; plus (ii) Total Debt.
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"Transferee" has the meaning set forth in Section 9.08(d).
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the PBGC
or the Plan under Title IV of ERISA.
"Unused Commitment" means at any date, with respect to any Bank, an
amount equal to its Commitment less the aggregate outstanding principal amount
of its Syndicated Dollar Loans and Foreign Currency Loans, but not its Money
Market Loans.
"WBG" means Wachovia Bank of Georgia, N.A., a national banking
association, and its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Borrower and its Consolidated Subsidiaries delivered
to the Banks unless with respect to any such change concurred in by the
Borrower's independent public accountants or required by GAAP, in determining
compliance with any of the provisions of this Agreement or any of the other Loan
Documents: (i) the Borrower shall have objected to determining such compliance
on such basis at the time of delivery of such financial statements, or (ii) the
Required Banks shall so object in writing within 30 days after the delivery of
such financial statements, in either of which events such calculations shall be
made on a basis consistent with those used in the preparation of the latest
financial statements as to which such objection shall not have been made (which,
if
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objection is made in respect of the first financial statements delivered
under Section 5.01 hereof, shall mean the financial statements referred to in
Section 4.04).
SECTION 1.03. References. Unless otherwise indicated, references in
this Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other
Subdivisions are references to articles, exhibits, schedules, sections and other
subdivisions hereof.
SECTION 1.04. Use of Defined Terms. All terms defined in this Agreement
shall have the same defined meanings when used in any Exhibits or Schedules
hereto and in any of the other Loan Documents, unless otherwise defined therein
or unless the context shall require otherwise.
SECTION 1.05. Terminology; Headings. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the plural
shall include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend Syndicated Loans. Each Bank severally
agrees, on the terms and conditions set forth herein, to make Loans (which may
be, at the option of the Borrower and subject to the terms and conditions
hereof, Foreign Currency Loans or Syndicated Dollar Loans, and Syndicated Dollar
Loans may be Base Rate Loans or Euro-Dollar Loans) to the Borrower from time to
time before the Termination Date; provided that,
(i) immediately after each such Loan is made, the sum of the
aggregate outstanding principal amount of the Syndicated Dollar Loans
and the Dollar Equivalent of the aggregate principal amount of the
Foreign Currency Loans by such Bank shall not exceed the amount of its
Commitment, and
(ii) the aggregate outstanding principal amount of all
Syndicated Dollar Loans and Money Market Loans of all Banks and the
Dollar Equivalent of the aggregate principal amount
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of the Foreign Currency Loans of all Banks shall not exceed the
aggregate amount of all of the Commitments.
The Dollar Equivalent of each Foreign Currency Loan on the date each Foreign
Currency Loan is disbursed pursuant hereto shall be deemed to be the amount of
such Foreign Currency Loan outstanding for the purpose of calculating the
aggregate outstanding principal amount of the Foreign Currency Loans for
purposes of clause (ii) of Section 2.01 and clause (ii) of Section 2.03(a);
provided, however, that if at the time of receipt of any Notice of Borrowing or
Money Market Quote Request, the aggregate outstanding principal amount of all
Syndicated Dollar Loans and Money Market Loans of all Banks and the Dollar
Equivalent of the aggregate principal amount of the Foreign Currency Loans of
all Banks is equal to or greater than 50% of the aggregate amount of all of the
Commitments, then the Dollar Equivalent of each Foreign Currency Loan shall be
calculated as of such date, rather than as of the date such Foreign Currency
Loans were disbursed, and in the event that, as a result of such calculation,
the aggregate outstanding principal amount of all Syndicated Dollar Loans and
Money Market Loans of all Banks and the Dollar Equivalent of the aggregate
principal amount of the Foreign Currency Loans of all Banks exceeds the
aggregate amount of all of the Commitments, then (i) no additional Borrowings
shall be permitted and (ii) the Foreign Currency Loans shall be subject to
mandatory repayment pursuant to the provisions of Section 2.11(b). Each (x) Base
Rate Borrowing under this Section shall be in an aggregate principal amount of
$1,000,000 or any larger integral multiple of $500,000, and (ii) Euro-Dollar
Borrowing or Foreign Currency Borrowing under this Section shall be in an
aggregate principal amount of $ 5,000,000 (or the Dollar Equivalent thereof in
any Foreign Currency) or any larger integral multiple of $1,000,000 (or the
Dollar Equivalent thereof in any Foreign Currency) (except that any such
Syndicated Borrowing may be in the aggregate amount of the Unused Commitments)
and shall be made from the several Banks ratably in proportion to their
respective Commitments. Within the foregoing limits, the Borrower may borrow
under this Section, repay or, to the extent permitted by Section 2.10, prepay
Syndicated Loans and reborrow under this Section at any time before the
Termination Date. Notwithstanding the foregoing, if there shall occur on or
prior to the date of any Foreign Currency Loan any change in national or
international financial, political or economic conditions or currency exchange
rates or exchange controls which would in the reasonable opinion of the Agent
make it impracticable to make such Foreign Currency Loan, then the Agent
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shall forthwith give notice thereof to the Borrower and the Banks, and such
Foreign Currency Loan shall be made on such date as Base Rate Loans, unless the
Borrower notifies the Agent at least two Domestic Business Days before such date
that it elects not to borrow on such date.
SECTION 2.02. Method of Borrowing. (a) The Borrower shall give the
Agent notice (a "Notice of Borrowing"), which shall be substantially in the form
of Exhibit E, prior to 11:00 A.M. (Atlanta, Georgia time) for Dollar Borrowings,
and 9:30 A.M. (Atlanta, Georgia time) for Foreign Currency Borrowings, on the
same Domestic Business Day for each Base Rate Borrowing, at least 3 Euro-Dollar
Business Days before each Euro-Dollar Borrowing, and at least 3 Foreign Currency
Business Days before each Foreign Currency Borrowing, specifying:
(i) the date of such Syndicated Borrowing, which shall be a
Domestic Business Day in the case of a Base Rate Borrowing, a
Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, or a
Foreign Currency Business Day in the case of a Foreign Currency
Borrowing,
(ii) the aggregate amount of such Syndicated Borrowing,
(iii) whether the Syndicated Loans comprising such Borrowing
are to be Base Rate Loans, Euro-Dollar Loans or Foreign Currency Loans,
and if such Loans are to be Foreign Currency Loans, specifying the
Foreign Currency, and
(iv) in the case of a Fixed Rate Borrowing, the duration of
the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period; provided, that if one or more
Commitment Reduction Dates are scheduled to occur during the Interest
Period so selected, and as a result thereof (but for this proviso) the
Borrower shall become obligated to prepay or repay all or any portion
of the Loans on any of such Commitment Reduction Dates pursuant to
Section 2.10, then a portion of such Fixed Rate Borrowing which is
equal to the amount of the Loans that would otherwise be so prepaid or
repaid on any of such Commitment Reduction Dates either (A) shall have
applicable thereto an Interest Period or Interest
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Periods, as selected by the Borrower, ending on or before the
Commitment Reduction Date on which Loans corresponding in amount to
such portion would otherwise be prepaid or repaid, or (B) shall instead
be made as a Base Rate Borrowing.
(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's ratable share of
such Borrowing and such Notice of Borrowing, once received by the Agent, shall
not thereafter be revocable by the Borrower.
(c) Not later than 11:00 A.M. (Atlanta, Georgia time) on the date of
each Syndicated Borrowing, each Bank shall (except as provided in paragraph (d)
of this Section) make available its ratable share of such Syndicated Borrowing,
in Federal or other funds immediately available in Atlanta, Georgia, to the
Agent at its address referred to in Section 9.01, which funds shall be in
Dollars, if such Borrowing is a Dollar Borrowing, and in the applicable Foreign
Currency, if such Borrowing is a Foreign Currency Borrowing, determined pursuant
to Section 9.01. Unless the Agent determines that any applicable condition
specified in Article III has not been satisfied, the Agent will make the funds
so received from the Banks available to the Borrower at the Agent's aforesaid
address. Unless the Agent receives notice from a Bank, at the Agent's address
referred to in or specified pursuant to Section 9.01, no later than 4:00 P.M.
(local time at such address) on the Domestic Business Day before the date of a
Syndicated Borrowing stating that such Bank will not make a Syndicated Loan in
connection with such Syndicated Borrowing, the Agent shall be entitled to assume
that such Bank will make a Syndicated Loan in connection with such Syndicated
Borrowing and, in reliance on such assumption, the Agent may (but shall not be
obligated to) make available such Bank's ratable share of such Syndicated
Borrowing to the Borrower for the account of such Bank. If the Agent makes such
Bank's ratable share available to the Borrower and such Bank does not in fact
make its ratable share of such Syndicated Borrowing available on such date, the
Agent shall be entitled to recover such Bank's ratable share from such Bank or
the Borrower (and for such purpose shall be entitled to charge such amount to
any account of the Borrower maintained with the Agent), together with interest
thereon for each day during the period from the date of such Syndicated
Borrowing until such sum shall be paid in full at a rate per annum equal to the
rate at which the Agent determines that it obtained (or could have obtained)
overnight Federal funds to cover such amount for
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each such day during such period, provided that (i) any such payment by the
Borrower of such Bank's ratable share and interest thereon shall be without
prejudice to any rights that the Borrower may have against such Bank and (ii)
until such Bank has paid its ratable share of such Syndicated Borrowing,
together with interest pursuant to the foregoing, it will have no interest in or
rights with respect to such Syndicated Borrowing for any purpose hereunder. If
the Agent does not exercise its option to advance funds for the account of such
Bank, it shall forthwith notify the Borrower of such decision.
(d) If any Bank makes a new Syndicated Loan hereunder on a day on which
the Borrower is to repay all or any part of an outstanding Syndicated Loan from
such Bank, such Bank shall apply the proceeds of its new Syndicated Loan to make
such repayment as a Refunding Loan and only an amount equal to the difference
(if any) between the amount being borrowed and the amount of such Refunding Loan
shall be made available by such Bank to the Agent as provided in paragraph (c)
of this Section, or remitted by the Borrower to the Agent as provided in Section
2.12, as the case may be; provided, however, that if the Syndicated Loan which
is to be repaid is a Foreign Currency Loan, the foregoing provisions shall apply
only if the new Syndicated Loan is to be made in the same Foreign Currency.
(e) Notwithstanding anything to the contrary contained in this
Agreement, no Fixed Rate Borrowing may be made if there shall have occurred a
Default or an Event of Default, which Default or Event of Default shall not have
been cured or waived, and all Refunding Loans shall be made as Base Rate Loans
(but shall bear interest at the Default Rate, if applicable).
(f) In the event that a Notice of Borrowing fails to specify whether
the Syndicated Loans comprising such Borrowing are to be Base Rate Loans,
Euro-Dollar Loans or Foreign Currency Loans, such Syndicated Loans shall be made
as Base Rate Loans. If the Borrower is otherwise entitled under this Agreement
to repay any Syndicated Loans maturing at the end of an Interest Period
applicable thereto with the proceeds of a new Syndicated Borrowing, and the
Borrower fails to repay such Syndicated Loans using its own moneys and fails to
give a Notice of Borrowing in connection with such new Borrowing, a new
Syndicated Borrowing shall be deemed to be made on the date such Syndicated
Loans mature in an amount equal to the principal amount of the Syndicated Loans
so maturing, and the Syndicated Loans comprising such new Syndicated Borrowing
shall be Base Rate Loans, which
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<PAGE>
shall be in the Dollar Equivalent of such maturing Loans, if such maturing Loans
were Foreign Currency Loans.
(g) Notwithstanding anything to the contrary contained herein, there
shall not be more than 8 Fixed Rate Borrowings outstanding at any given time.
SECTION 2.03. Money Market Loans. (a) In addition to making Syndicated
Borrowings, the Borrower may, as set forth in this Section 2.03, request the
Banks to make offers to make Money Market Borrowings available to the Borrower.
The Banks may, but shall have no obligation to, make such offers and the
Borrower may, but shall have no obligation to, accept any such offers in the
manner set forth in this Section 2.03, provided that:
(i) the number of interest rates applicable to Money Market
Loans which may be outstanding at any given time is subject to the
provisions of Section 2.02(g);
(ii) the aggregate principal amount of all Money Market Loans,
together with the aggregate principal amount of all Syndicated Loans,
at any one time outstanding shall not exceed the aggregate amount of
the Commitments of all of the Banks at such time; and
(iii) the Money Market Loans of any Bank will be deemed to be
usage of the Commitments for the purpose of calculating availability
pursuant to Section 2.01(ii) and 2.03(a)(ii), but will not reduce such
Bank's obligation to lend its pro rata share of the remaining Unused
Commitment.
(b) When the Borrower wishes to request offers to make Money Market
Loans, it shall give the Agent (which shall promptly notify the Banks) notice
substantially in the form of Exhibit I hereto (a "Money Market Quote Request")
so as to be received no later than 10:00 A.M. (Atlanta, Georgia time) at least 1
Domestic Business Day prior to the date of the Money Market Borrowing proposed
therein (or such other time and date as the Borrower and the Agent, with the
consent of the Required Banks, may agree), specifying:
(i) the proposed date of such Money Market Borrowing, which
shall be a Euro-Dollar Business Day (the "Money Market Borrowing
Date");
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(ii) the maturity date (or dates) (each a "Stated Maturity
Date") for repayment of each Money Market Loan to be made as part of
such Money Market Borrowing (which Stated Maturity Date shall be that
date occurring not less than 7 days but not more than 180 days from the
date of such Money Market Borrowing); provided that the Stated Maturity
Date for any Money Market Loan may not extend beyond the Termination
Date (as in effect on the date of such Money Market Quote Request); and
(iii) the aggregate amount of principal to be requested by the
Borrower as a result of such Money Market Borrowing, which shall be at
least $5,000,000 (and in larger integral multiples of $1,000,000) but
shall not cause the limits specified in Section 2.03(a) to be violated.
The Borrower may request offers to make Money Market Loans having up to
2 different Stated Maturity Dates in a single Money Market Quote
Request; provided that the request for each separate Stated Maturity
Date shall be deemed to be a separate Money Market Quote Request for a
separate Money Market Borrowing. Except as otherwise provided in the
immediately preceding sentence, after the first Money Market Quote
Request has been given hereunder, no Money Market Quote Request shall
be given until at least 5 Domestic Business Days after all prior Money
Market Quote Requests have been fully processed by the Agent, the Banks
and the Borrower pursuant to this Section 2.03.
(c) (i) Each Bank may, but shall have no obligation to, submit a
response containing an offer to make a Money Market Loan substantially in the
form of Exhibit J hereto (a "Money Market Quote") in response to any Money
Market Quote Request; provided that, if the Borrower's request under Section
2.03(b) specified more than 1 Stated Maturity Date, such Bank may, but shall
have no obligation to, make a single submission containing a separate offer for
each such Stated Maturity Date and each such separate offer shall be deemed to
be a separate Money Market Quote. Each Money Market Quote must be submitted to
the Agent not later than 10:00 A.M. (Atlanta, Georgia time) on the Money Market
Borrowing Date; provided that any Money Market Quote submitted by WBG may be
submitted, and may only be submitted, if WBG notifies the Borrower of the terms
of the offer contained therein not later than 9:45 A.M. (Atlanta, Georgia time)
on the Money Market Borrowing Date (or 15 minutes prior to the time that the
other
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Banks are required to have submitted their respective Money Market Quotes).
Subject to Section 6.01, any Money Market Quote so made shall be irrevocable
except with the written consent of the Agent given on the instructions of the
Borrower.
(ii) Each Money Market Quote shall specify:
(A) the proposed Money Market Borrowing Date and the
Stated Maturity Date therefor;
(B) the principal amounts of the Money Market Loan which
the quoting Bank is willing to make for the applicable Money
Market Quote, which principal amounts (x) may be greater than
or less than the Commitment of the quoting Bank, (y) shall be
at least $5,000,000 or a larger integral multiple of
$1,000,000, and (z) may not exceed the principal amount of the
Money Market Borrowing for which offers were requested;
(C) the rate of interest per annum (rounded upwards, if
necessary, to the nearest 1/100th of 1%) offered for each such
Money Market Loan (such amounts being hereinafter referred to
as the "Money Market Rate"); and
(D) the identity of the quoting Bank.
Unless otherwise agreed by the Agent and the Borrower, no Money Market Quote
shall contain qualifying, conditional or similar language or propose terms other
than or in addition to those set forth in the applicable Money Market Quote
Request (other than setting forth the principal amounts of the Money Market Loan
which the quoting Bank is willing to make for the applicable Interest Period)
and, in particular, no Money Market Quote may be conditioned upon acceptance by
the Borrower of all (or some specified minimum) of the principal amount of the
Money Market Loan for which such Money Market Quote is being made.
(d) The Agent shall as promptly as practicable after the Money Market
Quote is submitted (but in any event not later than 10:30 A.M. (Atlanta, Georgia
time)) on the Money Market Borrowing Date, notify the Borrower of the terms (i)
of any Money Market Quote submitted by a Bank that is in accordance with Section
2.03(c) and (ii) of any Money Market Quote that amends, modifies or is otherwise
inconsistent with a previous Money Market Quote submitted by such Bank with
respect to the same
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Money Market Quote Request. Any such subsequent Money Market Quote shall be
disregarded by the Agent unless such subsequent Money Market Quote is submitted
solely to correct a manifest error in such former Money Market Quote. The
Agent's notice to the Borrower shall specify (A) the principal amounts of the
Money Market Borrowing for which offers have been received and (B) the
respective principal amounts and Money Market Rates so offered by each Bank
(identifying the Bank that made each Money Market Quote).
(e) Not later than 11:00 A.M. (Atlanta, Georgia time) on the Money
Market Borrowing Date, the Borrower shall notify the Agent of its acceptance or
nonacceptance of the offers so notified to it pursuant to Section 2.03(d) and
the Agent shall promptly notify each Bank which submitted an offer. In the case
of acceptance, such notice shall specify the aggregate principal amount of
offers (for each Stated Maturity Date) that are accepted. The Borrower may
accept any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the related
Money Market Quote Request;
(ii) the aggregate principal amount of each Money Market Loan
comprising a Money Market Borrowing shall be at least $5,000,000 (and
in larger integral multiples of $1,000,000) but shall not cause the
limits specified in Section 2.03(a) to be violated;
(iii) acceptance of offers may only be made in ascending order
of Money Market Rates; and
(iv) the Borrower may not accept any offer where the Agent has
advised the Borrower that such offer fails to comply with Section
2.03(c)(ii) or otherwise fails to comply with the requirements of this
Agreement (including without limitation, Section 2.03(a)).
If offers are made by 2 or more Banks with the same Money Market Rates for a
greater aggregate principal amount than the amount in respect of which offers
are accepted for the related Stated Maturity Date, the principal amount of Money
Market Loans in respect of which such offers are accepted shall be allocated by
the Borrower among such Banks as nearly as possible in proportion to the
aggregate principal amount of such offers. Determinations
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by the Borrower of the amounts of Money Market Loans shall be conclusive in the
absence of manifest error.
(f) Any Bank whose offer to make any Money Market Loan has been
accepted shall, not later than 12:00 P.M. (Atlanta, Georgia time) on the Money
Market Borrowing Date, make the amount of such Money Market Loan allocated to it
available to the Agent at its address referred to in Section 9.01 in immediately
available funds. The amount so received by the Agent shall, subject to the terms
and conditions of this Agreement, be made available to the Borrower on such date
by depositing the same, in immediately available funds, not later than 4:00 P.M.
(Atlanta, Georgia time), in an account of the Borrower maintained with WBG.
(g) After any Money Market Loan has been funded, the Agent shall notify
the Banks of the aggregate principal amount of the Money Market Quotes received
and the highest and lowest rates included in such Money Market Quotes.
SECTION 2.04. Notes. (a) The Syndicated Loans of each Bank shall be
evidenced by a single Syndicated Dollar Loan Note in an amount equal to the
original principal amount of such Bank's Commitment and a single Foreign
Currency Loan Note, each payable to the order of such Bank for the account of
its Lending Office.
(b) The Money Market Loans made by any Bank to the Borrower shall be
evidenced by a single Money Market Loan Note payable to the order of such Bank
for the account of its Lending Office in an amount equal to the original
principal amount of the aggregate Commitments.
(c) Upon receipt of each Bank's Notes pursuant to Section 3.01, the
Agent shall deliver such Notes to such Bank. Each Bank shall record, and prior
to any transfer of its Notes shall endorse on the schedules forming a part
thereof appropriate notations to evidence, the date, amount and maturity of, and
effective interest rate for, each Loan made by it, the date and amount of each
payment of principal made by the Borrower with respect thereto, whether such
Loan is a Base Rate Loan, Euro-Dollar Loan or Foreign Currency Loan, and if a
Foreign Currency Loan, a specification of the Foreign Currency, and such
schedules of each such Bank's Notes shall constitute rebuttable presumptive
evidence of the principal amounts owing and unpaid on such Bank's Notes;
provided that the failure of any Bank to make, or any error in making, any such
recordation or endorsement shall
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not affect the obligation of the Borrower hereunder or under the Notes or the
ability of any Bank to assign its Notes. Each Bank is hereby irrevocably
authorized by the Borrower so to endorse its Notes and to attach to and make a
part of any Note a continuation of any such schedule as and when required.
SECTION 2.05. Maturity of Loans. (a) Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
(b) Notwithstanding the foregoing, the outstanding principal amount of
the Loans, if any, together with all accrued but unpaid interest thereon, if
any, shall be due and payable on the Termination Date.
SECTION 2.06. Interest Rates. (a) "Applicable Margin" means:
(i) for the period commencing on the Closing Date to and
including the first Performance Pricing Determination Date, (x) for any
Base Rate Loan, 0.00%, and (y) for any Euro-Dollar Loan or Foreign
Currency Loan, 0.275%; and
(ii) from and after the first Performance Pricing
Determination Date, (x) for any Base Rate Loan, 0.00% and (y) for each
Euro-Dollar Loan, the percentage determined on each Performance Pricing
Determination Date by reference to the table set forth below as to such
type of Loan and the Debt/EBITDA Ratio for the quarterly or annual
period ending immediately prior to such Performance Pricing
Determination Date.
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Debt/EBITDA Ratio Applicable
----------------- -----------------
Margin < 1.0 to 1.0 0.25%
> 1.0 to 1.0 but
<= 2.0 to 1.0 0.275%
> 2.0 to 1.0 but
<= 2.5 to 1.0 0.30%
> 2.5 to 1.0 but
<= 3.0 to 1.0 0.3625%
> 3.0 to 1.0 0.55%
In determining interest for purposes of this Section 2.06 and fees for
purposes of Section 2.07, the Borrower and the Banks shall refer to the
Borrower's most recent consolidated quarterly and annual (as the case may be)
financial statements delivered pursuant to Section 5.01(a) or (b), as the case
may be. If such financial statements require a change in interest pursuant to
this Section 2.06 or fees pursuant to Section 2.07, the Borrower shall deliver
to the Agent, along with such financial statements, a notice to that effect,
which notice shall set forth in reasonable detail the calculations supporting
the required change. The "Performance Pricing Determination Date" is the date
which is the last date on which such financial statements are permitted to be
delivered pursuant to Section 5.01(a) or (b), as applicable. Any such required
change in interest and fees shall become effective on such Performance Pricing
Determination Date, and shall be in effect until the next Performance Pricing
Determination Date, provided that: (x) for Fixed Rate Loans, changes in interest
shall only be effective for Interest Periods commencing on or after the
Performance Pricing Determination Date; and (y) no fees or interest shall be
decreased pursuant to this Section 2.06 or Section 2.07 if a Default is in
existence on the Performance Pricing Determination Date.
(b) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day plus the
Applicable Margin. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of and, to the extent
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<PAGE>
permitted by applicable law, overdue interest on any Base Rate Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin plus the applicable Adjusted
London Interbank Offered Rate for such Interest Period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than 3 months, at intervals of 3 months after the first day
thereof. Any overdue principal of and, to the extent permitted by law, overdue
interest on any Euro-Dollar Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upwards,
if necessary, to the next higher 1/100th of 1%) by dividing (i) the applicable
London Interbank Offered Rate for such Interest Period by (ii) 1.00 minus the
Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan
means for the Interest Period of such Euro-Dollar Loan, the rate per annum
determined on the basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of such Euro-Dollar Loan offered for
a term comparable to such Interest Period, which rates appear on the Telerate
Page 3750 effective as of 11:00 A.M., London time, 2 Euro-Dollar Business Days
prior to the first day of such Interest Period, provided that if no such offered
rates appear on such page, the "London Interbank Offered Rate" for such Interest
Period will be the arithmetic average (rounded upward, if necessary, to the next
higher 1/100th of 1%) of rates quoted by not less than 2 major banks in New York
City, selected by the Agent, at approximately 10:00 A.M., New York City time, 2
Euro-Dollar Business Days prior to the first day of such Interest Period, for
deposits in Dollars offered to leading European banks for a period comparable to
such Interest Period in an amount comparable to the principal amount of such
Euro-Dollar Loan.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum
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reserve requirement for a member bank of the Federal Reserve System in respect
of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(d) Each Money Market Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Money Market Loan is
made until it becomes due, at a rate per annum equal to the applicable Money
Market Rate set forth in the relevant Money Market Quote. Such interest shall be
payable on the Stated Maturity Date thereof, and, if the Stated Maturity Date
occurs more than 90 days after the date of the relevant Money Market Loan, at
intervals of 90 days after the first day thereof. Any overdue principal of and,
to the extent permitted by law, overdue interest on any Money Market Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the Default Rate.
(e) Each Foreign Currency Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin plus the applicable Adjusted
IBOR Rate for such Interest Period. Such interest shall be payable for each
Interest Period on the last day thereof and, if such Interest Period is longer
than 3 months, at intervals of 3 months after the first day thereof. Any overdue
principal of and, to the extent permitted by law, overdue interest on any
Foreign Currency Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the Default Rate.
"Adjusted IBOR Rate" means, with respect to each Interest Period for a
Foreign Currency Loan, the sum of (i) the rate obtained by dividing (A) IBOR for
such Interest Period by (B) a percentage equal to 1 minus the then stated
maximum rate (stated as a decimal) of all reserve requirements (including,
without limitation, any marginal, emergency, supplemental, special or other
reserves) applicable to any member bank of the Federal Reserve System as defined
in Regulation D (or against any successor category of liabilities as defined in
Regulation D), plus (ii) if the relevant Foreign Currency Loan is in British
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pounds sterling, a percentage sufficient to compensate the Banks for the cost of
complying with any reserves, liquidity and/or special deposit requirements of
the Bank of England directly or indirectly affecting the maintenance or funding
of such Foreign Currency Loan.
"IBOR" means, for any Interest Period, with respect to Foreign Currency
Loans, the offered rate for deposits in the applicable Foreign Currency, for a
period comparable to the Interest Period and in an amount comparable to the
amount of such Foreign Currency Loan appearing on Telerate Page 3750, or, if it
is unavailable on Telerate, on the Reuters Screen Page FRBD, FRBE, FRBF or FRBG,
as applicable, or, if it is unavailable on either Telerate or the Reuters
Screen, then such rate shall be determined by the Agent from any other interest
rate reporting service of recognized standing designated in writing by the Agent
to the Borrower, as of 11:00 A.M. (London, England time) on the day that is two
Business Days prior to the first day of the Interest Period.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
Banks by telecopier of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) After the occurrence and during the continuance of an Event of
Default, the principal amount of the Loans (and, to the extent permitted by
applicable law, all accrued interest thereon) may, at the election of the
Required Banks, bear interest at the Default Rate.
SECTION 2.07. Fees. (a) The Borrower shall pay to the Agent, for the
ratable account of each Bank, a facility fee, calculated in the manner provided
in the last paragraph of Section 2.06(a)(ii), on the aggregate amount of such
Bank's Commitment (without taking into account the amount of the outstanding
Loans made by such Bank), at a rate per annum equal to: (i) for the period
commencing on the Closing Date to and including the first Performance Pricing
Determination Date, 0.125%; and (ii) from and after the first Performance
Pricing Determination Date, the percentage determined on each Performance
Pricing Determination Date by reference to the table set forth below and the
Debt/EBITDA Ratio for the quarterly or annual period ending immediately prior to
such Performance Pricing Determination Date:
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Debt/EBITDA Ratio Facility Fee
< 1.0 to 1.0 0.10%
> 1.0 to 1.0 but
<= 2.0 to 1.0 0.125%
> 2.0 to 1.0 but
<= 2.5 to 1.0 0.15%
> 2.5 to 1.0 but
<= 3.0 to 1.0 0.1875%
> 3.0 to 1.0 0.25%
Such facility fees shall accrue from and including the Closing Date to (but
excluding the Termination Date) and shall be payable on each March 31, June 30,
September 30 and December 31 and on the Termination Date.
(c) The Borrower shall pay to the Agent, for the account and sole
benefit of the Agent, such fees and other amounts at such times as set forth in
the Agent's Letter Agreement.
SECTION 2.08. Optional Termination or Reduction of Commitments. The
Borrower may, upon at least 3 Domestic Business Days' notice to the Agent,
terminate at any time, or proportionately reduce the Unused Commitments from
time to time by an aggregate amount of at least $5,000,000 or any larger
integral multiple of $1,000,000. If the Commitments are terminated in their
entirety, all accrued fees (as provided under Section 2.07) shall be due and
payable on the effective date of such termination.
SECTION 2.09. Mandatory Reduction and Termination of Commitments. (a)
The Commitments shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable on
such date.
(b) The aggregate amount of the Commitments shall be reduced by
$5,000,000 on each Commitment Reduction Date. Each such reduction shall be
applied to reduce the Commitments of the several Banks ratably. No optional
reduction of the Commitments
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<PAGE>
pursuant to Section 2.08 shall reduce the amount of any subsequent mandatory
reduction pursuant to this Section 2.09(b).
SECTION 2.10. Optional Prepayments. (a) The Borrower may, upon at least
1 Domestic Business Day's notice to the Agent, prepay any Base Rate Borrowing in
whole at any time, or from time to time in part in amounts aggregating at least
$1,000,000 or any larger integral multiple of $500,000, by paying the principal
amount to be prepaid together with accrued interest thereon to the date of
prepayment. Each such optional prepayment shall be applied to prepay ratably the
Base Rate Loans of the several Banks included in such Base Rate Borrowing.
(b) Except as provided in Section 8.02, the Borrower may not prepay all
or any portion of the principal amount of any Fixed Rate Loan prior to the
maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section
2.10, the Agent shall promptly notify each Bank of the contents thereof and of
such Bank's ratable share of such prepayment and such notice, once received by
the Agent, shall not thereafter be revocable by the Borrower.
SECTION 2.11. Mandatory Prepayments. (a) On each date on which the
Commitments are reduced pursuant to Section 2.08 or Section 2.09, the Borrower
shall repay or prepay such principal amount of the outstanding Loans, if any
(together with interest accrued thereon and any amount due under Section
8.05(a)), as may be necessary so that after such payment the aggregate unpaid
principal amount of the Loans does not exceed the aggregate amount of the
Commitments as then reduced.
(b) If the Agent determines at any time (either on its own initiative
or at the instance of any Bank) that the aggregate principal amount of the
Foreign Currency Loans outstanding (after converting each Foreign Currency Loan
to its Dollar Equivalent on the date of calculation) at any time exceeds 105% of
the aggregate amount of all of the Commitments less the outstanding aggregate
amount of all Syndicated Dollar Loans, then upon 5 Foreign Currency Business
Days' written notice from the Agent, the Borrower shall prepay an aggregate
principal amount of Foreign Currency Loans sufficient to bring the aggregate of
the Foreign Currency Loans outstanding within the aggregate amount of all of the
Commitments less the outstanding aggregate amount of all Syndicated Dollar
Loans. Nothing in the foregoing shall
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<PAGE>
require the Agent to make any such calculation unless expressly requested to do
so by the Required Banks.
(c) Each such payment or prepayment under paragraph (a) or (b) above
shall be applied ratably to the Loans of the Banks outstanding on the date of
payment or prepayment in the following order of priority:(i) first, to Base Rate
Loans; (ii) secondly, to Euro-Dollar Loans; and (iii) lastly, to Money Market
Loans.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 11:00 A.M. (Atlanta, Georgia time) on the date when
due, in Federal or other funds (subject to paragraph (c) below with respect to
Foreign Currency Loans) immediately available in Atlanta, Georgia, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Bank its ratable share of each such payment received by the Agent for
the account of the Banks.
(b) Whenever any payment of principal of, or interest on, the Base Rate
Loans or Money Market Loans or of fees hereunder shall be due on a day which is
not a Domestic Business Day, the date for payment thereof shall be extended to
the next succeeding Domestic Business Day. Whenever any payment of principal of
or interest on, the Euro-Dollar Loans or the Foreign Currency Loans shall be due
on a day which is not a Euro-Dollar Business Day or Foreign Currency Business
Day, as the case may be, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day or Foreign Currency Business Day, as
the case may be, unless such Euro-Dollar Business Day or Foreign Currency
Business Day, as the case may be, falls in another calendar month, in which case
the date for payment thereof shall be the next preceding Euro-Dollar Business
Day or Foreign Currency Business Day, as the case may be.
(c) All payments of principal and interest with respect to Foreign
Currency Loans shall be made in the Foreign Currency in which the related
Foreign Currency Loan was made.
(d) All payments of principal, interest and fees and all other amounts
to be made by a Borrower pursuant to this Agreement with respect to any Loan or
fee relating thereto shall be paid without deduction for, and free from, any
tax, imposts, levies, duties, deductions, or withholdings of any nature now or
at anytime hereafter imposed by any governmental authority or by
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<PAGE>
any taxing authority thereof or therein excluding in the case of each Bank,
taxes imposed on or measured by its net income, and franchise taxes imposed on
it, by the jurisdiction under the laws of which such Bank is organized or any
political subdivision thereof and, in the case of each Bank, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction of such
Bank's applicable Lending Office or any political subdivision thereof (all such
non-excluded taxes, imposts, levies, duties, deductions or withholdings of any
nature being "Taxes"). In the event that the Borrower is required by applicable
law to make any such withholding or deduction of Taxes with respect to any Loan
or fee or other amount, the Borrower shall pay such deduction or withholding to
the applicable taxing authority, shall promptly furnish to any Bank in respect
of which such deduction or withholding is made all receipts and other documents
evidencing such payment and shall pay to such Bank additional amounts as may be
necessary in order that the amount received by such Bank after the required
withholding or other payment shall equal the amount such Bank would have
received had no such withholding or other payment been made. If no withholding
or deduction of Taxes are payable in respect to any Loan or fee relating
thereto, the Borrower shall furnish any Bank, at such Bank's request, a
certificate from each applicable taxing authority or an opinion of counsel
acceptable to such Bank, in either case stating that such payments are exempt
from or not subject to withholding or deduction of Taxes. If the Borrower fails
to provide such original or certified copy of a receipt evidencing payment of
Taxes or certificate(s) or opinion of counsel of exemption, the Borrower agrees
to compensate such Bank for, and indemnify them with respect to, the tax
consequences of the Borrower's failure to provide evidence of tax payments or
tax exemption.
Each Bank which is not organized under the laws of the United States or
any state thereof agrees, as soon as practicable after receipt by it of a
request by the Borrower to do so, to file all appropriate forms and take other
appropriate action to obtain a certificate or other appropriate document from
the appropriate governmental authority in the jurisdiction imposing the relevant
Taxes, establishing that it is entitled to receive payments of principal and
interest under this Agreement and the Notes without deduction and free from
withholding of any Taxes imposed by such jurisdiction; provided, that, if it is
unable, for any reason, to establish such exemption, or to file such forms and,
in any event, during such period of time as such request for exemption is
pending, the Borrower shall nonetheless
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<PAGE>
remain obligated under the terms of the immediately preceding paragraph.
In the event any Bank receives a refund of any Taxes paid by the
Borrower pursuant to this Section 2.12(d), it will pay to the Borrower the
amount of such refund promptly upon receipt thereof; provided, however, if at
any time thereafter it is required to return such refund, the Borrower shall
promptly repay to it the amount of such refund.
If any Bank determines that it is entitled to a reduction in (and not a
complete exemption from) the applicable withholding Tax, such Bank shall notify
the Borrower and the Agent, and the Borrower and the Agent may withhold from any
interest payment to such Bank an amount equivalent to the applicable reduction
in withholding Tax. If any of the forms or other documentation required above
are not delivered to the Agent as therein required, then the Borrower and the
Agent may withhold from any interest payment to such Bank not providing such
forms or other documentation an amount equivalent to the applicable withholding
Tax.
Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower and the Banks
contained in this Section 2.12(d) shall be applicable with respect to any
Participant, Assignee or other Transferee, and any calculations required by such
provisions (i) shall be made based upon the circumstances of such Participant,
Assignee or other Transferee, and (ii) constitute a continuing agreement and
shall survive the termination of this Agreement and the payment in full or
cancellation of the Notes.
Any of the Agent or any Bank claiming any additional amounts payable
pursuant to this Section 2.12(d) shall use reasonable efforts (consistent with
legal and regulatory restrictions) to file any certificate or document
reasonably requested by the Borrower or to change the jurisdiction of its
applicable Lending Office if the making of such filing or change would avoid the
need for or reduce the amount of any such additional amounts that may thereafter
accrue or avoid the circumstances giving rise to such exercise and would not, in
the reasonable determination of the Agent or such Bank, as the case may be,
result in any additional costs, expenses or risks or be otherwise
disadvantageous to it. Each of the Agent and each Bank agrees to use reasonable
efforts to notify the Borrower as
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promptly as practicable upon its becoming aware that circumstances exist that
would cause the Borrower to become obligated to pay additional amounts to the
Agent or such Bank pursuant to this Section 2.12(d).
SECTION 2.13. Computation of Interest and Fees. Interest on Base Rate
Loans and Money Market Loans shall be computed on the basis of a year of 360
days and paid for the actual number of days elapsed (including the first day but
excluding the last day). Interest on Euro-Dollar Loans and on Foreign Currency
Loans shall be computed on the basis of a year of 360 days (except for any
Foreign Currency Loans outstanding in British pounds sterling or in Canadian
dollars (or, if selected as a Foreign Currency pursuant to clause (ii) of the
definition of "Foreign Currency," in Australian dollars, Belgian francs, Irish
punts or New Zealand dollars), which shall be computed on the basis o f a year
of 365 or 366 days, as the case may be) and paid for the actual number of days
elapsed, calculated as to each Interest Period from and including the first day
thereof to but excluding the last day thereof. Facility fees and any other fees
payable hereunder shall be computed on the basis of a year of 360 days and paid
for the actual number of days elapsed (including the first day but excluding the
last day).
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to First Borrowing. The obligation of each
Bank to make a Loan on the occasion of the first Borrowing is subject to the
satisfaction of the conditions set forth in Section 3.02 and receipt by the
Agent of the following (as to the documents described in paragraphs (a),(c), (d)
and (e) below (in sufficient number of counterparts for delivery of a
counterpart to each Bank and retention of one counterpart by the Agent):
(a) from each of the parties hereto of either (i) a duly
executed counterpart of this Agreement signed by such party or (ii) a
facsimile transmission of such executed counterpart with the original
to be sent to the Agent by overnight courier;
(b) a duly executed Syndicated Dollar Loan Note, a duly
executed
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Foreign Currency Loan Note and a duly executed Money Market Loan Note
for the account of each Bank complying with the provisions of Section
2.04;
(c) an opinion (together with any opinions of local counsel
relied on therein) of Robinson, Bradshaw & Hinson, counsel for the
Borrower, dated as of the Closing Date, substantially in the form of
Exhibit B and covering such additional matters relating to the
transactions contemplated hereby as the Agent or any Bank may
reasonably request;
(d) an opinion of Jones, Day, Reavis & Pogue, special counsel
for the Agent, dated as of the Closing Date, substantially in the form
of Exhibit C and covering such additional matters relating to the
transactions contemplated hereby as the Agent may reasonably request;
(e) a certificate (the "Closing Certificate") substantially in
the form of Exhibit G, dated as of the Closing Date, signed by a
principal financial officer of the Borrower, to the effect that (i) no
Default has occurred and is continuing on the date of the first
Borrowing and (ii) the representations and warranties of the Borrower
contained in Article IV are true on and as of the date of the first
Borrowing hereunder;
(f) A certificate of the Borrower, signed by the Secretary or
an Assistant Secretary of the Borrower substantially in the form of
Exhibit H (the "Officer's Certificate"), certifying as to the names,
true signatures and incumbency of the officer or officers of the
Borrower authorized to execute and deliver the Loan Documents, and
certified copies of the following items: (i) the Borrower's Certificate
of Incorporation, (ii) the Borrower's Bylaws, (iii) a certificate of
the Secretary of State of the State of North Carolina as to the
existence of the Borrower as a North Carolina corporation, and (iv) the
action taken by the Board of Directors of the Borrower authorizing the
Borrower's execution, delivery and performance of this Agreement, the
Notes and the other Loan Documents to which the Borrower is a party;
(g) receipt of the fees and other amounts payable to the Agent
on the Closing Date pursuant to the Agent's Letter Agreement.
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In addition, if the Borrower desires funding of a Fixed Rate Loan on the Closing
Date, the Agent shall have received, by Friday, April 18, 1997, a funding
indemnification letter satisfactory to it, pursuant to which (i) the Agent and
the Borrower shall have agreed upon the interest rate, amount of Borrowing and
Interest Period for such Fixed Rate Loan, and (ii) the Borrower shall indemnify
the Banks from any loss or expense arising from the failure to close on the
anticipated Closing Date identified in such letter or the failure to borrow such
Fixed Rate Loan on such date.
SECTION 3.02. Conditions to All Borrowings. The obligation of each Bank
to make a Syndicated Loan on the occasion of each Borrowing is subject to the
satisfaction of the following conditions except as expressly provided in the
last sentence of this Section 3.02:
(a) receipt by the Agent of a Notice of Borrowing or
notification pursuant to Section 2.03(e) of acceptance of one or more
Money Market Quotes, as applicable.
(b) the fact that, immediately before and after such
Borrowing, no Default shall have occurred and be continuing;
(c) the fact that the representations and warranties of the
Borrower contained in Article IV of this Agreement shall be true on and
as of the date of such Borrowing (except for representations and
warranties which are made only as of a stated prior date); and
(d) the fact that, immediately after such Borrowing, the
conditions set forth in clauses (i) and (ii) of Section 2.01 shall have
been satisfied.
Each Syndicated Borrowing and each Money Market Borrowing hereunder shall be
deemed to be a representation and warranty by the Borrower on the date of such
Borrowing as to the truth and accuracy of the facts specified in paragraphs (b),
(c) and (d) of this Section; provided that (i) if such Borrowing is a Syndicated
Borrowing which consists solely of a Refunding Loan, such Borrowing shall not be
deemed to be such a representation and warranty and (ii) as to the
representations contained in clause (iv) of Section 4.02, the Borrower shall be
deemed to represent and warrant only that such representations are true and
correct in all material respects.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, is duly qualified to transact business
in every jurisdiction where, by the nature of its business, such qualification
is necessary, except for any jurisdictions in which the failure to become
qualified does not have and would not reasonably be expected to cause a Material
Adverse Effect, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where the failure to have such licenses, authorizations,
consents and approvals does not have and would not reasonably be expected to
cause a Material Adverse Effect.
SECTION 4.02. Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Notes and the other Loan Documents (i) are within the Borrower's
corporate powers, (ii) have been duly authorized by all necessary corporate
action on the part of the Borrower, (iii) require no action by or in respect of
or filing with, any governmental body, agency or official, (iv) do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Borrower or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Borrower or any of its Subsidiaries, and (v) do not result in
the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower enforceable in accordance with its terms, and
the Notes and the other Loan Documents, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Borrower enforceable in accordance with their respective terms, provided
that the enforceability hereof and thereof is subject in each case to general
principles of equity
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and to bankruptcy, insolvency and similar laws affecting the enforcement of
creditors' rights generally.
SECTION 4.04. Financial Information. (a) The consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of April 28, 1996 and the
related consolidated statements of income, shareholders' equity and cash flows
for the Fiscal Year then ended, reported on by KPMG Peat Marwick LLP, copies of
which have been delivered to the Agent, and the unaudited consolidated financial
statements of the Borrower for the interim period ended January 26, 1997, copies
of which have been delivered to the Agent, fairly present, in conformity with
GAAP, the consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such dates and their consolidated results of operations and
cash flows for such periods stated.
(b) Since April 28, 1996 there has been no event, act, condition or
occurrence having a Material Adverse Effect.
SECTION 4.05. No Litigation. There is no action, suit or proceeding
pending, or to the knowledge of the Borrower threatened, against or affecting
the Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which could have or reasonably be expected
to cause a Material Adverse Effect or which in any manner draws into question
the validity of or could impair the ability of the Borrower to perform its
obligations under, this Agreement, the Notes or any of the other Loan Documents.
SECTION 4.06. Compliance with ERISA. (a) The Borrower and each member
of the Controlled Group have fulfilled their obligations under the minimum
funding standards of ERISA and the Code with respect to each Plan and are in
compliance in all material respects with the presently applicable provisions of
ERISA and the Code, and have not incurred any liability to the PBGC or a Plan
under Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled Group is or
ever has been obligated to contribute to any Multiemployer Plan.
SECTION 4.07. Compliance with Laws; Payment of Taxes. The Borrower and
its Subsidiaries are in compliance with all applicable laws, regulations and
similar requirements of governmental authorities, except where such compliance
is being contested in good faith through appropriate proceedings and
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except for any noncompliance that does not have and would not reasonably be
expected to cause a Material Adverse Effect. There have been filed on behalf of
the Borrower and its Subsidiaries all Federal, state and local income, excise,
property and other tax returns which are required to be filed by them and all
taxes due pursuant to such returns or pursuant to any assessment received by or
on behalf of the Borrower or any Subsidiary have been paid, except where for
taxes which are being contested in good faith through appropriate proceedings
and except for any failure to file which does not have and would not reasonably
be expected to cause a Material Adverse Effect. The charges, accruals and
reserves on the books of the Borrower and its Subsidiaries in respect of taxes
or other governmental charges are, in the opinion of the Borrower, adequate.
United States income tax returns of the Borrower and its Subsidiaries have been
examined and closed through the Fiscal Year ended May 2, 1993.
SECTION 4.08. Subsidiaries. Each of the Borrower's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, is duly qualified to transact business in
every jurisdiction where, by the nature of its business, such qualification is
necessary, except for any jurisdictions in which the failure to become qualified
does not have and would not reasonably be expected to cause a Material Adverse
Effect, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. The Borrower has no Subsidiaries except for those Subsidiaries listed
on Schedule 4.08 (and any new Subsidiaries created or acquired after the Closing
Date as to which the Agent has been notified in writing) which accurately sets
forth each such Subsidiary's complete name and jurisdiction of incorporation.
SECTION 4.09. Investment Company Act. Neither the Borrower nor any of
its Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.4
SECTION 4.10. Public Utility Holding Company Act. Neither the Borrower
nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of
a "holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended.
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SECTION 4.11. Ownership of Property; Liens. Each of the Borrower and
its Consolidated Subsidiaries has title to its properties sufficient for the
conduct of its business, and none of such property is subject to any Lien except
as permitted in Section 5.17.
SECTION 4.12. No Default. Neither the Borrower nor any of its
Consolidated Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound which has or would reasonably be expected to cause a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
SECTION 4.13. Full Disclosure. All factual information heretofore
furnished in writing by the Borrower to the Agent or any Bank for purposes of or
in connection with this Agreement or any transaction contemplated hereby is, and
all such factual information hereafter furnished in writing by the Borrower to
the Agent or any Bank will be, true, accurate and complete in every material
respect or based on reasonable estimates on the date as of which such
information is stated or certified. The Borrower has disclosed to the Banks in
writing any and all facts which have or would reasonably be expected to cause a
Material Adverse Effect.
SECTION 4.14. Environmental Matters. (a) Neither the Borrower nor any
Subsidiary is subject to any Environmental Liability which has or would
reasonably be expected to cause a Material Adverse Effect and neither the
Borrower nor any Subsidiary has been notified that it has been designated as a
potentially responsible party under CERCLA or under any state statute similar to
CERCLA. None of the Properties has been identified on any current or proposed
National Priorities List under 40 C.F.R. ss. 300. There has been no
identification of any of the Properties on any CERCLIS list or any list arising
from a state statute similar to CERCLA which has or would reasonably be expected
to cause a Material Adverse Effect.
(b) No Hazardous Materials have been or are being used, produced,
manufactured, processed, treated, recycled, generated, stored, disposed of,
managed or otherwise handled at, or shipped or transported to or from the
Properties or are otherwise present at, on, in or under the Properties, or, to
the best of the knowledge of the Borrower, at or from any adjacent
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site or facility that has or would reasonably be expected to cause a Material
Adverse Effect.
(c) The Borrower, and each of its Subsidiaries and Affiliates, has
procured all Environmental Authorizations necessary for the conduct of its
business, and is in compliance with all Environmental Requirements in connection
with the operation of the Properties and the Borrower's, and each of its
Subsidiary's and Affiliate's, respective businesses, except for any
non-procurement or noncompliance that does not have and would not reasonably be
expected to cause a Material Adverse Effect.
SECTION 4.15. Capital Stock. All Capital Stock, debentures, bonds,
notes and all other securities of the Borrower and its Subsidiaries presently
issued and outstanding are validly and properly issued in accordance with all
applicable laws, including but not limited to, the "Blue Sky" laws of all
applicable states and the federal securities laws. The issued shares of Capital
Stock of the Borrower's Wholly Owned Subsidiaries are owned by the Borrower free
and clear of any Lien or adverse claim. At least a majority of the issued shares
of capital stock of each of the Borrower's other Subsidiaries (other than Wholly
Owned Subsidiaries) is owned by the Borrower free and clear of any Lien or
adverse claim.
SECTION 4.16. Margin Stock. Neither the Borrower nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock, or be used for any purpose which violates, or which is inconsistent with,
the provisions of Regulation G, T, U or X.
SECTION 4.17. Insolvency. After giving effect to the execution and
delivery of the Loan Documents and the making of the Loans under this Agreement:
(i) the Borrower will not (x) be "insolvent," within the meaning of such term as
used in O.C.G.A. ss. 18-2-22 or as defined in ss. 101 of the "Bankruptcy Code",
or Section 2 of either the "UFTA" or the "UFCA", or as defined or used in any
"Other Applicable Law" (as those terms are defined below), or (y) be unable to
pay its debts generally as such debts become due within the meaning of Section
548 of the Bankruptcy Code, Section 4 of the UFTA or Section 6 of the UFCA, or
(z) have an unreasonably small capital to engage in any business or transaction,
whether current or contemplated, within the meaning
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of Section 548 of the Bankruptcy Code, Section 4 of the UFTA or Section 5 of the
UFCA; and (ii) the obligations of the Borrower under the Loan Documents and with
respect to the Loans will not be rendered avoidable under any Other Applicable
Law. For purposes of this Section 4.17, "Bankruptcy Code" means Title 11 of the
United States Code, "UFTA" means the Uniform Fraudulent Transfer Act, "UFCA"
means the Uniform Fraudulent Conveyance Act, and "Other Applicable Law" means
any other applicable state law pertaining to fraudulent transfers or acts
voidable by creditors, in each case as such law may be amended from time to
time.
SECTION 4.18. Insurance. The Borrower and each of its Subsidiaries has
(either in the name of the Borrower or in such Subsidiary's own name), with
financially sound and reputable insurance companies, insurance in at least such
amounts and against at least such risks (including on all its property, and
public liability and worker's compensation) as are usually insured against in
the same general area by companies of established repute engaged in the same or
similar business.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable hereunder or under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after
the end of each Fiscal Year, a consolidated (and consolidating, if
requested by the Agent) balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the
related consolidated (and consolidating, if requested by the Agent)
statements of income, shareholders' equity and cash flows for such
Fiscal Year, setting forth in each case in comparative form the figures
for the previous fiscal year, all certified by KPMG Peat Marwick LLP or
other independent public accountants of nationally recognized standing,
with such certification to be free of exceptions and qualifications not
acceptable to the Required Banks;
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(b) as soon as available and in any event within 45 days after
the end of each of the first 3 Fiscal Quarters of each Fiscal Year, a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries (broken down by business unit, if requested by the Agent)
as of the end of such Fiscal Quarter and the related consolidated
statement of income and statement of cash flows (broken down by
business unit, if requested by the Agent) for such Fiscal Quarter and
for the portion of the Fiscal Year ended at the end of such Fiscal
Quarter, setting forth in each case in comparative form the figures for
the corresponding Fiscal Quarter and the corresponding portion of the
previous Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, GAAP and consistency by
the chief financial officer or the chief accounting officer of the
Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate,
substantially in the form of Exhibit F (a "Compliance Certificate"), of
the chief financial officer or the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Sections 5.05, 5.15, 5.16, 5.17, 5.19, 5.20 and 5.21 on
the date of such financial statements and (ii) stating whether any
Default exists on the date of such certificate and, if any Default then
exists, setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of annual
financial statements referred to in paragraph (a) above, a statement of
the firm of independent public accountants which reported on such
statements to the effect that nothing has come to their attention to
cause them to believe that any Default existed under Sections 5.05,
5.15, 5.16, 5.19, 5.20 and 5.21 on the date of such financial
statements;
(e) within 5 Domestic Business Days after the Borrower becomes
aware of the occurrence of any Default or event which has or would
reasonably be expected to cause a Material Adverse Effect, a
certificate of the chief financial officer or the chief accounting
officer of the Borrower setting forth the details thereof and the
action
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which the Borrower is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of
the Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(g) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent or any filings
under Section 16 of the Securities and Exchange Act) and annual,
quarterly or monthly reports which the Borrower shall have filed with
the Securities and Exchange Commission;
(h) if and when any member of the Controlled Group (i) gives
or is required to give notice to the PBGC of any "reportable event" (as
defined in Section 4043 of ERISA) with respect to any Plan which might
constitute grounds for a termination of such Plan under Title IV of
ERISA, or knows that the plan administrator of any Plan has given or is
required to give notice of any such reportable event, a copy of the
notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA, a copy of such notice; or (iii) receives
notice from the PBGC under Title IV of ERISA of an intent to terminate
or appoint a trustee to administer any Plan, a copy of such notice; and
(i) from time to time such additional information regarding
the financial position or business of the Borrower and its Subsidiaries
as the Agent, at the request of any Bank, may reasonably request.
SECTION 5.02. Inspection of Property, Books and Records. The Borrower
will (i) keep, and cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries in conformity with GAAP shall be
made of all dealings and transactions in relation to its business and
activities; and (ii) subject to the next succeeding sentence, permit, and cause
each Subsidiary to permit, representatives of any Bank at such Bank's expense
prior to the occurrence of a Default and at the Borrower's expense after the
occurrence of a Default to visit and inspect any of their respective properties,
to examine and make abstracts from any of their respective books
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and records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants. The
Borrower agrees to cooperate and assist in such visits and inspections, in each
case at such reasonable times and on reasonable notice and as often as may
reasonably be desired.
SECTION 5.03. Maintenance of Existence. The Borrower shall, and shall
cause each Subsidiary to, maintain its corporate existence and carry on its
business in substantially the same manner and in substantially the same fields
as such business is now carried on and maintained.
SECTION 5.04. Dissolution. Neither the Borrower nor any of its
Subsidiaries shall suffer or permit dissolution or liquidation either in whole
or in part or redeem or retire any shares of its own stock or that of any
Subsidiary, except through corporate reorganization to the extent permitted by
Section 5.05, and except that Guilford Printers, Inc. a non-material Subsidiary,
may be dissolved at the option of the Borrower.
SECTION 5.05. Consolidations, Mergers and Sales of Assets. The Borrower
will not, nor will it permit any Subsidiary to, consolidate or merge with or
into, or sell, lease or otherwise transfer all or any substantial part of its
assets to, any other Person, or discontinue or eliminate any business line or
segment, provided that: (a) the Borrower may merge with another Person if (i)
such Person was organized under the laws of the United States of America or one
of its states (ii) the Borrower is the corporation surviving such merger and
(iii) immediately after giving effect to such merger, no Default shall have
occurred and be continuing; (b) Subsidiaries of the Borrower may merge with one
another; and (c) the foregoing limitation on the sale, lease or other transfer
of assets and on the discontinuation or elimination of a business line or
segment shall not prohibit (i) the consummation of the Chattanooga
Sale/Leaseback Transaction, or (ii) in addition to the Chattanooga
Sale/Leaseback Transaction, during any Fiscal Quarter, a transfer of assets or
the discontinuance or elimination of a business line or segment (in a single
transaction or in a series of related transactions) unless the aggregate assets
to be so transferred or utilized in a business line or segment to be so
discontinued, when combined with all other assets transferred, and all other
assets utilized in all other business lines or segments discontinued (other than
the Chattanooga Sale/Leaseback Transaction), during such Fiscal
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Quarter and the immediately preceding 3 Fiscal Quarters, contributed more than
10% of EBITDA during the 4 Fiscal Quarters immediately preceding such Fiscal
Quarter.
SECTION 5.06. Use of Proceeds. The proceeds of the Loans may be used
for general corporate purposes and payment of Debt in existence on the Closing
Date. No portion of the proceeds of the Loans will be used by the Borrower or
any Subsidiary (i) in connection with, whether directly or indirectly, any
tender offer for, or other acquisition of, stock of any corporation with a view
towards obtaining control of such other corporation, unless such tender offer or
other acquisition is to be made on a negotiated basis with the approval of the
Board of Directors of the Person to be acquired, and the provisions of Section
5.16 would not be violated, (ii) directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any Margin
Stock, or (iii) for any purpose in violation of any applicable law or
regulation.
SECTION 5.07. Compliance with Laws; Payment of Taxes. The Borrower
will, and will cause each of its Subsidiaries and each member of the Controlled
Group to, comply with applicable laws (including but not limited to ERISA),
regulations and similar requirements of governmental authorities (including but
not limited to PBGC), except where the necessity of such compliance is being
contested in good faith through appropriate proceedings diligently pursued and
except for any noncompliance that does not have and would not reasonably be
expected to cause a Material Adverse Effect. The Borrower will, and will cause
each of its Subsidiaries to, pay promptly when due all taxes, assessments,
governmental charges, claims for labor, supplies, rent and other obligations
which, if unpaid, might become a lien against the property of the Borrower or
any Subsidiary, except liabilities being contested in good faith and against
which, if requested by the Agent, the Borrower will set up reserves in
accordance with GAAP and except for any noncompliance that does not have and
would not reasonably be expected to cause a Material Adverse Effect.
SECTION 5.08. Insurance. The Borrower will maintain, and will cause
each of its Subsidiaries to maintain (either in the name of the Borrower or in
such Subsidiary's own name), with financially sound and reputable insurance
companies, insurance on all its property in at least such amounts and against at
least such risks (including on all its property, and public liability and
worker's compensation) as are usually insured against in the
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same general area by companies of established repute engaged in the same or
similar business.
SECTION 5.09. Change in Fiscal Year. The Borrower will not change its
Fiscal Year without the consent of the Required Banks.
SECTION 5.10. Maintenance of Property. The Borrower shall, and shall
cause each Subsidiary to, maintain all of its properties and assets in
reasonably good condition, repair and working order, ordinary wear and tear
excepted.
SECTION 5.11. Environmental Notices. The Borrower shall furnish to the
Banks and the Agent prompt written notice of all Environmental Liabilities,
pending, threatened or anticipated Environmental Proceedings, Environmental
Notices, Environmental Judgments and Orders, and Environmental Releases at, on,
in, under or in any way affecting the Properties, and all facts, events, or
conditions that could lead to any of the foregoing, except for any such matters
that does not have and would not reasonably be expected to cause a Material
Adverse Effect.
SECTION 5.12. Environmental Matters. The Borrower and its Subsidiaries
will not, and will use reasonable efforts to cause any Third Party to not, use,
produce, manufacture, process, treat, recycle, generate, store, dispose of,
manage at, or otherwise handle, or ship or transport to or from the Properties
any Hazardous Materials except for any such matters that does not have and would
not reasonably be expected to cause a Material Adverse Effect.
SECTION 5.13. Environmental Release. The Borrower agrees that upon the
occurrence of an Environmental Release at or on any of the Properties that does
not have and would not reasonably be expected to cause a Material Adverse
Effect, it will investigate the extent of, and take appropriate remedial action
to eliminate, such Environmental Release.
SECTION 5.14. Transactions with Affiliates. Neither the Borrower nor
any of its Subsidiaries shall enter into, or be a party to, any transaction with
any Affiliate of the Borrower or such Subsidiary (which Affiliate is not the
Borrower or a Wholly Owned Subsidiary), except as permitted by law and pursuant
to reasonable terms which are fully disclosed to the Agent and the Banks, and
are no less favorable to Borrower or such Subsidiary
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than would be obtained in a comparable arm's length transaction with a Person
which is not an Affiliate.
SECTION 5.15. Loans or Advances. Neither the Borrower nor any of its
Subsidiaries shall make loans or advances to any Person except as permitted by
Section 5.16 and except: (i) loans and advances made prior to the Closing Date
and listed on Schedule 5.15, (ii) loans or advances to employees not exceeding
$5,000,000 in the aggregate principal amount outstanding at any time, in each
case made in the ordinary course of business and consistent with practices
existing on January 26, 1997; (iii) deposits required by government agencies or
public utilities; (iv) loans and advances made after the Closing Date to
Rayonese Textile Inc. in an amount which, together with Investments in Rayonese
Textile Inc. made after the Closing Date and permitted by clause (vii) of
Section 5.16, does not exceed $25,000,000; and (v) other loans and advances in
an amount which, together with Investments permitted by clause (viii) of Section
5.16, does not exceed 10% of Stockholders' Equity; provided that after giving
effect to the making of any loans, advances or deposits permitted by this
Section, and no Default shall be in existence or be created thereby.
SECTION 5.16. Investments. Neither the Borrower nor any of its
Subsidiaries shall make Investments in any Person except as permitted by Section
5.15 and Investments in existence on the Closing Date and listed on Schedule
5.16 and except Investments in (i) direct obligations of the United States
Government maturing within one year, (ii) certificates of deposit issued by a
commercial bank whose credit is satisfactory to the Agent, (iii) commercial
paper rated A1 or the equivalent thereof by S&P or P1 or the equivalent thereof
by Moody's and in either case maturing within 6 months after the date of
acquisition, (iv) tender bonds the payment of the principal of and interest on
which is fully supported by a letter of credit issued by a United States bank
whose long-term certificates of deposit are rated at least AA or the equivalent
thereof by S&P and Aa or the equivalent thereof by Moody's, (v) Investments
pursuant to its deferred compensation plan, funded with life insurance through a
Rabbi Trust; (vi) investments in Joint Ventures in an aggregate amount not
exceeding $25,000,000; (vii) Investments made after the Closing Date 3096726
Canada Inc. and/or in Rayonese Textile Inc. in an aggregate amount which,
together with loans and advances to 3096726 Canada Inc. and/or Rayonese Textile
Inc. and permitted by clause (iv) of Section 5.16, do not exceed $25,000,000;
and/or (viii) other Investments in an amount which,
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together with loans and advances permitted by clause (v) of Section 5.15, does
not exceed 10% of Stockholders' Equity; provided, however, immediately after
giving effect to the making of any Investment, no Default shall have occurred
and be continuing.
SECTION 5.17. Priority Debt. Neither the Borrower nor any Consolidated
Subsidiary will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, and the Borrower shall not permit any
Subsidiary to incur any Debt, other than Debt of Subsidiaries existing on the
Closing Date and listed on Schedule 5.17, except:
(a) Liens existing on the Closing Date securing Debt
outstanding on the date of this Agreement in an aggregate principal
amount not exceeding $11,000,000;
(b) any Lien existing on any specific fixed asset of any
corporation at the time such corporation becomes a Consolidated
Subsidiary and not created in contemplation of such event;
(c) any Lien on any specific fixed asset securing Debt
incurred or assumed for the purpose of financing all or any part of the
cost of acquiring or constructing such asset, provided that such Lien
attaches to such asset concurrently with or within 18 months after the
acquisition or completion of construction thereof;
(d) any Lien on any specific fixed asset of any corporation
existing at the time such corporation is merged or consolidated with or
into the Borrower or a Consolidated Subsidiary and not created in
contemplation of such event;
(e) any Lien existing on any specific fixed asset prior to the
acquisition thereof by the Borrower or a Consolidated Subsidiary and
not created in contemplation of such acquisition;
(f) Liens securing Debt owing by any Subsidiary to the
Borrower;
(g) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing paragraphs of this Section, provided that (i) such
Debt is not secured by any
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additional assets, and (ii) the amount of such Debt secured by any such
Lien is not increased;
(h) Liens incidental to the conduct of its business or the
ownership of its assets which (i) do not secure Debt and (ii) do not in
the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business;
(i) any Lien on Margin Stock;
(j) Debt owing to the Borrower or another Subsidiary;
(k) Special Purchase Money Liens;
(l) Liens not otherwise permitted by the foregoing paragraphs
of this Section securing Debt (other than indebtedness represented by
the Notes), and Debt of Subsidiaries not otherwise permitted by
paragraph (j), in an aggregate principal amount at any time outstanding
not to exceed 8% of Stockholders' Equity.
Provided the sum of (A) the aggregate amount of Debt secured by Liens permitted
by the foregoing paragraphs (a) through (h) and (l), plus (B) Debt of
Subsidiaries permitted by paragraph (l), shall not at any time exceed an
aggregate amount equal to 15% of Stockholders' Equity.
SECTION 5.18. Restrictions on Ability of Subsidiaries to Pay Dividends.
The Borrower shall not permit any Subsidiary to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such Subsidiary to (i) pay any dividends or
make any other distributions on its Capital Stock or any other interest (other
than dividends paid or payable in the form of additional Capital Stock) or (ii)
make or repay any loans or advances to the Borrower or the parent of such
Subsidiary.
SECTION 5.19. Interest Coverage. At the end of each Fiscal Quarter,
commencing with the Fiscal Quarter ending January 26, 1997, the ratio of EBIT to
Consolidated Net Interest Expense shall not have been less than 2.25 to 1.0.
SECTION 5.20. Ratio of Total Debt to Total Capitalization. The ratio of
Total Debt to Total Capitalization will not at the end of each Fiscal Month
exceed 0.60 to 1.00.
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SECTION 5.21. Debt/EBITDA Ratio. The Debt/EBITDA Ratio will at the end
of each Fiscal Month be less than 3.5 to 1.00.
SECTION 5.22. Acquisitions. Neither the Borrower nor any Subsidiary
shall make any Acquisitions after the Closing Date, unless (i) the Acquisition
is of stock or assets of a Person in substantially similar lines of business to
that of the Borrower and its Subsidiaries and (ii) in an aggregate amount which
does not exceed $50,000,000.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of
any Loan or shall fail to pay any interest on any Loan within 5
Domestic Business Days after such interest shall become due, or shall
fail to pay any fee or other amount payable hereunder within 5 Domestic
Business Days after such fee or other amount becomes due; or
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.01(e), 5.02(ii), 5.03 to 5.06, inclusive,
Sections 5.15, 5.16 or 5.18 through 5.22 inclusive; or
(c) the Borrower shall fail to observe or perform any covenant
or agreement contained or incorporated by reference in this Agreement
(other than those covered by paragraph (a) or (b) above) and such
failure shall not have been cured within 30 days after the earlier to
occur of (i) written notice thereof has been given to the Borrower by
the Agent at the request of any Bank or (ii) the Borrower otherwise
becomes aware of any such failure; or
(d) any representation or warranty made by the Borrower in
Article IV of this Agreement or any representation, warranty,
certification or statement made in any certificate, financial statement
or other document delivered pursuant to this Agreement shall prove to
have
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been incorrect or misleading in any material respect when made (or
deemed made); or
(e) the Borrower or any Subsidiary shall fail to make any
payment in respect of Debt in an aggregate principal amount outstanding
of $5,000,000 or more (other than the Notes) when due or within any
applicable grace period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Debt in an aggregate principal amount
outstanding of $5,000,000 or more of the Borrower or any Subsidiary
(including, without limitation, any required mandatory prepayment or
"put" of such Debt to the Borrower or any Subsidiary) or enables (or,
with the giving of notice or lapse of time or both, would enable) the
holders of such Debt or Commitment or any Person acting on such
holders' behalf to accelerate the maturity thereof or terminate any
such commitment (including, without limitation, any required mandatory
prepayment or "put" of such Debt to the Borrower or any Subsidiary); or
(g) the Borrower or any Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally, or shall admit in
writing its inability, to pay its debts as they become due, or shall
take any corporate action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 60 days; or an order
for relief shall be entered against the
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Borrower or any Subsidiary under the federal bankruptcy laws as now or
hereafter in effect; or
(i) the Borrower or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become
liable to pay to the PBGC or to a Plan under Title IV of ERISA; or
notice of intent to terminate a Plan or Plans shall be filed under
Title IV of ERISA by the Borrower, any member of the Controlled Group,
any plan administrator or any combination of the foregoing; or the PBGC
shall institute proceedings under Title IV of ERISA to terminate or to
cause a trustee to be appointed to administer any such Plan or Plans or
a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding
shall not have been dismissed within 30 days thereafter; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any such Plan or Plans must be terminated; or
the Borrower or any other member of the Controlled Group shall enter
into, contribute or be obligated to contribute to, terminate or incur
any withdrawal liability with respect to, a Multiemployer Plan; or
(j) one or more judgments or orders for the payment of money
in an aggregate amount in excess of $5,000,000 shall be rendered
against the Borrower or any Subsidiary and such judgment or order shall
continue unsatisfied and unstayed for a period of 30 days; or
(k) a federal tax lien shall be filed against the Borrower or
any Subsidiary under Section 6323 of the Code or a lien of the PBGC
shall be filed against the Borrower or any Subsidiary under Section
4068 of ERISA and in either case such lien is for an amount of
$1,000,000 or more and remains undischarged for a period of 25 days
after the date of filing; or
(l) (i) Except for the Culp Family, any Person or two or more
Persons acting in concert shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934) of 20% or more of
the outstanding shares of the voting stock of the Borrower; or (ii) as
of any date a majority of the Board of Directors of the Borrower
consists of individuals who were not either (A)
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directors of the Borrower as of the corresponding date of the previous
year, (B) selected or nominated to become directors by the Board of
Directors of the Borrower of which a majority consisted of individuals
described in clause (A), or (C) selected or nominated to become
directors by the Board of Directors of the Borrower of which a majority
consisted of individuals described in clause (A) and individuals
described in clause (B).
then, and in every such event: (i) any Bank may terminate its obligation to fund
a Money Market Loan in connection with any relevant Money Market Quote; and (ii)
the Agent shall, if requested by the Required Banks, by notice to the Borrower
(x) terminate the Commitments and they shall thereupon terminate, and/or (y)
declare the Notes (together with accrued interest thereon), and all other
amounts payable hereunder and under the other Loan Documents, to be, and the
Notes (together with accrued interest thereon), and all other amounts payable
hereunder and under the other Loan Documents shall thereupon become, immediately
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower together with interest at
the Default Rate accruing on the principal amount thereof from and after the
date of such Event of Default; provided that if any Event of Default specified
in paragraph (g) or (h) above occurs with respect to the Borrower, without any
notice to the Borrower or any other act by the Agent or the Banks, the
Commitments shall thereupon terminate and the Notes (together with accrued
interest thereon) and all other amounts payable hereunder and under the other
Loan Documents shall automatically and without notice become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower together with interest thereon at the
Default Rate accruing on the principal amount thereof from and after the date of
such Event of Default. Notwithstanding the foregoing, the Agent shall have
available to it all other remedies at law or equity, and shall exercise any one
or all of them at the request of the Required Banks.
SECTION 6.02. Notice of Default. The Agent shall give notice to the
Borrower of any Default under Section 6.01(c) promptly upon being requested to
do so by any Bank and shall thereupon notify all the Banks thereof.
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ARTICLE VII
THE AGENT
SECTION 7.01. Appointment; Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Loan Documents with such powers as are specifically delegated to
the Agent by the terms hereof and thereof, together with such other powers as
are reasonably incidental thereto. The Agent: (a) shall have no duties or
responsibilities except as expressly set forth in this Agreement and the other
Loan Documents, and shall not by reason of this Agreement or any other Loan
Document be a trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any Bank under, this Agreement or
any other Loan Document, or for the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by the Borrower to perform any of its obligations hereunder or
thereunder; (c) shall not be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document except to the
extent requested by the Required Banks, and then only on terms and conditions
satisfactory to the Agent, and (d) shall not be responsible for any action taken
or omitted to be taken by it hereunder or under any other Loan Document or any
other document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or wilful
misconduct. The Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The provisions of this
Article VII are solely for the benefit of the Agent and the Banks, and the
Borrower shall not have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement
and under the other Loan Documents, the Agent shall act solely as agent of the
Banks and does not assume and shall not be deemed to have assumed any obligation
towards or relationship of agency or trust with or for the Borrower. The duties
of the Agent shall be ministerial and administrative in nature, and the Agent
shall not have by reason of this Agreement or any other Loan Document a
fiduciary relationship in respect of any Bank.
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SECTION 7.02. Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telecopier, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants or other experts selected by the Agent. As to any matters not
expressly provided for by this Agreement or any other Loan Document, the Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder and thereunder in accordance with instructions signed by the Required
Banks, and such instructions of the Required Banks in any action taken or
failure to act pursuant thereto shall be binding on all of the Banks.
SECTION 7.03. Defaults. The Agent shall not be deemed to have knowledge
of the occurrence of a Default or an Event of Default (other than the nonpayment
of principal of or interest on the Loans) 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 nonpayment of principal of or interest on the
Loans whether or not it has received any notice of the occurrence of such
nonpayment. The Agent shall (subject to Section 9.06) take such action hereunder
with respect to such Default or Event of Default as shall be directed by the
Required Banks, 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 best interests of the Banks.
SECTION 7.04. Rights of Agent as a Bank and its Affiliates. With
respect to the Loans made by the Agent and any Affiliate of the Agent, the Agent
in its capacity as a Bank hereunder and any Affiliate of the Agent or such
Affiliate (collectively, "Wachovia"), Wachovia in its capacity as a Bank
hereunder shall have the same rights and powers hereunder as any other Bank and
may exercise the same as though it were not acting as the Agent, and the term
"Bank" or "Banks" shall, unless the context otherwise indicates, include
Wachovia in its individual capacity and any Affiliate of the Agent in its
individual
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capacity. The Agent and any Affiliate of the Agent may (without having to
account therefor to any Bank) accept deposits from, lend money to and generally
engage in any kind of banking, trust or other business with the Borrower (and
any of the Borrower's Affiliates) as if the Bank were not acting as the Agent,
and the Agent and any Affiliate of the Agent may accept fees and other
consideration from the Borrower (in addition to any agency fees and arrangement
fees heretofore agreed to between the Borrower and the Agent) for services in
connection with this Agreement or any other Loan Document or otherwise without
having to account for the same to the Banks.
SECTION 7.05. Indemnification. Each Bank severally agrees to indemnify
the Agent, to the extent the Agent shall not have been reimbursed by the
Borrower, ratably in accordance with its Commitment, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or any other Loan Document or any other documents contemplated
by or referred to herein or therein or the transactions contemplated hereby or
thereby (excluding, unless an Event of Default has occurred and is continuing,
the normal administrative costs and expenses incident to the performance of its
agency duties hereunder) or the enforcement of any of the terms hereof or
thereof or any such other documents; provided, however that no Bank shall be
liable for any of the foregoing to the extent they arise from the gross
negligence or wilful misconduct of the Agent. If any indemnity furnished to the
Agent for any purpose shall, in the opinion of the Agent, be insufficient or
become impaired, the Agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished.
SECTION 7.06 CONSEQUENTIAL DAMAGES. THE AGENT SHALL NOT BE RESPONSIBLE
OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
SECTION 7.07. Payee of Note Treated as Owner. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes hereof unless
and until a written notice
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of the assignment or transfer thereof shall have been filed with the Agent and
the provisions of Section 9.08(c) have been satisfied. Any requests, authority
or consent of any Person who at the time of making such request or giving such
authority or consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of that Note or of any Note or
Notes issued in exchange therefor or replacement thereof.
SECTION 7.08. Nonreliance on Agent and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Borrower and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Agent shall not be required to keep itself (or any Bank) informed
as to the performance or observance by the Borrower of this Agreement or any of
the other Loan Documents or any other document referred to or provided for
herein or therein or to inspect the properties or books of the Borrower or any
other Person. Except for notices, reports and other documents and information
expressly required to be furnished to the Banks by the Agent hereunder or under
the other Loan Documents, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the affairs,
financial condition or business of the Borrower or any other Person (or any of
their Affiliates) which may come into the possession of the Agent.
SECTION 7.09. 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 7.05 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.
SECTION 7.10. 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
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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,
which, if no Event of Default is in existence, has been approved by the Borrower
(which approval shall not be unreasonably withheld or delayed). 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 and, if no Event of Default is in existence, with
the consent of the Borrower (which shall not be unreasonably withheld or
delayed), 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 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 Article VII
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.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period:
(a) the Agent reasonably determines that deposits in Dollars
(in the applicable amounts) are not being offered in the relevant
market for such Interest Period, or
(b) the Required Banks advise the Agent that the London
Interbank Offered Rate or IBOR, as the case may be, as reasonably
determined by the Agent will not adequately and fairly reflect the cost
to such Banks of funding the relevant type of Fixed Rate Loans for such
Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that
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the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make the type of Fixed Rate Loans specified in such
notice shall be suspended. Unless the Borrower notifies the Agent at least 2
Domestic Business Days before the date of any Borrowing of such type of Fixed
Rate Loans for which a Notice of Borrowing has previously been given that it
elects not to borrow on such date, such Borrowing shall instead be made as a
Base Rate Borrowing.
SECTION 8.02. Illegality. If, after the date hereof, the adoption of
any applicable law, rule or regulation, or any change therein or any existing or
future law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof (any such
agency being referred to as an "Authority" and any such event being referred to
as a "Change of Law"), or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority shall make it unlawful or impossible for any Bank (or its Lending
Office) to make, maintain or fund its Euro-Dollar Loans or Foreign Currency
Loans and such Bank shall so notify the Agent, the Agent shall forthwith give
notice thereof to the other Banks and the Borrower, whereupon until such Bank
notifies the Borrower and the Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans or Foreign Currency Loans, as the case may be, shall be suspended. Before
giving any notice to the Agent pursuant to this Section, such Bank shall
designate a different Lending Office if such designation will avoid the need for
giving such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine that it may not
lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans
or Foreign Currency Loans, as the case may be, to maturity and shall so specify
in such notice, the Borrower shall immediately prepay in full the then
outstanding principal amount of each Euro-Dollar Loan or Foreign Currency Loans,
as the case may be, of such Bank, together with accrued interest thereon any
amount due such Bank pursuant to Section 8.05(a). Concurrently with prepaying
each such Euro-Dollar Loan or Foreign Currency Loans, as the case may be, the
Borrower shall borrow a Base Rate Loan in an equal principal amount from such
Bank (on which interest and principal shall be payable contemporaneously with
the related Euro-Dollar Loans or Foreign Currency Loans, as the case may be, of
the other Banks), and such Bank shall make such a Base Rate Loan.
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SECTION 8.03. Increased Cost and Reduced Return. (a) If after the date
hereof, a Change of Law or compliance by any Bank (or its Lending Office) with
any request or directive (whether or not having the force of law) of any
Authority:
(i) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal
Reserve System, but excluding (A) with respect to any Euro-Dollar Loan
any such requirement included in an applicable Euro-Dollar Reserve
Percentage and (B) with respect to any Foreign Currency Loan any such
requirement included in the applicable Adjusted IBOR Rate) against
assets of, deposits with or for the account of, or credit extended by,
any Bank (or its Lending Office); or
(ii) shall impose on any Bank (or its Lending Office) or on
the United States market for certificates of deposit or the London
interbank market any other condition affecting its Fixed Rate Loans,
its Notes or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce
the amount of any sum received or receivable by such Bank (or its Lending
Office) under this Agreement or under its Notes with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction.
(b) If any Bank shall have determined that after the date hereof the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof, or compliance by any Bank (or its Lending Office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any Authority, has or would have the effect of reducing the rate of return on
such Bank's capital as a consequence of its obligations hereunder to a level
below that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such
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Bank to be material, then from time to time, within 15 days after demand by such
Bank, the Borrower shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction.
(c) Each Bank will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error and provided that it is rendered in good faith. In determining
such amount, such Bank may use any reasonable averaging and attribution methods.
(d) The provisions of this Section 8.03 (i) shall be applicable with
respect to any Participant, Assignee or other Transferee, and any calculations
required by such provisions shall be made based upon the circumstances of such
Participant, Assignee or other Transferee and (ii) shall constitute a continuing
agreement and shall survive the termination of this Agreement and the payment in
full or cancellation of the Notes.
SECTION 8.04. Base Rate Loans or Other Fixed Rate Loans Substituted for
Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or maintain
any type of Fixed Rate Loans has been suspended pursuant to Section 8.02 or (ii)
any Bank has demanded compensation under Section 8.03, and the Borrower shall,
by at least 5 Euro-Dollar Business Days' or Foreign Currency Business Days, as
applicable, prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until such
Bank notifies the Borrower that the circumstances giving rise to such suspension
or demand for compensation no longer apply:
(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans or Foreign Currency Loans, as the case may be, shall
be made instead either (A) as Base Rate Loans, (B) if such suspension
or demand for compensation relates to Euro-Dollar Loans, but not
Foreign Currency Loans, as Foreign Currency Loans, or (C) if such
demand for compensation relates to Foreign Currency Loans, but not
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Euro-Dollar Loans, as Euro-Dollar Loans, as the Borrower may elect in
the notice to such Bank through the Agent referred to hereinabove (in
all cases interest and principal on such Loans shall be payable
contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its Euro-Dollar Loans or Foreign Currency
Loans, as the case may be, has been repaid, all payments of principal
which would otherwise be applied to repay such Fixed Rate Loans shall
be applied to repay its Base Rate Loans instead.
SECTION 8.05. Compensation. Upon the request of any Bank, delivered to
the Borrower and the Agent, the Borrower shall pay to such Bank such amount or
amounts as shall compensate such Bank for any loss, cost or expense incurred by
such Bank as a result of:
(a) any payment or prepayment (pursuant to Section 2.10, 2.11, 6.01,
8.02 or otherwise) of a Fixed Rate Loan on a date other than the last day of an
Interest Period for such Fixed Rate Loan; or
(b) any failure by the Borrower to prepay a Fixed Rate Loan on the date
for such prepayment specified in the relevant notice of prepayment hereunder (if
the Agent, acting at the direction of the Required Banks, has agreed to permit
any such prepayment); or
(c) any failure by the Borrower to borrow a Fixed Rate Loan on the date
for the Fixed Rate Borrowing of which such Fixed Rate Loan is a part specified
in the applicable Notice of Borrowing delivered pursuant to Section 2.02 or
notification of acceptance of Money Market Quotes pursuant to Section 2.03(e);
or
(d) any failure by the Borrower to pay a Foreign Currency Loan in the
applicable Foreign Currency;
such compensation to include, without limitation, as applicable: (A) an amount
equal to the excess, if any, of (x) the amount of interest which would have
accrued on the amount so paid or prepaid or not prepaid or borrowed for the
period from the date of such payment, prepayment or failure to prepay or borrow
to the last day of the then current Interest Period for such Fixed Rate Loan
(or, in the case of a failure to prepay or borrow, the Interest Period for such
Fixed Rate Loan which would have
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commenced on the date of such failure to prepay or borrow) at the applicable
rate of interest for such Fixed Rate Loan provided for herein over (y) the
amount of interest (as reasonably determined by such Bank) such Bank would have
paid on (i) deposits in Dollars of comparable amounts having terms comparable to
such period placed with it by leading banks in the London interbank market (if
such Fixed Rate Loan is a Euro-Dollar Loan), or (ii) any deposit in a Foreign
Currency of comparable amounts having terms comparable to such period placed
with it by lending banks in the applicable interbank market for such Foreign
Currency (if such Fixed Rate Loan is a Foreign Currency Loan); or (B) any such
loss, cost or expense incurred by such Bank in liquidating or closing out any
foreign currency contract undertaken by such Bank in funding or maintaining such
Fixed Rate Loan (if such Fixed Rate Loan is a Foreign Currency Loan).
SECTION 8.06. Failure to Pay in Foreign Currency. If the Borrower is
unable for any reason to effect payment in a Foreign Currency as required by
this Agreement or if the Borrower shall default in the Foreign Currency, each
Bank may, through the Agent, require such payment to be made in Dollars in the
Dollar Equivalent amount of such payment. In any case in which the Borrower
shall make such payment in Dollars, the Borrower agrees to hold the Banks
harmless from any loss incurred by the Banks arising from any change in the
value of Dollars in relation to such Foreign Currency between the date such
payment became due and the date of payment thereof.
SECTION 8.07. Judgment Currency. If for the purpose of obtaining
judgment in any court or enforcing any such judgment it is necessary to convert
any amount due in any Foreign Currency into any other currency, the rate of
exchange used shall be the Agent's spot rate of exchange for the purchase of the
Foreign Currency with such other currency at the close of business on the
Foreign Currency Business Day preceding the date on which judgment is given or
any order for payment is made. The obligation of the relevant Borrower in
respect of any amount due from it hereunder shall, notwithstanding any judgment
or order for a liquidated sum or sums in respect of amounts due hereunder or
under any judgment or order in any other currency or otherwise be discharged
only to the extent that on the Foreign Currency Business Day following receipt
by the Agent of any payment in a currency other than the relevant Foreign
Currency the Agent is able (in accordance with normal banking procedures) to
purchase the relevant Foreign Currency with such other currency. If the amount
of the relevant Foreign Currency that the Agent is able to
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purchase with such other currency is less than the amount due in the relevant
Foreign Currency, notwithstanding any judgment or order, the Borrower shall
indemnify the Banks for the shortfall.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing (including bank wire, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth on the signature pages hereof or such other address or
telecopier number as such party may hereafter specify for the purpose by notice
to each other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section and the appropriate confirmation is
received, (ii) if given by mail, 72 hours after such communication is deposited
in the mails with first class postage prepaid, addressed as aforesaid or (iii)
if given by any other means, when delivered at the address specified in this
Section.
SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note or other
Loan Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Documentary Taxes. The Borrower shall pay (i)
all reasonable out-of-pocket expenses of the Agent, including fees and
disbursements of special counsel for the Agent, in connection with the
preparation of this Agreement and the other Loan Documents, any waiver or
consent hereunder or thereunder or any amendment hereof or thereof or any
Default or alleged Default hereunder or thereunder and (ii) if a Default occurs,
all reasonable out-of-pocket expenses incurred by the Agent and the Banks,
including fees and disbursements of counsel, in connection with such Default and
collection and other enforcement proceedings resulting therefrom, including
reasonable out-of-pocket expenses incurred in enforcing this Agreement and the
other Loan Documents. The Borrower shall
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indemnify the Agent and each Bank against any transfer taxes, documentary taxes,
assessments or charges made by any Authority by reason of the execution and
delivery of this Agreement or the other Loan Documents.
SECTION 9.04. Indemnification. The Borrower shall indemnify the Agent,
the Banks and each Affiliate thereof and their respective directors, officers,
employees and agents from, and hold each of them harmless against, any and all
losses, liabilities, claims or damages to which any of them may become subject,
insofar as such losses, liabilities, claims or damages arise out of or result
from any actual or proposed use by the Borrower of the proceeds of any extension
of credit by any Bank hereunder or breach by the Borrower of this Agreement or
any other Loan Document or from any investigation, litigation (including,
without limitation, any actions taken by the Agent or any of the Banks to
enforce this Agreement or any of the other Loan Documents) or other proceeding
(including, without limitation, any threatened investigation or proceeding)
relating to the foregoing, and the Borrower shall reimburse the Agent and each
Bank, and each Affiliate thereof and their respective directors, officers,
employees and agents, upon demand for any expenses (including, without
limitation, reasonable legal fees) incurred in connection with any such
investigation or proceeding; but excluding any such losses, liabilities, claims,
damages or expenses incurred by reason of the gross negligence or wilful
misconduct of the Person to be indemnified.
SECTION 9.05 Setoff; Sharing of SetoffsSetoff; Sharing of
Setoffs. (a) The Borrower hereby grants to the Agent and each Bank a lien for
all indebtedness and obligations owing to them from the Borrower upon all
deposits or deposit accounts, of any kind, or any interest in any deposits or
deposit accounts thereof, now or hereafter pledged, mortgaged, transferred or
assigned to the Agent or any such Bank or otherwise in the possession or control
of the Agent or any such Bank for any purpose for the account or benefit of the
Borrower and including any balance of any deposit account or of any credit of
the Borrower with the Agent or any such Bank, whether now existing or hereafter
established hereby authorizing the Agent and each Bank at any time or times
during the existence of an Event of Default with or without prior notice to
apply such balances or any part thereof to such of the indebtedness and
obligations owing by the Borrower to the Banks and/or the Agent then past due
and in such amounts as they may elect, and whether or not the collateral, if
any, or the responsibility of other Persons primarily, secondarily or otherwise
liable may be deemed
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adequate. For the purposes of this paragraph, all remittances and property shall
be deemed to be in the possession of the Agent or any such Bank as soon as the
same may be put in transit to it by mail or carrier or by other bailee.
(b) Each Bank agrees that if it shall, by exercising any right of
setoff or counterclaim or resort to collateral security or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest owing
with respect to the Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of all principal
and interest owing with respect to the Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks owing to such other Banks,
and such other adjustments shall be made, as may be required so that all such
payments of principal and interest with respect to the Notes held by the Banks
owing to such other Banks shall be shared by the Banks pro rata; provided that
(i) nothing in this Section shall impair the right of any Bank to exercise any
right of setoff 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, and (ii) if all or any portion of such payment
received by the purchasing Bank is thereafter recovered from such purchasing
Bank, such purchase from each 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) of 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, whether or not acquired pursuant
to the foregoing arrangements, may exercise rights of setoff or counterclaim and
other rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.06. 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
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are affected thereby, by the Agent); provided that, no such amendment or waiver
shall, unless signed by all 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 Loan or any fees (other than fees payable to the Agent)
hereunder, (iii) change the date fixed for any payment of principal of or
interest on any Loan 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 the percentage 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 Loans, or (viii) release any
Guarantee given to support payment of the Loans.
(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 except through the Agent or 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 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
requisite percentage of Banks. The Borrower will not, directly or indirectly,
pay or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, to any Bank (in its capacity as such) 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 remuneration is concurrently paid, on the same terms, ratably to all such
Banks.
SECTION 9.07. No Margin Stock Collateral. Each of the Banks represents
to the Agent and each of the other Banks that it in good faith is not, directly
or indirectly (by negative pledge or otherwise), relying upon any Margin Stock
as collateral in the extension or maintenance of the credit provided for in this
Agreement.
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SECTION 9.08. Successors and Assigns. (a) The provisions of this
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) Any Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in any Loan owing to such Bank, any Note
held by such Bank, any Commitment hereunder 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 Note 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
loan or loans, (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 loan
or loans, (iii) the change of the principal of the related loan or loans, (iv)
any change in the rate at which either interest is payable thereon or (if the
Participant is entitled to any part thereof) fee is payable hereunder from the
rate at which the Participant is entitled to receive interest or fee (as the
case may be) in respect of such participation, (v) the release or substitution
of all or any substantial part of the collateral (if any) held as security for
the Loans, or (vi) the release of any Guarantee given to support payment of the
Loans. Each Bank selling a participating interest in any Loan, Note, Commitment
or other interest under this Agreement, other than a Money Market Loan or Money
Market Loan Note or participating interest therein, shall, within 10 Domestic
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. The Borrower agrees that each
Participant shall be entitled to the benefits of Article VIII with respect to
its participation in Loans outstanding from time to time.
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(c) Any Bank may at any time assign to one or more banks or financial
institutions (each an "Assignee") all, or in the case of its Syndicated Loans
and Commitments, a proportionate part of all its Syndicated Loans and
Commitments, of its rights and obligations under this Agreement, the Notes and
the other Loan Documents, and such Assignee shall assume all such rights and
obligations, pursuant to an Assignment and Acceptance, executed by such
Assignee, such transferor Bank and the Agent (and, in the case of an Assignee
that is not then a Bank, subject to clauses (iii) below, by the Borrower);
provided that (i) no 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 Commitment, (ii) if a Bank is assigning only a portion of its
Commitment, then, the amount of the Commitment being assigned (determined as of
the effective date of the assignment) shall be in an amount not less than
$10,000,000, (iii) except during the continuance of a Default, no interest may
be sold by a Bank pursuant to this paragraph (c) to any Assignee that is not
then a Bank (or an Affiliate of a Bank) without the consent of the Borrower and
the Agent, which consent shall not be unreasonably withheld, and (iv) a Bank may
not have more than 2 Assignees that are not then Banks at any one time. 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,
(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, and (D)
payment of a processing and recordation fee of $2,500 to the Agent, such
Assignee shall for all purposes be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank under this Agreement to the same extent
as if it were an original party hereto with a Commitment 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 Banks or the Agent shall be required. Upon the
consummation of any transfer to an Assignee pursuant to this paragraph (c), the
transferor Bank, the Agent and the Borrower shall make appropriate arrangements
so that, if required, a new Note is issued each of such Assignee and such
transferor Bank and such transferor Bank.
(d) Subject to the provisions of Section 9.09, the Borrower authorizes
each Bank to disclose to any Participant, Assignee or other transferee (each a
"Transferee") and any
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prospective Transferee any and all financial 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.
(e) No Transferee shall be entitled to receive any greater payment
under Section 2.12(d) or Section 8.03 than the transferor Bank would have been
entitled to receive with respect to the rights transferred, unless such transfer
is made with the Borrower's prior written consent or by reason of the provisions
of Section 8.02 or 8.03 requiring such Bank to designate a different Lending
Office under certain circumstances or at a time when the circumstances giving
rise to such greater payment did not exist.
(f) Anything in this Section 9.08 to the contrary notwithstanding, any
Bank may assign and pledge all or any portion of the Loans and/or obligations
owing to it to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal Reserve
Bank, provided that any payment in respect of such assigned Loans and/or
obligations made by the Borrower to the assigning and/or pledging Bank in
accordance with the terms of this Agreement shall satisfy the Borrower's
obligations hereunder in respect of such assigned Loans and/or obligations to
the extent of such payment. No such assignment shall release the assigning
and/or pledging Bank from its obligations hereunder.
SECTION 9.09. Confidentiality. Each Bank agrees to exercise
commercially reasonable 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 any 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, any Bank or their
respective Affiliates may be a party, (vi) to the extent
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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 9.09; provided that should disclosure of any such confidential
information be required by virtue of clause (ii) of the immediately preceding
sentence, to the extent permitted by law, any relevant Bank shall promptly
notify the Borrower of same so as to allow the Borrower to seek a protective
order or to take any other appropriate action; provided, further, that, no Bank
shall be required to delay compliance with any directive to disclose any such
information so as to allow the Borrower to effect any such action.
SECTION 9.10. Representation by Banks. Each Bank hereby represents that
it is a commercial lender or financial institution which makes loans in the
ordinary course of its business and that it will make its Loans hereunder for
its own account in the ordinary course of such business; provided, however that,
subject to Section 9.08, the disposition of the Note or Notes held by that Bank
shall at all times be within its exclusive control.
SECTION 9.11. Obligations Several. The obligations of each Bank
hereunder are several, and no Bank shall be responsible for the obligations or
commitment of any other Bank hereunder. Nothing contained in this Agreement and
no action taken by the Banks pursuant hereto shall be deemed to constitute the
Banks to be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Bank shall be a
separate and independent debt, and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement or any other Loan Document and
it shall not be necessary for any other Bank to be joined as an additional party
in any proceeding for such purpose.
SECTION 9.12. Georgia Law. This Agreement and each Note shall be
construed in accordance with and governed by the law of the State of Georgia.
SECTION 9.13. Severability. In case any one or more of the provisions
contained in this Agreement, the Notes or any of the other Loan Documents should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and
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therein shall not in any way be affected or impaired thereby and shall be
enforced to the greatest extent permitted by law.
SECTION 9.14. Interest. In no event shall the amount of interest, and
all charges, amounts or fees contracted for, charged or collected pursuant to
this Agreement, the Notes or the other Loan Documents and deemed to be interest
under applicable law (collectively, "Interest") exceed the highest rate of
interest allowed by applicable law (the "Maximum Rate"), and in the event any
such payment is inadvertently received by any Bank, then the excess sum (the
"Excess") shall be credited as a payment of principal, unless the Borrower shall
notify such Bank in writing that it elects to have the Excess returned
forthwith. It is the express intent hereof that the Borrower not pay and the
Banks not receive, directly or indirectly in any manner whatsoever, interest in
excess of that which may legally be paid by the Borrower under applicable law.
The right to accelerate maturity of any of the Loans does not include the right
to accelerate any interest that has not otherwise accrued on the date of such
acceleration, and the Agent and the Banks do not intend to collect any unearned
interest in the event of any such acceleration. All monies paid to the Agent or
the Banks hereunder or under any of the Notes or the other Loan Documents,
whether at maturity or by prepayment, shall be subject to rebate of unearned
interest as and to the extent required by applicable law. By the execution of
this Agreement, the Borrower covenants, to the fullest extent permitted by law,
that (i) the credit or return of any Excess shall constitute the acceptance by
the Borrower of such Excess, and (ii) the Borrower shall not seek or pursue any
other remedy, legal or equitable , against the Agent or any Bank, based in whole
or in part upon contracting for charging or receiving any Interest in excess of
the Maximum Rate. For the purpose of determining whether or not any Excess has
been contracted for, charged or received by the Agent or any Bank, all interest
at any time contracted for, charged or received from the Borrower in connection
with this Agreement, the Notes or any of the other Loan Documents shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
in equal parts throughout the full term of the Commitments. The Borrower, the
Agent and each Bank shall, to the maximum extent permitted under applicable law,
(i) characterize any non-principal payment as an expense, fee or premium rather
than as Interest and (ii) exclude voluntary prepayments and the effects thereof.
The provisions of this Section shall be deemed to be incorporated into each Note
and each of the other Loan Documents (whether or not any provision of this
Section is
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referred to therein). All such Loan Documents and communications relating to any
Interest owed by the Borrower and all figures set forth therein shall, for the
sole purpose of computing the extent of obligations hereunder and under the
Notes and the other Loan Documents be automatically recomputed by the Borrower,
and by any court considering the same, to give effect to the adjustments or
credits required by this Section.
SECTION 9.15. Interpretation. No provision of this Agreement or any of
the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
SECTION 9.16. Waiver of Jury Trial; Consent to Jurisdiction. The
Borrower (a) and each of the Banks and the Agent irrevocably waives, to the
fullest extent permitted by law, any and all right to trial by jury in any legal
proceeding arising out of this Agreement, any of the other Loan Documents, or
any of the transactions contemplated hereby or thereby, (b) submits to the
nonexclusive personal jurisdiction in the State of Georgia, the courts thereof
and the United States District Courts sitting therein, for the enforcement of
this Agreement, the Notes and the other Loan Documents, (c) waives any and all
personal rights under the law of any jurisdiction to object on any basis
(including, without limitation, inconvenience of forum) to jurisdiction or venue
within the State of Georgia for the purpose of litigation to enforce this
Agreement, the Notes or the other Loan Documents, and (d) agrees that service of
process may be made upon it in the manner prescribed in Section 9.01 for the
giving of notice to the Borrower. Nothing herein contained, however, shall
prevent the Agent from bringing any action or exercising any rights against any
security and against the Borrower personally, and against any assets of the
Borrower, within any other state or jurisdiction.
SECTION 9.17. Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 9.18. Source of Funds -- ERISA. Each of the Banks hereby
severally (and not jointly) represents to the Borrower that no part of the funds
to be used by such Bank to fund the Loans hereunder from time to time
constitutes (i) assets
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allocated to any separate account maintained by such Bank in which any employee
benefit plan (or its related trust) has any interest nor (ii) any other assets
of any employee benefit plan. As used in this Section, the terms "employee
benefit plan" and "separate account" shall have the respective meanings assigned
to such terms in Section 3 of ERISA.
SECTION 9.19. Replacement of Banks. The Borrower may, at any time and
so long as no Default or Event of Default has then occurred and is continuing,
replace any Bank that has requested additional amounts from the Borrower under
Section 2.12(d) or 8.03, or who has caused a suspension of its obligation to
make Euro-Dollar Loans or Foreign Currency Loans pursuant to Section 8.02, by
written notice to such Bank and the Agent given not more than thirty (30) days
after any such event and identifying one or more Persons each of which shall be
reasonably acceptable to the Agent (each, a "Replacement Bank," and
collectively, the "Replacement Banks") to replace such Bank (the "Replaced
Bank"), provided that (i) the notice from the Borrower to the Replaced Bank and
the Agent provided for hereinabove shall specify an effective date for such
replacement (the "Replacement Effective Date"), which shall be at least 5
Business Days after such notice is give, (ii) as of the relevant Replacement
Effect Date, each Replacement Bank shall enter into an Assignment and Acceptance
with the Replaced Bank pursuant to Section 9.08 pursuant to which such
Replacement Banks collectively shall acquire, in such proportion among them as
they may agree with the Borrower and the Agent, all (but not less than all) of
the Commitments and outstanding Loans of the Replaced Bank, and, in connection
therewith, shall pay to the Replaced Bank, as the purchase price in respect
thereof, an amount equal to the sum as of the Replacement Effective Date
(without duplication) of (y) the unpaid principal amount of, and all accrued but
unpaid interest on all outstanding Loans of the Replaced Bank and (z) the
Replaced Bank's ratable share of all accrued but unpaid fees owing to the
Replaced Bank hereunder, and (iii) all other obligations of the Borrower owing
to the Replaced Bank under this Agreement (other than those specifically
described in clause (ii) above in respect of which the assignment purchase price
has been, or is concurrently being, paid), as a result of the actions required
to be taken under this Section, shall be paid in full by the Borrower to the
Replaced Bank on or prior to the Replacement Effective Date.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, under seal, by their respective authorized officers as of the day
and year first above written.
CULP, INC. (SEAL)
By:_______________________________
Title:
Culp, Inc.
101 South Main Street
High Point, North Carolina
27261-2686
Attention: Franklin N. Saxon
Vice President and
Chief Financial Officer]
Telecopier number: 910-887-7089
Confirmation number: 910-888-6266
WACHOVIA BANK OF GEORGIA, N.A.,
as Agent (SEAL)
By:____________________________
Title:
Lending Office
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Syndications Group
Telecopier number: 404-332-4005
Confirmation number: 404-332-6971
81
<PAGE>
COMMITMENTS WACHOVIA BANK OF NORTH
CAROLINA, N.A.,
as a Bank (SEAL)
$42,000,000
By:_________________________________
Title:
Lending Office
Wachovia Bank of North
Carolina, N.A.
200 North Main Street
High Point, North Carolina 27261
Attention: Peter T. Callahan
Telecopier number: 910-887-7550
Confirmation number: 910-887-7641
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Documentation
Agent (SEAL)
$38,000,000 By:_________________________________
Title:
Lending Office
First Union National Bank of
North Carolina
150 Fayetteville Street Mall
6th Floor
Raleigh, North Carolina 27601
Attention: Mendal Lay
Telecopier number: 919-829-6067
Confirmation number: 919-829-6064
82
<PAGE>
$15,000,000 SUNTRUST BANK, ATLANTA (SEAL)
By:_________________________________
Title:
By:_________________________________
Title:
Lending Office
SunTrust Bank, Atlanta
25 Park Place
23rd Floor
Atlanta, Georgia 30303
Attention: Jeff Drucker
Telecopier number: 404-588-8833
Confirmation number: 404-230-1403
$15,000,000 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEEN (SEAL)
By:_________________________________
Title:
By:_________________________________
Title:
Lending Office
Rabobank Nederland, New York Branch
245 Park Avenue
New York, New York 10167
Attention: Customer Service
Department
Telecopier number: 212-916-7930
Confirmation number: 212-916-7928
with a copy to:
Rabobank Nederland
One Atlantic Center, Suite 3450
Atlanta, Georgia 30309-3400
Attention: Theodore W. Cox
Telecopier number: 404-877-9150
83
<PAGE>
Confirmation number: 404-877-9109
84
<PAGE>
$15,000,000 ABN AMRO BANK, N.V., ATLANTA
AGENCY (SEAL)
By:_____________________________
Title:
By:_____________________________
Title:
Lending Office
ABN AMRO Bank, N.V., Atlanta Agency
One Ravinia Drive, Suite 1200
Atlanta, Georgia 30346
Attention: Mark Clegg
Telecopier number: 770-399-7397
Confirmation number: 770-399-7399
TOTAL COMMITMENTS:
$125,000,000
85
<PAGE>
EXHIBIT A-1
FORM OF SYNDICATED DOLLAR LOAN NOTE
Atlanta, Georgia
April 23, 1997
For value received, CULP, INC., a North Carolina corporation (the
"Borrower"), promises to pay to the order of __________________________________,
a ____________________ (the "Bank"), for the account of its Lending Office, the
principal sum of ___________________________________ AND NO/100 DOLLARS
($____________), or such lesser amount as shall equal the unpaid principal
amount of each Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Syndicated Dollar Loan Note on the dates and at the rate or rates
provided for Syndicated Dollar Loans in the Credit Agreement. Interest on any
overdue principal of and, to the extent permitted by law, overdue interest on
the principal amount hereof shall bear interest at the Default Rate, as provided
for in the Credit Agreement. All such payments of principal and interest shall
be made in lawful money of the United States in Federal or other immediately
available funds at the office of Wachovia Bank of Georgia, N.A., 191 Peachtree
Street, N.E., Atlanta, Georgia 30303-1757, or such other address as may be
specified from time to time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto, and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.
This Syndicated Dollar Loan Note is one of the Syndicated Dollar Loan
Notes referred to in the Credit Agreement dated as of April 23, 1997 among the
Borrower, the Banks listed on the signature pages thereof, Wachovia Bank of
Georgia, N.A.,
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as Agent and First Union National Bank of North Carolina, as Documentation Agent
(as the same may be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
optional and mandatory prepayment and the repayment hereof and the acceleration
of the maturity hereof, as well as the obligation of the Borrower to pay all
costs of collection, including reasonable attorneys fees, in the event this
Syndicated Loan Note is collected by law or through an attorney at law.
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Syndicated Dollar Loan
Note to be duly executed, under seal, by its duly authorized officer as of the
day and year first above written.
CULP, INC. (SEAL)
By:__________________________
Title:
87
<PAGE>
Syndicated Dollar Loan Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
88
<PAGE>
Base Rate Amount Amount of
or Euro- of Principal Maturity Notation
Date Dollar Loan Loan Repaid Date Made By
89
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
90
<PAGE>
EXHIBIT A-2
FORM OF FOREIGN CURRENCY LOAN NOTE
Atlanta, Georgia
April 23, 1997
For value received, CULP, INC., a North Carolina corporation (the
"Borrower"), promises to pay to the order of _________________________________,
a ____________________ (the "Bank"), for the account of its Lending Office, the
outstanding principal amount of the Foreign Currency Loans made by the Bank to
the Borrower as Foreign Currency Loans pursuant to the Credit Agreement referred
to below, on the dates and in the amounts provided in the Credit Agreement. The
Borrower promises to pay interest on the unpaid principal amount of this Note on
the dates and at the rate or rates provided for Foreign Currency Loans in the
Credit Agreement. Interest on any overdue principal of and, to the extent
permitted by law, overdue interest on the principal amount hereof shall bear
interest at the Default Rate, as provided for in the Credit Agreement. All such
payments of principal and interest shall be made in lawful money of the
applicable Foreign Currency in immediately available funds at the office of
Wachovia Bank of Georgia, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia
30303-1757, or such other address as may be specified from time to time pursuant
to the Credit Agreement.
All Foreign Currency Loans made by the Bank, the respective maturities
thereof, the interest rates from time to time applicable thereto, and all
repayments of the principal thereof shall be recorded by the Bank and, prior to
any transfer hereof, endorsed by the Bank on the schedule attached hereto, or on
a continuation of such schedule attached to and made a part hereof; provided
that the failure of the Bank to make any such recordation or endorsement shall
not affect the obligations of the Borrower hereunder or under the Credit
Agreement.
This Note is one of the Foreign Currency Loan Notes referred to in the
Credit Agreement dated as of April 23, 1997 among the Borrower, the Banks listed
on the signature pages thereof, Wachovia Bank of Georgia, N.A., as Agent and
First Union National Bank of North Carolina, as Documentation Agent (as the same
may be amended and modified from time to time, the "Credit
91
<PAGE>
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
optional and mandatory prepayment and the repayment hereof and the acceleration
of the maturity hereof, as well as the obligation of the Borrower to pay all
costs of collection, including reasonable attorneys fees, in the event this
Syndicated Loan Note is collected by law or through an attorney at law.
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Foreign Currency Loan
Note to be duly executed, under seal, by its duly authorized officer as of the
day and year first above written.
CULP, INC. (SEAL)
By:__________________________
Title:
92
<PAGE>
Foreign Currency Loan Note (cont'd)
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF CULP, INC.
DATED April 23, 1997
Principal
Amount of Maturity Principal
Loan and of Interest Amount Unpaid
Date Currency Period Paid Balance
- ------------------------------------------------------------
93
<PAGE>
EXHIBIT A-3
MONEY MARKET LOAN NOTE
As of April 23, 1997
For value received, CULP, INC., a North Carolina corporation (the
"Borrower"), promises to pay to the order of , a _______________ (the "Bank"),
for the account of its Lending Office, the principal sum of ONE HUNDRED
TWENTY-FIVE MILLION AND NO/100 DOLLARS ($125,000,000) or such lesser amount as
shall equal the unpaid principal amount of each Money Market Loan made by the
Bank to the Borrower pursuant to the Credit Agreement referred to below, on the
dates and in the amounts provided in the Credit Agreement. The Borrower promises
to pay interest on the unpaid principal amount of this Money Market Loan Note on
the dates and at the rate or rates provided for in the Credit Agreement referred
to below. Interest on any overdue principal of and, to the extent permitted by
law, overdue interest on the principal amount hereof shall bear interest at the
Default Rate, as provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of Wachovia Bank of
Georgia, N.A., 191 Peachtree Street, N.E., Atlanta, Georgia 30303-1757, or such
other address as may be specified from time to time pursuant to the Credit
Agreement.
All Money Market Loans made by the Bank, the respective maturities
thereof, the interest rates from time to time applicable thereto, and all
repayments of the principal thereof shall be recorded by the Bank and, prior to
any transfer hereof, endorsed by the Bank on the schedule attached hereto, or on
a continuation of such schedule attached to and made a part hereof; provided
that the failure of the Bank to make any such recordation or endorsement shall
not affect the obligations of the Borrower hereunder or under the Credit
Agreement.
This Money Market Loan Note is one of the Money Market Loan Notes
referred to in the Credit Agreement dated as of April 23, 1997 among the
Borrower, the Banks listed on the signature pages thereof, Wachovia Bank of
Georgia, N.A., as Agent and First Union National Bank of North Carolina, as
Documentation Agent (as the same may be amended and modified from time to time,
the
94
<PAGE>
"Credit Agreement"). Terms defined in the Credit Agreement are used herein with
the same meanings. Reference is made to the Credit Agreement for provisions for
the optional and mandatory prepayment and the repayment hereof and the
acceleration of the maturity hereof, as well as the obligation of the Borrower
to pay all costs of collection, including reasonable attorneys fees, in the
event this Syndicated Loan Note is collected by law or through an attorney at
law.
The Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment and any other notice required by law relative
hereto, except to the extent as otherwise may be expressly provided for in the
Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Money Market Loan Note
to be duly executed, under seal, by its duly authorized officer as of the day
and year first above written.
CULP, INC. (SEAL)
By:__________________________
Title:
95
<PAGE>
Money Market Loan Note (cont'd)
MONEY MARKET LOANS AND PAYMENTS OF PRINCIPAL
- -------------------------------------------------------------------------------
Amount Amount of Stated
Interest of Principal Maturity Notation
Date Rate Loan Repaid Date Made By
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
96
<PAGE>
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
97
<PAGE>
EXHIBIT B
OPINION OF
COUNSEL FOR THE BORROWER
[Dated as provided in Section 3.01 of the Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn: Syndications Group
Dear Sirs:
We have acted as counsel for Culp, Inc., a North Carolina corporation
(the "Borrower") in connection with the Credit Agreement (the "Credit
Agreement") dated as of April 23, 1997, among the Borrower, the banks listed on
the signature pages thereof, Wachovia Bank of Georgia, N.A., as Agent and First
Union National Bank of North Carolina, as Documentation Agent. Terms defined in
the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion. We have assumed for purposes of our opinions set forth
below that the execution and delivery of the Credit Agreement by each Bank and
by the Agent have been duly authorized by each Bank and by the Agent.
98
<PAGE>
Upon the basis of the foregoing, we are of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of North Carolina and has all corporate
powers required to carry on its business as now conducted.
2. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes (i) are within the Borrower's corporate powers,
(ii) have been duly authorized by all necessary corporate action, (iii) require
no action by or in respect of, or filing with, any governmental body, agency or
official, (iv) do not contravene, or constitute a default under, any provision
of applicable law or regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement, judgment, injunction, order, decree
or other instrument which to our knowledge is binding upon the Borrower and (v)
to our knowledge, except as provided in the Credit Agreement, do not result in
the creation or imposition of any Lien on any asset of the Borrower or any of
its Subsidiaries.
3. The Credit Agreement constitutes a valid and binding agreement of
the Borrower, enforceable against the Borrower in accordance with its terms, and
the Notes constitute valid and binding obligations of the Borrower, enforceable
in accordance with their respective terms, except as such enforceability may be
limited by: (i) bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and (ii) general principles of equity.
4. To our knowledge, there is no action, suit or proceeding pending, or
threatened, against or affecting the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, consolidated financial position or consolidated
results of operations of the Borrower and its Consolidated Subsidiaries,
considered as a whole, or which in any manner questions the validity or
enforceability of the Credit Agreement or any Note.
5. Each of the Borrower's Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, and has all corporate powers and all material governmental
licenses, authorizations,
99
<PAGE>
consents and approvals required to carry on its business as now conducted.
6. Neither the Borrower nor any of its Subsidiaries is an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
7. Neither the Borrower nor any of its Subsidiaries is a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended.
8. We are qualified to practice in the State of North Carolina and do
not purport to be experts on any laws other than the laws of the United States
and the State of North Carolina and this opinion is rendered only with respect
to such laws. We have made no independent investigation of the laws of any other
jurisdiction.
This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you, any Assignee, Participant
or other Transferee under the Credit Agreement, and Jones, Day, Reavis & Pogue
without our prior written consent.
Very truly yours,
100
<PAGE>
EXHIBIT C
OPINION OF
JONES, DAY, REAVIS & POGUE, SPECIAL COUNSEL
FOR THE AGENT
[Dated as provided in Section 3.01 of the Credit Agreement]
To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn: Syndications Group
Dear Sirs:
We have participated in the preparation of the Credit Agreement (the
"Credit Agreement") dated as of April 23, 1997, among Culp, Inc., a North
Carolina corporation (the "Borrower"), the banks listed on the signature pages
thereof (the "Banks"), Wachovia Bank of Georgia, N.A., as Agent (the "Agent")
and First Union National Bank of North Carolina, as Documentation Agent, and
have acted as special counsel for the Agent for the purpose of rendering this
opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in
the Credit Agreement are used herein as therein defined.
This opinion letter is limited by, and is in accordance with, the
January 1, 1992 edition of the Interpretive Standards applicable to Legal
Opinions to Third Parties in Corporate Transactions adopted by the Legal Opinion
Committee of the Corporate and Banking Law Section of the State Bar of Georgia
which Interpretive Standards are incorporated herein by this reference.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
101
<PAGE>
Upon the basis of the foregoing, and assuming the due authorization,
execution and delivery of the Credit Agreement and each of the Notes by or on
behalf of the Borrower, we are of the opinion that the Credit Agreement
constitutes a valid and binding agreement of the Borrower and each Note
constitutes valid and binding obligations of the Borrower, in each case
enforceable in accordance with its terms except as: (i) the enforceability
thereof may be affected by bankruptcy, insolvency, reorganization, fraudulent
conveyance, voidable preference, moratorium or similar laws applicable to
creditors' rights or the collection of debtors' obligations generally; (ii)
rights of acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability; and (iii) the enforceability
of certain of the remedial, waiver and other provisions of the Credit Agreement
and the Notes may be further limited by the laws of the State of Georgia;
provided, however, such additional laws do not, in our opinion, substantially
interfere with the practical realization of the benefits expressed in the Credit
Agreement and the Notes, except for the economic consequences of any procedural
delay which may result from such laws.
In giving the foregoing opinion, we express no opinion as to the effect
(if any) of any law of any jurisdiction except the State of Georgia. We express
no opinion as to the effect of the compliance or noncompliance of the Agent or
any of the Banks with any state or federal laws or regulations applicable to the
Agent or any of the Banks by reason of the legal or regulatory status or the
nature of the business of the Agent or any of the Banks.
This opinion is delivered to you in connection with the transaction
referenced above and may only be relied upon by you and any Assignee,
Participant or other Transferee under the Credit Agreement without our prior
written consent.
Very truly yours,
102
<PAGE>
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
Dated ______________ __, ____
Reference is made to the Credit Agreement dated as of April 23, 1997
(together with all amendments and modifications thereto, the "Credit Agreement")
among Culp, Inc., a North Carolina corporation (the "Borrower"), the Banks (as
defined in the Credit Agreement), Wachovia Bank of Georgia, N.A., as Agent (the
"Agent") and First Union National Bank of North Carolina, as Documentation
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, without recourse to
the Assignor, 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 Commitment and a interest (which on the Effective
Date hereof is $__________________)) in the Syndicated Loans [and Money Market
Loans] owing to the Assignor and a % 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 or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement 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 Commitment (without giving effect to assignments
thereof which have not yet become effective) is $__________ and the aggregate
outstanding principal amount of Syndicated Loans [and Money Market Loans] owing
to it (without giving effect to assignments thereof which have not yet become
effective) is $ _________;
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(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
or any other instrument or document furnished pursuant thereto; and (iii)
attaches the Note[s] referred to in paragraph 1 above and requests that the
Agent exchange such Note[s] for [(x)] a new Syndicated Dollar Loan Note dated
_________, ____ in the principal amount of $__________ , a new Foreign Currency
Loan Note dated __________________, ____ in the principal amount of $__________
and a new Money Market Loan Note in the principal amount of $___________, each
payable to the order of the Assignee [and (y) a new Syndicated Dollar Loan Note
dated __________________, ____ in the principal amount of $__________ , a new
Foreign Currency Loan Note dated __________________, ____ in the principal
amount of $__________ and a new Money Market Loan Note in the principal amount
of $___________, each payable to the order of the Assignor].
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 4.04(a) thereof (or any more recent financial statements of the Borrower
delivered pursuant to Section 5.01(a) or (b) 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 obligations which by the terms of the Credit
Agreement are required to be performed by it as a Bank; (vi) specifies as its
Lending Office (and 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
(viii) makes the representation and warranty contained in Section 9.18 of the
Credit Agreement [, and (ix) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying as to the Assignee's status for
104
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.
5. Upon such execution and acceptance by the Agent [and execution by
the Borrower] [IF REQUIRED BY THE CREDIT AGREEMENT], 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 Sections 8.03, 9.03 and 9.04 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] [IF REQUIRED BY THE CREDIT AGREEMENT], 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 Georgia.
[NAME OF ASSIGNOR]
By:_____________________________
Title:
[NAME OF ASSIGNEE]
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<PAGE>
By:_____________________________
Title:
Lending Office:
[Address]
WACHOVIA BANK OF GEORGIA, N.A.,
As Agent
By:_____________________________
Title:
[NAME OF BORROWER]
IF REQUIRED BY THE CREDIT AGREEMENT.
By:_____________________________
Title:
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<PAGE>
EXHIBIT E
NOTICE OF BORROWING
______________________________, ____
Wachovia Bank of Georgia, N.A., as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Syndications Group
Re: Credit Agreement (as amended and modified from time to time,
the "Credit Agreement") dated as of April 23, 1997 by and
among Culp, Inc., the Banks from time to time parties thereto,
Wachovia Bank of Georgia, N.A., as Agent and First Union
National Bank of North Carolina, as Documentation Agent.
Gentlemen:
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings attributable thereto in the Credit Agreement.
This Notice of Borrowing is delivered to you pursuant to Section 2.02
of the Credit Agreement.
The Borrower hereby requests a [Euro-Dollar Borrowing] [Base Rate
Borrowing] [Foreign Currency Borrowing in][SPECIFY FOREIGN CURRENCY] in the
aggregate principal amount of [the Dollar Equivalent of] $__________ to be made
on _________, ____, and for interest to accrue thereon at the rate established
by the Credit Agreement for [Euro-Dollar Loans] [Base Rate Loans] [Foreign
Currency Loans]. The duration of the Interest Period with respect thereto shall
be [1 month] [2 months] [3 months] [6 months] [30 days] [60 days] [90 days] [120
days].
The Borrower has caused this Notice of Borrowing to be executed and
delivered by its duly authorized officer this _____ day of _____________, _____.
CULP, INC.
107
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By:_________________________
Title:
108
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EXHIBIT F
COMPLIANCE CERTIFICATE
Reference is made to the Credit Agreement dated as of April 23, 1997
(as modified and supplemented and in effect from time to time, the "Credit
Agreement") among Culp, Inc., as Borrower, the Banks from time to time parties
thereto, Wachovia Bank of Georgia, N.A., as Agent and First Union National Bank
of North Carolina, as Documentation Agent. Capitalized terms used herein shall
have the meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 5.01(c) of the Credit Agreement, ________________,
the duly authorized ____________________ of Culp, Inc., hereby certifies to the
Agent and the Banks that the information contained in the Compliance Check List
attached hereto is true, accurate and complete as of ________________, ____, and
that no Default is in existence on and as of the date hereof.
CULP, INC.
By:__________________________
Title:
109
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CULP, INC.
COMPLIANCE CHECK LIST
_____________________
__________________, ____
1. Consolidations, Mergers and Sales of Assets. (Section 5.05.)
The Borrower will not, nor will it permit any Subsidiary to,
consolidate or merge with or into, or sell, lease or otherwise transfer
all or any substantial part of its assets to, any other Person, or
discontinue or eliminate any business line or segment, provided that
(a) the Borrower may merge with another Person if (i) such Person was
organized under the laws of the United States of America or one of its
states, (ii) the Borrower is the corporation surviving such merger and
(iii) immediately after giving effect to such merger, no Default shall
have occurred and be continuing, (b) Subsidiaries of the Borrower may
merge with one another, and (c) the foregoing limitation on the sale,
lease or other transfer of assets and on the discontinuation or
elimination of a business line or segment shall not prohibit, during
any Fiscal Quarter, a transfer of assets or the discontinuance or
elimination of a business line or segment (in a single transaction or
in a series of related transactions) unless the aggregate assets to be
so transferred or utilized in a business line or segment to be so
discontinued, when combined with all other assets transferred, and all
other assets utilized in all other business lines or segments
discontinued, during such Fiscal Quarter and the immediately preceding
3 Fiscal Quarters, contributed more than 10% of EBITDA during the 4
Fiscal Quarters immediately preceding such Fiscal Quarter.
(a) Value of assets transferred or business
lines or segments discontinued $_____________
(b) EBITDA - Schedule 1 $_____________
(c) 10% of (b) $_____________
Limitation (a) not to exceed (c)
2. Loans and Advances (Section 5.15)
110
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Neither the Borrower nor any of its Subsidiaries shall make loans or
advances to any Person except as permitted by Section 5.16 and except:
(i) loans and advances made prior to the Closing Date and listed on
Schedule 5.15, (ii) loans or advances to employees not exceeding
$5,000,000 in the aggregate principal amount outstanding at any time,
in each case made in the ordinary course of business and consistent
with practices existing on January 26, 1997; (iii) deposits required by
government agencies or public utilities; (iv) loans and advances made
after the Closing Date to 3096726 Canada Inc. and/or Rayonese Textile
Inc. in an aggregate amount which, together with Investments in 3096726
Canada Inc. and/ or Rayonese Textile Inc. made after the Closing Date
and permitted by clause (vii) of Section 5.16, does not exceed
$25,000,000; and (v) other loans and advances in an amount which,
together with Investments permitted by clause (viii) of Section 5.16,
does not exceed 10% of Stockholders' Equity; provided that after giving
effect to the making of any loans, advances or deposits permitted by
this Section, and no Default shall be in existence or be created
thereby.
(a) To Employees $_____________
Limitation $5,000,000
(b) Loans and advances to 3096726 Canada Inc. and/or Rayonese Textile
Inc.-- See Paragraph 3(d) below
(c) Other Loans and advances-- See Paragraph 3(i) below
3. Investments (Section 5.16)
Neither the Borrower nor any of its Subsidiaries shall make Investments
in any Person except as permitted by Section 5.15 and Investments in
existence on the Closing Date and listed on Schedule 5.16 and except
Investments in (i) direct obligations of the United States Government
maturing within one year, (ii) certificates of deposit issued by a
commercial bank whose credit is satisfactory to the Agent, (iii)
commercial paper rated A1 or the equivalent thereof by S&P or P1 or the
equivalent thereof by Moody's and in either case maturing within 6
months after the date of acquisition, (iv) tender bonds the payment of
the principal of and interest on which is fully supported by a letter
of credit issued by a United States bank whose long-term certificates
of deposit are rated at least AA or the equivalent thereof by S&P and
Aa or the
111
<PAGE>
equivalent thereof by Moody's, (v) Investments pursuant to its deferred
compensation plan, funded with life insurance through a Rabbi Trust;
(vi) investments in Joint Ventures in an aggregate amount not exceeding
$25,000,000; (vii) Investments made after the Closing Date in 3096726
Canada Inc. and/or Rayonese Textile Inc. in an aggregate amount which,
together with loans and advances to 3096726 Canada Inc. and/or Rayonese
Textile Inc. and permitted by clause (iv) of Section 5.16, do not
exceed $25,000,000; and/or (viii) other Investments in an amount which,
together with loans and advances permitted by clause (v) of Section
5.15, does not exceed 10% of Stockholders' Equity; provided, however,
immediately after giving effect to the making of any Investment, no
Default shall have occurred and be continuing.
(a) Investments in Joint Ventures $___________
Limitation $25,000,000
(b) Loans and advances after the Closing Date
to 3096726 Canada Inc. and/or $___________
Rayonese Textile Inc.
(c) Investments after the Closing Date
in 3096726 Canada Inc. and/or $___________
Rayonese Textile Inc.
(d) Sum of (b) and (c) $___________
Limitation: (d) may not exceed $25,000,000
(e) Loans and advances not permitted by
clauses (i) through (iv), inclusive,
of ss. 5.15 $___________
(f) Investments not permitted by
clauses (i) through (vii), inclusive,
of ss. 5.16 $___________
(g) Sum of (e) and (f) $___________
(h) Stockholders' Equity $___________
(i) 10% of (h) $___________
Limitation: (g) may not exceed (i)
112
<PAGE>
4. Priority Debt (Section 5.17)
None of the Borrowers' nor any Consolidated Subsidiary's property is
subject to any Lien securing Debt, except for:
Description of Lien and Property Amount of Debt
subject to same Secured
a. ___________________________ $_____________
b. ___________________________ $_____________
c. ___________________________ $_____________
d. ___________________________ $_____________
e. ___________________________ $_____________
f. ___________________________ $_____________
Total $
=============
(a) Liens not permitted by Sections 5.17(a)
through (h), inclusive $_____________
(b) Debt of Subsidiaries not permitted by
Section 5.17(j) $_____________
(c) Sum of (a) and (b) $_____________
(d) Stockholders' Equity $_____________]
(e) Debt secured by Liens permitted by
Sections 5.17(a) through (h), inclusive $_____________
(f) Sum of (c) and (e) $_____________
(g) 8% of (c) $_____________
(h) 15% of (f) $_____________
Limitations: (c) may not exceed (g)
(f) may not exceed (h)
5. Interest Coverage (Section 5.19)
113
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At the end of each Fiscal Quarter, commencing with the Fiscal Quarter
ending January 26, 1997, the ratio of EBIT to Consolidated Net Interest
Expense shall not have been less than 2.25 to 1.0.
(a) EBIT - Schedule 1 $_____________
(b) Consolidated Net Interest Expense
- Schedule 1 $_____________
(c) Actual ratio of (a) to (b) ____ to 1.0
Minimum ratio 2.25 to 1.0
6. Ratio of Total Debt to Total Capitalization (Section 5.20)
The ratio of Total Debt to Total Capitalization will not at the end of
each Fiscal Month exceed 0.60 to 1.00.
(a) Total Debt $_____________
(b) Stockholders' Equity $_____________
(c) Total Capitalization (sum of (a) and (b) $_____________
(d) Actual ratio of (a) to (c) ____ to 1.0
Maximum ratio 0.60 to 1.0
7. Debt/EBITDA Ratio (Section 5.21)
The Debt/EBITDA Ratio will at the end of each Fiscal Month be less than
3.5 to 1.00.
(a) Total Debt $_____________
(b) EBITDA - Schedule 1 $_____________
(c) Actual ratio of (a) to (b) ____ to 1.0
Maximum ratio < 3.5 to 1.0
114
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Schedule 1
EBIT/EBITDA
I. EBIT:
(a) Consolidated Net Income for:
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
Total $_____________
(b) Consolidated Net Interest Expense (1) for:
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
Total $_____________
(c) Income taxes for:
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
Total $_____________
TOTAL EBIT (sum of (a) through (c)) $_____________
II. EBITDA
(a) EBIT (from Part I) $_____________
(b) Depreciation expense for:
quarter $_____________
--- ----
quarter $_____________
--- ----
___________________________
(1) Exclude Restricted Investments
115
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quarter $_____________
--- ----
quarter $_____________
--- ----
Total $_____________
116
<PAGE>
(c) Amortization expense for:
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
Total $_____________
(d) Other Non-cash charges for:
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
quarter $_____________
--- ----
Total $_____________
TOTAL EBITDA (sum of (a) through (d)) $_____________
117
<PAGE>
EXHIBIT G
CULP, INC.
CLOSING CERTIFICATE
Reference is made to the Credit Agreement (the "Credit Agreement")
dated as of April 23, 1997, among Culp, Inc., the Banks listed therein, Wachovia
Bank of Georgia, N.A., as Agent and First Union National Bank of North Carolina,
as Documentation Agent. Capitalized terms used herein have the meanings ascribed
thereto in the Credit Agreement.
Pursuant to Section 3.01(e) of the Credit Agreement, __________________
________________________, the duly authorized _________________________ of Culp,
Inc., hereby certifies to the Agent and the Banks that (i) no Default has
occurred and is continuing as of the date hereof, and (ii) the representations
and warranties contained in Article IV of the Credit Agreement are true on and
as of the date hereof.
Certified as of April 23, 1997.
By:_____________________________
Printed Name:________________
Title:_______________________
118
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EXHIBIT H
CULP, INC.
SECRETARY'S CERTIFICATE
The undersigned, ____________________________, _______________________
_________________, Secretary of Culp, Inc., a North Carolina corporation (the
"Borrower"), hereby certifies that [s]he has been duly elected, qualified and is
acting in such capacity and that, as such, [s]he is familiar with the facts
herein certified and is duly authorized to certify the same, and hereby further
certifies, in connection with the Credit Agreement dated as of April 23, 1997
among the Borrower, Wachovia Bank of Georgia, N.A. as Agent, First Union
National Bank of North Carolina, as Documentation Agent and the Banks listed on
the signature pages thereof, that:
1. Attached hereto as Exhibit A is a complete and correct copy of the
Certificate of Incorporation of the Borrower as in full force and effect on the
date hereof as certified by the Secretary of State of the State of North
Carolina, the Borrower's state of incorporation.
2. Attached hereto as Exhibit B is a complete and correct copy of the
Bylaws of the Borrower as in full force and effect on the date hereof.
3. Attached hereto as Exhibit C is a complete and correct copy of the
resolutions duly adopted by the Board of Directors of the Borrower on
__________________, ____ 1997 approving, and authorizing the execution and
delivery of, the Credit Agreement, the Notes and the other Loan Documents (as
such terms are defined in the Credit Agreement) to which the Borrower is a
party. Such resolutions have not been repealed or amended and are in full force
and effect, and no other resolutions or consents have been adopted by the Board
of Directors of the Borrower in connection therewith.
4. ____________________________, who is __________________ of the
Borrower signed the Credit Agreement, the Notes and the other Loan Documents to
which the Borrower is a party, was duly elected, qualified and acting as such at
the time [s]he signed the Credit Agreement, the Notes and other Loan Documents
to which the Borrower is a party, and [his/her] signature appearing on the
Credit Agreement, the Notes and the other Loan Documents to which the Borrower
is a party is [his/her] genuine signature.
119
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set [his/her] hand as of April
23, 1997.
____________________________________
120
<PAGE>
EXHIBIT I
MONEY MARKET QUOTE REQUEST
[Date]
Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Syndications Group
Re: Money Market Quote Request
This Money Market Quote Request is given in accordance with Section
2.03 of the Credit Agreement (as amended or modified from time to time, the
"Credit Agreement") dated as of April 23, 1997, among Culp, Inc., the Banks from
time to time parties thereto, Wachovia Bank of Georgia, N.A., as Agent and First
Union National Bank of North Carolina, as Documentation Agent. Terms defined in
the Credit Agreement are used herein as defined therein.
The Borrower hereby requests that the Agent obtain quotes for a Money
Market Borrowing based upon the following:
1. The proposed date of the Money Market Borrowing shall be
______________, 19_____ (the "Money Market Borrowing Date").(1)*
2. The aggregate amount of the Money Market Borrowing shall be
$_______________.(2)
3. The Stated Maturity Date(s) applicable to the Money Market Borrowing
shall be ______ days.(3)
121
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________________________
* All numbered footnotes appear on the last page of this Exhibit I.
122
<PAGE>
Very truly yours,
CULP, INC.
By:___________________________
Title:
(1) The date must be a Euro-Dollar Business Day.
(2) The amount of the Money Market Borrowing is subject to Section 2.03(a) and
(b).
(3) The Stated Maturity Dates are subject to Section 2.03(b)(iii). The Borrower
may request that up to 2 different Stated Maturity Dates be applicable to
any Money Market Borrowing, provided that (i) each such Stated Maturity
Date shall be deemed to be a separate Money Market Quote Request and (ii)
the Borrower shall specify the amounts of such Money Market Borrowing to be
subject to each such different Stated Maturity Date.
123
<PAGE>
EXHIBIT I
MONEY MARKET QUOTE
Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Syndications Group
Re: Money Market Quote to Culp, Inc.
This Money Market Quote is given in accordance with Section 2.03(c)(ii)
of the Credit Agreement (as amended or modified from time to time, the "Credit
Agreement") dated as of April 23, 1997, among Culp, Inc. (the "Borrower"), the
Banks from time to time parties thereto, Wachovia Bank of Georgia, N.A., as
Agent and First Union National Bank of North Carolina, as Documentation Agent.
Terms defined in the Credit Agreement are used herein as defined therein.
In response to the Borrower's Money Market Quote Request dated
_______________, ____, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank:
2. Person to contact at Quoting Bank:
3. Date of Money Market Borrowing:1*
4. We hereby offer to make Money Market Loan(s) in the following
maximum principal amounts for the following Interest Periods and at the
following rates:
Maximum Stated
Principal Maturity
Amount(2) Date(3) Rate Per Annum(4)
- --------- -------- -----------------
124
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______________________
* All numbered footnotes appear on the last page of this Exhibit J.
125
<PAGE>
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the Credit Agreement,
irrevocably obligate(s) us to make the Money Market Loan(s) for which any
offer(s) [is] [are] accepted, in whole or in part (subject to the last sentence
of Section 2.03(c)(i) of the Credit Agreement).
126
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Very truly yours,
[Name of Bank]
Dated: By:______________________________
___________________________ Authorized Officer
127
<PAGE>
_______________________
(1) As specified in the related Money Market Quote Request.
(2) The principal amount bid for each Stated Maturity Date may not exceed the
principal amount requested. Money Market Quotes must be made for at least
$5,000,000 or a larger integral multiple of $1.000,000.
(3) The Stated Maturity Dates are subject to Section 2.03(b)(iii).
(4) Subject to Section 2.03(c)(ii)(C).
128
<PAGE>
Schedule 4.08
Subsidiaries
Name Jurisdiction of Incorporation
Guilford Printers, Inc. North Carolina(2)
Culp International, Inc. Virgin Islands
3096726 Canada Inc. Federal Laws of Canada
Rayonese Textile Inc. Federal Laws of Canada
__________________________
(2) Administratively dissolved by the North Carolina Secretary of State,
effective December 12, 1993
129
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Schedule 5.15
Loans and Advances existing on the Closing Date
NONE.
130
<PAGE>
Schedule 5.16
Investments existing on the Closing Date
1. The Restricted Investments in existence from time to time.
2. The Borrower's Investments in Subsidiaries.
131
<PAGE>
Schedule 5.17
Debt of Subsidiaries existing on the Closing Date
Indebtedness of Rayonese Textile, Inc. (the outstanding principal amount of
which is approximately CN $ 754,000 as of the Closing Date) represented by that
certain Canada-Quebec Subsidiary Agreement on Industrial Development between
Rayonese Textile Inc. and Industry Canada.
132
April 22, 1997
Line of Credit Agreement
Mr. Franklin N. Saxon
Senior Vice President & Chief Financial Officer
Culp, Inc.
P. O. Box 2686
High Point, N. C. 27261
Dear Frank:
Wachovia Bank of North Carolina, N. A. ("Bank") is pleased to offer to your
company the following credit facility:
TYPE: Revolving Line of Credit
AMOUNT: Up to Four Million Dollars ($4,000,000.00)
PURPOSE: For general working capital purposes.
REPAYMENT TERMS: Interest payable monthly on the first business day of each
calendar month.
TERMINATION DATE: After closing, this line of credit will expire on May 31,
1998 ("Termination Date") provided however that the
Termination Date shall automatically be extended for an
additional three month period on each August 31, November
30, February 28, and May 31 (each an "Extension Date")
unless the Bank has notified the Borrower in writing at
least 60 days prior to an Extension Date that it will not be
so extended. In no event shall the Termination Date extend
beyond the "Termination Date" in effect under the Credit
Agreement dated April 23, 1997 between Culp, Inc. and
Wachovia Bank of Georgia, as Agent.
<PAGE>
INTEREST RATE: The interest rate shall be the 30 day Adjusted London
Interbank Offered Rate ("LIBOR") plus the Applicable Margin
as defined in section 2.06 of the $125,000,000.00 Credit
Agreement between Culp, Inc. and Wachovia Bank of Georgia,
N.A., as Agent dated April 23, 1997. The "London Interbank
Offered Rate" means the rate per annum determined on the
basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of such
Euro-Dollar Loan offered for a term comparable to such
Interest Period, which rates appear on the Telerate Page
3750 effective as of 11:00 A.M., London time, 2 Euro-Dollar
Business Days prior to the first day of such Interest
Period, provided that if no such offered rates appear on
such page, the "London Interbank Offered Rate" for such
Interest Period will be the arithmetic average (rounded
upward, if necessary, to the next higher 1/100th of 1%) of
rates quoted by not less than 2 major banks in New York
City, selected by the Agent, at approximately 10:00 A.M.,
New York City time, 2 Euro Dollar Business Days prior to the
first day of such Interest Period, for deposits in Dollars
offered to leading European banks for a period comparable to
such Interest Period in an amount comparable to the
principal amount of such Euro-Dollar Loan.
The "Adjusted London Interbank Offered Rate" means, for any
Interest Period, a rate per annum equal to the quotient
obtained (rounded upwards, if necessary, to the next higher
1/100th of 1%) by dividing (i) the applicable London
Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
FINANCIAL REPORTS: The following information will be required:
1. Year end audited financial statements prepared by a
certified public accounting firm acceptable to the Bank.
2. Quarterly income statements, balance sheets, and cash
flow statements.
FEES: 5,000.00 Facility fee payable upon acceptance.
<PAGE>
OTHER CONDITIONS: This commitment is subject to the terms and conditions of
the Credit Agreement dated April 23, 1997 between Culp, Inc.
and Wachovia Bank of Georgia, as Agent as amended and
supplemented from time to time.
In no event shall either your company or the Bank be liable
to the other for indirect, special, or consequential damages
which may arise out of the issuance of this commitment.
Closing must occur by April 29, 1997.
All information and representations are and will be at
closing accurate.
COMMITMENT No condition or other term of this commitment may be
MODIFICATIONS: waived or modified except by a writing signed by both your
company and the Bank.
Please call me if you have any questions about the terms of this offer. If this
commitment is not accepted and returned to the Bank by April 25, 1997, this
commitment shall be null and void. To acknowledge your acceptance, please sign
below and return to me. We look forward to working with you.
Very truly yours,
Pete T. Callahan
Senior Vice President
ACCEPTED THIS ________ DAY OF __________________, 1997:
CULP, INC.
BY:___________________________________
TITLE: Senior Vice President and Chief Financial Officer
REIMBURSEMENT AND SECURITY AGREEMENT
BETWEEN
CULP, INC.,
AND
WACHOVIA BANK OF NORTH CAROLINA, NATIONAL ASSOCIATION
DATED AS OF APRIL 1, 1997
RELATING TO $3,377,000 PRINCIPAL AMOUNT
CHESTERFIELD COUNTY, SOUTH CAROLINA
INDUSTRIAL REVENUE BONDS
(CULP, INC. PROJECT) SERIES 1988
---------------------------------------------
<PAGE>
REIMBURSEMENT AND SECURITY AGREEMENT
THIS REIMBURSEMENT AND SECURITY AGREEMENT, dated as of April 1, 1997,
is made and entered into by and between CULP, INC., a North Carolina corporation
(the "Company"), and WACHOVIA BANK OF NORTH CAROLINA, NATIONAL ASSOCIATION, a
national banking association with its principal office in Winston-Salem, North
Carolina (the "Bank").
W I T N E S S E T H:
WHEREAS, on December 19, 1988, Chesterfield County, South Carolina (the
"Issuer"), issued its Industrial Revenue Bonds (Culp, Inc. Project) Series 1988
in the aggregate principal amount of $3,377,000 (the "Bonds") pursuant to an
Indenture of Trust dated as of December 1, 1988 (as the same may be supplemented
pursuant to its terms, the "Indenture"), between the Issuer and Branch Banking
and Trust Company, as trustee (together with any successors in trust, the
"Trustee"); and
WHEREAS, pursuant to a Loan Agreement dated as of December 1, 1988 (as
the same may be amended pursuant to its terms and the terms of the Indenture,
the "Loan Agreement") between the Issuer and the Company, the Issuer loaned the
proceeds of the Bonds to the Company (i) to finance the acquisition,
construction and equipping of certain facilities more fully described in the
Loan Agreement (the "Project"), and (ii) to pay certain costs of issuing the
Bonds; and
WHEREAS, to provide additional security for the payment of the Bonds,
the Bank issued its irrevocable, direct-pay letter of credit No. LC 968-068488
dated April 1, 1996 (the "Original Letter of Credit"); and
WHEREAS, the Original Letter of Credit was issued pursuant to a 1996
Amended and Restated Credit Agreement dated as of April 1, 1996, among the
Company, the Bank, and First Union National Bank of North Carolina, N.A. (the
"1996 Credit Agreement"); and
WHEREAS, the Company has determined to replace the 1996 Credit
Agreement with a new credit agreement dated as of April 23, 1997 (the "Credit
Agreement"), among the Company, the Banks listed therein, and Wachovia Bank of
Georgia, N.A., as Agent ("Agent"); and
WHEREAS, as a condition to the execution of the Credit Agreement, the
Company and the Bank, at the request of the Agent, have agreed to enter into
this Reimbursement Agreement to set forth the Company's obligations to reimburse
the Bank for any draws on the Letter of Credit, as hereinafter defined; and
WHEREAS, in connection with the execution of the Credit Agreement, the
Bank has agreed to amend the terms of the Original Letter of Credit in order to
provide for automatic extension of the
<PAGE>
term thereof, and to amend certain references therein to refer to this
Reimbursement Agreement; and
WHEREAS, as required by SECTION 8.5 of the Indenture, the Trustee has
consented to the amendment of the Original Letter of Credit; and
WHEREAS, the Bank has agreed to issue the First Amendment to Letter of
Credit No. LC 968-068488 (the "First Amendment to Letter of Credit")
substantially in the form attached herein as EXHIBIT A, which is by this
reference made a part hereof (the Original Letter of Credit, as amended by the
First Amendment to Letter of Credit, as the same may be further amended from
time to time, the "Letter of Credit");
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I. DEFINITIONS.
Section I.1. Defined Terms. Unless otherwise specifically defined
herein, capitalized terms used but not defined herein shall have the meanings
assigned to them in the Credit Agreement. In the event the Credit Agreement is
no longer in effect, such terms and any other references to the terms of the
Credit Agreement shall have the meanings and substance assigned to them in the
Credit Agreement immediately prior to its termination. Furthermore, in addition
to the words and terms defined above, the following terms when used herein shall
have the following respective meanings:
"Bankruptcy Code" means Title 11 of the United States Code, as amended,
and any successor statute or statutes having substantially the same function.
"Business Day" means any day on which the offices of the Bank at which
drawings on the Letter of Credit are made, the Trustee, the Tender Agent, the
Registrar (as each such term is defined in the Indenture) and the Remarketing
Agent are each open for business and on which The New York Stock Exchange is not
closed.
"Closing Date" means April 23, 1997.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor federal tax code. Any reference to any provision of the Code shall
also include the income tax regulations promulgated thereunder, whether final,
temporary or proposed.
"Default" means any event that, with the passage of time or giving of
notice, or both, would constitute an Event of Default.
<PAGE>
"Default Rate" means on any day, the sum of 2% plus the then highest
interest rate (including the Applicable Margin) which may be applicable to any
Loans under the Credit Agreement (irrespective of whether any such type of Loans
are actually outstanding thereunder).
"Environmental Law" means any federal, state or local law, statute,
ordinance, rule, regulation, permit, license, approval, interpretation, order,
guidance or other legal requirement (including without limitation any subsequent
enactment, amendment or modification) relating to the protection of human health
or the environment, including, but not limited to, any requirement pertaining to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of materials that are or may constitute a threat to human health or
the environment.
"Event of Default" means any of the events specified in SECTION 8.1
hereof.
"Expiration Date" means the Initial Expiration Date or, if the stated
term of the Letter of Credit is extended as contemplated in SECTION 2.2(B)
hereof, the last day of each Successive Extension Period.
"Fee Percentage" means (i) on the Closing Date, _____ % per annum, and
(ii) on each Payment Date thereafter, the percentage determined on such Payment
Date by reference to the table set forth below and the Debt/EBITDA Ratio for the
quarterly or annual period ending immediately prior to such Payment Date:
Debt/EBITDA Ratio Fee Percentage
< 1.5 to 1.0 .35%
=> 1.5 to 1 but
< 2.3 to 1 .40%
=> 2.3 to 1 but
< 2.5 to 1 .50%
> 2.5 to 1 .65%
"Financial Statements" means the annual audited consolidated financial
statements of the Company and its Subsidiaries at April 30 and for the year then
ended.
"Generally Accepted Accounting Principles" means generally accepted
accounting principles, applied on a consistent basis for the Company and its
Subsidiaries on a consolidated basis throughout the period indicated, as further
described in Section 1.02 of the
<PAGE>
Credit Agreement.
"Governmental Authority" means any nation or government, any state,
department, agency or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to any government, and any corporation or other
entity owned or controlled (through stock or capital ownership or otherwise) by
any of the foregoing.
"Hazardous Material" means any substance or material meeting any one or
more of the following criteria: (i) it is or contains a substance designated as
a hazardous waste, hazardous substance, pollutant, contaminant or toxic
substance under any Environmental Law; (ii) it is toxic, explosive, corrosive,
ignitable, infectious, radioactive, mutagenic or otherwise hazardous, (iii) its
presence requires investigation or remediation under an Environmental Law or
common law; (iv) it constitutes a danger, nuisance, trespass or health or safety
hazard to persons or property; and/or (v) it is or contains, without limiting
the foregoing, petroleum hydrocarbons.
"Initial Expiration Date" means March 1, 2001.
"Letter of Credit Amount" means, at any time, the aggregate of the
Letter of Credit - Principal Component and the Letter of Credit - Interest
Component, subject to reduction or reinstatement as provided in the Letter of
Credit.
"Letter of Credit - Interest Component" has the meaning ascribed
thereto in SECTION 2.1 hereof.
"Letter of Credit - Principal Component" has the meaning ascribed
thereto in SECTION 2.1 hereof.
"Material Adverse Change" means a material adverse change in, any of
(i) the financial condition, operations, business, properties or prospects of
the Company and its Subsidiaries, taken as a whole; (ii) the ability of the
Company or any Subsidiary to perform under this Agreement or any Related
Document in any material respect or any other material contract to which any one
or more of them is a party in any material respect; (iii) the legality, validity
or enforceability of this Agreement or any Related Document; or (iv) the
perfection or priority of the liens of the Bank granted under this Agreement or
any Related Document or the rights and remedies of the Bank under this Agreement
or any Related Document (other than a change resulting from any act or omission
by the Bank).
"Moody's" means Moody's Investors Service and any successor thereto
which is a nationally recognized rating agency.
"Notice of Adjustment" has the meaning ascribed thereto in SECTION
2.4(B) hereof.
<PAGE>
"Notice of Non-Extension" means a written notice delivered by the Bank
to the Trustee, the Company and the Rating Agency to the effect that the Letter
of Credit will not be extended for a Successive Extension Period.
"Offering Memorandum" means collectively the Preliminary Offering
Memorandum and the Offering Memorandum with respect to the initial offering and
sale of the Bonds, together with the Supplement to Offering Memorandum to be
distributed in connection with the remarketing of the Bonds following the
Closing Date.
"Payment Date" means each anniversary of the Closing Date, commencing
April 23, 1998.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an unincorporated association, a trust or any other entity or
organization, including, but not limited to, a government or political
subdivision or an agency or instrumentality thereof.
"Placement Agent" means Wachovia Bank of North Carolina, National
Association, in its capacity as placement agent under the Placement Agreement.
"Placement Agreement" means the Placement Agreement as defined in the
Indenture.
"Pledged Bond Collateral" has the meaning set forth in SECTION 9.1
hereof.
"Pledged Bonds" means those Bonds which have been purchased from monies
drawn under the Letter of Credit and not remarketed by the Remarketing Agent
pursuant to of the Indenture.
"Purchase Price" means an amount equal to 100% of the principal amount
of any Bond tendered or deemed tendered for purchase pursuant to the Indenture
plus accrued and unpaid interest thereon to the date of purchase.
"Rating Agency" means Moody's, Standard & Poor's and any other national
rating service acceptable to the Trustee, the Remarketing Agent, the Bank and
the Company that has a rating of the Bonds in effect at that time.
"Reimbursement Agreement" means this Reimbursement and Security
Agreement, as the same may be amended, modified, supplemented or restated from
time to time.
"Reimbursement Obligations" means any one or more of the obligations of
the Company to the Bank under this Reimbursement Agreement, including but not
limited to the obligations specified
<PAGE>
in SECTION 2.5 of this Reimbursement Agreement.
"Related Documents" means the Bonds, the Indenture, the Loan Agreement,
the Placement Agreement, the Remarketing Agreement and any other instrument,
document, agreement or certificate relating thereto or otherwise executed and
delivered in connection with the issuance of the Bonds or the Letter of Credit.
"Remarketing Agent" means Wachovia Bank of North Carolina, National
Association, and its successors appointed and serving in such capacity under the
Indenture.
"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, and any successor thereto which is a
nationally recognized rating agency.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time, directly or indirectly, by the Company.
"Successive Extension Period" has the meaning ascribed thereto in
SECTION 2.2(B) hereof.
"Tender Advance" means a loan by the Bank to the Company made pursuant
to SECTION 2.6 hereof, the proceeds of which are used to reimburse the Bank for
the amount of a corresponding Tender Drawing.
"Tender Advance Interest Rate" means the interest rate applicable to a
Euro-Dollar Loan under the Credit Agreement as of the date of such Tender
Advance.
"Tender Agent" has the meaning ascribed thereto in ARTICLE I of the
Indenture.
"Tender Drawing" means a drawing under the Letter of Credit to pay the
portion of the Purchase Price of the Bonds allocable to principal.
"Termination Date" means the earliest of (i) the close of business on
the Expiration Date, (ii) the date on which the principal amount of and interest
on the Bonds shall have been paid in full, (iii) the close of business on the
second Business Day following conversion of the interest rate on the Bonds to a
Fixed Rate (as defined in the Indenture), (iv) the date on which the Bank honors
the draft drawn on the Letter of Credit pursuant to the Indenture following the
occurrence of an Event of Default (as defined in the Indenture) and an
acceleration, (v) the date the Letter of Credit is surrendered to the Bank for
cancellation, or (vi) the date the Bank honors the final drawing available under
the
<PAGE>
Letter of Credit.
Section I.2. Accounting Terms. Any accounting terms used in this
Reimbursement Agreement that are not specifically defined shall be interpreted
as set forth in Section 1.02 of the Credit Agreement.
Section I.3. Singular/Plural. Unless the context otherwise requires,
words in the singular include the plural and words in the plural include the
singular.
ARTICLE II. THE LETTER OF CREDIT.
Section II.1. Terms of Letter of Credit. The Bank issued its Letter of
Credit on April 1, 1996, in an amount equal to the sum of (i) the aggregate
principal amount of the Bonds (the "Letter of Credit - Principal Component"),
plus (ii) an amount equal to 120 days' interest on the Bonds, computed as though
the Bonds bore interest at the rate of 15% per annum, notwithstanding the actual
rate borne by the Bonds from time to time, based on a 360-day year for the
actual number of days elapsed (the "Letter of Credit - Interest Component"). The
Original Letter of Credit is hereby amended by the First Amendment, as set forth
on EXHIBIT A hereto. The Bank shall execute the First Amendment and deliver it
to the Trustee with instructions that the First Amendment be attached to the
Original Letter of Credit.
Section II.2. Term of the Letter of Credit; Extensions of the Stated
Term; Cancellation or Replacement of the Letter of Credit.
(a) The term of the Letter of Credit shall end on the Termination Date.
(b) The initial term of the Letter of Credit is stated to expire,
subject to earlier termination, on the Initial Expiration Date. The Initial
Expiration Date will be automatically extended, subject to earlier termination,
for successive additional periods of one calendar month each ("Successive
Extension Periods") until the fifth day of the thirteenth calendar month
following the calendar month during which the Company, the Trustee, and the
Rating Agency receive a Notice of Non-Extension from the Bank. The Bank's
decision to deliver a Notice of Non-Extension shall be made in its sole
discretion and no course of dealing or other circumstance shall be deemed to
require the Bank to refrain from delivering a Notice of Non-Extension. The
Company shall provide prior written notice to the Trustee of any amendment or
modification of this SECTION 2.2(B).
(c) The Letter of Credit may be canceled or replaced at any time
without penalty or premium at the request of the Company upon satisfaction of
all conditions specified in subsections (i), (ii)
<PAGE>
and (iii) hereof:
(i) the Company shall have given not less than thirty (30)
days prior written notice to the Bank that the Company desires to
cancel or replace the Letter of Credit;
(ii) the Letter of Credit shall have been returned to the Bank
for cancellation; and
(iii) all Reimbursement Obligations (including all Letter of
Credit fees) shall have been paid in full.
Upon the cancellation or replacement of the Letter of Credit in
accordance with this Section, the Bank will within ten (10) days of the
effective date of such cancellation or replacement refund to the Company any
unearned portion of the letter of credit fee previously paid by the Company to
the Bank pursuant to Section 2.4(a).
Section II.3. Reduction of Letter of Credit Amount; Restoration of
Letter of Credit Amount. Without limiting the provisions of the Letter of
Credit, the Letter of Credit - Interest Component shall be reduced in an amount
equal to any draw to pay interest on the Bonds (including interest constituting
a portion of the Purchase Price of Bonds), but shall be reinstated automatically
ten (10) calendar days after drawing unless the Bank shall have notified the
Trustee that (i) the Bank has not been reimbursed for said drawing or (ii) that
an Event of Default has occurred and is continuing. In addition, and without
limiting the provisions of the Letter of Credit, the Letter of Credit -
Principal Component shall be reduced in an amount equal to any draw to pay
principal of the Bonds (including any Tender Drawing), but, with respect to any
Tender Drawing, such amount will be reinstated upon receipt by the Trustee of
notice from the Bank that the Tender Advance applicable thereto has been repaid.
<PAGE>
Section II.4. Fees Relating to Letter of Credit.
(a) The Company hereby agrees to pay to the Bank annually in advance,
commencing on the Closing Date and thereafter on each Payment Date, a letter of
credit fee, calculated in the manner provided in the last paragraph of Section
2.06(a)(ii) of the Credit Agreement, equal to the product of the Letter of
Credit Amount in effect on the date of such payment (after giving effect to any
reduction in the Letter of Credit Amount resulting from a redemption of Bonds on
such date) multiplied by the applicable Fee Percentage. The letter of credit fee
shall be computed on the basis of the actual number of days elapsed over a
360-day year. If a Tender Advance is outstanding on any Payment Date, the
Company shall pay to the Bank an additional letter of credit fee on any date
when all or a portion of the principal amount of such Tender Advance is repaid
equal to the product of the principal amount of the Tender Advance being repaid,
multiplied by (1) the Fee Percentage, and (2) the number of days from the date
of such repayment until the next Payment Date divided by 360.
(b) If, after the date hereof, any law or regulation shall be adopted
or any change in any law or regulation or in the interpretation thereof by any
Governmental Authority shall occur, which adoption or change shall either: (i)
impose, modify or deem applicable any reserve, special deposit or similar
requirement against letters of credit issued by, or assets held by, or deposits
in or for the account of, the Bank, or (ii) impose on the Bank any other
condition relating, directly or indirectly, to this Reimbursement Agreement or
the Letter of Credit, and the result of any event referred to in clause (i) or
(ii) of this subsection shall be to increase the cost to the Bank of issuing or
maintaining the Letter of Credit, then the Company shall pay to the Bank, upon
demand therefor by the Bank, such additional amounts as the Bank shall
reasonably determine are necessary to compensate the Bank for such increased
cost, together with interest on such amount calculated at the Default Rate from
the date of such demand until payment in full if such amount is not paid in full
within thirty (30) days after such demand. The Bank shall deliver to the Company
a certificate as to such increased cost incurred by the Bank as a result of any
event mentioned in this subsection, setting forth in reasonable detail the basis
therefor and the manner of calculation thereof, as soon as practicable after the
Bank becomes aware of such change, which certificate shall be conclusive (absent
manifest error) as to the amount set forth therein.
(c) If after the date hereof, the adoption of any applicable law, rule
or regulation regarding capital adequacy, or any change therein, or any change
in the interpretation or administration thereof by any Governmental Authority,
or compliance by the Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any Governmental Authority,
has or would have the effect of reducing the rate of return on the
<PAGE>
Bank's capital as a consequence of its obligations under the Letter of Credit to
a level below that which the Bank could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's policies with respect
to capital adequacy), then the Company shall pay to the Bank, upon demand
therefor by the Bank, such additional amounts as the Bank shall reasonably
determine are necessary to compensate the Bank for such reduced rate of return,
together with interest on such amount calculated at the Default Rate from the
date of such demand until payment in full if such amount is not paid in full
within thirty (30) days after such demand. The Bank shall deliver to the Company
a certificate as to such reduced rate of return incurred by the Bank as a result
of any event mentioned in this subsection, setting forth in reasonable detail
the basis therefor and the manner of calculation thereof, as soon as practicable
after the Bank becomes aware of such change, which certificate shall be
conclusive (absent manifest error) as to the amount set forth therein. In
determining such amount, the Bank may use any reasonable averaging and
attribution methods.
(d) The Company hereby agrees to pay to the Bank upon each drawing
under the Letter of Credit in accordance with its terms a drawing fee equal to
$100.00 per drawing, unless the Bank or one of its Affiliates is serving as
Trustee pursuant to the terms of the Indenture on the date of such drawing. Such
fee is due and payable on the date each drawing under the Letter of Credit is
made.
Section II.5. Reimbursement of Drawings under Letter of Credit.
(a) The Company hereby agrees to pay to the Bank immediately after and
on the same Business Day as any amount is drawn and paid under the Letter of
Credit a sum equal to the amount so drawn; PROVIDED, HOWEVER, that if the Bank
makes a Tender Advance pursuant to SECTION 2.6 on account of a Tender Drawing,
the Company's obligation to reimburse the Bank for the amount of such Tender
Drawing shall be deemed satisfied by the Bank's application of the proceeds of
such Tender Advance.
(b) If the Company fails to pay to the Bank any amount when due under
this Reimbursement Agreement, interest shall accrue on any and all such amounts
at the Default Rate (in the case of interest on interest, to the maximum extent
permitted by law), commencing the day after such amounts first became due until
payment in full, and the Company hereby agrees to pay such accrued interest to
the Bank upon demand.
<PAGE>
Section II.6. Tender Advances, Prepayments, Interest Computations and
Notices.
(a) The Bank agrees to make Tender Advances to the Company for the
purpose of paying Tender Drawings arising from time to time (other than a Tender
Drawing upon conversion of the interest rate on the Bonds to a "Fixed Rate" as
defined in the Indenture), subject to the following conditions precedent: (i)
the representations and warranties contained in ARTICLE V hereof shall be true
and correct on and as of the date of such Tender Drawing as if made on and as of
such date; and (ii) after giving effect to the foregoing clause (i), no Default
or Event of Default under this Reimbursement Agreement shall have occurred and
be continuing. Each Tender Advance shall be in an amount equal to a
corresponding Tender Drawing and the proceeds of such Tender Advance shall be
applied by the Bank automatically to the payment in full of such Tender Drawing.
The Company hereby agrees to pay to the Bank the aggregate unpaid principal
amount of all Tender Advances, together with all accrued and unpaid interest
thereon, on the Termination Date. The Tender Advances may, but need not, be made
against and evidenced by such promissory notes or instruments as the Bank may
deem appropriate. Where a Tender Advance is evidenced by a promissory note or
other instrument, the Company hereby authorizes the Bank to endorse on any
schedule which may be attached thereto the amount of each Tender Advance made by
the Bank to the Company hereunder, the date such Tender Advance is made and the
amount of each payment or prepayment of principal of such Tender Advance
received by the Bank; PROVIDED, HOWEVER, that any failure by the Bank to make
any such endorsement shall not limit, modify or affect the obligations of the
Company hereunder or under any promissory note or instrument relating thereto in
respect of such Tender Advances.
(b) The Company hereby promises to pay to the Bank interest at a rate
per annum equal to the Tender Advance Interest Rate on the unpaid principal
amount of each Tender Advance for the period commencing on the date of such
Tender Advance to, but excluding, the date such Tender Advance is paid in full;
PROVIDED, HOWEVER, that if the Company fails to pay any portion of the principal
of or accrued interest on any Tender Advance when due, interest on the unpaid
principal amount of each Tender Advance shall accrue and be payable in
accordance with the provisions of SECTION 2.5(B). Accrued interest on each
Tender Advance shall be payable (i) on each Payment Date, (ii) upon the payment
or prepayment thereof (but only on the principal so paid or prepaid), and (iii)
on the Termination Date.
(c) All Tender Advances may be prepaid: (i) at any time by the Company
on one (1) Business Day's notice stating the amount to be prepaid (which shall
be $5,000 or a whole number multiple thereof); and (ii) at any time on behalf of
the Company on one (1) Business Day's notice from the Company or the Remarketing
Agent directing the Bank to deliver (or, if the Bonds are then maintained
<PAGE>
in book-entry form, authorize the release of) a specified principal amount of
Pledged Bonds held by or for the benefit of the Bank for remarketing pursuant to
SECTION 2.7 of the Indenture. 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 shall be
a Business Day). Upon payment to the Bank of the amount to be prepaid pursuant
to clause (i) or (ii) above, together with accrued interest, as set forth in
SECTION 2.6(B)(II) hereof, to the date of such prepayment on the amount to be
prepaid, the outstanding obligations of the Company under SECTION 2.6(A) shall
be reduced by the amount of such prepayment, interest shall cease to accrue on
the amount prepaid, and the Bank shall release or authorize the release from the
pledge and security interest created under SECTION 9.1 hereof a principal amount
of Pledged Bonds equal to the amount of such prepayment. Such Bonds shall be
delivered to (or, if the Bonds are then maintained in book-entry form,
registered for the account of) the Company, in the event of a prepayment
pursuant to clause (i) above, or the Remarketing Agent pursuant to SECTION 2.7
of the Indenture, in the event of a prepayment pursuant to clause (ii) above, as
appropriate.
Section II.7. Form and Place of Payments; Computation of Interest. All
payments by the Company to the Bank hereunder shall be made in lawful currency
of the United States and in immediately available funds at the Bank's principal
office, which at the date hereof is located at Winston-Salem, North Carolina.
Whenever any payment hereunder shall be due on a day which is not a Business
Day, the date for payment thereof shall be extended to the next succeeding
Business Day, and any interest payable thereof shall be payable for such
extended time at the specified rate. All interest (including, without
limitation, interest on Tender Advances) and fees hereunder shall be computed on
the basis of the actual number of days elapsed over a 360-day year and shall
include the first day but exclude the last day of the relevant period.
ARTICLE III. OBLIGATIONS ABSOLUTE.
Section III.1. Obligations Absolute, Unconditional and Irrevocable. The
obligations of the Company under this Reimbursement Agreement and the Related
Documents shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms hereof and thereof, under all
circumstances whatsoever, irrespective of any of the following circumstances:
(a) any lack of validity or enforceability of this Reimbursement
Agreement, the Letter of Credit, the Bonds or any of the other Related
Documents;
(b) any amendment or waiver of or any consent to departure
<PAGE>
from this Reimbursement Agreement, the Letter of Credit, the Bonds or all or any
of the other Related Documents (except to the extent such amendment or waiver
expressly relieves the Company of an obligation under this Reimbursement
Agreement or the Related Documents);
(c) the existence of any claim, setoff, defense or other rights which
the Company or any other Person may have at any time against the Trustee, the
Placement Agent, the Remarketing Agent, the Tender Agent, any beneficiary or any
transferee of the Letter of Credit (or any Person for whom the Trustee, the
Placement Agent, the Remarketing Agent, the Tender Agent, any such beneficiary
or any such transferee may be acting), the Bank, or any other Person, whether in
connection with this Reimbursement Agreement, the Letter of Credit, the Bonds,
the Credit Agreement or any of the other Related Documents or any unrelated
transaction;
(d) any statement or any other document presented under the Letter of
Credit proves to be forged, fraudulent or invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect whatsoever
(absent gross negligence or willful misconduct by the Bank);
(e) payment by the Bank under the Letter of Credit against presentation
of a draft or certificate that does not comply with the terms of the Letter of
Credit (absent gross negligence or willful misconduct by the Bank); and
(f) any other circumstance or happening whatsoever whether or not
similar to any of the foregoing.
Nothing contained herein shall act as a waiver of any rights or claims
the Company may have against the Bank or any other party listed in SECTION
3.1(C) above.
ARTICLE IV. CONDITIONS PRECEDENT TO
EXECUTION OF REIMBURSEMENT AGREEMENT
Section IV.1. Conditions Precedent to Execution of Reimbursement
Agreement. Each of the following is a condition precedent to the obligation of
the Bank to enter into this Reimbursement Agreement.
(a) On or before the Closing Date, the Bank shall have received the
following documents, instruments, opinions and certificates, each in form and
substance satisfactory to the Bank:
(i) a duly executed original of this Reimbursement Agreement
and the Credit Agreement;
(ii) a Closing Certificate as defined in Section 3.01(e)
<PAGE>
of the Credit Agreement, addressed to the Bank;
(iii) an Officer's Certificate, as defined in Section 3.01(f)
of the Credit Agreement, addressed to the Bank, together with a copy of
the items described in such section; and
(iv) a Certificate of the Trustee evidencing the Trustee's
consent to the First Amendment to Letter of Credit; and
(v) such other documents, instruments, opinions, certificates,
approvals or consents as the Bank may reasonably request.
(b) As of the Closing Date the Bank shall be satisfied that there has
been no Material Adverse Change, and that all information, representations and
materials submitted to the Bank by the Company in connection with the issuance
of the Letter of Credit are accurate and complete in all material respects.
ARTICLE V. REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company set forth in Article
IV of the Credit Agreement are hereby incorporated by reference as is set forth
herein. Such representations and warranties are true and accurate on the date
hereof (and the date of any Tender Advance, if any, made pursuant to this
Reimbursement Agreement).
ARTICLE VI. COVENANTS.
Until the Letter of Credit has terminated and all Reimbursement
Obligations have been paid in full, the Company will, and will cause its
Subsidiaries to:
Section VI.1. Financial and Business Information. Deliver to the Bank:
(a) As soon as available and in any event within forty-five (45) days
after the close of each of the first three Fiscal Quarters of each Fiscal Year
of the Company, beginning with the current quarter, a consolidated balance sheet
of the Company and its Consolidated Subsidiaries as of the end of such Fiscal
Quarter and the related consolidated statement of income and statement of cash
flows for such Fiscal Quarter then ended and for that portion of the Fiscal Year
then ended, setting forth in each case in comparative form the figures for the
corresponding Fiscal Quarter and the corresponding portion of the previous
Fiscal Year, all certified (subject to normal year-end adjustments) as to
fairness
<PAGE>
of presentation, GAAP and consistency by the chief financial officer or the
chief accounting officer of the Borrower;
(b) As soon as available and in any event within ninety (90) days after
the close of each Fiscal Year, consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the close of such Fiscal Year and the related
audited consolidated statements of income, shareholders' equity and cash flows
for each Fiscal Year, setting forth in comparative form the corresponding
figures for the preceding Fiscal Year, all certified by KPMG Peat Marwick LLP or
other independent public accountants of nationally recognized standing, with
such certification to be free of exceptions and qualifications not acceptable to
the Bank;
(c) Concurrently with the delivery of the financial statements
described in subsections (a) and (b) above, a certificate required by Section
5.01(c) of the Credit Agreement, in substantially the form of EXHIBIT F to the
Credit Agreement addressed to the Bank; and
(d) Copies of any other documents, instruments, certificates and
notices required to be delivered to the Agent pursuant to Section 5.01 of the
Credit Agreement.
Section VI.2. Notice of Certain Events. Promptly give notice in writing
to the Bank of any Default or Event of Default under the Reimbursement
Agreement.
Section VI.3. Covenants Incorporated by Reference. The covenants of the
Company set forth in Sections 5.02 through 5.05, inclusive, and 5.07 through
5.22, inclusive, of the Credit Agreement are hereby incorporated by reference
and shall be deemed to be made for the benefit the Bank under the Reimbursement
Agreement as if fully set forth herein; PROVIDED THAT in all such covenants, the
terms "the Banks" and "the Agent" shall be deemed to include the Bank, and the
Bank shall be entitled to receipt of all notices, instruments, certificates and
documents required to be delivered to the Banks or the Agent pursuant to such
sections.
ARTICLE VII. RESERVED.
ARTICLE VIII. EVENTS OF DEFAULT; REMEDIES.
Section VIII.1. Events of Default. The occurrence of any one or more of
the following events shall constitute an Event of Default hereunder:
(a) The Company shall fail to pay when due any amount payable under
this Reimbursement Agreement;
<PAGE>
(b) The Company shall fail to observe or perform any covenant,
restriction or agreement contained in SECTIONS 6.1, 6.2 AND 6.3 of this
Reimbursement Agreement;
(c) The Company shall fail to observe or perform any covenant,
restriction or agreement contained in this Reimbursement Agreement and not
described in SECTIONS 8.1(A) and (B) above for thirty (30) days after receipt by
the Company of written notice from the Bank;
(d) Any representation, warranty, certification or statement made or
deemed made by the Company in ARTICLE V of this Reimbursement Agreement, in any
Related Document, in the Credit Agreement or in any certificate, financial
statement or other document delivered pursuant to this Reimbursement Agreement
or any Related Document shall prove to have been incorrect in any material
respect when made or deemed made;
(e) A default or event of default as defined in any Related Document
shall occur and be continuing; or
(f) A default or event of default as defined in the Credit Agreement or
in any other agreement between the Company and the Bank shall occur and be
continuing.
Section VIII.2. Remedies. Upon the occurrence and during the
continuance of any Event of Default:
(a) Acceleration of Indebtedness. The Bank may, in its sole discretion,
(i) declare all Tender Advances and all other amounts due hereunder 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 Company, (ii) notify the Trustee of such occurrence and thereby require
the Trustee immediately to declare the principal of all Bonds then outstanding
and the interest accrued thereon immediately due and payable pursuant to the
Indenture, and (iii) pursue all remedies available to it by contract, at law or
in equity.
(b) Right of Set-off. The Bank may, and is hereby authorized by the
Company, at any time and from time to time, to the fullest extent permitted by
applicable laws, without advance notice to the Company (any such notice being
expressly waived by the Company), to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
any other indebtedness at any time owing by the Bank or any of its Affiliates to
or for the credit or the account of the Company against any or all of the
obligations of the Company under this Reimbursement Agreement now or hereafter
existing, whether or not such obligations have matured. The Bank agrees promptly
to notify the Company after any such set-off or application; PROVIDED, however,
<PAGE>
that the failure to give such notice shall not affect the validity of such
set-off and application.
(c) Rights and Remedies Cumulative; Non-Waiver; etc. The enumeration of
the Bank's rights and remedies set forth in this Reimbursement Agreement is not
intended to be exhaustive and the exercise by the Bank of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder, under any Related Documents or under any other agreement between the
Company and the Bank or that may now or hereafter exist in law or in equity or
by suit or otherwise. No delay or failure to take action on the part of the Bank
in exercising any right, power or privilege shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or privilege
preclude other or further exercise thereof or the exercise of any other right,
power or privilege or shall be construed to be a waiver of any Event of Default.
No course of dealing between the Company and the Bank or their agents or
employees shall be effective to change, modify or discharge any provision of
this Reimbursement Agreement or any of the Related Documents or to constitute a
waiver of any Event of Default.
ARTICLE IX. PLEDGED BONDS.
Section IX.1. The Pledge. The Company hereby pledges, assigns,
hypothecates, transfers, and delivers to the Bank all its right, title and
interest to, and hereby grants to the Bank a first lien on, and security
interest in, all right, title and interest of the Company in and to the
following (hereinafter collectively called the "Pledged Bond Collateral"):
(i) all Pledged Bonds;
(ii) all income, earnings, profits, interest, premium or other
payments in whatever form in respect of the Pledged Bonds; and
(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 Bond Collateral shall serve as security for the payment and
performance when due of the Reimbursement Obligations. The Company shall
deliver, or cause to be delivered, the Pledged Bonds to the Bank or to a pledge
agent designated by the Bank immediately upon receipt thereof or, in the case of
Pledged Bonds held under a book-entry system administered by The Depository
Trust Company ("DTC"), New York, New York (or any other clearing corporation),
the Company shall cause the Pledged Bonds to be reflected on the records of DTC
(or such other clearing corporation) as a position
<PAGE>
held by the Bank (or a pledge agent acceptable to the Bank) as a DTC participant
(or a participant in such other clearing corporation) and the Bank (or its
pledge agent) shall reflect on its records that the Pledged Bonds are owned
beneficially by the Company subject to the pledge in favor of the Bank.
Section IX.2. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing, the Bank, 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 Company or any other
person (all and each of which demands, advertisements and/or notices are hereby
expressly waived), may forthwith collect, receive, appropriate and realize upon
the Pledged Bond 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 deliver said Pledged Bond 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 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 Bank upon any such sale or sales, public or private, to
purchase the whole or any part of said Pledged Bond Collateral so sold, free of
any right or equity of redemption in the Company, which right or equity is
hereby expressly waived or released. The 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 Bond Collateral or in any way relating to the rights of the Bank
hereunder, including reasonable attorneys' fees and legal expenses, to the
payment in whole or in part of the Reimbursement Obligations in such order as
the Bank may elect, the Company remaining liable for any deficiency remaining
unpaid after such application, and only after so applying such net proceeds and
after the payment by the 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 Bank account for the surplus, if any, to the Company.
The Company agrees that the 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 Company 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 Bank in this Reimbursement Agreement and in any
other instrument or agreement securing, evidencing or relating to any of the
Reimbursement Obligations, the 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.
<PAGE>
If the Bank sells any of the Pledged Bond Collateral pursuant to this
SECTION 9.2, the Bank agrees that it will reinstate the Letter of Credit in an
amount sufficient to cover all principal and accrued interest on the Bonds so
sold for up to 120 days at 15% per annum (computed on the basis of a 360-day
year).
Section IX.3. Valid Perfected First Lien. The Company covenants that
the pledge, assignment and delivery of the Pledged Bond Collateral hereunder
will create a valid, perfected, first priority security interest in all right,
title or interest of the Company in or to such Pledged Bond Collateral, and the
proceeds thereof, subject to no prior pledge, lien, mortgage, hypothecation,
security interest, charge, option or encumbrance or to any agreement purporting
to grant to any third party a security interest in the property or assets of the
Company which would include the Pledged Bond Collateral. The Company covenants
and agrees that it will defend the Bank's right, title and security interest in
and to the Pledged Bond Collateral and the proceeds thereof against the claims
and demands of all persons whomsoever.
Section IX.4. Release of Pledged Bonds. Pledged Bonds shall be released
from the security interest created hereunder upon satisfaction of the
Reimbursement Obligations with respect to such Pledged Bonds as provided in
SECTION 2.8 of the Indenture.
ARTICLE X. MISCELLANEOUS.
Section X.1. Costs, Expenses and Taxes. The Company agrees to pay on
demand all reasonable out-of-pocket expenses of the Bank, including reasonable
fees and disbursements of counsel, in connection with: (i) the preparation,
execution, delivery, and filing, if required, of this Reimbursement Agreement
and the Letter of Credit, (ii) any amendments, supplements, consents or waivers
hereto or thereto, and (iii) the administration or enforcement of this
Reimbursement Agreement, the Bonds, the Letter of Credit and the Related
Documents and any other documents which may be delivered in connection herewith
or therewith. In addition, the Company shall pay any and all stamp and other
taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of this Reimbursement Agreement and
the Related Documents and agrees to save the Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees. It is the intention of the parties hereto
that the Company shall pay amounts referred to in this Section directly. In the
event the Bank pays any of the amounts referred to in this Section directly, the
Company will reimburse the Bank for such advances and interest on such advance
shall accrue until reimbursed at the Default Rate.
<PAGE>
Section X.2. Indemnification. From and at all times after the date of
this Reimbursement Agreement, and in addition to all of the Bank's other rights
and remedies against the Company, the Company agrees to indemnify, defend and
hold harmless the Bank, and each director, officer, employee, agent, successor,
assign and affiliate of the Bank from and against the following (collectively
"Costs"): any and all claims (whether valid or not), losses, damages, actions,
suits, inquiries, investigations, administrative proceedings, judgments, liens,
liabilities, penalties, fines, amounts paid in settlement, requirements of
Governmental Authorities, punitive damages, interest, damages to natural
resources and other costs and expenses of any kind or nature whatsoever
(including without limitation reasonable attorneys' fees and expenses, court
costs and fees, and consultant and expert witness fees and expenses) arising in
any manner, directly or indirectly, out of or by reason of (a) the negotiation,
preparation, execution or performance of this Reimbursement Agreement or the
Related Documents, or any transaction contemplated herein or therein, whether or
not the Bank or any other party protected under the indemnity agreement under
this paragraph is a party to any action, proceeding or suit in question, or the
target of any inquiry or investigation in question; PROVIDED, HOWEVER, that no
indemnified party shall have the right to be indemnified hereunder for any
liability resulting from the willful misconduct or gross negligence of such
indemnified party (as finally determined by a court of competent jurisdiction),
(b) any breach of any of the covenants, warranties or representations of the
Company hereunder or under any Related Document, (c) any violation or alleged
violation of any Environmental Law, federal or state securities law, common law,
equitable requirement or other legal requirement by the Company or with respect
to any property owned, leased or operated by the Company (in the past, currently
or in the future), (d) by reason of any untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference in the
Offering Memorandum, or in any supplement or amendment thereto, or the omission
to state therein a material fact necessary to make such statements, in the light
of the circumstances under which they are or were made, not misleading (other
than statements or information supplied by the Bank for incorporation in the
Offering Memorandum); (e) by reason of or in connection with the execution and
delivery or transfer of, or payment or failure to pay under, the Letter of
Credit (unless such Cost was caused by the willful misconduct or gross
negligence of the Bank); and/or (f) any presence, generation, treatment,
storage, disposal, transport, movement, release, suspected release or threatened
release of any Hazardous Material on, in, to or from any property (or any part
thereof including without limitation the soil and groundwater thereon and
thereunder) owned, leased or operated by the Company (in the past, currently or
in the future).
All of the foregoing Costs and obligations of the Company shall be
additional obligations hereunder. In the event the Bank
<PAGE>
or any other indemnified party shall suffer or incur any Costs, the Company
shall pay to the indemnified party the total of all such Costs suffered or
incurred by the party, and fulfill its other obligations hereunder, on demand.
Without limiting the foregoing, the Company shall be obligated to pay,
on demand, the costs of any investigation, monitoring, assessment, enforcement,
removal, remediation, restoration or other response or corrective action
undertaken by the Bank or any other indemnified party, or their respective
agents, with respect to any property owned, leased or operated by the Company.
It is expressly understood and agreed that the obligations of the
Company under this Section shall not be limited to any extent by the term of the
Letter of Credit or this Reimbursement Agreement and shall remain in full force
and effect unless and until expressly terminated by Bank in writing.
Section X.3. Waiver of Jury Trial. AS PART OF THE CONSIDERATION FOR NEW
VALUE THIS DAY RECEIVED, THE COMPANY HEREBY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING WITHIN THE STATE OF NORTH
CAROLINA FOR ANY ACTION TO WHICH THE COMPANY AND THE BANK ARE PARTIES ARISING
OUT OF OR IN CONNECTION WITH THIS REIMBURSEMENT AGREEMENT OR ANY OF THE RELATED
DOCUMENTS. TO THE EXTENT PERMITTED BY LAW, THE COMPANY WAIVES TRIAL BY JURY AND
WAIVES ANY OBJECTION WHICH THE COMPANY MAY HAVE BASED ON LACK OF JURISDICTION OR
IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY ACTION INSTITUTED
HEREUNDER OR UNDER ANY OF THE RELATED DOCUMENTS, OR ARISING OUT OF OR IN
CONNECTION WITH THIS REIMBURSEMENT AGREEMENT OR ANY OF THE RELATED DOCUMENTS, OR
ANY OTHER PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS REIMBURSEMENT
AGREEMENT OR ANY OF THE RELATED DOCUMENTS TO WHICH THE BANK IS A PARTY,
INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF OR IN CONNECTION WITH ANY
COURSE OF CONDUCT, COURSE OF DEALING OR STATEMENT (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE BANK OR THE COMPANY, AND THE COMPANY CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN
THIS SECTION SHALL AFFECT THE RIGHT OF THE BANK TO BRING ANY ACTION OR
PROCEEDING AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION THAT HAS
JURISDICTION OVER THE COMPANY.
Section X.4. Waiver of Automatic or Supplemental Stay. IN THE EVENT
THAT A PETITION FOR RELIEF UNDER ANY CHAPTER OF THE BANKRUPTCY CODE IS FILED BY
OR AGAINST THE COMPANY, THE COMPANY PROMISES AND COVENANTS THAT IT WILL NOT SEEK
A SUPPLEMENTAL STAY PURSUANT TO BANKRUPTCY CODE SS.SS. 105 OR 362 OR ANY OTHER
RELIEF PURSUANT TO BANKRUPTCY CODE SS. 105 OR ANY OTHER PROVISION OF THE
BANKRUPTCY CODE, WHETHER INJUNCTIVE OR OTHERWISE, WHICH WOULD STAY, INTERDICT,
CONDITION, REDUCE OR INHIBIT THE BANK'S ABILITY TO ENFORCE ANY RIGHTS IT HAS, AT
LAW OR IN EQUITY, TO COLLECT THE REIMBURSEMENT OBLIGATIONS FROM ANY PERSON OTHER
THAN THE COMPANY.
<PAGE>
Section X.5. Notices. All demands, notices, approvals, consents,
requests, and other communications hereunder shall be in writing and shall be
deemed to have been given when the writing is delivered, if given or delivered
by hand, overnight delivery service or facsimile transmitter (with confirmed
receipt), or five (5) days after being mailed, if mailed by first class,
registered or certified mail, postage prepaid, to the address or telecopy number
set forth below:
Party Address
Company Culp, Inc.
101 South Main Street
High Point, North Carolina 27261
Attention: Franklin N. Saxon
Telephone: (910) 888-6266
Telecopy: (910) 889-7089
Bank Wachovia Bank of North Carolina,
National Association
Post Office Box 631
High Point, North Carolina 27261
Attention: Peter T. Callahan
Telephone: (910) 887-7641
Telecopy: (910) 887-7550
with copies to: Wachovia Bank of North Carolina,
National Association
301 North Main Street
Winston-Salem, North Carolina 27150
Attention: International Department
Wachovia Bank of North Carolina,
National Association
100 North Main Street
Winston-Salem, North Carolina 27101
Attention: Bond and Money Market
Group/Customer Services
Trustee First-Citizens Bank & Trust Company
2917 Highwoods Boulevard
Raleigh, North Carolina 27604
Attention: Corporate Trust Department
Telephone: (919) 755-7422
Facsimile: (919) 755-2025
The Company, the Bank or the Trustee may, by notice given hereunder, designate
any further or different addresses or telecopy numbers to which subsequent
demands, notices, approvals, consents, requests or other communications shall be
sent or persons to whose attention the same shall be directed.
<PAGE>
Section X.6. Payment from Bank's Funds. The Bank hereby covenants and
agrees that any payments under the Letter of Credit will be made with the Bank's
own funds and not with funds of the Issuer or the Company.
Section X.7. Limited Liability of the Bank. As between the Company and
the Bank, the Company agrees to assume all risk of the acts or omissions of the
Trustee (and any transferee of the Letter of Credit) with respect to its use of
the Letter of Credit. Neither the Bank nor any of its officers or directors
shall be liable or responsible for: (a) the use which may be made of the Letter
of Credit or for any acts or omissions of the Trustee (or transferee) and any
beneficiary in connection therewith; (b) the validity, or genuineness of
documents, or of any endorsement(s) thereon, even if such documents should in
fact prove to be in any or all respects invalid, fraudulent or forged; or (c)
any other circumstances whatsoever in making or failing to make payment under
the Letter of Credit, except that the Company shall have a claim against the
Bank, and the Bank shall be liable to the Company, to the extent, but only to
the extent, of any direct, as opposed to consequential, damages suffered by the
Company which were caused by: (y) the Bank's willful misconduct or gross
negligence in determining whether documents presented under the Letter of Credit
comply with the terms thereof; or (z) the Bank's willful failure to pay under
the Letter of Credit after the presentation to it by the Trustee (or a successor
trustee under the Indenture to whom the Letter of Credit has been transferred in
accordance with its terms) of a draft and certificate strictly complying with
the terms and conditions of the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Bank may accept documents that appear on their
face to be in order without responsibility for further investigation.
Section X.8. Continuing Obligations; Revival of Obligations. The
obligations of the Company under this Reimbursement Agreement shall continue
until all amounts due and owing to the Bank hereunder as of the Termination Date
shall have been paid in full; PROVIDED, HOWEVER, that the obligations of the
Company pursuant to SECTIONS 10.1 and 10.2 hereof shall survive the termination
of this Reimbursement Agreement. The Company further agrees that to the extent
the Company makes a payment to the Bank, which payment or any part thereof is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver, or any other party under any
bankruptcy, insolvency or other similar state or federal statute, common law or
principles of equity, then, to the extent of such repayment by the Bank, the
Reimbursement Obligations or part thereof intended to be satisfied by such
payment shall be revived and continued in full force and effect as if such
payment had not been received by the Bank.
Section X.9. Confirmation of Lien. The Company hereby grants
<PAGE>
to the Bank, to secure payment by the Company of sums due hereunder, a lien on
moneys or instruments (at such times as they become payable to the Company under
the Indenture) which the Company has an interest in or title to pursuant to
SECTIONS 4.1, 4.2 or 4.4 of the Indenture, now or hereafter held in the Bond
Fund, Bond Purchase Fund or Project Fund (as such terms are defined in the
Indenture) or otherwise by the Trustee under any provision of the Indenture and
in the right of the Company to receive any such moneys or instruments. The Bank
hereby confirms that such lien is and shall be junior and subordinate to the
lien on such moneys in favor of the holders of the Bonds and the Trustee.
Section X.10. Controlling Law. This Reimbursement Agreement has been
executed, delivered and accepted at, and shall be deemed to have been made in,
North Carolina and shall be interpreted in accordance with the internal laws (as
opposed to conflicts of laws provisions) of the State of North Carolina.
Section X.11. Successors And Assigns. This Reimbursement Agreement
shall be binding upon the Company, its successors and assigns and all rights
against the Company arising under this Reimbursement Agreement shall be for the
sole benefit of the Bank.
Section X.12. Assignment and Sale. Without the prior written consent of
the Bank, the Company may not sell, assign or transfer this Reimbursement
Agreement or any of the Related Documents or any portion hereof or thereof,
including without limitation the Company's rights, title, interests, remedies,
powers, and duties hereunder or thereunder.
Section X.13. Amendment. This Reimbursement Agreement can be amended or
modified only by an instrument in writing signed by the parties. The Company
must provide the Trustee with prior written notice of any amendment or
modification of SECTION 2.2(B).
Section X.14. Severability. In the event that any provision of this
Reimbursement Agreement shall be determined to be invalid or unenforceable by
any court of competent jurisdiction, such determination shall not invalidate or
render unenforceable any other provision hereof.
Section X.15. Entire Reimbursement Agreement. THIS REIMBURSEMENT
AGREEMENT AND THE DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED
CONTEMPORANEOUSLY HEREWITH AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE
EMBODY THE ENTIRE REIMBURSEMENT AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES
HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS,
VERBAL OR WRITTEN, RELATING TO THE SUBJECT MATTER HEREOF. THIS REIMBURSEMENT
AGREEMENT AND THE DOCUMENTS AND INSTRUMENTS EXECUTED IN CONNECTION HEREWITH AND
THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE REPRESENT THE FINAL REIMBURSEMENT
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY PRIOR,
CONTEMPORANEOUS OR
<PAGE>
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section X.16. Counterparts. This Reimbursement Agreement may be
executed in several counterparts, each of which shall be an original and all of
which, together shall constitute but one and the same instrument.
Section X.17. Captions. The captions to the various sections and
subsections of this Reimbursement Agreement have been inserted for convenience
only and shall not limit or affect any of the terms hereof.
[The remainder of this page is left blank intentionally.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Reimbursement
Agreement to be duly executed and delivered by their respective duly authorized
officers as of the date first above written.
CULP, INC.
By: ___________________________________
Name: ___________________________________
Title: ___________________________________
[Execution by the Bank appears on the following page.]
<PAGE>
WACHOVIA BANK OF NORTH CAROLINA,
NATIONAL ASSOCIATION
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
<PAGE>
EXHIBIT A
FIRST AMENDMENT TO
IRREVOCABLE LETTER OF CREDIT
NO. LC 968-068488
April ___, 1997
First-Citizens Bank & Trust Company, as Trustee
2917 Highwoods Boulevard
Raleigh, North Carolina 27604
Attention: Corporate Trust Department
Ladies and Gentlemen:
In accordance with the terms of the Reimbursement and Security
Agreement dated as of April 1, 1997 (the "Reimbursement Agreement"), between us
and Culp, Inc., a North Carolina corporation (the "Company"), Irrevocable Letter
of Credit No. 968-068488, issued in your favor on April 1, 1996, is hereby
amended as follows:
1. The first paragraph of the Letter of Credit is hereby
amended by deleting therefrom the reference to "the 1996 Amended and
Restated Credit Agreement, dated as of April 1, 1996, among the
Company, First Union National Bank of North Carolina, as agent, and us
(the "Credit Agreement")," and inserting in its place the following:
"the Reimbursement and Security Agreement dated as of April 1, 1997,
between us and the Company (the "Reimbursement Agreement")."
2. Subparagraph (i) of the first paragraph thereof is hereby
amended to read as follows:
(i) the close of business on March 1, 2001, or, if such date
is extended pursuant to SECTION 2.2(B) of the Reimbursement Agreement,
the date as so extended,
3. Subsection (c) of Section 10 of the Letter of Credit is
hereby amended to read as follows:
(c) all Reimbursement Obligations relating to this Letter of
Credit, including all Letter of Credit fees, shall have been paid in
full.
4. The text of Section 11 of the Letter of Credit is hereby
deleted in its entirety, and the word "[Reserved]" shall be inserted in
its place.
<PAGE>
All other terms and conditions set forth in the Letter of Credit shall
remain in full force and effect.
Very truly yours,
WACHOVIA BANK OF NORTH CAROLINA, NATIONAL ASSOCIATION
By: ______________________________
Authorized Officer
1997
CULP
ANNUAL REPORT
(A graphic appears here of number 25)
CELEBRATING 25 YEARS
<PAGE>
ABOUT CULP
(Three photos appear here)
<PAGE>
Culp's team of 3,100 associates markets more than 2,000 patterns of upholstery
fabrics for furniture and over 600 styles of mattress ticking to an
international array of customers. The company is a fully integrated marketer to
the furniture, bedding and institutional furnishings industries with
manufacturing plants in North and South Carolina, Georgia, Pennsylvania and
Canada.
ABOUT THE COVER
The listing of Culp's shares on the New York Stock Exchange in December 1996
highlighted a year in which we celebrated our 25th corporate anniversary. Culp's
growth over that period has been headlined by success in becoming the world's
largest marketer of upholstery fabrics for furniture and a leading supplier of
mattress ticking.
(CFI Listed NYSE logo appears here)
(Five photos appear here)
<PAGE>
HIGHLIGHTS
CULP'S COMMON SHARES WERE LISTED on the New York Stock Exchange (December 1996)
with the new trading symbol, CFI.
NET SALES FOR 1997 REACHED A NEW HIGH of $398.9 million, up 13% from 1996, and
increased for the seventh consecutive year. Net income also set a new
annual record and increased for the eighth consecutive year to $13.8
million, or $1.18 per share, up 20% from 1996.
NET INCOME OF $4.8 MILLION IN THE FOURTH QUARTER represented the eighteenth
consecutive quarter of record earnings versus the comparable year-earlier
period.
INTERNATIONAL SALES ROSE 31% in 1997 and accounted for $101.6 million, or 25%,
of net sales.
THE BOARD INCREASED the regular quarterly cash dividend in June 1997 for the
eighth consecutive year, representing a 17% growth rate over the last five
years. The current indicated annual rate of $0.14 per share represents an
8% increase over the previous annualized payout.
CAPITAL EXPENDITURES for 1997 totaled a record $27.0 million, increasing the
amount invested over the past six years to $100.5 million.
A SECONDARY OFFERING of common stock completed in February 1997 provided $16.3
million in additional equity capital.
CULP'S FINANCIAL POSITION at the close of 1997 included a funded
debt-to-capital ratio of 37% and a new $125 million line of credit with
an international syndicate of financial institutions.
THE AVERAGE PRICE of Culp's shares during 1997 represented a 29% compound
appreciation to shareholders over the past five years.
(THREE GRAPHS APPEAR BELOW WITH THE FOLLOWING PLOT POINTS.)
NET SALES ($ MILLIONS)
93 94 95 96 97
$200.8 $245.0 $308.0 $351.7 $398.9
NET INCOME ($ MILLIONS)
93 94 95 96 97
$4.5 $7.7 $9.8 $11.0 $13.8
INCOME PER SHARE
93 94 95 96 97
$0.41 $0.69 $0.87 $0.98 $1.18
(CUSTOMER: PLEASE FILL IN THE PLOT POINTS ABOVE.)
<PAGE>
FIVE-YEAR
(AMOUNTS IN THOUSANDS, FISCAL FISCAL PERCENT GROWTH
EXCEPT PER SHARE DATA) 1997 1996 CHANGE RATE
- -------------------------------------------------------------------------
STATEMENTS OF INCOME
Net sales $ 398,879 351,667 13.4% 15.8%
Gross profit 72,485 62,538 15.9 19.2
Income from operations 27,427 23,470 16.9 37.9
Net income 13,770 10,980 25.4 35.9
Average shares outstanding 11,624 11,234 3.5 1.4
PER SHARE
Net income $ 1.18 0.98 20.4% 34.3%
Cash dividends 0.13 0.11 18.2 21.6
Book value 8.79 7.21 21.9 13.5
Year-end stock price 16.63 13.00 27.9 26.0
BALANCE SHEET
Working capital $ 69,777 56,953 22.5% 21.2%
Total assets 243,952 211,644 15.3 21.2
Funded debt 65,623 76,791 (14.5) 31.3
Shareholders' equity 110,789 81,446 36.0 17.0
RATIOS
Gross profit margin 18.2% 17.8%
Operating income margin 6.9 6.7
Net income margin 3.5 3.1
Return on average equity 15.2 14.4
Funded debt to capital 37.2 48.5
- ---------------------------------------------------------------------------
THROUGHOUT THIS ANNUAL REPORT, 1997, 1996, 1995, 1994 AND 1993 ARE USED TO
REFER, RESPECTIVELY, TO THE COMPANY'S FISCAL YEARS THAT ENDED IN THOSE SAME
CALENDAR PERIODS.
GROWTH OF A $10,000 INVESTMENT IN CULP
The graph below illustrates the 251% appreciation through 1997 in the value of a
$10,000 investment in Culp's shares five years ago. The values plotted exclude
dividends and are based on the average of the high and low for the stock each
year, adjusted for the three stock splits distributed over this period.
1992 1993 1994 1995 1996 1997
$10,000 $12,300 $25,900 $22,300 $23,600 $35,100
<PAGE>
(PHOTOS OF ROBERT G. CULP, III AND HOWARD L. DUNN, JR. APPEAR HERE)
To Our Fellow Shareholders
That's what I was aiming at," is the quip Lee Trevino once offered after
holing a remarkable shot from the fairway. It would be nice to say that when we
founded Culp 25 years ago, our aim was to become the world's largest marketer of
upholstery fabrics for furniture. We are indeed recognized today as the global
leader in that portion of our business, but we cannot honestly claim that as an
objective set in 1972. The principles and values laid as Culp's foundation,
however, remain as vital to our success today as when we started as a small, but
very ambitious, distributor of upholstery fabrics. We knew then that our
fortunes depended on one goal: delivering value to customers. As a fully
integrated manufacturer with a global array of customers, we still hold that
purpose before us every day.
We thought it was appropriate to use the cover to highlight Culp's 25th
anniversary. The celebration was capped in 1997 with the listing of our shares
on the New York Stock Exchange. We are proud of that milestone which has
afforded us increased visibility among individual and institutional investors.
Any corporation has a number of stakeholders dependent upon its progress, but we
keenly recognize the importance of delivering a positive return to those who
have provided the capital for us to pursue our goals. We are therefore
especially pleased with the performance of Culp's shares which have appreciated
in value at a faster rate than most broad market measures over the past five
years.
SECONDARY OFFERING UNDERSCORES SOUND GROWTH STRATEGY
Culp's growth since our initial public offering had been funded entirely
from internally generated funds and borrowings. During 1997, we decided to make
a secondary offering to obtain additional capital to fund our expansion plans.
The net result was the completion in February 1997 of an offering of common
stock that added $16.3 million in equity capital to Culp. Marketing the offering
included more than 50 meetings with investors both in the United States and
overseas. We found these contacts an excellent forum for presenting our growth
strategy to audiences well versed in business objectives who were able--and
certainly willing--to challenge our plans. The bottom line was a strong
endorsement for Culp's potential for future growth. Our statement was that we
were going to stick with essentially the game plan that has produced 18
consecutive quarters of record earnings and 16 consecutive quarters of record
sales versus comparable year-earlier periods.
<PAGE>
But underlying that broad comment was our presentation of Culp's strengths.
Attributes that we showcased included one of the broadest lines of
upholstery fabrics and mattress ticking available, a versatility in meeting
each customer's needs and a resolve throughout the organization to deliver
a consistently high level of customer service and product quality. We tried
to simplify what in reality is not an easy recipe by focusing on three
fundamental initiatives. One is our willingness and flexibility to pursue
new market opportunities. Another is the exceptional opportunity which we
have to continue building international sales. And the third is our ongoing
interest in acquiring complementary businesses in an industry where
ownership of resources is becoming more concentrated. We thought that a
sound outline for this letter was to summarize each of these areas for you,
our shareholders.
ONGOING CAPITAL INVESTMENTS SUPPORT MARKET LEADERSHIP
Maybe opportunistic is the best term to use in characterizing how Culp has built
market share. We have benefited from our heritage as a distributor that was
willing and eager to pursue any opening for a sale. Realistically, we are
probably not as nimble as we once were. The compensation for that, however,
is a vertically-integrated organization that is regarded as a valued
partner by many of the largest manufacturers of furniture and bedding in
the world. Achieving that competitive leadership has involved deliberate
planning and lots of capital. Over the past six years, we have invested
more than $100 million to modernize and expand our manufacturing capacity.
The importance we place on manufacturing efficiency was underscored during 1997
by record capital expenditures of approximately $27 million. The diversity
of some of the projects represented by this spending is noteworthy. The
addition of new air-jet weaving machines substantially increased our
capacity for jacquard greige, or unfinished, goods. We installed a
state-of-the-art flock coating line to produce flock greige goods. A new
manufacturing facility, completed in July 1997, is designed specifically
for wet printing these flocked fabrics to produce upholstery patterns that
are increasingly popular worldwide. Although these are different projects,
they are obviously linked. Each complements the other, expanding our
capacity while increasing our vertical integration and ability to help
manufacturers differentiate their products with fabrics with distinctive
patterns and textures.
(THREE GRAPHS APPEAR BELOW WITH THE FOLLOWING PLOT POINTS.)
CASH DIVIDENDS
PER SHARE
93 94 95 96 97
$0.64 $0.08 $0.10 $0.11 $0.13
SHAREHOLDER'S EQUITY
($ MILLIONS)
93 94 95 96 97
$54.5 $62.6 $71.4 $81.4 $110.8
RETURN ON
AVERAGE EQUITY
93 94 95 96 97
8.6% 13.1% 14.6% 14.4% 15.2%
<PAGE>
INTERNATIONAL SALES CONTINUE GROWTH TREND
The 31% growth in international sales during 1997 signaled the strong
momentum that has been achieved in this portion of our business.
International sales have risen sixfold since 1990, illustrating the
global aspect of Culp's marketing efforts. Our customer base includes
distributors and manufacturers in more than 50 countries. Furniture and
bedding manufacturers throughout the world value the designs and
finishes on our fabrics as essential components of their marketing
programs. The popularity of American styles has played directly to our
strengths although we are increasingly starting to market designs
crafted for specific cultural tastes. We have a design initiative to
keep Culp at the leading edge of new patterns, colorations and
textures, and we have the established manufacturing resources and
distribution capability to supply accounts throughout the world.
Apart from outstanding growth in international sales, the geographical
expansion of our customer base firmly evidences the company's
world-class standing. Only a few years ago, our shipments outside the
United States were largely confined to the nearby markets of Canada and
Mexico. Europe has now become the largest market outside of North
America for international sales, and we ship an increasing volume to
distributors in the Middle East, Asia and the Pacific Rim. We are
continuing to broaden that geographical diversity. Establishing our own
distribution facilities in certain international markets is a distinct
possibility. We are also increasing our use of CulpLink. This
proprietary, computer-based information system allows customers via the
internet to check and enter orders; verify the exact status of any
shipment with individual identification of each roll and color
specification; and review sales and invoice history.
ACQUISITIONS OFFER ACCELERATED GROWTH POTENTIAL
Our progression toward an integrated manufacturing process has included
several strategic acquisitions. Purchases such as Rossville/Chromatex
in 1994 and Rayonese the following year added
(TWO GRAPHS APPEAR BELOW WITH THE FOLLOWING PLOT POINTS.)
INTERNATIONAL SALES
($ MILLIONS)
93 94 95 96 97
$41.5 $44.0 $58.0 $77.4 $101.6
CAPITAL EXPENDITURES
($ MILLIONS)
93 94 95 96 97
$11.9 $16.8 $18.1 $14.4 $27.0
<PAGE>
incremental sales and earnings. Equally important, these operations
substantially broadened our marketing footprint. A stimulus for
acquiring other established fabric marketers is the consolidation
occurring at all levels within the furniture industry. Simply put, the
leading firms are increasing their market share each year. The ten
largest manufacturers of furniture in the United States accounted for
approximately 38% of total industry sales in the latest survey, up from
23% eleven years prior. These larger companies are seeking true
corporate partners who can provide not only the necessary volume of
fabrics but also consistently high product quality and customer
service. We are proud of the accomplishments Culp has made in each of
these areas and understand fully that achieving customer satisfaction
demands ongoing focus and attention.
Shortly after the close of 1997, we announced a letter of intent to acquire
certain of the assets of Phillips Mills. The inclusion of these
operations would enhance our market position in jacquard fabrics and
woven velvets. This proposed transaction illustrates our active pursuit
of other steps that can bolster Culp's market share. This initiative is
soundly supported by a strong balance sheet that at the close of 1997
included a funded debt-to-capital position of 37%. We were able to
capitalize on that financial position by closing a $125 million line of
credit that replaced an existing $65 million credit facility. This
additional loan resource significantly broadens our flexibility to
consider future growth opportunities.
CONSTRUCTION OF DESIGN CENTER UNDER WAY
As our worldwide stature has increased in recent years, we have
increasingly recognized the importance of the design of new patterns,
colorations and textures. To deliver value, our fabrics and ticking
must enhance the retail appeal of customers' products. We have
responded to this need by adding experienced personnel and investing in
new computer systems and equipment. Moreover, we have emphasized the
importance of instilling cooperation at all corporate levels to ensure
that design is not just expressed but delivered. A tangible expression
of this commitment is
(TWO PHOTOS APPEAR HERE)
(LEFT) SUPERIOR CUSTOMER SERVICE CULP'S DEDICATION TO CUSTOMER SERVICE IS A
CONSTANT. THE STANDARDS FOR QUALITY AND VALUE THAT MATTER ARE SET FOR US BY THE
MANY ACCOUNTS WE SERVE WORLDWIDE.
(RIGHT) PRODUCT DESIGN AND INNOVATION OUR FABRICS AND TICKING MUST ENHANCE THE
RETAIL APPEAL OF CUSTOMERS' PRODUCTS. THE HOWARD L. DUNN DESIGN CENTER, OPENING
IN 1998, WILL CONSOLIDATE MOST OF OUR DESIGN RESOURCES TO STRENGTHEN OUR DESIGN
LEADERSHIP.
<PAGE>
INCREASING WORLDWIDE PRESENCE CULP'S INTERNATIONAL SALES HAVE RISEN SIXFOLD
SINCE 1990, HIGHLIGHTING THE GLOBAL ASPECT OF THE COMPANY'S MARKETING EFFORTS.
WET-PRINTED FLOCK FABRICS ARE ONE OF THE GROWTH CATEGORIES IN INTERNATIONAL
MARKETS, AND 1997 CAPITAL PROJECTS INCLUDED A FLOCK COATING LINE AS WELL AS A
NEW DEDICATED MANUFACTURING FACILITY TO ENSURE CULP'S CAPACITY TO SUPPORT FUTURE
DEMAND.
the new Howard L. Dunn Design Center that is planned for completion in
December 1997. We are excited about how this unique facility will
consolidate most of our design resources, providing an exceptional
environment for creativity and imagination.
INCENTIVES BASED ON EARNINGS GROWTH
Our corporate culture is clearly fixed on growth. We believe that an
integral part of the strategy must be establishing appropriate goals -
and rewards. Our executive compensation program has a definite focus on
increasing earnings per share. If we are successful, the resulting
corporate performance should mean an above-average return for
shareholders.
We are prepared to face a competitive marketplace again in 1998. Based on
the recent positive trends in overall consumer confidence, we believe
the year will be one of sound progress for Culp. As we have indicated
before, consumer spending on home furnishings can be influenced by a
host of variables including interest rates, employment levels and the
buoyancy of the overall economy. We have the advantage of the capital
projects during 1997 which have provided us increased capacity in some
of the most popular categories of fabrics and ticking. We have set an
aggressive plan to continue increasing international sales, and our
marketing programs are set soundly on the principles of innovation,
styling leadership and creativity. Our task is to capitalize on this
competitive advantage and further increase our market share.
Sincerely,
/s/ Robert G. Culp, III
Robert G. (Rob) Culp, III
Chairman and Chief Executive Officer
/s/ Howard L. Dunn, Jr.
Howard L. Dunn, Jr.
President and Chief Operating Officer
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following analysis of the financial condition and results of operations
should be read in conjunction with the Financial Statements and Notes and other
exhibits included elsewhere in this report.
Overview
Culp believes it is the largest manufacturer and marketer in the world for
upholstery fabrics for furniture and is one of the leading global producers of
mattress fabrics (or ticking). The company's fabrics are used primarily in the
production of residential and commercial upholstered furniture and bedding
products, including sofas, recliners, chairs, love seats, sectionals, sofa-beds,
office seating, modular office systems and mattress sets. Although Culp markets
fabrics at most price levels, the company emphasizes fabrics that have broad
appeal in the promotional and popular-priced categories of furniture and
bedding.
Culp's position as a leading worldwide manufacturer and marketer of
upholstery fabrics and mattress ticking has been achieved through internal
expansion and the integration of strategic acquisitions. In 1995, the company
completed the acquisition of Rayonese Textile Inc. ("Rayonese") in a transaction
valued at $10.5 million. The acquisition of Rayonese substantially increased the
company's capacity to manufacture jacquard greige, or unfinished, goods used by
the company in the production of printed fabrics. In 1994, the company completed
the purchase of Rossville/Chromatex in a transaction valued at $39.3 million.
This acquisition significantly added to the company's capacity to produce
jacquard and dobby upholstery fabrics marketed principally for residential
furniture. In January 1997, the company acquired a facility in Lumberton, North
Carolina and has purchased the related manufacturing equipment necessary for
this facility. This new facility, which is expected to be operational by July
1997, is expected to require capital expenditures of approximately $9 million.
This investment will approximately double Culp's capacity to produce wet-printed
flock upholstery fabrics. The company has experienced significant growth in
sales for this fabric category over the past three years, particularly in
international markets.
The company is organized into four business units. Culp Textures manufactures
jacquard and dobby woven fabrics for residential and commercial furniture.
Rossville/Chromatex manufactures jacquard and dobby woven fabrics primarily for
residential furniture. Velvets/Prints manufactures a broad range of printed and
velvet fabrics used primarily for residential and juvenile furniture. Culp Home
Fashions principally manufactures mattress ticking. The company believes that
this business unit structure, adopted in 1994, has been effective in increasing
business with existing customers, as well as in broadening the company's
customer base.
Results of Operations
The following table sets forth certain items in the company's consolidated
statements of income as a percentage of net sales.
1997 1996 1995
- --------------------------------------------------------
Net sales 100.0% 100.0% 100.0%
Cost of sales 81.8 82.2 82.2
- --------------------------------------------------------
Gross profit 18.2 17.8 17.8
Selling, general and
administrative expenses 11.3 11.1 10.9
- --------------------------------------------------------
Income from operations 6.9 6.7 6.9
Interest expense 1.2 1.5 1.5
Interest income (0.1) 0.0 0.0
OTHER EXPENSE 0.4 0.3 0.4
- --------------------------------------------------------
Income before income taxes 5.4 4.9 5.0
Income taxes(*) 36.0 36.5 37.0
- --------------------------------------------------------
Net income 3.5% 3.1% 3.2%
========================================================
(*) CALCULATED AS A PERCENT OF INCOME BEFORE INCOME TAXES.
The following table sets forth the company's sales by product category and
then by business unit for each of the company's three most recent years. The
table also sets forth the change in net sales for major product categories and
the business units as a percentage for comparative periods included in the
table.
(DOLLARS IN THOUSANDS) AMOUNTS PERCENT CHANGE
----------------------- --------------
1996 1995
PRODUCT CATEGORY/ TO TO
BUSINESS UNIT 1997 1996 1995 1997 1996
- ---------------------------------------------------------------------
Upholstery fabrics:
Culp Textures $ 88,218 $ 84,384 $ 85,125 4.5% (0.9)%
Rossville/
Chromatex 79,512 74,203 63,765 7.2% 16.4%
- ---------------------------------------------------------------------
167,730 158,587 148,890 5.8% 6.5%
Velvets/Prints 156,467 125,701 106,803 24.5% 17.7%
- ---------------------------------------------------------------------
324,197 284,288 255,693 14.0% 11.2%
Mattress ticking:
Culp Home
Fashions 74,682 67,379 52,333 10.8% 28.8%
- ---------------------------------------------------------------------
$398,879 $351,667 $308,026 13.4% 14.2%
=====================================================================
1997 Compared with 1996
SALES. Net sales for 1997 increased by $47.2 million, or 13.4%, compared with
1996. The company's sales of upholstery fabrics increased $39.9 million, or
14.0% in 1997 compared with 1996. Sales from Velvets/Prints were up
significantly from the prior year, reflecting increased international sales of
wet-printed flock fabrics. Sales from Rossville/Chromatex and Culp Textures also
rose for the year. Sales from Culp Home Fashions, principally represented by
mattress ticking, rose 10.8% for the year. Business within the United States,
especially sales to residential furniture manufacturers, decreased by 2.1%
during the fourth quarter of 1997 in comparison to the same period of 1996.
However, the company still achieved an 8% gain in sales to U.S.-based accounts
for the year. International sales, consisting primarily of upholstery fabrics,
increased to $101.6 million, up 31.2% from 1996. International shipments
accounted for 25.5% of the company's sales for 1997, up from 22.0% in 1996.
Sales were made to customers in over 50 countries during 1997. See note 11 on
page 21 for more information about international sales.
<PAGE>
GROSS PROFIT AND COST OF SALES. Gross profit for 1997 increased by $9.9 million
and amounted to 18.2% of net sales compared with 17.8% in 1996. A significant
portion of the increase in gross profit dollars was generated by Velvets/Prints
and, to a lesser degree, by Culp Home Fashions. Gross profit for Culp Textures
and Rossville/Chromatex increased slightly. Factors contributing to the higher
profitability included the increased absorption of fixed costs as a result of
the growth in sales, and the benefit from the company's ongoing capital
investment in equipment designed to lower manufacturing costs and raise
productivity. The company also began to experience a stabilization in cost of
raw materials during 1997 and, in some instances, realized lower costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased as a percentage of net sales for 1997.
Although the company is continuing to emphasize cost-containment programs,
planned increases in expenses related to resources for designing new fabrics,
higher selling commissions related to international sales and higher data
processing costs contributed to the higher ratio of expenses to net sales.
INTEREST EXPENSE. Interest expense, net of interest income, of $4.4 million for
1997 was down from $5.2 million in 1996 due to lower average borrowings
outstanding.
OTHER EXPENSE. Other expense increased $565,000 in comparison to 1996, primarily
due to the non-recurring write-off of certain fixed assets totaling $175,000 and
the recognition last year of a gain of $100,000 related to an indemnification
for an environmental matter.
INCOME TAXES. The effective tax rate for 1997 decreased slightly to 36.0%
compared with 36.5% in 1996. This decrease was primarily due to the lower tax
rate related to Canadian income and tax benefits related to international sales.
NET INCOME. Net income increased 25% to $13.8 million in 1997 compared to $11.0
million in 1996.
1996 Compared with 1995
NET SALES. Net sales for 1996 increased by $43.6 million, or 14.2%, compared
with 1995. The company's sales of upholstery fabrics increased $28.6 million, or
11.2% in fiscal 1996 compared to fiscal 1995. Sales from Rossville/Chromatex and
Velvets/Prints were up significantly from the prior year, while Culp Textures'
sales were down slightly. The gain of $15.0 million in sales from the Culp Home
Fashions business unit reflected higher shipments to existing accounts and the
additional sales from Rayonese. Sales of mattress ticking for 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 1995 in which it was included in the
company's results. International sales, consisting primarily of upholstery
fabrics, increased to $77.4 million, up 33.5% from 1995. International shipments
accounted for 22.0% of the company's sales for 1996, up from 18.8% in 1995.
GROSS PROFIT AND COST OF SALES. Gross profit for 1996 increased by $7.9 million
and remained constant as a percentage of net sales at 17.8%. The increase in
gross profit was generated by improvements in Velvets/Prints and, to a lesser
degree, Culp Home Fashions. Gross profit for Culp Textures was flat and for
Rossville/Chromatex was down in comparison to 1995. The cost of most raw
materials generally rose throughout 1996, and the company was unable to offset
very much of the impact of these increases through higher prices. Raw material
price increases were offset by a shift in the company's product mix toward
fabrics with higher gross margins and increased production efficiencies. During
the latter part of the year, the company began experiencing some easing in the
rate of increase in the cost of raw materials.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased as a percentage of net sales for 1996.
Although the company continued 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.
OTHER EXPENSE. Other expense decreased $126,000 compared to 1995, primarily due
to the recognition in 1996 of a gain of $100,000 related to an indemnification
for an environmental matter.
INCOME TAXES. The effective tax rate for 1996 decreased slightly to 36.5%
compared with 37.0% in 1995.
INTEREST EXPENSE. Interest expense for 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 1996.
NET INCOME. Net income increased 12.3% to $11.0 million in 1996 compared to $9.8
million in 1995.
Liquidity and Capital Resources
LIQUIDITY. Cash and cash investments were $830,000 as of April 27, 1997 compared
with $498,000 at the end of 1996. Funded debt (long-term debt, including current
maturities, less restricted investments) decreased to $65.6 million at the close
of 1997 from $76.8 million at the end of 1996. As a percentage of total capital
(funded debt plus total shareholders' equity), the company's borrowings amounted
to 37.2% as of April 27, 1997 compared with 48.5% at the end of 1996. The
company's working capital as of April 27, 1997 was $69.8 million compared with
$57.0 million at the close of 1996.
The company's cash flow from operations was $23.4 million for 1997,
consisting of $28.2 million from earnings (net income plus depreciation,
amortization and deferred income taxes) offset by a reduction of $4.8 million
from changes in working capital. On February 4, 1997 the company sold 1.2
million shares in a public offering with net proceeds of approximately $16.3
million. The funds from operations and the net proceeds from the public offering
of stock were used principally to fund capital expenditures of $27.0 million and
reduce long-term debt.
<PAGE>
FINANCING ARRANGEMENTS. In April 1997, the company completed a $125 million
syndicated, unsecured, multi-currency revolving credit facility. The facility,
which has a term of five years, requires quarterly payments of interest on all
outstanding borrowings and provides for a reduction of $5 million annually in
the maximum amount of the facility. As of April 27, 1997, the company had
outstanding balances of $41.0 million under the credit facility.
The company also has a total of $31.6 million in outstanding industrial
revenue bonds ("IRBs") which have been used to finance capital expenditures. The
IRBs are collateralized by restricted investments of $11.0 million as of April
27, 1997 and letters of credit for the outstanding balance of the IRBs and
certain interest payments due thereunder. The company expects to close an $8.5
million IRB to finance its new manufacturing facility in Lumberton, NC in July
1997. With the completion of this IRB, the company will reach the maximum amount
of available financing from this source for the foreseeable future.
The company's loan agreements require, among other things, that the company
maintain certain financial ratios. As of April 27, 1997, the company was in
compliance with the required financial covenants.
As of April 27, 1997, the company had three interest rate swap agreements to
reduce its exposure to floating interest rates on a $25 million notional amount.
The effect of these contracts is to "fix" the interest rate payable on $25
million of the company's bank borrowings at a weighted average rate of 7.1%. The
company also enters into foreign exchange forward and option 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.
CAPITAL EXPENDITURES. The company maintains a significant program of capital
expenditures designed to increase capacity as needed, enhance manufacturing
efficiencies through modernization and increase the company's vertical
integration. Capital expenditures totaled $27.0 million for 1997. The company
anticipates spending approximately $27 million in 1998.
The company believes that cash flows from operations and funds available
under existing credit facilities and committed IRB financings will be sufficient
to fund capital expenditures and working capital requirements for the
foreseeable future.
Pending Acquisition
On April 30, 1997, Culp announced that it has signed a letter of intent to
acquire the business and certain assets relating to the upholstery fabric
businesses operating as Phillips Weaving Mills, Phillips Velvet Mills, Phillips
Printing and Phillips Mills. These operating units are owned by Phillips
Industries, Inc., a privately owned corporation based in High Point, North
Carolina. Closing of the transaction is subject to negotiation of a definitive
asset purchase agreement, completion of due diligence and certain other
conditions set forth in the letter of intent.
Inflation
The company's costs for operating expenses, such as labor, utilities and
manufacturing supplies, rose during 1997 and 1996. Additionally, generally
higher costs of raw materials were experienced during 1996. Competitive
conditions did not allow the company to fully offset the impact of these
increases through higher prices, which put pressure on profit margins. Although
the cost of the company's raw materials stabilized and, in some cases, declined
during 1997, the net incremental effect on margins will continue to be
influenced by raw material prices, other operating costs and overall competitive
conditions.
Seasonality
The company's business is slightly seasonal, with increased sales during the
company's second and fourth fiscal quarters. This seasonality results from
one-week closings of the company's manufacturing facilities, and the facilities
of most of its customers in the United States, during the first and third
quarters for the holiday weeks including July 4th and Christmas.
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, SFAS No. 123 allows the continued use of the intrinsic value based
method accompanied with pro forma disclosures of the fair value based method.
The company has adopted this alternative commencing with the year ended April
27, 1997.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share," which is effective
for financial statements for both interim and annual periods ending after
December 15, 1997. SFAS No. 128 specifies the computation, presentation,
and disclosure requirements for earnings per share for entities with publicly
held common stock. Early adoption of SFAS No. 128 is prohibited and, as a
result, the company plans to adopt SFAS No. 128 in its fiscal third quarter of
1998.
Other than the adoption of SFAS No. 128, the implementation of new
accounting standards will not have a material impact on the company's
financial statements in 1998.
Forward-Looking Information
This annual report to shareholders and the company's annual report on Form
10-K may contain statements that could be deemed forward-looking statements,
which 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.
Additionally, strengthening of the U.S. dollar against foreign currencies
could make the company's products less competitive on the basis of price in
international markets.
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 27, 1997 AND APRIL 28, 1996 (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 1997 1996
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
current assets:
cash and cash investments $ 830 498
accounts receivable 56,691 52,038
inventories 53,463 47,395
other current assets 5,450 4,191
- -----------------------------------------------------------------------------------------------------------------
total current assets 116,434 104,122
restricted investments 11,018 5,250
property, plant and equipment, net 91,231 76,961
goodwill 22,262 22,871
other assets 3,007 2,440
- -----------------------------------------------------------------------------------------------------------------
total assets $ 243,952 211,644
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY current liabilities:
current maturities of long-term debt $ 100 7,100
accounts payable 29,903 27,308
accrued expenses 15,074 12,564
income taxes payable 1,580 197
- -----------------------------------------------------------------------------------------------------------------
total current liabilities 46,657 47,169
long-term debt 76,541 74,941
deferred income taxes 9,965 8,088
- -----------------------------------------------------------------------------------------------------------------
total liabilities 133,163 130,198
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 12,608,759 at
April 27, 1997 and 11,290,300 at April 28, 1996 630 565
capital contributed in excess of par value 33,899 16,878
retained earnings 76,260 64,003
- -----------------------------------------------------------------------------------------------------------------
total shareholders' equity 110,789 81,446
total liabilities and shareholders' equity $ 243,952 211,644
=================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED APRIL 27, 1997, APRIL 28, 1996,
AND APRIL 30, 1995 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
net sales $ 398,879 351,667 308,026
cost of sales 326,394 289,129 253,345
- -----------------------------------------------------------------------------------------------------------------
gross profit 72,485 62,538 54,681
selling, general and administrative expenses 45,058 39,068 33,432
- -----------------------------------------------------------------------------------------------------------------
income from operations 27,427 23,470 21,249
interest expense 4,671 5,316 4,715
interest income (280) (92) (64)
other expense 1,521 956 1,082
- -----------------------------------------------------------------------------------------------------------------
income before income taxes 21,515 17,290 15,516
income taxes 7,745 6,310 5,741
- -----------------------------------------------------------------------------------------------------------------
net income $ 13,770 10,980 9,775
net income per share $ 1.18 0.98 0.87
=================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL
FOR THE YEARS ENDED APRIL 27, 1997, COMMON COMMON CONTRIBUTED TOTAL
APRIL 28, 1996 AND APRIL 30, 1995 STOCK STOCK IN EXCESS OF RETAINED SHAREHOLDERS'
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) SHARES AMOUNT PAR VALUE EARNINGS EQUITY
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
balance, May 1, 1994 11,177,353 $ 558 16,487 45,604 62,649
cash dividends ($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
proceeds from public offering of
1,200,000 shares 1,200,000 60 16,235 16,295
cash dividends ($0.13 per share) (1,513) (1,513)
net income 13,770 13,770
common stock issued in connection
with stock option plan 118,459 5 786 791
- --------------------------------------------------------------------------------------------------------------------
balance, April 27, 1997 12,608,759 $ 630 33,899 76,260 110,789
====================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED APRIL 27, 1997, APRIL 28, 1996 AND APRIL 30, 1995
(DOLLARS IN THOUSANDS) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------
cash flows from operating activities:
<S> <C> <C> <C>
net income $ 13,770 10,980 9,775
adjustments to reconcile net income to net cash provided by
operating activities:
depreciation 12,688 12,348 11,257
amortization of intangible assets 810 748 628
provision for deferred income taxes 966 2,210 1,373
changes in assets and liabilities, net of effects of business
acquired:
accounts receivable (4,653) (7,786) (5,515)
inventories (6,068) (1,624) (7,281)
other current assets (348) (537) (310)
other assets (205) (103) (518)
accounts payable 2,586 (1,077) 159
accrued expenses 2,510 1,032 2,180
income taxes payable 1,383 (464) 25
- -----------------------------------------------------------------------------------------------------------------
net cash provided by operating activities 23,439 15,727 11,773
cash flows from investing activities:
capital expenditures (26,958) (14,385) (18,058)
purchase of restricted investments (9,770) (6,019) (57)
purchase of investments to fund deferred compensation liability (563) (1,286) -
sale of restricted investments 4,002 1,564 2,185
business acquired - - (10,455
- -----------------------------------------------------------------------------------------------------------------
net cash used in investing activities (33,289) (20,126) (26,385
cash flows from financing activities:
proceeds from issuance of long-term debt 54,500 19,854 23,455
principal payments on long-term debt (59,900) (11,555) (11,275)
cash dividends paid (1,513) (1,236) (1,120)
proceeds from common stock issued 17,086 306 92
change in accounts payable - capital expenditures 9 (3,865) 2,160
- -----------------------------------------------------------------------------------------------------------------
net cash provided by financing activities 10,182 3,504 13,312
increase (decrease) in cash and cash investments 332 (895) (1,300)
cash and cash investments, beginning of year 498 1,393 2,693
- -----------------------------------------------------------------------------------------------------------------
cash and cash investments, end of year $ 830 498 1,393
=================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
<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 primarily manufactures and markets
furniture upholstery fabrics and mattress ticking 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 1997, 1996 and 1995 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.
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 whether 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 27, 1997, the amount of such undistributed income was $5.2
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.
Stock Option Plan - Prior to April 29, 1996, the company accounted for its stock
option plan in accordance with the provisions of Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense was recorded on the date of grant
only if the current market price of the underlying stock exceeded the exercise
price. On April 29, 1996, the company adopted SFAS No. 123, Accounting for
Stock-Based Compensation, which permits entities to recognize as expense over
the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB Opinion No. 25 and provide pro forma net income and pro forma
net income per share disclosures for employee stock option grants made in fiscal
1996 and future years as if the fair-value-based method defined in SFAS No. 123
had been applied. The company has elected to continue to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No.
123.
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 27, 1997.
<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
(11,624,136 in 1997, 11,234,363 in 1996, and 11,203,160 in 1995). 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 1996 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) Acquisition
On March 6, 1995, the company acquired Rayonese Textile Inc. (Rayonese), a
manufacturer of home furnishings fabrics located 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.
(3) Accounts Receivable A summary of accounts receivable follows:
(DOLLARS IN THOUSANDS) 1997 1996
- --------------------------------------------------------
customers $ 58,568 53,392
allowance for doubtful accounts (1,500) (1,016)
reserve for returns and allowances (377) (338)
- --------------------------------------------------------
$ 56,691 52,038
========================================================
(4) Inventories
A summary of inventories follows:
(DOLLARS IN THOUSANDS) 1997 1996
- --------------------------------------------------------
inventories on the FIFO cost method
raw materials $ 32,025 29,150
work-in-process 4,627 5,067
finished goods 20,212 16,708
- --------------------------------------------------------
total inventories on the
FIFO cost method 56,864 50,925
adjustments of certain inventories
to the LIFO cost method (3,401) (3,530)
- --------------------------------------------------------
$ 53,463 47,395
========================================================
(5) Property, Plant and Equipment
A summary of property, plant and equipment follows:
DEPRECIABLE LIVES
(DOLLARS IN THOUSANDS) (IN YEARS) 1997 1996
- --------------------------------------------------------------------
land and improvements 10 $ 1,795 1,765
buildings and improvements 7-40 13,719 13,529
leasehold improvements 7-10 1,379 1,320
machinery and equipment 3-12 124,531 109,906
office furniture and equipment 3-10 13,122 12,152
capital projects in progress 19,019 8,517
- --------------------------------------------------------------------
173,565 147,189
accumulated depreciation (82,334) (70,228)
- --------------------------------------------------------------------
$ 91,231 76,961
====================================================================
(6) Goodwill
A summary of goodwill follows:
(DOLLARS IN THOUSANDS) 1997 1996
- --------------------------------------------------------
goodwill $ 24,218 24,218
accumulated amortization (1,956) (1,347)
- --------------------------------------------------------
$ 22,262 22,871
========================================================
(7) Accounts Payable
A summary of accounts payable follows:
(DOLLARS IN THOUSANDS) 1997 1996
- --------------------------------------------------------------
accounts payable - trade $ 24,156 21,570
accounts payable - capital expenditures 5,747 5,738
- --------------------------------------------------------------
$ 29,903 27,308
==============================================================
(8) Accrued Expenses
A summary of accrued expenses follows:
(DOLLARS IN THOUSANDS) 1997 1996
- -------------------------------------------------------
compensation and benefits $ 10,217 8,153
other 4,857 4,411
- -------------------------------------------------------
$ 15,074 12,564
=======================================================
<PAGE>
(9) Income Taxes
A summary of income taxes follows:
(DOLLARS IN THOUSANDS) 1997 1996 1995
- ---------------------------------------------------------
CURRENT
- ---------------------------------------------------------
federal $ 5,109 3,345 3,473
state 881 700 699
Canadian 789 0 0
- ---------------------------------------------------------
6,779 4,045 4,172
deferred
federal (26) 1,422 1,374
state (12) 145 195
Canadian 1,004 698 0
- ---------------------------------------------------------
966 2,265 1,569
$ 7,745 6,310 5,741
========================================================
Income before income taxes related to the company's Canadian operation for the
years ended April 27, 1997 and April 28, 1996 were $5,500,000 and $2,100,000,
respectively. Income before income taxes from this operation was not significant
for the year ended April 30, 1995.
The following schedule summarizes the principal differences between income
taxes at the federal income tax rate and the effective income tax rate reflected
in the consolidated financial statements:
1997 1996 1995
- -----------------------------------------------------------
FEDERAL INCOME TAX RATE 35.0% 34.2% 34.1%
- -----------------------------------------------------------
state income taxes, net of federal
income tax benefit 2.6 3.4 3.8
exempt income of foreign
sales corporation (1.7) (1.7) (1.5)
other 0.1 0.6 0.6
- -----------------------------------------------------------
36.0% 36.5% 37.0%
===========================================================
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities consist of the following:
(DOLLARS IN THOUSANDS) 1997 1996
- --------------------------------------------------------
deferred tax liabilities:
property, plant and equipment, net$ (8,903) (7,328)
goodwill (1,019) (720)
other (105) (437)
- --------------------------------------------------------
total deferred tax liabilities (10,027) (8,485)
deferred tax assets:
accounts receivable 638 474
inventories 380 148
compensation 1,231 960
liabilities and reserves 691 782
- --------------------------------------------------------
gross deferred tax assets 2,940 2,364
valuation allowance 0 0
- --------------------------------------------------------
total deferred tax assets 2,940 2,364
$ (7,087) (6,121)
========================================================
Deferred taxes are classified in the accompanying consolidated balance sheet
captions as follows:
(DOLLARS IN THOUSANDS) 1997 1996
- --------------------------------------------------------
other current assets $ 2,878 1,967
deferred income taxes (9,965) (8,088)
- --------------------------------------------------------
$ (7,087) (6,121)
========================================================
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 $5,396,000 in 1997;
$4,623,000 in 1996; and $4,071,000 in 1995.
(10) Long-Term Debt A summary of long-term debt follows:
(DOLLARS IN THOUSANDS) 1997 1996
- -------------------------------------------------------------
industrial revenue bonds and
other obligations $ 31,641 22,241
revolving credit facility 41,000 -
revolving line of credit 4,000 -
revolving credit line, repaid in 1997 - 23,300
term loan, repaid in 1997 - 35,500
subordinated note payable, repaid in 1997 - 1,000
- -------------------------------------------------------------
76,641 82,041
current maturities (100) (7,100)
- -------------------------------------------------------------
$ 76,541 74,941
=============================================================
On April 23, 1997, the company entered into a revolving credit agreement (the
"Credit Agreement") providing for a five-year unsecured multi-currency revolving
credit facility with a syndicate of banks in the United States and Europe. The
Credit Agreement provides for a revolving loan commitment of $125,000,000 which
declines $5,000,000 at each of four annual dates beginning in April 1998. The
agreement requires payment of a quarterly facility fee in advance. Additionally,
the agreement requires payment of interest on any outstanding borrowings based
on, at the company's option, (1) the reference rate of the agent acting on
behalf of the syndicate of banks, or (2) a specified pricing grid which
increases from LIBOR or IBOR based on the company's debt to EBITDA ratio, as
defined by the agreement. At April 27, 1997, all of the outstanding borrowings
under the multi-currency agreement were based on LIBOR and the interest rate was
approximately 6.0%.
On April 23, 1997, the company obtained a $4,000,000 revolving line of credit
which expires on May 31, 1998. However, the line of credit will automatically be
extended for an additional three-month period on each August 31, November 30,
February 28 and May 31 unless the bank notifies the company that the line of
credit will not be extended. Additionally, the revolving line of credit requires
payment of interest monthly on any outstanding borrowings at an interest rate
based on LIBOR plus a margin based on the company's debt to EBITDA ratio, as
defined in the credit facility. At April 27, 1997, the interest rate on
outstanding borrowings was approximately 6.0%.
During 1997, the company obtained $9,500,000 of new industrial revenue bond
(IRB) financing related to the expansion of its plant and equipment at its West
Hazelton, Pennsylvania and Burlington, North Carolina facilities. The final
maturities of these IRBs range from the year 2006 to 2009. The remaining IRBs
are substantially due in one-time payments at various dates from 2008
<PAGE>
to 2013 and all of the bonds bear interest at variable rates at approximately
64% of the prime rate (prime at April 27, 1997 was 8.5%). The IRBs are
collateralized by restricted investments of $11,018,000 and letters of credit
for $32,416,000 at April 27, 1997.
The company's loan agreements require, among other things, that the company
maintain compliance with certain positive and negative financial covenants. At
April 27, 1997, the company was in compliance with these required financial
covenants.
At April 27, 1997, the company had three interest rate swap agreements with a
bank 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
- -------------------------------------------------------
$15,000,000 7.3% April 2000
$ 5,000,000 6.9% June 2002
$ 5,000,000 6.6% July 2002
The company believes it could terminate these agreements as of April 27, 1997
for little or no cost based on current market conditions. Net amounts paid under
these agreements increased interest expense by approximately $301,000 in 1997;
$290,000 in 1996; and $138,000 in 1995. 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: 1998 - $100,000; 1999 - $4,075,000; 2000 - $200,000; 2001 - $200,000;
and 2002 - $41,154,000.
Interest paid during 1997, 1996 and 1995 totaled $4,834,000, $5,365,000, and
$4,668,000, respectively.
(11) Commitments and Contingencies
The company leases certain office, manufacturing and warehouse facilities and
equipment, primarily computer and vehicles, 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 $4,590,000 in 1997; $3,502,000 in 1996; and $2,486,000 in
1995. Future minimum rental commitments for noncancellable operating leases are
$4,091,000 in 1998; $3,840,000 in 1999; $3,092,000 in 2000; $2,067,000 in 2001;
$1,881,000 in 2002; and $10,189,000 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 approximately
$12,000,000 as of April 27, 1997.
(12) Stock Option Plans
The company has a fixed stock option plan under which options to purchase common
stock may be granted to officers, directors and key employees. At April 27,
1997, 865,728 shares of common stock were authorized for issuance under the
plan. Options are generally exercisable one year after the date of grant and
generally expire beginning ten years after the date of grant.
No compensation cost has been recognized for this stock option plan as
options are granted under the plan at an option price not less than fair market
value at the date of grant. Had compensation cost for this stock-based
compensation plan been determined consistent with SFAS No. 123, the company's
pro forma net income and net income per share for 1997 and 1996 would have
approximated the company's net income and net income per share in the
accompanying consolidated statements of income as compensation cost was
immaterial for options granted in 1997 and 1996.
The fair value of each option grant is estimated on the date of grant using
the Black Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997 and 1996: dividend yield of 1%; risk-free
interest rates of 5%; expected volatility of 44%; and expected lives of 3
years.
A summary of the status of the plan as of April 27, 1997, April 28, 1996 and
April 30, 1995 and changes during the years ended on those dates is presented
below and continued on the next page:
<TABLE>
<CAPTION>
1997 1996 1995
WEIGHTED-AVG. WEIGHTED-AVG. WEIGHTED-AVG.
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 443,437 $ 7.46 455,721 $ 6.65 385,884 $ 5.81
Granted 82,250 12.61 83,250 8.27 97,250 9.05
Exercised (118,459) 6.81 (85,534) 3.51 (27,413) 3.31
Canceled/expired - - (10,000) 11.25 - -
------ ------ -------
Outstanding at end of year 407,228 8.69 443,437 7.46 455,721 6.65
-------- ------- -------
Options exercisable at year-end 336,228 7.91 371,437 7.37 369,721 6.07
granted during the year $ 4.55 $ 2.98 -
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- ---------------------------------
NUMBER WEIGHTED-AVG. NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVG. EXERCISABLE WEIGHTED-AVG.
EXERCISE PRICES AT 4/27/97 CONTRACTUAL LIFE EXERCISE PRICE AT 4/27/97 EXERCISE PRICE
- ---------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
$ 2.82-$ 4.63 128,728 2.1years $ 4.01 128,728 $ 4.01
$ 7.75-$ 9.00 110,875 7.1 8.43 110,875 8.43
$ 9.90- $12.75 134,375 7.6 12.08 75,375 12.05
$13.34- $14.38 33,250 5.3 13.90 21,250 14.22
------- -------
407,228 5.5 8.69 336,228 7.91
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
During fiscal 1995, the company adopted a 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 ended April 27, 1997. Since these options were
granted in fiscal 1995, the provisions of SFAS No. 123 are not applicable.
As of April 27, 1997, the 121,000 options outstanding under the plan have
exercise prices of $0.05 and a weighted-average remaining contractual life of
6.7 years. The options outstanding vested on April 27, 1997 as the company
achieved an annual compound rate of growth in its primary earnings per share of
17% during the three-year period ended April 27, 1997.
During March 1997, the company's board of directors approved the 1997
performance-based stock option plan which provides for the one-time grant to
certain officers and certain senior managers of options to purchase 106,000
shares of the company's common stock at $1.00 per share. Options under the plan
are exercisable the earlier of January 1, 2006 or approximately 30 days after
the end of fiscal 1999 if the company achieves net income per share of $1.50 for
fiscal 1999, which would represent a 13% compound growth rate from 1997. The
1997 performance-based option plan is pending shareholder approval at the
company's annual shareholder meeting in September 1997. As a result, the date of
grant for the options to purchase 106,000 shares will occur in September 1997,
if approved by the shareholders, and the compensation expense would begin to be
recorded under APB Opinion No. 25 in fiscal 1998, provided the company's
financial performance is on track to achieve the net income per share target.
(13) Benefit Plans
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 $875,000 in 1997; $791,000 in
1996; and $771,000 in 1995.
In addition to the defined contribution plan, the company has a nonqualified
deferred compensation plan covering officers and certain other associates. At
April 27, 1997 and April 28, 1996, the company had approximately $1,774,000 and
$1,286,000, respectively, of assets related to the nonqualified plan which are
included in other assets. The company also had a liability of $2,128,000 and
$1,426,000 at April 27, 1997 and April 28, 1996, respectively, which is included
in accrued expenses in the accompanying consolidated balance sheets.
(14) International Sales
International sales, of which 91%, 90% and 98% were denominated in U.S. dollars
in 1997, 1996 and 1995, accounted for 25% of net sales in 1997, 22% in 1996, and
19% in 1995, and are summarized by geographic area as follows:
(DOLLARS IN THOUSANDS) 1997 1996 1995
- --------------------------------------------------------
NORTH AMERICA
(excluding USA) $ 27,479 23,528 16,707
Europe 25,245 18,927 19,177
Middle East 23,505 15,609 6,081
Asia and Pacific Rim 19,646 12,124 8,969
South America 2,604 2,753 3,749
All other areas 3,092 4,456 3,288
- --------------------------------------------------------
$ 101,571 77,397 57,971
========================================================
(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 $27,549,000
in 1997; $27,739,000 in 1996; and $20,484,000 in 1995. The amount due from this
customer at April 27, 1997 was approximately $2,718,000 and at April 28, 1996
was approximately $2,608,000.
A director of the company is also a director of a bank participating in the
syndicated revolving credit facility and an officer and director of the lessor
of the company's office facilities in High Point. The amount of interest and
other fees paid to the bank was approximately $2,217,000 in 1997; $2,580,000 in
1996; and $2,039,000 in 1995, and the loans payable to the bank and amounts
guaranteed through letters of credit by the bank at April 27, 1997 and April 28,
1996 aggregated $28,672,000 and $48,402,000, respectively. Rent expense for the
company's office facilities in High Point was approximately $436,000 in 1997;
$421,000 in 1996; and $435,000 in 1995.
Rents paid to entities owned by certain shareholders and officers of the
company and their immediate families were $680,000 in 1997; $680,000 in 1996;
and $670,000 in 1995.
<PAGE>
(16) Foreign Exchange Contracts
The company generally enters into foreign exchange forward and option contracts
as a hedge against its exposure to currency fluctuations on firm commitments to
purchase certain machinery and equipment and raw materials. 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 $2,432,000 and
$1,924,000 of outstanding foreign exchange forward contracts as of
April 27, 1997 and April 28, 1996, respectively (primarily denominated in
German marks, Austrian shillings and Belgian francs). The contracts outstanding
at April 27, 1997 mature at various dates in fiscal 1998. Due to the short
maturity of these financial instruments, the fair values of these contracts
approximate the contract amounts at April 27, 1997 and April 28, 1996,
respectively.
(17) Stock Offering
In February of 1997, the company completed the sale of 1,200,000 shares of
common stock at a per share price of $15 less commissions and expenses of
approximately $1,700,000 which resulted in net proceeds realized of
approximately $16,300,000. The net proceeds received from the offering were used
to reduce outstanding borrowings under the company's revolving credit line.
The stock offering also included 640,000 shares of common stock sold by two
non-management shareholders at a per share price of $15 less commissions of
approximately $576,000 which resulted in net proceeds realized of approximately
$9,024,000 by the selling shareholders.
(18) Subsequent Event
On April 30, 1997, the company announced that it signed a letter of intent to
purchase the operations and certain assets relating to an upholstery fabric
business operating as Phillips Weaving Mills, Phillips Velvet Mills, Phillips
Printing and Phillips Mills. Closing of the transaction, is subject to
negotiation of a definitive asset purchase agreement, completion of due
diligence and certain other conditions set forth in the letter of intent.
<PAGE>
SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL FISCAL FISCAL
(AMOUNTS IN THOUSANDS, 1997 1997 1997 1997 1996
EXCEPT PER SHARE AMOUNTS) 4TH QUARTER 3RD QUARTER 2ND QUARTER 1ST QUARTER 4TH QUARTER
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
net sales $ 105,678 97,468 105,204 90,529 102,162
cost of sales 85,386 80,317 86,082 74,609 82,957
- ---------------------------------------------------------------------------------------------------------------------
gross profit 20,292 17,151 19,122 15,920 19,205
SG & A expenses 11,730 10,760 11,704 10,864 11,300
- ---------------------------------------------------------------------------------------------------------------------
income from operations 8,562 6,391 7,418 5,056 7,905
interest expense 1,019 1,228 1,242 1,182 1,352
interest income (90) (73) (60) (57) (92)
other expense 404 421 301 395 365
income before income taxes 7,229 4,815 5,935 3,536 6,280
income taxes 2,389 1,805 2,225 1,326 2,230
- ---------------------------------------------------------------------------------------------------------------------
net income 4,840 3,010 3,710 2,210 4,050
=====================================================================================================================
EBITDA (6) $ 11,582 9,279 10,540 8,003 10,814
depreciation 3,248 3,119 3,177 3,144 3,070
cash dividends 410 368 367 368 310
=====================================================================================================================
weighted average shares outstanding 12,546 11,342 11,312 11,297 11,284
=====================================================================================================================
PER SHARE DATA (3) (5)
net income $ 0.39 0.27 0.33 0.20 0.36
cash dividends 0.0325 0.0325 0.0325 0.0325 0.0275
book value 8.79 7.89 7.66 7.37 7.21
=====================================================================================================================
BALANCE SHEET DATA (5)
working capital $ 69,777 60,689 57,230 53,635 56,953
property, plant and equipment, net 91,231 86,146 80,316 78,292 76,961
total assets 243,952 228,262 219,527 208,283 211,644
capital expenditures 8,333 8,949 5,201 4,475 6,675
long-term debt 76,541 86,266 72,891 70,916 74,941
funded debt (1) 65,623 80,588 74,612 72,772 76,791
shareholders' equity 110,789 89,578 86,835 83,356 81,446
capital employed (7) 176,412 170,166 161,447 156,128 158,237
=====================================================================================================================
RATIOS & OTHER DATA (5)
gross profit margin 19.2% 17.6% 18.2% 17.6% 18.8%
operating income margin 8.1 6.6 7.1 5.6 7.7
net income margin 4.6 3.1 3.5 2.4 4.0
EBITDA margin 11.0 9.5 10.0 8.8 10.6
effective income tax rate 33.0 37.5 37.5 37.5 35.5
funded debt-to-total capital ratio (1) 37.2 47.4 46.2 46.6 48.5
working capital turnover 5.3 5.3 5.4 5.4 5.3
days sales in receivables 49 47 45 43 46
inventory turnover 6.6 6.2 6.6 6.0 6.8
=====================================================================================================================
STOCK DATA (3)
stock price
high $ 19.63 17.00 14.38 14.25 13.25
low 14.50 13.50 11.75 11.50 10.00
close 16.63 14.88 13.75 12.25 13.00
P/E ratio (2)
high 16.6 14.7 13.0 13.6 13.5
low 12.3 11.6 10.6 11.0 10.2
trading volume (shares) 2,165 945 563 1,364 1,325
=====================================================================================================================
</TABLE>
FISCAL FISCAL FISCAL
(AMOUNTS IN THOUSANDS, 1996 1996 1996
EXCEPT PER SHARE AMOUNTS) 3RD QUARTER 2ND QUARTER 1ST QUARTER
- -------------------------------------------------------------------------------
net sales 86,476 90,672 72,357
cost of sales 71,447 74,565 60,159
- -------------------------------------------------------------------------------
gross profit 15,029 16,107 12,198
SG & A expenses 9,639 9,675 8,454
- -------------------------------------------------------------------------------
income from operations 5,390 6,432 3,744
interest expense 1,279 1,388 1,297
interest income 0 0 0
other expense 266 219 107
income before income taxes 3,845 4,825 2,340
income taxes 1,430 1,825 825
- -------------------------------------------------------------------------------
net income 2,415 3,000 1,515
===============================================================================
EBITDA (6) 8,450 9,494 6,852
depreciation 3,140 3,071 3,067
cash dividends 309 309 308
===============================================================================
weighted average shares outstanding 11,232 11,211 11,207
===============================================================================
PER SHARE DATA (3) (5)
net income 0.22 0.27 0.14
cash dividends 0.0275 0.0275 0.0275
book value 6.89 6.72 6.48
===============================================================================
BALANCE SHEET DATA (5)
working capital 52,266 46,373 45,069
property, plant and equipment, net 73,356 73,876 75,744
total assets 197,704 200,404 192,725
capital expenditures 2,620 2,084 3,006
long-term debt 68,112 65,137 67,662
funded debt (1) 79,667 76,692 79,217
shareholders' equity 77,623 75,351 72,624
capital employed (7) 157,290 152,043 151,841
===============================================================================
RATIOS & OTHER DATA (5)
gross profit margin 17.4% 17.8% 16.9%
operating income margin 6.2 7.1 5.2
net income margin 2.8 3.3 2.1
EBITDA margin 9.8 10.5 9.5
effective income tax rate 37.2 37.8 35.3
funded debt-to-total capital ratio (1) 48.5 50.6 50.4
working capital turnover 5.3 5.4 5.4
days sales in receivables 43 47 45
inventory turnover 5.7 6.0 5.1
===============================================================================
STOCK DATA (3)
stock price
high 11.50 11.00 10.00
low 9.50 9.00 7.75
close 10.00 9.75 7.75
P/E ratio (2)
high 12.2 12.1 11.2
low 10.1 9.9 8.7
trading volume (shares) 1,142 1,011 1,454
===============================================================================
(1) FUNDED DEBT INCLUDES LONG- AND SHORT-TERM DEBT, LESS RESTRICTED INVESTMENTS.
(2) P/E RATIOS BASED ON TRAILING 12-MONTH NET 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.
(8) CULP'S COMMON SHARES WERE LISTED ON THE NEW YORK STOCK EXCHANGE ON DECEMBER
31, 1996.
<PAGE>
SELECTED ANNUAL DATA
<TABLE>
<CAPTION>
PERCENT FIVE-YEAR
FISCAL FISCAL FISCAL FISCAL FISCAL CHANGE GROWTH
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996 1995 1994 1993 1997/1996 RATE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (4) (5)
net sales $398,879 351,667 308,026 245,049 200,783 13.4% 15.8%
cost of sales 326,394 289,129 253,345 202,426 168,599 12.9 15.2
- ---------------------------------------------------------------------------------------------------------------------------
gross profit 72,485 62,538 54,681 42,623 32,184 15.9 19.2
S G & A expenses 45,058 39,068 33,432 27,858 24,203 15.3 12.9
- ---------------------------------------------------------------------------------------------------------------------------
income from operations 27,427 23,470 21,249 14,765 7,981 16.9 37.9
interest expense 4,671 5,316 4,715 2,515 1,409 (12.1) 26.9
interest income (280) (92) (64) (79) (29) 204.3 15.5
other expense 1,521 956 1,082 350 1 59.1 39.5
- ---------------------------------------------------------------------------------------------------------------------------
income before income taxes 21,515 17,290 15,516 11,979 6,600 24.4 40.5
income taxes 7,745 6,310 5,741 4,314 2,099 22.7 51.7
- ---------------------------------------------------------------------------------------------------------------------------
net income 13,770 10,980 9,775 7,665 4,501 25.4 35.9
- ---------------------------------------------------------------------------------------------------------------------------
EBITDA(6) $ 39,404 35,610 32,052 23,256 14,933 10.7 25.7
depreciation 12,688 12,348 11,257 8,497 6,724 2.8 12.4
cash dividends 1,513 1,236 1,120 887 696 22.4 23.2
- ---------------------------------------------------------------------------------------------------------------------------
weighted average shares outstanding 11,624 11,234 11,203 11,076 10,875 3.5 1.4
PER SHARE DATA (3) (4) (5)
net income $ 1.18 0.98 0.87 0.69 0.41 20.4% 34.3%
cash dividends 0.13 0.11 0.10 0.08 0.064 18.2 21.6
book value 8.79 7.21 6.37 5.60 5.01 21.9 13.5
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA (4) (5)
working capital $ 69,777 56,953 38,612 37,949 34,942 22.5% 21.2%
property, plant and equipment, net 91,231 76,961 75,805 64,004 44,529 18.5 18.3
total assets 243,952 211,644 194,999 164,948 106,548 15.3 21.2
capital expenditures 26,958 14,385 18,058 16,764 11,938 87.4 16.8
businesses acquired 0 0 10,455 38,205 0 0 0
long-term debt 76,541 74,941 62,187 58,512 23,147 2.1 40.3
funded debt (1) 65,623 76,791 72,947 58,639 26,582 (14.5) 31.3
shareholders' equity 110,789 81,446 71,396 62,649 54,521 36.0 17.0
capital employed (7) 176,412 158,237 144,343 121,288 81,103 11.5 21.2
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS & OTHER DATA (4) (5)
gross profit margin 18.2% 17.8% 17.8% 17.4% 16.0
%
operating income margin 6.9 6.7 6.9 6.0 4.0
net income margin 3.5 3.1 3.2 3.1 2.2
EBITDA margin 9.9 10.1 10.4 9.5 7.4
effective income tax rate 36.0 36.5 37.0 36.0 31.8
funded debt-to-total capital ratio (1) 37.2 48.5 50.5 48.3 32.8
RETURN ON AVERAGE TOTAL CAPITAL 10.1 9.5 9.6 9.2 7.4
return on average equity 15.2 14.4 14.6 13.1 8.6
working capital turnover 5.3 5.3 5.6 5.7 5.4
days sales in receivables 49 46 47 43 43
inventory turnover 6.4 6.0 6.0 6.3 6.4
- ---------------------------------------------------------------------------------------------------------------------------
STOCK DATA (3)
stock price
high $ 19.63 13.25 12.50 17.33 7.33
low 11.50 7.75 7.25 5.67 3.60
close 16.63 13.00 9.75 11.63 7.20
P/E ratio (2)
high 16.6 13.5 14.3 25.1 17.7
low 9.7 7.9 8.3 8.2 8.7
trading volume (shares) 5,037 (8) 4,932 10,161 11,178 2,646
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) - (8) SEE SELECTED QUARTERLY DATA TABLE FOOTNOTE
<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 27, 1997 and April 28, 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the years in the three-year period ended April 27, 1997. 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 27, 1997 and April 28, 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended April 27, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP.
Greensboro, North Carolina
May 22, 1997
MANAGEMENT'S RESPONSIBILITY
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 1997 is
presented above.
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).
/s/ Robert G. Culp, III
Robert G. Culp, III
Chairman and Chief Executive Officer
/s/ Franklin N. Saxon
Franklin N. Saxon
Senior Vice President and Chief Financial Officer
May 22, 1997
<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)
Franklin N. Saxon
Senior Vice President and Chief Financial Officer, Treasurer, Secretary;
Director (E)
Kenneth M. Ludwig
Senior Vice President-Human Resources; Assistant Secretary
Harry R. Culp, D.D.S.
Director
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
Patrick H. Norton
Director (N); Senior Vice President, Sales and Marketing;
La-Z-Boy, Inc., Monroe, MI
Earl N. Phillips, Jr.
Director; Co-Founder and President, First Factors Corporation
High Point, NC
Bland W. Worley
Director (A,C,N); Retired Chairman of the Board and Chief Executive
Officer, BarclaysAmericanCorporation, Charlotte, NC
BOARD COMMITTEES:
A-AUDIT
C-COMPENSATION
E-EXECUTIVE
N-NOMINATING
SHAREHOLDER INFORMATION
Corporate Address
101 South Main Street
Post Office Box 2686
High Point, NC 27261
Telephone: (910) 889-5161
Fax: (910) 887-7089
Registrar and Transfer Agent
Wachovia Bank, N.A.
Winston-Salem, NC 27102
(800) 633-4236
Written shareholder correspondence should be sent to:
Wachovia Shareholder Services
P.O. Box 8218
Boston, MA 02266-8218
Transfers should be sent to:
Wachovia Shareholder Services
P.O. Box 8217
Boston, MA 02266-8217
Auditors
KPMG Peat Marwick LLP
Greensboro, NC 27401
Legal Counsel
Robinson, Bradshaw & Hinson, PA
Charlotte, NC 28246
Form 10-K and Quarterly Reports/Investor Contact
The Form 10-K Annual Report of Culp, Inc., as filed with the Securities and
Exchange Commission, is available from the company without charge to
shareholders upon written request. Shareholders may also obtain copies of the
company's news releases issued in conjunction with the company's quarterly
results. These requests and other investor contacts should be directed to the
Investor Relations department at the corporate address.
NYSE Symbol
The company's common stock is traded on the New York Stock Exchange under the
symbol CFI.
Analyst Coverage
These analysts cover Culp, Inc.:
Interstate/Johnson Lane - Kay Norwood, CFA
Raymond, James & Associates - Budd Bugatch, CFA
Robinson-Humphrey Co., Inc. - Lorraine Miller, CFA
Wheat First Securities, Inc. - John Baugh, CFA
Value Line, Inc. - Jed S. Brody
Stock Listing
Culp, Inc. common stock is traded on the New York Stock Exchange under the
symbol CFI. As of April 27, 1997, Culp, Inc. had approximately 2,900
shareholders based on the number of holders of record and an estimate of the
number of individual participants represented by security position listings.
Annual Meeting
Shareholders are invited to attend the annual meeting to be held Tuesday,
September 16, 1997 at the Radisson Hotel; 135 South Main Street; High Point,
North Carolina.
<PAGE>
(Graphic appears here of number 25)
CULP, INC.
101 SOUTH MAIN STREET
POST OFFICE BOX 2686
HIGH POINT, NC 27261
TELEPHONE: (910) 889-5161
INTERNET: [email protected]
EXHIBIT 22
LIST OF SUBSIDIARIES OF CULP, INC.
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 STATEMENTS (NOS.
33-13310, 33-37027, 33-80206, 33-62843 AN 333-27519) ON FORM S-8 OF CULP, INC.
OF OUR REPORT DATED MAY 22, 1997, RELATING TO THE CONSOLIDATED BALANCE SHEETS
OF CULP, INC. AND SUBSIDIARY AS OF APRIL 27, 1997 AND APRIL 28, 1996, AND THE
RELATED CONSOLIDATED STATEMENTS OF INCOME, SHAREHOLDERS' EQUITY AND CASH FLOWS
FOR EACH OF THE YEARS IN THE THREE-YEAR PERIOD ENDED APRIL 27, 1997, WHICH
REPORT IS INCORPORATED BY REFERENCE IN THE APRIL 27, 1997 ANNUAL REPORT ON
FORM 10-K OF CULP, INC.
KPMG PEAT MARWICK LLP
GREENSBORO, NORTH CAROLINA
JULY 24, 1997
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 27, 1997 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/ Harry R. Culp
Harry R. Culp
DATE: JUNE 2, 1997
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 27, 1997 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 20, 1997
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 27, 1997 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 3, 1997
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 27, 1997 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 3, 1997
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 27, 1997 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 2, 1997
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 27, 1997 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 1, 1997
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 27, 1997 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 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000723603
<NAME> Culp, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-27-1997
<PERIOD-START> APR-29-1996
<PERIOD-END> APR-27-1997
<CASH> 830
<SECURITIES> 0
<RECEIVABLES> 58,568
<ALLOWANCES> (1,877)
<INVENTORY> 53,463
<CURRENT-ASSETS> 5,450
<PP&E> 173,565
<DEPRECIATION> (82,334)
<TOTAL-ASSETS> 243,952
<CURRENT-LIABILITIES> 46,657
<BONDS> 0
0
0
<COMMON> 630
<OTHER-SE> 110,159
<TOTAL-LIABILITY-AND-EQUITY> 243,952
<SALES> 398,879
<TOTAL-REVENUES> 398,879
<CGS> 326,394
<TOTAL-COSTS> 326,394
<OTHER-EXPENSES> 45,058
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,671
<INCOME-PRETAX> 21,515
<INCOME-TAX> 7,745
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,770
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
