Company: CULP
Filing Date: 2025-08-15
Form Type: DEF 14A
Source: 0000950170-25-109242
Chunk: 59

Company: CULP INC
Filing Date: 2025-08-15
Form: DEF 14A
Chunk 59
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6 will consist of the following elements:

With respect to NEO salaries, in response to continuing challenges in the home furnishings industry demand and market environments and the associated need for the Company to manage costs, no salary increases for NEOs are currently anticipated for fiscal 2026; provided, however, the Committee may re-evaluate executive officer salaries later in fiscal 2026 if there is significant improvement in Company performance and market conditions.. As a result, the Committee believes NEO base salary levels will remain well below the 50th percentile market level, even as compared to the Company’s 2025 peer group (as describe above).

The annual cash incentive bonus program will continue for fiscal 2026; however, as a result of the above-referenced integration initiative involving the combination of the Company's two operating divisions, upholstery fabrics and mattress fabrics, into one unified business, the Company's fiscal 2026 annual cash incentive bonus program will be based solely upon the Company's consolidated performance, rather than the multiple separate reporting units comprising the fiscal 2025 annual cash incentive bonus program. The fiscal 2026 program will be tied to consolidated adjusted earnings before interest, taxes, depreciation and amortization ("adjusted EBITDA") goals, with any potential awards capped at 50% of historical target award levels. In addition, any earned awards are subject to reduction by 40% if the Company’s net debt exceeds a predetermined threshold as of the end of fiscal 2026. Annual incentive plan metrics were selected to reinforce the Company’s current strategic priorities for fiscal 2026, including returning to profitability, margin improvement, and ongoing balance sheet management.

The fiscal 2026 program consists of two measurement levels for consolidated adjusted EBITDA - threshold and target – for performance goals and corresponding award funding opportunities. The bonus opportunities under the program are capped at 50% of historical target award levels and threshold bonus opportunities under the program are set at 20% of historical target bonus levels (and 40% of the reduced target award levels for fiscal 2026). Annual adjusted EBITDA goals have been established by the Committee, and target award opportunities for all NEOs have been established, ranging from 35% to 50% of annual salary (i.e., 50% lower as compared to the goals established for fiscal 2025). The annual incentive bonuses under the plan, if any, will be paid in cash.

In developing the performance targets for the fiscal 2026 annual cash incentive program, the Committee carefully evaluated then-current and expected business conditions