Exhibit 10.2

 

 

SIXTH AMENDMENT TO CREDIT AGREEMENT

 

THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as
of March 27, 2020 by and between CULP, INC., a North Carolina corporation
("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank").

 

RECITALS

 

WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of August 13, 2013, as amended by a First Amendment to Credit Agreement between
Borrower and Bank dated as of July 10, 2015, by a Second Amendment to Credit
Agreement between Borrower and Bank dated as of March 10, 2016, by a Third
Amendment to Credit Agreement between Borrower and Bank dated as of August 1,
2016, by a Fourth Amendment to Credit Agreement between Borrower and Bank dated
as of September 27, 2016, by a Fifth Amendment to Credit Agreement between
Borrower and Bank dated as of August 13, 2018, and as further amended from time
to time ("Credit Agreement").

 

WHEREAS, Bank and Borrower have agreed to certain changes in the terms and
conditions set forth in the Credit Agreement and have agreed to amend the Credit
Agreement to reflect said changes.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

 

1.Amendments to Credit Agreement.  The Credit Agreement is hereby amended as set
forth in this Section 1.

 

1.1The definition of “Applicable Margin” set forth in Article I of the Credit
Agreement is amended and restated in its entirety to read as follows:

 

“(a)  “Applicable Margin” shall be 1.45% until the first Rate Determination Date
(hereafter defined) after May 3, 2020, and as of and after such first Rate
Determination Date after May 3, 2020 shall be determined based on the pricing
grid set forth below and tied to the Consolidated Total Debt to Consolidated
EBITDA ratio determined as set forth in Section 5.9(b):

 

Price

Level

Consolidated Total Debt

to Consolidated EBITDA Ratio

Applicable Margin

I

Less than 0.75 to 1.00

1.45%

 

II

Greater than or equal to 0.75 to 1.00 but less than 1.50 to 1.00

1.90%

III

Greater than or equal to 1.50 to 1.00 but less than 2.25 to 1.00

2.35%

IV

Greater than or equal to 2.25 to 1.00 but less than 3.00 to 1.00

2.80%

 

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The Applicable Margin shall be determined effective as of the date (herein, the
“Rate Determination Date”) which is 10 days after receipt by the Bank of the
annual (in the case of the fourth Fiscal Quarter) and quarterly financial
statements of the Borrower pursuant to the provisions of Section 5.3 for the
Fiscal Quarter as of the end of which the foregoing ratio is being determined,
based on such quarterly or annual financial statements, as the case may be, for
the Fiscal Quarter then ended, and the Applicable Margin so determined shall
remain effective from such Rate Determination Date until the date which is 10
days after receipt by the Bank of the financial statements for the next Fiscal
Quarter (which latter date shall be a new Rate Determination Date); provided
that if the Borrower shall have failed to deliver to the Bank the financial
statements required to be delivered pursuant to the provisions of Section 5.3
with respect to the Fiscal Quarter most recently ended within the time period
specified herein, then for the period beginning on the day which is 10 days
after the required delivery date of such financial statements and ending on the
earlier of (A) 10 days after the date on which the Borrower shall deliver to the
Bank the financial statements to be delivered pursuant to the provisions of
Section 5.3 with respect to such Fiscal Quarter or any subsequent Fiscal
Quarter, or (B) 10 days after the date on which the Borrower shall deliver to
the Bank annual financial statements required to be delivered pursuant to the
provisions of Section 5.3(a) with respect to the Fiscal Year which includes such
Fiscal Quarter or any subsequent Fiscal Year, the Applicable Margin shall be
determined at Pricing Level IV set forth above.  Any change in the Applicable
Margin as of any Rate Determination Date shall result in a corresponding change,
effective on and as of such Rate Determination Date, in the interest rate
applicable to the Loans outstanding on such Rate Determination Date.”

 

1.2Section 2.1(a) of the Credit Agreement is hereby amended by (a) deleting
“August 15, 2020” as the last day on which Bank will make advances under the
Line of Credit, and by substituting for said date “August 15, 2022”, and (b)
deleting “TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00)” as the
maximum principal amount of the Line of Credit and by substituting “THIRTY
MILLION AND NO/100 DOLLARS ($30,000,000.00”) in lieu thereof.

 

1.3Section 2.2(a) of the Credit Agreement is hereby amended by deleting the
sentence which reads “Each change in Daily One Month LIBOR shall become
effective on each Business Day such change is announced within Bank.”

 

1.4Section 2.2(b) of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

 

“(b)Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon
demand, in addition to any other amounts due or to become due hereunder, any and
all (i) withholdings, interest equalization taxes, stamp taxes or other taxes
(except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) costs,
expenses and liabilities arising from or in connection with reserve percentages
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board, as amended), assessment rates imposed by the Federal
Deposit Insurance Corporation, or similar requirements or costs imposed by any
domestic or foreign governmental authority or resulting from compliance by Bank
with any request or directive (whether or not having the force of law) from any
central bank or other governmental authority and related in any manner to
LIBOR.  In determining which of the foregoing are attributable to any LIBOR
option available to Borrower hereunder, any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrower.”

 

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1.5A new Section 2.4 is hereby added to the Credit Agreement, which shall read
as follows:

 

“SECTION 2.4BENCHMARK REPLACEMENT PROVISIONS.  Notwithstanding anything to the
contrary contained in this Agreement, in the Line of Credit Note or in any
related Loan Document (for the purposes of these Benchmark Replacement
Provisions, a Swap Agreement is not a Loan Document):

 

(a)Benchmark Replacement.  If a Benchmark Transition Event or an Early Opt-in
Election, as applicable, occurs, the applicable Benchmark Replacement will
replace the then-current Benchmark for all purposes under this Agreement, the
Line of Credit Note or any related Loan Document.  Any Benchmark Replacement
will become effective on the applicable Benchmark Replacement Date without any
further action or consent of Borrower.

 

(b)Benchmark Replacement Conforming Changes.  Bank will have the right to make
Benchmark Replacement Conforming Changes from time to time, and any amendments
implementing such Benchmark Replacement Conforming Changes will become effective
without any further action or consent of Borrower.

 

(c)Notices; Standards for Decisions and Determinations.  Bank will promptly
notify Borrower of (i) any occurrence of a Benchmark Transition Event or an
Early Opt-in Election, as applicable, (ii) the implementation of any Benchmark
Replacement, and (iii) the effectiveness of any Benchmark Replacement Conforming
Changes. Any determination, decision or election that may be made by Bank
pursuant to these Benchmark Replacement Provisions, including any determination
with respect to a tenor, rate or adjustment or of the occurrence or
non-occurrence of an event, circumstance or date and any decision to take or
refrain from taking any action or any selection, will be conclusive and binding
absent manifest error and will be made in its sole discretion and without
Borrower consent.

 

(d)Certain Defined Terms.  As used in this Note, each of the following
capitalized terms has the meaning given to such term below:

 

(i)“Benchmark” means, initially, LIBOR (including Daily One Month LIBOR, if
applicable); provided, however, that if a Benchmark Transition Event or an Early
Opt-in Election, as applicable, has occurred with respect to LIBOR or the
then-current Benchmark, then “Benchmark” means the applicable Benchmark
Replacement to the extent that such Benchmark Replacement has become effective
pursuant to the provisions of this Agreement.

 

(ii)“Benchmark Administrator” means, initially, ICE Benchmark Administration
Limited, a United Kingdom company, or any successor administrator of the
then-current Benchmark or any insolvency or resolution official with authority
over such administrator.

 

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(iii)“Benchmark Replacement” means the first alternative set forth in the order
below that can be determined by Bank as of the applicable Benchmark Replacement
Date:

 

(1)the sum of: (A) Term SOFR or, if Bank determines that Term SOFR for the
Corresponding Tenor cannot be determined, Term SOFR for the longest tenor that
can be determined by Bank that is shorter than the Corresponding Tenor, and (B)
the spread adjustment, or method for calculating or determining such spread
adjustment (which may be a positive or negative value or zero) that has been
selected or recommended by the Relevant Governmental Body for Term SOFR;
provided, however, that this clause (1) shall not apply (i) to any borrowings
under the Line of Credit if a Swap Agreement is in effect with respect to all or
any portion of the Line of Credit as of the Benchmark Transition Event or Early
Opt-in Election, and (ii) to any borrowings under the Line of Credit that bear
interest at Daily One Month LIBOR;

 

(2)the sum of: (A) the alternate rate of interest that has been selected by Bank
as the replacement for the then-current Benchmark for the Corresponding Tenor
(which, without limitation, may be compounded SOFR in arrears, term SOFR, Bank’s
Prime Rate, or another benchmark selected by Bank); and (B) the applicable
spread adjustment or method for calculating or determining such spread
adjustment, (which may be a positive or negative value or zero) that has been
selected by Bank.

 

With respect to Bank’s decisions under this paragraph (2):

 

(x) if a Swap Agreement relating to a portion of the line of Credit is in effect
as of the Benchmark Transition Event or Early Opt-in Election, then Bank may
without limitation, select (i) the benchmark referenced in the Swap Agreement,
which may be the sum of a fallback rate and spread adjustment, for the entire
balance of the Line of Credit, or (ii) the benchmark referenced in the Swap
Agreement, which may be the sum of a fallback rate and spread adjustment, for
the hedged portion of the Line of Credit, and the applicable Benchmark
Replacement for the remaining non-hedged portion of the Line of Credit; and

 

(y) in the case of a replacement rate for Daily One Month LIBOR, Bank may,
without limitation, select SOFR notwithstanding the availability or feasibility
of determining a daily one month SOFR; and

 

(z) Bank’s selection of any applicable Benchmark Replacement shall give due
consideration to (i) any selection or recommendation by the Relevant
Governmental Body at such time for a replacement rate, the mechanism for
determining such a rate, the methodology or conventions applicable to such rate,
or the spread adjustment, or method for calculating or determining such spread
adjustment, for such rate, or (ii) any evolving or then-prevailing market
convention for determining a rate of interest as a replacement to the
then-current Benchmark, the methodology or conventions applicable to such rate,
or the spread adjustment, or method for calculating or determining such spread
adjustment, for such alternate rate for U.S. dollar-denominated syndicated or
bilateral credit facilities at such time.

 

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Provided, however, during any period of time that the Benchmark Replacement
would be less than zero percent (0.0%), the Benchmark Replacement shall be
deemed to be zero percent (0.0%) for the purposes of this Agreement, the Line of
Credit Note and the related Loan Documents, subject to any applicable floor rate
provision.

 

(iv)“Benchmark Replacement Conforming Changes” means any technical,
administrative or operational changes (including, without limitation, changes to
the definition of “Interest Period,” timing and frequency of determining rates
and making payments of interest, prepayment provisions and other administrative
matters) that Bank decides may be appropriate to reflect the adoption and
implementation of such Benchmark Replacement and to permit the administration
thereof by Bank.

 

(v)“Benchmark Replacement Date” means the date specified by Bank in a notice to
Borrower following a Benchmark Transition Event or Early Opt-in Election.

 

(vi)“Benchmark Transition Event” means the occurrence of one or more of the
following events with respect to the then-current Benchmark: a public statement
or publication of information by or on behalf of the Benchmark Administrator or
a regulatory supervisor for the Benchmark Administrator announcing that (A) the
Benchmark Administrator has ceased or will cease to provide the Benchmark
permanently or indefinitely or (B) the Benchmark is no longer representative of
underlying markets.

 

(vii)“Corresponding Tenor” means a tenor having approximately the same length as
the Interest Period, provided, however, that the Corresponding Tenor for Daily
One Month LIBOR shall be one day.

 

(viii)“Early Opt-in Election” means the election by Bank to declare that the
Benchmark will be replaced prior to the occurrence of a Benchmark Transition
Event and the provision by Bank of written notice of such election to Borrower
indicating that at least five (5) currently outstanding U.S. dollar-denominated
syndicated credit facilities at such time contain (as a result of amendment or
as originally executed) Term SOFR plus a spread adjustment that has been
selected or recommended by the Relevant Governmental Body.

 

(ix)“Interest Period” means, initially, the applicable LIBOR interest period,
and if a Benchmark Replacement is applicable, the tenor of the Benchmark
Replacement.

 

(x)“Relevant Governmental Body” means the Federal Reserve Board and/or the
Federal Reserve Bank of New York, or a committee officially endorsed or convened
by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any
successor thereto.

 

(xi)“SOFR” with respect to any day means the secured overnight financing rate
published for such day by the Federal Reserve Bank of New York, as the
administrator thereof, (or a successor administrator) on its website.

 

(xii)“Swap Agreement” means a swap agreement by and between Borrower and Bank or
its affiliates.

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(xiii)“Term SOFR” means the forward-looking term rate for the Corresponding
Tenor based on SOFR that has been selected or recommended by the Relevant
Governmental Body.”

 

1.6Section 5.9 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

 

“SECTION 5.9.FINANCIAL CONDITION.  Maintain Borrower's financial condition as
follows using generally accepted accounting principles consistently applied and
used consistently with prior practices (except to the extent modified by the
definitions herein):

 

(a)Liquidity. Unencumbered Liquid Assets with an aggregate fair market value not
at any time less than Ten Million and No/100 Dollars ($10,000,000.00).  As used
herein, “Unencumbered Liquid Assets” shall mean cash, cash equivalents and/or
publicly traded marketable securities acceptable to Bank in its sole discretion,
free of any lien or other encumbrance.  Retirement account assets held in a
fiduciary capacity by Borrower shall not qualify as Unencumbered Liquid Assets.

 

(b)Consolidated Total Debt/Consolidated EBITDA Ratio.  Ratio of Consolidated
Total Debt to Consolidated EBITDA not greater than 3.00 to 1.00 as of each
Fiscal Quarter end, determined on a rolling 4-quarter basis.    

 

The term “Consolidated Total Debt” as used in this Section 5.9(b) shall have the
definition given such terms in the Omaha Note Purchase Agreement (but excluding
for purposes of this Section 5.9(b) any future amendments thereto not made with
the written consent of Bank), which definitions shall survive for purposes of
this Agreement notwithstanding the termination of the Omaha Note Purchase
Agreement or the repayment in full of the Borrower’s obligations thereunder.  

 

(c)Consolidated EBITDA/Consolidated Net Interest Expense Ratio.  Ratio of
Consolidated EBITDA to Consolidated Net Interest Expense not less than 3.00 to
1.00 as of each Fiscal Quarter end, determined on a rolling 4-quarter basis.”

 

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1.7Section 6.3 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

 

“SECTION 6.3.LIENS AND OTHER INDEBTEDNESS.  Create, incur, assume or permit to
exist, nor shall any Consolidated Subsidiary create, incur, assume or permit to
exist, any lien on any asset now owned or hereafter acquired by it, and Borrower
shall not incur and shall not permit any Subsidiary to incur any indebtedness or
liabilities resulting from borrowings, loans or advances, whether secured or
unsecured, matured or unmatured, liquidated or unliquidated, joint or several,
other than any liabilities of Subsidiaries existing as of, and disclosed to Bank
prior to, the date hereof and listed on Schedule 6.3, and except for (a) 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; (b) 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 or within 18 months after the acquisition or completion of
construction thereof; (c) any lien on any specific fixed asset of any
corporation existing at the time such corporation is merged or consolidated with
or into Borrower or a Consolidated Subsidiary and not created in contemplation
of such event; (d) any lien existing on any specific fixed asset prior to the
acquisition thereof by Borrower or a Consolidated Subsidiary and not created in
contemplation of such acquisition; (e) liens securing debt owed by a Subsidiary
to Borrower; (f) any lien arising out of the refinancing, extension, renewal or
refunding of any debt secured by any lien permitted by any of the foregoing
clauses (a) through (e), provided that such debt is not secured by any
additional assets, and the amount of such debt secured by any such lien is not
increased; (g) mechanics, warehousemen, carrier, landlord and other statutory
liens which arise in the ordinary course of Borrower's or a Consolidated
Subsidiary’s business for amounts not yet due, and liens in security deposits
made in the ordinary course of Borrower's or a Consolidated Subsidiary’s
business; (h) liens which (x) are incurred in connection with the purchase of
looms, (y) secure debt consisting only of the deferred purchase price of such
looms, and no other debt, which deferred purchase price debt is non-interest
bearing and payable in no more than two (2) years from the date of purchase, and
(z) encumber only the looms so purchased, and not any other assets; (i) debt
owing to Borrower or another Subsidiary; and (j) additional unsecured debt
(other than the Line of Credit) of Borrower and its Subsidiaries; provided,
however, that the sum of (A) the aggregate amount of debt secured by liens
permitted by the foregoing clauses (a) through (h), plus (B) debt of Borrower
and its Subsidiaries permitted by clause (j) shall not exceed an aggregate
amount equal to 15% of Consolidated Net Worth.”

 

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1.8Section 6.5 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

 

“SECTION 6.5.GUARANTIES.  Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except (a) any of
the foregoing in favor of Bank, and (b) additional unsecured guaranties in
amounts not to exceed an aggregate of $2,000,000.00 at any time outstanding.”

 

1.9Schedule 6.3 to the Credit Agreement is deleted and replaced by Schedule 6.3
attached hereto.

 

2.Conditions to Effectiveness.  The effectiveness of this Amendment is subject
to the fulfillment to Bank’s satisfaction of the following conditions:

 

 

(a)

Documentation.  Bank shall have received, in form and substance satisfactory to
Bank, each of the following, duly executed:

 

(i)This Amendment;

 

(ii)

A Fourth Modification to Revolving Line of Credit Note; and

 

(iii)

Such other documentation as Bank may reasonably require in connection with this
Amendment.

 

 

(b)

Financial Condition.  There shall have been no material adverse change, as
determined by Bank, in the financial condition or business of Borrower, nor any
material decline, as determined by Bank, in the market value of any substantial
or material portion of the assets of Borrower.

 

 

(c)

Amendment Fee.  In consideration of the changes set forth herein and as a
condition to the effectiveness hereof, immediately upon signing this Amendment
Borrower shall pay to Bank a non-refundable fee of $60,000.00.

 

3.No Further Amendment.  Except as specifically provided herein, all terms and
conditions of the Credit Agreement remain in full force and effect, without
waiver or modification.  All terms defined in the Credit Agreement shall have
the same meaning when used in this Amendment.  This Amendment and the Credit
Agreement shall be read together, as one document.

 

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4.Representations and Warranties.  Borrower hereby remakes all representations
and warranties contained in the Credit Agreement and reaffirms all covenants set
forth therein.  Borrower further certifies that as of the date of this Amendment
there exists no Event of Default as defined in the Credit Agreement, nor any
condition, act or event which with the giving of notice or the passage of time
or both would constitute any such Event of Default.  Borrower acknowledges and
confirms that Bank has existing, valid first priority security interests and
liens in the collateral securing the Line of Credit and that such security
interests and liens shall secure Borrower’s obligations under the Credit
Agreement as amended by this Amendment including, without limitation, all
obligations under the Line of Credit Note and all future modifications of the
Credit Agreement, the Line of Credit Note and the other Loan Documents.

 

5.Costs.  Borrower agrees to pay all costs and expenses of the Bank in
connection with the preparation, execution and delivery of this Amendment,
including without limitation the fees and expenses of the Bank’s legal counsel.

 

6.Counterparts.  This Amendment may be executed in any number of counterparts,
each of which when executed and delivered shall be deemed to be an original, and
all of which when taken together shall constitute one and the same document.

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed, with the intention that it constitute an instrument under seal, as of
the day and year first written above.

 

 

 

 

WELLS FARGO BANK,

 

 

 

 

 

 

CULP, INC.

 

 

NATIONAL ASSOCIATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Kenneth R. Bowling

 

By:

/s/ Tim Sechrest

Name:

Kenneth R. Bowling

 

Name:

Tin Sechrest

Title:

Exec VP, CFP

 

Title:

Sr. VP

 

 

 

 

 

 

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