Exhibit 10.3

 

SEVENTH AMENDMENT TO CREDIT AGREEMENT

 

THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as
of June 30, 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, by a Sixth Amendment to Credit
Agreement between Borrower and Bank dated as of March 27, 2020, 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.

 

1.1A new defined term, “Modification Period”, is hereby added in appropriate
alphabetical order to Article I of the Credit Agreement, which term shall be
defined as follows:

 

“Modification Period” means a period of time commencing on June 30, 2020 and
terminating upon the Rate Determination Date next following the end of
Borrower’s fourth Fiscal Quarter of 2021 (which Fiscal Quarter end is presumed
to be May 2, 2021).”

 

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1.2The definition of “Applicable Margin” set forth in Article I of the Credit
Agreement is amended to provide that, during the Modification Period, the
Applicable Margin shall be as set forth below:

 

Price

Level

Consolidated Total Debt

to Consolidated EBITDA Ratio

Applicable Margin

I

Less than 0.75 to 1.00

1.60%

II

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

2.05%

III

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

2.50%

IV

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

3.00%

 

For avoidance of doubt, upon the expiration of the Modification Period, the
provisions of this Section 1.2 shall automatically terminate and be of no
further force or effect, and the manner of determining the Applicable Margin
shall revert to the manner of such determination in effect immediately prior to
the Modification Period.

 

1.3The definition of “Capital Stock” set forth in Article I of the Credit
Agreement is amended and restated in its entirety to read as follows:

 

 

“(c)

“Capital Stock” means any capital stock of Borrower or any Consolidated
Subsidiary (to the extent issued to a Person other than Borrower), whether
common or preferred, that is not redeemable at the option of the holder.”

 

 

1.4Section 5.9(b) of the Credit Agreement is hereby amended to provide that,
during the Modification Period, the ratio of Consolidated Total Debt to
Consolidated EBITDA shall be determined on the following basis, instead of on a
rolling 4-quarter basis:

 

For the Fiscal Quarter ending nearest to July 31, 2020 (i.e., first Fiscal
Quarter of 2021), the ratio shall be determined using EBITDA from the first,
second and third Fiscal Quarters of 2020 and the first Fiscal Quarter of 2021.

 

For the Fiscal Quarter ending nearest to October 31, 2020 (i.e., second Fiscal
Quarter of 2021), the ratio shall be determined using EBITDA from the second and
third Fiscal Quarters of 2020 and the first and second Fiscal Quarters of 2021.

 

For the Fiscal Quarter ending nearest to January 31, 2021 (i.e., third Fiscal
Quarter of 2021), the ratio shall be determined using EBITDA from the third
Fiscal Quarter of 2020 and the first, second and third Fiscal Quarters of 2021.

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For the Fiscal Quarter ending nearest to April 30, 2021 (i.e., fourth Fiscal
Quarter of 2021), the ratio shall be determined using EBITDA from the first,
second, third and fourth Fiscal Quarters of 2021.

 

For avoidance of doubt, upon the expiration of the Modification Period, the
provisions of this Section 1.4 shall automatically terminate and be of no
further force or effect, and the manner of determining the ratio of Consolidated
Total Debt to Consolidated EBITDA shall revert to the manner of such
determination in effect immediately prior to the Modification Period.

 

1.5Section 6.2 of the Credit Agreement is amended and restated in its entirety
to read as follows:

 

“SECTION 6.2.    CAPITAL EXPENDITURES.  Make, and will not permit any of its
Subsidiaries to make, capital expenditures in excess of (i) $10,000,000 in the
aggregate (combined for Borrower and its Subsidiaries) during Fiscal Year 2021,
and (ii) $15,000,000.00 in the aggregate (combined for Borrower and its
Subsidiaries) during any Fiscal Year thereafter.”

 

1.6Section 6.3 of the Credit Agreement is hereby amended by deleting the words
“shall not exceed an aggregate amount equal to 15% of Consolidated Net Worth” at
the end of Section 6.3 and by inserting in the place and stead thereof the words
“shall not exceed an aggregate amount equal to 5% of Consolidated Net Worth.”

 

1.7A new Section 6.10 is hereby added to the Credit Agreement, which shall read
as follows:

 

“SECTION 6.10. RESTRICTED PAYMENTS.  During the Modification Period, declare or
pay any dividend or distribution either in cash, stock or any other property on
Borrower's stock now or hereafter outstanding, nor redeem, retire, repurchase or
otherwise acquire any shares of any class of Borrower's stock now or hereafter
outstanding; provided however, that Borrower may (i) declare and pay dividends
or make distributions solely in shares of its Capital Stock (or options,
warrants or other rights to acquire its Capital Stock) and (ii) declare and pay
cash dividends or make distributions to its shareholders and may redeem, retire,
repurchase or otherwise acquire any shares of any class of Borrower's stock, so
long as the aggregate amount paid does not exceed $10,000,000.00 during the
Modification Period.  Borrower shall provide to Bank, upon request, any
documentation required by Bank to substantiate the appropriateness of amounts
paid or to be paid. For avoidance of doubt, upon the expiration of the
Modification Period, the provisions of this Section 6.10 shall automatically
terminate and be of no further force or effect.”

 

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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; and

 

(ii)

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 $15,000.00.  Borrower hereby
authorizes Bank to debit Borrower’s account number xxxxxxxxx4183 with Bank for
the payment of such fee.

 

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.

 

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.

 

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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.

 

 

 

 

 

 

 

 

 

 

 

 

 

[Remainder of Page Intentionally Left Blank]

 

 

 

 

 

 

 

 

 

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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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