Exhibit 10.1
 
 
SECOND AMENDMENT TO CREDIT AGREEMENT

 
 
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as
of, March 10th, 2016 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, 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.
 
1.1         The following amendments are hereby made to Article I
(“Definitions”) of the Credit Agreement:
 
 
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(a)         The definition of “Applicable Margin” is hereby amended and restated
in its entirety to read as follows:
 
“(a)  “Applicable Margin” shall be shall be 1.45% until the first Rate
Determination Date (hereafter defined) after March 1, 2016, and as of and after
such first Rate Determination Date after March 1, 2016 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%

 
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 III 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.”
 
 
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(b)           The definition of “LIBOR” is hereby amended by adding the
following sentence at the end thereof: “Notwithstanding anything in this
Agreement to the contrary, if LIBOR determined as provided above would be less
than zero percent (0.0%), then LIBOR shall be deemed to be zero percent (0.0%).”
 
1.2         Section 2.1(a) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
 
“(a)           Line of Credit.  Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including August 15, 2018, not to exceed at any time the aggregate
principal amount of THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00) ("Line of
Credit"), the proceeds of which shall be used to provide working capital and for
general corporate purposes; provided, however, that no portion of the proceeds
of the Line of Credit 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
corporation to be acquired, and the provisions of Section 6.6 would not be
violated, (ii) directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any Margin Stock (as
hereinafter defined), or (iii) for any purpose in violation of any applicable
law or regulation.  Borrower's obligation to repay advances under the Line of
Credit shall be evidenced by a promissory note dated as of the date hereof (as
amended from time to time, the "Line of Credit Note"), all terms of which are
incorporated herein by this reference.”
 
 
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1.3         Section 5.9(a) of the Credit Agreement is hereby amended and
restated in its entirety to read as follows:
 
“(a)           Liquidity.  Unencumbered Liquid Assets with an aggregate fair
market value not at any time less than Twenty Million and No/100 Dollars
($20,000,000.00).  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.”
 
1.4.        Section 5.9(c) of the Credit Agreement is hereby deleted.
 
1.5         Section 6.2 of the Credit Agreement is hereby 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 $15,000,000.00 in the
aggregate (combined for Borrower and its Subsidiaries) during any Fiscal Year.”
 
1.6.        The Compliance Checklist attached to the Form of Compliance
Certificate attached at Exhibit A to the Credit Agreement is hereby deleted and
replaced by the Compliance Checklist attached as Exhibit A to this Amendment.
 
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 Second Modification to Revolving Line of Credit Note;

 
 
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(iii)
A Pledge Agreement by Borrower of not less than 65% of the voting stock of Culp
International Holdings Ltd., an exempted company incorporated with limited
liability under the laws of the Cayman Islands, and a share transfer certificate
executed in blank; and

 
 
(iv)
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.

 
 
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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.
 
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
(including Lender’s North Carolina counsel and Cayman Islands local 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.
 
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.
 
 

CULP, INC. WELLS FARGO BANK,       NATIONAL ASSOCIATION         By: /s/ Kenneth
R. Bowling By: /s/ Timothy Sechrest     Name: Kenneth R. Bowling Name: Timothy
Sechrest     Title: Chief Financial Officer Title: Senior Vice President

 
 
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