EXHIBIT 10.1
 

 
RESTRICTED STOCK UNIT AGREEMENT
 
THIS RESTRICTED STOCK UNIT AGREEMENT (the “Agreement”), dated as of
__________________, is between CULP, INC., a North Carolina corporation (the
“Corporation”), and ____________________ (“Recipient”).
 
Background Statement
 
The Corporation desires to grant to Recipient Restricted Stock Units (the
“Units”) pursuant to the Culp, Inc. 2015 Equity Incentive Plan (the “Plan”). 
Capitalized terms used but not defined in this Agreement shall have the meanings
given to them in the Plan.
 
STATEMENT OF AGREEMENT
 
NOW, THEREFORE, the parties hereby agree as follows:
 
Section 1.                          Grant of Units.  The Corporation hereby
grants to Recipient _________ Units.  Each Unit shall entitle Recipient to
receive, upon vesting thereof in accordance with this Agreement and the Plan, up
to ________ shares of common stock, par value $0.05 per share, of the
Corporation (“Common Stock”).  Except as permitted by the Plan, the Units may
not be assigned, pledged, hypothecated or transferred in any manner.  Recipient
shall not have, with respect to any Units, any rights of a shareholder of the
Corporation, including without limitation any right to vote as a shareholder of
the Corporation or any right to receive distributions from the Corporation in
respect of the Units.
 
Section 2.                          Vesting.  Except as may otherwise be
provided in the Plan or this Agreement, the Units shall vest in the amounts set
forth below, depending upon the Cumulative Operating Income of the Corporation,
as follows:
 
Level
Cumulative
Operating Income
Number of Shares
Vested
     
Below Entry Point (Threshold)
Below $___________
0
Entry Point (Threshold)
$___________
______
Target
$___________
______
Maximum
$___________
______
     

For Cumulative Operating Income amounts that are between the levels shown above,
a pro rata number of shares will vest, calculated on a straight line basis.
 
The number of Units and shares vested shall further be subject to the TSR
Moderator provisions contained in this paragraph.  The number of Shares to vest
as determined above shall be multiplied by the ratio of (1) the Total
Shareholder Return of the Corporation’s Common Stock during the Performance
Period divided by (2) the Total Shareholder Return of the Russell 2000 Index
during the Performance Period; provided, however, that in no event will the
provisions of this paragraph result in vesting of more than _____ shares per
Unit.

--------------------------------------------------------------------------------

Notwithstanding the foregoing, all unvested Units (and the number of shares at
the Target level set forth above) shall immediately vest upon:
 
(a)               the termination by the Corporation of the employment of
Recipient without Cause or by reason of the death or Disability of Recipient; or
 
(b)              Recipient’s employment is terminated by the Corporation in
anticipation of a Change of Control, or
 
(c)               Recipient is employed by the Company or an affiliate thereof
at the time a Change of Control occurs, and at any time during the three-year
period following such Change of Control (provided that the Units granted
hereunder and related shares have not otherwise vested),
 
(i)          Employee’s employment is terminated by the Corporation or an
affiliate thereof for any reason other than for death, Disability or Cause, or
 
(ii)         Employee terminates his employment for Good Reason within one year
following the initial existence of the conditions giving rise to such Good
Reason.
 
Section 3.                          Definitions.  For purposes of this
Agreement, the following terms shall have the meanings indicated below:
 
“Cause” shall mean (i) the commission by Recipient of a felony (or crime
involving moral turpitude); (ii) theft, conversion, embezzlement or
misappropriation by Recipient of funds or other assets of the Corporation or its
Subsidiaries or any other act of fraud with respect to the Corporation or its
Subsidiaries (including without limitation the acceptance of bribes or kickbacks
or other acts of self-dealing); (iii) intentional, grossly negligent or unlawful
misconduct by Recipient that causes significant harm to the Corporation or its
Subsidiaries; or (iv) repeated instances of intoxication with alcohol or drugs
while conducting business during regular business hours.
 
“Change of Control” shall have the meaning given to such term in the Plan.  In
addition, for an award that vests according to Cumulative Operating Income of a
Division, “Change of Control” shall be deemed to have occurred upon consummation
of a sale of all or substantially all of the assets of such Division by the
Corporation to an unaffiliated third party.
 
“Cumulative Operating Income” shall mean the total Operating Income of the
Corporation, excluding extraordinary and non-recurring items including
restructuring and related charges, goodwill or fixed asset impairment charges,
prepayment fees on debt, other extraordinary charges or credits, and the effects
of acquisitions, for the three fiscal years beginning _____________ and ending
_____________ (the “Performance Period”).

--------------------------------------------------------------------------------

“Disability” shall have the meaning given to such term in the primary disability
benefit plan of the Corporation in which Recipient participates.  In the absence
of any such plan, “Disability” shall mean any physical or mental impairment that
renders Recipient unable to perform the essential functions of his job with the
Corporation and its Subsidiaries for a period of at least 120 days, either with
or without reasonable accommodation.  At the Corporation’s request, Recipient
shall submit to an examination by a duly licensed physician who is mutually
acceptable to the Corporation and Recipient for the purpose of ascertaining the
existence of a Disability, and shall authorize the physician to release the
results of Recipient’s examination to the Corporation.
 
“Good Reason” shall mean, without Employee’s express written consent, the
existence of any of the following conditions unless such conditions are fully
corrected within thirty days after Employee notifies the Company of the
existence of such conditions as hereinafter provided:

(a)               a material diminution in Employee’s authority, duties or
responsibilities;
 
(b)              a material diminution in the authority, duties or
responsibilities of the supervisor to whom Employee is required to report,
including a requirement that Employee report to a Company officer or employee
instead of reporting directly to the Company’s board of directors;
 
(c)               a material diminution in Employee’s Base Salary, other than as
a result of across-the-board salary reductions similarly affecting all
management personnel of the Company; or
 
(d)              a material change in the geographic location at which Employee
must regularly perform services for the Company.
 
Employee shall notify the Company that he believes that one or more of the
conditions described above exists, and of his intention to terminate employment
for Good Reason as a result thereof, within sixty days after the time that he
gains knowledge of such conditions.  Employee shall not deliver a notice of
termination of employment for Good Reason until thirty days after he delivers
the notice described in the preceding sentence, and Employee may do so only if
the conditions described in such notice have not been fully corrected by the
Company.
 
“Operating Income” shall mean operating income as calculated and disclosed on
the Corporation’s financial statements for the fiscal years in question.
 
“Performance Period” shall mean the period over which Cumulative Operating
Income is measured, as set forth in the definition of Cumulative Operating
Income above.
 
“Russell 2000 Index” shall mean the stock index of that name as published by
FTSE Russell and the Frank Russell Company.  If the Russell 2000 Index ceases to
be published during the Performance Period or otherwise becomes unavailable, the
Russell 2000 Index shall mean a similar index or measurement of small
capitalization stocks, as selected by the Compensation Committee of the
Corporation’s board of directors.

--------------------------------------------------------------------------------

“Total Shareholder Return” (TSR) shall mean the total value at the end of a
specified period of a hypothetical $100.00 investment, made at the beginning of
the specified period, in a stock or index, including increases in trading value
and all dividends paid during the specified period of time.
 
Section 4.                          Settlement.
 
(a)               As soon as reasonably practicable following a determination by
the Corporation that all or part of the Units have vested pursuant to the terms
of this Agreement, the Corporation shall issue as provided in 4(b) below, shares
of Common Stock with respect to all such Units that have vested.  Such shares of
Common Stock shall not be treated as issued and outstanding until such shares
have been issued by the Corporation in accordance with all applicable laws and
the Corporation’s bylaws and articles of incorporation.  Any certificate(s)
evidencing shares of Common Stock shall bear such legends as the Corporation
shall determine to be necessary to comply with all laws, including all
applicable federal and state securities laws.  All such shares of Common Stock
issued pursuant to this Agreement shall be fully paid and nonassessable.
 
(b)              Such shares shall be issued as follows:
 
(i)          _________% of such shares (rounded to the nearest whole share)
shall be issued directly to the Recipient; and
 
(ii)         _________% of such shares (rounded to the nearest whole share) to
Recipient’s Account under the Culp, Inc. Deferred Compensation Plan for Certain
Key Employees (“Deferred Compensation Plan”), to be held and administered in
accordance with the terms and conditions of the Deferred Compensation Plan and
such other terms and conditions as the Corporation may establish in order to
comply with legal requirements or otherwise.  Recipient understands and agrees
that Recipient must also enter this election in the enrollment website for the
Deferred Compensation Plan, in accordance with the terms of such plan.  If such
election is not so entered by Recipient within 30 days from the date of this
Agreement, the deferral election in this subparagraph (ii) will be null and
void, and 100% of the shares of Common Stock to be distributed hereunder will be
issued directly to Recipient upon vesting under subparagraph (i) above,
notwithstanding the percentage shown in subparagraph (i).
 
Section 5.                          Forfeiture.  All Units that do not vest
pursuant to Section 2 shall automatically be cancelled and forfeited by
Recipient effective as of the earlier to occur of (a) the first day after the
end of the Performance Period (to the extent that Cumulative Operating Income
for the Corporation is not sufficient to cause such Units to vest pursuant to
the terms of this Agreement), (b) the termination by Recipient of his employment
with the Corporation or its Subsidiaries for any reason or (c) the termination
by the Corporation of Recipient’s employment with the Corporation or its
Subsidiaries for Cause (each such event being referred to herein as a
“Forfeiture Event”).  Upon the occurrence of a Forfeiture Event, all unvested
Units shall automatically, without further action by the Corporation or
Recipient, be cancelled and forfeited.

--------------------------------------------------------------------------------

Section 6.                          Tax Matters.
 
(a)               Recipient shall promptly pay to the Corporation all federal,
state and local income, social security and payroll taxes of any kind required
by law to be withheld with respect to the vesting of any Units and the issuance
of shares of Common Stock in respect thereof.  Subject to the approval of the
Committee, Recipient may elect to satisfy this obligation by having the
Corporation withhold shares of Common Stock that would otherwise be issued to
Recipient with respect to any Units that have vested, which shares of Common
Stock shall have a Fair Market Value (as of the date that the amount of the
withholding requirement is to be determined) equal to the amount of such
withholding requirement.  If Recipient fails to make such payments as required
(whether in cash or having shares of Common Stock withheld), the Corporation
shall, to the extent permitted by law, have the right to deduct from any payment
of any kind otherwise due to Recipient all federal, state and local income,
social security and payroll taxes of any kind required by law to be withheld
with respect to the vesting of Units and the issuance of shares of Common Stock
in respect thereof.
 
(b)              Notwithstanding anything in this Agreement to the contrary, if
a Change of Control occurs and if Recipient is entitled under any agreement or
arrangement (including, without limitation, this Agreement) to receive
compensation that would constitute a parachute payment (including, without
limitation, the vesting of any rights) within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”) but for the operation of
this sentence, then the amount of all such payments shall be reduced, as
determined by the Corporation, to the extent necessary to cause the aggregate
present value of all payments in the nature of compensation to Recipient that
are contingent on a change in the ownership or effective control of the
Corporation, or in the ownership of a substantial portion of the assets of the
Corporation, not to exceed 2.99 times Recipient’s “base amount,” all within the
meaning of Section 280G of the Code and the regulations promulgated thereunder. 
The parties intend for the immediately preceding sentence to be interpreted and
applied so as to prevent Recipient from receiving, with respect to a Change of
Control, an excess parachute payment within the meaning of Section 280G of the
Code.
 
Section 7.                          Clawback.  If the Corporation’s reported
financial or operating results become subject to a material negative
restatement, the Compensation Committee (the “Committee”) of the Corporation’s
board of directors may require the Recipient to pay to the Corporation an amount
corresponding to each award to the Recipient under this Agreement, or otherwise
return such Units or Common Stock, that the Committee determines would not have
been vested or paid if the Corporation’s results as originally published had
been equal to the Corporation’s results as subsequently restated; provided that
any requirement or claim under this Section must be made, if at all, within five
years after the date the amount claimed was originally vested or paid, whichever
is later.

--------------------------------------------------------------------------------

In the alternative, the Committee may require Recipient to repay or return
compensation awarded hereunder pursuant to such rules as may be adopted from
time to time pursuant to Section 954 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, to the extent applicable.  By acceptance of any award
or Units hereunder, Recipient expressly acknowledges and agrees that any and all
Units or Common Stock, as well as the equivalent cash value thereof with respect
to any and all such Units or Common Stock, that have become vested, exercised,
free of restriction or otherwise released to and/or monetized by or for the
benefit of the Recipient or any transferee or assignee thereof (collectively,
the “Award-Equivalent Value”), are and will be fully subject to the terms of any
policy regarding repayment, recoupment or clawback of compensation now or
hereafter adopted by the Corporation in response to the requirements of the
Dodd-Frank Wall Street Reform and Consumer Protection Act, rulemaking of the
Securities and Exchange Commission or otherwise.  Recipient acknowledges and
agrees that any such policy will apply to any and all Units or Common Stock, and
Award-Equivalent Value in accordance with its terms, whether retroactively or
prospectively, and agrees to cooperate fully with the Corporation to facilitate
the recovery of any Units or Common Stock and/or Award-Equivalent Value that the
Committee determines in its sole discretion is required to be recovered pursuant
to the terms of such policy.
 
The obligations of Recipient to make payments or return Common Stock under this
Section are independent of any involvement by such Recipient in events that led
to the restatement.  The provisions of this Section are in addition to, not in
lieu of, any remedies that the Corporation may have against any persons whose
misconduct caused or contributed to a need to restate the Corporation’s reported
results.
 
Section 8.                          Miscellaneous.
 
(a)               Governing Law.  This Agreement shall be construed,
administered and governed in all respects under and by the applicable internal
laws of the State of North Carolina, without giving effect to the principles of
conflicts of laws thereof.
 
(b)              Entire Agreement; Amendment and Waiver.  This Agreement and the
Units granted hereunder shall be subject to the terms of the Plan, which hereby
is incorporated into this Agreement as though set forth in full herein. 
Recipient hereby acknowledges receipt of a copy of the Plan.  This Agreement and
the Plan reflect the entire agreement between the parties hereto and supersede
any prior or contemporaneous written or oral understanding or agreement
regarding the subject matter hereof.  This Agreement may not be modified,
amended, supplemented or waived except by a writing signed by the parties
hereto, and such writing must refer specifically to this Agreement.
 
(c)              Assignment; Binding Effect.  This Agreement, as amended from
time to time, shall be binding upon, inure to the benefit of and be enforceable
by the heirs, successors and assigns of the parties hereto; provided, however,
that this provision shall not permit any assignment in contravention of the
terms contained elsewhere herein.
 
(d)              No Right to Employment.  Nothing in this Agreement shall confer
on Recipient any right to continue in the employ of the Corporation or any of
its Subsidiaries.

--------------------------------------------------------------------------------

(e)               Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Delivery of an executed
counterpart of this Agreement by facsimile or other electronic device shall be
equally as effective as delivery of an original executed counterpart of this
Agreement.  Any party delivering an executed counterpart of this Agreement by
facsimile or other electronic device shall also deliver an original executed
counterpart of this Agreement, but the failure to deliver an original executed
counterpart of this Agreement shall not affect the validity, enforceability and
binding effect of this Agreement.
 
(f)               Notices.  Any notice hereunder to the Corporation shall be
addressed to the Corporation’s principal executive office, Attention:
Compensation Committee, and any notice hereunder to Recipient shall be addressed
to Recipient at his last address in the records of the Corporation, subject to
the right of either party to designate at any time hereafter in writing a
different address.  Any notice shall be deemed to have been given when delivered
personally, one (1) day after dispatch if sent by reputable overnight courier,
fees prepaid, or three (3) days following mailing if sent by registered mail,
return receipt requested, postage prepaid and addressed as set forth above.
 
[Signature page is the next page.]

--------------------------------------------------------------------------------

 
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.
 
 
CULP, INC.,
 
a North Carolina corporation
 
 
 
 
 
By:
 
 
 
 
Name:
 
 
 
Title:
 
 
 
 
 
 
 
 
 
 
RECIPIENT