EXHIBIT 10.1


                  SEPARATION AGREEMENT AND WAIVER OF CLAIMS
                  -----------------------------------------

      THIS  AGREEMENT is made and entered into by and between  KENNETH M. LUDWIG
(hereinafter  referred  to as  "Employee")  and  CULP,  INC.,  a North  Carolina
corporation (hereinafter referred to as the "Company").

      THEREFORE,  in  consideration  of the mutual  agreements  and promises set
forth within this  Agreement,  the receipt and  sufficiency  of which are hereby
acknowledged, Employee and the Company agree as follows:

      1.  Consideration.  As valuable and sufficient  consideration for each and
all of the Employee's obligations and promises set forth below, the Company will
provide the following:

      (a) The Company will continue  Employee's  current salary through June 30,
2009. These payments will be made at the Company's regular monthly paydays,  and
are subject to withholding for standard statutory deductions and for any benefit
plans in which Employee  continues to participate  during the severance  period.
Employee's auto allowance will end as of December 31, 2007.

      (b) In addition to the  aforementioned  severance  pay,  Employee shall be
entitled to continue health care coverage under COBRA.  Employee may continue to
pay the regular  employee rate for such coverage until the conclusion of the pay
continuation  covered in paragraph (a) above.  Following  such period,  Employee
shall be responsible for the full premium under the Company's COBRA plan.

      (c) Vested stock options will continue to be exercisable  until  September
28, 2009,  subject to the terms of each option and the Company's policy on stock
trading and "blackout periods".

      (d)  Under   the   Deferred   Compensation   Plan,   Employee's   elective
contributions  for plan year 2007 are binding  and will  continue to be deducted
from Employee's pay. Employee will have no option to have elective contributions
deducted  for plan year 2008.  Employee  will be entitled to a  distribution  of
Employee's account balance after June 30, 2008.

      (e)  Employee  will be  entitled  to receive a bonus  under the  Company's
Management  Incentive Plan,  after the end of the Company's  current fiscal year
and in  accordance  with the  provisions  of the  Management  Incentive  Plan as
approved by the Company's board of directors on April 26, 2007,  equal to 66.67%
of the bonus amount that Employee would  otherwise have been entitled to receive
under such Plan if he had  remained  employed by the Company  through the end of
the current fiscal year.

      (f) Outplacement  assistance for 18 months from the date of termination of
employment  will be provided  through an  outplacement  services  firm  mutually
agreeable to Company and Employee.

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      (g) Employee's termination shall be treated as a resignation.

      2. Prior  Legal  Obligations.  The  parties  agree that the Company has no
prior legal obligation to make the payments or provide the benefits agreed to in
paragraph 1.

      3. Waiver of Claims.  In exchange for the Company's  agreement to make the
payments and provide the benefits set forth in paragraph 1, Employee  agrees not
to make any claims or demands or to commence any type of legal action (including
administrative  charges or  lawsuits)  against the Company (as well as its Board
members,  officers,  officials,  employees and agents) or any related companies,
subsidiaries,   successors,  or  assigns  on  matters  arising  from  Employee's
employment  with or  termination  from the Company.  This  includes,  but is not
limited to a release of any and all rights,  claims, or causes of action arising
under any state or federal  constitution,  statute,  law, rule,  regulation,  or
common-law  principle  of tort,  contract,  or  equity.  This  waiver  of claims
specifically   includes  but  is  not  limited  to  any  action  under  the  Age
Discrimination  in Employment Act of 1967, 29 U.S.C sec. 621, et seq.; Title VII
of the Civil Rights Act of 1964, as amended,  42 U.S.C. sec. 2000e, et seq.; the
Americans with  Disabilities  Act of 1990, 42 U.S.C.  sec.  12101,  et seq., the
Family and Medical Leave Act; the Equal Pay Act; the Fair Labor  Standards  Act;
the Sarbanes-Oxley Act, all as amended,  or any other federal,  state, county or
municipal  statute or  ordinance  relating to any  condition  of  employment  or
employment discrimination.

      Employee  also releases the Company and each  "employee  benefit plan" (as
that term is defined in Section 3(3) of the Employee  Retirement Income Security
Act of 1974, as amended) sponsored, contributed to or maintained by the Company,
and each  insurer,  administrator,  trustee and  fiduciary of any such  employee
benefit plan, from any and all claims,  actions,  demands and suits,  other than
claims for benefits in the ordinary course.

      By entering  into this  Agreement,  Employee  does not waive any rights or
claims that  Employee  might have which  arise as a result of any  conduct  that
occurs after the date this Agreement is signed by the parties.

      4. Full  Cooperation.  Employee agrees that no other person (including but
not  limited  to  Employee's   attorney,   heirs,   executors,   administrators,
successors,  and assigns)  may assert any claim that  Employee has or might have
against the Company and further  agrees that Employee will fully  cooperate with
the  Company  in  seeking  dismissal  of any such  claim that might be raised on
Employee's behalf.  Additionally,  Employee  acknowledges that Employee may have
knowledge of facts relevant to a legal action or claim against the Company,  and
that it may be  necessary to provide  information  as a witness  regarding  that
action or claim.  Employee agrees to cooperate fully in providing information in
Employee's  knowledge  at such  times  and at such  places  as the  Company  may
reasonably request.

      5.  Termination  of Employment.  Employee and the Company hereby  mutually
agree  that  their  employment  relationship  shall  terminate  effective  as of
December 31, 2007, and they further agree that the relationship  created by this
Agreement is purely contractual and that no employment relationship is intended,
or should be inferred,  from the performance of the Company's  obligations under
this Agreement.

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<PAGE>

      6.  Return of Company  Property.  All  records,  files,  lists,  including
computer-generated  lists,  drawings,  notes,  notebooks,  letters,  blueprints,
manuals,  sketches,  specifications,  formulas,  financial documents,  sales and
business plans, customer lists, lists of customer contacts, pricing information,
computers,  software, cellular phones, credit cards, keys, equipment and similar
items  relating to the Company's  business,  together with any other property of
the Company or property which the Employee  received in the course of employment
with the Company, shall be returned to the Company immediately. Employee further
represents that Employee will not copy or cause to be copied, print out or cause
to be printed out any software, documents or other materials originating with or
belonging to the Company.

      7.  Performance.  Employee  understands  and  agrees  that  the  Company's
obligation  to perform  under this  Agreement  is  conditioned  upon  Employee's
covenants and promises to the Company as set forth herein. In the event Employee
breaches  any such  covenants  and  promises,  or causes any such  covenants  or
promises  to be  breached,  the  Company's  obligations  to  perform  under this
Agreement shall automatically  terminate,  and the Company shall have no further
liability  or  obligation  to  Employee.  Alternatively,  the  Company  may seek
injunctive relief to enforce the provisions of this Agreement.

      8.  Non-admission  of  Liability.  It is understood  that the Company,  by
entering  into this  Agreement,  in no way admits any  liability to any party or
that it has in any way  violated  any state or  federal  law or any other law or
regulation.

      9. Confidentiality and Non-disparagement.  Employee agrees to maintain the
confidentiality of this Agreement by not disclosing its contents,  including the
amount of the monetary payments, except to Employee's legal or tax counsel; in a
privileged  communication;  or as otherwise required by law. Employee agrees not
to make any statements to the Company's employees,  customers or suppliers or to
any  public or media  source,  whether  written  or oral,  regarding  Employee's
departure from the Company's employment except as may be approved by the Company
in advance.  Employee further agrees not to make any statement (including to any
media source, or to the Company's suppliers, customers or employees) or take any
action that would  disrupt,  impair,  embarrass,  harm, or adversely  affect the
Company,  its  affiliates or any of their  employees,  officers,  directors,  or
customers,  or place the Company,  its  affiliates  or such  individuals  in any
negative  light.  Employee  hereby  recognizes that any breach of this paragraph
would cause the Company irreparable injury and damage, the amount of which would
be difficult to determine. In the event the Company establishes a breach of this
paragraph,  Employee  agrees to forfeit the  payment of any unpaid or  unaccrued
benefits  under the  Agreement.  Employee  also agrees to pay any legal fees and
associated  costs incurred by the Company in enforcing this Agreement  and/or in
seeking any relief or damages.

      10.  Entire  Agreement;  Modification.  Employee  affirms  that  the  only
consideration for the signing of this Agreement is set forth in paragraph 1, and
that no other  promises or assurances of any kind have been made to the Employee
by the Company, its attorneys, or any other person as an inducement for Employee
to sign this Agreement.  This Agreement can be changed only by written amendment
signed by both parties.

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<PAGE>

      11. Complete Defense. The parties agree that this Agreement may be treated
as a complete defense to any legal, equitable, or administrative action that may
be brought,  instituted,  or taken by Employee, or on Employee's behalf, against
the  Company  and  shall  forever  be a  complete  bar  to the  commencement  or
prosecution of any claim, demand, lawsuit,  charge, or other legal proceeding of
any kind against the Company,  any related companies and  subsidiaries,  and the
directors,  officers, employees and agents of them, including any successors and
assigns,  relating  the  Employee's  employment  with  the  Company  and/or  the
termination of Employee's employment with the Company.

      12. Successors,  Assigns, and Representatives.  This Agreement shall inure
to and be  binding  upon the  parties  hereto,  their  respective  heirs,  legal
representatives, successors, and assigns.

      13.  Governing  Law.  This  Agreement  shall be governed and  construed in
accordance  with the laws of the  state of  North  Carolina  and any  applicable
federal laws.

      14.  Partial  Invalidity.  The parties  agree that the  provisions of this
Agreement shall be deemed severable and that the invalidity or  unenforceability
of any provision  shall not affect the validity or  enforceability  of the other
portions or provisions. Such provisions shall be appropriately limited and given
effect to the extent that they may be enforceable.

      15. Revocation. Employee understands that this Agreement may be revoked by
Employee within seven (7) days after the signing of the Agreement. To revoke the
Agreement, Employee understands that Employee must notify the Company in writing
that  Employee  no longer  wishes to be bound by this  Agreement  and desires to
revoke the Agreement immediately.  This Agreement shall not become effective and
enforceable  until  seven (7) days  after it has been  signed by  Employee.  All
correspondence  to the Company  regarding  this  Agreement and any revocation of
this  Agreement  should be  addressed  to  Franklin N.  Saxon,  Chief  Executive
Officer, Culp, Inc., P.O. Box 2686, High Point, N.C. 27261-2686.

      16.  Employee  affirms  that  Employee  has  carefully  read  this  entire
Separation  Agreement  and  Waiver of Claims.  Employee  attests  that  Employee
possesses  sufficient education and/or experience to fully understand the extent
and impact of its provisions.

      Employee  attests that  Employee  has been  afforded  the  opportunity  to
consider this Agreement for a period of twenty-one (21) days.  Employee  further
attests that Employee has been advised by the Company to discuss this  Agreement
with an attorney of Employee's choice.

      Employee  affirms  that  Employee  is  fully  competent  to  execute  this
Separation  Agreement and Waiver of Claims and that Employee does so voluntarily
and without any coercion,  undue influence,  threat, or intimidation of any kind
or type.

      THE  UNDERSIGNED  HEREBY STATE THAT THEY HAVE CAREFULLY READ THE FOREGOING
SEPARATION AGREEMENT AND WAIVER OF CLAIMS AND KNOW THE CONTENTS THEREOF AND SIGN
THE SAME OF THEIR OWN FREE ACT.


                       (Signatures on the Following Page)

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<PAGE>

EMPLOYEE:


/s/ Kenneth M. Ludwig                     December 11, 2007
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Kenneth M. Ludwig                         Date



FOR THE COMPANY:

/s/ Franklin N. Saxon                     December 11, 2007
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Franklin N. Saxon                         Date







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