AMENDMENT AND AGREEMENT
This Amendment and Agreement is entered into as of the 14th day of
December, 1994, by and between CULP, INC., ROSSVILLE INVESTMENTS, INC.,
ROSSVILLE COMPANIES, INC., CHROMATEX, INC., ROSSVILLE VELOURS, INC. and
RDC, INC.
The purpose of this agreement is to resolve certain items that have
arisen out of the Asset Purchase Agreement (the "Agreement") by and between
Culp, Inc. ("Culp"), Rossville Companies, Inc., Chromatex, Inc.., Rossville
Velours, Inc. and A & E Leasing, Inc. (now known as Rossville Investments,
Inc., and herein referred to as "Rossville") dated October 13, 1993.
Capitalized terms not defined herein shall have the same meaning as that
given to such terms in the Agreement unless the contest requires otherwise.
Pursuant to the Agreement, Culp has delivered the Buyer Note to
Rossville in the original principal amount of $9,632,724. The principal
amount of the Buyer Note is subject to adjustment pursuant to the terms of
the Agreement, and the parties hereto have reached further agreements about
the Buyer Note.
1. Section 1.7 of the Agreement provides that the parties shall
agree on total amount of Returns and Uncollected Accounts and shall make an
adjustment to the Buyer Note after comparing the amount of Returns and
Uncollected Accounts to the reserves for such items on the Closing Date
Balance Sheet. The parties have agreed that the total amount of Returns
and Uncollected Accounts exceeds the reserves on the Closing Date Balance
Sheet by $58,537, and
therefore the principal amount of the Buyer Note shall be reduced by
$58,537 pursuant to Section 1.7(c)(ii) of the Agreement.
2. Section 7.2(c) provides that the principal amount of the Buyer
Note will be reduced by the amount of expenses incurred by the parties to
address the matters described in that Section, subject to a $100,000
maximum reduction. To date, Rossville has incurred $53,825 to address
matters described in Section 7.2(c), and Culp has incurred $21,126 in
expenses to address such matters. Further, the parties have agreed that at
least $40,000 in additional expenditures will be required on account of
these matters. Therefore, the principal amount of the Buyer Note will be
reduced by $46,125 ($100,000 less the amount of expenses paid directly by
Rossville) pursuant to Section 7.2(c) of the Agreement. Any further claims
or expenditures that would have reduced the amount of the Buyer Note under
Section 7.2(c) but for the $100,000 limit contained in Section 7.2(c) will,
to the extent such claims or expenses relate to matters also covered by
Section 7.2(a), be subject to the $50,000 "basket" provided in Section
7.2(a) before any further reductions in the amount of the Buyer Note are
made.
3. After the purchase of certain assets by Culp from Rossville and
its affiliates pursuant to the Agreement, an account payable in the amount
of $4,415 by Rossville to Culp was created because of direct payments into
Rossville's bank accounts of receivables that were purchased by Culp. For
this reason, the principal amount of the Buyer Note will be reduced by
$4,415 in payment of this account owned by Rossville to Culp.
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4. Pursuant to the Agreement, Culp made certain payments on behalf
of Rossville to pay amounts due to factors owed by Rossville and its
affiliates. The payment made to BNY Financial Corporation was insufficient
because of late payment charges, and Culp was charged $4,335 on account of
those charges. The late payment charges paid by Culp will be reimbursed to
Culp by Rossville through a reduction in the Buyer Note, and therefore the
principal amount of the Buyer Note will be reduced by $4,335.
5. The Buyer Note provides that if the principal amount thereof is
decreased because Returns and Uncollected Accounts exceed the reserve for
such items on the Closing Date Balance Sheet, then the holder of the Buyer
Note will make a refund to Culp of interest paid with respect to the amount
of such decrease from the Closing Date to the date of the final
determination of the amount of the decrease. Through October 31, 1994, the
amount of interest paid by Culp with respect to the Returns and Uncollected
Accounts adjustment is $4,248. The principal amount of the Buyer Note will
be reduced accordingly to account for this refund of interest.
6. The parties have agreed that, after adjusting the amount of the
Buyer Note as described above and to account for prior payments on the
Buyer Note, Culp will make a prepayment on December 14, 1994 in an amount
that will reduce the outstanding principal balance of the Buyer Note to
$1,000,000. The calculation of the amount to be prepaid is as follows:
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$ 9,632,724 original principal balance
(58,537) adjustment under paragraph 1 above
(46,125) adjustment under paragraph 2 above
(4,415) adjustment under paragraph 3 above
(4,335) adjustment under paragraph 4 above
(4,248) refund of interest (paragraph 5 above)
9,515,064 adjusted principal balance
(2,408,181) payment on November 1, 1994
7,106,883 adjusted principal balance after 11/1/94
payment
1,000,000 amount to remain outstanding
$ 6,106,883 amount of prepayment on 12/14/94
Pursuant to this agreement, (i) Culp will make a payment of $6,106,883 on
December 14, 1994 as a prepayment of the Buyer Note; (ii) Culp will pay all
accrued interest to the date of such prepayment to the holder of the Buyer
Note; and (iii) the Buyer Note will be further modified as follows:
(a) The Contract Rate will be changed from the Prime Rate plus one-
half of one percent to the "Adjusted LIBOR Rate" (as defined in
the 1994 Amended and Restated Credit Agreement dated as of April
15, 1994 by and between Culp and First Union National Bank of
North Carolina, as agent, and other parties, including any
amendments thereto) plus one-half of one percent;
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(b) Interest only will be payable quarterly; and
(c) The principal balance of the Buyer Note will be due and payable
in full on November 1, 1996, with no other principal payments
required during the period from December 14, 1994, through
November 1, 1996.
7. The parties acknowledge and agree that certain remedial action
must be taken in connection with two underground storage tanks at the
Chromatex plant. The existence of these tanks was not disclosed at the
time of the closing of the acquisition under the Agreement. The parties
agree that Culp's costs in taking the required remedial action will
constitute a claim against the Sellers and Rossville under Section 7.2(a)
of the Agreement in an amount not to exceed $25,000, and such amount will
be applied against the $50,000 "basket" contained in Section 7.2(a). Culp
further agrees that it will not assert further claims against the Sellers
in connection with the four underground storage tanks at Chromatex plants
#1 and #2.
8. On December 14, 1994, at the time of making the prepayment
described in paragraph 6 above, Culp will execute a Substitute Buyer Note
in the principal amount of $1,000,000 and in the form of Exhibit A attached
hereto, and will deliver such Substitute Buyer Note to Rossville in
exchange for the original Buyer Note, which shall be marked "paid and
satisfied in full" by Rossville and delivered to Culp.
9. In connection with the agreements contained herein, Culp has
agreed to lease extensions with the owners of the real property
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located in Rossville, Georgia and used in connection with the Business purchased
pursuant to the Agreement (referred to herein as the "Rossville Real
Estate"). The Sellers have requested that they be released from certain
liabilities under the Agreement that relate to the Rossville Real Estate,
in exchange for an acknowledgement and agreement by the owners of the
Rossville Real Estate that such owners will be responsible for the released
claims. Therefore, Culp hereby releases the Sellers (as defined in the
Agreement) from any claims arising after the date hereof against such
Sellers on account of (i) a breach of the representations contained in
Section 3.22(a), 3.22(b) or 3.22(c) of the Agreement solely to the extent
such representations relate to the Rossville Real Estate, (ii) any
contamination of the Rossville Real Estate by Hazardous Materials,
specifically including contamination by asbestos, or (iii) any material
deficiency in the condition of the Rossville Real Estate that does not
relate to Environmental Laws (the claims described in clauses (i), (ii) and
(iii) above being herein referred to as "Released Claims"); provided,
however, that this release shall not apply to any claims that relate to
conditions caused by the activities of the Sellers while such Sellers
operated the Business at the Rossville Real Estate. Rossville (formerly
known as A & E Leasing, Inc. and defined as the "Shareholder" in the
Agreement) and RDC, Inc., the owners of the Rossville Real Estate, hereby
agree that (i) Rossville will be liable for and will hold harmless and
indemnify Culp for any and all Released Claims that relate in whole or in
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part to the portion of the Rossville Real Estate leased to Culp under the
lease between Rossville and Culp dated November 1, 1993 and (ii) RDC, Inc.
will be liable for and will hold harmless and indemnify Culp for any and
all Released Claims that relate in whole or in part to the portion of the
Rossville Real Estate leased to Culp under the lease between RDC, Inc. and
Culp dated November 1, 1993. This agreement is intended as a supplement to
and is incorporated hereby into the leases between Culp, Rossville and RDC,
Inc. relating to the Rossville Real Estate.
IN WITNESS WHEREOF, this Amendment and Agreement is executed as of the
date first above written.
CULP, INC.
By: /s/ Franklin N. Saxon
Title: Vice President and CFO
ROSSVILLE INVESTMENTS, INC.
(f.k.a. A & E Leasing, Inc.)
By: /s/ Ronald Satterfield
Title: President
ROSSVILLE COMPANIES, INC.
By: /s/ Ronald Satterfield
Title: E.V.P.
(Signatures continued)
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CHROMATEX, INC.
By: /s/ Ronald Satterfield
Title: E.V.P.
ROSSVILLE VELOURS, INC.
By: /s/ Ronald Satterfield
Title: E.V.P.
RDC, INC.
By: /s/ W. Frank Hutchinson
Title: President
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EXHIBIT A
SUBSTITUTE PROMISSORY NOTE
$1,000,000 Rossville, Georgia
December 14, 1994
FOR VALUE RECEIVED, the undersigned, Culp, Inc., a North Carolina
corporation, (the "Maker") promises to pay to the order of Rossville
Investments, Inc., a Georgia corporation (f.k.a. A & E Leasing, Inc.) (the
"Lender"), the principal sum of ONE MILLION DOLLARS ($1,000,000), together
with interest from date hereof until maturity, upon unpaid principal
balances, at the rate hereinafter specified.
Subject to the limitations hereinafter set forth, the disbursed and
unpaid principal balances of the indebtedness hereby evidenced shall bear
interest prior to maturity at a rate per annum which shall, from day to
day, be equal to the lesser of (a) the maximum effective rate of interest
(the "Maximum Rate") which the Lender may, from time to time, lawfully
charge, or (b) a rate ("Contract Rate") equal to (i) one-half of one
percent (.5%) per annum, plus (ii) the "Adjusted LIBOR Rate" as defined in
the 1994 Amended and Restated Credit Agreement (the "Credit Agreement") by
and between the Maker and First Union National Bank of North Carolina (the
"Bank") and Wachovia Bank of North Carolina, N.A. dated April 15, 1994,
each change in the rate of interest to be charged hereon to become
effective, without notice to the undersigned, on the effective date of each
change in the Maximum Rate or the Adjusted LIBOR Rate, as the case may be.
The rate payable under this note on December 14, 1994 (Adjusted LIBOR Rate
plus .5%) is 6.625%.
Any payment not made when due and, in the event of the acceleration of
the indebtedness evidenced hereby by reason of the Maker's default, the
entire unpaid principal balance hereof, shall bear interest after maturity
at the lesser of (i) the maximum effective contract rate of interest which
the Lender may lawfully charge under applicable statutes and laws in effect
at the time of any such default and (ii) the Adjusted LIBOR Rate (as
periodically adjusted in accordance with the immediately preceding
paragraph) plus three and one-half percent (3.5%) per annum.
Said principal is payable in one installment on November 1, 1996; and
said interest, upon unpaid principal balances, calculated as above
provided, is payable quarterly on the first day of each and every quarter
hereafter, commencing on the 1st day of February, 1995 with a final payment
of all accrued and unpaid interest being due and payable on November 1,
1996.
All installments of both principal and interest on this Note are
payable at the office of Lender, at P.O. Box 487, Rossville, Georgia,
30741, or at such other place as the holder may designate
in writing, in lawful money of the United States of America, which
shall be legal tender in payment of all debts and dues, public and
private, at the time of payment.
If:
(i) the Maker shall fail to make payment of any installment of
principal or interest, or any part thereof as above provided, or
(ii) the Maker breaches any of the terms of the Asset Purchase
Agreement (the "Asset Purchase Agreement") dated October 13, 1993 by and
between the Maker and Lender which has a material adverse effect on the
combined assets, operations or future prospects of the Maker, or
(iii) any of the representations and warranties contained in
Article IV of the Asset Purchase Agreement are breached or are inaccurate
or false or untrue in any respect which breach or inaccuracy could have a
material adverse effect on the combined assets, operations or future
prospects of the Maker, or
(iv) the Maker's "Funded Debt to Net Worth" ratio at any time is
greater than 1.35 to 1, or
(v) upon any default in full payment, promptly as and when due
(whether by reason of demand, acceleration or otherwise), of any other
indebtedness, liabilities or obligations of the Maker to the Lender or to
Chromatex, Inc. or Rossville Velours, Inc., whether now existing or
hereafter created or arising, or
(vi) Maker shall make an assignment for the benefit of creditors,
file a petition in bankruptcy, petition or apply to any tribunal for the
appointment of a custodian, receiver or any trustee for it or a substantial
part of its or his assets, or shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or hereafter
in effect; or if there shall have been filed any such petition or
application, or any such proceeding shall have been commenced against Maker
in which any order for relief is entered or which remains undismissed for a
period of thirty (30) days or more; or Maker, by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a
custodian, receiver or any trustee for it or any substantial part of any of
its properties, or shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of thirty (30) days or
more; or Maker shall generally not pay its debts as such debts become due;
or
(vii) a judgment or order for the payment of money in an amount in
excess of Two Million Dollars ($2,000,000) is rendered
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and remains unsatisfied against the Maker or any Subsidiary and either
(i) enforcement proceedings shall have been commenced by any creditor
upon such judgment or order or (ii) there shall be any period of
thirty (30) consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect; or
(viii) the percentage of stock of the Maker owned by the Culp
family as reported in public information filings is reduced below fifteen
percent (15%); or
(ix) Maker or any of its Subsidiaries enter into any transaction
of merger, consolidation, pooling of interest, joint venture, syndication
or combination with any other person or entity or sell, lease, transfer or
otherwise dispose of all or a substantial part (as defined in Subparagraph
c below) of its assets (whether or not now owned or hereafter acquired) in
any single transaction or series of related transactions, to any person or
entity (other than acquisitions by Maker in which the Maker is the
surviving entity), except that:
(a) any Subsidiary may merge with the Maker, provided that
the Maker shall be the continuing or surviving corporation
or with any one or more other Subsidiaries;
(b) any Subsidiary may sell, lease or otherwise dispose of
any of its assets to the Maker;
(c) Maker and its Subsidiaries may, in one (1) fiscal year,
sell at then current market value assets (i) having a book
value of less than twenty-five percent (25%) of the total
consolidated book value of assets as of the end of the
preceding fiscal year and (ii) which contributed less than
twenty-five percent (25%) of the operating profits in the
immediately preceding four fiscal quarters [a sale of more
than such assets shall constitute a sale of substantially
all of its assets for purposes of this Paragraph (ix)]; or
(x) a default or an event of default occurs in connection with
any Funded Debt which results in the Holder of such debt accelerating the
maturity of such debt or otherwise declaring such debt due and payable;
then, if Buyer has not cured such default within ten (10) days of receipt
of written notice of such default from Lender, and in any of such events,
the entire unpaid principal balance of the indebtedness evidenced hereby,
together with all interest then accrued, shall, at the absolute option of
the Lender, at once
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become due and payable, without demand or notice, the same being
expressly waived.
"Funded Debt" for purposes of this Note shall mean:
(i) Indebtedness for borrowed money or for the deferred purchase
price of property or services (other than trade accounts payable on
customary terms and accrued expenses in the ordinary course of business),
(ii) financial obligations evidenced by bonds, debentures, notes or other
similar instruments (including, but not limited to, the "Buyer Notes"),
(iii) financial obligations as lessee under leases which shall have been or
should be, in accordance with generally accepted accounting principals,
recorded as capital leases, and (iv) obligations under or indirect
guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against
loss in respect of indebtedness or financial obligations of others of the
kinds referred to in Clauses (i) through (iii) above.
"Net Worth" for purposes of this Note means the excess of book value
of the assets of the Maker and its Subsidiaries over the Maker's and its
Subsidiaries' liabilities calculated in accordance with generally accepted
accounting principals, provided, however, that in performing such
calculation there shall be excluded from the assets of the Maker and its
Subsidiaries (i) any amounts owed to Maker or any of its Subsidiaries by a
Related Person.
"Subsidiary" or "Subsidiaries" for purposes of this Note shall mean
any entity which is included in Maker's consolidated financial statements
filed in connection with its annual report on Form 10-K or its quarterly
reports on Form 10-Q with the Securities and Exchange Commission ("SEC")
or, in the event Maker is no longer required to file such reports, any
entity which would be required under the rules and regulations of the
Securities Exchange Act of 1934 to be included in such consolidated
financial statements.
"Related Person" shall mean any Person (a) which now or hereafter
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with Maker, or (b) which now or
hereafter beneficially owns or holds five percent (5%) or more of the
capital stock of Maker, or (c) five percent (5%) or more of the capital
stock of which is beneficially owned or held by Maker. For the purposes
hereof, "Control" shall mean possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
person or entity, whether through the ownership or voting stock, by
contract or otherwise.
This Note is one of the "Buyer Notes" which are referred to in the
Asset Purchase Agreement dated October 13, 1993 by and among Maker,
Rossville Companies, Inc., Chromatex, Inc., Rossville
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Velours, Inc. and A & E Leasing, Inc. (the "Asset Purchase
Agreement"). Notwithstanding any other provision of this Note, the
principal amount outstanding with respect to the Promissory Note shall
be increased or decreased, as the case may be, in accordance with the
provisions of the Asset Purchase Agreement. Upon the final
determination of such increase or decrease, the Maker and Lender will
execute an appropriate amendment to note reflecting such increase or
decrease. If the principal amount of the Note is increased, interest
shall be due and payable (at the rates provided herein) on the amount
of such increase from the Closing through the date of such increase
and such interest shall be paid on February 1, 1994 or, if such
determination is made after February 1, 1994, such interest through
the most recent quarterly interest payment date shall be
immediately paid with the remainder of such interest to be paid
with the immediately following quarterly interest payment. If the
principal amount of the note is decreased, the Lender shall refund
any interest payments made with respect to the amount of the decrease
between the Closing and the date of the final determination of the
amount of the adjustment. Notwithstanding the foregoing, no
interest payments shall be made or return of interest payments
will be required with respect to any adjustment to this Note made
pursuant to the indemnification provisions of Article VII of the
Asset Purchase Agreement.
If this Note is placed in the hands of an attorney for collection, by
suit or otherwise, or to enforce its collection, the Maker shall pay on
demand all costs of collection and litigation (including court costs),
together with a reasonable attorney's fee.
The Maker waives protest, demand, presentment and notice of dishonor,
and agrees that this Note may be extended, in whole or in part, without
limit as to the number of such extensions, or the period or periods
thereof, and without notice to them and without affecting its liability
thereon.
The privilege is reserved and given to make additional payments on the
principal of this Note, without penalty. Any partial prepayment of
principal shall, however, not have the effect of suspending or deferring
the annual principal payments herein provided for, but the same shall
continue to be due and payable on each due date subsequent to any such
partial prepayment of the principal, and shall operate to effect full
payment of the principal at an earlier date.
It is the intention of the Lender and the Maker to comply strictly
with all applicable usury laws; and, accordingly, in no event and upon no
contingency shall the Lender ever be entitled to receive, collect, or apply
as interest any interest, fees, charges, or other payments equivalent to
interest, in excess of the maximum rate which the Lender may lawfully
charge under applicable statutes and laws from time to time in effect;
and, in the event that the holder hereof ever receives, collects, or
applies as
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interest, any such excess, such amount which, but for this
provision, would be excessive interest, shall be applied to the
reduction of the principal amount of the indebtedness evidenced hereby;
and, if the principal amount of the indebtedness evidenced hereby, and
all lawful interest thereon, is paid in full, any remaining excess
shall forthwith be paid to the Maker, or other party lawfully
entitled thereto. All interest paid or agreed to be paid by the Maker
shall, to the maximum extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period
until payment in full of the principal, so that the interest hereon
for such full period shall not exceed the maximum amount permitted
by applicable law. Any provision hereof, or of any other agreement
between the Lender and the Maker, that operates to bind, obligate, or
compel the Maker to pay interest in excess of such maximum lawful
contract rate shall be construed to require the payment of the
maximum rate only. The provisions of this paragraph shall be given
precedence over any other provision contained herein or in any other
agreement between the Lender and the Maker that is in conflict with
the provisions of this paragraph.
This Note shall be governed and construed according to the internal
statutes and laws of the State of North Carolina, without reference to any
conflicts of law principles.
This Note is not negotiable and may not be assigned.
ATTEST: CULP, INC.
By:________________________ By: _____________________________
Secretary Vice President
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