Exhibit 10.2
PROMISSORY NOTE
$2,500,000.00
January 22, 2007
CULP, INC.
1823 East Chester Drive
High Point, North Carolina 27265
(hereinafter referred to as "Borrower")
WACHOVIA BANK, NATIONAL ASSOCIATION
Charlotte, North Carolina 28202
(hereinafter referred to as "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Two Million, Five Hundred Thousand and No/100 Dollars
($2,500,000.00) or such sum as may be advanced and outstanding from time to
time, with interest on the unpaid principal balance at the rate and on the terms
provided in this Promissory Note (including all renewals, extensions or
modifications hereof, this "Note").
LOAN AGREEMENT. This Note is subject to the provisions of that certain Amended
and Restated Credit Agreement between Bank and Borrower dated August 23, 2002,
as now or hereafter modified from time to time (the "Credit Agreement").
USE OF PROCEEDS. Borrower shall use the proceeds of the loan(s) evidenced by
this Note for the commercial purposes of Borrower, as follows: To provide
funding for the acquisition by Borrower of the mattress ticking assets of
International Textile Group Inc.
SECURITY. Borrower has granted Bank a lien and security interest in the
collateral described in the Loan Documents, including, but not limited to, real
and personal property collateral described in that certain Deed of Trust,
Assignment of Rents, Security Agreement and Fixture Filing, dated October 25,
2005, and recorded in Book 6423, at Page 328, Guilford County Registry (the
"Deed of Trust").
INTEREST RATE. Interest shall accrue on the unpaid principal balance of this
Note during each Interest Period from the date hereof at a rate per annum equal
to 1-month LIBOR plus 3.0% ("Interest Rate"). Interest for each Interest Period
shall accrue each day during such Interest Period, commencing on and including
the first day to but excluding the last day. "Interest Period" means each period
commencing on the last day of the immediately preceding Interest Period and
ending on the same day of the month that interest is due 1 month thereafter;
provided (i) the first Interest Period shall commence on the date hereof and end
on the first day thereafter that interest is due, (ii) any Interest Period that
ends in a month for which there is no day which numerically corresponds to the
last day of the immediately preceding Interest Period shall end on the last day
of the month and (iii) any Interest Period that would otherwise extend past the
maturity date of this Note shall end on the maturity date of this Note. "LIBOR"
means, with respect to each Interest Period, the rate for U.S. dollar deposits
with a maturity equal to the number of months specified above, as reported on
Telerate page 3750 as of 11:00 a.m., London time, on the second London business
day before such Interest Period begins (or if not so reported, then as
determined by the Bank from another recognized source or interbank quotation).
INDEMNIFICATION. Borrower shall indemnify Bank against Bank's loss or expense as
a consequence of (a) Borrower's failure to make any payment when due under this
Note, (b) any payment, prepayment or conversion of any loan on a day other than
the last day of the Interest Period, or (c) any failure to make a borrowing or
conversion after giving notice thereof ("Indemnified Loss or Expense"). The
amount of such Indemnified Loss or Expense shall be determined by Bank based
upon the assumption that Bank funded 100% of that portion of the loan in the
London interbank market.
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (as defined herein) occurs and as long as a Default continues, all
outstanding Obligations, other than Obligations under any swap agreements (as
defined in 11 U.S.C. ss. 101, as in effect from time to time) between Borrower
and Bank or its affiliates, shall bear interest at the Interest Rate plus 3%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST AND FEE(S) COMPUTATION (ACTUAL/360). Interest and fees, if any, shall
be computed on the basis of a 360-day year for the actual number of days in the
applicable period ("Actual/360 Computation"). The Actual/360 Computation
determines the annual effective yield by taking the stated (nominal) rate for a
year's period and then dividing said rate by 360 to determine the daily periodic
rate to be applied for each day in the applicable period. Application of the
Actual/360 Computation produces an annualized effective interest rate exceeding
the nominal rate.
REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly
payments of accrued interest only, commencing on February 25, 2007 ("Payment
Commencement Date"), and continuing on the same day of each month thereafter
until fully paid. In any event, all principal and accrued interest shall be due
and payable on June 30, 2010 (the "Maturity Date").
AUTOMATIC DEBIT OF CHECKING ACCOUNT FOR LOAN PAYMENT. Borrower authorizes Bank
to debit demand deposit account number 2040231023238 or any other account with
Bank (routing number 0543000219) designated in writing by Borrower, beginning on
the Payment Commencement Date for any payments due under this Note. Borrower
further certifies that Borrower holds legitimate ownership of this account and
preauthorizes this periodic debit as part of its right under said ownership.
COMMITMENT FEE. Borrower shall pay to Bank a commitment fee of $10,000.00 on the
date hereof, which fee, once paid, shall be fully earned and non-refundable.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default occurs, monies may be applied to the Obligations in
any manner or order deemed appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
DEFINITIONS. Loan Documents. The term "Loan Documents", as used in this Note and
the other Loan Documents, refers to this Note, the Deed of Trust, the Credit
Agreement, and all documents executed in connection with or related to the loan
evidenced by this Note and any prior notes which evidence all or any portion of
the loan evidenced by this Note, and any letters of credit issued pursuant to
the Credit Agreement to which this Note is subject, any applications for such
letters of credit and any other documents executed in connection therewith or
related thereto, and may include, without limitation, a commitment letter that
survives closing, guaranty agreements, security agreements, security
instruments, financing statements, mortgage instruments, any renewals or
modifications, whenever any of the foregoing are executed, but does not include
swap agreements (as defined in 11 U.S.C. ss. 101, as in effect from time to
time). Obligations. The term "Obligations", as used in this Note and the other
Loan Documents, refers to any and all indebtedness and other obligations under
this Note, all other obligations under any other Loan Document(s), and all
obligations under any swap agreements (as defined in 11 U.S.C. ss. 101, as in
effect from time to time) between Borrower and Bank, or its affiliates, whenever
executed. Certain Other Terms. All terms that are used but not otherwise defined
in any of the Loan Documents shall have the definitions provided in the Uniform
Commercial Code.
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LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 4% of each payment past due for 15 or more days.
This late charge shall not apply to payments due at maturity or by acceleration
hereof, unless such late payment is in an amount not greater than the highest
periodic payment due hereunder.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses actually incurred to enforce or collect any of the
Obligations including, without limitation, reasonable arbitration, paralegals',
attorneys' and experts' fees and expenses, whether incurred without the
commencement of a suit, in any trial, arbitration, or administrative proceeding,
or in any appellate or bankruptcy proceeding.
USURY. If at any time the effective interest rate under this Note would, but for
this paragraph, exceed the maximum lawful rate, the effective interest rate
under this Note shall be the maximum lawful rate, and any amount received by
Bank in excess of such rate shall be applied to principal and then to fees and
expenses, or, if no such amounts are owing, returned to Borrower.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: Nonpayment; Nonperformance. The failure of timely payment or
performance of the Obligations or Default under this Note or any other Loan
Documents. False Warranty. A warranty or representation made or deemed made in
the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. Cross Default. At Bank's option, any default in payment or
performance of any obligation under the Credit Agreement or Deed of Trust (or
any other note secured by the Deed of Trust).
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: Bank
Lien. Foreclose its security interest or lien against Borrower's deposit
accounts and investment property without notice. Acceleration Upon Default.
Accelerate the maturity of this Note and, at Bank's option, any or all other
Obligations, other than Obligations under any swap agreements (as defined in 11
U.S.C. ss. 101, as in effect from time to time) between Borrower and Bank, or
its affiliates, which shall be due in accordance with and governed by the
provisions of said swap agreements; whereupon this Note and the accelerated
Obligations shall be immediately due and payable; provided, however, if the
Default is based upon a bankruptcy or insolvency proceeding commenced by or
against Borrower or any guarantor or endorser of this Note, all Obligations
(other than Obligations under any swap agreement as referenced above) shall
automatically and immediately be due and payable. Cumulative. Exercise any
rights and remedies as provided under the Note and other Loan Documents, or as
provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank the financial
information, in each instance prepared in accordance with generally accepted
accounting principles consistently applied and otherwise in form (with original
signatures) and substance satisfactory to Bank, as and when required to be
delivered by Borrower to Bank in accordance with the provisions of the Credit
Agreement (whether or not the Credit Agreement has terminated).
FINANCIAL COVENANTS. Borrower shall comply in all respects with the financial
covenants contained in the Credit Agreement (whether or not the Credit Agreement
has terminated).
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
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Except to the extent otherwise provided by the Loan Documents or prohibited by
law, each Borrower and each other person liable under this Note waives
presentment, protest, notice of dishonor, demand for payment, notice of
intention to accelerate maturity, notice of acceleration of maturity, notice of
sale and all other notices of any kind. Further, each agrees that Bank may (i)
extend, modify or renew this Note or make a novation of the loan evidenced by
this Note, and/or (ii) grant releases, compromises or indulgences with respect
to any collateral securing this Note, or with respect to any Borrower or other
person liable under this Note or any other Loan Documents, all without notice to
or consent of each Borrower and other such person, and without affecting the
liability of each Borrower and other such person; provided, Bank may not extend,
modify or renew this Note or make a novation of the loan evidenced by this Note
without the consent of the Borrower, or if there is more than one Borrower,
without the consent of at least one Borrower; and further provided, if there is
more than one Borrower, Bank may not enter into a modification of this Note
which increases the burdens of a Borrower without the consent of that Borrower.
MISCELLANEOUS PROVISIONS. Assignment. This Note and the other Loan Documents
shall inure to the benefit of and be binding upon the parties and their
respective heirs, legal representatives, successors and assigns. Bank's
interests in and rights under this Note and the other Loan Documents are freely
assignable, in whole or in part, by Bank. In addition, nothing in this Note or
any of the other Loan Documents shall prohibit Bank from pledging or assigning
this Note or any of the other Loan Documents or any interest therein to any
Federal Reserve Bank. Borrower shall not assign its rights and interest
hereunder without the prior written consent of Bank, and any attempt by Borrower
to assign without Bank's prior written consent is null and void. Any assignment
shall not release Borrower from the Obligations. Organization; Powers. Borrower
represents that Borrower (i) is a corporation duly organized, validly existing
and in good standing under the laws of its state of organization, and is
authorized to do business in each other jurisdiction wherein its ownership of
property or conduct of business legally requires such organization; (ii) has the
power and authority to own its properties and assets and to carry on its
business as now being conducted and as now contemplated; and (iii) has the power
and authority to execute, deliver and perform, and by all necessary action has
authorized the execution, delivery and performance of, all of its obligations
under this Note and any other Loan Document to which it is a party. Compliance
with Laws. Borrower represents that Borrower and any subsidiary and affiliate of
Borrower and any guarantor are in compliance in all respects with all federal,
state and local laws, rules and regulations applicable to its properties,
operations, business, and finances, including, without limitation, any federal
or state laws relating to liquor (including 18 U.S.C. ss. 3617, et seq.) or
narcotics (including 21 U.S.C. ss. 801, et seq.) and/or any commercial crimes;
all applicable federal, state and local laws and regulations intended to protect
the environment; and the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), if applicable. None of Borrower, or any subsidiary or
affiliate of Borrower or any guarantor is a Sanctioned Person or has any of its
assets in a Sanctioned Country or does business in or with, or derives any of
its operating income from investments in or transactions with, Sanctioned
Persons or Sanctioned Countries in violation of economic sanctions administered
by OFAC. The proceeds from the Loan will not be used to fund any operations in,
finance any investments or activities in, or make any payments to, a Sanctioned
Person or a Sanctioned Country. "OFAC" means the U.S. Department of the
Treasury's Office of Foreign Assets Control. "Sanctioned Country" means a
country subject to a sanctions program identified on the list maintained by OFAC
and available at http://www.treas.gov/offices/enforcement/ofac/sanctions/, or as
otherwise published from time to time. "Sanctioned Person" means (i) a person
named on the list of Specially Designated Nationals or Blocked Persons
maintained by OFAC available at
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http://www.treas.gov/offices/enforcement/ofac/sdn/, or as otherwise published
from time to time, or (ii) (A) an agency of the government of a Sanctioned
Country, (B) an organization controlled by a Sanctioned Country, or (C) a person
resident in a Sanctioned Country, to the extent subject to a sanctions program
administered by OFAC. Applicable Law; Conflict Between Documents. This Note and,
unless otherwise provided in any other Loan Document, the other Loan Documents
shall be governed by and interpreted under the laws of the state named in Bank's
address on the first page hereof without regard to that state's conflict of laws
principles. If the terms of this Note should conflict with the terms of any loan
agreement or any commitment letter that survives closing, the terms of this Note
shall control. Borrower's Accounts. Except as prohibited by law, Borrower grants
Bank a security interest in all of Borrower's deposit accounts and investment
property with Bank and any of its affiliates. Swap Agreements. All swap
agreements (as defined in 11 U.S.C. ss. 101, as in effect from time to time), if
any, between Borrower and Bank or its affiliates are independent agreements
governed by the written provisions of said swap agreements, which will remain in
full force and effect, unaffected by any repayment, prepayment, acceleration,
reduction, increase or change in the terms of this Note, except as otherwise
expressly provided in said written swap agreements, and any payoff statement
from Bank relating to this Note shall not apply to said swap agreements except
as otherwise expressly provided in such payoff statement. Jurisdiction. Borrower
irrevocably agrees to non-exclusive personal jurisdiction in the state
identified as the Jurisdiction above. Severability. If any provision of this
Note or of the other Loan Documents shall be prohibited or invalid under
applicable law, such provision shall be ineffective but only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Note or other such document.
Notices. Any notices to Borrower shall be sufficiently given, if in writing and
mailed or delivered to the Borrower's address shown above or such other address
as provided hereunder, and to Bank, if in writing and mailed or delivered to
Wachovia Bank, National Association, Mail Code VA7628, P. O. Box 13327, Roanoke,
VA 24040 or Wachovia Bank, National Association, Mail Code VA7628, 10 South
Jefferson Street, Roanoke, VA 24011 or such other address as Bank may specify in
writing from time to time. Notices to Bank must include the mail code. In the
event that Borrower changes Borrower's address at any time prior to the date the
Obligations are paid in full, Borrower agrees to promptly give written notice of
said change of address by registered or certified mail, return receipt
requested, all charges prepaid. Plural; Captions. All references in the Loan
Documents to Borrower, guarantor, person, document or other nouns of reference
mean both the singular and plural form, as the case may be, and the term
"person" shall mean any individual, person or entity. The captions contained in
the Loan Documents are inserted for convenience only and shall not affect the
meaning or interpretation of the Loan Documents. Advances. Bank may, in its sole
discretion, make other advances which shall be deemed to be advances under this
Note, even though the stated principal amount of this Note may be exceeded as a
result thereof. Posting of Payments. All payments received during normal banking
hours after 2:00 p.m. local time at the office of Bank first shown above shall
be deemed received at the opening of the next banking day. Joint and Several
Obligations. If there is more than one Borrower, each is jointly and severally
obligated together with all other parties obligated for the Obligations. Fees
and Taxes. Borrower shall promptly pay all documentary, intangible recordation
and/or similar taxes on this transaction whether assessed at closing or arising
from time to time. LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. EACH OF
THE PARTIES HERETO, INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY
JUDICIAL, MEDIATION OR ARBITRATION PROCEEDING OR ANY CLAIM OR CONTROVERSY
BETWEEN OR AMONG THEM THAT MAY ARISE OUT OF OR BE IN ANY WAY CONNECTED WITH THIS
AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT BETWEEN OR
AMONG THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT
SHALL ANY PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (1) INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES OR (2) PUNITIVE OR EXEMPLARY DAMAGES. EACH OF
THE PARTIES HEREBY EXPRESSLY WAIVES ANY RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY
DAMAGES THEY MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN CONNECTION WITH ANY
SUCH PROCEEDING, CLAIM OR CONTROVERSY, WHETHER THE SAME IS RESOLVED BY
ARBITRATION, MEDIATION, JUDICIALLY OR OTHERWISE. Patriot Act Notice. To help
fight the funding of terrorism and money laundering activities, Federal law
requires all financial institutions to obtain, verify, and record information
that identifies each person who opens an account. For purposes of this section,
account shall be understood to include loan accounts. Final Agreement. This Note
and the other Loan Documents represent the final agreement between the parties
and may not be contradicted by evidence of prior, contemporaneous or subsequent
oral agreements of the parties. There are no unwritten oral agreements between
the parties.
ARBITRATION. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy arising out of
or relating to the Loan Documents between parties hereto (a "Dispute") shall be
resolved by binding arbitration conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and the Federal Arbitration Act. Disputes
may include, without limitation, tort claims, counterclaims, a dispute as to
whether a matter is subject to arbitration, or claims arising from documents
executed in the future, but shall specifically exclude claims brought as or
converted to class actions. A judgment upon the award may be entered in any
court having jurisdiction. Notwithstanding the foregoing, this arbitration
provision does not apply to disputes under or related to swap agreements.
Special Rules. All arbitration hearings shall be conducted in the city named in
the address of Bank first stated above. A hearing shall begin within 90 days of
demand for arbitration and all hearings shall conclude within 120 days of demand
for arbitration. These time limitations may not be extended unless a party shows
cause for extension and then for no more than a total of 60 days. The expedited
procedures set forth in Rule 51 et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000.00. Arbitrators shall be licensed
attorneys selected from the Commercial Financial Dispute Arbitration Panel of
the AAA. The parties do not waive applicable Federal or state substantive law
except as provided herein. Preservation and Limitation of Remedies.
Notwithstanding the preceding binding arbitration provisions, the parties agree
to preserve, without diminution, certain remedies that any party may exercise
before or after an arbitration proceeding is brought. The parties shall have the
right to proceed in any court of proper jurisdiction or by self-help to exercise
or prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale or under applicable law by judicial foreclosure including a proceeding to
confirm the sale; (ii) all rights of self-help including peaceful occupation of
real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment of
receiver and filing an involuntary bankruptcy proceeding; and (iv) when
applicable, a judgment by confession of judgment. Any claim or controversy with
regard to any party's entitlement to such remedies is a Dispute. Waiver of Jury
Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE
IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A
DISPUTE AS TO WHICH BINDING ARBITRATION HAS BEEN DEMANDED.
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IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be duly executed under seal.
CULP, INC. (SEAL)
By: /s/ Kenneth R. Bowling
Name: Kenneth R. Bowling, Title: Vice President, Finance & Treasurer
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