SECOND AMENDED AND RESTATED CREDIT AGREEMENT by and among WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender, Culp, Inc., as a Borrower, and the other Loan Parties from time to time party hereto

Exhibit 10.1

EXECUTION VERSION

 

 

 

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

by and among

▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
as Lender,

▇▇▇▇, Inc.,
as a Borrower,

and the other Loan Parties

from time to time party hereto

 

 

 

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Table of Contents

Page

 

1.	DEFINITIONS AND CONSTRUCTION	1
1.1	Definitions	1
1.2	Accounting Terms	25
1.3	UCC Terms	25
1.4	Construction	26
1.5	Time References	27
1.6	Payment in Full	27
1.7	Rounding	27
1.8	Resolution of Drafting Ambiguities	27
2.	CREDIT FACILITY	28
2.1	Revolving Loans.	28
2.2	Borrowing Procedures.	28
2.3	Letter of Credit Facility	29
2.4	Payments; Prepayments.	29
2.5	Interest and Fees.	32
2.6	Intent to Limit Charges to Maximum Lawful Rate	33
2.7	Illegality; Market Conditions	33
2.8	Increased Costs	33
2.9	Capital Requirements	33
2.10	Certificates for Reimbursement	34
2.11	Delay in Requests	34
3.	CONDITIONS; TERM OF AGREEMENT	34
3.1	Conditions Precedent to the Initial Revolving Loan	34
3.2	Conditions Precedent to all Revolving Loans	34
3.3	Maturity	35
3.4	Effect of Maturity	35
3.5	Early Termination by Borrowers	35
4.	REPRESENTATIONS AND WARRANTIES	35
4.1	Due Organization and Qualification	35
4.2	Due Authorization; No Conflict	36
4.3	Binding Obligations; Perfected Liens.	36
4.4	Title to Assets; No Encumbrances	36
4.5	Litigation	36
4.6	Compliance with Laws	36
4.7	No Material Adverse Effect	37
4.8	Solvency	37
4.9	Environmental Condition	37
4.10	Complete Disclosure; Projections	37
4.11	Taxes	37
4.12	Margin Stock; Investment Company Act, Etc	38
4.13	OFAC; Sanctions; Anti-Corruption Laws; Anti-Money Laundering Laws; Patriot Act	38
4.14	Employee and Labor Matters	38
4.15	ERISA	38
4.16	Capitalization and Subsidiaries	38
4.17	Brokers	39

 

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5.	AFFIRMATIVE COVENANTS	39
5.1	Financial Statements; Borrowing Base Certificate; Other Information	39
5.2	Notices of Material Events	39
5.3	Existence	40
5.4	Maintenance of Properties	40
5.5	Taxes	40
5.6	Insurance	40
5.7	Field Examinations; Appraisals	40
5.8	Compliance with Laws; OFAC; Sanctions, Etc	41
5.9	Cash Management; Collection of Proceeds of Collateral.	41
5.10	Further Assurances	43
5.11	[Reserved]	43
5.12	Costs and Expenses	43
5.13	Formation of Subsidiaries	43
5.14	Supply Chain Financing Agreement	44
5.15	Post-Closing Covenants	44
6.	NEGATIVE COVENANTS	44
6.1	Indebtedness	44
6.2	Liens	44
6.3	Restrictions on Fundamental Changes	44
6.4	Asset Dispositions	45
6.5	Nature of Business	45
6.6	Prepayments and Amendments	45
6.7	Restricted Payments	45
6.8	Accounting Methods	46
6.9	Investments	46
6.10	Transactions with Affiliates	46
6.11	Use of Proceeds	46
7.	FINANCIAL COVENANT	47
7.1	Fixed Charge Coverage Ratio	47
8.	EVENTS OF DEFAULT AND REMEDIES	47
8.1	Events of Default	47
8.2	Remedies.	48
9.	NOTICES, AMENDMENTS, WAIVERS, INDEMNIFICATION, ETC.	49
9.1	Demand; Protest; Counterclaims, Etc	49
9.2	Indemnification	49
9.3	Notices	50
9.4	Assignments; Successors	50
9.5	Amendments; Waivers	50
9.6	Collateral Matters	51
10.	JURY TRIAL WAIVER; OTHER WAIVERS CONSENTS; GOVERNING LAW.	51
10.1	GOVERNING LAW	51
10.2	FORUM NON CONVENIENS	51
10.3	WAIVER OF JURY TRIAL	51
10.4	SUBMISSION TO JURISDICTION	51
10.5	WAIVER OF CLAIMS	52
11.	GENERAL PROVISIONS	52
11.1	Effectiveness; Section Headings; Severability	52
11.2	Counterparts; Electronic Execution	53
11.3	Patriot Act	53
11.4	Integration	53

 

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11.5	Disclosure	53
11.6	Company as Agent for Borrowers	53
11.7	Amendment and Restatement; No Novation	54

 

 

Schedules

 

Schedule 1.1(a)		Definition of Eligible Accounts
Schedule 1.1(b)		Definitions of Eligible Inventory, Eligible In-Transit Inventory, and Eligible Raw Material Inventory
Schedule 1.1(c)		List of Freight Forwarders
Schedule 2.5		Fees
Schedule 2.7		SOFR Replacement
Schedule 3.1		Conditions Precedent to Initial Revolving Loans
Schedule 4.5		Pending Litigation
Schedule 4.9		Environmental Matters
Schedule 4.14		Collective Bargaining Agreements, Etc.
Schedule 4.16		Subsidiaries
Schedule 5.1		Financial and Collateral Reporting
Schedule 5.9		Deposit Accounts and Securities Accounts
Schedule 6.1		Existing Indebtedness
Schedule 6.2		Existing Liens
Schedule 6.9		Exiting Investments

 

 

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SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of January 19, 2023, by and among ▇▇▇▇, INC., a North Carolina corporation (the “Company”; together with any entity that may hereafter become party hereto as a Borrower, each individually, a “Borrower” and collectively, “Borrowers”), READ WINDOW PRODUCTS, LLC, a North Carolina limited liability company (together with any entity that may hereafter become party hereto as a Guarantor (each individually, a “Guarantor” and collectively, “Guarantors”)), and ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION (“Lender”).

PRELIMINARY STATEMENTS

The Company has entered into that certain ▇▇▇▇▇▇▇ and Restated Credit Agreement dated as of June 24, 2022 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Existing Credit Agreement”) with Lender.

The Borrowers have requested that ▇▇▇▇▇▇ amend and restate the Existing Credit Agreement and the Lender has indicated its willingness to do so and to make the Revolving Loans and issue the Letters of Credit on the terms and subject to the conditions set forth herein.

The parties hereto hereby agree as follows:

“Accounting Changes” means changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants (or successor thereto or any agency with similar functions).

“Administrative Borrower” has the meaning set forth in Section 11.6.

“Affiliate” means, as applied to any Person, any other Person who controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of a Person, whether through the ownership of Equity Interests, by contract, or otherwise; provided, that, for purposes of the definition of Eligible Accounts and Section 6.10: (a) if any Person owns directly or indirectly 10% or more of the Equity Interests having ordinary voting power for the election of directors or equivalent governing body of a Person, then both such Persons shall be Affiliates of each other, (b) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (c) each partnership in which a Person is a general partner shall be deemed an Affiliate of such Person.

“Agreement” means this Second Amended and Restated Credit Agreement.

 

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“Anti-Corruption Laws” means: (a) the U.S. Foreign Corrupt Practices Act of 1977, (b) the U.K. ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, and (c) any other anti-bribery or anti-corruption laws, regulations or ordinances in any jurisdiction in which any member of the Loan Party Group is located or doing business.

“Anti-Money Laundering Laws” means applicable laws or regulations in any jurisdiction in which any member of the Loan Party Group is located or doing business that relates to money laundering, any predicate crime to money laundering, or any financial record keeping and reporting requirements related thereto.

“Applicable Margin” means, as of any date of determination, the applicable margin set forth in the following table that corresponds to the Monthly Average Excess Availability for the most recently completed month:

Tier	Monthly Average Excess Availability	Applicable Margin for SOFR Loans	Applicable Margin for Base Rate Loans
1	Greater than 50% of the Maximum Credit	1.50%	0.50%
2	Less than or equal to 50% of the Maximum Credit	1.75%	0.75%

 

provided, that, for the period from the Closing Date until the last day of the first full calendar month immediately following the Closing Date, the Applicable Margin shall be based on the applicable percentage set forth in Tier 1. In the event that, at any time after the end of any calendar month, the Monthly Average Excess Availability for such calendar month used for the determination of the Applicable Margin was less than the actual amount of the Monthly Average Excess Availability for such period as a result of the inaccuracy of information provided by or on behalf of any Borrower to Lender for the calculation of Monthly Average Excess Availability, the Applicable Margin for such period shall be adjusted to the applicable percentage based on such actual Monthly Average Excess Availability and any additional interest for the applicable period as a result of such recalculation shall be promptly paid to Lender.

“Authorized Person” means any one of the individuals identified as an officer of a Loan Party or any other individual identified by Administrative Borrower in writing as an authorized person and authenticated through Lender’s electronic platform or portal in accordance with its procedures for such authentication.

“Bank Product” means any one or more of the following financial products or accommodations provided by Lender or its Affiliates to a Loan Party: (a) credit cards (including commercial cards (including so-called “purchase cards”, “procurement cards” or “p-cards”)), (b) payment card processing services, (c) debit cards, (d) stored value cards, (e) any cash management or related services, including treasury, depository, return items, overdraft, controlled disbursement, merchant store value cards, e-payables services, electronic funds transfer, interstate depository

 

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network, automatic clearing house transfer (including the Automated Clearing House processing of electronic funds transfers through the direct Federal Reserve Fedline system) and other cash management arrangements, or (f) transactions under Hedge Agreements.

“Bank Product Obligations” means all obligations, liabilities, reimbursement obligations, fees, or expenses owing by a Loan Party to Lender or any of its Affiliates pursuant to or in connection with a Bank Product and irrespective of whether for the payment of money, and whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising.

“Bankruptcy Code” means Title 11 of the United States Code.

“Base Rate” means the greater of (a) the Federal Funds Rate plus 1/2%, and (b) the rate of interest announced, from time to time, within Lender at its principal office in San Francisco as its “prime rate”, with the understanding that the “prime rate” is one of Lender’s base rates (not necessarily the lowest of such rates) and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof after its announcement in such internal publications as Lender may designate (and, if any such announced rate is less than zero, then the rate determined pursuant to this clause (b) shall be deemed to be zero).

“Base Rate Loan” means each portion of the Revolving Loans that bears interest at a rate determined by reference to the Base Rate.

“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which any Loan Party or any of its Subsidiaries or ERISA Affiliates has been an “employer” (as defined in Section 3(5) of ERISA) within the past six years.

“Borrower” and “Borrowers” have the respective meanings set forth in the preamble to this Agreement.

“Borrowing Base” means, as of any date of determination, the result of:

 

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“Borrowing Base Certificate” means a certificate setting forth the calculation of the Borrowing Base in the form provided by Lender to a Borrower, as such form, subject to the terms hereof, may from time to time be modified by ▇▇▇▇▇▇, which is duly completed (including all schedules thereto) and delivered by or on behalf of Borrowers to Lender.

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close in the State of New York.

“Capital Expenditures” means, with respect to any Person for any period, the amount of all expenditures by such Person during such period that are capital expenditures as determined in accordance with GAAP.

“Capital Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

“Cash Dominion Event” means either of (a) the occurrence of an Event of Default or (b) the fact or circumstance that Excess Availability is less than 20% of the Maximum Credit.

“Cash Dominion Period” means each period commencing on the date on which a Cash Dominion Event occurs and ending on the first day thereafter on which Excess Availability has been greater than or equal to 20% of the Maximum Credit for 60 consecutive days and no Event of Default exists.

“Cash Equivalents” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof, (b) marketable direct obligations issued or fully guaranteed by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or ▇▇▇▇▇’▇ Investors Service, Inc. (“Moody’s”), (c) commercial paper maturing no more than 270 days from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody’s, (d) certificates of deposit, time deposits, overnight bank deposits or bankers’ acceptances maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States or any state thereof or the District of Columbia or any United States branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $1,000,000,000, (e) deposit accounts maintained with (i) any bank that satisfies the criteria described in clause (d) above, or (ii) any other bank organized under the laws of the United States or any state thereof so long as the full amount maintained with any such other bank is insured by the Federal Deposit Insurance Corporation, (f) repurchase obligations of any commercial bank satisfying the requirements of clause (d) of this definition or of any recognized securities dealer having combined capital and

 

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surplus of not less than $1,000,000,000, having a term of not more than seven days, with respect to securities satisfying the criteria in clauses (a) or (d) above, (g) debt securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the criteria described in clause (d) above, and (h) Investments in money market funds substantially all of whose assets are invested in the types of assets described in clauses (a) through (g) above.

“Cash Management Bank” has the meaning set forth in Section 5.9.

“Change in Law” means the occurrence after the date of this Agreement of: (a) the adoption or effectiveness of any law, rule, regulation, judicial ruling, judgment or treaty, (b) any change in any law, rule, regulation, judicial ruling, judgment or treaty or in the administration, interpretation, implementation or application by any Governmental Authority of any law, rule, regulation, guideline or treaty, (c) any new, or adjustment to, requirements prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Board of Governors of the Federal Reserve System), requirements imposed by the Federal Deposit Insurance Corporation, or similar requirements imposed by any domestic or foreign governmental authority or resulting from compliance by Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority and related in any manner to SOFR, or (d) the making or issuance by any Governmental Authority of any request, rule, guideline or directive, whether or not having the force of law; provided, that, notwithstanding anything in this Agreement to the contrary, (i) the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇ Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith, and (ii) all requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted or issued.

“Change of Control” means that:

(b) any Person or two or more Persons acting in concert (other than the ▇▇▇▇ Family) shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influence over the management or policies of the Company or control over the Equity Interests of such Person entitled to vote for members of the board of directors of the Company on a fully-diluted basis (and taking into account all such Equity Interests that such Person or group has the right to acquire pursuant to any option right) representing 35% or more of the combined voting power of such Equity Interests;

 

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(c) during any period of 12 consecutive months commencing on or after the Closing Date, the occurrence of a change in the composition of the board of directors of the Company such that a majority of the members of such board of directors are not Continuing Directors; or

(d) the Company fails to own and control, directly or indirectly, 100% of the Equity Interests of each other Loan Party.

“Closing Date” means the earlier of the date of the making of the initial Revolving Loan or issuance of the initial Letter of Credit under this Agreement.

“Collateral” means all assets and interests in assets and proceeds thereof now owned or hereafter acquired by any Person in or upon which a Lien is granted, or is purported to be granted, by such Person to Lender under any of the Loan Documents.

“Collection Account” means each deposit account of a Borrower identified on Schedule 5.9 as a collection account and such other deposit accounts as may be established after the Closing Date in accordance with the terms hereof in each case used exclusively to receive payments on accounts and proceeds of other Collateral.

“Commitment” means the commitment of Lender to make Revolving Loans or otherwise provide any credit or services to a Borrower under this Agreement.

“Compliance Certificate” means a certificate in the form provided by Lender to a Borrower, as such form, subject to the terms hereof, may from time to time be modified by Lender, which is duly completed (including all schedules thereto), and delivered by or on behalf of Borrowers to Lender.

“Compliance Period” means the period (a) commencing on (i) the date that Excess Availability is less than 15% of the Maximum Credit or (ii) the occurrence of an Event of Default and (b) ending on the date on which Excess Availability has been greater than or equal to such amount for any consecutive 60 day period thereafter and no Event of Default exists.

“Continuing Directors” means those directors who were either (a) directors of the Company on the Closing Date, (b) directors approved by a board consisting of a majority appointed or approved by individuals referred to in clause (a) of this definition, and (c) directors approved by a board consisting of a majority appointed or approved by individuals in clauses (a) and (b).

“Control Agreement” means a control agreement, in form and substance reasonably satisfactory to Lender, executed and delivered by a Loan Party, Lender, and the applicable securities intermediary (with respect to a securities account) or bank (with respect to a deposit account).

“Credit Facility” means the Revolving Loans provided to or for the benefit of each Borrower pursuant to Section 2.1 or other financial accommodations provided for under the Loan Documents.

“▇▇▇▇ Family” means ▇▇▇▇▇▇ ▇. ▇▇▇▇, III, his spouse, his mother, his siblings, his lineal descendants, and any trusts established for the benefit of any of them.

 

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“Daily Simple SOFR” means, for any day (a “SOFR Rate Day”), a rate per annum equal to SOFR for the day (such day, a “SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to (i) if such SOFR Rate Day is a U.S. Government Securities Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website; provided, that, if Daily Simple SOFR determined as provided above would be less than zero, then Daily Simple SOFR shall be deemed to be zero. If by 5:00 p.m. (New York City time) on the second (2nd) U.S. Government Securities Business Day immediately following any SOFR Determination Day, SOFR in respect of such SOFR Determination Day has not been published on the SOFR Administrator’s Website and a Benchmark Replacement Date with respect to Daily Simple SOFR has not occurred, then SOFR for such SOFR Determination Day will be SOFR as published in respect of the first preceding U.S. Government Securities Business Day for which SOFR was published on the SOFR Administrator’s Website; provided that any SOFR determined pursuant to this sentence shall be utilized for purposes of calculation of Daily Simple SOFR for no more than three (3) consecutive SOFR Rate Days. Any change in Daily Simple SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower.

“Default” means any event or condition which with notice, or passage of time, or both, would constitute an Event of Default.

“Default Rate” means, for any Obligation (including, to the extent permitted by law, interest not paid when due), two percent plus the interest rate otherwise applicable thereto (calculated using the highest Applicable Margin), or in the case of the Letter of Credit fee, two percent above the per annum rate otherwise applicable thereto.

“Dollars” or “$” means United States dollars.

“Earn-Outs” means unsecured liabilities of a Loan Party arising under an agreement to make any deferred payment as a part of the consideration payable in respect of a Permitted Acquisition, including performance bonuses or consulting payments in any related services, employment or similar agreement, in an amount that is subject to or contingent upon the revenues, income, cash flow or profits (or the like) of the target of such Permitted Acquisition.

“EBITDA” means, with respect to any fiscal period and with respect to any Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP, (a) the consolidated net income (or loss), for such period, minus (b) without duplication, the sum of the following amounts for such period to the extent included in determining consolidated net income (or loss) for such period: (i) unusual or non-recurring gains, and (ii) interest income, plus (c) without duplication, the sum of the following amounts for such period to the extent deducted in determining consolidated net income (or loss) for such period: (i) non-cash unusual or non-cash non-recurring losses, (ii) Interest Expense, (iii) income taxes, (iv) depreciation and amortization, (v) non-cash losses and non-cash charges (excluding any such non-cash loss or charge (A) to the extent (1) added to EBITDA pursuant to the immediately preceding clause (i), or (2) that represents an accrual or reserve for a potential cash charge in any future period or amortization of a prepaid cash charge that was paid in a prior period and (B) relating to a write-down, write off or reserve with

 

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respect to accounts receivable or inventory), (vi) solely for amounts incurred through October 31, 2022 (A) $2,900,000 in respect of inventory impairment and (B) $713,000 in respect of restructuring and related cash charges, and (vii) other restructuring and related cash charges in an aggregate amount not to exceed $2,000,000.

“Eligible Accounts” has the meaning set forth in Schedule 1.1(a).

“Eligible In-Transit Inventory” has the meaning set forth in Schedule 1.1(b).

“Eligible Inventory” has the meaning set forth in Schedule 1.1(b).

“Eligible Raw Material Inventory” has the meaning set forth in Schedule 1.1(b).

“Equity Interests” means, with respect to a Person, all of the shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in such Person, whether voting or nonvoting, including capital stock or partnership, limited liability company or other equity ownership or profit interests or units, preferred stock, or any other “equity security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Securities Exchange Act of 1934).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.

“ERISA Affiliate” means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of any Loan Party or its Subsidiaries under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of any Loan Party or its Subsidiaries under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which any Loan Party or any of its Subsidiaries is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with any Loan Party or any of its Subsidiaries and whose employees are aggregated with the employees of such Loan Party or its Subsidiaries under IRC Section 414(o).

“Event of Default” has the meaning set forth in Section 8.1.

“Excess Availability” means, as of any date of determination, the amount, as determined by ▇▇▇▇▇▇, equal to (a) the lesser of (i) the Borrowing Base and (ii) the Maximum Credit, minus, without duplication, (b) the amount of Revolving Loans and Letter of Credit Usage.

“Excluded Account” has the meaning specified therefor in the Security Agreement.

“Excluded Swap Obligation” means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the guaranty of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act (7 U.S.C. § 1 et seq.), and any successor statute or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) due to such Loan Party’s failure for any reason

 

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to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (7 U.S.C. § 1 et seq.), and any successor statute and the regulations thereunder at the time the guaranty of such Loan Party or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guaranty or security interest is or becomes illegal.

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal to, for each day during such period, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Lender from three Federal funds brokers of recognized standing selected by it (and, if any such rate is below zero, then the rate determined pursuant to this definition shall be deemed to be zero).

“Fixed Charge Coverage Ratio” means, with respect to any fiscal period and with respect to any Person and its Subsidiaries determined on a consolidated basis in accordance with GAAP, the ratio of (a) EBITDA for such period minus Unfinanced Capital Expenditures made (to the extent not already incurred in a prior period) or incurred during such period, to (b) Fixed Charges for such period.

“Fixed Charges” means, with respect to any fiscal period and with respect to any Person and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, the sum, without duplication, of (a) Interest Expense required to be paid (other than interest paid-in-kind, amortization of financing fees, and other non-cash Interest Expense) during such period, (b) scheduled principal payments in respect of Indebtedness that are required to be paid during such period (excluding, to the extent deducted from the calculation of consolidated net income (or loss) of the Company and its Subsidiaries, royalty payments made with respect to intellectual property licenses during such period), (c) all Federal, State, and local income taxes required to be paid during such period, and (d) all Restricted Payments paid (whether in cash or other property, other than common Equity Interests) during such period.

“Freight Forwarders” shall mean the Persons listed on Schedule 1.1(c) hereto or such other Person or Persons as may be selected by a Borrower after the date hereof and after written notice by a Borrower to Lender who are reasonably acceptable to Lender to handle the receipt of inventory within the United States or to clear inventory through the Bureau of Customs and Border Protection or other domestic or foreign export control authorities or otherwise perform port of entry services to process inventory imported by a Borrower from outside the United States (such Persons sometimes being referred to herein individually as a “Freight Forwarder”), provided, that, as to each such Person, (a) Lender shall have received a Freight Forwarder agreement by such Person in favor of ▇▇▇▇▇▇ (in form and substance satisfactory to Lender) duly authorized, executed and delivered by such Person, (b) such agreement shall be in full force and effect and (c) such Person shall be in compliance in all material respects with the terms thereof.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

 

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“Governing Documents” means, with respect to any Person, the certificate or articles of incorporation, certificate of formation, by-laws, limited liability company agreement, operating agreement or other organizational or governing documents of such Person.

“Governmental Authority” means the government of any nation or any political subdivision thereof, whether at the national, state, territorial, provincial, county, municipal or any other level, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of, or pertaining to, government (including any supra-national bodies such as the European Union or the European Central Bank).

“Guarantor” means each Person (other than an individual) that at any time guaranties all or any portion of the Obligations.

“Guaranty” means the Guaranty, dated of even date herewith, by each Loan Party in favor of ▇▇▇▇▇▇ and any other guarantee of the Obligations at any time executed and delivered by a Loan Party in favor of ▇▇▇▇▇▇.

“Hedge Agreement” means a “swap agreement” as that term is defined in Section 101(53B)(A) of the Bankruptcy Code.

“Indebtedness” as to any Person means (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (c) all obligations of such Person as a lessee under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (e) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and, other than royalty payments payable in the ordinary course of business in respect of non-exclusive licenses), (f) all monetary obligations of such Person owing under Hedge Agreements (which amount shall be calculated based on the amount that would be payable by such Person if the Hedge Agreement were terminated on the date of determination), and (g) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (f) above. For purposes of this definition, (i) the amount of any Indebtedness represented by a guaranty or other similar instrument shall be the lesser of the principal amount of the obligations guaranteed and still outstanding and the maximum amount for which the guaranteeing Person may be liable pursuant to the terms of the instrument embodying such Indebtedness, and (ii) the amount of any Indebtedness which is limited or is non-recourse to a Person or for which recourse is limited to an identified asset shall be valued at the lesser of (A) if applicable, the limited amount of such obligations, and (B) if applicable, the fair market value of such assets securing such obligation.

 

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“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other Federal or State bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

“Interest Expense” means, for any period, the aggregate of the interest expense of a Person and its Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

“Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide accounts receivable arising in the ordinary course of business), or acquisitions of Indebtedness, Equity Interests, or all or substantially all of the assets of such other Person (or of any division or business line of such other Person), and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustment for increases or decreases in value, or write-ups, write-downs, or write-offs with respect to such Investment.

“IRC” means the Internal Revenue Code of 1986, as in effect from time to time.

“Lender” has the meaning set forth in the preamble to this Agreement.

“Lender Expenses” has the meaning set forth in Section 5.12.

“Lender Payment Account” means such account of Lender as Lender may from time to time designate in writing to a Borrower as the Lender Payment Account for purposes of the Loan Documents.

“Letter of Credit” has the meaning set forth in Section 2.3.

“Letter of Credit Usage” means, as of any date, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit, and (b) the aggregate amount of outstanding reimbursement obligations with respect to Letters of Credit which remain unreimbursed or which have not been paid through a Revolving Loan.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit arrangement, encumbrance, easement, lien (statutory or other), security interest, or other security arrangement and any other preference, priority, or preferential arrangement of any kind or nature whatsoever, including any conditional sale contract or other title retention agreement, the interest of a lessor under a Capital Lease and any synthetic or other financing lease having substantially the same economic effect as any of the foregoing.

“Loan Account” has the meaning set forth in Section 2.4(e).

“Loan Documents” means this Agreement, the Control Agreements, each Borrowing Base Certificate, each Security Agreement, each Guaranty, any note or notes executed by a Borrower in

 

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connection with this Agreement and payable to Lender, any subordination agreement, and any other instrument or agreement entered into, now or in the future, by any Loan Party in connection with this Agreement (but specifically excluding agreements for Bank Products).

“Loan Manager Service” means ▇▇▇▇▇▇’s proprietary automated loan management program that may from time to time be entered into between a Borrower at such time and Lender.

“Loan Party” means any Borrower or any Guarantor.

“Loan Party Group” means (a) each Loan Party, (b) the parent of each Loan Party, (c) any Affiliate or Subsidiary of any Loan Party, (d) any guarantor of the Obligations, (e) the owner of any collateral securing any part of the Obligations, and (f) any officer, director or agent acting on behalf of any of the parties referred to in items (a) through (e) with respect to the Credit Facility.

“Margin Stock” as defined in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.

“Material Adverse Effect” means (a) a material adverse effect in the business, operations, results of operations, assets, liabilities or financial condition of the Loan Parties, taken as a whole, (b) a material impairment of the ability of Loan Parties to perform their obligations under the Loan Documents to which they are a party or of Lender’s ability to enforce the Obligations or realize upon the Collateral (other than as a result of an action taken or not taken that is solely in the control of Lender), or (c) a material impairment of the enforceability or priority of the Liens of Lender with respect to all or a material portion of the Collateral.

“Material Amount” means $2,500,000.

“Material Indebtedness” means Indebtedness (other than the Revolving Loans) of a Loan Party in an aggregate principal amount exceeding the Material Amount. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of a Loan Party in respect of any Hedge Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that a Loan Party would be required to pay if such Hedge Agreement were terminated at such time.

“Maturity Date” means January 19, 2026.

“Maximum Credit” means $35,000,000.

“Monthly Average Excess Availability” means, for any one calendar month period commencing on the first day of such period, the daily average of the Excess Availability for such period.

“Net Recovery Percentage” means, as of any date of determination, the percentage of the book value of the inventory of a Borrower that is estimated to be recoverable in an orderly liquidation of such inventory net of all associated costs and expenses of such liquidation, such percentage to be determined as to each category of inventory and to be as specified in the most recent appraisal that is received by, and acceptable to, Lender.

 

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“Obligations” means (a) all loans (including the Revolving Loans), debts, principal, interest (including any interest that accrues after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), premiums, liabilities (including all amounts charged to any Loan Account), obligations (including reimbursement and indemnification obligations with respect to Letters of Credit whether or not contingent), fees, expenses (and any fees or expenses that accrue after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), guaranties, and all covenants and duties of any other kind and description owing by any Loan Party arising out of, under, pursuant to, in connection with, or evidenced by any Loan Document and whether or not for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due, and all other expenses or other amounts that any Loan Party is required to pay or reimburse by the Loan Documents or by law or otherwise in connection with the Loan Documents, and (b) all Bank Product Obligations, provided, that, notwithstanding anything to the contrary contained herein, the Obligations shall exclude any Excluded Swap Obligation. Without limiting the generality of the foregoing, the Obligations include the obligation to pay (i) the principal of the Revolving Loans, (ii) interest accrued on the Revolving Loans, (iii) the amount necessary to reimburse Lender for amounts paid or payable pursuant to Letters of Credit, (iv) Letter of Credit commissions, fees (including fronting fees) and charges, (v) Lender Expenses, (vi) fees payable under any Loan Document, and (vii) indemnities and other amounts payable by any Loan Party under any Loan Document. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all or any portion thereof and any extensions, modifications, renewals, or alterations of the Obligations, both prior and subsequent to any Insolvency Proceeding.

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001, as amended).

“Payment Conditions” means, at the time of determination with respect to any specified transaction or payment, the following:

 

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“Permitted Acquisition” means any acquisition by a Person of all or substantially all of the assets of (or of any division or business line of) any other Person, or the acquisition by a Person of all of the Equity Interests of any other Person (whether by means of a merger, consolidation, or otherwise); provided, that, as to any such acquisition, each of the following conditions is satisfied:

(a) as of the date of such acquisition and after giving effect thereto, no Event of Default exists or would exist and the proposed acquisition is consensual;

(b) Lender shall have received from the Company a written certificate, in form and substance satisfactory to Lender, showing that the Loan Parties (i) would be in compliance with the financial covenant(s) in Section 7 of this Agreement for the fiscal month ended immediately prior to the proposed date of consummation of such proposed acquisition regardless of whether such financial covenant(s) are required to be tested for such fiscal month, and (ii) are projected to be in compliance with the financial covenant(s) in Section 7 of this Agreement for each of the 12 fiscal months in the period ended one year after the proposed date of consummation of such proposed acquisition assuming that such financial covenant(s) will be required to be tested in each such fiscal month, provided, that, such certificate shall include reasonably detailed calculations with respect to such financial covenant(s) and the calculation of the financial covenant(s) shall be on a pro forma basis (including pro forma adjustments arising out of events which are directly attributable to such proposed acquisition, are factually supportable, and are expected to have a continuing impact, in each case, determined as if the acquisition had been effective at the beginning of the relevant period and as are acceptable to Lender) created by adding the historical financial statements of the Loan Parties and their Subsidiaries to the historical consolidated financial statements of the Person to be acquired (or the historical financial statements related to the assets to be acquired) pursuant to the proposed acquisition;

(c) Lender shall have received forecasted balance sheets, profit and loss statements, and cash flow statements of the Person or assets to be acquired, all prepared on a basis consistent with such Person’s (or assets’) historical financial statements, together with appropriate supporting details and a statement of underlying assumptions for the one year period following the date of the proposed acquisition, on a quarter by quarter basis), in form and substance (including as to scope and underlying assumptions) reasonably satisfactory to Lender;

(d) as of the date of any such acquisition, each of the Payment Conditions shall be satisfied;

(e) the assets being acquired or the Person whose Equity Interests are being acquired did not have negative EBITDA during the 12 consecutive month period most recently ended prior to the date of the proposed acquisition for which financial statements are then available;

 

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(f) Lender shall have received written notice from the Company of the proposed acquisition at least 15 Business Days prior to the anticipated closing date of the proposed acquisition and, not later than five Business Days prior to the anticipated closing date of the proposed acquisition, copies of the acquisition agreement and other material documents relative to the proposed acquisition, which agreement and documents shall be reasonably acceptable to Lender;

(g) the assets being acquired, or the Person whose Equity Interests are being acquired, are useful in or engaged in, as applicable, the business of the Loan Parties or a business reasonably related thereto;

(h) the assets being acquired are located within the United States, or the Person whose Equity Interests are being acquired is organized in a jurisdiction located within the United States; and

(i) the purchase consideration payable in respect of all Permitted Acquisitions (including the proposed acquisition and including deferred payment obligations) shall not exceed $25,000,000 in the aggregate; provided, that, the purchase consideration payable in respect of any single acquisition or series of related purchases or other acquisitions shall not exceed $10,000,000 in the aggregate.

“Permitted Affiliate Payments” means each (a) payment made to Culp Fabrics (Shanghai) Co., Ltd., Culp Upholstery Fabrics – Haiti, Ltd., ▇▇▇▇ Home Fashions – Haiti, Ltd., and Rayonese Textile Inc., so long as (i) all such payments in the aggregate do not exceed the Permitted Affiliate Payments Basket per fiscal month of the Company, (ii) such payment is made in the ordinary course of business of the Loan Parties in accordance with historical practices, and (iii) no Event of Default exists at the time of or after giving effect to such payment, and (b) other payment, so long as (i) at the time of and after giving effect to such payment, the Payment Conditions are satisfied and (ii) such payment is made in the ordinary course of business of the Loan Parties in accordance with historical practices.

“Permitted Affiliate Payments Basket” means $10,000,000; provided, that, if the trailing twelve month consolidated net sales of the Company and its Subsidiaries at any time after the sixth calendar month anniversary of the Closing Date decreases by 10% or more (based off of the trailing twelve month consolidated net sales of the Company and its Subsidiaries as of October 30, 2022), the Lender may, in its sole discretion, reduce the Permitted Affiliate Payments Basket to an amount up to the percentage of such decrease in net sales times the amount of the Permitted Affiliate Payments Basket immediately prior to such reduction.

“Permitted Discretion” means a determination made in the exercise of reasonable (from the perspective of a secured asset-based lender) business judgment.

“Permitted Dispositions” means each of the following:

 

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“Permitted Indebtedness” means:

 

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“Permitted Investments” means each of the following:

 

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“Permitted Liens” means:

 

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“Permitted Tax Distribution” means that if the Equity Interests of a Loan Party are owned by a Person that is not a Loan Party and such Loan Party has been converted to a pass-through entity for tax purposes, distributions by such Loan Party solely for the payment of income taxes by any Person as a result of its direct or indirect ownership of the Equity Interests of such Loan Party in an amount not to exceed the Federal and State income tax paid or to be paid by the owner of Equity Interests in a Loan Party on taxable income earned by such Loan Party and attributable to such owner as a result of such Loan Party’s “pass-through” tax status, assuming the highest marginal income tax rate for Federal and State (for the State or States in which any equity owner is liable for income taxes with respect to such income) income tax purposes, after taking into account any deduction for State income taxes in calculating the Federal income tax liability and all other deductions, credits, deferrals and other reductions available to such owners from or through such Loan Parties.

“Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

“Projections” means forecasted balance sheets, profit and loss statements, and cash flow statements with respect to a Loan Party, all prepared on a basis consistent with its historical financial statements, and projected amounts available under the Borrowing Base, together with appropriate supporting details and a statement of underlying assumptions.

“Real Property” means any estates or interests in real property now owned or hereafter acquired by any Loan Party and the improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located.

 

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“Reserves” means, as of any date of determination, those reserves that Lender deems necessary or appropriate, in its Permitted Discretion and subject to Section 2.1(b), to establish and maintain (including reserves with respect to (a) sums that any Loan Party is required to pay under any Loan Document (such as taxes, assessments, insurance premiums, or, in the case of leased assets, rents or other amounts payable under such leases) and has failed to pay, (b) amounts owing by any Loan Party to any Person to the extent secured by a Lien on, or trust over, any of the Collateral (other than a Permitted Lien), which Lien or trust, in the Permitted Discretion of Lender likely would be pari passu or have a priority superior to Lender’s Liens (such as Liens or trusts in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes where given priority under applicable law) in and to such item of the Collateral), (c) amounts to the extent dilution calculated by Lender in its Permitted Discretion exceeds five percent, (d) obligations in respect of Bank Products, and (e) estimated costs relating to unpaid freight charges, warehousing or storage charges, taxes, duties, and other similar unpaid costs associated with the acquisition and import of Eligible In-Transit Inventory and estimated reclamation claims of unpaid sellers of Eligible In-Transit Inventory.

“Restricted Payment” means any (a) dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests of a Loan Party, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or on account of any return of capital to the stockholders, partners or members (or the equivalent Person thereof) of a Loan Party, or payment made to redeem, purchase, repurchase or retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire any Equity Interests of a Loan Party, or any setting apart of funds or property for any of the foregoing, or (b) the payment by a Loan Party of any management, advisory or consulting fee or of any extraordinary salary, bonus or other form of compensation, in each case, to any Person who is directly or indirectly a significant partner, shareholder, owner or executive officer of any such Person, to the extent such extraordinary salary, bonus or other form of compensation is not included in the corporate overhead of a Loan Party.

“Revolving Loans” means the revolving loans made by ▇▇▇▇▇▇ to a Borrower under this Agreement.

“Sanction” or “Sanctions” means any and all economic or financial sanctions, sectoral sanctions, secondary sanctions, trade embargoes and anti-terrorism laws imposed, administered or enforced from time to time by: (a) the United States of America, including those administered by OFAC, the U.S. State Department, the U.S. Department of Commerce, or through any existing or future Executive Order, (b) the United Nations Security Council, (c) the European Union, (d) the United Kingdom, or (e) any other Governmental Authority in any jurisdiction in which (i) any member of the Loan Party Group is located or conducts business, (ii) in which any of the proceeds of the Credit Facility will be used, or (iii) from which repayment of the Credit Facility will be derived.

 

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“Sanctioned Target” means any target of Sanctions, including: (a) Persons on any list of targets identified or designated pursuant to any Sanctions, (b) Persons, countries, or territories that are the target of any territorial or country-based Sanctions program, (c) Persons that are a target of Sanctions due to their ownership or control by any Sanctioned Target(s), or (d) otherwise a target of Sanctions, including vessels, planes and ships, that are designated under any Sanctions program.

“Security Agreement” means the Amended and Restated Security Agreement, dated of even date herewith, by and among each Loan Party and Lender, and any other agreement or instrument at any time executed by a Loan Party or any other Person in connection with this Agreement that is intended to (or purports to) create, perfect or evidence a Lien to secure the Obligations.

“SOFR” means a rate per annum equal to the secured overnight financing rate as administered by the SOFR Administrator.

“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).

“SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at ▇▇▇▇://▇▇▇.▇▇▇▇▇▇▇▇▇▇.▇▇▇, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time.

“SOFR Loans” means each portion of a Revolving Loan that bears interest at a rate determined by reference to Daily Simple SOFR.

“Solvent” means, with respect to any Person as of any date of determination, that (a) at fair valuations, the sum of such Person’s debts (including contingent liabilities) is less than all of such Person’s assets, (b) such Person is not engaged or about to engage in a business or transaction for which the remaining assets of such Person are unreasonably small in relation to the business or transaction or for which the property remaining with such Person is an unreasonably small capital, (c) such Person has not incurred and does not intend to incur, or reasonably believe that it will incur, debts beyond its ability to pay such debts as they become due (whether at maturity or otherwise), and (d) such Person is “solvent” or not “insolvent”, as applicable within the meaning given those terms and similar terms under applicable laws relating to voidable transfers, fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability (irrespective of whether such contingent liabilities meet the criteria for accrual under Statement of Financial Accounting Standard No. 5).

“Specified Real Property” means that certain real property owned by the Company located at ▇▇▇▇ ▇▇-▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.

“Subordinated Indebtedness” means any Indebtedness of any Loan Party incurred from time to time that is subordinated in right of payment to the Obligations and is subject to a subordination agreement in form and substance satisfactory to Lender, and is otherwise on terms (including maturity, interest, fees, repayment, covenants and subordination) satisfactory to Lender.

 

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“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the Equity Interests having ordinary voting power to elect a majority of the board of directors (or equivalent) of such corporation, partnership, limited liability company, or other entity.

“Supply Chain Financed Accounts” means accounts owing by a Supply Chain Financing Customer to a Borrower which have been purchased by the Supply Chain Financer pursuant to the Supply Chain Financing Agreement.

“Supply Chain Financer” means ▇▇▇▇▇ Fargo.

“Supply Chain Financing Agreement” means that certain Receivables Purchase Agreement, dated as of March 16, 2011, between the Company and the Supply Chain Financer, as amended, restated, supplemented, or otherwise modified prior to the Closing Date or as amended, restated, supplemented, or otherwise modified thereafter in accordance with the terms of Section 6.6(b) of this Agreement.

“Supply Chain Financing Customers” means HNI Corporation, an Iowa corporation, and its Affiliates.

“Swap Obligation” means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

“Termination Date” means the earliest to occur of (a) the Maturity Date, (b) the date on which the maturity of the Obligations is accelerated (or deemed accelerated) and the Commitment is terminated (or deemed terminated), or (c) the termination of the Commitment in accordance with the provisions of Section 3.5.

“UCC” means the Uniform Commercial Code as in effect in the State of New York and any successor statute, as in effect from time to time (except that terms used herein which are not otherwise defined herein and defined in the Uniform Commercial Code as in effect in the State of New York on the Closing Date shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Lender may otherwise determine).

“Unfinanced Capital Expenditures” means Capital Expenditures (a) not financed with the proceeds of any incurrence of Indebtedness (other than the incurrence of any Revolving Loans), the proceeds of any sale or issuance of Equity Interests or equity contributions, the proceeds of any asset sale (other than the sale of inventory in the ordinary course of business), or any insurance proceeds, and (b) that are not reimbursed by a third Person (excluding any Loan Party or any of its Affiliates) in the period such expenditures are made pursuant to a written agreement.

“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities.

 

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“Value” means, the lower of (a) cost computed on a first-in first-out basis in accordance with GAAP or (b) market value; provided, that, for purposes of the calculation of the Borrowing Base, (i) the Value of the inventory shall not include: (A) the portion of the value of inventory equal to the profit earned by any Affiliate on the sale thereof to a Borrower or (B) write-ups or write-downs in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary contained herein, the cost of the inventory shall be computed in the same manner and consistent with the most recent appraisal of the inventory that is received by, and acceptable to, Lender prior to the Closing Date, if any.

 

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Each request for a Revolving Loan or the issuance, amendment, renewal or extension of any Letter of Credit delivered by a Borrower shall be deemed to be a representation and warranty by each Borrower that the conditions specified in Section 3.2 have been satisfied on and as of the date of the applicable Revolving Loan or issuance, amendment, renewal or extension of a Letter of Credit and after giving effect thereto. The making of any Revolving Loan or the issuance, amendment, renewal or extension of any Letter of Credit shall not be deemed a modification or waiver by Lender of any of the terms of any Loan Document or any Event of Default or Default.

Each Loan Party represents and warrants to Lender the following:

 

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Unless otherwise hereafter agreed in writing by ▇▇▇▇▇▇:

 

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[Continued on following page.]

 

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The parties have caused this Agreement to be executed as of the date on page 1.

LOAN PARTIES:	▇▇▇▇, INC., as a Borrower
	By:
	Name:		▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
	Title:		EVP, CFO, and Treasurer
	READ WINDOW PRODUCTS, LLC, as a Guarantor
	By:		▇▇▇▇, INC., its sole member and manager
	By:
	Name:		▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
	Title:		EVP, CFO, and Treasurer
	Address:
	▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
	▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
	Attention: ▇▇▇ ▇▇▇▇▇▇▇, Chief Financial Officer
	Email: ▇▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇

 

[CULP—CREDIT AGREEMENT]

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LENDER:	▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, a national banking association
	By:
	Name:		▇▇▇▇ ▇▇▇▇▇▇▇▇
	Title:		Authorized Signatory
	Address:
	▇▇▇ ▇. ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇
	▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
	Attention: Relationship Manager – Culp
	Email: ▇▇▇▇▇.▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇

 

[CULP—CREDIT AGREEMENT]

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SCHEDULE 1.1(a)
TO
CREDIT AGREEMENT

Definition of Eligible Accounts

“Eligible Accounts” means accounts created by a Borrower in the ordinary course of its business that arise out of such Borrower’s sale of goods or rendition of services or acquired by a Borrower in a Permitted Acquisition that in each case at the time of creation or acquisition and at all times thereafter satisfy the criteria set forth below as determined by Lender in its Permitted Discretion. Except as otherwise agreed by ▇▇▇▇▇▇, Eligible Accounts shall not include the following:

 

	Schedule 1.1(a)-1
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In determining the amount to be included, Eligible Accounts shall be calculated net of customer deposits, unapplied cash, taxes, finance charges, service charges, discounts, credits, allowances, and rebates.

 

 

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SCHEDULE 1.1(b)

TO

CREDIT AGREEMENT

Definitions of Eligible Inventory, Eligible In-Transit Inventory, and Eligible Raw Material Inventory

“Eligible In-Transit Inventory” means those items of inventory that do not constitute Eligible Inventory solely because the criteria set forth in clauses (c) and (e) of the definition of “Eligible Inventory” are not satisfied with respect to such inventory, but as to which,

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“Eligible Inventory” means inventory of a Borrower consisting of finished goods held for resale in the ordinary course of the business of such Borrower that at all times satisfy the criteria set forth below as determined by Lender in its Permitted Discretion. Except as otherwise agreed by Lender, any inventory shall not be included in Eligible Inventory if:

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“Eligible Raw Material Inventory” means those items of inventory that do not constitute Eligible Inventory solely because they do not constitute finished goods, but which are goods that are first quality raw materials.

 

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SCHEDULE 2.5
TO
CREDIT AGREEMENT

Fees and Expenses

 

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SCHEDULE 2.7
TO
CREDIT AGREEMENT

SOFR Replacement

Defined terms used in this Schedule 2.7 that are not otherwise defined in this Agreement are set forth at the end of this Schedule 2.7.

“Benchmark” means, initially, Daily Simple SOFR, provided, that, if a Benchmark Transition Event, has occurred with respect to Daily Simple SOFR or the then-current Benchmark,

 

	Schedule 2.7-1
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then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has become effective pursuant to the provisions of this Schedule 2.7.

“Benchmark Administrator” means, initially, the Federal Reserve Bank of New York, or any successor administrator of the then-current Benchmark or any insolvency or resolution official with authority over such administrator.

“Benchmark Replacement” means the sum of: (a) the alternate rate of interest that has been selected by Lender as the replacement for the then-current Benchmark; and (b) the spread adjustment or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by Lender, in each case, giving due consideration to (i) any selection or recommendation by the Relevant Governmental Body at such time for a replacement rate, the mechanism for determining such a rate, the methodology or conventions applicable to such rate, or the spread adjustment, or method for calculating or determining such spread adjustment, for such rate, or (ii) any evolving or then-prevailing market convention for determining a rate of interest as a replacement to the then-current Benchmark, the methodology or conventions applicable to such rate, or the spread adjustment, or method for calculating or determining such spread adjustment, for such alternate rate for U.S. dollar-denominated syndicated or bilateral credit facilities at such time; provided, that, if the Benchmark Replacement as determined as provided above would be less than zero, then the Benchmark Replacement shall be deemed to be zero.

“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the timing and frequency of determining rates and making payments of interest, prepayment provisions, and other technical, administrative or operational matters) that Lender decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by Lender in a manner substantially consistent with market practice (or, if Lender decides that adoption of any portion of such market practice is not administratively feasible or if Lender determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as ▇▇▇▇▇▇ decides is reasonably necessary in connection with the administration of this Agreement).

“Benchmark Replacement Date” means the earlier to occur of the following events with respect to the then-current Benchmark:

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“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark: a public statement or publication of information by or on behalf of the Benchmark Administrator or a regulatory supervisor for the Benchmark Administrator announcing that (a) the Benchmark Administrator has ceased or will cease to provide the Benchmark permanently or indefinitely or (b) the Benchmark is no longer representative.

“Benchmark Unavailability Period” means, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to the then-current Benchmark and solely to the extent that the Benchmark has not been replaced with a Benchmark Replacement, the period (a) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the Benchmark for all purposes hereunder in accordance with this Schedule 2.7 and (b) ending at the time that a Benchmark Replacement has replaced the Benchmark for all purposes hereunder pursuant to this Schedule 2.7.

“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System and/or the Federal Reserve Bank of New York, or any successor thereto.

 

 

 

 

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SCHEDULE 3.1
TO
CREDIT AGREEMENT

Conditions Precedent to Initial Revolving Loans and Letter of Credit

The obligation of Lender to make its initial Revolving Loans (or issue any Letter of Credit) on the Closing Date is subject to the satisfaction of the conditions precedent to all Revolving Loans and Letters of Credit provided for in Section 3.2 and each of the following conditions precedent (except as ▇▇▇▇▇▇ may otherwise agree in writing):

 

	Schedule 3.1-1
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SCHEDULE 5.1
TO
CREDIT AGREEMENT

Financial and Collateral Reporting

Each Loan Party will deliver, or cause to be delivered, to Lender each of the following:

 

	Schedule 5.1-1
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Any documents, schedules, invoices or other papers delivered to Lender may be destroyed or otherwise disposed of by Lender one year after the same are delivered to Lender.

Each Loan Party and Lender agree that the delivery of a Borrowing Base Certificate through Lender’s electronic platform or portal, subject to Lender’s authentication process, or by such other electronic method as may be directed by ▇▇▇▇▇▇ from time to time, or by such other electronic input of information necessary to calculate the Borrowing Base as may be directed by ▇▇▇▇▇▇ from time to time, shall in each case be used for purposes of the obligations of Borrowers to deliver Borrowing Base Certificates hereunder, with the same legal effect as if such Borrowing Base Certificate had been manually executed by a Borrower and delivered to Lender.

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