SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ ]
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
.........Culp, Inc..............................................................
(Name of Registrant as Specified in Charter)
.........Franklin, N. Saxon Senior Vice President and Corporate Secretary.......
(Name of Person(s) Filing Proxy Statement)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11:
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Set forth the amount on which the filing fee is calculated and state how it was
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
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(Logo of CULP appears here)
101 South Main Street
Post Office Box 2686
High Point, North Carolina 27261-2686
Telephone (910) 889-5161
DEAR SHAREHOLDERS:
You are cordially invited to attend the 1996 Annual Meeting of
Shareholders. It will be held at the Radisson Hotel, 135 South Main Street, High
Point, North Carolina on Tuesday, September 17, 1996 at 9:00 a.m. local time.
In the accompanying materials, you will find a Notice of Annual Meeting
of Shareholders, as well as a Proxy Statement relating to the business to be
covered at the Annual Meeting. Shareholders will be asked to (1) ratify the
appointment of the independent auditors, and (2) elect directors.
Whether or not you plan to attend the Annual Meeting, please complete,
date and sign your proxy card and return it promptly in the envelope provided.
If you attend the meeting, you may vote in person if you wish, even if you
previously returned your proxy.
We encourage you to attend the meeting. We look forward to meeting and
talking with many of you there.
Sincerely,
By:/s/ Robert G. Culp, III
ROBERT G. CULP, III
Chairman and Chief Executive Officer
(Logo of CULP appears here)
101 South Main Street
Post Office Box 2686
High Point, North Carolina 27261-2686
Telephone (910) 889-5161
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD
September 17, 1996
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Culp, Inc. (the "company") will
be held at the Radisson Hotel, 135 South Main Street, High Point, North Carolina
on Tuesday, September 17, 1996 at 9:00 a.m. local time, for the purpose of
considering and acting on the following matters:
(1) To ratify the appointment of KPMG Peat Marwick LLP as the
independent auditors of the company for the current fiscal
year; and
(2) To elect three (3) directors to serve until the 1999 Annual
Meeting;
(3) To transact such other business as may properly come before
the meeting, or any adjournment or adjournments thereof.
Only shareholders of record as of the close of business on July 11,
1996, are entitled to notice of and to vote at the Annual Meeting and any
adjournment or adjournments thereof.
Whether or not you expect to be present at the Annual Meeting, please
complete, date and sign the enclosed form of proxy and return it promptly in the
enclosed envelope. If you attend the meeting, your proxy will be returned to you
upon request.
The Proxy Statement accompanying this notice sets forth further
information concerning the items listed above and the use of the enclosed proxy.
You are urged to study this information carefully.
The Annual Report of the company also accompanies this notice.
By Order of the Board of Directors.
By:/s/ Franklin N. Saxon
FRANKLIN N. SAXON
Senior Vice President and Corporate Secretary
July 19, 1996
(Logo of CULP appears here)
101 South Main Street
Post Office Box 2686
High Point, North Carolina 27261-2686
Telephone (910) 889-5161
Proxy Statement
INTRODUCTION
This Proxy Statement is furnished to the shareholders of Culp, Inc.
(hereinafter sometimes referred to as the "company") by the company's Board of
Directors in connection with the solicitation of proxies for use at the Annual
Meeting of Shareholders of the company to be held on Tuesday, September 17, 1996
, at 9:00 a.m. at the Radisson Hotel, 135 South Main Street, High Point, North
Carolina, and at any adjournment or adjournments thereof. Action will be taken
at the Annual Meeting on the ratification of the appointment of independent
auditors, the election of certain directors, and any other business that
properly comes before the meeting.
This Proxy Statement and accompanying form of proxy are first being
mailed to shareholders on or about July 19, 1996.
Whether or not you expect to attend the Annual Meeting, please
complete, date and sign the accompanying form of proxy and return it promptly to
ensure that your shares are voted at the meeting. Any shareholder giving a proxy
may revoke it at any time before a vote is taken: (i) by duly executing a proxy
bearing a later date; (ii) by executing a notice of revocation in a written
instrument filed with the secretary of the company; or (iii) by appearing at the
meeting and notifying the secretary of the intention to vote in person. Unless a
contrary choice is specified, all shares represented by valid proxies received
pursuant to this solicitation, and not revoked before they are exercised, will
be voted for the ratification of the appointment of KPMG Peat Marwick LLP as the
independent auditors of the company for the current fiscal year, and for the
election of the three (3) directors named in this Proxy Statement. The proxy
also confers discretionary authority upon the persons named therein, or their
substitutes, with respect to any other business that may properly come before
the meeting. Unless otherwise stated herein, each matter submitted to the
shareholders requires the affirmative vote of a majority of the votes cast at
the Annual Meeting for approval. A shareholder abstaining from the vote on a
proposal will be counted as present for purposes of determining whether a quorum
is present, but will be counted as not having voted on the proposal in question.
This means that in cases where a majority of the shares represented is required
to approve a proposal, an abstention will have the effect of a vote against the
proposal in question.
The company will bear the entire cost of preparing this Proxy Statement
and of soliciting proxies. Proxies may be solicited by employees of the company,
either personally, by special letter, or by telephone. The company also will
request brokers and others to send solicitation material to beneficial owners of
the company's stock and will reimburse them for this purpose upon request.
1
VOTING SECURITIES
Only shareholders of record at the close of business on July 11, 1996
will be entitled to vote at the Annual Meeting or any adjournment or
adjournments thereof. The number of outstanding shares entitled to vote at the
meeting is 11,300,613.
The following table lists the beneficial ownership of the company's
common stock ("Common Stock") with respect to: (i) each person known by the
company to be the beneficial owner of more than five percent of such Common
Stock; and (ii) all executive officers, directors and nominees of the company as
a group, a total of 12 persons, as of July 11, 1996.
Number of Shares Percent of
Title of Name and Address of Beneficially Outstanding
Class Beneficial Owner Owned Shares
Common Stock, Robert G. Culp, III 3,634,309 (1) 31.9%
par value, 903 Forrest Hill Drive
$.05 per share High Point, NC 27262
Winsal & Company 3,048,750(2) 27.0%
c/o First Union Corporation
401 S. Tryon Street
Fiduciary Operations NC1151
Charlotte, NC 28288-1151
Dimensional Fund Advisors, Inc. 694,040(3) 6.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
First Bank System, Inc. 565,635 5.0%
601 2nd Ave., South
Minneapolis, MN 55402-4302
T. Rowe Price Associates, Inc. 697,662(4) 6.2%
100 East Pratt Street
Baltimore, Maryland 21289-1009
All executive officers, 4,327,425(5) 37.6%
directors and nominees
as a group (12 persons)
(1) These shares include all of the shares (3,048,750) listed below that also
are beneficially owned in the name of Winsal & Company as trustee of the
Robert G. Culp, Jr. Family Trust, all of which shares Robert G. Culp, III
has the right to vote and jointly (with Winsal & Company) has the right
to invest. (See Note (2) below); also includes 63,338 shares held of
record by Susan B. Culp, the wife of Mr. Culp, the beneficial ownership
of which shares Mr. Culp disclaims, and includes 92,500 shares subject to
options owned by Mr. Culp that are immediately exercisable.
(2) All of these shares also are included in the shares listed above for
Robert G. Culp, III (See Note (1) above). Includes 1,029,375 shares held
of record by Winsal & Company for the benefit of Judith C. Walker, sister
of Robert G. Culp, III; 825,000 shares held of record by Winsal & Company
for the benefit of Harry R. Culp, brother of Robert G. Culp, III, and
1,194,375 shares held of record by Winsal & Company for the benefit of
Robert G. Culp, III, all of which shares Robert G. Culp, III has the
right to vote and jointly (with Winsal & Company) has the right to
invest.
2
(3) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 694,040 shares of
Culp, Inc. stock as of April 30, 1996, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation
Group Trust, investment vehicles for qualified employee benefit plans,
all of which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(4) These securities are owned by various individual and institutional
investors as of April 30, 1996, which T. Rowe Price Associates, Inc.
(Price Associates) serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For purposes of the
reporting requirements of the Securities Exchange Act of 1934, Price
Associates is deemed to be a beneficial owner of such securities;
however, Price associates expressly disclaims that it is, in fact, the
beneficial owner of such securities.
(5) Includes 220,338 shares subject to options owned by certain officers and
directors that are immediately exercisable.
INDEPENDENT AUDITORS
The Board of Directors recommends that the shareholders ratify the
board's appointment of KPMG Peat Marwick LLP to serve as the auditors for the
company for the fiscal year ending April 27, 1997. The Audit Committee
recommended such appointment to the board. KPMG Peat Marwick LLP served as the
independent auditors for the company for the last five fiscal years.
Representatives of the firm are expected to attend the Annual Meeting and will
have the opportunity to make any statements they consider appropriate and to
respond to shareholders' questions.
ELECTION OF DIRECTORS
The number of directors constituting the board has been fixed at ten by
the company's shareholders in accordance with the company's bylaws.
The company's bylaws provide that the Board of Directors shall be divided
into three classes of directors with staggered three-year terms, so that one
class or approximately one-third of the Board of Directors will be elected every
year. At the Annual Meeting the shareholders will elect three (3) directors and
each will serve for a term of three years (until the 1999 Annual Meeting of
Shareholders) or until his successor shall be elected and shall qualify. Two of
the three directors whose terms expire at the 1996 annual Meeting of
Shareholders (Baxter P. Freeze and Franklin N. Saxon) have been nominated for
re-election. In addition, Harry R. Culp has been nominated to to serve a
three-year term.
In the absence of specifications to the contrary, proxies will be voted
for the election of each of the three (3) nominees listed in the table below. An
equal number of votes will be cast for each nominee except as noted below, and
the persons who receive the highest number of votes for election at the Annual
Meeting will be elected as directors. If, at or before the time of the meeting,
any of the nominees becomes unavailable for any reason, the proxy holders have
the discretion to vote for a substitute nominee or nominees. The board currently
knows of no reason why any of the nominees listed below is likely to become
unavailable.
The North Carolina Business Corporation Act (the "Corporation Act")
provides that when cumulative voting applies, shareholders are "entitled to
multiply the number of votes they are entitled to cast by the number of
directors for whom they are entitled to vote and cast the product for a single
candidate or distribute the product among two or more candidates." Cumulative
voting procedures will not be followed at the Annual Meeting unless a
shareholder calls for cumulative voting as provided in the Corporation Act. The
Corporation Act sets forth the procedure by which a shareholder may call for
cumulative voting as follows:
3
A shareholder or proxy who has the right to cumulate his votes announces
in open meeting, before voting for directors starts, his intention to
vote cumulatively; and if such announcement is made, the chair shall
declare that all shares entitled to vote have the right to vote
cumulatively and shall announce the number of shares present in person
and by proxy, and shall thereupon grant a recess of not less than one
hour nor more than four hours, as he shall determine, or of such other
period of time as is unanimously then agreed upon.
If any shareholder announces his intention to vote his shares on a cumulative
basis, the proxy holders may, in their discretion, vote the shares to which such
proxy relates on a basis other than equally for each of the nominees listed
below and for less than all such nominees, and in such event the proxy holders
shall cast such votes in a manner that would tend to elect the greatest number
of such nominees (or any substitutes therefor in the case of unavailability) as
the number of votes cast by them would permit.
4
Nominees, Directors and Executive Officers
The following table sets forth certain information with respect to the three (3)
nominees for election to the Board of Directors, the seven (7) other directors,
and the executive officers of the company:
Shares and
Percent of
Common Stock
Year Year Beneficially
Became Term Owned as of
Name and Age Position with Company (1) Director Expires July 11, 1996 Notes
- ------------ ------------------------- -------- ------- ------------- -----
Nominees
Harry R. Culp, 44 N/A N/A N/A N/A (2)
Baxter P. Freeze, 76 Director 1972 1996 273,638 (3)
2.4%
Franklin N. Saxon, 43 Senior Vice President and Chief 1987 1996 32,000 (2)(4)
Financial Officer; Treasurer;
Secretary; Director
Directors and
Executive Officers
Andrew W. Adams, 56 Senior Vice President of 1989 1997 20,313 (2)(5)
Corporate Development; Director
Robert G. Culp, III, 49 Chairman of the Board and 1972 1997 3,634,309 (6)
Chief Executive Officer; (31.9%)
Director
Howard L. Dunn, Jr., 58 President and Chief Operating 1972 1998 290,147 (2)(7)
Officer; Director 2.6%
Earl M. Honeycutt, 78 Director 1972 1997 6,565 (2)(8)
Patrick H. Norton, 74 Director 1987 1997 33,166 (2)(9)
Earl N. Phillips, Jr., 56 Director 1992 1998 10,500 (2)(10)
Judith C. Walker, 53 Director 1993 1996 5,625 (2)(11)
Bland W. Worley, 78 Director 1983 1998 8,162 (2)(12)
Kenneth M. Ludwig, 43 Senior Vice President - Human N/A N/A 13,000 (2)(13)
Resources; Assistant Secretary
- ------------------------------------------------------------------
(1) Officers of the company are elected by the Board of Directors each
year. The present officers were elected by the board on June 18, 1996.
(2) Less than one percent (1%)
5
(3) Includes 183,094 shares held of record by Anne C. Freeze, wife of Mr.
Freeze, the beneficial ownership of which shares Mr. Freeze disclaims, and 5,625
shares subject to options owned by Mr. Freeze that are immediately exercisable.
(4) Includes 13,000 shares subject to options owned by Mr. Saxon that are
immediately exercisable, and 18,684 shares owned through the
company's 401(k) plan.
(5) Includes 13,000 shares subject to options owned by Mr. Adams that are
immediately exercisable.
(6) Includes 3,048,750 shares held of record by Winsal & Company for the
benefit of Robert G. Culp, III, Judith C. Walker and Harry R. Culp, all
of which shares Robert G. Culp, III has the right to vote and jointly
(with Winsal & Company) has the right to invest; includes 63,338 shares
held of record by Susan B. Culp, wife of Robert G. Culp, III, the
beneficial ownership of which shares Mr. Culp, III disclaims, and
92,500 shares subject to options owned by Mr. Culp that are immediately
exercisable.
(7) Includes 66,715 shares owned by Patricia Dunn, wife of Mr. Dunn,
and 58,563 shares subject to options owned by Mr. Dunn that are
immediately exercisable.
(8) Includes 940 shares held of record by Virginia Honeycutt, wife of Mr.
Honeycutt, the beneficial ownership of which Mr. Honeycutt disclaims;
and 4,025 shares subject to options owned by Mr. Honeycutt that are
immediately exercisable.
(9) Includes 5,625 shares subject to options owned by Mr. Norton that are
immediately exercisable.
(10) Includes 5,625 shares subject to options owned by Mr. Phillips that are
immediately exercisable.
(11) Includes 5,625 shares subject to options owned by Ms. Walker that are
immediately exercisable.
(12) Includes 100 shares owned by Ada Worley, wife of Mr. Worley, and 3,750
shares subject to options owned by Mr. Worley that are immediately
exercisable.
(13) Includes 13,000 shares subject to options owned by Mr. Ludwig that are
immediately exercisable.
Nominees:
HARRY R. CULP has been practicing dentistry in High Point since July
1981. He is the brother of Robert G. Culp, III, and sister of Judith C. Walker.
He has served previously as a director of the company from September 18, 1990
to September 28, 1993.
BAXTER P. FREEZE, SR. served as president of Commonwealth Hosiery
Mills, Inc., a manufacturer of hosiery, in, Randleman, North Carolina, for
41 years until his retirement in 1996. He continues to serve as Chairman of the
Board.
FRANKLIN N. SAXON joined the company in 1983 as its controller and
assistant secretary. Mr. Saxon served as controller until 1985, when the
board elected him vice president and chief financial officer. The board elected
Mr. Saxon treasurer in 1985, and he was elected as a director in 1987, and as
secretary in 1995. The board elected Mr. Saxon to the position of senior
vice president in June, 1996.
Other Officers and Directors:
ANDREW W. ADAMS joined the company in 1986, serving first as vice
president of the Industrial Fabrics division and later as vice president of
operations for the Upholstery Fabrics division. In 1988, the board elected
Mr. Adams vice
6
president-marketing of the company, and in 1989 he became a member of the Board
of Directors. He was elected to the position of senior vice
president-manufacturing by the board in 1993. He now holds the position of
senior vice-president of corporate development.
ROBERT G. CULP, III is one of the founders of the company and was
executive vice president and secretary until 1981 when he was elected by the
board to serve as president. The board elected Mr. Culp chief operating
officer in 1985, and chief executive officer in 1988. In 1990, the Board of
Directors elected Mr. Culp chairman of the board. Mr. Culp serves as a member
of the local board of directors of First Union National Bank of North Carolina.
He is the brother of Judith C. Walker and Harry R. Culp.
HOWARD L. DUNN, JR. is one of the founders of the company and
served as vice president of manufacturing and product development from
1972 until 1988, when the board elected Mr. Dunn executive vice president.
The board elected Mr. Dunn president and chief operating officer in 1993.
EARL M. HONEYCUTT served as president of Amoco Fabrics and Fibers
Company, a textile manufacturing subsidiary of Amoco Chemical Corporation,
Atlanta, Georgia, for 15 years until his retirement in 1983.
PATRICK H. NORTON has served since 1981 as senior vice president of
sales and marketing and a member of the board of directors of La-Z-Boy Chair
Company, a furniture manufacturer, Monroe, Michigan. Mr. Norton currently serves
as a co-chairman of the Home Furnishings Council and a member of the board of
directors of the American Furniture Manufacturers Association.
EARL N. PHILLIPS, JR. is co-founder and has served as president of
First Factors Corporation, an asset-based lending firm located in High
Point, North Carolina, since 1982. He also serves as a member of several
Boards of Directors, including First Union National Bank of North Carolina.
JUDITH CULP WALKER was a practicing attorney with Keziah, Gates and
Samet in High Point, North Carolina from 1987 through May, 1995. Prior to
joining Keziah, Gates and Samet, Ms. Walker was an attorney with Wyatt, Early,
Harris, Hauser and Wheeler in High Point. She is the sister of Robert G. Culp,
III.
BLAND W. WORLEY served as chief executive officer of
BarclaysAmericanCorporation, Charlotte, North Carolina from 1975 until 1982 and
as chairman of the board of that corporation until his retirement in 1985.
BarclaysAmericanCorporation is a financial services company.
KENNETH M. LUDWIG joined the company in 1985 as director of
personnel. The board elected Mr. Ludwig vice president-human resources in
1986, and assistant secretary in 1995. The board elected Mr. Ludwig to the
position of senior vice president-human resources in June, 1996.
Board Committees and Attendance
There are four standing committees of the Board of Directors:
Executive Committee, Audit Committee, Compensation Committee, and Nominating
Committee.
The Executive Committee, the members of which are Messrs. Culp, Dunn,
Saxon, and Adams, may exercise the full authority of the Board of Directors when
the board is not in session, except for certain powers related to borrowing,
electing certain officers, and other powers that may not lawfully be delegated
to board committees.
Messrs. Freeze, Honeycutt and Worley serve on the Audit Committee.
The function of the Audit Committee is to review the scope of the audits and
the findings of the independent auditors. The auditors meet with the Audit
Committee to
7
discuss audit and financial reporting issues. The committee also reviews the
company's significant accounting policies, major internal accounting controls,
reports from the company's internal auditors, the Annual Report to shareholders,
and the Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
The Compensation Committee approves matters relating to compensation,
including fringe benefits and benefit plans for management and directors of the
company, and reports to the Board of Directors from time to time as to its
recommendation on compensation and policies for both management and directors.
The committee also administers the company's stock option plans. The members of
this committee are Messrs. Freeze, Honeycutt and Worley.
The members of the Nominating Committee, which recommends nominees for
election to the Board of Directors, are Messrs. Culp, Norton, and Worley. The
nominees for election to the Board of Directors contained in this Proxy
Statement have been chosen by the Nominating Committee. Recommendations from
shareholders for nominees to the Board of Directors will be considered by the
Nominating Committee if made in writing addressed to any member of the
Nominating Committee at the company's main office. In order to be considered,
such recommendations must be received at least 120 days prior to the date of the
meeting at which directors are to be elected.
During the fiscal year ended April 28, 1996, the Board of Directors had
four (4) meetings; the Audit Committee, four (4) meetings; the Compensation
Committee, three (3) meetings, and the Nominating Committee, one (1) meeting.
Each board member attended at least 75% of the aggregate number of the meetings
of the Board of Directors and of the committees on which he served. Under
current management practices, the Executive Committee exists mainly to act in
place of the board in cases where time constraints or other considerations make
it impractical to convene a meeting of the entire board or to obtain written
consents from all board members. The Executive Committee held several informal
meetings during fiscal 1996, and took action on one occasion by written consent.
All significant management decisions requiring action by the Board of Directors
were considered and acted upon by the full board.
8
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth
compensation paid by the company in the forms specified therein for the years
ended April 28, 1996, April 30, 1995, and May 1, 1994 to (i) the chief executive
officer of the company and (ii) the company's four other most highly compensated
executive officers.
SUMMARY COMPENSATION TABLE
================================================================================
Annual Compensation Long Term Compensation All Other
Name and Salary Bonus Option Grants Compensation
Principal Position Year $ $ # $(1)
Robert G. Culp, III 1996 210,000 210,000 12,000 16,920(2)(3)
Chairman of the Board; 1995 204,000 204,000 37,000 15,989
Chief Executive Officer 1994 197,700 197,700 10,000 13,239
Howard L. Dunn 1996 175,000 175,000 8,000 22,640(2)(3)
President and 1995 169,000 169,000 25,000 10,420
Chief Operating Officer 1994 163,000 163,000 7,000 6,621
Andrew W. Adams 1996 140,000 105,000 5,000 2,980
Senior Vice President - 1995 135,000 101,250 14,000 4,596
Manufacturing 1994 125,000 93,750 4,000 4,065
Franklin N. Saxon 1996 111,000 66,600 5,000 10,383(3)
Senior Vice President and 1995 107,000 64,200 13,000 8,530
Chief Financial Officer; 1994 102,000 61,200 4,000 7,719
Treasurer; Secretary
Kenneth M. Ludwig 1996 96,800 58,080 5,000 3,448(3)
Senior Vice President - 1995 93,100 55,860 13,000 2,584
Human Resources; 1994 88,100 52,860 4,000 2,212
Assistant Secretary
(1) Includes the company's matching contribution to such officers' accounts
under the Employee Retirement Builder 401(k) Plan.
(2) Includes annual premiums of $7,500 paid by the company for split-dollar
life insurance on the life of Mr. Culp, and $10,000 for split-dollar life
insurance on the life of Mr. Dunn.
.
(3) Includes reportable interest on deferred compensation of $6,432 for Mr
Culp; $9,641 for Mr. Dunn; $7,464 for Mr. Saxon; and $449 for Mr. Ludwig.
================================================================================
9
Option Grants Table. The following table sets forth certain
information concerning grants of stock options to the executive officers named
in the Summary Compensation Table during the year ended April 28, 1996.
STOCK OPTION GRANTS IN FISCAL 1996
===============================================================================
% of Total Potential Realizable Value at
Options Assumed Annual Rates of
Options Granted to Exercise or Stock Price Appreciation for
Granted Employees in Base Price Expiration Option Term (1)
(1)
Name (#) Fiscal Year (%) ($/Sh) Date 5%($) 10%($)
- ---- -------- --------------- ------------- ----------- ----------- ----------
Robert G. Culp, III 12,000 16.7 8.53 7-02-00 16,334 47,417
Howard L. Dunn, Jr. 8,000 11.1 7.75 7-02-05 38,991 98,812
Andrew W. Adams 5,000 6.9 7.75 7-02-05 24,370 61,757
Franklin N. Saxon 5,000 6.9 7.75 7-02-05 24,370 61,757
Kenneth M. Ludwig 5,000 6.9 7.75 7-02-05 24,370 61,757
(1) Rounded to nearest thousand.
================================================================================
Option Exercises and Year-End Value Table. The following table sets
forth certain information concerning exercises of stock options during fiscal
1996 by the executive officers named in the Summary Compensation Table, and
options held by such officers at the end of fiscal 1996.
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND FISCAL YEAR OPTION VALUES
Number of Value of Unexercised
Unexercised Options In-the-Money Options
Shares Acquired Value at Fiscal Year-End(#) at Fiscal Year-End($)(1)
on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------ --------------- ----------- ------------- ----------- -------------
(2) (2)
Robert G. Culp, III -0- -0- 80,500 37,000 526,845 377,390
Howard L. Dunn, Jr. -0- -0- 50,563 26,000 381,632 275,100
Andrew W. Adams -0- -0- 8,000 15,000 17,000 155,750
Franklin N. Saxon -0- -0- 8,000 14,000 17,000 142,800
Kenneth M. Ludwig 26,814 190,694 8,000 14,000 17,000 142,800
- ----------------------------------------------
(1) Closing price of company stock at April 28, 1996 was $13.00.
(2) Includes options granted under the company's Performance-Based Option Plan,
which options will not become exercisable unless (a) the company meets
certain earnings growth rates over the period from fiscal 1995 through
fiscal 1997, or (b) the option-holder remains employed by the company until
2003.
================================================================================
10
PERFORMANCE COMPARISON
The following graph shows changes over the five-year period ending
April 28, 1996 in the value of $100 invested in (1) the Common Stock of the
company, (2) the NASDAQ Market Index, and (3) the Textile Manufacturing Index
reported by Media General Financial Services, Richmond, Virginia, consisting of
twenty-three companies (including the company) in the textile industry. The
graph shows year-end values for an investment in each of the three investments
described, assuming the reinvestment of all dividends and excluding any trading
commissions or taxes.
CULP, INC.
COMPARISON OF TOTAL RETURN TO SHAREHOLDERS
April 28, 1991 to April 28, 1996
(Comparison Chart appears here. Plot poins are below.)
1991 1992 1993 1994 1995 1996
Culp 100 143 200 325 276 368
Media General Textile Mfg. 100 148 160 147 142 144
NASDAQ 100 121 139 155 180 257
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Severance Protection Plan. In September 1989, the company adopted a
Severance Protection Plan, which covers officers and key management associates
("Executives") of the company. The Severance Protection Plan provides for the
company and covered Executives to enter into written agreements that do not
become effective except upon a change in control (as defined in such agreements)
of the company. If a change in control occurs, the agreements provide that the
Executive will be entitled to continued employment with the company with the
same basic responsibilities and compensation as before the change in control for
a period of one year. If the Executive is terminated, demoted or has his pay or
benefits reduced for reasons other than good cause, or if the Executive
terminates his employment voluntarily after serving nine months of the one-year
employment period, the Executive is entitled to a lump sum payment equal to the
Executive's base salary plus bonus during the twelve months immediately
preceding the termination of employment. The plan does not prevent the company
from terminating the Executive for cause at any time. The purpose of the
Severance Protection Plan is to ensure the company continuity of management and
the Executive continuity of employment in the event of any actual or threatened
change in control of the company. The plan is not intended to alter materially
the compensation and benefits a covered Executive could reasonably expect in the
absence of such a change in control. As of April 28, 1996, the company's
potential obligation pursuant to the Severance Protection Plan was $1,475,910,
which is the amount that would be expended by the company under the Plan if all
of the designated executives were terminated or otherwise entitled to benefits
after a change in control of the company.
Compensation of Directors. Directors who are also officers of the
company do not receive additional compensation for service as directors.
Non-employee directors receive $10,000 per year for participation as a member of
the Board of Directors, $2,000 per year for each committee on which they serve,
and an annual stock option grant of 1,875 shares.
Compensation Committee Interlocks and Insider Participation. The
members of the Compensation Committee are Baxter P. Freeze, Earl M.
Honeycutt and Bland W. Worley, all of whom are non-employee directors.
No member of the committee serves on the Compensation Committee of another
corporation that has a business relationship with the company.
Compensation Committee Report. The following is a report of the
Compensation Committee on compensation of executive officers for the fiscal year
ended April 28, 1996. The Compensation Committee has based compensation for the
company's executive officers on three primary factors: (1) compensation paid to
executive officers at comparable firms in the company's industry, (2) the
individual executive's performance and contribution to the company, and (3) the
financial performance of the company. In general, the committee has set base
salaries for executives relying most heavily on the first two factors mentioned
above, and has linked executive compensation to the third factor, the company's
financial performance, through incentive bonuses that are based solely on the
annual financial results of the company and periodic grants of stock options to
executive officers.
After reviewing published compensation surveys and proxy information
from companies included in the Performance Comparison data, and based on general
knowledge of the industry, the committee believes that the base salaries paid to
the company's executive officers are at or below than those generally prevailing
in the company's industry and for other manufacturing companies of similar size.
For this reason, a larger portion of the compensation paid to the company's
executives is based on incentive compensation that is dependent upon the
company's financial results. Even after including incentive compensation, the
committee believes that total compensation paid to the company's executives is
generally lower than the average total compensation paid to executives in the
company's industry. This is especially true of the company's Chief Executive
Officer and President.
Under the company's Management Incentive Plan, certain executive
officers are selected by the Compensation Committee (based on management
recommendations) to receive annual cash bonuses based on the company's financial
results. The Compensation Committee sets performance targets for the company in
terms of financial measurements judged by the committee to be relevant
indicators of management and corporate performance. Cash bonuses are then
awarded to the executives participating in the plan pursuant to a formula that
pays a percentage of the maximum bonus award established by the committee for
each participating executive based upon the percentages of the performance
targets the company achieves in a fiscal year. The cash bonuses shown in the
Summary Compensation Table were paid under this plan.
12
The committee maintains a policy of encouraging executives to make
significant investments in the company's stock, so that executive officers'
long-term interests will be aligned with those of the company's shareholders. To
that end, the committee periodically approves the grant of incentive stock
options to executive officers under the company's Stock Option Plan. During
fiscal 1995, the company adopted (and the shareholders approved) a
performance-based stock option plan, which provides for the one-time grant to
executives of options that could become exercisable in 1997, but only if the
company meets a targeted level of earnings growth (otherwise these options are
not exercisable until January 1, 2003).
The base salaries for all executive officers, including the Chief
Executive Officer, were increased for fiscal 1996 at modest rates that were
lower than the general rate of increase for all employees of the company.
Increases in overall compensation for executive officers were a reflection of
the improved operating results achieved by the company for fiscal 1996. The
company's net income for the year (the measure used for the performance target
for fiscal 1996) was at a level that allowed maximum bonus awards to be paid
pursuant to the Management Incentive Plan. While the committee expects that
total compensation for the company's executives will remain at or below industry
averages, the committee also recognizes that compensation may need to be
increased moderately in future years for the company to attract and retain
quality management.
The Compensation Committee approved grants of stock options to certain
officers and employees during fiscal 1996 to increase the opportunity of these
employees to participate in the growth of the company and the value of its
stock. The specific levels of options granted generally reflected the level of
responsibility of the employees and officers receiving the option awards and the
committee's judgment about the direct link between the employee's performance
and decisions and the company's financial results. For that reason, more senior
officers received larger awards, and the Chief Executive Officer received a
significantly larger award than other officers.
The compensation for the Chief Executive Officer is determined under
the same policies and practices used for all of the company's executive
officers, as discussed above. In addition, the company has provided a split
dollar life insurance plan for the Chief Executive Officer for many years, and
this program was continued in fiscal 1996. The committee believes this type of
plan provides a cost effective means of providing this benefit, since the
company expects to recover the cost of premium payments on the plan from the
cash value of the insurance policy.
The foregoing report has been furnished by the members of the
Compensation Committee:
Baxter P. Freeze, Chairman
Earl M. Honeycutt
Bland W. Worley
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Lease Transactions. The company leases three (3) industrial facilities
from partnerships owned by certain of the company's executive officers,
directors, principal shareholders and members of their immediate families.
Principals of these related entities include Esther R. Culp (mother of Robert
G. Culp, III), Robert G. Culp, III, Judith C. Walker (sister of Robert G.
Culp, III and director), and Harry R. Culp (brother of Robert G. Culp, III,
and nominee for election as a director). These facilities contain a total of
299,000 square feet of floor space. The company also leases its headquarters
office space (33,440 square feet) from Phillips Interests, Inc. Earl N.
Phillips, Jr. is the president and a director of Phillips Interests, Inc.
and a director of the company. (See "Certain Business Relationships").
The initial terms of the leases described above generally range from
five to ten years, with one or more five-year renewal options. Base rent per
year for the leased industrial facilities ranges from $1.70 to $2.43 per square
foot. The leases typically prohibit assignment or subletting without the
lessor's consent but such consent may not be unreasonably withheld. The lessor
is generally responsible for maintenance only of roof and structural portions of
the leased facilities. The industrial facilities are leased on a "triple net"
basis, with the company responsible for payment of all property taxes, insurance
premiums and maintenance, other than structural maintenance. The company
believes that at the time the leases and any lease renewals were executed the
terms of all such leases were no less favorable to the company than could have
been obtained in arms-length transactions with unaffiliated persons. The company
received independent appraisals to this effect with respect to the industrial
facility leases. At the time the company entered into the lease with Phillips
Interests, Inc. (January 19, 1990), Mr. Phillips was not a director of the
company. Related party leases are approved by the Audit Committee and are
reviewed annually by the Audit Committee. The total amounts of rent paid by the
company under the industrial facilities and office leases during fiscal 1996
were approximately$680,000 and $421,000, respectively.
Certain Business Relationships. The company had sales of approximately
$27.7 million, 7.9% of the company's net sales, to La-Z-Boy Chair Company in
fiscal 1996. Patrick H. Norton, a director, is that company's senior vice
president of sales and marketing and also serves on its board of directors.
Earl N. Phillips, Jr., a director of the company, is also a director
of a subsidiary of the company's lead bank, and an officer and director of the
lessor of the company's office facilities in High Point. The amount of interest
and other fees paid to the lead bank was approximately $2.6 million in fiscal
1996 and the loans payable to the bank and amounts guaranteed through letters of
credit by the bank at April 28, 1996 aggregated $48.4 million. Rent expense for
the company's office facilities in High Point was approximately $421,000 in
fiscal 1996.
Other Relationships. From time to time during fiscal 1996, the company
employed the law firm Keziah, Gates and Samet, which firm employed through May,
1995 Judith C. Walker, sister of Robert G. Culp, III, and a director of the
company.
REPORTS OF SECURITIES OWNERSHIP
Section 16(a) of the Securities Exchange Act of 1934 requires the
company's directors, its executive officers, any persons who hold more than ten
percent of the company's common stock and certain trusts (collectively,
"insiders") to report their holdings of and transactions in the company's Common
Stock to the Securities and Exchange Commission (the "SEC"). Specific due dates
for these reports have been established, and the company is required to disclose
in this proxy statement any late filings and any failures to file that have
occurred since April 30, 1995.
Insiders must file three types of ownership reports with the SEC:
initial ownership reports, change-in-ownership reports and year-end reports.
Under the SEC's rules, insiders must furnish the company with copies of all
Section 16(a) reports that they file. Based solely on a review of copies of
these reports and on written representations the company has received, the
company believes that since April 30, 1995, its insiders have complied with all
applicable Section 16(a) reporting requirements.
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===============================================================================
YOUR DIRECTORS RECOMMEND VOTES "FOR"
o THE RATIFICATION OF KPMG Peat Marwick LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR FISCAL 1997
o THE THREE NOMINEES FOR DIRECTOR
================================================================================
15
SHAREHOLDER PROPOSALS FOR 1996 MEETING
Shareholders may submit proposals appropriate for shareholder action
at the company's Annual Meeting consistent with the regulations of the
Securities and Exchange Commission and the company's bylaws. The nominees named
in this Proxy Statement are those chosen by the Nominating Committee of the
Board of Directors. Nominations may also be made by shareholders in accordance
with the company's bylaws. The bylaws require that such nominations must be
received by the company at least 120 days prior to the Annual Meeting and shall
include certain biographical and other information about the persons nominated
as specified in the bylaws. For shareholder proposals and nominations for
director to be considered for inclusion in the Proxy Statement for the 1997
Annual Meeting, they must be received by the company no later than April 27,
1997. Such proposals should be directed to Culp, Inc., Attention: Franklin N.
Saxon, Vice President and Chief Financial Officer, 101 South Main Street, Post
Office Box 2686, High Point, North Carolina 27261.
OTHER MATTERS
The company's management is not aware of any matter which may be
presented for action at the Annual Meeting other than the matters set forth
herein. Should any matters requiring a vote of the shareholders arise, it is
intended that the accompanying proxy will be voted in respect thereof in
accordance with the best judgment of the person or persons voting the proxy,
discretionary authority to do so being included in the proxy.
By Order of the Board of Directors,
By: /s/ Franklin N. Saxon
FRANKLIN N. SAXON
Senior Vice President and Chief Financial Officer
- --------------------------------------------------------------------------------
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
SOLICITED, AND TO EACH PERSON REPRESENTING THAT AS OF THE RECORD DATE FOR THE
ANNUAL MEETING HE OR SHE WAS A BENEFICIAL OWNER OF SHARES OF THE COMPANY, ON
WRITTEN REQUEST, A COPY OF THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K TO THE
SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE CONSOLIDATED FINANCIAL
STATEMENTS AND SCHEDULES THERETO. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO
CULP, INC., ATTENTION: FRANKLIN N. SAXON, SENIOR VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER, 101 SOUTH MAIN STREET, P. O. BOX 2686, HIGH POINT, NORTH
CAROLINA 27261.
16
Front
P R O X Y
CULP, INC.
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert G. Culp, III and Franklin N. Saxon, and
each of them, attorneys and proxies with full power of substitution, to act and
vote as designated below the shares of common stock of Culp, Inc. held of record
by the undersigned on July 11, 1996, at the Annual Meeting of Shareholders to be
held on September 17, 1996, or any adjournment or adjournments thereof.
1. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG Peat Marwick LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR FISCAL 1997.
( ) FOR ( ) AGAINST ( ) ABSTAIN
2. ELECTION OF DIRECTORS:
( ) FOR the 3 nominees listed below ( ) WITHHOLD AUTHORITY to vote
(except as marked to the contrary) for the 3 nominees listed below.
(Instruction: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
Harry R. Culp, Baxter P. Freeze, Franklin N. Saxon
3. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
(continued on other side)
(continued from other side)
This proxy will be voted as directed herein. If no direction is made, this
proxy will be voted for the ratification of KPMG Peat Marwick LLP as independent
auditors in proposal 1, and for the nominees listed in proposal 2. If, at or
before the time of the meeting, any of the nominees listed above has become
unavailable for any reason, the proxies have the discretion to vote for a
substitute nominee or nominees.
Dated: , 1996
(SEAL)
Signature
(SEAL)
Signature
Please sign exactly as name appears on this card. If signing
as attorney, administrator, executor, guardian, or trustee,
please give such title. If signing on behalf of a corporation,
please give name and title of authorized officer signing.)
17
