SEC Filing | Culp Inc

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 1997

REGISTRATION NO. 333-18199

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

AMENDMENT NO. 2

TO
FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

CULP, INC.

(Exact name of registrant as specified in its charter)

NORTH CAROLINA 2221 56-1001967
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)

101 SOUTH MAIN STREET
HIGH POINT, NORTH CAROLINA 27261-2686
TEL: (910) 889-5161

(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

FRANKLIN N. SAXON
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
CULP, INC.
101 SOUTH MAIN STREET
HIGH POINT, NORTH CAROLINA 27261-2686
TEL: (910) 889-5161

(Name, address, including zip code, and telephone number, including
area code, of agent for service)

COPIES TO:

ROBIN L. HINSON DAVID M. CARTER
HENRY H. RALSTON HUNTON & WILLIAMS
ROBINSON, BRADSHAW & HINSON, P.A. RIVERFRONT PLAZA
1900 INDEPENDENCE CENTER 951 EAST BYRD STREET
CHARLOTTE, NORTH CAROLINA 28246 RICHMOND, VIRGINIA 23219-4074
TEL: (704) 377-2536 TEL: (804) 788-8200

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(e)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

(Redherring appears on the left side of the page rotated. The language is
as followed.)

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

[A PHOTOGRAPH OF JACQUARD
FABRIC PROVIDES A
BACKGROUND FOR THIS
PAGE.]

SUBJECT TO COMPLETION, DATED JANUARY 29, 1997

1,600,000 Shares

(Culp Logo)

Common Stock

Of the 1,600,000 shares of common stock (the "Common Stock") of Culp, Inc.
("Culp" or the "Company") offered hereby, 1,200,000 shares are being offered by
the Company and 400,000 shares are being offered by certain shareholders of the
Company (the "Selling Shareholders"). See "Selling Shareholders." The Company
will not receive any of the proceeds from the sale of shares offered by the
Selling Shareholders in this Offering (the "Offering").

The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "CFI." On January 27, 1997, the last reported sales price of
the Common Stock on the NYSE was $15.00 per share. See "Price Range of Common
Stock and Dividend Policy."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) SHAREHOLDERS

Per Share...................................... $ $ $ $
Total (3)...................................... $ $ $ $

(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."

(2) Before deducting expenses of this Offering, all of which are payable by the
Company, estimated at $500,000.

(3) The Selling Shareholders have granted the Underwriters an option,
exercisable within 30 days of the date hereof, to purchase up to an
additional 240,000 shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to Public,
Underwriting Discount and Proceeds to Selling Shareholders will be $ ,
$ and $ , respectively. See "Underwriting."

The Shares are being offered by the several Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to certain
conditions. Delivery of the shares is expected against payment therefor on or
about , 1997, at the offices of Wheat, First Securities, Inc.,
Richmond, Virginia.

Wheat First Butcher Singer Raymond James & Associates, Inc.

The date of this Prospectus is , 1997.

[PHOTOGRAPHS OF
THE COMPANY'S PRODUCTS
AND END USE
APPLICATIONS.]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. ANY SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

[A STYLIZED MAP OF THE WORLD
INDICATING THE COMPANY'S GEOGRAPHIC
CUSTOMER BASE OVERLAID ON A
FABRIC PATTERN BACKGROUND.]

PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS OTHERWISE INDICATED, ALL INFORMATION CONTAINED HEREIN ASSUMES NO EXERCISE
OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION OR OF OPTIONS TO PURCHASE COMMON
STOCK OUTSTANDING AS OF THE DATE OF THIS PROSPECTUS.

THE COMPANY

Culp is the largest manufacturer and marketer of furniture upholstery
fabrics in the world and is a leading producer of mattress fabrics (known as
mattress ticking). The Company's fabrics are used principally in the production
of residential and commercial furniture and bedding products, including sofas,
recliners, chairs, loveseats, sectionals, sofa-beds, office seating, panel
systems and mattress sets. From fiscal 1992 to fiscal 1996, the Company's net
sales increased at a compound annual rate of 16.4% from $191.3 million to $351.7
million and earnings per share increased at a compound annual rate of 38.0% from
$0.27 to $0.98. Through the most recent quarter ended October 27, 1996, the
Company has achieved 16 consecutive quarters of record earnings per share and 14
consecutive quarters of record net sales, based on comparative periods. Culp has
paid quarterly cash dividends since 1983, and the annual rate of dividends has
been increased each year since 1990.

Culp markets one of the broadest product lines in its industry, with a wide
range of fabric constructions, patterns, colors, textures and finishes. This
breadth is made possible by Culp's extensive manufacturing capabilities that
include a variety of weaving, printing and finishing operations and the ability
to produce various yarns and uncolored, unfinished base fabrics (known as greige
goods) used in its products. Culp's staff of over 50 designers uses
computer-aided design ("CAD") systems to develop the Company's own patterns and
styles. Culp's product line currently includes more than 3,000 upholstery fabric
patterns and 1,000 mattress ticking styles. Although Culp markets fabrics at
most price levels, the Company has emphasized fabrics that have a broad appeal
in the "good" and "better" price categories of furniture and bedding.

The Company's sales growth has occurred across a variety of product lines,
and Culp has developed its manufacturing capabilities with the flexibility to
take advantage of growth opportunities. For example, the Company has recently
experienced a substantial increase in sales of wet-printed flock upholstery
fabrics due to: (i) recent product development improvements in wet-printed flock
manufacturing processes that have enhanced the value of the product to the
consumer as an alternative to more expensive woven velvet fabrics, (ii) strong
international demand for these fabrics and (iii) disruption in the production of
wet-printed flock fabrics experienced by a major competitor that has reduced
available product supply on a near-term basis. To support further sales growth,
the Company intends to open a new facility that is expected to approximately
double its wet-printing capacity. In addition, the Company has experienced
significant growth in sales of printed jacquard upholstery fabrics and mattress
ticking. This increase has resulted from the product line expansion of printed
jacquard mattress ticking, a product category pioneered by the Company,
improvements in printing technologies and the integration of the acquisition of
Rayonese Textile Inc. ("Rayonese") in fiscal 1995.

Culp markets its products worldwide, with sales to customers in over 50
countries. The Company's international sales have increased from $44.0 million
in fiscal 1994 to $77.4 million in fiscal 1996 and were $45.9 million in the
first six months of fiscal 1997. Although shipments to U.S.-based customers
continue to account for most of the Company's sales, Culp's success in building
a global presence has led to an increasing proportion of sales to international
accounts (23.4% of net sales for the first six months of the current fiscal
year). The Company's network of 30 international sales agents represents Culp's
products in major furniture and bedding markets outside the United States.

Over the past five fiscal years, the Company has invested $73.5 million in
capital expenditures to expand its manufacturing capacity, install more
efficient production equipment and vertically integrate its operations. These
expenditures, which have reduced the Company's manufacturing costs, have
included the installation of narrow and wide-width weaving machines and
additional printing equipment to support the growth in woven and printed
upholstery fabrics and mattress ticking. The Company expects to spend
approximately $31 million in capital expenditures during fiscal 1997. A
substantial portion of fiscal 1997's planned expenditures is targeted to expand
the Company's capacity to support sales growth in wet-printed flock fabrics and
printed jacquard upholstery fabrics and mattress ticking and to vertically
integrate a key process in producing unprinted flock greige goods. As a result
of expenditures to date, the Company has been able to support a substantially
higher level of sales, as well as lower its production costs and enhance its
relative competitive position.

Culp has complemented its internal expansion with strategic acquisitions.
The most recent acquisitions include its Rossville/Chromatex business unit
("Rossville/Chromatex") in fiscal 1994 and Rayonese in fiscal 1995. Each of
these acquisitions has been successfully integrated into the Company's
operations and has contributed to Culp's growth.

Trends in upholstery fabrics and mattress ticking demand generally parallel
trends in demand for furniture and bedding. Culp believes that U.S. demographic
trends, particularly the maturation of the "baby boom" generation, will continue
to support long-term growth of the U.S. furniture and bedding industries.
Although the demand for home furnishings in more developed international
geographic regions such as Western Europe is relatively mature, major areas such
as Eastern Europe, the Middle East and Asia are experiencing significant
increases in sales of furniture and home furnishings. Consumers in these areas
are attracted to designs that mirror American tastes, and Culp has been able to
capitalize on this preference.

Management believes that Culp's position as a leading worldwide
manufacturer and marketer of upholstery fabrics and mattress ticking is the
result of the following competitive strengths: (i) broad product offering and
diverse manufacturing capabilities, (ii) manufacturing efficiency and vertical
integration, (iii) design innovation, (iv) diverse global customer base, (v)
distribution capability, (vi) commitment to customer service and (vii) the
ability to integrate acquisitions.

GROWTH STRATEGY

The Company's strategy for continued growth includes five key initiatives:

EXPAND WET-PRINTED FLOCK FABRIC CAPACITY. Culp plans to capitalize on the
increasing worldwide popularity of wet-printed flock fabrics through the
addition of wet-printing equipment and flock coating machinery. In November
1996, the Company's Board of Directors approved capital expenditures for a new
facility that will approximately double Culp's wet-printed flock fabric
capacity. The Company currently plans to begin production at this facility by
July 1997.

GROW INTERNATIONAL SALES. Culp is focusing on expanding its international
sales to capitalize on the growth in demand for furniture and bedding in many
markets outside the United States. Factors aiding Culp include a growing
preference for American designs, the relatively low importance of labor costs in
the Company's fabrics, the Company's overall manufacturing efficiency and Culp's
worldwide distribution capability. The Company plans to continue expanding its
international sales network and is exploring the establishment of distribution
facilities in certain areas outside the United States.

INCREASE CAPACITY FOR PRINTED JACQUARD FABRICS. The Company has experienced
significant growth in sales of printed jacquard mattress ticking and upholstery
fabrics. These fabrics feature designs printed on jacquard greige goods and
offer popular pricing and an appearance traditionally available only on more
expensive woven jacquard fabrics in which the design is woven into the fabric.
The Company's success with printed jacquard fabrics has been possible because of
the Company's diverse printing and finishing capabilities coupled with the
internal availability of jacquard greige goods. To support further sales growth
of these products, the Company is currently expanding capacity at Rayonese by
installing additional narrow and wide-width weaving machines to produce more
jacquard greige goods.

ENHANCE PRODUCT VALUE AND INCREASE VERTICAL INTEGRATION. Culp has
implemented a company-wide program in recent years designed to enhance the
competitive value of its upholstery fabrics and mattress ticking. The Company
believes that this initiative will continue to be vital to its future success in
increasing sales to existing customers as well as broadening its customer base.
This program involves a widespread effort to address manufacturing efficiency,
distribution capability, customer service and design innovation. The Company
believes that the continuation of this effort, including strategic initiatives
to expand vertical integration, will lead to further gains in market share.

PURSUE ADDITIONAL STRATEGIC ACQUISITIONS. The Company's growth has been
significantly enhanced by the integration of strategic acquisitions of
complementary businesses, including Rossville/Chromatex in fiscal 1994 and
Rayonese in fiscal 1995. The Company believes that the continuing trend toward
consolidation within its industry may offer additional opportunities to acquire
complementary businesses on a selective basis.

RECENT DEVELOPMENTS

In addition to the planned expansion of the Company's wet-printing capacity
described above, the Company recently received "best efforts" commitments from
its principal bank lenders, Wachovia Bank of North Carolina, N.A. and First
Union National Bank of North Carolina, to refinance its existing $66 million
credit facility with a $125 million syndicated five-year, unsecured,
multi-currency credit facility. Terms of the proposed new facility include
reduced interest costs, less restrictive financial covenants and additional
borrowing capacity to fund capital expenditures, working capital needs and other
corporate uses, including possible acquisitions. The agent for these lenders has
agreed to use commercially reasonable efforts to complete this refinancing,
which is expected to include several leading international lending institutions.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

The Company's principal executive offices are located at 101 South Main
Street, High Point, North Carolina 27261.

THE OFFERING

Common Stock offered by:
The Company.......................................................... 1,200,000 shares
The Selling Shareholders............................................. 400,000 shares
Common Stock to be outstanding after the Offering...................... 12,540,577 shares
NYSE symbol............................................................ "CFI"
Use of proceeds by the Company......................................... For expansion of facilities, equipment purchases,
possible future acquisitions, repayment of debt,
working capital and other general corporate purposes.
See "Use of Proceeds."

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

(in thousands, except per share data)

SIX MONTHS ENDED
FISCAL (1) OCT. 29, OCT. 27,
1992 1993 1994 1995 1996 1995 1996

STATEMENT OF INCOME DATA:
Net sales..................................... $191,311 $200,783 $245,049 $308,026 $351,667 $163,029 $195,733
Cost of sales................................. 161,204 168,599 202,426 253,345 289,129 134,724 160,691
Gross profit.................................. 30,107 32,184 42,623 54,681 62,538 28,305 35,042
Selling, general and administrative
expenses.................................... 24,597 24,203 27,858 33,432 39,068 18,129 22,568
Income from operations........................ 5,510 7,981 14,765 21,249 23,470 10,176 12,474
Interest expense.............................. 1,421 1,409 2,515 4,715 5,316 2,685 2,424
Interest income............................... (136) (29) (79) (64) (92) -- (117)
Other expense................................. 288 1 350 1,082 956 326 696
Income before income taxes.................... 3,937 6,600 11,979 15,516 17,290 7,165 9,471
Income taxes.................................. 964 2,099 4,314 5,741 6,310 2,650 3,551
Net income.................................... $ 2,973 $ 4,501 $ 7,665 $ 9,775 $ 10,980 $ 4,515 $ 5,920
Net income per share.......................... $ 0.27 $ 0.41 $ 0.69 $ 0.87 $ 0.98 $ 0.40 $ 0.52
Cash dividends per share...................... $ 0.049 $ 0.064 $ 0.080 $ 0.100 $ 0.110 $ 0.055 $ 0.065

Weighted average shares outstanding........... 10,827 10,875 11,076 11,203 11,234 11,209 11,304

OTHER DATA:
Capital expenditures.......................... $ 12,396 $ 11,938 $ 16,764 $ 18,058 $ 14,385 $ 5,090 $ 9,676
Depreciation.................................. 7,085 6,724 8,497 11,257 12,348 6,138 6,321
Net sales per employee (2).................... 108 111 118 118 125 60 64

AS OF OCTOBER 27, 1996
AS
ACTUAL ADJUSTED (4)

BALANCE SHEET DATA:
Working capital...................................................................................... $ 57,230 $ 57,230
Total assets......................................................................................... 219,527 219,527
Long-term debt, including current maturities......................................................... 79,991 63,571
Funded debt (3)...................................................................................... 74,612 58,192
Shareholders' equity................................................................................. 86,835 103,255

(1) The Company's fiscal year ends on the Sunday closest to April 30.
Accordingly, references to fiscal 1992, fiscal 1993, fiscal 1994, fiscal
1995 and fiscal 1996 refer to the fiscal years ended on May 3, 1992, May 2,
1993, May 1, 1994, April 30, 1995 and April 28, 1996, respectively.

(2) Net sales per employee represents net sales for the period divided by the
average number of employees. The average number of employees is calculated
using the number of employees at the beginning and end of each month in the
respective period.

(3) Funded debt is long-term debt, including current maturities, less restricted
investments, which are segregated industrial revenue bond funds pending
application by the Company.

(4) Gives effect to the sale of shares offered by the Company hereby. The $16.4
million estimated net proceeds from the sale of the shares offered by the
Company (after deduction for estimated underwriting discounts and
commissions and offering expenses) have been applied to reduce the balance
of the Company's revolving credit line (long-term debt) pending their
ultimate use. See "Use of Proceeds."

RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY. THIS
PROSPECTUS, INCLUDING INFORMATION INCORPORATED BY REFERENCE HEREIN, CONTAINS
CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), WHICH REPRESENT THE
COMPANY'S EXPECTATIONS OR BELIEFS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS
CONCERNING INDUSTRY PERFORMANCE, THE COMPANY'S OPERATIONS, PERFORMANCE,
FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES, MARGINS AND GROWTH IN
SALES OF THE COMPANY'S PRODUCTS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN
THIS PROSPECTUS THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S CONTROL, AND
ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT
FACTORS, INCLUDING THOSE DESCRIBED IN THIS "RISK FACTORS" SECTION.

ECONOMIC CONDITIONS. Demand for the Company's products generally is
dependent upon consumer demand for, and production levels of, upholstered
furniture and bedding products, which in turn fluctuate with U.S. and
international economic conditions and cycles. Demand generally is higher during
periods of economic strength and lower during periods of economic weakness or
uncertainty. Key economic conditions influencing demand for Culp's products are
housing starts, sales of existing homes, the level of consumer confidence,
population demographics, trends in disposable income, the level of consumer
spending, prevailing interest rates for home mortgages and the availability of
consumer credit. Adverse economic conditions could have a material adverse
effect on the Company.

COMPETITION. The markets for the Company's products are highly competitive.
Competitive factors include price, quality, product design and styling and
customer service. The Company's market share could be significantly affected by
any one or more of these factors, which could have a material adverse effect on
the Company. In addition, although the Company is the largest supplier of
upholstery fabric to the furniture industry and one of the largest suppliers of
mattress ticking to the bedding industry, some of the Company's competitors are
larger overall and have greater financial resources than the Company. Although
the Company is planning to expand its wet-printing capacity by adding an
additional facility, there can be no assurance that this facility will be
completed on schedule or that, once it is completed, this facility will be
successful. Additionally, there can be no assurance that other competitors will
not expand their capacity to produce wet-printed flock fabrics, thereby reducing
the Company's market opportunity. See "Business -- Competition."

PRICING AND AVAILABILITY OF RAW MATERIALS. Raw material costs make up more
than half of the Company's total production expenses. The Company is dependent
upon outside suppliers for most of its raw material needs. The Company is
subject to price increases and delays in receiving supplies of these materials.
Although most of the Company's raw materials are available from more than one
source, a disruption in the availability or price increases of raw materials
could have an adverse effect on the Company. In particular, the Company
currently relies on one supplier for the bulk of its flock greige goods (the
base fabric used in producing printed flock fabrics). Due to the limited supply
of flock greige goods, there can be no assurance that the Company will be able
to obtain sufficient quantities of this raw material at economical prices if its
existing supply is interrupted. Although the Company plans to begin operating
its own flock coating manufacturing line to produce flock greige goods during
the fourth quarter of fiscal 1997, the flock-coating process differs
substantially from other manufacturing processes used by the Company.
Accordingly, unforeseen technological difficulties or other matters could
materially delay the Company's production of flock greige goods.

Raw material prices increased during fiscal 1995 and 1996, and the Company
was unable to fully pass along to customers such increases through higher
selling prices. In certain cases, the Company has been able to offset, in whole
or in part, raw material price increases by increased production efficiencies or
a shift to different fabric constructions. There can be no assurance that
significant raw material price increases will not occur in the future or that
profit margins will not be adversely affected by such price increases. See
"Business -- Sources and Availability of Raw Materials."

ACQUISITION RISK. The Company evaluates acquisition opportunities in the
ordinary course of its business. Acquisitions involve numerous risks, including
difficulties in the assimilation of the operations and services of the acquired
companies, the expenses incurred in connection with the acquisition, the
diversion of management's attention from other business concerns and the
potential loss of key employees of the acquired company. There can be no
assurance that future acquisitions, if any, will be successfully integrated into
the Company's operations. In addition, there can be no assurance that the
Company will complete any future acquisitions or that acquisitions will
contribute favorably to the Company's operations and financial condition.

INTERNATIONAL BUSINESS RISKS. International sales have increased from $44.0
million in fiscal 1994 to $77.4 million in fiscal 1996. Such sales are subject
to certain international business risks, including possible unsettled political
conditions, expropriation, import and export restrictions, exchange controls,
inflationary economies and currency risks. The Company's business is generally
conducted in U.S. dollars. Accordingly, fluctuations in currency exchange rates
may adversely affect the ability of the Company to compete effectively with
firms located outside the United States. In particular, strengthening of the
U.S. dollar against foreign currencies could make the Company's products less
competitive on the basis of price in international markets.

ENVIRONMENTAL AND OTHER REGULATIONS. The Company is subject to federal,
state and local laws and regulations in the areas of safety, health and
environmental pollution controls. The Company treats dyeing waste in its
wastewater treatment system operated under governmental permits. Although the
Company believes it is in material compliance with these laws and regulations,
there can be no assurance that environmental requirements will not become more
stringent in the future or that the Company will not incur substantial costs to
comply with such requirements. A failure of the Company to comply with such laws
and regulations could subject it to liability ranging from monetary damages to
injunctive action, which could adversely affect the Company. See
"Business -- Environmental and Other Regulations."

DEPENDENCE UPON KEY PERSONNEL. The Company is dependent upon the continued
services of certain members of senior management, in particular those of Robert
G. Culp, III, Chairman and Chief Executive Officer, and Howard L. Dunn,
President and Chief Operating Officer, two of the founders of the Company. The
Company believes the loss of the services of key members of senior management
could have an adverse effect on the Company. In addition, the Company believes
that its future success will depend in large part upon its continued ability to
attract, retain and motivate additional employees. There can be no assurance
that the Company will be able to attract and retain sufficient qualified
personnel to meet its business needs. See "Management."

SIGNIFICANT SHAREHOLDER. Upon the completion of this Offering, assuming
that the Underwriters' over-allotment option is not exercised, Robert G. Culp,
III will beneficially own, directly and through voting and investment control of
certain shares held in trusts, 25.6% of the outstanding shares of the Common
Stock (23.7% if the Underwriters' over-allotment option is exercised).
Accordingly, Mr. Culp will be in a position to influence the election of the
Company's directors and the outcome of corporate actions requiring shareholder
approval. This concentration of ownership may have the effect of delaying or
preventing a change in control of the Company.

SHARES ELIGIBLE FOR FUTURE SALE. Sales of a substantial number of shares of
the Company's Common Stock in the public market after the Offering could
adversely affect the market price of the shares of Common Stock. All of the
12,540,577 shares of Common Stock to be outstanding upon completion of this
Offering will be freely tradeable without restriction unless held by affiliates
of the Company. All such shares held by affiliates of the Company are eligible
for sale in the public market, subject to the volume and other limitations set
forth in Rule 144 under the Securities Act. The Company, its directors and
executive officers, and certain shareholders, who in the aggregate own 4,095,043
shares, have agreed not to sell any shares of Common Stock (other than shares to
be sold in the Offering) for a period of 180 days from the date of this
Prospectus, subject to certain limited exceptions, without the prior written
consent of the Representatives of the Underwriters. The Company has granted
outstanding options to purchase a total of 588,410 shares of Common Stock, which
are currently vested or are subject to vesting based on performance criteria.
See "Underwriting" and Note 12 of Notes to Audited Consolidated Financial
Statements.

ANTI-TAKEOVER PROVISIONS. The Company's Articles of Incorporation and
Bylaws contain certain provisions that may have the effect of deterring a future
takeover of the Company, including the classification of the Board of Directors
into three classes. These provisions could limit the price that certain
investors might be willing to pay in the future for shares of Common Stock. In
addition, 10,000,000 shares of the Company's preferred stock may be issued in
the future without further shareholder approval and upon such terms and
conditions, and having such rights, privileges and preferences, as the Board of
Directors of the Company may determine. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could adversely affect the market price of shares of
Common Stock and could have the effect of making it more difficult for a third
party to acquire, or of discouraging a third party from acquiring, a majority of
the outstanding voting stock of the Company. The Company has no present plans to
issue any shares of preferred stock.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,200,000 shares of
Common Stock offered by the Company hereby are estimated to be $16.4 million
based on a $15.00 price per share after deducting the estimated underwriting
discount and offering expenses. The Company intends to use the net proceeds of
this Offering for capital expenditures (including expansion of facilities and
acquisition of equipment), possible future acquisitions, debt repayment and for
working capital and other general corporate purposes. Pending the ultimate
application of the net proceeds, the Company intends to apply the net proceeds
to reduce the outstanding balance of the Company's revolving line of credit
which currently bears interest at a spread over the one-month LIBOR and is
scheduled to mature on March 1, 2001. While the Company evaluates acquisition
opportunities in the ordinary course of its business, the Company has no present
understandings, agreements or commitments with respect to any such transaction.

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
October 27, 1996 on an actual basis and as adjusted to give effect to the sale
of the shares of Common Stock offered hereby at an assumed offering price of
$15.00 per share, after deduction of the estimated offering expenses and
underwriting discount, and the application of the net proceeds therefrom. The
information in the table below is qualified in its entirety by, and should be
read in conjunction with, the Consolidated Financial Statements (including the
Notes thereto) of the Company included elsewhere in this Prospectus.

AS OF OCTOBER 27, 1996
ACTUAL AS ADJUSTED

(IN THOUSANDS)
Cash and cash investments............................................................... $ 744 $ 744
Restricted investments (1).............................................................. $ 5,379 $ 5,379

Industrial revenue bonds and other obligations.......................................... $ 22,191 $ 22,191
Term loan............................................................................... 32,500 32,500
Revolving credit line................................................................... 24,300 7,880
Other................................................................................... 1,000 1,000
Long-term debt, including current maturities....................................... 79,991 63,571
Shareholders' equity:
Preferred stock, $0.05 par value...................................................... -- --
Common stock, $0.05 par value......................................................... 566 626
Capital contributed in excess of par value............................................ 17,081 33,441
Retained earnings..................................................................... 69,188 69,188
Total shareholders' equity......................................................... 86,835 103,255
Total long-term debt and shareholders' equity.................................... $166,826 $ 166,826

(1) Restricted investments were purchased with proceeds of industrial revenue
bond issues and are invested pending application of such proceeds to project
costs or repayment of the bonds.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

The Common Stock is listed for trading on the NYSE under the symbol "CFI."
Prior to December 31, 1996, the Common Stock was quoted on the Nasdaq National
Market ("Nasdaq") under the symbol "CULP." The following table sets forth, for
the periods indicated, the high and low sales prices of the Common Stock as
reported on Nasdaq for dates prior to December 31, 1996 and on the NYSE for
dates thereafter and the cash dividends declared by the Company per outstanding
share of Common Stock.

CASH DIVIDEND
HIGH LOW DECLARED

FISCAL 1995:
First Quarter................................................................ $12.50 $ 7.25 $0.0250
Second Quarter............................................................... 9.25 7.50 0.0250
Third Quarter................................................................ 10.50 8.75 0.0250
Fourth Quarter............................................................... 9.75 8.50 0.0250

FISCAL 1996:
First Quarter................................................................ 10.00 7.75 0.0275
Second Quarter............................................................... 11.00 9.00 0.0275
Third Quarter................................................................ 11.50 9.50 0.0275
Fourth Quarter............................................................... 13.25 10.00 0.0275

FISCAL 1997:
First Quarter................................................................ 14.25 11.50 0.0325
Second Quarter............................................................... 14.38 11.75 0.0325
Third Quarter (through January 27, 1997)..................................... 17.00 13.50 0.0325

On January 27, 1997, the last reported sale price of the Common Stock on
the NYSE was $15.00 per share. The Company believes that as of October 27, 1996,
there were approximately 2,800 beneficial owners of the Company's Common Stock.

The Company has paid a quarterly cash dividend since its initial public
offering of Common Stock in 1983, and the annual rate of dividends has been
increased each year since 1990. The most recently declared quarterly dividend
was $0.0325 per share, which represents an annual dividend rate of $0.13 per
share.

SELECTED FINANCIAL DATA

The selected consolidated financial data, with the exception of net sales
per employee, as of May 3, 1992, May 2, 1993, May 1, 1994, April 30, 1995 and
April 28, 1996 and for each of the years in the five-year period ended April 28,
1996 are derived from, and are qualified by reference to, the consolidated
financial statements of the Company, which have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. The consolidated
financial statements as of April 30, 1995 and April 28, 1996 and for each of the
years in the three-year period ended April 28, 1996, and the report thereon, are
included elsewhere in this Prospectus. The selected consolidated financial data,
with the exception of net sales per employee, as of and for the six months ended
October 29, 1995 and October 27, 1996 are derived from the unaudited
consolidated financial statements of the Company. These consolidated financial
statements include all adjustments (consisting of normal recurring adjustments)
which the management of the Company considers necessary for a fair presentation
of the results of the periods. The consolidated financial statements as of
October 27, 1996 and for the six months ended October 29, 1995 and October 27,
1996 are included elsewhere in this Prospectus. The results for the six months
ended October 27, 1996 are not necessarily indicative of the results to be
expected for the entire fiscal year.

(UNAUDITED)
AS OF AND FOR THE AS OF AND FOR THE
YEAR ENDED SIX MONTHS ENDED
MAY 3, MAY 2, MAY 1, APRIL 30, APRIL 28, OCT. 29, OCT. 27,
1992 1993 1994 1995 1996 1995 1996

(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF INCOME DATA:
Net sales............................... $191,311 $200,783 $245,049 $ 308,026 $ 351,667 $163,029 $195,733
Cost of sales........................... 161,204 168,599 202,426 253,345 289,129 134,724 160,691
Gross profit............................ 30,107 32,184 42,623 54,681 62,538 28,305 35,042
Selling, general and administrative
expenses.............................. 24,597 24,203 27,858 33,432 39,068 18,129 22,568
Income from operations.................. 5,510 7,981 14,765 21,249 23,470 10,176 12,474
Interest expense........................ 1,421 1,409 2,515 4,715 5,316 2,685 2,424
Interest income......................... (136) (29) (79) (64) (92) -- (117)
Other expense........................... 288 1 350 1,082 956 326 696
Income before income taxes.............. 3,937 6,600 11,979 15,516 17,290 7,165 9,471
Income taxes............................ 964 2,099 4,314 5,741 6,310 2,650 3,551
Net income.............................. $ 2,973 $ 4,501 $ 7,665 $ 9,775 $ 10,980 $ 4,515 $ 5,920
Net income per share.................... $ 0.27 $ 0.41 $ 0.69 $ 0.87 $ 0.98 $ 0.40 $ 0.52
Cash dividends per share................ $ 0.049 $ 0.064 $ 0.080 $ 0.100 $ 0.110 $ 0.055 $ 0.065

Weighted average shares
outstanding........................... 10,827 10,875 11,076 11,203 11,234 11,209 11,304

OTHER DATA:
Capital expenditures.................... $ 12,396 $ 11,938 $ 16,764 $ 18,058 $ 14,385 $ 5,090 $ 9,676
Depreciation............................ 7,085 6,724 8,497 11,257 12,348 6,138 6,321
Net sales per employee (unaudited)
(1)................................... 108 111 118 118 125 60 64

BALANCE SHEET DATA:
Cash and cash investments............... $ 3,951 $ 7,219 $ 2,693 $ 1,393 $ 498 $ 930 $ 744
Working capital......................... 26,665 34,942 37,949 38,612 56,953 46,373 57,230
Total assets............................ 93,195 106,548 164,948 194,999 211,644 200,404 219,527
Long-term debt, including current
maturities............................ 16,817 26,582 61,562 73,742 82,041 76,692 79,991
Funded debt (2)......................... 16,817 26,582 58,639 72,947 76,791 76,692 74,612
Shareholders' equity.................... 50,651 54,521 62,649 71,396 81,446 75,351 86,835

(1) Net sales per employee represents net sales for the period divided by the
average number of employees. The average number of employees is calculated
using the number of employees at the beginning and end of each month in the
respective period.

(2) Funded debt is long-term debt, including current maturities, less restricted
investments, which are segregated industrial revenue bond funds pending
application by the Company.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following analysis of the financial condition and results of operations
should be read in conjunction with the Consolidated Financial Statements
(including the Notes thereto) included elsewhere in this Prospectus.

OVERVIEW

The Company's net sales have increased from $245.0 million in fiscal 1994
to $308.0 million in fiscal 1995 and $351.7 million in fiscal 1996, with $195.7
million in net sales for the first six months of fiscal 1997 compared to $163.0
million in the first six months of fiscal 1996. Net income per share has
increased from $0.69 in fiscal 1994 to $0.87 in fiscal 1995 and $0.98 in fiscal
1996, and net income per share for the first six months of fiscal 1997 was $0.52
compared to $0.40 for the first six months of fiscal 1996.

Culp's position as a leading worldwide manufacturer and marketer of
upholstery fabrics and mattress ticking has been achieved through internal
expansion and the successful integration of strategic acquisitions. In fiscal
1995, the Company completed the acquisition of Rayonese in a transaction valued
at $10.5 million. The acquisition of Rayonese substantially increased the
Company's capacity to manufacture primarily jacquard greige goods used by the
Company in the production of its printed fabrics, including upholstery fabrics
and mattress ticking. In fiscal 1994, the Company completed the purchase of
Rossville/Chromatex in a transaction valued at $39.3 million. This acquisition
significantly added to the Company's capacity to produce jacquard and dobby
upholstery fabrics marketed principally for residential furniture. In January
1997, the Company acquired a 107,000 square-foot building in Lumberton, North
Carolina and had executed purchase orders for most of the new equipment for this
facility. This facility is expected to require capital expenditures of $9
million and to approximately double the Company's capacity to produce
wet-printed flock upholstery fabric. The Company has experienced increasing
demand for this product, particularly in international markets. The Company
anticipates that the Lumberton facility will commence operations by July 1997.

The Company is organized into four business units: (i) Culp Textures (which
manufactures jacquard and dobby woven fabrics used primarily for residential and
commercial furniture), (ii) Rossville/Chromatex (which manufactures jacquard and
dobby woven fabrics used for residential furniture), (iii) Velvets/Prints (which
manufactures a broad range of printed and velvet fabrics used primarily for
residential and juvenile furniture) and (iv) Culp Home Fashions (which
principally manufactures mattress ticking). The Company believes that this
decentralized business unit structure, adopted in fiscal 1994, has been
effective in increasing business with existing customers, as well as in
broadening the Company's customer base.

The Company's business, which is directly linked to the demand for
upholstery fabrics and mattress ticking, is cyclical in nature and can be
significantly affected by changes in overall economic conditions. See "Risk
Factors -- Economic Conditions."

RESULTS OF OPERATIONS

The following table sets forth certain items in the Company's consolidated
statements of income as a percentage of net sales.

FIRST SIX MONTHS
FISCAL FISCAL FISCAL FISCAL FISCAL
1994 1995 1996 1996 1997

Net sales.................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.............................................. 82.6 82.2 82.2 82.7 82.1
Gross profit............................................... 17.4 17.8 17.8 17.3 17.9
Selling, general and administrative expenses............... 11.4 10.9 11.1 11.1 11.5
Income from operations..................................... 6.0 6.9 6.7 6.2 6.4
Interest expense........................................... 1.0 1.5 1.5 1.6 1.3
Interest income............................................ 0.0 0.0 0.0 0.0 (0.1)
Other expense, net......................................... 0.1 0.4 0.3 0.2 0.4
Income before income taxes................................. 4.9 5.0 4.9 4.4 4.8
Income taxes............................................... 1.8 1.8 1.8 1.6 1.8
Net income................................................. 3.1% 3.2% 3.1% 2.8% 3.0%

The following table sets forth the Company's net sales by major product
category and business unit for each of the Company's three most recent fiscal
years and the first six months of fiscal 1996 and fiscal 1997. The table also
sets forth the percent change in net sales for the Company's major product
categories of upholstery fabrics and mattress ticking and business units within
each major category for comparative periods.

PERCENT CHANGE
FIRST
NET SALES FISCAL FISCAL SIX MONTHS
FIRST SIX MONTHS 1994 1995 FISCAL
FISCAL FISCAL FISCAL FISCAL FISCAL TO TO 1996
1994 (1) 1995 (2) 1996 1996 1997 1995 1996 TO 1997

(DOLLARS IN THOUSANDS)
Upholstery fabrics:
Culp Textures................... $ 78,317 $ 85,125 $ 84,384 $ 40,299 $ 44,802 8.7% (0.9)% 11.2%
Rossville/Chromatex............. 31,047 63,765 74,203 33,318 39,887 N/A 16.4% 19.7%
Velvets/Prints.................. 97,036 106,803 125,701 55,604 75,100 10.1% 17.7% 35.1%
206,400 255,693 284,288 129,221 159,789 23.9% 11.2% 23.7%
Mattress ticking:
Culp Home Fashions.............. 38,649 52,333 67,379 33,808 35,944 35.4% 28.8% 6.3%
Net sales.................... $245,049 $308,026 $351,667 $163,029 $195,733 25.7% 14.2% 20.1%

(1) Rossville/Chromatex was acquired on November 1, 1993.

(2) Rayonese (part of Culp Home Fashions) was acquired on March 6, 1995.

FIRST SIX MONTHS OF FISCAL 1997 COMPARED WITH FIRST SIX MONTHS OF FISCAL 1996

NET SALES. Net sales for the first six months of fiscal 1997 increased
$32.7 million, or 20.1%, from the prior year period. The increase in the
Company's net sales resulted from increased sales to existing customers as well
as sales to new accounts, particularly in the Company's Velvets/Prints and
Rossville/Chromatex business units. Net sales of upholstery fabrics for the
first six months of fiscal 1997 increased $30.6 million, or 23.7%, from the
prior year period. Each of the business units in this product category recorded
higher sales for the 1997 period compared to the first six months of fiscal
1996. Sales of mattress ticking for the first six months of fiscal 1997 rose
$2.1 million, or 6.3%, from the prior year period. International sales,
consisting primarily of upholstery fabrics, increased $11.9 million, up 34.9%,
from the year-earlier period. As a result of this increase, international sales
accounted for 23.4% of the Company's sales for the 1997 period compared with
20.9% for the prior year period.

GROSS PROFIT AND COST OF SALES. Gross profit for the first six months of
fiscal 1997 increased in both absolute dollars and as a percentage of net sales.
Factors contributing to the higher profitability included the increased
absorption of fixed costs as a result of the growth in sales as well as the
benefit from the Company's ongoing capital investment in modernized equipment
designed to lower manufacturing costs and raise productivity. During the first
six months of fiscal 1997, the prices of the Company's raw materials stabilized,
and in some cases declined.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased as a percentage of net sales in the first six
months of fiscal 1997 compared to 1996. Although the Company is continuing to
emphasize cost-containment programs, planned increases in expenses related to
resources for designing new fabrics and higher selling commissions related to
international sales contributed to the higher ratio of expenses to net sales.
The accrual for incentive-based compensation plans through the first six months
of fiscal 1997 was also a significant factor contributing to the increase in
these expenses.

INTEREST EXPENSE. Interest expense, net of interest income, of $2.3 million
for the first six months of fiscal 1997 was down from $2.7 million in the 1996
period due to lower average borrowings outstanding.

OTHER EXPENSE. Other expense increased $370,000 for the first six months of
fiscal 1997 compared to a year ago, principally due to the non-recurring
write-off of certain fixed assets totalling $175,000 and the recognition in the
1996 period of $100,000 in gain related to an indemnification for an
environmental matter.

NET INCOME. Net income increased 31.1% to $5.9 million in the first six
months of fiscal 1997 compared to $4.5 million for the prior year period.

FISCAL 1996 COMPARED WITH FISCAL 1995

NET SALES. Net sales for fiscal 1996 increased by $43.6 million, or 14.2%,
compared to fiscal 1995. The Company's sales of upholstery fabrics increased
$28.6 million, or 11.2%, in fiscal 1996 compared to fiscal 1995. Sales from
Rossville/Chromatex and Velvets/Prints were up significantly from the prior
year, while Culp Textures' sales were down slightly. The increase of $15.0
million in sales from the Culp Home Furnishings business unit reflected higher
shipments to existing accounts and the additional sales from Rayonese. Sales
from the Culp Home Furnishings business unit for fiscal 1996 included $7.7
million from Rayonese, which was acquired on March 6, 1995. Rayonese contributed
$1.4 million to sales for the portion of fiscal 1995 in which it was included in
the Company's results. International sales, consisting primarily of upholstery
fabrics, increased to $77.4 million, up 33.5% from fiscal 1995. International
shipments accounted for 22.0% of the Company's sales for fiscal 1996, up from
18.8% in fiscal 1995. The base of the Company's international customers
continued to broaden, with sales to customers in over 50 countries during fiscal
1996.

GROSS PROFIT AND COST OF SALES. Gross profit for fiscal 1996 increased by
$7.9 million and remained constant as a percentage of net sales at 17.8%. The
cost of most raw materials generally rose throughout fiscal 1996, and the
Company was unable to offset much of the impact of these increases through
higher prices. Raw material price increases were offset by a shift in the
Company's product mix toward fabrics with higher gross margins and increased
production efficiencies. During the latter part of the year, the Company began
experiencing some easing in the rate of increase in the cost of raw materials.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased as a percentage of net sales for fiscal 1996.
Although the Company is continuing to emphasize cost-containment programs,
planned increases in expenses related to the design of new fabrics and higher
selling commissions related to international sales led to the higher ratio of
expenses to net sales.

INTEREST EXPENSE. Interest expense for fiscal 1996 rose 12.7% to $5.3
million. The increase principally reflected additional borrowings related to
funding the acquisition of Rayonese, capital expenditures and an increased level
of working capital needed to support increased sales. The Company experienced
generally lower prevailing interest rates during fiscal 1996.

NET INCOME. Net income increased 12.3% to $11.0 million in fiscal 1996
compared to $9.8 million in fiscal 1995.

FISCAL 1995 COMPARED WITH FISCAL 1994

NET SALES. Net sales in fiscal 1995 increased by $63.0 million, or 25.7%,
compared to fiscal 1994. The increase of $49.3 million in upholstery fabrics was
attributable primarily to the incremental sales of $32.7 million contributed by
Rossville/Chromatex, which was acquired on November 1, 1993. Excluding that
contribution, the Company's sales of upholstery fabrics increased $16.6 million,
or 8.0%. Shipments of each business unit within upholstery fabrics were up for
the year. The $13.7 million increase in sales in mattress ticking primarily
reflected higher shipments to existing accounts and, to a lesser degree, the
success of programs to broaden the customer base. Sales of mattress ticking for
fiscal 1995 included $1.4 million from Rayonese, which was acquired on March 6,
1995. International sales, consisting primarily of upholstery fabrics, increased
to $58.0 million, up 31.6%, from fiscal 1994. This category of sales represented
18.8% of total sales in fiscal 1995 and 18.0% of total sales in fiscal 1994.

GROSS PROFIT AND COST OF SALES. Gross profit for fiscal 1995 increased both
in absolute dollars and as a percentage of net sales. The Rossville/Chromatex
and Culp Home Fashions business units contributed significantly to those gains.
Gross margins for Culp Textures and Velvets/Prints were up, although not as
significantly. The Company experienced increased raw material prices during
fiscal 1995 which generally were not passed along to customers through price
increases.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses declined as a percentage of net sales for fiscal 1995.
The lower ratio of expenses primarily reflects a company-wide program to contain
these costs and operate more efficiently.

INTEREST EXPENSE. Interest expense for fiscal 1995 increased 87.5% to $4.7
million. The increase principally reflected the full-year inclusion of the bank
borrowings and financing provided by the seller related to the acquisition of
Rossville/Chromatex and increased capital expenditures. Significantly higher
prevailing interest rates also contributed to the increase in interest expense
for the year.

OTHER EXPENSE. Other expense for fiscal 1995 increased to $1.1 million
compared with $350,000 in fiscal 1994. The principal factors contributing to the
increased expense were amortization of goodwill related to the
Rossville/Chromatex acquisition and higher debt issue costs.

NET INCOME. Net income increased 27.6% to $9.8 million in fiscal 1995 from
$7.7 million in fiscal 1994.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY. Cash and cash investments were $744,000 as of October 27, 1996
compared to $498,000 at the end of fiscal 1996. Funded debt (long-term debt,
including current maturities, less restricted investments) decreased to $74.6
million at the close of the first six months of fiscal 1997 from $76.8 million
at the end of fiscal 1996. As a percentage of total capital (funded debt plus
shareholders' equity), the Company's borrowings amounted to 46.2% as of October
27, 1996 compared to 48.5% at the end of fiscal 1996. The Company's working
capital as of October 27, 1996 was $57.2 million compared to $57.0 million at
the end of fiscal 1996.

The Company's cash flow from operations was $16.2 million for the first six
months of fiscal 1997, consisting of $12.7 million from earnings (net income
plus depreciation, amortization and deferred income taxes) and $3.5 million from
changes in working capital. The funds from operations were used principally to
fund capital expenditures of $9.7 million and reduce long-term debt.

FINANCING ARRANGEMENTS. The Company has an unsecured loan agreement with
two banks, which provides for a $32.5 million five-year term loan and a $33.5
million revolving credit line with a five-year term. The term loan requires
monthly installments of $500,000 and a final payment of $6.5 million on March 1,
2001. The revolving credit line requires payment of an annual facility fee and
expires on March 1, 2001. Additionally, the term loan and the credit line
require payment of interest on any outstanding borrowings at an interest rate
based on a spread over the one-month LIBOR. As of October 27, 1996, the Company
had outstanding balances of $56.8 million under the bank facilities and an
additional $9.2 million in borrowings available under the revolving credit
facility. On December 17, 1996, the Company received "best efforts" commitments
from its principal bank lenders, Wachovia Bank of North Carolina, N.A. and First
Union National Bank of North Carolina, to refinance its existing $66 million
term loan and revolving line of credit with a $125 million syndicated five-year,
unsecured, multi-currency credit facility, which is expected to include several
leading international lending institutions. Terms of the proposed new facility
include reduced interest costs, less restrictive financial covenants and
additional borrowing capacity to fund capital expenditures, working capital
needs and other corporate uses, including possible acquisitions. Although the
agent for these lenders, Wachovia Bank of Georgia, N.A., has agreed to use
commercially reasonable efforts to complete this refinancing, subject to certain
conditions including the completion of satisfactory loan documentation, there
can be no assurance that this refinancing will be completed.

The Company also has a total of $21.6 million in currently outstanding
industrial revenue bonds ("IRBs"), which have been used to finance capital
expenditures. The IRBs are collateralized by restricted investments of $5.4
million as of October 27, 1996 and letters of credit for the outstanding balance
of the IRBs and certain interest payments due thereunder. Substantially all of
the bonds are due in one-time payments at various dates from 2008 to 2013, with
interest at variable rates at approximately 60% of the prime rate. In December
1996, the Company borrowed $3.5 million under an IRB to finance additional
jacquard weaving capacity at its West Hazelton, Pennsylvania plant, and the
Company expects to complete a $6.0 million IRB by the end of December 1996 to
finance the installation of flock coating equipment at its plant in Burlington,
North Carolina. The Company anticipates that it will finance capital
expenditures of approximately $8.0 million in connection with the Lumberton,
North Carolina wet-printing facility to be opened by July 1997 with an
additional IRB. After

the completion of these anticipated IRB transactions, the Company's outstanding
IRB debt will be approximately $40 million, the maximum outstanding amount of
such bonds allowed under federal tax law. Therefore, additional IRB financing
will not be available to the Company until the amount of its outstanding IRBs is
substantially reduced.

The Company's loan agreements require, among other things, that the Company
maintain certain financial ratios. The Company was in compliance with these
required financial covenants as of October 27, 1996 and as of the date of this
Prospectus.

As of October 27, 1996, the Company had three interest rate swap agreements
to reduce its exposure to floating interest rates on a $25 million notional
amount. The effect of these contracts is to "fix" the interest rate payable on
$25 million of the Company's bank borrowings at a weighted average rate of 7.1%.
The Company also enters into foreign exchange forward contracts to hedge against
currency fluctuations with respect to firm commitments to purchase machinery,
equipment and certain raw materials when those commitments are denominated in
foreign currencies.

CAPITAL EXPENDITURES. The Company maintains a significant program of
capital expenditures designed to increase capacity as needed, enhance
manufacturing efficiencies through modernization and increase the Company's
vertical integration. Capital expenditures were $16.8 million in fiscal 1994,
$18.1 million in fiscal 1995, $14.4 million in fiscal 1996 and $9.7 million
during the first six months of fiscal 1997. The Company expects that total
capital expenditures for fiscal 1997 will be approximately $31 million,
including the acquisition of, and purchase of equipment for, the Lumberton
facility. Although final budgets for fiscal 1998 have not been determined, the
Company is currently anticipating capital expenditures during fiscal 1998 of
approximately $20 million. The Company believes that cash flows from operations,
the net proceeds from the Company's sale of shares in the Offering and funds
available under existing credit facilities and committed IRB financings will be
sufficient to fund capital expenditures and working capital for the foreseeable
future.

INFLATION

The Company experienced generally higher costs of raw materials during
fiscal 1996 and 1995. Other operating expenses, such as labor, utilities and
manufacturing supplies, also rose over these periods. Competitive conditions did
not allow the Company to fully offset the impact of these increases through
higher prices, which put pressure on profit margins. Although the cost of the
Company's raw materials has stabilized during the first six months of fiscal
1997, and in some cases declined, the net incremental effect on margins will
continue to be influenced by raw material prices, other operating costs and
overall competitive conditions. See "Risk Factors -- Pricing and Availability of
Raw Materials."

SEASONALITY

The Company's business is slightly seasonal, with increased sales during
the Company's second and fourth fiscal quarters. This seasonality results from
one-week closings of the Company's manufacturing facilities, and the facilities
of most of its U.S. customers, during the first and third quarters for the July
4th and Christmas holiday weeks.

NEW ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation,"
which permits a change from the intrinsic value based method of accounting for
stock options (Accounting Principles Board Opinion No. 25) to a fair value based
method for employee stock option and similar equity investments. As an
alternative, the SFAS No. 123 allows the continued use of the intrinsic value
based method accompanied with pro forma disclosures of the fair value based
method. The Company plans to adopt this alternative commencing with the fiscal
year ending April 27, 1997.

The implementation of other new accounting standards will not have a
material impact on the Company's financial statements in fiscal 1997.

BUSINESS

Culp is the largest manufacturer and marketer of furniture upholstery
fabrics in the world and is a leading producer of mattress ticking. The
Company's fabrics are used principally in the production of residential and
commercial furniture and bedding products, including sofas, recliners, chairs,
loveseats, sectionals, sofa-beds, office seating, panel systems and mattress
sets. Culp markets one of the broadest product lines in its industry, with a
wide range of fabric constructions, patterns, colors, textures and finishes.
This breadth is made possible by Culp's extensive manufacturing capabilities
that include a variety of weaving, printing and finishing operations and the
ability to produce various yarns and greige goods used in its products. Culp's
staff of over 50 designers uses CAD systems to develop the Company's own
patterns and styles. Culp's product line currently includes more than 3,000
upholstery fabric patterns and 1,000 mattress ticking styles. Although Culp
markets fabrics at most price levels, the Company has emphasized fabrics that
have a broad appeal in the "good" and "better" price categories of furniture and
bedding.

Over the past five fiscal years, the Company has invested $73.5 million in
capital expenditures to expand its manufacturing capacity, install more
efficient production equipment and vertically integrate its operations. These
expenditures, which have reduced the Company's manufacturing costs, have
included the installation of narrow and wide-width weaving machines and
additional printing equipment to support the growth in woven and printed
upholstery fabrics and mattress ticking. The Company expects to spend
approximately $31 million in capital expenditures during fiscal 1997. A
substantial portion of fiscal 1997's planned expenditures is targeted to expand
the Company's printing capacity to support sales growth in wet-printed flock
fabrics and to vertically integrate a key process in producing unprinted flock
greige goods. As a result of expenditures to date, the Company has been able to
support a substantially higher level of sales, as well as lower its production
costs and enhance its relative competitive position.

The Company is organized into four business units (Culp Textures,
Rossville/Chromatex, Velvets/Prints and Culp Home Fashions), which has enabled
it to focus its marketing and manufacturing resources on the unique demands of
its customers and on expanding end-use markets. The Company believes this
organizational structure has proven effective in increasing business with
existing customers, as well as broadening the Company's customer base. Each of
these business units has considerable autonomy in developing its marketing and
manufacturing plans.

Culp believes that its emphasis on product innovation, quality and customer
service has been a significant reason for its success in increasing its share of
the overall market for upholstery fabrics and mattress ticking. The Company has
also been innovative in its use of technology to enhance communication within
the organization and with customers. As an example, CULPLINK, the Company's
proprietary, on-line customer information system, was introduced in May 1995 to
provide certain international customers and key sales agents with the capability
to track the status of orders and shipments, enter orders and access sales
history. CULPLINK is expected to be accessible to customers through the Internet
during fiscal 1998.

Culp has ten manufacturing facilities, with a combined total of 2.2 million
square feet, that are located in North Carolina (4), South Carolina (2),
Pennsylvania (2), Georgia (1) and Quebec, Canada (1). The Company's distribution
system is designed to offer customers fast, responsive delivery. Products are
shipped directly to customers from the Company's manufacturing facilities, as
well as from three regional distribution facilities strategically located in
High Point, North Carolina, Los Angeles, California, and Tupelo, Mississippi,
which are areas of high concentration of furniture manufacturing. In addition,
the Company maintains an inventory of upholstery fabrics at a warehouse facility
in Grand Rapids, Michigan to supply large commercial furniture manufacturers in
that area.

Culp's position as a leading global marketer of upholstery fabrics and
mattress ticking has been achieved through internal expansion and strategic
acquisitions. The most recent acquisitions include Rossville/Chromatex in fiscal
1994 and Rayonese in fiscal 1995. Each of these acquisitions has been
successfully integrated into the Company's operations and has contributed to
Culp's growth.

INDUSTRY OVERVIEW

Culp markets products worldwide to manufacturers that operate in three
principal markets and several specialty markets:

RESIDENTIAL FURNITURE. This market includes upholstered furniture sold to
consumers. Products include sofas, recliners, chairs, loveseats, sectionals and
sofa-beds.

COMMERCIAL FURNITURE. This market includes upholstered office seating and
panel systems sold primarily to be used in offices, hotels and institutional
settings. The establishment of home offices is adding to the demand for
commercial furniture.

BEDDING. This market includes mattresses and box springs.

SPECIALTY MARKETS. This category represents several other markets,
including juvenile furniture (baby car seats and baby items), "top of the bed"
(comforters and bedspreads), outdoor furniture, recreational vehicle seating,
automotive aftermarket (slip-on seat covers) and retail fabric stores.

The upholstery fabric manufacturing industry is highly fragmented. Although
several major firms compete in this market, no one firm is dominant. Conversely,
the mattress ticking industry is concentrated among relatively few large
suppliers. The Company believes that the worldwide total market for its products
exceeds $6 billion. American Furniture Manufacturers Association, a trade
association, reports that U.S. residential furniture manufacturers shipped
products valued at approximately $19 billion (wholesale) during 1995.
Approximately 40% of this furniture is believed to consist of upholstered
products, which over the past several years has been the fastest growing
category of residential furniture. According to FURNITURE/TODAY, a leading trade
publication, annual sales of upholstery fabrics in the United States for
residential applications are approximately $2 billion. A recent survey conducted
for Culp by an independent international consulting firm estimated annual sales
of upholstery fabrics outside the United States to be more than $4 billion.

Trends in upholstery fabrics and mattress ticking demand generally parallel
trends in demand for consumer purchases of furniture and bedding. Factors
influencing consumer purchases of home furnishings include the number of
household formations, growth in the general population, the demographic profile
of the population, consumer confidence, employment levels, the amount of
disposable income, housing starts and existing home sales. The long-term trend
in U.S. demand for furniture and bedding has been one of moderate growth,
although there have been some occasional, temporary periods of a modest downturn
in sales due principally to changes in economic conditions. Periods of decline,
however, have been brief, with annual shipments in the United States declining
in only four of the past 24 years.

The Company believes that demographic trends will continue to support
long-term growth in the U.S. residential furniture and bedding industries. In
particular, as "baby boomers" (people born between 1946 and 1964) mature to the
35-to-64 year age group over the next decade, they will be reaching their
highest earning power. This age group includes the largest consumers of
residential furniture. Furthermore, statistics show that the average size of new
homes has increased in recent years, which generally results in increased
purchases of furnishings per home.

There is an established trend toward consolidation in the furniture
industry at all levels. FURNITURE/TODAY has reported that the ten largest U.S.
furniture manufacturers accounted for approximately 39% of the total industry
sales in 1995, up from a 23% share ten years earlier. This trend is expected to
continue due to several factors, including the need to invest significant
capital to maintain modern manufacturing and distribution facilities, as well as
to provide the sophisticated computer-based systems to interface with retailers
and suppliers. The Company believes that, as this trend continues, opportunities
may increasingly exist for large upholstery fabric manufacturers capable of
supplying the product requirements of large furniture manufacturers on a timely
basis.

Although the demand for home furnishings in more developed international
geographic regions such as Western Europe is relatively mature, major areas such
as Eastern Europe, the Middle East and Asia are experiencing significant
increases in sales of furniture and home furnishings. Consumers in these areas
are attracted to designs that mirror American tastes, and U.S.-based
manufacturers such as Culp have been able to capitalize on this preference.
Production costs of fabrics involve a relatively low labor component, which
provides an advantage for a company with modern, efficient manufacturing
equipment and systems. The large size of the furniture and bedding markets
within the United States has led to a fabric manufacturing industry that
features ready access to a broad range of raw materials, large manufacturers
with lower costs resulting from economies of scale and the ready availability of
new designs and patterns. The Company believes that these characteristics enable
Culp to compete effectively in international markets.

COMPETITIVE STRENGTHS

The Company believes that its position as a leading worldwide manufacturer
and marketer of upholstery fabrics and mattress ticking is the result of the
following competitive strengths:

BROAD PRODUCT OFFERING AND DIVERSE MANUFACTURING CAPABILITIES. Culp markets
one of the broadest product lines in its industry, with a wide range of fabric
constructions, patterns, colors, textures and finishes. This breadth is made
possible by Culp's extensive manufacturing capabilities that include a variety
of weaving, printing and finishing operations and the ability to produce various
yarns and greige goods used in its products. Although most of the Company's
competitors emphasize one particular type of fabric, Culp competes in every
major category except leather (which accounts for a relatively small portion of
the residential furniture sold in the United States annually). This product line
diversity provides the Company valuable flexibility to adjust to changes in
consumer tastes and styles. Culp produces a wide range of fabric coverings which
appeals to major manufacturers that want to differentiate their products for
competitive reasons. Culp's manufacturing versatility also enhances the
Company's ability to introduce new fabrics.

MANUFACTURING EFFICIENCY AND VERTICAL INTEGRATION. Over the past five
fiscal years, the Company has invested $73.5 million in capital expenditures to
expand its manufacturing capacity, install more efficient production equipment
and vertically integrate its operations. These expenditures, which have reduced
the Company's manufacturing costs, have included the installation of narrow and
wide-width weaving machines and additional printing equipment to support the
growth in woven and printed upholstery fabrics and mattress ticking. The Company
plans to spend approximately $31 million in capital expenditures during fiscal
1997. The Company expects that an increasing emphasis of the Company's capital
spending will be directed to the further vertical integration of its operations.
For example, an expansion project currently underway is expected to
approximately double Culp's capacity to extrude polypropylene yarn, which is the
largest category of yarn used by Culp. Additionally, the Company is expanding
its capacity to manufacture jacquard greige goods and adding the capability to
produce flock greige goods. Since raw materials represent more than half of the
Company's production costs, increasing vertical integration is expected to
significantly reduce Culp's overall production costs.

DESIGN INNOVATION. Although design trends within the Company's markets are
generally not subject to radical change, the introduction of new fabric patterns
and designs is a very important aspect of Culp's service to its customers. Culp
has increased its investment in design and creative capabilities in recent
years, and the Company believes that it has one of the most flexible design
programs in the industry. The Company's design staff includes over 50
individuals assigned to the design function in the Company's four business
units, including designers with experience in designing products for specific
international markets. The Company has installed CAD workstations to facilitate
the creation of appealing designs more efficiently. This process significantly
simplifies the process for showing a customer a prototype design compared with
the conventional, and more expensive, practice of producing an actual swatch of
the fabric. During fiscal 1998, Culp expects to consolidate most of its design
resources into a new center that will facilitate the sharing of design ideas and
CAD and other technologies among its business units. The new design center is
expected to enhance the Company's merchandising and marketing of its products by
providing an environment in which customers can be shown new products as well as
participate in product development initiatives.

DIVERSE GLOBAL CUSTOMER BASE. Culp has successfully diversified its
customer base in recent years by increasing its sales to customers in markets
other than the U.S. residential furniture market. The most significant component
of this change has been the growth in international sales, which have increased
from $44.0 million in fiscal 1994 to $77.4 million in fiscal 1996 and were $45.9
million for the first six months of fiscal 1997. International shipments,
principally of upholstery fabrics, accounted for 22.0% of the Company's net
sales in fiscal 1996, up from 18.8% in the prior year. The Company's
international sales are diversified, both by geographic region and product line,
with customers in over 50 countries. Culp has also expanded its marketing
initiatives to further penetrate commercial furniture, juvenile furniture and
certain specialty markets. Sales to customers in markets other than the U.S.
residential furniture market represented 46% of net sales for the first six
months of fiscal 1997.

DISTRIBUTION CAPABILITY. The Company's products are shipped directly from
its manufacturing facilities, as well as from regional distribution facilities
strategically located in areas where there are considerable concentrations of
furniture manufacturers, to improve its ability to meet customers' delivery
demands. Three of these distribution facilities primarily service small and
medium-size residential furniture companies and generally ship orders within 48
hours of receipt. The fourth, and most recent, regional distribution facility,
located in Grand Rapids, Michigan, supplies large commercial furniture
manufacturers on a "just in time" basis. The Company has also developed
worldwide shipping capabilities to supply manufacturers and distributors in
Europe, the Middle East, Asia and the Pacific Rim.

COMMITMENT TO CUSTOMER SERVICE. The Company is committed to delivering
superior customer service. Culp has developed internal information systems that
have enabled it to substantially improve its on-time delivery performance and
reduce its lead time for orders. In addition, the Company works closely with its
customers to coordinate production and delivery schedules. The Company is
continuing to pursue opportunities for enhancing its level of service. CULPLINK,
the Company's proprietary on-line customer information system, was introduced in
May 1995 to provide certain international customers and key sales agents with
the capability to track the status of orders and shipments, enter orders and
access sales history. CULPLINK is expected to be accessible to customers through
the Internet during fiscal 1998.

ABILITY TO INTEGRATE ACQUISITIONS. Culp has complemented its internal
expansion through the integration of strategic acquisitions of other fabric
manufacturers. The acquisitions of Rossville/Chromatex in fiscal 1994 and
Rayonese in fiscal 1995 have added to the growth in the Company's sales and
earnings while strengthening Culp's basic competitive position. The Company
believes that its managerial and financial resources serve as a significant
competitive advantage in supporting the ability to pursue strategic acquisitions
in the future.

GROWTH STRATEGY

The Company believes that its competitive strengths provide it with the
opportunity to build on its leadership position in the global upholstery fabric
and mattress ticking markets. The Company's strategy for continued growth
includes five key initiatives:

EXPAND WET-PRINTED FLOCK FABRIC CAPACITY. Culp is experiencing significant
growth in sales of wet-printed flock fabrics, a product line it entered in late
fiscal 1994. Recent product development improvements in the wet-printed flock
manufacturing processes have enhanced the quality of wet-printed flock fabrics
as an alternative to more expensive woven velvet fabrics. In addition, the
Company has experienced strong international demand for this product. Moreover,
a disruption in production of wet-printed flock fabric experienced by a major
competitor has reduced available product supply on a near-term basis. Culp plans
to capitalize on the increasing worldwide popularity of wet-printed flock
fabrics through the addition of wet-printing equipment and flock coating
machinery. In November 1996, the Company's Board of Directors approved capital
expenditures of $9 million for a new facility that is expected to approximately
double its wet-printing capacity, which is currently approximately 10 million
linear yards annually. This initiative involves the purchase of an existing
107,000-square-foot building in Lumberton, North Carolina, which was completed
in January 1997, and the installation of new equipment specifically designed for
wet-printed flock fabrics. The Company currently plans to begin production at
this facility by July 1997.

GROW INTERNATIONAL SALES. Culp is focusing on expanding its international
sales to capitalize on the growth in demand for home furnishings in many markets
outside the United States. Factors aiding Culp include a growing preference for
American designs, the relatively low importance of labor costs in the Company's
fabrics, the Company's overall manufacturing efficiency and Culp's worldwide
distribution capability. The Company plans to continue expanding its
international sales network and is exploring the establishment of distribution
facilities in certain areas outside the United States, utilizing its business
model for regional sales and distribution.

INCREASE CAPACITY FOR PRINTED JACQUARD FABRICS. The Company has experienced
significant growth in sales of printed jacquard mattress ticking and upholstery
fabrics. These fabrics feature designs printed on jacquard greige goods and
offer popular pricing and an appearance traditionally available only on more
expensive woven jacquard fabrics in which the design is woven into the fabric.
Culp pioneered the introduction of this fabric category for mattress ticking in
1992. The Company's success with printed jacquard fabrics has been possible
because of the Company's diverse printing and finishing capabilities coupled
with the internal availability of jacquard greige goods. The increase in sales
of printed jacquard fabrics has resulted from the product line expansion of
printed jacquard mattress ticking, improvements in printing technologies and the
integration of the acquisition of Rayonese in fiscal 1995. To support further
sales growth of these products, the Company is currently expanding its capacity
at Rayonese by installing additional narrow and wide-width weaving machines to
produce more jacquard greige goods.

ENHANCE PRODUCT VALUE AND INCREASE VERTICAL INTEGRATION. Culp has
implemented a company-wide program in recent years designed to enhance the
competitive value of its upholstery fabrics and mattress ticking. The Company
believes that this initiative will continue to be vital to its future success in
increasing sales to existing customers as well as broadening its customer base.
This program involves a widespread effort to improve manufacturing efficiency,
distribution capability, customer service and design innovation. The Company
believes that the continuation of this effort, including strategic initiatives
to expand vertical integration, such as yarn extrusion and production of flock
greige goods, will lead to further gains in market share.

BUSINESS UNITS

Culp's organization encompasses four business units: (i) Culp Textures,
(ii) Rossville/Chromatex, (iii) Velvets/Prints and (iv) Culp Home Fashions. The
Company believes that this decentralized structure, adopted in fiscal 1994, has
been effective in increasing business with existing customers and in expanding
the Company's customer base. This management structure delegates more
responsibility to the major operating centers that are directly involved in
day-to-day customer service. The Company believes that this change from a more
centralized decision-making format has encouraged the managers of each unit,
each of whom has extensive experience in the industry, to develop and pursue
growth strategies most appropriate for their respective product lines,
manufacturing assets and customers. Accordingly, Culp's senior management has
been able to devote more time to planning and guiding the Company's strategic
direction, and believes that this organizational structure would facilitate the
integration of any future acquisitions.

Each of these business units is accorded considerable autonomy and is
responsible for designing, manufacturing and marketing its respective product
lines. Considerable synergies exist among the business units, including the
sharing of common raw materials made internally, such as polypropylene yarns,
certain dyed and spun yarns, greige goods and printed heat-transfer paper.
Products manufactured at one business unit's facility are commonly transferred
to another business unit's facility for additional value-added processing steps.
For example, jacquard greige goods manufactured at Rayonese (part of Culp Home
Fashions) are shipped to a Velvets/Prints' facility where printed fabrics are
produced using various printing and finishing equipment. The following table
sets forth certain information for each of the Company's business units.

CULP'S BUSINESS UNITS

MAJOR FISCAL 1996 PERCENT OF FISCAL
PRODUCT CATEGORY BUSINESS UNIT NET SALES 1996 SALES PRODUCT LINES (BASE CLOTH, IF APPLICABLE)

Upholstery
Fabrics Culp Textures $ 84.4 million 24.0% Woven jacquards
Woven dobbies

Rossville/Chromatex $ 74.2 million 21.1% Woven jacquards
Woven dobbies

Velvets/Prints $125.7 million 35.7% Wet prints (flock)
Heat-transfer prints (jacquard, flock)
Woven velvets
Tufted velvets (woven polyester)
Mattress Ticking Culp Home Fashions $ 67.4 million 19.2% Woven jacquards
Heat-transfer prints (jacquard, knit,
sheeting)
Pigment prints (jacquard, knit, sheeting,
non-woven)

CULP TEXTURES. Culp Textures manufactures and markets jacquard and dobby
woven fabrics used primarily for residential and commercial furniture. Culp
Textures' manufacturing facilities are located in Burlington and Graham, North
Carolina and Pageland, South Carolina. Culp Textures has become increasingly
vertically integrated, complementing its extensive weaving capabilities with the
ability to extrude, dye and texturize yarn. Many of the designs marketed by Culp
Textures feature intricate, complicated patterns such as floral and abstract
designs. Culp Textures accounts for the majority of the Company's sales to the
commercial furniture market. The Company maintains an inventory at a third-party
warehouse in Grand Rapids, Michigan to supply fabrics marketed by Culp Textures
to large commercial furniture manufacturers on a "just in time" basis.

ROSSVILLE/CHROMATEX. Rossville/Chromatex was acquired in fiscal 1994 and
includes manufacturing facilities in Rossville, Georgia and West Hazelton,
Pennsylvania. This acquisition expanded the Company's capacity for jacquard and
dobby woven fabrics marketed principally for residential furniture. Although
Rossville/Chromatex markets fabrics to many of the same customers served by Culp
Textures, the patterns produced by Rossville/Chromatex generally feature more
textured and chenille yarns. Rossville/Chromatex has been particularly
successful in spinning its own novelty yarns to produce chenille or textured
plaid fabrics that embody "country" patterns.

VELVETS/PRINTS. Velvets/Prints, Culp's largest business unit, manufactures
and markets a broad range of printed and velvet fabrics. These include
wet-printed designs on flocked fabrics, which have recently experienced
significant growth in demand, heat-transfer prints on jacquard and flocked
fabrics, woven velvets and tufted velvets. These fabrics typically offer
manufacturers richly colored patterns and textured surfaces. Recent product
development improvements in manufacturing processes have significantly enhanced
the quality of printed flock fabrics which are principally used for residential
furniture. These fabrics are also used for other upholstered products such as
baby car seats. These fabrics are manufactured at Burlington, North Carolina and
Anderson, South Carolina. A significant portion of the Company's current capital
expenditures are directed toward expanding its capacity for printed fabrics. The
Company's new wet-printing facility in Lumberton, North Carolina will produce
fabrics to be marketed by the Velvets/Prints business unit. Culp is also
installing in Burlington the Company's first flock coating line (which produces
flock greige goods) to further vertically integrate its production of wet-
printed flock fabrics. This operation is expected to begin production in the
fourth quarter of fiscal 1997.

CULP HOME FASHIONS. Culp Home Fashions principally markets mattress ticking
to bedding manufacturers. These fabrics encompass woven jacquard ticking as well
as heat-transfer and pigment-printed ticking on a variety of base fabrics,
including jacquard, knit, poly/cotton sheeting and non-woven materials. Culp
Home Fashions has successfully blended its diverse printing and finishing
capabilities with its access to a variety of base fabrics to offer innovative
designs to bedding manufacturers for mattress products. Printed jacquard fabrics
represent Culp Home Fashions' fastest growing product line, offering customers
better values with designs and textures of more expensive fabrics. Most jacquard
greige goods printed by Culp Home Fashions are provided by the business unit's
Rayonese facility. The expansion of the Rayonese capacity has been an important
factor in the ability of this business unit to increase its market share.
Moreover, the additional Rayonese capacity has allowed the Company to increase
vertical integration by supplying narrow-width jacquard greige goods to the
Velvets/Prints business unit for the production of printed jacquard upholstery
fabrics. Culp Home Fashions' manufacturing facilities are located in Stokesdale,
North Carolina and St. Jerome, Quebec.

PRODUCTS

The Company's upholstery fabrics and mattress ticking can be broadly
grouped under the three main categories of wovens, prints and velvets. The
following table indicates the product lines within each of these categories, a
brief description of their characteristics and identification of their principal
end-use markets.

CULP FABRIC CATEGORIES

UPHOLSTERY FABRICS CHARACTERISTICS PRINCIPAL MARKETS

WOVENS:
JACQUARDS Elaborate, complex designs such as florals and tapestries in Residential furniture
traditional, transitional and contemporary styles. Woven on Commerical furniture
intricate looms using a wide variety of synthetic and natural
yarns.
DOBBIES Geometric designs such as plaids, stripes and solids in Residential furniture
traditional and country styles. Woven on less complicated Commercial furniture
looms using a variety of weaving constructions and primarily
synthetic yarns.
PRINTS:
WET PRINTS Contemporary patterns with deep, rich colors on a nylon flock Residential furniture
base fabric for a very soft texture and excellent wearability. Juvenile furniture
Produced by screen printing directly onto the base fabric.
HEAT-TRANSFER PRINTS Sharp, intricate designs on flock or jacquard base fabrics. Residential furniture
Plush feel (flocks), deep colors (jacquards) and excellent Juvenile furniture
wearability. Produced by using heat and pressure to transfer
color from printed paper onto base fabric.
VELVETS:
WOVEN VELVETS Basic designs such as plaids and semi-plains in traditional Residential furniture
and contemporary styles with a plush feel. Woven with a
short-cut pile using various weaving methods and synthetic
yarns.
TUFTED VELVETS Lower cost production process of velvets in which synthetic Residential furniture
yarns are punched into a base polyester fabric for texture.
Similar designs as woven velvets.

MATTRESS TICKING CHARACTERISTICS PRINCIPAL MARKETS

WOVENS:
JACQUARDS Florals and other intricate designs. Woven on complex looms Bedding
using a wide variety of synthetic and natural yarns.
PRINTS:
HEAT-TRANSFER PRINTS Sharp, detailed designs. Produced by using heat and pressure Bedding
to transfer color from printed paper onto base fabrics,
including woven jacquards, knits and poly/cotton sheetings.
PIGMENT PRINTS Variety of designs produced economically by screen printing Bedding
pigments onto a variety of base fabrics, including jacquards,
knits, poly/cotton sheeting and non-wovens.

Although fabrics marketed for upholstery applications and those used for
mattress ticking may have similar appearances, mattress ticking must be
manufactured on weaving and printing equipment in wider widths to accommodate
the physical size of box springs and mattresses. The Company's products include
all major types of coverings, except for leather, that manufacturers use today
for furniture and bedding. The Company also markets fabrics for certain
specialty markets, but these do not currently represent a material portion of
the Company's business. Culp's products range in price from $2.50 per yard to
$7.00 per yard for upholstery fabrics and $1.20 per yard to $7.00 per yard for
mattress ticking.

PRODUCT DESIGN AND STYLING

Although design trends within the Company's markets are generally not
subject to radical change, the introduction of new fabrics and designs is an
important aspect of Culp's service to its customers. Accordingly, Culp's success
is largely dependent on the Company's ability to market fabrics with appealing
designs and patterns. Culp has a staff of over 50 designers involved in the
design and development of new patterns and styles, including designers with
experience in designing products for specific international markets. Culp uses
CAD systems in the development of new fabrics which assists the Company in
providing what it believes to be one of the most flexible design programs in the
industry. These systems have enabled the Company's designers to experiment with
new ideas and involve customers more actively in the process. The use of CAD
systems has also supported the Company's emphasis on integrating manufacturing
considerations into the early phase of a new design. Culp intends to continue
employing this design-for-manufacture approach in the development of new
fabrics. The completion of a new design center in fiscal 1998 will enable most
of the Company's designers to be located in a central facility to facilitate the
sharing of design ideas and CAD and other technologies. The new design center is
expected to enhance the Company's merchandising and marketing of its products by
providing an environment in which customers can be shown new products as well as
participate in product development initiatives.

The process of developing new designs involves maintaining an awareness of
broad fashion trends both in the United States and internationally. These
concepts are blended with input from the Company's customers to develop new
fabric designs and styles. Most of these designs are introduced by Culp at major
trade conferences that occur twice a year in the United States (January and
July) and annually in several major international markets.

CUSTOMERS AND SALES

Culp's size, broad product line, diverse manufacturing base and effective
distribution system enable it to market products to more than 2,500 customers.
Major customers are leading manufacturers of upholstered furniture, including
Bassett, Furniture Brands International (Broyhill, Thomasville and Lane),
Lifestyles International (Berkline, Universal, Benchcraft, Drexel, Henredon and
others), Flexsteel, La-Z-Boy and LADD (Clayton Marcus, Barclay, Pennsylvania
House and American Drew). Representative customers for the Company's fabrics for
commercial furniture include Herman Miller, HON Industries and Steelcase. In the
mattress ticking area, Culp's customer base includes leading bedding
manufacturers such as Sealy, Serta, Simmons and Spring Air. Culp's customers
also include many small and medium-size furniture and bedding manufacturers. In
international markets, Culp sells upholstery fabrics primarily to distributors
that maintain inventories for resale to furniture manufacturers.

The following table sets forth the Company's net sales by geographic area
by amount and percentage of total net sales for the three most recent fiscal
years and the first six months of fiscal 1997.

NET SALES BY GEOGRAPHIC AREA

(dollars in thousands)

FIRST SIX MONTHS
FISCAL 1994 FISCAL 1995 FISCAL 1996 OF FISCAL 1997

United States................. $201,011 82.0 % $250,055 81.2 % $274,270 78.0 % $149,860 76.5 %
North America (excluding
U.S.)....................... 12,128 4.9 16,707 5.4 23,528 6.7 14,073 7.2
Europe........................ 17,334 7.1 19,177 6.2 18,927 5.4 10,483 5.4
Middle East................... 1,740 0.7 6,081 2.0 15,609 4.4 9,156 4.7
Asia and Pacific Rim.......... 5,529 2.3 8,969 2.9 12,124 3.4 8,815 4.5
South America................. 1,248 0.5 3,749 1.2 2,753 0.8 999 0.5
All other areas............... 6,059 2.5 3,288 1.1 4,456 1.3 2,347 1.2
Total....................... $245,049 100.0 % $308,026 100.0 % $351,667 100.0 % $195,733 100.0 %

DISTRIBUTION

The majority of the Company's products are shipped directly from its
manufacturing facilities. This "direct ship" program is primarily utilized by
large manufacturers. Small and medium-size residential furniture manufacturers
use one of the Company's three regional distribution facilities which have been
strategically positioned in areas which have a high concentration of residential
furniture manufacturers -- High Point, North Carolina, Los Angeles, California
and Tupelo, Mississippi. In addition, the Company maintains an inventory of
upholstery fabric at a warehouse in Grand Rapids, Michigan to supply large
commercial furniture manufacturers in that area on a "just in time" basis. The
Company closely monitors demand in each distribution territory to decide which
patterns and styles to hold in inventory. These products are available on demand

by customers and are usually shipped within 48 hours of receipt of an order.
Culp receives a higher price for the products marketed through its regional
facilities to compensate the Company for the higher costs associated with
maintaining these inventories and operating the local distribution centers.
Substantially all of the Company's shipments of mattress ticking are made from
its manufacturing facilities in Stokesdale, North Carolina and St. Jerome,
Quebec, Canada.

In international markets, Culp sells primarily to distributors that
maintain inventories of upholstery fabrics for resale to furniture
manufacturers. The Company plans to explore the establishment of distribution
facilities in certain areas outside the United States to support increasing
international sales.

MANUFACTURING

Substantially all of the upholstery fabrics and mattress ticking currently
marketed by Culp is produced at the Company's ten manufacturing facilities.
These plants encompass a total of 2.2 million square feet and include yarn
extrusion, spinning, dyeing and texturizing equipment, narrow and wide-width
jacquard looms, dobby and woven velvet looms, tufting machines, printing
equipment for pigment, heat-transfer and wet printing, as well as fabric
finishing equipment. Over the past five fiscal years, the Company has invested
$73.5 million in capital expenditures to expand the Company's manufacturing
capacity, install more efficient production equipment and vertically integrate
its operations. Culp expects that capital expenditures will be approximately $31
million in fiscal 1997. Culp is actively pursuing ISO certification for its
manufacturing facilities. ISO certification is an international recognition of a
company's proven ability to deliver high quality products and services. Culp's
facility at Stokesdale, North Carolina, which produces mattress ticking, was
awarded ISO-9002 certification during fiscal 1997. The Company expects to
complete the ISO certification process at additional facilities in the near
future.

The Company's woven fabrics are made from various types of synthetic and
natural yarn, such as polypropylene, polyester, acrylic, rayon, nylon or cotton.
The Company currently extrudes and spins a portion of its own needs for yarn and
purchases the remainder from outside suppliers. Although Culp expects to
continue to rely on suppliers for the majority of its yarn requirements, the
percentage of internally generated yarn is expected to increase as additional
extrusion equipment is added over the next two years. Yarn is woven into various
fabrics on jacquard, dobby or velvet weaving equipment. Once the weaving is
completed, the fabric can be printed or finished using a variety of processes.
Culp purchases a significant amount of greige goods from other suppliers to be
printed at the Company's plants, but has increased its internal production
capability for jacquard greige goods. The acquisition of Rayonese in fiscal 1995
significantly increased the Company's capacity to produce its own jacquard
greige goods. Culp has installed additional equipment at Rayonese to further
increase its capacity for jacquard greige goods.

The Company is currently installing its first flock coating line to produce
flock greige goods to be used primarily as the base cloth for wet and
heat-transfer-printed flock products. Flock fabrics are produced by the
application of very short fibers, usually nylon, onto a poly/cotton woven base
fabric to create a velvet effect. During the flock coating process, the fibers
are bonded onto the base fabric with an adhesive substance by utilizing an
electrostatic charging procedure which causes the fibers to vertically align
with the base fabric.

Tufted velvet fabrics are produced by tufting machines which insert an
acrylic or polypropylene yarn through a polyester woven base fabric creating
loop pile surface material which is then sheared to create a velvet surface.
Tufted velvet fabrics are typically lower-cost fabrics utilized in the Company's
lower-priced product mix.

The Company's printing operations include pigment and heat-transfer
methods, as well as wet printing. The Company also produces its own printed
heat-transfer paper, another component of vertical integration that helps Culp
reduce its manufacturing costs. Wet printing is the most recent addition to the
Company's printing capabilities, and the Company plans to approximately double
its wet-printing capacity.

SOURCES AND AVAILABILITY OF RAW MATERIALS

Raw materials account for more than half of the Company's total production
costs. The Company purchases various types of synthethic and natural yarns
(polypropylene, polyester, acrylic, nylon, rayon and cotton), various types of
greige goods (poly/cotton wovens, flocks, polyester wovens, poly/rayon and
poly/cotton jacquard wovens, polyester knits, poly/cotton sheeting and
non-wovens), polypropylene resins, rayon staple, latex, dyes and chemicals from
a variety of suppliers. The Company has made a significant investment in
becoming more vertically integrated and producing more of its jacquard greige
goods, polypropylene yarns, package dyed yarns and printed heat-transfer paper
internally. As a result, a larger portion of its raw materials are comprised of
more basic commodities such as rayon staple, undyed yarns, polypropylene resin
chips, unprinted heat-transfer paper and unflocked poly/cotton base fabric. Most
of the Company's raw

materials are available from more than one primary source, and prices of such
materials fluctuate depending upon current supply and demand conditions and the
general rate of inflation. Many of the Company's basic raw materials are
petrochemical products or are produced from such products, and therefore the
Company's raw material costs are particularly sensitive to changes in
petrochemical prices. Generally, the Company has not had significant difficulty
in obtaining raw materials.

The Company currently relies on one supplier for most of its flock greige
goods. Due to the limited supply of flock greige goods, there can be no
assurance that the Company will be able to obtain sufficient quantities of flock
greige goods at economical prices if its existing supply is interrupted. In
addition, although the Company plans to begin operating its own flock coating
manufacturing line to produce flock greige goods during the fourth quarter of
fiscal 1997, the manufacturing process for this fabric differs substantially
from the weaving and other processes used in producing the Company's other
fabrics. Accordingly, unforeseen technological difficulties or other matters
could materially delay the Company's production of flock greige goods.

COMPETITION

The upholstery fabrics market is highly fragmented and competitive, and the
Company believes that no one firm dominates the United States or international
markets. The Company believes its principal upholstery fabrics competitors are
the Burlington House Fabrics division of Burlington Industries, Inc., Joan
Fabrics Corporation, Malden Mills, Inc., the Mastercraft division of Collins &
Aikman Company, Microfibres, Inc., Phillips Mills, Inc. and Quaker Fabric
Corporation. Conversely, the mattress ticking market is concentrated in a few
relatively large suppliers. The Company believes its principal mattress ticking
competitors are Bekaert Textiles B.V., Blumenthal Print Works, Inc., Burlington
House Fabrics division of Burlington Industries, Inc. and Tietex, Inc. Although
the Company is the largest supplier of upholstery fabric to the furniture
industry and a leading supplier of mattress ticking to the bedding industry,
some of the Company's competitors are larger overall and have greater financial
resources than the Company. Competition for the Company's products is based
primarily on price, design, quality, timing of delivery and service.

ENVIRONMENTAL AND OTHER REGULATIONS

The Company is subject to various federal and state laws and regulations,
including the Occupational Safety and Health Act and federal and state
environmental laws, as well as similar laws governing its Rayonese facility in
Canada. The Company periodically reviews its compliance with such laws and
regulations in an attempt to minimize the risk of material violations.

The Company's operations involve a variety of materials and processes that
are subject to environmental regulation. Under current law, environmental
liability can arise from previously owned properties, leased properties and
properties owned by third parties, as well as from properties currently owned
and leased by the Company. Environmental liabilities can also be asserted by
adjacent landowners or other third parties in toxic tort litigation. In
addition, under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA"), and analogous state statutes,
liability can be imposed for the disposal of waste at sites targeted for cleanup
by federal and state regulatory authorities. Liability under CERCLA is strict as
well as joint and several. The Company has accrued reserves for environmental
matters based on information presently available. Based on this information and
the Company's established reserves, the Company does not believe that
environmental matters will have a material adverse effect on either the
Company's financial condition or results of operations. However, there can be no
assurance that the costs associated with environmental matters will not increase
in the future.

In its pre-acquisition examination of its new Lumberton facility, the
Company discovered certain chlorinated solvents in the soil and groundwater
which are believed to have originated from an adjacent property. The Company and
the then owner of the Lumberton facility agreed to exclude the area of the
property known to be affected from the property that the Company acquired. The
Company believes that it will not be deemed a responsible party with respect to
such known contamination and accordingly that such contamination will not have a
material adverse effect on the Company's operations or financial condition,
although there can be no assurance that other portions of the Lumberton property
may not become affected in the future or that other environmental issues may not
arise.

In 1992, the Company discovered soil and groundwater contamination at its
Stokesdale, North Carolina facility, which had been purchased in 1986 pursuant
to an agreement in which the seller of the facility indemnified the Company
against environmental contamination on the property. The Company has taken
action to remediate the contamination of this facility and reached a monetary
settlement in 1995 with the former owner of the property under the former
owner's indemnification obligations to the Company. In addition, the United
States Environmental Protection Agency has obtained a judgment against

the owner and lessor of the Company's plant in West Hazelton, Pennsylvania
relating to remediation of soil and groundwater contamination at the West
Hazelton facility. No claim has been asserted against the Company in connection
with the judgment or the contamination at the West Hazelton facility, and the
Company is fully indemnified against any such claims by the owner of that
facility and the related corporation from which the Company purchased the assets
located at this facility.

EMPLOYEES

As of December 1, 1996, the Company had 3,143 employees. All of the hourly
employees at the Company's facility in West Hazelton, Pennsylvania and all of
the hourly employees at the Rayonese facility in Canada (approximately 15% of
the Company's workforce) are represented by a union. The Company recently
concluded the negotiation of a new collective bargaining agreement with the
union that represents the hourly employees at the West Hazelton plant. The new
contract is scheduled to expire on December 31, 1999 and is subject to
ratification by a vote of the hourly employees. The collective bargaining
agreement with respect to the Rayonese hourly employees expires in 1999. The
Company is not aware of any efforts to organize any more of its employees and
believes its relations with its employees are good.

PROPERTIES

The Company's headquarters are located in High Point, North Carolina, and
the Company currently operates ten manufacturing facilities and three regional
distribution facilities. The Company has entered into an agreement to warehouse
inventory at a regional distribution facility in Grand Rapids, Michigan operated
by a third party. The following is a summary of the Company's principal
administrative, manufacturing and distribution facilities which, unless
otherwise noted, are leased by the Company. The manufacturing facilities are
organized by business unit.

APPROX.
TOTAL AREA EXPIRATION DATE
LOCATION PRINCIPAL USE (SQ. FT.) OF LEASE (1)

HEADQUARTERS AND DISTRIBUTIONS
CENTERS:

High Point, North Carolina Corporate headquarters 33,000 2015
High Point, North Carolina Regional distribution 65,000 2008
Los Angeles, California Regional distribution 45,000 2002
Tupelo, Mississippi Regional distribution 35,000 2002

CULP TEXTURES:

Graham, North Carolina (2) Manufacturing 341,000 N/A
Burlington, North Carolina (2) Manufacturing and distribution 302,000 N/A
Pageland, South Carolina (2) Manufacturing 96,000 N/A

ROSSVILLE/CHROMATEX:

Rossville, Georgia Manufacturing and distribution 396,000 2001
West Hazelton, Pennsylvania Manufacturing 110,000 2013
West Hazelton, Pennsylvania Manufacturing and distribution 100,000 2008

VELVETS/PRINTS:

Burlington, North Carolina Manufacturing and distribution 242,000 2021
Lumberton, North Carolina (2) Manufacturing 107,000 N/A
Anderson, South Carolina (2) Manufacturing 99,000 N/A

CULP HOME FASHIONS:

Stokesdale, North Carolina (2) Manufacturing and distribution 140,000 N/A
St. Jerome, Quebec, Canada (2) Manufacturing and distribution 202,000 N/A

(1) Includes all options to renew

(2) Owned by the Company

The Company also leases showrooms in Tupelo, Mississippi, High Point, North
Carolina and Iper, Belgium.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company are as follows:

NAME AGE POSITION

Robert G. Culp, III.................................. 50 Chairman of the Board and Chief Executive Officer
Howard L. Dunn....................................... 58 President, Chief Operating Officer and Director
Kenneth M. Ludwig.................................... 44 Senior Vice President -- Human Resources
Franklin N. Saxon.................................... 44 Senior Vice President, Chief Financial Officer and
Director
Harry R. Culp........................................ 45 Director
Baxter P. Freeze..................................... 76 Director
Earl M. Honeycutt.................................... 78 Director
Patrick H. Norton.................................... 74 Director
Earl N. Phillips, Jr................................. 56 Director
Bland W. Worley...................................... 79 Director

ROBERT G. CULP, III is one of the founders of the Company and served as
Executive Vice President and Secretary until 1981, as President from 1981 to
1993, as Chief Operating Officer from 1985 until 1993, and as Chief Executive
Officer since 1988. Mr. Culp has served as a director since 1972, and 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.

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. Mr. Dunn has served as a
director since 1972.

KENNETH M. LUDWIG joined the Company in 1985 as Director of Personnel and
was elected Vice President-Human Resources in 1986. Mr. Ludwig has served as
Senior Vice President-Human Resources since June 1996.

FRANKLIN N. SAXON joined the Company in 1983, serving first as Controller
and, since 1985, as Chief Financial Officer and Treasurer. Mr. Saxon was
appointed Corporate Secretary in June 1995 and was appointed Senior Vice
President in June 1996 and has served as a director since 1987.

HARRY R. CULP has been practicing dentistry in High Point, North Carolina
since July 1981. Dr. Culp was elected a director in 1996 and served previously
as a director of the Company from 1990 to 1993. He is the brother of Robert G.
Culp, III.

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 of
Commonwealth Hosiery Mills, Inc. Mr. Freeze has served as a director of the
Company since 1972.

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. Mr. Honeycutt has served as
a director since 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. Mr. Norton currently serves as a member of the Board
of Directors of the American Furniture Manufacturers Association. Mr. Norton has
served as a director of the Company since 1987.

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. Mr. Phillips has served
as a director of the Company since 1992.

BLAND W. WORLEY served as Chief Executive Officer of
BarclaysAmericanCorporation, a financial services company, from 1975 until 1982
and as Chairman of the Board of that corporation until his retirement in 1985.
Mr. Worley has served as a director of the Company since 1983.

SELLING SHAREHOLDERS

Of the 1,600,000 shares of Common Stock offered by this Prospectus, 200,000
shares are to be sold by the Robert G. Culp, Jr. Family Trust for the benefit of
Harry R. Culp, under an Agreement dated October 31, 1978 (the "Harry Culp
Trust"), and 200,000 shares are to be sold by the Robert G. Culp, Jr. Family
Trust for the benefit of Judith Culp Walker, under an Agreement dated October
31, 1978 (the "Judith Walker Trust"; the Harry Culp Trust and the Judith Walker
Trust are referred to as the "Selling Shareholders"). Harry R. Culp, a director
of the Company, is a beneficiary of the Harry Culp Trust, and Judith C. Walker,
a director of the Company from 1993 to 1996, is a beneficiary of the Judith
Walker Trust. Robert G. Culp, III, Chairman of the Board of Directors and Chief
Executive Officer, is a trustee of each of the Harry Culp Trust and the Judith
Walker Trust and is the brother of Harry R. Culp and Judith C. Walker. Each of
the Selling Shareholders has granted to the Underwriters an option to purchase
an additional 120,000 shares of Common Stock solely to cover over-allotments.

As of the date of this Prospectus, the Harry Culp Trust and the Judith
Walker Trust beneficially own 825,000 shares and 1,029,375 shares (or 7.3% and
9.1%), respectively, of the outstanding shares of Common Stock. Assuming that
all of the 400,000 shares of Common Stock offered by the Selling Shareholders
are sold (and the Underwriters do not exercise their over-allotment option), the
Harry Culp Trust and the Judith Walker Trust will beneficially own, immediately
following the completion of this Offering, 625,000 shares and 829,375 shares (or
5.0% and 6.6%), respectively, of the outstanding shares of Common Stock.
Assuming that the Underwriters' over-allotment option is exercised, the Harry
Culp Trust and the Judith Walker Trust will beneficially own, immediately
following the completion of the Offering, 505,000 shares and 709,375 shares (or
4.0% and 5.7%), respectively, of the outstanding shares of Common Stock.

The Company leases two industrial facilities from partnerships that are, or
have been within the past three years, owned in part by Judith C. Walker and
Harry R. Culp. The initial term of the leases are five to seven years, with one
or more five-year renewal options. Base rent per year for the leased facilities
ranges from $2.05 to $2.40 per square foot, and these facilities contain a total
of approximately 307,000 square feet of floor space. The leases prohibit
assignment or subletting without the lessor's consent but such consent may not
be unreasonably withheld. The lessor is responsible for maintenance only of roof
and structural portions of the leased facilities. The facilities are leased on a
"triple net" basis, with the Company being 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, and the Company received independent appraisals to this
effect. The total amount of rent paid by the Company under these leases during
fiscal 1996 was approximately $612,000.

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement among the
Company and Wheat, First Securities, Inc. and Raymond James & Associates, Inc.,
as representatives of the Underwriters (the "Representatives"), the Underwriters
have severally agreed to purchase from the Company and the Selling Shareholders,
and the Company and the Selling Shareholders have agreed to sell to each of the
Underwriters, the respective number of Shares set forth opposite each
Underwriter's name below.

NUMBER OF
UNDERWRITER SHARES

Wheat, First Securities, Inc...........................................................................
Raymond James & Associates, Inc........................................................................

Total........................................................................................ 1,600,000

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligation is such that they are committed to purchase and pay for all the
Shares if any are purchased.

The Underwriters propose to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus and to certain securities dealers at such price less a concession not
in excess of $ per share. The Underwriters may allow, and such selected
dealers may reallow, a concession not in excess of $ per share of Common Stock
to certain brokers and dealers. After the Offering, the price to the public,
concession, allowance and reallowance may be changed by the Representatives.

The Selling Shareholders have granted to the Underwriters an option,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to 240,000 additional shares of Common Stock to cover
over-allotments, if any, at the same price per share as the initial 400,000
shares of Common Stock to be purchased by the Underwriters from the Selling
Shareholders. To the extent that the Underwriters exercise this option, each of
the Underwriters will be committed, subject to certain conditions, to purchase
such additional shares of Common Stock in approximately the same proportion as
set forth in the above table. The Underwriters may purchase such shares only to
cover over-allotments made in connection with this Offering.

The Company has agreed not to issue, and all directors and executive
officers of the Company and the Selling Shareholders have agreed not to offer,
sell or contract to sell, or otherwise dispose of, directly or indirectly, or
announce an offering of, any shares of Common Stock or other equity securities
of the Company for 180 days after the date of this Prospectus, subject to
certain limited exceptions, without the prior written consent of the
Representatives.

The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Robinson, Bradshaw & Hinson, P.A., Charlotte, North
Carolina. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Hunton & Williams, Richmond, Virginia. At December
18, 1996, members of Robinson, Bradshaw & Hinson, P.A. beneficially owned less
than 1% of the outstanding shares of Common Stock. Henry H. Ralston, an
Assistant Secretary of the Company, is a member of Robinson, Bradshaw & Hinson,
P.A.

EXPERTS

The Consolidated Financial Statements of the Company and subsidiary as of
April 30, 1995 and April 28, 1996, and for each of the fiscal years in the
three-year period ended April 28, 1996, have been audited by KPMG Peat Marwick
LLP, independent certified public accountants. Such financial statements have
been included herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company is subject to the informational requirements of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 as well as at the Commission's
regional offices located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and at Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies can be obtained from the Commission by mail at
prescribed rates. Requests should be directed to the Commission's Public
Reference Branch, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Such material may also be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov). Such information
may also be inspected and copied at the offices of the NYSE at 20 Broad Street,
New York, New York 10005.

This Prospectus constitutes a part of a registration statement on Form S-3
(herein, together with all exhibits thereto, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act,
with respect to the securities offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Reference is hereby made to the Registration Statement, and to the
exhibits thereto for further information with respect to the Company and the
securities offered hereby. Copies of the Registration Statement and the exhibits
thereto are on file at the offices of the Commission and may be obtained upon
payment of the prescribed fee or may be examined without charge at the public
reference facilities of the Commission described above. Statements contained
herein concerning the provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to the
copy of the applicable document filed with the Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission (File
No.0-12781) are incorporated by reference in this Prospectus:

(1) Annual Report on Form 10-K for the fiscal year ended April 28, 1996;

(2) Quarterly Reports on Form 10-Q for the fiscal quarters ended July 28,
1996 and October 27, 1996;

(3) Current Report on Form 8-K filed May 30, 1996; Current Report on Form
8-K filed August 8, 1996; Current Report on Form 8-K filed November 6, 1996, as
amended by Amendment No. 1 thereto on Form 8-K/A filed December 20, 1996; and
Current Report on Form 8-K filed December 20, 1996; and

(4) the description of the Company's Common Stock contained in its Form 8-A
filed with the Commission on December 19, 1996.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering shall be deemed to be incorporated by reference
into this Prospectus.

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

This Prospectus incorporates documents by reference which are not presented
herein or delivered herewith. These documents (not including exhibits to the
documents incorporated by reference unless such exhibits are specifically
incorporated by reference into the information that the Prospectus incorporates)
are available without charge to each person to whom a Prospectus is delivered
upon written or oral request. Requests should be directed to Culp, Inc., 101
South Main Street, High Point, North Carolina 27261, Attention: Investor
Relations Department, telephone: (910) 888-6261.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE

AUDITED CONSOLIDATED FINANCIAL STATEMENTS:

Report of Independent Auditors......................................................................................... F-2

Consolidated Balance Sheets as of April 30, 1995 and April 28, 1996.................................................... F-3

Consolidated Statements of Income for the Years Ended May 1, 1994, April 30, 1995, and April 28, 1996.................. F-4

Consolidated Statements of Shareholders' Equity for the Years Ended May 1, 1994, April 30, 1995, and April 28, 1996.... F-5

Consolidated Statements of Cash Flows for the Years Ended May 1, 1994 April 30, 1995, and April 28, 1996............... F-6

Notes to Audited Consolidated Financial Statements..................................................................... F-7

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS:

Consolidated Balance Sheet as of October 27, 1996...................................................................... F-16

Consolidated Statements of Income for the Six Months Ended October 29, 1995 and October 27, 1996....................... F-17

Consolidated Statements of Cash Flows for the Six Months Ended October 29, 1995 and October 27, 1996................... F-18

Notes to Unaudited Consolidated Financial Statements................................................................... F-19

F-1

REPORT OF INDEPENDENT AUDITORS

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF CULP, INC.:

We have audited the accompanying consolidated balance sheets of Culp, Inc.
and subsidiary as of April 30, 1995 and April 28, 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the years in the three-year period ended April 28, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Culp, Inc.
and subsidiary as of April 30, 1995 and April 28, 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended April 28, 1996, in conformity with generally accepted accounting
principles.

KPMG PEAT MARWICK LLP

Greensboro, North Carolina
May 29, 1996

F-2

CULP, INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE DATA)

APRIL APRIL
30, 28,
1995 1996

ASSETS
Current assets:
Cash and cash investments........................................................................ $ 1,393 $ 498
Accounts receivable.............................................................................. 44,252 52,038
Inventories...................................................................................... 45,771 47,395
Other current assets............................................................................. 3,194 4,191
Total current assets........................................................................... 94,610 104,122
Restricted investments.............................................................................. 795 5,250
Property, plant and equipment, net.................................................................. 75,805 76,961
Goodwill............................................................................................ 22,600 22,871
Other assets........................................................................................ 1,189 2,440
Total assets................................................................................... $194,999 $211,644
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................................................. $ 11,555 $ 7,100
Accounts payable................................................................................. 32,250 27,308
Accrued expenses................................................................................. 11,532 12,564
Income taxes payable............................................................................. 661 197
Total current liabilities...................................................................... 55,998 47,169
Long-term debt...................................................................................... 62,187 74,941
Deferred income taxes............................................................................... 5,418 8,088
Total liabilities.............................................................................. 123,603 130,198
Commitments and contingencies (note 11)
Shareholders' equity:
Preferred stock, $.05 par value, authorized 10,000,000 shares.................................... -- --
Common stock, $.05 par value, authorized 40,000,000 shares, issued and outstanding 11,204,766 at
April 30, 1995 and 11,290,300 at April 28, 1996................................................. 560 565
Capital contributed in excess of par value....................................................... 16,577 16,878
Retained earnings................................................................................ 54,259 64,003
Total shareholders' equity..................................................................... 71,396 81,446
Total liabilities and shareholders' equity..................................................... $194,999 $211,644

The accompanying notes are an integral part of the audited consolidated
financial statements.

F-3

CULP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

YEAR ENDED
APRIL APRIL
MAY 1, 30, 28,
1994 1995 1996

Net sales................................................................................ $245,049 $308,026 $351,667
Cost of sales............................................................................ 202,426 253,345 289,129
Gross profit........................................................................... 42,623 54,681 62,538
Selling, general and administrative expenses............................................. 27,858 33,432 39,068
Income from operations................................................................. 14,765 21,249 23,470
Interest expense......................................................................... 2,515 4,715 5,316
Interest income.......................................................................... (79) (64) (92)
Other expense, net....................................................................... 350 1,082 956
Income before income taxes............................................................. 11,979 15,516 17,290
Income taxes............................................................................. 4,314 5,741 6,310
Net income............................................................................. $ 7,665 $ 9,775 $ 10,980
Net income per share..................................................................... $ 0.69 $ 0.87 $ 0.98

The accompanying notes are an integral part of the audited consolidated
financial statements.

F-4

CULP, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE DATA)

CAPITAL
CONTRIBUTED
COMMON COMMON IN EXCESS TOTAL
STOCK STOCK OF RETAINED SHAREHOLDERS'
SHARES AMOUNT PAR VALUE EARNINGS EQUITY

Balance, May 2, 1993......................................... 7,259,161 $362 $15,333 $ 38,826 $54,521
Cash dividends ($0.08 per share)........................... -- -- -- (887) (887)
Net income................................................. -- -- -- 7,665 7,665
Common stock issued in connection with stock option plan,
including $484 of tax benefit........................... 212,140 11 1,339 -- 1,350
Three-for-two stock split.................................. 3,706,052 185 (185) -- --
Balance, May 1, 1994......................................... 11,177,353 558 16,487 45,604 62,649
Cash dividends ($0.10 per share)........................... -- -- -- (1,120) (1,120)
Net income................................................. -- -- -- 9,775 9,775
Common stock issued in connection with stock option plan... 27,413 2 90 -- 92
Balance, April 30, 1995...................................... 11,204,766 560 16,577 54,259 71,396
Cash dividends ($0.11 per share)........................... -- -- -- (1,236) (1,236)
Net income................................................. -- -- -- 10,980 10,980
Common stock issued in connection with stock option plan... 85,534 5 301 -- 306
Balance, April 28, 1996...................................... 11,290,300 $565 $16,878 $ 64,003 $81,446

The accompanying notes are an integral part of the audited consolidated
financial statements.

F-5

CULP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

YEAR ENDED
APRIL APRIL
MAY 1, 30, 28,
1994 1995 1996

Cash flows from operating activities:
Net income............................................................................... $ 7,665 $ 9,775 $ 10,980
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation.......................................................................... 8,497 11,257 12,348
Amortization of intangible assets..................................................... 344 628 748
Provision for deferred income taxes................................................... 1,118 1,373 2,210
Changes in assets and liabilities, net of effects of businesses acquired:
Accounts receivable................................................................. (1,839) (5,515) (7,786)
Inventories......................................................................... (4,330) (7,281) (1,624)
Other current assets................................................................ (304) (310) (537)
Other assets........................................................................ (389) (518) (103)
Accounts payable.................................................................... (420) 159 (1,077)
Accrued expenses.................................................................... 539 2,180 1,032
Income taxes payable................................................................ (401) 25 (464)
Net cash provided by operating activities........................................ 10,480 11,773 15,727
Cash flows from investing activities:
Capital expenditures..................................................................... (16,764) (18,058) (14,385)
Purchase of restricted investments....................................................... (3,593) (57) (6,019)
Purchase of investments to fund deferred compensation liability.......................... -- -- (1,286)
Sale of restricted investments........................................................... 670 2,185 1,564
Businesses acquired...................................................................... (38,205) (10,455) --
Net cash used in investing activities............................................ (57,892) (26,385) (20,126)
Cash flows from financing activities:
Proceeds from issuance of long-term debt................................................. 49,203 23,455 19,854
Principal payments on long-term debt..................................................... (14,223) (11,275) (11,555)
Dividends paid........................................................................... (887) (1,120) (1,236)
Proceeds from common stock issued........................................................ 1,350 92 306
Change in accounts payable -- capital expenditures....................................... 7,443 2,160 (3,865)
Net cash provided by financing activities........................................ 42,886 13,312 3,504
Decrease in cash and cash investments...................................................... (4,526) (1,300) (895)
Cash and cash investments, beginning of year............................................... 7,219 2,693 1,393
Cash and cash investments, end of year..................................................... $ 2,693 $ 1,393 $ 498

The accompanying notes are an integral part of the audited consolidated
financial statements.

F-6

CULP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its subsidiary, which is wholly-owned. All significant intercompany balances
and transactions are eliminated in consolidation.

DESCRIPTION OF BUSINESS

The Company manufactures and markets upholstery fabrics and mattress
ticking internationally for the furniture, bedding, and related industries, with
the majority of its business conducted in the United States.

FISCAL YEAR

The Company's fiscal year is the 52 or 53 week period ending on the Sunday
closest to April 30. Fiscal years 1994, 1995 and 1996 included 52 weeks.

STATEMENTS OF CASH FLOWS

For purposes of reporting cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash investments.

ACCOUNTS RECEIVABLE

Substantially all of the Company's accounts receivable are due from
manufacturers and distributors in the markets noted above. The Company grants
credit to customers, a substantial number of which are located in the United
States. Management performs credit evaluations of the Company's customers and
generally does not require collateral.

INVENTORIES

Principally all inventories are valued at the lower of last-in, first-out
(LIFO) cost or market. Information related to the first-in, first-out (FIFO)
method may be useful in comparing operating results to those of companies not on
LIFO. The LIFO valuation method decreased net income $73,000 ($0.01 per share)
in 1994, had no effect on net income in 1995, and decreased net income $66,000
($0.01 per share) in 1996 compared with the FIFO method.

RESTRICTED INVESTMENTS

Restricted investments were purchased with proceeds from industrial revenue
bond issues and are invested pending application of such proceeds to project
costs or repayment of the bonds. The investments are stated at cost which
approximates market value.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is recorded at cost. Depreciation is
generally computed using the straight-line method over the estimated useful
lives of the respective assets. Major renewals and betterments are capitalized.
Maintenance, repairs and minor renewals are expensed as incurred. When
properties are retired or otherwise disposed of, the related cost and
accumulated depreciation are removed from the accounts. Amounts received on
disposal less the book value of assets sold are charged or credited to income.

FOREIGN CURRENCY TRANSLATION

The United States dollar is the functional currency for the Company's
Canadian subsidiary. Translation gains or losses for this subsidiary are
reflected in net income.

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill, which represents the unamortized excess of the purchase price
over the fair values of the net assets acquired, is being amortized using the
straight-line method over 40 years. The Company assesses the recoverability of
goodwill by determining whether the amortization of the balance over its
remaining life can be recovered through undiscounted future

F-7

CULP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
operating cash flows of the acquired businesses. The assessment of the
recoverability of goodwill will be impacted if estimated cash flows are not
achieved.

Other intangible assets are included in other assets and consist
principally of debt issue costs. Amortization is computed using the
straight-line method over the respective terms of the debt agreements.

INCOME TAXES

Deferred taxes are recognized for the temporary differences between the
financial statement carrying amounts and the tax bases of the Company's assets
and liabilities and operating loss and tax credit carryforwards at income tax
rates expected to be in effect when such amounts are realized or settled. The
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.

No provision is made for income taxes which may be payable if undistributed
income of the Company's Canadian subsidiary were to be paid as dividends to the
Company, since the Company intends that such earnings will continue to be
invested. At April 28, 1996 the amount of such undistributed income was $1.5
million. Foreign tax credits may be available as a reduction of United States
income taxes in the event of such distributions.

REVENUE RECOGNITION

Revenue is recognized when products are shipped to customers. Provision is
made currently for estimated product returns, claims and allowances.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and cash investments, accounts receivable,
other current assets, accounts payable and accrued expenses approximates fair
value because of the short maturity of these financial instruments.

The fair value of the Company's long-term debt is estimated by discounting
the future cash flows at rates currently offered to the Company for similar debt
instruments of comparable maturities. The fair value of the Company's long-term
debt approximates the carrying value of the debt due to the variable interest
rates on the majority of long-term debt at April 28, 1996.

INTEREST RATE SWAP AGREEMENTS

Interest rate swap agreements generally involve the exchange of fixed and
floating rate interest payment obligations without the exchange of the
underlying principal amounts. These agreements are used to effectively fix the
interest rates on certain variable rate borrowings. Net amounts paid or received
are reflected as adjustments to interest expense.

FORWARD CONTRACTS

Gains and losses related to qualifying hedges of firm commitments are
deferred and included in the measurement of the related foreign currency
transaction when the hedged transaction occurs.

PER SHARE DATA

Primary income per share is computed by dividing net income by the weighted
average number of common shares outstanding during each year, as restated for
stock splits (11,075,988 in 1994, 11,203,160 in 1995, and 11,234,363 in 1996).
The effect of stock options on the calculation is not materially dilutive.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

F-8

CULP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 1 -- GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED
RECLASSIFICATION

Certain items in the 1995 consolidated financial statements have been
reclassified to conform with the presentation adopted in the current year. The
reclassifications did not impact net income as previously reported.

NOTE 2 -- ACQUISITIONS

On March 6, 1995, the Company acquired Rayonese Textile Inc. ("Rayonese"),
a manufacturer of home furnishings fabrics based near Montreal, Canada. The
transaction was valued at approximately $10.5 million and included the purchase
of 100% of the Rayonese common stock and the assumption of Rayonese's funded
debt. Goodwill on the transaction was approximately $5 million, which is being
amortized on the straight-line method over 40 years. The acquisition was
accounted for as a purchase, and accordingly, the net assets and operations of
Rayonese have been included in the Company's consolidated financial statements
since March 6, 1995.

On November 2, 1993, the Company purchased the operations and assets
relating to an upholstery fabric business operating as Rossville Mills,
Chromatex and Rossville Velours ("Rossville/Chromatex"). The transaction was
valued at approximately $39.3 million and involved the purchase of assets for
cash, the repayment of Rossville/Chromatex debt and the assumption of certain
liabilities. Goodwill on the transaction was approximately $18.9 million, which
is being amortized on the straight-line method over 40 years. The acquisition
was accounted for as a purchase, and accordingly, the net assets and operations
of Rossville/Chromatex have been included in the Company's consolidated
financial statements since November 1, 1993.

NOTE 3 -- ACCOUNTS RECEIVABLE

A summary of accounts receivable follows:

1995 1996

(IN THOUSANDS)
Customers....................................................................... $44,014 $53,321
Factors......................................................................... 1,314 71
Allowance for doubtful accounts................................................. (739) (1,016)
Reserve for returns and allowances.............................................. (337) (338)
$44,252 $52,038

NOTE 4 -- INVENTORIES

A summary of inventories follows:

1995 1996

(IN THOUSANDS)
Inventories on the FIFO cost method
Raw materials................................................................. $25,385 $29,150
Work-in-process............................................................... 3,465 5,067
Finished goods................................................................ 19,834 16,708
Total inventories on the FIFO cost method.................................. 48,684 50,925
Adjustments of certain inventories to the LIFO cost method...................... (2,913) (3,530)
$45,771 $47,395

F-9

CULP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 5 -- PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment follows:

DEPRECIABLE LIVES
(IN YEARS) 1995 1996

(IN THOUSANDS)
Land and improvements....................................... 10 $ 958 $ 1,765
Buildings and improvements.................................. 7-40 12,793 13,529
Leasehold improvements...................................... 7-10 1,242 1,320
Machinery and equipment..................................... 3-12 101,427 109,906
Office furniture and equipment.............................. 3-10 12,020 12,152
Capital projects in progress................................ 6,047 8,517
134,487 147,189
Accumulated depreciation.................................... (58,682) (70,228)
$ 75,805 $ 76,961

NOTE 6 -- GOODWILL

A summary of goodwill follows:

1995 1996

(IN THOUSANDS)
Goodwill........................................................................ $23,337 $24,218
Accumulated amortization........................................................ (737) (1,347)
$22,600 $22,871

NOTE 7 -- ACCOUNTS PAYABLE

A summary of accounts payable follows:

1995 1996

(IN THOUSANDS)
Accounts payable -- trade....................................................... $22,647 $21,570
Accounts payable -- capital expenditures........................................ 9,603 5,738
$32,250 $27,308

NOTE 8 -- ACCRUED EXPENSES

A summary of accrued expenses follows:

1995 1996

(IN THOUSANDS)
Compensation and benefits....................................................... $ 6,497 $ 8,153
Other........................................................................... 5,035 4,411
$11,532 $12,564

F-10

CULP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 9 -- INCOME TAXES

A summary of income taxes follows:

1994 1995 1996

(IN THOUSANDS)
Current
Federal................................................................ $2,420 $3,473 $3,345
State.................................................................. 383 699 700
Canadian............................................................... -- -- --
2,803 4,172 4,045
Deferred
Federal................................................................ 1,279 1,374 1,422
State.................................................................. 232 195 145
Canadian............................................................... -- -- 698
1,511 1,569 2,265
$4,314 $5,741 $6,310

Income before income taxes related to the Company's Canadian operation for
the year ended April 28, 1996 was $2,100,000. In the prior year, income before
income taxes from this operation was not significant.

The following schedule summarizes the principal differences between income
taxes at the federal income tax rate and the effective income tax rate reflected
in the consolidated financial statements:

1994 1995 1996

Federal income tax rate...................................................... 34.0% 34.1% 34.2%
State income taxes, net of federal income tax benefit........................ 3.8 3.8 3.4
Exempt income of foreign sales corporation................................... (1.4) (1.5) (1.7)
Other........................................................................ (0.4) 0.6 0.6
36.0% 37.0% 36.5%

F-11

CULP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 9 -- INCOME TAXES -- CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities consist of the following:

1995 1996

(IN THOUSANDS)
Deferred tax liabilities:
Property, plant and equipment, net........................................... $ (5,625) $ (7,328)
Goodwill..................................................................... (432) (720)
Employee benefits............................................................ (249) (295)
Other........................................................................ (139) (142)
Total deferred tax liabilities............................................ (6,445) (8,485)
Deferred tax assets:
Accounts receivable.......................................................... 357 474
Inventories.................................................................. 81 148
Compensation................................................................. 475 960
Liabilities and reserves..................................................... 922 782
Alternative minimum tax...................................................... 699 --
Gross deferred tax assets................................................. 2,534 2,364
Valuation allowance....................................................... -- --
Total deferred tax assets................................................. 2,534 2,364
$ (3,911) $ (6,121)

Deferred taxes are classified in the accompanying consolidated Balance
Sheet captions as follows:

1995 1996

(IN THOUSANDS)
Other current assets.......................................................... $ 1,507 $ 1,967
Deferred income taxes......................................................... (5,418) (8,088)
$(3,911) $(6,121)

The Company believes that it is more likely than not that the results of
future operations will generate sufficient taxable income to realize the
remaining deferred tax assets.

Income taxes paid, net of income tax refunds, were $3,113,000 in 1994;
$4,071,000 in 1995; and $4,623,000 in 1996.

NOTE 10 -- LONG-TERM DEBT

A summary of long-term debt follows:

1995 1996

(IN THOUSANDS)
Industrial revenue bonds and other obligations................................. $ 15,787 $ 22,241
Revolving credit line.......................................................... 10,000 23,300
Term loan...................................................................... 41,500 35,500
Subordinated note payable...................................................... 1,000 1,000
Convertible note payable....................................................... 5,455 --
73,742 82,041
Current maturities............................................................. (11,555) (7,100)
$ 62,187 $ 74,941

F-12

CULP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 10 -- LONG-TERM DEBT -- CONTINUED
The Company has an unsecured loan agreement with two banks, which provides
for a $36,000,000 five-year term loan and a $33,500,000 revolving credit line,
which also has a five-year term. The term loan requires monthly installments of
$500,000, and a final payment of $6,500,000 on March 1, 2001. The revolving
credit line requires payment of an annual facility fee in advance. Additionally,
the term loan and the credit line require payment of interest on any outstanding
borrowings at an interest rate based on a spread over the one month LIBOR (this
LIBOR rate at April 28, 1996 was 5.4%).

The industrial revenue bonds ("IRBs") are collateralized by restricted
investments of $5,250,000 and letters of credit for $22,436,000 at April 28,
1996. Substantially all of the bonds are due in one-time payments at various
dates from 2008 to 2013, with interest at variable rates at approximately 60% of
the prime rate (prime at April 28, 1996 was 8.25%).

In connection with the Rossville/Chromatex acquisition (note 2), the
Company has a subordinated note payable to the former owners with interest based
on a spread over the one month LIBOR. The note is payable on November 1, 1996.

In connection with the purchase of Rayonese Textile Inc. (note 2), the
Company issued a convertible note payable of $5,455,000. The note was payable on
March 6, 1998 or upon 45 days notice to the Company by the holders starting on
March 6, 1996. The holders gave 45 days notice, and the Company repaid the note
payable in March 1996.

The Company's loan agreements require, among other things, that the Company
maintain certain financial ratios. At April 28, 1996, the Company was in
compliance with these required financial covenants.

At April 28, 1996, the Company had five interest rate swap agreements with
two banks in order to reduce its exposure to floating interest rates on a
portion of its variable rate borrowings.

The following table summarizes certain data regarding the interest rate
swaps:

NOTIONAL AMOUNT INTEREST RATE EXPIRATION DATE

$ 2,300,000 6.4% July 1996
150,000 7.6 July 1996
15,000,000 7.3 April 2000
5,000,000 6.9 June 2002
5,000,000 6.6 July 2002

The estimated amount at which the Company could terminate these agreements
as of April 28,1996 is approximately $220,000. Net amounts paid under these
agreements increased interest expense by approximately $227,000 in 1994;
$138,000 in 1995; and $290,000 in 1996. Management believes the risk of
incurring losses resulting from the inability of the bank to fulfill its
obligation under the interest rate swap agreements to be remote and that any
losses incurred would be immaterial.

The principal payment requirements of long-term debt during the next five
years are: 1997 -- $7,100,000; 1998 -- $6,100,000; 1999 -- $6,275,000;
2000 -- $6,200,000; and 2001 -- $5,154,000, excluding payments, if any, on the
revolving credit line for its five-year term. The term loan and revolving credit
facilities expire on March 1, 2001, at which time a final payment of $6,500,000
is due for the term loan and any outstanding borrowings on the revolver are due.
These final payments at the expiration date are not included in the scheduled
payments above.

Interest paid during 1994, 1995 and 1996 totalled $2,254,000, $4,668,000,
and $5,365,000, respectively.

NOTE 11 -- COMMITMENTS AND CONTINGENCIES

The Company leases certain office, manufacturing and warehouse facilities
and transportation and other equipment under noncancellable operating leases.
Lease terms related to real estate range from five to ten years with renewal
options for additional periods ranging from five to fifteen years. The leases
generally require the Company to pay real estate taxes, maintenance, insurance
and other expenses. Rental expense for operating leases, net of sublease income,
was $2,021,000 in 1994; $2,486,000 in 1995; and $3,502,000 in 1996. Future
minimum rental commitments for noncancellable operating leases are $2,874,000 in
1997; $2,466,000 in 1998; $1,458,000 in 1999; $1,221,000 in 2000; $727,000 in
2001; and $5,242,000 in later years.

F-13

CULP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 11 -- COMMITMENTS AND CONTINGENCIES -- CONTINUED
The Company is involved in several legal proceedings and claims which have
arisen in the ordinary course of its business. These actions, when ultimately
concluded and settled, will not, in the opinion of management, have a material
adverse effect upon the financial position, results of operations or liquidity
of the Company.

The Company has outstanding capital expenditure commitments of $1,521,000
as of April 28, 1996.

NOTE 12 -- STOCK OPTION PLANS

The Company has a stock option plan under which options to purchase common
stock may be granted to officers, directors and key employees. At April 28,
1996, 984,187 shares of common stock were authorized for issuance under the
plan. Options are granted under the plan at an option price not less than fair
market value at the date of grant. Options are generally exercisable one year
after the date of grant and generally expire beginning ten years after the date
of grant. At April 30, 1995, 369,721 shares were exercisable and 614,000 shares
were available for future grants. At April 28, 1996, 371,437 shares were
exercisable and 540,750 shares were available for future grants.

Stock option activity under this plan is summarized as follows:

NUMBER OF
NUMBER OF NUMBER OF SHARES NUMBER OF SHARES OUTSTANDING OPTION PRICE
SHARES GRANTED CANCELLED/EXPIRED SHARES EXERCISED AT YEAR-END PER SHARE

1994............ 98,269 -- (288,855) 385,884 $2.82-$14.03
1995............ 97,250 -- (27,413) 455,721 $2.82-$14.03
1996............ 83,250 (10,000) (85,534) 443,437 $2.82-$14.03

During fiscal 1995, the Company adopted a performance-based stock option
plan which provided for the one-time grant to officers and certain senior
managers of options to purchase 121,000 shares of the Company's common stock at
$.05 (par value) per share. Coincident with the adoption of this plan, the
Company's 1993 stock option plan was amended to reduce the number of shares
issuable under that plan by 121,000 shares. Options under the plan are
exercisable the earlier of January 1, 2003 or approximately 45 days after the
end of fiscal 1997 if the Company achieves an annual compound rate of growth in
its primary earnings per share of 17% during the three-year period ending April
27, 1997. At April 28, 1996, 114,000 options were outstanding.

NOTE 13 -- DEFINED CONTRIBUTION PLAN

The Company has a defined contribution plan which covers substantially all
employees and provides for participant contributions on a pre-tax basis and
discretionary matching contributions by the Company which are determined
annually. Company contributions to the plan were $574,000 in 1994; $771,000 in
1995; and $791,000 in 1996.

NOTE 14 -- INTERNATIONAL SALES

International sales, of which 90% were denominated in U.S. dollars,
accounted for 18% of net sales in 1994, 19% in 1995, and 22% in 1996, and are
summarized by geographic area as follows:

1994 1995 1996

(IN THOUSANDS)
Europe............................................................... $17,334 $19,177 $18,927
North America (excluding the United States).......................... 12,128 16,707 23,528
Asia and Pacific Rim................................................. 5,529 8,969 12,124
South America........................................................ 1,248 3,749 2,753
Middle East.......................................................... 1,740 6,081 15,609
All other areas...................................................... 6,059 3,288 4,456
$44,038 $57,971 $77,397

F-14

CULP, INC.

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE 15 -- RELATED PARTY TRANSACTIONS

A director of the Company is also an officer and director of a major
customer of the Company. The amount of sales to this customer was approximately
$15,464,000 in 1994; $20,484,000 in 1995; and $27,739,000 in 1996. The amount
due from this customer at April 30, 1995 was approximately $2,443,000 and at
April 28, 1996 was approximately $2,608,000.

A director of the Company is also a director of the Company's lead bank, an
officer and director of one of the Company's factors, and an officer and
director of the lessor of the Company's office facilities in High Point. The
amount of factor commissions paid to this factor was approximately $158,000 in
1994; $55,000 in 1995; and $28,000 in 1996, and the amount due from the factor
at April 30, 1995 and April 28, 1996 was $808,000 and $67,000, respectively. The
amount of interest and other fees paid to the bank was approximately $1,555,000
in 1994; $2,039,000 in 1995; and $2,580,000 in 1996, and the loans payable to
the bank and amounts guaranteed through letters of credit by the bank at April
30, 1995 and April 28, 1996 aggregated $42,862,000 and $48,402,000,
respectively. Rent expense for the Company's office facilities in High Point was
approximately $427,000 in 1994; $435,000 in 1995; and $421,000 in 1996.

Rents paid to entities owned by certain shareholders and officers of the
Company and their immediate families were $630,000 in 1994; $670,000 in 1995;
and $680,000 in 1996.

NOTE 16 -- FOREIGN EXCHANGE FORWARD CONTRACTS

The Company generally enters into foreign exchange forward contracts as a
hedge against its exposure to currency fluctuations on firm commitments to
purchase certain machinery and equipment and raw materials. Machinery and
equipment and raw material purchases hedged by foreign exchange forward
contracts are valued by using the exchange rate of the applicable foreign
exchange forward contract. The Company had approximately $6,056,000 and
$1,924,000 of outstanding foreign exchange forward contracts as of April 30,
1995 and April 28, 1996, respectively (primarily denominated in German marks and
Austrian shillings). The contracts outstanding at April 28, 1996 mature at
various dates in fiscal 1997. The fair values of these contracts were $6,553,000
and $1,850,000 at April 30, 1995 and April 28, 1996, respectively. Fair values
were estimated by obtaining quotes from banks assuming all contracts were
purchased on April 30, 1995 and April 28, 1996, respectively.

NOTE 17 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Following is a summary of unaudited quarterly information:

FISCAL 1995 FISCAL 1996
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER 1ST QUARTER 2ND QUARTER

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales................... $ 66,349 $ 78,445 $ 77,791 $ 85,441 $ 72,357 $ 90,672
Cost of sales............... 55,249 64,272 64,785 69,039 60,159 74,565
Gross profit.............. 11,100 14,173 13,006 16,402 12,198 16,107
Selling, general and
administrative expenses... 7,569 8,363 8,295 9,205 8,454 9,675
Income from operations.... 3,531 5,810 4,711 7,197 3,744 6,432
Interest expense............ 1,077 1,144 1,120 1,374 1,297 1,388
Interest income............. (23) (24) (14) (3) -- --
Other expense, net.......... 177 190 245 470 107 219
Income before income
taxes................... 2,300 4,500 3,360 5,356 2,340 4,825
Income taxes................ 850 1,700 1,260 1,931 825 1,825
Net income................ $ 1,450 $ 2,800 $ 2,100 $ 3,425 $ 1,515 $ 3,000
Net income per share........ $ 0.13 $ 0.25 $ 0.19 $ 0.31 $ 0.14 $ 0.27

3RD QUARTER 4TH QUARTER

Net sales................... $ 86,476 $102,162
Cost of sales............... 71,447 82,957
Gross profit.............. 15,029 19,205
Selling, general and
administrative expenses... 9,639 11,300
Income from operations.... 5,390 7,905
Interest expense............ 1,279 1,352
Interest income............. -- (92)
Other expense, net.......... 266 365
Income before income
taxes................... 3,845 6,280
Income taxes................ 1,430 2,230
Net income................ $ 2,415 $ 4,050
Net income per share........ $ 0.22 $ 0.36

F-15

CULP, INC.

UNAUDITED CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE DATA)

OCTOBER 27,
1996

ASSETS
Current assets:
Cash and cash investments................................................................................... $ 744
Accounts receivable......................................................................................... 52,202
Inventories................................................................................................. 52,300
Other current assets........................................................................................ 3,697
Total current assets...................................................................................... 108,943
Restricted investments......................................................................................... 5,379
Property, plant and equipment, net............................................................................. 80,316
Goodwill....................................................................................................... 22,568
Other assets................................................................................................... 2,321
Total assets.............................................................................................. $ 219,527
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt........................................................................ $ 7,100
Accounts payable............................................................................................ 26,936
Accrued expenses............................................................................................ 16,841
Income taxes payable........................................................................................ 836
Total current liabilities................................................................................. 51,713
Long-term debt................................................................................................. 72,891
Deferred income taxes.......................................................................................... 8,088
Total liabilities......................................................................................... 132,692
Shareholders' equity:
Preferred stock, $.05 par value, authorized 10,000,000 shares............................................... --
Common stock, $.05 par value, authorized 40,000,000 shares, issued and outstanding 11,338,577............... 566
Capital contributed in excess of par value.................................................................. 17,081
Retained earnings........................................................................................... 69,188
Total shareholders' equity................................................................................ 86,835
Total liabilities and shareholders' equity................................................................ $ 219,527

The accompanying notes are an integral part of the unaudited consolidated
financial statements.

F-16

CULP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE DATA)

SIX MONTHS ENDED
OCTOBER 29, OCTOBER 27,
1995 1996

Net sales........................................................................................... $ 163,029 $ 195,733
Cost of sales....................................................................................... 134,724 160,691
Gross profit...................................................................................... 28,305 35,042
Selling, general and administrative expenses........................................................ 18,129 22,568
Income from operations............................................................................ 10,176 12,474
Interest expense.................................................................................... 2,685 2,424
Interest income..................................................................................... -- (117)
Other expenses, net................................................................................. 326 696
Income before income taxes........................................................................ 7,165 9,471
Income taxes........................................................................................ 2,650 3,551
Net income........................................................................................ $ 4,515 $ 5,920
Net income per share................................................................................ $ 0.40 $ 0.52

The accompanying notes are an integral part of the unaudited consolidated
financial statements.

F-17

CULP, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

SIX MONTHS ENDED
OCTOBER 29, OCTOBER 27,
1995 1996

Cash flows from operating activities:
Net income........................................................................................ $ 4,515 $ 5,920
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation................................................................................... 6,138 6,321
Amortization of intangible assets.............................................................. 358 444
Provision for deferred income taxes............................................................ (36) --
Changes in assets and liabilities:
Accounts receivable.......................................................................... (2,678) (164)
Inventories.................................................................................. (3,861) (4,905)
Other current assets......................................................................... (221) 470
Other assets................................................................................. (23) (22)
Accounts payable............................................................................. 1,632 3,220
Accrued expenses............................................................................. (457) 4,277
Income taxes payable......................................................................... 1,068 639
Net cash provided by operating activities............................................... 6,435 16,200
Cash flows from investing activities:
Capital expenditures.............................................................................. (5,090) (9,676)
Purchases of restricted investments............................................................... -- (107)
Purchase of investments to fund deferred compensation liability................................... (1,286) --
Proceeds from sale of restricted investments...................................................... 795 2
Net cash used in investing activities................................................... (5,581) (9,781)
Cash flows from financing activities:
Proceeds from issuance of long-term debt.......................................................... 6,000 1,000
Principal payments on long-term debt.............................................................. (3,050) (3,050)
Change in accounts payable-capital expenditures................................................... (3,707) (3,592)
Dividends paid.................................................................................... (617) (735)
Proceeds from common stock issued................................................................. 57 204
Net cash used in financing activities................................................... (1,317) (6,173)
Increase (decrease) in cash and cash investments.................................................... (463) 246
Cash and cash investments at beginning of period.................................................... 1,393 498
Cash and cash investments at end of period.......................................................... $ 930 $ 744

The accompanying notes are an integral part of the unaudited consolidated
financial statements.

F-18

CULP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- BASIS OF PRESENTATION

The consolidated financial statements and related notes included herein are
unaudited; however, such statements reflect all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management of the
Company, necessary for a fair statement of results for the interim periods.

Certain amounts for fiscal year 1996 have been reclassified to conform with
the fiscal year 1997 presentation. Such reclassifications had no effect on net
income as previously reported.

The results of operations for the six months ended October 27, 1996 are not
necessarily indicative of the results to be expected for the full year.

NOTE 2 -- ACCOUNTS RECEIVABLE

A summary of accounts receivable follows:

OCTOBER 27,
1996

(IN THOUSANDS)
Customers.............................................................................. $53,713
Allowance for doubtful accounts........................................................ (1,087)
Reserve for returns and allowances..................................................... (424)
$52,202

NOTE 3 -- INVENTORIES

Inventories are carried at the lower of cost or market. Cost is determined
for substantially all inventories using the LIFO (last-in, first-out) method.

A summary of inventories follows:

OCTOBER 27,
1996

(IN THOUSANDS)
Inventories on the FIFO cost method
Raw materials........................................................................ $31,347
Work-in-process...................................................................... 3,521
Finished goods....................................................................... 21,920
Total inventories on the FIFO cost method......................................... 56,788
Adjustments of certain inventories to the LIFO cost method............................. (4,488)
$52,300

NOTE 4 -- RESTRICTED INVESTMENTS

F-19

CULP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- ACCOUNTS PAYABLE

A summary of accounts payable follows:

OCTOBER 27,
1996

(IN THOUSANDS)
Accounts payable-trade................................................................. $24,790
Accounts payable-capital expenditures.................................................. 2,146
$26,936

NOTE 6 -- ACCRUED EXPENSES

A summary of accrued expenses follows:

OCTOBER 27,
1996

(IN THOUSANDS)
Compensation and benefits.............................................................. $11,447
Other.................................................................................. 5,394
$16,841

NOTE 7 -- LONG-TERM DEBT

A summary of long-term debt follows:

OCTOBER 27,
1996

(IN THOUSANDS)
Industrial revenue bonds and other obligations......................................... $22,191
Revolving credit line.................................................................. 24,300
Term loan.............................................................................. 32,500
Subordinated note payable.............................................................. 1,000
79,991
Less current maturities................................................................ (7,100)
$72,891

The Company has an unsecured loan agreement with two banks, which provides
for a $32,500,000 five-year term loan and a $33,500,000 revolving credit line,
which also has a five-year term. The term loan requires monthly installments of
$500,000 and a final payment of $6,500,000 on March 1, 2001. The revolving
credit line requires payment of an annual facility fee in advance and expires on
March 1, 2001.

The Company's loan agreements require, among other things, that the Company
maintain certain financial ratios. At October 27, 1996, the Company was in
compliance with these required financial covenants.

At October 27, 1996, the Company had three interest rate swap agreements in
order to reduce its exposure to floating interest rates on a portion of its
variable rate borrowings.

The following table summarizes certain data regarding the interest rate
swaps:

NOTIONAL AMOUNT INTEREST RATE EXPIRATION DATE

$15,000,000 7.3% April 2000
5,000,000 6.9 June 2002
5,000,000 6.6 July 2002

Net amounts paid under these agreements increased interest expense for the
six months ended October 29, 1995 and October 27, 1996 by approximately $120,000
and $158,000, respectively. Management believes the risk of incurring losses

F-20

CULP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7 -- LONG-TERM DEBT -- CONTINUED
resulting from the inability of the bank to fulfill its obligation under the
interest rate swap agreements to be remote and that any losses incurred would be
immaterial.

The estimated amount at which the Company could have terminated these
agreements as of October 27, 1996 is approximately $309,000.

NOTE 8 -- CASH FLOW INFORMATION

Payments for interest and income taxes during the period were:

SIX MONTHS ENDED
OCTOBER 29, OCTOBER 27,
1995 1996

(IN THOUSANDS)
Interest.................................................................... $ 2,870 $ 2,411
Income taxes................................................................ 1,582 2,913

NOTE 9 -- FOREIGN EXCHANGE FORWARD CONTRACTS

F-21

[PHOTOGRAPHS OF
THE COMPANY'S PRODUCTS
AND END USE APPLICATIONS.]

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING
SHAREHOLDERS OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANYONE TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.

TABLE OF CONTENTS

PAGE

Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 8
Capitalization................................. 8
Price Range of Common Stock
and Dividend Policy.......................... 9
Selected Financial Data........................ 10
Management's Discussion and Analysis
of Financial Condition and
Results of Operations........................ 11
Business....................................... 16
Management..................................... 27
Selling Shareholders........................... 28
Underwriting................................... 29
Legal Matters.................................. 29
Experts........................................ 30
Additional Information......................... 30
Incorporation of Certain Documents by
Reference.................................... 30
Index to Consolidated Financial Statements..... F-1

1,600,000 Shares

(Culp logo)

Common Stock

P R O S P E C T U S

Wheat First Butcher Singer

Raymond James & Associates, Inc.

, 1997

[A PHOTOGRAPH OF
A JACQUARD FABRIC
PROVIDES A BACKGROUND
FOR THIS PAGE.]

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the Registrant's costs and expenses in
connection with the sale and distribution of the securities being registered,
other than the underwriting discounts and commissions. All amounts shown are
estimates except for the Commission registration fee, the NASD filing fee and
the New York Stock Exchange listing.

SEC registration fee...................................................................... $ 9,061
NASD filing fee........................................................................... 3,490
New York Stock Exchange listing........................................................... 4,200
Blue Sky fees and expenses................................................................ 1,000
Accounting fees and expenses.............................................................. 100,000
Legal fees and expenses................................................................... 150,000
Printing, engraving and mailing expenses.................................................. 100,000
Miscellaneous............................................................................. 132,249
Total................................................................................ $500,000

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 55-2-02 of the North Carolina Business Corporation Act (the "North
Carolina Corporation Act") enables a North Carolina corporation in its articles
of incorporation to eliminate or limit, with certain exceptions, the personal
liability of a director for monetary damages for breach of duty as a director.
No such provision is effective to eliminate or limit a director's liability for
(i) acts or omissions that the director at the time of the breach knew or
believed to be clearly in conflict with the best interests of the corporation,
(ii) improper distributions described in Section 55-8-33 of the North Carolina
Corporation Act, (iii) any transaction from which the director derived an
improper personal benefit, or (iv) acts or omissions occurring prior to the date
the exculpatory provision became effective. The Company's Articles of
Incorporation limit the personal liability of its directors to the fullest
extent permitted by the North Carolina Corporation Act.

Sections 55-8-50 through 55-8-58 of the North Carolina Corporation Act
permit a corporation to indemnify its directors, officers, employees or agents
under either or both a statutory or nonstatutory scheme of indemnification.
Under the statutory scheme, a corporation may, with certain exceptions,
indemnify a director, officer, employee or agent of the corporation who was, is
or is threatened to be made, a party to any threatened, pending or completed
legal action, suit or proceeding, whether civil, criminal, administrative, or
investigative, because of the fact that such person was a director, officer,
agent or employee of the corporation, or is or was serving at the bequest of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. This indemnity may include the obligation to pay any
judgment, settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan) and reasonable expenses incurred in
connection with a proceeding (including counsel fees), but no such
indemnification may be granted unless such director, officer, agent or employee
(i) conducted himself in good faith, (ii) reasonably believed (1) that any
action taken in his official capacity with the corporation was in the best
interest of the corporation or (2) that in all other cases his conduct at least
was not opposed to the corporation's best interest, and (iii) in the case of any
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. Whether a director has met the requisite standard of conduct for the
type of indemnification set forth above is determined by the board of directors,
a committee of directors, special legal counsel or the shareholders in
accordance with Section 55-8-55. A corporation may not indemnify a director
under the statutory scheme in connection with a proceeding by or in the right of
the corporation in which the director was adjudged liable to the corporation or
in connection with a proceeding in which a director was adjudged liable on the
basis of having received an improper personal benefit.

In addition to, and notwithstanding the conditions of and limitations on
indemnification described above under the statutory scheme, Section 55-8-57 of
the North Carolina Corporation Act permits a corporation to indemnify or agree
to indemnify any of its directors, officers, employees or agents against
liability and expenses (including attorneys' fees) in any proceeding (including
proceedings brought by or on behalf of the corporation) arising out of their
status as such or their activities in such capacities, except for any
liabilities or expenses incurred on account of activities that were, at the time
taken, known or believed by the person seeking indemnification to be clearly in
conflict with the best interests of the corporation. Because the Company's
Bylaws provide for indemnification to the fullest extent permitted under the
North Carolina Corporation Act, the Company may indemnify its directors,
officers and employees in accordance with either the statuary or the
nonstatutory standard.

II-1

Sections 55-8-52 and 55-8-56 of the North Carolina Corporation Act requires
a corporation, unless its articles of incorporation provide otherwise, to
indemnify a director or officer who has been wholly successful on the merits or
otherwise in the defense of any proceeding to which such director or officer
was, or was threatened to be made, a party. Unless prohibited by the articles of
incorporation, a director or officer also may make application and obtain
court-ordered indemnification if the court determines that such director or
officer is fairly and reasonably entitled to such indemnification as provided in
Section 55-8-54 and 55-8-56.

Additionally, Section 55-8-57 of the North Carolina Corporation Act
authorizes a corporation to purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee or agent of the
corporation against certain liabilities incurred by such persons, whether or not
the corporation is otherwise authorized by the North Carolina Corporation Act to
indemnify such party. The Company's directors and officers are currently covered
under directors' and officers' insurance policies maintained by the Company that
will indemnify such persons against certain liabilities arising from acts or
omissions in the discharge of their duties. Such insurance policies provide $15
million coverage for liabilities, including liabilities for alleged violation of
securities laws.

ITEM 16. EXHIBITS

EXHIBIT NO. DESCRIPTION OF EXHIBIT

1 Form of Underwriting Agreement.
4.1 Articles 4, 5 and 6 of Articles of Incorporation of the Company, filed as Exhibit 3(i) to the Company's Form
10-Q for the quarter ended January 29, 1995, are incorporated herein by reference.
4.2 Article II of the Bylaws of the Company, filed as Exhibit 3(b) to the Company's Form 10-K for the year ended
April 28, 1991, is incorporated herein by reference.
5* Opinion of Robinson, Bradshaw & Hinson, P.A. with respect to the validity of the shares being offered.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Robinson, Bradshaw & Hinson, P.A.
24 Powers of Attorney (included on the signature page of the Registration Statement as initially filed).
27 Financial Data Schedule, filed as Exhibit 27 to the Company's Form 10-Q for the quarter ended October 27,
1996, is incorporated herein by reference.

* Previously filed.

ITEM 17. UNDERTAKINGS

The undersigned Company hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the Company's annual
report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions contained in the Company's Articles of Incorporation
and By-laws and the laws of the State of North Carolina, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Company hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.

II-2

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of High Point, State
of North Carolina, on this 29th day of January, 1997.

By: /s/ KENNETH M. LUDWIG
KENNETH M. LUDWIG
SENIOR VICE PRESIDENT

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.

SIGNATURE TITLE DATE

ROBERT G. CULP, III* Chairman of the Board of Directors January 29, 1997
ROBERT G. CULP, III and Chief Executive Officer

FRANKLIN N. SAXON* Senior Vice President, Chief Financial and January 29, 1997
FRANKLIN N. SAXON Accounting Officer and Director

HOWARD L. DUNN, JR.* President, Chief Operating Officer and January 29, 1997
HOWARD L. DUNN, JR. Director

HARRY R. CULP* Director January 29, 1997
HARRY R. CULP

BAXTER P. FREEZE* Director January 29, 1997
BAXTER P. FREEZE

EARL M. HONEYCUTT* Director January 29, 1997
EARL M. HONEYCUTT

PATRICK H. NORTON* Director January 29, 1997
PATRICK H. NORTON

EARL N. PHILLIPS, JR.* Director January 29, 1997
EARL N. PHILLIPS, JR.

BLAND W. WORLEY* Director January 29, 1997
BLAND W. WORLEY

*By: /s/ STEPHEN T. HANCOCK
(STEPHEN T. HANCOCK, ATTORNEY-IN-FACT)

II-3

INDEX TO EXHIBITS

EXHIBIT NO. DESCRIPTION

1 Form of Underwriting Agreement.
4.1 Articles 4, 5 and 6 of Articles of Incorporation of the Company, filed
as Exhibit 3(i) to the Company's Form 10-Q for the quarter ended January
29, 1995, are incorporated herein by reference.
4.2 Article II of the Bylaws of the Company, filed as Exhibit 3(b) to the
Company's Form 10-K for the year ended April 28, 1991, is incorporated
herein by reference.
5* Opinion of Robinson, Bradshaw & Hinson, P.A. with respect to the
validity of the shares being offered.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Robinson, Bradshaw & Hinson, P.A.
24 Powers of Attorney (included on the signature page of this Registration
Statement).
27 Financial Data Schedule, filed as Exhibit 27 to the Company's Form 10-Q
for the quarter ended October 27, 1996, is incorporated herein by
reference.

* Previously filed.

                                1,600,000 SHARES

                                   CULP, INC.

                                  COMMON STOCK



                             UNDERWRITING AGREEMENT






WHEAT, FIRST SECURITIES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
  As Representatives of the Several
  Underwriters Named in Schedule I
  hereto
c/o Wheat, First Securities, Inc.
Riverfront Plaza
901 East Byrd Street
Richmond, Virginia 23219                                    January 29, 1997

Dear Sirs:

         Culp, Inc., a North Carolina  corporation  (the  "Company"),  proposes,
subject  to the terms and  conditions  stated  herein,  to issue and sell to the
underwriters  named in Schedule I hereto (the  "Underwriters")  an  aggregate of
1,200,000  shares of common stock,  $0.05 par value, of the Company (the "Common
Stock"),  and the selling shareholders named in Schedule II hereto (the "Selling
Shareholders"),  propose,  subject to the terms and conditions stated herein, to
sell to the  Underwriters an aggregate of 400,000 shares of Common Stock and, at
the election of the Underwriters,  an aggregate of 240,000  additional shares as
set forth in Schedule II. The  aggregate  of 1,600,000  shares to be sold by the
Company and the Selling  Shareholders  are herein called the "Firm  Securities,"
and the  aggregate  of  240,000  additional  shares  to be  sold by the  Selling
Shareholders  are herein called the "Optional  Securities."  The Firm Securities
and the Optional  Securities that the Underwriters elect to purchase pursuant to
Section 2 hereof are collectively called the "Securities."







1.       REPRESENTATIONS AND WARRANTIES.

         (a)      The Company represents and warrants to, and agrees with, the 
         Underwriters that:

                  (i) A  registration  statement in respect of the Securities on
         Form S-3 (File No.  333-18199)  under the  Securities  Act of 1933,  as
         amended (the "Act"), and as a part thereof a preliminary prospectus, in
         respect  of the  Securities  has been  filed  with the  Securities  and
         Exchange Commission (the "Commission") in the form heretofore delivered
         to  you,  and,  excluding  exhibits  thereto,  for  each  of the  other
         Underwriters;   such  registration  statement,  as  amended,  has  been
         declared effective by the Commission; no other document with respect to
         such  registration  statement (other than those documents  incorporated
         into such  registration  statement by reference)  has  heretofore  been
         filed with the Commission other than in accordance with Section 5(a) of
         this Agreement;  and no stop order suspending the effectiveness of such
         registration  statement  has been  issued  and no  proceeding  for that
         purpose  has been  instituted  or  threatened  by the  Commission  (any
         preliminary prospectus included in such registration statement or filed
         with the Commission  pursuant to Rule 424 of the rules and  regulations
         of the Commission under the Act being hereinafter called a "Preliminary
         Prospectus",   the  various  parts  of  such  registration   statement,
         including  (i) all exhibits  thereto,  and  including  the  information
         contained  in the form of final  prospectus  filed with the  Commission
         pursuant to Rule 424(b) under the Act in  accordance  with Section 5(a)
         of this Agreement and deemed by virtue of Rule 430A under the Act to be
         part  of the  registration  statement  at  the  time  it  was  declared
         effective,  together with any related registration statement filed with
         the Commission for  registration of a portion of the Securities,  which
         registration  statement became effective  pursuant to Rule 462(b) under
         the Act,  and (ii)  the  documents  incorporated  by  reference  in the
         registration  statement at the time it was declared effective,  each as
         amended at the time such part became  effective,  being  herein  called
         collectively the "Registration Statement," and the final prospectus, in
         the form first filed pursuant to Rule 424(b),  being hereinafter called
         the "Prospectus,"  PROVIDED, that if the Company elects to rely on Rule
         434 under the Act, all references to the Prospectus  shall be deemed to
         include, without limitation, the form of prospectus and the abbreviated
         term sheet, taken together, provided to the Underwriters by the Company
         in  reliance  on Rule 434);  any  reference  herein to any  Preliminary
         Prospectus  or the  Prospectus  shall be deemed to refer to and include
         the documents  incorporated by reference  therein  pursuant to Form S-3
         under the Act; and the terms "supplement" and "amendment" or "amend" as
         used in this Agreement shall include all documents  subsequently  filed
         by the Company with the Commission  pursuant to the Securities Exchange
         Act of 1934,  as amended (the  "Exchange  Act"),  that are deemed to be
         incorporated by reference in the Prospectus;

                  (ii)  No  order  preventing  or  suspending  the  use  of  any
         Preliminary  Prospectus  has been  issued by the  Commission,  and each
         Preliminary Prospectus, at the time of filing thereof, conformed in all
         material  respects  to the  requirements  of the Act and the  rules and
         regulations  of the  Commission  thereunder,  and did not  contain  any
         untrue  statement of a material  fact or omit to state a material  fact
         required  to be stated  therein  or  necessary  to make the  statements
         therein, in the light of the circumstances under


                                       -2-





         which they were made,  not  misleading;  PROVIDED,  HOWEVER,  that this
         representation  and  warranty  shall  not  apply to any  statements  or
         omissions  made in reliance  upon and in  conformity  with  information
         furnished  in writing to the  Company by the  Underwriters  through you
         expressly for use therein or by the Selling  Shareholder  expressly for
         use in the preparation of the answers therein to Item 7 of Form S-3;

                  (iii)  Each   document   incorporated   by  reference  in  the
         Prospectus when they were filed,  or to be filed,  with the Commission,
         conformed in all material  respects to the requirements of the Exchange
         Act and the rules and regulations of the Commission thereunder, and, as
         of their  filing  date,  none of such  documents  contained  an  untrue
         statement  of a  material  fact or  omitted  to state a  material  fact
         required  to be stated  therein  or  necessary  to make the  statements
         therein not misleading;

                  (iv) The Registration  Statement conforms,  and the Prospectus
         and any amendments or supplements thereto will conform, in all material
         respects to the  requirements  of the Act and the rules and regulations
         of  the  Commission  thereunder  and  do  not  and  will  not as of the
         applicable  effective  date as to the  Registration  Statement  and any
         amendment  thereto  and  as of the  applicable  filing  date  as to the
         Prospectus  and any amendment or supplement  thereto  contain an untrue
         statement of a material  fact or omit to state a material fact required
         to be stated  therein or necessary to make the statements  therein,  in
         light of the circumstances  under which they were made, not misleading;
         PROVIDED,  HOWEVER,  that this  representation  and warranty  shall not
         apply to any  statements  or  omissions  made in  reliance  upon and in
         conformity with information  furnished in writing to the Company by the
         Underwriters  through  you  expressly  for use therein or by any of the
         Selling  Shareholders  expressly  for  use  in the  preparation  of the
         answers therein to Item 7 of Form S-3;

                  (v)  Neither  the  Company  nor  any  of its  subsidiaries,  a
         complete  and correct  list of which is  attached as Schedule  III (the
         "Subsidiaries"),  has  sustained  since the date of the latest  audited
         financial  statements  included in the  Prospectus any material loss or
         interference  with its business  from fire,  explosion,  flood or other
         calamity,  whether  or not  covered  by  insurance,  or from any  labor
         dispute or court or  governmental  action,  order or decree,  otherwise
         than as set forth or  contemplated  in the  Prospectus;  and, since the
         respective  dates as of which  information is given in the Registration
         Statement and the Prospectus, there has not been any material change in
         the  outstanding  capital stock or long-term debt of the Company (other
         than payments in the ordinary  course) or any material  adverse change,
         or any development  involving a prospective material adverse change, in
         or  affecting  the general  affairs,  management,  financial  position,
         shareholders' equity or results of operations of the Company, otherwise
         than as set forth or contemplated in the Prospectus;

                  (vi) The  Company and each of its  Subsidiaries  have good and
         marketable  title  in fee  simple  to all  real  property  and good and
         marketable  title to all material  items of personal  property owned by
         them, free and clear of all liens, encumbrances and defects except such
         as are  described in the  Prospectus,  secure  obligations  incurred in
         connection  with  industrial  revenue bond  financing or such as do not
         materially affect the value of


                                       -3-





         such property and do not interfere with the use made and proposed to be
         made of such property by the Company and the Subsidiaries; and any real
         property  and  buildings  held under lease by the Company or any of the
         Subsidiaries  are held by it under valid,  subsisting  and  enforceable
         leases with such  exceptions  as are not material and do not  interfere
         with  the use  made  and  proposed  to be made  of  such  property  and
         buildings by the Company or such Subsidiaries;

                  (vii) The Company and each of its Subsidiaries  have been duly
         incorporated  and are validly existing as corporations in good standing
         under the laws of their respective jurisdictions of incorporation, with
         power  and  authority  (corporate  and  other)  to own or  lease  their
         respective  properties  and  conduct  their  respective  businesses  as
         described  in the  Prospectus,  and each has been duly  qualified  as a
         foreign  corporation  for the  transaction  of business  and is in good
         standing under the laws of each other  jurisdiction in which it owns or
         leases  properties,  or conducts  any  business,  so as to require such
         qualification,  except where the failure to so qualify would not result
         in a material  adverse effect on the consolidated  financial  position,
         shareholders'  equity or results of  operations  of the Company and the
         Subsidiaries taken as a whole;

                  (viii) The Company  has an  authorized  capitalization  as set
         forth in the Prospectus under the caption  "Capitalization"  and in the
         Form 8-A filed with the  Commission  on  December  19,  1996,  which is
         incorporated by reference in the  Prospectus;  all of the issued shares
         of capital  stock of the Company have been duly and validly  authorized
         and  issued,  are  fully  paid and  nonassessable  and  conform  to the
         description  of the  capital  stock  of the  Company  contained  in the
         Prospectus;  except  as  described  in  the  Prospectus,  there  are no
         preemptive or other similar  rights to subscribe for or to purchase any
         securities of the Company; except as described in the Prospectus, there
         are no  warrants,  options  or other  similar  rights to  purchase  any
         securities  of the  Company;  neither  the  filing of the  Registration
         Statement nor the offering or sale of the Securities as contemplated by
         this  Agreement  gives  rise  to  any  rights  for or  relating  to the
         registration  of any  securities  of the Company  with  respect to such
         filing,  offering or sale,  other than rights which have been waived or
         satisfied;

                  (ix) All of the issued and outstanding shares of capital stock
         of each of the  Subsidiaries  owned by the  Company  have been duly and
         validly authorized and issued and are fully paid and nonassessable; and
         except otherwise set forth in the Prospectus, all outstanding shares of
         capital  stock of each of the  Subsidiaries  owned by the  Company  are
         directly owned by the Company free and clear of any perfected  security
         interest  and  any  other   security   interests,   claims,   liens  or
         encumbrances;

                  (x) The Securities to be sold by the Company  pursuant to this
         Agreement  have been duly and validly  authorized  and, when issued and
         delivered against payment therefor as provided herein, will be duly and
         validly issued and fully paid and nonassessable and will conform to the
         description of the Securities contained in the Prospectus as amended or
         supplemented;



                                       -4-





                  (xi) The issue and sale of the  Securities  by the Company and
         the  performance by the Company of this Agreement and the  consummation
         by the Company of the other transactions  herein  contemplated will not
         conflict  with or  result  in a breach  or  violation  of any  terms or
         provisions of, or constitute a default under, any indenture,  mortgage,
         deed of trust, loan agreement or other agreement or instrument to which
         the  Company  or any of the  Subsidiaries  is a party or by  which  the
         Company  or any of the  Subsidiaries  is bound  or to which  any of the
         property or assets of the Company or any of the  Subsidiaries  is bound
         or to which any of the  property or assets of the Company or any of the
         Subsidiaries  is subject,  nor will such action result in any violation
         of the  provisions  of the Articles of  Incorporation  or Bylaws of the
         Company   (each  as  amended  to  date  the   "Charter"  and  "Bylaws",
         respectively)  or the articles of incorporation or bylaws of any of the
         Subsidiaries  or any statute or any order,  rule or  regulation  of any
         court or  governmental  agency  or body  having  jurisdiction  over the
         Company or any of the Subsidiaries or any of their  properties;  and no
         consent, approval, authorization,  order, registration or qualification
         of or with any such court or  governmental  agency or body is  required
         for the issue and sale of the  Securities  or the  consummation  by the
         Company of the transactions contemplated by this Agreement, except such
         as may be  required  under  the Act and such as may be  required  under
         state  securities or Blue Sky laws in connection  with the purchase and
         distribution of the Securities by the Underwriters and the clearance of
         such offering  with the National  Association  of  Securities  Dealers,
         Inc.;

                  (xii) There are no legal or governmental  proceedings  pending
         to which the Company or any of its  Subsidiaries is a party or of which
         any property of the Company or any of its  Subsidiaries  is the subject
         other than as set forth or  contemplated  in the  Prospectus,  that, if
         determined  adversely to the Company or any of its Subsidiaries,  would
         individually or in the aggregate have a material  adverse effect on the
         financial  position,  shareholders'  equity or results of operations of
         the  Company or of the Company  and the  Subsidiaries  taken as a whole
         and, to the best of the Company's  knowledge,  no such  proceedings are
         threatened or contemplated by governmental authorities or by others;

                  (xiii)  KPMG Peat  Marwick  LLP,  who have  certified  certain
         financial   statements  of  the  Company  and  the  Subsidiaries,   are
         independent public accountants as required by the Act and the rules and
         regulations of the Commission thereunder;

                  (xiv) All employee  benefit  plans (as defined in Section 3(3)
         of the Employee  Retirement  Income  Security  Act of 1974,  as amended
         ("ERISA"))  established,  maintained or  contributed  to by the Company
         comply in all material  respects with the  requirements of ERISA and no
         employee pension benefit plan (as defined in Section 3(2) of ERISA) has
         incurred  or assumed an  "accumulated  funding  deficiency"  within the
         meaning of Section 302 of ERISA or has incurred or assumed any material
         liability  (other  than for the  payment of  premiums)  to the  Pension
         Benefit Guaranty Corporation;

                  (xv) The consolidated  financial statements of the Company and
         the  Subsidiaries,  together  with related  notes,  as set forth in the
         Registration  Statement  present fairly the financial  position and the
         results of operations of the Company and the Subsidiaries at


                                       -5-





         the  indicated  dates and for the  indicated  periods;  such  financial
         statements  have been prepared in accordance  with  generally  accepted
         accounting  principles,  consistently  applied  throughout  the periods
         presented  except as noted in the notes  thereon,  and all  adjustments
         necessary for a fair presentation of results for such periods have been
         made; and the selected financial information included in the Prospectus
         presents fairly the information  shown therein and has been compiled on
         a basis consistent with the financial statements presented therein;

                  (xvi) The Company and each of the Subsidiaries  have filed all
         federal,  state and foreign  income,  franchise  and excise tax returns
         which have been required to be filed (or has received an extension with
         respect  thereto),  and has paid,  or made  adequate  reserves for, all
         taxes indicated by said returns and all assessments received by them to
         the extent that such taxes have become due and are not being  contested
         in good faith;  to the best  knowledge  of the Company  there is no tax
         deficiency that has been or might be asserted  against the Company that
         could  have a  material  adverse  effect on the  business,  properties,
         business  prospects,  condition  (financial or otherwise),  earnings or
         results of operations of the Company;

                  (xvii) Neither the Company nor any of the  Subsidiaries  is in
         violation of any international,  federal or state law,  regulation,  or
         treaty relating to the storage, handling, transportation,  treatment or
         disposal of hazardous substances (as defined in 42 U.S.C. Section 9601)
         or hazardous  materials  (as defined by any  international,  federal or
         state law or regulation) or other waste  products,  which  violation is
         reasonably  likely  to  result  in a  material  adverse  effect  on the
         financial condition or business operations or properties of the Company
         and the Subsidiaries  taken as a whole, and the Company and each of the
         Subsidiaries  have  received  all material  permits,  licenses or other
         approvals  as may be required of them under  applicable  international,
         federal and state  environmental  laws and regulations to conduct their
         business as  described in the  Prospectus;  and the Company and each of
         the  Subsidiaries  are in compliance in all material  respects with the
         terms and conditions of any such permit,  license or approval;  neither
         the Company nor any of the  Subsidiaries  has  received  any notices or
         claims  that it is a  responsible  party or a  potentially  responsible
         party in connection  with any claim or notice  asserted  pursuant to 42
         U.S.C.  Section  9601 ET  SEQ.  or any  state  superfund  law;  and the
         disposal by the Company or any  Subsidiary  of any of the Company's and
         each Subsidiary's  hazardous substances,  hazardous materials and other
         waste products has been lawful in all material respects;

                  (xviii) No relationship, direct or indirect, exists between or
         among the Company or any of the Subsidiaries,  on the one hand, and the
         directors,  officers,  shareholders,  customers  or  suppliers  of  the
         Company or any of the  Subsidiaries on the other hand, that is required
         by the Act or the Exchange Act, or by the rules and  regulations  under
         either of such Acts to be described in the  Registration  Statement and
         the Prospectus or documents  incorporated by reference  therein that is
         not so described;

                  (xix) Neither the Company nor any of the Subsidiaries has
         taken and none of such entities will take, directly or indirectly, any
         action that is designed to or that has


                                       -6-





         constituted or that might  reasonably be expected to cause or result in
         stabilization  or  manipulation  of the  price of any  security  of the
         Company to facilitate the sale or resale of the Securities;

                  (xx)  Each  of  the  Company  and  the  Subsidiaries  owns  or
         possesses,  or can  acquire on  reasonable  terms,  adequate  licenses,
         copyrights,  trademarks,  service marks and trade names  (collectively,
         "intellectual   property")  necessary  to  carry  on  its  business  as
         presently operated by it, except where the failure to own or possess or
         have the ability to acquire any such  intellectual  property would not,
         individually or in the aggregate, have a material adverse effect on the
         Company and the Subsidiaries  taken as a whole, and neither the Company
         nor any of the  Subsidiaries  has  received  any notice or is otherwise
         aware of any infringement of or conflict with asserted rights of others
         with respect to any  intellectual  property or of any facts which would
         render any  intellectual  property invalid or inadequate to protect the
         interest  of the Company or any of the  Subsidiaries  therein and which
         infringement  or conflict  could have a material  adverse effect on the
         Company and the Subsidiaries taken as a whole;

                  (xxi) Except as described in the  Prospectus,  the Company and
         the  Subsidiaries  maintain  insurance  of the types and in the amounts
         that are customary or required for the business  operated by them,  all
         of which insurance is in full force and effect;

                  (xxii) The Company and each of the Subsidiaries  holds and are
         operating in compliance, in all material respects, with all franchises,
         grants,   authorizations,   licenses,  permits,  easements,   consents,
         certificates  and orders of any  governmental or  self-regulatory  body
         required for the conduct of their  respective  businesses  as presently
         being  conducted  ("licenses")  and all  licenses are valid and in full
         force and effect, and the Company,  and each of the Subsidiaries are in
         compliance,  in all  material  respects,  with all  laws,  regulations,
         orders and decrees applicable to them;

                  (xxiii) The Securities have been approved for listing, subject
         to notice of issuance, on the New York Stock Exchange;

                  (xxiv) This Agreement has been duly authorized, executed and
         delivered by the Company;

                  (xxv) The Company  maintains  a system of internal  accounting
         controls   sufficient  to  provide   reasonable   assurance   that  (i)
         transactions  are executed in accordance with  management's  general or
         specific authorization;  (ii) transactions are recorded as necessary to
         permit preparation of financial statements in conformity with generally
         accepted  accounting  principles  and to  maintain  accountability  for
         assets;  (iii) access to assets is permitted  only in  accordance  with
         management's general or specific  authorization;  and (iv) the recorded
         accountability   for  assets  is  compared  with  existing   assets  at
         reasonable  intervals and  appropriate  action is taken with respect to
         any differences;



                                       -7-





                  (xxvi)  There  is  no  document  or  contract  of a  character
         required  to  be  described  in  the  Registration   Statement  or  the
         Prospectus or to be filed as an exhibit to the  Registration  Statement
         which is not  described  or filed as  required.  All such  contracts to
         which the  Company  or a  Subsidiary  is a party  constitute  valid and
         binding agreements of the Company; and

                  (xxvii) The conditions for use of  registration  statements on
         Form S-3 set forth in the  General  Instructions  on Form S-3 have been
         satisfied  and  the  Company  is  entitled  to use  such  form  for the
         transaction contemplated herein.

         (b)  Each of the  Selling  Shareholders,  severally  and  not  jointly,
represents and warrants to, and agrees with, the  Underwriters  and the Company,
solely with respect to such Selling Shareholder, that:

                  (i) No consent, approval,  authorization or order of any court
         or governmental  agency or body is required for the consummation of the
         transactions  contemplated  by this  Agreement in  connection  with the
         execution and delivery by such Selling  Shareholder  of this  Agreement
         and for the  sale and  delivery  of the  Securities  to be sold by such
         Selling Shareholder hereunder, except such as may be required under the
         Act or  state  securities  or Blue  Sky  laws in  connection  with  the
         purchase and distribution of the Securities by the Underwriters and the
         clearance of such offering with the National  Association of Securities
         Dealers,  Inc.; and such Selling  Shareholder has full right, power and
         authority to enter into this  Agreement and to sell,  assign,  transfer
         and  deliver  the  Securities  to be sold by such  Selling  Shareholder
         hereunder;

                  (ii) The  sale of the  Securities  to be sold by such  Selling
         Shareholder  hereunder and the  performance  of this  Agreement and the
         consummation  by such Selling  Shareholder of the  transactions  herein
         contemplated  will not conflict with or result in a breach or violation
         of any terms or  provisions  of, or  constitute  a default  under,  any
         statute, indenture,  mortgage, deed of trust, loan agreement, guarantee
         or other agreement or instrument to which such Selling Shareholder is a
         party or by which such Selling  Shareholder  is subject,  or any order,
         rule or regulation of any court or  governmental  agency or body having
         jurisdiction  over such  Selling  Shareholder  or the  property of such
         Selling Shareholders;

                  (iii) At such  Delivery  Date (as  hereinafter  defined)  such
         Selling Shareholder will have good and valid title to the Securities to
         be sold by such Selling  Shareholder  hereunder,  free and clear of all
         liens,  encumbrances,  equities or claims  (other than those imposed by
         the Act or under this Agreement); and, upon delivery of such Securities
         and payment therefor  pursuant  hereto,  good and valid title to all of
         such Securities, free and clear of all liens, encumbrances, equities or
         claims, will be transferred to the Underwriters;

                  (iv) No offering,  sale or other disposition of any Securities
         (or any securities convertible into or exercisable for such Securities)
         will be made within 180 days after the


                                       -8-





         date  of the  Prospectus,  directly  or  indirectly,  by  such  Selling
         Shareholder, otherwise than hereunder or with your written consent;

                  (v) Such Selling  Shareholder has not taken and will not take,
         directly or  indirectly,  any action  which is designed to or which has
         constituted or which might reasonably be expected to cause or result in
         stabilization  or  manipulation  of the  price of any  security  of the
         Company to facilitate the sale or resale of the Securities;

                  (vi)  Such   Selling   Shareholder   is   familiar   with  the
         Registration  Statement  and  the  Prospectus  and  verifies  that  the
         information set forth therein under the caption "Selling  Shareholders"
         respecting it is true and complete;

                  (vii) In order to document the  Underwriters'  compliance with
         the reporting and  withholding  provisions of the Tax Equity and Fiscal
         Responsibility   Act  of  1982,   as  amended,   with  respect  to  the
         transactions  herein  contemplated,  such Selling Shareholder agrees to
         deliver to you prior to or at the First  Delivery Date (as  hereinafter
         defined) a properly  completed  and  executed  United  States  Treasury
         Department Form W-9 (or other applicable form or statement specified by
         Treasury Department regulations in lieu thereof);

                  (viii) Such Selling  Shareholder  specifically agrees that the
         Securities are subject to the interests of the Underwriters  hereunder.
         Such Selling  Shareholder  agrees that its obligations  hereunder shall
         not be terminated by operation of law,  whether by death or incapacity,
         liquidation  or  dissolution,  or by the  occurrence of any other event
         that is not by the terms of this  Agreement a condition to such Selling
         Shareholder's obligations hereunder;

                  (ix) This Agreement has been duly executed and delivered by or
         on behalf of each Selling Stockholder; and

                  (x) Such Selling  Shareholder does not believe that any of the
         representations and warranties of the Company contained in Section 1(a)
         hereof are not true and correct in all material respects.

2.       PURCHASE AND SALE.

         Subject to the terms and conditions  herein set forth,  (a) the Company
and each of the Selling Shareholders,  severally and not jointly,  agree to sell
to the  Underwriters,  and each of the  Underwriters  agrees,  severally and not
jointly, to purchase from the Company and each of the Selling Shareholders, at a
purchase  price  per  share  of [$ . ],  the  number  of Firm  Securities  to be
purchased by such Underwriter as set forth opposite the name of such Underwriter
in  Schedule  I  hereto  and  (b)  in the  event  and to  the  extent  that  the
Underwriters  shall  exercise the election to purchase  Optional  Securities  as
provided  below,  each of the Selling  Shareholders  agrees,  severally  and not
jointly,  as  set  forth  in  Schedule  II  hereto,  to  sell  to  each  of  the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from each of the Selling Shareholders,  at the purchase price set forth
in clause (a) of this


                                       -9-





Section 2, that  portion of the number of Optional  Securities  as to which such
election  shall have been  exercised  (to be adjusted by you so as to  eliminate
fractional  securities)  determined  by  multiplying  such  number  of  Optional
Securities  by a  fraction,  the  numerator  of which is the  maximum  number of
Optional  Securities that such  Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto,  and the denominator
of  which is the  maximum  number  of the  Optional  Securities  that all of the
Underwriters are entitled to purchase.

         Each of the Selling  Shareholders,  as and to the extent  indicated  in
Schedule  II  hereto,   hereby  grants,   severally  and  not  jointly,  to  the
Underwriters  an option to  purchase at their  election  up to 120,000  Optional
Securities,  as more  particularly  set  forth in  Schedule  II  hereto,  at the
purchase price per share set forth in the paragraph  above, for the sole purpose
of  covering  over-allotments  in the  sale of the  Firm  Securities.  Any  such
election to purchase  Optional  Securities  shall be made in  proportion  to the
maximum number of Optional Securities to be sold by the Selling  Shareholders as
set  forth in  Schedule  II  hereto.  Any such  election  to  purchase  Optional
Securities  may be exercised no more than once by written notice from you to the
Selling  Shareholders,  given  within a period of 30 days after the date of this
Agreement,  setting  forth the  aggregate  amount of Optional  Securities  to be
purchased and the date on which such Optional Securities are to be delivered and
payment  therefor is to be made,  as  determined  by you but in no event earlier
than the First  Delivery  Date (as defined in Section 4 hereof)  or,  unless you
otherwise  agree in writing,  earlier  than two or later than 10  business  days
after the date of such notice;  provided that if such notice is delivered  after
noon, Richmond,  Virginia time, the date for delivery of the Optional Securities
and payment therefor shall be no earlier than three business days after the date
of such notice.

3.       OFFERING BY THE UNDERWRITERS.

         Upon the  authorization  by you of the release of the Firm  Securities,
the several  Underwriters propose to offer the Firm Securities for sale upon the
terms and conditions set forth in the Prospectus.

4.       DELIVERY AND PAYMENT.

         Certificates  in definitive  form for the Securities to be purchased by
each Underwriter  hereunder,  and in such  denominations  and registered in such
names as Wheat,  First  Securities,  Inc. may request upon at least two business
days' prior  notice to the Company or any Selling  Shareholder,  as  applicable,
shall be delivered  by or on behalf of the Company or such Selling  Shareholder,
as  applicable,  to Wheat,  First  Securities,  Inc.,  for the  account  of each
Underwriter,  against  payment  by  such  Underwriter  or on its  behalf  of the
purchase price therefor.  Payment of the purchase price for the Securities shall
be made by certified or official bank check in immediately  available  funds or,
at the option of Wheat, First Securities,  Inc., by wire transfer of immediately
available funds all at the offices of Wheat, First Securities,  Inc., Riverfront
Plaza,  901 East  Byrd  Street,  Richmond,  Virginia.  The time and date of such
delivery and payment shall be, with respect to the Firm Securities,  10:00 a.m.,
Richmond, Virginia time, ON _______________, 1997 or at such other time and date
as you and the  Company  may agree upon in  writing,  and,  with  respect to the
Optional Securities, 10:00 a.m., Richmond, Virginia time,


                                      -10-





on the date specified by you in the written notice given by you (consistent with
Section 2 hereof)  of the  Underwriters'  election  to  purchase  such  Optional
Securities,  or at such other time and date as you and the Selling  Shareholders
may  agree  upon in  writing.  Such  time  and  date  for  delivery  of the Firm
Securities  is herein called the "First  Delivery  Date," such time and date for
delivery of the Optional  Securities,  if not the First Delivery Date, is herein
called the "Second  Delivery  Date," and each such time and date for delivery is
herein called a "Delivery  Date." Such  certificates  will be made available for
checking  and  packaging  at least 24 hours prior to each  Delivery  Date at the
offices of Wheat, First Securities,  Inc. at the address set forth above or such
other  location  designated by the  Underwriters  to the Company and the Selling
Shareholders.

5.       AGREEMENTS OF THE COMPANY.

         The Company agrees with the Underwriters:

         (a) To prepare the Prospectus in a form reasonably  approved by you and
to file such  Prospectus (or a term sheet as permitted by Rule 434(c))  pursuant
to Rule 424(b) under the Act not later than the  Commission's  close of business
on the  second  business  day  following  the  execution  and  delivery  of this
Agreement  or, if  applicable,  such  earlier  time as may be  required  by Rule
430A(a)(3) under the Act; to make no amendment or supplement to the Registration
Statement or  Prospectus  prior to any Delivery  Date which shall be  reasonably
disapproved  by you promptly after  reasonable  notice  thereof;  to advise you,
promptly after it receives notice thereof, of the time when any amendment to the
Registration  Statement has been filed or becomes effective or any supplement to
the Prospectus or any amended  Prospectus has been filed and to furnish you with
copies  thereof;  to file  promptly  all  reports  and any  definitive  proxy or
information  statements  required to be filed by the Company with the Commission
subsequent  to the date of the  Prospectus  and for so long as the delivery of a
Prospectus  is  required  in  connection  with  the  offering  or  sale  of  the
Securities;  to advise you,  promptly after it receives notice  thereof,  of the
issuance  by the  Commission  of any stop  order or of any order  preventing  or
suspending  the use of any  Preliminary  Prospectus  or the  Prospectus,  of the
suspension of the  qualification  of the  Securities for offering or sale in any
jurisdiction,  of the  initiation or  threatening of any proceeding for any such
purpose,  of any request by the Commission for the amending or  supplementing of
the Registration  Statement or Prospectus or for additional  information and, in
the  event of the  issuance  of any stop  order or of any  order  preventing  or
suspending the use of any Preliminary Prospectus or the Prospectus or suspending
any such  qualification,  to use promptly its reasonable  best efforts to obtain
its withdrawal;

         (b)  Promptly  from  time  to  time to  take  such  actions  as you may
reasonably  request to qualify the  Securities  for  offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit  the  continuance  of sales and  dealings  therein  in such
jurisdictions  for as long as may be necessary to complete the  distribution  of
the Securities,  PROVIDED that in connection  therewith the Company shall not be
required  to qualify as a foreign  corporation  or to file a general  consent to
service of process in any jurisdiction;

         (c) To  furnish  the  Underwriters  with  copies  of  the  Registration
Statement  and the  Prospectus  in such  quantities as you may from time to time
reasonably request during such


                                      -11-





period  following  the date hereof that a prospectus is required to be delivered
in  connection  with offers or sales of  Securities,  and, if the  delivery of a
prospectus  is  required  during this period and if at such time any event shall
have  occurred  as  a  result  of  which  the  Prospectus  as  then  amended  or
supplemented  would  include an untrue  statement of a material  fact or omit to
state any material fact  necessary in order to make the statements  therein,  in
the light of the  circumstances  under which they were made when such Prospectus
is delivered, not misleading,  or, if for any other reason it shall be necessary
during such period to amend or supplement the Prospectus to comply with the Act,
to notify you and upon your  request to file such  document  and to prepare  and
furnish  without charge to you and to any dealer in securities as many copies as
you may from time to time  reasonably  request  of an  amended  Prospectus  or a
supplement to the  Prospectus  which will correct such  statement or omission or
effect such compliance;

         (d)  As  soon  as  practicable,  to  make  generally  available  to its
shareholders  (within  the  meaning of Rule 158 under the Act) and to deliver to
you, an earnings  statement of the Company,  conforming with the requirements of
Section  11(a) of the Act and Rule 158  under the Act,  covering  a period of at
least  12  months  beginning  after  the  effective  date  of  the  Registration
Statement;  provided that, so long as the Company continues to be subject to the
reporting  requirements  under  Section  13 or 15(d) of the  Exchange  Act,  the
Company  shall not be required to make  available  any such  earnings  statement
other than as included in periodic reports filed with the Commission as required
by such provisions of the Exchange Act;

         (e) For a period  of 180 days from the date of the  Prospectus,  not to
offer,  sell,  contract to sell or otherwise  dispose of any  securities  of the
Company  (other  than the  Securities  to be sold by the  Company  hereunder  or
pursuant  to employee  stock  option  plans or pursuant to options,  warrants or
rights  outstanding  on the date of this  Agreement)  without your prior written
consent;

         (f)  During a period  of five  years  from  the  effective  date of the
Registration  Statement,  to  furnish  to you  copies  of all  reports  or other
communications  (financial or other) distributed to shareholders generally,  and
deliver  to you (i) as soon as they are  available,  copies of any  reports  and
financial  statements  furnished to or filed with the Commission or any national
securities  exchange on which any class of  securities of the Company is listed;
and (ii) such  additional  information  concerning  the business  and  financial
condition of the Company as you may from time to time reasonably request; and

         (g) To apply the net proceeds from the sale of the Securities for the
purposes set forth in the Prospectus.

6.       PAYMENT OF EXPENSES.

         The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following:  (i) the fees, disbursements
and  expenses  of the  Company's  and  the  Selling  Shareholders'  counsel  and
accountants in connection with the  registration of the Securities under the Act
and all other expenses in connection with the  preparation,  printing and filing
of the Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments  and  supplements  thereto and the mailing and  delivering  of copies
thereof to the


                                      -12-





Underwriters  and dealers;  (ii) the cost of  reproducing  any  Agreement  Among
Underwriters,  this  Agreement,  the Blue Sky Survey and any other  documents in
connection  with the offering,  purchase,  sale and delivery of the  Securities;
(iii) all expenses in connection  with the  qualification  of the Securities for
offering  and sale under  state  securities  laws as  provided  in Section  5(b)
hereof,  including the fees and disbursements of counsel for the Underwriters in
connection with such  qualification  and in connection with the Blue Sky Survey;
(iv) the filing fees  incident to securing any  required  review by the National
Association  of  Securities  Dealers,  Inc.  of the  terms  of the  sale  of the
Securities;  (v) the cost of  preparing  stock  certificates;  (i) the  costs or
expenses  of any  transfer  agent or  registrar;  and (vi) all  other  costs and
expenses incident to the performance of its obligations  hereunder which are not
otherwise specifically provided for in this Section. It is understood,  however,
that except as provided  in Section 8 and  Section 11 hereof,  the  Underwriters
will pay all their own costs and expenses,  including the fees of their counsel,
stock  transfer  taxes  on  resale  of any of the  Securities  by  them  and any
advertising expenses connected with any offers they may make.

7.       CONDITIONS TO OBLIGATIONS OF UNDERWRITERS.

         The obligations of the Underwriters  hereunder, as to the Securities to
be delivered at each Delivery Date, shall be subject,  in their  discretion,  to
the condition that all  representations  and warranties and other  statements of
the Company and each of the Selling  Shareholders  herein are, at and as of such
Delivery Date, true and correct,  the condition that the Company and each of the
Selling  Shareholders  shall have performed all of their respective  obligations
hereunder theretofore to be performed, and the following additional conditions:

         (a) The Prospectus  shall have been filed with the Commission  pursuant
to Rule 424(b) under the Act within the  applicable  time period  prescribed for
such filing by the rules and  regulations  under the Act and in accordance  with
Section 5(a) of this Agreement;  no stop order  suspending the  effectiveness of
the  Registration  Statement  shall have been issued and no proceeding  for that
purpose  shall have been  initiated or  threatened  by the  Commission;  and all
requests for additional  information  on the part of the  Commission  shall have
been complied with to your reasonable satisfaction;

         (b)  Hunton  &  Williams,  counsel  for the  Underwriters,  shall  have
furnished  to you such  opinion or  opinions,  dated such  Delivery  Date,  with
respect to the  incorporation  of the Company,  the  validity of the  Securities
being issued at such Delivery Date, the Registration Statement,  the Prospectus,
and other related matters as you may reasonably request,  and such counsel shall
have  received such papers and  information  as they may  reasonably  request to
enable them to pass upon such matters;

         (c) Robinson,  Bradshaw & Hinson, P.A., counsel for the Company,  shall
have furnished to you their written  opinion,  dated such Delivery Date, in form
reasonably  satisfactory  to you,  to the effect set forth in Exhibit A attached
hereto.

         Such  opinion  may be  furnished  subject to such  stated  assumptions,
limitations  and  qualifications  as shall be reasonably  acceptable to Hunton &
Williams, counsel for the Underwriters.


                                      -13-






         (d)  Robinson,  Bradshaw  &  Hinson,  P.A.,  counsel  for  the  Selling
Shareholders,  shall  have  furnished  to you its  written  opinion,  dated such
Delivery  Date, in form and  substance  reasonably  satisfactory  to you, to the
effect set forth in Exhibit B.

         Such  opinion  may be  furnished  subject to such  stated  assumptions,
limitations  and  qualifications  as shall be reasonably  acceptable to Hunton &
Williams, counsel for the Underwriters.

         (e) At  10:00  a.m.,  Richmond,  Virginia,  time,  on the  date of this
Agreement  and the  effective  date of the most  recently  filed  post-effective
amendment to the  Registration  Statement and also at each Delivery  Date,  KPMG
Peat  Marwick LLP shall have  furnished  to you a letter or  letters,  dated the
respective  date  of  delivery  thereof,   in  form  and  substance   reasonably
satisfactory  to  you,  containing   statements  and  information  of  the  type
ordinarily  included in  accountants'  "comfort  letters" to  underwriters  with
respect to the financial  statements and certain financial  information relating
to the Company and its Subsidiaries  contained in the Registration Statement and
the Prospectus;

         (f) (i)  Neither the  Company  nor any of the  Subsidiaries  shall have
sustained, since the date of the latest audited financial statements included in
the Prospectus, any loss or interference with its business from fire, explosion,
flood or other calamity,  whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree,  otherwise than as set
forth or contemplated in the Prospectus,  and (ii) since the respective dates as
of which  information is given in the  Prospectus  there shall not have been any
change in the outstanding  capital stock or long-term debt of the Company or any
of the  Subsidiaries or any change,  or any development  involving a prospective
change,  in or affecting the general affairs,  management,  financial  position,
shareholders'  equity or  results  of  operations  of the  Company or any of the
Subsidiaries otherwise than as set forth or contemplated in the Prospectus,  the
effect of which,  in any such case  described  in clause  (i) or (ii) is in your
reasonable  judgment so  material  and  adverse as to make it  impracticable  or
inadvisable  to  proceed  with  the  public  offering  or  the  delivery  of the
Securities  being delivered at such Delivery Date on the terms and in the manner
contemplated by the Prospectus;

         (g) On or after the date hereof  there shall not have  occurred  any of
the following:  (i) a suspension or material limitation in trading of any of the
securities of the Company on the New York Stock Exchange; (ii) any United States
federal or state statute,  regulation,  rule or order of any court,  legislative
body, agency or other governmental authority shall have been enacted, published,
decreed  or  promulgated  or any  proceeding  or  investigation  shall have been
commenced which, in your reasonable  judgment,  materially and adversely affects
the  business or  operations  of the  Company;  (iii) a  suspension  or material
limitation  in trading in securities  generally on the New York Stock  Exchange;
(iv) a general  moratorium on commercial banking activities in New York or North
Carolina  declared by either federal or New York or North Carolina  authorities;
(v) the outbreak or escalation of hostilities involving the United States or the
declaration  by the United  States of a national  emergency  or war, if any such
event specified in this clause (v) would have such a materially  adverse effect,
in your  reasonable  judgment,  as to make it  impracticable  or  inadvisable to
proceed  with the  public  offering  or the  delivery  of the  Securities  being
delivered at such Delivery Date on the terms and in the manner contemplated


                                      -14-





in the Prospectus;  or (vi) such a material adverse change in general  economic,
political,  financial or international conditions affecting financial markets in
the  United  States  having a  material  adverse  impact  on  trading  prices of
securities in general, as, in your reasonable judgment,  makes it inadvisable to
proceed with the payment for and delivery of the Securities;

         (h) The  Company  shall  have  furnished  to you  copies of  agreements
between the directors and executive officers of the Company, in form and content
reasonably  satisfactory  to you,  pursuant to which such  persons  agree not to
offer,  sell, or contract to sell, or otherwise dispose of, any shares of Common
Stock  beneficially  owned  by  them  or any  securities  convertible  into,  or
exchangeable  for,  Common  Stock  (other  than  pursuant  to BONA FIDE gifts to
persons who agree in writing with the donor to be bound by this restriction), on
or before  the 180th day after the date of this  Agreement  without  your  prior
written consent; and

         (i)  The  Company  and  each of the  Selling  Shareholders  shall  have
furnished or caused to be furnished to you at such Delivery Date certificates of
officers  of the  Company  and  each  of  the  Selling  Shareholders  reasonably
satisfactory  to you as to the accuracy of the  respective  representations  and
warranties of the Company and each of the Selling  Shareholders herein at and as
of such  Delivery  Date,  as to the  performance  by the Company and each of the
Selling Shareholders of all of their obligations hereunder to be performed at or
prior to such Delivery Date, as to the matters set forth in subsections  (a) and
(f) of this Section and as to such other matters as you may reasonably request.

8.       INDEMNIFICATION AND CONTRIBUTION.

         (a) The Company  will  indemnify  and hold  harmless  each  Underwriter
against any losses, claims,  damages or liabilities,  joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based  upon an untrue  statement  or  alleged  untrue  statement  of a
material  fact  contained  in  any  Preliminary  Prospectus,   the  Registration
Statement or the Prospectus,  or any amendment or supplement  thereto,  or arise
out of or are based upon the  omission or alleged  omission  to state  therein a
material fact required to be stated  therein or necessary to make the statements
therein not  misleading,  and will promptly  reimburse each  Underwriter for any
legal or other expenses  reasonably  incurred by such  Underwriter in connection
with  investigating,  preparing  to  defend  or  defending,  or  appearing  as a
third-party  witness in  connection  with,  any such action or claim;  PROVIDED,
HOWEVER,  that the  Company  shall not be liable in any such case to the  extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue  statement or alleged  untrue  statement or omission or alleged  omission
made in any Preliminary Prospectus,  the Registration Statement or Prospectus or
any such amendment or supplement in reliance upon and in conformity with written
information  furnished to the Company by the Underwriters  through you expressly
for use therein; PROVIDED,  FURTHER, that the foregoing indemnity agreement with
respect  to any  Preliminary  Prospectus  shall not inure to the  benefit of any
Underwriter from whom the person asserting any such losses,  claims,  damages or
liabilities purchased Securities, or any person controlling such Underwriter, if
a copy of the Prospectus (as then amended or  supplemented  if the Company shall
have furnished any  amendments or supplements  thereto) was not sent or given by
or on behalf of such  Underwriter to such person,  if required by law so to have
been delivered, at or prior to the


                                      -15-





written  confirmation  of the sale of the Securities to such person,  and if the
Prospectus  (as so amended or  supplemented)  would have cured the defect giving
rise to such losses, claims, damages or liabilities.

         (b)  Subject to  subsection  (f) of this  Section,  each of the Selling
Shareholders  severally  and not jointly will  indemnify  and hold harmless each
Underwriter  against  any  losses,  claims,  damages  or  liabilities,  joint or
several,  to  which  the  Underwriter  may  become  subject,  under  the  Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect  thereof) arise out of or are based upon an untrue  statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration  Statement  or the  Prospectus,  or  any  amendment  or  supplement
thereto,  or arise out of or are based upon the omission or alleged  omission to
state therein a material fact required to be stated therein or necessary to make
the  statements  therein  not  misleading,  and  will  promptly  reimburse  each
Underwriter  for  any  legal  or  other  expenses  reasonably  incurred  by such
Underwriter in connection with investigating,  preparing to defend or defending,
or appearing as a  third-party  witness in connection  with,  any such action or
claim;  PROVIDED,  HOWEVER,  that a Selling  Shareholder will only be liable for
information  furnished  in writing by or on behalf of such  Selling  Shareholder
expressly for use in any Preliminary Prospectus, the Registration Statement, the
Prospectus or any  amendment or  supplement  thereto,  it being  understood  and
agreed  that  the only  such  information  furnished  by a  Selling  Shareholder
consists of the  information  regarding it included  under the caption  "Selling
Shareholders"; PROVIDED, FURTHER, that none of the Selling Shareholders shall be
liable in any such  case to the  extent  that any such  loss,  claim,  damage or
liability  arises out of or is based upon an untrue  statement or alleged untrue
statement or omission or alleged  omission made in any  Preliminary  Prospectus,
the Registration Statement or the Prospectus or any such amendment or supplement
in reliance upon and in  conformity  with written  information  furnished to the
Company by the  Underwriters  through you expressly  for use therein;  PROVIDED,
FURTHER,  that the foregoing indemnity agreement with respect to any Preliminary
Prospectus  shall  not inure to the  benefit  of any  Underwriter  from whom the
person  asserting  any such losses,  claims,  damages or  liabilities  purchased
Securities,  or any  person  controlling  such  Underwriter,  if a  copy  of the
Prospectus (as then amended or  supplemented if the Company shall have furnished
any amendments or supplements  thereto) was not sent or given by or on behalf of
such  Underwriter to such person,  if required by law so to have been delivered,
at or prior to the written  confirmation  of the sale of the  Securities to such
person,  and if the Prospectus (as so amended or supplemented)  would have cured
the defect giving rise to such losses, claims, damages or liabilities.

         (c) Each  Underwriter  will indemnify and hold harmless the Company and
any Selling  Shareholder against any losses,  claims,  damages or liabilities to
which the Company or any Selling  Shareholder may become subject,  under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
in  respect  thereof)  arise out of or are based  upon an  untrue  statement  or
alleged  untrue  statement  of a  material  fact  contained  in any  Preliminary
Prospectus,  the Registration  Statement or the Prospectus,  or any amendment or
supplement  thereto,  or arise out of or are based upon the  omission or alleged
omission  to state  therein a material  fact  required  to be stated  therein or
necessary to make the  statements  therein not  misleading,  in each case to the
extent,  but only to the extent,  that such untrue  statement or alleged  untrue
statement or omission or alleged omission was made in any Preliminary


                                      -16-





Prospectus,  the Registration  Statement or the Prospectus or any such amendment
or  supplement  in reliance  upon and in  conformity  with  written  information
furnished  to the  Company by such  Underwriter  through you  expressly  for use
therein;  and will  reimburse  the Company and any Selling  Shareholder  for any
legal or other  expenses  reasonably  incurred  by the  Company  and the Selling
Shareholder in connection with investigating,  preparing to defend or defending,
or appearing as a  third-party  witness in connection  with,  any such action or
claim.  The Company and each of the Selling  Shareholders  acknowledge  that the
statements set forth in the last paragraph  immediately  preceding your names on
the cover page, the last paragraph on the inside front cover page and the first,
second and third paragraphs under the heading  "Underwriting" in the Preliminary
Prospectus  and the  Prospectus  constitute  the only  information  furnished in
writing  by or on  behalf  of the  several  Underwriters  for  inclusion  in the
Preliminary  Prospectus  or the  Prospectus,  and you,  as the  Representatives,
confirm that such statements are correct.

         (d) Promptly  after receipt by an  indemnified  party under  subsection
(a),  (b) or (c)  above  of  notice  of the  commencement  of any  action,  such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying  party  under such  subsection,  notify the  indemnifying  party in
writing  of  the  commencement  thereof;  but  the  omission  so to  notify  the
indemnifying  party shall not relieve it from any liability which it may have to
any  indemnified  party otherwise than under such  subsection.  In case any such
action shall be brought  against any  indemnified  party and it shall notify the
indemnifying party of the commencement  thereof, the indemnifying party shall be
entitled to participate  therein and, to the extent that it shall wish,  jointly
with any other  indemnifying  party  similarly  notified,  to assume the defense
thereof, with counsel satisfactory to such indemnified party; PROVIDED, HOWEVER,
that if the defendants in any such action include both the indemnified party and
the  indemnifying  party and the  indemnified  party shall have been  advised by
counsel that representation of such indemnified party and the indemnifying party
may be inappropriate under applicable  standards of professional  conduct due to
actual or potential  differing  interests between them, the indemnified party or
parties shall have the right to select separate counsel to defend such action on
behalf  of  such  indemnified  party  or  parties.  It is  understood  that  the
indemnifying  party shall,  in  connection  with any such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys  together  with  appropriate
local  counsel  at any time for all  indemnified  parties  unless  such  firm of
attorneys shall have reasonably  concluded that one or more indemnified  parties
has actual differing interests with other indemnified  parties.  Upon receipt of
notice from the indemnifying  party to such indemnified party of its election so
to appoint counsel to defend such action and approval by the  indemnified  party
of such counsel,  the indemnifying  party will not be liable to such indemnified
party under this Section 8 for any legal or other expenses subsequently incurred
by such indemnified  party in connection with the defense thereof unless (i) the
indemnified  party shall have employed  separate  counsel in accordance with the
proviso to the next preceding  sentence,  (ii) the indemnifying  party shall not
have  employed  counsel  reasonably  satisfactory  to the  indemnified  party to
represent  the  indemnified  party  within a  reasonable  time  after  notice of
commencement  of the action or (iii) the  indemnifying  party has authorized the
employment  of  counsel  for  the  indemnified  party  at  the  expense  of  the
indemnifying party; and except that, if clause (i) or (iii) is applicable,  such
liability shall be only in respect of the counsel referred to in such clause (i)
or (iii). The


                                      -17-





indemnifying  party shall not be liable for any settlement  entered into without
its written consent (which consent will not be unreasonably withheld).

         (e)  If  the  indemnification   provided  for  in  this  Section  8  is
unavailable  to or  insufficient  to hold  harmless an  indemnified  party under
subsection  (a) or (b)  above in  respect  of any  losses,  claims,  damages  or
liabilities (or actions or proceedings in respect thereof)  referred to therein,
then each  indemnifying  party shall contribute to the amount paid or payable by
such  indemnified  party  as  a  result  of  such  losses,  claims,  damages  or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and each
of the Selling  Shareholders  on the one hand and the  Underwriters on the other
from the offering of the Securities. If, however, the allocation provided by the
immediately  preceding  sentence is not  permitted by  applicable  law or if the
indemnified party failed to give the notice required under subsection (d) above,
then each indemnifying  party shall contribute to such amount paid or payable by
such indemnified  party in such proportion as is appropriate to reflect not only
such  relative  benefits but also the relative  fault of the Company and each of
the Selling  Shareholders  on the one hand and the  Underwriters on the other in
connection  with the  statements  or  omissions  which  resulted in such losses,
claims,  damages or liabilities (or actions or proceedings in respect  thereof),
as well as any other relevant  equitable  considerations.  The relative benefits
received by the Company and each of the Selling Shareholders on the one hand and
the  Underwriters  on the other shall be deemed to be in the same  proportion as
the total net proceeds from the offering (after deducting the total underwriting
discount, but before deducting expenses) received by the Company and each of the
Selling  Shareholders bear to the total  underwriting  discounts and commissions
received  by the  Underwriters,  in each  case as set  forth in the table on the
cover  page of the  Prospectus.  The  relative  fault  shall  be  determined  by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged  omission to state a material fact
relates to information supplied by the Company or any Selling Shareholder on the
one hand or the  Underwriters  on the other and the  parties'  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement or omission.  The Company,  each of the Selling  Shareholders  and the
Underwriters  agree  that it would not be just and  equitable  if  contributions
pursuant to this subsection (e) were determined by PRO RATA allocation  (even if
the  Underwriters  were treated as one entity for such  purpose) or by any other
method  of   allocation   which  does  not  take  into  account  the   equitable
considerations  referred to above in this  subsection  (e).  Except in the event
that the indemnified  party failed to give the notice required under  subsection
(d) above, the amount paid or payable by an indemnified party as a result of the
losses,  claims,  damages or  liabilities  (or actions or proceedings in respect
thereof) referred to above in this subsection (e) shall be deemed to include any
legal  or  other  expenses  reasonably  incurred  by such  indemnified  party in
connection   with   investigating   or  defending  any  such  action  or  claim.
Notwithstanding  the provisions of this subsection (e), no Underwriter  shall be
required  to  contribute  any  amount in excess of the amount by which the total
price at which the Securities  underwritten  by it and distributed to the public
were offered to the public exceeds the amount of damages which such  Underwriter
has otherwise  been  required to pay by reason of such untrue or alleged  untrue
statement  or  omission  or alleged  omission.  No person  guilty of  fraudulent
misrepresentation  (within  the  meaning of  Section  11(f) of the Act) shall be
entitled to  contribution  from any person who was not guilty of such fraudulent
misrepresentation. The


                                      -18-





Underwriters' obligations under this subsection (e) are several in proportion to
their respective underwriting obligations and not joint.

         (f) The  liability  of  each of the  Selling  Shareholders  under  this
Section 8 shall be limited to an amount  equal to the  initial  public  offering
price less the  underwriting  discount of the  Securities  sold by such  Selling
Shareholder to the Underwriters.

         (g) The obligations of the Company and each of the Selling Shareholders
under this Section 8 shall be in addition to any liability which the Company and
such Selling  Shareholder  may otherwise  have and shall  extend,  upon the same
terms and  conditions,  to each person,  if any,  who  controls any  Underwriter
within the meaning of the Act; and the  obligations  of the  Underwriters  under
this Section 8 shall be in addition to any liability which the  Underwriters may
otherwise  have and shall extend,  upon the same terms and  conditions,  to each
officer and director of the Company and to each person, if any, who controls the
Company within the meaning of the Act.

9.       DEFAULT OF UNDERWRITERS.

         (a) If any Underwriter  shall default in its obligation to purchase the
Securities that it has agreed to purchase  hereunder at a Delivery Date, you may
in your discretion arrange for you or another party or other parties to purchase
such  Securities on the terms  contained  herein.  If within 36 hours after such
default  by  any  Underwriter  you do not  arrange  for  the  purchase  of  such
Securities, then the Company and the Selling Shareholders shall be entitled to a
further  period  of 36 hours  within  which to  procure  another  party or other
parties  satisfactory  to you to purchase such  Securities on such terms. In the
event that, within the respective prescribed periods, you notify the Company and
the  Selling  Shareholders  that you have so arranged  for the  purchase of such
Securities,  or the Company and the  Selling  Shareholders  notify you that they
have so arranged for the purchase of such Securities, you or the Company and the
Selling  Shareholders  shall have the right to postpone such Delivery Date for a
period of not more than seven  days,  in order to effect  whatever  changes  may
thereby be made necessary in the Registration Statement or the Prospectus, or in
any other documents or arrangements, and the Company agrees to file promptly any
amendments  to the  Registration  Statement  or the  Prospectus  which  in  your
opinion,  exercised in consultation with Hunton & Williams,  may thereby be made
necessary.  The term  "Underwriter"  as used in this Agreement shall include any
person  substituted  under this  Section  with like effect as if such person had
originally been a party to this Agreement with respect to such Securities.

         (b) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting  Underwriter or  Underwriters  by you and the Company
and the Selling  Shareholders as provided in subsection (a) above, the aggregate
number of such Securities that remains  unpurchased does not exceed one-eleventh
of the aggregate  number of all the  Securities to be purchased at such Delivery
Date,  then the  Company and the  Selling  Shareholders  shall have the right to
require each  non-defaulting  Underwriter  to purchase the number of  Securities
that such Underwriter agreed to purchase hereunder at such Delivery Date and, in
addition,  to require each  non-defaulting  Underwriter to purchase its PRO RATA
share  (based  on the  number of  Securities  that  such  Underwriter  agreed to
purchase hereunder at such Delivery Date) of the


                                      -19-





share of such defaulting Underwriter or Underwriters for which such arrangements
have not been made;  but nothing  herein shall relieve a defaulting  Underwriter
from liability for its default.

         (c) If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting  Underwriter or  Underwriters  by you and the Company
and the Selling  Shareholders as provided in subsection (a) above, the aggregate
number of such Securities that remains unpurchased  exceeds  one-eleventh of the
aggregate number of all the Securities to be purchased at such Delivery Date, or
if the  Company  and the  Selling  Shareholders  shall  not  exercise  the right
described in  subsection  (b) above to require  non-defaulting  Underwriters  to
purchase  Securities  of a defaulting  Underwriter  or  Underwriters,  then this
Agreement  (or, with respect to the Second  Delivery Date, the obligation of the
Underwriters  to purchase and of the Selling  Shareholders  to sell the Optional
Securities)  shall  thereupon  terminate,  without  liability on the part of any
non-defaulting Underwriters or the Company and the Selling Shareholders,  except
for the expenses to be borne by the Company and the  Underwriters as provided in
Section 6 hereof and the  indemnity  and  contribution  agreements  in Section 8
hereof; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.

10.      REPRESENTATIONS AND INDEMNITIES TO SURVIVE.

         The respective indemnities, agreements, representations, warranties and
other  statements  of the  Company,  each of the  Selling  Shareholders  and the
several Underwriters,  as set forth in this Agreement or made by or on behalf of
them, respectively,  pursuant to this Agreement,  shall remain in full force and
effect,  regardless of any  termination or cancellation of this Agreement or any
investigation  (or any statement as to the results thereof) made by or on behalf
of the  Underwriters  or any  controlling  person  of  any  Underwriter,  or the
Company, or any officer or director or controlling person of the Company or each
of the Selling  Shareholders,  and shall survive delivery of and payment for the
Securities.

11.      TERMINATION AND PAYMENT OF EXPENSES.

         If this  Agreement  shall be  terminated  pursuant to Section 9 hereof,
neither the Company nor any of the Selling  Shareholders shall then be under any
liability  to any  Underwriter  except as  provided  in Section 6 and  Section 8
hereof;  but if for any other reason any  Securities  are not delivered by or on
behalf of the Company or any of the Selling Shareholders as provided herein, the
Company  will  reimburse  the  Underwriters  through  you for all  out-of-pocket
expenses,  including fees and disbursements of counsel,  reasonably  incurred by
the Underwriters in making  preparations for the purchase,  sale and delivery of
the Securities not so delivered,  but neither the Company nor any of the Selling
Shareholders  shall then be under further liability to any Underwriter except as
provided in Section 6 and Section 8 hereof.



                                      -20-





12.      NOTICES.

         In all  dealings  hereunder,  you  shall  act on  behalf of each of the
Underwriters,  and the parties hereto shall be entitled to act and rely upon any
statement,  request,  notice or agreement on behalf of any  Underwriter  made or
given by you.

         All statements,  requests, notices and agreements hereunder shall be in
writing  or by  telegram  if  promptly  confirmed  in  writing,  and  if to  the
Underwriters  shall  be  sufficient  in all  respects  if  delivered  or sent by
reliable courier,  first-class  mail, telex or facsimile  transmission to Wheat,
First  Securities,  Inc., at Riverfront  Plaza, 901 East Byrd Street,  Richmond,
Virginia 23219, Attention: Corporate Finance Department (telecopier number (804)
782-3440);  if to any of the  Selling  Shareholders  or  the  Company  shall  be
sufficient in all respects if delivered or sent by reliable courier, first-class
mail,  telex, or facsimile  transmission to the address of the Company set forth
in the Registration Statement,  Attention:  Franklin N. Saxon (telecopier number
(910)  887-7089,  with a copy (which shall not  constitute  notice) to Robinson,
Bradshaw & Hinson,  P.A., 101 North Tryon Street, Suite 1900,  Charlotte,  North
Carolina 28246, Attention:  Henry H. Ralston (telecopier number (704) 378-4000);
PROVIDED,  HOWEVER,  that any notice to any  Underwriter  pursuant  to Section 8
hereof shall be delivered or sent by reliable  courier,  first-class mail, telex
or facsimile  transmission  to such  Underwriter at its address set forth in the
Underwriters'  Questionnaire,  which  address will be supplied to the Company or
the Selling  Shareholders by you upon request.  Any such  statements,  requests,
notices or agreements shall take effect upon receipt thereof.

13.      SUCCESSORS.

         This  Agreement  shall be binding upon, and inure solely to the benefit
of, the Underwriters,  each of the Selling  Shareholders and the Company and, to
the extent  provided in Sections 8 and 10 hereof,  the officers and directors of
the Company and each of the Selling  Shareholders  and each person who  controls
the  Company  or  any  Underwriter,   and  their  respective  heirs,  executors,
administrators,  successors  and assigns,  and no other person shall  acquire or
have any right under or by virtue of this Agreement.  No purchaser of any of the
Securities from any Underwriter  shall be deemed a successor or assign by reason
merely of such purchase.

14.      TIME OF THE ESSENCE.

         Time shall be of the essence in this Agreement.

15.      BUSINESS DAY.

         As used  herein,  the term  "business  day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.



                                      -21-





16.      APPLICABLE LAW.

         This  Agreement  shall be construed in accordance  with the laws of the
State of New York.

17.      CAPTIONS.

         The  captions  included  in this  Agreement  are  included  solely  for
convenience of reference and shall not be deemed to be a part of this Agreement.

18.      COUNTERPARTS.

         This Agreement may be executed by any one or more of the parties in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.



                                      -22-





         If the foregoing is in accordance with your understanding,  please sign
and return to us four  counterparts  hereof,  and upon the acceptance  hereof by
you, this letter and such acceptance hereof shall constitute a binding agreement
among each of the  Underwriters  and the  Company.  It is  understood  that your
acceptance of this Agreement on behalf of each of the  Underwriters  is pursuant
to the authority set forth in a form of Agreement Among  Underwriters,  the form
of which will be submitted  to the Company and each of the Selling  Shareholders
for  examination,  upon  request,  but  without  warranty on your part as to the
authority of the signers thereof.

                                       Very truly yours,

                                       CULP, INC.

                                       By:
                                                Robert G. Culp, III
                                                Chairman of the Board and
                                                Chief Executive Officer

                                       THE ROBERT G. CULP, JR. FAMILY TRUST
                                       FOR THE BENEFIT OF JUDITH CULP WALKER
                                       UNDER AN AGREEMENT DATED OCTOBER 31,
                                       1978


                                       By:
                                                Name:  Robert G. Culp, III
                                                Title: Trustee

                                       THE ROBERT G. CULP, JR. FAMILY TRUST
                                       FOR THE BENEFIT OF HARRY R. CULP UNDER
                                       AN AGREEMENT DATED OCTOBER 31, 1978


                                       By:
                                                Name:  Robert G. Culp, III
                                                Title: Trustee
Accepted as of the date hereof 
at Richmond, Virginia:

WHEAT, FIRST SECURITIES, INC.
RAYMOND JAMES & ASSOCIATES, INC.
Representatives of the Underwriters

By:      WHEAT, FIRST SECURITIES, INC.

By:
         Name:   William L. Tyson
         Title:   Managing Director


                                      -23-




                                   SCHEDULE I


                                                             Optional Securities
                                                             to be Purchased if
                                         Firm Securities       Maximum Option
                        Underwriter      to be Purchased          Exercised



Wheat, First Securities, Inc............       __________            __________

Raymond James & Associates, Inc.........       __________            __________



                                 TOTAL          1,600,000               240,000
                                                =========               =======








                                   SCHEDULE II




                                                                              Number of Optional
                                                    Total Number of Firm      Securities to be
                                                         Securities            Sold if Maximum
                                                         to be Sold           Option Exercised

                                                                      


The Company.........................................         1,200,000               --


The Selling Shareholders:


         The Robert G. Culp, Jr. Family
         Trust for the Benefit of Judith Culp
         Walker under an Agreement dated
         October 31, 1978......................                200,000                   120,000

         The Robert G. Culp, Jr. Family
         Trust for the Benefit of Harry R.
         Culp under an Agreement dated
         October 31, 1978......................                200,000                   120,000



                                               TOTAL         1,600,000                   240,000
                                                             =========                   =======











                                  SCHEDULE III

                            SUBSIDIARIES OF CULP INC.



                                                      State or Country
         NAME OF SUBSIDIARY                           of Incorporation



Guilford Printers, Inc.                            North Carolina

Culp International, Inc.                           Virgin Islands

3096726 Canada Inc.                                Canada

Rayonese Textile Inc.                              Canada


                                                                    EXHIBIT 23.1
 
                         INDEPENDENT AUDITORS' CONSENT
 
The Board of Directors
Culp, Inc.:
 
     We consent to the use of our report included herein and to the reference to
our firm under the headings "Experts" and "Selected Financial Data" in the
Prospectus.
 
   
                                         /s/ KPMG PEAT MARWICK
    
 
   
Greensboro, North Carolina
January 29, 1997


   
                                                                    EXHIBIT 23.2
    
 
                       ROBINSON, BRADSHAW & HINSON, P.A.
                                ATTORNEYS AT LAW
                            ONE INDEPENDENCE CENTER
                       101 NORTH TRYON STREET, SUITE 1900
                      CHARLOTTE, NORTH CAROLINA 28246-1900
                            TELEPHONE (704) 377-2536
 
   
                                January 29, 1997
    
 
Culp, Inc.
101 South Main Street
High Point, North Carolina 27261
Attention: Mr. Franklin N. Saxon
 
   
RE: Culp, Inc. -- Registration Statement on Form S-3 (File No. 333-18199) (the
"Registration Statement")
    
 
Gentlemen and Ladies:
 
   
     We hereby consent to be named in the Registration Statement and in the
prospectus that constitutes Part I thereof as attorneys who will pass upon
certain legal matters in connection with the validity of the 1,840,000 shares of
Common Stock of Culp, Inc. described therein and to the continued inclusion of
our opinion filed as Exhibit 5 to the Registration Statement.
    
 
                                         Sincerely yours,
 
                                         ROBINSON, BRADSHAW & HINSON, P.A.
 
                                         /S/  STEPHEN M. LYNCH
 
                                         Stephen M. Lynch