CONSENT AND FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENTS

Exhibit 10.3

CONSENT AND FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENTS

THIS CONSENT AND FIFTH AMENDMENT TO NOTE PURCHASE AGREEMENTS , dated as of the 11th day of August, 2008 (this “ Amendment ”), is made by and between Culp, Inc., a North Carolina corporation (the “ Company ”), and the holders of Notes (as defined in the Note Purchase Agreements referred to below) set forth on the signature pages hereto (the “ Noteholders ”).

RECITALS

A.        The Company and certain financial institutions or entities have heretofore entered into separate and several Note Purchase Agreements, each dated as of March 4, 1998, as amended by that certain First Amendment to Note Purchase Agreements, dated as of January 31, 2002, that certain Second Amendment to Note Purchase Agreements, dated as of December 6, 2006, that certain Third Amendment to Note Purchase Agreements, dated as of April 17, 2007, and that certain Fourth Amendment to Note Purchase Agreements, dated as of February 19, 2008 (collectively, the “ Note Purchase Agreements ”), pursuant to which the Company has issued its $20,000,000 8.80% Series A Senior Notes due March 15, 2008 collectively (the “ Series A Notes ”) and its $55,000,000 8.80% Series B Senior Notes due March 15, 2010 (collectively, the “ Series B Notes ”, and together with the Series A Notes, the “ Notes ”).  The Series A Notes matured on March 15, 2008, were repaid in full and are no longer outstanding.  Capitalized terms used herein without definition shall have the meanings given to them in the Note Purchase Agreements.

B.        The Company has requested that the Noteholders consent to the Company’s purchase of certain assets and the assumption of certain liabilities of Bodet & Horst USA, L.P., a New York limited partnership, which assets and liabilities relate to the seller’s business of the manufacture and sale of running meters of certain textiles, in the United States, Canada and Mexico (the “B&H Acquisition” ) and, in consideration for such consent, the Company has offered to amend the Note Purchase Agreements as set forth herein.

C.        The Noteholders have agreed to grant such consent and effect such amendments upon the terms and conditions set forth herein.

STATEMENT OF AGREEMENT

The parties hereto agree as follows:

          1.  Consent .  Notwithstanding the terms of Section 10.10 of the Note Purchase Agreements, the Noteholders hereby consent to the B&H Acquisition; provided that (a) such sale occurs on or prior to August 22, 2008 and (b) the gross sales price paid in respect thereof does not exceed $11,500,000.  The foregoing consent shall extend only to the matters expressly set forth above and not to any other provisions of the Note Purchase Agreements, all of which shall, except as hereinafter expressly provided, remain in full force and effect.

          2. Incorporation of Additional Financial Covenants .  In consideration of the Consent provided by the Noteholders pursuant to Section 1 hereof, the Company agrees that the following financial covenants (including, solely for purposes of such financial covenants, the defined terms used therein), which are forth in that certain Note Purchase Agreement, dated as of August 11, 2008, between the Company, United of Omaha Life Insurance Company and the other Purchaser named in Schedule A thereto (the “2008 Note Purchase Agreement” ), as in effect on the date of this Amendment, are hereby incorporated by reference as if set forth in full in the Note Purchase Agreements.  Failure of the Company to comply with any of the incorporated covenants shall constitute an Event of Default under Section 11(c) of the Note Purchase Agreements.  

For purposes of clarity, (a) the foregoing covenants are in addition to, and do not amend or modify, the covenants, related definitions and agreements of the Company contained in the Note Purchase Agreements as in effect immediately prior to the effectiveness of this Amendment and (b) no amendment or other modification of the above referenced Sections 10.2(a) and 10.2(b) of the 2008 Note Purchase Agreement shall constitute an amendment to the Note Purchase Agreements unless expressly agreed to in writing by the Required Holders.

          3. Amendment to Section 9 .  Section 9 of each of the Note Purchase Agreements is amended by adding the following as new Section 9.7:

Section 9.7.        Guaranty by Subsidiaries.   The Company will cause each Subsidiary which becomes a borrower or a guarantor in respect of Indebtedness of the Company outstanding under any facility or agreement in respect of which senior Indebtedness of the Company may be outstanding (including, without limitation, the Credit Agreement and that certain Note Purchase Agreement, dated as of August 11, 2008, between the Company and the Purchasers named in Schedule A thereto and any replacement of either thereof) to concurrently enter into a Subsidiary Guaranty, and within three Business Days thereafter will deliver to each of the holders of the Notes the following items:

                               (a) an executed counterpart of such Subsidiary Guaranty or joinder agreement in respect of an existing Subsidiary Guaranty, as appropriate; and

                               (b) such other documents, certificates, legal opinions and information as the Required Holders reasonably may require regarding such Subsidiary, the authorization of the transactions contemplated by such Subsidiary Guaranty and the enforceability of such Subsidiary Guaranty, including without limitation an Intercreditor Agreement.

          4. Amendment to Section 10.1 .  Paragraph (a) of Section 10.1 of each of the Note Purchase Agreements is hereby deleted in its entirety and is replaced with the following:

(a)       Tangible Net Worth to be less than the sum of (a) $65,164,800, plus (b) an aggregate amount equal to 50% of its Consolidated Net Income (but, in each case, only if a positive number) for each completed fiscal quarter, beginning with the fiscal quarter ending August 3, 2008.

          5. Amendment to Section 10.7 .  Section 10.7 of each of the Note Purchase Agreements is hereby deleted in its entirety and is replaced with the following:

Section 10.7.       Sale and Lease-Back.   The Company will not, and will not permit any Subsidiary to, enter into or permit to remain in effect any Sale and Leaseback Transaction with any Person.  Notwithstanding the foregoing, the Company may enter into a Sale and Leaseback Transaction relating to its corporate headquarters located in High Point, North Carolina; provided that (i) the sales price received by the Company in connection with such transaction is not less than $5,500,000, (ii) the proceeds of such sale (less reasonable expenses and taxes paid in connection therewith) are applied to the repayment of the Indebtedness secured by such corporate headquarters, and (iii) to the extent such transaction involves a Capital Lease, the Indebtedness incurred by the Company and attributable to such transaction (consisting of the aggregate Rentals to become due under the related lease, discounted from the respective due dates at the interest rate implicit in such Rentals and otherwise in accordance with GAAP) shall constitute Priority Debt and shall, at the time of such transaction and after giving effect thereto, be permitted within the limitations of Section 10.2(c) hereof; and provided, further, that the Company may seek in good faith the prior written consent of the Required Holders for a Sale and Leaseback Transaction relating to its corporate headquarters with a sales price of less than $5,500,000, it being understood that the manner in which the Company proposes to payoff all existing Indebtedness secured by such corporate headquarters must be acceptable to the Required Holders.

          6. Addition of New Section 10.12 .  Section 10 of each of the Note Purchase Agreements is amended by adding the following as new Section 10.12:

Section 10.12.