Page 50
Exhibit 10.17
YARN PURCHASE AGREEMENT
This YARN PURCHASE AGREEMENT is entered into as of January 1, 1999
between PARKDALE AMERICA, LLC, hereinafter referred to as "Parkdale", and CONE
▇▇▇▇▇ CORPORATION, hereinafter referred to as "Cone".
Parkdale agrees to sell and Cone agrees to purchase yarns meeting the
specifications spelled out in attached Schedule A beginning April 1, 1999 and
continuing through December 31, 2004.
IT IS AGREED:
1. QUANTITIES.
Cone's projected weekly requirements for each of the yarn counts
are stated in Schedule A for karded cotton ringspun. Parkdale agrees to
supply up to these quantities at the conversion prices set forth in
Schedule A plus any additional requirements at those prices. Actual
weekly shipments will be coordinated by the schedulers for the parties.
Cone agrees to purchase from Parkdale all requirements for these yarns
in excess of internal production. Cone is not required to order any
minimum amount of yarn while this agreement remains in effect.
Should Cone's requirements increase significantly over
projections stated in Schedule A or should Cone desire additional denim
yarns in excess of its internal production at the expiration of its
other outside denim yarn contracts, Parkdale shall have a right of first
refusal for all such additional denim yarns that it is willing to supply
at competitive prices and quality in the quantity desired.
Notwithstanding the above, the parties agree that nothing contained
herein prevents Cone from entering into a joint venture outside the
United States which manufactures these yarns. However, should Cone
invest in such a joint venture it will not use its production of these
yarns in the manufacture of denim in the United States unless Cone owns
50% or more of the joint venture so as to make the joint venture the
equivalent of internal capacity. Moreover, the parties agree that
nothing contained herein prevents Cone from otherwise increasing its
internal yarn capacity for these yarns. Should Cone decide to build a
new plant to increase such capacity, it will give Parkdale written
notice of at least one year prior to
Page 51
the expected completion date. In addition, the parties agree that
nothing contained herein prevents Cone from contracting with third
parties for the purchase of fabric containing karded cotton ringspun
yarn without regard to the yarn source or from contracting with third
parties to weave fabric containing karded cotton ringspun yarn supplied
to Cone or assigned by Cone pursuant to this agreement.
Cone will provide Parkdale with a rolling three months projection
of yarn requirements covered by this agreement. The parties agree that
such projections are good faith estimates only and actual requirements
may vary significantly from the projections. Therefore, nothing in this
agreement constitutes a "take or pay" obligation on the part of Cone.
2. PRICES.
Yarn prices per pound shall be determined as follows:
o Cost of cotton content is based upon cotton price as fixed by
Cone plus no basis points times waste factor as stated in
Schedule A.
o Conversion costs as listed in Schedule A.
3. COTTON PRICE FIXATIONS AND REIMBURSEMENT PAYMENTS.
Except as otherwise may be agreed by the parties for the year
1999, Parkdale is responsible for purchasing the cotton. Cone is
responsible for fixing the cotton price. For 1999, the transition from
Cone's previously acquired cotton position to Parkdale's responsibility
for purchasing cotton shall be managed by ▇▇▇▇▇▇ ▇▇▇▇▇▇ of Cone or as
otherwise designated in writing by Cone.
3.A All fixation orders and executions of orders must be confirmed in
writing. Cone will provide fixation orders by contract months
that are currently being traded and in multiples of 100 ▇▇▇▇▇.
3.B In the event that the cotton content of the yarn deliveries are
less than the number of ▇▇▇▇▇ fixed for the quarter, the average
of the excess cotton fixation will be rolled forward to the next
quarter having an open cotton position. If the cotton content of
the yarn
Page 52
deliveries is greater than the ▇▇▇▇▇ fixed for the quarter,
cotton fixation will be rolled back from the upcoming quarter.
3.C. Should Cone fail to exercise its right to fix the price as
contemplated by paragraph 3.A above, Parkdale has the right to
fix the cotton price for the coming quarter's yarn requirements.
3.D The individual responsible for price fixation orders and
executions shall be ▇▇▇▇▇▇ ▇▇▇▇▇▇ or as otherwise designated in
writing by Cone.
3.E Parkdale agrees to provide a status report each week of yarn
deliveries against cotton price fixations.
3.F. With respect to any cotton rebate or reimbursement
program, such as the Step 2 program, which may be or become in
effect during this agreement, the parties agree as follows:
Cone shall receive the benefit as it relates to cotton
contained in the yarn purchased by Cone pursuant to this
agreement. Each month Parkdale will send Cone a report
detailing the net pounds of cotton contained in these yarns
eligible for payment reimbursement. Net pounds will be
calculated by subtracting returned pounds from shipped pounds.
The net pounds will then be multiplied by the reimbursement
payment to determine the total amount payable to Cone each
week. Within ten (10) days of the end of each quarter,
Parkdale will write Cone a check reimbursing the total payment
reimbursement for the quarter. Should any cotton rebate or
reimbursement program be in effect for which this calculation
and reimbursement to Cone is not workable, then the parties
agree that a procedure will be developed to assure that Cone
shall receive an economic benefit as close to what would be
realized under this paragraph as possible.
4. TERM.
Unless terminated sooner upon the mutual agreement of the
parties, this agreement shall remain in effect until December 31, 2004,
and shall continue for successive renewal terms of one calendar year
each thereafter, unless at least one year in advance of the commencement
of the renewal term a party gives notice to the other party of its
election to terminate the agreement.
Page 53
5. ASSIGNMENT.
None of the rights or obligations under this agreement shall be
assigned or deleted without the express written consent of each party,
which consent shall not be unreasonably withheld. Notwithstanding this,
Cone shall have the right to assign all or a portion of the entitlements
under this agreement to a third party greige ▇▇▇▇▇▇ who will produce
fabric for the account of Cone. Any such third party would be required
to agree to abide by the confidentiality provisions of paragraph 15
below, and Cone and Parkdale will otherwise develop a mutually agreeable
procedure to protect the confidential nature of this transaction.
6. SPECIFICATIONS.
Any changes in specifications of the yarn counts covered in
Schedule A that result in an increase or decrease in Parkdale's
manufacturing costs must be mutually agreed to in writing upon before
commencement of manufacture. These changes will also be reflected in the
yarn prices.
7. PAYMENT.
All invoices are payable net cash thirty (30) days in U. S.
dollars. Terms are F.O.B. Parkdale's Hillsville, Virginia plant
unless otherwise mutually agreed to by the parties.
8. COVER OPTION.
Should Parkdale for any reason be unable to fulfill the
conditions of this contract, Parkdale will be responsible for purchasing
yarn from a reliable supplier and delivering such yarn to Cone under the
terms and conditions of this contract. Parkdale shall notify Cone thirty
(30) days in advance should this become necessary.
9. WARRANTY.
Parkdale warrants that the yarn supplied hereunder shall conform
to the specifications set forth in Schedule A. These specifications may
be changed from time to time upon agreement in writing between the
parties. In addition, yarn supplied hereunder will meet the requirements
of Levi ▇▇▇▇▇▇▇. Parkdale further represents and warrants that it shall
pass good title to the yarn, free and clear of any liens, security
interests, claims or other
Page 54
encumbrances, to Cone and the yarn shall be free from defects of
material and workmanship. With respect to any defects in the yarn used
by Cone, Cone shall be entitled to damages in an amount necessary to
make Cone whole limited to Cone's cost excluding profits. Parkdale
further represents and warrants that the use or sale of the yarn
delivered hereunder will not infringe the claims of any United States
patent covering the yarn. Parkdale further represents and warrants that
all yarn delivered hereunder is or will be produced in compliance with
requirements of the Fair Labor Standards Act of 1938 as amended.
10. INSPECTION AND REJECTION.
Cone will notify Parkdale as soon as possible if yarn deliveries
vary from the specifications contained herein. All non-conforming yarns
will be returned to Parkdale.
11. INVENTORY AVAILABILITY.
Parkdale agrees to maintain an inventory of each of the yarns
covered by this contract equal to three (3) days requirements.
12. PACKAGING.
Yarn shall be delivered on pallets. All packaging materials will
be returned to Parkdale at their expense. Yarn performance data will
accompany each shipment.
13. ADDITIONS OR DELETIONS OF YARN COUNTS.
Cone may elect to discontinue a given yarn count or to add a yarn
count to this contract. However, negotiations on waste factors and
conversion costs must be mutually agreed upon prior to adding a yarn
count. All such changes will be reflected on a revised Schedule A.
14. GOVERNING LAW.
This agreement has been executed in the State of North Carolina
and the parties agree that the rights and obligations of the parties
shall be governed by North Carolina law.
Page 55
15. CONFIDENTIALITY.
Neither Parkdale nor Cone shall use or disclose to any third
party (other than any assignee by Cone permitted under paragraph 5
above) any information related to this agreement or the transactions
contemplated hereby, except as is required to be disclosed by applicable
law or becomes generally available to the public other than through a
breach of this agreement, or for transactions specifically contemplated
by this agreement.
Each of the parties hereto has caused this Agreement to be executed by
its appropriate officer as of the day and year first above written.
PARKDALE AMERICA, LLC CONE ▇▇▇▇▇ CORPORATION
By: /s/ W. ▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------- -------------------
▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer Title: Chief Executive Officer
Page 56
Schedule A containing technical specifications, committed quantities, and
conversion prices has been omitted because of its competitive nature. A copy
will be furnished to the Commission upon request.
