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EXHIBIT 10.29
YARN SUPPLY AGREEMENT
This YARN SUPPLY AGREEMENT (this "Agreement") is dated this 5th
day of January,
2005 and is made by and between Parkdale Mills, Inc., a North
Carolina
corporation, and Parkdale America, LLC, a North Carolina limited
liability
company (collectively, "Parkdale"), and Delta Apparel, Inc., a
Georgia
corporation ("Delta").
WITNESSETH
WHEREAS, Parkdale produces yarns and related products for sale
and Delta
and its Subsidiaries (as hereafter defined) consume yarns in
connection with the
manufacture of activewear;
WHEREAS, Parkdale America, LLC and Delta have entered into an
Asset
Purchase Agreement, dated as of November 18, 2004 (the
"Acquisition Agreement"),
pursuant to which Parkdale America, LLC has agreed to purchase
from Delta
substantially all of the assets and properties used in the
operation of a
yarn-spinning facility located in Edgefield, South Carolina (the
"Facility");
and
WHEREAS, Parkdale and Delta wish to enter into an agreement for
the supply
of yarn.
NOW, THEREFORE, in consideration of the promises and of the
mutual
covenants and agreements herein contained, the legal sufficiency
and adequacy of
which is hereby expressly acknowledged, the parties hereto agree
as set forth in
this Agreement.
1. Definitions. The following terms used in this Agreement shall
have
the meanings set forth in this SECTION 1:
"Acquisition Agreement" shall have the meaning set forth in the
Recitals.
"Basis" shall mean the premium or discount charged by
merchants
(suppliers) of cotton over and above the future market cost of
such cotton,
which premium or discount is based on the quality type, payment
terms and
delivery point of such cotton and which Basis (i) is calculated
in points per
pound where one point is equal to $.0001 (or one hundredth of
one cent) and (ii)
shall be proposed annually by Parkdale on the anniversary date
of this Agreement
and be acceptable to Delta.
"Cost Price" shall mean the cotton price per pound based on the
pricing
procedures set forth on EXHIBIT C.
"Disputes" shall have the meaning set forth in SECTION 15.
"Facility" shall have the meaning set forth in the Recitals.
"New Business" shall have the meaning set forth in SECTION
3.
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"Specifications" shall have the meaning set forth in SECTION
4(a).
"Subsidiary" shall mean any corporation, partnership, limited
liability
company or other entity of which shares of stock or other
ownership interests
having ordinary voting power (other than stock or such other
ownership interests
having such power only by reason of the happening of a
contingency) to elect a
majority of the board of directors or other managers of such
corporation,
partnership, limited liability company or other entity are at
the time owned, or
the management of which is otherwise at the time controlled,
directly or
indirectly, through one or more intermediaries, or both, by
Delta.
"Taxes" shall have the meaning set forth in SECTION 7.
"Term" shall have the meaning set forth in SECTION 2.
"Territory" shall mean the United States of America, Canada,
Mexico,
Guatemala, Belize, El Salvador, Honduras, Nicaragua, Costa Rica
and Panama.
"Yarn" shall mean Yarn Counts made from one hundred percent
(100%) cotton
or fifty percent (50%) cotton/fifty percent (50%) polyester
(hereinafter
"50/50") open end spun yarn, ring spun yarn, or air jet spun
yarn, or other
cotton/polyester blends to form heather yarns ("hereinafter
"Blends") to be
delivered pursuant to SECTION 4, excluding, however, yarns that
Parkdale does
not manufacture as of the date of this Agreement in the ordinary
course of its
business.
"Yarn Counts" means such yarn counts made from 100% cotton or
50/50 open
end spun yarn, ring spun yarn, or air jet spun yarn, or Blends
as are set forth
in the Specifications.
2. Term. The term of this Agreement (hereinafter the "Term")
shall
commence on January 1, 2005 and shall continue until and include
December 31,
2009 unless written notice of termination is served by either
party upon the
other in accordance with the provisions of SECTIONS 11 OR 12
below.
3. Product; Quantity. Subject to the terms and conditions of
this
Agreement, during the Term, Delta shall purchase exclusively
from Parkdale, and
Parkdale shall supply to Delta, all Yarn required by Delta and
its Subsidiaries
for use in manufacturing operations conducted by Delta and its
Subsidiaries in
the Territory. Parkdale's obligation under this Agreement to
supply to Delta,
and Delta's obligation to purchase from Parkdale, Yarn required
by Delta and its
Subsidiaries shall include Yarn required by any new business
operated or
acquired (whether acquired by means of an asset purchase, stock
purchase,
merger, consolidation, or otherwise) by Delta or any of its
Subsidiaries during
the Term (each, a "New Business"), as long as such Yarn is
required for use in
manufacturing operations conducted by such New Business in the
Territory.
Notwithstanding the foregoing, Delta shall not be required to
purchase
exclusively from Parkdale, and Parkdale shall not be required to
supply to
Delta, any Yarn required by any New Business acquired by Delta
or any of its
Subsidiaries during the Term to the extent that an obligation
exists for such
New Business to acquire Yarn from a supplier other than Parkdale
under a supply
agreement or other binding arrangement in effect prior to
Delta's or its
Subsidiary's acquisition of such New Business.
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4. Duties and Obligations of Parkdale.
(a) Compliance with Standards. Parkdale shall supply Yarn in
full
compliance with the product specifications (the
"Specifications") set forth in
EXHIBIT A attached hereto. Any modifications to the
Specifications may only be
made by agreement in writing by both parties.
(b) Delivery. Parkdale shall ship and regularly fulfill the
weekly supply
of Yarn (as set forth in purchase orders provided by Delta to
Parkdale) to Delta
or to such destination(s) as Delta shall designate in writing on
an F.O.B.
(Parkdale's facility) basis with carriers designated by Delta so
that Delta
shall assume all freight, transportation, and insurance from the
time of
delivery. If Parkdale determines that it will be unable to meet
Delta's delivery
requirements, as set forth in any purchase order provided by
Delta to Parkdale,
it shall so notify Delta no later than ten (10) days after
receipt of Delta's
order and propose an alternative delivery schedule. If such
alternative delivery
schedule is not acceptable to Delta, Delta shall have the right
to reject the
alternative delivery schedule by written notice to Parkdale and
to utilize an
alternative supply source with respect to such order. In
addition, in the event
that Parkdale fails to deliver Yarn on any required delivery
date, Delta may
utilize an alternative supply source with respect to such Yarn.
Claims by Delta
for inadequate delivery of Yarn shall be void unless Delta gives
Parkdale
written notice of the claim within thirty (30) calendar days of
receipt of the
Yarn at the destination designated by Delta.
(c) Records. All original records, in whatever form, relating to
the
manufacturing, production, quality control assurance, proof of
origin records
and shipment of Yarn shall be retained by Parkdale for a period
of not less than
two (2) years from the date of delivery of each lot of Yarn to
which said
records pertain. Parkdale shall provide Delta or its
representatives with
access, upon reasonable notice to Parkdale, to inspect
Parkdale's quality
control and other records relating to the Yarn and all other
records relating to
obligations of Parkdale pursuant to this Agreement.
(d) Shipping Pallets. Parkdale shall, at its expense, (i)
provide all
shipping pallets for the transportation of Yarn, and (ii) pick
up on a regular
basis and return to its premises all shipping pallets which have
been emptied by
Delta.
(e) Time of the Essense. Parkdale acknowledges that time is of
the essence
under this Agreement.
(f) Location of Manufacturing Operations. Parkdale agrees that
all Yarn
delivered hereunder shall be manufactured by it in North
Carolina, South
Carolina, or Virginia, or at such other location as Delta may
approve in
writing.
5. Warranty. Parkdale warrants that the Yarn delivered hereunder
shall
conform in all respects to the Specifications and shall be
manufactured,
produced and shipped in accordance with the Specifications and
warrants that the
Yarn shall be free from defects in materials and workmanship and
that, at the
time of delivery, Parkdale shall have good title and right to
transfer and sell
the same and that the same shall be delivered free of
encumbrances. If Parkdale
fails to deliver any Yarn hereunder free of encumbrances, Delta
may reject such
Yarn pursuant to SECTION 6 or Delta may, upon written notice to
Parkdale,
require that Parkdale, at its expense, defend the title thereto
and promptly
cause any security interest, claim, demand, lien, or other
encumbrance to be
removed. EXCEPT FOR THE WARRANTIES SET FORTH IN THIS SECTION 5,
PARKDALE MAKES
NO OTHER WARRANTIES OF QUALITY, AND PARKDALE
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HEREBY DISCLAIMS ALL OTHER WARRANTIES OF QUALITY, WHETHER
EXPRESS OR IMPLIED,
WHETHER CREATED BY CONTRACT OR BY OPERATION OF LAW, INCLUDING
BUT NOT LIMITED TO
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
6. Rejection of Yarn.
(a) Delta may reject any Yarn that does not conform in any
respect to
the warranties provided by Parkdale in SECTION 5 of this
Agreement provided that
Delta gives notice to Parkdale of such rejection within thirty
(30) days after
Delta discovers the nonconformity.
(b) Upon rejection of Yarn by Delta, Parkdale shall promptly
replace the
nonconforming Yarn with Yarn conforming to the warranties in
SECTION 5 of this
Agreement. Parkdale shall bear all costs in fulfilling its
obligation to replace
nonconforming Yarn, including all freight costs associated with
return of
nonconforming Yarn to Parkdale and all freights costs associated
with the
shipment of replacement Yarn to Delta.
7. Purchase Price, Payment; Rebates. The purchase price for each
pound
of Yarn delivered by Parkdale pursuant to this Agreement shall
be calculated in
accordance with the formula set forth on EXHIBIT B attached
hereto. Parkdale
shall invoice Delta weekly for all Yarn delivered during the
preceding week
pursuant to Delta's purchase orders. Such invoices shall be
payable by Delta on
a net forty-five (45) day basis following actual receipt of the
invoice. All
payments shall be remitted to Parkdale at the address specified
in or given
pursuant to SECTION 18 hereof. Delta is solely responsible for,
and will pay,
any and all applicable sales, use, value added, or excise taxes,
and any and all
imposts, customs, duties or consular fees or charges related to
importation or
exportation of goods, imposed by any governmental authority in
the Territory in
connection with the sale of Yarn by Parkdale to Delta
(collectively "Taxes"),
excluding, however, any Taxes measured upon Parkdale's income.
Each party agrees
to take all actions reasonably required to obtain exemptions
from or reductions
of Taxes (other than income Taxes) required to be paid or
withheld that may be
applicable to any payment due hereunder. Parkdale agrees to pay
to Delta all
rebate amounts actually received by Parkdale under any rebate
program(s)
administered by the USDA for the benefit of cotton consumers to
the extent such
rebates are attributable to bales of cotton opened by Parkdale
to fulfill its
obligations under this Agreement. Such rebate payments shall be
made by Parkdale
within seven (7) days of the end of each month.
8. Purchase Orders. All sales of Yarn produced for Delta in
accordance
with this Agreement will be made pursuant to purchase orders
submitted by Delta
from time to time, the terms of which shall be controlled by the
terms of this
Agreement, regardless of whether such purchase orders reference
this Agreement.
To the extent the terms of a purchase order conflict with the
terms of this
Agreement, the terms of this Agreement shall control. Except as
provided in
SECTION 4(b) with respect to delivery schedules, each purchase
order for Yarn
submitted by Delta in accordance with the provisions of this
Agreement shall be
deemed automatically accepted by Parkdale, subject to the
provisions of Section
4(b) with respect to delivery requirements.
9. Limitation of Liability. Subject to compliance with the
Specifications and without limiting SECTION 5, the determination
of the
suitability of the Yarn furnished hereunder for the uses
contemplated by Delta
is the sole responsibility of Delta and Parkdale shall have no
responsibility in
connection therewith. Except in the case of gross negligence or
gross
misconduct, Parkdale's sole
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liability and Delta's sole remedy for the non-delivery or
delivery of inadequate
quantities of Yarn, or for the delivery of Yarn not conforming
to
Specifications, shall be for Delta's direct damages, if such
failure is not
excused pursuant to SECTION 11 of this Agreement. Neither party
shall, under any
circumstances, be liable for loss of profits or any other
indirect or
consequential damages except in the case of gross negligence or
gross
misconduct.
10. Confidentiality.
(a) This Agreement, the terms herof, and all information
furnished or to
be furnished by Delta to Parkdale or by Parkdale to Delta in
connection with and
during the Term of this Agreement shall be kept confidential by
the party
receiving said information, except for purposes authorized by
this Agreement,
and neither party shall disclose such information to any person
or firm unless
previously authorized in writing by the other party to do so;
provided, however,
that the party receiving such i
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