DOUGHERTY & COMPANY LLC INVESTMENT BANKERS
October 24, 2000
John L. Bakane
President & CEO
Cone Mills Corporation
3101 North Elm Street
Greensboro, NC 27415-6540
Re: Debenture Advisory Proposal
Dear John:
I am writing with respect to the modification to our investment banking
engagement as it is more fully described in the executed Debenture Restructuring
Proposal, dated April 7, 2000, as amended on May 26, 2000 and as further amended
on July 27, 2000 (the "Engagement").
As you are aware, we were initially engaged to advise Cone Mills Corporation
("Cone") on restructuring its debt. Subsequent to our engagement, Cone has
decided to pursue an exchange offer involving its 8.125% Debentures. As we have
discussed, our role will continue to be limited to an advisory one. We will not
provide any service that may constitute participation in the exchange offer.
The amended and restated terms of our advisory services are detailed in the
following attachments:
Exhibit A - Advisory Proposal
Exhibit B - Terms and Conditions of Advisory Engagement
Exhibit C - Fee Schedule
If you agree to this modification, please so indicate by signing this letter and
returning it via fax to Steve at (612) 317-2045.
Sincerely,
/s/ Steven D. McWhirter /s/ Stuart H. Mason
Steven D. McWhirter Stuart H. Mason
Executive Vice President Executive Vice President
Dougherty & Company LLC Dougherty & Company LLC
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AGREED TO AND ACKNOWLEDGED BY:
/s/ John L. Bakane October 24, 2000
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John L. Bakane Date:
President & CEO
Cone Mills Corporation
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CONE MILLS CORPORATION
DEBENTURE ADVISORY PROPOSAL
EXHIBIT A - ADVISORY PROPOSAL
Dougherty will provide advisory services (the "Advisory Services") to Cone in
determining the terms and conditions of an exchange offer to the 8.125%
Debentures (the "Debentures") and the simultaneous amendment of the terms of the
Debentures and the release of the security interest recently granted to the
holders of the Debentures (collectively, the "Exchange Offer"). The Exchange
Offer will allow a significant increase in Cone's flexibility as it seeks to
restructure the terms of its other debt. This effort will involve the following:
[ ] Work with Cone's management to establish the approximate terms and
conditions of the Exchange Offer that we agree will incent the
Debenture holders to accept the Exchange Offer, including, without
limitation, provide information to Cone regarding comparable
transactions in the marketplace. These terms will be used as a
benchmark of success against which Dougherty's Advisory Services will
be measured; and
[ ] Assist Cone in preparing a presentation to its Board of Directors that
will outline these terms and conditions and discuss the economic impact
of them on the company.
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CONE MILLS CORPORATION
DEBENTURE ADVISORY PROPOSAL
EXHIBIT B - TERMS AND CONDITIONS OF ADVISORY ENGAGEMENT
The following are the terms under which Dougherty will be engaged by Cone to
undertake the Advisory Services:
1. Services Provided. Dougherty shall provide to Cone the services set
forth in Exhibit A to this Engagement.
2. Exclusive Engagement. Dougherty shall have the exclusive rights to
advise Cone in pursuing the Exchange Offer through closing or
withdrawal and abandonment of the Exchange Offer (the "Exclusive
Advisory Period"). Cone hereby represents that it shall engage no other
advisor during the period covered by this letter to pursue the Exchange
Offer.
3. Expenses. Subject to its prior approval of estimates, Cone shall bear
all reasonable costs and expenses incident to the Advisory Services
including: costs and legal fees incurred by Dougherty; and any and all
other expenses incurred by Dougherty in connection with the Exchange
Offer.
Cone has deposited $25,000 with Dougherty to provide for payment of
such expenses. Additionally, Dougherty will invoice Cone on a monthly
basis for all reimbursable expenses. Such invoices are to be paid when
presented. Any amount of the expense deposit held by Dougherty at
closing will be credited against any fee payable to Dougherty.
4. Fee Schedule. Cone will pay to Dougherty a fee for its Advisory
Services according to the terms of Exhibit C of this Engagement.
5. Noncircumvention. During the terms of the Exclusive Advisory Period,
Cone will not directly or indirectly attempt to complete any portion of
the Exchange Offer with the advisory assistance of any other party
without the consent of Dougherty. If such a transaction is completed,
Cone will pay Dougherty at closing the amount indicated in Paragraph 4.
6. Disclosure. Cone agrees to provide Dougherty with certain information,
including up-to-date financial data on its operations, as well as all
other information reasonably requested by Dougherty. This information
shall be furnished in a timely manner and Cone represents and warrants
that such information relating to Cone shall be complete and accurate
in all material respects.
7. Confidentiality. Cone agrees to keep confidential all information,
forms, correspondence and writings concerning Dougherty disclosed to
Cone in connection
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with this transaction except as may be required by courts or government
agencies. Dougherty agrees to keep confidential any information
concerning Cone subject to the same conditions. Any such information
provided will be returned with no copies having been retained.
8. Indemnification. Recognizing that services of the type contemplated in
this Engagement sometimes result in litigation, Cone agrees to
indemnify and hold harmless Dougherty, its affiliates and their
respective officers, directors, employees, members, agents and
controlling persons (collectively, the "Indemnified Parties"), from and
against any losses, claims, damages and liabilities, joint or several,
arising out of actions or alleged actions taken or omitted to be taken
by Cone (including any untrue statements made or any statements omitted
to be made by Cone in any written legal document) or actions or alleged
or omitted to be taken by an indemnified person with Cone's consent
(collectively, the "Matters"). Cone will promptly reimburse the
Indemnified Parties for all expenses (including reasonable fees and
expenses of legal counsel) as incurred in connection with the
investigation of, preparation for or defense of any pending or
threatened claim related to or arising in any manner out of any Matter
hereunder, or any action or proceeding arising therefrom (collectively,
"Proceedings"), whether or not such Indemnified Party is a formal party
to any such Proceeding. In the event that Dougherty asserts its rights
to Indemnification hereunder, Cone has the right but not the obligation
to select legal counsel for Dougherty that is reasonably acceptable to
Dougherty, provided, however, that Cone shall be responsible for fees
and expenses of only one legal counsel for all Indemnified Parties with
respect to any single claim or series of related claims. Cone has the
further right but not the obligation to settle all claims asserted
against Dougherty that are subject to Dougherty's right to
Indemnification hereunder. Notwithstanding the foregoing, Cone shall
not be liable in respect of any losses, claims, damages, liabilities or
expenses to the extent that such losses, claims, damages, liabilities
or expenses resulted from the gross negligence or willful misconduct of
the Indemnified Parties (individually or collectively) or to the extent
such losses, claims, damages, liabilities or expenses arise from an
Indemnified Party's alleged breach of its or his fiduciary or similar
legal responsibility to its or his clients.
Cone agrees that if any indemnification or reimbursement sought
pursuant to this Engagement were for any reason, except for reason of
an Indemnified Party's gross negligence or willful misconduct, not to
be available to any Indemnified Party or insufficient to hold it
harmless as and to the extent contemplated by this Engagement, then
Cone shall contribute to the amount paid or payable by such Indemnified
Party in respect of losses, claims, damages and liabilities in such
proportion as is appropriate to reflect the relative benefits to Cone
and its stockholders on the one hand, and Dougherty on the other, in
connection with the Matters to which such indemnification or
reimbursement relates, or if such allocation is not permitted by
applicable law, not only such relative benefits but also the relative
faults of such parties as well as any other equitable considerations.
In no event shall the Indemnified Parties contribute or otherwise be
liable, except for reason of an Indemnified Party's gross negligence or
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willful misconduct, for an amount in excess of the aggregate amount of
fees actually received by Dougherty pursuant to such Engagement
(excluding amounts received by Dougherty as reimbursement for
expenses).
Cone further agrees that no Indemnified Party shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to Cone
for or in connection with Dougherty's Engagement hereunder, except for
losses, claims, damages, liabilities or expenses to the extent that
such losses, claims, damages, liabilities or expenses resulted from the
gross negligence or willful misconduct of such Indemnified Party. The
indemnity, reimbursement and contribution obligations of Cone shall be
in addition to any liability which Cone may otherwise have and shall be
binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of Cone or an Indemnified Party.
The indemnity, reimbursement and contribution provisions set forth
herein shall remain operative and in full force and effect regardless
of (i) any withdrawal, termination of, consummation of or failure to
initiate or consummate any Matter referred to herein, (ii) any
investigation made by or on behalf of any party hereto or any person
controlling (within the meaning of Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of 1934,
as amended) any party hereto, (iii) any termination or the completion
or expiration of Dougherty's Engagement and (iv) whether or not
Dougherty shall, or shall not be called upon to, render any formal or
informal advice in the course of such Engagement.
9. Integration. This letter summarizes and evidences the discussions to
the date hereof, and contains all understandings and agreements between
the parties and supersedes any and all prior communications between the
parties, oral and written, and may be amended only by writing and
signed by both parties.
10. Notice. Any notice to be given pursuant to this agreement may be
effected by personal delivery in writing, or by posting with first
class U.S. mail, postage prepaid, or by facsimile transmission and
addressed to the other party at the address listed below. Service by
mail shall be deemed effective at the expiration of the fifth date
after mailing. Each party may designate a different address by giving a
written notice to the other party. Mailed notices shall be addressed as
follows:
DOUGHERTY & COMPANY LLC 90 South Seventh Street, Suite 4400
Minneapolis, MN 55402
Fax: (612) 317-22045
Attn: Russell S. King
Senior Vice President
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CONE MILLS CORPORATION Cone Mills Corporation
3101 North Elm Street
Greensboro, NC 27415-6540
Fax: (336) 379-6949
Attn: John L. Bakane
President & Chief Executive Officer
11. Miscellaneous. This Engagement shall be governed by the laws of the
State of Minnesota. This Engagement is solely for the benefit of the
parties and may not be relied upon by any other person or entity.
12. Execution in Counterparts. This letter may be executed in any number of
counterparts each of which shall be deemed an original, but such
counterparts together constitute only one and the same instrument. The
parties also agree that the faxed signed letter shall have the same
force and effect as the original signed letters.
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CONE MILLS CORPORATION
DEBENTURE ADVISORY PROPOSAL
EXHIBIT C - FEE SCHEDULE
For its efforts under this Engagement, Dougherty will receive compensation
according to the following schedule; such fees are to be paid at the closing:
Base Compensation: $750,000.
Incentive Compensation: $300,000, provided that the terms achieved in the
Exchange Offer are economically comparable to the benchmark terms more fully
described in the Registration Statement on Form S-4 as filed by Cone with the
Securities and Exchange Commission on August 4, 2000.
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