Exhibit 10.1
THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
by and among
DELTA APPAREL, INC.
M. J. SOFFE CO.
and
JUNKFOOD CLOTHING COMPANY,
as Borrowers
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Agent
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders
Dated: September ___, 2007

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THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
     This THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated September
___, 2007 (this “Agreement”), is entered into by and among DELTA APPAREL, INC.,
a Georgia corporation (“Delta”), M. J. SOFFE CO. a North Carolina corporation
(“Soffe”), and JUNKFOOD CLOTHING COMPANY, a Georgia corporation (“JCC”; Delta,
Soffe, and JCC being hereinafter collectively called “Borrowers” and
individually a “Borrower”); the parties hereto from time to time as Lenders,
whether by execution of this Agreement or an Assignment and Acceptance (each
individually, a “Lender” and collectively, “Lenders”); and WACHOVIA BANK,
NATIONAL ASSOCIATION, a national bank (“Wachovia”), in its capacity as agent for
Lenders (together with its successors in such capacity, “Agent”).
W I T N E S S E T H:
     WHEREAS, Borrowers, certain financial institutions (collectively,
“Lenders”) and Agent, in its capacity as agent for the Lenders entered into that
certain Second Amended and Restated Loan and Security Agreement dated August 22,
2005 (as amended, modified or supplemented from time to time prior to the date
hereof, the “Existing Loan Agreement”); and
     WHEREAS, each Borrower has requested that Lenders amend and restate the
Existing Loan Agreement and make available an amended and restated Credit
Facility to Borrowers, which shall be used by Borrowers to finance their mutual
and collective enterprise of marketing, designing, manufacturing and
distributing branded and private-label apparel. In order to utilize the
financial powers of each Borrower in the most efficient and economical manner,
and in order to facilitate the financing of each Borrower’s needs, Lenders will,
at the request of any Borrower, make loans to all Borrowers under the amended
and restated Credit Facility on a combined basis and in accordance with the
provisions hereinafter set forth. Borrowers’ business is a mutual and collective
enterprise and Borrowers believe that the consolidation of all Loans under this
Agreement will enhance the aggregate borrowing powers of each Borrower and ease
the administration of their loan relationship with Lenders, all to the mutual
advantage of Borrowers. Lenders’ willingness to extend credit to Borrowers and
to administer each Borrower’s collateral security therefor, on a combined basis
as more fully set forth in this Agreement, is done solely as an accommodation to
Borrowers and at Borrowers’ request in furtherance of Borrowers’ mutual and
collective enterprise; and
     WHEREAS, each Borrower has agreed to be jointly and severally liable for
loans and all outstanding other obligations under this Agreement and to
guarantee the obligations of each of the other Borrowers under this Agreement
and each of the other Financing Agreements; and
     WHEREAS, Agent and Lenders are willing to amend and restate the Existing
Loan Agreement, as hereinafter set forth, to, among other things, increase the
maximum amount of credit that may be obtained thereunder by Borrowers; and
     WHEREAS, each of Borrowers, Agent and Lenders acknowledges and agrees that
(i) the Obligations represent, among other things, the amendment, restatement,
renewal, extension, consolidation and modification of the Existing Obligations
arising in connection with the Existing Loan Agreement and the other Existing
Financing Agreements executed in connection therewith; (ii) it intends that the
collateral pledged under the Existing Loan Agreement and the other Existing
Financing Agreements executed in connection therewith shall secure, without
interruption or

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impairment of any kind, all Existing Obligations under the Existing Loan
Agreement and the other Existing Financing Agreements executed in connection
therewith, as amended, restated, renewed, extended, consolidated and modified
hereunder, together with all other Obligations hereunder; and (iii) all security
interests and liens evidenced by the Existing Loan Agreement and the other
Existing Financing Agreements executed in connection therewith are hereby
ratified, confirmed and continued; and
     WHEREAS, Borrowers, Agent and Lender intend that (i) the provisions of the
Existing Loan Agreement and the other Existing Financing Agreements executed in
connection therewith, to the extent restated, renewed, extended, consolidated,
amended and modified hereby and by the other Financing Agreements dated as of
the date hereof, be hereby superseded and replaced by the provisions hereof and
of the other Financing Agreements; and (ii) by entering into and performing
their respective obligations hereunder, this transaction shall not constitute a
novation; and
     WHEREAS, each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrowers on a pro
rata basis according to its Commitment (as defined below) on the terms and
conditions set forth herein and Agent is willing to act as agent for Lenders on
the terms and conditions set forth herein and the other Financing Agreements;
     NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
     For purposes of this Agreement, the following terms shall have the
respective meanings given to them below:
     “Accounts” shall mean, as to each Borrower, all present and future rights
of such Borrower to payment of a monetary obligation, whether or not earned by
performance, which is not evidenced by chattel paper or an instrument, (a) for
property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
secondary obligation incurred or to be incurred, or (d) arising out of the use
of a credit or charge card or information contained on or for use with the card.
     “Acquisition Agreement” shall mean, with respect to each Acquisition
Transaction, each stock purchase agreement or asset purchase agreement, as the
context may require, to be executed and delivered by and among a Borrower or an
Acquisition Subsidiary, as purchaser, and each owner, as seller, of the Capital
Stock or assets to be sold to such Borrower or Acquisition Subsidiary, together
with any and all permitted amendments, modifications and supplements thereto,
restatements thereof and substitutes therefor.
     “Acquisition Consideration” shall mean the consideration given and to be
given by a Borrower or any Acquisition Subsidiary for or in an Acquisition
Transaction, including the fair market value of any cash, property, Capital
Stock or services given and the amount of any Funded Debt assumed or incurred by
such Borrower or Acquisition Subsidiary in connection with such Acquisition
Transaction.

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     “Acquisition Documents” shall mean, individually and collectively, as the
context may require, each Acquisition Agreement and any and all other
agreements, documents or instruments at any time executed and delivered by a
Borrower or an Acquisition Subsidiary, an Acquisition Target or any other Person
in connection with an Acquisition Transaction.
     “Acquisition Subsidiary” shall mean a Subsidiary formed by a Borrower after
the Closing Date to purchase all of the issued and outstanding Capital Stock, or
all or substantially all of the assets, of an Acquisition Target or a division
or separate line of business of an Acquisition Target, subject to the
satisfaction of each of the following conditions as determined by Agent: (i) no
Default or Event of Default exists at the time or would result therefrom;
(ii) such Borrower and such Subsidiary deliver to Agent any and all documents,
agreements, financial statements, projections and instruments reasonably
requested by Agent, in form and substance reasonably satisfactory to Agent in
all respects, in connection with such formation, including (a) such documents
and instruments as may be necessary to grant or confirm to Agent a first
priority perfected lien on and security interest in all of the assets of the
Subsidiary, including the Capital Stock in such Subsidiary owned by such
Borrower (and subject to any permitted liens), and (b) a joinder agreement
executed by such Subsidiary, together with such other collateral documents and
opinions of counsel as may be requested by Agent, each in form and substance
satisfactory to Agent; and (iii) such Borrower shall give Agent at least 7 days
prior written notice before forming such Subsidiary and provide copies of all
organizational documents of such Subsidiary to Agent.
     “Acquisition Target” shall mean a Person whose Capital Stock or assets are
to be purchased pursuant to the terms of an Acquisition Agreement.
     “Acquisition Transaction” shall mean the transaction pursuant to an
Acquisition Agreement for the purchase of all of the issued and outstanding
Capital Stock of, or all or substantially all of the assets of, an Acquisition
Target, or for the purchase of all or substantially all of the assets of a
division or separate line of business of an Acquisition Target.
     “Adjusted Eurodollar Rate” shall mean, with respect to each Interest Period
for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary,
to the next onesixteenth (1/16) of one (1%) percent) determined by dividing
(a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to:
(i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve
Percentage” shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a nonUnited States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
     “Administrative Borrower” shall mean Delta, in its capacity as
Administrative Borrower on behalf of itself and the other Borrowers pursuant to
Section 6.11 hereof and its successors and assigns in such capacity.
     “Affiliate” shall mean, with respect to a specified Person, any other
Person (a) which directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, such specified
Person; (b) which beneficially owns or holds five (5%) percent or more of any
class of the Voting Stock or other equity interest of such specified Person; or
(c) of which five

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(5%) percent or more of the Voting Stock or other equity interest is
beneficially owned or held by such specified Person or a Subsidiary of such
specified Person. For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlling,” “controlled by” and “under common
control with”) when used with respect to any specified Person shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of Voting Stock, by agreement or otherwise.
     “Agent” shall mean Wachovia Bank, National Association, in its capacity as
agent on behalf of Lenders pursuant to the terms hereof and any replacement or
successor agent hereunder.
     “Agent Payment Account” shall mean the bank account of Agent as Agent may
from time to time designate for wiring or otherwise transferring, in immediately
available funds, the items received for deposit in, and the funds from time to
time on deposit in, the Blocked Accounts.
     “Agreement Date” shall mean as of September ___, 2007.
     “Alternate Excess Availability” shall mean the amount, as determined by
Agent, calculated at any time, equal to: (a) the Borrowing Base minus (b) the
amount of all then outstanding and unpaid Obligations.
     “Amount Due From Factor” shall mean (a)(i) at the date in question, if a
current Factor Status Statement has been delivered by Factor to Agent on such
date, an amount equal to the aggregate credit balances due from Factor to JCC
under the Factoring Agreement on such date as reflected on the Factor Status
Statement from Factor, or (ii) if a current Factor Status Statement has not been
delivered to Agent on such date, an amount equal to the aggregate credit
balances due to JCC under the Factoring Agreement on such date as reflected on
the Due From Factor Report delivered to Agent by Borrowers on such date or
(iii) in the absence of delivery of the Due From Factor Report, an amount
determined by Agent in its sole discretion, minus (b) at the date in question,
the Factor Reserve.
     “Anti-Terrorism Law” shall mean the USA PATRIOT Act or any other statute,
regulation, executive order, or other law pertaining to the prevention of future
acts of terrorism, in each case as such law may be amended from time to time.
     “Assignment and Acceptance” shall mean an Assignment and Acceptance
substantially in the form of Exhibit A attached hereto (with blanks
appropriately completed) delivered to Agent in connection with an assignment of
a Lender’s interest hereunder in accordance with the provisions of Section 13.7
hereof.
     “Average Daily Balance” shall have the meaning set forth in Section 3.2(b)
hereof.
     “Bank Products” shall mean any one or more of the following types of
products, services or facilities extended to any Borrower by Wachovia or any
Affiliate of Wachovia: (i) commercial credit cards; (ii) merchant card services;
(iii) products or services under Cash Management Agreements; (iv) Hedging
Agreements; (v) interstate depository network services; and (vi) such other
banking products or services provided by Wachovia or any Affiliate of Wachovia
as may be requested by any Borrower, other than Letters of Credit.

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     “Banking Relationship Debt” shall mean Indebtedness or other obligations of
a Borrower to Wachovia (or any Affiliate of Wachovia) arising out of or relating
to Bank Products.
     “Blocked Accounts” shall have the meaning set forth in Section 6.3(a)
hereof
     “Blocked Person” shall have the meaning given to such term in Section 8.8.
     “Borrowing Base” shall mean, at any time, an amount equal:
     (a) the sum of:
     (i) eighty-five percent (85%) of the Net Amount of the Eligible Accounts,
plus
     (ii) eighty-five percent (85%) of the Amount Due From Factor on such date
that is attributable to Factored Accounts, plus
     (iii) the lesser of:

  (1)   the Inventory Loan Limit, or     (2)   the lesser of (A) sixty percent
(60%) of the Value of Eligible Inventory consisting of finished goods,
Borrowers’ raw materials consisting of raw cotton and yarn for such finished
goods and finished yarn categorized as work-in-process; or (B) eighty-five
percent (85%) of the Net Orderly Liquidation Value of such Eligible Inventory,
plus

     (iv) the lesser of: (1) $9,537,500; or (2) 70% of the appraised fair market
value (based on an appraisal that is in form, contains assumptions and utilizes
methods acceptable to Agent and that is performed by an appraiser acceptable to
Agent) of Eligible Real Property of Borrowers located in the State of North
Carolina, which amount, in the case of either (1) or (2), as applicable, shall
be reduced on the first day of each month, commencing October 1, 2007, by an
amount equal to $87,500; plus
     (v) the lesser of (1) $5,500,000; or (2) 85% multiplied by the Net Orderly
Liquidation Value of the Eligible Equipment of Borrowers, which amount, in the
case of either (1) or (2), as applicable, shall be reduced on the first day of
each month, commencing October 1, 2007, by an amount equal to $91,667; plus
     (vi) the lesser of: (1) $1,445,826; or (2) 70% of the appraised fair market
value (based on an appraisal that is in form, contains assumptions and utilizes
methods acceptable to Agent and that is performed by an appraiser acceptable to
Agent) of Eligible Real Property of Borrowers located in the State of Tennessee,
which amount, in the case of either (1) or (2), as applicable, shall be reduced
on the first day of each month, commencing October 1, 2007, by an amount equal
to $15,278; plus

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     (g) the lesser of: (i) $7,500,000; or (ii) 45% multiplied by the Net
Orderly Liquidation Value of the Eligible Trademarks; minus
     (b) the Reserves.
     “Business Day” shall mean any day other than a Saturday, Sunday, or other
day on which commercial banks are authorized or required to close under the laws
of the State of New York or the State of Georgia or the State of North Carolina,
and a day on which the Reference Bank and Agent are open for the transaction of
business, except that if a determination of a Business Day shall relate to any
Eurodollar Rate Loans, the term Business Day shall also exclude any day on which
banks are closed for dealings in dollar deposits in the London interbank market
or other applicable Eurodollar Rate market.
     “Capital Expenditures” shall mean, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets which
are not, in accordance with GAAP, treated as expense items for such Person in
the year made or incurred or as a prepaid expense applicable to a future year or
years.
     “Capital Leases” shall mean, as applied to any Person, any lease of (or any
agreement conveying the right to use) any property (whether real, personal or
mixed) by such Person as lessee which in accordance with GAAP, is required to be
reflected as a liability on the balance sheet of such Person.
     “Capital Stock” shall mean, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person’s capital stock, or partnership, limited liability company or other
equity interests at any time outstanding, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or other
interests (but excluding any debt security that is exchangeable for or
convertible into such capital stock).
     “Cash Dominion Trigger Date” shall mean (i) the date on which an Event of
Default exists, or (ii) the date on which Excess Availability is less than
$5,000,000.
     “Cash Equivalents” shall mean, at any time, (a) any evidence of
Indebtedness with a maturity date of one hundred eighty (180) days or less
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof; provided, that, the full faith
and credit of the United States of America is pledged in support thereof;
(b) certificates of deposit or bankers’ acceptances with a maturity of one
hundred eighty (180) days or less of any financial institution that is a member
of the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $250,000,000; (c) commercial paper (including variable
rate demand notes) with a maturity of one hundred eighty (180) days or less
issued by a corporation (except an Affiliate of Borrower) organized under the
laws of any State of the United States of America or the District of Columbia
and rated at least A-1 by Standard & Poor’s Ratings Service, a division of The
McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.;
(d) repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and undivided
profits of not less than $250,000,000; ‘(e) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within one

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hundred eighty (180) days or less from the date of acquisition; provided, that,
the terms of such agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the Comptroller of the Currency on October 31, 1985; and
(f) investments in money market funds and mutual funds which invest
substantially all of their assets in securities of the types described in
clauses (a) through (e) above.
     “Cash Management Agreements” shall mean any agreement entered into from
time to time between any Borrower or any of its Subsidiaries, on the one hand,
and Wachovia or any of its Affiliates, on the other, in connection with cash
management services for operating, collections, payroll and trust accounts of
such Borrower or its Subsidiaries provided by such banking or financial
institution, including automatic clearinghouse services, controlled disbursement
services, electronic funds transfer services, information reporting services,
lockbox services, stop payment services and wire transfer services.
     “Change of Control” shall mean (a) the transfer (in one transaction or a
series of transactions) of all or substantially all of the assets of any
Borrower or Guarantor to any Person or group (as such term is used in
Section 13(d)(3) of the Exchange Act), other than as permitted in Section 9.7
hereof; (b) the liquidation or dissolution of any Borrower or Guarantor or the
adoption of a plan by the stockholders of any Borrower or Guarantor relating to
the dissolution or liquidation of Borrower or any Guarantor, other than as
permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act), except for one or
more Permitted Holders, of beneficial ownership, directly or indirectly, of a
majority of the voting power of the total outstanding Voting Stock of any
Borrower or Guarantor or the Board of Directors of any Borrower or Guarantor; or
(d) during any period of two (2) consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of any Borrower or
Guarantor (together with any new directors who have been appointed by any
Permitted Holder, or whose nomination for election by the stockholders of such
Borrower or Guarantor, as the case may be, was approved by a vote of at least
sixty-six and two-thirds (66 2/3%) percent of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of any Borrower then still in
office.
     “CIT” shall mean The CIT Group/Commercial Services, Inc., a New York
corporation.
     “Closing Date” shall mean the date on which all the conditions precedent in
Section 4 hereof are satisfied or waived and the initial Loans are made under
this Agreement.
     “Code” shall mean the Internal Revenue Code of 1986, as the same now exists
or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
     “Collateral” shall have the meaning set forth in Section 5.1 hereof.
     “Collateral Access Agreement” shall mean an agreement in writing, in form
and substance satisfactory to Agent, from any lessor of premises to any
Borrower, or any other Person to whom any Collateral (including Inventory,
Equipment, bills of lading or other documents of title) is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, pursuant
to which such lessor, consignee or other Person, inter alia, acknowledges the
first priority security interest of Agent in such

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Collateral, agrees to waive any and all claims such lessor, consignee or other
Person may, at any time, have against such Collateral, whether for processing,
storage or otherwise, and agrees to permit Agent access to, and the right to
remain on, the premises of such lessor, consignee or other Person so as to
exercise Agent’s rights and remedies and otherwise deal with such Collateral and
in the case of any consignee or other Person who at any time has custody,
control or possession of any Collateral, acknowledges that it holds and will
hold possession of the Collateral for the benefit of Agent and Lenders and
agrees to follow all instructions of Agent with respect thereto.
     “Commitment” shall mean, at any time, as to each Lender, the principal
amount set forth beside such Lender’s name on Schedule 1.21 hereto or in the
Assignment and Acceptance pursuant to which such Lender became a Lender
hereunder in accordance with the provisions of Section 13.7 hereof, as the same
may be adjusted from time to time in accordance with the terms hereof; sometimes
being collectively referred to herein as “Commitments.”
     “Credit Facility” shall mean the Loans and Letters of Credit provided to or
for the benefit of Borrowers pursuant to Sections 2.1 and 2.2 hereof.
     “Current Hedging Exposure” means, as of any date of determination, one
hundred percent (100%) of the aggregate mark-to-market exposure then owing by
Borrowers and Obligors under Hedging Agreements, determined by the Lender or
Affilate of such Lender that is counterparty to each Hedging Agreement, based on
termination value after netting, using a mutually satisfactory method, and
furnished to the Agent on a monthly basis (or more frequently, in the reasonable
discretion of the Agent).
     “Customs Broker” shall mean each Person listed on Schedule 1.24 hereto or
such other Person as may be selected by any Borrower after the date hereof and
after written notice by such Borrower to Agent who is reasonably acceptable to
Agent, provided, that, as to each such Person (including those listed on
Schedule 1.24), such Borrower has used reasonable efforts to obtain a Collateral
Access Agreement duly authorized, executed and delivered by such Person.
     “Default” shall mean an act, condition or event which with notice or
passage of time or both would constitute an Event of Default.
     “Default Rate” shall mean the interest rate referred to in clause (c) of
the definition of “Interest Rate”.
     “Defaulting Lender” shall have the meaning set forth in Section 6.9(d)
hereof.
     “Deposit Account Control Agreement” shall mean an agreement in writing, in
form and substance satisfactory to Agent, by and among Agent, any Borrower with
a deposit account at any bank and the bank at which such deposit account is at
any time maintained which provides that such bank will comply with instructions
originated by Agent directing disposition of the funds in the deposit account
without further consent by such Borrower and such other terms and conditions as
Agent may require, including as to any such agreement with respect to any
Blocked Account, providing that all items received or deposited in the Blocked
Accounts are the property of Agent, that the bank has no lien upon, or right to
setoff against, the Blocked Accounts, the items received for deposit therein, or
the funds from time to time on deposit therein and that the bank will wire, or
otherwise transfer, in immediately available funds, on a daily basis to the
Agent Payment Account all funds received or deposited into the Blocked Accounts.

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     “Dilution Reserve” shall mean a reserve established by Agent in such amount
as Agent may determine at any time that (a) the percentage equal to; (i) bad
debt write-downs or write-offs, discounts, returns, promotions, credit, credit
memos and other dilutive items with respect to Accounts, divided by (ii) gross
sales, exceeds (b) five percent (5%) on a consolidated basis.
     “Due From Factor Report” shall mean a report based on information provided
to JCC by Factor and prepared by JCC concurrently with each request for a Loan
under this Agreement (but no less frequently than monthly) that reflects the
status of Factored Accounts under the Factoring Agreement on such date.
     “EBITDA” shall mean, as to Borrowers, with respect to any period, an amount
equal to: (a) the Net Income of Borrowers and their Subsidiaries for such period
on a consolidated basis determined in accordance with GAAP, plus (b) to the
extent deducted in the computation of Net Income, (i) depreciation, amortization
and other non-cash charges (including imputed interest and deferred
compensation) for such period, all in accordance with GAAP, plus (ii) the
Interest Expense for such period, plus (iii) charges for Federal, Provincial,
State, district, municipal, local and foreign income taxes.
     “Eligible Accounts” shall mean Accounts created by a Borrower which are and
continue to be acceptable to Agent based on the criteria set forth below. In
general, Accounts shall be Eligible Accounts if:
     (a) such Accounts arise from the actual and bona fide sale and delivery of
goods by such Borrower or rendition of services by such Borrower in the ordinary
course of its business which transactions are completed in accordance with the
terms and provisions contained in any documents related thereto;
     (b) such Accounts are not unpaid more than the earlier of (i) sixty
(60) days after the original due date or for them (ii) one hundred twenty
(120) days after the date of the original invoice for them (or one hundred fifty
(150) days after the date of the original invoice for them for certain account
debtors of such Borrower which are pre-approved by Agent, on terms and
conditions acceptable to Agent);
     (c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
     (d) such Accounts do not arise from sales on consignment, guaranteed sale,
sale and return, sale on approval, or other terms under which payment by the
account debtor may be conditional or contingent;
     (e) the chief executive office of the account debtor with respect to such
Accounts is located in the United States of America or Canada (provided, that,
at any time promptly upon Agent’s request, such Borrower shall execute and
deliver, or cause to be executed and delivered, such other agreements, documents
and instruments as may be required by Agent to perfect the security interests of
Agent in those Accounts of an account debtor with its chief executive office or
principal place of business in Canada in accordance with the applicable laws of
the Province of Canada in which such chief executive office or principal place
of business is located and take or cause to be taken such other and further
actions as Agent may request to enable Agent as secured party with respect
thereto to collect such Accounts under the applicable Federal or Provincial laws
of Canada) or, at Agent’s

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option, if the chief executive office and principal place of business of the
account debtor with respect to such Accounts is located other than in the United
States of America or Canada, then if either: (i) the account debtor has
delivered to such Borrower an irrevocable letter of credit issued or confirmed
by a bank satisfactory to Agent and payable only in the United States of America
and in U.S. dollars, sufficient to cover such Account, in form and substance
satisfactory to Agent and if required by Agent, the original of such letter of
credit has been delivered to Agent or Agent’s agent and such Borrower has
complied with the terms of Section 5.2(h) hereof with respect to the assignment
of the proceeds of such letter of credit to Agent or naming Agent as transferee
beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to
credit insurance payable to Agent issued by an insurer and on terms and in an
amount acceptable to Agent, or (iii) such Account is otherwise acceptable in all
respects to Agent (subject to such lending formula with respect thereto as Agent
may determine);
     (f) such Accounts do not consist of progress billings (such that the
obligation of the account debtors with respect to such Accounts is conditioned
upon such Borrower’s satisfactory completion of any further performance under
the agreement giving rise thereto), bill and hold invoices or retainage
invoices, except as to bill and hold invoices, if (i) such bill and hold
invoices constitute Quiksilver Bill and Hold Accounts, or (ii) Agent shall have
received an agreement in writing from the account debtor, in form and substance
satisfactory to Agent, confirming the unconditional obligation of the account
debtor to take the goods related thereto and pay such invoice;
     (g) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to any right of setoff or recoupment against
such Accounts (but the portion of the Accounts of such account debtor in excess
of the amount at any time and from time to time owed by such Borrower to such
account debtor or claimed owed by such account debtor may be deemed Eligible
Accounts);
     (h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
     (i) such Accounts are subject to the first priority, valid and perfected
security interest of Agent and any goods giving rise thereto are not, and were
not at the time of the sale thereof, subject to any liens except those permitted
in this Agreement;
     (j) neither the account debtor nor any officer or employee of the account
debtor with respect to such Accounts is an officer, employee, agent or other
Affiliate of any Borrower;
     (k) the account debtors with respect to such Accounts are not any foreign
government, the United States of America, any State, political subdivision,
department, agency or instrumentality thereof, unless, (i) the account debtor is
the United States of America, any State, political subdivision, department,
agency or instrumentality thereof, and (ii) the Federal Assignment of Claims Act
of 1940, as amended or any similar State or local law, if applicable, has been
complied with in a manner satisfactory to Agent, or Agent, in its discretion,
has expressly waived such compliance with respect to Accounts, the aggregate
amount of which do not exceed $7,500,000 at any time;

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     (l) there are no proceedings or actions which are threatened or pending
against the account debtors with respect to such Accounts which might result in
any material adverse change in any such account debtor’s financial condition;
     (m) such Accounts of a single account debtor or its affiliates do not
constitute more than fifteen (15%) percent of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
     (n) such Accounts are not owed by an account debtor who has Accounts unpaid
more than the earlier of (i) sixty (60) days after the original due date or for
them (ii) one hundred twenty (120) days after the original invoice date for them
(or one hundred fifty (150) days after the date of the original invoice for them
for certain account debtors of such Borrower which are pre-approved by Agent, on
terms and conditions acceptable to Agent) which constitute more than fifty (50%)
percent of the total Accounts of such account debtor;
     (o) the account debtor is not located in a state requiring the filing of a
Notice of Business Activities Report or similar report in order to permit such
Borrower to seek judicial enforcement in such State of payment of such Account,
unless such Borrower has qualified to do business in such state or has filed a
Notice of Business Activities Report or equivalent report for the then current
year or such failure to file and inability to seek judicial enforcement is
capable of being remedied without any material delay or material cost;
     (p) such Accounts are not Factored Accounts; and
     (q) such Accounts are owed by account debtors deemed creditworthy at all
times by such Borrower consistent with its current practice and who are
reasonably acceptable to Agent.
General criteria for Eligible Accounts may be established and revised from time
to time by Agent in good faith based on an event, condition or other
circumstance arising after the date hereof, or existing on the date hereof to
the extent Agent has no written notice thereof from a Borrower, which adversely
affects or could reasonably be expected to adversely affect the Accounts in the
good faith determination of Agent. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
     “Eligible Equipment” shall mean Equipment owned or operated in the ordinary
course of the business of a Borrower, in each case which is acceptable to Agent
based on the criteria set forth below. In general, Eligible Equipment shall not
include: (a) components which are not part of operating Equipment; (b) Equipment
which is uninsured, damaged, obsolete, in disrepair or under repair; (c) spare
parts for Equipment; (d) Equipment at premises other than those owned and
controlled by such Borrower, except any Equipment which would otherwise be
deemed Eligible Equipment that is not located at premises owned and operated by
such Borrower may nevertheless be considered Eligible Equipment: (i) as to
locations which are leased by such Borrower if Agent shall have received a
Collateral Access Agreement from the owner and lessor of such location, duly
authorized, executed and delivered by such owner and lessor or if Agent shall
not have received a Collateral Access Agreement (in a form reasonably acceptable
to Agent), Agent may, at its option, nevertheless consider Equipment at such
location to be Eligible Equipment to the extent Agent shall have established
such Reserves in respect of amounts at any time payable by such Borrower to the
owner and lessor thereof as Agent shall determine, and (ii) as to locations
owned and operated by a third Person, (A) if Agent shall have received a
Collateral Access Agreement from such owner and

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operator with respect to such location, duly authorized, executed and delivered
by such owner and operator or if Agent shall not have received a Collateral
Access Agreement (in a form reasonably acceptable to Agent), Agent may, at its
option, nevertheless consider Equipment at such location to be Eligible
Equipment to the extent Agent shall have established such Reserves in respect of
amounts at any time payable by such Borrower to the owner and operator thereof
as Agent shall determine, and (B) in addition, as to locations owned and
operated by a third Person, Agent shall have received, if required by Agent:
(1) UCC-1 financing statements between the owner and operator, as consignee or
bailee, and such Borrower, as consignor or bailor, in form and substance
satisfactory to Agent, which are duly assigned to Agent and (2) a written notice
to any lender to the owner and operator of the first priority security interest
in such Equipment of Agent; (e) Equipment subject to a security interest or lien
in favor of any Person other than Agent except those permitted in this Agreement
(but without limiting the right of Agent to establish any Reserves with respect
to amounts secured by such security interest or lien in favor of any Person even
if permitted herein); (f) Equipment which is not subject to the first priority,
valid and perfected security interest of Agent; (g) Equipment which has become
part of, or affixed to, any Real Property; or (h) Equipment located outside the
United States of America. The criteria for Eligible Equipment set forth above
may only be changed and any new criteria for Eligible Equipment may only be
established by Agent in good faith based on either: (i) an event, condition or
other circumstance arising after the date hereof, or (ii) an event, condition or
other circumstance existing on the date hereof to the extent Agent has no
written notice thereof from a Borrower prior to the date hereof, in either case
under clause (i) or (ii) which adversely affects or could reasonably be expected
to adversely affect the Equipment in the good faith determination of Agent. Any
Equipment which is not Eligible Equipment shall nevertheless be part of the
Collateral.
     “Eligible Inventory” shall mean Inventory consisting of finished goods held
for resale in the ordinary course of the business of a Borrower, raw materials
for such finished goods and finished yarn categorized as work-in-process, which
are acceptable to Agent based on the criteria set forth below. In general,
Eligible Inventory shall not include (a) work-in-process (other than finished
yarn); (b) raw materials other than yarn and raw cotton; (c) spare parts for
Equipment; (d) packaging and shipping materials; (e) supplies used or consumed
in such Borrower’s business; (f) Inventory at premises other than those owned
and controlled by such Borrower, except any Inventory which would otherwise be
deemed Eligible Inventory at locations in the United States of America which are
not owned and operated by such Borrower may nevertheless be considered Eligible
Inventory: (i) as to locations which are leased by such Borrower if Agent shall
have received a Collateral Access Agreement from the owner and lessor of such
location, duly authorized, executed and delivered by such owner and lessor,
except that notwithstanding that Agent shall not have received such an agreement
for a particular leased location, Agent may consider Inventory at such leased
location which would otherwise be Eligible Inventory to be Eligible Inventory
and in such event, Agent may at any time establish such Reserves as Agent may
determine in respect of amounts at any time payable by such Borrower to the
owner or lessor of such location, without limiting any other rights and remedies
of Agent under this Agreement or under the other Financing Agreements with
respect to the establishment of Reserves or otherwise and (ii) as to premises of
third parties (including consignees and processors), Agent shall have received a
Collateral Access Agreement duly authorized, executed and delivered by the owner
and operator of such premises (except that notwithstanding that Agent shall not
have received such an agreement as to a particular third party location, Agent
may consider Inventory at such location which would otherwise be Eligible
Inventory to be Eligible Inventory and in such event, Agent may at any time
establish such Reserves as Agent may determine in respect of amounts at any time
payable by such Borrower to such third party, without limiting any other rights
or remedies of Agent under this Agreement or under the other Financing
Agreements with respect to the establishment of Reserves or otherwise), and in
addition, if

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required by Agent, as to premises of third parties where assets of such Borrower
are located: (A) the owner and operator executes appropriate UCC-1 financing
statements in favor of such Borrower, which financing statements are duly
assigned to Agent and (B) any secured Agent to the owner and operator is
properly notified of the first priority lien on such Inventory of Agent; (g)
Inventory located outside the United States of America shall only be Eligible
Inventory if it is Eligible In-Transit Inventory; (h) Inventory subject to a
security interest or lien in favor of any Person other than Agent, except those
permitted in this Agreement; (i) bill and hold goods; (j) Inventory which is not
subject to the first priority, valid and perfected security interest of Agent,
(k) damaged and/or defective Inventory which is unsaleable or which such
Borrower has not marked down to its realizable value; (l) Inventory purchased or
sold on consignment; (m) samples; (n) Inventory to be returned to vendors;
(o) Inventory subject to any License Agreement or other agreement that limits,
conditions or restricts such Borrower’s or Agent’s right to sell or otherwise
dispose of such Inventory unless the Licensor has entered into a Licensor/Lender
Agreement with Agent, except that notwithstanding that Agent shall not have
received such a Licensor/Lender Agreement for a particular License Agreement,
Agent may consider Inventory subject to such License Agreement which would
otherwise be Eligible Inventory to be Eligible Inventory and in such event,
Agent may at any time establish such Reserves as Agent may determine in respect
of amounts at any time payable by such Borrower to the Licensor of such
Inventory, without limiting any other rights and remedies of Agent under this
Agreement or under the other Financing Agreements with respect to the
establishment of Reserves or otherwise; or (p) Inventory that is the subject of
an Intellectual Property Claim. General criteria for Eligible Inventory may be
established and revised from time to time by Agent in good faith based on an
event, condition or other circumstance arising after the date hereof, or
existing on the date hereof to the extent Agent has no written notice thereof
from a Borrower, which adversely affects or could reasonably be expected to
adversely affect the Inventory in the good faith determination of Agent. Any
Inventory which is not Eligible Inventory shall nevertheless be part of the
Collateral.
     “Eligible In-Transit Inventory” shall mean Inventory of a Borrower that
would constitute Eligible Inventory but for the fact that it is in transit to
the premises of a Borrower or a Customs Broker located within the United States,
and which is acceptable to Agent based on the criteria set forth below. In
general, inventory in transit shall only be deemed Eligible In-Transit Inventory
if: (a) it is in the United States in transit to the premises of a Borrower in
the United States and the requirements of clauses (i) through (v) below are
satisfied in form and substance satisfactory to Agent, or (b) it is outside of
the United States in transit to either the premises of a Customs Broker or the
premises of a Borrower in the United States and the requirements of clauses
(i) through (vii) below are satisfied in form and substance satisfactory to
Agent: (i) as to premises which are not owned and controlled by a Borrower (and
in the case of inventory in transit from a location outside of the United
States, the premises of a Customs Broker), either (A) Agent has received a
Collateral Access Agreement duly authorized, executed and delivered by the
owner, lessor and operator of such other premises (or by the Customs Broker) to
which the inventory is in transit, as the case may be, or (B), in Agent’s
discretion, Agent shall have established such Reserves as Agent may determine in
respect of amounts at any time payable by such Borrower to such owner, lessor
and operator of such other premises (or to the Customs Broker), (ii) title and
risk of loss to the inventory shall have passed to such Borrower, (iii) the
seller of such inventory (A) has no right, to reclaim, divert the shipment of,
reroute, repossess, stop delivery or otherwise assert any lien rights or title
retention with respect to such inventory and (B) has entered into an agreement
with Agent waiving its lien rights and any retention of title in respect of such
inventory and such agreement is in full force and effect, (iv) such inventory is
insured against types of loss, damage, hazards, and risks, and in amounts,
satisfactory to Agent, (v) such inventory is not subject to any letter of credit
(including any Letter of Credit issued

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hereunder); (vi) such inventory is subject to a tangible, negotiable bill of
lading that: (A) was issued by the carrier or, if a freight forwarder is engaged
by a Borrower, by the freight forwarder, (B) is endorsed to the order of Agent,
(C) bears a notation on its face that such bill of lading is subject to the
security interest of Agent, and (D) is in the United States in the possession of
Agent or the Customs Broker dealing with such inventory and from whom Agent has
received a Collateral Access Agreement, duly authorized, executed and delivered
by such Person, and such agreement is in full force and effect, binding upon
such Person and such Person has complied with the terms thereof; and (vii) Agent
has received (A) a copy of the certificate of marine cargo insurance in
connection therewith in which Agent has been named as an additional insured and
loss payee in a manner acceptable to Agent, (B) a certificate duly executed by
an officer of such Borrower that such Inventory satisfies all criteria to be
otherwise deemed Eligible Inventory hereunder, and (C) if requested by Agent, a
copy of the invoice, packing slip and manifest with respect thereto.
     “Eligible Real Property” shall mean Real Property of Borrowers owned in fee
subject to a Mortgage in favor of Agent; provided, however, that Eligible Real
Property shall not include (a) Real Property subject to pending or threatened
(in writing to a Borrower) condemnation by any Governmental Authority or any
pending or threatened (in writing to a Borrower) enforcement action by any
Governmental Authority with respect to the environmental condition of such Real
Property; (b) Real Property subject to a security interest or lien in favor of
any Person other than Agent except those permitted in this Agreement (but
without limiting the right of Agent to establish any Reserves with respect to
amounts secured by such security interest or lien in favor of any Person even if
permitted herein); (c) Real Property which is not subject to the first priority,
valid and perfected security interest or lien of Agent; (d) Real Property with
respect to which improvements thereon are uninsured; (e) Real Property located
outside the United States of America; or (f) Real Property with respect to which
Agent has not received an appraisal pursuant to Section 7.4(a) hereof. The
criteria for Eligible Real Property set forth above may only be changed and any
new criteria for Eligible Real Property may only be established by Agent in good
faith based on either (i) an event, condition or other circumstance arising
after the date hereof; or (ii) an event, condition or other circumstance
existing on the date hereof to the extent Agent has no written notice thereof
from a Borrower prior to the date hereof, in either case under clause (i) or
(ii) which adversely affects or could reasonably be expected to adversely affect
the Real Property in the good faith determination of Agent. Any Real Property
which is not Eligible Real Property shall nevertheless be part of the
Collateral.
     “Eligible Trademark” shall mean any federally registered trademark of
Borrowers used in the ordinary course of Borrowers’ business which is acceptable
to Agent based on the criteria set forth below. In general, Eligible Trademarks
shall not include (a) any trademark subject to an Intellectual Property Claim,
any trademark securing Permitted Trademark Financing Debt, or any trademark
otherwise subject to a security interest or lien in favor of any Person other
than Agent except those permitted in this Agreement (but without limiting the
right of Agent to establish any Reserves with respect to amounts secured by such
security interest or lien in favor of any Person even if permitted herein);
(b) any trademark which is not subject to the first priority, valid and
perfected security interest or lien of Agent; (c) any trademark registered
exclusively outside the United States of America; or (d) any trademark with
respect to which Agent has not received an appraisal in form, scope and
methodology acceptable to Agent and by an appraiser acceptable to Agent,
addressed to Agent and Lenders and upon which Agent and Lenders are expressly
permitted to rely. General criteria for Eligible Trademarks may be established
and revised from time to time by Agent in good faith based on an event,
condition or other circumstance arising after the date hereof, or existing on
the date hereof to the extent Agent has no written notice thereof from a
Borrower, which adversely affects or could reasonably be expected to adversely
affect the trademark in the good faith

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determination of Agent. Any trademark which is not an Eligible Trademark shall
nevertheless be part of the Collateral.
     “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of
any Lender and/or any Affiliate of such Lender which is at least fifty (50%)
percent owned by such Lender or its parent company; (c) any Person (whether a
corporation, partnership, trust or otherwise) that is engaged in the business of
making, purchasing, holding or otherwise investing in bank loans and similar
extensions of credit in the ordinary course of its business and is administered
or managed by a Lender or with respect to any Lender that is a fund which
invests in bank loans and similar extensions of credit, any other fund that
invests in bank loans and similar extensions of credit and is managed by the
same investment advisor as such Lender or by an institutional Affiliate of such
investment advisor, and in each case is approved by Agent and after the initial
syndication of the Credit Facility by Wachovia or its Affiliates, unless a
Default or Event of Default exists, Borrowers; and (d) any other commercial
bank, financial institution or institutional “accredited investor” (as defined
in Regulation D under the Securities Act of 1993) approved by Agent; provided,
that, neither any Borrower nor any Guarantor nor any Affiliate of any Borrower
or Guarantor shall qualify as an Eligible Transferee and (ii) no Person to whom
any Indebtedness which is in any way subordinated in right of payment to any
other Indebtedness of any Borrower or Guarantor shall qualify as an Eligible
Transferee, except as Agent may otherwise specifically agree
     “Environmental Laws” shall mean all foreign, Federal, State and local laws
(including common law), legislation, rules, codes, licenses, permits (including
any conditions imposed therein), authorizations, judicial or administrative
decisions, injunctions or agreements between any Borrower and any Governmental
Authority, (a) relating to pollution and the protection, preservation or
restoration of the environment (including air, water vapor, surface water,
ground water, drinking water, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource), or to human health
or safety, (b) relating to the exposure to, or the use, storage, recycling,
treatment, generation, manufacture, processing, distribution, transportation,
handling, labeling, production, release or disposal, or threatened release, of
Hazardous Materials, or (c) relating to all laws with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Materials. The term “Environmental Laws” includes (i) the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Federal
Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the
Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous
and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974,
(ii) applicable state counterparts to such laws, and (iii) any common law or
equitable doctrine that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any
Hazardous Materials.
     “Equipment” shall mean, as to each Borrower, all of such Borrower’s now
owned and hereafter acquired equipment, wherever located, including machinery,
data processing and computer equipment and computer hardware and software
(whether owned or licensed, and including embedded software), vehicles, tools,
furniture, fixtures, all attachments, accessions and property now or hereafter
affixed thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.

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     “ERISA” shall mean the United States Employee Retirement Income Security
Act of 1974, together with all rules, regulations and interpretations thereunder
or related thereto.
     “ERISA Affiliate” shall mean any Person required to be aggregated with any
Borrower or any Subsidiaries of such Borrower under Sections 414(b), 414(c),
414(m) or 414(o) of the Code.
     “ERISA Event” shall mean (a) any “reportable event”, as defined in
Section 4043 of ERISA or the regulations issued thereunder, with respect to a
Plan; (b) the adoption of any amendment to a Plan that would require the
provision of security pursuant to Section 401(a)(29) of the Code or Section 307
of ERISA; (c) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA),
whether or not waived; (d) the filing pursuant to Section 412 of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum funding
standard with respect to any Plan; (e) the occurrence of a “prohibited
transaction” with respect to which any Borrower or any Subsidiaries of such
Borrower is a “disqualified person” (within the meaning of Section 4975 of the
Code) or with respect to which any Borrower or any Subsidiaries of such Borrower
could otherwise be liable; (f) a complete or partial withdrawal by any Borrower
or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations
which is treated as such a withdrawal or notification that a Multiemployer Plan
is in reorganization; (g) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the Pension Benefit Guaranty
Corporation to terminate a Plan or Multiemployer Plan; (h) an event or condition
which might reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan or Multiemployer Plan; (i) the imposition of any liability under Title IV
of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but
not delinquent under Section 4007 of ERISA, upon any Borrower or any ERISA
Affiliate; and 0) any other event or condition with respect to a Plan or
Multiemployer Plan or any Plan subject to Title IV of ERISA maintained, or
contributed to, by any ERISA Affiliate that could reasonably be expected to
result in liability of any Borrower.
     “Eurodollar Rate” shall mean with respect to the Interest Period for a
Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected, by Borrowers and approved by Agent) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to Borrowers in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by Borrowers.
     “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which
interest is payable based on the Adjusted Eurodollar Rate in accordance with the
terms hereof.
     “Event of Default” shall mean the occurrence or existence of any event or
condition described in Section 10.1 hereof.
     “Excess Availability” shall mean the amount, as determined by Agent,
calculated at any time, equal to: (a) the lesser of: (i) the Borrowing Base and
(ii) the Maximum Credit, minus (b) the amount of all then outstanding and unpaid
Obligations.

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     “Exchange Act” shall mean the Securities Exchange Act of 1934, together
with all rules, regulations and interpretations thereunder or related thereto.
     “Excluded Real Property” shall mean all now owned real property of
Borrowers, including leasehold interests, together with the buildings,
structures and other improvements located thereon, and all licenses, easements
and appurtenances relating thereto, wherever located, as more particularly
described on Schedule 1.47 hereto, but not including the Real Property subject
to the Mortgages.
     “Executive Order 13224” shall mean Executive Order 13224 of September 21,
2001 Blocking Property and Prohibiting Transactions With Persons Who Commit,
Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001).
     “Existing Financing Agreements” shall mean the “Financing Agreements” as
defined in the Existing Loan Agreement.
     “Existing Letters of Credit” shall mean, collectively, the letters of
credit issued for the account of any Borrower pursuant to the Existing Loan
Agreement or for which any Borrower is otherwise liable.
     “Existing Loan Agreement” shall have the meaning set forth in the recitals
to this Agreement.
     “Existing Loans” shall mean the “Loans” under (and as defined in) the
Existing Loan Agreement.
     “Existing Obligations” shall mean the “Obligations” under (and as defined
in) the Existing Loan Agreement.
     “Factor “ shall mean CIT.
     “Factor Documents” shall mean the Factoring Agreement and any and all other
documents, agreements and instruments executed in connection therewith or
relating thereto.
     “Factor Intercreditor Agreement” shall mean that certain Intercreditor and
Assignment Agreement dated August 6, 2007, among Agent, Factor, and JCC pursuant
to which, among other things, (a) JCC has assigned to Agent, for its benefit and
for the benefit of Lenders, all sums at any time due or to become due from
Factor to JCC under the Factoring Agreement and other Factor Documents and
(b) Factor and Agent have established the relative priorities of their security
interests and liens with respect to JCC’s Accounts and other property.
     “Factor Reserve” shall mean the amount which at any time may be charged to
JCC under the Factoring Agreement or withheld from sums otherwise due to JCC
under the Factoring Agreement, including interest, fees, commissions, ledger
debt and other charges due Factor under the Factoring Agreement and the amount
of any actual or anticipated disputes or claims arising with respect to any
Factored Account.
     “Factor Status Statement” shall mean an account current statement or
similar report issued by Factor on a monthly basis under the Factoring Agreement
and setting forth the status of the Factored Accounts with Factor.

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     “Factored Account” shall mean an Account of JCC which is factored by Factor
under the Factoring Agreement.
     “Factoring Agreement” shall mean that certain Factoring Agreement dated
August 6, 2007, between Factor and JCC as in effect on the date hereof and as
amended in compliance with the Factor Intercreditor Agreement.
     “Fee Letter” shall mean collectively, the letter agreements, each dated
August 31, 2007, by and among Borrowers and Agent, setting forth certain fees
payable by Borrowers to Agent for its benefit and for the benefit of Lenders.
     “Financing Agreements” shall mean, collectively, this Agreement, the Factor
Intercreditor Agreement, the Junkfood Subordination Agreement, the Pledge
Agreement, the Guarantees, the Mortgages and all notes, guarantees, security
agreements and other agreements, documents and instruments now or at any time
hereafter executed and/or delivered by any Borrower or Obligor in connection
with this Agreement.
     “Fixed Charge Coverage Ratio” shall mean, with respect to Borrowers and
their Subsidiaries, on a consolidated basis, for any period of determination,
the ratio of (a) EBITDA of Borrowers during such period minus the amount of any
taxes paid in cash, cash dividends to the equity holders of such Person, other
distributions to equity holders of such Person, and redemptions with respect to
the Capital Stock of such Person (including, but not limited to stock
repurchases) during the period in question minus all Unfinanced Capital
Expenditures made during such period to (b) Fixed Charges of Borrowers and their
Subsidiaries for the same period.
     “Fixed Charges” for any Person during any period shall mean the sum of,
without duplication, (a) cash interest paid during such period, (b) all
regularly scheduled (as determined at the beginning of the respective period)
principal payments of Indebtedness for borrowed money and Indebtedness with
respect to the Capital Leases (and, without duplicating any item included in
clause (a) of this definition, the interest component with respect to
Indebtedness under Capital Leases), and (c) an amount equal to the product of:
(i) $194,445 (which represents the aggregate monthly reduction of the Eligible
Real Property and Eligible Equipment components of the Borrowing Base in effect
under this Agreement multiplied by the (ii) the cumulative number of months that
elapsed during such period of determination since the Closing Date.
     “Foreign Lender” shall mean any Lender that is organized under the laws of
a jurisdiction other than that in which a Borrower is resident for tax purposes.
For purposes of this definition, the United States of America, each State
thereof and the District of Columbia shall be deemed to constitute a single
jurisdiction.
     “Funded Debt” shall mean collectively, (a) the aggregate principal amount
of Indebtedness for borrowed money which would, in accordance with GAAP, be
classified as long-term Indebtedness, together with the current maturities
thereof and the face amount of all outstanding letters of credit; (b) all
Indebtedness outstanding under any revolving credit, line of credit or renewals
thereof, notwithstanding that any such Indebtedness is created within one year
of the expiration of such agreement; and (c) all Indebtedness with respect to
Capital Leases.
     “Funding Bank” shall have the meaning given to such term in Section 3.3
hereof.

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     “GAAP” shall mean generally accepted accounting principles in the United
States of America as in effect from time to time as set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board which are applicable to the circumstances
as of the date of determination consistently applied, except that, for purposes
of Section 9.22 hereof and for purposes of calculating “Net Income” as defined
in this Agreement, until such time as Administrative Borrower notifies Agent of
a change in GAAP that would have a material effect on the calculation of Net
Income or the covenant set forth in Section 9.22 and Borrowers and Agent
mutually agree on the treatment of such change or the recalculation of such
covenant, GAAP shall be determined on the basis of such principles in effect on
the date hereof and consistent with those used in the preparation of the most
recent audited financial statements delivered to Agent prior to the date hereof.
     “Governmental Authority” shall mean any nation or government, any state,
province, or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
     “Guarantee” shall mean, individually, any guarantee executed by a Guarantor
substantially in the form of Exhibit C attached hereto, and “Guarantees” shall
collectively refer to all such guarantees.
     “Guarantors” shall mean any Person that at any time after the date hereof
becomes party to a guarantee in favor of Agent or any Lender or otherwise liable
on or with respect to the Obligations or who is the owner of any property which
is security for the Obligations (other than Borrowers); each sometimes being
referred to herein individually as a “Guarantor”.
     “Hazardous Materials” shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
     “Hedging Agreement” shall mean any interest rate protection agreement,
foreign currency exchange agreement, forward contract, curency swap agreement,
commodity price protection agreement or other interest or currency exchange rate
or commodity price hedging arrangement.
     “Honduras JV” shall mean Green Valley Industrial Park, S.A.
     “Honduras Subsidiary” shall mean each of Delta Apparel Honduras, S.A., a
Honduran sociedad anónima, Delta Cortes, S.A., a Honduran sociedad anónima,
Atled Holding Company Honduras, S de RL, a Honduran company, La Paz Honduras, S
de RL, a Honduran company, and Ceiba Textiles, S de RL, a Honduran company.

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     “Hostile Acquisition” shall mean any investment in a Person, resulting in
control of such Person, involving a tender offer or proxy contest that has not
been recommended or approved by the board of directors or similar body of such
Person that is the subject of the investment prior to the first public
announcement or disclosure relating to such investment.
     “Immaterial Subsidiary” means any Subsidiary of a Borrower which accounted
for less than (a) two percent (2%) of the consolidated assets of the Borrowers
and their Subsidiaries, on a consolidated basis, as of the end of the Borrowers’
most recent fiscal year and (b) two percent (2%) of the consolidated revenues of
the Borrowers and their Subsidiaries, on a consolidated basis, for the four
fiscal quarters ending as of the Borrowers’ most recent fiscal year.
     “Increase Effective Date” shall have the meaning given to such term in
Section 2.5(b) hereof.
     “Indebtedness” shall mean, with respect to any Person, any liability,
whether or not contingent, (a) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof) or evidenced by bonds, notes, debentures or similar
instruments; (b) representing, the balance deferred and unpaid of the purchase
price of any property or services (except any such balance that constitutes an
account payable to a trade creditor (whether or not an Affiliate) created,
incurred, assumed or guaranteed by such Person in, the ordinary course of
business of such Person in connection with obtaining goods, materials or
services that is not overdue by more than ninety (90) days, unless the trade
payable is being contested in good faith); (c) all obligations as lessee under
leases which have been, or should be, in accordance with GAAP recorded as
Capital Leases; (d) any contractual obligation, contingent or otherwise, of such
Person to pay or be liable for the payment of any indebtedness described in this
definition of another Person, including, without limitation, any such
indebtedness, directly or indirectly guaranteed, or any agreement to purchase,
repurchase, or otherwise acquire such indebtedness, obligation or liability or
any security therefor, or to provide funds for the payment or discharge thereof,
or to maintain solvency, assets, level of income, or other financial condition;
(e) all obligations with respect to redeemable stock and redemption or
repurchase obligations under any Capital Stock or other equity securities issued
by such Person; (f) all reimbursement obligations and other liabilities of such
Person with respect to surety bonds (whether bid, performance or otherwise),
letters of credit, banker’s acceptances or similar documents or instruments
issued for such Person’s account; (g) all indebtedness of such Person in respect
of indebtedness of another Person for borrowed money or indebtedness of another
Person otherwise described in this definition which is secured by any consensual
lien, security interest, collateral assignment, conditional sale, mortgage, deed
of trust, or other encumbrance on any asset of such Person, whether or not such
obligations, liabilities or indebtedness are assumed by or are a personal
liability of such Person, all as of such time; (h) Banking Relationship Debt;
(i) all obligations, liabilities and indebtedness of such Person (marked to
market) arising under swap agreements, cap agreements and collar agreements and
other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency or commodity values; (j) all
obligations owed by such Person under License Agreements with respect to
non-refundable, advance or minimum guarantee royalty payments; (k) indebtedness
of any partnership or joint venture in which such Person is a general partner or
a joint venturer to the extent such Person is liable therefor as a result of
such Person’s ownership interest in such entity, except to the extent that the
terms of such indebtedness expressly provide that such Person is not liable
therefor or such Person has no liability therefor as a matter of law and (l) the
principal and interest portions of all rental obligations of such Person under
any synthetic lease or similar off-balance sheet financing where such
transaction is considered to be borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP.

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     “Indemnitee” shall have the meaning given to such term in Section 11.5
hereof.
     “Information Certificate” shall mean the Information Certificate of
Borrowers constituting Exhibit D hereto containing material information with
respect to Borrowers and their respective businesses and assets provided by or
on behalf of Borrowers to Agent in connection with the preparation of this
Agreement and the other Financing Agreements and the financing arrangements
provided for herein.
     “Intellectual Property” shall mean, as to each Borrower, such Borrower’s
now owned and hereafter arising or acquired: patents, patent rights, patent
applications, copyrights, works which are the subject matter of copyrights,
copyright applications, copyright registrations, trademarks, servicemarks, trade
names, trade styles, trademark and service mark applications, and licenses and
rights to use any of the foregoing and all applications, registrations and
recordings relating to any of the foregoing as may be filed in the United States
Copyright Office, the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof, any political
subdivision thereof or in any other country or jurisdiction, together with all
rights and privileges arising under applicable law with respect to any
Borrower’s use of any of the foregoing; all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing; all
rights to sue for past, present and future infringement of any of the foregoing;
inventions, trade secrets, formulae, processes, compounds, drawings, designs,
blueprints, surveys, reports, manuals, and operating standards; goodwill
(including any goodwill associated with any trademark or servicemark, or the
license of any trademark or servicemark); customer and other lists in whatever
form maintained; trade secret rights, copyright rights, rights in works of
authorship, domain names and domain name registration; software and contract
rights relating to computer software programs, in whatever form created or
maintained.
     “Intellectual Property Claim” shall mean the assertion by any Person of a
claim (whether asserted in writing, by action, suit or proceeding or otherwise)
that any Borrower’s ownershp, use, marketing, sale or distribution of any
Inventory, Equipment, Intellectual Property or other property is violative of
any ownership or right to use any Intellectual Property of such Person. Without
limiting the generality of the foregoing, an Intellectual Property Claim shall
include any claim by an purchaser of Intellectual Property from a Borrower or
other Person, and any claim by a secured party holding a Lien on Intellectual
Property pursuant to any Permitted Trademark Financing Debt or otherwise.
     “Interest Expense” shall mean, for any period, as to any Person, all of the
following as determined on a consolidated basis in accordance with GAAP:
(a) total interest expense, whether paid or accrued during such period
(including the interest component of Capital Leases for such period), including
all bank fees, commissions, discounts and other fees and charges owed with
respect to letters of credit (but excluding amortization of discount and
amortization of deferred financing fees paid in cash in connection with the
transactions contemplated hereby, interest paid in property other than cash and
any other interest expense not payable in cash), minus (b) any net payments
received during such period as interest income received in respect of its
investments in cash.
     “Interest Period” shall mean for any Eurodollar Rate Loan, a period of
approximately one (1), two (2), or three (3) months duration as Borrowers (or
Administrative Borrower on behalf of Borrowers) may elect, the exact duration to
be determined in accordance with the customary practice in the applicable
Eurodollar Rate market; provided, that, Borrowers (or Administrative Borrower on

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behalf of Borrowers) may not elect an Interest Period which will end after the
last day of the then-current term of this Agreement.
     “Interest Rate” shall mean:
          (a) Subject to clauses (b) and (c) of this definition below: as to
Prime Rate Loans, the Prime Rate plus zero percent (0.0%) and, as to Eurodollar
Rate Loans, a rate of one and three-quarters percent (1.75%) per annum in excess
of the Adjusted Eurodollar Rate (based on the Eurodollar Rate applicable for the
Interest Period selected by Borrowers (or Administrative Borrower on behalf of
Borrowers) as in effect two (2) Business Days after the date of receipt by Agent
of the request of Borrower for such Eurodollar Rate Loans in accordance with the
terms hereof, whether such rate is higher or lower than any rate previously
quoted to any Borrower);
          (b) Subject to clause (c) below, effective as and when set forth in
Exhibit B hereto, and each fiscal quarter ending thereafter, the Interest Rate
payable by Borrowers shall be increased or decreased, as the case may be, to the
rate equal to the applicable margin set forth in Exhibit B hereto, on a per
annum basis, in excess of the Prime Rate as to Prime Rate Loans, and in excess
of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans, in each case, based
on either (i) the quarterly average of the Alternate Excess Availability of
Borrower for the immediately preceding three (3) calendar months or
(ii) Borrowers’ Fixed Charge Coverage Ratio, calculated on a quarterly basis,
for the immediately preceding four (4) consecutive fiscal quarters of Borrowers
as calculated by Agent in good faith.
          (c) Notwithstanding anything to the contrary contained in clauses
(a) and (b) above, the applicable margin otherwise used to calculate the
Interest Rate shall be the highest percentage set forth on Exhibit B hereto for
each category of Loans (without regard to the amount of Alternate Excess
Availability or the Fixed Charge Coverage Ratio) plus two (2%) percent per
annum, at Agent’s option, without notice, (i) either (A) for the period on and
after the date of termination hereof until such time as all Obligations are
indefeasibly paid and satisfied in full, or (B) for the period from and after
the date of the occurrence of any Event of Default, and for so long as such
Event of Default is continuing as determined by Agent and (ii) on the Loans at
any time outstanding in excess of the amounts available to Borrowers under
Section 2 (whether or not such excesses) arise or are made with or without
Agent’s knowledge or consent and whether made before or after an Event of
Default).
     “Inventory” shall mean, as to each Borrower, all of such Borrower’s now
owned and hereafter existing or acquired goods, wherever located, which (a) are
leased by such Borrower as lessor; (b) are held by such Borrower for sale or
lease or to be furnished under a contract of service; (c) are furnished by such
Borrower under a contract of service; or (d) consist of raw materials, work in
process, finished goods or materials used or consumed in its business.
     “Inventory Loan Limit” shall mean $60,000,000.
     “Investment Property Control Agreement” shall mean an agreement in writing,
in form and substance satisfactory to Agent, by and among Agent, any Borrower
and any securities intermediary, commodity intermediary or other Person who has
custody, control or possession of any investment property of such Borrower
acknowledging that such securities intermediary, commodity intermediary or other
Person has custody, control or possession of such investment property on behalf
of Agent, that it will comply with entitlement orders originated by Agent with
respect to such investment

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property, or other instructions of Agent, or (as the case may be) apply any
value distributed on account of any commodity contract as directed by Agent, in
each case, without the further consent of such Borrower and including such other
terms and conditions as Agent may require.
     “Issuing Bank” shall mean Wachovia or any Lender that is approved by Agent
that shall issue a Letter of Credit for the account of a Borrower and have
agreed in a manner satisfactory to Agent to be subject to the terms hereof as an
Issuing Bank.
     “Junkfood Acquisition” shall mean the acquisition by JCC of all or
substantially all of the assets of Junkfood Seller pursuant to the Junkfood
Purchase Documents.
     “Junkfood Asset Purchase Agreement” shall have the meaning set forth in the
recitals to this Agreement.
     “Junkfood Purchase Documents” shall mean, individually and collectively,
the Junkfood Asset Purchase Agreement, Junkfood Seller Note, Junkfood Seller
Guaranty and other documents, instruments and agreements executed in connection
therewith or relating thereto.
     “Junkfood Seller” shall have the meaning set forth in the recitals to this
Agreement.
     “Junkfood Seller Guaranty” shall mean that certain Guaranty dated as of
August 22, 2005, made by Delta in favor of Junkfood Seller as in effect on the
date hereof and as amended in compliance with the Junkfood Subordination
Agreement.
     “Junkfood Seller Note” shall mean that certain Promissory Note dated as of
August 22, 2005, in the original principal amount of $2,500,000 executed and
delivered by JCC in favor of Junkfood Seller as in effect on the date hereof and
as amended in compliance with the Junkfood Subordination Agreement.
     “Junkfood Subordination Agreement” shall mean that certain Debt
Subordination Agreement dated August 22, 2005, among Borrowers, Junkfood Seller
and Agent.
     “Lenders” shall mean the financial institutions who are signatories hereto
as Lenders and other Persons made a party to this Agreement as a Lender in
accordance with Section 13.7 hereof, and their respective successors and
assigns; each sometimes being referred to herein individually as a “Lender”.
     “Letter of Credit Documents” shall mean, with respect to any Letter of
Credit, such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk or (b) any collateral
security for such obligations.
     “Letter of Credit Limit” shall mean $20,000,000.
     “Letter of Credit Obligations” shall mean, at any time, the sum of (a) the
aggregate undrawn amount of all Letters of Credit outstanding at such time, plus
(b) the aggregate amount of all drawings under Letters of Credit for which
Issuing Bank has not at such time been reimbursed, plus (c) without duplication,
the aggregate amount of all payments made by each Lender to Issuing Bank

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with respect to such Lender’s participation in Letters of Credit as provided in
Section 2.2 for which Borrowers have not at such time reimbursed the Lenders,
whether by way of a Loan or otherwise.
     “Letters of Credit” shall mean all letters of credit (whether documentary
or stand-by and whether for the purchase of Inventory, Equipment or otherwise)
issued by an Issuing Bank for the account of any Borrower pursuant to this
Agreement, and all amendments, renewals, extensions or replacements thereof and
including the Existing Letters of Credit.
     “License Agreement” shall mean any agreement between a Borrower and a
Licensor pursuant to which such Borrower is authorized to use any Intellectual
Property in connection with the manufacturing, marketing, sale or other
distribution of any Inventory of such Borrower.
     “Licensor” shall mean any Person from whom a Borrower obtains the right to
use (whether on an exclusive or non-exclusive basis) any Intellectual Property
in connection with such Borrower’s manufacture, marketing, sale or other
distribution of any Inventory.
     “Licensor/Lender Agreement” shall mean an agreement between Agent and a
Licensor by which Agent is given the unqualified right, vis-à-vis such Licensor,
to enforce Agent’s security interests and liens with respect to and to dispose
of a Borrower’s Inventory with the benefit of any Intellectual Property
applicable thereto, irrespective of such Borrower’s default under any License
Agreement with such Licensor and which is otherwise in form and substance
reasonably satisfactory to Agent.
     “Loans” shall mean the loans now or hereafter made by or on behalf of any
Lender or by Agent for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
     “Material Adverse Effect” shall mean a material adverse effect on (a) the
financial condition, business, performance or operations of Borrowers, taken as
a whole; (b) the legality, validity or enforceability of this Agreement or any
of the other Financing Agreements; (c) the legality, validity, enforceability,
perfection or priority of the security interests and liens of Agent upon the
Collateral; (d) the Collateral or its value; (e) the ability of any Borrower to
repay the Obligations or of any Borrower to perform its obligations under this
Agreement or any of the other Financing Agreements as and when to be performed;
or (f) the ability of Agent or any Lender to enforce the Obligations or realize
upon the Collateral or otherwise with respect to the rights and remedies of
Agent and Lenders under this Agreement or any of the other Financing Agreements.
     “Material Contract” shall mean (a) any contract or other agreement (other
than the Financing Agreements), written or oral, of any Borrower involving
monetary liability of or to any Person in an amount in excess of $1,000,000 in
any fiscal year and (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which any Borrower is a party
as to which the breach, nonperformance, cancellation or failure to renew by any
party thereto would have a Material Adverse Effect.
     “Maximum Credit” shall mean the amount of $100,000,000, subject to increase
from time to time pursuant to Section 2.5.
     “Maximum Interest Rate” shall mean the maximum non-usurious rate of
interest under applicable Federal or State law as in effect from time to time
that may be contracted for, taken,

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reserved, charged or received in respect of the indebtedness of Borrowers to
Agent and Lenders, or to the extent that at any time such applicable law may
thereafter permit a higher maximum non-usurious rate of interest, then such
higher rate. Notwithstanding any other provision hereof, the Maximum Interest
Rate shall be calculated on a daily basis (computed on the actual number of days
elapsed over a year of three hundred sixty-five (365) or three hundred sixty-six
(366) days, as the case may be).
     “Mexican Subsidiary” shall mean Delta Campeche, S.A. de C.V., a company
organized under the laws of Mexico.
     “Monthly Average Excess Availability” shall mean, at any time, the average
of the amount of the Excess Availability for the immediately preceding thirty
(30) days as calculated by Agent based on the amount of the Excess Availability
on each date during such period.
     “Mortgages” shall mean, individually and collectively, each of the
following, as each may be amended, modified, supplemented, extended or restated
from time to time: (a) that certain Amended and Restated Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated
October 3, 2003, by Delta in favor of Agent with respect to the Real Property
and related assets of Delta located in Catawba County, North Carolina; (b) that
certain Deed of Trust, Assignment of Rents and Leases, Security Agreement and
Fixture Filing, dated November 1, 2004, by Delta in favor of Agent with respect
to the Real Property and related assets of Delta located in Anderson County,
Tennessee; (c) that certain First Deed of Trust, Assignment of Rents and Leases,
Security Agreement and Fixture Filing, dated as of October 3, 2003, by Soffe in
favor of Agent with respect to the Real Property and related assets of Soffe
located in Cumberland County, North Carolina; and (d) that certain First Deed of
Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing,
dated as of October 3, 2003, by Soffe in favor of Agent with respect to the Real
Property and related assets of Soffe located in Robeson County, North Carolina.
     “Multiemployer Plan” shall mean a “multi-employer plan” as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding six (6) years contributed to by any Borrower or
ERISA Affiliate, or with respect to which any Borrower, Guarantor or any ERISA
Affiliate may incur any liability.
     “Net Amount of Eligible Accounts” shall mean the gross amount of Eligible
Accounts less (a) sales, excise or similar taxes included in the amount thereof
and (b) returns, discounts, claims, credits and allowances of any nature at any
time issued, owing, granted, outstanding, available or claimed with respect
thereto.
     “Net Income” shall mean, with respect to any Person, for any period, the
aggregate of the net income (loss) of such Person and its Subsidiaries, on a
consolidated basis, for such period (excluding to the extent included therein
any extraordinary, one-time or nonrecurring gains) after deducting all charges
which should be deducted before arriving at the net income (loss) for such
period and after deducting the Provision for Taxes for such period, all as
determined in accordance with GAAP; provided, that, (a) the net income of any
Person that is not a wholly-owned Subsidiary or that is accounted for by the
equity method of accounting shall be included only to the extent of the amount
of dividends or distributions paid or payable to such Person or a wholly-owned
Subsidiary of such Person; (b) the effect of any change in accounting principles
adopted by such Person or its Subsidiaries after the date hereof shall be
excluded; and (c) the net income (if positive) of any wholly-owned Subsidiary to
the extent that the declaration or payment of dividends or similar

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distributions by such wholly-owned Subsidiary to such Person or to any other
wholly-owned subsidiary of such Person is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to such wholly-owned
Subsidiary shall be excluded. For the purpose of this definition, net income
excludes any gain (but not loss) together with any related Provision for Taxes
for such gain (but not loss) realized upon the sale or other disposition of any
assets that are not sold in the ordinary course of business (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or of any
Capital Stock of such Person or a Subsidiary of such Person and any net income
realized as a result of changes in accounting principles or the application
thereof to such Person; provided, the Honduras Subsidiaries and the Mexican
Subsidiary shall be considered to be wholly-owned Subsidiaries of Delta for
purposes of the calculation of Net Income hereunder so long as Delta owns at
least 97% of the Capital Stock of each such Subsidiaries.
     “Net Orderly Liquidation Value” shall mean with respect to a Borrower’s
Equipment, Inventory and trademarks, the value that is estimated to be
recoverable in an orderly liquidation of such Equipment, Inventory or trademarks
net of estimated liquidation expenses as determined from time to time by an
appraisal of such Equipment, Inventory or trademarks in form and containing
assumptions and appraisal methods satisfactory to Agent that is performed by a
qualified appraisal company selected by or acceptable to Agent; provided, that,
with respect to any Eligible Trademark registered both in and outside the United
States of America, only the appraised value of such Eligible Trademark in the
United States shall be included in the Net Orderly Liquidation Value therefor.
     “Net Proceeds” shall mean the aggregate cash proceeds received by any
Borrower, or any Subsidiaries of a Borrower, in respect of any asset sale
permitted under Section 9.7 hereof, net of the direct costs relating to such
asset sale (including, without limitation, legal, accounting and investment
banking fees, and sales commissions) and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof (after taking into
account any available tax credits or deductions and any tax sharing
arrangements), amounts applied to the repayment of indebtedness secured by a
lien on the asset or assets that are the subject of such asset sale and any
other indebtedness required to be repaid in connection with such transaction and
any reserve for adjustment in respect of the sale price of such asset or assets.
Net Proceeds shall exclude any non-cash proceeds received from any asset sale,
but shall include such proceeds when and as converted by any Borrower or any
Subsidiary of a Borrower to cash.
     “Notice of Default or Failure of Condition” shall have the meaning given to
such term in Section 12.3(a) hereof.
     “Obligations” shall mean (a) any and all Loans, Letter of Credit
Obligations and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by any or all of the Borrowers to Agent or
any Lender or any of their Affiliates or Issuing Bank, including principal,
interest, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether arising under this
Agreement or otherwise, whether now existing or hereafter arising, whether
arising before, during or after the initial or any renewal term of this
Agreement or after the commencement of any case with respect to any or all of
the Borrowers under the United States Bankruptcy Code or any similar statute
(including the payment of interest and other amounts which would accrue and
become due but for the commencement of such case, whether or not such amounts
are allowed or allowable in whole or in part in such case), whether direct or
indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, secured or unsecured, and however
acquired by Agent or Lenders and (b) for purposes

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only of Sections 5 and 6.4 hereof, any and all Banking Relationship Debt. From
and after the Closing Date, all Existing Obligations outstanding on the Closing
Date shall be deemed to be outstanding, and to constitute Obligations, under
this Agreement, and shall be subject to all of the terms and conditions hereof.
Notwithstanding anything to the contrary contained herein, the term
“Obligations” as used in the Loan Agreement and other Financing Agreements shall
not include any indebtedness, liabilities or obligations owing by any Borrower
to Factor pursuant to the Factoring Agreement
     “Obligor” shall mean any guarantor, endorser, acceptor, surety or other
Person liable on or with respect to the Obligations or who is the owner of any
property which is security for the Obligations (including Guarantors), other
than a Borrower.
     “Other Taxes” shall have the meaning given to such term in Section 6.13
hereof.
     “Participant” shall mean any financial institution that acquires and holds
a participation in the interest of any Lender in any of the Loans and Letters of
Credit in conformity with the provisions of Section 13.6 of this Agreement
governing participations.
     “Permits” shall have the meaning set forth in Section 8.7(b) hereof.
     “Permitted Acquisition” shall mean any Acquisition Transaction, provided
that:
     (a) the Acquisition Target’s business is in a Permitted Business Field;
     (b) Agent shall have received copies of (i) the definitive Acquisition
Documents and related due diligence documents (including lien search reports,
title insurance commitments and environmental assessments), (ii) historical
financial statements or other financial information of the Acquisition Target in
form and substance reasonably acceptable to Agent and (iii) all other financial
information, and such other documents and information, of the Acquisition Target
as Agent may reasonably request, all of which shall be reasonably acceptable to
Agent;
     (c) if the acquired assets are to be included in the Borrowing Base
simultaneously with the consummation of the Permitted Acquisition, Agent’s
examiners shall have completed a field exam and audit of the Acquisition Target,
in scope and with results reasonably acceptable to Agent, or if such field exam
and audit are not conducted, then the assets of such Acquisition Target shall
not be included in the Borrowing Base and shall be ineligible for borrowing
purposes until such exam and audit are conducted in scope and with results
reasonably acceptable to Agent;
     (d) the Acquisition Consideration for all Acquisition Transactions during
the term of this Agreement shall not exceed $20,000,000;
     (e) no Default or Event of Default shall exist at the time of the
Acquisition Transaction or after giving effect thereto;
     (f) Borrowers shall have delivered to Agent a certificate executed by the
chief financial officer of Borrowers which demonstrates to the reasonable
satisfaction of Agent that (a) at the time of such Acquisition Transaction
Borrowers shall have Monthly Average Excess Availability of not less than
$15,000,000 and (b) at the time of and after giving effect to such Acquisition
Transaction Borrowers shall have Excess Availability of not less than
$15,000,000;

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     (g) any Indebtedness incurred to any or all of the sellers in connection
with any such Acquisition Transaction shall be subordinated to the prior payment
and performance of the Obligations pursuant to a debt subordination agreement
that is in all respects acceptable to Agent;
     (h) the Acquisition Transaction is not a Hostile Acquisition;
     (i) Borrower shall have notified Agent in writing of the Acquisition
Transaction (and provided to Agent and each Lender a complete information
package with respect to the Acquisition Transaction) at least 14 days prior to
the scheduled closing date of the Acquisition Transaction;
     (j) the structure of the Acquisition Transaction shall be reasonably
acceptable to Agent and Lenders in all material respects, including the
requirement that, after giving effect to the Acquisition Transaction, all of the
Capital Stock of the Acquisition Target and/or Acquisition Subsidiary, as
appropriate, shall be directly or indirectly owned (legally and beneficially) by
a Borrower and a Borrower shall control all Voting Stock of any such Acquisition
Target; and
     (k) Agent contemporaneously with the closing of such Acquisition
Transaction shall have received (i) such documents and instruments as may be
necessary to grant or confirm to Agent a first priority perfected lien on and
security interest in all of the assets (including Capital Stock) of the
Acquisition Target and/or Acquisition Subsidiary, as appropriate, so acquired,
and (ii) if the Acquisition Target and/or Acquisition Subsidiary, as
appropriate, acquired is not merged into a Borrower or an Acquisition Subsidiary
that already is a “Borrower” under the Agreement, a Joinder Agreement executed
by such Acquisition Target and/or Acquisition Subsidiary, as appropriate,,
together with such other collateral documents and opinions of counsel as may be
requested by Agent, each in form and substance satisfactory to Agent
     “Permitted Business Field” shall mean the business engaged in by Borrowers
on the Closing Date or a business substantially similar to the business engaged
in by Borrowers on the Closing Date.
     “Permitted Central American Working Capital Debt” means Indebtedness
incurred by the Mexican Subsidiary or the Honduras Subsidiaries (or any other
Subsidiaries organized under the laws of Mexico or Honduras which are formed by
Borrowers or their Subsidiaries in compliance with this Agreement), with respect
to one or more working capital credit facilities for use in the operations of
the Mexican Subsidiary, the Honduras Subsidiaries or such other Subsidiaries
described above at any time after the Closing Date with respect to a credit
facility in an aggregate principal amount acceptable to Agent; provided that
(i) such Indebtedness is unsecured by any stock or assets of any Borrower or
Obligor, and any Lien in the Inventory of any of the Mexican Subsidiary, the
Honduras Subsidiaries or such other Subsidiaries described above granted to
secure such Indebtedness shall not extend or continue following the sale of any
such Inventory to a Borrower, and the secured party holding any such Lien (and
its successors and assigns), if required by Agent, is a party with Agent to an
intercreditor agreement that is in all respects acceptable to Agent, (ii) such
Indebtedness matures on a date not earlier than six (6) months after the last
day of the Credit Facility and does not include any amortization payments,
(iii) such Indebtedness accrues interest at a rate determined in good faith by
the Board of Directors (or applicable governing authority) of such Mexican
Subsidiary, such Honduras Subsidiaries or such other Subsidiaries described
above to be a market rate of interest for such Indebtedness at the time of
issuance thereof, (iv) at the time of the incurrence of such Indebtedness, such
Indebtedness is permitted under the Material Contracts as in effect on the date
hereof without the need to obtain any waivers thereunder, and (v) such
Indebtedness is otherwise on terms and conditions satisfactory to the Agent,
acting reasonably.

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     “Permitted Holders” shall mean the Persons listed on Schedule 1.89 hereto
and their respective successors and assigns.
     “Permitted Indebtedness” shall have the meaning given to such term in
Section 9.9 hereof.
     “Permitted Liens” shall have the meaning given to such term in Section 9.8
hereof.
     “Permitted Trademark Financing Debt” means Indebtedness incurred by one or
more Borrowers at any time after the Closing Date with respect to a credit
facility in an aggregate principal amount acceptable to Agent; provided that
(i) such Indebtedness is unsecured by any stock or assets of any Borrower or
Obligor other than certain or all of the trademarks of Borrowers, (ii) the
secured party holding any Lien securing such Indebtedness (and its successors
and assigns), if required by Agent, is a party with Agent to an intercreditor
agreement that is in all respects acceptable to Agent, and specifically in which
Agent is given the unqualified right, vis-à-vis such secured party (and its
successors and assigns), to enforce Agent’s security interests and liens with
respect to and to dispose of a Borrower’s Inventory with the benefit of any
trademarks applicable thereto, irrespective of such Borrower’s default under any
financing agreements or other documents with such secured party, (iii) any
subsequent purchaser or licensor of the trademarks (from either a Borrower or
any other Person), if required by Agent, is a party to an intercreditor
agreement or other agreement that is in all respects acceptable to Agent, and
specifically in which Agent is given the unqualified right, vis-à-vis such
purchaser or licensor (and its successors and assigns), to enforce Agent’s
security interests and liens with respect to and to dispose of a Borrower’s
Inventory with the benefit of any trademarks applicable thereto, irrespective of
such Borrower’s default under any agreements or other documents with such
purchaser or licensor, (iii) such Indebtedness matures on a date not earlier
than six (6) months after the last day of the Credit Facility and does not
include any amortization payments, (iv) such Indebtedness accrues interest at a
rate determined in good faith by the Board of Directors (or applicable governing
authority) of the applicable Borrower to be a market rate of interest for such
Indebtedness at the time of issuance thereof, (v) at the time of the incurrence
of such Indebtedness, such Indebtedness is permitted under the Material
Contracts as in effect on the date hereof without the need to obtain any waivers
thereunder, and (vi) such Indebtedness is otherwise on terms and conditions
satisfactory to the Agent, acting reasonably.
     “Person” or “person” shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Code), limited liability company, limited liability
partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
     “Plan” shall mean an employee benefit plan (as defined in Section 3(3) of
ERISA) which any Borrower sponsors, maintains, or to which it makes, is making,
or is obligated to make contributions, or in the case of a Multiemployer Plan
has made contributions at any time during the immediately preceding six (6) plan
years.
     “Pledge Agreement” shall mean that certain Amended and Restated Stock
Pledge Agreement by Borrowers in favor of Agent dated the date hereof.
     “Prime Rate” shall mean the rate from time to time publicly announced by
Wachovia Bank, National Association, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.

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     “Prime Rate Loans” shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
     “Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a
percentage) the numerator of which is such Lender’s Commitment and the
denominator of which is the aggregate amount of all of the Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.6 hereof; provided, that, if the Commitments have been terminated,
the numerator shall be the unpaid amount of such Lender’s Loans and its interest
in the Letters of Credit and the denominator shall be the aggregate amount of
all unpaid Loans and Letters of Credit.
     “Provision for Taxes” shall mean an amount equal to all taxes imposed on or
measured by net income, whether Federal, State, Provincial, municipal or local,
and whether foreign or domestic, that are paid or payable by any Person in
respect of any period in accordance with GAAP.
     “Qualified Factor” shall mean Factor and any other Person that Agent deems
to be acceptable, and so long as Factor or such other Person is a party with
Agent to an intercreditor agreement that is in all respects acceptable to Agent.
For the purposes hereof, the Factor Intercreditor Agreement shall be deemed to
be an intercreditor agreement that Agent deems to be acceptable in all respects.
     “Quiksilver Bill and Hold Accounts” shall means Accounts for which
Quiksilver, Inc. is the account debtor in an aggregate amount not to exceed
$3,000,000 and which would otherwise constitute Eligible Accounts but for the
fact that such Accounts are evidenced by bill and hold invoices.
     “Real Property” shall mean all now owned and hereafter acquired real
property of each Borrower, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located, including the
real property and related assets more particularly described in the Mortgages.
     “Receivables” shall mean, as to each Borrower, all of the following now
owned or hereafter arising or acquired property of such Borrower: (a) all
Accounts; (b) all amounts at any time payable to such Borrower in respect of the
sale or other disposition by such Borrower of any Account or other obligation
for the payment of money; (c) all interest, fees, late charges, penalties,
collection fees and other amounts due or to become due or otherwise payable in
connection with any Account; (d) all payment intangibles of such Borrower,
letters of credit, indemnities, guarantees, security or other deposits and
proceeds thereof issued payable to such Borrower or otherwise in favor of or
delivered to such Borrower in connection with any Account; or (e) all other
accounts, contract rights, chattel paper, instruments, notes, general
intangibles and other forms of obligations owing to such Borrower, whether from
the sale and lease of goods or other property, licensing of any property
(including Intellectual Property or other general intangibles), rendition of
services or from loans or advances by such Borrower or to or for the benefit of
any third Person (including loans or advances to any Affiliates or Subsidiaries
of such Borrower) or otherwise associated with any Accounts, Inventory or
general intangibles of such Borrower (including choses in action, causes of
action, tax refunds, tax refund claims, any funds which may become payable to
such Borrower in connection with the termination of any Plan or other employee
benefit plan and any other amounts payable to Borrower from any Plan or other
employee benefit plan, rights and claims against carriers and shippers, rights
to indemnification, business interruption insurance and proceeds thereof,
casualty or any similar

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types of insurance and any proceeds thereof and proceeds of insurance covering
the lives of employees on which such Borrower is a beneficiary).
     “Records” shall mean, as to each Borrower, all of such Borrower’s present
and future books of account of every kind or nature, purchase and sale
agreements, invoices, ledger cards, bills of lading and other shipping evidence,
statements, correspondence, memoranda, credit files and other data relating to
the Collateral or any account debtor, together with the tapes, disks, diskettes
and other data and software storage media and devices, file cabinets or
containers in or on which the foregoing are stored (including any rights of such
Borrower with respect to the foregoing maintained with or by any other Person).
     “Reference Bank” shall mean Wachovia Bank, National Association, or such
other bank as Agent may from time to time designate.
     “Register” shall have the meaning set forth in Section 13.7(b) hereof.
     “Report” shall have the meaning set forth in Section 12.10 hereof.
     “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata
Shares aggregate sixty-six and two-thirds (66 2/3%) percent or more of the
aggregate of the Commitments of all Lenders, or if the Commitments shall have
been terminated, Lenders to whom at least sixty-six and two-thirds (66 2/3%)
percent of the then outstanding Obligations are owing.
     “Reserves” shall mean as of any date of determination, such amounts as
Agent may from time to time establish and revise in good faith reducing the
amount of Loans and Letters of Credit which would otherwise be available to
Borrowers under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks arising after the date of this
Agreement or of which Agent had no actual knowledge as of such date, which, as
determined by Agent in good faith, adversely affect, or would have a reasonable
likelihood of adversely affecting, either (i) the Collateral or any other
property which is security for the Obligations or its value, including any
Dilution Reserve and a reserve for Current Hedging Exposure, (ii) the assets,
business or financial condition of any Borrower or Obligor or (iii) the security
interests and other rights of Agent or any Lender in the Collateral (including
the enforceability, perfection and priority thereof); or (b) to reflect Agent’s
good faith belief that any collateral report or financial information furnished
by or on behalf of any Borrower or Obligor to Agent is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) to reflect
outstanding Letters of Credit as provided in Section 2.2 hereof; or (d) in the
amount of any Banking Relationship Debt; or (e) in respect of any state of facts
which Agent determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default. To the
extent Agent may revise the lending formulas used to determine the Borrowing
Base or establish new criteria or revise existing criteria for Eligible Accounts
or Eligible Inventory so as to address any circumstances, condition, event or
contingency in an manner satisfactory to Agent, Agent shall not establish a
Reserve for the same purpose. The amount of any Reserve established by Agent
shall have a reasonable relationship to the event, condition or other matter
which is the basis for such reserve as determined by Agent in good faith.
     “Secured Parties” shall mean Agent, Lenders, Issuing Bank, and Wachovia or
any other Lender or Affiliate as the obligee with respect to any Banking
Relationship Debt, and each counterparty to any Hedging Agreement that is (or at
the time such Hedging Agreement was entered into, was) a Lender or an Affiliate
of a Lender.

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     “Settlement Period” shall have the meaning set forth in Section 6.9(b)
hereof.
     “Solvency Certificate” shall mean an officer’s certificate of Borrowers
prepared by the chief financial officer of Borrowers as to the financial
condition, solvency and related matters of the Obligors, in each case on a pro
forma basis after giving effect to the initial borrowings under the Financing
Agreements, in form and substance satisfactory to Agent.
     “Solvent” shall mean, at any time with respect to any Person, that at such
time such Person (a) is able to pay its debts as they mature and has (and has a
reasonable basis to believe it will continue to have) sufficient capital (and
not unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such Person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).
     “Special Agent Advances” shall have the meaning set forth in Section 12.11
hereof.
     “Subsidiary” or “subsidiary” shall mean, with respect to any Person, any
corporation, limited liability company, limited liability partnership or other
limited or general partnership, trust, association or other business entity of
which an aggregate of at least a majority of the outstanding Capital Stock or
other interests entitled to vote in the election of the board of directors of
such corporation (irrespective of whether, at the time, Capital Stock of any
other class or classes of such corporation shall have or might have voting power
by reason of the happening of any contingency), managers, trustees or other
controlling Persons, or an equivalent controlling interest therein, of such
Person is, at the time, directly or indirectly, owned by such Person and/or one
or more subsidiaries of such Person.
     “Taxes” shall have the meaning set forth in Section 6.13(a) hereof.
     “Trading with the Enemy Act” shall have the meaning set forth in
Section 9.22 hereof.
     “UCC” shall mean the Uniform Commercial Code as in effect in the State of
Georgia, and any successor statute, as in effect from time to time (except that
terms used herein which are defined in the Uniform Commercial Code as in effect
in the State of Georgia on the date hereof shall continue to have the same
meaning notwithstanding any replacement or amendment of such statute except as
Agent may otherwise determine).
     “Unfinanced Capital Expenditures” shall mean Capital Expenditures made and
not financed with the proceeds of money borrowed.
     “USA PATRIOT Act” shall mean the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
PATRIOT) Act of 2001 (Public Law 107-56), as in effect from time to time.

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     “Value” shall mean, as determined by Agent in good faith, with respect to
Inventory, the lower of (a) cost computed on a first-in, first-out basis in
accordance with GAAP or (b) market value; provided, that, for purposes of the
calculation of the Borrowing Base, (i) the Value of the Inventory shall not
include: (A) the portion of the value of Inventory equal to the profit earned by
any Affiliate on the sale thereof to any Borrower or (B) write-ups or
write-downs in value with respect to currency exchange rates and
(ii) notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.
     “Voting Stock” shall mean with respect to any Person, (a) one (1) or more
classes of Capital Stock of such Person having general voting powers to elect at
least a majority of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.
     “Wachovia” shall mean Wachovia Bank, National Association, a national bank,
in its individual capacity, and its successors and assigns.
SECTION 2. CREDIT FACILITIES
     2.1 Loans.
          (a) Subject to and upon the terms and conditions contained herein,
each Lender severally (and not jointly) agrees to fund its Pro Rata Share of
Loans to Borrowers from time to time in amounts requested by Borrowers up to the
amount outstanding at any time equal to the lesser of: (i) the Borrowing Base or
(ii) the Maximum Credit at such time. Except as otherwise provided herein or
permitted hereunder, (x) the aggregate principal amount of the sum of the Loans
and Letter of Credit Obligations outstanding at any time to Borrowers shall not
exceed the lesser of the Borrowing Base or the Maximum Credit, and (y) the
aggregate principal amount of the Loans outstanding at any time to Borrowers
based on the Eligible Inventory of Borrowers shall not exceed the Inventory Loan
Limit. If Agent shall determine, in its sole discretion, that a material adverse
change in the financial condition of any Borrower has occurred, or if a Default
or Event of Default exists, then Agent shall have the right (exercisable at such
time or times as Agent deems appropriate) to require that separate Borrowing
Base calculations be made for each Borrower, as well as the right to limit the
use of proceeds of the Loans by each Borrower to an amount equal to such
Borrower’s Borrowing Base.
          (b) Agent may, in its discretion, from time to time, upon not less
than five (5) days’ prior notice to Borrowers, (i) reduce the lending formula
with respect to Eligible Accounts to the extent that Agent determines in good
faith that (A) the dilution with respect to the Accounts for any period (based
on the ratio of (1) the aggregate amount of reductions in Accounts other than as
a result of payments in cash to (2) the aggregate amount of total sales) has
increased in any material respect or may be reasonably anticipated to increase
in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has materially declined or (ii) reduce the
lending formula(s) with respect to Eligible Inventory to the extent that Agent
determines that: (A) the number of days of the turnover of the Inventory for any
period has changed or (B) the liquidation value of the Eligible Inventory, or
any category thereof, has decreased, or (C) the nature, quality or mix of the
Inventory has materially deteriorated. The amount of any decrease in the lending
formulas

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shall have a reasonable relationship to the event, condition or circumstance
which is the basis for such decrease as determined by Agent in good faith. In
determining whether to reduce the lending formula(s), Agent may consider events,
conditions, contingencies or risks which.are also considered in determining
Eligible Accounts, Eligible Inventory or in establishing Reserves.
          (c) Except in Agent’s discretion, (i) the aggregate amount of the
Loans outstanding at any time shall not exceed the Maximum Credit, (ii) the
aggregate amount of Loans and Letter of Credit Obligations based on Eligible
Inventory consisting of yarn classified as work-in-process outstanding at any
time shall not exceed $1,000,000 at any time and (iii) the aggregate amount of
the Loans and the Letter of Credit Obligations outstanding at any time shall not
exceed the Maximum Credit. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Obligations, exceed the amounts available under the lending
formulas, the Letter of Credit Limit, the Inventory Loan Limit or the Maximum
Credit, as applicable, such event shall not limit, waive or otherwise affect any
rights of Agent or Lenders in that circumstance or on any future occasions and
Borrowers shall, upon demand by Agent, which may be made at any time or from
time to time, immediately repay to Agent the entire amount of any such
excess(es) for which payment is demanded.
          (d) From and after the Closing Date, all Existing Loans outstanding on
the Closing Date shall be deemed to be made and outstanding, and to constitute
Loans, under this Agreement, and shall be subject to all of the terms and
conditions hereof.
     2.2 Letter of Credit.
          (a) Subject to and upon the terms and conditions contained herein and
in the Letter of Credit Documents, at the request of a Borrower (or
Administrative Borrower on behalf of such Borrower), Agent agrees to cause
Issuing Bank to issue, and Issuing Bank agrees to issue, for the account of such
Borrower one or more Letters of Credit, for the ratable risk of each Lender
according to its Pro Rata Share, containing terms and conditions acceptable to
Agent and Issuing Bank. From and after the Closing Date, all Existing Letters of
Credit outstanding on the Closing Date shall be deemed to be issued and
outstanding, and to constitute Letters of Credit, under this Agreement and all
Letter of Credit Obligations (as defined in the Existing Loan Agreement)
outstanding on the Closing Date shall be deemed to be and constitute Letter of
Credit Obligations under this Agreement, and shall be subject to all of the
terms and conditions hereof.
          (b) The Borrower requesting such Letter of Credit (or Administrative
Borrower on behalf of such Borrower) shall give Agent and Issuing Bank two
(2) Business Days’ prior written notice of such Borrower’s request for the
issuance of a Letter of Credit. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day and in no event shall be a
date less than ten (10) days prior to the end of the then current term of this
Agreement) of issuance of such requested Letter of Credit, whether such Letter
of Credit may be drawn in a single or in partial draws, the date on which such
requested Letter of Credit is to expire (which date shall be a Business Day and
shall not be more than one year from the date of issuance), the purpose for
which such Letter of Credit is to be issued, and the beneficiary of the
requested Letter of Credit. The Borrower requesting the Letter of Credit (or
Administrative Borrower on behalf of such Borrower) shall attach to such notice
the proposed terms of the Letter of Credit. The renewal or extension of any
Letter of Credit shall, for purposes hereof be treated in all respects the same
as the issuance of a new Letter of Credit hereunder.

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          (c) In addition to being subject to the satisfaction of the applicable
conditions precedent contained in Section 4 hereof and the other terms and
conditions contained herein, no Letter of Credit shall be available unless each
of the following conditions precedent have been satisfied in a manner
satisfactory to Agent: (i) the Borrower requesting such Letter of Credit (or
Administrative Borrower on behalf of such Borrower) shall have delivered to
Issuing Bank at such times and in such manner as Issuing Bank may require, an
application, in form and substance satisfactory to Issuing Bank and Agent, for
the issuance of the Letter of Credit and such other Letter of Credit Documents
as may be required pursuant to the terms thereof, and the form and terms of the
proposed Letter of Credit shall be satisfactory to Agent and Issuing Bank,
(ii) as of the date of issuance, no order of any court, arbitrator or other
Governmental Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that
Issuing Bank refrain from, the issuance of letters of credit generally or the
issuance of such Letter of Credit, (iii) after giving effect to the issuance of
such Letter of Credit, the Letter of Credit Obligations shall not exceed the
Letter of Credit Limit, and (iv) the Excess Availability, prior to giving effect
to any Reserves with respect to such Letter of Credit, on the date of the
proposed issuance of any Letter of Credit shall be equal to or greater than:
(A) if the proposed Letter of Credit is for the purpose of purchasing Inventory
that would constitute Eligible Inventory but for the fact that it is or will be
in transit to the premises of a Borrower located with the United States, and the
documents of title with respect thereto are consigned and delivered to Issuing
Bank at a location in the United States, the sum of (1) the percentage equal to
one hundred percent (100%) minus the then applicable percentage with respect to
Eligible Inventory set forth in the definition of the term Borrowing Base
multiplied by the Value of such Eligible Inventory, plus (2) freight, taxes,
duty and other amounts which Agent estimates must be paid in connection with
such Inventory upon arrival and for delivery to one of such Borrower’s locations
for Eligible Inventory within the United States of America and (B) if the
proposed Letter of Credit is for any other purpose or the documents of title are
not consigned and delivered to Issuing Bank at a location in the United States
in connection with a Letter of Credit for the purpose of purchasing Inventory,
an amount equal to one hundred (100%) percent of the Letter of Credit
Obligations with respect thereto. Effective on the issuance of each Letter of
Credit, a Reserve shall be established in the applicable amount set forth in
Section 2.2(c)(iv)(A) or Section 2.2(c)(iv)(B).
          (d) Except in Agent’s discretion, with the consent of all Lenders, the
amount of all outstanding Letter of Credit Obligations shall not at any time
exceed the Letter of Credit Limit.
          (e) Each Borrower shall reimburse immediately Issuing Bank for any
draw under any Letter of Credit issued for the account of such Borrower and pay
Issuing Bank the amount of all other charges and fees payable to Issuing Bank in
connection with any Letter of Credit issued for the account of such Borrower
immediately when due, irrespective of any claim, setoff, defense or other right
which such Borrower may have at any time against Issuing Bank or any other
Person. Each drawing under any Letter of Credit or other amount payable in
connection therewith when due shall constitute a request by the Borrower for
whose account such Letter of Credit was issued to Agent for a Prime Rate Loan in
the amount of such drawing or other amount then due, and shall be made by Agent
on behalf of Lenders as a Loan (or Special Agent Advance, as the case may be).
The date of such Loan shall be the date of the drawing or as to other amounts,
the due date therefor. Any payments made by or on behalf of Agent or any Lender
to Issuing Bank and/or related parties in

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connection with any Letter of Credit shall constitute additional Loans to such
Borrower pursuant to this Section 2 (or Special Agent Advances as the case may
be).
          (f) Borrowers and Guarantors shall indemnify and hold Agent and
Lenders harmless from and against any and all losses, claims, damages,
liabilities, costs and expenses which Agent or any Lender may suffer or incur in
connection with any Letter of Credit and any documents, drafts or acceptances
relating thereto, including any losses, claims, damages, liabilities, costs and
expenses due to any action taken by Issuing Bank or correspondent with respect
to any Letter of Credit, except for such losses, claims, damages, liabilities,
costs or expenses that are a direct result of the gross negligence or willful
misconduct of Agent or any Lender as determined pursuant to a final
non-appealable order of a court of competent jurisdiction. Each Borrower and
Guarantor assumes all risks with respect to the acts or omissions of the drawer
under or beneficiary of any Letter of Credit and for such purposes the drawer or
beneficiary shall be deemed such Borrower’s agent. Each Borrower and Guarantor
assumes all risks for, and agrees to pay, all foreign, Federal, State and local
taxes, duties and levies relating to any goods subject to any Letter of Credit
or any documents, drafts or acceptances thereunder. Each Borrower and Guarantor
hereby releases and holds Agent and Lenders harmless from and against any acts,
waivers, errors, delays or omissions with respect to or relating to any Letter
of Credit, except for the gross negligence or willful misconduct of Agent or any
Lender as determined pursuant to a final, non-appealable order of a court of
competent jurisdiction. The provisions of this Section 2.2(f) shall survive the
payment of Obligations and the termination of this Agreement.
          (g) In connection with Inventory purchased pursuant to any Letter of
Credit, Borrowers and Guarantors shall, at Agent’s request, instruct all
suppliers, carriers, forwarders, Customs Brokers, warehouses or others receiving
or holding cash, checks, Inventory, documents or instruments in which Agent
holds a security interest that upon Agent’s request, such items are to be
delivered to Agent and/or subject to Agent’s order, and if they shall come into
such Borrower’s or Guarantor’s possession, to deliver them, upon Agent’s
request, to Agent in their original form. Except as otherwise provided herein,
Agent shall not exercise such right to request such items so long as no Default
or Event of Default shall exist or have occurred and be continuing. Except as
Agent may otherwise specify, Borrowers and Guarantors shall designate Issuing
Bank as the consignee on all bills of lading and other negotiable and
non-negotiable documents.
          (h) Each Borrower and Guarantor hereby irrevocably authorizes and
directs Issuing Bank to name such Borrower or Guarantor as the account party
therein and to deliver to Agent all instruments, documents and other writings
and property received by Issuing Bank pursuant to the Letter of Credit and to
accept and rely upon Agent’s instructions and agreements with respect to all
matters arising in connection with the Letter of Credit or the Letter of Credit
Documents with respect thereto. Nothing contained herein shall be deemed or
construed to grant any Borrower or Guarantor any right or authority to pledge
the credit of Agent or any Lender in any manner. Borrowers and Guarantors shall
be bound by any reasonable interpretation made in good faith by Agent, or
Issuing Bank under or in connection with any Letter of Credit or any documents,
drafts or acceptances thereunder, notwithstanding that such interpretation may
be inconsistent with any instructions of any Borrower or Guarantor.
          (i) Immediately upon the issuance or amendment of any Letter of
Credit, each Lender shall be deemed to have irrevocably and unconditionally
purchased and received, without recourse or warranty, an undivided interest and
participation to the extent of such Lender’s Pro Rata Share of the liability
with respect to such Letter of Credit and the obligations of Borrowers with

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respect thereto (including all Letter of Credit Obligations with respect
thereto). Each Lender shall absolutely, unconditionally and irrevocably assume,
as primary obligor and not as surety, and be obligated to pay to Issuing Bank
therefor and discharge when due, its Pro Rata Share of all of such obligations
arising under such Letter of Credit. Without limiting the scope and nature of
each Lender’s participation in any Letter of Credit, to the extent that Issuing
Bank has not been reimbursed or otherwise paid as required hereunder or under
any such Letter of Credit, each such Lender shall pay to Issuing Bank its Pro
Rata Share of such unreimbursed drawing or other amounts then due to Issuing
Bank in connection therewith.
          (j) The obligations of Borrowers to pay each Letter of Credit
Obligations and the obligations of Lenders to make payments to Agent for the
account of Issuing Bank with respect to Letters of Credit shall be absolute,
unconditional and irrevocable and shall be performed strictly in accordance with
the terms of this Agreement under any and all circumstances, whatsoever,
notwithstanding the occurrence or continuance of any Default, Event of Default,
the failure to satisfy any other condition set forth in Section 4 or any other
event or circumstance. If such amount is not made available by a Lender when
due, Agent shall be entitled to recover such amount on demand from such Lender
with interest thereon, for each day from the date such amount was due until the
date such amount is paid to Agent at the interest rate then payable by any
Borrower in respect of Loans that are Prime Rate Loans. Any such reimbursement
shall not relieve or otherwise impair the obligation of Borrowers to reimburse
Issuing Bank under any Letter of Credit or make any other payment in connection
therewith.
     2.3 [Intentionally Omitted.]
     2.4 Commitments. The aggregate amount of each Lender’s Pro Rata Share of
the Loans and Letter of Credit Obligations shall not exceed the amount of such
Lender’s Commitment, as the same may from time to time be amended in accordance
with the provisions hereof.
     2.5 Voluntary Increase in Commitments .
          (a) Upon the terms and subject to the conditions set forth herein, on
any Business Day during the period from the Closing Date through the ninetieth
(90th) day immediately prior to the last calendar day of the term of this
Agreement, and so long as no Default or Event of Default exists, Borrowers may
request that the Commitments be increased and, upon such request, Agent shall
use reasonable efforts in light of then-current market conditions to solicit
additional Eligible Transferees to become Lenders for the purposes of this
Agreement, or to encourage any Lender to increase its Commitment; provided, that
(a) each Lender that is a party to this Agreement immediately prior to such
increase shall have the first option, and may elect, to fund its Pro Rata Share
of the amount of the increase in the Commitment (or any such greater amount in
the event that one or more Lenders does not elect to fund its respective Pro
Rata Share of the amount of the increase in the Commitment), thereby increasing
its Commitment hereunder, but no Lender shall have any obligation to do so,
(b) in the event that it becomes necessary to include a new Eligible Transferee
to fund the amount of the requested increase in the Commitment, each such
Eligible Transferee shall become a Lender hereunder and agree to become party
to, and shall assume and agree to be bound by, this Agreement, subject to all
terms and conditions hereof; (c) no Lender shall have an obligation to
Borrowers, Agent or any other Lender to increase its Commitment or its Pro Rata
Share of the Commitments, which decision shall be made in the sole discretion of
each Lender; and (d) in no event shall the addition of any Lender or Lenders or
the increase in the Commitment of any Lender under this Section 2.5 increase the
Commitments to an aggregate amount greater than $110,000,000. Upon the addition
of any Lender, or the increase in the Commitment of any Lender, the dollar

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amount of the Commitment set forth opposite each Lender’s name on Schedule 1.21
to this Agreement shall be amended by Agent and Borrowers to reflect such
addition or such increase, and Agent shall deliver to Lenders and Borrowers a
copy of such amendment. Lenders shall be entitled to receive and Borrowers shall
be obligated to pay a mutually agreeable amendment fee to Agent for the pro rata
benefit of those Lenders who increase their Commitment and any new Lenders, such
fee to be based upon the increase in their Commitments only and not on their
aggregate Commitments after giving effect to such increase.
          (b) If any requested increase in the Commitments is agreed to in
accordance with subsection (a) above, Agent and Borrowers shall determine the
effective date of such increase (the “Increase Effective Date”). Agent, with the
consent and approval of Borrowers, shall promptly confirm in writing to Lenders
the final allocation of such increase as of the Increase Effective Date, and
each new Lender and each existing Lender that has increased its Commitment shall
purchase Loans and Letter of Credit Obligations from each other Lender in an
amount such that, after such purchase or purchases, the amount of outstanding
Loans and Letter of Credit Obligations from each Lender shall equal such
Lender’s respective Pro Rata Share of the Commitments, as modified to give
effect to such increase, multiplied by the aggregate amount of Loans outstanding
and Letter of Credit Obligations from all Lenders. As condition precedents to
the effectiveness of such increase, Borrowers shall deliver to Agent (i) a
certificate dated as of the Increase Effective Date (in sufficient copies for
each Lender) signed by the Chief Financial Officer of Borrowers, including a
compliance certificate demonstrating compliance with the terms of this Agreement
and certification that, both before and after giving effect to such increase,
each representation and warranty contained in Section 8 is true and correct in
all material respects on and as of the Increase Effective Date (except to the
extent that any such representation or warranty is stated to relate solely to an
earlier date), that the requested increase is permitted under all Material
Contracts, and that no Default or Event of Default exists, and (ii) legal
opinions from counsel to Borrowers in form and substance acceptable to Agent
that, among other things, the requested increase in the Commitments provided for
herein does not violate any Material Contract. Upon the request of any Lender,
Borrowers shall deliver one or more promissory notes reflecting the new or
increased Commitment of each such Lender as of the Increase Effective Date.
SECTION 3. INTEREST AND FEES
     3.1 Interest.
          (a) Borrowers shall pay to Agent, for the benefit of Lenders, interest
on the outstanding principal amount of the Loans at the Interest Rate. All
interest accruing hereunder on and after the date of any Event of Default or
termination hereof or on the principal amount of the Loans at any time
outstanding in excess of the amounts available to Borrowers under Section 2
(whether or not such excess(es), arise or are made with or without Agent’s
knowledge or consent and whether made before or after an Event of Default) shall
be payable ON DEMAND.
          (b) Borrowers (or Administrative Borrower on behalf of Borrowers) may
from time to time request Eurodollar Rate Loans or that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrowers (or
Administrative Borrower on behalf of Borrowers) shall specify the amount of the
Eurodollar Rate Loan or the amount of the Prime Rate Loans to be converted to
Eurodollar Rate Loans or the amount of the Eurodollar Rate Loan to be continued
(subject to the limits set forth below) and the Interest Period to be applicable
to such Eurodollar Rate Loans. Subject

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to the terms and conditions contained herein, two (2) Business Days after
receipt by Agent of such a request from Borrowers (or Administrative Borrower on
behalf of Borrowers), such Prime Rate Loans shall be converted to Eurodollar
Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be,
provided, that, (i) no Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default shall
exist or have occurred and be continuing, (ii) no party hereto shall have sent
any notice of termination of this Agreement, (iii) Borrowers (or Administrative
Borrower on behalf of Borrowers) shall have complied with such customary
procedures as are established by Agent and specified by Agent to Borrowers from
time to time for requests by Borrowers for Eurodollar Rate Loans, (iv) no more
than four (4) Interest Periods may be in effect at any one time, (v) the
aggregate amount of the Eurodollar Rate Loans must be in an amount not less than
$3,000,000 or an integral multiple of $1,000,000 in excess thereof, and
(vi) Agent and each Lender shall have determined that the Interest Period or
Adjusted Eurodollar Rate is available to Agent and such Lender and can be
readily determined as of the date of the request for such Eurodollar Rate Loan
by Borrowers (or Administrative Borrower on behalf of Borrowers). Any request by
Borrowers (or Administrative Borrower on behalf of Borrowers) for a Eurodollar
Rate Loan or to convert Prime Rate Loans to Eurodollar Rate Loans or to continue
any existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding
anything to the contrary contained herein, Agent and Lenders shall not be
required to purchase United States Dollar deposits in the London interbank
market or other applicable Eurodollar Rate market to fund any Eurodollar Rate
Loans, but the provisions hereof shall be deemed to apply as if Agent and
Lenders had purchased such deposits to fund the Eurodollar Rate Loans.
          (c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Agent has
received and approved a request to continue such Eurodollar Rate Loan at least
two (2) Business Days prior to such last day in accordance with the terms
hereof. Any Eurodollar Rate Loans shall, at Agent’s option, upon notice by Agent
to convert to Prime Rate Loans in the event that this Agreement shall terminate
or not be renewed. Borrowers shall pay to Agent, for the benefit of Lenders,
upon demand by Agent (or Agent may, at its option, charge any loan account of
Borrowers) any amounts required to compensate any Lender or participant with
Lender for any loss (including loss of anticipated profits), cost or expense
incurred by such Person, as a result of the conversion of Eurodollar Rate Loans
to Prime Rate Loans pursuant to any of the foregoing.
          (d) Interest shall be payable by Borrowers to Agent, for the account
of Agent and Lenders, as applicable, monthly in arrears not later than the first
day of each calendar month and shall be calculated on the basis of a three
hundred sixty (360) day year and actual days elapsed. Interest shall also be
payable with respect to any Eurodollar Rate Loans on the last day of each
applicable Interest Period with respect to such Loans. Borrower acknowledges and
understands that the calculation of interest on the basis of the actual days
elapsed over the period of a three hundred sixty (360) day year as opposed to a
year of three hundred sixty-five (365) or three hundred sixty-six (366) days
results in a higher effective rate of interest. The interest rate on
non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or
decrease by an amount equal to each increase or decrease in the Prime Rate
effective on the first day of the month after any change in such Prime Rate is
announced based on the Prime Rate in effect on the last day of the month in
which any such change occurs. In no event shall charges constituting interest
payable by Borrowers to Agent and Lenders exceed the maximum amount or the rate
permitted under any applicable law or regulation, and if any such part or
provision of this Agreement is in contravention of any such law or regulation,
such part or provision shall be deemed amended to conform thereto.

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     3.2 Fees.
     Borrowers agree to pay to Agent the following non-refundable fees as
follows:
          (a) the fees set forth in the Fee Letter; and
          (b) on the first day of each month in arrears for the benefit of
Lenders, an unused line fee at a rate equal to one quarter of one percent
(0.250%) per annum calculated upon the amount by which the Maximum Credit
exceeds the average daily principal balance of the outstanding Loans and Letter
of Credit Obligations during the immediately preceding month (or part thereof)
(the “Average Daily Balance”) while this Agreement is in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be payable
on the first day of each month in arrears and shall be fully earned when due;
and
          (c) in addition to any charges, fees or expenses charged by Issuing
Bank in connection with the Letters of Credit, Borrowers shall pay to Agent, for
the benefit of Lenders, (i) a fronting fee equal to 0.125% of the stated amount
of each Letter of Credit, which fee shall be payable upon issuance of the Letter
of Credit and on each anniversary date of such issuance, and shall be payable on
any increase in stated amount made between any such dates, and (ii) a letter of
credit fee at a rate equal to the applicable margin set forth in Exhibit B
hereto, on a per annum basis, in excess of the Adjusted Eurodollar Rate as to
Eurodollar Rate Loans, on the daily outstanding balance of the Letter of Credit
Obligations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that Agent may, and
upon the written direction of Required Lenders shall, require Borrowers to pay
to Agent for the ratable benefit of Lenders such letter of credit fee, at a rate
equal to the Default Rate per annum on such daily outstanding balance for:
(x) the period from and after the date of termination hereof until Agent and
Lenders have received full and final payment of all Obligations (notwithstanding
entry of a judgment against Borrowers) and (y) the period from and after the
date of the occurrence of an Event of Default for so long as such Event of
Default is continuing as determined by Agent. Such letter of credit fee shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrowers to pay such fee shall survive the
termination of this Agreement.
     3.3 Changes in Laws and Increased Costs of Loans.
          (a) If after the date hereof, either (i) any change in, or in the
interpretation of, any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to any Lender or
any banking or financial institution from whom any Lender borrows funds or
obtains credit (a “Funding Bank”), or (ii) a Funding Bank or any Lender complies
with any future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank, any Lender or Issuing Bank determines that
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof has or would
have the effect described below, or a Funding Bank, any Lender or Issuing Bank
complies with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, and in the case of any event set forth in this clause (iii), such
adoption, change or compliance has or would have the direct or indirect effect
of reducing the rate of return on any Lender’s or Issuing Bank’s capital as a
consequence of its obligations hereunder to a level below that which such Lender
or Issuing Bank could have achieved but for such adoption, change or compliance
(taking

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into consideration the Funding Bank’s or Lender’s or Issuing Bank’s policies
with respect to capital adequacy) by an amount deemed by such Lender or Issuing
Bank to be material, and the result of any of the foregoing events described in
clauses (i), (ii) or (iii) is or results in an increase in the cost to any
Lender or Issuing Bank of funding or maintaining the Loans, the Letters of
Credit or its Commitment, then Borrowers and Guarantors shall from time to time
upon demand by Agent pay to Agent additional amounts sufficient to indemnify
such Lender or Issuing Bank, as the case may be, against such increased cost on
an after-tax basis (after taking into account applicable deductions and credits
in respect of the amount indemnified). A certificate as to the amount of such
increased cost shall be submitted to Administrative Borrower by Agent or the
applicable Lender and shall be conclusive, absent manifest error.
          (b) If prior to the first day of any Interest Period, (a) Agent shall
have determined in good faith (which determination shall be conclusive and
binding upon Borrowers and Guarantors) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for
ascertaining the Adjusted Eurodollar Rate for such Interest Period, (b) Agent
has received notice from the Required Lenders that the Adjusted Eurodollar Rate
determined or to be determined for such Interest Period will not adequately and
fairly reflect the cost to Lenders of making or maintaining Eurodollar Rate
Loans during such Interest Period, or (c) Dollar deposits in the principal
amounts of the Eurodollar Rate Loans to which such Interest Period is to be
applicable are not generally available in the London interbank market, Agent
shall give telecopy or telephonic notice thereof to Administrative Borrower as
soon as practicable thereafter, and will also give prompt written notice to
Administrative Borrower when such conditions no longer exist. If such notice is
given (i) any Eurodollar Rate Loans requested to be made on the first day of
such Interest Period shall be made as Prime Rate Loans, (ii) any Loans that were
to have been converted on the first day of such Interest Period to or continued
as Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans
and (iii) each outstanding Eurodollar Rate Loan shall be converted, on the last
day of the then-current Interest Period thereof, to Prime Rate Loans. Until such
notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be
made or continued as such, nor shall any Borrower (or Administrative Borrower on
behalf of any Borrower) have the right to convert Prime Rate Loans to Eurodollar
Rate Loans.
          (c) Notwithstanding any other provision herein, if the adoption of or
any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the date hereof shall
make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate
Loans as contemplated by this Agreement, (a) Agent or such Lender shall promptly
give written notice of such circumstances to Administrative Borrower (which
notice shall be withdrawn whenever such circumstances no longer exist), (b) the
commitment of such Lender hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate
Loans shall forthwith be canceled and, until such time as it shall no longer be
unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender
shall then have a commitment only to make a Prime Rate Loan when a Eurodollar
Rate Loan is requested and (c) such Lender’s Loans then outstanding as
Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate
Loans on the respective last days of the then current Interest Periods with
respect to such Loans or within such earlier period as required by law. If any
such conversion of a Eurodollar Rate Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, Borrowers and
Guarantors shall pay to such Lender such amounts, if any, as may be required
pursuant to Section 3.3(d) below.

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          (d) Borrowers and Guarantors shall indemnify Agent and each Lender and
shall hold Agent and each Lender harmless from any loss or expense which Agent
or such Lender may sustain or incur as a consequence of (d) default by any
Borrower in making a borrowing of, conversion into or extension of Eurodollar
Rate Loans after such Borrower (or Administrative Borrower on behalf of such
Borrower) has given a notice requesting the same in accordance with the
provisions of this Agreement, (e) default by any Borrower in making any
prepayment of a Eurodollar Rate Loan after such Borrower has given a notice
thereof in accordance with the provisions of this Agreement, and (f) the making
of a prepayment of Eurodollar Rate Loans on a day which is not the last day of
an Interest Period with respect thereto. With respect to Eurodollar Rate Loans,
such indemnification may include an amount equal to the excess, if any, of
(i) the amount of interest which would have accrued on the amount so prepaid, or
not so borrowed, converted or extended, for the period from the date of such
prepayment or of such failure to borrow, convert or extend to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or extend, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Rate Loans provided for herein over (ii) the amount of interest (as determined
by such Agent or such Lender) which would have accrued to Agent or such Lender
on such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank Eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Obligations.
     3.4 Maximum Interest.
          (a) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Financing Agreements, in no event whatsoever shall
the aggregate of all amounts that are contracted for, charged or received by
Lenders pursuant to the terms of this Agreement or any of the other Financing
Agreements and that are deemed interest under applicable law exceed the Maximum
Interest Rate (including, to the extent applicable, the provisions of
Section 5197 of the Revised Statutes of the United States of America as amended,
12 U.S.C. Section 85, as amended). No agreements, conditions, provisions or
stipulations contained in this Agreement or any of the other Financing
Agreements, or any Event of Default, or the exercise by Lenders of the right to
accelerate the payment or the maturity of all or any portion of the Obligations,
or the exercise of any option whatsoever contained in this Agreement or any of
the other Financing Agreements, or the prepayment by Borrowers of any of the
Obligations, or the occurrence of any event or contingency whatsoever shall
entitle Agent or Lenders to contract for, charge or receive in any event,
interest or any charges, amounts, premiums or fees deemed interest by applicable
law in excess of the Maximum Interest Rate. In no event shall Borrowers be
obligated to pay interest or such amounts as may be deemed interest under
applicable law in amounts which exceed the Maximum Interest Rate. All
agreements, conditions or stipulations, if any, which may in any event or
contingency whatsoever operate to bind, obligate or compel Borrowers to pay
interest or such amounts which are deemed to constitute interest in amounts
which exceed the Maximum Interest Rate shall be without binding force or effect,
at law or in equity, to the extent of the excess of interest or such amounts
which are deemed to constitute interest over such Maximum Interest Rate.
          (b) In the event any Interest is charged or received in excess of the
Maximum Interest Rate (“Excess”), each Borrower acknowledges and stipulates that
any such charge or receipt shall be the result of an accident and bona fide
error, and that any Excess received by Agent and Lenders shall be applied first,
to the payment of the then outstanding and unpaid principal hereunder; second to
the payment of the other Obligations then outstanding and unpaid; and third,
returned to Borrowers, it being the intent of the parties hereto not to enter
into a usurious or otherwise illegal

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relationship. The right to accelerate the maturity of any of the Obligations
does not include the right to accelerate any interest that has not otherwise
accrued on the date of such acceleration, and Agent and Lenders does not intend
to collect any unearned interest in the event of any such acceleration. Each
Borrower recognizes that, with fluctuations in the rates of interest set forth
in Section 3.1 of this Agreement and the Maximum Interest Rate, such an
unintentional result could inadvertently occur. All monies paid to Agent or
Lenders hereunder or under any of the other Financing Agreements, whether at
maturity or by prepayment, shall be subject to any rebate of unearned interest
as and to the extent required by applicable law.
          (c) By the execution of this Agreement, each Borrower agrees that
(A) the credit or return of any Excess shall constitute the acceptance by
Borrowers of such Excess, and (B) no Borrower shall seek or pursue any other
remedy, legal or equitable, against Agent and Lenders, based in whole or in part
upon contracting for, charging or receiving any interest or such amounts which
are deemed to constitute interest in excess of the Maximum Interest Rate. For
the purpose of determining whether or not any Excess has been contracted for,
charged or received by Agent and Lenders, all interest at any time contracted
for, charged or received from Borrowers in connection with this Agreement or any
of the other Financing Agreements shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread during the entire term of this
Agreement in accordance with the amounts outstanding from time to time hereunder
and the Maximum Interest Rate from time to time in effect in order to lawfully
charge the maximum amount of interest permitted under applicable laws.
          (d) Borrowers, Agent and Lenders shall, to the maximum extent
permitted under applicable law, (i) characterize any non-principal payment as an
expense, fee or premium rather than as interest and (ii) exclude voluntary
prepayments and the effects thereof.
          (e) The provisions of this Section 3.4 shall be deemed to be
incorporated into each of the other Financing Agreements (whether or not any
provision of this Section is referred to therein). Each of the Financing
Agreements and communications relating to any interest owed by Borrowers and all
figures set forth therein shall, for the sole purpose of computing the extent of
the Obligations, be automatically recomputed by Borrowers, and by any court
considering the same, to give effect to the adjustments or credits required by
this Section.
SECTION 4. CONDITIONS PRECEDENT
     4.1 Conditions Precedent to Initial Loans and Letters of Credit. Each of
the following is a condition precedent to Agent and Lenders making the initial
Loans and providing the initial Letters of Credit hereunder:
          (a) all requisite corporate action and proceedings in connection with
the transactions contemplated by this Agreement and the other Financing
Agreements shall be satisfactory in form and substance to Agent, and Agent shall
have received all information and copies of all documents, including records of
requisite corporate action and proceedings which Agent may have requested in
connection therewith, such documents where requested by Agent or its counsel to
be certified by appropriate corporate officers or Governmental Authorities;
          (b) all financial information, projections, budgets, business plans,
cash flows and such other information as Agent shall request from time to time,
including (i) projected quarterly balance sheets, income statements, statements
of cash flows and Excess Availability of Borrowers

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and Guarantors for the period commencing July 1, 2007 through the end of the
2008 fiscal year of Borrowers, (ii) projected annual balance sheets, income
statements, statements of cash flows and Excess Availability of Borrowers and
Guarantors for the period commencing July 1, 2007 through the end of the 2010
fiscal year of Borrowers (and in addition thereto, further projected income
statements of Borrowers and Guarantors commencing July 1, 2007 through the end
of the 2011 and 2012 fiscal years of Borrowers), in each case as to the
projections described in clauses (i) and (ii), with the results and assumptions
set forth in all of such projections in form and substance satisfactory to
Agent, and an opening pro forma balance sheet for Borrowers and Guarantors in
form and substance satisfactory to Agent, (iii) any updates or modifications to
the projected financial statements of Borrowers and Guarantors described
hereinabove heretofore received by Agent, in each case in form and substance
satisfactory to Agent, and (iv) an aging of Accounts as of August 31, 2007,
perpetual Inventory records as of August 31, 2007 and/or rollforwards of
Accounts and Inventory through the Closing Date, together with supporting
documentation, each in form and substance satisfactory to Agent;
          (c) no material adverse change shall have occurred in the assets,
business or financial condition of Borrowers and their Subsidiaries, taken as a
whole, since the date of Agent’s latest field examination and no change or event
shall have occurred which would impair the ability of Borrowers or any Obligor
to perform their obligations hereunder or under any of the other Financing
Agreements to which it is a party or of Agent to enforce the Obligations or
realize upon the Collateral;
          (d) Agent shall have completed its business and legal due diligence,
with results satisfactory to Agent, including (i) receipt and review of third
party appraisals, in form and containing assumptions and appraisal methods
satisfactory to Agent by an appraiser acceptable to Agent on which Agent and
Lenders are permitted to rely, (ii) field examinations of the business and
Collateral of Borrowers in accordance with Agent’s customary procedures and
practices and as otherwise required by the nature and circumstances of the
businesses of Borrowers, and (iii) to the extent not delivered in connection
with the Existing Loan Agreement, environmental assessments of the Real Property
of Borrowers conducted by an independent environmental engineering firm
acceptable to Agent and in form, scope and methodology acceptable to Agent, and
Agent shall be satisfied with the corporate and capital structure and management
of Borrowers and with all legal, tax, accounting and other matters relating to
Borrowers;
          (e) Agent shall have received, in form and substance satisfactory to
Agent, all consents, waivers, acknowledgments and other agreements from third
Persons which Agent may deem necessary or desirable in order to permit, protect
and perfect its security interests in and liens upon the Collateral or to
effectuate the provisions or purposes of this Agreement and the other Financing
Agreements, including Collateral Access Agreements by owners and lessors of
leased premises of Borrower and by warehouses at which Collateral is located;
          (f) the Excess Availability as determined by Agent, as of the date
hereof, shall be not less than $10,000,000 after giving effect to the initial
Loans made or to be made and Letters of Credit issued or to be issued in
connection with the initial transactions contemplated hereunder;
          (g) Agent shall have received, in form and substance satisfactory to
Agent, Deposit Account Control Agreements by and among Agent, each Borrower and
each bank where such Borrower has a deposit account, in each case, duly
authorized, executed and delivered by such

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bank and such Borrower (or Agent shall be the bank’s customer with respect to
such deposit account as Agent may specify);
          (h) Agent shall have received evidence, in form and substance
satisfactory to Agent, that Agent has a valid perfected first priority security
interest and lien in all of the Collateral;
          (i) Agent shall have received and reviewed UCC search results for all
jurisdictions in the United States and Canada which assets of each Borrower and
Guarantor are located, which search results shall be in form and substance
satisfactory to Agent;
          (j) Agent shall have received, in form and substance satisfactory to
Agent, an amendment to the Factor Intercreditor Agreement duly executed and
delivered by the parties thereto;
          (k) Agent shall have received, in form and substance satisfactory to
Agent, a Uniform Commercial Code financing statements on Form UCC-1 or Form
UCC-3, as applicable, duly filed in such office or offices as may be necessary
or, in the opinion of Agent, desirable to perfect Agent’s liens in and to the
collateral of Borrowers and their domestic Subsidiaries, and Agent shall have
received confirmation of the filing of all such financing statements;
          (l) Agent shall have received the Solvency Certificate and all
financial statements attached as exhibits thereto;
          (m) Agent shall have received, at least five (5) Business Days prior
to the Closing Date, a certificate reasonably satisfactory to the Agent, for
benefit of itself and the Lenders, provided by Borrowers that sets forth
information required by the USA PATRIOT Act including, without limitation, the
identity of the Obligors, the name and address of the Obligors and other
information that will allow the Administrative Agent or any Lender, as
applicable, to identify the Obligors in accordance with the USA PATRIOT Act;
          (n) Agent shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Agent, and certificates of insurance policies
and/or endorsements naming Agent as loss payee;
          (o) Agent shall have received, in form and substance satisfactory to
Agent, such opinion letters of counsel to Borrowers and Guarantors with respect
to the Financing Agreements and such other matters as Agent may request; and
          (p) the other Financing Agreements and all instruments and documents
hereunder, including amendments to the Mortgages, shall have been duly executed
and delivered to Agent, in form and substance satisfactory to Agent.
     4.2 Conditions Precedent to All Loans and Letters of Credit. Each of the
following is an additional condition precedent to Agent and Lenders making Loans
and/or providing Letters of Credit to Borrowers, including the initial Loans and
Letters of Credit and any future Loans and Letters of Credit:
          (a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan

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or providing each such Letter of Credit, and after giving effect thereto, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate on and as of such earlier date);
          (b) no law, regulation, order, judgment or decree of any Governmental
Authority shall exist, and no action, suit, investigation, litigation or
proceeding shall be pending or threatened in any court or before any arbitrator
or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or
otherwise affect (A) the making of the Loans or providing the Letters of Credit,
or (B) the consummation of the transactions contemplated pursuant to the terms
hereof or the other Financing Agreements or (ii) has or could reasonably be
expected to have a Material Adverse Effect; and
          (c) no Default or Event of Default shall exist or have occurred and be
continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit and after giving effect thereto.
     4.3 Conditions Subsequent to All Loans and Letters of Credit. The
obligation of Agent and Lenders to continue to make Loans and/or provide Letters
of Credit to Borrowers is subject to the fulfillment, on or before the date
appliable thereto, of the condition subsequent set forth below (the failure by
Borrowers to so perform or cause to be performed constituting an Event of
Default):
          (a) on or before October ___, 2007, Agent shall have received,
reviewed and found acceptable fully paid endorsements to Agent’s mortgagee title
insurance policies (or binding commitments to issue endorsements to Agent’s
mortgagee title insurance policies, marked to Agent’s satisfaction to evidence
the form of such endorsements to be delivered after the Closing Date) with
respect to the title insurance policies that insure the Mortgages to create a
valid lien on all Real Property subject thereto, which endorsements (and
commitments therefor) shall give effect to the transactions contemplated by this
Agreement, shall “down-date” the effective date of the title insurance policy
(or policies) to which they relate and shall not have a specific survey
exception
SECTION 5. GRANT OF SECURITY INTEREST
     5.1 Grant of Security Interest. To secure payment and performance of all
Obligations, (i) each Borrower hereby confirms the pledge and assignment to
Agent, for itself and the benefit of Secured Parties, of the Collateral under
(and as defined in) the Existing Loan Agreement and the other Financing
Agreements (as defined in the Existing Loan Agreement), and the creation in
favor of Agent, for the benefit of the Secured Parties, under the Existing Loan
Agreement and such other Financing Agreements of a continuing security interest
in and Lien upon such Collateral, all as security for the Obligations, and
(ii) each Borrower hereby grants to Agent, for itself and the benefit of Secured
Parties, a continuing security interest in, a lien upon, and a right of set off
against, and hereby assigns to Agent, for itself and the benefit of Lenders, as
security, all personal and real property and fixtures, and interests in property
and fixtures, of each Borrower, whether now owned or hereafter acquired or
existing, and wherever located (together with all other collateral security for
the Obligations at any time granted to or held or acquired by Agent or any
Lender, collectively, the “Collateral”), including:
          (a) all Accounts;
          (b) all general intangibles, including, without limitation, all
Intellectual Property

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          (c) all goods, including, without limitation, Inventory and Equipment;
          (d) all Real Property and fixtures;
          (e) all chattel paper including, without limitation, all tangible and
electronic chattel paper;
          (f) all instruments including, without limitation, all promissory
notes;
          (g) all documents;
          (h) all deposit accounts;
          (i) all letters of credit, banker’s acceptances and similar
instruments and including all letter-of-credit rights;
          (j) all supporting obligations and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Receivables and other Collateral, including (i) rights and remedies under or
relating to guaranties, contracts of suretyship, letters of credit and credit
and other insurance related to the Collateral, (ii) rights of stoppage in
transit, replevin, repossession, reclamation and other rights and remedies of an
unpaid vendor, lienor or secured party, (iii) goods described in invoices,
documents, contracts or instruments with respect to, or otherwise representing
or evidencing, Receivables or other Collateral, including returned, repossessed
and reclaimed goods, and (iv) deposits by and property of account debtors or
other Persons securing the obligations of account debtors;
          (k) all (i) investment property (including securities, whether
certificated or uncertificated, securities accounts, security entitlements,
commodity contracts or commodity accounts) and (ii) monies, credit balances,
deposits and other property of such Borrower now or hereafter held or received
by or in transit to Agent, any Lender or its Affiliates or at any other
depository or other institution from or for the account of such Borrower,
whether for safekeeping, pledge, custody, transmission, collection or otherwise;
          (1) all commercial tort claims, including, without limitation, those
identified in the Information Certificate;
          (m) to the extent not otherwise described above, all Receivables;
          (n) all Records; and
          (o) all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.
     Subject to the restrictions on the incurrence of purchase money
Indebtedness in Section 9.9(b) hereof but notwithstanding anything to the
contrary contained in clause (c) above, the types or items of Collateral
described in such clause shall not include any Equipment purchased with the
proceeds of such purchase money Indebtedness which is, or at the time of any
Borrower’s

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acquisition thereof shall be, subject to a purchase money lien or security
interest (including capitalized or finance leases) permitted under Section 9.8
hereof if: (a) the valid grant of a security interest or lien to Agent, for
itself and the ratable benefit of Lenders, in such item of Equipment is
prohibited by the terms of the agreement between such Borrower and the holder of
such purchase money lien or security interest and the consent of such holder to
Agent’s lien has not been or is not waived, or the consent of such holder has
not been or is not otherwise obtained, or under applicable law such prohibition
cannot be waived and (b) the purchase money lien on such item of Equipment is or
shall become and remain valid and perfected.
     5.2 Perfection of Security Interests.
          (a) Each Borrower irrevocably and unconditionally authorizes Agent (or
its agent) to file at any time and from time to time such financing statements
with respect to the Collateral naming Agent or its designee as the secured party
and such Borrower as debtor, as Agent may require, and including any other
information with respect to such Borrower or otherwise required by part 5 of
Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may
determine, together with any amendment and continuations with respect thereto,
which authorization shall apply to all financing statements filed on, prior to
or after the date hereof. Each Borrower hereby ratifies and approves all
financing statements naming Agent or its designee as secured party and such
Borrower as debtor with respect to the Collateral (and any amendments with
respect to such financing statements) filed by or on behalf of Agent prior to
the date hereof and ratifies and confirms the authorization of Agent to file
such financing statements (and amendments, if any). Each Borrower hereby
authorizes Agent to adopt on behalf of such Borrower any symbol required for
authenticating any electronic filing. In the event that the description of the
collateral in any financing statement naming Agent or its designee as the
secured party and any Borrower as debtor includes assets and properties of such
Borrower that do not at any time constitute Collateral, whether hereunder, under
any of the other Financing Agreements or otherwise, the filing of such financing
statement shall nonetheless be deemed authorized by such Borrower to the extent
of the Collateral included in such description and it shall not render the
financing statement ineffective as to any of the Collateral or otherwise affect
the financing statement as it applies to any of the Collateral. In no event
shall any Borrower at any time file, or permit or cause to be filed, any
correction statement or termination statement with respect to any financing
statement (or amendment or continuation with respect thereto) naming Agent or
its designee as secured party and such Borrower as debtor.
          (b) No Borrower has any chattel paper (whether tangible or electronic)
or instruments as of the date hereof, except as set forth in the Information
Certificate. In the event that any Borrower shall be entitled to or shall
receive any chattel paper or instrument after the date hereof, such Borrower
shall promptly notify Agent thereof in writing. Promptly upon the receipt
thereof by or on behalf of any Borrower (including by any agent or
representative), such Borrower shall deliver, or cause to be delivered to Agent,
all tangible chattel paper and instruments that such Borrower has or may at any
time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Agent may from time to time specify, in each case except as
Agent may otherwise agree. At Agent’s option, each Borrower shall, or Agent may
at any time on behalf of such Borrower, cause the original of any such
instrument or chattel paper to be conspicuously marked in a form and manner
acceptable to Agent with the following legend referring to chattel paper or
instruments as applicable: “This [chattel paper][instrument] is subject to the
security interest of Wachovia Bank, National Association, as Agent, and any
sale, transfer, assignment or encumbrance of this [chattel paper][instrument]
violates the rights of such secured party.”

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          (c) In the event that any Borrower shall at any time hold or acquire
an interest in any electronic chattel paper or any “transferable record” (as
such term is defined in Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), such Borrower shall
promptly notify Agent thereof in writing. Promptly upon Agent’s request, each
Borrower shall take, or cause to be taken, such actions as Agent may request to
give Agent control of such electronic chattel paper under Section 9-105 of the
UCC and control of such transferable record under Section 201 of the Federal
Electronic Signatures in Global and National Commerce Act or, as the case may
be, Section 16 of the Uniform Electronic Transactions Act, as in effect in such
jurisdiction.
          (d) No Borrower has any deposit accounts as of the date hereof, except
as set forth in the Information Certificate. No Borrower shall, directly or
indirectly, after the date hereof open, establish or maintain any deposit
account unless each of the following conditions is satisfied: (i) Agent shall
have received not less than five (5) Business Days prior written notice of the
intention of such Borrower to open or establish such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of the
account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom such Borrower is dealing and the purpose of the account, (ii) the bank
where such account is opened or maintained shall be acceptable to Agent, and
(iii) on or before the opening of such deposit account, such Borrower shall as
Agent may specify either (A) deliver to Agent a Deposit Account Control
Agreement with respect to such deposit account duly authorized, executed and
delivered by such Borrower and the bank at which such deposit account is opened
and maintained or (B) arrange for Agent to become the customer of the bank with
respect to the deposit account on terms and conditions acceptable to Agent. The
terms of this subsection (d) shall not apply to deposit accounts specifically
and exclusively used for payroll, payroll taxes and other employee wage and
benefit payments to or for the benefit of any Borrower’s salaried employees.
          (e) No Borrower owns or holds, directly or indirectly, beneficially or
as record owner or both, any investment property, as of the date hereof, or have
any investment account, securities account, commodity account or other similar
account with any bank or other financial institution or other securities
intermediary or commodity intermediary as of the date hereof, in each case
except as set forth in the Information Certificate.
          (f) In the event that any Borrower shall be entitled to or shall at
any time after the date hereof hold or acquire any certificated securities, such
Borrower shall promptly endorse, assign and deliver the same to Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as Agent may from time to time specify. If any securities, now or hereafter
acquired by any Borrower are uncertificated and are issued to such Borrower its
nominee directly by the issuer thereof, such Borrower shall immediately notify
Agent thereof and shall as Agent may specify, either (A) cause the issuer to
agree to comply with instructions from Agent as to such securities, without
further consent of Borrower or such nominee, or (B) arrange for Agent to become
the registered owner of the securities.
          (g) No Borrower shall, directly or indirectly, after the date hereof
open, establish or maintain any investment account, securities account,
commodity account or any other similar account (other than a deposit account)
with any securities intermediary or commodity intermediary unless each of the
following conditions is satisfied: (A) Agent shall have received not less than
five (5) Business Days prior written notice of the intention of such Borrower to
open or establish such account which notice shall specify in reasonable detail
and specificity reasonably acceptable to Agent

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the name of the account, the owner of the account, the name and address of the
securities intermediary or commodity intermediary at which such account is to be
opened or established, the individual at such intermediary with whom such
Borrower is dealing and the purpose of the account, (B) the securities
intermediary or commodity intermediary (as the case may be) where such account
is opened or maintained shall be acceptable to Agent, and (C) on or before the
opening of such investment account, securities account or other similar account
with a securities intermediary or commodity intermediary, such Borrower shall,
as Agent may specify, either (1) execute and deliver, and cause to be executed
and delivered to Agent, an Investment Property Control Agreement with respect
thereto duly authorized, executed and delivered by such Borrower and such
securities intermediary or commodity intermediary or (2) arrange for Agent to
become the entitlement holder with respect to such investment property on terms
and conditions acceptable to Agent.
          (h) No Borrower is the beneficiary or otherwise entitled to any right
to payment under any letter of credit, banker’s acceptance or similar instrument
as of the date hereof, except as set forth in the Information Certificate. In
the event that any Borrower shall be entitled to or shall receive any right to
payment under any letter of credit, banker’s acceptance or any similar
instrument, whether as beneficiary thereof or otherwise after the date hereof,
such Borrower shall promptly notify Agent thereof in writing. Each Borrower
shall immediately, as Agent may specify, either (i) deliver, or cause to be
delivered to Agent, with respect to any such letter of credit, banker’s
acceptance or similar instrument, the written agreement of the issuer and any
other nominated Person obligated to make any payment in respect thereof
(including any confirming or negotiating bank), in form and substance
satisfactory to Agent, consenting to the assignment of the proceeds of the
letter of credit to Agent by such Borrower and agreeing to make all payments
thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agent
to become, at Borrowers’ expense, the transferee beneficiary of the letter of
credit, banker’s acceptance or similar instrument (as the case may be).
          (i) No Borrower has any commercial tort claims as of the date hereof,
except as set forth in the Information Certificate. In the event that any
Borrower shall at any time after the date hereof have any commercial tort
claims, such Borrower shall promptly notify Agent thereof in writing, which
notice shall (i) set forth in reasonable detail the basis for and nature of such
commercial tort claim and (ii) include the express grant by such Borrower to
Agent of a security interest in such commercial tort claim (and the proceeds
thereof). In the event that such notice does not include such grant of a
security interest, the sending thereof by such Borrower to Agent shall be deemed
to constitute such grant to Agent. Upon the sending of such notice, any
commercial tort claim described therein shall constitute part of the Collateral
and shall be deemed included therein. Without limiting the authorization of
Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by
such Borrower of this Agreement or any of the other Financing Agreements, Agent
is hereby irrevocably authorized from time to time and at any time to file such
financing statements naming Agent or its designee as secured party and such
Borrower as debtor, or any amendments to any financing statements, covering any
such commercial tort claim as Collateral. In addition, each Borrower shall
promptly upon Agent’s request, execute and deliver, or cause to be executed and
delivered, to Agent such other agreements, documents and instruments as Agent
may require in connection with such commercial tort claim.
          (j) No Borrower has any goods, documents of title or other Collateral
in the custody, control or possession of a third party as of the date hereof,
except as set forth in the Information Certificate and except for goods located
in the United States in transit to a location of such Borrower permitted herein
in the ordinary course of business of such Borrower in the possession of the
carrier transporting such goods. In the event that any goods, documents of title
or

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other Collateral are at any time after the date hereof in the custody, control
or possession of any other Person not referred to in the Information Certificate
or such carriers, Borrowers shall promptly notify Agent thereof in writing.
Promptly upon Agent’s request, each Borrower shall deliver to Agent a Collateral
Access Agreement duly authorized, executed and delivered by such Person and the
Borrower that is the owner of such Collateral.
          (k) Each Borrower shall take any other actions reasonably requested by
Agent from time to time to cause the attachment, perfection and first priority
of, and the ability of Agent to enforce, the security interest of Agent in any
and all of the Collateral, including, (i) executing, delivering and, where
appropriate, filing financing statements and amendments relating thereto under
the UCC or other applicable law, to the extent, if any, that such Borrower’s
signature thereon is required therefor, (ii) causing Agent’s name to be noted as
secured party on any certificate of title for a titled good if such notation is
a condition to attachment, perfection or priority of, or ability of Agent to
enforce, the security interest of Agent in such Collateral, (iii) complying with
any provision of any statute, regulation or treaty of the United States as to
any Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of Agent to enforce, the security interest
of Agent in such Collateral, (iv) obtaining the consents and approvals of any
Governmental Authority or third party, including, without limitation, any
consent of any licensor, lessor or other Person obligated on Collateral, and
taking all actions required by any earlier versions of the UCC or by other law,
as applicable in any relevant jurisdiction.
SECTION 6. COLLECTION AND ADMINISTRATION
     6.1 Borrowers’ Loan Account. Agent shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letters of
Credit and other Obligations and the Collateral, (b) all payments made by or on
behalf of Borrower and (c) all other appropriate debits and credits as provided
in this Agreement, including fees, charges, costs, expenses and interest. All
entries in the loan account(s) shall be made in accordance with Agent’s
customary practices as in effect from time to time.
     6.2 Statements. Agent shall render to Administrative Borrower each month a
statement setting forth the balance in Borrowers’ loan account(s) maintained by
Agent for Borrowers pursuant to the provisions of this Agreement, including
principal, interest, fees, costs and expenses. Each such statement shall be
subject to subsequent adjustment by Agent but shall, absent manifest errors or
omissions, be considered correct and deemed accepted by Borrowers and
conclusively binding upon Borrowers as an account stated except to the extent
that Agent receives a written notice from Administrative Borrower of any
specific exceptions of Administrative Borrower thereto within thirty (30) days
after the date such statement has been mailed by Agent. Until such time as Agent
shall have rendered to Administrative Borrower a written statement as provided
above, the balance in Borrowers’ loan account(s) shall be presumptive evidence
of the amounts due and owing to Agent and Lenders by Borrowers.
     6.3 Collection of Accounts.
          (a) Borrowers shall establish and maintain, at their expense, blocked
accounts or lockboxes and related blocked accounts (in either case, “Blocked
Accounts”), as Agent may specify, with such banks as are acceptable to Agent
into which Borrowers shall promptly deposit and direct their account debtors to
directly remit all payments on Receivables and all payments constituting
proceeds of Inventory or other Collateral in the identical form in which such
payments are made,

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whether by cash, check or other manner. Borrowers shall deliver, or cause to be
delivered to Agent a Deposit Account Control Agreement in form and substance
satisfactory to Agent, duly authorized, executed and delivered by each bank
where a Blocked Account is maintained as provided in Section 5.2 hereof or at
any time and from time to time Agent may become the bank’s customer with respect
to any of the Blocked Accounts and promptly upon Agent’s request, Borrowers
shall execute and deliver such agreements and documents as Agent may require in
connection therewith. Prior to the occurrence of a Cash Dominion Trigger Date,
Borrowers shall be permitted to transfer cash from the Blocked Accounts and to
use the funds therein for working capital and general corporate purposes to the
extent permitted herein. Upon the occurrence of a Cash Dominion Trigger Date,
(i) each Borrower and Guarantor agrees that all payments made to such Blocked
Accounts or other funds received and collected by Agent or any Lender, whether
in respect of the Receivables, as proceeds of Inventory or other Collateral, or
otherwise, shall be treated as payments to Agent and Lenders in respect of the
Obligations and shall constitute the property of Agent and Lenders to the extent
of the then outstanding Obligations, and (ii) the Agent may disregard Borrowers’
instructions with respect to the Blocked Accounts, exercise exclusive dominion
and control over the Blocked Accounts, and apply funds deposited therein as
directed by the Required Lenders or as otherwise provided herein. Agent’s rights
to exercise exclusive dominion and control over the Blocked Accounts shall
continue in effect only until such time (if any) as Agent has confirmed that
(i) no Event of Default then exists and (ii) Borrowers have maintained Excess
Availability of at least $5,000,000 for 60 consecutive days.
          (b) Each Borrower and all of such Borrower’s shareholders, directors,
employees, agents, Subsidiaries or other Affiliates shall, acting as trustee for
Agent, receive, as the property of Agent, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other Collateral
which come into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to Agent.
In no event shall the same be commingled with any Borrower’s own funds.
Borrowers agree to reimburse Agent on demand for any amounts owed or paid to any
bank at which a Blocked Account is established or any other bank or Person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Agent’s payments to or indemnification of such bank or Person. The obligation of
Borrowers to reimburse Agent for such amounts pursuant to this Section 6.3 shall
survive the termination of this Agreement.
     6.4 Payments. All Obligations shall be payable to the Agent Payment Account
as provided in Section 6.3 or such other place as Agent may designate from time
to time. Agent shall apply payments received or collected from any Borrower or
for the account of any Borrowers (including the monetary proceeds of collections
or of realization upon any Collateral) as follows: first, to pay any fees,
indemnities or expense reimbursements then due to Agent from Borrowers; second,
to pay any fees, indemnities or expense reimbursements then due to Lenders from
Borrower; third, to pay interest due in respect of any Loans (and including any
Special Agent Advances); fourth, to pay or prepay principal in respect of
Special Agent Advances; fifth, to pay principal due in respect of the Loans and
to pay Hedging Obligations up to the amount of Current Hedging Exposure, and
Letters of Credit; sixth, to pay or prepay any other Obligations (including any
Hedging Obligations in excess of the Current Hedging Exposure) whether or not
then due, in such order and manner as Agent determines. Notwithstanding anything
to the contrary contained in this Agreement, unless so directed by
Administrative Borrower, or unless an Event of Default shall exist or have
occurred and be continuing. Agent shall not apply any payments which it receives
to any Eurodollar Rate Loans, except (a) on the expiration date of the Interest
Period applicable to any such Eurodollar Rate Loans, or (b) in the event that
there are no outstanding Prime Rate Loans. At Agent’s option, all

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principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrowers. Borrowers shall make all payments to Agent and
Lenders on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes, levies, imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or proceeds of
Collateral applied to the payment of, any of the Obligations, Agent or any
Lender is required to surrender or return such payment or proceeds to any Person
for any reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Agent or such Lender. Borrowers shall be liable to pay to Agent, and do hereby
indemnify and hold Agent and Lenders harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Agent or any Lender in
reliance upon such payment or proceeds. This Section 6.4 shall survive the
payment of the Obligations and the termination of this Agreement.
     6.5 Authorization to Make Loans. Agent is authorized to make the Loans and
provide Letters of Credit based upon telephonic or other instructions received
from anyone purporting to be an officer of any Borrower or other authorized
Person or, at the discretion of Agent, if such Loans are necessary to satisfy
any Obligations. All requests for Loans or Letters of Credit hereunder shall
specify the date on which the requested advance is to be made or Letters of
Credit established (which day shall be a Business Day) and the amount of the
requested Loan. Requests received after 11:00 a.m. (Atlanta, Georgia) time on
any day shall be deemed to have been made as of the opening of business on the
immediately following Business Day. All Loans and Letters of Credit under this
Agreement shall be conclusively presumed to have been made to, and at the
request of and for the benefit of, Borrowers when deposited to the credit of
Borrowers or otherwise disbursed or established in accordance with the
instructions of Borrowers or in accordance with the terms and conditions of this
Agreement.
     6.6 Use of Proceeds. All Loans made or Letters of Credit provided by Agent
or Lenders to Borrowers pursuant to the provisions hereof shall be used by
Borrowers only for: (a) payments to each of the Persons listed in the
disbursement direction letter furnished by Borrowers to Agent on the Closing
Date; (b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements; and (c) general operating, working capital and other proper
corporate purposes of Borrowers not otherwise prohibited by the terms hereof.
None of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Loans to
be considered a “purpose credit” within the meaning of Regulation U of the Board
of Governors of the Federal Reserve System, as amended.
     6.7 Pro Rata Treatment. Except to the extent otherwise provided in this
Agreement: (a) the making and conversion of Loans shall be made among the
Lenders based on their respective Pro Rata Shares as to the Loans and (b) each
payment on account of any Obligations to or for the account of one or more of
Lenders in respect of any Obligations due on a particular day shall be allocated
among the Lenders entitled to such payments based on their respective Pro Rata
Shares and shall be distributed accordingly.
     6.8 Sharing of Payments, Etc.

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          (a) Borrowers agree that, in addition to (and without limitation of)
any right of setoff, banker’s lien or counterclaim Agent or any Lender may
otherwise have, each Lender shall be entitled, at its option (but subject, as
among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset
balances held by it for the account of any Borrower at any of its offices, in
dollars or in any other currency, against any principal of or interest on any
Loans owed to such Lender or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such balances are then due to
such Borrower), in which case it shall promptly notify Borrowers and Agent
thereof; provided, that, such Lender’s failure to give such notice shall not
affect the validity thereof.
          (b) If any Lender (including Agent) shall obtain from any Borrower
payment of any principal of or interest on any Loan owing to it or payment of
any other amount under this Agreement or any of the other Financing Agreements
through the exercise of any right of setoff, banker’s lien or counterclaim or
similar right or otherwise (other than from Agent as provided herein), and, as a
result of such payment, such Lender shall have received more than its Pro Rata
Share of the principal of the Loans or more than its share of such other amounts
then due hereunder or thereunder by Borrowers to such Lender than the percentage
thereof received by any other Lender, it shall promptly pay to Agent, for the
benefit of Lenders, the amount of such excess and simultaneously purchase from
such other Lenders a participation in the Loans or such other amounts,
respectively, owing to such other Lenders (or such interest due thereon, as the
case may be) in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all Lenders shall share the benefit of
such excess payment (net of any expenses that may be incurred by such Lender in
obtaining or preserving such excess payment) in accordance with their respective
Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall
make appropriate adjustments among themselves (by the resale of participation
sold or otherwise) if such payment is rescinded or must otherwise be restored.
          (c) Borrowers agree that any Lender purchasing a participation (or
direct interest) as provided in this Section may exercise, in a manner
consistent with this Section, all rights of setoff, banker’s lien, counterclaim
or similar rights with respect to such participation as fully as if such Lender
were a direct holder of Loans or other amounts (as the case may be) owing to
such Lender in the amount of such participation.
          (d) Nothing contained herein shall require any Lender to exercise any
right of setoff, banker’s lien, counterclaims or similar rights or shall affect
the right of any Lender to exercise, and retain the benefits of exercising, any
such right with respect to any other Indebtedness or obligation of any Borrower.
If, under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a setoff to which this Section applies, such
Lender shall, to the extent practicable, assign such rights to Agent for the
benefit of Lenders and, in any event, exercise its rights in respect of such
secured claim in a manner consistent with the rights of Lenders entitled under
this Section to share in the benefits of any recovery on such secured claim.
     6.9 Settlement Procedures.
          (a) In order to administer the Credit Facility in an efficient manner
and to minimize the transfer of funds between Agent and Lenders, Agent may, at
its option, subject to the terms of this Section, make available, on behalf of
Lenders, the full amount of the Loans requested or charged to Borrowers’ loan
account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof,
without requirement of prior notice to Lenders of the proposed Loans.

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          (b) With respect to all Loans made by Agent on behalf of Lenders as
provided in this Section, the amount of each Lender’s Pro Rata Share of the
outstanding Loans shall be computed weekly, and shall be adjusted upward or
downward on the basis of the amount of the outstanding Loans as of 5:00 p.m.
(Atlanta, Georgia time) on the Business Day immediately preceding the date of
each settlement computation; provided, that, Agent retains the absolute right at
any time or from time to time to make the above described adjustments at
intervals more frequent than weekly, but in no event more than twice in any
week. Agent shall deliver to each of the Lenders after the end of each week, or
at such lesser period or periods as Agent shall determine, a summary statement
of the amount of outstanding Loans for such period (such week or lesser period
or periods being hereinafter referred to as a “Settlement Period”). If the
summary statement is sent by Agent and received by a Lender prior to 12:00 p.m.
(Atlanta, Georgia time), then such Lender shall make the settlement transfer
described in this Section by no later than 3:00 p.m. (Atlanta, Georgia time) on
the same Business Day and if received by a Lender after such time, then such
Lender shall make the settlement transfer by not later than 3:00 p.m. (Atlanta,
Georgia time) on the next Business Day following the date of receipt. If, as of
the end of any Settlement Period, the amount of a Lender’s Pro Rata Share of the
outstanding Loans is more than such Lender’s Pro Rata Share of the outstanding
Loans as of the end of the previous Settlement Period, then such Lender shall
forthwith (but in no event later than the time set forth in the preceding
sentence) transfer to Agent by wire transfer in immediately available funds the
amount of the increase. Alternatively, if the amount of a Lender’s Pro Rata
Share of the outstanding Loans in any Settlement Period is less than the amount
of such Lender’s Pro Rata Share of the outstanding Loans for the previous
Settlement Period, Agent shall forthwith transfer to such Lender by wire
transfer in immediately available funds the amount of the decrease. The
obligation of each of the Lenders to transfer such funds and effect such
settlement shall be irrevocable and unconditional and without recourse to or
warranty by Agent. Agent and each Lender agrees to mark its books and records at
the end of each Settlement Period to show at all times the dollar amount of its
Pro Rata Share of the outstanding Loans and Letters of Credit. Each Lender shall
only be entitled to receive interest on its Pro Rata Share of the Loans to the
extent such Loans have been funded by such Lender. Because Agent on behalf of
Lenders may be advancing and/or may be repaid Loans prior to the time when
Lenders will actually advance and/or be repaid such Loans, interest with respect
to Loans shall be allocated by Agent in accordance with the amount of Loans
actually advanced by and repaid to each Lender and Agent and shall accrue from
and including the date such Loans are so advanced to but excluding the date such
Loans are either repaid by Borrowers or actually settled with the applicable
Lender as described in this Section.
          (c) To the extent that Agent has made any such amounts available and
the settlement described above shall not yet have occurred, upon repayment of
any Loans by Borrower, Agent may apply such amounts repaid directly to any
amounts made available by Agent pursuant to this Section. In lieu of weekly or
more frequent settlements, Agent may, at its option, at any time require each
Lender to provide Agent with immediately available funds representing its Pro
Rata Share of each Loan, prior to Agent’s disbursement of such Loan to Borrower.
In such event, all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately to their Pro Rata Shares. No Lender shall be
responsible for any default by any other Lender in the other Lender’s obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender’s obligation to make a Loan hereunder.
          (d) If Agent is funding a particular Loan to a Borrower (or
Administrative Borrower for the benefit of such Borrower) pursuant to this
Section above on any day, Agent may

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assume that each Lender will make available to Agent such Lender’s Pro Rata
Share of the Loan requested or otherwise made on such day and Agent may, in its
discretion, but shall not be obligated to, cause a corresponding amount to be
made available to or for the benefit of Borrower on such day. If Agent makes
such corresponding amount available to Borrower and such corresponding amount is
not in fact made available to Agent by such Lender, Agent shall be entitled to
recover such corresponding amount on demand from such Lender together with
interest thereon for each day from the date such payment was due until the date
such amount is paid to Agent at the Federal Funds Rate for each day during such
period (as published by the Federal Reserve Bank of Atlanta or at Agent’s option
based on the arithmetic mean determined by Agent of the rates for the last
transaction in overnight Federal funds arranged prior to 9:00 a.m. (Atlanta,
Georgia time) on that day by each of the three leading brokers of Federal funds
transactions in New York City selected by Agent) and if such amounts are not
paid within three (3) days of Agent’s demand, at the highest Interest Rate
provided for in Section 3.1 hereof applicable to Prime Rate Loans. During the
period in which such Lender has not paid such corresponding amount to Agent,
notwithstanding anything to the contrary contained in this Agreement or any of
the other Financing Agreements, the amount so advanced by Agent to or for the
benefit of any Borrower shall, for all purposes hereof, be a Loan made by Agent
for its own account. Upon any such failure by a Lender to pay Agent, Agent shall
promptly thereafter notify Administrative Borrower of such failure and Borrowers
shall pay such corresponding amount to Agent for its own account within five
(5) Business Days of Administrative Borrower’s receipt of such notice. A Lender
who fails to pay Agent its Pro Rata Share of any Loans made available by Agent
on such Lender’s behalf, or any Lender who fails to pay any other amount owing
by it to Agent, is a “Defaulting Lender”. Agent shall not be obligated to
transfer to a Defaulting Lender any payments received by Agent for the
Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder (including any principal, interest or fees).
Amounts payable to a Defaulting Lender shall instead be paid to or retained by
Agent. Agent may hold and, in its discretion, re-lend to a Borrower the amount
of all such payments received or retained by it for the account of such
Defaulting Lender. For purposes of voting or consenting to matters with respect
to this Agreement and the other Financing Agreements and determining Pro Rata
Shares, such Defaulting Lender shall be deemed not to be a “Lender and such
Lender’s Commitment shall be deemed to be zero (0). This Section shall remain
effective with respect to a Defaulting Lender until such default is cured. The
operation of this Section shall not be construed to increase or otherwise affect
the Commitment of any Lender, or relieve or excuse the performance by any
Borrower or any Obligor of their duties and obligations hereunder.
          (e) Nothing in this Section or elsewhere in this Agreement or the
other Financing Agreements shall be deemed to require Agent to advance funds on
behalf of any Lender or to relieve any Lender from its obligation to fulfill its
Commitment hereunder or to prejudice any rights that any Borrower may have
against any Lender as a result of any default by any Lender hereunder in
fulfilling its Commitment.
     6.10 Obligations Several; Independent Nature of Lenders’ Rights. The
obligation of each Lender hereunder is several, and no Lender shall be
responsible for the obligation or commitment of any other Lender hereunder.
Nothing contained in this Agreement or any of the other Financing Agreements and
no action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity. The amounts payable at any time hereunder to each
Lender shall be a separate and independent debt, and subject to Section 12.3
hereof, each Lender shall be entitled to protect and enforce its rights arising
out of this Agreement and it shall not be necessary for any other Lender to be
joined as an additional party in any proceeding for such purpose.

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     6.11 Appointment of Administrative Borrower as Agent for Requesting Loans
and Receipts of Loans and Statements.
          (a) Each Borrower hereby irrevocably appoints and constitutes
Administrative Borrower as its agent and attorney-in-fact to request and receive
Loans and Letters of Credit pursuant to this Agreement and the other Financing
Agreements from Agent or any Lender in the name or on behalf of such Borrower.
Agent and Lenders may disburse the Loans to such bank account of Administrative
Borrower or a Borrower or otherwise make such Loans to a Borrower and provide
such Letters of Credit to a Borrower as Administrative Borrower may designate or
direct, without notice to any other Borrower or Guarantor. Notwithstanding
anything to the contrary contained herein, Agent may at any time and from time
to time require that Loans to or for the account of any Borrower be disbursed
directly to an operating account of such Borrower.
          (b) Administrative Borrower hereby accepts the appointment by
Borrowers to act as the agent and attorney-in-fact of Borrowers pursuant to this
Section 6.8. Administrative Borrower shall ensure that the disbursement of any
Loans to each Borrower requested by or paid to or for the account of Parent, or
the issuance of any Letter of Credit for a Borrower hereunder, shall be paid to
or for the account of such Borrower.
          (c) Each Borrower and other Guarantor hereby irrevocably appoints and
constitutes Administrative Borrower as its agent to receive statements on
account and all other notices from Agent and Lenders with respect to the
Obligations or otherwise under or in connection with this Agreement and the
other Financing Agreements.
          (d) Any notice, election, representation, warranty, agreement or
undertaking by or on behalf of any other Borrower or any Guarantor by
Administrative Borrower shall be deemed for all purposes to have been made by
such Borrower or Guarantor, as the case may be, and shall be binding upon and
enforceable against such Borrower or Guarantor to the same extent as if made
directly by such Borrower or Guarantor.
          (e) No purported termination of the appointment of Administrative
Borrower as agent as aforesaid shall be effective, except after ten (10) days’
prior written notice to Agent.
     6.12 Nature and Extent of Each Borrower’s Liability.
          (a) Each Borrower shall be liable for, on a joint and several basis,
and hereby guarantees the timely payment by all other Borrowers of, all of the
Loans and other Obligations, regardless of which Borrower actually may have
received the proceeds of any Loans or other extensions of credit hereunder or
the amount of such Loans received or the manner in which Agent or any Lender
accounts for such Loans or other extensions of credit on its books and records,
it being acknowledged and agreed that Loans to any Borrower inure to the mutual
benefit of all Borrowers and that Agent and Lenders are relying on the joint and
several liability of Borrowers in extending the Loans and other financial
accommodations hereunder. Each Borrower hereby unconditionally and irrevocably
agrees that upon default in the payment when due (whether at stated maturity, by
acceleration or otherwise) of any principal of, or interest owed on, any of the
Loans or other Obligations, such Borrower shall forthwith pay the same, without
notice or demand.

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          (b) Each Borrower’s joint and several liability hereunder with respect
to, and guaranty of, the Loans and other Obligations shall, to the fullest
extent permitted by applicable law, be unconditional irrespective of (i) the
validity, enforceability, avoidance or subordination of any of the Obligations
or of any promissory note or other document evidencing all or any part of the
Obligations, (ii) the absence of any attempt to collect any of the Obligations
from any other Borrower or any Guarantor or any Collateral or other security
therefor, or the absence of any other action to enforce the same, (iii) the
waiver, consent, extension, forbearance or granting of any indulgence by Agent
or any Lender with respect to any provision of any instrument evidencing or
securing the payment of any of the Obligations, or any other agreement now or
hereafter executed by any other Borrower and delivered to Agent or any Lender,
(iv) the failure by Agent to take any steps to perfect or maintain the perfected
status of its security interest in or lien upon, or to preserve its rights to,
any of the Collateral or other security for the payment or performance of any of
the Obligations or Agent’s release of any Collateral or of its security
interests or liens upon any Collateral, (v) Agent’s or Lenders’ election, in any
proceeding instituted under the Bankruptcy Code, for the application of
Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or grant of a
security interest by any other Borrower, as debtor-in-possession under
Section 364 of the Bankruptcy Code, (vii) the release or compromise, in whole or
in part, of the liability of any Borrower or Guarantor for the payment of any of
the Obligations, (viii) any amendment or modification of any of the Financing
Agreements or any waiver of a Default or Event of Default, (ix) any increase in
the amount of the Obligations beyond any limits imposed herein or in the amount
of any interest, fees or other charges payable in connection therewith, or any
decrease in the same, (x) the disallowance of all or any portion of Agent’s or
any Lender’s claims against any other Borrower or Guarantor for the repayment of
any of the Obligations under Section 502 of the Bankruptcy Code, or (xi) any
other circumstance that might constitute a legal or equitable discharge or
defense of any Borrower. After the occurrence and during the continuance of any
Event of Default, Agent may proceed directly and at once, without notice to any
Borrower or Guarantor, against any or all of Borrowers to collect and recover
all or any part of the Obligations, without first proceeding against any other
Borrower or Guarantor or against any Collateral or other security for the
payment or performance of any of the Obligations, and each Borrower waives any
provision under applicable law that might otherwise require Agent to pursue or
exhaust its remedies against any Collateral or Borrower or Guarantor before
pursuing another Borrower or Guarantor. Each Borrower consents and agrees that
Agent shall be under no obligation to marshal any assets in favor of any
Borrower or Guarantor or against or in payment of any or all of the Obligations.
          (c) No payment or payments made by a Borrower or Guarantor or received
or collected by Agent from a Borrower or any other Person by virtue of any
action or proceeding or any setoff or appropriation or application at any time
or from time to time in reduction of or in payment of the Obligations shall be
deemed to modify, reduce, release or otherwise affect the liability of any
Borrower under this Agreement, each of whom shall remain jointly and severally
liable for the payment and performance of all Loans and other Obligations until
full payment of the Obligations.
          (d) Each Borrower is unconditionally obligated to repay the
Obligations as a joint and several obligor under this Agreement. If, as of any
date, the aggregate amount of payments made by a Borrower on account of the
Obligations and proceeds of such Borrower’s Collateral that are applied to the
Obligations exceeds the aggregate amount of Loan proceeds actually used by such
Borrower in its business (such excess amount being referred to as an
“Accommodation Payment”), then each of the other Borrowers (each such Borrower
being referred to as a “Contributing Borrower”) shall be obligated to make
contribution to such Borrower (the “Paying Borrower”) in an amount equal to (A)
the product derived by multiplying the sum of each Accommodation Payment of

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each Borrower by the Allocable Percentage of the Borrower from whom contribution
is sought less (B) the amount, if any, of the then outstanding Accommodation
Payment of such Contributing Borrower (such last mentioned amount which is to be
subtracted from the aforesaid product to be increased by any amounts theretofore
paid by such Contributing Borrower by way of contribution hereunder, and to be
decreased by any amounts theretofore received by such Contributing Borrower by
way of contribution hereunder); provided, however, that a Paying Borrower’s
recovery of contribution hereunder from the other Borrowers shall be limited to
that amount paid by the Paying Borrower in excess of its Allocable Percentage of
all Accommodation Payments then outstanding of all Borrowers. As used herein,
the term “Allocable Percentage” shall mean, on any date of determination
thereof, a fraction the denominator of which shall be equal to the number of
Borrowers who are parties to this Agreement on such date and the numerator of
which shall be 1; provided, however, that such percentages shall be modified in
the event that contribution from a Borrower is not possible by reason of
insolvency, bankruptcy or otherwise by reducing such Borrower’s Allocable
Percentage equitably and by adjusting the Allocable Percentage of the other
Borrowers proportionately so that the Allocable Percentages of all Borrowers at
all times equals 100%.
          (e) Each Borrower hereby subordinates any claims, including any right
of payment, subrogation, contribution and indemnity, that it may have from or
against any other Borrower or any Guarantor, and any successor or assign of any
other Borrower or any Guarantor, including any trustee, receiver or
debtor-in-possession, howsoever arising, due or owing or whether heretofore, now
or hereafter existing, to the full payment of all of the Obligations.
     6.13 Taxes.
          (a) Any and all payments by or on account of any of the Obligations
shall be made free and clear of and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, charges, withholdings, liabilities, restrictions or conditions
of any kind, excluding (i) in the case of each Lender, Issuing Bank and Agent
(A) taxes measured by its net income, and franchise taxes imposed on it, by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Lender, Issuing Bank or Agent (as the case may be) is organized and (B) any
United States withholding taxes payable with respect to payments under the
Financing Agreements under laws (including any statute, treaty or regulation) in
effect on the date hereof (or, in the case of an Eligible Transferee, the date
of the Assignment and Acceptance) applicable to such Lender, Issuing Bank or
Agent, as the case may be, but not excluding any United States withholding taxes
payable as a result of any change in such laws occurring after the date hereof
(or the date of such Assignment and Acceptance) and (ii) in the case of each
Lender, taxes measured by its net income, and franchise taxes imposed on it as a
result of a present or former connection between such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any taxing
authority thereof or therein (all such non-excluded taxes, levies, imposts,
fees, deductions, charges, withholdings and liabilities being hereinafter
referred to as “Taxes”).
          (b) If any Taxes shall be required by law to be deducted from or in
respect of any sum payable in respect of the Obligations to any Lender, Issuing
Bank or Agent (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 6.13), such Lender, Issuing Bank or
Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the relevant Borrower shall make
such deductions, (iii) the relevant Borrower shall pay the full amount deducted
to the relevant taxing authority or other

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authority in accordance with applicable law and (iv) the relevant Borrower shall
deliver to Agent evidence of such payment.
          (c) In addition, each Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies of the United States or any political subdivision thereof or any
applicable foreign jurisdiction, and all liabilities with respect thereto, in
each case arising from any payment made hereunder or under any of the other
Financing Agreements or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any of the other Financing
Agreements (collectively, “Other Taxes”).
          (d) Each Borrower shall indemnify each Lender, Issuing Bank and Agent
for the full amount of Taxes and Other Taxes (including any Taxes and Other
Taxes imposed by any jurisdiction on amounts payable under this Section 6.13)
paid by such Lender, Issuing Bank or Agent (as the case may be) and any
liability (including for penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted; provided, that, if such Lender, Issuing Bank or Agent is
successful in obtaining a refund of any Taxes or Other Taxes that were
incorrectly or illegally asserted, such Lender, Issuing Bank or Agent, as
applicable, shall promptly remit the portion of such refunded amount, if any,
paid by Borrowers under this Section 6.13(d) in respect of such incorrect or
illegal Taxes or Other Taxes. This indemnification shall be made within thirty
(30) days from the date such Lender, Issuing Bank or Agent (as the case may be)
makes written demand therefor. A certificate as to the amount of such payment or
liability delivered to Administrative Borrower by a Lender, Issuing Bank (with a
copy to Agent) or by Agent on its own behalf or on behalf of a Lender or Issuing
Bank, shall be conclusive absent manifest error.
          (e) As soon as practicable after any payment of Taxes or Other Taxes
by any Borrower, such Borrower shall furnish to Agent, at its address referred
to herein, the original or a certified copy of a receipt evidencing payment
thereof.
          (f) Without prejudice to the survival of any other agreements of any
Borrower hereunder or under any of the other Financing Agreements, the
agreements and obligations of such Borrower contained in this Section 6.13 shall
survive the termination of this Agreement and the payment in full of the
Obligations.
          (g) Any Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
applicable Borrower is resident for tax purposes, or any treaty to which such
jurisdiction is a party, with respect to payments hereunder or under any of the
other Financing Agreements shall deliver to Administrative Borrower (with a copy
to Agent), at the time or times prescribed by applicable law or reasonably
requested by Administrative Borrower or Agent (in such number of copies as is
reasonably requested by the recipient), whichever of the following is applicable
(but only if such Foreign Lender is legally entitled to do so): (i) duly
completed copies of Internal Revenue Service Form W-8BEN claiming exemption
from, or a reduction to, withholding tax under an income tax treaty, or any
successor form, (ii) duly completed copies of Internal Revenue Service Form
8-8ECI claiming exemption from withholding because the income is effectively
connection with a U.S. trade or business or any successor form, (iii) in the
case of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under Sections 871(h) or 881(c) of the Code, (A) a certificate of the
Lender to the effect that such Lender is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of a Borrower
within the meaning of Section 881(c)(3)(B) of the Code or a

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“controlled foreign corporation” described and Section 881(c)(3)(C) of the Code
and (B) duly completed copies of Internal Revenue Service Form W-8BEN claiming
exemption from withholding under the portfolio interest exemption or any
successor form or (iv) any other applicable form, certificate or document
prescribed by applicable law as a basis for claiming exemption from or a
reduction in United States withholding tax duly completed together with such
supplementary documentation as may be prescribed by applicable law to permit a
Borrower to determine the withholding or deduction required to be made. Unless
Administrative Borrower and Agent have received forms or other documents
satisfactory to them indicating that payments hereunder or under any of the
other Financing Agreements to or for a Foreign Lender are not subject to United
States withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty, Borrowers or Agent shall withhold amounts required to be
withheld by applicable requirements of law from such payments at the applicable
statutory rate.
          (h) Any Lender claiming any additional amounts payable pursuant to
this Section 6.13 shall use its reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to change the jurisdiction of its
applicable lending office if the making of such a change would avoid the need
for, or reduce the amount of, any such additional amounts that would be payable
or may thereafter accrue and would not, in the sole determination of such
Lender, be otherwise disadvantageous to such Lender.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
     Each Borrower hereby covenants and agrees, on behalf of itself and its
Subsidiaries, as applicable below, as follows:
     7.1 Collateral Reporting.
               (a) Borrowers shall provide Agent with the following documents in
a form satisfactory to Agent:
                    (i) on a weekly basis or more frequently as required by
Lender, (A) a schedule of sales made, credits issued and cash received, and
(B) each Due From Factor Report, together with copies of all data and other
information requested by Agent from which each such Due From Factor Report is
derived.
                    (ii) on a monthly basis or more frequently as Lender may
request, (A) a report detailing the calculation of the Borrowing Base certified
by the chief financial officer of Delta or an authorized designee thereof, in
form and substance satisfactory to Agent, (B) perpetual inventory reports,
(C) inventory reports by location and category, (D) agings of accounts payable,
and (E) agings of accounts receivable (together with a reconciliation to the
previous month’s aging and general ledger)
                    (iii) upon Agent’s request, (A) copies of customer
statements and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents, and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrowers;
                    (iv) reports detailing any sales or transfers of Equipment
or Real Property during the prior month; and

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               (v) such other reports as to the Collateral as Agent shall
request from time to time.
          (b) If any of Borrowers’ records or reports of the Collateral are
prepared or maintained by an accounting service, contractor, shipper or other
agent, Borrowers hereby irrevocably authorizes such service, contractor, shipper
or agent to deliver such records, reports, and related documents to Agent and to
follow Agent’s instructions with respect to further services at any time that an
Event of Default exists or has occurred and is continuing.
     7.2 Accounts Covenants.
          (a) Borrowers shall notify Agent promptly of: (i) any material delay
in any Borrower’s performance of any of its obligations to any account debtor
involving an Account exceeding $500,000 or the assertion of any claims, offsets,
defenses or counterclaims by any account debtor involving an amount exceeding
$500,000, or any disputes with account debtors, or any settlement, adjustment or
compromise thereof involving an amount exceeding $500,000, (ii) all material
adverse information relating to the financial condition of any account debtor
and (iii) any event or circumstance which, to any Borrower’s knowledge would
cause Agent to consider any then existing Accounts as no longer constituting
Eligible Accounts. No credit, discount, allowance or extension or agreement for
any of the foregoing shall be granted to any account debtor without Agent’s
consent, except in the ordinary course of a Borrower’s business in accordance
with such Borrower’s historical practices and policies. So long as no Event of
Default exists or has occurred and is continuing, Borrowers shall settle, adjust
or compromise any claim, offset, counterclaim or dispute with any account
debtor. At any time that an Event of Default exists or has occurred and is
continuing, Agent shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
          (b) Without limiting the obligation of Borrowers to deliver any other
information to Agent, Borrowers shall promptly report to Agent any return of
Inventory by any one account debtor if (i) the Inventory so returned in such
case has a value in excess of $200,000, and (ii) the Account arising out of the
sale of the Inventory so returned was not already excluded from Eligible
Accounts in whole or in part as a result of the account debtor’s potential
return rights with respect to such Inventory. At any time that Inventory is
returned, reclaimed or repossessed, the Account (or portion thereof) which arose
from the sale of such returned, reclaimed or repossessed Inventory shall not be
deemed an Eligible Account. In the event any account debtor returns Inventory
when an Event of Default exists or has occurred and is continuing, Borrowers
shall, upon Agent’s request, (i) hold the returned Inventory in trust for Agent,
(ii) segregate all returned Inventory from all of its other property,
(iii) dispose of the returned Inventory solely according to Agent’s
instructions, and (iv) not issue any credits, discounts or allowances with
respect thereto without Agent’s prior written consent.
          (c) With respect to each Account: (i) the amounts shown on any invoice
delivered to Agent or schedule thereof delivered to Agent shall be true and
complete, (ii) no payments shall be made thereon except payments immediately
delivered to Agent pursuant to the terms of this Agreement, (iii) no credit,
discount, allowance or extension or agreement for any of the foregoing shall be
granted to any account debtor except as reported to Agent in accordance with
this Agreement and except for credits, discounts, allowances or extensions made
or given in the ordinary course of each Borrower’s business in accordance with
practices and policies previously disclosed to

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Agent, (iv) there shall be no setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Agent in accordance with the terms of this Agreement, (v) none of
the transactions giving rise thereto will violate any applicable State or
Federal laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms.
          (d) Agent shall have the right at any time or times, in Agent’s name
or in the name of a nominee of Agent, to verify the validity, amount or any
other matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
          (e) Borrowers shall deliver or cause to be delivered to Agent, with
appropriate endorsement and assignment, with full recourse to Borrowers, all
chattel paper and instruments which any Borrower now owns or may at any time
acquire immediately upon any Borrower’s receipt thereof, except as Agent may
otherwise agree.
     7.3 Inventory Covenants. With respect to the Inventory: (a) each Borrower
shall at all times maintain inventory records reasonably satisfactory to Agent,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, such Borrower’s cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrowers shall conduct cycle
counts of the Inventory throughout each year, but shall conduct a physical count
of Inventory at any time or times as Agent may request on or after an Event of
Default, and promptly following such physical inventory shall supply Agent with
a report in the form and with such specificity as may be reasonably satisfactory
to Agent concerning such physical count; (c) Borrowers shall not remove any
Inventory from the locations set forth or permitted herein, without the prior
written consent of Agent, except for sales of Inventory in the ordinary course
of a Borrower’s business and except to move Inventory directly from one location
set forth or permitted herein to another such location and except for Inventory
shipped from the manufacturer thereof to such Borrower which is in transit to
the locations set forth or permitted herein; each Borrower shall, at its
expense, at any time or times as Agent may request upon the occurrence or during
the existence of an Event of Default, deliver or cause to be delivered to Agent
written reports or appraisals as to the Inventory in form, scope and methodology
acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and Lenders upon which Agent and Lenders are expressly permitted to rely;
(e) each Borrower shall produce, use, store and maintain the Inventory with all
reasonable care and caution and in accordance with applicable standards of any
insurance and in conformity with applicable laws (including the requirements of
the Federal Fair Labor Standards Act of 1938, as amended and all rules,
regulations and orders related thereto); (f) each Borrower assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; (g) Borrowers shall not sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate any Borrower to repurchase such Inventory
except for the right of return given to customers of such Borrower consistent
with its current policies as of the date hereof; (h) each Borrower shall keep
the Inventory in good and marketable condition; and (i) Borrowers shall not,
without prior written notice to Agent, acquire or accept any Inventory on
consignment or approval.
     7.4 Equipment and Real Property Covenants. With respect to the Equipment
and Real Property: (a) each Borrower shall, at its expense, at any time or times
as Agent may request upon the occurrence or during the existence of an Event of
Default, deliver or cause to be delivered to Agent written reports or appraisals
as to the Equipment and/or the Real Property in form, scope and methodology
acceptable to Agent and by an appraiser acceptable to Agent, addressed to Agent
and

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Lenders and upon which Agent and Lenders are expressly permitted to rely;
(b) Borrowers shall keep the Equipment in good order, repair, running and
marketable condition (ordinary wear and tear excepted); (c) Borrowers shall use
the Equipment and Real Property with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with all
applicable laws; (d) the Equipment is and shall be used in a Borrower’s business
and not for personal, family, household or farming use; (e) Borrowers shall not
remove any Equipment from the locations set forth or permitted herein, except to
the extent necessary to have any Equipment repaired or maintained in the
ordinary course of the business of a Borrower or to move Equipment directly from
one location set forth or permitted herein to another such location except for
the movement of motor vehicles used by or for the benefit of such Borrower in
the ordinary course of business and Borrowers shall not remove any Equipment
currently located in the United States to any location outside of the United
States except for (i) the textile equipment currently located at 1015 Temple
Avenue South, Fayette, Alabama, and (ii) the cutting equipment currently located
at 100 West Pine Street, Maiden, North Carolina; (f) the Equipment is now and
shall remain personal property and Borrowers shall not permit any of the
Equipment to be or become a part of or affixed to real property so as to become
a fixture or an accession to real property unless it is attached to the Real
Property subject to the Mortgage; and (g) each Borrower assumes all
responsibility and liability arising from the use of the Equipment and Real
Property.
     7.5 Power of Attorney. Each Borrower hereby irrevocably designates and
appoints Agent (and all Persons designated by Agent) as such Borrower’s true and
lawful attorney-in-fact, and authorizes Agent, in such Borrower’s or Agent’s
name, to: (a) at any time a Default or an Event of Default exists or has
occurred and is continuing (i) demand payment on Receivables or other
Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of such Borrower’s rights and remedies to collect
any Receivable or other Collateral, (iv) sell or assign any Receivable upon such
terms, for such amount and at such time or times as Agent deems advisable,
(v) settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Receivable, (vii) prepare, file and sign such Borrower’s name on any
proof of claim in bankruptcy or other similar document against an account debtor
or other obligor in respect of any Receivables or other Collateral,
(viii) notify the post office authorities to change the address for delivery of
remittances from account debtors or other obligors in respect of Receivables or
other proceeds of Collateral to an address designated by Agent, and open and
dispose of all mail addressed to such Borrower and handle and store all mail
relating to the Collateral; and (ix) do all acts and things which are necessary,
in Agent’s determination, to fulfill such Borrower’s obligations under this
Agreement and the other Financing Agreements and (b) at any time to (i) after a
Cash Dominion Trigger Date and until such time (if any) as Agent has confirmed
that no Event of Default then exists and Borrowers have maintained Excess
Availability of at least $5,000,000 for 60 consecutive days, take control in any
manner of any item of payment in respect of Receivables or constituting
Collateral or otherwise received in or for deposit in the Blocked Accounts or
otherwise received by Agent or any Lender, including pursuant to Section 6.3(a),
(ii) after a Cash Dominion Trigger Date and until such time (if any) as Agent
has confirmed that no Event of Default then exists and Borrowers have maintained
Excess Availability of at least $5,000,000 for 60 consecutive days, have access
to any lockbox or postal box into which remittances from account debtors or
other obligors in respect of Receivables or other proceeds of Collateral are
sent or received, (iii) endorse such Borrower’s name upon any items of payment
in respect of Receivables or constituting Collateral or otherwise received by
Agent and any Lender and deposit the same in Agent’s account for application to
the Obligations, (iv) endorse such Borrower’s name upon any chattel paper,
document, instrument, invoice, or similar document or agreement relating to any
Receivable or any goods pertaining thereto or any other Collateral, including
any warehouse or other receipts, or bills of lading and other negotiable or non-

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negotiable documents, (v) clear Inventory the purchase of which was financed
with a Letter of Credit through U.S. Customs in such Borrower’s name, Agent’s
name or the name of Agent’s designee, and to sign and deliver to customs
officials powers of attorney in such Borrower’s name for such purpose, and to
complete in such Borrower’s or Agent’s name, any order, sale or transaction,
obtain the necessary documents in connection therewith and collect the proceeds
thereof, (vi) sign such Borrower’s name on any verification of Receivables and
notices thereof to account debtors or other obligors in respect thereof and
(vii) execute in such Borrower’s name and file any UCC financing statements or
amendments thereto. Each Borrower hereby releases Agent and Lenders and their
respective officers, employees and designees from any liabilities arising from
any act or acts under this power of attorney and in furtherance thereof, whether
of omission or commission, except as a result of Agent’s or any Lender’s own
gross negligence or willful misconduct as determined pursuant to a final
non-appealable order of a court of competent jurisdiction.
     7.6 Right to Cure. Agent may, at its option, (a) upon notice to
Administrative Borrower, cure any default by any Borrower under any material
agreement with a third party which affects the Collateral, its value or the
ability of Agent to collect, sell or otherwise dispose of the Collateral or the
rights and remedies of Agent therein or the ability of any Borrower to perform
its obligations hereunder or under the other Financing Agreements, (b) pay or
bond on appeal any judgment entered against any Borrower, (c) discharge taxes,
liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (d) pay any amount, incur any
expense or perform any act which, in Agent’s judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Agent and Lenders with respect thereto. Agent may add any amounts so
expended to the Obligations and charge Borrowers’ account therefor, such amounts
to be repayable by Borrowers on demand. Agent and Lenders shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of any Borrower. Any
payment made or other action taken by Agent or any Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
     7.7 Access to Premises. From time to time as requested by Agent, at the
cost and expense of Borrowers, (a) Agent or its designee shall have complete
access to all of each Borrower’s premises during normal business hours and after
notice to Administrative Borrower, or at any time and without notice to any
Borrower if an Event of Default exists or has occurred and is continuing, for
the purposes of inspecting, verifying and auditing the Collateral and all of
each Borrower’s books and records, including the Records, and (b) each Borrower
shall promptly furnish to Agent such copies of such books and records or
extracts therefrom as Agent may request, and (c) Agent or any Lender or Agent’s
designee may use during normal business hours such of any Borrower’s personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing (provided, that, such Borrower shall make such personnel, equipment,
supplies and premises available to Agent or its designee in such manner so as to
minimize any interference with the operations of such Borrower and so as to
enable Agent or its designee to comply with applicable health and safety
procedures and regulations) and if an Event of Default exists or has occurred
and is continuing for the collection of Accounts and realization of other
Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
     Each Borrower hereby represents and warrants to Agent, Lenders and Issuing
Bank the following (which shall survive the execution and delivery of this
Agreement), the truth and accuracy

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of which are a continuing condition of the making of Loans and providing Letters
of Credit to Borrowers:
     8.1 Corporate Existence, Power and Authority; Subsidiaries. Each Borrower
is a corporation duly organized and in good standing under the laws of its state
of incorporation and is duly qualified as a foreign corporation and in good
standing, in all states or other jurisdictions where the nature and extent of
the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the financial condition,
results of operation or business of such Borrower and its Subsidiaries, taken as
whole, or the rights of Agent in or to any of the Collateral. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder are all within each
Borrower’s corporate powers, have been duly authorized, are not in contravention
of law or the terms of any Borrower’s certificate of incorporation, by-laws, or
other organizational documentation, or any indenture, agreement or undertaking
to which any Borrower is a party or by which any Borrower or its property are
bound, and will not result in the creation or imposition of, or require or give
rise to any obligation to grant, any lien, security interest, charge or other
encumbrance upon any property of any Borrower except as otherwise expressly
permitted pursuant to Section 9.8 of this Agreement. This Agreement and the
other Financing Agreements constitute legal, valid and binding obligations of
each Borrower enforceable in accordance with their respective terms.
     8.2 Name; State of Organization; Chief Executive Office; Collateral
Locations.
          (a) The exact legal name of each Borrower is as set forth on the
signature page of this Agreement and in the Information Certificate. No Borrower
has, during the five years prior to the date of this Agreement, been known by or
used any other corporate or fictitious name or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any Person,
or acquired any of its property or assets out of the ordinary course of
business, except as set forth in the Information Certificate.
          (b) Each Borrower is an organization of the type and organized in the
jurisdiction set forth in the Information Certificate. The Information
Certificate accurately sets forth the organizational identification number of
each Borrower or accurately states that such Borrower has none and accurately
sets forth the federal employer identification number of each Borrower.
          (c) The chief executive office and mailing address of each Borrower
and each Borrower’s Records concerning Accounts are located only at the address
identified as such in Schedule 8.2 and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in
Schedule 8.2, subject to the rights of any Borrower to establish new locations
in accordance with Section 9.2 below. The Information Certificate correctly
identifies any of such locations which are not owned by a Borrower and sets
forth the owners and/or operators thereof.
     8.3 Financial Statements; No Material Adverse Change.
          (a) All financial statements relating to any Borrower which have been
or may hereafter be delivered by any Borrower to Agent and Lenders have been
prepared in accordance with GAAP and fairly present the financial condition and
the results of operation of such Borrower as at the dates and for the periods
set forth therein. Except as disclosed in any interim financial statements
furnished by Borrowers to Agent prior to the date of this Agreement, there has
been no act, condition

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or event which has had or is reasonably likely to have a Material Adverse Effect
since the date of the most recent audited financial statements furnished by
Borrowers to Agent prior to the date of this Agreement.
          (b) The pro forma balance sheets and future cash flow projections for
Borrowers and their Subsidiaries (together with the summaries of assumptions and
projected assumptions, based on historical performance with respect thereto)
furnished by Borrowers to Agent prior to the date of this Agreement represent
the reasonable, good faith opinion of Borrowers and their management as to the
subject matter thereof.
     8.4 Priority of Liens, Title to Properties. The security interests and
liens granted to Agent under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof other than
Collateral located in a Borrower’s locations outside of the United States as set
forth in item 9 of the Information Certificate. Each Borrower has good and
marketable title to all of its properties and assets subject to no liens,
mortgages, pledges, security interests, encumbrances or charges of any kind,
except those granted to Agent and such others as are specifically listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.
     8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it. All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Each Borrower has paid or caused
to be paid all taxes due and payable or claimed due and payable in any
assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower and with respect to which adequate reserves have been
set aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
     8.6 Litigation. Except as set forth on the Information Certificate, there
is no present investigation by any Governmental Authority pending, or to the
best of each Borrower’s knowledge threatened, against or affecting any Borrower,
its assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of each Borrower’s knowledge threatened, against
any Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against any
Borrower could reasonably be expected to have a Material Adverse Effect.
     8.7 Compliance with Other Agreements and Applicable Laws.

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          (a) Borrowers are not in default in any material respect under, or in
violation in any material respect of any of the terms of, any agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound. Borrower is in compliance in all
material respects with the requirements of all applicable laws, rules,
regulations and orders of any Governmental Authority relating to its business,
including those set forth in or promulgated pursuant to the Occupational Safety
and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as
amended, ERISA, the Code, as amended, and the rules and regulations thereunder,
all Federal, State and local statutes, regulations, rules and orders relating to
consumer credit (including, as each has been amended, the Truth-in-Lending Act,
the Fair Credit Billing Act, the Equal Credit Opportunity Act and the Fair
Credit Reporting Act, and regulations, rules and orders promulgated thereunder),
all Federal, State and local states, regulations, rules and orders pertaining to
sales of consumer goods (including, without limitation, the Consumer Products
Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914, as
amended, and all regulations, piles and orders promulgated thereunder).
          (b) Each Borrower has obtained all material permits, licenses,
approvals, consents, certificates, orders or authorizations of any governmental
agency required for the lawful conduct of its business. Schedule 8.7 hereto sets
forth all material permits, licenses, approvals, consents, certificates, orders
or authorizations (the “Permits”) issued to or held by each Borrower as of the
date hereof by any Federal, State or local governmental agency and any
applications pending by each Borrower with such federal, state or local
governmental agency. The Permits constitute all permits, licenses, approvals,
consents, certificates, orders or authorizations necessary for each Borrower to
own and operate its business as presently conducted or proposed to be conducted
where the failure to have such Permits would have a material adverse effect on
the business, performance, operations or properties of such Borrower or the
legality, validity or enforceability of this Agreement or the other Financing
Agreements or the ability of Borrowers and their respective Subsidiaries, taken
as a whole, to perform its obligations under the Agreement or any of the other
Financing Agreements or the rights and remedies of Agent under this Agreement or
any of the other Financing Agreements. All of the Permits are valid and
subsisting and in full force and effect. There are no actions, claims or
proceedings pending or threatened that seek the revocation, cancellation,
suspension or modification of any of the Permits.
     8.8 Anti-Terrorism Laws.
          (a) General. None of the Obligors or their Affiliates is in violation
of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any Anti-Terrorism Law.
          (b) Executive Order No. 13224. None of the Credit Party or their
Affiliates is any of the following (each a “Blocked Person”):
               (i) a Person owned or controlled by, or acting for or on behalf
of, any Person that is listed in the annex to, or is otherwise subject to the
provisions of, Executive Order No. 13224;
               (ii) a Person or entity with which any bank or other financial
institution is prohibited from dealing or otherwise engaging in any transaction
by any Anti-Terrorism Law;

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               (iii) a Person or entity that commits, threatens or conspires to
commit or supports “terrorism” as defined in Executive Order No. 13224;
               (iv) a Person or entity that is named as a “specially designated
national” on the most current list published by the U.S. Treasury Department
Office of Foreign Asset Control at its official website or any replacement
website or other replacement official publication of such list; or
               (v) a Person or entity who is affiliated with a Person or entity
listed above.
          (c) None of the Obligors or their Affiliates (i) conducts any business
or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person or (ii) deals in, or otherwise
engages in any transaction relating to, any property or interests in property
blocked pursuant to Executive Order No. 13224.
     8.9 Environmental Compliance.
          (a) Except as set forth on Schedule 8.9 hereto, Borrowers and their
Subsidiaries have not generated, used, stored, treated, transported,
manufactured, handled, produced or disposed of any Hazardous Materials, on or
off its premises (whether or not owned by it) in any manner which at any time
violates any applicable Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder and the operations of Borrowers and
their Subsidiaries comply in all material respects with all Environmental Laws
and all licenses, permits, certificates, approvals and similar authorizations
thereunder.
          (b) Except as set forth on Schedule 8.9 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any Governmental Authority or any other Person nor is any pending or
to the best of each Borrower’s knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
any Borrower or any Subsidiary of any Borrower or the release, spill or
discharge, threatened or actual, of any Hazardous Material or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or any other environmental, health or safety
matter, which affects any Borrower or its business, operations or assets or any
properties at which any Borrower has transported, stored or disposed of any
Hazardous Materials.
          (c) Borrowers and their Subsidiaries have no material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials.
          (d) Borrowers and their Subsidiaries have all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrowers under any Environmental Law
and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect.
     8.10 Employee Benefits.

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          (a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401 (a) of the Code has received
a favorable determination letter from the Internal Revenue Service and to the
best knowledge of each Borrower, nothing has occurred which would cause the loss
of such qualification. Each Borrower and its ERISA Affiliates have made all
required contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any Plan.
          (b) There are no pending or to the best knowledge of each Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Authority,
with respect to any Plan. There has been no prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan that has not been
fully cured by reversal of the transaction or otherwise, including payment in
full of any applicable fees or penalties.
          (c) (i) No ERISA Event has occurred or is reasonably expected to
occur; (ii) the current value of each Plan’s assets (determined in accordance
with the assumptions used for funding such Plan pursuant to Section 412 of the
Code) do not exceed such Plan’s liabilities under Section 4001(a)(16) of ERISA;
(iii) Borrowers and their ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability under Title IV of ERISA with respect
to any Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iv) Borrowers and their ERISA Affiliates have not incurred and do not
reasonably expect to incur, any liability (and no event has occurred which, with
the giving of notice under Section 4219 of ERISA, would result in such
liability), under Section 4201 or 4243 of ERISA with respect to a Multiemployer
Plan; and (v) Borrowers and their ERISA Affiliates have not engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
     8.11 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by any Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.11 hereto, subject to
the right of each Borrower to establish new accounts in accordance with
Section 9.13 below.
     8.12 Intellectual Property. Each Borrower owns or licenses or otherwise has
the right to use all Intellectual Property necessary for the operation of its
business as presently conducted or proposed to be conducted. As of the date
hereof, Borrowers do not have any Intellectual Property registered, or subject
to pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule 8.12 hereto and has not granted any licenses with respect thereto other
than as set forth in Schedule 8.12 hereto. No event has occurred which permits
or would permit after notice or passage of time or both, the revocation,
suspension or termination of such rights. To the best of the knowledge of each
Borrower, no slogan or other advertising device, product, process, method,
substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by any
Borrower infringes any patent, trademark, servicemark, tradename, copyright,
license or other Intellectual Property owned by any other Person presently and
no claim or litigation is pending or threatened against or affecting any
Borrower contesting its right to sell or use any such Intellectual Property.
Schedule 8.12 sets forth all of the agreements or other arrangements of each
Borrower pursuant to which such Borrower has a license or other right to use any
trademarks, logos, designs, representations or other Intellectual Property owned
by another Person with respect to Eligible

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Inventory of such Borrower as in effect on the date hereof and the dates of the
expiration of such agreements or other arrangements of such Borrower as in
effect on the date hereof. No trademark, servicemark or other Intellectual
Property at any time used by any Borrower which is owned by another Person, or
owned by such Borrower subject to any security interest, lien, collateral
assignment, pledge or other encumbrance in favor of any Person other than Agent,
is affixed to any Eligible Inventory, except to the extent permitted under the
term of the license agreements listed on Schedule 8.12 hereto.
     8.13 Subsidiaries; Affiliates; Capitalization.
          (a) No Borrower has any direct or indirect Subsidiaries or Affiliates
nor is any Borrower engaged in any joint venture or partnership except as set
forth in the Information Certificate.
          (b) The issued and outstanding shares of Capital Stock of each
Borrower are directly and beneficially owned and held by the Persons indicated
in the Information Certificate, and in each case all of such shares have been
duly authorized and are fully paid and non-assessable, free and clear of all
claims, liens, pledges and encumbrances of any kind, except as disclosed in
writing to Agent prior to the date hereof.
     8.14 Solvency. Each Borrower is Solvent and will continue to be Solvent
after the creation of the Obligations, the security interests of Agent and the
other transactions contemplated hereunder.
     8.15 Labor Disputes.
          (a) Set forth on Schedule 8.15 hereto is a list (including dates of
termination) of all collective bargaining or similar agreements between or
applicable to any Borrower and any union, labor organization or other bargaining
agent in respect of the employees of any Borrower on the date hereof.
          (b) There is (i) no significant unfair labor practice complaint
pending against any Borrower or, to the best of the knowledge of each Borrower,
threatened against it, before the National Labor Relations Board, and no
significant grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is pending on the date hereof against
any Borrower or, to best of the knowledge of each Borrower, threatened against
it, and (ii) no significant strike, labor dispute, slowdown or stoppage is
pending against any Borrower or, to the best of the knowledge of each Borrower,
threatened against any Borrower.
     8.16 Restrictions on Subsidiaries. Except for restrictions contained in
this Agreement or any other agreement with respect to Indebtedness of Borrowers
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on any Borrower or any Subsidiaries of any Borrower
which prohibit or otherwise restrict (a) the transfer of cash or other assets
(i) between any Borrower and any of its Subsidiaries or (ii) between any
Subsidiaries of any Borrower or (b) the ability of any Borrower or any of its
Subsidiaries to incur Indebtedness or grant security interests to Agent or any
Lender in the Collateral.
     8.17 Material Contracts. Schedule 8.17 hereto sets forth all Material
Contracts to which each Borrower is a party or is bound as of the date hereof.
Borrowers have delivered true, correct and complete copies of such Material
Contracts to Agent on or before the date hereof. No Borrower is in

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breach of or in default under any Material Contract and has not received any
notice of the intention of any other party thereto to terminate any Material
Contract.
     8.18 Payable Practices. Each Borrower and Guarantor have not made any
material change in the historical accounts payable practices from those in
effect immediately prior to the date hereof.
     8.19 Accuracy and Completeness of Information. All information furnished by
or on behalf of any Borrower in writing to Agent or any Lender in connection
with this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate is true and correct in all material respects on the date as of which
such information is dated or certified and does not omit any material fact
necessary in order to make such information not misleading. No event or
circumstance has occurred which has had or could reasonably be expected to have
a Material Adverse Effect, which has not been fully and accurately disclosed to
Agent in writing.
     8.20 Survival of Warranties, Cumulative. All representations and warranties
contained in this Agreement or any of the other Financing Agreements shall
survive the execution and delivery of this Agreement and shall be deemed to have
been made again to Agent and Lenders on the date of each additional Loan,
advance or Letter of Credit hereunder and shall be conclusively presumed to have
been relied on by Agent and Lenders regardless of any investigation made or
information possessed by Agent or any Lender. The representations and warranties
set forth herein shall be cumulative and in addition to any other
representations or warranties which any Borrower shall now or hereafter give, or
cause to be given, to Agent or any Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
     Each Borrower hereby covenants and agrees, on behalf of itself and its
Subsidiaries, as applicable below, as follows:
     9.1 Maintenance of Existence. Each Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrowers shall give Agent thirty (30) days prior written notice of
any proposed change in any Borrower’s corporate name, which notice shall set
forth the new name and Borrowers shall deliver to Agent a copy of the amendment
to the Certificate of Incorporation of such Borrower providing for the name
change certified by the Secretary of State of the jurisdiction of incorporation
of such Borrower as soon as it is available.
     9.2 New Collateral Locations. Each Borrower may open any new location
within the continental United States provided such Borrower (a) gives Agent
fifteen (15) days prior written notice of the intended opening of any such new
location and (b) executes and delivers, or causes to be executed and delivered,
to Agent such agreements, documents, and instruments as Agent may deem
reasonably necessary or desirable to protect its interests in the Collateral at
such location, including UCC financing statements.
     9.3 Compliance with Laws, Regulations, Etc.

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          (a) Each Borrower shall, and shall cause any Subsidiary of such
Borrower to, at all times, comply in all material respects with all laws, rules,
regulations, licenses, permits, approvals and orders applicable to it and duly
observe all requirements of any Federal, State or local Governmental Authority,
including ERISA, the Code, the Occupational Safety and Health Act of 1970, as
amended, the Fair Labor Standards Act of 1938, as amended, and all statutes,
rules, regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including all of the Environmental
Laws.
          (b) At the reasonable request of Agent and in any event, to the extent
required by applicable law, each Borrower shall establish and maintain, at its
expense, a system to assure and monitor its continued compliance with all
Environmental Laws in all of its operations, which system shall include annual
reviews of such compliance by employees or agents of such Borrower who are
familiar with the requirements of the Environmental Laws. Copies of all
environmental surveys, audits, assessments, feasibility studies and results of
remedial investigations shall be promptly furnished, or caused to be furnished,
by each Borrower to Agent. Each Borrower shall take prompt and appropriate
action to respond to any non-compliance with any of the Environmental Laws and
shall regularly report to Agent on such response.
          (c) Each Borrower shall give both oral and written notice to Agent
immediately upon such Borrower’s receipt of any notice of, or such Borrower’s
otherwise obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(ii) any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or violation of
any Environmental Law by such Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental, health or
safety matter, which affects such Borrower or its business, operations or assets
or any properties at which such Borrower transported, stored or disposed of any
Hazardous Materials.
          (d) Without limiting the generality of the foregoing, whenever Agent
reasonably determines that there is non-compliance, or any condition which
requires any action by or on behalf of any Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrowers shall, at Agent’s
request and Borrowers’ expense: (i) cause an independent environmental engineer
acceptable to Agent to conduct such tests of the site where such Borrower’s
non-compliance or alleged non-compliance with such Environmental Laws has
occurred as to such non-compliance and prepare and deliver to Agent a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Agent a supplemental report of such
engineer whenever the scope of such non-compliance, or such Borrower’s response
thereto or the estimated costs thereof, shall change in any material respect.
          (e) Each Borrower shall indemnify and hold harmless Agent and Lenders
and their respective directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including reasonable
attorneys’ fees actually incurred and legal expenses) directly or indirectly
arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
such Borrower and the preparation and implementation of any closure, remedial or
other required

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plans. All representations, warranties, covenants and indemnifications in this
Section 9.3 shall survive the payment of the Obligations and the termination of
this Agreement.
     9.4 Payment of Taxes and Claims. Each Borrower shall, and shall cause any
Subsidiary to, duly pay and discharge all taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower or such
Subsidiary, as the case may be, and with respect to which adequate reserves have
been set aside on its books.
     9.5 Insurance. Each Borrower shall, and shall cause any Subsidiary to, at
all times, maintain with financially sound and reputable insurers insurance with
respect to the Collateral against loss or damage and all other insurance of the
kinds and in the amounts customarily insured against or carried by corporations
of established reputation engaged in the same or similar businesses and
similarly situated. Said policies of insurance shall be satisfactory to Agent as
to form, amount and insurer. Each Borrower shall furnish certificates, policies
or endorsements to Agent as Agent shall require as proof of such insurance, and,
if such Borrower fails to do so, Agent is authorized, but not required, to
obtain such insurance at the expense of Borrowers. All policies shall provide
for at least thirty (30) days’ prior written notice to Agent of any cancellation
or reduction of coverage and that Agent may act as attorney for each Borrower in
obtaining, and at any time an Event of Default exists or has occurred and is
continuing, adjusting, settling, amending and canceling such insurance. Each
Borrower shall cause Agent to be named as a loss payee and an additional insured
(but without any liability for any premiums) under such insurance policies and
each Borrower shall obtain non-contributory lender’s loss payable endorsements
to all insurance policies in form and substance satisfactory to Agent. Such
lender’s loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Agent as its interests may appear and further
specify that Agent and Lenders shall be paid regardless of any act or omission
by any Borrower or any of its Affiliates. Without limiting any other rights of
Agent or Lenders, at its option, Agent may apply any insurance proceeds received
by Agent at any time to the cost of repairs or replacement of Collateral and/or
to payment of the Obligations, whether or not then due, in any order and in such
manner as Agent may determine or hold such proceeds as cash collateral for the
Obligations.

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     9.6 Financial Statements and Other Information.
          (a) Each Borrower shall, and shall cause any Subsidiary to, keep
proper books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
such Borrower and its Subsidiaries in accordance with GAAP. Borrowers shall
promptly furnish to Agent and Lenders all such financial and other information
as Agent shall reasonably request relating to the Collateral and the assets,
business and operations of Borrowers, and to notify the auditors and accountants
of Borrowers that Agent is authorized to obtain such information directly from
them. Without limiting the foregoing, Borrowers shall furnish or cause to be
furnished to Agent, the following: (i) within thirty (30) days after the end of
each fiscal month (other than at the end of a fiscal quarter), monthly unaudited
consolidated financial statements (including in each case balance sheets,
statements of income and loss, statements of cash flow, and statements of
shareholders’ equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Borrowers and their Subsidiaries
as of the end of and through such fiscal month, certified to be correct by the
chief financial officer of Borrowers subject to normal year-end adjustments,
(ii) within forty-five (45) days after the end of each fiscal quarter (other
than at the end of the fiscal year), unaudited consolidated financial statements
(including in each case balance sheets, statements of income and loss,
statements of cash flow, and statements of shareholders’ equity) and
(iii) within ninety (90) days after the end of each fiscal year, audited
consolidated financial statements (including in each case balance sheets,
statements of income and loss, statements of cash flow and statements of
shareholders’ equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the
operations of Borrowers and their Subsidiaries as of the end of and for such
fiscal year, together with the unqualified opinion of independent certified
public accountants, which accountants shall be an independent accounting firm
selected by Borrowers and reasonably acceptable to Agent, that such financial
statements have been prepared in accordance with GAAP, and present fairly the
results of operations and financial condition of Borrowers and their
Subsidiaries as of the end of and for the fiscal year then ended ; and (iv) at
such time as available, but in no event later than thirty (30) days prior to the
end of each fiscal year (commencing with the fiscal year of Borrowers ending
June 30, 2009), projected consolidated financial statements (including in each
case, forecasted balance sheets and statements of income and loss, statements of
cash flow, and statements of shareholders’ equity, and projected Excess
Availability) of Borrowers for the next fiscal year, all in reasonable detail,
and in a format consistent with the projections delivered by Borrowers to Agent
prior to the date hereof, together with such supporting information as Agent may
reasonably request. Such projected financial statements shall be prepared on a
quarterly basis for the next succeeding year. Such projections shall represent
the reasonable best estimate by Borrowers and Guarantors of the future financial
performance of Borrowers for the periods set forth therein and shall have been
prepared on the basis of the assumptions set forth therein which Borrowers and
Guarantors believe are fair and reasonable as of the date of preparation in
light of current and reasonably foreseeable business conditions (it being
understood that actual results may differ from those set forth in such projected
financial statements). If reasonably requested by Agent, each year Borrowers
shall provide to Agent a semi-annual update with respect to such projections or
at any time a Default or Event of Default exists or has occurred and is
continuing, more frequently as Agent may require.
          (b) Borrowers shall promptly notify Agent in writing of the details of
(i) any loss, damage, investigation, action, suit, proceeding or claim relating
to the Collateral or any other property which is security for the Obligations or
which would result in any material adverse change in the business, properties,
assets, goodwill or condition, financial or otherwise, of Borrowers and their
Subsidiaries taken as a whole, (ii) any Material Contract of any Borrower being
terminated or

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amended or any new Material Contract entered into (in which event Borrowers
shall provide Agent with a copy of such Material Contract), (iii) any order,
judgment or decree in excess of $500,000 shall have been entered against any
Borrower or any of its properties or assets, (iv) any notification of violation
of laws or regulations received by any Borrower, (v) any ERISA Event, and
(vi) the occurrence of any Default or Event of Default.
          (c) To the extent not already provided by Borrowers in a publicly
available format, or in any case, if requested by Agent, Borrowers shall
promptly furnish or cause to be furnished to Agent copies of all reports which
any Borrower sends to its stockholders generally and copies of all reports and
registration statements which any Borrower files with the Securities and
Exchange Commission, any national securities exchange or the National
Association of Securities Dealers, Inc. and such other reports as Agent may
hereafter specifically identify to Administrative Borrower that Agent will
require be provided to Agent, all press releases and all other statements
concerning material changes or developments in the business of a Borrower made
available by any Borrower to the public.
          (d) Borrowers shall furnish or cause to be furnished to Agent such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrowers, as Agent may, from time to time, reasonably
request. Agent is hereby authorized to deliver a copy of any financial statement
or any other information relating to the business of Borrowers to any Court or
other Government Authority to the extent required by statute, rule, regulation,
subpoena or court order, or to any Affiliate of any Agent or Lender or to any
participant or assignee or prospective participant or assignee. Each Borrower
hereby irrevocably authorizes and directs all accountants or auditors to deliver
to Agent, at Borrowers’ expense, copies of the financial statements of Borrowers
and any reports or management letters prepared by such accountants or auditors
on behalf of Borrowers and to disclose to Agent and Lenders such information as
they may have regarding the business of Borrowers. Any documents, schedules,
invoices or other papers delivered to Agent or any Lender may be destroyed or
otherwise disposed of by Agent or such Lender one (1) year after the same are
delivered to Agent or such Lender, except as otherwise designated by
Administrative Borrower to Agent or such Lender in writing.
          (e) At any time or times that, pursuant to the terms of Section 9.22
hereof, the Fixed Charge Coverage Ratio is not in effect, Borrowers shall, for
informational purposes only, no later than forty-five (45) days following the
last day of each fiscal quarter of Borrowers, report Borrowers’ calculation of
the Fixed Charge Coverage Ratio for the four (4) fiscal quarter period most
recently ended
     9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Each Borrower
shall not, and shall not permit any Subsidiary to, directly or indirectly,
          (a) merge into or with or consolidate with any other Person or permit
any other Person to merge into or with or consolidate with it, except for
mergers of a Borrower into, or consolidations of a Borrower with, another
Borrower in which a Borrower is the surviving entity; or
          (b) sell, issue, assign, lease, license, transfer, abandon or
otherwise dispose of any Capital Stock or Indebtedness to any other Person or
any of its assets to any other Person, except for
               (i) sales of Inventory in the ordinary course of business,

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               (ii) the disposition of worn-out or obsolete Equipment so long as
(A) any proceeds are paid to Agent and (B) such sales do not involve Equipment
having an aggregate fair market value in excess of $100,000 for all such
Equipment disposed of in any fiscal year of Borrowers;
               (iii) the issuance and sale by any Borrower of Capital Stock of
such Borrower after the date hereof; provided, that, (A) Agent shall have
received not less than ten (10) Business Days prior written notice of such
issuance and sale by such Borrower, which notice shall specify the parties to
whom such shares are to be sold, the terms of such sale, the total amount which
it is anticipated will be realized from the issuance and sale of such stock and
the net cash proceeds which it is anticipated will be received by such Borrower
from such sale, (B) such Borrower shall not be required to pay any cash
dividends or repurchase or redeem such Capital Stock or make any other payments
in respect thereof except as permitted in Section 9.11 hereof, (C) the terms of
such Capital Stock, and the terms and conditions of the purchase and sale
thereof, shall not include any terms that include any limitation on the right of
any Borrower to request or receive Loans or Letters of Credit or the right of
any Borrower to amend or modify any of the terms and conditions of this
Agreement or any of the other Financing Agreements or otherwise in any way
relate to or affect the arrangements of Borrowers with Agent or Lenders or are
more restrictive or burdensome to any Borrower than the terms of any Capital
Stock in effect on the date hereof, and (D) as of the date of such issuance and
sale and after giving effect thereto, no Default or Event of Default shall exist
or have occurred;
               (iv) the issuance of Capital Stock of any Borrower consisting, of
common stock pursuant to a stock option plan, 401(k) plan, or incentive stock
award plan of such Borrower for the benefit of its employees, directors and
consultants, provided, that, in no event shall such Borrower be required to
issue, or shall such Borrower issue, Capital Stock pursuant to such stock option
plan, 401(k) plan, or incentive stock award plan which would result in an Event
of Default;
               (v) sales of Excluded Real Property (other than Excluded Real
Property covered by a Mortgage pursuant to Section 9.19 hereof) and related
assets, provided, that, as to each and all of such sales (A) Agent shall have
received not less than ten (10) days’ prior written notice of such sale, which
notice shall set forth in reasonable detail satisfactory to Agent, the parties
to such sale, the Excluded Real Property to be sold, the purchase price and the
manner of payment thereof and such other information with respect thereto as
Agent may request, (B) such sale shall be on commercially reasonable terms in a
bona fide arm’s-length transaction with a non-affiliated Person, (C) all of the
Net Proceeds of any such sale shall be paid either (i) directly to Agent or
(ii) to a Borrower, provided, that, the entire amount of the Net Proceeds are
used to repay the outstanding amount of Loans which amounts may be reborrowed,
(D) Borrowers shall not incur any liabilities in connection with such sales
except as permitted herein, and (E) as of the date of such sale and after giving
effect thereto, no Default or Event of Default shall exist or have occurred and
be continuing;
               (vi) dispositions of investments permitted under Section 9.10(b)
to the extent the proceeds thereof are used to acquire additional investments
permitted under Section 9.10(b);
               (vii) sales of Factored Accounts by JCC to Factor pursuant to the
Factoring Agreement or sales of such Factored Accounts to any other Qualified
Factor; and

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               (viii) the charitable donation of Borrowers’ Fayette County,
Alabama Real Property and related assets, provided, that, (A) Borrowers shall
not incur any liabilities in connection with such donation, and (B) as of the
date of such donation and after giving effect thereto, no Default or Event of
Default shall exist or have occurred and be continuing;
          (c) form or acquire any Subsidiaries other than those listed on the
Information Certificate and as permitted in accordance with Section 9.10 hereof;
          (d) wind up, liquidate or dissolve, except for liquidations or
dissolutions of an Immaterial Subsidiary; or
          (e) agree to do any of the foregoing.
     9.8 Encumbrances. Each Borrower shall not, and shall permit any Subsidiary
to, create, incur, assume or suffer to exist any security interest, mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever on any of its
assets or properties, including the Collateral, except the following (“Permitted
Liens”):
          (a) the security interests and liens of Agent for itself and the
benefit of Lenders;
          (b) liens securing the payment of taxes, assessments or other
government charges or levies, either not yet overdue or the validity of which
are being contested in good faith by appropriate proceedings diligently pursued
and available to such Borrower or such Subsidiary, as the case may be and with
respect to which adequate reserves have been set aside on its books;
          (c) non-consensual statutory liens (other than liens securing the
payment of taxes) arising in the ordinary course of such Borrower’s or such
Subsidiary’s business to the extent: (i) such liens secure Indebtedness which is
not overdue or (ii) such liens secure Indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to such Borrower or
such Subsidiary, in each case prior to the commencement of foreclosure or other
similar proceedings and with respect to which adequate reserves have been set
aside on its books;
          (d) zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of such Borrower or such Subsidiary as presently conducted thereon or
materially impair the value of the Real Property which may be subject thereto;
          (e) purchase money security interests in Equipment (including Capital
Leases) to secure Indebtedness permitted under Section 9.9(b) hereof;
          (f) liens specified in any title insurance policy delivered to and
accepted by Agent in connection with any Mortgage;
          (g) security interests in the Inventory of the Honduras Subsidiaries
to secure Permitted Honduras Working Capital Debt to the extent permitted under
Section 9.9(h) hereof;

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          (h) security interests in the trademarks of Borrowers to secure
Permitted Trademark Financing Debt to the extent permitted under Section 9.9(i)
hereof;
          (g) the security interests and liens set forth on Schedule 8.4 hereto.
     9.9 Indebtedness. Each Borrower shall not, and shall not permit any
Subsidiary to, incur, create, assume, become or be liable in any manner with
respect to, or permit to exist, any Indebtedness, except the following
(“Permitted Indebtedness”):
          (a) (i) the Obligations; (ii) guarantees permitted by Section 9.10(d)
hereof; and (iii) Indebtedness permitted by Section 9.10(h) hereof;
          (b) purchase money Indebtedness (including Capital Leases) to the
extent secured by purchase money security interests in Equipment (including
Capital Leases) not to exceed $1,000,000 in the aggregate at any time
outstanding so long as such security interests do not apply to any property of
such Borrower other than the Equipment so acquired, and the Indebtedness secured
thereby does not exceed the cost of the Equipment so acquired;
          (c) Indebtedness of such Borrower under Hedging Agreements entered
into for the purpose of protecting a Person against fluctuations in interest
rates; provided, that, such arrangements are with banks or other financial
institutions that have combined capital and surplus and undivided profits of not
less than $100,000,000 and are not for speculative purposes and such
indebtedness shall be unsecured;
          (d) Banking Relationship Debt of Borrowers entered into by Borrowers
in the ordinary course of the businesses of Borrowers consistent with the
current practices of Borrowers as of the date hereof;
          (e) Indebtedness of such Borrower under License Agreements with
respect to non-refundable, advance or minimum guarantee royalty payments,
entered into by such Borrower in the ordinary course of the businesses of such
Borrower consistent with the current practices of such Borrower as of the date
hereof;
          (f) the Indebtedness set forth on Schedule 9.9 hereto; provided, that,
(i) such Borrower may only make regularly scheduled payments of principal and
interest in respect of such Indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such Indebtedness as in
effect on the date hereof, (ii) such Borrower shall not, directly or indirectly,
(A) amend, modify, alter or change the terms of such Indebtedness or any
agreement, document or instrument related thereto as in effect on the date
hereof except, that, such Borrower may, after prior written notice to Agent,
amend, modify, alter or change the terms thereof so as to extend the maturity
thereof, or defer the timing of any payments in respect thereof, or to forgive
or cancel any portion of such Indebtedness (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness, or
set aside or otherwise deposit or invest any sums for such purpose, and
(iii) Borrower shall furnish to Agent all notices or demands in connection with
such Indebtedness either received by such Borrower or on its behalf, promptly
after the receipt thereof, or sent by such Borrower or on its behalf,
concurrently with the sending thereof, as the case may be;

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          (g) Indebtedness incurred by the Honduras Subsidiaries during the
period from October 2, 2006 through October 2, 2008 with respect to the purchase
of certain Equipment for use in the operations of the Honduras Subsidiaries, in
an aggregate principal amount not to exceed $15,000,000;
          (h) Permitted Central American Working Capital Debt; and
          (i) Permitted Trademark Financing Debt.
     9.10 Loans, Investments, Guarantees, Etc. Each Borrower shall not, and
shall not permit any Subsidiary to, directly or indirectly, make any loans or
advance money or property to any Person, or invest in (by capital contribution,
dividend or otherwise) or purchase or repurchase the Capital Stock or
Indebtedness or all or a substantial part of the assets or property of any
Person, or guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the Indebtedness, performance, obligations or dividends
of any Person, or form or acquire any Subsidiaries, or agree to do any of the
foregoing, except:
          (a) the endorsement of instruments for collection or deposit in the
ordinary course of business;
          (b) investments in cash or Cash Equivalents, provided, that, (i) no
Loans are then outstanding and (ii) as to any of the foregoing, unless waived in
writing by Agent, Borrower shall take such actions as are deemed necessary by
Agent to perfect the security interest of Agent in such investments;
          (c) the existing equity investments of such Borrower as of the date
hereof in its Subsidiaries, provided, that, such Borrower shall have no
obligation to make any other investment in, or loans to, or other payments in
respect of, any such Subsidiaries;
          (d) guarantees by any Subsidiaries of any Borrower of the Obligations
in favor of Agent and Lenders;
          (e) stock or obligations issued to such Borrower by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to such Borrower in connection with the insolvency, bankruptcy, receivership or
reorganization of such Person or a composition or readjustment of the debts of
such Person; provided, that, the original of any such stock or instrument
evidencing such obligations shall be promptly delivered to Agent, upon Agent’s
request, together with such stock power, assignment or endorsement by such
Borrower as Agent may request;
          (f) obligations of account debtors to such Borrower arising from
Accounts which are past due evidenced by a promissory note made by such account
debtor payable to such Borrower; provided, that, promptly upon the receipt of
the original of any such promissory note by such Borrower, such promissory note
shall be endorsed to the order of Agent by such Borrower and promptly delivered
to Agent as so endorsed;
          (g) the loans, advances and guarantees set forth on Schedule 9.10
hereto; provided, that, (i) such Borrower may only make regularly scheduled
payments of principal and interest in respect of such Indebtedness in accordance
with the terms of the agreement or instrument

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evidencing or giving rise to such Indebtedness as in effect on the date hereof,
(ii) such Borrower shall not, directly or indirectly, (A) amend, modify, alter
or change the terms of such Indebtedness or any agreement, document or
instrument related thereto as in effect on the date hereof except, that, such
Borrower may, after prior written notice to Agent, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness, or set aside or
otherwise deposit or invest any sums for such purpose, and (iii) such Borrower
shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by such Borrower or on its behalf, promptly after
the receipt thereof, or sent by such Borrower or on its behalf, concurrently
with the sending thereof, as the case may be;
          (h) loans by such Borrower to any other Borrower after the date
hereof;
          (i) the transactions contemplated by the Junkfood Purchase Documents;
          (j) Permitted Acquisitions;
          (k) upfront advances by such Borrower for anticipated royalties under
License Agreements entered into by such Borrower in the ordinary course of
business of such Borrower consistent with the current practices of such Borrower
as of the date hereof; and
          (l) investments in the Honduras JV not to exceed an aggregate amount
of $3,000,000 during the term of this Agreement.
     9.11 Dividends and Redemptions. Each Borrower shall, not, directly or
indirectly, declare or pay any dividends on account of any shares of class of
Capital Stock of such Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of Capital Stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other than common stock or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect of any such
shares or agree to do any of the foregoing except, that:
          (a) any Subsidiary of such Borrower may pay dividends to such
Borrower;
          (b) such Borrower may pay cash dividends or distributions from funds
legally available therefor to its shareholders from time to time in amounts such
that the aggregate amount paid to its shareholders since May 16, 2000 does not
exceed twenty-five percent (25%) of such Borrower’s cumulative Net Income for
the period from May 16, 2000 through the date of determination, provided, that,
(i) Agent shall have received at least ten (10) days prior to any payment
thereof, a certificate signed by such Borrower’s chief financial officer
(A) setting forth such Borrower’s Net Income for the applicable period and
(B) certifying that such dividend or distribution is not in violation of
applicable law or any other agreement to which such Borrower is a party or by
which it is bound and (ii) as of the date of any such payment and after giving
effect thereto, no Default or Event of Default shall exist.
     9.12 Transactions with Affiliates. Each Borrower shall not, and shall not
permit any Subsidiary to, directly or indirectly,

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          (a) except as set forth in Schedule 9.12 hereto, purchase, acquire or
lease any property (or processing services) from, or sell, transfer or lease any
property to, any officer, director, agent or other Person affiliated with such
Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of such Borrower’s business and upon fair and reasonable terms no
less favorable to such Borrower than Borrower would obtain in a comparable arm’s
length transaction with an unaffiliated Person; or
          (b) make any payments of management, consulting or other fees for
management or similar services, or of any Indebtedness owing to any officer,
employee, shareholder, director or other Affiliate of such Borrower, except,
               (i) reasonable compensation to officers, employees and directors
for services rendered to such Borrower in the ordinary course of business;
               (ii) dividends permitted under Section 9.11(b) above;
               (iii) payments by such Borrower to the Honduras Subsidiaries for
(A) actual and necessary reasonable out-of-pocket administrative, operating and
capital expenditures of the Honduras Subsidiaries for the business of such
Borrower as presently conducted in the ordinary course of business (including
lease payments, payroll, insurance, franchise taxes and similar items),
provided, that, the amount of all such payments permitted under this Section
9.12(b)(iii)(A) in respect of capital expenditures shall not exceed $1,000,000
in the aggregate in any fiscal year of such Borrower, and (B) actual and
necessary reasonable out-of-pocket legal, accounting, insurance (including
premiums for such insurance), marketing, payroll and similar types of services
paid for by such Honduras Subsidiary in the ordinary course of its business as
conducted as of the date hereof or as the same may be directly attributable to
such Borrower; provided, that, (1) such expenses are in the ordinary course of
and pursuant to the reasonable requirements of such Borrower’s business as
conducted on the date hereof, and (2) to the extent such expenses are payable to
a Honduras Subsidiary, such expenses shall be payable upon terms no less
favorable to such Borrower, than such Borrower, could obtain in a comparable
arm’s length transaction with a Person who is not an Affiliate; and
               (iv) payments by such Borrower to Mexican Subsidiary for
(A) actual and necessary reasonable out-of-pocket administrative, operating and
capital expenses of Mexican Subsidiary for the business of such Borrower as
presently conducted in the ordinary course of business (including lease
payments, payroll, insurance, franchise taxes and similar items), provided,
that, the amount of all such payments permitted under Section 9.12(b)(iv)(A) in
respect of capital expenditures shall not exceed $1,000,000 in the aggregate in
any fiscal year of such Borrower and (B) actual and necessary reasonable
out-of-pocket legal, accounting, insurance (including premiums for such
insurance), marketing, payroll and similar types of services paid for by Mexican
Subsidiary in the ordinary course of its business as conducted as of the date
hereof or as the same may be directly attributable to such Borrower; provided,
that, (1) such expenses are in the ordinary course of and pursuant to the
reasonable requirements of such Borrower’s business as conducted on the date
hereof, and (2) to the extent such expenses are payable to Mexican Subsidiary,
such expenses shall be payable upon terms no less favorable to such Borrower,
than such Borrower, could obtain in a comparable arm’s length transaction with a
Person who is not an Affiliate;
               (v) Indebtedness permitted under Section 9.10(h) above; and

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               (vi) investments in the Honduras JV permitted under
Section 9.10(k) above.
     9.13 Additional Bank Accounts. Each Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.11 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Agent and subject to such conditions thereto as Agent
may establish and (b) as to any accounts used by such Borrower to make payments
of payroll, taxes or other obligations to third parties, after prior written
notice to Agent.
     9.14 Compliance with ERISA. Each Borrower shall and shall cause each of its
ERISA Affiliates to: (a) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other Federal and
State law; (b) cause each Plan which is qualified under Section 401 (a) of the
Code to maintain such qualification; (c) not terminate any of such Plans so as
to incur any liability to the Pension Benefit Guaranty Corporation; (d) not
allow or suffer to exist any prohibited transaction involving any of such Plans
or any trust created thereunder which would subject such Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA; (e) make all required
contributions to any Plan which it is obligated to pay under Section 302 of
ERISA, Section 412 of the Code or the terms of such Plan; (f) not allow or
suffer to exist any accumulated funding deficiency, whether or not waived, with
respect to any such Plan; or (g) allow or suffer to exist any occurrence of a
reportable event or any other event or condition which presents a material risk
of termination by the Pension Benefit Guaranty Corporation of any such Plan that
is a single employer plan, which termination could result in any liability to
the Pension Benefit Guaranty Corporation.
     9.15 End of Fiscal Years: Fiscal Quarters. Each Borrower shall, for
financial reporting purposes, cause its, and each of its Subsidiaries’
(a) fiscal years to end the Saturday closest to June 30 of each year and
(b) fiscal quarters to end on the last day of the thirteenth (13th) week
following the end of the immediately preceding fiscal quarter, provided, that,
the end of the fourth fiscal quarter shall be on the last day of the fourteenth
(14th) week following the end of the third fiscal quarter whenever necessary to
have the fourth fiscal quarter end on the Saturday closest to June 30.
     9.16 Change in Business. Each Borrower shall not engage in any business
other than the business of such Borrower on the date hereof and any business
reasonably related, ancillary or complimentary to the business in which such
Borrower is engaged on the date hereof.
     9.17 Limitation of Restrictions Affecting Subsidiaries. Each Borrower shall
not, directly, or indirectly, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or limits the ability of any
Subsidiary of such Borrower to (a) pay dividends or make other distributions or
pay any Indebtedness owed to such Borrower or any Subsidiary of such Borrower;
(b) make loans or advances to such Borrower or any Subsidiary of such Borrower,
(c) transfer any of its properties or assets to Borrower or any Subsidiary of
Borrower; or (d) create, incur, assume or suffer to exist any lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired, other
than encumbrances and restrictions arising under (i) applicable law, (ii) this
Agreement, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of such Borrower or any of its
Subsidiaries, (iv) customary restrictions on

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dispositions of real property interests found in reciprocal easement agreements
of such Borrower or its Subsidiary, (v) any agreement relating to Permitted
Indebtedness or Permitted Liens incurred by a Subsidiary of such Borrower prior
to the date on which such Subsidiary was acquired by such Borrower and
outstanding on such acquisition date, and (vi) the extension or continuation of
contractual obligations in existence on the date hereof; provided, that, any
such encumbrances or restrictions contained in such extension or continuation
are no less favorable to Agent and Lenders than those encumbrances and
restrictions under or pursuant to the contractual obligations so extended or
continued.
     9.18 Foreign Assets Control Regulations, Etc. None of the requesting or
borrowing of the Loans or the requesting or issuance, extension or renewal of
any Letter of Credit or the use of the proceeds of any thereof will violate the
Trading With the Enemy Act (50 USC §1 et seq., as amended) (the “Trading With
the Enemy Act”) or any of the foreign assets control regulations of the United
States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) (the
“Foreign Assets Control Regulations”) or any enabling legislation or executive
order relating thereto (including, but not limited to (a) Executive Order 13224,
and (b) the USA PATRIOT Act. None of the Obligors shall, nor shall any of them
permit any of their respective Subsidiaries to, (i) conduct any business or
engage in any transaction or dealing with any Blocked Person, including the
making or receiving any contribution of funds, goods or services to or for the
benefit of any Blocked Person; (ii) deal in, or otherwise engage in any
transaction relating to, any property or interests in property blocked pursuant
to Executive Order No. 13224; or (iii) engage in on conspire to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in Executive Order
No. 13224 or the USA PATRIOT Act. Each of the Obligors shall deliver to the
Agent and Lenders any certification or other evidence requested from time to
time by the Agent or any Lender, in the Agent’s sole discretion, confirming such
Person’s compliance with this Section.
     9.19 Excluded Real Property; After Acquired Real Property.
          (a) In the event that Agent determines that (i) the average daily
Excess Availability of Borrowers shall have been less than $3,000,000 during any
consecutive thirty (30) day period, or (ii) a Default or Event of Default
exists, without limiting any other rights of Agent, or duties or obligations of
Borrowers, upon Agent’s request, Borrowers shall promptly, execute and deliver
to Agent (A) a mortgage, deed of trust or deed to secure debt, as Agent may
determine, in form and substance substantially similar to the Mortgages in
respect of any or all of the Excluded Real Property (as Agent shall determine in
its sole discretion, exercised in good faith), and as to any provisions relating
to specific state laws satisfactory to Agent and in form appropriate for
recording in the real estate records of the jurisdiction in which such Excluded
Real Property is located granting to Agent a first and only lien and mortgage on
and security interest in such Excluded Real Property, fixtures or other property
located thereon, and (B) such other agreements, surveys, title insurance
policies, documents and instruments as Agent may require in connection
therewith.
          (b) If any Borrower hereafter acquires any Real Property, fixtures or
any other property that is of the kind or nature described in the Mortgages and
such Real Property, fixtures or other property at any one location has a fair
market value in an amount equal to or greater than $500,000 (or if a Default or
Event of Default exists, then regardless of the fair market value of such
assets), without limiting any other rights of Agent or any Lender, or duties or
obligations of such Borrower, upon Agent’s request, such Borrower shall execute
and deliver to Agent a mortgage, deed of trust or deed to secure debt, as Agent
may determine, in form and substance substantially similar

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to the Mortgages and as to any provisions relating to specific state laws
satisfactory to Agent and in form appropriate for recording in the real estate
records of the jurisdiction in which such Real Property or other property is
located granting to Agent a first and only lien and mortgage on and security
interest in such Real Property, fixtures or other property (except as such
Borrower would otherwise be permitted to incur hereunder or under the Mortgages
or as otherwise consented to in writing by Agent) and such other agreements,
documents and instruments as Agent may require in connection therewith.
     9.20 Costs and Expenses. Borrowers shall pay to Agent and Lenders on demand
all costs, expenses, filing fees and taxes paid or payable in connection with
the preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Agent’s
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) costs and expenses and
fees for insurance premiums, environmental audits, surveys, assessments,
engineering reports and inspections, appraisal fees and search fees, costs and
expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Agent’s customary charges and fees with respect thereto; (c) charges, fees or
expenses charged by any Issuing Bank in connection with any Letter of Credit;
(d) costs and expenses of preserving and protecting the Collateral; (e) costs
and expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of Agent, selling or
otherwise realizing upon the Collateral, and otherwise enforcing the provisions
of this Agreement and the other Financing Agreements or defending any claims
made or threatened against Agent or any Lender arising out of the transactions
contemplated hereby and thereby (including preparations for and consultations
concerning any such matters); (f) all out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Agent during the course
of periodic field examinations of the Collateral and Borrower’s operations, plus
Agent’s then standard per diem charge ($850 as of Closing Date) per person per
day for Agent’s examiners in the field and office; and (g) the reasonable fees
actually incurred and disbursements of counsel (including legal assistants) to
Agent in connection with any of the foregoing.
     9.21 Further Assurances. At the request of Agent at any time and from time
to time, each Borrower shall, at Borrowers’ expense, duly execute and deliver,
or cause to be duly executed and delivered, such further agreements, documents
and instruments, and do or cause to be done such further acts as may be
necessary or proper to evidence, perfect, maintain and enforce the security
interests and the priority thereof in the Collateral and to otherwise effectuate
the provisions or purposes of this Agreement or any of the other Financing
Agreements. Agent may at any time and from time to time request a certificate
from an officer of any Borrower representing that all conditions precedent to
the making of Loans and providing Letters of Credit contained herein are
satisfied. In the event of such request by Agent, Agent and Lenders may, at
Agent’s option, cease to make any further Loans or provide any further Letters
of Credit until Agent has received such certificate and, in addition, Agent has
determined that such conditions are satisfied. Where permitted by law, each
Borrower hereby authorizes Agent to execute and file one or more UCC financing
statements signed only by Agent.

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     9.22 Fixed Charge Coverage Ratio. If at any time during any month,
Alternate Excess Availability as determined by Agent is less than $10,000,000,
Borrowers shall not, as of the end of such month, permit the Fixed Charge
Coverage Ratio for the twelve (12) month period most recently ended to be less
than 1.10 to 1.0.
     9.23 Amount Due From Factor. Borrowers shall promptly provide Agent with
copies of all reports, statements of account and other communications received
by JCC from Factor with reference to the Factoring Agreement, including all
Factor Status Statements, all notices of default or termination and all
amendments to the Factoring Agreement (which must comply with the provisions of
Section 9.24 hereof).
     9.24 Amendments to Factoring Agreement, Etc. Borrowers shall not enter into
or permit any amendment or modification to the Factoring Agreement except to the
extent expressly permitted under the Factor Intercreditor Agreement. Borrowers
shall promptly notify Agent in writing if Factor exercises its right under the
Factoring Agreement to withdraw credit approval or a credit line with respect to
any account debtor of JCC.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
     10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an “Event of Default
and collectively as “Events of Default”:
          (a) (i) Borrowers fail to pay any of the Obligations when due or
(ii) Borrowers or any Obligor fails to perform any of the covenants contained in
Sections 9.3, 9.4, 9.6, 9.13, 9.14, 9.16, or 9.22 of this Agreement and such
failure shall continue for ten (10) days; provided, that, such ten (10) day
period shall not apply in the case of (A) any failure to observe any such
covenant which is not capable of being cured at all or within such ten (10) day
period or which has been the subject of a prior failure within a six (6) month
period or (B) an intentional breach by any Borrower or Obligor of any such
covenant or (iii) any Borrower fails to perform any of the terms, covenants,
conditions or provisions contained in this Agreement or any of the other
Financing Agreements other than those described in Sections 10.1(a)(i) and
10.1(a)(ii) above;
          (b) any representation, warranty or statement of fact made by any
Borrower to Agent in this Agreement, the other Financing Agreements or any other
agreement, schedule, confirmatory assignment or otherwise shall when made or
deemed made be false or misleading in any material respect;
          (c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Agent;
          (d) any judgment for the payment of money is rendered against any
Borrower or Obligor in excess of $500,000 in any one case or in excess of
$2,000,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against any
Borrower or Obligor or any of their assets having a value in excess of $500,000
in the aggregate;

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          (e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
          (f) any Borrower or Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
          (g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or Obligor or all or any part of its
properties and such petition or application is not dismissed within forty-five
(45) days after the date of its filing or such Borrower or Obligor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;
          (h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or Obligor or for all or any part of its
property; or
          (i) any default by any Borrower or Obligor under any agreement,
document or instrument relating to any Indebtedness for borrowed money owing to
any Person other than a Lender, or any capitalized lease obligations, contingent
Indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any Person other than Agent, in any case
in an amount in excess of $500,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any material default
under any Material Contract to any Person other than Agent, which default
continues for more than the applicable cure period, if any, with respect
thereto;
          (j) any material provision hereof or of any of the other Financing
Agreements shall for any reason cease to be valid, binding and enforceable with
respect to any party hereto or thereto (other than Agent) in accordance with its
terms, or any such party shall challenge the enforceability hereof or thereof,
or shall assert in writing, or take any action or fail to take any action based
on the assertion that any provision hereof or of any of the other Financing
Agreements has ceased to be or is otherwise not valid, binding or enforceable in
accordance with its terms, or any security interest provided for herein or in
any of the other Financing Agreements shall cease to be a valid and perfected
first priority security interest in any of the Collateral purported to be
subject thereto (except as otherwise permitted herein or therein);
          (k) an ERISA Event shall occur which results in or could reasonably be
expected to result in liability of any Borrower in an aggregate amount in excess
of $500,000;
          (l) any Change of Control shall occur;

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          (m) the indictment by any Governmental Authority, or as Agent may
reasonably and in good faith determine, the threatened indictment by any
Governmental Authority of any Borrower of which any Borrower or Agent receives
notice, in either case, as to which there is a reasonable possibility of an
adverse determination, in the good faith determination of Agent, under any
criminal statute, or commencement or threatened commencement of criminal or
civil proceedings against such Borrower, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral with an aggregate value in excess of $500,000 or more,
or (ii) any other property of any Borrower which is necessary or material to the
conduct of its business;
          (n) there shall be a material adverse change in the business, assets
or prospects of Borrowers and their Subsidiaries, taken as a whole, after the
date hereof;
          (o) there shall be an event of default under any of the other
Financing Agreements; or
          (p) there shall be (i) a default or event of default under any of the
Junkfood Seller Note, the Junkfood Seller Guaranty, the Junkfood Asset Purchase
Agreement or any other guaranty, security agreement, mortgage or similar
agreement executed by any Borrower or Guarantor in connection therewith, or
(ii) any default by Junkfood Sellers under the Junkfood Subordination Agreement.
     10.2 Remedies.
          (a) At any time an Event of Default exists or has occurred and is
continuing, Agent and Lenders shall have all rights and remedies provided in
this Agreement, the other Financing Agreements, the UCC and other applicable
law, all of which rights and remedies may be exercised without notice to or
consent by any Borrower or Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Agent and Lenders hereunder, under any of the
other Financing Agreements, the UCC or other applicable law, are cumulative, not
exclusive and enforceable, in Agent’s discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower of this Agreement or any
of the other Financing Agreements. Subject to Section 12 hereof, Agent may, at
any time or times, proceed directly against any Borrower or Obligor to collect
the principal balance of the Obligations and all interest accrued thereon
without prior recourse to the Collateral.
          (b) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, in its discretion and
without limitation, (i) accelerate the payment of the principal balance of the
Obligations and all interest accrued thereon and demand immediate payment
thereof to Agent for itself and the ratable benefit of Lenders (provided, that,
upon the occurrence of any Event of Default described in Sections 10.1(g) and
10.1(h), the principal balance of the Obligations and all interest accrued
thereon shall automatically become immediately due and payable) and
(ii) terminate the Commitments and this Agreement (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h),
the Commitments and any other obligation of Agent or a Lender hereunder shall
automatically terminate).

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          (c) Without limiting the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Agent may, in its discretion, and upon
the direction of the Required Lenders, shall (i) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any portion of the
Collateral, (ii) require any Borrower, at Borrowers’ expense, to assemble and
make available to Agent any part or all of the Collateral at any place and time
designated by Agent, (iii) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (iv) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (v) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker’s board, at any office of Agent
or elsewhere) at such prices or terms as Agent may deem reasonable, for cash,
upon credit or for future delivery, with Agent having the right to purchase the
whole or any part of the Collateral at any such public sale, all of the
foregoing being free from any right or equity of redemption of any Borrower,
which right or equity of redemption is hereby expressly waived and released by
such Borrower and/or (vi) terminate this Agreement. If any of the Collateral is
sold or leased by Agent upon credit terms or for future delivery, the
Obligations shall not be reduced as a result thereof until payment therefor is
finally collected by Agent. If notice of disposition of Collateral is required
by law, five (5) days prior notice by Agent to Administrative Borrower
designating the time and place of any public sale or the time after which any
private sale or other intended disposition of Collateral is to be made, shall be
deemed to be reasonable notice thereof and each Borrower waives any other
notice. In the event Agent institutes an action to recover any Collateral or
seeks recovery of any Collateral by way of prejudgment remedy, each Borrower
waives the posting of any bond which might otherwise be required. At any time an
Event of Default exists or has occurred and is continuing, upon Agent’s request,
Borrowers will either, as Agent shall specify, furnish cash collateral to
Issuing Bank to be used to secure and fund the reimbursement obligations to
Issuing Bank in connection with any Letter of Credit Obligations or furnish cash
collateral to Agent for the Letter of Credit Obligations. Such cash collateral
shall be in the amount equal to one hundred ten (110%) percent of the amount of
the Letter of Credit Obligations plus the amount of any fees and expenses
payable in connection therewith through the end of the latest expiration date of
the Letters of Credit giving rise to such Letter of Credit Obligations.
          (d) At any time or times that an Event of Default exists or has
occurred and is continuing, Agent may, in its discretion, enforce the rights of
any Borrower against any account debtor, secondary obligor or other obligor in
respect of any of the Accounts or other Receivables. Without limiting the
generality of the foregoing, Agent may, in its discretion, at such time or times
(i) notify any or all account debtors, secondary obligors or other obligors in
respect thereof that the Receivables have been assigned to Agent and that Agent
has a security interest therein and Agent may direct any or all account debtors,
secondary obligors and other obligors to make payment of Receivables directly to
Agent, (ii) extend the time of payment of, compromise, settle or adjust for
cash, credit, return of merchandise or otherwise, and upon any terms or
conditions, any and all Receivables or other obligations included in the
Collateral and thereby discharge or release the account debtor or any secondary
obligors or other obligors in respect thereof without affecting any of the
Obligations, (iii) demand, collect or enforce payment of any Receivables or such
other obligations, but without any duty to do so, and Agent and Lenders shall
not be liable for any failure to collect or enforce the payment thereof nor for
the negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Agent may deem necessary or desirable for the protection
of its interests and the interests of Lenders. At any time that an Event of
Default exists or

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has occurred and is continuing, at Agent’s request, all invoices and statements
sent to any account debtor shall state that the Accounts and such other
obligations have been assigned to Agent and are payable directly and only to
Agent and Borrowers shall deliver to Agent such originals of documents
evidencing the sale and delivery of goods or the performance of services giving
rise to any Accounts as Agent may require. In the event any account debtor
returns Inventory when an Event of Default exists or has occurred and is
continuing, Borrowers shall, upon Agent’s request, hold the returned Inventory
in trust for Agent, segregate all returned Inventory from all of its other
property, dispose of the returned Inventory solely according to Agent’s
instructions, and not issue any credits, discounts or allowances with respect
thereto without Agent’s prior written consent.
          (e) To the extent that applicable law imposes duties on Agent or any
Lender to exercise remedies in a commercially reasonable manner (which duties
cannot be waived under such law), each Borrower acknowledges and agrees that it
is not commercially unreasonable for Agent or any Lender (i) to fail to incur
expenses reasonably deemed significant by Agent or any Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (ii) to
fail to obtain third party consents for access to Collateral to be disposed of,
or to obtain or, if not required by other law, to fail to obtain consents of any
Governmental Authority or other third party for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection
remedies against account debtors, secondary obligors or other Persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (iv) to exercise collection remedies against account debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (v) to advertise
dispositions of Collateral through publications or media of general circulation,
whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as any Borrower, for expressions of
interest in acquiring all or any portion of the Collateral, (vii) to hire one or
more professional auctioneers to assist in the disposition of Collateral,
whether or not the collateral is of a specialized nature, (viii) to dispose of
Collateral by utilizing Internet sites that provide for the auction of assets of
the types included in the Collateral or that have the reasonable capability of
doing so, or that match buyers and sellers of assets, (ix) to dispose of assets
in wholesale rather than retail markets, (x) to disclaim disposition warranties,
(xi) to purchase insurance or credit enhancements to insure Agent or Lenders
against risks of loss, collection or disposition of Collateral or to provide to
Agent or Lenders a guaranteed return from the collection or disposition of
Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain the
services of other brokers, investment bankers, consultants and other
professionals to assist Agent in the collection or disposition of any of the
Collateral. Each Borrower acknowledges that the purpose of this Section is to
provide non-exhaustive indications of what actions or omissions by Agent or any
Lender would not be commercially unreasonable in the exercise by Agent or any
Lender of remedies against the Collateral and that other actions or omissions by
Agent or any Lender shall not be deemed commercially unreasonable solely on
account of not being indicated in this Section. Without limitation of the
foregoing, nothing contained in this Section shall be construed to grant any
rights to any Borrower or to impose any duties on Agent or Lenders that would
not have been granted or imposed by this Agreement or by applicable law in the
absence of this Section.
          (f) For the purpose of enabling Agent to exercise the rights and
remedies hereunder, each Borrower hereby grants to Agent, to the extent
assignable, an, irrevocable, non exclusive license (exercisable without payment
of royalty or other compensation to such Borrower) to use, assign, license or
sublicense any of the trademarks, service-marks, trade names, business names,
trade styles, designs, logos and other source of business identifiers and other
Intellectual

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Property and general intangibles now owned or hereafter acquired by such
Borrower, wherever the same maybe located, including in such license reasonable
access to all media in which any of the licensed items may be recorded or stored
and to all computer programs used for the compilation or printout thereof.
          (g) Agent may apply the cash proceeds of Collateral actually received
by Agent from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Agent may elect, whether or not then due. Borrowers shall remain liable to
Agent and Lenders for the payment of any deficiency with interest at the highest
rate provided for herein and all costs and expenses of collection or
enforcement, including reasonable attorneys’ fees actually incurred and legal
expenses.
          (h) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Agent and Lenders may, at Agent’s option, and
upon the occurrence of an Event of Default at the direction of the Required
Lenders, Agent and Lenders shall, without notice, (i) cease making Loans or
arranging for Letters of Credit or reduce the lending formulas or amounts of
Loans and Letters of Credit available to Borrowers and/or (ii) terminate any
provision of this Agreement providing for any future Loans to be made by Agent
and Lenders or Letters of Credit to be issued by Issuing Bank and (ii) Agent
may, at its option, establish such Reserves as Agent determines, without
limitation or restriction, notwithstanding anything to the contrary contained
herein.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
     11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
          (a) The validity, interpretation and enforcement of this Agreement and
the other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of Georgia (without giving
effect to principles of conflicts of law).
          (b) Each Borrower, Agent, Issuing Bank and Lenders irrevocably consent
and submit to the nonexclusive jurisdiction of the Superior Court of Fulton
County, Georgia and the United States District Court for the Northern District
of Georgia and waive any objection based on venue or forum, non conveniens with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except that
Agent and Lenders shall have the right to bring any action or proceeding against
any Borrower or its property in the courts of any other jurisdiction which Agent
deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against any Borrower or its property).
          (c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the U.S. mails, or,
at

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Agent’s option, by service upon such Borrower (or Administrative Borrowe on
behalf of such Borrower) in any other manner provided under the rules of any
such courts. Within thirty (30) days after such service, each Borrower shall
appear in answer to such process, failing which such Borrower shall be deemed in
default and judgment may be entered by Agent against such Borrower for the
amount of the claim and other relief requested.
          (d) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH BORROWER, AGENT.
ISSUING BANK AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY
OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR RELATED
OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT
OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE. EACH BORROWER, AGENT, ISSUING BANK AND
LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT SUCH
BORROWER, AGENT, ISSUING BANK OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF
A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
          (e) Agent, Lenders and Issuing Bank shall not have any liability to
any Borrower (whether in tort, contract, equity or otherwise) for losses
suffered by such Borrower in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Agent, such Lender or Issuing Bank, as applicable, that the losses were the
result of its acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Agent, each Lender and Issuing Bank shall be
entitled to the benefit of the rebuttable presumption that it acted in good
faith and with the exercise of ordinary care in the performance by it of the
terms of this Agreement. Each Borrower: (i) certifies that neither Agent, any
Lender, Issuing Bank nor any representative, agent or attorney acting for or on
behalf of Agent, any Lender or Issuing Bank has represented, expressly or
otherwise, that Agent, Lenders and Issuing Bank would not, in the event of
litigation, seek to enforce any of the waivers provided for in this Agreement or
any of the other Financing Agreements and (ii) acknowledges that in entering
into this Agreement and the other Financing Agreements, Agent, Lenders and
Issuing Bank are relying upon, among other things, the waivers and
certifications set forth in this Section 11.1 and elsewhere herein and therein.
     11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and chattel paper, included in or evidencing any of
the Obligations or the Collateral, and any and all other demands and notices of
any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Borrower which Agent or any Lender may elect to give shall
entitle such Borrower to any other or further notice or demand in the same,
similar or other circumstances. Without limiting the generality of the
foregoing, each Borrower waives (i) notice prior to Agent’s taking possession or
control of any of the Collateral or any bond or security which might be required
by any court prior to allowing

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Agent to exercise any of Agent’s remedies, including the issuance of an
immediate writ of possession and (ii) the benefit of all valuation, appraisement
and exemption laws.
     11.3 Amendments and Waivers.
          (a) Neither this Agreement nor any other Financing Agreement nor any
terms hereof or thereof may be amended, waived, discharged or terminated unless
such amendment, waiver, discharge or termination is in writing signed by Agent
and the Required Lenders or, at Agent’s option, by Agent with the authorization
of the Required Lenders, and in addition, with respect to any amendments (other
than with respect to any provision of Section 12 hereof), by any Borrower and
such amendment, waiver, discharge or termination shall be effective and binding
as to all Lenders and Issuing Bank only in the specific instance and for the
specific purpose for which given; except, that, no such amendment, waiver,
discharge or termination shall:
               (i) reduce the interest rate or any fees or extend the time of
payment of principal, interest or any fees or reduce the principal amount of any
Loan or Letter of Credit, in each case without the consent of each Lender
directly affected thereby,
               (ii) increase the Commitment of any Lender over the amount
thereof then in effect or provided hereunder, including pursuant to Section 2.5,
in each case without the consent of the Lender directly affected thereby,
               (iii) release any Collateral (except as expressly provided
hereunder or under any of the other Financing Agreements or applicable law and
except as permitted under Section 12.11(b) hereof), without the consent of Agent
and all of Lenders,
               (iv) reduce any percentage specified in the definition of
Required Lenders, without the consent of Agent and all of Lenders,
               (v) consent to the assignment or transfer by any Borrower or
Guarantor of any of their rights and obligations under this Agreement, without
the consent of Agent and all of Lenders,
               (vi) amend, modify or waive any terms of this Section 11.3 or
Section 12.8 hereof, without the consent of Agent and all of Lenders, or
               (vii) increase the advance rates constituting part of the
Borrowing Base, without the consent of Agent and all of Lenders.
          (b) Agent, Lenders and Issuing Bank shall not, by any act, delay,
omission or otherwise be deemed to have expressly or impliedly waived any of its
or their rights, powers and/or remedies unless such waiver shall be in writing
and signed as provided herein. Any such waiver shall be enforceable only to the
extent specifically set forth therein. A waiver by Agent, any Lender or Issuing
Bank of any right, power and/or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right, power and/or remedy which
Agent, any Lender or Issuing Bank would otherwise have on any future occasion,
whether similar in kind or otherwise.
          (c) Notwithstanding anything to the contrary contained in
Section 11.3(a) above, in the event that any Borrower or Guarantor requests that
this Agreement or any other Financing

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Agreements be amended or otherwise modified in a manner which would require the
unanimous consent of all of the Lenders and such amendment or other modification
is agreed to by the Required Lenders, then, with the consent of Borrowers, Agent
and the Required Lenders, Borrowers, Agent and the Required Lenders may amend
this Agreement without the consent of the Lenders that did not agree to such
amendment or other modification (collectively, the “Minority Lenders”) to
provide for (i) the termination of the Commitment of each of the Minority
Lenders, (ii) the addition to this Agreement of one or more other Lenders, or an
increase in the Commitment of one or more of the Required Lenders, so that the
Commitments, after giving effect to such amendment, shall be in the same
aggregate amount as the Commitments immediately before giving effect to such
amendment, (iii) if any Loans are outstanding at the time of such amendment, the
making of such additional Loans by such new Lenders or Required Lenders, as the
case may be, as may be necessary to repay in full the outstanding Loans of the
Minority Lenders immediately before giving effect to such amendment and (iv) the
payment of all interest, fees and other Obligations payable or accrued in favor
of the Minority Lenders and such other modifications to this Agreement as
Borrowers and the Required Lenders may determine to be appropriate.
          (d) Notwithstanding anything to the contrary contained in
Section 11.3(a) above, in connection with any amendment, waiver, discharge or
termination, in the event that any Lender whose consent thereto is required
shall fail to consent or fail to consent in a timely manner (such Lender being
referred to herein as a “Non-Consenting Lender”), but the consent of any other
Lenders to such amendment, waiver, discharge or termination that is required are
obtained, if any, then Wachovia shall have the right, but not the obligation, at
any time thereafter, and upon the exercise by Wachovia of such right, such
Non-Consenting Lender shall have the obligation, to sell, assign and transfer to
Wachovia or such Eligible Transferee as Wachovia may specify, the Commitment of
such Non-Consenting Lender and all rights and interests of such Non-Consenting
Lender pursuant thereto. Wachovia shall provide the Non-Consenting Lender with
prior written notice of its intent to exercise its right under this Section,
which notice shall specify on date on which such purchase and sale shall occur.
Such purchase and sale shall be pursuant to the terms of an Assignment and
Acceptance (whether or not executed by the Non-Consenting Lender), except that
on the date of such purchase and sale, Wachovia, or such Eligible Transferee
specified by Wachovia, shall pay to the Non-Consenting Lender (except as
Wachovia and such Non-Consenting Lender may otherwise agree) the amount equal
to: (i) the principal balance of the Loans held by the Non-Consenting Lender
outstanding as of the close of business on the business day immediately
preceding the effective date of such purchase and sale, plus (ii) amounts
accrued and unpaid in respect of interest and fees payable to the Non-Consenting
Lender to the effective date of the purchase, minus (iii) the amount of the
closing fee received by the Non-Consenting Lender pursuant to the terms hereof
or of any of the other Financing Agreements multiplied by the fraction, the
numerator of which is the number of months remaining in the then current term of
the Credit Facility and the denominator of which is the number of months in the
then current term thereof. Such purchase and sale shall be effective on the date
of the payment of such amount to the Non-Consenting Lender and the Commitment of
the Non-Consenting Lender shall terminate on such date.
          (e) The consent of Agent shall be required for any amendment, waiver
or consent affecting the rights or duties of Agent hereunder or under any of the
other Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section and the exercise by Agent of any of its rights
hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory
shall not be deemed an amendment to the advance rates provided for in this
Section 11.3. The consent of Issuing Bank shall be required for any amendment,
waiver or consent affecting the rights or duties of Issuing Bank hereunder or
under any of the other Financing Agreements, in addition to

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the consent of the Lenders otherwise required by this Section, provided, that,
the consent of Issuing Bank shall not be required for any other amendments,
waivers or consents. Notwithstanding anything to the contrary contained in
Section 11.3(a) above, (i) in the event that Agent shall agree that any items
otherwise required to be delivered to Agent as a condition of the initial Loans
and Letters of Credit hereunder may be delivered after the date hereof, Agent
may, in its discretion, agree to extend the date for delivery of such items or
take such other action as Agent may deem appropriate as a result of the failure
to receive such items as Agent may determine or may waive any Event of Default
as a result of the failure to receive such items, in each case without the
consent of any Lender and (ii) Agent may consent to any change in the type of
organization, jurisdiction of organization or other legal structure of any
Borrower, Guarantor or any of their Subsidiaries and amend the terms hereof or
of any of the other Financing Agreements as may be necessary or desirable to
reflect any such change, in each case without the approval of any Lender.
     11.4 Waiver of Counterclaims. Each Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims), in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
     11.5 Indemnification. Each Borrower shall jointly and severally indemnify
and hold Agent, each Lender and Issuing Bank, and its officers, directors,
agents, employees, advisors and counsel and their respective Affiliates (each
such Person being an “Indemnitee”), harmless from and against any and all
losses, claims, damages, liabilities, costs or expenses (including reasonable
attorneys’ fees and expenses) imposed on, incurred by or asserted against any of
them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including amounts paid in settlement, court costs,
and the reasonable fees and expenses of counsel, except, as to any indemnified
party, for such losses, claims, damages, liabilities, costs or expenses
resulting from gross negligence or willful misconduct of such party, its
directors, agents, employees or counsel as determined pursuant to a final,
non-appealable order of a court of competent jurisdiction (but without limiting
the obligations of Borrowers or Guarantors as to any other Indemnitee). To the
extent that the undertaking to indemnify, pay and hold harmless set forth in
this Section may be unenforceable because it violates any law or public policy,
Borrowers and Guarantors shall pay the maximum portion which it is permitted to
pay under applicable law to Agent and Lenders in satisfaction of indemnified
matters under this Section. To the extent permitted by applicable law, no
Borrower or shall assert, and each Borrower hereby waives, any claim against any
Indemnitee, on any theory of liability for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, any of the other Financing
Agreements or any undertaking or transaction contemplated hereby. No Indemnitee
referred to above shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed by it
through telecommunications, electronic or other information transmission systems
in connection with this Agreement or any of the other Financing Agreements or
the transaction contemplated hereby or thereby. All amounts due under this
Section shall be payable upon demand. The foregoing indemnity shall survive the
payment of the Obligations and the termination of this Agreement.

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SECTION 12. THE AGENT
     12.1 Appointment, Powers and Immunities. Each Lender and Issuing Bank
irrevocably designates, appoints and authorizes Wachovia to act as Agent
hereunder and under the other Financing Agreements with such powers as are
specifically delegated to Agent by the terms of this Agreement and of the other
Financing Agreements, together with such other powers as are incidental thereto.
Without limiting the generality of the foregoing, Agent shall have the sole and
exclusive right and authority to: (x) act as the disbursing and collecting Agent
for Lenders with respect to all payments and collections arising in connection
with this Agreement and the other Financing Agreements; (y) execute and deliver
as Agent each Financing Agreement (including the Factor Intercreditor Agreement,
the Junkfood Subordination Agreement and each Collateral Access Agreement) and
accept delivery of each such agreement by any Borrower, Guarantor or other
Person; and (z) bind each Lender to the terms of the Factor Intercreditor
Agreement and the Junkfood Subordination Agreement as if such Lender were a
direct signatory thereto (including the terms of the Factor Intercreditor
Agreement relating to the priority, enforcment and release of Agent’s security
interest and liens). Agent (a) shall have no duties or responsibilities except
those expressly set forth in this Agreement and in the other Financing
Agreements, and shall not by reason of this Agreement or any other Financing
Agreement be a trustee or fiduciary for any Lender; (b) shall not be responsible
to Lenders for any recitals, statements, representations or warranties contained
in this Agreement or in any of the other Financing Agreements, or in any
certificate or other document referred to or provided for in, or received by any
of them under, this Agreement or any other Financing Agreement, or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Financing Agreement or any other document referred
to or provided for herein or therein or for any failure by any Borrower or
Obligor or any other Person to perform any of its obligations hereunder or
thereunder; and (c) shall not be responsible to Lenders for any action taken or
omitted to be taken by it hereunder or under any other Financing Agreement or
under any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own gross
negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction. Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith. Agent may
deem and treat the payee of any note as the holder thereof for all purposes
hereof unless and until the assignment thereof pursuant to an agreement (if and
to the extent permitted herein) in form and substance satisfactory to Agent
shall have been delivered to and acknowledged by Agent.
     12.2 Reliance by Agent. Agent shall be entitled to rely upon any
certification, notice or other communication (including any thereof by
telephone, telecopy, telex, telegram or cable) believed by it to be genuine and
correct and to have been signed or sent by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel, independent
accountants and other experts selected by Agent. As to any matters not expressly
provided for by this Agreement or any other Financing Agreement, Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
or thereunder in accordance with instructions given by the Required Lenders or
all of Lenders as is required in such circumstance, and such instructions of
such Agents and any action taken or failure to act pursuant thereto shall be
binding on all Lenders.
     12.3 Events of Default.
          (a) Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or an Event of Default or other failure of a condition
precedent to the Loans and Letters of

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Credit hereunder, unless and until Agent has received written notice from a
Lender, or Borrower specifying such Event of Default or any unfulfilled
condition precedent, and stating that such notice is a “Notice of Default or
Failure of Condition”. In the event that Agent receives such a Notice of Default
or Failure of Condition, Agent shall give prompt notice thereof to the Lenders.
Agent shall (subject to Section 12.7) take such action with respect to any such
Event of Default or failure of condition precedent as shall be directed by the
Required Lenders; provided, that, unless and until Agent shall have received
such directions, Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to or by reason of such Event of
Default or failure of condition precedent, as it shall deem advisable in the
best interest of Lenders. Without limiting the foregoing, and notwithstanding
the existence or occurrence and continuance of an Event of Default or any other
failure to satisfy any of the conditions precedent set forth in Section 4 of
this Agreement to the contrary, Agent may, but shall have no obligation to,
continue to make Loans and Issuing Bank may, but shall have no obligation to,
issue or cause to be issued any Letters of Credit for the ratable account and
risk of Lenders from time to time if Agent believes making such Loans or issuing
or causing to be issued such Letters of Credit is in the best interests of
Lenders.
          (b) Except with the prior written consent of Agent, no Lender or
Issuing Bank may assert or exercise any enforcement right or remedy in respect
of the Loans, Letter of Credit Obligations or other Obligations, as against any
Borrower or Obligor or any of the Collateral or other property of any Borrower
or Obligor.
     12.4 Wachovia in its Individual Capacity. With respect to its Commitment
and the Loans made and Letters of Credit issued by it (and any successor acting
as Agent), so long as Wachovia shall be a Lender hereunder, it shall have the
same rights and powers hereunder as any other Lender and may exercise the same
as though it were not acting as Agent, and the term “Lender” or “Lenders” shall,
unless the context otherwise indicates, include Wachovia in its individual
capacity as Lender hereunder. Wachovia (and any successor acting as Agent) and
its Affiliates may (without having to account therefor to any Lender) lend money
to, make investments in and generally engage in any kind of business with any
Borrower (and any Subsidiaries or Affiliates of such Borrower) as if it were not
acting as Agent, and Wachovia and its Affiliates may accept fees and other
consideration from any Borrower or any Obligor and any Subsidiaries and
Affiliates of such Borrower or Obligor for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.
     12.5 Indemnification. Lenders agree to indemnify Agent (to the extent not
reimbursed by Borrowers hereunder and without limiting any obligations of
Borrowers hereunder) ratably, in accordance with their Pro Rata Shares, for any
and all claims of any kind and nature whatsoever that may be imposed on,
incurred by or asserted against Agent (including by any Lender) arising out of
or by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that Agent is
obligated to pay hereunder) or the enforcement of any of the terms hereof or
thereof or of any such other documents, provided, that, no Lender shall be
liable for any of the foregoing to the extent it arises from the gross
negligence or willful misconduct of the party to be indemnified as determined by
a final non-appealable judgment of a court of competent jurisdiction. The
foregoing indemnity shall survive the payment of the Obligations and the
termination of this Agreement.
     12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
has, independently and without reliance on Agent or other Lender, and based on
such documents and

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information as it has deemed appropriate, made its own credit analysis of
Borrowers and Obligors and has made its own decision to enter into this
Agreement and that it will, independently and without reliance upon Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Financing
Agreements. Agent shall not be required to keep itself informed as to the
performance or observance by any Borrower or Obligor of any term or provision of
this Agreement or any of the other Financing Agreements or any other document
referred to or provided for herein or therein or to inspect the properties or
books of any Borrower or Obligor. Agent will use reasonable efforts to provide
Lenders with any information received by Agent from any Borrower or Obligor
which is required to be provided to Lenders or deemed to be requested by Lenders
hereunder and with a copy of any Notice of Default or Failure of Condition
received by Agent from any Borrower or Lender; provided, that, Agent shall not
be liable to any Lender for any failure to do so, except to the extent that such
failure is attributable to Agent’s own gross negligence or willful misconduct as
determined by a final non-appealable judgment of a court of competent
jurisdiction. Except for notices, reports and other documents expressly required
to be furnished to Lenders by Agent hereunder, Agent shall not have any duty or
responsibility to provide any Lender with any other credit or other information
concerning the affairs, financial condition or business of any Borrower or
Obligor that may come into the possession of Agent.
     12.7 Failure to Act. Except for action expressly required of Agent
hereunder and under the other Financing Agreements, Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from Lenders of their
indemnification obligations under Section 12.5 hereof against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action.
     12.8 Additional Loans. Agent shall not make any Loans or provide any
Letters of Credit to Borrowers on behalf of Lenders intentionally and with
actual knowledge that such Loans or Letters of Credit would cause the aggregate
amount of the total outstanding Loans and Letter of Credit Obligations to
Borrowers to exceed the Borrowing Base, without the prior consent of all
Lenders, except, that, Agent may make such additional Loans or provide such
additional Letters of Credit on behalf of Lenders, intentionally and with actual
knowledge that such Loans or Letters of Credit will cause the total outstanding
Loans and Letters of Credit to Borrowers to exceed the Borrowing Base, as Agent
may deem necessary or advisable in its discretion, provided, that: (a) the total
principal amount of the additional Loans or additional Letters of Credit to
Borrower which Agent may make or provide after obtaining such actual knowledge
that the aggregate principal amount of the Loans equal or exceed the Borrowing
Base shall not exceed the aggregate amount equal to $5,000,000 outstanding at
any time and shall not cause the total principal amount of the Loans and Letter
of Credit Obligations to exceed the Maximum Credit and (b) no such additional
Loan or Letters of Credit shall be outstanding more than ninety (90) days after
the date such additional Loan or Letter of Credit is made or issued (as the case
may be), except as the Required Lenders may otherwise agree. Each Lender shall
be obligated to pay Agent the amount of its Pro Rata Share of any such
additional Loans or Letters of Credit provided that Agent is acting in
accordance with the terms of this Section 12.8.
     12.9 Concerning the Collateral and the Related Financing Agreements. Each
Lender authorizes and directs Agent to enter into this Agreement and the other
Financing Agreements. Each Lender agrees that any action taken by Agent or
Required Lenders in accordance with the terms of this Agreement or the other
Financing Agreements and the exercise by Agent or Required Lenders of

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their respective powers set forth therein or herein, together with such other
powers that are incidental thereto, shall be binding upon all of the Lenders.
     12.10 Field Audit, Examination Reports and other Information; Disclaimer by
Lenders. By signing this Agreement, each Lender:
          (a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report and a monthly report with respect to the Borrowing Base prepared by Agent
(each field audit or examination report and monthly report with respect to the
Borrowing Base being referred to herein as a “Report” and collectively,
“Reports”), appraisal and financial statements;
          (b) expressly agrees and acknowledges that Agent (A) does not make any
representation or warranty as to the accuracy of any Report, appraisal or
financial statement or (B) shall not be liable for any information contained in
any Report, appraisal or financial statement;
          (c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or any other party performing
any audit or examination will inspect only specific information regarding
Borrowers and Obligors and will rely significantly upon Borrowers’ and any
Obligor’s books and records, as well as on representations of Borrowers’ and any
Obligor’s personnel; and
          (d) agrees to keep all Reports confidential and strictly for its
internal use in accordance with the terms of Section 13.5 hereof, and not to
distribute or use any Report in any other manner.
     12.11 Collateral Matters.
          (a) Agent may, at its option, from time to time, at any time on or
after an Event of Default and for so long as the same is continuing or upon any
other failure of a condition precedent to the making of Loans and issuance of
Letters of Credit hereunder, make such disbursements and advances (“Special
Agent Advances”) which Agent, in its sole discretion, deems necessary or
desirable either (i) to preserve or protect the Collateral or any portion
thereof or (ii) to enhance the likelihood or maximize the amount of repayment by
Borrowers of the Loans and other Obligations, provided, that, the aggregate
principal amount of the Special Agent Advances pursuant to this clause (ii),
plus the then outstanding principal amount of the additional Loans and Letters
of Credit which Agent may make or provide as set forth in Section 12.8 hereof,
shall not exceed the aggregate amount of ten (10%) percent of the Maximum Credit
or (iii) to pay any other amount chargeable to Borrowers pursuant to the terms
of this Agreement or any of the other Financing Agreements consisting of costs,
fees and expenses and payments to Issuing Bank on account of Letter of Credit
Obligations. Special Agent Advances shall be repayable on demand and be secured
by the Collateral. Special Agent Advances shall not constitute Loans but shall
otherwise constitute Obligations hereunder. Interest on Special Advances shall
be payable at the Interest Rate then applicable to Prime Rate Loans. Agent shall
notify each Lender and Borrowers in writing of each such Special Agent Advance,
which notice shall include a description of the purpose of such Special Agent
Advance. Without limitation of its obligations pursuant to Section 6.9, each
Lender agrees that it shall make available to Agent, upon Agent’s demand, in
immediately available funds, the amount equal to such Lender’s Pro Rata Share of
each such Special Agent Advance. If such funds are not made available to Agent
by such Lender, such Lender shall be deemed a Defaulting Lender and

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Agent shall be entitled to recover such funds, on demand from such Lender
together with interest thereon for each day from the date such payment was due
until the date such amount is paid to Agent at the Federal Funds Rate for each
day during such period (as published by the Federal Reserve Bank of Atlanta or
at Agent’s option based on the arithmetic mean determined by Agent of the rates
for the last transaction in overnight Federal funds arranged prior to 9:00 a.m.
(Atlanta, Georgia time) on that day by each of the three leading brokers of
Federal funds transactions in New York City selected by Agent) and if such
amounts are not paid within three (3) days of Agent’s demand, at the highest
Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans.
          (b) Lenders hereby irrevocably authorize Agent, at its option and in
its discretion to release any security interest in, mortgage or lien upon, any
of the Collateral (i) upon termination of the Commitments and payment and
satisfaction of all of the Obligations and delivery of cash collateral to the
extent required under Section 13.1 below, or (ii) constituting property being
sold or disposed of if Administrative Borrower or any Borrower certifies to
Agent that the sale or disposition is made in compliance with Section 9.7 hereof
(and Agent may rely conclusively on any such certificate, without further
inquiry), or (iii) constituting property in which any Borrower or Obligor did
not own an interest at the time the security interest, mortgage or lien was
granted or at any time thereafter, or (iv) having a value in the aggregate in
any fiscal quarter period of less than $500,000, and to the extent Agent may
release its security interest in and lien upon any such Collateral pursuant to
the sale or other disposition thereof, such sale or other disposition shall be
deemed consented to by Lenders, or (v) if required or permitted under the terms
of any of the other Financing Agreements, including any intercreditor agreement,
or (vi) constituting trademarks securing Permitted Trademark Financing Debt if
concurrently with such release (A) Administrative Borrower or any Borrower
certifies to Agent that the Indebtedness constituting the Permitted Trademark
Financing Debt is incurred, and Liens securing the same are granted, in
compliance with Sections 9.8 and 9.9 hereof (and Agent may rely conclusively on
any such certificate, without further inquiry), and (B) Borrowers deliver to
Agent a report detailing the calculation of the Borrowing Base which excludes
therefrom any trademarks securing the Permitted Trademark Financing Debt, or
(vii) approved, authorized or ratified in writing by all of Lenders. Except as
provided above, Agent will not release any security interest in, mortgage or
lien upon, any of the Collateral without the prior written authorization of all
of Lenders. Upon request by Agent at any time, Lenders will promptly confirm in
writing Agent’s authority to release particular types or items of Collateral
pursuant to this Section. In no event shall the consent or approval of Issuing
Bank be required to any release of Collateral.
          (c) Without any manner limiting Agent’s authority to act without any
specific or further authorization or consent by the Required Lenders, each
Lender agrees to confirm in writing, upon request by Agent, the authority to
release Collateral conferred upon Agent under this Section. Agent shall (and is
hereby irrevocably authorized by Lenders to) execute such documents as may be
necessary to evidence the release of the security interest, mortgage or liens
granted to Agent upon any Collateral to the extent set forth above; provided,
that, (i) Agent shall not be required to execute any such document on terms
which, in Agent’s opinion, would expose Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any
security interest, mortgage or lien upon (or obligations of any Borrower or any
Obligor in respect of) the Collateral retained by any Borrower or any Obligor.
          (d) Agent shall have no obligation whatsoever to any Lender, Issuing
Bank or any other Person to investigate, confirm or assure that the Collateral
exists or is owned by any Borrower or Obligor or is cared for, protected or
insured or has been encumbered, or that any

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particular items of Collateral meet the eligibility criteria applicable in
respect of the Loans or Letters of Credit hereunder, or whether any particular
reserves are appropriate, or that the liens and security interests granted to
Agent pursuant hereto or any of the Financing Agreements or otherwise have been
properly or sufficiently or lawfully created, perfected, protected or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent in this Agreement or in any of the other Financing
Agreements, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Agent may act in any manner it may
deem appropriate, in its discretion, given Agent’s own interest in the
Collateral as a Lender and that Agent shall have no duty or liability whatsoever
to any other Lender or Issuing Bank.
     12.12 Agency for Perfection. Each Lender and Issuing Bank hereby appoints
Agent and each other Lender and Issuing Bank as agent and bailee for the purpose
of perfecting the security interests in and liens upon the Collateral of Agent
in assets which, in accordance with Article 9 of the UCC can be perfected only
by possession (or where the security interest of a secured party with possession
has priority over the security interest of another secured party) and Agent and
each Lender and Issuing Bank hereby acknowledges that it holds possession of any
such Collateral for the benefit of Agent as secured party. Should any Lender or
Issuing Bank obtain possession of any such Collateral, such Lender shall notify
Agent thereof, and, promptly upon Agent’s request therefor shall deliver such
Collateral to Agent or in accordance with Agent’s instructions.
     12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days’
notice to Lenders and Administrative Borrower. If Agent resigns under this
Agreement, the Required Lenders shall appoint from among the Lenders a successor
agent for Lenders. If no successor agent is appointed prior to the effective
date of the resignation of Agent, Agent may appoint, after consulting with
Lenders and Administrative Borrower, a successor agent from among Lenders. Upon
the acceptance by the Lender so selected of its appointment as successor agent
hereunder, such successor agent shall succeed to all of the rights, powers and
duties of the retiring Agent and the term “Agent” as used herein and in the
other Financing Agreements shall mean such successor agent and the retiring
Agent’s appointment, powers and duties as Agent shall be terminated. After any
retiring Agent’s resignation hereunder as Agent, the provisions of this
Section 12 shall inure to its benefit as to any actions taken or omitted by it
while it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is thirty (30) days after the date of a
retiring Agent’s notice of resignation, the retiring Agent’s resignation shall
nonetheless thereupon become effective and Lenders shall perform all of the
duties of Agent hereunder until such time, if any, as the Required Lenders
appoint a successor agent as provided for above.
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
     13.1 Term.
          (a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on September 21, 2012, unless sooner
terminated pursuant to the terms hereof. Upon the effective date of termination
of the Financing Agreements, Borrowers shall pay to Agent, in full, all
outstanding and unpaid Obligations and shall furnish cash collateral to Agent in
such amounts as Agent determines are reasonably necessary to secure Agent and
Lenders from loss, cost, damage or expense, including reasonable attorneys’ fees
actually incurred and legal expenses, in connection with

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any contingent Obligations, including issued and outstanding Letters of Credit
and checks or other payments provisionally credited to the Obligations and/or as
to which Agent or any Lender has not yet received final and indefeasible payment
and any continuing obligations of Agent or any Lender pursuant to any Deposit
Account Control Agreement. The amount of such cash collateral (or letter of
credit, as Agent may determine) as to any Letter of Credit Obligations shall be
in the amount equal to one hundred ten (110%) percent of the amount of the
Letter of Credit Obligations plus the amount of any fees and expenses payable in
connection therewith through the end of the latest expiration date of the
Letters of Credit giving rise to such Letter of Credit Obligations. Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to such bank account of Agent, as Agent may, in
its discretion, designate in writing to Administrative Borrower for such
purpose. Interest shall be due until and including the next Business Day, if the
amounts so paid by Borrowers to the bank account designated by Agent are
received in such bank account later than 12:00 noon, Atlanta, Georgia time.
          (b) No termination of the Commitments, this Agreement or any of the
other Financing Agreements shall relieve or discharge any Borrower of its
respective duties, obligations and covenants under this Agreement or any of the
other Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Agent’s continuing security interest in the Collateral
and the rights and remedies of Agent and Lenders hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and paid. Accordingly, each
Borrower and Guarantor waives any rights it may have under the UCC to demand the
filing of termination statements with respect to the Collateral and Agent shall
not be required to send such termination statements to Borrowers or Guarantors,
or to file them with any filing office, unless and until this Agreement shall
have been terminated in accordance with its terms and all Obligations paid and
satisfied in full in immediately available funds.
     13.2 Interpretative Provisions.
          (a) All terms used herein which are defined in Article 1, Article 8 or
Article 9 of the UCC shall have the meanings given therein unless otherwise
defined in this Agreement.
          (b) All references to the plural herein shall also mean the singular
and to the singular shall also. mean the plural unless the context otherwise
requires.
          (c) All references to any Borrower, any Obligor, Agent, Lenders and
Issuing Bank pursuant to the definitions set forth in the recitals hereto, or to
any other Person herein, shall include their respective successors and assigns.
          (d) The words “hereof’, “herein”, “hereunder”, “this Agreement” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not any particular provision of this Agreement and as
this Agreement now exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
          (e) The word “including” when used in this Agreement shall mean
“including, without limitation”.
          (f) An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory, to Agent, if such Event of Default is capable of being
cured as determined by Agent.

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          (g) All references to the term “good faith” used herein when
applicable to Agent or any Lender shall mean, notwithstanding anything to the
contrary contained herein or in the UCC, honesty in fact in the conduct or
transaction concerned. Borrowers shall have the burden of proving any lack of
good faith on the part of Agent or any Lender alleged by any Borrower at any
time.
          (h) Any accounting term used in this Agreement shall have, unless
otherwise specifically provided herein, the meaning customarily given in
accordance with GAAP, and all financial computations hereunder shall be computed
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied and using the same method for inventory valuation as used
in the preparation of the financial statements of Borrowers most recently
received by Agent prior to the date hereof. Notwithstanding anything to the
contrary contained in GAAP or any interpretations or other pronouncements by the
Financial Accounting Standards Board or otherwise, the term “unqualified
opinion” as used herein to refer to opinions or reports provided by accountants
shall mean an opinion or report that is unqualified and also does not include
any explanation, supplemental comment or other comment concerning the ability of
the applicable Person to continue as a going concern or the scope of the audit.
          (h) In the computation of periods of time from a specified date to a
later specified date, the word “from” means “from and including”, the words “to
and “until” each mean “to but excluding” and the word “through” means “to and
including”.
          (i) Unless otherwise expressly provided herein, (i) references herein
to any agreement, document or instrument shall be deemed to include all
subsequent amendments, modifications, supplements, extensions, renewals,
restatements or replacements with respect thereto, but only to the extent the
same are not prohibited by the terms hereof or of any other Financing Agreement,
and (iii) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, recodifying, supplementing or interpreting the statute or regulation.
          (j) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
          (k) This Agreement and other Financing Agreements may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms.
          (1) This Agreement and the other Financing Agreements are the result
of negotiations among and have been reviewed by counsel to Agent and the other
parties, and are the products of all parties. Accordingly, this Agreement and
the other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent’s or any Lender’s involvement in their preparation.
     13.3 Notices.
     (a) All notices, requests and demands hereunder shall be in writing and
deemed to have been given or made: if delivered in Person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next Business Day, one (1)
Business Day after sending; and if by certified mail, return receipt requested,
five (5) days after

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mailing. Notices delivered through electronic communications shall be effective
to the extent set forth in Section 13.3(b) below. All notices, requests and
demands upon the parties are to be given to the following addresses (or to such
other address as any party may designate by notice in accordance with this
Section):

         
 
  If to Borrowers:   Delta Apparel, Inc.
 
      2750 Premiere Parkway, Suite 100
 
      Duluth, Georgia 30097
 
      Attention: Deborah Merrill
 
      Telephone No.: (864) 232-5200 (ext. 6620)
 
      Telecopy No.:   (678) 584-1095
 
       
 
  If to Agent:   Wachovia Bank, National Association
 
      171 17th Street GA4524
 
      4th Floor
 
      Atlanta, Georgia 30363
 
      Attention: Daniel Denton, Portfolio Manager
 
      Telephone No.: (404) 214-1696
 
      Telecopy No.:   (404) 214-7299

          (b) Notices and other communications to Lenders and Issuing Bank
hereunder may be delivered or furnished by electronic communication (including
e-mail and Internet or intranet websites) pursuant to procedures approved by
Agent or as otherwise determined by Agent, provided, that, the foregoing shall
not apply to notices to any Lender or Issuing Bank pursuant to Section 2 hereof
if such Lender or Issuing Bank, as applicable, has notified Agent that it is
incapable of receiving notices under such Section by electronic communication.
Unless Agent otherwise requires, (i) notices and other communications sent to an
e-mail address shall be deemed received upon the sender’s receipt of an
acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written
acknowledgement), provided, that, if such notice or other communication is not
given during the normal business hours of the recipient, such notice shall be
deemed to have been sent at the opening of business on the next Business Day for
the recipient, and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing clause
(i) of notification that such notice or communications is available and
identifying the website address therefor.
     13.4 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
     13.5 Confidentiality.
          (a) Agent, each Lender and Issuing Bank shall use all reasonable
efforts to keep confidential, in accordance with its customary procedures for
handling confidential information and safe and sound lending practices, any
non-public information supplied to it by any Borrower pursuant to this Agreement
which is clearly and conspicuously marked as confidential at the time such
information is furnished by such Borrower to Agent, such Lender or Issuing Bank,
provided, that, nothing contained herein shall limit the disclosure of

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any such information: (i) to the extent required by statute, rule, regulation,
subpoena or court order, (ii) to bank examiners and other regulators, auditors
and/or accountants, in connection with any litigation to which Agent, such
Lender or Issuing Bank is a party, (iii) to any Lender or Participant (or
prospective Lender or Participant) or Issuing Bank or to any Affiliate of any
Lender so long as such Lender, Participant (or prospective Lender or
Participant), Issuing Bank or Affiliate shall have been instructed to treat such
information as confidential in accordance with this Section 13.5, or (iv) to
counsel for Agent, any Lender, Participant (or prospective Lender or
Participant) or Issuing Bank.
          (b) In the event that Agent, any Lender or Issuing Bank receives a
request or demand to disclose any confidential information pursuant to any
subpoena or court order, Agent or such Lender or Issuing Bank, as the case may
be, agrees (i) to the extent permitted by applicable law or if permitted by
applicable law, to the extent Agent or such Lender or Issuing Bank determines in
good faith that it will not create any risk of liability to Agent or such Lender
or Issuing Bank, Agent or such Lender or Issuing Bank will promptly notify
Administrative Borrower of such request so that Administrative Borrower may seek
a protective order or other appropriate relief or remedy and (ii) if disclosure
of such information is required, disclose such information and, subject to
reimbursement by Borrowers of Agent’s or such Lender’s or Issuing Bank’s
expenses, cooperate with Administrative Borrower in the reasonable efforts to
obtain an order or other reliable assurance that confidential treatment will be
accorded to such portion of the disclosed information which Administrative
Borrower so designates, to the extent permitted by applicable law or if
permitted by applicable law, to the extent Agent or such Lender or Issuing Bank
determines in good faith that it will not create any risk of liability to Agent
or such Lender or Issuing Bank.
          (c) In no event shall this Section 13.5 or any other provision of this
Agreement, any of the other Financing Agreements or applicable law be deemed:
(i) to apply to or restrict disclosure of information that has been or is made
public by any Borrower, Guarantor or any third party or otherwise becomes
generally available to the public other than as a result of a disclosure in
violation hereof, (ii) to apply to or restrict disclosure of information that
was or becomes available to Agent, any Lender (or any Affiliate of any Lender)
or Issuing Bank on a non-confidential basis from a Person other than a Borrower
or Guarantor, (iii) to require Agent, any Lender or Issuing Bank to return any
materials furnished by a Borrower or Guarantor to Agent, a Lender or Issuing
Bank or prevent Agent, a Lender or Issuing Bank from responding to routine
informational requests in accordance with the Code of Ethics for the Exchange of
Credit Information promulgated by The Robert Morris Associates or other
applicable industry standards relating to the exchange of credit information.
The obligations of Agent, Lenders and Issuing Bank under this Section 13.5 shall
supersede and replace the obligations of Agent, Lenders and Issuing Bank under
any confidentiality letter signed prior to the date hereof or any other
arrangements concerning the confidentiality of information provided by any
Borrower or Guarantor to Agent or any Lender. In addition, Agent and Lenders may
disclose information relating to the Credit Facility to Gold Sheets and other
publications, with such information to consist of deal terms and other
information customarily found in such publications, and that, subject to
Borrowers’ consent, which consent shall not be unreasonably withheld or delayed,
Wachovia may otherwise use the corporate name and logo of Borrowers and
Guarantors or deal terms in “tombstones” or other advertisements, public
statements or marketing materials.

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     13.6 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Agent, Lenders, Issuing Bank, Borrowers and
their respective successors and assigns, except that no Borrower may assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent. Any such purported assignment without such express prior written consent
shall be void. No Lender may assign its rights and obligations under this
Agreement without the prior written consent of Agent, except as provided in
Section 13.7 below. The terms and provisions of this Agreement and the other
Financing Agreements are for the purpose of defining the relative rights and
obligations of Borrowers, Agent, Lenders and Issuing Bank with respect to the
transactions contemplated hereby and there shall be no third party beneficiaries
of any of the terms and provisions of this Agreement or any of the other
Financing Agreements.
     13.7 Assignments; Participations.
          (a) Each Lender may assign all or, if less than all, a portion equal
to at least $5,000,000 in the aggregate for the assigning Lender, of such rights
and obligations under this Agreement to one or more Eligible Transferees (but
not including for this purpose any assignments in the form of a participation),
each of which assignees shall become a party to this Agreement as a Lender by
execution of an Assignment and Acceptance; provided, that, (i) if such Eligible
Transferee is not a bank, Agent shall receive a representation in writing by
such Eligible Transferee that no part of its acquisition of its Loans is made
out of assets of any employee benefit plan, (ii) such transfer or assignment
will not be effective until recorded by Agent on the Register and (iii) Agent
shall have received for its sole account payment of a processing fee from the
assigning Lender or the assignee in the amount of $5,000. As used in this
Section, the term “employee benefit plan” shall have the meaning assigned to it
in Title I of ERISA and shall also include a “plan” as defined in
Section 4975(e)(1) of the Code.
          (b) Agent shall maintain a register of the names and addresses of
Lenders, their Commitments and the principal amount of their Loans (the
“Register”). Agent shall also maintain a copy of each Assignment and Acceptance
delivered to and accepted by it and shall modify the Register to give effect to
each Assignment and Acceptance. The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and Borrowers, Obligors,
Agent and Lenders may treat each Person whose name is recorded in the Register
as a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by Administrative Borrower and any Lender at any
reasonable time and from time to time upon reasonable prior notice.
          (c) Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, (i) the
assignee thereunder shall be a party hereto and to the other Financing
Agreements and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, have the rights and
obligations (including, without limitation, the obligation to participate in
Letter of Credit Obligations) of a Lender hereunder and thereunder and (ii) the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this Agreement.
          (d) By execution and delivery of an Assignment and Acceptance, the
assignor and assignee thereunder confirm to and agree with each other and the
other parties hereto as follows: (i) other than as provided in such Assignment
and Acceptance, the assigning Lender makes no

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representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any of the other Financing Agreements or the execution, legality,
enforceability, genuineness, sufficiency or value of this Agreement or any of
the other Financing Agreements furnished pursuant hereto, (ii) the assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower, any Obligor or any of their
Subsidiaries or the performance or observance by any Borrower or any Obligor of
any of the Obligations; (iii) such assignee confirms that it has received a copy
of this Agreement and the other Financing Agreements, together with such other
documents and information it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance, (iv) such
assignee will, independently and without reliance upon the assigning Lender,
Agent and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Financing Agreements, (v) such
assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Financing
Agreements as are delegated to Agent by the terms hereof and thereof, together
with such powers as are incidental thereto, and (vi) such assignee agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of this Agreement and the other Financing Agreements are required to
be performed by it as a Lender. Agent and Lenders may furnish any information
concerning any Borrower or Obligor in the possession of Agent or any Lender from
time to time to assignees and Participants.
          (e) Each Lender may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement and the other Financing Agreements (including, without limitation, all
or a portion of its Commitments and the Loans owing to it and its participation
in the Letter of Credit Obligations, without the consent of Agent or the other
Lenders); provided, that, (i) such Lender’s obligations under this Agreement
(including, without limitation, its Commitment hereunder) and the other
Financing Agreements shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, and Borrowers, Obligors and Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and the other Financing Agreements, (iii) the
Participant shall not have any rights under this Agreement or any of the other
Financing Agreements (the Participant’s rights against such Lender in respect of
such participation to be those set forth in the agreement executed by such
Lender in favor of the Participant relating thereto) and all amounts payable by
any Borrower or Obligor hereunder shall be determined as if such Lender had not
sold such participation, and (iv) if such Participant is not a bank, represent
that no part of its acquisition of its participation is made out of assets of
any employee benefit plan. As used in this Section, the term “employee benefit
plan” shall have the meaning assigned to it in Title I of ERISA and shall also
include a “plan” as defined in Section 4975(e)(l) of the Code.
          (f) Nothing in this Agreement shall prevent or prohibit any Lender
from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lenders from such Federal Reserve Bank; provided, that,
no such pledge shall release such Lender from any of its obligations hereunder
or substitute any such pledgee for such Lender as a party hereto.
          (g) Borrowers shall assist Agent or any Lender permitted to sell
assignments or participations under this Section 13.7 in whatever manner
necessary in order to enable or effect any such assignment or participation,
including (but not limited to) the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested and
the delivery of

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informational materials, appraisals or other documents for, and the
participation of relevant management in meetings and conference calls with,
potential Lenders or Participants. Borrowers shall certify the correctness and
accuracy of all descriptions of Borrowers and their affairs provided, prepared
or reviewed by any Borrower that are contained in any selling materials prepared
for potential Lenders in connection with the initial syndication of the Loans
and all other information provided by it and included in such materials.
     13.8 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
     13.9 USA PATRIOT Act. Each Lender subject to the USA PATRIOT Act hereby
notifies Borrowers and Guarantors that pursuant to the requirements of the USA
PATRIOT Act, it is required to obtain, verify and record information that
identifies each Person or corporation who opens an account and/or enters into a
business relationship with it, which information includes the name and address
of Borrowers and Guarantors and other information that will allow such Lender to
identify such Person in accordance with the USA PATRIOT Act and any other
applicable law. Borrowers and Guarantors are hereby advised that any Loans or
Letters of Credit hereunder are subject to satisfactory results of such
verification.
     13.10 No Novation; Reaffirmation of Grant of Security Interest.
          (a) Each Borrower agrees that the security interests and liens granted
to Wachovia, as Agent, pursuant to the Existing Loan Agreement and the Existing
Financing Agreements (as defined in the Existing Loan Agreement), shall remain
outstanding and in full force and effect in accordance with the Existing
Financing Agreements, in each case, as amended as of the date hereof and shall
continue to secure the Obligations.
          (b) Each Borrower, Agent, Issuing Bank and each Lender acknowledges
and agrees that (i) the Obligations represent, among other things, the
amendment, restatement, renewal, extension, and modification of the Obligations
(as defined in the Existing Loan Agreement) arising in connection with the
Existing Loan Agreement and the other Existing Financing Agreements executed in
connection therewith; (ii) each Borrower, Agent, Issuing Bank and each Lender
intends that the Collateral pledged under the Existing Loan Agreement and the
other Existing Financing Agreements executed in connection therewith shall
secure, without interruption or impairment of any kind, all existing Obligations
(as defined in the Existing Loan Agreement) under the Existing Loan Agreement
and the other Existing Financing Agreements executed in connection therewith as
amended, restated, renewed, extended, and modified hereunder, together with all
other Obligations hereunder; and (iii) all security interests and liens granted
under or evidenced by the Existing Loan Agreement and the other Existing
Financing Agreements executed in connection therewith are hereby ratified,
confirmed and continued.

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          (c) Each Borrower, Agent, Issuing Bank and each Lender intends that by
entering into and performing their respective obligations hereunder, this
transaction shall not constitute a novation or an accord and satisfaction.
     13.11 Counterparts, Etc. This Agreement or any of the other Financing
Agreements may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile shall have the same force and effect
as the delivery of an original executed counterpart of this Agreement or any of
such other Financing Agreements. Any party delivering an executed counterpart of
any such agreement by telefacsimile shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.

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     IN WITNESS WHEREOF, Agent, Lenders and Borrowers have caused these presents
to be duty executed as of the day and year first above written.

                  BORROWERS:    
 
                DELTA APPAREL, INC., a Georgia corporation    
 
           
 
  By:        
 
           
 
           
 
  Title:        
 
           
 
                Chief Executive Office:    
 
                2750 Premiere Parkway         Suite 100         Duluth, Georgia
30097    
 
                M.J. SOFFE CO., a North Carolina corporation    
 
           
 
  By:        
 
           
 
           
 
  Title:        
 
           
 
                Chief Executive Office:    
 
                2750 Premiere Parkway         Suite 100         Duluth, Georgia
30097    
 
                JUNKFOOD CLOTHING COMPANY, a Georgia corporation    
 
           
 
  By:        
 
           
 
           
 
  Title:        
 
           
 
                Chief Executive Office:    
 
                2750 Premiere Parkway         Suite 100         Duluth, Georgia
30097    

[Signatures continued on following page]

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                  AGENT AND LENDER:    
 
                WACHOVIA NATIONAL BANK, NATIONAL ASSOCIATION    
 
           
 
  By:        
 
           
 
           
 
  Title:        
 
           
 
                Address:         200 Galleria Parkway         Suite 1500        
Atlanta, Georgia 30339    
 
                LENDERS:    
 
                     
 
       
 
           
 
  By:        
 
           
 
           
 
  Title:        
 
           
 
                Address:    
 
                     
 
                     
 
                     

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