Document:

EX-10.2.3 SECOND AMENDMENT/LOAN AND SECURITY AGRMT

 

Exhibit 10.2.3

SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT 

     THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
“Amendment”) is made and entered into this 26th day of February, 2007, by and among
DELTA APPAREL, INC., a Georgia corporation (“Delta”), M.J. SOFFE CO., a North Carolina corporation
(“Soffe”), JUNKFOOD CLOTHING COMPANY, a Georgia corporation (“JCC”; Delta, Soffe and JCC being
hereinafter collectively referred to as “Borrowers” and each individually as a “Borrower”),
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as agent
(together with its successors in such capacity, “Agent”) for the financial institutions party from
time to time to the Loan Agreement (as defined below) as lenders (“Lenders”), and such Lenders.

Recitals:

     Borrowers are parties to a certain Second Amended and Restated Loan and Security Agreement
dated August 22, 2005, among Borrowers, Agent and Lenders, as amended by that certain First
Amendment to Second Amended and Restated Loan and Security Agreement and Consent dated October 2,
2006 (as so amended, and as at any other time amended, restated, modified or supplemented, the
“Loan Agreement”), pursuant to which Agent and Lenders have made certain loans and other financial
accommodations available to Borrowers.

     The parties hereto desire to further amend the Loan Agreement as hereinafter set forth.

     NOW, THEREFORE, for TEN DOLLARS ($10.00) in hand paid and other good and valuable
consideration, the receipt and sufficiency of which are hereby severally acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:

     1. Definitions. All capitalized terms used in this Amendment, unless otherwise
defined herein, shall have the meaning ascribed to such terms in the Loan Agreement.

     2. Amendments to Loan Agreement. The Loan Agreement is hereby amended as follows:

          (a) By deleting the definitions of “Fixed Charge Coverage Ratio,” “Fixed Charges” and “Maximum
Credit” contained in Section 1 of the Loan Agreement and by substituting the following new
definitions in lieu thereof:

     “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), (c) an amount equal to
the product of: (i) $265,278 (which represents the aggregate monthly reduction of
the Fixed Asset Loan Limit and the Tennessee Asset Loan Limit in effect under this
Agreement prior to the First Amendment Date) multiplied by the (ii) the cumulative
number of months that elapsed during such period of determination prior to the First
Amendment Date, and (d) an amount equal to the product of: (i) $177,778 (which
represents the aggregate monthly reduction of the Fixed Asset Loan Limit and the
Tennessee Asset Loan Limit currently in effect under this Agreement) multiplied by
the (ii) the cumulative number of months that elapsed during such period of
determination following the First Amendment Date.

          “Maximum Credit” shall mean the amount of $90,000,000.

          (b) By deleting clause (b) of Section 3.2 of the the Loan Agreement in its entirety and by
substituting the following new clause (b) in lieu thereof:

          (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) By deleting the reference to “$85,000,000” contained in the recitals to Exhibit A
to the Loan Agreement and by substituting in lieu thereof a reference to “$90,000,000”.

          (d) By attaching Schedule 1.21 to this Amendment to the Loan Agreement in proper
numerical sequence as Schedule 1.21 thereto.

     3. Additional Covenants and Agreements. To induce Agents and Lenders to enter into
this Amendment, each Borrower covenants and agrees that no later than forty-five (45) days from the
date of this Amendment, Borrower shall have delivered to Agent, in form and substance satisfactory
to Agent, the following documents related to the Mortgage covering Real Property located in Fayette
County, Alabama (as at any time amended, the “Alabama Mortgage”):

     (a) a duly executed amendment which gives effect to the transactions contemplated by
this Amendment;

     (b) if deemed necessary by Agent, a mortgage tax order from the Alabama Department of
Revenue with respect to recording taxes payable in connection with the recordation of the
Mortgage amendment described in clause (a) above; and

     (c) a valid, effective and fully paid endorsement to Agent’s mortgage title insurance
policy with respect to the Alabama Mortgage.

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     4. Ratification and Reaffirmation. Each Borrower hereby ratifies and reaffirms the
Obligations, each of the Financing Agreements and all of such Borrower’s covenants, duties,
indebtedness and liabilities under the Financing Agreements.

     5. Acknowledgments and Stipulations. Each Borrower acknowledges and stipulates that
the Loan Agreement and the other Financing Agreements executed by such Borrower are legal, valid
and binding obligations of such Borrower that are enforceable against such Borrower in accordance
with the terms thereof; all of the Obligations are owing and payable without defense, offset or
counterclaim (and to the extent there exists any such defense, offset or counterclaim on the date
hereof, the same is hereby waived by such Borrower); the security interests and liens granted by
such Borrower in favor of Agent are duly perfected, first priority security interests and liens;
and the unpaid principal amount of the Loans as of the opening of business on February 26, 2007,
totaled $78,254,254.70.

     6. Representations and Warranties. Each Borrower represents and warrants to Agent and
Lenders, to induce Agent and Lenders to enter into this Amendment, that no Default or Event of
Default exists on the date hereof; the execution, delivery and performance of this Amendment have
been duly authorized by all requisite corporate action on the part of such Borrower and this
Amendment has been duly executed and delivered by such Borrower; and all of the representations and
warranties made by such Borrower in the Loan Agreement are true and correct on and as of the date
hereof.

     7. Reference to Loan Agreement. Upon the effectiveness of this Amendment, each
reference in the Loan Agreement to “this Agreement,” “hereunder,” or words of like import shall
mean and be a reference to the Loan Agreement, as amended by this Amendment.

     8. Breach of Amendment. This Amendment shall be part of the Loan Agreement and a
breach of any representation, warranty or covenant herein shall constitute an Event of Default.

     9. Conditions Precedent. The effectiveness of the amendments contained in Section 2
hereof is subject to the satisfaction of each of the following conditions precedent, in form and
substance satisfactory to Agent, unless satisfaction thereof is specifically waived in writing by
Agent:

     (a) Agent shall have received a duly executed Secretary’s Certificate of Director
Resolutions from each Borrower;

     (b) Agent shall have received a duly executed counterpart of this Amendment from each
of the parties hereto;

     (c) Agent shall have received duly executed amendments to each of the Mortgages (other
than the Alabama Mortgage) which give effect to the transactions contemplated by this
Amendment;

     (d) Agent shall have received a valid, effective and fully-paid endorsement to Agent’s
mortgage title insurance policy with respect to each Mortgage (other than the Alabama
Mortgage);

     (e) No Default or Event of Default shall be in existence.

     10. Expenses of Agent. Borrowers agree to pay, on demand, all costs and expenses
incurred by Agent in connection with the preparation, negotiation and execution of this Amendment
and any other Financing Agreements executed pursuant hereto and any and all amendments,
modifications,

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and supplements thereto, including, without limitation, the costs and fees of Agent’s legal
counsel and any taxes or expenses associated with or incurred in connection with any instrument or
agreement referred to herein or contemplated hereby.

     11. Effectiveness; Governing Law. This Amendment shall be effective upon acceptance
by Agent and Lenders (notice of which acceptance is hereby waived), whereupon the same shall be
governed by and construed in accordance with the internal laws of the State of Georgia.

     12. Successors and Assigns. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.

     13. No Novation, etc.. Except as otherwise expressly provided in this Amendment,
nothing herein shall be deemed to amend or modify any provision of the Loan Agreement or any of the
other Financing Agreements, each of which shall remain in full force and effect. This Amendment is
not intended to be, nor shall it be construed to create, a novation or accord and satisfaction, and
the Loan Agreement as herein modified shall continue in full force and effect.

     14. Counterparts; Telecopied Signatures. This Amendment may be executed in any number
of counterparts and by different parties to this Amendment on separate counterparts, each of
which, when so executed, shall be deemed an original, but all such counterparts shall constitute
one and the same agreement. Any signature delivered by a party by facsimile transmission shall be
deemed to be an original signature hereto.

     15. Further Assurances. Each Borrower agrees to take such further actions as Agent
shall reasonably request from time to time in connection herewith to evidence or give effect to the
amendments set forth herein or any of the transactions contemplated hereby.

     16. Section Titles. Section titles and references used in this Amendment shall be
without substantive meaning or content of any kind whatsoever and are not a part of the agreements
among the parties hereto.

     17. Release of Claims. To induce Agent and Lenders to enter into this Amendment, each
Borrower hereby releases, acquits and forever discharges Agent and Lenders, and all officers,
directors, agents, employees, successors and assigns of Agent and Lenders, from any and all
liabilities, claims, demands, actions or causes of action of any kind or nature (if there be any),
whether absolute or contingent, disputed or undisputed, at law or in equity, or known or unknown,
that such Borrower now has or ever had against Agent or any Lender arising under or in connection
with any of the Financing Agreements or otherwise. Each Borrower represents and warrants to Agent
and Lenders that such Borrower has not transferred or assigned to any Person any claim that such
Borrower ever had or claimed to have against Agent or any Lender.

     18. Waiver of Jury Trial. To the fullest extent permitted by applicable law, the
parties hereto each hereby waives the right to trial by jury in any action, suit, counterclaim or
proceeding arising out of or related to this Amendment.

[Remainder of page intentionally left blank.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under
seal and delivered by their respective duly authorized officers on the date first written above.

BORROWERS:

	 	 	 	 	 	 	 
	ATTEST:	 	DELTA APPAREL, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	Name:                                                             	 	 
	[CORPORATE SEAL]

	 	 	 	Title:                                                             	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	M.J. SOFFE CO.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	Name:                                                             	 	 
	[CORPORATE SEAL]

	 	 	 	Title:                                                             	 	 
	 
	 	 	 	 	 	 
	ATTEST:	 	JUNKFOOD CLOTHING COMPANY	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	Secretary

	 	 	 	Name:                                                            	 	 
	[CORPORATE SEAL]

	 	 	 	Title:                                                             	 	 

[Signatures continued on following page.]

 

 

	 	 	 	 	 	 	 
	 	 	AGENT:
	 
	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:                                                             	 	 
	 

	 	 	 	Title:                                                             	 	 
	 
	 	 	 	 	 	 
	 	 	LENDERS:	 	 
	 
	 	 	 	 	 	 
	 	 	WACHOVIA BANK, NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:                                                             	 	 
	 

	 	 	 	Title:                                                             	 	 
	 
	 	 	 	 	 	 
	 	 	THE CIT GROUP/COMMERCIAL SERVICES, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:                                                             	 	 
	 

	 	 	 	Title:                                                             	 	 
	 
	 	 	 	 	 	 
	 	 	IDB BANK	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:                                                             	 	 
	 

	 	 	 	Title:                                                             	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:                                                             	 	 
	 

	 	 	 	Title:                                                             	 	 

 

 

SCHEDULE 1.21

to

SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

Commitments

	 	 	 	 	 
	 	 	Name of Lender	 	Commitment
	1.

	 	Wachovia Bank, National Association
	 	$57,500,000
	2

	 	The CIT Group/Commercial Services, Inc.
	 	$15,000,000
	3.

	 	IDB Bank
	 	$17,500,000EX-10.18 EMPLOYMENT AGREEMENT - DAVID R. PALMER

 

Exhibit 10.18

EMPLOYMENT AND NON-SOLICITATION AGREEMENT

     THIS EMPLOYMENT AND NON-SOLICITATION AGREEMENT (“Agreement”), dated as of January 29, 2007, is
by and between DELTA APPAREL, INC., a Georgia corporation (“Company”), and David R. Palmer, a South
Carolina resident (“Executive”).

     NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
agree as follows:

     1. Employment. Executive agrees to continue Executive’s employment with the Company,
and the Company agrees to employ Executive, on the terms and conditions set forth in this
Agreement. This Agreement shall replace and supersede the Prior Agreement, the term of which shall
end upon the signing of this Agreement. Executive agrees during the term of this Agreement to
devote substantially all of his business time, efforts, skills and abilities to the performance of
his duties to the Company and to the furtherance of the Company’s business.

     Executive’s initial job title will be Vice President of Business Planning and Company
Assistant Treasurer and his duties will be those as are designated by the Chief Executive Officer
of the Company.

     2. Compensation.

          (a) Base Salary. During the term of Executive’s employment with the Company pursuant
to this Agreement, the Company shall pay to Executive as compensation for his services an annual
base salary of not less than $150,000.00 (“Base Salary”). Executive’s Base Salary will be payable
in arrears in accordance with the Company’s normal payroll procedures and will be reviewed annually
and subject to upward adjustment at the discretion of the President and CEO which may require the
approval of the Compensation Committee of the Company’s Board of Directors.

          (b) Incentive Bonus. During the term of Executive’s employment with the Company
pursuant to this Agreement, Executive shall be entitled to participate in the Company’s Short-Term
Incentive Compensation Plan as in effect from time to time. Any cash compensation payable under
this paragraph shall be referred to as “Incentive Compensation” in this Agreement.

          (c) Executive Fringe Benefits. During the term of Executive’s employment with the
Company pursuant to this Agreement, Executive shall be entitled to receive such executive fringe
benefits as are provided to the executives in comparable positions under any of the Company’s plans
and/or programs in effect from time to time for which Executive is eligible to participate and to
receive such other benefits as are customarily available to executives of the Company, including,
without limitation, vacations and life, medical and disability insurance.

 

 

          (d) Tax Withholding. The Company shall have the right to deduct from any compensation
payable to Executive under this Agreement social security (FICA) taxes and all federal, state,
municipal, foreign or other taxes or charges as may now be in effect or that may hereafter be
enacted or required.

          (e) Expense Reimbursements. The Company shall pay or reimburse Executive for all
reasonable business expenses incurred or paid by Executive in the course of performing his duties
hereunder, including, but not limited to, reasonable travel expenses for Executive. As a condition
to such payment or reimbursement, however, Executive shall maintain and provide to the Company
reasonable documentation and receipts for such expenses.

     3. Term. Unless sooner terminated pursuant to Section 4 of this Agreement, and
subject to the provisions of Section 5 hereof, the term of this Agreement (the “Term”) shall
commence as of the date hereof and shall continue until December 30, 2009.

     4. Termination. Notwithstanding the provisions of Section 3 hereof, but subject to
the provisions of Section 5 hereof, Executive’s employment under this Agreement shall terminate as
follows:

          (a) Death. Executive’s employment shall terminate upon the death of Executive;
provided, however, that the Company shall continue to pay (in accordance with its normal payroll
procedures) the Base Salary to Executive’s estate for a period of six (6) months after the date of
Executive’s death if Executive is employed by the Company on date of his death.

          (b) Termination for Cause. The Company may terminate Executive’s employment at any
time for “Cause” (as hereinafter defined) by delivering a written termination notice to Executive.
For purposes of this Agreement, “Cause” shall mean any of the following:

     (i) fraud; (ii) embezzlement; (iii) Executive’s commission of a felony; (iv)
the willful or continued failure or refusal by Executive to perform and discharge
Executive’s duties, responsibilities and obligations under this Agreement; (v) any
act of moral turpitude or willful misconduct by Executive intended to result in
personal enrichment of Executive at the expense of the Company, or any of its
affiliates or which has a material adverse impact on the business or reputation of
the Company or any of its affiliates (such determination to be made by the President
and CEO in his reasonable judgment); (vi) gross negligence or intentional misconduct
resulting in damage to the property, reputation or business of the Company; (vii)
the ineligibility of
Executive to perform Executive’s duties because of a ruling,
directive or other action by any agency of the United States or any state of the
United States having regulatory authority over the Company; or (viii) Executive’s
failure to correct or cure any material breach of or default under this Agreement
within ten (10) days after receiving written notice of such breach or default from
the Company.

2

 

          (c) Termination Without Cause. The Company may terminate Executive’s employment at
any time for any or no reason by delivering a written termination notice to Executive.

          (d) Termination by Executive. Executive may terminate his employment at any time by
delivering sixty (60) days prior written notice to the Company; provided, however, that the terms,
conditions and benefits specified in Section 5 hereof shall apply or be payable to Executive only
if such termination occurs as a result of a material breach by the Company of any provision of this
Agreement which breach is not cured within ten (10) days after the Chief Executive Officer of the
Company receives from Executive a written notice detailing such breach.

          (e) Termination Following Disability. In the event Executive becomes “disabled” (as
defined below), the Company may terminate Executive’s employment by delivering a written
termination notice to Executive. Notwithstanding the foregoing, Executive shall continue to
receive his full Base Salary and benefits to which he is entitled under this Agreement for a period
of six (6) months after the effective date of such termination. For purposes of this section, the
Executive shall be considered disabled if the Executive (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months, or (ii) is, by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous period of not less than
12 months, receiving income replacement benefits for a period of not less than three (3) months
under the Company’s disability insurance policy and/or salary continuation policy as in effect on
the date of such disability.

          (f) Payments. Subject to any limitations under Section 409A of the Internal Revenue
Code of 1986, as amended (“Code”), and related Treasury Regulations, following any expiration or
termination of this Agreement or Executive’s employment hereunder, and in addition to (but not in
duplication of) any amounts owed pursuant to Section 5 hereof, the Company shall pay to Executive
all amounts earned by Executive hereunder prior to the date of such expiration or termination.

          (g) Non-Disparagement. Executive agrees that during and following the termination of
his employment he will not publicly (or in a manner he reasonably should have expected to be made
public) disparage or otherwise make negative comments regarding the Company, its employees or its
affiliates, provided, however, that the foregoing shall in no way restrict the Executive from in
good faith reporting any concerns that he may have to (i) any authority within the Company
designated to receive complaints or concerns from employees, including, without limitation, the
Company’s Board of Directors or a committee thereof, or (ii) any regulator or other governmental
authority with supervisory responsibility for the Company (including, without limitation, the
Securities and Exchange Commission) or the Company’s independent auditors.

     5. Certain Termination Benefits. In the event that:

3

 

     (i) the provisions of Section 6 do not apply;

     (ii) either the Company terminates Executive’s employment without Cause pursuant to
Section 4(c) or Executive terminates his employment pursuant to Section 4(d) as a
result of an uncured material breach by the Company of any provision of this Agreement; and

     (iii) the Executive executes and delivers the release contemplated in Section (f)
below,

     then in such case the Company will provide Executive the benefits described in
subsection (a) below and, if and to the extent that Executive is eligible to participate in
such plans, subsections (b) through (c) below.

          (a) Base Salary and Incentive Compensation. The Company shall pay to Executive (i)
his Base Salary (as in effect as of the date of his termination) and (ii) Incentive Compensation
(in an aggregate amount equal to the applicable portion of the cash Incentive Compensation received
by the Executive for the most recent fiscal year prior to his termination) as follows:

	 	 	 	 	 	 	 
	Years of	 	Base	 	 	 	Payout
	Service	 	Salary	 	Incentive Compensation	 	Period
	Less than one

	 	3 months
	 	25% of the Short Term
Incentive Plan award
for the most recent
full fiscal year prior
to termination
	 	3 months
	One but less 
than two

	 	6 months
	 	50% of the Short Term
Incentive Plan award
for the most recent
full fiscal year prior
to termination
	 	6 months
	Two but less 

than three

	 	9 months
	 	75% of the Short Term
Incentive Plan award
for the most recent
full fiscal year prior
to termination
	 	9 months
	Three or More

	 	12 months
	 	100% of the Short Term
Incentive Plan award
for the most recent
full fiscal year prior
to termination
	 	12 months

To the extent permitted under Code Section 409A, the sum of applicable Base Salary and Incentive
Compensation shall be divided into equal monthly payments and paid to the Executive over the
applicable Payout Period shown in the table above, depending on the Executive’s years of service at
the time of Termination.

          (b) Life and Group Disability Insurance. If and to the extent that the Company’s
plans in effect from time to time permit such coverage and to the extent permitted under Code
Section 409A, the Company shall continue to provide Executive with group life and disability
insurance coverage for applicable Payout Period described above in (a) following termination at
coverage levels and rates equal to those applicable to Executive immediately prior
to such termination or, if different, as provided to other executive level employees during
such applicable period.

4

 

          (c) Medical Insurance. Upon termination of this Agreement, the Executive shall be
entitled to all COBRA continuation benefits available under the Company’s group health plans to
similarly situated employees. To the extent permitted under Code Section 409A, during the
applicable Payout Period, the Company shall provide such COBRA continuation benefits to the
Executive at the active employee rates similarly situated employees must pay for such benefits.
Upon the expiration of such Payout Period, the Executive will be responsible for paying the full
COBRA premiums for the remaining COBRA continuation period.

          (d) Offset. To the extent permitted by COBRA and the Health Insurance Portability and
Accountability Act of 1996, as amended (“HIPAA”), any fringe benefits received by Executive in
connection with any other employment accepted by Executive that are reasonably comparable, even if
not necessarily as beneficial to Executive, to the fringe benefits then being provided by the
Company pursuant to paragraphs (b) and (c) of this Section 5, shall be deemed to be the equivalent
of such benefits, and shall terminate the Company’s responsibility to continue providing the fringe
benefits package, taken as a whole, then being provided by the Company pursuant to paragraphs (b)
and (c) of this Section 5. The Company agrees that if Executive’s employment with the Company is
terminated, Executive shall have no duty to mitigate damages.

          (e)  General Release. Acceptance by Executive of any amounts pursuant to this Section
5 shall constitute a full and complete release by Executive of any and all claims Executive may
have against the Company, its officers, directors and affiliates, including, but not limited to,
claims he might have relating to Executive’s employment with the Company and cessation thereof;
provided, however, that there may properly be excluded from the scope of such general release the
following:

     (i) claims that Executive may have against the Company for reimbursement of
ordinary and necessary business expenses incurred by him during the course of his
employment;

     (ii) claims that may be made by the Executive for payment of Base Salary,
bonuses, fringe benefits, stock upon vesting of incentive stock awards, stock upon
exercise of stock options properly due to him, or other amounts or benefits due to
him under this Agreement;

     (iii) claims respecting any matters for which the Executive is entitled to be
indemnified under the Company’s Certificate of Incorporation or By-laws or
applicable law, respecting third party claims asserted or third party litigation
pending or threatened against the Executive; and

     (iv) any claims prohibited by applicable law from being included in the
release.

A condition to Executive’s receipt of any amounts pursuant to this Section 5 shall be Executive’s
execution and delivery of a general release as described above. In exchange for such release, the

5

 

Company shall, if Executive’s employment is terminated without Cause, provide a release to
Executive, but only with respect to claims against Executive that Executive identifies in writing
to the Company at the time of such termination.

     6. Effect of Change of Control.

          (a) If within one (1) year following a “Change of Control” (as hereinafter defined), Executive
terminates his employment with the Company for “Good Reason” (as hereinafter defined) or the
Company terminates Executive’s employment for any reason other than Cause, death or disability (as
defined in Section 4(e)), the Company shall pay to Executive: (i) an amount equal to one times the
Executive’s Base Salary as of the date of termination; and (ii) an amount equal to the cash
Incentive Compensation received by the Executive for the most recent fiscal year prior to his
termination. In addition, the Company shall provide the Executive with out-placement assistance.
In addition, to the extent permitted under the terms of the various plans, the Company shall
continue to provide the Executive with coverage under the Company’s various welfare and benefit
plans, including retirement and group healthcare, dental and life in which Executive participates
at the time of termination, for the period equal to twelve (12) months from the date of termination
at coverage levels and rates substantially equal to those applicable to Executive immediately prior
to such termination.

          (b) “Change of Control” means, with respect to the Executive, a “change in ownership,” a
“change in effective control,” or a “change in the ownership of substantial assets” of a
corporation as described in Treasury Regulations Section 1.409A-3(g)(5) (which events are
collectively referred to herein as “Change of Control events”) after the date of this agreement.
To constitute a Change of Control with respect to the Executive, the Change of Control event must
relate to a change in control of Delta Apparel, Inc.

     (i) A “change in ownership” of a corporation occurs on the date that any one
person, or more than one person acting as a group, acquires ownership of stock of
the corporation that, together with stock held by such person or group, constitutes
more than 50 percent of the total fair market value or total voting power of the
stock of such corporation. However, if any one person, or more than one person
acting as a group, is considered to own more than 50 percent of the total fair
market value or total voting power of the stock of a corporation, the acquisition of
additional stock by the same person or persons is not considered to cause a change
in ownership of the corporation (or to cause a change in the effective control of
the corporation (within the meaning of paragraph (ii) below)).

     (ii) Notwithstanding that a corporation has not undergone a change in ownership
under paragraph (i) above, a “change in effective control” of a corporation occurs
on the date that either:

          (A) Any one person, or more than one person acting as a group, acquires (or has
acquired during the 12-month period ending on the date of the most recent
acquisition by such person or persons) ownership of stock of the

6

 

corporation possessing 35 percent or more of the total voting power of the
stock of such corporation; or

          (B) A majority of members of the corporation’s board of directors is replaced
during any 12-month period by directors whose appointment or election is not
endorsed by a majority of the members of the corporation’s board of directors prior
to the date of the appointment or election.

          For purposes of this paragraph (ii), the term corporation refers solely to the
relevant corporation identified in the opening paragraph of this Section 6(a) for
which no other corporation is a majority shareholder.

          (c) “Good Reason” shall mean any of the following actions taken by the Company without the
Executive’s written consent after a Change of Control:

     (i) the assignment to the Executive by the Company of duties inconsistent with,
or the reduction of the powers and functions associated with, the Executive’s
position, duties, responsibilities and status with the Company immediately prior to
a Change of Control or Potential Change of Control (as defined below), or an adverse
change in Executive’s titles or offices as in effect immediately prior to a Change
of Control or Potential Change of Control, or any removal of the Executive from or
any failure to re-elect Executive to any of such positions, except in connection
with the termination of his employment for disability (as provided in Section 4(e))
or Cause or as a result of Executive’s death, except to the extent that a change in
duties relates to the elimination of responsibilities attendant to the Company’s no
longer being a publicly traded company;

     (ii) a reduction by the Company in the Executive’s Base Salary as in effect on
the date of a Change of Control or Potential Change of Control, or as the same may
be increased from time to time during the term of this Agreement;

     (iii) the Company shall require the Executive to be based anywhere other than
at or within a 25-mile radius of the Company’s principal executive offices or the
location where the Executive is based on the date of a Change of Control or
Potential Change of Control, or if Executive agrees to such relocation, the Company
fails to reimburse the Executive for moving and all other expenses reasonably
incurred in connection with such move;

     (iv) a significant increase in Executive’s required travel on behalf of the
Company;

     (v) the Company shall fail to continue in effect any Company-sponsored plan or
benefit that is in effect on the date of a Change of Control or
Potential Change of Control (other than the Incentive Stock Award Plan or the
Company’s stock option plan) and pursuant to which Executive has received

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awards or benefits and that provides (A) incentive or bonus compensation, (B) fringe
benefits such as vacation, medical benefits, life insurance and accident insurance,
(C) reimbursement for reasonable expenses incurred by the Executive in connection
with the performance of duties with the Company, or (D) retirement benefits such as
a Internal Revenue Code Section 401(k) plan, except to the extent that such
plans taken as a whole are replaced with substantially comparable plans;

     (vi) any material breach by the Company of any provision of this Agreement
which is not cured within ten (10) days of the Company’s receipt from Executive of
notice thereof; and

     (vii) any failure by the Company to obtain the assumption of this Agreement by
any successor or assign of the Company effected in accordance with the provisions of
Section 13.

          (d) “Potential Change of Control” shall mean the date as of which (i) the Company enters into
an agreement the consummation of which, or the approval by shareholders of which, would constitute
a Change of Control; (ii) proxies for the election of directors of the Board of Directors of the
Company are solicited by anyone other than the Company; (iii) any person (including, but not
limited to, any individual, partnership, joint venture, corporation, association or trust) publicly
announces an intention to take or to consider taking actions which, if consummated, would
constitute a Change of Control; or (iv) any other event occurs which is deemed to be a Potential
Change of Control by the Board of Directors of the Company and the Board adopts a resolution to the
effect that a Potential Change of Control has occurred.

          (e) In the event that (i) Executive would otherwise be entitled to the compensation and
benefits described in Section 5 or 6(a) hereof (“Compensation Payments”), and (ii) the Company
determines, based upon the advice of tax counsel, that, as a result of such Compensation Payments
and any other benefits or payments required to be taken into account under the Internal Revenue
Code of 1986, as amended (the “Code”), Section 280G(b)(2) (“Parachute Payments”), any of such
Parachute Payments would be reportable by the Company as an “excess parachute payment” under Code
Section 280G, such Compensation Payments shall be reduced to the extent necessary to cause the
aggregate present value (determined in accordance with Code Section 280G and applicable regulations
promulgated thereunder) of the Executive’s Parachute Payments to equal 2.99 times the “base amount”
as defined in Code Section 280G(b)(3) with respect to such Executive. However, such reduction in
the Compensation Payments shall be made only if, in the opinion of such tax counsel, it would
result in a larger Parachute Payment to the Executive than payment of the unreduced Parachute
Payments after deduction in each case of tax imposed on and payable by the Executive under Section
4999 of the Code (“Excise Tax”). The value of any non-cash benefits or any deferred payment or
benefit for purposes of this paragraph shall be determined by a firm of independent auditors
selected by the Company.

          (f) The parties hereto agree that the payments provided under Section 6(a) above are
reasonable compensation in light of Executive’s services rendered to the Company and

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that neither party shall assert that the payment of such benefits constitutes an “excess
parachute payment” within the meaning of Section 280G(b)(1) of the Code.

          (g) Unless the Company determines that any Parachute Payments made hereunder must be reported
as “excess parachute payments” in accordance with Section 6(e) above, neither party shall file any
return taking the position that the payment of such benefits constitutes an “excess parachute
payment” within the meaning of Section 280G(b)(1) of the Code.

     7. Non-Competition. Executive agrees that during the Term and for a period of four
months from the date of the termination of Executive’s employment with the Company pursuant to
Sections 4(b), 4(c), 4(d), 4(e) or 6 herein or for any other reason that results in the Executive
being entitled to the benefits described in Section 5, he will not, directly or indirectly, compete
with the Company by providing to any company that is in a “Competing Business” services
substantially similar to the services provided by Executive at the time of termination. Competing
Business shall be defined as any business that engages, in whole or in part, in the manufacturing
or marketing of activewear apparel in the United States of America (the “Restricted Territory”),
and Executive’s employment function or affiliation is directly or indirectly in such business of
activewear apparel manufacturing or marketing.

     8. Non-Solicitation. For a period of two years after the later of the expiration of
the Term or the termination or cessation of his employment with the Company for any reason
whatsoever, Executive shall not, on his own behalf or on behalf of any other person, partnership,
association, corporation, or other entity, (a) solicit or in any manner attempt to influence or
induce any employee of the Company or its subsidiaries or affiliates (known by the Executive to be
such) to leave the employment of the Company or its subsidiaries or affiliates (other than through
general advertisements not directed at any particular employee or group of employees), nor shall he
use or disclose to any person, partnership, association, corporation or other entity any
information obtained while an employee of the Company concerning the names and addresses of the
Company’s employees, or (b) solicit, entice or induce any customer or supplier of the Company (or
any actively sought customer or supplier of the Company) at the time of expiration or termination
for or on behalf of any Competing Business in the Restricted Territory.

     9. Non-Disclosure of Trade Secrets. During and prior to the Term of this Agreement,
Executive has had access to and became familiar with and will have access to and become familiar
with various trade secrets and proprietary and confidential information of the Company and its
affiliates, including, but not limited to, processes, computer programs, compilations of
information, records, sales procedures, customer requirements, pricing techniques, customer lists,
methods of doing business and other confidential information (collectively, referred to as “Trade
Secrets”) which are owned by the Company and/or its affiliates and regularly used in the operation
of its or their business, and as to which the Company and/or its affiliates take precautions to
prevent dissemination to persons other than certain directors, officers and employees. Executive
acknowledges and agrees that the Trade Secrets (1) are secret and not known in the industry; (2)
give the Company and/or its affiliates an advantage
over competitors who do not know or use the Trade Secrets; (3) are of such value and nature as
to make it reasonable and necessary to protect and preserve the confidentiality and

9

 

secrecy of the Trade Secrets; and (4) are valuable, special and unique assets of the Company and/or
its affiliates, the disclosure of which could cause substantial injury and loss of profits and
goodwill to the Company and/or its affiliates. Executive may not use in any way or disclose any of
the Trade Secrets, directly or indirectly, either during the Term or at any time after the
expiration of the Term or the termination of Executive’s employment with the Company for any reason
whatsoever, except as required in the course of his employment under this Agreement, as required in
connection with a judicial or administrative proceeding, or if the information becomes public
knowledge other than as a result of an unauthorized disclosure by the Executive. All files,
records, documents, information, data and similar items relating to the business of the Company
and/or its affiliates, whether prepared by Executive or otherwise coming into his possession, will
remain the exclusive property of the Company and/or its affiliates (as the case may be) and may not
be removed from the premises of the Company under any circumstances without the prior written
consent of the Board of Directors of the Company and/or its affiliates (as the case may be) (except
in the ordinary course of business during Executive’s period of active employment under this
Agreement), and in any event must be promptly delivered to the Chief Executive Officer of the
Company upon termination of Executive’s employment with the Company. Executive agrees that upon
his receipt of any subpoena, process or other request to produce or divulge, directly or
indirectly, any Trade Secrets to any entity, agency, tribunal or person, Executive shall timely
notify and promptly hand deliver a copy of the subpoena, process or other request to the Board of
Directors of the Company. For this purpose, Executive irrevocably nominates and appoints the
Company (including any attorney retained by the Company), as his true and lawful attorney-in-fact,
to act in Executive’s name, place and stead to perform any act that Executive might perform to
defend and protect against any disclosure of any Trade Secrets. The rights granted to the Company
and/or its affiliates in this Section 9 are intended to be in addition to and not in replacement of
any protection of trade secrets provided by equity, any statute, judicially created law or other
agreement.

     10. Remedies. In the event that Executive violates any of the provisions of Sections
7, 8 or 9 hereof (the “Protective Covenants”) or fails to provide the notice required by Section
4(d) hereof, in addition to any other remedy that may be available at law, in equity or hereunder,
the Company shall be entitled to receive from Executive the profits, if any, received by Executive
upon exercise of any Company granted stock options or incentive stock awards or upon lapse of the
restrictions on any grant of restricted stock to the extent such options or rights were exercised,
or such restrictions lapsed, subsequent to the commencement of the six-month period prior to the
termination of Executive’s employment. In addition, Executive acknowledges and agrees that any
breach of a Protective Covenant by him will cause irreparable damage to the Company and/or its
affiliates, the exact amount of which will be difficult to determine, and that the remedies at law
for any such breach will be inadequate. Accordingly, Executive agrees that, in addition to any
other remedy that may be available at law, in equity or hereunder, the Company, and/or its
affiliates shall be entitled to specific performance and injunctive relief, without posting bond or
other security, to enforce or prevent any violation of any of the Protective Covenants by him.

     11. Severability. The parties hereto intend all provisions of this Agreement to be
enforced to the fullest extent permitted by law. The provisions of this Agreement are severable.
The covenants on the part of the Executive contained in the Protective Covenants shall be

10

 

construed as independent covenants and agreements of the Executive, independently supported by good
and adequate consideration, shall be construed independently of the other provisions in this
Agreement and shall survive this Agreement. The existence of any claim or cause of action of
Executive against the Company or any of its affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company or its affiliates of
the covenants of Executive contained in this Agreement. The parties in no way intend to include a
provision that contravenes public policy. Therefore, if any of the provisions, clauses, sentences,
or paragraphs, or portions (“provisions”) of this Agreement is unlawful, against public policy, or
otherwise declared void or unenforceable, such provision shall be deemed excluded from this
Agreement, which shall in all other respects remain in effect. Furthermore, in lieu of such
illegal, invalid or unenforceable provision, there shall be added as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable. If any Court should construe any portion of this
Agreement to be too broad to prevent enforcement to its fullest extent then such portion shall be
enforced to the maximum extent that the Court finds reasonable and enforceable.

     12. Compliance With Section 409A. Notwithstanding any other provision of this
Agreement, to the extent applicable, this Agreement is intended to comply with Section 409A of the
Code and the regulations (or similar guidance) thereunder. To the extent any provision of this
Agreement is contrary to or fails to address the requirements of Section 409A of the Code, this
Agreement shall be construed and administered as necessary to comply with such requirements.

     13. Miscellaneous.

          a. Notices. Any notices, consents, demands, requests, approvals and other
communications to be given under this Agreement by either party to the other must be in writing and
must be either (i) personally delivered, (ii) mailed by registered or certified mail, postage
prepaid with return receipt requested, (iii) delivered by reputable overnight express delivery
service or reputable same-day local courier service, or (iv) delivered by telex or facsimile
transmission, with confirmed receipt, to the address set forth below, or to such other address as
may be designated by the parties from time to time in accordance with this Section 12(a):

If to the Company:

Delta Apparel, Inc.

2750 Premiere Parkway

Suite 100

Duluth, Georgia 30097

Attn: Vice President of Human Resources

Fax No.: (678) 775-6999

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If to Executive:

David R. Palmer

999 Altamont Road

Greenville, South Carolina 29609

               Notices delivered personally or by overnight express delivery service or by local courier
service are deemed given as of actual receipt. Mailed notices are deemed given three (3) business
days after mailing. Notices delivered by telex or facsimile transmission are deemed given upon
receipt by the sender of the answer back (in the case of a telex) or transmission confirmation (in
the case of a facsimile transmission).

          b. Entire Agreement. This Agreement supersedes any and all other agreements, either
oral or written, between the parties with respect to the subject matter of this Agreement and
contains all of the covenants and agreements between the parties with respect to the subject matter
of this Agreement.

          c. Modification. No change or modification of this Agreement is valid or binding upon
the parties, nor will any waiver, termination or discharge of any term or condition of this
Agreement be so binding, unless confirmed in writing and signed by the parties to this Agreement.

          d. Governing Law and Venue. The parties acknowledge and agree that this Agreement and
the obligations and undertakings of the parties under this Agreement will be performable in
Georgia. This Agreement is governed by, and construed in accordance with, the laws of the State of
Georgia without giving consideration to the conflict of laws provisions thereof. If any action is
brought to enforce or interpret this Agreement, the parties consent to the jurisdiction and venue
of the Federal District Court for the Northern District of Georgia and any state or superior court
located in Fulton or Gwinett Counties, Georgia.

          e. Enforcement. Executive agrees that upon Executive’s violation or threatened
violation of any of the provisions of this Agreement, the Company shall, in addition to any other
rights and remedies available to it, at law, in equity, or otherwise, be entitled to specific
performance and injunctive relief including, without limitation, an injunction to be issued by any
court of competent jurisdiction enjoining and restraining Executive from committing any violation
or threatened violation of the provisions of this Agreement and Executive consents to the issuance
of such injunction without the necessity of bond or other security in the event of a breach or
threatened breach by him of this Agreement. Furthermore and notwithstanding anything to the
contrary in this Agreement, the Company shall, in addition to any other rights or remedies
available to it, at law, in equity, or otherwise, be entitled to reimbursement of court costs,
reasonable attorneys’ fees, and any other expenses reasonably incurred by it or its affiliates as a
result of a breach or threatened breach of this agreement by Executive.

12

 

          f. Counterparts. This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement, and all of which, when taken
together, shall be deemed to constitute one and the same agreement. The exchange of copies of this
Agreement and of signature pages by facsimile transmission shall constitute effective execution and
delivery of this Agreement as to the parties and may be used in lieu of the original agreement for
all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their
original signatures for any purpose whatsoever.

          g. Costs. Except as provided in Section 13(e) above or except as provided below, if
any action at law or in equity is necessary to enforce or interpret the terms of this Agreement,
each party shall bear its own costs and expenses (including, without limitation, attorneys’ fees);
provided, however, that in the event Executive incurs costs or expenses in connection with
successfully enforcing this Agreement following a Change of Control, the Company shall reimburse
the Executive for all such reasonable costs and expenses (including, without limitation, attorneys’
fees).

          h. Estate. If Executive dies prior to the expiration of the term of employment or
during a period when monies are owing to him, any monies that may be due him from the Company under
this Agreement as of the date of his death shall be paid to his estate as and when otherwise
payable.

          i. Assignment. The rights, duties and benefits to Executive hereunder are personal to
him, and no such right, duty or benefit may be assigned by him without the prior written consent of
the Company. The rights and obligations of the Company shall inure to the benefit and be binding
upon it and its successors and assigns, which assignment shall not require the consent of
Executive.

          j. Binding Effect. This Agreement is binding upon and shall inure to the benefit of
the parties hereto, their respective executors, administrators, successors, personal
representatives, heirs and assigns permitted under subsection 13(i) above.

          k. Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person or entity (other than affiliates of the Company
as provided herein) any rights, benefits or remedies of any nature whatsoever under or by reason of
this Agreement.

          l. Waiver of Breach. The waiver by the Company or Executive of a breach of any
provision of this Agreement by Executive or the Company may not operate or be construed as a waiver
of any subsequent breach.

          m. Construction. The parties agree that this Agreement was freely negotiated among
the parties and that Executive has had the opportunity to consult with an attorney in negotiating
its terms. Accordingly, the parties agree that this Agreement shall not be construed in favor of
any party or against any party. The parties further agree that the headings and
subheadings are for convenience of the parties only and shall not be given effect in the
construction of this Agreement.

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.

DELTA APPAREL, INC.

/S/ Martha M. Watson                                                  

Martha M. Watson

Vice President and Company Secretary

“Executive”

/S/ David R. Palmer                                                  

David R. Palmer

Vice President of Business Planning and

Company Assistant Treasurer

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