Document:

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                                                                   EXHIBIT 10.16

                             LOAN FACILITY AGREEMENT

                                  BY AND AMONG

                            FLOWERS INDUSTRIES, INC.,

                             SUNTRUST BANK, ATLANTA

                                       AND

                      EACH OF THE PARTICIPANTS PARTY HERETO

                          DATED AS OF NOVEMBER 5, 1999

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                              AMENDED AND RESTATED
                             LOAN FACILITY AGREEMENT

                                Table of Contents

<TABLE>
<CAPTION>
                                                                                                                PAGE
<S>                   <C>                                                                                       <C>
ARTICLE I.            DEFINITIONS.................................................................................2
SECTION 1.01.           Definitions...............................................................................2
SECTION 1.02.           Accounting Terms.........................................................................18

ARTICLE II.           LOAN FACILITY; COMMITMENT TO MAKE LOANS....................................................18
SECTION 2.01.           Loan Facility............................................................................18
SECTION 2.02.           Conveyance of Participant's Interest.....................................................19
SECTION 2.03.           Funding of Loans; Swing Line; Funding of Participant's Interest in Loans.................20
SECTION 2.04.           Fees ....................................................................................22
SECTION 2.05.           Interest on Funded Participant's Interest................................................22
SECTION 2.06.           Payments and Computations, Etc...........................................................23
SECTION 2.07.           Voluntary Reduction of the Unutilized Commitment.........................................24
SECTION 2.08.           Extension of Commitment..................................................................24
SECTION 2.09.           Pro Rata Treatment.......................................................................25
SECTION 2.10.           Sharing of Setoffs.......................................................................25

ARTICLE III           DISTRIBUTION OF PAYMENTS...................................................................26
SECTION 3.01.           Flowers' Servicing Obligations with Respect to Loans; Collateral; Non-Recourse...........26
SECTION 3.02.           Bank's Obligations with Respect to Loans and Collateral..................................27
SECTION 3.03.           Application of Payments..................................................................27
SECTION 3.04.           Servicing Report and Distributor Status Report...........................................28

ARTICLE IV.           REQUIREMENTS OF NOTES......................................................................28
SECTION 4.01.           Notes....................................................................................28
SECTION 4.02.           Repurchase of Ineligible Notes...........................................................30

ARTICLE V.            REPURCHASE OBLIGATION OF FLOWERS WITH RESPECT TO DEFAULTED LOANS...........................31
SECTION 5.01.           Repurchase Obligation of Flowers.........................................................31
SECTION 5.02.           Transfer of Notes........................................................................31
SECTION 5.03.           Reliance on Repurchase Obligation........................................................32
SECTION 5.04.           Certain Waivers..........................................................................32
SECTION 5.05.           Bankruptcy Rescission....................................................................33

ARTICLE VI.           CONDITIONS OF LOANS........................................................................33
</TABLE>

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<TABLE>
<S>                   <C>                                                                                       <C>
ARTICLE VII.          REPRESENTATIONS AND WARRANTIES.............................................................34
SECTION 7.01.           Corporate Existence and Power............................................................34
SECTION 7.02.           Corporate and Governmental Authorization; No Contravention...............................34
SECTION 7.03.           Binding Effect...........................................................................35
SECTION 7.04.           Financial Information....................................................................35
SECTION 7.05.           No Litigation............................................................................35
SECTION 7.06.           Compliance with ERISA....................................................................35
SECTION 7.07.           Compliance with Laws; Payment of Taxes...................................................35
SECTION 7.08.           Subsidiaries.............................................................................36
SECTION 7.09.           Investment Company Act...................................................................36
SECTION 7.10.           Public Utility Holding Company Act.......................................................36
SECTION 7.11.           Ownership of Property; Liens.............................................................37
SECTION 7.12.           No Default...............................................................................37
SECTION 7.13.           Full Disclosure..........................................................................37
SECTION 7.14.           Environmental Matters....................................................................37
SECTION 7.15.           Capital Stock............................................................................38
SECTION 7.16.           Margin Stock.............................................................................38
SECTION 7.17.           Insurance................................................................................38
SECTION 7.18.           Notes; Books and Records.................................................................38
SECTION 7.19.           Y2K Plan.................................................................................39

ARTICLE VIII.         COVENANTS..................................................................................39
SECTION 8.01.           Information..............................................................................39
SECTION 8.02.           Inspection of Property, Books and Records................................................41
SECTION 8.03.           Maintenance of Existence.................................................................42
SECTION 8.04.           Consolidations, Mergers and Sales of Assets..............................................42
SECTION 8.05.           Use of Proceeds..........................................................................43
SECTION 8.06.           Compliance with Laws; Payment of Taxes...................................................43
SECTION 8.07.           Insurance................................................................................44
SECTION 8.08.           Change in Fiscal Year....................................................................44
SECTION 8.09.           Maintenance of Property..................................................................44
SECTION 8.10.           Environmental Notices....................................................................44
SECTION 8.11.           Environmental Matters....................................................................44
SECTION 8.12.           Environmental Release....................................................................45
SECTION 8.13.           Transactions with Affiliates.............................................................45
SECTION 8.14.           Loans or Advances........................................................................45
SECTION 8.15.           Investments..............................................................................46
SECTION 8.16.           Negative Pledge..........................................................................46
SECTION 8.17.           Adjusted Fixed Charges Coverage Ratio....................................................48
SECTION 8.18.           Leverage Ratio...........................................................................48
SECTION 8.19.           Minimum Consolidated Net Worth...........................................................49
SECTION 8.20.           Minimum Adjusted Consolidated EBDITA.....................................................49
SECTION 8.21.           Subsidiary Borrowings....................................................................49
</TABLE>

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<TABLE>
<S>                   <C>                                                                                        <C>
SECTION 8.22.           Collateral Protection Covenants..........................................................49
SECTION 8.23.           Separateness from Unrestricted Subsidiaries..............................................50
SECTION 8.24.           Year 2000 Compliance.....................................................................51

ARTICLE IX.           EVENTS OF DEFAULT AND ESCROW FUNDING OBLIGATION............................................52
SECTION 9.01.           Events of Default........................................................................52
SECTION 9.02.           Remedies on Default......................................................................54

ARTICLE X.            ESCROW FUNDING OBLIGATION AND ESCROW.......................................................56
SECTION 10.01           Appointment of Escrow Agent..............................................................56
SECTION 10.02           Deposit of Escrow Funds..................................................................56
SECTION 10.03           The Escrow Account.......................................................................56
SECTION 10.04           Payments of Repurchase Price for Defaulted Loans.........................................56
SECTION 10.05           Reduction of Amount in Escrow............................................................56
SECTION 10.06           Fees and Expenses of Escrow Agent........................................................57
SECTION 10.07           Liability of Escrow Agent................................................................57

ARTICLE XI.           THE BANK...................................................................................58
SECTION 11.01.          Appointment of the Bank as Agent.........................................................58
SECTION 11.02.          Nature of Duties of the Bank.............................................................58
SECTION 11.03.          Lack of Reliance on the Bank.............................................................59
SECTION 11.04.          Certain Rights of the Bank...............................................................59
SECTION 11.05.          Reliance by the Bank.....................................................................59
SECTION 11.06.          Indemnification of the Bank..............................................................60
SECTION 11.07.          The Bank in its Individual Capacity......................................................60
SECTION 11.08.          Holders of Participation Certificates....................................................60

ARTICLE XII.          MISCELLANEOUS..............................................................................60
SECTION 12.01.          No Waiver................................................................................60
SECTION 12.02.          Notices..................................................................................61
SECTION 12.03.          Governing Law............................................................................61
SECTION 12.04.          Survival of Representations and Warranties...............................................62
SECTION 12.05.          Descriptive Headings.....................................................................62
SECTION 12.06.          Severability.............................................................................62
SECTION 12.07.          Time is of the Essence...................................................................62
SECTION 12.08.          Counterparts.............................................................................62
SECTION 12.09.          Payment of Costs.........................................................................62
SECTION 12.10.          Benefit of Agreement; Assignments; Participations........................................63
SECTION 12.11.          Third Party Beneficiaries................................................................64
SECTION 12.12.          Cumulative Remedies; No Waiver...........................................................64
SECTION 12.13.          Amendments; Consents.....................................................................64
SECTION 12.14.          Set-Off..................................................................................65
SECTION 12.15.          Indemnity................................................................................65
SECTION 12.16.          Jurisdiction and Venue...................................................................65
</TABLE>

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<TABLE>
<S>                <C>                                                                                           <C>
SECTION 12.17.          Waiver of Jury Trial.....................................................................66
SECTION 12.18.          Effect on Existing Loan Facility Agreement; Execution of New Loan Documents..............66
SECTION 12.19.          Termination of Agreement.................................................................66
</TABLE>

Exhibits:

Exhibit "A" -     Form of Bank Note
Exhibit "B" -     Form of Distributor's Agreement
Exhibit "C" -     Form of Funding Approval Notice
Exhibit "D" -     Form of Participation Certificate
Exhibit "E" -     Form of Weekly Statement
Exhibit "F" -     Form of Weekly Servicing Report to Participants
Exhibit "G" -     Form of Opinion
Exhibit "H" -     Form of Compliance Certificate

Schedules:

Schedule 5.01     -  Quarterly Threshold Amount and Non-Guaranteed Amount
Schedule 7.08     -  Subsidiaries

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<PAGE>   6

                            LOAN FACILITY AGREEMENT

         THIS LOAN FACILITY AGREEMENT ("Agreement") is entered into as of the
5th day of November, 1999, by and among FLOWERS INDUSTRIES, INC. ("Flowers"), a
Georgia corporation having its principal office at 1919 Flowers Circle,
Thomasville, Georgia 31757, SUNTRUST BANK, ATLANTA a Georgia banking corporation
(the "Bank"), and SunTrust Bank, Atlanta and each of the other lending
institutions listed on the signature pages hereto (SunTrust Bank, Atlanta and
such lenders, together with any assignees thereof becoming "Participants"
pursuant to the terms of this Agreement, the "Participants").

                                   WITNESSETH:

         WHEREAS, Flowers has established a loan program with the Bank pursuant
to that certain Note Purchase, Loan Commitment and Servicing Agreement dated as
of September 20, 1996, as amended by that First Amendment to Note Purchase, Loan
Commitment and Servicing Agreement, dated as of January 2, 1997, as amended by
the Second Amendment to Note Purchase, Loan Commitment and Servicing Agreement,
dated as of January 15, 1997, as amended by the Third Amendment to Note
Purchase, Loan Commitment and Servicing Agreement, dated as of August 17, 1998,
as amended by the Fourth Amendment to Note Purchase, Loan Commitment and
Servicing Agreement, dated as of September 25, 1998, by the Bank and as amended
by the Fifth Amendment to Note Purchase, Loan Commitment and Servicing
Agreement, dated as of July 16, 1999, by and among Flowers and the Bank, and as
amended by the Sixth Amendment to Note Purchase Loan Commitment and Servicing
Agreement, dated as of October 8, 1999, by and among Flowers and the Bank (the
"Existing Loan Facility Agreement") to provide loans to certain distributors of
Flowers and its Subsidiaries;

         WHEREAS, Flowers has requested that the Bank increase its Commitment
(as defined under the Existing Loan Facility Agreement) and make certain other
changes to the Existing Loan Facility Agreement, and the Bank is willing to do
so subject to the replacement of the Existing Loan Facility Agreement with this
Agreement, pursuant to which the Participants shall purchase participations in
the Commitment and the loans to distributors of Flowers and its Subsidiaries
outstanding thereunder, and subject to the other terms and conditions hereof;

         WHEREAS, the Participants and the Bank desire Flowers to service all
such loans upon the terms and conditions set forth in the Servicing Agreement,
dated as of the date hereof, by and between Flowers and the Bank, as the same
may be amended, restated, supplemented or otherwise modified from time to time
(the "Servicing Agreement"); and

         WHEREAS, Flowers is willing, subject to the limitations set forth
herein, to repurchase such loans upon the occurrence of certain events, and is
willing to escrow funds for such repurchase, all as more fully set forth below;

         NOW, THEREFORE, upon the terms and conditions hereinafter stated, and
in consideration of the mutual premises set forth above and other adequate
consideration, the receipt

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and sufficiency of which is hereby acknowledged, Flowers and the Bank agree that
the Existing Loan Facility Agreement is hereby replaced in its entirety by this
Agreement, and Flowers, the Bank and the Participants, intending to be legally
bound, hereby agree as follows:

                                   ARTICLE I.

                                  DEFINITIONS

         SECTION 1.01. Definitions. In addition to the other terms defined
herein, the following terms used herein shall have the meanings herein specified
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

         "Adjusted Consolidated EBITDA" means at any time the sum of the
following, determined on a consolidated basis for Flowers and its Restricted
Subsidiaries, at the end of each Fiscal Quarter: (i) Adjusted Consolidated Net
Income; plus (ii) Adjusted Consolidated Interest Expense; plus (iii) taxes on
income; plus (iv) depreciation; plus (v) amortization; plus (vi) without
duplication, other non-cash charges.

         "Adjusted Consolidated Fixed Charges" means at any date the sum of (i)
Adjusted Consolidated Interest Expense for the 4 Fiscal Quarter period used in
the calculation of Adjusted Consolidated Net Income for the determination of
Adjusted EBILT, and (ii) all payment obligations of Flowers and the Restricted
Subsidiaries for such period under all operating leases and rental agreements.

         "Adjusted Consolidated Interest Expense" for any period means interest,
whether expensed or capitalized, in respect of Indebtedness of Flowers or any of
the Restricted Subsidiaries outstanding during such period.

         "Adjusted Consolidated Net Income" means, for any period, the Net
Income of Flowers and its Restricted Subsidiaries determined on a consolidated
basis, but excluding (i) extraordinary items, (ii) any equity interests of
Flowers or any Restricted Subsidiary in the unremitted earnings of any Person
that is not a Subsidiary, (iii) mark to market adjustments made in connection
with Flowers' commodities hedging program in accordance with GAAP and (iv)
non-recurring charges of $64,461,000 incurred in the 4th Fiscal Quarter of the
1998 Fiscal Year.

         "Adjusted Consolidated Net Worth" means the Net Worth of Flowers and
the Subsidiaries, with all Unrestricted Subsidiaries being accounted for on an
equity basis of accounting, and otherwise determined on a consolidated basis in
accordance with GAAP.

         "Adjusted Consolidated Total Assets" means, at any time, the total
assets of Flowers and its Restricted Subsidiaries, with any investments in
Unrestricted Subsidiaries included as assets as

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if all Unrestricted Subsidiaries were being accounted for on an equity basis of
accounting, determined in all other respects on a consolidated basis in
accordance with GAAP.

         "Adjusted Consolidated Total Debt" means the aggregate of all
Indebtedness (except that, for purposes of determining Adjusted Consolidated
Total Debt, letters of credit and similar instruments described in clause (e) of
the definition of Indebtedness shall be included only to the extent they have
maturities greater than 1 year) of Flowers and the Restricted Subsidiaries on a
consolidated basis in accordance with GAAP, excluding, however, any Convertible
Redeemable Capital Stock or Convertible Subordinated Debt if the current market
value of an equity security into which such Convertible Redeemable Capital Stock
or Convertible Subordinated Debt is convertible is greater than the conversion
price for such security.

         "Adjusted EBILT" means at any date the sum of (i) Adjusted Consolidated
Net Income for any 4 of the last 6 Fiscal Quarters ending prior to the date of
measurement, such 4 Fiscal Quarters to be selected by Flowers, plus (ii) the sum
of Adjusted Consolidated Fixed Charges and taxes on income (including deferred
taxes) for the same 4 Fiscal Quarters.

         "Adjusted Total Capitalization" means the sum of (i) Adjusted
Consolidated Total Debt and (ii) Adjusted Consolidated Net Worth.

         "Affiliate" of any relevant Person means (i) any Person that directly,
or indirectly through one or more intermediaries, controls the relevant Person
(a "Controlling Person"), (ii) any Person (other than the relevant Person or a
Subsidiary of the relevant Person) which is controlled by or is under common
control with a Controlling Person, or (iii) any Person (other than a Subsidiary
of the relevant Person) of which the relevant Person owns, directly or
indirectly, 20% or more of the common stock or equivalent equity interests. As
used herein, the term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise.

         "Agreement" means this Loan Facility Agreement, either as originally
executed or as it may be from time to time supplemented, amended, renewed,
extended or otherwise modified.

         "Authorized Signatory" means an officer of Flowers named in the most
recent Certificate Regarding Authorized Signatories delivered to the Bank.

         "Business Day" means a day of the year on which commercial banks are
not required or authorized to close in Atlanta, Georgia.

         "Capital Stock" means any nonredeemable capital stock of Flowers or any
Consolidated Subsidiary (to the extent issued to a Person other than Flowers),
whether common or preferred.

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         "Capitalized Lease" means any lease which is required to be capitalized
on the balance sheet of the lessee pursuant to GAAP but shall exclude any lease
which at the time of its incurrence was an operating lease for purposes of GAAP
as in effect at such time.

         "CERCLA" means the Comprehensive Environmental Response compensation
and Liability Act, 42 U.S.C.ss.9601 et. seq. and its implementing regulations
and amendments.

         "CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.

         "Closing Certificate" means a certificate of an officer of Flowers
delivered pursuant to Section 6(g).

         "Closing Date" means November 5, 1999.

         "Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.

         "Collateral" means the property of a Distributor subject to a security
interest or lien which secures a Loan, which shall include all accounts
receivable, inventory and other business assets of the Distributor, and all
property and assets of any guarantor subject to such a security interest or lien
in favor of the Bank as security for obligations incurred pursuant to its
guaranty.

         "Collections" means, with respect to any Loan, all cash collections and
other cash proceeds received in connection therewith, including without
limitation, all Payments, Insurance Proceeds and Liquidation Proceeds.

         "Commitment" has the meaning set forth in Section 2.01(b).

         "Commitment Fee" has the meaning set forth in Section 2.04.

         "Commitment Termination Date" has the meaning set forth in Section
2.01(b).

         "Compliance Certificate" has the meaning set forth in Section 8.01(c).

         "Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, would be consolidated
with those of Flowers in its consolidated financial statements as of such date.

         "Consolidated Total Assets" means, at any time, the total assets of
Flowers and its Consolidated Subsidiaries, determined on a consolidated basis,
as set forth or reflected on the most recent consolidated balance sheet of
Flowers and its Consolidated Subsidiaries, prepared in accordance with GAAP.

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<PAGE>   10

         "Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with Flowers, are treated as a single employer
under Section 414 of the Code.

         "Convertible Redeemable Capital Stock" means any Capital Stock that by
its terms (or by the terms of any agreement by which, or equity security into
which, it is convertible or for which it is exchangeable or any other agreement)
or upon the happening of any event matures or is or will become mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, or is exchangeable for
or convertible into an equity security of Flowers.

         "Convertible Subordinated Debt" means any Indebtedness of Flowers (i)
which is and remains subordinated in right of payment to the obligations of
Flowers hereunder and (ii) which by its terms is exchangeable for or convertible
into an equity security of Flowers.

         "Customary Practices" means Flowers' or any of the Selling
Subsidiaries' normal and customary practices with respect to the approval,
servicing and administration of the Loans, as in effect from time to time, which
practices shall be consistent with the standard approval, servicing and
administration policies employed by Flowers with respect to all Loans held by it
in its own portfolio as of the Closing Date, including without limitation, the
policies and procedures set forth in the Policies and Procedures Manual
delivered to the Bank on the Closing Date.

         "Cut-Off Date" means (i) as of the Closing Date, November 5, 1999 and
(ii) with respect to each Statement delivered after the Closing Date, the second
preceding Saturday to the relevant Payment Date.

         "Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.

         "Default Interest" has the meaning set forth in Section 2.06(b).

         "Defaulted Loan" has the meaning set forth in Section 5.01.

         "Distributor" means a Person or Persons obligated on an outstanding
Loan, whether the Person that originally executed and delivered the Note and the
Distributor's Agreement underlying such Loan, or any Person or Persons that
assumes such Loan.

         "Distributor Loan Documents" means (i) with respect to each Purchased
Loan, a loan application, a Note duly endorsed to the order of the Bank, a
recorded UCC-1 financing statement, a guaranty, if any, and a Distributor's
Agreement containing a security interest securing the Note, assigned to the
Bank, (ii) with respect to each Existing Loan, other than a Purchased Loan, a
loan application, a Note in favor of the Bank, a security agreement, a recorded
UCC-1 financing statement, a guaranty, if any, and a disbursement and set-off
authorization and (iii) with respect to

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each Loan made on or after the Closing Date, a Note in favor of the Bank, and a
recorded UCC-1 financing statement.

         "Distributor Loan File" means the files maintained by Flowers, which
shall include true and correct copies of the Distributor Loan Documents
pertaining to a particular Loan and any additional documents required to be
added to the Distributor Loan File pursuant to this Agreement.

         "Distributor Loan Interest Rate" means the annual rate at which
interest accrues on any Loan, which rate shall be, in the case of any Purchased
Loan, the rate set forth in the Purchased Note and, in the case of any other
Loan, twelve percent (12.0%) per annum, calculated on the basis of a 360-day
year for the actual number of days elapsed (or 12.1667% per annum calculated on
the basis of a 365-day year for the actual number of days elapsed).

         "Distributor Route" means, in respect of a Distributor for whom a Loan
is outstanding, the contractual right of such Distributor to distribute products
of Flowers or its Subsidiaries in a specified geographic location set forth in a
Distributor's Agreement, together with all "Distributor's Rights" (as such term
is defined therein) and the related accounts receivable, inventory and equipment
securing a Loan.

         "Distributor's Agreement" means the contractual arrangement between
Flowers or one of the Selling Subsidiaries with a Distributor for whom a Loan is
outstanding whereby such Distributor agrees to distribute Flowers' product in a
specified geographic location and Flowers or one of its Subsidiaries agrees to
provide the Distributor with product and other services, including its
Proprietary Administrative Services, such agreement to be substantially in the
form of Exhibit "B" attached hereto.

         "Dollars" or "$" means dollars in lawful currency of the United States
of America.

         "Eligible Assignee" shall mean (i) a commercial bank organized under
the laws of the United States or any state thereof having total assets in excess
of $1,000,000,000.00 or any commercial finance or asset-based lending Affiliate
of any such commercial bank and (ii) any Participant.

         "Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.

         "Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of Flowers or any Restricted Subsidiary required by any
Environmental Requirement.

         "Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent, or written agreements with an
Environmental Agency or other entity arising from or in

                                       6
<PAGE>   12

any way associated with any Environmental Requirement, whether or not
incorporated in a judgment, decree or order.

         "Environmental Liabilities" means any liabilities, whether accrued,
contingent or otherwise, arising from and in any way associated with any
Environmental Requirements.

         "Environmental Notices" means notice from any Environmental Authority
or by any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.

         "Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.

         "Environmental Releases" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.

         "Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to Flowers, any Restricted
Subsidiary or the Properties, including but not limited to any such requirement
under CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.

         "Escrow Account" shall have the meaning set forth in Section 10.02.

         "Escrow Agent" shall have the meaning set forth in Section 10.01.

         "Escrow Funding Obligation" shall mean Flowers' obligation to put
immediately available funds in escrow described in Article X in the amount of
the Maximum Recourse Amount at the time such escrow is required to be funded,
and the ongoing obligation of Flowers to increase such funds on the first day of
each Fiscal Quarter as set forth in Section 10.02.

         "Event of Default" has the meaning set forth in Section 9.01.

         "Existing Loan Facility Agreement" has the meaning set forth in the
Recital paragraphs to this Agreement.

         "Existing Loan" means any of the Purchased Loans and the loans to
Distributors made by the Bank pursuant to the Existing Loan Facility Agreement
as in effect from time to time.

                                       7
<PAGE>   13

         "Existing Note" means any of the Purchased Notes or the promissory
notes from the Distributors to the Bank substantially in the form attached to
the Existing Loan Facility Agreement as in effect from time to time.

         "Federal Funds Rate" shall mean, for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of Atlanta, or, if such rate
is not so published for any day that is a Business Day, the average quotations
for the day of such transactions received by the Bank from three federal funds
brokers of recognized standing selected by it.

         "Fiscal Quarter" means any fiscal quarter of Flowers.

         "Fiscal Year" means any fiscal year of Flowers.

         "Flower's Credit Agreement" means that certain $500,000,000 Amended and
Restated Credit Agreement, dated as of January 30, 1998, among Flowers, the
Banks listed therein, Wachovia Bank, N.A., as Bank, Bank of Nova Scotia, as
Documentation Bank and NationsBank, N.A., as Syndications Bank, as from time to
time in effect.

         "Flowers Security Agreement" means the Security Agreement, dated as of
September 20, 1996, executed by Flowers and certain of its Subsidiaries in favor
of the Bank, as amended by that certain First Amendment to Security Agreement,
dated as of the date hereof, by and among Flowers, such Subsidiaries and the
Bank.

         "Funded Participant's Interest" means the aggregate outstanding amount
of Participant Fundings made by a Participant hereunder with respect to the
Loans, and shall include, with respect to the Bank, the aggregate outstanding
amount of Swing Line Loans made with respect to Loans.

         "Funding Approval Notice" means a written notice from Flowers or a
Selling Subsidiary to the Bank setting forth an authorization for a Loan,
containing such information required by, and in substantially the form of,
Exhibit "C" attached hereto, appropriately completed.

         "GAAP" means generally accepted accounting principles applied on a
basis consistent with those which, in accordance with Section 1.02, are to be
used in making the calculations for purposes of determining compliance with the
terms of this Agreement.

         "General Assignment" shall mean, collectively, each assignment from
each of Flowers and the Selling Subsidiaries, dated as of the Note Purchase
Date, assigning and transferring to the Bank each of the Purchased Loans and
collateral therefor owned by such Person.

                                       8
<PAGE>   14

         "Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividends or other obligation of any other Person in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by such Person:

                  (a) to purchase such Indebtedness or obligation or any
         property constituting security therefore;

                  (b) to advance or supply funds (i) for the purchase or payment
         of such Indebtedness or obligation, or (ii) to maintain any working
         capital or other balance sheet condition or any income statement
         condition of any other Person or otherwise to advance or make available
         funds for the purchase or payment of such Indebtedness or obligations;

                  (c) to lease properties or to purchase properties or services
         primarily for the purpose of assuring the owner of such Indebtedness or
         obligation of the ability of any other Person to make payment of the
         Indebtedness or obligation; or

                  (d) otherwise to assure the owner of such Indebtedness or
         obligations against loss in respect thereof.

In any computation of the Indebtedness or other liabilities of the obligor under
any Guaranty, the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor.

         "Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. ss. 6901 et seq. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (b)
"hazardous substance", pollutant", or "contaminant" as defined in CERCLA, or in
any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof,
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation and (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.

         "Indebtedness" with respect to any Person means, at any time, without
duplication,

                  (a) its liabilities for borrowed money and its redemption
         obligations in respect of mandatorily redeemable Preferred Stock;

                  (b) its liabilities for the deferred purchase price of
         property acquired by such Person (excluding accounts payable arising in
         the ordinary course of business but

                                       9
<PAGE>   15

         including all liabilities created or arising under any conditional sale
         or other title retention agreement with respect to any such property);

                  (c) all liabilities appearing on its balance sheet in
         accordance with GAAP in respect of Capitalized Leases;

                  (d) all liabilities for borrowed money secured by any Lien
         with respect to any property owned by such Person (whether or not it
         has assumed or otherwise become liable for such liabilities);

                  (e) all its liabilities in respect of letters of credit or
         instruments serving a similar function issued or accepted for its
         account by banks and other financial institutions (whether or not
         representing obligations for borrowed money);

                  (f) Swaps of such Person; and

                  (g) any Guaranty of such Person with respect to liabilities of
         a type described in any clauses (a) through (f) hereof.

         "Ineligible Note" has the meaning set forth in Section 4.02.

         "Insurance Proceeds" means proceeds of any insurance payable to Flowers
or a Selling Subsidiary in connection with a Distribution Route securing a Loan
unless such proceeds are released to the Distributor in accordance with
Customary Practices or are paid to Flowers or a Selling Subsidiary pursuant to a
liability policy.

         "Interest Period" means, with respect to the calculation of LIBOR
hereunder, a period of one month, initially commencing on July 20, 1999;
provided that, (i) the first day of any Interest Period must be a Business Day,
(ii) any Interest Period that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in the next calendar month, in which case the Interest Period
shall end on the next preceding Business Day, and (iii) the first day of each
succeeding Interest Period shall be the last day of the preceding Interest
Period.

         "Investment" means any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guaranty or assumption of any obligation of such
Person or otherwise.

         "Keebler" means Keebler Foods Company, a Delaware corporation with its
principal place of business in Elmhurst, Illinois.

         "Keebler Acquisition" means, collectively, the acquisition by Flowers
(i) from Artal Luxemburg S.A., pursuant to a Stock Purchase Agreement dated as
of January 28, 1998, of an

                                       10
<PAGE>   16

aggregate of 9,581,169 shares of common capital stock in Keebler, and (ii) from
Bermore Limited, pursuant to a Stock Purchase and Stockholder's Agreement dated
as of January 28, 1998, of an aggregate of 1,616,691 shares of common capital
stock in Keebler, as a result of which, after giving effect to the Keebler
Accession, Flowers will own approximately 51% of the common capital stock of
Keebler, on a fully-diluted basis.

         "Leverage Ratio" means the ratio of Adjusted Consolidated Total Debt to
Adjusted Total Capitalization.

         "LIBOR" means, for each Interest Period, the offered rate for deposits
in Dollars determined by the Bank for the Interest Period appearing on Telerate
Page 3750 as of 11:00 a.m. (London, England time) on the day that is two
Business Days prior to the first day of such Interest Period. If the foregoing
rate is unavailable from the Telerate for any reason, then such rate shall be
determined by the Bank from the Reuters Screen LIBO Page as of 11:00 a.m.
(London, England time) on the day that is two Business Days prior to the first
day of such Interest Period; if two or more of such rates appear on the Reuters
Screen LIBO Page, the rate shall be the arithmetic mean of such rates. If the
foregoing rate is also unavailable from the Reuters Screen for any reason, then
such rate shall be determined by the Bank on any other interest rate reporting
service of recognized standing designated in writing by the Bank to Flowers, in
any such case rounded, if necessary, to the next higher 1/16 of 1.0%, if the
rate is not such a multiple. If a Reserve Percentage becomes applicable, LIBOR
shall be appropriately adjusted.

         "Lien" means, with respect to any asset, any mortgage, deed to secure
debt, deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Indebtedness or a
Guaranty, whether by consensual agreement or by operation of statute or other
law, or by any agreement, contingent or otherwise, to provide any of the
foregoing. For the purposes of this Agreement, Flowers or any Subsidiary shall
be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, Capitalized Lease or other title retention agreement relating to such
asset.

         "Liquidation Proceeds" means all amounts collected by Flowers or a
Selling Subsidiary, individually or as agent for the Bank, with respect to a
Defaulted Loan (other than Insurance Proceeds).

         "Loan" means any of the Existing Loans or the New Loans.

         "Loan Closing Date" means, with respect to any Loan, the date on which
the documents governing such Loan are executed and delivered and such Loan is
funded.

         "Loan Default" means an occurrence with respect to a Loan which is
defined by the applicable Distributor Loan Documents to be an event of default.

                                       11
<PAGE>   17

         "Loan Indebtedness" means all amounts due and payable by a Distributor
under the terms of the Distributor Loan Documents for a given Loan, including,
without limitation, outstanding principal, accrued interest, any commitment
fees, and all reasonable costs and expenses of any legal proceeding brought by
the Bank to collect any of the foregoing (including without limitation,
reasonable attorneys' fees actually incurred).

         "Loan Payment Default" means the failure of a Distributor to make a
payment of principal, accrued interest thereon or any other amounts, within the
cure period following the due date therefor, as provided under the applicable
Loan Documents.

         "Margin Stock" means "margin stock" as defined in Regulations T, U or X
of the Board of Governors of the Federal Reserve System, as in effect from time
to time, together with all official rulings and interpretations issued
thereunder.

         "Material Adverse Effect" means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the
financial condition, operations, business or properties of Flowers and its
Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the
Bank under the Distributor Loan Documents generally, this Agreement, the
Servicing Agreement or the Flowers Security Agreement or the ability of Flowers
or any Selling Subsidiary to perform its obligations under the Distributor Loan
Documents generally, this Agreement, the Servicing Agreement or the Flowers
Security Agreement, as applicable, or (c) the legality, validity or
enforceability of the Distributor Loan Documents generally, this Agreement, the
Servicing Agreement or the Flowers Security Agreement.

         "Material Subsidiary" means, as of each date of determination, any
Restricted Subsidiary that would at such time constitute a "significant
subsidiary" (as such term is defined in Regulation S-X of the Securities and
Exchange Commission as in effect on the Closing Date) of the Company.

         "Maximum Commitment Amount" means $80,000,000, as such amount may be
reduced pursuant to Section 2.07.

         "Maximum Recourse Amount" means, as of any date of determination, the
greater of (i) the Quarterly Threshold Amount in effect as of such date, and
(ii) (x) the aggregate Principal Balance of the Loans outstanding hereunder on
such date minus (y) the applicable Non-Guaranteed Amount as of such date.

         "Mission Critical Systems and Equipment" means Flowers and its
Subsidiaries' hardware and software systems, and equipment relating to the
operation of its business and its general business plan, including, without
limitation, equipment in addition to computers, and with respect to which, the
failure to properly function would have a Material Adverse Effect.

                                       12
<PAGE>   18

         "Multiemployer Plan" has the meaning set forth in Section 4001(a) (3)
of ERISA.

         "Net Income" means, as applied to any Person for any Period the
aggregate amount of net income of such Person, after taxes, for such period, as
determined in accordance with GAAP.

         "Net Proceeds of Capital Stock" means any proceeds received by Flowers
or a Consolidated Subsidiary in respect of the issuance of Capital Stock, after
deducting therefrom all reasonable and customary costs and expenses incurred by
Flowers or such Consolidated Subsidiary directly in connection with the issuance
of such Capital Stock.

         "Net Worth" of any Person means the Total Assets of such Person less
all liabilities of such Person which would be shown as liabilities on a balance
sheet of such Person as of such time prepared in accordance with GAAP.

         "New Loan" means any loan made by the Bank to a Distributor pursuant to
the terms hereof and of the Servicing Agreement, on or after the Closing Date.

         "New Note" means a promissory note from a Distributor to the Bank
substantially in the form of Exhibit "A" attached hereto, evidencing a New Loan.

         "Non-Guaranteed Amount" means, for any period, the amount set forth on
Schedule 5.01 for such period.

         "Note Purchase Date" means September 20, 1996, the date on which the
Bank purchased the Purchased Notes from Flowers and the Selling Subsidiaries.

         "Notes" means, collectively, the Existing Notes and the New Notes.

         "Operating Profits" means, as applied to any Person for any period, the
operating income of such Person for such period, as determined in accordance
with GAAP.

         "Participating Commitment" means the amount set forth opposite each
Participant's name on the signature pages hereof, as such amount may be modified
by assignment pursuant to the terms hereof; provided that, following the
termination of the Commitment, each Participant's Participating Commitment shall
be deemed to be its Pro Rata Share of the aggregate Loans.

         "Participant Funding" means a funding by the Participants of their Pro
Rata Share of Loans.

         "Participant Funding Request" has the meaning set forth in Section
2.03(b).

         "Participant's Interest" has the meaning set forth in Section 2.02.

                                       13
<PAGE>   19

         "Participant's Unused Commitment" means, with respect to any
Participant, the difference between such Participant's Participating Commitment
and such Participant's Funded Participant's Interest.

         "Participation Certificate" means, a certificate issued by the Bank to
a Participant, substantially in the form of Exhibit "D" attached hereto,
evidencing such Participant's ownership interest conveyed hereunder.

         "Payment" means any Scheduled Payment or Prepayment of a Loan.

         "Payment Date" means the first Business Day of each calendar week.

         "Payment Period" means (i) initially, the period commencing on the
Closing Date and ending on the date immediately prior to the next Payment Date
and (ii) thereafter, the period commencing on each Payment Date and ending on
the next Payment Date.

         "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

         "Permitted Investments" means commercial paper, certificates of deposit
or repurchase agreements of banks organized under the laws of the United States
with a long term debt rating of A+ or better by Standard & Poor's, a division of
McGraw-Hill, Inc. or Moody's Investors Services, Inc., United States Treasury
bills and other obligations of the United States government, each with a term of
one year or less.

         "Permitted Keebler Investments" means: (i) the Keebler Acquisition; and
(ii) additional shares of common capital stock in Keebler acquired from time to
time (a) from third parties in the open market, (b) from Bermore Limited and
Artal Luxemburg S.A. in private transactions, (c) from management of Keebler in
private transactions and/or (d) from Keebler as part of an offering of stock by
Keebler (whether public or private), but in the case of this clause (d), only to
the extent necessary for Flowers to maintain ownership of at least 51% of the
common capital stock of Keebler, on a fully-diluted basis.

         "Person" means an individual, a corporation, a partnership, an
unincorporated association, a trust or any other entity or organization,
including, but not limited to, a government or political subdivision or an
agency or instrumentality thereof.

         "Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five (5) plan years made
contributions.

                                       14
<PAGE>   20

         "Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the Payment of any amount upon liquidation or
dissolution of such corporation.

         "Prepayment" means any full or partial prepayment of principal together
with accrued and unpaid interest thereon any Loan.

         "Principal Balance" means, with respect to any Loan, the outstanding
principal balance of such Loan after application of any Payment, Insurance
Proceeds or Liquidation Proceeds received as of such date.

         "Program Documents" means and include, as the context requires, this
Agreement, the Servicing Agreement, the Flowers Security Agreement, the General
Assignment, the Distributor Loan Documents and any and all other instruments,
agreements, documents and writings contemplated hereby or executed in connection
herewith or the Notes.

         "Properties" means all real property owned, leased or otherwise used or
occupied by Flowers or any Restricted Subsidiary, wherever located.

         "Proprietary Administrative Services" means all right, title and
interest of the Flowers and its Subsidiaries in and to all books, records,
computer software, customer lists, computer equipment and other personal
property used in connection with the proprietary administrative services
provided to the Distributors.

         "Pro Rata Share" means, with respect to each of the Participants, the
percentage designated as such Participant's Pro Rata Share on the signature
pages hereof, as such percentage may change from time to time as a result of
assignments or amendments pursuant to this Agreement.

         "Purchased Loans" shall mean all loans made by Flowers or any Selling
Subsidiary to their Distributors to finance the purchase of Distributor Routes
secured by a first priority lien on such Distributor Routes, and conveyed,
assigned and sold to Bank pursuant to the Existing Loan Facility Agreement.

         "Purchased Notes" shall mean all promissory notes of Distributors
initially owned and held by Flowers and the Selling Subsidiaries evidencing
Purchased Loans.

         "Quarterly Payment Date" means the last day of each calendar quarter.

         "Quarterly Threshold Amount" means, for any period, the amount set
forth on Schedule 5.01 for such period.

         "Repurchase Price" has the meaning set forth in Section 5.01.

                                       15
<PAGE>   21

         "Required Participants" means, at any time, the Participants holding at
least 66 2/3% of the sum of (x) aggregate Funded Participant's Interests, plus
(y) the Participant's Unused Commitments, or, following the termination of the
Commitment, the Participants holding at least 66 2/3% of the aggregate
outstanding Funded Participant's Interests at such time.

         "Reserve Percentage" means, for any day, the stated maximum rate
(expressed as a decimal) of all reserves required to be maintained with respect
to liabilities or assets consisting of or including "Eurocurrency liabilities,"
as prescribed by Regulation D of the Board of Governors of the Federal Reserve
System (or by any other governmental body having jurisdiction with respect
thereto), including, without limitation, any basic, marginal, emergency,
supplemental, special, transitional or other reserves, the rate so determined to
be rounded upward to the nearest whole multiple of 1/100 of 1%.

         "Responsible Officer" means the chief financial officer, principal
accounting officer, treasurer or comptroller of Flowers, and any other officer
of Flowers with responsibility for the administration of the relevant portion of
this Agreement or the Distributor Loan Documents.

         "Restricted Subsidiary" of a Person means any Subsidiary of the
referenced Person that is not an Unrestricted Subsidiary.

         "Reuters Screen" means, when used in connection with any designated
page and LIBOR, the display page so designated on the Reuter Monitor Money Rates
Service (or such other page as may replace that page on that service for the
purpose of displaying rates comparable to LIBOR).

         "Scheduled Payment" means the weekly payment of principal and interest
which is payable by a Distributor from time to time with respect to a Loan.

         "Selling Subsidiary" means, on any date, each Subsidiary of Flowers in
respect of which there is outstanding on such date a Loan to one or more
Distributors of such Selling Subsidiary.

         "Servicer" means Flowers unless and until Flowers is removed as
Servicer pursuant to the Servicing Agreement.

         "Servicer Advance" has the meaning set forth in the Servicing Agreement

         "Servicing Agreement" means that certain Servicing Agreement, dated as
of the date hereof, by and between Flowers and the Bank, as amended, restated,
supplemented or otherwise modified from time to time.

         "Statement" means the weekly report prepared for the Bank by the
Servicer, substantially in the form of Exhibit "E" attached hereto.

                                       16
<PAGE>   22

         "Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by Flowers.

         "Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended Fiscal Quarter of such Person,
based on the assumption that such Swap had terminated at the end of such Fiscal
Quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.

         "Swing Line Loan" has the meaning set forth in Section 2.03(a).

         "Telerate" means, when used in connection with any designated page and
LIBOR, the display page so designated on the Telerate, Inc. Service (or such
other page as may replace that page on that service for the purpose of
displaying rates comparable to LIBOR).

         "Third Parties" means all lessees, sublessees, licensees and other
users of the Properties, excluding those users of the Properties in the ordinary
course of Flowers' business and on a temporary basis.

         "Total Assets" means, with respect to any Person at any time, the total
assets of such Person as set forth or reflected on the most recent consolidated
balance sheet of such Person, prepared in accordance with GAAP.

         "Total Capitalization" means the sum of (i) Consolidated Total Debt and
(ii) Consolidated Net Worth.

         "Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value of
all Plan assets applicable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the PBGC
or the Plan under Title IV of ERISA.

         "Unrestricted Subsidiary" means, so long as Keebler is a Subsidiary,
Keebler, or any of its Subsidiaries, and "Unrestricted Subsidiaries" means,
collectively, Keebler and its Subsidiaries.

         "Upfront Fee" has the meaning set forth in Section 2.4(a).

                                       17
<PAGE>   23

         "Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by Flowers.

         "Y2K Plan" has the meaning set forth in Section 7.19.

         "Year 2000 Compliant and Ready" means that (a) Flowers and its
Subsidiaries hardware and software systems with respect to the operation of its
business will, in all material respects: (i) handle date information involving
any and all dates before, during and after January 1, 2000, including accepting
input, providing output and performing date calculations in whole or in part;
(ii) operate, accurately without unscheduled interruption on and in respect of
any and all dates before, during and after January 1, 2000 and without any
change in performance; and (iii) store and provide date input information
without creating any ambiguity as to the century; and (b) Flowers has developed
alternative plans to ensure business continuity in the event of the failure of
any or all of items (i) through (iii) in clause (a) above in this definition.

         SECTION 1.02. Accounting Terms. All accounting terms not specifically
defined herein shall be construed as having the respective meanings customary
under GAAP consistently applied from and after the date of this Agreement.

                                  ARTICLE II.

                    LOAN FACILITY; COMMITMENT TO MAKE LOANS

         SECTION 2.01. Loan Facility

         (a) Subject to this Agreement becoming effective, all Existing Loans
are hereby deemed to be outstanding as Loans under the Commitment and this
Agreement.

         (b) Subject to and upon the terms and conditions set forth in this
Agreement, the Bank hereby agrees to make Loans to such Distributors as may be
named by Flowers or any Selling Subsidiary in its Funding Approval Notices
received during the period on or after the Closing Date but prior to November 3,
2000 (as such period may be extended pursuant to Section 2.08 hereto, the
"Commitment Termination Date"), in an aggregate principal amount at any one time
outstanding not to exceed an amount equal to the Maximum Commitment Amount (the
"Commitment").

         (c) Within the limits of the Commitment and in accordance with the
procedures set forth in the Servicing Agreement, Flowers may authorize the Bank
to make Loans under the terms of this Agreement for its Distributors in
accordance with its Customary Practices. Each Loan shall be for a term of not
more than ten (10) years, to be amortized in equal weekly payments of principal
and interest. Each Loan shall bear interest at a fixed rate per annum equal to
the

                                       18
<PAGE>   24

Distributor Loan Interest Rate. Each Loan may be prepaid at any time by the
Distributor without penalty or premium, but with interest accrued thereon on the
amount prepaid.

         (d) The Bank's obligation to make a Loan under the Distributor Loan
Documents is subject to the fulfillment of the following conditions as of the
Loan Closing Date of such Loan:

                  (i)   this Agreement and each of the other Program Documents
         shall be in full force and effect;

                  (ii)  the representations and warranties of Flowers contained
         in Article VII hereof shall be true and correct in all material
         respects with the same effect as though such representations and
         warranties had been made on the Loan Closing Date of such Loan;

                  (iii) the Bank shall have received a Funding Approval Notice
         executed by Flowers or the appropriate Selling Subsidiary authorizing
         such Loan, the original Note evidencing such Loan executed by the
         Distributor and a copy of the UCC-1 Financing Statement executed by the
         Distributor;

                  (iv)  all precedents and conditions to the Loan specified in
         the Servicing Agreement shall have been satisfied or waived by the
         Bank; and

                  (v)   no Event of Default or Default exists or would result
         therefrom.

         In addition, if the Subsidiary of Flowers which is party to the
Distributor's Agreement is not a Selling Subsidiary, Flowers shall cause such
Subsidiary to become a party to the Flowers Security Agreement and to execute
such UCC-1 financing statements as the Bank shall reasonably require in
connection therewith.

         SECTION 2.02. Conveyance of Participant's Interest.

         (a) The Bank hereby sells, assigns, transfers and conveys to the
Participants, without recourse or warranty, and each Participant hereby
purchases from the Bank, an undivided percentage ownership interest (which
percentage shall be equal to each Participant's Pro Rata Share) in (i) the
Commitment, (ii) the Loans, including, without limitation, the Existing Loans,
(iii) the benefit of the Collateral, (iv) all rights against any guarantor of
any Loan, including Flowers, (v) the Distributor Loan Documents, (vi) all rights
pursuant to any guaranty of the obligations of Flowers hereunder and (viii) all
right, title and interest to any payment or right to receive payment with
respect to the foregoing (collectively, the "Participant's Interest").
Notwithstanding the foregoing, each Participant's right to receive payments of
interest, commitment fees or other fees with respect to the Commitment and the
Loans shall not exceed the amounts which such Participant is entitled to receive
pursuant to the terms of this Agreement.

         (b) In consideration of the entry by each Participant into this
Agreement and the obligation of each Participant hereunder, the Bank shall issue
a Participation Certificate to each

                                       19
<PAGE>   25

Participant on the Closing Date. Each Participation Certificate shall evidence
such Participant's Participating Commitment, and the Funded Participant's
Interest outstanding thereunder shall bear interest as hereinafter set forth and
shall be payable as hereinafter set forth.

         (c) In accordance with the terms and conditions hereof, and in
consideration of the sale of the Participant's Interest to such Participant,
each Participant severally agrees from time to time, during the period
commencing on the Closing Date and ending on the Commitment Termination Date to
fund its Pro Rata Share of outstanding Loans made by the Bank to the
Distributors in an aggregate amount at any one time outstanding not to exceed
such Participant's Participating Commitment (subject to each Participant's
obligations pursuant to Section 2.03(d) hereof).

         (d) The Bank (i) represents and warrants to each Participant that it is
the legal and beneficial owner of the Participant's Interest being conveyed to
such Participant, and that such Participant's Interest is free and clear of any
lien or other encumbrance; (ii) makes no representation or warranty to any
Participant, and assumes no responsibility with respect to, any statements,
warranties or representations made by Flowers or any of its Subsidiaries in or
in connection with this Agreement and the other Program Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of this Agreement or any other instrument or document furnished pursuant hereto;
and (iii) makes no representation or warranty to any Participant, and assumes no
responsibility, with respect to the financial condition of the Flowers, any of
its Subsidiaries or any of the Distributors, or the performance or observance by
the Flowers, any of its Subsidiaries or any of the Distributors of any of their
obligations under this Agreement, any other Program Documents, any of the
Distributor Loan Documents or any other instrument or document furnished
pursuant hereto or thereto.

         (e) Each Participant (i) confirms that it has received a copy of this
Agreement and the other Program Documents, together with copies of the financial
statements referred to in Section 7.04 of this Agreement and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Agreement; and (ii) agrees that it
will, independently and without reliance upon the Bank or any other Participant
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 Program Documents.

         SECTION 2.03. Funding of Loans; Swing Line; Funding of Participant's
Interest in Loans.

         (a) The Bank shall fund Loans requested by Flowers in accordance with
the terms of the Funding Approval Notice, the applicable Distributor Loan
Documents and the Servicing Agreement. On the date of any such funding, the Bank
shall elect whether or not to require the Participants to fund their respective
Pro Rata Share of such Loan or Loans to be made on such date. In the event that
the Bank elects not to require the Participants to fund their Pro Rata Share of
the Loans on such date, the Bank shall make such Loans (each, a "Swing Line
Loan") to the

                                       20
<PAGE>   26

Distributors for the account of the Bank; provided that, the aggregate amount of
Swing Line Loans outstanding on any date shall not exceed $10,000,000 and
further provided that the sum of (x) the aggregate outstanding Swing Line Loans
plus (y) the aggregate outstanding Funded Participant's Interests (exclusive of
the Swing Line Loans) shall not exceed the Maximum Commitment Amount. If (i) any
Event of Default shall have occurred, (ii) after giving effect to any requested
Loan, the aggregate Swing Line Loans outstanding hereunder would exceed
$10,000,000, or (iii) the Bank otherwise determines in its sole discretion to
request a Participant Funding hereunder, then the Bank shall notify the
Participants pursuant to subsection (b) requesting a Participant Funding.

         (b) In the event that the Bank desires that the Participants fund their
respective Pro Rata Shares of Loans made or outstanding pursuant to the
Distributor Loan Documents, the Bank shall deliver written or telecopy notice to
the Participants (or telephonic notice promptly confirmed in writing or by
telecopy) (a "Participant Funding Request") by no later than 10:00 a.m.
(Atlanta, Georgia time) on the date which is the requested date of the
Participant Funding which shall specify (x) the date of the Participant Funding,
which shall be a Business Day, and (y) each Participant's Pro Rata Share of the
Loans outstanding to be funded in connection with such Participant Funding.

         (c) Each Participant shall make its Participant Funding in the amount
of its Pro Rata Share on the proposed date thereof by wire transfer of
immediately available funds to the Bank in Atlanta, Georgia by not later than
2:00 P.M. (Atlanta, Georgia time). Unless the Bank shall have received notice
from a Participant prior to the date of any Participant Funding that such
Participant will not make available to the Bank such Participant's Pro Rata
Share of such Participant Funding, the Bank may assume that the Participant has
made such portion available to the Bank on the date of such Participant Funding
in accordance with this subsection (c) and the Bank may, in reliance on such
assumption, make available to the Distributors a corresponding amount. If and to
the extent that such Participant shall not have made such portion available to
the Bank, such Participant and Flowers shall severally agree to repay the Bank
forthwith (on demand in the case of the Participant and within three (3) days of
such demand in the case of Flowers), without duplication, such amount with
interest at the Federal Funds Rate plus 2% per annum and, until such time as
such Participant has repaid to the Bank such amount, such Participant shall (i)
have no right to vote regarding any issue on which voting is required or
advisable under this Agreement or the other Program Documents, and (ii) shall
not be entitled to receive any payments of interest, fees or repayment of the
principal amount of such Loans which the Participant has failed to pay to the
Bank. If such Participant repays such amount to the Bank, then such amount shall
constitute part of such Participant's Funded Participant's Interest. If Flowers
repays such amount to the Bank, the Bank shall assign Notes back to Flowers in
accordance with Section 5.02 hereof in an aggregate principal amount as close
to, but not exceeding, the amount of such payment, and Flowers will be deemed to
have purchased a participation in the Funded Participant's Interest of the
non-paying Participant to the extent of the excess.

         (d) Each Participant's obligations to fund its Pro Rata Share of any
requested Participant Funding shall be absolute and unconditional and shall not
be affected by any

                                       21
<PAGE>   27

circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense, or other right which such Participant may have against the
Bank, Flowers or any Distributor or any other Person for any reason whatsoever,
(ii) the occurrence of any Default or Event of Default, (iii) the occurrence of
any Loan Default, (iv) the occurrence of any Repurchase Obligation pursuant to
Section 5.01 hereof, (v) any adverse change in the condition (financial or
otherwise) of Flowers or any other Subsidiary or any Distributor, (vi) the
acceleration or maturity of any Loan or Flowers' obligations hereunder or the
termination of the Commitment or the Participating Commitments after the making
of any Swing Line Loans, (vii) any breach of this Agreement by Flowers or any
other Participant, or (viii) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.

         (e) Notwithstanding the foregoing provisions of this Section 2.03, no
Participant shall be required to fund its Pro Rata Share of any requested
Participant Funding for purposes of refunding a Swing Line Loan pursuant to
subsection (d) above if a Loan Default with respect to the relevant Loan has
occurred and is continuing and, prior to the making by the Bank of such Swing
Line Loan, the Bank had received written notice from Flowers, the relevant
Distributor or any Participant specifying that such Loan Default had occurred
and was continuing (and identifying the same as a Loan Default, as the case may
be) which has not been cured or waived; provided that, in the case of a Loan
Default arising from a Default or Event of Default where the Participants are
not pursuing remedies, the Participants will be obligated to fund their
respective Pro Rata Shares of Swing Line Loans as long as the aggregate amount
of such Swing Line Loans does not exceed $5,000,000.

         SECTION 2.04. Fees.

         (a) Flowers shall pay to the Bank, for the ratable benefit of the
Participants, on the Closing Date, an upfront fee (the "Upfront Fee") in an
amount equal to $400,000. Promptly upon the Bank's receipt thereof, the Bank
shall promptly pay the Upfront Fee to the Participants, pro rata based on their
respective Pro Rata Shares.

         (b) Flowers shall pay to the Bank, for the ratable benefit of the
Participants, quarterly in arrears on each Quarterly Payment Date, commencing on
September 30, 1999 and continuing thereafter, a commitment fee (the "Commitment
Fee") in an amount equal to one eighth of one percent per annum (0.125%) per
annum multiplied by the average daily amount of the Participant's Unused
Commitments during the calendar quarter ending on such Quarterly Payment Date,
for the period commencing on the Closing Date and ending on the Commitment
Termination Date, or such earlier date as the Participating Commitments shall
expire or terminate. Promptly upon the Bank's receipt thereof, the Bank shall
promptly pay the Commitment Fee to the Participants, pro rata based on their
respective Pro Rata Shares.

         SECTION 2.05. Interest on Funded Participant's Interest.

         (a) Subject to Section 2.06, the Bank shall pay to the Participants,
pro rata based upon their respective Pro Rata Shares, weekly in arrears on each
Payment Date, interest on the

                                       22
<PAGE>   28

Participant's Funded Participant's Interests in an amount equal to the sum of
(a) with respect to the average daily Maximum Recourse Amount for the week
ending on such Payment Date, the amount of interest which would have accrued
thereon during such week at a rate of interest equal to LIBOR plus one and
one-eighth of one percent (1.125%) per annum and (b) with respect to the
remaining aggregate Principal Balance of the Loans, the amount of interest which
would have accrued thereon during such week at a rate of interest equal to LIBOR
plus one and five-eighths of one percent (1.625%) per annum.

         (b) Interest on the Participant's Funded Participant's Interests shall
be payable in arrears by the Bank to the Participants on each Payment Date,
commencing on November 8, 1999 and continuing thereafter, from and to the extent
of the sum of (x) interest payments received by the Bank on the Loans during the
week ending on such Payment Date and (y) other amounts received by the Bank
hereunder.

         (c) In the event that the interest and other amounts received by the
Bank from Flowers and the Distributors during any week are insufficient to pay
the interest to the Participants required to be paid on any Payment Date
pursuant hereto and all other amounts required to be paid to the Bank and the
Participants during such week, Flowers shall, upon demand of the Bank,
immediately fund such difference to the Bank (with such payment allocated to
specific Loan Payment Defaults as agreed by Flowers and Bank) and if such
shortfall results from Loan Payment Defaults rather than interest rate
variances, either, at the election of the Flowers, (x) Flowers shall be
reimbursed by the Bank upon receipt of such amount from the applicable
Distributor, (y) the Loan Indebtedness of such Distributor shall be deemed to be
reduced by such amount for purposes of a repayment or purchase of such Defaulted
Loan by Flowers in accordance with the terms of this Agreement or (z) if elected
by Flowers and if such amount is sufficient to cure any Loan Payment Default,
such amount shall be deemed to have satisfied Flower's obligation to cure such
Loan Payment Default hereunder.

         SECTION 2.06. Payments and Computations, Etc.

         (a) All amounts to be paid by Flowers hereunder shall be paid no later
than 2:00 P.M. (Atlanta, Georgia time) on the day when due in same day funds to
office of the Bank located in Atlanta, Georgia.

         (b) Flowers shall, to the extent permitted by law, pay to the Bank on
demand from time to time interest on any amount not paid by Flowers when due
hereunder (including its Escrow Funding Obligation) at an interest rate per
annum equal to two percent (2%) per annum above the otherwise applicable rate of
interest per annum (the "Default Interest").

         (c) All computations of interest and other amounts due hereunder shall
be made on the basis of a year of 360 days and the actual number of days
elapsed. Whenever a payment which is to be made hereunder shall be due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day.

                                       23
<PAGE>   29

         SECTION 2.07. Voluntary Reduction of the Unutilized Commitment .

Upon at least three (3) Business Days' prior telephonic notice (promptly
confirmed in writing) to the Bank, Flowers shall have the right, without premium
or penalty, to terminate the Commitment, in part or in whole, provided that (i)
any such termination shall apply to permanently reduce the Commitment, (ii) any
such termination shall apply to proportionately and permanently reduce the
Participating Commitments of each of the Participants, (ii) any partial
termination pursuant to this Section 2.07 shall be in an amount of at least
$5,000,000 and integral multiples of $1,000,000, and (iii) the Commitment may
not be reduced if, as a result thereof, the amount of the Commitment would be
less than the aggregate sum of all outstanding Loans pursuant to such the
Commitment.

         SECTION 2.08. Extension of Commitment.

         (a) Flowers may, by written notice to the Bank (which shall promptly
deliver a copy to each Participant), given not more than sixty (60) days prior
to any anniversary to the date of this Agreement while the Commitment is in
effect, request that the Participants extend the then scheduled Commitment
Termination Date (the "Existing Date") for an additional 364-day period. Each
Participant shall, by notice to the Bank given within 15 days after receipt of
such request, advise Flowers and the Bank whether or not such Participant
consents to the extension request (and any Participant which does not respond
during such 15-day period shall be deemed to have advised Flowers and the Bank
that it will not agree to such extension.)

         (b) In the event that on the 15th Business Day after receipt of the
notice delivered pursuant to subsection (a) above, all of the Participants shall
have agreed to extend their respective Participating Commitments, the Commitment
Termination Date shall be deemed to have been extended, effective as of the
Existing Date, to the date which is 364 days thereafter.

         (c) In the event that, on the 15th Business Day after receipt of the
notice delivered pursuant to subsection (a) above, all of the Participants shall
not have agreed to extend their respective Participating Commitments, Flowers
and the Bank shall notify the consenting Participants ("Consenting
Participants") of the amount of the Participating Commitments of the
non-extending Participants ("Non-Consenting Participants") and such Consenting
Participants shall, by notice to Flowers and the Bank given within ten (10)
Business Days after receipt of such notice, advise Flowers and Bank whether or
not such Participant wishes to purchase all or a portion of the Participating
Commitments of the Non-Consenting Participants (and any Participant which does
not respond during such 10-Business Day period shall be deemed to have rejected
such offer). In the event that more than one Consenting Participant agrees to
purchase all or a portion of such Participating Commitments, Flowers and the
Bank shall allocate such Participating Commitments among such Consenting
Participants so as to preserve, to the extent possible, the relative pro rata
shares of the Consenting Participants of the Participating Commitments prior to
such extension request. If Consenting Participants do not elect to assume all of
the Participating Commitments of the Non-Consenting Participants, Flowers shall
have the right, subject to the terms and conditions of Section 12.10, to arrange
for one or more banks (any such bank being called a "New Participant"), to
purchase the Participating Commitment of any Non-Consenting

                                       24
<PAGE>   30

Participant. Each Non-Consenting Participant shall assign its Participating
Commitment and its Participant's Interest outstanding hereunder to the
Consenting Participant or New Participant purchasing such Participating
Commitment in accordance with Section 12.10, in return for payment in full of
all principal, interest and other amounts owing to such Non-Consenting
Participant hereunder, on or before the Existing Date and, as of the effective
date of such assignment, shall no longer be a party hereto, provided that each
New Participant shall be subject to the approval of the Bank (which approval
shall not be unreasonably withheld). If (and only if) Participants (including
New Participants) holding Participating Commitments representing at least an
amount equal to the greater of (x) the sum of all outstanding Loans and (y) 85%
of the aggregate Participating Commitments on the date of such extension request
shall have agreed to such extension by the Existing Date (the "Continuing
Participants"), then (i) the Commitment Termination Date shall be extended for
an additional 364-day period and (ii) the Participating Commitment of any
Non-Consenting Participant which has not been assigned to a Consenting
Participant or a New Participant shall terminate (with the result that the
amount of the Commitments shall be decreased proportionately by the amount of
such Participating Commitment), and all amounts owing to such Non-Consenting
Participant shall become due and payable, together with all interest accrued
thereon and all other amounts owed to such Non-Consenting Participant hereunder,
on the Existing Date applicable to such Participant without giving effect to any
extension of the Commitment Termination Date.

         SECTION 2.09. Pro Rata Treatment.

Subject to the application of payments pursuant to Article III and except as
specifically provided therein, each payment of principal of any Funded
Participant's Interest, each payment of interest with respect to the Funded
Participant's Interest, each payment of the Commitment Fee and each reduction of
the Commitment shall be allocated pro rata among the Participants in accordance
with their respective applicable Pro Rata Share of the Commitment. Each
Participant agrees that in computing such Participant's portion of any Funded
Participant's Interest to be made hereunder, the Bank may, in its discretion,
round each Participant's percentage of such Participant Funding Request to the
next higher or lower whole dollar amount.

         SECTION 2.10. Sharing of Setoffs.

Each Participant agrees that if it shall, in accordance with applicable law,
through the exercise of a right of banker's lien, setoff or counterclaim against
Flowers or any Distributor, or pursuant to a secured claim under Section 506 or
Title 11 of the United States Code or other security or interest arising from,
or in lieu of, such secured claim, received by the Participant under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, obtain payment (voluntary or involuntary) in respect of any Funded
Participant's Interest under this Agreement as a result of which the unpaid
principal portion of its Funded Participant's Interest shall be proportionately
less than the unpaid principal portion of the Funded Participant's Interest of
any other Participant, it shall be deemed simultaneously to have purchased from
such other Participant at face value, and shall promptly pay to such other
Participant the purchase price for, a participation in the Funded Participant's
Interest of such other Participant, so that the aggregate

                                       25
<PAGE>   31

unpaid principal amount of the Funded Participant's Interest and participations
in Funded Participant's Interests held by each Participant shall be in the same
proportion to the aggregate unpaid principal amount of all Funded Participant's
Interests then outstanding as the principal amount of its Purchases prior to
such exercise of banker's lien, setoff or counterclaim or other event was to the
principal amount of all Funded Participant's Interests outstanding prior to such
exercise of banker's lien, setoff or counterclaim or other event; provided,
however, that, if any such purchase or purchases or adjustments shall be made
pursuant to this Section and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be rescinded to the
extent of such recovery and the purchase price or prices or adjustment restored
without interest. Flowers expressly consents to the foregoing arrangements and
agrees, to the extent permitted by applicable law, that any Participant holding
a Funded Participant's Interest or a participation in a Funded Participant's
Interest deemed to have been so purchased may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
by Flowers to such Participant by reason thereof.

                                  ARTICLE III.

              FLOWERS' SERVICING OBLIGATIONS; BANK'S OBLIGATIONS;
                            DISTRIBUTION OF PAYMENTS

         SECTION 3.01. Flowers' Servicing Obligations with Respect to Loans;
Collateral; Non-Recourse.

         (a) Each of the Bank and the Participants acknowledges and agrees that
Flowers shall, for itself and for the benefit of the Bank and all Participants,
(i) document, close, manage, service, administer and collect the Loans in
accordance with the terms of this Agreement, the Servicing Agreement and its
Customary Practices, and shall have full power and authority to do or cause to
be done any and all things in connection with such management, servicing,
administration and collection which it may deem necessary or desirable and (ii)
distribute all funds collected with respect to the Loans.

         (b) Notwithstanding anything in this Agreement to the contrary, each of
the Bank and the Participants acknowledges and agrees that Flowers shall have no
obligation to the Bank or the Participants with respect to (i) the creation,
perfection, priority or continuation of any Lien on any Collateral obtained by
the Bank with respect to the Loans at the request of Flowers or (ii) the
obtaining or retention of any guaranties of the Loans (other than to distribute
any proceeds therefrom in accordance with the terms of this Article III). Each
of the Bank and the Participants acknowledges and agrees that Flowers has the
right to release or modify the terms of, any Collateral or any guaranty of any
Loan.

         (c) Each of the Bank and the Participants acknowledges and agrees that
Flowers, in accordance with its Customary Practices, is authorized to permit the
assumption of any Distributor Loan by a transferee of the Distributor's interest
in the related Distributor Route, pursuant to which such transferee becomes
liable under such Distributor Loan and reaffirms and assumes all

                                       26
<PAGE>   32

of the obligations of the Distributor under all of the Distributor Loan
Documents. In connection with any such assumption, none of the payment terms of
such Distributor Loan may be changed.

         SECTION 3.02. Bank's Obligations with Respect to Loans and Collateral.

         (a) Each of the Participants acknowledges and agrees that all payments
made to the Participants pursuant to this Agreement by the Bank shall be made
solely from amounts received by the Bank from Flowers, the Distributors and
other obligors or Collateral under the applicable Loan Documents, and the Bank
shall have no personal liability for any amounts payable to the Participants
hereunder.

         (b) Each of the Participants acknowledges and agrees that the Bank
shall be relying solely upon Flowers for purposes of documenting, closing,
managing, servicing, administering and collecting the Loans in accordance with
the terms of this Agreement and the Servicing Agreement and exercising all
discretionary powers involved in such management, servicing, administration and
collection, and that the Bank shall have no personal liability for any of such
activities. Each of the Participants further acknowledges and agrees that the
Bank has no obligation to the Participants with respect to the creation,
perfection, priority or continuation of any Lien on any Collateral or with
respect to any guaranties requested by Flowers (other than to distribute the
proceeds received by the Bank therefrom to the Participants).

         (c) Each of the Participants acknowledges and agrees that any payments
of delinquent payment fees received from the Distributors pursuant to the
Distributor Loan Agreements shall be for the sole account of the Bank and that
the Participants shall have no right to receive such payments unless an Event of
Default has occurred and is continuing; provided that, with respect to any
payments received from a Distributor, such payments shall be first applied to
pay all accrued but unpaid interest and principal and other fees due and owing
from such Distributor before application of such payment to any delinquent
payment fees.

         (d) Each of the Participants acknowledges and agrees that all Liens
granted under the Distributor Loan Documents are granted to the Bank and that
only the Bank, with the consent of the Required Participants, has the right to
foreclose on any collateral for, or exercise any remedies under, the Distributor
Loan Documents.

         SECTION 3.03. Application of Payments.

         (a) Flowers shall collect all payments directly from the Distributors
and shall forward such payments to the Bank on each Payment Date, net of the
servicing fee owed under the terms of the Servicing Agreement. Each of the
Participants acknowledges and agrees that amounts received by the Bank are not
capable of being allocated to any specific Loan, and that the Bank shall apply
the amounts it receives as follows: (i) first, to the payment of accrued
interest on the Funded Participant's Interests hereunder, (ii) second, to the
payment of the fees owing to the Bank under the Servicing Agreement, (iii)
third, to the repayment of the Funded Participant's Interests

                                       27
<PAGE>   33

outstanding hereunder, and (iv) fourth, to the payment of all other amounts
owing to the Bank or any Participant hereunder.

         (b) On each Quarterly Payment Date, Flowers shall pay the Commitment
Fee to the Bank, and the Bank shall distribute such amount to the Participants
pro rata in accordance with Section 2.04 hereof, with any remainder to be
applied as set forth in the Servicing Agreement.

         (c) If not sooner repaid, all amounts due and payable to the Bank and
the Participants under the Program Documents shall be due and payable in full on
the Commitment Termination Date.

         SECTION 3.04. Servicing Report and Distributor Status Report.

         On each Payment Date, the Bank shall telecopy to the Participants, a
servicing report in the form of Exhibit "F" attached hereto (the "Servicing
Report").

                                  ARTICLE IV.

                             REQUIREMENTS OF NOTES

         SECTION 4.01. Notes. Each of the Purchased Notes purchased by the Bank
on the Note Purchase Date, each Note tendered by Flowers or a Selling Subsidiary
to the Bank as a condition precedent to an Existing Loan and each Note tendered
by Flowers or a Selling Subsidiary to the Bank hereunder as a condition
precedent to a Loan to be made on or after the Closing Date, shall meet on the
date of such tender each of the following applicable requirements:

         (a) Each Purchased Note was originated by Flowers or the applicable
Selling Subsidiary in the ordinary course of business and in accordance with all
applicable laws;

         (b) Each Note other than a Purchased Note was approved by Flowers or
the applicable Selling Subsidiary in accordance with its Customary Practices;

         (c) Each Note provides for payment of interest at the Distributor Loan
Interest Rate;

         (d) Each Note, by its terms, matures not more than ten years after the
date thereof;

         (e) Each Note provides for weekly even amortization of principal and
interest;

         (f) Each Loan and each of the related Distributor Loan Documents is a
legal, valid and binding obligation of the Distributor thereunder and is
enforceable in accordance with its terms by the holder thereof, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights in general and

                                       28
<PAGE>   34

by general principles of equity, whether such enforcement is considered in a
proceeding at equity or in law;

         (g) As to each Distributor Route underlying a Purchased Note,
immediately prior to assignment to the Bank, Flowers or the applicable Selling
Subsidiary had a first priority perfected security interest therein and had
legal title to and was the sole beneficial owner of the related Distributor Loan
Documents and the assignment to the Bank of the Purchased Loan and the
Distributor Loan Documents validly transferred the Purchased Loan, Distributor
Loan Documents and the first priority lien and security interest thereunder to
the Bank, free and clear of any Lien and it is not necessary under the laws of
the applicable jurisdiction to file notice of assignment of such Lien to the
Bank in the UCC records in order to maintain the perfection or priority thereof;

         (h) Each Note is secured by a fully perfected, first priority security
interest in favor of the Bank in the Distributor Route of the Distributor;

         (i) No Note or other Distributor Loan Document is subject to any right
of rescission, set-off, counterclaim or defense, including the defense of usury;
the operation of the terms of the Distributor Loan Documents or the exercise of
any right thereunder will not render such Note unenforceable in whole or in part
or subject to any right of rescission, set-off, counterclaim or defense,
including the defense of usury, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect thereto;

         (j) Each Note and related Distributor Loan Documents are the only
contracts evidencing the transaction described therein and constitute the entire
agreement of the parties thereto with respect to such transaction and the
original of the Note, all Distributor Loan Documents, and other collateral
documents have been, or will be, upon request of the Bank, delivered to the
Bank, properly assigned, in the case of a Purchased Note;

         (k) Each Note and related Distributor Loan Documents are genuine and
all signatures, names, descriptions of collateral, amounts and other facts and
statements therein and thereon are true and correct (including the applicable
Distributor Route number set forth on the Note);

         (l) In the case of each Purchased Note, Flowers or the applicable
Selling Subsidiary has full power and authority to sell each Purchased Note and
the accompanying security therefor to the Bank and is not prohibited by
applicable law from making such a valid sale and assignment;

         (m) No party is in default under any Note or any related Distributor
Loan Document;

         (n) All disclosures required to be made under applicable federal and
state law have been properly and completely made with respect to each Note and
each Note is in full compliance with all applicable federal and state laws,
including without limitation, applicable state usury laws;

         (o) Flowers has not consented to a sale, lease, transfer or encumbrance
of the collateral securing any Note or to any material adverse alteration in the
Distributor Route securing the same;

                                       29
<PAGE>   35

         (p) Each Purchased Note has been endorsed to the order of the Bank, and
each Purchased Note allows for assignment thereof and accompanying security
therefor without notice to or consent from the Distributor;

         (q) The proceeds of each Note has been used for commercial purposes and
not for the purchase of consumer and household goods;

         (r) The Principal Balance of each Note does not exceed the "first
original purchase price" as such term is used in Section 3.01 of the
Distributor's Agreements; and

         (s) In the case of each Note evidencing an Existing Loan, Flowers
maintains a Distributor Loan File containing one of each of the Distributor Loan
Documents, duly executed by the Distributor and each other party thereto,
substantially in the form of the Distributor Loan Documents attached as an
Exhibit to the Existing Loan Facility Agreement as in effect immediately prior
to the replacement thereof by this Agreement, and in the case of each Note
evidencing a Loan to be made on or after the Closing Date, Flowers maintains a
Distributor Loan File containing one of each of the Distributor Loan Documents,
duly executed by the Distributor and each other party thereto, substantially in
the form attached hereto as Exhibits.

         SECTION 4.02. Repurchase of Ineligible Notes.

Flowers hereby acknowledges and agrees that the representation and warranty that
each of the Notes satisfies the applicable requirements of Section 4.01 shall
survive the purchase of the Purchased Notes by the Bank on the Note Purchase
Date and the making of any other Loan by the Bank either under the Existing Loan
Facility Agreement or hereunder and, in the case of the Purchased Notes, shall
inure to the benefit of the Bank regardless of any restrictive endorsement or
assignment. Flowers shall promptly give the Bank notice of any discovery that a
Note failed on the date of tender to the Bank (whether or not Flowers knew or
could have known of such failure at such date) to meet the applicable
requirements set forth above and if such failure is not remedied within thirty
(30) days after discovery thereof, Flowers shall, on the next Payment Date,
repurchase such Note (an "Ineligible Note") for the Repurchase Price thereof and
the Bank shall assign such Note to Flowers in accordance with Section 5.02
hereof. The Bank acknowledges and agrees that a misrepresentation by Flowers
pursuant to Section 7.18(a) or (b) shall not be a Default or Event of Default
under Section 9.01(d) hereof but shall only trigger Flowers' repurchase
obligation under this Section 4.02 (with the understanding that any
misrepresentation as to the Principal Balance of a Purchased Note pursuant to
Section 7.18(a) or (b) shall obligate Flowers to repurchase such Note at such
Principal Balance less any Payments received by the Bank with respect thereto).
Notwithstanding the foregoing, the obligation of Flowers set forth in this
Section 4.02 is separate and independent of the obligation of Flowers to
purchase Defaulted Loans pursuant to Article V and is not subject to the
limitations set forth therein. Moreover, any Repurchase Price paid by Flowers
pursuant hereto with respect to an Ineligible Loan (whether or not such
Ineligible Loan also constitutes a Defaulted Loan) shall not be included for
purposes of determining whether or not Flowers has paid the Maximum Recourse
Amount. Furthermore,

                                       30
<PAGE>   36

nothing in this Section 4.02 shall be deemed to limit Flowers' obligations
pursuant to any indemnity set forth herein.

                                   ARTICLE V.

        REPURCHASE OBLIGATION OF FLOWERS WITH RESPECT TO DEFAULTED LOANS

         SECTION 5.01. Repurchase Obligation of Flowers.

Subject to the limitation set forth below, in the event that (a) any installment
of principal or interest on any Loan is not paid by the Distributor within sixty
(60) days after its due date (regardless of whether Flowers makes any Servicer
Advance with respect to such defaulted payment), or (b) any other event of
default as defined in any Note shall occur, then upon demand by the Bank,
Flowers shall repurchase said Loan (herein called a "Defaulted Loan" provided
that, if an Event of Default exists or Flowers has no current obligation to
repurchase Defaulted Loans hereunder, the term "Defaulted Loan" shall include
any Loan for which a payment event of default has occurred) for an amount equal
to the Principal Balance of such Defaulted Loan, plus accrued but unpaid
interest thereon (the "Repurchase Price") within three (3) Business Days after
demand by the Bank.

Notwithstanding the foregoing, the payments made by Flowers pursuant hereto to
repurchase Defaulted Loans pursuant to this Section 5.01 shall not at any time
exceed the Maximum Recourse Amount.

The parties expressly acknowledge and agree that the Maximum Recourse Amount
shall equal an increasing percentage of the aggregate Principal Balance of the
Loans during the term of this Agreement and that the parties shall recalculate
the Maximum Recourse Amount as of the first day of each Fiscal Quarter and
Flowers shall, (i) in the event that the Escrow Funding Obligation is in effect,
deposit any increased amount of the Maximum Recourse Amount into the Escrow
Account, or (ii) in the event that any Defaulted Loan has not been repurchased
hereunder due to Flowers having paid in full the Maximum Recourse Amount as of
an earlier date, repurchase any such Defaulted Loan up to such increased Maximum
Recourse Amount; provided that, Flowers shall not have any obligation to
purchase any such previously Defaulted Loan unless such Loan became a Defaulted
Loan within 180 days prior to such increase in the Maximum Recourse Amount and
was scheduled as a Defaulted Loan to the Bank in compliance with the Servicing
Agreement.

         SECTION 5.02. Transfer of Notes.

         Upon payment to the Bank of the Repurchase Price for each of the Notes
to be repurchased pursuant to Section 5.01, the Bank shall endorse the
repurchased Notes to Flowers without recourse or warranty of any nature, express
or implied and shall reassign to Flowers any Security Agreement, Uniform
Commercial Code Financing Statement or other collateral for such Note

                                       31
<PAGE>   37

being repurchased. The obligation of Flowers (as provided below) to repurchase a
Defaulted Loan or to fund the Escrow Account in the amount of all of the Notes
upon an Escrow Funding Obligation shall be absolute and unconditional
irrespective of:

         (a) any lack of validity or enforceability of any Note to be
repurchased hereunder, or any other agreement or instrument relating thereto
(including, but not limited to, any guaranty thereof or any Security Agreement),

         (b) any bankruptcy or insolvency of the Distributor or other obligor;

         (c) any change in the time, manner or place of payment of, or in any
other term of, such Note, or any other amendment or waiver of, a consent to
departure from, such Defaulted Loan,

         (d) any other circumstance that might otherwise constitute a defense
available to, or a discharge of, Flowers, in respect of its obligations
hereunder,

         (e) the particular manner in which the Bank deals with the Distributor
or other endorsers or guarantors of the Notes, or

         (f) any action taken by the Bank with respect to the security for the
Notes.

The parties hereby expressly agree that any action taken by the Bank in
violation of the Servicing Agreement will not limit, vitiate or otherwise affect
Flowers' obligations hereunder but the waivers set forth above shall not affect
Flowers' ability to bring a separate action at law to recover any actual damages
suffered by Flowers as a result of such breach by the Bank.

         SECTION 5.03. Reliance on Repurchase Obligation.

Flowers expressly acknowledges and agrees that the Bank, in making its credit
decision with regard to the purchase of the Notes on the Note Purchase Date and
the establishment of the Commitment, and the Participants in making their
respective credit decisions with regard to the purchase of participations in the
Commitment and the Loans, have relied solely upon the repurchase obligation of
Flowers set forth above and the other obligations of Flowers hereunder and that
neither the Bank nor any Participant is under any obligation or duty to perform
any credit analysis or investigation with regard to the creditworthiness of any
Distributor.

         SECTION 5.04. Certain Waivers.

Flowers hereby expressly waives, with respect to each of the Notes:

         (a) presentment, protest, and notice of dishonor,

         (b) promptness, diligence, notice of acceptance and any other notice,

                                       32

<PAGE>   38

         (c) any defense to recovery by the Bank of deficiency after nonjudicial
sale of any Note, and

         (d) any requirement that the Bank proceed against the Distributor, any
other obligor with respect to a Defaulted Loan or any collateral therefor prior
to making a repurchase demand hereunder.

         SECTION 5.05. Bankruptcy Rescission.

If claim is ever made upon the Bank for repayment or recovery of any amount or
amounts received in payment or on account of any of the amounts paid by any
Distributor or Flowers hereunder, and the Bank repays all or part of said amount
by reason of any judgment, decree or order of any court or administrative body
having jurisdiction over the Bank or any of its property, then and in such event
Flowers shall be and remain liable to the Bank for the amounts so repaid or
recovered to the same extent as if such amount had never originally been paid to
the Bank.

                                  ARTICLE VI.

                              CONDITIONS OF LOANS

         The obligation of the Bank to establish the Commitment pursuant to this
Agreement is subject to the Bank having received the following, each dated as of
the Closing Date, in form and substance satisfactory to the Bank and (except as
to the Servicing Agreement) the Participants:

         (a) A duly executed counterpart of this Agreement;

         (b) A duly executed amendment to the Flowers Security Agreement;

         (c) Duly executed amendments to the UCC-1 financing statements with
respect to Flowers and each of the Selling Subsidiaries, as appropriate;

         (d) Copies of the organizational papers of Flowers and each of the
Selling Subsidiaries certified as true and correct by the Secretary of State of
the State of its incorporation (in the case of Flowers) or its Secretary or
Assistant Secretary (in the case of a Selling Subsidiary) and a certificate of
good standing from the Secretary of State of the State of its incorporation;

         (e) A certificate of the Secretary or Assistant Secretary of Flowers
and each of the Selling Subsidiaries certifying (i) the names and true
signatures of the officers of Flowers, and each of the Selling Subsidiaries
authorized to execute this Agreement and the other documents to be delivered
hereunder, (ii) the bylaws of such Person, and (iii) the resolutions of the
Boards of Directors of such Person approving this Agreement and the transactions
contemplated hereby;

                                       33
<PAGE>   39

         (f) A favorable written opinion of each of G. Anthony Campbell, Esquire
and Troutman Sanders LLP, counsel for Flowers and the Selling Subsidiaries,
substantially in the form of Exhibit "G" hereto, addressing the transactions
contemplated hereby and such other matters as the Bank may reasonably request;

         (g) A duly executed Closing Certificate of Flowers;

         (h) A duly executed certificate of Flowers identifying the Authorized
Signatories for each such Person, in form and substance satisfactory to the
Bank; and

         (i) All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all documents incident
hereto or delivered in connection therewith shall be satisfactory in form and
substance to the Bank.

                                  ARTICLE VII.

                         REPRESENTATIONS AND WARRANTIES

         Flowers represents and warrants to the Bank and each Participant that:

         SECTION 7.01. Corporate Existence and Power.

Flowers is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Georgia. Flowers is duly qualified to
transact business in every jurisdiction where, by the nature of its business,
such qualification is necessary, except for any failure to comply with the
foregoing which does not have and reasonably could not be expected to cause a
Material Adverse Effect, and has all corporate powers and all government
authorizations, licenses, consents and approvals required to engage in its
business and operations as now conducted, except for any failure to comply with
the foregoing which does not have and reasonably could not be expected to cause
a Material Adverse Effect.

         SECTION 7.02. Corporate and Governmental Authorization; No
Contravention.

The execution, delivery and performance by Flowers and each of the Selling
Subsidiaries of this Agreement and the other Program Documents (i) are within
such entity's corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) require no action by or in respect of or filing with,
any governmental body, agency or official, (iv) do not contravene, or constitute
a default under, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of such entity or of any material
agreement, judgment, injunction, order, decree or other instrument binding upon
Flowers, any Selling Subsidiary or any other Restricted Subsidiaries, and (v) do
not result in the creation or imposition of any Lien on any asset of Flowers,
any Selling Subsidiary or any other Restricted Subsidiaries (other than a Lien
in favor of the Bank).

                                       34
<PAGE>   40

         SECTION 7.03. Binding Effect.

This Agreement constitutes a valid and binding agreement of Flowers enforceable
in accordance with its terms, and the Flowers Security Agreement and the other
Program Documents, when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of Flowers and each of
the Selling Subsidiaries party thereto, enforceable in accordance with their
respective terms, provided that the enforceability hereof and thereof is subject
in each case to general principles of equity and to bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally.

         SECTION 7.04. Financial Information.

         (a) The consolidated balance sheet of Flowers and its Consolidated
Subsidiaries as of January 2, 1999 and the related consolidated statements of
income, shareholders' equity and cash flows for the Fiscal Year then ended,
reported on by PricewaterhouseCoopers LLP, copies of which have been delivered
to the Bank fairly present, in conformity with GAAP, the consolidated financial
position of Flowers and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such period stated.

         (b) Since January 2, 1999, there has been no event, act, condition or
occurrence which has or reasonably could be expected to cause a Material Adverse
Effect.

         SECTION 7.05. No Litigation.

There is no action, suit or proceeding pending, or to the knowledge of Flowers
threatened, against or affecting Flowers or any of its Restricted Subsidiaries
before any court or arbitrator or any governmental body, agency or official
which has or reasonably could be expected to have a Material Adverse Effect or
which in any manner draws into question the validity of this Agreement or the
Flowers Security Agreement or which in any manners draws into question the
validity of Distributor Loan Documents generally, whether directly, or by a
cause of action which could potentially be asserted against a significant
portion of the Distributor Loan Documents.

         SECTION 7.06. Compliance with ERISA.

         (a) Flowers and each member of the Controlled Group have fulfilled
their obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and are in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and have not incurred any
liability to the PBGC or a Plan under Title IV of ERISA.

         (b) Neither Flowers nor any member of the Controlled Group has incurred
any withdrawal liability with respect to any Multiemployer Plan under Title IV
of ERISA, and no such liability is expected to be incurred.

         SECTION 7.07. Compliance with Laws; Payment of Taxes.

                                       35
<PAGE>   41

Flowers and, to the best of Flowers' knowledge, its Material Subsidiaries, are
in compliance with all applicable laws, regulations and similar requirements of
governmental authorities, except where such compliance is being contested in
good faith through appropriate proceedings or which does not have and reasonably
could not be expected to cause a Material Adverse Effect. There have been filed
on behalf of Flowers and its Material Subsidiaries all Federal, state and local
income, material excise, material property and other material tax returns which
are required to be filed by them and all taxes due pursuant to such returns or
pursuant to any assessment received by or on behalf of Flowers or any Material
Subsidiary have been paid, except where such payments are being contested in
good faith through appropriate proceedings or the failure to pay does not have
and reasonably could not be expected to cause a Material Adverse Effect. The
charges, accruals and reserves on the books of Flowers and its Material
Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of Flowers, adequate. As of the Closing Date, United States income tax
returns of Flowers and its Material Subsidiaries have been examined and closed
through the 1996 Fiscal Year.

         SECTION 7.08. Subsidiaries.

Each of Flowers' Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation, is
duly qualified to transact business in every jurisdiction where, by the nature
of its business, such qualification is necessary, and has all corporate powers
and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, except for any failure to comply with
the foregoing which does not have and reasonably could not be expected to cause
a Material Adverse Effect. As of the Closing Date, Flowers has no Subsidiaries
except for those Subsidiaries listed on Schedule 7.08, which accurately sets
forth each such Subsidiary's complete name and jurisdiction of incorporation.
None of such Subsidiaries, other than those listed as such on Schedule 7.08, is
a Material Subsidiary as of the Closing Date. Within (15) fifteen days after any
Subsidiary becomes a Material Subsidiary, or the creation or acquisition of any
Subsidiary which becomes a Material Subsidiary, Flowers will send to the Bank
either a supplement to or replacement of Schedule 7.08 (showing such Subsidiary
and indicating that it is a Material Subsidiary), or a copy of Form 8-K sent to
the Securities and Exchange Commission, showing such Subsidiary as a Material
Subsidiary.

         SECTION 7.09. Investment Company Act.

Neither Flowers nor any of its Subsidiaries is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.

         SECTION 7.10. Public Utility Holding Company Act.

Neither Flowers nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a

                                       36
<PAGE>   42

"holding company", as such terms are defined in the Public Utility Holding
Company Act of 1935, as amended.

         SECTION 7.11. Ownership of Property; Liens.

Each of Flowers and its Material Subsidiaries has title to, or leasehold or
other interests in, its properties sufficient for the conduct of its business,
and none of such property is subject to any Lien except as permitted in Section
8.16.

         SECTION 7.12. No Default.

Neither Flowers nor any of its Material Subsidiaries is in default under or with
respect to any agreement, instrument or undertaking to which it is a party or by
which it or any of its property is bound which has or reasonably could be
expected to cause a Material Adverse Effect. No Default or Event of Default has
occurred and is continuing.

         SECTION 7.13. Full Disclosure.

Flowers' annual report on Form 10-K for the fiscal year ended at January 2, 1999
and quarterly report on Form 10-Q for the fiscal quarter ended at April 24,
1999, copies of which have been furnished by Flowers to the Bank, did not, as of
the dates such Form 10-K and Form 10-Q were filed with the Securities and
Exchange Commission, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. From the date of
filing of such quarterly report through the date hereof, except for the Form 8-K
filed on July 29, 1999 with the Securities and Exchange Commission, Flowers has
not filed a current report on Form 8-K with the Securities and Exchange
Commission and, as of the date hereof, no event or condition exists which would
require such filing by Flowers pursuant to the Securities Exchange Act of 1934,
as amended, except for any such event or condition which has heretofore been
disclosed in writing to the Bank by delivery to the Bank of a Form 8-K.

         SECTION 7.14. Environmental Matters.

         (a) Neither Flowers nor any Restricted Subsidiary is subject to any
Environmental Liability which has or reasonably could be expected to cause a
Material Adverse Effect and, to the best of Flowers' knowledge, neither Flowers
nor any Restricted Subsidiary has been designated as a potentially responsible
party under CERCLA or under any state statute similar to CERCLA. To the best of
Flowers' knowledge, none of the Properties has been identified on any current or
proposed (i) National Priorities List under 40 C.F.R. 300, (ii) CERCLIS list or
(iii) any list arising from a state statute similar to CERCLA.

         (b) To the best of Flowers' knowledge, no Hazardous Materials have been
or are being used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed of, managed or otherwise handled at, or shipped or
transported to or from the Properties or are

                                       37
<PAGE>   43

otherwise present at, on, in or under the Properties, or, to the best of the
knowledge of Flowers, at or from any adjacent site or facility, except for
Hazardous Materials, such as cleaning solvents, pesticides and other materials
used, produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed, or otherwise handled in material compliance with all
applicable Environmental Requirements.

         (c) To the best of Flowers' knowledge, Flowers, and each of its
Restricted Subsidiaries and Affiliates, has procured all Environmental
Authorizations necessary for the conduct of its business, and is in compliance
with all Environmental Requirements in connection with the operation of the
Properties and Flowers', and each of its Restricted Subsidiary's and
Affiliate's, respective businesses, except where failure to comply does not have
and reasonably could not be expected to cause a Material Adverse Effect.

         SECTION 7.15. Capital Stock.

All Capital Stock, debentures, bonds, notes and all other securities of Flowers
presently issued and outstanding are validly and properly issued in accordance
with all applicable laws in all material respects, including but not limited to,
the "Blue Sky" laws of all applicable states and the federal securities laws,
except to the extent any failure with respect thereto would not have and
reasonably could not be expected to cause a Material Adverse Effect. The issued
shares of Capital Stock of Flowers' Wholly Owned Subsidiaries are owned by
Flowers free and clear of any Lien or adverse claim. At least a majority of the
issued shares of capital stock of each of Flowers' other Subsidiaries (other
than Wholly Owned Subsidiaries) is owned by Flowers free and clear of any Lien
or adverse claim.

         SECTION 7.16. Margin Stock.

Neither Flowers nor any of its Subsidiaries is engaged principally, or as one of
its important activities, in the business of purchasing or carrying any Margin
Stock, and no part of the proceeds of any Loan made hereunder will be used to
purchase or carry any Margin Stock or to extend credit to others for the purpose
of purchasing or carrying any Margin Stock, or be used for any purpose which
violates, or which is inconsistent with, the provisions of Regulation T, U or X.

         SECTION 7.17. Insurance.

Flowers and each of its Material Subsidiaries has (either in the name of Flowers
or in such Material Subsidiary's own name), with financially sound and reputable
insurance companies, insurance in at least such amounts (including deductibles,
co-insurance and self-insurance with respect to which adequate reserves are
maintained) and against at least such risks (including on all its property, and
public liability and worker's compensation) as are usually insured against in
the same general area by companies of established repute engaged in the same or
similar business and similarly situated.

         SECTION 7.18. Notes; Books and Records.

                                       38
<PAGE>   44

          (a) Each Purchased Note purchased by the Bank on September 20, 1996
and each other Note tendered by Flowers under the Existing Loan Facility
Agreement or this Agreement as a condition precedent for a Loan satisfies all of
the applicable requirements of Article IX of this Agreement.

         (b) The information set forth on the "Distributor Loan Schedule"
delivered in connection with the Existing Loan Facility Agreement with respect
to the Principal Balance of each Purchased Note, all other such information was
true and correct in all material respects as of September 20, 1996.

         (c) Flowers has marked, and has caused each of the Selling Subsidiaries
to mark, their respective books and records to evidence that the Purchased Loans
were sold to the Bank as of September 20, 1996.

         SECTION 7.19. Y2K Plan.

Flowers has developed its plan (the "Y2K Plan") for making the Mission Critical
Systems and Equipment Year 2000 Compliant and Ready. Flowers and its
Subsidiaries' have met the Y2K Plan milestones in all material respects such
that Flowers reasonably believes, after due diligence, that all Mission Critical
Systems and Equipment will be Year 2000 Compliant and Ready in accordance with
the Y2K Plan.

                                 ARTICLE VIII.

                                   COVENANTS

         Until such time as the Commitment has been terminated or is no longer
in effect and the Bank no longer owns any Notes, Flowers will, unless the
Required Participants shall otherwise consent in writing:

         SECTION 8.01. Information.

Deliver to the Bank:

         (a) as soon as available and in any event within 90 days after the end
of each Fiscal Year,

                  (i) a consolidated balance sheet of Flowers and its
         Consolidated Subsidiaries as of the end of such Fiscal Year and the
         related consolidated statements of income, shareholders' equity and
         cash flows for such Fiscal Year, setting forth in each case in
         comparative form the figures for the previous fiscal year, all
         certified by PricewaterhouseCoopers LLP or other independent public
         accountants of nationally

                                       39
<PAGE>   45

         recognized standing, with such certification to be free of exceptions
         and qualifications not acceptable to the Participants; and

                  (ii) so long as there is an Unrestricted Subsidiary, a
         consolidated balance sheet and statement of income for such periods
         which accounts for the Unrestricted Subsidiaries using an equity basis
         of accounting, in each case setting forth in each case in comparative
         form the figures for the previous fiscal year, accompanied by a
         restricted use report as to such balance sheet and income statement
         from PricewaterhouseCoopers LLP or other independent public accountants
         of nationally recognized standing, which report may be qualified on the
         basis that the use of the equity basis of accounting does not conform
         to GAAP and qualified as to the absence of a statement of cash flows
         and as to the absence of footnotes and otherwise to be free of
         exceptions and qualifications not acceptable to the Required Banks;

         (b) as soon as available and in any event within 45 days after the end
of each of the first 3 Fiscal Quarters of each Fiscal Year:

                  (i) a consolidated balance sheet of the Flowers and its
         Consolidated Subsidiaries as of the end of such Fiscal Quarter and the
         related statement of income and statement of cash flows for such Fiscal
         Quarter and for the portion of the Fiscal Year ended at the end of such
         Fiscal Quarter, setting forth in each case in comparative form the
         figures for the corresponding Fiscal Quarter and the corresponding
         portion of the previous Fiscal Year, all certified (subject to normal
         year-end adjustments) as to fairness of presentation, GAAP and
         consistency by the chief financial officer or the chief accounting
         officer of the Flowers;

                  (ii) so long as there is an Unrestricted Subsidiary, a
         consolidated balance sheet and statement of income for such periods
         which accounts for the Unrestricted Subsidiaries using an equity basis
         of accounting, in each case setting forth in each case in comparative
         form the figures for the corresponding Fiscal Quarter and the
         corresponding portion of the previous Fiscal Year, all certified
         (subject to normal year-end adjustments and to qualification based on
         the use of the equity basis of accounting) as to fairness of
         presentation, GAAP and consistency by the chief financial officer or
         the chief accounting officer of the Flowers;

         (c) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate,
substantially in the form of Exhibit H (a "Compliance Certificate"), of the
chief financial officer or the chief accounting officer of Flowers (i) setting
forth in reasonable detail the calculations required to establish whether
Flowers was in compliance with the requirements of Sections 8.13 through 8.20,
inclusive, on the date of such financial statements and (ii) stating whether any
Default exists on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which Flowers is taking or
proposes to take with respect thereto;

                                       40
<PAGE>   46

         (d) simultaneously with the delivery of each set of annual financial
statements referred to in paragraph (a) above, a statement of the firm of
independent public accountants which reported on such statements to the effect
that nothing has come to their attention to cause them to believe that any
Default under Sections 8.13 through 8.20, inclusive, existed on the date of such
financial statements;

         (e) within five (5) Business Days after Flowers becomes aware of the
occurrence of any Default, a certificate of a senior financial officer or
accounting officer or the chief financial officer or the chief accounting
officer or the Treasurer of Flowers setting forth the details thereof and the
action which Flowers is taking or proposes to take with respect thereto;

         (f) promptly upon the mailing thereof to the shareholders of Flowers
generally, copies of all financial statements, reports and proxy statements so
mailed;

         (g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and annual or quarterly reports which Flowers shall
have filed with the Securities and Exchange Commission;

         (h) if and when any member of the Controlled Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA, a copy of such notice; or (iii)
receives notice from the PBGC under Title IV of ERISA of an intent to terminate
or appoint a trustee to administer any Plan, a copy of such notice; and

         (i) at any time prior to January 1, 2000, within 5 Domestic Business
Days after Flowers becomes aware of any deviations from the Y2K Plan which would
cause compliance with the Y2K Plan to be delayed or not achieved, which delay or
failure to achieve would have or could reasonably be expected to cause a
Material Adverse Effect, a statement of the Chief Executive Officer, Chief
Financial Officer, or Chief Technology Officer setting forth the details thereof
and the action which Flowers is taking or proposes to take with respect thereto;

         (j) promptly upon the receipt thereof at any time prior to January 1,
2000, a copy of any third party assessments of Flowers Y2K Plan together with
any recommendations made by such third party with respect to Year 2000
compliance; and

         (k) from time to time such additional information regarding the
financial position or business of Flowers and its Subsidiaries (other than
non-public information as to the Unrestricted Subsidiaries) as the Bank, at the
request of any Participant, may reasonably request.

         SECTION 8.02. Inspection of Property, Books and Records.

                                       41
<PAGE>   47

Flowers will (i) keep, and cause each Subsidiary to keep, proper books of record
and account in which full, true and correct entries in conformity with GAAP
shall be made of all dealings and transactions in relation to its business and
activities; and (ii) permit, and cause each Restricted Subsidiary to permit,
representatives of the Bank (x) at the Bank's expense and upon reasonable notice
and at a time reasonably convenient to Flowers (but in any event within 10 days
of such notice) prior to the occurrence and continuance of a Default and (y) at
Flowers' expense and without prior notice after the occurrence and continuance
of a Default, to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
officers, employees and independent public accountants. Flowers agrees to
cooperate and assist in such visits and inspections, in each case.

         SECTION 8.03. Maintenance of Existence.

Flowers will at all times preserve and keep in full force and effect its
corporate existence. Subject to Section 8.04, Flowers will at all times preserve
and keep in full force and effect the corporate existence of each of its
Restricted Subsidiaries (unless merged into Flowers or a Restricted Subsidiary)
and all rights and franchises of Flowers and its Restricted Subsidiaries unless,
in the good faith judgment of Flowers, the termination of or failure to preserve
and keep in full force and effect such corporate existence, right or franchise
would not, individually or in the aggregate, have and could not reasonably be
expected to cause a Material Adverse Effect. Flowers will, and will cause each
Restricted Subsidiary (subject to Section 8.04), at all times to carry on its
business in the food or beverage business or any related line of business.

         SECTION 8.04. Consolidations, Mergers and Sales of Assets.

Flowers will not, nor will it permit any Material Subsidiary to, consolidate or
merge with or into, or sell, lease or otherwise transfer all or any substantial
part of its assets to, any other Person, or discontinue or eliminate any
business line or segment, provided that (a) Flowers may merge with another
Person if (i) such Person was organized under the laws of the United States of
America or one of its states, (ii) Flowers is the corporation surviving such
merger and (iii) immediately after giving effect to such merger, no Default
shall have occurred and be continuing, (b) Subsidiaries of Flowers may merge
with one another, provided that in the case of a merger of a Restricted
Subsidiary with an Unrestricted Subsidiary, the Restricted Subsidiary is the
corporation surviving such merger, (c) other Persons may merge into or with
Subsidiaries to effect an acquisition permitted by Section 8.15 and (d) the
foregoing limitation on the sale, lease or other transfer of assets and on the
discontinuation or elimination of a Subsidiary or division shall not prohibit
(x) transfers of assets (including stock of a Restricted Subsidiary) to or among
Restricted Subsidiaries, (y) during any Fiscal Year, a transfer of assets other
than Margin Stock or the discontinuance or elimination of a Subsidiary or
division (in a single transaction or in a series of related transactions) unless
the aggregate assets to be so transferred or utilized in a Restricted Subsidiary
or division to be so discontinued, when combined with all other assets
transferred, and all other assets utilized in all other Restricted Subsidiaries
or divisions discontinued, in any Fiscal Year, constituted more than 15% of
Adjusted Consolidated Total Assets measured as of the end of the immediately

                                       42
<PAGE>   48

preceding Fiscal Year and (z) transfers of Margin Stock. Nothing in this Section
8.04 shall be interpreted to (i) limit or abridge the provisions of Section
2.09(a) of the Flowers Credit Agreement or (ii) restrict Flowers' ability to
dispose of (1) vehicles, (2) delivery routes, (3) assets obtained through
acquisitions of businesses or assets on or after the date hereof, provided that
proceeds of any such disposition shall be reinvested in Flowers by reducing
Indebtedness or by investing in operating assets, and (4) obsolete,
under-performing or non-core assets, disposition of which, in management's
judgment, would enhance the Flowers' operations and profitability, and
dispositions described in this sentence shall not be subject to, or included in
the computations under, clause (d) above.

         SECTION 8.05. Use of Proceeds.

In the event that the transactions hereunder should be recharacterized as a
secured loan, the proceeds of the Purchase Price shall be used for general
corporate purposes, provided, that no portion of the proceeds of the Loans will
be used by Flowers or any Subsidiary (i) in connection with, whether directly or
indirectly, any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other corporation,
unless such tender offer or other acquisition is to be made on a negotiated
basis with the approval of the Board of Directors of the Person to be acquired,
and the provisions of Section 8.16 would not be violated, (ii) directly or
indirectly, for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any Margin Stock (other than the repurchase by Flowers of
its own Capital Stock), or (iii) for any purpose in violation of any applicable
law or regulation.

         SECTION 8.06. Compliance with Laws; Payment of Taxes.

         (a) Flowers will, and will cause each of its Material Subsidiaries and
each member of the Controlled Group to, comply with applicable laws (including
but not limited to ERISA), regulations and similar requirements of governmental
authorities (including but not limited to PBGC), except where the necessity of
such compliance is being contested in good faith through appropriate proceedings
diligently pursued or if failure to comply does not have and reasonably could
not be expected to cause a Material Adverse Effect. Flowers will, and will cause
each of its Material Subsidiaries to, pay promptly when due all taxes,
assessments, governmental charges, claims for labor, supplies, rent and other
obligations which, if unpaid, might become a lien against the property of
Flowers or any Restricted Subsidiary, except liabilities being contested in good
faith and against which, if requested by the Bank, Flowers will set up reserves
in accordance with GAAP and liabilities the nonpayment of which would not have
and reasonably could not be expected to cause a Material Adverse Effect.

         (b) Flowers shall not permit the aggregate complete or partial
withdrawal liability under Title IV of ERISA with respect to Multiemployer Plans
incurred by Flowers and members of the Controlled Group to exceed $5,000,000 at
any time. For purposes of this Section 8.06(b), the amount of withdrawal
liability of Flowers and members of the Controlled Group at any date shall be
the aggregate present value of the amount claimed to have been incurred less any
portion thereof which Flowers and members of the Controlled Group have paid or
as to which Flowers

                                       43
<PAGE>   49

reasonably believes, after appropriate consideration of possible adjustments
arising under Sections 4219 and 4221 of ERISA, it and members of the Controlled
Group will have no liability, provided that Flowers shall obtain prompt written
advice from independent actuarial consultants supporting such determination.
Flowers agrees (i) once in each year, beginning with the 1999 Fiscal Year, to
request a current statement of the withdrawal liability of Flowers and members
of the Controlled Group from each Multiemployer Plan, if any, and (ii) to
transmit a copy of such statement to the Bank within fifteen (15) days after
Flowers receives the same.

         SECTION 8.07. Insurance.

Flowers will maintain, and will cause each of its Material Subsidiaries to
maintain (either in the name of Flowers or in such Material Subsidiary's own
name), with financially sound and reputable insurance companies, insurance on
all its property in at least such amounts (including deductibles, co-insurance
and self-insurance, if adequate reserves are maintained with respect thereto)
and against at least such risks (including on all its property, and public
liability and worker's compensation) as are usually insured against in the same
general area by companies of established repute engaged in the same or similar
business and similarly situated.

         SECTION 8.08. Change in Fiscal Year.

Flowers will not change its Fiscal Year without the consent of the Bank, which
shall not be unreasonably withheld (taking into consideration for such purpose
the effect, if any, such change would have on the financial covenants contained
in this Agreement).

         SECTION 8.09. Maintenance of Property.

Flowers shall, and shall cause each Restricted Subsidiary to, maintain all of
its properties and assets in good condition, repair and working order, ordinary
wear and tear excepted, except where any failure would not have and could not
reasonably be expected to cause a Material Adverse Effect.

         SECTION 8.10. Environmental Notices.

Flowers shall furnish to the Bank prompt written notice of all Environmental
Liabilities, pending, threatened or anticipated Environmental Proceedings,
Environmental Notices, Environmental Judgments and Orders, and Environmental
Releases of which Flowers shall have received actual notice or have actual
knowledge at, on, in, under or in any way affecting the Properties, and all
facts, events, or conditions that could lead to any of the foregoing, if the
amount of liability or of remediation cost to Flowers has or reasonably could be
expected to cause a Material Adverse Effect.

         SECTION 8.11. Environmental Matters.

                                       44
<PAGE>   50

Flowers and its Material Subsidiaries will not, and will not knowingly permit
any Third Party to, use, produce, manufacture, process, treat, recycle,
generate, store, dispose of, manage at, or otherwise handle, or ship or
transport to or from the Properties any Hazardous Materials in violation of
applicable Environmental Requirements, except to the extent that failure to
comply would not have and reasonably could not be expected to cause a Material
Adverse Effect.

         SECTION 8.12. Environmental Release.

Flowers agrees that upon its becoming aware of the occurrence of an
Environmental Release, except for any Environmental Release which occurred in
substantial compliance with all Environmental Requirements, at or on any of the
Properties it will act promptly to determine the extent of, and to take such
remedial action to eliminate, any such Environmental Release, whether or not
ordered or otherwise directed to do so by any Environmental Authority, except to
the extent that failure to take remedial action would not have and reasonably
could not be expected to cause a Material Adverse Effect.

         SECTION 8.13. Transactions with Affiliates.

Neither Flowers nor any of its Material Subsidiaries shall enter into, or be a
party to, any transaction with any Affiliate of Flowers or such Material
Subsidiary (which Affiliate is not Flowers or a Restricted Subsidiary, other
than a Person in which Flowers or such Material Subsidiary owns less than a
majority interest and which, if it were a Restricted Subsidiary, would not be a
Material Subsidiary), except as permitted by law and in the ordinary course of
business and pursuant to reasonable terms which either (x) are no less favorable
to Flowers or such Material Subsidiary than would be obtained in a comparable
arm's length transaction with a Person which is not an Affiliate or (y) have
been approved by a majority of the Board of Directors of Flowers or such
Material Subsidiary; provided, that the foregoing shall not affect the ability
of Flowers or any Material Subsidiary to determine, in its sole discretion, the
amount or form of executive or director compensation from time to time.

         SECTION 8.14. Loans or Advances.

Neither Flowers nor any of its Material Subsidiaries shall make loans or
advances to any Person except as permitted by Section 8.16 and except: (i) loans
or advances to employees not exceeding $10,000,000 in the aggregate principal
amount outstanding at any time, in each case made in the ordinary course of
business and consistent with practices existing on the Closing Date; (ii)
deposits required by government agencies or public utilities; (iii) loans or
advances to and among Flowers and its Wholly Owned Subsidiaries; and (iv) other
loans or advances in an aggregate amount outstanding which, together with
Investments permitted by clause (vi) other loans or advances, to Persons other
than the Unrestricted Subsidiaries (loans and advances to Unrestricted
Subsidiaries not being permitted), in an aggregate amount outstanding which,
together with Investments permitted by clause (vi) of Section 8.15 do not exceed
15% of Adjusted Consolidated Total Assets as of the last day of the immediately
preceding Fiscal Quarter; provided that after

                                       45
<PAGE>   51

giving effect to the making of any loans, advances, or deposits permitted by
this Section, no Default shall be in existence or be created thereby.

         SECTION 8.15. Investments.

Neither Flowers nor any of its Restricted Subsidiaries shall make Investments in
any Person except as permitted by Section 8.14 and except Investments in (i)
direct obligations of the United States Government maturing within one year,
(ii) certificates of deposit issued by a commercial bank whose credit is
satisfactory to the Bank, (iii) commercial paper rated A1 or the equivalent
thereof by Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc. or
P1 or the equivalent thereof by Moody's Investors Service, Inc. and in either
case maturing within 6 months after the date of acquisition; (iv) tender bonds
the payment of the principal of and interest on which is fully supported by a
letter of credit issued by a United States bank whose long-term certificates of
deposit are rated at least AA or the equivalent thereof by Standard & Poor's
Corporation and Aa or the equivalent thereof by Moody's Investors Service, Inc.;
(v) Investments by Flowers or any Restricted Subsidiary in the stock (or other
ownership interests) or assets of any Person in the food or beverage business or
any related line of business and/or (vi) other Investments in an aggregate
amount outstanding which, together with loans and advances permitted by clause
(iv) of Section 8.14, do not exceed 15% of Adjusted Consolidated Total Assets as
of the last day of the immediately preceding Fiscal Quarter, and which, as to
Investments in Keebler, constitute Permitted Keebler Investments; provided,
however, immediately after giving effect to the making of any Investment, no
Default shall have occurred and be continuing.

         SECTION 8.16. Negative Pledge.

Neither Flowers nor any Restricted Subsidiary will create, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired by it, except:

         (a) Liens existing on January 30, 1998, securing Indebtedness
outstanding on such date in an aggregate principal amount not exceeding
$24,000,000;

         (b) any Lien existing on any specific fixed asset of any corporation at
the time such corporation becomes a Restricted Subsidiary and not created in
contemplation of such event;

         (c) any Lien on any specific fixed asset (real or personal) securing
Indebtedness incurred or assumed for the purpose of financing all or any part of
the cost of acquiring or constructing such asset, provided that such Lien
attaches to such asset concurrently with or within 18 months after the
acquisition or completion of construction thereof;

         (d) any Lien on any specific fixed asset of any corporation existing at
the time such corporation is merged or consolidated with or into Flowers or a
Restricted Subsidiary and not created in contemplation of such event;

                                       46
<PAGE>   52

         (e) any Lien existing on any specific fixed asset prior to the
acquisition thereof by Flowers or a Restricted Subsidiary and not created in
contemplation of such acquisition;

         (f) Liens on assets of a Restricted Subsidiary securing Indebtedness
owing by any Restricted Subsidiary to Flowers or by any Restricted Subsidiary to
another Restricted Subsidiary;

         (g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Indebtedness secured by any Lien permitted by any of the
foregoing paragraphs of this Section, provided that (i) such Indebtedness is not
secured by any additional assets, and (ii) the amount of such Indebtedness
secured by any such Lien is not increased;

         (h) Liens incidental to the conduct of its business or the ownership of
its assets which (i) do not secure Indebtedness and (ii) do not in the aggregate
materially detract from the value of its assets or materially impair the use
thereof in the operation of its business;

         (i) Liens imposed by any governmental authority for taxes, assessments
or charges not yet delinquent or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of Flowers or any of its Subsidiaries, as the case may be, in
accordance with GAAP;

         (j) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business (whether or not
statutory) which are not overdue for a period of more than 30 days or which are
being contested in good faith and by appropriate proceedings, for which a
reserve or other appropriate provisions, if any, as shall be required by GAAP
shall have been made;

         (k) Liens, pledges or deposits to secure non-delinquent obligations
under worker's compensation, unemployment insurance and other social security
legislation and Liens arising from the pledge by Flowers or any of its
Subsidiaries of industrial revenue bonds or other instruments to secure
reimbursement obligations under letters of credit issued to support the payment
of such bonds or instruments;

         (1) Liens on capital stock of or other ownership interests in any
Person not a Restricted Subsidiary of Flowers securing Indebtedness of such
Person;

         (m) Liens resulting from progress payments or partial payments under
United States government contracts or subcontracts;

         (n) Liens arising from legal proceedings, so long as such proceedings
are being contested in good faith by appropriate proceedings diligently
conducted and so long as execution is stayed on all judgments resulting from any
such proceedings;

         (o) any Lien on Margin Stock;

                                       47
<PAGE>   53

         (p) grants of security and rights of setoff in deposit or credit
accounts, including demand, savings, passbook, share draft or like accounts,
certificates of deposit, money market accounts, items held for collection or
deposit, commercial paper, negotiable instruments and similar accounts and
instruments held at banks or financial institutions to secure the payment or
reimbursement under overdraft, acceptance and similar facilities and rights of
setoff, banker's liens and other similar rights arising solely by operation of
law;

         (q) Liens arising from the pledge by Flowers or any of its Subsidiaries
of industrial revenue bonds or similar instruments to secure reimbursement
obligations under letters of credit issued to support the payment of such bonds;
and

         (r) Liens not otherwise permitted by the foregoing paragraphs of this
Section securing Indebtedness (other than indebtedness represented by the Notes)
in an aggregate principal amount at any time outstanding which, together with
the aggregate amount of Indebtedness of Restricted Subsidiaries permitted by
Section 8.20(iv), does not exceed 20% of Adjusted Consolidated Net Worth as of
the last day of the immediately preceding Fiscal Quarter.

         SECTION 8.17. Adjusted Fixed Charges Coverage Ratio.

           At the end of each Fiscal Quarter, commencing with the third Fiscal
Quarter of the 1999 Fiscal Year, the ratio of Adjusted EBILT to Adjusted
Consolidated Fixed Charges shall at all times be greater than ratio set forth
below for each Fiscal Quarter of each Fiscal Year set forth below:

<TABLE>
<CAPTION>
                                          Adjusted Fixed Charges
Fiscal Quarter     Fiscal Year                 Coverage Ratio
<S>                <C>                    <C>
    Third          1999                        1.50 to 1.0
    Fourth         1999                        1.45 to 1.0
    First          2000                        1.20 to 1.0
    Second         2000                        1.10 to 1.0
    Third          2000                        1.20 to 1.0
    Fourth         2000                        1.50 to 1.0
    First          2001                        1.65 to 1.0
    Second         2001                        1.65 to 1.0
    Third          2001                        1.75 to 1.0
    Fourth         2001
              and thereafter                   2.00 to 1.0
</TABLE>

         SECTION 8.18. Leverage Ratio.

         The Leverage Ratio shall at all times be less than (i) through and
including the third Fiscal Quarter of Fiscal Year 2000, 0.65 to 1.0 and (ii)
during and after the fourth Fiscal Quarter of Fiscal Year 2000, 0.60 to 1.0.

                                       48
<PAGE>   54

         SECTION 8.19. Minimum Consolidated Net Worth.

Adjusted Consolidated Net Worth will at no time be less than $487,569,000, plus
the sum of (x) 50% of the cumulative Net Proceeds of Capital Stock received
during any period after April 27, 1998, plus (y) 50% of any equity resulting
from a conversion of Indebtedness of Flowers during any period after April 27,
1998, less (z) any amount of equity of Flowers repurchased during any period
after April 27, 1998, calculated quarterly at the end of each Fiscal Quarter.

         SECTION 8.20. Minimum Adjusted Consolidated EBIDTA.

         At the end of each Fiscal Quarter, commencing with the Fourth Fiscal
Quarter of Fiscal Year 1999, Adjusted Consolidated EBITDA shall at all times be
greater than amount set forth below for each Fiscal Quarter of each Fiscal Year
set forth below:

<TABLE>
<CAPTION>
 Fiscal Quarter     Fiscal Year       Adjusted Consolidated EBITDA
<S>                 <C>               <C>
     Fourth            1999                    $32,000,000
     First             2000                    $32,000,000
     Second            2000                    $29,000,000
     Third             2000                    $44,000,000
     Fourth            2000                    $63,000,000
</TABLE>

         SECTION 8.21. Subsidiary Borrowings.

Flowers shall not permit any Restricted Subsidiary to become liable for any
Indebtedness, whether secured or unsecured, except: (i) such of the foregoing as
is owed to Flowers or another Wholly-Owned Subsidiary; (ii) Indebtedness or
obligations secured by Liens permitted by Section 8.16; (iii) Indebtedness or
obligations of a Subsidiary outstanding at the time such Subsidiary becomes a
Subsidiary, provided that (a) such Indebtedness shall not have been incurred in
contemplation of such Subsidiary becoming a Subsidiary, and (b) immediately
after such Subsidiary becomes a Subsidiary, no Default or Event of Default shall
exist, and provided, further, that such Indebtedness may not be extended,
renewed, or refunded except as otherwise permitted by this Agreement; and (iv)
other Indebtedness which, when combined with the total of the Indebtedness
secured by all Liens permitted by Section 8.16(r), without duplication, does not
exceed 20% of Adjusted Consolidated Net Worth as of the last day of the
immediately preceding Fiscal Quarter.

         SECTION 8.22. Collateral Protection Covenants.

In addition to the covenants set forth above, and notwithstanding whether or not
any of the following would be otherwise permitted thereby, Flowers, in express
acknowledgment that the Bank and each Participant has entered into this
Agreement and the transactions contemplated hereby in express reliance upon
Flowers covenants set forth herein to continue to administer and

                                       49
<PAGE>   55

operate the Distributor Routes in accordance with its Customary Practices,
Flowers hereby covenants and agrees that it shall, and shall cause each of its
Subsidiaries to:

         (a) Not in any Fiscal Year, terminate or discontinue more than
one-third of the Distributor Routes for which there is an outstanding Loan
hereunder;

         (b) Comply in all material respects with the terms of the Distributor's
Agreement and administer the terms thereof in good faith and in accordance with
Flowers' Customary Practices;

         (c) Not amend or materially modify the terms of the Distributor's
Agreements or any other Distributor Loan Document without the prior written
consent of the Bank; provided that, unless an Event of Default has occurred and
is continuing or Flowers has no current liability under the repurchase
obligation set forth in Section 4.01, Flowers may terminate any Distributor
Route in accordance with its Customary Practices as long as Flowers provides the
Bank written notice thereof within sixty (60) days thereafter and Flowers
otherwise acts in good faith to sell the Distributor Route in accordance with
its Customary Practices; if an Event of Default has occurred and is continuing
or Flowers has no repurchase obligation pursuant to Section 4.01, Flowers shall
not terminate any Distributor Route without the prior written consent of the
Bank;

         (d) Not sell, transfer, lease or otherwise dispose of any of its right,
title and interest in and to the Distributor's Agreements or other Distributor
Loan Documents, the Proprietary Administrative Services, the trademarks used in
connection with the Distributor's Agreements, or the stock of any Selling
Subsidiary who is party to a Distribution Agreement pledged to the Bank pursuant
to the Program Documents;

         (e) Not offer, directly or indirectly, any competing loan facility for
the purposes of refinancing the Loans hereunder unless such refinancing
opportunity is offered to all Distributors on an equal basis;

         (f) With respect to a Defaulted Loan, where an Event of Default has
occurred and is continuing or Flowers has no current repurchase obligation
pursuant to Section 4.01, waive any right of first refusal with respect to a
sale of the Distributor Route by the Bank in a public foreclosure sale (provided
Flowers is provided notice and an opportunity to appear at the sale) or any
right to approve or otherwise block a sale of the Distributor Route by the Bank.

Without otherwise limiting the remedies of the Bank upon an Event of Default,
including, without limitation, the right to bring a breach of contract action
for failure of Flowers to comply with any other provision of this Section 8.21,
the Bank acknowledges and agrees that any breach by Flowers of the covenant set
forth in Section 8.21(a) above shall not provide the Bank with any claim for
damages against Flowers or any Selling Subsidiary in respect of any Loan once
Flowers no longer has the obligation hereunder to repurchase Defaulted Loans.

         SECTION 8.23. Separateness from Unrestricted Subsidiaries.

                                       50
<PAGE>   56

Flowers shall conduct its business and operations in accordance with the
following provisions:

         (a) maintain books and records and bank accounts separate from those of
the Unrestricted Subsidiaries;

         (b) maintain its bank accounts and all its other assets separate from
those of the Unrestricted Subsidiaries;

         (c) hold itself out to creditors and the public as a legal entity
separate and distinct from the Unrestricted Subsidiaries;

         (d) prepare separate tax returns and financial statements showing it as
a separate member of a consolidated group of which the Unrestricted Subsidiaries
also are members;

         (e) allocate and charge fairly and reasonably any common employee or
overhead shared with any of the Unrestricted Subsidiaries;

         (f) transact all business with Unrestricted Subsidiaries on an arm's
length basis and enter into transactions with Unrestricted Subsidiaries only on
a commercially reasonable basis;

         (g) conduct business in its own name and use separate stationery,
invoices and checks;

         (h) not commingle its assets or funds with those of any Unrestricted
Subsidiary;

         (i) not assume, Guarantee or pay the Indebtedness of any Unrestricted
Subsidiary;

         (j) pay its own liabilities and expenses only out of its own funds, and
not pay any liabilities and expenses of any of the Unrestricted Subsidiaries;

         (k) pay salaries of its own employees from its own funds, and not pay
salaries of the employees of any Unrestricted Subsidiary;

         (l) not hold out its credit as being available to satisfy the
obligations of any Unrestricted Subsidiary;

         (m) not make loans to any Unrestricted Subsidiary or buy or hold
evidence of indebtedness issued by any Unrestricted Subsidiary;

         (n) not pledge its assets for the benefit of any Unrestricted
Subsidiary; and

         (o) correct any known misunderstanding regarding its identity as being
separate from the Unrestricted Subsidiaries.

         SECTION 8.24. Year 2000 Compliance.

                                       51
<PAGE>   57

Flowers will meet the milestones as to all Mission Critical Systems and
Equipment contained in the Y2K Plan (other than testing) on or before October
15, 1999, and will have all Mission Critical Systems and Equipment Year 2000
Compliant and Ready (including all internal and external testing), on or before
November 1, 1999, except where failure to meet the milestones would not have or
could not reasonably be expected to cause a Material Adverse Effect.

                                  ARTICLE IX.

                EVENTS OF DEFAULT AND ESCROW FUNDING OBLIGATION

         SECTION 9.01. Events of Default.

Any one or more of the following shall constitute an Event of Default hereunder:

         (a) Flowers fails to pay when due any repurchase obligation, Servicer
Advance, or its Escrow Funding Obligation, or other payment due and payable
hereunder within five (5) days of its due date; or

         (b) Flowers shall fail to observe or perform any covenant contained in:
(i) Sections 8.01(e), 8.01(i), 8.01(j), 8.02(ii), 8.03 through 8.05, inclusive,
Sections 8.17 through 8.19, inclusive, and Sections 8.20 or 8.24; or (ii)
Sections 8.14, 8.15 or 8.21, and with respect to this clause (ii) such failure
shall not have been cured within 10 days after the earlier to occur of (1)
written notice thereof has been given to Flowers by the Bank at the request of
any Participant or (2) any Responsible Officer of Flowers otherwise becomes
aware of any such failure; or

         (c) Flowers shall fail to observe or perform any covenant or agreement
contained or incorporated by reference in this Agreement (other than those
covered by paragraph (a) or (b) above) or the Servicing Agreement and such
failure shall not have been cured within 30 days after the earlier to occur of
(i) written notice thereof has been given to Flowers by the Bank or (ii) any
Responsible Officer of Flowers otherwise becomes aware of any such failure; or

         (d) any representation, warranty, certification or statement made by
Flowers or any Selling Subsidiary in Article VII of this Agreement, in the
Servicing Agreement or in any certificate, financial statement or other document
delivered pursuant to this Agreement (other than any representation, warranty,
certification or statement set forth in Section 7.18(a) or (b) hereof or which
relates, and to the extent it relates, to a Distributor or the Distributor Loan
Documents of a Distributor, the breach of which shall be governed by Section
4.02 hereof) shall prove to have been incorrect or misleading in any material
respect when made (or deemed made); or

         (e) Flowers or any Material Subsidiary shall fail to make any payment
in respect of Indebtedness in an aggregate amount outstanding in excess of
$10,000,000 (other than hereunder) when due or within any applicable grace
period; or

                                       52
<PAGE>   58

         (f) any event or condition shall occur which results in the
acceleration of the maturity of Indebtedness or, as a result of any event of
default, there is a requirement for the mandatory purchase or sale of property
subject to any "synthetic lease" (meaning a lease transaction under which the
obligations of Flowers are treated as debt for tax purposes but not under GAAP)
and/or the payment of any final rent payment or guaranteed residual amount with
respect thereto (any such obligation to purchase or sell property or pay a final
rent payment or guaranteed residual amount under a synthetic lease as a result
of an event of default thereunder being a "synthetic lease obligation") in an
aggregate amount outstanding in excess of $10,000,000 of Flowers or any Material
Subsidiary (including, without limitation, any required mandatory prepayment or
"put" of such Indebtedness or, as a result of an event of default, a synthetic
lease obligation, to Flowers or any Material Subsidiary) or enables (or, with
the giving of notice or lapse of time or both, would enable) the holders of such
Indebtedness or commitment therefor or lessor under any such synthetic lease or
any Person acting on such holders' or lessor's behalf to accelerate the maturity
thereof or terminate any such commitment or to require, as a result of an event
of default, the purchase or sale of such property or the payment of any other
synthetic lease obligation (including, without limitation, any required
mandatory prepayment or "put" of such Indebtedness or synthetic lease obligation
to Flowers or any Material Subsidiary); or

         (g) Flowers or any Material Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally, or shall admit in writing its
inability, to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or

         (h) an involuntary case or other proceeding shall be commenced against
Flowers or any Material Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an order for
relief shall be entered against Flowers or any Material Subsidiary under the
federal bankruptcy laws as now or hereafter in effect; or

         (i) Flowers or any member of the Controlled Group shall fail to pay
when due any amount of $2,000,000 or greater which it shall have become liable
to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans shall be filed under Title IV of ERISA by Flowers, any
member of the Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to
terminate or to cause a trustee to be appointed to administer any such Plan or
Plans or a proceeding shall be instituted by a fiduciary of any such Plan or
Plans to enforce Section 515 or

                                       53
<PAGE>   59

4219 (c) (5) of ERISA and such proceeding shall not have been dismissed within
30 days thereafter; or a condition shall exist by reason of which the PBGC would
be entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated, in each case if the amount of Unfunded Vested Liabilities is in
excess of $10,000,000; or

         (j) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $20,000,000 shall be rendered against Flowers or
any Material Subsidiary and such judgment or order shall continue unbonded,
undischarged, unsatisfied and unstayed for a period of 30 days; or

         (k) a federal tax lien shall be filed against Flowers or any Material
Subsidiary under Section 6323 of the Code, if the amount involved is in excess
of $20,000,000, or a lien of the PBGC shall be filed against Flowers or any
Material Subsidiary under Section 4068 of ERISA and in either case such lien
shall remain undischarged for a period of 25 days after the date of filing, if
the amount involved is in excess of $10,000,000; or

         (1) in any 12 month period or less, (i) 50% or more of the members of
the full Board of Directors of Flowers shall have resigned or been removed or
replaced, or (ii) any Person or "Group" (as defined in Section 2(d) (3) of the
Securities Exchange Act of 1934, as amended) (other than an employee benefit or
stock ownership plan of Flowers) shall have acquired, during such period,
directly or indirectly, more than 30% of the capital stock (whether common or
preferred or a combination thereof) of Flowers, provided that Flowers' purchase
of treasury shares of shares of its capital stock outstanding on the date hereof
which results in one or more of Flowers' shareholders of record as of the date
of this Agreement owning 30% or more of Flowers' Capital Stock shall not
constitute an acquisition for purposes of this Section 9.01(l); or

         (m) the occurrence of any event, act, occurrence, or condition which
either has or which reasonably could be expected to cause a Material Adverse
Effect; or

         (n) in the event that this Agreement is deemed to constitute a security
agreement, any security interest granted to the Bank herein or therein is
invalid or unenforceable; or

         (o) the Flowers Security Agreement shall fail to grant a valid,
enforceable first priority security interest in the collateral described herein.

         SECTION 9.02. Remedies on Default.

         (a) Upon the occurrence and during the continuation of an Event of
Default (other than an Event of Default described in Section 9.01(g) or (h)),
the Bank may, with the consent of the Required Participants, and upon the
written request of the Required Participants, shall, take any or all of the
following actions, without prejudice to the rights of the Servicer or any
Participant to enforce its claims against Flowers, any other Credit Party, any
Distributor or other obligor with respect to any Loan: (i) declare the
Commitment terminated, whereupon the Commitment shall terminate immediately and
any unpaid Commitment Fee shall forthwith become due and payable

                                       54
<PAGE>   60

without any other notice of any kind (with the express understanding that such
termination of the Commitment shall not result in a termination of the
Participating Commitments of each Participant), (ii) demand that Flowers honor
its Escrow Funding Obligation, by placing in escrow with the Bank the Repurchase
Price for each of the Notes then held by the Bank (subject to the limitations of
the Maximum Recourse Amount), without presentment, demand, protest or any other
notice of any kind, all of which are expressly waived, (iii) replace Flowers as
the Servicer of the Notes under the Servicing Agreement with the Bank or any of
its agents, representatives or appointees and (iv) take any other action and
exercise any other remedy available by contract or at law, all of which shall be
cumulative.

         (b) Upon the occurrence of an Event of Default under Section 9.01(g) or
(h), (i) all obligations of the Bank to Flowers, including, without limitation,
the Commitment shall automatically terminate and any unpaid Commitment Fee shall
forthwith become due and payable without any other notice of any kind with the
express understanding that such termination of the Commitment shall not result
in a termination of the Participating Commitments of each Participant), (ii) the
obligation of Flowers to honor its Escrow Funding Obligation, by placing in
escrow with the Bank the Repurchase Price for each of the Notes then held by the
Bank (subject to the limitations of the Maximum Recourse Amount) hereof, shall
be immediately due and payable, without presentment, demand, protest, or any
other notice of any kind, all of which are expressly waived, (iii) the Bank
shall automatically replace Flowers as the Servicer with respect to the Notes
under the Servicing Agreement and (iv) the Bank may take any other action and
exercise any other remedy available by contract or at law, all of which shall be
cumulative.

         (c) Upon the occurrence of an Event of Default and acceleration of the
Escrow Funding Obligation as provided in (a) or (b) above, the Bank may pursue
any remedy available under this Agreement or any other Program Document, or
available at law or in equity, all of which shall be cumulative.

         (d) All payments with respect to this Agreement received by the Bank or
any after the occurrence of an Event of Default and acceleration of the
repurchase obligation, shall be applied (i) first to the costs and expenses
(including attorneys' fees and disbursements) incurred by the Bank as a result
of the Event of Default and to the payment of any fees owing to the Bank as
Servicer under the Servicing Agreement, (ii) second, to the payment of
Commitment Fee, if any, owing to the Participants hereunder, (iii) third, to the
payment of accrued interest on the Funded Participant's Interests hereunder,
(iv) fourth, to the payment of the fees owing to the Bank under the Servicing
Agreement, (v) fifth, to the payment of the fees owing to the Servicer under the
Servicing Agreement, (vi) sixth to the repayment of the Funded Participant's
Interests outstanding hereunder, (vii) seventh, to the payment of all other
amounts owing to the Bank or any Participant hereunder, and (viii) eighth, to
such Persons as may be legally entitled thereto.

                                       55
<PAGE>   61

                                   ARTICLE X.

                      ESCROW FUNDING OBLIGATION AND ESCROW

         SECTION 10.01 Appointment of Escrow Agent. Flowers hereby appoints,
authorizes and directs the Bank, as Escrow Agent (in such capacity herein called
the "Escrow Agent,") to act as escrow agent to receive, hold, invest and
distribute the escrow funds deposited with the Escrow Agent pursuant to the
terms and conditions hereof.

         SECTION 10.02 Deposit of Escrow Funds. In the event
Flowers has an obligation to comply with its Escrow Funding Obligation, Flowers
will deposit immediately available funds, in an amount not to exceed the Maximum
Recourse Amount, with the Escrow Agent in an escrow account established by the
Escrow Agent for the purposes of this Agreement (the "Escrow Account").

         On the first day of each Fiscal Quarter, Flowers shall recalculate the
Maximum Recourse Amount in accordance with Section 5.01 and deposit any
increased amount of the Maximum Recourse Amount resulting from such calculation
with the Escrow Agent on such date, together with any amounts used by the Bank
to satisfy the repurchase obligation of Flowers with respect to any Ineligible
Note.

         SECTION 10.03 The Escrow Account. All escrow funds delivered to the
Escrow Agent pursuant hereto shall be held by the Escrow Agent in the Escrow
Account, and the Escrow Agent shall invest any cash held by it in Permitted
Investments for the benefit of Flowers.

         SECTION 10.04 Payments of Repurchase Price for Defaulted Loans. The
Escrow Agent is authorized to pay the Bank from the escrowed funds all amounts
due on Defaulted Loans and, to the extent not paid by Flowers in accordance with
Section 4.02, Ineligible Notes.

         SECTION 10.05 Reduction of Amount in Escrow. (a) Quarterly, beginning
90 days after Flowers complies with its Escrow Funding Obligation, the Escrow
Agent will pay to Flowers all amounts in the Escrow Account in excess of the
then outstanding Maximum Recourse Amount.

         (b) After all the Notes have been paid in full and this Agreement
terminated, the Escrow Agent shall pay all amounts contained in the Escrow
Account to Flowers, after deducting any fees payable for its escrow services.

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<PAGE>   62

         SECTION 10.06 Fees and Expenses of Escrow Agent. The customary fees and
expenses of the Escrow Agent shall be paid by Flowers, and the Escrow Agent is
authorized to deduct such fees and expenses from the funds in the Escrow Account
prior to making any other payments permitted hereunder.

         SECTION 10.07 Liability of Escrow Agent.

                  (a) Liability Limitations. In performing any of its duties
under this Agreement, or upon the claimed failure to perform its duties
hereunder, Escrow Agent shall not be liable to anyone for any damages, losses,
or expenses which any of them may incur as a result of the Escrow Agent so
acting, or failing to act; provided, however, Escrow Agent shall be liable for
damages arising out of its willful default or gross negligence under this
Agreement. Accordingly, Escrow Agent shall not incur any such liability with
respect to (i) any action taken or omitted to be taken in good faith upon advice
of its counsel given with respect to any questions relating to the duties and
responsibilities of the Escrow Agent hereunder or (ii) to any action taken or
omitted to be taken in reliance upon any document; including any written notice
or instructions provided for in this Agreement, not only as to its due execution
and to the validity and effectiveness of its provisions but also as to the truth
and accuracy of any information contained therein, which the Escrow Agent shall
in good faith believe to be genuine, to have been signed or presented by the
purported proper person or persons and to conform with the provisions of this
Agreement. Written instructions provided to Escrow Agent hereunder by the Bank
shall be signed by an authorized representative(s) of the Bank. The Escrow Agent
makes no representations and shall not be liable for any deficiencies in any
deposit made under the Agreement. The Escrow Agent shall make no disbursement,
investment or other use of funds until and unless it has collected funds. The
Escrow Agent shall not be liable for collection items until the proceeds of the
same in actual cash have been received or the Federal Reserve has given the
Escrow Agent credit for the funds.

                  (b) Indemnification. Flowers hereby agrees to indemnify and
hold harmless the Escrow Agent from and against any and all losses, claims,
damages, liabilities and expenses, including without limitations, reasonable
costs of investigation and counsel fees and disbursements (both at the trial and
appellate levels) which may be imposed on the Escrow Agent or incurred by it in
connection with its acceptance of its appointment as Escrow Agent hereunder or
the performance of its duties hereunder, including, without limitation, any
litigation arising from this Agreement or involving the subject matter thereof.
The indemnity provisions of this paragraph (b) shall survive the termination of
this Agreement and the resignation or removal of the Escrow Agent.

                  (c) Disputes. In the event of a dispute between any of the
parties hereto as to the proper disposition of funds or other property held by
the Escrow Agent, the Escrow Agent shall continue to hold the same undisbursed
until such time as the disputing parties agree in writing as to a proper
disposition of such funds or the property. If such arrangement is not
forthcoming, the Escrow Agent shall be entitled to tender into the registry or
custody of any court

                                       57
<PAGE>   63

of competent jurisdiction all money or property in its hands under the terms of
this agreement, whereupon the parties hereto agree the Escrow Agent shall be
discharged from all further duties under this Agreement. The filing of any such
legal proceedings shall not deprive the Escrow Agent of its compensation earned
prior to such filing.

                  (d) Duties and Responsibilities. The duties and
responsibilities of the Escrow Agent hereunder shall be limited to those
expressly set forth in this Agreement, and the Escrow Agent shall not be bound
in any way by any other contract or agreement by or among the Bank, the
Participants and Flowers whether or not the Escrow Agent has knowledge of any
such contract or agreement or the terms and conditions thereof.

                  (e) Attachment. If all or any part of the escrowed funds is
attached, garnished or levied upon, pursuant to any court order, or if the
delivery thereof shall be stayed or enjoined by a court order, or any other
order, judgment or decree shall be made or entered by any court of competent
jurisdiction effecting the escrowed funds or any part thereof or any act of the
Escrow Agent, then the Escrow Agent is hereby authorized to obey and comply with
such writ, order, judgment or decree so entered or issued; and if the Escrow
Agent obeys or complies with any such writ, order, judgment or decree, then it
shall not be liable to any other party hereto or any other person by reason of
such compliance.

                                  ARTICLE XI.

                                    THE BANK

         SECTION 11.01. Appointment of the Bank as Agent.

To the extent of its ownership interest in the Loans, each Participant hereby
designates Bank as its agent to administer all matters concerning the Loans and
to act as herein specified. Each Participant hereby irrevocably authorizes the
Bank to take such actions on its behalf under the provisions of this Agreement,
the other Program Documents, and all other instruments and agreements referred
to herein or therein, and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Bank by the terms hereof and thereof and such other powers as are reasonably
incidental thereto. The Bank may perform any of its duties hereunder by or
through its agents or employees.

         SECTION 11.02. Nature of Duties of the Bank.

The Bank shall have no duties or responsibilities except those expressly set
forth in this Agreement and the other Program Documents. None of the Bank nor
any of its respective officers, directors, employees or agents shall be liable
for any action taken or omitted by it as such hereunder or in connection
herewith, unless caused by its or their gross negligence or willful misconduct.
The Bank shall not have by reason of this Agreement a fiduciary relationship in
respect of any Participant; and nothing in this Agreement, express or implied,
is intended to or

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<PAGE>   64

shall be so construed as to impose upon the Bank any obligations in respect of
this Agreement or the other Program Documents except as expressly set forth
herein.

         SECTION 11.03. Lack of Reliance on the Bank

         (a) Independently and without reliance upon the Bank, each Participant,
to the extent it deems appropriate, has made and shall continue to make (i) its
own independent investigation of the financial condition and affairs of Flowers
and its Subsidiaries in connection with the taking or not taking of any action
in connection herewith, and (ii) its own appraisal of the creditworthiness of
Flowers and its Subsidiaries, and, except as expressly provided in this
Agreement, the Bank shall have no duty or responsibility, either initially or on
a continuing basis, to provide any Participant with any credit or other
information with respect thereto, whether coming into its possession before the
making of the Loans or at any time or times thereafter.

         (b) The Bank shall not be responsible to any Participant for any
recitals, statements, information, representations or warranties herein or in
any document, certificate or other writing delivered in connection herewith or
for the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Agreement, any Program Document,
any Distributor Loan Document or any other documents contemplated hereby or
thereby, or the financial condition of Flowers, any of its Subsidiaries or any
Distributor, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or the other documents contemplated hereby or thereby, or the
financial condition of Flowers, any of its Subsidiaries or any Distributor, or
the existence or possible existence of any Default or Event of Default.

         SECTION 11.04. Certain Rights of the Bank.

If the Bank shall request instructions from the Required Participants with
respect to any action or actions (including the failure to act) in connection
with this Agreement, the Bank shall be entitled to refrain from such act or
taking such act, unless and until the Bank shall have received instructions from
the Required Participants; and the Bank shall not incur liability in any Person
by reason of so refraining. Without limiting the foregoing, no Participant shall
have any right of action whatsoever against the Bank as a result of the Bank
acting or refraining from acting hereunder in accordance with the instructions
of the Required Participants.

         SECTION 11.05. Reliance by the Bank.

The Bank shall be entitled to rely, and shall be fully protected in relying,
upon any note, writing, resolution, notice, statement, certificate, telex,
teletype or telecopier message, cable gram, radiogram, order or other
documentary, teletransmission or telephone message believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person. The Bank
may consult with legal counsel (including counsel for any Credit Party),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted

                                       59
<PAGE>   65

to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.

         SECTION 11.06. Indemnification of the Bank.

To the extent the Bank is not reimbursed and indemnified by Flowers, each
Participant will reimburse and indemnify the Bank, ratably according to the
respective Pro Rata Shares, in either case, for and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including counsel fees and disbursements) or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against the Bank in performing its duties hereunder, in any way relating to or
arising out of this Agreement or the other Program Documents; provided that no
Participant shall be liable to the Bank for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Bank's gross negligence or willful
misconduct.

         SECTION 11.07. The Bank in its Individual Capacity.

With respect to its obligations under this Agreement and the amounts advanced by
it, the Bank shall have the same rights and powers hereunder as any other
Participant and may exercise the same as though it were not performing the
duties specified herein; and the terms "Participants", "Required Participants",
or any similar terms shall, unless the context clearly otherwise indicates,
include the Bank in its individual capacity. The Bank may accept deposits from,
lend money to, and generally engage in any kind of banking, trust, financial
advisory or other business with Flowers or its Subsidiaries or any affiliate of
Flowers and its Subsidiaries as if it were not performing the duties specified
herein, and may accept fees and other consideration from Flowers and its
Subsidiaries for services in connection with this Agreement and otherwise
without having to account for the same to the Participants.

         SECTION 11.08. Holders of Participation Certificates.

The Bank may deem and treat the payee of any Participation Certificate as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the Bank. Any request,
authority or consent of any Person who, at the time of making such request or
giving such authority or consent, is the holder of any Participation Certificate
shall be conclusive and binding on any subsequent holder, transferee or assignee
of such Participation Certificate or of any Participation Certificate or
Certificates issued in exchange therefor.

                                  ARTICLE XII.

                                 MISCELLANEOUS

         SECTION 12.01. No Waiver.

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<PAGE>   66

No delay or failure on the part of the Bank in the exercise of any right, power
or privilege granted under this Agreement, under any other Program Document, or
available at law or in equity, shall impair any such right, power or privilege
or be construed as a waiver of any Event of Default or any acquiescence therein.
No single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege. No waiver shall
be valid against the Bank unless made in writing and signed by the Bank, and
then only to the extent expressly specified therein.

         SECTION 12.02. Notices.

Unless otherwise provided herein, all notices, requests and other communications
provided for hereunder shall be in writing (including bank wire, telex, telecopy
or similar teletransmission or writing) and shall be given at the following
addresses:

   (1)  If to the Bank,   SunTrust Bank, Atlanta
                          303 Peachtree St. NE, 2nd Floor
                          Atlanta, Georgia 30308
                          Attention: Strategic Partner Programs
                          Center Code 1923

                          Telephone: (404) 724-3320
                          Telecopy:  (404) 724-3716

   (2)  If to Flowers,    Flowers Industries, Inc.
                          11796 U.S. Highway 19 South
                          1919 Flowers Circle
                          Thomasville, Georgia 31757
                          Attention:  Mr. Kirk Tolbert

                          Telephone:  (912) 227-2278
                          Telecopy:   (912) 225-5435

Any such notice, request or other communication shall be effective (i) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
above and the appropriate answerback is received, (ii) if given by mail, upon
the earlier of receipt or the third Business Day after such communication is
deposited in the United States mails, registered or certified, with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means
(including, without limitation, by air courier), when delivered at the address
specified herein. Flowers or the Bank may change its address for notice purposes
by notice to the other parties in the manner provided herein.

         SECTION 12.03. Governing Law.

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<PAGE>   67

This Agreement and all other Loan Documents shall be governed by and interpreted
in accordance with the laws of the State of Georgia.

         SECTION 12.04. Survival of Representations and Warranties.

All representations and warranties contained herein or made by or furnished on
behalf of Flowers or the Selling Subsidiaries in connection herewith shall
survive the execution and delivery of this Agreement and all other Program
Documents.

         SECTION 12.05. Descriptive Headings.

The descriptive headings of the several sections of this Agreement are inserted
for convenience only and do not constitute a part of this Agreement.

         SECTION 12.06. Severability.

If any part of any provision contained in this Agreement or in any other Loan
Document shall be invalid or unenforceable under applicable law, said part shall
be ineffective to the extent of such invalidity only, without in any way
affecting the remaining parts of said provision or the remaining provisions.

         SECTION 12.07. Time is of the Essence.

Time is of the essence in interpreting and performing this Agreement and all
other Loan Documents.

         SECTION 12.08. Counterparts.

This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which, taken together, shall
constitute one and the same instrument.

         SECTION 12.09. Payment of Costs.

Flowers shall pay all costs, expenses, taxes and fees (i) incurred by the Bank
in connection with the preparation, execution and delivery of this Agreement and
all other Program Documents including, without limitation, the costs and
professional fees of counsel for the Bank, Messrs. King & Spalding, whether or
not the transaction contemplated hereby shall be consummated, and any and all
stamp, intangible or other taxes that may be payable or determined in the future
to be payable in connection therewith; (ii) incurred by the Bank in connection
with the preparation, execution and delivery of any waiver, amendment or consent
by the Bank relating to the Program Documents, including, without limitation,
the costs and professional fees of counsel for the Bank; and (iii) incurred by
the Bank and the Participants in enforcing the Program Documents at any time
that an Event of Default has occurred and is continuing, including, without
limitation, attorneys' fees and expenses of counsel for the Bank and the
Participants.

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<PAGE>   68

         SECTION 12.10.    Benefit of Agreement; Assignments; Participations.

         (a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the parties
hereto, provided that Flowers may not assign or transfer any of its interest
hereunder without the prior written consent of the Participants.

         (b) Any Participant may make, carry or transfer Loans at, to or for the
account of, any of its branch offices or the office of an Affiliate of such
Participant.

         (c) Each Participant may assign all of its interests, rights and
obligations under this Agreement (including all of its Participating Commitments
and the Funded Participant's Interest at the time owing to it and the
Participation Certificates held by it) to any Eligible Assignee; provided,
however, that (i) the Flowers and the Bank shall each have given its prior
written consent to such assignment (which consent shall not be unreasonably
withheld or delayed) unless such assignment is an Affiliate of the assigning
Participant or, in the case of the Flowers, unless an Event of Default has
occurred and is continuing hereunder, (ii) unless the Participant is assigning
its entire Participating Commitment, the amount of the Participating Commitment
of the assigning Participant subject to each assignment (determined as of the
date the assignment and acceptance with respect to such assignment is delivered
to the Bank) shall not be less than the lesser of (x) 50% of its original
Participating Commitment or (y) $5,000,000 and (iii) the parties to each such
assignment shall execute and deliver to the Bank an Assignment and Acceptance,
together with the Participation Certificate subject to such assignment and,
unless such assignment is to an Affiliate of such Participant, a processing and
recordation fee of $3,000. Within ten (10) Business Days after receipt of the
notice and the Assignment and Acceptance, Bank shall execute and deliver, in
exchange for the surrendered Participation Certificate, a new Participation
Certificate to the order of the assignor and such assignee in a principal amount
equal to the applicable Participating Commitment retained and assumed by it,
respectively, pursuant to such Assignment and Acceptance. Such new Participation
Certificate shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Participation Certificate, shall be dated
the date of the surrendered Participation Certificate which it replaces, and
shall otherwise be in substantially the form attached hereto.

         (d) Each Participant may, without the consent of Flowers or the Bank,
sell sub-participations to one or more banks or other entities in all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Participating Commitment and the Funded Participant's Interest
owing to it), provided, however, that (i) no Participant may sell a
sub-participation in its Participating Commitment (after giving effect to any
permitted assignment hereof) unless it retains an aggregate exposure of 25% of
its original Participating Commitment; provided, however, sales of
sub-participations to an Affiliate of such Participant shall not be included in
such calculation; provided, further, however, no such maximum amount shall be
applicable to any such sub-participation sold at any time there exists an Event
of Default hereunder, (ii) such Participant's obligations under this Agreement
shall remain unchanged, (iii)

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<PAGE>   69

such Participant shall remain solely responsible to the other parties hereto for
the performance of such obligations, and (iv) the sub-participating bank or
other entity shall not be entitled to the benefit (except through its selling
Participant) of the cost protection provisions contained in Article II of this
Agreement, (v) Flowers, Bank and the other Participants shall continue to deal
solely and directly with each Participant in connection with such Participant's
rights and obligations under this Agreement and the other Program Documents, and
(vi) in no event shall a selling Participant be obligated to the sub-participant
to take or refrain from taking any action hereunder except that such Participant
may agree that it will not (except as provided below), without the consent of
the sub-participant, agree to (A) the extension of any date fixed for the
payment of principal of or interest on the Funded Participant's Interests, (B)
the decrease of the amount of any principal, interest or fees due on any date
fixed for the payment thereof with respect to the Funded Participant's
Interests; (C) the increase in the committed amount of the Funded Participant's
Interests; (D) any decrease in the rate at which either interest is payable
thereon or (if the Participant is entitled to any part thereof) fee is payable
hereunder from the rate at which the Participant is entitled to receive interest
or fee (as the case may be) in respect of such participation, or (E) the release
of any guaranty given to support payment of Funded Participant's Interests (but
excluding any guaranty which is a Distributor Loan Document). Each Participant
shall promptly notify in writing the Bank and the Flowers of any sale of a
sub-participation hereunder and shall certify to Flowers and Bank its compliance
with the terms hereof.

         SECTION 12.11. Third Party Beneficiaries.

No persons shall be deemed to be third party beneficiaries of this Agreement.
Except as otherwise expressly provided for in this Agreement, this Agreement is
solely for the benefit of Flowers and the Bank and their respective successors
and assigns, and no other person shall have any right, benefit, priority or
interest under, or because of the existence of, this Agreement.

         SECTION 12.12. Cumulative Remedies; No Waiver.

The rights, powers, and remedies of the Bank provided herein or in any other
Program Document are cumulative and not exclusive of any right, power, or remedy
provided by law or equity.

         SECTION 12.13. Amendments; Consents.

No amendment, modification, supplement, termination, or waiver of any provision
of this Agreement or any other Program Document, and no consent to any departure
by Flowers or any of their respective Subsidiaries therefrom, may in any event
be effective unless in writing signed by the Required Participants, and then
only in the specific instance and for the specific purpose given; provided that
no amendment, waiver or consent shall, unless in writing and signed by all the
Participants do any of the following: (i) waive any of the conditions specified
in Section 2.1 or Article IV, (ii) increase the Participating Commitments or
contractual obligations of the Participants to the Bank or Flowers under this
Agreement, (iii) reduce the principal of, or interest on, the Participation
Certificates or any fees hereunder, (iv) postpone any date fixed for the payment
in respect of principal of, or interest on, the Participation Certificates or
any fees

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<PAGE>   70

hereunder, (v) agree to release Flowers from its Escrow Funding Obligation, (vi)
modify the definition of "Required Participants," or (vii) modify this Section
12.13. Notwithstanding the foregoing, no amendment, waiver or consent shall,
unless in writing and signed by the Bank in addition to the Participants
required hereinabove to take such action, affect the rights or duties of the
Bank under this Agreement or under any other Program Document or Distributor
Loan Document. In addition, notwithstanding the foregoing, the Bank and Flowers
may, without the consent of or notice to the Participants, enter into
amendments, modifications or waivers with respect to the Servicing Agreement as
long as such amendments or modifications do not conflict with the terms of this
Agreement.

         SECTION 12.14. Set-Off.

Upon the occurrence and during the continuation of an Event of Default, Flowers
authorizes each Participant, without notice or demand, to apply any indebtedness
due or to become due to Flowers from such Participant in satisfaction of any of
the indebtedness, liabilities or obligations of Flowers under this Agreement or
under any other Program Document, including, without limitation, the right to
set-off against any deposits or other cash collateral of Flowers held by
Participant.

         SECTION 12.15. Indemnity.

Flowers agrees to protect, indemnify and save harmless the Bank and each
Participant (but not any sub-participants purchasing sub-participations pursuant
to Section 12.10(d) hereof) and all directors, officers, employees and agents of
the Bank and each Participant ( the "Indemnified Parties"), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever with respect to or in connection with the execution and delivery of
this Agreement, the purchase or the making of the Loans or any of them or the
purchase of the Participant's Interests or any of them, the enforcement,
performance and administration of this Agreement or any powers granted to the
Bank or any Participant hereunder or under any Program Documents, any failure of
any representation and warranty of Flowers hereunder, any failure of Flowers or
any Selling Subsidiary to comply with the covenants set forth herein or the
terms of the Distributor Loan Documents, arising out of the relationship between
Flowers and its Subsidiaries and the Distributors or otherwise unless arising
solely from the gross negligence or willful or intentional misconduct of such
Indemnified Party as determined by a court of competent jurisdiction. The
indemnity contained in this section shall survive the termination of this
Agreement.

         SECTION 12.16. Jurisdiction and Venue.

Flowers agrees, without power of revocation, that any civil suit or action
brought against it as a result of any of its obligations under this Agreement or
under any other Program Document may be brought against it either in the
Superior Court of Fulton County, Georgia, or in the United States District Court
for the Northern District of Georgia, and Flowers hereby irrevocably submits to
the jurisdiction of such courts and irrevocably waives, to the fullest extent
permitted by law,

                                       65
<PAGE>   71

any objections that it may now or hereafter have to the laying of the venue of
such civil suit or action and any claim that such civil suit or action has been
brought in an inconvenient forum, and Flowers agrees that final judgment in any
such civil suit or action shall be conclusive and binding upon it and shall be
enforceable against it by suit upon such judgment in any court of competent
jurisdiction.

         SECTION 12.17. Waiver of Jury Trial.

To the extent permitted by applicable law, Flowers hereby waives the right to
trial by jury.

         SECTION 12.18. Effect on Existing Loan Facility Agreement; Execution of
New Loan Documents.

Upon the Closing Date, all "Loans" (as defined under the Existing Loan Facility
Agreement) outstanding pursuant to the Existing Loan Facility Agreement shall be
deemed to be Loans outstanding hereunder, and the Existing Loan Facility
Agreement shall be of no further force and effect, except to the extent that all
indemnities set forth therein are deemed to expressly survive the termination
thereof.

         SECTION 12.19. Termination of Agreement.

This Agreement shall terminate, except as otherwise provided herein, upon the
indefeasible payment in full of all amounts owing to the Bank pursuant to the
Program Documents and the termination of the Commitment.

                                       66
<PAGE>   72

         WITNESS the hand and seal of the parties hereto through their duly
authorized officers, as of the date first above written.

                                   FLOWERS INDUSTRIES, INC.

                                   By:
                                      -----------------------------------------
                                      Name:
                                           ------------------------------------
                                      Title:
                                            -----------------------------------

                                   Attest:
                                          -------------------------------------
[Corporate Seal]                          Name:
                                               --------------------------------
                                          Title:
                                                -------------------------------

<PAGE>   73

Address for Notices:                        SUNTRUST BANK, ATLANTA, as the
                                              Bank and as a Participant
303 Peachtree St., N.E., 3rd Floor
Atlanta, GA 30303
Attention: Ms. Kim Martin                   By:
Telecopy No.: (404) 230-5305                   --------------------------------
                                               Name:
                                                    ---------------------------
                                               Title:
                                                      -------------------------

Participating Commitment: $60,000,000
Pro Rata Share: 75%

                  [SIGNATURE PAGE TO LOAN FACILITY AGREEMENT]
<PAGE>   74

                                               COOPERATIEVE CENTRALE
                                               RAIFFEISEN-BOERENLEENBANK B.A.,
Rabobank Nederland                             "RABOBANK NEDERLAND,"
245 Park Avenue                                NEW YORK BRANCH, as a Participant
New York, New York 10167
Attention:  Corporate Services Department
Telecopy No.:  (212) 818-0233                  By:
                                                  -----------------------------
with a copy to:                                   Name:
                                                       ------------------------
                                                  Title:
                                                        -----------------------

Rabobank Nederland
One Atlantic Center, Suite 3450                By:
1201 W. Peachtree Street                          -----------------------------
Atlanta, Georgia 30309-3400                       Name:
Attention: Mr. Theodore Cox                            ------------------------
Telecopy No.:  (404) 877-9150                     Title:
                                                        -----------------------

Participating Commitment: $20,000,000
Pro Rata Share: 25%

                  [SIGNATURE PAGE TO LOAN FACILITY AGREEMENT]
<PAGE>   75

                                  SCHEDULE 5.01

              Quarterly Threshold Amount and Non-Guaranteed Amount

<TABLE>
<CAPTION>
                                QUARTERLY      QUARTERLY          NON-
                                 STEP UP       THRESHOLD       GUARANTEED
QUARTER, YEAR & DATE             AMOUNT         AMOUNT          AMOUNT
<S>                            <C>          <C>              <C>
4th FY 1999 (1/1/00)                        $ 36,620,000     $ 43,380,000
  Total FY 1999                5,520,000    $ 36,620,000     $ 43,380,000

1st FY 2000 (4/22/00)          1,520,000    $ 38,140,000     $ 41,860,000
2nd FY 2000 (7/15/00)          1,520,000    $ 39,660,000     $ 40,340,000
3rd FY 2000 (10/7/00)          1,520,000    $ 41,180,000     $ 38,820,000
4th FY 2000 (12/30/00)         1,520,000    $ 42,700,000     $ 37,300,000
  Total FY 2000                6,080,000    $ 42,700,000     $ 37,300,000

1st FY 2001 (4/21/01)          1,620,000    $ 44,320,000     $ 35,680,000
2nd FY 2001 (7/14/01)          1,620,000    $ 45,940,000     $ 34,060,000
3rd FY 2001 (10/6/01)          1,620,000    $ 47,560,000     $ 32,440,000
4th FY 2001 (12/29/01)         1,620,000    $ 49,180,000     $ 30,820,000
  Total FY 2001                6,480,000    $ 49,180,000     $ 30,820,000

1st FY 2002 (4/20/02)          1,720,000    $ 50,900,000     $ 29,100,000
2nd FY 2002 (7/13/02)          1,720,000    $ 52,620,000     $ 27,380,000
3rd FY 2002 (10/5/02)          1,720,000    $ 54,340,000     $ 25,660,000
4th FY 2002 (12/28/02)         1,720,000    $ 56,060,000     $ 23,940,000
  Total FY 2002                6,880,000    $ 56,060,000     $ 23,940,000

1st FY 2003 (4/19/03)          1,820,000    $ 57,880,000     $ 22,120,000
2nd FY 2003 (7/12/03)          1,820,000    $ 59,700,000     $ 20,300,000
3rd FY 2003 (10/4/03)          1,820,000    $ 61,520,000     $ 18,480,000
4th FY 2003 (1/3/04)           1,820,000    $ 63,340,000     $ 16,660,000
  Total FY 2003                7,280,000    $ 63,340,000     $ 16,660,000
</TABLE>

<PAGE>   76

<TABLE>
<S>                           <C>           <C>              <C>
1st FY 2004 (4/24/04)          1,820,000    $ 65,160,000     $ 14,840,000
2nd FY 2004 (7/17/04)          1,820,000    $ 66,980,000     $ 13,020,000
3rd FY 2004 (10/9/04)          1,820,000    $ 68,800,000     $ 11,200,000
4th FY 2004 (1/1/05)           1,820,000    $ 70,620,000     $  9,380,000
  Total FY 2004                7,280,000    $ 70,620,000     $  9,380,000

1st FY 2005 (4/23/05)            845,000    $ 71,465,000     $  8,535,000
2nd FY 2005 (7/16/05)            845,000    $ 72,310,000     $  7,690,000
3rd FY 2005 (10/8/05)            845,000    $ 73,155,000     $  6,845,000
4th FY 2005 (12/31/05)           845,000    $ 74,000,000     $  6,000,000
  Total FY 2005                3,380,000    $ 74,000,000     $  6,000,000

  Total                       74,000,000
</TABLE>

<PAGE>   77

                                  SCHEDULE 7.08

                                  Subsidiaries

                           [To be provided by Flowers]

<PAGE>   78

                   FIRST AMENDMENT TO LOAN FACILITY AGREEMENT

         THIS FIRST AMENDMENT TO LOAN FACILITY AGREEMENT ("Amendment") made as
of this 29th day of December, 1999, by and between FLOWERS INDUSTRIES, INC., a
Georgia corporation having its principal office in Thomasville, Georgia
("Flowers"), and SUNTRUST BANK, ATLANTA, a Georgia banking corporation, having
its principal office in Atlanta, Georgia ("SunTrust") and COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND," New York Branch
("Rabobank") (SunTrust and Rabobank, together with any assignees thereof
becoming "Participants" pursuant to the terms of the Loan Facility Agreement,
the "Participants").

                              W I T N E S S E T H :

         WHEREAS, Flowers and the Participants are parties to that certain Loan
Facility Agreement dated as of November 5, 1999 (as heretofore amended or
modified, the "Agreement"; all terms used herein without definition shall have
the meanings set forth in the Agreement); and

         WHEREAS, Flowers has requested that the Participants amend the
Agreement as set forth herein, and the Participants are willing to so agree,
subject to the terms and conditions hereof;

         NOW, THEREFORE, for and in consideration of the foregoing premises, the
mutual covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which hereby is acknowledged, the
parties hereby agree that the Agreement is hereby amended as follows:

         1.       Unless otherwise specifically defined herein, each term used
herein which is defined in the Agreement shall have the meaning assigned to such
term in the Agreement. Each reference to "hereof", "hereunder", "herein" and
"hereby" and each other similar reference and each reference to "this Agreement"
and each other similar reference contained in the Agreement shall from and after
the date hereof refer to the Agreement as amended hereby.

         2.       Section 8.01 (a)of the Agreement is hereby amended by adding
the following new clause (iii) to the end thereof;

                  (iii)    simultaneously with the delivery of each set of
         financial statements referred to in clauses (i) and (ii) above, a copy
         of the auditor's management letter furnished to Flowers by such
         independent public accountants; and

         3.       Section 8.17 of the Agreement hereby is deleted in its
entirety and the following is substituted therefor:

         SECTION  8.17. Adjusted Fixed Charges Coverage Ratio

<PAGE>   79

                  At the end of each Fiscal Quarter, commencing with the third
         Fiscal Quarter of the 1999 Fiscal Year, the ratio of Adjusted EBILT to
         Adjusted Consolidated Fixed Charges shall at all times be greater than
         the ratio set forth below for each Fiscal Quarter of each Fiscal Year
         set forth below:

<TABLE>
<CAPTION>
                                                      Adjusted Fixed Charges
                  Fiscal Quarter     Fiscal Year         Coverage Ratio
                  --------------     -----------         --------------
                  <S>                <C>              <C>
                      Third          1999                 1.50 to 1.0
                      Fourth         1999                 1.30 to 1.0
                      First          2000                 1.20 to 1.0
                      Second         2000                 1.10 to 1.0
                      Third          2000                 1.20 to 1.0
                      Fourth         2000                 1.50 to 1.0
                      First          2001                 1.65 to 1.0
                      Second         2001                 1.65 to 1.0
                      Third          2001                 1.75 to 1.0
                      Fourth         2001
                      and thereafter                      2.00 to 1.0
</TABLE>

         4.       Section 8.20 of the Agreement hereby is deleted in its
entirety and the following is substituted therefor:

         SECTION  8.20. Minimum Adjusted Consolidated EBIDTA.

                  At the end of each Fiscal Quarter, commencing with the Fourth
         Fiscal Quarter of Fiscal Year 1999, Adjusted Consolidated EBITDA shall
         at all times be greater than the amount set forth below for each Fiscal
         Quarter of each Fiscal Year set forth below:

<TABLE>
<CAPTION>
                  Fiscal Quarter     Fiscal Year   Adjusted Consolidated EBITDA
                  --------------     -----------   ----------------------------
                  <S>                <C>           <C>
                      Fourth           1999               $15,000,000
                      First            2000               $32,000,000
                      Second           2000               $29,000,000
                      Third            2000               $44,000,000
                      Fourth           2000               $63,000,000
</TABLE>

         5.       Except for the amendments and agreements expressly set forth
above, the Agreement shall remain unchanged and in full force and effect.
Flowers acknowledges and expressly agrees that the Participants reserve the
right to, and do in fact, require strict compliance with the terms and
provisions of the Agreement, as amended by this Amendment.

         6.       Flowers hereby affirms and restates as of the date hereof all
covenants set forth in

<PAGE>   80

the Agreement, as amended hereby, and such covenants are incorporated by
reference herein as if set forth herein directly.

         7.       Except as expressly amended herein, all terms, covenants and
conditions of the Agreement and all other Loan Documents shall remain in full
force and effect. The parties hereto do expressly ratify and confirm the
Agreement as amended herein.

         8.       Flowers hereby agrees that nothing herein shall constitute a
waiver by the Participants of any Default or Event of Default, whether known or
unknown, which may exist under the Agreement. Flowers hereby further agrees that
no action, inaction or agreement by the Participants, including without
limitation, any indulgence, waiver, consent or agreement altering the provisions
of the Agreement which may have occurred with respect to the non-payment of any
obligation during the terms of the Agreement or any portion thereof, or any
other matter relating to the Agreement, shall require or imply any future
indulgence, waiver, or agreement by the Participants. In addition, Flowers
acknowledges and agrees that it has no knowledge of any defenses, counterclaims,
offsets or objections in its favor against the Participants with regard to any
of the obligations due under the terms of the Agreement or any other Program
Document as of the date of this Amendment.

         9.       This Amendment shall be binding upon and inure to the benefit
of the parties hereto, their respective successors, successors-in-titles, and
assigns.

         10.      This Amendment sets forth the entire understanding of the
parties with respect to the matters set forth herein, and shall supersede any
prior negotiations or agreements, whether written or oral, with respect thereto.

         11.      This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.

         12.      This Amendment may be executed by one or more of the parties
hereto in any number of separate counterparts, each of which shall be deemed an
original and all of which, taken together, shall be deemed to constitute one and
the same instrument. Delivery of an executed counterpart of this Amendment by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart hereof.

<PAGE>   81

IN WITNESS WHEREOF, the parties hereto have executed this Amendment through
their authorized officers as of the date first above written.

                                         FLOWERS INDUSTRIES, INC.

                                         By:
                                             Name:
                                                  --------------------------
                                             Title:
                                                   -------------------------

                                         Attest:
                                             Name:
                                                  --------------------------
                                             Title:
                                                   -------------------------

                                                      [CORPORATE SEAL]

<PAGE>   82
Address for Notices:                           SUNTRUST BANK, ATLANTA, as the
                                                    Bank and as a Participant
303 Peachtree St., N.E., 3rd Floor
Atlanta, GA 30303
Attention: Ms. Kim Martin                      By:
Telecopy No.: (404) 230-5305                      -----------------------------
                                                  Name:
                                                  Title:

Participating Commitment: $60,000,000
Pro Rata Share: 75%

<PAGE>   83

                                              COOPERATIEVE CENTRALE
                                              RAIFFEISEN-BOERENLEENBANK B.A.,
Rabobank Nederland                            "RABOBANK NEDERLAND,"
245 Park Avenue                               NEW YORK BRANCH, as a Participant
New York, New York 10167
Attention:  Corporate Services Department
Telecopy No.:  (212) 818-0233                 By:
                                                 ------------------------------
                                                   Name:
with a copy to:                                    Title:

Rabobank Nederland
One Atlantic Center, Suite 3450               By:
1201 W. Peachtree Street                         -----------------------------
Atlanta, Georgia 30309-3400                       Name:
Attention: Mr. Theodore Cox                       Title:
Telecopy No.:  (404) 877-9150

Participating Commitment: $20,000,000
Pro Rata Share: 25%

                                      L-6

<PAGE>   84

                   SECOND AMENDMENT TO LOAN FACILITY AGREEMENT

     THIS SECOND AMENDMENT TO LOAN FACILITY AGREEMENT ("Amendment") made as of
this 30th day of March, 2000, by and among FLOWERS INDUSTRIES, INC., a Georgia
corporation having its principal office in Thomasville, Georgia ("Flowers"),
SUNTRUST BANK, formerly known as SunTrust Bank, Atlanta, a Georgia banking
corporation, having its principal office in Atlanta, Georgia ("SunTrust") and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK NEDERLAND," New
York Branch ("Rabobank", together with SunTrust, the "Participants").

                              W I T N E S S E T H :

     WHEREAS, Flowers and the Participants are parties to that certain Loan
Facility Agreement dated as of November 5, 1999, as amended by that certain
First Amendment to Loan Facility Agreement dated as of December 29, 1999 (as so
amended, the "Agreement"; all terms used herein without definition shall have
the meanings set forth in the Agreement); and

     WHEREAS, Flowers has requested that the Participants amend the Agreement as
set forth herein, and the Participants are willing to so agree, subject to the
terms and conditions hereof;

     NOW, THEREFORE, for and in consideration of the foregoing premises, the
mutual covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which hereby is acknowledged, the
parties hereby agree that the Agreement is hereby amended as follows:

     1. Unless otherwise specifically defined herein, each term used herein
which is defined in the Agreement shall have the meaning assigned to such term
in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby"
and each other similar reference and each reference to "this Agreement" and each
other similar reference contained in the Agreement shall from and after the date
hereof refer to the Agreement as amended hereby.

     2. Section 1.01 of the Agreement hereby is amended by deleting the
definitions of "Adjusted Consolidated Fixed Charges", "Adjusted Consolidated Net
Income", "Adjusted EBILT", "Flower's Credit Agreement", and "Net Proceeds of
Capital Stock" in their entirety and replacing such definitions in Section 1.01
with the following definitions in the appropriate alphabetical order:

          "Adjusted Consolidated Fixed Charges" means at any date the sum of (i)
     Adjusted Consolidated Interest Expense for the Fiscal Year to date or 4
     Fiscal Quarter period (as applicable) used in the calculation of Adjusted
     Consolidated Net Income for the determination of Adjusted EBILTDA, and (ii)
     all payment obligations of Flowers and its Restricted Subsidiaries for such
     period under all operating leases and rental agreements.

<PAGE>   85

          "Adjusted Consolidated Net Income" means, for any period, the Net
     Income of Flowers and its Restricted Subsidiaries determined on a
     consolidated basis, including (without duplication) any cash dividends
     received from Keebler or any other Investment, but excluding (i)
     extraordinary items, (ii) any equity interests of Flowers or any Restricted
     Subsidiary in the unremitted earnings of any Person that is not a
     Subsidiary, (iii) mark-to-market adjustments made in connection with
     Flowers' commodities hedging program in accordance with GAAP, and (iv)
     gains and losses from sales of assets outside the ordinary course of
     business.

          "Adjusted EBILTDA" means at any date the sum of (i) Adjusted
     Consolidated Net Income for the Fiscal Year to date (when calculated as of
     the end of the second and third Fiscal Quarters of the 2000 Fiscal Year) or
     the 4 Fiscal Quarters ending on or prior to the date of measurement (when
     calculated as of the end of the fourth Fiscal Quarter of the 2000 Fiscal
     Year and thereafter), plus (ii) the sum of Adjusted Consolidated Fixed
     Charges and taxes on income (including deferred taxes), depreciation and
     amortization for the same Fiscal Year to date or 4 Fiscal Quarters (as
     applicable).

          "Flowers Credit Agreement" means that certain $500,000,000 Second
     Amended and Restated Credit Agreement, dated as of March 30, 2000, among
     Flowers, the banks listed therein, Wachovia Bank, N.A., as Agent, The Bank
     of Nova Scotia, as Documentation Bank and Bank of America, N.A., as
     Syndications Agent, as from time to time in effect.

          "Net Proceeds of Capital Stock" means any cash proceeds received by
     Flowers or a Restricted Subsidiary in respect of the issuance of Capital
     Stock, after deducting therefrom all reasonable and customary costs and
     expenses incurred by Flowers or such Consolidated Subsidiary directly in
     connection with the issuance of such Capital Stock.

     3. Section 1.01 of the Credit Agreement hereby is amended by adding the
following new definitions of "Borrowing Base", "Capital Expenditures", "Fiscal
Period", "Indebtedness for Borrowed Money", "New Capitalized Lease Obligations",
"New Indebtedness for Borrowed Money", "Permitted Refinancing Indebtedness",
"Permitted Refinancing Leases", "Restricted Payments", "Second Amendment
Effective Date", "Synthetic Lease" and "Synthetic Lease Obligations" in
appropriate alphabetical order:

          "Borrowing Base" means the sum on the last day of any Fiscal Period,
     as shown on the balance sheet of Flowers for such date (except as to clause
     (iv) below), of:

          (i) 80% of the net book value of all accounts receivable (net of
          all reserves) of Flowers and its Restricted Subsidiaries, calculated
          in accordance with GAAP;

                                      -2-
<PAGE>   86

               (ii) 50% of the book value of all inventory of Flowers and its
               Restricted Subsidiaries, calculated in accordance with GAAP;

               (iii) 50% of the net book value of all tangible property, plant
               and equipment of Flowers and its Restricted Subsidiaries,
               calculated in accordance with GAAP; and

               (iv) 60% of the product of (a) the average per share closing
               price of Keebler common stock during such Fiscal Period times (b)
               the number of shares of such stock owned by Flowers, as of such
               date.

          "Capital Expenditures" means for any period the sum of all capital
     expenditures incurred during such period by Flowers and its Restricted
     Subsidiaries, as determined in accordance with GAAP.

          "Fiscal Period" means each fiscal period of Flowers, consisting of
     approximately four weeks, Flowers having thirteen such fiscal periods in
     each Fiscal Year.

          "Indebtedness for Borrowed Money" means Indebtedness of the types
     described in clauses (a) and (d) of the definition of Indebtedness.

          "New Capitalized Leases" means Capitalized Leases which are entered
     into on or after the Second Amendment Effective Date, other than Permitted
     Refinancing Leases; provided, that any Synthetic Lease which is in
     existence on the Second Amendment Effective Date and is not a Permitted
     Refinancing Lease shall not constitute a New Capitalized Lease, regardless
     of any classification or reclassification thereof at any time for purposes
     of GAAP.

          "New Indebtedness for Borrowed Money" means Indebtedness for Borrowed
     Money which is incurred on or after the Second Amendment Effective Date,
     other than Permitted Refinancing Indebtedness.

          "Permitted Refinancing Indebtedness" means Indebtedness for Borrowed
     Money which is incurred on or after the Second Amendment Effective Date
     solely to refinance Indebtedness for Borrowed Money which existed prior to
     the Second Amendment Effective Date, so long as the principal amount is not
     increased or the maturity shortened to a date prior to January 1, 2004,
     such Indebtedness for Borrowed Money is not secured by a Lien on any assets
     of Flowers or any of its Subsidiaries, other than a Lien on assets, if any,
     which as of the Second Amendment Effective Date secured the Indebtedness
     for Borrowed Money being refinanced, and the credit or other agreement
     governing such Indebtedness for Borrowed Money does not contain any
     financial, negative or affirmative covenants (other than collateral related
     covenants, where collateral is permitted

                                      -3-
<PAGE>   87

     pursuant to this definition) which are more restrictive in any material
     respect on Flowers or any of its Subsidiaries than those contained in this
     Agreement.

          "Permitted Refinancing Leases" means Capitalized Leases which are
     entered into on or after the Second Amendment Effective Date solely to
     refinance Capitalized Leases or Synthetic Leases which existed prior to the
     Second Amendment Effective Date, so long as the principal component of the
     base rent obligations thereunder are not increased or the maturity
     shortened to a date prior to January 1, 2004, such Capitalized Leases are
     not secured by a Lien on any assets of Flowers or any of its Subsidiaries,
     other than a Lien on assets, if any, which as of the Second Amendment
     Effective Date secured the obligations under the Capitalized Lease or
     Synthetic Lease being refinanced, and lease agreement, participation
     agreement, guaranty or other agreement governing such Capitalized Lease
     does not contain any financial, negative or affirmative covenants (other
     than collateral related covenants, where collateral is permitted pursuant
     to this definition) which are more restrictive in any material respect on
     Flowers or any of its Subsidiaries than those contained in this Agreement.

          "Restricted Payment" means (i) any dividend or other distribution on
     any shares of Flowers' Capital Stock (except dividends payable solely in
     shares of its Capital Stock) or (ii) any payment on account of the
     purchase, redemption, retirement or acquisition of (a) any shares of
     Flowers' Capital Stock (except shares acquired upon the conversion thereof
     into other shares of its Capital Stock) or (b) any option, warrant or other
     right to acquire shares of Flowers Capital Stock.

          "Second Amendment Effective Date" means March 30, 2000.

          "Synthetic Lease" means a lease of property which is intended to be
     classified as an operating lease in accordance with GAAP, but with respect
     to which it is intended that the lessee be treated as the owner of the
     property subject thereto for purposes of federal income tax.

          "Synthetic Lease Obligations" means the principal component of the
     base rent obligations of a Person as lessee under a Synthetic Lease.

     4. Section 1.01 of the Agreement is further amended by deleting the
definitions of "Mission Critical Systems and Equipment," "Y2K Plan" and "Year
2000 Compliant and Ready."

     5. Section 7.16 of the Agreement hereby is deleted in its entirety and the
following is substituted therefor:

     SECTION 7.16 Margin Stock.

                                      -4-
<PAGE>   88

          Neither Flowers nor any of its Subsidiaries is engaged principally, or
     as one of its important activities, in the business of purchasing or
     carrying any Margin Stock (other than its ownership stock in Keebler), and
     no part of the proceeds of any Loan made hereunder will be used for any
     purpose which violates, or which is inconsistent with, the provisions of
     Regulation T, U or X.

     6. Section 7.19 of the Agreement hereby is deleted in its entirety and the
following is substituted therefor:

        SECTION 7.19 INTENTIONALLY OMITTED

     7. Section 8.01(c) of the Agreement hereby is deleted in its entirety and
the following is substituted therefor:

     (c) simultaneously with the delivery of each set of financial statements
     referred to in paragraphs (a) and (b) above, a certificate, substantially
     in the form of Exhibit H (a "Compliance Certificate"), of the chief
     financial officer or the chief accounting officer of Flowers (i) setting
     forth in reasonable detail the calculations required to establish whether
     Flowers was in compliance with the requirements of Sections 8.13 through
     8.20, inclusive, and Section 8.26 on the date of such financial statements
     and (ii) stating whether any Default exists on the date of such certificate
     and, if any Default then exists, setting forth the details thereof and the
     action which Flowers is taking or proposes to take with respect thereto;

     8. Section 8.01(i) of the Agreement hereby is deleted in its entirety and
the following is substituted therefor:

     (i) INTENTIONALLY OMITTED.

                                      -5-
<PAGE>   89

     9. Section 8.01(j) of the Agreement hereby is deleted in its entirety and
the following is substituted therefor:

     (j) within 15 days after the receipt thereof, a copy of the report of
     Arthur Andersen Consulting to Flowers rendered pursuant to engagement
     letter dated January 12, 2000; and

     10. Section 8.04 of the Agreement is hereby amended by deleting subsection
8.04(d)(z) in its entirety and replacing said subsection with the following:

     (z) transfers of (but not Liens on) Margin Stock.

     11. Section 8.14 of the Agreement hereby is deleted in its entirety and the
following is substituted therefor:

         SECTION 8.14 Loans or Advances.

          Neither Flowers nor any of its Material Subsidiaries shall make loans
     or advances to any Person except as permitted by Section 8.16 and except:
     (i) loans or advances to employees not exceeding $10,000,000 in the
     aggregate principal amount outstanding at any time, in each case made in
     the ordinary course of business and consistent with practices existing on
     the Second Amendment Effective Date; (ii) deposits required by government
     agencies or public utilities; (iii) loans or advances to and among Flowers
     and its Wholly Owned Subsidiaries; and (iv) other loans or advances, to
     Persons other than the Unrestricted Subsidiaries (loans and advances to
     Unrestricted Subsidiaries not being permitted), in an aggregate amount
     outstanding which do not exceed 15% of Adjusted Consolidated Total Assets
     as of the last day of the immediately preceding Fiscal Quarter; provided
     that after giving effect to the making of any loans, advances or deposits
     permitted by this Section, no Default shall be in existence or be created
     thereby.

     12. Section 8.15 of the Agreement hereby is deleted in its entirety and the
following is substituted therefor:

         SECTION 8.15 Investments.

          Neither Flowers nor any of its Restricted Subsidiaries shall make
     Investments in any Person except as permitted by Section 8.14 and except
     Investments in (i) direct obligations of the United States Government
     maturing within one year, (ii) certificates of deposit issued by a
     commercial bank whose credit is satisfactory to the Agent, (iii) commercial
     paper rated A1 or the equivalent thereof by Standard & Poor's Ratings
     Group, a division of McGraw-Hill, Inc. or P1 or the equivalent thereof by
     Moody's Investors Service, Inc. and in either case maturing within 6 months
     after the date of acquisition; (iv) tender

                                      -6-
<PAGE>   90

     bonds the payment of the principal of and interest on which is fully
     supported by a letter of credit issued by a United States bank whose
     long-term certificates of deposit are rated at least AA or the equivalent
     thereof by Standard & Poor's Corporation and Aa or the equivalent thereof
     by Moody's Investors Service, Inc.; (v) Investments by Flowers or any
     Restricted Subsidiary in the stock (or other ownership interests) of
     Persons which are Restricted Subsidiaries as of the Second Amendment
     Effective Date and/or (vi) Permitted Keebler Investments; provided,
     however, immediately after giving effect to the making of any Investment,
     no Default shall have occurred and be continuing.

     13. Section 8.16(o) of the Agreement hereby is deleted in its entirety and
the following is substituted therefor:

          (o) Liens in favor of the Participants to secure the Escrow Funding
     Obligation and other obligations of Flowers under this Agreement and (if
     applicable) under any other agreement pertaining to Indebtedness which is
     required to be equally and ratably secured by any Lien securing the Escrow
     Funding Obligation and such other obligations;

     14. Section 8.17 of the Agreement hereby is deleted in its entirety and the
following is substituted therefor:

         SECTION 8.17. Adjusted Fixed Charges Coverage Ratio

          At the end of each Fiscal Quarter, commencing with the second Fiscal
     Quarter of the 2000 Fiscal Year, the ratio of Adjusted EBILTDA to Adjusted
     Consolidated Fixed Charges shall at all times be equal to or greater than
     the ratio set forth below for such Fiscal Quarter of each Fiscal Year set
     forth below:

<TABLE>
<CAPTION>

                                            Adjusted Fixed Charges
         Fiscal Quarter       Fiscal Year      Coverage Ratio
         --------------      -----------       --------------
         <S>                  <C>           <C>           <C>
         Second                 2000              1.10 to 1.0
         Third                  2000              1.15 to 1.0
         Fourth                 2000              1.20 to 1.0
         First                  2001              1.25 to 1.0
         Second                 2001              1.25 to 1.0
         Third                  2001              1.25 to 1.0
         Fourth                 2001
         and thereafter                           1.50 to 1.0
</TABLE>

     15. Section 8.18 of the Agreement hereby is deleted in its entirety and the
following is substituted therefor:

          SECTION 8.18 Leverage Ratio. The Leverage Ratio shall at all times be
     equal to or less than 0.65 to 1.0.

                                      -7-
<PAGE>   91

     16. Section 8.20 of the Agreement hereby is deleted in its entirety and the
following is substituted therefor:

          SECTION 8.20 Adjusted Consolidated EBITDA. At the end of each Fiscal
     Quarter, commencing with the first Fiscal Quarter of the 2000 Fiscal Year,
     Adjusted Consolidated EBITDA shall at all times be equal to or greater than
     the amount set forth below for each Fiscal Quarter of each Fiscal Year set
     forth below, and shall be calculated (i) at the end of each Fiscal Quarter
     in the 2000 Fiscal Year, for such Fiscal Quarter only, and (ii) at the end
     of each Fiscal Quarter thereafter, for the 4 Fiscal Quarter period then
     ending.

<TABLE>
<CAPTION>

                                                    Adjusted
         Fiscal Quarter      Fiscal Year      Consolidated EBITDA
         --------------      -----------      -------------------

         <S>                 <C>              <C>
         First                  2000              $ 26,500,000
         Second                 2000              $ 18,500,000
         Third                  2000              $ 24,500,000
         Fourth                 2000              $ 25,000,000
         First                  2001              $105,000,000
         Second                 2001              $105,000,000
         Third                  2001              $115,000,000
         Fourth                 2001              $115,000,000
         First and thereafter   2002              $125,000,000
</TABLE>

     17. Section 8.21 of the Agreement hereby is deleted in its entirety and the
following is substituted therefor:

         SECTION 8.21 Subsidiary Borrowings.

          Flowers shall not permit any Restricted Subsidiary to become liable
     for any Indebtedness, whether secured or unsecured, except: (i) such of the
     foregoing as is owed to Flowers or another Wholly-Owned Subsidiary; (ii)
     Indebtedness or obligations secured by Liens permitted by Section 8.16;
     (iii) Indebtedness or obligations of a Subsidiary outstanding at the time
     such Subsidiary becomes a Subsidiary, provided that (a) such Indebtedness
     shall not have been incurred in contemplation of such Subsidiary becoming a
     Subsidiary, and (b) immediately after such Subsidiary becomes a Subsidiary,
     no Default or Event of Default shall exist, and provided, further, that
     such Indebtedness may not be extended, renewed, or refunded except as
     otherwise permitted by this Agreement; and (iv) subject to the provisions
     of Section 8.25, other Indebtedness which, when combined with the total of
     the Indebtedness secured by all Liens permitted by Section 8.16(r), without
     duplication, does not exceed 20% of Adjusted

                                      -8-
<PAGE>   92

     Consolidated Net Worth as of the last day of the immediately preceding
     Fiscal Quarter.

     18. Section 8.24 of the Agreement hereby is deleted in its entirety and the
following is substituted therefor:

         SECTION 8.24 Borrowing Base.

          At the end of each Fiscal Period, the sum of (i) all Indebtedness
     (including the Loans under the Flowers Credit Agreement and the obligations
     of Flowers under this Agreement in an amount equal to the Maximum Recourse
     Amount) of Flowers and its Restricted Subsidiaries plus (ii) all Synthetic
     Lease Obligations of Flowers and its Restricted Subsidiaries shall not
     exceed the Borrowing Base, and within 10 Domestic Business Days after the
     end of such Fiscal Period, Flowers shall furnish to the Bank a certificate,
     in reasonable detail, showing the calculations with respect thereto.

     19. A new Section 8.25 hereby is added, as follows:

         SECTION 8.25 New Indebtedness for Money Borrowed and New Capitalized
     Leases.

          Flowers shall not, and Flowers shall not permit its Restricted
     Subsidiaries to, incur any New Indebtedness for Money Borrowed or New
     Capitalized Leases, provided, that, so long as no Default or Event of
     Default is in existence or would be created thereby: (i) New Indebtedness
     for Money Borrowed may be issued in any amount, subject to the provisions
     of Section 8.21, so long as the indenture, agreement, instrument or other
     agreement related thereto does not directly or indirectly prohibit or
     restrain, or have the effect of prohibiting or restraining, or imposing
     materially adverse conditions on, the ability of Flowers or its Restricted
     Subsidiaries to create any Lien on any of its assets in favor of the
     Participants to secure the Escrow Funding Obligation and other obligations
     owed by Flowers to the Participants under this Agreement and under any
     other agreement pertaining to Indebtedness which must be equally and
     ratably secured by any Lien securing the Escrow Funding Obligation and such
     other obligations (the foregoing being collectively referred to as a
     "Negative Pledge Clause"); (ii) subject to the provisions of Section 8.21,
     New Indebtedness for Money Borrowed may be incurred pursuant to a working
     capital line up to $50,000,000 (which does not contain a Negative Pledge
     Clause); and (iii) New Capitalized Leases may be entered into up to an
     aggregate of $25,000,000 which do not contain a Negative Pledge Clause
     (except as to the assets being leased pursuant thereto).

     20. A new Section 8.26 hereby is added, as follows:

         SECTION 8.26 Capital Expenditures.

                                      -9-
<PAGE>   93

          Flowers shall not, and Flowers shall not permit its Restricted
     Subsidiaries to, incur Capital Expenditures in any Fiscal Year, except that
     Capital Expenditures may be incurred up to an aggregate amount not
     exceeding (x) $40,000,000 in the 2000 Fiscal Year and (y) $37,500,000 in
     any Fiscal Year thereafter, provided that after giving effect to the
     incurrence of any Capital Expenditures permitted by this Section, no
     Default shall be in existence or be created thereby.

     21. A new Section 8.27 hereby is added, as follows:

          SECTION 8.27 Restricted Payments. Flowers will not declare any
     Restricted Payment during any Fiscal Year unless, as of the date of such
     declaration, no Default or Event of Default is in existence or would be
     created thereby by the making of such payment, and: (i) with respect to
     Restricted Payments consisting of repurchases of stock in Flowers from any
     employee of Flowers or any Restricted Subsidiary whose such employment is
     being or has been terminated (whether voluntarily or involuntarily),
     repurchases for an aggregate amount for all such employees not exceeding
     $2,500,000 in any Fiscal Year; and (ii) with respect to all other
     Restricted Payments, on a pro forma basis, based upon Flowers' good faith
     estimates (taking into account circumstances then known to it), after
     giving effect to such declaration and the payment thereof, and taking into
     account any additional Indebtedness anticipated in good faith by Flowers to
     be incurred in connection therewith during the relevant period and other
     Indebtedness anticipated in good faith by Flowers to be incurred during the
     relevant period, together with interest expense during the relevant period
     on all such anticipated Indebtedness, both as of (x) the end of the current
     Fiscal Period and (y) the end of the current Fiscal Quarter, (1) no Default
     or Event of Default would be in existence or created thereby, (2) the sum
     of the Unused Commitments less any Swing Loans and Money Market Loans then
     outstanding, (as such terms are defined in the Flowers Credit Agreement)
     would be at least $15,000,000 and (3) the amount by which the Borrowing
     Base would exceed the sum of all Indebtedness plus (without duplication)
     all Synthetic Lease Obligations would be at least $15,000,000. Prior to
     declaring any Restricted Payments pursuant hereto, Flowers shall furnish to
     the Bank a certificate, in reasonable detail, showing the calculations with
     respect to the foregoing.

     22. Section 9.01(b) of the Agreement hereby is deleted in its entirety and
the following is substituted therefor:

     (b) Flowers shall fail to observe or perform any covenant contained in: (i)
     Sections 8.01(e), 8.02(ii), 8.03 through 8.05, inclusive, Sections 8.17
     through 8.19, inclusive, Sections 8.20 or 8.25 through 8.27, inclusive; or
     (ii) Section 8.24, and, with respect to this clause (ii) such failure shall
     not have been cured within 10 days after the earlier to occur of (1)
     delivery to the Bank of the certificate

                                      -10-
<PAGE>   94

         required to be furnished pursuant to Section 8.24 and (2)
         the date such certificate was required to be so delivered pursuant to
         Section 8.24; or (ii) Sections 8.14, 8.15 or 8.21, and with respect to
         this clause (ii) such failure shall not have been cured within 10 days
         after the earlier to occur of (1) written notice thereof has been
         given to Flowers by the Bank at the request of any Participant or (2)
         any Responsible Officer of Flowers otherwise becomes aware of any such
         failure; or

         23. Exhibit H, Compliance Certificate to the Agreement, is hereby
deleted in its entirety and Exhibit H attached hereto is substituted therefor.

         24. Upon SunTrust's receipt of (i) executed signature pages from all
parties to this Amendment, and (ii) an amendment fee in the amount of $420,000,
all amendments to the Participation Agreement made herein shall become
effective as of the Second Amendment Effective Date, unless expressly stated to
become effective as of any other date. Such amendment fee shall be distributed
to all Participants that execute this Amendment pro rata based on their
respective interests.

         25. Except for the amendments and agreements expressly set forth above,
the Agreement shall remain unchanged and in full force and effect. Flowers
acknowledges and expressly agrees that the Participants reserve the right to,
and do in fact, require strict compliance with the terms and provisions of the
Agreement, as amended by this Amendment.

         26. Flowers hereby affirms and restates as of the date hereof all
covenants set forth in the Agreement, as amended hereby, and such covenants are
incorporated by reference herein as if set forth herein directly.

         27. Except as expressly amended herein, all terms, covenants and
conditions of the Agreement and all other Loan Documents shall remain in full
force and effect. The parties hereto do expressly ratify and confirm the
Agreement as amended herein.

         28. Flowers hereby agrees that nothing herein shall constitute a
waiver by the Participants of any Default or Event of Default, whether known or
unknown, which may exist under the Agreement. Flowers hereby further agrees
that no action, inaction or agreement by the Participants, including without
limitation, any indulgence, waiver, consent or agreement altering the
provisions of the Agreement which may have occurred with respect to the
non-payment of any obligation during the terms of the Agreement or any portion
thereof, or any other matter relating to the Agreement, shall require or imply
any future indulgence, waiver, or agreement by the Participants. In addition,
Flowers acknowledges and agrees that it has no knowledge of any defenses,
counterclaims, offsets or objections in its favor against the Participants with
regard to any of the obligations due under the terms of the Agreement or any
other Program Document as of the date of this Amendment.

         29. This Amendment shall be binding upon and inure to the benefit of
the parties hereto, their respective successors, successors-in-titles, and
assigns.

                                     -11-
<PAGE>   95

         30. This Amendment sets forth the entire understanding of the parties
with respect to the matters set forth herein, and shall supersede any prior
negotiations or agreements, whether written or oral, with respect thereto.

         31. This Amendment shall be governed by and construed in accordance
with the laws of the State of Georgia.

         32. This Amendment may be executed by one or more of the parties
hereto in any number of separate counterparts, each of which shall be deemed an
original and all of which, taken together, shall be deemed to constitute one
and the same instrument. Delivery of an executed counterpart of this Amendment
by facsimile transmission shall be as effective as delivery of a manually
executed counterpart hereof.

                                     -12-
<PAGE>   96

IN WITNESS WHEREOF, the parties hereto have executed this Amendment through
their authorized officers as of the date first above written.

                                           FLOWERS INDUSTRIES, INC.

                                           By:
                                               --------------------------------
                                               Name:
                                                     ---------------------------
                                               Title:
                                                     ---------------------------

                                           Attest:
                                                  -----------------------------
                                                  Name:
                                                       -------------------------
                                                  Title:
                                                       -------------------------

                                                  [CORPORATE SEAL]

<PAGE>   97

Address for Notices:                         SUNTRUST BANK, formerly known as
                                             SunTrust Bank, Atlanta, as the Bank
                                             and as a Participant

303 Peachtree St., N.E., 3rd Floor
Atlanta, GA 30308
Attention: Ms. Kim Martin                     By:
Telecopy No.: (404) 230-5305                     -------------------------------
                                                 Name:
Participating Commitment: $60,000,000            Title:
Pro Rata Share: 75%

<PAGE>   98

                                              COOPERATIEVE CENTRALE
                                              RAIFFEISEN-BOERENLEENBANK B.A.,
Rabobank Nederland                            "RABOBANK NEDERLAND,"
245 Park Avenue                               NEW YORK BRANCH, as a Participant
New York, New York 10167
Attention:  Corporate Services Department
Telecopy No.:  (212) 818-0233                 By:
                                                   ----------------------------
with a copy to:                                    Name:
                                                   Title:
Rabobank Nederland
One Atlantic Center, Suite 3450               By:
1201 W. Peachtree Street                           ----------------------------
Atlanta, Georgia 30309-3400                        Name:
Attention: Mr. Theodore Cox                        Title:
Telecopy No.:  (404) 877-9150

Participating Commitment: $20,000,000
Pro Rata Share: 25%

<PAGE>   99

                                   EXHIBIT H

                             COMPLIANCE CERTIFICATE

         Reference is made to the Loan Facility Agreement dated as of November
5, 1999, and as amended by that certain First Amendment to Loan Facility
Agreement dated as of December 29, 1999 (among Flowers Industries, Inc.,
SunTrust Bank, formerly known as SunTrust Bank, Atlanta a Georgia banking
corporation (the "Bank"), and SunTrust Bank and each of the other lending
institutions listed on the signature pages thereto (SunTrust Bank, Atlanta and
such lenders, together with any assignees thereof becoming "Participants"
pursuant to the terms of the Loan Facility Agreement, the "Participants").
Capitalized terms used herein shall have the meanings ascribed thereto in the
Loan Facility Agreement.

         Pursuant to Section 8.01(c) of the Loan Facility Agreement, , the duly
authorized of Flowers Industries, Inc., hereby (A) certifies to the Agent and
the Banks that the information contained in the Compliance Check List attached
hereto is true, accurate and complete as of , , (B) certifies to the Bank that
no Default is in existence on and as of the date hereof and (C) restates and
reaffirms that the representations and warranties contained in Article VII of
the Loan Facility Agreement are true on and as of the date hereof as though
restated on and as of this date.

                                    FLOWERS INDUSTRIES, INC.

                                    By:
                                       ----------------------------------------
                                       Title:

<PAGE>   100

                              COMPLIANCE CHECK LIST
                            Flowers Industries, Inc.

                           -------------------------

                             --------------, -----

1.       Loans and Advances (Section 8.14)

         Neither Flowers nor any of its Material Subsidiaries shall make loans
         or advances to any Person except as permitted by Section 5.16 and
         except: (i) loans or advances to employees not exceeding $10,000,000
         in the aggregate principal amount outstanding at any time, in each
         case made in the ordinary course of business and consistent with
         practices existing on the Closing Date; (ii) deposits required by
         government agencies or public utilities; (iii) loans or advances to
         and among Flowers and its Wholly Owned Subsidiaries; and (iv) other
         loans or advances, to Persons other than the Unrestricted Subsidiaries
         (loans and advances to Unrestricted Subsidiaries not being permitted),
         in an aggregate amount outstanding which do not exceed 15% of Adjusted
         Consolidated Total Assets as of the last day of the immediately
         preceding Fiscal Quarter; provided that after giving effect to the
         making of any loans, advances or deposits permitted by this Section,
         no Default shall be in existence or be created thereby.

         (a)      loans and advances to employees               $
                                                                 --------------
         (b)      lesser of (a) and $10,000,000                 $
                                                                 --------------

         (c)      other loans and advances not
                  permitted by clauses (i) through (iii),
                  inclusive(1)                                  $
                                                                 --------------

         (d)      Adjusted Consolidated Total Assets            $
                                                                 --------------

         (e)      15% of (d)                                    $
                                                                 --------------

         Limitation (d) may not exceed (e)

--------
(1)      Loans and advances to the Unrestricted Subsidiaries are not permitted
         and may not be included in this category.

<PAGE>   101

2.       Negative Pledge (Section 8.16)

         (a)      Amount of Indebtedness secured by Liens
                  permitted by Sections 8.16(a)
                  through 8.16(g), inclusive, and
                  (l) and (n)    Schedule - 1                       $
                                                                     -----------
         (b)      Amount of Debt secured by Liens not
                  permitted by Section (q)   Schedule - 1           $
                                                                     -----------

         (c)      Aggregate amount of Indebtedness of
                  Restricted Subsidiaries permitted
                  by Section 8.20(iv)                               $
                                                                     -----------

         (d)      Sum of (b) and (c)                                $
                                                                     -----------

         (e)      Adjusted Consolidated Net Worth                   $
                                                                     -----------

         (f)      20% of (e)                                        $
                                                                     -----------

         Limitation (d) may not exceed (f)

<PAGE>   102

3.       Adjusted Fixed Charge Coverage Ratio (Section 8.17)

At the end of each Fiscal Quarter, commencing with the second Fiscal Quarter of
the 2000 Fiscal Year, the ratio of Adjusted EBILTDA to Adjusted Consolidated
Fixed Charges shall at all times be equal to or greater than the ratio set
forth below for such Fiscal Quarter of each Fiscal Year set forth below:

<TABLE>
<CAPTION>
                                         Adjusted Fixed Charges
Fiscal Quarter         Fiscal Year       Coverage Ratio
--------------         -----------       --------------

<S>                    <C>               <C>
Second                 2000              1.10 to 1.0
Third                  2000              1.15 to 1.0
Fourth                 2000              1.20 to 1.0
First                  2001              1.25 to 1.0
Second                 2001              1.25 to 1.0
Third                  2001              1.25 to 1.0
Fourth                 2001
and thereafter                           1.50 to 1.0
</TABLE>

         (a)      Adjusted Consolidated Net Income
                  Schedule 2                                    $
                                                                 --------------
         (b)      Adjusted Consolidated Interest
                  Expense - Schedule 2                          $
                                                                 --------------

         (c)      payments on operating leases
                  and rental agreements                         $
                                                                 --------------

         (d)      taxes - Schedule 2                            $
                                                                 --------------

         (e)      depreciation - Schedule 2                     $
                                                                 --------------

         (f)      amortization - Schedule 2                     $
                                                                 --------------

         (g)      sum of (a) plus (b) plus (c)
                  plus (d) plus (e) plus (f)                    $
                                                                 --------------
                                                                $
         (h)      sum of (b) plus (c)                            --------------

              Ratio of (g) to (h)                                 --------------

                  Requirement                                    [> 1.10 to 1.0]
                                                                 [> 1.15 to 1.0]
                                                                 [> 1.20 to 1.0]
                                                                 [> 1.25 to 1.0]
                                                                 [> 1.50 to 1.0]

<PAGE>   103

4.       Leverage Ratio (Section 8.18)

         The Leverage Ratio shall at all times be equal to or less than 0.65 to
1.0.

         (a)      Adjusted Consolidated Total Debt
                  Schedule - 4                                   $
                                                                 --------------

         (b)      Adjusted Consolidated Net Worth                $
                                                                 --------------

         (c)      Sum of (a) plus (b)                            $
                                                                 --------------

         Ratio of (a) to (c)
                                                                 --------------

         Requirement                                             0.65 to 1.00

<PAGE>   104
5.       Minimum Adjusted Consolidated Net Worth (Section 8.19)

         Adjusted Consolidated Net Worth will at no time be less than
         $487,569,000, plus the sum of (x) 50% of the cumulative Net Proceeds of
         Capital Stock received during any period after April 27, 1998, plus (y)
         50% of any equity resulting from a conversion of Indebtedness of
         Flowers during any period after April 27, 1998, less (z) any amount of
         equity of Flowers repurchased during any period after April 27, 1998,
         calculated quarterly at the end of each Fiscal Quarter.

         (a)      cumulative Net Capital Proceeds since
                  April 27, 1998                              $__________

         (b)      50% of (a)                                  $__________

         (c)      equity resulting from Indebtedness
                  conversion since April 27, 1998             $__________

         (d)      amount of equity repurchased
                  since April 27, 1998                        $__________

         (e)      (c) less (d)                                $__________

         (f)      50% of (e)                                  $__________

         (g)      sum of $487,589,000, plus (b),
                  plus (f)                                    $__________

         (h)      Adjusted Consolidated Net Worth             $__________

                  Limitation  (h) may not be less than (g)

<PAGE>   105

6.       Adjusted Consolidated EBITDA (Section 8.20)

         At the end of each Fiscal Quarter, commencing with the first Fiscal
         Quarter of the 2000 Fiscal Year, Adjusted Consolidated EBITDA shall at
         all times be equal to or greater than the amount set forth below for
         each Fiscal Quarter of each Fiscal Year set forth below, and shall be
         calculated (i) at the end of each Fiscal Quarter in the 2000 Fiscal
         Year, for such Fiscal Quarter only, and (ii) at the end of each Fiscal
         Quarter thereafter, for the 4 Fiscal Quarter period then ending.

<TABLE>
<CAPTION>
<S>                                      <C>             <C>
                                                         Adjusted
Fiscal Quarter                           Fiscal Year     Consolidated
--------------                           -----------     ------------
                                                         EBITDA
                                                         ------

First                                       2000         $ 26,500,000
Second                                      2000         $ 18,500,000
Third                                       2000         $ 24,500,000
Fourth                                      2000         $ 25,000,000
First                                       2001         $105,000,000
Second                                      2001         $105,000,000
Third                                       2001         $115,000,000
Fourth                                      2001         $115,000,000
First and thereafter                        2002         $125,000,000
          Adjusted Consolidated EBITDA
          Schedule - 5                                   $__________
</TABLE>

7.       Capital Expenditures (Section 8.26)

         Flowers shall not, and Flowers shall not permit its Restricted
         Subsidiaries to, incur Capital Expenditures in any Fiscal Year, except
         that Capital Expenditures may be incurred up to an aggregate amount not
         exceeding (x) $40,000,000 in the 2000 Fiscal Year and (y) $37,500,000
         in any Fiscal Year thereafter, provided that after giving effect to the
         incurrence of any Capital Expenditures permitted by this Section, no
         Default shall be in existence or be created thereby.

         (a)      Capital Expenditures incurred in Fiscal Year to date: $_______

                  Limitation: (a) may not exceed $25,000,000 in the 2000 Fiscal
Year and $37,500,000 in any Fiscal Year thereafter

<PAGE>   106

                                                                    Schedule - 1

(a)
                      Liens Securing Debt In The Principal
                       Amount of $50,000 or More which are
                        Not Permitted by Sections 8.16(a)
                         through 8.16(g), inclusive, and
                                (l), (n) and (p)

<TABLE>
<CAPTION>
                                                                                Relevant Provision of
Description of Lien                      Amount of Debt Secured                 Section 8.16 Permitting Same
-------------------                      ----------------------                 ----------------------------
<S>                                      <C>                                    <C>

1.                                       $
   ----------------                       --------------------                  ---------------------
2.                                       $
   ----------------                       --------------------                  ---------------------
3.                                       $
   ----------------                       --------------------                  ---------------------
4.                                       $
   ----------------                       --------------------                  ---------------------
5.                                       $
   ----------------                       --------------------                  ---------------------
6.                                       $
   ----------------                       --------------------                  ---------------------
7.                                       $
   ----------------                       --------------------                  ---------------------
8.                                       $
   ----------------                       --------------------                  ---------------------
9.                                       $
   ----------------                       --------------------                  ---------------------
</TABLE>

(b)      Aggregate Amount of Other Liens Securing Debt which are Not Permitted
         by Sections 8.16(a) through 8.16(g), inclusive
         and (l), (n) and (p)                                       $__________

(c)      Aggregate Amount of All Debt Secured
               by Liens                                             $__________

<PAGE>   107

                                                                    Schedule - 2

                        Adjusted Fixed Charge Coverage(2)

Adjusted Consolidated Net Income for:

_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________

         Total                                                $__________

Adjusted Consolidated Interest Expense for:

_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________

         Total                                                $__________

Operating Leases and Rentals for:

_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________

         Total                                                $__________

Taxes for:

_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________

         Total                                                $__________

Depreciation for:

--------------------
2        Include Restricted Subsidiaries Only, and include only Fiscal Year to
         date for calculation at end of second and third Fiscal Quarter of 2000
         Fiscal Year

<PAGE>   108

_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________

         Total                                                $__________

Amortization for:

_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________
_____ quarter _____                                           $__________

         Total                                                $__________

<PAGE>   109

                                                                    Schedule - 4

                        Adjusted Consolidated Total Debt

<TABLE>
<CAPTION>
                                                     INTEREST
                                                     RATE                  MATURITY              TOTAL
                                                     --------              --------              -----
<S>      <C>                                         <C>                   <C>                   <C>

(a)      Unsecured Borrowed Money

         ====================                        ----------            ----------            $__________

         ====================                        ----------            ----------            $__________

         Total Unsecured Borrowed Money                                                          $__________

(b)      Deferred Purchase Price

         ====================                        ----------            ----------            $__________

         ====================                        ----------            ----------            $__________

         Total Deferred Purchase Price                                                           $__________

(c)      Capitalized Leases

         ====================                        ----------            ----------            $__________

         ====================                        ----------            ----------            $__________

         Total Capitalized Leases                                                                $__________

(d)      Secured Borrowed Money

         ====================                        ----------            ----------            $__________

         ====================                        ----------            ----------            $__________

         Total Secured Borrowed Money                                                            $__________

(e)      Letters of Credit and Similar Instruments(3)

         ====================                        ----------            ----------            $__________

         ====================                        ----------            ----------            $__________

         Total Letters of Credit and Similar Instruments                                         $__________

(f)      Swaps
</TABLE>

----------------
(3) Include only if have maturities of greater than 1 year
<PAGE>   110

<TABLE>
<S>      <C>                                         <C>                   <C>                   <C>
         ====================                        ----------            ----------            $__________

         ====================                        ----------            ----------            $__________

         Total Swaps                                                                             $__________

(g)      Guaranties

         ====================                        ----------            ----------            $__________

         ====================                        ----------            ----------            $__________

         Total Guaranties                                                                        $__________

(h)      Convertible Redeemable Capital Stock(4)

         ====================                        ----------            ----------            $__________

         ====================                        ----------            ----------            $__________

         Total Convertible Redeemable Capital Stock                                              $__________

(i)      Convertible Subordinated Debt(2)

         ====================                        ----------            ----------            $__________

         ====================                        ----------            ----------            $__________

         Total Convertible Subordinated Debt                                                     $__________

ADJUSTED CONSOLIDATED TOTAL DEBT-sum of (a) plus (b) plus (c) plus (d) plus (e)
     plus (f) plus (g) less (h) less (i)                                                          $__________
</TABLE>
----------------
(4) Include only if current market value of an equity security into which it is
    convertible is greater than the conversion price for such security.
<PAGE>   111

                                                                    Schedule - 5

                         Adjusted Consolidated EBITDA (5)

Adjusted Consolidated Net Income for:

__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________

         Total                                              $__________

Adjusted Consolidated Interest Expense for:

__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________

         Total                                              $__________

Taxes for:

__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________

         Total                                              $__________

Depreciation for:
__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________

         Total                                              $__________

Amortization for:

__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________

         Total                                              $__________

Other Non-cash Charges for:

__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________
__________ quarter __________                               $__________

                                                      Total

(5)      Include Restricted Subsidiaries Only and for each Fiscal Quarter of the
         2000 Fiscal Year, include only calculation for such Fiscal Quarter<PAGE>   1
                                                                   EXHIBIT (4b)

           NOTE AGREEMENT DATED AS OF AUGUST 28, 1997 RELATING TO THE

                COMPANY'S 6.6% SENIOR NOTES DUE AUGUST 28, 2007

                                     IV-9

<PAGE>   2
================================================================================

                               RUSSELL CORPORATION

                                 NOTE AGREEMENT

                           Dated as of August 28, 1997

                                  $125,000,000

                     6.65% Senior Notes due August 28, 2007

================================================================================

<PAGE>   3

                                TABLE OF CONTENTS

                          (Not a part of the Agreement)

<TABLE>
<CAPTION>
SECTION                                             HEADING                                                  PAGE

<S>                                                                                                           <C>
Section 1.     DESCRIPTION OF NOTES AND COMMITMENT............................................................1
    Section 1.1   Description of Notes........................................................................1
    Section 1.2   Commitment, Closing Date....................................................................2

Section 2.     PREPAYMENT OF NOTES............................................................................2
    Section 2.1   Required Prepayments........................................................................2
    Section 2.2   Optional Prepayment with Premium............................................................2
    Section 2.3   Prepayment of Notes upon a Change of Control................................................3
    Section 2.4   Notice of Optional Prepayments..............................................................5
    Section 2.5   Application of Prepayments..................................................................5
    Section 2.6   Direct Payment..............................................................................5

Section 3.     REPRESENTATIONS................................................................................6
    Section 3.1   Representations of the Company..............................................................6
    Section 3.2   Representations of the Purchaser............................................................6

Section 4.     CLOSING CONDITIONS.............................................................................7
    Section 4.1   Conditions..................................................................................7
    Section 4.2   Waiver of Conditions........................................................................8

Section 5.     COMPANY COVENANTS..............................................................................8
    Section 5.1   Corporate Existence, Etc....................................................................8
    Section 5.2   Insurance...................................................................................8
    Section 5.3   Taxes, Claims for Labor and Materials; Compliance with Laws.................................8
    Section 5.4   Maintenance, Etc............................................................................9
    Section 5.5   Nature of Business..........................................................................9
    Section 5.6   Interest Charges Coverage Ratio.............................................................9
    Section 5.7   Limitations on Debt.........................................................................9
    Section 5.8   Limitation on Liens........................................................................10
    Section 5.9   Limitation on Long-Term Leases.............................................................12
    Section 5.10  Restricted Payments........................................................................12
    Section 5.11  Investments................................................................................13
    Section 5.12  Mergers, Consolidations and Sales of Assets................................................14
    Section 5.13  Guaranties.................................................................................18
    Section 5.14  Repurchase of Notes........................................................................18
    Section 5.15  Transactions with Affiliates...............................................................18
    Section 5.16  Multiemployer Plan Liability and Termination of Pension Plans..............................18
    Section 5.17  Reports and Rights of Inspection...........................................................19

SECTION 6.     EVENTS OF DEFAULT AND REMEDIES THEREFOR.......................................................22
</TABLE>

                                       i
<PAGE>   4

<TABLE>
<S>                                                                                                          <C>
    Section 6.1   Events of Default..........................................................................22
    Section 6.2   Notice to Holders..........................................................................23
    Section 6.3   Acceleration of Maturities.................................................................23
    Section 6.4   Rescission of Acceleration.................................................................24

Section 7.     AMENDMENTS, WAIVERS AND CONSENTS..............................................................24
    Section 7.1   Consent Required...........................................................................24
    Section 7.2   Solicitation of Holders....................................................................25
    Section 7.3   Effect of Amendment or Waiver..............................................................25

Section 8.     INTERPRETATION OF AGREEMENT; DEFINITIONS......................................................25
    Section 8.1   Definitions................................................................................25
    Section 8.2   Accounting Principles......................................................................35
    Section 8.3   Directly or Indirectly.....................................................................35

Section 9.     MISCELLANEOUS                                                                                 35
    Section 9.1   Registered Notes...........................................................................35
    Section 9.2   Exchange of Notes..........................................................................35
    Section 9.3   Loss, Theft, Etc. of Notes.................................................................36
    Section 9.4   Expenses, Stamp Tax Indemnity..............................................................36
    Section 9.5   Powers and Rights Not Waived; Remedies Cumulative..........................................36
    Section 9.6   Notices....................................................................................36
    Section 9.7   Reproduction of Documents..................................................................37
    Section 9.8   Successors and Assigns.....................................................................37
    Section 9.9   Survival of Covenants and Representations..................................................37
    Section 9.10  Severability...............................................................................37
    Section 9.11  Governing Law..............................................................................38
    Section 9.12  Captions...................................................................................38

Signature Page...............................................................................................37
</TABLE>

                                       ii
<PAGE>   5

ATTACHMENTS TO NOTE AGREEMENT:

<TABLE>
<S>            <C>           <C>
Schedule I     -             Purchaser Schedule

Schedule II    -             Description of Current Debt, Funded Debt, Long-Term Leases, Liens and
                             Investments

Schedule III   -             Subsidiaries of the Company

Exhibit A      -             Form of 6.65% Senior Note due August 28, 2007

Exhibit B      -             Representations and Warranties of the Company

Exhibit C      -             Description of Closing Opinion of Independent Counsel for the Company
</TABLE>

                                      iii
<PAGE>   6

                               RUSSELL CORPORATION
                                 One Lee Street
                          Alexander City, Alabama 35010

                                 NOTE AGREEMENT

                                  $125,000,000
                     6.65% Senior Notes due August 28, 2007

                                                                     Dated as of
                                                                 August 28, 1997

To the Purchaser named in Schedule I
  hereto which is a signatory of this
  Agreement

Ladies and Gentlemen:

               The undersigned, RUSSELL CORPORATION, an Alabama corporation (the
"Company"), agrees with you as follows:

SECTION 1.     DESCRIPTION OF NOTES AND COMMITMENT.

               Section 1.1 Description of Notes. The Company will authorize the
issue and sale of $125,000,000 aggregate principal amount of its 6.65% Senior
Notes (the "Notes") to be dated the date of issue, to bear interest from such
date at the rate of 6.65% per annum, payable quarterly on November 28, February
28, May 28 and August 28 in each year (commencing November 28, 1997) and at
maturity and to bear interest on overdue principal (including any overdue
required or optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest at the
Overdue Rate after the date due, whether by acceleration or otherwise, until
paid, to be expressed to mature on August 28, 2007, and to be substantially in
the form attached hereto as Exhibit A. Interest on the Notes shall be computed
on the basis of a 360-day year of twelve 30-day months. If any amount of
principal, premium, if any, or interest on or in respect of any Note becomes due
and payable on any date which is not a Business Day, such amount shall be
payable on the next succeeding Business Day and the period of extension shall be
included in the computation of interest payable on such Business Day. The Notes
are not subject to prepayment or redemption at the option of the Company prior
to their expressed maturity dates except on the terms and conditions and in the
amounts and with the premium, if any, set forth in ss. 2 of this Agreement. The
term "Notes" as used herein shall include each Note delivered pursuant to this
Agreement. You are hereinafter sometimes referred to as the

                                       1
<PAGE>   7

"Purchaser". The terms which are capitalized herein shall have the meanings set
forth in ss. 8.1 unless the context shall otherwise require.

               Section 1.2 Commitment, Closing Date. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to you, and you
agree to purchase from the Company, Notes in the principal amount set forth
opposite your name on Schedule I hereto at a price of 100% of the principal
amount thereof on the Closing Date hereafter mentioned.

               Delivery of the Notes will be made at the offices of Prudential
Capital Group, One Gateway Center, 11th Floor, Newark, N.J. 07102-5311 against
payment therefor in Federal Reserve or other funds current and immediately
available at the principal office of Aliant Bank, Alexander City, AL in the
amount of the purchase price on August 28, 1997 (the "Closing Date"). The Notes
delivered to you on the Closing Date will be delivered to you in the form of a
single registered Note for the full amount of your purchase (unless different
denominations (of not less than $1,000,000) are specified by you), registered in
your name or in the name of such nominee, as may be specified in Schedule I
attached hereto and in substantially the form attached hereto as Exhibit A.

SECTION 2.     PREPAYMENT OF NOTES.

               No prepayment of the Notes may be made except to the extent and
in the manner expressly provided in this Agreement.

               Section 2.1 Required Prepayments. In addition to paying the
entire outstanding principal amount and the interest due on the Notes on the
maturity date thereof, the Company agrees that on August 28th in each of the
years 2001 through 2006, inclusive, it will prepay and apply and there shall
become due and payable on the principal indebtedness evidenced by the Notes an
amount equal to the lesser of (a) $17,857,143.00 or (b) the principal amount of
the Notes then outstanding. The entire remaining principal amount of the Notes
shall become due and payable on August 28, 2007. No premium shall be payable in
connection with any required prepayment made pursuant to this ss. 2.1.

               In the event that the Company shall prepay less than all of the
Notes pursuant to ss. 2.2 hereof, such payments shall be credited in each case
first, against the final maturities of the Notes being prepaid and then, against
the amounts of the prepayments required by this ss. 2.l on such Notes in the
inverse order of the maturities thereof.

               Section 2.2 Optional Prepayment with Premium. In addition to the
payments required by ss. 2.1, upon compliance with ss. 2.4 the Company shall
have the privilege, at any time and from time to time, of prepaying the
outstanding Notes, either in whole or in part (but if in part then in a minimum
principal amount of $1,000,000) by payment of the principal amount of the Notes,
or portion thereof to be prepaid, and accrued interest thereon to the date of
such prepayment, together with a premium equal to the Make-Whole Amount.

                                       2
<PAGE>   8

               Section 2.3 Prepayment of Notes upon a Change of Control. (a) In
the event that any Change of Control shall occur or the Company shall have
actual knowledge of any proposed Change of Control, the Company will give
written notice (the "Company Notice") of such fact by overnight courier in the
manner provided in ss. 9.6 hereof to the holders of the Notes. The Company
Notice shall be sent promptly upon receipt of such knowledge by the Company and
in any event no later than three days following the occurrence of a Change of
Control. The Company Notice shall (1) describe the facts and circumstances of
such Change of Control in reasonable detail, (2) make reference to this ss.
2.3(a) and the right of the holders of the Notes to require payment on the terms
and conditions provided for in this ss. 2.3(a), (3) offer in writing to prepay
the outstanding Notes, together with accrued interest to the date of prepayment
and a premium equal to the then applicable Make-Whole Amount, and (4) specify a
date for such prepayment (the "Change of Control Prepayment Date") which Change
of Control Prepayment Date shall be the later of (i) the date of such Change of
Control or (ii) a date not more than 60 days nor less than 30 days following the
date of such Company Notice. Each holder of the then outstanding Notes shall
have the right to accept such offer and require prepayment of the Notes held by
such holder by written notice to the Company (a "Noteholder Notice") sent by
overnight courier in the manner provided in ss. 9.6 hereof not later than 25
days after the date of the Company Notice. The Company shall on the Change of
Control Prepayment Date prepay all, but not less than all, Notes held by holders
which have so accepted such offer of prepayment. The prepayment price of the
Notes payable upon the occurrence of a Change of Control shall be an amount
equal to 100% of the outstanding principal amount of the Notes so to be prepaid
and accrued interest thereon to the date of such prepayment, together with a
premium equal to the then applicable Make-Whole Amount determined as of the
Change of Control Prepayment Date.

               (b) In the event that the holder of any Note shall have delivered
to the Company a Noteholder Notice pursuant to ss. 2.3(a), then the Company
shall promptly, and in any event within five days after receipt of such
Noteholder Notice, deliver by overnight courier in the manner provided in ss.
9.6 hereof written notice of such Noteholder Notice to each other holder of the
Notes and, notwithstanding the provisions of ss. 2.3(a), the right of each such
other holder to accept the offer of prepayment and require prepayment of the
Notes shall remain in effect until the later to occur of (1) 30 days after the
date of the Company Notice and (2) 15 days after the date of the notice required
to be delivered pursuant to this ss. 2.3(b); provided, however, that the
provisions of this clause (2) shall only apply with respect to notices required
to be delivered pursuant to this ss. 2.3(b) to the extent that such notices
relate to Noteholder Notices made prior to the expiration of the period
specified in ss. 2.3(a).

               (c) Without limiting the foregoing, if the Company fails to give
the Company Notice required pursuant to ss. 2.3(a) as a result of the occurrence
of a Change of Control, each holder of the Notes shall have the right to require
the Company to prepay, and the Company will prepay, such holder's Notes in full,
together with accrued interest thereon to the date of prepayment and a premium
equal to the then applicable Make-Whole Amount; provided that each holder of the
Notes shall so notify the Company of its election to require the Company to
prepay its Notes in accordance with this ss. 2.3(c) within 365 days after such
holder has actual knowledge of any such Change of Control by overnight courier
in the manner provided in ss. 9.6 hereof. Notice of any required prepayment
pursuant to this ss. 2.3(c) shall be delivered by a holder of the Notes which
was entitled to, but did not receive, such Company Notice to the Company after
such holder has

                                       3
<PAGE>   9

actual knowledge of such Change of Control. On the date (the "Change of Control
Delayed Prepayment Date") designated in such holder's notice (which shall be not
more than 60 days nor less than 30 days following the date of such holder's
notice), the Company shall prepay in full all the Notes held by such holder,
together with accrued interest thereon to the date of prepayment and a premium
equal to the then applicable Make-Whole Amount. If the holder of any Note gives
any notice pursuant to this ss. 2.3(c), the Company shall give a Company Notice
within three days of receipt of such notice and identify the Change of Control
Delayed Prepayment Date to all other holders of the Notes and each of such
holders shall then and thereupon have the right to accept the Company's offer to
prepay the Notes held by such holder and require prepayment of such Notes by
delivery of a Noteholder Notice within 21 days of the date of such Company
Notice; provided only that any date for prepayment of such Notes shall be the
Change of Control Delayed Prepayment Date. On the Change of Control Delayed
Prepayment Date, the Company shall prepay in full the Notes of each holder
thereof which has accepted such offer of prepayment at a prepayment price of
100% of the outstanding principal amount of the Notes so to be prepaid and
accrued interest thereon to the date of such prepayment, together with a premium
equal to the applicable Make-Whole Amount determined as of the Change of Control
Delayed Prepayment Date.

               (d)           For purposes of this ss. 2.3:

               "Acquiring Person" shall mean a "person" or "group of persons"
within the meaning of Sections 13(d) and 14(d) of the Securities and Exchange
Act of 1934, as amended.

               "Change of Control" of the Company shall mean that an Acquiring
Person (other than the Russell Family) directly or indirectly becomes the
beneficial owner of more than 50% of the total voting power of the Voting Stock
of the Company then outstanding.

               "Russell Family" shall mean, collectively:

                             (a) the lineal descendants (including Persons who
               have been legally adopted by a lineal descendant) and the spouses
               of lineal descendants of Benjamin Russell (founder of the
               Company), and

                             (b) the Benjamin and Roberta Russell Foundation,
               Incorporated, and

                             (c) any trust directly or indirectly controlled by,
               or for the benefit of, one or more of such Persons described in
               clause (a) above or directly or indirectly controlled by any
               corporation or partnership described in clause (d) below, and

                             (d) any corporation or partnership in which voting
                control as to such entity is held, directly or indirectly, by
                any one or more of the Persons described in clause (a) above
                or by such trusts described in clause (c) above, and

                             (e) any Person acting as the executor or
                administrator of the estate or other legal representative of
                any Person described in clause (a) above.

                                       4
<PAGE>   10

               Section 2.4 Notice of Optional Prepayments. The Company will give
notice of any prepayment of the Notes pursuant to ss. 2.2 to each holder thereof
not less than 30 days nor more than 60 days before the date fixed for such
optional prepayment specifying (a) such date, (b) the principal amount of the
holder's Notes to be prepaid on such date, (c) that a premium may be payable,
(d) the date when such premium will be calculated, (e) the estimated premium,
and (f) the accrued interest applicable to the prepayment. Such notice of
prepayment shall also certify compliance with all requirements, if any, which
are conditions precedent to any such prepayment. Notice of prepayment having
been so given, the aggregate principal amount of the Notes specified in such
notice, together with accrued interest thereon and the premium, if any, payable
with respect thereto shall become due and payable on the prepayment date
specified in said notice. Two Business Days prior to the prepayment date
specified in such notice, the Company shall provide each holder of a Note
written notice of the premium, if any, payable in connection with such
prepayment and, whether or not any premium is payable, a reasonably detailed
computation of the Make-Whole Amount.

               Section 2.5   Application  of  Prepayments.  All partial
prepayments shall be applied on all outstanding Notes ratably in accordance with
the unpaid principal amounts thereof.

               Section 2.6 Direct Payment. Notwithstanding anything to the
contrary contained in this Agreement or the Notes, in the case of any Note owned
by you or your nominee or owned by any subsequent Institutional Holder which has
given written notice to the Company requesting that the provisions of this ss.
2.6 shall apply, the Company will punctually pay, and in any event not later
than 12:00 p.m. New York, New York time, when due the principal thereof,
interest thereon and premium, if any, due with respect to said principal,
without any presentment thereof, directly to you, to your nominee or to such
subsequent Institutional Holder at your address or your nominee's address set
forth in Schedule I hereto or such other address as you, your nominee or such
subsequent Institutional Holder may from time to time designate in writing to
the Company or, if a bank account with a United States bank is designated for
you or your nominee on Schedule I hereto or in any written notice to the Company
from you, from your nominee or from any such subsequent Institutional Holder,
the Company will make such payments in immediately available funds to such bank
account, marked for attention as indicated, or in such other manner or to such
other account in any United States bank as you, your nominee or any such
subsequent Institutional Holder may from time to time direct in writing. In the
event any payment is received after 12:00 p.m. New York, New York time on any
payment date, such payment shall be deemed to have been received on the Business
Day next succeeding the date of such payment.

               Upon the payment in full of any Note held by you, your nominee or
any subsequent Institutional Holder; you, your nominee or any such subsequent
Institutional Holder hereby agrees to use your or its reasonable best efforts to
return said Note to the Company at the address set forth in ss. 9.6 hereof.

SECTION 3.     REPRESENTATIONS.

               Section 3.1 Representations of the Company. The Company
represents and warrants that all representations and warranties set forth in
Exhibit B attached hereto are true and correct as of the date hereof and are
incorporated herein by reference with the same force and effect as though herein
set forth in full.

                                       5
<PAGE>   11

               Section 3.2 Representations of the Purchaser. (a) You represent
as of the Closing Date, and in entering into this Agreement the Company
understands, that you are acquiring the Notes for the purpose of investment and
not with a view to the distribution thereof, and that you have no present
intention of selling, negotiating or otherwise disposing of the Notes; it being
understood, however, that the disposition of your Property shall at all times be
and remain within your control.

                  (b) You further represent, as of the Closing Date, at least
one of the following statements is an accurate representation as to each source
of funds (a "Source") to be used to pay the purchase price of the Notes to be
purchased hereunder:

                             (i) if an insurance company, the Source does not
               include assets allocated to any separate account maintained by it
               in which any employee benefit plan (or its related trust) has any
               interest, other than a separate account that is maintained solely
               in connection with its fixed contractual obligations under which
               the amounts payable, or credited, to such plan and to any
               participant or beneficiary of such plan (including any annuitant)
               are not affected in any manner by the investment performance of
               the separate account; or

                             (ii) the Source is either (x) an insurance company
               pooled separate account, within the meaning of Prohibited
               Transaction Exemption ("PTE") 90-1 (issued January 29, 1990), (y)
               a bank collective investment fund, within the meaning of the PTE
               91-38 (issued July 12, 1991) and, except as such Purchaser shall
               have disclosed to the Company in writing pursuant to this clause
               (b), no employee benefit plan or group of plans maintained by the
               same employee organization beneficially owns more than 10% of all
               assets allocated to such pooled separate account or collective
               investment fund or (z) the Source is an insurance company general
               account of which the assets are such that if any of them are, or
               are deemed to be, assets of any Plan, the acquisition of the
               Notes by such Purchaser pursuant hereto is eligible for and
               satisfies the requirements of PTE 95-60 (issued July 12, 1995);
               or

                             (iii) the Source constitutes assets of an
               "investment fund" (within the meaning of Part V of PTE 84-14
               managed by a "qualified professional asset manager" or "QPAM"
               (within the meaning of Part V of PTE 84-14), no employee benefit
               plan's assets that are included in such investment fund, when
               combined with the assets of all other employee benefit plans
               established or maintained by the same employer or by an affiliate
               (within the meaning of Section V(c)(1) of PTE 84-14) of such
               employer or by the same employer or by the same employee
               organization and managed by such QPAM, exceed 20% of the total
               client assets managed by such QPAM, the conditions of Part I(c)
               and (g) of PTE 84-14 are satisfied, neither the QPAM nor a person
               controlling or controlled by the QPAM (applying the definition of
               "control" in Section V(e) of the PTE 84-14) owns a 5% or more
               interest in the Company and (x) the identity of such QPAM and (y)
               the names of all employee benefit plans whose assets are included
               in such investment fund have been disclosed to the Company in
               writing pursuant to this paragraph (iii); or

                                       6
<PAGE>   12

                             (iv)           the Source is a governmental plan;
               or

                             (v)            the Source is one or more employee
                benefit plans, or a separate account or trust fund comprised of
                one or more employee benefit plans, each of which has been
                identified to the Company in writing pursuant to this paragraph
                (v); or

                             (vi)           the Source does not include assets
               of any employee benefit plan, other than a plan exempt from the
               coverage of ERISA.

As used in this paragraph, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL
PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.

SECTION 4.     CLOSING CONDITIONS.

               Section 4.1 Conditions. Your obligation to purchase the Notes on
the Closing Date shall be subject to the performance by the Company of its
agreements hereunder which by the terms hereof are to be performed at or prior
to the time of delivery of the Notes and to the following further conditions
precedent:

                             (a) Closing Certificate. You shall have received a
               certificate dated the Closing Date, signed by the President or a
               Vice President of the Company, the truth and accuracy of which
               shall be a condition to your obligation to purchase the Notes
               proposed to be sold to you and to the effect that (1) the
               representations and warranties of the Company set forth in
               Exhibit B attached hereto are true and correct on and with
               respect to the Closing Date, (2) the Company has performed all of
               its obligations hereunder which are to be performed on or prior
               to the Closing Date, and (3) no Default or Event of Default has
               occurred and is continuing.

                             (b) Legal Opinions. You shall have received from
               Bradley Arant Rose & White LLP independent counsel for the
               Company, an opinion dated the Closing Date, in form and substance
               satisfactory to you, and covering the matters set forth in
               Exhibit C , attached hereto.

                             (c) Company's Existence and Authority. On or prior
               to the Closing Date, you shall have received, in form and
               substance reasonably satisfactory to you, such documents and
               evidence with respect to the Company as you may reasonably
               request in order to establish the existence and good standing of
               the Company and the authorization of the transactions
               contemplated by this Agreement.

                             (d) Legality of Investment. The Notes to be
               purchased by you shall be a legal investment for you under the
               laws of each jurisdiction to which you may be subject (without
               resort to any so-called "basket provisions" to such laws).

                                       7
<PAGE>   13
                             (e) Structuring  Fee.  The  Company shall  have
               paid you by wire  transfer to such  account as you designate  on
               or prior to the  Closing Date a structuring fee of $25,000.

                             (f) Satisfactory Proceedings. All proceedings taken
               in connection with the transactions contemplated by this
               Agreement, and all documents necessary to the consummation
               thereof, shall be satisfactory in form and substance to you, and
               you shall have received a copy (executed or certified as may be
               appropriate) of all legal documents or proceedings taken in
               connection with the consummation of said transactions.

               Section 4.2 Waiver of Conditions. If on the Closing Date the
Company fails to tender to you the Notes to be issued to you on such date or if
the conditions specified in ss. 4.1 have not been fulfilled, you may thereupon
elect to be relieved of all further obligations under this Agreement. Without
limiting the foregoing, if the conditions specified in ss. 4.1 have not been
fulfilled, you may waive compliance by the Company with any such condition to
such extent as you may in your sole discretion determine. Nothing in this ss.
4.2 shall operate to relieve the Company of any of its obligations hereunder or
to waive any of your rights against the Company.

SECTION 5.     COMPANY COVENANTS.

               From and after the Closing Date and continuing so long as any
amount remains unpaid on any Note:

               Section 5.1 Corporate Existence, Etc. The Company will preserve
and keep in full force and effect, and will cause each Subsidiary to preserve
and keep in full force and effect, its corporate existence and all licenses and
permits which, individually or in the aggregate, are material to the proper
conduct of its business, provided that the foregoing shall not prevent any
transaction permitted by ss. 5.12.

               Section 5.2 Insurance. The Company will maintain, and will cause
each Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers and in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties.

               Section 5.3 Taxes, Claims for Labor and Materials; Compliance
with Laws. (a) The Company will promptly pay and discharge, and will cause each
Subsidiary promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Subsidiary,
respectively, or upon or in respect of all or any part of the Property or
business of the Company or such Subsidiary, all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a Lien upon any Property of the
Company or such Subsidiary; provided the Company or such Subsidiary shall not be
required to pay any such tax, assessment, charge, levy, account payable or claim
if (1) the validity, applicability or amount thereof is being contested in good
faith by appropriate actions or proceedings which will prevent the forfeiture or
sale of any Property of the Company or such Subsidiary or any material
interference with the use thereof by the Company or such Subsidiary, and (2) the
Company or such Subsidiary shall set aside on its books, reserves deemed by it
to be adequate with respect thereto.

                                       8
<PAGE>   14
               (b) The Company will promptly comply and will cause each
Subsidiary to comply with all laws, ordinances or governmental rules and
regulations to which it is subject including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA and all
Environmental Laws, the violation of which could materially and adversely affect
the properties, business, prospects, profits or condition (financial or
otherwise) of the Company and its Subsidiaries or would result in any Lien not
permitted under ss. 5.8.

               Section 5.4 Maintenance, Etc. The Company will maintain, preserve
and keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency thereof shall be maintained.

               Section 5.5 Nature of Business. Neither the Company nor any
Subsidiary will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Company and its Subsidiaries would be changed from the general nature of the
business engaged in by the Company and its Subsidiaries on the date of this
Agreement.

               Section 5.6 Interest Charges Coverage Ratio. The Company will
keep and maintain at all times the ratio of Net Income Available for Interest
Charges to Consolidated Interest Charges at not less than 2.0 to 1.0 for each
elapsed Rolling Four Quarters Period.

               Section 5.7 Limitations on Debt. (a) The Company will not, and
will not permit any Subsidiary to, create, assume, guarantee or otherwise incur
or in any manner be or become liable in respect of any Debt, except:

                             (1) Funded Debt evidenced by the Notes;

                             (2) Funded Debt of the Company and its
               Subsidiaries outstanding as of the Closing Date and described on
               Schedule II attached hereto;

                             (3) additional Funded Debt of the Company and Debt
               of its Subsidiaries, provided that at the time of creation,
               issuance, assumption, guarantee or incurrence thereof and after
               giving effect thereto and to the application of the proceeds
               thereof:

                                      (i) Consolidated Funded Debt would not
                             exceed 50% of Consolidated Total Capitalization,
                             and

                                      (ii) the sum of (A) Debt secured by Liens
                             permitted and incurred within the limitations of
                             ss. 5.8(h) and, without duplication, (B) the
                             aggregate amount of all Debt of Subsidiaries (other
                             than Debt of Subsidiaries permitted by ss.
                             5.7(a)(5)) and (C) the aggregate amount of
                             Attributable Debt of the Company and its
                             Subsidiaries, would not exceed 15% of Consolidated
                             Net Worth;

                                       9
<PAGE>   15

                              (4) Current Debt of the Company, provided that
               during the twelve-month period immediately preceding the date of
               any determination hereunder, there shall have been a period of 60
               consecutive days during which (i) the Company shall have been
               free of all Current Debt or (ii) the largest aggregate principal
               amount of all Current Debt outstanding on each day of such 60-day
               period did not exceed the amount of additional Funded Debt which
               could have been issued or incurred by the Company within the
               limitations of ss. 5.7(a)(3) on each day of such period and which
               Current Debt shall during each day of such 60-day period be
               deemed to constitute outstanding Funded Debt for purposes of any
               determination of additional Funded Debt to be issued or incurred
               within the limitations of said ss. 5.7(a)(3); and

                              (5) Debt of a Subsidiary to the Company or to a
               Wholly-owned Subsidiary which is the parent corporation of such
               Subsidiary.

                         (b)  The renewal, extension or refunding of any Funded
          Debt, issued, incurred or outstanding pursuant toss. 5.7(a) shall
          constitute the issuance of additional Funded Debt which is, in turn,
          subject to the limitations of the applicable provisions of this ss.
          5.7.

                         (c)  Any corporation which becomes a Subsidiary after
          the date hereof shall for all purposes of this ss. 5.7 be deemed to
          have created, assumed or incurred at the time it becomes a Subsidiary
          all Debt of such corporation existing immediately after it becomes a
          Subsidiary.

               Section 5.8 Limitation on Liens. The Company will not, and will
not permit any Subsidiary to, create or incur, or suffer to be incurred or to
exist, any Lien on its or their Property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer any
Property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its or their general creditors, or acquire or agree
to acquire, or permit any Subsidiary to acquire, any Property or assets upon
conditional sales agreements or other title retention devices, except:

                              (a) Liens for Property taxes and assessments or
               governmental charges or levies and Liens securing claims or
               demands of mechanics and materialmen, provided that payment
               thereof is not at the time required by ss. 5.3;

                              (b) Liens of or resulting from any judgment or
               award not to exceed $10,000,000 in the aggregate, the time for
               the appeal or petition for rehearing of which shall not have
               expired, or in respect of which the Company or a Subsidiary shall
               at any time in good faith be prosecuting an appeal or proceeding
               for a review and in respect of which a stay of execution pending
               such appeal or proceeding for review shall have been secured;

                              (c) Liens incidental to the conduct of business or
               the ownership of properties and assets (including Liens in
               connection with worker's compensation, unemployment insurance and
               other like laws, warehousemen's and attorneys' liens and
               statutory landlords' liens) and Liens to secure the performance
               of bids, tenders or trade contracts, or to secure statutory
               obligations, surety or appeal bonds or other Liens of like
               general nature incurred in the ordinary course of business and
               not in connection with the borrowing of money,

                                       10
<PAGE>   16

               provided in each case, the obligation secured is not overdue or,
               if overdue, is being contested in good faith by appropriate
               actions or proceedings;

                             (d) minor survey exceptions or minor encumbrances,
               easements or reservations, or rights of others for rights-of-way,
               utilities and other similar purposes, or zoning or other
               restrictions as to the use of real properties, which are
               necessary for the conduct of the activities of the Company and
               its Subsidiaries or which customarily exist on properties of
               corporations engaged in similar activities and similarly situated
               and which do not in any event materially impair their use in the
               operation of the business of the Company and its Subsidiaries;

                             (e) Liens securing Indebtedness of a Subsidiary to
               the Company or to a Wholly-owned Subsidiary which is the parent
               corporation of such Subsidiary;

                             (f) Liens existing as of the Closing Date and
                described on Schedule II attached hereto;

                             (g) Liens created or incurred after the Closing
               Date given to secure the payment of the purchase price incurred
               in connection with the acquisition or construction of fixed
               assets useful and intended to be used in carrying on the business
               of the Company or a Subsidiary, including Liens existing on such
               fixed assets at the time of acquisition thereof or at the time of
               acquisition by the Company or a Subsidiary of any business entity
               then owning such fixed assets, whether or not such existing Liens
               were given to secure the payment of the purchase price of the
               fixed assets to which they attach so long as they were not
               incurred, extended or renewed in contemplation of such
               acquisition, provided that (1) the Lien shall attach solely to
               the fixed assets acquired or constructed, (2) such Lien shall
               have been created or incurred within twelve months of the date of
               acquisition or the date of completion of construction, (3) at the
               time of acquisition or construction of such fixed assets, the
               aggregate amount remaining unpaid on all Indebtedness secured by
               Liens on such fixed assets whether or not assumed by the Company
               or a Subsidiary shall not exceed an amount equal to the lesser of
               the total acquisition price or fair market value at the time of
               acquisition or construction of such fixed assets (as determined
               in good faith by the Board of Directors of the Company), (4) in
               the case of the creation or incurrence of any Capitalized Lease,
               the fixed asset which is the subject thereof if previously owned
               by the Company shall have been sold or otherwise disposed of
               within the limitations provided in ss. 5.12(b)(2), and (5) all
               such Debt shall have been incurred within the applicable
               limitations provided in ss. 5.7(a)(3) and ss. 5.7(a)(4);

                             (h) Liens created or incurred after the Closing
               Date given to secure Debt of the Company or any Subsidiary in
               addition to Liens permitted by the preceding clauses (a) through
               (g), inclusive, hereof, provided that all Debt secured by Liens
               incurred pursuant to this ss. 5.8(h) shall have been incurred
               within the limitations of ss. 5.7(a)(3) and ss. 5.7(a)(4); and

                             (i) any extension, renewal or replacement of any
               Lien permitted by the preceding clause (f) hereof in respect of
               the same Property theretofore subject to such Lien in

                                       11
<PAGE>   17

               connection with the extension, renewal or refunding of the
               Indebtedness secured thereby; provided that (1) such Lien shall
               attach solely to the same such Property, and (2) such extension,
               renewal or refunding of such Indebtedness shall be without
               increase in the principal remaining unpaid as of the date of such
               extension, renewal or refunding.

               Section 5.9 Limitation on Long-Term Leases. The Company will not,
and will not permit any Subsidiary to, become obligated, as lessee, under any
Long-Term Lease if, at the time of entering into such Long-Term Lease and after
giving effect thereto, the maximum aggregate Rentals payable by the Company and
all of its Subsidiaries on a consolidated basis in any fiscal year thereafter
under all Long-Term Leases then outstanding would exceed 1% of Consolidated Net
Worth for the immediately preceding fiscal year.

               Section 5.10 Restricted Payments. (a) The Company will not,
except as hereinafter provided:

                             (1) Declare or pay any dividends, either in cash or
               Property, on any shares of its capital stock of any class (except
               dividends or other distributions resulting from stock splits or
               dividends payable solely in shares of common stock of the
               Company);

                             (2) Directly or indirectly, or through any
               Subsidiary, purchase, redeem or retire any shares of its capital
               stock of any class or any warrants, rights or options to purchase
               or acquire any shares of its capital stock;

                             (3) Make any other payment or distribution, either
               directly or indirectly or through any Subsidiary, in respect of
               its capital stock; or

                             (4) Make any payment of or in respect of the
               principal amount (including, without limitation, any prepayment
               premium) of any Subordinated Funded Debt of the Company or any
               Subsidiary, except a payment at final maturity, payments of
               required sinking fund or required periodic prepayments, all as
               established by the original terms of such Subordinated Funded
               Debt;

(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options and all such other
payments, prepayments, redemptions, purchases or distributions being herein
collectively called "Restricted Payments"), if after giving effect thereto the
sum of (i) the aggregate amount of Restricted Payments made during the period
from and after July 4, 1992 to and including the date of the making of the
Restricted Payment in question, plus (ii) the aggregate amount of all Restricted
Investments made by the Company or any Subsidiary during said period would
exceed the sum of (A) $150,000,000 plus (B) 50% of Consolidated Net Income for
each of the elapsed fiscal quarters computed on a cumulative basis for said
entire period (or if Consolidated Net Income for any such fiscal quarter is a
deficit figure, then minus 100% of such deficit) plus (C) the aggregate net cash
proceeds received by the Company from the issuance and sale of shares of capital
stock of the Company, whether original issuances or from treasury, during such
period.

               (b) The Company will not declare any dividend which constitutes a
Restricted

                                       12
<PAGE>   18

Payment payable more than 60 days after the date of declaration thereof.

               (c) For the purposes of this ss. 5.10, the amount of any
Restricted Payment declared, paid or distributed in Property shall be deemed to
be the greater of the book value or fair market value (as determined in good
faith by the Board of Directors of the Company) of such Property at the time of
the making of the Restricted Payment in question.

               (d) The Company will not authorize or make a Restricted Payment
if after giving effect to the proposed Restricted Payment: (1) a Default or
Event of Default would exist or (2) the Company could not incur at least $1.00
of additional Funded Debt pursuant toss. 5.7(a)(3).

               Section 5.11 Investments. The Company will not, and will not
permit any Subsidiary to, make any Investments, other than:

                             (a) Investments by the Company and its
               Subsidiaries existing as of the Closing Date and described on
               Schedule II attached hereto;

                             (b) Investments by the Company and its Subsidiaries
               in and to Subsidiaries 80% or more (by number of votes) of the
               Voting Stock of which is beneficially owned, directly or
               indirectly, by the Company, including any Investment in a
               corporation which, after giving effect to such Investment, will
               become a Subsidiary 80% or more (by number of votes) of the
               Voting Stock of which is beneficially owned, directly or
               indirectly, by the Company;

                             (c) Investments in commercial paper maturing in 270
               days or less from the date of issuance which, at the time of
               acquisition by the Company or any Subsidiary, is rated not lower
               than "A-1" by Standard & Poor's Corporation and not lower than
               "P-1" by Moody's Investors Service, Inc.;

                             (d) Investments in direct obligations of the United
               States of America or any agency or instrumentality of the United
               States of America, the payment or guarantee of which constitutes
               a full faith and credit obligation of the United States of
               America, in either case, maturing in twelve months or less from
               the date of acquisition thereof;

                             (e) Investments in certificates of deposit maturing
               within one year from the date of issuance thereof, issued by (1)
               a bank or trust company organized under the laws of the United
               States or any state thereof, having, at the time of acquisition
               thereof by the Company or a Subsidiary, capital, surplus and
               undivided profits aggregating at least $100,000,000 and whose
               long-term certificates of deposit are, at the time of acquisition
               thereof by the Company or a Subsidiary, rated AA or better by
               Standard & Poor's Corporation and Aa or better by Moody's
               Investors Service, Inc. or (2) any banking subsidiary of Wachovia
               Corporation, AmSouth Bancorporation, SunTrust Banks, Inc.,
               SouthTrust Corporation, Regions Financial Corporation, The Chase
               Manhattan Bank, Synovus Financial Corporation, and Aliant
               National Corporation or any Person who succeeds to all, or
               substantially all, of the assets and business of any thereof;

                             (f) Investments in variable rate demand bonds
               maturing or with optional puts

                                       13
<PAGE>   19

               within one year or less from the date of acquisition thereof,
               which, at the time of acquisition by the Company or any
               Subsidiary, are rated not lower than "A" or "A-1" by Standard &
               Poor's Corporation and not lower than "A2" or "P-1" by Moody's
               Investors Service, Inc.;

                             (g) loans or advances in the usual and ordinary
               course of business to officers, directors and employees for
               expenses (including moving expenses related to a transfer)
               incidental to carrying on the business of the Company or any
               Subsidiary; provided that the amount of all such loans or
               advances permitted pursuant to this ss. 5.11(g) shall not at any
               one time exceed $3,000,000 in the aggregate; and

                             (h) other Investments (in addition to those
               permitted by the foregoing provisions of this ss. 5.11), provided
               that (1) all such other Investments shall have been made out of
               funds available for Restricted Payments which the Company or any
               Subsidiary would then be permitted to make in accordance with the
               provisions of ss. 5.10, (2) after giving effect to such other
               Investments, no Default or Event of Default would exist and (3)
               the Company would be permitted by the provisions of ss. 5.7(a)(3)
               to incur at least $1.00 of additional Funded Debt.

               In valuing any Investments for the purpose of applying the
limitations set forth in this ss. 5.11, such Investments shall be taken at the
original cost thereof, without allowance for any subsequent write-offs or
appreciation or depreciation therein, but less any amount repaid, recovered or
received on account of capital or principal.

               For purposes of this ss. 5.11, at any time when a corporation
becomes a Subsidiary, all Investments of such corporation at such time shall be
deemed to have been made by such corporation, as a Subsidiary, at such time.

               Section 5.12 Mergers, Consolidations and Sales of Assets. (a) The
Company will not, and will not permit any Subsidiary to, consolidate with or be
a party to a merger with any other corporation, or sell, lease or otherwise
dispose of all or substantially all of its assets; provided that:

                             (1) any Subsidiary may merge or consolidate with or
               into, or sell, lease or otherwise dispose of all or substantially
               all of its assets to, the Company or any other Subsidiary the
               percentage ownership by the Company of which shall be greater
               than or equal to the percentage ownership by the Company of the
               Subsidiary being merged or consolidated or all or substantially
               all of the assets of which are being sold, leased or otherwise
               disposed of, so long as (i) in any merger or consolidation
               involving the Company, the Company shall be the surviving or
               continuing corporation and (ii) in any sale, lease or other
               disposition, after giving effect to such sale, lease or other
               disposition, (A) no Default or Event of Default would exist and
               (B) the Company would be permitted by the provisions of ss.
               5.7(a)(3) to incur at least $1.00 of additional Funded Debt;

                             (2) the Company may consolidate with or merge into
               any other corporation if (i) the Company is the surviving
               corporation or (ii)(A) the corporation which results from such
               consolidation or merger (the "surviving corporation") is
               organized under the laws of

                                       14
<PAGE>   20

               any State of the United States or the District of Columbia and
               (B) the due and punctual payment of the principal of and premium,
               if any, and interest on all of the Notes, according to their
               tenor, and the due and punctual performance and observation of
               all of the covenants in the Notes and this Agreement to be
               performed or observed by the Company are expressly assumed in
               writing by the surviving corporation and the surviving
               corporation shall furnish the holders of the Notes an opinion of
               counsel satisfactory to the holders of at least 66-2/3% in
               aggregate principal amount of the Notes then outstanding to the
               effect that the instrument of assumption has been duly
               authorized, executed and delivered and constitutes the legal,
               valid and binding contract and agreement of the surviving
               corporation enforceable in accordance with its terms and which
               opinion may contain exceptions and qualifications as are
               customary in similar transactions and (iii) at the time of such
               consolidation or merger and immediately after giving effect
               thereto, (A) no Default or Event of Default would exist and (B)
               the surviving corporation would be permitted by the provisions of
               ss. 5.7(a)(3) to incur at least $1.00 of additional Funded Debt;

                             (3) any corporation may merge into the Company if
               at the time of such merger and immediately after giving effect
               thereto, (i) no Default or Event of Default would exist and (ii)
               the Company would be permitted by the provisions of ss. 5.7(a)(3)
               to incur at least $1.00 of additional Funded Debt; and

                             (4) the Company may sell or otherwise dispose of
               all or substantially all of its assets (other than stock and
               Indebtedness of a Subsidiary, which may only be sold or otherwise
               disposed of pursuant to ss. 5.12(c)) to any Person for
               consideration which represents the fair market value (as
               determined in good faith by the Board of Directors of the
               Company, a copy of which determination certified by the Secretary
               or an Assistant Secretary of the Company shall have been
               furnished to the holders of the Notes) at the time of such sale
               or other disposition if (i) the acquiring Person is a corporation
               organized under the laws of any State of the United States or
               District of Columbia, (ii) the due and punctual payment of the
               principal of and premium, if any, and interest on all the Notes,
               according to their tenor, and the due and punctual performance
               and observance of all of the covenants in the Notes and in this
               Agreement to be performed or observed by the Company are
               expressly assumed in writing by the acquiring corporation and the
               acquiring corporation shall furnish the holders of the Notes an
               opinion of counsel satisfactory to the holders of at least
               66-2/3% in aggregate principal amount of the Notes then
               outstanding to the effect that the instrument of assumption has
               been duly authorized, executed and delivered and constitutes the
               legal, valid and binding contract and agreement of such acquiring
               corporation enforceable in accordance with its terms and which
               opinion may contain exceptions and qualifications as are
               customary in similar transactions, and (iii) at the time of such
               sale or disposition and immediately after giving effect thereto,
               (A) no Default or Event of Default would exist and (B) the
               acquiring corporation would be permitted by the provisions of ss.
               5.7(a)(3) to incur at least $1.00 of additional Funded Debt.

               (b) The Company will not, and will not permit any Subsidiary to,
sell, lease, transfer, abandon or

                                       15
<PAGE>   21

otherwise dispose of, assets (except assets sold, leased, transferred, abandoned
or otherwise disposed of in the ordinary course of business and, except with
respect to inventory sold in the ordinary course of business, for fair market
value or as provided in ss. 5.12(a)(4)); provided that the foregoing
restrictions do not apply to:

                             (1) the sale, lease, transfer or other disposition
               of assets of a Subsidiary to the Company or a Wholly-owned
               Subsidiary; or

                             (2) the sale, lease, transfer or other disposition
               of such assets for cash or other Property to a Person or Persons
               other than an Affiliate (which Affiliate is not a Subsidiary) if
               all of the following conditions are met:

                                      (i) such assets (valued at the greater of
                             fair market value or net book value) do not,
                             together with all other assets of the Company and
                             its Subsidiaries previously disposed of during the
                             same fiscal year, exceed 10% of Consolidated Total
                             Assets;

                                      (ii) the determination to sell, lease,
                             transfer or otherwise dispose of such assets was
                             made in accordance with policies approved by the
                             Board of Directors of the Company or such
                             Subsidiary; and

                                      (iii) immediately after the consummation
                             of the transaction and after giving effect thereto,
                             (A) no Default or Event of Default would exist, and
                             (B) the Company would be permitted by the
                             provisions of ss. 5.7(a)(3) to incur at least $1.00
                             of additional Funded Debt.

               Computations pursuant to this ss. 5.12(b) shall include
dispositions made pursuant to ss. 5.12(c) and computations pursuant to
ss. 5.12(c) shall include dispositions made pursuant to this ss. 5.12(b).

               (c) The Company will not, and will not permit any Subsidiary to,
sell, pledge or otherwise dispose of any shares of the stock (including as
"stock" for the purposes of this Section any options or warrants to purchase
stock or other Securities exchangeable for or convertible into stock) of a
Subsidiary (said stock, options, warrants and other Securities herein called
"Subsidiary Stock") or sell, pledge or otherwise dispose of any Indebtedness of
any Subsidiary, nor will any Subsidiary issue, sell, pledge or otherwise dispose
of any shares of its own Subsidiary Stock, provided that the foregoing
restrictions do not apply to:

                             (1) the issue of directors qualifying shares; or

                             (2) the issue of Subsidiary Stock to the Company
               or a Wholly-owned Subsidiary; and

                             (3) the sale or other disposition to a Person
               (other than directly or indirectly to an Affiliate) of any shares
               of Subsidiary Stock or Indebtedness of any Subsidiary if all of
               the following conditions are met:

                                       16
<PAGE>   22

                                      (i) such assets (valued at the greater of
                             fair market value or net book value) of the
                             Subsidiary do not, together with all other assets
                             of the Company and its Subsidiaries previously
                             disposed of during the same fiscal year (other than
                             in the ordinary course of business), exceed 10% of
                             Consolidated Total Assets;

                                      (ii) the determination to sell or
                             otherwise dispose of such assets was made in
                             accordance with policies approved by the Board of
                             Directors of the Company or such Subsidiaries;

                                      (iii) in the case of a sale of any
                             Subsidiary Stock of a Wholly-owned Subsidiary to a
                             Person other than the Company or another
                             Wholly-owned Subsidiary, immediately after the
                             consummation of the transaction and after giving
                             effect thereto, all Debt of any other Subsidiary
                             (of which such previously Wholly-owned Subsidiary
                             is the parent corporation) then held by such
                             previously Wholly-owned Subsidiary shall be deemed
                             to be Debt to be created or incurred by the Company
                             and its other Subsidiaries within the limitations
                             of ss. 5.7(a)(3);

                                      (iv) in the case of a sale of any
                             Indebtedness of any Subsidiary, immediately after
                             the consummation of the transaction and after
                             giving effect thereto, all Debt of such Subsidiary
                             then held by Persons other than the Company or any
                             Wholly-owned Subsidiary which is the parent
                             corporation of such Subsidiary shall be deemed to
                             be Debt to be created or incurred by such
                             Subsidiary within the limitations of ss. 5.7(a)(3);

                                      (v) in the case of a sale of Indebtedness
                             or other Investments in a Subsidiary, immediately
                             after the consummation of the transaction and after
                             giving effect thereto, all Indebtedness and other
                             Investments in such Subsidiary held by the Company
                             and its other Subsidiaries shall be deemed to be
                             Investments to be made or created within the
                             limitations of ss. 5.11; and

                                      (vi) immediately after the consummation of
                             the transaction and after giving effect thereto,
                             (A) no Default or Event of Default would exist, and
                             (B) the Company would be permitted by the
                             provisions of ss. 5.7(a)(3) to incur at least $1.00
                             of additional Funded Debt.

               Computations pursuant to this ss. 5.12(c) shall include
dispositions made pursuant to ss. 5.12(b) and computations pursuant to
ss. 5.12(b) shall include dispositions made pursuant to this ss. 5.12(c).

               Section 5.13 Guaranties. The Company will not, and will not
permit any Subsidiary to, become or be liable in respect of any Guaranty except
Guaranties by the Company or any Subsidiary incurred in compliance with the
provisions ss. 5.7(a)(3) and ss. 5.7(a)(4) which are limited in amount to a
stated maximum dollar exposure or Guaranties by the Company which constitute
Guaranties of obligations incurred by any Subsidiary in compliance with the
provisions of ss. 5.7(a)(3).

                                       17
<PAGE>   23

               Section 5.14 Repurchase of Notes. Neither the Company nor any
Subsidiary or Affiliate, directly or indirectly, may repurchase or make any
offer to repurchase any Notes unless an offer has been made to repurchase Notes,
pro rata, from all holders of the Notes at the same time and upon the same
terms. In case the Company or any Subsidiary or Affiliate repurchases or
otherwise acquires any Notes, such Notes shall immediately thereafter be
cancelled and no Notes shall be issued in substitution therefor. Without
limiting the foregoing, upon the purchase or other acquisition of any Notes by
the Company, any Subsidiary or any Affiliate, such Notes shall no longer be
outstanding for purposes of any section of this Agreement relating to the taking
by the holders of the Notes of any actions with respect hereto, including,
without limitation, ss. 6.3, ss. 6.4 and ss. 7.1.

               Section 5.15 Transactions with Affiliates. The Company will not,
and will not permit any Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of Property with, or the rendering of any
service by or for, any Affiliate) which transaction or arrangement is material
to the Company or such Subsidiary, except in the ordinary course of and pursuant
to the reasonable requirements of the Company's or such Subsidiary's business
and upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person other than an Affiliate.

               Section 5.16 Multiemployer Plan Liability and Termination of
Pension Plans. The Company will not and will not permit any ERISA Affiliate to
withdraw from any Multiemployer Plan if such withdrawal could result in
withdrawal liability (as described in Part l of Subtitle E of Title W of ERISA)
which could materially and adversely affect the properties, business, prospects,
profits or condition (financial or otherwise) of the Company. The Company and
any ERISA Affiliate will not permit any employee benefit plan maintained by it
to be terminated if such termination could result in the imposition of a Lien on
any property of the Company or any ERISA Affiliate pursuant to Section 4068 of
ERISA.

               Section 5.17 Reports and Rights of Inspection. The Company will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full and correct entries will be made of all dealings or transactions
of, or in relation to, the business and affairs of the Company or such
Subsidiary, in accordance with GAAP consistently applied (except for changes
disclosed in the financial statements furnished to you pursuant to this ss. 5.17
and concurred in by the independent public accountants referred to in ss.
5.17(b) hereof), and will furnish to you so long as you are the holder of any
Note and to each other Institutional Holder of the then outstanding Notes (in
duplicate if so specified below or otherwise requested):

                              (a) Quarterly Statements. As soon as available and
               in any event within 45 days after the end of each quarterly
               fiscal period (except the last) of each fiscal year, copies of:

                                      (1) a consolidated balance sheet of the
                             Company and its Subsidiaries as of the close of
                             such quarterly fiscal period, setting forth in
                             comparative form the consolidated figures for the
                             corresponding period of the preceding fiscal year,

                                      (2) a consolidated statement of income of
                             the Company and its

                                       18
<PAGE>   24

                             Subsidiaries for such quarterly fiscal period and
                             for the portion of the fiscal year ending with
                             such quarterly fiscal period, in each case setting
                             forth in comparative form the consolidated figures
                             for the corresponding periods of the preceding
                             fiscal year,

                                      (3) a consolidated statement of cash flows
                             of the Company and its Subsidiaries for the portion
                             of the fiscal year ending with such quarterly
                             fiscal period, setting forth in comparative form
                             the consolidated figures for the corresponding
                             period of the preceding fiscal year, and

                                      (4) a consolidated statement of
                             stockholders' equity of the Company and its
                             Subsidiaries for the portion of the fiscal year
                             ending with such quarterly fiscal period, setting
                             forth in comparative form the consolidated figures
                             for the corresponding period of the preceding
                             fiscal year,

all in reasonable detail and certified as complete and correct by an authorized
financial officer of the Company;

               (b) Annual Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company, copies of:

                                      (1) a consolidated balance sheet of the
               Company and its Subsidiaries as of the close of such fiscal year,

                                      (2) a consolidated statement of income of
               the Company and its Subsidiaries for such fiscal year,

                                      (3)   a consolidated statement of cash
               flows of the Company and its Subsidiaries for such fiscal year,
               and

                                      (4)   a consolidated statement of
               stockholders' equity of the Company and its Subsidiaries for such
               fiscal year,

               in each case setting forth in comparative form the consolidated
               figures for the preceding fiscal year, all in reasonable detail
               and accompanied by a report thereon of a firm of independent
               public accountants of recognized national standing selected by
               the Company, containing an opinion unqualified as to scope
               limitations imposed by the Company, unqualified as to the Company
               being a going concern and otherwise without qualification except
               as therein noted, to the effect that the consolidated financial
               statements present fairly, in all material respects, the
               consolidated financial position of the Company and its
               Subsidiaries as of the end of the fiscal year being reported on
               and the consolidated results of the operations and cash flows for
               said year in conformity with GAAP and that the examination of
               such accountants in connection with such financial statements has
               been conducted in accordance with generally accepted auditing
               standards and included such tests of the accounting records and
               such other auditing procedures as said accountants deemed
               necessary in the circumstances;

                                       19
<PAGE>   25

                             (c) Audit Reports. Promptly upon receipt thereof,
               one copy of each interim or special audit made by independent
               accountants of the books of the Company or any Subsidiary and any
               management letter received from such accountants in connection
               with such interim or special audits;

                             (d) SEC and Other Reports. Promptly upon their
               becoming available, one copy of each financial statement, report,
               notice or proxy statement sent by the Company to stockholders
               generally and of each regular or periodic report, and any
               registration statement or prospectus filed by the Company or any
               Subsidiary with any securities exchange or the Securities and
               Exchange Commission or any successor agency (other than
               Registration Statements on Form S-8 relating to employee benefit
               plans);

                             (e) ERISA Reports. Promptly upon the occurrence
               thereof, written notice of (1) a Reportable Event with respect to
               any Plan; (2) the institution of any steps by the Company, any
               ERISA Affiliate, the PBGC or any other Person to terminate any
               Plan; (3) the institution of any steps by the Company or any
               ERISA Affiliate to withdraw from any Plan; (4) a non-exempt
               "prohibited transaction" within the meaning of Section 406 of
               ERISA in connection with any Plan; (5) any material increase in
               the contingent liability of the Company or any Subsidiary with
               respect to any post-retirement welfare liability; or (6) the
               taking of any action by, or the threatening of the taking of any
               action by, the Internal Revenue Service, the Department of Labor
               or the PBGC with respect to any of the foregoing;

                             (f) Officer's Certificates. Within the periods
               provided in paragraphs (a) and (b) above, a certificate of the
               chief financial officer of the Company stating that such officer
               has reviewed the provisions of this Agreement and setting forth:
               (1) the information and computations (in sufficient detail)
               required in order to establish whether the Company was in
               compliance with the requirements of ss. 5.6 through ss. 5.13 at
               the end of the period covered by the financial statements then
               being furnished, and (2) whether there existed as of the date of
               such financial statements and whether, to the best of such
               officer's knowledge, there exists on the date of the certificate
               or existed at any time during the period covered by such
               financial statements any Default or Event of Default and, if any
               such condition or event exists on the date of the certificate,
               specifying the nature and period of existence thereof and the
               action the Company is taking and proposes to take with respect
               thereto;

                             (g) Accountant's Certificates. Within the period
               provided in paragraph (b) above, a certificate of the accountants
               who render an opinion with respect to such financial statements,
               stating that they have reviewed this Agreement, stating that they
               have reviewed the computations made by the Company in connection
               with the requirements of ss. 5.17(f) and whether or not they
               concur with the results of such computations, and stating further
               whether, in making their audit, such accountants have become
               aware of any Default or Event of Default under any of the terms
               or provisions of this Agreement insofar as any such terms or
               provisions pertain to or involve accounting matters or
               determinations, and if any such condition or event then exists,
               specifying the nature and period of existence thereof;

                                       20
<PAGE>   26

                             (h) Material Litigation. Promptly after the Company
               shall have knowledge thereof, written notice of any proceedings
               pending against the Company or any Subsidiary in any court or
               before any governmental authority or arbitration board or
               tribunal which involve the possibility of materially affecting
               adversely the properties, business, prospects, profits or
               condition (financial or otherwise) of the Company and its
               Subsidiaries; and

                             (i) Requested Information. With reasonable
               promptness, such other financial data and information or other
               information necessary to demonstrate compliance with the terms
               and provisions of this Agreement as you or any such Institutional
               Holder may reasonably request.

Without limiting the foregoing, the Company will permit you, so long as you are
the holder of any Note, and each Institutional Holder of the then outstanding
Notes (or such Persons as either you or such Institutional Holder may
designate), to visit and inspect, under the Company's guidance, any of the
properties of the Company or any Subsidiary, to examine all of their books of
account, records, reports and other papers, to make copies and extracts
therefrom and to discuss their respective affairs, finances and accounts with
their respective officers, employees, and independent public accountants (and by
this provision the Company authorizes said accountants to discuss with you the
finances and affairs of the Company and its Subsidiaries) all at such reasonable
times and as often as may be reasonably requested. Any visitation shall be at
the sole expense of you or such Institutional Holder unless a Default or Event
of Default shall have occurred and be continuing, or if the holder of any Note
or of any other evidence of Indebtedness of the Company or any Subsidiary gives
any written notice or takes any other action with respect to a claimed default,
in which case, any such visitation or inspection shall be at the sole expense of
the Company.

SECTION 6.     EVENTS OF DEFAULT AND REMEDIES THEREFOR.

               Section 6.1     Events of Default.  Any one or more of the
following shall constitute an "Event of Default" as such term is used herein:

                             (a) Default shall occur in the payment of interest
               on any Note when the same shall have become due and such default
               shall continue for more than five days; or

                             (b) Default shall occur in the making of any
               required prepayment on any of the Notes as provided in ss. 2.1;
               or

                             (c) Default shall occur in the making of any other
               payment of the principal of any Note or premium, if any, thereon
               at the expressed or any accelerated maturity date or at any date
               fixed for prepayment; or

                             (d) Default shall occur in the observance or
               performance of any covenant or agreement contained in ss. 5.7
               through ss. 5.13; or

                             (e) Default shall occur in the observance or
               performance of any covenant or

                                       21
<PAGE>   27
               agreement contained in ss. 5.6 and such default shall continue
               for more than ten days; or

                             (f) Default shall occur in the observance or
               performance of any other provision of this Agreement which is not
               remedied within 30 days after the earlier of (1) the day on which
               a Responsible Officer of the Company first obtains knowledge of
               such default, or (2) the day on which written notice thereof is
               given to the Company by the holder of any Note; or

                             (g) Default shall be made in the payment when due
               (whether by lapse of time, by declaration, by call for redemption
               or otherwise) of the principal of or interest on any Indebtedness
               for borrowed money (other than the Notes) of the Company or any
               Subsidiary aggregating $10,000,000 or more or of any amount due
               pursuant to any Interest Rate Protection Agreement the
               termination amount of which is equal to $3,000,000 or more and
               such default shall continue beyond the period of grace, if any,
               allowed with respect thereto; or

                             (h) Default or the happening of any event shall
               occur under any indenture, agreement or other instrument under
               which any Indebtedness for borrowed money (other than the Notes)
               of the Company or any Subsidiary aggregating $10,000,000 or more
               may be issued or under any Interest Rate Protection Agreement the
               termination amount of which is equal to $3,000,000 or more and
               such default or event shall continue for a period of time
               sufficient to permit the acceleration of the maturity of any
               Indebtedness for borrowed money of the Company or any Subsidiary
               outstanding thereunder; or

                             (i) Any representation or warranty made by the
               Company herein, or made by the Company in any statement or
               certificate furnished by the Company in connection with the
               consummation of the issuance and delivery of the Notes or
               furnished by the Company pursuant hereto, is untrue in any
               material respect as of the date of the issuance or making
               thereof; or

                             (j) Final judgment or judgments for the payment of
               money aggregating in excess of $10,000,000 is or are outstanding
               against the Company or any Subsidiary or against any Property or
               assets of either and any one of such judgments has remained
               unpaid, unvacated, unbonded or unstayed for a period of 10 days
               from the expiration of all appeals; or

                             (k) A custodian, liquidator, trustee or receiver
               is appointed for the Company or any Subsidiary or for the major
               part of the Property of either and is not discharged within 60
               days after such appointment; or

                             (l) The Company or any Subsidiary becomes insolvent
               or bankrupt, is generally not paying its debts as they become due
               or makes an assignment for the benefit of creditors, or the
               Company or any Subsidiary applies for or consents to the
               appointment of a custodian, liquidator, trustee or receiver for
               the Company or such Subsidiary or for the major part of the
               Property of either; or

                                       22
<PAGE>   28

                             (m) Bankruptcy, reorganization, arrangement or
               insolvency proceedings, or other proceedings for relief under any
               bankruptcy or similar law or laws for the relief of debtors, are
               instituted by or against the Company or any Subsidiary and, if
               instituted against the Company or any Subsidiary, are consented
               to or are not dismissed within 60 days after such institution.

               Section 6.2 Notice to Holders. When any Event of Default
described in the foregoing ss. 6.1 has occurred, or if the holder of any Note or
of any other evidence of indebtedness for borrowed money of the Company gives
any notice or takes any other action with respect to a claimed default, the
Company agrees to give notice within three Business Days of such event to all
holders of the Notes then outstanding.

               Section 6.3 Acceleration of Maturities. When any Event of Default
described in paragraph (a), (b) or (c) of ss. 6.1 has happened and is
continuing, any holder of any Note may, by notice in writing sent in the manner
provided in ss. 9.6 hereof to the Company, declare the entire principal and all
interest accrued on such Note to be, and such Note shall thereupon become
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in paragraphs (a) through (j), inclusive, of said ss. 6.1 has
happened and is continuing, the holder or holders of more than 50% of the
principal amount of Notes at the time outstanding may, by notice in writing in
the manner provided in ss. 9.6 to the Company, declare the entire principal and
all interest accrued on all Notes to be, and all Notes shall thereupon become,
forthwith due and payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived. When any Event of
Default described in paragraph (k), (l) or (m) of ss. 6.1 has occurred, then all
outstanding Notes shall immediately become due and payable without presentment,
demand or notice of any kind. Upon the Notes becoming due and payable as a
result of any Event of Default as aforesaid, the Company will forthwith pay to
the holders of the Notes the entire principal and interest accrued on the Notes
and, to the extent not prohibited by applicable law, an amount as liquidated
damages for the loss of the bargain evidenced hereby (and not as a penalty)
equal to the Make-Whole Amount, determined as of the date on which the Notes
shall so become due and payable. No course of dealing on the part of the holder
or holders of any Notes nor any delay or failure on the part of any holder of
Notes to exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Company further agrees,
to the extent permitted by law, to pay to the holder or holders of the Notes all
costs and expenses incurred by them in the collection of any Notes upon any
Default hereunder or thereon, including reasonable compensation to such holder's
or holders' attorneys for all services rendered in connection therewith.

               Section 6.4 Rescission of Acceleration. The provisions of ss. 6.3
are subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (l), inclusive, of ss. 6.1, the holders of 66-2/3% in aggregate
principal amount of the Notes then outstanding may, by written instrument filed
with the Company, rescind and annul such declaration and the consequences
thereof, provided that at the time such declaration is annulled and rescinded:

                                       23
<PAGE>   29

                             (a) no judgment or decree has been entered for the
               payment of any monies due pursuant to the Notes or this
               Agreement;

                             (b) all arrears of interest upon all the Notes and
               all other sums payable under the Notes and under this Agreement
               (except any principal, interest or Make-Whole Amount on the Notes
               which has become due and payable solely by reason of such
               declaration under ss. 6.3) shall have been duly paid; and

                             (c) each and every Default and Event of Default
               shall have been made good, cured or waived pursuant to ss. 7.1;

and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto.

SECTION 7.     AMENDMENTS, WAIVERS AND CONSENTS.

               Section 7.1 Consent Required. Any term, covenant, agreement or
condition of this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the holders of at least 66-2/3% in aggregate principal
amount of the Notes then outstanding; provided that without the written consent
of the holders of all of the Notes then outstanding, no such amendment or waiver
shall be effective (a) which will change the time of payment (including any
prepayment required by ss. 2.1) of the principal of or the interest on any Note
or change the principal amount thereof or change the rate of interest thereon,
or (b) which will change the time of payment or method of calculation of the
premium, if any, on any Note, or (c) which will change any of the provisions
with respect to optional prepayments, or (d) which will change the percentage of
holders of the Notes required to consent to any such amendment or waiver of any
of the provisions of this ss. 7 or ss. 6 or (e) which will change any of the
provisions of ss. 5.14 or ss. 7.2.

               Section 7.2 Solicitation of Holders. So long as there are any
Notes outstanding, the Company will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of
this Agreement or the Notes unless each holder of Notes (irrespective of the
amount of Notes then owned by it) shall be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with such information as the Company reasonably believes would be
necessary to enable each holder to make an informed decision with respect
thereto. The Company will not, directly or indirectly, pay or cause to be paid
any remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any holder of Notes as consideration for or as an inducement to
entering into by any holder of Notes of any waiver or amendment of any of the
terms and provisions of this Agreement or the Notes unless such remuneration is
concurrently offered, on the same terms, ratably to the holders of all Notes
then outstanding. Promptly and in any event within 30 days of the date of
execution and delivery of any such waiver or amendment, the Company shall
provide a true, correct and complete copy thereof to each of the holders of the
Notes.

                                       24
<PAGE>   30

               Section 7.3 Effect of Amendment or Waiver. Any such amendment or
waiver shall apply equally to all of the holders of the Notes and shall be
binding upon them, upon each future holder of any Note and upon the Company,
whether or not such Note shall have been marked to indicate such amendment or
waiver. No such amendment or waiver shall extend to or affect any obligation not
expressly amended or waived or impair any right consequent thereon.

SECTION 8.     INTERPRETATION OF AGREEMENT; DEFINITIONS.

               Section 8.1 Definitions. Unless the context otherwise requires,
the terms hereinafter set forth when used herein shall have the following
meanings and the following definitions shall be equally applicable to both the
singular and plural forms of any of the terms herein defined:

               "Acquiring Person" shall have the meaning set forth in ss.
2.3(d).

               "Affiliate" shall mean (a) the executive officers and directors
of the Company and (b) any Person (other than a Wholly-owned Subsidiary) (1)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (2) which
beneficially owns or holds 5% or more of any class of the Voting Stock of the
Company or (3) 5% or more of the Voting Stock (or in the case of a Person which
is not a corporation, 5% or more of the equity interest) of which is
beneficially owned or held by the Company or a Subsidiary. The term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise.

               "Attributable Debt" shall mean the face amount of accounts or
notes receivable sold, pledged or otherwise transferred by the Company or any
Subsidiary in respect of any Receivables Financing.

               "Board of Directors" of any Person shall mean the board of
directors of such Person and any executive committee of such board to the
extent, but only to the extent, such executive committee shall be authorized by
the board of directors of such Person to take any action in lieu of such board.

               "Business Day" shall mean any day other than a Saturday, Sunday
or other day on which banks in Birmingham, Alabama or New York, New York are
required by law to close.

               "Called Principal" shall mean, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to ss. 2.2 or ss. 2.3 or
is declared to be immediately due and payable pursuant to ss. 6.3, as the
context requires.

               "Capitalized Lease" shall mean any lease the obligation for
Rentals with respect to which is required to be capitalized on a consolidated
balance sheet of the lessee and its subsidiaries in accordance with GAAP or, if
not so capitalized, for which the amounts of the asset and liability (had such
lease been capitalized) would at such time be so required to be disclosed in a
note to such a balance sheet.

                                       25
<PAGE>   31

               "Capitalized Rentals" of any Person shall mean as of the date of
any determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet or disclosed
in a note to such consolidated balance sheet of such Person.

               "Change of Control" shall have the meaning set forth in ss.
2.3(d).

               "Closing Date" shall have the meaning set forth in ss. 1.2.

               "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations from time to time promulgated thereunder.

               "Company" shall mean Russell Corporation, an Alabama corporation,
and any Person who succeeds to all, or substantially all, of the assets and
business of Russell Corporation.

               "Competitor" shall mean the Sara Lee Corporation, or any
subsidiary or affiliate thereof, or a corporation or entity primarily engaged in
the textile or apparel manufacturing business or which is a member of an
affiliated group that derives more than 20% of its total revenues from the
textile or apparel manufacturing business or any Plan of any thereof.

               "Consolidated Funded Debt" shall mean as of the date of any
determination thereof all Funded Debt of the Company and its Subsidiaries,
determined on a consolidated basis after eliminating intercompany items.

               "Consolidated Interest Charges" shall mean all Interest Charges
on all Indebtedness of the Company and its Subsidiaries, determined on a
consolidated basis after eliminating intercompany items.

               "Consolidated Net Income" for any period shall mean the gross
revenues of the Company and its Subsidiaries for such period less all expenses
and other proper charges (including taxes on income), determined on a
consolidated basis after eliminating earnings or losses attributable to
outstanding Minority Interests, but excluding in any event:

                             (a) net earnings and losses of any Subsidiary
               accrued prior to the date it became a Subsidiary;

                             (b) net earnings and losses of any corporation
               (other than a Subsidiary), substantially all the assets of which
               have been acquired in any manner by the Company or any
               Subsidiary, realized by such corporation prior to the date of
               such acquisition;

                             (c) net earnings and losses of any corporation
               (other than a Subsidiary) with which the Company or a Subsidiary
               shall have consolidated or which shall have merged into or with
               the Company or a Subsidiary prior to the date of such
               consolidation or merger;

                             (d) net earnings of any business entity (other than
               a Subsidiary) in which the

                                       26
<PAGE>   32

               Company or any Subsidiary has an ownership interest unless such
               net earnings shall have actually been received by the Company or
               such Subsidiary in the form of cash distributions;

                             (e) any portion of the net earnings of any
               Subsidiary which for any reason is unavailable for payment of
               dividends to the Company or any other Subsidiary; and

                             (f) any other extraordinary gain (net of the
               related tax expense).

               "Consolidated Net Worth" shall mean as of the date of any
determination thereof the amount of the capital stock accounts (net of treasury
stock at cost and Redeemable Preferred Stock) plus (or minus, in the case of a
deficit) the surplus and retained earnings of the Company and its Subsidiaries,
consolidated in accordance with GAAP and after deducting any Minority Interests
in such Subsidiaries.

               "Consolidated Total Assets" shall mean as of the date of any
determination thereof the total amount of all assets of the Company and its
Subsidiaries consolidated in accordance with GAAP and after deducting any
Minority Interests in such Subsidiaries.

               "Consolidated Total Capitalization" shall mean as of the date of
any determination thereof the sum of (a) Consolidated Funded Debt and (b)
Consolidated Net Worth.

               "Current Debt" of any Person shall mean as of the date of any
determination thereof (a) all Indebtedness of such Person for borrowed money
other than Funded Debt of such Person and (b) Guaranties by such Person of
Current Debt of others.

               "Debt" of any Person shall mean as of the date of any
determination thereof the sum of all (a) Current Debt and (b) Funded Debt of
such Person.

               "Default" shall mean any event or condition the occurrence of
which would, with the lapse of time or the giving of notice, or both, constitute
an Event of Default.

               "Discounted Value" shall mean, with respect to the Called
Principal of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their respective
scheduled due dates to the Settlement Date with respect to such Called
Principal, in accordance with accepted financial practice and at a discount
factor (as converted to reflect the periodic basis on which interest on such
Note is payable, if payable other than on a semi-annual basis) equal to the
Reinvestment Yield with respect to such Called Principal.

               "Environmental Law" shall mean any international, Federal, state
or local statute, law, regulation, order, consent decree, judgment, permit,
license, code, covenant, deed restriction, common law, treaty, convention,
ordinance or other requirement relating to public health, safety or the
environment, including, without limitation, those relating to releases,
discharges or emissions to air, water, land or groundwater, to the withdrawal or
use of groundwater, to the use and handling of polychlorinated biphenyls or
asbestos, to the disposal, treatment, storage or

                                       27
<PAGE>   33

management of hazardous or solid waste, or Hazardous Substances or crude oil, or
any fraction thereof, or to exposure to toxic or hazardous materials, to the
handling, transportation, discharge or release of gaseous or liquid Hazardous
Substances and any regulation, order, notice or demand issued pursuant to such
law, statute or ordinance, in each case applicable to the Property of the
Company and its Subsidiaries or the operation, construction or modification of
any thereof, including without limitation the following: the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986, the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and the Hazardous and Solid Waste Amendments of 1984, the Hazardous Materials
Transportation Act, as amended, the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1976, the Safe Drinking Water Control Act, the
Clean Air Act of 1966, as amended, the Toxic Substances Control Act of 1976, the
Occupational Safety and Health Act of 1977, as amended, the Emergency Planning
and Community Right-to-Know Act of 1986, the National Environmental Policy Act
of 1975, the Oil Pollution Act of 1990 and any similar or implementing state
law, and any state statute and any further amendments to these laws providing
for financial responsibility for cleanup or other actions with respect to the
release or threatened release of Hazardous Substances or crude oil, or any
fraction thereof and all rules, regulations, guidance documents and publications
promulgated thereunder.

               "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.

               "ERISA Affiliate" shall mean any corporation, trade or business
that is, along with the Company, a member of a controlled group of corporations
or a controlled group of trades or businesses, as described in section 414(b)
and 414(c), respectively, of the Code or Section 4001 of ERISA.

               "Event of Default" shall have the meaning set forth in ss. 6.1.

               "Funded Debt" of any Person shall mean, without duplication, (a)
all Indebtedness of such Person for borrowed money or which has been incurred in
connection with the acquisition of assets in each case having a final maturity
of one or more than one year from the date of origin thereof (or which is
renewable or extendible at the option of the obligor for a period or periods
more than one year from the date of origin), including all payments in respect
thereof that are required to be made within one year from the date of any
determination of Funded Debt, whether or not the obligation to make such
payments shall constitute a current liability of the obligor under GAAP, (b) all
Capitalized Rentals of such Person, (c) all Guaranties by such Person of Funded
Debt of others and (d) all Redeemable Preferred Stock of such Person.

               "Funding Subsidiary" shall have the meaning set forth in ss. 9.7.

               "GAAP" shall mean United States generally accepted accounting
principles as in effect at the time.

                                       28
<PAGE>   34

               "Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any Property or assets constituting security therefor, (b) to advance or supply
funds (1) for the purchase or payment of such Indebtedness or obligation, (2) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, (c) to lease Property or to purchase Securities or other Property
or services primarily for the purpose of assuring the owner of such Indebtedness
or obligation of the ability of the primary obligor to make payment of the
Indebtedness or obligation, or (d) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and in Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.

               "Hazardous Substance" shall mean any hazardous or toxic material,
substance or waste, pollutant or contaminant which is regulated under any
statute, law, ordinance, rule or regulation of any local, state, regional or
Federal authority having jurisdiction over the Property of the Company and its
Subsidiaries or its use, including but not limited to any material, substance or
waste which is: (a) defined as a hazardous substance under Section 311 of the
Federal Water Pollution Control Act (33 U.S.C. ss. 1317) as amended; (b)
regulated as a hazardous waste under Section 1004 or Section 3001 of the Federal
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act (42 U.S.C. ss. 6901 et seq.), as amended; (c) defined as a hazardous
substance under Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.), as amended, or (d)
defined or regulated as a hazardous substance or hazardous waste under any rules
or regulations promulgated under any of the foregoing statutes.

               "Indebtedness" of any Person shall mean and include all
obligations of such Person which in accordance with GAAP shall be classified
upon a balance sheet of such Person as liabilities of such Person, and in any
event shall include, without limitation, all (a) obligations of such Person for
borrowed money or which has been incurred in connection with the acquisition of
Property or assets, (b) obligations secured by any Lien upon Property or assets
owned by such Person, even though such Person has not assumed or become liable
for the payment of such obligations, (c) obligations created or arising under
any conditional sale or other title retention agreement with respect to Property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of such Property, (d) Capitalized Rentals, (e)
Guaranties of obligations of others of the character referred to in this
definition and (f) Redeemable Preferred Stock.

               "Institutional Holder" shall mean any of the following Persons:
(a) any bank, savings and

                                       29
<PAGE>   35

loan association, savings institution, trust company or national banking
association, acting for its own account or in a fiduciary capacity, (b) any
charitable foundation, (c) any insurance company, (d) any fraternal benefit
society, (e) any pension, retirement or profit sharing trust or fund within the
meaning of Title I of ERISA or for which any bank, trust company, national
banking association or investment adviser registered under the Investment
Advisers Act of 1940, as amended, is acting as trustee or agent, (f) any
investment company or business development company, as defined in the Investment
Company Act of 1940, as amended, (g) any small business investment company
licensed under the Small Business Investment Act of 1958, as amended, (h) any
broker or dealer registered under the Securities Exchange Act of 1934, as
amended, or any investment adviser registered under the Investment Adviser Act
of 1940, as amended, (i) any government, any public employees' pension or
retirement system, or any other government agency supervising the investment of
public funds, (j) any other entity all of the equity owners of which are
Institutional Holders or (k) any other Person which may be within the definition
of "qualified institutional buyer" as such term is used in Rule 144A, as from
time to time in effect, promulgated under the Securities Act of 1933, as
amended.

               "Interest Charges" for any period shall mean all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made (including, without limitation,
payment-in-kind, zero coupon and other like Securities and the interest
component of Rentals on Capitalized Leases).

               "Investments" shall mean all investments, in cash or by delivery
of Property made, directly or indirectly in any Person, whether by acquisition
of shares of capital stock, Indebtedness or other obligations or Securities or
by loan, advance, capital contribution or otherwise; provided that "Investments"
shall not mean or include (a) routine investments in Property to be used or
consumed in the ordinary course of business or (b) receivables arising from the
sale of goods and services in the ordinary course of business.

               "Interest Rate Protection Agreement" shall mean any agreement,
device or arrangement designed to protect at least one of the parties thereto
from the fluctuations of interest rates, exchange rates or forward rates
applicable to such party's assets, liabilities or exchange transactions,
including, without limitation, dollar-denominated or cross-currency interest
rate exchange agreements, forward currency exchange agreements, dollar
protection agreements, interest rate cap agreements, interest rate collar
agreements, forward rate currency or interest rate options, puts or warrants.

               "Lien" shall mean any interest in Property securing an obligation
owed to, or a claim by, a Person other than the owner of the Property, whether
such interest is based on the common law, statute or contract, and including but
not limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Subsidiary shall be deemed to be the owner of any
Property which it has acquired or holds subject to a conditional sale agreement,

                                       30
<PAGE>   36

Capitalized Lease or other arrangement pursuant to which title to the Property
has been retained by or vested in some other Person for security purposes and
such retention or vesting shall constitute a Lien.

               "Long-Term Lease" shall mean any lease of real or personal
Property (other than a lease relating to data processing equipment not to exceed
$5,000,000 in aggregate total cost and a Capitalized Lease) having an original
term, including any period for which the lease may be renewed or extended at the
option of the lessor, of more than three years.

               "Make-Whole Amount" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Make-Whole Amount shall in no event
be less than zero.

               "Minority Interests" shall mean any shares of stock of any class
of a Subsidiary (other than directors' qualifying shares as required by law)
that are not owned by the Company and/or one or more of its Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests constituting
preferred stock at the voluntary or involuntary liquidating value of such
preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority Interests
in preferred stock.

               "Multiemployer Plan" shall have the same meaning as in ERISA.

               "Net Income Available for Interest Charges" for any period shall
mean the sum of (a) Consolidated Net Income during such period plus (to the
extent deducted in determining Consolidated Net Income), (b) all provisions for
any Federal, state or other income taxes made by the Company and its
Subsidiaries during such period and (c) Consolidated Interest Charges during
such period.

               "Notes" shall have the meaning set forth in ss. 1.1.

               "Overdue Rate" shall mean the lesser of (a) the maximum rate
permitted by applicable law and (b) the greater of (1) 8.65% per annum or (2) 2%
plus the rate which The Bank of New York, New York, New York announces from time
to time as its prime lending rate, as in effect from time to time.

               "PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.

               "Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, and a government or agency or political
subdivision thereof.

               "Plan" shall mean a "pension plan," as such term is defined in
ERISA, established or

                                       31
<PAGE>   37

maintained by the Company or any ERISA Affiliate or as to which the Company or
any ERISA Affiliate contributed or is a member or otherwise may have any
liability.

               "Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.

               "Receivables Financing" shall mean any transaction pursuant to
which funds are advanced to the Company or any Subsidiary in exchange for which
the Company or any of its Subsidiaries sell, pledge or otherwise dispose of any
notes or accounts receivable other than such a transaction (i) between the
Company and a Subsidiary pursuant to which funds are advanced to the Subsidiary
by the Company or (ii) between a Subsidiary and a Wholly-owned Subsidiary which
is the parent of such Subsidiary pursuant to which funds are advanced to the
Subsidiary by such parent.

               "Redeemable Preferred Stock" shall mean any class or series of
capital stock of a Person which class or series of capital stock is entitled to
preference or priority over other classes or series of capital stock of such
Person in respect of voting rights, the payment of dividends or the distribution
of assets upon liquidation and which preferred stock is redeemable by such
Person.

               "Reinvestment Yield" shall mean, with respect to the Called
Principal of any Note, the yield to maturity implied by (i) the yields reported,
as of 10:00 A.M. (New York City local time) on the Business Day next preceding
the Settlement Date with respect to such Called Principal, on the display
designated as "Page 678" on the Telerate Service (or such other display as may
replace page 678 on the Telerate Service) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or if such yields shall not be reported as
of such time or the yields reported as of such time shall not be ascertainable,
(ii) the Treasury Constant Maturity Series yields reported, for the latest day
for which such yields shall have been so reported as of the Business Day next
preceding the Settlement Date with respect to such Called Principal, in Federal
Reserve Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury securities having a constant maturity equal to
the Remaining Average Life of such Called Principal as of such Settlement Date.
Such implied yield shall be determined, if necessary, by (a) converting U.S.
Treasury bill quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between yields reported for
various maturities.

               "Remaining Average Life" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.

               "Remaining Scheduled Payments" shall mean, with respect to the
Called Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were

                                       32
<PAGE>   38

made prior to its scheduled due date.

               "Rentals" shall mean and include as of the date of any
determination thereof all fixed payments (including as such all payments which
the lessee is obligated to make to the lessor on termination of the lease or
surrender of the Property) payable by the Company or a Subsidiary, as lessee or
sublessee under a lease of Property, but shall be exclusive of any amounts
required to be paid by the Company or a Subsidiary (whether or not designated as
rents or additional rents) on account of maintenance, repairs, insurance, taxes
and similar charges. Fixed rents under any so-called "percentage leases" shall
be computed solely on the basis of the minimum rents, if any, required to be
paid by the lessee regardless of sales volume or gross revenues.

               "Reportable Event" shall have the same meaning as in ERISA.

               "Responsible Officer" shall mean the Chief Executive Officer,
the Chief Financial Officer, the Chief Operating Officer, if any, the President
or the Treasurer of the Company.

               "Restricted Investments" shall mean all Investments, other than
Investments described in clauses (a) through (h) of ss. 5.11.

               "Restricted Payments" shall have the meaning set forth in ss.
5.10.

               "Rolling Four Quarters Period" shall mean a period of four
consecutive fiscal quarters treated as a single accounting period.

               "Russell Family" shall have the meaning set forth in ss. 2.3(d).

               "Security" shall have the same meaning as in Section 2(l) of the
Securities Act of 1933, as amended.

               "Settlement Date" shall mean, with respect to the Called
Principal of any Note, the date on which such Called Principal is to be prepaid
pursuant to ss. 2.2 or ss. 2.3 or is declared to be immediately due and payable
pursuant to ss. 6.3, as the context requires.

               "Subordinated Funded Debt" shall mean all Funded Debt of the
Company (a) which has a final maturity later than August 28, 2007, (b) which is
not subject to repayment prior to August 28, 2007 whether by means of a sinking
fund, periodic maturities, required prepayments or other analogous payments or
otherwise, (c) which by its express terms prohibits optional prepayments in
whole and in part on or prior to August 28, 2007 and (d) which is at all times
evidenced by a written instrument or instruments containing subordination
provisions acceptable to the holders of 66-2/3% in aggregate principal amount of
the Notes then outstanding, providing for the subordination thereof to other
Funded Debt of the Company, including, without limitation, to the Notes.

               The term "subsidiary" shall mean as to any particular parent
corporation any corporation of which more than 50% (by number of votes) of the
Voting Stock shall be beneficially owned, directly or indirectly, by such parent
corporation. The term "Subsidiary" shall mean a subsidiary of the Company.

                                       33
<PAGE>   39

               "Subsidiary Stock" shall have the meaning set forth in ss.
5.12(c).

               "Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).

               "Wholly-owned" when used in connection with any Subsidiary shall
mean a Subsidiary of which all of the issued and outstanding shares of stock
(including as "stock" for purposes of this definition any options or warrants to
purchase stock or other Securities exchangeable for or convertible into stock)
(except shares required as directors' qualifying shares) shall be owned by the
Company and/or one or more of its Wholly-owned Subsidiaries.

               Section 8.2 Accounting Principles. Where the character or amount
of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in accordance
with GAAP, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.

               Section 8.3 Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.

SECTION 9.     MISCELLANEOUS.

               Section 9.1 Registered Notes. The Company shall cause to be kept
at its principal office a register for the registration and transfer of the
Notes, and the Company will register or transfer or cause to be registered or
transferred, as hereinafter provided any Note issued pursuant to this Agreement

               At any time and from time to time the holder of any Note which
has been duly registered as hereinabove provided may transfer such Note to any
Person other than a Competitor upon surrender thereof at the principal office of
the Company duly endorsed or accompanied by a written instrument of transfer
duly executed by the registered holder of such Note or its attorney duly
authorized in writing and containing a notation on such Note of the date to
which interest has been paid thereon and of the amount of any prepayments made
on account of the principal thereof.

               The Person in whose name any Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal, premium, if any, and
interest on any Note shall be made to or upon the written order of such
registered holder.

               Section 9.2 Exchange of Notes. At any time and from time to time,
upon not less than

                                       34
<PAGE>   40

ten days' notice to that effect given by the holder of any Note initially
delivered or of any Note substituted therefor pursuant to ss. 9.1, this ss. 9.2
or ss. 9.3, and, upon surrender of such Note at its office, the Company will
deliver in exchange therefor, without expense to such holder, except as set
forth below, a Note for the same aggregate principal amount as the then unpaid
principal amount of the Note so surrendered, or Notes in the minimum
denomination of $1,000,000 (or such lesser amount as shall constitute 100% of
the Notes of such holder) or any amount in excess thereof as such holder shall
specify, dated as of the date to which interest has been paid on the Note so
surrendered or, if such surrender is prior to the payment of any interest
thereon, then dated as of the date of issue, registered in the name of such
Person or Persons as may be designated by such holder, and otherwise of the same
form and tenor as the Notes so surrendered for exchange. The Company may require
the payment of a sum sufficient to cover any stamp tax or governmental charge
imposed upon such exchange or transfer.

               Section 9.3 Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchaser or any subsequent Institutional Holder having a
net worth of $50,000,000 or more is the owner of any such lost, stolen or
destroyed Note, then the affidavit of an authorized officer of such owner,
setting forth the fact of loss, theft or destruction and of its ownership of
such Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as a
condition to the execution and delivery of a new Note other than the written
agreement of such owner to indemnify the Company.

               Section 9.4 Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement and the transactions contemplated
hereby, and all such expenses relating to any amendment, waivers or consents
pursuant to the provisions hereof (whether or not the same are actually executed
and delivered), including, without limitation, any amendments, waivers, or
consents resulting from any work-out, renegotiation or restructuring relating to
the performance by the Company of its obligations under this Agreement and the
Notes. The Company also agrees that it will pay and save you harmless against
any and all liability with respect to stamp and other taxes, if any, which may
be payable or which may be determined to be payable in connection with the
execution and delivery of this Agreement or the Notes, whether or not any Notes
are then outstanding. The Company agrees to protect and indemnify you against
any liability for any and all brokerage fees and commissions payable or claimed
to be payable to any Person authorized by the Company in connection with the
transactions contemplated by this Agreement.

               Section 9.5 Powers and Rights Not Waived; Remedies Cumulative. No
delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to, and are not exclusive of, any rights or
remedies any such holder would otherwise have.

                                       35
<PAGE>   41

               Section 9.6 Notices. All communications provided for hereunder
shall be in writing and, if to you, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to you at your address appearing on Schedule I to this Agreement
or such other address as you or the subsequent holder of any Note initially
issued to you may designate to the Company in writing, and if to the Company,
delivered or mailed by registered or certified mail or overnight air courier, or
by facsimile communication, to the Company at 755 Lee Street, P.O. Box 272,
Alexander City, Alabama 35011-0272, Attention: Chief Financial Officer or to
such other address as the Company may in writing designate to you or to a
subsequent holder of the Note initially issued to you; provided, however, that a
notice to you by overnight air courier shall only be effective if delivered to
you at a street address designated for such purpose in Schedule I, and a notice
to you by facsimile communication shall only be effective if made by confirmed
transmission to you at a telephone number designated for such purpose in
Schedule I and a copy of such facsimile communication is delivered to you by
overnight air courier on the next succeeding Business Day, or, in either case,
as you or a subsequent holder of any Note initially issued to you may designate
to the Company in writing.

               Section 9.7 Reproduction of Documents. This Agreement and all
documents relating hereto, including, without limitation, (a) consents, waivers,
and modifications which may hereafter be executed, (b) documents received by you
at the closing of your purchase of the Notes (except the Notes themselves), and
(c) financial statements, certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, micro-card, miniature photographic or other similar
process and you may destroy any original documents so reproduced. The Company
agrees and stipulates that any such reproduction shall be admissible in evidence
as the original itself in any judicial or administrative proceeding (whether or
not the original is in existence and whether or not such reproduction was made
by you in the regular course of business) and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.

               Section 9.8 Successors and Assigns. This Agreement shall be
binding upon the Company and its successors and assigns and shall inure to your
benefit and to the benefit of your successors and assigns, including each
successive holder or holders of any Notes and this Agreement shall be binding
upon you and your successors and assigns and it shall inure to the benefit of
the Company and its successors and assigns.

               Section 9.9 Survival of Covenants and Representations. All
covenants, representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with the
Closing Date, shall survive the closing and the delivery of this Agreement and
the Notes and all representations and warranties made by you herein shall
survive the Closing Date and delivery of this Agreement and the Notes.

               All covenants, representations and warranties made by the Company
in connection herewith shall be deemed to have been relied upon by you
notwithstanding any investigation heretofore or hereafter made by you or on your
behalf.

                                       36
<PAGE>   42

               Section 9.10 Severability. Should any part of this Agreement for
any reason be declared invalid or unenforceable, such decision shall not affect
the validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.

               Section 9.11 Governing Law. This Agreement and the Notes issued
and sold hereunder shall be governed by and construed in accordance with the
laws of the State of New Jersey.

               Section 9.12 Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.

                            [Signature Page Follows]

                                       37
<PAGE>   43

               The execution hereof by you shall constitute a contract between
us for the uses and purposes hereinabove set forth, and this Agreement may be
executed in any number of counterparts, each executed counterpart constituting
an original but all together only one agreement.

                                        RUSSELL CORPORATION

                                        By:
                                           ----------------------------------
                                        Its:
                                           ----------------------------------

Accepted as of August 28, 1997.

                                        THE PRUDENTIAL INSURANCE
                                            COMPANY OF AMERICA

                                        By:
                                           ----------------------------------
                                            Vice President

                                       38
<PAGE>   44

                                   SCHEDULE I
                               PURCHASER SCHEDULE

<TABLE>
<CAPTION>

                                                                                          Aggregate
                                                                                          Principal
                                                                                          Amount of
                                                                                          Notes to be                      Note
                                                                                          Purchased                  Denomination(s)
                                                                                          ------------               ---------------
<S>                                                                                       <C>                        <C>
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA                                                                                $125,000,000                 $125,000,000
</TABLE>

(1)      All payments on account of Notes held by such purchaser shall be made
         by wire transfer of immediately available funds for credit to:

         Account No. 890-0304-391
         The Bank of New York
         New York, New York
         (ABA No.: 021-000-018)

         Each such wire transfer shall set forth the name of the Company, a
         reference to "6.65% Senior Notes due 2007, Security No. !Inv. 5705!,
         and the due date and application (as among principal, interest and
         Make-Whole Amount) of the payment being made.

(2)      Address for all notices relating to payments:

         The Prudential Insurance Company of America
         c/o Prudential Capital Group
         Three Gateway Center, 12th Floor
         100 Mulberry Street
         Newark, New Jersey 07102-4077

         Attention:  Manager, Investment Operations Group

(3)      Address for all other communications and notices:

         The Prudential Insurance Company of America
         c/o Prudential Capital Group
         4200 Ross Ave, Suite 4200E
         Dallas,  Texas  75201
         Attention:  Managing Director

<PAGE>   45

                                   SCHEDULE I
                               (to Note Agreement)

(4)      Recipient of telephone prepayment notices:

         Manager, Investment Structure and Pricing
         (201) 802-7398
         (201) 802-6432 (facsimile)

(5)      Tax Identification No.: 22-1211670

                                      I-2
<PAGE>   46

                   DESCRIPTION OF CURRENT DEBT, FUNDED DEBT,
                    LONG-TERM LEASES, LIENS AND INVESTMENTS

1.       Current Debt of the Company and its Subsidiaries outstanding as of
July 6, 1997 is as follows:

<TABLE>
<CAPTION>
      DEBT HOLDER                     AMOUNT

<S>                               <C>
AmSouth Bank                      $ 44,700,000
Aliant Bank                          4,150,000
Wachovia Bank & Trust               75,000,000
SunTrust Bank, Atlanta(1)           45,283,600
Chase Manhattan Bank                49,300,000
                                  ------------

    Total Current Debt            $218,433,600
                                  ============
</TABLE>

(1)      $20,283,600 of the amount outstanding represents debt for Russell Corp.
         U.K., Ltd. which is denominated in (pound) (pound) 12,000,000 @ 1.6903
         (pound)/$ = $20,283,600.

2.       Funded Debt (other than Capitalized Rentals) of the Company and its
         Subsidiaries outstanding on the Closing Date is as follows:

<TABLE>
<CAPTION>
          DEBT HOLDER                                AMOUNT

<S>                                              <C>
Prudential Insurance Co. (6.78%)                 $100,000,000
Prudential Insurance Co. (8.83%)                   32,200,000
Allstate Life Insurance (6.72%)                    25,714,285
Connecticut General Life Insurance (6.72%)         21,428,571
Teachers Insurance & Annuity (6.72%)               17,142,858
Trust Company Bank                                 75,000,000
Compass Bank - DeSoto Mills (6.95%)                   103,886
                                                 ------------
    Total Funded Debt                            $271,589,600
                                                 ============
</TABLE>

                                   SCHEDULE II
                              (to Note Agreement)

<PAGE>   47

3.       Long-Term Leases of the Company and its Subsidiaries outstanding on the
         Closing Date are as follows:

<TABLE>
<CAPTION>

           LESSOR                                                               DESCRIPTION

<S>                                                                <C>

Central Plaza Properties                                           Cross Creek Outlet, Mt. Airy, NC
Clyde E. Turner                                                    Cross Creek Hillsville, VA plant
The Venture Properties Development, Inc.                           Cross Creek North Wilkesboro, VA plant
Stone/Snyder General Partnership                                   Baltimore, MD sales office
Westerville Center                                                 Westerville, OH sales office
Certified, Inc.                                                    Snellville, GA sales office
Dermody Industrial Group                                           Sparks, NV warehouse*
The Rebiero Corporation                                            Reno, NV sales office
Ben Chen                                                           Santa Ana, CA sales office
City of Alexander City                                             Alexander City, AL hangar
Mid-Georgia Landholdings, Inc.                                     Atlanta, GA sourcing office
Montgomery Warehouses, LLC                                         Montgomery, AL warehouse
Parkway Tower Associates                                           Dallas, TX sales office
Prentiss Properties Acquisition Partners, L.P.                     Dallas, TX sales office
Helmsley-Spear, Inc.                                               New York, NY sales office
Emerald Real Estate Investments, LLC                               Atlanta, GA sales office
The Irvine Company                                                 Irvine, CA sales office*
Pelmad Corporation                                                 Miami, FL sales office and warehouse
Fitzpatrick Family Partners, Ltd.                                  Montgomery, AL plant
155th East 50th Company                                            New York, NY apartment
L.A.W. (Ladd Engineering)                                          Ft. Payne, AL warehouse
Irby C. Harris                                                     Ft. Payne, AL warehouse
SH & S Partnership                                                 Bentonville, AR sales office
Town of Columbia                                                   Columbia, AL plant
Town of Slocomb                                                    Slocomb, AL plant
Charter Oaks                                                       Valdosta, GA outlet store
                                                                   Foley, AL outlet store
Horizon Outlet Center                                              Traverse City, MI outlet store
R.R. Park City, Inc.                                               Park City, UT outlet store
Marco Island Partners                                              Marco Island, FL outlet store
SOS Associates, Ltd.                                               Sarasota, FL outlet store
Castle Rock Factory Shops
Limited Partnership                                                Castle Rock, CO outlet store
Colonial Realty Limited Partnership                                Columbus, GA outlet store
Dalton Factory Stores                                              Dalton, GA outlet store
Wigwam Outlet Stores, L.L.C                                        Goodyear, AZ outlet store
Retail Developers Ltd.                                             Boaz, AL outlet store
Slidell Factory Outlets, Ltd.                                      Slidell, LA outlet store
Ohio Factory Shops Partnership                                     Jeffersonville, OH outlet store
New Plan Factory Malls, Inc.                                       Branson, MO outlet store
</TABLE>

                                      II-2

<PAGE>   48

<TABLE>
<S>                                                                <C>
Tanger Properties Limited Partnership                              Pigeon Forge, TN outlet store
                                                                   Riverhead, NY outlet store
                                                                   Locust Grove, GA outlet store
                                                                   Branson MO outlet store
                                                                   Commerce, GA outlet store
                                                                   San Marcos, TX outlet store
Orlando Outlet World, Ltd.                                         Orlando, FL outlet store
New Plan Realty Trust                                              St. Augustine, FL outlet store
                                                                   Osage Beach, MO outlet store
Benderson 85-1 Trust                                               Sedona, AZ outlet store
Nags Head Associates Limited Partnership                           Nags Head, NC outlet store
Waccamaw Factory Stores                                            Myrtle Beach SC outlet store
Factory Stores of America, Inc.                                    Nashville, TN outlet store
Williams Investment Company                                        Adel, GA outlet store
The Cordish Company                                                Ocean City, MD outlet store
Flatwoods Factory Outlet Stores, Inc.                              Flatwoods, WV outlet store
USA Factory Stores, Inc.                                           Opelika, AL outlet store
Inmobiliaria Hondurena
  del Valle, S.A. de C.V                                           Choloma, Honduras plant
Dica Comercio Adminsitacao
  e Empreendimentos Ltda.                                          Sao Paulo, Brazil sales office
Maria da Graca Nogueira Barone                                     Sao Paulo, Brazil apartment
Jet Forward Development Limited                                    Kowloon, Hong Kong sales office
Dazooby Investments Pty. Ltd.                                      Melbourne, Australia sales office and warehouse
David Smith Packaging                                              West Lothian, Scotland warehouse
West Lothian Council                                               West Lothian, Scotland warehouse
Urbanizadora                                                       Alicante, Spain sales office
Denical, S.A                                                       Alicante, Spain apartment
Novotel Corporation                                                Krefeld, Germany sales office
Eurobail Company                                                   Paris, France sales office
Elettomeccanica Lampredi Srl                                       Scandicci, Italy sales office
MS-Medox                                                           Prague, Czech Republic sales office
Europaint                                                          Ternat, Belgium sales office and warehouse#
                                                                   London, England sales office*
Orbit Investments                                                  Wilmslow, England sales office#
Nestle Company                                                     Richmond-Surrey, England sales office#
Inmobiliaria Mirabel Sa De                                         Mexico City, Mexico sales office
Mrs. Luba Clement                                                  San Juan del Rio, Mexico distribution center
Arrendadora Valle de Oro                                           San Juan del Rio, Mexico warehouse
Mrs. Graciela Garcia Galva                                         San Juan del Rio, Mexico warehouse
Mr. Mauricio Perez Hagg                                            San Juan del Rio, Mexico warehouse
</TABLE>

* Property subleased to third party.
# Currently negotiating termination.

4.       Capitalized Leases of the Company and its Subsidiaries outstanding on
         the Closing Date are

                                      II-3
<PAGE>   49

         as follows:

<TABLE>
<CAPTION>

                DEBT HOLDER                             AMOUNT

<S>                                                   <C>
Industrial Development Board of Geneva, AL            $2,575,000
Industrial Development Board of Columbia, AL           2,575,000
Industrial Development Board of Ashland, AL            1,800,000
                                                      ----------

    Total Capital Leases                              $6,950,000
                                                      ==========
</TABLE>

5.       Liens securing Indebtedness of the Company and its Subsidiaries
         existing on the Closing Date are as follows:

<TABLE>
<CAPTION>

                DEBT HOLDER                             AMOUNT

<S>                                                   <C>
Industrial Development Board of Geneva, AL            $2,575,000
Industrial Development Board of Columbia, AL           2,575,000
Industrial Development Board of Ashland, AL            1,800,000
                                                      ----------
    Total Liens                                       $6,950,000
                                                      ==========
</TABLE>

                                      II-4
<PAGE>   50

6.       Investments of the Company in the Subsidiaries outstanding on the
         Closing Date are as follows:

<TABLE>
<CAPTION>

    INVESTMENTS IN SUBSIDIARIES:                  AMOUNT

<S>                                          <C>
Cross Creek Apparel, Inc.                    $ 40,832,622.20
Russell Corp, U.K., Ltd.                       53,215,329.02
Russell Athletic, Inc.                          7,545,200.06
Russell Development Corporation                 3,916,384.06
Russell Athletic West                           3,315,936.77
Habersham Mills                                 3,325,465.00
Russell Mill Stores, Inc.                          86,634.33
Alexander City Flying Service, Inc.                62,486.28
DeSoto Mills, Inc.                             10,145,437.99
Russell Mexico S.A. de C.V                      5,039,011.22
Russell CZ s.r.o                                   15,237.50
Russell Foreign Sales, Ltd.                              -0-
Russell Spain, S.L                                  4,404.24
Russell Corp. Australia PTY.LTD                 4,997,066.39
Russell Germany                                    17,717.93
Russell Far East                                    1,294.00
Russell Brazil                                  1,939,000.00
Russell Honduras                                    5,101.00
Russell Japan                                      95,075.12
                                             ---------------
    Total Investments                        $134,559,402.80
                                             ===============
</TABLE>

                                      II-5
<PAGE>   51

                                  SCHEDULE III
                          SUBSIDIARIES OF THE COMPANY

<TABLE>
<CAPTION>

                                                                         PERCENTAGE OF VOTING
                                                                        STOCK OWNED BY COMPANY
                                               JURISDICTION OF             AND EACH OTHER
    NAME OF SUBSIDIARY                          INCORPORATION                 SUBSIDIARY
   --------------------                        ---------------          ----------------------

<S>                                            <C>                      <C>
Cross Creek Apparel, Inc.                       North Carolina                    100%

Eagle R Holdings Limited                        United Kingdom                    100%

Russell Corp. UK, Ltd.                          United Kingdom                    100%

Citygate Textiles Limited                       United Kingdom                    100%

Russell Athletic, Inc.                             Georgia                        100%

Russell Mills Stores, Inc.                         Delaware                       100%

Russell Athletic West, Inc.                         Nevada                        100%

Habersham Mills                                    Georgia                        100%

Alexander City Flying                              Alabama                        100%
Service, Inc.

Russell Development                                Georgia                        100%
Corporation

DeSoto Mills, Inc.                                 Georgia                        100%

Russell Germany, GmbH                              Germany                        100%

Russell France SARL                                 France                        100%

Russell Spain, S.L.                                 Spain                         100%

Russell Italy Srl                                   Italy                         100%

Russell Corp. Canada Ltd.                           Canada                        100%

Russell CZ s.r.o                                Czech Republic                    100%

Russell Corp. Far East, Ltd.                      Hong Kong                       100%
</TABLE>

                                  SCHEDULE III
                              (to Note Agreement)

<PAGE>   52

<TABLE>
<S>                                               <C>                             <C>
Russell Mexico, S.A. de C.V.                        Mexico                        100%

Russell Corp. Australia PTY. LTD.                 Australia                       100%

Russell Foreign Sales, Ltd.                        Barbados                       100%

Russell Corp. Bangladesh Limited                  Bangladesh                      100%

Russell de Honduras S.A. de C.V.                   Honduras                       100%

Russell do Brasil Ltda.                             Brazil                        100%

Russell Yucatan S.A. de C.V.*.                      Mexico                        100%
</TABLE>

* Incorporation in process.

                                  SCHEDULE III
                              (to Note Agreement)

<PAGE>   53

                                                                       EXHIBIT A

                               RUSSELL CORPORATION

                                6.65% Senior Note
                               Due August 28, 2007

No. R-1                                                          August 28, 1997
PPN 782352\A
INV !5705!

$125,000,000

         RUSSELL CORPORATION, an Alabama corporation (the "Company"), for value
received, hereby promises to pay to THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
or registered assigns on the twenty-eighth day of August, 2007 the principal
amount of ONE HUNDRED TWENTY-FIVE MILLION DOLLARS ($125,000,000) and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the principal amount from time to time remaining unpaid hereon at the rate of
6.65% per annum from the date hereof until maturity, payable quarterly on
November 28, February 28, May 28, and August 28 in each year (commencing on
November 28, 1997) and at maturity. The Company agrees to pay interest on
overdue principal (including any overdue required or optional prepayment of
principal) and premium, if any, and (to the extent legally enforceable) on any
overdue installment of interest, at the Overdue Rate after the due date, whether
by acceleration or otherwise, until paid. "Overdue Rate" shall mean the lesser
of (a) the maximum rate permitted by applicable law and (b) the greater of (1)
8.65% per annum or (2) 2% plus the rate which The Bank of New York, New York,
New York announces from time to time as its prime lending rate, as in effect
from time to time.

         Both the principal hereof and interest hereon are payable at the home
office of the registered holder of this Note in coin or currency of the United
States of America which at the time of payment shall be legal tender for the
payment of public and private debts. If any amount of principal, premium, if
any, or interest on or in respect of this Note becomes due and payable on any
date which is not a Business Day, such amount shall be payable on the next
succeeding Business Day and the period of extension shall be included in the
computation of interest payable on such Business Day. "Business Day" means any
day other than a Saturday, Sunday or other day on which banks in Birmingham,
Alabama or New York, New York are required by law to close.

         This Note is one of the 6.65% Senior Notes Due August 28, 2007 (the
"Notes") of the Company in the aggregate principal amount of $125,000,000 issued
under and pursuant to the terms and provisions of the Note Agreement, dated as
of August 28, 1997 (the "Note Agreement"), entered into by the Company with the
original Purchaser therein referred to and this Note and the holder hereof are
entitled equally and ratably with the holders of all other Notes

<PAGE>   54

outstanding under the Note Agreement to all the benefits provided for thereby or
referred to therein. Reference is hereby made to the Note Agreement for a
statement of such rights and benefits.

         This Note and the other Notes outstanding under the Note Agreement may
be declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreement.

         The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.

         This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.

         THIS NOTE AND SAID NOTE AGREEMENT ARE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY.

                                                    RUSSELL CORPORATION

                                                    By:
                                                       -------------------------
                                                       Title

          THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE LAWS OF ANY STATE AND MAY BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF ONLY IF REGISTERED OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AVAILABLE UNDER SUCH ACT AND APPLICABLE STATE LAW.

                                       2
<PAGE>   55

                                                                       EXHIBIT B

                         REPRESENTATIONS AND WARRANTIES

The Company represents and warrants to you as follows:

1.       Subsidiaries. (a) Schedule III attached to the Agreements states the
name of each of the Company's Subsidiaries, its jurisdiction of incorporation
and the percentage of its Voting Stock owned by the Company and/or its
Subsidiaries. The Company and each Subsidiary has good and marketable title to
all of the shares it purports to own of the stock of each Subsidiary, free and
clear in each case of any Lien. All such shares have been duly issued and are
fully paid and non-assessable.

         (b)      The Company, Cross Creek Apparel, Inc., Habersham Mills,
DeSoto Mills, Inc. and Alexander City Flying Service, Inc. when consolidated in
accordance with GAAP constitute 89% or more of the consolidated assets, earnings
and revenues of the Company and its Subsidiaries.

         2.       Corporate Organization and Authority. The Company, and each
Subsidiary,

                  (a)      is a corporation duly organized, validly existing and
         in good standing under the laws of its jurisdiction of incorporation;

                  (b)      has all requisite power and authority and all
         necessary licenses and permits to own and operate its properties and to
         carry on its business as now conducted and as presently proposed to be
         conducted; and

                  (c)      is duly licensed or qualified and is in good standing
         as a foreign corporation in each jurisdiction wherein the nature of the
         business transacted by it or the nature of the Property owned or leased
         by it makes such licensing or qualification necessary except where the
         failure to be so licensed or qualified would not materially affect
         adversely the properties, business, prospects, profits or condition
         (financial or otherwise) of the Company and its Subsidiaries.

         3.       Financial Statements. (a) The consolidated balance sheets of
the Company and its consolidated Subsidiaries as of December 31, 1994, December
30, 1995, and January 4, 1997 and the statements of income, stockholders' equity
and cash flows for the fiscal years ended on said dates, each accompanied by a
report thereon containing an opinion unqualified as to scope limitations imposed
by the Company and otherwise without qualification except as therein noted, by
Ernst & Young LLP (or their appropriate predecessor), have been prepared in
accordance with GAAP consistently applied except as therein noted, are correct
and complete and present fairly, in all material respects, the financial
position of the Company and its Subsidiaries as of such dates and the results of
their operations and changes in their cash flows for such periods. The unaudited
consolidated balance sheets of the Company and its consolidated Subsidiaries as
of July 6, 1997

<PAGE>   56

and the unaudited statements of income and cash flows for the 13-week period and
the 26-week period ended on said date prepared by the Company have been prepared
in accordance with GAAP consistently applied, are correct and complete and
present fairly, in all material respects, the financial position of the Company
and its consolidated Subsidiaries as of said date and the results of their
operations and changes in their financial position or cash flows for such period
subject to year-end audit adjustments.

         (b)      Since January 4, 1997, there has been no change in the
condition, financial or otherwise, of the Company and its consolidated
Subsidiaries as shown on the consolidated balance sheet as of such date except
changes in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse.

         4.       Indebtedness. (a) Schedule II attached to the Agreement
correctly describes all Current Debt, Funded Debt, Capitalized Leases, Long-Term
Leases, Liens securing Indebtedness and Investments of the Company and its
Subsidiaries outstanding on the Closing Date.

         (b)      The Company has furnished to the Purchaser true, correct and
complete copies of each instrument under which any Indebtedness of the Company
is or will be issued or by which it is or may be secured and any other
instrument in respect of Indebtedness of the Company if such instrument contains
covenants or other provisions that have or could have the effect of (1)
restricting the types of provisions that any other agreement to which the
Company may become a party, may contain or (2) restricting the conduct of the
Company's business or the incurrence by the Company of Indebtedness.

         5.       Full Disclosure. Neither the financial statements referred to
in paragraph 4 hereof nor the Agreements, or any other written statement
furnished by or on behalf of the Company to you in connection with the
negotiation of the sale of the Notes, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact peculiar to the
Company or its Subsidiaries which the Company has not disclosed to you in
writing which materially affects adversely nor, so far as the Company can now
foresee, will materially affect adversely the properties, business, prospects,
profits or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole.

         6.       Pending Litigation. There are no proceedings pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
Subsidiary in any court or before any governmental authority or arbitration
board or tribunal which involve the possibility of materially affecting
adversely the properties, business, prospects, profits or condition (financial
or otherwise) of the Company and its Subsidiaries.

         7.       Title to Properties. The Company and each Subsidiary has good
and marketable title in fee simple (or its equivalent under applicable law) to
all material parcels of real Property and has good title to all the other
material items of Property it purports to own, including that reflected in the
most recent balance sheet referred to in paragraph 3 hereof, except as sold or
otherwise disposed of in the ordinary course of business and except for Liens
permitted by the Agreement.

<PAGE>   57

         8.       Leases. The Company and each Subsidiary has complied with all
obligations under all leases to which it is a party except where the failure to
comply with such leases would not materially affect adversely the properties,
business, prospects, profits or condition (financial or otherwise) of the
Company and its Subsidiaries.

         9.       Patents and Trademarks. The Company and each Subsidiary owns
or possesses all the patents, trademarks, trade names, service marks,
copyrights, licenses and rights with respect to the foregoing necessary for the
present and planned future conduct of its business, without any known conflict
with the rights of others.

         10.      Sale is Legal and Authorized. The sale of the Notes and
compliance by the Company with all of the provisions of the Agreement and the
Notes;

                  (a)      are within the corporate powers of the Company;

                  (b)      will not violate any provisions of any law or any
         order of any court or governmental authority or agency and will not
         conflict with or result in any breach of any of the terms, conditions
         or provisions of, or constitute a default under the Articles of
         Incorporation or By-laws of the Company or any indenture or other
         agreement or instrument to which the Company is a party or by which it
         may be bound or result in the imposition of any Liens or encumbrances
         on any property of the Company; and

                  (c)      have been duly authorized by proper corporate action
         on the part of the Company and its stockholders, executed and delivered
         by the Company and the Agreement and the Notes constitute the legal,
         valid and binding obligations, contracts and agreements of the Company
         enforceable in accordance with their respective terms.

         The obligations of the Company under the Agreement and the Notes rank
at least pari passu in right of payment with all other unsecured Indebtedness
(actual or contingent) of the Company.

         11.      No Defaults. No Default or Event of Default has occurred and
is continuing. The Company is not in default in the payment of principal,
premium, if any, or interest on any Indebtedness for borrowed money and is not
in default under any instrument or instruments or agreements under and subject
to which any Indebtedness for borrowed money has been issued and no event has
occurred and is continuing under the provisions of any such instrument or
agreement which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.

         12.      Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company of the
Agreement or the Notes or compliance by the Company with any of the provisions
of the Agreement or the Notes.

         13.      Taxes. All tax returns required to be filed by the Company or
any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
assessments, fees and other governmental

<PAGE>   58

charges upon the Company or any Subsidiary or upon any of their respective
properties, income or franchises, which are shown to be due and payable in such
returns have been paid. For all taxable years ending on or before January 4,
1992, the Federal income tax liability of the Company and its Subsidiaries has
been satisfied and either the period of limitations on assessment of additional
Federal income tax has expired or the Company and its Subsidiaries have entered
into an agreement with the Internal Revenue Service closing conclusively the
total tax liability for the taxable year. The Company does not know of any
proposed additional tax assessment against it for which adequate provision has
not been made on its accounts, and no material controversy in respect of
additional Federal or state income taxes due since said date is pending or to
the knowledge of the Company threatened. The provisions for taxes on the books
of the Company and each Subsidiary are adequate for all open years, and for its
current fiscal period.

         14.      Use of Proceeds. The net proceeds from the sale of the Notes
will be used to refinance short-term debt and for other corporate purposes. None
of the transactions contemplated in the Agreements (including, without
limitation thereof, the use of proceeds from the issuance of the Notes) will
violate or result in a violation of Section 7 of the Securities Exchange Act of
1934, as amended, or any regulation issued pursuant thereto, including, without
limitation, Regulations G, T and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II. None of the proceeds from the sale of the
Notes will be used to purchase, or refinance any borrowing the proceeds of which
were used to purchase, any "security" within the meaning of the Securities
Exchange Act of 1934, as amended.

         15.      Private Offering. Neither the Company, directly or indirectly,
nor any agent on its behalf has offered or will offer the Notes or any similar
Security or has solicited or will solicit an offer to acquire the Notes or any
similar Security from or has otherwise approached or negotiated or will approach
or negotiate in respect of the Notes or any similar Security with any Person
other than the Purchasers. Neither the Company, directly or indirectly, nor any
agent on its behalf has offered or will offer the Notes or any similar Security
or has solicited or will solicit an offer to acquire the Notes or any similar
Security from any Person so as to bring the issuance and sale of the Notes
within the provisions of Section 5 of the Securities Act of 1933, as amended.

         16.      ERISA. The consummation of the transactions provided for in
the Agreements and compliance by the Company with the provisions thereof and the
Notes issued thereunder will not involve any prohibited transaction within the
meaning of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended. Each Plan complies in all material respects with all applicable
statutes and governmental rules and regulations, and (a) no Reportable Event
(other than a merger of Plans of the Company) has occurred and is continuing
with respect to any Plan, (b) neither the Company nor any ERISA Affiliate has
withdrawn from any Plan or Multiemployer Plan that is subject to Title IV of
ERISA or instituted steps to do so, and (c) no steps have been instituted to
terminate any Plan that is subject to Title IV or ERISA. No condition exists or
event or transaction has occurred in connection with any Plan which could result
in the incurrence by the Company or any ERISA Affiliate of any material
liability, fine or penalty. No Plan maintained by the Company or any ERISA
Affiliate, nor any trust created thereunder, has incurred any "accumulated
funding deficiency" as defined in Section 302 of ERISA nor does the present
value of all benefits vested under all Plans exceed, as of the last annual
valuation date, the value of the assets of the Plans allocable to such vested
benefits. Neither the Company nor any ERISA

<PAGE>   59

Affiliate has any contingent liability with respect to any post-retirement
"welfare benefit plan" (as such term is defined in ERISA) except as follows: (i)
retirees and covered dependents may be entitled to continuation coverage under
the Company's medical benefits plans as required by Part 6 of Subtitle B of
Title I of ERISA and (ii) the Company maintains a plan under which a death
benefit of $2,000 is payable with respect to (A) employees and (B) retired
employees who have completed 20 years of continuous service as of the date of
their retirement.

         17.      Compliance with Law. Neither the Company nor any Subsidiary
(a) is in violation of any law, ordinance, franchise, governmental rule or
regulation to which it is subject (including, without limitation, any
Environmental Law) or (b) has failed to obtain any license, permit, franchise or
other governmental authorization necessary to the ownership of its property or
to the conduct of its business; which violation or failure to obtain would
materially affect adversely the business, prospects, profits, properties or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole, or materially impair the ability of the Company to perform its
obligations contained in the Agreements or the Notes. Neither the Company nor
any Subsidiary is in default with respect to any order of any court or
governmental authority or arbitration board or tribunal.

         18.      Investment Company Act Status. Neither the Company nor any
Subsidiary is an "investment company," or a company "controlled" by an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.

         19.      No Violation. Neither the Company nor any Subsidiary is in
violation of (a) its charter documents or By-laws or (b) any provision of any
agreement, indenture or other instrument to which the Company or any such
Subsidiary is a party or by which it may be bound, except where such violation
would not materially affect adversely the properties, business, profits,
prospects or condition (financial or otherwise) of the Company and its
Subsidiaries, and neither the Company nor any Subsidiary is a party to, or bound
by, any agreement, indenture or other instrument whereby performance in
accordance with the terms and provisions thereof could materially affect
adversely the business, prospects, profits or condition (financial or otherwise)
of the Company and its Subsidiaries.

<PAGE>   60

                                                                       EXHIBIT C

                        DESCRIPTION OF CLOSING OPINION OF
                       INDEPENDENT COUNSEL TO THE COMPANY

         The closing opinion of Bradley, Arant, Rose & White, independent
counsel for the Company, which is called for by ss. 4.1 of the Agreements, shall
be dated the Closing Date and addressed to the Purchaser, shall bE satisfactory
in scope and form to the Purchaser and shall be to the effect that:

                  1. The Company is a corporation, duly incorporated, validly
         existing and in good standing under the laws of the State of Alabama,
         has the corporate power and the corporate authority to execute and
         perform the Agreements and to issue the Notes and has the full
         corporate power and the corporate authority to conduct the activities
         in which it is now engaged.

                  2. Each of Alexander City Flying Service, Inc., DeSoto Mills,
         Inc., Habersham Mills and Cross Creek Apparel, Inc. (collectively, the
         "Specified Subsidiaries") is a corporation duly organized, validly
         existing and in good standing under the laws of its jurisdiction of
         incorporation and all of the issued and outstanding shares of capital
         stock of each Specified Subsidiary have been duly issued, are fully
         paid and non-assessable and are owned by the Company.

                  3. The Agreement has been duly authorized by all necessary
         corporate action on the part of the Company, have been duly executed
         and delivered by the Company and constitutes the legal, valid and
         binding contract of the Company enforceable in accordance with their
         terms, subject to bankruptcy, insolvency, fraudulent conveyance or
         similar laws affecting creditors' rights generally, and general
         principles of equity (regardless of whether the application of such
         principles is considered in a proceeding in equity or at law).

                  4. The Notes have been duly authorized by all necessary
         corporate action on the part of the Company, have been duly executed
         and delivered by the Company and constitute the legal, valid and
         binding obligations of the Company enforceable in accordance with their
         terms, subject to bankruptcy, insolvency, fraudulent conveyance or
         similar laws affecting creditors' rights generally, and general
         principles of equity (regardless of whether the application of such
         principles is considered in a proceeding in equity or at law).

                  5. No approval, consent or withholding of objection on the
         part of, or filing, registration or qualification with, any
         governmental body, Federal or state, is necessary in connection with
         the execution and delivery of the Agreement or the Notes.

                  6. The issuance and sale of the Notes and the execution,
         delivery and performance by the Company of the Agreement do not
         conflict with or result in any breach of any of the provisions of or
         constitute a default under or result in the creation or imposition of
         any Lien upon any of the Property of the Company pursuant to the
<PAGE>   61

         provisions of the Articles of Incorporation or By-laws of the Company
         or any agreement or other instrument known to such counsel to which the
         Company is a party or by which the Company may be bound.

                  7. There are no proceedings pending, or to the knowledge of
         such counsel threatened against the Company or any Subsidiary, in any
         court or before any arbitration board or tribunal which could
         materially affect adversely the properties, business, prospects,
         profits or condition (financial or otherwise) of the Company and its
         Subsidiaries.

                  8. The issuance of the Notes and the use of the proceeds of
         the sale of the Notes in accordance with the provisions of and as
         contemplated by the Agreement does not violate or conflict with
         regulations, G, T or X of the Board of Governors of the Federal Reserve
         System, 12 C.F.R. Chapter II.

                  9. The courts of the State of Alabama will give effect to
         those provisions of the Agreement and the Notes which stipulate that
         such documents shall be governed by, and construed in accordance with,
         the laws of the State of New Jersey.

                  10. The issuance, sale and delivery of the Notes under the
         circumstances contemplated by the Agreement does not, under existing
         law, require the registration of the Notes under the Securities Act of
         1933, as amended, or the qualification of an indenture under the Trust
         Indenture Act of 1939, as amended.

         The opinion of Bradley, Arant, Rose & White shall cover such other
matters relating to the sale of the Notes as the Purchaser may reasonably
request With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and officers of the Company. The opinion of Bradley, Arant, Rose &
White, independent counsel for the Company, shall state that it may be relied
upon by permitted successors and assigns of the Purchaser.

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