Document:

Deposit Account Control Agreement

 Exhibit 10.2 
 EXECUTION COPY  
 (Lockbox – With Activation) 
 DEPOSIT ACCOUNT CONTROL AGREEMENT 
 This Agreement is entered into as of May 26, 2006, among Unifi Kinston, LLC (“Company”), Bank of America, N.A. (“Lender”), as agent for itself and the financial institutions party thereto from time to
time as lenders (“Agent”), under that certain Amended and Restated Credit Agreement (as amended, restated, supplemented, modified, replaced or refinanced from time to time, the “Credit Agreement”), dated as of May 26, 2006,
among Unifi, Inc. (the “Parent”) and certain of its domestic subsidiaries, including, without limitation, the Company, as borrowers, such lenders and the Lender, in its capacity as Agent, and Bank of America, N.A. (“Bank”)
with respect to the following: 
 A. Bank has agreed to establish and maintain for Company post office number 404523 (the “Lockbox
Address”) and deposit account number 3752207307 (the “Account”). Bank performs the services described in Exhibit A, which includes receiving mail at the Lockbox Address, processing it and depositing checks and other payment
instructions (“Checks”) into the Account (the “Lockbox Service”). 
 B. Company has assigned to Lender and the Notes
Agent (as defined below) a security interest in the Account and in Checks mailed to the Lockbox Address. 
 C. Company, Lender and Bank are
entering into this Agreement to evidence the security interest of the Lender and the Notes Agent in the Account and such Checks and to provide for the disposition of net proceeds of Checks deposited in the Account. 
 Accordingly, Company, Lender and Bank agree as follows: 
 1. (a) This Agreement evidences Lender’s control over the Account and the Account is a “Deposit Account” (as such term is defined in Section 9-102(29) of the Uniform Commercial Code, as in
effect from time to time in New York (the “UCC”)). Notwithstanding anything to the contrary in the agreement between Bank and Company governing the Account, Bank will comply with instructions originated by Lender as set forth herein
directing the disposition of funds in the Account without further consent of the Company. 
 (b) Company represents and warrants to Lender
and Bank that it has not assigned or granted a security interest in the Account or any Check deposited in the Account, except to Lender and the Notes Agent. Bank represents that it qualifies as a “Bank” within the meaning of
Section 9-102(8) of the UCC and agrees that, for the purposes of this Agreement, its “jurisdiction” (as determined by the rules set forth in Section 9-304(b) of the UCC) be shall be the State of New York. 

 (c) Company will not permit the Account to become subject to any other pledge, assignment, lien, charge
or encumbrance of any kind, other than Lender’s security interest referred to herein. 
 2. During the Activation Period (as defined below), Bank shall
prevent Company from making any withdrawals from the Account. Prior to the Activation Period, Company may operate and transact business through the Account in its normal fashion, including making withdrawals from the Account, but covenants to Lender
it will not close the Account. Bank shall have no liability in the event Company breaches this covenant to Lender. A reasonable period of time following the commencement of the Activation Period, and continuing on each Business Day thereafter, Bank
shall transfer all available balances in the Account to Lender at its account specified in the Notice (as defined below). The “Activation Period” means the period which commences within a reasonable period of time not to exceed two
Business Days after Bank’s acknowledgement of receipt of a written notice from Lender in the form of Exhibit B (the “Notice”). A “Business Day” is each day except Saturdays, Sundays and Bank holidays. Funds are not available
if, in the reasonable determination of Bank, they are subject to a hold, dispute or legal process preventing their withdrawal. 
 3. Bank agrees it shall not
offset, charge, deduct or otherwise withdraw funds from the Account, except as permitted by Section 4, until it has been advised in writing by Lender that all of Company’s obligations that are secured by the Checks and the Account are paid
in full. Lender shall notify Bank promptly in writing upon payment in full of Company’s obligations. 
 4. Bank is permitted to charge the Account:

 (a) for its fees and charges relating to the Account or associated with the Lockbox Service and this Agreement; and 
 (b) in the event any Checks deposited into the Account is returned unpaid for any reason or for any breach of warranty claim. 
 (c) for any account adjustments as it relates to encoding errors or other adjustments as a result of customary banking practices. 
 5. (a) If the balances in the Account are not sufficient to compensate Bank for any fees, account adjustments or charges due Bank in connection with the Account,
the Lockbox Service or this Agreement, Company agrees to pay Bank on demand the amount due Bank. Company will have breached this Agreement if it has not paid Bank, within five days after such demand, the amount due Bank. 
 (b) If the balances in the Account are not sufficient to compensate Bank for any account adjustment as described in Section 4 or returned Checks,
Company agrees to pay Bank on demand the amount due Bank. If Company fails to so pay Bank immediately upon demand, Lender agrees to pay Bank within five days after Bank’s demand to Lender to pay any amount received by Lender with respect to
such returned Checks or account adjustments as described in section 4. The failure to so pay Bank shall constitute a breach of this Agreement. 

 (c) Company hereby authorizes Bank, without prior notice, from time to time to debit any other account
Company may have with Bank for the amount or amounts due Bank under subsection 5(a) or 5(b). 
 6. (a) Each Business Day, Bank will send any Checks not
processed in accordance with the Lockbox Service set-up documents as well as any other materials, such as invoices, received at the Lockbox Address plus information regarding the deposit for the day to the address specified below for Company or as
otherwise specified in writing by Company to Bank. 
 (b) In addition to the original Bank statement provided to Company, Bank will provide
Lender with a duplicate of such statement. 
 7. (a) Bank will not be liable to Company or Lender for any expense, claim, loss, damage or cost
(“Damages”) arising out of or relating to its performance under this Agreement other than those Damages which result directly from its acts or omissions constituting gross negligence or intentional misconduct. 
 (b) In no event will Bank be liable for any special, indirect, exemplary or consequential damages, including but not limited to lost profits. 

(c) Bank will be excused from failing to act or delay in acting, and no such failure or delay shall constitute a breach of this Agreement or otherwise
give rise to any liability of Bank, if (i) such failure or delay is caused by circumstances beyond Bank’s reasonable control, including but not limited to legal constraint, emergency conditions, action or inaction of governmental, civil or
military authority, fire, strike, lockout or other labor dispute, war, riot, theft, flood, earthquake or other natural disaster, breakdown of public or private or common carrier communications or transmission facilities, equipment failure, or
negligence or default of Company or Lender or (ii) such failure or delay resulted from Bank’s reasonable belief that the action would have violated any guideline, rule or regulation of any governmental authority. 
 (d) Bank shall have no duty to inquire or determine whether Company’s obligations to Lender are in default or whether Lender is entitled to provide
the Notice to Bank. Bank may rely on notices and communications it believes in good faith to be genuine and given by the appropriate party. 
 (e) Notwithstanding any of the other provisions in this Agreement, in the event of the commencement of a case pursuant to Title 11, United States Code, filed by or against Company, or in the event of the commencement of any similar case
under then applicable federal or state law providing for the relief of debtors or the protection of creditors by or against Company, Bank may act as Bank deems necessary to comply with all applicable provisions of governing statutes and shall not be
in violation of this Agreement as a result. 
 (f) Bank shall be permitted to comply with any writ, levy order or other similar judicial or
regulatory order or process concerning the Lockbox Address, the Account or any Check and shall not be in violation of this Agreement for so doing. 

 8. Company and Lender shall jointly and severally indemnify Bank against, and hold it harmless from, any and all
liabilities, claims, costs, expenses and damages of any nature (including but not limited to allocated costs of staff counsel, other reasonable attorney’s fees and any fees and expenses) in any way arising out of or relating to disputes or
legal actions concerning Bank’s provision of the services described in this Agreement. This section does not apply to any cost or damage attributable to the gross negligence or intentional misconduct of Bank. Company’s and Lender’s
obligations under this section shall survive termination of this Agreement. 
 9. Company and Lender shall jointly and severally pay to Bank, upon receipt of
Bank’s invoice, all costs, expenses and attorneys’ fees (including allocated costs for in-house legal services) incurred by Bank in connection with the enforcement of this Agreement and any instrument or agreement required hereunder,
including but not limited to any such costs, expenses and fees arising out of the resolution of any conflict, dispute, motion regarding entitlement to rights or rights of action, or other action to enforce Bank’s rights in a case arising under
Title 11, United States Code. Company agrees to pay Bank, upon receipt of Bank’s invoice, all costs, expenses and attorneys’ fees (including allocated costs for in-house legal services) incurred by Bank in the preparation and
administration of this Agreement (including any amendments hereto or instruments or agreements required hereunder). 
 10. Termination and Assignment of this
Agreement shall be as follows: 
 (a) Lender may terminate this Agreement by providing notice to Company and Bank that all of Company’s
obligations which are secured by Checks and the Account are paid in full. Lender may also terminate or it may assign this Agreement upon 30 day’s prior written notice to Company and Bank, provided, however, that any such assignment shall only
be to (i) an affiliate or wholly-owned subsidiary of Lender or (ii) U.S. Bank National Association, in its capacity as trustee and collateral agent (the “Notes Agent”) under that certain Indenture, dated as of May 26, 2006
(as amended, restated, supplemented, modified, replaced or refinanced from time to time, the “Indenture”), among the Parent, as issuer, certain of its domestic subsidiaries, including, without limitation, the Company, as guarantors and
U.S. Bank National Association, as Notes Agent, pursuant to the terms of that certain Intercreditor Agreement, dated as of May 26, 2006 (as amended, restated, supplemented, modified, replaced or refinanced from time to time, the
“Intercreditor Agreement”), among the Parent, certain of its domestic subsidiaries, including, without limitation, the Company, party thereto, Lender, in its capacity thereunder, as the SCF Agent (as defined in the Intercreditor
Agreement), and U.S. Bank National Association, as “Notes Agent”. Bank may terminate this Agreement upon 30 days’ prior written notice to Company and Lender. Company may not terminate this Agreement or the Lockbox Service except with
the written consent of Lender and upon prior written notice to Bank. 
 (b) Notwithstanding subsection 10(a), Bank may terminate this
Agreement at any time by written notice to Company and Lender if either Company or Lender breaches any of the terms of this Agreement, or any other agreement with Bank. 
 11. (a) Each party represents and warrants to the other parties that (i) this Agreement constitutes its duly authorized, legal, valid, binding and enforceable obligation; (ii) the performance of its
obligations under this Agreement and the consummation of the 

 
transactions contemplated hereunder will not (A) constitute or result in a breach of its certificate or articles of incorporation, by-laws or
partnership agreement, as applicable, or the provisions of any material contract to which it is a party or by which it is bound or (B) result in the violation of any law, regulation, judgment, decree or governmental order applicable to it; and
(iii) all approvals and authorizations required to permit the execution, delivery, performance and consummation of this Agreement and the transactions contemplated hereunder have been obtained. 
 (b) The parties each agree that it shall be deemed to make and renew each representation and warranty in subsection 11(a) on and as of each day on
which Company uses the services set forth in this Agreement. 
 12. (a) This Agreement may be amended only by a writing signed by Company, Lender and
Bank; except that Bank’s charges are subject to change by Bank upon 30 days’ prior written notice to Company; and provided, however, that during the Activation Period, the Bank and the Lender may agree to amend Section 2 of this
Agreement to provide for the transfer of funds in the Account to another account of the Lender, without the consent of the Company. This Section shall survive the termination of this Agreement. 
 (b) This Agreement may be executed in counterparts; all such counterparts shall constitute but one and the same agreement. 
 (c) This Agreement controls in the event of any conflict between this Agreement and any other document or written or oral statement. This Agreement
supersedes all prior understandings, writings, proposals, representations and communications, oral or written, of any party relating to the subject matter hereof. 
 (d) This Agreement shall be interpreted in accordance with New York law without reference to that state’s principles of conflicts of law. 
 13. Any written notice or other written communication to be given under this Agreement shall be addressed to each party at its address set forth on the signature page of this Agreement or to such other address as a
party may specify in writing. Except as otherwise expressly provided herein, any such notice shall be effective upon receipt. 
 14. Nothing contained in the
Agreement shall create any agency, fiduciary, joint venture or partnership relationship between Bank and Company or Lender. 

 In Witness Whereof, the parties hereto have executed this Agreement by their duly authorized officers as
of the day and year first above written. 
  

									
	 Unifi Kinston, LLC
 (“Company”)
	 		 	
					
	By:	 	/s/ Charles McCoy	 		 		 	Address for notices:
	 Name:
	 	  	 		 		 	 7201 West Friendly Avenue
 Greensboro,
North Carolina 27410

	 Title:
	 	  	 		 		 
		 		 		 		 	 Attention: William M. Lowe
 Telephone:
(336)316-5664
 Telecopy: (336)294-4751

					
		 		 		 		 	with a copy to:
					
		 		 		 		 	 Unifi, Inc.
 7201 West Friendly Avenue
 Greensboro, North Carolina 27410
 Attention: Charles McCoy,
Esq.

 Signature Page to Deposit Account Control Agreement – Unifi Kinston, LLC 

									
	 Bank of America, N.A.
 (“Lender”)
	 		 	
					
	By:	 	/s/ Andrew A. Doherty	 		 		 	Address for notices:
	 Name:
	 	Andrew A. Doherty	 		 		 	6100 Fairview Road
	 Title:
	 	SVP	 		 		 	Suite 200
		 		 		 		 	Charlotte, NC 28210

 Signature Page to Deposit Account Control Agreement – Unifi Kinston, LLC 

									
	 Bank of America, N.A.
 (“Lender”)
	 		 	
					
	By:	 	  	 		 		 	Address for notices:
	 Name:
	 	  	 		 		 	6100 Fairview Road
	 Title:
	 	  	 		 		 	Suite 200
		 		 		 		 	Charlotte, NC 28210
			
	 Bank of America, N.A.
 (“Bank”)
	 		 	
					
	By:	 	/s/ Shanelle L. Dawson	 		 		 	Address for notices:
	 Name:
	 	Shanelle L. Dawson	 		 		 	 600 Peachtree Street, 10th Flr
 Atlanta, GA 30308

	 Title:
	 	VP	 		 		 
		 		 		 		 	 Attn: Elise McEachern
 Tel: 404-607-5378
 Fax: 404-607-6059 and,

					
		 		 		 		 	 600 Peachtree Street, 10th Flr
 Atlanta, GA 30308
 Attn: Shanelle
Dawson
 Tel: 404-607-5493
 Fax: 404-607-5482

 EXHIBIT A 
 TO DEPOSIT ACCOUNT CONTROL AGREEMENT 
 STANDARD TERMS AND CONDITIONS 
 The Lockbox Service involves processing Checks that are received at a Lockbox Address. With this Service, Company instructs its customers to mail checks it wants to have
processed under the Service to the Lockbox Address. Bank picks up mail at the Lockbox Address according to its mail pick-up schedule. Bank will have unrestricted and exclusive access to the mail directed to the Lockbox Address. Bank will provide
Company with the Lockbox Service for a Lockbox Address when Company has completed and Bank has received Bank’s then current set-up documents for the Lockbox Address. 
 If Bank receives any mail containing Company’s lockbox number at Bank’s lockbox operations location (instead of the Lockbox Address), Bank may handle the mail as if it had been received at the Lockbox
Address. 
 PROCESSING 
 Bank will handle Checks received at the Lockbox Address according to the applicable deposit account agreement, as if the Checks were delivered by Company to Bank for deposit to the Account, except as modified by these Terms and Conditions.

 Bank will open the envelopes picked up from the Lockbox Address and remove the contents. For the Lockbox Address, Checks and other documents contained in
the envelopes will be inspected and handled in the manner specified in the Company’s set-up documents. Bank captures and reports information related to the lockbox processing, where available, if Company has specified this option in the set-up
documents. Bank will endorse all Checks Bank processes on Company’s behalf. 
 If Bank processes an unsigned check as instructed in the set-up
documents, and the check is paid, but the account owner does not authorize payment, Company agrees to indemnify Bank, the drawee bank (which may include Bank) and any intervening collecting bank for any liability or expense incurred by such
indemnitee due to the payment and collection of the check. 
 If Company instructs Bank not to process a check bearing a handwritten or typed notation
“Payment in Full” or words of similar import on the face of the check, Company understands that Bank has adopted procedures designed to detect Checks bearing such notations; however, Bank will not be liable to Company or any other party
for losses suffered if Bank fails to detect Checks bearing such notations. 
 RETURNED CHECK 
 Unless Company and Bank agree to another processing procedure, Bank will reclear a Check once which has been returned and marked “Refer to Maker,” “Not
Sufficient Funds” or “Uncollected Funds.” If the Check is returned for any other reason or if the Check is returned a second time, Bank will debit the Account and return the Check to Company. Company agrees 

 
that Bank will not send a returned item notice to Company for a returned Check unless Company and Bank have agreed otherwise. 
 ACCEPTABLE PAYEES 
 For the Lockbox
Address, Company will provide to Bank the names of Acceptable Payees (“Acceptable Payee” means Company’s name and any other payee name provided to Bank by Company as an acceptable payee for Checks to be processed under the Lockbox
Service). Bank will process a check only if it is made payable to an Acceptable Payee and if the check is otherwise processable. Company warrants that each Acceptable Payee is either (i) a variation of Company’s name or (ii) is an
affiliate of Company which has authorized Checks payable to it to be credited to the Account. Bank may treat as an Acceptable Payee any variation of any Acceptable Payee’s name that Bank deems to be reasonable. 
 CHANGES TO PROCESSING INSTRUCTIONS 
 Company may request Bank orally or in writing to make changes to the processing instructions (including changes to Acceptable Payees) for any Lockbox Address by contacting its Bank representative, so long as such changes do not conflict
with the terms of the Deposit Account Control Agreement. Bank will not be obligated to implement any requested changes until Bank has actually received the requests and had a reasonable opportunity to act upon them. In making changes, Bank is
entitled to rely on instructions purporting to be from Company. 

 EXHIBIT B 
 DEPOSIT ACCOUNT CONTROL AGREEMENT 
 UNIFI KINSTON, LLC 
 7201 West Friendly Avenue 
 Greensboro, North
Carolina 27410 
  

	To:	Bank of America, N.A. 

  

	 	Re:	Unifi Kinston, LLC 

	 	  	Account No. 3752207307 

 Ladies and Gentlemen: 
 Reference is made to the Deposit Account Control Agreement dated May 26, 2006 (the “Agreement”) among Unifi Kinston, LLC, us and you
regarding the above-described account (the “Account”). In accordance with Section 2 of the Agreement, we hereby give you notice of our exercise of control of the Account and we hereby instruct you to transfer funds to our account as
follows: 
  

			
	Bank Name:	 	  
		
	ABA No.:	 	  
		
	Account Name:    	 	  
		
	Account No.:	 	3752207307

  

			
	Very truly yours,
	
	  
	as Lender
		
	By:	 	  
	 Name:
	 	  
	 Title:
	 	  

			
	Acknowledged By:
	
	  
	As Bank
		
	 By:
	 	  
	 Name:
	 	  
	 Title:EX-10.12 EMPLOYMENT AGREEMENT/DEBORAH H. MERRILL

 

EXHIBIT 10.12

EMPLOYMENT AND NON-SOLICITATION AGREEMENT

     THIS EMPLOYMENT AND NON-SOLICITATION AGREEMENT (the “Agreement”), dated as of August 25, 2004,
is by and between DELTA APPAREL, INC., a Georgia corporation (the “Company”), and Deborah H.
Merrill, a Georgia resident (“Executive”).

     WHEREAS, Executive and the Company want to enter into a written agreement providing for the
terms of Executive’s employment by the Company; and

     WHEREAS, Executive agrees that the Company’s promises set out in this Agreement provide good
and sufficient consideration for the promises of Executive set forth in this Agreement.

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

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

     Executive’s initial job title will be Director of Corporate Reporting, Planning and
Administration his duties will be those as are designated by the Chief Executive Officer of the
Company.

     2. Compensation.

          (a) Base Salary. During the term of Executive’s employment with the Company pursuant
to this Agreement, the Company shall pay to Executive as compensation for his services an annual
base salary of not less than $100,440.00 (“Base Salary”). Executive’s Base Salary will be payable
in arrears in accordance with the Company’s normal payroll procedures and will be reviewed annually
and subject to upward adjustment at the discretion of the Company.

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

 

 

payable under this paragraph shall be referred to as “Incentive Compensation” in this Agreement.

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

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

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

     3. Term. Unless sooner terminated pursuant to Section 4 of this Agreement, and
subject to the provisions of Section 5 hereof, the term of this Agreement (the “Term”) shall
commence as of the date hereof and shall continue until December 31, 2006.

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

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

          (b) Termination for Cause. The Company may terminate Executive’s employment at any
time for “Cause” (as hereinafter defined) by delivering a written termination notice to Executive.
For purposes of this Agreement, “Cause” shall mean any of the following: (i) Executive’s commission
of a felony or a crime involving moral turpitude; (ii) Executive’s commission of an act
constituting fraud, deceit or material misrepresentation with respect to the Company or any of its
affiliates; (iii) Executive’s embezzlement of funds or assets from the Company or any of its
affiliates; (iv) evidence sufficient to conclude that Executive is addicted to any alcoholic,
controlled or illegal substance or drug; (v) Executive’s commission of any act or omission of gross
negligence or willful misconduct in the performance of his duties to the Company; or (vi)
Executive’s failure to correct or cure any material breach of or default under

2

 

this Agreement not
described in any of the preceding clauses within ten (10) days after receiving written notice of
such breach or default from the Company. Determinations pursuant to this section shall be made by the Compensation Committee of the Company’s Board of Directors, if
any, and otherwise by the Company’s Chief Executive Officer.

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

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

          (e) Termination Following Disability. In the event Executive becomes “disabled” (as
defined in the Company’s disability insurance policy as in effect on the date of such disability)
and is unable to perform his material duties and responsibilities hereunder for a period of at
least ninety (90) days in the aggregate during any one hundred twenty (120) consecutive day period,
the Company may terminate Executive’s employment by delivering a written termination notice to
Executive. Notwithstanding the foregoing, Executive shall continue to receive his full Base Salary
and benefits to which he is entitled under this Agreement for a period of six (6) months after the
effective date of such termination.

          (f) Payments. Following any expiration or termination of this Agreement or
Executive’s employment hereunder, and in addition to (but not in duplication of) any amounts owed
pursuant to Section 5 hereof, the Company shall pay to Executive all amounts earned by Executive
hereunder prior to the date of such expiration or termination.

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

     5. Certain Termination Benefits. In the event that:

	 	(i)	 	the provisions of Section 6 do not apply;
	 
	 	(ii)	 	either (y) the Company terminates Executive’s employment
without Cause pursuant to Section 4(c) or (z) Executive terminates his
employment

3

 

	 	 	 	pursuant to Section 4(d) as a result of an uncured material breach by the
Company of any provision of this Agreement; and
	 
	 	(iii)	 	the Executive executes and delivers the release contemplated
in Section (f) below,

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

          (a) Base Salary and Incentive Compensation. For a period of twelve (12) months
following the termination, the Company shall continue to pay to Executive (i) his Base Salary (as
in effect as of the date of his termination) and (ii) Incentive Compensation (in an aggregate
amount equal to the cash Incentive Compensation received by the Executive for the most recent
fiscal year prior to his termination).

          (b) Life and Group Disability Insurance. If and to the extent that the Company’s
plans in effect from time to time permit such coverage, the Company shall continue to provide
Executive with the opportunity to obtain group life and disability insurance coverage for a period
of twelve (12) months following termination at coverage levels and rates equal to those applicable
to Executive immediately prior to such termination or, if different, as provided to other executive
level employees during such twelve-month period.

          (c) Medical Insurance. If and to the extent that the Company’s plans in effect from
time to time permit such coverage, the Company shall continue to provide Executive and his family
with the opportunity to obtain group medical insurance coverage under the Company’s medical plans
(as the same may change from time to time) or other substantially similar health insurance for a
period of twelve (12) months following termination at coverage levels and rates equal to those
applicable to Executive immediately prior to such termination or, if different, as provided to
other executive level employees during such twelve-month period or, at the Company’s option, pay
COBRA premiums during such twelve-month period.

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

          (e) Payment Default. Any amounts owed by the Company to Executive under this Section
5 that are not paid when due shall bear interest at a rate of 10% per annum.

          (f) General Release. Acceptance by Executive of any amounts pursuant to this Section
5 shall constitute a full and complete release by Executive of any and all claims
Executive may have against the Company, its officers, directors and affiliates, including, but
not

4

 

limited to, claims he might have relating to Executive’s employment with the Company and
cessation thereof; provided, however, that there may properly be excluded from the scope of such
general release the following:

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

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

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

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

A condition to Executive’s receipt of any amounts pursuant to this Section 5 shall be Executive’s
execution and delivery of a general release as described above. In exchange for such release, the
Company shall, if Executive’s employment is terminated without Cause, provide a release to
Executive, but only with respect to claims against Executive that Executive identifies in writing
to the Company at the time of such termination.

     6. Effect of Change of Control.

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

          (b) “Change of Control” shall mean the date as of which: (i) there shall be consummated (1)
any consolidation or merger of the Company other than a merger of the Company in which the holders
of the Company’s common stock immediately prior to the merger

5

 

have the majority ownership of common
stock of the surviving corporation immediately after the merger, or (2) any sale, lease, exchange
or other transfer (in one transaction or a series of related transactions) of all, or substantially
all, of the assets of the Company; or (ii) the stockholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company; or (iii) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), shall become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of 30% of the Company’s outstanding common stock; or (iv) during any period of two
(2) consecutive years, individuals who at the beginning of such period constitute the entire Board
of Directors of the Company shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by the Company’s stockholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office who were directors
at the beginning of the period. Notwithstanding anything to the contrary herein, the consummation
of the transactions contemplated by the Stock Purchase Agreement by and among the Company, M.J.
Soffe Co., a North Carolina company (“Soffe”), and the shareholders of Soffe, shall not constitute
or give rise to a “Change of Control” within the meaning of this Agreement.

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

	 	(i)	 	the assignment to the Executive by the Company
of duties inconsistent with, or the reduction of the powers and
functions associated with, the Executive’s position, duties,
responsibilities and status with the Company immediately prior to a
Change of Control or Potential Change of Control (as defined below), or
an adverse change in Executive’s titles or offices as in effect
immediately prior to a Change of Control or Potential Change of
Control, or any removal of the Executive from or any failure to
re-elect Executive to any of such positions, except in connection with
the termination of his employment for disability (as provided in
Section 4(e)) or Cause or as a result of Executive’s death, except to
the extent that a change in duties relates to the elimination of
responsibilities attendant to the Company’s no longer being a publicly
traded company;
	 
	 	(ii)	 	a reduction by the Company in the Executive’s
Base Salary as in effect on the date of a Change of Control or
Potential Change of Control, or as the same may be increased from time
to time during the term of his Agreement;
	 
	 	(iii)	 	the Company shall require the Executive to be
based anywhere other than at or within a 25-mile radius of the
Company’s principal executive offices or the location where the
Executive is based on the date of a Change of Control or Potential
Change of Control, or if Executive agrees to such relocation, the
Company fails to

6

 

	 	 	 	reimburse the Executive for moving and all other
expenses reasonably incurred in connection with such move;
	 
	 	(iv)	 	a significant increase in Executive’s required
travel on behalf of the Company;
	 
	 	(v)	 	the Company shall fail to continue in effect
any Company-sponsored plan or benefit that is in effect on the date of
a Change of Control or Potential Change of Control (other than the
Incentive Stock Award Plan or the Company’s stock option plan) and
pursuant to which Executive has received awards or benefits and that
provides (A) incentive or bonus compensation, (B) fringe benefits such
as vacation, medical benefits, life insurance and accident insurance,
(C) reimbursement for reasonable expenses incurred by the Executive in
connection with the performance of duties with the Company, or (D)
retirement benefits such as a Internal Revenue Code Section 401(k)
plan, except to the extent that such plans taken as a whole are
replaced with substantially comparable plans;
	 
	 	(vi)	 	any material breach by the Company of any
provision of this Agreement which is not cured within ten (10) days of
the Company’s receipt from Executive of notice thereof; and
	 
	 	(vii)	 	any failure by the Company to obtain the
assumption of this Agreement by any successor or assign of the Company
effected in accordance with the provisions of Section 12.

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

          (e) In the event that (i) Executive would otherwise be entitled to the compensation and
benefits described in Section 5 or 6(a) hereof (“Compensation Payments”),
and (ii) the Company determines, based upon the advice of tax counsel, that, as a result of
such Compensation Payments and any other benefits or payments required to be taken into account
under the Internal Revenue Code of 1986, as amended (the “Code”), Section 280G(b)(2) (“Parachute
Payments”), any of such Parachute Payments would be reportable by the Company as an “excess
parachute payment” under Code Section 280G, such Compensation Payments shall be reduced to the
extent necessary to cause the aggregate present value (determined in

7

 

accordance with Code Section
280G and applicable regulations promulgated thereunder) of the Executive’s Parachute Payments to
equal 2.99 times the “base amount” as defined in Code Section 280G(b)(3) with respect to such
Executive. However, such reduction in the Compensation Payments shall be made only if, in the
opinion of such tax counsel, it would result in a larger Parachute Payment to the Executive than
payment of the unreduced Parachute Payments after deduction in each case of tax imposed on and
payable by the Executive under Section 4999 of the Code (“Excise Tax”). The value of any non-cash
benefits or any deferred payment or benefit for purposes of this paragraph shall be determined by a
firm of independent auditors selected by the Company.

          (f) The parties hereto agree that the payments provided under Section 6(a) above are
reasonable compensation in light of Executive’s services rendered to the Company and that neither
party shall assert that the payment of such benefits constitutes an “excess parachute payment”
within the meaning of Section 280G(b)(1) of the Code.

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

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

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

8

 

     9. Non-Disclosure of Trade Secrets. During and prior to the Term of this Agreement,
Executive has had access to and became familiar with and will have access to and become familiar
with various trade secrets and proprietary and confidential information of the Company and its
affiliates, including, but not limited to, processes, computer programs, compilations of
information, records, sales procedures, customer requirements, pricing techniques, customer lists,
methods of doing business and other confidential information (collectively, referred to as “Trade
Secrets”) which are owned by the Company and/or its affiliates and regularly used in the operation
of its or their business, and as to which the Company and/or its affiliates take precautions to
prevent dissemination to persons other than certain directors, officers and employees. Executive
acknowledges and agrees that the Trade Secrets (1) are secret and not known in the industry; (2)
give the Company and/or its affiliates an advantage over competitors who do not know or use the
Trade Secrets; (3) are of such value and nature as to make it reasonable and necessary to protect
and preserve the confidentiality and secrecy of the Trade Secrets; and (4) are valuable, special
and unique assets of the Company and/or its affiliates, the disclosure of which could cause
substantial injury and loss of profits and goodwill to the Company and/or its affiliates.
Executive may not use in any way or disclose any of the Trade Secrets, directly or indirectly,
either during the Term or at any time after the expiration of the Term or the termination of
Executive’s employment with the Company for any reason whatsoever, except as required in the course
of his employment under this Agreement, as required in connection with a judicial or administrative
proceeding, or if the information becomes public knowledge other than as a result of an
unauthorized disclosure by the Executive. All files, records, documents, information, data and
similar items relating to the business of the Company and/or its affiliates, whether prepared by
Executive or otherwise coming into his possession, will remain the exclusive property of the
Company and/or its affiliates (as the case may be) and may not be removed from the premises of the
Company under any circumstances without the prior written consent of the Board of Directors of the
Company and/or its affiliates (as the case may be) (except in the ordinary course of business
during Executive’s period of active employment under this Agreement), and in any event must be
promptly delivered to the Chief Executive Officer of the Company upon termination of Executive’s
employment with the Company. Executive agrees that upon his receipt of any subpoena, process or
other request to produce or divulge, directly or indirectly, any Trade Secrets to any entity,
agency, tribunal or person, Executive shall timely notify and promptly hand deliver a copy of the
subpoena, process or other request to the Board of Directors of the Company. For this purpose,
Executive irrevocably nominates and appoints the Company (including any attorney retained by the
Company), as his true and lawful attorney-in-fact, to act in Executive’s name, place and stead to
perform any act that Executive might perform to defend and protect against any disclosure of any
Trade Secrets. The rights granted to the Company and/or its affiliates in this Section 9 are
intended to be in addition to and not in replacement of any protection of trade secrets provided by
equity, any statute, judicially created law or other agreement.

     10. Remedies. In the event that Executive violates any of the provisions of Sections
7, 8 or 9 hereof (the “Protective Covenants”) or fails to provide the notice required by Section
4(d) hereof, in addition to any other remedy that may be available at law, in equity or hereunder,
the Company shall be entitled to receive from Executive the profits, if any, received by Executive
upon exercise of any Company granted stock options or incentive stock awards or upon lapse of the
restrictions on any grant of restricted stock to the extent such options or rights

9

 

were exercised,
or such restrictions lapsed, subsequent to the commencement of the six-month period prior to the
termination of Executive’s employment. In addition, Executive acknowledges and agrees that any
breach of a Protective Covenant by him will cause irreparable damage to the Company and/or its
affiliates, the exact amount of which will be difficult to determine, and that the remedies at law
for any such breach will be inadequate. Accordingly, Executive agrees that, in addition to any
other remedy that may be available at law, in equity or hereunder, the Company, and/or its
affiliates shall be entitled to specific performance and injunctive relief, without posting bond or
other security, to enforce or prevent any violation of any of the Protective Covenants by him.

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

     12. Miscellaneous.

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

If to the Company:

10

 

Delta Apparel, Inc.

2750 Premiere Parkway

Suite 100

Duluth, Georgia 30047

Attn: Chief Executive Officer

Fax No.: (678) 775-6999

If to Executive:

Deborah H. Merrill

3906 Tocca Falls Drive

Duluth, Georgia 30097

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

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

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

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

          e. Enforcement. Executive agrees that upon Executive’s violation or threatened
violation of any of the provisions of this Agreement, the Company shall, in addition to any other
rights and remedies available to it, at law, in equity, or otherwise, be entitled to specific
performance and injunctive relief including, without limitation, an injunction to be issued by any
court of competent jurisdiction enjoining and restraining Executive from committing any violation
or threatened violation of the provisions of this Agreement and

11

 

Executive consents to the issuance
of such injunction without the necessity of bond or other security in the event of a breach or
threatened breach by him of this Agreement. Furthermore and notwithstanding anything to the
contrary in this Agreement, the Company shall, in addition to any other rights or remedies
available to it, at law, in equity, or otherwise, be entitled to reimbursement of court costs,
reasonable attorneys’ fees, and any other expenses reasonably incurred by it or its affiliates as a
result of a breach or threatened breach of this agreement by Executive.

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

          g. Costs. Except as provided in Section 12(e) above or except as provided below, if
any action at law or in equity is necessary to enforce or interpret the terms of this Agreement,
each party shall bear its own costs and expenses (including, without limitation, attorneys’ fees);
provided, however, that in the event Executive incurs costs or expenses in connection with
successfully enforcing this Agreement following a Change of Control, the Company shall reimburse
the Executive for all such reasonable costs and expenses (including, without limitation, attorneys’
fees).

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

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

          j. Binding Effect. This Agreement is binding upon and shall inure to the benefit of
the parties hereto, their respective executors, administrators, successors, personal
representatives, heirs and assigns permitted under subsection 12(i) above.

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

12

 

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

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

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

13

 

IMPORTANT: READ CAREFULLY BEFORE SIGNING

	 	 	 	 	 
	 

	 	“Company”
	 
	 	 	 	 
	 

	 	DELTA APPAREL, INC.
	 
	 	 	 	 
	 

	 	By:
	 	 
	 

	 	 	 	 
	 

	 	Name: Robert W. Humphreys

Title:   President & CEO
	 
	 	 	 	 
	 

	 

	 	“Executive”
	 

	 	 	 	 
	 

	 	 	 	 
	 

	 	 
	 

	 	Deborah H. Merrill

14

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