Document:

COLLATERAL ASSIGNMENT OF ACQUISITION AGREEMENTS
                 -----------------------------------------------

     THIS COLLATERAL ASSIGNMENT OF ACQUISITION AGREEMENTS ("Assignment"),  dated
May 16, 2000, is by and among DH APPAREL  COMPANY,  INC., a Georgia  corporation
("Duck  Head"),  with its chief  executive  office at 1020-A  Barrow  Industrial
Parkway,  Winter,  Georgia 30680, and DELTA APPAREL, INC., a Georgia corporation
("Delta",  and together with Duck Head,  each  individually,  an "Assignor"  and
collectively,  "Assignors"),  with its chief execute office at 3355 Breckinridge
Boulevard,  Suite 100,  Duluth,  Georgia 30096,  in favor of CONGRESS  FINANCIAL
CORPORATION (SOUTHERN), a Georgia corporation ("Assignee"),  having an office at
200 Galleria Parkway, Suite 1500, Atlanta, Georgia 30339.

                              W I T N E S S E T H:
                              --------------------

     WHEREAS,  each of Assignors has acquired  certain  assets of Delta Woodside
Industries,  Inc. ("Seller"), as set forth in the Distribution Agreement,  dated
March 15, 2000, by and among Seller and Assignors (as the same now exists or may
hereafter be amended,  modified,  supplemented,  extended,  renewed, restated or
replaced,  the  "Distribution  Agreement",  together with the other  agreements,
documents and  instruments  referred to therein in Section 2.1 thereof or at any
time executed and/or delivered in connection with the transactions  contemplated
by such Section 2.1, collectively, the "Acquisition Agreements");

     WHEREAS,  Duck Head and  Assignee  have  entered or are about to enter into
financing  arrangements  pursuant to which  Assignee may make loans and advances
and provide other financial accommodations to Duck Head as set forth in the Loan
and Security  Agreement,  dated of even date  herewith,  among Duck Head,  Delta
Merchandising,  Inc. and  Assignee  (as the same now exists or may  hereafter be
amended, modified,  supplemented,  extended,  renewed, restated or replaced, the
"Duck Head Loan  Agreement")  and other  agreements,  documents and  instruments
referred  to therein or at any time  executed  and/or  delivered  in  connection
therewith or related  thereto,  including,  but not limited to, this  Assignment
(all of the foregoing,  together with the Loan Agreement,  as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced,  being collectively  referred to herein as the "Duck Head Financing
Agreements");

     WHEREAS,  Delta  and  Assignee  have  entered  or are  about to enter  into
financing  arrangements  pursuant to which  Assignee may make loans and advances
and provide other financial accommodations to Delta as set forth in the Loan and
Security Agreement,  dated of even date herewith, between Delta and Assignee (as
the same  now  exists  or may  hereafter  be  amended,  modified,  supplemented,
extended,  renewed,  restated or replaced, the "Delta Loan Agreement") and other
agreements,  documents  and  instruments  referred  to  therein  or at any  time
executed and/or delivered in connection therewith or related thereto, including,
but not limited to, this  Assignment  (all of the  foregoing,  together with the
Loan Agreement, as the same now exist

                                      - 1 -
<PAGE>

or may hereafter be amended, modified, supplemented, extended, renewed, restated
or  replaced,  being  collectively  referred  to herein as the "Delta  Financing
Agreements" and together with the Duck Head Financing Agreements,  collectively,
the "Financing Agreements");

     WHEREAS, in order to induce Assignee to make loans and advances and provide
other  financial  accommodations  to each Assignor  pursuant to each of the Duck
Head  Loan  Agreement  and the Delta  Loan  Agreement  and the  other  Financing
Agreements,  each  Assignor has agreed to grant to Assignee  certain  collateral
security as set forth herein;

     NOW, THEREFORE, in consideration of the premises set forth above, the terms
and conditions contained herein, and other good and valuable consideration,  the
receipt and  sufficiency  of which are hereby  acknowledged,  the parties hereby
agree as follows:

     1. GRANT OF SECURITY INTEREST AND ASSIGNMENT
        -----------------------------------------

     As  collateral  security  for  the  prompt   performance,   observance  and
indefeasible payment in full of all of the Obligations (as hereinafter defined),
each Assignor hereby assigns, pledges,  transfers and sets over to Assignee, and
grants to Assignee a  continuing  security  interest in and a general lien upon,
all of each of Assignor's  now existing or hereafter  arising  right,  title and
interest  in  and to  each  of  the  Acquisition  Agreements  and  all  proceeds
thereunder,  including,  but not limited to, (a) all rights of each  Assignor to
receive  monies due to become due to it thereunder  or in connection  therewith;
(b) all rights of each  Assignor  to indemnification  and claims for  damages or
other relief  pursuant to such  Acquisition  Agreements;  (c) all rights of each
Assignor  to  perform  and  exercise  all  remedies  thereunder  and to  require
performance by the other parties  thereto;  and (d) all  proceeds,  collections,
recoveries and rights of  subrogation  with respect to the foregoing (all of the
foregoing being collectively referred to herein as the "Collateral").

     2. OBLIGATIONS SECURED
        -------------------

     The assignment,  security interest and lien granted to Assignee pursuant to
this Assignment shall secure the prompt  performance,  observance and payment in
full of any and all  obligations,  liabilities  and  indebtedness of every kind,
nature  and  description  owing by each of  Assignors  to  Assignee  and/or  its
affiliates, including principal, interest, charges, fees, premiums, indemnities,
and  expenses,  however  evidenced,  whether  as  principal,  surety,  endorser,
guarantor  or  otherwise,  arising  under  this  Assignment,  the Duck Head Loan
Agreement, the Delta Loan Agreement and the other Financing Agreements,  whether
now existing or hereafter arising,  whether arising before,  during or after the
initial or any renewal  term of the Duck Head Loan  Agreement  or the Delta Loan
Agreement  or after the  commencement  of any case with  respect to any Assignor
under the United  States  Bankruptcy  Code or any  similar  statute  (including,
without limitation, the payment of interest and other amounts which would accrue
and  become  due but for the  commencement  of such  case),  whether  direct  or
indirect,  absolute or contingent,  joint or several, due or not due, primary or
secondary,  liquidated  or  unliquidated,  secured  or  unsecured  (all  of  the
foregoing being collectively referred to herein as the "Obligations").

                                      -2-
<PAGE>

     3. NO ASSUMPTION OF DUTIES
        -----------------------

     This  Assignment  is executed  only as security  for the  Obligations  and,
therefore,  the  execution  and  delivery of this  Assignment  shall not subject
Assignee  to, or transfer or pass to  Assignee,  or in any way affect or modify,
the liability of Assignors under the Acquisition  Agreements.  In no event shall
the acceptance of this Assignment by Assignee or the exercise by Assignee of any
rights hereunder or assigned  hereby,  constitute an assumption of any liability
or  obligation  of  Assignors  to any of the other  parties  to the  Acquisition
Agreements or any other persons.

     4. REPRESENTATIONS, WARRANTIES AND COVENANTS
        -----------------------------------------

     Each  Assignor  hereby  represents,  warrants  and  covenants  with  and to
Assignee the following  (all of such  representations,  warranties and covenants
being continuing as long as any of the Obligations are outstanding):

     (a) Each of the Acquisition  Agreements is and shall be a legal,  valid and
binding obligation of each Assignor.

     (b) As of the date  hereof,  no default  or event of default  under or with
respect to the Acquisition Agreements exists or has occurred.

     (c) Each  Assignor has  obtained  all  consents  required for the valid and
binding assignment of the Acquisition Agreements.

     (d) Each  Assignor  shall  promptly and  faithfully  abide by,  perform and
discharge in all material  respects the obligations,  covenants,  conditions and
duties  which the  Acquisition  Agreements  provide are to be  performed by each
Assignor.

     (e) Each of the  Acquisition  Agreements  is in full force and effect  and,
without  the prior  written  consent  of  Assignee,  Assignors  will not  amend,
supplement  or otherwise  modify or terminate  any of the terms or provisions of
any  of the  Acquisition  Agreements,  in  any  manner  that  would  materially,
adversely  affect the rights or claims of  Assignors  or  materially,  adversely
affect any of the Collateral or the rights of Assignors or Assignee with respect
thereto;  provided,  that,  unless and until an Event of  Default  exists or has
occurred and is continuing, Assignors may, upon notice thereof to Lender, amend,
supplement  or otherwise  modify or terminate  any of the terms or provisions of
the  Acquisition  Agreements so long as either (i) such  amendment,  supplement,
modification  or  termination  does not  waive,  release  or limit any rights or
claims of Assignors or increase the  obligations  of Assignors or make any terms
thereof more  restrictive or burdensome to Assignors or in any manner  adversely
affect  Assignee  or any  rights of  Assignee  as  determined  in good  faith by
Assignee and  confirmed by Assignee to Assignors in writing or (ii) Assignee has
consented in writing to such amendment, supplement, modification or termination.

                                      -3-
<PAGE>

     (f) At  Assignors'  sole cost and  expense,  Assignors  shall appear in and
defend any action or proceedings  affecting Assignee and arising under,  growing
out of or in any manner connected with the obligations,  covenants,  conditions,
duties, agreements or liabilities of Assignors under the Acquisition Agreements.

     (g) Each Assignor  shall:  (i) promptly  notify  Assignee of each and every
dispute  with,  proceeding  or claim  against,  cause of  action  or  litigation
involving  any  person  for  which  any  Assignor  has or may have any  right to
indemnification or claim for damages or other relief or remedies, whether at law
or in equity,  arising under or in connection with the  Acquisition  Agreements,
(ii) diligently  enforce all rights to  indemnification  or claim for damages or
other  relief or  remedies,  whether  at law or in equity,  arising  under or in
connection with the Acquisition Agreements and (iii) not take or permit, and has
not taken or permitted  since the execution of the Acquisition  Agreements,  any
action that  adversely  affects,  in the good faith  judgment of  Assignee,  the
Obligations or the Collateral.

     (h) Each Assignor shall promptly deliver or cause to be delivered a copy of
every written notice or communication  received by such Assignor pursuant to any
of the  Acquisition  Agreements  to  Assignee  in the  manner  and at the  place
provided for notices contained herein.

     (i) In no event shall any  Assignor  without the prior  written  consent of
Assignee,  waive in any material  respect,  or release or  discharge  any of its
rights or any of the  obligations,  duties or  liabilities of any other party to
the  Acquisition  Agreements,  or compromise or settle any right or any claim or
dispute with respect to any of its rights or any of the  obligations,  duties or
liabilities of any other party to the  Acquisition  Agreements.  No such waiver,
release,  discharge,  compromise  or settlement  shall be effective  without the
prior written consent of Assignee.

     5. EVENTS OF DEFAULT
        -----------------

     All Obligations shall become immediately due and payable, without notice or
demand, at the option of Assignee,  upon the occurrence of any Event of Default,
as such  term is  defined  in the Duck  Head Loan  Agreement  or the Delta  Loan
Agreement (each an "Event of Default" hereunder).

     6. RIGHTS AND REMEDIES
        -------------------

     (a) At any  time  an  Event  of  Default  exists  or  has  occurred  and is
continuing,  Assignee shall have the absolute right to enforce, in its name, any
and all  rights to  indemnification  or claim  for  damages  or other  relief or
remedies,  whether at law or in equity,  arising under or in connection with the
Acquisition  Agreements,  or  otherwise  and apply the  proceeds  thereof to the
Obligations in such order or manner as Assignee shall determine.

                                      -4-
<PAGE>

     (b) In order to effectuate the foregoing, each Assignor, for itself and its
respective successors and assigns,  hereby constitutes and appoints Assignee and
each officer and employee thereof as its  attorney-in-fact  with power to assert
claims  and  commence  and  prosecute  suit  against  any Person or to settle or
compromise any such claim or suit relating to any such right,  claim,  relief or
remedy, and to sign and file any and all papers required in connection therewith
and to take any and all other  action  which  Assignee  may,  in its good  faith
discretion,  deem  appropriate.  Each Assignor  hereby ratifies and approves all
acts which  Assignee or any officer or employee  thereof as attorney  may do and
this power of attorney,  being coupled with an interest,  is irrevocable as long
as any of the Obligations remain outstanding.

     (c) No  failure  to  exercise,  and no delay in  exercising  on the part of
Assignee any right, power or privilege under this Assignment, the Loan Agreement
or under any of the other Financing  Agreements or other  documents  referred to
herein or therein  shall  operate as a waiver  thereof;  nor shall any single or
partial  exercise  of any right,  power or  privilege  hereunder  or  thereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power and  privilege.  The rights and  remedies of  Assignee  under this
Assignment, the other Financing Agreements or applicable law, are cumulative and
not exclusive  and all such rights and remedies may be exercised  alternatively,
successively or concurrently.

     7. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
        ------------------------------------------------------------

     (a) The validity, interpretation and enforcement of this Assignment and the
other  Financing  Agreements  and any dispute  arising  out of the  relationship
between the parties  hereto,  whether in contract,  tort,  equity or  otherwise,
shall be governed by the internal laws of the State of Georgia  (without  giving
effect to principles of conflicts of law).

     (b)  Assignor  and   Assignee   irrevocably   consent  and  submit  to  the
non-exclusive  jurisdiction of the Superior Court of Fulton County,  Georgia and
the United  States  District for the Northern  District of Georgia and waive any
objection  based on venue or forum non  conveniens  with  respect  to any action
instituted  therein  arising under this Assignment or any of the other Financing
Agreements  or in any way  connected or related or incidental to the dealings of
each Assignor and Assignee in respect of this  Assignment or the other Financing
Agreements or the transactions  related hereto or thereto,  in each case whether
now existing or thereafter  arising,  and whether in contract,  tort,  equity or
otherwise,  and agree that any dispute with respect to any such matters shall be
heard only in the courts  described  above (except that Assignee  shall have the
right to bring any action or proceeding  against any Assignor or its property in
the  courts  of  any  other  jurisdiction  which  Assignee  deems  necessary  or
appropriate  in order to realize on any  collateral  granted to  Assignee  or to
otherwise enforce its rights against each Assignor or its property).

                                      -5-
<PAGE>

     (c) Each  Assignor  hereby waives  personal  service of any and all process
upon it and  consents  that all such service of process may be made by certified
mail  (return  receipt  requested)  directed to its address set forth herein and
service  so made  shall be deemed to be  completed  ten (10) days after the same
shall have been so deposited in the U.S.  mails,  or, at Assignee's  option,  by
service upon Assignor in any other manner  provided  under the rules of any such
courts.  Within thirty (30) days after such service,  such Assignor shall appear
in  answer to such  process,  failing  which  such  Assignor  shall be deemed in
default and  judgment may be entered by Assignee  against such  Assignor for the
amount of the claim and other relief requested.

     (d) EACH ASSIGNOR AND ASSIGNEE  HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM,  DEMAND,  ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS ASSIGNMENT
OR ANY OF THE OTHER  FINANCING  AGREEMENTS OR (ii) IN ANY WAY CONNECTED  WITH OR
RELATED OR INCIDENTAL  TO THE DEALINGS OF THE PARTIES  HERETO IN RESPECT TO THIS
ASSIGNMENT OR ANY OF THE OTHER FINANCING  AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR  HEREAFTER  ARISING,  AND
WHETHER IN  CONTRACT,  TORT,  EQUITY OR  OTHERWISE.  EACH  ASSIGNOR AND ASSIGNEE
HEREBY  AGREES AND  CONSENTS  THAT ANY SUCH  CLAIM,  DEMAND,  ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL  WITHOUT A JURY AND THAT EACH ASSIGNOR OR
ASSIGNEE MAY FILE AN ORIGINAL  COUNTERPART OF A COPY OF THIS ASSIGNMENT WITH ANY
COURT AS WRITTEN  EVIDENCE OF THE CONSENT OF SUCH  ASSIGNOR  AND ASSIGNEE TO THE
WAIVER OF THEIR RIGHTS TO TRIAL BY JURY.

     8. MISCELLANEOUS
        -------------

     (a) All  notices,  requests and demands  hereunder  shall be in writing and
shall be deemed  to have  been  duly  given or made:  if  delivered  in  person,
immediately upon delivery;  if by telex,  telegram,  or facsimile  transmission,
immediately  upon sending and upon  confirmation  of receipt;  if by  nationally
recognized  overnight  courier  service  with  instructions  to deliver the next
business  day,  one (1) business day after  sending;  and if by certified  mail,
return receipt requested, five (5) days after mailing. All notices, requests and
demands upon the parties are to be given to the following  addresses (or to such
other  address  as any party may  designate  by notice in  accordance  with this
Section):

           If to Assignors:          DH Apparel Company, Inc.
                                     1020-A Barrow Industrial Parkway
                                     Winter, Georgia 30680
                                     Attention: Chief Financial Officer

                                     Delta Apparel, Inc.
                                     3355 Breckinridge Boulevard
                                     Suite 100
                                     Duluth, Georgia 30096
                                     Attention: Chief Financial Officer

                                   -6-

<PAGE>

           If to Assignee:           Congress Financial Corporation
                                       (Southern)
                                     200 Galleria Parkway, Suite 1500
                                     Atlanta, Georgia 30339
                                     Attention: Portfolio Manger

     (b) All references to the plural herein shall also mean the singular and to
the singular shall also mean the plural. All references to Assignor and Assignee
herein shall include their respective  successors and assigns. All references to
the  term  "Person"  or  "person"  herein  shall  mean  any   individual,   sole
proprietorship,  partnership,  corporation (including,  without limitation,  any
corporation which elects  subchapter S status under the Internal Revenue Code of
1986, as amended),  limited liability  company,  limited liability  corporation,
limited liability partnership, business trust, unincorporated association, joint
stock  company,  trust,  joint venture or other entity or any  government or any
agency instrumentality or political subdivision thereof.

     (c) No provision  hereof may be changed,  waived,  discharged or terminated
except by an instrument in writing signed by the party against whom  enforcement
of the change, waiver, discharge or termination is sought.

     (d) This Assignment  shall be binding upon each Assignor and its successors
and assigns and inure to the benefit of and be  enforceable  by Assignee and its
successors and assigns.

     (e)  If  any  provision  of  this  Assignment  is  held  to be  invalid  or
unenforceable,  such  invalidity or  unenforceability  shall not invalidate this
Assignment  as a whole but this  Assignment  shall be construed as though it did
not  contain  the  particular  provision  or  provisions  held to be  invalid or
unenforceable  and the rights and  obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by law.

                   [BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

                                      -7-
<PAGE>

     IN WITNESS WHEREOF,  the parties have caused this instrument to be executed
by persons duly authorized, as of the date first above written.

                                            ASSIGNORS:

                                            DH APPAREL COMPANY, INC.

                                            By: /s/ K. Scott Grassmyer
                                                -----------------------------
                                            Title:  Sr. Vice President & CFO

                                            DELTA APPAREL, INC.

                                            By: /s/ Herbert M. Mueller
                                                ------------------------------
                                            Title:  Vice President & CFO

                                            ASSIGNEE:

                                            CONGRESS FINANCIAL CORPORATION
                                               (SOUTHERN)

                                            By:  /s/ Daniel Cott
                                                --------------------------
                                            Title: Executive Vice President

                                      - 8 -LOAN AND SECURITY AGREEMENT

                                 by and between

                    CONGRESS FINANCIAL CORPORATION (SOUTHERN)
                                    as Lender

                                       and

                               DELTA APPAREL, INC.
                                   as Borrower

                               Dated: May 16, 2000

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
                                                                                              Page
                                                                                              ----
<S>          <C>                                                                               <C>

SECTION 1    DEFINITIONS .......................................................................1

SECTION 2    CREDIT FACILITIES ................................................................19
    2.1      Revolving Loans ..................................................................19
    2.2      Letter of Credit Accommodations ..................................................20
    2.3      Term Loan ........................................................................23

SECTION 3    INTEREST AND FEES ................................................................23
    3.1      Interest. ........................................................................23
    3.2      Closing Fee ......... ............................................................25
    3.3      Servicing Fee ....................................................................25
    3.4      Unused Line Fee ..................................................................25
    3.5      Changes in Laws and Increased Costs of Loans. ....................................25

SECTION 4    CONDITIONS PRECEDENT .............................................................27
      4.1    Conditions Precedent to Initial Loans and Letter of Credit Accommodations ........27
      4.2    Conditions Precedent to All Loans and Letter of Credit Accommodations ............30

SECTION 5    GRANT OF SECURITY INTEREST .......................................................31

SECTION 6    COLLECTION AND ADMINISTRATION ....................................................32
      6.1    Borrower's Loan Account ..........................................................32
      6.2    Statements .......................................................................32
      6.3    Collection of Accounts ...........................................................32
      6.4    Payments .........................................................................33
      6.5    Authorization to Make Loans ......................................................34
      6.6    Use of Proceeds ..................................................................34

SECTION 7    COLLATERAL REPORTING AND COVENANTS ...............................................35
      7.1    Collateral Reporting .............................................................35
      7.2    Accounts Covenants ...............................................................35
      7.3    Inventory Covenants ..............................................................37
      7.4    Equipment and Real Property Covenants ............................................37
      7.5    Power of Attorney ................................................................38
      7.6    Right to Cure ....................................................................39
      7.7    Access to Premises ...............................................................39
      7.8    Bills of Lading and Other Documents of Title......................................40

                                      (i)
<PAGE>

SECTION 8    REPRESENTATIONS AND WARRANTIES ...................................................40
    8.1      Corporate Existence, Power and Authority; Subsidiaries............................40
    8.2      Financial Statements; No Material Adverse Change. ................................41
    8.3      Chief Executive Office; Collateral Locations. ....................................41
    8.4      Priority of Liens; Title to Properties ...........................................41
    8.5      Tax Returns ......................................................................41
    8.6      Litigation .......................................................................42
    8.7      Compliance with Other Agreements and Applicable Laws .............................42
    8.8      Environmental Compliance .........................................................43
    8.9      Employee Benefits. ...............................................................43
    8.10     Bank Accounts ....................................................................44
    8.11     Intellectual Property ............................................................44
    8.12     Acquisition of Assets ............................................................45
    8.13     Solvency .........................................................................45
    8.14     Labor Disputes ...................................................................46
    8.15     Corporate Name; Prior Transactions ...............................................46
    8.16     Restrictions on Subsidiaries .....................................................46
    8.17     Material Contracts ...............................................................46
    8.18     Accuracy and Completeness of Information. ........................................46
    8.19     Survival of Warranties; Cumulative ...............................................46

SECTION 9    AFFIRMATIVE AND NEGATIVE COVENANTS ...............................................47
    9.1      Maintenance of Existence .........................................................47
    9.2      New Collateral Locations .........................................................47
    9.3      Compliance with Laws, Regulations, Etc. ..........................................47
    9.4      Payment of Taxes and Claims ......................................................48
    9.5      Insurance ........................................................................49
    9.6      Financial Statements and Other Information .......................................49
    9.7      Sale of Assets, Consolidation, Merger, Dissolution, Etc. .........................51
    9.8      Encumbrances .....................................................................52
    9.9      Indebtedness .....................................................................53
    9.10     Loans, Investments, Guarantees, Etc. .............................................53
    9.11     Dividends and Redemptions ........................................................55
    9.12     Transactions with Affiliates .....................................................56
    9.13     Additional Bank Accounts .........................................................57
    9.14     Compliance with ERISA. ...........................................................57
    9.15     End of Fiscal Years: Fiscal Quarters .............................................57
    9.16     Change in Business................................................................57
    9.17     Limitation of Restrictions Affecting Subsidiaries ................................57
    9.18     Existing Real Property; After Acquired Real Property .............................58
    9.19     Costs and Expenses ...............................................................59
    9.20     Further Assurances ...............................................................59
    9.21     Year 2000 Compliance .............................................................59

                                      (ii)
<PAGE>

SECTION 10   EVENTS OF DEFAULT AND REMEDIES ...................................................60
   10.1      Events of Default ................................................................60
   10.2      Remedies .........................................................................62

SECTION 11   JURY TRIAL WAIVER; OTHER WAIVERS
             AND CONSENTS; GOVERNING LAW.......................................................63
   11.1      Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver ............63
   11.2      Waiver of Notices ................................................................65
   11.3      Amendments and Waivers ...........................................................65
   11.4      Waiver of Counterclaims ..........................................................65
   11.5      Indemnification ..................................................................65

SECTION 12   TERM OF AGREEMENT; MISCELLANEOUS .................................................66
   12.1      Term .............................................................................66
   12.2      Interpretative Provisions ........................................................67
   12.3      Notices ..........................................................................68
   12.4      Partial Invalidity ...............................................................68
   12.5      Successors .......................................................................68
   12.6      Entire Agreement .................................................................69

</TABLE>

                                     (iii)

<PAGE>

                                    INDEX TO
                             EXHIBITS AND SCHEDULES
                             ----------------------

Exhibit A              Information Certificate

Exhibit B              Applicable Margins for Interest Rate Calculation

Schedule 1.15          Customs Brokers

Schedule 1.30          Existing Letters of Credit

Schedule 1.31          Existing Real Property

Schedule 1.60          Permitted Holders

Schedule 8.2           Pro Forma Balance Sheet and Cash Flow Projections

Schedule 8.4           Existing Liens

Schedule 8.7           Permits

Schedule 8.8           Environmental Matters

Schedule 8.10          Bank Accounts

Schedule 8.11          Licensed Intellectual Property

Schedule 8.14          Labor Matters

Schedule 8.17          Material Contracts

Schedule 9.9           Existing Indebtedness

Schedule 9.10          Existing Loans, Advances and Guarantees

                                      (i)
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                           LOAN AND SECURITY AGREEMENT
                           ---------------------------

     This Loan and Security  Agreement dated May 16, 2000 is entered into by and
between  Congress  Financial  Corporation  (Southern),   a  Georgia  corporation
("Lender") and Delta Apparel, Inc., a Georgia corporation ("Borrower").

                              W I T N E S S E T H:
                              --------------------

     WHEREAS,  Borrower has requested  that Lender enter into certain  financing
arrangements  with Borrower  pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and

     WHEREAS,  Lender is willing to make such loans and provide  such  financial
accommodations on the terms and conditions set forth herein;

     NOW,  THEREFORE,  in consideration of the mutual  conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency  of  which is  hereby  acknowledged,  the  parties  hereto  agree as
follows:

SECTION 1. DEFINITIONS
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     For  purposes  of this  Agreement,  the  following  terms  shall  have  the
respective meanings given to them below:

     1.1  "Accounts"  shall mean all  present  and future  rights of Borrower to
payment  for  goods  sold or  leased  or for  services  rendered,  which are not
evidenced  by  instruments  or  chattel  paper,  and  whether  or not  earned by
performance.

     1.2 "Adjusted  Eurodollar  Rate" shall mean,  with respect to each Interest
Period for any Eurodollar  Rate Loan, the rate per annum  (rounded  upwards,  if
necessary,  to the next one- sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the  Eurodollar  Rate for such Interest  Period by (b) a percentage
equal to: (i) one (1) minus (ii) the  Reserve  Percentage.  For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage,  expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United  States or an international  banking office of Reference
Bank used to fund a Eurodollar  Rate Loan or any Eurodollar  Rate Loan made with
the proceeds of such deposit,  whether or not the Reference  Bank actually holds
or has made any such deposits or loans.  The Adjusted  Eurodollar  Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.

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     1.3 "Affiliate" shall mean, with respect to a specified  Person,  any other
Person (a) which  directly  or  indirectly  through  one or more  intermediaries
controls,  or is controlled by, or is under common control with,  such specified
person;  (b) which  beneficially  owns or holds five (5%) percent or more of any
class of the Voting Stock or other equity interest of such specified  person; or
(c) of which  five (5%)  percent  or more of the  Voting  Stock or other  equity
interest is beneficially  owned or held by such specified person or a Subsidiary
of such specified person. For purposes of this definition, "control" (including,
with correlative meanings,  the terms "controlling",  "controlled by" and "under
common control with") when used with respect to any specified  person shall mean
the  possession,  directly  or  indirectly,  of the power to direct or cause the
direction of the  management  and policies of such person,  whether  through the
ownership of Voting Stock, by agreement or otherwise.

     1.4  "Blocked  Accounts"  shall have the  meaning  set forth in Section 6.3
hereof.

     1.5  "Borrowing  Base"  shall  mean,  at any  time,  the  amount  equal to:
(a) eighty-five  (85%)  percent of the Net  Amount of  Eligible  Accounts,  plus
(b) the  lesser  of:  (i)  fifty-five  (55%)  percent  of the Value of  Eligible
Inventory  consisting of finished goods, raw materials  consisting of raw cotton
and  yarn  for  such  finished   goods,   and  finished  yarn   categorized   as
work-in-process,  or (ii)  Inventory  Loan Limit,  less  (c) any  Reserves.  For
purposes  only of applying  the  sublimit on  Revolving  Loans based on Eligible
Inventory  set forth  clause  (b)(ii)  above,  Lender may treat the then undrawn
amounts  of  outstanding  Letter of Credit  Accommodations  for the  purpose  of
purchasing  Eligible  Inventory  as Revolving  Loans to the extent  Lender is in
effect basing the issuance of the Letter of Credit  Accommodations  on the Value
of  the  Eligible   Inventory   being  purchased  with  such  Letter  of  Credit
Accommodations.  In  determining  the actual  amounts  of such  Letter of Credit
Accommodations  to be so treated for purposes of the sublimit,  the  outstanding
Revolving Loans and Reserves shall be attributed  first to any components of the
lending  formulas set forth above that are not subject to such sublimit,  before
being  attributed  to the  components  of the lending  formulas  subject to such
sublimit.

     1.6  "Business  Day" shall mean any day other than a Saturday,  Sunday,  or
other day on which  commercial  banks are  authorized or required to close under
the laws of the State of New York,  the State of  Georgia  or the State of North
Carolina,  and a day on which the  Reference  Bank and  Lender  are open for the
transaction of business,  except that if a determination of a Business Day shall
relate to any  Eurodollar  Rate Loans,  the term Business Day shall also exclude
any day on which banks are closed for dealings in dollar  deposits in the London
interbank market or other applicable Eurodollar Rate market.

     1.7 "Capital  Expenditures"  shall mean,  with  respect to any Person,  all
expenditures  made and liabilities  incurred for the acquisition of assets which
are not, in  accordance  with GAAP,  treated as expense items for such Person in
the year made or incurred or as a prepaid expense applicable to a future year or
years.

     1.8 "Capital Leases" shall mean, as applied to any Person, any lease of (or
any agreement  conveying the right to use) any property (whether real,  personal
or mixed) by such

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Person as lessee which in accordance with GAAP, is required to be reflected as a
liability on the balance sheet of such Person.

     1.9  "Capital  Stock" shall mean,  with respect to any Person,  any and all
shares,  interests,  participations or other equivalents (however designated) of
such Person's capital stock,  partnership interests or limited liability company
interests at any time outstanding,  and any and all rights,  warrants or options
exchangeable  for or convertible into such capital stock or other interests (but
excluding any debt security that is  exchangeable  for or convertible  into such
capital stock).

     1.10 "Cash  Equivalents"  shall  mean,  at any time,  (a) any  evidence  of
Indebtedness  with a  maturity  date of one  hundred  eighty  (180) days or less
issued or  directly  and fully  guaranteed  or insured  by the United  States of
America of any agency or instrumentality thereof; provided, that, the full faith
and credit of the United  States of America is pledged in support  thereof;  (b)
certificates of deposit or bankers'  acceptances  with a maturity of one hundred
eighty (180) days or less of any financial  institution  that is a member of the
Federal Reserve System having combined capital and surplus and undivided profits
of not less than  $250,000,000;  (c) commercial paper  (including  variable rate
demand notes) with a maturity of one hundred eighty (180) days or less issued by
a corporation  (except an Affiliate of Borrower) organized under the laws of any
State of the United  States of America or the  District of Columbia and rated at
least A-1 by Standard & Poor's Ratings  Service,  a division of The  McGraw-Hill
Companies,  Inc.  or at  least  P-1 by  Moody's  Investors  Service,  Inc.;  (d)
repurchase  obligations  with a term of not  more  than  thirty  (30)  days  for
underlying  securities  of the types  described in clause (a) above entered into
with any financial institution having combined capital and surplus and undivided
profits of not less than  $250,000,000;  (e)  repurchase  agreements and reverse
repurchase  agreements  relating  to  marketable  direct  obligations  issued or
unconditionally  guaranteed  by the  United  States of  America or issued by any
governmental  agency  thereof  and  backed by the full  faith and  credit to the
United States of America,  in each case maturing within one hundred eighty (180)
days or less from the date of  acquisition;  provided,  that,  the terms of such
agreements  comply  with  the  guidelines  set  forth in the  Federal  Financial
Agreements of Depository  Institutions  with Securities  Dealers and Others,  as
adopted  by the  Comptroller  of the  Currency  on  October  31,  1985;  and (f)
investments  in money market  funds and mutual funds which invest  substantially
all of their assets in securities of the types  described in clauses (a) through
(e) above.

     1.11 "Change of Control" shall mean (a) the transfer (in one transaction or
a series of transactions) of all or substantially  all of the assets of Borrower
to any Person or group (as such term is used in Section 13(d)(3) of the Exchange
Act);  (b) the  liquidation or dissolution of Borrower or the adoption of a plan
by the  stockholders  of Borrower  relating to the dissolution or liquidation of
Borrower;  (c) the  acquisition  by any Person or group (as such term is used in
Section 13(d)(3) of the Exchange Act), except for one or more Permitted Holders,
of beneficial ownership,  directly or indirectly, of fifty (50%) percent or more
of the voting  power of the total  outstanding  Voting  Stock of Borrower or the
Board of Directors of Borrower;  or (d) during any period of two (2) consecutive
years,  individuals who at the beginning of such period constituted the Board of
Directors of Borrower  (together  with any new directors who have been appointed
by any Permitted Holder, or whose nomination for election by the stockholders of
Borrower, as the

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case may be, was approved by a vote of at least  sixty-six  and  two-thirds  (66
2/3%) percent of the directors then still in office who were either directors at
the beginning of such period or whose  election or  nomination  for election was
previously  so  approved)  cease for any reason to  constitute a majority of the
Board of Directors of Borrower then still in office.

     1.12 "Code" shall mean the Internal Revenue Code of 1986, together with all
rules, regulations and interpretations thereunder or related thereto.

     1.13 "Collateral" shall have the meaning set forth in Section 5 hereof.

     1.14 "Collateral  Access Agreement" shall mean an agreement in writing,  in
form and  substance  satisfactory  to  Lender,  from any lessor of  premises  to
Borrower,  or any other  person  to whom any  Collateral  (including  Inventory,
Equipment,  bills of lading or other documents of title) is consigned or who has
custody,  control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located, pursuant
to which such lessor,  consignee or other person,  inter alia,  acknowledges the
first priority security  interest of Lender in such Collateral,  agrees to waive
any and all claims such lessor, consignee or other person may, at any time, have
against such  Collateral,  whether for  processing,  storage or  otherwise,  and
agrees to permit  Lender  access to, and the right to remain on, the premises of
such lessor,  consignee or other  person so as to exercise  Lender's  rights and
remedies and otherwise  deal with such  Collateral and in the case of any person
who at any time has  custody,  control or  possession  of any bills of lading or
other documents of title, agrees to hold such bills of lading or other documents
as bailee  for  Lender and to follow all  instructions  of Lender  with  respect
thereto.

     1.15  "Customs  Brokers"  shall mean the persons  listed on  Schedule  1.15
hereto or such other person as may be selected by Borrower after the date hereof
and after written  notice by Borrower to Lender who is reasonably  acceptable to
Lender,  provided,  that, as to each such person (including those listed on such
Schedule),  Borrower has used reasonable  efforts to obtain a Collateral  Access
Agreement duly authorized, executed and delivered by such person.

     1.16 "Distribution  Agreements" shall mean,  individually and collectively,
(a) the  Distribution  Agreement,  dated  as of  March  15,  2000  by and  among
Woodside,   DH  Apparel  Company,  Inc.  and  Borrower  (the  "DWI  Distribution
Agreement") and (b) Deed, dated as of the date hereof, from Delta Mills, Inc. to
Borrower,  with  respect  to the  real  property  located  in  Edgefield,  South
Carolina, the Bill of Sale, Assignment and Assumption Agreement,  dated the date
hereof, made by Delta Mills, Inc., as Seller and Borrower, as Purchaser, and the
Agreement  for the  Purchase  and Sale of Property  dated April 1, 2000,  by and
between Delta Mills,  Inc., as Seller and Borrower,  as Buyer, and (c) all bills
of sale,  quitclaim deeds,  assignment and assumption  agreements and such other
instruments of transfer as are referred to in the agreements described in clause
(a) and (b) above and all side letters with respect thereto, and all agreements,
documents and instruments executed and/or delivered in connection therewith,  as
all  of  the  foregoing  now  exist  or  may  hereafter  be  amended,  modified,
supplemented,  extended, renewed, restated or replaced; provided, that, the term
"Distribution Agreements" as used herein shall not include any of the "Financing
Agreements" as such term is defined herein.

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     1.17 "EBITDA" shall mean, as to any Person,  with respect to any period, an
amount equal to: (a) the Net Income of such Person and its Subsidiaries for such
period  on a  consolidated  basis  determined  in  accordance  with  GAAP,  plus
depreciation,  amortization  and  other  non-cash  charges  (including,  but not
limited to, imputed interest and deferred  compensation) for such period (to the
extent deducted in the computation of Net Income),  all in accordance with GAAP,
plus the  Interest  Expense  for such  period  (to the  extent  deducted  in the
computation  of Net  Income),  plus  charges  for  Federal,  Provincial,  State,
district, municipal, local and foreign income taxes.

     1.18 "Eligible  Accounts" shall mean Accounts created by Borrower which are
and continue to be  acceptable  to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:

     (a) such Accounts  arise from the actual and bona fide sale and delivery of
goods by Borrower or rendition of services by Borrower in the ordinary course of
its business which  transactions  are completed in accordance with the terms and
provisions contained in any documents related thereto;

     (b) such  Accounts  are not unpaid  more than the earlier of (i) sixty (60)
days after the original due date or for them (ii) one hundred  twenty (120) days
after the date of the original invoice for them (or one hundred fifty (150) days
after the date of the original  invoice for them for certain  account debtors of
Borrower which are pre-approved by Lender, on terms and conditions acceptable to
Lender);

     (c) such Accounts comply with the terms and conditions contained in Section
7.2(c) of this Agreement;

     (d) such Accounts do not arise from sales on consignment,  guaranteed sale,
sale and return,  sale on  approval,  or other terms under which  payment by the
account debtor may be conditional or contingent;

     (e) the chief  executive  office of the account debtor with respect to such
Accounts is located in the United States of America or Canada  (provided,  that,
at any time promptly upon Lender's request,  Borrower shall execute and deliver,
or cause to be executed and  delivered,  such other  agreements,  documents  and
instruments  as may be required by Lender to perfect the  security  interests of
Lender in those Accounts of an account debtor with its chief executive office or
principal  place of business in Canada in accordance with the applicable laws of
the Province of Canada in which such chief  executive  office or principal place
of  business  is located  and take or cause to be taken  such other and  further
actions as Lender may  request to enable  Lender as secured  party with  respect
thereto to collect such Accounts under the applicable Federal or Provincial laws
of Canada) or, at Lender's  option,  if the chief executive office and principal
place of business of the account debtor with respect to such Accounts is located
other than in the United  States of America or Canada,  then if either:  (i) the
account debtor has delivered to Borrower an irrevocable  letter of credit issued
or  confirmed  by a bank  satisfactory  to Lender and payable only in the United
States of America and in U.S. dollars, sufficient to cover such

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Account, in form and substance satisfactory to Lender and if required by Lender,
the  original of such letter of credit has been  delivered to Lender or Lender's
agent and the issuer thereof  notified of the assignment of the proceeds of such
letter of credit to Lender,  or (ii) such Account is subject to credit insurance
payable to Lender issued by an insurer and on terms and in an amount  acceptable
to Lender,  or  (iii) such  Account is otherwise  acceptable  in all respects to
Lender  (subject to such  lending  formula  with  respect  thereto as Lender may
determine);

     (f) such  Accounts  do not  consist  of  progress  billings  (such that the
obligation of the account  debtors with respect to such Accounts is  conditioned
upon Borrower's  satisfactory  completion of any further  performance  under the
agreement  giving rise thereto),  bill and hold invoices or retainage  invoices,
except as to bill and hold invoices,  if Lender shall have received an agreement
in writing  from the  account  debtor,  in form and  substance  satisfactory  to
Lender,  confirming the  unconditional  obligation of the account debtor to take
the goods related thereto and pay such invoice;

     (g) the account  debtor with  respect to such  Accounts  has not asserted a
counterclaim,  defense  or  dispute  and does not have,  and does not  engage in
transactions  which may give rise to any right of setoff or  recoupment  against
such Accounts (but the portion of the Accounts of such account  debtor in excess
of the amount at any time and from time to time owed by Borrower to such account
debtor or claimed owed by such account debtor may be deemed Eligible Accounts);

     (h) there are no  facts,  events or  occurrences  which  would  impair  the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;

     (i) such  Accounts are subject to the first  priority,  valid and perfected
security  interest of Lender and any goods giving rise thereto are not, and were
not at the time of the sale thereof, subject to any liens except those permitted
in this Agreement;

     (j) neither  the account  debtor nor any officer or employee of the account
debtor with  respect to such  Accounts is an officer,  employee,  agent or other
Affiliate of Borrower;

     (k) the account  debtors with respect to such  Accounts are not any foreign
government,  the United  States of America,  any State,  political  subdivision,
department,  agency or instrumentality thereof, unless, if the account debtor is
the United  States of America,  any State,  political  subdivision,  department,
agency or instrumentality thereof, upon Lender's request, the Federal Assignment
of  Claims  Act of 1940,  as  amended  or any  similar  State or local  law,  if
applicable, has been complied with in a manner satisfactory to Lender;

     (l) there are no  proceedings  or actions  which are  threatened or pending
against the account  debtors with respect to such Accounts which might result in
any material adverse change in any such account debtor's financial condition;

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     (m) such  Accounts  of a single  account  debtor or its  affiliates  do not
constitute  more than fifteen (15%) percent of all otherwise  Eligible  Accounts
(but the portion of the Accounts not in excess of such  percentage may be deemed
Eligible Accounts);

     (n) such Accounts are not owed by an account debtor who has Accounts unpaid
more than the earlier of (i) sixty (60) days after the  original due date or for
them (ii) one hundred twenty (120) days after the original invoice date for them
(or one hundred fifty (150) days after the date of the original invoice for them
for certain  account  debtors of Borrower which are pre- approved by Lender,  on
terms and  conditions  acceptable  to Lender) which  constitute  more than fifty
(50%) percent of the total Accounts of such account debtor;

     (o) the account debtor is not located in a state  requiring the filing of a
Notice  of  Business  Activities  Report  or  similar  report in order to permit
Borrower to seek judicial  enforcement in such State of payment of such Account,
unless Borrower has qualified to do business in such state or has filed a Notice
of Business  Activities Report or equivalent report for the then current year or
such failure to file and  inability to seek judicial  enforcement  is capable of
being remedied without any material delay or material cost;

     (p) such Accounts are owed by account  debtors whose total  indebtedness to
Borrower  does not exceed the credit limit with respect to such account  debtors
(as determined by Borrower from time to time  substantially  consistent with its
current  practices as of the date hereof) by more than twenty (20%)  percent and
as is  reasonably  acceptable  to Lender (but the portion of the Accounts not in
excess of such credit limit may be deemed Eligible Accounts); and

     (q) such Accounts are owed by account  debtors deemed  creditworthy  at all
times by Borrower  consistent  with its current  practice and who are reasonably
acceptable to Lender.

General criteria for Eligible  Accounts may be established and revised from time
to time  by  Lender  in  good  faith  based  on an  event,  condition  or  other
circumstance  arising  after the date hereof,  or existing on the date hereof to
the extent Lender has no written notice thereof from Borrower,  which  adversely
affects or could  reasonably be expected to adversely affect the Accounts in the
good faith determination of Lender. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.

     1.19 "Eligible Inventory" shall mean Inventory consisting of finished goods
held for  resale  in the  ordinary  course  of the  business  of  Borrower,  raw
materials  for  such   finished   goods  and  finished   yarn   categorized   as
work-in-process,  which are acceptable to Lender based on the criteria set forth
below.  In general,  Eligible  Inventory  shall not include  (a) work-in-process
(other than finished  yarn);  (b) raw materials  other than yarn and raw cotton;
(c) spare  parts for  equipment;  (d)  packaging  and  shipping  materials;  (e)
supplies  used or consumed in  Borrower's  business;  (f)  Inventory at premises
other than those owned and  controlled by Borrower,  except any Inventory  which
would otherwise be deemed  Eligible  Inventory at locations in the United States
of America  which are not owned and  operated by Borrower  may  nevertheless  be
considered Eligible Inventory:  (i) as to locations which are leased by Borrower
if Lender shall have received a Collateral  Access  Agreement from the owner and
lessor of such location, duly

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authorized,  executed  and  delivered  by such  owner and  lessor,  except  that
notwithstanding  that Lender shall not have  received  such an  agreement  for a
particular  leased  location,  Lender  may  consider  Inventory  at such  leased
location which would  otherwise be Eligible  Inventory to be Eligible  Inventory
and in such event,  Lender may at any time establish such Reserves as Lender may
determine  in respect of amounts at any time payable by Borrower to the owner or
lessor of such  location,  without  limiting  any other  rights and  remedies of
Lender under this Agreement or under the other Financing Agreements with respect
to the  establishment  of Reserves or otherwise and (ii) as to premises of third
parties  (including  consignees  and  processors),  Lender shall have received a
Collateral Access Agreement duly authorized, executed and delivered by the owner
and operator of such premises (except that notwithstanding that Lender shall not
have received such an agreement as to a particular third party location,  Lender
may  consider  Inventory  at such  location  which would  otherwise  be Eligible
Inventory  to be Eligible  Inventory  and in such event,  Lender may at any time
establish  such  Reserves as Lender may  determine  in respect of amounts at any
time payable by Borrower to such third party,  without limiting any other rights
or  remedies  of Lender  under  this  Agreement  or under  the  other  Financing
Agreements with respect to the  establishment of Reserves or otherwise),  and in
addition, if required by Lender, as to premises of third parties where assets of
Borrower are  located:  (A) the owner and operator  executes  appropriate  UCC-1
financing statements in favor of Borrower, which are duly assigned to Lender and
(B) any secured  lender to the owner and  operator  is properly  notified of the
first priority lien on such Inventory of Lender;   (g) Inventory located outside
the United  States of America  shall only be Eligible  Inventory if (i) it is in
transit  to either the  premises  of a Customs  Broker in the  United  States or
premises of Borrower in the United States and as to premises of a Customs Broker
or premises  which are not owned and  controlled  by Borrower only if Lender has
received a Collateral  Access Agreement duly authorized,  executed and delivered
by such Customs Broker or the owner, lessor and operator of such other premises,
as the case may be, (ii) Lender has a first priority perfected security interest
in and  control and  possession  of all  originals  of  documents  of title with
respect to such  Inventory,  (iii)  Lender  has  received  a  Collateral  Access
Agreement from the Customs Broker dealing with such Inventory,  duly authorized,
executed and delivered by such person,  and such  agreement is in full force and
effect,  binding  upon such person and such person has  complied  with the terms
thereof,  (iv) Lender has received (A) a copy of the certificate of marine cargo
insurance in  connection  therewith in which it has been named as an  additional
insured  and loss payee in a manner  acceptable  to Lender and (B) a copy of the
invoice and manifest with respect thereto, and (v) such Inventory is not subject
to any  Letter of Credit  Accommodation;  (h) Inventory  subject  to a  security
interest  or lien in  favor  of any  person  other  than  Lender,  except  those
permitted in this Agreement; (i) bill and hold goods; (j) Inventory which is not
subject to the first priority,  valid and perfected security interest of Lender;
(k) damaged and/or defective Inventory which is unsaleable or which any Borrower
has not marked down to its realizable value; (l) Inventory  purchased or sold on
consignment;  (m) samples; and (n) Inventory to be returned to vendors.  General
criteria for Eligible Inventory may be established and revised from time to time
by  Lender in good  faith  based on an event,  condition  or other  circumstance
arising  after the date  hereof,  or  existing  on the date hereof to the extent
Lender has no written notice thereof from Borrower,  which adversely  affects or
could reasonably be expected to adversely affect the Inventory in the good faith
determination  of Lender.  Any Inventory  which is not Eligible  Inventory shall
nevertheless be part of the Collateral.

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     1.20 "Environmental Laws" shall mean all foreign,  Federal, State and local
laws  (including  common law),  legislation,  rules,  codes,  licenses,  permits
(including  any  conditions  imposed  therein),   authorizations,   judicial  or
administrative  decisions,  injunctions or agreements  between  Borrower and any
Governmental   Authority,   (a)  relating  to  pollution  and  the   protection,
preservation  or restoration  of the  environment  (including  air, water vapor,
surface water,  ground water,  drinking  water,  drinking water supply,  surface
land, subsurface land, plant and animal life or any other natural resource),  or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling,  treatment,  generation,   manufacture,   processing,   distribution,
transportation,   handling,  labeling,   production,  release  or  disposal,  or
threatened  release,  of Hazardous  Materials,  or (c) relating to all laws with
regard to  recordkeeping,  notification,  disclosure and reporting  requirements
respecting Hazardous  Materials.  The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response,  Compensation and Liability Act of
1980,  the Federal  Superfund  Amendments and  Reauthorization  Act, the Federal
Water  Pollution  Control Act of 1972,  the Federal Clean Water Act, the Federal
Clean Air Act,  the  Federal  Resource  Conservation  and  Recovery  Act of 1976
(including the Hazardous and Solid Waste Amendments thereto),  the Federal Solid
Waste  Disposal  and the  Federal  Toxic  Substances  Control  Act,  the Federal
Insecticide,  Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974,  (ii)  applicable  state  counterparts  to such laws, and (iii) any
common law or equitable  doctrine that may impose  liability or obligations  for
injuries or damages  due to, or  threatened  as a result of, the  presence of or
exposure to any Hazardous Materials.

     1.21  "Equipment"  shall  mean all of  Borrower's  now owned and  hereafter
acquired  equipment,  machinery,  computers  and computer  hardware and software
(whether  owned  or  licensed),   vehicles,  tools,  furniture,   fixtures,  all
attachments, accessions and property now or hereafter affixed thereto or used in
connection  therewith,  and  substitutions  and replacements  thereof,  wherever
located.

     1.22  "ERISA"  shall  mean the United  States  Employee  Retirement  Income
Security Act of 1974,  together with all rules,  regulations and interpretations
thereunder or related thereto.

     1.23 "ERISA Affiliate" shall mean any person required to be aggregated with
Borrower or any of its  Subsidiaries  under Sections 414(b),  414(c),  414(m) or
414(o) of the Code.

     1.24 "ERISA  Event" shall mean (a) any  "reportable  event",  as defined in
Section 4043 of ERISA or the regulations  issued  thereunder,  with respect to a
Plan;  (b) the  adoption  of any  amendment  to a Plan that  would  require  the
provision of security pursuant to Section  401(a)(29) of the Code or Section 307
of ERISA;  (c) the existence with respect to any Plan of an "accumulated funding
deficiency"  (as  defined in Section  412 of the Code or Section  302 of ERISA),
whether or not  waived;  (d) the  filing  pursuant to Section 412 of the Code or
Section  303(d) of ERISA of an application  for a waiver of the minimum  funding
standard  with  respect  to  any  Plan;  (e) the  occurrence  of  a  "prohibited
transaction"  with  respect to which  Borrower or any of its  Subsidiaries  is a
"disqualified  person"  (within the meaning of Section 4975 of the Code) or with
respect to which Borrower or any of its Subsidiaries  could otherwise be liable;
(f) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from
a Multiemployer

                                        9
<PAGE>

Plan or a  cessation  of  operations  which is treated as such a  withdrawal  or
notification that a Multiemployer Plan is in reorganization; (g) the filing of a
notice  of  intent  to  terminate,  the  treatment  of  a  Plan  amendment  as a
termination  under  Section  4041 or  4041A of  ERISA,  or the  commencement  of
proceedings by the Pension Benefit  Guaranty  Corporation to terminate a Plan or
Multiemployer Plan; (h) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer,  any Plan or Multiemployer Plan; (i) the
imposition  of any  liability  under  Title IV of ERISA,  other than the Pension
Benefit Guaranty  Corporation premiums due but not delinquent under Section 4007
of ERISA,  upon  Borrower or any ERISA  Affiliate;  and  (j) any  other event or
condition  with respect to a Plan or  Multiemployer  Plan or any Plan subject to
Title IV of ERISA  maintained,  or contributed  to, by any ERISA  Affiliate that
could reasonably be expected to result in liability of Borrower.

     1.25 "Eurodollar Rate" shall mean with respect to the Interest Period for a
Eurodollar  Rate  Loan,  the  interest  rate per annum  equal to the  arithmetic
average of the rates of interest per annum (rounded  upwards,  if necessary,  to
the next  one-sixteenth  (1/16) of one (1%) percent) at which  Reference Bank is
offered  deposits of United States  dollars in the London  interbank  market (or
other  Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the  commencement
of such Interest Period in amounts  substantially  equal to the principal amount
of  the  Eurodollar  Rate  Loans  requested  by and  available  to  Borrower  in
accordance  with this Agreement,  with a maturity of comparable  duration to the
Interest Period selected by Borrower.

     1.26  "Eurodollar  Rate Loans"  shall mean any Loans or portion  thereof on
which  interest is payable based on the Adjusted  Eurodollar  Rate in accordance
with the terms hereof.

     1.27 "Event of Default" shall mean the occurrence or existence of any event
or condition described in Section 10.1 hereof.

     1.28 "Excess  Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of: (i) the  Borrowing Base and
(ii) the Revolving Loan Limit,  minus (b) the sum of: (i) the amount of all then
outstanding and unpaid  Obligations (but not including for this purpose the then
outstanding  principal amount of the Term Loan),  plus (ii) the aggregate amount
of all then  outstanding  and unpaid  trade  payables and other  obligations  of
Borrower  which are more than  sixty  (60) days past due as of such  time,  plus
(iii) the amount of checks  issued by Borrower to pay trade  payables  and other
obligations  which are more than sixty  (60) days past due as of such time,  but
not yet sent.

     1.29  "Exchange  Act"  shall  mean  the  Securities  Exchange  Act of 1934,
together with all rules,  regulations and interpretations  thereunder or related
thereto.

     1.30  "Existing  Letters of Credit" shall mean the letters of credit issued
for the account of Borrower listed on Schedule 1.30 hereto.

                                       10
<PAGE>

     1.31  "Existing  Real  Property"  shall mean all now owned real property of
Borrower, including leasehold interests, together with the buildings, structures
and  other  improvements  located  thereon,  and  all  licenses,  easements  and
appurtenances relating thereto, wherever located, as more particularly described
on  Schedule  1.31 hereto but not  including  the Real  Property  subject to the
Mortgages.

     1.32 "Financing  Agreements" shall mean,  collectively,  this Agreement and
all notes, guarantees,  security agreements and other agreements,  documents and
instruments now or at any time hereafter  executed and/or  delivered by Borrower
or any Obligor in connection with this Agreement.

     1.33 "Fixed Charge Coverage Ratio" shall mean, with respect to Borrower and
its Subsidiaries, on a consolidated basis, for any period of determination,  the
ratio of (a) EBITDA  during such period to (b) Fixed Charges of Borrower and its
Subsidiaries for the same period.

     1.34  "Fixed  Charges"  for any  period  shall  mean  the  sum of,  without
duplication, (a) all Interest Expense, (b) all Capital Expenditures, and (c) all
regularly  scheduled (as determined at the beginning of the  respective  period)
principal  payments of  Indebtedness  for borrowed money and  Indebtedness  with
respect to Capital Leases (and without  duplicating in items (a) and (c) of this
definition,  the interest  component with respect to Indebtedness  under Capital
Leases).

     1.35 "GAAP" shall mean  generally  accepted  accounting  principles  in the
United  States of  America  as in  effect  from time to time as set forth in the
opinions and pronouncements of the Accounting  Principles Board and the American
Institute of Certified Public  Accountants and the statements and pronouncements
of  the  Financial  Accounting  Standards  Board  which  are  applicable  to the
circumstances as of the date of determination consistently applied.

     1.36  "Governmental  Authority"  shall mean any nation or  government,  any
state,  province,  or other political  subdivision thereof, any central bank (or
similar  monetary  or  regulatory  authority)  thereof,  any  entity  exercising
executive,  legislative,  judicial, regulatory or administrative functions of or
pertaining  to  government,  and  any  corporation  or  other  entity  owned  or
controlled,  through  stock or capital  ownership  or  otherwise,  by any of the
foregoing.

     1.37  "Hazardous  Materials"  shall mean any hazardous,  toxic or dangerous
substances,  materials and wastes,  including hydrocarbons  (including naturally
occurring  or  man-made  petroleum  and  hydrocarbons),   flammable  explosives,
asbestos,  urea  formaldehyde  insulation,   radioactive  materials,  biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or  contaminants  (including  materials  which include
hazardous  constituents),  sewage, sludge,  industrial slag, solvents and/or any
other  similar  substances,   materials,  or  wastes  and  including  any  other
substances,  materials  or  wastes  that  are  or  become  regulated  under  any
Environmental  Law (including any that are or become  classified as hazardous or
toxic under any Environmental Law).

     1.38 "Indebtedness"  shall mean, with respect to any Person, any liability,
whether or not contingent,  (a) in respect of borrowed money (whether or not the
recourse of the lender is to the

                                       11
<PAGE>

whole of the assets of such Person or only to a portion thereof) or evidenced by
bonds, notes,  debentures or similar  instruments;  (b) representing the balance
deferred  and unpaid of the purchase  price of any property or services  (except
any such  balance  that  constitutes  an  account  payable  to a trade  creditor
(whether or not an Affiliate) created,  incurred,  assumed or guaranteed by such
Person in the  ordinary  course of business of such  Person in  connection  with
obtaining  goods,  materials or services that is not overdue by more than ninety
(90) days,  unless the trade payable is being contested in good faith);  (c) all
obligations  as lessee under leases which have been, or should be, in accordance
with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent
or  otherwise,  of  such  Person  to pay or be  liable  for the  payment  of any
indebtedness described in this definition of another Person, including,  without
limitation,  any such indebtedness,  directly or indirectly  guaranteed,  or any
agreement  to purchase,  repurchase,  or  otherwise  acquire such  indebtedness,
obligation  or liability or any security  therefor,  or to provide funds for the
payment or discharge thereof, or to maintain solvency,  assets, level of income,
or other financial  condition;  (e) all  obligations  with respect to redeemable
stock and redemption or repurchase  obligations under any Capital Stock or other
equity securities issued by such Person;  (f) all reimbursement  obligations and
other  liabilities  of such Person with  respect to surety bonds  (whether  bid,
performance or otherwise),  letters of credit,  banker's  acceptances or similar
documents  or  instruments  issued  for  such  Person's  account;  and  (g)  all
indebtedness  of such Person in respect of  indebtedness  of another  Person for
borrowed money or  indebtedness  of another Person  otherwise  described in this
definition  which  is  secured  by  any  consensual  lien,   security  interest,
collateral  assignment,  conditional  sale,  mortgage,  deed of trust,  or other
encumbrance  on any  asset of such  Person,  whether  or not  such  obligations,
liabilities or indebtedness  are assumed by or are a personal  liability of such
Person, all as of such time.

     1.39 "Information  Certificate"  shall mean the Information  Certificate of
Borrower  constituting  Exhibit A hereto  containing  material  information with
respect  to  Borrower,  its  business  and  assets  provided  by or on behalf of
Borrower to Lender in connection  with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.

     1.40 "Intellectual  Property" shall mean Borrower's now owned and hereafter
arising or acquired:  patents,  patent rights, patent applications,  copyrights,
works  which are the  subject  matter of  copyrights,  copyright  registrations,
trademarks,  trade names, trade styles, trademark and service mark applications,
and licenses and rights to use any of the foregoing;  all extensions,  renewals,
reissues,  divisions,  continuations,  and  continuations-in-part  of any of the
foregoing; all rights to sue for past, present and future infringement of any of
the  foregoing;  inventions,  trade  secrets,  formulae,  processes,  compounds,
drawings,  designs,   blueprints,   surveys,  reports,  manuals,  and  operating
standards;  goodwill;  customer and other lists in whatever form maintained; and
trade  secret  rights,  copyright  rights,  rights in works of  authorship,  and
contract rights relating to computer software programs, in whatever form created
or maintained.

     1.41 "Interest  Expense" shall mean, for any period, as to any Person,  all
of the  following as  determined in  accordance  with GAAP:  (a) total  interest
expense,  whether  paid or accrued  during such period  (including  the interest
component of Capital Leases for such period), including, without limitation, all
bank fees, commissions, discounts and other fees and charges

                                       12
<PAGE>

owed with respect to letters of credit (but excluding   amortization of discount
and amortization of deferred  financing fees paid in cash in connection with the
transactions contemplated hereby,  interest paid in property other than cash and
any other  interest  expense not payable in cash),  minus  (b) any net  payments
received  during  such  period as  interest  income  received  in respect of its
investments in cash.

     1.42 "Interest Period" shall mean for any Eurodollar Rate Loan, a period of
approximately  one (1),  two (2), or three (3) months  duration as Borrower  may
elect,  the exact  duration to be determined  in  accordance  with the customary
practice in the applicable Eurodollar Rate market;  provided, that, Borrower may
not  elect  an  Interest  Period  which  will  end  after  the  last  day of the
then-current term of this Agreement.

     1.43 "Interest Rate" shall mean:

     (a) Subject to clauses (b) and (c) of this  definition  below:  as to Prime
Rate Loans,  the Prime Rate and,  as to  Eurodollar  Rate  Loans,  a rate of two
percent  per annum in  excess  of the  Adjusted  Eurodollar  Rate  (based on the
Eurodollar  Rate  applicable for the Interest  Period selected by Borrower as in
effect two (2) Business  Days after the date of receipt by Lender of the request
of Borrower for such  Eurodollar Rate Loans in accordance with the terms hereof,
whether  such  rate is  higher  or  lower  than any rate  previously  quoted  to
Borrower);

     (b) Subject to clause (c) below, effective as of the first day of the month
after Lender's receipt of the financial  statements  required to be delivered to
Lender  pursuant to Section  9.6(a)(ii)  hereof in respect of the fiscal quarter
ending June 30, 2000,  the Interest Rate payable by Borrower  shall be increased
or decreased, as the case may be, to the rate equal to the applicable margin set
forth in Exhibit B hereto,  on a per annum basis, in excess of the Prime Rate as
to Prime  Rate  Loans,  and in  excess  of the  Adjusted  Eurodollar  Rate as to
Eurodollar Rate Loans, in each case,  based on either (i) the quarterly  average
of the Excess Availability of Borrower for the immediately preceding full fiscal
quarter  or  (ii)  Borrower's  Fixed  Charge  Coverage  Ratio,  calculated  on a
quarterly  basis,  for the  immediately  preceding four (4)  consecutive  fiscal
quarters  of  Borrower,  ending  June 30,  2000  (except  that for  purposes  of
calculating the Fixed Charge Coverage Ratio for the period ending June 30, 2000:
(A) the Fixed Charge Coverage Ratio shall be calculated on a fiscal year to date
basis as of July 1, 1999, and (B) the Interest Expense paid to Lender in respect
of the Obligations from the date of closing to June 30, 2000 shall be calculated
on an annualized basis) as calculated by Lender in good faith.

     (c)  Notwithstanding  anything to the contrary contained in clauses (a) and
(b) above,  the applicable  margin otherwise used to calculate the Interest Rate
shall be the highest  percentage set forth on Exhibit B hereto for each category
of Loans (without  regard to the amount of Excess  Availability  or Fixed Charge
Coverage  Ratio) plus two (2%) percent per annum,  at Lender's  option,  without
notice,  (i) either (A) for the period on and after the date of  termination  or
non- renewal hereof until such time as all Obligations are indefeasibly paid and
satisfied  in  full,  or  (B) for  the  period  from and  after  the date of the
occurrence of any Event of Default,  and for so long as such Event of Default is
continuing as  determined by Lender and (ii) on the Revolving  Loans at any time
outstanding in excess of the amounts available to Borrower under Section 2

                                       13
<PAGE>

(whether  or not such  excess(es)  arise or are made  with or  without  Lender's
knowledge or consent and whether made before or after an Event of Default).

     1.44  "Inventory"  shall  mean all of  Borrower's  now owned and  hereafter
existing or acquired  raw  materials,  work in process,  finished  goods and all
other inventory of whatsoever kind or nature, wherever located.

     1.45 "Inventory Loan Limit" shall mean $15,000,000,  provided, that, in the
event Lender determines that the number of days of the turnover of the Inventory
for any period has not materially changed, the Inventory Loan Limit shall be (i)
$18,000,000  for the period  commencing  July 1, 2001 through and including June
30, 2002, and (ii) $20,000,000 for the period commencing July 1, 2002 and at all
times thereafter.

     1.46  "Letter of Credit  Accommodations"  shall mean the letters of credit,
merchandise  purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the  account of  Borrower  or any  Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer  the  performance  by  Borrower  of its  obligations  to such  issuer
(including without limitation, the Existing Letters of Credit).

     1.47 "Loans" shall mean the Revolving Loans and the Term Loan.

     1.48  "Material  Contract"  shall mean (a) any contract or other  agreement
(other than the Financing  Agreements),  written or oral, of Borrower  involving
monetary  liability of or to any Person in an amount in excess of  $1,000,000 in
any fiscal year and (b) any other  contract or other  agreement  (other than the
Financing Agreements),  whether written or oral, to which Borrower is a party as
to which the  breach,  nonperformance,  cancellation  or failure to renew by any
party thereto  would have a material  adverse  effect on the  business,  assets,
condition  (financial  or  otherwise)  or results of  operations or prospects of
Borrower or the validity or enforceability  of this Agreement,  any of the other
Financing  Agreements,  or any of the rights and remedies of Lender hereunder or
thereunder.

     1.49  "Maximum  Credit"  shall  mean the amount of  $35,000,000  subject to
increase as set forth in Section 2.1(d) hereof.

     1.50 "Maximum  Interest Rate" shall mean the maximum  non-usurious  rate of
interest  under  applicable  Federal or State law as in effect from time to time
that may be contracted for, taken,  reserved,  charged or received in respect of
the  indebtedness of Borrower to Lender,  or to the extent that at any time such
applicable  law may  thereafter  permit a higher  maximum non-  usurious rate of
interest, then such higher rate. Notwithstanding any other provision hereof, the
Maximum  Interest  Rate shall be  calculated  on a daily basis  (computed on the
actual number of days elapsed over a year of three hundred  sixty-five  (365) or
three hundred sixty-six (366) days, as the case may be).

     1.51 "Mortgages"  shall mean,  individually and  collectively,  each of the
following:  (a) the Deed of Trust  and  Security  Agreement,  dated of even date
herewith, by Borrower in favor of

                                       14
<PAGE>

Lender with respect to the Real Property and related assets of Borrower  located
in Maiden, North Carolina,  (b) the Deed of Trust and Security Agreement,  dated
of even date  herewith,  by Borrower in favor of Lender with respect to the Real
Property and related assets of Borrower located in Knoxville, Tennessee, and (c)
the Open-End Mortgage and Security  Agreement,  dated of even date herewith,  by
Borrower in favor of Lender with respect to the Real Property and related assets
of Borrower located in Edgefield, South Carolina.

     1.52 "Multiemployer Plan" shall mean a "multi-employer  plan" as defined in
Section  4001(a)(3) of ERISA which is or was at any time during the current year
or the  immediately  preceding six (6) years  contributed  to by Borrower or any
ERISA Affiliate.

     1.53 "Net  Amount of  Eligible  Accounts"  shall  mean the gross  amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time  issued,  owing,  granted,  outstanding,  available  or claimed with
respect thereto.

     1.54 "Net Income" shall mean,  with respect to any Person,  for any period,
the aggregate of the net income (loss) of such Person and its Subsidiaries, on a
consolidated  basis,  for such period  (excluding to the extent included therein
any extraordinary,  one-time or non-recurring gains) after deducting all charges
which  should be  deducted  before  arriving  at the net income  (loss) for such
period and after  deducting  the  Provision  for Taxes for such  period,  all as
determined in accordance  with GAAP;  provided,  that, (a) the net income of any
Person that is not a  wholly-owned  Subsidiary  or that is accounted  for by the
equity method of  accounting  shall be included only to the extent of the amount
of dividends or  distributions  paid or payable to such Person or a wholly-owned
Subsidiary of such Person; (b) the effect of any change in accounting principles
adopted  by such  Person  or its  Subsidiaries  after the date  hereof  shall be
excluded; and (c) the net income (if positive) of any wholly-owned Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such  wholly-owned  Subsidiary  to such  Person or to any other  wholly-owned
subsidiary of such Person is not at the time permitted by operation of the terms
of its charter or any agreement,  instrument,  judgment, decree, order, statute,
rule or governmental regulation applicable to such wholly-owned Subsidiary shall
be excluded.  For the purpose of this  definition,  net income excludes any gain
(but not loss) together with any related  Provision for Taxes for such gain (but
not loss) realized upon the sale or other disposition of any assets that are not
sold  in  the  ordinary  course  of  business  (including,  without  limitation,
dispositions  pursuant  to sale and  leaseback  transactions)  or of any Capital
Stock of such Person or a Subsidiary of such Person and any net income  realized
as a result of changes in accounting  principles or the  application  thereof to
such Person.

     1.55 "Net  Proceeds"  shall mean the aggregate  cash  proceeds  received by
Borrower,  or any of its  Subsidiaries  in respect  of any asset sale  permitted
under  Section 9.7 hereof,  net of the direct costs  relating to such asset sale
(including,  without limitation,  legal, accounting and investment banking fees,
and sales commissions) and any relocation expenses incurred as a result thereof,
taxes  paid or  payable as a result  thereof  (after  taking  into  account  any
available tax credits or deductions and any tax sharing  arrangements),  amounts
applied  to the  repayment  of  indebtedness  secured  by a lien on the asset or
assets that are the subject of such asset sale and any

                                       15
<PAGE>

other indebtedness required to be repaid in connection with such transaction and
any reserve for adjustment in respect of the sale price of such asset or assets.
Net Proceeds shall exclude any non-cash  proceeds  received from any asset sale,
but shall  include  such  proceeds  when and as  converted  by  Borrower  or any
Subsidiary of Borrower to cash.

     1.56  "Obligations"  shall mean any and all Revolving Loans, the Term Loan,
Letter  of Credit  Accommodations  and all other  obligations,  liabilities  and
indebtedness of every kind,  nature and description  owing by Borrower to Lender
and/or its affiliates,  including principal,  interest, charges, fees, costs and
expenses, however evidenced,  whether as principal,  surety, endorser, guarantor
or otherwise,  whether  arising under this  Agreement or otherwise,  whether now
existing or  hereafter  arising,  whether  arising  before,  during or after the
initial or any renewal term of this Agreement or after the  commencement  of any
case with respect to Borrower  under the United  States  Bankruptcy  Code or any
similar statute (including the payment of interest and other amounts which would
accrue and become due but for the commencement of such case, whether or not such
amounts are  allowed or  allowable  in whole or in part in such  case),  whether
direct or indirect,  absolute or contingent,  joint or several,  due or not due,
primary or secondary,  liquidated  or  unliquidated,  secured or unsecured,  and
however acquired by Lender.

     1.57 "Obligor"  shall mean any  guarantor,  endorser,  acceptor,  surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.

     1.58  "Payment  Account"  shall have the  meaning  set forth in Section 6.3
hereof.

     1.59 "Permits" shall have the meaning set forth in Section 8.7 hereof.

     1.60  "Permitted  Holders"  shall mean the persons  listed on Schedule 1.60
hereto and their respective successors and assigns.

     1.61 "Person" or "person" shall mean any individual,  sole  proprietorship,
partnership,  corporation  (including any corporation  which elects subchapter S
status  under  the  Code),   limited   liability   company,   limited  liability
partnership,   business   trust,   unincorporated   association,   joint   stock
corporation,  trust,  joint  venture or other  entity or any  government  or any
agency or instrumentality or political subdivision thereof.

     1.62 "Plan"  means an employee  benefit plan (as defined in Section 3(3) of
ERISA) which Borrower sponsors,  maintains,  or to which it makes, is making, or
is obligated to make  contributions,  or in the case of a Multiemployer Plan has
made  contributions  at any time during the  immediately  preceding six (6) plan
years.

     1.63 "Prime Rate" shall mean the rate from time to time publicly  announced
by First Union National Bank, or its successors,  as its prime rate,  whether or
not such announced rate is the best rate available at such bank.

                                       16
<PAGE>

     1.64 "Prime Rate  Loans"  shall mean any Loans or portion  thereof on which
interest  is  payable  based on the  Prime  Rate in  accordance  with the  terms
thereof.

     1.65  "Provision for Taxes" shall mean an amount equal to all taxes imposed
on or measured by net income, whether Federal, State,  Provincial,  municipal or
local,  and whether foreign or domestic,  that are paid or payable by any Person
in respect of any period in accordance with GAAP.

     1.66 "Real Property"  shall mean all now owned and hereafter  acquired real
property  of  Borrower,   including  leasehold  interests,   together  with  all
buildings,  structures, and other improvements located thereon and all licenses,
easements and appurtenances  relating thereto,  wherever located,  including the
real property and related assets more particularly described in the Mortgages.

     1.67  "Receivables"  shall mean:  (a) all Accounts;  (b) all amounts at any
time payable to Borrower in respect of the sale or other disposition by Borrower
of any Account or other  obligation for the payment of money;  (c) all interest,
fees,  late  charges,  penalties,  collection  fees and other  amounts due or to
become due or otherwise payable in connection with any Account;  (d) all letters
of credit,  indemnities,  guarantees,  security or other  deposits  and proceeds
thereof  issued  payable to Borrower or  otherwise  in favor of or  delivered to
Borrower in  connection  with any  Account;  or (e) all other  contract  rights,
chattel  paper,  instruments,  notes,  general  intangibles  and other  forms of
obligations owing to Borrower, whether from the sale and lease of goods or other
property,  licensing of any property (including  Intellectual  Property or other
general  intangibles),  rendition  of  services  or from  loans or  advances  by
Borrower  or to or for the  benefit  of any  third  person  (including  loans or
advances to any Affiliates or  Subsidiaries)  or otherwise  associated  with any
Accounts,  Inventory  or general  intangibles  of Borrower  (including,  without
limitation,  choses in action, causes of action, tax refunds, tax refund claims,
any  funds  which  may  become  payable  to  Borrower  in  connection  with  the
termination  of any Plan or other  employee  benefit plan and any other  amounts
payable to Borrower from any Plan or other  employee  benefit  plan,  rights and
claims  against  carriers  and  shippers,  rights to  indemnification,  business
interruption  insurance and proceeds  thereof,  casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance  covering the liens
of employees on which Borrower is beneficiary.

     1.68  "Records"  shall mean all of  Borrower's  present and future books of
account of every kind or nature, purchase and sale agreements,  invoices, ledger
cards, bills of lading and other shipping evidence, statements,  correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor,  together with the tapes,  disks,  diskettes and other data and software
storage  media and  devices,  file  cabinets  or  containers  in or on which the
foregoing  are stored  (including  any rights of  Borrower  with  respect to the
foregoing maintained with or by any other person).

     1.69  "Reference  Bank" shall mean First Union National Bank, or such other
bank as Lender may from time to time designate.

                                       17
<PAGE>

     1.70 "Renewal Date" shall the meaning set forth in Section 12.1 hereof.

     1.71 "Reserves" shall mean as of any date of determination, such amounts as
Lender may from time to time  establish  and revise in good faith  reducing  the
amount of  Revolving  Loans and  Letter of  Credit  Accommodations  which  would
otherwise  be available to Borrower  under the lending  formula(s)  provided for
herein: (a) to reflect events, conditions,  contingencies or risks arising after
the date of this Agreement or of which Lender had no actual knowledge as of such
date,  which, as determined by Lender in good faith,  adversely affect, or would
have a reasonable  likelihood of adversely affecting,  either (i) the Collateral
or any other property which is security for the  Obligations or its value,  (ii)
the assets,  business or financial condition of Borrower or any Obligor or (iii)
the security  interests and other rights of Lender in the Collateral  (including
the enforceability, perfection and priority thereof); or (b) to reflect Lender's
good faith belief that any collateral report or financial  information furnished
by or on  behalf  of  Borrower  or any  Obligor  to  Lender  is or may have been
incomplete,  inaccurate or misleading in any material respect; or (c) to reflect
outstanding Letter of Credit  Accommodations as provided in Section 2.2  hereof;
(d) $255,000 in respect of deferred compensation liabilities of Borrower for its
employees and those of any member of the Delta Apparel  Employee  Group (as such
term is defined in the DWI  Distribution  Agreement)  such  reserve to terminate
upon Lender's receipt of evidence, in form and substance satisfactory to it that
the option provided to members of the Delta Apparel  Employee Group to receive a
distribution   of  deferred   compensation   benefits  in  connection  with  the
transactions  contemplated by the Distribution  Agreement has expired; or (e) in
respect of any state of facts which Lender  determines in good faith constitutes
an Event of Default or may,  with notice or passage of time or both,  constitute
an Event of Default.  To the extent Lender may revise the lending  formulas used
to determine  the Borrowing  Base or establish  new criteria or revise  existing
criteria  for  Eligible  Accounts  or  Eligible  Inventory  so as to address any
circumstances,  condition,  event or  contingency in an manner  satisfactory  to
Lender, Lender shall not establish a Reserve for the same purpose. The amount of
any Reserve  established by Lender shall have a reasonable  relationship  to the
event,  condition  or other  matter  which is the  basis  for  such  reserve  as
determined by Lender in good faith.

     1.72 "Revolving Loan Limit" shall mean  $25,000,000  subject to increase as
provided in Section 2.1(d) hereof.

     1.73 "Revolving Loans" shall mean the loans now or hereafter made by Lender
to or for the  benefit of Borrower on a  revolving  basis  (involving  advances,
repayments and readvances) as set forth in Section 2.1 hereof.

     1.74  "Subsidiary" or "subsidiary"  shall mean, with respect to any Person,
any corporation,  limited liability  company,  limited liability  partnership or
other  limited or general  partnership,  trust,  association  or other  business
entity of which an aggregate of at least a majority of the  outstanding  Capital
Stock  or other  interests  entitled  to vote in the  election  of the  board of
directors of such  corporation  (irrespective of whether,  at the time,  Capital
Stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency),  managers, trustees
or other controlling persons, or an equivalent

                                       18
<PAGE>

controlling  interest  therein,  of such  Person  is, at the time,  directly  or
indirectly, owned by such Person and/or one or more subsidiaries of such Person.

     1.75 "Term  Loan"  shall mean the term loan made by Lender to  Borrower  as
provided for in Section 2.3 hereof.

     1.76  "Value"  shall mean,  as  determined  by Lender in good  faith,  with
respect to  Inventory,  the lower of (a) cost  computed on a first-in  first-out
basis in accordance with GAAP or (b) market value.

     1.77 "Voting  Stock" shall mean with respect to any Person,  (a) one (1) or
more classes of Capital  Stock of such Person  having  general  voting powers to
elect at least a majority  of the board of  directors,  managers  or trustees of
such  Person,  irrespective  of whether at the time  Capital  Stock of any other
class or classes have or might have voting  power by reason of the  happening of
any  contingency,  and (b) any  Capital  Stock  of such  Person  convertible  or
exchangeable  without  restriction  at the  option of the  holder  thereof  into
Capital Stock of such Person described in clause (a) of this definition.

     1.78  "Woodside"  shall  mean  Delta  Woodside  Industries,  Inc.,  a South
Carolina corporation, and its successors and assigns.

SECTION 2. CREDIT FACILITIES
           -----------------

     2.1 Revolving Loans.
         ----------------

     (a) Subject to and upon the terms and conditions  contained herein,  Lender
agrees  to make  Revolving  Loans  to  Borrower  from  time  to time in  amounts
requested by Borrower up to the amount equal to the lesser of: (i) the Borrowing
Base or (ii) the Revolving Loan Limit.

     (b) Lender may, in its  discretion,  from time to time,  upon not less than
five (5) days prior  notice to  Borrower,  (i) reduce the lending  formula  with
respect to Eligible  Accounts to the extent that Lender determines in good faith
that (A) the dilution  with respect to the Accounts for any period (based on the
ratio of (1) the  aggregate  amount of  reductions  in Accounts  other than as a
result of  payments  in cash to (2) the  aggregate  amount of total  sales)  has
increased in any material  respect or may be reasonably  anticipated to increase
in  any  material   respect  above  historical   levels,   or  (B)  the  general
creditworthiness  of account debtors has materially  declined or (ii) reduce the
lending  formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (A) the number of days of the turnover of the Inventory for any
period has changed or (B) the liquidation  value of the Eligible  Inventory,  or
any category thereof,  has decreased,  or (C) the nature,  quality or mix of the
Inventory has materially deteriorated. The amount of any decrease in the lending
formulas  shall  have a  reasonable  relationship  to the  event,  condition  or
circumstance  which is the basis for such  decrease as  determined  by Lender in
good faith. In determining whether to reduce the lending formula(s),  Lender may
consider events,

                                       19
<PAGE>

conditions,  contingencies  or risks which are also  considered  in  determining
Eligible Accounts, Eligible Inventory or in establishing Reserves.

     (c)  Except  in  Lender's  discretion,  (i)  the  aggregate  amount  of the
Revolving  Loans  outstanding  at any time shall not exceed the  Revolving  Loan
Limit,  (ii) the  aggregate  amount  of  Revolving  Loans  and  Letter of Credit
Accommodations  based on Eligible  Inventory  consisting  of yarn  classified as
work-in- process outstanding at any time shall not exceed $1,000,000 at any time
and  (iii)  the  aggregate  amount  of  the  Loans  and  the  Letter  of  Credit
Accommodations  outstanding at any time shall not exceed the Maximum Credit.  In
the event that the  outstanding  amount of any  component  of the Loans,  or the
aggregate amount of the outstanding  Loans and Letter of Credit  Accommodations,
exceed the amounts  available  under the lending  formulas,  the Revolving  Loan
Limit,  the sublimits for Letter of Credit  Accommodations  set forth in Section
2.2(e),  the Inventory Loan Limit or the Maximum  Credit,  as  applicable,  such
event shall not limit,  waive or  otherwise  affect any rights of Lender in that
circumstance  or on any future  occasions  and  Borrower  shall,  upon demand by
Lender, which may be made at any time or from time to time, immediately repay to
Lender the entire amount of any such excess(es) for which payment is demanded.

     (d) The Revolving Loan Limit may be permanently  increased,  one time only,
by $5,000,000 to  $30,000,000,  upon the written  request of Borrower to Lender,
such request shall be irrevocable and shall become  effective three (3) Business
Days after such  request  is  received  by  Lender,  provided,  that,  as of the
proposed  effective  date of any such increase,  Lender has  determined  that no
Event of Default or any act,  condition or event which with notice or passage of
time or  both,  would  constitute  an  Event  of  Default,  shall  exist or have
occurred. To the extent any such increase becomes effective,  the Maximum Credit
shall be automatically deemed increased by $5,000,000.

     2.2 Letter of Credit Accommodations.
         --------------------------------

     (a) Subject to and upon the terms and conditions  contained  herein, at the
request of  Borrower,  Lender  agrees to provide or arrange for Letter of Credit
Accommodations  for the  account of  Borrower  containing  terms and  conditions
acceptable to Lender and the issuer thereof.  Any payments made by Lender to any
issuer thereof and/or  related  parties in connection  with the Letter of Credit
Accommodations shall constitute  additional Revolving Loans to Borrower pursuant
to this Section 2.

     (b) In addition  to any  charges,  fees or expenses  charged by any bank or
issuer in connection  with the Letter of Credit  Accommodations,  Borrower shall
pay to Lender a letter  of credit  fee at a rate  equal to one and  one-half  (1
1/2%) percent per annum on the daily outstanding balance of the Letter of Credit
Accommodations for the immediately preceding month (or part thereof), payable in
arrears as of the first day of each succeeding month, except that Borrower shall
pay to Lender such letter of credit fee, at Lender's option,  without notice, at
a rate  equal to three and  one-half  (3 1/2%)  percent  per annum on such daily
outstanding  balance for: (i) the period from and after the date of  termination
or  non-renewal  hereof until Lender has received  full and final payment of all
Obligations (notwithstanding entry of a judgment against Borrower) and

                                       20
<PAGE>

(ii) the period from and after the date of the occurrence of an Event of Default
for so long as such Event of Default is continuing as determined by Lender. Such
letter of credit fee shall be  calculated  on the basis of a three hundred sixty
(360) day year and actual  days  elapsed and the  obligation  of Borrower to pay
such fee shall survive the termination or non-renewal of this Agreement.

     (c)  Borrower  shall give Lender two (2)  Business  Days' prior  written of
Borrower's  request for the issuance of a Letter of Credit  Accommodation.  Such
notice shall be  irrevocable  and shall  specify the original face amount of the
Letter of Credit Accommodation  requested,  the effective date (which date shall
be a Business Day) of issuance of such requested Letter of Credit Accommodation,
whether  such  Letter  of Credit  Accommodations  may be drawn in a single or in
partial draws, the date on which such requested  Letter of Credit  Accommodation
is to expire  (which date shall be a Business  Day),  the purpose for which such
Letter of Credit  Accommodation  is to be  issued,  and the  beneficiary  of the
requested Letter of Credit  Accommodation.  Borrower shall attach to such notice
the proposed form of the Letter of Credit Accommodation.

     (d) In  addition to being  subject to the  satisfaction  of the  applicable
conditions  precedent  contained  in  Section 4 hereof  and the other  terms and
conditions  contained  herein,  no  Letter  of  Credit  Accommodations  shall be
available unless each of the following  conditions precedent have been satisfied
in a manner  satisfactory  to Lender:  (i) Borrower  shall have delivered to the
proposed issuer of such Letter of Credit Accommodation at such times and in such
manner as such proposed issuer may require, an application in form and substance
satisfactory  to such proposed  issuer and Lender for the issuance of the Letter
of Credit  Accommodation and such other documents as may be required pursuant to
the  terms  thereof,  and the form and  terms of the  proposed  Letter of Credit
Accommodation shall be satisfactory to Lender and such proposed issuer,  (ii) as
of the date of issuance, no order of any court, arbitrator or other Governmental
Authority  shall  purport by its terms to enjoin or restrain  money center banks
generally  from  issuing  letters of credit of the type and in the amount of the
proposed  Letter  of  Credit  Accommodation,  and no  law,  rule  or  regulation
applicable to money center banks generally and no request or directive  (whether
or  not  having  the  force  of  law)  from  any  Governmental   Authority  with
jurisdiction  over money center banks generally shall prohibit,  or request that
the proposed  issuer of such Letter of Credit  Accommodation  refrain from,  the
issuance  of letters of credit  generally  or the  issuance  of such  Letters of
Credit Accommodation;  and (iii) the Excess Availability, prior to giving effect
to any  Reserves  with respect to such Letter of Credit  Accommodations,  on the
date of the proposed issuance of any Letter of Credit  Accommodations,  shall be
equal to or greater than: (A) if the proposed Letter of Credit  Accommodation is
for the purpose of  purchasing  Eligible  Inventory,  the sum of (1)  forty-five
(45%)  percent  multiplied  by the Value of such  Eligible  Inventory,  plus (2)
freight,  taxes,  duty and other amounts which Lender  estimates must be paid by
Borrower in connection  with such Inventory upon arrival and for delivery to one
of  Borrower's  locations  for Eligible  Inventory  within the United  States of
America and (iv) if the proposed Letter of Credit Accommodation is for any other
purpose,  an amount  equal to one  hundred  (100%)  percent  of the face  amount
thereof and all other  commitments  and  obligations  made or incurred by Lender
with respect

                                       21
<PAGE>

thereto.  Effective  on the issuance of each Letter of Credit  Accommodation,  a
Reserve  shall be  established  in the  applicable  amount  set forth in Section
2.2(d)(iii)(A) or Section 2.2(d)(iii)(B).

     (e) Except in Lender's discretion,  the amount of all outstanding Letter of
Credit Accommodations and all other commitments and obligations made or incurred
by Lender in connection  therewith shall not at any time exceed $10,000,000.  At
any time an Event of Default  exists or has  occurred  and is  continuing,  upon
Lender's  request,  Borrower will either  furnish cash  collateral to secure the
reimbursement  obligations to the issuer in connection with any Letter of Credit
Accommodations  or furnish  cash  collateral  to Lender for the Letter of Credit
Accommodations.

     (f) Borrower shall  indemnify and hold Lender harmless from and against any
and all losses, claims,  damages,  liabilities,  costs and expenses which Lender
may suffer or incur in connection with any Letter of Credit  Accommodations  and
any documents,  drafts or acceptances  relating  thereto,  including any losses,
claims, damages, liabilities,  costs and expenses due to any action taken by any
issuer or  correspondent  with  respect to any  Letter of Credit  Accommodation.
Borrower  assumes all risks with  respect to the acts or omissions of the drawer
under or beneficiary of any Letter of Credit Accommodation and for such purposes
the drawer or beneficiary shall be deemed Borrower's agent. Borrower assumes all
risks for,  and agrees to pay,  all  foreign,  Federal,  State and local  taxes,
duties  and  levies  relating  to any  goods  subject  to any  Letter  of Credit
Accommodations  or any  documents,  drafts or acceptances  thereunder.  Borrower
hereby  releases and holds Lender  harmless from and against any acts,  waivers,
errors,  delays or  omissions,  whether  caused by  Borrower,  by any  issuer or
correspondent  or otherwise  with respect to or relating to any Letter of Credit
Accommodation, except for the gross negligence or wilful misconduct of Lender as
determined  pursuant to a final,  non-appealable  order of a court of  competent
jurisdiction. The provisions of this Section 2.2(e) shall survive the payment of
Obligations and the termination or non-renewal of this Agreement.

     (g) In connection  with  Inventory  purchased  pursuant to Letter of Credit
Accommodations,  Borrower  will, at Lender's  request,  instruct all  suppliers,
carriers, forwarders, customs brokers, warehouses or others receiving or holding
cash,  checks,  Inventory,  documents  or  instruments  in which  Lender holds a
security  interest to deliver them to Lender and/or  subject to Lender's  order,
and if they  shall  come into  Borrower's  possession,  to  deliver  them,  upon
Lender's  request,  to Lender in their  original  form.  Borrower shall also, at
Lender's  request,  designate Lender as the consignee on all bills of lading and
other negotiable and non-negotiable documents.

     (h)  Borrower  hereby  irrevocably  authorizes  and directs any issuer of a
Letter of Credit Accommodation to name Borrower as the account party therein and
to deliver to Lender all instruments,  documents and other writings and property
received by issuer pursuant to the Letter of Credit Accommodations and to accept
and rely upon Lender's  instructions  and agreements with respect to all matters
arising  in  connection  with  the  Letter  of  Credit   Accommodations  or  the
applications therefor.  Nothing contained herein shall be deemed or construed to
grant  Borrower  any right or  authority  to pledge  the credit of Lender in any
manner. Lender shall have no liability of any kind with respect to any Letter of
Credit Accommodation

                                       22
<PAGE>

provided by an issuer  other than Lender  unless  Lender has duly  executed  and
delivered to such issuer the  application or a guarantee or  indemnification  in
writing with respect to such Letter of Credit  Accommodation.  Borrower shall be
bound by any interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit  Accommodation or
any  documents,  drafts or  acceptances  thereunder,  notwithstanding  that such
interpretation  may be inconsistent  with any  instructions of Borrower.  Lender
shall have the sole and exclusive  right and  authority  to, and Borrower  shall
not:  (i) at  any  time an  Event  of  Default  exists  or has  occurred  and is
continuing, (A) approve or resolve any questions of non-compliance of documents,
(B) give any  instructions  as to  acceptance  or rejection of any  documents or
goods  or  (C)  execute  any  and  all  applications  for  steamship  or  airway
guaranties, indemnities or delivery orders, and (ii) at all times, (A) grant any
extensions of the maturity of, time of payment for, or time of presentation  of,
any  drafts,  acceptances,  or  documents,  and  (B)  agree  to any  amendments,
renewals,  extensions,  modifications,  changes or  cancellations  of any of the
terms or conditions of any of the applications, Letter of Credit Accommodations,
or documents, drafts or acceptances thereunder or any letters of credit included
in the  Collateral.  Lender may take such  actions  either in its own name or in
Borrower's name.

     (i) Any rights,  remedies,  duties or obligations  granted or undertaken by
Borrower to any issuer or  correspondent  in any  application  for any Letter of
Credit  Accommodation,  or  any  other  agreement  in  favor  of any  issuer  or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or obligations
undertaken by Lender to any issuer or  correspondent  in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed  to have  been  undertaken  by  Borrower  to  Lender  and to apply in all
respects to Borrower.

     2.3 Term Loan.  Lender is making a Term Loan to  Borrower  in the  original
         ----------
principal  amount  of  $10,000,000.  The Term  Loan is (a)  evidenced  by a Term
Promissory Note in such original principal amount duly executed and delivered by
Borrower  to Lender  concurrently  herewith;  (b) to be  repaid,  together  with
interest  and  other  amounts,  in  accordance  with  this  Agreement,  the Term
Promissory  Note, and the other  Financing  Agreements and (c) secured by all of
the Collateral.

SECTION 3. INTEREST AND FEES
           -----------------

     3.1 Interest.
         ---------

     (a)  Borrower  shall pay to Lender  interest on the  outstanding  principal
amount of the Loans at the Interest Rate. All interest accruing hereunder on and
after the date of any Event of Default or termination  or non-renewal  hereof or
on the principal amount of the Revolving Loans at any time outstanding in excess
of the  amounts  available  to  Borrower  under  Section 2 (whether  or not such
excess(es),  arise or are made with or without Lender's knowledge or consent and
whether made before or after an Event of Default) shall be payable ON DEMAND.

                                       23
<PAGE>

     (b)  Borrower  may from  time to time  request  that  Prime  Rate  Loans be
converted to Eurodollar  Rate Loans or that any existing  Eurodollar  Rate Loans
continue for an additional  Interest  Period.  Such request from Borrower  shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar Rate
Loans  (subject  to the limits set forth  below) and the  Interest  Period to be
applicable to such  Eurodollar  Rate Loans.  Subject to the terms and conditions
contained  herein,  two (2)  Business  Days  after  receipt  by Lender of such a
request from  Borrower,  such Prime Rate Loans shall be converted to  Eurodollar
Rate Loans or such  Eurodollar  Rate Loans shall  continue,  as the case may be,
provided,  that, (i) no Event of Default,  or act, condition or event which with
notice or  passage of time or both would  constitute  an Event of Default  shall
exist or have occurred and be  continuing,  (ii) no party hereto shall have sent
any notice of termination or non-renewal of this Agreement, (iii) Borrower shall
have complied with such  customary  procedures as are  established by Lender and
specified  by Lender to Borrower  from time to time for requests by Borrower for
Eurodollar  Rate Loans,  (iv) no more than four (4)  Interest  Periods may be in
effect at any one time, (v) the aggregate  amount of the  Eurodollar  Rate Loans
must be in an  amount  not less  than  $3,000,000  or an  integral  multiple  of
$1,000,000 in excess  thereof,  and (vi) Lender shall have  determined  that the
Interest  Period or Adjusted  Eurodollar Rate is available to Lender through the
Reference  Bank and can be readily  determined as of the date of the request for
such Eurodollar Rate Loan by Borrower.  Any request by Borrower to convert Prime
Rate Loans to Eurodollar Rate Loans or to continue any existing  Eurodollar Rate
Loans shall be irrevocable.  Notwithstanding  anything to the contrary contained
herein,  Lender and  Reference  Bank shall not be required  to  purchase  United
States  Dollar  deposits  in the  London  interbank  market or other  applicable
Eurodollar  Rate market to fund any  Eurodollar  Rate Loans,  but the provisions
hereof shall be deemed to apply as if Lender and  Reference  Bank had  purchased
such deposits to fund the Eurodollar Rate Loans.

     (c) Any  Eurodollar  Rate Loans shall  automatically  convert to Prime Rate
Loans upon the last day of the  applicable  Interest  Period,  unless Lender has
received and approved a request to continue such  Eurodollar  Rate Loan at least
two (2)  Business  Days  prior to such  last day in  accordance  with the  terms
hereof.  Any Eurodollar  Rate Loans shall,  at Lender's  option,  upon notice by
Lender to Borrower, convert to Prime Rate Loans in the event that this Agreement
shall terminate or not be renewed.  Borrower shall pay to Lender, upon demand by
Lender (or Lender may, at its option,  charge any loan account of Borrower)  any
amounts  required to compensate  Lender,  the Reference Bank or any  participant
with  Lender  for any loss  (including  loss of  anticipated  profits),  cost or
expense  incurred by such person,  as a result of the  conversion  of Eurodollar
Rate Loans to Prime Rate Loans pursuant to any of the foregoing.

     (d) Interest  shall be payable by Borrower to Lender monthly in arrears not
later than the first day of each  calendar  month and shall be calculated on the
basis of a three hundred sixty (360) day year and actual days elapsed.  Borrower
acknowledges  and  understands  that the calculation of interest on the basis of
the actual days elapsed over the period of a three  hundred sixty (360) day year
as opposed to a year of three hundred  sixty-five  (365) or three hundred sixty-
six (366) days results in a higher effective rate of interest. The interest rate
on non-contingent  obligations (other than Eurodollar Rate Loans) shall increase
or  decrease by an amount  equal to each  increase or decrease in the Prime Rate
effective on the first day of the month after any

                                       24
<PAGE>

change in such Prime Rate is announced  based on the Prime Rate in effect on the
last day of the month in which any such change occurs.

     (e) On the date hereof,  the Prime Rate is nine (9 %) percent and therefore
the rate of interest in effect hereunder for Prime Rate Loans outstanding on the
date of this  Agreement,  expressed  in  simple  interest  terms,  is nine (9 %)
percent per annum.

     3.2 Closing Fee.  Borrower  shall pay to Lender as a closing fee the amount
         ------------
of $175,000 which shall be fully earned and payable as of the date hereof.  Such
closing  fee  shall  not  be  subject  to  rebate  upon  any  prepayment  of the
Obligations  except to the extent  required by Section 3.6 of this  Agreement or
applicable  law.  Such  closing  fee  shall  compensate  Lender  for  the  costs
associated with the origination,  structuring, processing, approving and closing
of the  transactions  contemplated by this Agreement,  exclusive of any expenses
for  which  Borrower  has  agreed  to  reimburse  Lender  pursuant  to any other
provision  of  this  Agreement  or  the  other  Financing  Agreements  (such  as
attorneys' fees).

     3.3 Servicing Fee.  Borrower shall pay to Lender monthly a servicing fee in
         --------------
an amount  equal to $2,000 in respect of  Lender's  services  for each month (or
part thereof) while this Agreement  remains in effect and for so long thereafter
as any of the Obligations are outstanding, which fee shall be fully earned as of
and  payable in  advance  on the date  hereof and on the first day of each month
hereafter.

     3.4 Unused Line Fee.  Borrower  shall pay to Lender  monthly an unused line
         ----------------
fee at a rate equal to one-quarter  of one (1/4%)  percent per annum  calculated
upon the amount by which the  Revolving  Loan Limit  exceeds the  average  daily
principal  balance  of the  outstanding  Revolving  Loans  and  Letter of Credit
Accommodations  during the  immediately  preceding month (or part thereof) while
this Agreement is in effect and for so long thereafter as any of the Obligations
are  outstanding,  which fee shall be  payable on the first day of each month in
arrears.

     3.5 Changes in Laws and Increased Costs of Loans.
         ---------------------------------------------

     (a)  Notwithstanding   anything  to  the  contrary  contained  herein,  all
Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to Prime
Rate Loans in the event that (i) any change in applicable  law or regulation (or
the interpretation or administration  thereof) shall either (A) make it unlawful
for Lender,  Reference Bank or any  participant  with Lender to make or maintain
Eurodollar  Rate Loans or to comply with the terms hereof in connection with the
Eurodollar  Rate  Loans,  or (B) shall  result in the  increase  in the costs to
Lender,  Reference  Bank  or  any  participant  of  making  or  maintaining  any
Eurodollar  Rate  Loans by an amount  deemed by  Lender to be  material,  or (C)
reduce the amounts  received or receivable by Lender in respect  thereof,  by an
amount  deemed by Lender to be  material  or (ii) the cost to Lender,  Reference
Bank or any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be material.  Borrower shall
pay to Lender,  upon demand by Lender (or Lender may, at its option,  charge any
loan  account of  Borrower)  any amounts  required  to  compensate  Lender,  the
Reference Bank or any  participant  with Lender for any loss  (including loss of
anticipated profits), cost or expense incurred by such person as a result of the
foregoing,

                                       25
<PAGE>

including, without limitation, any such loss, cost or expense incurred by reason
of the  liquidation or  reemployment of deposits or other funds acquired by such
person to make or maintain the Eurodollar Rate Loans or any portion  thereof.  A
certificate  of Lender  setting  forth the basis for the  determination  of such
amount  necessary  to  compensate  Lender as  aforesaid  shall be  delivered  to
Borrower and shall be conclusive, absent manifest error.

     (b) If any payments or prepayments in respect of the Eurodollar  Rate Loans
are  received by Lender  other than on the last day of the  applicable  Interest
Period (whether pursuant to acceleration, upon maturity or otherwise), including
any payments pursuant to the application of collections under Section 6.3 or any
other  payments  made with the  proceeds of  Collateral,  Borrower  shall pay to
Lender upon  demand by Lender (or Lender  may,  at its  option,  charge any loan
account of Borrower) any amounts  required to compensate  Lender,  the Reference
Bank or any  participant  with Lender for any additional loss (including loss of
anticipated  profits),  cost or expense  incurred  by such person as a result of
such prepayment or payment,  including,  without  limitation,  any loss, cost or
expense  incurred by reason of the  liquidation or  reemployment  of deposits or
other funds  acquired by such person to make or maintain  such  Eurodollar  Rate
Loans or any portion thereof.

     3.6 Maximum Interest.
         -----------------

     (i) Notwithstanding anything to the contrary contained in this Agreement or
any  of the  other  Financing  Agreements,  in no  event  whatsoever  shall  the
aggregate of all amounts that are contracted for,  charged or received by Lender
pursuant to the terms of this Agreement or any of the other Financing Agreements
and that are deemed  interest under  applicable law exceed the Maximum  Interest
Rate (including, to the extent applicable, the provisions of Section 5197 of the
Revised  Statutes  of the  United  States  of  America  as  amended,  12  U.S.C.
Section 85, as amended). No agreements,  conditions,  provisions or stipulations
contained in this  Agreement or any of the other  Financing  Agreements,  or any
Event of  Default,  or the  exercise  by Lender of the right to  accelerate  the
payment  or  the  maturity  of all or any  portion  of the  Obligations,  or the
exercise of any option  whatsoever  contained  in this  Agreement  or any of the
other  Financing  Agreements,  or  the  prepayment  by  Borrower  of  any of the
Obligations,  or the  occurrence of any event or contingency  whatsoever,  shall
entitle Lender to contract for, charge or receive in any event,  interest or any
charges,  amounts,  premiums or fees deemed interest by applicable law in excess
of the Maximum  Interest  Rate.  In no event shall  Borrower be obligated to pay
interest  or such  amounts as may be deemed  interest  under  applicable  law in
amounts which exceed the Maximum  Interest Rate. All  agreements,  conditions or
stipulations,  if any, which may in any event or contingency  whatsoever operate
to bind,  obligate or compel  Borrower to pay interest or such amounts which are
deemed to constitute  interest in amounts which exceed the Maximum Interest Rate
shall be without binding force or effect,  at law or in equity, to the extent of
the excess of interest or such amounts which are deemed to  constitute  interest
over such Maximum Interest Rate.

     (ii) In the event any  Interest  is  charged or  received  in excess of the
Maximum Interest Rate ("Excess"),  Borrower acknowledges and stipulates that any
such charge or receipt  shall be the result of an accident  and bona fide error,
and that any Excess received by Lender

                                       26
<PAGE>

shall be  applied,  first,  to the  payment of the then  outstanding  and unpaid
principal  hereunder;  second  to the  payment  of the  other  Obligations  then
outstanding and unpaid; and third,  returned to Borrower, it being the intent of
the  parties  hereto  not  to  enter  into  a  usurious  or  otherwise   illegal
relationship.  The right to  accelerate  the maturity of any of the  Obligations
does not include the right to  accelerate  any interest  that has not  otherwise
accrued on the date of such acceleration,  and Lender does not intend to collect
any unearned interest in the event of any such acceleration. Borrower recognizes
that,  with  fluctuations  in the rates of interest  set forth in Section 3.1 of
this Agreement and the Maximum Interest Rate, such an unintentional result could
inadvertently  occur.  All monies paid to Lender  hereunder  or under any of the
other  Financing  Agreements,  whether at  maturity or by  prepayment,  shall be
subject to any rebate of  unearned  interest  as and to the extent  required  by
applicable law.

     (iii) By the  execution  of this  Agreement,  Borrower  agrees that (A) the
credit or return of any Excess shall  constitute  the  acceptance by Borrower of
such Excess,  and (B) Borrower shall not seek or pursue any other remedy,  legal
or equitable,  against Lender,  based in whole or in part upon  contracting for,
charging  or  receiving  any  interest  or such  amounts  which  are  deemed  to
constitute  interest in excess of the Maximum  Interest Rate. For the purpose of
determining  whether  or not any  Excess  has been  contracted  for,  charged or
received by Lender, all interest at any time contracted for, charged or received
from Borrower in connection  with this  Agreement or any of the other  Financing
Agreements  shall,  to the extent  permitted by  applicable  law, be  amortized,
prorated,  allocated  and spread  during the entire  term of this  Agreement  in
accordance  with the amounts  outstanding  from time to time  hereunder  and the
Maximum  Interest  Rate from time to time in effect in order to lawfully  charge
the maximum amount of interest permitted under applicable laws.

     (iv)  Borrower and Lender  shall,  to the maximum  extent  permitted  under
applicable law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest and (ii) exclude  voluntary  prepayments and the
effects thereof.

     (v) The  provisions of this Section 3.6 shall be deemed to be  incorporated
into each of the other  Financing  Agreements  (whether or not any  provision of
this  Section is referred to  therein).  Each of the  Financing  Agreements  and
communications  relating to any  interest  owed by Borrower  and all figures set
forth  therein  shall,  for the sole  purpose  of  computing  the  extent of the
Obligations,   be  automatically  recomputed  by  Borrower,  and  by  any  court
considering the same, to give effect to the  adjustments or credits  required by
this Section.

SECTION 4. CONDITIONS PRECEDENT
           --------------------

     4.1   Conditions   Precedent   to  Initial   Loans  and  Letter  of  Credit
           ---------------------------------------------------------------------
Accommodations.  Each of the following is a condition precedent to Lender making
---------------
the initial  Loans and  providing  the initial  Letter of Credit  Accommodations
hereunder:

     (a) Lender  shall have  received,  in form and  substance  satisfactory  to
Lender,  evidence that the  Distribution  Agreements have been duly executed and
delivered by and to the appropriate  parties thereto and all of the transactions
contemplated under the terms of the

                                       27
<PAGE>

Distribution Agreements, including without limitation, all of the reorganization
events  described  in Section 2.1 of the DWI  Distribution  Agreement  have been
consummated prior to or  contemporaneously  with the execution of this Agreement
and that Borrower has good and marketable title to all of the assets used in the
operations and business of the Delta Apparel division of Woodside;

     (b) Lender  shall have  received a copy of the summary of the  opinion,  in
form and substance satisfactory to Lender,  addressed and delivered to the Board
of  Directors  of  Woodside  as to the  solvency  of Borrower at the time of the
distribution contemplated by the Distribution Agreements;

     (c) Lender shall have received a copy of the opinion, in form and substance
satisfactory  to Lender,  addressed  and  delivered to Delta Mills,  Inc. to the
effect that the sale by Delta  Mills,  Inc. to  Borrower of the  Rainsford  yarn
plant in Edgefield,  South Carolina  including  related inventory is fair from a
financial  point of view to the  holders of Delta  Mills,  Inc.'s 9 5/8%  Senior
Notes in the aggregate principal amount of $150,000,000;

     (d) Lender  shall have  received,  in form and  substance  satisfactory  to
Lender,  all  releases,  terminations  and such  other  documents  as Lender may
request to evidence and  effectuate the  termination by the existing  lenders to
Borrower  of their  respective  financing  arrangements  with  Borrower  and the
termination  and release by it or them,  as the case may be, of any  interest in
and to any assets and properties of Borrower and each Obligor,  duly authorized,
executed and delivered by it or each of them, including, but not limited to, (i)
UCC termination  statements for all UCC financing statements previously filed by
it or any of them or their  predecessors,  as secured  party and Borrower or any
Obligor, as debtor and (ii) satisfactions and discharges of any mortgages, deeds
of trust or deeds to secure  debt by  Borrower  or any  Obligor in favor of such
existing  lender  or  lenders,   in  form  acceptable  for  recording  with  the
appropriate Governmental Authority;

     (e) all requisite  corporate  action and proceedings in connection with the
transactions contemplated by the Distribution Agreements, this Agreement and the
other  Financing  Agreements  shall be  satisfactory  in form and  substance  to
Lender,  and  Lender  shall  have  received  all  information  and copies of all
documents, including records of requisite corporate action and proceedings which
Lender  may  have  requested  in  connection  therewith,  such  documents  where
requested  by Lender or its counsel to be  certified  by  appropriate  corporate
officers or Governmental Authorities;

     (f) no material adverse change shall have occurred in the assets,  business
or  financial  condition  of Borrower  since the date of Lender's  latest  field
examination  and no change or event shall have  occurred  which would impair the
ability of Borrower or any Obligor to perform its obligations hereunder or under
any of the  other  Financing  Agreements  to which it is a party or of Lender to
enforce the Obligations or realize upon the Collateral;

     (g) Lender  shall have  completed  a field  review of the  Records and such
other  information  with  respect to the  Collateral  as Lender  may  require to
determine the amount of

                                       28
<PAGE>

Revolving Loans available to Borrower  (including,  without limitation,  current
perpetual  inventory  records  and/or  roll-forwards  of Accounts and  Inventory
through  the  date of  closing  and test  counts  of the  Inventory  in a manner
satisfactory to Lender,  together with such supporting  documentation  as may be
necessary or appropriate,  and other documents and information  that will enable
Lender to accurately  identify and verify the Collateral),  the results of which
each case shall be satisfactory to Lender, not more than three (3) Business Days
prior to the date hereof;

     (h) Lender  shall have  received,  in form and  substance  satisfactory  to
Lender, all consents,  waivers,  acknowledgments and other agreements from third
persons which Lender may deem necessary or desirable in order to permit, protect
and  perfect  its  security  interests  in and liens upon the  Collateral  or to
effectuate the provisions or purposes of this Agreement and the other  Financing
Agreements,  including,  without  limitation,  Collateral  Access  Agreements by
owners and lessors of leased  premises of Borrower  and by  warehouses  at which
Collateral is located;

     (i) Lender  shall have  received,  in form and  substance  satisfactory  to
Lender,  duly  authorized,  executed and  delivered by Woodside and Borrower the
agreement of Woodside  consenting  to the  collateral  assignment by Borrower to
Lender of all of its rights and remedies and claims for damages and other relief
under the  Distribution  Agreements  and  granting  Lender such other  rights as
Lender may require, duly authorized, executed and delivered by Woodside;

     (j) Lender  shall have  received,  in form and  substance  satisfactory  to
Lender,  a  pro-forma  consolidated  balance  sheet of Borrower  reflecting  the
initial  transactions   contemplated  under  the  Distribution   Agreements  and
hereunder,  including,  but not limited to, (i) the consummation of the transfer
of the assets by Woodside to Borrower and the other transactions contemplated by
the   Distribution   Agreements   and  (ii)  the  Loans  and  Letter  of  Credit
Accommodations  provided by Lender to Borrower on the date hereof and the use of
the  proceeds  of  the  initial  Loans  as  provided  herein,  accompanied  by a
certificate,  dated of even date  herewith,  of the chief  financial  officer of
Borrower  stating that such pro-forma  balance sheet annexed thereto  represents
the  reasonable,  good faith  opinion of such  officer as to the subject  matter
thereof as of the date of such certificate;

     (k) the Excess Availability as determined by Lender, as of the date hereof,
shall be not less than $8,000,000  after giving effect to the initial Loans made
or to be made and  Letter  of  Credit  Accommodations  issued or to be issued in
connection with the initial transactions hereunder;

     (l) Lender  shall have  received,  in form and  substance  satisfactory  to
Lender,  all agreements  with the depository  banks and Borrower with respect to
the Blocked Accounts as Lender may require pursuant to Section 6.3 hereof,  duly
authorized, executed and delivered by such depository banks and Borrower;

     (m) Lender shall have received evidence, in form and substance satisfactory
to Lender, that Lender has a valid perfected first priority security interest in
all of the Collateral;

                                       29
<PAGE>

     (n) Lender shall have  received  and  reviewed  UCC search  results for all
jurisdictions  in the United  States and Canada  which  assets of  Borrower  are
located,  which search  results shall be in form and substance  satisfactory  to
Lender;

     (o)  Lender  shall  have  received  any  existing  environmental  audits of
Borrower's   plants  and  the  Real   Property   conducted  by  an   independent
environmental  engineering  firm  acceptable to Lender,  and in form,  scope and
methodology  satisfactory  to Lender,  confirming  (i) Borrower is in compliance
with all  material  applicable  Environmental  Laws and (ii) the  absence of any
material  potential or actual liability of Borrower for any remedial action with
respect  to any  environmental  condition  or any other  material  environmental
problems;

     (p) Lender  shall have  received,  in form and  substance  satisfactory  to
Lender,  valid and  effective  title  insurance  policy with respect to the Real
Property of Borrower located in Edgefield,  South Carolina,  issued by a company
and agent acceptable to Lender (i) insuring the priority, amount and sufficiency
of the  Mortgages,  (ii)  insuring  against  matters  that would be disclosed by
surveys and (iii) containing any legally available  endorsements,  assurances or
affirmative coverage requested by Lender for protection of its interests;

     (q)  Lender  shall  have  received  evidence  of  insurance  and loss payee
endorsements  required  hereunder and under the other Financing  Agreements,  in
form and  substance  satisfactory  to  Lender,  and  certificates  of  insurance
policies and/or endorsements naming Lender as loss payee;

     (r) Lender  shall have  received,  in form and  substance  satisfactory  to
Lender,  such  opinion  letters  of  counsel  to  Borrower  with  respect to the
Distribution  Agreements,  the  Financing  Agreements  and such other matters as
Lender may request; and

     (s) the  other  Financing  Agreements  and all  instruments  and  documents
hereunder and thereunder  shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.

     4.2 Conditions Precedent to All Loans and Letter of Credit  Accommodations.
         -----------------------------------------------------------------------
Each of the  following is an  additional  condition  precedent to Lender  making
Loans and/or providing Letter of Credit  Accommodations  to Borrower,  including
the initial Loans and Letter of Credit  Accommodations  and any future Loans and
Letter of Credit Accommodations:

     (a) all  representations  and warranties  contained herein and in the other
Financing Agreements shall be true and correct in all material respects with the
same effect as though such  representations  and warranties had been made on and
as of the date of the making of each such Loan or providing  each such Letter of
Credit Accommodation and after giving effect thereto,  except to the extent that
such  representations and warranties  expressly relate solely to an earlier date
(in which  case such  representations  and  warranties  shall have been true and
accurate on and as of such earlier date);

                                       30
<PAGE>

     (b) no law,  regulation,  order,  judgment  or decree  of any  Governmental
Authority  shall  exist,  and no  action,  suit,  investigation,  litigation  or
proceeding  shall be pending or threatened in any court or before any arbitrator
or Governmental Authority,  which (i) purports to enjoin, prohibit,  restrain or
otherwise  affect (A) the making of the Loans or providing  the Letter of Credit
Accommodations,  or  (B)  the  consummation  of  the  transactions  contemplated
pursuant to the terms hereof or the other  Financing  Agreements  or (ii) has or
could  reasonably be expected to have a material  adverse  effect on the assets,
business or  prospects  of  Borrower or would  impair the ability of Borrower to
perform its obligations hereunder or under any of the other Financing Agreements
or of Lender to enforce any  Obligations or realize upon any of the  Collateral;
and

     (c) no Event of Default and no act,  condition or event which,  with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be continuing on and as of the date of the making of such Loan
or providing  each such Letter of Credit  Accommodation  and after giving effect
thereto.

SECTION 5. GRANT OF SECURITY INTEREST
           --------------------------

     To secure  payment and  performance  of all  Obligations,  Borrower  hereby
grants to Lender a continuing  security interest in, a lien upon, and a right of
set off  against,  and  hereby  assigns  to Lender as  security,  the  following
property and  interests in property of Borrower,  whether now owned or hereafter
acquired or existing,  and wherever located  (together with all other collateral
security  for the  Obligations  at any time  granted to or held or  acquired  by
Lender, collectively, the "Collateral"):

     5.1 Receivables;

     5.2  all  other   present  and  future   general   intangibles   (including
Intellectual  Property and existing and future leasehold interests in equipment,
real estate and fixtures),  chattel paper,  documents,  instruments,  investment
property  (including   securities,   whether   certificated  or  uncertificated,
securities  accounts,  security  entitlements,  commodity contracts or commodity
accounts), letters of credit, bankers' acceptances and guaranties;

     5.3  all  present  and  future  monies,  securities  and  other  investment
property,  credit  balances,  deposits,  deposit  accounts and other property of
Borrower  now or  hereafter  held or  received by or in transit to Lender or its
Affiliates  or at any  other  depository  or other  institution  from or for the
account of Borrower,  whether for safekeeping,  pledge,  custody,  transmission,
collection or otherwise,  and all present and future liens,  security interests,
rights,  remedies,  title and interest in, to and in respect of Receivables  and
other  Collateral,  including  (a)  rights and  remedies  under or  relating  to
guaranties,  contracts  of  suretyship,  letters  of credit and credit and other
insurance  related  to the  Collateral,  (b)  rights  of  stoppage  in  transit,
replevin,  repossession,  reclamation and other rights and remedies of an unpaid
vendor,  lien or secured  party,  (c) goods  described in  invoices,  documents,
contracts  or  instruments  with  respect  to,  or  otherwise   representing  or
evidencing, Receivables or other Collateral, including returned, repossessed and

                                       31
<PAGE>

reclaimed  goods,  and (d) deposits by and property of account  debtors or other
persons securing the obligations of account debtors;

     5.4 Inventory;

     5.5 Equipment;

     5.6 Real Property;

     5.7 Records; and

     5.8 all  products  and proceeds of the  foregoing,  in any form,  including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of any or all of the foregoing.

     5.9  Notwithstanding  anything  to the  contrary  contained  in Section 5.1
through 5.8 above,  the types or items of  Collateral  described in such Section
shall  not  include  any  Equipment  which  is,  or at the  time  of  Borrower's
acquisition  thereof  shall be,  subject to a purchase  money  mortgage or other
purchase  money lien or  security  interest  (including  capitalized  or finance
leases) permitted under Section 9.8 hereof if: (a) the valid grant of a security
interest or lien to Lender in such item of Equipment is  prohibited by the terms
of the agreement between Borrower and the holder of such purchase money mortgage
or other  purchase money lien or security  interest or under  applicable law and
such prohibition has not been or is not waived,  or the consent of the holder of
the purchase money  mortgage or other  purchase money lien or security  interest
has not  been  or is not  otherwise  obtained,  or  under  applicable  law  such
prohibition  cannot be  waived  and (b) the  purchase  money  mortgage  or other
purchase  money lien or security  interest on such item of Equipment is or shall
become valid and perfected.

SECTION 6. COLLECTION AND ADMINISTRATION
           -----------------------------

     6.1  Borrower's  Loan  Account.  Lender  shall  maintain  one or more  loan
          --------------------------
account(s)  on its books in which  shall be  recorded  (a) all Loans,  Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on  behalf  of  Borrower  and (c) all other  appropriate  debits  and
credits as provided in this Agreement,  including fees, charges, costs, expenses
and  interest.  All entries in the loan  account(s)  shall be made in accordance
with Lender's customary practices as in effect from time to time.

     6.2  Statements.  Lender  shall  render to Borrower  each month a statement
          -----------
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement,  including principal,
interest,  fees,  costs and expenses.  Each such  statement  shall be subject to
subsequent  adjustment by Lender but shall, absent manifest errors or omissions,
be considered  correct and deemed accepted by Borrower and conclusively  binding
upon Borrower as an account  stated except to the extent that Lender  receives a
written  notice from  Borrower of any specific  exceptions  of Borrower  thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to

                                       32
<PAGE>

Borrower a written  statement as provided above,  the balance in Borrower's loan
account(s) shall be presumptive  evidence of the amounts due and owing to Lender
by Borrower.

     6.3 Collection of Accounts.
         -----------------------

     (a) Borrower shall establish and maintain, at its expense, blocked accounts
or lockboxes and related blocked accounts (in either case, "Blocked  Accounts"),
as Lender may specify,  with such banks as are  acceptable  to Lender into which
Borrower shall promptly deposit and direct its account debtors to directly remit
all payments on Receivables and all payments  constituting proceeds of Inventory
or other  Collateral  in the  identical  form in which such  payments  are made,
whether by cash, check or other manner.  The banks at which the Blocked Accounts
are  established   shall  enter  into  an  agreement,   in  form  and  substance
satisfactory  to Lender,  providing  that all items received or deposited in the
Blocked  Accounts are the property of Lender,  that the  depository  bank has no
lien upon, or right to setoff against, the Blocked Accounts,  the items received
for deposit therein,  or the funds from time to time on deposit therein and that
the depository bank will wire, or otherwise transfer,  in immediately  available
funds,  on a daily  basis,  all funds  received  or  deposited  into the Blocked
Accounts  to such  bank  account  of  Lender  as  Lender  may from  time to time
designate  for  such  purpose  ("Payment  Account").  Borrower  agrees  that all
payments made to such Blocked  Accounts or other funds received and collected by
Lender, whether in respect of the Receivables, as proceeds of Inventory or other
Collateral or otherwise shall be treated as payments to Lender in respect of the
Obligations and therefore shall  constitute the property of Lender to the extent
of the then outstanding Obligations.

     (b) For the  purposes  of  calculating  interest on the  Obligations,  such
payments  or other  funds  received  will be  applied  (conditional  upon  final
collection)  to the  Obligations  one (1)  Business  Day  following  the date of
receipt of immediately  available  funds by Lender in the Payment  Account.  For
purposes of calculating the amount of the Revolving Loans available to Borrower,
such  payments  will be  applied  (conditional  upon  final  collection)  to the
Obligations  on the Business Day of receipt by Lender of  immediately  available
funds in the Payment  Account,  if such payments are received in sufficient time
(in  accordance  with Lender's  usual and customary  practices as in effect from
time to time) to credit Borrower's loan account on such day, and if not, then on
the next Business Day.

     (c)  Borrower  and  all  of  shareholders,  directors,  employees,  agents,
Subsidiaries or other Affiliates shall,  acting as trustee for Lender,  receive,
as the  property  of Lender,  any  monies,  checks,  notes,  drafts or any other
payment  relating to and/or proceeds of Accounts or other  Collateral which come
into their  possession  or under their  control  and  immediately  upon  receipt
thereof,  shall  deposit  or  cause  the  same to be  deposited  in the  Blocked
Accounts,  or remit  the same or cause  the  same to be  remitted,  in kind,  to
Lender.  In no event shall the same be  commingled  with  Borrower's  own funds.
Borrower  agrees to  reimburse  Lender on demand for any amounts owed or paid to
any bank at which a Blocked  Account is  established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or  indemnification  of such bank or person. The obligation
of Borrower to

                                       33
<PAGE>

reimburse Lender for such amounts pursuant to this Section 6.3 shall survive the
termination or non-renewal of this Agreement.

     6.4 Payments.  All  Obligations  shall be payable to the Payment Account as
         ---------
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender shall apply payments received or collected from Borrower or for the
account of  Borrower  (including  the  monetary  proceeds of  collections  or of
realization upon any Collateral) as follows: first, to pay any fees, indemnities
or expense  reimbursements  then due to Lender  from  Borrower;  second,  to pay
interest due in respect of any Loans;  third, to pay principal due in respect of
the Loans;  fourth, to pay or prepay any other  Obligations  whether or not then
due, in such order and manner as Lender determines.  Notwithstanding anything to
the contrary  contained in this  Agreement,  unless so directed by Borrower,  or
unless an Event of  Default  shall  exist or have  occurred  and be  continuing,
Lender shall not apply any  payments  which it receives to any  Eurodollar  Rate
Loans,  except (a) on the expiration date of the Interest  Period  applicable to
any  such  Eurodollar  Rate  Loans,  or  (b) in  the  event  that  there  are no
outstanding Prime Rate Loans. At Lender's option, all principal, interest, fees,
costs,  expenses and other charges  provided for in this  Agreement or the other
Financing Agreements may be charged directly to the loan account(s) of Borrower.
Borrower shall make all payments to Lender on the Obligations free and clear of,
and  without  deduction  or  withholding  for  or on  account  of,  any  setoff,
counterclaim,   defense,  duties,  taxes,  levies,  imposts,  fees,  deductions,
withholding,  restrictions  or  conditions  of any kind. If after receipt of any
payment  of, or  proceeds  of  Collateral  applied to the payment of, any of the
Obligations,  Lender is required to surrender or return such payment or proceeds
to any Person for any reason,  then the Obligations  intended to be satisfied by
such payment or proceeds  shall be  reinstated  and continue and this  Agreement
shall  continue in full force and effect as if such  payment or proceeds had not
been  received by Lender.  Borrower  shall be liable to pay to Lender,  and does
hereby  indemnify  and hold Lender  harmless  for the amount of any  payments or
proceeds  surrendered  or  returned.  This  Section 6.4 shall  remain  effective
notwithstanding  any  contrary  action  which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.

     6.5 Authorization to Make Loans. Lender is authorized to make the Loans and
         ----------------------------
provide  the  Letter of Credit  Accommodations  based upon  telephonic  or other
instructions  received  from anyone  purporting  to be an officer of Borrower or
other  authorized  person or, at the  discretion  of  Lender,  if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations  hereunder shall specify the date on which the requested  advance
is to be made or Letter of Credit Accommodations established (which day shall be
a Business Day) and the amount of the requested  Loan.  Requests  received after
11:00 a.m. Atlanta, Georgia time on any day shall be deemed to have been made as
of the opening of business on the immediately  following Business Day. All Loans
and Letter of Credit  Accommodations  under this Agreement shall be conclusively
presumed  to have been made to, and at the  request of and for the  benefit  of,
Borrower  when  deposited  to the credit of Borrower or  otherwise  disbursed or
established  in accordance  with the  instructions  of Borrower or in accordance
with the terms and conditions of this Agreement.

                                       34
<PAGE>

     6.6 Use of Proceeds.  The initial Revolving Loan under this Agreement shall
         -----------------
be in an amount that is not less than  $250,000.  Borrower shall use the initial
proceeds  of the  Loans  provided  by  Lender to  Borrower  hereunder  only for:
(a) payments to each of the persons listed in the disbursement  direction letter
furnished  by  Borrower  to Lender on or about the date  hereof  and (b)  costs,
expenses and fees in connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Financing  Agreements.  All other Loans
made or Letter of Credit Accommodations  provided by Lender to Borrower pursuant
to the provisions  hereof shall be used by Borrower only for general  operating,
working  capital and other proper  corporate  purposes of Borrower not otherwise
prohibited by the terms hereof.  None of the proceeds will be used,  directly or
indirectly, for the purpose of purchasing or carrying any margin security or for
the  purposes  of reducing or retiring  any  indebtedness  which was  originally
incurred to purchase or carry any margin security or for any other purpose which
might  cause any of the Loans to be  considered  a "purpose  credit"  within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System,
as amended.

SECTION 7. COLLATERAL REPORTING AND COVENANTS
           ----------------------------------

     7.1 Collateral Reporting.
         ---------------------

     (a) Borrower  shall provide  Lender with the following  documents in a form
satisfactory to Lender:

          (i) on a weekly  basis or more  frequently,  as required by Lender,  a
     schedule of sales made, credits issued and cash received;

          (ii) on a monthly basis or more frequently as Lender may request,  (A)
     perpetual  inventory  reports,   (B)  inventory  reports  by  location  and
     category,  (C)  agings  of  accounts  payable  (and  including  information
     indicating  the  status of  payments  to owners  and  lessors of the leased
     premises of Borrower) and (D) agings of accounts receivable  (together with
     a reconciliation to the previous month's aging and general ledger);

          (iii) upon Lender's  request,  (A) copies of customer  statements  and
     credit memos,  remittance advices and reports,  and copies of deposit slips
     and bank  statements,  (B) copies of shipping and delivery  documents,  and
     (C) copies  of  purchase  orders,   invoices  and  delivery  documents  for
     Inventory and Equipment acquired by Borrower;

          (iv) such other  reports as to the  Collateral as Lender shall request
     from time to time; and

     (b) If any of Borrower's  records or reports of the Collateral are prepared
or  maintained  by an accounting  service,  contractor,  shipper or other agent,
Borrower  hereby  irrevocably  authorizes such service,  contractor,  shipper or
agent to deliver such records,  reports,  and related documents to Lender and to
follow Lender's  instructions  with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.

                                       35
<PAGE>

     7.2 Accounts Covenants.
         -------------------

     (a) Borrower  shall notify  Lender  promptly of: (i) any material  delay in
Borrower's performance of any of its obligations to any account debtor involving
an Account exceeding $100,000 or the assertion of any claims, offsets,  defenses
or counterclaims  by any account debtor involving an amount exceeding  $100,000,
or  any  disputes  with  account  debtors,  or  any  settlement,  adjustment  or
compromise  thereof  involving an amount exceeding  $100,000,  (ii) all material
adverse  information  relating to the financial  condition of any account debtor
and (iii) any event or circumstance  which, to Borrower's  knowledge would cause
Lender to consider any then existing Accounts as no longer constituting Eligible
Accounts.  No credit,  discount,  allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor without  Lender's  consent,
except  in the  ordinary  course  of  Borrower's  business  in  accordance  with
practices and policies previously  disclosed in writing to Lender. So long as no
Event of  Default  exists or has  occurred  and is  continuing,  Borrower  shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor.  At any time that an Event of Default exists or has occurred and
is continuing,  Lender shall, at its option, have the exclusive right to settle,
adjust or compromise  any claim,  offset,  counterclaim  or dispute with account
debtors or grant any credits, discounts or allowances.

     (b)  Without  limiting  the  obligation  of  Borrower  to deliver any other
information to Lender,  Borrower  shall promptly  report to Lender any return of
Inventory  by any one account  debtor if the  Inventory so returned in such case
has a value in  excess  of  $50,000.  At any time that  Inventory  is  returned,
reclaimed or repossessed,  the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible  Account.  In the event any account  debtor  returns  Inventory when an
Event of Default exists or has occurred and is continuing,  Borrower shall, upon
Lender's  request,  (i) hold the returned  Inventory  in trust for Lender,  (ii)
segregate all returned  Inventory from all of its other property,  (iii) dispose
of the  returned  Inventory  solely  according  to  Lender's  instructions,  and
(iv) not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.

     (c) With  respect to each  Account:  (i) the  amounts  shown on any invoice
delivered  to Lender or schedule  thereof  delivered to Lender shall be true and
complete,  (ii) no payments  shall be made thereon except  payments  immediately
delivered to Lender  pursuant to the terms of this  Agreement,  (iii) no credit,
discount,  allowance or extension or agreement for any of the foregoing shall be
granted to any account  debtor except as reported to Lender in  accordance  with
this Agreement and except for credits, discounts,  allowances or extensions made
or given in the  ordinary  course of  Borrower's  business  in  accordance  with
practices and policies  previously  disclosed to Lender,  (iv) there shall be no
setoffs,  deductions,  contras, defenses,  counterclaims or disputes existing or
asserted with respect  thereto  except as reported to Lender in accordance  with
the terms of this Agreement,  (v) none of the  transactions  giving rise thereto
will  violate  any  applicable  State  or  Federal  laws  or  regulations,   all
documentation  relating  thereto will be legally  sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.

                                       36
<PAGE>

     (d) Lender shall have the right at any time or times,  in Lender's  name or
in the name of a nominee of Lender, to verify the validity,  amount or any other
matter  relating  to any  Account  or  other  Collateral,  by  mail,  telephone,
facsimile transmission or otherwise.

     (e)  Borrower  shall  deliver  or cause to be  delivered  to  Lender,  with
appropriate  endorsement  and  assignment,  with full recourse to Borrower,  all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately  upon  Borrower's  receipt  thereof,  except as Lender may otherwise
agree.

     (f) Lender may, at any time or times that an Event of Default exists or has
occurred  and is  continuing,  (i) notify any or all  account  debtors  that the
Accounts  have been  assigned to Lender and that Lender has a security  interest
therein  and Lender may direct any or all  accounts  debtors to make  payment of
Accounts  directly to Lender,  (ii)  extend the time of payment of,  compromise,
settle or adjust for cash, credit, return of merchandise or otherwise,  and upon
any terms or conditions,  any and all Accounts or other obligations  included in
the Collateral and thereby  discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without  affecting any of
the  Obligations,  (iii) demand,  collect or enforce  payment of any Accounts or
such other  obligations,  but without any duty to do so, and Lender shall not be
liable for its  failure to collect or enforce  the  payment  thereof nor for the
negligence  of its  agents  or  attorneys  with  respect  thereto  and (iv) take
whatever  other action Lender may deem necessary or desirable for the protection
of its  interests.  At any time that an Event of Default  exists or has occurred
and is continuing,  at Lender's request, all invoices and statements sent to any
account  debtor shall state that the Accounts  and such other  obligations  have
been assigned to Lender and are payable directly and only to Lender and Borrower
shall  deliver to Lender such  originals  of documents  evidencing  the sale and
delivery of goods or the  performance of services giving rise to any Accounts as
Lender may require.

     7.3 Inventory Covenants.  With respect to the Inventory: (a) Borrower shall
         --------------------
at all times  maintain  inventory  records  reasonably  satisfactory  to Lender,
keeping correct and accurate  records  itemizing and describing the kind,  type,
quality  and  quantity  of  Inventory,   Borrower's   cost  therefor  and  daily
withdrawals  therefrom  and  additions  thereto;  (b) Borrower  shall  conduct a
physical  count of the  Inventory  at least once each  year,  but at any time or
times as  Lender  may  request  on or after an Event of  Default,  and  promptly
following such physical  inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such  physical  count;  (c)  Borrower  shall not remove any  Inventory  from the
locations set forth or permitted  herein,  without the prior written  consent of
Lender,  except for sales of  Inventory  in the  ordinary  course of  Borrower's
business and except to move  Inventory  directly  from one location set forth or
permitted herein to another such location and except for Inventory  shipped from
the  manufacturer  thereof to Borrower  which is in transit to the locations set
forth or permitted  herein;  (d) upon Lender's  request,  Borrower shall, at its
expense,  twice in any  twelve  (12) month  period,  but at any time or times as
Lender  may  request  on or after an Event of  Default,  deliver  or cause to be
delivered to Lender  written  reports or appraisals as to the Inventory in form,
scope and  methodology  acceptable  to Lender and by an appraiser  acceptable to
Lender,  addressed  to Lender and upon which  Lender is  expressly  permitted to
rely; (e) Borrower shall produce, use, store and maintain the Inventory with all

                                       37
<PAGE>

reasonable care and caution and in accordance  with applicable  standards of any
insurance and in conformity with applicable laws (including the  requirements of
the  Federal  Fair  Labor  Standards  Act of 1938,  as  amended  and all  rules,
regulations and orders related thereto); (f) Borrower assumes all responsibility
and  liability  arising from or relating to the  production,  use, sale or other
disposition  of the  Inventory;  (g)  Borrower  shall not sell  Inventory to any
customer on approval,  or any other basis which  entitles the customer to return
or may obligate  Borrower to repurchase  such Inventory  except for the right of
return given to customers of Borrower consistent with its current policies as of
the date hereof;  (h) Borrower  shall keep the Inventory in good and  marketable
condition;  and (i) Borrower shall not,  without prior written notice to Lender,
acquire or accept any Inventory on consignment or approval.

     7.4 Equipment and Real  Property  Covenants.  With respect to the Equipment
         ----------------------------------------
and Real Property: (a) at any time or times as Lender may request on or after an
Event of Default,  deliver or cause to be delivered to Lender written reports or
appraisals  as to the  Equipment  and/or the Real  Property  in form,  scope and
methodology  acceptable  to Lender  and by an  appraiser  acceptable  to Lender,
addressed to Lender and upon which Lender is  expressly  permitted to rely;  (b)
Borrower shall keep the Equipment in good order, repair,  running and marketable
condition  (ordinary  wear  and  tear  excepted);  (c)  Borrower  shall  use the
Equipment  and  Real  Property  with all  reasonable  care  and  caution  and in
accordance with applicable standards of any insurance and in conformity with all
applicable  laws; (d) the Equipment is and shall be used in Borrower's  business
and not for personal,  family,  household or farming use; (e) Borrower shall not
remove any Equipment from the locations set forth or permitted herein, except to
the  extent  necessary  to have any  Equipment  repaired  or  maintained  in the
ordinary  course of the business of Borrower or to move Equipment  directly from
one location set forth or permitted  herein to another such location  except for
the  movement  of motor  vehicles  used by or for the benefit of Borrower in the
ordinary  course of  business  and  Borrower  shall  not  remove  any  Equipment
currently  located in the United  States to any  location  outside of the United
States except for the excess  sewing  equipment  currently  located at 314 Water
Street, Washington,  Georgia; (f) the Equipment is now and shall remain personal
property  and Borrower  shall not permit any of the  Equipment to be or become a
part of or affixed to real property so as to become a fixture or an accession to
real  property  unless  it is  attached  to the  Real  Property  subject  to the
Mortgage; and (g) Borrower assumes all responsibility and liability arising from
the use of the Equipment and Real Property.

     7.5 Power of Attorney.  Borrower hereby irrevocably designates and appoints
         ------------------
Lender  (and all persons  designated  by Lender) as  Borrower's  true and lawful
attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name, to: (a)
at any time an Event of Default or act,  condition or event which with notice or
passage  of time or both  would  constitute  an Event of  Default  exists or has
occurred  and  is  continuing   (i)  demand  payment  on  Receivables  or  other
Collateral,  (ii)  enforce  payment  of  Receivables  by  legal  proceedings  or
otherwise,  (iii) exercise all of Borrower's  rights and remedies to collect any
Receivable or other  Collateral,  (iv) sell or assign any  Receivable  upon such
terms,  for such amount and at such time or times as the Lender deems advisable,
(v) settle, adjust,  compromise,  extend or renew an Account, (vi) discharge and
release any  Receivable,  (vii) prepare,  file and sign  Borrower's  name on any
proof of claim in bankruptcy or other similar document against an account debtor
other obligor in respect of any Receivables or other  Collateral,  (viii) notify
the post office authorities to change the address for

                                       38
<PAGE>

delivery of  remittances  from account  debtors or other  obligors in respect of
Receivables or other proceeds of Collateral to an address  designated by Lender,
and open and dispose of all mail  addressed to Borrower and handle and store all
mail  relating  to the  Collateral;  and (ix) do all acts and  things  which are
necessary,  in Lender's  determination,  to fulfill Borrower's obligations under
this  Agreement and the other  Financing  Agreements  and (b) at any time to (i)
take control in any manner of any item of payment in respect of  Receivables  or
constituting  Collateral or otherwise  received in or for deposit in the Blocked
Accounts or  otherwise  received by Lender,  (ii) have  access to any lockbox or
postal box into which  remittances  from  account  debtors or other  obligors in
respect of  Receivables  or other  proceeds of Collateral  are sent or received,
(iii) endorse   Borrower's  name  upon  any  items  of  payment  in  respect  of
Receivables  or  constituting  Collateral  or  otherwise  received by Lender and
deposit the same in Lender's  account for application to the  Obligations,  (iv)
endorse Borrower's name upon any chattel paper, document,  instrument,  invoice,
or  similar  document  or  agreement  relating  to any  Receivable  or any goods
pertaining  thereto or any other  Collateral,  including  any warehouse or other
receipts,  or bills of lading and other negotiable or non-negotiable  documents,
(v) clear  Inventory  the purchase of which was  financed  with Letter of Credit
Accommodations  through U.S.  Customs in Borrower's  name,  Lender's name or the
name of Lender's  designee,  and to sign and deliver to customs officials powers
of attorney in Borrower's  name for such purpose,  and to complete in Borrower's
or Lender's name, any order, sale or transaction, obtain the necessary documents
in connection  therewith and collect the proceeds thereof,  (vi) sign Borrower's
name on any  verification  of Receivables and notices thereof to account debtors
or other  obligors in respect  thereof and (vii) execute in Borrower's  name and
file  any UCC  financing  statements  or  amendments  thereto.  Borrower  hereby
releases  Lender and its officers,  employees and designees from any liabilities
arising  from any act or acts under this power of  attorney  and in  furtherance
thereof,  whether of omission or commission,  except as a result of Lender's own
gross  negligence  or  wilful  misconduct  as  determined  pursuant  to a  final
non-appealable order of a court of competent jurisdiction.

     7.6 Right to Cure. Lender may, at its option,  (a) upon notice to Borrower,
         --------------
cure any default by Borrower  under any  material  agreement  with a third party
which  affects  the  Collateral,  its value or the ability of Lender to collect,
sell or otherwise dispose of the Collateral or the rights and remedies of Lender
therein or the ability of Borrower  to perform its  obligations  under the other
Financing  Agreements,  (b) pay or bond on appeal any judgment  entered  against
Borrower,  (c) discharge taxes, liens,  security interests or other encumbrances
at any time levied on or existing with respect to the Collateral and (d) pay any
amount,  incur any expense or perform any act which,  in Lender's  judgment,  is
necessary or appropriate to preserve, protect, insure or maintain the Collateral
and the rights of Lender  with  respect  thereto.  Lender may add any amounts so
expended to the Obligations and charge Borrower's account therefor, such amounts
to be repayable by Borrower on demand.  Lender shall be under no  obligation  to
effect  such cure,  payment or bonding  and shall not, by doing so, be deemed to
have assumed any obligation or liability of Borrower.  Any payment made or other
action  taken by Lender  under this  Section  shall be without  prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.

                                       39
<PAGE>

     7.7 Access to Premises.  From time to time as  requested by Lender,  at the
         -------------------
cost and expense of  Borrower,  (a) Lender or its designee  shall have  complete
access to all of  Borrower's  premises  during normal  business  hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default  exists  or  has  occurred  and  is  continuing,  for  the  purposes  of
inspecting,  verifying and auditing the Collateral  and all of Borrower's  books
and records,  including the Records,  and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request,  and (c) Lender or its designee may use during  normal  business  hours
such  of  Borrower's  personnel,  equipment,  supplies  and  premises  as may be
reasonably necessary for the foregoing (provided, that, Borrower shall make such
personnel,  equipment, supplies and premises available to Lender or its designee
in such  manner  so as to  minimize  any  interference  with the  operations  of
Borrower and so as to enable  Lender or its  designee to comply with  applicable
health and safety  procedures and regulations) and if an Event of Default exists
or has occurred and is continuing for the collection of Accounts and realization
of other Collateral.

     7.8 Bills of Lading  and Other  Documents  of Title.  In the event that any
         ------------------------------------------------
Inventory which would otherwise be Eligible Inventory located outside the United
States of America  which is in transit to  premises  of a Customs  Broker in the
United States or premises of Borrower as described in the definition of Eligible
Inventory,  constitutes  Eligible  Inventory  then (a) Borrower  shall cause all
bills of lading and other  documents of title relating to goods being  purchased
by Borrower  which are outside the United  States and in transit to the premises
of Borrower or the  premises  of a Customs  Broker in the United  States to name
Borrower as consignee, unless and until Lender may direct otherwise; (b) at such
time and from time to time as Lender may direct,  Borrower shall cause Lender or
such financial  institution or other person as Lender may specify to be named as
consignee;  (c) without  limiting any other rights of Lender  hereunder,  Lender
shall  have  the  right  to  endorse  and   negotiate   on  behalf  of,  and  as
attorney-in-fact  for,  Borrower  any bill of lading or other  document of title
with  respect to such goods naming  Borrower as  consignee to Lender;  (d) there
shall be three (3) originals of each of such bill of lading or other document of
title which unless and until Lender shall direct otherwise shall be delivered as
follows: (i) one (1) original to such Customs Broker as Borrower may specify (so
long as Lender has  received a  Collateral  Access  Agreement  duly  authorized,
executed and  delivered by such Customs  Broker),  and (ii) two (2) originals to
Lender or to such other person as Lender may  designate  for such  purpose;  (e)
Borrower  shall obtain a copy (but not the  originals) of such bill of lading or
other documents from the Customs Broker;  and (f) Borrower shall cause all bills
of lading or other  documents of title  relating to goods  purchased by Borrower
which are outside the United  States and in transit to the  premises of Borrower
or the premises of a Customs  Broker in the United States to be issued in a form
so as to constitute  negotiable documents as such term is defined in the Uniform
Commercial Code.

SECTION 8. REPRESENTATIONS AND WARRANTIES
           ------------------------------

     Borrower  hereby  represents  and warrants to Lender the  following  (which
shall  survive the  execution  and  delivery of this  Agreement),  the truth and
accuracy of which are a continuing

                                       40
<PAGE>

condition of the making of Loans and providing  Letter of Credit  Accommodations
by Lender to Borrower:

     8.1 Corporate Existence, Power and Authority;  Subsidiaries.  Borrower is a
         --------------------------------------------------------
corporation  duly  organized and in good standing under the laws of its state of
incorporation  and is  duly  qualified  as a  foreign  corporation  and in  good
standing in all states or other jurisdictions where the nature and extent of the
business  transacted by it or the  ownership of assets makes such  qualification
necessary,  except for those  jurisdictions  in which the  failure to so qualify
would not have a material  adverse  effect on  Borrower's  financial  condition,
results of  operation  or  business  or the rights of Lender in or to any of the
Collateral. The execution, delivery and performance of this Agreement, the other
Financing Agreements and the transactions  contemplated hereunder and thereunder
are all within Borrower's  corporate  powers,  have been duly authorized and are
not  in  contravention  of  law  or  the  terms  of  Borrower's  certificate  of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or  undertaking  to which  Borrower is a party or by which Borrower or
its  property  are bound.  This  Agreement  and the other  Financing  Agreements
constitute  legal,  valid and binding  obligations  of Borrower  enforceable  in
accordance with their respective terms.  Borrower does not have any Subsidiaries
except as set forth on the Information Certificate.

     8.2 Financial  Statements;  No Material  Adverse Change.  (a) All financial
         ----------------------------------------------------
statements relating to Borrower which have been or may hereafter be delivered by
Borrower to Lender have been prepared in accordance with GAAP and fairly present
the financial condition and the results of operation of Borrower as at the dates
and for the  periods  set forth  therein.  Except as  disclosed  in any  interim
financial  statements  furnished by Borrower to Lender prior to the date of this
Agreement, there has been no material adverse change in the assets, liabilities,
properties and condition, financial or otherwise, of Borrower, since the date of
the most recent  audited  financial  statements  furnished by Borrower to Lender
prior to the date of this Agreement.

     (b) The pro forma balance sheets and future cash flow projections  attached
as Schedule 8.2 for Borrower and its  Subsidiaries  (together with the summaries
of assumptions and projected  assumptions,  based on historical performance with
respect  thereto)  furnished  by  Borrower  to Lender  prior to the date of this
Agreement  represent  the  reasonable,  good faith  opinion of Borrower  and its
management as to the subject matter thereof.

     8.3 Chief  Executive  Office;  Collateral  Locations.  The chief  executive
         -------------------------------------------------
office of Borrower and Borrower's Records  concerning  Accounts are located only
at the address set forth on the signature page hereto, and its only other places
of  business  and the  only  other  locations  of  Collateral,  if any,  are the
addresses  set forth in the  Information  Certificate,  subject  to the right of
Borrower to establish new locations in  accordance  with Section 9.2 below.  The
Information Certificate correctly identifies any of such locations which are not
owned by Borrower and sets forth the owners and/or operators  thereof and to the
best of Borrower's knowledge, the holders of any mortgages on such locations.

     8.4 Priority of Liens;  Title to  Properties.  The security  interests  and
         -----------------------------------------
liens granted to Lender under this Agreement and the other Financing  Agreements
constitute valid and perfected

                                       41
<PAGE>

first priority liens and security  interests in and upon the Collateral  subject
only to the liens indicated on Schedule 8.4 hereto and the other liens permitted
under Section 9.8 hereof other than Collateral  located in Borrower's  locations
outside  of  the  United  States  as set  forth  in  item  9 of the  Information
Certificate and Mexico,  pursuant to Section 9.10 hereof.  Borrower has good and
marketable  title to all of its  properties  and  assets  subject  to no  liens,
mortgages,  pledges,  security  interests,  encumbrances or charges of any kind,
except  those  granted to Lender and such others as are  specifically  listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.

     8.5 Tax  Returns.  Borrower has filed,  or caused to be filed,  in a timely
         -------------
manner all tax returns,  reports and declarations which are required to be filed
by it. All information in such tax returns, reports and declarations is complete
and  accurate in all material  respects.  Borrower has paid or caused to be paid
all taxes due and payable or claimed due and payable in any assessment  received
by it,  except taxes the validity of which are being  contested in good faith by
appropriate  proceedings  diligently  pursued and available to Borrower and with
respect to which  adequate  reserves have been set aside on its books.  Adequate
provision  has been made for the  payment of all  accrued  and  unpaid  Federal,
State, county, local, foreign and other taxes whether or not yet due and payable
and whether or not disputed.

     8.6 Litigation.  Except as set forth on the Information Certificate,  there
         -----------
is no present  investigation by any Governmental  Authority  pending,  or to the
best of Borrower's  knowledge  threatened,  against or affecting  Borrower,  its
assets or  business  and there is no action,  suit,  proceeding  or claim by any
Person  pending,  or to the best of  Borrower's  knowledge  threatened,  against
Borrower or its assets or  goodwill,  or against or affecting  any  transactions
contemplated by this Agreement,  which if adversely  determined against Borrower
would result in any material adverse change in the assets, business or prospects
of Borrower or would  impair the ability of Borrower to perform its  obligations
hereunder or under any of the other Financing  Agreements to which it is a party
or of Lender to enforce any Obligations or realize upon any Collateral.

     8.7 Compliance with Other Agreements and Applicable Laws.
         -----------------------------------------------------

     (a)  Borrower  is not in  default  in any  material  respect  under,  or in
violation  in any  respect  of any of the terms  of,  any  agreement,  contract,
instrument,  lease or other  commitment to which it is a party or by which it or
any of its assets are bound.  Borrower is in compliance in all material respects
with the requirements of all applicable laws,  rules,  regulations and orders of
any  Governmental  Authority  relating  to  its  business,   including,  without
limitation,  those  set forth in or  promulgated  pursuant  to the  Occupational
Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938,
as  amended,  ERISA,  the  Code,  as  amended,  and the  rules  and  regulations
thereunder, all Federal, State and local statutes, regulations, rules and orders
relating to consumer credit  (including,  without  limitation,  as each has been
amended,  the  Truth-in-  Lending  Act,  the Fair Credit  Billing Act, the Equal
Credit Opportunity Act and the Fair Credit Reporting Act, and regulations, rules
and  orders  promulgated  thereunder),  all  Federal,  State and  local  states,
regulations,  rules and orders pertaining to sales of consumer goods (including,
without  limitation,  the Consumer Products Safety Act of 1972, as amended,  and
the Federal Trade Commission Act of 1914, as amended, and all regulations, rules
and orders promulgated thereunder).

                                       42
<PAGE>

     (b)  Borrower  has obtained  all  material  permits,  licenses,  approvals,
consents,  certificates,  orders or  authorizations  of any governmental  agency
required for the lawful conduct of its business.  Schedule 8.7 hereto sets forth
all material permits, licenses,  approvals,  consents,  certificates,  orders or
authorizations  (the  "Permits")  issued to or held by  Borrower  as of the date
hereof by any Federal,  State or local governmental  agency and any applications
pending by Borrower with such federal,  state or local governmental  agency. The
Permits constitute all permits,  licenses,  approvals,  consents,  certificates,
orders or authorizations  necessary for Borrower to own and operate its business
as presently  conducted  or proposed to be  conducted  where the failure to have
such Permits would have a material adverse effect on the business,  performance,
operations or properties of Borrower or the legality, validity or enforceability
of this Agreement or the other  Financing  Agreements or the ability of Borrower
to perform its  obligations  under the  Agreement or any of the other  Financing
Agreements  or the rights and remedies of Lender under this  Agreement or any of
the other Financing Agreements.  All of the Permits are valid and subsisting and
in full force and effect. There are no actions, claims or proceedings pending or
threatened that seek the revocation, cancellation, suspension or modification of
any of the Permits.

     8.8 Environmental Compliance.
         -------------------------

     (a) Except as set forth on Schedule 8.8 hereto, Borrower and any Subsidiary
have not generated, used, stored, treated, transported,  manufactured,  handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether
or not owned by it) in any  manner  which at any time  violates  any  applicable
Environmental  Law or any  license,  permit,  certificate,  approval  or similar
authorization  thereunder  and the  operations  of Borrower  and any  Subsidiary
complies in all material respects with all Environmental  Laws and all licenses,
permits, certificates, approvals and similar authorizations thereunder.

     (b)  Except  as set  forth  on  Schedule  8.8  hereto,  there  has  been no
investigation,  proceeding,  complaint,  order,  directive,  claim,  citation or
notice by any  Governmental  Authority or any other person nor is any pending or
to  the  best  of  Borrower's   knowledge   threatened,   with  respect  to  any
non-compliance with or violation of the requirements of any Environmental Law by
Borrower and any  Subsidiary or the release,  spill or discharge,  threatened or
actual, of any Hazardous  Material or the generation,  use, storage,  treatment,
transportation,  manufacture,  handling, production or disposal of any Hazardous
Materials or any other  environmental,  health or safety  matter,  which affects
Borrower  or its  business,  operations  or  assets or any  properties  at which
Borrower has transported, stored or disposed of any Hazardous Materials.

     (c) Borrower and its Subsidiaries have no material liability (contingent or
otherwise)  in  connection  with a release,  spill or  discharge,  threatened or
actual, of any Hazardous Materials or the generation,  use, storage,  treatment,
transportation,  manufacture,  handling, production or disposal of any Hazardous
Materials.

     (d) Borrower and its Subsidiaries have all licenses, permits, certificates,
approvals  or  similar  authorizations  required  to be  obtained  or  filed  in
connection with the operations of

                                       43
<PAGE>

Borrower  under  any  Environmental  Law  and  all of  such  licenses,  permits,
certificates,  approvals or similar  authorizations  are valid and in full force
and effect.

     8.9 Employee Benefits.
         ------------------

     (a) Each Plan is in material  compliance with the applicable  provisions of
ERISA,  the Code and other  federal or state law. Each Plan which is intended to
qualify under Section 401(a) of the Code has received a favorable  determination
letter  from the  Internal  Revenue  Service  and to the best  knowledge  of the
Borrower, nothing has occurred which would cause the loss of such qualification.
Borrower and its ERISA  Affiliates have made all required  contributions  to any
Plan subject to Section 412 of the Code, and no application for a funding waiver
or an extension of any  amortization  period pursuant to Section 412 of the Code
has been made with respect to any Plan.

     (b) There are no pending or to the best  knowledge of Borrower,  threatened
claims,  actions or  lawsuits,  or action by any  Governmental  Authority,  with
respect to any Plan.  There has been no prohibited  transaction  or violation of
the  fiduciary  responsibility  rules with respect to any Plan that has not been
fully cured by reversal of the  transaction or otherwise,  including  payment in
full of any applicable fees or penalties.

     (c) (i) No ERISA  Event has  occurred or is  reasonably  expected to occur;
(ii) the current value of each Plan's assets  (determined in accordance with the
assumptions  used for funding such Plan  pursuant to Section 412 of the Code) do
not  exceed  such  Plan's  liabilities  under  Section   4001(a)(16)  of  ERISA;
(iii) Borrower  and its ERISA  Affiliate have not incurred and do not reasonably
expect to incur,  any liability under Title IV of ERISA with respect to any Plan
(other  than  premiums  due and not  delinquent  under  Section  4007 of ERISA);
(iv) Borrower  and its ERISA  Affiliates have not incurred and do not reasonably
expect to incur, any liability (and no event has occurred which, with the giving
of notice under  Section 4219 of ERISA,  would result in such  liability)  under
Section  4201 or  4243 of  ERISA  with  respect  to a  Multiemployer  Plan;  and
(v) Borrower  and its ERISA  Affiliates  have not engaged in a transaction  that
could be subject to Section 4069 or 4212(c) of ERISA.

     8.10 Bank Accounts.  All of the deposit  accounts,  investment  accounts or
          --------------
other  accounts  in the name of or used by  Borrower  maintained  at any bank or
other financial  institution  are set forth on Schedule 8.10 hereto,  subject to
the right of Borrower to establish new accounts in accordance  with Section 9.13
below.

     8.11 Intellectual Property.  Borrower owns or licenses or otherwise has the
          ----------------------
right  to use all  Intellectual  Property  necessary  for the  operation  of its
business as  presently  conducted  or proposed to be  conducted.  As of the date
hereof, Borrower does not have any Intellectual Property registered,  or subject
to pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof,  any political
subdivision  thereof or in any other  country,  other than  those  described  in
Schedule 8.11 hereto and has not granted any licenses with respect thereto other
than as set forth in Schedule 8.11 hereto.  No event has occurred  which permits
or would permit after notice or passage of time or

                                       44
<PAGE>

both, the revocation,  suspension or termination of such rights.  To the best of
the  knowledge  of Borrower,  no slogan or other  advertising  device,  product,
process,  method,  substance or other Intellectual  Property or goods bearing or
using any Intellectual Property presently contemplated to be sold by or employed
by Borrower infringes any patent, trademark, servicemark,  tradename, copyright,
license or other  Intellectual  Property owned by any other Person presently and
no claim or litigation is pending or  threatened  against or affecting  Borrower
contesting  its right to sell or use any such  Intellectual  Property.  Schedule
8.11 sets forth all of the agreements or other arrangements of Borrower pursuant
to which  Borrower  has a license or other right to use any  trademarks,  logos,
designs,  representations or other Intellectual Property owned by another person
as in  effect  on the  date  hereof  and the  dates  of the  expiration  of such
agreements or other arrangements of Borrower as in effect on the date hereof. No
trademark,  servicemark  or other  Intellectual  Property  at any  time  used by
Borrower which is owned by another person,  or owned by Borrower  subject to any
security interest,  lien, collateral assignment,  pledge or other encumbrance in
favor of any person  other than Lender,  is affixed to any  Eligible  Inventory,
except to the extent permitted under the term of the license  agreements  listed
on Schedule 8.11 hereto.

     8.12 Acquisition of Assets.
          ----------------------

     (a)  The  Distribution   Agreements  and  the   transactions   contemplated
thereunder  have been duly  executed,  delivered  and  performed  (except to the
extent  that  the  Distribution  Agreements  as in  effect  on the  date  hereof
expressly  contemplate  performance  after the date hereof) in  accordance  with
their  terms  by  the  respective  parties  thereto  in all  material  respects,
including  the  fulfillment  of all  conditions  precedent set forth therein and
giving effect to the terms of the Distribution Agreements and the assignments to
be executed and delivered by Woodside (or any of its affiliates or subsidiaries)
thereunder,  Borrower  has  acquired  and has good and  marketable  title to the
assets of the Delta Apparel division of Woodside,  free and clear of all claims,
liens,  pledges and  encumbrances  of any kind,  except as permitted  hereunder.
Borrower has acquired all of the assets  consisting of the Delta Apparel Company
division of all of the various subsidiaries of Woodside.

     (b) All actions and proceedings, required by the Distribution Agreements in
respect of the Intercompany  Reorganization  (as such term is defined in the DWI
Distribution  Agreement),  applicable  law or  regulation  (including,  but  not
limited to, compliance with the Hart-Scott-Rodino Anti-Trust Improvements Act of
1976, as amended if applicable) to be taken have been taken and the transactions
required  thereunder  have been duly and validly  taken and  consummated  hereof
(except for those provisions thereof that are solely for the benefit of Woodside
and not for Borrower and which do not otherwise affect or relate to Borrower).

     (c)  No  court  of  competent   jurisdiction  has  issued  any  injunction,
restraining   order  or  other  order  which   prohibits   consummation  of  the
transactions  described in the  Distribution  Agreements and no  governmental or
other  action or  proceeding  has been  threatened  or  commenced,  seeking  any
injunction,  restraining  order or other order which seeks to void or  otherwise
modify the transactions described in the Distribution Agreements.

                                       45
<PAGE>

     (d) Borrower has  delivered,  or caused to be delivered,  to Lender,  true,
correct and complete copies of the Distribution Agreements.

     8.13  Solvency.  Borrower is solvent and will  continue to be solvent after
           ---------
the creation of the Obligations,  the security interests of Lender and the other
transaction  contemplated hereunder, is able to pay its debts as they mature and
has (and has reason to believe it will continue to have) sufficient capital (and
not  unreasonably  small capital) to carry on its business and all businesses in
which it is about to engage.  The assets and  properties  of  Borrower at a fair
valuation and at their present  salable value are, and will be, greater than the
Indebtedness of Borrower,  and including subordinated and contingent liabilities
computed at the amount which, to the best of Borrower's knowledge, represents an
amount which can reasonably be expected to become an actual or mature liability.

     8.14 Labor Disputes.
          ---------------

     (a) Set  forth  on  Schedule  8.14  hereto  is a list  (including  dates of
termination)  of all  collective  bargaining  or similar  agreements  between or
applicable to Borrower and any union,  labor  organization  or other  bargaining
agent in respect of the employees of Borrower on the date hereof.

     (b) There is (i) no  significant  unfair labor practice  complaint  pending
against  Borrower  or,  to the best of the  knowledge  of  Borrower,  threatened
against it,  before the  National  Labor  Relations  Board,  and no  significant
grievance  or  significant  arbitration  proceeding  arising out of or under any
collective  bargaining  agreement is pending on the date hereof against Borrower
or, to best of the  knowledge  of Borrower,  threatened  against it, and (ii) no
significant  strike,  labor  dispute,  slowdown or  stoppage is pending  against
Borrower  or,  to the best of the  knowledge  of  Borrower,  threatened  against
Borrower.

     8.15 Corporate Name; Prior Transactions.  Borrower has not, during the past
          -----------------------------------
five years,  been known by or used by any other  corporate or fictitious name or
been a party to any merger or  consolidation,  or acquired all or  substantially
all of the assets of any Person,  or acquired  any of its property or assets out
of the  ordinary  course of  business,  except  as set forth in the  Information
Certificate.

     8.16  Restrictions on Subsidiaries.  Except for  restrictions  contained in
           -----------------------------
this Agreement or any other  agreement with respect to  Indebtedness of Borrower
permitted hereunder as in effect on the date hereof, there are no contractual or
consensual restrictions on Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between Borrower
and any of its  Subsidiaries  or  (ii) between  any  Subsidiaries of Borrower or
(b) the ability of Borrower or any of its Subsidiaries to incur  Indebtedness or
grant security interests to Lender in the Collateral.

     8.17  Material  Contracts.  Schedule  8.17 hereto  sets forth all  Material
           --------------------
Contracts  to which  Borrower  is a party  or is  bound  as of the date  hereof.
Borrower  has  delivered  true,  correct and  complete  copies of such  Material
Contracts to Lender on or before the date hereof. Borrower is

                                       46
<PAGE>

not in breach of or in default under any Material  Contract and has not received
any notice of the intention of any other party thereto to terminate any Material
Contract.

     8.18 Accuracy and Completeness of Information. All information furnished by
          -----------------------------------------
or on behalf of Borrower in writing to Lender in connection  with this Agreement
or any of the other Financing Agreements or any transaction  contemplated hereby
or thereby, including all information on the Information Certificate is true and
correct in all  material  respects on the date as of which such  information  is
dated or  certified  and does not omit any material  fact  necessary in order to
make such  information  not misleading.  No event or  circumstance  has occurred
which has had or could  reasonably be expected to have a material adverse affect
on the business,  assets or prospects of Borrower,  which has not been fully and
accurately disclosed to Lender in writing.

     8.19 Survival of Warranties; Cumulative. All representations and warranties
          -----------------------------------
contained  in this  Agreement  or any of the other  Financing  Agreements  shall
survive the execution and delivery of this Agreement and shall be deemed to have
been  made  again to Lender on the date of each  additional  borrowing  or other
credit accommodation  hereunder and shall be conclusively  presumed to have been
relied  on by  Lender  regardless  of  any  investigation  made  or  information
possessed by Lender. The  representations  and warranties set forth herein shall
be cumulative and in addition to any other  representations  or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.

SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
           ----------------------------------

     9.1 Maintenance of Existence.  Borrower shall at all times preserve,  renew
         -------------------------
and keep in full,  force and  effect  its  corporate  existence  and  rights and
franchises  with  respect  thereto  and  maintain  in full  force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts  necessary  to carry on the  business as  presently  or proposed to be
conducted.  Borrower  shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name,  which notice shall set forth the new
name  and  Borrower  shall  deliver  to  Lender a copy of the  amendment  to the
Certificate of Incorporation of Borrower providing for the name change certified
by the Secretary of State of the  jurisdiction of  incorporation  of Borrower as
soon as it is available.

     9.2 New Collateral Locations. Borrower may open any new location within the
         -------------------------
continental  United States provided  Borrower (a) gives Lender fifteen (15) days
prior  written  notice of the intended  opening of any such new location and (b)
executes and delivers,  or causes to be executed and  delivered,  to Lender such
agreements,  documents,  and instruments as Lender may deem reasonably necessary
or  desirable  to protect its  interests  in the  Collateral  at such  location,
including UCC financing statements.

     9.3 Compliance with Laws, Regulations, Etc.
         ---------------------------------------

     (a) Borrower shall, and shall cause any Subsidiary to, at all times, comply
in all material respects with all laws, rules, regulations,  licenses,  permits,
approvals and orders

                                       47
<PAGE>

applicable  to it and duly observe all  requirements  of any  Federal,  State or
local Governmental Authority, including ERISA, the Code, the Occupational Safety
and Health Act of 1970,  as amended,  the Fair Labor  Standards  Act of 1938, as
amended, and all statutes, rules, regulations,  orders, permits and stipulations
relating to  environmental  pollution and employee health and safety,  including
all of the Environmental Laws.

     (b) At the  reasonable  request of Lender  and in any event,  to the extent
required by applicable  law,  Borrower  shall  establish  and  maintain,  at its
expense,  a system to assure  and  monitor  its  continued  compliance  with all
Environmental  Laws in all of its operations,  which system shall include annual
reviews of such  compliance  by employees or agents of Borrower who are familiar
with the requirements of the  Environmental  Laws.  Copies of all  environmental
surveys,  audits,  assessments,  feasibility  studies  and  results of  remedial
investigations  shall be  promptly  furnished,  or  caused to be  furnished,  by
Borrower to Lender. Borrower shall take prompt and appropriate action to respond
to any  non-compliance  with any of the  Environmental  Laws and shall regularly
report to Lender on such response.

     (c) Borrower shall give both oral and written notice to Lender  immediately
upon  Borrower's  receipt of any notice of, or  Borrower's  otherwise  obtaining
knowledge of, (i) the  occurrence of any event  involving the release,  spill or
discharge,  threatened  or  actual,  of  any  Hazardous  Material  or  (ii)  any
investigation,  proceeding,  complaint,  order,  directive,  claims, citation or
notice  with  respect  to:  (A)  any  non-compliance  with or  violation  of any
Environmental Law by Borrower or (B) the release, spill or discharge, threatened
or actual,  of any  Hazardous  Material  or (C) the  generation,  use,  storage,
treatment, transportation,  manufacture, handling, production or disposal of any
Hazardous  Materials or (D) any other  environmental,  health or safety  matter,
which affects  Borrower or its business,  operations or assets or any properties
at which Borrower transported, stored or disposed of any Hazardous Materials.

     (d) Without  limiting the  generality  of the  foregoing,  whenever  Lender
reasonably  determines  that there is  non-compliance,  or any  condition  which
requires  any action by or on behalf of Borrower in order to avoid any  material
non-compliance,  with any Environmental Law, Borrower shall, at Lender's request
and  Borrower's  expense:  (i)  cause  an  independent   environmental  engineer
acceptable  to  Lender  to  conduct  such  tests  of the site  where  Borrower's
non-compliance  or  alleged  non-compliance  with  such  Environmental  Laws has
occurred as to such non-compliance and prepare and deliver to Lender a report as
to such non-compliance  setting forth the results of such tests, a proposed plan
for responding to any environmental  problems described therein, and an estimate
of the costs  thereof and (ii) provide to Lender a  supplemental  report of such
engineer  whenever  the scope of such  non-compliance,  or  Borrower's  response
thereto or the estimated costs thereof, shall change in any material respect.

     (e) Borrower  shall  indemnify and hold  harmless  Lender,  its  directors,
officers, employees, agents, invitees, representatives,  successors and assigns,
from and against any and all losses, claims,  damages,  liabilities,  costs, and
expenses  (including  attorneys' fees and legal expenses) directly or indirectly
arising  out  of  or   attributable   to  the  use,   generation,   manufacture,
reproduction,  storage, release, threatened release, spill, discharge,  disposal
or presence  of a Hazardous  Material,  including  the costs of any  required or
necessary repair, cleanup or other

                                       48
<PAGE>

remedial work with respect to any property of Borrower and the  preparation  and
implementation   of  any  closure,   remedial  or  other  required  plans.   All
representations,  warranties, covenants and indemnifications in this Section 9.3
shall survive the payment of the  Obligations and the termination or non-renewal
of this Agreement.

     9.4  Payment  of Taxes and  Claims.  Borrower  shall,  and shall  cause any
          ------------------------------
Subsidiary to, duly pay and discharge all taxes, assessments,  contributions and
governmental charges upon or against it or its properties or assets,  except for
taxes the  validity of which are being  contested  in good faith by  appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary,  as
the case may be, and with respect to which adequate reserves have been set aside
on its  books.  Borrower  shall be liable  for any tax or  penalties  imposed on
Lender  as a result  of the  financing  arrangements  provided  for  herein  and
Borrower  agrees to  indemnify  and hold  Lender  harmless  with  respect to the
foregoing,  and to repay to Lender on demand the amount thereof,  and until paid
by Borrower  such amount shall be added and deemed part of the Loans,  provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes  attributable to the income of Lender from any amounts
charged or paid hereunder to Lender.  The foregoing  indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.

     9.5 Insurance.  Borrower  shall,  and shall cause any Subsidiary to, at all
         ----------
times,  maintain with financially  sound and reputable  insurers  insurance with
respect to the Collateral  against loss or damage and all other insurance of the
kinds and in the amounts  customarily insured against or carried by corporations
of  established  reputation  engaged  in the  same  or  similar  businesses  and
similarly  situated.  Said policies of insurance shall be satisfactory to Lender
as to form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance,  and,
if Borrower  fails to do so, Lender is authorized,  but not required,  to obtain
such  insurance at the expense of Borrower.  All policies  shall  provide for at
least thirty (30) days prior  written  notice to Lender of any  cancellation  or
reduction  of  coverage  and that  Lender may act as  attorney  for  Borrower in
obtaining,  and at any time an Event of Default  exists or has  occurred  and is
continuing, adjusting, settling, amending and canceling such insurance. Borrower
shall cause  Lender to be named as a loss payee and an  additional  insured (but
without any  liability  for any  premiums)  under such  insurance  policies  and
Borrower shall obtain non-contributory lender's loss payable endorsements to all
insurance policies in form and substance  satisfactory to Lender.  Such lender's
loss payable  endorsements  shall  specify  that the proceeds of such  insurance
shall be payable to Lender as its interests may appear and further  specify that
Lender shall be paid regardless of any act or omission by Borrower or any of its
Affiliates.  At its option,  Lender may apply any insurance proceeds received by
Lender at any time to the cost of repairs or replacement of Collateral and/or to
payment of the  Obligations,  whether or not then due,  in any order and in such
manner as Lender may determine or hold such proceeds as cash  collateral for the
Obligations.

     9.6 Financial Statements and Other Information.
         -------------------------------------------

     (a) Borrower  shall,  and shall cause any  Subsidiary to, keep proper books
and records in which true and complete  entries shall be made of all dealings or
transactions of or in

                                       49
<PAGE>

relation to the Collateral and the business of Borrower and its  Subsidiaries in
accordance  with  GAAP.  Borrower  shall  promptly  furnish  to Lender  all such
financial and other  information as Lender shall reasonably  request relating to
the  Collateral  and the assets,  business and  operations  of Borrower,  and to
notify the auditors and  accountants  of Borrower  that Lender is  authorized to
obtain such  information  directly from them.  Without  limiting the  foregoing,
Borrower shall furnish or cause to be furnished to Lender,  the  following:  (i)
within  thirty (30) days after the end of each fiscal  month  (other than at the
end of a fiscal quarter),  monthly unaudited  consolidated  financial statements
(including  in  each  case  balance  sheets,  statements  of  income  and  loss,
statements  of cash  flow,  and  statements  of  shareholders'  equity),  all in
reasonable  detail,  fairly presenting the financial position and the results of
the  operations  of Borrower and its  Subsidiaries  as of the end of and through
such fiscal  month,  certified to be correct by the chief  financial  officer of
Borrower,  subject to normal year-end  adjustments,  (ii) within forty-five (45)
days after the end of each fiscal  quarter  (other than at the end of the fiscal
year),  unaudited  consolidated  financial  statements  (including  in each case
balance  sheets,  statements of income and loss,  statements  of cash flow,  and
statements of shareholders'  equity) and (iii) within ninety (90) days after the
end of each fiscal year, audited consolidated financial statements (including in
each case balance sheets, statements of income and loss, statements of cash flow
and statements of shareholders' equity), and the accompanying notes thereto, all
in reasonable  detail,  fairly presenting the financial position and the results
of the operations of Borrower and its Subsidiaries as of the end of and for such
fiscal year,  together with the  unqualified  opinion of  independent  certified
public  accountants,  which accountants shall be an independent  accounting firm
selected by Borrower and  reasonably  acceptable to Lender,  that such financial
statements  have been prepared in accordance  with GAAP,  and present fairly the
results of operations and financial  condition of Borrower and its  Subsidiaries
as of the end of and for the fiscal year then ended.

     (b) Borrower shall promptly  notify Lender in writing of the details of (i)
any loss, damage,  investigation,  action, suit, proceeding or claim relating to
the Collateral or any other  property  which is security for the  Obligations or
which  would  result in any  material  adverse  change in  Borrower's  business,
properties,  assets,  goodwill or condition,  financial or  otherwise,  (ii) any
Material  Contract of Borrower  being  terminated or amended or any new Material
Contract  entered into (in which event Borrower shall provide Lender with a copy
of such Material  Contract),  (iii) any  order,  judgment or decree in excess of
$500,000  shall have been entered  against  Borrower or any of its properties or
assets,  (iv) any  notification of violation of laws or regulations  received by
Borrower,  (v) any ERISA Event,  and (vi) the occurrence of any Event of Default
or act,  condition or event which,  with notice or the passage of time or giving
of notice or both, would constitute an Event of Default.

     (c) Borrower shall promptly after the sending or filing thereof  furnish or
cause to be furnished to Lender  copies of all reports which  Borrower  sends to
its stockholders generally and copies of all reports and registration statements
which Borrower files with the Securities and Exchange  Commission,  any national
securities exchange or the National Association of Securities Dealers, Inc.

     (d) Borrower shall  deliver,  or cause to be delivered,  to Lender,  within
ninety (90) days from the date hereof, an opening unaudited consolidated balance
sheet of Borrower and its

                                       50
<PAGE>

Subsidiaries  after  giving  effect  to the  transactions  contemplated  by this
Agreement and the  Distribution  Agreements,  which present fairly the financial
condition of Borrower as of such date.

     (e) Borrower shall furnish or cause to be furnished to Lender such budgets,
forecasts,  projections and other information  respecting the Collateral and the
business of  Borrower,  as Lender may,  from time to time,  reasonably  request.
Lender is hereby authorized to deliver a copy of any financial  statement or any
other  information  relating  to the  business of Borrower to any court or other
Government  Authority  to the extent  required  by  statute,  rule,  regulation,
subpoena  or court  order  or to any  participant  or  assignee  or  prospective
participant or assignee.  Borrower hereby irrevocably authorizes and directs all
accountants or auditors to deliver to Lender, at Borrower's  expense,  copies of
the  financial  statements  of Borrower  and any reports or  management  letters
prepared by such  accountants  or auditors on behalf of Borrower and to disclose
to Lender such  information as they may have regarding the business of Borrower.
Any documents,  schedules,  invoices or other papers  delivered to Lender may be
destroyed  or  otherwise  disposed  of by Lender one (1) year after the same are
delivered  to Lender,  except as otherwise  designated  by Borrower to Lender in
writing.

     9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower shall
         --------------------------------------------------------
not, and shall not permit any Subsidiary to, directly or indirectly,

     (a) merge into or with or  consolidate  with any other Person or permit any
other Person to merge into or with or consolidate with it; or

     (b) sell,  assign,  lease,  transfer,  abandon or otherwise  dispose of any
Capital  Stock or  Indebtedness  to any other Person or any of its assets to any
other Person, except for

          (i) sales of Inventory in the ordinary course of business,

          (ii) the disposition of worn-out or obsolete  Equipment so long as (A)
     any proceeds are paid to Lender and (B) such sales do not involve Equipment
     having an  aggregate  fair  market  value in excess  of  $100,000  all such
     Equipment disposed of in any fiscal year of Borrower;

          (iii) the issuance  and sale by Borrower of Capital  Stock of Borrower
     after the date hereof;  provided,  that, (A) Lender shall have received not
     less than ten (10) Business Days prior written  notice of such issuance and
     sale by  Borrower,  which  notice  shall  specify  the parties to whom such
     shares are to be sold, the terms of such sale, the total amount which it is
     anticipated  will be realized  from the issuance and sale of such stock and
     the net cash proceeds which it is anticipated  will be received by Borrower
     from  such  sale,  (B)  Borrower  shall  not be  required  to pay any  cash
     dividends  or  repurchase  or redeem such  Capital  Stock or make any other
     payments in respect thereof except as permitted in Section 9.11 hereof, (C)
     the  terms of such  Capital  Stock,  and the terms  and  conditions  of the
     purchase  and sale  thereof,  shall not include any terms that  include any
     limitation  on the right of Borrower to request or receive  Loans or Letter
     of Credit Accommodations or the right of Borrower to amend or modify any of
     the terms

                                       51
<PAGE>

and  conditions of this  Agreement or any of the other  Financing  Agreements or
otherwise  in any way  relate to or affect the  arrangements  of  Borrower  with
Lender are more  restrictive  or  burdensome  to Borrower  than the terms of any
Capital  Stock  in  effect  on the date  hereof,  and (D) as of the date of such
issuance and sale and after giving effect  thereto,  no Event of Default or act,
condition or event which with notice or passage of time or both would constitute
an Event of Default shall exist or have occurred;

     (iv) the issuance of Capital  Stock of Borrower  consisting of common stock
pursuant to a stock option plan,  401(k) plan, or incentive  stock award plan of
Borrower for the benefit of its employees, directors and consultants,  provided,
that, in no event shall Borrower be required to issue,  or shall Borrower issue,
Capital  Stock  pursuant to such stock  option plan,  401(k) plan,  or incentive
stock award plan which would result in an Event of Default;

     (v)  sales of Existing  Real  Property  (other than  Existing Real Property
covered by a Mortgage  pursuant to Section  9.18  hereof)  and  related  assets,
provided,  that, as to each and all of such sales (A) Lender shall have received
not less than ten (10) days  prior  written  notice of such sale,  which  notice
shall set forth in reasonable detail satisfactory to Lender, the parties to such
sale,  the Existing Real Property to be sold,  the purchase price and the manner
of payment thereof and such other information with respect thereto as Lender may
request,  (B) such sale shall be on commercially reasonable terms in a bona fide
arm's-length  transaction  with a non-  affiliated  person,  (C) all  of the Net
Proceeds of any such sale shall be paid either (i) directly to Lender or (ii) to
Borrower,  provided,  that,  the entire  amount of the Net  Proceeds are used to
repay the outstanding amount of Revolving Loans which amounts may be reborrowed,
(D)  Borrower  shall not incur any  liabilities  in  connection  with such sales
except as permitted herein, and (E) as of the date of such sale and after giving
effect  thereto,  no Event of  Default,  or act,  condition  or event which with
notice or  passage of time or both would  constitute  an Event of Default  shall
exist or have occurred and be continuing.

     (c) form or  acquire  any  Subsidiaries  other  than  those  listed  on the
Information Certificate and as permitted in accordance with Section 9.10 hereof;

     (d) wind up, liquidate or dissolve; or

     (e) agree to do any of the foregoing.

     9.8  Encumbrances.  Borrower shall not, and shall permit any Subsidiary to,
          -------------
create,  incur,  assume  or suffer to exist  any  security  interest,  mortgage,
pledge, lien, charge or other encumbrance of any nature whatsoever on any of its
assets or properties, including the Collateral, except:

     (a) the security interests and liens of Lender;

     (b) liens  securing  the  payment of taxes,  either not yet  overdue or the
validity of which are being  contested in good faith by appropriate  proceedings
diligently pursued and

                                       52
<PAGE>

available to Borrower or such Subsidiary, as the case may be and with respect to
which adequate reserves have been set aside on its books;

     (c)  non-consensual  statutory liens (other than liens securing the payment
of taxes)  arising in the ordinary  course of  Borrower's  or such  Subsidiary's
business to the extent: (i) such liens secure  Indebtedness which is not overdue
or (ii) such liens secure  Indebtedness  relating to claims or liabilities which
are fully  insured  and being  defended  at the sole cost and expense and at the
sole  risk of the  insurer  or being  contested  in good  faith  by  appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary,  in
each case prior to the commencement of foreclosure or other similar  proceedings
and with respect to which adequate reserves have been set aside on its books;

     (d)  zoning  restrictions,   easements,   licenses,   covenants  and  other
restrictions  affecting the use of Real  Property  which do not interfere in any
material  respect with the use of such Real Property or ordinary  conduct of the
business  of Borrower  or such  Subsidiary  as  presently  conducted  thereon or
materially impair the value of the Real Property which may be subject thereto;

     (e) purchase  money  security  interests in  Equipment  (including  Capital
Leases) to secure Indebtedness permitted under Section 9.9(b) hereof; and

     (f) the security interests and liens set forth on Schedule 8.4 hereto.

     9.9  Indebtedness.  Borrower shall not, and shall not permit any Subsidiary
          -------------
to, incur, create, assume, become or be liable in any manner with respect to, or
permit to exist, any Indebtedness, except:

     (a) the Obligations;

     (b) purchase money  Indebtedness  (including  Capital Leases) to the extent
secured by purchase money  security  interests in Equipment  (including  Capital
Leases) not to exceed  $1,000,000  in the aggregate at any time  outstanding  so
long as such security  interests do not apply to any property of Borrower  other
than the Equipment so acquired,  and the  Indebtedness  secured thereby does not
exceed the cost of the Equipment so acquired;

     (c) Indebtedness of Borrower under interest swap agreements,  interest rate
cap  agreements,   interest  rate  collar  agreements,  interest  rate  exchange
agreements and similar  contractual  agreements  entered into for the purpose of
protecting a Person against fluctuations in interest rates; provided, that, such
arrangements are with banks or other financial  institutions  that have combined
capital and surplus and undivided  profits of not less than $100,000,000 and are
not for speculative purposes and such Indebtedness shall be unsecured;

     (d) the Indebtedness set forth on Schedule 9.9 hereto;  provided, that, (i)
Borrower may only make regularly scheduled payments of principal and interest in
respect of such  Indebtedness  in accordance  with the terms of the agreement or
instrument evidencing or giving

                                       53
<PAGE>

rise to such  Indebtedness as in effect on the date hereof,  (ii) Borrower shall
not,  directly or indirectly,  (A) amend,  modify,  alter or change the terms of
such Indebtedness or any agreement, document or instrument related thereto as in
effect on the date hereof except, that, Borrower may, after prior written notice
to Lender,  amend, modify, alter or change the terms thereof so as to extend the
maturity thereof,  or defer the timing of any payments in respect thereof, or to
forgive or cancel any  portion of such  Indebtedness  (other  than  pursuant  to
payments  thereof),  or to reduce the  interest  rate or any fees in  connection
therewith,  or (B) redeem, retire,  defease,  purchase or otherwise acquire such
Indebtedness,  or set aside or  otherwise  deposit  or invest  any sums for such
purpose,  and (iii)  Borrower  shall furnish to Lender all notices or demands in
connection with such Indebtedness  either received by Borrower or on its behalf,
promptly  after the  receipt  thereof,  or sent by  Borrower  or on its  behalf,
concurrently with the sending thereof, as the case may be.

     9.10 Loans, Investments, Guarantees, Etc. Borrower shall not, and shall not
          ------------------------------------
permit any  Subsidiary  to,  directly or  indirectly,  make any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all
or a  substantial  part of the assets or property of any person,  or  guarantee,
assume,  endorse,  or otherwise become  responsible for (directly or indirectly)
the Indebtedness,  performance,  obligations or dividends of any Person, or form
or acquire any Subsidiaries, or agree to do any of the foregoing, except:

     (a) the  endorsement  of  instruments  for  collection  or  deposit  in the
ordinary course of business;

     (b)  investments  in cash  or  Cash  Equivalents,  provided,  that,  (i) no
Revolving Loans are then outstanding and (ii) as to any of the foregoing, unless
waived in  writing  by Lender,  Borrower  shall take such  actions as are deemed
necessary  by  Lender  to  perfect  the  security  interest  of  Lender  in such
investments;

     (c) the existing  equity  investments  of Borrower as of the date hereof in
its Subsidiaries,  provided, that, Borrower shall have no obligation to make any
other  investment  in, or loans to, or other  payments  in respect  of, any such
Subsidiaries;

     (d) guarantees by any  Subsidiaries of Borrower of the Obligations in favor
of Lender;  (e) equity  investment  of  Borrower  in a  wholly-owned  Subsidiary
organized under the laws of Mexico (the "Mexican Subsidiary"),  provided,  that,
each of the  following  conditions is satisfied  (i) Borrower  shall execute and
deliver to Lender in form and  substance  satisfactory  to Lender,  a pledge and
security  agreement  granting  to Lender a first  pledge of and lien on at least
sixty-five (65%) of all of the issued and outstanding shares of Capital Stock of
such  Subsidiary,  (ii) Borrower shall deliver the original  stock  certificates
evidencing such shares of Capital Stock (or such other evidence as may be issued
in the case of a limited  liability  company)  together  with stock  powers with
respect  thereto  duly  executed  in  blank,  and  (iii)  as of the date of such
investment  and  after  giving  effect  thereto,  no Event of  Default,  or act,
condition or event which

                                       54
<PAGE>

with  notice or  passage of time or both  would  constitute  an Event of Default
shall exist or have occurred;

     (f)  stock  or  obligations  issued  to  Borrower  by any  Person  (or  the
representative  of such Person) in respect of  Indebtedness of such Person owing
to Borrower in  connection  with the  insolvency,  bankruptcy,  receivership  or
reorganization  of such Person or a composition or  readjustment of the debts of
such  Person;  provided,  that,  the  original  of any such stock or  instrument
evidencing such obligations shall be promptly delivered to Lender, upon Lender's
request,  together with such stock power,  assignment or endorsement by Borrower
as Lender may request;

     (g) obligations or account debtors to Borrower  arising from Accounts which
are past due evidenced by a promissory  note made by such account debtor payable
to Borrower;  provided,  that,  promptly upon the receipt of the original of any
such promissory note by Borrower,  such promissory note shall be endorsed to the
order of Lender by Borrower and promptly delivered to Lender as so endorsed;

     (h) the loans,  advances and  guarantees set forth on Schedule 9.10 hereto;
provided,  that, as to such loans,  advances and guarantees,  (i) Borrower shall
not,  directly or indirectly,  (A) amend,  modify,  alter or change the terms of
such loans,  advances or  guarantees  or any  agreement,  document or instrument
related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase
or otherwise acquire the obligations arising pursuant to such guarantees, or set
aside or  otherwise  deposit  or  invest  any sums  for such  purpose,  and (ii)
Borrower shall furnish to Lender all notices or demands in connection  with such
loans,  advances or guarantees or other Indebtedness  subject to such guarantees
either  received  by  Borrower  or on its  behalf,  promptly  after the  receipt
thereof,  or sent by Borrower or on its  behalf,  concurrently  with the sending
thereof, as the case may be.

     9.11 Dividends and Redemptions. Borrower shall not, directly or indirectly,
          --------------------------
declare or pay any  dividends on account of any shares of class of Capital Stock
of Borrower now or hereafter  outstanding,  or set aside or otherwise deposit or
invest  any sums for such  purpose,  or redeem,  retire,  defease,  purchase  or
otherwise  acquire  any  shares of any class of  Capital  Stock (or set aside or
otherwise  deposit or invest any sums for such  purpose)  for any  consideration
other  than  common  stock or  apply or set  apart  any sum,  or make any  other
distribution  (by  reduction  of  capital or  otherwise)  in respect of any such
shares or agree to do any of the foregoing except, that:

     (a) any Subsidiary of Borrower may pay dividends to Borrower;

     (b) Borrower may pay cash dividends or distributions from legally available
funds therefor,  to its shareholders  from time to time in amounts such that the
aggregate amount paid to shareholders does not exceed  twenty-five (25%) percent
of its cumulative Net Income (calculated from the date of this Agreement to date
of determination),  provided, that, (i) Lender shall have received ten (10) days
prior to any payment thereof, a certificate signed by Borrower's chief financial
officer (A) setting forth Borrower's cumulative Net Income with respect to which
the

                                       55
<PAGE>

dividend  or  distribution  is to be made and  providing  full  information  and
computations  with respect  thereto and (B) such dividend or distribution is not
in violation of  applicable  law or any other  agreement to which  Borrower is a
party or by which it is bound, (ii) as of the date of any such payment and after
giving  effect  thereto,   the  Excess  Availability  shall  be  not  less  than
$6,000,000, and (iii) as of the date of any such payment and after giving effect
thereto,  no Event of Default or any act,  condition or event which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred;

     (c) Borrower may repurchase  its Capital Stock  consisting of common stock,
provided, that, as to (i) any such repurchase,  each of the following conditions
is satisfied:  (A) as of the date of the payment for such  repurchase  and after
giving effect thereto, no Event of Default or any act, condition or event which,
with notice or passage of time or both,  would  constitute  an Event of Default,
shall exist or have occurred and be  continuing,  (B) such  repurchase  shall be
paid with funds legally available therefor, (C)such repurchase shall not violate
any law or regulation or the terms of any indenture, agreement or undertaking to
which Borrower is a party or by which Borrower or its property is bound,  (D) as
of the date of any such  payment for such  repurchase  and after  giving  effect
thereto, the Excess Availability shall be not less than $3,000,000,  and (E) the
aggregate  amount of all payments for such  repurchases  during the term of this
Agreement shall not exceed $3,000,000.

     9.12 Transactions with Affiliates. Borrower shall not, and shall not permit
          -----------------------------
any Subsidiary to, directly or indirectly,

     (a) purchase,  acquire or lease any  property  from,  or sell,  transfer or
lease any property to, any officer,  director,  agent or other person affiliated
with Borrower,  except in the ordinary  course of and pursuant to the reasonable
requirements of Borrower's  business and upon fair and reasonable  terms no less
favorable  to the Borrower  than  Borrower  would  obtain in a comparable  arm's
length transaction with an unaffiliated person; or

     (b) make  any  payments  of  management,   consulting  or  other  fees  for
management or similar  services,  or of any  Indebtedness  owing to any officer,
employee, shareholder, director or other Affiliate of Borrower, except,

          (i) reasonable  compensation to officers,  employees and directors for
     services rendered to Borrower in the ordinary course of business;

          (ii) dividends permitted under Section 9.11 (b) above;

          (iii)  payments by Borrower to Delta  Apparel  Honduras,  S.A. for (A)
     actual and necessary reasonable out-of-pocket administrative, operating and
     capital  expenditures of Delta Apparel  Honduras,  S.A. for the business of
     Borrower  as  presently  conducted  in  the  ordinary  course  of  business
     (including lease payments, payroll, insurance,  franchise taxes and similar
     items),  provided,  that, the amount of all such payments  permitted  under
     Section 9.12 (iii)(A) in respect of capital  expenditures  shall not exceed
     $250,000 in the  aggregate in any fiscal year of  Borrower,  and (B) actual
     and necessary reasonable out-of-pocket legal, accounting, insurance

                                       56
<PAGE>

     (including  premiums for such  insurance),  marketing,  payroll and similar
     types of services paid for by Delta Apparel Honduras,  S.A. in the ordinary
     course of its  business as  conducted  as of the date hereof or as the same
     may be directly attributable to Borrower; provided, that, (1) such expenses
     are in the ordinary  course of and pursuant to the reasonable  requirements
     of  Borrower's  business as conducted  on the date  hereof,  and (2) to the
     extent such  expenses are payable to Delta  Apparel  Honduras,  S.A.,  such
     expenses  shall be payable upon terms no less  favorable to Borrower,  than
     Borrower,  could obtain in a comparable  arm's  length  transaction  with a
     person who is not an Affiliate; and

          (iv)  payments by Borrower  to Mexican  Subsidiary  for (A) actual and
     necessary reasonable  out-of-pocket  administrative,  operating and capital
     expenses of Mexican  Subsidiary  for the  business of Borrower as presently
     conducted in the ordinary  course of business  (including  lease  payments,
     payroll, insurance, franchise taxes and similar items), provided, that, the
     amount of all such payments permitted under Section 9.12 (iv)(A) in respect
     of capital  expenditures  shall not exceed $750,000 in the aggregate in any
     fiscal  year  of  Borrower   and  (B)  actual  and   necessary   reasonable
     out-of-pocket  legal,  accounting,  insurance  (including premiums for such
     insurance),  marketing,  payroll and similar  types of services paid for by
     Mexican  Subsidiary in the ordinary  course of its business as conducted as
     of the date hereof or as the same may be directly attributable to Borrower;
     provided,  that,  (1)  such  expenses  are in the  ordinary  course  of and
     pursuant to the reasonable requirements of Borrower's business as conducted
     on the date  hereof,  and (2) to the extent  such  expenses  are payable to
     Mexican  Subsidiary,  such  expenses  shall be  payable  upon terms no less
     favorable to Borrower,  than Borrower,  could obtain in a comparable  arm's
     length transaction with a person who is not an Affiliate.

     9.13 Additional Bank Accounts.  Borrower shall not, directly or indirectly,
          -------------------------
open, establish or maintain any deposit account, investment account or any other
account  with any bank or other  financial  institution,  other than the Blocked
Accounts and the accounts set forth in Schedule 8.10 hereto,  except:  (a) as to
any new or additional Blocked Accounts and other such new or additional accounts
which contain any Collateral or proceeds thereof, with the prior written consent
of Lender and subject to such  conditions  thereto as Lender may  establish  and
(b) as to any accounts  used by Borrower to make  payments of payroll,  taxes or
other obligations to third parties, after prior written notice to Lender.

     9.14  Compliance  with  ERISA.  Borrower  shall and shall cause each of its
           ------------------------
ERISA  Affiliates  to:  (a) maintain  each Plan in  compliance  in all  material
respects with the applicable provisions of ERISA, the Code and other Federal and
State law;  (b) cause  each Plan which is qualified  under Section 401(a) of the
Code to maintain such  qualification;  (c) not terminate any of such Plans so as
to incur any  liability to the Pension  Benefit  Guaranty  Corporation;  (d) not
allow or suffer to exist any prohibited  transaction involving any of such Plans
or any trust  created  thereunder  which  would  subject  Borrower or such ERISA
Affiliate  to a tax or penalty or other  liability  on  prohibited  transactions
imposed  under  Section  4975  of the  Code  or  ERISA;  (e) make  all  required
contributions  to any Plan which it is  obligated  to pay under  Section  302 of
ERISA,  Section  412 of the Code or the  terms of such  Plan;  (f) not  allow or
suffer to exist any accumulated funding deficiency,  whether or not waived, with
respect to any such Plan;  or (g) allow or suffer to exist any  occurrence  of a
reportable event or any other event or condition

                                       57
<PAGE>

which presents a material risk of termination  by the Pension  Benefit  Guaranty
Corporation of any such Plan that is a single employer plan,  which  termination
could result in any liability to the Pension Benefit Guaranty Corporation.

     9.15 End of Fiscal Years: Fiscal  Quarters.  Borrower  shall, for financial
          --------------------------------------
reporting purposes, cause its, and each of its Subsidiaries' (a) fiscal years to
end the Saturday closest to June 30 of each year and (b) fiscal  quarters to end
on  the  last  day  of the  thirteenth  (13th)  week  following  the  end of the
immediately  preceding  fiscal  quarter,  provided,  that, the end of the fourth
fiscal quarter shall be on the last day of the fourteenth  (14th) week following
the end of the third fiscal quarter whenever necessary to have the fourth fiscal
quarter end on the Saturday closest to June 30.

     9.16 Change in Business.  Borrower  shall not engage in any business  other
          -------------------
than the  business of Borrower  on the date hereof and any  business  reasonably
related, ancillary or complimentary to the business in which Borrower is engaged
on the date hereof.

     9.17 Limitation of  Restrictions  Affecting  Subsidiaries.  Borrower  shall
          -----------------------------------------------------
not, directly,  or indirectly,  create or otherwise cause or suffer to exist any
encumbrance  or  restriction  which  prohibits  or  limits  the  ability  of any
Subsidiary of Borrower to (a) pay  dividends or make other  distributions or pay
any Indebtedness owed to Borrower or any Subsidiary of Borrower;  (b) make loans
or advances to Borrower or any Subsidiary of Borrower,  (c) transfer  any of its
properties or assets to Borrower or any  Subsidiary of Borrower;  or (d) create,
incur,  assume or suffer to exist any lien upon any of its  property,  assets or
revenues,  whether now owned or hereafter acquired,  other than encumbrances and
restrictions    arising   under   (i) applicable   law,   (ii) this   Agreement,
(iii) customary  provisions  restricting  subletting  or assignment of any lease
governing  a  leasehold  interest  of  Borrower  or  any  of  its  Subsidiaries,
(iv) customary  restrictions on dispositions of real property interests found in
reciprocal easement agreements of Borrower or its Subsidiary,  (v) any agreement
relating to permitted Indebtedness incurred by a Subsidiary of Borrower prior to
the date on which such  Subsidiary  was acquired by Borrower and  outstanding on
such  acquisition  date, and (vi) the  extension or  continuation of contractual
obligations  in  existence  on  the  date  hereof;   provided,  that,  any  such
encumbrances or restrictions  contained in such extension or continuation are no
less  favorable  to Lender than those  encumbrances  and  restrictions  under or
pursuant to the contractual obligations so extended or continued.

     9.18 Existing Real Property; After Acquired Real Property. (a) In the event
          -----------------------------------------------------
that Lender  determines  that (i) the  average daily Excess  Availability of the
Borrower shall have been less than $3,000,000 during any consecutive thirty (30)
day period, or (ii) an Event of Default,  or act,  condition or event which with
notice or passage of time or both would  constitute an Event of Default  exists,
without  limiting  any other  rights of  Lender,  or  duties or  obligations  of
Borrower, upon Lender's request, Borrower shall promptly, execute and deliver to
Lender  (A) a  mortgage,  deed of trust or deed to secure  debt,  as Lender  may
determine,  in form and  substance  substantially  similar to the  Mortgages  in
respect of any or all of the Existing Real  Property (as Lender shall  determine
in its sole  discretion,  exercised  in good  faith),  and as to any  provisions
relating to specific state laws  satisfactory to Lender and in form  appropriate
for  recording  in the real  estate  records of the  jurisdiction  in which such
Existing Real Property is located granting to

                                       58
<PAGE>

Lender a first and only  lien and  mortgage  on and  security  interest  in such
Existing Real Property, fixtures or other property located thereon, and (B) such
other agreements,  surveys, title insurance policies,  documents and instruments
as Lender may require in connection therewith.

     (b) If Borrower hereafter acquires any Real Property, fixtures or any other
property that is of the kind or nature  described in the Mortgages and such Real
Property, fixtures or other property at any one location has a fair market value
in an amount  equal to or greater than  $500,000 (or if an Event of Default,  or
act,  condition  or event  which  with  notice or  passage of time or both would
constitute an Event of Default exists,  then regardless of the fair market value
of such  assets),  without  limiting  any other  rights of Lender,  or duties or
obligations  of Borrower,  upon  Lender's  request,  Borrower  shall execute and
deliver to Lender a mortgage,  deed of trust or deed to secure  debt,  as Lender
may determine,  in form and substance substantially similar to the Mortgages and
as to any provisions  relating to specific state laws satisfactory to Lender and
in form appropriate for recording in the real estate records of the jurisdiction
in which such Real  Property or other  property is located  granting to Lender a
first and only lien and mortgage on and security interest in such Real Property,
fixtures or other property  (except as Borrower would  otherwise be permitted to
incur  hereunder or under the Mortgages or as otherwise  consented to in writing
by Lender) and such other  agreements,  documents and  instruments as Lender may
require in connection therewith.

     9.19 Costs and Expenses.  Borrower shall pay to Lender on demand all costs,
          -------------------
expenses,  filing  fees  and  taxes  paid or  payable  in  connection  with  the
preparation,   negotiation,  execution,  delivery,  recording,   administration,
collection,  liquidation,  enforcement and defense of the Obligations,  Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents  which may  hereafter be  contemplated  (whether or not executed) or
entered  into in  respect  hereof  and  thereof,  including:  (a) all  costs and
expenses of filing or recording  (including  Uniform  Commercial  Code financing
statement  filing  taxes  and fees,  documentary  taxes,  intangibles  taxes and
mortgage  recording taxes and fees, if  applicable);  (b) costs and expenses and
fees  for  insurance  premiums,   environmental  audits,  surveys,  assessments,
engineering  reports and inspections,  appraisal fees and search fees, costs and
expenses  of  remitting  loan  proceeds,  collecting  checks and other  items of
payment,  and establishing and maintaining the Blocked  Accounts,  together with
Lender's customary charges and fees with respect thereto;  (c) charges,  fees or
expenses  charged by any bank or issuer in connection  with the Letter of Credit
Accommodations;  (d)  costs  and  expenses  of  preserving  and  protecting  the
Collateral; (e) costs and expenses paid or incurred in connection with obtaining
payment  of the  Obligations,  enforcing  the  security  interests  and liens of
Lender,  selling or  otherwise  realizing  upon the  Collateral,  and  otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending  any claims  made or  threatened  against  Lender  arising  out of the
transactions  contemplated  hereby and thereby  (including  preparations for and
consultations  concerning any such matters);  (f) all out-of-pocket expenses and
costs  heretofore and from time to time hereafter  incurred by Lender during the
course  of  periodic  field   examinations  of  the  Collateral  and  Borrower's
operations,  plus a per diem  charge at the rate of $650 per  person per day for
Lender's  examiners in the field and office;  and (g) the fees and disbursements
of counsel  (including legal assistants) to Lender in connection with any of the
foregoing.

                                       59
<PAGE>

     9.20 Further Assurances. At the request of Lender at any time and from time
          -------------------
to time,  Borrower shall, at its expense,  duly execute and deliver, or cause to
be  duly  executed  and  delivered,  such  further  agreements,   documents  and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements.  Lender may
at any time and from  time to time  request a  certificate  from an  officer  of
Borrower  representing that all conditions  precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In the
event of such  request by Lender,  Lender may, at its option,  cease to make any
further  Loans or provide  any  further  Letter of Credit  Accommodations  until
Lender has received such  certificate  and, in addition,  Lender has  determined
that such  conditions are satisfied.  Where  permitted by law,  Borrower  hereby
authorizes  Lender  to  execute  and file one or more UCC  financing  statements
signed only by Lender.

     9.21 Year 2000  Compliance.  Borrower  shall take all  action  which may be
          ----------------------
required so that its  computer-based  information  systems,  including,  without
limitation,  all of its proprietary  computer hardware and software (and whether
supplied  by others or with  which  Borrower's  systems  interface)  are able to
operate  effectively and correctly  process data using dates on or after January
1, 2000.  Compliance with the foregoing shall mean that the systems will operate
and correctly  process data without human  intervention  such that (a)  there is
correct century recognition,  (b) calculations properly accommodate same century
and  multi-century  formulas and date  values,   and (c) all leap years shall be
calculated correctly.  Upon Lender's request,  Borrowers shall certify to Lender
in  writing  that its  information  systems  have  been  modified,  updated  and
programmed  as  required  by this  Section.  On and after  January 1, 2000,  the
computer-based  information  systems of  Borrower  shall be,  and with  ordinary
course  upgrading  and  maintenance,  will  continue to be  sufficient to permit
Borrower to conduct its business  without any adverse  effect as a result of the
year 2000.

SECTION 10. EVENTS OF DEFAULT AND REMEDIES
            ------------------------------

     10.1 Events of Default.  The  occurrence or existence of any one or more of
          ------------------
the  following  events  are  referred  to  herein  individually  as an "Event of
Default", and collectively as "Events of Default":

     (a) (i)  Borrower  fails to pay any of the  Obligations  within  three  (3)
Business  Days after the same  becomes due and  payable or (ii)  Borrower or any
Obligor  fails to perform any of the  covenants  contained in Sections 9.3, 9.4,
9.6, 9.13, 9.14, 9.16, or 9.21 of this Agreement and such failure shall continue
for ten (10) days;  provided,  that, such ten (10) day period shall not apply in
the case of: (A) any failure to observe any such  covenant  which is not capable
of being  cured at all or within  such ten (10) day period or which has been the
subject of a prior failure  within a six (6) month period or (B) an  intentional
breach of Borrower or any Obligor of any such covenant or (iii)  Borrower  fails
to perform any of the terms,  covenants,  conditions or provisions  contained in
this  Agreement  or any of the  other  Financing  Agreements  other  than  those
described in Sections 10.1(a)(i) and 10.1(a)(ii) above;

                                       60
<PAGE>

     (b) any  representation,  warranty or statement of fact made by Borrower to
Lender in this Agreement, the other Financing Agreements or any other agreement,
schedule, confirmatory assignment or otherwise shall when made or deemed made be
false or misleading in any material respect;

     (c) any Obligor  revokes,  terminates or fails to perform any of the terms,
covenants,  conditions  or  provisions of any  guarantee,  endorsement  or other
agreement of such party in favor of Lender;

     (d) any judgment for the payment of money is rendered  against  Borrower or
any Obligor in excess of $500,000 in any one case or in excess of  $2,000,000 in
the aggregate and shall remain  undischarged or unvacated for a period in excess
of thirty (30) days or execution shall at any time not be effectively stayed, or
any judgment  other than for the payment of money,  or  injunction,  attachment,
garnishment or execution is rendered  against  Borrower or any Obligor or any of
their assets having a value in excess of $500,000 in the aggregate;

     (e) any Obligor (being a natural person or a general  partner of an Obligor
which is a partnership) dies or Borrower or any Obligor, which is a partnership,
limited  liability  company,  limited  liability  partnership  or a corporation,
dissolves or suspends or discontinues doing business;

     (f)  Borrower  or  any  Obligor  becomes  insolvent   (however  defined  or
evidenced),  makes an assignment  for the benefit of  creditors,  makes or sends
notice of a bulk  transfer  or calls a meeting  of its  creditors  or  principal
creditors;

     (g) a case or proceeding  under the bankruptcy laws of the United States of
America  now or  hereafter  in effect or under any  insolvency,  reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any  jurisdiction  now or hereafter  in effect  (whether at law or in equity) is
filed against  Borrower or any Obligor or all or any part of its  properties and
such petition or application is not dismissed within  forty-five (45) days after
the date of its  filing  or  Borrower  or any  Obligor  shall  file  any  answer
admitting or not  contesting  such  petition or  application  or  indicates  its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner;

     (h) a case or proceeding  under the bankruptcy laws of the United States of
America  now or  hereafter  in effect or under any  insolvency,  reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any  jurisdiction  now or  hereafter  in effect  (whether at a law or equity) is
filed by Borrower or any Obligor or for all or any part of its property; or

     (i) any default by Borrower or any Obligor under any agreement, document or
instrument  relating to any  Indebtedness for borrowed money owing to any person
other than Lender, or any capitalized lease obligations, contingent Indebtedness
in connection with any guarantee, letter of credit, indemnity or similar type of
instrument in favor of any person other than Lender, in any case in an amount in
excess of $500,000, which default continues for more

                                       61
<PAGE>

than the applicable cure period,  if any, with respect thereto,  or any material
default  under any of the  Distribution  Agreements  by Borrower,  Woodside,  DH
Apparel  Company,  Inc. or any other party  thereto or under any other  material
contract,  lease,  license or other  obligation to any person other than Lender,
which default  continues for more than the applicable cure period,  if any, with
respect thereto;

     (j) an ERISA  Event shall occur  which  results in or could  reasonably  be
expected to result in liability of Borrower in an aggregate  amount in excess of
$500,000;

     (k) any Change of Control;

     (l)  the  indictment  by  any  Governmental  Authority,  or as  Lender  may
reasonably  and in  good  faith  determine,  the  threatened  indictment  by any
Governmental  Authority of Borrower of which Borrower or Lender receives notice,
in either  case,  as to which there is a  reasonable  possibility  of an adverse
determination,  in the good faith  determination  of Lender,  under any criminal
statute,  or  commencement  or  threatened  commencement  of  criminal  or civil
proceedings  against  Borrower,  pursuant to which  statute or  proceedings  the
penalties or remedies sought or available  include  forfeiture of (i) any of the
Collateral  with an aggregate  value in excess of $500,000 or more,  or (ii) any
other  property of Borrower which is necessary or material to the conduct of its
business;

     (m) there shall be a material  adverse  change in the  business,  assets or
prospects of Borrower or any Obligor after the date hereof; or

     (n) there  shall be an event of  default  under any of the other  Financing
Agreements.

     10.2 Remedies.
          ---------

     (a) At any  time  an  Event  of  Default  exists  or  has  occurred  and is
continuing,  Lender  shall  have  all  rights  and  remedies  provided  in  this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by  Borrower or any  Obligor,  except as such notice or consent is
expressly  provided  for  hereunder or required by  applicable  law. All rights,
remedies  and  powers  granted  to  Lender  hereunder,  under  any of the  other
Financing  Agreements,  the Uniform Commercial Code or other applicable law, are
cumulative,   not   exclusive   and   enforceable,   in   Lender's   discretion,
alternatively,  successively,  or concurrently on any one or more occasions, and
shall include,  without limitation,  the right to apply to a court of equity for
an  injunction  to  restrain a breach or  threatened  breach by Borrower of this
Agreement or any of the other Financing  Agreements.  Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the principal
balance of the  Obligations  and all  interest  accrued  thereon  without  prior
recourse to the Collateral.

     (b) Without limiting the foregoing,  at any time an Event of Default exists
or has occurred and is  continuing,  Lender may, in its  discretion  and without
limitation,  (i)   accelerate  the  payment  of  the  principal  balance  of the
Obligations and all interest accrued thereon and

                                       62
<PAGE>

demand immediate payment thereof to Lender (provided,  that, upon the occurrence
of any Event of Default described in Sections 10.1(g) and 10.1(h), the principal
balance of the Obligations and all interest accrued thereon shall  automatically
become  immediately due and payable),  (ii)  with or without judicial process or
the aid or assistance  of others,  enter upon any premises on or in which any of
the Collateral may be located and take  possession of the Collateral or complete
processing,  manufacturing  and repair of all or any portion of the  Collateral,
(iii)  require Borrower,  at Borrower's  expense, to assemble and make available
to Lender any part or all of the Collateral at any place and time  designated by
Lender, (iv)  collect, foreclose, receive, appropriate,  setoff and realize upon
any and all  Collateral,  (v)   remove  any or all of the  Collateral  from  any
premises on or in which the same may be located for the purpose of effecting the
sale,  foreclosure or  other disposition thereof or for any other purpose,  (vi)
sell,  lease,  transfer,  assign,  deliver or  otherwise  dispose of any and all
Collateral (including, without limitation,  entering into contracts with respect
thereto, public or private sales at any exchange,  broker's board, at any office
of Lender or elsewhere)  at such prices or terms as Lender may deem  reasonable,
for cash, upon credit or for future  delivery,  with the Lender having the right
to purchase the whole or any part of the Collateral at any such public sale, all
of the foregoing  being free from any right or equity of redemption of Borrower,
which right or equity of redemption is hereby  expressly  waived and released by
Borrower and/or (vii) terminate this Agreement. If any of the Collateral is sold
or leased by Lender upon credit terms or for future  delivery,  the  Obligations
shall not be reduced  as a result  thereof  until  payment  therefor  is finally
collected by Lender.  If notice of disposition of Collateral is required by law,
five (5) days prior notice by Lender to Borrower  designating the time and place
of any public sale or the time after which any  private  sale or other  intended
disposition of Collateral is to be made, shall be deemed to be reasonable notice
thereof and Borrower waives any other notice.  In the event Lender institutes an
action to recover any  Collateral or seeks  recovery of any Collateral by way of
prejudgment  remedy,  Borrower  waives  the  posting  of any  bond  which  might
otherwise be required.

     (c) For the purpose of enabling  Lender to exercise the rights and remedies
hereunder,  Borrower  hereby  grants to  Lender,  to the extent  assignable,  an
irrevocable,  non- exclusive license  (exercisable without payment of royalty or
other compensation to Borrower) to use, assign, license or sublicense any of the
trademarks,  service-marks,  trade names, business names, trade styles, designs,
logos and other source of business  identifiers and other Intellectual  Property
and general  intangibles now owned or hereafter  acquired by Borrower,  wherever
the same maybe located, including in such license reasonable access to all media
in which any of the licensed items may be recorded or stored and to all computer
programs used for the compilation or printout thereof.

     (d) Lender may apply the cash proceeds of Collateral  actually  received by
Lender from any sale, lease,  foreclosure or other disposition of the Collateral
to payment of the  Obligations,  in whole or in part and in such order as Lender
may elect,  whether or not then due.  Borrower shall remain liable to Lender for
the payment of any  deficiency  with  interest at the highest rate  provided for
herein  and all costs and  expenses  of  collection  or  enforcement,  including
attorneys' fees and legal expenses.

                                       63
<PAGE>

     (e) Without  limiting the  foregoing,  upon the  occurrence  of an Event of
Default  or an  event  which  with  notice  or  passage  of time  or both  would
constitute an Event of Default,  Lender may, at its option,  without notice, (i)
cease making Loans or arranging  for Letter of Credit  Accommodations  or reduce
the  lending  formulas  or  amounts  of  Revolving  Loans  and  Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement  providing for any future Loans or Letter of Credit  Accommodations to
be made by Lender to Borrower.

SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
            ------------------------------------------------------------

     11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
          ----------------------------------------------------------------------

     (a) The validity,  interpretation and enforcement of this Agreement and the
other  Financing  Agreements  and any dispute  arising  out of the  relationship
between the parties  hereto,  whether in contract,  tort,  equity or  otherwise,
shall be governed by the internal laws of the State of Georgia  (without  giving
effect to principles of conflicts of law).

     (b) Borrower and Lender irrevocably consent and submit to the non-exclusive
jurisdiction  of the  Superior  Court of Fulton  County,  Georgia and the United
States  District  Court  for the  Northern  District  of  Georgia  and waive any
objection  based on venue or forum non  conveniens  with  respect  to any action
instituted  therein  arising under this Agreement or any of the other  Financing
Agreements or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or any of the other Financing
Agreements or the transactions  related hereto or thereto,  in each case whether
now existing or hereafter  arising,  and whether in  contract,  tort,  equity or
otherwise,  and agree that any dispute with respect to any such matters shall be
heard only in the courts  described  above  (except  that Lender  shall have the
right to bring any action or proceeding  against Borrower or its property in the
courts of any other  jurisdiction which Lender deems necessary or appropriate in
order to realize on the  Collateral or to otherwise  enforce its rights  against
Borrower or its property).

     (c) Borrower hereby waives personal  service of any and all process upon it
and  consents  that all such  service of process may be made by  certified  mail
(return  receipt  requested)  directed to its address set forth on the signature
pages hereof and service so made shall be deemed to be  completed  five (5) days
after the same shall have been so deposited in the U.S.  mails,  or, at Lender's
option, by service upon Borrower in any other manner provided under the rules of
any such courts.  Within  thirty (30) days after such  service,  Borrower  shall
appear in answer to such  process,  failing  which  Borrower  shall be deemed in
default and judgment may be entered by Lender against Borrower for the amount of
the claim and other relief requested.

     (d)  BORROWER  AND LENDER EACH HEREBY  WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR
ANY OF THE  OTHER  FINANCING  AGREEMENTS  OR (ii) IN ANY WAY  CONNECTED  WITH OR
RELATED OR

                                       64
<PAGE>

INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR
ANY OF THE OTHER  FINANCING  AGREEMENTS OR THE  TRANSACTIONS  RELATED  HERETO OR
THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER  ARISING,  AND WHETHER IN
CONTRACT, TORT, EQUITY OR OTHERWISE.  BORROWER AND LENDER EACH HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL  WITHOUT A JURY AND THAT  BORROWER OR LENDER MAY FILE AN ORIGINAL
COUNTERPART OF A COPY OF THIS  AGREEMENT  WITH ANY COURT AS WRITTEN  EVIDENCE OF
THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     (e) Lender  shall not have any  liability  to  Borrower  (whether  in tort,
contract,  equity or  otherwise)  for losses  suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated  by this  Agreement,  or any act,  omission or event  occurring  in
connection  herewith,  unless it is  determined  by a final  and  non-appealable
judgment  or court order  binding on Lender,  that the losses were the result of
acts or omissions  constituting gross negligence or willful  misconduct.  In any
such  litigation,  Lender  shall be entitled  to the  benefit of the  rebuttable
presumption  that it acted in good faith and with the exercise of ordinary  care
in the performance by it of the terms of this Agreement.

     11.2  Waiver  of  Notices.   Borrower  hereby   expressly   waives  demand,
           --------------------
presentment,  protest and notice of protest and notice of dishonor  with respect
to any and all instruments and commercial  paper,  included in or evidencing any
of the Obligations or the Collateral,  and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement,  except such as are expressly provided for herein. No notice
to or demand on Borrower  which Lender may elect to give shall entitle  Borrower
to any  other  or  further  notice  or  demand  in the  same,  similar  or other
circumstances. Without limiting the generality of the foregoing, Borrower waives
(i)  notice  prior  to  Lender's  taking  possession  or  control  of any of the
Collateral or any bond or security which might be required by any court prior to
allowing Lender to exercise any of Lender's remedies,  including the issuance of
an  immediate  writ  of  possession  and  (ii)  the  benefit  of all  valuation,
appraisement and exemption laws.

     11.3  Amendments  and Waivers.  Neither this  Agreement  nor any  provision
           ------------------------
hereof shall be amended,  modified,  waived or discharged orally or by course of
conduct,  but only by a written  agreement  signed by an  authorized  officer of
Lender,  and as to  amendments,  as also  signed  by an  authorized  officer  of
Borrower.  Lender shall not, by any act, delay,  omission or otherwise be deemed
to have expressly or impliedly waived any of its rights,  powers and/or remedies
unless such waiver  shall be in writing and signed by an  authorized  officer of
Lender. Any such waiver shall be enforceable only to the extent specifically set
forth therein.  A waiver by Lender of any right,  power and/or remedy on any one
occasion  shall not be construed as a bar to or waiver of any such right,  power
and/or remedy which Lender would otherwise have on any future occasion,  whether
similar in kind or otherwise.

                                       65
<PAGE>

     11.4 Waiver of  Counterclaims.  Borrower waives all rights to interpose any
          -------------------------
claims,  deductions,   setoffs  or  counterclaims  of  any  nature  (other  then
compulsory  counterclaims)  in any  action or  proceeding  with  respect to this
Agreement,  the Obligations,  the Collateral or any matter arising  therefrom or
relating hereto or thereto.

     11.5  Indemnification.  Borrower shall  indemnify and hold Lender,  and its
           ----------------
directors,  agents, employees and counsel, harmless from and against any and all
losses, claims, damages, liabilities,  costs or expenses imposed on, incurred by
or  asserted   against  any  of  them  in   connection   with  any   litigation,
investigation,  claim or  proceeding  commenced  or  threatened  related  to the
negotiation,  preparation,  execution,  delivery,  enforcement,  performance  or
administration  of  this  Agreement,  any  other  Financing  Agreements,  or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act,  omission,  event  or  transaction  related  or  attendant  thereto,
including amounts paid in settlement,  court costs, and the fees and expenses of
counsel, except for such losses, claims, damages, liabilities, costs or expenses
resulting  from the  gross  negligence  or  wilful  misconduct  of  Lender,  its
directors,  agents,  employees  or counsel as  determined  pursuant  to a final,
non-appealable  order of a court of competent  jurisdiction.  To the extent that
the  undertaking  to indemnify,  pay and hold harmless set forth in this Section
may be  unenforceable  because it violates  any law or public  policy,  Borrower
shall pay the maximum portion which it is permitted to pay under  applicable law
to Lender in  satisfaction  of  indemnified  matters  under  this  Section.  The
foregoing  indemnity  shall  survive  the  payment  of the  Obligations  and the
termination or non-renewal of this Agreement.

SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
            --------------------------------

     12.1 Term.
          -----

     (a)  This  Agreement  and  the  other  Financing  Agreements  shall  become
effective  as of the date set forth on the first page hereof and shall  continue
in full force and effect for a term  ending on the date three (3) years from the
date hereof  (the  "Renewal  Date"),  and from year to year  thereafter,  unless
sooner terminated pursuant to the terms hereof. Lender or Borrower may terminate
this Agreement and the other Financing  Agreements effective on the Renewal Date
or on the  anniversary  of the  Renewal  Date in any year by giving to the other
party at least  sixty (60) days  prior  written  notice;  provided,  that,  this
Agreement and all other Financing Agreements must be terminated  simultaneously.
Upon  the  effective  date  of  termination  or  non-renewal  of  the  Financing
Agreements,  Borrower shall pay to Lender,  in full, all  outstanding and unpaid
Obligations  and shall  furnish  cash  collateral  to Lender in such  amounts as
Lender  determines  are reasonably  necessary to secure Lender from loss,  cost,
damage or expense,  including attorneys' fees and legal expenses,  in connection
with any contingent  Obligations,  including  issued and  outstanding  Letter of
Credit Accommodations and checks or other payments provisionally credited to the
Obligations   and/or  as  to  which  Lender  has  not  yet  received  final  and
indefeasible  payment.  Such  payments  in respect of the  Obligations  and cash
collateral  shall be  remitted by wire  transfer  in Federal  funds to such bank
account of Lender,  as Lender may, in its  discretion,  designate  in writing to
Borrower for such purpose. Interest shall be due until and including the

                                       66
<PAGE>

next  Business  Day,  if the  amounts so paid by  Borrower  to the bank  account
designated  by Lender are received in such bank  account  later than 12:00 noon,
Atlanta, Georgia time.

     (b) No  termination  of this  Agreement or the other  Financing  Agreements
shall relieve or discharge  Borrower of its respective  duties,  obligations and
covenants  under this  Agreement  or the other  Financing  Agreements  until all
Obligations  have been  fully and  finally  discharged  and paid,  and  Lender's
continuing  security  interest in the  Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law, shall
remain  in effect  until  all such  Obligations  have  been  fully  and  finally
discharged and paid.

     (c) If for any reason this Agreement is terminated  prior to the end of the
then  current  term  or  renewal  term  of  this  Agreement,   in  view  of  the
impracticality  and extreme  difficulty of  ascertaining  actual  damages and by
mutual agreement of the parties as to a reasonable  calculation of Lender's lost
profits  as a  result  thereof,  Borrower  agrees  to pay to  Lender,  upon  the
effective date of such termination, an early termination fee in the amount equal
to one (1%) percent of the Maximum Credit.  Such early  termination fee shall be
presumed  to be the  amount of damages  sustained  by Lender as a result of such
early   termination  and  Borrower  agrees  that  it  is  reasonable  under  the
circumstances currently existing. In addition,  Lender shall be entitled to such
early  termination fee upon the occurrence of any Event of Default  described in
Sections 10.1(g) and 10.1(h) hereof,  even if Lender does not exercise its right
to terminate this Agreement,  but elects, at its option, to provide financing to
Borrower or permit the use of cash collateral under the United States Bankruptcy
Code.  The early  termination  fee  provided  for in this  Section 12.1 shall be
deemed included in the Obligations.

     (d)  Notwithstanding  anything to the contrary contained in Section 12.1(c)
above,  in the event of the  termination  of this  Agreement  at the  request of
Borrower  prior to the end of the term of this  Agreement and the full and final
repayment of all Obligations and the receipt by Lender of cash collateral all as
provided  in Section  12.1(a)  above,  Borrower  shall not be required to pay to
Lender an early  termination  fee if such  payments  are made to Lender with the
initial  proceeds of a financing  transaction  provided or underwritten by First
Union National Bank to Borrower.

     12.2 Interpretative Provisions.
          --------------------------

     (a) All terms used  herein  which are  defined in Article 1 or Article 9 of
the  Uniform  Commercial  Code  shall have the  meanings  given  therein  unless
otherwise defined in this Agreement.

     (b) All references to the plural herein shall also mean the singular and to
the singular shall also mean the plural unless the context otherwise requires.

     (c) All references to Borrower and Lender  pursuant to the  definitions set
forth in the recitals hereto, or to any other person herein, shall include their
respective successors and assigns.

                                       67
<PAGE>

     (d) The words "hereof", "herein",  "hereunder",  "this Agreement" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not any  particular  provision of this Agreement and as this Agreement
now  exists or may  hereafter  be  amended,  modified,  supplemented,  extended,
renewed, restated or replaced.

     (e) The word "including" when used in this Agreement shall mean "including,
without limitation".

     (f) An Event of Default shall exist or continue or be continuing until such
Event of  Default is waived in  accordance  with  Section  11.3 or is cured in a
manner  satisfactory  to  Lender,  if such  Event of Default is capable of being
cured as determined by Lender.

     (g) Any accounting term used in this Agreement shall have, unless otherwise
specifically  provided herein, the meaning  customarily given in accordance with
GAAP,  and  all  financial  computations  hereunder  shall  be  computed  unless
otherwise  specifically provided herein, in accordance with GAAP as consistently
applied  and  using  the same  method  for  inventory  valuation  as used in the
preparation  of the financial  statements of Borrower most recently  received by
Lender prior to the date hereof.

     (h) In the  computation of periods of time from a specified date to a later
specified date, the word "from" means "from and  including",  the words "to" and
"until"  each  mean "to but  excluding"  and the word  "through"  means  "to and
including".

     (i) Unless otherwise  expressly provided herein,  (i) references  herein to
any agreement,  document or instrument shall be deemed to include all subsequent
amendments,  modifications,  supplements,  extensions, renewals, restatements or
replacements  with  respect  thereto,  but only to the  extent  the same are not
prohibited  by  the  terms  hereof  or of any  other  Financing  Agreement,  and
(ii) references  to any statute or  regulation  are to be construed as including
all statutory and  regulatory  provisions  consolidating,  amending,  replacing,
recodifying, supplementing or interpreting the statute or regulation.

     (j) The captions  and headings of this  Agreement  are for  convenience  of
reference only and shall not affect the interpretation of this Agreement.

     (k) This Agreement and other Financing Agreements may use several different
limitations,  tests or measurements to regulate the same or similar matters. All
such  limitations,  tests and  measurements  are  cumulative  and shall  each be
performed in accordance with their terms.

     (l) This  Agreement and the other  Financing  Agreements  are the result of
negotiations  among and have been  reviewed  by  counsel to Lender and the other
parties,  and are the products of all parties.  Accordingly,  this Agreement and
the other  Financing  Agreements  shall not be construed  against  Lender merely
because of Lender's involvement in their preparation.

                                       68
<PAGE>

     12.3  Notices.  All  notices,  requests and demands  hereunder  shall be in
           --------
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief  executive  office set forth below, or to such other address as either
party may  designate  by  written  notice to the other in  accordance  with this
provision,  and (b) deemed to have been given or made:  if  delivered in person,
immediately  upon  delivery;  if by telex,  telegram or facsimile  transmission,
immediately  upon sending and upon  confirmation  of receipt;  if by  nationally
recognized  overnight  courier  service  with  instructions  to deliver the next
Business  Day,  one (1) Business Day after  sending;  and if by certified  mail,
return receipt requested, five (5) days after mailing.

     12.4 Partial  Invalidity.  If any provision of this Agreement is held to be
          --------------------
invalid  or  unenforceable,   such  invalidity  or  unenforceability  shall  not
invalidate  this Agreement as a whole,  but this Agreement shall be construed as
though  it did not  contain  the  particular  provision  held to be  invalid  or
unenforceable  and the rights and  obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.

     12.5  Successors.  This Agreement,  the other Financing  Agreements and any
           -----------
other document  referred to herein or therein shall be binding upon and inure to
the  benefit of and be  enforceable  by Lender,  Borrower  and their  respective
successors  and  assigns,  except that  Borrower may not assign its rights under
this Agreement,  the other Financing  Agreements and any other document referred
to herein or therein  without the prior written  consent of Lender.  Lender may,
after notice to Borrower,  assign its rights and delegate its obligations  under
this Agreement and the other  Financing  Agreements  and further may assign,  or
sell  participations  in,  all or any part of the  Loans,  the  Letter of Credit
Accommodations or any other interest herein to another financial  institution or
other person,  in which event,  the assignee or  participant  shall have, to the
extent of such assignment or  participation,  the same rights and benefits as it
would have if it were the Lender hereunder,  except as otherwise provided by the
terms of such assignment or participation.

     12.6 Entire Agreement. This Agreement, the other Financing Agreements,  any
          -----------------
supplements hereto or thereto,  and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and  understanding  concerning the subject matter hereof and thereof between the
parties  hereto,  and  supersede  all other  prior  agreements,  understandings,
negotiations  and   discussions,   representations,   warranties,   commitments,
proposals,  offers and contracts  concerning the subject matter hereof,  whether
oral or  written.  In the event of any  inconsistency  between the terms of this
Agreement and any schedule or exhibit hereto,  the terms of this Agreement shall
govern.

                                       69

<PAGE>

     IN WITNESS  WHEREOF,  Lender and Borrower have caused these  presents to be
duly executed as of the day and year first above written.

LENDER
------

CONGRESS FINANCIAL CORPORATION
(SOUTHERN)

By:  /s/ Daniel Cott
     -------------------------
Title:  Executive Vice President

Address:
--------

200 Galleria Parkway
Suite 1500
Atlanta, Georgia 30339

BORROWER
--------

DELTA APPAREL, INC.

By:  /s/ Herbert M. Mueller
     -----------------------------
Title:   Vice President & CFO

Chief Executive Office:
-----------------------

3355 Breckinridge Boulevard
Suite 100
Duluth, Georgia 30096

                                       70
<PAGE>

EXHIBIT B
---------

                Applicable Margins for Interest Rate Calculations
                -------------------------------------------------

The applicable margins will be determined as set forth below:

<TABLE>
<CAPTION>

When Excess Availability or                 Applicable                         Applicable
Fixed Charge Coverage Ratio Is:             Prime Rate Margin                  Eurodollar Margin

<S>                                               <C>                                 <C>
$20,000,000 or more
 or equal to or greater than 2.0 to 1.0             -                                 2.00%

$10,000,000 to $19,999,999
or equal to or greater than 1.5 to 1 but
less than 2.0 to 1                                .25%                                2.25%

Less than $10,000,000
or less than 1.5 to 1                             .50%                                2.50%

</TABLE>

Borrower need only meet either the Excess  Availability test or the Fixed Charge
Coverage Ratio test to qualify for the corresponding applicable margin.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00010-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00010-of-00352.parquet"}]]