Document:

Separation Agreement

 EXHIBIT 10.3 
  
 SEPARATION AGREEMENT 
  
 Daisytek International Corporation (“Daisytek”) and George Maney (“Maney”) enter the following agreement (“Agreement”),
effective December 4, 2002 (“Effective Date”), for the purpose of completely resolving any and all issues, disputes and claims related to Maney’s employment with Daisytek, the termination of Maney’s employment with Daisytek, and
all other matters related in any way to, or resulting in any way from, the relationship between Maney and Daisytek. 
  
 1.    Payments and benefits.    As consideration to Maney for Maney’s promises, releases and
representations in this Agreement, Daisytek agrees to provide the following payments and benefits to Maney: 
  
 a.    $409,486.50 as severance pay, from which taxes will be withheld as required by law; 
  
 b.    $10,000.00 for Maney’s first
quarter bonus for fiscal year 2002, from which taxes will be withheld as required by law; 
  
 c.    $258,138.50 in lieu of any and all stock options granted or that could have been granted, whether vested or
unvested, under any agreement between Daisytek and Maney, from which taxes will be withheld as required by law. Maney agrees that Maney will have no further rights whatsoever to any Daisytek stock options, and that Maney waives and relinquishes any
and all such rights in return for the payments set out herein. 
  
 d.    Daisytek will make the payments specified above to Maney in two payments as follows. On January 1, 2003, Daisytek will make a $393,555.75 payment to Maney. On April 1, 2003, Daisytek will
make a $284,069.25 payment to Maney. 
  
 2.    Resignation by Maney.    Maney agrees to voluntarily resign Maney’s employment with Daisytek effective January 1, 2003, and Daisytek agrees to accept Maney’s resignation
effective January 1, 2003. Maney agrees that his decision to resign his employment is purely voluntary, and that he has not been discriminated or retaliated against during his employment with Daisytek. 
  
 3.    Release by Maney.    In
return for the payments, releases and other consideration described herein, Maney, for himself and his heirs and assigns, hereby releases and waives all claims and causes of action of any and every sort against Daisytek, its parents, subsidiaries,
affiliates, partners, limited partners, successors, shareholders, directors, officers, employees, agents, attorneys and assigns, which Maney has, has had, or may have in the future arising in any way from any event, act or omission which occurred at
any time from the beginning of time to the Effective Date, including, but not limited to Maney’s employment with Daisytek, the termination of Maney’s employment with Daisytek, and all other matters related in any way to the relationship
between Maney and Daisytek. This release includes, but is not limited to, claims in tort, contract, under statute, in equity or otherwise, and claims for compensation, severance, retaliation, bonuses, stock, stock options, performance incentives,
payments as the result of a sale merger or business combination, benefits, vehicle payments or expenses, incidental and consequential damages, expense reimbursement of any sort, injuries, or any other sort of damages or relief whatsoever. This
release also includes, but is not limited to, claims under the Americans With Disabilities Act, Age Discrimination in Employment Act, Family and Medical Leave Act, Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act, the Texas
Commission on Human Rights Act, the Texas Payday Act, any workers’ compensation statute, and any other federal, state or local act or ordinance pertaining to employment. The intent of Maney and Daisytek is that this release will be interpreted
in as broad a fashion as possible and that it is intended to be a total and complete release of all claims of any sort whatsoever. 
  
 4.    Release by Daisytek.    In return for the releases and other consideration described herein, Daisytek
hereby releases and waives all claims and causes of action of any and every sort against Maney that Daisytek has, has had, or may have in the future arising in any way from any event, act or omission that occurred at any time from the beginning of
time to the Effective Date with the exception of the Form of Loan Agreement and Form of Promissory Note signed by Maney and dated September 27, 2001, and the Form of Loan Agreement and Form of Promissory Note signed by Maney and dated November 20,
2000, for which Maney shall remain liable. 
  
 5.    Trade Secrets/Confidential Information.    Maney acknowledges that Daisytek’s Confidential Information is uniquely valuable to Daisytek and agrees that during Maney’s lifetime,
Maney will not disclose Confidential Information to any other person or entity without Daisytek’s prior written consent and will not 

 duplicate, copy, disseminate or attempt to duplicate, copy or disseminate Confidential Information or any part or portion
of it or allow or permit any person or entity within Maney’s control to do so. “Confidential Information” as used in this Agreement includes the following: all trade secrets of Daisytek and any information or item that does not
qualify under applicable law as a trade secret but to which Daisytek limits access, to any extent, either internally or externally. Confidential Information includes but is not limited to information and items related to plans, strategies,
inventions, devices, services, products, processes, properties, assets, customers, customer lists, customer preferences, markets, marketing strategies, rebate programs, incentive programs, promotions, management, employees, technology, know-how,
financial conditions or prospects, employee compensation, fee information, cost information, pricing information, business development plans and strategies, marketing plans and strategies, instructional methodology and techniques, computer software,
specifications and code, sources of supply, products or services, designs, analyses, drawings, photographs and reports, computer operating systems, applications and program listings, flow charts, manuals, documentation, databases, accounting and
business methods, production procedures, or merchandising systems. 
  
 6.    Return of property.    On or before the Effective Date, Maney will return to Daisytek’s counsel all property, tangible or intangible, that Daisytek provided to Maney during the
course of or as the result of Maney’s employment with Daisytek, as well as all property, tangible or intangible, that Maney developed or produced as the result of or in the course of Maney’s employment with Daisytek. This includes, but is
not limited to, all keys, computers, computer passwords, equipment, and originals and all copies of computer discs, emails, schedules, worksheets, spreadsheets, files or other stored information, documents, and voice, video or data recordings of any
sort that are within his possession or control. 
  
 7.    Covenant Not to Compete. 
  
 a.    Maney agrees that for the one-year period immediately following the Effective Date or for one year from the date of any court order enforcing all or part of this Agreement, whichever is
later, Maney will not in the United States, Mexico, the United Kingdom, Argentina, Australia, Ireland, Norway, Sweden, Germany, France, or Italy, 
  
 (i)    Either directly or indirectly, for Maney’s own behalf or on behalf of any other person or entity, engage
in or carry on any business or in any way become associated with any business that distributes or provides corporate supplies, peripherals, professional tape products, office products, customer care, logistics, distribution, fulfillment, or demand
generation services similar to those that Daisytek offered or planned to offer while Maney was employed by Daisytek (“Business of Daisytek”); 
  
 (ii)    Either directly or indirectly attempt in any manner to solicit, from any person or entity that is or was a
client of Daisytek, business of the type performed or formerly performed by Daisytek for such client or to persuade any such client to cease to do business or to reduce the amount of business which any such client has customarily done with Daisytek
or contemplates doing with Daisytek (as used herein the noun “client” shall mean anyone who is a client or customer, supplier, trading group, dealer, trader, venture partner or sales representative or affiliate of any of the above who
purchases Daisytek product or services or otherwise does business with Daisytek at any time during the twelve (12) month period immediately preceding the Effective Date and any prospective persons to whom Daisytek had made a formal presentation (or
similar offering of services) within a period of twelve (12) months immediately preceding the Effective Date); 
  
 (iii)    Either directly or indirectly, for Maney’s own behalf or on behalf of any other person or entity, be or
become an employee, agent, consultant or representative of or become a director or officer of any person, firm, corporation, association or other entity that is engaged in or currently intends to become engaged in, or is carrying on any business
that is in direct or indirect competition with the Business of Daisytek; or 
  
 (iv)    Either directly or indirectly be or become a shareholder, joint venturer in or owner (in whole or in part) of or be a partner of or associated with or have any proprietary or financial
interest, in any firm, corporation, joint venture, partnership or association or other entity that is engaged in, or currently intends to become engaged in or is carrying on any business that is in direct or indirect competition with the Business of
Daisytek. 
  
 Nothing in this Section will prevent Maney from owning less than
five percent (5%) of the stock of any publicly traded corporation as long as Maney is not a participant in the management or affairs of the corporation in a manner that would otherwise violate any prohibition contained in this Section. 

 
 b.    It is understood and agreed that
the scope of the covenants contained in this Section are reasonable as to time, area and scope of activity restrained and are necessary to protect Daisytek’s legitimate 

 business interests. Specifically, Maney has considered the covenants in light of the benefits Maney will
obtain by means of this Agreement and has concluded that the covenants leave Maney with a reasonable number and variety of permitted avenues for engaging in employment in a number of locations and a number of occupations during the period of
restriction. 
  
 c.    If the
restrictions contained in this Section regarding time, geography, or scope of activity are determined by a court to be unenforceable, Daisytek and Maney agree that said court may substitute a provision it believes to be enforceable for the one it
believes to be unenforceable, and this Agreement may be enforced as amended. 
  
 8.    Non-disparagement.    Maney and Daisytek agree not to make any negative or disparaging remarks of any sort regarding one another. 
  
 9.    Responsibility for
Taxes.    Maney assumes responsibility for all taxes, if any, due by him on or as a result of any payment made to him under this Agreement, with the sole exception of any mandatory payroll withholding and employer
contribution required by local, state or federal law. Daisytek makes no representations of any kind relating to the taxability or non-taxability of any payments made or consideration given under this Agreement. Maney acknowledges that he should seek
independent advice regarding the taxability of the payments made hereunder, to the extent he desires such advice. Maney also acknowledges that a report of the payments herein may or may not be made by Daisytek or Daisytek’s representatives to
the Internal Revenue Service depending upon applicable tax laws. Maney acknowledges that he must pay all of his own legal or tax advice fees, taxes and COBRA continuation premiums out of the proceeds of the consideration described in this Agreement.

  
 10.    Cooperation with Daisytek’s
Audit Committee.    Maney agrees that he has been given a full and fair opportunity to express concerns about Daisytek’s alleged practices and financial and accounting improprieties to Daisytek’s Audit Committee.
Maney further agrees that he has done so and that he has no material concerns that he has not brought to the attention of the Audit Committee. Maney agrees to continue to make himself reasonably available to confer with, report to, and/or assist
Daisytek’s Audit Committee with regard to the Audit Committee’s investigation of any practices or alleged improprieties of Daisytek. If Maney fails to do so, in addition to all other remedies that Daisytek may have for Maney’s breach
of this Agreement, Daisytek may cancel all remaining payments due to Maney by Daisytek under this Agreement. 
  
 11.    Confidentiality.    Maney agrees to keep amounts, terms and conditions of this Agreement strictly
confidential. Except as required by law or legal process issued by a court or government agency with competent jurisdiction, Maney agrees that he shall not disclose the amounts, terms and conditions of this Agreement to any person or entity except
for his attorneys or tax advisors, and spouse. Maney additionally agrees that he will inform his attorneys, tax advisors, and spouse that the amounts, terms and conditions of this Agreement are to be kept strictly confidential, and that they are
bound to this confidentiality provisions as Maney’s agents. 
  
 12.    Duty to Report.    Maney and Daisytek agree that notwithstanding the provisions regarding nondisparagement and confidentiality contained in paragraphs 7 and 10 of this Agreement, Maney
may report facts known by him about Daisytek which he has a duty to report by law or public policy to any governmental entity or agency. 
  
 13.    Reapplication for Employment.    Maney agrees that he shall neither seek nor accept reemployment
with or through Daisytek, whether such employment be directly with Daisytek or a parent, subsidiary or affiliate of Daisytek. 
  
 14.    Severability.    If any provision of this Agreement is declared to be illegal, invalid or
unenforceable, such provision(s) will be severed from this Agreement and this Agreement shall be construed as if such illegal, invalid or unenforceable provision was never part of this Agreement. Any such illegal, invalid or unenforceable provision
will not affect the validity or the enforceability of this Agreement or its remaining provisions. 
  
 15.    Governing law/legal fees and costs.    This Agreement is made under, and will be construed in
accordance with the laws of the State of Texas. In the event that any legal action is necessary to enforce this Agreement, the prevailing party will be entitled to recover his, its reasonable attorneys’ fees and costs. 

 IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of the date first written above.

  

	 DAISYTEK INTERNATIONAL CORPORATION
	 	GEORGE MANEY
				
	 By:
	 	
	 	By:	 	 /s/    George Maney

	 	 	 Its    /s/    President/CEO
	 	 	 	 
				
	Date:	 	  

	 	Date:	 	 /s/    12/4/02Form of New 12 3/4% Senior Note Due 2009

EXHIBIT 4.2 
 
FORM OF NEW 123⁄4% SENIOR NOTE DUE 2009 
 
(Face of Note) 
 
DAN RIVER INC. 
 
12- 3/4% SENIOR NOTE DUE 2009 
 
[THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A
DEPOSITARY OR A SUCCESSOR DEPOSITARY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE. 
 
UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]1 
 
THIS NOTE WAS ISSUED WITH ORIGINAL ISSUE DISCOUNT (AS DEFINED IN SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED). THE ISSUE PRICE OF THE NOTE IS $950.35 (PER $1,000), THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS
$49.65 (PER $1,000), THE ISSUE DATE IS APRIL 15, 2003 AND THE YIELD TO MATURITY IS 14% PER ANNUM. 

	1	 	To be included only if the Note is issued in global form. 

DAN RIVER INC. 
 
12- 3/4% SENIOR NOTE DUE 2009 
 

	 	 	                                       
          CUSIP
No.                              

	 No.                    
	 	                                       
          $                              
                  

 
Interest Payment Dates: April 15 and October 15 
Record Dates: April 1 and October 1

 
DAN RIVER INC., a Georgia corporation (the
“Company,” which term includes any successor corporation under the indenture hereinafter referred to ), for value received, promises to pay to
                                        
    , or registered assigns, the principal sum of                             
Dollars on April 15, 2009. 
 
Reference is hereby
made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as set forth at this place. 
 
Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse
hereof by manual signature, this Note shall not be entitled to any benefits under the Indenture referred to on the reverse hereof or be valid or obligatory for any purpose. 
 
IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate seal.

 

	 [SEAL]
	 	 	 	 Dated:

	
	 	 	 	 	 DAN RIVER INC.

	
	 	 	 	 	 	 	 By:
	 	  

	 	 	 	 	 	 	 	 	 Name:
 Title:

	
	 	 	 	 	 Attested to as of the date hereof:

	
	 	 	 	 	 	 	 By:
	 	  

	 	 	 	 	 	 	 	 	 Name:
 Title:

 
This is one of the Notes
referred to 
in the within-mentioned Indenture: 
 

	 HSBC BANK USA
 as Trustee

	
	 By:
	 	  

	 	 	 Authorized Signatory

(Back of Note) 
 
12- 3/4% Senior Notes due 2009 
 
Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 
 
1. Interest. The Company promises to pay interest on the principal amount of this Note at the rate of
12- 3/4% per annum from the date of original issuance until maturity. The Company shall pay interest and
Additional Interest semi-annually on April 15 and October 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an “Interest Payment Date”). Interest on this Note will accrue from the
most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date; provided, further, that the first Interest Payment Date shall be October 15, 2003. The
Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue payments of the principal, Purchase Price and Redemption Price of this Note from time to time on demand at a rate that is 2% per
annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any (without regard to any applicable
grace periods), hereon from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 
 
2. Method of Payment. The Company shall pay interest on the Notes (except defaulted interest) and
Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on the April 1 and October 1 next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before
such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. Any such installment of interest or Additional Interest, if any, not punctually paid or duly provided for shall forthwith cease to be
payable to the registered Holders on such Interest Payment Date, and may be paid to the registered Holders at the close of business on a special interest payment date to be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the registered Holders not less than 10 days prior to such special interest payment date, or may be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the
Notes may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. The Notes will be payable as to principal, Redemption Price, Purchase Price, interest and Additional Interest, if any, at the
office or agency of the Company maintained for such purpose within or without the City and State of New York, or, at the option of the Company, payment of interest and Additional Interest may be made by check mailed to the Holders at their addresses
set forth in the register of Holders, provided that payment by wire transfer of immediately available funds will be required with respect to principal, Redemption Price and Purchase Price of, and interest and Additional Interest (if any) on,
all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Trustee or the Paying Agent. Such payment shall be in such coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts. 
 
3. Paying Agent and Registrar. Initially, HSBC Bank USA, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company
may act in any such capacity. 
 
4.
Indenture. The Company issued $157.0 million in aggregate principal amount of the Notes under an Indenture dated as of April 15, 2003 (the “Indenture”) between the Company, the Guarantors party thereto from time to time and
the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S.C. Code §§ 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such 

Act for a statement of such terms. The Notes are general obligations of the Company. The Company may issue Additional Notes under the
Indenture. 
 
5. Optional Redemption. At any
time, the Company may, at its option, redeem all or part of the Notes at any time at a Redemption Price equal to the greater of (a) 100% of the principal amount of the Notes being redeemed and (b) as determined by the Quotation Agent, the sum of the
present value of the principal amount of such Notes at April 15, 2009 plus the present value of the remaining scheduled payments of interest on such Notes to and including April 15, 2009 discounted to the Redemption Date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points, together, in either case with accrued and unpaid interest, if any, to the Redemption Date. 
 
6. Special Redemption. At any time, or from time to
time in the event the Company completes one or more Equity Offerings on or before April 15, 2006, the Company may, at its option, use the net cash proceeds from any such Equity Offerings to redeem up to 35% of the principal amount of the Notes (a
“Special Redemption”) at a Redemption Price of 112.750% of the principal amount thereof, together with accrued and unpaid interest and Additional Interest, if any, to the Redemption Date, provided, however, that (a) at
least 65% of the original principal amount of the Notes issued under the Indenture remains outstanding immediately after each such Special Redemption; and (b) each such Special Redemption shall occur not more than 120 days after the date of the
closing of the applicable Equity Offering. 
 
7.
Mandatory Redemption. Except as set forth in Paragraph 9 below with respect to repurchases of Notes in certain events, the Company shall not be required to make mandatory redemption or repurchase payments with respect to the Notes.

 
8. Selection and Notice of Redemption.
Subject to the provisions of the Indenture, a notice of redemption will be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder whose Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for
redemption. 
 
If less than all of the Notes are to
be redeemed, the Trustee shall select the Notes or portions thereof to be redeemed (a) in compliance with the requirements of the national securities exchange, if any, on which the Notes are listed; or (b) if the Notes are not listed on any national
securities exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate. 
 
9. Repurchase at Option of Holder. 
 
(a) Change of Control Offer. Upon the occurrence of a Change of Control (unless the Company has exercised its right to redeem the
Notes as described in paragraph 5 above and in the Indenture), the Company shall be required to make an offer (a “Change of Control Offer”) to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of each
Holder’s Notes at a Purchase Price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of repurchase, in accordance with the procedures set forth
in the Indenture. Within 30 days following any Change of Control, the Company shall mail a notice to each Holder setting forth the procedures governing the Change of Control Offer as required by the Indenture. 
 
(b) Net Proceeds Offer. If on the 366th day after an
Asset Sale the Company has not applied or invested the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(A) and (3)(B) of paragraph (a) of Section 4.10 of the Indenture (each, a “Net Proceeds Offer Trigger
Date”), such aggregate amount of Net Cash Proceeds which has not been applied or invested on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(A) and (3)(B) of paragraph (a) of Section 4.10 of the Indenture (each, a

“Net Proceeds Offer Amount”) shall be applied by the Company to make an offer to purchase (the “Net Proceeds
Offer”) pursuant to Sections 3.10 and 4.10 of the Indenture to all Holders and, and at the Company’s option, to all holders of other Indebtedness that is pari passu with the Notes on a date (the “Net Proceeds Offer Payment
Date”) not less than 30 days following the applicable Net Proceeds Offer Trigger Date, from all Holders pro rata, the maximum amount of Notes and such other pari passu Indebtedness equal to the Net Proceeds Offer Amount with respect
to the Notes at a price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the Purchase Date. 
 
Each Net Proceeds Offer will be mailed to the record Holders as shown on the register of Holders within 30
days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in
part in integral multiples of $1,000 in exchange for cash. To the extent Holders properly tender Notes (along with any other Indebtedness of the Company properly tendered) in an amount exceeding the Net Proceeds Offer Amount, the tendered Notes will
be purchased pro rata based on the aggregate amounts of Notes and other pari passu Indebtedness of the Company properly tendered (and the Trustee shall select the tendered Notes of tendering Holders pro rata based on the amount of
Notes and other pari passu Indebtedness of the Company properly tendered). A Net Proceeds Offer shall remain open for a period of 20 Business Days or such longer period as may be required by law. 
 
(c) Excess Cash Flow Offer. If on the last day of each
fiscal year of the Company (each, a “Measurement Date”), (1) the Company has any Term Loan Indebtedness outstanding, (2) the Company has Excess Cash Flow for the fiscal year ended on such Measurement Date, and (3) after giving
effect to any repayment of Term Loan Indebtedness and/or Excess Cash Flow Offer (assuming the Company purchases the maximum amount of Notes possible in such offer), the sum of the Company’s cash, Cash Equivalents and amounts available for
borrowing under the revolving portion of its Credit Facilities (after giving effect to any borrowing base limitations) would be equal to or greater than $38.0 million, then the Company shall, no later than the Excess Cash Flow Offer Date, apply an
amount (the “Initial Excess Cash Flow Amount”) equal to (a) 75% of the Excess Cash Flow for such fiscal year to prepay, repay, redeem or repurchase (and permanently reduce the commitments under) Term Loan Indebtedness (whether or
not required by the terms of the documentation governing such Term Loan Indebtedness), and (b) 25% of the Excess Cash Flow for such fiscal year (or, if less, the amount equal to the difference between (i) 75% of the Excess Cash Flow for such fiscal
year and (ii) the amount used to prepay, repay, redeem or repurchase Term Loan Indebtedness pursuant to clause (a) hereof) to make an offer (an “Excess Cash Flow Offer”) to the Holders of Notes and any other Indebtedness ranking
equally with the Notes and having similar provisions requiring the Company to prepay, repay, redeem or repurchase such Indebtedness from Excess Cash Flow to purchase on a pro rata basis in proportion to the respective principal amounts (or
accreted value, in the case of Indebtedness other than the Notes issued with original issue discount) of the Notes and such other Indebtedness then outstanding at a Purchase Price in cash equal to 100% of the principal amount (or accreted value, in
the case of Indebtedness other than the Notes issued with original issue discount) of the Notes or such other Indebtedness to be purchased (the “Excess Cash Flow Purchase Price”), together with accrued and unpaid interest thereon to
the date fixed for the purchase of the Notes pursuant to such Excess Cash Flow Offer in accordance with the terms of the Indenture. 
 
If on any Measurement Date, the Company (1) has no Term Loan Indebtedness outstanding, (2) has Excess Cash Flow for the fiscal year ending
on such Measurement Date and (3) after giving effect to any Excess Cash Flow Offer contemplated hereby would have Minimum Liquidity, then the Company shall, no later than the Excess Cash Flow Offer Date, apply an amount (the “Reduced Excess
Cash Flow Amount”) equal to 25% of the Excess Cash Flow for such fiscal year to make an Excess Cash Flow Offer to the Holders of Notes and such other Indebtedness ranking equally with the Notes and having similar provisions requiring the
Company to prepay, repay, redeem or repurchase such Indebtedness from Excess Cash Flow to purchase on a pro rata basis in proportion to the respective principal amounts (or accreted value, in the case of Indebtedness other than the Notes
issued with original issue discount) of the Notes and such other Indebtedness then outstanding at a Purchase Price in cash equal to the Excess Cash Flow Purchase Price, together with accrued and 

unpaid interest thereon to the date fixed for the purchase of the Notes pursuant to such Excess Cash Flow Offer in accordance with the terms
of the Indenture. 
 
Each Excess Cash Flow Offer
will be mailed to all record Holders as shown on the register of Holders at least 30 days but not more than 60 days before the Excess Cash Flow Offer Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture.
Upon receiving notice of the Excess Cash Flow Offer, Holders may elect to tender their Notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent Holders properly tender Notes (along with any other pari passu
Indebtedness of the Company properly tendered) in an amount exceeding the Excess Cash Flow Amount, the tendered Notes will be purchased on a pro rata based on the aggregate amounts of Notes tendered (and the Trustee shall select the
tendered Notes of tendering Holders pro rata based on the amount of Notes and other pari passu Indebtedness of the Company properly tendered). An Excess Cash Flow Offer shall remain open for a period of 20 Business Days or such longer
period as may be required by law. 
 
10.
Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The
Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part. Also, it need not exchange or register the transfer of any Notes for a
period of 15 days before a selection of Notes to be redeemed or during the period between a record date and the corresponding Interest Payment Date. 
 
11. Persons Deemed Owners. The registered Holder of a Note may be treated as its owner for all purposes. 
 
12. Amendment, Supplement and Waiver. Subject to
certain exceptions, the Indenture, the Notes and the Security Documents may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the then outstanding Notes, and any existing default or compliance
with any provision of the Indenture, the Notes or the Security Documents may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes. Without the consent of any Holder of a Note, the Indenture and
the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for the assumption of the Company’s obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all
of the Company’s assets pursuant to Article V of the Indenture, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any
such Holder, or to comply with the Trust Indenture Act or to terminate, replace, amend, modify or supplement any Security Document as provided in Section 3(e) of the Deposit Agreement as in effect on the date of the Indenture. 
 
In addition, other than during any First Priority Period, the
Trustee shall join with the Company in the execution of any amendment to any Security Document to conform to any amendment to the security agreements relating to such Credit Facility without the consent of the Holders, in each case, (i) so long as
the Company has Indebtedness outstanding under any Credit Facility that is secured by a first priority Lien, (ii) upon the written request of the Company, accompanied by a Board Resolution (evidenced by an Officers’ Certificate) authorizing the
execution of any such amendment, and (iii) upon receipt by the Trustee of the documents described in Section 7.2 of the Indenture. 
 
13. Defaults and Remedies. Events of Default include: (i) the failure to pay interest on any Note when the same becomes due and
payable and the default continues for a period of 30 days; (ii) the failure to pay the principal of or premium if any, on any Note, when such principal or premium becomes due and payable, at maturity, upon redemption or otherwise; (iii) a default
under any covenant or agreement contained in the Indenture, which default continues for a period of 60 days after the Company receives written notice 

specifying the default from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes (except in the case
of a default under Section 5.1 of the Indenture, which will constitute an Event of Default with such notice requirement but without such passage of time requirement); (iv) the failure to pay at final maturity (giving effect to any applicable grace
periods and any extensions thereof) the stated principal amount of any Indebtedness of the Company or any Restricted Subsidiary of the Company, or acceleration of the final Stated Maturity of any such Indebtedness if in either case the aggregate
principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final Stated Maturity or which has been accelerated aggregates $10.0 million or more at any time,
provided that, in each case, such Indebtedness has not been discharged in full or such acceleration rescinded or annulled within twenty (20) days of such payment default or acceleration; (v) one or more judgments in an aggregate amount in
excess of $10.0 million shall have been rendered against the Company or any of its Significant Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and
non-appealable; (vi) certain events of bankruptcy affecting the Company or any of its Significant Subsidiaries; (vii) any Guarantee of a Significant Subsidiary ceases to be in full force and effect or is declared to be null and void and
unenforceable or is found to be invalid or any Guarantor that is a Significant Subsidiary denies its liability under its Guarantee (other than by reason of release of a Guarantor in accordance with the terms of the Indenture); (viii) a default by
the Company or any Guarantor in the performance of any of their respective obligations under the Security Documents that materially and adversely affects the enforceability, validity, perfection or priority of the Lien on the Collateral or that
adversely affects the condition or value of the Collateral, taken as a whole, in any material respect, which default continues for a period of 30 days after the Company receives written notice specifying the default from the Trustee or Holders of at
least 25% of the outstanding principal amount of the Notes; or (ix) except as permitted by the Security Documents (or any replacement thereof), any amendments thereto and the provisions of the Indenture, any of the Security Documents is repudiated
or disaffirmed by the Company or any Restricted Subsidiary or ceases to be in full force and effect or ceases to be effective, in all material respects, to create the Lien purported to be created in the Collateral in favor of the Holders of the
Notes, which repudiation, disaffirmation or cessation continues for 30 days after the Company receives written notice specifying the default from the Trustee or Holders of at least 25% of the outstanding principal amount of the Notes. 
 
14. Trustee Dealings with Company. Subject to certain
limitations, the Trustee under the Indenture, in its individual or any other capacity, may become owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates as if it were not Trustee. 
 
15. No Recourse Against Others. No past, present or
future director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 
 
16. Authentication. This Note shall not be valid until authenticated by the signature of the Trustee
or an authenticating agent. 
 
17.
Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 
 
18. Discharge Prior to Maturity. If the Company deposits with the Trustee or Paying Agent cash or U.S. Government Securities sufficient to pay the principal or Redemption Price of, and interest and Additional
Interest, if any, on, the Notes to maturity or a specified Redemption Date and satisfies certain conditions specified in the Indenture, the Company will be discharged from the Indenture, except for certain Sections thereof. 

 
19.
Governing Law. The validity and interpretation of the Indenture, the Guarantees, if any, and this Note shall be governed by and construed in accordance with the laws of the state of New York, but without giving effect to applicable principles
of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. Each party hereto agrees to submit to the jurisdiction of any New York state court sitting in the Borough of Manhattan in the City
of New York or any federal court sitting in the Borough of Manhattan in the City of New York in respect of any suit, action or proceeding arising out of or relating to the Indenture, the Guarantees, if any, and the Notes, and irrevocably accepts for
itself and in respect of its property, generally and unconditionally, jurisdiction of the aforesaid courts in respect of such suit or action or proceeding arising out of or relating to the Indenture, the Notes and the Guarantees. Each of the
Trustee, the Company and any Guarantor irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury and any objection which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 
 
20. CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security
Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the correctness or accuracy of
such numbers either as printed on the Notes or as contained in any notice of redemption or repurchase and reliance may be placed only on the other identification numbers placed thereon. 
 
The Company will furnish to any Holder upon written request and without charge a copy of the Indenture.
Request may be made to: 
 
Dan
River Inc. 
2291 Memorial Drive 
Danville, Virginia 24541 
Attention: Secretary 

ASSIGNMENT FORM 
 
To assign this Note, fill in the form below: 
 
(I) or (we) assign and transfer this Note to 
 

(Insert assignee’s soc. sec. or tax I.D. no.)

 

 

 

 

 

(Print or type assignee’s name address and zip code) 
 
and irrevocably appoint
                                        
                                        
                                        
                                        
                 
agent to transfer this Note on the books
of the Company. The agent may substitute another to act for him. 
 
Date:                              
 

	
	 Your Signature:
	 	

	 	 	 (Sign exactly as your name appears on the face of this Note)

 

	
	 Signature Guarantee:
	 	

	 	 	 (Participant in recognized signature guarantee medallion program)

 
OPTION OF
HOLDER TO ELECT PURCHASE 
 
If you wish to
elect to have all or any portion of this Note purchased by the Company pursuant to Section 4.10 (“Net Proceeds Offer”), Section 4.15 (“Change of Control Offer”) or Section 4.19 (“Excess Cash Flow
Offer”) of the Indenture, check the applicable boxes 
 

	 in whole     ̈
	 	 in whole      ̈
	 	 in whole      ̈

	 in part         ̈
	 	 in part          ̈
	 	 in part          ̈

	 Amount to be purchased: $___________
	 	 Amount to be purchased: $___________
	 	 Amount to be purchased: $___________

 

	
	 Dated:                     
	 	 Signature:
	 	  

	 	 	 	 	 (Sign exactly as your name appears on the other side of this
Note)

 

	
	 Signature Guarantee:
	 	

	 	 	 (Participant in recognized signature guarantee medallion program)

 

	 Social Security Number or
 Taxpayer Identification Number:
	 	

 
SCHEDULE OF
EXCHANGES OF NOTES 
 
The following exchanges
of a part of this Global Note for Certificated Notes or a part of another Global Note have been made: 
 

	 Date of Exchange

	    	 Amount of decrease
 in principal amount
 of this Global
Note

	    	 Amount of increase
 in principal amount
 of this Global
Note

	    	 Principal amount of
 this Global Note
following such
 decrease
(or
 increase)

	    	 Signature of
 authorized officer of
Trustee

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