Deed of Trust

SPACE ABOVE LINE FOR PROCESSING DATA ___________________


RETURN TO: PREPARED BY: Peggy H. Hey, Esq. Peggy H. Hey, Esq. POYNER & SPRUILL LLP POYNER & SPRUILL LLP 301 South College Street, Suite 2300 301 South College Street Charlotte, NC 28202 Suite 2300
Charlotte, NC 28202


State of North Carolina County of Robeson


DEED OF TRUST, ASSIGNMENT OF RENTS AND
SECURITY AGREEMENT


This record, in addition to covering other property: [] covers timber to be cut; [] covers as-extracted collateral; [X] is filed as a fixture filing and covers goods that are or are to become fixtures. The real property to which the foregoing is related is described hereinbelow. The "Secured Party" is the Beneficiary identified below and the "Debtor" is the Grantor identified below. The record owner is: Grantor. This document serves as a fixture filing under the North Carolina Uniform Commercial Code (N.C.G.S ss.25-9-502).


NOTICE: THE DEBT SECURED HEREBY IS SUBJECT TO CALL IN FULL OR THE TERMS THEREOF BEING MODIFIED IN THE EVENT OF SALE OR CONVEYANCE OF THE PROPERTY CONVEYED.


THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND SECURITY AGREEMENT ("Deed of Trust"), entered into as of the effective date as stated in the DEED OF TRUST SUPPLEMENT & INFORMATION SCHEDULE ("Information Schedule") attached to this Deed of Trust, by M. J. SOFFE CO. (whether one or more, "Grantor") with a mailing address of One Soffe Drive, Fayetteville, North Carolina 28302 to SPRUILLCO, LTD. ("Trustee"), with a mailing address of 3600 Glenwood Avenue, Raleigh, North Carolina 27612, for the benefit of JAMES F. SOFFE, JOHN D. SOFFE and ANTHONY M. CIMAGLIA (collectively, the "Beneficiary"), with a mailing address of 822 Shannon Drive, Fayetteville, NC 28302, which address is the place to which all notices and communications should be sent to Beneficiary regarding this Deed of Trust.


A. Grantor desires to secure (1) the payment of the Obligations (as defined in the INFORMATION SCHEDULE), with interest thereon, and all extensions, renewals, modifications, amendments, substitutions and replacements thereof and therefor, in whole or in part, (2) the payment of all other sums, with interest thereon, advanced in accordance with the Obligations or herewith to protect the security


of this Deed of Trust, or advanced to protect the rights of Beneficiary hereunder or under the Obligations, (3) the performance of the covenants and agreements contained herein and (4) the performance of the covenants and agreements contained in the Obligations and those in all documents evidencing or securing the Obligations, by a conveyance of Grantor's interest in the lands and improvements and a grant of the security interests hereinafter described.


B. The maximum principal amount of the Obligations that may be secured by this Deed of Trust at any one time is an amount up to Twenty Million Dollars ($20,000,000.00). The current principal amount of the Obligations outstanding which are secured by this Deed of Trust as of the date hereof (including any amounts which have been advanced prior to the date hereof) is Twenty Million Dollars ($20,000,000).


C. The Obligations shall be evidenced by one or more instruments (to include promissory notes), supporting obligations (to include guarantees), and other evidences of an indebtedness or other obligation owing to Beneficiary by the person identified on the INFORMATION SCHEDULE under the heading "Obligations" as the obligor, such evidences of indebtedness or other obligation and all extensions, renewals, modifications, amendments, substitutions and replacements thereof and therefor to be in a written form, the terms and conditions (including the maturity dates of the Obligations) of which are incorporated herein by reference, and which Obligations may contain provisions for the adjustment of the interest rate or rates, adjustments in payments, extension or renewal of the term or terms, among other things.


NOW, THEREFORE, in consideration of the premises and for the purpose of securing the Obligations and the other indebtedness and obligations as aforesaid, and in further consideration of the sum of Ten Dollars ($10) paid to Grantor by Trustee, receipt of which is hereby acknowledged, Grantor has given, granted, bargained, sold and conveyed, and by these presents does give, grant, bargain, sell and convey unto Trustee, his heirs, successors and assigns, with power of sale, for the benefit of Beneficiary and upon the representations, warranties, covenants, terms and conditions set forth in this Deed of Trust, all of Grantor's right, title and interest in and to (1) the parcels of land described on EXHIBIT A, (2) the rights and benefits appurtenant to said parcels of land and (3) the buildings and other improvements (to include manufactured homes) now located thereon and thereunder and those which in the future may be or may come to be located thereon and thereunder (collectively, the "Property"), together with all equipment, fixtures, standing timber, crops grown, growing and to be grown on the Property (to include crops that are produced on trees, vines and bushes, and aquatic goods) and other farm products (to include livestock - born and unborn, supplies and products of crops and livestock), oil, gas and other minerals and as-extracted collateral owned by Grantor and that in which the Grantor has any rights and interests, both now existing and located in, on, over and under the Property and that which may be hereafter acquired and located as aforesaid, whether used in connection with the ownership, possession, operation and maintenance of the Property, or otherwise (collectively, the "Collateral" and the Collateral includes any and all of the proceeds and products thereof, including insurance and condemnation proceeds, accessions and additions thereto, and replacements and substitutions therefor).


TO HAVE AND TO HOLD the Property and Collateral, with all the rights, privileges and appurtenances thereunto belonging or appertaining to Trustee, his heirs, successors and assigns, forever, upon the trusts and for the uses and purposes herein set out.


Grantor covenants with Trustee that it is seized of the Property in fee, that it is seized of the Collateral in fee, and has the right to convey its interest in the Property and Collateral as provided herein; that title is marketable and free and clear of all encumbrances; and that it will warrant and defend the title to the Property and Collateral against the lawful claims of all persons whomsoever that arise from and after the date of the stock purchase as set forth in the Stock Purchase Agreement (defined herein), except (with respect to all of this paragraph) for all of the exceptions set forth in the INFORMATION SCHEDULE under the heading "Permitted Liens", or such other exhibit or schedule, if any, attached to this Deed of Trust.


Grantor represents, warrants, covenants and agrees with Trustee and Beneficiary as set forth above and in the Sections set forth hereinbelow:


Section 1. Payment of Amounts Due under the Obligations. Grantor shall pay when due all amounts owing by it, and perform all other obligations required to be performed from time to time by it, under each and all of the Obligations and this Deed of Trust.


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Section 2. Payment of Taxes, Assessments and other Amounts; Maintenance
of Insurance.


2.1 Payment of Taxes, etc. Grantor covenants and agrees that it will pay when due, all taxes, assessments, levies and charges upon or against the Property and upon or against the Collateral, of every character which are now liens thereon and any which may hereafter become liens thereon; and upon Beneficiary's request, immediately deliver to Beneficiary official receipts therefor. To the extent Grantor does not so pay, Beneficiary may, at its option, pay any such taxes, assessments, levies and charges against the Property and those against the Collateral, and the official receipts therefor shall be conclusive evidence of payment, the amount due and validity thereof. Any amounts so expended shall immediately become debts due by Grantor payable on demand, shall bear interest at the Contract Rate, and their payment shall be secured by this Deed of Trust.


2.2 Insurance. Grantor covenants and agrees that it will keep the Property and Collateral insured against loss and damage by fire, tornado and windstorm, and against such other hazards, events and circumstances as Beneficiary may reasonably require, in reasonable amounts, for the benefit of Beneficiary, loss, if any, to be made payable in the policy or policies of insurance to Beneficiary as its interest may appear, the loss payable clauses to be in such form as Beneficiary may reasonably require. All insurance shall be in companies reasonably approved by Beneficiary copies of the policies and renewals thereof shall, when issued, be immediately delivered to Beneficiary to be held by it, and all insurance policies shall provide for at least thirty (30) days prior written notice of cancellation to Beneficiary. Grantor will pay all premiums for such insurance when due and if requested of Beneficiary, deliver to Beneficiary official receipts therefor. To the extent Grantor does not so pay, Beneficiary may, at its option, pay the same and any amounts so expended shall immediately become debts due by Grantor payable on demand, shall bear interest at the Contract Rate, and their payment shall be secured by this Deed of Trust. In the event of loss, Grantor will give immediate notice by mail to Beneficiary, who may make proof of loss if not made promptly by Grantor. The proceeds of any insurance, or any part thereof, may be applied by Grantor, at its option, either to the reduction of the indebtedness hereby secured in such order as Grantor so determines in its discretion, or to the restoration or repair of the Property and the Collateral - unless applicable law prohibits Grantor from electing between those two options, in which event the proceeds shall be applied as applicable law mandates.


2.3 Escrow Accounts. After Grantor's failure to pay and, if Beneficiary requires and the Property or Collateral is not subject to a superior deed of trust for which the Beneficiary of such has not paid, then Grantor agrees to pay and shall pay on the first day of each month or such other day as Beneficiary may direct, to Beneficiary or to its duly authorized representative, a sum equal to one-twelfth of the known or estimated (by Beneficiary) yearly taxes, assessments and insurance premiums on or against the Property and the Collateral. Beneficiary shall be under no obligation to pay interest on such payments, unless payment of interest is mandated under applicable law and then only the minimum amount required under applicable law. Beneficiary shall hold and apply such payments to the payment of taxes, assessments and insurance premiums as and when due. If the total of such monthly payments shall exceed the amount needed, the excess shall be held for future needs, unless a different application is mandated under applicable law; but, should such monthly payments at any time fail to provide sufficient funds to pay taxes, assessments and insurance premiums when due, then Grantor shall, upon written demand, pay to Beneficiary, within ten (10) days of receipt of such demand, the amount necessary to cover the deficiency. In the event of a foreclosure sale or deed-in-lieu thereof, Beneficiary may apply any balance remaining of the funds accumulated for the above purposes to the payment of the indebtedness secured by this Deed of Trust, unless such application is prohibited under applicable law.


Section 3. Maintenance of the Property. Grantor covenants and agrees that (1) it will not commit or permit any waste to the Property and the Collateral, and will keep the Property and Collateral in as good order, repair and condition as it is now, reasonable wear and tear excepted, and (2) it will do and cause to be done - - and refrain from doing and causing to be done - such acts relating to the Property and the Collateral as Beneficiary may, from time to time, reasonably request. Beneficiary shall have the right to inspect, at all reasonable times, the Property and Collateral.


Section 4. Assignment of Rents, Leases and Profits; Management of Property; Appointment of Receiver. As further security for the payment of the Obligations and the other indebtedness and obligations secured by this Deed of Trust, if and when the Property or Collateral is not subject to a superior deed of trust, Grantor will assign to Trustee and Beneficiary all rents, profits, revenues,


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royalties, accounts, moneys, contract rights, leases, intangible rights and other benefits arising from, related to and otherwise connected to or flowing from the Property and the Collateral, all of which are a part of and included as a subset within the terms "Property" and "Collateral" (the rents, profits, etc. are collectively, the "Rents and Profits"); and Beneficiary shall have the absolute and unconditional right, upon and during the continuance of an Event of Default hereunder, either by entering upon and taking possession of either or both the Property and the Collateral, or otherwise, to rent or continue renting the same, at any reasonable rate of rent determined by Beneficiary and to otherwise manage and operate the Property and the Collateral in such manner as it deems necessary or appropriate, to collect the Rents and Profits, and, after deducting from any Rents and Profits actually collected from the management and operation of the Property and the Collateral the costs and expenses thereof (including, without limitation, payment of all expenses related to the Property and the Collateral as may be required or permitted under this Deed of Trust or which may be necessary to protect the security of this Deed of Trust, as Beneficiary in its reasonable discretion deems appropriate), to apply the remainder to payment of the Obligations secured hereby and any other indebtedness and obligations secured hereby, in such order as Beneficiary may determine, unless a specific order of application is mandated under applicable law. Also, if and when the Property or Collateral is not subject to a prior deed of trust and upon and during the continuance of an Event of Default, Beneficiary shall have the absolute and unconditional right to apply for and to obtain the appointment of a receiver or similar official for all or a portion of the Property and the Collateral, to, among other things, manage and operate the Property and the Collateral, or any part thereof or interest therein, and to collect and apply the Rents and Profits as provided above. In the event of such application, Grantor consents to the appointment of such receiver or similar official and agrees that such receiver or similar official may be appointed without notice to Grantor (unless notice is mandated under applicable law and then with only such minimum notice as may be mandated under applicable law), without regard to the adequacy of any security for the indebtedness secured hereby and without regard to the solvency of Grantor or any other person who may be liable for the payment of the Obligations or any other indebtedness or obligations secured hereunder - unless thresholds for adequacy of security or solvency are mandated by applicable law and then with only the minimum thresholds so mandated. All expenses related to the appointment of a receiver or other similar official hereunder shall be the responsibility of Grantor, but if paid by Beneficiary, Grantor hereby agrees to pay to Beneficiary, immediately and without demand, all such expenses, together with interest thereon from the date of payment of the same at the Contract Rate. All sums so paid by Beneficiary, and the interest thereon, shall be added to and be secured by the lien of this Deed of Trust. This provision is subordinate to the collateral assignment contained in the Congress Deed of Trust and any collateral assignment executed pursuant to the Congress Deed of Trust or concerning the indebtedness secured by the Congress Deed of Trust.


Section 5. Condemnation. Subject to the rights of any superior holder of a deed of trust on the Property or Collateral, unless otherwise prohibited by applicable law, Grantor covenants and agrees that in the event of a condemnation, or other taking by eminent domain or other proceeding, of the Property and the Collateral, or any part of or interest, right or estate in either or both. Grantor shall have the right to apply the proceeds to the Obligations or to acquire additional property to replace the Property and the Collateral.


Section 6. Sale or Transfer of Property; Junior Liens. Except as provided in the INFORMATION SCHEDULE under the heading "Jurisdiction Specific Provisions", Grantor covenants and agrees that the sale, conveyance-in-lieu-of-condemnation, lease, demise, further encumbrance (including, without limitation, by way of mortgage, deed of trust, security deed, deed to secure debt, declaration of trust, assignment, pledge or security agreement), transfer or other disposition by Grantor, either directly or indirectly, voluntarily or involuntarily, of all or any material part of the Property or the Collateral, or any material interest, right or estate in either or both, without Beneficiary's prior written consent, which may not be withheld unreasonably, shall be an Event of Default under this Deed of Trust and shall entitle Beneficiary to exercise, at its option, any and all rights and remedies provided to Beneficiary under this Deed of Trust upon and during the continuance of an Event of Default; provided, however, if Grantor has the written consent of the holder of the Congress Deed of Trust to do such act then it shall not need the consent of Beneficiary.


Section 7. Security Agreement; Harmonization of Conflicts. Grantor hereby grants to Beneficiary a security interest in the Collateral and any of the Property constituting personal property for the purpose of securing the payment of the Obligations, with interest thereon, and extensions, renewals, modifications and amendments thereof, or substitutions and replacements therefor, in whole or in part, the payment of all other sums, with interest thereon, at the Contract Rate, advanced in accordance with the Obligations or hereunder to protect the security of this Deed of Trust, or advanced to protect the rights of Beneficiary


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hereunder or under the Obligations, and to secure the performance of the covenants and agreements contained herein and in the Obligations. This Deed of Trust constitutes a "security agreement" with respect to the Collateral and the Property constituting personal property as that term is now or hereafter used in the Uniform Commercial Code as enacted in the jurisdiction whose laws govern this Deed of Trust, and Beneficiary shall have all of the rights and remedies provided to a secured party now or hereafter under the Uniform Commercial Code as enacted in such jurisdiction, including, without limitation, the right to proceed against the Collateral and the Property constituting personal property in accordance with the provisions of the Uniform Commercial Code relating to default and enforcement of a security interest by a secured party, or to instruct the Trustee to proceed as to the Collateral and the Property, including, without limitation, that which constitutes personal property, in accordance with laws applicable to foreclosure of real estate interests in the jurisdiction whose laws govern this Deed of Trust, as provided herein. If Grantor has executed and delivered to Beneficiary a separate security agreement or agreements in connection with any or all of the Obligations, that security agreement or those security agreements and the security interests created therein shall be in addition to and not in substitution of this Deed of Trust and the liens and security interests created hereby and this Deed of Trust shall be in addition to and not in substitution of the other security agreement or agreements and the security interests created thereby. In all cases this Deed of Trust and the aforesaid security agreement or agreements, shall be applied and enforced in harmony with and in conjunction with each other to the end that Beneficiary realizes fully upon its rights and remedies in each and the liens and security interests created by each; and, to the extent conflicts exist between this Deed of Trust and the other security agreements or records, they shall be resolved in favor of Beneficiary for the purpose of achieving the full realization of Beneficiary's rights and remedies and the liens and security interests as aforesaid.


Section 8. Third Party Grantors. Any Grantor who executes this Deed of Trust but is not a party to or obligated on any of the Indebtedness included in the Obligations, is executing this Deed of Trust to mortgage, grant and convey Grantor's interest in the Property and the Collateral under the terms of this Deed of Trust and, except as otherwise provided in this Deed of Trust with respect to obligations of Grantor hereunder or referred to in this Deed of Trust, is not personally obligated to pay the sums secured by this Deed of Trust over and above the value of the Property and the Collateral and the loss such Grantor will incur from a foreclosure thereon or from delivery of a deed-in-lieu of foreclosure.


Section 9. Legal Matters.


9.1 Compliance with Laws. Grantor represents and warrants to Beneficiary, after due inquiry and investigation, that while Beneficiary has any interest in or lien upon the Property, the Property and Collateral at all times hereafter will continue to be in substantially full compliance with all applicable federal, state and local laws, regulations, ordinances, directives, orders, guidelines and advisory opinions, including, without limitation, (i) environmental laws, regulations, ordinances, directives, orders, guidelines and advisory opinions, (ii) laws, regulations, ordinances, directives, orders, guidelines and advisory opinions relating to access to, from, in, around and over the Property by persons with physical or other disabilities (e.g. Americans With Disabilities Act of 1990 (42 U.S.C. ss.12101 et seq.) and regulations and guidelines promulgated thereunder and any similarly motivated state and local laws and regulations) and (iii) other laws, regulations, ordinances, directives, orders, guidelines and advisory opinions relating to public health, welfare and safety. Grantor will constantly maintain all licenses, permits and approvals required with respect thereto, and will remain in substantially full compliance with all of the terms, conditions and requirements of such licenses, permits and approvals.


9.2 Notices. Grantor represents and warrants to Beneficiary that it will promptly notify Beneficiary of any change in the nature or extent of any hazardous substances located or maintained on, in or under the Property or used in connection with the Property or Collateral. Grantor covenants and agrees to immediately transmit to Beneficiary copies of any regulatory notices received with respect to any hazardous substances affecting the Property or Collateral.


9.3 Indemnification. Grantor shall indemnify and hold Beneficiary and Trustee harmless from and against any and all damages, penalties, fines, claims, liens, suits, liabilities, costs (including, without limitation, clean-up costs), judgments and expenses (including, ...