CONFORMED*
RESTATED CREDIT AGREEMENT

between

PILLOWTEX CORPORATION
BORROWER

NATIONSBANK OF TEXAS, N.A.
AGENT

and

CERTAIN LENDERS
LENDERS

$175,000,000

NOVEMBER 12, 1996

====================================
PREPARED BY HAYNES AND BOONE, L.L.P.
====================================

*Conformed to show signatures

TABLE OF CONTENTS

SECTION 1 DEFINITIONS AND TERMS . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time References . . . . . . . . . . . . . . . . . . . . . . . . .15
1.3 Other References. . . . . . . . . . . . . . . . . . . . . . . . .15
1.4 Accounting Principles . . . . . . . . . . . . . . . . . . . . . .15

SECTION 2 COMMITMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
2.1 Revolving Facility. . . . . . . . . . . . . . . . . . . . . . . .15
2.2 Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . .16
2.3 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . .17
2.4 Swing-Line Subfacility. . . . . . . . . . . . . . . . . . . . . .19
2.5 Borrowing Requests and LC Requests. . . . . . . . . . . . . . . .20
2.6 Extension of Facility . . . . . . . . . . . . . . . . . . . . . .20
2.7 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.8 Increases in Revolving Facility . . . . . . . . . . . . . . . . .21

SECTION 3 TERMS OF PAYMENT. . . . . . . . . . . . . . . . . . . . . . . . .21
3.1 Notes and Payments. . . . . . . . . . . . . . . . . . . . . . . .21
3.2 Interest and Principal Payments . . . . . . . . . . . . . . . . .21
3.3 Interest Options. . . . . . . . . . . . . . . . . . . . . . . . .22
3.4 Quotation of Rates. . . . . . . . . . . . . . . . . . . . . . . .22
3.5 Default Rate. . . . . . . . . . . . . . . . . . . . . . . . . . .22
3.6 Interest Recapture. . . . . . . . . . . . . . . . . . . . . . . .22
3.7 Interest Calculations . . . . . . . . . . . . . . . . . . . . . .23
3.8 Maximum Rate. . . . . . . . . . . . . . . . . . . . . . . . . . .23
3.9 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . .23
3.10 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . .24
3.11 Order of Application. . . . . . . . . . . . . . . . . . . . . . .24
3.12 Sharing of Payments, Etc... . . . . . . . . . . . . . . . . . . .24
3.13 Offset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
3.14 Booking Borrowings. . . . . . . . . . . . . . . . . . . . . . . .25
3.15 Basis Unavailable or Inadequate for CD Rate, Swing Rate, or LIBOR
Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
3.16 Additional Costs. . . . . . . . . . . . . . . . . . . . . . . . .25
3.17 Change in Laws. . . . . . . . . . . . . . . . . . . . . . . . . .26
3.18 Funding Loss. . . . . . . . . . . . . . . . . . . . . . . . . . .26
3.19 Foreign Lenders, Participants, and Assignees. . . . . . . . . . .27

SECTION 4 FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
4.1 Treatment of Fees . . . . . . . . . . . . . . . . . . . . . . . .27
4.2 Fees to Agent and Affiliates. . . . . . . . . . . . . . . . . . .27
4.3 LC Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

SECTION 5 SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.1 Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.2 Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.3 Creation of Liens and Further Assurances. . . . . . . . . . . . .29
5.4 Collateral Release. . . . . . . . . . . . . . . . . . . . . . . .29
5.5 Additional Companies. . . . . . . . . . . . . . . . . . . . . . .29
5.6 Change in Tax Laws. . . . . . . . . . . . . . . . . . . . . . . .30

SECTION 6 CONDITIONS PRECEDENT AND SUBSEQUENT . . . . . . . . . . . . . . .30
6.1 Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . .30
6.2 Conditions Subsequent . . . . . . . . . . . . . . . . . . . . . .30

SECTION 7 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . .31
7.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
7.2 Corporate Existence, Good Standing, and Authority . . . . . . . .31
7.3 Subsidiaries and Names. . . . . . . . . . . . . . . . . . . . . .31
7.4 Authorization and Contravention . . . . . . . . . . . . . . . . .31
7.5 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . .32
7.6 Financial Statements. . . . . . . . . . . . . . . . . . . . . . .32
7.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . .32
7.8 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
7.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . . .32
7.10 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . .32
7.11 Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . .33
7.12 Government Regulations. . . . . . . . . . . . . . . . . . . . . .33
7.13 Transactions with Affiliates. . . . . . . . . . . . . . . . . . .33
7.14 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.15 Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.18 Intellectual Property . . . . . . . . . . . . . . . . . . . . . .33
7.19 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
7.20 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . .34
7.21 Fieldcrest Asset Acquisition. . . . . . . . . . . . . . . . . . .34

SECTION 8 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . .34
8.1 Certain Items Furnished . . . . . . . . . . . . . . . . . . . . .34
8.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . .35
8.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . .36
8.4 Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.6 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . .36
8.7 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.8 Maintenance of Existence, Assets, and Business. . . . . . . . . .36
8.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
8.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . .36
8.11 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . .37
8.12 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . .37

SECTION 9 NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . .38
9.1 Payroll Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.2 Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
9.3 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . .38
9.4 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . .39
9.5 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.6 Transactions with Affiliates. . . . . . . . . . . . . . . . . . .39
9.7 Compliance with Laws and Documents. . . . . . . . . . . . . . . .39
9.8 Loans, Advances, and Investments. . . . . . . . . . . . . . . . .39
9.9 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . .39
9.10 Disposition of Assets . . . . . . . . . . . . . . . . . . . . . .39

(ii)

9.11 Mergers, Consolidations, and Dissolutions . . . . . . . . . . . .40
9.12 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . .40
9.13 Fiscal Year and Accounting Methods. . . . . . . . . . . . . . . .40
9.14 New Businesses. . . . . . . . . . . . . . . . . . . . . . . . . .40
9.15 Government Regulations. . . . . . . . . . . . . . . . . . . . . .40
9.16 Contingent Liabilities. . . . . . . . . . . . . . . . . . . . . .40
9.17 Operating Leases. . . . . . . . . . . . . . . . . . . . . . . . .40
9.18 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . .40
9.19 Asset Purchase Agreement. . . . . . . . . . . . . . . . . . . . .40
9.20 Strict Compliance . . . . . . . . . . . . . . . . . . . . . . . .41
9.21 Legal Defeasance and Covenant Defeasance. . . . . . . . . . . . .41

SECTION 10 FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . .41
10.1 Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . .41
10.2 Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . .41
10.3 Funded Debt/EBITDA. . . . . . . . . . . . . . . . . . . . . . . .41
10.4 Minimum Interest Coverage Ratio . . . . . . . . . . . . . . . . .41

SECTION 11 DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
11.1 Payment of Obligations. . . . . . . . . . . . . . . . . . . . . .41
11.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
11.3 Debtor Relief . . . . . . . . . . . . . . . . . . . . . . . . . .42
11.4 Judgments and Attachments . . . . . . . . . . . . . . . . . . . .42
11.5 Government Action . . . . . . . . . . . . . . . . . . . . . . . .42
11.6 Misrepresentation . . . . . . . . . . . . . . . . . . . . . . . .42
11.7 Ownership of Other Companies. . . . . . . . . . . . . . . . . . .42
11.8 Change of Control of Borrower . . . . . . . . . . . . . . . . . .43
11.9 Other Funded Debt . . . . . . . . . . . . . . . . . . . . . . . .43
11.10 SEC Reporting Requirements. . . . . . . . . . . . . . . . . . . .43
11.11 Validity and Enforceability . . . . . . . . . . . . . . . . . . .44
11.12 LCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44

SECTION 12 RIGHTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . .44
12.1 Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . .44
12.2 Company Waivers. . . . . . . . . . . . . . . . . . . . . . . . .44
12.3 Performance by Agent. . . . . . . . . . . . . . . . . . . . . . .45
12.4 Not in Control. . . . . . . . . . . . . . . . . . . . . . . . . .45
12.5 Course of Dealing . . . . . . . . . . . . . . . . . . . . . . . .45
12.6 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . .45
12.7 Application of Proceeds . . . . . . . . . . . . . . . . . . . . .45
12.8 Certain Proceedings . . . . . . . . . . . . . . . . . . . . . . .45
12.9 Expenditures by Lenders . . . . . . . . . . . . . . . . . . . . .46
12.10 Diminution in Value of Collateral . . . . . . . . . . . . . . . .46

SECTION 13 AGENT AND LENDERS . . . . . . . . . . . . . . . . . . . . . . . .46
13.1 Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
13.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
13.3 Proportionate Absorption of Losses. . . . . . . . . . . . . . . .47
13.4 Delegation of Duties; Reliance. . . . . . . . . . . . . . . . . .48
13.5 Limitation of Agent's Liability . . . . . . . . . . . . . . . . .48
13.6 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
13.7 Collateral Matters. . . . . . . . . . . . . . . . . . . . . . . .49

(iii)

13.8 Limitation of Liability . . . . . . . . . . . . . . . . . . . . .50
13.9 Relationship of Lenders . . . . . . . . . . . . . . . . . . . . .50
13.10 Benefits of Agreement . . . . . . . . . . . . . . . . . . . . . .50

SECTION 14 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .50
14.1 Nonbusiness Days. . . . . . . . . . . . . . . . . . . . . . . . .50
14.2 Communications. . . . . . . . . . . . . . . . . . . . . . . . . .50
14.3 Form and Number of Documents. . . . . . . . . . . . . . . . . . .50
14.4 Exceptions to Covenants . . . . . . . . . . . . . . . . . . . . .51
14.5 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
14.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . .51
14.7 Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . .51
14.8 Amendments, Consents, Conflicts, and Waivers. . . . . . . . . . .51
14.9 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . .52
14.10 Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
14.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . .53
14.12 Entirety. . . . . . . . . . . . . . . . . . . . . . . . . . . . .53

(iv)

SCHEDULES AND EXHIBITS

Schedule 1.1(a) - Lenders and Commitments
Schedule 1.1(b) - Existing Letters of Credit
Schedule 1.1(c) - Fiscal-Month Ends
Schedule 5.5 - Lender-Lien Limitation
Schedule 6 - Closing Documents
Schedule 7.3 - Companies and Names
Schedule 9.2 - Permitted Debt
Schedule 9.5 - Permitted Liens
Schedule 9.8 - Permitted Loans, Advances, and Investments

Exhibit A-1 - Swing-Line Note
Exhibit A-2 - Revolving Note
Exhibit B - Guaranty
Exhibit C-1 - Security Agreement
Exhibit C-2 - Release of Mortgage and Deed of Trust (North
and South Carolina)
Exhibit C-3 - Release of Second Mortgage (Pennsylvania)
Exhibit D-1 - Notice of Conversion
Exhibit D-2 - Compliance Certificate
Exhibit D-3 - Closing Certificate
Exhibit E-1 - Opinion of Texas Counsel
Exhibit E-2 - Opinion of Mexico Counsel
Exhibit F - Assignment and Assumption Agreement

(v)

RESTATED CREDIT AGREEMENT

THIS CREDIT AGREEMENT is entered into as of November 12, 1996, between
PILLOWTEX CORPORATION, a Texas corporation ("BORROWER"), Lenders (defined
below), and NATIONSBANK OF TEXAS, N.A., as agent for Lenders.

Borrower, certain Lenders, and Agent are party to the Credit Agreement (as
amended, through the date of this agreement, the "EXISTING CREDIT AGREEMENT")
dated as of December 1, 1994, providing for (a) revolving loans, (b) a term
loan, and (c) the issuance by Agent of letters of credit.

Borrower has requested that Lenders enter into this agreement to renew,
extend, and entirely amend and restate the Existing Credit Agreement and provide
for (a) a revolving line of credit in an amount totaling $175,000,000 (with
certain subfacilities for letters of credit and swing-line advances) to be used
by Borrower as provided in SECTION 7.1 in the form of a revolving-credit
facility of $175,000,000 (the "REVOLVING FACILITY") to be funded by Lenders from
time to time. Lenders are willing to extend the requested credit on the terms
and conditions of this agreement.

ACCORDINGLY, for adequate and sufficient consideration, Borrower, Lenders,
and Agent agree as follows:

SECTION 1 DEFINITIONS AND TERMS.

1.1 DEFINITIONS. As used in the Loan Documents:

ASSET PURCHASE AGREEMENT means the Asset Purchase Agreement dated as of
October 3, 1996, between Fieldcrest Cannon, Inc. and Borrower providing for the
Fieldcrest Asset Acquisition.

AFFILIATE of a Person means any other individual or entity who has the
power (directly or indirectly through ownership, voting securities, contract, or
otherwise -- but not solely by being an officer or director of that Person) to
direct or cause the direction of management or policies of that Person.

AGENT means, at any time, NationsBank of Texas, N.A. -- or its successor
appointed under SECTION 13 below -- acting as AGENT for Lenders under the Loan
Documents. References to Agent in respect of LCs are to that institution in its
individual capacity.

APPLICABLE MARGIN means, for any day, the margin of interest over the Base
Rate, the CD Rate, or the LIBOR Rate, as the case may be, that is applicable
when any interest rate is determined under this agreement.

(a) The Applicable Margin is subject to adjustment (upwards or
downwards, as appropriate) based on the better of (1) Borrower's Senior
Debt Rating or (2) the ratio of Funded Debt to EBITDA, as stated in the
table below:

==================================================================================================================================
APPLICABLE APPLICABLE APPLICABLE APPLICABLE
SENIOR RATIO OF FUNDED MARGIN FOR MARGIN FOR MARGIN FOR MARGIN FOR APPLICABLE
DEBT RATING DEBT TO EBITDA BASE-RATE LIBOR-RATE SWING CD-RATE PERCENTAGES
BORROWINGS BORROWINGS BORROWINGS BORROWINGS
- ----------------------------------------------------------------------------------------------------------------------------------

B+/B1 Less than or 0% 1.50% 1.75% 1.625% .375%
equal to 4.00,
but greater
than 3.50 to
1.00

BB-/Ba3 Less than or 0% 1.125% 1.375% 1.250% .250%
equal to 3.50
to 1.00, but
greater than
3.00 to 1.00

BB/Ba2 Less than or 0% .875% 1.125% 1.00% .250%
equal to 3.00
to 1.00, but
greater than
2.50 to 1.00

BB+/Ba1 Less than or 0% .625% .875% .750% .225%
equal to 2.50
to 1.00, but
greater than
2.00 to 1.00

BBB-/Baa3 Less than or 0% 0.50% .75% .625% .200%
equal 2.00 to
1.00
==================================================================================================================================

(b) From the Closing Date through the date that Agent receives the
Current Financials and Compliance Certificate for the year ending
December 28, 1996, the Applicable Margin is deemed to be .875% for LIBOR-
Rate Borrowings and 1.00% for CD-Rate Borrowings, and the Applicable
Percentage is deemed to be .250%.

(c) After receipt of the Current Financials and Compliance
Certificate for the year ending December 28, 1996 -- EXCEPT as otherwise
stated in CLAUSE (a) above -- the Applicable Margin and Applicable
Percentage in effect at any time are based upon either the Senior Debt
Rating or the ratio of Funded Debt to EBITDA as determined from the Current
Financials and related Compliance Certificate then most recently received
by Agent, effective as of the date received by Agent.

(d) For purposes of the definitions of APPLICABLE MARGIN and
APPLICABLE PERCENTAGE, EBITDA is calculated for the Companies' most
recently-completed-four-fiscal quarters, and Funded Debt is determined as
of the last day of that four-fiscal-quarter period.

(e) If Borrower fails to timely furnish to Agent any Financial
Statements and related Compliance Certificate as required by this
agreement, then the maximum Applicable Margin and Applicable Percentage
apply from the date those Financial Statements and related Compliance
Certificate are required to be delivered and remain in effect until
Borrower furnishes them to Agent.

APPLICABLE PERCENTAGE means, for any day, a commitment-fee percentage
applicable under SECTION 4.4, subject to adjustment (upwards or downwards, as
appropriate), based on the measurements set forth in the chart set out in the
definition of the term APPLICABLE MARGIN. The Applicable Percentage is
calculated and determined as further provided in the definition of the term
APPLICABLE MARGIN.

ASSESSMENT RATE means, for any day and any CD-Rate Borrowing, the actual
(if published) or the estimated (if the actual rate is not known) assessment
rate (rounded upwards, if necessary, to the nearest 0.01%) paid by Agent to the
Federal Deposit Insurance Corporation for that corporation's insuring liability
for U.S. dollar deposits.

ASSET SALE means any sale, lease, assignment, conveyance, transfer, or
other disposition of assets (including, without limitation, the sale, issuance,
or disposition of any stock or other equity securities and also including,
without limitation, sale/leaseback arrangements) by Borrower or any of
Borrower's Subsidiaries, including, without limitation, an actual or
constructive loss of property, an agreed or compromised loss of property, or the
taking of any property under the power of eminent domain.

ASSIGNEE is defined in SECTION 14.10(c).

ASSIGNMENT AND ASSUMPTION AGREEMENTS is defined in SECTION 14.10(c).

BA means a banker's acceptance, which is a draft drawn by Borrower on Agent
and accepted and held (but not discounted) by Agent in connection with a draft
or drawing under a LC with extended payment terms.

BASE RATE means, for any day, the greater of EITHER (a) the annual interest
rate most recently announced by Agent as its prime rate (which may not
necessarily represent the lowest or best rate actually charged to any customer)
in effect at its principal office in Dallas, Texas, automatically fluctuating
upward and downward as specified in each announcement without special notice to
Borrower or any other Person, OR (b) the SUM of the Federal-Funds Rate PLUS
0.5%.

BASE-RATE BORROWING means a Borrowing bearing interest at the SUM of the
Base Rate PLUS the Applicable Margin.

BEACON means Beacon Manufacturing Company, a North Carolina corporation.

BORROWER is defined in the preamble to this agreement.

BORROWING means any amount disbursed (a) by one or more Lenders to or on
behalf of Borrower under the Loan Documents, including any Swing Borrowing,
either as an original disbursement of funds, a renewal, extension, or
continuation of an amount outstanding, or a payment under an LC or (b) by any
Lender in accordance with, and to satisfy the obligations of any Company under,
any Loan Document.

BORROWING DATE is defined in SECTION 2.2(a).

BORROWING REQUEST means a request by Borrower to Agent for a Borrowing
either by telephone or in writing (in form acceptable to Agent) under
SECTION 2.2(a).

BUSINESS DAY means (a) for purposes of any LIBOR-Rate Borrowing, a day when
commercial banks are open for international business in London, England, and (b)
for all other purposes, any day OTHER THAN Saturday, Sunday, and any other day
that commercial banks are authorized by Law to be closed in Texas.

CAPITAL LEASE means any capital lease or sublease that is required by GAAP
to be capitalized on a balance sheet.

CAPITAL STOCK means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.

CAPITALIZATION means, at any time, the sum of (a) Borrower's stockholder's
equity, plus (b) Funded Debt.

CD RATE means, for a CD-Rate Borrowing and for its Interest Period, the
annual interest rate (rounded upward, if necessary, to the nearest 0.01%) equal
to the SUM of (a) the annual rate bid by certificate of deposit dealers of
recognized standing on the first day of that Interest Period for the purchase at
face value from Agent of a certificate of deposit in an amount comparable to
that CD-Rate Borrowing and having a maturity approximately equal to that
Interest Period, PLUS (b) the Assessment Rate on the first day of that Interest
Period.

CD-RATE BORROWING means a Borrowing bearing interest at the SUM of the CD
Rate PLUS the Applicable Margin.

CERCLA means the COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION AND
LIABILITY ACT OF 1980, 42 U.S.C. Sections 9601 ET SEQ.

CHANGE OF CONTROL means the occurrence of any of the events described in
SECTION 11.8.

CLOSING DATE means the date agreed to by Borrower and Agent for the initial
Borrowing, which must be a Business Day occurring, if ever, no later than
November 29, 1996.

CODE means the INTERNAL REVENUE CODE OF 1986.

COLLATERAL is defined in SECTION 5.2.

COMMITMENT means, at any time and for any Lender, the amounts stated beside
that Lender's name on the most-recently amended SCHEDULE 1.1(a).

COMMITMENT PERCENTAGE means, for any Lender, the proportion (stated as a
percentage) that its Commitment bears to the total Commitments of all Lenders.

COMMITMENT USAGE means, at any time, the SUM of (a) the Principal Debt
(which includes, without limitation, the Principal Debt under the Swing-Line
Subfacility) PLUS (b) the LC Exposure for documentary LCs or BAs into which any
documentary LC may have been converted.

COMPANIES means, at any time, Borrower and each of its Subsidiaries.

COMPLIANCE CERTIFICATE means a certificate substantially in the form of
EXHIBIT D-2 and signed by a Responsible Officer.

CONTAMINATED SITE LIST means (a) the NATIONAL PRIORITIES LIST established
under CERCLA, (b) the COMPREHENSIVE ENVIRONMENTAL RESPONSE COMPENSATION AND
LIABILITY AND INFORMATION SYSTEM established under CERCLA, or (c) any other
list, registry, or other compilation established by any Tribunal of sites that
require or potentially require removal, remedial, or other actions in response
to the Release or threatened Release of any Hazardous Substance.

CURRENT FINANCIALS, unless otherwise specified:

(a) means EITHER (i) the Companies' consolidated Financial Statements
for the year ending December 30, 1995, TOGETHER WITH the Companies'
Financial Statements for the portion of the fiscal year ending on
September 28, 1996, OR (ii) at any time after annual Financial Statements
are first delivered under SECTION 8.1, the Companies' annual Financial
Statements then most recently delivered to Lenders under SECTION 8.1(a),
TOGETHER WITH the Companies' quarterly Financial Statements then most
recently delivered to Lenders under SECTION 8.1(b); but

(b) EXCEPT as provided in the definition of EBITDA, does not include
the results of operation and cash flows for any Company for the time period
before it becomes a member of Borrower's consolidated group.

CURRENT RATIO means, at any time, the QUOTIENT of the SUM of the Company's
(a) cash, PLUS (b) accounts receivable, PLUS (c) inventory DIVIDED BY the SUM of
the Company's (x) accounts payable PLUS (y) Principal Debt.

DEBT of any Person means, at any time and without duplication (a) all
obligations required by GAAP to be classified upon that Person's balance sheet
as liabilities, (b) liabilities secured (or for which the holder of the Debt has
an existing Right, contingent or otherwise, to be so secured) by any Lien
existing on property owned or acquired by that Person, (c) obligations that have
been (or under GAAP should be) capitalized for financial reporting purposes, and
(d) all guaranties, endorsements, and other contingent obligations for Debt of
others.

DEBTOR RELIEF LAWS means the BANKRUPTCY CODE OF THE UNITED STATES OF
AMERICA and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, or similar Laws affecting creditors' Rights.

DEFAULT is defined in SECTION 11.

DEFAULT RATE means, for any day, an annual interest rate equal from day to
day to the lesser of EITHER (a) the then-existing Base Rate PLUS 2% OR (b) the
Maximum Rate.

DETERMINING LENDERS means, at any time, any combination of Lenders holding
(directly or indirectly) AT LEAST EITHER (a) 51% of the total Commitments while
there is no Principal Debt or LC Exposure OR (b) 51% of the Principal Debt PLUS
the LC Exposure while there is any Principal Debt or LC Exposure.

DISTRIBUTION means, with respect to any shares of any capital stock or
other equity securities issued by a Person (a) the retirement, redemption,
purchase, or other acquisition for value of those securities, (b) the
declaration or payment of any dividend on or with respect to those securities,
(c) any loan or advance by that Person to, or other investment by that Person
in, the holder of any of those securities OTHER THAN those loans and advances
referred to in ITEM 5 on SCHEDULE 9.8, and (d) any other payment by that Person
with respect to those securities.

EBITDA means -- for any Person, for any period, and without duplication --
the SUM of (a) Net Income PLUS (b) to the extent actually deducted in
calculating Net Income, interest expense (including, without limitation,
interest that is capitalized), Taxes, depreciation, and amortization.

EMPLOYEE PLAN means an employee pension benefit plan covered by TITLE IV of
ERISA and established or maintained by any Company.

ENVIRONMENTAL INDEMNITY AGREEMENT means any agreement (including, without
limitation, insurance policies) known to any Company by which any Company or
Predecessor is (or may reasonably claim to be) entitled to receive reimbursement
or other payment on account of any Environmental Liability OTHER THAN any
agreements (a) in the nature of environmental consulting or engineering
agreements for professional services or (b) the terms of which preclude any
Company or Predecessor from asserting a claim for reimbursement or other payment
on account of any Environmental Liability.

ENVIRONMENTAL INVESTIGATION means any health, safety, or environmental site
assessment, investigation, study, review, audit, compliance audit, or compliance
review conducted at any time or from time to time -- whether at the request of
Agent or any Lender, upon the order or request of any Tribunal, or at the
voluntary instigation of any Company -- concerning any Real Property or the
business operations or activities of any Company, including, without limitation
(a) air, soil, groundwater, or surface-water sampling and monitoring, (b)
repair, cleanup, remediation, or detoxification, (c) preparation and
implementation of any closure, remedial, spill, emergency, or other plans, and
(d) any health, safety, or environmental compliance audit or review.

ENVIRONMENTAL LAW means any applicable Law that relates to (a) the
condition of air, ground or surface water, soil, or other environmental media,
(b) the environment or natural resources, (c) safety or health, or (d) the
regulation of any contaminants, wastes, and Hazardous Substances, including,
without

limitation, CERCLA, OSHA, the HAZARDOUS MATERIALS TRANSPORTATION ACT (49
U.S.C. Section 1801 ET SEQ.), the RESOURCE CONSERVATION AND RECOVERY ACT (42
U.S.C. Section 6901 ET SEQ.), the CLEAN WATER ACT (33 U.S.C. Section 1251 ET
SEQ.), the CLEAN AIR ACT (42 U.S.C. Section 7401 ET SEQ.), the TOXIC
SUBSTANCES CONTROL ACT (15 U.S.C. Section 2601 ET SEQ.), the FEDERAL
INSECTICIDE, FUNGICIDE, AND RODENTICIDE ACT (7 U.S.C. Section 136 ET SEQ.),
the EMERGENCY PLANNING AND COMMUNITY RIGHT-TO-KNOW ACT (42 U.S.C. Section
11001 ET SEQ.), the SAFE DRINKING WATER ACT (42 U.S.C. Section 201 AND
Section 300F ET SEQ.), the RIVERS AND HARBORS ACT (33 U.S.C. Section 401 ET
SEQ.), the OIL POLLUTION ACT (33 U.S.C. Section 2701 ET SEQ.), analogous
state and local Laws, and any analogous future enacted or adopted Law, or (c)
to the Release or threatened Release of Hazardous Substances.

ENVIRONMENTAL LIABILITY means any liability, loss, fine, penalty,
charge, lien, damage, cost, or expense of any kind that results directly or
indirectly, in whole or in part (a) from the violation of any Environmental
Law, (b) from the Release or threatened Release of any Hazardous Substance,
(c) from removal, remediation, or other actions in response to the Release or
threatened Release of any Hazardous Substance, (d) from actual or threatened
damages to natural resources, (e) from the imposition of injunctive relief or
other orders, (f) from personal injury, death, or property damage which
occurs as a result of any Company's use, storage, handling, or the Release or
threatened Release of a Hazardous Substance, or (g) from any Environmental
Investigation performed at, on, or for any Real Property.

ENVIRONMENTAL PERMIT means any permit, license, or other authorization
from any Tribunal that is required under any Environmental Law for the lawful
conduct of any business, process, or other activity.

ENVIRONMENTAL REPORT means any written or verbal report memorializing
any Environmental Investigation.

EQUITY INTERESTS means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

ERISA means the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.

EXISTING CREDIT AGREEMENT is defined in the preamble to this Agreement.

EXISTING LCS means the letters of credit issued by Agent or any of
Agent's Affiliates for the account of any Company prior to the Closing Date
and which are set out on SCHEDULE 1.1(b).

EXISTING-LC EXPOSURE means the total undrawn and face amount of the
Existing LCs.

EXISTING PRINCIPAL DEBT means the Principal Debt under the Existing
Credit Agreement owing to Lenders as of the date of this agreement.

FEDERAL-FUNDS RATE means, for any day, the annual rate (rounded upwards,
if necessary, to the nearest 0.01%) determined (which determination is
conclusive and binding, absent manifest error) by Agent to be equal to (a)
the weighted average of the rates on overnight federal-funds transactions
with member banks of the Federal Reserve System arranged by federal-funds
brokers on that day, as published by the Federal Reserve Bank of New York on
the next Business Day, or (b) if those rates are not published for any day,
the average of the quotations at approximately 10:00 a.m. received by Agent
from three federal-funds brokers of recognized standing selected by Agent in
its sole discretion.

FIELDCREST ASSET ACQUISITION means the acquisition under the Asset
Purchase Agreement by Pillowtex Corporation of certain assets of Fieldcrest
Cannon, Inc.

FINANCIAL STATEMENTS of a Person means balance sheets, profit and loss
statements, reconciliations of capital and surplus, and statements of cash
flow prepared (a) according to GAAP (subject to year end audit adjustments
with respect to interim Financial Statements) and (b) except as stated in
SECTION 1.4, in comparative form to prior year-end figures or corresponding
periods of the preceding fiscal year, as applicable.

FISCAL MONTH means (a) for any period before December 31, 1994, a
calendar month, and (b) thereafter, a period of four, five, or six weeks
having seven days in each week ending on a Saturday and that otherwise
approximates a calendar-monthly period. The fiscal-month ends for 1996
through 2001 are described on SCHEDULE 1.1(c). Reference to a fiscal month by
the name of a calendar month means the fiscal month that encompasses the most
of that calendar month (e.g., the fiscal month of January 1996 ends on
February 3, 1996).

FISCAL QUARTER means (a) for any period before December 31, 1994, a
calendar quarter, and (b) thereafter, any quarter of a fiscal year ending on
the last day of a fiscal month (e.g., the third fiscal quarter in 1996 ends
on September 26, 1996). The fiscal-quarter ends for 1996 through 2001 are
indicated on SCHEDULE 1.1(c) by asterisks.

FISCAL YEAR means (a) for any period before December 31, 1994, a
calendar year, and (b) thereafter, Borrower's fiscal year for accounting and
Tax purposes, which consists of 52- or 53-week period beginning on the first
day after the end of the immediately preceding fiscal year and ending on the
Saturday nearest to the December 31 following that first day. References to a
fiscal year with a number corresponding to any calendar year means the fiscal
year ending on the Saturday nearest to December 31 during that calendar year
(e.g., fiscal year 1999 ends on January 1, 2000).

FUNDED DEBT means -- at any time and without duplication -- the SUM of
(a) the balance of any obligation for borrowed money that is required by GAAP
to be shown as a liability, PLUS (b) the total net rentals (net of any
interest, Taxes, or other expenses included in those rentals) payable under
Capital Leases.

FUNDING LOSS means any loss, expense, or reduction in yield that any
Lender reasonably incurs because (a) Borrower fails or refuses (for any
reason whatsoever OTHER THAN a default by Agent or the Lender claiming that
loss, expense, or reduction in yield) to take any Borrowing that it has
requested under this agreement, or (b) Borrower prepays or pays any Borrowing
or converts any Borrowing to a Borrowing of another Type, in each case, other
than on the last day of the applicable Interest Period.

GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants
and the Financial Accounting Standards Board that are applicable from time to
time.

GUARANTY means a guaranty substantially in the form of the attached
EXHIBIT B.

HAZARDOUS SUBSTANCE means (a) any substance that is reasonably expected
to require, removal, remediation, or other response under any Environmental
Law, (b) any substance that is designated, defined

or classified as a hazardous waste, hazardous material, pollutant,
contaminant, explosive, corrosive, flammable, infectious, carcinogenic,
mutagenic, radioactive, dangerous, or toxic or hazardous substance under any
Environmental Law, including, without limitation, any hazardous substance
within the meaning of Section 101(14) of CERCLA, (c) petroleum, oil,
gasoline, natural gas, fuel oil, motor oil, waste oil, diesel fuel, jet fuel,
and other petroleum hydrocarbons, (d) asbestos and asbestos-containing
materials in any form, (e) polychlorinated biphenyls, (f) urea formaldehyde
foam, or (g) any substance the presence of which on any Real Property either
(i) poses or threatens to pose a hazard to the health or safety of persons or
to the environment or (ii) could constitute a health or safety hazard to
persons or the environment if it emanated or migrated from the Real Property.

INTEREST PERIOD is determined in accordance with SECTION 3.9.

LAWS means all applicable statutes, laws, treaties, ordinances, rules,
regulations, orders, writs, injunctions, decrees, judgments, opinions, and
interpretations of any Tribunal.

LC means (a) a documentary or standby letter of credit issued by Agent,
any Lender, or any of their Affiliates under this agreement and under an LC
Agreement, or -- although not a letter of credit -- any BA into which a
documentary letter of credit has been converted and (b) any Existing LC.

LC AGREEMENT means (a) for Existing LC Nos. 120780 and 37025, the
Reimbursement Agreements described as ITEMS 2 and 3, respectively, on
SCHEDULE 9.2, and (b) for any other LC, a letter of credit application and
agreement (in form and substance satisfactory to Agent or such Lender,
respectively, issuing the LC) submitted and executed by Borrower to Agent or
Lender or any of their Affiliates for an LC for the account of any Company.

LC EXPOSURE means, without duplication, the SUM of (a) the total face
amount of all undrawn and uncancelled LCs and any BAs into which any
documentary LCs have been converted PLUS (b) the total unpaid reimbursement
obligations of Borrower under drawings or drafts under any LC.

LC REQUEST means a request by Borrower to Agent or Lender by electronic
device or in writing (in form acceptable to Agent or such Lender,
respectively) for an LC.

LC SUBFACILITY means a subfacility for the issuance of LCs, as described
in SECTION 2.3, under which the LC Exposure for (a) standby LCs issued by
Agent or any Lender may never exceed $20,000,000 in the aggregate, and (b)
for documentary LCs and BAs into which documentary LCs may have been
converted issued by Agent or any Lender may never collectively exceed
$20,000,000 in the aggregate, and (c) for standby or documentary LCs (and BAs
into which documentary LCs may have been converted) issued by Lenders other
than Agent may never exceed $3,000,000 in the aggregate.

LENDER LIEN means any present or future first-priority (UNLESS a
different priority is specifically provided in the Loan Documents) Lien
securing the Obligations and assigned, conveyed, or granted to or created in
favor of Agent for the benefit of Lenders.

LENDERS means the financial institutions -- including, without
limitation, Agent (possibly acting through one or more of its Affiliates for
LCs) in respect of its share of Borrowings (including Swing Borrowings) and
LCs -- named on SCHEDULE 1.1(a) or on the most-recently-amended SCHEDULE
1.1(a), if

any, delivered by Agent under this agreement, and, subject to this agreement,
their respective successors and assigns (but not any Participant who is not
otherwise a party to this agreement).

LIBOR RATE means, for a LIBOR-Rate Borrowing and for the relevant
Interest Period, the annual interest rate (rounded upward, if necessary, to
the nearest 0.01%) equal to the quotient obtained by DIVIDING (a) the rate
that deposits in United States dollars are offered to Agent in the London
interbank market at approximately 11:00 a.m. London time two Business Days
before the first day of that Interest Period in an amount comparable to that
LIBOR-Rate Borrowing and having a maturity approximately equal to that
Interest Period, BY (b) one MINUS the Reserve Requirement (expressed as a
decimal) applicable to the relevant Interest Period.

LIBOR-RATE BORROWING means a Borrowing bearing interest at the SUM of
the LIBOR Rate PLUS the Applicable Margin.

LIEN means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind and any other
arrangement for a creditor's claim to be satisfied from assets or proceeds
prior to the claims of other creditors or the owners.

LITIGATION means any action by or before any Tribunal.

LOAN DOCUMENTS means (a) this agreement, certificates and reports
delivered under this agreement, and exhibits and schedules to this agreement,
(b) all agreements, documents, and instruments in favor of Agent or Lenders
(or Agent on behalf of Lenders) ever delivered under this agreement or
otherwise delivered in connection with all or any part of the Obligations
other than Assignment and Assumption Agreements, (c) any contract entered
into between Borrower and any Lender or Affiliate of any Lender under
(whether or not in excess of the minimum dollar requirements of) ITEM 14 OF
SCHEDULE 9.2, (d) all LCs and LC Agreements, (e) the letter agreement
described in SECTION 4.2, and (f) all renewals, extensions, and restatements
of, and amendments and supplements to, any of the foregoing.

MATERIAL ADVERSE EVENT means any circumstance or event that,
individually or collectively, is reasonably expected to result (at any time
before the Commitments are fully canceled or terminated and the Obligations
are fully paid and performed) in any (a) material impairment of (i) the
ability of Borrower to perform any of its payment or other material
obligations under any Loan Document, (ii) the Companies as a whole to perform
any of their payment or other material obligations under any Loan Document,
or (iii) the ability of Agent or any Lender to enforce any of those
obligations or any of their respective Rights under the Loan Documents, (b)
material and adverse effect on the financial condition of the Companies as a
whole as represented to Lenders in the Current Financials most recently
delivered as of EITHER the date of this agreement OR such later date to which
Determining Lenders may have, in their sole discretion, agreed with Borrower
in writing, or (c) Default or Potential Default.

MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for a Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest
that, under applicable Law, that Lender is permitted to contract for, charge,
take, reserve, or receive on the Obligations.

MINIMUM NET WORTH is defined in SECTION 10.1.

MULTIEMPLOYER PLAN means a multiemployer plan as defined in SECTIONS
3(37) or 4001(a)(3) of ERISA or SECTION 414(f) of the Code to which any
Company (or any Person that, for purposes of TITLE IV of ERISA, is a member
of Borrower's controlled group or is under common control with Borrower
within the meaning of SECTION 414 of the Code) is making, or has made, or is
accruing, or has accrued, an obligation to make contributions.

NET INCOME of any Person means that Person's profit or loss after
deducting its Tax expense before deducting the unamortized Lender fees
associated with the Existing Credit Agreement.

NET PROCEEDS means the aggregate cash proceeds received by the Borrower
or any of its Subsidiaries in respect of any Permitted Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Permitted Asset Sale), net of the
direct costs relating to such Permitted Asset Sale (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), 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), and any reserve
for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.

NET WORTH means -- at any time and for any Person -- its stockholders'
equity.

NOTES means all of the Revolving Notes and the Swing-Line Note.

NOTICE OF CONVERSION means a request substantially in the form of
EXHIBIT D-1.

OBLIGATED COMPANIES means, at any time:

(a) Borrower; and

(b) Each of Borrower's Subsidiaries EITHER (i) that has executed a
Guaranty and a Security Agreement OR (ii) if it is a foreign entity
and if its execution of a Guaranty or a Security Agreement would
create a material Tax obligation for the Companies that would not
otherwise exist, with respect to which a Lender Lien has been created
in as much -- but in no event less than 65% -- of its capital stock as
may be pledged without creating a material Tax obligation for the
Companies that would not otherwise exist.

Nothing in this definition implies that Borrower is not obligated to comply with
SECTION 8.11.

OBLIGATIONS means all present and future (a) Debts, liabilities, and
obligations of any Company to Agent, any Lender, or NationsBanc Capital
Markets, Inc., and related to any Loan Document, whether principal, interest,
fees, costs, attorneys' fees, or otherwise, and (b) renewals, extensions, and
modifications of any of the foregoing.

OPERATING LEASE means a lease or sublease that is not a Capital Lease.

OSHA means the OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970, 29 U.S.C.
Section 651 ET SEQ.

PARTICIPANT is defined in SECTION 14.10(b).

PBGC means the Pension Benefit Guaranty Corporation.

PERMITTED ACQUISITION means both (a) the Fieldcrest Asset Acquisition
(without regard to the following conditions) and (b) formation or acquisition
by any Company of a Subsidiary or the acquisition -- which, subject to
SECTION 9.11, may be by merger -- by any Company of substantially all the
assets of another Person if:

(i) no Default or Potential Default exists or would exist as a result
of that formation or acquisition (including, but not limited to, non-
compliance with the covenants set forth in SECTION 10 after giving effect
to a Permitted Acquisition);

(ii) that formation or acquisition is within the Companies' current
line of business of "designing, manufacturing, and marketing bedroom
textile furnishings" and related or similar products;

(iii) at least 15 days before that formation or acquisition, Borrower
gives to Agent and Lenders a written description of that formation or
acquisition, which includes a reasonably-detailed calculation of -- and
description of the funding sources, if applicable, for -- the total
investment or purchase price involved (including, without limitation all
Debt for which the acquired Person is to remain obligated and what portion
of it, if any, that is to be guaranteed, assumed, or paid -- through merger
or otherwise -- by any other Company);

(iv) the total of all investments in any newly-formed Subsidiaries
PLUS, without duplication, the total purchase price -- INCLUDING, without
limitation and without duplication, the total Funded Debt to be guaranteed,
assumed, or paid by any other Company but EXCLUDING other Debt of the
acquired Persons and fundings through equity issuances -- for all of those
acquisitions do not exceed 15% of the total Capitalization of the Borrower;

(v) any new Subsidiary as a result of that formation or acquisition
becomes an Obligated Company concurrently with that formation or
acquisition;

(vi) the Companies execute and deliver such other documents and take
such action as any Lender may reasonably request in order to effect the
provisions of the Loan Documents; and

(vii) concurrently with the closing of that formation or acquisition,
Borrower provides Agent and Lenders with a certificate of a Responsible
Officer of Borrower certifying that all the conditions in this definition
have been fulfilled for that formation or acquisition to be -- and it is --
a "PERMITTED ACQUISITION."

PERMITTED ASSET SALES means (a) sales and dispositions of assets in the
ordinary course of business for fair and adequate consideration; (b) sales of
assets that are obsolete or are no longer in use and are not significant to
the continuation of that Company's business; (c) sales of assets (i) obtained
as the result of mergers and consolidating permitted under this agreement and
Permitted Acquisitions and (ii) that are unnecessary to the Companies'
business operations; and (d) sales and dispositions from any Company to any
Obligated Company.

PERMITTED DEBT means Debt described on SCHEDULE 9.2.

PERMITTED LIENS means the Liens described on SCHEDULE 9.5.

PERSON means any individual, entity, or Tribunal.

PHC means Ptex Holding Company, a Delaware corporation and a direct
Subsidiary of Borrower.

PMSC means Pillowtex Management Services Company, a Delaware business
trust, a direct Subsidiary of PHC, and an indirect Subsidiary of Borrower.

POTENTIAL DEFAULT means any event's occurrence or any circumstance's
existence that would -- upon any required notice, time lapse, or both -- become
a Default.

PREDECESSOR means any Person for whose obligations and liabilities any
Company is reasonably expected to be liable as the result of any merger, DE
FACTO merger, stock purchase, asset purchase or divestiture, combination, joint
venture, investment, reclassification, or other similar business transaction.

PRINCIPAL DEBT means, at any time, the unpaid principal balance of all
Borrowings.

PRO RATA and PRO RATA PART mean, at any time and for any Lender, the
proportion (stated as a percentage) that the Principal Debt owed to it bears to
the total Principal Debt owed to all Lenders.

PILLOWTEX, INC. means Pillowtex, Inc., a Delaware corporation and a direct
Subsidiary of Borrower.

REAL PROPERTY means any land, buildings, fixtures, and other improvements
to land now or in the future directly or indirectly owned by any Company, leased
to or otherwise operated by any Company, or subleased by any Company to any
other Person.

RELEASE means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, disposal, migrating, or
other movement into the air, ground or surface water, or soil.

RELEASE RATING means -- at any time the Senior Unsecured Debt Rating of
Borrower by Standard & Poor's Corporation and Moody's Investors Service are
equal to or better than BBB- and Baa3, respectively, PROVIDED, HOWEVER, that no
more than one ratings differential shall apply.

REPRESENTATIVES means representatives, officers, directors, employees,
accountants, attorneys, and agents.

RESERVE REQUIREMENT means, for any LIBOR-Rate Borrowing and for the
relevant Interest Period, the maximum total reserve requirements (including all
basic, supplemental, emergency, special, marginal, and other reserves required
by applicable Law) applicable to a member bank of the Federal Reserve System for
eurocurrency fundings or liabilities.

RESPONSIBLE OFFICER means Borrower's chairman, president, chief executive
officer, chief financial officer, chief accounting officer, or treasurer.

REVOLVING FACILITY is defined in the recitals to this agreement and
which includes the LC Subfacility and the Swing-Line Subfacility.

REVOLVING NOTE means one of the promissory notes substantially in the
form of EXHIBIT A-2.

RIGHTS means rights, remedies, powers, privileges, and benefits.

SECURITY AGREEMENT means a Security Agreement in substantially the form
of EXHIBIT C-1.

SENIOR SUBORDINATED DEBT means that debt issued pursuant to the Offering
Memorandum of Borrower dated November 6, 1996, in an amount of up to
$140,000,000.

SENIOR DEBT RATING means the rating on the Borrower's Existing Credit
Facility provided by (1) the higher of either Standard & Poor's Corporation
or Moody's Investors Service provided that (a) no more than one ratings
differential shall apply, or (b) if two or more ratings deferential, the
rating shall be that rating that is one rating greater than the lowest
rating, or, (2) if not available from one of the above corporations, then
that rating that is two levels better than the rating given by such
corporations on the Senior Subordinated Debt.

SENIOR UNSECURED DEBT RATING means the Borrower's Senior Unsecured Debt
Rating provided by (1) the higher of either Standard & Poor's Corporation or
Moody's Investors Service provided that (a) no more than one ratings
differential shall apply, or, (b) if two or more ratings differential, the
rating shall be that rating that is one rating greater than the lowest
rating, or, (2) if not available from one of the above corporations, then
that rating that is two levels better than the rating given by such
corporations on the Senior Subordinated Debt.

SOLVENT means, as to any Person, that (a) the aggregate fair market
value of its assets exceeds its liabilities, (b) it has sufficient cash flow
to enable it to pay its Debts as they mature, and (c) it does not have
unreasonably small capital to conduct its businesses.

SUBSIDIARY of any Person means any entity of which more than 50% (in
number of votes) of the stock (or equivalent interests) is owned of record or
beneficially, directly or indirectly, by that Person.

SWING-LINE NOTE means a promissory note substantially in the form of the
attached EXHIBIT A-1, as renewed, extended, amended, and restated.

SWING BORROWING means a Borrowing under the Swing-Line Subfacility
bearing interest at the sum of the Federal-Funds Rate PLUS the Applicable
Margin for Swing Borrowings.

SWING-LINE SUBFACILITY means the facility under the Revolving Facility
described in SECTION 2.4.

TAXES means, for any Person, taxes, assessments, or other governmental
charges or levies imposed upon it, its income, or any of its properties,
franchises, or assets.

TERMINATION DATE means the earlier of EITHER (a) the fifth anniversary
of the Closing Date (as that date may be extended by Borrower and Lenders
under SECTION 2.7) OR (b) the effective date that Lenders'

commitments to lend and issue LCs under this agreement are otherwise canceled
or terminated in accordance with this agreement.

TORFEACO means Torfeaco Industries Limited, an Ontario corporation.

TRIBUNAL means any (a) local, state, territorial, federal, or foreign
judicial, executive, regulatory, administrative, legislative, or governmental
agency, board, bureau, commission, department, or other instrumentality, (b)
private arbitration board or panel, or (c) central bank.

TYPE means any type of Borrowing determined with respect to the
applicable interest option.

WORKING CAPITAL means -- for any Person and at any time -- the SUM of
(a) current assets (excluding cash and cash equivalents) MINUS (b) current
liabilities (excluding the current portion of each of Funded Debt, deferred
Taxes, and income Tax liabilities).

1.2 TIME REFERENCES. Unless otherwise specified, in the Loan Documents
(a) time references (E.G., 10:00 a.m.) are to time in Dallas, Texas, and (b)
in calculating a period from one date to another, the word "FROM" means "FROM
AND INCLUDING" and the word "TO" or "UNTIL" means "TO BUT EXCLUDING."

1.3 OTHER REFERENCES. Unless otherwise specified, in the Loan
Documents (a) where appropriate, the singular includes the plural and VICE
VERSA, and words of any gender include each other gender, (b) heading and
caption references may not be construed in interpreting provisions, (c)
monetary references are to currency of the United States of America, (d)
section, paragraph, annex, schedule, exhibit, and similar references are to
the particular Loan Document in which they are used, (e) references to
"TELECOPY," "FACSIMILE," "FAX," or similar terms are to facsimile or telecopy
transmissions, (f) references to "INCLUDING" mean including without limiting
the generality of any description preceding that word, (g) the rule of
construction that references to general items that follow references to
specific items are limited to the same type or character of those specific
items is not applicable in the Loan Documents, (h) references to any Person
include that Person's heirs, personal representatives, successors, trustees,
receivers, and permitted assigns, (i) references to any Law include every
amendment or supplement to it, rule and regulation adopted under it, and
successor or replacement for it, and (j) references to any Loan Document or
other document include every renewal and extension of it, amendment and
supplement to it, and replacement or substitution for it.

1.4 ACCOUNTING PRINCIPLES. Unless otherwise specified, in the Loan
Documents (a) GAAP determines all accounting and financial terms and
compliance with financial covenants, (b) GAAP in effect on the date of this
agreement determines compliance with financial covenants, (c) otherwise, all
accounting principles applied in a current period must be comparable in all
material respects to those applied during the preceding comparable period,
and (d) while Borrower has any consolidated Subsidiaries (i) all accounting
and financial terms and compliance with reporting covenants must be on a
consolidating and consolidated basis, as applicable and (ii) compliance with
financial covenants must be on a consolidated basis.

SECTION 2 COMMITMENT. Subject to the provisions in the Loan Documents, each
Lender severally but not jointly agrees to extend credit to Borrower in
accordance with the following provisions.

2.1 REVOLVING FACILITY. Each Lender severally but not jointly agrees to
lend to Borrower that Lender's Commitment Percentage of Borrowings (OTHER THAN
Swing Borrowings) which Borrower may borrow, repay, and reborrow under this
agreement SUBJECT TO the following conditions:

(a) Each Borrowing may only occur on a Business Day on or after the
Closing Date and before the Termination Date;

(b) Each Borrowing may only be (i) $1,000,000 or a greater integral
multiple of $100,000 if a Base-Rate Borrowing or (ii) $4,000,000 or a
greater integral multiple of $1,000,000 if a CD-Rate Borrowing or a LIBOR-
Rate Borrowing;

(c) The SUM of (i) the Commitment Usage, PLUS (ii) the total undrawn
and uncancelled face amount of, and all unpaid drafts or drawings under,
all documentary and all standby letters of credit, the reimbursement
obligations for which have been assumed by any Company in connection with
any Permitted Acquisition after the Closing Date, PLUS (iii) the LC
Exposure for standby LCs MAY NEVER EXCEED the total Commitments; and

(d) The SUM of the Commitment Usage plus the LC Exposure for standby
LCs (in each case whether direct or participated) owed to that Lender MAY
NEVER EXCEED that Lender's Commitment.

2.2 BORROWING PROCEDURE. The following procedures apply to Borrowings
OTHER THAN Swing Borrowings (see SECTION 2.4):

(a) EXISTING PRINCIPAL DEBT. On the Closing Date (i) the Existing
Principal Debt is renewed, (ii) by 10:00 a.m., Agent shall notify Lenders
of the amount that each Lender must pay or receive, as the case may be, so
that each Lender is owed, under the Revolving Facility, its Commitment
Percentage of the remaining Existing Principal Debt, (iii) by 1:00 p.m.,
each Lender shall pay to Agent the amount required by it to be paid
according to that notice, (iv) by 3:00 p.m., to the extent those payments
are received by Agent, it shall distribute the amounts to be received by
each Lender according to that notice, and (v) the remaining Existing
Principal Debt under CLAUSE (ii) above will then constitute a Base-Rate
Borrowing under the Revolving Facility.

(b) BORROWING REQUEST. Borrower may request a Borrowing by making or
delivering a Borrowing Request to Agent, which is irrevocable and binding
on Borrower, stating the Type, amount, and Interest Period for each
Borrowing and which must be received by Agent no later than 11:00 a.m. on
the (i) second Business Day before the date on which funds are requested
(the "BORROWING DATE") for any LIBOR-Rate Borrowing or CD-Rate Borrowing,
or (ii) Borrowing Date for any Base-Rate Borrowing. Agent shall promptly
notify each Lender of any Borrowing Request.

(c) FUNDING. Each Lender shall remit its Commitment Percentage of
each requested Borrowing to Agent's principal office in Dallas, Texas, in
funds that are available for immediate use by Agent by 2:00 p.m. on the
applicable Borrowing Date. Subject to receipt of those funds, Agent shall
(unless to its actual knowledge any of the applicable conditions precedent
have not been satisfied by Borrower or waived by the requisite Lenders
under SECTION 14.8) make those funds available to Borrower by (at
Borrower's option) (i) wiring the funds to or for the account of

Borrower at the direction of Borrower or (ii) depositing the funds in
Borrower's account with Agent.

(d) FUNDING ASSUMED. Absent contrary written notice from a Lender,
Agent may assume that each Lender has made its Commitment Percentage of the
requested Borrowing available to Agent on the applicable Borrowing Date,
and Agent may, in reliance upon such assumption (but shall not be required
to), make available to Borrower a corresponding amount. If a Lender fails
to make its Commitment Percentage of any requested Borrowing available to
Agent on the applicable Borrowing Date, Agent may recover the applicable
amount on demand, (i) from that Lender TOGETHER WITH interest, commencing
on the Borrowing Date and ending on (but excluding) the date Agent recovers
the amount from that Lender, at an annual interest rate equal to the
Federal-Funds Rate, or (ii) if that Lender fails to pay its amount upon
demand, then from Borrower. No Lender is responsible for the failure of
any other Lender to make its Commitment Percentage of any Borrowing;
HOWEVER, failure of any Lender to make its Commitment Percentage of any
Borrowing does not excuse any other Lender from making its Commitment
Percentage of any Borrowing.

2.3 LETTERS OF CREDIT.

(a) EXISTING-LC EXPOSURE. The Existing-LC Exposure is renewed
without any additional fees under SECTION 4.3 EXCEPT when an Existing LC is
reissued or extended or as may be otherwise provided in the related LC
Agreement.

(b) CONDITIONS. Subject to the terms and conditions of this
agreement and applicable Law, Agent (itself or through one of its
Affiliates, and references in this SECTION 2.3 to AGENT include those
Affiliates), and, in some instances, certain Lenders, agree to issue LCs
upon Borrower's making or delivering an LC Request and delivering an LC
Agreement, both of which must be received by Agent or Lender no later than
on the Business Day before the requested LC is to be issued, SO LONG AS
(i) no LC may expire after three Business Days before the Termination Date,
(ii) the LC Exposure for standby LCs does not exceed $20,000,000 (or, if
issued by a Lender, after aggregation with the documentary LCs and BAs
issued by any Lender other than Agent and all outstanding standby LCs
issued by any Lender other than Agent, $3,000,000), (iii) the LC Exposure
for documentary LCs and BAs into which they may have been converted does
not exceed $20,000,000 (or if issued by a Lender, after aggregation with
the standby LCs issued by any Lender other than Agent, and all outstanding
documentary LCs and BAs issued by any Lender other than Agent, $3,000,000),
and (iv) the limitations in SECTIONS 2.1(c) and (d) are not exceeded.

(c) PARTICIPATION. Immediately upon Agent's or any Lender's issuance
of any LC (Lender in such capacity referred to herein as "ISSUING LENDER")
Agent or Issuing Lender shall be deemed to have sold and transferred to
each other Lender, and each other Lender shall be deemed irrevocably and
unconditionally to have purchased and received from Agent, without recourse
or warranty, an undivided interest and participation to the extent of such
Lender's Commitment Percentage in the LC and all applicable Rights of Agent
or Issuing Lender in the LC -- OTHER THAN Rights to receive certain fees
provided in SECTION 4.3 to be for Agent's sole account. If no Default or
Potential Default exists on the Termination Date for those Lenders whose
Commitments are not extended under SECTION 2.6, then (i) the participation
of those Lenders in

each outstanding LC shall be terminated and (ii) the participation by each
Lender whose Commitment has been extended under SECTION 2.6 shall be
deemed to have irrevocably and unconditionally increased in all
then-outstanding LCs to that Lender's Commitment Percentage recalculated
to take into account the termination of the Commitments of those Lenders
described in CLAUSE (i) above.

(d) REIMBURSEMENT OBLIGATIONS. To induce Agent to issue and maintain
LCs, and to induce Lenders to participate in issued LCs, Borrower agrees to
pay or reimburse Agent (i) on the date when any draft or draw request is
presented under any LC, the amount paid or to be paid by Agent and
(ii) promptly, upon demand, the amount of any additional fees Agent
customarily charges for the application and issuance of an LC, for amending
LC Agreements, for honoring drafts and draw requests, and for taking
similar action in connection with letters of credit. If Borrower has not
reimbursed Agent for any drafts or draws paid or to be paid on the date of
Agent's demand for reimbursement, Agent is irrevocably authorized to fund
Borrower's reimbursement obligations as a Base-Rate Borrowing if proceeds
are available and if the conditions in this agreement for such a Borrowing
(OTHER THAN any notice requirements or minimum funding amounts) have, to
Agent's knowledge, been satisfied. The proceeds of that Borrowing shall be
advanced directly to Agent to pay Borrower's unpaid reimbursement
obligations. If funds cannot be advanced, then Borrower's reimbursement
obligation shall constitute a demand obligation. Borrower's obligations
under this section are absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim, or defense to
payment that Borrower may have at any time against Agent or any other
Person. From Agent's demand for reimbursement to the date paid (including
any payment from proceeds of a Base-Rate Borrowing), unpaid reimbursement
amounts accrue interest that is payable on demand at the Default Rate
thereafter.

(e) GENERAL. Agent or Issuing Lender shall promptly notify Borrower
of the date and amount of any draft or draw request presented for honor
under any LC (but failure to give notice will not affect Borrower's
obligations under this agreement). Agent or Issuing Lender shall pay the
requested amount upon presentment of a draft or draw request unless
presentment on its face does not comply with the terms of the applicable
LC. When making payment, Agent or Issuing Lender may disregard (i) any
default or potential default that exists under any other agreement and
(ii) obligations under any other agreement that have or have not been
performed by the beneficiary or any other Person (and neither Agent nor
Issuing Lender is liable for any of those obligations). Borrower's
reimbursement obligations to Agent and Lenders, and each Lender's
obligations to Agent, under this section are absolute and unconditional
irrespective of, and Agent is not responsible for, (i) the validity,
enforceability, sufficiency, accuracy, or genuineness of documents or
endorsements (even if they are in any respect invalid, unenforceable,
insufficient, inaccurate, fraudulent, or forged), (ii) any dispute by any
Company with or any Company's claims, setoffs, defenses, counterclaims, or
other Rights against Agent, any Lender, or any other Person, or (iii) the
occurrence of any Potential Default or Default. However, nothing in this
agreement constitutes a waiver of Borrower's Rights to assert any claim or
defense based upon the gross negligence or willful misconduct of Agent or
any Lender. Agent shall promptly distribute reimbursement payments
received from Borrower to all Lenders according to their Pro Rata Part.

(f) OBLIGATIONS OF LENDERS. If Borrower fails to reimburse Agent as
provided in SECTION 2.3(d) within 24 hours after Agent's demand for
reimbursement, and funds cannot be

advanced to satisfy the reimbursement obligations, Agent shall promptly
notify each Lender of Borrower's failure, of the date and amount paid,
and of each Lender's Commitment Percentage of the unreimbursed amount.
Each Lender shall promptly and unconditionally make available to Agent
in immediately available funds its Commitment Percentage of the unpaid
reimbursement obligation, subject to the limitations of SECTION 2.1(d).
Funds are due and payable to Agent before the close of business on the
Business Day when Agent gives notice to each Lender of Borrower's
reimbursement failure (if notice is given before 1:00 p.m.) or on the
next succeeding Business Day (if notice is given after 1:00 p.m.). All
amounts payable by any Lender accrue interest after the due date at the
Federal-Funds Rate from the day the applicable draft or draw is paid by
Agent to (but not including) the date the amount is paid by the Lender
to Agent.

(g) DUTIES OF AGENT. Agent and Issuing Lenders agrees with each
Lender that it will exercise and give the same care and attention to each
LC as it gives to its other letters of credit. Each Lender and Borrower
agree that, in paying any draft or draw under any LC, neither Agent nor
Issuing Lender has responsibility to obtain any document (OTHER THAN any
documents expressly required by the respective LC) or to ascertain or
inquire as to any document's validity, enforceability, sufficiency,
accuracy, or genuineness or the authority of any Person delivering it.
Neither Agent nor its Representatives will be liable to any Lender or any
Company for any LC's use or for any beneficiary's acts or omissions. Any
action, inaction, error, delay, or omission taken or suffered by Agent or
any of its Representatives in connection with any LC, applicable draws,
drafts, or documents, or the transmission, dispatch, or delivery of any
related message or advice, if in good faith and in conformity with
applicable Laws and in accordance with the standards of care specified in
the UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS (1993 REVISION),
INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500 (as amended or
modified), is binding upon the Companies and Lenders and does not place
Agent or any of its Representatives under any resulting liability to any
Company or any Lender. Agent is not liable to any Company or any Lender
for any action taken or omitted, in the absence of gross negligence or
willful misconduct, by Agent or its Representative in connection with any
LC.

(h) CASH COLLATERAL. On the Termination Date and if requested by
Determining Lenders while a Default exists, Borrower shall provide Agent
and Issuing Lenders, for the benefit of Lenders, cash collateral in an
amount to equal the then-existing LC Exposure.

(i) INDEMNIFICATION. BORROWER SHALL PROTECT, INDEMNIFY, PAY, AND
SAVE AGENT, EACH LENDER, AND THEIR RESPECTIVE REPRESENTATIVES HARMLESS FROM
AND AGAINST ANY AND ALL CLAIMS, DEMANDS, LIABILITIES, DAMAGES, LOSSES,
COSTS, CHARGES, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) WHICH
ANY OF THEM MAY INCUR OR BE SUBJECT TO AS A CONSEQUENCE OF THE ISSUANCE OF
ANY LC, ANY DISPUTE ABOUT IT, OR THE FAILURE OF AGENT TO HONOR A DRAFT OR
DRAW REQUEST UNDER ANY LC AS A RESULT OF ANY ACT OR OMISSION (WHETHER RIGHT
OR WRONG) OF ANY PRESENT OR FUTURE TRIBUNAL. HOWEVER, NO PERSON IS
ENTITLED TO INDEMNITY UNDER THE FOREGOING FOR ITS OWN GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT.

(j) LC AGREEMENTS. Although referenced in any LC, terms of any
particular agreement or other obligation to the beneficiary are not
incorporated into this agreement in any manner. The fees and other amounts
payable with respect to each LC are as provided in this agreement, drafts
and draws under each LC are part of the Obligations, only the events
specified

in this agreement as a Default shall constitute a default under any LC,
and the terms of this agreement control any conflict between the terms
of this agreement and any LC Agreement.

2.4 SWING-LINE SUBFACILITY.

(a) CONDITIONS. For the convenience of the parties, Agent, solely
for its own account, may make any requested Borrowing of $100,000 (or a
greater integral multiple of $50,000) directly to Borrower as a Swing
Borrowing without requiring each other Lender to fund its Commitment
Percentage thereof unless and until SECTION 2.4(b) is applicable. Swing
Borrowings are subject to the following conditions:

(i) Each Swing Borrowing must occur on a Business Day before the
Termination Date;

(ii) The total Principal Debt for Swing Borrowings may not exceed
$5,000,000, and the Commitment Usage may not exceed the total
Commitments (as that amount is reduced and cancelled in accordance
with this agreement);

(iii) The first Borrowing Request after Borrower has received
a Swing Borrowing shall be for an amount at least equal to that Swing
Borrowing and the proceeds of the requested Borrowing shall be used to
reduce the Principal Debt for Swing Borrowings to zero; and

(iv) Each Swing Borrowing bears interest at the lesser of (a) the
Swing Rate or (b) the Maximum Rate; and

(v) Each Borrowing under the Swing-Line Subfacility is available
and may be prepaid on same-day telephonic notice from Borrower to
Agent, if notice is received by 2:00 p.m.

(b) If Borrower fails to repay any Swing Borrowing within two
Business Days after demand by Agent (or upon the Termination Date), Agent
shall promptly notify each Lender of Borrower's failure and the unpaid
amount. No later than the close of business on the date Agent gives notice
(if notice is given before 12:00 noon on any Business Day, or, if made at
any other time, on the next Business Day following the date of notice),
each Lender shall irrevocably and unconditionally purchase and receive from
Agent a ratable participation in such Swing Borrowing and shall make
available to Agent in immediately available funds its Commitment Percentage
of such unpaid amount, together with interest from the date when its
payment was due to, but not including, the date of payment, at the Default
Rate. If a Lender does not promptly pay its amount upon Agent's demand,
and until Lender makes the required payment, Agent is deemed to continue to
have outstanding a Swing Borrowing in the amount of the Lender's unpaid
obligation. Borrower shall make each payment of all or any part of any
Swing Borrowing to Agent for the ratable benefit of Agent and those Lenders
who have funded their participations in Swing Borrowings under this section
(but all interest accruing on Swing Borrowings before the funding date of
any participation is payable solely to Agent for its own account).

2.5 BORROWING REQUESTS AND LC REQUESTS. Each Borrowing Request and LC
Request constitutes a representation and warranty by Borrower that as of the
Borrowing Date or the date of issuance of the requested LC, as the case may be,
that all of the conditions precedent in SECTION 6 have been satisfied.

2.6 EXTENSION OF FACILITY. At any time during the 90-day period before
the first anniversary of the Closing Date, Borrower may give a written request
to Agent that Determining Lenders extend the Termination Date for one year.
Determining Lenders may, in their sole discretion, grant Borrower's request by
executing an amendment to this agreement amending CLAUSE (a) of the definition
of Termination Date to be the sixth anniversary of the Closing Date as between
themselves and Borrower. For those Lenders that do not execute that amendment,
the date in CLAUSE (a) of the definition of Termination Date remains the fifth
anniversary of the Closing Date as between them and Borrower. If Determining
Lenders fail to respond to Borrower's request, Borrower's request is deemed
denied.

2.7 TERMINATION. Borrower may -- upon giving at least five Business
Days prior written and irrevocable notice to Agent -- terminate all or part of
the unused portion of the Commitment. Each partial termination must be in an
amount of not less than $10,000,000 or a greater integral multiple of
$1,000,000, and must be ratable in accordance with each Lender's Commitment
Percentage. At the time of any termination, Borrower shall pay to Agent, for
the account of each Lender, as applicable, all accrued and unpaid fees under
this agreement and the interest attributable to the amount of that reduction.
Any part of the Commitments terminated may not be reinstated.

2.8 INCREASES IN REVOLVING FACILITY. Notwithstanding anything to the
contrary, Borrower may request one or more Lenders to increase their respective
share of the Revolving Facility so that the total Revolving Facility may be
increased to no more than $175,000,000. That increase, unless prior to the
Closing Date, must be effected by an amendment to this agreement under
SECTION 14.8 that is executed by Borrower, Agent, and the one or more Lenders
selected by Borrower who have agreed to increase their Commitments and by
Borrower's execution and delivery of a replacement Revolving Note.

SECTION 3 TERMS OF PAYMENT.

3.1 NOTES AND PAYMENTS.

(a) NOTES. Principal Debt under the Revolving Facility (OTHER THAN
Principal Debt under the Swing-Line Subfacility) is evidenced by the
Revolving Notes, one payable to each Lender in the stated amount of its
Commitment. Principal Debt under the Swing-Line Subfacility shall be
evidenced by a Swing-Line Note payable to Agent in the stated principal
amount of $5,000,000.

(b) PAYMENT. Borrower must make each payment and prepayment on the
Obligations to Agent's principal office in Dallas, Texas in immediately
available funds by 2:00 p.m. on the day due; otherwise, but subject to
SECTION 3.8, those funds continue to accrue interest as if they were
received on the next Business Day. Agent shall promptly pay to each Lender
the part of any payment or prepayment to which that Lender is entitled
under this agreement on the same day Agent receives the funds from
Borrower.

(c) PAYMENT ASSUMED. Unless Agent has received notice from Borrower
prior to the date on which any payment is due under this agreement that
Borrower will not make that payment in full, Agent may assume that Borrower
has made the full payment due and Agent may, in reliance upon that
assumption, cause to be distributed to each Lender on that date the amount
then due to each Lender. If and to the extent Borrower does not make the
full payment due to Agent, each Lender shall repay to Agent on demand the
amount distributed to that Lender by Agent together with interest for each
day from the date that Lender received payment from Agent until the date
that Lender repays Agent (unless such repayment is made on the same day as
such distribution), at an interest rate equal to the Federal-Funds Rate.

3.2 INTEREST AND PRINCIPAL PAYMENTS.

(a) INTEREST. Accrued interest on each CD-Rate Borrowing and LIBOR-
Rate Borrowing is due and payable on the last day of its respective
Interest Period. If any Interest Period for a LIBOR-Rate Borrowing is
greater than three months, then accrued interest is also due and payable on
the date three months after the commencement of the Interest Period. If
any Interest Period for a CD-Rate Borrowing is greater than 90 days, then
accrued interest is also due and payable on the 90th day after the
commencement of the Interest Period. Accrued interest on each Borrowing is
due and payable on the last day of each March, June, September, and
December -- commencing on the first of those dates that follows the Closing
Date -- and on the Termination Date. Accrued interest on each Base-Rate
Borrowing which is also a Swing Borrowing is due and payable on the last
day of each month (commencing December 28, 1996) and on the Termination
Date.

(b) PRINCIPAL. The Principal Debt is due and payable on the
Termination Date. Before that date, Borrower may at any time prepay,
without penalty and in whole or in part, the Principal Debt SO LONG AS (i)
each voluntary partial prepayment must be in a principal amount not less
than $1,000,000 or a greater integral multiple of $100,000 and (ii)
Borrower shall pay any related Funding Loss upon demand. Conversions under
SECTION 3.10 are not prepayments.

(i) CHANGE OF CONTROL. Upon the occurrence of a Change of
Control, Borrower shall prepay the Principal Debt.

(ii) ASSET SALE. Within 270 days after any Permitted Asset Sale,
which, in a single transaction or series of related transactions, has
either (i) a fair market value in excess of $500,000, or (ii) Net
Proceeds in excess of $500,000, Borrower shall make a mandatory
prepayment of the Obligation in an amount equal to 100% of the Net
Proceeds, but only to the extent Borrower or its Subsidiary has not
used such proceeds for working capital or general corporate purposes
or not otherwise prohibited in this agreement or in the Indenture
executed by the Companies and Bank One, Columbus, N.A., as trustee, or
reinvested the Net Proceeds in property or assets related to the
business of Borrower.

(iii) EQUITY ISSUANCE. Upon any issuance of Equity Interests
by a Company, such Company shall make a mandatory prepayment of the
Obligation in an amount equal to 100% of the Net Proceeds to the
extent Company has not used such proceeds for

working capital or general corporate purposes or not otherwise
prohibited in this agreement or in the Indenture executed by the
Companies and Bank One, Columbus, N.A., as trustee, or reinvested
the Net Proceeds in property or assets related to the business of
Borrower within 270 days after such issuance.

3.3 INTEREST OPTIONS. Except that the LIBOR Rate and CD Rate may not be
selected when a Default or Potential Default exists and except as otherwise
provided in this agreement, Borrowings bear interest at an annual rate equal to
the LESSER OF (a) the Base Rate plus the Applicable Margin, the CD Rate plus the
Applicable Margin, or the LIBOR Rate plus the Applicable Margin (in each case as
designated or deemed designated by Borrower), as the case may be, AND (b) the
Maximum Rate. Each change in the Base Rate and Maximum Rate is effective,
without notice to Borrower or any other Person, upon the effective date of
change.

3.4 QUOTATION OF RATES. Borrower may call Agent before delivering a
Borrowing Request to receive an indication of the interest rates then in effect,
but the indicated rates do not bind Agent or Lenders or affect the interest rate
that is actually in effect when Borrower makes a Borrowing request or on the
Borrowing Date.

3.5 DEFAULT RATE. If permitted by Law, all past-due Principal Debt,
Borrower's past-due payment and reimbursement obligations in connection with
LCs, and past-due interest accruing on any of the foregoing bears interest from
the date due (stated or by acceleration) at the Default Rate until paid,
regardless whether payment is made before or after entry of a judgment.

3.6 INTEREST RECAPTURE. If the designated interest rate applicable to any
Borrowing exceeds the Maximum Rate, the interest rate on that Borrowing is
limited to the Maximum Rate, but any subsequent reductions in the designated
rate shall not reduce the interest rate thereon below the Maximum Rate until the
total amount of accrued interest equals the amount of interest that would have
accrued if that designated rate had always been in effect. If at maturity
(stated or by acceleration), or at final payment of the Notes, the total
interest paid or accrued is less than the interest that would have accrued if
the designated rates had always been in effect, then, at that time and to the
extent permitted by Law, Borrower shall pay an amount equal to the difference
between (a) the LESSER of the amount of interest that would have accrued if the
designated rates had always been in effect AND the amount of interest that would
have accrued if the Maximum Rate had always been in effect, and (b) the amount
of interest actually paid or accrued on the Notes.

3.7 INTEREST CALCULATIONS. Interest will be calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed but computed as if each calendar year consisted of 360 days (unless the
calculation would result in an interest rate greater than the Maximum Rate, in
which event interest will be calculated on the basis of a year of 365 or 366
days, as the case may be). All interest rate determinations and calculations by
Agent are conclusive and binding absent manifest error.

3.8 MAXIMUM RATE. Regardless of any provision contained in any Loan
Document, no Lender is entitled to contract for, charge, take, reserve, receive,
or apply, as interest on all or any part of the Obligations, any amount in
excess of the Maximum Rate, and, if Lenders ever do so, then any excess shall be
treated as a partial prepayment of principal and any remaining excess shall be
refunded to Borrower. In determining if the interest paid or payable exceeds
the Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted
under applicable Law, (a) treat all Borrowings as but a single extension of

credit (and Lenders and Borrower agree that is the case and that provision in
this agreement for multiple Borrowings is for convenience only), (b)
characterize any nonprincipal payment as an expense, fee, or premium rather
than as interest, (c) exclude voluntary prepayments and their effects, and
(d) amortize, prorate, allocate, and spread the total amount of interest
throughout the entire contemplated term of the Obligations. However, if the
Obligations are paid in full before the end of their full contemplated term,
and if the interest received for its actual period of existence exceeds the
Maximum Amount, Lenders shall refund any excess (and Lenders may not, to the
extent permitted by Law, be subject to any penalties provided by any Laws for
contracting for, charging, taking, reserving, or receiving interest in excess
of the Maximum Amount). If the Laws of the State of Texas are applicable for
purposes of determining the "MAXIMUM RATE" or the "MAXIMUM AMOUNT," then
those terms mean the "INDICATED RATE CEILING" from time to time in effect
under ARTICLE 5069-1.04, TITLE 79, REVISED CIVIL STATUTES OF TEXAS, as
amended. Borrower agrees that CHAPTER 15, SUBTITLE 79, REVISED CIVIL STATUTES
OF TEXAS, 1925, as amended (which regulates certain revolving credit loan
accounts and revolving triparty accounts), does not apply to the Obligations.

3.9 INTEREST PERIODS. When Borrower requests any CD-Rate Borrowing or
LIBOR-Rate Borrowing, Borrower may elect the applicable interest period (each an
"INTEREST PERIOD"), which may be, at Borrower's option, 30, 60, 90, or 180 days
for CD-Rate Borrowings, and one, two, three, or six months for LIBOR-Rate
Borrowings, subject to the following conditions: (a) the initial Interest
Period for a CD-Rate Borrowing and a LIBOR-Rate Borrowing commences on the
applicable Borrowing Date or conversion date, and each subsequent Interest
Period applicable to any Borrowing commences on the day when the next preceding
applicable Interest Period expires; (b) if any Interest Period for a CD-Rate
Borrowing or a LIBOR-Rate Borrowing begins on a day for which no numerically
corresponding Business Day in the calendar month at the end of the Interest
Period exists, then the Interest Period ends on the last Business Day of that
calendar month; (c) no Interest Period for any portion of Principal Debt may
extend beyond the scheduled repayment date for that portion of Principal Debt;
and (d) no more than ten Interest Periods may be in effect at one time.

3.10 CONVERSIONS. Subject to the dollar limits and denominations of
SECTION 2.1(b), Borrower may (a) convert a LIBOR-Rate Borrowing on the last day
of the applicable Interest Period to a Base-Rate Borrowing or a CD-Rate
Borrowing, (b) convert a CD-Rate Borrowing on the last day of an Interest Period
to a Base-Rate Borrowing or a LIBOR-Rate Borrowing, (c) convert a Base-Rate
Borrowing at any time to a CD-Rate Borrowing or a LIBOR-Rate Borrowing, and
(d) elect a new Interest Period for a CD-Rate Borrowing or a LIBOR-Rate
Borrowing, by telephonic request to Agent no later than 11:00 a.m. on the third
Business Day before the conversion date or the last day of the Interest Period,
as the case may be (for conversion to a CD-Rate Borrowing or a LIBOR-Rate
Borrowing or election of a new Interest Period), and no later than 11:00 a.m.
one Business Day before the last day of the Interest Period (for conversion to a
Base-Rate Borrowing). Borrower shall provide a Notice of Conversion to Agent no
later than two days after the date of the conversion. Absent Borrower's
telephonic request for conversion or election of a new Interest Period, a CD-
Rate Borrowing and a LIBOR-Rate Borrowing shall be deemed converted to a Base-
Rate Borrowing effective when the applicable Interest Period expires.

3.11 ORDER OF APPLICATION.

(a) NO DEFAULT. If no Default or Potential Default exists, any
payment shall be applied to the Obligations -- EXCEPT as otherwise
specifically provided in the Loan Documents -- in the order and manner as
Borrower directs.

(b) DEFAULT. If a Default or Potential Default exists or if Borrower
fails to give direction, any payment (including proceeds from the exercise
of any Rights) shall be applied in the following order: (i) To all fees
and expenses for which Agent or Lenders have not been paid or reimbursed in
accordance with the Loan Documents (and if such payment is less than all
unpaid or unreimbursed fees and expenses, then the payment shall be paid
against unpaid and unreimbursed fees and expenses in the order of
incurrence or due date); (ii) to accrued interest on the Principal Debt;
(iii) to the Principal Debt outstanding under the Swing-Line Subfacility;
(iv) to any LC reimbursement obligations that are due and payable and that
remain unfunded by any Borrowing; (v) to the remaining Principal Debt in
the order as Determining Lenders may elect (but Determining Lenders agree
to apply proceeds in an order that will minimize any Funding Loss); (vi) to
the remaining Obligations in the order and manner Determining Lenders deem
appropriate; and (vii) as a deposit with Agent, for the benefit of Lenders,
as security for and payment of any subsequent LC reimbursement obligations.

(c) PRO RATA. Payments of the Principal Debt and accrued interest
due as of the Termination Date for those Lenders whose Commitments have not
been extended under SECTION 2.6 shall, if no Default or Potential Default
then exists, be paid to each of them in the proportion for each of those
Lenders that such Principal Debt and interest owed to it bears to such
Principal Debt and interest owed to all of those Lenders at that time.
Otherwise, each payment or prepayment shall be distributed to each Lender
in accordance with its Pro Rata Part of that payment or prepayment.

3.12 SHARING OF PAYMENTS, ETC.. If any Lender obtains any payment or
prepayment with respect to the Obligations (whether voluntary, involuntary,
or otherwise, including, without limitation, as a result of exercising its
Rights under SECTION 3.13) that exceeds the part of that payment or
prepayment that it is then entitled to receive under the Loan Documents, then
that Lender shall purchase from the other Lenders participations that will
cause the purchasing Lender to share the excess payment or prepayment ratably
with each other Lender. If all or any portion of any excess payment or
prepayment is subsequently recovered from the purchasing Lender, then the
purchase shall be rescinded and the purchase price restored to the extent of
the recovery. Borrower agrees that any Lender purchasing a participation
from another Lender under this section may, to the fullest extent permitted
by Law, exercise all of its Rights of payment (including the Right of offset)
with respect to that participation as fully as if that Lender were the direct
creditor of Borrower in the amount of that participation.

3.13 OFFSET. If a Default exists, each Lender is entitled to exercise (for
the benefit of all Lenders in accordance with SECTION 3.12) the Rights of offset
and banker's Lien against each and every account and other property, or any
interest therein, that any Company may now or hereafter have with, or which is
now or hereafter in the possession of, that Lender to the extent of the full
amount of the Obligations owed (directly or participated) to it.

3.14 BOOKING BORROWINGS. To the extent permitted by Law, any Lender may
make, carry, or transfer its Borrowings at, to, or for the account of any of its
branch offices or the office of any of its Affiliates. However, no Affiliate is
entitled to receive any greater payment under SECTION 3.16 than the transferor
Lender would have been entitled to receive with respect to those Borrowings.

3.15 BASIS UNAVAILABLE OR INADEQUATE FOR CD RATE, SWING RATE, OR LIBOR
RATE. If, on or before any date when a CD Rate, Swing Rate, or a LIBOR Rate is
to be determined for a Borrowing,

Agent or any Lender determines (and Determining Lenders agree with that
determination) that the basis for determining the applicable rate is not
available or that the resulting rate does not accurately reflect the cost to
Lenders of making or converting Borrowings at that rate for the applicable
Interest Period, then Agent shall promptly notify Borrower and Lenders of
that determination (which is conclusive and binding on Borrower absent
manifest error) and the applicable Borrowing shall bear interest at the SUM
of the Base Rate PLUS the Applicable Margin. Until Agent notifies Borrower
that those circumstances no longer exist, Lenders' commitments under this
agreement to make, or to convert to, CD-Rate Borrowings, Swing Borrowings,
and LIBOR-Rate Borrowings, as the case may be, are suspended.

3.16 ADDITIONAL COSTS. Each Lender severally and not jointly agrees to
notify Agent, the other Lenders, and Borrower within one year after it has
actual knowledge that any circumstances exist that would give rise to any
payment obligation by Borrower under CLAUSES (a) through (c) below. Although no
Lender shall have any liability to Agent, any other Lender, or any Company for
its failure to give that notice, Borrower is not obligated to pay any amounts
under those clauses that arise, accrue, or are imposed more than one year before
that notice to the extent it is applicable to those amounts.

(a) RESERVES. With respect to any CD-Rate Borrowing, Swing
Borrowing, or LIBOR-Rate Borrowing (i) if any present or future Law
imposes, modifies, or deems applicable (or if compliance by any Lender with
any requirement of any Tribunal results in) any requirement that any
reserves (including, without limitation, any marginal, emergency,
supplemental, or special reserves) be maintained, and if (ii) those
reserves reduce any sums receivable by that Lender under this agreement or
increase the costs incurred by that Lender in advancing or maintaining any
portion of any CD-Rate Borrowing, Swing Borrowing, or LIBOR-Rate Borrowing,
then (iii) that Lender (through Agent) shall deliver to Borrower a
certificate setting forth in reasonable detail the calculation of the
amount necessary to compensate it for its reduction or increase (which
certificate is conclusive and binding absent manifest error), and
(iv) Borrower shall promptly pay that amount to that Lender upon demand.
The provisions of and undertakings and indemnification set forth in this
paragraph shall survive the satisfaction and payment of the Obligations and
termination of this agreement.

(b) CAPITAL ADEQUACY. With respect to any Borrowing or LC if any
present or future Law regarding capital adequacy or compliance by Agent (as
issuer of LCs) or any Lender with any request, directive, or requirement
now existing or hereafter imposed by any Tribunal regarding capital
adequacy, or any change in its written policies or in the risk category of
this transaction, reduces the rate of return on its capital as a
consequence of its obligations under this agreement to a level below that
which it otherwise could have achieved (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by it to be
material (and it may, in determining the amount, utilize reasonable
assumptions and allocations of costs and expenses and use any reasonable
averaging or attribution method), then (unless the effect is already
reflected in the rate of interest then applicable under this agreement)
Agent or that Lender (through Agent) shall notify Borrower and deliver to
Borrower a certificate setting forth in reasonable detail the calculation
of the amount necessary to compensate it (which certificate is conclusive
and binding absent manifest error), and Borrower shall promptly pay that
amount to Agent or that Lender upon demand. The provisions of and
undertakings and indemnification set forth in this paragraph shall survive
the satisfaction and payment of the Obligations and termination of this
agreement.

(c) TAXES. Any Taxes payable by Agent or any Lender or ruled (by a
Tribunal) payable by Agent or any Lender in respect of this agreement or
any other Loan Document shall, if permitted by Law, be paid by Borrower,
together with interest and penalties, if any (except for Taxes payable on
the overall net income of Agent or that Lender and except for interest and
penalties incurred as a result of the gross negligence or willful
misconduct of Agent or any Lender). Agent or that Lender (through Agent)
shall notify Borrower and deliver to Borrower a certificate setting forth
in reasonable detail the calculation of the amount of payable Taxes, which
certificate is conclusive and binding (absent manifest error), and Borrower
shall promptly pay that amount to Agent for its account or the account of
that Lender, as the case may be. If Agent or that Lender subsequently
receives a refund of the Taxes paid to it by Borrower, then the recipient
shall promptly pay the refund to Borrower.

3.17 CHANGE IN LAWS. If any Law makes it unlawful for any Lender to make
or maintain CD-Rate Borrowings, Swing Borrowings, or LIBOR-Rate Borrowings, then
that Lender shall promptly notify Borrower and Agent, and (a) as to undisbursed
funds, that requested Borrowing shall be made as a Base-Rate Borrowing, and
(b) as to any outstanding Borrowing (i) if maintaining the Borrowing until the
last day of the applicable Interest Period is unlawful, the Borrowing shall be
converted to a Base-Rate Borrowing as of the date of notice, in which event
Borrower will not be required to pay any related Funding Loss, or (ii) if not
prohibited by Law, the Borrowing shall be converted to a Base-Rate Borrowing as
of the last day of the applicable Interest Period, or (iii) if any conversion
will not resolve the unlawfulness, Borrower shall promptly prepay the Borrowing,
without penalty or any related Funding Loss.

3.18 FUNDING LOSS. EXCEPT when excused under SECTION 3.17, Borrower agrees
to indemnify each Lender against, and pay to it upon demand, any Funding Loss of
that Lender. When any Lender demands that Borrower pay any Funding Loss, that
Lender shall deliver to Borrower and Agent a certificate setting forth in
reasonable detail the basis for imposing Funding Loss and the calculation of the
amount, which calculation is conclusive and binding absent manifest error. The
provisions of and undertakings and indemnification set forth in this paragraph
shall survive the satisfaction and payment of the Obligations and termination of
this agreement.

3.19 FOREIGN LENDERS, PARTICIPANTS, AND ASSIGNEES. Each Lender,
Participant (by accepting a participation interest under this agreement), and
Assignee (by executing an Assignment and Assumption Agreement) that is not
organized under the Laws of the United States of America or one of its states
(a) represents to Agent and Borrower that (i) no Taxes are required to be
withheld by Agent or Borrower with respect to any payments to be made to it in
respect of the Obligations and (ii) it has furnished to Agent and Borrower two
duly completed copies of either U.S. Internal Revenue Service FORM 4224, FORM
1001, FORM W-8, or any other form acceptable to Agent that entitles it to
exemption from U.S. federal withholding Tax on all interest payments under the
Loan Documents, and (b) covenants to (i) provide Agent and Borrower a new FORM
4224, FORM 1001, FORM W-8, or other form acceptable to Agent upon the expiration
or obsolescence of any previously delivered form according to Law, duly executed
and completed by it, and (ii) comply from time to time with all Laws with regard
to the withholding Tax exemption. If any of the foregoing is not true or the
applicable forms are not provided, then Borrower and Agent (without duplication)
may deduct and withhold from interest payments under the Loan Documents any
United States federal-income Tax at the maximum rate under the Code.

SECTION 4 FEES.

4.1 TREATMENT OF FEES. The fees described in this SECTION 4 (a) are not
compensation for the use, detention, or forbearance of money, (b) are in
addition to, and not in lieu of, interest and expenses otherwise described in
this agreement, (c) are payable in accordance with SECTION 3.1(b) and (c),
(d) are non-refundable, (e) to the fullest extent permitted by Law, bear
interest, if not paid when due, at the Default Rate, and (f) with respect to the
fees referenced in SECTION 4.3 and 4.4, are calculated on the basis of actual
number of days (including the first day but excluding the last day) elapsed, as
if each calendar year consisted of 360 days, unless computation would result in
an interest rate to be deemed to exist (notwithstanding the foregoing) in excess
of the Maximum Rate in which event the computation is made on the basis of a
year of 365 or 366 days, as the case may be.

4.2 FEES TO AGENT AND AFFILIATES. Borrower shall pay to Agent and its
Affiliates that Agent may designate the arrangement/structuring fee and annual
administrative fee described in the letter agreement (as it may be renewed,
extended, or modified) dated as of September 19, 1996, between Borrower, Agent,
and NationsBanc Capital Markets, Inc. Those fees are solely for the account of
Agent and its Affiliates EXCEPT to the extent that Agent may agree in writing
with any Lender in respect of that arrangement/structuring fee.

4.3 LC FEES. As a condition precedent to the issuance (including, without
limitation, the extension) of each LC, Borrower shall pay to Agent:

(a) For the account of each Lender according to each Lender's
Commitment Percentage on the day the fee is payable: (i) for a documentary
LC (or any BA into which a documentary LC is converted), an issuance fee of
0.625% per annum of the face amount of the LC (or BA, as the case may be)
payable on the date of issuance; (ii) for standby LCs under either of the
Reimbursement Agreements referred to as ITEMS 2 and 3 on SCHEDULE 9.2, the
LC fees required by and payable in accordance with those agreements; and
(iii) for any other standby LC, an issuance fee payable on the date of
issuance (and on each anniversary date of issuance if it has a tenor of
more than one year) equal to a percentage per annum of the face amount of
that LC equal to the Applicable Margin in effect for LIBOR-Rate Borrowings
on the date of issuance (or anniversary date, as the case may be); and

(b) For the account of Agent and Issuing Lender only (i) on the day
of each issuance of any LC, a fronting fee of 0.125% per annum of the face
amount of the LC, and (ii) all normal and customary out of pocket expenses
and miscellaneous charges of Agent which are subject to change at any time
without notice to Borrower EXCEPT any notice given generally to Agent's
similarly-situated customers.

On the Closing Date, Agent shall pay to each Lender that Lender's Pro Rata Part
of that portion of any LC fees Agent has received from Borrower under the
Reimbursement Agreements referred to in CLAUSE (a)(ii) above for the period from
the Closing Date through December 28, 1996. Otherwise, all LC and other fees
paid to Agent or any other parties before the date of this agreement in respect
of any Existing LCs are solely for the account of those parties without any
accounting for them or sharing of them with Agent or Lenders notwithstanding any
contrary provision in this agreement.

4.4 COMMITMENT FEE. From and after the Closing Date, Borrower shall pay
to Agent a commitment fee for Lenders according to each Lender's Commitment
Percentage. The fee is payable as it accrues on the last Business Day of each of
the fiscal months of March, June, September, and December -- commencing on the
first of those dates that follows the date of this agreement -- and on the
Termination Date. Each payment of the fee is equal to the following, determined
for the fiscal quarter (or portion of a fiscal quarter commencing on the date
of this agreement or ending on the Termination Date) preceding and including the
date it is due: from the Closing Date until the Termination Date, the product of
the Applicable Percentage multiplied by the amount by which (i) the total
Commitments exceed (ii) the sum of the average-daily Principal Debt under the
Notes (less the sum of the average daily amount of Swing Borrowings outstanding)
plus the average-daily LC Exposure for standby LCs.

4.5 RESTATEMENT FEE. As a condition precedent to the effectiveness of
this restatement, Borrower shall pay to each Lender on its Pro-Rata Part of the
Commitment if such Commitment is $20,000,000, or greater, 15 basis points, and
if such Commitment is between $10,000,000 and $20,000,000, 10 basis points.

SECTION 5 SECURITY.

5.1 GUARANTY. Borrower shall cause each of its present and future
(whether under SECTIONS 9.8 or 9.11 or otherwise) Subsidiaries to
unconditionally guarantee the full payment and performance of the Obligations by
execution of a Guaranty (OTHER THAN any foreign Subsidiary the execution of a
Guaranty by which would create a material Tax obligation for the Companies that
would not otherwise exist).

5.2 COLLATERAL. Borrower shall cause full payment and performance of the
Obligations to be secured by Lender Liens on all of the items and types of
property (TOGETHER WITH its proceeds, the "COLLATERAL") described in the present
and future Loan Documents creating Lender Liens, including, without limitation:

(a) Present and future accounts receivable and inventory of each
present and future (whether under SECTIONS 9.8 or 9.11 or otherwise)
Company (OTHER THAN any foreign Company the granting of Lender Liens by
which would create a material Tax obligation for the Companies that would
not otherwise exist);

(b) (i) 100% of the present and future capital stock of all of
Borrower's present and future (whether under SECTIONS 9.8 or 9.11 or
otherwise) domestic Subsidiaries and (ii) approximately all (but not less
than 65%) of the present and future (whether under SECTIONS 9.8 or 9.11 or
otherwise) capital stock of all of Borrower's present and future (whether
under SECTIONS 9.8 or 9.11 or otherwise) foreign Subsidiaries the pledge of
which would not create a material Tax obligation for the Companies that
would not otherwise exist.

5.3 CREATION OF LIENS AND FURTHER ASSURANCES. Borrower covenants and
agrees that the Lender Liens described in SECTION 5.2 shall be created and
perfected as a condition to funding any Borrowings or issuance of any LC.
Furthermore, Borrower shall -- and shall cause each other appropriate Company
to -- perform the acts, duly authorize, execute, acknowledge, deliver, file, and
record any additional writings, and pay all filings fees and costs as Agent or
Determining Lenders may reasonably deem appropriate or necessary to perfect and
maintain the Lender Liens and preserve and protect the Rights of Agent and

Lenders under any Loan Document, including, without limitation, furnishing the
items in PART B on SCHEDULE 6 by the deadlines specified in SCHEDULE 6 or
elsewhere in the Loan Documents.

5.4 COLLATERAL RELEASE. Agent shall release the Lender Liens on the
Collateral described in SECTIONS 5.2(a)and (b)(i) -- but not in SECTION
5.2(b)(ii) (unless the foreign Tax Laws change to permit execution of a security
agreement and guaranty by each such foreign Subsidiary pursuant to SECTION 5.6)
or the Liens described as ITEMS 9 and 10 on SCHEDULE 9.5 -- if no Default or
Potential Default exists and if the Release Rating is satisfied for Borrower,
Borrower requests the release, and Borrower delivers to Agent properly completed
(but for Agent's execution and, if necessary, acknowledgment) release documents
in form and substance satisfactory to Agent.

5.5 ADDITIONAL COMPANIES.

(a) ADDITIONAL GUARANTIES AND LENDER LIENS. As required by SECTION
5.1, 5.2, 8.11, and 9.8 and possible other provisions in the Loan Documents
(i) Pillowtex, Inc., PHC, and PMSC have all unconditionally guaranteed the
full payment and performance of the Obligations, (ii) Borrower has created
Lender Liens upon all of the issued and outstanding capital stock of
Pillowtex, Inc. and PHC, (iii) PHC has created Lender Liens on all of the
beneficial ownership of PMSC (which Agent and Lenders agree was not subject
to Lender Liens at any time when owned by Borrower), and (iv) Beacon,
Tennessee Woolen Mills, Inc., Manetta Home Fashions, Inc., Pillowtex, Inc.,
PHC, and PMSC have (A) acknowledged in writing that all assets -- limited,
in the case of PMSC, as provided in SECTION 5.5(b) below (and capital stock
transferred to them) continue to be subject to pre-existing Lender Liens
(to the extent of those Lender Liens) already encumbering those assets and
stock and (B) have created Lender Liens upon all of their respective
present and future accounts receivable and inventory.

(b) LIEN LIMITATION. SCHEDULE 5.5 is a list of inventory transferred
by Borrower to PMSC. Notwithstanding any contrary provision in any Loan
Document other than SECTION 5.5(c), the Lender Liens on the inventory
listed on SCHEDULE 5.5 are limited -- effective as of March 30, 1996,
immediately before those transfers to PMSC by Borrower -- so that they only
secure an amount of the Obligations equal to the amount corresponding to
Borrower's tax basis, which tax basis is reflected on SCHEDULE 5.5. The
limitation in this SECTION 5.5(b) applies only to the inventory on hand as
of March 30, 1996, and not to any other present or future assets now or in
the future created or owned by PMSC.

(c) NO LIEN LIMITATION. Notwithstanding SECTION 5.5(b) or any amounts
described on SCHEDULE 5.5, if at any time the ratio of the Companies'
consolidated Funded Debt to EBITDA ever exceeds 4.50 to 1.00 or if a
Default exists that has resulted in a termination of the commitments of
Lenders to extend credit under this agreement, then -- in any of those
events and automatically without further action by any Person -- the
limitation of the Lender Liens in SECTION 5.5(b) no longer is effective and
the Lender Liens on the assets and groups of assets described on SCHEDULE
5.5 secure the full payment and performance of the full Obligations.

5.6 CHANGE IN TAX LAWS. Notwithstanding anything to the contrary set
forth in this SECTION 5, in the event the Tax Laws regarding foreign
Subsidiaries are changed to remove the creation of a material Tax Obligation
against the foreign Subsidiary, each such foreign Subsidiary may, at Borrower's
and Subsidiary's discretion execute a Guaranty and Security Agreement to provide
Lender with a security

interest in all of its present and future accounts receivable and inventory
in exchange for a release of its pledge of securities.

SECTION 6 CONDITIONS PRECEDENT AND SUBSEQUENT.

6.1 CONDITIONS PRECEDENT. No Lender is obligated to fund the initial
Borrowing and Agent is not obligated to issue any LC unless Agent has received
all of the items described in PART A on SCHEDULE 6. In addition, no Lender is
obligated to fund (as opposed to continue or convert) any Borrowing and Agent is
not obligated to issue any LC or Fund any Swing Borrowing, as the case may be,
unless on the applicable Borrowing Date, issue date, or creation date (and after
giving effect to the requested Borrowing or LC), as the case may be: (a) Agent
timely receives a Borrowing Request or LC Request (together with the applicable
LC Agreement), as the case may be; (b) Agent receives any applicable LC fee;
(c) all of the representations and warranties of the Companies in the Loan
Documents are true and correct in all material respects (unless they speak to a
specific date or are based on facts which have changed by transactions
contemplated or expressly permitted by this agreement); (d) no Material Adverse
Event, Default, or Potential Default exists; (e) the funding of the Borrowing or
issuance of the LC, as the case may be, is permitted by Law; (f) no limitation
in SECTION 2.1, 2.3, or 2.4 is exceeded; and (g) completion by Borrower of the
issuance of the Senior Subordinated Debt. Each Borrowing Request and LC
Request, however delivered, constitutes Borrower's representation and warranty
that the conditions in CLAUSES (c) through (g) above are satisfied. Upon
Agent's or any Lender's reasonable request, Borrower shall deliver to Agent or
such Lender evidence substantiating any of the matters in the Loan Documents
that are necessary to enable Borrower to qualify for the Borrowing or LC, as the
case may be. Each condition precedent in this agreement (including, without
limitation, those on SCHEDULE 6) is material to the transactions contemplated by
this agreement, and time is of the essence with respect to each condition
precedent.

6.2 CONDITIONS SUBSEQUENT. Not later than 45 days after the Closing Date,
Borrower will cause Pillowtex de Mexico S. de R.L. de C.V. to execute a Security
Agreement. Additionally, in connection with the delivery of such Security
Agreement, Borrower will obtain a legal opinion from Mexico counsel as to those
items set forth on EXHIBIT E-2.

SECTION 7 REPRESENTATIONS AND WARRANTIES.** Borrower represents and warrants to
Agent and Lenders as follows:

7.1 PURPOSE. Borrower will use proceeds (which includes the LC
Subfacility) and Swing-Line Subfacility for (i) refinancing certain existing
Debt, (ii) the Companies' working capital and general corporate purposes, (iii)
issuance of standby or documentary LCs, (iv) capital expenditures in the
ordinary course of business, (v) financing a portion of the Fieldcrest Asset
Acquisition, and (vi) investments, purchase prices, payment of certain Funded
Debt, or any combination of them in connection with Permitted Acquisitions. No
Company is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying any
"MARGIN STOCK" within the meaning of

** All references in Sections 7, 8, and 9 to each Company's corporate
existence, qualification, good standing, corporate charter, and bylaws are
modified in respect of PMSC to apply (to the extent applicable) to its
trust existence, certificate of trust, and declaration of trust.

REGULATION U of the Board of Governors of the Federal Reserve System, as
amended. No part of the proceeds of any LC draft or drawing or Borrowing will
be used, directly or indirectly, for a purpose that violates any Law, including,
without limitation, REGULATION U.

7.2 CORPORATE EXISTENCE, GOOD STANDING, AND AUTHORITY. Each Company is
duly organized, validly existing, and in good standing under the Laws of its
jurisdiction of incorporation. Except where not a Material Adverse Event, each
Company (a) is (and after the Fieldcrest Asset Acquisition will be) duly
qualified to transact business and is in good standing as a foreign corporation
in each jurisdiction where the nature and extent of its business and properties
require due qualification and good standing (each of which jurisdictions is
identified on SCHEDULE 6), and (b) possesses (and after the Acquisition will
possess) all requisite authority and power to conduct its business as is now
being, or is contemplated by this agreement to be, conducted.

7.3 SUBSIDIARIES AND NAMES. Borrower has no Subsidiaries except as
disclosed on SCHEDULE 7.3 and as otherwise disclosed in writing to Agent and
Lenders from time to time after the date of this agreement to reflect any
changes to the schedule as a result of transactions permitted by this agreement.
All of the outstanding shares of capital stock (or similar voting interests) of
Borrower's Subsidiaries are (a) duly authorized, validly issued, fully paid, and
nonassessable, (b) owned of record and beneficially as described in that
schedule or those writings, free and clear of any Liens, restrictions, claims,
or Rights of another Person EXCEPT Permitted Liens, and (c) not subject to any
warrant, option, or other acquisition Right of any Person or subject to any
transfer restriction EXCEPT restrictions imposed by securities Laws and general
corporate Laws. Except as disclosed on SCHEDULE 7.3, no Company has changed its
corporate name within the four-month period before the Closing Date.

7.4 AUTHORIZATION AND CONTRAVENTION. The execution and delivery by each
Company of each Loan Document to which it is a party, the performance by it of
its obligations under those Loan Documents, and, to the extent applicable, its
completion of the Fieldcrest Asset Acquisition (a) are within its corporate
power, (b) have been duly authorized by all necessary corporate action,
(c) require no action by or filing with any Tribunal (EXCEPT any action or
filing that has been taken or made on or before the Closing Date), (d) do not
violate any provision of its charter or bylaws, (e) do not violate any provision
of Law applicable to it EXCEPT violations that individually or collectively are
not a Material Adverse Event, and (f) do not violate any material agreements to
which it is a party EXCEPT violations that are not a Material Adverse Event.

7.5 BINDING EFFECT. Upon execution and delivery by all parties to it,
each Loan Document will constitute a legal and binding obligation of each
Company party to it, enforceable against it in accordance with that Loan
Document's terms EXCEPT as that enforceability may be limited by Debtor Relief
Laws and general principles of equity.

7.6 FINANCIAL STATEMENTS. The Current Financials were prepared in
accordance with GAAP and present fairly, in all material respects, the
Companies' consolidated financial condition, results of operations, and cash
flows as of, and for the portion of the fiscal year ending on their dates
(subject only to normal year-end adjustments for interim statements). All
material liabilities of the Companies as of those dates are reflected in those
Current Financials or in the notes to them or have otherwise been disclosed to
Lenders in writing. Except for transactions directly related to, specifically
contemplated by, or expressly permitted by the Loan Documents and the Fieldcrest
Asset Acquisition, (a) no material adverse changes have occurred in the
Companies' consolidated financial condition from that shown in the Current

Financials, and (b) no Company has incurred any material liability EXCEPT Debt
that is not prohibited by the Loan Documents.

7.7 LITIGATION. EXCEPT where not a Material Adverse Event (a) no Company
is subject to, or aware of the threat of, any Litigation that is reasonably
likely to be determined adversely to any Company and (b) no outstanding or
unpaid judgments against any Company exist.

7.8 TAXES. EXCEPT where not a Material Adverse Event (a) all Tax returns
of each Company required to be filed have been filed (or extensions have been
granted) before delinquency, and (b) all Taxes imposed (including after the
Fieldcrest Asset Acquisition) upon each Company that are due and payable have
been paid before delinquency.

7.9 ENVIRONMENTAL MATTERS. EXCEPT where not a Material Adverse Event, no
Company (a) knows of any environmental condition or circumstance adversely
affecting any Company's properties or operations, (b) has received any report of
any Company's violation (or, to Borrower's knowledge, any Predecessor's
violation) of any Environmental Law, or (c) knows that any Company is under any
obligation to remedy any violation of any Environmental Law. Each Company has
taken prudent steps to determine that its properties and operations doe not
violate any Environmental Law, except violations that are not a Material Adverse
Event.

7.10 EMPLOYEE PLANS. EXCEPT where not a Material Adverse Event (a) no
Employee Plan has incurred an "ACCUMULATED FUNDING DEFICIENCY" (as defined in
SECTION 302 of ERISA or SECTION 412 of the Code), (b) no Company has incurred
liability -- EXCEPT for liabilities for premiums that have been paid or that are
not past due -- under ERISA to the PBGC in connection with any Employee Plan,
(c) no Company has withdrawn in whole or in part from participation in a
Multiemployer Plan, (d) no Company has engaged in any "PROHIBITED TRANSACTION"
(as defined in SECTION 406 of ERISA or SECTION 4975 of the Code), (e) no
"REPORTABLE EVENT" (AS DEFINED IN SECTION 4043 of ERISA) has occurred, excluding
events for which the notice requirement is waived under applicable PBGC
regulations, (f) no Company or Affiliate of any Company has any liability under
or is subject to any Lien under ERISA, the Code, or any similar provisions of
any Law of Canada or any of its provinces to or on account of any employee
benefit plan, program, scheme, or arrangement established or maintained by any
Company or Affiliate of any Company or to which any Company or any Affiliate of
any Company contributes or had an obligation to contribute, (g) each Employee
Plan complies in all material respects, both in form and operation, with ERISA
and the Code, and (h) no Multiemployer Plan is in reorganization within the
meaning of Section 418 of the Code.

7.11 PROPERTIES; LIENS. Each Company has indefeasible title to all its
property reflected on the Current Financials EXCEPT for property that is
obsolete or that has been disposed of in the ordinary course of business between
the date of the Current Financials and the date of this agreement or, after the
date of this agreement, as permitted by SECTION 9.10 or SECTION 9.11. The
Companies will acquire indefeasible title to all of the property proposed to be
conveyed to the Companies under the Asset Purchase Agreement. No Lien exists on
any property of any Company EXCEPT Permitted Liens. No Company is party or
subject to any agreement, instrument, or order which in any way restricts any
Company's ability to allow Liens to exist upon any of its assets EXCEPT relating
to Permitted Liens.

7.12 GOVERNMENT REGULATIONS. No Company is subject to regulation under the
INVESTMENT COMPANY ACT OF 1940, as amended, or the PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935, as amended.

7.13 TRANSACTIONS WITH AFFILIATES. No Company is a party to a material
transaction with any of its Affiliates (excluding other Obligated Companies)
EXCEPT transactions in the ordinary course of business and upon fair and
reasonable terms not materially less favorable than it could obtain or could
become entitled to in an arm's-length transaction with a Person that was not its
Affiliate.

7.14 DEBT. No Company has any Debt EXCEPT Permitted Debt.

7.15 LEASES. EXCEPT where not a Material Adverse Event (a) each Company
enjoys peaceful and undisturbed possession of all leases necessary for the
operation of its properties and assets, none of which contains any unusual or
burdensome provisions which might materially affect or impair the operation of
those properties and assets, and (b) all material leases under which any Company
is a lessee are in full force and effect, and to the knowledge of Borrower, no
default -- or event that, with notice, time lapse, or both, would become a
default -- exists.

7.16 INSURANCE. Each Company maintains with financially sound,
responsible, and reputable insurance companies or associations -- or, as to
workers' compensation or similar insurance, with an insurance fund or by
self-insurance authorized by the jurisdictions in which it operates -- insurance
concerning its properties and businesses against casualties and contingencies
and of types and in amounts (and with co-insurance and deductibles) as is
customary in the case of similar businesses.

7.17 LABOR MATTERS. EXCEPT where not a Material Adverse Event (a) no
actual or threatened strikes, labor disputes, slow downs, walkouts, work
stoppages, or other concerted interruptions of operations that involve any
employees employed at any time in connection with the business activities or
operations at the Real Property exist, (b) hours worked by and payment made to
the employees of any Company or (to Borrower's knowledge) any Predecessor have
not been in violation of the FAIR LABOR STANDARDS ACT or any other applicable
Laws pertaining to labor matters, (c) all payments due from any Company for
employee health and welfare insurance, including, without limitation, workers
compensation insurance, have been paid or accrued as a liability on its books,
(d) the business activities and operations of each Company are in compliance
with OSHA and other applicable health and safety Laws.

7.18 INTELLECTUAL PROPERTY. Each Company owns or has the right to use
all material licenses, patents, patent applications, copyrights, service marks,
trademarks, trademark applications and trade names necessary to continue to
conduct its businesses as presently conducted by it and proposed to be conducted
by it immediately after the date of this agreement. Each Company is conducting
its business without infringement or claim of infringement of any license,
patent, copyright, service mark, trademark, trade name, trade secret or other
intellectual property right of others, OTHER THAN any infringements or claims
that, if successfully asserted against or determined adversely to any Company,
would not, individually or collectively, constitute a Material Adverse Event.
To the knowledge of any Company, no infringement or claim of infringement by
others of any material license, patent, copyright, service mark, trademark,
trade name, trade secret or other intellectual property of any Company exists.

7.19 SOLVENCY. On each Borrowing Date and the date any LC is issued, each
Company is -- and after giving effect to the requested Borrowing or LC and the
Fieldcrest Asset Acquisition will be -- Solvent.

7.20 FULL DISCLOSURE. Each fact or condition relating to the Loan
Documents, any Company's financial condition, business, or property, or the
Fieldcrest Asset Acquisition that is a Material Adverse

Event has been disclosed in writing to Agent. All information previously
furnished by any Company to Agent in connection with the Loan Documents was
- -- and all information furnished in the future by any Company to Agent will
be -- true and accurate in all material respects or based on reasonable
estimates on the date the information is stated or certified.

7.21 FIELDCREST ASSET ACQUISITION. Borrower shall use its best efforts
to consummate the Fieldcrest Asset Acquisition on or before 45 days after the
Closing Date.

SECTION 8 AFFIRMATIVE COVENANTS.** From the Closing Date -- for purposes of
SECTIONS 8.2 and 8.11 -- or from the date of this agreement -- for all other
provisions in this SECTION 8 -- and for so long as any Lender is committed to
lend or issue LCs under this agreement and until the Obligations have been paid
in full, Borrower covenants and agrees with Agent and Lenders that, without
first obtaining Agent's written notice of Determining Lenders' consent to the
contrary:

8.1 CERTAIN ITEMS FURNISHED. Borrower shall furnish the following to
each Lender:

(a) ANNUAL FINANCIALS, ETC. Promptly after preparation but no later
than 90 days after the last day of each fiscal year of Borrower, Financial
Statements showing the Companies' consolidated financial condition and
results of operations as of, and for the year ended on, that last day,
accompanied by:

(i) the unqualified opinion of KPMG Peat Marwick or other firm of
nationally-recognized independent certified public accountants
reasonably acceptable to Determining Lenders, based on an audit using
generally accepted auditing standards, that the consolidated portion
of those Financial Statements were prepared in accordance with GAAP
and present fairly, in all material respects, the Companies'
consolidated financial condition and results of operations; and

(ii) a certificate from a Responsible Officer of Borrower certifying
that those Financial Statements were prepared in accordance with GAAP
and present fairly the Companies' consolidated financial condition and
results of operations.

(b) QUARTERLY FINANCIALS, ETC. Promptly after preparation but no
later than 45 days after the last day of each fiscal quarter of Borrower,
Financial Statements showing the Companies' consolidated financial
condition and results of operations for that fiscal quarter and for the
period from the beginning of the current fiscal year to the last day of
that fiscal quarter, accompanied by (i) a Compliance Certificate and (ii) a
summary form, reasonably acceptable to Agent, of the Companies'
consolidated-accounts-receivable aging.

(c) FINANCIAL PROJECTIONS. No later than 120 days after the end of
each fiscal year of the Companies, financial projections of the Companies
for the next succeeding three-year period, in the form reasonably
satisfactory to Agent, setting forth management's projections for each
fiscal quarter of the next-succeeding-fiscal year and on a yearly basis
thereafter.

(d) OTHER REPORTS. Promptly after preparation and distribution,
accurate and complete copies of all reports and other material
communications about material financial matters or material corporate plans
or projections by or for any Company for distribution to any Tribunal or
any existing or potential creditor (i) including, without limitation, each
FORM 10-K, 10-Q, and S-8 filed with the Securities and Exchange Commission
but (ii) excluding (A) credit, trade, and other reports prepared and
distributed in the ordinary course of business, and (B) information
otherwise furnished to Agent and Lenders under this agreement.

(e) EMPLOYEE PLANS. As soon as possible and within 30 days after
Borrower knows or has reason to know that any event which would constitute
a reportable event under SECTION 4043(b) of TITLE IV of ERISA with respect
to any Company's employee pension or other benefit plan subject to ERISA
has occurred, or that the PBGC has instituted or will institute proceedings
under ERISA to terminate that plan, deliver a certificate of a Responsible
Officer of Borrower setting forth details as to that reportable event and
the action which the Companies propose to take with respect to it, together
with a copy of any notice of that reportable event which may be required to
be filed with the PBGC, or any notice delivered by the PBGC evidencing its
intent to institute those proceedings or any notice to the PBGC that the
plan is to be terminated, as the case may be. For all purposes of this
section, Borrower is deemed to have all knowledge or knowledge of all
facts attributable to the plan administrator under ERISA.

(f) OTHER NOTICES. Notice -- promptly after Borrower knows -- of
(i) the existence and status of any Litigation that, if determined
adversely to any Company, would be a Material Adverse Event, (ii) any
change in any material fact or circumstance represented or warranted by any
Company in any Loan Document, (iii) a Default or Potential Default,
specifying the nature thereof and what action the Companies have taken, are
taking, or propose to take.

(g) APPRAISALS. Promptly after any Companies obtains them, any
appraisals of any of the assets acquired under the Asset Purchase
Agreement.

(h) OTHER INFORMATION. Promptly when reasonably requested by Agent
or any Lender, such information (not otherwise required to be furnished
under this agreement) about any Company's business affairs, assets, and
liabilities.

8.2 USE OF PROCEEDS. Borrower shall use the proceeds of Borrowings only
for the purposes represented in this agreement.

8.3 BOOKS AND RECORDS. Each Company shall maintain books, records, and
accounts necessary to prepare financial statements in accordance with GAAP.

8.4 INSPECTIONS. Upon reasonable request, each Company shall allow Agent
or any Lender (or their respective Representatives) to inspect any of its
properties, to review reports, files, and other records and to make and take
away copies, to conduct tests or investigations, and to discuss any of its
affairs, conditions, and finances with its other creditors, directors, officers,
employees, or representatives from time to time, during reasonable business
hours. Any reviews and investigations shall be limited to matters relevant to
the present or future financial condition of the Companies and their compliance
with -- or ability to comply with -- the Loan Documents.

8.5 TAXES. Each Company shall promptly pay when due any and all Taxes
EXCEPT Taxes that are being contested in good faith by lawful proceedings
diligently conducted, against which reserve or other provision required by GAAP
has been made, and in respect of which levy and execution of any Lien has been
and continues to be stayed.

8.6 PAYMENT OF OBLIGATIONS. Each Company shall promptly pay (or renew and
extend) all of its material obligations as they become due (unless the
obligations are being contested in good faith by appropriate proceedings).

8.7 EXPENSES. Borrower shall promptly pay upon demand (a) all costs,
fees, and expenses paid or incurred by Agent incident to any Loan Document
(including, without limitation, the reasonable fees and expenses of Agent's
counsel in connection with the negotiation, preparation, delivery, and execution
of the Loan Documents and any related amendment, waiver, or consent) and (b) all
reasonable costs and expenses incurred by Agent or any Lender in connection with
the enforcement of the obligations of any Company under the Loan Documents or
the exercise of any Rights under the Loan Documents (including, without
limitation, reasonable allocated costs of in-house counsel, other reasonable
attorneys' fees, and court costs), all of which are part of the Obligations,
bearing interest, if not paid upon demand, at the Default Rate until paid.

8.8 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Each Company shall
(a) EXCEPT in connection with mergers and consolidations permitted under
SECTION 9.11, maintain its corporate existence and good standing in its state of
incorporation, and (b) EXCEPT where not a Material Adverse Event (i) maintain
its authority to transact business and good standing in all other states, (ii)
maintain all licenses, permits, and franchises necessary for its business, and
(iii) keep all of its assets that are useful in and necessary to its business in
good working order and condition (ordinary wear and tear excepted) and make all
necessary repairs and replacements.

8.9 INSURANCE. Each Company shall, at its cost and expense, maintain the
insurance described in SECTION 7.16.

8.10 ENVIRONMENTAL MATTERS.

(a) Borrower shall furnish to Agent and Lenders (i) a copy of all
future Environmental Reports, if any, and reports or notices to any
Tribunal about any Release of Hazardous Substances, if any, in any
Company's possession or prepared by or on behalf of any Company in respect
of any Real Property, and (ii) a report within five Business Days after any
Company first has knowledge or reason to believe that any unreported
Release of a Hazardous Substance has occurred at any Real Property that (A)
requires or has resulted in any report or other notice to any Tribunal
under any Environmental Law or (B) results or threatens to result in the
presence of any Hazardous Substance in the environment in a quantity,
concentration, state, or other condition that substantially exceeds any
applicable standard for the protection of human health or the environment
under any Environmental Law.

(b) Borrower shall -- and shall cause each other Company to -- (i)
obtain and keep in effect all Environmental Permits in substantial
compliance with all Environmental Laws, (ii) operate and manage its
businesses, processes, and other activities in substantial compliance with
all Environmental Laws, Environmental Permits, and Environmental Indemnity
Agreements and

in a manner to avoid incurring Environmental Liabilities, to prevent any
Release of Hazardous Substances in any material amounts or in substantial
violation of any Environmental Law, and to minimize the risk of loss or
damage in the event of any Release of Hazardous Substances, (iii) keep each
Environmental Indemnity Agreement in full force and effect according to its
terms, take all steps that may be necessary or appropriate to timely assert
and receive payment or all claims under it, and (to the extent that the
material remediation or indemnity protections or benefits provided by it
would be jeopardized) not consent to any modification or amendment of any
Environmental Indemnity Agreement or waive, compromise, settle, or
otherwise release or discharge any obligation or indemnity of any
indemnitor or other obligor under it, and (iv) continuously and diligently
carry out such removal, remedial, or other response actions as may be
necessary or appropriate (A) in respect of each matter that constitutes
substantial non-compliance with any Environmental Law and (B) to prevent or
minimize potential Environmental Liabilities from any of those matters or
any Release of Hazardous Substances.

8.11 SUBSIDIARIES. Borrower shall cause each present and future Subsidiary
of Borrower (whether as a result of acquisition, creation, or otherwise) to
become an Obligated Company.

8.12 INDEMNIFICATION.

(a) THE COMPANIES SHALL, JOINTLY AND SEVERALLY INDEMNIFY AGENT AND
LENDERS AND THEIR RESPECTIVE PARENTS, SUBSIDIARIES, DIRECTORS, OFFICERS,
EMPLOYEES, REPRESENTATIVES, AGENTS, SUCCESSORS, ASSIGNS, AND ATTORNEYS
(COLLECTIVELY, THE "INDEMNIFIED PARTIES"), PROTECT AND DEFEND (WITH COUNSEL
REASONABLY ACCEPTABLE TO DETERMINING LENDERS) AGAINST, HOLD THEM HARMLESS
FROM AND AGAINST, AND ON DEMAND PAY OR REIMBURSE THEM FOR ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
SUITS, CLAIMS, AND PROCEEDINGS AND ALL COSTS, EXPENSES (INCLUDING, WITHOUT
LIMITATION, ALL REASONABLE ATTORNEYS' FEES AND LEGAL EXPENSES WHETHER OR
NOT SUIT IS BROUGHT), AND DISBURSEMENTS OF ANY KIND OR NATURE (THE
"INDEMNIFIED LIABILITIES") THAT MAY AT ANY TIME BE IMPOSED ON, INCURRED BY,
OR ASSERTED AGAINST THE INDEMNIFIED PARTIES, IN ANY WAY RELATING TO OR
ARISING OUT OF (i) ANY LOAN DOCUMENT, (ii) THE FIELDCREST ASSET ACQUISITION
OR ANY OTHER TRANSACTION CONTEMPLATED BY ANY LOAN DOCUMENT, (iii) ANY
COLLATERAL, (iv) ANY REAL PROPERTY, (v) ANY ENVIRONMENTAL LIABILITY IN ANY
WAY RELATED TO ANY COMPANY, PREDECESSOR, COLLATERAL, REAL PROPERTY, OR ANY
ACT, OMISSION, STATUS, OWNERSHIP, OR OTHER RELATIONSHIP, CONDITION, OR
CIRCUMSTANCE CONTEMPLATED BY, CREATED UNDER, OR ARISING PURSUANT TO OR IN
CONNECTION WITH ANY LOAN DOCUMENT OR THE FIELDCREST ASSET ACQUISITION, OR
(vi) ANY INDEMNIFIED PARTY'S SOLE OR CONCURRENT ORDINARY NEGLIGENCE.

(b) THE FOREGOING PROVISIONS (i) ARE NOT LIMITED IN AMOUNT, EVEN IF
THAT AMOUNT EXCEEDS THE AMOUNT OF THE OBLIGATIONS, (ii) INCLUDE, WITHOUT
LIMITATION, REASONABLE FEES AND EXPENSES OF ATTORNEYS AND OTHER COSTS OR
EXPENSES OF LITIGATION OR OF PREPARING FOR LITIGATION, DAMAGES OR INJURY TO
PERSONS, PROPERTY, OR NATURAL RESOURCES ARISING UNDER ANY STATUTORY OR
COMMON LAW, PUNITIVE DAMAGES, FINES, AND OTHER PENALTIES, AND LOSS OF VALUE
OF ANY REAL PROPERTY OR COLLATERAL, (iii) ARE NOT AFFECTED BY ANY ACT OR
OMISSION OF ANY TRIBUNAL OR OTHER THIRD PARTY, OR THE SOURCE OR ORIGIN OF
ANY HAZARDOUS SUBSTANCE, AND (iv) ARE NOT

AFFECTED BY ANY INDEMNIFIED PARTY'S INVESTIGATION, ACTUAL OR CONSTRUCTIVE
KNOWLEDGE, COURSE OF DEALING, OR WAIVER.

(c) HOWEVER, NO INDEMNIFIED PARTY HAS THE RIGHT TO BE INDEMNIFIED
UNDER THE LOAN DOCUMENTS FOR ITS OWN FRAUD, GROSS NEGLIGENCE, OR WILLFUL
MISCONDUCT OR FOR ANY ENVIRONMENTAL LIABILITY CAUSED SOLELY BY ITS
VIOLATION OF AN ENVIRONMENTAL LAW.

(d) THE PROVISIONS OF AND UNDERTAKINGS AND INDEMNIFICATION IN THIS
SECTION SURVIVE THE FORECLOSURE OF ANY LENDER LIEN OR ANY TRANSFER IN LIEU
OF THAT FORECLOSURE, THE SALE OR OTHER TRANSFER OF ANY COLLATERAL OR REAL
PROPERTY TO ANY PERSON, THE SATISFACTION OF THE OBLIGATIONS, THE
TERMINATION OF THE LOAN DOCUMENTS, AND THE RELEASE OF ANY OR ALL LENDER
LIENS.

SECTION 9 NEGATIVE COVENANTS.** From the Closing Date -- for purposes of
SECTION 9.5 -- or from the date of this agreement -- for all other provisions
in this SECTION 9 -- and for so long as any Lender is committed to lend or
issue LCs under this agreement and until the Obligations have been paid in
full, Borrower covenants and agrees with Agent and Lenders that, without
first obtaining Agent's written notice of Determining Lenders' consent to the
contrary:

9.1 PAYROLL TAXES. No Company may use any proceeds of any Borrowing to
pay the wages of employees unless a timely payment to or deposit with the United
States of America of all amounts of Tax required to be deducted and withheld
with respect to such wages is also made.

9.2 DEBT. No Company may (a) have any Debt EXCEPT Permitted Debt or (b)
voluntarily prepay or cause to be prepaid any principal of, or interest on, any
of its Debt EXCEPT the Obligations and (while no Default or Potential Default
exists) other Debt.

9.3 EMPLOYEE PLANS. EXCEPT where not a Material Adverse Event, no Company
may permit any of the events or circumstances described in SECTION 7.10 to exist
or occur.

9.4 LETTERS OF CREDIT. No Company may have issued for its account -- or
otherwise become obligated for any reimbursement obligations for -- any letter
of credit EXCEPT (a) LCs, (b) letters of credit for which the reimbursement
obligations are assumed by Borrower in connection with a Permitted Acquisition,
and (c) letters of credit issued in connection with the Reimbursement Agreements
described in ITEM 2 and 3 on SCHEDULE 9.2.

9.5 LIENS. No Company may (a) create, incur, or suffer or permit to be
created or incurred or to exist any Lien upon any of its assets except Permitted
Liens or (b) enter into or permit to exist any arrangement or agreement that
directly or indirectly prohibits any Company from creating or incurring any Lien
on any of its assets EXCEPT the Loan Documents and leases that place a Lien
prohibition on only the leased property.

** All references in Sections 7, 8, and 9 to each Company's corporate
existence, qualification, good standing, corporate charter, and bylaws are
modified in respect of PMSC to apply (to the extent applicable) to its trust
existence, certificate of trust, and declaration of trust.

9.6 TRANSACTIONS WITH AFFILIATES. No Company may enter into any material
transaction with any of its Affiliates (excluding other Companies) EXCEPT
transactions in the ordinary course of business and upon fair and reasonable
terms not materially less favorable than it could obtain or could become
entitled to in an arm's-length transaction with a Person that was not its
Affiliate.

9.7 COMPLIANCE WITH LAWS AND DOCUMENTS. No Company may (a) violate the
provisions of any Laws applicable to it or of any material agreement to which it
is a party if that violation alone, or when aggregated with all other
violations, would be a Material Adverse Event, (b) violate the provisions of its
charter or bylaws, or (c) repeal, replace, or amend any provision of its charter
or bylaws if that action would be a Material Adverse Event.

9.8 LOANS, ADVANCES, AND INVESTMENTS. No Company may make any loan,
advance, extension of credit, or capital contribution to, make any investment
in, or purchase or commit to purchase any stocks or other securities or
evidences of Debt of, or interests in, any other Person EXCEPT those described
on SCHEDULE 9.8.

9.9 DISTRIBUTIONS. No Company may declare, make, or pay any Distribution
EXCEPT:

(a) Distributions paid in the form of additional common stock;

(b) Distributions to any Obligated Company; and

(c) Distributions by Borrower if (i) no Default or Potential Default
exists or would exist after giving effect to the Distribution and (ii) the
total (without duplication) of all of those Distributions declared or paid
during any fiscal year do not exceed the SUM of (A) 50% of the Companies'
consolidated Net Income for that fiscal year, PLUS (B) if paid by April 30
during that year, the portion of the then-preceding-fiscal year's
Distributions that would have been permitted under CLAUSE (A) above that
did not represent any carryover from earlier years and was not declared and
paid during that preceding-fiscal year.

9.10 DISPOSITION OF ASSETS. No Company may make or permit to be made an
Asset Sale other than a Permitted Asset Sale.

9.11 MERGERS, CONSOLIDATIONS, AND DISSOLUTIONS. No Company may merge or
consolidate with any other Person or dissolve EXCEPT:

(a) if no Default or Potential Default exists or will exist as a
result of it, any merger or consolidation (i) between Obligated Companies
if Borrower -- if it is involved -- is the survivor or (ii) in connection
with any Permitted Acquisition if the survivor is, or concurrently with
that Permitted Acquisition becomes, an Obligated Company; and

(b) dissolution of any Subsidiary if substantially all of its assets
have been conveyed to any Obligated Company.

9.12 ASSIGNMENT. No Company may assign or transfer any of its Rights,
duties, or obligations under any of the Loan Documents.

9.13 FISCAL YEAR AND ACCOUNTING METHODS. No Company may change its fiscal
year for accounting purposes or any material aspect of its method of accounting
except to conform any new Subsidiary's accounting methods to Borrower's
accounting methods.

9.14 NEW BUSINESSES. No Company may engage in any business EXCEPT the
businesses in which it is presently engaged and any other reasonably related
business.

9.15 GOVERNMENT REGULATIONS. No Company may conduct its business in a way
that it becomes regulated under the INVESTMENT COMPANY ACT OF 1940, as amended,
or the PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, as amended.

9.16 CONTINGENT LIABILITIES. No Company may endorse, guarantee, or
otherwise become surety for, or contingently liable upon, the obligations of any
Person except (a) endorsements of negotiable instruments in the ordinary course
of business, (b) with respect to any LCs, (c) guaranties of any Company of Debt
or Operating Leases of any Obligated Company, (d) contingent liabilities that
exist on the Closing Date and are fully described on SCHEDULE 9.2, and
(e) contingent liabilities permitted in connection with a Permitted Acquisition.

9.17 OPERATING LEASES. No Company may become obligated under any Operating
Lease that would cause the total-Operating-Lease-payment obligations of all of
the Companies -- without duplication for guaranties by any Company of another
Company's Operating-Lease-payment obligations --to exceed $12,000,000 during any
fiscal year.

9.18 CAPITAL EXPENDITURES. No Company may make expenditures for the
acquisition, construction, improvement, or replacement of land, buildings,
equipment, or other fixed or capital assets or leaseholds (excluding
expenditures properly chargeable to repairs or maintenance) EXCEPT capital
expenditures in the ordinary course of business.

9.19 ASSET PURCHASE AGREEMENT. No Company may make or permit to be made
any material amendment or material modification to or waiver of compliance under
the Asset Purchase Agreement or any schedules to it unless Borrower first
notifies Agent of the amendment, modification, or waiver and obtains Agent's
written approval of it.

9.20 STRICT COMPLIANCE. No Company may indirectly do anything that it may
not directly do under any covenant in any Loan Document.

9.21 LEGAL DEFEASANCE AND COVENANT DEFEASANCE. No Company may exercise its
right of Legal Defeasance or Covenant Defeasance (as those terms are defined in
the Senior Subordinated Debt).

SECTION 10 FINANCIAL COVENANTS. From the Closing Date and for so long as
any Lender is committed to lend or issue LCs under this agreement and until the
Obligations have been paid in full, Borrower covenants and agrees with Agent and
Lenders that, without first obtaining Agent's written notice of Determining
Lenders' consent to the contrary, it may not directly or indirectly permit:

10.1 MINIMUM NET WORTH. The Companies' consolidated Minimum Net Worth --
determined on the last day of each fiscal quarter of Borrower -- to ever be LESS
than the SUM of (a) 90% of the

Companies' consolidated Net Worth at December 30, 1995, PLUS (b) 50% of the
Companies' cumulative, consolidated Net Income (without deduction for losses)
after December 30, 1995.

10.2 CURRENT RATIO. The Current Ratio determined at the end of each fiscal
quarter of Borrower to ever be LESS than 1.30 to 1.00.

10.3 FUNDED DEBT/EBITDA. The ratio, after giving effect to any Permitted
Acquisition if audited financials are available or, if audited financials are
not available, based on Determining Lender approval, of (a) the Companies'
consolidated Funded Debt on the last day of any fiscal quarter to (b) their
consolidated EBITDA for the 12-fiscal month period ending on that last day to
ever exceed:

===============================================================================
Period(s) Ratio
===============================================================================
Each fiscal quarter from 9/28/96 through 1/2/99 4.00 to 1.00
- -------------------------------------------------------------------------------
Each subsequent fiscal quarter 3.50 to 1.00
===============================================================================

10.4 MINIMUM INTEREST COVERAGE RATIO. The ratio, after giving effect to
any Permitted Acquisition, if audited financials are available or, if audited
financials are not available, based on Determining Lender approval, of (a) the
Company's consolidated EBITDA for the 12-fiscal month period ending on the last
day of the previous fiscal year to (b) the interest expense during that period
on the Company's Debt (including, without limitation, the interest component
under Capital Leases) to ever be less than 2.50 to 1.00.

SECTION 11 DEFAULT. The term "DEFAULT" means the occurrence of any one or more
of the following:

11.1 PAYMENT OF OBLIGATIONS. Borrower's failure or refusal to pay
(a) principal of any Note or any LC Exposure or any part thereof on or before
the date due or (b) any other part of the Obligations on or before three
Business Days after the date due.

11.2 COVENANTS. Any Company's failure or refusal to punctually and
properly perform, observe, and comply with any covenant (OTHER THAN covenants to
pay the Obligations):

(a) In SECTIONS 8.2, 8.8(a), 8.12, 9.1 through 9.6, 9.8 through 9.12,
9.15 through 9.20, or 10.4; or

(b) In SECTIONS 8.1, 8.10(a), (b), or (d), 10.1, 10.2, or 10.3, and
that failure or refusal continues for ten days after the earlier of EITHER
any Company knows of it OR any Company is notified of it by Agent or any
Lender; or

(c) In any other provision of any Loan Document, and that failure or
refusal continues for 30 days after the earlier of EITHER any Company knows
of it OR any Company is notified of it by Agent or any Lender; or

11.3 DEBTOR RELIEF. Any Company (a) is not Solvent, (b) fails to pay its
Debts generally as they become due, (c) voluntarily seeks, consents to, or
acquiesces in the benefit of any Debtor Relief Law, or (d) becomes a party to or
is made the subject of any proceeding provided for by any Debtor Relief Law --
EXCEPT as a creditor or claimant -- that could suspend or otherwise adversely
affect the Rights of Agent or any Lender granted in the Loan Documents (UNLESS,
if the proceeding is involuntary, the applicable petition is dismissed within 60
days after its filing).

11.4 JUDGMENTS AND ATTACHMENTS. Where the amounts in controversy or of any
judgments, as the case may be, exceed -- from and after the Closing Date and
individually or collectively for all of the Companies -- $5,000,000, the
Companies fail (a) to have discharged, within 60 days after its commencement,
any attachment, sequestration, or similar proceeding against any assets of any
Company or (b) to pay any money judgment against any Company within ten days
before the date on which any Company's assets may be lawfully sold to satisfy
that judgment.

11.5 GOVERNMENT ACTION. Where EITHER it is a Material Adverse Event OR the
fair value of the assets involved exceed -- from and after the Closing Date and
individually or collectively for all of the Companies -- $5,000,000 (a) a final
non-appealable order is issued by any Tribunal (including, but not limited to,
the United States Justice Department) seeking to cause any Company to divest a
significant portion of its assets under any antitrust, restraint of trade,
unfair competition, industry regulation, or similar Laws, or (b) any Tribunal
condemns, seizes, or otherwise appropriates, or takes custody or control of all
or any substantial portion of any Company's assets.

11.6 MISREPRESENTATION. Any material representation or warranty made by
any Company in any Loan Document at any time proves to have been materially
incorrect when made.

11.7 OWNERSHIP OF OTHER COMPANIES. EXCEPT as a result of transactions
permitted by this agreement, one or more Obligated Companies fail to own,
beneficially and of record, with power to vote, 100% of the issued and
outstanding shares of capital stock of each other Obligated Company OTHER THAN
Borrower.

11.8 CHANGE OF CONTROL OF BORROWER.

(a) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Borrower and
its Subsidiaries taken as a whole to any Person;

(b) the adoption of a plan relating to the liquidation or dissolution
of Borrower;

(c) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
Person becomes the beneficial owner (as defined in RULE 13d-3 and 13d-5 of
the SECURITIES EXCHANGE ACT OF 1934) directly or indirectly, of more than
50% of the voting stock of Borrower; and

(d) The individuals who, as of the date of this agreement, constitute
the members of Borrower's board of directors (for purposes of this SECTION
11.8, the "INCUMBENT BOARD") do not constitute or cease for any reason to
constitute at least 66 2/3% of:

(i) Borrower's board of directors; or

(ii) The surviving corporation's board of directors in the event
of any merger or consolidation (if permitted by SECTION 9.11)
involving Borrower; or

(iii) The controlling entity's board of directors, comparable
body if there is no board of directors, or voting control if there is
no comparable body, in the event that the surviving corporation under
CLAUSE (ii) above is directly or indirectly controlled by that entity.

For purposes of this SECTION 11.8(d), any individual who becomes a member of the
board of directors or comparable body or who obtains a voting interest, as
applicable under CLAUSES (i), (ii), or (iii) above, after the date of this
agreement and whose election, or nomination for election, was approved by a vote
of the individuals comprising at least 66 2/3% of the incumbent board -- OTHER
THAN an election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election contest, as those
terms are used in RULE 14a-11 of REGULATION 14A under the SECURITIES AND
EXCHANGE ACT OF 1934) -- shall be deemed to be a member of the incumbent board.

11.9 OTHER FUNDED DEBT. In respect of any Funded Debt (OTHER THAN the
Obligations) individually or collectively of at least $5,000,000 (a) any Company
fails to make any payment when due, or (b) any default or other event or
condition occurs or exists beyond the applicable grace or cure period, the
effect of which is to cause or to permit any holder of that Funded Debt to
cause -- whether or not it elects to cause -- any of that Funded Debt to become
due before its stated maturity or regularly scheduled payment dates, or (c) any
of that Funded Debt is declared to be due and payable or required to be prepaid
by any Company before its stated maturity.

11.10 SEC REPORTING REQUIREMENTS. Borrower fails to comply with any
reporting requirements of the SECURITIES EXCHANGE ACT OF 1934, as amended, for
which the failure to report would constitute a Material Adverse Event.

11.11 VALIDITY AND ENFORCEABILITY. Once executed, this agreement, any
Note, any LC Agreement, any Guaranty, or any pledge of Subsidiary stock ceases
to be in full force and effect in any material respect or is declared to be null
and void or its validity or enforceability is contested in writing by any
Company party to it or any Company party to it denies in writing that it has any
further liability or obligations under it EXCEPT in accordance with that
document's express provisions or as the appropriate parties under SECTION 14.8
below may otherwise agree in writing.

11.12 LCS. Agent or Issuing Lender is served with, or becomes subject to,
a court order, injunction, or other process or decree restraining or seeking to
restrain it from paying any amount under any LC and EITHER (a) a drawing has
occurred under the LC, and Borrower has refused to reimburse Agent or Issuing
Lender for payment, OR (b) the expiration date of the LC has occurred, but the
Right of the beneficiary to draw under the LC has been extended past the
expiration date in connection with the pendency of the related court action or
proceeding, and Borrower has failed to deposit with Agent or Issuing Lender cash
collateral in an amount equal to Agent's or Issuing Lender's maximum exposure
under the LC.

SECTION 12 RIGHTS AND REMEDIES.

12.1 REMEDIES UPON DEFAULT.

(a) DEBTOR RELIEF. If a Default exists under SECTION 11.3, the
commitment to extend credit under this agreement automatically terminates,
the entire unpaid balance of the Obligations automatically becomes due and
payable without any action of any kind whatsoever.

(b) OTHER DEFAULTS. If any Default exists, subject to the terms of
SECTION 13.5(b), Agent may (with the consent of, and must, upon the request
of, Determining Lenders), do any one or more of the following: (i) If the
maturity of the Obligations has not already been accelerated under
SECTION 12.1(a), declare the entire unpaid balance of all or any part of
the Obligations immediately due and payable, whereupon it is due and
payable; (ii) terminate the commitments of Lenders to extend credit under
this agreement; (iii) reduce any claim to judgment; (iv) demand payment of
an amount equal to the LC Exposure then existing and retain as collateral
for the LC Exposure any amounts received from any Company, from any
property of any Company, from any Obligated Company, through offset, or
otherwise; and (v) exercise any and all other legal or equitable Rights
afforded by the Loan Documents, by applicable Laws, or in equity.

(c) OFFSET. If a Default exists, to the extent permitted by
applicable Law, each Lender may exercise the Rights of offset and banker's
lien against each and every account and other property, or any interest
therein, which any Company may now or hereafter have with, or which is now
or hereafter in the possession of, that Lender to the extent of the full
amount of the Obligations owed to that Lender.

12.2 COMPANY WAIVERS. To the extent permitted by Law, each Company waives
presentment and demand for payment, protest, notice of intention to accelerate,
notice of acceleration, and notice of protest and nonpayment, and agrees that
its liability with respect to all or any part of the Obligations is not affected
by any renewal or extension in the time of payment of all or any part of the
Obligations, by any indulgence, or by any release or change in any security for
the payment of all or any part of the Obligations.

12.3 PERFORMANCE BY AGENT. If any Company's covenant, duty, or agreement
is not performed in accordance with the terms of the Loan Documents, Agent may,
while a Default exists, at its option (but subject to the approval of
Determining Lenders), perform or attempt to perform that covenant, duty, or
agreement on behalf of that Company (and any amount expended by Agent in its
performance or attempted performance is payable by the Companies, jointly and
severally, to Agent on demand, becomes part of the Obligations, and bears
interest at the Default Rate from the date of Agent's expenditure until paid).
However, Agent does not assume and shall never have, except by its express
written consent, any liability or responsibility for the performance of any
Company's covenants, duties, or agreements.

12.4 NOT IN CONTROL. Nothing in any Loan Documents gives or may be deemed
to give to Agent or any Lender the Right to exercise control over any Company's
Real Property, other assets, affairs, or management or to preclude or interfere
with any Company's compliance with any Law or require any act or omission by any
Company that may be harmful to Persons or property. Any "MATERIAL ADVERSE
EVENT" or other materiality or substantiality qualifier of any representation,
warranty, covenant, agreement, or other provision of any Loan Document is
included for credit documentation purposes only and does not

imply or be deemed to mean that Agent or any Lender acquiesces in any
non-compliance by any Company with any Law, document, or otherwise or does
not expect the Companies to promptly, diligently, and continuously carry out
all appropriate removal, remediation, compliance, closure, or other
activities required or appropriate in accordance with all Environmental Laws.
Agent's and Lenders' power is limited to the Rights provided in the Loan
Documents. All of those Rights exist solely -- and may be exercised in
manner calculated by Agent or Lenders in their respective good faith business
judgment -- to preserve and protect the Collateral and to assure payment and
performance of the Obligations.

12.5 COURSE OF DEALING. The acceptance by Agent or Lenders of any partial
payment on the Obligations is not a waiver of any Default then existing. No
waiver by Agent, Determining Lenders, or Lenders of any Default is a waiver of
any other then-existing or subsequent Default. No delay or omission by Agent,
Determining Lenders, or Lenders in exercising any Right under the Loan Documents
impairs that Right or is a waiver thereof or any acquiescence therein, nor will
any single or partial exercise of any Right preclude other or further exercise
thereof or the exercise of any other Right under the Loan Documents or
otherwise.

12.6 CUMULATIVE RIGHTS. All Rights available to Agent, Determining
Lenders, and Lenders under the Loan Documents are cumulative of and in addition
to all other Rights granted to Agent, Determining Lenders, and Lenders at law or
in equity, whether or not the Obligations are due and payable and whether or not
Agent, Determining Lenders, or Lenders have instituted any suit for collection,
foreclosure, or other action in connection with the Loan Documents.

12.7 APPLICATION OF PROCEEDS. Any and all proceeds ever received by Agent
or Lenders from the exercise of any Rights pertaining to the Obligations shall
be applied to the Obligations according to SECTION 3.

12.8 CERTAIN PROCEEDINGS. Borrower shall promptly execute and deliver, or
cause the execution and delivery of, all applications, certificates,
instruments, registration statements, and all other documents and papers Agent
or Determining Lenders reasonably request in connection with the obtaining of
any consent, approval, registration, qualification, permit, license, or
authorization of any Tribunal or other Person necessary or appropriate for the
effective exercise of any Rights under the Loan Documents. Because Borrower
agrees that Agent's and Determining Lenders' remedies at Law for failure of
Borrower to comply with the provisions of this section would be inadequate and
that failure would not be adequately compensable in damages, Borrower agrees
that the covenants of this section may be specifically enforced.

12.9 EXPENDITURES BY LENDERS. Any sums spent by Agent or any Lender in
the exercise of any Right under any Loan Document is payable by the Companies to
Agent on demand, becomes part of the Obligations, and bears interest at the
Default Rate from the date spent until the date repaid.

12.10 DIMINUTION IN VALUE OF COLLATERAL. Neither Agent nor any Lender has
any liability or responsibility whatsoever for any diminution in or loss of
value of any collateral now or in the future securing payment or performance of
any of the Obligations (OTHER THAN diminution in or loss of value caused by its
own gross negligence or willful misconduct).

SECTION 13 AGENT AND LENDERS.

13.1 AGENT.

(a) APPOINTMENT. Each Lender appoints Agent (and Agent accepts
appointment) as its nominee and agent, in its name and on its behalf:
(i) To act as its nominee and on its behalf in and under all Loan
Documents; (ii) to arrange the means whereby its funds are to be made
available to Borrower under the Loan Documents; (iii) to take any action
that it properly requests under the Loan Documents (subject to the
concurrence of other Lenders as may be required under the Loan Documents);
(iv) to receive all documents and items to be furnished to it under the
Loan Documents; (v) to be the secured party, mortgagee, beneficiary,
recipient, and similar party in respect of any collateral for the benefit
of Lenders; (vi) to promptly distribute to it all material information,
requests, documents, and items received from Borrower under the Loan
Documents; (vii) to promptly distribute to it its ratable part of each
payment or prepayment (whether voluntary, as proceeds of collateral upon or
after foreclosure, as proceeds of insurance thereon, or otherwise) in
accordance with the terms of the Loan Documents; and (viii) to deliver to
the appropriate Persons requests, demands, approvals, and consents received
from it. However, Agent may not be required to take any action that
exposes it to personal liability or that is contrary to any Loan Document
or applicable Law.

(b) SUCCESSOR. Agent may voluntarily resign and shall resign upon
the request of Determining Lenders for cause (I.E., Agent is continuing to
fail to perform its responsibilities as Agent under the Loan Documents).
If the initial or any successor Agent ever ceases to be a party to this
agreement or if the initial or any successor Agent ever resigns (whether
voluntarily or at the request of Determining Lenders), then Determining
Lenders shall (which, if no Default or Potential Default exists, is subject
to Borrower's approval that may not be unreasonably withheld) appoint the
successor Agent from among Lenders (OTHER THAN the resigning Agent). If
Determining Lenders fail to appoint a successor Agent within 30 days after
the resigning Agent has given notice of resignation or Determining Lenders
have removed the resigning Agent, then the resigning Agent may, on behalf
of Lenders, appoint a successor Agent, which must be a commercial bank
having a combined capital and surplus of at least $1,000,000,000 (as shown
on its most recently published statement of condition). Upon its
acceptance of appointment as successor Agent, the successor Agent succeeds
to and becomes vested with all of the Rights of the prior Agent, and the
prior Agent is discharged from its duties and obligations of Agent under
the Loan Documents (but, when used in connection with LCs issued and
outstanding before the appointment of the successor Agent, "AGENT" shall
continue to refer solely to the prior Agent -- but, any LCs issued or
renewed after the appointment of any successor Agent shall be issued or
renewed by the successor Agent), and each Lender shall execute the
documents that any Lender, the resigning or removed Agent, or the successor
Agent reasonably request to reflect the change. After any Agent's
resignation or removal as Agent under the Loan Documents, the provisions of
this section inure to its benefit as to any actions taken or not taken by
it while it was Agent under the Loan Documents.

(c) RIGHTS AS LENDER. Agent, in its capacity as a Lender, has the
same Rights under the Loan Documents as any other Lender and may exercise
those Rights as if it were not acting as Agent. The term "LENDER", unless
the context otherwise indicates, includes Agent. Agent's resignation or
removal does not impair or otherwise affect any Rights that it has or may
have in its capacity as an individual Lender. Each Lender and Borrower
agree that Agent is not a fiduciary

for Lenders or for Borrower but is simply acting in the capacity
described in this agreement to alleviate administrative burdens for
Borrower and Lenders, that Agent has no duties or responsibilities to
Lenders or Borrower except those expressly set forth in the Loan
Documents, and that Agent in its capacity as a Lender has the same
Rights as any other Lender.

(d) OTHER ACTIVITIES. Agent or any Lender may now or in the future
be engaged in one or more loan, letter of credit, leasing, or other
financing transactions with Borrower, act as trustee or depositary for
Borrower, or otherwise be engaged in other transactions with Borrower
(collectively, the "OTHER ACTIVITIES") not the subject of the Loan
Documents. Without limiting the Rights of Lenders specifically set forth
in the Loan Documents, neither Agent nor any Lender is responsible to
account to the other Lenders for those other activities, and no Lender
shall have any interest in any other Lender's activities, any present or
future guaranties by or for the account of Borrower that are not
contemplated by or included in the Loan Documents, any present or future
offset exercised by Agent or any Lender in respect of those other
activities, any present or future property taken as security for any of
those other activities, or any property now or hereafter in Agent's or any
other Lender's possession or control that may be or become security for the
obligations of Borrower arising under the Loan Documents by reason of the
general description of indebtedness secured or of property contained in any
other agreements, documents, or instruments related to any of those other
activities (but, if any payments in respect of those guaranties or that
property or the proceeds thereof is applied by Agent or any Lender to
reduce the Obligations, then each Lender is entitled to share ratably in
the application as provided in the Loan Documents).

13.2 EXPENSES. Each Lender shall pay its Pro Rata Part of any reasonable
expenses (including, without limitation, court costs, reasonable attorneys' fees
and other costs of collection) incurred by Agent (while acting in such capacity)
in connection with any of the Loan Documents if Agent is not reimbursed from
other sources within 30 days after incurrence. Each Lender is entitled to
receive its Pro Rata Part of any reimbursement that it makes to Agent if Agent
is subsequently reimbursed from other sources.

13.3 PROPORTIONATE ABSORPTION OF LOSSES. Except as otherwise provided in
the Loan Documents, nothing in the Loan Documents gives any Lender any advantage
over any other Lender insofar as the Obligations is concerned or relieves any
Lender from ratably absorbing any losses sustained with respect to the
Obligations (except to the extent unilateral actions or inactions by any Lender
result in Borrower or any other obligor on the Obligations having any credit,
allowance, setoff, defense, or counterclaim solely with respect to all or any
part of that Lender's Pro Rata Part of the Obligations).

13.4 DELEGATION OF DUTIES; RELIANCE. Lenders may perform any of their
duties or exercise any of their Rights under the Loan Documents by or through
Agent, and Lenders and Agent may perform any of their duties or exercise any of
their Rights under the Loan Documents by or through their respective
Representatives. Agent, Lenders, and their respective Representatives (a) are
entitled to rely upon (and shall be protected in relying upon) any written or
oral statement believed by it or them to be genuine and correct and to have been
signed or made by the proper Person and, with respect to legal matters, upon
opinion of counsel selected by Agent or that Lender (but nothing in this
CLAUSE (a) permits Agent to rely on (i) oral statements if a writing is required
by this agreement or (ii) any other writing if a specific writing is required by
this agreement), (b) are entitled to deem and treat each Lender as the owner and
holder of its portion of the Obligations for all purposes until, written notice
of the assignment or transfer is given to and received by Agent (and any
request, authorization, consent, or approval of any Lender is conclusive

and binding on each subsequent holder, assignee, or transferee of or
Participant in that Lender's portion of the Obligations until that notice is
given and received), (c) are not deemed to have notice of the occurrence of a
Default unless a responsible officer of Agent, who handles matters associated
with the Loan Documents and transactions thereunder, has actual knowledge or
Agent has been notified by a Lender or Borrower, and (d) are entitled to
consult with legal counsel (including counsel for Borrower), independent
accountants, and other experts selected by Agent and are not liable for any
action taken or not taken in good faith by it in accordance with the advice
of counsel, accountants, or experts.

13.5 LIMITATION OF AGENT'S LIABILITY.

(a) EXCULPATION. Neither Agent nor any of its representatives will
be liable for any action taken or omitted to be taken by it or them under
the Loan Documents in good faith and believed by it or them to be within
the discretion or power conferred upon it or them by the Loan Documents or
be responsible for the consequences of any error of judgment (except for
fraud, gross negligence, or willful misconduct), and neither Agent nor any
of its representatives has a fiduciary relationship with any Lender by
virtue of the Loan Documents (but nothing in this agreement negates the
obligation of Agent to account for funds received by it for the account of
any Lender).

(b) INDEMNITY. Unless indemnified to its satisfaction against loss,
cost, liability, and expense, Agent may not be compelled to do any act
under the Loan Documents or to take any action toward the execution or
enforcement of the powers thereby created or to prosecute or defend any
suit in respect of the Loan Documents. If Agent requests instructions from
Lenders, or Determining Lenders, as the case may be, with respect to any
act or action in connection with any Loan Document, Agent is entitled to
refrain (without incurring any liability to any Person by so refraining)
from that act or action unless and until it has received instructions. In
no event, however, may Agent or any of its Representatives be required to
take any action that it or they determine could incur for it or them
criminal or onerous civil liability. Without limiting the generality of
the foregoing, no Lender has any right of action against Agent as a result
of Agent's acting or refraining from acting under this agreement in
accordance with instructions of Determining Lenders.

(c) RELIANCE. Agent is not responsible to any Lender or any
Participant for, and each Lender represents and warrants that it has not
relied upon Agent in respect of, (i) the creditworthiness of any Company
and the risks involved to that Lender, (ii) the effectiveness,
enforceability, genuineness, validity, or the due execution of any Loan
Document (EXCEPT by Agent), (iii) any representation, warranty, document,
certificate, report, or statement made therein (EXCEPT by Agent) or
furnished thereunder or in connection therewith, (iv) the adequacy of any
collateral now or hereafter securing the Obligations or the existence,
priority, or perfection of any Lien now or hereafter granted or purported
to be granted on the collateral under any Loan Document, or (v) observation
of or compliance with any of the terms, covenants, or conditions of any
Loan Document on the part of any Company. EACH LENDER AGREES TO INDEMNIFY
AGENT AND ITS REPRESENTATIVES AND HOLD THEM HARMLESS FROM AND AGAINST (BUT
LIMITED TO SUCH LENDER'S COMMITMENT PERCENTAGE OF) ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
REASONABLE EXPENSES, AND REASONABLE DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER THAT MAY BE IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY THEM IN
ANY WAY RELATING TO OR ARISING OUT OF THE

LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY THEM UNDER THE LOAN
DOCUMENTS IF AGENT AND ITS REPRESENTATIVES ARE NOT REIMBURSED FOR SUCH
AMOUNTS BY ANY COMPANY. ALTHOUGH AGENT AND ITS REPRESENTATIVES HAVE THE
RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN
ORDINARY NEGLIGENCE, AGENT AND ITS REPRESENTATIVES DO NOT HAVE THE
RIGHT TO BE INDEMNIFIED UNDER THIS AGREEMENT FOR ITS OR THEIR OWN
FRAUD, GROSS NEGLIGENCE, OR WILLFUL MISCONDUCT.

13.6 DEFAULT. While a Default exists, Lenders agree to promptly confer in
order that Determining Lenders or Lenders, as the case may be, may agree upon a
course of action for the enforcement of the Rights of Lenders. Agent is
entitled to refrain from taking any action (without incurring any liability to
any Person for so refraining) unless and until it has received instructions from
Determining Lenders. In actions with respect to any Company's property, Agent
is acting for the ratable benefit of each Lender.

13.7 COLLATERAL MATTERS.

(a) Each Lender authorizes and directs Agent to enter into the Loan
Documents for the Lender Liens and agrees that any action taken by Agent
concerning any Collateral (with the consent or at the request of
Determining Lenders) in accordance with any Loan Document, that Agent's
exercise (with the consent or at the request of Determining Lenders) of
powers concerning the Collateral in any Loan Document, and that all other
reasonably incidental powers are authorized and binding upon all Lenders.

(b) Agent is authorized on behalf of all Lenders, without the
necessity of any notice to or further consent from any Lender, from time to
time before a Default or Potential Default, to take any action with respect
to any Collateral or Loan Documents related to Collateral that may be
necessary to perfect and maintain perfected the Lender Liens upon the
Collateral.

(c) Except to use the same standard of care that it ordinarily uses
for collateral for its sole benefit, Agent has no obligation whatsoever to
any Lender or to any other Person to assure that the Collateral exists or
is owned by any Company or is cared for, protected, or insured or has been
encumbered or that the Lender Liens have been properly or sufficiently or
lawfully created, perfected, protected, or enforced or are entitled to any
particular priority.

(d) Agent shall exercise the same care and prudent judgment with
respect to the Collateral and the Loan Documents as it normally and
customarily exercises in respect of similar collateral and security
documents.

(e) Lenders irrevocably authorize Agent, at its option and in its
discretion, to release any Lender Lien upon any Collateral (i) upon full
payment of the Obligations, (ii) constituting property being disposed of as
permitted under any Loan Document, (iii) constituting property in which no
Company owned any interest at the time the Lender Lien was granted or at
any time after that, (iv) constituting property leased to any Company under
a lease that has expired or been terminated in a transaction permitted
under the Loan Documents or is about to expire and that has not been, and
is not intended by that Company to be, renewed, (v) consisting of an
instrument evidencing Debt pledged to Agent (for the benefit of Lenders),
if the underlying Debt has been paid in full, or (vi) if approved,
authorized, or ratified in writing by Lenders. Upon request by

Agent at any time, Lenders shall confirm in writing Agent's authority
to release particular types or items of Collateral under this CLAUSE
(e).

13.8 LIMITATION OF LIABILITY. No Lender or any Participant will incur any
liability to any other Lender or Participant except for acts or omissions in bad
faith, and neither Agent nor any Lender or Participant will incur any liability
to any other Person for any act or omission of any other Lender or any
Participant.

13.9 RELATIONSHIP OF LENDERS. The Loan Documents do not create a
partnership or joint venture among Agent and Lenders or among Lenders.

13.10 BENEFITS OF AGREEMENT. None of the provisions of this section inure
to the benefit of any Company or any other Person EXCEPT Agent and Lenders;
consequently, no Company or any other Person is entitled to rely upon, or to
raise as a defense, in any manner whatsoever, the failure of Agent or any Lender
to comply with these provisions.

SECTION 14 MISCELLANEOUS.

14.1 NONBUSINESS DAYS. Any payment or action that is due under any Loan
Document on a non-Business Day may be delayed until the next-succeeding Business
Day (but interest shall continue to accrue on any applicable payment until
payment is in fact made) unless the payment concerns a CD-Rate Borrowing or a
LIBOR-Rate Borrowing, in which case if the next-succeeding Business Day is in
the next calendar month, then such payment shall be made on the next-preceding
Business Day.

14.2 COMMUNICATIONS. Unless otherwise specifically provided, whenever any
Loan Document requires or permits any consent, approval, notice, request, or
demand from one party to another, communication must be in writing (which may be
by telex or telecopy) to be effective and shall be deemed to have been given
(a) if by telex, when transmitted to the appropriate telex number and the
appropriate answer back is received, (b) if by telecopy, when transmitted to the
appropriate telecopy number (and all communications sent by telecopy must be
confirmed promptly thereafter by telephone; but any requirement in this
parenthetical shall not affect the date when the telecopy shall be deemed to
have been delivered), (c) if by mail, on the third Business Day after it is
enclosed in an envelope and properly addressed, stamped, sealed, and deposited
in the appropriate official postal service, or (d) if by any other means, when
actually delivered. Until changed by notice pursuant to this agreement, the
address (and telecopy number) for each party to a Loan Document is set forth on
SCHEDULE 1.1(a).

14.3 FORM AND NUMBER OF DOCUMENTS. The form, substance, and number of
counterparts of each writing to be furnished under this agreement must be
satisfactory to Agent and its counsel.

14.4 EXCEPTIONS TO COVENANTS. No Company may take or fail to take any
action that is permitted as an exception to any of the covenants contained in
any Loan Document if that action or omission would result in the breach of any
other covenant contained in any Loan Document.

14.5 SURVIVAL. All covenants, agreements, undertakings, representations,
and warranties made in any of the Loan Documents survive all closings under the
Loan Documents and, except as otherwise indicated, are not affected by any
investigation made by any party.

14.6 GOVERNING LAW. Unless otherwise stated in any Loan Document, the
laws of the State of Texas and of the United States of America govern the Rights
and duties of the parties to the Loan Documents and the validity, construction,
enforcement, and interpretation of the Loan Documents.

14.7 INVALID PROVISIONS. Any provision in any Loan Document held to be
illegal, invalid, or unenforceable is fully severable; the appropriate Loan
Document shall be construed and enforced as if that provision had never been
included; and the remaining provisions shall remain in full force and effect and
shall not be affected by the severed provision. Agent, Lenders, and each
Company party to the affected Loan Document agree to negotiate, in good faith,
the terms of a replacement provision as similar to the severed provision as may
be possible and be legal, valid, and enforceable.

14.8 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS.

(a) DETERMINING LENDERS. Unless otherwise specifically provided
(i) the provisions of this agreement may be amended, modified, or waived,
only by an instrument in writing executed by Borrower, Agent, and
Determining Lenders and supplemented only by documents delivered or to be
delivered in accordance with the express terms of this agreement, and
(ii) the other Loan Documents may only be the subject of an amendment,
modification, or waiver that has been approved by Determining Lenders and
Borrower.

(b) ALL LENDERS. Any amendment to or consent or waiver under this
agreement or any Loan Document that purports to accomplish any of the
following must be by an instrument in writing executed by Borrower and
Agent and executed (or approved, as the case may be) by each Lender:
(i) Extends the due date or decreases the amount of any scheduled payment
or amortization of the Obligations beyond the date specified in the Loan
Documents; (ii) decreases any rate or amount of interest, fees, or other
sums payable to Agent or Lenders under this agreement (except such
reductions as are contemplated by this agreement); (iii) changes the
definition of "APPLICABLE MARGIN," "APPLICABLE PERCENTAGE," "COMMITMENT,"
"COMMITMENT PERCENTAGE," "DETERMINING LENDERS," "PRO RATA PART," and
(except as provided in SECTION 2.7) "TERMINATION DATE"; (iv) increases any
one or more Lenders' Commitment; (v) waives compliance with, amends, or
fully or partially releases -- EXCEPT as expressly provided by the Loan
Documents or for when a Company merges into another Person or dissolves
when specifically permitted in the Loan Documents -- any Guaranty or
Collateral; or (vi) changes this CLAUSE (b) or any other matter
specifically requiring the consent of all Lenders under this agreement.

(c) AGENCY FEES. Any amendment or consent or waiver with respect to
fees payable solely to Agent under a separate letter agreement must be
executed in writing only by Agent and Borrower.

(d) CONFLICTS. Any conflict or ambiguity between the terms and
provisions of this agreement and terms and provisions in any other Loan
Document is controlled by the terms and provisions of this agreement.

(e) WAIVERS. No course of dealing or any failure or delay by Agent,
any Lender, or any of their respective Representatives with respect to
exercising any Right of Agent or any Lender under this agreement operates
as a waiver thereof. A waiver must be in writing and signed by Agent and
Lenders (or Determining Lenders, if permitted under this agreement) to be
effective,

and a waiver will be effective only in the specific instance and for the
specific purpose for which it is given.

14.9 MULTIPLE COUNTERPARTS. Any Loan Document may be executed in a number
of identical counterparts with the same effect as if all signatories had signed
the same document. All counterparts must be construed together to constitute
one and the same instrument.

14.10 PARTIES.

(a) PARTIES BOUND. Each Loan Document binds and inures to the
parties to it, any intended beneficiary of it, and each of their respective
successors and permitted assigns. No Company may assign or transfer any
Rights or obligations under any Loan Document without first obtaining all
Lenders' consent, and any purported assignment or transfer without Lenders'
consent is void. No Lender may transfer, pledge, assign, sell any
participation in, or otherwise encumber its portion of the Obligations
EXCEPT as permitted by CLAUSES (b) or (c) below.

(b) PARTICIPATIONS. Any Lender may (subject to the provisions of
this section, in accordance with applicable Law, in the ordinary course of
its business, and at any time) sell to one or more Persons (each a
"PARTICIPANT") participating interests in its portion of the Obligations.
The selling Lender remains a "LENDER" under the Loan Documents, the
Participant does not become a "LENDER" under the Loan Documents, and the
selling Lender's obligations under the Loan Documents remain unchanged.
The selling Lender remains solely responsible for the performance of its
obligations and remains the holder of its share of the Principal Debt for
all purposes under the Loan Documents. Borrower and Agent shall continue
to deal solely and directly with the selling Lender in connection with that
Lender's Rights and obligations under the Loan Documents, and each Lender
must retain the sole right and responsibility to enforce due obligations of
the Companies. Participants have no Rights under the Loan Documents EXCEPT
certain voting Rights as provided below. Subject to the following, each
Lender may obtain (on behalf of its Participants) the benefits of SECTION 3
with respect to all participations in its part of the Obligations
outstanding from time to time so long as Borrower is not obligated to pay
any amount in excess of the amount that would be due to that Lender under
SECTION 3 calculated as though no participations have been made. No Lender
may sell any participating interest under which the Participant has any
Rights to approve any amendment, modification, or waiver of any Loan
Document EXCEPT as to matters in SECTION 14.8(b).

(c) ASSIGNMENTS. Each Lender may make assignments to the Federal
Reserve Bank. Each Lender may also assign to one or more assignees (each
an "ASSIGNEE") all or any part of its Rights and obligations under the Loan
Documents SO LONG AS (i) the assignor Lender and Assignee execute and
deliver to Agent and Borrower for their consent and acceptance (that may
not be unreasonably withheld) an assignment and assumption agreement in
substantially the form of EXHIBIT F (an "ASSIGNMENT AND ASSUMPTION
AGREEMENT") and pay to Agent a processing fee of $2,500, (ii) the
assignment is for an identical percentage of the assignor Lender's Rights
and obligations, and (iii) the conditions (including, without limitation,
minimum amounts of Commitment that may be assigned or that must be
retained) for that assignment set forth in the applicable Assignment and
Assumption Agreement are satisfied. The EFFECTIVE DATE in each Assignment
and Assumption Agreement must (unless a shorter period is agreeable to
Borrower and Agent) be at least five Business Days after it is executed and
delivered by the assignor Lender and

the Assignee to Agent and Borrower for acceptance. Once that
Assignment and Assumption Agreement is accepted by Agent and Borrower,
then, from and after the EFFECTIVE DATE stated in it (i) the Assignee
automatically becomes a party to this agreement and, to the extent
provided in that Assignment and Assumption Agreement, has the Rights
and obligations of a Lender under the Loan Documents, (ii) the assignor
Lender, to the extent provided in that Assignment and Assumption
Agreement, is released from its obligations to fund Borrowings under
this agreement and its reimbursement obligations under this agreement
and, in the case of an Assignment and Assumption Agreement covering all
of the remaining portion of the assignor Lender's Rights and
obligations under the Loan Documents, that Lender ceases to be a party
to the Loan Documents, (iii) Borrower shall execute and deliver to the
assignor Lender and the Assignee the appropriate Notes in accordance
with this agreement following the transfer, (iv) upon delivery of the
Notes under CLAUSE (iii) preceding, the assignor Lender shall return to
Borrower all Notes previously delivered to that Lender under this
agreement, and (v) SCHEDULE 1.1(a) is automatically deemed to be
amended to reflect the name, address, telecopy number, and Commitment
of the Assignee and the remaining Commitment (if any) of the assignor
Lender, and Agent shall prepare and circulate to Borrower and Lenders
an amended SCHEDULE 1.1(a) reflecting those changes.

14.11 CONFIDENTIALITY. With respect to any non-public information or
material furnished to Agent, Lenders, or their Representatives by any Company
about its financial condition or business prospects that is clearly marked
confidential when furnished but that is not otherwise available, disclosed, or
furnished to Agent, any Lender, or any of their Representatives (the "SUBJECT
INFORMATION"), Agent, Lender, and their Representatives (a) may use the subject
information in any way any of them may deem appropriate in connection with the
transactions contemplated in the Loan Documents, (b) may disclose or furnish the
subject information to Agent, any Lender, any prospective or actual Participant
or Assignee, any Tribunal, or the Representatives of any of the foregoing or in
response to interrogatories, depositions, requests for information or documents,
subpoenas, civil investigation demands, or similar process under applicable Law,
(c) may disclose or furnish the subject information to any one or more Persons
without restriction while a Default or Potential Default exists or any time in
connection with the exercise of Agent's any Lender's, or any of their
Representatives' Rights under the Loan Documents, but (d) may not otherwise
disclose or distribute the subject information.

14.12 ENTIRETY.

(a) Until the Closing Date and payment in full of all amounts owing
under the Credit Agreement (as renewed, extended, or amended) dated as of
December 1, 1994, between Borrower, certain lenders, and Agent (in its
capacity as agent for those lenders), that Credit Agreement may remain in
full force and effect and is not terminated, canceled, or nullified by this
agreement.

(b) OTHERWISE, THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN BORROWER, LENDERS, AND AGENT AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]

EXECUTED as of the date first stated above.

4111 Mint Way PILLOWTEX CORPORATION, as
Dallas, TX 75237 BORROWER
Attn: Mr. Jeffrey D. Cordes
Executive Vice President
Telecopy: (214) 339-8565 By /s/ JEFFREY D. CORDES
-------------------------------
Jeffrey D. Cordes,
Executive Vice President
and Chief Financial
Officer

NATIONSBANK OF TEXAS, N.A.,
as AGENT and a LENDER

By /s/ SHARON M. ELLIS
-------------------------------
Sharon M. Ellis, Vice President

BANK OF AMERICA ILLINOIS, as a COMERICA BANK - TEXAS, as a LENDER
LENDER

By /s/ CLAIRE LIU By /s/ CHRISTOPHER JONES
------------------------------- -------------------------------
Claire Liu, Vice President Christopher Jones, SVP

WELLS FARGO BANK (TEXAS), N.A., as THE BANK OF TOKYO-MITSUBISHI,
a LENDER LTD., HOUSTON AGENCY, as a LENDER

By /s/ MARY JO HOCH By /s/ JOHN M. MEARNS
------------------------------- -------------------------------
Mary Jo Hoch, Vice President J. Mearns, VP & Manager

SIGNATURE PAGE 1 OF 2 TO RESTATED CREDIT AGREEMENT

BANK ONE, TEXAS, N.A., as a THE BANK OF NOVA SCOTIA, as a
LENDER LENDER

By /s/ SCOTT RHEA By /s/ A.S. NORSWORTHY
------------------------------- -------------------------------
Scott Rhea, Assistant A.S. Norsworthy, Sr.
Vice President Team Leader-Loan
Operations

NBD BANK, as a LENDER FIRST AMERICAN NATIONAL BANK, as
a LENDER

By /s/ WILLIAM J. MCCAFFREY By /s/ COREY NAPIER
------------------------------- -------------------------------
William J. McCaffrey, Corey Napier, Vice President
Vice President

CREDIT LYONNAIS NEW YORK
BRANCH, as a LENDER

By /s/ JACQUES-YVES MULLIEZ
-------------------------------
Jacques-Yves Mulliez,
Senior Vice President

SIGNATURE PAGE 2 OF 2 TO RESTATED CREDIT AGREEMENT

EXHIBIT A-1

SWING-LINE NOTE

$5,000,000 Dallas, Texas November 12, 1996

FOR VALUE RECEIVED, the undersigned, PILLOWTEX CORPORATION, a Texas
corporation (the "COMPANY"), hereby promises to pay to the order of NATIONSBANK
OF TEXAS, N.A. ("NATIONSBANK"), on or before the Termination Date, the principal
sum of $5,000,000, or so much thereof as may be advanced and outstanding under
this note, TOGETHER WITH interest.

This note has been executed and delivered under, and is subject to the
terms of, the Restated Credit Agreement (as renewed, extended, amended, or
restated, the "CREDIT AGREEMENT") dated as of November 12, 1996, between the
Company, certain Lenders, and NationsBank, as Agent, and is the "SWING-LINE
NOTE" referred to therein. All of the terms defined in the Credit Agreement
have the same meaning when used in this note.

This note incorporates by reference the principal and interest payment
terms in the Credit Agreement for this note including, without limitation, the
final maturity indicated as the Termination Date and all other provisions in the
Credit Agreement applicable to this note -- such as provisions regarding the
obligations of the holder of this note to advance funds under this note,
applicable interest rates before and after a Default, voluntary and mandatory
prepayments, acceleration of maturity, exercise of rights and remedies, payment
of attorneys' fees, court costs, and other costs of collection, certain waivers
by the Company and others now or hereafter obligated for payment of any sums due
under this note, and security for the payment of this note.

PILLOWTEX CORPORATION, as the COMPANY

By
--------------------------------------------
Jeffrey D. Cordes, Executive Vice
President and Chief Financial Officer

EXHIBIT A-1

EXHIBIT A-2

REVOLVING NOTE

$___________ Dallas, Texas _______________, 1996

FOR VALUE RECEIVED, PILLOWTEX CORPORATION, a Texas corporation ("MAKER"),
promises to pay to the order of __________________________ ("PAYEE"), that
portion of the principal amount of $___________ that may from time to time be
disbursed and outstanding under this note, TOGETHER WITH interest.

This note is a "REVOLVING NOTE" under the Credit Agreement (as renewed,
extended, amended, or restated, the "CREDIT AGREEMENT") dated as of November __,
1996, between Maker as BORROWER, Payee, certain other "LENDERS," and NationsBank
of Texas, N.A., as "AGENT" for Lenders. All of the terms defined in the Credit
Agreement have the same meanings when used -- unless otherwise defined -- in
this note.

This note incorporates by reference the principal and interest payment
terms in the Credit Agreement for this note, including, without limitation, the
final maturity date for this note, which is the Termination Date. Principal and
interest are payable to the holder of this note through Agent at its offices at
901 Main Street, Dallas, Texas 75202, or at any other address of which Agent may
notify Maker in writing.

This note also incorporates by reference all other provisions in the Credit
Agreement applicable to this note -- such as provisions for disbursement of
principal, applicable-interest rates before and after Default, voluntary and
mandatory prepayments, acceleration of maturity, exercise of Rights, payment of
attorney's fees, courts costs, and other costs of collection, certain waivers by
Maker and other obligors, assurances and security, choice of Texas and United
States federal Law, usury savings, and other matters applicable to Loan
Documents under the Credit Agreement.

PILLOWTEX CORPORATION, as MAKER

By
--------------------------------------------
Jeffrey D. Cordes, Executive Vice
President and Chief Financial Officer

EXHIBIT A-2
2

EXHIBIT B

RESTATED GUARANTY

THIS GUARANTY is executed as of _____________________________, 1996, by:

- BEACON MANUFACTURING COMPANY, a North Carolina corporation; MANETTA
HOME FASHIONS, INC., a North Carolina corporation; TENNESSEE WOOLEN
MILLS, INC., a Tennessee corporation; PILLOWTEX, INC., a Delaware
corporation; PTEX HOLDING COMPANY, a Delaware corporation; and
PILLOWTEX MANAGEMENT SERVICES COMPANY, a Delaware business trust
("GUARANTORS"); for the benefit of

- NATIONSBANK OF TEXAS, N.A., a national banking association (in its
capacity as Agent for the Lenders now or in the future party to the
Credit Agreement described below, "AGENT").

PILLOWTEX CORPORATION, a Texas corporation ("BORROWER"), Agent, and certain
Lenders entered into the Credit Agreement (as renewed, extended, amended, or
restated, the "EXISTING CREDIT AGREEMENT") and other Loan Documents dated as of
December 1, 1994.

In connection with the Existing Credit Agreement, Guarantors, Agent, and
certain Lenders entered into the Guaranty dated as of December 1, 1994
("EXISTING GUARANTY").

Borrower, Agent, and certain Lenders have entered into the Restated Credit
Agreement (as renewed, extended, amended, or restated, the "CREDIT AGREEMENT")
and other Loan Documents dated as of the date first written above.

As a continuing inducement to Lender to extend credit to Debtor under the
Credit Agreement -- and as a condition precedent to that credit -- Guarantors
are executing and delivering this agreement to extend, renew, and entirely amend
and restate the Existing Guaranty.

ACCORDINGLY, for adequate and sufficient consideration, each Guarantor
jointly and severally guarantees to Agent and Lenders the prompt payment of the
Guaranteed Debt (defined below) at -- and at all times after -- its maturity (by
acceleration or otherwise) as follows:

1. DEFINITIONS. Terms defined in the Credit Agreement have the same
meanings when used -- unless otherwise defined -- in this guaranty. As used in
this guaranty:

AGENT is defined in the preamble to this guaranty and includes its
successor appointed under SECTION 13 of the Credit Agreement and acting as AGENT
for Lenders under the Loan Documents.

BORROWER is defined in the recitals to this guaranty and includes, without
limitation, Borrower, Borrower as a debtor-in-possession, and any receiver,
trustee, liquidator, conservator, custodian, or similar party appointed for
Borrower or for all or substantially all of Borrower's assets under any Debtor
Relief Law.

CREDIT AGREEMENT is defined in the recitals to this guaranty.

GUARANTEED DEBT means the Obligations, as defined in the Credit Agreement,
and all present and future costs, attorneys' fees, and expenses reasonably
incurred by Agent or any Lender to enforce Borrower's, any Guarantor's,

EXHIBIT B

or any other obligor's payment of any of the Obligations, including,
without limitation (to the extent lawful), all present and future
amounts that would become due but for the operation of Sections 502 or
506 or any other provision of TITLE 11 of the UNITED STATES CODE and
all present and future accrued and unpaid interest (including, without
limitation, all post-petition interest if Borrower or any Subsidiary
voluntarily or involuntarily becomes subject to any Debtor Relief Law).

GUARANTORS is defined in the preamble to this guaranty.

SUBORDINATED DEBT means all present and future obligations of Borrower to
any Guarantor, whether those obligations are (a) direct, indirect, fixed,
contingent, liquidated, unliquidated, joint, several, or joint and several, (b)
due or to become due to any Guarantor, (c) held by or are to be held by any
Guarantor, (d) created directly or acquired by assignment or otherwise, or (e)
evidenced in writing.

2. GUARANTY. This is an absolute, irrevocable, and continuing guaranty,
and the circumstance that at any time or from time to time the Guaranteed Debt
may be paid in full does not affect the obligation of any Guarantor with respect
to the Guaranteed Debt incurred after that. This guaranty remains in effect
until the Guaranteed Debt is fully paid and performed and all commitments to
extend any credit under the Credit Agreement have terminated. No Guarantor may
rescind or revoke its obligations with respect to the Guaranteed Debt.
Notwithstanding any contrary provision in this guaranty, however, each
Guarantor's maximum liability under this guaranty is limited, to the extent, if
any, required so that its liability is not subject to avoidance under any Debtor
Relief Law.

3. CONSIDERATION. Each Guarantor represents and warrants that (a) the
value of the consideration received and to be received by it is reasonably worth
at least as much as its liability under this guaranty and (b) such liability may
reasonably be expected to directly or indirectly benefit it.

4. CUMULATIVE RIGHTS. If any Guarantor becomes liable for any
indebtedness owing by Borrower to Agent or any Lender, OTHER THAN under this
guaranty, that liability may not be in any manner impaired or affected by this
guaranty. The Rights of Agent or Lenders under this guaranty are cumulative of
any and all other Rights that Agent or Lenders may ever have against each
Guarantor. The exercise by Agent or Lenders of any Right under this guaranty or
otherwise does not preclude the concurrent or subsequent exercise of any other
Right.

5. PAYMENT UPON DEMAND. If a Default exists, each Guarantor shall -- on
demand and without further notice of dishonor and without any notice having been
given to any Guarantor previous to that demand of either the acceptance by Agent
or Lenders of this guaranty or the creation or incurrence of any Guaranteed
Debt -- pay the amount of the Guaranteed Debt then due and payable to Agent and
Lenders. It is not necessary for Agent or Lenders, in order to enforce that
payment by any Guarantor, first or contemporaneously to institute suit or
exhaust remedies against Borrower or others liable on any Guaranteed Debt or to
enforce Rights against any collateral securing any Guaranteed Debt.

6. SUBORDINATION. The Subordinated Debt is expressly subordinated to the
full and final payment of the Guaranteed Debt. Each Guarantor agrees not to
accept any payment of any Subordinated Debt from Borrower if a Default exists.
If any Guarantor receives any payment of any Subordinated Debt in violation of
the foregoing, that Guarantor shall hold that payment in trust for Agent and
Lenders and promptly turn it over to Agent, in the form received (with any
necessary endorsements), to be applied to the Guaranteed Debt.

7. SUBROGATION AND CONTRIBUTION. Until no Lender is obligated to lend or
issue LCs under the Credit Agreement and the Guaranteed Debt has been fully paid
and performed (a) no Guarantor may assert, enforce, or otherwise exercise any
Right of subrogation to any of the Rights or Liens of Agent or Lenders or any
other beneficiary against Borrower or any other obligor on the Guaranteed Debt
or any collateral or other security or any Right of

2 EXHIBIT B

recourse, reimbursement, subrogation, contribution, indemnification, or
similar Right against Borrower or any other obligor on any Guaranteed
Debt or any guarantor of it, (b) each Guarantor defers all of the
foregoing Rights (whether they arise in equity, under contract, by
statute, under common Law, or otherwise), and (c) each Guarantor defers
the benefit of, and any Right to participate in, any collateral or
other security given to Agent or Lenders or any other beneficiary to
secure payment of any Guaranteed Debt.

8. NO RELEASE. No Guarantor's obligations under this guaranty may be
released, diminished, or affected by the occurrence of any one or more of the
following events: (a) Any taking or accepting of any other security or
assurance for any Guaranteed Debt; (b) any release, surrender, exchange,
subordination, impairment, or loss of any collateral securing any Guaranteed
Debt; (c) any full or partial release of the liability of any other obligor on
the Obligations; (d) the modification of, or waiver of compliance with, any
terms of any other Loan Document; (e) the insolvency, bankruptcy, or lack of
corporate or partnership power of any other obligor at any time liable for any
Guaranteed Debt, whether now existing or occurring in the future; (f) any
renewal, extension, or rearrangement of any Guaranteed Debt or any adjustment,
indulgence, forbearance, or compromise that may be granted or given by Agent or
any Lender to any other obligor on the Obligations; (g) any neglect, delay,
omission, failure, or refusal of Agent or any Lender to take or prosecute any
action in connection with the Guaranteed Debt; (h) any failure of Agent or any
Lender to notify any Guarantor of any renewal, extension, or assignment of any
Guaranteed Debt, or the release of any security or of any other action taken or
refrained from being taken by Agent or any Lender against Borrower or any new
agreement between Agent, any Lender, and Borrower, it being understood that
neither Agent nor any Lender is required to give any Guarantor any notice of any
kind under any circumstances whatsoever with respect to or in connection with
any Guaranteed Debt, OTHER THAN any notice required to be given to Guarantors by
Law or elsewhere in this guaranty; (i) the unenforceability of any Guaranteed
Debt against any other obligor because it exceeds the amount permitted by Law,
the act of creating it is ULTRA VIRES, the officers creating it exceeded their
authority or violated their fiduciary duties in connection with it, or
otherwise; or (j) any payment of the Obligations to Agent or Lenders is held to
constitute a preference under any Debtor Relief Law or for any other reason
Agent or any Lender is required to refund that payment or make payment to
someone else (and in each such instance this guaranty will be reinstated in an
amount equal to that payment).

9. WAIVERS. To the maximum extent lawful, each Guarantor waives all
Rights by which it might be entitled to require suit on an accrued Right of
action in respect of any Guaranteed Debt or require suit against Borrower or
others, whether arising under Section 34.02 of the TEXAS BUSINESS AND COMMERCE
CODE, as amended (regarding its Right to require Agent or Lenders to sue
Borrower on accrued Right of action following its written notice to Agent or
Lenders), Section 17.001 of the TEXAS CIVIL PRACTICE AND REMEDIES CODE, as
amended (allowing suit against it without suit against Borrower, but precluding
entry of judgment against it before entry of judgment against Borrower), RULE 31
of the TEXAS RULES OF CIVIL PROCEDURE, as amended (requiring Agent or Lenders to
join Borrower in any suit against it unless judgment has been previously entered
against Borrower), or otherwise.

10. CREDIT AGREEMENT PROVISIONS. Each Guarantor acknowledges that certain
(a) representations and warranties in the Credit Agreement are applicable to it
and confirms that each such representation and warranty is true and correct, and
(b) covenants and other provisions in the Credit Agreement are applicable to it
or are imposed upon it and agrees to promptly and properly comply with or be
bound by each of them.

11. RELIANCE AND DUTY TO REMAIN INFORMED. Each Guarantor confirms that it
has executed and delivered this guaranty after reviewing the terms and
conditions of the Loan Documents and such other information as it has deemed
appropriate in order to make its own credit analysis and decision to execute
and deliver this guaranty. Each Guarantor confirms that it has made its own
independent investigation with respect to Borrower's creditworthiness and is not
executing and delivering this guaranty in reliance on any representation or
warranty by Agent or any Lender as to that creditworthiness. Each Guarantor
expressly assumes all responsibilities to remain

3 EXHIBIT B

informed of the financial condition of Borrower and any circumstances
affecting Borrower's ability to perform under the Loan Documents to
which it is a party or any collateral securing any Guaranteed Debt.

12. NO REDUCTION. The Guaranteed Debt may not be reduced, discharged, or
released because or by reason of any existing or future offset, claim, or
defense (except for the defense of complete and final payment of the Guaranteed
Debt) of Borrower or any other obligor against Agent or Lenders or against
payment of the Guaranteed Debt, whether that offset, claim, or defense arises in
connection with the Guaranteed Debt or otherwise. Those claims and defenses
include, without limitation, failure of consideration, breach of warranty,
fraud, bankruptcy, incapacity/infancy, statute of limitations, lender liability,
accord and satisfaction, usury, forged signatures, mistake, impossibility,
frustration of purpose, and unconscionability.

13. VENUE AND SERVICE OF PROCESS. EACH GUARANTOR (A) IRREVOCABLY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF ANY TEXAS STATE OR FEDERAL COURT,
(B) IRREVOCABLY WAIVES -- TO THE FULLEST EXTENT PERMITTED BY LAW -- ANY
OBJECTION THAT IT MAY NOW OR IN THE FUTURE HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION BROUGHT IN CONNECTION WITH ANY LOAN DOCUMENT OR THE GUARANTEED DEBT
BROUGHT IN DISTRICT COURTS OF DALLAS COUNTY, TEXAS, OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION,
(C) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THOSE
COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (D) IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THOSE COURTS IN ANY LITIGATION BY THE
MAILING OF COPIES OF THAT LEGAL PROCESS BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR BY DELIVERY BY A NATIONALLY
RECOGNIZED COURIER SERVICE, AND SERVICE IS DEEMED COMPLETE UPON DELIVERY OF THE
LEGAL PROCESS AT ITS ADDRESS AS PROVIDED IN THIS GUARANTY, AND (E) IRREVOCABLY
AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY TO ANY LOAN DOCUMENT ARISING
OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE GUARANTEED DEBT MAY BE
BROUGHT IN ONE OF THOSE COURTS. The scope of each of these waivers is intended
to be all-encompassing of any and all disputes that may be filed in any court
and that relate to the subject matter of this transaction -- including, without
limitation, contract claims, tort claims, breach of duty claims, and all other
common Law and statutory claims. These waivers are a material inducement to the
agreement by Agent and each Lender to enter into the Loan Documents, and they
have each relied -- and may continue to rely -- on these waivers in its dealings
with Guarantors. Each Guarantor represents and warrants that it has reviewed
these waivers with its legal counsel, and that it knowingly and voluntarily
agrees to each waiver following consultation with legal counsel. These waivers
are irrevocable, may not be modified either orally or in writing, and apply to
any renewals, extensions, amendments, and replacements of any Loan Document.

14. LOAN DOCUMENT. This guaranty is a Loan Document and is subject to the
applicable provisions of SECTIONS 1 and 14 of the Credit Agreement, all of which
are incorporated into this guaranty by reference the same as if set forth in
this guaranty verbatim.

15. COMMUNICATIONS. Solely for purposes of SECTION 14.2 of the Credit
Agreement, communications to each Guarantor may be sent in care of Borrower at
Borrower's address and telecopy number.

16. AMENDMENTS, ETC. No amendment, waiver, or discharge to or under this
guaranty is valid unless it is in writing and is signed by the party against
whom it is sought to be enforced and is otherwise in conformity with the
requirements of SECTION 14.8 of the Credit Agreement.

17. ENTIRETY. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS TO WHICH ANY
GUARANTOR IS A PARTY REPRESENT THE FINAL AGREEMENT BETWEEN THAT GUARANTOR,
AGENT, AND LENDERS WITH RESPECT TO THE SUBJECT MATTER OF THIS GUARANTY AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF

4 EXHIBIT B

PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

18. AGENT AND LENDERS. Agent is the agent for each Lender under the
Credit Agreement. All Rights granted to Agent under or in connection with this
guaranty are for each Lender's ratable benefit. Agent may, without the joinder
of any Lender, exercise any Rights in Agent's or Lenders' favor under or in
connection with this guaranty. Agent's and each Lender's Rights and obligations
VIS-A-VIS each other may be subject to one or more separate agreements between
those parties. However, no Guarantor is required to inquire about any such
agreement or is subject to any terms of it unless that Guarantor specifically
joins it. Therefore, neither any Guarantor nor its successors or assigns is
entitled to any benefits or provisions of any such separate agreement or is
entitled to rely upon or raise as a defense any party's failure or refusal to
comply with the provisions of it.

19. PARTIES. This guaranty benefits Agent, Lenders, and their respective
successors and assigns and binds each Guarantor and its successors and assigns.
Upon appointment of any successor Agent under the Credit Agreement, all of the
Rights of Agent under this guaranty automatically vests in that new Agent as
successor Agent on behalf of Lenders without any further act, deed, conveyance,
or other formality OTHER THAN that appointment. The Rights of Agent and Lenders
under this guaranty may be transferred with any assignment of the Guaranteed
Debt. The Credit Agreement contains provisions governing assignments of the
Guaranteed Debt and of Rights and obligations under this guaranty.

[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES TO FOLLOW.]

5 EXHIBIT B

EXECUTED as of the date first stated above.

PILLOWTEX, INC. and BEACON MANUFACTURING COMPANY,
PTEX HOLDING COMPANY MANETTA HOME FASHIONS, INC.,
TENNESSEE WOOLEN MILLS, INC.,
and PILLOWTEX MANAGEMENT SERVICES
COMPANY

By By
----------------------------- ----------------------------------
Norman J. Shuman, Secretary Jeffrey D. Cordes, Executive Vice
President of each Guarantor

Agent executes this guaranty in acknowledgment of PARAGRAPH 17 above.

NATIONSBANK OF TEXAS, N.A.,as AGENT

By
----------------------------------
Sharon M. Ellis, Vice President

SIGNATURE PAGE TO RESTATED GUARANTY

EXHIBIT C-1

RESTATED SECURITY AGREEMENT

THIS AGREEMENT is executed as of ___________________________, 1996, by:

- PILLOWTEX CORPORATION, a Texas corporation ("BORROWER/DEBTOR");

- NATIONSBANK OF TEXAS, N.A., a national banking association (in its
capacity as Agent for the Lenders now or in the future party to the
Credit Agreement described below "SECURED PARTY").

In connection with the Existing Credit Agreement, Subsidiary/Debtors,
Agent, and certain Lenders entered into the Security Agreement dated as of
December 1, 1994 ("EXISTING SECURITY AGREEMENT").

As a continuing inducement to Lender to extend credit to Debtor under the
Credit Agreement -- and as a condition precedent to that credit --
Subsidiary/Debtors are executing and delivering this agreement to extend, renew,
and entirely amend and restate the Existing Security Agreement.

ACCORDINGLY, for adequate and sufficient consideration, Borrower/Debtor,
and each Subsidiary/Debtor jointly and severally agree with Secured Party for
the benefit of Lenders as follows:

1. DEFINITIONS. Terms defined in the Credit Agreement or the UCC have
the same meanings when used -- unless otherwise defined -- in this agreement.
If the definition given a term in the Credit Agreement conflicts with the
definition given that term in the UCC, then the Credit Agreement definition
controls to the extent allowed by Law. If the definition given a term in
CHAPTER 9 of the UCC conflicts with the definition given that term in any other
chapter of the UCC, then the CHAPTER 9 definition controls. Furthermore, as
used in this agreement:

ACCOUNTS means, for each Debtor, all of its present and future accounts,
instruments, receivables, accounts receivable, chattel paper, documents, general
intangibles, and book debts arising from its sale or lease of goods or rendition
of services, including, without limitation, all present and future (a) amounts
due to it from a factor, (b) returned, reclaimed, refused, or repossessed goods,
and (c) books and records pertaining to, and security and guaranties for, any of
the foregoing.

BORROWER/DEBTOR is defined in the preamble to this agreement and includes,
without limitation, Borrower/Debtor, Borrower/Debtor as a debtor-in-possession,
and any receiver, trustee, liquidator, conservator, custodian, or similar party
appointed for Borrower or for all or substantially all of Borrower/Debtor's
assets under any Debtor Relief Law.

EXHIBIT C-1

COLLATERAL is defined in PARAGRAPH 4 below.

CREDIT AGREEMENT is defined in the recitals to this agreement.

DEBTORS means Borrower/Debtor and Subsidiary/Debtors.

FINANCING STATEMENT means a financing statement executed by each Debtor and
Secured Party for filing in the jurisdictions listed in SCHEDULE 6 to the Credit
Agreement, and in substantially the form of ANNEX 2 to this agreement.

INVENTORY means, for each Debtor, all of its present and future inventory,
including, without limitation, all present and future (a) materials, goods and
work-in-process, finished goods, and other tangible property held for sale or
lease or being processed for sale or lease in its present or future business,
whether to be furnished under contracts or used or consumed in that Debtor's
business, (b) documents (including documents of title) covering any of the
foregoing, and (c) such property the sale or other disposition of which has
given rise to accounts and which has not been returned to or repossessed or
stopped in transit by that Debtor.

OBLIGOR means any Person obligated with respect to any of the Collateral,
whether as a party to a contract, an account debtor, issuer of any securities,
or otherwise.

OBLIGATIONS means the "OBLIGATIONS," as defined in the Credit Agreement,
including, without limitation, all present and future indebtedness, liabilities,
and obligations of each Debtor arising under this agreement, and all present and
future costs, attorneys' fees, and expenses reasonably incurred by Secured Party
or any Lender to enforce any Debtor's or any other obligor's payment of any of
the Obligations, including, without limitation (to the extent lawful), all
present and future amounts that would become due but for the operation of
Sections 502 or 506 or any other provision of TITLE 11 of the UNITED STATES CODE
and all present and future accrued and unpaid interest (including, without
limitation, all post-petition interest if any Debtor voluntarily or
involuntarily becomes subject to any Debtor Relief Law).

PLEDGED SECURITIES means, whether now owned or acquired in the future by
any Debtor, all present and future shares of capital stock issued by any of the
following subsidiaries, including, without limitation, all present and future
increases, profits, combinations, reclassifications, dividends, and substitutes
and replacements for any of the foregoing (SO LONG AS the Pledged Securities
does not include more than the number of voting shares required to be pledged
under the Credit Agreement):

Subsidiary/Debtors,
Torfeaco Industries Limited, an Ontario corporation, and
588747 Alberta Ltd., an Alberta corporation
Pillowtex de Mexico F. de R.L. de C.V., a Mexico corporation

SECURED PARTY is defined in the preamble to this agreement and includes its
successor appointed under SECTION 13 of the Credit Agreement and acting as AGENT
for Lenders under the Loan Documents.

SECURITY INTEREST means the security interests granted and the transfers,
pledges, and assignments made under PARAGRAPH 2 below, which is a "LENDER LIEN,"
as defined in the Credit Agreement.

SUBSIDIARY/DEBTORS is defined in the preamble to this agreement.

UCC means the UNIFORM COMMERCIAL CODE as adopted in Texas or any other
applicable jurisdiction.

2 EXHIBIT C-1

2. SECURITY INTEREST. To secure the prompt, unconditional, and complete
payment and performance of the Obligations when due, each Debtor jointly and
severally grants to Secured Party a security interest in the Collateral
identified for it in PARAGRAPH 4 below and jointly and severally pledges and
collaterally transfers and assigns that Collateral to Secured Party, all upon
and subject to the terms and conditions of this agreement. If the grant,
pledge, or collateral transfer or assignment of any specific item of the
Collateral is expressly prohibited by any contract, then the Security Interest
nonetheless remains effective to the extent allowed by UCC Section 9.318 or
other applicable Law but is otherwise limited by that prohibition.

3. NO ASSUMPTION OR MODIFICATION. The Security Interest is given as
security only in order to secure the prompt, unconditional, and complete payment
and performance of the Obligations when due. Neither Secured Party nor any
Lender assumes or may become liable for any Debtors' liabilities, duties, or
obligations under or in connection with the Collateral. Neither Secured Party's
acceptance of this agreement nor its taking any action in carrying out this
agreement, constitutes Secured Party's approval of the Collateral or Secured
Party's assumption of any obligation under or in connection with the Collateral.
This agreement does not affect or modify any Debtors' obligations with respect
to any Collateral.

4. COLLATERAL. The term "COLLATERAL" means the following items and types
of property -- wherever located and now or in the future acquired or existing:

- For each Debtor, all of its Accounts, Inventory, and Pledged
Securities; and

- All cash and noncash proceeds of any other Collateral, including,
without limitation, all cash, accounts, general intangibles,
documents, instruments, chattel paper, goods, and any other property
received upon the sale or disposition of any other Collateral and all
insurance proceeds of any kind paid at any time in connection with any
other Collateral.

5. FRAUDULENT CONVEYANCE. Notwithstanding any contrary provision, each
Debtor agrees that, if -- but for the application of this paragraph -- any of
the Obligations or the Security Interest would constitute a preferential
transfer under 11 U.S.C. Section 547, a fraudulent conveyance under 11 U.S.C.
Section 548, or a fraudulent conveyance or transfer under any state fraudulent
conveyance, fraudulent transfer, or similar Law in effect from time to time
(each a "FRAUDULENT CONVEYANCE"), then the Obligations and Security Interest
remains enforceable to the maximum extent possible without causing any of the
Obligations or the Security Interest to be a fraudulent conveyance, and this
agreement is automatically amended to carry out the intent of this paragraph.

6. REPRESENTATIONS AND WARRANTIES. Debtors jointly and severally
represent and warrant to Secured Party on behalf of Lenders that:

(a) CREDIT AGREEMENT. All representations and warranties in the
Credit Agreement that are applicable to each Debtor or its assets or operations
are accurate and complete and are ratified and confirmed.

(b) BINDING OBLIGATION. This agreement creates a legal, valid, and
binding Lender Lien in and to the Collateral (subject to delivery to Secured
Party of the stock certificates for the Pledged Securities) in favor of Secured
Party and enforceable against the Debtor owning that Collateral. For Collateral
in which the Security Interest may be perfected by the filing of Financing
Statements, once those Financing Statements and Continuation Statements have
been properly filed in the jurisdictions described on SCHEDULE 6 to the Credit
Agreement, the Security Interest in that Collateral will be fully perfected.
For the Pledged Securities, the taking by Secured Party of physical possession
in Texas of the stock certificates representing the Pledged Securities will
perfect the Security Interest in that Collateral. Once perfected, the Security
Interest will constitute a first-priority Lender Lien on the Collateral, subject
only to Permitted Liens. The creation of the Security Interest does not require
the consent of any Person that has not been obtained.

3 EXHIBIT C-1

(c) LOCATIONS. The attached ANNEX 1 accurately describes (i) the
location of each Debtor's principal place of business and chief executive
office, (ii) if different from CLAUSE (I) above, the one or more locations of
its books and records concerning its Accounts, (iii) the locations where any of
its Inventory (EXCEPT when temporarily in the hands of a third-party contractor
for processing and until sold in the ordinary course of business) is currently
and will -- SUBJECT TO PARAGRAPH 7(B) below -- in the future be maintained, and
(iv) none of the locations described on the attached ANNEX 1 have changed within
six months before the date of this agreement. EXCEPT as stated in CLAUSE (III)
above, each Debtor's Inventory is currently and will be in its possession.

(d) ACCOUNTS. Each Debtor's Accounts (i) arise from its sales or
rendition of services, (ii) are due to that Debtor, and (iii) are not subject to
any material setoff, counterclaim, defense, allowance, adjustment (OTHER THAN
discounts for prompt payment shown on the invoice), or material dispute,
objection, or complaint by any Obligor.

(e) SECURITIES. All Pledged Securities are duly authorized, validly
issued, fully paid, and non-assessable, and the transfer of them is not subject
to any restrictions OTHER THAN restrictions imposed by applicable Laws. The
Pledged Securities are approximately the maximum number of shares of each
Subsidiary that may be pledged without creating a material Tax obligation for
the Companies that would not otherwise exist.

(f) ADDITIONAL COLLATERAL. The foregoing representations and
warranties will be true and correct in all respects with respect to any
additional Collateral or additional specific descriptions of certain Collateral
delivered to Secured Party in the future by any Debtor.

The failure of any of these representations or warranties to be accurate and
complete does not impair the Security Interest in any Collateral.

7. COVENANTS. While any Lender is committed to lend or extend credit
under the Credit Agreement and until the Obligations are fully paid and
performed, each Debtor jointly and severally covenants and agrees with Secured
Party on behalf of Lenders that, without first obtaining Secured Party's written
notice of Determining Lenders' consent to the contrary:

(a) CREDIT AGREEMENT. Each Debtor shall promptly and fully comply
with and perform all covenants and agreements in the Credit Agreement that are
applicable to it or its assets or operations, each of which is ratified and
confirmed.

(b) CERTAIN RELOCATIONS AND CHANGES. Each Debtor shall give Secured
Party 30 days' written notice before any proposed (i) relocation of its
principal place of business or chief executive office, (ii) relocation of the
place where its books and records concerning its Accounts are kept, (iii) change
of its name, and (iv) relocation of any Collateral (OTHER THAN delivery of
Inventory in the ordinary course of business to third-party contractors for
processing and sales of Inventory in the ordinary course of business or as
permitted by the Credit Agreement) to a location not described on the attached
ANNEX 1.

(i) Within 30 days after the date of this agreement and at all
times after that time -- with respect to any of its Inventory having a
value of at least $1,500,000 that is from time to time delivered to any
third-party contractor for processing in the ordinary course of business --
deliver to Secured Party a bailee, estoppel, and subordination agreement
providing that such third-party contractor holds that Inventory as Secured
Party's bailee, subordinates to the Security Interest all right, title, and
interest it may have in and to that Inventory, and covenants to keep that
Inventory segregated and clearly marked as being owned by that Debtor,
which agreement must otherwise be in form and substance reasonably
acceptable to Secured Party and its special counsel; and

4 EXHIBIT C-1

(ii) EITHER (A) cause the landlord or lessor for each location
where any of its Inventory is maintained (and for which a valid and
enforceable estoppel and subordination agreement has not previously been
delivered to Secured Party) to execute and deliver to Secured Party an
estoppel and subordination agreement in substantially the form of the
attached ANNEX 3 or such other form as may be reasonably acceptable to
Secured Party and its special counsel, OR (B) deliver to Secured Party a
legal opinion or other evidence (in each case that is reasonably
satisfactory to Secured Party and it special counsel) that neither the
applicable lease nor the Laws of the jurisdiction in which that location is
situated provide for contractual, common Law, or statutory landlord's Liens
(for those locations for which such legal opinion or other evidence has not
been previously delivered to Secured Party).

(d) OTHER NOTICES AND ACTIONS. Each Debtor shall promptly notify
Secured Party of (i) any change in any material fact or circumstance represented
or warranted by any Debtor with respect to any of the Collateral, (ii) any
claim, action, or proceeding challenging the Security Interest or affecting
title to all or any material portion of the Collateral or the Security Interest
(and, at Secured Party's request, that Debtor shall appear in and defend any
such action or proceeding at that Debtor's expense), (iii) any default or event
of default by that Debtor or any other party under or in connection with any
material portion (individually or collectively) of the Collateral (and it shall
immediately use reasonable efforts to remedy the same or immediately demand that
the same be remedied),

(e) RECORD OF COLLATERAL. Each Debtor shall maintain at its chief
executive office a current record of where all of its Collateral is located and
permit Secured Party or its representatives to inspect and make copies from
those records pursuant to the Credit Agreement and furnish to Secured Party,
from time to time, such documents, lists, descriptions, certificates, and other
information necessary or helpful to keep Secured Party informed with respect to
the identity, location, status, condition, terms of, parties to, and value of
the Collateral.

(f) COLLATERAL IN TRUST. While a Default or Potential Default
exists, each Debtor shall (i) hold in trust (and not commingle with its other
assets) for Secured Party all of its Collateral that is contracts, chattel
paper, instruments, or documents of title at any time received by it, (ii)
promptly deliver that Collateral to Secured Party unless Secured Party at its
option gives Debtor written permission to retain any of it, and (iii) cause each
contract, chattel paper, instrument, or document of title so retained to be
marked to state that it is assigned to Secured Party and each instrument to be
endorsed to the order of Secured Party (but failure to be so marked or endorsed
may not impair the Security Interest in any such Collateral).

(g) PERFORM OBLIGATIONS. Each Debtor shall perform all of its
material obligations under or in connection with all of its Collateral in
accordance with customary business practices.

(h) AMENDMENTS, ETC. No Debtor may amend, alter, or modify, or
permit the amendment, alteration, or modification of, any material portion
(individually or collectively) of any Collateral (OTHER THAN the processing of
Inventory in the ordinary course of business).

(i) IMPAIRMENT OF COLLATERAL. No Debtor may do or permit any act
that is reasonably likely to adversely impair the value or usefulness any
material portion of any Collateral.

8. REMEDIES UPON DEFAULT. While a Default exists, Secured Party is,
subject to Credit Agreement, entitled to exercise any one or more of the
following Rights.

(a) RIGHTS. Secured Party may exercise any and all Rights available
to a secured party under the UCC, in addition to any and all other Rights
afforded by this agreement and the other Loan Documents, at law, in equity, or
otherwise, including, without limitation (i) requiring Debtors to assemble
Collateral and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to the applicable Debtor and
Secured Party, (ii) applying by appropriate judicial proceedings for appointment
of a receiver for Collateral, (iii) applying to the Obligations any cash held by
Secured Party under this agreement, (iv) reducing any claim to judgment,

5 EXHIBIT C-1

(v) exercising the Rights of offset or banker's Lien against the interest of
each Debtor in and to every account and other property of each Debtor in
Secured Party's possession to the extent of the full amount of the
Obligations, (vi) foreclosing the Security Interest and any other Liens
Secured Party may have or otherwise realize upon any and all of the Rights
Secured Party may have in and to Collateral, and (vii) bringing suit or other
proceedings before any Tribunal either for specific performance of any
covenant or condition contained in any of the Loan Documents or in aid of the
exercise of any Right granted to Secured Party in any Loan Document.

(b) NOTICE. If any Collateral threatens to decline speedily in value
or is of the type customarily sold on a recognized market, Secured Party may
sell or otherwise dispose of that Collateral without notification,
advertisement, or other notice of any kind. Otherwise, reasonable notice of the
time and place of any public sale of the Collateral -- or reasonable
notification of the time after which any private sale or other intended
disposition of the Collateral is to be made -- shall be sent to Debtor and to
any other Person entitled to notice under the UCC. Notice sent or given not
less than ten calendar days prior to the taking of the action to which the
notice relates is reasonable notice. It is not necessary that the Collateral be
at the location of the sale.

(c) SALES OF SECURITIES. In connection with the sale of any
Collateral that is securities, Secured Party is authorized, but not obligated,
to limit prospective purchasers to the extent deemed necessary or desirable by
Secured Party to render that sale exempt from the registration and similar
requirements under applicable Laws, and no sale so made in good faith by Secured
Party may be deemed not to be "COMMERCIALLY REASONABLE" because so made.

(d) OTHER SALES. Secured Party's sale of less than all Collateral
does not exhaust Secured Party's Rights under this agreement and Secured Party
is specifically empowered to make successive sales until all Collateral is sold.
If the proceeds of a sale of less than all Collateral is less than the
Obligations, then this agreement and the Security Interest remain in full force
and effect as to the unsold portion of the Collateral just as though no sale had
been made. In the event any sale under this agreement is not completed or is,
in Secured Party's opinion, defective, that sale does not exhaust Secured
Party's Rights under this agreement, and Secured Party is entitled to cause a
subsequent sale or sales to be made. All statements of fact or other recitals
made in any bill of sale or assignment or other instrument evidencing any
foreclosure sale under this agreement -- whether about nonpayment of the
Obligations, the occurrence of any Default, Secured Party's having declared all
of the Obligations to be due and payable, notice of time, place, and terms of
sale and the properties to be sold having been duly given, or any other act or
thing having been duly done by Secured Party -- shall be taken as PRIMA FACIE
evidence of the truth of the facts so stated and recited. Secured Party may
appoint or delegate any one or more Persons as agent to perform any act or acts
necessary or incident to any sale held by Secured Party, including the sending
of notices and the conduct of sale, but such acts must be done in the name and
on behalf of Secured Party.

(e) OBLIGORS. While a Default exists, Secured Party may notify or
require each Obligor to make payment directly to Secured Party, and Secured
Party may take control of the proceeds paid to Secured Party. Until Secured
Party elects to exercise these Rights, each Debtor is authorized to collect and
enforce the Collateral and to retain and expend all payments made on Collateral.
While Secured Party is entitled to and elects to exercise these Rights, Secured
Party has the Right in its own name or in the name of the applicable Debtor to
(i) compromise or extend time of payment with respect to Collateral for such
amounts and upon such terms as Secured Party may reasonably determine, (ii)
demand, collect, receive, receipt for, sue for, compound, and give acquittance
for any and all amounts due or to become due with respect to Collateral, (iii)
take control of cash and other proceeds of any Collateral, (iv) endorse the
applicable Debtor's name on any notes, acceptances, checks, drafts, money
orders, or other evidences of payment on Collateral that may come into Secured
Party's possession, (v) sign the applicable Debtor's name on any invoice or bill
of lading relating to any Collateral, on any drafts against Obligors or other
Persons making payment with respect to Collateral, on assignments and
verifications of accounts or other Collateral, and on notices to Obligors making
payment with respect to Collateral, (vi) send requests for verification of
obligations to any Obligor, and (vii) do all other acts and things reasonably
necessary to carry out the intent of this agreement. If any Obligor fails to
make payment on any Collateral when due, Secured Party is authorized, in its
sole discretion, either in its own name or in the applicable Debtor's name, to
take such action as Secured Party reasonably shall deem

6 EXHIBIT C-1

appropriate for the collection of any amounts owed with respect to Collateral
or upon which a delinquency exists. However, Secured Party is NEITHER (x)
liable for its failure to collect, or for its failure to exercise diligence
in the collection of, any amounts owed with respect to Collateral (EXCEPT for
its own fraud, gross negligence, willful misconduct, or violation of any
Law), NOR (y) under any duty whatever to anyone except the applicable Debtor
and Lenders to account for funds that it shall actually receive under this
agreement. A receipt given by Secured Party to any Obligor is a full and
complete release, discharge, and acquittance to that Obligor, to the extent
of any amount so paid to Secured Party. Secured Party may apply or set off
amounts paid and the deposits against any liability of the applicable Debtor
to Secured Party. Regarding the existence of any Default for purposes of
this agreement, each Debtor agrees that the Obligors on any Collateral may
rely upon written certification from Secured Party that a Default exists.

(f) POWER-OF-ATTORNEY. Secured Party is deemed to be irrevocably
appointed as each Debtor's agent and attorney-in-fact with all Right to enforce
all of that Debtor's Rights under or in connection with the Collateral effective
and operable at all times while a Default exists. All reasonable costs,
expenses and liabilities incurred and all payments made by Secured Party as that
Debtor's agent and attorney-in-fact (including, without limitation, reasonable
attorney's fees and expenses) are considered a loan by Secured Party to that
Debtor that is repayable on demand, accrues interest at the Default Rate until
paid, and is part of the Obligations.

(g) APPLICATION OF PROCEEDS. While a Default exists, Secured Party
shall apply the proceeds of any sale or other disposition of Collateral in the
following order: (i) Payment of all its reasonable expenses incurred in
retaking, holding, and preparing any Collateral for disposition, in arranging
for such disposition, and in actually disposing of the same (all of which are
part of the Obligations); (ii) repayment of amounts reasonably expended by
Secured Party under PARAGRAPH 9 below; (iii) payment of the balance of the
Obligations in the order and manner specified in the Credit Agreement; and (iv)
delivery EITHER (A) to Borrower/Debtor for the account of all Debtors OR (B) as
a court of competent jurisdiction may direct.

9. OTHER RIGHTS.

(a) PERFORMANCE. If any Debtor fails to preserve the priority
(subject to Permitted Liens) of the Security Interest in any Collateral or
otherwise fails to perform any of its obligations under any Loan Document with
respect to any Collateral, then Secured Party may, at its option, but without
being required to do so, prosecute or defend any suits in relation to the
Collateral or take any other action that such Debtor is required -- but has
failed -- to take. Any amount that is reasonably expended or paid by Secured
Party in connection with the foregoing (including, without limitation, court
costs and reasonable attorneys' fees and expenses) bears interest at the Default
Rate from the date spent or incurred until repaid and is payable (with that
interest) by Debtors to Secured Party upon demand and is part of the
Obligations.

(b) COLLATERAL IN SECURED PARTY'S POSSESSION. If, while a Default
exists, any Collateral comes into Secured Party's possession, Secured Party may
use that Collateral for the purpose of preserving it or its value pursuant to
the order of a court of appropriate jurisdiction or in accordance with any other
Rights held by Secured Party in respect of that Collateral. Debtors jointly and
severally covenant to promptly reimburse and pay to Secured Party, at Secured
Party's request, the amount of all reasonable expenses, costs, Taxes, and other
charges incurred by Secured Party in connection with its custody and
preservation of that Collateral, all of which bear interest at the Default Rate
from the date spent or incurred until repaid and are (with that interest)
payable by Debtors to Secured Party upon demand and are part of the Obligations.
EXCEPT for Secured Party's own fraud, gross negligence, or willful misconduct
(i) the risk of accidental loss or damage to, or diminution in value of, any
Collateral is on Debtors, (ii) Secured Party has no liability for failure to
obtain or maintain insurance or to determine whether any insurance in effect is
adequate as to amount or risks insured, (iii) Secured Party has no duty to fix
or preserve Rights against any Obligors in respect of any Collateral and is
never liable for any failure to use diligence to collect any amount payable in
respect of any Collateral (OTHER THAN to account to Debtors and Lenders for what
Secured Party may actually collect or receive).

7 EXHIBIT C-1

(c) RECORD OWNERSHIP OF SECURITIES. While a Default exists,
Secured Party may have any Collateral that is securities and that is in the
possession of Secured Party, or its nominee or nominees, registered in its
name, or in the name of its nominee or nominees, as pledgee.

(d) VOTING OF SECURITIES. As long as no Default exists, the
applicable Debtor may exercise all voting Rights pertaining to any Collateral
that is securities. While a Default exists, the Right to vote any Collateral
that is securities is vested exclusively in Secured Party. Accordingly, each
applicable Debtor irrevocably constitutes and appoints Secured Party as that
Debtor's proxy and attorney-in-fact -- effective only while a Default exists but
with full power of substitution -- to vote, and to act with respect to, any
Collateral that is securities standing in the name of that Debtor or with
respect to which that Debtor is entitled to vote and act. That proxy is coupled
with an interest, is irrevocable, and continues until the Obligations are fully
paid and performed.

(e) CERTAIN PROCEEDS. The provisions of this CLAUSE (E) are
applicable only while a Default exists. Notwithstanding any contrary provision,
all dividends or distributions of property in respect of, and all proceeds of,
any Collateral that is securities -- whether those dividends, distributions, or
proceeds result from a subdivision, combination, or reclassification of the
outstanding capital stock of any issuer or as a result of any merger,
consolidation, acquisition, or other exchange of assets to which any issuer may
be a party, or otherwise -- are part of the Collateral, shall, if received by
any Debtor, be held in trust for Secured Party's benefit, and shall immediately
be delivered to Secured Party (accompanied by proper instruments of assignment
or stock or bond powers executed by the applicable Debtor in accordance with
Secured Party's instructions) to be held subject to the terms of this agreement.
Any cash proceeds of any Collateral that come into Secured Party's possession
(including, without limitation, insurance proceeds) may, at Secured Party's
option, be applied in whole or in part to the Obligations (to the extent then
due), be fully or partially released to or under the written instructions of
that applicable Debtor for any general or specific purpose, or be fully or
partially retained by Secured Party as additional Collateral. Any cash
Collateral in Secured Party's possession may be invested by Secured Party in
certificates of deposit issued by Secured Party, any Lender, or any other state
or national bank having combined capital and surplus greater than $100,000,000
or in securities issued or guaranteed by the United States of America or any of
its agencies. Secured Party is never obligated to make any investment and never
has any liability to any Debtor or any Lender for any loss that may result from
any investment or non-investment. All interest and other amounts earned from
any investment may be dealt with by Secured Party in the same manner as other
cash Collateral.

(f) INDEMNIFICATION. DEBTORS JOINTLY AND SEVERALLY ASSUME ALL
LIABILITY FOR ALL COLLATERAL, FOR THE SECURITY INTEREST, AND FOR ANY USE,
POSSESSION, MAINTENANCE, AND MANAGEMENT OF, ALL COLLATERAL (INCLUDING, WITHOUT
LIMITATION, ANY TAXES ARISING AS A RESULT OF, OR IN CONNECTION WITH, THE
TRANSACTIONS CONTEMPLATED IN THIS AGREEMENT) AND JOINTLY AND SEVERALLY AGREE TO
ASSUME LIABILITY FOR, AND TO INDEMNIFY AND HOLD SECURED PARTY, EACH LENDER, AND
THEIR RESPECTIVE REPRESENTATIVE (THE "INDEMNIFIED PARTIES") HARMLESS FROM AND
AGAINST, AND DEFEND EACH INDEMNIFIED PARTY AGAINST, ALL CLAIMS, CAUSES OF
ACTION, OR LIABILITY, FOR INJURIES TO OR DEATHS OF PERSONS AND DAMAGE TO
PROPERTY HOWSOEVER ARISING FROM OR INCIDENT TO SUCH USE, POSSESSION,
MAINTENANCE, AND MANAGEMENT (WHETHER SUCH PERSONS BE AGENTS OR EMPLOYEES OF
DEBTOR OR OF THIRD PARTIES, OR SUCH DAMAGE BE TO PROPERTY OF DEBTOR OR OF
OTHERS) AND ALL LOSSES, DAMAGES, CLAIMS, COSTS, PENALTIES, LIABILITIES, AND
EXPENSES, INCLUDING, WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS' FEES,
HOWSOEVER ARISING OR INCURRED BECAUSE OF, INCIDENT TO, OR WITH RESPECT TO
COLLATERAL OR ANY USE, POSSESSION, MAINTENANCE, OR MANAGEMENT OF IT. (THE
"INDEMNIFIED LIABILITIES"). HOWEVER, NO INDEMNIFIED PARTY IS ENTITLED TO
INDEMNITY UNDER THIS PARAGRAPH FOR ITS OWN GROSS NEGLIGENCE, WILLFUL MISCONDUCT,
OR FRAUD OR FOR ANY INDEMNIFIED LIABILITY ARISING FROM ITS ACTIONS AFTER SECURED
PARTY HAS FORECLOSED THE SECURITY INTEREST OR ACCEPTED CONVEYANCE IN LIEU OF
FORECLOSURE OR (EXCEPT FOR THE PLEDGED SECURITIES) TAKEN POSSESSION OF ANY
COLLATERAL. The provisions of this paragraph survive the payment and
performance of the Obligations and the release of the Security Interest.

8 EXHIBIT C-1

(g) SUBROGATION. If any of the Obligations is given in renewal or
extension or applied toward the payment of Debt secured by any Lien, Secured
Party is subrogated to all of the Rights, titles, interests, and Liens securing
that Debt.

10. MISCELLANEOUS.

(a) TERM. This agreement terminates when no Lender has any
commitment to lend or extend credit under the Credit Agreement and the
Obligations are fully paid and performed. No Obligor on any Collateral is
obligated to inquire about the termination of this agreement and is fully
protected in making payments directly to Secured Party, which payments Secured
Party shall pay to Borrower/Debtor on behalf of Debtors after termination of
this agreement.

(b) NO RELEASE. Neither the Security Interest, any Debtor's
obligations, nor Secured Party's or any Lenders' Rights under this agreement are
released, diminished, impaired, or adversely affected by the occurrence of any
one or more of the following events: (i) The taking or accepting of any other
security or assurance for any Obligations; (ii) any release, surrender,
exchange, subordination, or loss of any security or assurance at any time
existing in connection with any Obligations; (iii) the modification of,
amendment to, or waiver of compliance with any terms of any other Loan Document
without the consent of Debtors EXCEPT as required in that Loan Document; (iv)
any present or future insolvency, bankruptcy, or lack of corporate or trust
power of any party at any time liable for the payment of any Obligations; (v)
EXCEPT as specifically required by any other Loan Document, any renewal,
extension, or rearrangement of the payment of any Obligations (either with or
without notice to or consent of any Debtor) or any adjustment, indulgence,
forbearance, or compromise that may be granted or given by Secured Party or any
Lender to any Debtor; (vi) any neglect, delay, omission, failure, or refusal of
Secured Party or any Lender to take or prosecute any action in connection with
any agreement, document, guaranty, or instrument evidencing, securing, or
assuring the payment of any Obligations; (vii) any failure of Secured Party or
any Lender to notify any Debtor of any renewal, extension, or assignment of any
Obligations, or the release of any security under any other document or
instrument, or of any other action taken or refrained from being taken by
Secured Party or any Lender against any Debtor, or any new agreement between
Secured Party, any Lender, and any Debtor, it being understood that, except as
expressly required by the Credit Agreement, neither Secured Party nor any Lender
is required to give any Debtor any notice of any kind under any circumstances
whatsoever with respect to or in connection with the Obligations, including,
without limitation, notice of acceptance of this agreement or any Collateral
ever delivered to or for the account of Secured Party under this agreement;
(viii) the illegality, invalidity, or unenforceability of any Obligations
against any third party obligated with respect to it by reason of the fact that
the Obligations, or the interest paid or payable with respect to any of it,
exceeds the amount permitted by Law, the act of creating any of it is ULTRA
VIRES, or the officers, partners, or trustees creating any of it acted in excess
of their authority, or for any other reason; or (ix) if any payment by any party
obligated with respect to any Obligations is held to constitute a preference
under applicable Laws or for any other reason Secured Party or any Lender is
required to refund any payment on any Obligations or pay the amount of it to
someone else.

(c) WAIVERS. To the maximum extent lawful, except to the extent
expressly otherwise provided in this agreement or in any other Loan Document,
Debtors jointly and severally waive (i) any Right to require Secured Party or
any Lender to proceed against any other Person, to exhaust Rights in Collateral,
or to pursue any other Right that Secured Party or any Lender may have; (ii)
with respect to the Obligations, presentment and demand for payment, protest,
notice of protest and nonpayment, notice of acceleration, and notice of intent
to accelerate; and (iii) all Rights of marshaling in respect of any Collateral.

(d) FINANCING STATEMENT. Secured Party may at any time file this
agreement (or a carbon, photographic, or other reproduction of this agreement)
as a financing statement, but the failure of Secured Party to do so does not
impair the validity or enforceability of this agreement.

9 EXHIBIT C-1

(e) INFORMATION. Except as otherwise provided by Law, Secured
Party's charge for furnishing each statement of account or each list of
Collateral is $10.00.

(f) VENUE AND SERVICE OF PROCESS. EACH DEBTOR (i) IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF ANY TEXAS STATE OR FEDERAL COURT,
(ii) IRREVOCABLY WAIVES -- TO THE FULLEST EXTENT PERMITTED BY LAW -- ANY
OBJECTION THAT IT MAY NOW OR IN THE FUTURE HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION BROUGHT IN CONNECTION WITH ANY LOAN DOCUMENT OR THE OBLIGATIONS
BROUGHT IN DISTRICT COURTS OF DALLAS COUNTY, TEXAS, OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION,
(iii) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY OF THOSE
COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (iv) IRREVOCABLY CONSENTS TO
THE SERVICE OF PROCESS OUT OF ANY OF THOSE COURTS IN ANY LITIGATION BY THE
MAILING OF COPIES OF THAT LEGAL PROCESS BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, POSTAGE PREPAID, BY HAND-DELIVERY, OR BY DELIVERY BY A NATIONALLY
RECOGNIZED COURIER SERVICE, AND SERVICE IS DEEMED COMPLETE UPON DELIVERY OF THE
LEGAL PROCESS AT ITS ADDRESS AS PROVIDED IN THIS AGREEMENT, AND (v) IRREVOCABLY
AGREES THAT ANY LEGAL PROCEEDING AGAINST ANY PARTY TO ANY LOAN DOCUMENT ARISING
OUT OF OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE OBLIGATIONS MAY BE
BROUGHT IN ONE OF THOSE COURTS. The scope of each of these waivers is intended
to be all-encompassing of any and all disputes that may be filed in any court
and that relate to the subject matter of this transaction -- including, without
limitation, contract claims, tort claims, breach of duty claims, and all other
common Law and statutory claims. These waivers are a material inducement to the
agreement by Secured Party and each Lender to enter into the Loan Documents, and
they have each relied -- and may continue to rely -- on these waivers in its
dealings with Debtors. Each Debtor represents and warrants that it has reviewed
these waivers with its legal counsel, and that it knowingly and voluntarily
agrees to each waiver following consultation with legal counsel. These waivers
are irrevocable, may not be modified either orally or in writing, and apply to
any renewals, extensions, amendments, and replacements of any Loan Document.

(g) LOAN DOCUMENT. This agreement is a Loan Document and is subject
to the applicable provisions of SECTIONS 1 and 14 of the Credit Agreement, all
of which are incorporated in this agreement by reference the same as if set
forth in this agreement verbatim.

(h) COMMUNICATIONS. Solely for purposes of SECTION 14.2 of the
Credit Agreement, communications to each Debtor may be sent in care of
Borrower/Debtor at Borrower/Debtor's address and telecopy number.

(i) AMENDMENTS, ETC. No amendment, waiver, or discharge to or under
this agreement is valid unless it is in writing and is signed by the party
against whom it is sought to be enforced and is otherwise in conformity with the
requirements of SECTION 14.8 of the Credit Agreement.

(j) ENTIRETY. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH
ANY DEBTOR IS PARTY REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.

(k) SECURED PARTY AND LENDERS. Secured Party is the agent for each
Lender under the Credit Agreement. The Security Interest and all Rights granted
to Secured Party under or in connection with this agreement are for each
Lender's ratable benefit. Secured Party may, without the joinder of any Lender,
exercise any Rights in Secured Party's or Lenders' favor under or in connection
with this agreement, including, without limitation, conducting any foreclosure
sales and executing full or partial releases of, amendments or modifications to,
or consents or waivers under this agreement. Secured Party's and each Lender's
Rights and obligations VIS-A-VIS each other may be subject to one or more
separate agreements between those parties. However, no Debtor need inquire
about any such agreement or is subject to any terms of it unless that Debtor
specifically joins it. Therefore, neither any Debtor

10 EXHIBIT C-1

nor its successors or assigns is entitled to any benefits or provisions of
any such separate agreement or is entitled to rely upon or raise as a defense
any party's failure or refusal to comply with the provisions of it.

(l) PARTIES. This agreement benefits Secured Party, Lenders, and
their respective successors and assigns and binds each Debtor and its successors
and assigns. Upon appointment of any successor AGENT under the Credit
Agreement, all of the Rights of Secured Party under this agreement automatically
vests in that new AGENT as successor Secured Party on behalf of Lenders without
any further act, deed, conveyance, or other formality OTHER THAN that
appointment. The Rights of Secured Party and Lenders under this agreement may
be transferred with any assignment of the Obligations. The Credit Agreement
contains provisions governing assignments of the Obligations and of Rights and
obligations under this agreement.

REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.

11 EXHIBIT C-1

EXECUTED as of the date first stated above.

PILLOWTEX, INC. and BEACON MANUFACTURING COMPANY,
PTEX HOLDING COMPANY MANETTA HOME FASHIONS, INC.,
TENNESSEE WOOLEN MILLS, INC., and
PILLOWTEX MANAGEMENT SERVICES
COMPANY

By By
------------------------------- ------------------------------
Norman J. Shuman, Secretary Jeffrey D. Cordes,
Executive Vice
President of each Debtor

Secured Party executes this agreement in acknowledgment of PARAGRAPH 10(j)
above.

NATIONSBANK OF TEXAS, N.A.,as AGENT

By
----------------------------------
Sharon M. Ellis, Vice President

SIGNATURE PAGE TO RESTATED SECURITY AGREEMENT

ANNEX 1

LOCATIONS

- ------------------------------------------------------------------------------------------------------------------------------
PRINCIPAL PLACE LOCATION OF BOOKS OWNER/MANAGER OF
OF BUSINESS AND AND RECORDS PREMISES WHERE
DEBTOR CHIEF EXECUTIVE OFFICE CONCERNING ACCOUNTS LOCATION(S) OF INVENTORY INVENTORY LOCATED
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------

Pillowtex, Inc. 1071-79 Avenue of c/o Pillowtex 3820 Union Pacific Avenue Angel & Jean Echevarria
the Americas Management Services Los Angeles, CA 90071 c/o Ben Bohr
10th Floor Company 8383 Wilshire Blvd.
New York, NY 10016 4111 Mint Way Beverly Hills, CA 90211
Dallas, Dallas 203/260-7951
County, TX
-------------------------------------------------------
1801 South Davis St. Jimmie D. Smith
Rocky Mount,NC 651 Woodruff Rd.
P.O. Box 7626
Rocky Mount, NC 27804
919/937-7380
-------------------------------------------------------
1 Grove Street 7 Grove Street Realty
First Floor Trust
Watertown, MA 02172 1 Grove Street
Watertown, MA 02172
617/926-1111
- ------------------------------------------------------------------------------------------------------------------------------

EXHIBIT C-1

Pillowtex, Inc. 1071-79 Avenue of c/o Pillowtex 1071-79 Avenue of the M.J. Fenton
the Americas Management Services Americas Adam's & Co. Real Estate
10th Floor Company 10th Floor 411 5th Avenue
New York, NY 10016 4111 Mint Way New York, NY 10016 New York, NY 10016
Dallas, Dallas 212/679-5500
County, TX
-------------------------------------------------------
New York Apartment Amelia Joyce Lee
235 E. 40th Street Republic Bank of New York
Apt. 30-A 452 Fifth Avenue
New York, NY 10016 New York, NY 10018
212/370-0283
-------------------------------------------------------
1112 Wesleyan Blvd. C. W. Heck
Rocky Mount, NC 1617 Pinecrest
Rocky Mount, NC
704/597-0010
-------------------------------------------------------
Franklin Cove Jeff Ganneway
Apt. #6 Franklin Rental
Tunica, MS Patricia Franklin Trust
P.O. Box 728
Tunica, MS 38676
- ------------------------------------------------------------------------------------------------------------------------------

2 EXHIBIT C-1

Pillowtex, Inc. 1071-79 Avenue of c/o Pillowtex 883 Sneath Lane Tom Robertson
the Americas Management Services Suite 217 Woodmont Companies
10th Floor Company San Bruno, CA 1350 Ralston Avenue
New York, NY 10016 4111 Mint Way Belmont, CA 94002
Dallas, Dallas 415/592-3960
County, TX
-------------------------------------------------------
Southeast Corner Parking David Maggs
Lot 14008 Dublin
4740 S. Whipple Street Lockport, IL 60441
Chicago, IL 60362 312/247-4777
-------------------------------------------------------
Chicago Parking Lot William Biederman
3010-3012 W. 47th Street Biederman & O'Keefe Ltd.
Chicago, IL 60632 30 N. LaSalle Street
Suite 1426
Chicago, IL 60602
-------------------------------------------------------
33 South Sixth Street Richard L. Keller
Minneapolis, MN 55402 4340 Multifoods Tower
33 South Sixth Street
Minneapolis, MN 55402
612/372-1500
-------------------------------------------------------
1904 Third Avenue, George Riley
Suite 333 Clise Agency
Seattle, WA 98101 200 Securities Blvd.
Seattle, WA 98101
- ------------------------------------------------------------------------------------------------------------------------------

3 EXHIBIT C-1

Pillowtex, Inc. 1071-79 Avenue of c/o Pillowtex 8310 University Executive Pat Gavin
the Americas Management Services Park Pizzagalli Investment
10th Floor Company Suite 540 Company
New York, NY 10016 4111 Mint Way Charlotte, NC 28262 50 Joy Drive
Dallas, Dallas P.O. Box 2009
County, TX South Burlington, VT 05403
704/542-8886
-------------------------------------------------------
3025 West 47th Street Pillowtex Corporation
Chicago, IL 60632
-------------------------------------------------------
420-30 Mariny Street Pillowtex Corporation
Rocky Mount, NC 27801
-------------------------------------------------------
Rural Delivery Route Pillowtex Corporation
Number 3
Moulstown Road
Hanover, PA 17331
-------------------------------------------------------
c/o Pillowtex Highway 61 South, Pillowtex Corporation
Management Services Industrial Park
Company Tunica, MS 38676
4111 Mint Way
Dallas, Dallas
County, TX
- ------------------------------------------------------------------------------------------------------------------------------
Beacon Manufacturing 411 Mint Way 202 Whitson Avenue Girmes Property Asheville Property
Company Dallas, Dallas Swannanoa, NC 28778 Highway 74 Administration and
County, TX Asheville, NC Leasing, Inc.
f/k/a DeBall-Girmes of
America
-------------------------------------------------------
Factory Building Jantzen, Inc.
Westminster
Oconee County, SC
- ------------------------------------------------------------------------------------------------------------------------------

4 EXHIBIT C-1

Beacon Manufacturing 4111 Mint Way 202 Whitson Avenue Warehouse Building 996 Riverside Drive, Inc.
Company Dallas, Dallas Swannanoa, NC 28778 996 Riverside Drive
County, TX Asheville, NC
-------------------------------------------------------
Outlet Store Atlantic American
136 West Avenue Properties, Inc.
Kannapolis, North Carolina
-------------------------------------------------------
Bread Store BMC
Buncombe County,
North Carolina
- ------------------------------------------------------------------------------------------------------------------------------

5 EXHIBIT C-1

Manetta Home Fashions, 4111 Mint Way 4111 Mint Way 505 Miller Street W.W. Heath
Inc. Dallas, Dallas Dallas, Dallas P.O. Box 508 Lando Land Co.
County, TX County, TX Monroe, NC 28110 1 Main St.
Lando, SC 29724
704/282-4382
-------------------------------------------------------
1 Main Street W.W. Heath
Lando, SC 29724 Lando Land Co.
1 Main St.
Lando, SC 29724
704/282-4382
- ------------------------------------------------------------------------------------------------------------------------------
Pillowtex Corporation 4111 Mint Way 4111 Mint Way
Dallas, Dallas Dallas, Dallas
County, TX County, TX
- ------------------------------------------------------------------------------------------------------------------------------
Ptex Holding Company 300 Delaware Ave, 300 Delaware Ave,
Suite 1704 Suite 1704
Wilmington, DE Wilmington, DE
19801-1612 19801-1612
- ------------------------------------------------------------------------------------------------------------------------------
Pillowtex Management 4111 Mint Way 4111 Mint Way 4666 Duncanville Rd. Jeff Greenberg
Services Company Dallas, Dallas Dallas, Dallas Dallas, TX 50 W. Ridgewood Ave.
County, TX County, TX [P.O. Box 927
_____wood, NJ 07451]
-------------------------------------------------------
4111 Mint Way Pillowtex Management
Dallas, TX 75237 Services Company
-------------------------------------------------------
3444 Morse Dr. Pillowtex Management
Dallas, TX 75236 Services Company
- ------------------------------------------------------------------------------------------------------------------------------
Tennessee Woolen Mills, 4111 Mint Way 4111 Mint Way 301 South Cumberland Carolyn Stone
Inc. Dallas, Dallas Dallas, Dallas Lebanon, TN 37087 416 Rome Pike
County, TX County, TX Lebanon, TN 37087
615/444-4889
-------------------------------------------------------
601 Space Park North Dr. Jim Brown
Goodlettesville, TN 37071 First Management Services
333 Union Street,
Suite 400
Nashville, TN 37201
-------------------------------------------------------
122 East Market Street Tennessee Woolen Mills,
Lebanon, TN 37087 Inc.
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
6 EXHIBIT C-1

ANNEX 2

THIS DOCUMENT Haynes and Boone, L.L.P.
PREPARED BY AND WHEN 3100 NationsBank Plaza
FILED RETURN TO: Dallas, Texas 75202-3789
Attention: Sheila L. White

FINANCING STATEMENT

THIS FINANCING STATEMENT IS PRESENTED TO A FILING OFFICER
FOR FILING UNDER THE UNIFORM COMMERCIAL CODE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DEBTOR'S NAME AND MAILING ADDRESS: _______________________
4111 Mint Way
Dallas, Texas 75237

FED TAX ID NO. ____________________
- --------------------------------------------------------------------------------
SECURED PARTY'S NAME AND MAILING NationsBank of Texas, N.A., as Agent
ADDRESS: for Lenders*
901 Main Street
Dallas, Texas 75202

FED TAX ID NO. 75-2238693
- --------------------------------------------------------------------------------
FOR FILING OFFICER:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES OR
ITEMS OF PROPERTY AND INTERESTS (THE "COLLATERAL"):

All of the following items and types of property -- wherever located and
now or in the future acquired or existing:

[FOR THE FINANCING STATEMENTS FOR BORROWER/DEBTOR]

1. All of Debtor's present and future accounts, instruments,
receivables, accounts receivable, chattel paper, documents, general
intangibles, and book debts arising from its sale or lease of goods or
rendition of services, including, without limitation, all present and
future (a) amounts due to it from a factor, (b) returned, reclaimed,
refused, or repossessed goods, and (c) books and records pertaining to,
and security and guaranties for, any of the foregoing.

2. All of its present and future inventory, including, without
limitation, all present and future (a) materials, goods and work-in-
process, finished goods, and other tangible property held for sale or lease
or being processed for sale or lease in its present or future business,
whether to be furnished under contracts or used or consumed in that
Debtor's business, (b) documents (including documents of title) covering
any of the foregoing, and (c) such property the sale or other disposition
of which has given rise to accounts and which has not been returned to or
repossessed or stopped in transit by that Debtor.

3. Whether now owned or acquired in the future by Debtor, all
present and future shares of capital stock issued by any of the following
entities, including, without limitation, all present and future

- -----------------
* Secured Party is serving as AGENT under the Credit Agreement (as renewed,
extended, amended, or restated from time to time) dated as of December 1,
1994, between Pillowtex Corporation as BORROWER, Secured Party as AGENT,
and certain LENDERS from time to time party to it. The security interests
evidenced an perfected by this financing statement, as amended or continued
from time to time, is granted to Secured Party in that capacity on behalf
of those LENDERS.

EXHIBIT C-1

increases, profits, combinations, reclassifications, investment property,
dividends, and substitutes and replacements for any of the foregoing
(subject to any limitations in the Security Agreement to which this
Financing Statement relates):

Beacon Manufacturing Company, a North Carolina corporation;
Manetta Home Fashions, Inc., a North Carolina corporation;
Pillowtex, Inc.;
Ptex Holding Company;
Pillowtex Management Services Company;
Tennessee Woolen Mills, Inc., a Tennessee corporation;
Torfeaco Industries Limited, an Ontario corporation;
588747 Alberta Ltd., an Alberta corporation; and
Pillowtex de Mexico S. De R.L. de C.V., a Mexico corporation

All cash and noncash proceeds of any other Collateral, including,
without limitation, all cash, accounts, general intangibles, documents,
instruments, chattel paper, goods, and any other property received upon the sale
or disposition of any other Collateral and all insurance proceeds of any kind
paid at any time in connection with any other Collateral.

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

______________________________, as DEBTOR NATIONSBANK OF TEXAS, N.A., as
Agent for Lenders as SECURED
PARTY*

By By
-------------------------------------- ---------------------------
Jeffrey D. Cordes, Executive Vice Sharon M. Ellis, Vice
President President

EXHIBIT C-1
2

ANNEX 3

Dated as of _________________________

NationsBank of Texas, N.A., Agent
901 Main Street
Dallas, Texas 75202

Re: LESSEE: _______________________________________
PREMISES: _________________described on the attached EXHIBIT A

The undersigned is the landlord ("LANDLORD") under a lease (as renewed,
extended, amended, or substituted, the "LEASE") covering the Premises. Landlord
understands that Lessee is or will be party to, or a guarantor under, a Credit
Agreement (as renewed, extended, amended, or restated the "CREDIT AGREEMENT")
with you and certain lenders which requires (a) granting to you on behalf of
those lenders security interests in, among other things, all of Lessee's present
and future inventory now or in the future located at the Premises (together with
all cash and non-cash proceeds, the "COLLATERAL") and (b) subordinating in your
favor on behalf of those lenders any liens, security interests, and other rights
to which Landlord might be entitled in the Collateral.

To satisfy those requirements and induce you and those lenders to extend
credit under the Credit Agreement, Landlord agrees that, notwithstanding
anything to the contrary in the Lease, until all of Lessee's obligations to you
and those lenders have been paid and performed in full (a) all liens, security
interests, and other rights to which Landlord might be entitled in the
Collateral are subordinate and inferior to any present or future security
interests granted to you on behalf of those lenders in the Collateral,
regardless of the order in which any liens, security interests, and rights in
the Collateral were or will be created, attached, pledged, filed, recorded,
registered, or perfected, (b) Landlord intends that the Collateral will not
become fixtures and will be and remain personal property, notwithstanding the
manner of their annexation to the Premises, their adaptability to the uses and
purposes for which the Premises are used, and the intentions of the party making
the annexation, (c) Landlord will notify you in writing by Certified Mail,
Return Receipt Requested, at the above address, if Lessee defaults on its lease
obligations and grant to you the right but not the obligation to cure those one
or more defaults, (d) you and your representatives are entitled to enter upon
the Premises and assemble, appraise, display, sever, remove, maintain, prepare
for sale or lease, repair, lease, transfer, or sell at one or more public
auctions or private sales any Collateral, and (e) you may, without notice to
Landlord or Landlord's consent and without affecting the validity of this
agreement, increase, extend the times of payment of, or otherwise modify any of
Lessee's debts to you or the performance of any of the terms and conditions of
the Credit Agreement or related documents. This agreement inures to you, those
lenders, and the respective successors and assigns of each and binds Landlord
and Landlord's heirs, personal representatives, successors, and assigns.
Landlord waives notice of acceptance of this agreement.

Very truly yours,

- -------------------------------------- -----------------------------------
(address)
- -------------------------------------- By
- -------------------------------------- -----------------------------------
(telephone) (Name)
- -------------------------------------- -----------------------------
(telecopy) (Title)
-----------------------------

EXHIBIT C-1

THIS DOCUMENT Haynes and Boone, L.L.P.
PREPARED BY AND WHEN 3100 NationsBank Plaza
RECORDED RETURN TO: Dallas, Texas 75202-3789
Attention: Sheila L. White

EXHIBIT C-2

RELEASE OF MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
AND FINANCING STATEMENT

from

REALMAC, INC.,
as GRANTOR,

in favor of

SHARON M. ELLIS,

as TRUSTEE,

for the benefit and in favor of

NATIONSBANK OF TEXAS, N.A.,
as AGENT for the benefit of the LENDERS described in this instrument,

covering property situated in
Buncombe County, North Carolina, and
Oconee County, South Carolina

November __, 1996

EXHIBIT C-2

RELEASE OF MORTGAGE, DEED OF TRUST, SECURITY AGREEMENT,
AND FINANCING STATEMENT

STATE OF ________

COUNTY OF ________

This RELEASE OF MORTGAGE is executed as of November __, 1996 by NATIONSBANK
OF TEXAS, N.A., as Beneficiary (in such capacity, "LENDER").

WHEREAS, on or about __________________, 19____, PILLOWTEX, a Texas
corporation ("GRANTOR"), executed that certain Mortgage, Deed of Trust, Security
Agreement, and Financing Statement (the "DEED OF TRUST"), recorded as File
No. ____________ of the Real Property Records of ________County, ________, and
covering the real and personal property more fully described therein, including,
without limitation, the land described on EXHIBIT A attached hereto and
incorporated herein for all purposes (collectively, the "PROPERTY").

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Lender, being the current owner and holder of the
Deed of Trust, has RELEASED and DISCHARGED, and by these presents hereby
RELEASES and DISCHARGES the property from the liens and security interests of
the Deed of Trust and any related UCC-1 Financing Statements connected
therewith.

EXECUTED as of the day and date first above written.

LENDER:

NATIONSBANK OF TEXAS, N.A.

By
---------------------------------------------
Sharon M. Ellis, Vice President

EXHIBIT C-2

THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section

On November __, 1996, personally came before me SHARON M. ELLIS who, being
by me duly sworn, says that she is a Vice President of NATIONSBANK OF TEXAS,
N.A., that the seal affixed to the foregoing instrument in writing is the
corporate seal of that corporation, and that such instrument was signed and
sealed by her, on behalf of that corporation, and acknowledges such instrument
to be the act and deed of that corporation.

[PERSONALIZED SEAL]
--------------------------------------------------
Notary Public in and for the State of Texas

(Name)
--------------------------------------------
My Commission expires:

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

THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section

Personally appeared before me _______________________________ who, being
duly sworn, says that he/she was present and saw the corporate seal of the
within-named NATIONSBANK OF TEXAS, N.A. affixed to the foregoing Release of
Mortgage; and that he/she saw Sharon M. Ellis, as Vice President, and
________________, as ___________________, sign, attest and deliver the within
written instrument, and that he/she, with _______________________________,
witnessed the execution and delivery thereof as the act and deed of
NATIONSBANK OF TEXAS, N.A.

- -------------------------------------
Signature of First Witness

Sworn to and subscribed before me this ____ day of November, 1996.

(L.S.)
----------------------------------------
Notary Public for the State of Texas
My commission expires:
---------------

[NOTARY SEAL]

EXHIBIT C-2
2

EXHIBIT A

LAND

[TO BE PROVIDED BY BORROWER.]

EXHIBIT C-2

THIS DOCUMENT Haynes and Boone, L.L.P.
PREPARED BY AND WHEN 3100 NationsBank Plaza
RECORDED RETURN TO: Dallas, Texas 75202-3789
Attention: Sheila L. White

EXHIBIT C-3

RELEASE OF SECOND MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF LEASES AND RENTS, AND FINANCING STATEMENT

from

PILLOWTEX CORPORATION,
as MORTGAGOR,

in favor of

NATIONSBANK OF TEXAS, N.A.,
as AGENT for the LENDERS described in this instrument,

covering property situated in
York County, Pennsylvania

November __, 1996

EXHIBIT C-3

RELEASE OF SECOND MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS, AND FINANCING STATEMENT

STATE OF ________

COUNTY OF ________

This RELEASE OF MORTGAGE is executed as of November __, 1996 by NATIONSBANK
OF TEXAS, N.A., as Beneficiary (in such capacity, "LENDER").

WHEREAS, on or about __________________, 19____, PILLOWTEX, a Texas
corporation ("GRANTOR"), executed that certain Second Mortgage, Deed of Trust,
Security Agreement, and Financing Statement (the "DEED OF TRUST"), recorded as
File No. ____________ of the Real Property Records of ________County, ________,
and covering the real and personal property more fully described therein,
including, without limitation, the land described on EXHIBIT A attached hereto
and incorporated herein for all purposes (collectively, the "PROPERTY").

EXECUTED as of the day and date first above written.

LENDER:

NATIONSBANK OF TEXAS, N.A.

By
--------------------------------------------
Sharon M. Ellis, Vice President

CERTIFICATE OF RESIDENCE

The undersigned certifies that the precise residence of Mortgagee is:

NationsBank of Texas, N.A.
901 Main Street
Dallas, Texas 75202

-------------------------------------------
Sharon M. Ellis, Vice President
of and on behalf of
NationsBank of Texas, N.A.

EXHIBIT C-3

THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section

On _______________________, 1996, before me, a notary public, the
undersigned officer personally appeared SHARON M. ELLIS and
__________________, who acknowledged themselves to be the Vice President, and
_____________________________________, respectively, of NATIONSBANK OF TEXAS,
N.A., and that they, as such officers, being authorized to do so, executed
the foregoing instrument for the purposes contained in it, by signing the
name of the corporation by themselves as such officers.

[PERSONALIZED SEAL]
-------------------------------------------------
Notary Public in and for the State of Texas

(Name)
-------------------------------------------
My Commission expires:

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

EXHIBIT C-3
2

EXHIBIT A

EXHIBIT C-3

EXHIBIT D-1

NOTICE OF CONVERSION

AGENT: NationsBank of Texas, N.A. DATE: ____________________

BORROWER: Pillowtex Corporation

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

This notice is delivered under SECTION 3.10 of the Credit Agreement (as
renewed, extended, amended, or restated, the "CREDIT AGREEMENT") dated as of
November __, 1996, between Borrower, Agent, and certain lenders. Terms defined
in the Credit Agreement have the same meanings when used -- unless otherwise
defined -- in this notice.

Borrower presently has a ____________________(1) Borrowing (the
"EXISTING BORROWING") under the Revolving Facility in the amount of
$____________________ -- which, if a ____________________(2) Rate Borrowing,
has an Interest Period of ____________________(3) ending on
____________________. On ________________________ (the "CONVERSION DATE"),
Borrower shall partially pay, continue in full or part as the same Type of
Borrowing, or convert in full or part to another Type of Borrowing and -- if
applicable -- with the Interest Period(s) designated below
[CHECK APPLICABLE BOXES]:

/ / Amount to be paid, if any, $_______________

/ / Balance to be in the following Types of Borrowings with -- if
applicable -- the following Interest Period(s):

---------------------------------------------------------------
---------------------------------------------------------------
Type(1) Amount(4) Interest Period(4)
---------------------------------------------------------------
---------------------------------------------------------------
$
---------------------------------------------------------------
$
---------------------------------------------------------------
$
---------------------------------------------------------------
$
---------------------------------------------------------------
---------------------------------------------------------------

Borrower certifies that on the Conversion Date -- and after giving effect
to the above action(s) -- (a) all of the representations and warranties in the
Loan Documents will be true and correct in all material respects -- UNLESS they
speak to a specific date or the facts on which they are based have been changed
by transactions contemplated or expressly permitted by the Credit Agreement --
and (b) no Material Adverse Event, Default, or Potential Default will exist.

PILLOWTEX CORPORATION

By
----------------------------------------
Name
----------------------------------------
Title(5)
----------------------------------------

________________
(1) Base-Rate, CD-Rate, or LIBOR-Rate
(2) LIBOR- or CD-
(3) 1, 2, 3, or 6 months for LIBOR-Rate Borrowings or 30, 60, 90, or 180 days
for CD-Rate Borrowings
(4) Must be $1,000,000 or $100,000 greater multiple for a Base-Rate Borrowing
or $4,000,000 or $100,000 multiple for any other Type of Borrowing
(5) Must be a Responsible Officer

EXHIBIT D-1

EXHIBIT D-2

COMPLIANCE CERTIFICATE

FOR THE FISCAL QUARTER ENDED ____________________ (the "SUBJECT QUARTER")

AGENT: NationsBank of Texas, N.A. DATE: ____________________

BORROWER: Pillowtex Corporation

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

This certificate is delivered under the Credit Agreement (as renewed,
extended, amended, or restated, the "CREDIT AGREEMENT") dated as of November __,
1996, between Borrower, Agent, and certain lenders, all defined terms in which
have the same meanings when used -- unless otherwise defined -- in this
certificate.

In my capacity as a Responsible Officer of -- and on behalf of -- Borrower,
I certify to Agent and Lenders on the date of this certificate that (a) I am a
Responsible Officer of Borrower, (b) Borrower's Financial Statements attached to
this certificate were prepared in accordance with GAAP and present fairly the
Companies' consolidated financial condition and results of operations as of, and
for the fiscal quarter ended on, the last day of the Subject Quarter, (c) a
review of the activities of the Companies during the Subject Quarter has been
made under my supervision with a view to determining whether, during the Subject
Quarter, the Companies performed and complied with all of their obligations
under the Loan Documents, and, during the Subject Quarter, to my knowledge
(i) the Companies performed, and complied with all of their obligations under
the Loan Documents (EXCEPT for the deviations, if any, described on a schedule
to this certificate) in all material respects, and (ii) no Default (nor any
Potential Default) has occurred which has not been cured or waived (EXCEPT the
Defaults or Potential Defaults, if any, described on the schedule to this
certificate), and (d) to my knowledge, the status of compliance by the Companies
with SECTIONS 9.9, 9.18, 10.1, 10.2, 10.3, and 10.4 of the Credit Agreement at
the end of the Subject Quarter is as described on the schedule to this
certificate.

By
------------------------------------------
Name
------------------------------------------
Title(1)
------------------------------------------

_______________
(1) Must be a Responsible Officer

EXHIBIT D-2

SCHEDULE TO COMPLIANCE CERTIFICATE

(For Fiscal Quarter Ended ___________________________)

A. Describe deviations from performance or compliance with covenants, if
any, pursuant to CLAUSE (c)(i) of the attached certificate. If none, so state.

B. Describe Potential Defaults and Defaults, if any, pursuant to CLAUSE
(c)(ii) of the attached certificate. If none, so state.

C. Reflect compliance with SECTIONS 9.9, 9.17, 10.1, 10.2, 10.3, and 10.4
at the end of the Subject Period on a consolidated basis pursuant to CLAUSE (d)
of the attached certificate.

TABLE 1
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
COVENANT AT END OF SUBJECT PERIOD
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 9.9 DISTRIBUTIONS
- -------------------------------------------------------------------------------
(a) Net Income for previous fiscal year $
- -------------------------------------------------------------------------------
(b) 50% of LINE (a) $
- -------------------------------------------------------------------------------
(c) Distributions paid -- excluding carryovers from $
earlier years -- during previous fiscal year
and by April 30 of this fiscal year for
previous fiscal year -- MAY NOT EXCEED LINE (b)
- -------------------------------------------------------------------------------
(d) Net Income for this fiscal year $
- -------------------------------------------------------------------------------
(e) 50% of LINE (d) $
- -------------------------------------------------------------------------------
(f) Distributions paid -- excluding carryovers for $
previous fiscal year included in LINE (c) --
during this fiscal year -- MAY NOT EXCEED LINE
(e)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 9.17 OPERATING LEASES
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Operating Lease obligations for most- $
recently ended fiscal year
- -------------------------------------------------------------------------------
MAXIMUM $12,000,000
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 10.1 MINIMUM NET WORTH
- -------------------------------------------------------------------------------
(a) Stockholder's equity (Net Worth) $
- -------------------------------------------------------------------------------

EXHIBIT D-2

- -------------------------------------------------------------------------------
(b) 90% of Consolidated-Net Worth at December 30, $
1995
- -------------------------------------------------------------------------------
(c) 50% of Cumulative Net Income (without deduction $
for losses) after December 30, 1995
- -------------------------------------------------------------------------------
(d) MINIMUM NET WORTH -- TOTAL of LINES (b), AND $
(c)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECTION 10.2 CURRENT RATIO
- -------------------------------------------------------------------------------
(a) Current assets $
- -------------------------------------------------------------------------------
(b) Current liabilities $
- -------------------------------------------------------------------------------
(c) RATIO of LINE (a) TO LINE (b) ____ to 1.00
- -------------------------------------------------------------------------------
(d) MINIMUM 1.3 to 1.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Section 10.3 FUNDED DEBT/EBITDA
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(a) Funded Debt $
- -------------------------------------------------------------------------------
(b) Net Income for last 12 fiscal months $
- -------------------------------------------------------------------------------
(c) Interest expense (including capitalized $
interest) for last 12 fiscal months
- -------------------------------------------------------------------------------
(d) Taxes for last 12 fiscal months $
- -------------------------------------------------------------------------------
(e) Depreciation for last 12 fiscal months $
- -------------------------------------------------------------------------------
(f) Amortization for last 12 fiscal months $
- -------------------------------------------------------------------------------
(g) EBITDA -- TOTAL of LINES (b), (c), (d), (e), $
PLUS (f)
- -------------------------------------------------------------------------------
(h) RATIO of LINE (a) TO LINE (g) ____ to 1.00
- -------------------------------------------------------------------------------
(i) MAXIMUM 4.0 to 1.00
through
1/2/99; 3.5
to 1.00
after 1/2/99
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Section 10.4 INTEREST COVERAGE RATIO
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(a) Net Income for 1, 2, 3, or 4 fiscal quarters $
- -------------------------------------------------------------------------------
(b) Interest expense (including capitalized $
interest) for period in that applicable period
- -------------------------------------------------------------------------------
(c) Taxes for that applicable period $
- -------------------------------------------------------------------------------
(d) Depreciation for that applicable period $
- -------------------------------------------------------------------------------
(e) Amortization for that applicable period $
- -------------------------------------------------------------------------------
(f) EBITDA that applicable period -- TOTAL of LINES $
(a), (b), (c), (d), PLUS (e)
- -------------------------------------------------------------------------------
(g) Interest expense on the Company's Debt for that $
applicable period
- -------------------------------------------------------------------------------
(h) RATIO of LINE (f) TO LINE (g) ____ to 1.00
- -------------------------------------------------------------------------------
(i) MINIMUM RATIO 2.5 to 1.00
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXHIBIT D-2
2

EXHIBIT D-3

CLOSING CERTIFICATE

AGENT: NationsBank of Texas, N.A. DATE: ________________, 1996

BORROWER: Pillowtex Corporation

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

This certificate is delivered under the Credit Agreement (as renewed,
extended, amended, or restated, the "CREDIT AGREEMENT") dated as of November 8,
1996, between Borrower, Agent, and certain lenders, all defined terms in which
have the same meanings when used -- unless otherwise defined -- in this
certificate.

In my capacity as a Responsible Officer of -- and on behalf of -- Borrower,
I certify to Agent and Lenders on the date of this certificate that (a) I am a
Responsible Officer of Borrower, (b) except as disclosed in writing to Agent and
Lenders, there have been no amendments or modifications to or waivers of
compliance under the Fieldcrest Acquisition Agreement, and (c) upon completion
of the Fieldcrest Asset Acquisition (i) all of the representations and
warranties in the Loan Documents will be true and correct in all material
respects and (ii) no Material Adverse Event, Default, or Potential Default will
exist.

By
------------------------------------------
Name
------------------------------------------
Title(1)
------------------------------------------

_______________
(1) Must be a Responsible Officer

EXHIBIT E-1

OPINION OF TEXAS COUNSEL

1. EXISTENCE AND AUTHORITY. Each Company is a corporation or partnership
duly organized, validly existing and (if a corporation, in good standing) under
the laws of its state of organization. Except where failure would not
reasonably be expected to be a Material Adverse Event, each Company (a) is duly
qualified to transact business as a foreign entity in each jurisdiction where
the nature and extent of its business and properties require the same, and (b)
possesses all requisite authority, power, licenses, permits, and franchises to
conduct its business as is now being conducted. Each Company possesses all
requisite corporate or partnership authority, power, licenses, permits, and
franchises to execute, deliver, and comply with the terms of the Loan Documents
to which it is a party, all which have been duly authorized and approved by all
necessary corporate or partnership action and, except where failure would not
reasonably be expected to be a Material Adverse Event, for which no approval or
consent of any Person or Tribunal is required which has not been obtained and no
filing or other notification to any Person or Tribunal is required which has not
been properly completed. Each Company has the power to own its respective
properties and to conduct its respective business as currently conducted. The
execution, delivery, and performance by each Company of the Loan Documents to
which it is a party do not violate or cause a default under the Certificate or
Articles of Incorporation or Articles of Organization, or Bylaws, or
Regulations, or Charter, or agreement of limited partnership, of such Company,
any law, any judgment, decree, or order of any court or any other agency of
government known to this firm that is applicable to such Company or its
property, or any material agreement know to this firm to which such Company is a
party or by which its property is bound, including, with respect to the Company
which is a party thereto, the Credit Agreement and will not result in the
creation or imposition of any Lien upon the property or assets of such Company,
other than as provided by the Loan Documents.

2. COMPLIANCE WITH LOAN DOCUMENTS. No Company is, nor will the
execution, delivery, performance, or observance of the Loan Documents cause any
Company to be (a) in violation of any laws or any material agreements to which
it is a party, or (b) in violation of its partnership agreement, articles of
organization, regulations, bylaws or charter.

3. LITIGATION. Except for Litigation that is not, individually or
collectively, a Material Adverse Event, no Company is aware of any pending or
threatened Litigation by, against, or affecting any Company or its assets or
real estate. Except for those that are not, individually or collectively, a
Material Adverse Event, there are no outstanding or unpaid judgments orders,
writs, injunctions or decrees against any Company or its assets.

4. GOVERNMENT REGULATION. No Company is (a) a "holding company," a
"subsidiary company" of a "holding company," an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company," or a "public
utility" within the meaning of the Public Utility Holding Company Act of 1935,
as amended, (b) a "public utility" within the meaning of the Federal Power Act,
as amended, (c) an "investment company" or "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or (d) an "investment advisor" within the meaning of the Investment Advisors Act
of 1940, as amended.

5. ENFORCEABILITY. Each of the Loan Documents has been duly executed and
delivered by each Company party thereto and constitutes a legal, valid and
binding obligation of each Company party thereto, enforceable against each such
Company in accordance with its terms.

6. EMPLOYEE BENEFIT PLANS. No (a) Company employee benefit plan (as
defined in the Internal Revenue Code of 1954, as amended, and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) has incurred an
accumulated funding deficiency in a material amount; (b) Company has incurred
material liability to the Pension Benefit Guaranty Corporation in connection
with any such plan; (c) Company has withdrawn in whole or in part from
participation in a multiemployer pension plan (as defined in ERISA); and
(d) prohibited transaction or
EXHIBIT E-1
1

reportable event (as such terms are defined in ERISA) has occurred which
could have a material adverse effect on Borrower's financial condition.

7. TAXES. All tax returns of each Company required to be filed have been
filed and all taxes imposed upon each Company which are due and payable have
been paid.

8. USURY. The interest contracted for in the Loan Documents does not
exceed the rate of interest currently allowed to be contracted for under Texas
usury law. With respect to the Loan Documents, (a) no fees, sums or other
benefits, direct or indirect, including any compensating balance requirements or
fees in lieu thereof, have been paid to or received by or are, or may be,
payable to or receivable by the Agent (for the benefit of the Lenders), except
as set forth in the Loan Documents, (c) any expenses reimbursable to the Agent
(for the benefit of the Lenders) in connection with the Loans have been and will
be limited to the actual costs incurred and paid to third parties, (d) the
prepayment premiums or funding loss payments contained in the Credit Agreement
bear a reasonable relationship to the amount of loss or inconvenience which may
be suffered by the Agent (and the Lenders) as a result of any prepayment, and
(e) the fees required to be paid by SECTIONS 4.2, 4.3, and 4.4 of the Credit
Agreement do not constitute interest under Texas law.

9. NO DEFAULT. The execution, delivery, and performance by any Company
with respect to the Loan Documents to which it is a party do not and will not
contravene or constitute a default under, any provision of any law or regulation
of the State of Texas or the United States of America, and no authorization,
approval, consent, order, license, or other action by, and no notice to or
filing with, any individual, corporation, partnership, trust unincorporated
association or other legal entity or organization, or any government, court,
agency, or political subdivision, is required in connection with such execution,
delivery and performance under any law or regulation of the State of Texas or
the United States of America or any judgment, decree, or order of any court or
governmental or regulatory authority, which has not been obtained or given.

10. CONSENTS. No approval, authorization, or other action by, or filing
with, any governmental authority of the United States of America or any state,
or any court or arbitrator, is required in connection with the execution,
delivery and performance on the date hereof by each Company with respect to the
Loan Documents to which it is a party, except (a) such approvals,
authorizations, actions or filings as have been made or secured as of the date
hereof, and (b) the filing or recording of any Uniform Commercial Code financing
statements or amendments, and any other document or instrument required to be
filed in order to perfect a lien in any of the Collateral, and any continuation
statements or similar documents required to be filed to maintain the
effectiveness thereof.

11. SECURITY INTEREST. All right, title and interest of each Company in
respect of the Collateral has been effectively made subject to the security
interests of the Agent (for the benefit of the Lenders) pursuant to the Credit
Agreement. Assuming the due filing in proper form in the office of the
Secretary of State of the State of Texas of financing statements covering the
Collateral, the Agent (for the benefit of the Lenders) will have good and valid
perfected liens and security interests in the Collateral to the extent such
security interest is perfected by central filing under the Uniform Commercial
Code as in effect in the State of Texas (the "UCC").

12. PLEDGED SECURITIES. Based upon a review of the stock transfer records
of each issuer thereof, the Pledged Securities that are capital stock
collectively constitute all the issued and outstanding shares of capital stock
of each issuer, are owned by the Persons identified on SCHEDULE 2 to the
Security Agreement, and no other person owns any interest in any capital stock
of any Company and all of the Pledged Securities that are capital stock are duly
authorized, validly issued, fully paid and non-assessable, and, all of the
Pledged Securities are free and clear of any liens, encumbrances, or security
interests whatsoever other than the liens created by the pledge of the Security
Agreement pursuant to the Credit Agreement. There are no outstanding rights,
warrants, options, or agreements to purchase or otherwise acquire any shares of
stock or securities or obligations of any kind convertible into any share of
capital stock, of any class. There are also no restrictions on transfer of the
capital stock of any Company. No filings or recordings are required to perfect
or make valid and enforceable the pledge under the Security Agreement.

EXHIBIT E-1
2

With the delivery to and possession by the Agent (for the benefit of the
Lenders) of the certificates representing the Pledged Securities, the Agent
(for the benefit of the Lenders) will have a valid, perfected, first priority
security interest in and pledge of all the Pledged Securities as security for
Obligations.

EXHIBIT E-1
3

EXHIBIT E-2

OPINION OF MEXICO COUNSEL

1. ENFORCEABILITY OF SECURITY AGREEMENT. The Security Agreement
evidences a valid and binding obligation and agreement of ____________________,
and, assuming that it is enforceable under the applicable laws of the United
States of America, is enforceable in accordance with its terms under the laws of
Mexico.

2. EXISTENCE AND AUTHORITY. The Company is a corporation duly organized,
validy existing, and in good standing under the laws of its state of
jurisdiction of organization. Except where failure would not reasonably be
expected to be a Material Adverse Event, the Company (a) is duly qualified to
transact business as a foreign entity in each jurisdiction where the nature and
extent of its business and properties require the same, and (b) possesses all
requisite authority, power, licenses, permits, and franchises to conduct its
business as is now being conducted.

EXHIBIT E-2
1

EXHIBIT F

ASSIGNMENT AND ASSUMPTION AGREEMENT

THIS AGREEMENT is entered into as of ______________________, between
________________________ ("ASSIGNOR") and ______________________ ("ASSIGNEE").

PILLOWTEX CORPORATION, a Texas corporation ("BORROWER"), certain lenders
("LENDERS"), and NATIONSBANK OF TEXAS, N.A., a national banking association (in
its capacity as Agent for Lenders, "AGENT"), are party to the Restated Credit
Agreement (as renewed, extended, amended, or restated, the "CREDIT AGREEMENT")
dated as of November __, 1996, all of the defined terms in which have the same
meanings when used -- unless otherwise defined -- in this agreement. This
agreement is entered into as required by SECTION 14.10(c) of the Credit
Agreement and is not effective until consented to by Borrower and Agent, which
consents may not under the Credit Agreement be unreasonably withheld.

ACCORDINGLY, for adequate and sufficient consideration, Assignor and
Assignee agree as follows:

1. ASSIGNMENT AND ASSUMPTION. By this agreement, and effective as of
_________________________ (which must be at least five Business Days after the
execution and delivery of this agreement to both Borrower and Agent for consent,
the "EFFECTIVE DATE"), Assignor sells and assigns to Assignee (without recourse
to Assignor) and Assignee purchases and assumes from Assignor a ___% interest
(the "ASSIGNED INTEREST") in and to all of Assignor's Rights and obligations
under the Credit Agreement as of the Effective Date, including, without
limitation, the Assigned Interest in (a) Assignor's Commitment as of the
Effective Date, (b) Notes held by Assignor as of the Effective Date, (c) all
Principal Debt owed to Assignor on the Effective Date, (d) all unpaid
reimbursement obligations under drawings or drafts under any LC on the Effective
Date, (e) all outstanding participations owned by Assignor under SECTION 2.4(c)
of the Credit Agreement on the Effective Date, (f) all interest accruing in
respect of the Assigned Interest after the Effective Date, (g) all LC fees paid
in advance before the Effective Date under SECTION 4.3(a) of the Credit
Agreement in respect of the Assigned Interest and in respect of any period or
periods after the Effective Date, and (h) all commitment fees accruing in
respect of the Assigned Interest under SECTION 4.4 of the Credit Agreement after
the Effective Date.

2. ASSIGNOR PROVISIONS. Assignor (a) represents and warrants to Assignee
that as of the Effective Date (i) the following principal amounts and LC
liabilities are owed to it without reduction for any assignments that have not
yet become effective:

--------------------------------------------------
--------------------------------------------------
ITEM AMOUNT
--------------------------------------------------
--------------------------------------------------
Principal Debt of Revolving Facility $
--------------------------------------------------
LC reimbursables $
--------------------------------------------------
Section 2.4(c) participations $
--------------------------------------------------
--------------------------------------------------

and (ii) Assignor is the legal and beneficial owner of the Assigned Interest,
which is free and clear of any adverse claim, and (b) makes no representation or
warranty to Assignee and assumes no responsibility to Assignee with respect to
(i) any statements, warranties, or representations made in or in connection with
any Loan Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency, or value of any Loan Document, or (iii) the financial
condition of any Company or the performance or observance by any Company of any
of its obligations under any Loan Document.

EXHIBIT F

NationsBank of Texas, N.A., Agent
________________, 1994
Page 2

3. ASSIGNEE PROVISIONS. Assignee (a) represents and warrants to
Assignor, Borrower, and Agent that Assignee is legally authorized to enter
into this agreement, (b) confirms that it has received a copy of the Credit
Agreement, copies of the Current Financials, and such other documents and
information as it deems appropriate to make its own credit analysis and
decision to enter into this agreement, (c) agrees with Assignor, Borrower,
and Agent that Assignee shall -- independently and without reliance upon
Agent, Assignor, or any other Lender and based on such documents and
information as Assignee deems appropriate at the time -- continue to make its
own credit decisions in taking or not taking action under the Loan Documents,
(d) appoints and authorizes Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to
Agent by the terms of the Loan Documents and all other reasonably-incidental
powers, (e) agrees with Assignor, Borrower, and Agent that Assignee shall
perform and comply with all provisions of the Loan Documents applicable to
Lenders in accordance with their respective terms, and (f) if Assignee is not
organized under the Laws of the United States of America or one of its
states, it (i) represents and warrants to Assignor, Agent, and Borrower that
no Taxes are required to be withheld by Assignor, Agent, or Borrower with
respect to any payments to be made to it in respect of the Obligations, and
it has furnished to Agent and Borrower two duly completed copies of either
U.S. Internal Revenue Service FORM 4224, FORM 1001, FORM W-8, or any other
form acceptable to Agent that entitles Assignee to exemption from U.S.
federal withholding Tax on all interest payments under the Loan Documents,
(ii) covenants to provide Agent and Borrower a new FORM 4224, FORM 1001, FORM
W-8, or other form acceptable to Agent upon the expiration or obsolescence of
any previously delivered form according to Law, duly executed and completed
by it, and to comply from time to time with all Laws with regard to the
withholding Tax exemption, and (iii) agrees with Agent and Borrower that, if
any of the foregoing is not true or the applicable forms are not provided,
then Agent and Borrower (without duplication) may deduct and withhold from
interest payments under the Loan Documents any United States federal-income
Tax at the full rate applicable under the Code.

4. CREDIT AGREEMENT AND COMMITMENTS. From and after the Effective
Date (a) Assignee shall be a party to the Credit Agreement and (to the extent
provided in this agreement) have the Rights and obligations of a Lender under
the Loan Documents and (b) Assignor shall (to the extent provided in this
agreement) relinquish its Rights and be released from its obligations under
the Loan Documents. On the Effective Date, after giving effect to this
agreement, but without giving effect to any other assignments that have not
yet become effective, Assignor's total Commitment (which, if positive, must
be at least $10,000,000) and Assignee's total Commitment (which must be at
least $10,000,000) will be as follows:

------------------------------------------------------
------------------------------------------------------
LENDER REVOLVING FACILITY TOTAL
------------------------------------------------------
------------------------------------------------------
Assignor $ $
------------------------------------------------------
Assignee $ $
------------------------------------------------------
------------------------------------------------------

5. NOTES. Assignor and Assignee request Borrower to issue new Notes to
Assignor and Assignee in the amounts of their respective Commitments under
PARAGRAPH 4 above and otherwise issued in accordance with the Credit Agreement.
Upon delivery of those Notes, Assignor shall return to Borrower all Notes
previously delivered to Assignor under the Credit Agreement.

6. PAYMENTS AND ADJUSTMENTS. From and after the Effective Date, Agent
shall make all payments in respect of the Assigned Interest (including payments
of principal, interest, fees, and other amounts) to Assignee.

EXHIBIT F
2

NationsBank of Texas, N.A., Agent
________________, 1994
Page 3

Assignor and Assignee shall make all appropriate adjustments in payments for
periods before the Effective Date by Agent or with respect to the making of
this assignment directly between themselves.

7. CONDITIONS PRECEDENT. PARAGRAPHS 1 through 5 above are not effective
until (a) counterparts of this agreement are executed and delivered by Assignor
and Assignee to -- and are executed in the spaces below by -- Borrower and Agent
and (b) Agent receives from Assignor or Assignee a $2,500 processing fee.

8. INCORPORATED PROVISIONS. Although this agreement is not a Loan
Document, the provisions of SECTIONS 1 and 14 of the Credit Agreement applicable
to Loan Documents are incorporated into this instrument by reference the same as
if this agreement were a Loan Document and those provisions were set forth in
this agreement verbatim.

9. COMMUNICATIONS. For purposes of SECTION 14.2 of the Credit Agreement,
Assignee's address and telecopy number -- until changed under that section --
are beside its signature below.

10. AMENDMENTS, ETC. No amendment, waiver, or discharge to or under this
agreement is valid unless in writing that is signed by the party against whom it
is sought to be enforced and is otherwise in conformity with the requirements of
the Credit Agreement.

11. ENTIRETY. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
ASSIGNOR AND ASSIGNEE ABOUT ITS SUBJECT MATTER AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF ASSIGNOR
AND ASSIGNEE. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN ASSIGNOR AND
ASSIGNEE.

12. PARTIES. This agreement binds and benefits Assignor, Assignee, and
their respective successors and assigns that are permitted under the Credit
Agreement.

EXECUTED as of the date first stated above.

[ASSIGNOR] [ASSIGNEE]

By By
------------------------------ ------------------------------
(Name) (Name)
------------------------------ ------------------------------
(Title) (Title)
------------------------------ ------------------------------

(Address)
------------------------------
------------------------------
------------------------------
(Telecopy No.)

EXHIBIT F
3

NationsBank of Texas, N.A., Agent
________________, 1994
Page 4

As of the Effective Date, Borrower and Agent consent to this agreement and
the transactions contemplated in it.

PILLOWTEX CORPORATION, as BORROWER NATIONSBANK OF TEXAS, N.A., as AGENT

EXHIBIT F
4