EXHIBIT 10.1
 
WAIVER, CONSENT AND THIRD AMENDMENT TO
TERM LOAN AGREEMENT
 
THIS WAIVER, CONSENT AND THIRD AMENDMENT TO TERM LOAN AGREEMENT (this
“Amendment”), dated to be effective as of December 20, 2002, is entered into
among PILLOWTEX CORPORATION, a Delaware corporation (the “Borrower”), the
lenders that are parties to the Loan Agreement defined below (collectively, the
“Lenders”), and BANK OF AMERICA, N.A., as Administrative Agent for itself and
the Lenders (in said capacity, the “Administrative Agent”).
 
BACKGROUND
 
A.    The Borrower, the Lenders and the Administrative Agent are parties to that
certain Term Loan Agreement, dated as of May 24, 2002 (as amended through the
date hereof, the “Loan Agreement”). Terms defined in the Loan Agreement and not
otherwise defined herein shall be used herein as defined in the Loan Agreement.
 
B.    The Borrower, the Lenders and the Administrative Agent desire to make
certain amendments to the Loan Agreement.
 
C.    The Borrower has requested a limited waiver of compliance with certain
financial covenants under the Loan Agreement.
 
D.    The Borrower has requested that the Lenders consent to the sale of certain
Subject Assets.
 
NOW, THEREFORE, in consideration of the covenants, conditions and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which are all hereby acknowledged, the Borrower, the
Lenders and the Administrative Agent covenant and agree as follows:
 
1.    WAIVER.    Subject to the satisfaction of the conditions of effectiveness
set forth in Section 7 of this Amendment and the other conditions contained
herein, the Lenders hereby waive compliance by the Borrower with (a) the
required Interest Coverage Ratio set forth in Section 10.1 of the Loan Agreement
at the end of the fiscal quarter ending on December 28, 2002, and (b) the
required Leverage Ratio set forth in Section 10.2 of the Loan Agreement at the
end of the fiscal quarter ending on December 28, 2002. The waiver provided in
this Section 1 shall not be and shall not be deemed to be a waiver of any other
covenant or requirement under the Loan Agreement.
 
2.    CONSENT.    Borrower desires to sell (a) the Plant 4 Sheet Mill located in
Kannapolis, North Carolina, (b) certain looms located in the Plant 16 Sheet Mill
in Salisbury, North Carolina, and (c) certain looms located in the Plant 4 Sheet
Mill in Kannapolis, North Carolina, all of which are Subject Assets
(collectively, the “Subject Asset Sales”). Subject to the satisfaction of the
conditions of effectiveness set forth in Section 7 of this Amendment and the
other conditions contained herein, the Lenders hereby consent to the Subject
Asset Sales, which

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consent is expressly conditioned on the following: (i) Net Cash Proceeds
received from the Subject Asset Sales shall be used to prepay the Term Loan in
accordance with Section 3.3 of the Loan Agreement; and (ii) the Subject Asset
Sales shall be consummated on substantially the same material terms and
conditions (with no changes as to amount or terms of payment) set forth in the
respective purchase contracts set forth in Exhibit A to this Amendment. The
consent provided hereby (A) is limited to the extent specifically set forth
above and no other terms, covenants or provisions of the Loan Agreement or any
Loan Document are intended to be effected hereby, and (B) shall not constitute
and shall not be deemed to constitute a waiver of future compliance by Borrower
with any provision of the Loan Agreement or any Loan Document.
 
3.    AMENDMENTS TO LOAN AGREEMENT.    The Loan Agreement is hereby amended as
follows:
 
(a)    Section 8.1(r) is amended and restated in its entirety, as follows:
 
(r)    As soon as practical, but in any event no later than 30 days after the
end of each fiscal month of the Borrower (subject to the exception set forth
below), beginning with the fiscal month ending September 28, 2002 and continuing
through and including the fiscal month ending March 29, 2003, a certificate of
the vice president and controller, the vice president and treasurer or the chief
financial officer of the Borrower, in form and detail satisfactory to the
Administrative Agent, demonstrating compliance with Section 10.3 and Section
10.4 as of the end of such fiscal month. Notwithstanding the above to the
contrary, the certificate required to be delivered hereunder demonstrating
compliance with Section 10.3 as of the end of the fiscal month of the Borrower
ending December 28, 2002 shall be delivered no later than 45 days after the end
of such fiscal month.
 
(b)    Section 10.3 is amended and restated in its entirety, as follows:
 
Section 10.3    Asset Coverage Ratio.    The Borrower will not permit the ratio
of (a) the sum of (i) cash on hand, plus (ii) the amount of eligible accounts
receivable and inventory in the “Borrowing Base” described in the Revolving
Credit Agreement, plus (iii) 50% of net property, plant, and equipment book
values, to (b) the outstanding principal amount of all long term Debt,
determined in accordance with GAAP on a consolidated basis for the Borrower and
its Subsidiaries, at the end of each fiscal month, beginning with the fiscal
month ending September 28, 2002 and ending with the fiscal month ending March
29, 2003, to be less than 1.0 to 1.0, measured monthly in accordance with the
requirements of Section 8.1(r).
 
(c)    Section 10.4 is amended and restated in its entirety, as follows:
 
Section 10.4    Minimum Availability.    Permit the minimum amount available to
be borrowed under the Revolving Credit Agreement to be less than

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(a) $40,000,000 during the fiscal month of September 2002, (b) $45,000,000
during the fiscal months of October and November 2002, and (c) $40,000,000
during the fiscal months of December 2002 and January, February and March 2003,
measured monthly in accordance with the requirements of Section 8.1(r).
 
4.    AMENDMENT FEE.    Borrower shall pay to the Administrative Agent, for the
pro rata benefit of the Lenders that execute and deliver this Amendment to the
Administrative Agent (or its counsel) not later than 5:00 p.m., Dallas time,
December 20, 2002, an amendment fee in an amount equal to the product of 0.25%
multiplied by the outstanding principal amount of the Term Loan owed to each
such Lender. Such amendment fee shall be paid in immediately available funds and
shall be due and payable only to each Lender eligible for payment pursuant to
the preceding sentence no later than two Business Days after the conditions set
forth in Section 7 of this Amendment have been satisfied. The Borrower agrees
that the failure to timely pay the amendment fee provided in this Section 4
shall constitute an immediate Event of Default under Section 11.1(a) of the Loan
Agreement with no grace or cure period.
 
5.    RELEASE.
 
(a)    The Borrower and each Guarantor hereby unconditionally and irrevocably
remises, acquits, and fully and forever releases and discharges the
Administrative Agent and the Lenders and all respective affiliates and
subsidiaries of the Administrative Agent and the Lenders, their respective
officers, servants, employees, agents, attorneys, financial advisors,
principals, directors and shareholders, and their respective heirs, legal
representatives, successors and assigns (collectively, the “Released Lender
Parties”) from any and all claims, demands, causes of action, obligations,
remedies, suits, damages and liabilities (collectively, the “Borrower Claims”)
of any nature whatsoever, whether now known, suspected or claimed, whether
arising under common law, in equity or under statute, which the Borrower or any
Guarantor ever had or now has against the Released Lender Parties which may have
arisen at any time on or prior to the date of this Amendment and which were in
any manner related to any of the Loan Documents or the enforcement or attempted
enforcement by the Administrative Agent or the Lenders of rights, remedies or
recourses related thereto.
 
(b)    The Borrower and each Guarantor covenants and agrees never to commence,
voluntarily aid in any way, prosecute or cause to be commenced or prosecuted
against any of the Released Lender Parties any action or other proceeding based
upon any of the Borrower Claims which may have arisen at any time on or prior to
the date of this Amendment and were in any manner related to any of the Loan
Documents.
 
(c)    The agreements of the Borrower and each Guarantor set forth in this
Section 5 shall survive termination of this Amendment and the other Loan
Documents.
 
6.    REPRESENTATIONS AND WARRANTIES.    By its execution and delivery hereof,
the Borrower represents and warrants to the Lenders that, as of the date hereof:

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(a)    after giving effect to this Amendment, the representations and warranties
contained in the Loan Agreement and the other Loan Documents are true and
correct on and as of the date hereof as if made on and as of such date, except
to the extent that such representations and warranties expressly relate solely
to an earlier date (in which case such representations and warranties shall have
been true and accurate in all material respects on and as of such earlier date);
 
(b)    after giving effect to this Amendment, no event has occurred and is
continuing which constitutes an Event of Default;
 
(c)    the Borrower has legal power and authority to execute and deliver this
Amendment, and this Amendment constitutes the legal, valid and binding
obligation of the Borrower, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy or other debtor relief
laws and by general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law) and except as rights to indemnity
may be limited by federal or state securities laws;
 
(d)    neither the execution, delivery and performance of this Amendment nor the
consummation of any transactions contemplated herein will violate or conflict
with, or result in a breach of, or constitute a default under, or require any
consent under (i) the articles of incorporation, bylaws or other organizational
documents of the Borrower, (ii) any applicable law, rule, or regulation or any
order, writ, injunction, or decree of any Governmental Authority or arbitrator,
or (iii) any agreement or instrument to which the Borrower is a party or by
which it or any of its property is bound or subject; and
 
(e)    no authorization, approval, consent, or other action by, notice to, or
filing with, any Governmental Authority or other Person (including the Board of
Directors of Borrower), is required for the execution, delivery or performance
by the Borrower of this Amendment.
 
7.    CONDITIONS OF EFFECTIVENESS.    This Amendment shall be effective as of
December 20, 2002 only after each of the following conditions precedent shall
have been satisfied:
 
(a)    the Administrative Agent shall receive counterparts of this Amendment
executed by the Required Lenders and the Borrower;
 
(b)    the representations and warranties set forth in Section 6 of this
Amendment shall be true and correct;
 
(c)    all reasonable out-of-pocket fees and expenses in connection with the
Loan Documents, including this Amendment, including legal and other professional
fees and expenses incurred on or prior to the date of this Amendment by
Administrative Agent or any Lender, including, without limitation, the
reasonable fees and expenses of Winstead Sechrest & Minick P.C. and FTI
Consulting, shall have been paid; and

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(d)    the Administrative Agent shall receive, in form and substance
satisfactory to the Administrative Agent and its counsel, such other documents,
certificates and instruments as the Administrative Agent shall reasonably
require.
 
8.    REFERENCE TO LOAN AGREEMENT.    Upon the effectiveness of this Amendment,
each reference in the Loan Agreement to “this Agreement,” “hereunder,” or words
of like import shall mean and be a reference to the Loan Agreement, as affected
and amended by this Amendment.
 
9.    COUNTERPARTS; EXECUTION VIA FACSIMILE.    This Amendment may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. This Amendment
may be validly executed and delivered by facsimile or other electronic
transmission.
 
10.    GOVERNING LAW: BINDING EFFECT.    This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas and shall be binding
upon the Borrower, the Administrative Agent, each Lender and their respective
successors and assigns.
 
11.    HEADINGS.    Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
 
12.    LOAN DOCUMENT.    This Amendment is a Loan Document and is subject to all
provisions of the Loan Agreement applicable to Loan Documents, all of which are
incorporated in this Amendment by reference the same as if set forth in this
Amendment verbatim.
 
13.    NO ORAL AGREEMENTS.    THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES 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.
 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
 
BORROWER:
 
PILLOWTEX CORPORATION
By:
 
 

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Name:
 

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Title:
 

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ADMINISTRATIVE AGENT:
 
BANK OF AMERICA, N.A., as Administrative Agent and a Lender
By:
 

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William E. Livingstone, IV
Managing Director

 
Waiver, Consent and Third Amendment
Signature Page

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Each of the undersigned hereby (a) consents and agrees to this Amendment’s
execution and delivery, (b) ratifies and confirms its obligations under its
guaranty, (c) acknowledges and agrees that its obligations under its guaranty
are not released, diminished, impaired, reduced, or otherwise adversely affected
by this Amendment, and (d) acknowledges and agrees that it has no claims or
offsets against, or defenses or counterclaims to, its guaranty
 
GUARANTORS:
 
PTEX, INC
PILLOWTEX MANAGEMENT SERVICES COMPANY
BEACON MANUFACTURING COMPANY
FC ONLINE, INC
TENNESSEE WOOLEN MILLS, INC
FIELDCREST CANNON, INC
ENCEE, INC
FCC CANADA, INC.
FIELDCREST CANNON LICENSING, INC
FCI CORPORATE LLC
FIELDCREST CANNON TRANSPORTATION, INC.
FCI OPERATIONS LLC
THE LESHNER CORPORATION
OPELIKA INDUSTRIES, INC
PILLOWTEX CANADA INC.
 
By:
 

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Name:
 

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Title:
 

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PTEX HOLDING COMPANY
FIELDCREST CANNON FINANCING, INC
By:
 

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Name:
 

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Title:
 

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Waiver, Consent and Third Amendment
Signature Page

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Lender signature page to that certain Waiver, Consent and Third Amendment to
Term Loan Agreement dated to be effective as of December 20, 2002, by and among
Pillowtex Corporation, the Lenders party thereto, and Bank of America, N.A., as
Administrative Agent for the Lenders.
 

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By:
 

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Name:
 

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Title:
 

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Waiver, Consent and Third Amendment
Signature Page