EMPLOYMENT   AGREEMENT   dated   as  of  May  4,   2000   (the
"AGREEMENT"),  between PARAGON TRADE BRANDS,  INC., a Delaware  corporation (the
"COMPANY"), and MICHAEL T. RIORDAN (the "EXECUTIVE").

                  WHEREAS, the Company has offered to employ the Executive,  and
the Executive desires to accept such employment, on the terms and conditions set
forth herein;

                  NOW,   THEREFORE,   in  consideration  of  the  covenants  and
agreements hereinafter set forth, the parties hereto agree as follows:

         1.       EFFECTIVENESS OF AGREEMENT

                  This  Agreement  shall become  effective as of the date hereof
(the "EFFECTIVE DATE").

         2.       EMPLOYMENT AND DUTIES

                  2.1 GENERAL. The Company hereby employs the Executive, and the
Executive  agrees to serve,  as  President  and Chief  Executive  Officer of the
Company,  upon the terms and conditions  herein  contained.  The Executive shall
have all of the  responsibilities  and  powers  normally  associated  with  such
offices.  So long as the  Executive  is employed by the Company,  the  Executive
shall serve as a member of the Board of Directors  of the Company (the  "BOARD")
and of the Company's  Executive  Committee.  The Executive  shall preside at all
meetings  of  the  Board,  determine  the  agendas  for  all  such  meetings  in
consultation  with the  Company's  Executive  Committee  and have  such  further
responsibilities  and powers as are  normally  associated  with the  position of
Chairman of the Board. The Executive agrees to serve the Company  faithfully and
to the best of his ability under the direction of the Board.

                  2.2 EXCLUSIVE SERVICES. Except as may otherwise be approved in
advance by the board, and except during vacation periods and reasonable  periods
of absence due to sickness,  personal injury or other disability,  the Executive
shall devote his full working time  throughout the Employment Term (as defined n
Section 2.4) to the  services  required of him  hereunder  The  Executive  shall
render his services  exclusively to the Company during the Employment  Term, and
shall use his best  efforts,  judgment  and energy to improve  and  advance  the
business and interests of the Company in a manner  consistent with the duties of
his position.  Notwithstanding  the foregoing,  but subject to the provisions of
Section 9, the Executive may (a) serve on corporate,  civic or charitable boards
or engage in charitable activities,  (b) perform outside speaking,  lecturing or
teaching engagements, (c) continue to serve as an advisor to Kruger Inc. and (d)
manage  personal  investments,  PROVIDED that none of the  foregoing  activities
interfere with the performance of the Executive's duties under this Agreement.



<PAGE>
                                       2




                  2.3      PLACE OF PERFORMANCE.

                  2.3.1  PRE-OCTOBER  31, 2001.  Prior to October 31, 2001,  the
Executive shall continue to reside in his current  principal  residence in Green
Bay, Wisconsin,  and shall perform his services under this Agreement as follows:
(i) for on day during each work week,  the Executive  shall perform his services
at an office  established  by the Executive I his  principal  residence in Green
Bay,  Wisconsin (or, at the Executive's  election with the reasonable consent of
the  Company,  at  an  office  located  in  Green  Bay,  Wisconsin  outside  the
Executive's  principal  residence)  (in either case, the "GREEN BAY OFFICE") and
(ii) for four days  during  each  work week  (inclusive  of  travel  time),  the
Executive's  services  shall  be  performed  at the  Company's  headquarters  in
Norcross,  Georgia (the "NORCROSS OFFICE"). The Executive shall otherwise travel
on Company business as reasonably required by the Board.

                  2.3.2  POST-OCTOBER  31,  2001.  Except  as  the  parties  may
otherwise  agree,  the  Executive  shall be required to relocate to the Atlanta,
Georgia  metropolitan area by October 31, 2001.  Following such relocation,  the
Executive's services under this Agreement shall be principally  performed at the
Norcross Office,  subject to travel on Company business  reasonably  required by
the Board.

                  2.4 TERM OF EMPLOYMENT.  The Executive's employment under this
Agreement  shall  commence as of the Effective  Date and shall  terminate on the
earlier of (i) the third anniversary of the Effective Date, and (ii) termination
of the Executive's  employment  pursuant to this Agreement;  PROVIDED,  HOWEVER,
that the term of the  Executive's  employment  shall be  automatically  extended
without  further action of either party for additional one year periods,  unless
written notice of either  party's  intention not to extend has been given to the
other  party  hereto  at  least  90 days  prior  to the  expiration  of the then
effective term. The period commencing as of the Effective Date and ending on the
third  anniversary of the Effective Date or such later date to which the term of
the  Executive's  employment  under this  Agreement  shall have been extended is
hereinafter  referred to as the  "EMPLOYMENT  TERM." A notice  delivered  by the
Company  that it does not  intend to  extend  the term of this  Agreement  shall
hereinafter be referred to as a "NONRENEWAL NOTICE."

                  2.5 REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Executive for reasonable  travel and other business  expenses incurred by him in
the fulfillment of his duties hereunder upon presentation by the Executive of an
itemized account of such  expenditures,  in accordance with Company policy.  The
Company shall also reimburse the Executive for reasonable  expenses  (including,
without  limitation,  for  airfare  and ground  transportation)  incurred by him
pursuant to Section 2.3.1 in traveling to and returning form the Norcross Office
on a weekly basis (or more  frequently if necessary in light of the  Executive's
personal and family obligations).



<PAGE>
                                       3



                  3.       COMPENSATION

                  3.1 BASE SALARY.  From the Effective Date, the Executive shall
be entitled to receive a base salary  ("BASE  SALARY") at a rate of $500,000 per
annum, payable in arrears in equal installments in accordance with the Company's
payroll practices, with such increases as may be provided in accordance with the
terms  hereof.   Once  increased,   such  higher  amount  shall  constitute  the
Executive's Base Salary.

                  3.2  ANNUAL  REVIEW.  The  Executive's  Base  Salary  shall be
reviewed by the Board,  based upon the Executive's  performance,  not less often
than  annually,  and may be  increased  but not  decreased.  In  addition to any
increases  effected as a result of such review, the Board at any time may in its
sole discretion increase the Executive's Base Salary.

                  3.3      BONUS.

                  3.3.1  2000  FISCAL  YEAR.  For  the  2000  fiscal  year,  the
Executive shall be entitled to receive a bonus (without any proration)  based on
the  level of the  Applicable  Performance  Measure  (as  defined  in  Exhibit A
attached  hereto) for the fiscal year ending  December 31, 2000 (as set forth in
the Company's audited financial statements for such fiscal year):

                           Amount of
                           Applicable                  Bonus Amount (as a
                           PERFORMANCE MEASURE         PERCENTAGE OF BASE SALARY
                           -------------------         -------------------------
                           $60      Million                           0
                           $75      Million                          60
                           $90      Million                         120
                           $97      Million                         180

The amount of the  Executive's  bonus  shall be  adjusted  upward to reflect any
linear interpolation between the foregoing performance measures.

                  3.3.2 POST-2000 FISCAL YEARS. For fiscal years after 2000, the
Board shall annually adopt a bonus plan and performance  criteria upon which the
bonuses of executives of the Company  shall be based.  Commencing  with the 2001
fiscal year, during his employment under this Agreement,  the Executive shall be
entitled to participate in such bonus plan, based on performance  criteria to be
determined  at the  beginning  of  each  year by the  Board  in  good  faith  in
reasonable  consultation  with  the  Executive,   and  otherwise  in  an  amount
(expressed as a percentage  of Base Salary,  which shall not be less than 60% if
the target  performance  measures  are  satisfied  and not less than 180% if the
maximum performance  measures established for the Company's senior executives as
a whole  are  satisfied)  and on other  terms  and  conditions  that are no less
favorable than those applicable to any other senior executive of the Company.


<PAGE>
                                       4


                  3.4 STOCK OPTIONS.  Effective as of May 4, 2000, the Executive
shall be granted options (the "STOCK OPTIONS") to purchase 700,000 shares of the
Company's common stock,  par value $.01 per share (the "COMMON  STOCK"),  on the
terms and conditions set forth in the Option  Agreement  dated as of May 4, 2000
(the  "OPTION  AGREEMENT")  by and between the  Company and the  Executive.  The
Executive  shall be  eligible  to receive  future  grants of options to purchase
shares of Common Stock as determined by the Board.

         4.       EMPLOYEE BENEFITS

                  The  Executive   shall,   during  his  employment  under  this
Agreement,  be eligible to participate in all employee and fringe benefit plans,
programs and arrangements which shall be established by the Company for, or made
available to, its senior  executives ,on terms and  conditions  that are no less
favorable  than those  applicable to any other senior  executive of the Company,
PROVIDED  that  the  Executive  may  elect  not  to  participate,  or  to  defer
participation,  in the Company's  medical and/or dental plans. In addition,  the
Company  shall  furnish the Executive  with the  following  benefits  during his
employment under this Agreement:

                  (i)   paid  vacation  of  five  weeks  per  calendar  year  in
         accordance with the vacation policy of the Company;

                  (ii)   reimbursement of the Executive's reasonable expenses in
         connection with maintaining and operating the Green Bay Office;

                  (iii)  Reimbursement of the Executive's reasonable expenses in
         connection with tax and financial planning services;

                  (iv)  Reimbursement  of the  Executive's  reasonable  expenses
         (including  rent  and  utilities)  in  connection  with  maintaining  a
         furnished residence in the Atlanta, Georgia metropolitan area;

                  (v)  reimbursement  of  the  Executive's  reasonable  expenses
         (including initiation fees and dues) in connection with his memberships
         in a country  club and a health club  located in the  Atlanta,  Georgia
         metropolitan area;

                  (vi)  reimbursement  of the Executive's  reasonable  legal and
         out-of-pocket expenses in connection with the preparation,  negotiation
         and enforcement  (including  dispute  resolution) of this Agreement and
         any related documentation;

                  (vii)  reimbursement  of the Executive's  expenses  associated
         with the relocation of his family and moving of his household goods and
         furnishings  to a new  residence in the Atlanta,  Georgia  metropolitan
         area;


<PAGE>
                                       5



                  (viii) reimbursement of the Executive's broker's fees, closing
         costs and other  similar  expenses  (including  reasonable  legal fees)
         associated  with (x) the sale of his residence in Green Bay,  Wisconsin
         and  (y)  the  purchase  of a new  residence  in the  Atlanta,  Georgia
         metropolitan area; and

                  (ix)   coverage   by  a   customary   director   and   officer
         indemnification  policy on a basis that is no lees  favorable  than the
         coverage provided to any other Company officer or director.

         5.       TERMINATION OF EMPLOYMENT

                  5.1    TERMINATION WITHOUT CAUSE; RESIGNATION FOR GOOD REASON.

                  5.1.1  GENERAL.  If, prior to the expiration of the Employment
Term, the Executive's  employment is terminated by the Company without Cause (as
defined in Section 5.3), or the Executive  terminates his  employment  hereunder
for Good  Reason (as  defined  in Section  5.4),  the  Company  shall pay to the
Executive  in a lump sum,  within 30 days  after  the date of  termination,  and
amount equal to (x) two times the sum of (i) the Executive's  annual Base Salary
(at the rate in effect on the date of such  termination) and (ii) the average of
the  Executive's  annual bonus  pursuant to Section 3.3 for the two fiscal years
immediately  preceding the fiscal year in which such termination  occurs (or, if
such termination  occurs (A) during the 2001 fiscal year, an amount equal to the
bonus for the 2000  fiscal year or (B) during the 2000  fiscal  year,  an amount
equal to 120% of the  Executive's  annual  Base Salary (at the rate in effect on
the date of such  termination)),  and (y) a PRO RATA portion of the target bonus
to which the  Executive  would have been  entitled  for the year of  termination
pursuant to Section 3.3 had the Executive remained employed for the entire year.
In addition,  the Executive  shall be entitled to continue to participate in the
Company's  welfare benefit plans (or, if the Executive is ineligible to continue
to participate  under the terms thereof,  in substitute  programs adopted by the
Company  providing  substantially  comparable  benefits)  during the period (the
"CONTINUATION  PERIOD")  beginning on the date of termination  and ending on the
earlier of (i) the second anniversary of the date of termination and (ii) in the
case of any such welfare plan, the date on which the Executive  becomes  covered
by a similar  welfare plan maintained by another  employer.  The Executive shall
have no further right to receive any other  compensation  or benefits after such
termination or resignation of employment except as determined in accordance with
the terms of the employee benefit plans and programs of the Company.

                  5.1.2 DEATH DURING  CONTINUATION  PERIOD.  In the event of the
Executive's death during the Continuation  Period,  the Executive's family shall
continue to participate  during the remainder of the Continuation  Period in the
Company's  welfare  benefit  plans  on the same  terms  and  conditions  as were
applicable prior to the date of the Executive's death.

                  5.1.3  DATE  OF  TERMINATION.   The  date  of  termination  of
employment  without  Cause shall be the date  specified  in a written  notice of
termination  to the  Executive  (which date


<PAGE>
                                       6


shall be at least 10  business  days  after  receipt  by the  Executive  of such
written  notice).  The date of  resignation  for Good  Reason  shall be the date
specified  in the  written  notice  of  resignation  from the  Executive  to the
Company;  PROVIDED,  HOWEVER,  that no such  written  notice  shall be effective
unless the cure period  specified in Section 5.4 has expired without the Company
having corrected, to the reasonable satisfaction of the Executive,  the event or
events  subject to cure. If no date of  resignation  is specified in the written
notice from the Executive to the Company,  the date of termination  shall be the
first day following such expiration of such cure period.

                  5.2      TERMINATION FOR CAUSE; RESIGNATION FOR GOOD REASON.

                  5.2.1  GENERAL.  If, prior to the expiration of the Employment
Term, the Executive's  employment is terminated by the Company for Cause, or the
Executive resigns from his employment  hereunder other than for Good Reason, the
Executive  shall be  entitled  only to  payment  of his Base  Salary  and  other
compensation  and benefits  through and  including  the date of  termination  or
resignation.  The  Executive  shall have no further  right to receive  any other
compensation  or benefits  after such  termination or resignation of employment,
except as determined in accordance with the terms of the employee  benefit plans
and programs of the Company.

                  5.2.2 DATE OF  TERMINATION.  Subject to the proviso to Section
5.3, the date of termination  for Cause shall be the date specified in a written
notice of  termination  to the  Executive  after formal action by the Board at a
meeting  of the  Board,  at which  meeting  the  Board,  by a  two-thirds  vote,
determines to terminate the  Executive for Cause.  The Executive  shall have the
right to receive  notice of and appear  (with legal  counsel) at such meeting to
respond  to  any  allegations  made  against  him  concerning  the  contemplated
termination.  The date of  resignation  without  Good  Reason  shall be the date
specified  in the  written  notice  of  resignation  from the  Executive  to the
Company,  or if no date is specified therein,  10 business days after receipt by
the Company of written notice of resignation from the Executive.

                  5.3     CAUSE.  Termination for "CAUSE" shall mean termination
of the Executive's employment because of:

                  (i)    any willful act or omission that constitutes a material
         breach by the  Executive of any of his  material obligations under this
         Agreement;

                  (ii)   the willful and  continued failure  or refusal  of  the
         Executive to  substantially perform the duties  reasonably  required of
         him as an employee of the Company;

                  (iii)  the  Executive's  conviction  of  a  felony   involving
         dishonesty or moral turpitude; or


<PAGE>
                                       7



                  (iv) any other willful  misconduct  by the Executive  which is
         materially  injurious to the financial condition or business reputation
         of the  Company  or any of its  subsidiaries  or  affiliates  (it being
         understood  that the good faith  performance  by the  Executive  of the
         duties  required of him  pursuant  to Section 2.1 shall not  constitute
         "misconduct" for purposes of this clause (iv));

PROVIDED, HOWEVER, that if any such Cause relates to the Executive's obligations
under this Agreement or is otherwise  susceptible to cure, the Company shall not
terminate the Executive's  employment  hereunder  unless the Company first gives
the  Executive  notice of its intention to terminate and of the grounds for such
termination and the Executive has not, within 20 business days following receipt
of the notice,  cured such Cause,  or in the event such Cause is not susceptible
to cure within such 20 business  day  period,  the  Executive  has not taken all
reasonable  steps  within  such 20  business  day  period to cure such  Cause as
promptly as practicable thereafter.

                  5.4      GOOD REASON.  For purposes  of this  Agreement, "GOOD
REASON" shall  mean any of the following  (without the Executive's prior written
consent):

                  (i)    a decrease in the Executive's base rate of compensation
         or a  failure by the  Company to  pay  material  compensation  due  and
         payable to the Executive in connection with his employment;

                  (ii)   a  diminution of  the  responsibilities,  positions  or
         titles of the Executive from those set forth in this Agreement;

                  (iii)  the  Company's  requiring the  Executive to be based at
         any office  or  location that  is  inconsistent  with the provisions of
         Section 2.3;

                  (iv)   the Company's delivery to the Executive of a Nonrenewal
         Notice; or

                  (v)    a  material  breach  by the  Company  of  any  term  or
         provision of this Agreement;

PROVIDED,  HOWEVER,  that no event or condition described in clauses (i) through
(iii) or (v) of this  Section 5.4 shall  constitute  Good Reason  unless (X) the
Executive  gives the Company  written  notice of his  objection to such event or
condition and (Y) such event or condition is not corrected by the Company within
20 business  days of its receipt of such notice (or in the event that such event
or  condition  is not  susceptible  to  correction  within such 20 business  day
period,  the Company has not taken all reasonable  steps within such 20 business
day period to  correct  such  event or  condition  as  promptly  as  practicable
thereafter).

<PAGE>
                                       8



         6.       DEATH, DISABILITY OR RETIREMENT

                  In the event of termination of the  Executive's  employment by
reason of death,  Permanent  Disability (as hereinafter  defined) or retirement,
the Executive (or his estate,  as  applicable)  shall be entitled to Base Salary
and  other   compensation  and  benefits  through  and  including  the  date  of
termination. In addition, the Company shall pay to the Executive (or his estate,
as applicable) in a lump sum, within 30 days after the date of  termination,  an
amount equal to 100% of the Base Salary for six months,  plus a pro rata portion
of the maximum  bonus to which the  Executive  would have been  entitled for the
year of termination  pursuant to Section 3.3 had the Executive remained employed
for the entire  year.  If the  Executive's  employment  terminates  by reason of
Permanent Disability, payments to the Executive pursuant to this Section 6 shall
be  reduced  by an  amount  equal  to the sum of all  benefits  received  by the
Executive during the six-month  period  following the date of termination  under
any  disability  plan  maintained  by  the  Company.  Other  benefits  shall  be
determined  in  accordance  with the employee  benefit  plans or programs of the
Company,  and the  Company  shall  have no  further  obligation  hereunder.  For
purposes of this Agreement,  "PERMANENT  DISABILITY"  means a physical or mental
disability or infirmity of the Executive that prevents the normal performance of
substantially all his duties as an employee of the Company,  which disability or
infirmity shall exist for any continuous period of 180 days.

         7.       CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY

                  7.1  GROSS-UP  PAYMENT.  Anything  in  this  Agreement  to the
contrary or any termination of this Agreement  notwithstanding,  in the event it
shall be determined that any payment or  distribution or benefit  received or to
be received by the  Executive  pursuant  to the terms of this  Agreement  or any
other payment or  distribution or benefit made or provided by the Company or any
of its affiliates,  to or for the benefit of the Executive  (whether pursuant to
this  Agreement or otherwise and  determined  without  regard to any  additional
payments  required  under this Section 7) (a "Payment")  would be subject to the
excise tax imposed by Section  4999 of the  Internal  Revenue  Code of 1986,  as
amended (the "CODE"), or any interest or penalties are incurred by the Executive
with  respect  to such  excise  tax (such  excise  tax,  together  with any such
interest and penalties,  is hereinafter  collectively referred to as the "EXCISE
TAX"), then the Executive shall be entitled to receive an additional  payment (a
"GROSS-UP PAYMENT") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties  imposed with respect to such taxes),
including, without limitation, any income and employment taxes (and any interest
and  penalties  imposed  with  respect  thereto)  and Excise Tax imposed upon he
Gross-Up Payment,  the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments.  Any such Gross-Up Payment shall be
reduced by the Offset Amount (as defined below), if any, and shall be subject to
applicable  tax  withholding  pursuant  to Section  11.5.  for  purposes of this
Section 7, "OFFSET  AMOUNT" means the amount of the Gross-Up  Payment that would
have been payable  pursuant to this Section 7.1 had the only Payment  taken into
account for purposes of calculating the Gross-Up  Payment been the  acceleration
of vesting that occurs pursuant to Section  2(c)(iii) of the Option Agreement as
a

<PAGE>
                                       9


result of a Sale (as  defined in the  Option  Agreement)  with  respect to those
Performance-Based Options (as defined in the Option Agreement) that did not vest
in a fiscal  year of the  Company  preceding  the fiscal  year in which the Sale
occurs as a result of the  failure of the  Company to  achieve  the  performance
targets  for such  fiscal  year set  forth in  Section  2(c)(ii)  of the  Option
Agreement.

                  7.2 GROSS-UP PAYMENT CALCULATION. Subject to the provisions of
Section  7.3,  all  determinations  required  to be made under  this  Section 7,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up  Payment  and  the  assumptions  to be  utilized  in  arriving  at such
determination,  shall be made by such certified public accounting firm as may be
jointly  designated by the Executive  and the Company (the  "ACCOUNTING  FIRM"),
which shall provide detailed supporting calculations both to the Company and the
Executive  within 15 business  days of the receipt of notice from the  Executive
that there has been a  payment,  or such  earlier  time as is  requested  by the
Company.  All fees and expenses of the Accounting  Firm shall be borne solely by
the Company.  Any Gross-Up  Payment,  as determined  pursuant to this Section 7,
shall be paid by the Company to the Executive within five days of the receipt of
the Accounting  Firm's  determination.  Any determination by the Accounting Firm
shall be  binding  upon  the  Company  and the  Executive.  As a  result  of the
uncertainty  in the  application  of section 4999 of the Code at the time of the
initial  determination  by the  Accounting  Firm  hereunder it is possible  that
Gross-Up  Payments which will not have been made by the Company should have been
made  ("UNDERPAYMENT"),  consistent  with the  calculations  required to be made
hereunder.  In the event that the  Company  exhausts  its  remedies  pursuant to
Section 7.3 and the  Executive  thereafter  is required to make a payment of any
Excise Tax, the Accounting Firm shall  determine the amount of the  Underpayment
that has  occurred  and any such  Underpayment  shall  be  promptly  paid by the
Company to or for the benefit of the Executive.

                  7.3 CLAIM BY THE IRS. The  Executive  shall notify the Company
in writing of any claim by the U.S.  Internal  Revenue Service (the "IRS") that,
if successful, would require the payment by the Company of the Gross-Up Payment.
Such  notification  shall be given as soon as practicable  but no later than ten
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested  to be paid.  The  Executive  shall not pay such claim prior to the
expiration of the 30-day period  following the date on which the Executive gives
such notice to the Company (or such shorter  period  ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing  prior to the  expiration of such period that it desires to
contest such claim, the Executive shall:

                  (i)   give the Company any information reasonably requested by
          the Company relating to such claim;

                  (ii)   take  such action  in  connection with  contesting such
          claim as the Company shall reasonably  request in writing from time to
          time, including, without limitation,


<PAGE>
                                       10


         accepting  legal  representation  with  respect  to such  claim  by  an
         attorney reasonably selected by the Company; and

                  (iii)   cooperate with  the  Company in  good faith  in  order
         effectively to contest such claim;

PROVIDED,  HOWEVER,  that the Company  shall bear and pay directly all costs and
expenses;  (including  additional interest and penalties) incurred in connection
with such contest and shall  indemnify  and hold the Executive  harmless,  on an
after-tax  basis,  for any Excise Tax or income and  employment  tax  (including
interest  and  penalties  with  respect  thereto)  imposed  as a result  of such
representation  and payment of costs and  expenses.  Without  limitation  on the
foregoing  provisions  of this  Section  7.3,  the  Company  shall  control  all
proceedings  taken in connection with such contest and, at its sole option,  may
pursue or forgo any and all administrative  appeals,  proceedings,  hearings and
conferences  with the taxing  authority in respect of such claim and may, at its
sole option,  either  direct the  Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible  manner,  and the Executive shall
agree to prosecute  such contest to a  determination  before any  administrative
tribunal,  in a court  of  initial  jurisdiction  and in one or  more  appellate
courts, as the Company shall determine;  PROVIDED,  HOWEVER, that if the Company
directs the Executive to pay such claim and sue for a refund,  the Company shall
advance the amount of such payment to the  Executive on an  interest-free  basis
and shall indemnify and hold the Executive harmless, on an after-tax basis, from
any Excise Tax or income and  employment  tax  (including  interest or penalties
with  respect  thereto)  imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and PROVIDED FURTHER,  that any
extension  of the  statute of  limitations  relating to payment of taxes for the
taxable year of the  Executive  with respect to which such  contested  amount is
claimed to be due is limited solely to such contested amount.  Furthermore,  the
Company's  control of the  contest  shall be limited to issues  with  respect to
which a Gross-Up  Payment would be payable  hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
IRS or any other taxing authority.

                  7.4  ENTITLEMENT  TO  REFUND.  If,  after the  receipt  by the
Executive  of an amount  advanced by the Company  pursuant to Section  7.3,  the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive  shall (subject to the Company's  complying with the  requirements  of
Section  7.3)  promptly  pay to the Company the amount of such refund  (together
with any interest paid or credited thereon after taxes applicable thereto).  If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 7.3, a determination is made that the Executive shall not be entitled
to any refund  with  respect to such claim and the  Company  does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration  of 30 days  after such  determination,  then such  advance  shall be
forgiven  and shall not be required to be repaid and the amount of such  advance
shall offset, to the extent thereof,  the amount of Gross-Up Payment required to
be paid.

<PAGE>
                                       11



         8.       NO MITIGATION OR OFFSET

                  The Executive  shall not be required to mitigate the amount of
any  payment or benefit  provided  for herein by  seeking  other  employment  or
otherwise, and any such payment or benefit will not be reduced in the event such
other employment is obtained.

         9.       NO SOLICITATION; CONFIDENTIALITY; NONCOMPETITION

                  9.1 NONSOLICITATION.  For so long as the Executive is employed
by the Company and continuing for one year thereafter,  the Executive shall not,
without the prior written consent of the Company,  directly or indirectly,  as a
sole proprietor,  member of a partnership,  stockholder or investor,  officer or
director of a corporation, or as an employee, associate,  consultant or agent of
any person,  partnership,  corporation or other business  organization or entity
other than the Company or any of its subsidiaries or affiliates:  (x) solicit or
endeavor  to  entice  away  from  the  Company  or any of its  subsidiaries  any
individual who is, or, was during the then most recent 6-month period,  employed
by the Company or any of its subsidiaries;  or (y) solicit or endeavor to entice
away from the Company or any of its subsidiaries any person or entity who is, or
was within the then most recent 6-month period, a customer of the Company or any
of its subsidiaries.

                  9.2  CONFIDENTIALITY.  The Executive covenants and agrees with
the  Company  that  he  will  not at any  time,  except  in  performance  of his
obligations  to the Company  hereunder or wit the prior  written  consent of the
Company, directly or indirectly, disclose any secret or confidential information
that he may learn or has learned by reason of his  association  with the Company
or any of its subsidiaries and affiliates.  The term "CONFIDENTIAL  INFORMATION"
includes  information not previously  disclosed to the public or tot he trade by
the  Company's  or  any of  its  subsidiaries'  or  affiliates'  management,  or
otherwise  in the public  domain,  with  respect to the  Company's  o any of its
subsidiaries'  or affiliates'  products,  facilities,  applications and methods,
trade secrets and other intellectual  property,  systems,  procedures,  manuals,
confidential   reports,   product  price  lists,   customer   lists,   technical
information,  financial information, business plans, prospects or opportunities,
but shall  exclude  any  information  which (i) is or becomes  available  to the
public or is generally  known in the industry or industries in which the Company
operates  other than as a result of  disclosure by the Executive in violation of
his  agreements  under this  Section  9.2 or (ii) the  Executive  is required to
disclose under any applicable laws,  regulations or directives of any government
agency,  tribunal  or  authority  having  jurisdiction  in the  matter  or under
subpoena or other process of law.

                  9.3 NO COMPETING  EMPLOYMENT.  For so long as the Executive is
employed by the Company and continuing for one year thereafter (the  "NONCOMPETE
TERM"),  the  Executive  shall not,  without  the prior  written  consent of the
Company, directly or indirectly, as a sole proprietor,  member of a partnership,
stockholder or investor  (other than a stockholder  or investor  owning not more
than a 5% interest), officer or director of a corporation, or as an employee,


<PAGE>
                                       12


associate,  consultant or agent of any person partnership,  corporation or other
business   organization  or  entity  other  than  the  Company  or  any  of  its
subsidiaries  or  affiliates,  render any service to or in any way be affiliated
with any business which is engaged in the business of manufacturing  store brand
infant disposable  diapers,  located in such geographic areas as the business of
the  Company  and its  subsidiaries  is  located  at the  time  of  termination;
PROVIDED,  HOWEVER,  that if (x) the Company delivers a Nonrenewal Notice to the
Executive  and (y) the  Executive's  employment  is  terminated  for any  reason
following the delivery of such Nonrenewal  Notice,  the Executive's  obligations
under  this  Section  9.3  shall  terminate  as of the  date of  termination  of
employment.

                  9.4  EXCLUSIVE  PROPERTY.  The  Executive  confirms  that  all
confidential  information  is and shall  remain the  exclusive  property  of the
Company.  All  business  records,  papers  and  documents  kept  or  made by the
Executive  relating  to the  business  of the  Company  shall be and  remain the
property of the  Company,  except for such papers  customarily  deemed to be the
personal copies of the Executive.

                  9.5 INJUNCTIVE RELIEF. Without intending to limit the remedies
available to the Company, the Executive acknowledges that a breach of any of the
covenants  contained in this  Section 9 may result in material  and  irreparable
injury to the Company or its  subsidiaries  or affiliates  for which there is no
adequate  remedy a law, that it will not e possible to measure  damages for such
injuries  precisely and that,  in the event of such a breach or threat  thereof,
the Company  shall be entitled to seek a temporary  restraining  order  and/or a
preliminary or permanent  injunction  restraining the Executive from engaging in
activities  prohibited by this Section 9 or such other relief as may be required
specifically  to  enforce  any of the  covenants  in this  Section 9. If for any
reason, it is held that the restrictions under this Section 9 are not reasonable
or that  consideration  therefor  is  inadequate,  such  restrictions  shall  be
interpreted or modified to include as much of the duration and scope  identified
in this Section 9 as will render such restrictions valid and enforceable.

         10.      ARBITRATION

                  Any dispute or controversy arising under or in connection with
this Agreement  that cannot be mutually  resolved by the parties hereto shall be
settled  exclusively  by arbitration in New York, New York before one arbitrator
of exemplary  qualifications  and stature,  who shall be selected jointly by the
Company and the Executive,  or, if the Company and the Executive cannot agree on
the selection of the arbitrator,  shall be selected by the American  Arbitration
Association  (PROVIDED that any arbitrator selected by the American  Arbitration
Association  shall not, without the consent of the parties hereto, be affiliated
with  the  Company  or the  Executive  or any of their  respective  affiliates).
Judgment  may  be  entered  o  the  arbitrator's   award  in  any  court  having
jurisdiction. The parties hereby agree that the arbitrator shall be empowered to
enter an equitable  decree mandating  specific  enforcement of the terms of this
Agreement.


<PAGE>
                                       13



         11.      MISCELLANEOUS

                  11.1   NOTICES.  All notices or communications hereunder shall
be in writing, addressed as follows:

                  To the Company:

                           Paragon Trade Brands, Inc.
                           180 Technology Parkway
                           Norcross, GA  30092
                           Telecopier No.:  (212) 332-7575
                           Attention:  General Counsel

                  To the Executive:

                           Michael T. Riordan
                           2964 S. Telemark Circle
                           Green Bay, Wisconsin  54313
                           Telecopier No.:  (920) 497-3641

All such  notices  shall be  conclusively  deemed  to be  received  and shall be
effective,  (i) if sent by hand delivery, upon receipt, (ii) if sent by telecopy
or facsimile  transmission,  upon  confirmation of receipt by the sender of such
transmission  or (iii) if sent by registered or certified mail, on the fifth day
after the day on which such notice is mailed.

                  11.2  SEVERABILITY.  Each provision of this Agreement shall be
interpreted  in such manner as to be effective and valid under  applicable  law,
but if nay  provision of this  Agreement is held to be  prohibited by or invalid
under  applicable law, such provision will be ineffective  only to the extent of
such  prohibition  or  invalidity,  without  invalidating  the remainder of such
provision or the remaining provisions of this Agreement.

                  11.3 ASSIGNMENT.  The Company's  rights and obligation  sunder
this  Agreement  shall not be assignable by the Company  except as incident to a
reorganization, merger or consolidation, or transfer of all or substantially all
of the  Company's  business  and  properties.  The  Company  shall  require  any
permitted  successor or assign to assume and agree to perform this  Agreement in
the same manner and to the same extent that the Company wold have been  required
to perform it had no such succession or assignment  taken place.  This Agreement
shall not be assignable or otherwise  subject to  hypothecation by the Executive
without the prior written consent of the Company.  This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.

                  11.4  ENTIRE  AGREEMENT.  This  Agreement,  the  Stock  Option
Agreement and the related  agreements  referred to therein  represent the entire
agreement of the parties and shall  supersede  any and all  previous  contracts,
arrangements or understandings between the Company


<PAGE>
                                       14


and the Executive  relating to the subject matter hereof.  This Agreement may be
amended at any time by mutual written agreement of the parties hereto.

                  11.5  WITHHOLDING.  The payment of any amount pursuant tot his
Agreement shall be subject to the applicable  withholding and payroll taxes, and
such other  deductions as may be required under the Company's  employee  benefit
plans, if any.

                  11.6     GOVERNING LAW.  This  Agreement  shal  be  construed,
interpreted, and governed in accordance with  the laws of the  State of New York
without reference to rules relating to conflicts of law.

                  IN WITNESS  WHEREOF,  the Company has caused this Agreement to
be duly  executed and the Executive has hereunto set his hand, as of the day and
year first above written.

                                      PARAGON TRADE BRANDS, INC.


                                      By:      /S/ ALAN J. CYRON
                                           -------------------------------------
                                           Name:  Alan J. Cyron
                                           Title:  EVP & Chief Financial Officer


                                      EXECUTIVE


                                              /S/ MICHAEL T. RIORDAN
                                      ------------------------------------------
                                      Michael T. Riordan


<PAGE>


                                                                       EXHIBIT A

The "Applicable Performance Measure" means the sum of the following measures for
the Company's fiscal year ending December 31, 2000:

<TABLE>
<CAPTION>
     <S>                                        <C>          <C>                 <C>            <C>
     MEASURES                                   LO           TARGET              MAX            SUPER-MAX

     (1) US EBITDA                              45.0         52.5                60.0           n/a

     (2) PMI cash flow                          6.6          9.1                 11.6           n/a

     (3) 21mm-CAPEX*                            0.0          2.0                 4.0            n/a

     (4) Receivable and Inventory               4.0          5.0                 6.0            n/a

     (5) Other Assets to Cash**                 1.4          3.4                 5.4            n/a

     (6) Net earnings in
         Foreign subsidiaries***                3.0          3.0                 3.0            N/A
                                                ---          ---                 ---            ---
         MEASURE TOTAL                          60.0         75.0                90.0           97.0

<FN>
  * Excluding new Training Pant M/C and any new business investments.

 **      Includes sales of building and equipment to JV's.

***      At current ownership.
</FN>
</TABLE>

DETERMINATION OF WHETHER THE APPLICABLE PERFORMANCE MEASURE HAS BEEN ACHIEVED AT
ANY LEVEL WILL BE BASED ON THE "MEASURE  TOTAL" FOR SUCH LEVEL,  AND NOT WHETHER
ANY INDIVIDUAL MEASURE HAS BEEN INDEPENDENTLY ACHIEVED.