LICENSE AGREEMENT




                                     BETWEEN




                           KIMBERLY-CLARK CORPORATION




                                       AND




                           PARAGON TRADE BRANDS, INC.











<PAGE>


                                LICENSE AGREEMENT

      This  License  Agreement  is made and entered  into as of this 15th day of
March, 1999, between Kimberly-Clark  Corporation,  a Delaware corporation having
offices at 351 Phelps Drive,  Irving, Texas 75038 ("LICENSOR") and Paragon Trade
Brands, Inc., a Delaware Corporation having a principal place of business at 180
Technology  Parkway,  Norcross,  Georgia  30092  (including  any entity which it
controls or as to which it is under
common control, "LICENSEE").

                                   WITNESSETH

      WHEREAS,  LICENSEE has  requested a license from  LICENSOR  under  certain
patents in order to manufacture  disposable  absorbent products with containment
flaps; and

      WHEREAS, the parties desire to enter into this License Agreement under the
terms and conditions hereinafter recited.

      NOW THEREFORE, it is agreed as follows:

                                    ARTICLE I
                                   DEFINITIONS

      As used throughout  this  Agreement,  each term shall have the meaning set
forth in this Article I:

      1.01 "ABSORBENT  PANT(S)" shall mean absorbent articles which are intended
to be pulled on to fit about the waist of the wearer,  whether  infant or child,
and includes training pants.

      1.02 "CALENDAR YEAR" shall mean the twelve (12) month period commencing on
the Effective  Date and ending on the last day of the twelfth month  thereafter,
and each subsequent twelve (12) month period thereafter.

      1.03.  "CONVERSION  DATE" shall mean the earlier of (a) August 1, 1999, if
the Effective  Date has not yet  occurred;  or (b) 90 days after the Court Order
has been stayed or  modified in any manner not  approved by LICENSOR in writing,
unless the Court Order has been reinstated or


<PAGE>


modified in a manner  approved by LICENSOR in writing prior to the expiration of
such 90 day period.  In further  clarification  of the foregoing,  no Conversion
Date shall occur if the Court Order has been entered prior to August 1, 1999 and
remains in full force and effect.

      1.04  "COURT  ORDER"  shall  mean an  order  of the  Bankruptcy  Court  in
Bankruptcy  Case No.  98-60390  (U.S.  Bankruptcy  Court,  Northern  District of
Georgia,  Atlanta  Division)  approving  the  Settlement  Agreement  between the
LICENSEE and the LICENSOR.

      1.05 "DALLAS  LITIGATION"  shall mean the action captioned  KIMBERLY-CLARK
CORPORATION  V. PARAGON TRADE BRANDS,  INC.,  pending  before the U.S.  District
Court,   Northern   District   of   Texas,   Dallas   Division   (Civil   Action
3:95-CV-2574-T).

      1.06 "EFFECTIVE  DATE" shall mean the first day of the month following the
entry of the Court Order.

      1.07  "ENLOE  PATENTS"  shall  mean U.S.  Patent  4,704,116,  U.S.  Patent
4,846,823,  U.S.  Patent  5,413,570,  U.S.  Patent  5,415,644  and  U.S.  Patent
5,599,338  and/or  any  U.S.  continuations,  continuations-in-part,  divisions,
extensions,  reissues and  reexaminations  thereof;  and any U.S.  patent issued
pursuant to U.S. Patent Application Serial No. 437,358 dated 05/09/1995,  and/or
any U.S. continuations,  divisions, continuations in-part, extensions, reissues,
and  reexaminations of the Serial No. 437,358  application;  and any counterpart
patent applications and patents issued in Canada.

      1.08 "INFANT DISPOSABLE DIAPER(S)" shall mean absorbent articles which are
intended to be manually fastened about an infant or a child and are not intended
to be pulled on to fit about the waist of the wearer.

      1.09  "NET  SALES"  shall  mean the  gross  amount  of sales  invoiced  to
independent  third parties by LICENSEE,  less  Reductions  in Sales,  for Infant
Disposable  Diapers or  Absorbent  Pants  which (a) are made,  used,  or sold by
LICENSEE  and (b),  but for this  license,  would  infringe a Valid Claim in the
place where such products are made, used or sold by LICENSEE. For the purpose of
this  Agreement,  products which have been accused of infringement in the Dallas
Litigation  shall be deemed to infringe a Valid Claim. Net Sales for the purpose
of calculating  royalties  hereunder shall reflect a selling price which results
from a bona fide, arm's length


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<PAGE>


transaction between LICENSEE and an independent, unrelated third party customer.
If the selling price is reduced in light of other  consideration from the buyer,
or is a sale to a related third party,  such selling price shall not be deemed a
selling price derived from a bona fide, arm's length transaction,  and a selling
price for the same product resulting from a bona fide, arm's length  transaction
between  LICENSEE and an  independent,  unrelated  third party customer shall be
substituted for purposes of calculating "Net Sales" under this Agreement, or, at
LICENSOR's  option,  in the event the sale by LICENSEE is not to an  independent
third  party,  Net Sales shall be measured on the basis of the highest  price in
any of the  succession of sales or other  transfers of the  applicable  products
until such products come into an independent  third party's  hands.  "Net Sales"
shall not include bulk sales of defective  product not sold or resold for use as
Infant Disposable Diapers or Absorbent Pants.

      1.10  "REDUCTIONS IN SALES" shall mean,

            (a) transportation  charges or allowances  actually paid or granted;

            (b)  credits  or  allowances  actually  given or made on  account of
rejects, returns, or retroactive price reductions;

            (c)  any  tax  or  other  governmental   charge  directly  on  sale,
transportation,  use or delivery of products  included in the  invoice,  paid by
LICENSEE and not recovered from the purchaser; and

            (d) rebates, discounts and broker commissions.

"Reductions in Sales" do not include (a) slotting fees or other payments made to
a  retailer  to  induce  it to  stock a  manufacturer's  product(s),  or (b) any
reimbursement,  credit or payment for retailer advertising or retailer promotion
expenses;  and no deduction of such fees,  payments,  reimbursements  or credits
shall be made in calculating Net Sales.

      1.11  "Safe Harbor  Absorbent  Pants" shall mean Absorbent Pants that: 

            (a) employ no  superabsorbent  material having an  Absorbency  Under
Load value of 27 grams per gram or greater as described in and determined by the
teachings of U.S.  Patent B1 5,147,  343 issued  March 17, 1998 to  Kellenberger
("Kellenberger Patent"); and

            (b) employ no superabsorbent  material having a Pressure  Absorbency
Index of 100 or greater as described in and  determined by the teachings of U.S.
Patent 5, 601,542, issued February 11, 1997 to Melius ("Melius Patent"); and



                                       3
<PAGE>


            (c) employ a liquid  impermeable,  vapor  permeable film which has a
basis  weight of not less than 22 grams per square meter in any  backsheet  that
employs a substantially liquid impermeable,  vapor permeable film as a component
of the backsheet; and

            (d) employ a containment means ("ULG") as illustrated in the drawing
attached hereto as Exhibit A and as described  (substituting "training pant" for
"diaper"),  both as to physical  structure and as to performance,  in the letter
attached hereto as Exhibit B; and

            (e) which are otherwise of the same construction,  configuration and
formed from the same  materials as the training pant attached  hereto as Exhibit
C.

      1.12 "Safe Harbor Infant Disposable  Diapers" shall mean Infant Disposable
Diapers that:

            (a) employ no  superabsorbent  material  having an Absorbency  Under
Load value of 27 grams per gram or greater as described in and determined by the
teachings of U.S.  Patent B1 5,147,  343 issued March 17, 1998 to  Kellenberger;
and
            (b) employ no superabsorbent  material having a Pressure  Absorbency
Index of 100 or greater as described in and  determined by the teachings of U.S.
Patent 5, 601,542, issued February 11, 1997 to Melius; and

            (c) employ a liquid  impermeable,  vapor  permeable film which has a
basis  weight of not less than 22 grams per square meter in any  backsheet  that
employs a substantially liquid impermeable,  vapor permeable film as a component
of the backsheet; and

            (d) employ a containment means ("ULG") as illustrated in the drawing
attached hereto as Exhibit A and as described, both as to physical structure and
as to performance, in the letter attached hereto as Exhibit B; and

            (e) which are otherwise of the same construction,  configuration and
formed from the same materials as the Infant  Disposable  Diaper attached hereto
as Exhibit D.

      1.13 "SETTLEMENT  AGREEMENT" shall mean the settlement  agreement  between
LICENSEE and LICENSOR settling LICENSOR'S claims as defined therein.

      1.14 "TERRITORY" shall mean the United States of America,  its territories
and possessions and Canada, its territories and possessions.

      1.15  "VALID CLAIM" shall mean a claim of an unexpired Enloe  Patent which
has not been  found invalid or  unenforceable by a U.S. or Canadian governmental
tribunal or a U.S. or



                                       4
<PAGE>


Canadian court of competent  jurisdiction in a decision from which no appeal has
or may be taken.

                                   ARTICLE II
                                     LICENSE

      2.01 LICENSE GRANT: LICENSOR grants to LICENSEE,  subject to the terms and
conditions of this Agreement,  a non-exclusive right and license under the Enloe
Patents to make, have made, use and sell Infant Disposable Diapers and Absorbent
Pants in the  Territory.  LICENSEE has no right to grant  sublicenses  under the
Enloe  Patents.  The term for the license  grant under this  Section  2.01 shall
commence on January 1, 1999 and, unless  terminated in accordance with any other
provision hereof,  shall remain in full force and effect until the expiration of
the last to expire of the Enloe  Patents.  No  implied  license  is  granted  to
LICENSEE other than under the Enloe Patents.

      2.02  COVENANT NOT TO SUE:

            (a) So long as LICENSEE is in compliance  with the material terms of
this Agreement, LICENSOR covenants not to sue LICENSEE for infringement, if any,
of the  Enloe  Patents  arising  from  the  manufacture,  use or sale of  Infant
Disposable  Diapers or Absorbent Pants by LICENSEE occurring on or after January
1, 1999.
            (b) So long as LICENSEE is in compliance  with the material terms of
this Agreement, LICENSOR covenants not to sue LICENSEE for infringement, if any,
of the Kellenberger  Patent (as defined in Section  1.11(a)),  the Melius Patent
(as defined in Section 1.11(b)) or U.S. Patent 5,843,056 issued December 1, 1998
to Good  ("Good  Patent")  or any  counterpart  patent  issued  in Canada to the
Kellenberger Patent, Melius Patent or Good Patent, arising from the manufacture,
use or sale by  LICENSEE  on or after  January  1,  1999,  of Infant  Disposable
Diapers which conform with Section  1.12(a),  (b) and (c) or of Absorbent  Pants
which conform with Section 1.11(a), (b) and (c).

      2.03  CONVERSION  DATE:  The license and  covenant not to sue set forth in
Sections  2.01 and 2.02,  respectively,  shall,  except with respect to products
manufactured  prior to the Conversion  Date and sold pursuant to Article III and
Section  4.05,  terminate and be of no further force and effect on and after the
Conversion Date.

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<PAGE>

                                   ARTICLE III
                                 CONVERSION DATE

      On or before the Conversion Date,  LICENSEE shall cease manufacture of any
Infant Disposable  Diapers and any Absorbent Pants which infringe a Valid Claim.
LICENSOR  may continue to sell Infant  Disposable  Diapers and  Absorbent  Pants
manufactured  prior to the  Conversion  Date subject to payment of the royalties
set forth in Section 4.05.

                                   ARTICLE IV
                                    ROYALTIES

      4.01  ROYALTIES:  Royalties  shall  be  payable  at  different  rates  for
different products.

            (a)   INFANT DISPOSABLE DIAPERS

            From the Effective Date through the term of this Agreement, LICENSEE
shall pay  LICENSOR a royalty of two and one-half  percent  (2.5%) for the first
two hundred  million dollars of Net Sales of Infant  Disposable  Diapers in each
Calendar  Year and shall pay  LICENSOR  a royalty  of one and  one-half  percent
(1.5%) of Net  Sales of  Infant  Disposable  Diapers  in  excess of two  hundred
million dollars in each Calendar Year if such royalties are paid  voluntarily by
LICENSEE provided, however, that for the term of this Agreement, royalties shall
be payable  at the  higher  rate of two and  one-half  percent  (2.5%) as to any
product design as to which LICENSOR is required to enforce its rights  hereunder
through  litigation  or  arbitration;  and provided  further,  however,  that no
percentage  royalty  under the Enloe  Patents shall be due on Safe Harbor Infant
Disposable Diapers.

            (b)   ABSORBENT PANTS:

            From the Effective Date through the term of this Agreement, LICENSEE
shall pay  LICENSOR a royalty of 5.0  percent  (5.0%) of Net Sales of  Absorbent
Pants;  provided,  however,  that no percentage  royalty under the Enloe Patents
shall be due on Safe Harbor Absorbent Pants.

       4.02 MINIMUM  ANNUAL  ROYALTY:  In each  Calendar  Year during which this
Agreement is in effect,  LICENSEE shall pay to LICENSOR a minimum annual royalty
for Infant Disposable Diapers of five million dollars ($5,000,000.00). Royalties
on Infant  Disposable  Diapers  paid  pursuant  to Section  4.01(a)  shall count
towards the minimum annual royalty.

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<PAGE>

       4.03 ONE  ROYALTY:  Royalties  shall be payable only once on each unit of
product and shall accrue upon sale by LICENSEE.

       4.04 ROYALTY BEFORE EFFECTIVE DATE.  Commencing as of January 1, 1999 and
until the  Effective  Date,  LICENSEE  shall pay  LICENSOR  a royalty of two and
one-half percent (2.5%) of Net Sales of Infant Disposable  Diapers and a royalty
of 5.0 percent (5.0%) of Net Sales of Absorbent Pants;  provided,  however, that
no percentage royalty under the Enloe Patents shall be due on Safe Harbor Infant
Disposable  Diapers or Safe Harbor  Absorbent  Pants;  and provided further that
anything to the foregoing notwithstanding, the minimum payment to LICENSOR under
this Section 4.04 with respect to the month of January,  1999 shall be $250,000,
and with respect to any month thereafter shall not be less than $500,000.

       4.05 ROYALTY AFTER CONVERSION DATE. Sales of product  manufactured before
the  Conversion  Date but sold  after the  Conversion  Date will be subject to a
royalty  at the  same  rates  as set  forth  in  Section  4.04,  which  shall be
calculated by applying such royalty rates to LICENSEE's  inventory on hand as of
the  Conversion  Date,  except that the royalty  payable under this Section 4.05
with respect to such inventory shall not be less than $500,000.

                                    ARTICLE V
                             PAYMENT AND ACCOUNTING

      5.01 MINIMUM PAYMENTS:  Except as otherwise  provided in Section 5.02, the
minimum annual royalty for Infant  Disposable  Diapers set forth in Section 4.02
shall be paid by LICENSEE to LICENSOR in quarterly  installments  of one million
two  hundred-fifty  thousand  dollars  ($1,250,000.00)  on the  last day of each
quarter of the Calendar Year until such time as the minimum  annual  royalty for
Infant Disposable Diapers for that Calendar Year has been paid to LICENSOR.  The
minimum payment of $500,000 per month under Sections 4.04 and 4.05 shall be paid
on the 15th of each month, and any additional percentage royalties shall be paid
on or before the 30th of the following  month. The royalty payment under Section
4.05 shall be paid 15 days after the Conversion Date.

      5.02 ONGOING  ROYALTIES AND ACCOUNTINGS:  Within sixty (60) days after the
close of each  quarter of the Calendar  Year during the term of this  Agreement,
and  within  thirty  (30) days  after  each  month  during the time prior to the
Effective Date, LICENSEE shall render an accounting to



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<PAGE>

LICENSOR  with  respect to all  royalty  payments  due under the  provisions  of
Article IV. Such accounting shall be accompanied by payment from LICENSEE of the
amounts by which the cumulative  royalties due to the end of the period which is
the subject of the accounting for Infant Disposable Diapers and Absorbent Pants,
respectively,  exceed the amount of  royalties as to such  products  theretofore
paid for such period.  Such  accounting  shall  indicate,  for such period,  the
monetary  amount of Net Sales with  respect to which  royalty  payments are due.
LICENSEE shall keep accurate records in sufficient detail to enable royalties to
be determined and shall maintain such records at its principal place of business
in the United States.  Each such accounting shall be treated as confidential and
proprietary  information of Paragon to the extent the information therein is not
substantially  available elsewhere,  and shall only be used for the purposes set
forth herein, PROVIDED, HOWEVER, that the dollar amount of the royalties paid or
payable  to  LICENSOR  hereunder  shall not be deemed  confidential.  LICENSOR's
in-house  patent  counsel  shall  maintain  the  confidentiality  of  each  such
accounting  and the  information  contained  therein,  and shall only share such
accounting and the information  contained  therein with such persons at LICENSOR
or its  outside  counsel  or  auditors  who need to know  such  information  for
purposes of verifying such accounting.

      5.03 ROYALTIES UPON TERMINATION:  Within sixty (60) days of the Conversion
Date or of termination of this Agreement  according to the provisions of Article
VII or Article  VIII,  LICENSEE  shall  render an  accounting  to LICENSOR  with
respect  to  all  royalty  payments  which  it is  obligated  to pay  under  the
provisions  of  Article  IV and  shall  pay such  royalties  to  LICENSEE.  Such
accounting  shall be  subject  to the  confidentiality  treatment  set  forth in
Section 5.02.

      5.04 AUDIT:  At LICENSOR's  request and expense,  LICENSEE shall permit an
independent certified public accountant selected by LICENSOR, except one to whom
there shall be some reasonable  objection by LICENSEE,  to have access,  once in
each Calendar Year during regular  business hours and upon reasonable  notice to
LICENSEE,  to such of the records of LICENSEE as may be  necessary to verify the
accuracy  of the  reports  and  payments  made  under this  Agreement,  but said
accountant  shall not  disclose to LICENSOR  any  information  except that which
relates to the  information  which should  properly have been  contained in such
reports  as  provided  for in  Sections  5.02 and  5.03.  The  right  to  review
LICENSEE's  records as to any given time period  shall  terminate  two (2) years
after LICENSOR's receipt of royalties in respect to such time periods.

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<PAGE>

      5.05  INCOME  TAX:  Any income or other tax that  LICENSEE  is required to
withhold and pay on behalf of LICENSOR with respect to the royalties  payable to
LICENSOR  under the  Agreement  shall be deducted from said  royalties  prior to
remittance  to  LICENSOR;  provided,  however,  that  in  regard  to any  tax so
deducted,  LICENSEE shall give or cause to be given to LICENSOR such  assistance
as may reasonably be necessary to enable LICENSOR to claim  exemption  therefrom
or credit  therefor,  and in each case shall furnish LICENSOR proper evidence of
the taxes paid on its behalf.  Notwithstanding the foregoing, LICENSEE shall not
withhold  any  income or other  tax,  if  LICENSOR  provides  its tax  number to
LICENSEE,  unless a  change  in law  requires  withholding  notwithstanding  the
furnishing of such number.

                                   ARTICLE VI
                                   ARBITRATION

      Any dispute  between  LICENSOR  and  LICENSEE as to whether or not a given
Infant Disposable Diaper or Absorbent Pant is subject to payment of a percentage
royalty under the terms of this Agreement or the amount of any royalty hereunder
shall  be  subject  to  mandatory  binding  arbitration  by  a  panel  of  three
arbitrators,  one of which will be selected by each of LICENSOR and LICENSEE and
the third of which  shall be selected  by the other two  arbitrators.  Any party
which  fails to select an  arbitrator  within  45 days of a written  demand  for
arbitration  hereunder  shall be deemed to have waived its right to designate an
arbitrator, and such arbitrator may be selected by such office of JAMS/Endispute
or the American Arbitration Association as the other party shall designate.  Any
such  arbitration  shall be limited in scope to the question of whether or not a
given  Infant  Disposable  Diaper or  Absorbent  Pant is subject to payment of a
percentage  royalty  under the terms of this  Agreement  (including  the  proper
construction of the Valid Claim(s) of the Enloe Patent asserted to be infringed)
or the required amount of such payment and shall not address any aspect or issue
concerning  the validity of any of the Enloe  Patents,  which  validity shall be
presumed.  The party  losing  any such  arbitration  shall bear the costs of the
three  arbitrators,  and, in the event the arbitrators  conclude that the losing
party was acting in bad faith,  the  winner's  reasonable  attorneys'  fees,  as
determined by the arbitrators.  The arbitration  shall be conducted  pursuant to
such rules and proceedings as the parties shall agree at that time; in the event
of any disagreement between the parties about the terms, conditions or timing of
the  arbitration,  the  arbitrators  shall have the  authority  to  resolve  the
dispute.  The arbitration and any decision rendered shall be confidential to the
parties and shall not be



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<PAGE>

disclosed  to third  parties  except to the  extent  required  by law,  by rules
governing litigation, or by court order.

                                   ARTICLE VII
                             EFFECTIVE DATE AND TERM

      Except as otherwise provided herein,  this Agreement will become effective
on the day first written above, and, unless previously  terminated in accordance
with any of the provisions hereof,  shall remain in effect until the last of the
Enloe Patents to expire,  except that the  provisions  of Section  2.02(b) shall
remain in effect until the last of the  Kellenberger  Patent,  Melius Patent and
Good Patent and any counterpart patents issued in Canada has expired.

                                  ARTICLE VIII
                                   TERMINATION

      8.01  BREACH:  Failure by  LICENSEE  or LICENSOR to comply with any of its
obligations  and covenants  contained in this Agreement  shall entitle the other
party to give to the party in default a written notice requiring it to cure such
default(s).  If a default is not cured within  thirty (30) days after receipt of
notice,  the notifying party shall be entitled,  without  prejudice to any other
rights  conferred by this  Agreement or by law, to terminate  this  Agreement by
giving  written  notice to take effect  immediately.  The right of each party to
terminate  this  Agreement  shall not be  affected  by waiver  of, or failure to
terminate for any previous default.

      8.02 INSOLVENCY:  LICENSOR may, at its election,  terminate this Agreement
upon the bankruptcy or insolvency of LICENSEE. In such event,  termination shall
be deemed  effective  as of the date of  LICENSEE's  insolvency  but in no event
later than a time prior to LICENSEE's  filing of a petition in bankruptcy.  This
Section  8.02  shall not apply to  LICENSEE'S  Chapter  11  Bankruptcy  Case No.
98-60390 (United States Bankruptcy Court, Northern District of Georgia,  Atlanta
Division).

      8.03 SURVIVAL: Termination of this Agreement under Section 8.01 or Section
8.02 shall not terminate the parties'  obligations to one another for the period
prior to  termination.  Without  limiting the generality of the  foregoing,  the
provisions  of Article VI shall  survive  termination  of this  Agreement  under
Section  8.01 or Section  8.02,  but the  arbitration  described in such Article
shall 


                                       10
<PAGE>

be limited to Infant Disposable Diapers and Absorbent Pants  manufactured,  used
or sold by LICENSEE prior to the date of termination.

                                   ARTICLE IX
                                   ASSIGNMENT

      9.01 GENERAL: Subject to the provisions of this Article IX, this Agreement
shall be binding upon and inure to the benefit of the  successors and assigns of
all or substantially all of LICENSEE'S Infant Disposable Diaper business and the
successors and assigns of all or substantially all of LICENSEE'S Absorbent Pants
business;  provided,  however,  that a  successor  or assign of only one of such
Infant  Disposable  Diaper  business or Absorbent  Pants business shall have the
benefit  and  burdens  of this  Agreement  only  with  respect  to such  line of
business.  This Agreement  shall not create a license for or otherwise  apply to
the activities of successors or assigns prior to the date of any such succession
or assignment.

      9.02 EXISTING DIAPER ENTITIES: Notwithstanding Section 9.01 hereof, in the
event of assignment  hereunder to or any combination of LICENSEE and an existing
business which sells Infant Disposable Diapers, then (a) the phrase "two hundred
million dollars" in Section 4.01(a) shall be increased by an amount equal to the
sales by such  existing  business  of Infant  Disposable  Diapers for the twelve
months preceding the date of such assignment or combination  ("Existing Business
Diaper Sales");  (b) the figure $5,000,000 in Section 4.02 shall be increased by
an amount equal to two and one half percent (2.5%) of Existing  Business  Diaper
Sales; (c) the figure $1,250,000 in Section 5.01 shall be increased by an amount
equal to five-eighths of one percent (0.625%) of Existing Business Diaper Sales;
and (d) the royalty rate under Section 4.01(a) shall be two and one-half percent
(2.5%) with respect to such amount of all annual sales by LICENSEE, in excess of
the sum ("Combined Twelve Month Diaper Sales") of Existing Business Diaper Sales
and the sales of Infant  Disposable  Diapers by  LICENSEE  in the twelve  months
preceding the date of such  assignment or combination  ("Prior  LICENSEE  Diaper
Sales"),  as shall equal the ratio (i)  Existing  Business  Diaper Sales to (ii)
Combined  Twelve  Month  Diaper  Sales  (the  amount  of  incremental  sales  so
determined under this subsection 9.02(d), "Existing Business Attributable Diaper
Increase").

      9.03 SUCCESSIVE COMBINATIONS:  In the event of more than one assignment or
combination  of LICENSEE  and an existing business which sells Infant Disposable
Diapers, then the



                                       11
<PAGE>


provisions  of Section  9.02 shall  continue be applied to each such  successive
assignment  and  thereafter,  except that (a) "Existing  Business  Diaper Sales"
shall equal the sum of (i) all  Existing  Business  Diaper  Sales as  previously
determined  under Section 9.02 (without  regard to this Section 9.03),  (ii) the
Existing Business  Attributable  Diaper Increase for the twelve months preceding
such  successive  assignment  or  combination  (the  sum of (i) and  (ii),  "Old
Existing  Business  Diaper  Sales");  and (iii)  the sales of Infant  Disposable
Diapers  by the  existing  business  which  is the  subject  of such  successive
assignment  or  combination  for the twelve  months  preceding  such  successive
assignment or combination; and (b) "Prior LICENSEE Diaper Sales" shall equal the
sales by LICENSEE for the twelve months preceding such successive  assignment or
combination, less Old Existing Business Diaper Sales.

      9.04 CONSENT TO ASSIGNMENT:  The license grant hereunder shall be personal
to Paragon  and shall be  nontransferable  and  nonassignable  to third  parties
without  the  prior  written  consent  of  K-C,  which  consent  K-C  shall  not
unreasonably  withhold or unreasonably  delay. It shall not be unreasonable  for
K-C to withhold or delay its consent if the effect of the  proposed  transfer or
assignment  would be to allow a transferee or assignee to obtain the prospective
right to make, import,  use, offer for sale or sell Infant Disposable Diapers or
Absorbent  Pants in the Territory  without  entering  into a mutually  agreeable
settlement agreement with K-C for any past infringing activity by the transferee
or  assignee  with  respect  to the  K-C  patents  identified  in  this  License
Agreement.  In  addition,  the license  grant  hereunder  shall not apply to the
manufacture, import, use or sale of Infant Disposable Diapers or Absorbent Pants
by any other business entity acquired by Paragon,  by which Paragon is acquired,
merged with Paragon, consolidated with Paragon, partnered with Paragon or in any
other  business  arrangement  with  Paragon  after  the  effective  date of this
Settlement Agreement without the prior written consent of K-C, which consent K-C
shall  not  unreasonably  withhold  or  unreasonably  delay.  It  shall  not  be
unreasonable  for K-C to  withhold  or delay its  consent  if the  effect of the
proposed  transaction  would be to allow an acquiring,  merging or consolidating
entity or partner to obtain the prospective  right to make,  import,  use, offer
for sale or sell Infant  Disposable  Diapers or Absorbent Pants in the Territory
without entering into a mutually agreeable settlement agreement with K-C for any
past infringing  activity by the acquiring,  merging or consolidating  entity or
partner with respect to the K-C patents identified in this License Agreement.



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<PAGE>


                                    ARTICLE X
                                  GOVERNING LAW

      This Agreement shall be construed and all questions  relating hereto shall
be determined in accordance with the laws of the State of Delaware.

                                   ARTICLE XI
                   REPRESENTATIONS AND WARRANTIES; LIMITATIONS

      11.01   REPRESENTATIONS  AND  WARRANTIES  OF  LICENSOR:   LICENSOR  hereby
represents and warrants the following:

              (a)  LICENSOR  has the full right,  power and  authority  to enter
into this Agreement and perform in accordance with its terms.

              (b) LICENSOR has good and complete  title in and to (or beneficial
interest to) the Enloe  Patents and has the right to license them to LICENSEE in
accordance with the terms of this Agreement.

              (c) LICENSOR has good and complete  title in and to (or beneficial
interest to) the Kellenberger  Patent,  Melius Patent and Good Patent (including
any Canadian  counterpart  patents) and has the right to grant a covenant not to
sue LICENSEE in accordance with the terms of Section 2.02(b) of this Agreement.

      11.02 REPRESENTATION AND WARRANTIES OF LICENSEE:

              (a) LICENSEE has the full right, power and authority to enter into
this Agreement and perform in accordance with its terms.

              (b)  LICENSEE  has no  knowledge  of any  existing  or  contingent
impediment,  including  the effect of its pending  bankruptcy  proceeding or any
lack of  liquidity,  to its  performing  in  accordance  with the  terms of this
Agreement.

      11.03 LIMITATIONS:

              (a) Except as set forth above,  neither party has made, or intends
to make, any express or implied  warranty to the other. In particular,  LICENSOR
has made no  express or  implied  warranty  in this  Agreement  that  LICENSEE's
making,  using, or selling of products will not infringe  another patent held by
LICENSOR or held by a third party.

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<PAGE>

              (b) Nothing in this  Agreement  shall be  construed as granting by
implication,  estoppel,  or  otherwise,  any licenses or rights under patents of
LICENSOR other than the Enloe Patents.

                                   ARTICLE XII
                                     NOTICES

      Any notice  required or permitted to be given under this  Agreement by one
of the parties to the other shall be in writing and shall be deemed to have been
sufficiently given for all purposes hereunder if personally  delivered or mailed
by registered or certified mail, postage prepaid, addressed to such party at its
address below or as from time to time may be directed otherwise by such party by
notice to the other party.  Any such mailed  notice shall be deemed to have been
given three (3) business days after mailing.

      All notices to LICENSOR shall be addressed as follows:
            Kimberly-Clark Corporation
            351 Phelps Drive
            Irving, Texas  75038
                  Attention:  Senior Vice President, Law and Government Affairs

       All notices to LICENSEE shall be addressed as follows:
            Paragon Trade Brands, Inc.
            180 Technology Parkway
            Norcross, Georgia 30092
            Attention:  General Counsel

                                  ARTICLE XIII
                                 PATENT MARKING

      LICENSEE shall mark each package  containing Infant Disposable  Diapers or
Absorbent Pants (as the case may be) which, but for this license, would infringe
a Valid Claim with a statement substantially equivalent to

                  "The products are made under one or more of the following U.S.
            Patents:  4,704,116, 4,846,823, 5,413,570, 5,415,644 and 5,599,338."

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<PAGE>

      LICENSEE  shall modify such  statement  upon request of  LICENSOR to add a
reference to Enloe Patents which cover  LICENSEE's  product and that issue after
the date of this Agreement.

      LICENSEE shall commence the marking  program upon exhaustion of LICENSEE's
current supply of packaging materials.

                                   ARTICLE XIV
                                     WAIVER

      The waiver by either of the parties to this Agreement of any breach of any
provision hereof by the other party shall not be construed to be a waiver of any
succeeding breach of such provision or a waiver of the provision itself.

                                   ARTICLE XV
                                 ENFORCEABILITY

      If and to the extent that any court or governmental  tribunal of competent
jurisdiction holds any of the terms, provisions or conditions or part thereof of
this Agreement, or the application hereof to any circumstances, to be invalid or
unenforceable  in a final  nonappealable  order, the remainder of this Agreement
and the  application  of such term,  provision  or  condition or part thereof to
circumstances  other  than those as to which it is held  invalid or  enforceable
shall not be  affected  thereby  and each of the  other  terms,  provisions  and
conditions of this Agreement  shall be valid and enforceable to the extent it is
consonant with the intention of the parties upon entering into this Agreement.

                                   ARTICLE XVI
                                    HEADINGS

      The  headings   appearing   herein  have  been  inserted  solely  for  the
convenience of the parties hereto and shall not affect the construction, meaning
or interpretation of this Agreement.


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<PAGE>



                                  ARTICLE XVII
                                ENTIRE AGREEMENT

      This  Agreement  is entered into as part of a  Settlement  Agreement.  The
terms and provisions  contained in this  Agreement and the Settlement  Agreement
(including its  attachments)  attached hereto as Exhibit E constitute the entire
agreement and understanding between the parties to this Agreement. Neither party
has relied or will rely on any  representation  or agreement of the other except
to the extent set forth herein or in the  Settlement  Agreement  (including  its
attachments),  and  neither  party  shall be bound by or charged  with any oral,
written  or implied  agreements,  representations,  warranties,  understandings,
commitments  or  obligations  not  specifically  set  forth  herein  or  in  the
Settlement  Agreement  (including its attachments).  These Agreements may not be
released, discharged,  abandoned, changed or modified in any manner except by an
instrument in writing signed by a duly authorized officer of each of the parties
hereto.

      Each of the parties  hereto has caused this  instrument  to be executed by
its respective duly authorized representative as of the day and year first above
written.

KIMBERLY-CLARK CORPORATION                  PARAGON TRADE BRANDS, INC.


BY:        /s/ O. George Everbach                  BY: /s/ B. V. Abraham
        --------------------------                    ------------------------
           O. George Everbach                          B. V. Abraham
        --------------------------                    ------------------------
           (print)                                     (print)

TITLE:     Senior Vice President -              TITLE: Chairman and CEO
           Law and Government Affairs
        --------------------------                    ------------------------
           (print)                                       (print)






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