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                                                                    EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT, (the "Agreement") is entered into as of July 1, 2000,
between WESTPOINT STEVENS INC., a Delaware corporation with its principal place
of business in West Point, Georgia (the "Company"), and JOHN T. TOOLAN, an
individual resident of New Jersey (the "Executive").

                              W I T N E S S E T H:
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         WHEREAS, the Company is engaged in the manufacturing and marketing of
home fashion consumer products throughout the United States and abroad; and

         WHEREAS, the Executive is employed by the Company as its Executive Vice
President/Sales and Marketing;

         WHEREAS, the Company desires to continue the employment of the
Executive, and the Executive desires to continue employment with the Company, on
the terms and subject to the conditions set forth in this Agreement;

         NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and obligations hereinafter set forth, the parties hereto, intending
to be legally bound, hereby agree as follows:

         1.       Effective Date. This Agreement is effective as of July 1, 2000
(the "Effective Date").

         2.       Term. This Agreement shall be for a three-year term commencing
on the Effective Date and shall be extended on a daily basis without further
action by the Executive or the Company (such period of time, collectively, the
"Term of Employment"); provided, however, that either party may, by written
notice to the other party, cause the Term of Employment to cease to extend
automatically. The Term of Employment shall end on the third anniversary of the
date of such notice.

         3.       Duties. During the Term of Employment, the Executive shall
serve as the Company's Executive Vice President/Sales and Marketing and shall
have such specific responsibilities or duties consistent with the Executive's
position as Executive Vice President/Sales and Marketing as may be determined
and assigned to the Executive from time to time by or upon the authority of the
Board of Directors (the "Board"), the Chief Executive Officer or the President.
The Executive shall serve the Company faithfully and to the best of his ability
in such capacities, devoting substantially all his business time, attention,
knowledge, energy and skills to such employment; provided, however, that the
Executive may devote reasonable periods of time to civic or community affairs
and engage in personal investment activities, so long as such activities do not,
individually or in the aggregate, significantly interfere with the performance
by the Executive of his duties under this Agreement or violate the provisions of
Section 9 of this Agreement. If elected, the Executive also shall serve during
any part of the Term of Employment as any other officer or a director of the
Company or any

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subsidiary corporation or parent corporation of the Company without any
compensation therefor other than as specified in this Agreement.

         4.       Compensation and Benefits.

                  (a)      Base Salary. During the Term of Employment, the
Company shall pay to the Executive a base salary, payable in accordance with the
Company's standard payroll practices for senior executive employees, commencing
at an annual rate of $400,000 ("Base Salary"); provided, however, that such Base
Salary shall be reviewed at least annually by the Board of the Company or the
Compensation Committee thereof in light of the Company's performance during the
preceding year, and the Board or the Compensation Committee thereof may, in its
sole discretion, increase (but not decrease) such Base Salary based on such
review.

                  (b)      Incentive Compensation. During the Term of
Employment, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to senior executive officers of the Company. Without limiting the
foregoing, the following shall apply:

                           (i)      the Executive shall participate in the top
bonus category of the Company's Senior Management Incentive Plan the (the
"MIP"), as in effect from time to time, at a level commensurate with other
senior executives of the Company;

                           (ii)     the Executive shall participate in the
Company's Key Employee Stock Bonus Plan (the "Stock Bonus Plan"), as in effect
from time to time; and

                           (iii)    the Executive shall be entitled to
participate in grants of options and other awards under the Company's Omnibus
Stock Incentive Plan (the "Omnibus Plan") or any successor or similar plans, the
level of such participation to be commensurate with other senior executives of
the Company, as determined in good faith by the Board or the Compensation
Committee of the Company.

                  (c)      Welfare Benefit Plans. During the Term of Employment,
the Executive shall be entitled to participate in any medical, dental,
disability, insurance, retirement, savings, vacation or other welfare or fringe
benefit plans or programs made available to the Company's senior executive
officers.

                  (d)      Expenses. During the Term of Employment, the
Executive shall be entitled to prompt reimbursement for all reasonable
business-related expenses incurred by the Executive in accordance with the
policies and procedures of the Company as in effect from time to time with
respect to other senior executives.

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                  (e)      Vacation. During the Term of Employment, the
Executive shall be entitled to paid vacation in accordance with the policies of
the Company as in effect with respect to other senior executives, but in no
event shall such vacation time be less than five weeks per calendar year.

                  (f)      Fringe Benefits. During the Term of Employment, the
Executive shall be entitled to all of the fringe benefits that are from time to
time available to other senior executives. Without limiting the foregoing, (i)
the Executive shall be entitled to reasonable personal use of Company aircraft,
provided that such use shall not interfere with the Company's business use of
such aircraft, and (ii) with the consent of the Chief Executive Officer, the
Executive may elect to receive either an automobile allowance in accordance with
Company policy or payment of the reasonable cost of membership (including
initiation fees and dues) in a private club selected by the Executive; provided,
however, that in the event that the Company terminates the Executive for Cause
or the Executive voluntarily terminates employment with the Company without Good
Reason prior to the fifth anniversary of the Effective Date, the Executive shall
return to the Company (and the Company shall be entitled to withhold from any
payment due the Executive with this Agreement or otherwise) the amount equal to
such club initiation fee, multiplied by a fraction, the numerator of which is
the number of whole calendar months remaining in the Term of Employment as of
the termination date and the denominator of which is 60.

         5.       Termination.

                  (a)      Disability. In the event of the Disability of the
Executive during the Term of Employment, the Company shall have the right, upon
written notice to the Executive, to terminate the Executive's employment
hereunder, effective upon the 90th calendar day following the giving of such
notice (or such later day as shall be specified in such notice) unless prior to
such time the Executive shall have returned to the performance of his duties as
required hereunder. For purposes of this provision, "Disability" shall mean any
physical or mental disability or incapacity expected to be of long-continued or
indefinite duration which renders the Executive incapable of performing in all
material respects the essential functions of his regular duties and
responsibilities with the Company.

                  (b)      Death. In the event of the death of the Executive
during the Term of Employment, this Agreement shall automatically terminate.

                  (c)      Cause. The Company shall have the right, upon written
notice to the Executive, to terminate the Executive's employment under this
Agreement for Cause, in which case this Agreement shall terminate, and the
Executive shall be removed from office, effective as of the date specified by
the Company in the notice (subject to the Executive's right to correct any
conduct described in clause (iii) or (iv) of the definition of Cause below). For
purposes of this Agreement, the term "Cause"shall mean:

                           (i)      fraud or embezzlement on the part of the
Executive or material breach by the Executive of his obligations under Section 9
hereof; or

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                           (ii)     conviction of the Executive of any felony;
or

                           (iii)    a material breach of, or the willful failure
or refusal by the Executive to perform and discharge, the Executive's duties,
responsibilities and obligations under this Agreement without Good Reason under
clause (i) or (ii) of the definition thereof; or

                           (iv)     a material breach by the Executive of the
Company's Code of Conduct for Corporate Officers as in effect from time to time.

For purposes of this provision, the Company shall be deemed to have Cause to
terminate the Executive's employment due to conduct described in clause (iii) or
(iv) above only if such conduct has not been corrected within 30 days of written
notice thereof to the Executive by the Company, such notice to state with
specificity the nature of the breach, failure or refusal; provided that if such
breach, failure or refusal cannot reasonably be corrected within 30 days of
written notice thereof, correction shall be commenced by the Executive within
such period and may be corrected within a reasonable period thereafter; and,
provided further that any such breach, failure or refusal by reason of
Disability (as defined in Section 5(a) hereof) or death shall not constitute
Cause for purposes hereof.

                  (d)      Without Cause. The Company shall have the right to
terminate the Executive's employment under this Agreement without Cause at any
time during the Term of Employment, in which case Agreement shall terminate on
the date specified in such notice.

                  (e)      Good Reason. The Executive shall have the right to
terminate his employment under this Agreement for Good Reason upon prior written
notice to the Company, in which case this Agreement shall terminate on the date
specified in such notice; provided that in the case of clause (i) or (ii) of
this Section 5(e), the date of termination specified in such notice shall be at
least thirty days after the delivery of such notice, in each such case subject
to the Company's right as provided below to remedy the event giving rise to the
termination prior to the date of termination specified in such notice. For
purposes of this Agreement, the term "Good Reason" shall mean:

                           (i)      the assignment to the Executive of any
duties inconsistent in any material respect with the Executive's positions
(including status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 3 of this Agreement, or
any other action by the Company which results in a material diminishment in such
positions, authority, duties or responsibilities; or

                           (ii)     any failure by the Company to comply with
any of the provisions of Section 4 of this Agreement, including any decrease in
bonus opportunity by reason of a change in employee group under the Company's
Senior Management Incentive Plan as in effect from time; or

                           (iii)    any termination of the Executive's
employment by the Company otherwise than as permitted by this Agreement; or

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                           (iv)     any failure by any Successor (as such term
is defined in Section 15(b) hereof) of the Company to comply with this
Agreement; or

                           (v)      the occurrence of a Change in Control of the
Company.

For purposes of this provision, the Executive shall be deemed to have Good
Reason to terminate his employment with the Company due to circumstances
described in paragraphs (i) or (ii) above only if such circumstances are not
corrected by the Company within 30 days of written notice thereof to the Company
by the Executive. "Change in Control" means the occurrence of any one of the
following events: (i) any person or other entity (other than a subsidiary of the
Company or Holcombe T. Green, Jr. or any of his affiliates as defined in Rule
405 under the Securities Act of 1933), including any person as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"),
becoming the beneficial owner, as defined in Rule 13d-3 of the Exchange Act,
directly or indirectly, of more than fifty percent (50%) of the total combined
voting power of all classes of capital stock of the Company ordinarily entitled
to vote for the election of directors of the Company, (ii) the Board approving
the sale of all or substantially all of the property or assets of the Company,
(iii) the Board approving a consolidation or merger of the Company with another
corporation (other than with any subsidiary of the Company or in which the
Company is the surviving corporation), the consummation of which would result in
the occurrence of an event described in clause (i) above, or (iv) a change in
the Board occurring with the result that the members of the Board on the
effective date hereof (the "Incumbent Directors") no longer constitute a
majority of such Board, provided that any person becoming a director whose
election or nomination for election was supported by a majority of the Incumbent
Directors shall be considered an Incumbent Director for purposes hereof.

         6.       Obligations of the Company upon Termination.

                  (a)      Termination by the Company Other Than for Cause or
Disability; Termination by the Executive for Good Reason. If, during the Term of
Employment, the Company terminates the Executive's employment other than for
Cause or Disability, or the Executive terminates employment for Good Reason
within a period of 90 days after the occurrence of the event giving rise to Good
Reason, then and, with respect to payments and benefits described in clauses
(i)(B), (i)(C) and (ii) below, only if the Executive executes a release of all
employment-related claims against the Company and its affiliates in a form
satisfactory to the Company:

                           (i)      the Company shall pay to the Executive the
following amounts:

                                    (A)      the sum of (1) the Executive's Base
Salary through the date of termination to the extent not theretofore paid, (2)
any annual bonus payable under Section 4(b), which has been earned but not
theretofore paid, (3) any accrued vacation pay to the extent not theretofore
paid, and (4) unless the Executive has elected a different payout date in a
prior deferral election, any compensation previously deferred by the Executive
(together with any accrued interest

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or earnings thereon) to the extent not theretofore paid (the sum of the amounts
described in clauses (1), (2), (3) and (4) shall be hereinafter referred to as
the "Accrued Obligations");

                                    (B)      the amount equal to the product of
(x) the Executive's annual Base Salary in effect as of the date of termination,
and (y) the number of whole and fractional years remaining in the Term of
Employment as of the date of termination; and

                                    (C)      the amount equal to the product of
(x) the amount of the target bonus applicable to the Executive under the MIP in
respect of the Company's fiscal year in which the date of termination occurs,
and (y) the number of years remaining in the Term of Employment as of the date
of termination (with any fractional years treated as whole years).

                           (ii)     all outstanding unvested awards under the
Stock Bonus Plan, the Omnibus Plan and any other equity compensation plans of
the Company shall become immediately vested in full and, in the case of any
stock options or similar awards requiring exercise by the holder, shall become
immediately exercisable;

                           (iii)    for the remaining Term of Employment, the
Company shall continue medical and dental benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans described in Section 4 of this Agreement if
the Executive's employment had not been terminated, which coverage shall be in
addition to and shall not reduce any continuation coverage required under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"); provided,
however, that such benefits shall cease if the Executive becomes eligible to
receive medical or dental benefits under the plan of another employer; and

                           (iv)     to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits").

The Company shall pay the amounts described in clause (i)(A) in a lump sum in
cash within 60 days of the date of the termination. The Company shall pay the
amounts described in clauses (i)(B) and (i)(C) on the dates such amounts would
have been paid if the Executive's employment with the Company had not
terminated; provided, however, that the Company shall discontinue such payments,
and the Executive shall forfeit all rights to such amounts, if the Executive
becomes employed by a Competitor (as defined in Section 9(b)). With respect to
the medical and dental benefits described in clause (iii), the Company may
charge the Executive an amount equal to the applicable employee premium for
COBRA continuation coverage; provided, however, that in such event the Company
shall reimburse the amount of such premium to the Executive.

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                           (v)      The Company shall indemnify and hold the
Executive harmless from and against (i) the imposition of excise tax (the
"Excise Tax") under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), on any payment made pursuant to this Section 5(e)
(including any payment made under this paragraph) or under any other plan,
arrangement or agreement of the Company, its successors, any person whose
actions result in a change of control of the Company or any person affiliated
with any of them (collectively referred to as the "Payments"), and (ii) any
federal, state or local income tax imposed on any payment made pursuant to this
paragraph. For the purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amounts of such Excise Tax, independent tax
counsel, reasonably acceptable to the Executive, shall be selected by the
Company's independent auditors. For the purpose of determining the amount of any
payment under clause (ii) of the first sentence of this paragraph, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals in the calendar year in which
the indemnity payment is to be made and state and local income taxes at the
highest marginal rate of taxation applicable to individuals as are in effect in
the state and locality of the Executive's domicile for income tax purposes in
the calendar year in which such payment is to be made, net of the maximum
reduction in federal income taxes that could be obtained from deduction of such
state and local taxes.

                  (b)      Death. If the Executive's employment is terminated by
reason of the Executive's death during the Term of Employment, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations, the timely payment or provision of Other Benefits, and payment of
an amount equal to the product of (x) the target MIP bonus applicable to the
Executive for the fiscal year in which the date of termination occurs, and (y) a
fraction, the numerator of which is the number of days in the fiscal year
through the date of termination and the denominator of which is 365 (the
"Prorated Bonus"). In addition, all outstanding unvested awards under the Stock
Bonus Plan, the Omnibus Plan and any other equity compensation plans of the
Company shall become immediately vested in full and, in the case of stock
options or similar awards requiring exercise by the holder, shall become
immediately exercisable. Accrued Obligations and the Prorated Bonus shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 60 days of the date of termination. With respect to the provision of
Other Benefits, the term Other Benefits as used in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits under such plans, programs, practices and
policies relating to death benefits, if any, as are applicable to the Executive
on the date of his death.

                  (c)      Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the Term of
Employment, this Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations, payment of an amount
equal to the Prorated Bonus described in Section 6(b), and the timely payment or
provision of Other Benefits. Accrued Obligations and the Prorated Bonus shall be
paid to the Executive in a lump sum in cash within 60 days of the date of
termination. In addition, for a period of one year following the date of
termination, the Company shall continue medical and dental benefits to the
Executive and/or the Executive's family on the same basis set forth in Section
6(a). With respect

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to the provision of Other Benefits, the term Other Benefits as used in this
Section 6(c) shall include, without limitation, and the Executive shall be
entitled to receive, disability and other benefits under such plans, programs,
practices and policies relating to disability, if any, as are applicable to the
Executive and his family on the date of termination.

                  (d)      Cause or Voluntary Termination without Good Reason.
If the Executive's employment shall be terminated for Cause during the Term of
Employment, or if the Executive voluntarily terminates employment during the
Term of Employment without Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits.

         7.       Obligations of the Executive upon Termination.

                  (a)      Termination by the Company Other Than for Cause or
Disability; Termination by the Executive for Good Reason. If, during the Term of
Employment, the Company terminates the Executive's employment other than for
Cause or Disability, or the Executive terminates employment for Good Reason
within 90 days after the occurrence of the event giving rise to Good Reason,
then the Executive shall have no further obligations hereunder.

                  (b)      Other Termination of Employment. If, during the Term
of Employment, the Executive's employment with the Company terminates for any
reason other than the Employee's death or a termination described in Section
7(a), or if this Agreement expires on the third anniversary of notice by either
party pursuant to Section 2, then the Executive shall remain subject to the
provisions of Section 9.

                  (c)      Mitigation. The Executive shall be under no
obligation to mitigate damages in order to receive any of the payments or
benefits described in Section 6.

         8.       Non-exclusivity of Rights. Nothing in this Agreement shall
prevent, limit or otherwise affect such rights as the Executive may have under
any other agreements with the Company. Amounts which are vested benefits or
which the Executive is otherwise entitled to receive under any plans or programs
of the Company at or subsequent to the Executive's date of termination shall be
payable in accordance with such plan or program; provided, however, that
payments made pursuant to Section 6(a) hereof shall be in lieu of any severance
payments under the Company's severance plans, if any, as in effect; and provided
further, that the Executive acknowledges that, upon request by the Company, he
shall immediately reimburse the Company for any amounts which the Executive has
received pursuant to any other severance plans of the Company, except that the
Executive shall not be required to make any payment to the Company until all
obligations of the Company to the Executive hereunder have been discharged.

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         9.       Restrictions on Conduct of the Executive.

                  (a)      General. The Executive and the Company understand and
agree that the purpose of the provisions of this Section 9 is to protect
legitimate business interests of the Company, as more fully described below, and
is not intended to eliminate the Executive's post-employment competition with
the Company per se, nor is it intended to impair or infringe upon the
Executive's right to work, earn a living, or acquire and possess property from
the fruits of his labor. The Executive hereby acknowledges that the
post-employment restrictions set forth in this Section 9 are reasonable and that
they do not, and will not, unduly impair his ability to earn a living after the
termination of this Agreement. Therefore, subject to the limitations of
reasonableness imposed by law, the Executive shall be subject to the
restrictions set forth in this Section 9.

                  (b)      Definitions. The following capitalized terms used in
this Section 9 shall have the meanings assigned to them below, which definitions
shall apply to both the singular and plural forms of such terms:

                           "Competitive Position" means any employment with a
Competitor in which the Executive will use or is likely to use any Confidential
Information or Trade Secrets, or in which the Executive has duties for such
Competitor that relate to Competitive Services and that are the same or similar
to those services actually performed by the Executive for the Company;

                           "Competitive Services" means the manufacturing and
marketing of textile home fashion products.

                           "Competitor" means any Person engaged, wholly or in
part, in Competitive Services.

                           "Confidential Information" means all information
regarding the Company, its activities, business or clients that is the subject
of reasonable efforts by the Company to maintain its confidentiality and that is
not generally disclosed by practice or authority to persons not employed by the
Company, but that does not rise to the level of a Trade Secret. "Confidential
Information" shall include, but is not limited to, financial plans and data
concerning the Company; management planning information; business plans;
operational methods; market studies; marketing plans or strategies; product
development techniques or plans; customer lists; details of customer contracts;
current and anticipated customer requirements; past, current and planned
research and development; business acquisition plans; and new personnel
acquisition plans. "Confidential Information" shall not include information that
has become generally available to the public by the act of one who has the right
to disclose such information without violating any right or privilege of the
Company. This definition shall not limit any definition of "confidential
information" or any equivalent term under state or federal law.

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                           "Determination Date" means the date of termination
of the Executive's employment with the Company for any reason whatsoever or any
earlier date (during the Term of Employment) of an alleged breach of the
Restrictive Covenants by the Executive.

                           "Person" means any individual or any corporation,
partnership, joint venture, limited liability company, association or other
entity or enterprise.

                           "Principal or Representative" means a principal,
owner, partner, shareholder, joint venturer, investor, member, trustee,
director, officer, manager, employee, agent, representative or consultant.

                           "Protected Customers" means any Person to whom the
Company has sold its products or services or solicited to sell its products or
services during the twelve (12) months prior to the Determination Date.

                           "Protected Employees" means employees of the Company
who were employed by the Company at any time within six (6) months prior to the
Determination Date.

                           "Restricted Period" means the Term of Employment and
a period extending for one year from the termination of the Executive's
employment with the Company; provided, however, with respect to any Trade Secret
that constitutes a trade secret under Georgia law, the Restricted Period shall
be of unlimited duration.

                           "Restricted Territory" means the entire United
States.

                           "Restrictive Covenants" means the restrictive
covenants contained in Section 9(c) hereof.

                           "Trade Secrets" means all information, with regard
to form, including, but not limited to, technical or nontechnical data, a
formula, a pattern, a compilation, a program, a device, a method, a technique, a
drawing, a process, financial data, financial plans, product plans, distribution
lists or a list of actual or potential customers, advertisers or suppliers which
is not commonly known by or available to the public and which information: (A)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use; and (B) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
Without limiting the foregoing, Trade Secret means any item of Confidential
Information that constitutes a "trade secret(s)" under the common law or
statutory law of the State of Georgia.

                  (c)      Restrictive Covenants.

                           (i)      Restriction on Disclosure and Use of
Confidential Information and Trade Secrets. The Executive understands and agrees
that the Confidential Information and Trade

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Secrets constitute valuable assets of the Company and its affiliated entities,
and may not be converted to the Executive's own use. Accordingly, the Executive
hereby agrees that the Executive shall not, directly or indirectly, at any time
during the Restricted Period reveal, divulge, or disclose to any Person not
expressly authorized by the Company any Confidential Information, and the
Executive shall not, directly or indirectly, at any time during the Restricted
Period use or make use of any Confidential Information in connection with any
business activity other than that of the Company. Throughout the term of this
Agreement and at all times after the date that this Agreement terminates for any
reason, the Executive shall not directly or indirectly transmit or disclose any
Trade Secret of the Company to any Person, and shall not make use of any such
Trade Secret, directly or indirectly, for himself or for others, without the
prior written consent of the Company. The parties acknowledge and agree that
this Agreement is not intended to, and does not, alter either the Company's
rights or the Executive's obligations under any state or federal statutory or
common law regarding trade secrets and unfair trade practices.

         Anything herein to the contrary notwithstanding, the Executive shall
not be restricted from disclosing or using Confidential Information that is
required to be disclosed by law, court order or other legal process; provided,
however, that in the event disclosure is required by law, the Executive shall
provide the Company with prompt notice of such requirement so that the Company
may seek an appropriate protective order prior to any such required disclosure
by the Executive.

                           (ii)     Nonsolicitation of Protected Employees. The
Executive understands and agrees that the relationship between the Company and
each of its Protected Employees constitutes a valuable asset of the Company and
may not be converted to the Executive's own use. Accordingly, the Executive
hereby agrees that during the Restricted Period the Executive shall not directly
or indirectly on the Executive's own behalf or as a Principal or Representative
of any Person or otherwise solicit or induce any Protected Employee to terminate
his or her employment relationship with the Company or to enter into employment
with any other Person.

                           (iii)    Restriction on Relationships with Protected
Customers. The Executive understands and agrees that the relationship between
the Company and each of its Protected Customers constitutes a valuable asset of
the Company and may not be converted to the Executive's own use. Accordingly,
the Executive hereby agrees that, during the Restricted Period, the Executive
shall not, without the prior written consent of the Company, directly or
indirectly, on the Executive's own behalf or as a Principal or Representative of
any Person, solicit, divert, take away or attempt to solicit, divert or take
away a Protected Customer for the purpose of providing or selling Competitive
Services; provided, however, that the prohibition of this covenant shall apply
only to Protected Customers with whom the Executive had Material Contact on the
Company's behalf during the twelve (12) months immediately preceding the
termination of his employment hereunder. For purposes of this Agreement, the
Executive had "Material Contact" with a Protected Customer if (a) he had
business dealings with the Protected Customer on the Company's behalf; (b) he
was responsible for supervising or coordinating the dealings between the Company
and the Protected Customer; or (c) he obtained Trade Secrets or Confidential
Information about the customer as a result of his association with the Company.

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                           (iv)     Noncompetition with the Company. The parties
acknowledge: (A) that the Executive's services under this Agreement require
special expertise and talent in the provision of Competitive Services and that
the Executive will have substantial contacts with customers, suppliers,
advertisers and vendors of the Company; (B) that pursuant to this Agreement, the
Executive will be placed in a position of trust and responsibility and he will
have access to a substantial amount of Confidential Information and Trade
Secrets and that the Company is placing him in such position and giving him
access to such information in reliance upon his agreement not to compete with
the Company during the Restricted Period; (C) that due to his management duties,
the Executive will be the repository of a substantial portion of the goodwill of
the Company and would have an unfair advantage in competing with the Company;
(D) that due to the Executive's special experience and talent, the loss of the
Executive's services to the Company under this Agreement cannot reasonably or
adequately be compensated with the Company; and (F) that the Executive is
capable of obtaining gainful, lucrative and desirable employment that does not
violate the restrictions contained in this Agreement. In consideration of the
compensation and benefits being paid and to be paid by the Company to the
Executive hereunder, the Executive hereby agrees that, during the Restricted
Period, the Executive will not, without prior written consent of the Company,
directly or indirectly seek or obtain a Competitive Position in the Restricted
Territory with a Competitor; provided, however, that the provisions of this
Agreement shall not be deemed to prohibit the ownership by the Executive of any
securities of the Company or its affiliated entities or not more than five
percent (5%) of any class of securities of any corporation having a class of
securities registered pursuant to the 1934 Act.

                  (d)      Enforcement of Restrictive Covenants.

                           (i)      Rights and Remedies Upon Breach. In the
event the Executive breaches, or threatens to commit a breach of, any of the
provisions of the Restrictive Covenants, the Company shall have the following
rights and remedies, which shall be independent of any others and severally
enforceable, and shall be in addition to, and not in lieu of, any other rights
and remedies available to the Company at law or in equity;

                                    (A)      the right and remedy to enjoin,
preliminarily and permanently, the Executive from violating or threatening to
violate the Restrictive Covenants and to have the Restrictive Covenants
specifically enforced by any court of competent jurisdiction, it being agreed
that any breach or threatened breach of the Restrictive Covenants would cause
irreparable injury to the Company and that money damages would not provide an
adequate remedy to the Company; and

                                    (B)      the right and remedy to require the
Executive to account for and pay over to the Company all compensation, profits,
monies, accruals, increments or other benefits derived or received by the
Executive as the result of any transactions constituting a breach of the
Restrictive Covenants.

                           (ii)     Severability of Covenants. The Executive
acknowledges and agrees that the Restrictive Covenants are reasonable and valid
in time and scope and in all other respects.

                                       12

<PAGE>   13
The covenants set forth in this Agreement shall be considered and construed as
separate and independent covenants. Should any part or provision of any covenant
be held invalid, void or unenforceable in any court of competent jurisdiction,
such invalidity, voidness or unenforceability shall not render invalid, void or
unenforceable any other part or provision of this Agreement. If any portion of
the foregoing provisions is found to be invalid or unenforceable by a court of
competent jurisdiction because its duration, the territory, the definition of
activities or the definition of information covered is considered to be invalid
or unreasonable in scope, the invalid or unreasonable term shall be redefined,
or a new enforceable term provided, such that the intent of the Company and the
Executive in agreeing to the provisions of this Agreement will not be impaired
and the provision in question shall be enforceable to the fullest extent of the
applicable laws.

         10.      Deductions and Withholding; Expenses. The Executive agrees
that the Company and/or its subsidiaries or affiliates shall withhold from any
and all compensation paid to and required to be paid to the Executive pursuant
to this Agreement, all federal, state, local and/or other taxes which the
Company determines are required to be withheld in accordance with applicable
statutes and/or regulations from time to time in effect and all amounts required
to be deducted in respect of the Executive's coverage under applicable employee
benefit plans. For purposes of this Agreement and calculations hereunder, all
such deductions and withholdings shall be deemed to have been paid to and
received by the Executive.

         11.      Entire Agreement. This Agreement embodies the entire agreement
of the parties with respect to the Executive's employment. This Agreement may
not be changed or terminated orally but only by an agreement in writing signed
by the parties hereto.

         12.      Waiver. The waiver by the Company of a breach of any provision
of this Agreement by the Executive shall not operate or be construed as a waiver
of any subsequent breach by him. The waiver by the Executive of a breach of any
provision of this Agreement by the Company shall not operate or be construed as
a waiver of any subsequent breach by the Company.

         13.      Governing Law. This Agreement shall be subject to, and
governed by, the laws of the State of Georgia, without regard to choice of law
principles.

         14.      Dispute Resolution. Except as necessary to specifically
enforce, or enjoin the breach of this Agreement or any provision herein (to the
extent such remedies may otherwise be available), any dispute arising out of or
relating to this Agreement shall be submitted to binding arbitration by one
arbiter under the then existing Commercial Arbitration Rules of the American
Arbitration Association in arbitration proceedings conducted in Atlanta,
Georgia. The arbiter shall have no power or authority in making his award to
modify, enlarge or add to the terms and provisions of this Agreement, except as
otherwise expressly agreed herein. The arbiter shall provide the parties a draft
of the tentative award and the reasons therefor and permit them to submit briefs
supporting or challenging the tentative award. Judgment upon the final award of
the arbiter shall be binding upon the parties and may be entered in any court
having jurisdiction. INITIALED: _____

                                       13

<PAGE>   14
         15.      Assignability; Successors. (a) The obligations of the
Executive may not be delegated and, except as expressly provided in Section 6(b)
relating to beneficiaries, the Executive may not, without the Company's written
consent thereto, assign, transfer, convey, pledge, encumber, hypothecate or
otherwise dispose of this Agreement or any interest herein. Any such attempted
delegation or disposition shall be null and void and without effect.

                  (b)      The Company and the Executive agree that this
Agreement and each of the Company's rights and obligations hereunder may be
assigned or transferred by the Company to and shall be assumed by and binding
upon any corporation or other business entity which succeeds to the assets or
conducts the business of the Company, whether directly or indirectly, by
purchase, merger, consolidation or otherwise (a "Successor"). In the event that
another corporation or other business entity becomes a Successor of the Company,
then the Successor shall, by an agreement in form and substance reasonably
satisfactory to the Executive, expressly assume and agree to perform this
Agreement in the same manner and to the same extent as the Company would be
required to perform if there had been no Successor.

         16.      Notices. All notices to the Company or the Executive permitted
or required hereunder shall be in writing, shall refer to this Agreement and
shall be delivered personally, by telecopier or by courier service providing for
next-day delivery or sent by registered or certified mail, return receipt
requested; to the following addresses:

         The Company:
         WestPoint Stevens Inc.
         507 West Tenth Street
         West Point, Georgia  31833
         Attn:  M. Clayton Humphries, Jr.
                General Counsel

         with a copy to:

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

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

                  -------------------------
                  Attn:
                        -------------------

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

         The Executive:

         John T. Toolan

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

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

                                       14

<PAGE>   15

Any party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party. Any such notice
shall be deemed given, if delivered personally, upon receipt; if sent by
certified or registered mail, 3 days after deposit (postage prepaid) with the
U.S. mail service; if sent by courier service providing for next day delivery,
the next business day following deposit with such courier service; and if
telecopied, when telecopied.

         17.      Effective Date. This Agreement shall be effective as of the
date first written above.

         18.      Paragraph Headings. The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

         19.      Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.

         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in Atlanta, Georgia as of the date first above written.

                                        WESTPOINT STEVENS INC.

                                        By: /s/ Holcombe T. Green, Jr.
                                           ------------------------------------
                                              Holcombe T. Green, Jr.
                                              Chairman of the Board and Chief
                                              Executive Officer

                                        /s/ John T. Toolan
                                        ---------------------------------------
                                        John T. Toolan

                                               15<PAGE>   1
                                 FIFTH AMENDMENT

                                       TO

                   THE LICENSE AGREEMENT OF NOVEMBER 22, 1995

                                     BETWEEN

                           JOSEPH R. LAKOWICZ, PH. D.

                                       AND

                                  SPECTRX, INC.

<PAGE>   2

                      FIFTH AMENDMENT TO LICENSE AGREEMENT

         THE FIFTH AMENDMENT TO THE LICENSE AGREEMENT, DATED MAY 31, 2000 BY
AND BETWEEN Joseph R. Lakowicz, Ph. D., (hereinafter "Dr. Lakowicz"), an
individual, residing at 10037 Fox Den Road; Ellicott City, Maryland 21042-2225,
and SpectRx, Inc., (hereinafter "SRX"), a Delaware corporation having a
principal place of business at 6025-A Unity Drive, Norcross, Georgia 30017 (Dr.
Lakowicz and SRX hereinafter collectively referred to as "the Parties").

                                   WITNESSETH

         WHEREAS the Parties have entered into a license agreement, dated
November 22, 1995, as amended (the "License Agreement");

         WHEREAS there have arisen certain issues between the Parties relating
to the terms and conditions of the License Agreement and to the Parties'
performance thereunder;

         WHEREAS the Parties have agreed on changes and amendments to the
License Agreement in settlement of all outstanding such issues; and

         WHEREAS the Parties desire to amend the License Agreement pursuant to
Section 12.7 thereof;

         NOW, THEREFORE, in consideration of these premises and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged to by the Parties, the Parties hereby agree as follows:

                            1. Payment of Royalties

         Sections 3.2, 3.4 and 3.5. Sections 3.2, 3.4 and 3.5 relating to the
payment of earned and minimum royalties shall be replaced in their entirety by
new Sections 3.2, 3.4 and 3.5 as follows:

         3.2      Timing of Royalty Payments

         (a)      For the year 2000 and for each year thereafter that this
                  Agreement remains in effect, royalty reports and the
                  appropriate corresponding earned and/or minimum royalty
                  payments as set forth in Sections 3.3 and 3.4, respectively,
                  shall be made by SRX to Dr. Lakowicz quarterly, payable within
                  30 days following the end of each calendar quarter ending
                  March 31, June 30, September 30 and December 31, respectively;
                  provided, however, that for the year 2000, the first such
                  report and royalty payment for the first calendar quarter of
                  2000 shall be made 30 days after March 31st or 10 days
                  following execution of this Fifth Amendment, whichever occurs
                  later.

         (b)      Within 30 days after the end of the first calendar quarter
                  each year (subject to the proviso in Section 3.2 (a)), SRX
                  shall pay Dr. Lakowicz any earned royalties for that quarter.
                  If the earned royalties are less than 25% of the applicable
                  annual minimum royalty during 2000 or, in the years following
                  2000, less than 12.5% of the applicable annual minimum royalty
                  (hereinafter the "Relevant Quarterly
<PAGE>   3

                  Percentage"), SRX shall also pay Dr. Lakowicz the difference
                  between the earned royalties for the first quarter and the
                  Relevant Quarterly Percentage of the applicable annual minimum
                  royalty (the "First Quarter Shortage"). If the earned
                  royalties are greater than the Relevant Quarterly Percentage
                  of the applicable annual minimum royalty, SRX shall be
                  entitled to credit any amount of earned royalties paid for the
                  first quarter in excess of the Relevant Quarterly Percentage
                  of the applicable annual minimum royalty (the "First Quarter
                  Excess") against (and to so reduce) the portion of the minimum
                  royalties due for the second calendar quarter.

         (c)      Within 30 days after the end of the second calendar quarter
                  each year, SRX shall pay Dr. Lakowicz the earned royalties for
                  that quarter. If the earned royalty for that quarter is less
                  than the Relevant Quarterly Percentage of the applicable
                  annual minimum royalty, SRX shall also pay Dr. Lakowicz the
                  difference between that amount and the actual earned royalties
                  for the second calendar quarter (the "Second Quarter
                  Shortage"); provided, however, SRX may credit the First
                  Quarter Excess, if any, against the amount due. If the earned
                  royalty for the second quarter plus the First Quarter Excess,
                  if any, is greater than the Relevant Quarterly Percentage of
                  the applicable annual minimum royalty, SRX may credit any
                  excess first against previously paid Quarter Shortages, and if
                  the excess is greater than the previously paid Quarter
                  Shortages, the remaining excess (the "Second Quarter Excess")
                  carries over, and SRX shall be entitled to credit the Second
                  Quarter Excess against (and to so reduce) the portion of the
                  minimum royalties due for the third calendar quarter.

         (d)      Within 30 days after the end of the third quarter each year,
                  SRX shall pay Dr. Lakowicz the earned royalties for that
                  quarter. If the earned royalty for that quarter is less than
                  the Relevant Quarterly Percentage of the applicable annual
                  minimum royalty, SRX shall also pay Dr. Lakowicz the
                  difference between the Relevant Quarterly Percentage of the
                  applicable annual minimum royalty and the actual earned
                  royalties for the third calendar quarter (the "Third Quarter
                  Shortage"); provided, however, SRX may credit the Second
                  Quarter Excess, if any, against the amount due. If the earned
                  royalty for the third quarter plus the Second Quarter Excess
                  is greater than the Relevant Quarterly Percentage of the
                  applicable annual minimum royalty, SRX may credit any excess
                  first against previously paid Quarter Shortages, and if the
                  excess is greater than the previously paid Quarter Shortages,
                  the remaining excess (the "Third Quarter Excess") carries
                  over, and SRX shall be entitled to credit the Third Quarter
                  Excess against (and to so reduce) the portion of the minimum
                  royalty due for the fourth calendar quarter.

         (e)      Within 30 days after the end of the fourth calendar quarter
                  each year, SRX shall pay Dr. Lakowicz the earned royalties for
                  that quarter. If the earned royalty for that quarter is less
                  than 25% of the applicable annual minimum royalty in 2000 or
                  less than 62.5% of the applicable annual minimum royalty for
                  all years after 2000, SRX shall also pay Dr. Lakowicz the
                  difference between such amount and the actual earned royalties
                  for the fourth calendar quarter (the "Fourth Quarter
                  Shortage"); provided, however, SRX may credit the Third
                  Quarter Excess, if any, against (and to so reduce) the amount
                  due. If the earned royalty for the fourth quarter plus the
                  Third Quarter Excess, if any, is greater than the Relevant
                  Quarterly Percentage of

<PAGE>   4

                  the applicable annual minimum royalty, SRX may credit any
                  excess against previously paid Quarter Shortages, up to the
                  amount of the uncredited Quarter Shortages.

         3.4      Amount of Minimum Royalties. SRX shall be obligated to make
minimum royalty payments to Dr. Lakowicz as follows: Annual minimum royalties
for the year 2000 of $200,000; annual minimum royalties of $225,000 for the year
2001; and annual minimum royalties of $250,000 for the year 2002 and for each
year thereafter during the term of the License Agreement. Minimum royalties
under this Section 3.4 shall be paid according to the schedule set out in
Section 3.2 hereof and shall be subject to any reductions applicable under the
termination provisions of Section 10 of the License Agreement, as amended
herein. Dr. Lakowicz agrees to accept as payment each quarter, at SRX's option,
which shall be exercisable at SRX's sole discretion, at least 50% of the minimum
royalties due in 2000 and at least 25% of the minimum royalties due in 2001 in
SRX common stock. Such SRX stock shall be credited against the minimum royalties
due at the closing price ("Closing Price"). Closing Price shall be equal to the
average of the closing price per SRX share for the twenty trading (20) days
immediately preceding the last day of the prior full calendar quarter for which
the payment is due.

         3.5      Crediting of Prior Research Program Payments. Dr. Lakowicz
acknowledges receipt of $62,500 from SRX during 2000 in partial consideration of
amounts owing under the License Agreement prior to this Fifth Amendment and
agrees that SRX may credit half of that amount against quarterly royalty
payments when making such payments in accordance with Section 3.2 above, as
amended.

         2.       Termination, Conversion To Non-Exclusive and Protection For
Sub-licensees

         Term and Termination Sections 10.2(a) and (b) of the License Agreement
shall be replaced in their entirety with the following:

         10.2(a)  If SRX is in default as a result of failure to pay earned or
minimum royalties when due pursuant to Section 3 hereof and such default is not
cured by SRX within thirty (30) days after receiving written notice thereof from
Dr. Lakowicz pursuant to Section 12.5 hereof (the "Payment Default Notice"), Dr.
Lakowicz shall have the right to convert the exclusive license granted to SRX in
Section 2.1 of the License Agreement to a non-exclusive license by written
election pursuant to Section 12.5 hereof within thirty (30) days after the last
day of the thirty (30) day period following the receipt by SRX of the Payment
Default Notice. If SRX is in default of any other material obligation under this
License Agreement and such default is not cured by SRX within sixty (60) days
after receiving written notice thereof from Dr. Lakowicz pursuant to Section
12.5 hereof (the "Other Material Default Notice"), Dr. Lakowicz shall have the
right to convert the exclusive license granted to SRX in Section 2.1 of the
License Agreement to a non-exclusive license by written election pursuant to
Section 12.5 hereof within thirty (30) days after the last day of the 60-day
period following the receipt by SPX of the Other Material Default Notice. Upon
such conversion to a non-exclusive license, the minimum royalties set forth in
Section 3.4 hereof due thereafter shall be reduced by 50%, without prejudice to
monies previously owed and then due and payable to Dr. Lakowicz. For the quarter
immediately preceding such Payment Default Notice or Other Material Default
Notice, 50% of any then due and owing minimum royalties shall become due within
thirty (30) days of the date

<PAGE>   5
of conversion to a non-exclusive license, and if not paid within said thirty
(30) days of the date of conversion to a non-exclusive license, Dr. Lakowicz
shall have the right to terminate the license effective upon receipt of notice
of same by SRX. Any earned royalties due after conversion to a non-exclusive
license, shall be reduced by 25%, without prejudice to monies previously owed
and then due and payable to Dr. Lakowicz. Upon conversion to a non-exclusive
license, all then due and owing earned royalties shall be due within thirty (30)
days of the date of conversion to a non-exclusive license, and if not paid
within said thirty (30) days of the date of conversion to a non-exclusive
license, Dr. Lakowicz shall have the right to terminate the license effective
upon receipt of notice of same by SRX. The remaining 50% of any minimum
royalties due at the time of the Payment Default Notice or Other Material
Default Notice due prior to the applicable reduction hereunder (the "Minimum
Royalty Remainder"), shall not be waived, but shall remain due and shall be
payable on the first anniversary of the Payment Default Notice or Other Material
Default Notice, as the case may be. Further, upon such conversion to a
non-exclusive license, should Dr. Lakowicz license the Licensed Technology under
any patent or patent application covered by this Agreement to another licensee,
then, in respect of such patent or patent application, the payment of all sums
due under Section 7.1 shall be reduced by 50% effective as of the date of such
license to another licensee. If, after conversion to a non-exclusive license,
SRX is in default as a result of failure to pay reduced earned or minimum
royalties when due, pursuant to Section 3 hereof, and such default is not cured
by SRX within thirty (30) days after receiving written notice thereof from Dr.
Lakowicz pursuant to Section 12.5 hereof (the "Non-Exclusive Default Payment
Notice"), Dr. Lakowicz shall have the right to terminate the non-exclusive
license to SRX under this agreement, within thirty (30) days subsequent to the
last day of the thirty (30) day period following the receipt by SRX of the
Non-Exclusive Payment Default Notice. If, after conversion to a non-exclusive
license, SRX is in default of any other material obligation under this Agreement
and such default is not cured by SRX within sixty (60) days after receiving
written notice thereof from Dr. Lakowicz, pursuant to Section 12.5 hereof (the
"Non-Exclusive Other Material Default Notice"), Dr. Lakowicz shall have the
right to terminate the non-exclusive license to SRX hereunder by written notice
pursuant to Section 12.5 hereof, within thirty (30) days after the last day of
the sixty (60) day period following the receipt by SRX of the Non-Exclusive
Other Material Default Notice.

         Earned royalties at the reduced rate shall be creditable first against
current year minimum royalties and then against any amounts still owing for
minimum royalties prior to the conversion to a non-exclusive license under this
paragraph for as long as the License Agreement shall remain in effect.

         10.2(b)  In the event SRX shall fail to pay the Minimum Royalty
Remainder when due under Section 10.2(a) hereof, Dr. Lakowicz shall have the
right to terminate the license effective upon receipt of notice of same by SRX.

         10.2(d)  If SRX is adjudicated bankrupt or insolvent, or if SRX
enters into a composition with its creditors, or if a receiver is appointed for
any portion of SRX's assets, then DR. LAKOWICZ may terminate this Agreement upon
giving written notice to SRX at least thirty (30) days prior to the effective
date of the termination.

<PAGE>   6
                               Termination by SRX

         Section 10.3, "Termination by SRX", shall be amended to read as
follows:

         10.3     Termination Or Conversion To Non-Exclusive By SRX. SRX may
terminate this Agreement at any time by giving Dr. Lakowicz 30 days' prior
written notice pursuant to Section 12.5 hereof of its election to terminate.
Alternatively, upon 30 days' prior written notice SRX may convert the exclusive
license granted to it under Section 2.1 hereof to a non-exclusive license and
reduce by 50% all annual minimum royalties to be paid pursuant to Section 3.4
hereof, without prejudice to monies previously owed and due and payable to Dr.
Lakowicz; provided, however, that SRX may not terminate this License Agreement
or convert it to non-exclusive before the end of 2000. Further, upon such a
conversion to a non-exclusive license, should Dr. Lakowicz license the Licensed
Technology under any patent or patent application to another licensee, then, in
respect of such patent or patent application, the payment of all sums due under
Section 7.1 shall be reduced by 50% effective as of the date of such license to
another licensee.

         Protection For Sublicensees. New Sections 10.5 and 10.4(d) shall be
added to the License Agreement and shall read as follows:

         10.5     Protection for Sub-licensees if SRX becomes a Non-Exclusive
Licensee. If the exclusive license granted to SRX under the License Agreement is
converted into a non-exclusive license pursuant to Section 10.2(a) hereof, any
exclusive sub-licensee of SRX that is not in default under its sub-license shall
remain an exclusive sub-licensee in the respective sub-licensee's field of use;
provided, however, that any Up-Front License Payment and any royalties received
by SRX from such sub-licensee are earned royalties and shall be paid to Dr.
Lakowicz in the amount and as such royalty payments are received by SRX from the
sub-licensee (the "Pass Through Royalties"). Pass Through Royalties are due and
payable within thirty (30) days of their receipt by SRX. If SRX fails to submit
Pass Through Royalties to Dr. Lakowicz within such time period, sub-licensee
shall immediately become a direct licensee of Dr. Lakowicz without change to the
sub-licensee's license, field of exclusivity or payment obligations. If a
sublicensee is a non-exclusive licensee of SRX, and SRX's license is converted
to non-exclusive, there is no change to the sublicensee's license, field of
non-exclusivity or payment obligations. Payments by SRX to Lakowicz for
non-exclusive sublicenses are on the same timetable and in the same amounts as
required for non-exclusive earned and minimum royalties. The foregoing
provisions for protection of a sub-licensee of SRX shall only be available to
sub-licensee of SRX who is a party to an arms-length sublicense with SRX (an
"Eligible Protected Sublicensee").

         10.4(d)  Protection for Sub-licensees if SRX's License is Terminated.
If the license granted to SRX hereunder is terminated pursuant to Section 10
hereof, any exclusive or non-exclusive sub-licensee of SRX that is not in
default to its sub-license and who is an Eligible Protected Sublicensee shall
automatically become an exclusive or non-exclusive licensee, respectively, of
Dr. Lakowicz without change to the sublicensee`s license, licensed field or
payment obligations. Pursuant to the applicable license agreement for
clarification and avoidance of misunderstanding, the Parties agree that if Dr.
Lakowicz becomes a direct licensor of a SRX sub-licensee under this paragraph he
shall be obligated to provide a continuation of
<PAGE>   7
such license in the SRX sub-licensee's field on unchanged terms and conditions
but shall not otherwise have additional obligations to the sub-licensee.

                           III.   Research Support

Research Support. Section 12.13 of the License Agreement is cancelled and any
outstanding obligations thereunder between the Parties are forgiven, and SRX
shall have no obligation for any funding of research or any other research under
the License Agreement.

                               IV. Licensed Field

         The Parties agree that the technology licensed to LJL Biosystems in the
attached agreement (Exhibit A to this Fifth Amendment) between FluorRx and LJL
Biosystems is within the field of the License Agreement.

                          V. Harmonization Of Documents

         The Parties agree that any conflicts between the License Agreement and
all prior amendments shall be resolved in favor of this Fifth Amendment, and the
License Agreement and all prior amendments shall be considered as further
amended, if necessary to be consistent with this Fifth Amendment.

                           VI. Settlement and Release

         The Parties agree that this Fifth Amendment is in full settlement and
satisfaction of all issues between them arising from the License Agreement as of
the last date of execution below, and the Parties hereby release each other from
all claims and causes of action, known or unknown, including, but not limited
to, demands for payment, notices of default, or notices of non-exclusivity, with
respect to the Licensing Agreement arising on or before the execution of this
Amendment, without prejudice to new claims arising thereafter, wherein SRX
maintains and is deemed to have continuously maintained an undiminished
exclusive license in the Licensed Technology. Any and all documents, letters,
faxes, papers or notices to the contrary sent to or served on SRX by Dr.
Lakowicz are hereby withdrawn by Dr. Lakowicz and the parties agree that they
shall be considered as never having been sent or served.

                                 VII. Execution

         The parties hereto, intending to be bound thereby, have affixed their
signatures below, bringing this Fifth Amendment into full force and effect as of
the date of last execution.

<TABLE>
<S>                                                              <C>
Joseph R. Lakowicz, Ph. D.                                       SpectRx, Inc.

--------------------------------------------------               --------------------------------------------
Signed at Ellicott City, this 31st day of May, 2000               Signed at Norcross this 31st day of May, 2000
</TABLE>

<PAGE>   8
<TABLE>
<S>                                                              <C>
Witnessed:                                                       Witnessed:

------------------------------------                             --------------------------------------------
Name:                                                            Name:
     -------------------------------                                  ---------------------------------------

Address:                                                         Address:
        ----------------------------                                     ------------------------------------
</TABLE>

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