Document:

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                                                                    Exhibit 10.2

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                               TERM LOAN AGREEMENT

                            Dated as of May 24, 2002

                                      among

                              PILLOWTEX CORPORATION
                                    Borrower

                              BANK OF AMERICA, N.A.
                              Administrative Agent

                                       and

                            the LENDERS party hereto

                             $150,000,000 Term Loan

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                               TABLE OF CONTENTS
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                                                                                                              Page

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ARTICLE I             Definitions .....................................................................          2

         Section 1.1         Definitions ..............................................................          2

ARTICLE II            Post-Petition Debt Satisfied by Term Loan .......................................         11

         Section 2.1         Satisfaction and Payment of Designated Post-Petition Claims ..............         11
         Section 2.2         The Term Notes ...........................................................         11
         Section 2.3         Repayment of Term Loan ...................................................         11
         Section 2.4         Interest .................................................................         11

ARTICLE III           Payments ........................................................................         12

         Section 3.1         Method of Payment ........................................................         12
         Section 3.2         Voluntary Prepayment .....................................................         12
         Section 3.3         Mandatory Prepayments ....................................................         12
         Section 3.4         Administration Fee .......................................................         13

ARTICLE IV            Interest Provisions .............................................................         14

         Section 4.1         Computation of Interest ..................................................         14

ARTICLE V             Security ........................................................................         14

         Section 5.1         Collateral ...............................................................         14
         Section 5.2         Guaranty Agreement and Supplements .......................................         15
         Section 5.3         Setoff ...................................................................         15
         Section 5.4         Release of Certain Collateral ............................................         15

ARTICLE VI            Conditions Precedent ............................................................         16

         Section 6.1         Conditions to the Term Loan ..............................................         16

ARTICLE VII           Representations and Warranties ..................................................         18

         Section 7.1         Corporate Existence ......................................................         18
         Section 7.2         Financial Condition ......................................................         19
         Section 7.3         Corporate Action; No Breach ..............................................         19
         Section 7.4         Operation of Business ....................................................         19
         Section 7.5         Litigation and Judgments .................................................         20
         Section 7.6         Rights in Properties; Liens ..............................................         20
         Section 7.7         Enforceability ...........................................................         20
         Section 7.8         Approvals ................................................................         20
         Section 7.9         Debt .....................................................................         21
         Section 7.10        Taxes ....................................................................         21
         Section 7.11        Use of Proceeds; Margin Securities .......................................         21
         Section 7.12        ERISA ....................................................................         21
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                                TABLE OF CONTENTS
                                  (continued)

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         Section 7.13        Disclosure ..............................................................          21
         Section 7.14        Subsidiaries ............................................................          21
         Section 7.15        Agreements ..............................................................          22
         Section 7.16        Compliance with Laws ....................................................          22
         Section 7.17        Investment Company Act ..................................................          22
         Section 7.18        Public Utility Holding Company Act ......................................          22
         Section 7.19        Environmental Matters ...................................................          22
         Section 7.20        No Change ...............................................................          23
         Section 7.21        Patents, Copyrights, Permits, Trademarks and Licenses ...................          23

ARTICLE VIII          Affirmative Covenants ..........................................................          24

         Section 8.1         Reporting Requirements ..................................................          24
         Section 8.2         Maintenance of Existence ................................................          26
         Section 8.3         Maintenance of Properties                                                          27
         Section 8.4         Taxes and Claims ........................................................          27
         Section 8.5         Insurance ...............................................................          27
         Section 8.6         Inspection Rights .......................................................          27
         Section 8.7         Keeping Books and Records ...............................................          27
         Section 8.8         Compliance with Laws ....................................................          27
         Section 8.9         Compliance with Agreements ..............................................          28
         Section 8.10        Further Assurances ......................................................          28
         Section 8.11        ERISA ...................................................................          28
         Section 8.12        Environmental Laws ......................................................          28

ARTICLE IX            Negative Covenants .............................................................          29

         Section 9.1         Debt ....................................................................          29
         Section 9.2         Limitation on Liens                                                                30
         Section 9.3         Mergers, Etc ............................................................          31
         Section 9.4         Restricted Payments .....................................................          31
         Section 9.5         Loans and Investments ...................................................          31
         Section 9.6         Transactions With Affiliates                                                       32
         Section 9.7         Disposition of Assets ...................................................          32
         Section 9.8         Sale and Leaseback ......................................................          33
         Section 9.9         Prepayment of Debt ......................................................          33
         Section 9.10        Nature of Business ......................................................          33
         Section 9.11        Accounting ..............................................................          33

ARTICLE X             Financial Covenants ............................................................          33

         Section 10.1        Interest Coverage Ratio .................................................          34
         Section 10.2        Leverage Ratio ..........................................................          34

ARTICLE XI            Default ........................................................................          34
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                                TABLE OF CONTENTS
                                   (continued)

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                                                                                                               Page

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         Section 11.1        Events of Default ........................................................         34
         Section 11.2        Remedies Upon Default ....................................................         36

ARTICLE XII           The Administrative Agent ........................................................         37

         Section 12.1        Appointment, Powers and Immunities .......................................         37
         Section 12.2        Rights of Administrative Agent as a Lender ...............................         38
         Section 12.3        Sharing of Payments, Etc .................................................         38
         Section 12.4        Indemnification ..........................................................         39
         Section 12.5        Independent Credit Decisions .............................................         40
         Section 12.6        Several Commitments ......................................................         40
         Section 12.7        Successor Administrative Agent ...........................................         40

ARTICLE XIII          Miscellaneous ...................................................................         41

         Section 13.1        Expenses .................................................................         41
         Section 13.2        INDEMNIFICATION ..........................................................         41
         Section 13.3        Limitation of Liability ..................................................         41
         Section 13.4        No Duty ..................................................................         42
         Section 13.5        Administrative Agent and Lenders Not Fiduciary ...........................         42
         Section 13.6        Equitable Relief .........................................................         42
         Section 13.7        No Waiver; Cumulative Remedies ...........................................         42
         Section 13.8        Successors and Assigns ...................................................         42
         Section 13.9        Survival .................................................................         45
         Section 13.10       Amendments and Waivers ...................................................         45
         Section 13.11       Maximum Interest Rate ....................................................         46
         Section 13.12       Notices ..................................................................         46
         Section 13.13       Governing Law ............................................................         48
         Section 13.14       Counterparts .............................................................         48
         Section 13.15       Severability .............................................................         48
         Section 13.16       Headings .................................................................         48
         Section 13.17       Non-Application of Chapter 346 of Texas Finance Code .....................         48
         Section 13.18       Construction .............................................................         48
         Section 13.19       WAIVER OF JURY TRIAL .....................................................         48
         Section 13.20       NO ORAL AGREEMENTS .......................................................         48
         Section 13.21       Confidentiality ..........................................................         49
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                               TERM LOAN AGREEMENT

         THIS TERM LOAN AGREEMENT (this "Agreement"), dated as of May 24, 2002,
is among PILLOWTEX CORPORATION, a Delaware corporation (the "Borrower"), the
several lenders from time to time parties hereto (collectively, the "Lenders")
and Bank of America, N.A., as Administrative Agent (in such capacity, the
"Administrative Agent").

                                R E C I T A L S :

         WHEREAS, Pillowtex Corporation, a Texas corporation ("Old Pillowtex"),
the Administrative Agent and certain of the Lenders are party to that certain
Term Credit Agreement dated as of December 19, 1997, as amended, and Old
Pillowtex, the Administrative Agent and certain of the Lenders are party to that
certain Amended and Restated Credit Agreement dated as of December 19, 1997, as
amended (collectively, the "Pre-Petition Credit Agreements");

         WHEREAS, on November 14, 2000 (the "Filing Date") Old Pillowtex filed
with the United States Bankruptcy Court for the District of Delaware, a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code (the "Bankruptcy Code") (the "Voluntary Bankruptcy Case");

         WHEREAS, on the Filing Date, certain of Old Pillowtex's Subsidiaries
filed with the United States Bankruptcy Court for the District of Delaware
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (together
with the Voluntary Bankruptcy Case, the "Chapter 11 Cases");

         WHEREAS, in connection with the Chapter 11 Cases, $150,000,000 of the
Lenders' secured claims under the Pre-Petition Credit Agreements were repaid and
re-advanced (or deemed repaid and re-advanced) on a post-petition basis and
designated as post-petition administrative claims (the "Designated Post-Petition
Claims");

         WHEREAS, in connection with the Chapter 11 Cases, Old Pillowtex and
certain of its Subsidiaries filed with the United States Bankruptcy Court for
the District of Delaware a Second Amended Joint Plan of Reorganization (the
"Plan of Reorganization") under which it is proposed that, among other things,
(a) Old Pillowtex merge with the Borrower, the Borrower being the surviving
entity, and (b) the Designated Post-Petition Claims be satisfied, in full, by
the issuance to the Lenders of an aggregate principal amount of $150,000,000 in
term notes by the Borrower; and

         WHEREAS, the Lenders have agreed to such treatment of the Designated
Post-Petition Claims, subject to the terms and conditions set forth herein;

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and intending to be legally bound
hereby, the parties hereto agree as follows:

TERM LOAN AGREEMENT - Page 1

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                                   ARTICLE I

                                   Definitions

     Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:

          "Administrative Agent" means Bank of America, N.A., as administrative
     agent for the Lenders, and any of its successors or assigns serving in such
     capacity.

          "Affiliate" means, as to any Person, (a) any Person (other than a
     Subsidiary) which, directly or indirectly, is in control of, is controlled
     by, or is under common control with such Person, or (b) any Person who is a
     director or officer (i) of such Person, (ii) of any Subsidiary of such
     Person or (iii) of any Person described in clause (a) above. For purposes
     of this definition, control of a Person shall mean the power, direct or
     indirect, (i) to vote 10% or more of the securities having ordinary voting
     power for the election of directors of such Person, whether by ownership of
     securities, contract, proxy or otherwise or (ii) to direct or cause the
     direction of the management and policies of such Person, whether by
     ownership of securities, contract, proxy or otherwise. Notwithstanding
     anything in this definition to the contrary, in no event shall the
     Administrative Agent or any Lender be considered an Affiliate of Borrower
     or any of its Subsidiaries.

          "Agreement" has the meaning specified in the recitals hereto.

          "Alabama Bonds" means those certain Revenue Bonds (Fieldcrest Cannon,
     Inc. Textile Mill Financing) issued by The Industrial Development Board of
     the City of Phenix City, Alabama (the "Issuer") pursuant to a Trust
     Indenture dated July 1, 1994 between the Issuer and Columbus Bank & Trust
     Company, as trustee, as modified by that certain First Supplemental Trust
     Indenture dated December 1, 1998 between the Issuer and Synovus Trust
     Company, as successor trustee.

          "Assignment Agreement" means an assignment agreement substantially in
     the form of Exhibit B hereto.

          "Borrower" means Pillowtex Corporation, a Delaware corporation, and
     any of its permitted successors and assigns.

          "Business Day" means a day other than a Saturday, Sunday or other day
     on which commercial lenders in Dallas, Texas, or Charlotte, North Carolina
     are authorized or required by law to close.

          "Bond Pledge Agreement" means the bond pledge agreement of the
     Borrower in favor of the Administrative Agent in substantially the form of
     Exhibit "F" hereto, as the same may be amended, supplemented, or modified.

          "Capital Expenditures" means, for any Person, all expenditures for
     assets which, in accordance with GAAP, are properly classified as
     equipment, real property,

TERM LOAN AGREEMENT - Page 2

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     improvements, fixed assets or a similar type of capitalized asset and which
     would be required to be capitalized and shown on the balance sheet of such
     Person.

          "Capital Lease Obligations" means, as to any Person, the obligations
     of such Person to pay rent or other amounts under a lease of (or other
     agreement conveying the right to use) real and/or personal property, which
     obligations are required to be classified and accounted for as a capital
     lease on a balance sheet of such Person under GAAP. For purposes of this
     Agreement, the amount of such Capital Lease Obligations shall be the
     capitalized amount thereof, determined in accordance with GAAP.

          "Cash Equivalents" means (a) obligations issued or fully guaranteed or
     insured by the United States Government or any state thereof, the District
     of Columbia or the Commonwealth of Puerto Rico or any agency or
     instrumentality thereof having maturities of not more than 12 months from
     the date of acquisition, (b) certificates of deposit and Eurodollar time
     deposits with maturities of 12 months or less from the date of acquisition,
     bankers' acceptances with maturities not exceeding 12 months and other
     interest bearing deposits or accounts, in each case with any Lender or with
     any commercial bank organized under the laws of the United States of
     America or any state thereof, the District of Columbia or the Commonwealth
     of Puerto Rico, each having capital and surplus in excess of $100,000,000,
     (c) repurchase obligations with a term of not more than seven days for
     underlying securities of the types described in clauses (a) and (b) entered
     into with any financial institution meeting the qualifications specified in
     clause (b) above, (d) commercial paper issued by any Lender or any
     Affiliate of any Lender and commercial paper rated A/1 or the equivalent
     thereof by Standard & Poor's Ratings Group or P-1 or the equivalent thereof
     by Moody's Investors Service, Inc. on the date of investment and in each
     case maturing within 12 months after the date of acquisition; and (e) money
     market funds that invest exclusively in securities of the type described in
     any of the foregoing clauses (a)-(d).

          "Chapter 11 Cases" has the meaning specified in the recitals to this
     Agreement.

          "Code" means the Internal Revenue Code of 1986, as amended, and the
     regulations promulgated and rulings issued thereunder.

          "Collateral" has the meaning specified in Section 5.1.

          "Company Property" has the meaning specified in Section 7.6.

          "Debt" means as to any Person at any time (without duplication): (a)
     all obligations of such Person for borrowed money, (b) all obligations of
     such Person evidenced by bonds, notes, debentures, or other similar
     instruments, (c) all obligations of such Person to pay the deferred
     purchase price of property or services, except trade and other accounts
     payable and current accrued expenses payable of such Person arising in the
     ordinary course of business which are not past due by more than ninety (90)
     days, (d) all Capital Lease Obligations of such Person, provided that,
     solely for purposes of calculating the Leverage Ratio for periods ending on
     or prior to March 31, 2003, Capital Lease Obligations permitted by Section
     9.1(f) shall be excluded from this definition of

TERM LOAN AGREEMENT - Page 3

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          "Debt", (e) all Debt or other obligations of others guaranteed by such
     Person, (f) all obligations secured by a Lien existing on property owned by
     such Person, whether or not the obligations secured thereby have been
     assumed by such Person or are non-recourse to the credit of such Person,
     (g) all reimbursement obligations of such Person (whether contingent or
     otherwise) in respect of letters of credit, bankers' acceptances, surety or
     other bonds and similar instruments, and (h) the aggregate amount of
     preferred stock issued by such Person.

          "Default" means an Event of Default or the occurrence of an event or
     condition which with notice or lapse of time or both would become an Event
     of Default.

          "Default Rate" means a fixed rate equal to 12% per annum.

          "Designated Post-Petition Claims" has the meaning specified in the
     recitals to this Agreement.

          "Dollars" and "$" mean lawful money of the United States of America.

          "Earnings From Operations" has the meaning given to such term pursuant
     to GAAP.

          "EBITDA" means, for any period, determined in accordance with GAAP on
     a consolidated basis for the Borrower and its Subsidiaries the sum of (a)
     Earnings From Operations plus (b) depreciation and amortization to the
     extent included in determining Earnings From Operations, plus (c)
     restructuring charges and impairment of long-lived assets up to and
     including the date of this Agreement, to the extent included in determining
     Earnings From Operations, plus (d) other non-cash charges (excluding any
     such non-cash charge to the extent it represents an accrual of or reserve
     for cash charges in any future period or amortization of a prepaid cash
     expense that was paid in a prior period except as noted in (c), above) to
     the extent included in determining Earnings From Operations, plus (e)
     professional fees incurred outside the ordinary course of business up to
     and including the date of this Agreement including legal counsel, financial
     advisors, human resource consultants, manufacturing consultants and cash
     management consultants to the extent included in determining Earnings From
     Operations, plus (f) Operational Restructuring Costs incurred on or before
     March 31, 2003, to the extent included in determining Earnings From
     Operations but not included in (c) and (e) above, not to exceed the amounts
     set forth in Schedule 1.2 for the applicable 12-month periods described in
     Schedule 1.2, plus (g) non-cash compensation expense, to the extent
     included in determining Earnings From Operations, plus (h) solely for the
     twelve-month period ending on the last day of the Borrower's third fiscal
     quarter of 2002, charges taken in the Borrower's fourth fiscal quarter of
     2001 as a result of the write-down of accounts receivable owed to the
     Borrower and its Subsidiaries by Kmart Corporation, to the extent included
     in determining Earnings From Operations, plus (i) costs incurred in
     connection with the preparation of an S-1 securities registration offering.

          "Environmental Laws" means any and all applicable Federal, state,
     local or municipal laws, rules, orders, regulations, statutes, ordinances,
     codes, decrees or other

TERM LOAN AGREEMENT - Page 4

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     applicable requirements of any Governmental Authority regulating, or
     imposing liability or standards of conduct concerning environmental
     protection matters, as now or may at any time hereafter be in effect,
     including, without limitation, any applicable provisions of the Clean Water
     Act, the Comprehensive Environmental Response, Compensation and Liability
     Act, the Superfund Amendment and Reauthorization Act of 1986, the Emergency
     Planning and Community Right to Know Act, the Resource Conservation and
     Recovery Act of 1976, the Safe Drinking Water Act, and the Toxic Substances
     Control Act, together, in each case, with each amendment, supplement or
     other modification thereto, and the regulations adopted and publications
     promulgated thereunder and all substitutions therefor.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
     amended from time to time, and the regulations thereunder.

          "ERISA Affiliate" means any corporation or trade or business which is
     a member of the same controlled group of corporations (within the meaning
     of Section 414(b) of the Code) as the Borrower or is under common control
     (within the meaning of Section 414(c) of the Code) with the Borrower.

          "Event of Default" has the meaning specified in Section 11.1.

          "Excess Cash Flow" means, for the Borrower and its Subsidiaries on a
     consolidated basis for any fiscal year of the Borrower, an amount equal to
     (a) EBITDA for such period, minus (b) the sum of the following, without
     duplication: (i) payments made on Debt during such period; (ii) the portion
     of Interest Expense for such period actually paid in cash during such
     period; (iii) the portion of Tax Expense for such period actually paid in
     cash during such period; (iv) actual non-financed Capital Expenditures for
     such period; (v) payments and prepayments of the Term Loan paid in cash;
     (vi) payments of charges included in clauses (c), (e) and (f) of the EBITDA
     definition above; and (vii) payments of any items included as
     "Reorganization Items" related to the Chapter 11 Cases in accordance with
     GAAP in the Borrower's and its Subsidiaries' consolidated statements of
     earnings and payments required by the Plan of Reorganization.

          "Fee Property" has the meaning specified in Section 7.6.

          "Fixed Rate" means a fixed rate equal to 10.00% per annum.

          "GAAP" means generally accepted accounting principles, applied on a
     consistent basis, as set forth in Opinions of the Accounting Principles
     Board of the American Institute of Certified Public Accountants and/or in
     statements of the Financial Accounting Standards Board and/or their
     respective successors and which are applicable in the circumstances as of
     the date of this Agreement. Accounting principles are applied on a
     "consistent basis" when the accounting principles applied in a current
     period are comparable in all material respects to those accounting
     principles applied in a preceding period.

TERM LOAN AGREEMENT - Page 5

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          "Governmental Authority" means any nation or government, any state or
     political subdivision thereof and any entity exercising executive,
     legislative, judicial, regulatory, or administrative functions of or
     pertaining to government.

          "Guarantors" means all of Borrower's direct and indirect domestic
     Subsidiaries (whether presently existing or hereafter formed or acquired),
     other than the Fieldcrest Cannon Foundation.

          "Guaranty Agreement" means the guaranty agreement executed by
     Guarantors in favor of the Administrative Agent in substantially the form
     of Exhibit "E" hereto, as the same may be amended, supplemented, or
     modified.

          "Hazardous Materials" means any hazardous materials, hazardous wastes,
     hazardous or toxic substances, defined or regulated as such in or under any
     Environmental Law, including, without limitation, asbestos, gasoline and
     any other petroleum products (including crude oil or any fraction thereof).

          "Intellectual Property Security Agreements" means intellectual
     property security agreement of the Borrower and any applicable Subsidiary
     in favor of the Administrative Agent in substantially the form of Exhibit
     "D" hereto, as the same may be amended, supplemented, or modified.

          "Intercreditor Agreement" means an intercreditor agreement among the
     Borrower, the other Obligated Parties, the Administrative Agent, the
     Revolving Lenders and Congress Financial Corporation, as the agent under
     the Revolving Credit Agreement, in form and substance satisfactory to the
     Administrative Agent, the Revolving Lenders, the agent for such Revolving
     Lenders and the Borrower, setting forth the relative rights of the
     Administrative Agent and Lenders hereunder and the Revolving Lenders, and
     the agent for such Revolving Lenders, under the Revolving Credit Agreement,
     with respect to the Collateral.

          "Interest Coverage Ratio" means, as of any date of determination, for
     the 12-month period then ended for the Borrower and its Subsidiaries, the
     ratio of (a) EBITDA for such 12-month period, to (b) Interest Expense
     during such 12-month period.

          "Interest Expense" means, for any period, the aggregate amount of all
     interest paid or accrued as a liability during such period in respect of
     indebtedness for borrowed money, including, without limitation, the portion
     of payments of Capital Lease Obligations which constitutes imputed
     interest, all as determined by GAAP.

          "Leased Property" has the meaning specified in Section 7.6.

          "Lender Affiliate" means (a) with respect to any Lender, (i) an
     Affiliate of such Lender or (ii) any entity (whether a corporation,
     partnership, trust or otherwise) that is engaging in making, purchasing,
     holding or otherwise investing in bank loans and similar extensions of
     credit in the ordinary course of its business and is administered or
     managed by a Lender or an Affiliate of such Lender and (b) with respect to
     any Lender that is a

TERM LOAN AGREEMENT - Page 6

<PAGE>

       fund that invests in bank loans and similar extensions of credit, any
       other fund that invests in bank loans and similar extensions of credit
       and is managed by the same investment advisor as such Lender or by an
       Affiliate of such investment advisor.

                "Lenders" has the meaning specified in the recitals to this
       Agreement.

                "Leverage Ratio" means, as of any date of determination, for the
       12-month period then ended for the Borrower and its Subsidiaries, the
       ratio of (a) Debt of the Borrower and its Subsidiaries on a consolidated
       basis as of the last day of such period, to (b) EBITDA during such
       period.

                "Lien" means any lien, mortgage, security interest, tax lien,
       financing statement, pledge, charge, hypothecation, assignment,
       preference, priority, or other encumbrance of any kind or nature
       whatsoever (including, without limitation, any conditional sale or title
       retention agreement), whether arising by contract, operation of law, or
       otherwise, other than financing statements filed in connection with
       operating leases to the extent such financing statements relate only to
       the property subject to such operating leases.

                "Loan Documents" means this Agreement and all promissory notes,
       pledge and security agreements, deeds of trust, mortgages, assignments,
       guaranties, and other instruments, documents, and agreements executed and
       delivered pursuant to or in connection with this Agreement, as such
       instruments, documents, and agreements may be amended, modified, renewed,
       extended, or supplemented from time to time.

                "Material Adverse Effect" means (a) a material adverse change
       in, or a material adverse effect upon, the business, prospects,
       operations, results of operations, assets, liabilities or condition
       (financial or otherwise) of the Borrower and its Subsidiaries taken as a
       whole, other than the Chapter 11 Cases or (b) a material adverse effect
       upon the validity, binding effect or enforceability against the Borrower
       or any other Obligated Party of any Loan Document.

                "Maturity Date" means May 24, 2007.

                "Maximum Borrowing Base" means the amount available to be loaned
       to the Borrower pursuant to the terms of the Revolving Credit Agreement.

                "Maximum Rate" means, at any time, with respect to each Lender,
       the maximum nonusurious interest rate, if any, that at any time or from
       time to time may be contracted for, taken, reserved, charged or received
       on the Term Loan or on other Debt under laws applicable to such Lender
       which are presently in effect or, to the extent allowed by law, under
       such applicable laws which may hereafter be in effect and which allow a
       higher maximum nonusurious interest rate than applicable laws now allow.

                "Merger Agreement" means the Agreement and Plan of Merger, dated
       to be effective as of May 24, 2002 between Old Pillowtex and the
       Borrower, as amended through the date hereof, and any agreements,
       documents or instruments executed or delivered in connection therewith
       and any renewals, extensions, amendments, restatements or other
       modifications of any of the above.

TERM LOAN AGREEMENT - Page 7

<PAGE>

                "Mortgages" means mortgages, deeds of trust, leasehold
       mortgages, or leasehold deeds of trust, as appropriate, executed by the
       Borrower or the applicable Subsidiary, as the case may be, in form and
       substance satisfactory to the Administrative Agent, granting a first or
       second priority lien, as applicable, to the Administrative Agent for the
       benefit of the Lenders on the applicable real property.

                "Moveable Assets" means all right, title and interest of the
       Borrower and its Subsidiaries in the machinery and equipment described on
       Schedule 1.4 and located as of March 15, 2002 at (i) the China Grove,
       North Carolina facility known as Plant #16, (ii) the Kannapolis, North
       Carolina sheet mill known as Plant #4, (iii) the Phenix City, Alabama
       facility and (iv) the Columbus, Georgia facility.

                "Multiemployer Plan" means a multiemployer plan defined as such
       in Section 4001(a)(3) of ERISA to which contributions have been made by
       the Borrower or any ERISA Affiliate and which is covered by Title IV of
       ERISA.

                "Net Cash Proceeds" means, with respect to any sale or other
       transfer or disposition of any asset of a Person to a third party, the
       aggregate amount of cash and Cash Equivalents received by such Person in
       connection with such transaction minus reasonable fees, commissions,
       costs and expenses and related taxes paid or payable as a result of such
       transaction.

                "Obligated Party" means the Borrower, any Guarantor and any
       other Person who is or becomes a party to any agreement that guarantees
       or secures payment and performance of the Obligations or any part
       thereof.

                "Obligations" means all (a) obligations, indebtedness, and
       liabilities of the Borrower and Guarantors to the Administrative Agent or
       any Lender (other than those, if any, arising under the Revolving Credit
       Agreement), now existing or hereafter arising, whether direct, indirect,
       related, unrelated, fixed, contingent, liquidated, unliquidated, joint,
       several, or joint and several (i) under this Agreement and the other Loan
       Documents, or (ii) pursuant to any cash management or treasury management
       arrangements, (b) all interest accruing on any of the above and (c) all
       reasonable out-of-pocket third party attorneys' fees, financial advisors'
       fees and other expenses incurred in the enforcement or collection of any
       of the above, including interest accruing after the commencement of any
       bankruptcy proceeding, whether or not allowed as a claim in such
       proceeding.

                "Old Pillowtex" has the meaning specified in the recitals to
       this Agreement.

                "Operational Restructuring Costs" for any period, on a
       consolidated basis for the Borrower and its Subsidiaries, the costs
       related to the permanent closure of a facility or facilities and the
       relocation of the production to an alternative facility or facilities to
       the extent included in determining Earnings From Operations consisting of
       the sum of (a) payments or accruals for severance and benefit
       continuation, plus (b) payments or accruals for employee retention
       bonuses, plus (c) expenses incurred to relocate equipment and inventory
       from a closed facility or facilities to an alternative manufacturing
       location

TERM LOAN AGREEMENT - Page 8

<PAGE>

       or locations, and to retrofit relocated equipment and alternative
       manufacturing location assets, plus (d) payments or accruals to resolve
       any environmental issues related to a closed facility or facilities, plus
       (e) employee training costs for the relocated equipment, plus (f)
       increased quality costs due to the start-up of production at the new
       facility or facilities and the phase-down of production at the closed
       facility or facilities, plus (g) increased labor and workers compensation
       costs during the phase-down of production at the closed facility or
       facilities, plus (h) payments or accruals for a general reduction in
       force.

                "PBGC" means the Pension Benefit Guaranty Corporation or any
       entity succeeding to all or any of its functions under ERISA.

                "Percentage" means, with respect to each Lender, the percentage
       set forth opposite such Lender's name on Schedule 1.1 attached hereto, or
       on any applicable Assignment Agreement.

                "Permitted Liens" has the meaning specified in Section 9.2.

                "Person" means any individual, corporation, business trust,
       association, company, partnership, joint venture, Governmental Authority,
       or other entity.

                "Pillowtex Merger" means the merger of Old Pillowtex into the
       Borrower pursuant to the Merger Agreement.

                "Plan" means any employee benefit or other plan established or
       maintained by the Borrower or any ERISA Affiliate and which is covered by
       Title IV of ERISA.

                "Plan of Reorganization" has the meaning specified in the
       recitals to this Agreement.

                "Pledge and Security Agreement" means the pledge and security
       agreement of the Borrower and the Guarantors in favor of the
       Administrative Agent in substantially the form of Exhibit "C" hereto, as
       the same may be amended, supplemented, or modified.

                "Prohibited Transaction" means any transaction set forth in
       Section 406 of ERISA or Section 4975 of the Code, other than a
       transaction exempt under Section 408 of ERISA or Section 4975 of the
       Code.

                "Reportable Event" means any of the events set forth in Section
       4043 of ERISA for which reporting requirements have not been waived.

                "Required Lenders" means, as of any date, Lenders on such date
       having Percentages aggregating in excess of 50%.

                "Revolving Credit Agreement" means the Revolving Credit
       Agreement of even date herewith among the Borrower, certain of its
       Subsidiaries, the Revolving Lenders, and Congress Financial Corporation,
       as agent for such Revolving Lenders, providing for

TERM LOAN AGREEMENT - Page 9

<PAGE>

       an aggregate commitment to lend of no greater than $200,000,000, as
       amended, extended, renewed, restated, replaced or refinanced as permitted
       hereby.

                "Revolving Lenders" means, as of any date, the lenders that are
       party to the Revolving Credit Agreement.

                "Revolving Loan Assets" means all of the assets of the Borrower
       and its Subsidiaries (other than the Subject Assets) which are subject to
       first priority Liens pursuant to the Revolving Credit Agreement and
       related documents executed in connection therewith.

                "RICO" means the Racketeer Influenced and Corrupt Organization
       Act of 1970, as amended from time to time.

                "Subject Assets" means all right, title and interest of the
       Borrower and its Subsidiaries in the fixed assets (including certain real
       estate) described on Schedule 1.3, located as of March 15, 2002 at (i)
       the Phenix City, Alabama facility and at the Columbus, Georgia facility,
       (ii) the Scottsboro, Alabama facility, and (iii) the Mauldin, South
       Carolina warehouse facility, the Tarboro, North Carolina yarn mill, the
       Salisbury, North Carolina facility known as Plant #7, the China Grove,
       North Carolina facility known as Plant #16 (not including the real estate
       or certain equipment), the Rocky Mount, North Carolina facility, the
       Kannapolis, North Carolina sheet mill known as Plant #4, and the Dallas,
       Texas ASL Facility.

                "Subordinated Debt" means with respect to the Borrower or any
       Guarantor, Debt of the Borrower or such Guarantor which is subordinated
       to the Obligations on terms and conditions and containing such
       amortization, covenants, events of default and other terms as are
       satisfactory to the Required Lenders.

                "Subsidiary" means, as to any Person, any corporation or other
       entity of which shares of stock (or analogous ownership interests) of
       each class having ordinary voting power (other than stock having such
       power only by reason of the happening of a contingency) to elect a
       majority of the board of directors or other managers of such corporation
       or other entity are at the time owned by such Person or by one or more
       Subsidiaries of such Person or by such Person and one or more
       Subsidiaries of such Person. A Subsidiary shall be deemed wholly-owned by
       a Person who owns all of the shares of stock (or analogous ownership
       interests) entitled to vote for the election of directors or other
       managers of such Subsidiary except for directors' qualifying shares.

                "Tax Expense" means, for any period, all expenses incurred
       during such period by the Borrower and its Subsidiaries, on a
       consolidated basis, in connection with income tax obligations, all as
       determined in accordance with GAAP applied consistently.

                "Term Loan" has the meaning specified in Section 2.1.

                "Term Notes" means the promissory notes payable to the order of
       the Lenders, each in substantially the form of Exhibit "A" hereto, and
       all extensions, renewals, and modifications thereof.

TERM LOAN AGREEMENT - Page 10

<PAGE>

                "UCC" means the Uniform Commercial Code as in effect from time
       to time in the State of Texas and the Uniform Commercial Code applicable
       in such other states as any Collateral may be located.

                Other Definitional Provisions. All definitions contained in this
Agreement are equally applicable to the singular and plural forms of the terms
defined. The words "hereof", "herein", and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement. Unless otherwise specified, all
Article and Section references pertain to this Agreement. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP.
Terms used herein that are defined in the UCC, unless otherwise defined herein,
shall have the meanings specified in the UCC.

                                   ARTICLE II

                    Post-Petition Debt Satisfied by Term Loan

       Section 2.1 Satisfaction and Payment of Designated Post-Petition Claims.
Subject to the terms and conditions of this Agreement, the Lenders severally
(but not jointly) agree to make to the Borrower on the date hereof a
$150,000,000 principal amount term loan (the "Term Loan"), which shall be used
solely to pay in full the Debt evidenced by the Designated Post-Petition Claims.
The Borrower and each Lender agree that upon the making of the Term Loan on the
date hereof, the Designated Post-Petition Claims shall be fully satisfied.

       Section 2.2 The Term Notes. The obligation of the Borrower to repay the
Term Loan shall be evidenced by the Term Notes executed by the Borrower, one
payable to the order of each Lender in the stated principal amount of such
Lender's Percentage of the Term Loan, and dated the date hereof.

       Section 2.3 Repayment of Term Loan. The Term Loan shall mature, and the
outstanding principal amount thereof shall be due and payable (together with
interest accrued thereon), on the Maturity Date. In addition, on the last day of
each December and June, commencing on December 31, 2002 and continuing until the
Term Loan is paid, in full, the Borrower shall repay, and there shall become due
and payable, a principal installment consisting of the original principal amount
of the Term Loan (less any amounts paid pursuant to Section 3.3(c) hereof),
multiplied by the percentage set forth below opposite the payment date:

--------------------------------------------------------------------------------
                     Payment Dates                        Installment Amount Due
--------------------------------------------------------------------------------
 December 31, 2002 and June 30, 2003                            0.5% each
--------------------------------------------------------------------------------
 December 31, 2003 and June 30, 2004                            2.5% each
--------------------------------------------------------------------------------
 December 31, 2004 through and including December 31, 2006      5.0% each
--------------------------------------------------------------------------------
 May 24, 2007                                                      69%
--------------------------------------------------------------------------------

       Section 2.4 Interest. The unpaid principal amount of the Term Loan shall
bear interest prior to maturity or the occurrence of an Event of Default at a
fixed rate per annum equal to the Fixed Rate. After maturity of the Term Loan or
upon the occurrence and during the continuance of an Event of Default, any
outstanding principal of the Term Loan and (to the fullest extent

TERM LOAN AGREEMENT - Page 11

<PAGE>

permitted by law) any other amount payable by the Borrower under this Agreement
or any other Loan Document shall bear interest at the Default Rate until the
same is paid in full. Interest payable at the Fixed Rate shall be payable on the
last day of each March, June, September, and December, commencing September 30,
2002, and continuing on to the Maturity Date. Interest payable at the Default
Rate shall be payable from time to time on demand. The interest due under this
Section 2.4 will be calculated taking into account any interest paid in
accordance with Sections 3.2 and 3.3(d) such that there will be no duplication
of interest paid.

                                  ARTICLE III

                                    Payments

     Section 3.1  Method of Payment. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement and the other Loan
Documents shall be made to the Administrative Agent at its office located at 901
Main Street, Dallas, Texas 75202 for the account of each Lender in Dollars and
in immediately available funds, without setoff, deduction, or counterclaim, not
later than 12 Noon., Dallas, Texas time on the date on which such payment shall
become due (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Business Day). Each payment received by
the Administrative Agent under this Agreement or any other Loan Document for the
account of a Lender shall be paid promptly to such Lender, in immediately
available funds. Whenever any payment under this Agreement or any other Loan
Document shall be stated to be due on a day that is not a Business Day, such
payment may be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of the payment of
interest and commitment fee, as the case may be.

     Section 3.2  Voluntary Prepayment. The Borrower may prepay the Term Loan in
whole or in part at any time or from time to time without premium or penalty
together with accrued interest from the last interest payment date (per Section
2.4) to the date of prepayment on the amount so prepaid, provided that (a) the
Borrower shall give the Administrative Agent prior notice of such prepayment and
such notice shall be received by the Administrative Agent before 12 Noon,
Dallas, Texas time, one Business Day before the date of such prepayment, (b) the
date of such prepayment shall be a Business Day, and (c) each partial prepayment
shall be in the principal amount of $500,000 or an integral multiple thereof,
and shall be applied to principal installments of the Term Loan in inverse order
of maturity.

     Section 3.3  Mandatory Prepayments.

             (a)  Promptly upon receipt by the Borrower or any of its
     Subsidiaries of the Net Cash Proceeds from any sale or other transfer or
     disposition of any of the Subject Assets or Moveable Assets, the Borrower
     shall prepay the Term Loan in accordance with Section 3.3(d) of this
     Agreement in a principal amount equal to 100% of such Net Cash Proceeds.

             (b)  Commencing on March 31, 2004 and on each March 31 thereafter
     subject to the minimum excess availability requirements set forth in the
     Revolving Credit Agreement, the Borrower shall prepay the Term Loan in
     accordance with Section 3.3(d)

TERM LOAN AGREEMENT - Page 12

<PAGE>

         of this Agreement in a principal amount equal to 50% of Excess Cash
         Flow, if any, for the fiscal year of the Borrower ending immediately
         preceding each such March 31. Notwithstanding any of the above to the
         contrary, if the Borrower does not have sufficient availability under
         the Revolving Credit Agreement to obtain an advance thereunder for
         purposes of making 100% of the prepayment described herein on March 31
         of any applicable calendar year, such that giving effect to such
         advance, the minimum excess availability requirements set forth in the
         Revolving Credit Agreement are not satisfied, then (i) the Borrower
         shall make a prepayment on March 31 in an amount equal to the amount
         the Borrower may borrow under the Revolving Credit Agreement for such
         purpose in accordance with such requirements, and (ii) on the Business
         Day immediately following any day thereafter on which the Borrower has
         sufficient availability under the Revolving Credit Agreement to obtain
         an advance thereunder in accordance with such requirements for purposes
         of making all or a portion of the remainder of such prepayment
         described herein, the Borrower shall make a payment hereunder in the
         amount of such availability until the prepayment described herein is
         paid, in full.

              (c)  Subject to any minimum excess availability requirements set
         forth in the Revolving Credit Agreement, if the aggregate amount of the
         initial commitment obtained by the Borrower pursuant to the Revolving
         Credit Agreement and the Maximum Borrowing Base shall both exceed
         $150,000,000, the Borrower shall, on the date hereof, prepay the Term
         Loan in accordance with Section 3.3(d) of this Agreement in a principal
         amount equal to 100% of the lesser of (i) the amount by which the
         initial commitment obtained by the Borrower under the Revolving Credit
         Agreement exceeds $150,000,000 or (ii) the amount by which the Maximum
         Borrowing Base exceeds $150,000,000.

              (d)  Any prepayment made under Section 3.3(a), Section 3.3(b) or
         Section 3.3(c) shall (i) include accrued interest from the last
         interest payment date (per Section 2.4) to the date of such prepayment
         on the principal amount prepaid, (ii) not be subject to any minimum
         payment provisions contained in this Agreement and (iii) be in addition
         to the scheduled payments of the Term Loan required under Section 2.3
         of this Agreement. Any prepayment made under Section 3.3(a) and Section
         3.3(b) shall be applied to the unpaid principal installments of the
         Term Loan in inverse order of maturity. Any prepayment made under
         Section 3.3(c) shall reduce the amount of the Term Loan subject to the
         scheduled amortization set forth in Section 2.3 of this Agreement.
         Nothing in this Section 3.3 shall be deemed to permit any violation of
         any other provision contained in this Agreement.

         Section 3.4 Administration Fee. The Borrower shall pay to the
Administrative Agent, solely for the Administrative Agent's account, an annual
administration fee in the amount of $150,000, payable in advance on May 24 of
each calendar year, commencing on the date hereof so long as the Term Loan is
outstanding hereunder.

TERM LOAN AGREEMENT - Page 13

<PAGE>

                                   ARTICLE IV

                               Interest Provisions

         Section 4.1 Computation of Interest. Interest on the Term Loan and all
other amounts payable by the Borrower hereunder shall be computed on the basis
of a year of 360 days and the actual number of days elapsed (including the first
day but excluding the last day) unless such calculation would result in a
usurious rate, in which case interest shall be calculated on the basis of a year
of 365 or 366 days, as the case may be.

                                   ARTICLE V

                                    Security

         Section 5.1 Collateral. To secure full and complete payment and
performance of the Obligations, the Borrower hereby agrees to execute and
deliver or cause to be executed and delivered the documents described below
covering the property and collateral described in this Section 5.1 (which,
together with any other property and collateral which may now or hereafter
secure the Obligations or any part thereof, is sometimes herein called the
"Collateral"):

              (a) The Borrower shall grant or cause to be granted to the
         Administrative Agent, for the benefit of the Lenders, a first priority
         Lien, subject to Permitted Liens, on all right, title and interest of
         the Borrower or the applicable Subsidiary in and to the Subject Assets,
         pursuant to the Pledge and Security Agreement, appropriate Mortgages
         and other collateral documents.

              (b) The Borrower shall grant to the Administrative Agent, for the
         benefit of the Lenders, a first priority security interest in all of
         the Alabama Bonds, pursuant to the Bond Pledge Agreement and any other
         documents, agreements, or instruments reasonably required by the
         Administrative Agent in connection therewith.

              (c) The Borrower shall grant or cause to be granted to the
         Administrative Agent, for the benefit of the Lenders, a second priority
         security interest, subject to Permitted Liens, in all of the Revolving
         Loan Assets, pursuant to the Pledge and Security Agreement, the
         Intellectual Property Security Agreements and appropriate Mortgages and
         other collateral documents.

              (d) To evidence the Administrative Agent's first priority security
         interest, subject to Permitted Liens, in certain Subject Assets and its
         second priority security interest, subject to Permitted Liens, in the
         Revolving Loan Assets, to the extent applicable, the Borrower will
         cause each of its Subsidiaries created or acquired after the date
         hereof to execute (i) a Security Agreement Supplement in substantially
         the form of Exhibit G to the Pledge and Security Agreement, (ii) an
         Intellectual Property Security Agreement, if requested by the
         Administrative Agent or the Required Lenders, and (iii) any applicable
         Mortgages, and deliver such documents to the Administrative Agent
         within 10 Business Days after such Subsidiary is created or acquired.
         Any title insurance policies, surveys, environmental site assessments
         and other matters incident to the

TERM LOAN AGREEMENT - Page 14

<PAGE>

         Mortgages must be reasonably satisfactory to the Administrative Agent
         in its reasonable discretion and shall be completed within such time
         after such Subsidiary is acquired or created that the Administrative
         Agent reasonably determines. The Borrower will also cause each such
         Subsidiary to obtain and deliver to the Administrative Agent such
         landlord lien waivers or subordinations as the Administrative Agent may
         reasonably require which waivers or subordinations shall be delivered
         to the Administrative Agent within such time after such Subsidiary is
         acquired or created that the Administrative Agent reasonably
         determines.

              (e)      The Borrower shall execute and cause to be executed such
         further documents and instruments, including, without limitation,
         Uniform Commercial Code financing statements, as the Administrative
         Agent, in its sole discretion, deems necessary or desirable to create,
         evidence, preserve, and perfect its liens and security interests in the
         Collateral.

         Section 5.2  Guaranty Agreement and Supplements.

              (a)     The Borrower shall cause the Guarantors to execute and
         deliver the Guaranty Agreement in favor of the Administrative Agent,
         for the benefit of the Lenders, guaranteeing full payment and
         performance of the Obligations.

              (b)     The Borrower will cause each of its domestic Subsidiaries
         created or acquired after the date hereof to execute a Guaranty
         Supplement in substantially the form of Exhibit A to the Guaranty
         Agreement and deliver such Guaranty Supplement to the Administrative
         Agent within 10 Business Days after such Subsidiary is created or
         acquired.

         Section 5.3 Setoff. If an Event of Default shall have occurred and be
continuing, the Administrative Agent and each Lender are hereby authorized to
set off and apply at any time and from time to time, without notice to the
Borrower (any such notice being hereby expressly waived by the Borrower), to set
off and apply any and all deposits (general, time or demand, provisional or
final, but excluding trust and escrow accounts) at any time held and other
indebtedness at any time owing by the Administrative Agent or such Lender to or
for the credit or the account of the Borrower against any and all of the
Obligations in such manner as the Administrative Agent or such Lender may
determine. The rights and remedies of the Administrative Agent and the Lenders
hereunder are in addition to other rights and remedies (including, without
limitation, other rights of setoff) which the Administrative Agent and the
Lenders may have.

         Section 5.4 Release of Certain Collateral. In the event that, pursuant
to Section 3.3(a) of this Agreement, the Lenders receive an aggregate amount of
$7,000,000 in Net Cash Proceeds from the sale or sales of assets located at the
facilities described in clause (iii) of the definition of "Subject Assets" in
Section 1.1 of this Agreement, then the Administrative Agent will release all of
its Liens on the machinery and equipment located at the Phenix City, Alabama
facility (or formerly located there in the event such machinery and equipment
has been moved). Upon any sale or disposal of assets constituting Collateral
that is permitted pursuant to Section 9.7 of this Agreement, the Administrative
Agent will release all of its Liens on such assets.

TERM LOAN AGREEMENT - Page 15

<PAGE>

                                   ARTICLE VI

                              Conditions Precedent

      Section 6.1 Conditions to the Term Loan. The obligation of the Lenders to
make the Term Loan is subject to the condition precedent that the Administrative
Agent shall have received on or before the date of the Term Loan all of the
following, each dated (unless otherwise indicated) the date hereof, in form and
substance satisfactory to the Administrative Agent:

           (a) Resolutions. Resolutions of the Board of Directors (or
      evidence of other equivalent partnership action) of the Borrower and
      each Guarantor certified by the Secretary or an Assistant Secretary of
      such Person which authorize (i) the execution, delivery, and
      performance by the Borrower of this Agreement and the other Loan
      Documents to which the Borrower is or is to be a party, and (ii) the
      execution, delivery and performance by such Guarantor of the Guaranty
      Agreement and the other Loan Documents to which such Guarantor is or is
      to be a party;

           (b) Incumbency Certificate. Certificates of incumbency certified
      by the Secretary or an Assistant Secretary of the Borrower and each
      Guarantor certifying the names of (i) the officers of the Borrower
      authorized to sign this Agreement and each of the other Loan Documents
      to which the Borrower is or is to be a party (including the
      certificates contemplated herein) together with specimen signatures of
      such officers, and (ii) the officers of such Guarantor authorized to
      sign the Guaranty Agreement and the other Loan Documents to which such
      Guarantor is or is to be a party (including the certificates
      contemplated herein) together with specimen signatures of such
      officers;

           (c) Organizational Documents. The organizational documents of the
      Borrower and each Guarantor certified by the jurisdiction of
      incorporation/organization of the Borrower and such Guarantor and dated
      within 30 days prior to the date hereof;

           (d) Bylaws. The bylaws of the Borrower and each Guarantor
      certified by the Secretary or an Assistant Secretary of such Person;

           (e) Governmental Certificates. Certificates of the appropriate
      government officials of the Borrower's and each Guarantor's
      jurisdiction of incorporation/organization as to the existence and good
      standing of the Borrower and such Guarantor, each dated within 30 days
      prior to the date hereof;

           (f) Term Notes. The Term Notes executed by the Borrower;

           (g) Pledge and Security Agreement. The Pledge and Security
      Agreement executed by the Borrower and the Guarantors;

           (h) Bond Pledge Agreement. The Bond Pledge Agreement executed by
      the Borrower, and any other documents, agreements, or instruments
      reasonably required by the Administrative Agent in connection
      therewith;

TERM LOAN AGREEMENT - Page 16

<PAGE>

          (i) Alabama Bonds. The Alabama Bonds, together with any endorsements,
     assignments, or other evidences of the Administrative Agent's security
     interest in such Alabama Bonds reasonably required by the Administrative
     Agent;

          (j) Intellectual Property Security Agreements. The Intellectual
     Property Security Agreements executed by the Borrower and/or the applicable
     Guarantors;

          (k) Mortgages. The Mortgages executed by the Borrower and/or the
     applicable Guarantors;

          (l) Financing Statements. Uniform Commercial Code financing statements
     in proper form for filing and covering the Collateral;

          (m) Guaranty Agreement. The Guaranty Agreement executed by the
     Guarantors;

          (n) Insurance Policies. Copies of all insurance policies required by
     Section 8.5, together with certificates from insurers naming the
     Administrative Agent as an additional named insured with respect to all
     insurance policies covering Collateral;

          (o) Real Estate Appraisal. Appraisals of the Fee Properties
     constituting the Collateral to the extent requested by the Administrative
     Agent;

          (p) Title Insurance. Mortgagee Policies of Title Insurance, with such
     endorsements as the Administrative Agent may require, issued by a company
     and in form and substance satisfactory to the Administrative Agent,
     insuring the Administrative Agent's Lien on (i) the Fee Properties and
     Leased Properties constituting Subject Assets to be of first priority,
     subject only to Permitted Liens and such exceptions as Administrative Agent
     shall approve in its discretion, and (ii) the Fee Properties and Leased
     Properties constituting Revolving Loan Assets to be of second priority,
     subject only to Permitted Liens and the Liens required by the Revolving
     Credit Agreement and related documents and such other exceptions as the
     Administrative Agent shall approve in its discretion, with all costs
     thereof to be paid by Borrower;

          (q) Survey. With respect to each parcel of Fee Property and Leased
     Property constituting Collateral, a survey with such certification as the
     Administrative Agent may reasonably require;

          (r) Environmental Site Assessment. With respect to each parcel of Fee
     Property and Leased Property constituting Collateral, a Phase I and/or
     Phase II Environmental Site Assessment to the extent requested by the
     Administrative Agent;

          (s) Merger Agreement. Evidence satisfactory to the Administrative
     Agent that all conditions precedent to the closing of the Pillowtex Merger
     have been satisfied, including without limitation (i) certified executed
     copies of the Merger Agreement, and (ii) the Certificate of Merger issued
     by the Secretary of State of the appropriate state or states;

TERM LOAN AGREEMENT - Page 17

<PAGE>

          (t)  Intercreditor Agreement. The Intercreditor Agreement executed by
     the Borrower, the Guarantors, the Administrative Agent, the Revolving
     Lenders, and Congress Financial Corporation as administrative agent under
     the Revolving Credit Agreement;

          (u)  Revolving Loan Documents. Fully executed counterparts of the
     Revolving Credit Agreement and other loan documents evidencing or executed
     and delivered in connection with the Revolving Credit Agreement;

          (v)  Opinion of Counsel. A favorable opinion of legal counsel to the
     Borrower and the Guarantors as to such matters as the Administrative Agent
     may reasonably request;

          (w)  Plan of Reorganization. The Plan of Reorganization shall have
     been confirmed and shall have become effective;

          (x)  Administrative Agent's Fee. The initial annual administration fee
     described in Section 3.4 shall have been paid in full by the Borrower;

          (y)  Attorneys' Fees and Expenses. Evidence that the costs and
     expenses (including reasonable attorneys' fees) referred to in Section
     13.1, to the extent incurred, shall have been paid in full by the Borrower;

          (z)  No Default. No Default shall have occurred and be continuing, or
     would result from the Term Loan;

          (aa) Representations and Warranties. All of the representations and
     warranties contained in Article VII hereof and in the other Loan Documents
     shall be true and correct; and

          (bb) Additional Documentation. The Administrative Agent shall have
     received such additional approvals, opinions, or documents as the
     Administrative Agent or its legal counsel, Winstead Sechrest & Minick P.C.,
     may reasonably request.

                                  ARTICLE VII

                         Representations and Warranties

     To induce the Lenders to enter into this Agreement, the Borrower represents
and warrants to the Administrative Agent and the Lenders that:

     Section 7.1 Corporate Existence. The Borrower and each of the Guarantors
(a) is a corporation or other Person duly organized and validly existing under
the laws of the jurisdiction of its organization, (b) has full legal power and
authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to use its corporate name
and to own, lease or otherwise hold its properties and assets and to carry on
its business as now conducted other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, would not have a Material Adverse

TERM LOAN AGREEMENT - Page 18

<PAGE>

Effect, (c) is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership, leasing or
holding of its properties makes such qualification necessary, except such
jurisdictions where the failure so to qualify would not have a Material Adverse
Effect, and (d) is in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Authority or instrumentality,
domestic or foreign, except where noncompliance would not have a Material
Adverse Effect. Neither the Borrower nor any of its Subsidiaries has received
any written communication from a Governmental Authority that alleges that the
Borrower or any of the Borrower's Subsidiaries is not in compliance, in all
material respects, with all material Federal, state, local or foreign laws,
ordinances, rules and regulations.

     Section 7.2 Financial Condition. The audited consolidated financial
statements of the Borrower and its Subsidiaries for the fiscal year ended on or
about December 31, 2001, the unaudited consolidated balance sheet of the
Borrower and its Subsidiaries as at March 30, 2002 and the related unaudited
consolidated statements of income and of cash flows for the periods ended on
such date, certified by the chief financial officer or controller of the
Borrower, copies of which have heretofore been furnished to each Lender, present
fairly the consolidated financial condition of the Borrower and its Subsidiaries
as of the respective dates indicated therein, and the consolidated results of
their operations and their consolidated cash flows for the respective periods
indicated therein (subject to normal year-end audit adjustments in the case of
unaudited financial statements). All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by such
accountants or such officer, as the case may be, and as disclosed therein).

     Section 7.3 Corporate Action; No Breach. The execution, delivery, and
performance by (a) the Borrower of this Agreement and the other Loan Documents
to which the Borrower is or may become a party and (b) each Guarantor of the
Loan Documents to which such Guarantor is or may become a party and compliance
with the terms and provisions hereof and thereof have been duly authorized by
all requisite action on the part of the Borrower and such Guarantor and do not
and will not (i) violate or conflict with, or result in a breach of, or
constitute a default under, or require any consent under (A) the articles of
incorporation, bylaws or other organizational documents of the Borrower or such
Guarantor, (B) any applicable law, rule, or regulation or any order, writ,
injunction, or decree of any Governmental Authority or arbitrator, or (C) any
agreement or instrument to which the Borrower or such Guarantor is a party or by
which any of them or any of their property is bound or subject, or (ii) result
in the creation or imposition of any Lien (except as provided in Article V and
except Permitted Liens) upon any of the revenues or assets of the Borrower or
such Guarantor.

     Section 7.4 Operation of Business. The Borrower and each of its
Subsidiaries possess all material licenses, permits, franchises, patents,
copyrights, trademarks, and tradenames, or rights thereto, necessary to conduct
their respective businesses substantially as now conducted and as presently
proposed to be conducted, except those, the failure of which would not have a
Material Adverse Effect, and the Borrower and each of its Subsidiaries are not
in violation of any valid rights of others with respect to any of the foregoing
that would result in a Material Adverse Effect.

TERM LOAN AGREEMENT - Page 19

<PAGE>

     Section 7.5 Litigation and Judgments. Except as disclosed on Schedule 7.5
hereto, and except for the Chapter 11 Cases and the filing and prosecution of
claims therein, there is no action, suit, investigation, or proceeding before or
by any Governmental Authority or arbitrator pending, or to the knowledge of the
Borrower, threatened against or affecting the Borrower or any of its
Subsidiaries, that would, if adversely determined, have a Material Adverse
Effect. There are no outstanding judgments against the Borrower or any of its
Subsidiaries.

     Section 7.6 Rights in Properties; Liens. The Borrower and each Guarantor
has good title to all its material assets (other than real property or interests
in real property, or goods sold on a consignment basis), in each case free and
clear of all Liens of any nature whatsoever except Permitted Liens. With respect
to real property or interests in real property, each of the Borrowers has (i)
good and marketable fee title to all of its material owned real property, (each,
a "Fee Property"), and (ii) a valid leasehold interest in all of the material
real property leased by it (each, a "Leased Property"), each such Fee Property
and each such Leased Property being referred to individually as a "Company
Property" in this Section 7.6), in each case free and clear of all Liens,
easements, covenants, rights-of-way and other similar restrictions of any nature
whatsoever, except (A) Permitted Liens, (B) easements, covenants, rights-of-way
and other similar restrictions of record, (C) any conditions that may be shown
by a current, accurate survey or physical inspection of any Company Property
made prior to the date of this Agreement, (D) any immaterial condemnation or
eminent domain proceeding affecting any real property that does not prevent such
real property from being utilized by the Borrower or any of its Subsidiaries
substantially for the purposes for which it was being utilized prior to such
proceeding, and (E) (I) zoning, building and other similar restrictions, (II)
Liens that have been placed by any developer, landlord or other third party on
property over which the Borrower or any of its Subsidiaries have easement rights
or on any Leased Property and subordination or similar agreements relating
thereto, and (III) unrecorded easements, covenants, rights-of-way or other
similar restrictions, none of which items set forth in clauses (I), (II) and
(III), individually or in the aggregate, materially impair the continued use and
operation of the property to which they relate in the business of the Borrower
or any Subsidiary, as now conducted.

     Section 7.7 Enforceability. This Agreement constitutes, and the other Loan
Documents to which the Borrower or any Guarantor is party, when delivered, shall
constitute legal, valid, and binding obligations of the Borrower or the
applicable Guarantor, as the case may be, enforceable against the Borrower or
the applicable Guarantor, as the case may be, in accordance with their
respective terms, except as limited by bankruptcy, insolvency, or other laws of
general application relating to the enforcement of creditors' rights.

     Section 7.8 Approvals. Other than with respect to certain industrial
revenue bond financings, no authorization, approval, or consent of, and no
filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower or
any Guarantor of this Agreement and the other Loan Documents to which the
Borrower or the applicable Guarantor, as the case may be, is or may become a
party or the validity or enforceability thereof, other than (i) those already
obtained, (ii) the filing of financing statements and other Loan Documents, and
(iii) those the failure to obtain would not have a Material Adverse Effect.

TERM LOAN AGREEMENT - Page 20

<PAGE>

     Section 7.9 Debt. The Borrower and its Subsidiaries have no Debt other than
that permitted under this Agreement, except as disclosed on Schedule 7.9 hereto.

     Section 7.10 Taxes. Except for those tax claims being addressed in the
Chapter 11 Cases, the Borrower and each of its Subsidiaries have filed all tax
returns (federal, state, and local) required to be filed, including all income,
franchise, employment, property, and sales tax returns, and have paid all of
their respective liabilities for taxes, assessments, governmental charges, and
other levies that are due and payable (other than (i) for which an extension for
filing is available and the Borrower or the applicable Subsidiary has taken
necessary steps to qualify for such extension, and (ii) the amount or validity
of which is currently being contested in good faith by appropriate proceedings
and with respect to which reserves in conformity with GAAP have been provided on
the books of the Borrower or its Subsidiaries, as applicable). The Borrower
knows of no pending investigation of the Borrower or any of its Subsidiaries by
any taxing authority or of any pending but unassessed tax liability as a result
of any investigation by a taxing authority of the Borrower or any of its
Subsidiaries, except as disclosed on Schedule 7.10.

     Section 7.11 Use of Proceeds; Margin Securities. Neither the Borrower nor
any of its Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulations U or X of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of the
Term Loan will be used to purchase or carry any margin stock or to extend credit
to others for the purpose of purchasing or carrying margin stock.

     Section 7.12 ERISA. The Borrower and each of its Subsidiaries are in
compliance in all material respects with all applicable provisions of ERISA.
Other than the event that occurred as a result of the Chapter 11 Cases and the
event that could occur as a result of a decrease in the number of participants
covered by the Plans, neither a Reportable Event nor a Prohibited Transaction
has occurred and is continuing with respect to any Plan. No notice of intent to
terminate a Plan has been filed, nor has any Plan been terminated. To the
Borrower's knowledge, no circumstances exist which constitute grounds entitling
the PBGC to institute proceedings to terminate, or appoint a trustee to
administer, a Plan, nor has the PBGC instituted any such proceedings. Neither
the Borrower nor any ERISA Affiliate has completely or partially withdrawn from
a Multiemployer Plan. The Borrower and each ERISA Affiliate have met their
minimum funding requirements under ERISA with respect to all of their Plans.

     Section 7.13 Disclosure. No statement, information, report, representation,
or warranty made by the Borrower in this Agreement or in any other Loan Document
or furnished to the Lenders in connection with this Agreement or any of the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements herein
or therein not misleading. There is no fact known to the Borrower which could
reasonably be expected to have a Material Adverse Effect that has not been
disclosed in writing to the Lenders.

     Section 7.14 Subsidiaries. The Borrower has no Subsidiaries other than
those listed on Schedule 7.14 hereto, and Schedule 7.14 sets forth the
jurisdiction of organization of each Subsidiary of Borrower and the percentage
of the Borrower's or applicable Subsidiary's

TERM LOAN AGREEMENT - Page 21

<PAGE>

ownership of the outstanding voting stock of each Subsidiary. All of the
outstanding capital stock of each Subsidiary of Borrower has been validly
issued, is fully paid, and is nonassessable.

       Section 7.15 Agreements. Other than with respect to certain cotton
contracts, neither the Borrower nor any of its Subsidiaries is a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction which could
reasonably be expected to have a Material Adverse Effect. Neither the Borrower
nor any of its Subsidiaries is in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party, the result of which would be a Material Adverse Effect.

       Section 7.16 Compliance with Laws. Neither the Borrower nor any of its
Subsidiaries is in violation in any material respect of any law, rule,
regulation, order, or decree of any Governmental Authority or arbitrator.

       Section 7.17 Investment Company Act. Neither the Borrower nor any of its
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.

       Section 7.18 Public Utility Holding Company Act. Neither the Borrower nor
any of its Subsidiaries is a "holding company" or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.

       Section 7.19 Environmental Matters. Except as disclosed in Schedule 7.19,
and subject to clause (f) below:

               (a)  To the best knowledge of the Borrower after reasonable
       inquiry, (i) the Fee Properties do not contain, in, on or under,
       including, without limitation, the soil and groundwater under the Fee
       Properties, any Hazardous Materials, and (ii) neither the Borrower nor
       any of its Subsidiaries have placed any Hazardous Materials on any Leased
       Properties, in each case which result in a currently existing violation
       of Environmental Laws.

               (b)  To the best knowledge of the Borrower after reasonable
       inquiry, the Borrower and its Subsidiaries are not in material violation
       of any Environmental Law which could materially interfere with the
       continued operation of any of the Company Properties or materially impair
       the fair saleable value of any thereof.

               (c)  Neither the Borrower nor any of its Subsidiaries have
       received any complaint, notice of violation, alleged violation, notice of
       investigation or of potential liability under Environmental Laws with
       regard to any of the Company Properties which has not been cured or is in
       the process of being cured and has been disclosed in writing by the
       Borrower to the Administrative Agent, nor do the Borrower or any of its
       Subsidiaries have knowledge that any Governmental Authority is
       contemplating delivering to the Borrower or any of its Subsidiaries any
       such notice.

TERM LOAN AGREEMENT - Page 22

<PAGE>

               (d)  Except for violations which have been cured or are in the
       process of being cured and have been disclosed in writing by the Borrower
       to the Administrative Agent, to the best knowledge of the Borrower after
       reasonable inquiry, Hazardous Materials have not been generated, treated,
       stored, disposed of (in the case of Leased Properties, by the Borrower or
       any of its Subsidiaries), at, on or under any of the Company Properties
       in violation of any Environmental Laws nor, to the best knowledge of the
       Borrower after reasonable inquiry, have any Hazardous Materials been
       transported (in the case of Leased Properties, by the Borrower or any of
       its Subsidiaries) from any of the Company Properties to any other
       location in violation of any Environmental Laws.

               (e)  There are no governmental administrative actions or judicial
       proceedings pending under any Environmental Law to which Borrower or any
       of its Subsidiaries thereof is a party with respect to any of the Company
       Properties, nor are there any consent decrees or other decrees, consent
       orders, administrative orders or other orders, or other administrative or
       judicial requirements outstanding against Borrower or any of its
       Subsidiaries thereof under any Environmental Law with respect to any of
       the Company Properties.

               (f)  Each of the representations and warranties set forth in
       paragraphs (a) through (e) of this Section 7.19 is true and correct in
       all material respects with respect to each parcel of Company Property.

       Section 7.20 No Change. Except as set forth in the Plan of
Reorganization, since March 30, 2002 (a) other than as otherwise disclosed in
the financial statements previously provided to the Lenders, there has been no
change, which has had or could reasonably be expected to have a Material Adverse
Effect and (b) no dividends or other distributions have been declared, paid or
made upon the capital stock of the Borrower or any of its Subsidiaries nor has
any of the capital stock of the Borrower or any of its Subsidiaries been
redeemed, retired, purchased or otherwise acquired for value by the Borrower or
any of its Subsidiaries.

       Section 7.21 Patents, Copyrights, Permits, Trademarks and Licenses.
Schedule 7.21 sets forth a true and complete list of all material patents,
trademarks (registered or unregistered), trade names, service marks and
copyrights and applications therefor owned, used or filed by or licensed to the
Borrower and its Subsidiaries and, with respect to such material registered
trademarks, contains a list of all jurisdictions in which such trademarks are
registered or applied for and all registration and application numbers. Except
as disclosed on Schedule 7.21, the Borrower and its Subsidiaries own or have the
right to use the patents, trademarks (registered or unregistered), trade names,
service marks, copyrights and applications therefor referred to in such
Schedule. To the best knowledge of the Borrower after reasonable inquiry, no
material claims are pending by any Person with respect to the ownership,
validity, enforceability or use of any such patents, trademarks (registered or
unregistered), trade names, service marks, copyrights, or applications therefor,
challenging or questioning the validity or effectiveness of any of the
foregoing, in any domestic jurisdiction.

TERM LOAN AGREEMENT - Page 23

<PAGE>

                                  ARTICLE VIII

                              Affirmative Covenants

       The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding, the Borrower will perform and observe the
following positive covenants, unless the Required Lenders shall otherwise
consent in writing:

       Section 8.1  Reporting Requirements. The Borrower will furnish to the
Administrative Agent for distribution to the Lenders:

                (a) Annual Financial Statements. As soon as practical, but in
       any event within 90 days after the end of each fiscal year of the
       Borrower, the audited consolidated balance sheet of the Borrower and its
       Subsidiaries as at the end of such fiscal year and the related audited
       consolidated statements of stockholders' equity, cash flows and income of
       the Borrower and its Subsidiaries for such fiscal year, setting forth in
       each case in comparative form the figures for the previous year,
       certified by independent certified public accountants reasonably
       acceptable to the Administrative Agent (it being hereby agreed that KPMG
       is acceptable to the Administrative Agent), accompanied by the opinion of
       such independent certified public accountants, which opinion shall be in
       scope and substance in accordance with generally accepted auditing
       standards and shall be unqualified.

                (b) Quarterly Financial Statements. As soon as practical, but in
       any event not later than 45 days after the end of each of the first three
       quarterly periods of each fiscal year of the Borrower the unaudited
       consolidated balance sheet of the Borrower and its Subsidiaries as at the
       end of such quarter and the related unaudited consolidated statements of
       income and cash flows of the Borrower and its Subsidiaries for such
       quarterly period and the portion of the fiscal year of the Borrower and
       its Subsidiaries through such date subject only to usual year-end
       adjustments and the absence of footnotes, setting forth in each case in
       comparative form the figures for the corresponding quarter in, and year
       to date portion of, the previous year, certified by the chief financial
       officer, controller or treasurer of the Borrower as being fairly stated
       in all material respects.

                (c) Monthly Financial Statements. As soon as practical, but in
       any event within 20 Business Days after the end of each fiscal month of
       each year, other than the last fiscal month of each fiscal quarter,
       commencing as of the fiscal month ending on or about May 31, 2002, the
       internal monthly financial statements comprising the unaudited
       consolidated balance sheet of the Borrower and its Subsidiaries as at the
       end of such month and the related unaudited consolidated statements of
       income and cash flows of the Borrower and its Subsidiaries for such month
       and for the portion of the fiscal year of the Borrower and its
       Subsidiaries through such date, in comparative form the consolidated
       figures for the corresponding month of, and year to date portion of, the
       previous year, certified by the chief financial officer, controller or
       treasurer of the Borrower as being fairly stated in all material
       respects.

TERM LOAN AGREEMENT - Page 24

<PAGE>

                (d) Monthly Cotton Purchase Information. As soon as practical,
       but in any event within 20 Business Days after the end of each fiscal
       month of each year, commencing as of the fiscal month ending on or about
       June 30, 2002, a report detailing the amount of cotton purchased during
       such fiscal month and the aggregate notional amount of forward purchase
       contracts for cotton outstanding as of the last day of such fiscal month.

                (e) Monthly Capital Lease and Letter of Credit Information. As
       soon as practical, but in any event within 20 Business Days after the end
       of each fiscal month of each year, other than the last fiscal month of
       each fiscal quarter, and in any event within 45 days after the end of the
       last month of each fiscal quarter, commencing as of the fiscal month
       ending on or about June 30, 2002, a report detailing (a) the amount of
       Capital Lease Obligations outstanding as of the end of such fiscal month,
       including the names of each lessor, the amount outstanding under each
       capital lease, and the term of each capital lease, and (b) the amount
       available to be drawn under commercial letters of credit outstanding
       under the Revolving Credit Agreement, including the beneficiary of each
       such letter of credit and the term of each such letter of credit.

                (f) Certificates of No Default. Concurrently with the delivery
       of the consolidated financial statements referred to in Section 8.1(a), a
       letter from the Borrower's independent certified public accountants
       reporting on such financial statements stating that in making the
       examination necessary to express their opinion on such financial
       statements no knowledge was obtained of any Default, except as specified
       in such letter, and concurrently with each delivery of the financial
       statements referred to in Sections 8.1(a), (b) and (c), a certificate of
       the vice president and controller, the vice president and treasurer or
       the chief financial officer of the Borrower stating that, to the best of
       such officer's knowledge after reasonable inquiry and review, the
       Borrower and its Subsidiaries have observed or performed all of their
       covenants and other agreements, and satisfied every condition, contained
       in this Agreement and the other Loan Documents to be observed, performed
       or satisfied by them, and that such officer has obtained no knowledge of
       any Default except as specified in such certificate.

                (g) Accountant Reports. Promptly upon receipt thereof, copies of
       all final reports submitted to the Borrower or to any of its Subsidiaries
       by the Borrower's independent certified public accountants in connection
       with each annual, interim or special audit of the books of the Borrower
       or its Subsidiaries made by such accountants, including, without
       limitation, any final comment letter submitted by such accountants to
       management in connection with their annual audit.

                (h) Public Reports. Promptly upon their becoming available,
       copies of all financial statements, reports, notices and proxy statements
       sent or made available to the public generally by the Borrower and all
       regular and periodic reports and all final registration statements and
       final prospectuses, if any, filed by the Borrower with any securities
       exchange or with the Securities and Exchange Commission or any
       Governmental Authority succeeding to any of its functions.

TERM LOAN AGREEMENT - Page 25

<PAGE>

                (i) Notice of Litigation. Promptly after the commencement
       thereof, notice of all actions, suits, and proceedings before any
       Governmental Authority or arbitrator affecting the Borrower or any of its
       Subsidiaries which, if determined adversely to the Borrower or such
       Subsidiary, could reasonably be expected to have a Material Adverse
       Effect.

                (j) Notice of Default. As soon as possible and in any event
       within five (5) Business Days after the occurrence of each Default of
       which Borrower has knowledge, a written notice setting forth the details
       of such Default and the action that the Borrower has taken and proposes
       to take with respect thereto.

                (k) ERISA Reports. Promptly after the filing or receipt thereof,
       copies of all reports, including annual reports, and notices which the
       Borrower or any of its Subsidiaries files with or receives from the PBGC
       or the U.S. Department of Labor under ERISA; and as soon as possible and
       in any event within five (5) Business Days after the Borrower or any of
       its Subsidiaries knows or has reason to know that any Reportable Event or
       Prohibited Transaction has occurred with respect to any Plan or that the
       PBGC or the Borrower or any of its Subsidiaries has instituted or will
       institute proceedings under Title IV of ERISA to terminate any Plan, a
       certificate of the chief financial officer, controller or treasurer of
       the Borrower setting forth the details as to such Reportable Event or
       Prohibited Transaction or Plan termination and the action that the
       Borrower proposes to take with respect thereto.

                (l) Reports to Other Creditors. Promptly after the furnishing
       thereof, to the extent the Administrative Agent so requests, copies of
       any statement or report furnished to any other party pursuant to the
       terms of any indenture, loan, or credit or similar agreement, including
       without limitation the Revolving Credit Agreement, and not otherwise
       required to be furnished to the Lenders pursuant to any other clause of
       this Section.

                (m) Notice of Material Adverse Effect. As soon as possible and
       in any event within five (5) Business Days after the occurrence thereof
       which Borrower has knowledge, written notice of any matter that could
       reasonably be expected to have a Material Adverse Effect.

                (n) Landlord Waivers. Within 60 days after the date hereof, the
       Borrower will use its best efforts to provide landlord lien waivers or
       subordinations, as the case may be, with respect to each location of
       equipment and inventory of Borrower and the Guarantors which is leased by
       Borrower or any such Guarantor and for which a landlord lien waiver or
       subordination is required by the Revolving Credit Agreement.

                (o) General Information. Promptly, such other information
       concerning the Borrower or any of its Subsidiaries as the Administrative
       Agent or any Lender may from time to time reasonably request.

       Section 8.2  Maintenance of Existence. Except as otherwise permitted
pursuant to Section 9.3, the Borrower will preserve and maintain, and will cause
each of its Subsidiaries to

TERM LOAN AGREEMENT - Page 26

<PAGE>

preserve and maintain, its corporate existence and all of its leases,
privileges, licenses, permits, franchises, qualifications, and rights that are
necessary or desirable in the ordinary conduct of its business, the loss of
which would have a Material Adverse Effect.

     Section 8.3 Maintenance of Properties. Except as otherwise permitted
pursuant to Sections 9.3 and 9.7, the Borrower will maintain, keep, and
preserve, and cause each of its Subsidiaries to maintain, keep, and preserve,
all of its properties (tangible and intangible) necessary or useful in the
proper conduct of its business in good working order and condition.

     Section 8.4 Taxes and Claims. Except for tax claims being addressed in the
Chapter 11 Cases, the Borrower will pay or discharge, and will cause each of its
Subsidiaries to pay or discharge, at or before maturity or before becoming
delinquent (a) all taxes, levies, assessments, and governmental charges imposed
on it or its income or profits or any of its property, and (b) all lawful claims
for labor, material, and supplies, which, if unpaid, might become a Lien upon
any of its property; provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to pay or discharge any tax, levy, assessment, or
governmental charge which is being contested in good faith by appropriate
proceedings diligently pursued, and for which adequate reserves have been
established in accordance with GAAP.

     Section 8.5 Insurance. The Borrower will maintain, and will cause each of
its Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies in such amounts and covering such risks as is usually
carried by corporations engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower and its Subsidiaries
operate, provided that in any event the Borrower will maintain and cause each of
its Subsidiaries to maintain workmen's compensation insurance, property
insurance, comprehensive general liability insurance, products liability
insurance, and business interruption insurance reasonably satisfactory to the
Administrative Agent. Each insurance policy covering the Collateral shall name
the Administrative Agent as an additional loss payee and shall provide that such
policy will not be canceled or reduced without thirty (30) days' prior written
notice to the Administrative Agent.

     Section 8.6 Inspection Rights. At any reasonable time and from time to
time, upon reasonable notice to the Borrower, the Borrower will permit, and will
cause each of its Subsidiaries to permit, representatives of the Administrative
Agent or any Lender to examine, copy, and make extracts from its books and
records, to visit and inspect its properties, and to discuss its business,
operations, and financial condition with its officers, employees, and
independent certified public accountants. In addition, the Borrower will permit,
and will cause each of its Subsidiaries to permit, representatives of the
Administrative Agent or any Lender to visit and inspect any of its properties
for the purpose of performing periodic collateral audits.

     Section 8.7 Keeping Books and Records. The Borrower will maintain, and will
cause each of its Subsidiaries to maintain, proper books of record and account
in which full, true, and correct entries in conformity with GAAP shall be made
of all dealings and transactions in relation to its business and activities.

     Section 8.8 Compliance with Laws. The Borrower will comply, and will cause
each of its Subsidiaries to comply with all applicable laws, rules, regulations,
orders, and decrees of

TERM LOAN AGREEMENT - Page 27

<PAGE>

any Governmental Authority or arbitrator, except to the extent that the failure
to comply therewith would not have a Material Adverse Effect.

     Section 8.9 Compliance with Agreements. The Borrower will comply, and will
cause each of its Subsidiaries to comply with the Revolving Credit Agreement,
all agreements related thereto, and all other agreements, contracts, and
instruments binding on it or affecting its properties or business, except to the
extent that the failure to comply therewith would not have a Material Adverse
Effect.

     Section 8.10 Further Assurances. The Borrower will, and will cause each of
its Subsidiaries to, execute and deliver such further agreements and instruments
and take such further action as may be reasonably requested by the
Administrative Agent to carry out the provisions and purposes of this Agreement
and the other Loan Documents and to create, preserve, and perfect the Liens of
the Administrative Agent in the Collateral.

     Section 8.11 ERISA. The Borrower will comply, and will cause each of its
Subsidiaries to comply, with all minimum funding requirements, and all other
material requirements, of ERISA, if applicable, so as not to give rise to any
liability thereunder.

     Section 8.12 Environmental Laws.

          (a) The Borrower and its Subsidiaries will comply in all material
     respects with, and use reasonable efforts to insure compliance in all
     material respects by all its tenants and subtenants, if any, with, all
     applicable Environmental Laws and obtain and comply in all material
     respects with and maintain, and use reasonable efforts to insure that all
     of their respective tenants and subtenants obtain and comply in all
     material respects with and maintain, any and all licenses, approvals,
     registrations or permits required by Environmental Laws.

          (b) The Borrower and its Subsidiaries will conduct and complete all
     investigations, studies, sampling and testing, and all remedial, removal
     and other actions required under Environmental Laws and promptly comply
     with all lawful orders and directives of all Governmental Authorities
     respecting Environmental Laws, except to the extent that the same are being
     contested in good faith by appropriate proceedings.

          (c) THE BORROWER AND ITS SUBSIDIARIES WILL DEFEND, INDEMNIFY AND HOLD
     HARMLESS ADMINISTRATIVE AGENT AND EACH LENDER, AND THEIR RESPECTIVE
     EMPLOYEES, AGENTS, OFFICERS AND DIRECTORS (COLLECTIVELY, THE "LENDER
     PARTIES"), FROM AND AGAINST ANY CLAIMS, DEMANDS, PENALTIES, FINES,
     LIABILITIES, SETTLEMENTS, DAMAGES, COSTS AND EXPENSES OF WHATEVER KIND OR
     NATURE KNOWN OR UNKNOWN, CONTINGENT OR OTHERWISE (INCLUDING AS A RESULT OF
     THE ORDINARY NEGLIGENCE OF ANY OF THE LENDER PARTIES) ACTUALLY ASSERTED
     AGAINST OR INCURRED BY THE LENDER PARTIES (OR ANY ONE OR MORE OF THEM),
     ARISING OUT OF, OR IN ANY WAY RELATING TO THE VIOLATION OF OR NONCOMPLIANCE
     WITH ANY ENVIRONMENTAL LAWS APPLICABLE TO

TERM LOAN AGREEMENT - Page 28

<PAGE>

     THE REAL PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY OF ITS
     SUBSIDIARIES, OR ANY ORDERS, REQUIREMENTS OR DEMANDS OF GOVERNMENTAL
     AUTHORITIES RELATED THERETO, INCLUDING, WITHOUT LIMITATION, REASONABLE
     ATTORNEY'S AND CONSULTANT'S FEES, INVESTIGATION AND LABORATORY FEES, COURT
     COSTS AND LITIGATION EXPENSES, EXCEPT TO THE EXTENT THAT ANY OF THE
     FOREGOING ARISE OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
     PARTY SEEKING INDEMNIFICATION THEREFOR OR RELATE TO VIOLATIONS OR ALLEGED
     VIOLATIONS OF ENVIRONMENTAL LAWS OR HAZARDOUS MATERIALS FIRST USED,
     RELEASED, SPILLED, EMITTED OR OTHERWISE LOCATED ON ANY REAL PROPERTY OWNED
     OR OPERATED BY THE BORROWER ANY OF ITS SUBSIDIARIES AFTER SUCH PROPERTY IS
     TRANSFERRED TO A LENDER PARTY OR ITS SUCCESSOR OR ASSIGN BY FORECLOSURE,
     DEED-IN-LIEU OF FORECLOSURE OR SIMILAR TRANSFER UNLESS CAUSED BY THE
     BORROWER ANY OF ITS SUBSIDIARIES.

                                   ARTICLE IX

                               Negative Covenants

     The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding, the Borrower will perform and observe the
following negative covenants, unless the Required Lenders shall otherwise
consent in writing:

     Section 9.1 Debt. The Borrower will not incur, create, assume, or permit to
exist, and will not permit any of its Subsidiaries to incur, create, assume, or
permit to exist, any Debt, except:

          (a) The Obligations;

          (b) Debt incurred under the Revolving Credit Agreement, and any
     renewals, extensions, replacements or refinancings thereof (except those
     that result in an increase to the original commitment amount thereunder);
     provided that the aggregate amount available to be drawn under commercial
     letters of credit issued for the account of the Borrower or any of its
     Subsidiaries thereunder shall not exceed $15,000,000 at any time prior to
     the Borrower's delivery to the Administrative Agent of a strategic plan
     regarding usage of commercial letters of credit, which is satisfactory to
     the Required Lenders;

          (c) Subordinated Debt;

          (d) Purchase money debt incurred after the date hereof in the ordinary
     course of business not to exceed an aggregate amount of $5,000,000;

          (e) Capital Lease Obligations incurred after the date hereof in the
     ordinary course of business not to exceed an aggregate amount of
     $5,000,000;

TERM LOAN AGREEMENT - Page 29

<PAGE>

          (f) Debt existing on the date hereof and Debt resulting from the
     conversion or termination, within 30 days after the date hereof of any
     operating leases existing on the date hereof, which is described on
     Schedule 7.9 hereof, including renewals, extensions, replacements or
     refinancings (but not increases) thereof, provided that the maximum amount
     of Capital Lease Obligations included on such Schedule 7.9 (including any
     Capital Lease Obligations resulting from the conversion or termination,
     within 30 days after the date hereof, of any operating leases existing on
     the date hereof included on such Schedule 7.9) shall not exceed
     $40,000,000;

          (g) Debt in respect of endorsement of negotiable instruments in the
     ordinary course of business;

          (h) Debt owing to the Borrower or any of the Guarantors by the
     Borrower or any Guarantor;

          (i) Guaranties by the Borrower or its Subsidiaries, to the extent the
     underlying Debt is permitted hereunder;

          (j) Debt associated with insurance premium financing;

          (k) Debt consisting of interest rate hedging contracts for purposes of
     fixing floating rate obligations under the Revolving Credit Agreement,
     provided that the aggregate notional amount of all such arrangements and
     contracts shall not exceed 50% of outstanding advances under the Revolving
     Credit Agreement at the time the arrangement or contract is entered into;

          (l) Debt consisting of foreign currency exchange hedging contracts
     with terms of no longer than 180 days, provided that the aggregate notional
     amount of all such contracts shall not exceed $5,000,000 at any time;

          (m) Debt consisting of forward purchase contracts for cotton and
     natural gas for amounts not exceeding 18 months of reasonably expected use;
     and

          (n) Debt associated with performance, surety and appeals bonds in the
     ordinary course of business.

     Section 9.2 Limitation on Liens. The Borrower will not incur, create,
assume, or permit to exist, and will not permit any of its Subsidiaries to
incur, create, assume, or permit to exist, any Lien upon any of its property,
assets, or revenues, whether now owned or hereafter acquired, except the
following (collectively, the "Permitted Liens"):

          (a) Liens disclosed on Schedule 9.2 hereto and any replacements or
     renewals thereof;

          (b) Liens in favor of the Administrative Agent for the benefit of the
     Lenders;

TERM LOAN AGREEMENT - Page 30

<PAGE>

          (c) First priority Liens on the Revolving Loan Assets and second
     priority Liens on the Subject Assets granted pursuant to the Revolving
     Credit Agreement, or any documents executed in connection therewith, and
     any replacements or renewals thereof;

          (d) Encumbrances consisting of minor easements, rights-of-way, zoning
     restrictions, or other restrictions on the use of real property that do not
     (individually or in the aggregate) materially affect the value of the
     assets encumbered thereby or materially impair the ability of the Borrower
     or its Subsidiaries to use such assets in their respective businesses, and
     none of which is violated in any material respect by existing or proposed
     structures or land use;

          (e) Liens for taxes, assessments, or other governmental charges which
     are not delinquent or which are being contested in good faith and for which
     adequate reserves have been established;

          (f) Liens of mechanics, materialmen, warehousemen, carriers, laborers,
     landlords, or other similar Liens securing obligations that are not yet due
     and are incurred in the ordinary course of business or by operation of law;

          (g) Liens resulting from good faith deposits to secure payments of
     workmen's compensation unemployment insurance, pensions or other social
     security programs or to secure the performance of tenders, statutory
     obligations, surety and appeal bonds, bids, or contracts (other than for
     payment of Debt), or leases made in the ordinary course of business; and

          (h) Liens securing Debt permitted by Section 9.1(d) or 9.1(e) hereof,
     so long as such Liens cover only the assets being acquired with such Debt.

     Section 9.3 Mergers, Etc. The Borrower will not, and will not permit any of
its Subsidiaries to, become a party to a merger or consolidation, or purchase or
otherwise acquire all or any part of the assets of any Person or any shares or
other evidence of beneficial ownership of any Person, or wind-up, dissolve, or
liquidate, except that (a) a Subsidiary of the Borrower may merge, consolidate,
dissolve, or liquidate into the Borrower or a Guarantor and (b) a Subsidiary of
the Borrower may dissolve if substantially all of its assets have been conveyed
pursuant to Section 9.7(d) hereof. It is understood and agreed that the
Pillowtex Merger will occur prior to or simultaneously with the effective date
of this Agreement.

     Section 9.4 Restricted Payments. Borrower will not declare, and will not
permit any of its Subsidiaries to declare, any dividends on any shares of any
class of stock, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, retirement or
other acquisition of any shares of any class of stock, or any warrants or
options to purchase such stock, whether now or hereafter outstanding, or make
any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Borrower or any of its
Subsidiaries; except that Guarantors may pay dividends to the Borrower or
another Guarantor.

     Section 9.5 Loans and Investments. The Borrower will not make, and will not
permit any of its Subsidiaries to make, any advance, loan, extension of credit,
or capital contribution to

TERM LOAN AGREEMENT - Page 31

<PAGE>

or investment in, or purchase, or permit any of its Subsidiaries to purchase,
any stock, bonds, notes, debentures, or other securities of any Person, except:

          (a)    any of the foregoing existing on the date hereof;

          (b)    the Borrower and its Subsidiaries may invest in, acquire and
     hold cash and Cash Equivalents;

          (c)    investments arising from transactions by the Borrower or any of
     its Subsidiaries with customers or suppliers in the ordinary course of
     business, including endorsements of negotiable instruments, debt
     obligations and other investments received in connection with the
     bankruptcy or reorganization of customers and suppliers and in settlement
     of delinquent obligations of, and other disputes with, customers and
     suppliers;

          (d)    the Borrower or any of its Subsidiaries may acquire and hold
     receivables owing to it, if created or acquired in the ordinary course of
     business and payable or dischargeable in accordance with customary trade
     terms;

          (e)    Loans or advances to directors, officers and employees of the
     Borrower or any of its Subsidiaries that do not exceed $1,000,000 in
     aggregate amount outstanding at any time;

          (f)    Investments in Guarantors;

          (g)    Investments in the form of hedging agreements (permitted by
     Section 9.1); and

          (h)    Investments in joint ventures, partnerships and other entities
     engaged in the same line of business as the Borrower and its Subsidiaries,
     which do not exceed $5,000,000 in the aggregate.

     Section 9.6 Transactions With Affiliates. The Borrower will not, and will
not permit its Subsidiaries to, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate except for transactions which are not
prohibited under this Agreement and which are in the ordinary course of the
Borrower's or applicable Subsidiary's business and which are upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than it
would obtain in a hypothetical comparable arm's length transaction with a Person
not an Affiliate.

     Section 9.7 Disposition of Assets. The Borrower will not sell, lease,
assign, transfer, or otherwise dispose of any of its assets, or permit any of
its Subsidiaries to do so with any of its assets (including through a
transaction of merger or consolidation of any Subsidiary of the Borrower and
including, without limitation, tax benefits, receivables and leasehold
interests), whether now owned or hereafter acquired, except for (a) sales of
inventory made in the ordinary course of business; (b) sales of assets that are
obsolete, worn-out or are no longer in use and that are not material in value
nor significant to the continuation of Borrower's or the applicable Subsidiary's
business; (c) sales and dispositions from any of the Borrower's Subsidiaries to
the Borrower or any Guarantor; (d) sales, transfers or dispositions of any of
the Moveable Assets,

TERM LOAN AGREEMENT - Page 32

<PAGE>

provided the Borrower gives notice thereof to the Administrative Agent and in
the case of any sale of such assets, the Net Cash Proceeds received therefrom by
the Borrower are used to prepay the Obligations in accordance with Section
3.3(a), (e) so long as an Event of Default has not occurred and is continuing,
sales of certain residential properties that comprise a portion of the property
encumbered by the Mortgages, provided that (i) Borrower or the applicable
Subsidiary obtains all governmental approvals in order to subdivide the
residential property from the remainder of the property, (ii) Borrower provides
Administrative Agent with ten (10) days' advance written notice of such
contemplated sale together with a release instrument in form and substance
reasonably satisfactory to Administrative Agent, (iii) the remainder of the
property shall continue to remain subject to the lien of the applicable
Mortgage, and (iv) the Net Cash Proceeds received from by the Borrower from such
sale are used to prepay the Obligations in accordance with Section 3.3(a), and
(f) asset sales from which the aggregate amount of Net Cash Proceeds never
exceeds $5,000,000, so long as such Net Cash Proceeds are used to prepay the
Obligations in accordance with Section 3.3(a). If any Moveable Assets are moved
to a jurisdiction outside of the United States of America, neither the
Administrative Agent nor any Lender will perfect or attempt to perfect a Lien on
such Moveable Assets under the laws of the applicable jurisdiction.

     Section 9.8 Sale and Leaseback. The Borrower will not enter into, and will
not permit any of its Subsidiaries to enter into, any arrangement with any
Person pursuant to which it leases from such Person real or personal property
that has been or is to be sold or transferred, directly or indirectly, by it to
such Person, other than such arrangements the aggregate outstanding amount of
which do not exceed $5,000,000 at any one time.

     Section 9.9 Prepayment of Debt. Subject to the Intercreditor Agreement, the
Borrower will not prepay, and will not permit any of its Subsidiaries to prepay,
any Debt, except the Obligations and the Debt incurred under the Revolving
Credit Agreement.

     Section 9.10 Nature of Business. The Borrower will not, and will not permit
any of its Subsidiaries to, engage in any business other than the businesses in
which they are engaged as of the date hereof and activities reasonably related
thereto.

     Section 9.11 Accounting. The Borrower will not, and will not permit any of
its Subsidiaries to, change its fiscal year or make any change (a) in accounting
treatment or reporting practices, except as required by GAAP and disclosed to
the Administrative Agent, or (b) in tax reporting treatment, except as required
by law and disclosed to the Administrative Agent.

                                   ARTICLE X

                               Financial Covenants

     The Borrower covenants and agrees that, as long as the Obligations or any
part thereof are outstanding, the following financial covenants will be observed
and performed, unless the Required Lenders shall otherwise consent in writing:

TERM LOAN AGREEMENT - Page 33

<PAGE>

     Section 10.1 Interest Coverage Ratio. The Borrower will not permit its
Interest Coverage Ratio, on a consolidated basis, at the end of the applicable
fiscal quarter of the Borrower described below to be less than the ratio set
forth opposite such fiscal quarter below:

--------------------------------------------------------------------------------
    Fiscal Quarters Ending On or About:                             Ratio
    -----------------------------------                             -----
--------------------------------------------------------------------------------
September 30, 2002                                               0.80 to 1.00
--------------------------------------------------------------------------------
December 31, 2002                                                1.25 to 1.00
--------------------------------------------------------------------------------
March 31, 2003                                                   2.10 to 1.00
--------------------------------------------------------------------------------
June 30, 2003 through and including March 31, 2007               3.00 to 1.00
--------------------------------------------------------------------------------

     Section 10.2 Leverage Ratio. The Borrower will not permit its Leverage
Ratio, on a consolidated basis, at the end of the applicable fiscal quarter of
the Borrower described below to be greater than the ratio set forth opposite
such fiscal quarter below:

--------------------------------------------------------------------------------
   Fiscal Quarters Ending On or About:                                Ratio
   -----------------------------------                                -----
--------------------------------------------------------------------------------
September 30, 2002                                               6.65 to 1.00
--------------------------------------------------------------------------------
December 31, 2002                                                5.20 to 1.00
--------------------------------------------------------------------------------
March 31, 2003                                                   4.50 to 1.00
--------------------------------------------------------------------------------
June 30, 2003                                                    3.70 to 1.00
--------------------------------------------------------------------------------
September 30, 2003                                               3.60 to 1.00

--------------------------------------------------------------------------------
December 31, 2003                                                3.10 to 1.00
--------------------------------------------------------------------------------
March 31, 2004 through and including March 31, 2007              3.00 to 1.00
--------------------------------------------------------------------------------

                                   ARTICLE XI

                                     Default

     Section 11.1 Events of Default. Each of the following shall be deemed an
"Event of Default":

          (a) The Borrower shall fail to pay when due the Obligations or any
     part thereof.

          (b) Any representation or warranty made or deemed made by the Borrower
     or any Obligated Party (or any of their respective officers) in any Loan
     Document or in any certificate, report, notice, or financial statement
     furnished at any time in connection with this Agreement shall be false,
     misleading, or erroneous in any material respect when made or deemed to
     have been made.

          (c) The Borrower or any Obligated Party shall fail to perform,
     observe, or comply with any covenant, agreement, or term contained in
     Section 8.1, Article IX or Article X of this Agreement.

TERM LOAN AGREEMENT - Page 34

<PAGE>

          (d) Any Obligated Party shall fail to perform, observe or comply with
     any covenant, agreement, or term contained in this Agreement or any other
     Loan Document not specifically referred to elsewhere in this Section 11.1
     and such failure shall not be remedied within a period of 30 days after the
     earlier of notice from the Administrative Agent or such time as the
     Borrower or such Obligated Party reasonably should have known of the
     occurrence thereof.

          (e) Except for the Chapter 11 Cases, the Borrower, any of its
     Subsidiaries, or any Obligated Party shall commence a voluntary proceeding
     seeking liquidation, reorganization, or other relief with respect to itself
     or its debts under any bankruptcy, insolvency, or other similar law now or
     hereafter in effect or seeking the appointment of a trustee, receiver,
     liquidator, custodian, or other similar official of it or a substantial
     part of its property or shall consent to any such relief or to the
     appointment of or taking possession by any such official in an involuntary
     case or other proceeding commenced against it or shall make a general
     assignment for the benefit of creditors or shall generally fail to pay its
     debts as they become due or shall take any corporate action to authorize
     any of the foregoing.

          (f) An involuntary proceeding shall be commenced against the Borrower,
     any of its Subsidiaries, or any Obligated Party seeking liquidation,
     reorganization, or other relief with respect to it or its debts under any
     bankruptcy, insolvency, or other similar law now or hereafter in effect or
     seeking the appointment of a trustee, receiver, liquidator, custodian, or
     other similar official for it or a substantial part of its property, and
     such involuntary proceeding shall remain undismissed and unstayed for a
     period of 60 days.

          (g) One or more final judgments or decrees shall be entered against
     the Borrower or any of its Subsidiaries involving in the aggregate a
     liability (not paid or fully covered by insurance) of $1,000,000 or more,
     and all such judgments or decrees shall not have been vacated, discharged,
     stayed or bonded pending appeal within 30 days after the entry of such
     judgment.

          (h) The Borrower, any of its Subsidiaries, or any Obligated Party
     shall fail to pay when due (beyond any grace period provided with respect
     thereto) any principal of or interest on any Debt (other than the
     Obligations) in excess of $1,000,000, or the maturity of any such Debt
     shall have been accelerated, or any such Debt shall have been required to
     be prepaid prior to the stated maturity thereof, or any event shall have
     occurred that permits (or, with the giving of notice or lapse of time or
     both, would permit) any holder or holders of such Debt or any Person acting
     on behalf of such holder or holders to accelerate the maturity thereof or
     require any such prepayment and such event has not been waived or cured.

          (i) This Agreement or any other Loan Document shall cease to be in
     full force and effect or shall be declared null and void or the validity or
     enforceability thereof shall be contested or challenged by the Borrower,
     any Subsidiary, any Obligated Party or any of their respective
     shareholders, or the Borrower or any Obligated Party shall deny that it has
     any further liability or obligation under any of the Loan Documents, or any
     lien or security interest created by the Loan Documents shall for any
     reason cease to be a

TERM LOAN AGREEMENT - Page 35

<PAGE>

     valid, perfected security interest in and lien upon any of the Collateral
     purported to be covered thereby, other than (A) as a result of an action or
     inaction by the Administrative Agent, any Lender or any representative
     thereof, or (B) as expressly provided or permitted in the Loan Documents.

          (j) Any of the following events shall occur or exist with respect to
     the Borrower or any ERISA Affiliate: (i) any Prohibited Transaction
     involving any Plan; (ii) any Reportable Event with respect to any Plan;
     (iii) the filing under Section 4041 of ERISA of a notice of intent to
     terminate any Plan or the termination of any Plan; (iv) any event or
     circumstance that might constitute grounds entitling the PBGC to institute
     proceedings under Section 4042 of ERISA for the termination of, or for the
     appointment of a trustee to administer, any Plan, or the institution by the
     PBGC of any such proceedings; or (v) complete or partial withdrawal under
     Section 4201 or 4204 of ERISA from a Multiemployer Plan or the
     reorganization, insolvency, or termination of any Multiemployer Plan; and
     in each case above, such event or condition, together with all other events
     or conditions, if any, have subjected or could in the reasonable opinion of
     the Administrative Agent subject the Borrower to any tax, penalty, or other
     liability to a Plan, a Multiemployer Plan, the PBGC, or otherwise (or any
     combination thereof) which in the aggregate exceed or could reasonably be
     expected to exceed $500,000.

          (k) An event of default shall occur under the Revolving Credit
     Agreement or any document, agreement or instrument executed and delivered
     in connection therewith which has not been waived or cured.

          (l) The Borrower, any of its Subsidiaries, or any Obligated Party, or
     any of their properties, revenues, or assets, shall become subject to an
     order of forfeiture, seizure, or divestiture (whether under RICO or
     otherwise) and the same shall not have been discharged within thirty (30)
     days from the date of entry thereof.

     Section 11.2 Remedies Upon Default. If any Event of Default shall occur and
be continuing, subject to the Intercreditor Agreement, with the consent of the
Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, without the necessity of
notice, (a) declare the Obligations or any part thereof to be immediately due
and payable, and the same shall thereupon become immediately due and payable,
without notice, demand, presentment, notice of dishonor, notice of acceleration,
notice of intent to accelerate, notice of intent to demand, protest, or other
formalities of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that upon the occurrence of an Event of Default
under Section 11.1(e) or Section 11.1(f), the Obligations shall become
immediately due and payable without notice, demand, presentment, notice of
dishonor, notice of acceleration, notice of intent to accelerate, notice of
intent to demand, protest, or other formalities of any kind, all of which are
hereby expressly waived by the Borrower, (b) foreclose or otherwise enforce any
Lien granted to the Administrative Agent for the benefit of the Lenders to
secure payment and performance of the Obligations in accordance with the terms
of the Loan Documents, or (c) exercise all rights and remedies available to it
in law or in equity, under the Loan Documents, or otherwise.

TERM LOAN AGREEMENT - Page 36

<PAGE>

                                  ARTICLE XII

                            The Administrative Agent

       Section 12.1 Appointment, Powers and Immunities. In order to expedite the
various transactions contemplated by this Agreement, the Lenders hereby
irrevocably appoint and authorize the Administrative Agent to act as their agent
hereunder and under each of the other Loan Documents. The Administrative Agent
consents to such appointment and agrees to perform the duties of the
Administrative Agent as specified herein. The Lenders authorize and direct the
Administrative Agent to take such action in their name and on their behalf under
the terms and provisions of the Loan Documents and to exercise such rights and
powers thereunder as are specifically delegated to or required of the
Administrative Agent for the Lenders, together with such rights and powers as
are reasonably incidental thereto. The Administrative Agent is hereby expressly
authorized to act as the Administrative Agent on behalf of the Lenders:

                (a) To receive on behalf of each of the Lenders and the
       Administrative Agent any payment of principal, interest, fees or other
       amounts paid pursuant to this Agreement and the Term Loan Notes and to
       distribute to each Lender and the Administrative Agent, or any or some of
       them its share of all payments so received as provided in this Agreement;

                (b) To receive all documents and items to be furnished under the
       Loan Documents;

                (c) To act as nominee for and on behalf of the Lenders and the
       Administrative Agent in and under the Loan Documents;

                (d) To arrange for the means whereby the funds of the Lenders
       are to be made available to the Borrower;

                (e) To distribute to the Lenders information, requests, notices,
       payments, prepayments, documents and other items received from the
       Borrower, the other Obligated Parties, and other Persons;

                (f) To execute and deliver to the Borrower, the other Obligated
       Parties, and other Persons, all requests, demands, approvals, notices,
       and consents received from the Lenders;

                (g) To the extent permitted by the Loan Documents, to exercise
       on behalf of each Lender all rights and remedies of such Lender upon the
       occurrence of any Event of Default;

                (h) To enter into the Intercreditor Agreement;

                (i) To accept, execute, and deliver any security documents as
       the secured party, including, without limitation all financing
       statements; and

                (j) To take such other actions as may be requested by Required
       Lenders.

TERM LOAN AGREEMENT - Page 37

<PAGE>

       Neither the Administrative Agent nor any of its Affiliates, officers,
directors, employees, attorneys, financial advisors or agents shall be liable
for any action taken or omitted to be taken by any of them hereunder or
otherwise in connection with this Agreement or any of the other Loan Documents
except for its or their own gross negligence or willful misconduct. Without
limiting the generality of the preceding sentence, the Administrative Agent (i)
may treat the payee of any Term Loan Note as the holder thereof until the
Administrative Agent receives written notice of the assignment or transfer
thereof signed by such payee and in form satisfactory to the Administrative
Agent; (ii) shall have no duties or responsibilities except those expressly set
forth in this Agreement and the other Loan Documents, and shall not by reason of
this Agreement or any other Loan Document be a trustee or fiduciary for any
Lender; (iii) shall not be required to initiate any litigation or collection
proceedings hereunder or under any other Loan Document except to the extent
requested by the Required Lenders; (iv) shall not be responsible to the Lenders
for any recitals, statements, representations or warranties contained in this
Agreement or any other Loan Document, or any certificate or other document
referred to or provided for in, or received by any of them under, this Agreement
or any other Loan Document or for the value, validity, effectiveness,
enforceability, or sufficiency of this Agreement or any other Loan Document or
any other document referred to or provided for herein or therein or for any
failure by any Person to perform any of its obligations hereunder or thereunder;
(v) may consult with legal counsel (including counsel for the Borrower),
independent public accountants, and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants, or experts; and (vi)
shall incur no liability under or in respect of any Loan Document by acting upon
any notice, consent, certificate, or other instrument or writing believed by it
to be genuine and signed or sent by the proper party or parties. As to any
matters not expressly provided for by this Agreement, the Administrative Agent
shall in all cases be fully protected in acting, or in refraining from acting,
hereunder in accordance with instructions signed by the Required Lenders, and
such instructions of the Required Lenders and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders; provided, however, that
the Administrative Agent shall not be required to take any action which exposes
the Administrative Agent to personal liability or which is contrary to this
Agreement or any other Loan Document or applicable law.

       Section 12.2 Rights of Administrative Agent as a Lender. With respect to
its commitment to lend hereunder and the Term Loan Note issued to it, the
Administrative Agent in its capacity as a Lender hereunder shall have the same
rights and powers hereunder as any other Lender and may exercise the same as
though it were not acting as the Administrative Agent and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the
Administrative Agent in its individual capacity. The Administrative Agent and
its Affiliates may (without having to account therefor to any Lenders) accept
deposits from, lend money to, act as trustee under indentures of, provide
merchant banking services to, and generally engage in any kind of business with
the Borrower, any of its Subsidiaries, any other Obligated Party, and any other
Person who may do business with or own securities of the Borrower, any
Subsidiary, or any other Obligated Party, all as if it were not acting as the
Administrative Agent and without any duty to account therefor to the Lenders.

       Section 12.3 Sharing of Payments, Etc. If any Lender shall obtain any
payment of any principal of or interest on the Term Loan or payment of any other
obligation under the Loan Documents then owed by the Borrower or any other
Obligated Party to such Lender, whether

TERM LOAN AGREEMENT - Page 38

<PAGE>

voluntary, involuntary, through the exercise of any right of setoff, banker's
lien, counterclaim or similar right, or otherwise, in excess of its pro rata
share, such Lender shall promptly purchase from the other Lenders participations
in the portion of the Term Loan held by them hereunder in such amounts, and make
such other adjustments from time to time as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of the other
Lenders in accordance with its pro rata portion thereof. To such end, all of the
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if all or any portion of such excess payment
is thereafter rescinded or must otherwise be restored. The Borrower agrees, to
the fullest extent it may effectively do so under applicable law, that any
Lender so purchasing such participation may exercise all rights of setoff,
banker's lien, counterclaim, or similar rights with respect to such
participation as fully as if such Lender were a direct holder of the amount of
such participation. Nothing contained herein shall require any Lender to
exercise any such right or shall affect the right of any Lender to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of the Borrower.

       Section 12.4 Indemnification. THE LENDERS HEREBY SEVERALLY AGREE TO
INDEMNIFY THE ADMINISTRATIVE AGENT FROM AND HOLD THE ADMINISTRATIVE AGENT
HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED UNDER SECTIONS 13.1 AND 13.2, BUT
WITHOUT LIMITING THE OBLIGATIONS OF THE BORROWER UNDER SECTIONS 13.1 AND 13.2),
RATABLY IN ACCORDANCE WITH THEIR RESPECTIVE PERCENTAGES, ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS,
DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES), AND
DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED
BY, OR ASSERTED AGAINST THE ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED TO BE
TAKEN BY THE ADMINISTRATIVE AGENT UNDER OR IN RESPECT OF ANY OF THE LOAN
DOCUMENTS; PROVIDED, THAT NO LENDER SHALL BE LIABLE FOR ANY PORTION OF THE
FOREGOING TO THE EXTENT CAUSED BY THE ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS
INTENTION OF THE LENDERS THAT THE ADMINISTRATIVE AGENT SHALL BE INDEMNIFIED
HEREUNDER FROM AND HELD HARMLESS AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS,
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND
OR NATURE DIRECTLY OR INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR
CONTRIBUTORY NEGLIGENCE OF THE ADMINISTRATIVE AGENT. WITHOUT LIMITING ANY OTHER
PROVISION OF THIS SECTION, EACH LENDER AGREES TO REIMBURSE THE ADMINISTRATIVE
AGENT PROMPTLY UPON DEMAND FOR ITS PERCENTAGE OF ANY AND ALL OUT-OF-POCKET
EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) INCURRED BY THE ADMINISTRATIVE
AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL
PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL

TERM LOAN AGREEMENT - Page 39

<PAGE>

ADVICE IN RESPECT OF RIGHTS OR RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO
THE EXTENT THAT THE ADMINISTRATIVE AGENT IS NOT REIMBURSED FOR SUCH EXPENSES BY
THE BORROWER.

       Section 12.5 Independent Credit Decisions. Each Lender agrees that it has
independently and without reliance on the Administrative Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of the Borrower and the Obligated
Parties and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based upon such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or any of the other Loan
Documents. The Administrative Agent shall not be required to keep itself
informed as to the performance or observance by the Borrower or any Obligated
Party of this Agreement or any other Loan Document or to inspect the properties
or books of the Borrower or any Obligated Party. Except for notices, reports and
other documents and information expressly required to be furnished to the
Lenders by the Administrative Agent hereunder or under the other Loan Documents,
the Administrative Agent shall not have any duty or responsibility to provide
any Lender with any credit or other financial information concerning the
affairs, financial condition or business of the Borrower or any Obligated Party
(or any of their Affiliates) which may come into the possession of the
Administrative Agent or any of its Affiliates.

       Section 12.6 Several Commitments. The commitments to lend and other
obligations of the Lenders under this Agreement are several. No Lender shall be
responsible for any act or omission of any other Lender.

       Section 12.7 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Lenders, and the
Required Lenders may remove the Administrative Agent upon notice to the
Administrative Agent. If the Administrative Agent shall resign as Administrative
Agent under the Loan Documents or be removed by the Required Lenders, then the
Required Lenders shall appoint from among the Lenders a successor agent to the
Administrative Agent for the Lenders which successor agent shall be approved by
the Borrower, which shall not unreasonably withhold its approval and shall not
be required during the existence of any Default hereunder, whereupon such
successor agent shall succeed to the rights, powers and duties of the resigning
Administrative Agent and the term "Administrative Agent" shall mean such
successor agent effective upon its appointment, and the former Administrative
Agent's rights, powers and duties as the Administrative Agent shall be
terminated, without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Agreement. After the retiring
Administrative Agent's resignation hereunder as Agent the provisions of this
Article XII shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under the Loan Documents.

TERM LOAN AGREEMENT - Page 40

<PAGE>

                                  ARTICLE XIII

                                  Miscellaneous

       Section 13.1 Expenses. The Borrower hereby agrees to pay on demand: (a)
all out-of-pocket costs and expenses of the Administrative Agent in connection
with the preparation, negotiation, execution, and delivery of this Agreement and
the other Loan Documents and any and all amendments, modifications, renewals,
extensions, and supplements thereof and thereto, including, without limitation,
the reasonable fees and expenses of legal counsel for the Administrative Agent,
(b) all reasonable out-of-pocket costs and expenses of the Administrative Agent
and each Lender in connection with any Default and the enforcement of this
Agreement or any other Loan Document, including, without limitation, the
reasonable out-of-pocket fees and expenses of legal counsel for the
Administrative Agent and each Lender, (c) all transfer, stamp, documentary, or
other similar taxes, assessments, or charges levied by any Governmental
Authority in respect of this Agreement or any of the other Loan Documents, (d)
all reasonable out-of-pocket costs, expenses, assessments, and other charges
incurred in connection with any filing, registration, recording, or perfection
of any security interest or Lien contemplated by this Agreement or any other
Loan Document, and (e) all other reasonable out-of-pocket costs and expenses
incurred by the Administrative Agent in connection with this Agreement or any
other Loan Document, including, without limitation, all reasonable costs,
expenses, and other charges incurred in connection with obtaining any mortgagee
title insurance policy, survey, audit, or appraisal in respect of the
Collateral.

       Section 13.2 INDEMNIFICATION. EXCEPT FOR ACTS OR OMISSIONS CONSTITUTING
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A COURT OF COMPETENT
JURISDICTION, THE BORROWER SHALL INDEMNIFY THE ADMINISTRATIVE AGENT AND THE
LENDERS AND EACH OF THEIR RESPECTIVE AFFILIATES AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS
AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, REASONABLE COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES) TO
WHICH ANY OF THEM MAY BECOME SUBJECT (INCLUDING AS A RESULT OF THE ORDINARY
NEGLIGENCE OF ANY OF THEM) WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO
(A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR
ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS
CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY THE BORROWER OR ANY
SUBSIDIARY OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT
CONTAINED IN ANY OF THE LOAN DOCUMENTS, OR (D) ANY INVESTIGATION, LITIGATION, OR
OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE FOREGOING.

       Section 13.3 Limitation of Liability. Neither the Administrative Agent
nor any of the Lenders nor any Affiliate, officer, director, employee, attorney,
or agent of the Administrative Agent or any of the Lenders shall have any
liability with respect to, and the Borrower hereby

TERM LOAN AGREEMENT - Page 41

<PAGE>

waives, releases, and agrees not to sue any of them upon, any claim for any
special, indirect, incidental, or consequential damages suffered or incurred by
the Borrower in connection with, arising out of, or in any way related to, this
Agreement or any of the other Loan Documents, or any of the transactions
contemplated by this Agreement or any of the other Loan Documents. The Borrower
hereby waives, releases, and agrees not to sue the Administrative Agent or the
Lenders or any of such Person's Affiliates, officers, directors, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the other Loan Documents. Nothing contained in this Section shall
affect the rights of the Borrower to collect actual damages awarded to them
against any of the Administrative Agent, the Lenders or any Affiliate of any of
the foregoing Persons.

       Section 13.4 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by the Administrative Agent or any
of the Lenders shall have the right to act exclusively in the interest of such
Persons and shall have no duty of disclosure, duty of loyalty, duty of care, or
other duty or obligation of any type or nature whatsoever to the Borrower or any
other Person.

       Section 13.5 Administrative Agent and Lenders Not Fiduciary. The
relationship between the Borrower, on one hand, and the Administrative Agent and
the Lenders, on the other hand, is solely that of debtor and creditor, and no
such Person has any fiduciary or other special relationship with the Borrower,
and no term or condition of any of the Loan Documents shall be construed so as
to deem the relationship between the Borrower and such Persons to be other than
that of debtor and creditor

       Section 13.6 Equitable Relief. The Borrower recognizes that in the event
the Borrower fails to pay, perform, observe, or discharge any or all of the
Obligations, any remedy at law may prove to be inadequate relief to the
Administrative Agent and the Lenders. The Borrower therefore agrees that the
Administrative Agent and the Lenders, if the Administrative Agent or the Lenders
so request, shall be entitled to temporary and permanent injunctive relief in
any such case without the necessity of proving actual damages.

       Section 13.7 No Waiver; Cumulative Remedies. No failure on the part of
the Administrative Agent or any Lender to exercise and no delay in exercising,
and no course of dealing with respect to, any right, power, or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power, or privilege under this Agreement preclude
any other or further exercise thereof or the exercise of any other right, power,
or privilege. The rights and remedies provided for in this Agreement and the
other Loan Documents are cumulative and not exclusive of any rights and remedies
provided by law.

       Section 13.8 Successors and Assigns.

                (a) This Agreement shall be binding upon and inure to the
       benefit of the parties hereto and their respective successors and
       assigns. The Borrower may not assign or transfer any of its rights or
       obligations hereunder without the prior written consent of the
       Administrative Agent and all of the Lenders. Any Lender may sell
       participations to one or more banks or other institutions in or to all or
       a portion of its rights and obligations

TERM LOAN AGREEMENT - Page 42

<PAGE>

       under this Agreement and the other Loan Documents (including, without
       limitation, all or a portion of its Percentage of the outstanding Term
       Loan); provided, however, that (i) such Lender's obligations under this
       Agreement and the other Loan Documents (including, without limitation,
       its Percentage of the outstanding Term Loan) shall remain unchanged, (ii)
       such Lender shall remain solely responsible to the Borrower for the
       performance of such obligations, (iii) such Lender shall remain the
       holder of its Term Loan Note for all purposes of this Agreement, and (iv)
       the Borrower shall continue to deal solely and directly with such Lender
       in connection with such Lender's rights and obligations under this
       Agreement and the other Loan Documents. Participants have no rights under
       the Loan Documents except as provided below. No Lender may sell any
       participating interest under which the participant has any rights to
       approve any amendment, modification, or waiver of any Loan Document
       except as to matters in Section 13.10(a), (b) and (c).

                (b) The Borrower and each of the Lenders agree that any Lender
       (the "Assigning Lender") may, with the Administrative Agent's consent
       (which consent shall not be unreasonably withheld or delayed) and unless
       an Event of Default has occurred or the proposed assignment is to be made
       to another Lender or to a Lender Affiliate, the Borrower's consent, which
       consent of the Borrower shall not be unreasonably withheld or delayed, at
       any time assign to one or more other banks, or financial institutions or
       other entities all, or a proportionate part of all, of its rights and
       obligations under this Agreement and the other Loan Documents (including,
       without limitation, its Percentage of the outstanding Term Loan) (each an
       "Assignee"); provided, however, that (i) each such assignment shall be of
       a consistent, and not a varying, percentage of all of the Assigning
       Lender's Percentage of the outstanding Term Loan, rights and obligations
       under this Agreement and the other Loan Documents, (ii) except in the
       case of an assignment of all of a Lender's rights and obligations under
       this Agreement and the other Loan Documents, the amount of the
       outstanding Term Loan being assigned pursuant to each assignment
       (determined as of the date of the Assignment and Acceptance with respect
       to such assignment) shall in no event be less than $1,000,000, and (iii)
       the parties to each such assignment shall execute and deliver to the
       Administrative Agent for its acceptance and recording in the Register (as
       defined below), an Assignment Agreement, together with the Term Note
       subject to such assignment, and a processing and recordation fee of
       $3,500 to be paid by the Assignee. Upon such execution, delivery,
       acceptance, and recording, from and after the effective date specified in
       each Assignment Agreement, which effective date shall be at least five
       Business Days after the execution thereof, or, if so specified in such
       Assignment Agreement the date of acceptance thereof by the Administrative
       Agent, (x) the assignee thereunder shall be a party hereto as a "Lender"
       and, to the extent that rights and obligations hereunder have been
       assigned to it pursuant to such Assignment Agreement, have the rights and
       obligations of a Lender hereunder and under the Loan Documents and (y)
       the Lender that is an assignor thereunder shall, to the extent that
       rights and obligations hereunder have been assigned by it pursuant to
       such Assignment Agreement, relinquish its rights and be released from its
       obligations under this Agreement and the other Loan Documents (and, in
       the case of an Assignment Agreement covering all or the remaining portion
       of a Lender's rights and obligations under the Loan Documents, such
       Lender shall cease to be a party thereto); provided that

TERM LOAN AGREEMENT - Page 43

<PAGE>

       the obligations of the Borrower under Section 13.1, 13.2 and 13.3 shall
       continue to apply to such Lender.

                (c) By executing and delivering an Assignment Agreement the
       Lender that is an assignor thereunder and the assignee thereunder confirm
       to and agree with each other and the other parties hereto as follows: (i)
       other than as provided in such Assignment Agreement, such Assigning
       Lender makes no representation or warranty and assumes no responsibility
       with respect to any statements, warranties, or representations made in or
       in connection with the Loan Documents or the execution, legality,
       validity, and enforceability, genuineness, sufficiency, or value of the
       Loan Documents or any other instrument or document furnished pursuant
       thereto; (ii) such Assigning Lender makes no representation or warranty
       and assumes no responsibility with respect to the financial condition of
       the Borrower or any Obligated Party or the performance or observance by
       the Borrower or any Obligated Party of its obligations under the Loan
       Documents; (iii) such assignee confirms that it has received a copy of
       the other Loan Documents, together with copies of the current financial
       statements dated a date acceptable to such assignee and such other
       documents and information as it has deemed appropriate to make its own
       credit analysis and decision to enter into such Assignment Agreement;
       (iv) such assignee will, independently and without reliance upon the
       Administrative Agent or such assignor and based on such documents and
       information as it shall deem appropriate at the time, continue to make
       its own credit decisions in taking or not taking action under this
       Agreement and the other Loan Documents; (v) such assignee appoints and
       authorizes the Administrative Agent to take such action as agent on its
       behalf and exercise such powers under the Loan Documents as are delegated
       to the Administrative Agent by the terms thereof, together with such
       powers as are reasonably incidental thereto; and (vi) such assignee
       agrees that it will perform in accordance with their terms all of the
       obligations which by the terms of the Loan Documents are required to be
       performed by it as a Lender.

                (d) The Administrative Agent shall maintain a copy of each
       Assignment Agreement delivered to and accepted by it and a register for
       the recordation of the names and addresses of the Lenders and the
       principal amount of the Term Loan owing to each Lender from time to time
       (the "Register"). The entries in the Register shall be conclusive and
       binding for all purposes, absent manifest error, and the Borrower, the
       Administrative Agent, and the Lenders may treat each Person whose name is
       recorded in the Register as a Lender hereunder for all purposes under the
       Loan Documents. The Register shall be available for inspection by the
       Borrower or any Lender at any reasonable time and from time to time upon
       reasonable prior notice.

                (c) Upon its receipt of an Assignment Agreement executed by an
       Assigning Lender and assignee, together with any Term Loan Note subject
       to such assignment, the Administrative Agent shall, if such Assignment
       Agreement has been completed and is in the form satisfactory to the
       Administrative Agent in its reasonable discretion, (i) accept such
       Assignment Agreement, (ii) record the information contained therein in
       the Register, and (iii) give prompt written notice thereof to the
       Borrower. Within five (5) Business Days after its receipt of such notice,
       the Borrower, at its expense, shall execute and deliver to the
       Administrative Agent in exchange for the surrendered Term Loan

TERM LOAN AGREEMENT - Page 44

<PAGE>

       Notes, new Term Loan Notes to the order of such assignee in an amount
       equal to the Percentage of the outstanding Term Loan assumed by it
       pursuant to such Assignment Agreement and, if the Assigning Lender has
       retained a portion of its Percentage of the outstanding Term Loan, new
       Term Loan Notes to the order of the Assigning Lender in an amount equal
       to the amount of the outstanding Term Loan retained by it hereunder (each
       such promissory note shall constitute a "Term Loan Note" for purposes of
       the Loan Documents). Such new Term Loan Notes shall be in an aggregate
       principal amount of the surrendered Term Loan Notes, shall be dated the
       last interest payment date prior to the effective date of such Assignment
       Agreement and shall otherwise be in substantially the form of the
       appropriate Term Loan Notes initially issued pursuant hereto with
       appropriate changes.

                (f)  Any Lender may, in connection with any assignment or
       participation or proposed assignment or participation pursuant to this
       Section, disclose to the assignee or participant or proposed assignee or
       participant, any information relating to the Borrower or its Subsidiaries
       furnished to such Lender by or on behalf of the Borrower or its
       Subsidiaries, so long as such assignee, participant or proposed assignee
       or participant agrees in writing to be bound the provisions of Section
       13.21 of this Agreement.

                (g)  Any Lender may at any time pledge or assign a security
       interest in all or any portion of its rights under this Agreement to
       secure obligations of such Lender, including any pledge or assignment to
       secure obligations to a Federal Reserve Bank and this Section shall not
       apply to any such pledge or assignment of a security interest; provided
       that no such pledge or assignment of a security interest shall release a
       Lender from any of its obligations hereunder or substitute any such
       pledgee or assignee for such Lender as a party hereto.

       Section 13.9  Survival. All representations and warranties made in this
Agreement or any other Loan Document or in any document, statement, or
certificate furnished in connection with this Agreement shall survive the
execution and delivery of this Agreement and the other Loan Documents, and no
investigation by the Administrative Agent or any closing shall affect the
representations and warranties or the right of the Lenders to rely upon them.
Without prejudice to the survival of any other obligation of the Borrower
hereunder, the obligations of the Borrower under Sections 13.1 and 13.2 shall
survive repayment of the Term Loan.

       Section 13.10 Amendments and Waivers. No amendment, modification or
waiver of, or consent with respect to, any provision of this Agreement or the
other Loan Documents shall in any event be effective unless the same shall be in
writing and signed and delivered by the Borrower and the Required Lenders, and
then any such amendment, modification, waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. No
amendment, modification, waiver or consent shall change the Percentage of any
Lender without the consent of such Lender. No amendment, modification, waiver or
consent shall (a) increase the amount of the Term Loan, (b) extend the date for
payment of any principal of or interest on the Term Loan or any fees or other
amounts payable hereunder, (c) reduce the principal amount of the Term Loan, the
rate of interest thereof or any fees or other amounts payable hereunder, (d)
release a Guaranty Agreement (other than as a result of a transaction permitted
hereunder) or all or substantially all of the Collateral, (e) amend, modify or
otherwise

TERM LOAN AGREEMENT - Page 45

<PAGE>

alter this Section, or (f) reduce the aggregate Percentage required to effect an
amendment, modification, waiver or consent without, in each case, the consent of
all Lenders. No provisions of Article XII or other provision of this Agreement
affecting the Administrative Agent in its capacity as such shall be amended,
modified or waived without the consent of the Administrative Agent.

       Section 13.11 Maximum Interest Rate. No provision of this Agreement or
any other Loan Document shall require the payment or the collection of interest
in excess of the maximum amount permitted by applicable law. If any excess of
interest in such respect is hereby provided for, or shall be adjudicated to be
so provided, in any Loan Document or otherwise in connection with this loan
transaction, the provisions of this Section shall govern and prevail and neither
the Borrower nor the sureties, guarantors, successors, or assigns of the
Borrower shall be obligated to pay the excess amount of such interest or any
other excess sum paid for the use, forbearance, or detention of sums loaned
pursuant hereto. In the event any Lender ever receives, collects, or applies as
interest any such sum, such amount which would be in excess of the maximum
amount permitted by applicable law shall be applied as a payment and reduction
of the principal of the indebtedness evidenced by such Lender's Term Note; and,
if the principal of such Lender's Term Note has been paid in full, any remaining
excess shall forthwith be paid to the Borrower. In determining whether or not
the interest paid or payable exceeds the Maximum Rate, the Borrower, the
Administrative Agent and the Lenders shall, to the extent permitted by
applicable law, (a) characterize any non-principal payment as an expense, fee,
or premium rather than as interest, (b) exclude voluntary prepayments and the
effects thereof, and (c) amortize, prorate, allocate, and spread in equal or
unequal parts the total amount of interest throughout the entire contemplated
term of the indebtedness evidenced by the Term Notes so that interest for the
entire term does not exceed the Maximum Rate.

       Section 13.12 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three Business Days
after being deposited in the mail, postage prepaid, or one day after being
entrusted to a reputable commercial overnight delivery service, or, in the case
of telecopy notice, when sent, confirmation of receipt received, addressed as
follows in the case of the Borrower and its Subsidiaries, the Administrative
Agent and the Lenders, or to such other address as may be hereafter notified by
such respective parties hereto:

The Borrower and its Subsidiaries:

            Pillowtex Corporation
            One Lake Circle Drive
            Kannapolis, NC 28081
            Attn: Treasurer
            Telephone: (704) 939-2976
            Telecopier: (704) 939-4441

TERM LOAN AGREEMENT - Page 46

<PAGE>

With copies to:

                  Pillowtex Corporation
                  4111 Mint Way
                  Dallas, TX 75236
                  Attn: John F. Sterling, Esq.
                  Telephone:  (214) 333-3225
                  Telecopier: (214) 467-0823

and

                  Jones, Day, Reavis & Pogue
                  2727 North Harwood Street
                  Dallas, TX 75201-1515
                  Attn: Thomas E. Gillespie, Esq.
                  Telephone:  (214) 969-5076
                  Telecopier: (214) 969-5100

Bank of America, in its capacities as the Administrative Agent and a Lender:

                  Bank of America, N.A.
                  1455 Market Street, 12th Floor
                  Mail Code CA5-701-12-09
                  San Francisco, California 94103
                  Attn: Gary Gordon Flieger
                  Telephone:  (415) 436-3484
                  Telecopier: (415) 503-5005

With a copy to:
                  Bank of America, N.A.
                  901 Main Street, 66th Floor
                  Dallas, Texas 75202
                  Attn: William E. Livingstone, IV
                  Telephone:  (214) 209-2023
                  Telecopier: (214) 209-3533

With a copy to:
                  Winstead Sechrest & Minick, P.C.
                  5400 Renaissance Tower
                  1201 Elm Street
                  Dallas, Texas 75270
                  Attn: Douglass T. Wingo, Esq.
                  Telephone:  (214) 745-5135
                  Telecopier: (214) 745-5390

The Other Lenders: At the addresses set forth on the signature pages hereof and
                   the signature page of each Assignment Agreement;

TERM LOAN AGREEMENT - Page 47

<PAGE>

provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders, as the case may be, shall not be effective until received.

     Section 13.13 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas and the applicable
laws of the United States of America.

     Section 13.14 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     Section 13.15 Severability. Any provision of this Agreement held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.

     Section 13.16 Headings. The headings, captions, and arrangements used in
this Agreement are for convenience only and shall not affect the interpretation
of this Agreement.

     Section 13.17 Non-Application of Chapter 346 of Texas Finance Code. The
provisions of Chapter 346 of the Texas Finance Code (Vernon's Texas Finance Code
Ann.) are specifically declared by the parties hereto not to be applicable to
this Agreement or any of the other Loan Documents or to the transactions
contemplated hereby.

     Section 13.18 Construction. The parties hereto acknowledge that each of
them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review this Agreement and the other Loan Documents
with its legal counsel and that this Agreement and the other Loan Documents
shall be construed as if jointly drafted by the Borrower, the Administrative
Agent and the Lenders.

     Section 13.19 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY WAIVE ALL
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF
THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF
THE BORROWER, ADMINISTRATIVE AGENT OR ANY LENDER IN THE NEGOTIATION,
ADMINISTRATION, OR ENFORCEMENT THEREOF.

     Section 13.20 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT, THE TERM NOTES,
THE OTHER LOAN DOCUMENTS, AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN
CONNECTION HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

TERM LOAN AGREEMENT - Page 48

<PAGE>

     Section 13.21 Confidentiality. Each Lender and the Administrative Agent
agrees (on behalf of itself and each of its Affiliates, directors, officers,
employees and representatives) to use reasonable efforts to keep confidential,
in accordance with customary procedures for handling confidential information of
this nature and in accordance with safe and sound banking or investment
practices, any non-public information supplied to it by the Borrower or any of
its Affiliates pursuant to this Agreement, provided that nothing herein shall
limit the disclosure of any such information (a) to the extent required by
statute, rule, regulation or judicial process, (b) to counsel for any Lender or
the Administrative Agent, (c) to bank or other examiners, regulatory bodies,
auditors or accountants of any Lender, (d) to the Administrative Agent or any
other Lender or any Affiliate thereof, (e) in connection with any litigation
relating to the transactions contemplated by the Loan Documents to which any one
or more of Lenders is a party, (f) to the extent necessary in connection with
the exercise of any rights or remedies under this Agreement or any other Loan
Document, or (g) to any Assignee or participant (or prospective Assignee or
participant) or to any direct or indirect contractual counterparties in swap
agreements or to the professional advisors of such swap counterparties so long
as such Assignee or participant (or prospective Assignee or participant) or
direct or indirect contractual counterparties in swap agreements or such swap
counterparties' professional advisors agrees to handle such information in
accordance with the provisions of this Section 13.21.

                     Remainder of page intentionally blank.
                             Signature pages follow.

TERM LOAN AGREEMENT - Page 49

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.

                                            BORROWER:
                                            ---------

                                            PILLOWTEX CORPORATION

                                            By: /s/ MICHAEL R. HARMON
                                                --------------------------------
                                                Executive Vice President and
                                                Chief Financial Officer

                                            ADMINISTRATIVE AGENT:
                                            ---------------------

                                            BANK OF AMERICA, N.A., as
                                            Administrative Agent and a Lender

                                            By: /s/ WILLIAM E. LIVINGSTONE, IV
                                                --------------------------------
                                                Managing Director

TERM LOAN AGREEMENT - Page 50

<PAGE>

                                  OTHER LENDERS

                                 [SEE ATTACHED]

TERM LOAN AGREEMENT - Page 51

<PAGE>

OCM ADMINISTRATIVE SERVICES II, L.L.C.

                              By:   Oaktree Capital Management, LLC,
                              Its:  Manager

                              By:   /s/ MARIUSZ J. MAZUREK
                                    --------------------------------
                                    Senior Vice President

                              By:   /s/ KENNETH LIANG
                                    --------------------------------
                                    Managing Director

                              Address for Notices:

                              c/o Oaktree Capital Management, LLC
                              333 South Grand Avenue, 28th Floor
                              Los Angeles, California 90071
                              Attn:  Mariusz Mazurek
                              Telephone:  (213) 830-6405
                              Telecopier: (213) 830-6494

TERM LOAN AGREEMENT - Page 52

<PAGE>

                                    LEHMAN COMMERCIAL PAPER, INC.

                                    By:    /s/ G. ANDREW KEITH
                                           --------------------------------
                                           Authorized Signatory

                                    Address for Notices:

                                           745 Seventh Avenue
                                           New York, NY 10019
                                    Attn:  Andrew Keith
                                    Telephone:  212-526-4059
                                                -----------------------------
                                    Telecopier: _____________________________

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                BANC OF AMERICA STRATEGIC SOLUTIONS, INC.

                                      /s/ WILLIAM E. LIVINGSTONE, IV
                                      --------------------------------------
                                      Managing Director

                                Address for Notices:

                                Bank of America, N.A.
                                901 Main Street, 66th Floor
                                Dallas, Texas 75202
                                Attn: William E. Livingstone, IV
                                Telephone:  (214) 209-2023
                                Telecopier: (214) 209-3533

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                               PW WILLOW LLC, by Bond Street Capital, LLC,
                               as agent

                               By:   /s/ SAM KIM
                                     -----------------------------------
                                     Managing Member

                               Address for Notices:

                               700 Palisade Avenue
                               Englewood Cliffs, NJ 07632
                               Attn: Sam Kim (or/and Mark Black)
                               Telephone:  (201) 567-5050
                               Telecopier: (201) 567-5055

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                 GENERAL ELECTRIC CAPITAL CORPORATION

                                 By:   /s/ WILLIAM S. RICHARDSON
                                       -------------------------------------
                                       Duly Authorized Signatory

                                 Address for Notices:

                                 GE Capital - Bank Loan Group
                                 60 Long Ridge Road, 4th Floor
                                 Stamford, CT 06927
                                 Attn: William S. Richardson
                                 Telephone:  (203) 316-7589
                                 Telecopier: (203) 316-7978

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                           CREDIT LYONNAIS - NEW YORK BRANCH

                           By:    /s/ JOHN-CHARLES VAN ESSCHE
                                  -----------------------------------------
                                  Vice President

                           Address for Notices:

                           ________________________________________________

                           ________________________________________________

                           ________________________________________________
                           Attn:  Simone Kerner
                           Telephone:  (212) 261-7731
                           Telecopier: (212) 261-3259

                                 Term Loan Agreement
                                    Signature Page

<PAGE>

                            WELLS FARGO BANK TEXAS, NATIONAL ASSOCIATION

                            By:   /s/ MICHAEL B. SULLIVAN
                                  ----------------------------------------
                                  Senior Vice President

                            Address for Notices:

                            MAC: T5303-047
                            1445 Ross Avenue - Suite 400
                            Dallas, Texas 75202-2812
                            Attn: Michael Sullivan
                            Telephone:  (214) 740-1595
                            Telecopier: (214) 969-0906

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                          FRANKLIN FLOATING RATE TRUST

                          By:  /s/ RICHARD HSU
                               -----------------------------------
                               Assistant Vice President

                          Address for Notices:

                          Franklin Templeton Investments
                          One Franklin Parkway Bldg. 920, Floor 2
                          San Mateo, CA 94403
                          Attn: Matthew Gregory
                          Telephone:  (650) 312-3309
                          Telecopier: (650) 312-3346

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                  SOCIETE GENERALE

                                  By:   /s/ ROBERT H. TAPLETT
                                        -----------------------------------
                                        Director

                                  Address for Notices:

                                  2001 Ross Avenue, #4800
                                  Dallas, TX 75201
                                  Attn: Trina Hoover
                                  Telephone:  (214) 979-2742
                                  Telecopier: (214) 754-0171

                                  cc:    1221 Avenue of the Americas
                                         New York, NY 10020

                                  Attn: Robert H. Taplett
                                  Telephone:  (212) 278-7278
                                  Telecopier: (212) 278-6462

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                   COMERICA BANK

                                   By:   /s/ JOE W. SULLIVAN
                                         -------------------------------
                                         Senior Vice President

                                   Address for Notices:

                                   Comerica Bank - Texas
                                   1508 W. Mockingbird
                                   Dallas, Texas 75235
                                   Attn: Robin Kain - MC 6510
                                   Telephone:  (214) 589-4708
                                   Telecopier: (214) 589-4724

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                            UBS AG, STAMFORD BRANCH

                                            By: /s/ ANTHONY N. JOSEPH
                                                --------------------------------
                                                Associate Director
                                                Banking Products Services, US

                                            By: /s/ LYNNE B. ALFARONE
                                                --------------------------------
                                                Associate Director
                                                Banking Products Services, US

                                            Address for Notices:

                                            677 Washington Boulevard
                                            Stamford, CT 06901
                                            Telephone:  (203) 719-3176
                                            Telecopier: (203) 719-3180

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                  B III CAPITAL PARTNERS, L.P.

                                  By: DDJ Capital III, LLC, its General Partner

                                  By: DDJ Capital Management, LLC, Manager

                                  By: /s/ ROBERT L. HOCKETT
                                      ------------------------------------------
                                      Authorized Signatory

                                  By: /s/ WENDY SCHNIPPER CLAYTON
                                      ------------------------------------------
                                      Authorized Signatory

                                  Address for Notices:

                                  c/o DDJ Capital Management, LLC
                                  141 Linden Street, Suite 4
                                  Wellesley, MA 02482-7910
                                  Attn: Wendy Schnipper Clayton, Esq.
                                  Telephone:  781-283-8500
                                  Telecopier: 781-283-8541

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                            CONTINENTAL CASUALTY COMPANY

                                            By: /s/ MARILOU R. MCGIRR
                                                --------------------------------
                                                Vice President

                                            Address for Notices:

                                            333 South Wabash Avenue
                                            Chicago, IL 60685
                                            Attn:  Karla Kambic
                                            Telephone:  (312) 822-1337
                                            Telecopier: (312) 817-1680

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                            FLEET NATIONAL BANK

                                            By:  /s/ G. CHRISTOPHER MILLER
                                                 -------------------------------
                                                 Vice President

                                            Address for Notices:

                                            777 Main Street
                                            Mail Stop: CT EH 40221A
                                            Hartford, CT 06115
                                            Attn:  Christopher Miller
                                            Telephone:  (860) 986-1563
                                            Telecopier: (860) 986-2435

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                       ARK CLO 2000-1, LIMITED

                                       By: Patriarch Partners, LLC
                                           Collateral Manager to ARK CLO 2000-1,
                                           Limited

                                       By: /s/ LYNN TILTON
                                           ---------------------------------
                                           Authorized Signatory

                                       Address for Notices:

                                       40 Wall Street - 25th Floor
                                       New York, NY 10005
                                       Attn:  Lynn Tilton
                                       Telephone:  (212) 825-0550
                                       Telecopier: (212) 825-2038

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                               REGIMENT CAPITAL LTD.

                               By:  Regiment Capital Management, LLC
                                    as its Investment Advisor

                               By:  Regiment Capital Advisors, LLC
                                    its Manager and pursuant to delegated
                                    authority

                               By:  /s/ TIMOTHY PETERSON
                                    --------------------------------------
                                    President

                               Contact & Address for Notices:

                               70 Federal Street, 7th Floor
                               Boston, MA 02110
                               Attn: Brooke Carroll
                               Telephone:  (617) 488-1600
                               Telecopier: (617) 488-1660

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                               VAN KAMPEN CLO I, LIMITED

                               By:   VAN KAMPEN MANAGEMENT, INC.
                                     as Collateral Manager

                               By:   /s/ WILLIAM LENGA
                                     ---------------------------------------
                                     Vice President

                               Address for Notices:

                               __________________________________________

                               __________________________________________

                               __________________________________________

                               Attn: ____________________________________

                               Telephone:________________________________

                               Telecopier:_______________________________

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                               KZH CYPRESSTREE-1 LLC

                               By:   /s/ SUSAN LEE
                                     ----------------------------------
                                     Authorized Agent

                               Address for Notices:

                               140 E. 45th Street, 11th Floor
                               New York, NY 10017
                               Attn: Virginia R. Conway
                               Telephone:  (212) 622-9353
                               Telecopier: (212) 622-0123

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                               VAN KAMPEN CLO II, LIMITED

                               By:   Van Kampen Management, Inc.,
                                     as Collateral Manager

                               By:   /s/ WILLIAM LENGA
                                     --------------------------------------
                                     Vice President

                               Address for Notices:

                               ____________________________________________

                               ____________________________________________

                               ____________________________________________

                               Attn: ______________________________________

                               Telephone:__________________________________

                               Telecopier:_________________________________

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                               T. ROWE PRICE RECOVERY FUND II, L.P.

                               By:   /s/ KIM Z. GOLDEN
                                     ------------------------------------
                                     Managing Director

                               Address for Notices:

                               T. Rowe Price Recovery Fund II, L.P.
                               100 E. Pratt St.
                               Baltimore, MD 21202
                               Attn: Mr. Kim Z. Golden
                               Telephone:  (410) 345-6703
                               Telecopier: (410) 783-4285

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                          WILLIAM E. SIMONS & SONS SPECIAL
                                          SITUATION PARTNERS, II, L.P.

                                          By: /s/ DALE LESHAW
                                              ----------------------------------
                                              Principal

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                            SATELLITE SENIOR INCOME FUND, LLC

                                            By: /s/ MARK D. SONNINO
                                                --------------------------------
                                                Principal

                                            Address for Notices:

                                            Satellite Asset Management, L.P.
                                            10 East 50th Street, 21st Floor
                                            New York, NY 10022
                                            Attn: Gene Ko
                                            Telephone:  (212) 209-2032
                                            Telecopier: (212) 209-2010

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                     B III-A CAPITAL PARTNERS, L.P.

                                     By: GP III-A, LLC, its General Partner

                                     By: DDJ Capital Management, LLC, Manager

                                     By: /s/ ROBERT L. HOCKETT
                                         ---------------------------------------
                                         Authorized Signatory

                                     By: /s/ WENDY SCHNIPPER CLAYTON
                                         ---------------------------------------
                                         Authorized Signatory

                                     Address for Notices:

                                     c/o DDJ Capital Management, LLC
                                     141 Linden Street, Suite 4
                                     Wellesley, MA 02482
                                     Attn: Wendy Schnipper Clayton
                                     Telephone:  (781) 283-8500
                                     Telecopier: (781) 283-8541

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                              MARINER LDC

                                              By: /s/ C. HOWE II
                                                  ------------------------------
                                                  Director

                                              Address for Notices:

                                              __________________________________
                                              __________________________________
                                              __________________________________
                                              Attn: ____________________________
                                              Telephone:  ______________________
                                              Telecopier: ______________________

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                             BALANCED HIGH-YIELD FUND II LTD.

                                             By: ING CAPITAL ADVISORS, LLC,
                                                 as Asset Manager

                                             By: /s/ JOHN J. D'ANGELO
                                                 -------------------------------
                                                 Vice President

                                             Address for Notices:

                                             ING Capital Advisors, LLC
                                             New York, NY 10169
                                             Attn: John J. D'Angelo
                                             Telephone:  (212) 309-8576
                                             Telecopier: (212) 309-6482

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                                 BANKERS TRUST COMPANY

                                                 By:  /s/ PETER SCHELLBACH
                                                      --------------------------
                                                      Director

                                                 Address for Notices:

                                                 Bankers Trust Company
                                                 90 Hudson Street, 5th Floor
                                                 Jersey City, NJ 07302
                                                 Mail Stop: JCY05-0511
                                                 Attn:  John Pineiro
                                                 Telephone:  (201) 593-2183
                                                 Telecopier: (201) 593-2315

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                             BALANCED HIGH-YIELD FUND I LTD.

                                             By: ING CAPITAL ADVISORS, LLC,
                                                 as Asset Manager

                                             By: /s/ JOHN J. D'ANGELO
                                                 --------------------------
                                                 Vice President

                                             Address for Notices:

                                             ING Capital Advisors, LLC
                                             New York, NY 10169
                                             Attn: John J. D'Angelo
                                             Telephone:  (212) 309-8576
                                             Telecopier: (212) 309-6482

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                             WILLIAM E. SIMONS & SONS SPECIAL
                                             SITUATION PARTNERS, L.P.

                                             By: /s/ DALE LESHAW
                                                 -------------------------------
                                                 Principal

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                           BANK POLSKA KASA OPIEKI, S.A., NEW
                                           YORK BRANCH

                                           By: /s/ Harvey Winter
                                               --------------------------------
                                               Vice President

                                           Address for Notices:

                                           470 Park Avenue South
                                           New York, NY 10016
                                           Attn:  Harvey Winter
                                           Telephone:  (212) 251-1222
                                           Telecopier: (212) 679-5910

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                              CREDIT INDUSTRIEL ET COMMERCIAL

                                              By: /s/ ANTHONY ROCK
                                                  ------------------------------
                                                  Vice President

                                              By: /s/ MARCUS EDWARD
                                                  ------------------------------
                                                  Vice President

                                              Address for Notices:

                                              520 Madison Avenue, 37th Floor
                                              New York, NY 10022
                                              Attn: Anthony Rock
                                              Telephone: (212) 715-4666
                                              Telecopier: (212) 715-4535

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                                 CREDIT SUISSE FIRST BOSTON

                                                 By: /s/ DONALD E. POLLARD
                                                     ---------------------------
                                                     Managing Director

                                                 By: /s/ HOWARD SHAMS
                                                     ---------------------------
                                                     Authorized Signatory

                                                 Address for Notices:

                                                 Credit Suisse First Boston
                                                 11 Madison Avenue
                                                 New York, NY 10010
                                                 Attn: Ashwinee Sawh
                                                 Telephone:  (212) 538-2905
                                                 Telecopier: (212) 561-8926

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                             BANK OF AMERICA, N.A., as a Lender

                                             By: /s/ LAURA T. SWEET
                                                 -------------------------------
                                                 Assistant Vice President

                                             Address for Notices:

                                             Bank of America, N.A.
                                             101 N. Tryon Street NC1-001-15-01
                                             Charlotte, NC 28255
                                             Attn: Bobbie Boratea
                                             Telephone:  (704) 386-3933
                                             Telecopier: (704) 409-0072

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                         FIDELITY ADVISOR SERIES II: Fidelity
                                         Advisor Floating Rate High Income Fund

                                         By: /s/ JOHN H. COSTELLO
                                             -----------------------------------
                                                Assistant Treasurer

                                         Address for Notices:

                                         _______________________________________
                                         _______________________________________
                                         _______________________________________
                                         Attn: Lisa Rymut
                                         Telephone:  (617) 392-8134
                                         Telecopier: (617) 476-5174

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                                FIDELITY FIXED INCOME TRUST
                                                Fidelity High Income Fund

                                                By: /s/ JOHN H. COSTELLO
                                                    ----------------------------
                                                    Assistant Treasurer

                                                Address for Notices:

                                                ________________________________
                                                ________________________________
                                                ________________________________
                                                Attn: Lisa Rymut
                                                Telephone:  (617) 392-8134
                                                Telecopier: (617) 476-5174

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                                 LAZARD DEBT RECOVERY FUND, LP

                                                 By: /s/ DAVID L. TASHJIAN
                                                     ---------------------------
                                                     Managing Director

                                                 Address for Notices:

                                                 30 Rockefeller Plaza
                                                 New York, NY 10020
                                                 Attn: Linda Gillin
                                                 Telephone:  (212) 632-6832
                                                 Telecopier: (212) 632-6655

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                            MOUNTAIN CAPITAL CLO I LTD.

                                            By:  /s/ GUY MAJOR
                                                 -------------------------------
                                                 Director

                                            Address for Notices:

                                            Mountain Capital CLO I Ltd.,
                                            c/o Mizuho Financial Group,
                                            32nd Floor, 1251 Avenue of the
                                            Americas, New York, NY 10020
                                            Attn: Mark Hanslin
                                            Telephone:  (212) 282-4977
                                            Telecopier: (212) 282-9710

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                        VAN KAMPEN
                                        SENIOR INCOME TRUST

                                        By: Van Kampen Investment Advisory Corp.

                                        By: /s/ BRAD LANGS
                                            ------------------------------------
                                            Vice President

                                        Address for Notices:

                                        ________________________________________
                                        ________________________________________
                                        Attn: __________________________________
                                        Telephone:  ____________________________
                                        Telecopier: ____________________________

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                            SILVER OAK CAPITAL, L.L.C.

                                            By:  /s/ JEFFREY H. ARONSON
                                                 -------------------------------
                                                 Authorized Signatory

                                            Address for Notices:

                                            Angelo Gordon & Co.
                                            245 Park Avenue, 26th Floor
                                            New York, NY 10167
                                            Attn: James Malley
                                            Telephone:  (212) 692-2034
                                            Telecopier: (212) 867-6395

                               Term Loan Agreement
                                 Signature Page

<PAGE>

                                     MIZUHO CORPORATE BANK, LTD.

                                     By:  /s/ CHRISTOPHER FAHEY
                                          --------------------------------------
                                          Vice President

                                     Address for Notices before April 15, 2002:

                                     1633 Broadway, 40th Floor
                                     New York, NY 10019
                                     Attn: Christopher Fahey
                                     Telephone:  (212) 649-0347
                                     Telecopier: (212) 541-4805

                                     Address for Notices after April 15, 2002:

                                     1251 Avenue of the Americas, 30th Floor
                                     New York, NY 10019
                                     Attn: Christopher Fahey
                                     Telephone:  _______________________________
                                     Telecopier: _______________________________

                              Term Loan Agreement
                                 Signature Page

<PAGE>

                                            PB CAPITAL CORPORATION

                                            By: /s/ EVON M. CONTOS
                                                --------------------------------
                                                Managing Director

                                            By: /s/ CHRISTOPHER J. RUZZI
                                                --------------------------------
                                                Vice President

                                            Address for Notices:

                                            590 Madison Avenue
                                            New York, NY 10022
                                            Attn: Ms. Lilianne Badette
                                            Telephone:  (212) 756-5503
                                            Telecopier: (212) 756-5536

                               Term Loan Agreement
                                 Signature Page<PAGE>

                                                                   Exhibit 10.15

   Confidential treatment has been requested for portions of this exhibit. The
    copy filed herewith omits the information subject to the confidentiality
   request. Omissions are designated as *. A complete version of this exhibit
     has been filed separately with the Securities and Exchange Commission.

                AT&T MNS and NetSolve CONTRACT SERVICES AGREEMENT

                                                                Amendment No. 16

The Contract Services Agreement effective August 1, 1995, between NetSolve,
Incorporated ("NetSolve") and AT&T Corp. ("Contract") as heretofore modified by
Amendments Number 5 and 11.0(collectively the "Agreement") is further amended as
follows effective as of January 1, 2002 ("Amendment No. 16).

Paragraphs 1-4, 7 and 24 are to be deleted in Amendment Number 11.0 and replaced
with the following for purposes of this Amendment No. 16. All paragraphs of
Amendment Number 5 other than 1-4 and 7 remain in effect with respect to any
other amendments to the Contract and this Amendment Number 16 unless any such
paragraphs are specifically deleted or revised in an amendment. Attachments A,
B, H and H-1, and Appendices A and B which are attached to this Amendment 16,
are incorporated herein.

Paragraph 1 - Statement of Work

NetSolve shall provide services ("Services") to AT&T in support of AT&T's
Managed Network Solutions (MNS) Service offering as defined and in accordance
with the "Statement Of Work," (which is comprised of Attachments A, H and H-1,
Appendices A and B to Amendment Number 11.0). Services shall be available to
AT&T in the United States and Canada and, subject to mutual agreement on pricing
and DMOQs, in other countries. Modifications to the Statement of Work may be
requested from time to time by AT&T and any modifications to Attachments A, H,
H-1 or Appendices A and B shall be approved and incorporated into this Amendment
Number 16 upon the written agreement of both parties. The pricing contained
herein shall apply to Services requested or any modification, provided that the
modifications requested do not require the furnishing of more material or labor
by NetSolve or longer times for performance of services. NetSolve shall
immediately notify AT&T's Contract Representative, in writing, of any requested
modification which NetSolve feels will require an increase to the prices
contained in Paragraph 4-Payment for Services, and shall furnish the amount of
such proposed increase in such writing. Following delivery of such notice,
NetSolve shall continue to provide Services without modification but shall not
institute any such modification until the AT&T Contract Representative and
NetSolve agree, in writing, to the appropriate charges.

Paragraph 2 - CONTRACT REPRESENTATIVE

AT&T's MNS Contract Representative is *. AT&T will notify NetSolve in writing if
a new Contract Representative is designated by AT&T. Notice of price changes to
be given hereunder shall be addressed by NetSolve to Mr. *, AT&T, *, Austin, TX
78759 and Mr. *, AT&T Supplier Management Division, Room 3D151D, 900 Route
202/206 North, Bedminster, NJ 07921.

Paragraph 3 - TERM

The effective date of this Amendment Number 16 is January 1, 2002 ("Effective
Date"). AT&T may place Orders with NetSolve under this Amendment Number 16 from
the Effective Date through and including June 30, 2003 (the "Ordering Period").
An Order shall be defined herein as a written order placed by AT&T to NetSolve
subject to termination as set forth in Paragraph 24 and shall not be defined
herein to be orders placed by AT&T's End user customer to AT&T. For purposes of
this Amendment 16, "AT&T End User Customer" or "End user customer" means an AT&T
end user customer to which NetSolve is providing Services pursuant to this
Amendment 16. The Term of this Amendment shall begin on the Effective Date and
shall terminate on February 28, 2004 (the "Expiration Date"). Any other
extensions of this Amendment Number 16 beyond the Expiration Date, or any other
continued work beyond the Expiration Date, shall be pursuant to a written
Agreement signed by both parties.

                            AT&T/NETSOLVE PROPRIETARY                     Page 1

<PAGE>

Paragraph 4 - PAYMENT FOR SERVICES

A. For services performed by NetSolve under this Amendment Number 16, AT&T will
pay NetSolve a monthly recurring charge for each Router Site. The monthly
recurring charges are set forth in Tables 1 and 2. In addition, AT&T will pay
certain one time, non-recurring charges and Time and Material (T&M) charges as
set forth in Table 1 below. .

B. The following is fixed for the term of this Amendment Number 16:

     (i)  Prices for the services in Items 1, 2, 3, 7, 8, 9, 10, 11 and 12 of
          Table 1, and

     (ii) The percentage fees in Item 5.

   The following pricing may change during the term of this Amendment Number 16:

     (i)  Prices for Item 5, as based on the actual manufacturer's invoice or
          list price, and/or

     (ii) Prices for Items 4 and 6 upon sixty (60) days written notice, only if
          NetSolve's suppliers change the underlying prices to NetSolve, in
          which case NetSolve shall only change its prices to AT&T by the same
          percentage (up or down) as the percentage change from NetSolve's
          suppliers to NetSolve.) At the same time NetSolve provides notice of a
          price change by NetSolve's supplier(s), NetSolve shall provide
          documentation to AT&T describing the underlying cost change and a
          calculation, as necessary, to support the price change. If AT&T does
          not find an error in the pricing provided by NetSolve within the above
          sixty (60) day notice period, the prices for Items 4 and 6 of Table 1
          shall be changed effective at the end of the notice period.

Any change to the price per Item 4 (pursuant to the terms above) shall be
applied to new Orders placed by AT&T after AT&T's receipt of NetSolve's notice
of the price change which will be reflected on the Customer Service Order
("CSO").

Any change to the price for Item 6 (pursuant to the terms above) shall be
applied to new Orders placed by AT&T after AT&T's receipt of NetSolve's notice
of the price change, or for existing Orders, the new pricing shall be applied as
of the next annual anniversary of the service start date for each existing
Order. NetSolve shall provide a summary of such prices to AT&T quarterly.

C. NetSolve will issue a credit to AT&T for Services performed in January in an
amount equal to the difference in price per this Amendment Number 16 and the
prior Amendment Number 11.0, such credit to be issued as a lump sum amount for
each applicable item in Table 1. NetSolve will make reasonable efforts to change
the pricing in its system prior to sending invoices for Services provided in
February but if unable to make such changes prior to the billing cutoff for the
February invoice, may also issue a lump sum credit for February. Thereafter,
NetSolve's billing shall reflect the pricing in this Amendment Number 16 on a
per line item basis and NetSolve may submit its billing in electronic form
without also submitting a paper copy.

D. NetSolve will not bill AT&T for any charges under Items 2 or 6 of Table 1 for
periods earlier than forty-five (45) days from the invoice date unless the
billing was deferred due to a delay by AT&T or its end user customer in
implementing Services.

                            AT&T/NetSolve Proprietary                     Page 2

<PAGE>

<TABLE>
<CAPTION>
Table 1
------------------------------------------------------------------------------------------------------------------------------------

                NetSolve Service Performed                                     Billing at List Price
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>
1.  Growth Markets Sales Process activities for
Express and MRS defined in Attachments H and H-1.                                $* per Proposal (1)
------------------------------------------------------------------------------------------------------------------------------------
2. Router Managed Hub and Non-Hub Sites                                          See Table 2 below.
services as defined in Attachment A
                                                                  Add $* per site per month for WAN Performance View
                                                                         Add $* per site per month for dial back-up /(2)/

------------------------------------------------------------------------------------------------------------------------------------
3. Implementation Coordination as defined in
Attachment A                                                $* per Hub or Non-Hub Site installed or moved ($* for international
                                                                                     locations).
------------------------------------------------------------------------------------------------------------------------------------
4. Installation Charge                                      Non-recurring fee per managed Router Site at $*(3) per site per
                                                            installation (international quotations will be priced individually upon
                                                            request). This charge will also apply when NetSolve coordinates a
                                                            domestic installation on AT&T's behalf utilizing AT&T's other vendor(s).
------------------------------------------------------------------------------------------------------------------------------------
5. Equipment procured by NetSolve for AT&T                   For routers - manufacturer's actual invoice to NetSolve plus *% of
                                                             Manufacturer's list price at the time the Order is executed.(4)
                                                             For other equipment - *% of manufacturer's list price at time of
                                                                      order from AT&T when NetSolve's vendor is used
------------------------------------------------------------------------------------------------------------------------------------
6. Customer Premise Equipment Maintenance                   NetSolve's current List Price (which shall be adjusted at least
                                                            quarterly to not exceed the then-current manufacturer's List
                                                            Price) at time of receipt of Order from AT&T (subject to annual
                                                            adjustment after implementation), less a discount of (i) *% off
                                                            of List Price effective January 1, 2002 (ii) *% off of List Price
                                                            effective July 1, 2002.(5)(7)
------------------------------------------------------------------------------------------------------------------------------------
7. Implementation Reschedule Fee                            $* per Router Site Postponed by AT&T or Customer beginning with the
                                                                     second such postponement for the Router Site.
------------------------------------------------------------------------------------------------------------------------------------
8. Time and Material Activities. Example of                                   $* per Hour (minimum 2 hour charge)
service to be applied  to:
                                                            All services are subject to a minimum of a two (2) hour T&M charge for
o    After Hours Installation (Work scheduled after            remote support or a four (4) hour T&M charge for on-site support.
     5:00 p.m.)

o    Multiple visits to customer site due to
     customer non-readiness

o    Site visit insisted by customer though problem
     resolution is determined and conveyed to be
     linked to non-managed customer equipment or due
     to fault of a party other than NetSolve or its
     subcontractors.
------------------------------------------------------------------------------------------------------------------------------------
9. Performance Reports                                        Reports
                                                              Included in charges under Item 2 above.
------------------------------------------------------------------------------------------------------------------------------------
10. Customer Migration Fee per site applicable to             Network Size
management center change for non-service related
reasons. (6)                                                  1-6 sites                                    $*
                                                              7- sites and above                           $*
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                           AT&T/NetSolve Proprietary                      Page 3

<PAGE>

<TABLE>
<CAPTION>

              NetSolve Service Performed                                      Billing at List Price
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>

------------------------------------------------------ -------------------------------------------------------------------------
11. Tele-Install for customers not desiring an
on-site installation per Item 4 above.                 $* flat charge per event for up to two hours of support. After two
                                                       hours, the charges per Item 8 shall apply, except that no minimum
                                                       number of hours will apply and billing will be in 30 minute increments

------------------------------------------------------ -------------------------------------------------------------------------
 12.  Shipping fees                                    NetSolve will utilize a shipping carrier designated by AT&T, with all
                                                       charges billed directly to AT&T by the carrier.
------------------------------------------------------ -------------------------------------------------------------------------
</TABLE>

Footnotes to Table 1:

(1)  Subject to 100% credit if network is managed by NetSolve (see Paragraph 4
     of Attachment H).

(2)  This charge for Orders accepted by NetSolve prior to the Effective Date
     will be at the amount in effect as of the Effective Date. Monthly DBU test
     results/reports shall be provided by NetSolve to all DBU customers by the
     later of (i) 120 days after the signature date of this Amendment 16 or (ii)
     sixty days following receipt of any information required from AT&T.

(3)  Additional charge at Time and Materials rate (see Item 8 in Table 1) for
     installations completed outside of 8:00 a.m. to 5:00 p.m. local time Monday
     through Friday.

(4)  The cost of the equipment will be invoiced as the equipment is received
     from the manufacturer. The percentage fee will be invoiced as the equipment
     is shipped to the end user customer. NetSolve will provide a monthly report
     detailing all inventory held by NetSolve, which has been billed to AT&T and
     not yet shipped to the end user customer.

(5)  Maintenance services purchased utilizing NetSolve's vendor may be canceled
     by AT&T only if the related Services per Item 2 of Table 1 are cancelled
     (as allowed in this Amendment 16) or if the AT&T end user customer elects
     to utilize its own vendor for such services and any such cancellation shall
     require ninety (90) days written notice to NetSolve by AT&T. NetSolve may
     not bill AT&T for such maintenance services after the later of (i) the end
     of the 90 day notice period or (ii) the effective cancellation date for the
     related Services per Item 2 of Table 1. Maintenance charges hereunder shall
     not predate installation of the applicable equipment by more than thirty
     (30) days unless the equipment has already been shipped to the end user
     customer and AT&T or the end user customer delay installation for more than
     thirty (30) days beyond the requested installation date. In any case where
     maintenance predates installation by more than 30 days, NetSolve shall
     provide a monthly exception report to AT&T.

(6)  This charge will include the creation and delivery of customer-specific
     information contained in NetSolve's database in a format to be mutually
     agreed upon, thirty (30) minutes of project management or engineering
     assistance per site (including any time required for turn-up of management
     PVC). Any time in excess of thirty (30) minutes per site on a per-customer
     basis will be billed at the rates in Item 8 of Table 1.

(7)  Modem Maintenance: NS will bill AT&T a monthly maintenance rate of $* per
     device for any modem under management by NS, where standard maintenance
     coverage is not available from a qualified vendor. This fee will cover all
     replacement costs to NetSolve, should the device become defective while
     under management.

Table 2

     The price to AT&T for the services under Item 2 of Table 1 are set forth
     below and are based on the Service Term and number of sites per each
     individual Order. No more than one end user customer can be included on a
     single Order.

     If the aggregate price is less than the amounts in Table 3 in any month,
     NetSolve will invoice AT&T a shortfall amount equal to the amount in Table
     3 less the actual aggregate amount.

                            AT&T/NetSolve Proprietary                     Page 4

<PAGE>

     All of the sites on each Order shall be installed within the Ramp-Up Period
     (defined as one-hundred-eighty (180) days after installation of the first
     site on the Order, unless AT&T and NetSolve mutually agree otherwise on a
     case by case basis). If all of the sites under an Order are not installed
     within the Ramp-Up Period, then NetSolve may bill AT&T based on the actual
     number of installed sites for that Order. Such price will be utilized only
     prospectively (i.e., there will be no adjustments to billing for prior
     months). Despite the foregoing, if the failure to meet the Ramp-Up schedule
     is due to NetSolve installation delays, then NetSolve shall bill AT&T based
     on the number of installed sites in the Order until the NetSolve delay is
     cured.

     If a customer cancels sites, NetSolve may base the pricing on the remaining
     number of sites. Provided, however, that if a customer cancels sites, due
     to a business downturn, then NetSolve shall not increase the price if the
     decrease in the number of sites results in a drop of only one level in
     Table 2. Notwithstanding the foregoing, NetSolve may base the pricing on
     the remaining number of sites if (i) AT&T has increased its price to the
     end user customer or (ii) the decrease results in the number of sites
     falling into the first level of Table 2. If a customer adds sites, the
     pricing will be the same price as the last Order for that customer.

TABLE 2 - January 1, 2002
<TABLE>
<CAPTION>

              ---------------------------------------------------------------------------------------------------------
                                   Domestic                                      Add for International
              ---------------------------------------------------------------------------------------------------------
              Number of Sites    12 Months       24 Months       36 Months       12 Months        24 or 36 Months
              ---------------------------------------------------------------------------------------------------------
              <S>           <C>           <C>              <C>             <C>              <C>
              ---------------------------------------------------------------------------------------------------------

              ---------------------------------------------------------------------------------------------------------
              1 - 3              $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              4 - 6              $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              7 - 25             $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              26 - 50            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              51 - 75            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              76 - 100           $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              101 - 150          $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              151 - 1,500        $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              1,501 - 3,000      $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              3,001 - 5,000      $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              5,001 +            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
</TABLE>

TABLE 2 - April 1, 2002
<TABLE>
<CAPTION>

              ---------------------------------------------------------------------------------------------------------
                                   Domestic                                      Add for International
              ---------------------------------------------------------------------------------------------------------
              Number of Sites    12 Months       24 Months       36 Months       12 Months        24 or 36 Months
              ---------------------------------------------------------------------------------------------------------
              <S>           <C>           <C>              <C>             <C>              <C>
              ---------------------------------------------------------------------------------------------------------

              ---------------------------------------------------------------------------------------------------------
              1 - 3              $*              $*              $*              $*               $*
             ---------------------------------------------------------------------------------------------------------
              4 - 6              $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              7 - 25             $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              26 - 50            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              51 - 75            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              76 - 100           $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              101 - 150          $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              151 - 1,500        $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              1,501 - 3,000      $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              3,001 - 5,000      $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              5,001 +            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------

</TABLE>
                                 AT&T/NetSolve Proprietary                Page 5

<PAGE>

TABLE 2 - July 1, 2002
<TABLE>
<CAPTION>
              ---------------------------------------------------------------------------------------------------------
                                   Domestic                                      Add for International
              ---------------------------------------------------------------------------------------------------------
              Number of Sites    12 Months       24 Months       36 Months       12 Months        24 or 36 Months
              ---------------------------------------------------------------------------------------------------------
              <S>                <C>             <C>             <C>             <C>              <C>
              1 - 3              $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              4 - 6              $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              7 - 25             $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              26 - 50            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              51 - 75            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              76 - 100           $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              101 - 150          $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              151 - 1,500        $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              1,501 - 3,000      $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              3,001 - 5,000      $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              5,001 +            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
</TABLE>

TABLE 2 - October 1, 2002
<TABLE>
<CAPTION>
              ---------------------------------------------------------------------------------------------------------
                                   Domestic                                      Add for International
              ---------------------------------------------------------------------------------------------------------
              Number of Sites    12 Months       24 Months       36 Months       12 Months        24 or 36 Months
              ---------------------------------------------------------------------------------------------------------
              <S>                <C>             <C>             <C>             <C>              <C>
              1 - 3              $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              4 - 6              $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              7 - 25             $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              26 - 50            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              51 - 75            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              76 - 100           $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              101 - 150          $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              151 - 1,500        $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              1,501 - 3,000      $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              3,001 - 5,000      $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
              5,001 +            $*              $*              $*              $*               $*
              ---------------------------------------------------------------------------------------------------------
</TABLE>

Notes to table 2:

Renewal service terms will be priced at the 36month rate for any renewal of 12
months or more.

Cancellation of Management Fees on Disconnects: NetSolve will cancel the billing
for management services effective two days after receipt of a valid disconnect
order from AT&T for requests that originate directly as a request from the end
user customer to NetSolve or that are identified as a result of the fault
isolation process - i.e., the end user customer has disconnected the managed
device or management circuit. NS will cancel the billing for management services
effective 30 days after receipt of a disconnect MACD from AT&T for all other
disconnect or service termination requests.

                        AT&T/NetSolve Proprietary                         Page 6

<PAGE>

Table 3

                            Minimum
                            Monthly
              Month         Billing

              Feb-02        *
              Mar-02        *
              Apr-02        *
              May-02        *
              Jun-02        *
              Jul-02        *
              Aug-02        *
              Sep-02        *
              Oct-02        *
              Nov-02        *
              Dec-02        *
              Jan-03        *
              Feb-03        *
              Mar-03        *
              Apr-03        *
              May-03        *
              Jun-03        *
              Until
              Ramp-down

(1) The Minimum Monthly Billing in Table 3 will be increased by the aggregate
totals of the Item 2, Table 1 monthly billing amounts of any End User Customer
that AT&T transfers to another network management center other than transfers
made as a result of an end user customer's dissatisfaction with NetSolve's
performance with respect to such customers. Revenue associated with End user
customer sites removed from AT&T as a result of either breach of Paragraph 6
herein or as a result of any right given to NetSolve in Paragraph 6 shall be
immediately deducted from Minimum Monthly Billing.

Paragraph 6 - COMPETITION

For purposes of this Amendment 16 only, Paragraph 6 of the Agreement as amended
by Amendment 5 is replaced by the following:

Paragraph 6 - COMPETITION

A. NetSolve shall not, without prior written authorization by AT&T MNS Business
Management, directly contract with any AT&T End User Customer to provide
substantially the same Services hereunder during the Term of this Amendment 16
and for a period of ninety (90) days thereafter. If NetSolve breaches or
violates the preceding sentence on more than one occasion, AT&T may, in its sole
discretion, immediately terminate this entire Amendment, upon written notice to
NetSolve, and immediately begin a ramp-down period of eight months. NetSolve
may, however, subcontract with an independent third party to provide
substantially the same Services to an AT&T End User Customer up to a maximum
total removal (including any sites obtained by NetSolve as a result of
NetSolve's breach of its duty not to directly contract) from AT&T of 750 End
User Customer Sites if the specific End User Customer opportunity was not
developed as a result of performing Services hereunder and did not involve any
Solicitation by NetSolve. Upon removal of more than 750 such End User Customer
sites as set forth herein, AT&T shall have the right to immediately terminate
this Amendment, upon written notice to NetSolve, and immediately begin a
ramp-down period of eight months. For purposes of this Paragraph 6 of Amendment
16, "AT&T End User Customer" means an end user customer to which NetSolve is
providing Services pursuant to this Amendment 16 and "Solicit" or "Solicitation"
means any contact with a AT&T End User Customer that is not

                        AT&T/NetSolve Proprietary                         Page 7

<PAGE>

allowed by this Amendment 16 including contact for the purpose of selling
directly to that customer the Services that NetSolve provides to AT&T under this
Amendment 16.

In addition, NetSolve agrees that with respect to the Services provided by
NetSolve under this Amendment 16 that it will not directly contact any End User
Customer or perform any activity with any End User Customer that is not
reasonably necessary in order for NetSolve to perform its responsibilities as
specifically set forth in the Agreement or this Amendment 16, including without
limitation, marketing activities, customer surveys, forums or meetings without
the specific prior written authorization of AT&T's MNS Contract Representative
as set forth in Paragraph 2. In the event that an AT&T End User Customer
contacts NetSolve with respect to the Services for a purpose that is not
reasonably necessary in order for NetSolve to perform its responsibilities as
specifically set forth in the Agreement or this Amendment 16, NetSolve shall
inform such AT&T End User Customer that such contact is not permitted and shall
terminate the contact and report immediately such contact to AT&T's MNS Contract
Representative as set forth in Paragraph 2. NetSolve shall not disclose to End
User Customers or potential customers that NetSolve is a supplier of contract
services to AT&T and shall represent itself to any End User Customer hereunder
as a representative of AT&T.

NetSolve acknowledges and agrees that all customer information derived as a
result of performing Services hereunder is the property of AT&T. NetSolve shall
promptly return all such customer information to AT&T upon termination or
expiration of this Amendment or the transfer of the applicable AT&T End User
Customer from NetSolve whichever is earlier with the exception of (i) Orders and
other business records which NetSolve must retain to support its financial and
tax reporting obligations and customary corporate record-keeping requirements;
and (ii) data contained electronically in NetSolve's databases which NetSolve
will purge in accordance with its standard practices. The applicable data in
item (ii) will be provided to AT&T in accordance with Item 10 of Table 1 of
Paragraph 4. In perpetuity, NetSolve shall not: (1) use any customer information
that it obtains as a result of performing the Services hereunder or the network
designs developed hereunder to compete with AT&T or others; and (2) NetSolve
should not disclose such customer information or network designs to any third
party, employees, agents, subcontractors or suppliers for the purpose of
competing with AT&T or others. Such disclosure shall not be prohibited: (i) if
NetSolve is required in a judicial, administrative or governmental proceeding to
disclose any such information, however, NetSolve shall provide AT&T with prompt
notice of such a requirement so AT&T may seek an appropriate protective order;
or (ii) in connection with a federal or state securities filing, or in any
effort to raise capital or borrow funds from any public or private source
provided NetSolve shall provide AT&T with prompt notice of any disclosure (for
example, in connection with a road show regarding a pending public offering of
securities, NetSolve would inform AT&T in advance of the types of information
NetSolve proposes to disclose such a length and estimated value of any contract
or amendment thereto with AT&T). AT&T may seek an appropriate protective order
if the parties do not reach agreement about the scope and content of any
proposed disclosure.

Paragraph 7 - INVOICING AND PAYMENT

Invoices for recurring monthly charges and maintenance shall be sent monthly in
advance by NetSolve, based on the number of Router Sites installed and
maintained as of the date the invoice was sent. Invoices for equipment purchased
from NetSolve shall be sent when the equipment is shipped by NetSolve to the
Router Site. Invoices for routers will be sent upon receipt by NetSolve of the
equipment. When the implementation of the end-user customer's network is
complete and operational NetSolve will invoice AT&T for the one-time,
non-recurring charges associated with the coordination and installation of
equipment (including the percentage fee for routers in Item 5 of Table 1).
Invoices shall be sent to AT&T at the address shown below, directed to the
personal attention of the person indicated below, or other representative as
designated by AT&T via any method mutually agreed, including electronic
submission of invoices. All undisputed amounts due shall be paid within
forty-five (45) days after AT&T's receipt of the invoice. Notice of any unpaid
disputed amount shall be given by AT&T to NetSolve in writing by AT&T prior to
expiration of the forty-five (45) day payment period. Any charges not paid or
disputed within such sixty (60) days after receipt of the invoice shall be
assessed a late charge of one-percent (1%) per month until paid.

Invoices to be sent to:
AT&T
Attn:  *

                          AT&T/NetSolve Proprietary                       Page 8

<PAGE>

Room 1B06
745 Rt. 202/206
Bridgewater, NJ  08807

Paragraph 24 - TERMINATION

Termination of this Amendment Number 16. -

a)   In the event NetSolve shall be in breach or default of any of the terms,
     conditions or covenants of this Agreement, or this Amendment Number 16, or
     in the event AT&T is in breach or default of its payment obligations under
     the Agreement, and such breach or default continues unremedied twenty-five
     (25) days after receipt of written notice, the non-defaulting party may
     terminate any Order(s) (except that if a given breach or default relates to
     only one end user customer and does not involve a breach of Paragraph 6
     herein, then only the Order(s) for that end user customer may be
     terminated) without any charge, obligation or liability. Notwithstanding
     the foregoing, AT&T's obligation to pay (i) for Services already received
     and accepted by AT&T, and (ii) any properly billed unpaid and undisputed
     charges (prior to resolution of the dispute) set forth under Item 10 of
     Table 2 of Paragraph 4, shall not be excused. If this Agreement is
     terminated by AT&T due to NetSolve's breach or default, AT&T may, at its
     discretion, begin a Ramp-Down period, not to exceed twelve (12) months, to
     transition existing Router Sites to other management centers without
     limitation as to the number of sites transitioned per month. In the event
     of such Ramp Down, the pricing shall not change, unless any such price
     change is made pursuant to Paragraph 4B.

b.)  The Agreement and all Orders under Attachments A and H may be terminated
     immediately by AT&T by notice in writing:

          i)   if NetSolve makes an assignment for the benefit of creditors
               (other than solely an assignment of moneys due);

          ii)  if NetSolve evidences an inability to pay debts as they become
               due, unless adequate assurance of such ability to pay is provided
               within thirty (30) days of such notice;

          iii) if a proceeding is commenced under a provision of the United
               States Bankruptcy Code, voluntarily by NetSolve;

          (iv) if a proceeding is commenced under a provision of the United
               States Bankruptcy Code, involuntarily, against NetSolve, and such
               proceeding is not dismissed within thirty (30) days.

c)   NetSolve shall provide AT&T with written notice, as soon as it may legally
     do so, if NetSolve merges with or is acquired by a competitor of AT&T. AT&T
     may terminate this Agreement at any time, without termination liability
     immediately by providing notice during the thirty day period following
     AT&T's receipt of written notice of the merger/acquisition that it will
     terminate this Agreement. If this Agreement is terminated by AT&T under
     this Paragraph 24c), AT&T may, at its discretion, begin a Ramp-Down period
     of twelve (12) months or less, to transition existing Router Sites to other
     management centers without limitation as to the number of sites
     transitioned per month. During the first twelve months of the Ramp-Down
     period the pricing for each Order shall not change (unless such pricing
     change is made pursuant to Paragraph 4B). Pricing for end user customers
     still managed by NetSolve after the first twelve months of migration shall
     be separately negotiated by the parties.

d)   Termination of Individual Orders placed pursuant to this Attachment A-AT&T
     may terminate individual Orders for Router Sites without charge, upon 30
     days written notice in the event AT&T has received a written notice from
     the end user customer that such end user customer: (i) is expanding and
     NetSolve is unable to provide the services defined in Attachment A; (ii)
     has terminated its services with AT&T due to a business downturn; or (iii)
     or has signed up for an AT&T service that NetSolve does not support for
     AT&T. The termination of individual Orders pursuant to this Paragraph 24d)
     shall not serve to reduce the minimum monthly billings set forth in Table 3
     of Paragraph 4 of this Amendment Number 16.

e)   In addition to its termination rights under Paragraphs 24a) through 24d)
     above, AT&T may cancel all Orders under this Agreement for any reason
     (termination for convenience) at any time after the Ordering Period in
     accordance with the Ramp-down schedule set forth in this Paragraph 24,
     provided that AT&T shall first have

                           AT&T/NetSolve Proprietary                      Page 9

<PAGE>

     provided NetSolve one-hundred-eighty (180) days prior written notice that
     it will begin a Ramp-Down. At the end of the notice period, an eight (8)
     month Ramp-Down will begin. Each month during the Ramp-Down, AT&T shall
     transition no more than 12.5% of the existing sites away from the NetSolve
     management center. After the eight (8) month Ramp-Down, Router Sites will
     still be managed by NetSolve only upon the mutual agreement of NetSolve and
     AT&T. Following receipt of the notice of termination under this Paragraph
     24e), NetSolve may reject Orders for new end user customers in its sole
     discretion.

f)   In the event of expiration or termination of this Agreement, in whole or in
     part, wherein all or some portion of the work will be performed by AT&T
     itself or elsewhere, NetSolve agrees to provide all reasonable efforts and
     full cooperation in the orderly transition of the work to AT&T designated
     Network Management centers, provision of reports, data configuration files
     and similar customer specific information and media necessary for
     continuation of the work transferred, continuation of work at reducing
     levels if necessary during a transition period and at reduced levels if
     work is transferred in part. Other than the charges in Item 10 of Table 1
     of Paragraph 4, there will be no additional charge to AT&T for such
     services.

Revisions/Additions to Attachments/Schedules:

     1.   The Performance Metrics and Credits set forth in Attachment A shall be
          retained for purposes of this Amendment including, without limitation,
          metric and credit applicable to Network Availability.

          The following credits will be reduced by *% effective January 1, 2002;
          *% effective April 1, 2002; *% effective July 1, 2002; and *%
          effective October 1, 2002:

          o    Pro-Active Monitoring

          o    Mean Time to Restore (MTTR) Overall

          o    Mean Time to Restore (MTTR) With Dispatch

          o    On Time Installation (First Sites)

          o    On Time Installation (Overall)

          The parties hereto agree that they will negotiate new mutually
          agreeable Performance Metrics and Credits within one hundred twenty
          (120) days of the effective date of this Amendment to replace or
          augment the current Performance Metrics and Credits. Until such time
          as the parties reach mutual agreement, the existing Performance
          Metrics and Credits shall continue to apply and any failure to reach
          such agreement shall not be considered a breach or default under the
          Agreement or Amendment 16.

     2.   Billing DMOQ. Insert the following in Attachment A under NetSolve
          Ongoing Responsibilities:

          Within ninety (90) days after the Effective Date of this Amendment 16,
          NetSolve will provide completions reporting for 100% of all orders via
          a mutually agreed format within 24 hours of completion (billing
          effective date). Billing notification defects (anything beyond 24
          hours of completion) will be flagged in transmission to AT&T for
          special attention by AT&T.

     3.   Service Level Agreement set. Attached hereto as Attachment B is a
          preliminary specification for additional SLA reporting which reporting
          NetSolve shall implement within 120 days after receipt from AT&T of a
          final specification. AT&T and NetSolve will mutually agree upon any
          charges for the development of such reporting in the event the scope
          of the reporting materially increases beyond that set forth in
          Attachment B or if the scope changes after NetSolve's receipt of the
          final specification. There shall be no Performance Credits from
          NetSolve to AT&T with respect to the SLAs in Attachment B.

     4.   Reimbursement for DBU Charges Related to Router Mis-configuration.
          Within existing Attachment A, under Section titled, Customer
          Satisfaction Metrics, insert new sub heading titled: Reimbursement for

                              AT&T/NetSolve Proprietary                  Page 10

<PAGE>

          DBU Charges Related to Router Mis-configuration. In the event AT&T
          identifies a possible credit to the end user customer and it is
          determined that such credit will be given to the End User Customer as
          a result of NetSolve's mis-configuration of a managed router device,
          NetSolve will credit to AT&T the underlying ISDN or POTS DBU charges
          billed to the end user customer by the ISDN or POTS service provider
          within thirty days of AT&T providing NetSolve a copy of the provider's
          billing to the end user customer. NetSolve's obligation shall not
          apply to the extent the mis-configuration was by AT&T, the end user
          customer, or any other third party not controlled by NetSolve.
          Further, NetSolve shall be permitted to negotiate a revised billing
          with the end user customer's service provider to reduce the billing to
          the extent possible. In no event shall NetSolve's credit exceed the
          amount actually paid to the provider by the end user customer.

     5.   Service Executive: Within existing Attachment A, after Section titled,
          Strategic Relationship Approach, insert new section titled: Service
          Executive.

               Both NetSolve and AT&T will provide to the other party a Single
               Point of Contact (SPOC) with responsibility for resolving any and
               all customer related issues for all Services performed by
               NetSolve under this Amendment 16.

     6.   Equipment Reclamation: Within existing Attachment A, under NetSolve's
          Roles and Responsibilities, Section B, create new category labeled as
          Disconnect Activities with the following requirement:

          o    Issues equipment reclamation request to customers with AT&T
               provided equipment within 24 hours of any equipment upgrade and
               within one week of receipt of any site disconnect MACD or network
               termination notice.

                 ALL OTHER TERMS AND CONDITIONS REMAIN THE SAME

NETSOLVE, INCORPORATED                            AT&T CORP.

By:     Robert C. Pojman                   By:      Diana Jones, CFSMD
   -----------------------------------        ----------------------------------

Signature:     /s/ Robert C. Pojman        Signature:     /s/ Diana Jones
          ----------------------------               ---------------------------

Title:    VP Business Development          Title: GROUP PROCUREMENT DIRECTOR
      --------------------------------

Date:          January 17, 2002            Date:         January 17, 2002
      --------------------------------          --------------------------------

                            AT&T/NetSolve Proprietary                    Page 11

<PAGE>

                                  Attachment A

                     MANAGED NETWORK SOLUTIONS and NETSOLVE

This Attachment A to Amendment Number 16.0 of the Contract Services Agreement,
(the "Agreement") covers Managed Router Solutions ("MRS") that NetSolve shall
provide to AT&T in support of AT&T's Managed Network Solutions ("MNS") offering,
when requested by AT&T and as described herein. This Attachment is an integral
part of the Agreement and shall be governed by the terms of the Agreement. In
the event of any conflict between the terms of this Attachment and the terms of
the Agreement, the terms of this Attachment shall prevail with respect to the
Services provided under this Attachment A.

Responsibilities

NetSolve's support of MRS will occur during pre-sale activities, post-sale
project management, and on-going network management. In each of these
activities, NetSolve will act as a subcontractor of AT&T. In any customer
communication, NetSolve will represent itself as AT&T, not as NetSolve. NetSolve
as a distinct organization will be transparent to the customer. AT&T shall have
the sole and independent responsibility for marketing MRS, including the
determination of customer pricing, and in no event shall NetSolve be permitted
to review or have access to AT&T's offer pricing to end-user Customers,
strategic marketing information, or other competitively sensitive information.
NetSolve shall only receive proposals and reports that are needed to perform
quality services for AT&T in a timely manner.

NETSOLVE'S ROLES AND RESPONSIBILITIES ARE AS FOLLOWS:

A.   NetSolve Pre-Sales Responsibilities

          o    Receive pre-qualification form

          o    Develop preliminary design of network, router, and DSU/CSU

          o    Consult with account team and customer

          o    Finalize overall network design

          o    Provide monthly report of number of customers and sites designed

          o    Growth Markets Sales Process activities outlined in Attachment H
               and H-1 and similar activities for other quotes as provided for
               in this Attachment A

B.   NetSolve Post-Sales Responsibilities

Implementation Coordination:

          o    Overall Project Management of Implementation

          o    Deliver Project Plan to Customer

          o    Inform customer of necessary preparations

          o    Place order for equipment with NetSolve's vendors for equipment
               if equipment is contained on the Order

          o    Place order with NetSolve's equipment maintenance vendors (or
               with AT&T's vendors for international locations) if equipment
               maintenance is contained on the Order

          o    Place order with NetSolve's equipment install vendors (or with
               AT&T's vendors for international locations) if equipment install
               is contained on the Order

Installation Activities:

          o    Receive, stage, and configure equipment

          o    Coordinate provisioning activity of transport and equipment
               vendors

                            AT&T/NetSolve Proprietary                    Page 12

<PAGE>

          o    Verify that network and equipment connectivity and configurations
               are supporting customer applications

          o    Schedule and coordinate test and turn-up activities

          o    Provide monthly report of installed customers and sites

          o    Provide installation through NetSolve's vendors (if equipment
               installation is contained on the Order) or AT&T's vendors

C.   NetSolve On-going Responsibilities

          o    Pro-actively monitor and manage customer networks 24 X 365

          o    Receive customer inquiry and trouble calls

          o    Perform appropriate software upgrades

          o    Isolate and work with equipment vendor to correct router software
               bugs

          o    Contact with vendors (including AT&T) for trouble resolution

          o    Contact with customers regarding progress of trouble resolution

          o    Provide monthly availability report to AT&T Project Managers and
               customers

          o    Maintain documentation of network design

          o    Provide monthly summary report of customer and sites supported

          o    Provide the following monthly reports via Global Exchange to
               begin following the first full month of service for a site. The
               reports listed below require that the end user customer router
               support the appropriate Management Information Base (MIB)
               Variables. Consult with end user customer regarding reports on a
               monthly basis (quarterly for end user customers with fifteen (15)
               or fewer sites).

               -    WAN Interface Utilization

               -    WAN Interface Traffic Type

               -    WAN Interface Protocol

               -    WAN Router Performance

               -    WAN Interface Utilization Exception

               -    WAN Interface Traffic Type Exception

               -    WAN Interface Error Exception

               -    WAN Frame Relay Exception

               -    WAN General Device Information

          o    Proactively manage performance of Customer Network

          o    Provide maintenance through NetSolve's vendors (if equipment
               maintenance is contained on the Order) or AT&T's vendors

AT&T ROLES AND RESPONSIBILITIES ARE AS FOLLOWS:

A.   AT&T Pre-Sales Responsibilities

          o    Assess initial requirements

          o    Provide pre-qualification form

          o    Develop design and customer pricing for network transport and
               equipment

          o    Present proposal to potential customer

B.   AT&T Post-Sales Responsibilities

o    Provide all appropriate customer information

                            AT&T/NetSolve Proprietary                    Page 13

<PAGE>

          o    Place order for network transport

          o    Inform NetSolve of network transport due date

          o    Place equipment orders when required

          o    Deliver project plan to Customer

Strategic Relationship Approach

AT&T MNS and NetSolve agree that in order for a strategic relationship to be
successful a clear understanding of strategies and goals and an overall
governing leadership team made up of the parties is required. In order to foster
this close cooperation, NetSolve and MNS agree to establish a Leadership Team
within a reasonable time frame following execution of this Agreement. The team
shall meet on at least a quarterly basis during the term of this Agreement. This
team shall review, coordinate and share strategic long-term planning with
respect to the services purchased by AT&T (but neither party shall be required
to divulge any proprietary information in this regard), establish principles and
policies governing the strategic relationship, set future directions, and
resolve issues presented to the team. This team shall include, at a minimum,
members from AT&T that are capable of providing functional requirements in line
with the strategies of MNS. This team shall include, at a minimum, members from
NetSolve that can understand and communicate requirements presented by AT&T
representatives to NetSolve's planning process.

Performance Metrics and Credits

Performance Metrics include the performance of NetSolve, any third party
suppliers of NetSolve and the performance of any suppliers recommended by AT&T
for which NetSolve has management responsibilities under this Attachment A. The
Performance Metrics will be used to determine any credits due AT&T by NetSolve,
subject to the adjustments set forth in the second paragraph of the section
titled "Credits for Missed DMOQs" of this Attachment A.

Table 1

------------------------------------------------------------------
Direct Measures of Quality            Target
("DMOQ")
------------------------------------------------------------------
Network Availability                  *% for each end user
------------------------------------------------------------------
Pro-Active Monitoring - % of          *% in the aggregate for all
troubles NetSolve calls
customer end users first and within
30 minutes.
------------------------------------------------------------------
On-Time Installation - First          *% in the aggregate for all
Sites                                 end user installations
------------------------------------------------------------------
On-Time Installation - Overall        *% in the aggregate for all
                                      end user installations
------------------------------------------------------------------
Mean Time To Restore - With           * Hrs, or * Hrs after
Dispatch                              deadline for technician
                                      arrival at site based on
                                      maintenance coverage
                                      purchased, whichever is
                                      later
------------------------------------------------------------------
Mean Time To Restore - Overall        * Hrs for all outages for
                                      all end users in the
                                      aggregate
------------------------------------------------------------------
Call Receipt - Average time           *% within 30 seconds in the
customer in queue waiting to be       aggregate for all end users
picked up for trouble reporting
------------------------------------------------------------------

                            AT&T/NetSolve Proprietary                    Page 14

<PAGE>

Network Availability Metrics

For purposes of these sections the following are defined as:

Network Component: all NetSolve-provided or approved components, in a network
designed and mutually agreed upon utilizing service and equipment providers
approved by NetSolve, including the frame relay ports and PVCs, local access to
AT&T's frame relay switch, T1 multiplexers, CSU/DSUs, routers (to the router LAN
port), and cabling between such units, which are covered by Services under a
Order accepted by NetSolve.

Link or Network Link: the logical connection between two customer sites covered
by NetSolve Services and consists of all of the
Network Components required for connectivity between such sites.

Downtime: the total time in a given month, measured in minutes for each Network
Link, that a Network Link is not available to the customer. For purposes of
determining whether the Network Availability target is met, Downtime excludes
outages resulting from (i) any operator error, improper act , or omission of
AT&T, AT&T's end user customer, or the affiliates, representatives, invitees,
licensees, vendors, or the like of either of them; (ii) inaccurate information
provided to NetSolve by AT&T or AT&T's end user customer; (iii) failure of any
facilities, equipment, services, or the like which are not Network Components,
including but not limited to LAN components; (iv) failure of AT&T or AT&T's end
user customer to perform any of their respective responsibilities under the
Agreement or this Attachment A; (v) unavailability of AT&T or AT&T's end user
customer personnel to grant NetSolve access to facilities as required for
NetSolve to perform its responsibilities; (vi) preventive or scheduled
maintenance activities of AT&T, AT&T's end user customer, or any other third
party not a sub-contractor or otherwise directed or consented to by NetSolve; or
(vii) any large scale outage of the AT&T network or a network segment, or a
significant portion of either thereof. This time will not be excluded from the
reported DMOQ, however this time will be excluded from the calculated credits.

Network Availability: the aggregate link minutes in one month (links multiplied
by minutes) minus the Downtime minutes, all divided by the aggregate link
minutes in one month (links multiplied by minutes) expressed as a percentage for
each month. Network Availability includes the physical layer, the data link
layer and the network layer of the Network, provided that the source of the
problem(s) is a Network Component.

Pro-Active Monitoring Metrics

NetSolve is responsible for first contact with customers for proactive trouble
monitoring for any customer's network. Pro-Active Monitoring is defined to mean
contacting the customer before the customer calls in and, in any event, within
30 minutes of receipt of alarm (managed devices only). This metric does not
apply in the event of a large-scale network outage which would affect more than
20% of the customers being managed by NetSolve.

Installation Metrics On-Time Installation (First Sites) - Since Installations
and MACs are scheduled by NetSolve Project Implementation Managers with the
end-user customer, it is imperative that the service provider arrive on the
scheduled date and time. Arrival at the customer premise must be in ample time
to allow the installation to be completed successfully and service turned up on
the scheduled date. On- Time Installation (First Sites) means the customer's
initial two sites were successfully installed on the scheduled installation
date. The scheduled installation date is determined by the later of (i) 60 days,
from contract acceptance by AT&T; (ii) the customer requested due date; or (iii)
50 days from receipt by NetSolve of a Order executed by AT&T.

On-Time Installation (Overall) - On time Installation (Overall) means all of the
customer's sites installed after the initial two sites were successfully
installed on the scheduled installation date.

Maintenance Metrics

Mean Time To Restore (MTTR) - Overall shall be defined as the arithmetic mean of
the time to clear trouble tickets (utilizing Downtime eligible for calculating
credits as the measure of Time To Restore).

                              AT&T/NetSolve Proprietary                  Page 15

<PAGE>

Mean Time To Restore (MTTR) With Dispatch shall be defined as the arithmetic
mean of the time to clear trouble tickets (utilizing Downtime eligible for
calculating credits as the measure of Time To Restore) when dispatching of a
technician (LEC or equipment maintenance) is required to restore the customer's
network to satisfactory operating condition.

Call Receipt

NetSolve shall produce monthly reporting showing the Average time MNS customers
wait in queue to be picked up for trouble reporting. This metric does not apply
in the event of a large-scale network outage which would affect more than 20% of
the customers being managed by NetSolve.

Credits for Missed DMOQ's

If NetSolve fails to meet the target monthly objectives in any month, NetSolve
shall provide AT&T with a credit in each succeeding month that the target
objective is not met. The credits associated with each performance metric are
set forth in the following table. In no event will the credits for Network
Availability, Pro-Active Monitoring, Mean Time to Restore Overall, or Mean Time
to Restore with Dispatch with respect to a customer site in any given month
exceed the total net billings to AT&T by NetSolve for that month for the charges
for the affected router managed hub sites and router managed non-hub sites set
forth in Item 2 of Table 1 in Paragraph 4 of Amendment Number 11.0. In no event
will the credits for On-Time Installation (First Sites), On-Time Installation
(Overall), and Customer Satisfaction Metrics - Installation (below) exceed the
total net billings to AT&T by NetSolve for the charges for installation set
forth in Item 4 of Table 1 in Paragraph 4 of Amendment Number 11.0.

No credit will be issued by NetSolve for any DMOQ for a particular customer to
the extent the missed DMOQ is caused by a negligent act, omission or failure of
AT&T or its affiliates, service supplier, or end user customer. In the event any
act, omission, or failure of AT&T's service suppliers (but not AT&T or its
affiliates) can be reasonably managed by NetSolve to increase the DMOQ, NetSolve
will attempt to work with that service supplier to increase that supplier's
performance if such work does not, in NetSolve's sole opinion, significantly
increase NetSolve's costs.

----------------------------- --------------------------------------------------
Network Availability          If NetSolve does not achieve a Network
                              Availability rate of * percent (*%) for any
                              customer's network during any two (2) months
                              of a rolling twelve (12) month period, NetSolve
                              shall provide AT&T with a * (*) month credit for
                              the net monthly fees for the charges set forth in
                              Item 2 of Table 1 Paragraph 4 of Amendment Number
                              11.0 for all the Router Sites associated with the
                              customer.
----------------------------- --------------------------------------------------
Pro-Active Monitoring         For the first month the objective is not met, the
                              credit will be equal to $* for each router site
                              which had downtime for an outage and was not
                              reported by NetSolve within thirty (30) minutes.
                              For any subsequent months the target objective is
                              not met, the credit will be equal to $* for each
                              router site which had downtime for an outage and
                              was not reported by NetSolve within thirty (30)
                              minutes.
----------------------------- --------------------------------------------------
Mean Time To Restore          The credit will be equal to $* for each router
(MTTR)Overall                 site that had Downtime and was restored  without
                              dispatch in more than four hours if the MTTR
                              Overall with Downtime for all customers exceeds
                              four hours.
----------------------------- --------------------------------------------------
Mean Time To Restore          The credit will be equal to $* for each router
(MTTR) With Dispatch          site that had Downtime and was restored with
                              dispatch in excess of the time allowed as set
                              forth above. No credit will be due if a credit
                              is issued for Mean Time to Restore Overall.
----------------------------- --------------------------------------------------
On Time installation          The credit will be equal to $* for each router
(First Sites)                 site that was installed after the scheduled due
                              date. No credit will be due for any site that is
                              rescheduled with an interval of less than five (5)
                              business days from the end of the day the
                              reschedule notice was received by NetSolve.
----------------------------  --------------------------------------------------
On Time installation          The credit will be equal to $* for each router
(Overall)                     site than was installed after the scheduled due
                              date. No credit will be due for any site that is
                              rescheduled with an interval of less than five (5)
----------------------------  --------------------------------------------------

                              AT&T/NetSolve Proprietary                  Page 16

<PAGE>

--------------------------------------------------------------------------------
                 business days from the end of the day the reschedule notice was
                 received by NetSolve.
 -------------------------------------------------------------------------------

     Customer Satisfaction Metrics

     Customer Satisfaction Requirements - If any NetSolve activity (
     installation or maintenance) is concluded by any AT&T end-user to be
     unsatisfactory, and AT&T provides a credit for such performance, the
     following credit is due to AT&T. No credit shall be due to AT&T if the
     service failure is due solely to any act, omission, or failure of AT&T or
     its service suppliers set forth below. If the service failure is due in
     part to any act, omission or failure of NetSolve or NetSolve suppliers, and
     AT&T or AT&T suppliers, the credit should be reduced by 50% of the amount
     calculated below.

     ---------------------------------------------------------------------------
           Activity Performed                      Credit Due *
     ---------------------------------------------------------------------------
              Installation                     Actual Credit to Customer
                                       Not to exceed 50% of Installation fee for
                                                  the affected sites
     ---------------------------------------------------------------------------
              Maintenance                      Actual Credit to Customer
                                       Not to exceed 25% of maintenance for the
                                              affected sites for the month
     ---------------------------------------------------------------------------

         *    The credit due will be reduced by the amount of any credit issued
              to the end user for On-Time Installation (First Sites) and On-Time
              Installation (Overall) under the section titled `Credits for
              Missed DMOQs' in this Attachment A.

     For any event that precipitates this type of credit due, AT&T and NetSolve
     will jointly perform an operational review to determine the factors that
     contributed to the situation. Both AT&T and NetSolve will engage the proper
     extended team to develop process changes to ensure these situations will be
     remedied for all future activities.

The credits set forth above constitute NetSolve's sole liability, and AT&T's
sole and exclusive remedy, for any failure to meet any DMOQs or other metrics.

     Miscellaneous

     Insufficiently Prepared Site - In the event that NetSolve or its supplier
     arrives at a site and cannot complete an installation and must be
     dispatched a second time due to the site being insufficiently prepared,
     NetSolve will bill AT&T T&M charges incurred (this is in addition to the
     standard installation fee). T&M charges will not apply if the site is
     prepared in accordance with the site survey instructions and the
     instructions are reasonably deemed inappropriate or inadequate and the
     condition giving rise to such assessment are reported to NetSolve in
     writing.

     Performance Reports

     NetSolve shall produce the following reports in a timely fashion on a
     monthly basis:

-------------------------------------- -----------------------------------------
     Management Center Reports         DMOQ Results including:
                                       o  Network Availability
                                       o  Mean Time To Restore (MTTR)
                                          Requiring Dispatch
                                       o  Mean Time To Restore (MTTR) Overall
                                       o  On Time installation - First Sites
                                       o  On Time installation - Overall
                                       o  Pro-Active Monitoring
                                       o  Trended Ticket & Down Time Report
                                       o  Service Performance by Customer
------------------------------------- ------------------------------------------
     Customer Reports                  o  Network Performance Reports as listed
                                          in Section C of NetSolve's
                                          Responsibilities in Attachment A

                              AT&T/NetSolve Proprietary                  Page 17

<PAGE>

--------------------------------------------------------------------------------
                                 Ticket Summary
--------------------------------------------------------------------------------

                                   Appendix A

                                  Supported CPE

This section may be updated in the future based upon mutual agreement between
AT&T and NetSolve. The following vendors' access routers are supported as part
of the Managed Router Service:

Routers
Cisco 2501 Router
Cisco 2502 Router
Cisco 2513 Router
Cisco 2514 Router
Cisco 2515 Router
Cisco 4500 Router
Cisco 4700 Router
Option - Dual Ethernet
Option - Token Ring
Cisco 7505 Router with HSSI Interface
Option - Dual Ethernet
Option - Dual Fast Ethernet
Option - Dual Token Ring
Option - FDDI Multimode
Option - 64MB DRAM

Router IOS
Cisco IOS  11.x

CSU/DSU
Cray DCP 3080
Digital Link Solo Encore
Digital Link 3100
Paradyne 316x
Paradyne 3610
Paradyne 9611.0

Out of Band Modems
Multi Modem MT 1932BL
Paradyne 3820

Protocols
IP
Routing protocols
BGP4, RIPV1, RIPV2 and Static

                              AT&T/NetSolve Proprietary                  Page 18

<PAGE>

                                   Appendix B

           Additional Professional Services Available Through NetSolve

These services will be billed based on time and materials expended by NetSolve.
These charges, when requested in writing by AT&T MNS, will be included in the
bill to AT&T from NetSolve. The types of on-site services to be provided will
be:
o    Perform address renumber design for customer network.
o    Perform individual address (IP) assignments behind the customer access
     router.
o    Perform on-site surveys.
o    Obtain information from customer as required to Change the LAN physical and
     logical design (if addressing changes needed).
o    Enable dynamic address discovery scheme (i.e. DHCP) for corporate LAN users
     (note: remote access assignment is performed by AT&T).
o    Installation Support.
o    Configuration of client workstations, proxy servers, and IP gateways with
     address of AT&T DNS Server.
o    Recommend performance improvements to customer.

                                  ATTACHMENT H

        Managed Network Service Commercial & Middle Market Sales Process

This Attachment for Contract Services ("Attachment H") to the Agreement covers
services ("Services") that NetSolve shall provide to AT&T in support of the
Growth Markets Sales process for quoting Managed Network Services (MNS), as
requested by AT&T and as described herein. This Attachment is an integral part
of the Agreement and shall be governed by the terms of the Agreement. In the
event of any conflict between the terms of this Attachment and the terms of the
Agreement, the terms of this Attachment shall prevail with respect to the
Services provided under this Attachment.

Paragraph 7 - Invoicing and Payment

NetSolve's invoice shall be rendered at the end of each month, and shall be
payable within 30 days of receipt. NetSolve shall mail invoices with copies of
any supporting documentation required by AT&T to the address shown on this
Agreement or an order.

                                 Attachment H-1

                         MRS Proposal Statement of Work

1.   Overview

NetSolve and AT&T Growth Markets wish to streamline the cycle time, and improve
accuracy in the design and pricing of the new bundles for Managed Router
Services. NetSolve will develop a network design and price quote for
opportunities generated by AT&T's Growth Markets sales organization that fit
within the new MRS bundles.

2.   NetSolve Pre-Sales Responsibilities

2.1  Interview prospect

Pre-qualification forms for MRS bundled services will be sent to NetSolve. Upon
receiving a pre-qualification form, NetSolve will contact a prospect and conduct
a technical interview to gather the necessary information to design and price a
Managed Router bundle. The initial prospect call will be made within one
business day of receipt of the pre-qualification form. Although NetSolve will
attempt to contact the prospect within one business day, the prospect's schedule
and knowledge of their network dictate the actual time required for interview
completion. If

                              AT&T/NetSolve Proprietary                  Page 19

<PAGE>

NetSolve is unsuccessful in obtaining an interview schedule with the prospect
after three attempts (including voice mail), the qualification form will be
returned to the appropriate DNAE and DNSM for follow up.

NetSolve will also assist in proposal closure by providing support to the DNAE
and, where mutually agreed by AT&T and NetSolve, assisting in or making customer
presentations.

2.2  Determine solution fit

NetSolve will utilize a standard set of criteria included in Exhibit 1 in order
to determine the proper solution. If the solution is determined to fall outside
one of the bundles, NetSolve will forward the opportunity back to the DNAE to be
sent to his/her Data Network Consultant (DNC) for completion.

2.3  Complete standard MNS pricing and design

NetSolve will complete an appropriate network design and pricing within 48 hours
for non-SNA offer bundles, and 96 hours for other offer bundles. The timing on
this deliverable is measured from the completion of the prospect interview. The
pricing includes quotes for management, equipment, cables, installation, and
maintenance. Equipment pricing will include terms indicated on the
pre-qualification form.

2.4  Create network map

NetSolve will create a network map that accompanies the pricing information in
2.3.

2.5  Provide DNAE checklist

NetSolve will include the appropriate DNAE checklist with each pricing, and
design package.

3.   NetSolve Post Sales Responsibilities

3.1  Complete and forward customer implementation plan

After AT&T has received a contract for a Managed Router Service solution,
NetSolve will complete and forward a Project Summary Description to facilitate
the transfer of information to the appropriate "service factory." A copy of this
implementation plan is provided in Exhibit 2.

3.2  Sales process performance reporting

NetSolve will track and report on all the bundled Managed Router Service quoting
activity for the Commercial and Middle Markets organization completed by
NetSolve. Monthly and calendar year to date statistics will be warehoused and
reported. NetSolve will report the following metrics by service product type and
total:

     o    Number of Proposals
     o    Number of Sites
     o    Closure percentage
     o    Proposal aging histogram
     o    Interval from proposal information release to contract sign
     o    Interval from pre-qualification arrival to interview
     o    Interval from interview to proposal

3.3  Update product features and pricing

NetSolve will update product features and pricing within three business days of
receipt from AT&T. If AT&T should release changes on a more periodic basis than
monthly, then AT&T and NetSolve agree to negotiate an appropriate increase in
the fee per proposal.

                              AT&T/NetSolve Proprietary                  Page 20

<PAGE>

4.   Communications

4.1  NetSolve/Sales Force

NetSolve will communicate initially with the field using ATTmail and Word
documents in RTF format. In the long term, the intention is to use a Web
interface to communicate to the field from a pre-qualification form and proposal
response perspective.

4.2  NetSolve/Factories

The Project Summary Description in Exhibit 2 will be the primary method for
interfacing the quoting capability of NetSolve with other AT&T MNS factories.

4.3  NetSolve/Product House

NetSolve will interface at least quarterly with the AT&T individuals and
organizations responsible for the MRS family in order to stay current with
future directions and strategy.

5.   AT&T Responsibilities

5.1  Pre-Sales

AT&T DNAEs will determine whether the solution to be offered fits within a
standard MRS bundle prior to sending the pre-qualification form to NetSolve. If,
after NetSolve contacts the customer to develop the network design, it is
determined that the proposal will not fit into a standard bundle, then NetSolve
will contact the DNAE to explain the situation, and pass along all new
information gathered. The DNAE is then responsible for working with an AT&T DNC
to develop the design and price quote.

                              AT&T/NetSolve Proprietary                  Page 21

<PAGE>

                                  Attachment B

1.  Service Level Agreement (SLA) Overview

The AT&T Managed Router Solutions SLA provides a set of standard service level
performance objectives which AT&T commits to meet during the Service Period.
Failure to meet the service level objectives by AT&T may result in financial
credits to the Customer per the terms of this Service Level Agreement. This SLA
is provided at no additional charge to Customers meeting the specified Customer
and Customer Site eligibility requirements. This Schedule A.4 shall apply to
Standard AT&T Managed Router Solutions and shall not apply to AT&T Managed
Router Solutions Prepackaged Services.

AT&T may from time to time modify this SLA, including but not limited to its
objectives, measurements and credits, upon one-month prior notice. AT&T will
send Customer a description of any such modifications prior to the effective
date of such modifications.

AT&T may add support for this SLA in new countries without prior notice. Upon
request, AT&T will provide a current list of countries where support for this
SLA is provided. AT&T may withdraw support for this SLA in a particular country
by providing three months' prior notice, to affected Customers.

The standard service level performance objectives are comprised of three
components: On-Time Site Implementation, Site Availability and Mean Time to
Repair. Mean Time to Repair is a combined metric of both with and without
dispatch. AT&T will use commercially reasonable efforts to meet or exceed the
subject Standard Service Level Performance Objectives based on the contents of
this Schedule A.4.

A.   On-Time Site Implementation is a metric, which measures on-time Site
     implementation based upon mutually agreed to schedule of dates between the
     Customer and AT&T.

B.   Site Availability is a metric, which measures the availability of a
     Customer Site over a calendar month. There are four tiers of Site
     Availability based upon type of transport, network configuration and backup
     for the subject Customer Site. The four tiers for Site Availability are
     without backup, ISDN dial backup, dual leased lines with one router and
     dual leased lines with two routers. Sites equipped with analog backup shall
     be classified as "without backup".

C.   Mean Time to Repair is a metric, which is defined as the average time it
     takes to repair a transport and/or logical problem with or without
     requiring a vendor dispatch and to restore a Customer Site to Normal
     Operation after an outage.

2.   Standard Service Level Performance Objectives For Eligible Domestic and
     International Sites
     -------------------------- --------------------- --------------------------
     Component                  Measurement           Objective
     -------------------------- --------------------- --------------------------
                On-Time Site    Individual Site       Completion of Each Site
              Implementation    Installation and      On Time
                                Enablement

     Site Availability -        Individual Site       *% - w/o backup
     (Objectives may vary by    Availability          * to *% - with ISDN dial
     country, see Exhibit A)                          backup
                                                      * to * % - with dual
                                                      leased lines, single
                                                      router
                                                      * to *% - with dual leased
                                                      lines, dual routers
     Mean Time to Repair

                                Mean Time To Repair -
                                with and without      (less than or equal to)
                                Dispatch              * hours

     -------------------------- ------------------------- ----------------------
On-Time Site Implementation is measured based on mutually agreed to schedule of
dates between the Customer and AT&T. AT&T and Customer will mutually agree to a
Customer Commit Date (CCD) for each Site after all the required data for the
Site is available. In the case of International Sites, these dates will also
include restrictions and/or limitations imposed by specified country PTTs. Both
Customer and AT&T will review these specific country time frames prior to
agreeing to a specific installation schedule.

                              AT&T/NetSolve Proprietary                  Page 22

<PAGE>

A site is implemented when: AT&T has completed the physical installation and
logical configuration of all CPE and network connectivity such that a Site is
able to send/receive data packets from the LAN interface of the WAN router
across the primary link according to the agreed upon design. When AT&T has
successfully established connectivity via a ping to the LAN interface of the WAN
router and all components are implemented according to the agreed upon design,
AT&T will notify Customer that the Site is available for their use and such Site
will be considered on-time if implemented on or before the Customer Commit Date.

Site Availability is defined as the ability to send or receive data packets from
the LAN port of a router over a primary or secondary (backup) link regardless of
the number of hops over a specified time frame. Site availability is measured
and reported as a percentage over a full calendar month. A Site Availability
metric is computed for each applicable tier. A Site is considered unavailable
from the time when it is detected as unable to send or receive data from the LAN
interface of the WAN router across either the primary or backup link (due to a
fault directly attributable to AT&T) or reported as such and a Trouble Ticket is
opened, to the time when AT&T notifies (i.e. by telephone, e-mail, voice mail,
fax or other agreed upon means) Customer that the problem has been resolved such
that Customer should be able to send or receive data over at least one of the
links. The Site Availability Objective for a metric is obtained from the table
in Exhibit A. The formula for Site Availability is:

               Total *Scheduled Minutes of Availability For Site -
                 Total Minutes Of Unavailability For Site * 100
                Total Scheduled Minutes of Availability for Site

*Scheduled Minutes equals the amount of minutes in a given month less any time
attributable to scheduled maintenance activities.

Mean Time to Repair is defined as the fixed monthly average of the outage time
associated for all applicable Customer Trouble Tickets. An outage is defined as
the time during which the Customer cannot access the network due to a fault
directly attributable to AT&T. ** A Site is considered repaired when restored to
Normal Operation which means the Customer has the ability to send/receive over a
primary route. The formula for Mean Time to Repair is:

                     Customer Total Of Outage Minutes/Month
                        Customer Total # Of Tickets/Month

**Criteria and exclusions for AT&T attributable outages can be found in below
under Exceptions.

3.  Customer Eligibility for Service Level Agreement

o    A minimum of 10 Customer Sites. In the event that the Customer does not
     meet the minimum number of Sites required for the SLA during the Service
     Period, AT&T shall owe no SLA credits and Customer will return any credits
     that AT&T may have paid in advance

o    All Customer Sites must utilize AT&T managed transport

o    Customer Sites will be included in the monthly measurements only if the
     Sites have been installed for at least one full calendar month, for such
     purposes of eligibility for this SLA a calendar month shall begin on the
     first of the month

o    Customer Sites, including all router configurations, must be managed out of
     one of the AT&T MNS Work Centers

o    Customer Sites must be tested and accepted by AT&T MNS Work Center
     personnel except for CPE and transport connections that are already
     installed as of the date such Sites are added to the Agreement, in which
     case, such CPE and transport connections are subject to prior Architectural
     Validation by AT&T

o    Each router console port must have a dedicated dial analog line to AT&T for
     out-of-band access and if the line is not available when required by AT&T,
     any down time associated with this Site will not be counted against AT&T
     Site availability SLA

o    Each Customer hub Site shall have a management PVC to the AT&T MNS Work
     Center.

o    If the Customer network utilizes ISDN backup in order to receive the
     Service Level Site Availability Objective for ISDN backup, the following
     rules apply: The access component of the ISDN connection needs to be
     diverse from the primary access link. Additionally, each hub Site shall be
     equipped with a minimum of 2 ISDN bearer channels in support of a maximum
     of 5 remote Sites equipped with ISDN.

o    Customer Premise Equipment (CPE) must be managed and maintained by AT&T and
     its agents

o    CPE must be compliant with AT&T engineering standards - both hardware and
     software

o    Customers must subscribe to a 7 X 24 X 4 CPE Maintenance Agreement where
     geographically available, otherwise Deferred Maintenance time shall take
     effect

o    If a Customer has more than one billable location ID, the Customer must
     select one of these IDs for crediting purposes when applicable

                           AT&T/NetSolve Proprietary                     Page 23

<PAGE>

4. Exceptions

Troubles that are caused by any of the events listed below that are not the
responsibility of AT&T shall not detract from Service Level objective
attainment:

o    Negligence of the Customer or their representatives
o    Any Force Majeure event that prevents AT&T or any such Agent, local
     exchange carrier or vendor from effecting restore or repair
o    Down time attributed to changes to any applicable foreign government or PTT
     regulations such as the PTT hours of operation
o    Down time caused by specific PTT designated holiday or publicly recognized
     holidays which impact AT&T's ability to provide the Service
o    Delayed maintenance (AT&T or vendor Agents respond or can repair within the
     Service Level commitment, but Customer reschedules to a different time or
     date)
o    No access (AT&T or vendor Agents respond or can repair within the Service
     Level commitment but the Customer does not provide Site access)
o    Customer unavailability to accept repairs, or, for transport or logical
     failures, instances in which Customer requests repairs to be delayed or
     rescheduled for another time
o    Any time that impacts the target metrics and Service Levels during which
     AT&T does not have out-of-band access to a Site
o    Interruptions or delays caused by the failure of power, equipment, services
     or systems (at Customer premise) not provided by AT&T including, but not
     limited to:
          o    UPS Backup power
          o    Generators
          o    Air conditioning/Heating
o    Any interruptions or delays during any period when the Customer or user has
     released a Service to AT&T for maintenance including maintenance windows or
     rearrangement purposes, or for the implementation of a Customer order.
o    Any interruptions or delays during any period when the Customer decides not
     to release the Service for testing and/or repair and the Customer continues
     to use the Service.
o    Customer initiated network changes outside of the Move, Add, Change ("MAC")
     procedures agreed to in the Customer Information Guide. All changes are
     subject to AT&T's review and approval.

Additional Exceptions - On-Time Site Implementation

If AT&T misses a mutually agreed to implementation date due to any of the
following factors, such implementation date shall be considered on-time:

o    AT&T's access to the Site was restricted
o    Any Customer changes that affect the agreed to implementation schedule
     without prior AT&T review
o    Inadequate environment at the Site, including, but not limited to,
     improperly cooled equipment rooms, power failure, etc., that is Customer's
     responsibility under the Attachment
o    Interruptions or delays due to labor difficulties, governmental orders,
     civil commotion, acts of God and other circumstances beyond AT&T's
     reasonable control
o    Customer is not ready for the installation of the transport, installation
     of the equipment, or testing of the installed configuration
o    The local LEC, telco or PTT fails to install and turnover to AT&T the
     requested transport facility in the time requested and required to complete
     the installation.

5. Definitions

Terms used in this SLA without definition have the meanings assigned to them in
the Attachment or in the Agreement. The following terms used in this SLA have
the meanings indicated:

Normal Operation - Repair of CUSTOMER Site so that it performs according to its
configuration, prior to the fault, using primary transport facilities (i.e.,
ability to send/receive data packets from the LAN interface of the WAN router
across the primary link).

Outage - the time, during which CUSTOMER cannot access the network due to a
fault directly attributable to AT&T and its Agents. An outage begins when a
trouble is detected or reported and a Trouble Ticket is opened. An outage ends
when AT&T notifies (i.e. telephone, e-mail, voicemail, fax or other agreed upon
means) CUSTOMER that the trouble has been repaired. Only a subset of Trouble
Tickets can classify as outages. Examples of Tickets, which do not classify, as
outages are those opened and closed by automation, i.e., no human intervention,
and tickets quoted as those in which AT&T and its Agents, are deemed not
responsible.

                              AT&T/NetSolve Proprietary                  Page 24

<PAGE>

Site - defined as a router and its associated DSU/CSU, back-up facilities,
dedicated maintenance modem with access line, and all transport connections,
regardless of the quantity of LAN/WAN ports resident on the remote/hub device.

Trouble Ticket - the AT&T record that stores the information required for
tracking a trouble activity or event (e.g. Outage) from the initial call receipt
through resolution or completion. Tickets can be either proactively detected by
the center or reported by the Customer.

Deferred Maintenance - the time that AT&T or its Agents cannot respond to a
Customer location to repair service due to the hours of operation. For purposes
of calculating service levels, the clock shall stop during the hours when the
maintenance providers are closed for business and shall re-start during the
hours of operations. As an example, if Customer purchases 5X8X NBD CPE
maintenance, assuming hours of operations of 9 A.M. - 5 P.M. M-F, and if an
outage occurs at 3:00 P.M. on Friday and lasts until the following Monday
morning at 10:00 A.M., AT&T would calculate, for SLA measurement purposes, 3
hours of down time, with the remaining time being attributable to Deferred
Maintenance. Not withstanding the above, AT&T shall provide fault isolation and
resolution services on a 7x24 basis until we determine that it is a CPE hardware
problem or LEC/PTT access problem, which is then subject to the conditions
listed above.

The Signatories below agree to this Service Level Agreement as outlined in this
document.

Company Name: ____________________________________________________________

Address: _________________________________________________________________

City: ____________    State: _________      Zip Code: _____________

Signature: _______________________________________________________________

Title:  ____________________________________Date: ________________________

AT&T Representative Signature: ___________________________________________

Title: ____________________________________ Date: ________________________

                              AT&T/NetSolve Proprietary                  Page 25

<PAGE>
<TABLE>
<CAPTION>

Exhibit A - Site Availability Objective by Country

------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Country                   w/o Backup             ISDN Backup             Dual Leased            Dual Leased
                                                                         Lines/Single Router    Lines/Dual Router
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S>                       <C>                    <C>                     <C>                    <C>
Americas
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
United States             *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Canada                    *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
EMEA
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Austria                   *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Belgium                   *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Denmark                   *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Finland                   *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
France                    *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Germany                   *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Ireland                   *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Italy                     *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Luxembourg                *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Netherlands               *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Norway                    *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Spain                     *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Sweden                    *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Switzerland               *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
United Kingdom            *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Asia Pacific
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Australia                 *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Hong Kong                 *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Japan (Tokyo)             *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Japan (All Others)        *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Malaysia (Kuala Lumpur    *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
New Zealand               *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Singapore                 *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Taiwan (Taipei)           *%                     *%                      *%                     *%
------------------------- ---------------------- ----------------------- ---------------------- ----------------------

</TABLE>

                              AT&T/NetSolve Proprietary                  Page 26

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