<PAGE>
 
                               THIRD AMENDMENT
                               --------------- 


          THIRD AMENDMENT (this "Amendment"), dated as of October 9, 1998, among
CAF HOLDINGS, INC. ("Holdings"), COLLINS & AIKMAN FLOORCOVERINGS, INC. (the
"Borrower"), the financial institutions party to the Credit Agreement referred
to below (each, a "Bank" and, collectively, the "Banks"), and BANKERS TRUST
COMPANY, as Agent for the Banks (in such capacity, the "Agent"). All capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings provided such terms in the Credit Agreement.


                             W I T N E S S E T H:
                             - - - - - - - - - - 

          WHEREAS, Holdings, the Borrower, the Banks and the Agent are parties
to a Credit Agreement, dated as of February 6, 1997 (as amended, modified or
supplemented to the date hereof, the "Credit Agreement");

          WHEREAS, the Borrower has requested a certain amendment to the Credit
Agreement as described below; and

          WHEREAS, subject to the terms and conditions of this Amendment, the
parties hereto wish to amend the Credit Agreement as herein provided;

          NOW, THEREFORE, it is agreed:

I.   Amendment to Credit Agreement.
     -----------------------------

          1.   Section 8.13 of the Credit Agreement is hereby amended by (i)
inserting the text "(x)" immediately after the text "provided, that" appearing
                                                     --------
in clause (i) of said Section and (ii) inserting the following text at the end
of clause (i) of said Section:

     "and (y) the Borrower may repurchase Senior Subordinated Notes on the open-
     market in an aggregate principal amount for all purchases made after the
     Third Amendment Effective Date pursuant to this clause (y) not to exceed
     $5,000,000, so long as (I) no Default or Event of Default then exists or
     would result therefrom and (II) the purchase price for such Senior
     Subordinated Notes does not exceed $1,050 per $1,000 principal amount
     thereof".

II.  Miscellaneous Provisions.
     ------------------------

          1.   In order to induce the Banks to enter into this Amendment, each
of Holdings and the Borrower hereby represents and warrants that:

          (a)  no Default or Event of Default exists as of the Third Amendment
Effective Date, both before and after giving effect to this Amendment, and

          (b)  all of the representations and warranties contained in the Credit
Agreement or the other Credit Documents are true and correct in all material
respects on the Third Amendment Effective Date both before and after giving
effect to this Amendment, with the same effect as though such representations
and warranties had been made on and as of the Third Amendment Effective Date (it
being understood that any representation or warranty made as of a specific date
shall be true and correct in all material respects as of such specific date).
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          2.   This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.

          3.   This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Agent.

          4.   THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.

          5.   This Amendment shall become effective on the date (the "Third
Amendment Effective Date") when Holdings, the Borrower and the Required Banks
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Agent at its Notice Office.

          6.   From and after the Third Amendment Effective Date, all references
in the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as modified
hereby.


                                     * * *
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IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Amendment as of the date first above
written.

                                   

                            CAF HOLDINGS, INC.
                       
                       
                            BY: /s/  Stephen M. Burns
                                --------------------------------- 
                                Stephen M. Burns
                                Title:   Director
                       
                       
                       
                            COLLINS & AIKMAN FLOORCOVERINGS INC.
                       
                            BY: /s/  Darrel V. McCay
                                --------------------------------- 
                                Darrel V. McCay
                                Title:  Vice President and 
                                Chief Financial Officer
                       
                       
                       
                            BANKERS TRUST COMPANY
                                Individually and as Agent
                       
                            BY: /s/  Mary Kay Coyle
                                --------------------------------- 
                                Mary Kay Coyle
                                Title:  Managing Director
                       
                       
                            FIRST SOURCE FINANCIAL LLP By:
                            FIRST SOURCE FINANCIAL, INC. ITS AGENT MANAGER
                       
                            BY: /s/  Robert M. Cosco
                                --------------------------------- 
                                Robert M. Cosco
                                Title:  Senior Vice President
                       
                       
                            HELLER FINANCIAL, INC.
                       
                            BY: /s/  Tamara L. Rulhm
                                --------------------------------- 
                                Tamara L. Rulhm
                                Title:  Assistant Vice President
                       
                       
                            LASALLE NATIONAL BANK
                       
                            BY: /s/  Richard G. Maier
                                --------------------------------- 
                                Richard G. Maier
                                Title:  Vice President
                       
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                            BANK OF BOSTON, N.A.
                       
                       
                            BY: /s/  Peter Van Der Horst
                                --------------------------------- 
                                Peter Van Der Horst
                                Title:  Vice President
                       
                       
                            First Union National Bank
                            
                       
                            BY: /s/  Joan Anderson
                                --------------------------------- 
                                Joan Anderson
                                Title:  Vice President
                       
                       
                       
                            LTCB TRUST COMPANY
                       
                            BY: /s/  Rebecca J. S. Silleit
                                --------------------------------- 
                                Rebecca J. S. Silleit
                                Title:  Sr. Vice President
                       
                       
                            SANWA BUSINES CREDIT CORPORATION
                       
                            BY: /s/  Stanley Kamiski
                                --------------------------------- 
                                Stanley Kamiski
                                Title:  Vice President
                       
                       
                            SENIOR DEBT PORTFOLIO
                       
                            BY: /s/  Barbara Campbell    
                                --------------------------------- 
                                Barbara Campbell    
                                Title:  Vice President
                       
                       
                            WACHOVIA BANK OF GEORGIA, N.A.
                       
                            BY: /s/  Richard E. S. Bowen
                                --------------------------------- 
                                Richard E. S. Bowen
                                Title:  Assistant Vice President


Each of the undersigned, each being a Guarantor under, and as defined in, the
Credit Agreement referenced in the foregoing Third Amendment, hereby consents to
the entering into of the Third Amendment and agrees to the provisions thereof
(including, without limitation, Sections 7 and 8 of Part II thereof).