[BankBoston's Letterhead appears here]






                                  July 21, 1998
                                                  [BankBoston Logo appears here]

Texfi Industries, Inc.
5400 Glenwood Avenue, Suite 215
Raleigh, North Carolina  27612

      Attention:  Robert Ambrosini

                         Forbearance Agreement Extension
                         -------------------------------

Ladies and Gentlemen:

      We refer to the Forbearance Agreement dated as of June 5, 1998 (the
"Forbearance Agreement") to which you and we are parties. Terms defined in the
Forbearance Agreement are used herein as therein defined.

      You have requested an extension of the Forbearance Period from July 24,
1998 to August 24, 1998, to permit additional time to negotiate a refinancing or
restructuring of the Borrower's outstanding Debt. The Agent and the Lenders
agree so to extend the Forbearance Period, provided that from and after the
earlier of the date of this letter and July 24, 1998 and continuing through
August 24, 1998,

      (a) the definition "Forbearance Period" is amended in its entirety to read
as follows:

            "Forbearance Period" means the period beginning on the date hereof
      and ending on the earlier of August 24, 1998 and the date on which the
      Agent notifies the Borrower any Forbearance Condition (as hereinafter
      defined) fails or ceases to be satisfied.

      (b) no repayments of principal of the Term Loan shall be required to be
made prior to August 24, 1998; and

      (c) the following shall be the "Forbearance Conditions" and Section 3 of
the Forbearance Agreement is hereby amended in its entirety to read as follows:

            Section 3. Forbearance Conditions. The following conditions shall
      constitute the "Forbearance Conditions":


            (a) The Borrower shall timely perform all of its obligations under
      this Agreement;
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Texfi Industries, Inc.
July 21, 1998
Page 2
 

            (b) No Default or Event of Default, other than the Forbearance
      Defaults and further instances of default, as of July 31, 1998, of the
      minimum EBITDA and minimum Adjusted Operating Cash Flow to Total Debt
      Service ratio requirements of the Loan Agreement, shall occur or be
      continuing;

            (c) No payments shall be made by the Borrower after the date of this
      Agreement to Mentmore or any other Affiliate of the Borrower, provided
      that the Borrower may reimburse Mentmore for out-of-pocket costs and
      expenses incurred in the ordinary course of Mentmore's provision of
      services to the Borrower, up to a maximum amount of such reimbursement
      during the Forbearance Period of $20,000;

            (d) No notice shall have been given pursuant to the Letter of Credit
      Reimbursement Agreement dated as of June 17, 1998 between The Chase
      Manhattan Bank and Mentmore Holdings Corporation that an "Event of
      Default" under and as defined in said Agreement has occurred and is
      continuing as contemplated by the provisions of Irrevocable Standby Letter
      of Credit No. P-369220 issued by The Chase Manhattan Bank on June 17,
      1998, in favor of BankBoston, N.A., as Agent;

            (e) The Borrower shall, and shall demonstrate to the Agent's
      satisfaction from time to time upon request by the Agent that the Borrower
      does, timely deduct from the wages of its employees all payroll taxes and
      make timely and proper deposits of all payroll and other "trust fund"
      taxes;

            (f) A comparison of the Borrower's results of operations and
      financial condition during the period from May 15, 1998 through any
      comparison date on or prior to August 24, 1998 to the business plan dated
      May 15, 1998 (adjusted for the increase in the interest rate applicable to
      the Loans as provided in Section 2(c)) submitted by the Borrower to the
      Agent and the Lenders (the "Business Plan") for the same period, shall not
      result in any material adverse variance;

            (g) No payment shall have been made in respect of the Subordinated
      Debt, nor shall the maturity of the Subordinated Debt have been
      accelerated or the holders thereof have taken any other action to enforce
      or exercise rights or remedies available to them upon default; and

            (h) Not later than August 15, 1998, a crisis consultant, turnaround
      manager or other similar, independent, qualified professional or firm
      acceptable to the Lenders in their reasonable judgment shall have been
      retained by the Borrower (including as an independent contractor, at the
      Borrower's election) to consult with it as needed and to assist it in
      fulfilling the Business Plan and implementing a turnaround plan, including
      handling creditor relationships


<PAGE>


Texfi Industries, Inc.
July 14, 1998
Page 3



      Please indicate your acceptance of the foregoing, your representation that
as of the date hereof there are no Defaults or Events of Default existing under
the Loan Agreement, other than the Forbearance Defaults, and your ratification
of the Forbearance Agreement, the Loan Agreement and the other Loan Documents,
except as modified hereby, by signing the enclosed duplicate of this letter in
the space indicated and returning it to the undersigned.

                                Very truly yours,


                                      BANKBOSTON,  N.A., as the Agent and
                                   as a Lender


                                      By:
                                         -------------------------------- 
                                         STEPHEN Y. McGEHEE
                                         MANAGING DIRECTOR

                                      THE CIT GROUP/COMMERCIAL
                                      SERVICES, INC.:


                                      By: /s/ Gordon Jones
                                          -------------------------------
                                      Name: Gordon Jones
                                            -----------------------------
                                     Title: Vice President
                                            -----------------------------

                             NATIONAL BANK OF CANADA


                                     By: /s/ Dan Shaw
                                        ---------------------------------
                                        Name: Dan Shaw
                                              ---------------------------
                                        Title:AVP
                                              ---------------------------


                                     By: /s/ Charles Collie
                                        --------------------------------- 
                                        Name: Charles Collie
                                              ---------------------------
                                        Title:VP & MGR
                                              ---------------------------
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Texfi Industries, Inc.
July 14, 1998
Page 4


 Accepted and agreed this day of July 1998.

  TEXFI INDUSTRIES, INC.


  By: /s/ Robert P. Ambrosini
      ----------------------------------    
     Name: Robert P. Ambrosini
     Title: Executive Vice President & C. F. O.