CONE MILLS CORPORATION

                        INCENTIVE STOCK OPTION AGREEMENT


         THIS AGREEMENT, dated as of the 15th day of June, 2001, between Cone
Mills Corporation, a North Carolina corporation having its principal office at
3101 N. Elm Street, Greensboro, North Carolina (hereinafter called the
"Company"), and, (Name) a key management employee of the Company (hereinafter
called the "Option Holder").

                               WITNESSETH:

         WHEREAS, the Board of Directors of the Company has adopted, and the
shareholders have approved, the Amended and Restated 1992 Stock Plan, a copy of
which is annexed hereto as Exhibit A (hereinafter called the "Plan"); and

         WHEREAS, the Company recognizes the value to it of the services of the
Option Holder as a key management employee and is desirous of furnishing him or
her with added incentive and inducement to contribute to the success of the
Company; and

         WHEREAS, on June 15, 2001, pursuant to the provisions of the Plan, the
stock committee ("Committee") appointed by the Board of Directors of the Company
(a) granted to the Option Holder, pursuant to Article II, Section 1 of the Plan,
an option in respect of the number of shares as set forth herein, (b) designated
the option an Incentive Stock Option, (c) fixed and determined the option price
as set forth herein, and (d) approved the form of this Agreement:

         NOW, THEREFORE, in consideration of the mutual promises and
representations herein contained and other good and valuable consideration, it
is agreed by and between the parties hereto as follows:

1.       Subject to the Plan, the terms and provisions of which are incorporated
         herein by reference,  the Company hereby  grants to the Option
         Holder an Incentive  Stock  Option to purchase,  on the terms and
         subject to the conditions  hereinafter  set forth,  all or any part of
         an aggregate of shares of the Common Stock ($0.10 par value) of the
         Company at the purchase price of $1.11 per  share  (the  "Option"),
         exercisable  in the amounts and at the times set forth in this
         paragraph 1. Unless  sooner  terminated as provided in Section 3(f) of
         Article II of the Plan or in this Agreement,  the Option shall
         terminate, and all rights of the Option Holder hereunder  shall expire,
         on June 14, 2011. In no event may the Option be exercised after June
         14, 2011.

         The Option may be exercised as follows:

         (a)      up to shares (20% of the total shares subject to the Option)
                  at any time after November 8, 2001 and prior to termination of
                  the Option;

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         (b)      up to shares (40% of the total shares subject to
                  the Option), less any shares previously purchased pursuant to
                  the Option, at any time after November 8, 2002 and prior to
                  termination of the Option;
         (c)      up to shares (60% of the total shares subject to
                  the Option), less any shares previously purchased pursuant to
                  the Option, at any time after November 8, 2003 and prior to
                  termination of the Option;
         (d)      up to shares (80% of the total shares subject to
                  the Option), less any shares previously purchased pursuant to
                  the Option, at any time after November 8, 2004 and prior to
                  termination of the Option;
         (e)      up to shares (100% of the total shares subject to
                  the Option), less any shares previously purchased pursuant to
                  the Option, at any time after November 8, 2005 and prior to
                  termination of the Option;

         provided, however, that not less than one hundred shares may be
         purchased at any one time unless the number purchased is the total
         number that may be purchased under the Option at that time.

  2.     The option or any part thereof may, to the extent that it is
         exercisable, be exercised in the manner provided in Section 3(c) of
         Article II of the Plan. Payment of the aggregate option price for the
         number of shares purchased shall be made in the manner provided in
         Section 3(d) Article II of the Plan.

3.       The Option or any part thereof may be exercised during the lifetime of
         the Option Holder only by the Option Holder and, except as provided in
         Section 3(f) of Article II of the Plan, may be exercised only while the
         Option Holder is in the employ of the Company.

4.       Except as provided in Section 3(e) and 3(f) of Article II of the Plan
         with respect to transfers upon the death of the Option Holder, the
         Option shall not be transferred, assigned, pledged or hypothecated in
         any way, whether by operation of law or otherwise. Upon any attempt to
         transfer, assign, pledge, hypothecate, or otherwise dispose of the
         Option or any right of privilege confirmed hereby contrary to the
         provisions hereof, the Option and the rights and privileges confirmed
         hereby shall immediately become null and void.

5.       If the  Corporation  shall be a party to any  merger or consolidation
         in which it is not the  surviving corporation or pursuant to which the
         shareholders of the Corporation exchange their Common Stock, or if the
         Corporation  shall dissolve or liquidate or sell all or substantially
         all of its assets, all options outstanding  under this Agreement shall
         terminate on the effective  date of such merger, consolidation,
         dissolution, liquidation or sale; provided, however, that the Committee
         in its discretion, may prior to such effective date, accelerate the
         time at which any outstanding option may be exercised, may authorize
         a payment to the Option Holder that approximates the economic benefit
         that the Option Holder would realize if the option were exercised
         immediately  before such effective  date, may authorize a payment in
         such other amount as it deems  appropriate  to compensate  the Option
         Holder for the  termination of their option, or may arrange for the
         granting of a substitute option to the Option Holder.

<PAGE>

6.       The Option Holder acknowledges that, in the event of certain
         dispositions of shares of Common Stock purchased pursuant to exercise
         of the Option, the Option Holder may recognize ordinary income for
         federal and state income tax purposes  (generally  in an amount equal
         to the difference between the fair market value of the purchased shares
         on the date of exercise  and the option  price  therefor)  and the
         Company may be entitled to a  corresponding  deduction.  Consequently,
         the Option Holder agrees to notify the Company of any disposition of
         shares purchased pursuant to exercise of the Option that is made
         within two years from the date of grant of the Option (June 15, 2001),
         or within one year after the delivery of a stock certificate evidencing
         such shares and to provide to the Company such information with respect
         to the disposition as may be reasonably requested by the Company. The
         Option Holder further agrees that, in the event of a disposition within
         either of the aforesaid periods, the Option Holder will pay, or make
         arrangements for payment, to the Company an amount equal to the income
         and other taxes that the Company may be required to withhold as a
         result of the Option Holder's disposition and that, unless such payment
         or arrangement is made, the Company shall be entitled to withhold, from
         other sums payable to the Option Holder the amount of such income and
         other taxes.

7.       Any notice to be given to the Company shall be addressed to the
         Secretary of the Company at the location of its principal corporate
         office.

8.       Nothing herein contained shall affect the right of the Option Holder to
         participate in and receive benefits under and in accordance with the
         provisions of any pension, insurance or other benefit plan or program
         of the Company as in effect from time to time and for which the Option
         Holder is eligible.

9.       Nothing herein contained shall affect the right of the Company, subject
         to the terms of any existing contractual arrangement to the contrary,
         to terminate the Option Holder's employment at any time for any reason
         whatsoever.

10.      This Agreement shall be binding upon and inure to the benefit of the
         Option Holder, his or her personal representatives, heirs and legatees,
         but neither this Agreement nor any rights hereunder shall be assignable
         or otherwise transferable by the Option Holder except as expressly set
         forth in this Agreement or in the Plan.

11.      Other terms and conditions:
         Pursuant to Article II, Section 3(d) of the Plan, the Committee has
         consented to the receipt of shares of Common Stock of the Company as a
         medium of payment.

                                        CONE MILLS CORPORATION

                                        By /s/John L. Bakane
                                          John L. Bakane
                                          President and Chief Executive Officer