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 2001 Stock Incentive 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 Paragraph 7 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 Paragraphs 3 and 4 of 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. The
         Committee retains the right in accordance with the Plan to accelerate
         the vesting schedule under such circumstances it deems appropriate
         including but not limited to the occurrence of a Change of Control as
         defined in the Plan.

  2.     The option or any part thereof may, to the extent that it is
         exercisable, be exercised by providing written notice of intent to
         exercise the Option, delivered to the Company at its principal office,
         and payment in full of the option  price for the  number of shares
         with  respect to which the Option is being exercised. Payment of the
         aggregate option price for the number of shares purchased shall be made
         in whole or in part in the form of cash, a check made payable to the
         Company, or by delivery of duly endorsed certificates evidencing shares
         of Common Stock of the Company. Upon receipt of shares as consideration
         for the purchase price, the Company shall determine the Fair Market
         Value of the delivered shares, as defined by the Plan, and advise the
         Option Holder of any balance due to be paid in cash.  No fractional
         shares shall be received as consideration for the exercise price. Any
         excess of the Fair Market Value of the delivered shares over the
         exercise  price shall be returned to the Option  Holder in the form of
         a certificate representing the shares to be returned. No certificate
         representing the option shares shall be delivered until payment in full
         for such shares has been made.

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
         this paragraph 3, may be exercised only while the Option Holder is in
         the employ of the Company. Provided, however, that the Option Holder
         may exercise the Option prior to its expiration, in whole or in part,

<PAGE>

         for a period of three months after a severance of the employment
         relationship, but only to the extent that such Options were exercisable
         on the date of such severance. Except as so exercised, such Options
         shall expire at the end of such three-month period.

         If the Option Holder shall retiree from the employ of the Company and
         shall qualify for Normal or Early Retirement under the retirement plan
         for which the Option Holder is eligible, the Option Holder shall have
         the right to exercise the option, prior to its expiration, in whole or
         in part (regardless of the extent to which such Option was exercisable
         immediately prior to his or her retirement), for a period of three
         months from and after retirement, and except as so exercised, such
         Option shall expire at the end of such three-month period.

         If before the date of expiration of the Option, the Option Holder shall
         retire from the employ of the Company by reason of disability under the
         then established policies of the Company, the Option Holder shall have
         the right to exercise the Option prior to its expiration, in whole or
         in part (regardless of the extent to which such Option was exercisable
         immediately prior to retirement), for a period of one year from and
         after the retirement. Except as so exercised, such Option shall expire
         at the end of such one-year period.

4.       Except as provided below in this Paragraph 4 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.

         In the event of the death of Option Holder while in the employ of the
         Company and before the date of expiration of the Option, the personal
         representative, or any person or persons who shall have acquired the
         Option by bequest or inheritance from the Option Holder, shall have the
         right to exercise the Option prior to its expiration, in whole or in
         part (regardless of the extent to which such Options were exercisable
         immediately prior to the Option Holder's death), for a period of one
         year from and after the Option Holder's death. Except as so exercised,
         such Options shall expire at the end of such one-year period.

5.       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.

<PAGE>

6.       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.

7.       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.

8.       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.

9.       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.

10.      Any reference to an employment relationship with the Company within
         this Agreement shall apply to the employment relationship with any of
         its Subsidiaries, as defined in the Plan.





                                  CONE MILLS CORPORATION


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