January 20, 1998

Mr. Bret J. Harris
Chief Financial Officer
Martin Color-Fi, Inc.
Star Fibers Corp.
Buchanan Industries, Inc.
P.O. Box 469
Edgefield, SC  29824

          Re:  Modification  of Revolving  Credit Loan having a current  maximum
               principal   availability   of  up  to  $30,000,000   extended  by
               NationsBank, N.A.

Dear Bret:

         This  letter  shall  serve as a written  modification  to that  certain
Fourth Amended and Restated Loan and Security Agreement dated to be effective as
of  September  30,  1997 (as amended or modified  the "Loan  Agreement")  by and
between Martin Color-Fi,  Inc., (for itself and as successor by merger to Custom
Colorants,  Inc. and  Palmetto  Spinning  Corporation)  Star Fibers  Corp.,  and
Buchanan Industries, Inc. (collectively,  the "Borrowers") and NationsBank, N.A.
("NationsBank").

         The Loan Agreement is amended by deleting the words "fifty-five percent
(55%) of the total  principal  outstanding  under  the  Revolving  Credit  Loan"
appearing  on line 13 of Section  2.5  entitled  Margin  Requirements  under the
Revolving Credit Loan and substituting in lieu thereof the following:

         (i) except as provided in (ii),  fifty-five  percent (55%) of the total
         principal  outstanding under the Revolving Credit Loan; and (ii) during
         the  period of time  commencing  on January 9, 1998 and ending on April
         15, 1998, sixty percent (60%) of the total principal  outstanding under
         the Revolving Credit Loan.

The intent of the modification  described in this letter is to provide Borrowers
a period of time  commencing  on January  9, 1998 and  ending on April 15,  1998
during which the inventory  "cap" will be raised from 55% of the total principal
outstanding  under  the  Revolving  Credit  Loan to 60% of the  total  principal
outstanding  under the Revolving  Credit Loan. On and after April 16, 1998,  the
maximum  principal  advanced and  outstanding  under the  Revolving  Credit Loan
against Eligible  Inventory shall not exceed,  at any time,  fifty-five  percent
(55%) of the total principal outstanding under the Revolving Credit Loan.



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Mr. Bret J. Harris
January 20, 1998
Page 2



         All capitalized  terms not otherwise  defined in this letter shall have
the  meaning  ascribed to such term in the Loan  Agreement.  All other terms and
conditions of the Loan Agreement and any other  document  executed in connection
with the Revolving Credit Loan (collectively, the "Loan Documents") shall remain
in full force and effect.  Except as  specifically  set forth  below,  Borrowers
represent  and  warrant   that,  as  of  the  date  of  this  letter;   (i)  all
representations  contained in the Loan  Agreement or the Loan Documents are true
and accurate;  (ii) all covenants  contained in the Loan  Agreement and the Loan
Documents have been and remain  satisfied;  and (iii) no Event of Default exists
or no  condition  exists which with the giving of notice or the passage of time,
or both,  would  constitute an Event of Default under Loan Agreement or the Loan
Documents.  NationsBank  acknowledges  that Borrowers have informed  NationsBank
that  Borrowers may have violated the covenant  contained in Section  7.1(aa) of
the Loan  Agreement.  The execution of this letter by  NationsBank  shall not be
deemed to be a waiver by  NationsBank  of any  rights it may have under the Loan
Agreement,  the other Loan Documents or otherwise in connection with a violation
of the  covenant  contained in Section  7.1(aa),  and  NationsBank  specifically
reserves all such rights.

         Please have all parties execute the original of this letter to indicate
the Borrowers'  agreement to be bound by the terms and conditions of this letter
and return the original fully-  executed letter to me as soon as possible.  This
letter agreement will be binding on all parties upon our receipt of the original
fully-executed and dated letter.

         This letter supersedes and replaces our letter to you dated January 12,
1998.

                                                         Kindest regards,

                                                         NationsBank, N.A.



                                                         Greg A. Lapointe
                                                         Senior Vice President




<PAGE>



Mr. Bret J. Harris
January 20, 1998
Page 3



Agreed to on this 20th day of January, 1998.

BORROWERS:

MARTIN COLOR-FI, INC.


By: Bret J. Harris
    Its: Chief Financial Officer

STAR FIBERS CORP.


By: Bret J. Harris
    Its: Chief Financial Officer


BUCHANAN INDUSTRIES, INC.


By: Bret J. Harris
    Its: Chief Financial Officer