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                               GALEY & LORD, INC.

                              Employment Agreement

         This Agreement between GALEY & LORD, INC., a Delaware Corporation (the
"Corporation"), and LEONARD F. FERRO (the "Executive") shall be effective as of
October 1, 2000.

         The Corporation and the Executive agree to the following:

         1. The Corporation agrees to employ the Executive in an executive
position, subject to the discretion of the Board of Directors of the Corporation
(the "Board"), under the terms set forth below.

         2. (a) The term of this Agreement begins October 1, 2000 and continues
for two years, unless earlier terminated under the provisions of Paragraph 10 of
this Agreement or by Notice by the Executive or the Corporation.

            (b) On October 1, 2001 and each succeeding October 1, the term shall
automatically be extended for an additional one-year period, such that the total
term remains two years at all times, unless, no later than 30 days prior to such
anniversary, either party shall give written Notice to the other that the term
shall not be extended further.

         3. Executive agrees to serve the Corporation faithfully, and to the
best of his ability, under the direction of the Board, devoting his entire time,
energy and skill during regular business hours performing the duties assigned by
the Board.

         4. The Corporation agrees to pay the Executive a salary for his
services at the annual rate (the "Annual Rate") of One Hundred Seventy Six
Thousand Four Hundred Dollars

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($176,400) per annum, payable in equal monthly installments in accordance with
the general practice of the Corporation for salaried employees. The Annual Rate
may be, but is not guaranteed to be, increased during the term of this
Agreement.

         5. Executive will participate in the Incentive Plan (the "IP"). The
Corporation may from time to time pay additional incentive compensation, under
the IP, when and if authorized by the Board or the appropriate committee of the
Board. Payments under the program are not guaranteed.

         6. The Corporation may provide deferred compensation through its
unfunded Deferred Compensation Plan (the "DCP"). Executive will participate in
the DCP according to its terms.

         7. The Corporation has established a Supplemental Executive Retirement
Plan (the "SERP") to provide retirement benefits in addition to the benefits
payable under the Corporation's Retirement Plan. Executive will participate in
the SERP subject to its terms.

         8. The Corporation may from time to time grant stock options under its
Stock Option Plan then in effect (the "SOP"). Executive will participate in the
SOP, at the discretion of the Board, subject to its terms.

         9. Executive acknowledges that this Agreement does not constitute a
guarantee of employment during the specified term.

         10. The Corporation may in its sole discretion at any time terminate
Executive's employment under this Agreement, whether for Cause (as defined in
clause (b) of paragraph 14) or without Cause.


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            (a) In the event that the Executive is involuntary terminated
without Cause, or the Executive terminates employment for Good Reason (as
defined in clause (d) of paragraph 14), Executive shall receive, as soon as
practicable following such termination:

                  (i) salary accrued through the date of termination at the
                  Annual Rate;

                  (ii) the balance held in his deferred compensation account in
                  the DCP at the date of termination;

                  (iii) the accrued value of Executive's SERP assuming
                  employment through the end of this Agreement, as illustrated
                  in the Exhibit; and
                         -------

                  (iv) the greater of (A) the benefit provided by the
                  Corporation's Severance Policy or (B) salary continuation at
                  the Annual Rate and continuation of Bonus Equivalents for the
                  time remaining in this Agreement.

            (b) In the event that the Executive is involuntary terminated
without Cause, or the Executive terminates employment for Good Reason, all
unvested stock options held by Executive will immediately vest, and shall be
exercisable in accordance with the provisions in the SOP and Executive's stock
option agreements executed pursuant thereto.

            (c) In the event that the Executive is involuntary terminated
without Cause, or the Executive terminates employment for Good Reason, the
Executive shall continue for the remainder of the term of this Agreement to
participate in, or the Corporation shall fund substantially equivalent
subsidized benefits, under the welfare and benefits plan of the Corporation.
Executive's rights under this clause (c) shall cease when Executive commences


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employment and obtains coverage under other plans on a substantially similar
basis to those of the Corporation.

            (d) If terminated for Cause, Executive is entitled to his salary
accrued through the date of termination at the Annual Rate.

         11. In consideration of this Agreement, Executive agrees to the
following for the period covered by this Agreement:

            (a) Executive agrees that he will not directly or indirectly render
services to, or become employed by, or consult with, or engage in any business
materially competitive with any of the businesses of the Corporation and its
subsidiary companies (Executive hereby acknowledges that Executive has had
access to, in his executive capacity, material information about all of the
Corporation's businesses) without first obtaining the written consent of the
Corporation;

            (b) Executive agrees that he will not directly or indirectly solicit
any active employees of the Corporation or its subsidiary companies;

            (c) Executive agrees that both during and after his employment
hereunder, he will abide by the Corporation's Confidentiality Agreement; and

            (d) Executive agrees that both during and after his employment
hereunder, he will in no way disparage the Corporation or its subsidiary
companies or employees;

         12. All reasonable legal fees paid or incurred by Executive pursuant to
any dispute or questions of interpretation relating to this Agreement shall be
paid or reimbursed by the Corporation if the Executive prevails in such dispute
in whole or in part.


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         13. This Agreement shall be binding upon, and shall inure to, the
benefit of the Corporation and its successors and assigns. The Corporation shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and/or
assets of the Corporation, by agreement to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the Corporation
would be required to perform it if no such succession had taken place. For
purposes of this Agreement, "Corporation" shall mean the Corporation as
hereinbefore defined and any successor to its business and/or assets as
aforesaid.

         14. The following capitalized terms used in this Agreement shall have
the meanings set forth below:

            (a) "Bonus Equivalent" means the highest annual bonus paid under the
Corporation's Annual Incentive Plan over the three-year period directly
preceding termination.

            (b) A termination for "Cause" means a termination of employment with
the Corporation or any of its subsidiary companies, which as determined by the
Corporation, is by reason of (i) the commission by the Executive of a felony or
a perpetration by the Executive of a dishonest act, material misrepresentation
or common law fraud against the Corporation or any subsidiary, joint venture or
other affiliate thereof, (ii) any other act or omission which is injurious to
the financial condition or business reputation of the Corporation or any
subsidiary, joint venture or other affiliate thereof, or (iii) the willful
failure or refusal of the Executive to substantially perform the material duties
of the Executive's position with the Corporation or any of the Corporation's
subsidiaries, joint venture or other affiliates.

            (c) "Confidentiality Agreement" is the Corporation's official policy
signed by Executive and on file in the Corporation's office.


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            (d) "Good Reason" means (i) a failure to promptly pay compensation
due and payable to the Executive in connection with his employment, (ii) a
reduction in Executive's level of compensation, including participation in
benefit and incentive plans, (other than changes to incentive or benefit plans
affecting all executives) of the Corporation in a similar manner, (iii) unless
agreed to by the Executive, the assignment to the Executive of duties
inconsistent with the Executive's position as such duties were immediately prior
to such assignment which results in a diminution of such position, authority,
duties or responsibilities, (iv) unless agreed to by the Executive the
assignment of the Executive to an office location that would require the
Executive to relocate, or (v) a change in the employment requirements of the
Executive which, in the view of the Board, subjects the Executive to unfair
circumstances.

            (e) "Notice" means notification, by one party of this Agreement to
the other, to voluntarily terminate this Agreement. For the purposes of this
Agreement, Notices and all other communication provided for herein shall be in
writing and shall be deemed to have been duly given (i) on the date of delivery,
if delivered by hand, (ii) on the date of transmission, if delivered by
facsimile, (iii) on the first business day following the date of deposit if
delivered by guaranteed overnight delivery service, or (iv) on the third
business day following the date delivered or mailed by United States registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

         If to the Corporation:

         Galey & Lord, Inc.
         980 Avenue of the Americas
         New York, NY 10018-5443
         Attention:  Chairman and Chief Executive Officer

         If to Executive:

         Leonard F. Ferro
         7005 Morganshire Court
         Summerfield, NC 27358


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or to such other address as either party may have furnished to the other in
writing according herewith, except that notices of change of address shall be
effective only upon receipt.

            (f) "Severance Policy" means the policy providing for severance
payments to salaried employees set forth in the Corporation's Policy Manual as
in effect on the date of the Executive's termination of employment.

         15. The covenants, agreements, representations, and warranties
contained in or made pursuant to this Agreement shall survive Executive's
termination of employment.

         16. This Agreement sets forth the entire understanding of the parties
with respect to the subject matter hereof, supersedes all existing agreements
between them concerning such subject matter, and may be modified only by a
written instrument duly executed by each party.

         17. Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term of
this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.

         18. Employee's rights and obligations under this Agreement shall not be
transferable by assignment or otherwise, such rights shall not be subject to
commutation, encumbrance, or the claims of Employee's creditors, and any attempt
to do any of the foregoing shall be void. The provisions of this Agreement shall
be binding upon and inure to the benefit of Executive and his heirs and personal
representatives.

         19. This Agreement does not create, and shall not be construed as
creating, any rights


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enforceable by any person not a party to this Agreement (except as provided in
paragraphs 13 and 18).

         20. The headings of this Agreement are solely for the convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.

         21. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflicts of law principles thereof.

         IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.

                                        GALEY & LORD, INC.

                                        By:  /s/    Arthur C. Wiener
                                            ----------------------------------
                                             Name:  Arthur C. Wiener
                                             Title: Chairman of the Board
                                                           and President

                                            /s/     Leonard F. Ferro
                                            ----------------------------------
                                                    Leonard F. Ferro

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