Document:

<PAGE>

                                                                  Exhibit 4.2.22

                                  AMENDMENT OF
                               1992 NOTE AGREEMENT

      This Amendment of 1992 Note Agreement ("Amendment"), entered into as of
March 22, 2002, by and among CONE MILLS CORPORATION (the "Company") and THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA (the "Noteholder").

      WHEREAS, the parties hereto have executed and delivered that certain Note
Agreement dated as of August 13, 1992 (as previously amended and as it may be
further amended, modified or supplemented, the "Note Agreement");

      WHEREAS,  the Company has  requested a certain  amendment be made to the
Note Agreement;

      WHEREAS, Noteholder is willing to enter into this Amendment subject to the
satisfaction of conditions and terms set forth herein;

      WHEREAS, capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Note Agreement (as amended by this
Amendment); and

      NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

      1.   Amendments to Note Amendment.

      1A.  Paragraph 5L of the Note Agreement. Paragraph 5L of the Note
Agreement is amended in its entirety to read as follows:

           5L. Credit Facility. The Company shall maintain at all times a
      revolving credit facility having a maturity date no earlier than
      January 15, 2003 with at least $67,000,000 in aggregate commitments
      available thereunder, less any Sharing Payments or Disposition
      Payments (as defined in the Senior Debt Intercreditor Agreement)
      received by the lenders with respect to the Credit Agreement under
      Section 3.4 of the Senior Debt Intercreditor Agreement, and
      otherwise in form and substance satisfactory to the Required
      Holders.

      2.   Conditions of Effectiveness. Upon satisfaction of the following, the
effective date of this Amendment shall be March 22, 2002 (the "Effective Date").
This Amendment shall become effective when, and only when, (a) the Noteholder
shall have received all of the following documents, each (unless otherwise
indicated) being dated the date hereof, in form and substance satisfactory to
the Noteholder:

           (i) executed originals of each of this Amendment and the Consent of
      Guarantors, attached hereto;

<PAGE>

                                                                               2

           (ii) such other documents, instruments, approvals or opinions as the
      Noteholder may reasonably request.

      (b)  The Company shall have paid all costs and expenses (including legal
fees) incurred by the Noteholder.

      (c)  The representations and warranties contained herein shall be true on
and as of the date hereof, and there shall exist on the date hereof no Event of
Default or Default; except as disclosed in writing to the Noteholder, there
shall exist no material adverse change in the financial condition, business
operation or prospects of the Company or its Subsidiaries since December 31,
2001.

      3.   Representations and Warranties.

      (a)  The Company hereby repeats and confirms each of the representations
and warranties made by it in (i) the Credit Agreement (it being understood that
any reference therein to (1) Lender includes the Noteholder, and (2) Loan
Documents includes the Note Agreement and the Notes (as amended hereby) and (ii)
paragraph 8H of the Note Agreement, as amended hereby, as though made on and as
of the date hereof, with each reference therein to "this Agreement", "hereof",
"hereunder", "thereof", "thereunder" and words of like import being deemed to be
a reference to the Note Agreement as amended hereby.

      (b)  The Company further represents and warrants as follows:

           (i)   The execution, delivery and performance by the Company of this
      Amendment are within its corporate powers, have been duly authorized by
      all necessary corporate action and do not contravene (A) its charter or
      by-laws, (B) law or (C) any legal or contractual restriction binding on or
      affecting the Company; and such execution, delivery and performance do not
      or will not result in or require the creation of any Lien upon or with
      respect to any of its properties.

           (ii)  No governmental approval is required for the due execution,
      delivery and performance by the Company of this Amendment, except for such
      governmental approvals as have been duly obtained or made and which are in
      full force and effect on the date hereof and not subject to appeal.

           (iii) This Amendment constitutes the legal, valid and binding
      obligations of the Company enforceable against the Company in accordance
      with its terms.

           (iv)  There are no pending or threatened actions, suits or
      proceedings affecting the Company or any of its Subsidiaries or the
      properties of the Company or any of its Subsidiaries before any court,
      governmental agency or arbitrator, that may, if adversely determined,
      materially adversely affect the financial condition, properties, business,
      operations or prospects of the Company and it Subsidiaries, considered as
      a whole, or affect the legality, validity or enforceability of the Note
      Agreement, as amended by this Amendment.

<PAGE>

                                                                               3

      4.   Miscellaneous.

      4A.  Reference to and Effect on the Note Agreement. (a) Upon the
effectiveness of this Amendment, on and after the date hereof each reference in
the Note Agreement to "this Agreement", "hereunder", "hereof" or words of like
import referring to the Note Agreement, and each reference in any other document
to "the Note Agreement", "thereunder", "thereof" or words of like import
referring to the Note Agreement, shall mean and be a reference to the Note
Agreement, as amended hereby.

      (b)  Except as specifically amended and waived above, the Note Agreement,
and all other related documents, are and shall continue to be in full force and
effect and are hereby in all respects ratified and confirmed.

      (c)  The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of any holder of a Note under
the Note Agreement or the Notes, nor constitute a waiver of any provision of any
of the foregoing.

      4B.  Costs and Expenses. The Company agrees to pay on demand all costs and
expenses incurred by any holder of a Note in connection with the preparation,
execution and delivery of this Amendment, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel. The Company further
agrees to pay on demand all costs and expenses, if any (including, without
limitation, reasonable counsel fees and expenses of counsel), incurred by any
holder of a Note in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Amendment, including,
without limitation, counsel fees and expenses in connection with the enforcement
of rights under this paragraph 4B.

      4C.  Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.

      4D.  Governing Law. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.

      4E.  Estoppel. To induce the Noteholder to enter into this Amendment, the
Company hereby acknowledges and agrees that, as of the date hereof, there exists
no right of offset, defense or counterclaim in favor of the Company against any
holder of the Notes with respect to the obligations of the Company to any such
holder, either with or without giving effect to this Amendment.

                            [Signatures on Next Page]

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                    CONE MILLS CORPORATION

                                    By /s/W. Scott Wenhold
                                       Name: W. Scott Wenhold
                                       Title: Treasurer

                                    THE PRUDENTIAL INSURANCE
                                      COMPANY OF AMERICA

                                    By /s/Michael E. Fitzgerald
                                       Name: Michael E. Fitzgerald
                                       Title: Vice President

        Signature page to March 2002 Amendment of 1992 Note Agreement

<PAGE>

                   CONSENT AND REAFFIRMATION OF GUARANTORS

      Each of the undersigned (i) acknowledges receipt of the foregoing
Amendment of 1992 Note Agreement, dated as of March 22, 2002 (the "Amendment"),
(ii) consents to the execution and delivery of the Amendment by the parties
thereto, and (iii) reaffirms all of its obligations and covenants under the
Guaranty Agreement dated as of January 28, 2000, and agrees that none of such
obligations and covenants shall be affected by the execution and delivery of the
Amendment. This Consent and Reaffirmation may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts, taken together, shall constitute but one and the same
instrument.

                                    CIPCO S.C., INC.

                                    By /s/Cheryl G. Hollis
                                       Name: Cheryl G. Hollis
                                       Title: Assistant Secretary

                                    CONE FOREIGN TRADING LLC

                                    By /s/Neil W. Koonce
                                       Name: Neil W. Koonce
                                       Title: Vice President

        Signature page to March 2002 Amendment of 1992 Note Agreement<PAGE>

                                                                   Exhibit 4.3.8

                       AMENDMENT NO. 8 TO CREDIT AGREEMENT

      THIS AMENDMENT NO. 8 TO CREDIT AGREEMENT (this  "Agreement") is made and
entered  into as of this 9th day of  November,  2001,  by and among CONE MILLS
CORPORATION,  a North Carolina corporation (the "Borrower"),  BANK OF AMERICA,
N.A., a national  banking  association,  EACH OF THE LENDERS  SIGNATORY HERETO
and BANK OF  AMERICA,  N.A.,  a national  banking  association,  as Agent (the
"Agent") for the Lenders.

                              W I T N E S S E T H:
                              --------------------

      WHEREAS, the Borrower, the Agent and the Lenders from time to time party
thereto (the Lenders") have entered into that certain Credit Agreement dated as
of January 28, 2000, as amended by Amendment No. 1 to Credit Agreement dated as
of July 14, 2000 ("Amendment No. 1"), Amendment No. 2 to Credit Agreement dated
as of December 12, 2000 ("Amendment No. 2"), Waiver and Amendment No 3 to Credit
Agreement dated as of April 23, 2001 ("Amendment No 3"), Amendment No 4 to
Credit Agreement dated as of June 28, 2001 ("Amendment No. 4"), Amendment No 5
to Credit Agreement dated as of August 10, 2001 ("Amendment No. 5"), Amendment
No 6 to Credit Agreement dated as of September 25, 2001 ("Amendment No. 6") and
Amendment No. 7 to Credit Agreement dated as of October 25, 2001 ("Amendment No.
7" and, together with Amendment No.1, Amendment No.2, Amendment No. 3, Amendment
No. 4, Amendment No. 5, and Amendment No. 6, the "Prior Amendments"; such Credit
Agreement as heretofore amended, the "Existing Credit Agreement");

      WHEREAS, the Borrower has requested the Agent and the Lenders to amend the
Existing Credit Agreement in such a manner that, upon giving effect to such
amendments and incorporating the terms of the Previous Amendments, the Existing
Credit Agreement as so amended would contain the terms, covenants, conditions
and other provisions as contained in the consolidated form of Credit Agreement
set forth as Exhibit A to this Agreement (the "Consolidated Form Credit
Agreement"), and the Agent and the Lenders are agreeable to such amendment and
to evidencing and reflecting such amendment in the Consolidated Form Credit
Agreement;

      NOW, THEREFORE, in consideration of the mutual covenants, promises and
conditions herein set forth, it is hereby agreed as follows:

      1.  Definitions. The term "Credit Agreement" as used herein and in the
          -----------
other Loan Documents shall mean the Existing Credit Agreement as previously and
as hereby amended and as from time to time further amended or modified. Unless
the context otherwise requires, all capitalized terms used herein without
definition shall have the respective meanings provided therefor in the Credit
Agreement.

      2.  Amendments to Credit Agreement. The Existing Credit Agreement is
          ------------------------------
hereby amended so that, as amended, it shall read as set forth in, and shall
have the terms, covenants, conditions and other provisions of, the Consolidated
Form Credit Agreement, the terms, covenants, conditions and other provisions of
which Consolidated Form Credit Agreement (including without limitation the terms

<PAGE>

of each amendment to the Existing Credit Agreement reflected therein) are hereby
incorporated by reference into this Agreement as if fully set forth herein. The
parties hereto acknowledge and agree that each amendment to the Existing Credit
Agreement effected hereby and reflected in the Consolidated Form Credit
Agreement is and shall be effective as if individually specified in this
Agreement (the parties further acknowledging that amendment of the Existing
Credit Agreement by reference to the Consolidated Form Credit Agreement provides
a convenience to the parties in order to show the amendments effected by this
Agreement and by prior amendments to the Existing Credit Agreement, so that the
amended terms can be read in the context of the full Credit Agreement), and that
this Agreement is not a novation of the Existing Credit Agreement or of any
credit facility provided thereunder or in respect thereof. The parties do not
have to execute the signature pages contained in the Consolidated Form Credit
Agreement. Subject to satisfaction of the conditions set forth herein, this
Agreement will become effective as of the date first set forth above upon
execution of the signature pages to this Amendment. The signature pages
contained in the Consolidated Form Credit Agreement may be left blank.
Notwithstanding that the Consolidated Form Credit Agreement is dated "as of
January 28, 2000", the changes to the Existing Credit Agreement effected by this
Agreement shall be effective as of the date first set forth above.

      3. Guarantors. Each of the Guarantors has joined into the execution of
         ----------
this Agreement for the purpose of consenting to the amendments contained herein
and reaffirming its guaranty of the Obligations as amended by the terms of this
Agreement.

      4.  Borrower's Representations and Warranties. The Borrower hereby
          -----------------------------------------
represents, warrants and certifies that:

          (a)  The representations and warranties made by it in Article VIII of
                                                                ------------
      the Credit Agreement are true on and as of the date hereof before and
      after giving effect to this Agreement except that the financial statements
      referred to in Section 8.6(a) shall be those most recently furnished to
                     --------------
      each Lender pursuant to Section 9.1(a) and (b) of the Credit Agreement;
                              --------------     ---

          (b)  The Borrower has the power and authority to execute and perform
      this Agreement and has taken all action required for the lawful execution,
      delivery and performance thereof;

          (c)  Except as has been disclosed to the Agent and the Lenders in
      writing, there has been no material adverse change in the condition,
      financial or otherwise, of the Borrower and its Subsidiaries, taken as a
      whole, since the date of the most recent financial reports of the Borrower
      received by each Lender under Section 9.1(a) of the Credit Agreement after
                                    --------------
      giving effect to the transaction contemplated by this Agreement;

          (d)  The business and properties of the Borrower and its Subsidiaries
      are not, and since the date of the most recent financial report of the
      Borrower and its Subsidiaries received by the Agent under Section 9.1(a)
                                                                --------------
      of the Credit Agreement have not been, adversely affected in any
      substantial way as the result of any fire, explosion, earthquake,

                                       2

<PAGE>

      accident, strike, lockout, combination of workmen, flood, embargo, riot,
      activities of armed forces, war or acts of God or the public enemy, or
      cancellation or loss of any major contracts; and

          (e) No Default or Event of Default has occurred and is continuing.

      5.  Entire Agreement. This Agreement sets forth the entire understanding
          ----------------
and agreement of the parties hereto in relation to the subject matter hereof and
supersedes any prior negotiations and agreements among the parties relative to
such subject matter. None of the terms or conditions of this Agreement may be
changed, modified, waived or canceled orally or otherwise, except as provided in
the Credit Agreement.

      6.  Full Force and Effect of Amendment. Except as hereby specifically
          ----------------------------------
amended, modified or supplemented, the Credit Agreement and all of the other
Loan Documents are hereby confirmed and ratified in all respects and shall
remain in full force and effect according to their respective terms.

      7.  Counterparts. This Agreement may be executed in any number of
          ------------
counterparts and all the counterparts taken together shall be deemed to
constitute one and the same instrument.

      8.  Enforceability. Should any one or more of the provisions of this
          --------------
Agreement be determined to be illegal or unenforceable as to one or more of the
parties hereto, all other provisions nevertheless shall remain effective and
binding on the parties hereto.

      9.  Credit Agreement and Other Loan Documents. All references in any of
          -----------------------------------------
the Loan Documents to the "Credit Agreement" shall mean the Credit Agreement as
amended hereby.

      10. Amendment Fees. Concurrently with the closing of this Agreement, the
          --------------
Borrower will pay to the Agent (for the benefit of each Lender) an amendment fee
(each, an "Amendment Fee") in an amount equal to (a) 0.75 percent (0.75%)
multiplied by (b) the Revolving Credit Commitment of such Lender as of the date
of such closing after giving effect to this Amendment. Such Amendment Fees shall
be fully-earned upon becoming due and payable, shall be non-refundable for any
reason whatsoever and shall be in addition to any other fee, cost or expense
payable pursuant to the Credit Agreement, any other Loan Document or any other
agreement.

      11. Conditions. The effectiveness of this Agreement shall be subject to
          ----------
fulfillment of the following conditions:

          (a)  The Agent shall have received on or before the date hereof (or in
      the case of the Account Control Agreements described in clause (ii) below,
      within 30 days after the date hereof), in each case in form and substance
      satisfactory to the Agent, the following:

               (i)   a fully-executed original of this Agreement;

               (ii)  fully-executed originals of Account Control Agreements from
          financial institutions acting as depositary for (and with respect to)
          the deposit accounts of the Borrower and the Guarantors (other than
          the Securitization

                                       3

<PAGE>

          Deposit Accounts) and other than Imprest/Payroll Accounts (provided
          that the aggregate amount deposited in all such Imprest/Payroll
          Accounts does not exceed the amounts permitted by Section 10.21 of the
                                                            -------------
          Credit Agreement), such Account Control Agreements to be in
          substantially the form attached hereto as Exhibit B or such other form
                                                    ---------
          or forms acceptable to the Agent;

               (iii)  a fully-executed original of an Equity Appreciation Rights
          Agreement, in substantially the form attached hereto as Exhibit C;
                                                                  ---------

               (iv)   the acknowledgment of General Electric Capital Corporation
          under the Receivables Purchase Agreement;

               (v)    a fully-executed copy of an amendment to the Senior Note
          Agreement in substantially the form attached hereto as Exhibit D; and
                                                                 ---------

          evidence satisfactory to the Agent of the satisfaction of all
          conditions to the effectiveness of such amendment;

               (vi)   a fully-executed original of an amendment to the Senior
          Debt Intercreditor Agreement in the form attached hereto as Exhibit E;
                                                                      ---------

               (vii)  payment by the Borrower to the Agent of all fees required
          to be paid hereunder or otherwise due and payable to the Agent or the
          Lenders at or prior the closing date, including without limitation all
          Amendment Fees and the fees and expenses of special counsel to the
          Agent to the extent invoiced prior to or on the closing date, plus
          such additional amounts as shall constitute its reasonable estimate of
          fees and expenses incurred or to be incurred by it through the closing
          proceedings (provided that such estimate shall not thereafter preclude
          a final settling of accounts between the Borrower and the Agent);

               (viii) the opinion of in-house counsel to the Borrower and the
          Guarantors containing such opinions and in form and substance as shall
          be reasonably acceptable to the Agent and its special counsel;

               (ix)   any additional agreements, instruments or documents which
          it may reasonably request in connection herewith; and

          (b)  The correctness in all respects on the date hereof of the
      representations and warranties of the Borrower contained herein.

      12. Release. Each of the Borrower and each Guarantor acknowledges that it
          -------
has no existing defense, counterclaim, offset, cross-complaint, claim or demand
of any kind or nature whatsoever that can be asserted to reduce or eliminate all
or any part of its liability to pay the full indebtedness outstanding under the
terms of the Credit Agreement, this Agreement, the Notes, the Facility Guaranty,
and the other Loan Documents. In consideration for the execution of this
Agreement, each of the Borrower and each Guarantor hereby releases and forever
discharges the Agent, the Lenders, their respective affiliates, predecessors,
successors and assignees, and all of the respective officers, directors,
employees and agents of the Agent, the Lenders and such

                                       4

<PAGE>

affiliates, predecessors, successors and assignees (collectively, the "Released
Parties") from any and all actions, causes of action, debts, dues, claims,
demands, liabilities and obligations of every kind and nature, both in law and
in equity, from the beginning of the world to the date hereof, known or unknown,
now existing, which might be asserted against the Agent, any Lender or any other
Released Party. This release applies to all matters arising out of or relating
to the Loan Documents, the indebtedness due under the Notes, the Credit
Agreement, this Agreement or any other Loan Document, and the lending, deposit,
borrowing and other banking relationships between the Borrower or any Guarantor
and the Agent, any Lender or any other Released Party, including the
administration, collateralization and funding thereof.

      13. Commitments. The parties hereto acknowledge that, after giving effect
          -----------
to the prepayment on the date hereof required by Section 2.1 (g) of the Credit
                                                 ---------------
Agreement (as amended hereby) and prior reductions of the Total Revolving Credit
Commitment pursuant to the terms of the Credit Agreement, the Total Revolving
Credit Commitment will be $68,375,804.34 as of the date hereof; and the
Revolving Credit Commitment of each Lender as of the date hereof will be the
respective amount shown on Schedule F attached hereto.

                           [Signature pages follow.]

                                       5

<PAGE>

                          EXHIBIT A TO AMENDMENT NO. 8

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers, all as of the day and year
first above written.

                                    BORROWER:

                                    CONE MILLS CORPORATION

                                    By:    /s/Gary L. Smith
                                    Name:  Gary L. Smith
                                    Title: EVP & CFO

                                    GUARANTORS:

                                    CIPCO S.C., INC.

                                    By:    /s/W. Scott Wenhold
                                    Name:  W. Scott Wenhold
                                    Title: Treasurer

                                    CONE FOREIGN TRADING LLC

                                    By:    /s/Neil W. Koonce
                                    Name:  Neil W. Koonce
                                    Title: Vice President

<PAGE>

                          EXHIBIT A TO AMENDMENT NO. 8

                                    AGENT:

                                    BANK OF AMERICA, N.A. as Agent for the
                                    Lenders

                                    By:    /s/John F. Register
                                    Name:  John F. Register
                                    Title: Principal

                                    LENDERS:

                                    BANK OF AMERICA, N.A.

                                    By:    /s/John F. Register
                                    Name:  John F. Register
                                    Title: Principal

                                    FIRST UNION NATIONAL BANK

                                    By:    /s/Tom Bohrer
                                    Name:  Tom Bohrer
                                    Title: Vice President

                                    WACHOVIA BANK, N.A.

                                    By:    /s/Charlene A. Johnson
                                    Name:  Charlene A. Johnson
                                    Title: Senior Vice President

<PAGE>

                          EXHIBIT A TO AMENDMENT NO. 8

                                    SUNTRUST BANK

                                    By:    /s/Samuel M. Ballesteros
                                    Name:  Samuel M. Balesteros
                                    Title: Director

                                    MORGAN GUARANTY TRUST COMPANY OF NEW YORK

                                    By:    /s/Gev F Nentin
                                    Name:  Gev F. Nentin
                                    Title: Managing Director

<PAGE>

                          EXHIBIT A TO AMENDMENT NO. 8

================================================================================

                                CREDIT AGREEMENT

                                  by and among

                             CONE MILLS CORPORATION
                                  as Borrower,

                             BANK OF AMERICA, N.A.,
                             as Agent and as Lender

                                       and

                   THE LENDERS PARTY HERETO FROM TIME TO TIME

                                January 28, 2000

                         BANC OF AMERICA SECURITIES LLC,
                   as Sole Lead Arranger and Sole Book Manager

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

ARTICLE I      DEFINITIONS AND TERMS..........................................2

      1.1      Definitions....................................................2
      1.2      Rules of Interpretation.......................................39
ARTICLE II     THE CREDIT FACILITIES.........................................41

      2.1      Revolving Loans...............................................41
      2.2      Use of Proceeds...............................................46
      2.3      Revolving Notes...............................................46
ARTICLE III    LETTERS OF CREDIT.............................................47

      3.1      Letters of Credit.............................................47
      3.2      Reimbursement and Participations..............................47
ARTICLE IV     EURODOLLAR FUNDING, FEES, AND PAYMENT CONVENTIONS.............51

      4.1      Interest Rate Options.........................................51
      4.2      Conversions and Elections of Subsequent Interest Periods......51
      4.3      Payment of Interest...........................................52
      4.4      Prepayments of Eurodollar Rate Loans..........................52
      4.5      Manner of Payment.............................................52
      4.6      Fees..........................................................53
      4.7      Pro Rata Payments.............................................54
      4.8      Computation of Rates and Fees.................................54
      4.9      Deficiency Advances; Failure to Purchase Participations.......54
      4.10     Intraday Funding..............................................55
      4.11     Cessation of Eurodollar Rate Loans............................55
ARTICLE V      SECURITY......................................................56

      5.1      Security......................................................56
      5.2      Further Assurances............................................57
      5.3      Information Regarding Collateral..............................57
      5.4      Mortgages.....................................................58
      5.5      Intercreditor Matters.........................................58
      5.6      Account Control Agreements....................................59
ARTICLE VI     CHANGE IN CIRCUMSTANCES.......................................60

      6.1      Increased Cost and Reduced Return.............................60
      6.2      Limitation on Types of Loans..................................61
      6.3      Illegality....................................................61
      6.4      Treatment of Affected Loans...................................62
      6.5      Compensation..................................................62
      6.6      Taxes.........................................................63
ARTICLE VII    CONDITIONS TO MAKING LOANS AND ISSUING LETTERS OF CREDIT......65

      7.1      Conditions of Initial Advance.................................65

                                       i

<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

                                                                            Page
                                                                            ----

      7.2      Conditions of Revolving Loans and Letter of Credit............68
ARTICLE VIII   REPRESENTATIONS AND WARRANTIES................................70

      8.1      Organization and Authority....................................70
      8.2      Loan Documents................................................70
      8.3      Solvency......................................................71
      8.4      Subsidiaries and Stockholders.................................71
      8.5      Ownership Interests...........................................71
      8.6      Financial Condition...........................................71
      8.7      Title to Properties...........................................72
      8.8      Taxes.........................................................72
      8.9      Other Agreements..............................................72
      8.10     Litigation....................................................73
      8.11     Margin Stock..................................................73
      8.12     Investment Company............................................73
      8.13     Patents, Etc..................................................73
      8.14     No Untrue Statement...........................................73
      8.15     No Consents, Etc..............................................74
      8.16     Employee Benefit Plans........................................74
      8.17     No Default....................................................75
      8.18     Environmental Laws............................................75
      8.19     Employment Matters............................................76
      8.20     RICO..........................................................76
      8.21     Year 2000 Compliance..........................................76
ARTICLE IX     AFFIRMATIVE COVENANTS.........................................77

      9.1      Financial Reports, Etc........................................77
      9.2      Maintain Properties...........................................79
      9.3      Existence, Qualification, Etc.................................79
      9.4      Regulations and Taxes.........................................80
      9.5      Insurance.....................................................80
      9.6      True Books....................................................80
      9.7      Year 2000 Compliance..........................................80
      9.8      Right of Inspection...........................................80
      9.9      Observe all Laws..............................................80
      9.10     Governmental Licenses.........................................81
      9.11     Covenants Extending to Other Persons..........................81
      9.12     Officer's Knowledge of Default................................81
      9.13     Suits or Other Proceedings....................................81
      9.14     Notice of Environmental Complaint or Condition................81
      9.15     Environmental Compliance......................................81
      9.16     Indemnification...............................................82
      9.17     Further Assurances............................................82
      9.18     Employee Benefit Plans........................................82

                                       ii

<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

                                                                            Page
                                                                            ----

      9.19     Continued Operations..........................................83
      9.20     New Subsidiaries..............................................83
      9.21     Controlled Accounts...........................................86
      9.22     Third-party Consultant........................................87
      9.23     Post-Closing Deliveries.......................................87
ARTICLE X      NEGATIVE COVENANTS............................................89

      10.1     Financial Covenants...........................................89
      10.2     Acquisitions..................................................90
      10.3     Capital Expenditures..........................................90
      10.4     Liens.........................................................90
      10.5     Indebtedness..................................................92
      10.6     Transfer of Assets............................................93
      10.7     Investments...................................................93
      10.8     Merger or Consolidation.......................................94
      10.9     Restricted Payments...........................................94
      10.10    Transactions with Affiliates..................................94
      10.11    Compliance with ERISA, the Code and Foreign Benefit Laws......94
      10.12    Fiscal Year...................................................95
      10.13    Dissolution, etc..............................................95
      10.14    Limitations on Sales and Leasebacks...........................95
      10.15    Rate Hedging Obligations......................................96
      10.16    Negative Pledge Clauses.......................................96
      10.17    Compensation; Reimbursement of Expenses.......................96
      10.18    Change in Accountants.........................................96
      10.19    Prepayments, Etc. of Indebtedness.............................96
      10.20    Partnerships..................................................96
      10.21    Imprest/Payroll Accounts......................................96
ARTICLE XI     EVENTS OF DEFAULT AND ACCELERATION............................97

      11.1     Events of Default.............................................97
      11.2     Agent to Act.................................................100
      11.3     Cumulative Rights............................................100
      11.4     No Waiver....................................................100
      11.5     Allocation of Proceeds.......................................100
ARTICLE XII    THE AGENT....................................................102

      12.1     Appointment, Powers, and Immunities..........................102
      12.2     Reliance by Agent............................................102
      12.3     Defaults.....................................................103
      12.4     Rights as Lender.............................................103
      12.5     Indemnification..............................................103
      12.6     Non-Reliance on Agent and Other Lenders......................104
      12.7     Resignation of Agent.........................................104

                                       iii

<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

                                                                            Page
                                                                            ----

ARTICLE XIII   MISCELLANEOUS................................................105

      13.1     Assignments and Participations...............................105
      13.2     Notices......................................................107
      13.3     Right of Set-off; Adjustments................................108
      13.4     Survival.....................................................109
      13.5     Expenses.....................................................109
      13.6     Amendments and Waivers.......................................109
      13.7     Counterparts; Facsimile Signatures...........................110
      13.8     Termination..................................................110
      13.9     Indemnification; Limitation of Liability.....................111
      13.10    Severability.................................................112
      13.11    Entire Agreement.............................................112
      13.12    Agreement Controls...........................................112
      13.13    Usury Savings Clause.........................................112
      13.14    Payments.....................................................113
      13.15    Fees.........................................................113
      13.16    Confidentiality..............................................113
      13.17    Governing Law; Waiver of Jury Trial..........................114

                                       iv

<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

EXHIBIT A         Applicable Commitment Percentages.........................A-1
EXHIBIT B         Form of Assignment and Acceptance.........................B-1
EXHIBIT C         Notice of Appointment (or Revocation) of Authorized
                  Representative............................................C-1
EXHIBIT D         Form of Borrowing Notice..................................D-1
EXHIBIT E         Form of Interest Rate Selection Notice....................E-1
EXHIBIT F         Form of Revolving Note....................................F-1
EXHIBIT G         Form of Opinion of Borrower's Counsel.....................G-1
EXHIBIT H         Compliance Certificate....................................H-1
EXHIBIT I         Form of Facility Guaranty.................................I-1
EXHIBIT J-1       Form of General Security Agreement......................J-1-1
EXHIBIT J-2       Form of Priority Security Agreement.....................J-2-1
EXHIBIT K         Form of Pledge Agreement (Borrower).......................K-1
EXHIBIT L         Form of Borrowing Base Certificate........................L-1
EXHIBIT M-1       Form of General Deed of Trust...........................M-1-1
EXHIBIT M-2       Form of General Mortgage................................M-2-1
EXHIBIT M-3       Form of Priority Deed of Trust..........................M-3-1
EXHIBIT M-4       Form of Priority Mortgage...............................M-4-1
EXHIBIT N         Real Properties to be Appraised...........................N-1
EXHIBIT O         Form of Certificate regarding Excess Cash Flow............O-1
EXHIBIT P         Imprest/Payroll Accounts..................................P-1
EXHIBIT Q         Projected EBITDA, PBGC Payments and LIFO Adjustments......Q-1

Schedule 1.1      Disposition of Assets.....................................S-1
Schedule 1.1A     Disposition of Additional Assets..........................S-2
Schedule 1.1B     Further Asset Dispositions................................S-3
Schedule 1.2      Material Subsidiaries.....................................S-4
Schedule 5.3      Information Regarding Collateral..........................S-5
Schedule 5.4      Real Property Subject to Mortgages........................S-6
Schedule 8.4      Subsidiaries and Investments in Other Persons.............S-7
Schedule 8.6      Indebtedness..............................................S-8
Schedule 8.7      Liens.....................................................S-9
Schedule 8.8      Tax Matters..............................................S-10
Schedule 8.10     Litigation...............................................S-11
Schedule 8.16     Employee Benefit Plan Events.............................S-12
Schedule 8.18     Environmental Issues.....................................S-13
Schedule 8.19     Employment Matters.......................................S-14
Schedule 9.5      Insurance................................................S-15
Schedule 10.10    Transactions with Affiliates.............................S-16
Schedule 10.14    Sale and Leaseback Transactions..........................S-17

                                        v

<PAGE>

                                CREDIT AGREEMENT

      THIS CREDIT AGREEMENT, dated as of January 28, 2000 (the "Agreement"), is
made by and among CONE MILLS CORPORATION, a North Carolina corporation having
its principal place of business in Greensboro, North Carolina (the "Borrower"),
BANK OF AMERICA, N.A., a national banking association organized and existing
under the laws of the United States, in its capacity as a Lender ("Bank of
America"), and each other financial institution executing and delivering a
signature page hereto and each other financial institution which may hereafter
execute and deliver an instrument of assignment with respect to this Agreement
pursuant to Section 13.1 (hereinafter such financial institutions may be
            ------------
referred to individually as a "Lender" or collectively as the "Lenders"), and
BANK OF AMERICA, N.A., a national banking association organized and existing
under the laws of the United States, in its capacity as agent for the Lenders
(in such capacity, and together with any successor agent appointed in accordance
with the terms of Section 12.7, the "Agent" or "Revolving Credit Agent");
                  ------------

                              W I T N E S S E T H:
                              --------------------

      WHEREAS, the Borrower has requested that the Lenders make available to the
Borrower a revolving credit facility of up to $80,000,000, the proceeds of which
are to be used for general corporate purposes and which shall include a letter
of credit facility of up to $10,000,000 for the issuance of standby and
commercial letters of credit; and

      WHEREAS, the Lenders are willing to make such revolving credit and letter
of credit facilities available to the Borrower upon the terms and conditions set
forth herein;

      NOW, THEREFORE, the Borrower, the Lenders and the Agent hereby agree as
follows:

<PAGE>

                                   ARTICLE I

                              Definitions and Terms
                              ---------------------

      1.1  Definitions. For the purposes of this Agreement, in addition to the
           -----------
definitions set forth above, the following terms shall have the respective
meanings set forth below:

           "Account Control Agreements" means, collectively, agreements in the
      form of Exhibit B to Amendment No. 8 or such other agreements as shall be
      in form and substance acceptable to the Agent in its sole discretion among
      the relevant Credit Party, the Priority Collateral Agent (or the General
      Collateral Agent and the Designated Collateral Subagent, as applicable)
      and each depositary bank in which Deposit Accounts (as defined in the
      Security Agreements) of any Credit Party are located conferring upon the
      Collateral Agents control (within the meaning of such term as defined in
      the Article 9 of the UCC) of such Deposit Accounts (other than the
      Securitization Deposit Accounts and the Imprest/Payroll Accounts) and
      containing such other terms as shall be acceptable to the Agent in its
      sole discretion, as the same may be amended, supplemented or restated from
      time to time.

           "Account Debtor" means each Person obligated in any way or in
      connection with any Account.

           "Accounts" has the meaning given to such term in the Security
      Agreement.

           "Acquisition" means the acquisition of a controlling equity interest
      in another Person (including the purchase of an option, warrant or
      convertible or similar type security to acquire such a controlling
      interest at the time it becomes exercisable by the holder thereof),
      whether by purchase of such equity interest or upon exercise of an option
      or warrant for, or conversion of securities into, such equity interest, or
      assets of another Person which constitute all or substantially all of the
      assets of such Person or of a line or lines of business conducted by such
      Person.

           "Actual Non-Cash LIFO Adjustments" means, with respect to any period,
      the Non-Cash LIFO Adjustments to income (or loss) of the Borrower and its
      Subsidiaries (as determined on a consolidated basis in accordance with
      GAAP applied on a Consistent Basis), to the extent such adjustments are
      reflected in the computation of Consolidated EBITDA for such period.

           "Actual PBGC Payments" means, with respect to the Two-Quarter Period
      ended June 30, 2002, the minimum amount of payments during such period by
      the Borrower and its Subsidiaries to their respective pension plans, as
      required by the PBGC pursuant to the PBGC Agreement.

           "Advance" means a borrowing under the Revolving Credit Facility
      consisting of a Base Rate Loan or a Eurodollar Rate Loan.

           "Affiliate" means any Person (i) which directly or indirectly through
      one or more intermediaries controls, or is controlled by, or is under
      common control with the

                                       2

<PAGE>

      Borrower; or (ii) which beneficially owns or holds 10% or more of any
      class of the outstanding voting stock (or in the case of a Person which is
      not a corporation, 10% or more of the equity interest) of the Borrower; or
      10% or more of any class of the outstanding voting stock (or in the case
      of a Person which is not a corporation, 10% or more of the equity
      interest) of which is beneficially owned or held by the Borrower. The term
      "control" means the possession, directly or indirectly, of the power to
      direct or cause the direction of the management and policies of a Person,
      whether through ownership of voting stock, by contract or otherwise.

           "Amendment No. 8" means that certain Amendment No. 8 to Credit
      Agreement dated as of November 9, 2001, among the Borrower, the Lenders
      parties thereto, and the Agent.

           "Applicable Commitment Fee" means .50% per annum.

           "Applicable Commitment Percentage" means, for each Lender at any
      time, a fraction the numerator of which shall be such Lender's Revolving
      Credit Commitment and the denominator of which shall be the Total
      Revolving Credit Commitment, which Applicable Commitment Percentage for
      each Lender as of the Closing Date is as set forth in Exhibit A; provided
                                                            ---------  --------
      that the Applicable Commitment Percentage of each Lender shall be
      increased or decreased to reflect any assignments to or by such Lender
      effected in accordance with Section 13.1.
                                  ------------

           "Applicable Lending Office" means, for each Lender and for each Type
      of Loan, the "Lending Office" of such Lender (or of an affiliate of such
      Lender) designated for such Type of Loan on the signature pages hereof or
      such other office of such Lender (or an affiliate of such Lender) as such
      Lender may from time to time specify to the Agent and the Borrower by
      written notice in accordance with the terms hereof as the office by which
      its Loans of such Type are to be made and maintained.

           "Applicable Margin" means:

                (a) prior to the Eighth Amendment Closing Date (except as
           otherwise set forth in clause (c) below), that percent per annum set
           forth below for the Base Rate and the Eurodollar Rate, respectively:

                                    Applicable Margin
           ---------------------------------------------------------------------
           Base Rate                                             Eurodollar Rate
           ---------                                             ---------------

            2.00%                                                     4.25%

                and (b) on and after the Eighth Amendment Closing Date (except
           as otherwise set forth in clause (c) below), that percent per annum
           set forth below for the Base Rate and the Eurodollar Rate,
           respectively:

                                    Applicable Margin
           ---------------------------------------------------------------------

                                       3

<PAGE>

           Base Rate                                             Eurodollar Rate
           ---------                                             ---------------

            4.00%                                                     6.25%

                and (c) (unless the Borrower shall have entered into an
           irrevocable Recapitalization Agreement by June 30, 2002 which remains
           in full force and effect with a Person who was and remains at all
           relevant times a Permitted Equity Holder), that percent per annum set
           forth below for the Base Rate and the Eurodollar Rate, respectively,
           at all times on and after July 1, 2002:

                                    Applicable Margin
           ---------------------------------------------------------------------
           Base Rate                                             Eurodollar Rate
           ---------                                             ---------------

            4.50%                                                     6.75%

                Pursuant to Section 4.11, all Loans shall be Base Rate Loans on
                            ------------
           and after the Eighth Amendment Closing Date. The Eurodollar Rate or
           its Applicable Margin may apply, however, in the calculation of
           certain fees, including without limitation the fee on outstanding
           Letters of Credit as set forth in Section 4.6.
                                             -----------

           "Applications and Agreements for Letters of Credit" means,
      collectively, the Applications and Agreements for Letters of Credit, or
      similar documentation, executed by the Borrower from time to time and
      delivered to the Issuing Bank to support the issuance of Letters of
      Credit.

                             "Approved Option Plan" means the Cone Mills Amended
      and Restated 1992 Stock Option Plan, as amended, the Cone Mills 1983 ESOP,
      as amended, the Cone Mills Corporation 1994 Stock Option Plan For
      Non-Employee Directors, as amended, the Shareholder Rights Plan dated
      October 14, 1999, and any other stock incentive plan, stock option plan or
      similar stock rights plan approved by the Board of Directors of the
      Borrower in the ordinary course of business.

           "Asset Disposition" means any disposition, whether by sale, lease,
      assignment or other transfer of (i) any of the assets of the Borrower or
      its Subsidiaries, and (ii) any of the capital stock, or securities or
      investments exchangeable, exercisable or convertible for or into, or
      otherwise entitling the holder to receive any of the capital stock, of any
      Subsidiary (other than a disposition to the Borrower or a Guarantor).

           "Assignment and Acceptance" shall mean an Assignment and Acceptance
      in the form of Exhibit B (with blanks appropriately filled in) delivered
                     ---------
      to the Agent in connection with an assignment of a Lender's interest under
      this Agreement pursuant to Section 13.1.
                                 ------------

           "Authorized Representative" means any of the President or any Vice
      President or the Treasurer or Controller of the Borrower or, with respect
      to financial matters, the chief

                                       4

<PAGE>

      financial officer of the Borrower, or any other Person expressly
      designated by the Board of Directors of the Borrower (or the appropriate
      committee thereof) as an Authorized Representative of the Borrower, as set
      forth from time to time in a certificate in the form of Exhibit C.
                                                              ---------

           "Bank of America" means Bank of America, N.A. and its successors and
      permitted assigns.

           "BAS" means Banc of America Securities LLC and its successors.

           "Base Rate" means, for any day, the rate per annum equal to the sum
      of (a) the higher of (i) the Federal Funds Rate for such day plus one-half
      of one percent (0.5%) and (ii) the Prime Rate for such day plus (b) the
      Applicable Margin. Any change in the Base Rate due to a change in the
      Prime Rate or the Federal Funds Rate shall be effective on the effective
      date of such change in the Prime Rate or Federal Funds Rate.

           "Base Rate Loan" means a Loan for which the rate of interest is
      determined by reference to the Base Rate.

           "Base Rate Refunding Loan" means a Base Rate Loan made to satisfy
      Reimbursement Obligations arising from a drawing under a Letter of Credit.

           "Board" means the Board of Governors of the Federal Reserve System
      (or any successor body).

           "Bond Trustee" means The Bank of New York, as successor to Wachovia
      Bank, N.A. (formerly known as Wachovia Bank of North Carolina, N.A.), as
      Trustee for the benefit of the holders of the Securities (as defined in
      the Senior Indenture) under the Senior Indenture, and any successor acting
      in such capacity.

           "Borrower's Account" means demand deposit account number 3750377459
      or any successor account with the Agent, which may be maintained at one or
      more offices of the Agent or an agent of the Agent.

           "Borrowing Base" means, as of any date of determination thereof, an
      amount equal to the sum of:

           (i)  the Core Borrowing Base; plus

           (ii) the Overadvance Basket.

           "Borrowing Base Certificate" means a certificate of the chief
      financial officer, chief executive officer, Treasurer or Controller of the
      Borrower setting forth the calculation of the Borrowing Base in the form
      of Exhibit L.
         ---------

                                       5

<PAGE>

           "Borrowing Notice" means the notice delivered by an Authorized
      Representative in connection with an Advance under the Revolving Credit
      Facility in the form of Exhibit D.
                              ---------

           "Business Day" means, (i) except as expressly provided in clause
      (ii), any day which is not a Saturday, Sunday or a day on which banks in
      the States of New York and North Carolina are authorized or obligated by
      law, executive order or governmental decree to be closed and, (ii) with
      respect to the selection, funding, interest rate, payment, and Interest
      Period of any Eurodollar Rate Loan, any day which is a Business Day, as
      described above, and on which the relevant international financial markets
      are open for the transaction of business contemplated by this Agreement in
      London, England, New York, New York and Charlotte, North Carolina.

           "Capital Expenditures" means, with respect to the Borrower and its
      Subsidiaries, for any period the sum of (without duplication) (i) all
                                       ---
      expenditures (whether paid in cash or accrued as liabilities) by the
      Borrower or any Subsidiary during such period for items that would be
      classified as "property, plant or equipment" or comparable items on the
      consolidated balance sheet of the Borrower and its Subsidiaries, including
      without limitation all transactional costs incurred in connection with
      such expenditures provided the same have been capitalized, excluding,
      however, the amount of any Capital Expenditures paid for with proceeds of
      casualty insurance as evidenced in writing and submitted to the Agent
      together with any compliance certificate delivered pursuant to Section
                                                                     -------
      9.1(a) or (b), and (ii) with respect to any Capital Lease entered into by
      ------    ---
      the Borrower or its Subsidiaries during such period, the present value of
      the lease payments due under such Capital Lease over the term of such
      Capital Lease applying a discount rate equal to the interest rate provided
      in such lease (or in the absence of a stated interest rate, that rate used
      in the preparation of the financial statements described in Section
                                                                  -------
      9.1(a)), all the foregoing in accordance with GAAP applied on a Consistent
      ------
      Basis.

           "Capital Leases" means all leases which have been or should be
      capitalized in accordance with GAAP as in effect from time to time
      including Statement Nos. 13 and 98 of the Financial Accounting Standards
      Board and any successor thereof.

           "Capital Market Transaction" means the issuance or sale in a
      registered public offering, Rule 144A/Regulation S transaction or private
      placement of capital stock (including equity-linked securities), other
      than the issuance of capital stock in connection with the exercise of
      stock options existing as of the Closing Date or hereafter granted in
      accordance with an Approved Option Plan.

           "Change of Control" means, at any time:

                (i)   any "person" or "group" (each as used in Sections 13(d)(3)
           and 14(d)(2) of the Exchange Act) either (A) becomes the "beneficial
           owner" (as defined in Rule 13d-3 of the Exchange Act ), directly or
           indirectly, of Voting Securities of the Borrower (or securities
           convertible into or exchangeable for such Voting Securities)
           representing 25% or more of the combined voting power of all

                                       6

<PAGE>

           Voting Securities of the Borrower (on a fully diluted basis) or (B)
           otherwise has the ability, directly or indirectly, to elect a
           majority of the board of directors of the Borrower;

                (ii)  during any period of up to 24 consecutive months,
           commencing on the Closing Date, individuals who at the beginning of
           such 24-month period were directors of the Borrower shall cease for
           any reason (other than the death, disability or retirement of an
           officer of the Borrower that is serving as a director at such time so
           long as another officer of the Borrower replaces such Person as a
           director) to constitute a majority of the board of directors of the
           Borrower; or

                (iii) any Person or two or more Persons acting in concert shall
           have acquired by contract or otherwise, or shall have entered into a
           contract or arrangement that, upon consummation thereof, will result
           in its or their acquisition of the power to exercise, directly or
           indirectly, a controlling influence on the management or policies of
           the Borrower.

           "CIPSA" means Compania Industrial de Parras, S.A.

           "Closing Date" means the date as of which this Agreement is executed
      by the Borrower, the Lenders and the Agent and on which the conditions set
      forth in Section 7.1 have been satisfied.
               -----------

           "Code" means the Internal Revenue Code of 1986, as amended, and any
      regulations promulgated thereunder.

           "Collateral" means, collectively, all General Collateral and all
      Priority Collateral.

           "Collateral Agency Agreements" means, collectively, the General
      Collateral Agency Agreement and the Priority Collateral Agency Agreement,
      as amended, supplemented or restated from time to time.

           "Collateral Agents" means, collectively, the Priority Collateral
      Agent, the General Collateral Agent and the Agent for the Lenders and
      itself with respect to the Lien on the Senior Lease Facility.

           "Compliance Certificate" means a certificate of an Authorized
      Representative of the Borrower demonstrating compliance with the covenants
      contained in Sections 10.1, 10.3 and 10.7(g), substantially in the form of
                   -------------  ----     -------
      Exhibit H.
      ---------

           "Consistent Basis" in reference to the application of GAAP means the
      accounting principles observed in the period referred to are comparable in
      all material respects to those applied in the preparation of the audited
      financial statements of the Borrower referred to as of the Closing Date in
      Section 8.6(a).
      --------------

                                       7

<PAGE>

           "Consolidated EBITDA" means, with respect to the Borrower and its
      Subsidiaries for any period ending on the date of computation thereof, the
      sum of, without duplication, (i) Consolidated Net Income, (ii)
      Consolidated Interest Expense, (iii) taxes on income, (iv) amortization,
      (v) depreciation, (vi) non-cash charges otherwise deducted in calculating
      Consolidated Net Income resulting from FASB No. 88 Adjustments, FASB No.
      106 Adjustments, FASB No. 112 Adjustments or FASB No. 121 Adjustments and
      (vii) Non-cash Restructuring Charges not to exceed $35,000,000 in Fiscal
      Year 2001, all determined on a consolidated basis in accordance with GAAP
      applied on a Consistent Basis.

           "Consolidated Indebtedness" means all Indebtedness for Money Borrowed
      of the Borrower and its Subsidiaries, all determined on a consolidated
      basis.

           "Consolidated Interest Coverage Ratio" means for any Four-Quarter
      Period ending on the date of computation thereof, the ratio of (i)
      Consolidated EBITDA for such Four-Quarter Period, to (ii) Consolidated
      Interest Expense for such Four-Quarter Period.

           "Consolidated Interest Expense" means, with respect to any period of
      computation thereof, the gross interest expense of the Borrower and its
      Subsidiaries, including without limitation (i) the current amortized
      portion of debt discounts to the extent included in gross interest
      expense, (ii) the current amortized portion of all fees (including fees
      payable in respect of any Rate Hedging Obligations) payable in connection
      with the incurrence of Indebtedness to the extent included in gross
      interest expense, (iii) the portion of any payments made in connection
      with Capital Leases allocable to interest expense, and (iv) the net cash
      financing costs incurred in connection with any Securitization
      Transaction, all determined on a consolidated basis in accordance with
      GAAP applied on a Consistent Basis.

           "Consolidated Leverage Ratio" means, as of the date of computation
      thereof, the ratio of (i) Consolidated Indebtedness (determined as at such
      date) to (ii) Consolidated EBITDA (for the Four-Quarter Period ending on
      (or most recently ended prior to) such date).

           "Consolidated Net Income" means, for any period of computation
      thereof, the gross revenues from operations of the Borrower and its
      Subsidiaries other than Parras Cone to the extent it constitutes a
      Subsidiary (including payments received by the Borrower and its
      Subsidiaries of (i) interest income, and (ii) dividends and distributions
      made in the ordinary course of their businesses by Persons (including
      Parras Cone) in which investment is permitted pursuant to this Agreement
      and not related to an extraordinary event), less all operating and
      non-operating expenses of the Borrower and its Subsidiaries including
      taxes on income, all determined on a consolidated basis in accordance with
      GAAP applied on a Consistent Basis; but excluding (for all purposes other
      than compliance with Section 10.1(a) hereof as income): (a) net gains or
                           ---------------
      losses on the sale, conversion or other disposition of capital assets, (b)
      net gains or losses on the acquisition, retirement, sale or other
      disposition of capital stock and other securities of the Borrower or its
      Subsidiaries, (c) net gains on the collection of proceeds of life
      insurance

                                       8

<PAGE>

      policies, (d) any write-up of any asset, (e) any net gain or loss recorded
      as a result of FASB 133 Adjustments, and (f) any other net gain or credit
      of an extraordinary nature as determined in accordance with GAAP applied
      on a Consistent Basis.

           "Consolidated Net Worth" means, as of any date on which the amount
      thereof is to be determined, the shareholders' equity of the Borrower and
      its Subsidiaries as of that date (excluding from the calculation thereof
      minimum pension liabilities as determined in accordance with FASB No. 87),
      determined on a consolidated basis, as reflected on the financial
      statements of the Borrower most recently delivered to the Lenders pursuant
      to Section 9.1 hereof, provided that Consolidated Net Worth shall be
         -----------
      computed and determined in accordance with GAAP applied on a Consistent
      Basis.

           "Contingent Obligation" means, as to any Person, any direct or
      indirect liability of that Person with respect to any Indebtedness, lease,
      dividend, guaranty, letter of credit or other obligation (each a "primary
                                                                        -------
      obligation") of another Person (the "primary obligor"), whether or not
      ----------                           ---------------
      contingent, (i) to purchase, repurchase or otherwise acquire any such
      primary obligation or any property constituting direct or indirect
      security therefor, or (ii) to advance or provide funds (a) for the payment
      or discharge of any such primary obligation, or (b) to maintain working
      capital or equity capital of the primary obligor in respect of any such
      primary obligation or otherwise to maintain the net worth or solvency or
      any balance sheet item, level of income or financial condition of such
      primary obligor, or (iii) to purchase property, securities or services
      primarily for the purpose of assuring the owner of any such primary
      obligation of the ability of the primary obligor thereof to make payment
      of such primary obligation, or (iv) otherwise to assure or hold harmless
      the owner of any such primary obligation against loss or failure or
      inability to perform in respect thereof. The amount of any Contingent
      Obligation, to the extent not expressly limited, shall be deemed to be an
      amount equal to the stated or determinable amount of the primary
      obligation in respect of which such Contingent Obligation is made or, if
      not stated or determinable, the maximum reasonably anticipated liability
      in respect thereof.

           "Continue," "Continuation," and "Continued" shall refer to the
      continuation pursuant to Section 4.2 hereof of a Eurodollar Rate Loan of
                               -----------
      one Type as a Eurodollar Rate Loan of the same Type from one Interest
      Period to the next Interest Period.

           "Controlled Accounts" means all depository accounts of the Borrower
      and its Subsidiaries, other than the Excluded Deposit Accounts, each of
      which shall be maintained with a Lender in accordance with Section 9.21.
                                                                 ------------

           "Convert," "Conversion," and "Converted" shall refer to a conversion
      pursuant to Section 4.2 of one Type of Loan into another Type of Loan.
                  -----------

           "Core Borrowing Base" means, as of any date of determination thereof,
      an amount equal to the sum of:

           (i)   the Eligible Receivables Amount multiplied by 85%; plus

                                       9

<PAGE>

           (ii)  the Eligible Inventory Amount multiplied by 50%; plus

           (iii) the Eligible Fixed Asset Amount multiplied by 50%.

           "Cost of Acquisition" means, with respect to any Acquisition, as at
      the date of entering into any agreement therefor, the sum of the following
                                                            ---
      (without duplication): (i) the value of the capital stock, warrants or
      options to acquire capital stock of Borrower or any Subsidiary to be
      transferred in connection therewith, (ii) the amount of any cash and fair
      market value of other property (excluding property described in clause (i)
      and the unpaid principal amount of any debt instrument) given as
      consideration, (iii) the amount (determined by using the face amount or
      the amount payable at maturity, whichever is greater) of any Indebtedness
      incurred, assumed or acquired by the Borrower or any Subsidiary in
      connection with such Acquisition, (iv) all additional purchase price
      amounts in the form of earnouts and other contingent obligations that
      should be recorded on the financial statements of the Borrower and its
      Subsidiaries in accordance with GAAP, (v) all amounts paid in respect of
      covenants not to compete, consulting agreements that should be recorded on
      financial statements of the Borrower and its Subsidiaries in accordance
      with GAAP, and other affiliated contracts in connection with such
      Acquisition, (vi) the aggregate fair market value of all other
      consideration given by the Borrower or any Subsidiary in connection with
      such Acquisition, and (vii) out of pocket transaction costs for the
      services and expenses of attorneys, accountants and other consultants
      incurred in effecting such transaction, and other similar transaction
      costs so incurred. For purposes of determining the Cost of Acquisition for
      any transaction, (A) the capital stock of the Borrower shall be valued (I)
      in the case of capital stock that is then listed on a national securities
      exchange or a national market system, the average of the last reported bid
      and ask quotations or the last prices reported thereon, and (II) with
      respect to any other shares of capital stock, as determined by a committee
      composed of the disinterested members of the Board of Directors of the
      Borrower and, if requested by the Agent, determined to be a reasonable
      valuation by the independent public accountants referred to in Section
                                                                     -------
      9.1(a), (B) the capital stock of any Subsidiary shall be valued as
      ------
      determined by a committee composed of the disinterested members of the
      Board of Directors of such Subsidiary and, if requested by the Agent,
      determined to be a reasonable valuation by the independent public
      accountants referred to in Section 9.1(a), and (C) with respect to any
                                 --------------
      Acquisition accomplished pursuant to the exercise of options or warrants
      or the conversion of securities, the Cost of Acquisition shall include
      both the cost of acquiring such option, warrant or convertible security as
      well as the cost of exercise or conversion.

           "Credit Parties" means, collectively, the Borrower, each Guarantor
      and each other Person providing Collateral pursuant to any Security
      Document from time to time (which Credit Parties as of the Closing Date
      are listed on Schedule 1.2).
                    ------------

           "Debenture Holders" means, at any time, collectively each of the
      holders of the Senior Debentures then outstanding.

                                       10

<PAGE>

           "Default" means any event or condition which, with the giving or
      receipt of notice or lapse of time or both, would constitute an Event of
      Default hereunder.

           "Default Rate" means (i) with respect to each Eurodollar Rate Loan,
      until the end of the Interest Period applicable thereto, a rate of two
      percent (2%) above the Eurodollar Rate applicable to such Loan, and
      thereafter at a rate of interest per annum which shall be two percent (2%)
      above the Base Rate, (ii) with respect to Base Rate Loans, Reimbursement
      Obligations, fees, and other amounts payable in respect of Obligations or
      (except as otherwise expressly provided therein) the obligations of any
      other Credit Party under any of the other Loan Documents, a rate of
      interest per annum which shall be two percent (2%) above the Base Rate and
      (iii) in any case, the maximum rate permitted by applicable law, if lower.

           "Designated Collateral Subagent" means Bank of America, N.A., not
      individually but solely in its capacity as designated collateral subagent
      on behalf of the General Secured Parties hereunder with respect to the
      General Collateral, pursuant to the terms of the General Collateral Agency
      Agreement, and its agents, successors and permitted assigns.

           "Direct Foreign Subsidiary" means a Subsidiary other than a Domestic
      Subsidiary a majority of whose Voting Securities, or a majority of whose
      Subsidiary Securities, are owned by the Borrower or a Domestic Subsidiary.

           "Dollars" and the symbol "$" means dollars constituting legal tender
      for the payment of public and private debts in the United States of
      America.

           "Domestic Subsidiary" means any Subsidiary of the Borrower organized
      under the laws of the United States of America, any state or territory
      thereof or the District of Columbia.

           "Eighth Amendment Closing Date" means November 9, 2001.

           "Eligible Assignee" means (i) a Lender, (ii) an affiliate of a
      Lender, and (iii) any other Person approved by the Agent and, unless an
      Event of Default has occurred and is continuing at the time any assignment
      is effected in accordance with Section 13.1, the Borrower, such approvals
                                     ------------
      not to be unreasonably withheld or delayed and such approval to be deemed
      given by the Borrower (in the absence of notice to the contrary, effective
      upon receipt) within two Business Days after notice of such proposed
      assignment has been provided by the assigning Lender to the Borrower;
      provided, however, that neither the Borrower nor an affiliate of the
      --------  -------
      Borrower shall qualify as an Eligible Assignee.

           "Eligible Fixed Assets" means the land and completed improvements
      thereon constituting real property and fixtures and all fully operable
      machinery and equipment of the Borrower and its Domestic Subsidiaries
      constituting fixed operating assets and associated repair parts, in each
      case which are located in the United States of America and in which (i)
      the Priority Collateral Agent for the benefit of the Priority Secured

                                       11

<PAGE>

      Parties shall have a Priority Lien pursuant to any Priority Mortgage, and
      (ii) the General Collateral Agent for the benefit of the General Secured
      Parties shall have a General Lien pursuant to any General Mortgage or
      other General Security Instrument.

           "Eligible Fixed Assets Amount" means (a) the net book value of
      Eligible Fixed Assets, all as determined in accordance with GAAP applied
      on a Consistent Basis and reflected on the financial statements of the
      Borrower most recently furnished to the Lenders pursuant to Section 9.1
                                                                  -----------
      hereof; minus (b) the aggregate amount of all Reserves allocable to
      Eligible Fixed Assets for purposes of calculating net book value of
      Eligible Fixed Assets, the Borrowers shall not adopt any method or
      schedule of depreciation providing for depreciation of such assets less
      rapidly than the depreciation methods and schedules in effect as of the
      Closing Date.

           "Eligible Inventory" means Inventory of the Borrower and its Domestic
      Subsidiaries which consists of the raw material, yarn and finished goods
      inventory (including greige goods) located in the United States of
      America, which the Agent, in its reasonable discretion, determines to be
      Eligible Inventory and in which (i) the Priority Collateral Agent for the
      benefit of the Priority Secured Parties shall have a Priority Lien
      pursuant to the Priority Security Agreement and (ii) the General
      Collateral Agent for the benefit of the General Secured Parties shall have
      a General Lien pursuant to the General Security Agreement. Without
      limiting the discretion of the Agent to establish other criteria of
      ineligibility, Eligible Inventory shall not, unless the Agent in its sole
      discretion elects, include any Inventory:
               (a)  that is not owned by the Borrower or a Domestic Subsidiary;
               (b)  with respect to which any of the representations,
           warranties, covenants, and agreements contained in the Priority
           Security Agreement or the General Security Agreement are incorrect or
           have been breached;
               (c)  that does not consist of finished goods or raw materials;
               (d)  that consists of work-in-process, chemicals, samples,
           prototypes, supplies, or packing and shipping materials;
               (e)  that is not in good condition, is unmerchantable, or does
           not meet all standards imposed by any Governmental Authority, having
           regulatory authority over such goods, their use or sale;
               (f)  that is not currently either usable or salable, at prices
           approximating at least carrying cost (as reflected on the Borrower's
           books), in the normal course of the Borrower's or the respective
           Domestic Subsidiary's business, or that is slow moving or stale;
               (g)  that is obsolete or used goods taken in trade;
               (h)  that is located outside the United States of America (or
           that is in-transit from vendors or suppliers);
               (i)  that is located in a public warehouse or in possession of a
           bailee or in a facility leased by the Borrower or a Domestic
           Subsidiary, if the warehouseman, or the bailee, or the lessor has not
           delivered to the Agent, if requested by the Agent, a subordination
           agreement in form and substance satisfactory to the Agent or if a

                                       12

<PAGE>

           Reserve for rents or storage charges has not been established for
           Inventory at that location;
               (j)  that contains or bears any Proprietary Rights licensed to
           the Borrower or a Domestic Subsidiary by any Person, if the Agent is
           not satisfied that the Priority Collateral Agent and the General
           Collateral Agent may sell or otherwise dispose of such Inventory in
           accordance with the terms of the Priority Security Agreement, the
           General Security Agreement and Section 11.1(C) without infringing the
                                          ---------------
           rights of the licensor of such Proprietary Rights or violating any
           contract with such licensor (and without payment of any royalties
           other than any royalties due with respect to the sale or disposition
           of such Inventory pursuant to the existing license agreement), and,
           as to which the Borrower or the respective Domestic Subsidiary has
           not delivered to the Agent a consent or sublicense agreement from
           such licensor in form and substance acceptable to the Agent if
           requested;
               (k)  that is not reflected in the details of an audit of Eligible
           Inventory; or
               (l)  that is Inventory placed on consignment.

           If any Inventory at any time ceases to be Eligible Inventory, such
      Inventory shall promptly be excluded from the calculation of Eligible
      Inventory and the Eligible Inventory Amount.
           "Eligible Inventory Amount" means (a) the net book value of Eligible
      Inventory on a "first in-first out" basis, all as determined in accordance
      with GAAP applied on a Consistent Basis and reflected on the books of the
      Borrower, minus (b) the aggregate amount of Reserves allocable to Eligible
      Inventory.

           "Eligible Receivables Amount" means the Overcollateralization Amount.

           "Eligible Securities" means the following obligations and any other
      obligations previously approved in writing by the Agent:

           (i)   Government Securities;

           (ii)  obligations of any corporation organized under the laws of any
      state of the United States of America or under the laws of any other
      nation, payable in the United States of America, expressed to mature not
      later than 92 days following the date of issuance thereof and rated in an
      investment grade rating category by S&P and Moody's;

           (iii)          interest bearing demand or time deposits issued by any
                          Lender; and

                          (iv)  Repurchase Agreements.

           "Employee Benefit Plan" means (i) any employee benefit plan,
      including any Pension Plan, within the meaning of Section 3(3) of ERISA
      which (a) is maintained for employees of the Borrower or any of its ERISA
      Affiliates, or any Subsidiary or is assumed by the Borrower or any of its
      ERISA Affiliates, or any Subsidiary in connection with any Acquisition or
      (b) has at any time been maintained for the employees of the

                                       13

<PAGE>

      Borrower, any current or former ERISA Affiliate, or any Subsidiary and
      (ii) any plan, arrangement, understanding or scheme maintained by the
      Borrower or any Subsidiary that provides retirement, deferred
      compensation, employee or retiree medical or life insurance, severance
      benefits or any other benefit covering any employee or former employee and
      which is administered under any Foreign Benefit Law or regulated by any
      Governmental Authority other than the United States of America.

           "Environmental Compliance Reserve" means any reserve which the Agent
      establishes in its reasonable discretion after prior written notice to the
      Borrower from time to time for amounts that are reasonably likely to be
      expended by the Borrower or any Domestic Subsidiary in order for the
      Borrower or such Subsidiary and their respective operations and property
      (a) to comply with any notice from a Governmental Authority asserting
      material non-compliance with Environmental Laws, or (b) to correct any
      such material non-compliance identified in a report delivered to the Agent
      pursuant to Section 9.14.
                  ------------

           "Environmental Laws" means any federal, state or local statute, law,
      ordinance, code, rule, regulation, order, decree, permit or license
      regulating, relating to, or imposing liability or standards of conduct
      concerning, any environmental matters or conditions, environmental
      protection or conservation, including without limitation, the
      Comprehensive Environmental Response, Compensation and Liability Act of
      1980, as amended; the Superfund Amendments and Reauthorization Act of
      1986, as amended; the Resource Conservation and Recovery Act, as amended;
      the Toxic Substances Control Act, as amended; the Clean Air Act, as
      amended; the Clean Water Act, as amended; together with all regulations
      promulgated thereunder, and any other "Superfund" or "Superlien" law.

           "Equity Appreciation Rights Agreement" means that certain Equity
      Appreciation Rights Agreement dated as of November 9, 2001, among the
      Borrower, the Agent and the Lenders, as the same may be amended,
      supplemented or restated from time to time.

           "ERISA" means the Employee Retirement Income Security Act of 1974,
      as amended from time to time, and any successor statute and all rules and
      regulations promulgated thereunder.

           "ERISA Affiliate," as applied to the Borrower, means any Person or
      trade or business which is a member of a group which is under common
      control with the Borrower, who together with the Borrower, is treated as a
      single employer within the meaning of Section 414(b) and (c) of the Code.

           "Eurodollar Rate" means the interest rate per annum calculated
      according to the following formula:

           Eurodollar      Interbank Offered Rate     Applicable
                        =  ----------------------  +
           Rate            1- Reserve Requirement     Margin

                                       14

<PAGE>

           "Eurodollar Rate Loan" means a Loan for which the rate of interest is
      determined by reference to the Eurodollar Rate.

           "Event of Default" means any of the occurrences set forth as such in
      Section 11.1.
      ------------

           "Excess Cash Flow" means, with respect to the Borrower and its
      Subsidiaries for any Two-Quarter Period that is listed in Exhibit Q
                                                                ---------
      hereto, the result (if positive) of the following calculation:

                (a)  the difference of (i) Consolidated EBITDA for such period
           minus (ii) Projected Consolidated EBITDA for such period,

                plus
                ----

                (b)  (in the case of the Two-Quarter Period ended June 30, 2002)
           the difference of (i) Projected PBGC Payments for such period minus
           (ii) Actual PBGC Payments for such period,

                plus
                ----

                (c)  (in the case of any Two-Quarter period listed in Exhibit Q)
                                                                      ---------
           the difference of (i) Projected Non-Cash LIFO Adjustments for such
           period minus (ii) Actual Non-Cash LIFO Adjustments for such period.

           "Excess Facility Sale Proceeds" means the amount of proceeds, net of
      transaction costs and expenses, received by the Borrower from the sale or
      sale and leaseback or other disposition of the Senior Lease Facility in
      excess of the amount paid to fully satisfy the Senior Lease Obligations.

           "Exchange Act" means the Securities Exchange Act of 1934, as amended,
      and the regulations promulgated thereunder.

           "Excluded Deposit Accounts" means (i) cotton margin accounts with
      aggregate deposits not in excess of $3,000,000 and (ii) any
      Imprest/Payroll Accounts.

           "Existing Credit Agreement" means that certain Credit Agreement dated
      as of August 7, 1997 by and among the Borrower, Morgan Guaranty Trust
      Company of New York, as agent, and the lenders party thereto, as amended.

           "Facility Guaranty" means each Guaranty Agreement between one or more
      Guarantors and the Agent for the benefit of the Agent and the Lenders,
      Prudential, the Senior Lease Creditor, Morgan, the General Collateral
      Agent, the Designated Collateral Subagent and the Priority Collateral
      Agent delivered as of the Closing Date and otherwise pursuant to Section
                                                                       -------
      9.20, as the same may be amended, supplemented, or restated from time to
      ----
      time.

                                       15

<PAGE>

           "Facility Termination Date" means such date as all of the following
      shall have occurred: (i) the Borrower shall have permanently terminated
      the Revolving Credit Facility by payment in full of all Revolving Credit
      Outstandings and Letter of Credit Outstandings, together with all accrued
      and unpaid interest thereon, except for the undrawn portion of Letters of
      Credit as have been fully cash collateralized in a manner consistent with
      the terms of Section 11.1(B), (ii) Revolving Credit Commitments and Letter
                   ---------------
      of Credit Commitments shall have terminated or expired and (iii) the
      Borrower shall have fully, finally and irrevocably paid and satisfied in
      full all Obligations (other than the Morgan Swap Obligations and
      Obligations consisting of continuing indemnities and other Contingent
      Obligations of the Borrower or any Guarantor that may be owing to the
      Lenders pursuant to the Loan Documents and expressly survive termination
      of this Agreement).

           "FASB No. 87" means Statement of Financial Standards No. 87.

           "FASB No. 88 Adjustments" means adjustments charged to income (or
      loss) and a corresponding liability resulting from "settlements and
      curtailments of pension plans" (as defined in the Statement of Financial
      Accounting Standards No. 88) and for related termination benefits.

           "FASB No. 106 Adjustments" means adjustments to income (or loss) less
      actual cash payments resulting from "retirement benefits other than
      pensions" (as defined in the Statement of Financial Accounting Standards
      No. 106).

           "FASB No. 112 Adjustments" means adjustments to income (or loss) less
      actual cash payments resulting from "post-employment benefits" (as defined
      in the Statement of Financial Accounting Standards No. 112).

           "FASB No. 121 Adjustments" means adjustments charged to income (or
      loss) resulting from impairment of long-lived assets (as defined in the
      Statement of Financial Accounting Standards No. 121).

           "FASB 133 Adjustments" means entries on or adjustments to any balance
      sheet or statement of income in respect of derivatives or hedging
      instruments as required or permitted by Statement of Financial Accounting
      Standards No. 133 other than adjustments relating to transactions in
      cotton derivatives in the ordinary course of business.

           "Federal Funds Rate" means, for any day, the rate per annum (rounded
      upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted
      average of the rates on overnight Federal funds transactions with members
      of the Federal Reserve System arranged by Federal funds brokers on such
      day, as published by the Federal Reserve Bank of New York on the Business
      Day next succeeding such day; provided that (i) if such day is not a
                                    --------
      Business Day, the Federal Funds Rate for such day shall be such rate on
      such transactions on the next preceding Business

                                       16

<PAGE>

      Day as so published on the next succeeding Business Day, and (ii) if no
      such rate is so published on such next succeeding Business Day, the
      Federal Funds Rate for such day shall be the average rate charged to the
      Agent (in its individual capacity) on such day on such transactions as
      determined by the Agent.

           "Fiscal Quarter" means each of the three month fiscal periods of the
      Borrower and its Subsidiaries ending on January 2, 2000, April 2, 2000,
      July 2, 2000, October 1, 2000, December 31, 2000, April 1, 2001, July 1,
      2001, September 30, 2001, December 30, 2001, March 31, 2002, June 30,
      2002, September 29, 2002 or December 29, 2002.

           "Fiscal Year" means, with respect to fiscal year 1999, the fiscal
      period of the Borrower and its Subsidiaries ending on January 2, 2000 and,
      with respect to fiscal year 2000, the fiscal period ending December 31,
      2000 and, with respect to fiscal year 2001, the fiscal period ending on
      December 30, 2001 and, with respect to fiscal year 2002, the fiscal period
      ending December 29, 2002.

           "Foreign Benefit Law" means any applicable statute, law, ordinance,
      code, rule, regulation, order or decree of any foreign nation or any
      province, state, territory, protectorate or other political subdivision
      thereof regulating, relating to, or imposing liability or standards of
      conduct concerning, any Employee Benefit Plan.

           "Four-Quarter Period" means a period of four full consecutive Fiscal
      Quarters of the Borrower and its Subsidiaries, taken together as one
      accounting period.

           "Fully Satisfied" means, with respect to (i) the Senior Revolving
      Credit Obligations, the Facility Termination Date shall have occurred,
      (ii) the Senior Note Obligations, the same shall have been paid in full in
      cash, (iii) the Senior Lease Obligations, the same shall have been paid in
      full in cash, (iv) the Senior Debenture Obligations, the same shall have
      been paid in full in cash and (v) the Morgan Swap Obligations, the same,
      if any, shall have been paid in full in cash and the Morgan Swap Agreement
      shall have terminated.

           "GAAP" or "Generally Accepted Accounting Principles" means generally
      accepted accounting principles, being those principles of accounting set
      forth in pronouncements of the Financial Accounting Standards Board, the
      American Institute of Certified Public Accountants, or which have other
      substantial authoritative support and are applicable in the circumstances
      as of the date of a report.

           "General Collateral" means the real and personal property, fixtures
      and assets of the Borrower and its Material Subsidiaries whether now
      existing or hereafter arising, created or acquired upon which a General
      Lien has been granted to the General Collateral Agent for the benefit of
      the General Secured Parties pursuant to the General Security Instruments.

           "General Collateral Agency Agreement" means that certain Collateral
      Agency Agreement dated as of the date hereof among the General Secured
      Parties and the General Collateral Agent, as amended, supplemented or
      restated from time to time.

                                       17

<PAGE>

           "General Collateral Agent" means Wilmington Trust Company, not
      individually but solely in its capacity as collateral agent on behalf of
      the General Secured Parties hereunder with respect to the General
      Collateral, pursuant to the terms of the General Collateral Agency
      Agreement, and the Designated Collateral Subagent and their agents,
      successors and permitted assigns.

           "General Lien" means, with respect to any General Collateral, a valid
      and enforceable Lien thereon in favor of the General Collateral Agent for
      the benefit of the General Secured Parties conferred under the General
      Security Instruments which is fully perfected and ranking of higher
      priority than any other Lien on such property other than a Priority Lien
      and Permitted Liens.

           "General Mortgages" means, collectively, all mortgages, deeds of
      trust and deeds to secure debt substantially in the form of Exhibit M-1 or
                                                                  -----------
      Exhibit M-2 granting a General Lien by the Borrower or a Guarantor to the
      -----------
      General Collateral Agent (or a trustee for the benefit of the General
      Collateral Agent) for the benefit of the General Secured Parties in
      General Collateral constituting real property and fixtures as collateral
      security for the General Senior Obligations, and the Guarantors'
      Obligations with respect thereto, as such documents may be amended,
      supplemented or restated from time to time.

           "General Secured Parties" means the Lenders, the Revolving Credit
      Agent, Prudential, Atlantic Financial Group, Ltd. and SunTrust Bank,
      Morgan and the Bond Trustee for the benefit of the Debenture Holders.

           "General Security Agreement" means that certain General Security
      Agreement dated as of the date hereof, and each additional General
      Security Agreement entered into after the date hereof by any Subsidiary in
      accordance with the terms of any Senior Credit Document, granting a
      General Lien to the General Collateral Agent for the benefit of the
      General Secured Parties pursuant to the General Collateral Agency
      Agreement, as collateral security for the General Senior Obligations, and
      the Guarantors' Obligations with respect thereto, as amended, supplemented
      or restated from time to time.

           "General Security Instruments" means (i) the General Security
      Agreement, (ii) the General Mortgages, (iii) the Pledge Agreement and (iv)
      all other agreements, instruments and other documents, whether now
      existing or hereafter in effect, pursuant to which the Borrower or any
      Material Subsidiary shall grant or convey to the General Collateral Agent
      for the benefit of the General Secured Parties a General Lien in property
      as security for payment of all or any portion of the General Senior
      Obligations, and the Guarantors' Obligations with respect thereto, all as
      amended, supplemented or restated from time to time.

           "General Senior Obligations" mean all Senior Debt Obligations other
      than Priority Senior Obligations, comprised of a pro rata portion of the
      Senior Revolving Credit Obligations, the Senior Note Obligations, the
      Senior Lease Obligations, Morgan Swap Obligations and Senior Debenture
      Obligations outstanding at any time.

                                       18

<PAGE>

           "Government Securities" means direct obligations of, or obligations
      the timely payment of principal and interest on which are fully and
      unconditionally guaranteed by, the United States of America or any agency
      thereof.

           "Governmental Authority" shall mean any Federal, state, municipal,
      national or other governmental department, commission, board, bureau,
      court, agency or instrumentality or political subdivision thereof or any
      entity or officer exercising executive, legislative, judicial, regulatory
      or administrative functions of or pertaining to any government or any
      court, in each case whether associated with a state of the United States,
      the United States, or a foreign entity or government.

           "Guarantors" means, at any date, the Material Subsidiaries who are
      parties to a Facility Guaranty at such date which as of the Closing Date
      includes the Material Subsidiaries identified on Schedule 1.2.
                                                       ------------

           "Guarantors' Obligations" has the meaning given to such term in the
      Facility Guaranty.

           "Hazardous Material" means and includes any pollutant, contaminant,
      or hazardous, toxic or dangerous waste, substance or material (including
      without limitation petroleum products, asbestos-containing materials and
      lead), the generation, handling, storage, transportation, disposal,
      treatment, release, discharge or emission of which is subject to any
      Environmental Law.

           "Imprest/Payroll Accounts" means, collectively, the deposit accounts
      identified on Exhibit P.
                    ---------

           "Indebtedness" means as to any Person, without duplication, (i) all
      Indebtedness for Money Borrowed of such Person, (ii) all Rate Hedging
      Obligations of such Person, (iii) all indebtedness secured by any Lien on
      any property or asset owned or held by such Person regardless or whether
      the indebtedness secured thereby shall have been assumed by such Person or
      is non-recourse to the credit of such Person, and (iv) all Contingent
      Obligations of such Person.

           "Indebtedness for Money Borrowed" means with respect to any Person,
      without duplication, all indebtedness in respect of money borrowed,
      including without limitation, all obligations under Capital Leases, all
      Synthetic Lease Indebtedness, all Securitization Outstandings, the
      deferred purchase price of any property or services, the aggregate face
      amount of all surety bonds, letters of credit, and bankers' acceptances,
      and (without duplication) all payment and reimbursement obligations in
      respect thereof whether or not matured, evidenced by a promissory note,
      bond, debenture or similar written obligation for the payment of money
      (including reimbursement agreements and conditional sales or similar title
      retention agreements), other than trade payables, documentary letters of
      credit and accrued expenses incurred in the ordinary course of business.

                                       19

<PAGE>

           "Interbank Offered Rate" means, with respect to any Eurodollar Rate
      Loan for the Interest Period applicable thereto, the rate per annum
      (rounded upwards, if necessary), to the nearest 1/100 of 1%) appearing on
      Telerate Page 3750 (or any successor page) as the London interbank offered
      rate for deposits in Dollars at approximately 11:00 A.M. (London time) two
      Business Days prior to the first day of such Interest Period for a term
      comparable to such Interest Period. If for any reason such rate is not
      available, the term "Interbank Offered Rate" shall mean, with respect to
      any Eurodollar Rate Loan for the Interest Period applicable thereto, the
      rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
      appearing on Reuters Screen LIBO Page as the London interbank offered rate
      for deposits in Dollars at approximately 11:00 A.M. (London time) two
      Business Days prior to the first day of such Interest Period for a term
      comparable to such Interest Period, provided, however; if more than one
                                          --------  -------
      rate is specified on Reuters Screen LIBO Page, the applicable rate shall
      be the arithmetic mean of all such rates (rounded upwards, if necessary,
      to the nearest 1/100 of 1%).

           "Intercreditor Agreements" means, collectively, the Senior Debt
      Intercreditor Agreement, the Leased Facility Intercreditor Agreement and
      the Securitization Intercreditor Agreement.

           "Interest Period" means, for each Eurodollar Rate Loan, a period
      commencing on the date such Eurodollar Rate Loan is made or Converted or
      Continued and ending, at the Borrower's option, on the date one, two or
      three months thereafter as notified to the Agent by the Authorized
      Representative in accordance with the terms hereof; provided that,
                                                          --------

                (i)  if an Interest Period for a Eurodollar Rate Loan would end
           on a day which is not a Business Day, such Interest Period shall be
           extended to the next Business Day (unless such extension would cause
           the applicable Interest Period to end in the succeeding calendar
           month, in which case such Interest Period shall end on the next
           preceding Business Day); and

                (ii) any Interest Period which begins on the last Business Day
           of a calendar month (or on a day for which there is no numerically
           corresponding day in the calendar month at the end of such Interest
           Period) shall end on the last Business Day of a calendar month.

           "Interest Rate Selection Notice" means the written notice delivered
      by an Authorized Representative in connection with the election of a
      subsequent Interest Period for any Eurodollar Rate Loan or the Conversion
      of any Eurodollar Rate Loan into a Base Rate Loan or the Conversion of any
      Base Rate Loan into a Eurodollar Rate Loan, in the form of Exhibit E.
                                                                 ---------

           "Inventory" has the meaning given to such term in the Security
      Agreement.

           "Issuing Bank" means Bank of America as issuer of Letters of Credit
      under Article III and its successors and permitted assigns.
            -----------

                                       20

<PAGE>

           "Leased Facility Intercreditor Agreement" means that certain
      Intercreditor Agreement dated as of the date hereof between the Agent and
      the Senior Lease Creditor relating to relative rights and remedies with
      respect to the Senior Leased Facility, as from time to time amended,
      supplemented or replaced.

           "Letter of Credit" means each standby or commercial letter of credit
      issued by the Issuing Bank pursuant to Article III hereof for the account
      of the Borrower in favor of a Person advancing credit or securing an
      obligation on behalf of the Borrower.

           "Letter of Credit Commitment" means, with respect to each Lender, the
      obligation of such Lender to acquire Participations in respect of Letters
      of Credit and Reimbursement Obligations up to an aggregate amount at any
      one time outstanding equal to such Lender's Applicable Commitment
      Percentage of the Total Letter of Credit Commitment as the same may be
      increased or decreased from time to time pursuant to this Agreement.

           "Letter of Credit Facility" means the facility described in Article
                                                                       -------
      III hereof providing for the issuance by the Issuing Bank for the account
      ---
      of the Borrower of Letters of Credit in an aggregate stated amount at any
      time outstanding not exceeding the Total Letter of Credit Commitment minus
      outstanding Reimbursement Obligations.

           "Letter of Credit Outstandings" means, as of any date of
      determination, the aggregate amount available to be drawn under all
      Letters of Credit plus Reimbursement Obligations then outstanding.

           "Lien" means any interest in property securing any obligation owed
      to, or a claim by, a Person other than the owner of the property, whether
      such interest is based on the common law, statute or contract, and
      including but not limited to the lien or security interest arising from a
      mortgage, encumbrance, pledge, security agreement, conditional sale or
      trust receipt or a lease, consignment or bailment for security purposes.
      For the purposes of this Agreement, the Borrower and any Subsidiary shall
      be deemed to be the owner of any property which it has acquired or holds
      subject to a conditional sale agreement, financing lease, or other
      arrangement pursuant to which title to the property has been retained by
      or vested in some other Person for security purposes.

           "Loan" or "Loans" means any of the Revolving Loans made under the
      Revolving Credit Facility.

           "Loan Documents" means this Agreement, the Notes, the Security
      Documents, the Intercreditor Agreements, the Facility Guaranties, the
      Applications and Agreements for Letter of Credit, the Equity Appreciation
      Rights Agreement, the Account Control Agreements, and all other
      instruments and documents heretofore or hereafter executed or delivered to
      or in favor of any Lender (including the Issuing Bank) or the Agent in
      connection with the Loans made and transactions contemplated under this
      Agreement, as amended, supplemented or restated from time to time.

                                       21

<PAGE>

           "Master Lease" means that certain Master Lease Agreement dated as of
      October 24, 1994 between the Borrower, as Lessee, and TCB Realty II
      Corporation, as Lessor ("TCB"), relating to the North Pointe Center
      Development, as amended, supplemented or restated from time to time and as
      assigned by TCB to Atlantic Financial Group, Ltd. pursuant to that certain
      Assignment Agreement dated as of April 15, 1999 among Citicorp Leasing,
      Inc. and SunTrust Bank.

           "Material Adverse Effect" means a material adverse effect on (i) the
      business, properties, operations, prospects or condition, financial or
      otherwise, of the Borrower and its Subsidiaries, taken as a whole, (ii)
      the ability of any Credit Party to pay or perform its respective
      obligations, liabilities and indebtedness under the Loan Documents as such
      payment or performance becomes due in accordance with the terms thereof,
      or (iii) the rights, powers and remedies of the Agent or any Lender under
      any Loan Document or the validity, legality or enforceability thereof.

           "Material Direct Foreign Subsidiary" means any Direct Foreign
      Subsidiary which would be considered a Material Subsidiary under clauses
      (i) or (ii) of the definition "Material Subsidiary" if it were a Domestic
      Subsidiary.

           "Material Real Property" means (i) each Mortgaged Property set forth
      on Schedule 5.4 and (ii) each other parcel of real property owned from
         ------------
      time to time by the Borrower or any Domestic Subsidiary having a fair
      market value at any time of determination of at least $1,000,000.

           "Material Real Property Support Documents" means for each Material
      Real Property (other than the Comfort Sleep property) and, with respect to
      Mortgaged Property subject to Sections 5.4(a)(ii)(B) and 5.4(b)(ii)(B),
                                    ----------------------     -------------
      only such of the following as are required by the applicable Governmental
      Authority), (i) the Title Policy pertaining thereto, (ii) such surveys,
      flood hazard certifications, appraisals, and environmental assessments
      thereof as the Agent may require prepared by recognized experts in their
      respective fields selected by the Borrower and reasonably satisfactory to
      the Agent, (iii) as to Material Real Property located in a flood hazard
      area, such flood hazard insurance as the Agent may require, (iv) as to
      leasehold interests, such lessor estoppel, waiver and consent
      certificates, (v) with respect to facilities leased or subleased to third
      parties (other than properties leased for less than $300,000 per Fiscal
      Year), such lessees' estoppel, waiver and consent certificates and
      subordination, nondisturbance and attornment agreements, (vi) such owner's
      or lessee's affidavits as the Agent may require, (vii) such opinions of
      local counsel with respect to the Mortgages or leasehold mortgages, as
      applicable, as the Agent may require, and (viii) such other documentation
      as the Agent may reasonably require, in each case as shall be in form and
      substance reasonably acceptable to the Agent.

           "Material Subsidiary" means any direct or indirect Domestic
      Subsidiary of the Borrower which (i) has total assets equal to or greater
      than 2% of consolidated total assets of the Borrower and its Domestic
      Subsidiaries (calculated as of the most recent fiscal period with respect
      to which the Agent shall have received financial statements required

                                       22

<PAGE>

      to be delivered pursuant to Sections 9.1(a) or (b) (or if prior to
                                  ---------------    ---
      delivery of any financial statements pursuant to such Sections, then
      calculated with respect to the Fiscal Year end financial statements
      referenced in Section 8.6) (the "Required Financial Information")) or (ii)
                    -----------
      has revenue equal to or greater than 2% of consolidated total revenue of
      the Borrower and its Domestic Subsidiaries (calculated for the most recent
      period for which the Agent has received the Required Financial
      Information); provided, however, that notwithstanding the foregoing, the
                    --------  -------
      term "Material Subsidiary" shall mean each of those Domestic Subsidiaries
      that together with the Borrower and each other Material Subsidiary have
      assets equal to not less than 98% of consolidated total assets of the
      Borrower and its Domestic Subsidiaries (calculated as described above) and
      revenue of not less than 98% of consolidated total revenue of the Borrower
      and its Domestic Subsidiaries (calculated as described above); provided
      further that if more than one combination of Domestic Subsidiaries
      satisfies both such thresholds, then those Domestic Subsidiaries so
      determined to be "Material Subsidiaries" shall be specified by the
      Borrower, and which include as of the Closing Date the Subsidiaries
      identified on Schedule 1.2.
                    ------------

           "Material Supply Agreement" means, collectively, (i) the exclusive
      Supply Agreement dated as of March 30, 1992 between the Borrower and Levi
      Strauss & Co., as amended or replaced from time to time, and (ii) any
      other contract or agreement with any retail or wholesale customer of the
      Borrower or any Subsidiary the cancellation, termination, or non-renewal
      of which would reasonably be likely to have a Material Adverse Effect.

           "Mexican Capital Expenditures" means all Capital Expenditures made
      with respect to property, plant or equipment located in Mexico other than
      Parras Cone Capital Expenditures.

           "Moody's" means Moody's Investors Service, Inc.

           "Morgan" means Morgan Guaranty Trust Company of New York, in its
      capacity as party to the Morgan Swap Agreement and obligee of the Morgan
      Swap Obligations.

           "Morgan Swap Agreement" means that certain ISDA Master Agreement
      dated as of July 20, 1998 between the Borrower and Morgan as supplemented
      pursuant to that certain letter agreement dated as of July 20, 1998, as
      from time to time amended, supplemented or restated, and as terminated on
      October 4, 2001.

           "Morgan Swap Obligations" means all obligations and liabilities of
      the Borrower to Morgan in respect of the interest rate hedging agreements
      entered into prior to, and outstanding on, the Closing Date under the
      Morgan Swap Agreement, including, but not limited to, (i) the obligations
      of the Borrower to make periodic payments to Morgan in accordance with the
      terms of the Morgan Swap Agreement and (ii) the obligation of the Borrower
      to make a termination payment to Morgan under Section 6(e) of the Morgan
      Swap Agreement, provided, however, that in the event that the payments to
      be made by the Borrower to Morgan under (i) and (ii) above are greater
      than $3,000,000, the amount of such obligations shall be deemed to be
      $3,000,000 for purposes of this definition.

                                       23

<PAGE>

           "Mortgaged Property" means, collectively, (i) the real property,
      leasehold interests, improvements, fixtures and other items of real and
      personal property related thereto and the products thereof of the Borrower
      and its Domestic Subsidiaries which are subject to a Mortgage on the
      Closing Date, and (ii) thereafter, any of such property owned or acquired
      by the Borrower or any Domestic Subsidiary, including any Subsidiary that
      is or is required to become a Guarantor after the Closing Date pursuant to
      Section 9.20, which has a fair market value in excess of $300,000 which is
      ------------
      required to become subject to a Mortgage hereunder and (iii) any other
      real property with respect to which the Borrower or a Domestic Subsidiary
      has elected in its sole discretion to make subject to a Mortgage.

           "Mortgages" means, collectively, each of the Priority Mortgages, the
      General Mortgages and the Senior Lease Facility Mortgage.

           "Multiemployer Plan" means a "multiemployer plan" as defined in
      Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate
      is making, or is accruing an obligation to make, contributions or has
      made, or been obligated to make, contributions within the preceding six
      (6) Fiscal Years.

           "Net Proceeds" (a) from any public or private offering of any
      security (including securities evidencing Indebtedness and any Capital
      Market Transaction) means cash payments received by the Borrower or any
      Subsidiary therefrom as and when received, net of all legal, accounting,
      banking and underwriting fees and expenses, commissions, discounts and
      other issuance expenses incurred in connection therewith and all taxes
      required to be paid or accrued as a consequence of such issuance; and (b)
      from any Asset Disposition means cash payments received by the Borrower or
      any Subsidiary therefrom (including any cash payments received pursuant to
      any note or other debt security received in connection with any Asset
      Disposition) as and when received, net of (i) all legal fees and expenses
      and other fees and expenses paid to third parties and incurred in
      connection therewith, (ii) all taxes required to be paid or accrued as a
      consequence of such disposition, (iii) all amounts applied to repayment of
      Indebtedness (other than the Obligations and Senior Note Obligations)
      secured by a Lien on the asset or property disposed.

           "Non-Cash LIFO Adjustments" means non-cash adjustments to income
      (reflected as a negative amount if a charge, or as a positive amount if a
      credit) resulting from the use of the "last in-first out" inventory method
      (as opposed to the "first in-first out" inventory method) in determining
      the cost of goods sold, all as determined in accordance with GAAP applied
      on a Consistent Basis.

           "Non-cash Restructuring Charges" means those expenses and charges
      against earnings incurred in connection with the Borrower's comprehensive
      corporate downsizing and reorganization program and which do not result in
      any cash payment by the Borrower or any Subsidiary, all as determined on a
      consolidated basis in accordance with GAAP applied on a Consistent Basis.

                                       24

<PAGE>

           "Notes" means the Revolving Notes.

           "Obligations" means the obligations, liabilities and Indebtedness of
      the Borrower with respect to (i) the principal and interest on the Loans
      as evidenced by the Notes, (ii) the Reimbursement Obligations and
      otherwise in respect of the Letters of Credit, and (iii) the payment and
      performance of all other obligations, liabilities and Indebtedness of the
      Borrower to the Lenders (including the Issuing Bank), the Agent or BAS
      hereunder, under any one or more of the other Loan Documents or with
      respect to the Loans.

           "Operating Documents" means with respect to any corporation, limited
      liability company, partnership, limited partnership, limited liability
      partnership or other legally authorized incorporated or unincorporated
      entity, the bylaws, operating agreement, partnership agreement, limited
      partnership agreement or other applicable documents relating to the
      operation, governance or management of such entity.

           "Organizational Action" means with respect to any corporation,
      limited liability company, partnership, limited partnership, limited
      liability partnership or other legally authorized incorporated or
      unincorporated entity, any corporate, organizational or partnership action
      (including any required shareholder, member or partner action), or other
      similar official action, as applicable, taken by such entity.

           "Organizational Documents" means with respect to any corporation,
      limited liability company, partnership, limited partnership, limited
      liability partnership or other legally authorized incorporated or
      unincorporated entity, the articles of incorporation, certificate of
      incorporation, articles of organization, certificate of limited
      partnership or other applicable organizational or charter documents
      relating to the creation of such entity.

           "Outstandings" means, collectively, at any date, the Letter of Credit
      Outstandings and Revolving Credit Outstandings on such date.

           "Overadvance Basket" means an amount of to $52,500,000, as modified
      from time to time in accordance with Section 2.1(h).
                                           --------------

           "Overcollateralization Amount" means, at any date of determination,
      the excess of the aggregate Outstanding Balance (as defined in the
      Receivables Purchase Agreement) of all Transferred Receivables (as defined
      in the Receivables Purchase Agreement) over the Capital Investment (as
      defined in the Receivables Purchase Agreement) with respect to such
      Transferred Receivables.

           "Parras Cone" means Parras Cone de Mexico, S. A., a joint venture of
      the Borrower and CIPSA.

           "Parras Cone Acquisition" means the purchase of (i) substantially all
      of the assets of, or (ii) a controlling equity interest in, Parras Cone,
      in each case, pursuant to a

                                       25

<PAGE>

      transaction financed exclusively with Parras Cone Debt and investments
      permitted under Section 10.7(h).
                      ---------------

           "Parras Cone Capital Expenditures" means all Capital Expenditures
      made by Parras Cone financed exclusively from internally generated revenue
      and/or the Parras Cone Debt.

           "Parras Cone Debt" means Indebtedness (other than Advances under the
      Revolving Credit Facility) incurred to finance the Parras Cone Acquisition
      (which may include refinancing the existing Indebtedness of Parras Cone),
      which Indebtedness is non-recourse to the Borrower and its Subsidiaries.

           "Participation" means, with respect to any Lender (other than the
      Issuing Bank) and a Letter of Credit, the extension of credit represented
      by the participation of such Lender hereunder in the liability of the
      Issuing Bank in respect of a Letter of Credit issued by the Issuing Bank
      in accordance with the terms hereof.

           "Payroll Accounts" means, collectively, the Imprest/Payroll Accounts
      that are identified as payroll accounts in Exhibit P.
                                                 ---------

           "PBGC" means the Pension Benefit Guaranty Corporation and any
      successor thereto.

           "PBGC Agreement" means (i) initially, the Memorandum of Understanding
      dated January 3, 2000 between the Borrower and the PBGC concerning certain
      of the Borrower's Pension Plans and (ii) from and after the execution of
      definitive documentation thereafter entered into between the Borrower on
      substantially the same terms as set forth in such Memorandum of
      Understanding, such definitive documentation.

           "Pension Plan" means any employee pension benefit plan within the
      meaning of Section 3(2) of ERISA, other than a Multiemployer Plan, which
      is subject to the provisions of Title IV of ERISA or Section 412 of the
      Code and which (i) is maintained for employees of the Borrower or any of
      its ERISA Affiliates or is assumed by the Borrower or any of its ERISA
      Affiliates in connection with any Acquisition or (ii) has at any time been
      maintained for the employees of the Borrower or any current or former
      ERISA Affiliate.

           "Permitted Asset Dispositions" means Asset Dispositions consisting of
      (i) dispositions of inventory in the ordinary course of business, (ii)
      dispositions of property that is substantially worn, damaged, obsolete or,
      in the judgment of the Borrower, no longer best used or useful in its
      business or that of any Subsidiary which in the aggregate during any
      Fiscal Year has a fair market value or book value, whichever is greater,
      of $1,000,000 or less, (iii) transfers of assets necessary to give effect
      to merger or consolidation transactions permitted by Section 10.8, (iv)
                                                           ------------
      the disposition of cash or Eligible Securities in the ordinary course of
      management of the investment portfolio of the Borrower and its
      Subsidiaries, (v) securitization of accounts receivable and related

                                       26

<PAGE>

      rights pursuant to the Securitization Transaction, (vi) the sale or
      discount without recourse of accounts receivable or notes receivable, or
      the conversion or exchange of accounts receivable into or for notes
      receivable in connection with the compromise or collection thereof, each
      in the ordinary course of business, (vii) dispositions of assets described
      on Schedule 1.1 hereto, (viii) dispositions of assets described on
         ------------
      Schedule 1.1A hereto, (ix) sale and leaseback transactions permitted under
      -------------
      Section 10.14, and (x) dispositions of assets described on Schedule 1.1B
      -------------                                              -------------
      hereto.

           "Permitted Equity Holder" means a Person that (a) in the good faith
      judgment of the Agent has sufficient financial means to perform the terms
      of a Recapitalization Agreement and (b) is otherwise acceptable to the
      Agent in its sole discretion.

           "Permitted Liens" has the meaning given to such term in Section 10.4.

           "Person" means an individual, partnership, corporation, limited
      liability company, limited liability partnership, trust, unincorporated
      organization, association, joint venture or a government or agency or
      political subdivision thereof.

           "Pledge Agreement" means, collectively (or individually as the
      context may indicate), (i) that certain Securities Pledge Agreement dated
      as of the date hereof from the Borrower to the General Collateral Agent
      for the benefit of the General Secured Parties, (ii) that certain Pledge
      Agreement dated as of the date hereof from the Borrower pledging 65% of
      the total outstanding shares of each of its Material Direct Foreign
      Subsidiaries to the General Collateral Agent for the benefit of the
      General Secured Parties, (iii) any additional Securities Pledge Agreement
      delivered to the General Collateral Agent pursuant to Section 5.1 and
                                                            -----------
      9.20, and (iv) with respect to any Subsidiary Securities issued by a
      ----
      Material Direct Foreign Subsidiary, any additional or substitute charge,
      agreement, document, instrument or conveyance, in form and substance
      acceptable to the General Collateral Agent, conferring under applicable
      foreign law upon the General Collateral Agent for the benefit of the
      General Secured Parties a General Lien upon such Subsidiary Securities and
      equity interests as are owned by the Borrower or any Domestic Subsidiary,
      in each case as hereafter amended, supplemented (including by Pledge
      Agreement Supplement) or restated from time to time.

           "Pledge Agreement Supplement" means, with respect to each Pledge
      Agreement, the Pledge Agreement Supplement in the form affixed as an
      exhibit to such Pledge Agreement.

           "Pledged Interests" means the Subsidiary Securities required to be
      pledged as General Collateral pursuant to Article V or the terms of any
                                                ---------
      Pledge Agreement.

           "Prime Rate" means the per annum rate of interest established from
      time to time by Bank of America as its prime rate, which rate may not be
      the lowest rate of interest charged by Bank of America to its customers.

                                       27

<PAGE>

           "Principal Office" means the principal office of Bank of America,
      presently located at 101 North Tryon Street, 15th Floor, NC1 001-15-04,
      Charlotte, North Carolina 28255, Attention: Agency Services, or such other
      office and address as the Agent may from time to time designate.

           "Priority Collateral" means the certain personal and real property,
      assets and fixtures of the Borrower and its Material Subsidiaries whether
      now existing or hereafter arising, created or acquired, upon which a
      Priority Lien has been granted to the Priority Collateral Agent for the
      benefit of the Priority Secured Parties pursuant to the Priority Security
      Instruments.

           "Priority Collateral Agency Agreement" means that certain Collateral
      Agency Agreement dated as of the date hereof among the Priority Secured
      Parties and the Priority Collateral Agent, as amended, supplemented or
      restated from time to time.

           "Priority Collateral Agent" means Bank of America not individually
      but solely in its capacity as collateral agent for the Priority Secured
      Parties with respect to the Priority Collateral pursuant to the terms of
      the Priority Collateral Agency Agreement, and its agents, successors and
      permitted assigns.

           "Priority Lien" means, with respect to any Priority Collateral, a
      valid and enforceable Lien thereon in favor of the Priority Collateral
      Agent for the benefit of the Agent, the Lenders and the other Priority
      Secured Parties conferred under the Priority Security Instruments which is
      fully perfected and ranking of higher priority than any other Lien,
      including any General Lien, on such property, except for Permitted Liens.

           "Priority Mortgages" means, collectively, all mortgages, deeds of
      trust and deeds to secure debt substantially in the form of Exhibit M-3 or
                                                                  -----------
      Exhibit M-4 granting a Priority Lien by the Borrower or a Guarantor to the
      -----------
      Priority Collateral Agent (or a trustee for the benefit of the Priority
      Collateral Agent) for the benefit of the Priority Secured Parties in
      Priority Collateral constituting real property and fixtures as collateral
      security for the Priority Senior Obligations, and if applicable, the
      Guarantors' Obligations with respect thereto, as such documents may be
      amended, supplemented or restated from time to time.

           "Priority Secured Parties" means the Lenders, the Revolving Credit
      Agent, Prudential, Atlantic Financial Group, Ltd. and SunTrust Bank.

                       "Priority Security Agreement" means that certain Priority
      Security Agreement dated as of the date hereof, and each additional
      Priority Security Agreement entered into after the date hereof by any
      Subsidiary in accordance with the terms of any Senior Credit Document,
      granting a Priority Lien to the Priority Collateral Agent for the benefit
      of the Priority Secured Parties pursuant to the Priority Collateral Agency
      Agreement as collateral security for the Priority Senior Obligations, and
      if applicable, the Guarantors' Obligations with respect thereto, as
      amended, supplemented or restated from time to time.

                                       28

<PAGE>

           "Priority Security Instruments" means (i) the Priority Security
      Agreement, (ii) the Priority Mortgages and (iii) all other agreements,
      instruments and other documents, whether now existing or hereafter in
      effect pursuant to which the Borrower or any Material Subsidiary shall
      grant or convey a Priority Lien to the Priority Collateral Agent for the
      benefit of the Priority Secured Parties as collateral security for the
      Priority Senior Obligations, and if applicable, the Guarantors'
      Obligations with respect thereto, all as amended, supplemented and
      restated from time to time.

           "Priority Senior Obligations" has the meaning given to such term in
      the Intercreditor Agreement.

           "Projected Consolidated EBITDA" means, with respect to any
      Two-Quarter Period, the projected amount of Consolidated EBITDA for such
      period, as set forth in Exhibit Q.
                              ---------

           "Projected Non-Cash LIFO Adjustments" means, with respect to any
      Two-Quarter Period, the projected amount of Non-Cash LIFO Adjustments for
      such period, as set forth in Exhibit Q.
                                   ---------

           "Projected PBGC Payments" means, with respect to the Two-Quarter
      Period ended June 30, 2002, the projected amount of payments during such
      period by the Borrower and its Subsidiaries into their respective pensions
      plans pursuant to the PBGC Agreement, as such projected amount is set
      forth in Exhibit Q.
               ---------

           "Proprietary Rights" means all of the Borrower's or any Domestic
      Subsidiary's now owned and hereafter arising or acquired: licenses,
      franchises, permits, patents, patent rights, copyrights, works which are
      the subject matter of copyrights, trademarks, service marks, trade names,
      trade styles, patent, trademark and service mark applications, and all
      licenses and rights related to any of the foregoing, and all other rights
      under any of the foregoing, all extensions, renewals, reissues, divisions,
      continuations, and continuations-in-part of any of the foregoing, and all
      rights to sue for past, present and future infringement of any of the
      foregoing.

           "Prudential" means The Prudential Insurance Company of America, in
      its capacity as holder of the Senior Notes.

           "Rate Hedging Obligations" means, without duplication, any and all
      obligations of the Borrower or any Subsidiary, whether absolute or
      contingent and howsoever and whensoever created, arising, evidenced or
      acquired (including all renewals, extensions and modifications thereof and
      substitutions therefor), under (i) any and all agreements, devices or
      arrangements designed to protect at least one of the parties thereto from
      the fluctuations of interest rates, exchange rates or forward rates
      applicable to such party's assets, liabilities or exchange transactions,
      including, but not limited to, Dollar-denominated or cross-currency
      interest rate exchange agreements, forward currency exchange agreements,
      interest rate cap or collar protection agreements, forward rate

                                       29

<PAGE>

      currency or interest rate options, puts, warrants and those commonly known
      as interest rate "swap" agreements; (ii) all other "derivative
      instruments" as defined in FASB 133 and which are subject to the reporting
      requirements of FASB 133; and (iii) any and all cancellations, buybacks,
      reversals, terminations or assignments of any of the foregoing; provided,
      however, under no circumstances shall obligations for cotton hedging in
      the ordinary course of business be considered Rate Hedging Obligations.

           "Recapitalization Agreement" means a written agreement (in form and
      substance satisfactory to the Agent in its sole discretion) between the
      Borrower and a Permitted Equity Holder, which agreement requires the
      Permitted Equity Holder to make a cash equity contribution to the Borrower
      on or before January 15, 2003, in an amount sufficient (in the judgment of
      the Agent) to ensure the effective recapitalization of the Borrower and
      its Subsidiaries that includes repayment of all Obligations and Senior
      Note Obligations on such date.

           "Receivables Purchase Agreement" means that certain Receivables
      Purchase and Servicing Agreement dated September 1, 1999 by and among Cone
      Receivables II LLC, as Seller, Redwood Receivables Corporation, as
      Purchaser, Cone Mills Corporation, as Servicer, and General Electric
      Capital Corporation, as Operating Agent and Collateral Agent, as amended
      by the First Amendment and Waiver to Securitization Agreements dated as of
      November 16, 1999 and the Second Amendment to Securitization Agreements
      dated as of the Closing Date and as amended, supplemented or restated from
      time to time.

           "Receivables Transfer Agreement" means that certain Receivables
      Transfer Agreement dated September 1, 1999 by and among Cone Mills
      Corporation, the other originators party thereto and Cone Receivables II
      LLC, as amended by the First Amendment and Waiver to Securitization
      Agreements dated as of November 16, 1999 and the Second Amendment to
      Securitization Agreements dated as of the Closing Date and as amended,
      supplemented or restated from time to time.

           "Registrar" means, with respect to any Subsidiary Securities required
      to be pledged pursuant to the terms of any Pledge Agreement, any Person
      authorized or obligated to maintain records of the registration of
      ownership or transfer of ownership of interests in such Subsidiary
      Securities, and in the event no such Person shall have been expressly
      designated by the related Subsidiary, shall mean (i) as to any corporation
      or limited liability company, its Secretary (or comparable official), and
      (ii) as to any partnership, its general partner (or managing general
      partner if one shall have been appointed).

           "Regulation D" means Regulation D of the Board as the same may be
      amended or supplemented from time to time.

           "Reimbursement Obligation" shall mean at any time, the obligation of
      the Borrower with respect to any Letter of Credit to reimburse the Issuing
      Bank and the Lenders to the extent of their respective Participations
      (including by the receipt by the

                                       30

<PAGE>

      Issuing Bank of proceeds of Loans pursuant to Section 2.1(c)(iii)) for
                                                    -------------------
      amounts theretofore paid by the Issuing Bank pursuant to a drawing under
      such Letter of Credit.

           "Repurchase Agreement" means a repurchase agreement entered into with
      any financial institution whose debt obligations or commercial papers are
      rated "A" by either of S&P or Moody's or "A-1" by S&P or "P-1" by Moody's
      with a term of no more than seven days.

           "Required Enforcement General Secured Parties" shall have the meaning
      given to such term in the Intercreditor Agreement.

           "Required General Secured Parties" means, as of any date, General
      Secured Parties (other than the Bond Trustee and the Debenture Holders)
      holding more than fifty percent (50%) of the General Senior Obligations
      (other than the Senior Debenture Obligations) outstanding on such date.

           "Required Lenders" means, as of any date, Lenders on such date having
      Credit Exposures (as defined below) aggregating (i) if there shall be
      fewer than three (3) Lenders, 100% of the aggregate Credit Exposures of
      all Lenders on such date, and (ii) if there shall be three (3) or more
      Lenders, more than 66-2/3% of the aggregate Credit Exposures of all the
      Lenders on such date. For purposes of the preceding sentence, the amount
      of the "Credit Exposure" of each Lender shall be equal at all times (a)
              ---------------
      other than following the occurrence and during the continuance of an Event
      of Default, to its Revolving Credit Commitment, and (b) following the
      occurrence and during the continuance of an Event of Default, to the sum
      of (i) the amount of such Lender's Applicable Commitment Percentage of
      Revolving Credit Outstandings plus (ii) the amount of such Lender's
      Applicable Commitment Percentage of Letter of Credit Outstandings;
      provided that, for the purpose of this definition only, (A) if any Lender
      --------
      shall have failed to fund its Applicable Commitment Percentage of any
      Advance, then the Revolving Credit Commitment of such Lender shall be
      deemed reduced by the amount it so failed to fund for so long as such
      failure shall continue and such Lender's Credit Exposure attributable to
      such failure shall be deemed held by any Lender making more than its
      Applicable Commitment Percentage of such Advance to the extent it covers
      such failure and (B) if any Lender shall have failed to pay to the Issuing
      Bank upon demand its Applicable Commitment Percentage of any drawing under
      any Letter of Credit resulting in an outstanding Reimbursement Obligation
      (whether by funding its Participation therein or otherwise), such Lender's
      Credit Exposure attributable to all Letter of Credit Outstandings shall be
      deemed to be held by the Issuing Bank until such Lender shall pay such
      deficiency amount to the Issuing Bank together with interest thereon as
      provided in Section 4.9.
                  -----------

           "Required Priority Secured Parties" means, as of any date, Priority
      Secured Parties holding more than fifty percent (50%) of the Priority
      Senior Obligations outstanding on such date.

                                       31

<PAGE>

           "Required Secured Parties" means, as of any date, (i) Priority
      Secured Parties holding more than fifty percent (50%) of the Priority
      Senior Obligations outstanding on such date and (ii) General Secured
      Parties (other than the Debenture Holders) holding more than fifty percent
      (50%) of the General Senior Obligations outstanding on such date,
      excluding in such calculations for all purposes of determination the
      Senior Debenture Obligations.

           "Reserves" means reserves that limit the availability of credit
      hereunder, consisting of reserves against Eligible Inventory, Eligible
      Fixed Assets, the Eligible Inventory Amount or the Eligible Fixed Assets
      Amount, established by the Agent from time to time in the Agent's
      reasonable credit judgment. Without limiting the generality of the
      foregoing, the following reserves shall be deemed to be a reasonable
      exercise of the Agent's credit judgment: (a) a reserve for accrued, unpaid
      interest on the Obligations, (b) reserves for rent at leased locations
      subject to statutory or contractual landlord liens, (c) Inventory
      shrinkage, (d) Environmental Compliance Reserves, (e) customs charges, and
      (f) warehousemen's or bailees' charges.

           "Reserve Requirement" means, at any time, the maximum rate at which
      reserves (including, without limitation, any marginal, special,
      supplemental, or emergency reserves) are required to be maintained under
      regulations issued from time to time by the Board by member banks of the
      Federal Reserve System against "Eurocurrency liabilities" (as such term is
      used in Regulation D). Without limiting the effect of the foregoing, the
      Reserve Requirement shall reflect any other reserves required to be
      maintained by such member banks with respect to (i) any category of
      liabilities which includes deposits by reference to which the Eurodollar
      Rate is to be determined, or (ii) any category of extensions of credit or
      other assets which include Eurodollar Rate Loans. The Eurodollar Rate
      shall be adjusted automatically on and as of the effective date of any
      change in the Reserve Requirement.

           "Restricted Payment" means (i) any dividend or other distribution,
      direct or indirect, on account of any shares of any class of stock of
      Borrower or any Subsidiary Securities of its Subsidiaries (other than
      those payable or distributable solely to the Borrower) now or hereafter
      outstanding, except a dividend payable solely in shares of a class of
      stock to the holders of that class; (ii) any redemption, conversion,
      exchange, put, call, retirement or similar payment, purchase or other
      acquisition for value, direct or indirect, of any shares of any class of
      stock of Borrower or any of its Subsidiaries (other than those payable or
      distributable solely to the Borrower) now or hereafter outstanding; (iii)
      any payment made to retire, or to obtain the surrender of, any outstanding
      warrants, options or other rights to acquire shares of any class of stock
      of Borrower or any Subsidiary Securities of its Subsidiaries now or
      hereafter outstanding; and (iv) any issuance and sale of Subsidiary
      Securities (other than director qualifying shares) of any Subsidiary of
      the Borrower (or any option, warrant or right to acquire such stock) other
      than to the Borrower; excluding in all instances however all payments
      which would otherwise be considered "Restricted Payments" made in
      accordance with the terms of an Approved Option Plan.

                                       32

<PAGE>

           "Revolving Credit Commitment" means, with respect to each Lender, the
      obligation of such Lender to make Revolving Loans to the Borrower up to an
      aggregate principal amount at any one time outstanding equal to such
      Lender's Applicable Commitment Percentage of the Total Revolving Credit
      Commitment.

           "Revolving Credit Facility" means the facility described in Section
      2.1 hereof providing for Loans to the Borrower by the Lenders in the
      aggregate principal amount of the Total Revolving Credit Commitment.

           "Revolving Credit Outstandings" means, as of any Determination Date,
      the aggregate principal amount of all Revolving Loans then outstanding.

           "Revolving Credit Termination Date" means (i) the Stated Termination
      Date or (ii) such earlier date of termination of Lenders' obligations
      pursuant to Section 11.1 upon the occurrence of an Event of Default, or
                  ------------
      (iii) such date as the Borrower may voluntarily and permanently terminate
      the Revolving Credit Facility by payment in full of all Revolving Credit
      Outstandings and Letter of Credit Outstandings and cancellation (or cash
      collateralization) of all Letters of Credit, together with all accrued and
      unpaid interest thereon.

           "Revolving Loan" means any borrowing pursuant to an Advance under the
      Revolving Credit Facility in accordance with Section 2.1.
                                                   -----------

           "Revolving Notes" means, collectively, the promissory notes of the
      Borrower evidencing Revolving Loans executed and delivered to the Lenders
      as provided in Section 2.3(a) substantially in the form of Exhibit F-1,
                                                                 -----------
      with appropriate insertions as to amounts, dates and names of Lenders.

           "S&P" means Standard & Poor's Ratings Group, a division of The
      McGraw-Hill Companies, Inc.

           "Secured Parties" means, collectively, the Priority Secured Parties,
      the General Secured Parties and the Agent and the Lenders with respect to
      the Senior Leased Facility.

           "Securitization Deposit Accounts" means those certain lockbox deposit
      accounts nos. 3750818293 with Bank of America, N.A. in each case held with
      such financial institutions in connection with the transactions
      contemplated under the Receivables Purchase Agreement.

           "Securitization Intercreditor Agreement" means the Intercreditor
      Agreement of even date herewith among General Electric Capital
      Corporation, the General Collateral Agent and certain other parties and
      more particularly described in the definition of "Permitted Encumbrances"
      in Annex X to the Receivables Purchase Agreement, as amended, supplemented
         -------
      or restated from time to time.

                                       33

<PAGE>

           "Securitization Outstandings" means, at any time, the Capital
      Investment (as defined in the Receivables Purchase Agreement) under the
      Receivables Purchase Agreement, in an aggregate amount not in excess of
      $60,000,000 at any time.

           "Securitization Transaction" means any transaction pursuant to which
      the Borrower or any Subsidiary, through Cone Receivables II LLC, sells,
      disposes of or otherwise transfers any interest, including any security
      interest, in accounts receivable and related rights pursuant to the
      Receivables Purchase Agreement.

           "Security Agreement" means, collectively (or individually as the
      context may indicate), (i) the Priority Security Agreement, (ii) the
      General Security Agreement, and (iii) any additional Security Agreement
      delivered to the Agent pursuant to Section 9.20, as amended, supplemented
                                         ------------
      or restated from time to time.

           "Security Documents" means, collectively, the General Security
      Instruments, the Priority Security Instruments and the Senior Lease
      Facility Mortgage.

           "Security Termination Date" means the earliest date on which any of
      the following shall occur: (i) all Senior Debt Obligations are Fully
      Satisfied, (ii) all Senior Revolving Credit Obligations, all Senior Note
      Obligations and all Senior Lease Obligations are Fully Satisfied, or (iii)
      when each of the Agent (at the direction of all the Lenders), the holders
      of the Senior Notes and the Senior Lease Creditor agree in writing to the
      termination of all the General Security Instruments and the Priority
      Security Instruments and to the release of all General Liens and Priority
      Liens granted thereto thereunder.

           "Senior Credit Documents" means, collectively, each of the Loan
      Documents, the Senior Debenture Documents, the Senior Lease Documents, the
      Senior Note Documents, and the Morgan Swap Agreement, as amended,
      supplemented or restated from time to time.

           "Senior Creditors" means, collectively, all of (i) the Agent and the
      Lenders and (ii) Prudential, (iii) the Senior Lease Creditor, (iv) Morgan
      and (v) the Bond Trustee on behalf of and for the benefit of the Debenture
      Holders.

           "Senior Debenture Documents" means, collectively, the Senior
      Indenture, the Senior Debentures and all documents delivered by or on
      behalf of the Borrower to the Bond Trustee or the Debenture Holders in
      connection therewith, as amended, supplemented or restated from time to
      time.

           "Senior Debenture Obligations" means, as of any date, all
      obligations, liabilities and indebtedness of the Borrower with respect to
      the payment of (i) all outstanding principal, together with accrued and
      unpaid interest thereon, and premium thereon, if any, of the Senior
      Debentures, and (ii) all fees, expenses and other payments required by or
      under the Senior Debenture Documents.

                                       34

<PAGE>

           "Senior Debentures" means the 8 1/8% Debentures due March 15, 2005
      issued by the Borrower pursuant to the Senior Indenture in an aggregate
      original principal amount of $100,000,000, as amended, restated or
      supplemented from time to time.

           "Senior Debt Intercreditor Agreement" means that certain
      Intercreditor Agreement dated as of the date hereof among the Collateral
      Agents and the Senior Creditors, as amended, supplemented or restated from
      time to time.

           "Senior Debt Obligations" means, collectively, all of the Senior
      Revolving Credit Obligations, the Senior Note Obligations, the Senior
      Lease Obligations, the Senior Debenture Obligations and the Morgan Swap
      Obligations.

           "Senior Debt Outstandings" means the sum of (i) the aggregate amount
      of Revolving Credit Outstandings and Letter of Credit Outstandings, plus
      (ii) the aggregate outstanding principal amount of the Senior Debentures,
      plus (iii) the aggregate outstanding principal amount of the Senior Notes.

           "Senior Indenture" means that certain Indenture dated as of February
      14, 1995 between the Borrower and the Bond Trustee, as amended, restated
      or supplemented from time to time.

           "Senior Lease Creditor" means, collectively, SunTrust Bank and
      Atlantic Financial Group, Ltd., as creditors of the Senior Lease
      Obligations.

           "Senior Lease Documents" means the Master Lease, the Loan Agreement
      (up to $16,000,000) dated as of October 24, 1994 between Atlantic
      Financial Group, Ltd. (as successor to TCB Realty II Corporation), as
      borrower, and SunTrust Bank (as successor to Citicorp Leasing, Inc.), as
      lender (the "Development Loan Agreement") and the other Key Agreements (as
      defined in the Development Loan Agreement), as amended by the Tenth
      Amendment to Master Lease of even date herewith and as amended,
      supplemented or restated from time to time.

           "Senior Lease Facility" means the Borrower's corporate headquarters,
      including land and improvements, located at 3101 North Elm Street,
      Greensboro, North Carolina and leased by the Borrower pursuant to the
      Senior Lease Documents.

           "Senior Lease Facility Mortgage" means the Deed of Trust and Security
      Agreement dated as of the Closing Date from Atlantic Financial Group, Ltd.
      in favor of the Agent for the benefit of itself and the Lenders granting a
      Lien on the Senior Lease Facility, as such document may be amended,
      supplemented or restated from time to time.

           "Senior Lease Obligations" means, as of any date, all obligations,
      liabilities and indebtedness of the Borrower with respect to the payment
      of all rent, fees, expenses and other payments required by or under the
      Senior Lease Documents to which it is a party.

                                       35

<PAGE>

           "Senior Note Agreement" means that certain Note Agreement dated
      August 13, 1992 between the Borrower and The Prudential Insurance Company
      of America pursuant to which the Senior Notes were issued, as amended,
      supplemented or restated from time to time.

           "Senior Note Documents" means the Senior Note Agreement, the Senior
      Notes, the Senior Note Equity Appreciation Rights Agreement and all
      documents delivered by or on behalf of the Borrower to Prudential in
      connection therewith, as amended, supplemented or restated from time to
      time.

           "Senior Note Equity Appreciation Rights Agreement" means that certain
      Equity Appreciation Rights Agreement dated as of November 9, 2001, between
      the Borrower and Prudential, as amended, supplemented or restated from
      time to time.

           "Senior Note Obligations" means, as of any date, all obligations,
      liabilities and indebtedness of the Borrower with respect to the payment
      of (i) all outstanding principal, together with accrued and unpaid
      interest and Yield Maintenance Amount thereon, on the Senior Notes, and
      (ii) all fees, expenses and other payments required by or under the Senior
      Note Agreement or any other Senior Note Document to which it is a party.

           "Senior Notes" means the [13.70%] Senior Notes Due January 15, 2003
      issued by the Borrower pursuant to the Senior Note Agreement in the
      original aggregate principal amount of $75,000,000, as amended,
      supplemented or restated from time to time.

           "Senior Pro Rata Share" means, with respect to any specified amount,
      the Lenders and the Agent's Senior Pro Rata Share (as defined in the
      Senior Debt Intercreditor Agreement) with respect to such amount.

           "Senior Revolving Credit Obligations" means, except as set forth
      below, all obligations, liabilities and indebtedness of the Borrower with
      respect to the payment of (i) all outstanding principal, together with
      accrued and unpaid interest thereon, on the Revolving Notes, (ii) all
      Letter of Credit Outstandings and (iii) all fees, expenses and other
      payments required by or under this Agreement or any other Loan Document to
      which it is a party; provided, however, with respect to all matters
                           --------  -------
      covered by Section 5.5 hereof and Section 1.2(b) of the Senior Debt
                 -----------
      Intercreditor Agreement for which determination is made at any time other
      than following the occurrence and during the continuance of an Event of
      Default under this Agreement or any other Loan Document, Senior Revolving
      Credit Obligations shall mean and be equal to the Total Revolving Credit
      Commitment.

           "Solvent" means, when used with respect to any Person, that at the
      time of determination:

           (a)  the fair value of its assets (both at fair valuation and at
      present fair saleable value on an orderly basis) is in excess of the total
      amount of its liabilities, including Contingent Obligations; and

                                       36

<PAGE>

           (b)  it is then able and expects to be able to pay its debts as they
      mature; and

           (c)  it has capital sufficient to carry on its business as conducted
      and as proposed to be conducted.

           "Stated Termination Date" means January 15, 2003.

           "Subsidiary" means any corporation or other entity in which more than
      50% of its outstanding Voting Securities or more than 50% of all equity
      interests is owned directly or indirectly by the Borrower and/or by one or
      more of the Borrower's Subsidiaries; provided however that neither Cone
      Receivables II LLC nor Parras Cone (prior to the consummation of the
      Parras Cone Acquisition in compliance with the terms hereof) shall
      constitute Subsidiaries for the purposes of this Agreement.

           "Subsidiary Securities" means the shares of capital stock or the
      other equity interests issued by or equity participations in any
      Subsidiary, whether or not constituting a "security" under Article 8 of
      the Uniform Commercial Code as in effect in any jurisdiction.

           "Swap Agreement" means one or more agreements between the Borrower
      and any Person with respect to Indebtedness evidenced by any or all of the
      Notes, on terms mutually acceptable to Borrower and such Person and
      approved by the Required Lenders, which agreements create Rate Hedging
      Obligations, as amended, supplemented or restated from time to time;
      provided, however, that no such approval of the Lenders shall be required
      --------  -------
      to the extent such agreements are entered into between the Borrower and
      any Lender or any affiliate of any Lender.

           "Synthetic Lease" means a leveraged leasing arrangement under which
      the lease of property is treated as an operating lease under GAAP but is
      treated as a financing lease arrangement for legal and tax purposes and in
      which a special purpose entity incurs Indebtedness to acquire such
      property and leases such property to the Borrower.

           "Synthetic Lease Indebtedness" means, with respect to a Person that
      is a lessee under a Synthetic Lease, at any time an amount equal to (i)
      the aggregate purchase price of any property that the lessor under such
      synthetic lease acquired, through one or a series of related transactions,
      and thereafter leased to such Person pursuant to such Synthetic Lease less
                                                                            ----
      (ii) the aggregate amount of all payments made on or prior to such time of
      fixed rent or other rent payments which reduced such Person's obligation
      under such Synthetic Lease and which are not the financial equivalent of
      interest. Synthetic Lease Indebtedness of a Person shall also include,
      without duplication, the amount of Synthetic Lease Indebtedness of others
      to the extent guarantied by such Person.

           "Termination Event" means: (i) a "Reportable Event" described in
      Section 4043 of ERISA and the regulations issued thereunder (unless the
      notice requirement has been waived by applicable regulation) other than
      any reportable event that is the subject of the PBGC Agreement; or (ii)
      the withdrawal of the Borrower or any ERISA Affiliate from a

                                       37

<PAGE>

      Pension Plan during a plan year in which it was a "substantial employer"
      as defined in Section 4001(a)(2) of ERISA or was deemed such under Section
      4062(e) of ERISA; or (iii) the termination of a Pension Plan, the filing
      of a notice of intent to terminate a Pension Plan or the treatment of a
      Pension Plan amendment as a termination under Section 4041 of ERISA; or
      (iv) the institution of proceedings to terminate a Pension Plan by the
      PBGC other than those actions by the PBGC that are the subject of the PBGC
      Agreement; or (v) any other event or condition which would constitute
      grounds under Section 4042(a) of ERISA for the termination of, or the
      appointment of a trustee to administer, any Pension Plan other than those
      actions by the PBGC that are the subject of the PBGC Agreement; or (vi)
      the partial or complete withdrawal of the Borrower or any ERISA Affiliate
      from a Multiemployer Plan; or (vii) the imposition of a Lien pursuant to
      Section 412 of the Code or Section 302 of ERISA other than those actions
      by the PBGC that are the subject of the PBGC Agreement; or (viii) any
      event or condition which results in the reorganization or insolvency of a
      Multiemployer Plan under Section 4241 or Section 4245 of ERISA,
      respectively; or (ix) any event or condition which results in the
      termination of a Multiemployer Plan under Section 4041A of ERISA or the
      institution by the PBGC of proceedings to terminate a Multiemployer Plan
      under Section 4042 of ERISA; or (x) any event or condition with respect to
      any Employee Benefit Plan which is regulated by any Foreign Benefit Law
      that results in the termination of such Employee Benefit Plan or the
      revocation of such Employee Benefit Plan's authority to operate under the
      applicable Foreign Benefit Law.

           "Title Policy" means, with respect to each Mortgaged Property as to
      which Mortgage Support Documents are required hereunder, the mortgagee
      title insurance policy (together with such endorsements as the Agent may
      reasonably require) issued to the General Collateral Agent in respect of
      such Mortgaged Property by an insurer selected by the Borrower and
      reasonably acceptable to the Revolving Credit Agent, insuring (in an
      amount satisfactory to the Agent) the General Lien of the General
      Collateral Agent for the benefit of the General Secured Parties on such
      Mortgaged Property to be duly perfected and of first priority, subject
      only to such exceptions as shall be acceptable to the Agent.

           "Total Letter of Credit Commitment" means an amount not to exceed
      $10,000,000.

           "Total Revolving Credit Commitment" means a principal amount equal to
      $80,000,000, as reduced from time to time in accordance with Sections
                                                                   --------
      2.1(e), (f), (g), and (j).
      -------------------------

           "Twelve-Month Period" means a period of twelve consecutive calendar
      months taken together as one accounting period.

           "Two-Quarter Period" means a period of two full consecutive Fiscal
      Quarters of the Borrower and its Subsidiaries, taken together as one
      accounting period.

           "Type" shall mean any type of Loan (i.e., a Base Rate Loan or a
      Eurodollar Rate Loan).

                                       38

<PAGE>

           "UCC" means the Uniform Commercial Code of the State of North
      Carolina as codified from time to time in the North Carolina General
      Statutes.

           "U.S. Capital Expenditures" means all Capital Expenditures other than
      Mexican Capital Expenditures and Parras Cone Capital Expenditures.

           "Voting Securities" means shares of capital stock issued by a
      corporation, or equivalent interests in any other Person, the holders of
      which are ordinarily, in the absence of contingencies, entitled to vote
      for the election of directors (or persons performing similar functions) of
      such Person, even if the right so to vote has been suspended by the
      happening of such a contingency.

           "Year 2000 Compliant" means all computer applications (including
      those affected by information received from its suppliers and vendors)
      that are material to the Borrower's or any of its Subsidiaries' business
      and operations are able to perform properly date-sensitive functions
      involving all dates on and after January 1, 2000.

           "Year 2000 Problem" means that computer applications used by the
      Borrower or any of its Subsidiaries (including those affected by
      information received from its suppliers and vendors) are unable to
      recognize correctly and perform properly date-sensitive functions
      involving certain dates on and after January 1, 2000.

           "Yield Maintenance Amount" has the meaning assigned thereto in the
      Senior Note Agreement.

      1.2  Rules of Interpretation.
           -----------------------

           (a)  All accounting terms not specifically defined herein shall have
      the meanings assigned to such terms and shall be interpreted in accordance
      with GAAP applied on a Consistent Basis.

           (b)  Each term defined in Articles 1, 8 or 9 of the North Carolina
      Uniform Commercial Code shall have the meaning given therein unless
      otherwise defined herein, except to the extent that the Uniform Commercial
      Code of another jurisdiction is controlling, in which case such terms
      shall have the meaning given in the Uniform Commercial Code of the
      applicable jurisdiction.

           (c)  The headings, subheadings and table of contents used herein or
      in any other Loan Document are solely for convenience of reference and
      shall not constitute a part of any such document or affect the meaning,
      construction or effect of any provision thereof.

           (d)  Except as otherwise expressly provided, references in any Loan
      Document to articles, sections, paragraphs, clauses, annexes, appendices,
      exhibits and schedules are references to articles, sections, paragraphs,
      clauses, annexes, appendices, exhibits and schedules in or to such Loan
      Document.

                                       39

<PAGE>

           (e)  All definitions set forth herein or in any other Loan Document
      shall apply to the singular as well as the plural form of such defined
      term, and all references to the masculine gender shall include reference
      to the feminine or neuter gender, and vice versa, as the context may
      require.

           (f)  When used herein or in any other Loan Document, words such as
      "hereunder," "hereto," "hereof" and "herein" and other words of like
      import shall, unless the context clearly indicates to the contrary, refer
      to the whole of the applicable document and not to any particular article,
      section, subsection, paragraph or clause thereof.

           (g)  References to "including" means including without limiting the
      generality of any description preceding such term, and for purposes hereof
      the rule of ejusdem generis shall not be applicable to limit a general
      statement, followed by or referable to an enumeration of specific matters,
      to matters similar to those specifically mentioned.

           (h)  Except as otherwise expressly provided, all dates and times of
      day specified herein shall refer to such dates and times at Charlotte,
      North Carolina.

           (i)  Whenever interest rates or fees are established in whole or in
      part by reference to a numerical percentage expressed as "___%," such
      arithmetic expression shall be interpreted in accordance with the
      convention that 1% = 100 basis points.

           (j)  Each of the parties to the Loan Documents and their counsel have
      reviewed and revised, or requested (or had the opportunity to request)
      revisions to, the Loan Documents, and any rule of construction that
      ambiguities are to be resolved against the drafting party shall be
      inapplicable in the construing and interpretation of the Loan Documents
      and all exhibits, schedules and appendices thereto.

           (k)  Any reference to an officer of the Borrower or any other Person
      by reference to the title of such officer shall be deemed to refer to each
      other officer of such Person, however titled, exercising the same or
      substantially similar functions.

           (l)  All references to any agreement or document as amended,
      supplemented or restated, or words of similar effect, shall mean such
      document or agreement, as the case may be, as amended, supplemented or
      restated from time to time only as and to the extent permitted therein and
      in the Loan Documents.

                                       40

<PAGE>

                                   ARTICLE II

                             The Credit Facilities
                             ---------------------

      2.1  Revolving Loans.
           ---------------

           (a)  Commitment. Subject to the terms and conditions of this
      Agreement, each Lender severally agrees to make Advances to the Borrower
      under the Revolving Credit Facility from time to time from the Closing
      Date until the Revolving Credit Termination Date on a pro rata basis as to
      the total borrowing requested by the Borrower on any day determined by
      such Lender's Applicable Commitment Percentage up to but not exceeding the
      Revolving Credit Commitment of such Lender, provided, however, that the
                                                  --------
      Lenders will not be required and shall have no obligation to make any such
      Advance (i) so long as a Default or an Event of Default has occurred and
      is continuing or (ii) if the Agent has accelerated the maturity of any of
      the Notes as a result of an Event of Default; provided further, however,
                                                    --------
      that immediately after giving effect to each such Advance, (A) the amount
      of Revolving Credit Outstandings plus Letter of Credit Outstandings shall
      not exceed the Total Revolving Credit Commitment and (B) Senior Debt
      Outstandings shall not exceed the Borrowing Base. Within such limits and
      subject to the other terms and conditions of this Agreement, the Borrower
      may borrow, repay and reborrow under the Revolving Credit Facility on any
      Business Day from the Closing Date until, but (as to borrowings and
      reborrowings) not including, the Revolving Credit Termination Date.

           (b)  Amounts. Except as otherwise permitted by the Lenders from time
                -------
      to time, the amount of (i) Revolving Credit Outstandings plus Letter of
      Credit Outstandings shall not exceed the Total Revolving Credit Commitment
      and (ii) Senior Debt Outstandings shall not exceed the Borrowing Base,
      and, in the event there shall be outstanding any such excess, the Borrower
      shall immediately make such payments and prepayments of the Revolving
      Credit Facility as shall be necessary to comply with these restrictions.
      Each Advance under the Revolving Credit Facility, other than Base Rate
      Refunding Loans, shall be in an amount of at least $1,000,000, and, if
      greater than $1,000,000, an integral multiple of $1,000,000.

           (c)  Advances.
                --------

                (i)    An Authorized Representative shall give the Agent (1) at
           least three (3) Business Days' irrevocable telephonic notice of each
           Eurodollar Rate Loan (whether representing an additional borrowing or
           the Continuation of a borrowing hereunder or the Conversion of a
           borrowing hereunder from a Base Rate Loan to a Eurodollar Rate Loan)
           prior to 11:00 A.M. and (2) irrevocable telephonic notice of each
           Base Rate Loan (other than Base Rate Refunding Loans to the extent
           the same are effected without notice pursuant to Section 2.1(c)(iii)
                                                            -------------------
           and whether representing an additional borrowing hereunder or the
           Conversion of borrowing hereunder from Eurodollar Rate Loans to Base
           Rate Loans) prior to 11:00 A.M. on the day of such proposed Revolving
           Loan. Each such notice shall be effective upon receipt by the Agent,
           shall specify the amount of the borrowing,

                                       41

<PAGE>

           the type of Revolving Loan (Base Rate or Eurodollar Rate), the date
           of borrowing and, if a Eurodollar Rate Loan, the Interest Period to
           be used in the computation of interest. The Authorized Representative
           shall provide the Agent written confirmation of each such telephonic
           notice in the form of a Borrowing Notice or Interest Rate Selection
           Notice (as applicable) with appropriate insertions but failure to
           provide such confirmation shall not affect the validity of such
           telephonic notice. Notice of receipt of such Borrowing Notice or
           Interest Rate Selection Notice, as the case may be, together with the
           amount of each Lender's portion of an Advance requested thereunder,
           shall be provided by the Agent to each Lender by telefacsimile
           transmission with reasonable promptness, but (provided the Agent
           shall have received such notice by 11:00 A.M.) not later than 1:00
           P.M. on the same day as the Agent's receipt of such notice.

                (ii)   Not later than 2:00 P.M. on the date specified for each
           borrowing under this Section 2.1, each Lender shall, pursuant to the
                                -----------
           terms and subject to the conditions of this Agreement, make the
           amount of the Advance or Advances to be made by it on such day
           available by wire transfer to the Agent in the amount of its pro rata
           share, determined according to such Lender's Applicable Commitment
           Percentage of the Revolving Loan or Revolving Loans to be made on
           such day. Such wire transfer shall be directed to the Agent at the
           Principal Office and shall be in the form of Dollars constituting
           immediately available funds. The amount so received by the Agent
           shall, subject to the terms and conditions of this Agreement, be made
           available to the Borrower by delivery of the proceeds thereof to the
           Borrower's Account or otherwise as shall be directed in the
           applicable Borrowing Notice by the Authorized Representative and
           reasonably acceptable to the Agent.

                (iii)  Notwithstanding the foregoing, if a drawing is made under
           any Letter of Credit, such drawing is honored by the Issuing Bank,
           and the Borrower shall not immediately fully reimburse the Issuing
           Bank in respect of such drawing from other funds available to the
           Borrower, (A) provided that the conditions to making a Loan as herein
           provided shall then be satisfied, the Reimbursement Obligation
           arising from such drawing shall be paid to the Issuing Bank by the
           Agent without the requirement of notice to or from the Borrower from
           immediately available funds which shall be advanced as a Base Rate
           Refunding Loan to the Agent at its Principal Office by each Lender
           under the Revolving Credit Facility in an amount equal to such
           Lender's Applicable Commitment Percentage of such Reimbursement
           Obligation, and (B) if the conditions to making a Revolving Loan as
           herein provided shall not then be satisfied, each of the Lenders
           shall fund by payment to the Agent (for the benefit of the Issuing
           Bank) at its Principal Office in immediately available funds the
           purchase from the Issuing Bank of their respective Participations in
           the related Reimbursement Obligation based on their respective
           Applicable Commitment Percentages of the Total Letter of Credit
           Commitment. If a drawing is presented under any Letter of Credit in
           accordance with the terms thereof and the Borrower shall not

                                       42

<PAGE>

           immediately reimburse the Issuing Bank in respect thereof, then
           notice of such drawing or payment shall be provided promptly by the
           Issuing Bank to the Agent and the Agent shall provide notice to each
           Lender by telephone or telefacsimile transmission. If notice to the
           Lenders of a drawing under any Letter of Credit is given by the Agent
           at or before 12:00 noon on any Business Day, each Lender shall either
           make a Base Rate Refunding Loan or fund the purchase of its
           Participation as specified above in the amount of such Lender's
           Applicable Commitment Percentage of such drawing or payment and shall
           pay such amount to the Agent for the account of the Issuing Bank at
           the Principal Office in Dollars and in immediately available funds
           before 2:30 P.M. on the same Business Day. If such notice to the
           Lenders is given by the Agent after 12:00 noon on any Business Day,
           each Lender shall either make such Base Rate Refunding Loan or fund
           such purchase before 12:00 noon on the next following Business Day.

           (d)  Repayment of Revolving Loans. The principal amount of each
                ----------------------------
      Revolving Loan shall be due and payable to the Agent for the benefit of
      each Lender in full on the Revolving Credit Termination Date, or earlier
      as specifically provided herein. The principal amount of any Revolving
      Loan may be prepaid in whole or in part (without penalty or premium, but
      subject to payment of any amounts required to be paid pursuant to Section
                                                                        -------
      6.5) on any Business Day, upon (A) at least three (3) Business Days'
      ---
      irrevocable telephonic notice in the case of each Revolving Loan that is a
      Eurodollar Rate Loan from an Authorized Representative (effective upon
      receipt) to the Agent prior to 11:00 A.M. and (B) irrevocable telephonic
      notice in the case of each Revolving Loan that is a Base Rate Loan from an
      Authorized Representative (effective upon receipt) to the Agent prior to
      11:00 A.M. on the day of such proposed repayment. The Authorized
      Representative shall provide the Agent written confirmation of each such
      telephonic notice but failure to provide such confirmation shall not
      effect the validity of such telephonic notice. All prepayments of
      Revolving Loans made by the Borrower shall be in the amount of $1,000,000
      or such greater amount which is an integral multiple of $1,000,000, or the
      amount equal to all Revolving Credit Outstandings, or such other amount as
      necessary to comply with Section 2.1(b),(f), (g), (h), (i) or (j). Subject
                               ----------------------------------------
      to Sections 2.1(a) and 7.2, all amounts repaid under this Section 2.1(d)
         ---------------     ---                                --------------
      may be reborrowed hereunder.

           (e)  Optional Reductions. The Borrower shall, by notice from an
                -------------------
      Authorized Representative, have the right from time to time but not more
      frequently than once each calendar month, upon not less than three (3)
      Business Days' written notice to the Agent, effective upon receipt, to
      reduce the Total Revolving Credit Commitment. The Agent shall give each
      Lender, within one (1) Business Day of receipt of such notice,
      telefacsimile notice, or telephonic notice (confirmed in writing), of such
      reduction. Each such reduction shall be in the aggregate amount of
      $1,000,000 or such greater amount which is in an integral multiple of
      $1,000,000, or the entire remaining Total Revolving Credit Commitment, and
      shall permanently reduce the Total Revolving Credit Commitment. Each
      reduction of the Total Revolving Credit Commitment shall be accompanied by
      payment of the Revolving Loans to the extent that the principal amount

                                       43

<PAGE>

      of Revolving Credit Outstandings plus Letter of Credit Outstandings
      exceeds the Total Revolving Credit Commitment after giving effect to such
      reduction, together with any amounts required to be paid pursuant to
      Section 6.5 and accrued and unpaid interest on the amounts prepaid.

           (f)  Mandatory Prepayments of Revolving Loans and Reductions of Total
                ----------------------------------------------------------------
      Revolving Credit Commitment -- Certain Proceeds. In addition to any
      -----------------------------------------------
      optional or mandatory reductions of the Total Revolving Credit Commitment
      effected under Section 2.1(e), (g), (h), (i) or (j). The Borrower shall
                     ------------------------------------
      make a mandatory prepayment in an amount equal to (i) the Lenders' Senior
      Pro Rata Share of (A) the Net Proceeds of each Capital Market Transaction
      of the Borrower or any Subsidiary (other than securities issued to the
      Borrower or another Subsidiary) permitted, (B) the Net Proceeds of any
      Asset Dispositions described in clause (ii) of the definition of
      "Permitted Asset Dispositions", and (C) the Net Proceeds of any Asset
      Dispositions described in clause (vii), (viii), (ix) or (x) of the
      definition of "Permitted Asset Dispositions", and (ii) 100% of the
      proceeds of any other Sharing Payment (as defined in the Senior Debt
      Intercreditor Agreement) received by the Agent or the Lenders from time to
      time.

           Each such mandatory prepayment required under Section 2.1(f)(i)(C)
                                                         --------------------
      shall be applied to the Priority Senior Obligations (as defined in the
      Senior Debt Intercreditor Agreement) and to the extent applied to the
      Revolving Credit Outstandings shall be a permanent reduction in the Total
      Revolving Credit Commitment to be effective on the date of receipt of such
      Net Proceeds. Each such mandatory prepayment required under Section
                                                                  -------
      2.1(f)(i)(A) and (B) and Section 2.1(f)(ii) shall be applied as a
      ------------     ---     ------------------
      permanent reduction in the Total Revolving Credit Commitment to be
      effective on the date of receipt of such Net Proceeds.

           Each mandatory prepayment required under this Section 2.1(f) shall be
                                                         --------------
      made (1) within 10 Business Days after the end of each Fiscal Quarter if
      the aggregate Net Proceeds received during such Fiscal Quarter (exclusive
      of amounts paid pursuant to subsection (3) below) are less than $250,000,
      (2) within 10 Business Days after the date on which the aggregate Net
      Proceeds received in any Fiscal Quarter (exclusive of amounts paid
      pursuant to subsection (3) below) exceed $250,0000, and (3) within 3
      Business Days after the date of receipt of Net Proceeds of $250,000 or
      more from any individual transaction. Each mandatory prepayment required
      under this Section 2.1(f) shall include a certificate of an Authorized
                 --------------
      Representative setting forth in reasonable detail the calculations
      utilized in computing the amount of such prepayment."

           (g)  Scheduled Mandatory Prepayments of Revolving Credit Outstandings
                ----------------------------------------------------------------
      and Letter of Credit Outstandings, and Reductions of Total Revolving
      --------------------------------------------------------------------
      Credit Commitment. In addition to any optional or mandatory reductions of
      -----------------
      the Total Revolving Credit Commitment effected under Section 2.1(e), (f),
                                                           --------------  ---
      (h), (i) or (j), the principal amount of the outstanding Revolving Loans
      ---  ---    ---
      and Letter of Credit Outstandings shall be prepaid by the Borrower
      according to the following schedule, each such prepayment to be
      accompanied

                                       44

<PAGE>

      by the payment of all amounts required to be paid pursuant to
      Section 6.5 and accrued and unpaid interest on the amounts prepaid:
      -----------

Date                                    Amount of Principal Repayment
----                                    -----------------------------

Eighth Amendment Closing Date           The Lenders' Senior Pro Rata Share of
                                        $1,000,000
May 15, 2002                            The Lenders' Senior Pro Rata Share of
                                        $2,500,000
June 30, 2002                           The Lenders' Senior Pro Rata Share of
                                        $2,500,000
August 15, 2002                         The Lenders' Senior Pro Rata Share of
                                        $2,500,000
September 30, 2002                      The Lenders' Senior Pro Rata Share of
                                        $2,500,000

           Each prepayment of principal pursuant to this Section 2.1(g) shall
      permanently reduce the Total Revolving Credit Commitment.
           (h)  Mandatory Changes in Overadvance Basket. From the Eighth
                ---------------------------------------
      Amendment Closing Date through March 31, 2002, the Overadvance Basket
      shall be $52,500,000. Thereafter, the Overadvance Basket shall be (i)
      $50,500,000 from April 1, 2002 through June 30, 2002, inclusive, (ii)
      $45,000,000 from July 1, 2002 through September 30, 2002, inclusive, (iii)
      $43,000,000 from October 1, 2002 through the Stated Termination Date. Each
      reduction of the Overadvance Basket shall be accompanied by payments and
      prepayments of the Revolving Credit Facility to the extent that the amount
      of Senior Debt Outstandings exceeds the Borrowing Base after giving effect
      to such reduction, each such repayment or prepayment to be accompanied by
      the payment of all amounts required to be paid pursuant to Section 6.5 and
      accrued and unpaid interest on the amounts repaid or prepaid.

           (i)  Cash Flow Reductions. The Borrower shall use its best efforts to
                --------------------
      ensure that the principal amount of all Revolving Loans is prepaid on each
      Business Day in an amount equal to the difference of (i) the aggregate
      collected cash balance of all Controlled Accounts as of the close of the
      immediately preceding Business Day less (ii) $3,000,000. Prepayments under
      this subsection shall be applied first to Base Rate Loans and then, if no
      such Loans are outstanding, to Eurodollar Rate Loans, such prepayment to
      be subject to the provisions of Section 6.5. Subject to Sections 2.1(a)
                                      -----------             ---------------
      and 7.2, all amounts repaid pursuant to this Section 2.1(i) may be
          ---                                      --------------
      reborrowed hereunder.

           (j)  Cash Flow Reductions of Revolving Credit Outstandings and Letter
           ---  ----------------------------------------------------------------
      of Credit Outstandings -- Excess Cash Flow. Within 3 Business Days after
      ------------------------------------------
      the actual date of delivery to the Agent (or, if earlier, within 3
      Business Days after the required date of delivery to the Agent hereunder)
      of the financial statements of the Borrower and its Subsidiaries (and
      related Compliance Certificate) as at (i) the end of any Fiscal Year

                                       45

<PAGE>

      ending after the Eighth Amendment Closing Date (a "Year-End Date"), or
      (ii) the end of the second Fiscal Quarter of any Fiscal Year ending after
      the Eighth Amendment Closing Date (a "Second-Quarter End Date"), the
      Borrower shall make a mandatory prepayment in an amount equal to 75%
      multiplied by the Lenders' Senior Pro Rata Share of the Excess Cash Flow
      for the Two-Quarter Period ended on each such Year-End Date or
      Second-Quarter End Date (as the case may be). Each such prepayment shall
      be accompanied by (a) the payment of all amounts required to be paid
      pursuant to Section 6.5 and accrued and unpaid interest on the amounts
                  -----------
      repaid or prepaid, and (b) a certificate of an Authorized Representative,
      in the form attached hereto as Exhibit O, setting forth the computation of
                                     ---------
      such Excess Cash Flow. Each such prepayment pursuant to this Section
                                                                   -------
      2.1(j) shall permanently reduce the Total Revolving Credit Commitment.
      ------
           The prepayments pursuant to this Section 2.1(j) shall be in addition
                                            --------------
      to any optional or mandatory prepayments effected under Sections 2.1(e) -
                                                              -----------------
      (i).
      ---
      2.1  Use of Proceeds. The proceeds of Revolving Loans shall be used by the
           ---------------
Borrower to refinance certain existing Indebtedness of the Borrower and for
general working capital needs and other corporate purposes.

      2.2  Revolving Notes. Revolving Loans made by each Lender shall be
           ---------------
evidenced by the Revolving Note payable to the order of such Lender in the
respective amount of its Applicable Commitment Percentage of the Total Revolving
Credit Commitment, which Revolving Note shall be dated the Closing Date or a
later date pursuant to an Assignment and Acceptance and shall be duly completed,
executed and delivered by the Borrower.

                                       46

<PAGE>

                                   ARTICLE III

                                Letters of Credit
                                -----------------

      3.1  Letters of Credit. The Issuing Bank agrees, subject to the terms and
           -----------------
conditions of this Agreement, upon request of the Borrower to issue from time to
time for the account of the Borrower Letters of Credit upon delivery to the
Issuing Bank of an Application and Agreement for Letter of Credit relating
thereto in form and content acceptable to the Issuing Bank; provided, that (i)
the Issuing Bank shall not issue (or renew) any Letter of Credit if it has been
notified by the Agent or has actual knowledge that a Default or Event of Default
has occurred and is continuing, (ii) the Letter of Credit Outstandings shall not
exceed the Total Letter of Credit Commitment and (iii) no Letter of Credit shall
be issued (or renewed) if, after giving effect thereto, Letter of Credit
Outstandings plus Revolving Credit Outstandings shall exceed the Total Revolving
Credit Commitment or Senior Debt Outstandings shall exceed the Borrowing Base.
No Letter of Credit shall have an expiry date (including all rights of the
Borrower or any beneficiary named in such Letter of Credit to require renewal)
or payment date occurring later than the earlier to occur of one year after the
date of its issuance or the seventh Business Day prior to the Stated Termination
Date.

      3.2  Reimbursement and Participations.
           --------------------------------

           (a)  The Borrower hereby unconditionally agrees to pay to the Issuing
      Bank immediately on demand at the Principal Office all amounts required to
      pay all drafts drawn or purporting to be drawn under the Letters of Credit
      and all reasonable expenses incurred by the Issuing Bank in connection
      with the Letters of Credit, and in any event and without demand to place
      in possession of the Issuing Bank (which shall include Advances under the
      Revolving Credit Facility if permitted by Section 2.1) sufficient funds to
                                                -----------
      pay all debts and liabilities arising under any Letter of Credit. The
      Issuing Bank agrees to give the Borrower prompt notice of any request for
      a draw under a Letter of Credit. The Issuing Bank may charge any account
      the Borrower may have with it for any and all amounts the Issuing Bank
      pays under a Letter of Credit, plus charges and reasonable expenses as
      from time to time agreed to by the Issuing Bank and the Borrower; provided
      that to the extent permitted by Section 2.1(c)(iii) and Section 2.4,
                                      -------------------     -----------
      amounts shall be paid pursuant to Advances under the Revolving Credit
      Facility. The Borrower agrees to pay the Issuing Bank interest on any
      Reimbursement Obligations not paid when due hereunder at the Default Rate.

           (b)  In accordance with the provisions of Section 2.1(c), the Issuing
                                                     --------------
      Bank shall notify the Agent of any drawing under any Letter of Credit
      promptly following the receipt by the Issuing Bank of such drawing.

           (c)  Each Lender (other than the Issuing Bank) shall automatically
      acquire on the date of issuance thereof a Participation in the liability
      of the Issuing Bank in respect of each Letter of Credit in an amount equal
      to such Lender's Applicable Commitment Percentage of such liability, and
      to the extent that the Borrower is obligated to pay the Issuing Bank under
      Section 3.2(a), each Lender (other than the Issuing Bank) thereby
      --------------

                                       47

<PAGE>

      shall absolutely, unconditionally and irrevocably assume, and shall be
      unconditionally obligated to pay to the Issuing Bank, its Applicable
      Commitment Percentage of the liability of the Issuing Bank under such
      Letter of Credit in the manner and with the effect provided in Section
                                                                     -------
      2.1(c)(iii).
      -----------

           (d)  Simultaneously with the making of each payment by a Lender to
      the Issuing Bank pursuant to Section 2.1(c)(iii)(B), such Lender shall,
                                   ----------------------
      automatically and without any further action on the part of the Issuing
      Bank or such Lender, acquire a Participation in an amount equal to such
      payment (excluding the portion thereof constituting interest accrued prior
      to the date the Lender made its payment) in the related Reimbursement
      Obligation of the Borrower. Each Lender's obligation to make payment to
      the Agent for the account of the Issuing Bank pursuant to Section
                                                                -------
      2.1(c)(iii) and Section 3.2(c), and the right of the Issuing Bank to
      -----------     --------------
      receive the same, shall be absolute and unconditional, shall not be
      affected by any circumstance whatsoever and shall be made without any
      offset, abatement, withholding or reduction whatsoever. In the event the
      Lenders have purchased Participations in any Reimbursement Obligation as
      set forth above, then at any time payment (in fully collected, immediately
      available funds) of such Reimbursement Obligation, in whole or in part, is
      received by the Issuing Bank from the Borrower, the Issuing Bank shall
      promptly pay to each Lender an amount equal to its Applicable Commitment
      Percentage of such payment from the Borrower.

           (e)  Promptly following the end of each calendar quarter, the Issuing
      Bank shall deliver to the Agent a notice describing the aggregate undrawn
      amount of all Letters of Credit at the end of such quarter. Upon the
      request of any Lender from time to time, the Issuing Bank shall deliver to
      the Agent, and the Agent shall deliver to such Lender, any other
      information reasonably requested by such Lender with respect to each
      Letter of Credit outstanding.

           (f)  The issuance by the Issuing Bank of each Letter of Credit shall,
      in addition to the conditions precedent set forth in Article VII, be
                                                           -----------
      subject to the conditions that such Letter of Credit be in such form and
      contain such terms as shall be reasonably satisfactory to the Issuing Bank
      consistent with the then current practices and procedures of the Issuing
      Bank with respect to similar letters of credit, and the Borrower shall
      have executed and delivered such other instruments and agreements relating
      to such Letters of Credit as the Issuing Bank shall have reasonably
      requested consistent with such practices and procedures. All Letters of
      Credit shall be issued pursuant to and subject to the Uniform Customs and
      Practice for Documentary Credits, 1993 revision, International Chamber of
      Commerce Publication No. 500 or, if the Issuing Bank shall elect by
      express reference in an affected Letter of Credit, the International
      Chamber of Commerce International Standby Practices commonly referred to
      as "ISP98," or any subsequent amendment or revision of either thereof.

           (g)  The Borrower agrees that the Issuing Bank may, in its sole
      discretion, accept or pay, as complying with the terms of any Letter of
      Credit, any drafts or other documents otherwise in order which may be
      signed or issued by an administrator,

                                       48

<PAGE>

      executor, trustee in bankruptcy, debtor in possession, assignee for the
      benefit of creditors, liquidator, receiver, attorney in fact or other
      legal representative of a party who is authorized under such Letter of
      Credit to draw or issue any drafts or other documents.

           (h)  Without limiting the generality of the provisions of Section
                                                                     -------
      13.9, the Borrower hereby agrees to indemnify and hold harmless the
      ----
      Issuing Bank, each other Lender and the Agent from and against any and all
      claims and damages, losses, liabilities, reasonable costs and expenses
      which the Issuing Bank, such other Lender or the Agent may incur (or which
      may be claimed against the Issuing Bank, such other Lender or the Agent)
      by any Person by reason of or in connection with the issuance or transfer
      of or payment or failure to pay under any Letter of Credit; provided that
      the Borrower shall not be required to indemnify the Issuing Bank, any
      other Lender or the Agent for any claims, damages, losses, liabilities,
      costs or expenses to the extent, but only to the extent, (i) caused by the
      willful misconduct or gross negligence of the party to be indemnified or
      (ii) caused by the failure of the Issuing Bank to pay under any Letter of
      Credit after the presentation to it of a request for payment strictly
      complying with the terms and conditions of such Letter of Credit, unless
      such payment is prohibited by any law, regulation, court order or decree.
      The indemnification and hold harmless provisions of this Section 3.2(h)
                                                               --------------
      shall survive repayment of the Obligations, occurrence of the Revolving
      Credit Termination Date, the Facility Termination Date and expiration or
      termination of this Agreement.

           (i)  Without limiting Borrower's rights as set forth in Section
                                                                   -------
      3.2(h), the obligation of the Borrower to immediately reimburse the
      ------
      Issuing Bank for drawings made under Letters of Credit and the Issuing
      Bank's right to receive such payment shall be absolute, unconditional and
      irrevocable, and such obligations of the Borrower shall be performed
      strictly in accordance with the terms of this Agreement and such Letters
      of Credit and the related Application and Agreement for any Letter of
      Credit, under all circumstances whatsoever, including the following
      circumstances:

                (i)    any lack of validity or enforceability of the Letter of
           Credit, the obligation supported by the Letter of Credit or any other
           agreement or instrument relating thereto (collectively, the "Related
           LC Documents");

                (ii)   any amendment or waiver of or any consent to or departure
           from all or any of the Related LC Documents;

                (iii)  the existence of any claim, setoff, defense (other than
           the defense of payment in accordance with the terms of this
           Agreement) or other rights which the Borrower may have at any time
           against any beneficiary or any transferee of a Letter of Credit (or
           any persons or entities for whom any such beneficiary or any such
           transferee may be acting), the Agent, the Lenders or any other
           Person, whether in connection with the Loan Documents, the Related LC
           Documents or any unrelated transaction;

                                       49

<PAGE>

                (iv)   any breach of contract or other dispute between the
           Borrower and any beneficiary or any transferee of a Letter of Credit
           (or any persons or entities for whom such beneficiary or any such
           transferee may be acting), the Agent, the Lenders or any other
           Person;

                (v)    any draft, statement or any other document presented
           under the Letter of Credit proving to be forged, fraudulent, invalid
           or insufficient in any respect or any statement therein being untrue
           or inaccurate in any respect whatsoever;

                (vi)   any delay, extension of time, renewal, compromise or
           other indulgence or modification granted or agreed to by the Agent,
           with or without notice to or approval by the Borrower in respect of
           any of Borrower's Obligations under this Agreement; or

                (vii)  any other circumstance or happening whatsoever, whether
           or not similar to any of the foregoing.

                                       50

<PAGE>

                                  ARTICLE IV

                Eurodollar Funding, Fees, and Payment Conventions
                -------------------------------------------------

     4.1   Interest Rate Options. Eurodollar Rate Loans and Base Rate Loans may
           ---------------------
be outstanding at the same time and, so long as no Default or Event of Default
shall have occurred and be continuing, the Borrower shall have the option to
elect the Type of Loan and the duration of the initial and any subsequent
Interest Periods and to Convert Revolving Loans in accordance with Sections
                                                                   --------
2.1(c)(i) and 4.2, as applicable; provided, however, (i) there shall not be
-----------------
outstanding at any one time Eurodollar Rate Loans having more than ten (10)
different Interest Periods, (ii) each Eurodollar Rate Loan (including each
Conversion into and each Continuation as a Eurodollar Rate Loan) shall be in an
amount of $1,000,000 or, if greater than $1,000,000, an integral multiple of
$1,000,000, and (iii) no Eurodollar Rate Loan shall have an Interest Period that
extends beyond the Stated Termination Date. If the Agent does not receive a
Borrowing Notice or an Interest Rate Selection Notice giving notice of election
of the duration of an Interest Period or of Conversion of any Loan to or
Continuation of a Loan as a Eurodollar Rate Loan by the time prescribed by
Sections 2.1(c)(i) and 4.2, as applicable, the Borrower shall be deemed to have
--------------------------
elected to obtain or Convert such Loan to (or Continue such Loan as) a Base Rate
Loan until the Borrower notifies the Agent in accordance with Section 4.2. The
                                                              -----------
Borrower shall not be entitled to elect to Continue any Loan as or Convert any
Loan into a Eurodollar Rate Loan if a Default or Event of Default shall have
occurred and be continuing.

      4.2  Conversions and Elections of Subsequent Interest Periods. Subject to
           --------------------------------------------------------
the limitations set forth in the definition of "Interest Period" and in Section
                                                                        -------
4.1, Section 4.11 and Article VI, the Borrower may:
---  ------------     ----------

           (a)  upon delivery of telephonic notice to the Agent (which shall be
      irrevocable) on or before 11:00 A.M. on any Business Day, Convert any
      Eurodollar Rate Loan to a Base Rate Loan on the last day of the Interest
      Period for such Eurodollar Rate Loan; and

           (b)  provided that no Default or Event of Default shall have occurred
      and be continuing, upon delivery of telephonic notice to the Agent (which
      shall be irrevocable on or before 11:00 A.M. three (3) Business Days'
      prior to the date of such Conversion or Continuation:

                (i)    elect a subsequent Interest Period for any Eurodollar
           Rate Loan to begin on the last day of the then current Interest
           Period for such Eurodollar Rate Loan; or

                (ii)   Convert any Base Rate Loan to a Eurodollar Rate Loan on
           any Business Day.

Each such notice shall be effective upon receipt by the Agent, shall specify the
amount of the Eurodollar Rate Loan affected and, if a Continuation as or
Conversion into a Eurodollar Rate Loan, the Interest Period to be used in the
computation of interest. The Authorized

                                       51

<PAGE>

Representative shall provide the Agent written confirmation of each such
telephonic notice in the form of a Borrowing Notice or Interest Rate Selection
Notice (as applicable) with appropriate insertions but failure to provide such
confirmation shall not affect the validity of such telephonic notice. Notice of
receipt of such Borrowing Notice or Interest Rate Selection Notice, as the case
may be, shall be provided by the Agent to each Lender by telefacsimile
transmission with reasonable promptness, but (provided the Agent shall have
received such notice by 11:00 A.M.) not later than 3:00 P.M. on the same day as
the Agent's receipt of such notice. All such Continuations or Conversions of
Loans shall be effected pro rata based on the Applicable Commitment Percentages
of the Lenders.

      4.3  Payment of Interest. The Borrower shall pay interest on the
           -------------------
outstanding and unpaid principal amount of each Revolving Loan, commencing on
the first date of such Revolving Loan until such Revolving Loan shall be repaid
at the applicable Base Rate or Eurodollar Rate as designated by the Borrower in
the related Borrowing Notice or Interest Rate Selection Notice or as otherwise
provided hereunder. Interest on each Revolving Loan shall be paid on the earlier
of (a) in the case of any Base Rate Loan, quarterly in arrears on the last
Business Day of each March, June, September and December, commencing on March
31, 2000, until the Eighth Amendment Closing Date, and then monthly in arrears
on the last Business Day of each month commencing November 30, 2001, until the
Revolving Credit Termination Date, at which date as applicable the entire
principal amount of and all accrued interest on the Revolving Loans shall be
paid in full, (b) in the case of any Eurodollar Rate Loan, on last day of the
applicable Interest Period for such Eurodollar Rate Loan and if such Interest
Period extends for more than three (3) months, at intervals of three (3) months
after the first day of such Interest Period, and (c) upon payment in full of the
Revolving Loan; provided, however, that if any Event of Default shall occur and
                --------  -------
be continuing, all amounts outstanding hereunder shall bear interest thereafter
until paid in full at the Default Rate.

      4.4  Prepayments of Eurodollar Rate Loans. Whenever any payment of
           ------------------------------------
principal shall be made in respect of any Loan hereunder, whether at maturity,
on acceleration, by prepayment or as otherwise required or permitted hereunder,
with the effect that any Eurodollar Rate Loan shall be prepaid in whole or in
part prior to the last day of the Interest Period applicable to such Eurodollar
Rate Loan, such payment of principal shall be accompanied by the additional
payment, if any, required by Section 6.5.
                             -----------

      4.5  Manner of Payment.
           -----------------

           (a)  Each payment of principal (including any prepayment) and payment
      of interest and fees, and any other amount required to be paid by or on
      behalf of the Borrower to the Lenders, the Issuing Bank, the Agent, or
      Bank of America with respect to any Revolving Loan, Letter of Credit or
      Reimbursement Obligation, shall be made to the Agent at the Principal
      Office in Dollars in immediately available funds without condition or
      deduction for any setoff, recoupment, deduction or counterclaim on or
      before 12:30 P.M. on the date such payment is due. The Agent may, but
      shall not be obligated to, debit the amount of such payment from any one
      or more ordinary deposit accounts of the Borrower with the Agent.

                                       52

<PAGE>

           (b)   Any payment made by or on behalf of the Borrower that is not
      made both in Dollars in immediately available funds and prior to 12:30
      P.M. on the date such payment is to be made shall constitute a
      non-conforming payment. Any such non-conforming payment shall not be
      deemed to be received until the later of (i) the time such funds become
      available funds and (ii) the next Business Day. Any non-conforming payment
      may constitute or become a Default or Event of Default as otherwise
      provided herein. Interest shall continue to accrue at the Default Rate on
      any principal or fees as to which no payment or a non-conforming payment
      is made from the date such amount was due and payable until the later of
      (i) the date such funds become available funds or (ii) the next Business
      Day.

           (c)  In the event that any payment hereunder or under any of the
      Notes becomes due and payable on a day other than a Business Day, then
      such due date shall be extended to the next succeeding Business Day unless
      provided otherwise under the definition of "Interest Period"; provided,
      however, that interest shall continue to accrue during the period of any
      such extension; and provided further, however, that in no event shall any
      such due date be extended beyond the Revolving Credit Termination Date.

      4.6  Fees.
           ----

           (a)  Commitment Fees. For the period beginning on the Closing Date
                ---------------
      and ending on the Revolving Credit Termination Date, the Borrower agrees
      to pay to the Agent, for the pro rata benefit of the Lenders based on
      their Applicable Commitment Percentages, a commitment fee equal to the
      Applicable Commitment Fee multiplied by the average daily amount by which
      the Total Revolving Credit Commitment exceeds the sum of (i) Revolving
      Credit Outstandings plus (ii) Letter of Credit Outstandings. Such fees
      shall be due in arrears on the last Business Day of each March, June,
      September and December, commencing March 31, 2000 until the Eighth
      Amendment Closing Date, and then monthly in arrears on the last Business
      Day of each month, commencing November 30, 2001, to and on the Revolving
      Credit Termination Date. Notwithstanding the foregoing, so long as any
      Lender fails to make available any portion of its Revolving Credit
      Commitment when requested, such Lender shall not be entitled to receive
      payment of its pro rata share of such fee until such Lender shall make
      available such portion.

           (b)  Letter of Credit Facility Fees. The Borrower shall pay to the
                ------------------------------
      Agent, for the pro rata benefit of the Lenders based on their Applicable
      Commitment Percentages, a fee on the aggregate amount available to be
      drawn on each outstanding Letter of Credit at a rate equal to the
      Applicable Margin for Eurodollar Rate Loans. Such fees shall be due with
      respect to each Letter of Credit quarterly in arrears on the last day of
      each March, June, September and December, the first such payment to be
      made on the first such date occurring after the date of issuance of a
      Letter of Credit.

           (c)  Letter of Credit Fronting and Administrative Fees. The Borrower
                -------------------------------------------------
      shall pay to the Issuing Bank a fronting fee of one-eighth percent per
      annum (.125%) on the stated amount of each Letter of Credit calculated for
      the stated term, such fee to be payable in full at or prior to the time of
      issuance of such Letter of Credit. Any renewal or

                                       53

<PAGE>

      continuation of a Letter of Credit beyond its current stated term shall be
      deemed to be a new issuance of such Letter of Credit subject to payment of
      a fronting fee as herein calculated. The Borrower shall also pay to the
      Issuing Bank such administrative fee and other fees, if any, in connection
      with the Letters of Credit in such amounts and at such times as the
      Issuing Bank and the Borrower shall agree from time to time.

           (d)  Agent Fees. The Borrower agrees to pay to the Agent, for the
                ----------
      Agent's individual account, an annual Agent's fee, such fee to be payable
      in such amounts and at such dates as from time to time agreed to by the
      Borrower and Agent in writing.

      4.7  Pro Rata Payments. Except as otherwise specified herein, (a) each
           -----------------
payment on account of the principal of and interest on Loans, the fees described
in Section 4.6(a), (b) and (c), and Reimbursement Obligations as to which the
   ---------------------------
Lenders have funded their respective Participations which remain outstanding,
shall be made to the Agent for the account of the Lenders pro rata based on
their Applicable Commitment Percentages, and (b) the Agent will promptly
distribute to the Lenders in immediately available funds payments received in
fully collected, immediately available funds from the Borrower.

      4.8  Computation of Rates and Fees. Except as may be otherwise expressly
           -----------------------------
provided, all interest rates (other than the Prime Rate which shall be computed
on the basis of the actual number of days elapsed in a year of 365/366 days) and
fees shall be computed on the basis of a year of 360 days and calculated for
actual days elapsed.

      4.9  Deficiency Advances; Failure to Purchase Participations. No Lender
           -------------------------------------------------------
shall be responsible for any default of any other Lender in respect to such
other Lender's obligation to make any Loan or Advance hereunder or to fund its
purchase of any Participation hereunder nor shall the Revolving Credit
Commitment or Letter of Credit Commitment of any Lender hereunder be increased
as a result of such default of any other Lender. Without limiting the generality
of the foregoing or the provisions of Section 4.10, in the event any Lender
                                      ------------
shall fail to advance funds to the Borrower as herein provided, the Agent may in
its discretion, but shall not be obligated to, advance under the applicable Note
in its favor as a Lender all or any portion of such amount or amounts (each, a
"deficiency advance") and shall thereafter be entitled to payments of principal
of and interest on such deficiency advance in the same manner and at the same
interest rate or rates to which such other Lender would have been entitled had
it made such Advance under its Note; provided that, (i) such defaulting Lender
shall not be entitled to receive payments of principal, interest or fees with
respect to such deficiency advance until such deficiency advance (together with
interest thereon as provided in clause (ii)) shall be paid by such Lender and
(ii) upon payment to the Agent from such other Lender of the entire outstanding
amount of each such deficiency advance, together with accrued and unpaid
interest thereon at the Federal Funds Rate, from the most recent date or dates
interest was paid to the Agent by the Borrower on each Loan comprising the
deficiency advance, then such payment shall be credited against the applicable
Note of the Agent in full payment of such deficiency advance and the Borrower
shall be deemed to have borrowed the amount of such deficiency advance from such
other Lender as of the most recent date or dates, as the case may be, upon which
any payments of interest were made by the Borrower thereon. In the event any
Lender shall fail to fund its

                                       54

<PAGE>

purchase of a Participation after notice from the Issuing Bank, such Lender
shall pay to the Issuing Bank, such amount on demand, together with interest at
the Federal Funds Rate on the amount so due from the date of such notice to the
date such purchase price is received by the Issuing Bank.

      4.10 Intraday Funding. Without limiting the provisions of Section 4.9,
           ----------------                                     -----------
unless the Borrower or any Lender has notified the Agent not later than 12:00
Noon of the Business Day before the date any payment (including in the case of
Lenders any Advance) to be made by it is due, that it does not intend to remit
such payment, the Agent may, in its discretion, assume that the Borrower or each
Lender, as the case may be, has timely remitted such payment in the manner
required hereunder and may, in its discretion and in reliance thereon, make
available such payment (or portion thereof) to the Person entitled thereto as
otherwise provided herein. If such payment was not in fact remitted to the Agent
in the manner required hereunder, then:

                (i)    if the Borrower failed to make such payment, each Lender
           shall forthwith on demand repay to the Agent the amount of such
           assumed payment made available to such Lender, together with interest
           thereon in respect of each day from and including the date such
           amount was made available by the Agent to such Lender to the date
           such amount is repaid to the Agent at the Federal Funds Rate; and

                (ii)   if any Lender failed to make such payment, the Agent
           shall be entitled to recover such corresponding amount forthwith upon
           the Agent's demand therefor, the Agent promptly shall notify the
           Borrower, and the Borrower shall promptly pay such corresponding
           amount to the Agent in immediately available funds upon receipt of
           such demand. The Agent also shall be entitled to recover interest on
           such corresponding amount in respect of each day from the date such
           corresponding amount was made available by the Agent to the Borrower
           to the date such corresponding amount is recovered by the Agent, (A)
           from such Lender at a rate per annum equal to the daily Federal Funds
           Rate or (B) from the Borrower, at a rate per annum equal to the
           interest rate applicable to the Loan which includes such
           corresponding amount. Until the Agent shall recover such
           corresponding amount together with interest thereon, such
           corresponding amount shall constitute a deficiency advance within the
           meaning of Section 4.9. Nothing herein shall be deemed to relieve any
           Lender from its obligation to fulfill its commitments hereunder or to
           prejudice any rights which the Agent or the Borrower may have against
           any Lender as a result of any default by such Lender hereunder.

      4.11 Cessation of Eurodollar Rate Loans. Notwithstanding any provision in
           ----------------------------------
this Agreement to the contrary, on and after the Eighth Amendment Closing Date,
the Borrower shall only be entitled to request Advances which bear interest at
the Base Rate, and the Borrower shall no longer be entitled to Convert Loans
pursuant to Section 4.2 (or otherwise) to, or Continue Loans as, Eurodollar Rate
            -----------
Loans. On the Eighth Amendment Closing Date, all Eurodollar Rate Loans shall be
automatically Converted to Base Rate Loans; and (except in the case of that
certain Loan whose Interest Period ends on November 15, 2001) the Borrower shall
pay any amounts required by Section 6.5.
                            -----------

                                       55

<PAGE>

                                   ARTICLE V

                                    Security
                                    --------

      5.1  Security.
           --------

           (a)  As security for the full and timely payment and performance of
      all Obligations, the Borrower shall, and shall cause all other Credit
      Parties to, on or before the Closing Date, do or cause to be done all
      things necessary in the opinion of the Agent and its counsel to (i) grant
      to the Priority Collateral Agent for the benefit of the Priority Secured
      Parties to secure the Priority Senior Obligations a Priority Lien in all
      now owned or hereafter acquired Priority Collateral subject to no prior
      Lien or other encumbrance or restriction on transfer (other than
      restrictions on transfer imposed by applicable securities laws), and (ii)
      grant to the General Collateral Agent for the benefit of the General
      Secured Parties to secure the General Senior Obligations a General Lien in
      all now owned or hereafter acquired General Collateral subject to no prior
      Lien or other encumbrance or restriction on transfer (other than any
      Priority Lien and restrictions on transfer imposed by applicable
      securities laws).

           (b)  Without limiting the foregoing, the Borrower and each Domestic
      Subsidiary having rights in any Subsidiary Securities shall on the Closing
      Date deliver to the General Collateral Agent, in form and substance
      reasonably acceptable to the Agent, (A) a Pledge Agreement which shall
      pledge to the General Collateral Agent for the benefit of the General
      Secured Parties (i) 65% of the Voting Securities of each Material Direct
      Foreign Subsidiary (to the extent 65% of such Voting Securities is owned
      by the Borrower or such Domestic Subsidiary and, if less than such 65% is
      so owned, then 100% of such lesser amount) and 100% of the non-voting
      Subsidiary Securities of such Direct Foreign Subsidiary, (ii) 100% of the
      Subsidiary Securities of all Domestic Subsidiaries and (iii) all of the
      membership interests of the Borrower in Cone Receivables II LLC, (B) if
      such Subsidiary Securities are in the form of certificated securities,
      such certificated securities, together with undated stock powers or other
      appropriate transfer documents endorsed in blank pertaining thereto, (C)
      if such Subsidiary Securities do not constitute securities and the issuer
      thereof has not elected to have such interests treated as securities under
      Article 8 of the Uniform Commercial Code, a control agreement (containing
      the provisions described in Section 9.20(f)(ii)) from the Registrar of
                                  -------------------
      such Subsidiary Securities and (D) Uniform Commercial Code financing
      statements reflecting the General Lien in favor of the General Collateral
      Agent on such Subsidiary Securities, each in form and substance acceptable
      to the Agent, and shall take such further action and deliver or cause to
      be delivered such further documents as required by the Security Documents
      or otherwise as the Agent may request to effect the transactions
      contemplated by this Article V. The Borrower shall, and shall cause each
                           ---------
      Domestic Subsidiary to, pledge to the General Collateral Agent for the
      benefit of the General Secured Parties to secure the General Senior
      Obligations (and as appropriate to reaffirm its prior pledge of) all of
      the Pledged Interests of any Domestic Subsidiary or Direct Foreign
      Subsidiary acquired or created after the Closing Date to the respective
      extent set forth above and deliver to the

                                       56

<PAGE>

      General Collateral Agent all of the documents and instruments in
      connection therewith as are required pursuant to the terms of Section 9.20
                                                                    ------------
      and of the Security Documents.

           (c)  As further security for the full and timely payment and
      performance of all Obligations, Atlantic Financial Group, Ltd. (borrower
      under the Senior Lease Documents) on or before the Closing Date the
      Borrower will execute and deliver the Senior Lease Facility Mortgage and
      do or cause to be done all things necessary in the opinion of the Agent
      and its counsel to grant to the Agent for the benefit of the Agent and the
      Lenders a Lien on the Senior Lease Facility subject to no prior Lien or
      other encumbrance or restriction on transfer other than Permitted Liens
      and Liens in favor of the Senior Lease Creditor. The Agent and the Senior
      Lease Creditor shall have entered into the Leased Facility Intercreditor
      Agreement on or prior to the Closing Date.

      5.2  Further Assurances. At the request of the Agent, the Borrower will or
           --------
will cause all other Credit Parties, as the case may be, to execute, by its duly
authorized officers, alone or with the Agent, General Collateral Agent or the
Priority Collateral Agent, as applicable, any certificate, instrument, financing
statement, control agreement, statement or document, or to procure any such
certificate, instrument, statement or document, or to take such other action
(and pay all connected costs) which the Agent, the Priority Collateral Agent,
the General Collateral Agent or any of them reasonably deems necessary from time
to time to create, continue or preserve the Priority Liens in the Priority
Collateral, the General Liens in the General Collateral and the Lien on the
Senior Leased Facility (and the perfection and priority thereof) and
specifically including all Collateral acquired by the Borrower or other Credit
Party after the Closing Date. Each of the Agent, General Collateral Agent and
the Priority Collateral Agent is hereby irrevocably authorized to execute and
file or cause to be filed, with or if permitted by applicable law without the
signature of the Borrower or any Credit Party appearing thereon, all Uniform
Commercial Code financing statements reflecting the Borrower or any other Credit
Party as "debtor" and the Agent (on behalf of the Lenders), General Collateral
Agent (on behalf of the General Secured Parties) or the Priority Collateral
Agent (on behalf of the Priority Secured Parties), as applicable, as "secured
party", and continuations thereof and amendments thereto, as the Agent or either
of the Collateral Agents reasonably deems necessary or advisable to give effect
to the transactions contemplated hereby and by the other Loan Documents.

      5.3  Information Regarding Collateral. The Borrower represents, warrants
           --------------------------------
and covenants that (i) the chief executive office of the Borrower and each other
Person providing Collateral pursuant to a Security Document (each, a "Grantor")
at the Closing Date is located at the address or addresses specified on Schedule
                                                                        --------
5.3, and (ii) Schedule 5.3 contains a true and complete list of (a) the exact
---           ------------
legal name, jurisdiction of formation, and address of each Grantor and of each
other Person that has effected any merger or consolidation with a Grantor or
contributed or transferred to a Grantor any property constituting Collateral at
any time since January 1, 1995 (excluding Persons making sales in the ordinary
course of their businesses to a Grantor of property constituting inventory in
the hands of such seller), (b) the exact legal name, jurisdiction of formation,
and each location of the chief executive office of each Grantor at any time
since January 1, 1995, (c) each location in the United States in which goods
constituting material Collateral are or have been located since January 1, 1995
(together with the name of each owner

                                       57

<PAGE>

of the property located at such address if not the applicable Grantor, and a
summary description of the relationship between the applicable Grantor and such
Person), and (d) each trade style used by any Grantor or any division thereof
since January 1, 1995 and the purposes for which it was used. The Borrower shall
not change, and shall not permit any other Grantor to change, its name,
jurisdiction of formation (whether by reincorporation, merger or otherwise), the
location of its chief executive office or any location specified in clause (c)
of the immediately preceding sentence, or use or permit any other Grantor or any
division thereof to use, any additional trade style, except upon giving not less
than thirty (30) days' prior written notice to the Agent and taking or causing
to be taken all such action at Borrower's or such other Grantor's expense as may
be reasonably requested by the Agent, the General Collateral Agent or the
Priority Collateral Agent to perfect or maintain the perfection of the General
Lien in the General Collateral and the Priority Lien in the Priority Collateral.

      5.4  Mortgages.
           ---------

           (a)  Without limiting the generality of Section 5.1, the Borrower, as
                                                   -----------
      security for all Priority Senior Obligations, and each Domestic
      Subsidiary, as security for the Guarantors' Obligations and for all
      Priority Senior Obligations, as applicable, shall deliver to the Priority
      Collateral Agent (i) on the Closing Date, with respect to each parcel of
      real property owned or leased by the Borrower or a Subsidiary listed on
      Schedule 5.4, a Priority Mortgage, and (ii) thereafter, with respect to
      ------------
      each parcel of real property owned, acquired or leased by the Borrower or
      a Domestic Subsidiary with a fair market value greater than $300,000,
      unless otherwise determined by the Required Lenders, a Priority Mortgage
      with respect to such parcel of real property and, (A) to the extent such
      real property is or becomes Material Real Property, the related Material
      Real Property Support Documents and (B) to the extent required by any law,
      regulation or directive of any applicable Governmental Authority, such
      required Material Real Property Support Documents.

           (b)  Without limiting the generality of Section 5.1, the Borrower, as
                                                   -----------
      security for all General Senior Obligations, and each Domestic Subsidiary,
      as security for all General Senior Obligations and, if a Guarantor, for
      the Guarantors' Obligations, as applicable, shall deliver to the General
      Collateral Agent (i) on the Closing Date, with respect to each parcel of
      real property owned or leased by the Borrower or a Subsidiary listed on
      Schedule 5.4, a General Mortgage, and (ii) thereafter, with respect to
      ------------
      each parcel of real property owned, acquired or leased by the Borrower or
      a Domestic Subsidiary with a fair market value greater than $300,000,
      unless otherwise determined by the Required Lenders, a General Mortgage
      with respect to such parcel of real property and, (A) to the extent such
      real property is or becomes Material Real Property, the related Material
      Real Property Support Documents and (B) to the extent required by any law,
      regulation or directive of any applicable Governmental Authority, such
      required Material Real Property Support Documents.

                                       58

<PAGE>

      5.5  Intercreditor Matters.
           ---------------------

           (a)  Each Lender from time to time party hereto, the Agent and the
      Borrower hereby consent to and agree with the terms of the Senior Debt
      Intercreditor Agreement and such Lenders hereby (i) acknowledge and agree
      that each General Lien and/or Priority Lien in all Collateral now owned or
      hereafter acquired and all remedies available with respect to such
      Collateral are subject to the terms of the Senior Debt Intercreditor
      Agreement, (ii) directs the Agent on their behalf to enter into each of
      the Senior Debt Intercreditor Agreement and the Collateral Agency
      Agreements and consents to the service by the Agent in the capacity of
      Priority Collateral Agent and Designated Collateral Subagent (as defined
      in the General Security Agreement) and (iii) acknowledges and agrees that:

                (A)  With respect to the Debenture Holders, the determination of
           the Required Enforcement General Secured Parties shall be made based
           on the entire amount of Senior Debenture Obligations then outstanding
           voting on a consolidated basis as a single vote as directed to the
           Bond Trustee by such Debenture Holders as may be required for any
           enforcement action under the terms of the Indenture, and

                (B)  With respect to the Lenders, the determination of the
           Required Enforcement General Secured Parties, the Required General
           Secured Parties and the Required Priority Secured parties shall be
           made based on the entire amount of Senior Revolving Credit
           Obligations then outstanding voting on a consolidated basis as a
           single vote as directed by the Required Lenders.

           (b)  Each Lender from time to time party hereto, the Agent and the
      Borrower hereby further consent to and agree with the terms of the Leased
      Facility Intercreditor Agreement and the Securitization Intercreditor
      Agreement and directs the Agent on their behalf to enter into such
      agreements.

      5.6  Account Control Agreements. From and after the Eighth Amendment
           --------------------------
Closing Date, the Borrower shall and shall cause each Credit Party to maintain
in full force and effect Account Control Agreements in respect of all Deposit
Accounts (as defined in the Security Agreements) of each Credit Party (other
than the Securitization Deposit Accounts and the Imprest/Payroll Accounts). The
Borrower shall not, nor shall it cause, suffer or permit any other Credit Party
to, open any Deposit Account (other than Securitization Deposit Accounts and
Excluded Deposit Accounts, in each case as to which the Borrower shall give
immediate notice thereof to the Agent and designate the Deposit Account as such)
unless the Borrower shall have given not less than twenty (20) Business Days
prior written notice thereof to the Agent and caused there to be executed and
delivered to the Agent an Account Control Agreement with respect to such Deposit
Account. The Borrower shall give prompt written notice to the Agent of any
notice or election of any depositary institution purporting to terminate,
suspend, cancel, revoke or declare invalid or unenforceable any Account Control
Agreement.

                                       59

<PAGE>

                                       60

<PAGE>

                                   ARTICLE VI

                             Change in Circumstances
                             -----------------------

      6.1  Increased Cost and Reduced Return.
           ---------------------------------

           (a)  If, after the date hereof, the adoption of any applicable law,
      rule, or regulation, or any change in any applicable law, rule, or
      regulation, or any change in the interpretation or administration thereof
      by any governmental authority, central bank, or comparable agency charged
      with the interpretation or administration thereof, or compliance by any
      Lender (or its Applicable Lending Office) with any request or directive
      (whether or not having the force of law) of any such governmental
      authority, central bank, or comparable agency:

                (i)    shall subject such Lender (or its Applicable Lending
           Office) to any tax, duty, or other charge with respect to any
           Eurodollar Rate Loans, its Note, or its obligation to make Eurodollar
           Rate Loans, or change the basis of taxation of any amounts payable to
           such Lender (or its Applicable Lending Office) under this Agreement
           or its Note in respect of any Eurodollar Rate Loans (other than taxes
           imposed on the overall net income of such Lender by the jurisdiction
           in which such Lender has its principal office or such Applicable
           Lending Office);

                (ii)   shall impose, modify, or deem applicable any reserve,
           special deposit, assessment, or similar requirement (other than the
           Reserve Requirement utilized in the determination of the Eurodollar
           Rate) relating to any extensions of credit or other assets of, or any
           deposits with or other liabilities or commitments of, such Lender (or
           its Applicable Lending Office), including the Revolving Credit
           Commitment of such Lender hereunder; or

                (iii)  shall impose on such Lender (or its Applicable Lending
           Office) or on the London interbank market any other condition
           affecting this Agreement or its Note or any of such extensions of
           credit or liabilities or commitments;

      and the result of any of the foregoing is to increase the cost to such
      Lender (or its Applicable Lending Office) of making, Converting into,
      Continuing, or maintaining any Loans or to reduce any sum received or
      receivable by such Lender (or its Applicable Lending Office) under this
      Agreement or its Note with respect to any Eurodollar Rate Loans, then the
      Borrower shall pay to such Lender on demand such amount or amounts as will
      compensate such Lender for such increased cost or reduction. If any Lender
      requests compensation by the Borrower under this Section 6.1(a), the
                                                       --------------
      Borrower may, by notice to such Lender (with a copy to the Agent), suspend
      the obligation of such Lender to make or Continue Loans of the Type with
      respect to which such compensation is requested, or to Convert Loans of
      any other Type into Loans of such Type, until the event or condition
      giving rise to such request ceases to be in effect (in which case the
      provisions of Section 6.4 shall be applicable); provided that such
                    -----------                       --------
      suspension shall not affect the right of such Lender to receive the
      compensation so requested.

                                       61

<PAGE>

           (b)  If, after the date hereof, any Lender shall have determined that
      the adoption of any applicable law, rule, or regulation regarding capital
      adequacy or any change therein or in the interpretation or administration
      thereof by any governmental authority, central bank, or comparable agency
      charged with the interpretation or administration thereof, or any request
      or directive regarding capital adequacy (whether or not having the force
      of law) of any such governmental authority, central bank, or comparable
      agency, has or would have the effect of reducing the rate of return on the
      capital of such Lender or any corporation controlling such Lender as a
      consequence of such Lender's obligations hereunder to a level below that
      which such Lender or such corporation could have achieved but for such
      adoption, change, request, or directive (taking into consideration its
      policies with respect to capital adequacy), then from time to time upon
      demand the Borrower shall pay to such Lender such additional amount or
      amounts as will compensate such Lender for such reduction.

           (c)  Each Lender shall promptly notify the Borrower and the Agent of
      any event of which it has knowledge, occurring after the date hereof,
      which will entitle such Lender to compensation pursuant to this Section
                                                                      -------
      6.1 and will designate a different Applicable Lending Office if such
      ---
      designation will avoid the need for, or reduce the amount of, such
      compensation and will not, in the judgment of such Lender, be otherwise
      disadvantageous to it. Any Lender claiming compensation under this Section
                                                                         -------
      6.1 shall furnish to the Borrower and the Agent a statement setting forth
      ---
      the additional amount or amounts to be paid to it hereunder which shall be
      conclusive in the absence of manifest error. In determining such amount,
      such Lender may use any reasonable averaging and attribution methods.

      6.2 Limitation on Types of Loans. If on or prior to the first day of any
          ----------------------------
Interest Period for any Eurodollar Rate Loan:

           (a)  the Agent determines (which determination shall be conclusive)
      that by reason of circumstances affecting the relevant market, adequate
      and reasonable means do not exist for ascertaining the Eurodollar Rate for
      such Interest Period; or

           (b)  the Required Lenders determine (which determination shall be
      conclusive) and notify the Agent that the Eurodollar Rate will not
      adequately and fairly reflect the cost to the Lenders of funding
      Eurodollar Rate Loans for such Interest Period;

then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Type of Loans and the relevant amounts or periods, and so long as such
condition remains in effect, the Lenders shall be under no obligation to make
additional Loans of such Type, Continue Loans of such Type, or to Convert Loans
of any other Type into Loans of such Type and the Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Loans of the
affected Type, either prepay such Loans or Convert such Loans into another Type
of Loan in accordance with the terms of this Agreement.

      6.3  Illegality. Notwithstanding any other provision of this Agreement, in
           ----------
the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund

                                       62

<PAGE>

Eurodollar Rate Loans hereunder, then such Lender shall promptly notify the
Borrower thereof and such Lender's obligation to make or Continue Eurodollar
Rate Loans and to Convert other Types of Loans into Eurodollar Rate Loans shall
be suspended until such time as such Lender may again lawfully make, maintain,
and fund Eurodollar Rate Loans (in which case the provisions of Section 6.4
                                                                -----------
shall be applicable).

      6.4  Treatment of Affected Loans. If the obligation of any Lender to make
           ---------------------------
a Eurodollar Rate Loan or to Continue, or to Convert Loans of any other Type
into, Loans of a particular Type shall be suspended pursuant to Section 6.1 or
                                                                -----------
6.3 hereof (Loans of such Type being herein called "Affected Loans" and such
---
Type being herein called the "Affected Type"), such Lender's Affected Loans
shall be automatically Converted into Base Rate Loans on the last day(s) of the
then current Interest Period(s) for Affected Loans (or, in the case of a
Conversion required by Section 6.3 hereof, on such earlier date as such Lender
                       -----------
may specify to the Borrower with a copy to the Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 6.1 or 6.3 hereof that gave rise to such Conversion no longer exist:
------------------

           (a)  to the extent that such Lender's Affected Loans have been so
      Converted, all payments and prepayments of principal that would otherwise
      be applied to such Lender's Affected Loans shall be applied instead to its
      Base Rate Loans; and

           (b)  all Loans that would otherwise be made or Continued by such
      Lender as Loans of the Affected Type shall be made or Continued instead as
      Base Rate Loans, and all Loans of such Lender that would otherwise be
      Converted into Loans of the Affected Type shall be Converted instead into
      (or shall remain as) Base Rate Loans.

If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 6.1 or 6.3 hereof that gave rise to the
                           -------------------------
Conversion of such Lender's Affected Loans pursuant to this Section 6.4 no
                                                            -----------
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Loans of the Affected Type made by other
Lenders are outstanding, such Lender's Base Rate Loans shall be automatically
Converted, on the first day(s) of the next succeeding Interest Period(s) for
such outstanding Loans of the Affected Type, to the extent necessary so that,
after giving effect thereto, all Loans held by the Lenders holding Loans of the
Affected Type and by such Lender are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their respective Revolving
Credit Commitments.

      6.5  Compensation. Upon the request of any Lender, the Borrower shall pay
           ------------
to such Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a result of:

           (a)  any payment, prepayment, or Conversion of a Eurodollar Rate Loan
      for any reason (including, without limitation, the acceleration of the
      Loans pursuant to Section 11.1) on a date other than the last day of the
                        ------------
      Interest Period for such Loan; or

                                       63

<PAGE>

           (b)  any failure by the Borrower for any reason (including, without
      limitation, the failure of any condition precedent specified in Article
                                                                      -------
      VII to be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar
      ---
      Rate Loan on the date for such borrowing, Conversion, Continuation, or
      prepayment specified in the relevant notice of borrowing, prepayment,
      Continuation, or Conversion under this Agreement.

      6.6  Taxes.
           -----

           (a)  Any and all payments by the Borrower to or for the account of
      any Lender or the Agent hereunder or under any other Loan Document shall
      be made free and clear of and without deduction for any and all present or
      future taxes, duties, levies, imposts, deductions, charges or
      withholdings, and all liabilities with respect thereto, excluding, in the
                                                              ---------
      case of each Lender and the Agent, taxes imposed on its income, and
      franchise taxes imposed on it, by the jurisdiction under the laws of which
      such Lender (or its Applicable Lending Office) or the Agent (as the case
      may be) is organized or any political subdivision thereof (all such
      non-excluded taxes, duties, levies, imposts, deductions, charges,
      withholdings, and liabilities being hereinafter referred to as "Taxes").
      If the Borrower shall be required by law to deduct any Taxes from or in
      respect of any sum payable under this Agreement or any other Loan Document
      to any Lender or the Agent, (i) the sum payable shall be increased as
      necessary so that after making all required deductions (including
      deductions applicable to additional sums payable under this Section 6.6)
                                                                  -----------
      such Lender or the Agent receives an amount equal to the sum it would have
      received had no such deductions been made, (ii) the Borrower shall make
      such deductions, (iii) the Borrower shall pay the full amount deducted to
      the relevant taxation authority or other authority in accordance with
      applicable law, and (iv) the Borrower shall furnish to the Agent, at its
      address referred to in Section 13.2, the original or a certified copy of a
                             ------------
      receipt evidencing payment thereof.

           (b)  In addition, the Borrower agrees to pay any and all present or
      future stamp or documentary taxes and any other excise or property taxes
      or charges or similar levies which arise from any payment made under this
      Agreement or any other Loan Document or from the execution or delivery of,
      or otherwise with respect to, this Agreement or any other Loan Document
      (hereinafter referred to as "Other Taxes").

           (c)  The Borrower agrees to indemnify each Lender and the Agent for
      the full amount of Taxes and Other Taxes (including, without limitation,
      any Taxes or Other Taxes imposed or asserted by any jurisdiction on
      amounts payable under this Section 6.6) paid by such Lender or the Agent
                                 -----------
      (as the case may be) and any liability (including penalties, interest, and
      expenses) arising therefrom or with respect thereto.

           (d)  Each Lender organized under the laws of a jurisdiction outside
      the United States, on or prior to the date of its execution and delivery
      of this Agreement in the case of each Lender listed on the signature pages
      hereof and on or prior to the date on which it becomes a Lender in the
      case of each other Lender, and from time to time thereafter if requested
      in writing by the Borrower or the Agent (but only so long as such Lender
      remains lawfully able to do so), shall provide the Borrower and the Agent
      with (i) Internal

                                       64

<PAGE>

      Revenue Service Form 1001 or 4224, as appropriate, or any successor form
      prescribed by the Internal Revenue Service, certifying that such Lender is
      entitled to benefits under an income tax treaty to which the United States
      is a party which reduces the rate of withholding tax on payments of
      interest or certifying that the income receivable pursuant to this
      Agreement is effectively connected with the conduct of a trade or business
      in the United States, (ii) Internal Revenue Service Form W-8 or W-9, as
      appropriate, or any successor form prescribed by the Internal Revenue
      Service, and (iii) any other form or certificate required by any taxing
      authority (including any certificate required by Sections 871(h) and
      881(c) of the Internal Revenue Code), certifying that such Lender is
      entitled to an exemption from or a reduced rate of tax on payments
      pursuant to this Agreement or any of the other Loan Documents.

           (e)  For any period with respect to which a Lender has failed to
      provide the Borrower and the Agent with the appropriate form pursuant to
      Section 6.6(d) (unless such failure is due to a change in treaty, law, or
      --------------
      regulation occurring subsequent to the date on which a form originally was
      required to be provided), such Lender shall not be entitled to
      indemnification under Section 6.6(a) or 6.6(b) with respect to Taxes
                            ------------------------
      imposed by the United States; provided, however, that should a Lender,
                                    --------  -------
      which is otherwise exempt from or subject to a reduced rate of withholding
      tax, become subject to Taxes because of its failure to deliver a form
      required hereunder, the Borrower shall take such steps as such Lender
      shall reasonably request to assist such Lender to recover such Taxes.

           (f)  If the Borrower is required to pay additional amounts to or for
      the account of any Lender pursuant to this Section 6.6, then such Lender
                                                 -----------
      will agree to use reasonable efforts to change the jurisdiction of its
      Applicable Lending Office so as to eliminate or reduce any such additional
      payment which may thereafter accrue if such change, in the judgment of
      such Lender, is not otherwise disadvantageous to such Lender.

           (g)  Within thirty (30) days after the date of any payment of Taxes,
      the Borrower shall furnish to the Agent the original or a certified copy
      of a receipt evidencing such payment.

           (h)  Without prejudice to the survival of any other agreement of the
      Borrower hereunder, the agreements and obligations of the Borrower
      contained in this Section 6.6 shall survive the termination of the
                        -----------
      Revolving Credit Commitments and the payment in full of the Notes and the
      Facility Termination Date.

                                       65

<PAGE>

                                   ARTICLE VII

            Conditions to Making Loans and Issuing Letters of Credit
            --------------------------------------------------------

      7.1                   Conditions of Initial Advance. The obligation of the
                            -----------------------------
                            Lenders to make the initial Advance under the
                            Revolving Credit Facility, and of the Issuing Bank
                            to issue any Letter of Credit, is subject to the
                            conditions precedent that:

           (a)  the Agent shall have received on the Closing Date, in form and
      substance satisfactory to the Agent and Lenders, the following:

                (i)    executed originals of each of this Agreement, the Notes,
           the initial Facility Guaranties, the initial Security Documents, and
           the other Loan Documents, together with all schedules and exhibits
           thereto;

                (ii)   the favorable written opinions with respect to the Loan
           Documents and the transactions contemplated thereby of special
           counsel to the Credit Parties (including special indenture counsel)
           in the jurisdictions of North Carolina, South Carolina, New York and
           Mexico, dated the Closing Date, addressed to the Agent and the
           Lenders and satisfactory to Smith Helms Mulliss & Moore, L.L.P.,
           special counsel to the Agent, substantially in the form of Exhibit G;
                                                                      ---------

                (iii)  resolutions of the boards of directors or other
           appropriate governing body (or of the appropriate committee thereof)
           of each Credit Party certified by its secretary or assistant
           secretary as of the Closing Date, approving and adopting the Loan
           Documents to be executed by such Person, and authorizing the
           execution and delivery thereof;

                (iv)   specimen signatures of officers or other appropriate
           representatives executing the Loan Documents on behalf of each of the
           Credit Parties, certified by the secretary or assistant secretary of
           such Credit Party;

                (v)    the Organizational Documents of each of the Credit
           Parties certified as of a recent date by the Secretary of State of
           its state of organization;

                (vi)   Operating Documents of each of the Credit Parties
           certified as of the Closing Date as true and correct by its secretary
           or assistant secretary;

                (vii)  certificates issued as of a recent date by the
           Secretaries of State of the respective jurisdictions of formation of
           each of the Credit Parties as to the due existence and good standing
           of such Person;

                (viii) appropriate certificates of qualification to do business,
           good standing and, where appropriate, authority to conduct business
           under assumed name, issued in respect of each of the Credit Parties
           as of a recent date by the

                                       66

<PAGE>

           Secretary of State or comparable official of each jurisdiction in
           which the failure to be qualified to do business or authorized so to
           conduct business could have a Material Adverse Effect;

                (ix)   notice of appointment of the initial Authorized
           Representative(s);

                (x)    a Compliance Certificate as of the end of the fiscal
  `        quarter most recently ended prior to the Closing Date;

                (xi)   evidence of all insurance required by the Loan Documents;

                (xii)  an initial Borrowing Notice, if any, and, if elected by
           the Borrower, Interest Rate Selection Notice;

                (xiii) evidence of the filing of Uniform Commercial Code
           financing statements reflecting the filing in all places required by
           applicable law to perfect the General Liens of the General Collateral
           Agent under the General Security Instruments and the Priority Liens
           of the Priority Collateral Agent under the Priority Security
           Instruments and the Lien of the Agent in the Senior Leased Facility,
           as to items of Collateral in which a security interest may be
           perfected by the filing of financing statements, and such other
           documents and/or evidence of other actions as may be necessary under
           applicable law to perfect the General Liens of the General Collateral
           Agent under the General Security Instruments and the Priority Liens
           of the Priority Collateral Agent under the Priority Security
           Instruments and the Lien of the Agent in the Senior Leased Facility,
           as the Agent, General Collateral Agent or Priority Collateral Agent
           may require, including without limitation the delivery by the
           Borrower of all certificates evidencing Pledged Interests,
           accompanied in each case by duly executed stock powers (or other
           appropriate transfer documents) in blank affixed thereto;

                (xiv)  evidence satisfactory to the Agent of the payment in full
           and termination of the Existing Credit Agreement;

                (xv)   executed originals of the Collateral Agency Agreements
           and the Senior Debt Intercreditor Agreement;

                (xvi)  executed originals of the Securitization Intercreditor
           Agreement and the Leased Facility Intercreditor Agreement;

                (xvii) copies of the Senior Indenture, the Senior Note
           Agreement, the Morgan Swap Agreement, the Receivables Transfer
           Agreement, the Receivables Purchase Agreement and the Senior Lease
           Documents, together with all material agreements executed in
           connection therewith, and amendments of the Senior Note Agreement,
           the Senior Lease Documents, the Receivables Transfer Agreement and
           the Receivables Purchase Agreement each in form and substance
           acceptable

                                       67

<PAGE>

           to the Lenders, certified as true and correct by an Authorized
           Officer of the Borrower;

                (xviii) evidence that all fees payable by the Borrower on the
           Closing Date to the Agent, BAS and the Lenders have been paid in
           full;

                (xix)   Uniform Commercial Code search results showing only
           those Liens as are acceptable to the Lenders;

                (xx)    the consolidated financial statements of the Borrower
           and its Subsidiaries for the fiscal years ended 1996, 1997 and 1998,
           including balance sheets, income and cash flow statements audited by
           independent public accountants of recognized national standing and
           prepared in conformity with GAAP and such other financial information
           as the Agent may request, all in form and substance acceptable to the
           Agent and the Lenders;

                (xxi)   information as may be requested by the Agent regarding
           litigation, tax, accounting, labor, insurance, pension liabilities
           (actual or contingent), real estate leases, material contracts, debt
           agreements, property ownership, environmental matters, contingent
           liabilities and management of the Borrower and its Subsidiaries,
           which information shall include, if requested by the Agent, (a) asset
           appraisal reports with respect to all of the material real and
           personal property owned by the Borrower and its Subsidiaries, and (b)
           a written audit of the accounts receivable not sold to Cone
           Receivables II LLC, inventory, payables, controls and systems of the
           Borrower and its Subsidiaries, all in form and substance acceptable
           to the Agent and the Lenders;

                (xxii)  information confirming that the Borrower's and its
           Subsidiaries' material computer applications and those of its key
           vendors and customers adequately address the Year 2000 Problem in all
           material respects, all in form and substance acceptable to the Agent
           and the Lenders;

                (xxiii) delivery of Material Real Property Support Documents as
           may be required by any Governmental Authority in connection with the
           delivery of any Mortgage;

                (xxiv)  executed officer's certificate by the chief financial
           officer of the Borrower as to compliance with Section 3.9(i) of the
           Indenture;

                (xxv)   the projected Borrowing Base as of the Closing Date,
           acceptable to the Lenders in form and substance;

                (xxvi)  thirteen week consolidated cash flow projections of the
           Borrower and its Subsidiaries commencing with the week starting
           January 17, 2000, acceptable to the Lenders in form and substance;

                                       68

<PAGE>

                (xxvii) such other documents, instruments, certificates and
           opinions as the Agent or any Lender may reasonably request on or
           prior to the Closing Date in connection with the consummation of the
           transactions contemplated hereby; and

           (b)  In the good faith judgment of the Agent and the Lenders:

                (i)     except as otherwise disclosed in public filings made
           with the Securities and Exchange Commission or disclosed in the
           financial projections delivered to the Agent by the Borrower dated
           October, 1999 (the "October Projections"), or as disclosed to the
           Lenders with respect to a certain customer's payment practices, there
           shall not have occurred a material adverse change since January 3,
           1999 in the business, assets, liabilities (actual or contingent),
           operations, condition (financial or otherwise) or prospects of the
           Borrower and its Subsidiaries taken as a whole or in the facts and
           information regarding such entities as represented to date other than
           as reflected in the October Projections;

                (ii)    no litigation, action, suit, investigation or other
           arbitral, administrative or judicial proceeding shall be pending or
           threatened in any court or before any arbitrator or Governmental
           Authority which could reasonably be likely to result in a Material
           Adverse Effect;

                (iii)   the Credit Parties shall have received all governmental,
           shareholder and third party approvals, consents and waivers necessary
           or advisable in connection with the Loan Documents and the
           transactions contemplated thereby, all of which shall be in full
           force and effect, and shall have made or given all necessary filings
           and notices as shall be required, and all applicable waiting periods
           shall have expired, to consummate the transactions contemplated
           hereby without the occurrence of any default under, conflict with or
           violation of (A) any applicable law, rule, regulation, order or
           decree of any Governmental Authority or arbitral authority or (B) any
           agreement, document or instrument to which any of the Credit Parties
           is a party or by which any of them or their properties is bound,
           except for such approvals, consents, waivers, filings and notices the
           receipt, making or giving of which will not have a Material Adverse
           Effect;

                (iv)    each of the lenders under the Existing Credit Agreement
           is a Lender party hereto with a Revolving Credit Commitment hereunder
           of not less than its equivalent commitment under the Existing Credit
           Agreement; and

                (v)    each of the Lenders is satisfied with (a) the form and
           content of all agreements relating to other Indebtedness of the
           Borrower and its Subsidiaries, including the Intercreditor
           Agreements, (b) the corporate capital and ownership structure of the
           Borrower and its Subsidiaries (including articles of incorporation,
           bylaws and management of the Borrower and its Subsidiaries) and (c)
           the status of all litigation of the Borrower and its Subsidiaries.

                                       69

<PAGE>

      7.2  Conditions of Revolving Loans and Letter of Credit. The obligations
           --------------------------------------------------
of the Lenders to make any Revolving Loans, and the Issuing Bank to issue (or
renew) Letters of Credit, hereunder on or subsequent to the Closing Date are
subject to the satisfaction of the following conditions:

           (a)  the Agent shall have received a Borrowing Notice if required by
      Article II;
      ----------

           (b)  the representations and warranties of the Credit Parties set
      forth in Article VIII and in each of the other Loan Documents shall be
               ------------
      true and correct in all material respects on and as of the date of such
      Advance or Letter of Credit issuance or renewal, with the same effect as
      though such representations and warranties had been made on and as of such
      date, except to the extent that such representations and warranties
      expressly relate to an earlier date and except that the financial
      statements referred to in Section 8.6(a) shall be deemed (solely for the
                                --------------
      purpose of the representation and warranty contained in such Section
                                                                   -------
      8.6(a) but not for the purpose of any cross reference to such Section
      ------                                                        -------
      8.6(a) or to the financial statements described therein contained in any
      ------
      other provision of Section 8.6 or elsewhere in Article 8) to be those
                         -----------                 ---------
      financial statements most recently delivered to the Agent and the Lenders
      pursuant to Section 9.1 from the date financial statements are delivered
                  -----------
      to the Agent and the Lenders in accordance with such Section;

           (c)  in the case of the issuance of a Letter of Credit, the Borrower
      shall have executed and delivered to the Issuing Bank an Application and
      Agreement for Letter of Credit in form and content acceptable to the
      Issuing Bank together with such other instruments and documents as it
      shall request;

           (d)  at the time of (and after giving effect to) each Advance or the
      issuance of a Letter of Credit, no Default or Event of Default specified
      in Article XI shall have occurred and be continuing; and
         ----------

           (e)  immediately after giving effect to:

                (i)    a Revolving Loan, the aggregate principal balance of all
           outstanding Revolving Loans for each Lender shall not exceed such
           Lender's Revolving Credit Commitment;

                (ii)   a Letter of Credit or renewal thereof, the aggregate
           principal balance of all outstanding Participations in Letters of
           Credit and Reimbursement Obligations (or in the case of the Issuing
           Bank, its remaining interest after deduction of all Participations in
           Letters of Credit and Reimbursement Obligations of other Lenders) for
           each Lender and in the aggregate shall not exceed, respectively, (X)
           such Lender's Letter of Credit Commitment or (Y) the Total Letter of
           Credit Commitment;

                (iii)  a Revolving Loan or a Letter of Credit or renewal
           thereof, (A) the sum of Revolving Credit Outstandings plus Letter of
           Credit Outstandings shall not

                                       70

<PAGE>

           exceed the Total Revolving Credit Commitment and (B) Senior Debt
           Outstandings shall not exceed the Borrowing Base.

                                       71

<PAGE>

                                  ARTICLE VIII

                         Representations and Warranties
                         ------------------------------

      The Borrower represents and warrants with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery of
the documents mentioned herein and the making of Loans), that:

      8.1  Organization and Authority.
           --------------------------

           (a)  The Borrower and each Subsidiary is a corporation duly organized
      and validly existing under the laws of the jurisdiction of its formation;

           (b)  The Borrower and each Subsidiary (x) has the requisite power and
      authority to own its properties and assets and to carry on its business as
      now being conducted and as contemplated in the Loan Documents, and (y) is
      qualified to do business in every jurisdiction in which failure so to
      qualify would have a Material Adverse Effect;

           (c)  The Borrower has the power and authority to execute, deliver and
      perform this Agreement and the Notes, and to borrow hereunder, and to
      execute, deliver and perform each of the other Loan Documents to which it
      is a party;

           (d)  Each Credit Party (other than the Borrower) has the power and
      authority to execute, deliver and perform the Facility Guaranty and each
      of the other Loan Documents to which it is a party;

           (e)  When executed and delivered, each of the Loan Documents to which
      any Credit Party is a party will be the legal, valid and binding
      obligation or agreement, as the case may be, of such Credit Party,
      enforceable against such Credit Party in accordance with its terms,
      subject to the effect of any applicable bankruptcy, moratorium,
      insolvency, reorganization or other similar law affecting the
      enforceability of creditors' rights generally and to the effect of general
      principles of equity (whether considered in a proceeding at law or in
      equity); and

           (f)  The Security Documents create valid security interests in the
      Collateral purported to be covered thereby, which security interests and
      Liens are and will remain perfected security interests and Liens, prior to
      all other Liens other than Permitted Liens.

      8.2  Loan Documents. The execution, delivery and performance by each
           --------------
Credit Party of each of the Loan Documents to which it is a party:

           (a)  have been duly authorized by all requisite Organizational Action
      of such Credit Party required for the lawful execution, delivery and
      performance thereof;

                                       72

<PAGE>

           (b)  do not violate any provisions of (i) any applicable law, rule or
      regulation, (ii) any judgment, writ, order, determination, decree or
      arbitral award of any Governmental Authority or arbitral authority binding
      on such Credit Party or its properties, or (iii) the Organizational
      Documents or Operating Documents of such Credit Party;

           (c)  does not and will not be in conflict with, result in a breach of
      or constitute an event of default, or an event which, with notice or lapse
      of time or both, would constitute an event of default, under any contract,
      indenture, agreement or other instrument or document to which such Credit
      Party is a party, or by which the properties or assets of such Credit
      Party are bound; and

           (d)  does not and will not result in the creation or imposition of
      any Lien upon any of the properties or assets of such Credit Party or any
      Subsidiary except any Liens in favor of the Secured Parties created by the
      Security Documents.

      8.3  Solvency. Each Credit Party is Solvent after giving effect to the
           --------
transactions contemplated by the Loan Documents.

      8.4  Subsidiaries and Stockholders. The Borrower has no Subsidiaries other
           -----------------------------
than those Persons listed as Subsidiaries in Schedule 8.4 and additional
                                             ------------
Subsidiaries created or acquired after the Closing Date in compliance with
Section 9.20; Schedule 8.4 states as of the date hereof the organizational form
------------  ------------
of each entity, the authorized and issued capitalization of each Subsidiary
listed thereon, the number of shares or other equity interests of each class of
capital stock or interest issued and outstanding of each such Subsidiary and the
number and/or percentage of outstanding shares or other equity interest
(including options, warrants and other rights to acquire any interest) of each
such class of capital stock or other equity interest owned by Borrower or by any
such Subsidiary; the outstanding shares or other equity interests of each such
Subsidiary have been duly authorized and validly issued and are fully paid and
non-assessable; and Borrower and each such Subsidiary owns beneficially and of
record all the shares and other interests it is listed as owning in Schedule
                                                                    --------
8.4, free and clear of any Lien (other than Liens in favor of the Collateral
---
Agents under the Security Documents).

      8.5  Ownership Interests. Borrower owns no interest in any Person other
           -------------------
than the Persons listed in Schedule 8.4, equity investments in Persons not
                           ------------
constituting Material Subsidiaries permitted under Section 10.7 and additional
                                                   ------------
Subsidiaries created or acquired after the Closing Date in compliance with
Section 9.20.
------------

      8.6  Financial Condition.
           -------------------

           (a)  The Borrower has heretofore furnished to each Lender an audited
      consolidated balance sheet of the Borrower and its Subsidiaries as at
      January 3, 1999 and the notes thereto and the related consolidated

                                       73

<PAGE>

      statements of income, stockholders' equity and cash flows for the Fiscal
      Year then ended as examined and certified by McGladrey & Pullen LLP, and
      unaudited consolidated interim financial statements of the Borrower and
      its Subsidiaries consisting of a consolidated balance sheets and related
      consolidated statements of income, stockholders' equity and cash flows, in
      each case without notes, for and as of the end of the nine month period
      ending October 3, 1999. Except as set forth therein, such financial
      statements (including the notes thereto) present fairly the financial
      condition of the Borrower and its Subsidiaries as of the end of such
      Fiscal Year and nine month period and results of their operations and the
      changes in its stockholders' equity for the Fiscal Year and interim period
      then ended, all in conformity with GAAP applied on a Consistent Basis,
      subject however, in the case of unaudited interim statements to year end
      audit adjustments;

           (b)  since the later of (i) the date of the audited financial
      statements delivered pursuant to Section 8.6(a) hereof or (ii) the date of
                                       --------------
      the audited financial statements most recently delivered pursuant to
      Section 9.1(a) hereof, there has been no material adverse change in the
      --------------
      condition, financial or otherwise, of the Borrower or any of its
      Subsidiaries or in the businesses, properties, performance, prospects or
      operations of the Borrower or its Subsidiaries, nor have such businesses
      or properties been materially adversely affected as a result of any fire,
      explosion, earthquake, accident, strike, lockout, combination of workers,
      flood, embargo or act of God other than (i) as set forth in the October
      Projections and (ii) as disclosed to the Lenders with respect to a certain
      customer's payment practices; and

           (c)  except as set forth in the financial statements referred to in
      Section 8.6(a) or in Schedule 8.6 or permitted by Section 10.5, neither
      --------------       ------------                 ------------
      the Borrower nor any Subsidiary has incurred, other than in the ordinary
      course of business, any material Indebtedness, Contingent Obligation or
      other commitment or liability which remains outstanding or unsatisfied.

      8.7  Title to Properties. The Borrower and each of its Subsidiaries and
           -------------------
 each other Credit Party has good and marketable title to all its real and
personal properties, subject to no transfer restrictions or Liens of any kind,
except for the transfer restrictions and Liens described in Schedule 8.7 and
                                                            ------------
Liens permitted by Section 10.4.
                   ------------

      8.8  Taxes. Except as set forth in Schedule 8.8, the Borrower and each of
           -----                         ------------
its Subsidiaries has filed or caused to be filed all federal, state and local
tax returns which are required to be filed by it and, except for taxes and
assessments being contested in good faith by appropriate proceedings diligently
conducted and against which reserves (if required in accordance with GAAP) are
reflected in the financial statements described in Section 8.6(a) or Sections
                                                   --------------    --------
9.1(a) or (b) and satisfactory to the Borrower's independent certified public
------    ---
accountants have been established, have paid or caused to be paid all taxes as
shown on said returns or on any assessment received by it, to the extent that
such taxes have become due.

      8.9  Other Agreements. No Credit Party nor any Subsidiary is
           ----------------

           (a)  a party to or subject to any judgment, order, decree, agreement,
      lease or instrument, or subject to other restrictions, which individually
      or in the aggregate could reasonably be expected to have a Material
      Adverse Effect; or

                                       74

<PAGE>

           (b)  in default in the performance, observance or fulfillment of any
      of the obligations, covenants or conditions contained in any agreement or
      instrument to which such Credit Party or any Subsidiary is a party, which
      default has, or if not remedied within any applicable grace period could
      reasonably be likely to have, a Material Adverse Effect.

      8.10 Litigation. Except as set forth in Schedule 8.10, there is no action,
           ----------                         -------------
suit, investigation or proceeding at law or in equity or by or before any
governmental instrumentality or agency or arbitral body pending,or, to the
knowledge of the Borrower, threatened by or against the Borrower or any
Subsidiary or other Credit Party or affecting the Borrower or any Subsidiary or
other Credit Party or any properties or rights of the Borrower or any Subsidiary
or other Credit Party, which could reasonably be likely to have a Material
Adverse Effect.

      8.11 Margin Stock. The proceeds of the borrowings made hereunder
           ------------
will be used by the Borrower only for the purposes expressly authorized herein.
None of such proceeds will be used, directly or indirectly,for the purpose of
purchasing or carrying any margin stock or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute any of the Loans
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 221) of the Board. Neither the Borrower nor any
agent acting in its behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments delivered pursuant hereto
to violate any regulation of the Board or to violate the Securities Exchange Act
of 1934, as amended, or the Securities Act of 1933, as amended, or any state
securities laws, in each case as in effect on the date hereof.

      8.12 Investment Company. No Credit Party is an "investment
                      ------------------
company," or an "affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the Investment
Company Act of 1940, as amended (15 U.S.C. ss. 80a-1, et seq.). The application
of the proceeds of the Loans and repayment thereof by the Borrower and the
performance by the Borrower and the other Credit Parties of the transactions
contemplated by the Loan Documents will not violate any provision of said Act,
or any rule, regulation or order issued by the Securities and Exchange
Commission thereunder, in each case as in effect on the date hereof.

      8.13 Patents, Etc. The Borrower and each other Credit Party owns or has
           ------------
the right to use, under valid license agreements or otherwise, all material
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights, trade secrets and copyrights necessary to or used in the conduct of
its businesses as now conducted and as contemplated by the Loan Documents,
without known conflict with any patent,license, franchise, trademark, trade
secret, trade name, copyright, other proprietary right of any other Person.

      8.14 No Untrue Statement. Neither (a) this Agreement nor any other Loan
           --------------------
Document or certificate or document executed and delivered by or on behalf of
the Borrower or any other Credit Party in accordance with or pursuant to any
Loan Document

                                       75

<PAGE>

nor (b) any statement, representation, or warranty provided to the Agent in
connection with the negotiation or preparation of the Loan Documents contains
any misrepresentation or untrue statement of material fact or omits to state a
material fact necessary, in light of the circumstance under which it was made,
in order to make any such warranty, representation or statement contained
therein not misleading.

           8.15  No Consents, Etc. Neither the respective businesses or
                 ----------------
 properties of the Credit Parties or any Subsidiary, nor any
 relationship among the Credit Parties or any Subsidiary and any other
 Person, nor any circumstance in connection with the execution,
 delivery and performance of the Loan Documents and the transactions
 contemplated hereby and thereby, is such as to require a consent,
 approval or authorization of, or filing,registration or qualification
 with, any Governmental Authority or any other Person on the part of
 any Credit Party as a condition to the execution, delivery and
 performance of, or consummation of the transactions contemplated by
 the Loan Documents, which, if not obtained or effected, would be
 reasonably likely to have a Material Adverse Effect, or if so, such
 consent, approval, authorization, filing, registration or
 qualification has been duly obtained or effected, as the case may be.

           8.16  Employee Benefit Plans.
                 ----------------------

                (a)  The Borrower and each ERISA Affiliate is in compliance with
           all applicable provisions of ERISA and the regulations and published
           interpretations thereunder and in compliance with all Foreign Benefit
           Laws with respect to all Employee Benefit Plans except for any
           required amendments for which the remedial amendment period as
           defined in Section 401(b) of the Code has not yet expired. Each
           Employee Benefit Plan that is intended to be qualified under Section
           401(a) of the Code has been determined or the Borrower or its
           Subsidiaries is in the process of obtaining a determination by the
           Internal Revenue Service to be so qualified, each trust related to
           such plan has been determined to be exempt under Section 501(a) of
           the Code, and each Employee Benefit Plan subject to any Foreign
           Benefit Law has received the required approvals by any Governmental
           Authority regulating such Employee Benefit Plan. No material
           liability has been incurred by the Borrower or any ERISA Affiliate
           which remains unsatisfied for any taxes or penalties with respect to
           any Employee Benefit Plan or any Multiemployer Plan;

                (b)  Neither the Borrower nor any ERISA Affiliate has (i)
           engaged in a nonexempt prohibited transaction described in Section
           4975 of the Code or Section 406 of ERISA affecting any of the
           Employee Benefit Plans or the trusts created thereunder which could
           subject any such Employee Benefit Plan or trust to a material tax or
           penalty on prohibited transactions imposed under Internal Revenue
           Code Section 4975 or ERISA, (ii) incurred any accumulated funding
           deficiency with respect to any Employee Benefit Plan, whether or not
           waived, or any other liability to the PBGC which remains outstanding
           other than the payment of premiums and there are no premium payments
           which are due and unpaid, (iii) failed to make a required
           contribution or payment to a

                                       76

<PAGE>

           Multiemployer Plan, (iv) failed to make a required installment or
           other required payment under Section 412 of the Code, Section 302 of
           ERISA or the terms of such Employee Benefit Plan, or (v) failed to
           make a required contribution or payment, or otherwise failed to
           operate in compliance with any Foreign Benefit Law regulating any
           Employee Benefit Plan;

                (c)  Except as set forth on Schedule 8.16 hereto, no Termination
                                            -------------
           Event has occurred or is reasonably expected to occur with respect to
           any Pension Plan or Multiemployer Plan, and neither the Borrower nor
           any ERISA Affiliate has incurred any unpaid withdrawal liability with
           respect to any Multiemployer Plan;

                (d)  The present value of all vested accrued benefits under each
           Employee Benefit Plan which is subject to Title IV of ERISA, or the
           funding of which is regulated by any Foreign Benefit Law did not, as
           of the most recent valuation date for each such plan, exceed the then
           current value of the assets of such Employee Benefit Plan allocable
           to such benefits;

                (e)  To the best of the Borrower's knowledge, each Employee
           Benefit Plan which is subject to Title IV of ERISA or the funding of
           which is regulated by any Foreign Benefit Law, maintained by the
           Borrower or any ERISA Affiliate, has been administered in accordance
           with its terms in all material respects and is in compliance in all
           material respects with all applicable requirements of ERISA,
           applicable Foreign Benefit Law and other applicable laws, regulations
           and rules;

                (f)  The consummation of the Loans and the issuance of the
           Letters of Credit provided for herein will not involve any prohibited
           transaction under ERISA which is not subject to a statutory or
           administrative exemption; and

                (g)  No material proceeding, claim, lawsuit and/or investigation
           exists or, to the best knowledge of the Borrower after due inquiry,
           is threatened concerning or involving any Employee Benefit Plan;

      8.17 No Default. As of the date hereof, there does not exist any Default
           ----------
or Event of Default hereunder.

      8.18 Environmental Laws. Except as listed on Schedule 8.18 or as otherwise
           ------------------                      -------------
could not reasonably be expected to have a Material Adverse Effect, the Borrower
and each Subsidiary is in compliance with all applicable Environmental Laws and
has been issued and currently maintains all required federal, state and local
permits, licenses, certificates and approvals. Except as listed on Schedule 8.18
                                                                   -------------
or as otherwise could not reasonably be expected to have a Material Adverse
Effect, neither the Borrower nor any Subsidiary has been notified of any pending
or threatened action, suit, proceeding or investigation, and neither the
Borrower nor any Subsidiary is aware of any facts, which (a) calls into
question, or could reasonably be expected to call into question, compliance by
the Borrower or any Subsidiary with any Environmental Laws, (b) seeks, or could
reasonably be expected to form the basis of a meritorious proceeding, to
suspend, revoke or terminate any license, permit or approval necessary for the
operation of the Borrower's or any

                                       77

<PAGE>

Subsidiary's business or facilities or for the generation, handling, storage,
treatment or disposal of any Hazardous Materials, or (c) seeks to cause, or
could reasonably be expected to form the basis of a meritorious proceeding to
cause, any property of the Borrower or any Subsidiary or other Credit Party to
be subject to any restrictions on ownership, use, occupancy or transferability
under any Environmental Law.

      8.19 Employment Matters.
           ------------------

           (a)  None of the employees of the Borrower or any Subsidiary is
      subject to any collective bargaining agreement except as set forth on
      Schedule 8.19 and there are no strikes, work stoppages, election or
      -------------
      decertification petitions or proceedings, unfair labor charges, equal
      opportunity proceedings, or other material labor/employee related
      controversies or proceedings pending or, to the best knowledge of the
      Borrower, threatened against the Borrower or any Subsidiary or between the
      Borrower or any Subsidiary and any of its employees, other than employee
      grievances arising in the ordinary course of business which could not
      reasonably be expected, individually or in the aggregate, to have a
      Material Adverse Effect; and

           (b)  Except to the extent a failure to maintain compliance would not
      have a Material Adverse Effect, the Borrower and each Subsidiary is in
      compliance in all respects with all applicable laws, rules and regulations
      pertaining to labor or employment matters, including without limitation
      those pertaining to wages, hours, occupational safety and taxation and
      there is neither pending or threatened any litigation, administrative
      proceeding nor, to the knowledge of the Borrower, any investigation, in
      respect of such matters which, if decided adversely, could reasonably be
      likely, individually or in the aggregate, to have a Material Adverse
      Effect.

      8.20 RICO. Neither the Borrower nor any Subsidiary is engaged in or has
           ----
engaged in any course of conduct that could subject any of their respective
properties to any Lien, seizure or other forfeiture under any racketeer
influenced and corrupt organizations law, whether civil or criminal, or other
similar laws.

      8.21 Year 2000 Compliance. All computer applications (including those
           --------------------
affected by information received from its suppliers and vendors) that are
material to the business and operations of the Borrower and any of its
Subsidiaries are Year 2000 Compliant, except to the extent that a failure to do
so could not reasonably be expected to have Material Adverse Effect.

                                       78

<PAGE>

                                  ARTICLE IX

                              Affirmative Covenants
                              ---------------------

      Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will, and where applicable will cause
each Subsidiary to:

      9.1  Financial Reports, Etc.
           ----------------------

           (a)  As soon as practical and in any event within 90 days after the
      end of each Fiscal Year of the Borrower, deliver or cause to be delivered
      to the Agent and each Lender (i) consolidated and consolidating balance
      sheets of the Borrower and its Subsidiaries as at the end of such Fiscal
      Year, and the notes thereto, and the related consolidated and
      consolidating statements of income, stockholders' equity and cash flows,
      and the respective notes thereto, for such Fiscal Year, setting forth
      (other than for consolidating statements) comparative financial statements
      for the preceding Fiscal Year, all prepared in accordance with GAAP
      applied on a Consistent Basis and containing, with respect to the
      consolidated financial statements, opinions of McGladrey & Pullen LLP, or
      other such independent certified public accountants selected by the
      Borrower and approved by the Agent, which are unqualified as to the scope
      of the audit performed and as to the "going concern" status of the
      Borrower and without any exception not acceptable to the Lenders, and (ii)
      a Compliance Certificate as of the end of such Fiscal Year;

           (b)  as soon as practical and in any event within 45 days after the
      end of each fiscal quarter (except for the last fiscal quarter of the
      Fiscal Year, as to which the following shall not be required to be
      delivered), deliver to the Agent and each Lender (i) consolidated and
      consolidating balance sheets of the Borrower and its Subsidiaries as at
      the end of such fiscal quarter, and the related consolidated and
      consolidating statements of income, stockholders' equity and cash flows
      for such fiscal quarter and for the period from the beginning of the then
      current Fiscal Year through the end of such reporting period, and
      accompanied by a certificate of an Authorized Representative to the effect
      that such financial statements present fairly the financial position of
      the Borrower and its Subsidiaries as of the end of such fiscal period and
      the results of their operations and the changes in their financial
      position for such fiscal period, in conformity with the standards set
      forth in Section 8.6(a) with respect to interim financial statements, and
               --------------
      (ii) a Compliance Certificate as of the end of such quarter;

           (c)  as soon as practical and in any event within 45 days after the
      end of each Fiscal Quarter deliver to the Agent and each Lender a
      certificate of an Authorized Representative of the Borrower certifying all
      Asset Dispositions for such Fiscal Quarter constituting Permitted Asset
      Dispositions under the terms of clause (ii), (vii), (viii) or (x) of such
      defined term together with evidence of application of all proceeds of each
      such Permitted Asset Disposition consummated more than 180 days prior to
      the end of such Fiscal Quarter;

                                       79

<PAGE>

           (d)  together with each delivery of the financial statements required
      by Section 9.1(a)(i), deliver to the Agent and each Lender a letter from
         -----------------
      the Borrower's accountants specified in Section 9.1(a)(i) stating that in
                                              -----------------
      performing the audit necessary to render an opinion on the financial
      statements delivered under Section 9.1(a)(i), they obtained no knowledge
                                 -----------------
      of any Default or Event of Default by the Borrower in the fulfillment of
      the terms and provisions of this Agreement insofar as they relate to
      financial matters (which at the date of such statement remains uncured);
      or if the accountants have obtained knowledge of such Default or Event of
      Default, a statement specifying the nature and period of existence
      thereof;

           (e)  promptly upon their becoming available to the Borrower, deliver
      to the Agent and each Lender a copy of (i) all regular or special reports
      or effective registration statements which Borrower or any Subsidiary
      shall file with the Securities and Exchange Commission (or any successor
      thereto) or any securities exchange, (ii) any proxy statement distributed
      by the Borrower or any Subsidiary to its shareholders, bondholders or the
      financial community in general, and (iii) any management letter or other
      report submitted to the Borrower or any Subsidiary by independent
      accountants in connection with any annual, interim or special audit of the
      Borrower or any Subsidiary; and

           (f)  not later than the 15 days after the last Business Day of the
      Fiscal Year ended December 30, 2001, deliver to the Agent and each Lender
      a capital and operating expense budget and consolidated financial
      projections for the Borrower and its Subsidiaries for the next Fiscal
      Year, prepared in accordance with GAAP applied on a Consistent Basis;

           (g)  as soon as practicable and in any event within twenty-five (25)
      days following the end of each fiscal month, deliver to the Agent and each
      Lender (i) a Borrowing Base Certificate as of the end of such month and an
      accounts receivable aging report in form and substance acceptable to the
      Agent and (ii) a Compliance Certificate as of the end of such month in
      form and substance acceptable to the Agent;

           (h)  as soon as practical and in any event within 25 days after the
      end of each fiscal month, deliver to the Agent and each Lender
      consolidated balance sheets of the Borrower and its Subsidiaries as at the
      end of such fiscal month, and the related consolidated statements of
      income, stockholders' equity and cash flows for such fiscal month and for
      the period from the beginning of the then current Fiscal Year through the
      end of such fiscal month all prepared by management of the Borrower using
      inventory estimation, and accompanied by a certificate of an Authorized
      Representative to the effect that such financial statements present fairly
      the financial position of the Borrower and its Subsidiaries as of the end
      of such fiscal month and the results of their operations and the changes
      in their financial position for such fiscal month;

           (i)  promptly, from time to time, deliver or cause to be delivered to
      the Agent and each Lender such other information regarding Borrower's and
      any Subsidiary's operations, business affairs and financial condition as
      the Agent or such Lender may reasonably request; and

                                       80

<PAGE>

           (j)  On the last Business Day of each week, deliver to the Agent (i)
      projected cash flow statements of the Borrower and its Subsidiaries for
      the 13 week period beginning on such date, (ii) a comparison of the week
      most recently ended with the amount projected for such week in the
      statements delivered pursuant to Section 9.1(j)(i) and (iii) an
                                       -----------------
      explanation of any material variances (10% or greater) between actual and
      projected cash flow;

           (k)  at any time or times requested by the Agent, permit the Agent
      (or any other Person satisfactory to the Agent in its sole discretion) to
      conduct a field examination and prepare a written business audit of all
      Eligible Inventory, Eligible Receivables, accounts payable, controls and
      systems of the Borrower and its Subsidiaries, in each case such field
      examination and audit to be performed and prepared at the expense of the
      Borrower, provided, however, that, during any period when no Event of
                -----------------
      Default has occurred and is continuing, the Agent (and its
      representatives) shall not perform and prepare such a field examination
      and audit more than three (3) times during any Fiscal Year, but provided
                                                                  ------------
      further that upon the occurrence and during the continuation of any Event
      -------
      of Default, the Agent (or its representatives) may perform and prepare
      such field examinations and audits as often and as many times as the Agent
      (in its sole discretion) shall determine.

           (l)   the Borrower authorizes the Agent to obtain, after the Eighth
      Amendment Closing Date, a written appraisal or appraisals of all real
      property, improvements and equipment of the Borrower and its Subsidiaries
      (including without limitation the real property identified on Exhibit N
                                                                    ---------
      attached hereto), such appraisals to be prepared (at the expense of the
      Borrower) by an appraiser satisfactory to the Agent and such appraisals to
      be in form and substance satisfactory to the Agent.

      The Agent and the Lenders are hereby authorized to deliver a copy of any
such financial or other information delivered hereunder to the Lenders (or any
affiliate of any Lender) or to the Agent, to any Governmental Authority having
jurisdiction over the Agent or any of the Lenders pursuant to any written
request therefor or in the ordinary course of examination of loan files, or to
any other Person who shall acquire or consider the assignment of, or acquisition
of any participation interest in, any Obligation permitted by this Agreement.

      9.2  Maintain Properties. Maintain all properties necessary to its
           -------------------
operations in good working order and condition, make all needed repairs,
replacements and renewals to such properties, and maintain free from Liens all
trademarks, trade names, patents, copyrights, trade secrets, know-how, and other
intellectual property and proprietary information (or adequate licenses
thereto), in each case as are reasonably necessary to conduct its business as
currently conducted or as contemplated hereby, all in accordance with customary
and prudent business practices.

      9.3  Existence, Qualification, Etc. Except as otherwise expressly
           -----------------------------
permitted under Section 10.8, do or cause to be done all things necessary to
                ------------
preserve and keep in full force and effect its existence and all material rights
and franchises, and maintain its license or qualification to do business as a
foreign corporation and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes such license
or qualification necessary except where the failure to so qualify would not have
a Material Adverse Effect.

                                       81

<PAGE>

      9.4  Regulations and Taxes. Comply in all material respects with or
           ---------------------
contest in good faith all statutes and governmental regulations and pay all
taxes, assessments, governmental charges, claims for labor, supplies, rent and
any other obligation which, if unpaid, would become a Lien against any of its
properties except liabilities being contested in good faith by appropriate
proceedings diligently conducted and against which adequate reserves acceptable
to the Borrower's independent certified public accountants have been established
unless and until any Lien resulting therefrom attaches to any of its property
and becomes enforceable against its creditors.

      9.5  Insurance. (a) Keep all of its insurable properties adequately
           ---------
insured at all times with responsible insurance carriers (or on a self-insured
basis customary for companies similarly situated and in accordance with prudent
business practices) against loss or damage by fire and other hazards to the
extent and in the manner as are customarily insured against by similar
businesses owning such properties similarly situated and otherwise as required
by the Security Documents, (b) maintain general public liability insurance with
responsible insurance carriers (or self-insurance as is customary for similarly
situated companies and in accordance with prudent business practices) at all
times against liability on account of damage to persons and property and (c)
maintain insurance under all applicable workers' compensation laws (or in the
alternative, maintain required reserves if self-insured for workers'
compensation purposes) and against loss by reason by business interruption, each
of the foregoing policies of insurance to have such limits, deductibles,
exclusions, co-insurance and other provisions providing no less coverages than
that specified in Schedule 9.5, and such insurance policies to be in form
                  ------------
reasonably satisfactory to the Agent, General Collateral Agent and/or Priority
Collateral Agent.

      9.6  True Books. Keep true books of record and account in which full, true
           ----------
and correct entries will be made of all of its dealings and transactions, and
set up on its books such reserves as may be required by GAAP with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business in general, and include such reserves in interim as
well as year-end financial statements.

      9.7  Year 2000 Compliance. The Borrower will promptly notify the Agent and
           --------------------
the Lenders in the event the Borrower discovers or determines that any computer
application (including those affected by information received from its suppliers
and vendors) that is material to its or any of its Subsidiaries' business and
operations is not Year 2000 Compliant, except to the extent that such failure
could not reasonably be expected to have a Material Adverse Effect.

      9.8  Right of Inspection. Permit any Person designated by any Lender or
           -------------------
the Agent to visit and inspect, at the Borrower's expense, any of the
properties, corporate books and financial reports of the Borrower or any
Subsidiary and to discuss its affairs, finances and accounts with its principal
officers and independent certified public accountants, all at reasonable times,
at reasonable intervals and with reasonable prior notice.

      9.9  Observe all Laws. Conform to and duly observe in all material
           ----------------
respects all laws, including all Environmental Laws and ERISA, rules and
regulations and all other valid requirements of any Governmental Authority with
respect to the conduct of its business, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.

                                       82

<PAGE>

      9.10 Governmental Licenses. Obtain and maintain all licenses, permits,
           ---------------------
certifications and approvals of all applicable Governmental Authorities as are
required for the conduct of its business as currently conducted and as
contemplated by the Loan Documents, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

      9.11 Covenants Extending to Other Persons. Cause each of its Subsidiaries
           ------------------------------------
to do with respect to itself, its business and its assets, each of the things
required of the Borrower in Sections 9.2 through 9.10, inclusive and 9.21.
                            ------------         ----                ----

      9.12 Officer's Knowledge of Default. Upon any officer of the Borrower
           ------------------------------
obtaining knowledge of any Default or Event of Default hereunder or under any
other obligation of the Borrower or any Subsidiary or other Credit Party to any
Lender, or any event, development or occurrence which could reasonably be
expected to have a Material Adverse Effect, cause such officer or an Authorized
Representative to promptly notify the Agent of the nature thereof, the period of
existence thereof, and what action the Borrower or such Subsidiary or other
Credit Party proposes to take with respect thereto.

      9.13 Suits or Other Proceedings. Upon any officer of the Borrower
           --------------------------
obtaining knowledge of any litigation or other proceedings being instituted
against the Borrower or any Subsidiary or other Credit Party, or any attachment,
levy, execution or other process being instituted against any assets of the
Borrower or any Subsidiary or other Credit Party, making a claim or claims in an
aggregate amount greater than $3,000,000, to the extent not covered by
insurance, promptly deliver to the Agent written notice thereof stating the
nature and status of such litigation, dispute, proceeding, levy, execution or
other process.

      9.14 Notice of Environmental Complaint or Condition. Promptly provide to
           ----------------------------------------------
the Agent true, accurate and complete copies of any and all notices, complaints,
orders, directives, claims or citations received by the Borrower or any
Subsidiary relating to any (a) material violation or alleged material violation
by the Borrower or any Subsidiary of any applicable Environmental Law; (b)
release or threatened release by the Borrower or any Subsidiary, or by any
Person handling, transporting or disposing of any Hazardous Material on behalf
of the Borrower or any Subsidiary, or at any facility or property owned or
leased or operated by the Borrower or any Subsidiary, of any Hazardous Material,
except where occurring legally pursuant to a permit or license or to the extent
such release could not have a Material Adverse Effect; or (c) material liability
or alleged material liability of the Borrower or any Subsidiary for the costs of
cleaning up, removing, remediating or responding to a release of Hazardous
Materials.

      9.15 Environmental Compliance. If the Borrower or any Subsidiary shall
           ------------------------
receive any letter, notice, complaint, order, directive, claim or citation
alleging that the Borrower or any Subsidiary has violated any Environmental Law,
has released any Hazardous Material, or is liable for the costs of cleaning up,
removing, remediating or responding to a release of Hazardous Materials, the
Borrower and any Subsidiary shall, within the time period permitted and to the
extent required by the applicable Environmental Law or the Governmental
Authority responsible for enforcing such Environmental Law, remove or remedy, or
cause the applicable Subsidiary to remove or remedy, such violation or release
or satisfy such liability.

                                       83

<PAGE>

      9.16 Indemnification. Without limiting the generality of Section 13.9, the
           ---------------                                     ------------
Borrower hereby agrees to indemnify and hold the Agent and the Lenders and any
affiliate of any Lender party to a Swap Agreement, and their respective
officers, directors, employees and agents, harmless from and against any and all
claims, losses, penalties, liabilities, damages and expenses (including
assessment and cleanup costs and reasonable attorneys', consultants' or other
expert fees, expenses and disbursements) arising directly or indirectly from,
out of or by reason of (a) the violation of any Environmental Law by the
Borrower or any Subsidiary or with respect to any property owned, operated or
leased by the Borrower or any Subsidiary or (b) the handling, storage,
transportation, treatment, emission, release, discharge or disposal of any
Hazardous Materials by or on behalf of the Borrower or any Subsidiary, or on or
with respect to property owned or leased or operated by the Borrower or any
Subsidiary. The provisions of this Section 9.16 shall survive repayment of the
                                   ------------
Obligations, occurrence of the Facility Termination Date and expiration or
termination of this Agreement.

      9.17 Further Assurances. At the Borrower's cost and expense, upon request
           ------------------
of the Agent, duly execute and deliver or cause to be duly executed and
delivered, to the Agent such further instruments, documents, certificates,
financing and continuation statements, and do and cause to be done such further
acts that may be reasonably necessary or advisable in the reasonable opinion of
the Agent to carry out more effectively the provisions and purposes of this
Agreement, the Security Documents and the other Loan Documents.

      9.18 Employee Benefit Plans.
           ----------------------

           (a)  With reasonable promptness, and in any event within thirty (30)
      days thereof, give notice to the Agent of (a) the establishment of any new
      Pension Plan (which notice shall include a copy of such plan), (b) the
      commencement of contributions to any Employee Benefit Plan to which the
      Borrower or any of its ERISA Affiliates was not previously contributing,
      (c) any material increase in the benefits of any existing Employee Benefit
      Plan, (d) each funding waiver request filed with respect to any Pension
      Plan and all communications received or sent by the Borrower or any ERISA
      Affiliate with respect to such request, including any communications
      relating to the PBGC Agreement and (e) the failure of the Borrower or any
      ERISA Affiliate to make a required installment or payment under Section
      302 of ERISA or Section 412 of the Code (in the case of Employee Benefit
      Plans regulated by the Code or ERISA and including any installments or
      payments relating to the PBGC Agreement) or under any Foreign Benefit Law
      (in the case of Employee Benefit Plans regulated by any Foreign Benefit
      Law) by the due date;

           (b)  Promptly and in any event within fifteen (15) days of becoming
      aware of the occurrence or forthcoming occurrence of any (a) Termination
      Event or (b) nonexempt "prohibited transaction," as such term is defined
      in Section 406 of ERISA or Section 4975 of the Code, in connection with
      any Employee Benefit Plan or any trust created thereunder, deliver to the
      Agent a notice specifying the nature thereof, what action the Borrower or
      any ERISA Affiliate has taken, is taking or proposes to take with respect
      thereto and, when known, any action taken or threatened by the Internal
      Revenue Service, the Department of Labor or the PBGC with respect thereto;
      and

                                       84

<PAGE>

           (c)  With reasonable promptness but in any event within fifteen (15)
      days for purposes of clauses (a), (b) and (c), deliver to the Agent copies
      of (a) any unfavorable determination letter from the Internal Revenue
      Service regarding the qualification of an Employee Benefit Plan under
      Section 401(a) of the Code, (b) all notices received by the Borrower or
      any ERISA Affiliate of the PBGC's or any Governmental Authority's intent
      to terminate any Pension Plan or to have a trustee appointed to administer
      any Pension Plan, including all correspondence associated with the PBGC
      Agreement, (c) each Schedule B (Actuarial Information) to the annual
      report (Form 5500 Series) filed by the Borrower or any ERISA Affiliate
      with the Internal Revenue Service with respect to each Employee Benefit
      Plan and (d) all notices received by the Borrower or any ERISA Affiliate
      from a Multiemployer Plan sponsor concerning the imposition or amount of
      withdrawal liability pursuant to Section 4202 of ERISA. The Borrower will
      notify the Agent in writing within five (5) Business Days of the Borrower
      or any ERISA Affiliate obtaining knowledge or reason to know that the
      Borrower or any ERISA Affiliate has filed or intends to file a notice of
      intent to terminate any Pension Plan under a distress termination within
      the meaning of Section 4041(c) of ERISA.

      9.19 Continued Operations. Continue at all times to conduct its
           --------------------
business and engage principally in the same line or lines of business
substantially as heretofore conducted.

      9.20 New Subsidiaries. Simultaneously with (i) the acquisition or creation
           ----------------
of any Material Subsidiary which is a Domestic Subsidiary, or upon any existing
Domestic Subsidiary becoming a Material Subsidiary, cause to be delivered to the
Agent each of the following and (ii) the acquisition or creation of any Material
Direct Foreign Subsidiary, cause to be delivered to the Agent each of the items
set forth in (d), (e), (f), (h) (subclauses (i), (ii), (iii) and (v) only) and
(i), below:

           (a)  a Facility Guaranty executed by such Subsidiary substantially in
      the form of Exhibit I;
                  ---------

           (b)  a General Security Agreement of such Subsidiary substantially in
      the form of Exhibit J-1, and a Priority Security agreement substantially
                  -----------
      in the form of Exhibit J-2, together with such Uniform Commercial Code
                     -----------
      financing statements on Form UCC-1 or otherwise duly executed by such
      Subsidiary as "Debtor" and (i) naming the General Collateral Agent for the
      benefit of the General Secured Parties, as "Secured Party," and (ii)
      naming the Priority Collateral Agent for the benefit of the Priority
      Secured Parties as "Secured Party", in each case in form, substance and
      number sufficient in the reasonable opinion of the Collateral Agents and
      their special counsel to be filed in all Uniform Commercial Code filing
      offices in all jurisdictions in which filing is necessary or advisable to
      perfect (y) the General Lien in favor of the General Collateral Agent for
      the benefit of the General Secured Parties and (z) the Priority Lien in
      favor of the Priority Collateral Agent for the benefit of the Priority
      Secured Parties, in each case to the extent such General Lien or Priority
      Lien may be perfected by Uniform Commercial Code filing;

           (c)  Priority Mortgages and General Mortgages with respect to all
      parcels of real property with a fair market value in excess of $300,000
      owned by such Subsidiary

                                       85

<PAGE>

      and with respect to any Material Real Property or to the extent required
      by any law, regulation or directive of any applicable Governmental
      Authority, Material Real Property Support Documents, as applicable, and
      related Uniform Commercial Code financing statements on Form UCC-1 or
      otherwise pertaining to fixtures;

           (d)  if the Subsidiary Securities issued by such Subsidiary that are,
      or are required to become, Pledged Interests, shall be owned by a
      Subsidiary who has not then executed and delivered to the General
      Collateral Agent a Pledge Agreement granting a General Lien to the General
      Collateral Agent, for the benefit of the General Secured Parties, in such
      equity interests, a Pledge Agreement executed by the Subsidiary that
      directly owns such Subsidiary Securities substantially in the form
      attached hereto as Exhibit K (or, as to the Pledged Interests issued by
                         ---------
      any Direct Foreign Subsidiary, in a form acceptable to the Agent), and if
      such Subsidiary Securities shall be owned by the Borrower or a Subsidiary
      who has previously executed a Pledge Agreement, a Pledge Agreement
      Supplement in the form required by such Pledge Agreement pertaining to
      such Subsidiary Securities;

           (e)  if the Pledged Interests issued by such Subsidiary constitute
      securities under Article 8 of the Uniform Commercial Code (i) the
      certificates representing such Pledged Interests and (ii) duly executed,
      undated stock powers or other appropriate powers of assignment in blank
      affixed thereto;

           (f)  (i) Uniform Commercial Code financing statements on form UCC-1
      or otherwise duly executed by the pledgor as "Debtor" and naming the
      General Collateral Agent for the benefit of the General Secured Parties as
      "Secured Party," in form, substance and number sufficient in the
      reasonable opinion of the Agent and its special counsel to be filed in all
      Uniform Commercial Code filing offices and in all jurisdictions in which
      filing is necessary or advisable to perfect in favor of the General
      Collateral Agent for the benefit of the General Secured Parties the
      General Lien on such Subsidiary Securities and (ii) if the Pledged
      Interests issued by such Subsidiary do not constitute securities and such
      Subsidiary has not elected to have such interests treated as securities
      under Article 8 of the applicable Uniform Commercial Code, a control
      agreement from the Registrar of such Subsidiary, in form and substance
      acceptable to the Agent and in which the Registrar (1) acknowledges that
      the pledgor is at the date of such acknowledgment the sole record, and to
      its knowledge, beneficial owner of such Subsidiary Securities, (2)
      acknowledges the General Lien in favor of the General Collateral Agent
      conferred under the Pledge Agreement and that such General Lien will be
      reflected on the registry for such Subsidiary Securities, (3) agrees that
      it will not register any transfer of such Subsidiary Securities nor
      acknowledge any Lien in favor of any other Person on such Subsidiary
      Securities, without the prior written consent of the General Collateral
      Agent, in each instance, until it receives notice from the General
      Collateral Agent that all General Liens on such Collateral in favor of the
      General Collateral Agent for the benefit of the General Secured Parties
      have been released or terminated, and (4) agrees that upon receipt of
      notice from the Agent or the General Collateral Agent that an Event of
      Default has occurred and is continuing and that the

                                       86

<PAGE>

      Subsidiary Securities identified in such notice have been transferred to a
      transferee identified in such notice, it will duly record such transfer of
      Subsidiary Securities on the appropriate registry without requiring
      further consent from the pledgor and shall thereafter treat the transferee
      as the sole record and beneficial owner of such Subsidiary Securities
      pending further transfer, notwithstanding any contrary instruction
      received from the pledgor;

           (g)  a supplement to the appropriate schedule attached to the
      appropriate Security Documents listing the additional Collateral,
      certified as true, correct and complete by the Authorized Representative
      (provided that the failure to deliver such supplement shall not impair the
      rights conferred under the Security Documents in after acquired
      Collateral);

           (h)  an opinion or opinions of counsel to the Subsidiary (including
      local counsel in each jurisdiction where Mortgaged Property is located)
      dated as of the date of delivery of the Facility Guaranty and other Loan
      Documents provided for in this Section 9.20 and addressed to the
                                     ------------
      Collateral Agents, in form and substance reasonably acceptable to the
      Collateral Agents (which opinion may include assumptions and
      qualifications of similar effect to those contained in the opinions of
      counsel delivered pursuant to Section 7.1(a)), to the effect that:
                                    --------------

                (i)    such Subsidiary is duly organized, validly existing and
           in good standing in the jurisdiction of its formation, has the
           requisite power and authority to own its properties and conduct its
           business as then owned and then conducted and proposed to be
           conducted and to execute, deliver and perform the Facility Guaranty
           and other Loan Documents described in this Section 9.20 to which such
                                                      ------------
           Subsidiary is a signatory, and is duly qualified to transact business
           and is in good standing as a foreign corporation or partnership in
           each other jurisdiction in which the character of the properties
           owned or leased, or the business carried on by it, requires such
           qualification and the failure to be so qualified would reasonably be
           likely to result in a Material Adverse Effect;

                (ii)   the execution, delivery and performance of the Facility
           Guaranty and other Loan Documents described in this Section 9.20 to
                                                               ------------
           which such Subsidiary is a signatory have been duly authorized by all
           requisite corporate or partnership action (including any required
           shareholder or partner approval), each of such agreements has been
           duly executed and delivered and constitutes the valid and binding
           agreement of such Subsidiary, enforceable against such Subsidiary in
           accordance with its terms, subject to the effect of any applicable
           bankruptcy, moratorium, insolvency, reorganization or other similar
           law affecting the enforceability of creditors' rights generally and
           to the effect of general principles of equity (whether considered in
           a proceeding at law or in equity);

                (iii)  the Subsidiary Securities of such Subsidiary are duly
           authorized, validly issued, fully paid and nonassessable, and free of
           any preemptive rights, and the applicable General Security Instrument
           (including foreign collateral

                                       87

<PAGE>

           documents) is effective to create a valid security interest in favor
           of the General Collateral Agent for the benefit of the General
           Secured Parties in such Subsidiary Securities as constitute Pledged
           Interests;

                (iv)   (A) the Uniform Commercial Code financing statements on
           Form UCC-1 delivered to the General Collateral Agent by the
           Subsidiary in connection with the delivery of the General Security
           Instruments of such Subsidiary have been duly executed by the
           Subsidiary and are in form, substance and number sufficient for
           filing in all Uniform Commercial Code filing offices in all
           jurisdictions in which filing is necessary to perfect in favor of the
           General Collateral Agent for the benefit of the General Secured
           Parties the General Lien on General Collateral conferred under such
           General Security Instruments to the extent such General Lien may be
           perfected by Uniform Commercial Code filing;

                       (B) the Uniform Commercial Code financing statements on
                Form UCC-1 delivered to the Priority Collateral Agent by the
                Subsidiary in connection with the delivery of the Priority
                Security Instruments of such Subsidiary have been duly executed
                by the Subsidiary and are in form, substance and number
                sufficient for filing in all Uniform Commercial Code filing
                offices in all jurisdictions in which filing is necessary to
                perfect in favor of the Priority Collateral Agent for the
                benefit of the Priority Secured Parties the Priority Lien on
                Priority Collateral conferred under such Priority Security
                Instruments to the extent such Priority Lien may be perfected by
                Uniform Commercial Code filing;

                (v)    in the case of Direct Foreign Subsidiaries only, that
           under the laws of the applicable foreign jurisdiction, all
           agreements, notices and other documents that are required to be
           executed, delivered, filed or recorded and all other action required
           to be taken, within or pursuant to the laws of such jurisdiction to
           perfect the General Lien conferred in favor of the General Collateral
           Agent under the applicable General Security Instrument as against
           creditors of and purchasers for value from the holder of the Pledged
           Interests has been duly executed, delivered, filed, recorded or
           taken, as the case may be;

                (vi)   each Mortgage is in appropriate form for due recordation
           and upon recordation shall constitute a valid and effective, fully
           perfected Priority Lien and General Lien, as applicable, on the real
           property and fixtures described therein; and

           (i)  current copies of the Organizational Documents and Operating
      Documents of such Subsidiary, minutes of duly called and conducted
      meetings (or duly effected consent actions) of the Board of Directors,
      partners, or appropriate committees thereof (and, if required by such
      Organizational Documents, Operating Documents or applicable law, of the
      shareholders, members or partners) of such Subsidiary authorizing the
      actions and the execution and delivery of documents described in this
      Section 9.20.
      ------------

                                       88

<PAGE>

     9.21  Controlled Accounts. Cause at all times all of its depository
           -------------------
accounts, other than Excluded Deposit Accounts, to be held by and maintained
with the Agent or any Lender.

     9.22  Third-party Consultant. Pay all fees and expenses of a third-party
           ----------------------
business consultant to be hired on or before February 15, 2000 in a manner
acceptable to the Agent on behalf of the Lenders, the Senior Lease Creditor and
Prudential, such consultant to be mutually acceptable to the Borrower, Agent and
Lenders, to report to and be available for meetings with the Lenders, the Agent,
the Senior Lease Creditor and Prudential and to have a scope of duties and cost
structure to be agreed upon. Copies of any consultant reports will be delivered
to the Borrower. In the event such consultant shall cease to be acceptable to
the Agent and the Lenders or shall not be available for meetings or shall not
deliver copies of such consultant reports as a result of its employment by or
client relationship with Prudential, the Borrower agrees to pay all fees and
expenses of an additional independent third-party consultant to be hired
thereafter by the Agent on behalf of the Lenders and to have a scope of duties
and cost structure to be agreed upon.

     9.23  Post-Closing Deliveries. Deliver to the Agent within the time periods
           -----------------------
indicated the following documents in form and substance satisfactory to the
Agent and the Lenders:

           (a)  within ninety (90) days of the Closing Date, the following
      Material Real Property Support Documents relating to each Mortgaged
      Property set forth on Schedule 5.4 hereto (other than the Comfort Sleep
                            ------------
      property) to the extent not delivered at the Closing Date:

                (i)    commitments for Title Policies with such endorsements as
           may be requested by the Agent;

                (ii)   copies of title exceptions with respect to the Mortgaged
           Property, acceptable in form and substance to the Agent;

                (iii)  Phase I environmental reports with respect to the
           Mortgaged Property, acceptable in form, scope, detail, analysis, and
           results to the Agent;

                (iv)   current surveys of the Mortgaged Property and surveyor's
           affidavits;

                (v)    appraisals of the Mortgaged Property and all machinery
           and equipment constituting Collateral;

                (vi)   Borrower's affidavit for the Mortgaged Property;

           (b)  Within thirty (30) days of the Closing Date, the following to
      the extent not delivered at the Closing Date:

                (i)    stock certificates and stock registry forms, as required
           by and acceptable in detail to the Agent, including any schedules
           affected thereby;

                                       89

<PAGE>

                (ii)   Account Control Agreements together with attached copies
           of account statements and customer-commodities intermediary account
           agreements;

                (iii)  third party consent of CIPCO S.C., Inc. and Prospin
           Industries, Inc. to assignment of any rights under their respective
           License Agreements with the Borrower; and

                (iv)   third party consent of Cluett, Peabody & Co., Inc. to
           assignment of any rights under its License Agreement with the
           Borrower, subject to the Borrower's exercise of its best efforts.

                (c)    Within five (5) business days of the Closing Date, the
           following to the extent not delivered at Closing Date:

                       (i)  all original schedules to this Agreement and any
                other Loan Document, revised and completed; and

                       (ii) executed originals of the Compliance Certificate,
                Initial Borrowing Notice, Interest Rate Selection Notice,
                Certificate of Borrowing Base and any other certificates
                required under this Agreement.

                                       90

<PAGE>

                                   ARTICLE X

                               Negative Covenants
                               ------------------

      Until the Facility Termination Date, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, nor will it permit any
Subsidiary to:

    10.1   Financial Covenants.
           -------------------

           (a)  Consolidated Net Worth. Permit as of each date set forth below
                ----------------------
      Consolidated Net Worth to be less than the amount set forth opposite each
      such date:

Date                                                    Consolidated Net
----                                                    Worth Must Exceed
                                                        -----------------

September 30, 2001                                      $90,000,000
December 30, 2001                                       $70,000,000
March 31, 2002                                          $67,000,000
June 30, 2002                                           $67,000,000
September 29, 2002                                      $68,000,000
December 29, 2002                                       $68,500,000

           (b)  Intentionally left blank.

           (c)  Consolidated Interest Coverage Ratio. Permit as of the end of
                ------------------------------------
      each Four-Quarter Period set forth below the Consolidated Interest
      Coverage Ratio to be less than that set forth opposite each such period:

                                                   Consolidated Interest
Four-Quarter Period Ending                         Coverage Ratio Must Exceed
--------------------------                         --------------------------

September 30, 2001                                 0.96 to 1.00
December 30, 2001                                  0.73 to 1.00
March 31, 2002                                     0.71 to 1.00
June 30, 2002                                      1.15 to 1.00
September 29, 2002                                 1.34 to 1.00
December 29, 2002                                  1.74 to 1.00

                                       91

<PAGE>

           (d)  Consolidated EBITDA. Permit as of the end of each Four-Quarter
                -------------------
      Period set forth below Consolidated EBITDA to be less than that set forth
      opposite each such period:

                                                        Consolidated EBITDA
Four-Quarter Period Ending                              Must Exceed
--------------------------                              -----------

September 30, 2001                                      $20,500,000
December 30, 2001                                       $15,500,000
March 31, 2002                                          $15,000,000
June 30, 2002                                           $23,500,000
September 29, 2002                                      $29,500,000
December 29, 2002                                       $38,000,000

           (e)  Non-Cash Restructuring Charges. Permit Non-cash Restructuring
                ------------------------------
      Charges to be greater than $35,000,000 in Fiscal Year 2001.

      10.2   Acquisitions. Enter into any agreement, contract, binding
             ------------
commitment or other arrangement providing for any Acquisition, or take any
action to solicit the tender of securities or proxies in respect thereof in
order to effect any Acquisition.

      10.3   Capital Expenditures.
             --------------------

           (a)  Make or become committed to make U.S. Capital Expenditures which
      exceed $10,000,000 in any Fiscal Year (on a non-cumulative basis, with the
      effect that amounts expended in any Fiscal Year may not be carried forward
      to a subsequent period).

           (b)  Make or become committed to make Mexican Capital Expenditures
      unless (i) no Default or Event of Default has occurred and is continuing,
      (ii) such Mexican Capital Expenditures are only for the purpose of
      purchasing the certain real property in Altamira, Mexico and making
      certain improvements thereto and (iii) such Mexican Capital Expenditures
      do not exceed $200,000 in any Fiscal Year (on a non-cumulative basis, with
      the effect that amounts expended in any Fiscal Year may not be carried
      forward to a subsequent period).

      10.4   Liens. Incur, create or permit to exist any Lien, charge or other
             -----
encumbrance of any nature whatsoever with respect to any property or assets now
owned or hereafter acquired by the Borrower or any Subsidiary, other than the
following (collectively, "Permitted Liens"):

           (a)  Liens on the General Collateral and the Priority Collateral
      created under the General Security Instruments and the Priority Security
      Instruments in favor of the General Collateral Agent or the Priority
      Collateral Agent, as applicable;

                                       92

<PAGE>

           (b)  Liens on Receivables (as defined in and transferred by an
      Originator in accordance with the Receivables Transfer Agreement) and
      Returned Goods (as defined in the Securitization Intercreditor Agreement)
      in favor of General Electric Capital Corporation, as collateral agent
      under the Receivables Purchase Agreement including, but not limited to,
      either (i) Liens securing an increase in the Securitization Outstandings
      under the Receivables Purchase Agreement from $50,000,000 to $60,000,000
      or (ii) Liens securing an additional factoring or securitization of
      receivables in an aggregate amount not to exceed $10,000,000;

           (c) Liens existing on the date hereof, other than as referred to in
      clauses (a) and (b) above, and set forth on Schedule 8.7;
                                                  ------------

           (d)  Liens imposed by law for taxes, assessments or charges of any
      Governmental Authority for claims not yet due or which are being contested
      in good faith by appropriate proceedings diligently conducted, which,
      except as expressly so specified on Schedule 8.7, are inferior in respect
                                          ------------
      of the Collateral to the Liens conferred under the Security Documents, and
      with respect to which adequate reserves or other appropriate provisions
      are being maintained in accordance with GAAP and which Liens are not yet
      enforceable by such creditors against other creditors;

           (e)  statutory Liens of landlords and Liens of carriers,
      warehousemen, mechanics, materialmen and other similar Liens imposed by
      law or created in the ordinary course of business and in existence less
      than 90 days from the date of creation thereof for amounts not yet due or
      which are being contested in good faith by appropriate proceedings
      diligently conducted, which, except as expressly so specified on Schedule
                                                                       --------
      8.7, are inferior in respect of the Collateral to the Liens conferred
      ---
      under the Security Documents, and with respect to which adequate reserves
      or other appropriate provisions are being maintained in accordance with
      GAAP and which Liens are not yet enforceable by such creditors against
      other creditors;

           (f)  Liens incurred or deposits made in the ordinary course of
      business (including, without limitation, surety bonds and appeal bonds) in
      connection with workers' compensation, unemployment insurance and other
      types of social security benefits or to secure the performance of tenders,
      bids, leases, contracts (other than for the repayment of Indebtedness),
      statutory obligations and other similar obligations or arising as a result
      of progress payments under government contracts;

           (g)  with respect to all real property to which (h) below does not
      apply, easements (including reciprocal easement agreements and utility
      agreements), rights-of-way, covenants, consents, reservations,
      encroachments, variations and zoning and other restrictions, charges or
      encumbrances (whether or not recorded), which do not interfere materially
      with the ordinary conduct of the business of the Borrower or any
      Subsidiary and which do not materially detract from the value of the
      property to which they attach or materially impair the use thereof to the
      Borrower or any Subsidiary;

                                       93

<PAGE>

           (h)  with respect to Mortgaged Real Property for which a Title Policy
      is required to be issued pursuant to the terms hereof, matters acceptable
      to the Agent appearing as exceptions to coverage on the Title Policies;

           (i)  purchase money Liens to secure Indebtedness permitted under
      Section 10.5(d) and incurred to purchase fixed assets, provided such\
      ---------------
      Indebtedness represents not less than 75% and not more than 95% of the
      purchase price of such assets as of the date of purchase thereof and no
      property other than the assets so purchased secures such Indebtedness;

           (j)  Liens arising in connection with Capital Leases permitted under
      Section 10.5(f); provided that no such Lien shall extend to any Collateral
      ---------------  --------
      or to any other property other than the assets subject to such Capital
      Leases; and

           (k)  Liens on assets of Parras Cone to secure Indebtedness permitted
      under Section 10.5(i).
            ---------------

      10.5 Indebtedness. Incur, create, assume or permit to exist any
           ------------
Indebtedness, howsoever evidenced, except:

           (a)  Indebtedness existing as of the Closing Date as set forth in
      Schedule 8.6; provided, none of the instruments and agreements evidencing
      ------------  --------
      or governing such Indebtedness shall be amended, supplemented or restated
      after the Closing Date to change any terms of subordination, repayment or
      rights of enforcement, conversion, put or exchange rights to be materially
      less favorable to the Agent or the Lenders than the terms and rights as in
      effect on the Closing Date;

           (b)  Indebtedness owing to the Agent or any Lender in connection with
      this Agreement, any Note or other Loan Document;

           (c)  the endorsement of negotiable instruments for deposit or
      collection or similar transactions in the ordinary course of business;

           (d)  purchase money Indebtedness (other than the Parras Cone Debt)
      described in Section 10.4(i) not to exceed an aggregate outstanding
                   ---------------
      principal amount at any time of $0;

           (e)  Indebtedness arising from Rate Hedging Obligations permitted
      under Section 10.15;
            -------------

           (f)  obligations under Capital Leases not to exceed an aggregate
      principal amount at any time in excess of $0;

           (g)  unsecured intercompany Indebtedness for loans and advances made
      by the Borrower or any Guarantor to the Borrower or any Guarantor, any
      such Indebtedness of

                                       94

<PAGE>

      the Borrower owing to any Guarantor shall be subordinate to payment of the
      Obligations hereunder at all times in accordance with the terms of the
      Facility Guaranty;

           (h)  additional unsecured Indebtedness for Money Borrowed not
      otherwise covered by clauses (a) through (g) above, provided that the
      aggregate outstanding principal amount of all such other Indebtedness
      permitted under this clause (h) shall in no event exceed $10,000,000 at
      any time, and provided further that this clause (h) shall not be deemed to
      permit any Contingent Obligation (other than Contingent Obligations
      arising under the Equity Appreciation Rights Agreement or the Senior Note
      Equity Appreciation Rights Agreement).

           (i)  the Parras Cone Debt;

           (j)  Indebtedness extending the maturity of, or renewing, refunding
      or refinancing, in whole or in part, Indebtedness incurred under clauses
      (a), (b), (g), (h) and (i) of this Section 10.5, provided that the terms
                                         ------------
      of any such extension, renewal, refunding or refinancing Indebtedness (and
      of any agreement or instrument entered into in connection therewith) shall
      not change any terms of subordination, repayment or rights of enforcement,
      conversion, put or exchange rights to be materially less favorable to the
      Agent and the Lenders than the terms of the Indebtedness as in effect
      prior to such action, and provided further that (1) the aggregate
      principal amount of such extended, renewed, refunded or refinanced
      Indebtedness shall not be increased by such action, (2) the group of
      direct or contingent obligors on such Indebtedness shall not be expanded
      as a result of any such action, and (3) immediately before and immediately
      after giving effect to any such extension, renewal, refunding or
      refinancing, no Default or Event of Default shall have occurred and be
      continuing; and

           (k)  Securitization Outstandings or Indebtedness described in and
      secured by Liens permitted under Section 10.4(b)(ii).
                                       -------------------

      10.6 Transfer of Assets. Conduct, permit, or suffer, or agree to conduct
           ------------------
or permit, or acquiesce in, any Asset Disposition other than Permitted Asset
Dispositions.

      10.7 Investments. Purchase, own, invest in or otherwise acquire, directly
           -----------
or indirectly, any stock or other securities, or make or permit to exist any
interest whatsoever in any other Person or permit to exist any loans or advances
to any Person, except that Borrower may make or maintain:

           (a)  investments in securities of any Person acquired in an
      Acquisition permitted hereunder;

           (b)  investments in Eligible Securities;

           (c)  investments existing as of the date hereof and as set forth in
      Schedule 8.4;
      ------------

                                       95

<PAGE>

           (d)  accounts receivable arising and trade credit granted in the
      ordinary course of business and any securities received in satisfaction or
      partial satisfaction thereof in connection with accounts of financially
      troubled Persons to the extent reasonably necessary in order to prevent or
      limit loss; and

           (e)  investments in (i) Guarantors and (ii) Cone Receivables II LLC
      in connection with the Securitization Transaction;

           (f)  loans between the Borrower and the Guarantors described in
      Section 10.5(g);
      ---------------

           (g)  investments made at such time as no Default or Event of Default
      shall have occurred and be continuing relating to the site in Altamira,
      Mexico (at which site the Borrower intends to construct a denim
      manufacturing facility), not in excess of (i) $2,700,000 in the Fiscal
      Year ended December 30, 2001, or (ii) $500,000 in the Fiscal Year ended
      December 29, 2002.

           (h)  other loans, advances and investments (including investments to
      finance the Parras Cone Acquisition) in an aggregate principal amount at
      any time outstanding which, when aggregated with the aggregate Costs of
      Acquisition for all Acquisitions (other than the Parras Cone Debt in the
      case of the Parras Cone Acquisition) agreed to or consummated after the
      Closing Date permitted at any time under Section 10.2, does not exceed
      $500,000.

    10.8   Merger or Consolidation. (a) Consolidate with or merge into any other
           -----------------------
Person, or (b) permit any other Person to merge into it, or (c) sell, transfer
or lease or otherwise dispose of all or a substantial part of its assets (other
than Permitted Asset Dispositions); provided, however, any Subsidiary of the
                                    --------  -------
Borrower may merge or transfer all or substantially all of its assets into or
consolidate with the Borrower (with the Borrower as the survivor) or any
Guarantor, provided further, that any resulting or surviving entity shall
           -------- -------
execute and deliver such agreements and other documents, including a Facility
Guaranty, and take such other action as the Agent may require to evidence or
confirm its express assumption of the obligations and liabilities of its
predecessor entities under the Loan Documents.

    10.9   Restricted Payments. Make any Restricted Payment or apply or set
           -------------------
apart any of their assets therefor or agree to do any of the foregoing.

    10.10  Transactions with Affiliates. Other than transactions permitted under
           ----------------------------
Sections 10.7 and 10.8 or as set forth on Schedule 10.10, enter into any
-------------     ----                    --------------
transaction after the Closing Date, including, without limitation, the purchase,
sale, lease or exchange of property, real or personal, or the rendering of any
service, with any Affiliate of the Borrower, except (a) that such Persons may
render services to the Borrower or its Subsidiaries for compensation at the same
rates generally paid by Persons engaged in the same or similar businesses for
the same or similar services, (b) that the Borrower or any Subsidiary may render
services to such Persons for compensation at the same rates generally charged by
the Borrower or such Subsidiary and (c) in either case in the ordinary course of
business and pursuant to the reasonable requirements of the

                                       96

<PAGE>

Borrower's (or any Subsidiary's) business consistent with past practice of the
Borrower and its Subsidiaries and upon fair and reasonable terms no less
favorable to the Borrower (or any Subsidiary) than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate.

      10.11 Compliance with ERISA, the Code and Foreign Benefit Laws. With
            --------------------------------------------------------
respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan:

           (a)  permit the occurrence of (i) any Termination Event which would
      result in a material liability on the part of the Borrower or any ERISA
      Affiliate to the PBGC or to any Governmental Authority, (ii) any action
      that violates the Borrower's material obligations under the PBGC
      Agreement, except those that are waived by the PBGC; or

           (b)  except for amounts defined as "Unfunded Benefit Liability" in
      the PBGC Agreement, permit the present value of all accumulated benefit
      obligations under all Pension Plans to exceed the current value of the
      assets of such Pension Plans allocable to such benefit liabilities; or

           (c)  permit any accumulated funding deficiency (as defined in Section
      302 of ERISA and Section 412 of the Code) with respect to any Pension
      Plan, whether or not waived, except for the "Unfunded Benefit Liability"
      as defined in the PBGC Agreement; or

           (d)  fail to make any contribution or payment to any Multiemployer
      Plan which the Borrower or any ERISA Affiliate may be required to make
      under any agreement relating to such Multiemployer Plan, or any law
      pertaining thereto; or

           (e)  engage, or permit any Borrower or any ERISA Affiliate to engage,
      in any prohibited transaction under Section 406 of ERISA or Sections 4975
      of the Code for which a civil penalty pursuant to Section 502(I) of ERISA
      or a tax pursuant to Section 4975 of the Code may be imposed; or

           (f)  permit the establishment of any Employee Benefit Plan providing
      post-retirement welfare benefits or establish or amend any Employee
      Benefit Plan which establishment or amendment could result in liability to
      the Borrower or any ERISA Affiliate or increase the obligation of the
      Borrower or any ERISA Affiliate to a Multiemployer Plan which annual
      liability or increase, individually or together with all similar
      liabilities and increases, is in excess of $1,000,000; or

           (g)  fail, or permit the Borrower or any ERISA Affiliate to fail, to
      establish, maintain and operate each Employee Benefit Plan in compliance
      in all material respects with the provisions of ERISA, the Code, all
      applicable Foreign Benefit Laws and all other applicable laws and the
      regulations and interpretations thereof.

      10.12 Fiscal Year. Change its Fiscal Year.
            -----------

                                       97

<PAGE>

     10.13 Dissolution, etc. Wind up, liquidate or dissolve (voluntarily or
           ----------------
involuntarily) or commence or suffer any proceedings seeking any such winding
up, liquidation or dissolution, except in connection with a merger or
consolidation permitted pursuant to Section 10.8.
                                    ------------

     10.14 Limitations on Sales and Leasebacks. Other than sale and leaseback
           -----------------------------------
transactions in the ordinary course of business having an aggregate value not in
excess of $250,000 in any Fiscal Year and except as set forth on Schedule 10.14,
                                                                 --------------
enter into any arrangement or arrangements with any Person providing for the
leasing by the Borrower or any Subsidiary of real or personal property, whether
now owned or hereafter acquired in a single transaction or series of related
transactions, which has been or is to be sold or transferred by the Borrower or
any Subsidiary to such Person or to any other Person to whom funds have been or
are to be advanced by such Person on the security of such property or rental
obligations of the Borrower or any Subsidiary.

     10.15 Rate Hedging Obligations. Incur any Rate Hedging Obligations or enter
           ------------------------
into any agreements, arrangements, devices or instruments relating to Rate
Hedging Obligations, except pursuant to Swap Agreements, in an aggregate
notional amount not to exceed at any time 50% of the Total Revolving Credit
Commitment, which create Rate Hedging Obligations incurred to limit risks of
currency or interest rate fluctuations to which the Borrower and its
Subsidiaries are otherwise subject by virtue of the operations of their
businesses, and not for speculative purposes.

     10.16 Negative Pledge Clauses. Except (i) as may exist on the Closing Date
           -----------------------
pursuant to any Senior Credit Documents or any Securitization Transaction
documents or (ii) in connection with any refinancing of the foregoing, enter
into or cause, suffer or permit to exist any agreement with any Person other
than the Agent and the Lenders pursuant to this Agreement or any other Loan
Documents which prohibits or limits the ability of any of the Borrower or any
Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, provided
                                                                       --------
that the Borrower and any Subsidiary may enter into such an agreement in
connection with, and that applies only to, property acquired with the proceeds
of purchase money Indebtedness permitted hereunder.

     10.17 Compensation; Reimbursement of Expenses.
           ---------------------------------------

           (a)  Pay any salary, fees, and other direct and indirect remuneration
      and compensation to any of its directors and executive officers in an
      amount in excess of those amounts paid to directors and executive officers
      of comparable companies engaged in the same general type of business and
      in similar financial condition;

           (b)  Reimburse any stockholder, officer, director, employee or agent
      of the Borrower or any Subsidiary for any expenses incurred by such Person
      other than reasonable expenses incurred for or on behalf of the Borrower
      or any Subsidiary in the ordinary course of business.

     10.18 Change in Accountants. Change its independent public accountants.
           ---------------------

                                       98

<PAGE>

     10.19 Prepayments, Etc. of Indebtedness. Prepay, redeem, purchase, defease
           ---------------------------------
or otherwise satisfy prior to the scheduled maturity thereof in any manner, or
make any payment in violation of any subordination terms of, any Indebtedness
(other than the Obligations) other than in connection with any refinancing
permitted under Section 10.5(j) or the payment of the Senior Lease Obligations
                ---------------
from proceeds of the sale or other disposition of the Senior Lease Facility.

     10.20 Partnerships. Become a general partner in any general or limited
           ------------
partnership.

     10.21 Imprest/Payroll Accounts. Permit at any time the aggregate amount on
           ------------------------
deposit in (a) all Payroll Accounts of the Borrower and its Subsidiaries to
exceed the amount required to pay the next scheduled payroll of such Persons, or
(b) all Imprest/Payroll Accounts (other than Payroll Accounts) of the Borrower
and its Subsidiaries to exceed $40,000.

                                       99

<PAGE>

                                   ARTICLE XI

                       Events of Default and Acceleration
                       ----------------------------------

      11.1 Events of Default. If any one or more of the following events (herein
           -----------------
called "Events of Default") shall occur for any reason whatsoever (and whether
such occurrence shall be voluntary or involuntary or come about or be effected
by operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority), that is to say:

           (a)  if default shall be made in the due and punctual payment of the
      principal of any Loan, Reimbursement Obligation or other Obligation, when
      and as the same shall be due and payable whether pursuant to any provision
      of Article II or Article III or Article IV, at maturity, by acceleration
      or otherwise; or

           (b)  if default shall be made in the due and punctual payment of any
      amount of interest on any Loan, Reimbursement Obligation or other
      Obligation or of any fees or other amounts payable to any of the Lenders
      or the Agent on the date on which the same shall be due and payable and
      such default shall continue for a period of two or more days; or

           (c)  if default shall be made in the performance or observance of any
      covenant set forth in Section 9.8, 9.12, 9.13, 9.20, 9.21, Article X or
                            -----------  ----  ----  ----  ----  ---------
      the Letter Agreement dated November 9, 2001 by the Borrower to the Agent;

           (d)  if a default shall be made in the performance or observance of,
      or shall occur under, any covenant, agreement or provision contained in
      this Agreement or the Notes (other than as described in clauses (a), (b)
      or (c) above) and such default shall continue for thirty (30) or more days
      after the earlier of receipt of notice of such default by the Authorized
      Representative from the Agent or an officer of the Borrower becomes aware
      of such default, or if a default shall be made in the performance or
      observance of, or shall occur under any covenant, agreement or provision
      contained in any of the other Loan Documents or any Intercreditor
      Agreement (beyond any applicable grace period, if any, contained therein)
      or in any instrument or document evidencing or creating any obligation,
      guaranty, or Lien in favor of the Agent or any of the Lenders or delivered
      to the Agent or any of the Lenders in connection with or pursuant to this
      Agreement or any of the Obligations, or if any Loan Document ceases to be
      in full force and effect (other than as expressly provided for hereunder
      or thereunder or with the express written consent of the Agent), or if
      without the written consent of the Lenders, this Agreement or any other
      Loan Document or either of the Collateral Agency Agreements or any of the
      Intercreditor Agreements shall be disaffirmed or shall terminate, be
      terminable or be terminated or become void or unenforceable for any reason
      whatsoever (other than as expressly provided for hereunder or thereunder
      or with the express written consent of the Agent), or if the Lien created
      by any of the Security Documents shall at any time fail to constitute a
      valid and perfected Lien on any material portion of the Collateral
      purported to be secured thereby, subject to no prior or equal Lien except
      Permitted Liens and, with

                                       100

<PAGE>

      respect only to General Collateral, the Priority Liens, or the Borrower or
      any other Credit Party shall so assert in writing; or

           (e)  if there shall occur (i) a default, which is not waived, in the
      payment of any principal, interest, premium or other amount with respect
      to any Indebtedness or Rate Hedging Obligation (other than the Loans and
      other Obligations) of the Borrower or any Subsidiary in an amount not less
      than $500,000 in the aggregate outstanding, or (ii) a default, which is
      not waived, in the performance, observance or fulfillment of any term or
      covenant contained in any agreement or instrument under or pursuant to
      which any such Indebtedness or Rate Hedging Obligation may have been
      issued, created, assumed, guaranteed or secured by the Borrower or any
      Subsidiary, or (iii) any other event of default as specified in any
      agreement or instrument under or pursuant to which any such Indebtedness
      or Rate Hedging Obligation may have been issued, created, assumed,
      guaranteed or secured by the Borrower or any Subsidiary, and such default
      or event of default referred to in clauses (i), (ii) and (iii) above shall
      continue for more than the period of grace, if any, therein specified, or
      such default or event of default shall permit the holder of any such
      Indebtedness (or any agent or trustee acting on behalf of one or more
      holders) to accelerate the maturity thereof or to commence any remedy in
      respect thereof ; or

           (f)  if any representation, warranty or other statement of fact
      contained in any Loan Document or in any writing, certificate, report or
      statement at any time furnished to the Agent or any Lender by or on behalf
      of the Borrower or any other Credit Party pursuant to or in connection
      with any Loan Document, or otherwise, shall be false or misleading in any
      material respect when given; or

           (g)  if the Borrower or any Subsidiary or other Credit Party shall be
      unable to pay its debts generally as they become due; file a petition to
      take advantage of any insolvency statute; make an assignment for the
      benefit of its creditors; commence a proceeding for the appointment of a
      receiver, trustee, liquidator or conservator of itself or of the whole or
      any substantial part of its property; file a petition or answer seeking
      liquidation, reorganization or arrangement or similar relief under the
      federal bankruptcy laws or any other applicable law or statute; or

           (h)  if a court of competent jurisdiction shall enter an order,
      judgment or decree appointing a custodian, receiver, trustee, liquidator
      or conservator of the Borrower or any Subsidiary or other Credit Party or
      of the whole or any substantial part of its properties and such order,
      judgment or decree continues unstayed and in effect for a period of sixty
      (60) days, or approve a petition filed against the Borrower or any
      Subsidiary seeking liquidation, reorganization or arrangement or similar
      relief under the federal bankruptcy laws or any other applicable law or
      statute of the United States of America or any state, which petition is
      not dismissed within sixty (60) days; or if, under the provisions of any
      other law for the relief or aid of debtors, a court of competent
      jurisdiction shall assume custody or control of the Borrower or any
      Subsidiary or other Credit Party or of the whole or any substantial part
      of its properties, which control is not

                                       101

<PAGE>

      relinquished within sixty (60) days; or if there is commenced against the
      Borrower or any Subsidiary or other Credit Party any proceeding or
      petition seeking reorganization, arrangement or similar relief under the
      federal bankruptcy laws or any other applicable law or statute of the
      United States of America or any state which proceeding or petition remains
      undismissed for a period of sixty (60) days; or if the Borrower or any
      Subsidiary or other Credit Party takes any action to indicate its consent
      to or approval of any such proceeding or petition; or

           (i)  if (i) one or more judgments or orders where the amount not
      covered by insurance (or the amount as to which the insurer denies
      liability) is in excess of $2,500,000 is rendered against the Borrower or
      any Subsidiary, or (ii) there is any attachment, injunction or execution
      against any of the Borrower's or Subsidiaries' properties for any amount
      in excess of $5,000,000 in the aggregate; and such judgment, attachment,
      injunction or execution remains unpaid, unstayed, undischarged, unbonded
      or undismissed for a period of thirty (30) days; or

           (j)  if the Borrower or any Subsidiary shall, other than in the
      ordinary course of business (as determined by past practices), suspend all
      or any part of its operations material to the conduct of the business of
      the Borrower or such Subsidiary for a period of more than 60 days; or

           (k)  if the Borrower or any Subsidiary shall breach any of the
      material terms or conditions of any agreement under which any Rate Hedging
      Obligations permitted hereby is created and such breach shall continue
      beyond any grace period, if any, relating thereto pursuant to the terms of
      such agreement, or if the Borrower or any Subsidiary shall disaffirm or
      seek to disaffirm any such agreement or any of its obligations thereunder;
      or

           (l)  if any Material Supply Agreement shall be terminated, canceled
      or not renewed, or any notice of the foregoing shall be given by any other
      party thereto, or a default shall occur under such agreement and continue
      beyond the grace or cure period, if any, applicable thereto; or

           (m)      if there shall occur any Change in Control; or

           (n)      if there shall occur any Termination Event as defined in the
                    Receivables Purchase Agreement; or

           (o)      if there shall occur any Event of Default as defined in the
                    Senior Note Agreement;

then, and in any such event and at any time thereafter, if such Event of Default
or any other Event of Default shall have not been waived,

           (A)  either or both of the following actions may be taken: (i) the
      Agent may, and at the direction of the Required Lenders shall, declare any
      obligation of the Lenders and the Issuing Bank to make further Revolving
      Loans or to issue additional Letters of

                                      102

<PAGE>

      Credit terminated, whereupon the obligation of each Lender to make further
      Revolving Loans, and of the Issuing Bank to issue additional Letters of
      Credit, hereunder shall terminate immediately, and (ii) the Agent shall at
      the direction of the Required Lenders, at their option, declare by notice
      to the Borrower any or all of the Obligations to be immediately due and
      payable, and the same, including all interest accrued thereon and all
      other obligations of the Borrower to the Agent and the Lenders, shall
      forthwith become immediately due and payable without presentment, demand,
      protest, notice or other formality of any kind, all of which are hereby
      expressly waived, anything contained herein or in any instrument
      evidencing the Obligations to the contrary notwithstanding; provided,
                                                                  --------
      however, that notwithstanding the above, if there shall occur an Event of
      Default under clause (g) or (h) above, then the obligation of the Lenders
      to make Revolving Loans, and of the Issuing Bank to issue Letters of
      Credit hereunder shall automatically terminate and any and all of the
      Obligations shall be immediately due and payable without the necessity of
      any action by the Agent or the Required Lenders or notice to the Agent or
      the Lenders;

           (B)  The Borrower shall, upon demand of the Agent or the Required
      Lenders, deposit cash with the Agent in an amount equal to the amount of
      any Letter of Credit Outstandings, as collateral security for the
      repayment of any future drawings or payments under such Letters of Credit,
      and such amounts shall be held by the Agent pursuant to the terms of a
      cash collateral agreement acceptable to the Agent; and

           (C)  the Agent and each of the Lenders shall have all of the rights
      and remedies available under the Loan Documents or under any applicable
      law.

      11.2 Agent to Act. In case any one or more Events of Default shall occur
           ------------
and not have been waived, subject to the provisions of Article XII, the Agent
                                                       -----------
may, and at the direction of the Required Lenders shall, proceed to protect and
enforce their rights and remedies contained herein or in any other Loan
Document, or as may be otherwise available at law or in equity.

      11.3 Cumulative Rights. No right or remedy herein conferred upon the
           -----------------
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained herein or in any other Loan Document, and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.

      11.4 No Waiver. No course of dealing between the Borrower and any Lender
           ---------
or the Agent or any failure or delay on the part of any Lender or the Agent in
exercising any rights or remedies under any Loan Document or otherwise available
to it shall operate as a waiver of any rights or remedies and no single or
partial exercise of any rights or remedies shall operate as a waiver or preclude
the exercise of any other rights or remedies hereunder or of the same right or
remedy on a future occasion.

      11.5 Allocation of Proceeds. If an Event of Default has occurred and not
           ----------------------
been waived, and the maturity of the Notes has been accelerated pursuant to
Article XI hereof, all payments received by the Agent pursuant to the terms of
----------
the Intercreditor Agreements, in respect of any

                                      103

<PAGE>

principal of or interest on the Obligations or any other amounts payable by the
Borrower hereunder, shall be applied by the Agent in the following order:

           (a)  the reasonable expenses incurred in connection with retaking,
      holding, preserving, processing, maintaining or preparing for sale, lease
      or other disposition of, any Collateral, including reasonable attorney's
      fees and legal expenses pertaining thereto;

           (b)  amounts due to the Lenders and the Issuing Bank pursuant to
      Sections 4.6(a), 4.6(b), 4.6(c) and 13.5;
      ----------------------------------------

           (c)  amounts due to the Agent pursuant to Section 4.6(d);
                                                     --------------

           (d)  payments of interest on Revolving Loans and Reimbursement
      Obligations, to be applied for the ratable benefit of the Lenders;

           (e)  payments of principal of Loans and Reimbursement Obligations, to
      be applied for the ratable benefit of the Lenders;

           (f)  payments of cash amounts to the Agent in respect of outstanding
      Letters of Credit pursuant to Section 11.1(B);
                                    ---------------

           (g)  amounts due to the Issuing Bank, the Agent and the Lenders
      pursuant to Sections 3.2(h), 9.16 and 13.9;
                  ---------------------     ----

           (h)  payments of all other amounts due under any of the Loan
      Documents, if any, to be applied for the ratable benefit of the Lenders;
      and

           (i)  any surplus remaining after application as provided for herein,
      to the Borrower or otherwise as may be required by applicable law.

                                      104

<PAGE>

                                   ARTICLE XII

                                    The Agent
                                    ---------

     12.1  Appointment, Powers, and Immunities. Each Lender hereby irrevocably
           -----------------------------------
appoints and authorizes the Agent to act as its agent under this Agreement and
the other Loan Documents with such powers and discretion as are specifically
delegated to the Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Agent (which term as used in this sentence and in Section 12.5 and the first
                                                      ------------
sentence of Section 12.6 hereof shall include its affiliates and its own and its
            ------------
affiliates' officers, directors, employees, and agents):

           (a)  shall not have any duties or responsibilities except those
      expressly set forth in this Agreement and the other Loan Documents and
      shall not be a trustee or fiduciary for any Lender;

           (b)  shall not be responsible to the Lenders for any recital,
      statement, representation, or warranty (whether written or oral) made by
      any Credit Party in or in connection with any Loan Document or any
      certificate or other document referred to or provided for in, or received
      by any of them under, any Loan Document, or for the value, validity,
      effectiveness, genuineness, enforceability, or sufficiency of any Loan
      Document, or any other document referred to or provided for therein or for
      any failure by any Credit Party or any other Person to perform any of its
      obligations thereunder;

           (c)  shall not be responsible for or have any duty to ascertain,
      inquire into, or verify the performance or observance of any covenants or
      agreements by any Credit Party or the satisfaction of any condition or to
      inspect the property (including the books and records) of any Credit Party
      or any of its Subsidiaries or affiliates;

           (d)  shall not be required to initiate or conduct any litigation or
      collection proceedings under any Loan Document (except as directed by the
      Required Lenders in accordance with the terms of the Loan Documents); and

           (e)  shall not be responsible for any action taken or omitted to be
      taken by it under or in connection with any Loan Document, except for its
      own gross negligence or willful misconduct.

The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care.

     12.2  Reliance by Agent. The Agent shall be entitled to rely upon any
           -----------------
certification, notice, instrument, writing, or other communication (including,
without limitation, any thereof by telephone or telefacsimile) believed by it to
be genuine and correct and to have been signed, sent or made by or on behalf of
the proper Person or Persons, and upon advice and statements of legal counsel
(including counsel for any Credit Party), independent accountants, and other
experts

                                      105

<PAGE>

selected by the Agent. The Agent may deem and treat the payee of any Note as the
holder thereof for all purposes hereof unless and until the Agent receives and
accepts an Assignment and Acceptance executed in accordance with Section 13.1
                                                                 ------------
hereof. As to any matters not expressly provided for by this Agreement, the
Agent shall not be required to exercise any discretion or take any action, but
shall be required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding on all of the Lenders; provided,
                                                                       --------
however, that the Agent shall not be required to take any action that exposes
-------
the Agent to personal liability or that is contrary to any Loan Document or
applicable law or unless it shall first be indemnified to its satisfaction by
the Lenders against any and all liability and expense which may be incurred by
it by reason of taking any such action.

     12.3  Defaults. The Agent shall not be deemed to have knowledge or notice
           --------
of the occurrence of a Default or Event of Default unless the Agent has received
written notice from a Lender or the Borrower specifying such Default or Event of
Default and stating that such notice is a "Notice of Default." In the event that
the Agent receives such a notice of the occurrence of a Default or Event of
Default, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall (subject to Section 12.2 hereof) take such action with respect to such
                  ------------
Default or Event of Default as shall reasonably be directed by the Required
Lenders, provided that, unless and until the Agent shall have received such
         -------- ----
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.

     12.4  Rights as Lender. With respect to its Revolving Credit Commitment and
           ----------------
the Loans made by it and Letters of Credit issued by it, Bank of America (and
any successor acting as Agent) in its capacity as a Lender hereunder shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not acting as the Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. Bank of America (and any successor acting as Agent) and
its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in, provide services to, and
generally engage in any kind of lending, trust, or other business with any
Credit Party or any of its Subsidiaries or affiliates as if it were not acting
as Agent, and Bank of America (and any successor acting as Agent) and its
affiliates may accept fees and other consideration from any Credit Party or any
of its Subsidiaries or affiliates for services in connection with this Agreement
or otherwise without having to account for the same to the Lenders.

     12.5  Indemnification. The Lenders agree to indemnify the Agent (to the
           ---------------
extent not reimbursed under Section 13.9 hereof, but without limiting the
                            ------------
obligations of the Borrower under such Section) ratably in accordance with their
respective Revolving Credit Commitments, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including reasonable attorneys' fees), or disbursements of any kind
and nature whatsoever that may be imposed on, incurred by or asserted (including
by any Lender) against the Agent in any way relating to or arising out of any
Loan Document or the transactions contemplated thereby or any action taken or
omitted by the Agent under any Loan Document;

                                      106

<PAGE>

provided that no Lender shall be liable for any of the foregoing to the extent
--------
they arise from the gross negligence or willful misconduct of the Person to be
indemnified. Without limitation of the foregoing, each Lender agrees to
reimburse the Agent promptly upon demand for its ratable share of any costs or
expenses payable by the Borrower under Section 13.5, to the extent that the
                                       ------------
Agent is not promptly reimbursed for such costs and expenses by the Borrower.
The agreements contained in this Section 12.5 shall survive payment in full of
                                 ------------
the Loans and all other amounts payable under this Agreement.

     12.6  Non-Reliance on Agent and Other Lenders. Each Lender agrees that it
           ---------------------------------------
has, independently and without reliance on the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own credit analysis of the Credit Parties and their Subsidiaries and decision to
enter into this Agreement and that it will, independently and without reliance
upon the Agent or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under the Loan Documents. Except for
notices, reports, and other documents and information expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition, or business of any
Credit Party or any of its Subsidiaries or affiliates that may come into the
possession of the Agent or any of its affiliates.

     12.7  Resignation of Agent. The Agent may resign at any time by giving
           --------------------
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders and shall
have accepted such appointment within thirty (30) days after the retiring
Agent's giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent which shall be a commercial bank
organized under the laws of the United States of America having combined capital
and surplus of at least $500,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor, such successor shall thereupon succeed to and
become vested with all the rights, powers, discretion, privileges, and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article XII shall continue in effect for its
                              -----------
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.

                                      107

<PAGE>

                                   ARTICLE XIII

                                  Miscellaneous
                                  -------------

      13.1  Assignments and Participations.
            ------------------------------

           (a)  Each Lender may assign to one or more Eligible Assignees all or
      a portion of its rights and obligations under this Agreement (including,
      without limitation, all or a portion of its Loans, its Note and its
      Revolving Credit Commitment); provided, however, that

                (i)    each such assignment shall be to an Eligible Assignee;

                (ii)   except in the case of an assignment to another Lender or
           an assignment of all of a Lender's rights and obligations under this
           Agreement, any such partial assignment shall be in an amount at least
           equal to $5,000,000 or an integral multiple of $5,000,000 in excess
           thereof;

                (iii)  each such assignment by a Lender shall be of a constant,
           and not varying, percentage of all of its rights and obligations
           under this Agreement and the Notes (except that any assignment by
           Bank of America shall not include its rights, benefits or duties as
           the Issuing Bank);

                (iv)   the parties to such assignment shall execute and deliver
           to the Agent for its acceptance an Assignment and Acceptance in the
           form of Exhibit B hereto, together with any Note subject to such
           assignment and a processing fee of $3,500; and

                (v)    the Eligible Assignee shall execute and deliver to the
           Collateral Agents a supplement to the Intercreditor Agreement in form
           and substance acceptable to the Collateral Agents; and

      Upon execution, delivery, and acceptance of such Assignment and
      Acceptance, the assignee thereunder shall be a party hereto and, to the
      extent of such assignment, have the obligations, rights, and benefits of a
      Lender hereunder and the assigning Lender shall, to the extent of such
      assignment, relinquish its rights and be released from its obligations
      under this Agreement. Upon the consummation of any assignment pursuant to
      this Section, the assignor, the Agent and the Borrower shall make
      appropriate arrangements so that, if required, new Notes are issued to the
      assignor and the assignee. If the assignee is not incorporated under the
      laws of the United States of America or a state thereof, it shall deliver
      to the Borrower and the Agent certification as to exemption from deduction
      or withholding of Taxes in accordance with Section 6.6.
                                                 -----------

           (b)  The Agent shall maintain at its address referred to in Section
                                                                       -------
      13.2 a copy of each Assignment and Acceptance delivered to and accepted by
      ----
      it and a register for the recordation of the names and addresses of the
      Lenders and the Revolving Credit

                                      108

<PAGE>

      Commitments of, and principal amount of the Loans owing to, each Lender
      from time to time (the "Register"). The entries in the Register shall be
      conclusive and binding for all purposes, absent manifest error, and the
      Borrower, the Agent and the Lenders may treat each Person whose name is
      recorded in the Register as a Lender hereunder for all purposes of this
      Agreement. The Register shall be available for inspection by the Borrower
      or any Lender at any reasonable time and from time to time upon reasonable
      prior notice.

           (c)  Upon its receipt of an Assignment and Acceptance executed by the
      parties thereto, together with any Note subject to such assignment and
      payment of the processing fee, the Agent shall, if such Assignment and
      Acceptance has been completed and is in substantially the form of Exhibit
                                                                        -------
      B hereto, (i) accept such Assignment and Acceptance, (ii) record the
      -
      information contained therein in the Register and (iii) give prompt notice
      thereof to the parties thereto.

           (d)  Each Lender may sell participations to one or more Persons in
      all or a portion of its rights, obligations or rights and obligations
      under this Agreement (including all or a portion of its Revolving Credit
      Commitment or its Loans); provided, however, that (i) such Lender's
                                --------  -------
      obligations under this Agreement shall remain unchanged, (ii) such Lender
      shall remain solely responsible to the other parties hereto for the
      performance of such obligations, (iii) the participant shall be entitled
      to the benefit of the yield protection provisions contained in Article VI
                                                                     ----------
      and the right of set-off contained in Section 13.3, and (iv) the Borrower
                                            ------------
      shall continue to deal solely and directly with such Lender in connection
      with such Lender's rights and obligations under this Agreement, and such
      Lender shall retain the sole right to enforce the obligations of the
      Borrower relating to its Loans and its Note and to approve any amendment,
      modification, or waiver of any provision of this Agreement (other than
      amendments, modifications, or waivers decreasing the amount of principal
      of or the rate at which interest is payable on such Loans or Note,
      extending any scheduled principal payment date or date fixed for the
      payment of interest on such Loans or Note, or extending its Revolving
      Credit Commitment).

           (e)  Notwithstanding any other provision set forth in this Agreement,
      any Lender may at any time assign and pledge all or any portion of its
      Loans and its Note to any Federal Reserve Bank as collateral security
      pursuant to Regulation A and any Operating Circular issued by such Federal
      Reserve Bank. No such assignment shall release the assigning Lender from
      its obligations hereunder.

           (f)  Any Lender may furnish any information concerning the Borrower
      or any of its Subsidiaries in the possession of such Lender from time to
      time to assignees and participants (including prospective assignees and
      participants) to the extent such recipients agree to be bound by the terms
      of Section 13.16.
         -------------

           (g)  Whenever in this Agreement any of the parties hereto is referred
      to, such reference shall be deemed to include the successors and permitted
      assigns of such party and all covenants, provisions and agreements by or
      on behalf of the Borrower which are

                                      109

<PAGE>

      contained in the Loan Documents shall inure to the benefit of the
      successors and permitted assigns of the Agent, the Lenders, or any of
      them. The Borrower may not assign or otherwise transfer to any other
      Person any right, power, benefit, or privilege (or any interest therein)
      conferred hereunder or under any of the other Loan Documents, or delegate
      (by assumption or otherwise) to any other Person any duty, obligation, or
      liability arising hereunder or under any of the other Loan Documents, and
      any such purported assignment, delegation or other transfer shall be void.

      13.2   Notices. Any notice shall be conclusively deemed to have been
             -------
received by any party hereto and be effective (i) on the day on which delivered
(including hand delivery by commercial courier service) to such party (against
receipt therefor), (ii) on the date of transmission to such party, in the case
of notice by telefacsimile (where the proper transmission of such notice is
either acknowledged by the recipient or electronically confirmed by the
transmitting device), or (iii) on the fifth Business Day after the day on which
mailed to such party, if sent prepaid by certified or registered mail, return
receipt requested, in each case delivered, transmitted or mailed, as the case
may be, to the address or telefacsimile number, as appropriate, set forth below
or such other address or number as such party shall specify by notice hereunder:

           (a)  if to the Borrower:

                Cone Mills Corporation
                3101 North Elm Street
                Greensboro, North Carolina 27415-6540
                Attn:  W. Scott Wenhold, Treasurer
                Telephone:     (336) 379-6098
                Telefacsimile: (336) 379-6043

                with a copy to:

                Cone Mills Corporation
                3101 North Elm Street
                Greensboro, North Carolina 27415-6540
                Attn:  Neil W. Koonce, Esq.
                Telephone:       (336) 379-6568
                Telefacsimile:   (336) 379-6972

           (b)  if to the Agent:

                Bank of America, N.A.
                901 Main Street
                TX1-492-14-11
                Dallas, Texas 75202-3714
                Attention: Molly J. Oxford
                Telephone: (214) 209-2627
                Telecopy: (214) 290-8367

                                      110

<PAGE>

                with a copy to:

                Bank of America, N.A.
                100 North Tryon Street, NC1-007-22-26
                Charlotte, North Carolina 28255
                Attention: John Register
                Telephone:       (704) 386-5390
                Telefacsimile:   (704) 386-7515

           (c)  if to the Lenders:

                At the addresses set forth on the signature pages hereof and on
                the signature page of each Assignment and Acceptance;

           (d)  if to any other Credit Party, at the address set forth on the
      signature page of the Facility Guaranty or Security Document executed by
      such Credit Party, as the case may be.

      13.3  Right of Set-off; Adjustments.
            -----------------------------

           (a)  Upon the occurrence and during the continuance of any Event of
      Default, each Lender (and each of its affiliates) is hereby authorized at
      any time and from time to time, to the fullest extent permitted by law, to
      set off and apply any and all deposits (general or special, time or
      demand, provisional or final) at any time held and other indebtedness at
      any time owing by such Lender (or any of its affiliates) to or for the
      credit or the account of the Borrower against any and all of the
      obligations of the Borrower now or hereafter existing under this Agreement
      and the Note held by such Lender, irrespective of whether such Lender
      shall have made any demand under this Agreement or such Note and although
      such obligations may be unmatured. Each Lender agrees promptly to notify
      the Borrower after any such set-off and application made by such Lender;
      provided, however, that the failure to give such notice shall not affect
      --------  -------
      the validity of such set-off and application. The rights of each Lender
      under this Section 13.3 are in addition to other rights and remedies
                 ------------
      (including, without limitation, other rights of set-off) that such Lender
      may have.

           (b)  If any Lender (a "benefited Lender") shall at any time receive
      any payment of all or part of the Loans owing to it, or interest thereon,
      or receive any collateral in respect thereof (whether voluntarily or
      involuntarily, by set-off, or otherwise), in a greater proportion than any
      such payment to or collateral received by any other Lender, if any, in
      respect of such other Lender's Loans owing to it, or interest thereon,
      such benefited Lender shall purchase for cash from the other Lenders a
      participating interest in such portion of each such other Lender's Loans
      owing to it, or shall provide such other Lenders with the benefits of any
      such collateral, or the proceeds thereof, as shall be necessary to cause
      such benefited Lender to share the excess payment or benefits of such
      collateral or proceeds ratably with each of the Lenders; provided,
                                                               --------
      however, that if all or any portion of such excess payment or benefits is
      -------
      thereafter recovered from such

                                      111

<PAGE>

      benefited Lender, such purchase shall be rescinded, and the purchase price
      and benefits returned, to the extent of such recovery, but without
      interest. The Borrower agrees that any Lender so purchasing a
      participation from a Lender pursuant to this Section 13.3 may, to the
                                                   ------------
      fullest extent permitted by law, exercise all of its rights of payment
      (including the right of set-off) with respect to such participation as
      fully as if such Person were the direct creditor of the Borrower in the
      amount of such participation.

      13.4 Survival. All covenants, agreements, representations and warranties
           --------
made herein shall survive the making by the Lenders of the Loans and the
issuance of the Letters of Credit and the execution and delivery to the Lenders
of this Agreement and the Notes and shall continue in full force and effect so
long as any of Obligations remain outstanding or any Lender has any Revolving
Credit Commitment hereunder or the Borrower has continuing obligations hereunder
unless otherwise provided herein.

      13.5 Expenses. The Borrower agrees to pay on demand all costs and expenses
           --------
of the Agent and the Lenders in connection with the preparation, execution and
delivery of this Agreement, the other Loan Documents, and the other documents to
be delivered hereunder, including, without limitation, the reasonable fees and
expenses of counsel for the Agent and each of the Lenders with respect thereto
and with respect to advising the Agent and the Lenders as to their rights and
responsibilities under the Loan Documents. The Borrower also agrees to pay on
demand all costs and expenses of the Agent in connection with the syndication
and administration and any modification or amendment of this Agreement, the
other Loan Documents, and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees and expenses of counsel for
the Agent. The Borrower further agrees to pay on demand all costs and expenses
of the Agent and the Lenders, if any (including, without limitation, reasonable
attorneys' fees and expenses and the cost of internal counsel), in connection
with the enforcement (whether through negotiations, legal proceedings, or
otherwise) of the Loan Documents and the other documents to be delivered
hereunder.

      13.6 Amendments and Waivers. Any provision of this Agreement or any other
           ----------------------
Loan Document may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrower or other applicable Credit Party
party to such Loan Document and either the Required Lenders or (as to Loan
Documents other than the Credit Agreement) the Agent on behalf of the Required
Lenders (and, if Article XII or the rights or duties of the Agent are affected
                 -----------
thereby, by the Agent); provided that no such amendment or waiver shall, unless
                        --------
signed by all the Lenders, (i) increase the Revolving Credit Commitments of the
Lenders or the Total Revolving Credit Commitment, (ii) reduce the principal of
or rate of interest on any Loan or any fees or other amounts payable hereunder,
(iii) postpone any date fixed for the payment of any scheduled installment of
principal of or interest on any Loan or any fees or other amounts payable
hereunder or for termination of any Revolving Credit Commitment, or (iv) change
the percentage of the Revolving Credit Commitment or of the unpaid principal
amount of the Notes, or the number of Lenders, which shall be required for the
Lenders or any of them to take any action under this Section 13.6 or any other
                                                     ------------
provision of this Agreement or (v) release any Guarantor or all or any material
portion of the Collateral except as otherwise permitted by the Loan Documents or
(vi) increase the amount of the Overadvance Basket or change any term

                                      112

<PAGE>

relating thereto or (vii) modify the calculation of the Borrowing Base; and
provided, further, that no such amendment or waiver that affects the rights,
--------  -------
privileges or obligations of the Issuing Bank as issuer of Letters of Credit,
shall be effective unless signed in writing by the Issuing Bank. Notwithstanding
the foregoing, each amendment, modification, supplement or restatement of any
Loan Document shall also comply with the terms of Section 5.11 of the
                                                  ------------
Intercreditor Agreement.

      No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances, except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agent's part in exercising any right, remedy or
option shall operate as a waiver of such or any other right, remedy or option or
of any Default or Event of Default.

      13.7 Counterparts; Facsimile Signatures. This Agreement may be executed in
           ----------------------------------
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such fully-executed
counterpart. Signatures on communications and other documents may be transmitted
by facsimile only with the consent of the Agent in its sole and absolute
discretion in each instance. The effectiveness of any such signatures accepted
by the Agent shall, subject to applicable law, have the same force and effect as
manual signatures and shall be binding on all parties. The Agent may also
require that any such signature be confirmed by a manually-signed hard copy
thereof. Each party hereto hereby adopts as an original executed signature page
each signature page hereafter furnished by such party to the Agent (or an agent
of the Agent) bearing (with the consent of the Agent) a facsimile signature by
or on behalf of such party. Nothing contained in this Section shall limit the
provisions of Section 12.2.
              ------------

      13.8 Termination. The termination of this Agreement shall not affect any
           -----------
rights of the Borrower, the Lenders or the Agent or any obligation of the
Borrower, the Lenders or the Agent, arising prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into or rights created or obligations incurred
prior to such termination have been fully disposed of, concluded or liquidated
and the Obligations arising prior to or after such termination have been
irrevocably paid in full. The rights granted to the Agent for the benefit of the
Lenders under the Loan Documents shall continue in full force and effect,
notwithstanding the termination of this Agreement, until all of the Obligations
have been paid in full after the termination hereof (other than Obligations in
the nature of continuing indemnities or expense reimbursement obligations not
yet due and payable, which shall continue) or the Borrower has furnished the
Lenders and the Agent with an indemnification satisfactory to the Agent and each
Lender with respect thereto. Notwithstanding the foregoing, if after receipt of
any payment of all or any part of the Obligations, any Lender is for any reason
compelled to surrender such payment to any Person because such payment is
determined to be void or voidable as a preference, impermissible setoff, a
diversion of trust funds or for any other reason, this Agreement shall continue
in full force and the Borrower shall be liable to, and shall indemnify and hold
the Agent or such Lender harmless for, the amount of such payment surrendered
until the Agent or such Lender shall have been finally and irrevocably paid in
full. The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Agent or
the Lenders in reliance upon such payment, and any such

                                      113

<PAGE>

contrary action so taken shall be without prejudice to the Agent or the Lenders'
rights under this Agreement and shall be deemed to have been conditioned upon
such payment having become final and irrevocable.

      13.9 Indemnification; Limitation of Liability.
           ----------------------------------------

           (a)  The Borrower agrees to indemnify and hold harmless the Agent and
      each Lender and each of their respective affiliates and their respective
      officers, directors, employees, agents, and advisors (each, an
      "Indemnified Party") from and against any and all claims, damages, losses,
      liabilities, costs, and expenses (including, without limitation,
      reasonable attorneys' fees (including the reasonably documented allocated
      cost of internal counsel) and settlement costs) that may be incurred by or
      asserted or awarded against any Indemnified Party, in each case arising
      out of or in connection with or by reason of (including, without
      limitation, in connection with any investigation, litigation, or
      proceeding or preparation of defense in connection therewith) the
      Revolving Credit Facility, the Loan Documents, any of the transactions
      contemplated herein or therein or the actual or proposed use of the
      proceeds of the Loans, except to the extent such claim, damage, loss,
      liability, cost, or expense is found in a final, non-appealable judgment
      by a court of competent jurisdiction to have resulted from such
      Indemnified Party's gross negligence or willful misconduct. In the case of
      an investigation, litigation or other proceeding to which the indemnity in
      this Section 13.9 applies, such indemnity shall be effective whether or
           ------------
      not such investigation, litigation or proceeding is brought by the
      Borrower, its directors, shareholders or creditors or an Indemnified Party
      or any other Person or any Indemnified Party is otherwise a party thereto
      and whether or not the transactions contemplated hereby are consummated.
      The foregoing provisions of this Section 13.9(a) shall be in addition to
                                       ---------------
      any right that an Indemnified Party shall have at common law or otherwise.
      No Indemnified Party shall be liable for any damages arising from the use
      by others of information or other materials obtained through internet,
      Intralinks or other similar information transmission systems in connection
      with the Loan Documents, except to the extent that such liability is found
      in a final non-appealable judgment by a court of competent jurisdiction to
      have directly resulted from such Indemnified Party's gross negligence or
      willful misconduct. The Borrower agrees that no Indemnified Party shall
      have any liability (whether direct or indirect, in contract or tort or
      otherwise) to it, any of its Subsidiaries, any Guarantor, or any security
      holders or creditors thereof arising out of, related to or in connection
      with the transactions contemplated herein and in the other Loan Documents,
      except to the extent that such liability is found in a final
      non-appealable judgment by a court of competent jurisdiction to have
      directly resulted from such Indemnified Party's gross negligence or
      willful misconduct. The Borrower agrees not to assert any claim against
      the Agent, any Lender, any of their affiliates, or any of their respective
      directors, officers, employees, attorneys, agents, and advisers, on any
      theory of liability, for special, indirect, consequential, or punitive
      damages arising out of or otherwise relating to the Loan Documents, any of
      the transactions contemplated herein or therein or the actual or proposed
      use of the proceeds of the Loans.

                                      114

<PAGE>

           (b)  Without prejudice to the survival of any other agreement of the
      Borrower hereunder, the agreements and obligations of the Borrower
      contained in this Section 13.9 shall survive the payment in full of the
      Loans and all other amounts payable under this Agreement.

      13.10  Severability. If any provision of this Agreement or the other Loan
             ------------
Documents shall be determined to be illegal or invalid as to one or more of the
parties hereto, then such provision shall remain in effect with respect to all
parties, if any, as to whom such provision is neither illegal nor invalid, and
in any event all other provisions hereof shall remain effective and binding on
the parties hereto.

      13.11  Entire Agreement. This Agreement, together with the other Loan
             ----------------
Documents, constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersedes all previous proposals, negotiations,
representations, commitments and other communications between or among the
parties, both oral and written, with respect thereto (except that those
provisions (if any) which by the express terms of the commitment letter and
joint investor letter, both dated as of January 14, 2000, executed by Bank of
America and BAS and accepted by the Borrower, survive the closing of the
Revolving Credit Facility and Letter of Credit Facility, shall survive and
continue in effect).

      13.12  Agreement Controls. In the event that any term of any of the Loan
             ------------------
Documents other than this Agreement conflicts directly with any express term of
this Agreement, the terms and provisions of this Agreement shall control to the
extent of such conflict.

      13.13  Usury Savings Clause. Notwithstanding any other provision herein,
             --------------------
the aggregate interest rate charged under any of the Notes, including all
charges or fees in connection therewith deemed in the nature of interest under
applicable law shall not exceed the Highest Lawful Rate (as such term is defined
below). If the rate of interest (determined without regard to the preceding
sentence) under this Agreement at any time exceeds the Highest Lawful Rate (as
defined below), the outstanding amount of the Loans made hereunder shall bear
interest at the Highest Lawful Rate until the total amount of interest due
hereunder equals the amount of interest which would have been due hereunder if
the stated rates of interest set forth in this Agreement had at all times been
in effect. In addition, if when the Loans made hereunder are repaid in full the
total interest due hereunder (taking into account the increase provided for
above) is less than the total amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Agreement had at all
times been in effect, then to the extent permitted by law, the Borrower shall
pay to the Agent an amount equal to the difference between the amount of
interest paid and the amount of interest which would have been paid if the
Highest Lawful Rate had at all times been in effect. Notwithstanding the
foregoing, it is the intention of the Lenders and the Borrower to conform
strictly to any applicable usury laws. Accordingly, if any Lender contracts for,
charges, or receives any consideration which constitutes interest in excess of
the Highest Lawful Rate, then any such excess shall be canceled automatically
and, if previously paid, shall at such Lender's option be applied to the
outstanding amount of the Loans made hereunder or be refunded to the Borrower.
As used in this paragraph, the term "Highest Lawful Rate" means the maximum
lawful interest rate, if any, that at any time or from time to

                                      115

<PAGE>

time may be contracted for, charged, or received under the laws applicable to
such Lender which are presently in effect or, to the extent allowed by law,
under such applicable laws which may hereafter be in effect and which allow a
higher maximum nonusurious interest rate than applicable laws now allow.

     13.14 Payments. All principal, interest, and other amounts to be paid by
           --------
the Borrower under this Agreement and the other Loan Documents shall be paid to
the Agent at the Principal Office in Dollars and in immediately available funds,
without setoff, recoupment, deduction or counterclaim. Subject to the definition
of "Interest Period" herein, whenever any payment under this Agreement or any
other Loan Document shall be stated to be due on a day that is not a Business
Day, such payment may be made on the next succeeding Business Day, and such
extension of time in such case shall be included in the computation of interest
and fees, as applicable, and as the case may be.

     13.15 Fees. The Borrower agrees to pay to the General Collateral Agent, for
           ----
its individual account, an annual agent's fee in such amount as shall be agreed
to from time to time by the Borrower and the General Collateral Agent, not to
exceed the fee customarily charged by the General Collateral Agent in similar
transactions, such fee to be deemed and agreed by the Borrower to be earned upon
payment and to be paid in one installment in advance on the date of this
Agreement and on each anniversary date hereof with respect to the period
commencing on the date hereof and continuing until the General Collateral Agent
resigns or is removed as General Collateral Agent hereunder or the occurrence of
the Termination Date, whichever shall first occur.

      13.16 Confidentiality. The Agent, each Lender and each of their respective
            ---------------
predecessors, successors and assignees (each, a "Lending Party") agrees to keep
                                                 -------------
confidential any information furnished or made available to it by the Borrower
pursuant to this Agreement; provided that nothing herein shall prevent any
                            --------
Lending Party from disclosing such information (a) to any other Lending Party or
any affiliate of any Lending Party, or any officer, director, employee, agent,
or advisor of any Lending Party or affiliate of any Lending Party whom it
determines has a reasonable need to be furnished such information and who agrees
to be bound by the terms of this Section 13.16, (b) to any other Person who
                                 -------------
agrees to be bound by the terms of this Section 13.16 if such disclosure is
                                        -------------
reasonably incidental to the administration of the Revolving Credit Facility or
Letter of Credit Facility, (c) as required by any law, rule, or regulation, (d)
upon a request or requirement (orally or in writing, by interrogatory, court
order, subpoena, administrative proceeding, civil investigatory demand, or any
similar legal process) of any court or administrative agency, governmental
authority or civil litigant (each Lending Party, however, shall to the extent
permitted by law and as promptly as practicable, notify Borrower prior to such
disclosure so that the Borrower may seek at the Borrower's sole expense a
protective order or other appropriate remedy), (e) upon the request or demand of
any regulatory agency or authority, (f) that is or becomes available to the
public or that is or becomes available to any Lending Party other than as a
result of a disclosure by any Lending Party prohibited by this Agreement, (g) to
the extent necessary in connection with the exercise of any remedy under this
Agreement or any other Loan Document, and (h) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed participant or assignee.

                                      116

<PAGE>

      13.17  Governing Law; Waiver of Jury Trial.
             -----------------------------------

           (a)  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THOSE
      SECURITY DOCUMENTS WHICH EXPRESSLY PROVIDE THAT THEY SHALL BE GOVERNED BY
      THE LAWS OF ANOTHER JURISDICTION) SHALL BE GOVERNED BY, AND CONSTRUED IN
      ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO
      CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

           (b)  THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND
      CONSENTS THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
      THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED
      IN ANY STATE OR FEDERAL COURT SITTING IN THE COUNTY OF MECKLENBURG, STATE
      OF NORTH CAROLINA, UNITED STATES OF AMERICA AND, BY THE EXECUTION AND
      DELIVERY OF THIS AGREEMENT, THE BORROWER EXPRESSLY WAIVES ANY OBJECTION
      THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN, OR TO THE
      EXERCISE OF JURISDICTION OVER IT AND ITS PROPERTY BY, ANY SUCH COURT IN
      ANY SUCH SUIT, ACTION OR PROCEEDING, AND THE BORROWER HEREBY IRREVOCABLY
      SUBMITS GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH
      COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.

           (c)  THE BORROWER AGREES THAT SERVICE OF PROCESS MAY BE MADE BY
      PERSONAL SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL
      PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR
      CERTIFIED MAIL (POSTAGE PREPAID) TO THE ADDRESS OF THE BORROWER PROVIDED
      IN SECTION 13.2, OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER THE
         ------------
      APPLICABLE LAWS IN EFFECT IN THE STATE OF NORTH CAROLINA.

           (d)  NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL
                                     ---------------    ---
      PRECLUDE THE AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR
      PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT IN THE COURTS
      OF ANY JURISDICTION WHERE THE BORROWER OR ANY OF THE BORROWER'S PROPERTY
      OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
      APPLICABLE LAWS OF ANY SUCH JURISDICTION, THE BORROWER HEREBY IRREVOCABLY
      SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
      RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO THE EXERCISE
      OF JURISDICTION OVER IT AND ITS PROPERTY BY ANY SUCH OTHER

                                      117

<PAGE>

      COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE
      LAW.

           (e)  IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
      REMEDIES UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT,
      INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE
      DELIVERED IN CONNECTION THEREWITH, THE BORROWER, THE AGENT AND THE LENDERS
      HEREBY AGREE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THAT ANY SUCH
      ACTION, SUIT OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
      JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE
      LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN ANY SUCH ACTION,
      SUIT OR PROCEEDING.

           (f)  THE BORROWER HEREBY EXPRESSLY WAIVES ANY OBJECTION IT MAY HAVE
      THAT ANY COURT TO WHOSE JURISDICTION IT HAS SUBMITTED PURSUANT TO THE
      TERMS HEREOF IS AN INCONVENIENT FORUM.

                         [Signatures on following pages]

                                      118

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be made, executed and delivered by their duly authorized officers as of the day
and year first above written.

                                     CONE MILLS CORPORATION

                                     By:______________________________________
                                     Name:  Gary L. Smith
                                     Title: Executive Vice President and
                                     Chief Financial Officer

                                     BANK OF AMERICA, N.A.,
                                     as Agent for the Lenders

                                     By:______________________________________
                                     Name:  Phifer Helms
                                     Title: Managing Director

                                      0-1

<PAGE>

                                     BANK OF AMERICA, N.A.

                                     By:______________________________________
                                     Name:  Phifer Helms
                                     Title: Managing Director

                                     Lending Office for Base Rate Loans:
                                         Bank of America, N.A.
                                         101 North Tryon Street, 15th Floor
                                         NC1-001-15-04
                                         Charlotte, North Carolina  28255
                                         Attention: CCS/Agency Services
                                         Telephone: (704) 386-9368
                                         Telefacsimile: (704) 409-0012

                                     Wire Transfer Instructions:
                                         Bank of America, N.A.
                                         ABA# 053000196
                                         Account No.: 1366212250600
                                         Reference: Cone Mills Corporation
                                         Attention: CCS/Agency Services

                                     Lending Office for Eurodollar Rate Loans:
                                         Bank of America, N.A.
                                         101 North Tryon Street, 15th Floor
                                         NC1-001-15-04
                                         Charlotte, North Carolina  28255
                                         Attention: CCS/Agency Services
                                         Telephone: (704) 386-9368
                                         Telefacsimile: (704) 409-0012

                                     Wire Transfer Instructions:
                                         Bank of America, N.A.
                                         ABA# 053000196
                                         Account No.: 1366212250600
                                         Reference: Cone Mills Corporation
                                         Attention: CCS/Agency Services

                                      0-2

<PAGE>

                                     FIRST UNION NATIONAL BANK

                                     By:____________________________________
                                     Name:  Roger Pelz
                                     Title: Senior Vice President

                                     Lending Office for Base Rate Loans:
                                         First Union National Bank
                                         201 South College Street
                                         Charlotte, North Carolina 28288
                                         Attention:  Gary Burkart
                                         Telephone:  (704) 374-6613
                                         Telefacsimile: (704) 383-7999

                                     Wire Transfer Instructions:
                                         First Union National Bank
                                         ABA# 053 000219
                                         Account No.:  1459168109011
                                         Reference:  Cone Mills
                                         Attention:  Gary Burkart

                                     Lending Office for Eurodollar Rate Loans:
                                         First Union National Bank
                                         201 South College Street
                                         Charlotte, North Carolina 28288
                                         Attention:  Gary Burkart
                                         Telephone:  (704) 374-6613
                                         Telefacsimile: (704) 383-7999

                                     Wire Transfer Instructions:
                                         First Union National Bank
                                         ABA# 053 000219
                                         Account No.:  1459168109011
                                         Reference:  Cone Mills
                                         Attention:  Gary Burkart

                                      0-3

<PAGE>

                                     WACHOVIA BANK, N.A.

                                     By:____________________________________
                                     Name:__________________________________
                                     Title:_________________________________

                                     Lending Office for Base Rate Loans:
                                         Wachovia Bank, N.A.
                                         100 N. Main Street
                                         Winston-Salem, NC 27150
                                         Attention: Lisa Crabb or Janet Yates
                                         Telephone: 336-732-6609 or -5181
                                         Telefacsimile: 336-732-3257

                                     Wire Transfer Instructions:
                                         Wachovia Bank, N.A.
                                         ABA# 0531 00494
                                         Account No.:  8791-998539
                                         Reference: Loan Proceeds for Cone Mills
                                         Attention: Agency Services

                                     Lending Office for Eurodollar Rate Loans:
                                         Wachovia Bank, N.A.
                                         100 N. Main Street
                                         Winston-Salem, NC 27150
                                         Attention: Lisa Crabb or Janet Yates
                                         Telephone: 336-732-6609 or -5181
                                         Telefacsimile: 336-732-3257

                                     Wire Transfer Instructions:
                                         Wachovia Bank, N.A.
                                         ABA# 0531 00494
                                         Account No.:  8791-998539
                                         Reference: Loan Proceeds for Cone Mills
                                         Attention: Agency Services

                                      0-4

<PAGE>

                                     SUNTRUST BANK

                                     By:____________________________________
                                     Name:__________________________________
                                     Title:_________________________________

                                     Lending Office for Base Rate Loans:
                                         SunTrust Bank
                                         25 Park Place, 21st Floor, MC-1941
                                         Atlanta, Georgia 30303
                                         Attention: Michelle Wood-Welch
                                         Telephone: (404) 588-8038
                                         Telefacsimile: (404) 230-1940

                                     Wire Transfer Instructions:
                                         SunTrust Bank
                                         ABA#  061-000-104
                                         Account No.: 9088000112
                                         Reference: Cone Mills
                                         Attention: Corporate Banking Operations
                                                    Support (Patrice Ransom)

                                     Lending Office for Eurodollar Rate Loans:
                                         SunTrust Bank
                                         25 Park Place, 21st Floor, MC-1941
                                         Atlanta, Georgia 30303
                                         Attention: Michelle Wood-Welch
                                         Telephone: (404) 588-8038
                                         Telefacsimile: (404) 230-1940

                                     Wire Transfer Instructions:
                                         SunTrust Bank
                                         ABA#  061-000-104
                                         Account No.: 9088000112
                                         Reference: Cone Mills
                                         Attention: Corporate Banking Operations
                                                    Support (Patrice Ransom)

                                      0-5

<PAGE>

                                     MORGAN GUARANTY TRUST COMPANY
                                     OF NEW YORK

                                     By:____________________________________
                                     Name:__________________________________
                                     Title:_________________________________

                                     Lending Office for Base Rate Loans:
                                         Morgan Guaranty Trust Company of
                                         New York
                                         60 Wall Street
                                         New York, New York
                                         Attention: Corrine Schoeb
                                         Telephone: 302-634-1836
                                         Telefacsimile: 302-634-4300

                                     Wire Transfer Instructions:
                                         Morgan Guaranty Trust Company of
                                         New York
                                         ABA# 021-000-238
                                         Account No.:  999-99-090
                                         Reference: Cone Mills Corp.
                                         Attention: Unit # 8

                                     Lending Office for Eurodollar Rate Loans:
                                         Morgan Guaranty Trust Company of
                                         New York
                                         60 Wall Street
                                         New York, New York
                                         Attention: Corrine Schoeb
                                         Telephone: 302-634-1836
                                         Telefacsimile: 302-634-4300

                                     Wire Transfer Instructions:
                                         Morgan Guaranty Trust Company of
                                         New York
                                         ABA# 021-000-238
                                         Account No.: 999-99-090
                                         Reference: Cone Mills Corp.
                                         Attention: Unit # 8

                                      O-6

<PAGE>

                                    EXHIBIT H

                             Compliance Certificate

Bank of America, N.A.,
as Agent
901 Main Street
TX1-492-14-11
Dallas, Texas 75202-3714
Attention: Agency Services
Telefacsimile:  (214)290-8367

Bank of America, N.A.,
as Agent
100 North Tryon Street
NC1-007-22-26
Charlotte, North Carolina 28255
Attention: John Register
Telefacsimile: (704) 386-7515

      Reference is hereby made to the Credit Agreement dated as of January 28,
2000 (as amended, the "Agreement") among Cone Mills Corporation, a North
Carolina corporation (the "Borrower"), the Lenders (as defined in the Agreement)
and Bank of America, N.A., as Agent for the Lenders ("Agent"). Capitalized terms
used but not otherwise defined herein shall have the respective meanings
therefor set forth in the Agreement. The undersigned, a duly authorized and
acting Authorized Representative, hereby certifies to you as of __________ (the
"Determination Date") as follows:

1.    Calculations:

I.    Compliance with Section 10.1(a): Consolidated Net Worth

      A.    Consolidated Net Worth                                   $__________

      Required: The Consolidated Net Worth as of each date set forth below must
                exceed the amount set forth opposite such date:

      Date                                    Consolidated Net Worth
      ----                                         Must Exceed
                                              ----------------------

September 30, 2001                                 $90,000,000
December 30, 2001                                  $70,000,000
March 31, 2002                                     $67,000,000
June 30, 2002                                      $67,000,000
September 29, 2002                                 $68,000,000
December 29, 2002                                  $68,500,000

                                      0-1

<PAGE>

II.   Compliance with Section 10.1(c): Consolidated Interest Coverage Ratio

      A.    Consolidated EBITDA
            1.    Consolidated Net Income (as calculated
                  in the definition thereof, including certain
                  exclusions therefrom)                               $_________
            2.    Consolidated Interest Expense (as
                  calculated in the definition thereof)               $_________
            3.    Taxes on income                                     $_________
            4.    Amortization                                        $_________
            5.    Depreciation                                        $_________
            6.    non-cash charges otherwise deducted
                  in calculating Consolidated Net Income
                  resulting from FASB No. 88,
                  FASB No. 106 Adjustments,
                  FASB No. 112 Adjustments
                  or FASB No. 121 Adjustments                         $_________
            7.    Non-cash Restructuring Charges                      $_________
            8.    Consolidated EBITDA
                  (sum of A.1, A.2, A.3, A.4, A.5.,
                  A.6 and A.7)                                        $_________

      B.    Consolidated Interest Expense
            1.    Debt discounts                                      $_________
            2.    Fees in connection with Indebtedness                $_________
            3.    Payments in connection with Capital Leases          $_________
            4.    Net cash financing costs in connection
                  with any Securitization Transaction                 $_________
            5.    Consolidated Interest Expense
                  (sum of B.1, B.2, B.3 and B.4)                      $_________

      C.    Consolidated Interest Coverage Ratio: The ratio of the
            Consolidated EBITDA (II.A.8) to Consolidated Interest Expense
            (II.B.5) is ______ to 1.00.

      Required: The Consolidated Interest Coverage Ratio for a Four-Quarter
                Period ending during the applicable period must exceed the
                corresponding ratio:

      Four-Quarter Period Ending             Consolidated Interest
                                                 Coverage Ratio
                                                  Must Exceed
      --------------------------             ---------------------
      September 30, 2001                          0.96 to 1.00

                                      0-2

<PAGE>

           Four-Quarter Period Ending                     Consolidated Interest
                                                          Coverage Ratio
                                                          Must Exceed
           --------------------------                     ---------------------

           December 30, 2001                              0.73 to 1.00
           March 31, 2002                                 0.71 to 1.00
           June 30, 2002                                  1.15 to 1.00
           September 29, 2002                             1.34 to 1.00
           December 29, 2002                              1.74 to 1.00

III.  Compliance with Section 10.1(d): Consolidated EBITDA

      Consolidated EBITDA (from II.A.8 above) for the most recent
      Fiscal Quarter                                                   $________

      Required: The Consolidated EBIDTA for a Four-Quarter Period ending during
                the applicable period must exceed the corresponding amount:

           Four-Quarter                                  Consolidated EBITDA
           Period Ending                                   Must Exceed

           September 30, 2001                              $20,500,000
           December 30, 2001                               $15,500,000
           March 31, 2002                                  $15,000,000
           June 30, 2002                                   $23,500,000
           September 29, 2002                              $29,500,000
           December 29, 2002                               $38,000,000

IV.   Compliance with Section 10.3: Capital Expenditures

      A.    U.S. Capital Expenditures                                  $________

      Required: U.S. Capital Expenditures must not exceed $10,000,000 in any
                Fiscal Year.

                                      0-3

<PAGE>

      B.    Mexican Capital Expenditures                               $________

      Required: Mexican Capital Expenditures must not exceed $200,000 in any
                Fiscal Year.

V.    Compliance with Section 10.7(g): Investments in Altamira, Mexico site:

      A.    Altamira, Mexico site investments                          $________

      Required: Investments made relating to Altamira, Mexico site for the
                following periods must not exceed the corresponding amounts:

         Fiscal Year Ending:                               Mexican Investments
         ===================                                  Not to Exceed:
                                                           -------------------
         December 30, 2001                                     $2,700,000
         =================                                     ==========

         December 29, 2002                                       $500,000
         =================                                       ========

2.    No Default

           A. Since __________ (the date of the last similar certification), (a)
      the Borrower has not defaulted in the keeping, observance, performance or
      fulfillment of its obligations pursuant to any of the Loan Documents; and
      (b) no Default or Event of Default specified in Article XI of the
      Agreement has occurred and is continuing.

           B. If a Default or Event of Default has occurred since __________
      (the date of the last similar certification), the Borrower proposes to
      take the following action with respect to such Default or Event of
      Default:
      __________________________________________
      ______________________________________________________________________.
      (Note, if no Default or Event of Default has occurred, insert "Not
      Applicable").

      The Determination Date is the date of the last required financial
statements submitted to the Lenders in accordance with Section 9.1 of the
Agreement.

                                      0-4

<PAGE>

         IN WITNESS WHEREOF, I have executed this Certificate this _____ day of
__________, 20__.

                                          CONE MILLS CORPORATION

                                          By:
                                               Authorized Representative

                                          Name:

                                          Title:

                                      0-5

<PAGE>

                                    EXHIBIT N

                         Real Properties to be Appraised

                                      0-6

<PAGE>

Cone Mills Corporation
Real Property List
November 9, 2001

Land and Buildings in Alamance County, NC
--------------------------------------------------------------------------------

Buildings
---------
Granite Plant/Whse Bldg (495,114 SF) - E Main St Hwy 70
Granite Office Bldg (3,450 SF) Hwy 70A
  Subtotal Granite Buildings

Warehouse Area Land
-------------------
15 Acres at Granite Plant Site  E Main St Hwy 70
13 Acres Land E Main St Hwy 70 (used for parking trailers and storage)
..05 Acres Commercial Land VL Off Hwy 70A
1.5 Acres Commercial Land - VL HWY 70A
..16 Acres Commercial Land - VL HWY 70A
..23 Acres BL HWY 70A - Land Only
..74 Acres 11F Commercial Lot HWY 49/70
..44 Acre- Commercial Lot Gravel St

Other Nearby Land
-----------------
2 acres Residential Haw River Frontage Land Off Boundary Street
1 Acre Residential Land Off Boundary Street
  Subtotal Granite Land

8.58 Acres Partially Fronting on Stone St Outside City Limits
6.37 Acres 4PRD Fronting on Stone St Inside City Limits
21.38 Acres Not Fronting on Stone St Poor Access Inside City Limits

White Oak Plant Land and Buildings - Guilford County, NC
--------------------------------------------------------------------------------

Buildings
---------
White Oak Plant Buildings (1,567,457 SF)
Water Filtration Plant/Underground Water Tanks at NW corner of
  Cone Blvd/Church St
   SubTotal White Oak Buildings

Land around and associated with the White Oak Plant
---------------------------------------------------
..25 Acres - SW corner of 1212 12th St/Fairview St - vacant residential lot
..25 Acres - SW corner of 1214 12th St/Fairview St - vacant residential lot
1.79 Acres SW Corner of 2505-2511 Fairview/14th St (vacant land beside Fairview
  Rec center)
2.6 Acres SW Corner 2501-2505 Fairview/16th St (vacant land part used as
  overflow parking)
5.3 Acres between 1701-1707 Fairview and between Yanceyville St (old steam line
  to Printworks)
..21 Acres of Print Works Land Tract Allocated to WO Waste Water Treatment Plant
  on Books
53.41 Acres-2420 Fairview - this is the actual land where the White Oak Plant is
  located
2.55 Acres 2429 Fairview Street at White Oak Power Plant
..26 Acres 2429 Fairview Street at White Oak Power Electric Shop
8.94 Acres-2420 R1 Fairview St (between Plant and West Side of Buffalo Creek WO
  Waste Water Treatment
4.59 Acres East Side of 2100 Fairview Street just south of WO plant (used for
  parking)

                                       0-7

<PAGE>

3.85 Acres-East Side of 2200 Fairview Street just south of tract 255-95-1 (used
  for parking)
3.20 Acres-East Side of 2300 Fairview Street just south of tract 255-96-1 vacant
  land
3.5 Acres- SW Corner of 1506 16th Street/Summit Avenue - vacant land
3.64 Acres-2401-2409 Summit Avenue (south of tract 255-116-1) - vacant land
5 Acres- 2301 Summit Avenue (south of tract 255-117-1) - vacant land
1.5 acres on NW Corner of 16th St/Summit Ave - vacant residential land
10.37 Acres 2201 Summit Ave (mostly flood plain land along Buffalo Cr south of
  tract 255-118-1)
10.89 Acres 1301 on North Side of 16th Street and Part of Old WO Lake Allocated
  to WO Plant
10.89 Acres 1301 on North Side of 16th Street and Part of Old WO Lake Allocated
  to WO Water Pl.
12.03 Acres 1301 on North Side of 16th Street and Part of Old WO Lake Allocated
  to WO Power Pl.
52.6 Acres - Summit Ave behind White Oak going south from Buffalo Creek
  1700-2300 Upland Dr
8.58 Acres 1700-2300 Upland Drive at White Oak Power Plant
8.58 Acres 1700-2300 Upland Drive at White Oak Waste Water Treatment Plant 1.
86 Acres 1519 Kay Street - vacant land (Kay St is not extended through to this
  land)
3.43 Acres on NW corner of 2701 N Church Street and Cone Blvd (WO water
  filtration plant)

Transportation/Proximity Plant Land and Buildings - Guilford County, NC
--------------------------------------------------------------------------------

Buildings
---------
Transportation Building (57,120 SF) /Service Garage (18,510 SF) on Corner of
  Maple St/Wendover Ave
Greensboro Sample Whse (96,007 SF) /Cotton Whse 30,961 SF) at SW Corner 1201
  Maple/Meadow St

Land
----
33.44 Acres Remaining Land on NW Corner of Maple St/Wendover Ave
4.56 Acres 1407 Yanceyville St (west side of Yanceyville St) - mostly bad
  topography
1.69 Acres -1100 Maple Street (Land where Transportation Building is located )
2.0 Acres 1100 Maple Street (Land where Greensboro Storage Warehouse is located)
..39 Acres Corner Yanceyville St/1416 Cypress St - bad typography Betty Trogdon's
  dad lives next door

Printworks Land and Buildings - Guilford County, NC
--------------------------------------------------------------------------------
Old Print Works Bldg (453,448 SF) - has been unused for about 4 years and is in
very bad shape
16.68 Acres On Fairview St Print Works Site

Rebond Land and Buildings - Guilford County, NC
--------------------------------------------------------------------------------
Rebond Warehouse Building (160,018 SF) 1601 Yanceyville St (where Cypress St
  runs into Yanceyville St)
Central Lift Truck Repair Building (12,511 SF) on 1600 Yanceyville Street beside
  Rebond
8.84 Acres Rebond Land 1601 Yanceyville St
2.40 Acres Rebond Land 1601 Yanceyville St (incl .24 acres w/ water tower on
  east side of Yanceyville)
3.76 Acres Land 1600 Yanceyville Street around Central Lift Truck Building

Salisbury Land and Buildings - Rowan County, NC
--------------------------------------------------------------------------------

Buildings
---------
Salisbury Plant 417,091 SF Closed in Spring 1999
Salisbury Warehouse (This Warehouse was sold on 5/29/01)

                                      0-8

<PAGE>

Land
----
14.69 Acres South Railroad Street - This is the Salisbury Plant Land
6.478 Acres near Vance Street - This land is beside Town Creek and has no road
  access
..2 Acres Off Ryan Street - Site of old unused pump house on West side Town Creek
  with no road access
Approx .2 Acres 105 Crawford Street - Part of paved parking lot for plant
Approx .3 Acres 111 Crawford Street - Part of paved parking lot for plant
Approx .3 Acres 117 Crawford Street - this is a grassy lot between two old mill
  houses
Approx .2 Acres 46 Hill Street - Part of paved parking lot for plant
Approx 1.2 Acres 48, 50, 52, 54, 56 Hill Street - Part of paved parking lot for
  plant
Approx .25 Acres 107 Crawford Street - Part of paved parking lot for plant
Approx .25 Acres 109 Crawford Street - Part of the paved parking lot for plant

Cliffside Plant Land and Buildings - Rutherford County, NC
--------------------------------------------------------------------------------

Buildings
---------
Cliffside Weave Plant (339,970 SF) Hwy 221A Mooresboro, NC
Old Cliffside Yarn Plant (662,494 SF) 272 Old Main Street, Cliffside NC
Office Bldg (3,375 SF) at Old Cliffside Yarn Plant N. Main Street
    Total Cliffside Buildings

Land at Cliffside Weave Plant
-----------------------------
35 Acres Improved Land at Cliffside Weave Plant Wiseman St, Hwy 221A 174
..55 Acres Land Surrounding Cliffside Weave Plant Wiseman St, Hwy 221A
20 Acres Condrey Tr. 2nd St
8.87 Acres Green & Laurel St.
2.83 Acres Pea Ridge Road (appraisal says this tract is 11.6 acres, but I think
  it is wrong)
12.33 Acres Hwy 120 & Stimson Street (incl. park improvements with a $13,520
  prop tax value)
..53 Acres Near Cliffside Weave Plant Hwy 221 A
..63 Acres Near Cliffside Weave Plant Hwy 221A
30.28 Acres Fairview St.
16.04 Acres Riverside St
1.83 Acres Hwy 221A
35 Acres Near Cliffside Weave Plant Near 221A

Land at Old Cliffside Yarn Plant
--------------------------------
34.56 Acres at Old Cliffside Yarn Plant, 272 Old Main Street, Cliffside NC
..97 Acres N. Main Street (this is the land around the office building at the
  Cliffside Yarn Plant)
1.6 Acres 16 Reservoir Street
..91 Acres 25th Avenue East
..59 Acres 20 Reservoir Street
1.05 Acres 41 N Main Street
1.53 Acres Main Road (includes Cone memorial clock with a $500 prop tax value )
1.24 Acres 36 N Main Street
1.19 Acres Oakland Avenue
..41 Acres 8 Reservoir Drive
..32 Acres 26 N Main Street
4.44 Acres12 Goforth Street
20 Acres 8 West Riverside Street

                                      0-9

<PAGE>

..94 Acres (includes the rescue squad house with a $5,000 prop tax value)
..19 Acres 16 Church Street (residential lot)

Haynes Plant Land and Building - Rutherford County, NC
--------------------------------------------------------------------------------

Building
--------
Haynes Bldg (465,049 SF) Hwy 221A (2401 Ellenboro Henrietta Rd) Ellenboro NC

Land Near Haynes Plant Hwy 221A Ellenboro-Henrietta Road
--------------------------------------------------------
4.45 Acres-Hazel St
2.37 Acres-5E Haynes St
2.86 Acres- 8W Haynes St
10.10 Acres- W. Haynes St. (includes a water storage tank/gazebo with a $4,500
  prop tax value)
17.59 Acres- Hwy 221A (11 acres of this was sold in 2001)
4.34 Acres- Cone Street
31.79 Acres Hwy 211 at Haynes Plant

Florence Plant Land and Building - Rutherford County, NC
--------------------------------------------------------------------------------

Building
--------
Florence Plant Building (205,499 SF) 186 Mill Street Forest City, NC

Land at Florence Plant
----------------------
5 acres Florence Plant Land Between Depot and Mill Streets
..2 Acres SW and SE Corners of Florence Street and Horvath Street
1.1 Acres SW Corner Depot Street and Green street (contains spur track)
1 Acre NW Corner Depot Street and Green street
1 Acre NE Corner 107 Mill Street and Florence Street

Jacquard Plant Land and Building - Rutherford County, NC
--------------------------------------------------------------------------------
Jacquard Plant Building (137,310 SF) Hwy 221A Forest City, NC
96.40 Acres land surrounding the plant - Hwy 221A, Forest City, NC

Carlisle Plant Land Building - Union County, SC
--------------------------------------------------------------------------------
Carlisle Finishing Building (779,906 SF)
186 Acres surrounding the Carlisle Plant
718 Acres (about 350 Acres Developable)
5.5 Acres and the Guest House

Raytex Plant Land and Building - Marion County, SC
--------------------------------------------------------------------------------
Raytex Plant Building (297,748 SF) Closed March 2001
33.942 Acres of Land
Land Improvements

                                      0-10

<PAGE>

                                    EXHIBIT O

                 Form of Certificate regarding Excess Cash Flow

Bank of America, N.A.,
as Agent
901 Main Street
TX1-492-14-11
Dallas, Texas 75202-3714
Attention:      Agency Services
Telefacsimile:  (214)290-8367

Bank of America, N.A.,
as Agent
100 North Tryon Street
NC1-007-22-26
Charlotte, North Carolina 28255
Attention: John Register
Telefacsimile: (704) 386-7515

         Reference is hereby made to the Credit Agreement dated as of January
28, 2000 ( as amended, the "Agreement") among Cone Mills Corporation, a North
Carolina corporation (the "Borrower"), the Lenders (as defined in the Agreement)
and Bank of America, N.A., as Agent for the Lenders ("Agent"). Capitalized terms
used but not otherwise defined herein shall have the respective meanings
therefor set forth in the Agreement. The undersigned, a duly authorized and
acting Authorized Representative, hereby certifies to you as of __________ (the
"Determination Date") as follows:

1.    Calculations (for Two-Quarter Period ending on Determination Date):

      A.    Consolidated EBITDA                        $__________

      B.    Projected Consolidated EBITDA              $__________

      C.    Difference of 1.A minus 1.B                             $__________

      D.    Projected PBGC Payments                    $__________*

      E.    Actual PBGC Payments                       $__________*

      F.    Difference of 1.D minus 1.E                             $__________*

      G.    Projected Non-Cash LIFO Adjustments                     $__________

---------------
      * Only for the Two-Quarter Period ending June 30, 2002

                                      0-11

<PAGE>

      H.    Actual Non-Cash LIFO Adjustments           $__________

      I.    1.G minus 1.H                                           $__________

      J.    1.C [plus 1.F*] plus 1.H                                $__________

      K.    Excess Cash Flow
            (Greater of 1.J and $0)                                 $__________

            The Determination Date is the date of the last required financial
      statements submitted to the Lenders in accordance with Section 9.1 of the
                                                             -----------
      Agreement.

            IN WITNESS WHEREOF, I have executed this Certificate this ___ day of
      ___________, 20___.

                                          CONE MILLS CORPORATION

                                          By: _______________________________
                                                 Authorized Representative

                                          Name: ____________________________
                                          Title: _____________________________

---------------
      * Only for the Two-Quarter Period ending June 30, 2002

                                      0-12

<PAGE>

                                    EXHIBIT P

                            Imprest/Payroll Accounts

<TABLE>
<CAPTION>
Account Holder             Account Name                  Bank                   Type                   A/C Number          State

<S>                        <C>                           <C>                    <C>                    <C>                 <C>
Cone Mills Corporation     Cone Mills Corporation        Arthur State Bank      Imprest Account        95113064            SC

Cone Mills Corporation     Cone Mills Corporation        Fist Citizens Bank     Imprest Account        4451203280          NC

Cone Mills Corporation     Cone Mills Corporation        European American      Imprest Account        29029063            NY
                                                         Bank

Cone Mills Corporation     Cone Mills Corporation        Mutual Community       Imprest Account        20069412            NC
                                                         Savings

Cone Mills Corporation     Cone Mills Hourly Payroll     First Union            ZBA Account for        2079900014206       NC
                                                                                Hourly Payroll

Cone Mills Corporation     Cone Mills Insurance          First Union            ZBA Account for        2072087403180       NC
                           Account                                              Blue Cross

Cone Mills Corporation     Cone Mills Salary Payroll     Bank of America        Payroll Account        TBD                 TX

</TABLE>

<PAGE>

                        DEPOSIT ACCOUNT CONTROL AGREEMENT

                           (PRIORITY COLLATERAL AGENT)

THIS DEPOSIT ACCOUNT CONTROL AGREEMENT (this "Control Agreement") is made and
entered into as of December 1, 2001 by and among CONE MILLS CORPORATION, a North
Carolina corporation (the "Borrower"), BANK OF AMERICA, N.A. (the "Depositary
Institution"), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER (each a
"Subsidiary Grantor"), and BANK OF AMERICA, N.A., as Priority Collateral Agent
(in such capacity, the "Priority Collateral Agent") for each of the Priority
Secured Parties, as defined in the Priority Security Agreement dated as of
January 28, 2000, among the Borrower, the Subsidiary Grantors parties thereto
and the Priority Collateral Agent (such Priority Security Agreement, as amended,
restated, supplemented, amended and restated or otherwise modified from time to
time, being referred to as the "Priority Security Agreement"). Reference is made
to the Intercreditor Agreement (as defined in the Priority Security Agreement)
and the Credit Agreement (as defined in the Intercreditor Agreement). All
capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned thereto in the Priority Security Agreement or, if
not defined therein, the respective meanings assigned thereto in the
Intercreditor Agreement or if not defined therein, the respective meanings
assigned thereto in the Credit Agreement.

                              W I T N E S S E T H:
                              --------------------

      WHEREAS, the Depositary Institution has established the deposit accounts
more specifically identified on Exhibit A hereto in the name of the Borrower or
                                ---------
one or more Subsidiary Grantors (such accounts, as they may be renumbered or
retitled from time to time, being referred to as the "Existing Accounts"); and

      WHEREAS, as collateral security for the payment and performance of all
Priority Senior Obligations, all Guarantor's Obligations incurred with respect
to the Priority Senior Obligations, and all obligations and liabilities under
the Priority Security Agreement, the Borrower and each Subsidiary Grantor has
granted to the Priority Collateral Agent for the benefit of the Priority Secured
Parties a security interest in the Deposit Accounts (as defined below),
including the Existing Accounts, pursuant to the Priority Security Agreement;
and

      WHEREAS, in furtherance of such security interest, the Priority Collateral
Agent, the Borrower, each Subsidiary Grantor and the Depositary Institution are
entering into this Control Agreement to grant to the Priority Collateral Agent
control of the Deposit Accounts within the meaning of Article 9 of the UCC (as
hereinafter defined);

      NOW, THEREFORE, in further consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:

<PAGE>

      1.  Account Identification. This Control Agreement applies to the Existing
          ----------------------
Accounts and to each other account (except any Securitization Deposit Account or
Imprest/Payroll Account, as defined below) now or hereafter established with the
Depositary Institution by or on behalf of the Borrower or any Subsidiary
Grantor, including all funds on deposit therein or credited thereto (the
Existing Accounts and such other accounts (excluding the Securitization Deposit
Accounts and the Imprest/Payroll Accounts) being referred to collectively as the
"Deposit Accounts"). All parties agree that each Deposit Account is a "deposit
account" within the meaning of Article 9 of the Uniform Commercial Code (the
"UCC") of the State of North Carolina (the "State"). Each of the Borrower and
each Subsidiary Grantor agrees to deliver written notice to the Priority
Collateral Agent of the establishment by the Borrower or any Subsidiary Grantor
of any account other than the Existing Accounts.

      For the purposes of this Control Agreement, "Imprest/Payroll Accounts"
shall mean, collectively, the deposit accounts identified as such on Exhibit B
                                                                     ---------
hereto, and "Securitization Deposit Accounts" shall mean, collectively, the
deposit accounts identified as such on Exhibit B hereto.
                                       ---------

      2.  Priority of Lien; Agency. The Depositary Institution hereby
          ------------------------
acknowledges the Lien of the Priority Collateral Agent for the benefit of the
Priority Secured Parties on the Deposit Accounts created pursuant to the
Priority Security Agreement. The Depositary Institution agrees that (except as
set forth in the General Security Agreement and the General Deposit Account
Control Agreement, and except for the rights of set-off and recoupment of the
Depositary Institution) the Depositary Institution (a) has not, to the best of
its knowledge, agreed and will not agree with any other Person to comply with
instructions or other directions concerning any Deposit Account or the
disposition of funds in any Deposit Account originated by such Person or any
other Person and (b) has not, to the best of its knowledge, consented or
acknowledged and will not consent to or acknowledge any Lien on any Deposit
Accounts in favor of any other Person.

      The parties acknowledge and agree that this Control Agreement was executed
and delivered prior to the General Deposit Account Control Agreement, and that
the Lien of the Priority Collateral Agreement in the Deposit Accounts has
priority over the Liens of the General Collateral Agent and Designated
Collateral Subagent in such accounts.

      3.  Control of Deposit Accounts. Except as provided in the following
          ---------------------------
sentence, the Depositary Institution may accept instructions from the Borrower
or the respective Subsidiary Grantor and perform any and all transactions at its
request with respect to any Deposit Account. The Borrower, each Subsidiary
Grantor and the Depositary Institution agree with the Priority Collateral Agent
that upon delivery by the Priority Collateral Agent to the Depository
Institution of a notice (in the form of Exhibit C hereto) that an Event of
                                        ---------
Default has occurred and is continuing, until such time as the Priority
Collateral Agent shall have furnished it with a subsequent notice either that
such Event of Default has been cured or waived or that the Priority Collateral
Agent no longer asserts an interest in any of the Deposit Accounts, (i) the
Depositary Institution shall discontinue accepting requests or demands from or
on behalf of the Borrower or any Subsidiary Grantor for access to, or
disposition of or possession of any funds on deposit in

                                       3

<PAGE>

any Deposit Account, (ii) the Depositary Institution shall follow the
instructions of the Priority Collateral Agent as to the holding, investment,
transfer or other disposition of all amounts from time to time on deposit in any
Deposit Account, and (iii) the Depositary Institution shall make the Deposit
Accounts available to the Priority Collateral Agent at its request, all without
further consent from or notice to the Borrower or any Subsidiary Grantor and
regardless of any instruction it may receive to the contrary from the Borrower
or any Subsidiary Grantor or any other Person. In addition, the Borrower and
each Subsidiary Grantor agrees that the Depositary Institution may act as the
agent of the Priority Collateral Agent in exercising as to any funds from time
to time on deposit in the Deposit Accounts any rights of set-off provided by
applicable law or by any Loan Document. The Borrower and each Subsidiary Grantor
agrees that the Depositary Institution shall be entitled to rely, without
independent investigation, on any statement of the Priority Collateral Agent to
the effect that an Event of Default has occurred and is continuing or to the
effect that any exercise of set-off requested by the Priority Collateral Agent
is permitted under the applicable law or any Loan Document.

      4.  Subordination of Rights. The Depositary Institution hereby agrees to
          -----------------------
subordinate any Lien, encumbrance, claim or right of set-off or recoupment
(whether statutory or consensual) it may have, now or in the future, with
respect to any Deposit Account (or any funds deposited in any Deposit Account)
to the Lien created in favor of the Priority Collateral Agent for the benefit of
the Secured Parties pursuant to the Priority Security Agreement; provided,
however, that the Depositary Institution does not waive or subordinate its
rights to set-off or recoupment with respect to routine deposit account
maintenance, wire transfer and other deposit account activity charges and fees
and for the reversal of provisional credits. The Depositary Institution further
agrees that, with respect to any Lien, claim or right of set-off or recoupment
(whether statutory or consensual) that is subordinated pursuant to this Section
                                                                        -------
4, the Depositary Institution will not prosecute collection or seek to enforce
-
or resort to any remedies against the Borrower or any Subsidiary Grantor prior
to the termination of this Control Agreement.

      5.  Information. The Depositary Institution shall provide the Priority
          -----------
Collateral Agent with such information with respect to the Deposit Accounts as
the Priority Collateral Agent may from time to time reasonably request, and the
Borrower and each Subsidiary Grantor hereby consents to such information being
provided to the Priority Collateral Agent and the Priority Secured Parties.

      6.  Exculpation and Indemnification. The Depositary Institution undertakes
          -------------------------------
to perform only such duties as are expressly set forth herein. Notwithstanding
any other provisions of this Control Agreement, the parties hereto agree that
the Depositary Institution shall not be liable for any action taken by it or any
of its directors, officers, agents or employees in accordance with this Control
Agreement, including, without limitation, any action so taken at the request of
the Priority Collateral Agent, except for the Depositary Institution's or such
Person's own gross negligence or willful misconduct. In no event shall the
Depositary Institution be liable for losses or delays resulting from causes
beyond the Depositary Institution's reasonable control or for indirect, special
or consequential damages. Without limiting the generality of the foregoing, the
Depositary Institution shall have no responsibility or liability to the Borrower
or any Subsidiary Grantor for complying with a notice from the Priority
Collateral Agent that an

                                       4

<PAGE>

Event of Default has occurred and is continuing (a "Default Notice") or
complying with instructions of the Priority Collateral Agent concerning any
Deposit Account or any funds deposited therein, and shall have no responsibility
to investigate the appropriateness of any such instruction or Default Notice,
even if the Borrower or any Subsidiary Grantor notifies the Depositary
Institution that the Priority Collateral Agent is not legally entitled to give
any such instruction or to deliver any Default Notice.

      The Borrower and each Subsidiary Grantor agrees to indemnify and hold
harmless the Depositary Institution, its directors, officers, agents and
employees (collectively, the "Indemnified Persons") against any and all claims,
causes of action, liabilities, lawsuits, demands and damages, including without
limitation any and all court costs and reasonable attorney's fees, in any way
related to or arising out of or in connection with this Control Agreement or any
action taken or not taken pursuant hereto, except to the extent caused by the
gross negligence or willful misconduct of such Indemnified Person.

      7.  Termination. This Control Agreement shall remain in full force and
          -----------
effect until such time as the Priority Collateral Agent shall deliver written
notice to the Depositary Institution that the Priority Collateral Agent no
longer asserts an interest in any of the Deposit Accounts.

      8.  Notices. Any notice hereunder shall be conclusively deemed to have
          -------
been delivered to any party hereto upon receipt when addressed to such party at
the address (or in the case of a notice by telecopy, at the telecopy number) set
forth below:

      (a) if to the Priority Collateral Agent:

          Bank of America, N.A.
          901 Main Street
          TX1-492-14-12
          Dallas, Texas 75202-3714
          Attention: Agency Services
          Telephone: (214) 209-2627
          Telecopy: (214) 290-8367

      (b) if to the Depository Institution at the address set forth following
its signature;

                                       5

<PAGE>

      (c) if to the Borrower or any Subsidiary Grantor:

          to such Borrower or Subsidiary Grantor
          3101 North Elm Street
          Greensboro, North Carolina 27415-6540
          Attn: W. Scott Wenhold, Treasurer
          Telephone: (336) 379-6098
          Telefacsimile: (336) 379-6043

          with a copy to:

          Cone Mills Corporation
          3101 North Elm Street
          Greensboro, North Carolina 27415-6540
          Attn:  Neil W. Koonce, Esq.
          Telephone: (336) 379-6568
          Telefacsimile: (336) 379-6972

      9.  Effect of Control. The parties hereto acknowledge and agree that this
          -----------------
Control Agreement shall be deemed to grant "control" of the Deposit Accounts to
the Priority Collateral Agent for the purposes of perfection of the Priority
Collateral Agent's security interest in the Deposit Accounts pursuant to Article
9 of the UCC as in effect from time to time.

      10. GOVERNING LAW. THIS CONTROL AGREEMENT SHALL BE GOVERNED BY, AND
          -------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA; AND IN
FURTHERANCE THEREOF THE PARTIES HERETO AGREE THAT NORTH CAROLINA IS THE "BANK'S
JURISDICTION" FOR PURPOSES OF THE UCC.

      11.  Conflict with Other Account Agreements. In the event of a conflict
           --------------------------------------
between this Control Agreement and any other agreement between the Depositary
Institution and the Borrower or any Subsidiary Grantor relating to any Deposit
Account, the terms of this Control Agreement will prevail.

      12. Successors and Assigns. The terms of this Control Agreement shall be
          ----------------------
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.

      13.  Counterparts. This Control Agreement may be executed in any number of
           ------------
counterparts each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Control
Agreement to produce or account for more than one such counterpart executed by
the Borrower, Subsidiary Grantor or Depositary Institution against whom
enforcement is sought.

                                       6

<PAGE>

                            [Signature pages follow]

                                       7

<PAGE>

      IN WITNESS WHEREOF, the parties have duly executed this Control Agreement
on the day and year first written above.

                                           CONE MILLS CORPORATION

                                           By: /s/W. Scott Wenhold
                                           Name:  W. Scott Wenhold
                                           Title: Treasurer

                                           CIPCO S.C., INC.

                                           By: /s/Cheryl G. Hollis
                                           Name: Cheryl G. Hollis
                                           Title: Assistant Secretary

                                           CONE FOREIGN TRADING LLC

                                           By: /s/Neil W. Koonce
                                           Name: Neil W. Koonce
                                           Title: Vice President

                                           BANK OF AMERICA, N.A., as Priority
                                           Collateral Agent

                                           By: /s/John F. Register
                                           Name: John F. Register
                                           Title: Principal

                                 Signature Page

<PAGE>

                                           BANK OF AMERICA, N.A.,
                                           as Depositary Institution

                                           By: /s/Mary Heare Amodio
                                           Name: Mary Heare Amodio
                                           Title: Vice President

                                           Address for Notices:

                                           Bank of America, N.A.
                                           101 South Tryon Street
                                           NC1-002-27-05
                                           Charlotte, North Carolina 28255-0001
                                           Attention:  Wilbert Harding
                                           Phone: (704) 386-4992
                                           Telecopy: (704) 409-0791

                                           with a copy to:

                                           Bank of America, N.A.
                                           101 South Tryon Street
                                           NC1-002-27-05
                                           Charlotte, North Carolina 28255-0001
                                           Attention:  Janie Dunham
                                           Phone: (704) 386-8412
                                           Telecopy: (704) 409-0503

                                 Signature Page

<PAGE>

                                   EXHIBIT A
                                   ---------

                                EXISTING ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name             Bank                 Type                       A/C  Number            State

<S>                          <C>                      <C>                  <C>                        <C>                    <C>
Cone Mills Corporation       Cone Mills Corp          Bank of America      Main Commercial DDA        3750377459             TX
                                                                           Account

Cone Mills Corporation       Cone Mills Payables      Bank of America      Payables CDA Account       101185248              TX

Cone Mills Corporation       CIPCO                    Bank of America      CIPCO Operating DDA        3751623704             TX
                                                                              Account

</TABLE>

<PAGE>

                                    EXHIBIT B
                                    ---------

                            IMPREST/PAYROLL ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name                Bank                 Type                    A/C  Number            State

<S>                          <C>                         <C>                  <C>                     <C>                    <C>
Cone Mills Corporation       Cone Mills Salary Payroll   Bank of America      Payroll Account         TBD                    TX

</TABLE>

                         SECURITIZATION DEPOSIT ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name             Bank                 Type                       A/C Number             State

<S>                          <C>                      <C>                  <C>                        <C>                    <C>
Cone Mills Corporation       Cone Receivables II      Bank of America      Atlanta/ SF LBX            3750818293             TX
                             LLC                                              Deposit Account

Cone Mills Corporation       Cone Receivables         Bank of America      Lockbox securitized        Lockbox #198543        GA
                             Atlanta LBX                                      with GECC

Cone Mills Corporation       Cone Receivables SF      Bank of America      Lockbox securitized        Lockbox #21193         CA
                             LBX                                              with GECC

</TABLE>

                                      B-1

<PAGE>

                                    EXHIBIT C
                                    ---------

                       FORM OF NOTICE OF EVENT OF DEFAULT

To:      Bank of America, N.A.,
         as Depository Institution
         101 South Tryon Street
         NC1-002-28-14
         Charlotte, North Carolina 28255-0001
         Attention: Reginald F. Pretty
         Telecopy: (704)386-6467

      Reference is made to the Deposit Account Control Agreement (as amended,
modified or supplemented from time to time, the "Account Control Agreement")
dated as of December 1, 2001, among Cone Mills Corporation (the "Borrower"),
Bank of America, N.A., as Depository Institution (the "Depository Institution")
the Subsidiary Grantors parties thereto, and Bank of America, N.A., as Priority
Collateral Agent. Capitalized terms not otherwise defined herein have the
meanings assigned thereto in the Account Control Agreement.

      We hereby give you notice, pursuant to Section 3 of the Account Control
Agreement, that an Event of Default has occurred and is continuing. Accordingly,
pursuant to the Account Control Agreement, (i) the Depository Institution must
discontinue accepting requests or demands from or on behalf of the Borrower or
any Subsidiary Grantor for access to, or disposition of or possession of any
funds on deposit in any Deposit Account, (ii) the Depository Institution must
follow the instructions of the Priority Collateral Agent as to the holding,
investment, transfer or other disposition of all amounts from time to time on
deposit in any Deposit Account, and (iii) the Depository Institution must make
the Deposit Accounts available to the Priority Collateral Agent at its request,
all without further consent from or notice to the Borrower or any Subsidiary
Grantor and regardless of any instruction the Depository Institution may receive
to the contrary from the Borrower or any Subsidiary Grantor or any other Person.

                                            BANK OF AMERICA, N.A.,
                                            as Priority Collateral Agent

                                            By:_________________________________
                                            Name:_______________________________
                                            Title:______________________________

<PAGE>

                        DEPOSIT ACCOUNT CONTROL AGREEMENT

                           (PRIORITY COLLATERAL AGENT)

THIS DEPOSIT ACCOUNT CONTROL AGREEMENT (this "Control Agreement") is made and
entered into as of November 9, 2001 by and among CONE MILLS CORPORATION, a North
Carolina corporation (the "Borrower"), FIRST UNION NATIONAL BANK (the
"Depositary Institution"), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER
(each a "Subsidiary Grantor"), and BANK OF AMERICA, N.A., as Priority Collateral
Agent (in such capacity, the "Priority Collateral Agent") for each of the
Priority Secured Parties, as defined in the Priority Security Agreement dated as
of January 28, 2000, among the Borrower, the Subsidiary Grantors parties thereto
and the Priority Collateral Agent (such Priority Security Agreement, as amended,
restated, supplemented, amended and restated or otherwise modified from time to
time, being referred to as the "Priority Security Agreement"). Reference is made
to the Intercreditor Agreement (as defined in the Priority Security Agreement)
and the Credit Agreement (as defined in the Intercreditor Agreement). All
capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned thereto in the Priority Security Agreement or, if
not defined therein, the respective meanings assigned thereto in the
Intercreditor Agreement or if not defined therein, the respective meanings
assigned thereto in the Credit Agreement.

                              W I T N E S S E T H:
                              --------------------

      WHEREAS, the Depositary Institution has established the deposit accounts
more specifically identified on Exhibit A hereto in the name of the Borrower or
                                ---------
one or more Subsidiary Grantors (such accounts, as they may be renumbered or
retitled from time to time, being referred to as the "Existing Accounts"); and

      WHEREAS, as collateral security for the payment and performance of all
Priority Senior Obligations, all Guarantor's Obligations incurred with respect
to the Priority Senior Obligations, and all obligations and liabilities under
the Priority Security Agreement, the Borrower and each Subsidiary Grantor has
granted to the Priority Collateral Agent for the benefit of the Priority Secured
Parties a security interest in the Deposit Accounts (as defined below),
including the Existing Accounts, pursuant to the Priority Security Agreement;
and

      WHEREAS, in furtherance of such security interest, the Priority Collateral
Agent, the Borrower, each Subsidiary Grantor and the Depositary Institution are
entering into this Control Agreement to grant to the Priority Collateral Agent
control of the Deposit Accounts within the meaning of Article 9 of the UCC (as
hereinafter defined);

      NOW, THEREFORE, in further consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:

                                       3

<PAGE>

      1.  Account Identification. This Control Agreement applies to the Existing
          ----------------------
Accounts and to each other account (except any Securitization Deposit Account or
Imprest/Payroll Account, as defined below) now or hereafter established with the
Depositary Institution by or on behalf of the Borrower or any Subsidiary
Grantor, including all funds on deposit therein or credited thereto (the
Existing Accounts and such other accounts (excluding the Securitization Deposit
Accounts and the Imprest/Payroll Accounts) being referred to collectively as the
"Deposit Accounts"). All parties agree that each Deposit Account is a "deposit
account" within the meaning of Article 9 of the Uniform Commercial Code (the
"UCC") of the State of North Carolina (the "State"). The Depositary Institution
agrees to deliver written notice to the Priority Collateral Agent of the
establishment by the Borrower or any Subsidiary Grantor of any account other
than the Existing Accounts.

      For the purposes of this Control Agreement, "Imprest/Payroll Accounts"
shall mean, collectively, the deposit accounts identified as such on Exhibit B
hereto, and "Securitization Deposit Accounts" shall mean, collectively, the
deposit accounts identified as such on Exhibit B hereto.

      2.  Priority of Lien; Agency. The Depositary Institution hereby
          ------------------------
acknowledges the Lien of the Priority Collateral Agent for the benefit of the
Priority Secured Parties on the Deposit Accounts created pursuant to the
Priority Security Agreement. The Depositary Institution agrees that (except as
set forth in the General Security Agreement and the General Deposit Account
Control Agreement, and except for the rights of set-off and recoupment of the
Depositary Institution) the Depositary Institution (a) has not agreed and will
not agree with any other Person to comply with instructions or other directions
concerning any Deposit Account or the disposition of funds in any Deposit
Account originated by such Person or any other Person and (b) has not consented
or acknowledged and will not consent to or acknowledge any Lien on any Deposit
Accounts in favor of any other Person.

      The parties acknowledge and agree that this Control Agreement was executed
and delivered prior to the General Deposit Account Control Agreement, and that
the Lien of the Priority Collateral Agreement in the Deposit Accounts has
priority over the Liens of the General Collateral Agent and Designated
Collateral Subagent in such accounts.

      3.  Control of Deposit Accounts. Except as provided in the following
          ---------------------------
sentence, the Depositary Institution may accept instructions from the Borrower
or the respective Subsidiary Grantor and perform any and all transactions at its
request with respect to any Deposit Account. The Borrower, each Subsidiary
Grantor and the Depositary Institution agree with the Priority Collateral Agent
that upon the Depositary Institution being notified by the Priority Collateral
Agent that an Event of Default has occurred and is continuing, until such time
as the Priority Collateral Agent shall have furnished it with a subsequent
notice either that such Event of Default has been cured or waived or that the
Priority Collateral Agent no longer asserts an interest in any of the Deposit
Accounts, (i) the Depositary Institution shall discontinue accepting requests or
demands from or on behalf of the Borrower or any Subsidiary Grantor for access
to, disposition of or possession of any funds on deposit in any Deposit Account,
(ii) the Depositary Institution shall follow the instructions of the Priority
Collateral Agent as to the holding,

                                        4

<PAGE>

investment, transfer or other disposition of all amounts from time to time on
deposit in any Deposit Account, and (iii) the Depositary Institution shall make
the Deposit Accounts available to the Priority Collateral Agent at its request,
all without further consent from or notice to the Borrower or any Subsidiary
Grantor and regardless of any instruction it may receive to the contrary from
the Borrower or any Subsidiary Grantor or any other Person. In addition, the
Borrower and each Subsidiary Grantor agrees that the Depositary Institution may
act as the agent of the Priority Collateral Agent in exercising as to any funds
from time to time on deposit in the Deposit Accounts any rights of set-off
provided by applicable law or by any Loan Document. The Borrower and each
Subsidiary Grantor agrees that the Depositary Institution shall be entitled to
rely, without independent investigation, on any statement of the Priority
Collateral Agent to the effect that an Event of Default has occurred and is
continuing or to the effect that any exercise of set-off requested by the
Priority Collateral Agent is permitted under the applicable law or any Loan
Document.

      4.  Subordination of Rights. The Depositary Institution hereby agrees to
          -----------------------
subordinate any Lien, encumbrance, claim or right of set-off or recoupment
(whether statutory or consensual) it may have, now or in the future, with
respect to any Deposit Account (or any funds deposited in any Deposit Account)
to the Lien created in favor of the Priority Collateral Agent for the benefit of
the Secured Parties pursuant to the Priority Security Agreement; provided,
however, that the Depositary Institution does not waive or subordinate its
rights to set-off or recoupment with respect to routine deposit account
maintenance, wire transfer and other deposit account activity charges and fees
and for the reversal of provisional credits. The Depositary Institution further
agrees that, with respect to any Lien, claim or right of set-off or recoupment
(whether statutory or consensual) that is subordinated pursuant to this Section
4, the Depositary Institution will not prosecute collection or seek to enforce
or resort to any remedies against the Borrower or any Subsidiary Grantor prior
to the termination of this Control Agreement.

      5.  Information. The Depositary Institution shall provide the Priority
          -----------
Collateral Agent with such information with respect to the Deposit Accounts as
the Priority Collateral Agent may from time to time reasonably request, and the
Borrower and each Subsidiary Grantor hereby consents to such information being
provided to the Priority Collateral Agent and the Priority Secured Parties.

      6.  Exculpation and Indemnification. The Depositary Institution undertakes
          -------------------------------
to perform only such duties as are expressly set forth herein. Notwithstanding
any other provisions of this Control Agreement, the parties hereto agree that
the Depositary Institution shall not be liable for any action taken by it or any
of its directors, officers, agents or employees in accordance with this Control
Agreement, including, without limitation, any action so taken at the request of
the Priority Collateral Agent, except for the Depositary Institution's or such
Person's own gross negligence or willful misconduct. In no event shall the
Depositary Institution be liable for losses or delays resulting from causes
beyond the Depositary Institution's reasonable control or for indirect, special
or consequential damages. Without limiting the generality of the foregoing, the
Depositary Institution shall have no responsibility or liability to the Borrower
or any Subsidiary Grantor for complying with a notice from the Priority
Collateral Agent that an Event of Default has occurred and is continuing (a
"Default Notice") or complying with

                                        5

<PAGE>

instructions of the Priority Collateral Agent concerning any Deposit Account or
any funds deposited therein, and shall have no responsibility to investigate the
appropriateness of any such instruction or Default Notice, even if the Borrower
or any Subsidiary Grantor notifies the Depositary Institution that the Priority
Collateral Agent is not legally entitled to give any such instruction or to
deliver any Default Notice.

      The Borrower and each Subsidiary Grantor agrees to indemnify and hold
harmless the Depositary Institution, its directors, officers, agents and
employees (collectively, the "Indemnified Persons") against any and all claims,
causes of action, liabilities, lawsuits, demands and damages, including without
limitation any and all court costs and reasonable attorney's fees, in any way
related to or arising out of or in connection with this Control Agreement or any
action taken or not taken pursuant hereto, except to the extent caused by the
gross negligence or willful misconduct of such Indemnified Person.

      7.  Termination. This Control Agreement shall remain in full force and
          -----------
effect until such time as the Priority Collateral Agent shall deliver written
notice to the Depositary Institution that the Priority Collateral Agent no
longer asserts an interest in any of the Deposit Accounts.

      8.  Notices. Any notice hereunder shall be conclusively deemed to have
          -------
been received by any party hereto and be effective on the day on which delivered
to such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties in writing (or,
in the case of notice by telecopy (where the receipt of such message is verified
by telephone or by electronic confirmation) when received at such telecopy
number as may from time to time be specified in written notice to the other
parties hereto or otherwise received), or if sent prepaid by certified or
registered mail return receipt requested on the fifth business day after the day
on which mailed or if sent prepaid by nationally recognized courier service, on
the first business day after the day on which placed in such courier's custody,
addressed to such party at said address:

      (a) if to the Priority Collateral Agent:

          Bank of America, N.A.
          901 Main Street
          TX1-492-14-12
          Dallas, Texas 75202-3714
          Attention: Agency Services
          Telephone: (214) 209-2627
          Telecopy: (214) 290-8367

      (b) if to the Depository Institution at the address set forth following
          its signature.

      9.  Effect of Control. The parties hereto acknowledge and agree that this
          -----------------
Control Agreement shall be deemed to grant "control" of the Deposit Accounts to
the Priority Collateral Agent for the purposes of perfection of the Priority
Collateral Agent's security interest in the Deposit Accounts pursuant to Article
9 of the UCC as in effect from time to time.

                                       6

<PAGE>

      10. GOVERNING LAW. THIS CONTROL AGREEMENT SHALL BE GOVERNED BY, AND
          -------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA; AND IN
FURTHERANCE THEREOF THE PARTIES HERETO AGREE THAT NORTH CAROLINA IS THE "BANK'S
JURISDICTION" FOR PURPOSES OF THE UCC.

      11. Conflict with Other Account Agreements. In the event of a conflict
          --------------------------------------
between this Control Agreement and any other agreement between the Depositary
Institution and the Borrower or any Subsidiary Grantor relating to any Deposit
Account, the terms of this Control Agreement will prevail.

      12. Successors and Assigns. The terms of this Control Agreement shall be
          ----------------------
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.

      13. Counterparts. This Control Agreement may be executed in any number of
          ------------
counterparts each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Control
Agreement to produce or account for more than one such counterpart executed by
the Borrower, Subsidiary Grantor or Depositary Institution against whom
enforcement is sought.

                            [Signature pages follow]

                                        7

<PAGE>

      IN WITNESS WHEREOF, the parties have duly executed this Control Agreement
on the day and year first written above.

                                           CONE MILLS CORPORATION

                                           By: /s/Gary L. Smith
                                           Name: Gary L. Smith
                                           Title: EVP & CFO

                                           CIPCO S.C., INC.

                                           By: /s/W. Scott Wenhold
                                           Name: W. Scott Wenhold
                                           Title: Treasurer

                                           CONE FOREIGN TRADING LLC

                                           By: /s/Neil W. Koonce
                                           Name: Neil W. Koonce
                                           Title: Vice President

                                           BANK OF AMERICA, N.A., as
                                           Priority Collateral Agent

                                           By: /s/John F. Register
                                           Name: John F. Register
                                           Title: Principal

                                 Signature Page

<PAGE>

                                           FIRST UNION NATIONAL BANK,
                                           as Depositary Institution

                                           By: /s/Tom Bohrer
                                           Name: Tom Bohrer
                                           Title: Vice President

                Address for Notices:
                -------------------

                                           c/o Wachovia Corporation
                                           100 N. Main Street
                                           NC 37202
                                           Winston-Salem, North Carolina  27102
                                           Attention:  Charlene Johnson
                                           Phone: (336) 732-5472
                                           Fax: (336) 732-6935

                                 Signature Page

<PAGE>

                                    EXHIBIT A
                                    ---------

                                EXISTING ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name                  Bank             Type                     A/C  Number             State

<S>                          <C>                           <C>              <C>                      <C>                     <C>
Cone Mills Corporation       Cone Mills Corp               First Union      Main Commercial DDA      2072081080826           NC
                                                                            Account

Cone Mills Corporation       Cone Mills Corp               First Union      ZBA Account for          2072087808866           NC
                                                                            Incoming Wires

Cone Mills Corporation       North Pointe Association      First Union      DDA Account              2072087399773           NC

Cone Mills Corporation       Cone Foreign Trading          First Union      DDA Account              2010000260786           NC

</TABLE>

<PAGE>

                                    EXHIBIT B
                                    ---------

                            IMPREST/PAYROLL ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name                   Bank                Type                   A/C Number            State

<S>                          <C>                            <C>                 <C>                    <C>                   <C>
Cone Mills Corporation       Cone Mills Hourly Payroll      First Union         ZBA Account for        2079900014206         NC
                                                                                   Hourly Payroll

Cone Mills Corporation       Cone Mills Insurance Account   First Union         ZBA Account for Blue   2072087403180         NC
                                                                                   Cross

</TABLE>

                         SECURITIZATION DEPOSIT ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name                   Bank                Type                A/C Number            State

<S>                          <C>                            <C>                 <C>                 <C>                   <C>

                                      NONE

</TABLE>

                                       4

<PAGE>

                        DEPOSIT ACCOUNT CONTROL AGREEMENT

                           (GENERAL COLLATERAL AGENT)

THIS DEPOSIT ACCOUNT CONTROL AGREEMENT (this "Control Agreement") is made and
entered into as of December 1, 2001 by and among CONE MILLS CORPORATION, a North
Carolina corporation (the "Borrower"), BANK OF AMERICA, N.A. (the "Depositary
Institution"), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER (each a
"Subsidiary Grantor"), WILMINGTON TRUST COMPANY, as General Collateral Agent (in
such capacity, the "General Collateral Agent"), and BANK OF AMERICA, N.A., as
Designated Collateral Subagent (in such capacity, the "Designated Collateral
Subagent") for each of the General Secured Parties, as defined in the General
Security Agreement dated as of January 28, 2000, among the Borrower, the
Subsidiary Grantors parties thereto and the General Collateral Agent (such
General Security Agreement, as amended, restated, supplemented, amended and
restated or otherwise modified from time to time, being referred to as the
"General Security Agreement"). Reference is made to the Intercreditor Agreement
(as defined in the General Security Agreement) and the Credit Agreement (as
defined in the Intercreditor Agreement). All capitalized terms used but not
otherwise defined herein shall have the respective meanings assigned thereto in
the General Security Agreement or, if not defined therein, the respective
meanings assigned thereto in the Intercreditor Agreement or if not defined
therein, the respective meanings assigned thereto in the Credit Agreement.

                              W I T N E S S E T H:
                              --------------------

      WHEREAS, the Depositary Institution has established the deposit accounts
more specifically identified on Exhibit A hereto in the name of the Borrower or
                                ---------
one or more Subsidiary Grantors (such accounts, as they may be renumbered or
retitled from time to time, being referred to as the "Existing Accounts"); and

      WHEREAS, as collateral security for the payment and performance of all
General Senior Obligations, all Guarantor's Obligations incurred with respect to
the General Senior Obligations, and all obligations and liabilities under the
General Security Agreement, the Borrower and each Subsidiary Grantor has granted
to the General Collateral Agent or the Designated Collateral Subagent, for the
benefit of the General Secured Parties, a security interest in the Deposit
Accounts (as defined below), including the Existing Accounts, pursuant to the
General Security Agreement; and

      WHEREAS, in furtherance of such security interest, the General Collateral
Agent, the Designated Collateral Subagent, the Borrower, each Subsidiary Grantor
and the Depositary Institution are entering into this Control Agreement to grant
to the General Collateral Agent control of the Deposit Accounts within the
meaning of Article 9 of the UCC (as hereinafter defined);

                                       5

<PAGE>

      NOW, THEREFORE, in further consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:

      1.  Account Identification. This Control Agreement applies to the Existing
          ----------------------
Accounts and to each other account (except any Securitization Deposit Account or
Imprest/Payroll Account, as defined below) now or hereafter established with the
Depositary Institution by or on behalf of the Borrower or any Subsidiary
Grantor, including all funds on deposit therein or credited thereto (the
Existing Accounts and such other accounts (excluding the Securitization Deposit
Accounts and the Imprest/Payroll Accounts) being referred to collectively as the
"Deposit Accounts"). All parties agree that each Deposit Account is a "deposit
account" within the meaning of Article 9 of the Uniform Commercial Code (the
"UCC") of the State of North Carolina (the "State"). Each of the Borrower and
each Subsidiary Grantor agrees to deliver written notice to the General
Collateral Agent and the Designated Collateral Subagent of the establishment by
the Borrower or any Subsidiary Grantor of any account other than the Existing
Accounts.

      For the purposes of this Control Agreement, "Imprest/Payroll Accounts"
shall mean, collectively, the deposit accounts identified as such on Exhibit B
                                                                     ---------
hereto, and "Securitization Deposit Accounts" shall mean, collectively, the
deposit accounts identified as such on Exhibit B hereto.
                                       ---------

      2.  Priority of Lien; Agency. The Depositary Institution hereby
          ------------------------
acknowledges the Liens of the General Collateral Agent and the Designated
Collateral Subagent, for the benefit of the General Secured Parties, on the
Deposit Accounts created pursuant to the General Security Agreement. The
Depositary Institution agrees that (except as set forth in the Priority Security
Agreement and the Priority Deposit Account Control Agreement, and except for the
rights of set-off and recoupment of the Depositary Institution) the Depositary
Institution (a) has not, to the best of its knowledge, agreed and will not agree
with any other Person to comply with instructions or other directions concerning
any Deposit Account or the disposition of funds in any Deposit Account
originated by such Person or any other Person and (b) has not, to the best of
its knowledge, consented or acknowledged and will not consent to or acknowledge
any Lien on any Deposit Accounts in favor of any other Person.

      The parties acknowledge and agree that the Priority Deposit Account
Control Agreement was executed and delivered prior to this Control Agreement,
and that the Lien of the Priority Collateral Agreement in the Deposit Accounts
has priority over the Liens of the General Collateral Agent and Designated
Collateral Subagent in such accounts.

      3.  Control of Deposit Accounts. Except as provided in the following
          ---------------------------
sentence, the Depositary Institution may accept instructions from the Borrower
or the respective Subsidiary Grantor and perform any and all transactions at its
request with respect to any Deposit Account. The Borrower, each Subsidiary
Grantor and the Depositary Institution agree with the General Collateral Agent
and the Designated Collateral Subagent that upon delivery by the General
Collateral Agent or the Designated Collateral Subagent to the Depository
Institution of a notice (in the form of Exhibit C hereto) that an Event of
Default has occurred and is continuing, until

                                       6

<PAGE>

such time as the General Collateral Agent or the Designated Collateral Subagent
shall have furnished it with a subsequent notice either that such Event of
Default has been cured or waived or that the General Collateral Agent no longer
asserts an interest in any of the Deposit Accounts, (i) the Depositary
Institution shall discontinue accepting requests or demands from or on behalf of
the Borrower or any Subsidiary Grantor for access to, disposition of or
possession of any funds on deposit in any Deposit Account, (ii) the Depositary
Institution shall, subject to any duty it may have to follow instructions of the
Priority Collateral Agent under the Priority Deposit Account Control Agreement,
follow the instructions of the General Collateral Agent or the Designated
Collateral Subagent (whether acting individually or jointly) as to the holding,
investment, transfer or other disposition of all amounts from time to time on
deposit in any Deposit Account, and (iii) the Depositary Institution shall,
subject to any duty it may have to follow instructions of the Priority
Collateral Agent under the Priority Deposit Account Control Agreement, make the
Deposit Accounts available to the General Collateral Agent or the Designated
Collateral Subagent at such Person's request, all without further consent from
or notice to the Borrower or any Subsidiary Grantor and regardless of any
instruction it may receive to the contrary from the Borrower or any Subsidiary
Grantor or any other Person. In addition, the Borrower and each Subsidiary
Grantor agrees that the Depositary Institution may act as the agent of the
General Collateral Agent or the Designated Collateral Subagent in exercising as
to any funds from time to time on deposit in the Deposit Accounts any rights of
set-off provided by applicable law or by any Loan Document. The Borrower and
each Subsidiary Grantor agrees that the Depositary Institution shall be entitled
to rely, without independent investigation, on any statement of the General
Collateral Agent or the Designated Collateral Subagent to the effect that an
Event of Default has occurred and is continuing or to the effect that any
exercise of set-off requested by the General Collateral Agent or the Designated
Collateral Subagent is permitted under the applicable law or any Loan Document.

      4.  Subordination of Rights. The Depositary Institution hereby agrees to
          -----------------------
subordinate any Lien, encumbrance, claim or right of set-off or recoupment
(whether statutory or consensual) it may have, now or in the future, with
respect to any Deposit Account (or any funds deposited in any Deposit Account)
to any Lien created in favor of the General Collateral Agent or the Designated
Collateral Subagent, for the benefit of the Secured Parties, pursuant to the
General Security Agreement; provided, however, that the Depositary Institution
does not waive or subordinate its rights to set-off or recoupment with respect
to routine deposit account maintenance, wire transfer and other deposit account
activity charges and fees and for the reversal of provisional credits. The
Depositary Institution further agrees that, with respect to any Lien, claim or
right of set-off or recoupment (whether statutory or consensual) that is
subordinated pursuant to this Section 4, the Depositary Institution will not
                              ---------
prosecute collection or seek to enforce or resort to any remedies against the
Borrower or any Subsidiary Grantor prior to the termination of this Control
Agreement.

      5.  Information. The Depositary Institution shall provide the General
          -----------
Collateral Agent or the Designated Collateral Subagent with such information
with respect to the Deposit Accounts as such General Collateral Agent or
Designated Collateral Subagent may from time to time reasonably request, and the
Borrower and each Subsidiary Grantor hereby consents to

                                       7

<PAGE>

such information being provided to the General Collateral Agent, the Designated
Collateral Subagent and the General Secured Parties.

      6.  Exculpation and Indemnification. The Depositary Institution undertakes
          -------------------------------
to perform only such duties as are expressly set forth herein. Notwithstanding
any other provisions of this Control Agreement, the parties hereto agree that
the Depositary Institution shall not be liable for any action taken by it or any
of its directors, officers, agents or employees in accordance with this Control
Agreement, including, without limitation, any action so taken at the request of
the General Collateral Agent or the Designated Collateral Subagent, except for
the Depositary Institution's or such Person's own gross negligence or willful
misconduct. In no event shall the Depositary Institution be liable for losses or
delays resulting from causes beyond the Depositary Institution's reasonable
control or for indirect, special or consequential damages. Without limiting the
generality of the foregoing, the Depositary Institution shall have no
responsibility or liability to the Borrower or any Subsidiary Grantor for
complying with a notice from the General Collateral Agent or the Designated
Collateral Subagent that an Event of Default has occurred and is continuing (a
"Default Notice") or complying with instructions of the General Collateral Agent
or the Designated Collateral Subagent concerning any Deposit Account or any
funds deposited therein, and shall have no responsibility to investigate the
appropriateness of any such instruction or Default Notice, even if the Borrower
or any Subsidiary Grantor notifies the Depositary Institution that the General
Collateral Agent or the Designated Collateral Subagent is not legally entitled
to give any such instruction or to deliver any Default Notice.

      The Borrower and each Subsidiary Grantor agrees to indemnify and hold
harmless the Depositary Institution, its directors, officers, agents and
employees (collectively, the "Indemnified Persons") against any and all claims,
causes of action, liabilities, lawsuits, demands and damages, including without
limitation any and all court costs and reasonable attorney's fees, in any way
related to or arising out of or in connection with this Control Agreement or any
action taken or not taken pursuant hereto, except to the extent caused by the
gross negligence or willful misconduct of such Indemnified Person.

      7.  Termination. This Control Agreement shall remain in full force and
          -----------
effect until such time as the General Collateral Agent or the Designated
Collateral Subagent shall deliver written notice to the Depositary Institution
that the General Collateral Agent no longer asserts an interest in any of the
Deposit Accounts.

      8.  Notices. Any notice hereunder shall be conclusively deemed to have
          -------
been delivered to any party hereto upon receipt when addressed to such party at
the address (or in the case of a notice by telecopy) the telecopy number) set
forth below:

      (a) if to the General Collateral Agent:

          Wilmington Trust Company
          1100 North Market Street
          Wilmington, Delaware 19890
          Attn: Corporate Trust Administration

                                       8

<PAGE>

          Main Phone: (302) 651-1000
          Main Telecopy: (302) 651-8882

          with a copy to the Designated Collateral Subagent:

          Bank of America, N.A.
          901 Main Street
          TX1-492-14-12
          Dallas, Texas 75202-3714
          Attention: Agency Services
          Telephone: (214) 209-2627
          Telecopy: (214) 290-8367

      (b) if to the Depository Institution at the address set forth following
its signature;

      (c) if to the Borrower or any Subsidiary Grantor:

          to such Borrower or Subsidiary Grantor
          3101 North Elm Street
          Greensboro, North Carolina 27415-6540
          Attn: W. Scott Wenhold, Treasurer
          Telephone: (336) 379-6098
          Telefacsimile: (336) 379-6043

          with a copy to:

          Cone Mills Corporation
          3101 North Elm Street
          Greensboro, North Carolina 27415-6540
          Attn: Neil W. Koonce, Esq.
          Telephone: (336) 379-6568
          Telefacsimile: (336) 379-6972

      9.  Effect of Control. The parties hereto acknowledge and agree that this
          -----------------
Control Agreement shall be deemed to grant "control" of the Deposit Accounts to
the General Collateral Agent and the Designated Collateral Subagent for the
purposes of perfection of the General Collateral Agent's and Designated
Collateral Subagent's security interests in the Deposit Accounts pursuant to
Article 9 of the UCC as in effect from time to time.

      10. GOVERNING LAW. THIS CONTROL AGREEMENT SHALL BE GOVERNED BY, AND
          -------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA; AND IN
FURTHERANCE THEREOF THE PARTIES HERETO AGREE THAT NORTH CAROLINA IS THE "BANK'S
JURISDICTION" FOR PURPOSES OF THE UCC.

                                       9

<PAGE>

      11. Conflict with Other Account Agreements. In the event of a conflict
          --------------------------------------
between this Control Agreement and any other agreement between the Depositary
Institution and the Borrower or any Subsidiary Grantor relating to any Deposit
Account, the terms of this Control Agreement will prevail, except that in the
event of a conflict between this Control Agreement and the Priority Deposit
Account Control Agreement, the terms of the Priority Deposit Account Control
Agreement will prevail.

      12. Successors and Assigns. The terms of this Control Agreement shall be
          ----------------------
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.

      13. Counterparts. This Control Agreement may be executed in any number of
          ------------
counterparts each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Control
Agreement to produce or account for more than one such counterpart executed by
the Borrower, Subsidiary Grantor or Depositary Institution against whom
enforcement is sought.

                            [Signature pages follow]

                                       10

<PAGE>

      IN WITNESS WHEREOF, the parties have duly executed this Control Agreement
on the day and year first written above.

                                           CONE MILLS CORPORATION

                                           By: /s/W. Scott Wenhold
                                           Name:  W. Scott Wenhold
                                           Title: Treasurer

                                           CIPCO S.C., INC.

                                           By: /s/Cheryl G. Hollis
                                           Name: Cheryl G. Hollis
                                           Title: Assistant Secretary

                                           CONE FOREIGN TRADING LLC

                                           By: /s/Neil W. Koonce
                                           Name: Neil W. Koonce
                                           Title: Vice President

                                           WILMINGTON TRUST COMPANY, as General
                                           Collateral Agent

                                           By: /s/Mary Kay Pupillo
                                           Name: Mary Kay Pupillo
                                           Title: Senior Financial Services
                                                  Officer

                                 Signature Page

<PAGE>

                                           BANK OF AMERICA, N.A., as Designated
                                           Collateral Subagent

                                           By: /s/John F. Register
                                           Name: John F. Register
                                           Title: Principal

                                           BANK OF AMERICA, N.A.,
                                           as Depositary Institution

                                           By: /s/Mary Heare Amodio
                                           Name: Mary Heare Amodio
                                           Title: Vice President

                                           Address for Notices:

                                           Bank of America, N.A.
                                           101 South Tryon Street
                                           NC1-002-27-05
                                           Charlotte, North Carolina 28255-0001
                                           Attention: Wilbert Harding
                                           Phone: (704) 386-4992
                                           Telecopy: (704) 409-0791

                                           with a copy to:

                                           Bank of America, N.A.
                                           101 South Tryon Street
                                           NC1-002-27-05
                                           Charlotte, North Carolina 28255-0001
                                           Attention: Janie Dunham
                                           Phone: (704) 386-8412
                                           Telecopy: (704) 409-0503

                                 Signature Page

<PAGE>

                                    EXHIBIT A

                                EXISTING ACCOUNTS

<TABLE>
<CAPTION>
Account Holder                Account Name                Bank                 Type                       A/C  Number          State

<S>                           <C>                         <C>                  <C>                        <C>                  <C>
Cone Mills Corporation        Cone Mills Corp             Bank of America      Main Commercial DDA        3750377459           TX
                                                                               Account

Cone Mills Corporation        Cone Mills Payables         Bank of America      Payables CDA Account       101185248            TX

Cone Mills Corporation        CIPCO                       Bank of America      CIPCO Operating DDA        3751623704           TX
                                                                               Account

</TABLE>

                                      A-1

<PAGE>

                                    EXHIBIT B

                            IMPREST/PAYROLL ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name                Bank                 Type                       A/C  Number         State

<S>                          <C>                         <C>                  <C>                        <C>                 <C>
Cone Mills Corporation       Cone Mills Salary Payroll   Bank of America      Payroll Account            TBD                 TX

</TABLE>

                        SECURITIZATION DEPOSIT ACCOUNTS

<TABLE>
<CAPTION>
Account Holder                Account Name                Bank                 Type                       A/C Number           State

<S>                           <C>                         <C>                  <C>                        <C>                  <C>
Cone Mills Corporation        Cone Receivables II         Bank of America      Atlanta/ SF LBX            3750818293           TX
                              LLC                                              Deposit Account

Cone Mills Corporation        Cone Receivables            Bank of America      Lockbox securitized        Lockbox #198543      GA
                              Atlanta LBX                                      with GECC

Cone Mills Corporation        Cone Receivables SF         Bank of America      Lockbox securitized        Lockbox #21193       CA
                              LBX                                              with GECC

</TABLE>

                                      B-1

<PAGE>

                                    EXHIBIT C
                                    ---------

                       FORM OF NOTICE OF EVENT OF DEFAULT

To:      Bank of America, N.A.,
         as Depository Institution
         101 South Tryon Street
         NC1-002-28-14
         Charlotte, North Carolina 28255-0001
         Attention: Reginald F. Pretty
         Telecopy: (704)386-6467

      Reference is made to the Deposit Account Control Agreement (as amended,
modified or supplemented from time to time, the "Account Control Agreement")
dated as of December 1, 2001, among Cone Mills Corporation (the "Borrower"),
Bank of America, N.A., as Depository Institution (the "Depository Institution")
the Subsidiary Grantors parties thereto, Wilmington Trust Company, as General
Collateral Agent (the "General Collateral Agent"), and Bank of America, N.A., as
Designated Collateral Subagent (the "Designated Collateral Subagent").
Capitalized terms not otherwise defined herein have the meanings assigned
thereto in the Account Control Agreement.

      We hereby give you notice, pursuant to Section 3 of the Account Control
Agreement, that an Event of Default has occurred and is continuing. Accordingly,
pursuant to the Account Control Agreement, (i) the Depository Institution must
discontinue accepting requests or demands from or on behalf of the Borrower or
any Subsidiary Grantor for access to, or disposition of or possession of any
funds on deposit in any Deposit Account, (ii) the Depository Institution must,
subject to any duty it may have to follow instructions of the Priority
Collateral Agent under the Priority Deposit Account Control Agreement, follow
the instructions of the General Collateral Agent or the Designated Collateral
Subagent (whether acting individually or jointly) as to the holding, investment,
transfer or other disposition of all amounts from time to time on deposit in any
Deposit Account, and (iii) the Depository Institution must, subject to any duty
it may have to follow instructions of the Priority Collateral Agent under the
Priority Deposit Account Control Agreement, make the Deposit Accounts available
to the General Collateral Agent or the Designated Collateral Subagent at such
Person's request, all without further consent from or notice to the Borrower or
any Subsidiary Grantor and regardless of any instruction the Depository
Institution may receive to the contrary from the Borrower or any Subsidiary
Grantor or any other Person.

                                           Bank of America, N.A.,
                                           as Priority Collateral Agent
                                           _____________________________________

                                           By:__________________________________

                                           Name:________________________________

                                           Title:_______________________________

<PAGE>

                        DEPOSIT ACCOUNT CONTROL AGREEMENT

                           (GENERAL COLLATERAL AGENT)

THIS DEPOSIT ACCOUNT CONTROL AGREEMENT (this "Control Agreement") is made and
entered into as of November 9, 2001 by and among CONE MILLS CORPORATION, a North
Carolina corporation (the "Borrower"), FIRST UNION NATIONAL BANK (the
"Depositary Institution"), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE BORROWER
(each a "Subsidiary Grantor"), WILMINGTON TRUST COMPANY, as General Collateral
Agent (in such capacity, the "General Collateral Agent"), and BANK OF AMERICA,
N.A., as Designated Collateral Subagent (in such capacity, the "Designated
Collateral Subagent") for each of the General Secured Parties, as defined in the
General Security Agreement dated as of January 28, 2000, among the Borrower, the
Subsidiary Grantors parties thereto and the General Collateral Agent (such
General Security Agreement, as amended, restated, supplemented, amended and
restated or otherwise modified from time to time, being referred to as the
"General Security Agreement"). Reference is made to the Intercreditor Agreement
(as defined in the General Security Agreement) and the Credit Agreement (as
defined in the Intercreditor Agreement). All capitalized terms used but not
otherwise defined herein shall have the respective meanings assigned thereto in
the General Security Agreement or, if not defined therein, the respective
meanings assigned thereto in the Intercreditor Agreement or if not defined
therein, the respective meanings assigned thereto in the Credit Agreement.

                              W I T N E S S E T H:
                              --------------------

      WHEREAS, the Depositary Institution has established the deposit accounts
more specifically identified on Exhibit A hereto in the name of the Borrower or
                                ---------
one or more Subsidiary Grantors (such accounts, as they may be renumbered or
retitled from time to time, being referred to as the "Existing Accounts"); and

      WHEREAS, as collateral security for the payment and performance of all
General Senior Obligations, all Guarantor's Obligations incurred with respect to
the General Senior Obligations, and all obligations and liabilities under the
General Security Agreement, the Borrower and each Subsidiary Grantor has granted
to the General Collateral Agent or the Designated Collateral Subagent, for the
benefit of the General Secured Parties, a security interest in the Deposit
Accounts (as defined below), including the Existing Accounts, pursuant to the
General Security Agreement; and

      WHEREAS, in furtherance of such security interest, the General Collateral
Agent, the Designated Collateral Subagent, the Borrower, each Subsidiary Grantor
and the Depositary Institution are entering into this Control Agreement to grant
to the General Collateral Agent control of the Deposit Accounts within the
meaning of Article 9 of the UCC (as hereinafter defined);

                                       4

<PAGE>

      NOW, THEREFORE, in further consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:

      1.  Account Identification. This Control Agreement applies to the Existing
          ----------------------
Accounts and to each other account (except any Securitization Deposit Account or
Imprest/Payroll Account, as defined below) now or hereafter established with the
Depositary Institution by or on behalf of the Borrower or any Subsidiary
Grantor, including all funds on deposit therein or credited thereto (the
Existing Accounts and such other accounts (excluding the Securitization Deposit
Accounts and the Imprest/Payroll Accounts) being referred to collectively as the
"Deposit Accounts"). All parties agree that each Deposit Account is a "deposit
account" within the meaning of Article 9 of the Uniform Commercial Code (the
"UCC") of the State of North Carolina (the "State"). The Depositary Institution
agrees to deliver written notice to the General Collateral Agent and the
Designated Collateral Subagent of the establishment by the Borrower or any
Subsidiary Grantor of any account other than the Existing Accounts.

      For the purposes of this Control Agreement, "Imprest/Payroll Accounts"
shall mean, collectively, the deposit accounts identified as such on Exhibit B
                                                                     ---------
hereto, and "Securitization Deposit Accounts" shall mean, collectively, the
deposit accounts identified as such on Exhibit B hereto.
                                       ---------

      2.  Priority of Lien; Agency. The Depositary Institution hereby
          ------------------------
acknowledges the Liens of the General Collateral Agent and the Designated
Collateral Subagent, for the benefit of the General Secured Parties, on the
Deposit Accounts created pursuant to the General Security Agreement. The
Depositary Institution agrees that (except as set forth in the Priority Security
Agreement and the Priority Deposit Account Control Agreement, and except for the
rights of set-off and recoupment of the Depositary Institution) the Depositary
Institution (a) has not agreed and will not agree with any other Person to
comply with instructions or other directions concerning any Deposit Account or
the disposition of funds in any Deposit Account originated by such Person or any
other Person and (b) has not consented or acknowledged and will not consent to
or acknowledge any Lien on any Deposit Accounts in favor of any other Person.

      The parties acknowledge and agree that the Priority Deposit Account
Control Agreement was executed and delivered prior to this Control Agreement,
and that the Lien of the Priority Collateral Agreement in the Deposit Accounts
has priority over the Liens of the General Collateral Agent and Designated
Collateral Subagent in such accounts.

      3.  Control of Deposit Accounts. Except as provided in the following
          ---------------------------
sentence, the Depositary Institution may accept instructions from the Borrower
or the respective Subsidiary and perform any and all transactions at its request
with respect to any Deposit Account. The Borrower, each Subsidiary Grantor and
the Depositary Institution agree with the General Collateral Agent and the
Designated Collateral Subagent that upon the Depositary Institution being
notified by the General Collateral Agent or the Designated Collateral Subagent
that an Event of Default has occurred and is continuing, until such time as the
General Collateral Agent or the Designated Collateral Subagent shall have
furnished it with a subsequent notice either that such Event of Default has been
cured or waived or that the General Collateral Agent no longer

                                       5

<PAGE>

asserts an interest in any of the Deposit Accounts, (i) the Depositary
Institution shall discontinue accepting requests or demands from or on behalf of
the Borrower or any Subsidiary for access to, disposition of or possession of
any funds on deposit in any Deposit Account, (ii) the Depositary Institution
shall, subject to any duty it may have to follow instructions of the Priority
Collateral Agent under the Priority Deposit Account Control Agreement, follow
the instructions of the General Collateral Agent or the Designated Collateral
Subagent (whether acting individually or jointly) as to the holding, investment,
transfer or other disposition of all amounts from time to time on deposit in any
Deposit Account, and (iii) the Depositary Institution shall, subject to any duty
it may have to follow instructions of the Priority Collateral Agent under the
Priority Deposit Account Control Agreement, make the Deposit Accounts available
to the General Collateral Agent or the Designated Collateral Subagent at such
Person's request, all without further consent from or notice to the Borrower or
any Subsidiary Grantor and regardless of any instruction it may receive to the
contrary from the Borrower or any Subsidiary Grantor or any other Person. In
addition, the Borrower and each Subsidiary Grantor agrees that the Depositary
Institution may act as the agent of the General Collateral Agent or the
Designated Collateral Subagent in exercising as to any funds from time to time
on deposit in the Deposit Accounts any rights of set-off provided by applicable
law or by any Loan Document. The Borrower and each Subsidiary Grantor agrees
that the Depositary Institution shall be entitled to rely, without independent
investigation, on any statement of the General Collateral Agent or the
Designated Collateral Subagent to the effect that an Event of Default has
occurred and is continuing or to the effect that any exercise of set-off
requested by the General Collateral Agent or the Designated Collateral Subagent
is permitted under the applicable law or any Loan Document.

      4.  Subordination of Rights. The Depositary Institution hereby agrees to
          -----------------------
subordinate any Lien, encumbrance, claim or right of set-off or recoupment
(whether statutory or consensual) it may have, now or in the future, with
respect to any Deposit Account (or any funds deposited in any Deposit Account)
to any Lien created in favor of the General Collateral Agent or the Designated
Collateral Subagent, for the benefit of the Secured Parties, pursuant to the
General Security Agreement; provided, however, that the Depositary Institution
does not waive or subordinate its rights to set-off or recoupment with respect
to routine deposit account maintenance, wire transfer and other deposit account
activity charges and fees and for the reversal of provisional credits. The
Depositary Institution further agrees that, with respect to any Lien, claim or
right of set-off or recoupment (whether statutory or consensual) that is
subordinated pursuant to this Section 4, the Depositary Institution will not
                              ---------
prosecute collection or seek to enforce or resort to any remedies against the
Borrower or any Subsidiary prior to the termination of this Control Agreement.

      5.  Information. The Depositary Institution shall provide the General
          -----------
Collateral Agent or the Designated Collateral Subagent with such information
with respect to the Deposit Accounts as such General Collateral Agent or
Designated Collateral Subagent may from time to time reasonably request, and the
Borrower and each Subsidiary Grantor hereby consents to such information being
provided to the General Collateral Agent, the Designated Collateral Subagent and
the General Secured Parties.

                                       6

<PAGE>

      6.  Exculpation and Indemnification. The Depositary Institution undertakes
          -------------------------------
to perform only such duties as are expressly set forth herein. Notwithstanding
any other provisions of this Control Agreement, the parties hereto agree that
the Depositary Institution shall not be liable for any action taken by it or any
of its directors, officers, agents or employees in accordance with this Control
Agreement, including, without limitation, any action so taken at the request of
the General Collateral Agent or the Designated Collateral Subagent, except for
the Depositary Institution's or such Person's own gross negligence or willful
misconduct. In no event shall the Depositary Institution be liable for losses or
delays resulting from causes beyond the Depositary Institution's reasonable
control or for indirect, special or consequential damages. Without limiting the
generality of the foregoing, the Depositary Institution shall have no
responsibility or liability to the Borrower or any Subsidiary Grantor for
complying with a notice from the General Collateral Agent or the Designated
Collateral Subagent that an Event of Default has occurred and is continuing (a
"Default Notice") or complying with instructions of the General Collateral Agent
or the Designated Collateral Subagent concerning any Deposit Account or any
funds deposited therein, and shall have no responsibility to investigate the
appropriateness of any such instruction or Default Notice, even if the Borrower
or any Subsidiary Grantor notifies the Depositary Institution that the General
Collateral Agent or the Designated Collateral Subagent is not legally entitled
to give any such instruction or to deliver any Default Notice.

      The Borrower and each Subsidiary Grantor agrees to indemnify and hold
harmless the Depositary Institution, its directors, officers, agents and
employees (collectively, the "Indemnified Persons") against any and all claims,
causes of action, liabilities, lawsuits, demands and damages, including without
limitation any and all court costs and reasonable attorney's fees, in any way
related to or arising out of or in connection with this Control Agreement or any
action taken or not taken pursuant hereto, except to the extent caused by the
gross negligence or willful misconduct of such Indemnified Person.

      7.  Termination. This Control Agreement shall remain in full force and
          -----------
effect until such time as the General Collateral Agent or the Designated
Collateral Subagent shall deliver written notice to the Depositary Institution
that the General Collateral Agent no longer asserts an interest in any of the
Deposit Accounts.

      8.  Notices. Any notice hereunder shall be conclusively deemed to have
          -------
been received by any party hereto and be effective on the day on which delivered
to such party (against receipt therefor) at the address set forth below or such
other address as such party shall specify to the other parties in writing (or,
in the case of notice by telecopy (where the receipt of such message is verified
by telephone or electronic confirmation) when received at such telecopy number
as may from time to time be specified in written notice to the other parties
hereto or otherwise received), or if sent prepaid by certified or registered
mail return receipt requested on the fifth business day after the day on which
mailed or if sent prepaid by nationally recognized courier service, on the first
business day after the day on which placed in such courier's custody, addressed
to such party at said address:

      (a) if to the General Collateral Agent:

                                       7

<PAGE>

          Wilmington Trust Company
          1100 North Market Street
          Wilmington, Delaware 19890
          Attn: Corporate Trust Administration
          Main Phone: (302) 651-1000
          Main Telecopy: (302) 651-8882
          with a copy to the Designated Collateral Subagent:

          Bank of America, N.A.
          901 Main Street
          TX1-492-14-12
          Dallas, Texas 75202-3714
          Attention: Agency Services
          Telephone: (214) 209-2627
          Telecopy: (214) 290-8367

      (b) if to the Depository Institution at the address set forth following
its signature.

      9.  Effect of Control. The parties hereto acknowledge and agree that this
          -----------------
Control Agreement shall be deemed to grant "control" of the Deposit Accounts to
the General Collateral Agent and the Designated Collateral Subagent for the
purposes of perfection of the General Collateral Agent's and Designated
Collateral Subagent's security interests in the Deposit Accounts pursuant to
Article 9 of the UCC as in effect from time to time.

      10. GOVERNING LAW. THIS CONTROL AGREEMENT SHALL BE GOVERNED BY, AND
          -------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NORTH CAROLINA; AND IN
FURTHERANCE THEREOF THE PARTIES HERETO AGREE THAT NORTH CAROLINA IS THE "BANK'S
JURISDICTION" FOR PURPOSES OF THE UCC.

      11. Conflict with Other Account Agreements. In the event of a conflict
          --------------------------------------
between this Control Agreement and any other agreement between the Depositary
Institution and the Borrower or any Subsidiary Grantor relating to any Deposit
Account, the terms of this Control Agreement will prevail, except that in the
event of a conflict between this Control Agreement and the Priority Deposit
Account Control Agreement, the terms of the Priority Deposit Account Control
Agreement will prevail.

      12. Successors and Assigns. The terms of this Control Agreement shall be
          ----------------------
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.

      13. Counterparts. This Control Agreement may be executed in any number of
          ------------
counterparts each of which when so executed and delivered shall be deemed an
original, and it shall not be necessary in making proof of this Control
Agreement to produce or account for more

                                       8

<PAGE>

than one such counterpart executed by the Borrower, Subsidiary Grantor or
Depositary Institution against whom enforcement is sought.

                            [Signature pages follow]

                                       9

<PAGE>

      IN WITNESS WHEREOF, the parties have duly executed this Control Agreement
on the day and year first written above.

                                           CONE MILLS CORPORATION

                                           By: /s/Gary L. Smith
                                           Name: Gary L. Smith
                                           Title: EVP & CFO

                                           CIPCO S.C., INC.

                                           By: /s/W. Scott Wenhold
                                           Name: W. Scott Wenhold
                                           Title: Treasurer

                                           CONE FOREIGN TRADING LLC

                                           By: /s/Neil W. Koonce
                                           Name: Neil W. Koonce
                                           Title: Vice President

                                           WILMINGTON TRUST COMPANY, as General
                                           Collateral Agent

                                           By: /s/Mary Kay Pupillo
                                           Name: Mary Kay Pupillo
                                           Title: Senior Financial Services
                                                  Officer

                                 Signature Page

<PAGE>

                                           BANK OF AMERICA, N.A., as Designated
                                           Collateral Subagent

                                           By: /s/John F. Register
                                           Name: John F. Register
                                           Title: Principal

                                           FIRST UNION NATIONAL BANK,
                                           as Depositary Institution

                                           By: /s/Tom Bohrer
                                           Name: Tom Bohrer
                                           Title: Vice President

                                           Address for Notices:

                                           c/o Wachovia Corporation
                                           100 N. Main Street
                                           NC 37202
                                           Winston-Salem, North Carolina  27102
                                           Attention: Charlene Johnson
                                           Phone: (336) 732-5472
                                           Fax: (336) 732-6935

                                 Signature Page

<PAGE>

                                    EXHIBIT A
                                    ---------

                                EXISTING ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name                  Bank             Type                     A/C  Number             State
<S>                          <C>                           <C>              <C>                      <C>                     <C>
Cone Mills Corporation       Cone Mills Corp               First Union      Main Commercial DDA      2072081080826           NC
                                                                            Account

Cone Mills Corporation       Cone Mills Corp               First Union      ZBA Account for          2072087808866           NC
                                                                            Incoming Wires

Cone Mills Corporation       North Pointe Association      First Union      DDA Account              2072087399773           NC

Cone Mills Corporation       Cone Foreign Trading          First Union      DDA Account              2010000260786           NC

</TABLE>

                                      C-1

<PAGE>

                                    EXHIBIT B
                                    ---------

                            IMPREST/PAYROLL ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name                   Bank                Type                   A/C Number            State
<S>                          <C>                            <C>                 <C>                    <C>                   <C>
Cone Mills Corporation       Cone Mills Hourly Payroll      First Union         ZBA Account for        2079900014206         NC
                                                                                   Hourly Payroll

Cone Mills Corporation       Cone Mills Insurance Account   First Union         ZBA Account for Blue   2072087403180         NC
                                                                                   Cross

</TABLE>

                         SECURITIZATION DEPOSIT ACCOUNTS

<TABLE>
<CAPTION>
Account Holder               Account Name                   Bank                Type                   A/C Number            State

<S>                          <C>                            <C>                 <C>                    <C>                   <C>

                                      NONE

</TABLE>

                                      C-2

<PAGE>

                      EQUITY APPRECIATION RIGHTS AGREEMENT

      THIS AGREEMENT made and entered into as of this 9th day of November, 2001
by and among CONE MILLS CORPORATION, a North Carolina corporation (herein called
the "Borrower"), BANK OF AMERICA, N.A., a national banking association (the
"Agent"), as Agent for the lenders (the "Lenders") party to the Credit Agreement
dated as of January 28, 2000 as amended by Amendment No. 1 to Credit Agreement
dated as of July 14, 2000, Amendment No. 2 to Credit Agreement dated as of
December 12, 2000, Waiver and Amendment No. 3 to Credit Agreement dated as of
April 23, 2001, Amendment No. 4 to Credit Agreement dated as of June 28, 2001,
Amendment No. 5 to Credit Agreement dated as of August 10, 2001 and Amendment
No. 6 to Credit Agreement dated as of September 25, 2001, Amendment No. 7 to the
Credit Agreement dated as of October 25, 2001, and an Amended No. 8 to Credit
Agreement dates as of the date hereof (collectively, as modified, amended or
syndicated from time to time, the "Credit Agreement"), among the Borrower, the
Agent, and the Lenders, and the UNDERSIGNED LENDERS.

                              W I T N E S S E T H:
                              --------------------

      WHEREAS, in order to induce the Agent and the Lenders to enter into the
Amendment No. 8 to Credit Agreement dated as of the date hereof ("Amendment No.
8") Borrower has agreed to grant to the Agent and the Lenders the equity
appreciation rights described herein; and

      NOW, THEREFORE, in consideration of the entering into of the Amendment No.
8 by the Agent and the Lenders, the Borrower does hereby agree as follows:

                                   ARTICLE I

                                   DEFINITIONS
                                   -----------

Section 1.01 Definitions. For purposes of this Agreement, in addition to the
             -----------
      definitions of terms set forth elsewhere herein, the following words and
      terms shall have the following meanings, respectively, unless the context
      clearly requires otherwise:

             "Agreement" means this Equity Appreciation Rights Agreement, as the
same may be modified, amended or supplemented from time to time.

             "Consolidated Group" means the Borrower and its Subsidiaries.

             "Credit Agreement" shall have the meaning set forth above; such
Credit Agreement to be deemed to continue in effect for purposes of this
Agreement, including Section 2.05 hereof.

             "EBITDA" means for the Consolidated Group, for the four most recent
fiscal quarters ending prior to the date of determination, the aggregate amount
of earnings from continuing operations on a consolidated basis before interest
expense, taxes, depreciation, amortization, any other nonrecurring or
restructuring charges (other than any nonrecurring or

                                       C-3

<PAGE>

restructuring charges representing expenses or charges incurred in the ordinary
course of business) and without giving effect to any extraordinary gain or loss
or gains or losses from asset sales outside of the ordinary course of business.
EBITDA shall be determined in accordance with generally accepted accounting
principles.

             "Exercise Date" means the date of the Exercise Notice.

             "Exercise Notice" means the notice of the exercise of the Agent's
right (on behalf of the Lenders) to receive the Rights Fee pursuant to Section
2.01 hereof.

             "Exercise Period" means the period (i) beginning on the earlier to
occur of (A) January 16, 2003 or (B) occurrence of an Event of Default which is
continuing under the Credit Agreement and/or the Senior Note Agreement and (ii)
ending on January 16, 2005.

             "Fair Market Value" means the value of the Consolidated Group
determined by an Independent Financial Expert, using a multiple of EBITDA which
shall represent the average multiples used in valuations of comparable entities
(in the opinion of the Independent Financial Expert) for the twelve month period
prior to the date of determination of Fair Market Value (or such shorter period
for which such information shall be available). In determining such average
multiple, the Independent Financial Expert shall be directed to make adjustments
determined appropriate by the Independent Financial Expert. Notwithstanding the
foregoing, if the capital stock of the Borrower is registered under the
Securities and Exchange Act of 1934, as amended, and traded on a national stock
exchange (including NASDAQ National Market System), "Fair Market Value" shall be
the product of (i) the average closing bid price of such stock for the
forty-five (45) day period preceding the Exercise Date and (ii) the number of
shares of capital stock of Borrower outstanding on the Exercise Date.

             "Independent Financial Expert" means a nationally recognized
investment banking firm reasonably acceptable to the Borrower (i) which does not
(and whose directors, officers and affiliates do not) have a direct or indirect
financial interest in any of the Consolidated Group, (ii) which has not been,
and, at the time it is called upon to give independent financial advice to any
of the Consolidated Group, is not (and none of whose directors, officers,
employees or affiliates is) a promoter, director or officer of any of the
Consolidated Group or any of its affiliates, or an underwriter with respect to
any of the Consolidated Group's securities and (iii) which does not provide any
advice or opinions to the Borrower or any of its affiliates except as an
independent financial expert. An Independent Financial Expert may be compensated
by the Borrower for opinions or services it provides as an Independent Financial
Expert.

             "Loans" means the Loans as that term is defined in the Credit
Agreement.

             "Senior Note Agreement" means the Note Agreement dated as of August
13, 1992 between the Borrower and The Prudential Insurance Company of America,
as such agreement may be amended, supplemented or restated from time to time.

             "Rights" means the equity appreciation right granted to the Agent
and Lenders pursuant to this Agreement.

                                      C-4

<PAGE>

             "Rights Fee" means the value of the Rights as at the date of
determination as provided in Section 2.02 hereof.

                                   ARTICLE II

                                     RIGHTS
                                     ------

Section 2.01 Grant. The Borrower hereby grants, transfers, conveys and assigns
             -----
      to the Agent for the benefit of the Lenders the right to receive, at the
      Agent's option, the Rights Fee. The Agent shall exercise the rights
      hereunder by the giving to the Borrower, at any time during the Exercise
      Period, an Exercise Notice in the manner provided in Section 3.01 hereof.
      Such Exercise Notice shall be dated the Exercise Date and shall set forth
      the name of an Independent Financial Expert selected by the Agent, if the
      Agent shall require that an Independent Financial Expert determine the
      Fair Market Value.

Section 2.02 Rights Fee. (a) Except as provided in Sections 2.03 and 2.05, the
             ----------
      Rights Fee shall be the greater of

        (I)   the product of 7% times the Fair Market Value; or

       (II)  $700,000.00.

(b)   In the event all Obligations (as defined in the Credit Agreement) have
      been indefeasibly paid in full by January 15, 2003 and the Facility
      Termination Date (as defined in the Credit Agreement) shall have occurred
      by January 15, 2003, the Rights Fee shall be $0.

Section 2.03 Computation. If the Borrower's capital stock is traded on a
             -----------
      national stock exchange the Fair Market Value shall be determined in the
      manner set forth in the definition of such term based on the price of such
      capital stock. If the Borrower's capital stock is not traded on a national
      stock exchange the Agent may (in its sole discretion) require that
      Borrower promptly, upon receipt of the Exercise Notice, retain at
      Borrower's expense the Independent Financial Expert specified in the
      Exercise Notice to determine the amount of the Rights Fee. The Borrower
      shall furnish to the Independent Financial Expert all financial
      information and such other information regarding the Consolidated Group as
      the Independent Financial Expert shall request from time to time. The
      Borrower further agrees that it will permit the Independent Financial
      Expert to examine the corporate books and financial records of the
      Consolidated Group and make copies or extracts therefrom and to discuss
      the affairs, finances and accounts of any such corporations with the
      principal officers of the Borrower and its independent public accountants,
      all at such reasonable times and as often as the Independent Financial
      Expert may reasonably request. The Borrower acknowledges and agrees that
      the prompt engagement of the Independent Financial Expert and furnishing
      of requested information is necessary for the determination of the Rights
      Fee. The Independent Financial Expert shall deliver to the Agent its
      report, in scope and detail reasonably satisfactory to the Agent, not
      later than sixty (60) days following the Exercise Date. In the event the
      Borrower fails to engage such Independent Financial Expert within twenty
      (20) days following the Exercise Date or fails at any time promptly to
      furnish information requested under this Section 2.02, then the Rights Fee
      shall be equal to $3,500,000.00 and shall be immediately due and payable.

                                      C-5

<PAGE>

Section 2.04 Payment. Within three (3) days of the establishment of the Rights
             -------
      Fee and in no event later than the 90th day after the Exercise Date, the
      Borrower shall pay the Rights Fee in immediately available funds.

Section 2.05 Financial Information. The Borrower hereby covenants and agrees to
             ---------------------
      furnish to the Agent the financial information described in Section 9.1 of
      the Credit Agreement by the date required under the Credit Agreement
      whether or not the Credit Agreement shall then be in full force and effect
      or any Obligations remain unpaid thereunder. In the event the Borrower
      shall fail at any time during the Exercise Period to furnish such
      information, and such failure continues for thirty (30) days following
      notice of such failure from the Agent, no Exercise Notice shall be
      required hereunder and the Rights Fee shall become immediately due and
      payable and shall be equal to $3,500,000.00. Such Rights Fee shall be paid
      immediately to the Agent without further demand or notice.

                                  ARTICLE III

                                  MISCELLANEOUS
                                  -------------

Section 3.01 Notice. Any notice or communication shall be in writing and
             ------
      delivered by telecopy or in person or mailed by first-class mail or
      overnight courier addressed as follows:

             If to the Borrower:  Cone Mills Corporation
                                  3101 North Elm Street
                                  Greensboro, North Carolina 27415-6540
                                  Attention: Gary L. Smith
                                  Telephone:
                                  Telecopy:

             if to the Agent:     Bank of America, N.A.
                                  Bank of America Corporate Center, 22nd Floor
                                  100 North Tryon Street, NC1-007-22-26
                                  Charlotte, NC 28255-0001
                                  Attention: John Register

      The Borrower or the Agent by notice may designate additional or different
addresses for subsequent notices or communications.

Section 3.02 Sharing of Rights Fee. The Borrower and the Agent acknowledge and
             ---------------------
      agree that the Rights Fee shall be paid by the Borrower to the Agent for
      the benefit of the Lenders. The Rights Fee paid to the Agent shall be paid
      by the Agent to the Lenders in the manner described in Section 4.7 of the
      Credit Agreement so long as a Lender shall have fulfilled its obligations
      to the Agent and the other Lenders under the Credit Agreement.

Section 3.03 GOVERNING LAW; SEVERABILITY. THE LAW OF THE STATE OF NORTH CAROLINA
             ---------------------------
      SHALL GOVERN THIS AGREEMENT BUT WITHOUT GIVING EFFECT TO APPLICABLE
      PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE
      LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. IF ONE OR MORE
      PROVISIONS OF THIS AGREEMENT ARE

                                      C-8

<PAGE>

      HELD TO BE UNENFORCEABLE UNDER APPLICABLE LAW, SUCH PROVISIONS SHALL BE
      SEVERED FROM THIS AGREEMENT AS IF SUCH PROVISIONS WERE NOT INCLUDED AND
      THE BALANCE OF THIS AGREEMENT SHALL BE ENFORCEABLE IN ACCORDANCE WITH ITS
      TERMS.

Section 3.04 Jurisdiction; Consent to Service of Process.
             -------------------------------------------

(a)   The Borrower hereby irrevocably and unconditionally submits, for itself
      and its property, to the jurisdiction of any North Carolina State court or
      Federal court of the United States of America sitting in Charlotte, North
      Carolina, and any Appellate court from any thereof, in any action or
      proceeding arising out of or relating to this Agreement or any related
      documents, or for recognition or enforcement of any judgment, and each of
      the parties hereto hereby irrevocably and unconditionally agrees that all
      claims in respect of any such action or proceeding may be heard and
      determined in North Carolina or, to the extent permitted by law, in such
      Federal court. Each of the parties hereto agrees that a final judgment in
      any such action or proceeding shall be conclusive and may be enforced in
      other jurisdictions by suit on the judgment or in any other manner
      provided by law.

(b)   The Borrower hereby irrevocably and unconditionally waives, to the fullest
      extent it may legally and effectively do so, any objection that it may now
      or hereafter have to the laying of venue of any suit, action or proceeding
      arising out of or relating to this Agreement in any North Carolina State
      or Federal court. Each of the parties hereto hereby irrevocably waives, to
      the fullest extent permitted by law, the defense or any inconvenient forum
      to the maintenance of such action or proceeding in any such court.

(c)   Each party to this Agreement irrevocably consents to service of process in
      the manner provided for notices in Section 3.01. Nothing in this Agreement
      will affect the right of any party to this Agreement to serve process in
      any other manner permitted by law.

                  [Remainder of page intentionally left blank.]

                                      C-7

<PAGE>

      IN WITNESS WHEREOF, the Borrower, the Agent and the Lenders have caused
this Agreement to be executed by their duly authorized officers as of the day
and year first above written.

                                    BORROWER:

                                    Cone Mills Corporation
WITNESS:

/s/Cherie G. Ehrhardt               By: /s/Gary L. Smith
Print Name:Cherie G. Ehrhardt       Name: Gary L. Smith
                                    Title: EVP & CFO
/s/Lenora R. Graves
Print Name: Lenora R. Graves

                                      C-8

<PAGE>

                                    BANK OF AMERICA, N.A., as Agent for
                                    the Lenders

                                    By: /s/John R. Register
                                    Name: John F. Register
                                    Title: Principal

                                    BANK OF AMERICA, N.A., as a Lender

                                    By: /s/John R. Register
                                    Name: John F. Register
                                    Title: Principal

                                      C-9

<PAGE>

                                    WACHOVIA BANK, NA

                                    By: /s/Charlene A. Johnson
                                    Name: Charlene A. Johnson
                                    Title: Senior Vice President

                                    FIRST UNION NATIONAL BANK

                                    By: /s/Tom Bohrer
                                    Name: Tom Bohrer
                                    Title: Vice President

                                    SUNTRUST BANK

                                    By: /s/Samuel M. Ballesteros
                                    Name: Samuel M. Ballesteros
                                    Title: Director

                                    MORGAN GUARANTY TRUST COMPANY
                                    OF NEW YORK

                                    By: /s/Gev F. Nentin
                                    Name: Gev F. Nentin
                                    Title: Managing Director

                                      C-10

<PAGE>

                                    Acknowledged and Agreed To:
                                    --------------------------

                                    CIPCO S.C, INC.

                                    By: /s/W. Scott Wenhold
                                    Name: W. Scott Wenhold
                                    Title: Treasurer

                                    CONE FOREIGN TRADING LLC

                                    By: /s/Neil W. Koonce
                                    Name: Neil W. Koonce
                                    Title: Vice President

                                      C-11

<PAGE>

                               LETTER OF DIRECTION

As of November 9, 2001

Wilmington Trust Company, as General Collateral Agent
1100 North Market Street
Wilmington, Delaware  19890
Attention: Mary Kay Pupillo

Bank of America, N.A., as Revolving Credit Agent
  and as Priority Collateral Agent
101 South Tryon Street
NC1-002-31-31
Charlotte, North Carolina 28255

      Re:  Deposit Account Control Agreements Relating to Cone Mills Corporation

Ladies and Gentlemen:

     Reference is made to

     (a) that certain Deposit Account Control Agreement (General Collateral
Agent) (the "First Union Account Control Agreement") dated as of November 9,
2001, by and among Cone Mills Corporation (the "Borrower"), Cone Foreign Trading
LLC ("CFT" and collectively with Cipco, the "Subsidiary Grantors"),Wilmington
Trust Company, as General Collateral Agent (the "General Collateral Agent"),
Bank of America, N.A., as Designated Collateral Subagent for the General Secured
Parties (as defined therein), and First Union National Bank; and

     (b) that certain Deposit Account Control Agreement (General Collateral
Agent) (the "Bank of America Account Control Agreement") dated as of December 1,
2001, by and among the Borrower, the Subsidiary Grantors, the General Collateral
Agent, Bank of America, N.A., as Designated Collateral Subagent, and Bank of
America, N.A., as Depositary Institution.

     The General Secured Parties (other than the Bond Trustee on behalf of the
Debenture Holders) and Wilmington Trust Company are parties to that certain
Collateral Agency Agreement (General) dated as of January 28, 2000 (the "General
Collateral Agency Agreement") setting forth the terms and conditions of the
agency relationship established with the General Collateral Agent.

     The General Secured Parties executing this letter below (which constitute
the Required General Secured Parties as defined in the General Collateral Agency
Agreement) hereby instruct the General Collateral Agent, to execute and deliver
(I) those copies of the First Union Account Control Agreement accompanying this
letter, and (ii) those copies of the Bank of America Account Control Agreement
accompanying this letter.

     This letter has been duly executed and delivered by the parties hereto as
of the date hereof.

                         [Signatures on following page.]

<PAGE>

                               BANK OF AMERICA, N.A., as
                                Revolving Credit Agent

                               By:      /s/John F. Register
                                        Name:    John F. Register
                                        Title:   Principal

                               FIRST UNION NATIONAL BANK

                               By:      /s/Tom Bohrer
                                        Name:    Tom Bohrer
                                        Title:   Vice President

                               SUNTRUST BANK

                               By:      /s/Samuel M. Ballesteros
                                        Name:    Samuel M. Ballesteros
                                        Title:   Director

                               WACHOVIA BANK, N.A.

                               By:      /s/Charlene A. Johnson
                                         Name:   Charlene A. Johnson
                                         Title:  Senior Vice President

                               JPMorgan ChaseBank formerly know
                               as Morgan Guaranty Trust Company Of New York

                               By:      /s/Roger Odell
                                        Name:    Roger Odell
                                        Title:   Managing Director

                               THE PRUDENTIAL INSURANCE
                                COMPANY OF AMERICA

                               By:      /s/Michael Fitzgerald
                                        Name:    Michael Fitzgerald
                                        Title:   Vice President

                               BANK OF AMERICA, N.A.

                               By:      /s/John F. Register
                                        Name:    John F. Register
                                        Title:   Principal

<PAGE>

                                    BANK OF AMERICA, N.A.

                                    By: /s/John F. Register
                                        Name: John F. Register
                                        Title: Principal

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