Document:

STATE OF NORTH CAROLINA

COUNTY OF DUPLIN

                                  GROUND LEASE
                                  ------------

         THIS GROUND LEASE dated the 30th day of November,  1984, by and between
GUILFORD MILLS,  INC., a Delaware  corporation  having an address at Post Office
Box  U-4,  Greensboro,   North  Carolina  27402  (hereinafter   referred  to  as
"Landlord")  and COGENTRIX  LEASING  CORPORATION,  a North Carolina  corporation
having an address at Two Parkway  Plaza,  Suite 290,  Charlotte,  North Carolina
28210 (hereinafter referred to as "Tenant"),

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

         In  consideration  of Ten  ($10.00)  Dollars,  other good and  valuable
consideration,  and the mutual covenants  contained herein,  and intending to be
legally  bound  hereby,  Landlord  and  Tenant  hereby  agree with each other as
follows:

                              ARTICLE I - PREMISES
                              --------------------

         Section  1.1  Landlord  hereby  leases and lets to  Tenant,  and Tenant
hereby takes and hires from Landlord, upon and subject to the terms, conditions,
covenants and  provisions  hereof,  all that certain  tract,  piece or parcel of
land, situated in Kenansville,  Duplin County, North Carolina, more particularly
described on Exhibit "A" and depicted on Exhibit "B", both of which exhibits are
annexed hereto and made a part hereof,  together with any and all  improvements,
appurtenances,   rights,  privileges  and  easements  benefiting,  belonging  or
pertaining thereto,  and any right, title and interest of Landlord in and to any
land lying in the bed of any street,  road or highway  (open or proposed) to the
center line  thereof,  in front of or adjoining  said tract,  piece or parcel of
land  (all the  foregoing  hereinafter  sometimes  referred  to as the  "Demised
Premises" and sometimes referred to as the "Premises").

                        ARTICLE II - TERM AND EXTENSIONS
                        --------------------------------

         Section  2.1 The initial  term of this Lease  shall  commence as of the
30th day of  November,  1984 (the  "Commencement  Date"),  and  unless  extended
pursuant to the  following  Section 2.2.1 through 2.2.4 shall end at midnight on
the  earlier  to occur of (a)  seventeen  (17)  years six (6)  months  after the
Commencement  Date or (b) fifteen (15) years after the Initial  Delivery Date as
defined below.

<PAGE>

                  Section 2.2.1 This Lease shall  automatically  be extended for
         two (2) additional  successive terms of ten (10) years each and a third
         additional term of five (S) years unless the parties  mutually agree in
         writing to the  contrary.  Thereafter,  this Lease may be extended from
         year to year with the mutual consent of the parties in writing.

                  Section  2.2.2 Each  extended term shall be on the same terms,
         covenants,  conditions,  provisions,  and  agreements  as in this Lease
         provided, except for term and as otherwise specified in this Lease.

                  Section  2.2.3  If any of  such  extensions  occur  as in this
         Section 2.2 provided,  such extended term shall commence immediately on
         the expiration of the prior term hereof.

                  Section  2.2.4 If either  Tenant or Landlord  shall  desire to
         terminate  this Lease at the end of the term then in effect  such party
         shall  notify the other  party in  writing  of its desire by  Certified
         Mail,  Return  Receipt  Requested,  prior  to one (1) year  before  the
         expiration  of the then current  term of this Lease,  whether it be the
         initial  term or an extended  term.  If the other party  agrees to such
         termination, it shall so notify the first party within thirty (30) days
         of receipt of such initial notice, otherwise this Lease shall be deemed
         to be  automatically  extended for the term set forth in Section  2.2.1
         above.

                               ARTICLE III - RENT
                               ------------------

                  Section 3.1.1 Tenant  covenants and agrees to pay Landlord for
         the Demised Premises, without offset or deduction, and without previous
         demand therefor, rent for each year of initial and any extended term of
         this Lease at the rate of One Dollar ($1.00) per year.

                  Section 3.1.2 Rent for each year shall be payable by Tenant on
         or before  the first day of each and every  calendar  year  during  the
         initial and each extended  term of this Lease,  and shall be payable at
         the address of Landlord first above set forth or at such other place of
         which  Landlord  shall have given  written  notice at least thirty (30)
         days in advance.

                                        2
<PAGE>

                            ARTICLE IV - DEFINITIONS
                            ------------------------

         Section 4.1  "Landlord"  shall mean,  at any given time,  only the then
owner of Landlord's interest in the Demised Premises.

         Section 4.2 "Tenant" shall mean, at any given time, only the then owner
of Tenant's interest in the Demised Premises.

         Section 4.3 "Person" shall mean and include an individual, corporation,
partnership (general or limited),  unincorporated  association,  business trust,
and any governmental entity.

         Section 4.4  "Improvements"  shall mean all  buildings,  structures and
improvements  hereafter  erected on the  Demised  Premises,  including,  without
limitation,  all  common  facilities,  walkway  and road  improvements,  parking
facilities,  landscaping  improvements of whatever nature, utility lines (to the
extent  of  Tenant's  interest  therein)  all  apparatus,   machinery,  devices,
fixtures,  appurtenances  and equipment  necessary for the proper  operation and
maintenance  of the foregoing,  including,  without  limitation,  the following:
steam  fixtures;  chutes,  ducts and  tanks;  oil  burners;  furnaces,  heaters,
incinerators and boilers; air cooling and air conditioning equipment;  washroom,
toilet and lavatory fixtures and equipment;  engines,  pumps,  dynamos,  motors,
generators,  electrical  wiring and  equipment;  and all  additions  thereto and
replacements thereof.

         Section 4.5 "Governmental  Authorities" shall mean all federal, county,
municipal  and local  governments,  and all  departments,  commissions,  boards,
bureaus and offices thereof,  having or claiming  jurisdiction  over the Demised
Premises and/or the Improvements.

         Section  4.6   "Personal   Property"   shall  mean,   at  the  time  of
determination, all equipment, furniture, furnishings and other personal property
located  on or at,  and used or  useful  in  connection  with the  operation  or
maintenance of, the Demised Premises.

         Section 4.7 "Steam  Purchase  Contract"  shall mean that certain  Steam
Purchase  Contract of even date herewith between Landlord and Tenant, as amended
from time to time.

         Section  4.8  "Initial  Delivery  Date"  shall be that date  defined in
Paragraph 3 of the Steam Purchase Contract.

         Section  4.9  "Assignment  Term"  shall have the  meaning  set forth in
Section 2.02 of the Kenansville Lease.

         Section 4.10  "Kenansville  Bill of Sale" shall mean a Bill of Sale and
Assignment  from  Tenant  in  favor  of the  Owner  Trustee,  pertaining  to the
Kenansville Facility,  this Lease and the Steam Purchase Agreement,  inter alio,
as it may be  amended  or  modified  from  time to time in  accordance  with the
provisions thereof and of the Participation Agreement.

                                       3

<PAGE>

         Section 4.11  "Kenansville  Facility" shall mean the Demised  Premises,
including all Improvements  thereon,  those improvements  described in Article V
hereof and all easements granted hereunder or in accordance herewith.

         Section 4.12 "Kenansville Lease" shall mean the Lease Agreement between
the  Owner  Trustee,  as  Lessor,  and  Tenant,  as  Lessee,  pertaining  to the
Kenansville Facility,  as it may be amended,  modified or supplemented from time
to time in  accordance  with the  provisions  thereof  and of the  Participation
Agreement.

         Section  4.13  "Kenansville  Mortgage"  shall  mean the Deed of  Trust,
Assignment of Leases,  Rents,  Issues and Profits and Security  Agreement  among
Tenant,  the North  Carolina  Trustee and GECC,  pertaining  to the  Kenansville
Facility,  this Lease and the Steam Purchase Contract,  inter olio, as it may be
amended or modified from time to time in accordance with the provisions  thereof
and of the Participation Agreement.

         Section 4.14 "North Carolina  Trustee" shall mean The Fidelity Company,
a North Carolina corporation.

         Section 4.15 "Owner  Trustee" shall mean United States Trust Company of
New York, a New York  corporation,  not in its  individual  capacity  (except as
expressly  provided in the Participation  Agreement and the Trust Agreement) but
solely as Owner  Trustee  under  the Trust  Agreement,  and its  successors  and
assigns as such owner Trustee.

         Section 4.16  "Participation  Agreement"  shall mean the  Participation
Agreement  dated as of  November  1,  1984,  among  Tenant,  Cogentrix  of North
Carolina,  Inc.,  General  Electric  Credit  Corporation  ("GECC") and the Owner
Trustee,  as it may be amended,  modified or supplemented  from tithe to time in
accordance with the terms thereof.

         Section 4.17 "Trust  Agreement" shall mean the Trust Agreement dated as
of November 1, 1984 between GECC and the Owner Trustee,  as it may be amended or
modified from time to time by agreement between the parties thereto.

                           ARTICLE V - USE OF PREMISES
                           ---------------------------

         Section 5.1 The Demised  Premises  may be used for a steam and electric
power  cogeneration  plant  and  related  lawful  purposes,   including  without
limitation,  a  manufacturing  plant or  plants  using  steam  produced  by said
facility,  provided  that no such  manufacturing  plant may commence  operations
unless in Tenant's reasonable opinion the qualification of Tenant's cogeneration
facility under the federal Public  Utility  Regulatory  Policies Act of 1978, as
then amended ("PURPA"),  is in jeopardy solely by reason of Landlord's breach of
the Steam Purchase Contract.

                                        4
<PAGE>

                     ARTICLE VI - TAXES AND UTILITY EXPENSES
                     ---------------------------------------

                  Section 6.1.1 Tenant shall,  during the term of this Lease, as
         additional  rent,  pay and discharge  punctually,  as and when the same
         shall  become  due  and  payable,   all  taxes,   special  and  general
         assessments,  water  rents,  rates and  charges,  sewer rents and other
         governmental   impositions   and  charges  of  every  kind  and  nature
         whatsoever,  extraordinary as well as ordinary (hereinafter referred to
         as "Taxes"),  and each and every installment thereof which shall or may
         during  the term of this  Lease be  charged,  levied,  laid,  assessed,
         imposed,  become due and payable,  or liens upon or for or with respect
         to the  Demised  Premises  or any part  thereof,  or any  Improvements,
         appurtenances  or  Personal  Property  thereon  or  therein or any part
         thereof,  together with all interest and penalties thereon, under or by
         virtue of all present or future laws, ordinances, requirements, orders,
         directives, rules or regulations of Governmental Authorities whatsoever
         (all of which shall also be included in the term "Taxes" as  heretofore
         defined) and all charges for sewer, water, steam, heat, gas, hot water,
         electricity,  light and power, and other service or services, furnished
         to the Demised Premises during the term of this Lease.

                  Section  6.1.2 To the extent that the same may be permitted by
         law,  Tenant  or its  designees  shall  have the right to apply for the
         conversion of any assessment for local  improvements  assessed.  during
         the term of this  Lease in order  to cause  the same to be  payable  in
         annual installments spread over the life of the improvements,  and upon
         such  conversion  Tenant  shall  pay  and  discharge   punctually  said
         installments  as they shall  become due and payable  during the term of
         this Lease. Landlord agrees to permit the application-for the foregoing
         conversion  to be filed in Landlord's  name,  if  necessary,  and shall
         execute any and all  documents  requested by Tenant to  accomplish  the
         foregoing result.

                  Section 6.1.3 Tenant shall be deemed to have complied with the
         covenants  of this section 6.1 if payment of such Taxes shall have been
         made either (i) within any period allowed by law or by the Governmental
         Authority  imposing the same during which payment is permitted  without
         penalty or interest  or (ii)  before the same shall  become a lien upon
         the Demised Premises,  and Tenant shall produce and exhibit to Landlord
         satisfactory  evidence of such  payment,  if Landlord  shall demand the
         same in writing.

                                       5
<PAGE>

                  Section  6.2.1  All  Taxes and  assessments  (which  have been
         converted into  installments as set forth in Section 6.1.2) which shall
         become payable during the calendar year in which the term of this Lease
         terminates shall be apportioned pro rata between Landlord and Tenant in
         accordance  with the portion of such year during  which such term shall
         be in effect.

                  Section 6.3.1 Tenant or its designees  shall have the right to
         contest or review all such Taxes by legal proceedings, or in such other
         manner as it may deem suitable  (which,  if  instituted,  Tenant or its
         designees shall conduct promptly at its own cost and expense;  and free
         of any expense to Landlord,  and, if necessary, in the name of and with
         the  cooperation  of Landlord and Landlord  shall execute all documents
         necessary to accomplish the foregoing).  Notwithstanding the foregoing,
         Tenant  shall  promptly  pay all such taxes if at any time the  Demised
         Premises  or any part  thereof  shall  then be  immediately  subject to
         forfeiture,  or if  Landlord  shall be subject to any civil or criminal
         liability, arising out of the non-payment thereof.

                  Section  6.3.2 The legal  proceedings.  referred to in Section
         6.3.1 shall include appropriate certiorari proceedings and appeals from
         orders  therein and appeals from any judgments,  decrees or orders.  In
         the event of any reduction, cancellation or discharge, Tenant shall pay
         the amount finally levied or assessed  against the Demised  Premises or
         adjudicated to be due and payable on any such contested Taxes.

         Section 6.4  Landlord  covenants  and agrees that if there shall be any
refunds or rebates on account of the Taxes paid by Tenant  under the  provisions
of this Lease, such refund or rebate shall belong to Tenant.

         Section 6.5 Landlord further  covenants and agrees on request of Tenant
at any time, but without cost to Landlord, to make application  individually (if
legally required) or to join in Tenant's application (if legally required) for a
separate tax assessment for the Demised  Premises.'  Landlord hereby agrees upon
request of Tenant to execute such instruments and to give Tenant such assistance
in connection with such  applications as shall  be-required by Tenant. If such a
separate  assessment cannot be obtained,  Taxes shall be apportioned between the
Demised  Premises  and any other  property of Landlord  included in the same tax
parcel based upon the relative tax  valuations  of the land,  improvements,  and
personal  property on the Demised  Premises and the remainder of the tax parcel,

                                       6
<PAGE>

as may be mutually agreed by Landlord and Tenant,  or failing  agreement  within
thirty (30) days prior to the last date for paying such taxes  without  interest
or penalty,  taxes shall be  apportioned  by binding  arbitration  conducted  in
accordance  with  the  rules  of  the  American  Arbitration   Association.   If
apportionment  has not been finally  determined  by the last date for payment of
such taxes without penalty or interest,  Landlord shall pay all disputed amounts
of taxes and when  apportionment  is finally  determined  Tenant shall reimburse
Landlord for any excess tax paid by Landlord,  plus  interest at a floating rate
equal to the announced "prime rate" of NCNB National Bank of North Carolina.

         Section 6.6 Nothing herein or in this Lease  otherwise  contained shall
require  or be  construed  to  require  Tenant to pay any  inheritance,  estate,
succession,  gift, franchise, income or profit taxes, that are or may be imposed
upon Landlord.

          ARTICLE VII - IMPROVEMENTS, REPAIRS, ADDITIONS, REPLACEMENTS
          ------------------------------------------------------------

         Section 7.1 Tenant  shall have the right,  at its own cost and expense,
to construction  any part or all of the Demised  Premises,  at any time and from
time to time,  such  improvements  as Tenant shall from time to time  determine,
subject  to Land  lord's  rights  of  approval  under  Paragraph  1 of the Steam
Purchase  Contract,  provided that the same shall be in compliance with all then
applicable zoning, building and other codes and ordinances and shall be designed
for the purposes  permitted  under  Section  5.1,  which  approval  shall not be
unreasonably  withheld or delayed,  and which  approval  shall  conclusively  be
deemed  given if such plans are  submitted to Landlord for approval if notice of
disapproval,  and the reasons therefor, is not given to Tenant within twenty-one
(21) days after the date of submission.

         Section 7.2 Tenant  shall,  at all times during the term of this Lease,
and at its own  cost and  expense,  keep  and  maintain  or cause to be kept and
maintained in repair and good condition  (ordinary wear and tear excepted),  the
Improvements,  and shall use all reasonable  precaution to prevent waste, damage
or injury.  Landlord shall not be required to furnish any services or facilities
(including,  without limitation, water, sewer or other utilities) or to make any
improvements,  repairs or alterations in or to the Demises  Premises  during the
term of this Lease (including,  without limitation,  any roads or other means of
access to the Demised Premises).

         Section 7.3 Tenant may, at its option and at its own cost and  expense,
at any time and from time to time, make such alterations, changes, replacements,
improvements and additions in and to the Demised Premises,  and the Improvements
and additions and the Improvements, as it may deem desirable consistent with the
purposes   permitted  under  Section  5.1,   including  the  demolition  of  any
Improvement(s),  subject to Landlord's  rights of approval under  Paragraph 1 of
the Steam Purchase Contract.

                                       7

<PAGE>

         Section 7.4 Until the  expiration or sooner  termination  of this Lease
(subject,  however,  to the rights of the holder of any  leasehold  Mortgage (as
hereinafter  defined)  to obtain a new lease as set forth  herein)  title to any
improvements,  the  personal  property  and any  alteration,  change or addition
thereto  shall  remain  solely in Tenant;  and Tenant alone shall be entitled to
deduct all  depreciation  on Tenants'  income tax returns for all  improvements,
personal  property,  additions,  changes or  alterations.  In no event shall the
construction of Improvements be considered as rent.

         Section 7.5 On the last day or sooner  termination  of the term of this
Lease,  Tenant shall quit and surrender the Demised Premises.  At the end of the
term of this  Lease,  Tenant  shall  remove all of the  Improvements,  including
without limitation the machinery,  controls,  wiring, piping and other equipment
located in or constituting part of the Improvements (whether or not the same are
fixtures or leasehold  improvements at law); in the event of termination of this
Lease other than at the end of the initial or extended term hereof, Tenant shall
have  sixty (60) days  following  the date of  termination  to  accomplish  such
removal.

                 ARTICLE VIII - REQUIREMENTS OF PUBLIC AUTHORITY
                 -----------------------------------------------

         Section 8.1 During the term of this  Lease,  Tenant  shall,  at its own
cost and expense,  promptly observe and comply with all present and future laws,
ordinances,  requirements,  orders,  directives,  rules and  regulations  of the
Governmental Authorities applicable to the Demised Premises whether the same are
in force at the  commencement  of the term of this Lease or may in the future be
passed,  enacted  or  directed,  and  Tenant  shall  pay  all  costs,  expenses,
liabilities,  losses, damages, fines, penalties,  claims and demands,  including
reasonable  counsel  fees,  that may in any  manner  arise out of or be  imposed
because of the failure of Tenant to comply with the covenants of this Article 8.

         Section 8.2 Tenant shall have the right to contest by appropriate legal
proceedings  diligently  conducted in good faith, in the name of the Tenant,  or
Landlord (if legally required),  or both (if legally required),  without cost or
expense to Landlord,  the validity or application of any law,  ordinance,  rule,
regulation or  requirement  of the nature  referred to in Section 8.1 and, if by
the terms of any such law,  ordinance,  order,  rule,  regulation or requirement
compliance  therewith may legally be delayed pending the prosecution of any such
proceeding,  Tenant  may  delay  such  compliance.  Therewith  until  the  final
determination of such proceeding.

                                       8
<PAGE>

         Section 8.3  Landlord  agrees to execute and.  deliver any  appropriate
papers or other instruments which may be necessary or proper to permit Tenant so
to contest the validity or application of any such law,, ordinance, order, rule,
regulation or requirement and to fully cooperate with Tenant in such contest.

                       ARTICLE IX - COVENANT AGAINST LIENS
                       -----------------------------------

         Section  9.1  If,  because  of  any  act or  omission  of  Tenant,  any
mechanic's lien or other lien, charge or order for the payment of money shall be
filed  against  Landlord or any portion of the  Demised  Premises  (other than a
leasehold  Mortgage described in Article XIX), Tenant shall, at its own cost and
expense, cause the same to be discharged of record by bonding or otherwise sixty
(60) days after written  notice from  Landlord to Tenant of the filing  thereof;
and Tenant  shall  indemnify  and save  harmless  Landlord  against and from all
costs, liabilities,  suits, penalties,  claims and demands, including reasonable
counsel fees, resulting therefrom.

                         ARTICLE X - ACCESS TO PREMISES
                         ------------------------------

         Section 10.1 Landlord or Landlord's agents and designees shall have the
right,  but not the  obligation,  to enter  upon  the  Demised  Premises  at all
reasonable  times,  consistent  with Tenants  reasonable  safety and operational
requirements, to examine same and to exhibit the Demised Premises to prospective
purchasers and prospective  tenants, but in the latter case only during the last
six (6) months of the term of this Lease.

                     ARTICLE XI - ASSIGNMENT AND SUBLETTING
                     --------------------------------------

         Section  11.1  Tenant  shall  have the right to assign  its  rights and
duties  under this Lease  either as  collateral  security  or to another  entity
created in connection with the financing arrangements entered into by Tenant, by
notifying  Landlord  of such  assignment.  In the event of any such  assignment,
Tenant shall remain liable for performance hereunder. Landlord agrees to execute
a "Consent and Agreement"  concurrently with the execution of this Lease in form
mutually satisfactory to the parties. Subject to the foregoing, this Lease shall
be binding upon and shall inure to the benefit of the parties,  their successors
and assigns.

                               ARTICLE XII - SIGNS
                               -------------------

         Section  12.1  Tenant  shall have the right to  install,  maintain  and
replace  in,  on or over or in  front  of the  Demised  Premises  or in any part
thereof  such signs  relating  to  Tenant's  operations,  identifying  Tenant or
erected to comply with applicable laws or regulations,  as Tenant may reasonably
desire,  provided that (a) Tenant shall comply with any applicable  requirements
of Governmental  Authorities having  jurisdiction and shall obtain any necessary
permits for such  purposes,  and (b) such signs  shall be approved by  Landlord,
which approval shall not be unreasonably withheld or delayed.

                                       9
<PAGE>

                            ARTICLE XIII - INDEMNITY
                            ------------------------

         Section 13.1 Tenant shall indemnify and save harmless Landlord from and
against any and all  liability,  damage,  penalties  or  judgments  arising from
injury to  person  or  property  sustained  by  anyone in and about the  Demised
Premises  resulting from any act or acts or omission or omissions of Tenant,  or
Tenant's officers,  agents,  servants,  employees,  or contractors provided that
Tenant shall not be liable to Landlord  for any  consequential  damages  arising
from Tenant's failure to comply with the Steam Purchase Contract.  Tenant shall,
at its own cost and  expense,  defend any and all suits or actions  which may be
brought against  Landlord or in which Landlord may be impleaded with others upon
any such above-mentioned  matter, claim or claims, except as may result from the
acts set forth in the exception in Section 13.2.

         Section  13.2 Except for its willful  acts or gross  negligence  or the
willful acts or gross negligence of its officers, agents, servants, employees or
contractors,  Landlord  shall not be  responsible  or liable  for any  damage or
..injury  to the  personal  property  or the  Improvements,  or to any  person or
persons, at any time on the Demised Premises,  including any damage or injury to
Tenant  or  to  any  of  Tenant's  officer,  agents,   servants,   employees  or
contractors.

         Section 13.3 Landlord shall indemnify and save harmless Tenant from and
against any and all  liability,  damage,  penalties  or  judgments  arising from
injury to person or property  sustained by anyone in and about any of Landlord's
property  adjacent to the  Demised  Premises  resulting  from any act or acts or
omission or omissions of Landlord,  or Landlord's  officers,  agents,  servants,
employees,  or contractors.  Landlord shall, at its own cost and expense, defend
any and all suits or  actions  which may be brought  against  Tenant or in which
Tenant may be impleaded with others upon any such above-mentioned  matter, claim
or claims,  except as may  result  from the acts set forth in the  exception  in
Section 13.4.

         Section  13.4 Except for its willful  acts or gross  negligence  or the
willful acts or gross negligence of its officers, agents, servants, employees or
contractors,  Tenant shall not be responsible or liable for any damage or injury
to the personal  property or the improvements,  or to any person or persons,  at
any  time  on any of  Landlord's  property  adjacent  to the  Demised  Premises,
including  any damage or injury to  Landlord or to any of  Landlord's  officers,
agents, servants, employees or contractors.

                                       10
<PAGE>

                             ARTICLE XIV - INSURANCE
                             -----------------------

         Section 14.1 Tenant shall,  at no expense to Landlord  provide and keep
in force (or cause to be  provided  and kept in force),  during the term of this
Lease, general liability insurance in an insurance company or companies selected
by Tenant,  and reasonably  satisfactory to the holder of any mortgage permitted
pursuant to the provisions of Article XIX hereof (all of such mortgages, whether
in the form of  mortgages,  deeds to. secure debt,  deeds of trust,  conditional
deeds,  or other  like  form,  being  hereinafter  collectively  referred  to as
"Mortgage"  or  "Mortgages"  and the  holders)  or  beneficiary(ies)  thereof as
"Mortgagee(s)"),  or if there shall not be such a Mortgage,  to Landlord, in the
amount of at least Five Million  ($5,000,000.00)  Dollars with respect to injury
or death to one or more than one person in any one accident or other  occurrence
and One  Hundred  Thousand  $100,000.00)  Dollars  with  respect  to  damages to
property. Such policy or policies shall include Landlord and each such Mortgagee
as named  insureds.  Tenant agrees to deliver  certificates of such insurance to
Landlord at the beginning of the term of this Lease and thereafter not less than
ten (10) days prior to the expiration of any such policy.  Such insurance  shall
be nancancellable without ten (10) days' written notice to Landlord, and to each
such Mortgagee.

         Section  14.2  During  the term of this  Lease,  Tenant  shall keep the
Improvements  insured for the benefit of Landlord and Tenant and the  Mortgagees
as their  respective  interests  may appear,  against loss or damage by fire and
customary  extended  coverage in at least the greater of (a) the minimum  amount
necessary  to avoid the  effect of  co-insurance  provisions  of the  applicable
policies,  or (b) 807.  of the  insurable  value of the  Improvements.  All such
policies shall be held by the holder of any such Mortgage, if any, or by Tenant,
:so long as there shall be no such  Mortgages.  Landlord  shall be provided with
certificates of such insurance.All proceeds payable at any time and from time to
time by and  insurance  company  under  such  policies  shall be  payable to the
Mortgagees,  if any, or, if none, shall be paid as hereinafter set forth. If any
such proceeds are paid to a Mortgagee,  same shall be applied in accordance with
the terms of such  Mortgage,  provided,  however if Tenant  fails to rebuild the
Improvements  in  accordance  with the  provisions  of Article XVI  hereof,  the
proceeds shall first be applied in repayment of any Mortgage  indebtedness.  The
balance  then  remaining,  if any,  shall be paid to  Tenant.  In the  event the
parties  are  unable  to  agree as to the  amounts  to be paid  pursuant  to the
provisions  set forth  herein  within  thirty  (30)  days  after the date of the
payment of the proceeds,  which proceeds shall be deposited with a bank or other
lending  institution  in escrow in the name of Landlord  and Tenant  until final

                                       11
<PAGE>

determination of such values,  the amounts of such respective  interest shall be
determined by arbitration  (in  accordance  with the rules then obtaining of the
American Arbitration Association) in Charlotte, North Carolina.  Landlord shall,
at Tenant's cost and expense, cooperate fully with Tenant in order to obtain the
largest possible recovery and execute any and all consents and other instruments
and take all other  actions  necessary or desirable in order to  effectuate  the
same and to cause such proceeds to be paid as hereinbefore provided and Landlord
shall not carry any  insurance  concurrent in coverage and  contributing  in the
event of loss with any insurance required to be furnished by Tenant hereunder if
the effect of such separate  insurance  would be to reduce the protection or the
payment to be made under Tenant's insurance.

                       ARTICLE XV - WAIVER OF SUBROGRATION
                       -----------------------------------

         Section 15.1 All insurance  policies  carried by either party  covering
the Demised Premises,  including but not limited to contents,  fire and casualty
insurance,  shall  expressly  waive any right on the part of the insurer against
the other party.  The parties hereto agree that their policies will include such
waiver clause or endorsement.

                            ARTICLE XVI - DESTRUCTION
                            -------------------------

         Section  16.1 In the event  that,  at any time  during the term of this
Lease,  the  Improvements  shall be  destroyed or damaged in whole or in part by
fire or  other  casualty,  then,  Tenant,  at its own cost  and  expense,  shall
(subject  to the  provisions  of Section  16.2)  cause the same to be  repaired,
replaced  or  rebuilt  within a  period  of time  which,  under  all  prevailing
circumstances, shall be reasonable.

         Section 16.2 In the event that at any time subsequent to the first five
(5) years of the initial term of this Lease or during any extended  term hereof,
any of the  Improvements  shall have been  damaged or  destroyed  by fire or any
other cause whatsoever,  then, notwithstanding the provisions of Section 16.1 or
any other provisions of this Lease,  Tenant shall have the right (subject to the
rights of Mortgagees),  but not the obligation,  to elect not to repair, replace
or rebuild the improvements and to terminate this Lease by giving written notice
of  termination to Landlord on or prior to the date twelve (12) months after the
occurrence of such damage or destruction,  and upon the giving of such notice of
termination  the term of this Lease shall  expire and come to an end on the last
day of the  calendar  month in which such notice  shall be given,  with the same
force  and  effect  as if said  day had  been  originally  fixed  herein  as the
expiration  date of the term of this  Lease,  and  neither  party shall have any
further rights or liabilities hereunder.

                                       12
<PAGE>

                          ARTICLE XVII - EMINENT DOMAIN
                          -----------------------------

                  Section  1.7.1 If the whole or a part of the Demised  Premises
         or any easement  appurtenant thereto or granted herein to Tenant or any
         part of Landlord's  property  adjacent to the Demised Premises shall be
         taken for any public or quasi-public  use under any statute or by right
         of eminent  domain or by  purchase in lieu  thereof,  which in any such
         event  renders  the  Demised  Premises  unsuitable  for the  conduct of
         Tenant's business thereon, in Tenant's reasonable judgment, then Tenant
         shall have the right,  but not the obligation,  to terminate this Lease
         by giving written notice of such termination to Landlord on or prior to
         the date one  hundred  and  eighty  (180)  days  after the date of such
         taking (or purchase), and upon the giving of such notice of termination
         the term of this Lease shall  expire and come to an end on the last day
         of the  calendar  month in which such notice  shall be given,  with the
         same force and effect as if said day had been  originally  fixed herein
         as the expiration date of the term of this Lease.

         Section  17.2 In the event of taking  (or  purchase)  resulting  in the
termination  of this Lease  pursuant  to the  provisions  of Section  17.1,  the
parties hereto agree to cooperate in applying for and in  prosecuting  any claim
for such taking and further agree that the aggregate net award,  after deducting
all  expenses  and costs  (including  attorneys'  fees)  incurred in  connection
therewith,  shall be divided between them in proportion to the fair market sales
value of their respective interests in the property condemned which, in the case
of the Landlord,  shall be the Landlord's  interest in the land constituting the
portion of the Demised Premises so condemned considered as vacant and unimproved
land but subject to this Lease assuming this Lease would have continued  through
its initial and succeeding three additional terms.

         Section 17.3 In the event of a taking (or  purchase)  not  resulting in
the  termination of this Lease,  pursuant to the provisions of section 17.1, the
parties hereto agree to cooper ate in applying for and in prosecuting  any claim
for any such taking and Tenant  shall,  at no cost or expense to Landlord,  make
(or cause to be made) all  repairs to the  Improvements  affected by such taking
(or  purchase)  to the  extent  necessary  to  restore  the  same to a  complete
architectural unit to the extent practical, taking into consideration the amount
of land remaining after any such taking or purchase.

                  Section 17.3.1 All compensation  available or paid to Landlord
         and Tenant  upon such a taking (or  purchase)  which does not result in
         the  termination  of this Lease shall be paid to Tenant for the purpose
         of paying towards the cost of such  restoration,  or, in the event that
         the parties hereto agree that only a portion of the aggregate  award is
         sufficient  to so restore,  then only such portion as agreed upon shall
         be paid to Tenant for such purpose and the balance shall be distributed
         in the same manner as is provided in Section  17.2 to the extent of any
         funds remaining.

                                       13
<PAGE>

                  Section 17.3.2 All  compensation  for any temporary  taking of
         the  Demised  Premises  shall be to  Tenant  without  participation  by
         Landlord,  unless the term of such taking shall extend  beyond the term
         of this Lease, in which case such  compensation  shall be prorated on a
         per diem basis between Landlord and Tenant.

         Section  17.4  In case  the  respective  portions  of any  award  to be
received  by  Landlord,  Tenant and the holder or  holders  of any  Mortgage  or
Mortgages  shall not be fixed in the  proceedings  for such taking in accordance
with the  agreement  of the parties set forth in this Article  XVII,  and if the
parties shall not . agree in writing on such  respective  portions within thirty
(30) days after the date of the final determination of the amount of such award,
the amounts of such  respective  portions shall be determined by arbitration (in
accordance   with  the  rules  then   obtaining  of  the  American   Arbitration
Association) Charlotte, North Carolina.

                            ARTICLE XVIII - EASEMENTS
                            -------------------------

         Section 18.1 In addition to the leasehold estate granted in this Lease,
but as an  appurtenance  to said  leasehold,  Land lord  grants  to  Tenant  the
following  easements  described  on Exhibit C attached  hereto and  incorporated
herein by this  reference  for the initial and any  extended  term of this Lease
over  portions  of the  property  owned  by  Landlord  adjacent  to the  Demised
Premises.

                        ARTICLE XIX - LEASEHOLD MORTGAGES
                        ---------------------------------

         Section 19.1 Tenant and every  successor and assign of Tenant is hereby
given the right by  Landlord in addition  to any other  rights  herein  granted,
without Landlord's prior written consent, to mortgage  (including  conveyance by
deed of trust) its  interests in this Lease,  or any part or parts thereof under
one or more leasehold  Mortgage(s)  and assign this Lease,  or any part or parts
thereof,  as collateral  security for such Mortgage(s),  upon the condition that
all rights acquired under such  Mortgage(s)  shall be subject to each and all of
the covenants,  conditions and  restrictions set forth in this Lease, and to all
rights and interests of Landlord herein, none of which covenants,  conditions or
restrictions  is or shall be waived by  Landlord by reason of the right given so
to mortgage such interest in this Lease, except as expressly provided herein. If
Tenant and/or Tenant's successors and assigns shall mortgage this leasehold,  or
any part or parts  thereof,  and if the  holder(s)  of such  Mortgage(s)  shall,

                                       14
<PAGE>

within  thirty  (30) days of  execution  send to  Landlord  a true copy  thereof
together with written native  specifying the name and address of the Mortgagees)
and the  pertinent  recording  date with  respect to such  Mortgage(s)  Landlord
agrees that so long as any such leasehold  Mortgage(s) shall remain  unsatisfied
of record or until written notice of  satisfaction  is given by the holder(s) to
Landlord, the following provisions shall apply:

                  Section  19.1.1 There shall be no  cancellation,  surrender or
         modification  of this  Lease by joint  action of  Landlord  and  Tenant
         without the prior consent in writing of the leasehold Mortgagee(s).

                  Section 19.1.2  Landlord  shall,  upon serving Tenant with any
         notice of default,  simultaneously serve a copy of such notice upon the
         holder(s) of such  leasehold  Mortgage(s).  The  leasehold  Mortgagees)
         shall  thereupon  have the  same  period  of time  provided  to  Tenant
         pursuant to Article  XXIII  hereof (as  extended by Article XX hereof),
         after service of such notice upon it, to remedy or cause to be remedied
         the defaults  complained of, and Landlord shall accept such performance
         by or at the  instigation of such leasehold  Mortgagees) as if the same
         had been done by Tenant.

                  Section  19.1.3  Anything  herein  contained  notwithstanding,
         while such leasehold Mortgages) remains unsatisfied of record, or until
         written notice of satisfaction is given by the holders) to Landlord, if
         any default shall occur which, pursuant to any provision of this Lease,
         entitles Landlord to terminate this Lease, and if before the expiration
         of thirty  (30) days from the date of service of notice of  termination
         upon such leasehold  Mortgagees) such leasehold  Mortgagees) shall have
         notified  Landlord  of its  (their)  desire to nullify  such notice and
         shall have paid to Landlord all rent and other payments herein provided
         for, and then in default, and shall have complied or shall commence the
         work of  complying  with ail of the other  requirements  of this Lease,
         except as provided in Section 19.1.4., if any are then in default,  and
         shall prosecute the same to completion with reasonable diligence,  then
         in such event  Landlord  shall not be entitled to terminate  this Lease
         and any notice of termination theretofore given shall be void and of no
         effect.

                  Section 19.1.4 If Landlord shall elect to terminate this Lease
         by reason of default of Tenant,  the  leasehold  Mortgagees)  shall not
         only have the right to nullify any notice of termination by curing such
         default,  as  aforesaid,  but shall also have the right to postpone and
         extend the specified date for the termination of this Lease as fixed by
         Landlord  in its notice of  termination,  for a period of not more than
         six (6) months,  provided that such leasehold Mortgagees) shall cure or
         cause to be cured any then  existing  money  defaults and meanwhile pay
         the rent and comply with and perform all of the other terms, conditions
         and  provisions  of this Lease on Tenant's part to be complied with and
         performed,  other than past non-monetary defaults, and provided further
         that the leasehold Mortgagees) shall forthwith take steps to acquire or
         sell Tenant's  interest in this Lease by foreclosure of the Mortgage(s)

                                       15
<PAGE>

         or otherwise and shall  prosecute  the same to completion  with all due
         diligence.  If at the end of said six (6) month  period  the  leasehold
         Mortgagees)  shall be  actively  engaged  in steps to  acquire  or sell
         Tenant's  interest herein,  the time of said Mortgagees) to comply with
         the provisions of this section 19.1.4 shall be extended for such period
         as shall be reasonably necessary to complete such steps with reasonable
         diligence and continuity.

                  Section 19.1.5  Landlord agrees that the name of the leasehold
         Mortgaqee(s) may be added to the "Loss Payable  Endorsement" of any and
         all insurance  policies  required to be carried by Tenant  hereunder on
         condition  that the insurance  proceeds are to be applied in the manner
         specified  in  this  Lease  and  that  the  leasehold   Mortgage(s)  or
         collateral document shall so provide.

                  Section   19.1.6   Landlord   agrees  that  in  the  event  of
         termination  of this  Lease by reason  of any  default  by Tenant  that
         Landlord  will enter into a new lease of the Demised  Premises with the
         leasehold  Mortgagees)  or  nominee(s),  for the remainder of the term,
         effective as of the date of such termination,  at the rent and upon the
         terms,  provisions,  covenants and  agreements as herein  contained and
         subject only to the same  conditions  of title as this Lease is subject
         to on the date of the execution  hereof,  and to the rights, if any, of
         any parties  then in  possession  of any part of the Demised  Premises,
         provided:

                           Section  19.1.6.1 Said Mortgagees) or nominees) shall
                  make written  request upon  Landlord for such new lease within
                  fifteen  (15)days after the date of such  termination and such
                  written  request is accompanied by payment to Landlord of sums
                  then due to Landlord under this Lease;

                           Section  19.1.6.2 Said Mortgagees) or nominees) shall
                  pay to Landlord at the time of the  execution  and delivery of
                  said new lease,  any and all sums which would,  at the time of
                  the  execution and delivery  thereof,  be due pursuant to this
                  Lease but for such termination,  and in addition thereto,  any
                  expenses,  including  reasonable  attorneys'  fees,  to  which
                  Landlord shall have been subjected by reason of such default;

                                       16
<PAGE>

                           Section  19.1.6.3 Said  Mortgagees)  or its nominees)
                  shall  perform and observe all covenants  herein  contained on
                  Tenant's  part to be performed  and shall  further  remedy any
                  other  conditions  which Tenant under the terminated lease was
                  obligated to perform under the terms of this Lease;

                           Section  19.1.6.4  The  tenant  under  such new lease
                  shall have the same  right,  title and  interest in and to the
                  improvements  and  personal   property  as  Tenant  under  the
                  terminated lease had;

                  Section  19.1.7 Nothing  herein  contained  shall require said
         leasehold  Mortgagees)  or  nominees)  to cure any  default  of  Tenant
         referred to in Article 24 hereof;

                  Section  19.1.8 The proceeds  from any  insurance  policies or
         arising from a condemnation are to be held by any leasehold Mortgagees)
         and  distributed  pursuant to the  provisions  of this  Lease,  but the
         leasehold  Mortgagees) may reserve rights to apply to the Mortgage debt
         all, or any part, of Tenant's  share of such proceeds  pursuant to such
         Mortgage(s);

                  Section 19.1.9 The leasehold Mortgagees) shall be given notice
         of any arbitration  proceedings by the parties  hereto,  and shall have
         the right to intervene  therein and be made party to such proceed ings,
         and the parties hereto do hereby consent to such  intervention.  In the
         event that the  leasehold  Mortgagees)  shall not elect to intervene or
         become  party to such  proceedings,  the  leasehold  Mortgagees)  shall
         receive  notice  of, and a copy of any award or  decision  made in said
         arbitration proceedings; and

                  Section  19.1.10  Landlord  shall,   upon  request,   execute,
         acknowledge  and  deliver to each  leasehold  Mortgagee,  an  agreement
         prepared at the sole cost and expense of Tenant,  in form  satisfactory
         to such leasehold Mortgagee(s),  between Landlord, Tenant and leasehold
         Mortgagee(s),  agreeing to all of the  provisions  of this Article XIX.
         The term  "Mortgage",  whenever  used herein,  shall  include  whatever
         security  instruments  are used in the locale of the Demised  Premises,
         such as, without  limitation,  deeds to secure debt, deeds of trust and
         conditional deeds, as well as financing statements, security agreements
         and other  documentation  required  pursuant to the Uniform  Commercial
         Code.

                                       17
<PAGE>

         Section 19.2 Any transfer, conveyance., sublease or assignment provided
for in this Article XIX or Article XI shall be a transfer, conveyance,  sublease
or assignment of each of the Steam Purchase  Contract and this Lease to the same
Person,  it being the intent of the parties that the primary  obligor of each of
the  Steam  Purchase  Contract  and this  Lease  shall at all  times be the same
Person.  Such assignee or sublessee shall be liable for obligations or duties of
Tenant under the Steam Purchase  Contract and this Lease to the extent set forth
below:

                  (i) following any assignment to the Owner Trustee  pursuant to
         the  Kenansville  Bill of Sale, the Owner Trustee shall be obligated to
         perform and Tenant  shall be  relieved  from all such  obligations  and
         duties except as set forth in (ii) below;

                  (ii) during the  Assignment  Term,  Tenant shall be liable for
         all such obligations and duties and the Owner Trustee shall be relieved
         from all such obligations and duties;

                  (iii) any other assignee (other than a security  assignee) and
         sublessee  shall be liable for such  obligations and duties only to the
         extent  arising after such  assignment and the Owner Trustee or Tenant,
         as the  case may be,  shall be  relieved  of all such  obligations  and
         duties; and

                  (iv)  a  security  assignee  (including  GECC  and  the  North
         Carolina  Trustee  pursuant to the  Kenansville  Mortgage) shall not be
         liable  for such  obligations  and  duties  except to the  extent  such
         obligations  and  duties  are  assumed  by such  assignee  on and after
         enforcement  of such  security  and except as set forth in this Article
         XIX.

                           ARTICLE XX - FORCE MAJEURE
                           --------------------------

         Section  20.1 In the event  that  Landlord  or Tenant or any  Mortgagee
shall be  delayed,  hindered in or  prevented  from the  performance  of any act
required hereunder by reason of strikes, lock-outs, labor troubles, inability to

                                       18
<PAGE>

procure  materials,   failure  of  power,   restrictive   governmental  laws  or
regulations,  riots,  insurrection,  the act,  failure  to act or default of the
other party, war or other reason beyond their control,  then performance of such
act  shall be  excused  for the  period  of the  delay  and the  period  for the
performance  of any such act shall be extended  for a period  equivalent  to the
period of such delay.

                       ARTICLE XXI - PERFORMANCE BY OTHERS
                       -----------------------------------

         Section 21.1 Any act required to be performed by Tenant pursuant to the
terms of this  Lease  may be  performed  by others on  Tenant's  behalf  and the
performance of such act shall be deemed to be performance by Tenant and shall be
acceptable as Tenant's act by Landlord.

                         ARTICLE XXII - QUIET ENJOYMENT
                         ------------------------------

         Section  22.1  Tenant,  upon  paying  the rent and all  other  sums and
charges to be paid by it as herein  provided,  and  observing  and  keeping  all
covenants, warranties, agreements and conditions of this Lease on its part to be
kept,  shall quietly have and enjoy the Demised Premises during the term of this
Lease, without hindrance or molestation by anyone.

         Section 22.2 Landlord represents and warrants to Tenant that it has fee
simple title to the Demised  Premises and the power and authority to execute and
deliver this Lease and to carry out and perform all covenants to be performed by
it hereunder. Landlord further represents and warrants to Tenant that:

                  Section   22.2.1  The  Demised   Premises  is  free  from  all
         encumbrances,  liens,  defects  in title,  violations  of law,  leases,
         tenancies, easements,  restrictions and agreements, except as set forth
         in Exhibit D, annexed hereto; and

                  Section 22.2.2 At the time of the  commencement of the term of
         this Lease,  sole and  undisturbed  physical  possession  of the entire
         Demised  Premises  will be  delivered  to Tenant  free and clear of all
         liens,  defects  in  title,  encumbrances,   restrictions,  agreements,
         easements,  tenancies  and  violations  of law,  except as set forth in
         Exhibit D, annexed hereto.

                                       19
<PAGE>

                            ARTICLE XXIII - DEFAULTS
                            ------------------------

         Section 23.1 In the event any one or more of the following  event shall
have occurred and shall not have been remedied as hereinafter provided:

                  Section  23.1.1  The  occurrence  of any  event  set  forth in
         Article XXIV hereof, without the curing of same as therein provided;

                  Section  23.1.2  Tenant's,failure  to pay any  installment  of
         rent,  when the same shall be due and  payable and the  continuance  of
         such  failure for a period of fifteen (15) days after notice in writing
         from  Landlord  to  Tenant  specifying  in  detail  the  nature of such
         failure;

                  Section  23.1.3  Tenant's  failure to perform any of the other
         covenants,  conditions and agreements herein contained an Tenant's part
         to be kept or performed and the continuance of such failure without the
         curing of same within a  reasonable  time after  notice in writing from
         Landlord to Tenant specifying in detail the nature of such failure; for
         purposes  of this  section,  one  hundred  eighty  (180)  days shall be
         conclusively  presumed  a  reasonable  time to cure a breach  hereunder
         (except  as such  time  may be  extended  pursuant  to  Section  23.2),
         provided,  that such 180-day  period shall be extended by an event that
         would constitute force majeure as defined in Article XX; or

                  Section  23.1.4  The  occurrence  of any  default  or event of
         default under the Steam Purchase  Contract and the  continuation of any
         such breach  beyond any  applicable  cure period (as  extended by force
         majeure as provided therein).

then,  Landlord  may, at its option,  give to Tenant a notice of election to end
the term of this Lease upon a date specified in such notice, which date shall be
not earlier  than the  expiration  of any  applicable  cure period and upon such
date, the term and estate hereby created and interest of Tenant  hereunder shall
likewise  cease without  further notice or lapse of time, as fully and with like
effect  as if the  entire  term of this  Lease had  elapsed,  but  Tenant  shall
continue to be liable to Landlord as hereinafter provided.

         Section  23.2 In the event that  Landlord  gives notice of a default of
such a nature that it cannot be cured  within such one hundred  eighty (180) day
period then such  default  shall not be deemed to continue for such time (not to
exceed an  additional  one hundred  eighty (180) days) so long as Tenant,  after
receiving  such  notice,  proceeds  to cure the  default  as soon as  reasonable
possible and continues to take all steps necessary to complete the same within a
period of time which, under all prevailing  circumstances,  shall be reasonable.
No default shall be deemed to continue if and so long as Tenant shall be delayed
in or prevented from curing the same by any cause specified in Article XX.

                                       20
<PAGE>

         Section 23.3 Notwithstanding anything to the contrary contained in this
Article  XXIII,  in the event that any defaults) of Tenant shall be cured in any
manner  hereinabove  provided,  such  defaults)  shall be  deemed  never to have
occurred  and  Tenant's  rights  hereunder  shall  continue  unaffected  by such
default(s).

         Section 23.4 Upon any termination of the term of this Lease pursuant to
Section  23.1,  or at any time  thereafter,  Landlord  may,  in  addition to and
without prejudice to any other rights and remedies Landlord shall have at law or
in equity,  re-enter the Demised Premises,  and recover  possession  thereof and
dispossess any or all occupants of the Demised Premises in the manner prescribed
by the statute relating to summary proceedings;  or similar statutes; but Tenant
in such case shall remain liable to Landlord as hereinafter provided.

         Section 23.5 In case of any such default,  re-entry,  expiration and/or
dispossess by summary proceedings:

                  Section 23.5.1 The rent shall become due thereupon and be paid
         up to the time of such re-entry, expiration and/or dispossess;

                  Section 23.5.2 Landlord may, subject to Article XIX, relet the
         Demised  Premises or any part or parts  thereof,  either in the name of
         Landlord or  otherwise,  for a term-or  terms which may, at  Landlord's
         option,  be less than or exceed the period which.  would otherwise have
         constituted  the  balance  of the  term of  this  Lease  and may  grant
         concessions or free rent; and

                  Section 23.5.3 Tenant or the legal  representatives  of Tenant
         shall also pay Landlord as liquidated damages for the failure of Tenant
         to  observe  and  perform  Tenant's   covenants  herein  contained  any
         deficiency  between the rent hereby  reserved  and/or  covenanted to be
         paid and the net amount,  if any, of the rents  collected on account of
         the lease or  leases  of the  Demised  Premises  for each  month of the
         period which would  otherwise have  constituted the balance of the term
         of this Lease.

                                       21
<PAGE>

                    ARTICLE XXIV - BANKRUPTCY AND INSOLVENCY
                    ----------------------------------------

         Section 24.1 If, after the commencement of the term of this Lease:

                  Section  24.1.1  Tenant,  while  having  title to the tenant's
         interest hereunder, shall be finally adjudged to be insolvent;

                  Section  24.1.2 A receiver or trustee  shall be appointed  for
         the aforesaid Tenant's property and affairs;

                  Section  24.1.3 The aforesaid  Tenant shall make an assignment
         for the benefit of creditors or shall file a petition in  bankruptcy or
         insolvency  or for  reorganization  or shall make  application  for the
         appointment of a receiver; or

                  Section  24.1.4 Any  execution or  attachment  shall be issued
         against the aforesaid Tenant or any of the aforesaid Tenant's property,
         whereby the  Demised  Premises  or any  improvements  shall be taken or
         occupied or  attempted to be taken or.  occupied by someone  other than
         the aforesaid Tenant, except as may herein be permitted;

and such adjudication, appointment, assignment, petition,execution or attachment
shall not be set aside,  vacated,  discharged  or bonded  within one hundred and
twenty (120) days after the issuance of the same, then a default hereunder shall
be deemed to have occurred so that the  .provisions  of Article XXIII and hereof
shall become effective and Landlord shall have the rights and remedies  provided
for therein.  Notwithstanding  anything to the contrary  hereinabove  contained,
upon the  occurrence of a default  pursuant to this Article XXIV if the rent due
and  payable  hereunder  shall  continue  to be paid  and the  other  covenants,
conditions  and  agreements  of this  Lease  on  Tenant's  part  to be kept  and
performed  shall  continue to be kept and  performed,  no event of default shall
have been deemed to have  occurred and the  provisions  of Article  XXIII hereof
shall not become effective.

                              ARTICLE XXV - WAIVERS
                              ---------------------

         Section 25.1 Failure o(pound) Landlord or Tenant to complain of any act
or  omission  on the part of the  other  party no  matter  how long the same may
continue,  shall not be deemed to be a waiver by said party of any of its rights
hereunder.  No waiver by Landlord or Tenant at any time, express or implied,  of
any breach of any  provision  of this Lease shall be deemed a waiver of a breach
of any other  provision of this Lease or a consent to any  subsequent  breach of

                                       22
<PAGE>

the same or any other  provision.  No  acceptance  by  Landlord  of any  partial
payment shall  constitute an accord or  satisfaction  but shall only be deemed a
part payment on account.

                             ARTICLE XXVI - NOTICES
                             ----------------------

         Section 26.1 Every  notice,  approval,  consent or other  communication
authorized or required by this Lease shall not be effective unless same shall be
in writing and shall be deemed  given to the other party at its address or telex
number  herein above first  mentioned,  or such other address or telex number as
either party may designate by notice given from time to time in accordance  with
this Article  XXVI and shall be either  delivered  personally  or sent by telex,
telegraph or postage  prepaid by United  States  registered  or certified  mail,
return receipt requested, and shall be deemed to have been made or given (i) if,
given by telex, when transmitted and the appropriate  answerback is received and
(ii) if given by any other  means,  when  delivered.  The rent payable by Tenant
hereunder  shall  be paid to  Landlord  at the same  place  where a  ,notice  to
Landlord is herein required to be directed.

                          ARTICLE XXVII - CERTIFICATES
                          ----------------------------

         Section 27.1 Either party shall,  without charge,  at any time and from
time to time hereafter, within ten (10) days after written request of the other,
certify by written instrument duly executed and acknowledged to any mortgagee or
purchaser,  or proposed  mortgagee or proposed  purchaser,  or any other person,
specified in such  request:  as to whether this Lease has been  supplemented  or
amended, and if so, the substance and manner of such supplement or amendment; as
to the validity and force and effect of this Lease, in accordance with its tenor
as then constituted;  as to the existence of any default  thereunder;  as to the
existence of any offsets,  counterclaims or defenses thereto on the part of such
other party;  as to the  commencement  and expiration  dates of the term of this
Lease;  and as to any other matters as may reasonably be so requested.  Any such
certificate may be relied upon by the party  requesting it and any other person,
to whom  the  same may be  exhibited  or  delivered,  and the  contents  of such
certificate shall be binding on the party executing same.

                         ARTICLE XXVIII - GOVERNING LAW
                         ------------------------------

         Section 28.1 This lease and the performance  thereof shall be governed,
interpreted, construed and regulated by the laws of the State of North Carolina.

                                       23
<PAGE>

                        ARTICLE XXIX - PARTIAL INVALIDITY
                        ---------------------------------

         Section  29.1.  If any term,  covenant,  condition or provision of this
Lease or the  application  thereof to any person or  circumstance  shall, at any
time or to any extent, be invalid or unenforceable, the remainder of this Lease,
or the application of such term or provision to persons  or-circumstances  other
than those as to which it is held to persons or  circumstances  other than those
as to which it is held invalid or unenforceable,  shall not be affected thereby,
and each term,  covenant,  condition  and provision of this Lease shall be valid
and be enforced to the fullest extent permitted by law.

                         ARTICLE XXX - SHORT FORM LEASE
                         ------------------------------

         Section  30.1 The  parties  will at any time,  at the request of either
one, promptly execute duplicate originals of an instrument,  in recordable form,
which will  constitute  a  memorandum  or short form of lease,  setting  forth a
description  of the Demised  Premises,  the  easement  rights  granted to Tenant
herein,  the term of this Lease and any other  portions  thereof,  excepting the
rental provisions, as either party may request.

                          ARTICLE XXXI - INTERPRETATION
                          -----------------------------

         Section  31.1  Wherever  herein the singular  number is used,  the same
shall include the plural,  and the  masculine  gender shall include the feminine
and neuter genders,  and vice versa, as the context shall require.  The captions
or headings used herein are for reference and  convenience  only,  and shall not
enter into the  interpretation  hereof.  This Lease may be  executed  in several
counterparts;  each of  which  shall  be an  original,  but all of  which  shall
constitute one and the same instrument.

                        ARTICLE XXXII - ENTIRE AGREEMENT
                        --------------------------------

         Section 32.1 No oral  statement or prior written  matter shall have any
force or effect.  Tenant agrees that it is not relying on any representations or
agreements other than those contained in this Lease. This Agreement shall not be
modified or cancelled except by writing subscribed by all parties.

                            ARTICLE XXXIII - PARTIES
                            ------------------------

         Section  33.1  Except  as  herein  otherwise  expressly  provided,  the
covenants,  conditions  and  agreements  contained  in this Lease shall bind and
inure to the  benefit  of  Landlord  and  Tenant  and  their  respective  heirs,
successors, administrators and assigns.

                                       24
<PAGE>

                        ARTICLE XXXIV - TENANT'S COVENANT

         Section 34.1 Tenant  hereby  covenants  and agrees that it shall comply
with the terms of the Steam Purchase Contract.

IN WITNESS  WHEREOF,  the parties hereto have hereunto set their hands and seals
the day and year first above written.

                                               "LANDLORD:"

                                               GUILFORD MILLS, INC.

ATTEST:
                                               By_______________________________
BY:____________________________
          Secretary                            Title____________________________

[Corporate Seal]

                                               "TENANT:"

                                               COGENTRIX LEASING CO

ATTEST:
                                               By:______________________________
BY:____________________________
          Secretary
                                               Title:___________________________

[Corporate Seal]

                                       25Return after recording to:
Moore & Van Allen (MEC)
3000 NCNB Plaza
Charlotte, NC 28280

                             STATE OF NORTH CAROLINA

COUNTY OF DUPLIN

                         FIRST AMENDMENT TO GROUND LEASE
                         -------------------------------

         THIS FIRST  AMENDMENT  TO GROUND  LEASE dated the 16th day of December,
1991, by and between  GUILFORD  MILLS,  INC., a Delaware  corporation  having an
address  at  Post  Office  Box  26969,  Greensboro,  North  Carolina  27419-6969
(hereinafter referred to as "Landlord") and

         UNITED  STATES  TRUST  COMPANY  OF NEW  YORK,  not  in  its  individual
capacity,  but solely as owner Trustee under that certain Trust  Agreement dated
as of November 1, 1984 between General Electric Capital Corporation, (then known
as General  Electric Credit  Corporation) and United States Trust Company of New
York,  as amended and  restated as of December  16, 1985 (in such  capacity  the
"Kenansville Owner Trustee") (hereinafter referred to as "Tenant").

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

         WHEREAS,  Landlord and  Cogentrix of North  Carolina,  Inc.  (formerly,
Cogentrix  Leasing  Corporation),  a North  Carolina  corporation  ("Cogentrix")
entered into that certain  Ground Lease dated November 30, 1984, a memorandum of
which is recorded with the Duplin County,  North  Carolina  Register of Deeds in
Book 937, at Page 169 (the  "Lease"),  pursuant to which  Cogentrix  leased from
Landlord  all that  certain  tract,  piece or parcel of land  situated in Duplin
County, North Carolina, and more particularly described on Exhibit A attached to
the Lease and incorporated herein by reference (the "Demised Premises");

         WHEREAS, Cogentrix assigned all of its right, title and interest in and
to the Lease to Tenant  pursuant  to a Bill of Sale,  Assignment  of Interest in
Ground Lease and General  Assignment  dated as of May 1, 1986 and recorded  with
the Duplin County Register of Deeds in Book 962, at Page 131; and

         WHEREAS,  the  parties  hereto  desire  to  amend  said  Lease  as more
particularly set forth below.

         NOW,  THEREFORE,  in consideration  of $10.00,  other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
the mutual covenants contained herein, and intending to be legally bound hereby,
Landlord and Tenant hereby agree with each other as follows:

<PAGE>

         1. Assignment and Subletting  Article XI of the Lease is hereby amended
by the addition of new Section 11.2, to read as follows:

                  Section  11, 2.  Tenant may  sublet,  subject  -to  Landlord's
         consent, which consent shall not be unreasonably  withheld,  delayed or
         denied,  any portion of the Demised Premises for use as a manufacturing
         plant in accordance  with Section 5.1;  provided  however,  that if the
         qualification  of  Tenant's  cogeneration  facility  under  PURPA is in
         jeopardy  under  the  circumstances  described  in  Section  5.1,  then
         Landlord's consent shall not be required.

         2.  Ratification.  Except  as  modified  hereby,  all of the  terms and
provisions of the Lease shall remain in full force and effect and shall continue
to apply to the Demised Premises.

         3. Effective  Date.  This  Amendment  shall be effective as of the date
first set forth above on execution by each of the parties hereto.

         4. Governing Law. The Lease and this Amendment shall be governed by and
construed in accordance  with the laws and court decisions of the State of North
Carolina.

         5.  Definitions.  Any defined  term used herein but not defined  herein
shall have such meaning ascribed to it in the Lease.

                                        2

<PAGE>

IN WITNESS WHEREOF, the Parties have hereunto executed this document under seal
by their duly authorized corporate officers.

                                                 LANDLORD:

                                                 GUILFORD MILLS, INC.
ATTEST:

By:______________________________                BY:____________________________

Title:_______________Secretary                   Title:________________President

       (Corporate Seal)

                                                 TENANT:

                                                 UNITED STATES TRUST COMPANY OF
                                                    NEW YORK, not in its
                                                    individual-capacity, but
                                                    solely as the Kenansville
Attest:__________________________                   Owner Trustee
       Title: Assistant Secretary

                                                 BY:____________________________

                                                 Title: Vice President

The  undersigned  joins  in the  execution  hereof  solely  for the  purpose  of
consenting to the terms hereof as the sublessee of the Demised Premises.

                                                  COGENTRIX OF NORTH CAROLINA,
                                                  INC.

ATTEST:

By:_____________________________                  By:___________________________

Title:Assistant Secretary                         Title: SR Vice President

(Corporate Seal)

                                       3

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