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General Counsel Employment Agreement

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EMPLOYMENT AGREEMENT


THIS EMPLOYMENT AGREEMENT effective as of September 10, 2003 (the "Effective Date") between Cone Mills Corporation, a North Carolina corporation (the "Company"), and Neil W. Koonce (the "Executive").


WHEREAS, the Executive is presently employed as the Vice President, General Counsel and Secretary of the Company and has made and is expected to continue to make major contributions to the profitability, growth and financial strength of the Company; and


WHEREAS, the Company desires to secure the services of the Executive for the future;


NOW, THEREFORE, in consideration of the mutual covenants contained herein the parties hereto agree as follows:


1. Definitions. In addition to the other terms defined in this Employment Agreement, the following terms shall have the definitions indicated:


(a) "Board" means the Board of Directors of the Company.


(b) "Change in Control" means the occurrence of any one of the following events without the approval of a majority of the Continuing Directors:


(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Exchange Act, is or becomes the beneficial owner (as
defined in Exchange Act Rules 13d-3 and 13d-5, except that for
purposes of this paragraph (i) such person shall be deemed to have
beneficial ownership of all shares that such person has the right to
acquire, whether such right is exercisable immediately or only after
the passage of time, directly or indirectly) of more than 20% of the
total voting power of the Company's Voting Stock. For purposes of this
clause (i), such person shall be deemed to beneficially own any Voting
Stock of a specified entity held by a parent entity, if such person is
the beneficial owner, directly or indirectly, of more than 20% of the
voting power of the parent entity's Voting Stock;


(ii) Continuing Directors cease for any reason to constitute a
majority of the Board then in office;


(iii) the merger or consolidation of the Company with or into
another person or the merger of another person with or into the
Company, other than a transaction following which the holders of
securities that represented 100% of the aggregate voting power of the
Voting Stock of the Company immediately prior to such transaction own,
directly or indirectly, at least a majority of the aggregate voting
power of the Voting Stock of the surviving person immediately after
such transaction in substantially the same proportion that such
holders held the aggregate voting power of the Voting Stock of the
Company immediately prior to such transaction; or


(iv) the sale of all or substantially all of the Company's assets
to another person.


(c) "Continuing Directors" means (i) the members of the Board in office on the Effective Date, and (ii) any successor to any such member (or any other member of the Board meeting the criteria of this clause (ii)) who after the Effective Date (x) is nominated or elected to membership on the Board by a majority of the Continuing Directors in office at the time of such nomination or election, and (y) is not an "affiliate" or "associate" (as defined in Regulation 12B under the Exchange Act) of any person who is then a beneficial owner, directly or indirectly, of securities representing 5% or more of the combined voting power of the Company's Voting Stock.


(d) "Exchange Act" means the Securities Exchange Act of 1934, as amended.


(e) "for cause" means (i) the commission by the Executive of a willful or grossly negligent act in the performance of his obligations under this Employment Agreement which causes material harm to the Company, its subsidiaries or affiliates, (ii) the commission by the Executive of any fraud, misappropriation, embezzlement or like act of dishonesty which causes material harm to the Company, its subsidiaries or affiliates, (iii) the Executive's willful disregard of his obligations under this Employment Agreement, or (iv) the Executive being convicted of, or pleading guilty or no contest to, a felony or other crime having as its predicate element fraud, dishonesty or misappropriation; provided, however, that in the case of clauses (i), (ii) or (iii) above, the Executive shall have received written notice of such proposed termination (which notice shall state the provision(s) of this Employment Agreement pursuant to which such termination is being effected and a description of the facts supporting such termination) and the Executive shall not have cured the acts or omissions supporting such termination within fifteen (15) days after receiving such notice. For purposes of this definition, no act or failure to act by the Executive shall be considered "willful" unless done or omitted to be done by the Executive in bad faith and without reasonable belief that the Executive's action or omission was in the best interests of the Company.


(f) "good reason" means the occurrence of any of the following events: (i) following a Change in Control, without the Executive's written consent, any change in the duties, responsibilities or status (including reporting responsibilities) of the Executive that is materially inconsistent with the Executive's position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control (including any material diminution of such duties, responsibilities or status); (ii) any other material breach of this Employment Agreement by the Company, which shall include, but not be limited to, any reduction by the Company of the Executive's rate of annual base salary or annual bonus opportunity (including any adverse change in the formula used to calculate such annual bonus); or (iii) a Change of Control.


(g) "Voting Stock" of a person means all classes of capital stock or other interests, including partnership interests, of such person then outstanding and normally entitled, without regard to the occurrence of any contingency, to vote in the election of directors, managers, or trustee thereof.


2. Employment. The Company shall employ the Executive, and the Executive accepts continued employment with the Company, upon the terms and conditions set forth in this Employment Agreement for the period beginning on the date hereof and terminating on December 31, 2005 (the "Initial Term") and continuing thereafter until terminated as provided in Section 4 hereof (the Initial Term and any additional term is herein referred to as the "Employment Period"). The Executive shall be employed as Vice President, General Counsel and Secretary. The Executive shall perform his duties principally at the offices of the Company in Greensboro, North Carolina, with such travel to such other locations from time to time as the Board may reasonably prescribe.


3. Compensation; Expenses; Benefits.


(a) The Company shall pay to the Executive during the Employment Period a salary at the annual rate of $219,996 payable in accordance with the payroll policy of the Company as in effect from time to time. The Company may, in its sole discretion, increase (but it shall not, without the written consent of the Executive, decrease) the annual salary payable to the Executive for his services hereunder.


(b) The Company shall pay or reimburse the Executive for all reasonable expenses actually incurred or paid by him in the performance of his services under this Employment Agreement, upon presentation of expense statements or vouchers or other supporting information as the Company may reasonably require.


(c) The Executive shall be eligible to receive bonus compensation from the Company in respect of each fiscal year of the Company (or portion thereof) occurring during the Employment Period.


(d) The Executive may participate in all bonus, term life insurance, major medical, hospitalization, pension or retirement, 401(k), sickness or disability and other plans and benefits provided for executive employees of the Company generally, as in effect from time to time (together, the "Benefits"); provided, however, that at no time following a Change in Control shall the terms of the Executive's participation in such plans and the benefits provided to the Executive thereunder be less favorable to the Executive than the Benefits provided to the Executive immediately prior to such Change in Control (disregarding any changes to such participation or benefits made in anticipation of such Change in Control).


(e) The Executive shall be entitled to not less than twenty (20) paid vacation days during each calendar year during the Employment Period.


4. Termination. (a) During the Employment Period, the employment of the Executive and the obligations of the Company hereunder shall be (in the case of subparagraph (i) below) or may be (in the case of subparagraphs (ii) and (iii) below) terminated by the Company on the occurrence of any one of the following events:


(i) The date of the death of the Executive.


(ii) At least thirty (30) days after the date on which the
Company shall have given the Executive written notice of termination
of his employment hereunder by reason of his physical or mental
incapacity on a permanent basis. The Executive shall be deemed to be
physically or mentally incapacitated on a permanent basis if the
Executive is determined by a physician reasonably acceptable to both
parties to be unable, by reason of any physical or mental incapacity,
for a period of 120 consecutive day or 180 days (whether or not
consecutive) during any twelve month period to perform his duties and
responsibilities hereunder.


(iii) The date on which the Company shall have given the
Executive written notice that the Executive has been terminated "for
cause."


(b) The Executive may terminate his employment without "good reason" at any time by giving the Company advance writte
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