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                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                 ---------------
                                    FORM 10-K
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
    For the Fiscal Year Ended June 27, 1999 - Commission File Number 1-10542

                                 ---------------
                                   UNIFI, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

         New York                                     11-2165495
--------------------------------------   --------------------------------------
(STATE OR OTHER JURISDICTION OF          (I.R.S. EMPLOYER IDENTIFICATION NO.)
 INCORPORATION OR ORGANIZATION)

     7201 West Friendly Avenue
    Greensboro, North Carolina                           27410
--------------------------------------   --------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)              (ZIP CODE)

             (336) 294-4410
------------------------------------------------
(REGISTRANT'S TELEPHONE NO., INCLUDING AREA CODE)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: 

        TITLE OF EACH CLASS           NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, par value $.10 per share        New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                   Yes X  No
                                      ---   ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Aggregate market value of the voting stock held by non-affiliated of the
registrant as of August 13, 1999 based on a closing price of $14.8125 per
share: $865,598,433

Number of shares outstanding as of August 13, 1999: 59,548,652

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement for the Annual Meeting of the
Shareholders of Unifi, Inc., to be held on October 21, 1999, are incorporated by
reference into Part III.

Exhibits, Financial Statement Schedules and Reports on Form 8-K index is located
on pages 32 through 34.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

                                    PART I


ITEM 1. BUSINESS

     Unifi, Inc., a New York corporation formed in 1969, together with its
subsidiaries, hereinafter set forth, (the "Company" or "Unifi"), is one of the
largest and most diversified producers and processors of textile yarns in the
world. The Company is primarily engaged in the processing of synthetic yarns in
two primary business segments, polyester and nylon. The polyester segment is
comprised of textured, dyed, twisted and beamed yarns with sales to knitters and
weavers that produce fabrics for the apparel, automotive and furniture
upholstery, home furnishings, industrial and other end use markets. The nylon
segment is comprised of textured nylon and covered spandex products with sales
to knitters and weavers that produce fabrics for the apparel, hosiery, socks and
other end use markets. See footnote to the Consolidated Financial Statements
("Footnote") 2 ("Acquisitions") on page 20 and Footnote 11 ("Investment in
Unconsolidated Affiliates") on pages 27 and 28 of this Report for information
concerning recent mergers, acquisitions and consolidations of the Company's
business, which is incorporated herein by reference.

     Texturing polyester and nylon filament fiber involves the processing of
partially oriented yarn ("POY"), which is either raw polyester or nylon filament
fiber purchased from chemical manufacturers, to give it greater bulk, strength,
stretch, consistent dyeability and a softer feel, thereby making it suitable for
use in knitting and weaving of fabrics. The texturing process involves the use
of high-speed machines to draw, heat and twist the POY to produce yarn having
various physical characteristics, depending on its ultimate end use.

     During the fourth quarter of fiscal year 1999, the Company formed Unifi
Technology Group, LLC ("UTG"), to provide consulting services focused on
integrated manufacturing, factory automation and electronic commerce solutions
to other domestic manufacturers. Effective June 1, 1999, UTG acquired the assets
of Cimtec, Inc. ("Cimtec"), a manufacturing automation solutions provider, for
$10.5 million. Subsequently, a five-percent interest in the new entity was sold
to certain former Cimtec shareholders. See Footnote 2 ("Acquisitions") on page
20 of this Report for additional information on UTG.

     See the information included under "Year 2000 Compliance Status" under

Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 11 and 12 of this Report.

SOURCES AND AVAILABILITY OF RAW MATERIALS

     The primary suppliers of POY to the Company's polyester segment are E. I.
DuPont de Nemours and Company ("Dupont"), Nanya Plastics Corp. of America
("Nanya"), Kosa (formerly Hoechst Celanese Corporation), Wellman Industries,
Reliance Industries, LTD. and P.T. Indorama Synthetics TBK, with the majority of
the Company's polyester POY being supplied by DuPont. In addition, the Company
has polyester POY manufacturing facilities in Ireland and Yadkinville, North
Carolina (which provides approximately 35% of its total domestic polyester POY
supply needs). The production of POY is comprised of two primary processes,
polymerisation (performed in Ireland only) and spinning (performed in both
Ireland and Yadkinville). The polymerisation process is the production of
polymer by a chemical reaction involving terephthalic acid and ethylene glycol,
which are combined to form chip. The spinning process involves the extrusion and
melting of chip to form molten polymer. The molten polymer is then extruded
through spinnerettes to form continuous multi-filament raw yarn (POY).
Substantially all of the raw materials for such manufactured POY is supplied by
Nanya for domestic production and by Dupont and Bayer AG for our Irish
operation. The primary suppliers of POY to the Company's nylon segment are
DuPont and Cookson Fibers, Inc., with the majority of the Company's nylon POY
being supplied by DuPont.

     Although the Company is heavily dependent upon a limited number of
suppliers, the Company has not had and does not anticipate any material
difficulty in obtaining its raw POY or raw materials used to manufacture
polyester POY.

     PATENTS AND LICENSES: The Company currently has several patents and
registered trademarks, none of which it considers material to its business as a
whole.

     CUSTOMERS: The Company, in fiscal year ended June 27, 1999, sold its
polyester yarns to approximately 1,150 customers and its nylon yarns to
approximately 400 customers, no one customer's purchases exceeded 10% of net
sales for the polyester segment during said period, while one customer comprised
19.5% of net sales for the

                                       2

<PAGE>
nylon segment for this time period. The Company does not believe that either its
polyester segment or its nylon segment is dependent on any one customer.

     BACKLOG: The Company, other than in connection with certain foreign sales
and for textured yarns that are package dyed according to customers'
specifications, does not manufacture to order. The Company's products can be
used in many ways and can be thought of in terms of a commodity subject to the
laws of supply and demand and, therefore, does not have what is considered a
backlog of orders. In addition, the Company does not consider its products to be
seasonal ones.

     COMPETITIVE CONDITIONS: The textile industry in which the Company currently
operates is keenly competitive. The Company processes and sells high-volume
commodity products, pricing is highly competitive with product quality and
customer service being essential for differentiating the competitors within the
industry. Product quality insures manufacturing efficiencies for the customer.
The Company's polyester and nylon yarns compete in a worldwide market with a
number of other foreign and domestic producers of such yarns. In the sale of
polyester filament yarns, major domestic competitors are Dillon Yarn Company,
Inc., Spectrum Dyed Yarns, Inc. and Milliken & Company and in the sale of nylon
yarns major domestic competitors are Jefferson Mills, Inc. and Worldtex, Inc.
Additionally, there are numerous foreign competitors that sell polyester and
nylon yarns in the United States.

     RESEARCH AND DEVELOPMENT: The estimated amount spent during each of the
last three fiscal years on Company-sponsored and Customer-sponsored research and
development activities is considered immaterial.

     COMPLIANCE WITH CERTAIN GOVERNMENT REGULATIONS: Management of the Company
believes that the operation of the Company's production facilities and the
disposal of waste materials are substantially in compliance with applicable laws
and regulations.

     EMPLOYEES: The number of full-time employees of the Company is
approximately 6,250.

     FINANCIAL INFORMATION ABOUT SEGMENTS: See the information included in
Footnote 9 ("Business Segments, Foreign Operations and Concentrations of Credit
Risk") on Page 24 through Page 26 of this Report for the Financial Information
About Segments required by Item 101 of Regulation S-K.


I
TEM 2. PROPERTIES

     The Company currently maintains a total of 20 manufacturing and warehousing
facilities, one central distribution center and one recycling center in North
Carolina; one manufacturing and related warehousing facility in Staunton,
Virginia; one central distribution center in Fort Payne, Alabama; four
manufacturing operations in Letterkenny, County of Donegal, Republic of Ireland;
two warehousing locations in Carrickfergus, Ireland; two manufacturing and one
office building in Brazil and one manufacturing and administration facility in
Bogota, Colombia. All of these facilities, which contain approximately 8,166,153
square feet of floor space, with the exception of one plant facility leased from
NationsBank Leasing and R.E. Corp. pursuant to a Sales-leaseback Agreement
entered on May 20, 1997, as amended, two warehouses in Carrickfergus, Ireland,
and one plant and the office in Brazil are owned in fee; and management believes
they are in good condition, well maintained, and are suitable and adequate for
present production.

     The polyester segment of the Company's business uses 17 manufacturing, six
warehousing and one dedicated office totaling 5.3 million square feet. The nylon
segment of the Company's business uses utilizes six manufacturing and four
warehousing facilities aggregating 2.7 million square feet.

     UTG leases six office locations in several states from which it conducts
business.

     The Company leases sales offices and/or apartments in New York, Coleshill,
England, Oberkotzau, Germany, and Lyon, France, and has a representative office
in Tokyo, Japan.

     The Company also leases its corporate headquarters building at 7201 West
Friendly Avenue, Greensboro, North Carolina, which consists of a building
containing approximately 121,125 square feet located on a tract of land
containing approximately 8.99 acres. This property is leased from Merrill Lynch
Trust Company of North Carolina, Trustee under the Unifi, Inc. Profit Sharing
Plan and Trust, and Wachovia Bank & Trust Company, N.A., Independent Trustee. On
May 20, 1996, the Company exercised its option to extend the term of the lease
on this property for five years, through March 13, 2002. Reference is made to a
copy of the lease agreement

                                       3

<PAGE>
attached to the Registrant's Annual Report on Form 10-K as Exhibit (10d) for the
fiscal year ended June 27, 1987, which is by reference incorporated herein.

     See the related information included in Footnote 8 ("Leases and
Commitments") on Page 24 of this Report.


ITEM 3. LEGAL PROCEEDINGS

     The Company is not currently involved in any litigation which is considered
material, as that term is used in Item 103 of Regulation S-K.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the fourth
quarter for the fiscal year ended June 27, 1999.


                                    PART II


ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
      MATTERS

     The Company's common stock is listed for trading on the New York Stock
Exchange. The following table sets forth the range of high and low sales prices
of the Unifi Common Stock as reported on the NYSE Composite Tape and the regular
cash dividends per share declared by Unifi during the periods indicated.

     On July 16, 1998, the Company announced its intention to discontinue the
payment of cash dividends and utilize the cash to purchase shares of the
Company's common stock. Accordingly, effective July 16, 1998, the Board of
Directors of the Company terminated the previously established policy of paying
cash dividends equal to approximately 30% of the Company's after tax earnings of
the previous fiscal year.

     As of August 13, 1999, there were approximately 849 holders of record of
the Company's common stock.

<TABLE>
<CAPTION>
                                                HIGH        LOW      DIVIDENDS
                                            ----------- ----------- ----------
<S>                                         <C>         <C>         <C>
Fiscal year 1997:
  First quarter ended September 29, 1996 ..   $ 28.88     $ 26.00     $ .11
  Second quarter ended December 29, 1996 ..   $ 33.13     $ 26.63     $ .11
  Third quarter ended March 30, 1997 ......   $ 33.88     $ 30.13     $ .11
  Fourth quarter ended June 29, 1997 ......   $ 36.88     $ 29.63     $ .11
Fiscal year 1998:
  First quarter ended September 28, 1997 ..   $ 43.63     $ 35.06     $ .14
  Second quarter ended December 28, 1997 ..   $ 42.25     $ 36.38     $ .14
  Third quarter ended March 29, 1998 ......   $ 42.13     $ 33.00     $ .14
  Fourth quarter ended June 28, 1998 ......   $ 39.56     $ 34.19     $ .14
Fiscal year 1999:
  First quarter ended September 27, 1998 ..   $ 34.25     $ 17.13     $  --
  Second quarter ended December 27, 1998 ..   $ 20.06     $ 11.94     $  --
  Third quarter ended March 28, 1999 ......   $ 19.56     $ 10.69     $  --
  Fourth quarter ended June 27, 1999 ......   $ 18.56     $ 11.56     $  --
</TABLE>

                                       4

<PAGE>

                        ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                 JUNE 27, 1999   JUNE 28, 1998   JUNE 29, 1997   JUNE 30, 1996   JUNE 25, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)      (52 WEEKS)      (52 WEEKS)      (52 WEEKS)      (53 WEEKS)     (52 WEEKS)
----------------------------------------------- --------------- --------------- --------------- --------------- --------------
<S>                                             <C>             <C>             <C>             <C>             <C>
Summary of Earnings:
Net sales .....................................   $1,251,160      $1,377,609      $1,704,926      $1,603,280      $1,554,557
Cost of sales .................................    1,076,610       1,149,838       1,473,667       1,407,608       1,330,410
Gross profit ..................................      174,550         227,771         231,259         195,672         224,147
Selling, general and administrative
 expense ......................................       55,338          43,277          46,229          45,084          43,116
Interest expense ..............................       27,459          16,598          11,749          14,593          15,452
Interest income ...............................       (2,399)         (1,869)         (2,219)         (6,757)        (10,372)
Other (income) expense ........................        1,569             389             819          (4,390)         (9,659)
Equity in (earnings) losses of
 unconsolidated affiliates ....................       (4,214)        (23,030)            399              --              --
Minority interest .............................        9,401             723              --              --              --
Non-recurring charge ..........................           --              --              --          23,826              --
                                                  ----------      ----------      ----------      ----------      ----------
Income from continuing operations
 before income taxes and other items
 listed below .................................       87,396         191,683         174,282         123,316         185,610
Provision for income taxes ....................       28,369          62,782          58,617          44,939          69,439
                                                  ----------      ----------      ----------      ----------      ----------
Income before extraordinary item
 and cumulative effect of accounting
 change .......................................       59,027         128,901         115,665          78,377         116,171
                                                  ----------      ----------      ----------      ----------      ----------
Extraordinary item, net of tax ................           --              --              --           5,898              --
Cumulative effect of accounting
 change, net of tax ...........................        2,768           4,636              --              --              --
                                                  ----------      ----------      ----------      ----------      ----------
Net income ....................................       56,259         124,265         115,665          72,479         116,171
                                                  ==========      ==========      ==========      ==========      ==========
Per Share of Common Stock:
Income before extraordinary item
 and cumulative effect of accounting
 change (diluted) .............................   $      .97      $     2.08      $     1.81      $     1.18      $     1.62
Extraordinary item (diluted) ..................           --              --              --          (  .09)             --
Cumulative effect of accounting
 change (diluted) .............................        ( .04)         (  .07)             --              --              --
Net income (diluted) ..........................          .93            2.01            1.81            1.09            1.62
Cash dividends ................................           --             .56             .44             .52             .40
Financial Data:
Working capital ...............................   $  216,897      $  209,878      $  216,145      $  196,222      $  333,357
Gross property, plant and
 equipment ....................................    1,231,013       1,145,622       1,147,148       1,027,128         910,383
Total assets ..................................    1,365,840       1,333,814       1,018,703         951,084       1,040,902
Long-term debt and other
 obligations ..................................      478,898         458,977         255,799         170,000         230,000
Shareholders' equity ..........................      646,138         636,197         548,531         583,206         603,502
</TABLE>

     Fiscal year 1995 through 1997 amounts include the spun cotton yarn
operations that were contributed to Parkdale America, LLC on June 30, 1997.

                                       5

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FISCAL 1999

     Following is a summary of operating income by segment for fiscal years 1999
and 1998, as reported regularly to the Company's management:

<TABLE>
<CAPTION>
                                                                       ALL
(AMOUNTS IN THOUSANDS)                 POLYESTER       NYLON          OTHER        CONSOLIDATED
------------------------------------- -----------   -----------   -------------   -------------
<S>                                   <C>           <C>           <C>             <C>
Fiscal 1999
 Net sales ..........................  $822,763      $449,009       $ (20,612)     $1,251,160
 Cost of sales ......................   719,535       384,772         (27,697)      1,076,610
 Selling, general and administrative     38,518        16,271             549          55,338
                                       --------      --------       ---------      ----------
 Operating income ...................  $ 64,710      $ 47,966       $   6,536      $  119,212
                                       ========      ========       =========      ==========
Fiscal 1998
 Net sales ..........................  $939,780      $470,994       $ (33,165)     $1,377,609
 Cost of sales ......................   797,613       387,428         (35,203)      1,149,838
 Selling, general and administrative     30,223        13,054              --          43,277
                                       --------      --------       ---------      ----------
 Operating income ...................  $111,944      $ 70,512       $   2,038      $  184,494
                                       ========      ========       =========      ==========
</TABLE>

     As described in Note 9 to the consolidated financial statements, all
"other" revenues and expenses, required to reconcile the polyester and nylon
operating segments to consolidated results, are comprised primarily of
intersegment sales and cost of sales eliminations and various expenses reported
internally at a consolidated level. In addition, fiscal 1999 "other" revenue and
expenses contains activity from the June 1, 1999 acquisition of Cimtec (see Note
2 to the consolidated financial statements).

     POLYESTER OPERATIONS

     In fiscal 1999, polyester net sales decreased $117.0 million, or 12.5%
compared to fiscal 1998. Year-over-year performance continues to be negatively
impacted by the continuing effects of Asian imports of yarns, fabric and
apparel, which have kept sales volumes, sales pricing and gross margins under
pressure both domestically and internationally. The fiscal 1999 over 1998 volume
increase of 1.0% was aided by twelve months of sales volume generated by the
business venture with Burlington Industries consummated May 29, 1998 (see Note
13 to the consolidated financial statements). Average unit sales prices declined
13.5% during fiscal 1999. In addition to the decline in average unit sales
prices created by market pressures, the pricing decline was also influenced by
decreasing fiber costs and the strengthening of the U.S. dollar. As described in
Note 10 to the consolidated financial statements, the Company utilizes forward
contracts to hedge exposure for sales in foreign currencies based on specific
sales orders with customers or for anticipated sales activity for a future time
period. Additionally, currency exchange rate risks are mitigated by purchases
and borrowings in local currencies. The Company also enters currency forward
contracts for committed equipment and inventory purchases. The Company does not
enter into derivative financial instruments for trading purposes.

     Polyester gross profit decreased $38.9 million during fiscal 1999 and gross
margins declined from 15.1% in 1998 to 12.5% in 1999. Gross profit for fiscal
1999 was reduced by a $4.0 million charge resulting from employee acceptance of
an early retirement plan. The remainder of the decline in gross profit and gross
margin can be attributed to the aforementioned pressures on sales prices caused
by imports.

     Selling, general and administrative expense allocated to the polyester
segment increased $8.3 million in fiscal 1999. Of this increase, $5.7 million
related to a charge resulting from employee acceptance of an early retirement
program offered in fiscal 1999. Selling, general and administrative expense, as
a percentage of polyester net sales, increased from 3.2% in fiscal 1998 to 4.7%
in fiscal 1999.

     NYLON OPERATIONS

     In fiscal 1999, nylon net sales decreased $22.0 million, or 4.7% compared
to fiscal 1998. Unit volumes for fiscal 1999 decreased by 4.8%, while average
sales prices, based on product mix, increased 0.1%. The reduction in sales
volume is primarily attributable to the continuing decline of the ladies hosiery
market. The sales price increase was impacted by a minor shift in domestic
product mix to lower volume, higher priced products.

                                       6

<PAGE>
     Nylon gross profit decreased $19.3 million and gross margin decreased from
17.7% in 1998 to 14.3% in 1999, due mainly to the previously noted decrease in
net sales and the corresponding lack of volume to cover existing fixed
manufacturing costs and depreciation. In addition, depreciation increased $8.0
million in fiscal 1999 over 1998 resulting from the completion in fiscal 1999 of
a nylon texturing and covering facility, constructed to replace older equipment
and consolidate several of the Company's older nylon facilities. Gross profit
was also reduced by a $2.6 million charge resulting from employee acceptance of
an early retirement plan offered in fiscal 1999.

     Selling, general and administrative expense allocated to the nylon segment
increased $3.2 million in fiscal 1999. Of this increase, $2.5 million related to
a charge resulting from employee acceptance of an early retirement program
offered in fiscal 1999. Selling, general and administrative expense, as a
percentage of nylon net sales, increased from 2.8% in fiscal 1998 to 3.6% in
fiscal 1999.

     CONSOLIDATED OPERATIONS

     Interest expense increased $10.9 million, from $16.6 million in fiscal 1998
to $27.5 million in fiscal 1999. The increase in interest expense reflects
higher levels of debt outstanding at higher average interest rates during fiscal
1999 and a $4.8 million reduction in capitalized interest for major construction
projects, as certain significant projects in process during the prior year
period have been completed. The weighted average interest rate on debt
outstanding at June 27, 1999 was 5.94%.

     Interest income improved by $530 thousand from 1998 to 1999 primarily as a
result of higher levels of invested funds. Other expense increased from $389
thousand to $1.6 million from 1998 to 1999.

     Earnings from our equity affiliates, Parkdale America, LLC. (the "LLC") and
Micell Technologies, Inc. ("Micell"), net of related amortization, totaled $4.2
million in fiscal 1999 compared with $23.0 million in fiscal 1998. The decline
in earnings is primarily attributable to the reduced earnings of the LLC and
higher start-up expenses at Micell. The LLC's operations were negatively
impacted by excess capacity in the markets and reduced sales volumes as imported
apparel eroded their customer's business.

     Effective May 29, 1999, the Company formed a limited liability company (the
"Partnership") with Burlington Industries, Inc. ("Burlington") to manufacture
and market natural textured polyester. The Company has an 85.42% ownership
interest in the Partnership and Burlington has 14.58%. However, for the first
five years of the Partnership, Burlington is entitled to receive the first $9.4
million of earnings. Subsequent to this five year period, earnings are to be
allocated based on ownership percentages. Burlington's share of the earnings of
the Partnership are reflected as minority interest and amounted to $9.4 million
in fiscal 1999 and $0.7 million in fiscal 1998.

     The effective tax rate decreased from 32.8% in 1998 to 32.5% in 1999. The
difference between the statutory and effective tax rate is primarily due to the
realization of state tax credits associated with significant capital
expenditures and the operating results of our Irish operations that are taxed at
a 10.0% effective rate.

     In the first quarter of fiscal 1999, the Company recognized a cumulative
effect of an accounting change of $4.5 million ($2.8 million after tax) or $.04
per diluted share as a result of changing its accounting policy regarding
start-up costs. Pursuant to the AICPA issued SOP 98-5, "Reporting on the Costs
of Start-Up Activities," any previously capitalized start-up costs were required
to be written-off as a cumulative effect of an accounting change. Accordingly,
the Company has written-off the unamortized balance of the previously
capitalized start-up costs.

     As a result of the above, the Company realized during the current year net
income of $56.3 million, or $0.93 per diluted share, compared to $124.3 million,
or $2.01 per diluted share for the prior fiscal year period. Before the
previously described cumulative effect of an accounting change in the current
year, earnings would have been $59.0 million or $0.97 per diluted share.

     In June 1997, the Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income," ("SFAS 130"). SFAS 130 requires the reporting of comprehensive income
and its components in complete, general purpose financial statements as well as
requires certain interim comprehensive income information be disclosed.
Comprehensive income represents the change in net assets of a business during a
period from non-owner sources, which are not included in net income. Foreign
currency translation adjustments presently represent the only component of
comprehensive income for the Company. As of June 28, 1998, the Company adopted
SFAS 130, Reporting Comprehensive Income. SFAS 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the

                                       7

<PAGE>
adoption of this Statement had no impact on the Company's net income or
shareholders' equity. Statement 130 requires unrealized gains or losses on the
Company's available-for-sale securities and the foreign currency translation
adjustments, which prior to adoption were reported separately in shareholders'
equity, to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of SFAS 130.

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
("SFAS 131") which the Company adopted in the fourth quarter of fiscal 1999.
SFAS 131 establishes standards of reporting financial information from operating
segments in annual and interim financial statements of public companies, as well
as establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined in SFAS 131
as components of an enterprise about which separate financial information is
available to the chief operating decision-maker for purposes of assessing
performance and allocating resources. The required segment reporting is detailed
in Note 9 to the consolidated financial statements. The adoption of SFAS 131 had
no effect on the consolidated results of operations or financial position.

     In March 1998, the AICPA issued SOP 98-1, "Accounting for the Cost of
Computer Software Developed for or Obtained for Internal-Use," ("SOP 98-1").
This SOP is effective for the Company in the first quarter of fiscal year 2000.
SOP 98-1 will require the capitalization of certain costs incurred after the
date of adoption in connection with developing or obtaining software for
internal use. The Company currently expenses certain of these internal costs
when incurred. As discussed in "Year 2000 Compliance Status" located in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the Company is actively implementing an enterprise-wide software
solution that is substantially complete at June 27, 1999. Consequently,
remaining costs associated with obtaining and modifying this system are not
anticipated to be material to the Company's results of operations or financial
position after the adoption of this SOP.

     In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS
133") and in August 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, "An Amendment to SFAS 133," which delayed the effective date
of SFAS 133 until the Company's fiscal year 2001. SFAS 133 will require the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
For derivatives that are hedges, changes in the fair value of derivatives will
either be offset against the change in fair value of the hedged asset,
liability, or firm commitment through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. Although the Company does not enter into derivative
financial instruments for trading purposes, it has not yet determined what the
effect of SFAS 133, for derivatives that are considered hedges, will be on its
results of operations or financial position.

FISCAL 1998

     Following is a summary of operating income by segment for fiscal years 1998
and 1997, as reported regularly to the Company's management:

<TABLE>
<CAPTION>
                                                                       ALL
(AMOUNTS IN THOUSANDS)                 POLYESTER       NYLON          OTHER        CONSOLIDATED
------------------------------------- -----------   -----------   -------------   -------------
<S>                                   <C>           <C>           <C>             <C>
Fiscal 1998
 Net sales ..........................  $939,780      $470,994       $ (33,165)     $1,377,609
 Cost of sales ......................   797,613       387,428         (35,203)      1,149,838
 Selling, general and administrative.    30,223        13,054              --          43,277
                                       --------      --------       ---------      ----------
 Operating income ...................  $111,944      $ 70,512       $   2,038      $  184,494
                                       ========      ========       =========      ==========
Fiscal 1997
 Net sales ..........................  $967,201      $469,954       $ 267,771      $1,704,926
 Cost of sales ......................   835,027       386,467         252,173       1,473,667
 Selling, general and administrative.    25,464        11,845           8,920          46,229
                                       --------      --------       ---------      ----------
 Operating income ...................  $106,710      $ 71,642       $   6,678      $  185,030
                                       ========      ========       =========      ==========
</TABLE>

                                       8

<PAGE>
     As illustrated in Note 9 to the consolidated financial statements, all
"other" revenues and expenses, required to reconcile the polyester and nylon
operating segments to consolidated results, are comprised primarily of
intersegment sales and cost of sales eliminations and various expenses reported
internally at a consolidated level. In addition, fiscal 1997 contains activity
related to the spinning of cotton and cotton blend fibers, which were
contributed to Parkdale America on June 30, 1997 (see Note 11 to the
consolidated financial statements).

     POLYESTER OPERATIONS

     Polyester net sales decreased $27.4 million from fiscal year 1997 to 1998.
Overall unit volume increased 1.5% during fiscal 1998. Average unit sales prices
declined 4.3% during fiscal 1998 primarily due to export sales comprising a
larger percentage of total fiscal 1998 sales as compared with fiscal 1997.
Export unit prices were adversely affected in fiscal 1998 due to various factors
including the strengthening of the U.S. dollar and increased competition. The
stronger U.S. dollar also negatively impacted the translation of our Irish
operation's sales in fiscal 1998 from the functional Irish punt currency to the
U.S. dollar. Domestically, unit volumes declined in fiscal 1998 as a result of
increased fiber, fabric and apparel imports. Unit volumes increased in the
fourth quarter due, in part, to the sales generated by the formation of a
limited liability company with Burlington Industries on May 29, 1998.

     Sales from foreign operations are denominated in local currencies and are
hedged in part by the purchase of raw materials and services in those same
currencies. As described in Note 10 to the consolidated financial statements,
currency exchange rate risks are mitigated by the utilization of foreign
currency forward contracts and purchases in local currencies. The Company does
not enter into derivative financial instruments for trading purposes.

     Polyester gross margins improved from 13.7% in fiscal 1997 to 15.1% in the
fiscal 1998. The increase in gross margin primarily reflects raw material cost
reductions based on product mix, which were partially offset by higher direct
and allocated indirect manufacturing costs as a percentage of net sales. The
increase in allocated indirect manufacturing costs results from the lower
consolidated sales base in fiscal 1998, in which to allocate indirect costs, as
a result of the contribution of our spun cotton yarn operations at the beginning
of the 1998 fiscal year.

     Selling, general and administrative expense allocated to the polyester
segment increased $4.8 million from fiscal 1997 to 1998. As a percentage of net
sales these costs increased from 2.6% in the prior fiscal year to 3.2% in the
current year. The increase mainly reflects the lower consolidated sales base, in
which to absorb allocated costs, as a result of the contribution of our spun
cotton yarn operations at the beginning of the 1998 fiscal year.

     NYLON OPERATIONS

     Nylon net sales remained stable from the fiscal year 1997 to 1998 despite a
4.4% decline in unit volume. The volume decrease was minimized by the
acquisition on November 14, 1997, of SI Holding Company (Spanco). The effect of
the volume decrease was offset by a 4.4% increase in average unit sales prices.

     Nylon gross margins were 17.7% in both fiscal 1998 and 1997. During fiscal
1998 nylon realized average unit raw material cost reductions based on product
mix, which were offset by higher direct and allocated indirect manufacturing
costs as a percentage of net sales. The increase in allocated indirect
manufacturing costs results from the lower consolidated sales base in fiscal
1998, in which to allocate indirect costs, as a result of the contribution of
our spun cotton yarn operations at the beginning of the 1998 fiscal year.

     Selling, general and administrative expense allocated to the nylon segment
increased $1.2 million from fiscal 1997 to 1998. As a percentage of net sales
these costs increased from 2.5% in fiscal 1997 to 2.8% in fiscal 1998. The
increase mainly reflects the lower consolidated sales base, in which to absorb
allocated costs, as a result of the contribution of our spun cotton yarn
operations at the beginning of the 1998 fiscal year.

     CONSOLIDATED OPERATIONS

     Interest expense increased $4.9 million, from $11.7 million in 1997 to
$16.6 million in 1998. The increase is associated with both higher levels of
debt outstanding during the current year and higher average interest rates
during this period. In February 1998, the Company issued $250.0 million of debt
securities, the proceeds of which were used to repay a portion of the revolving
credit facility. The coupon rate of the new securities is 6.50%. Debt

                                       9

<PAGE>
levels increased during the year as a result of capital expenditures,
investments in equity affiliates, stock repurchases and an acquisition.

     Interest income declined $350 thousand from 1997 to 1998 primarily as a
result of lower levels of invested funds. Other expense decreased from $819
thousand to $389 thousand from 1997 to 1998.

     Earnings from our equity affiliates, net of related amortization, totaled
$23.0 million in the current year. The effective tax rate decreased from 33.6%
in 1997 to 32.8% in 1998. The improvement in the effective tax rate is primarily
due to the realization of state tax credits in the current year associated with
significant capital expenditures and improved operating results of our Irish
operations that are taxed at a 10.0% effective rate.

     In the second quarter of fiscal 1998, the Company recognized a write-off of
$7.5 million ($4.6 million after tax) or $.07 per diluted share as a result of
changing its accounting policy regarding business reengineering costs.
Previously, substantially all direct external costs associated with installing a
new computer software system were capitalized, including those costs related to
business process reengineering. Pursuant to Emerging Issues Task Force 97-13
issued in November 1997, these costs were written off as a cumulative catch-up
adjustment.

     As a result of the above, the Company realized during fiscal 1998 net
income of $124.3 million, or $2.01 per diluted share, compared to $115.7 million
or $1.81 per diluted share for fiscal 1997. Before the cumulative effect of an
accounting change in fiscal 1998, earnings would have been $128.9 million or
$2.08 per diluted share.

LIQUIDITY AND CAPITAL RESOURCES

     Cash provided by operations continues to be a primary source of funds to
finance operating needs and capital expenditures. Cash generated from operations
was $209.8 million for fiscal 1999, compared to $181.7 million for fiscal 1998.
The primary sources of cash from operations, other than net income, were a
decrease in accounts receivable of $34.5 million, a decrease in inventory of
$16.3 million and non-cash adjustments aggregating $103.0 million. Depreciation
and amortization of $89.9 million, the after-tax cumulative effect of an
accounting change of $2.8 million, the deferred income tax provision of $4.6
million, and the distributions from unconsolidated equity affiliates in excess
of earnings of $5.3 million were the primary components of the non-cash
adjustments. Offsetting these sources was a decrease in accounts payable and
accruals of $14.0 million. All working capital changes have been adjusted to
exclude the effects of acquisitions and currency translation. Working capital
levels are more than adequate to meet the operating requirements of the Company.
The Company ended fiscal 1999 with working capital of $216.9 million, which
included cash and cash equivalents of $44.4 million.

     The Company utilized $159.6 million for net investing activities and $12.0
million for net financing activities during fiscal 1999. Significant
expenditures during this period included $118.8 million for capacity expansions
and upgrading of facilities, $27.1 million for acquisitions, $10.0 for
investments in equity affiliates, $39.3 million for the purchase and retirement
of Company common stock and $9.0 million for distributions to minority interest
shareholders. The Company also utilized the net proceeds of $35.4 million from
its long-term debt agreements to finance these expenditures. The Company
purchased, effective April 1, 1999, the polyester texturing and dyed yarn
property, plant and equipment of Fairway Polyester, LTDA located in Brazil for
$16.6 million. The Company also acquired the assets of Cimtec Inc, a
manufacturing solutions provider, effective June 1, 1999 for $10.5 million.
These acquisitions, which are not deemed significant to the Company's
consolidated net assets or result of operations, were accounted for by the
purchase method of accounting.

     At June 27, 1999, the Company has committed approximately $20.2 million for
the purchase and upgrade of equipment and facilities during fiscal 2000.

     In the third quarter of fiscal 1999, the Company recognized a $14.8 million
charge associated with the early retirement and termination of 114 salaried
employees. The charge was recorded as a component of selling, general and
administrative expenses in the amount of $8.2 million and cost of goods sold in
the amount of $6.6 million. Substantially all employees were terminated
effective March 31, 1999, with cash payments expected to be spread over a period
not to exceed three years.

     The Company periodically evaluates the carrying value of long-lived assets,
including property, plant and equipment and intangibles to determine if
impairment exists. If the sum of expected future undiscounted cash flows is less
than the carrying amount of the asset, an impairment loss is required to be
recognized for the difference between the fair value or the discounted future
cash flows and the carrying amount of the asset. As discussed in the current and
prior periods, the performance of our polyester operations continued to be
negatively

                                       10

<PAGE>
impacted by the ongoing effects of Asian fiber, fabric and apparel imports which
have reduced polyester sales volumes and gross margins. Additionally, in
response to the pressures caused by the importation of fabric and apparel, many
U.S. textile and apparel manufacturers are downsizing their domestic operations
and moving production capacity offshore. During the fourth quarter of fiscal
1999, the Company reviewed its projected future cash flows of the polyester
division's long-lived assets and determined no impairment exists at this time.

     Effective July 16, 1998, the Board of Directors terminated the
previously-established policy of paying cash dividends equal to approximately
30% of the Company's after-tax earnings for the previous year. In lieu of this
cash dividend, the Board of Directors authorized management to utilize in fiscal
1999 cash equal to the same 30% of previous year's earnings to purchase shares
of the Company's stock, as management deems advisable. The Board of Directors
also increased the remaining authorization pursuant to a resolution originally
adopted on October 21, 1993, to purchase 10 million shares of Unifi's common
stock. During the current year, the Company has purchased 2.1 million shares for
$39.3 million. Accordingly, there remains an authorization to repurchase
approximately 7.9 million shares. The Company will continue to operate its stock
buy-back program, as it deems appropriate, based on prevailing financial and
market conditions.

     Management believes the current financial position of the Company in
connection with its operations and its access to debt and equity markets are
sufficient to meet anticipated capital expenditure, strategic acquisition,
working capital, Company common stock repurchases and other financial needs.

YEAR 2000 COMPLIANCE STATUS

     The Company continues to actively address the business issues associated
with the year 2000 that impact information technology systems and
non-information technology systems (i.e., embedded technology) both internally
and in relation to our external customers, suppliers and other business
associates. Factors involved in addressing such business issues include the
evaluation, testing and implementation of the Company's enterprise-wide systems;
evaluation, upgrading and certifying of non-information technology systems;
assessing and testing significant customers' and vendors' compliance strategies
and monitoring the status thereof (including electronic commerce with these
companies); and, evaluating and monitoring the compliance plans of businesses in
which the Company maintains investments in their operations. The Company has
created a team of professionals with the responsibility of addressing business
issues associated with the year 2000. The Company does not believe any material
exposures or contingencies exist with respect to its internal information
systems as the installation of the remaining enterprises-wide software is
anticipated to be completed in the necessary time frame. At present, the Company
estimates it is approximately 95% complete with its enterprise-wide software
implementation efforts and approximately 95% complete with respect to
manufacturing plant floor applications implementations. Additionally, upgrades
are ongoing and are on schedule for certain applications where the Company has
elected to postpone enterprise software conversion. Testing of the respective
applications is an on-going process, which will go on throughout the next
quarter. Embedded technology devices are also being reviewed in conjunction with
the manufacturing plant floor compliance procedures.

     The Company is also dependent upon its customers' and vendors' compliance
with the year 2000 problem and could face disruption of business in the event
these efforts are unsuccessful. The Company has requested information on the
year 2000 compliance plans and status from its significant vendors and equity
affiliates and is presently not aware of any material exposures or
contingencies. Face-to-face meetings have been conducted and will continue in
order to plan and execute appropriate follow-up activities with its more
critical suppliers. The Company has sent surveys to its major customers and is
presently evaluating responses as they are submitted to plan and perform
necessary follow-up activities. Conversion plans have been established for the
Company's EDI customers and vendors and procedures have begun. Efforts are
underway to convert the remaining customers in the next fiscal quarter. The
Company will continue its efforts to gather information from businesses with
which it conducts business. However, such information is subject to accurate and
voluntary communication. Consequently, the Company cannot predict the likelihood
or impact on its business resulting from noncompliance by such parties. Although
the Company believes its business critical systems will be compliant, there can
be no assurances that all non-compliant systems will be identified or that all
significant suppliers or customers will be year 2000 capable. A worst-case
scenario could include interruption in the procurement of necessary materials or
the disruption in manufacturing or information systems. Such events would
adversely impact the distribution of product, timelines and accuracy of
record-keeping and collection of revenue among other consequences which could
cause a material impact on the Company's results of operation and financial
position.

                                       11

<PAGE>
     The Company has substantially completed contingency plans and recovery
procedures to deal with potential problems associated with failures in its own
computer systems as well as disruptions caused by system failures (or further
dependencies) of its critical suppliers. These plans include, among others, the
modification and upgrading of necessary business systems for which the
enterprise-wide system implementation efforts are not certain. Costs incurred in
the Company's year 2000 compliance efforts are being expensed as incurred.
Anticipated expenditures related to year 2000 compliance readiness, in addition
to those associated with the enterprise- wide software implementation, was $765
thousand for the fiscal year ending June 27, 1999.

EURO CONVERSION

     The Company conducts business in multiple currencies, including the
currencies of various European countries in the European Union which began
participating in the single European currency by adopting the Euro as their
common currency as of January 1, 1999. Additionally, the functional currency of
our Irish operation and several sales office locations will change before
January 1, 2002, from their historical currencies to the Euro. During the period
January 1, 1999, to January 1, 2002, the existing currencies of the member
countries will remain legal tender and customers and vendors of the Company may
continue to use these currencies when conducting business. Currency rates during
this period, however, will no longer be computed from one legacy currency to
another but instead will first be converted into the Euro. The Company continues
to evaluate the Euro conversion and the impact on its business, both
strategically and operationally. At this time, the conversion to the Euro has
not had, nor is expected to have, a material adverse effect on the financial
condition or results of operations of the Company.

FORWARD-LOOKING STATEMENTS

     Certain statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and other sections of this
quarterly report contain forward-looking statements within the meaning of
federal security laws about the Company's financial condition and results of
operations that are based on management's current expectations, estimates and
projections about the markets in which the Company operates, management's
beliefs and assumptions made by management. Words such as "expects,"
"anticipates," "believes," "estimates," variations of such words and other
similar expressions are intended to identify such forward-looking statements.
These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions which are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed or
forecasted in, or implied by, such forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's judgment only as of the date hereof. The Company undertakes
no obligation to update publicly any of these forward-looking statements to
reflect new information, future events or otherwise. Factors that may cause
actual outcome and results to differ materially from those expressed in, or
implied by, these forward-looking statements include, but are not necessarily
limited to, availability, sourcing and pricing of raw materials, pressures on
sales prices and volumes due to competition and economic conditions, reliance on
and financial viability of significant customers, technological advancements,
employee relations, changes in construction spending and capital equipment
expenditures (including those related to unforeseen acquisition opportunities),
the timely completion of construction and expansion projects planned or in
process, continued availability of financial resources through financing
arrangements and operations, negotiations of new or modifications of existing
contracts for asset management and for property and equipment construction and
acquisition, regulations governing tax laws, other governmental and
authoritative bodies' policies and legislation, the continuation and magnitude
of the Company's common stock repurchase program and proceeds received from the
sale of assets held for disposal. In addition to these representative factors,
forward-looking statements could be impacted by general domestic and
international economic and industry conditions in the markets where the Company
competes, such as changes in currency exchange rates, interest and inflation
rates, recession and other economic and political factors over which the Company
has no control.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     See the information included in Footnote 10 ("Derivative Financial
Instruments and Fair Value of Financial Instruments") on Pages 26 and 27 of this
Report.


ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's report of independent auditors and consolidated financial
statements and related notes follow on subsequent pages of this Report.

                                       12

<PAGE>

REPORT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND SHAREHOLDERS OF UNIFI, INC.

     We have audited the accompanying consolidated balance sheets of Unifi, Inc.
as of June 27, 1999, and June 28, 1998, and the related consolidated statements
of income, changes in shareholders' equity and comprehensive income, and cash
flows for each of the three years in the period ended June 27, 1999. Our audits
also include the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Unifi, Inc. at
June 27, 1999, and June 28, 1998, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended June 27,
1999, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

Greensboro, North Carolina
July 20, 1999


                                       13

<PAGE>
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                               JUNE 27, 1999     JUNE 28, 1998
-------------------------------------------------   ---------------   --------------
<S>                                                 <C>               <C>
ASSETS:
Current assets:
Cash and cash equivalents .......................     $    44,433      $     8,372
 Receivables ....................................         185,784          222,310
 Inventories ....................................         129,917          137,201
 Other current assets ...........................           2,015            1,308
                                                      -----------      -----------
   Total current assets .........................         362,149          369,191
                                                      -----------      -----------
Property, plant and equipment:
 Land ...........................................           6,973            6,525
 Buildings and air conditioning .................         241,852          206,559
 Machinery and equipment ........................         848,701          772,504
 Other ..........................................         133,487          160,034
                                                      -----------      -----------
                                                        1,231,013        1,145,622
Less accumulated depreciation ...................         541,275          497,042
                                                      -----------      -----------
                                                          689,738          648,580
Investment in unconsolidated affiliates .........         207,142          212,448
Other noncurrent assets .........................         106,811          103,595
                                                      -----------      -----------
                                                      $ 1,365,840      $ 1,333,814
                                                      ===========      ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
 Accounts payable ...............................     $    68,716      $    93,922
 Accrued expenses ...............................          52,889           43,939
 Income taxes payable ...........................           7,392            5,218
 Current maturities of long-term debt and
   other current liabilities ....................          16,255           16,234
                                                      -----------      -----------
   Total current liabilities ....................         145,252          159,313
                                                      -----------      -----------
Long-term debt and other liabilities ............         478,898          458,977
                                                      -----------      -----------
Deferred income taxes ...........................          78,369           62,970
                                                      -----------      -----------
Minority interests ..............................          17,183           16,357
                                                      -----------      -----------
Shareholders' equity:
 Common stock ...................................           5,955            6,163
 Capital in excess of par value .................              13           22,454
 Retained earnings ..............................         658,353          618,128
 Accumulated other comprehensive loss ...........         (18,183)         (10,548)
                                                      -----------      -----------
                                                          646,138          636,197
                                                      -----------      -----------
                                                      $ 1,365,840      $ 1,333,814
                                                      ===========      ===========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                       14

<PAGE>
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)             JUNE 27, 1999     JUNE 28, 1998     JUNE 29, 1997
------------------------------------------------------   ---------------   ---------------   --------------
<S>                                                      <C>               <C>               <C>
Net sales ............................................     $ 1,251,160       $ 1,377,609      $ 1,704,926
                                                           -----------       -----------      -----------
Costs and expenses:
 Cost of sales .......................................       1,076,610         1,149,838        1,473,667
 Selling, general and administrative expense .........          55,338            43,277           46,229
 Interest expense ....................................          27,459            16,598           11,749
 Interest income .....................................          (2,399)           (1,869)          (2,219)
 Other expense .......................................           1,569               389              819
 Equity in (earnings) losses of unconsolidated
   affiliates ........................................          (4,214)          (23,030)             399
 Minority interest ...................................           9,401               723               --
                                                           -----------       -----------      -----------
                                                             1,163,764         1,185,926        1,530,644
                                                           -----------       -----------      -----------
Income before income taxes and cumulative effect
 of accounting change ................................          87,396           191,683          174,282
Provision for income taxes ...........................          28,369            62,782           58,617
                                                           -----------       -----------      -----------
Income before cumulative effect of accounting
 change ..............................................          59,027           128,901          115,665
Cumulative effect of accounting change (net of
 applicable income taxes of $1,696 for
 June 27, 1999 and $2,902 for June 28, 1998) .........           2,768             4,636               --
                                                           -----------       -----------      -----------
Net income ...........................................     $    56,259       $   124,265      $   115,665
                                                           ===========       ===========      ===========
Earnings per common share -- basic:
 Income before cumulative effect of
   accounting change .................................     $       .97       $      2.10      $      1.83
 Cumulative effect of accounting change ..............           ( .04)           (  .07)              --
                                                           -----------       -----------      -----------
 Net income per common share .........................     $       .93       $      2.03      $      1.83
                                                           ===========       ===========      ===========
Earnings per common share -- assuming dilution:
 Income before cumulative effect of accounting
   change ............................................     $       .97       $      2.08      $      1.81
 Cumulative effect of accounting change ..............           ( .04)           (  .07)              --
                                                           -----------       -----------      -----------
 Net income per common share .........................     $       .93       $      2.01      $      1.81
                                                           ===========       ===========      ===========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                       15

<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                        CAPITAL IN                 ACCUMULATED        TOTAL       COMPREHENSIVE
(AMOUNTS IN THOUSANDS,            SHARES      COMMON     EXCESS OF    RETAINED    COMPREHENSIVE   SHAREHOLDERS'      INCOME
EXCEPT PER SHARE DATA)         OUTSTANDING     STOCK     PAR VALUE    EARNINGS    INCOME/(LOSS)       EQUITY         NOTE 1
----------------------------- ------------- ---------- ------------ ------------ --------------- --------------- --------------
<S>                           <C>           <C>        <C>          <C>          <C>             <C>             <C>
Balance June 30, 1996 .......     64,831     $ 6,483    $  62,255    $ 512,253     $    2,215      $  583,206         $   --
                                  ======     =======    =========    =========     ==========      ==========         ======
Purchase of stock ...........     (3,901)       (390)     (64,786)     (55,824)            --        (121,000)            --
Options exercised ...........        280          28        2,531       (1,404)            --           1,155             --
Stock option tax benefit              --          --           --        2,307             --           2,307             --
Cash dividends -- $.44
 per share ..................         --          --           --      (27,898)            --         (27,898)            --
Currency translation
 adjustments ................         --          --           --           --         (4,904)         (4,904)        (4,904)
Net income ..................         --          --           --      115,665             --         115,665        115,665
                                  ------     -------    ---------    ---------     ----------      ----------        -------
Balance June 29, 1997 .......     61,210       6,121           --      545,099         (2,689)        548,531        110,761
                                  ======     =======    =========    =========     ==========      ==========      =========
Purchase of stock ...........       (539)        (54)        (618)     (19,515)            --         (20,187)            --
Options exercised ...........        402          40        2,154           --             --           2,194             --
Stock option tax benefit              --          --           --        2,599             --           2,599             --
Stock issued for
 acquisition ................        561          56       20,918           --             --          20,974             --
Cash dividends -- $.56
 per share ..................         --          --           --      (34,320)            --         (34,320)            --
Currency translation
 adjustments ................         --          --           --           --         (7,859)         (7,859)        (7,859)
Net income ..................         --          --           --      124,265             --         124,265        124,265
                                  ------     -------    ---------    ---------     ----------      ----------      ---------
Balance June 28, 1998 .......     61,634       6,163       22,454      618,128        (10,548)        636,197        116,406
                                  ======     =======    =========    =========     ==========      ==========      =========
Purchase of stock ...........     (2,112)       (211)     (23,092)     (16,034)            --         (39,337)            --
Options exercised ...........         26           3          651           --             --             654             --
Currency translation
 adjustments ................         --          --           --           --         (7,635)         (7,635)        (7,635)
Net income ..................         --          --           --       56,259             --          56,259         56,259
                                  ------     -------    ---------    ---------     ----------      ----------      ---------
Balance June 27, 1999 .......     59,548     $ 5,955    $      13    $ 658,353     $  (18,183)     $  646,138      $  48,624
                                  ======     =======    =========    =========     ==========      ==========      =========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                       16

<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                                       JUNE 27, 1999     JUNE 28, 1998     JUNE 29, 1997
---------------------------------------------------------   ---------------   ---------------   --------------
<S>                                                         <C>               <C>               <C>
Cash and cash equivalents at beginning of year ..........     $    8,372        $    9,514        $   24,473
Operating activities:
  Net income ............................................         56,259           124,265           115,665
  Adjustments to reconcile net income to net
   cash provided by operating activities:
   Cumulative effect of accounting change (net
    of applicable income taxes) .........................          2,768             4,636                --
   (Earnings) losses of unconsolidated equity
    affiliates, net of distributions ....................          5,287           (15,282)              399
   Depreciation .........................................         82,993            65,033            85,533
   Amortization .........................................          6,883             4,677             2,366
   Deferred income taxes ................................          4,641            12,201            17,157
   Other ................................................            415              (350)              (85)
   Changes in assets and liabilities, excluding
    effects of acquisitions and foreign
    currency adjustments:
    Receivables .........................................         34,475             9,628           (26,441)
    Inventories .........................................         16,320              (793)          (10,032)
    Other current assets ................................           (948)            1,556              (462)
    Payables and accruals ...............................        (13,959)          (25,213)            9,260
    Income taxes ........................................         14,697             1,329            (9,524)
                                                              ----------        ----------        ----------
  Net -- operating activities ...........................        209,831           181,687           183,836
                                                              ----------        ----------        ----------
Investing activities:
  Capital expenditures ..................................       (118,846)         (250,064)         (143,176)
  Acquisitions ..........................................        (27,112)          (25,776)               --
  Investments in unconsolidated equity
   affiliates ...........................................        (10,000)          (39,492)           (2,250)
  Sale of capital assets ................................            847             2,428             3,046
  Other .................................................         (4,508)           (2,755)              768
                                                              ----------        ----------        ----------
  Net -- investing activities ...........................       (159,619)         (315,659)         (141,612)
                                                              ----------        ----------        ----------
Financing activities:
  Borrowing of long-term debt ...........................         97,000           440,273           187,500
  Repayment of long-term debt ...........................        (61,596)         (252,844)         (100,513)
  Issuance of Company stock .............................            654             2,194             3,462
  Stock option tax benefit ..............................             --             2,599             2,307
  Purchase and retirement of Company stock ..............        (39,337)          (20,187)         (121,000)
  Cash dividends paid ...................................             --           (34,320)          (27,898)
  Distributions to minority shareholders ................         (9,000)               --                --
  Other .................................................            249            (4,006)               --
                                                              ----------        ----------        ----------
  Net -- financing activities ...........................        (12,030)          133,709           (56,142)
                                                              ----------        ----------        ----------
Currency translation adjustment .........................         (2,121)             (879)           (1,041)
                                                              ----------        ----------        ----------
Net increase (decrease) in cash and cash
  equivalents ...........................................         36,061            (1,142)          (14,959)
                                                              ----------        ----------        ----------
Cash and cash equivalents at end of year ................     $   44,433        $    8,372        $    9,514
                                                              ==========        ==========        ==========
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.

                                       17

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES AND FINANCIAL STATEMENT INFORMATION

     PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and all majority-owned subsidiaries. The accounts of
all foreign subsidiaries have been included on the basis of fiscal periods ended
three months or less prior to the dates of the consolidated balance sheets. All
significant intercompany accounts and transactions have been eliminated.
Investments in 20 to 50% owned companies and partnerships are reported using the
equity method.

     RECLASSIFICATION: The Company has reclassified the presentation of certain
prior year information to conform with the current presentation format.

     REVENUE RECOGNITION: Revenues from sales are recognized at the time
shipments are made.

     FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign
subsidiaries are translated at year-end rates of exchange and revenues and
expenses are translated at the average rates of exchange for the year. Gains and
losses resulting from translation are accumulated in a separate component of
shareholders' equity and included in comprehensive income. Gains and losses
resulting from foreign currency transactions (transactions denominated in a
currency other than the subsidiary's functional currency) are included in net
income.

     CASH AND CASH EQUIVALENTS: Cash equivalents are defined as short-term
investments having an original maturity of three months or less.

     RECEIVABLES: Certain customer accounts receivable are factored without
recourse with respect to credit risk. Factored accounts receivable at June 27,
1999, and June 28, 1998, were $41.6 million and $49.2 million, respectively. An
allowance for losses is provided for known and potential losses rising from yarn
quality claims and for customers not factored based on a periodic review of
these accounts. Reserves for such losses were $8.7 million at June 27, 1999 and
$8.2 million at June 28, 1998.

     INVENTORIES: The Company utilizes the last-in, first-out ("LIFO") method
for valuing certain inventories representing 52.4% of all inventories at June
27, 1999, and the first-in, first-out ("FIFO") method for all other inventories.
Inventory values computed by the LIFO method are lower than current market
values. Inventories valued at current or replacement cost would have been
approximately $0.7 million and $8.9 million in excess of the LIFO valuation at
June 27, 1999 and June 28, 1998, respectively. Finished goods, work in process,
and raw materials and supplies at June 27, 1999, and June 28, 1998, amounted to
$69.7 million and $77.4 million; $14.6 million and $14.8 million; and $45.6
million and $45.0 million, respectively.

     PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. Depreciation is computed for asset groups primarily utilizing the
straight-line method for financial reporting and accelerated methods for tax
reporting. For financial reporting purposes, asset lives have been assigned to
asset categories over periods ranging between three and forty years.

     OTHER NONCURRENT ASSETS: Other noncurrent assets at June 27, 1999, and June
28, 1998, consist primarily of the cash surrender value of key executive life
insurance policies ($8.1 million and $7.1 million); unamortized bond issue costs
($6.7 million and $7.5 million); and acquisition related assets consisting of
the excess cost over fair value of net assets acquired and other intangibles
($86.3 million and $83.9 million), respectively. Bond issue costs are being
amortized on the straight-line method over the life of the bonds which
approximates the effective interest method. The acquisition related assets are
being amortized on the straight-line method over periods ranging between five
and thirty years. Accumulated amortization at June 27, 1999 and June 28, 1998,
for bond issue costs and acquisition related assets was $19.2 million and $10.2
million, respectively.

     LONG-LIVED ASSETS: Long-lived assets, including the excess cost over fair
value of net assets acquired, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of expected future undiscounted cash flows is less than
the carrying amount of the asset, a loss is recognized for the difference
between fair value and the carrying amount of the asset.

     INCOME TAXES: The Company and its domestic subsidiaries file a
consolidated federal income tax return. Income tax expense is computed on the
basis of transactions entering into pretax operating results. Deferred

                                       18

<PAGE>
income taxes have been provided for the tax effect of temporary differences
between financial statement carrying amounts and the tax basis of existing
assets and liabilities. Income taxes have not been provided for the
undistributed earnings of certain foreign subsidiaries as such earnings are
deemed to be permanently invested.

     EARNINGS PER SHARE: The following table details the computation of basic
and diluted earnings per share:

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                                              JUNE 27, 1999   JUNE 28, 1998   JUNE 29, 1997
------------------------------------------------------------------ --------------- --------------- --------------
<S>                                                                <C>             <C>             <C>
Numerator:
  Income before cumulative effect of accounting change ...........     $59,027         $128,901       $115,665
  Cumulative effect of accounting change .........................       2,768            4,636             --
                                                                       -------         --------       --------
  Net income .....................................................     $56,259         $124,265       $115,665
                                                                       =======         ========       ========
Denominator:
  Denominator for basic earnings per share -- weighted average
   shares ........................................................      60,568           61,331         63,294
  Effect of dilutive securities: stock options ...................           2              525            641
                                                                       -------         --------       --------
  Diluted potential common shares denominator for diluted 
   earnings per share --
   adjusted weighted average shares and
   assumed conversions ...........................................      60,570           61,856         63,935
                                                                       =======         ========       ========
</TABLE>

     STOCK-BASED COMPENSATION: With the adoption of SFAS 123, the Company
elected to continue to measure compensation expense for its stock-based employee
compensation plans using the intrinsic value method prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees." Had the fair value-based
method encouraged by SFAS 123 been applied, compensation expense would have been
recorded on 414,000 options granted in fiscal 1999 (which mostly vest over a two
year period), and 270,500 options granted in fiscal 1997 (which vest over a two
year period). No options were granted in fiscal 1998. Net income in fiscal 1999,
1998 and 1997 restated for the effect would have been $53.0 million or $0.88 per
diluted share, $122.8 million or $1.98 per diluted share and $115.1 million or
$1.80 per diluted share, respectively. The fair value and related compensation
expense of the 1999 and 1997 options were calculated as of the issuance date
using the Black-Scholes model with the following assumptions:

<TABLE>
<CAPTION>
OPTIONS GRANTED                        1999        1997
---------------------------------   ---------   ---------
<S>                                 <C>         <C>
  Expected life (years) .........     10.0        10.0
  Interest rate .................      6.14%       6.18%
  Volatility ....................      47.6%       31.1%
  Dividend yield ................        --        1.72%
</TABLE>

     RECENT ACCOUNTING PRONOUNCEMENTS: In June 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," ("SFAS 130"). SFAS 130 requires the
reporting of comprehensive income and its components in complete, general
purpose financial statements as well as requires certain interim comprehensive
income information be disclosed. Comprehensive income represents the change in
net assets of a business during a period from non-owner sources, which are not
included in net income. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale securities and the foreign currency translation
adjustments, which prior to adoption were reported separately in shareholders'
equity, to be included in other comprehensive income. Foreign currency
translation adjustments presently represent the only component of comprehensive
income for the Company. As of June 29, 1998, the Company adopted SFAS 130,
however, the adoption of this Statement had no impact on the Company's net
income or shareholders' equity. Prior year financial statements have been
reclassified to conform to the requirements of SFAS 130.

     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information,"
("SFAS 131") which the Company adopted in the fourth quarter of fiscal 1999.
SFAS 131 establishes standards of reporting financial information from operating
segments in annual and interim financial statements of public companies, as well
as establishes standards for related disclosures about products and services,
geographic areas and major customers. Operating segments are defined in SFAS 131
as components of an enterprise about which separate financial information is
available to the chief operating decision-maker for purposes of assessing
performance and allocating resources. The required segment

                                       19

<PAGE>
reporting is detailed in Note 9. The adoption of SFAS 131 had no effect on the
consolidated results of operations or financial position.

     In March 1998, the AICPA issued SOP 98-1, "Accounting for the Cost of
Computer Software Developed for or Obtained for Internal-Use," ("SOP 98-1").
This SOP is effective for the Company in the first quarter of fiscal year 2000.
SOP 98-1 requires the capitalization of certain costs incurred after the date of
adoption in connection with developing or obtaining software for internal use.
The Company currently expenses certain of these internal costs when incurred. As
discussed in "Year 2000 Compliance Status" located in Management's Discussion
and Analysis of Financial Condition and Results of Operations, the Company is
actively implementing an enterprise-wide software solution that is substantially
complete at June 27, 1999. Consequently, remaining costs associated with
obtaining and modifying this system are not anticipated to be material to the
Company's results of operations or financial position after the adoption of this
SOP.

     In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities," ("SFAS
133") and in August 1999, the FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities
-- Deferral of the Effective Date of FASB Statement No. 133," which delayed the
effective date of SFAS 133 until the Company's fiscal year 2001. SFAS 133 will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. For derivatives that are hedges, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
asset, liability, or firm commitment through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company does not enter into derivative financial
instruments for trading purposes and it has not yet determined what the effect
of SFAS 133, for derivatives that are considered hedges, will be on its earnings
and financial position.

     USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

2. ACQUISITIONS

     The Company formed Unifi do Brasil, LTDA to acquire the assets of Fairway
Polyester, LTDA., a Brazilian company, for $16.6 million effective April 1,
1999. Also, effective June 1, 1999, UNIFI Technology Group LLC, the newly formed
subsidiary of the Company, acquired the assets of Cimtec Inc. ("Cimtec"), a
manufacturing automation solutions provider, for $10.5 million. Subsequently, a
five-percent interest in the new entity was sold to certain former Cimtec
shareholders. The acquisitions, which are not considered significant to the
Company's consolidated net assets or results of operations, were accounted for
by the purchase method of accounting and both have been included in the
consolidated results of the Company since the respective acquisition dates.

     On November 14, 1997, the Company completed its Agreement and Plan of
Triangular Merger with SI Holding Company and thereby acquired their covered
yarn business for approximately $46.6 million. Additionally,
covenants-not-to-compete were entered into with the principal operating officers
of the acquired company in exchange for $9.2 million, to be paid generally over
the terms of the covenants. The acquisition, which is not considered significant
to the Company's consolidated net assets or results of operations, was accounted
for by the purchase method of accounting and accordingly, the net assets and
operations have been included in the Company's consolidated financial statements
beginning on the date the acquisition was consummated. After allocation of the
purchase price to the net assets acquired, the excess of cost over fair value
has been valued at $31.2 million.

3. CUMULATIVE EFFECT OF ACCOUNTING CHANGE

     In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities," which requires start-up costs, as defined, to be expensed
as incurred. In accordance with this SOP, any previously capitalized start-up
costs are required to be written-off as a cumulative effect of a change in
accounting principle. The Company, upon adoption of this SOP in the first
quarter of fiscal 1999, has written off the unamortized balance of such
previously capitalized start-up costs as of June 29, 1998, of $4.5 million ($2.8
million after tax) or $.04 per diluted share as a cumulative catch-up
adjustment.

                                       20

<PAGE>
     Pursuant to Emerging Issues Task Force No. 97-13 issued in November 1997,
the Company changed its accounting policy in the second quarter of fiscal 1998
regarding a project to install an entirely new computer software system which it
began in fiscal 1995. Previously, substantially all direct external costs
relating to the project were capitalized, including the portion related to
business process reengineering. In accordance with this accounting
pronouncement, the unamortized balance of these reengineering costs as of
September 28, 1997, of $7.5 million ($4.6 million after tax) or $.07 per diluted
share was written off as a cumulative catch-up adjustment in the second quarter
of fiscal 1998.

4. LONG-TERM DEBT AND OTHER LIABILITIES

     A summary of long-term debt follows:

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                                   JUNE 27, 1999     JUNE 28, 1998
-----------------------------------------------------   ---------------   --------------
<S>                                                     <C>               <C>
Bonds payable .......................................       $248,242         $248,038
Revolving credit facility ...........................        217,000          180,000
Sale-leaseback obligation ...........................          3,355            3,444
Other bank debt and other obligations ...............         26,556           43,729
                                                            --------         --------
 Total debt .........................................        495,153          475,211
 Current maturities .................................         16,255           16,234
                                                            --------         --------
 Total long-term debt and other liabilities .........       $478,898         $458,977
                                                            ========         ========
</TABLE>

     On February 5, 1998, the Company issued $250 million of senior, unsecured
debt securities (the "Notes") to qualified institutional buyers. The net
proceeds from the sale were used to repay a portion of the Company's bank credit
facility. The Notes, which were registered with the Securities and Exchange
Commission on April 2, 1998, bear a coupon rate of 6.50% and mature in 2008. The
estimated fair value of the Notes, based on quoted market prices, at June 27,
1999 and June 28, 1998, was approximately $229.7 million and $247.4 million,
respectively.

     The Company entered a $400 million revolving credit facility dated April
15, 1996, with a group of financial institutions that extends through April 15,
2001. The rate of interest charged is adjusted quarterly based on a pricing grid
which is a function of the ratio of the Company's debt to earnings before income
taxes, depreciation, amortization and other non-cash charges. The credit
facility provides the Company the option of borrowing at a spread over the base
rate (as defined) for base rate loans or the Adjusted London Interbank Offered
Rate (LIBOR) for Eurodollar loans. In accordance with the pricing grid, the
Company pays a quarterly facility fee ranging from 0.090%-0.150% of the total
amount available under the revolving credit facility. The weighted average
interest rates for fiscal years 1999 and 1998 were 5.57% and 5.89%,
respectively. At June 27, 1999 and June 28, 1998, the interest rates on the
outstanding balances were 5.29% and 5.92%, respectively. As a result of the
variable nature of the credit facility's interest rate, the fair value of the
Company's revolving credit debt approximates its carrying value.

     The revolving credit facility also provides the Company the option to
borrow funds competitively from the individual lenders, at their discretion,
provided that the sum of the competitive bid loans and the aggregate funds
committed under the revolving credit facility do not exceed the total committed
amount. The revolving credit facility allows the Company to reduce the
outstanding commitment in whole or in part upon satisfactory notice up to an
amount no less than the sum of the aggregate competitive bid loans and the total
committed loans. Any such partial termination is permanent. The Company may also
elect to prepay loans in whole or in part. Amounts paid in accordance with this
provision may be re-borrowed.

     The terms of the revolving credit facility contain, among other provisions,
requirements for maintaining certain net worth and other financial ratios and
specific limits or restrictions on additional indebtedness, liens and merger
activity. Provisions under this agreement are not considered restrictive to
normal operations.

     On May 20, 1997, the Company entered into a sales-leaseback agreement with
a financial institution whereby land, buildings and associated real and personal
property improvements of certain manufacturing facilities were sold to the
financial institution and will be leased by the Company over a sixteen year
period. Sales proceeds aggregated $27.5 million. The terms of the agreement
provide for an early purchase option at the end of year nine. If the agreement
has not been terminated before the end of the lease term, by exercising the
early purchase option or otherwise, the Company is required to purchase the
leased properties at the end of the lease term for

                                       21

<PAGE>
an amount equal to the fair market value as defined in the agreement. This
transaction has been recorded as a direct financing arrangement.

     On June 30, 1997, the Company entered into a Contribution Agreement
associated with the formation of Parkdale America, LLC (see Note 11). As a part
of the Contribution Agreement, ownership of a significant portion of the assets
financed under the sales-leaseback agreement and the related debt ($23.5
million) were assumed by the LLC.

     Payments for the remaining balance of the sales-leaseback agreement are due
semi-annually and are in varying amounts, in accordance with the agreement.
Principal payments required over the next five years are approximately $100
thousand per year. The interest rate implicit in the agreement is 7.84%, and the
fair value of the long-term obligation at June 27, 1999 and June 28, 1998,
approximates its carrying value.

     Other obligations consist of acquisition related liabilities due within the
next four years. Maturities of the obligations over the next four years are
$16.3 million, $4.0 million, $3.1 million and $3.6 million, respectively.

     Interest capitalized during fiscal 1999 and 1998 was $2.0 million and $6.8
million, respectively.

5. INCOME TAXES

     The provision for income taxes before the cumulative effect of accounting
change in fiscal 1999 and 1998 consists of the following:

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                      JUNE 27, 1999     JUNE 28, 1998     JUNE 29, 1997
------------------------------------------ ---------------   ---------------   --------------
<S>                                        <C>               <C>               <C>
Currently payable:
  Federal ................................    $ 20,124          $  43,245         $ 34,235
  State ..................................       2,951              5,704            6,074
  Foreign ................................         653              1,474            1,151
                                              --------          ---------         --------
  Total current ..........................      23,728             50,423           41,460
                                              --------          ---------         --------
Deferred:
  Federal ................................      10,219             23,799           18,929
  State ..................................      (5,718)           (11,715)          (1,994)
  Foreign ................................         140                275              222
                                              --------          ---------         --------
  Total deferred .........................       4,641             12,359           17,157
                                              --------          ---------         --------
Income taxes before extraordinary item and
  cumulative effect of accounting change .    $ 28,369          $  62,782         $ 58,617
                                              ========          =========         ========
</TABLE>

     Income taxes were 32.5%, 32.8% and 33.6% of pretax earnings in fiscal 1999,
1998 and 1997, respectively. A reconciliation of the provision for income taxes
(before cumulative effect of accounting change, where applicable) with the
amounts obtained by applying the federal statutory tax rate is as follows:

<TABLE>
<CAPTION>
                                                     JUNE 27, 1999     JUNE 28, 1998     JUNE 29, 1997
                                                    ---------------   ---------------   --------------
<S>                                                 <C>               <C>               <C>
Federal statutory tax rate ........................       35.0%             35.0%             35.0%
State income taxes net of federal tax benefit .....        3.1               2.9               3.2
State tax credits net of federal tax benefit ......       (5.1)             (4.9)             (1.7)
Foreign taxes less than domestic rate .............       (1.8)             (1.9)             (1.8)
Foreign Sales Corporation tax benefit .............       (0.7)             (0.4)             (0.5)
Research and experimentation credit ...............       (0.1)               --                --
Nondeductible expenses and other ..................        2.1               2.1              (0.6)
                                                          ----              ----              ----
Effective tax rate ................................       32.5%             32.8%             33.6%
                                                          ====              ====              ====
</TABLE>

     The deferred income taxes reflect the net tax effects of temporary
differences between the bases of assets and liabilities for financial reporting
purposes and their bases for income tax purposes. Significant components of the
Company's deferred tax liabilities and assets as of June 27, 1999, and June 28,
1998, were as follows:

                                       22

<PAGE>

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                                 JUNE 27, 1999     JUNE 28, 1998
----------------------------------------------------- ---------------   --------------
<S>                                                   <C>               <C>
Deferred tax liabilities:
 Property, plant and equipment ......................     $78,241           $48,935
 Investments in equity affiliates ...................      20,883            33,506
                                                          -------           -------
Total deferred tax liabilities ......................      99,124            82,441
                                                          -------           -------
Deferred tax assets:
 Accrued liabilities and valuation reserves .........       1,568             2,684
 State tax credits ..................................      17,043            12,379
 Other items ........................................       2,144             4,408
                                                          -------           -------
Total deferred tax assets ...........................      20,755            19,471
                                                          -------           -------
Net deferred tax liabilities ........................     $78,369           $62,970
                                                          =======           =======
</TABLE>

6. COMMON STOCK AND STOCK OPTION PLANS

     Common shares authorized were 500 million in 1999 and 1998. Common shares
outstanding at June 27, 1999, and June 28, 1998, were 59,547,819 and 61,634,386,
respectively.

     The Company has Incentive Stock Option Plans ("ISO") with 1,537,357 shares
reserved at June 27, 1999. There remain 691,000 options available for grant at
year end. The Company also has a Non-Qualified Stock Option Plan ("NQSO") with
1,613,999 shares reserved at June 27, 1999. There remain 37,992 options
available for grant at year end. The transactions for 1999, 1998 and 1997 were
as follows:

<TABLE>
<CAPTION>
                                                           ISO                         NQSO
                                               ---------------------------- ---------------------------
                                                  OPTIONS       WEIGHTED       OPTIONS       WEIGHTED
                                                OUTSTANDING   AVG. $/SHARE   OUTSTANDING   AVG. $/SHARE
                                               ------------- -------------- ------------- -------------
<S>                                            <C>           <C>            <C>           <C>
Fiscal 1997:
Shares under option -- beginning of year .....   1,793,378     $  18.76         693,519     $  25.47
Granted ......................................          --           --         465,500        28.64
Exercised ....................................    (346,787)        9.79              --           --
Canceled .....................................          --           --              --           --
                                                 ---------     --------         -------     --------
Shares under option -- end of year ...........   1,446,591     $  20.91       1,159,019     $  26.75
                                                 ---------     --------       ---------     --------
Fiscal 1998:
Granted ......................................          --     $     --              --     $     --
Exercised ....................................    (504,458)       14.31         (47,852)       25.76
Canceled .....................................          --           --              --           --
                                                 ---------     --------       ---------     --------
Shares under option -- end of year ...........     942,133     $  24.45       1,111,167     $  26.79
                                                 ---------     --------       ---------     --------
Fiscal 1999:
Granted ......................................     309,000     $  16.31         105,000     $  17.47
Exercised ....................................        (833)       16.31         (25,000)       25.65
Canceled .....................................     (12,435)       17.48          (6,668)       31.00
Converted from ISO to NQSO ...................    (391,508)       23.24         391,508        23.24
                                                 ---------     --------       ---------     --------
Shares under option -- end of year ...........     846,357     $  22.15       1,576,007     $  25.29
                                                 =========     ========       =========     ========
</TABLE>

                                       23

<PAGE>

<TABLE>
<CAPTION>
                                                         FISCAL 1999         FISCAL 1998        FISCAL 1997
                                                     ------------------  ------------------  -----------------
<S>                                                  <C>                 <C>                 <C>
ISO:
 Exercisable shares under option -- end of year ....          685,918             942,133          1,446,591
 Option price range ................................  $  10.19-$25.38     $  10.19-$25.38     $  4.80-$25.38
 Weighted average exercise price for options
   exercisable .....................................  $         23.52     $         24.45     $        20.91
 Weighted average remaining life of shares
   under options ...................................             6.4                 6.2                6.0
 Fair value of options granted .....................  $         11.04     $            --     $           --
NQSO:
 Exercisable shares under option -- end of year ....        1,542,077           1,021,001            888,519
 Option price range ................................  $  16.31-$31.00     $  25.38-$31.00     $ 23.88-$31.00
 Weighted average exercise price for options
   exercisable .....................................  $         25.48     $         26.42     $        25.45
 Weighted average remaining life of shares
   under options ...................................             6.0                 6.8                7.8
 Fair value of options granted .....................  $         11.21     $            --     $        13.32
</TABLE>

     Substantially all options granted in fiscal years 1997, 1998 and 1999 vest
over a two year period from the date of grant.

7. RETIREMENT PLANS

     The Company has a qualified profit-sharing plan, which provides benefits
for eligible salaried and hourly employees. The annual contribution to the plan,
which is at the discretion of the Board of Directors, amounted to $11.0 million
in 1999, $13.0 million in 1998 and $17.0 million 1997. The Company leases its
corporate office building from its profit-sharing plan through an independent
trustee.

8. LEASES AND COMMITMENTS

     In addition to the direct financing sales-leaseback obligation described in
Note 4, the Company is obligated under operating leases consisting primarily of
real estate and equipment. Future obligations for minimum rentals under the
leases during fiscal years after June 27, 1999, are $5.6 million in 2000, $4.8
million in 2001, $4.0 million in 2002, $3.1 million in 2003 and $1.9 million in
2004. Rental expense was $7.6 million, $6.8 million and $5.0 million for the
fiscal years 1999, 1998 and 1997, respectively. The Company had committed
approximately $20.2 million for the purchase and up grade of equipment and
facilities at June 27, 1999.

9. BUSINESS SEGMENTS, FOREIGN OPERATIONS AND CONCENTRATIONS OF CREDIT RISK

     The Company and its subsidiaries are engaged predominantly in the
processing of yarns by texturing of synthetic filament polyester and nylon fiber
with sales domestically and internationally, mostly to knitters and weavers for
the apparel, industrial, hosiery, home furnishing, automotive upholstery and
other end-use markets. Additionally, during fiscal 1999, the Company formed a
limited liability company to provide integrated manufacturing, factory
automation and electronic commerce solutions to other domestic manufactures. In
fiscal year 1997, the Company was also directly involved with the spinning of
cotton and cotton blend fibers. These operations were contributed to a limited
liability company on June 30, 1997, of which the Company has a 34% ownership
interest (see Note 11).

     In accordance with SFAS 131, segmented financial information of the
polyester and nylon operating segments, as regularly reported to management for
the purpose of assessing performance and allocating resources, is detailed
below. "All other" represents the results of the limited liability consulting
company in fiscal 1999 and the spun cotton operations in fiscal 1997.

                                       24

<PAGE>

<TABLE>
<CAPTION>
                                                                        ALL
(AMOUNTS IN THOUSANDS)                  POLYESTER       NYLON          OTHER           TOTAL
-------------------------------------- -----------   -----------   -------------   -------------
<S>                                    <C>           <C>           <C>             <C>
Fiscal 1999
 Net sales to external customers .....  $ 805,749     $ 443,850      $   1,561      $ 1,251,160
 Intersegment net sales ..............     17,014         5,159             --           22,173
 Depreciation and amortization .......     36,791        24,038             48           60,877
 Operating income ....................     64,710        47,966            (62)         112,614
 Total assets ........................    709,553       206,661         13,392          929,606
                                        ---------     ---------      ---------      -----------
Fiscal 1998
 Net sales to external customers .....  $ 911,704     $ 465,905      $      --      $ 1,377,609
 Intersegment net sales ..............     28,076         5,089             --           33,165
 Depreciation and amortization .......     46,003        15,030             --           61,033
 Operating income ....................    111,944        70,512             --          182,456
 Total assets ........................    650,335       249,754             60          900,149
                                        ---------     ---------      ---------      -----------
Fiscal 1997
 Net sales to external customers .....  $ 935,972     $ 464,608      $ 304,346      $ 1,704,926
 Intersegment net sales ..............     31,229         5,346              8           36,583
 Depreciation and amortization .......     49,460        11,929         19,277           80,666
 Operating income ....................    106,710        71,642          4,681          183,033
 Total assets ........................    548,533       180,323        182,539          911,395
                                        ---------     ---------      ---------      -----------
</TABLE>

     Segment operating income for fiscal 1999 was reduced $9.7 million and $5.1
million for polyester and nylon, respectively, as a result of the early
retirement and termination charge in the third quarter (see Note 14).

     Certain indirect manufacturing and selling, general and administrative
costs are allocated to the operating segments based on activity drivers relevant
to the respective costs. The primary differences between the segmented financial
information of the operating segments, as reported to management, and the
Company's consolidated reporting relates to fiber costing and capitalization of
property, plant and equipment costs. The domestic portion of the operating
division's fiber costs are valued on a standard cost basis, which approximates
first-in, first-out accounting to better match current fluctuations in fiber
costing. Subsequently, for those components of inventory valued utilizing the
last-in, first-out method (see Note 1), an adjustment is made at the corporate
level. For significant capital projects, capitalization is delayed for
management reporting until the facility is substantially complete, however, for
consolidated financial reporting, expenditures are capitalized into construction
in progress as costs are incurred.

                                       25

<PAGE>

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                                    JUNE 27, 1999     JUNE 28, 1998     JUNE 29, 1997
-------------------------------------------------------- ---------------   ---------------   --------------
<S>                                                      <C>               <C>               <C>
Depreciation and amortization
 Depreciation and amortization on specific assets of
   reportable segments .................................   $    60,877       $    61,033      $    80,666
 Depreciation on unallocated assets ....................        25,626             6,138            7,233
 Amortization of unallocated goodwill ..................         2,343             2,096               --
 Amortization of financing costs .......................         1,030               443               --
                                                           -----------       -----------      -----------
 Consolidated depreciation and amortization ............   $    89,876       $    69,710      $    87,899
                                                           ===========       ===========      ===========
Operating income
 Reportable segments operating income ..................   $   112,614       $   182,456      $   183,033
 Net LIFO to standard adjustment .......................         8,040             2,038            1,997
 Unallocated operating expense projects ................        (1,442)               --               --
                                                           -----------       -----------      -----------
 Consolidated operating income .........................   $   119,212       $   184,494      $   185,030
                                                           ===========       ===========      ===========
Total assets
 Reportable segments total assets ......................   $   929,606       $   900,149      $   911,395
 Cash, receivables and other current assets ............        18,269             2,604            9,027
 Unallocated corporate fixed assets ....................       176,161           188,311           90,852
 Other non-current corporate assets ....................        41,201            34,112            8,529
 Investments in equity affiliates ......................       207,142           212,488               --
 Intersegment notes and receivables ....................        (6,539)           (3,850)          (1,100)
                                                           -----------       -----------      -----------
 Consolidated Assets ...................................   $ 1,365,840       $ 1,333,814      $ 1,018,703
                                                           ===========       ===========      ===========
</TABLE>

     The Company's domestic operations serve customers principally located in
the southeastern United States as well as international customers located
primarily in Canada, Mexico, Europe and South America. During fiscal 1999, 1998
and 1997 the Company did not have sales to any one customer in excess of 10% of
consolidated revenues. Export sales, excluding those to the Company's
international operations, aggregated $153.9 million in 1999, $185.5 million in
1998 and $203.8 million in 1997. The concentration of credit risk for the
Company with respect to trade receivables is mitigated due to the large number
of customers, dispersion across different industries and geographic regions and
its factoring arrangements.

     The Company's foreign operations primarily consist of manufacturing
operations in Ireland, Brazil and Columbia. Net sales, pre-tax operating income
and total assets of the Company's foreign and domestic operations are as
follows:

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)          JUNE 27, 1999   JUNE 28, 1998   JUNE 29, 1997
------------------------------ --------------- --------------- --------------
<S>                            <C>             <C>             <C>
     Foreign operations:
      Net sales ..............   $   130,766     $   136,573    $   140,102
      Pre-tax income .........         6,804          15,107         12,683
      Total assets ...........       173,298         127,586        112,203
     Domestic operations:
      Net sales ..............   $ 1,120,394     $ 1,241,036    $ 1,564,824
      Pre-tax income .........        80,592         176,576        161,599
      Total assets ...........     1,192,542       1,206,228        906,500
</TABLE>

10. DERIVATIVE FINANCIAL INSTRUMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company conducts its business in various foreign currencies. As a
result, it is subject to the transaction exposure that arises from foreign
exchange rate movements between the dates that foreign currency transactions are
recorded (export sales and purchases commitments) and the dates they are
consummated (cash receipts and cash disbursements in foreign currencies). The
Company utilizes some natural hedging to mitigate these transaction exposures.
The Company also enters into foreign currency forward contracts for the purchase
and sale of European, Canadian and other currencies to hedge balance sheet and
income statement currency exposures. These contracts are principally entered
into for the purchase of inventory and equipment and the sale of Company
products into export markets. Counter-parties for these instruments are major
financial institutions.

                                       26

<PAGE>
     Currency forward contracts are entered to hedge exposure for sales in
foreign currencies based on specific sales orders with customers or for
anticipated sales activity for a future time period. Generally, 60-80% of the
sales value of these orders are covered by forward contracts. Maturity dates of
the forward contracts attempt to match anticipated receivable collections. The
Company marks the outstanding accounts receivable and forward contracts to
market at month end and any realized and unrealized gains or losses are recorded
as other income and expense. The Company also enters currency forward contracts
for committed equipment and inventory purchases. Generally 50-75% of the asset
cost is covered by forward contracts. Forward contracts are matched with the
anticipated date of delivery of the assets and gains and losses are recorded as
a component of the asset cost. The outstanding hedge agreements as of June 27,
1999 mature through June 2000.

     The dollar equivalent of these forward currency contracts and their related
fair values are detailed below:

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                      JUNE 27, 1999   JUNE 28, 1998
------------------------------------------ --------------- --------------
<S>                                        <C>             <C>
         Foreign currency purchase contracts:
  Notational amount ......................    $  2,842       $  29,184
  Fair value .............................       3,250          31,418
                                              --------       ---------
  Net unrecognized (gain) loss ...........    $   (408)      $  (2,234)
                                              ========       =========
         Foreign currency sales contracts:
  Notational amount ......................    $ 28,024       $  28,446
  Fair value .............................      27,826          28,646
                                              --------       ---------
  Net unrecognized (gain) loss ...........    $   (198)      $     200
                                              ========       =========
</TABLE>

     The following methods were used by the Company in estimating its fair value
disclosures for financial instruments:

     CASH AND CASH EQUIVALENTS, TRADE RECEIVABLES AND TRADE PAYABLES -- The
carrying amounts approximate fair value because of the short maturity of these
instruments.

     LONG-TERM DEBT -- The fair value of the Company's borrowings is estimated
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt of the same remaining maturities
(see Note 4).

     FOREIGN CURRENCY CONTRACTS -- The fair value is based on quotes obtained
from brokers or reference to publicly available market information.

11. INVESTMENT IN UNCONSOLIDATED AFFILIATES

     Investments in affiliates consist of a 34% interest in Parkdale America,
LLC (the "LLC") and a 41.61% interest in Micell Technologies, Inc. ("Micell").
The LLC was created on June 30, 1997, when the Company and Parkdale Mills, Inc.
("Parkdale") of Gastonia, North Carolina entered into a Contribution Agreement
(the "Agreement") that set forth the terms and conditions whereby each entity's
open-end and air jet spun cotton yarn assets and certain long-term debt
obligations were contributed to the LLC. In accordance with the Agreement, each
entity's inventory, owned real and tangible personal property and improvements
thereon and the Company's leased real property associated with the operations
were contributed to the LLC. Additionally, the Company contributed $32.9 million
in cash to the LLC on June 30, 1997, and is required to contribute $10.0 million
in cash on June 30, 1998, and $10.0 million on June 30, 1999, whereas Parkdale
contributed cash of $51.6 million on June 30, 1997. The LLC assumed certain
long-term debt obligations of the Company and Parkdale in the amounts of $23.5
million and $46.0 million, respectively. In exchange for the assets contributed
to the LLC and the liabilities assumed by the LLC, the Company received a 34%
interest in the LLC and Parkdale received a 66% interest in the LLC. The excess
of the Company's investment over its equity in the underlying net assets of the
LLC approximated $67.9 million at June 30, 1997 and is being amortized on a
straight-line basis over 30 years as a component of the equity in earnings of
unconsolidated affiliates.

                                       27

<PAGE>
     Condensed balance sheet and income statement information as of June 27,
1999 and June 28, 1998 and for the fiscal year ended June 27, 1999 and June 28,
1998, of the combined LLC and Micell is as follows:

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                        JUNE 27, 1999     JUNE 28, 1998
-------------------------------------------- ---------------   --------------
<S>                                          <C>               <C>
        Current assets .....................    $ 282,004         $ 260,358
        Noncurrent assets ..................      256,513           264,194
        Current liabilities ................      125,730           134,110
        Shareholders' equity and capital accounts 390,935           390,442

        Net sales ..........................    $ 594,445         $ 652,097
        Gross profit .......................       57,915           108,649
        Income from operations .............       27,653            80,546
        Net income .........................       21,262            75,788
</TABLE>

     The LLC is organized as a partnership for tax purposes. Taxable income is
passed through the LLC to the shareholders in accordance with the Operating
Agreement of the LLC. For the fiscal year ended June 27, 1999, distributions
received by the Company from the LLC aggregated $9.5 million.

12. SUPPLEMENTAL CASH FLOW INFORMATION

     Supplemental cash flow information is summarized below:

<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)                                    JUNE 27, 1999   JUNE 28, 1998   JUNE 29, 1997
-------------------------------------------------------- --------------- --------------- --------------
<S>                                                      <C>             <C>             <C>
     Cash payments for:
      Interest, net of amounts capitalized .............     $ 16,922        $ 16,521       $ 12,064
      Income taxes, net of refunds .....................        8,225          47,488         45,726
     Stock issued for SI Holdings Company acquisition ..           --          21,000             --
</TABLE>

13. MINORITY INTEREST

     Effective May 29, 1998, the Company formed a limited liability company (the
"Partnership") with Burlington Industries, Inc. ("Burlington") to manufacture
and market natural textured polyester yarns. The Company has an 85.42% interest
in the Partnership and Burlington has 14.58%. However, for the first five years
of the Partnership, Burlington is entitled to the first $9.4 million of
earnings. Subsequent to this five year period, earnings are to be allocated
based on ownership percentages. The Partnership's assets, liabilities and
earnings are consolidated with those of the Company and Burlington's interest in
the Partnership is included in the Company's financial statements as minority
interest. Burlington's share of the partnership earnings in fiscal 1999 and 1998
amounted to $9.4 million and $0.7 million, respectively.

14. EARLY RETIREMENT AND TERMINATION CHARGE

     During the third quarter of fiscal 1999, the Company recognized a $14.8
million charge associated with the early retirement and termination of 114
salaried employees. The charge was recorded as a component of selling, general
and administrative expenses in the amount of $8.2 million and cost of goods sold
in the amount of $6.6 million. Substantially all employees were terminated
effective March 31, 1999, with cash payments expected to be spread over a period
not to exceed three years. At June 27, 1999 there remained a reserve of $11.0
million that is expected to equal the future cash expenditures to such
terminated employees.

                                       28

<PAGE>
15. QUARTERLY RESULTS (UNAUDITED)

     Quarterly financial data for the years ended June 28, 1998, and June 27,
1999, is presented below:

<TABLE>
<CAPTION>
                                                    FIRST QUARTER   SECOND QUARTER   THIRD QUARTER   FOURTH QUARTER
(AMOUNT IN THOUSANDS, EXCEPT PER SHARE DATA)          (13 WEEKS)      (13 WEEKS)       (13 WEEKS)      (13 WEEKS)
-------------------------------------------------- --------------- ---------------- --------------- ---------------
<S>                                                <C>             <C>              <C>             <C>
 1998:
 Net sales .......................................    $ 329,842        $ 343,096       $ 345,986       $ 358,685
 Gross profit ....................................       49,518           59,005          58,134          61,114
 Income before cumulative effect of accounting
  change .........................................       27,525           33,019          33,286          35,071
 Cumulative effect of accounting change ..........                         4,636
 Net income ......................................       27,525           28,383          33,286          35,071
 Income before cumulative effect of accounting
  change (basic) .................................          .45              .54             .54             .57
 Income before cumulative effect of accounting
  change (diluted) ...............................          .45              .54             .54             .57
 Earnings per share (basic) ......................          .45              .46             .54             .57
 Earnings per share (diluted) ....................          .45              .46             .54             .57

 1999:
 Net sales .......................................    $ 328,815        $ 319,854       $ 294,805       $ 307,686
 Gross profit ....................................       47,477           50,460          29,970          46,643
 Income before cumulative effect of accounting
  change .........................................       21,030           22,498           1,093          14,406
 Cumulative effect of accounting change ..........        2,768
 Net income ......................................       18,262           22,498           1,093          14,406
 Income before cumulative effect of accounting
  change (basic) .................................          .34              .37             .02             .24
 Income before cumulative effect of accounting
  change (diluted) ...............................          .30              .37             .02             .24
 Earnings per share (basic) ......................          .34              .37             .02             .24
 Earnings per share (diluted) ....................          .30              .37             .02             .24
</TABLE>


I
TEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     The Company has not changed accountants nor are there any disagreements
with its accountants, Ernst & Young LLP, on accounting and financial disclosure
that should be reported pursuant to Item 304 of Regulation S-K.


                                   PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT AND COMPLIANCE WITH
SECTION 16(A) OF THE EXCHANGE ACT

(a) Directors of Registrant: The information included under the headings
"Election of Directors", "Nominees for Election as Directors", "Security Holding
of Directors, Nominees, and Executive Officers", "Directors' Compensation",
"Committees of the Board of Directors", and compliance with Section 16(a) of The
Securities and Exchange Act, beginning on Page 3 and ending on Page 6 and on
page 17 of the definitive proxy statement filed with the Commission since the
close of the Registrant's fiscal year ended June 27, 1999, and within 120 days
after the close of said fiscal year, are incorporated herein by reference.

                                       29

<PAGE>
(b) Identification of Executive Officers:

CHAIRMAN OF THE BOARD OF DIRECTORS

     G. ALLEN MEBANE, IV Mr. Mebane is 69 and has been an Executive Officer and
member of the Board of directors of the Company since 1971, serving as President
and Chief Executive Officer of the Company, relinquishing these positions in
1980 and 1985, respectively. He was the Chairman of the Board of Directors for
many years, Chairman of the Executive Committee from 1974 to 1995, and was
elected as one of the three members of the Office of Chairman on August 8, 1991.
On October 22, 1992, Mr. Mebane was again elected as Chairman of the Board of
Directors and on January 20, 1999 resumed the positions of Chief Executive
Officer and Chairman of the Executive Committee.

PRESIDENT AND CHIEF OPERATING OFFICER

     BRIAN R. PARKE Mr. Parke is 51 and has been the Manager or President of the
Company's Irish subsidiary (Unifi Textured Yarns Europe) from its acquisition by
the Company in 1984 to January 20, 1999, when he was elected President and Chief
Operating Officer of the Company. Additionally, Mr. Parke has been a Vice
President of the Company since October 21, 1993 and on July 22, 1999 was elected
to the Company's Board of Directors.

EXECUTIVE VICE PRESIDENTS

     JERRY W. ELLER Mr. Eller is 58 and has been a Vice President or Executive
Vice President since 1975. He has been a member of the Board of Directors since
1985 and is a member of the Executive Committee.

     G. ALFRED WEBSTER Mr. Webster is 51 and has been a Vice President or
Executive Vice President since 1979. He has been a member of the Board of
Directors since 1986 and is a member of the Executive Committee.

SENIOR VICE PRESIDENTS

     WILLIS C. MOORE, III Mr. Moore is 46 and had been a Partner with Ernst &
Young LLP, or its predecessors from 1975 until December 1994, when he became
employed by the Company as its Chief Financial Officer. Mr. Moore was elected
as a Vice President of the Company on October 19, 1995, and is currently
serving as a Senior Vice President and Chief Financial Officer.

     JAMES W. BROWN, JR. Mr. Brown is 47 and was an employee of Macfield, Inc.
from 1973 until the Macfield merger on August 8, 1991, when he became an
employee of the Company. He became a Vice President of the Company on October
22, 1992 and a Senior Vice President on January 20, 1999. He is currently
serving as President of the Nylon/Covered Yarn Division of the Company.

     STEWART O. LITTLE Mr. Little is 46 and has been a Vice President of the
Company since October 24, 1985 and a Senior Vice President since January 20,
1999. He is currently serving as President of the Polyester Division of the
Company.

     These officers, unless otherwise noted, were elected by the Board of
Directors of the Registrant at the Annual Meeting of the Board of Directors held
on October 22, 1998. Each officer was elected to serve until the next Annual
Meeting of the Board of Directors or until his successor was elected and
qualified.

(c) Family Relationship: Mr. Mebane, Chairman of the Board, and Mr. C. Clifford
Frazier, Jr., the Secretary of the Registrant, are first cousins. Except for
this relationship, there is no family relation between any of the Officers.


ITEM 11. EXECUTIVE COMPENSATION

     The information set forth under the headings "Compensation and Option
Committees Interlocks and Insider Participation in Compensation Decisions",
"Executive Officers and Their Compensation", "Employment and Termination
Agreements", "Options Granted", "Option Exercises and Option/SAR Values", the
"Report of the Compensation Committee on Executive Compensation", and the
"Performance Graph-Shareholder Return on Common Stock" beginning on Page 6 and
ending on Page 13 of the Company's definitive proxy statement filed with the
Commission since the close of the Registrant's fiscal year ended June 27, 1999,
and within 120 days after the close of said fiscal year, are incorporated herein
by reference.

     For additional information regarding executive compensation reference is
made to Exhibits (101), (10m), (10n), (10p), (10q), (10r) and (10s) of this Form
10-K.

                                       30

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Security ownership of certain beneficial owners and management is the same
as reported under the heading "Information Relating to Principal Security
Holders" on Page 2 of the definitive proxy statement and under the heading
"Security Holding of Directors, Nominees and Executive Officers" on Page 5 and
Page 6 of the definitive proxy statement filed with the Commission pursuant to
Regulation 14 (a) within 120 days after the close of the fiscal year ended June
27, 1999, which are hereby incorporated by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information included under the heading "Compensation and Option
Committees Interlocks and Insider Participation In Compensation Decisions", on
Page 6 and Page 7 of the definitive proxy statement filed with the Commission
since the close of the Registrant's fiscal year ended June 27, 1999, and within
120 days after the close of said fiscal year, is incorporated herein by
reference.

                                       31

<PAGE>

                                    PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) 1. Financial Statements

     The following financial statements and report of independent auditors are
filed as a part of this Report.

<TABLE>
<CAPTION>
                                                                                          PAGES
                                                                                         ------
<S>  <C>                                                                                 <C>
     Report of Independent Auditors ....................................................   13
     Consolidated Balance Sheets at June 27, 1999 and June 28, 1998 ....................   14
     Consolidated Statements of Income for the Years Ended June 27, 1999, June 28, 1998,
     and June 29, 1997 .................................................................   15
     Consolidated Statements of Changes in Shareholders' Equity and Comprehensive
     Income for the Years Ended June 27, 1999, June 28, 1998 and June 29, 1997 .........   16
     Consolidated Statements of Cash Flows for the Years Ended June 27, 1999, June 28,
     1998 and June 29, 1997 ............................................................   17
     Notes to Consolidated Financial Statements ........................................   18
</TABLE>

     2. Financial Statement Schedules

<TABLE>
<S>  <C>                                                <C>
     Schedules for the three years ended June 27, 1999:
                                                        
     II -- Valuation and Qualifying Accounts ..........  36
</TABLE>

     Schedules other than those above are omitted because they are not required,
are not applicable, or the required information is given in the consolidated
financial statements or notes thereto.

     Individual financial statements of the Registrant have been omitted because
it is primarily an operating company and all subsidiaries included in the
consolidated financial statements being filed, in the aggregate, do not have
minority equity interest and/or indebtedness to any person other than the
Registrant or its consolidated subsidiaries in amounts which together exceed 5%
of the total assets as shown by the most recent year end consolidated balance
sheet.

     With the exception of the information herein expressly incorporated by
reference, the 1999 Proxy Statement is not deemed filed as a part of this Annual
Report on Form 10-K.

     3. Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO.     DESCRIPTION
-------------   ----------------------------------------------------------------
<S>             <C>
     (2a-1)     Contribution Agreement, dated June 30, 1997, by and between
                Parkdale Mills, Inc., Unifi, Inc., UNIFI Manufacturing, Inc.,
                and Parkdale America, LLC, filed as Exhibit (2) to Unifi's Form
                8-K filed with the Commission on July 15, 1997, which is
                incorporated herein by reference.
       (3a)     Restated Certificate of Incorporation of Unifi, Inc., dated July
                21, 1994, (filed as Exhibit (3a) with the Company's Form 10-K
                for the fiscal year ended June 26, 1994), which is incorporated
                herein by reference.
       (3b)     Restated by-laws of Unifi, Inc., (effective July 22, 1999),
                filed herewith.
       (4a)     Specimen Certificate of Unifi, Inc.'s common stock, filed as
                Exhibit 4(a) to the Registration Statement on Form S-1,
                (Registration No. 2-45405), which is incorporated herein by
                reference.
       (4b)     Unifi, Inc.'s Registration Statement for the 6 1/2% Notes due
                2008, Series B, filed on Form S-4 (Registration No. 333-49243),
                which is incorporated herein by reference.
       (4c)     Description of Unifi, Inc.'s common stock, filed on November 5,
                1998, as Item 5. (Other Events) on Form 8-K, which is
                incorporated herein by reference.
      (10a)     *Unifi, Inc. 1982 Incentive Stock Option Plan, as amended, filed
                as Exhibit 28.2 to the Registration Statement on Form S-8,
                (Registration No. 33-23201), which is incorporated herein by
                reference.
      (10b)     *Unifi, Inc. 1987 Non-Qualified Stock Option Plan, as amended,
                filed as Exhibit 28.3 to the Registration Statement on Form S-8,
                (Registration No. 33-23201), which is incorporated herein by
                reference.
</TABLE>

                                       32

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.     DESCRIPTION
-------------   ----------------------------------------------------------------
     <S>             <C>
      (10c)     *Unifi, Inc. 1992 Incentive Stock Option Plan, effective July
                16, 1992, (filed as Exhibit (10c) with the Company's Form 10-K
                for the fiscal year ended June 27, 1993), and included as
                Exhibit 99.2 to the Registration Statement on Form S-8
                (Registration No. 33-53799), which are incorporated herein by
                reference.
      (10d)     *Unifi, Inc.'s Registration Statement for selling Shareholders,
                who are Directors and Officers of the Company, who acquired the
                shares as stock bonuses from the Company, filed on Form S-3
                (Registration No. 33-23201), which is incorporated herein by
                reference.
      (10e)     Unifi Spun Yarns, Inc.'s 1992 Employee Stock Option Plan filed
                as Exhibit 99.3 to the Registration Statement on Form S-8
                (Registration No. 33-53799), which is incorporated herein by
                reference.
      (10f)     *Unifi, Inc.'s 1996 Incentive Stock Option Plan (filed as
                Exhibit 10(f) with the Company's Form 10-K for the fiscal year
                ended June 30, 1996) which is incorporated herein by reference.
      (10g)     *Unifi, Inc.'s 1996 Non-Qualified Stock Option Plan (filed as
                Exhibit 10(g) with the Company's Form 10-K for the fiscal year
                ended June 30, 1996) which is incorporated herein by reference.
      (10h)     Lease Agreement, dated March 2, 1987, between NationsBank,
                Trustee under the Unifi, Inc. Profit Sharing Plan and Trust,
                Wachovia Bank and Trust Co., N.A., Independent Fiduciary, and
                Unifi, Inc., (filed as Exhibit (10d) with the Company's Form
                10-K for the fiscal year ended June 27, 1987), which is
                incorporated herein by reference.
      (10i)     Factoring Contract and Security Agreement and a Letter Amendment
                thereto, all dated as of May 25, 1994, by and between Unifi,
                Inc. and the CIT Group/DCC, Inc., (filed as Exhibit (10g) with
                the Company's Form 10-K for the fiscal year ended June 26,
                1994), which are incorporated herein by reference.
      (10j)     Factoring Contract and Security Agreement, dated as of May 2,
                1988, between Macfield, Inc., and First Factors Corp., and First
                Amendment thereto, dated September 28, 1990, (both filed as
                Exhibit (10g) with the Company's Form 10-K for the fiscal year
                ended June 30, 1991), and Second Amendment to the Factoring
                Contract and Security Agreement, dated March 1, 1992, (filed as
                Exhibit (10g) with the Company's Form 10-K for the fiscal year
                ended June 27, 1992), and Letter Agreement dated August 31, 1993
                and Amendment to Factoring Contract and Security Agreement dated
                January 5, 1994, (filed as Exhibit (10h) with the Company's Form
                10-K for the fiscal year ended June 26, 1994), which are
                incorporated herein by reference.
      (10k)     Factoring Agreement dated August 23, 1995, and a Letter
                Amendment thereto dated October 16, 1995, by and between Unifi,
                Inc. and Republic Factors Corp., (filed as Exhibit 10(k) with
                the Company's Form 10-K for the fiscal year ended June 30, 1996)
                which is incorporated herein by reference.
      (10l)     *Employment Agreement between Unifi, Inc. and G. Allen Mebane,
                dated July 19, 1990, (filed as Exhibit (10h) with the Company's
                Form 10-K for the fiscal year ended June 30, 1991), which is
                incorporated herein by reference.
      (10m)     *Employment Agreement between Unifi, Inc. and William T.
                Kretzer, dated July 19, 1990, (filed as Exhibit (10i) with the
                Company's Form 10-K for the fiscal year ended June 30, 1991),
                and Amendment to Employment Agreement between Unifi, Inc. and
                William T. Kretzer, dated October 22, 1992 (filed as Exhibit
                (10j) with the Company's Form 10-K for fiscal year ended June
                27, 1993), which are incorporated herein by reference, and
                Termination Agreement effective the 1st day of February, 1999,
                which is filed herewith.
      (10n)     *Severance Compensation Agreement between Unifi, Inc. and
                William T. Kretzer, dated July 20, 1996, expiring on July 19,
                1999 (similar agreements were signed with G. Allen Mebane,
                Robert A. Ward, Jerry W. Eller and G. Alfred Webster)(filed as
                Exhibit (10n) with the Company's Form 10-K for fiscal year ended
                June 30, 1996), which is incorporated herein by reference.
      (10o)     Credit Agreement, dated April 15, 1996, by and between Unifi,
                Inc. and The Several Lenders from Time to Time Party thereto and
                NationsBank, N.A. as agent, (filed as Exhibit (10o) with the
                Company's Form 10-K for the fiscal year ended June 30, 1996)
                which is incorporated herein by reference.
      (10p)     *Deferral Agreement, dated November 21, 1997, by and between
                Unifi, Inc. and William T. Kretzer (filed as Exhibit (10p) with
                the Company's Form 10-K for the fiscal year ended June 28,
                1998), which incorporated herein by reference. Note: Said
                Deferral Agreement was amended by the Termination Agreement
                filed as Exhibit (10m) to this Form 10-K.
</TABLE>

                                       33

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO.     DESCRIPTION
-------------   ----------------------------------------------------------------
<S>             <C>
     (10q)      *Severance Compensation Agreement between Unifi, Inc. and Willis
                C. Moore, III, dated July 16, 1998, expiring on July 20, 2001
                (similar agreements were signed with James W. Brown, Jr.,
                Kenneth L. Huggins, Stewart Q. Little, Ralph D. Mayes and
                Raymond W. Maynard)(filed as Exhibit (10q) with the Company's
                Form 10-K for the fiscal year ended June 28, 1998).
     (10r)      *Severance Compensation Agreement between Unifi, Inc. and Brian
                R. Parke, dated October 1, 1998, expiring on July 20, 2001,
                filed herewith.
     (10s)      *Agreement, effective February 1, 1999, by and between Unifi,
                Inc. and Jerry W. Eller, filed herewith.
      (21)      Subsidiaries of Unifi, Inc.
      (23)      Consent of Ernst & Young LLP.
      (27)      Financial Data Schedule.
       (b)      Reports on Form 8-K.
                None
</TABLE>

---------
* NOTE: These Exhibits are management contracts or compensatory plans or
  arrangements required to be filed as an exhibit to this Form 10-K pursuant to
  Item 14(c) of this report.

                                       34

<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                      UNIFI, INC.

September 21, 1999             By: /s/            G. ALLEN MEBANE, IV
          --                            ---------------------------------------
                                                  G. ALLEN MEBANE, IV
                                                  CHAIRMAN OF THE BOARD
                                                (CHIEF EXECUTIVE OFFICER)


September 21, 1999             By: /s/            WILLIS C. MOORE, III
          --                            ---------------------------------------
                                                  WILLIS C. MOORE, III
                                                  SENIOR VICE PRESIDENT
                                                (CHIEF FINANCIAL OFFICER)

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

<TABLE>
<S>                                    <C>                                  <C>
/s/   G. ALLEN MEBANE, IV              Chairman, Chief Executive Officer    September 21, 1999
----------------------------------     and Director                                   --
      G. ALLEN MEBANE, IV

/s/   BRIAN R. PARKE                   President, Chief Operating Officer   September 21, 1999
----------------------------------     and Director                                   --
      BRIAN R. PARKE

/s/   ROBERT A. WARD                   Senior Advisor to President and      September 21, 1999
----------------------------------     Director                                       --
      ROBERT A. WARD

/s/   JERRY W. ELLER                   Executive Vice President and         September 21, 1999
----------------------------------     Director                                       --
      JERRY W. ELLER

/s/   G. ALFRED WEBSTER                Executive Vice President and         September 21, 1999
----------------------------------     Director                                       --
      G. ALFRED WEBSTER

/s/   CHARLES R. CARTER                Director                             September 21, 1999
----------------------------------                                                    --
      CHARLES R. CARTER

/s/   KENNETH G. LANGONE               Director                             September 21, 1999
----------------------------------                                                    --
      KENNETH G. LANGONE

/s/   DONALD F. ORR                    Director                             September 21, 1999
----------------------------------                                                    --
      DONALD F. ORR

/s/   J.B. DAVIS                       Director                             September 21, 1999
----------------------------------                                                    --
      J.B. DAVIS

/s/   R. WILEY BOURNE, JR.             Director                             September 21, 1999
----------------------------------                                                    --
      R. WILEY BOURNE, JR.

                                       Director                             September 21, 1999
----------------------------------                                                    --
      SIR RICHARD GREENBURY
</TABLE>

                                       35

<PAGE>
(d) Schedule II -- Valuation and Qualifying Accounts
UNIFI, INC. AND SUBSIDIARIES
JUNE 27, 1999
(IN THOUSANDS)

<TABLE>
<CAPTION>
           COLUMN A              COLUMN B             COLUMN C                COLUMN D         COLUMN E
----------------------------- -------------- --------------------------- ------------------ --------------
                                                      ADDITIONS
                                             ---------------------------
                                                           CHARGED TO
                                BALANCE AT    CHARGED TO       OTHER
                               BEGINNING OF    COSTS AND   ACCOUNTS --     DEDUCTIONS --      BALANCE AT
         DESCRIPTION              PERIOD       EXPENSES      DESCRIBE         DESCRIBE       END OF PERIOD
----------------------------- -------------- ------------ -------------- ------------------ --------------
<S>                           <C>            <C>          <C>            <C>                <C>
  Allowance for doubtful
    accounts:
  Year ended June 27, 1999 ..     $8,225        $6,241      $    451(a)      $  (6,168)(b)      $8,749
  Year ended June 28, 1998 ..      5,462         3,917         3,665(a)         (4,819)(b)       8,225
  Year ended June 29, 1997 ..      6,595         4,390            --            (5,523)(b)       5,462
</TABLE>

(A) INCLUDES ACQUISITION RELATED ADJUSTMENTS TO WRITE-DOWN ACQUIRED ACCOUNTS
RECEIVABLE TO FAIR MARKET VALUE.

(B) INCLUDES UNCOLLECTIBLE ACCOUNTS WRITTEN OFF AND CUSTOMER CLAIMS PAID, NET OF
CERTAIN RECOVERIES.

                                       36




(Exhibit 3b)

         RESTATED BY-LAWS
         OF
         UNIFI, INC.

         (Effective July 22,1999)
------------------------------------------------------------------

                                TABLE OF CONTENTS


                                    ARTICLE I
                                  SHAREHOLDERS


Section 1.01 -    Annual Meeting....................................1
Section 1.02 -    Special meetings..................................1
Section 1.03 -    Notice of Meetings of Shareholders................1
Section 1.04 -    Waivers of Notice.................................3
Section 1.05 -    Quorum............................................3
Section 1.06 -    Fixing Record Date................................3
Section 1.07 -    List of Shareholders at Meeting...................4
Section 1.08 -    Proxies...........................................4
Section 1.09 -    Selection of Duties of Inspectors.................7
Section 1.10 -    Qualification of Voters...........................8
Section 1.11 -    Vote of Shareholders.............................10
Section 1.12 -    Written Consent of Shareholders..................10



                                   ARTICLE II
                                    DIRECTORS


Section 2.01 -    Management of Business;
                  Qualification of Directors.......................11
Section 2.02 -    Number of Directors..............................12
Section 2.03 -    Classification and Election......................12
Section 2.04 -    Newly Created Directorships and Vacancies........12
Section 2.05(a) - Resignations.....................................13
Section 2.05(b) - Removal of Directors.............................14
Section 2.06 -    Quorum of Directors..............................14
Section 2.07 -    Annual Meetings..................................14
Section 2.08 -    Regular Meetings.................................15
Section 2.09 -    Special Meetings.................................15
Section 2.10 -    Compensation.....................................15
Section 2.11 -    Committees.......................................15

                                       -i-

<PAGE>

Section 2.12 -    Interested Directors.............................16
Section 2.13 -    Loans to Directors...............................17
Section 2.14 -    Consent to Action................................17



                                   ARTICLE III
                                    OFFICERS


Section 3.01 -    Election or Appointment;
                  Number...........................................18
Section
 3.02 -    Term.............................................18
Section 3.03 -    Removal..........................................19
Section 3.04 -    Authority........................................19
Section 3.05 -    Voting Securities Owned by the Corporation.......19



                                   ARTICLE IV
                                  CAPITAL STOCK


Section 4.01 -    Stock Certificates...............................20
Section 4.02 -    Transfers........................................21
Section 4.03 -    Registered Holders...............................21
Section 4.04 -    New Certificates.................................21



                                    ARTICLE V
                        FINANCIAL NOTICES TO SHAREHOLDERS


Section 5.01 -    Dividends........................................22
Section 5.02 -    Share Distribution and Changes...................22
Section 5.03 -    Cancellation of Reacquired Shares................23
Section 5.04 -    Reduction of Stated Capital......................24
Section 5.05 -    Application of Capital Surplus
                  to Elimination of a Deficit......................24
Section 5.06 -    Conversion of Shares.............................24


                                      -ii-

<PAGE>

                                   ARTICLE VI
                                 INDEMNIFICATION


Section 6.01 -    Right to Indemnification.........................25

Section 6.02 -    Right of Claimant to Bring Suit..................27

Section 6.03 -    Nonexclusiveness.................................28
Section 6.04 -    Insurance for Indemnification
                  of Directors and Officers........................29



                                   ARTICLE VII
                                  MISCELLANEOUS


Section 7.01 -    Offices..........................................30
Section 7.02 -    Seal.............................................30
Section 7.03 -    Checks...........................................30
Section 7.04 -    Fiscal Year......................................30
Section 7.05 -    Books and Records................................30
Section 7.06 -    Duty of Directors and Officers...................31
Section 7.07 -    When Notice or Lapse of Time Unnecessary; Notices
                  Dispensed With When Delivery is Prohibited.......31
Section 7.08 -    Entire Board.....................................32
Section 7.09 -    Amendment of By-Laws.............................32
Section 7.10 -    Nonapplication of North Carolina
                  Shareholder Protection Act.......................33
Section 7.11 -    Section Headings.................................33


                                      -iii-

<PAGE>

         RESTATED BY-LAWS
         OF
         UNIFI, INC.

         ARTICLE I
         Shareholders

Section 1.01. Annual Meeting. The Annual Meeting of Shareholders for the
election of Directors and the transaction of such other business as may come
before it shall be held on such date in each calendar year, not later than the
one hundred fiftieth (150) day after the close of the Corporation's preceding
fiscal year, and at such place as shall be fixed by the President and stated in
the notice or waiver of notice of the meeting. Section 1.02. Special Meetings.
Special meetings of the shareholders, for any purpose of purposes, may be called
at any time by any Director, the President, any Vice President, the Treasurer or
the Secretary or by resolution of the Board of Directors. Special meetings of
the shareholders shall be held at such place as shall be fixed by the person or
persons calling the meeting and stated in the notice or waiver of notice of the
meeting.

Section 1.03. Notice of Meetings of Shareholders. Whenever shareholders are
required or permitted to take any action at a meeting, written notice shall
state the place, date and hour of the meeting and, unless it is the Annual
Meeting, indicate that it is being issued by or at the direction of the person
or persons calling the meeting. Notice of a special meeting shall also state the
purpose or purposes for which the meeting is called. If, at any meeting, action
is proposed to be taken which would, if taken, entitle shareholders fulfilling
the requirements of Section 623 of the Business Corporation Law to receive
payment for their shares, the notice of such meeting shall include a statement
of that purpose to that effect. A copy of the notice of any meeting shall be
given, personally or by mail, not less than ten nor more than fifty days before
the date of the meeting, to each shareholder entitled to vote at such meeting.
If mailed, such notice is given when deposited in the United States mail, with
postage thereon prepaid, directed to the shareholder at his address as it
appears on the record of shareholders, or, if he shall have filed with the
Secretary of the Corporation a written request that notices to him be mailed to
some other address, then directed to him at such other address. When a meeting
is adjourned to another time or place, it shall not be necessary to give any
notice of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken, and at
the adjourned meeting any business may be transacted that might have been
transacted on the original date of the meeting. However, if after the
adjournment, the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder of
record on the new record date entitled to notice under the next preceding
paragraph.

Section 1.04. Waivers of Notice. Notice of meeting need not be given to any
shareholder who submits a signed Waiver of Notice, in person or by proxy,
whether before or after the meeting.


<PAGE>

The attendance of any shareholder at a meeting, in person or by proxy, without
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a Waiver of Notice by him.

Section 1.05. Quorum. The holders of a majority of the shares entitled to vote
thereat shall constitute a quorum at a meeting of shareholders for the
transaction of any business, provided that when a specified item of business is
required to be voted on by a class or series, voting as a class, the holders of
a majority of the shares of such class or series shall constitute a quorum for
the transaction of such specified item of business.

When a quorum is once present to organize a meeting, it is not broken by the
subsequent withdrawal of any shareholders.

The shareholders present may adjourn the meeting despite the absence of a quorum
and at andy such adjourned meeting at which the requisite amount of voting stock
shall be represented, any business may be transacted which might have been
transacted at the meeting as originally noticed.

Section 1.06. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders. Such date shall
not be more than fifty nor less than ten days before the date of such meeting,
nor more than fifty days prior to any other action. When a determination of
shareholders of record entitled to notice of or to vote at any meeting or
shareholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date under this Section for the adjourned meeting.

Section 1.07. List of Shareholders at Meeting. A list of shareholders as of the
record date, certified by the corporate officer responsible for its preparation
or by a transfer agent, shall be produced at any meeting of shareholders upon
the request thereat or prior thereto of any shareholder. If the right to vote at
any meeting is challenged, the inspectors of election, or person presiding
thereat, shall require such list of shareholders to be produced as evidence of
the right of the persons challenged to vote at such meeting, and all persons who
appear from such list to be shareholders entitled to vote thereat may vote at
such meeting.

Section 1.08. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.

Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy
shall be valid after the expiration of eleven months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided in this
Section.

The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless, before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Corporate Officer responsible
for maintaining the list of shareholders.

Except when other provision shall have been made by written agreement between
the parties, the record holder of shares which are held by a pledgee as security
or which belong to another, upon demand therefor and payment of necessary
expenses thereof, shall issue to the pledgor or to such owner of such shares a
proxy to vote or take other action thereon.

A shareholder shall not sell his vote or issue a proxy to vote to any person for
any sum of money or anything of value, except as authorized in this Section and
Section 620 of the Business Corporation Law.

<PAGE>

A proxy which is entitled "irrevocable proxy" and which states that it is
irrevocable, is irrevocable when it is held by any of the following or a nominee
of any of the following:

(1) A Pledgee;

(2) A person who has purchased or agreed to purchase the shares;

(3) A creditor or creditors of the Corporation who extend or continue credit to
the Corporation in consideration of the proxy if the proxy states that it was
given in consideration of such extension or continuation of credit, the amount
thereof, and the name of the person extending or continuing credit;

(4) A person who has contracted to perform services as an Officer of the
Corporation, if a proxy is required by the contract of employment, if the proxy
states that it was given in consideration of such contract of employment, the
name of the employee and the period of employment contracted for;

(5) A person designated by or under an agreement under paragraph (a) of said
Section 620.

Notwithstanding a provision in a proxy, stating that it is irrevocable, the
proxy becomes revocable after the pledge is redeemed, or the debt of the
Corporation is paid, or the period of employment provided for in the contract of
employment has terminated, or the agreement under paragraph (a) of said Section
620 has terminated, and becomes revocable, in a case provided for in
subparagraph (3) or (4) above, at the end of the period, if any, specified
therein as the period during which it is irrevocable, or three years after the
date of the proxy, whichever period is less, unless the period of irrevocability
is renewed from time to time by the execution of a new irrevocable proxy as
provided in this Section. This paragraph does not affect the duration of a proxy
under the second paragraph of this Section.

A proxy may be revoked, notwithstanding a provision making it irrevocable, by a
purchaser of shares without knowledge of the existence of the provision unless
the existence of the proxy and its irrevocability is noted conspicuously on the
face or back of the certificate representing such shares.

Section 1.09. Selection and Duties of Inspectors. The Board of Directors, in
advance of any shareholders' meeting, may appoint one or more inspectors to act
at the meeting or any adjournment thereof. If inspectors are not so appointed,
the person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint one or more inspectors. In
case any person appointed failed to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.

The inspectors shall determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum,
the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding at
the meeting or any shareholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by them. Any report or


<PAGE>

certificate made by them shall be prima facie evidence of the facts stated and
of the vote as certified by them.

Unless appointed by the Board of Directors or requested by a shareholder, as
above provided in this Section, inspectors shall be dispensed with at all
meetings of shareholders.

The vote upon any question before any shareholders' meeting need not be by
ballot.

Section 1.10. Qualification of Voters. Every shareholder of record shall be
entitled at every meeting of shareholders to one vote for every share standing
in his name on the record of shareholders, except as expressly provided
otherwise in this Section and except as otherwise expressly provided in the
Certificate of Incorporation of the Corporation.

Treasury shares and shares held by another domestic or foreign corporation of
any type or kind, if a majority of the shares entitled to vote in the election
of Directors of such other corporation is held by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.

Shares held by an administrator, executor, guardian, conservator, committee, or
other fiduciary, except a Trustee, may be voted by him, either in person or by
proxy, without transfer of such shares into his name. Shares held by a Trustee
may be voted by him, either in person or by proxy, only after the shares have
been transferred into his name as Trustee or into the name of his nominee.

Shares held by or under the control of a receiver may be voted by him without
the transfer thereof into his name if authority so to do is contained in an
order of the court by which such receiver was appointed.

A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, or a
nominee of the pledgee.

Redeemable shares which have been called for redemption shall not be deemed to
be outstanding shares for the purpose of voting or determining the total number
of shares entitled to vote on any matter on and after the date on which written
notice of redemption has been sent to holders thereof and a sum sufficient to
redeem such shares has been deposited with a bank or trust company with
irrevocable instruction and authority to pay the redemption price to the holders
of the shares upon surrender of certificates therefor.

Shares standing in the name of another domestic or foreign corporation of any
type or kind may be voted by such Officer, agent or proxy as the By-Laws of such
corporation may provide, or, in the absence of such provision, as the Board of
Directors of such corporation may determine.

When shares are registered on the record of shareholders of the Corporation in
the name of, or have passed by operation of law or by virtue of any deed of
trust or other instrument to two or more fiduciaries, and if the fiduciaries
shall be equally divided as to voting such shares, any court having jurisdiction
of their accounts, upon petition by any of such fiduciaries or by any party in
interest, may direct the voting of such shares for the best interest of the
beneficiaries. This paragraph shall not apply in any case where the instrument
or order of the court appointing such fiduciaries shall otherwise direct how
such shares shall be voted.

Notwithstanding the foregoing paragraphs of this Section, the Corporation shall
be protected in treating the persons whose names shares stand on the record of
shareholders as the owners thereof for all purposes.

Section 1.11. Vote of Shareholders. Directors shall be elected by a plurality of
the votes cast at a meeting of shareholders by the holders of shares entitled to
vote in the election. Whenever any corporate action, other than the election of
Directors, is to be taken by vote of the shareholders, it shall, except as
otherwise required by the Business Corporation Law or by the Certificate of
Incorporation of the Corporation, be authorized by a majority of the votes cast
at a meeting of shareholders by the holders of shares entitled to vote thereon.

<PAGE>

Section 1.12. Written Consent of Shareholders. Whenever under the Business
Corporation Law shareholders are required or permitted to take any action by
vote, such action may be taken without a meeting on written consent, setting
forth the action so taken, signed by the holders of all outstanding shares
entitled to vote thereon. This paragraph shall not be construed to alter or
modify the provisions of any section of the Business Corporation Law or any
provision in the Certificate of Incorporation of the Corporation not
inconsistent with the Business Corporation Law under which the written consent
of the holders of less than all outstanding shares is sufficient for corporate
action.

Written consent thus given by the holders of all outstanding shares
entitled to vote shall have the same effect as a unanimous vote of shareholders.

         ARTICLE II
         Directors

Section 2.01. Management of Business; Qualifications of Directors. The business
of the Corporation shall be managed by its Board of Directors, each of whom
shall be at least twenty-one years of age.

Directors need not be Stockholders.

The Board of Directors, in addition to the powers and authority expressly
conferred upon it herein, by statute, by the Certificate of Incorporation of the
Corporation and otherwise, is hereby empowered to exercise all such powers as
may be exercised by the Corporation, except as expressly provided otherwise by
the statutes of the State of New York, by the Certificate of Incorporation of
the Corporation and these By-Laws.

Section 2.02. Number of Directors. The number of Directors which shall
constitute the entire Board shall be eleven (11), but this number may be
increased and subsequently again increased or decreased from time to time by the
affirmative vote of the majority of Directors, except that the number of
Directors shall not be less than nine (9).

Section 2.03. Classification and Election. (a) The Directors shall be divided
into three classes designated as Class 1, Class 2 and Class 3. All classes shall
be as nearly equal in number as possible and no class shall include less than
three (3) Directors. The term of office of the Directors initially classified
shall be as follows: Class 1 shall expire at the next (1992) Annual Meeting of
the Shareholders, Class 2 shall expire at the second succeeding (1993) Annual
Meeting of the Shareholders, and Class 3 shall expire at the third succeeding
(1994) Annual Meeting of the Shareholders. (b) At each Annual Meeting after such
initial classification, Directors to replace those whose terms expired at such
Annual Meeting shall be elected to hold office until the third succeeding Annual
Meeting of the Shareholders. A Director shall hold office until the Annual
Meeting for the year in which his term expires and subject to prior death,
resignation, retirement, or removal from office, until his successor shall be
elected and qualified.

Section 2.04. Newly Created Directorship and Vacancies. Newly created
Directorships or any decrease in Directorship shall be apportioned among the
classes as to make all classes as nearly equal in number as possible. Newly
created Directorships resulting from an increase in the number of Directors and
vacancies caused by death, resignation, retirement, or removal from office,
subject to Section 2.05(b), may be filled by the majority of the Directors
voting on the particular matter, if a quorum is present. If the number of
Directors then in office is less than a quorum, such newly created Directorships
and vacancies may be filled by the affirmative vote of a majority of the
Directors in office. When the number of Directors is increased by the Board, and
the newly created Directorships are filled by the Board, there shall be no
classification of the additional Directors until the next Annual Meeting of the
shareholders. Any Director elected by the Board to fill a vacancy shall serve
until the next meeting of the shareholders, at which the election of the
Directors is in the regular order of business, and until his successor is
elected and qualified.

In no case will a decrease in the number of Directors shorten the term of an
incumbent Director.

<PAGE>

Section 2.05(a). Resignations. Any Director of the Corporation may resign at any
time by giving written notice to the Board of Directors, the President or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, if any, or if no time is specified therein, then upon receipt
of such notice by the addressee; and, unless otherwise provided therein, the
acceptance of such resignation shall not be necessary to make it effective.

Section 2.05(b). Removal of Directors. Any or all of the Directors may be
removed at any time (i) for cause by vote of the shareholders or by action on
the Board of Directors or (ii) without cause by vote of the shareholders, except
as expressly provided otherwise by Section 706 of the Business Corporation Law.
The Board of Directors shall fill vacancies occurring in the Board by reason of
removal of Directors for cause. Vacancies occurring by reason of removal without
cause shall be filled by the Shareholders.

Section 2.06. Quorum of Directors. At all meetings of the Board of Directors, a
majority of the number of Directors then office shall be necessary and
sufficient to constitute a quorum for the transaction of business and the act of
a majority of the Directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as expressly provided
otherwise by the statutes of the State of New York and except as provided in the
third sentence of Section 2.04, in Section 2.11 and Section 7.09 hereof.

A majority of the Directors present, whether or not a quorum is present, may
adjourn any meeting of the Directors to another time and place. Notice of any
adjournment need not be given if such time and place are announced at the
meeting.

Section 2.07. Annual Meeting. The Board of Directors shall meet immediately
following the adjournment of the Annual Meeting of shareholders in each year at
the same place and no notice of such meeting shall be necessary.

Section 2.08. Regular Meetings. Regular meetings of the Board of Directors may
be held at such time and place as shall from time to time be fixed by the Board
and no notice thereof shall be necessary.

Section 2.09. Special Meetings. Special meetings may be called at any time by
any Director, the President, any Vice President, the Treasurer, or the Secretary
or by resolution of the Board of Directors. Special meetings shall be held at
such place as shall be fixed by the person or persons calling the meeting and
stated in the notice or waiver of notice of the meeting.

Section 2.10. Compensation. Directors shall receive such fixed sums and expenses
of attendance for attendance at each meeting of the Board or of any committee
and/or such salary as may be determined from time to time by the Board of
Directors; provided that nothing herein contained shall be construed to preclude
any Director from serving the Corporation in any other capacity and receiving
compensation therefor.

Section 2.11. Committees. The Board of Directors, by resolution adopted by a
majority of the entire Board, may designate from among its members an Executive
Committee and other committees, each consisting of three or more Directors, and
each of which, to the extent provided in the resolution, shall have the
authority of the Board of Directors, except that no such committee shall have
authority as to the following matters:

(a) The submission to shareholders of any action that needs shareholder's
authorization under the Business Corporation Law.

(b) The filling of vacancies in the Board of Directors or in any committee.

(c) The fixing of compensation of the Directors for serving on the Board of
Directors or on any committee.

(d) The amendment or repeal of the By-Laws, or the adoption of new By-Laws.

<PAGE>

(e) The amendment or repeal of any resolution of the Board of Directors which by
its terms shall not be so amendable or repealable.

The Board may designate one or more Directors as alternate members of any such
committee, who may replace any absent member or members at any meeting of such
committee. Each such committee shall serve at the pleasure of the Board of
Directors.

Regular meetings of any such committee shall be held at such time and place as
shall from time to time be fixed by such committee and no notice thereof shall
be necessary. Special meetings may be called at any time by any Officer of the
Corporation or any member of such committee.

Notice of each special meeting of each such committee shall be given (or waived)
in the same manner as notice of a special meeting of the Board of Directors. A
majority of the members of any such committee shall constitute a quorum for the
transaction of business and the act of a majority of the members present at the
time of the vote, if a quorum is present at such time, shall be the act of the
committee.

Section 2.12. Interested Directors. No contract or other transaction between the
Corporation and one or more of its Directors, or between the Corporation and any
other corporation, firm, association or other entity in which one or more of the
Corporation's Directors are Directors or Officers, or are financially
interested, shall be either void or voidable for this reason alone or by reason
alone that such Director or Directors are present at the meeting of the Board of
Directors, or of a committee thereof, which approves such contract or
transaction, or that his or their votes are counted for such purpose:

(1) If the fact of such common Directorship, Officership or financial interest
is disclosed or known to the Board or committee, and the Board or committee
approves such contract or transaction by a vote sufficient for such purpose
without counting the vote or votes of such interested Director or Directors;

(2) If such common Directorship, Officership or financial interest is disclosed
or known to the shareholders entitled to vote thereon, and such contract or
transaction is approved by vote of the shareholders; or

(3) If the contract or transaction is fair and reasonable as to the Corporation
at the time it is approved by the Board, a committee of the shareholders.

Common or interested Directors may be counted in determining the presence of a
quorum at a meeting of the Board or of a committee which approves such contract
or transaction.

Section 2.13. Loans to Directors. A loan shall not be made by the Corporation to
any Director unless it is authorized by vote of the shareholders. For this
purpose, the shares of the Director who would be the borrower shall not be
shares entitled to vote. A loan made in violation of this Section shall be a
violation of the duty to the Corporation of the Directors approving it, but the
obligation of the borrower with respect to the loan shall not be affected
thereby.

Section 2.14. Consent to Action. Any action required or permitted to be taken by
the Board of Directors or any committee thereof may be taken without a meeting
if all members of the Board or committee consent in writing, whether done before
or after the action so taken, to the adoption of a resolution authorizing the
action. The resolution and the written consent thereto shall be filed with the
Minutes of the proceeding of the Board or the committee.

         ARTICLE III
         Officers

Section 3.01. Election or Appointment: Number. The Officers shall be a Chairman,
a Vice-Chairman, a President, a Secretary, a Treasurer, and such number of
Executive Vice-Presidents, Vice-Presidents, Assistant Secretaries and Assistant
Treasurers, and such other Officers as the

<PAGE>

Board may from time to time determine. Any person may hold two or more offices
at the same time, except the offices of President and Secretary. Any Officer,
except the Chairman, Vice-Chairman and the President of the Corporation, may but
does not need to be chosen from among the Board of Directors.

Section 3.02. Term. Subject to the provisions of Section 3.03 hereof, all
officers shall be elected or appointed to hold office until the meeting of the
Board of Directors following the next Annual Meeting of shareholders, and each
officer shall hold office for the term for which he is elected or appointed and
until his successor has been elected or appointed and qualified.

The Board may require any Officer to give security for the faithful performance
of his duties. Section 3.03. Removal. Any Officer elected or appointed by the
Board of Directors may be removed by the Board with or without cause.

The removal of an Officer without cause shall be without prejudice to his
contract rights, if any. The election or appointment of an Officer shall not of
itself create contract rights.

Section 3.04. Authority. Any Director or such other person as may be designated
by the Board of Directors, and in the absence of such Director or other person,
the President shall be the Chief Executive Officer of the Corporation. The
Chairman shall oversee the general operations of the Corporation and set company
policy which would be implemented, interpreted and carried out by the President
and Chief Executive Officer who will report directly to the Chairman. The
Chairman shall preside at all meetings of the Board of Directors unless some
other person is designated by the Board.

Section 3.05. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers or notice of meeting, consents and other instruments relating
to securities owned by the Corporation may be executed in the name of and on
behalf of the Corporation by the President or any Vice-President and any such
officer may, in the name of and on behalf of the Corporation, take all such
action as any such officer may deem advisable to vote in person or by proxy at
any meeting of security holders of any Corporation in which the Corporation may
own securities and at any such meeting shall possess and may exercise any and
all rights and powers incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and possessed if
present. The Board of Directors may, by resolution, from time to time confer
like powers upon any other person or persons.

         ARTICLE IV
         Capital Stock

Section 4.01. Stock Certificates. The shares of the Corporation shall be
represented by certificates signed by the Chairman of the Board or the President
or a Vice-President and the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer of the Corporation, and may be sealed with the seal of
the Corporation or a facsimile thereof. The signatures of the Officers upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent or registered by a registrar other than the Corporation itself or its
employee. In case any Officer who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such Officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such Officer at the date of issue.

Each certificate representing shares shall also set fort such additional
material as is required by subdivisions (b) and (c) of Section 508 of the
Business Corporation Law. Section 4.02. Transfers. Stock of the Corporation
shall be transferable in the manner prescribed by the laws of the State of New
York and in these By-Laws Transfers of stock shall be made on the books of the
Corporation only by the person named in the certificate or by attorney lawfully
constituted in writing and upon the surrender of the certificate therefor, which
shall be canceled before the new certificate shall be issued.

<PAGE>

Section 4.03. Registered Holders. The Corporation shall be entitled to treat and
shall be protected in treating the persons in whose names shares or any
warrants, rights or options stand on the record of shareholders, warrant
holders, right holders or option holders, as the case may be, as the owners
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to, or interest in, any such share, warrant, right or option on the
part of any other person, whether or not the Corporation shall have notice
thereof, except as expressly provided otherwise by the Statutes of the State of
New York.

Section 4.04. New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the Directors may, in their discretion,
require the owner of the lost, stolen or destroyed certificate, or his legal
representatives, to give the Corporation a bond sufficient (in the judgment of
the Directors) to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss or theft of any such certificate or
the issuance of such new certificate. A new certificate may be issued without
requiring any bond when, in the judgment of the Directors, it is proper so to
do.

         ARTICLE V
         Financial Notices to Shareholders

Section 5.01. Dividends. When any dividend is paid or any other distribution is
made, in whole or in part, from sources other than earned surplus, it shall be
accompanied by a written notice (1) disclosing the amounts by which such
dividend or distribution affects stated capital, capital surplus and earned
surplus, or (2) if such amounts are not determinable at the time of such notice,
disclosing the approximate effect of such dividend or distribution upon stated
capital, capital surplus and earned surplus and stating that such amounts are
not yet determinable.

Section 5.02. Share Distribution and Changes. Every distribution to shareholders
of certificates representing a share distribution or a change of shares which
affects stated capital, capital surplus or earned surplus shall be accompanied
by a written notice (1) disclosing the amounts by which such distribution or
change affects stated capital, capital surplus or earned surplus, or (2) if such
amounts are not determinable at the time of such notice, disclosing the
approximate effect of such distribution or change upon stated capital, capital
surplus and earned surplus and stating that such amounts are not yet
determinable.

When issued shares are changed in any manner which affects stated capital,
capital surplus or earned surplus, and no distribution to shareholders of
certificates representing any shares resulting from such change is made,
disclosure of the effect of such change upon the stated capital, capital surplus
and earned surplus shall be made in the next financial statement covering the
period in which such change is made that is furnished by the Corporation to
holders of shares of the class or series so changed or, if practicable, in the
first notice of dividend or share distribution or change that is furnished to
such shareholders between the date of the change and shares and the next such
financial statement, and in any event within six months of the date of such
change.

Section 5.03. Cancellation of Reacquired Shares. When reacquired shares other
than converted shares are canceled, the stated capital of the Corporation shall
be reduced by the amount of stated capital then represented by such shares plus
any stated capital not theretofore allocated to any designated class or series
which is thereupon allocated to the shares canceled. The amount by which stated
capital has been reduced by cancellation of required shares during a stated
period of time shall be disclosed in the next financial statement covering such
period that is furnished by the Corporation to all its shareholders or, if
practicable, in the first notice of dividend or share distribution that is
furnished to the holders of each class or series of its shares between the end
of the period and the next such financial statement, and in any event to all its
shareholders within six months of the date of the reduction of capital.

<PAGE>

Section 5.04. Reduction of Stated Capital. When a reduction of stated capital
has been effected under Section 516 of the Business Corporation Law, the amount
of such reduction shall be disclosed in the next financial statement covering
the period in which such reduction is made that is furnished by the Corporation
to all its shareholders or, if practicable, in the first notice of dividend or
share distribution that is furnished to the holders of each class or series of
its shares between the date of such reduction and the next such financial
statement, and in any event to all its shareholders within six months of the
date of such reduction.

Section 5.05. Application of Capital Surplus to Elimination of a Deficit.
Whenever the Corporation shall apply any part or all of its capital surplus to
the elimination of any deficit in the earned surplus account, such application
shall be disclosed in the next financial statement covering the period in which
such elimination is made that is furnished by the Corporation to all its
shareholders or, if practicable, in the first notice of dividend or share
distribution that is furnished to holders of each class or series of its shares
between the date of such elimination and the next such financial statement, and
in any event to all its shareholders within six months of the date of such
action.

Section 5.06. Conversion of Shares. Should the Corporation issue any convertible
shares, then, when shares have been converted, disclosure of the conversion of
shares during a stated period of time and its effect, if any, upon stated
capital shall be made in the next financial statement covering such period that
is furnished by the Corporation to all its shareholders or, if practicable, in
the first notice of dividend or share distribution that is furnished to the
holders of each class or series of its shares between the end of such period and
the next financial statement, and in any event to all its shareholders within
six months of the date of the conversion of shares.

         ARTICLE VI
         Indemnification

Section 6.01. Right to Indemnification. The Corporation shall indemnify, defend
and hold harmless any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, investigative or other, including
appeals, by reason of the fact that he is or was a Director, Officer or employee
of the Corporation, or is or was serving at the request of the Corporation as a
Director, Officer or employee of any Corporation, partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such proceeding is alleged action in an official
capacity as a Director, Officer or employee or in any other capacity while
serving as a Director, Officer or employee, to the fullest extent authorized by
the New York Business Corporation Law, as the same exists or may hereafter be
amended, against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith; provided, however, that except as provided in Section 6.02 hereof
with respect to proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
the proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation.

The right to indemnification conferred in this Article shall be a contract right
and shall include the right to be paid by the Corporation expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that if required by law at the time of such payment, the payment of
such expenses incurred by a Director or Officer in his capacity as a Director or
Officer (and not in any other capacity in which service was or is rendered by
such person while a Director or Officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of such
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such Director or Officer, to repay all


<PAGE>

amounts so advanced if it should be determined ultimately that such Director or
Officer is not entitled to be indemnified under this Section or otherwise.

"Employee" as used herein, includes both an active employee in the Corporation's
service, as well as a retired employee who is or has been a party to a written
agreement under which he might be, or might have been, obligated to render
services to the Corporation.

Section 6.02. Right of Claimant to Bring Suit. If a claim under Section 6.01 is
not paid in full by the Corporation within sixty (60) days or, in cases of
advances of expenses, twenty (20) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the New York Business
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defence shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its shareholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the New York Business Law, nor an actual determination by
the Corporation (including its Board of Directors, independent legal counsel, or
its shareholders) that the claimant had not met such applicable standard of
conduct shall be a defense to the action or create a presumption that claimant
had not met the applicable standard of conduct. The Corporation shall be
precluded from asserting in any judicial proceeding commenced pursuant to this
Article that the procedures and presumptions of this Article are not valid,
binding and enforceable and shall stipulate in any such proceeding that the
Corporation is bound by all provisions of this Article.

Section 6.03. Nonexclusiveness. The indemnification and advances of expenses
granted pursuant to, or provided by, this Article shall not be deemed exclusive
of any other rights to which a Director or Officer seeking indemnification or
advancement or expenses may be entitled, whether contained in the Certificate of
Incorporation or these By-Laws, and the Board of Directors is authorized, from
time to time in its discretion, to enter into agreements with one or more
Directors, Officers and other persons providing for the maximum indemnification
allowed by applicable law.

The right to indemnification and the payment of expenses incurred in defending a
proceeding in advance of its final disposition conferred in this Article (a)
shall apply to acts or omissions antedating the adoption of this By-Law, (b)
shall be severable, (c) shall not be exclusive of other rights to which any
Director, Officer or employee may now or hereafter become entitled apart from
this Article, (d) shall continue as to a person who has ceased to be such
Director, Officer or employee and (e) shall inure to the benefit of the heirs,
Executors and Administrators of such a person.

Section 6.04. Insurance for Indemnification of Directors and Officers. The
Corporation shall have the power to purchase and maintain insurance (a) to
indemnify the Corporation for any obligations which it incurs as the result of
the indemnification of Directors and Officers under the provisions of this
Article; (b) to indemnify Directors and Officers in instances which they may be
indemnified by the Corporation under the provisions of this Article; and (c) to
indemnify Directors and Officers in instances in which they may not otherwise be
indemnified by the Corporation under the provisions of this Article, provided
the contract of insurance covering such Directors and Officers provides, in a
manner acceptable to the Superintendent of Insurance of the State of New York,
for a retention amount and for co-insurance.


<PAGE>

No insurance under the preceding paragraph of this Section may provide for any
payment, other than the cost of defense, to or on behalf of any Director of
Officer: (i) if a judgment or other final adjudication adverse to the insured
Director or Officer establishes that his acts of active and deliberate
dishonesty were material to the cause of action so adjudicated or that he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled, or (ii) in relation to any risk the insurance of which is
prohibited under the insurance laws of the State of New York.

         ARTICLE VII

         Miscellaneous

Section 7.01. Offices. The principal office of the Corporation shall be in the
City of New York, County of New York, State of New York. The Corporation may
also have offices at other places, within and/or without the State of New York.

Section 7.02. Seal. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its incorporation and the words "Corporate Seal of
New York".

Section 7.03. Checks. All checks or demands for money shall be signed by such
person or persons as the Board of Directors may from time to time determine.

Section 7.04. Fiscal Year. The fiscal year of the Corporation shall begin on the
1st day of July in each year and shall end on the 30th day of June of the
ensuing year and the first fiscal year shall end on June 30, 1969.

Section 7.05. Books and Records. The Corporation shall keep correct and complete
books and records of accounts and shall keep minutes of the proceedings of its
shareholders, Board of Directors and Executive Committee, if any, and shall keep
at the office of the Corporation in New York State or at the office of its
transfer agent or registrar in New York State, a record containing the names and
addresses of all shareholders, the number and class of shares held by each and
the dates when they respectively became the owners of record thereof. Any of the
foregoing books, minutes or records may be in written form or in any other form
capable of being converted into written form within a reasonable time.

Section 7.6. Duty of Directors and Officers. Directors and Officers shall
discharge the duties of their respective positions in good faith and with that
degree of diligence, care and skill which ordinarily prudent men would exercise
under similar circumstances in like positions. In discharging their duties,
Directors and Officers, when acting in good faith, may rely upon financial
statements of the Corporation represented to them to be correct by the President
or the Officer of the Corporation having charge of its books of accounts, or
stated in a written report by an independent public or certified public
accountant or firm of such accountants fairly to reflect the financial condition
of the Corporation.

Section 7.07. When Notice or Lapse of Time Unnecessary; Notice Dispensed With
When Delivery is Prohibited. Whenever, under the Business Corporation Law or the
Certificate of Incorporation or the By-Law of the Corporation or by the terms of
any agreement or instrument, the Corporation or the Board of Directors or any
committee thereof is authorized to take any action after notice to any person or
persons or after the lapse of a prescribed period of time, such action may be
taken without notice and without the lapse of such period of time, if at any
time before or after such action is completed the person or persons entitled to
such notice or entitled to participate in the action to be taken or, in the case
of a shareholder, by his attorney-in-fact, submit a signed waiver of notice of
such requirements.

Whenever any notice or communication is required to be given to any person by
the Business Corporation Law, the Certificate of Incorporation of the
Corporation or theses By-Laws, or by the terms of any agreement or instrument,
or as a condition precedent to taking any corporate action


<PAGE>

and communication with such person is then unlawful under any statute of the
State of New York or of the United States or any regulation, proclamation or
order issued under said statutes, then the giving of such notice or
communication to such person shall not be required and there shall be no duty to
apply for license or other permission to do so. Any affidavit, certificate or
other instrument which is required to be made or filed as proof of the giving of
any notice or communication required the Business Corporation Law shall, if such
notice or communication to any person is dispensed with under this paragraph,
include a statement that such notice or communication was not given to any
person with whom communication is unlawful. Such affidavit, certificate or other
instrument shall be as effective for all purposes as though such notice or
communication had been personally given to such person.

Section 7.08. Entire Board. As used in these By-Laws, the term "Entire Board"
means the total number of Directors which the Corporation would have if there
were no vacancies.

Section 7.09. Amendment of By-Laws. These By-Laws may be amended or repealed and
new By-Laws adopted by the Board of Directors or by vote of the holders of the
shares at the time entitled to vote of the holders of the shares at the time
entitled to vote in the election of any Directors, except that any amendment by
the Board changing the number of Directors shall require the vote of a majority
of the Entire Board and except that any By-Laws adopted by the Board may be
amended or repealed by the shareholders entitled to vote thereon as provided in
the Business Corporation Law.

If any By-Law regulating an impending election of Directors is adopted, amended
or repealed by the Board, the shall be set forth in the notice of the next
meeting of shareholders for the election of Directors the By-Law so adopted,
amended or repealed, together with a concise statement of the changes made.

Section 7.10 Nonapplication of North Carolina Shareholder Protection Act. The
provisions of North Carolina General Statutes 55-75 through 55-79 shall not be
applicable to this Corporation. Section 7.11. Section Headings. The Headings to
the Articles and Sections of these By-Laws have been inserted for convenience of
reference only and shall not be deemed to be a part of these By-Laws.

33


(Exhibit 10m)


                                    AGREEMENT


This AGREEMENT ("Agreement") entered into as of the 1st day of February, 1999,
by and between UNIFI, INC., a New York corporation, with its executive offices
in Greensboro, North Carolina (hereinafter, together with its wholly owned
subsidiaries, referred to as "UNIFI"), and WILLIAM T. KRETZER, of Guilford
County, North Carolina (hereinafter referred to as "MR. KRETZER");

                            W I T N E S S E T H:

WHEREAS, MR. KRETZER has been an employee of UNIFI since 1971 and has served as
President and Chief Executive Officer since 1985;
WHEREAS, MR. KRETZER and UNIFI agreed that MR. KRETZER would resign his
employment with UNIFI;
WHEREAS, in consideration of his past services to UNIFI, UNIFI has agreed to pay
to MR. KRETZER the sum of Three Million Dollars ($3,000,000) pursuant to Section
1 of this Agreement and to provide him with the benefits, split dollar
insurance, stock options and deferred compensation described in Sections 2, 3,
4, 5, 7 and 8; and
WHEREAS, in consideration of UNIFI's agreement to pay him the sum of One Million
Dollars ($1,000,000) pursuant to Section 12(A) of this Agreement, MR. KRETZER
has agreed to certain covenants regarding the disclosure of confidential
information and noncompetition;
NOW, THEREFORE, in consideration
 of these premises and mutual agreements herein
contained, and intending to be legally bound hereby, the parties agree as
follows:

Section 1. Cash Payments - UNIFI agrees to pay MR. KRETZER the sum of Three
Million Dollars ($3,000,000). This amount shall be paid in thirty-six (36) equal
monthly installments of $83,333 each on UNIFI's regular salaried payroll dates,
with the first monthly installment being due and payable on February 28, 1999
and a like installment being due and payable on the same date of each calendar
month thereafter, to and including January 2002. These payments will be subject
to all applicable federal and state taxes. In the event of MR. KRETZER's death
before January 31, 2002, the payments thereafter becoming due under this Section
1 will be paid to his estate. MR. KRETZER shall be entitled to the payments
provided for in this Section 1 even if he becomes employed by another company.

Section 2. Medical and Dental Insurance - UNIFI will continue to provide MR.
KRETZER the same medical and dental coverage provided to executive officers
covered by the terms of the Unifi, Inc. Employee Welfare Benefit Plan until the
earliest to occur of the last day of the month in which MR. KRETZER attains the
age of sixty-five (65) years or obtains employment with another company and
becomes eligible for substantially comparable benefits. MR. KRETZER shall be
eligible to continue to receive medical and dental benefits in order that he may
obtain coverage for himself and for his Dependents, as the term "Dependents" is
defined in the Medical Plan, and so that the following shall apply to coverage
of MR. KRETZER and his Dependents:

(A) As a condition of coverage of MR. KRETZER, he must pay for each month of
coverage an amount equal to the premium paid for such month by an active
employee for coverage under the Medical Plan. During the time when payments are
being made pursuant to Section 1, such premiums shall be paid by deductions from
such installments unless UNIFI in its sole discretion agrees otherwise.
Thereafter, such premiums shall be due on the first day of the month to which
they apply, but coverage will not be terminated unless any failure by MR.
KRETZER to pay


<PAGE>

premiums on the due date continues for more than 30 days after written notice
thereof is given to MR. KRETZER.

(B) As a condition of coverage of a Dependent, MR. KRETZER must pay for each
month of coverage an amount equal to the premium paid for such month by an
active employee for coverage of a Dependent under the Medical Plan. During the
time when payments are being made pursuant to Section 1, such premiums shall be
paid by deductions from such installments unless UNIFI in its sole discretion
agrees otherwise. Thereafter, such premiums shall be due on the first day of the
month to which they apply, but coverage will not be terminated unless any
failure by MR. KRETZER to pay premiums on the due date continues for more than
30 days after written notice thereof is given to MR. KRETZER, or unless MR.
KRETZER is in breach of Section 10 or Section 11 of this Agreement.


(C) The terms of medical and dental coverage for MR. KRETZER and his Dependents
at any given time shall be the terms applicable to executive officers of UNIFI
and their Dependents at such time. It is explicitly understood and agreed that
any amendments to or alteration of the Medical Plan (including any amendment
terminating the Medical Plan) may be applicable to MR. KRETZER and his
Dependents without regard to whether the amendment or alteration was adopted or
made before or after the date MR. KRETZER entered into this Agreement. It is
explicitly understood and agreed that a Dependent will lose medical and dental
coverage as of the first day of the month next following MR. KRETZER's
sixty-fifth (65th) birthday, regardless of the Dependent's age, unless the
Dependent has lost coverage earlier. In the event of MR. KRETZER's death before
his sixty-fifth (65th) birthday, his Dependents will continue to be eligible for
medical and dental coverage as hereinabove provided until the first day of the
month next following MR. KRETZER's sixty-fifth (65th) birthday.

(D) UNIFI will continue to provide MR. KRETZER group term life insurance
coverage in the amount of $750,000 until the earliest to occur of the last day
of the month in which MR. KRETZER attains the age of sixty-five (65) years or
obtains employment with another company and becomes eligible for a substantially
comparable life insurance benefit.

(E) In addition to the medical, dental and group life insurance benefits
described in Sections 2(A), (B), (C) and (D), MR. KRETZER shall be entitled to
all other benefits provided to executive officers of UNIFI (including, without
limitation, benefits under the portions of the Welfare Benefit Plan that provide
benefits in the event of disability and that provide accidental death and
dismemberment coverage) on the same basis and on the same terms as if MR.
KRETZER had continued his employment with UNIFI. MR. KRETZER's entitlement to
benefits under this Section 2(E) shall continue until the earliest to occur of
the last day of the month in which MR. KRETZER attains the age of sixty-five
(65) years or obtains employment with another company and becomes eligible for
substantially comparable benefits or is in breach of Section 10 or Section 11 of
this Agreement.

Section 3. COBRA, etc. - It is understood that this Agreement does not waive or
abrogate MR. KRETZER's entitlement to health insurance benefits under COBRA or
to vested retirement funds in UNIFI'S retirement plan. Any retirement benefits
to which MR. KRETZER is entitled shall be governed by the terms of the
retirement plan.


Section 4.        Other Benefits

<PAGE>

(A) MR. KRETZER agrees that no provision is granted for continued vacation pay,
automobile allowance, education renewal, tuition reimbursement, or mobile
telephone service after the date of this Agreement, and that he will return to
UNIFI all company property, documents, notes, software programs, data and any
other materials (including any copies thereof) in his possession.

(B) Until the date on which MR. KRETZER obtains full-time employment with
another company, MR. KRETZER will have the right to use UNIFI's airplanes and
apartments, provided that such use does not interfere with UNIFI's use of its
airplanes and apartments for business purposes and provided further that in
connection with such use by MR. KRETZER, he shall reimburse UNIFI in accordance
with the reimbursement policies then in effect for executive officers of UNIFI.

(C) Until the date on which MR. KRETZER obtains full-time employment with
another company, UNIFI will provide MR. KRETZER with an executive office (at
UNIFI's headquarters in Greensboro, North Carolina, or such other place as may
be mutually agreed upon by UNIFI and MR. KRETZER) and secretarial assistance.

Section 5. Split Dollar Insurance - Schedule A attached hereto lists the life
insurance policies on MR. KRETZER's life currently owned by UNIFI under a Split
Dollar Arrangement (the "Policies"). The Policies are subject to the Executive
Split Dollar Life Insurance Agreement dated July 1, 1990 (the "Split Dollar
Agreement") between UNIFI and MR. KRETZER (except that Schedule A to this
Agreement shall be substituted for Schedule A to the Split Dollar Agreement)
and, accordingly, MR. KRETZER shall have the right to and UNIFI the obligation
to continue the Split Dollar Agreement with respect to the Policies until the
applicable Termination Date, provided that MR. KRETZER continues to make the
required premium contributions under the Split Dollar Agreement.

Section 6. Taxes - MR. KRETZER will be responsible for any federal, state or
local taxes which may be owed by him by virtue of the receipt of any portion of
the consideration herein provided.

Section 7.        Option Grants -  Regarding option grants:


(A) MR. KRETZER was granted options under the Unifi, Inc. 1992 Incentive Stock
Option Plan and the Unifi, Inc. 1996 Incentive Stock Option Plan. Stock option
agreements dated October 27, 1992, October 21, 1993, and September 22, 1994 were
entered into in relation to the respective stock option grants. All options
which have not been exercised shall be canceled and the respective stock option
agreements terminated. New stock options will be granted to MR. KRETZER under
the Unifi, Inc. 1996 Non-Qualified Stock Option Plan for the number of
unexercised shares and at the purchase price per share as set forth in the
above-referenced respective incentive stock option agreements. All such new
options shall vest and be exercisable immediately and shall terminate ten (10)
years from the date the above-referenced incentive stock options were granted.

(B) MR. KRETZER was previously granted options under the Unifi, Inc. 1992
Non-Qualified Stock Option Plan and the Unifi, Inc. 1996 Non-Qualified Stock
Option Plan. Stock option agreements dated October 27, 1992, October 21, 1993,
September 22, 1994, April 18, 1995, April 18, 1996, April 17, 1997, and October
22, 1998 were entered into in relation to the respective stock option grants.
The option agreements will be amended to provide that all unexercised options
under the respective agreements are fully vested and exercisable immediately and
shall

<PAGE>

terminate ten (10) years from the date the above-referenced nonqualified stock
options were granted.

(C) In the event of MR. KRETZER's death before termination of any of the options
described in (A) and (B) above, such options will continue in effect and may be
exercised by MR. KRETZER's estate within six (6) months after his death.

Section 8. Deferral Agreement - The Deferral Agreement dated November 21, 1997,
between UNIFI and MR. KRETZER (the "Deferral Agreement") is hereby amended by
deleting paragraph 3 in its entirety and inserting in lieu thereof the
following:

A3. DEFERRAL. On January 2, 2003, the Executive or his designated beneficiary,
if the Executive should die before January 2, 2003, will be entitled to receive
the Deferral Shares and Accumulated Income in a lump sum. The Board of Directors
("Board") of UNIFI will consider any request by the Executive for an earlier
payment of the Deferral Shares and Accumulated Income, but any such earlier
payment will be in the sole discretion of the Board.


Section 9. 1999 Profit Sharing Plan Contribution - MR. KRETZER agrees that he is
not entitled to and waives his right to share in the contribution, if any, made
to UNIFI's Profit Sharing Plan and Trust (the "Profit Sharing Plan") for the
fiscal year ended June 30, 1999. MR. KRETZER hereby agrees to indemnify and hold
harmless UNIFI, its directors, officers and employees, as well as UNIFI's Profit
Sharing Plan and Trust, for any amounts that may be assessed against each and
every one of the foregoing for his not sharing in such contribution, if any, as
made to the Profit Sharing Plan for fiscal year ended June 30, 1999.

Section 10. Disclosure of Confidential Information - MR. KRETZER agrees that:

(A) For a period of three (3) years from the date of this Agreement, he will not
disclose or make available to any person or other entity any trade secrets,
confidential information, as hereinafter defined, or "know-how" relating to
UNIFI's, its affiliates' and subsidiaries', businesses without written authority
from UNIFI's President or Board of Directors, unless he is compelled to disclose
it by judicial process.

Confidential Information shall mean all information about UNIFI, its affiliates
or subsidiaries, or relating to any of their products or any phase of their
operations, not generally known to their competitors or which is not public
information, which MR. KRETZER knows or acquired knowledge of during the term of
his employment. Confidential Information does not include information that
becomes available to MR. KRETZER from a source other than UNIFI, provided MR.
KRETZER does not have actual knowledge or reason to believe such source was
bound by a duty of confidentiality to UNIFI.

(B) Documents - Under no circumstances shall MR. KRETZER remove from UNIFI's
offices any of UNIFI's books, records, documents, customer lists, or any copies
of such documents without UNIFI's written consent, nor shall he make any copies
of UNIFI's books, records, documents, or customer lists for use outside of
UNIFI, except as specifically authorized in writing by the President or Board of
Directors of UNIFI.

Section 11. Non-Compete - Subject to the provisos of this Section 11, MR.
KRETZER hereby promises and agrees that, for a period of three (3) years from
the date of this Agreement he will not, directly or indirectly, without the
prior written consent of UNIFI's Board of Directors or its Compensation
Committee:

<PAGE>

(A) Own any interest in (other than by ownership of less than ten percent (10%)
of any class of stock (or ownership interest) of a publicly or privately held
corporation or other business entity), act as a director, manage, operate,
control, be employed by, render advisory services to, represent, participate in,
or be connected with any business that is engaged in the business of producing,
manufacturing, distributing, and/or selling, in competition with UNIFI, in any
country in which UNIFI is engaged in the manufacturing, distribution or sales of
UNIFI Products or services on the date of this Agreement;


(B) Influence, attempt to influence or solicit any customer of UNIFI to
discontinue its purchase of, or divert its business with respect to, any UNIFI
Products or services manufactured and/or sold by UNIFI from UNIFI to himself or
any other person, firm, entity or corporation;

(C) Interfere with, disrupt, or attempt to disrupt the relationship, contractual
or otherwise, between UNIFI and any of its suppliers, principals, distributors,
lessors, licensors, licensees, or franchisees; or

(D) Solicit any employee or salesman of UNIFI, whose annual salary exceeds
$25,000, to work for himself or any other person, firm, entity or corporation
competing with UNIFI;

provided, however, that this Section 11 shall not prevent MR. KRETZER from:

(W) Engaging in any capacity in the business of producing, manufacturing,
distributing, and/or selling any of the UNIFI Products that UNIFI ceases to sell
to third parties after the date of this Agreement;

(X) Being employed or otherwise engaged by any entity whose primary business at
the time of his employment or engagement is not the sale of UNIFI Products to
third parties, even if that entity thereafter acquires or is acquired by another
entity whose primary business is the sale of UNIFI Products to third parties, if
MR. KRETZER's primary duties and responsibilities are unrelated in any material
respect to the UNIFI Products; and

provided further that UNIFI's Board of Directors will not unreasonably withhold
its consent to MR. KRETZER'S:

(Y) Engaging in any capacity in the business of producing, manufacturing,
distributing, and/or selling POY yarns; or

(Z) Serving as a director of and/or being employed by any corporation,
partnership, sole proprietorship or other entity (or as a manager and/or
employee of any limited liability company) in the textile industry whose primary
business is not the sale of UNIFI Products to third parties.

For purposes of this Section 11, UNIFI Products means (a) false twist textured
polyester and nylon filament yarns; (b) yarn dyed false twist textured polyester
and nylon filament yarns; (c) twisted texturized polyester and nylon filament
yarns for sewing thread applications; (d) warped yarns and fibers (whether
produced through conventional and/or warp drawn methods); and (e) covered
spandex (whether covered by conventional or air covering methods).


The parties intend to limit MR. KRETZER's right to compete only to the extent
necessary to protect UNIFI from unfair competition. The parties recognize,
however, that reasonable people


<PAGE>

may differ in making such a determination. Consequently, the parties hereby
agree that, if the scope or enforceability of any of the restrictive covenants
in this Section 11 or in Section 10 above is in any way disputed at any time,
the dispute shall be submitted to arbitration, as provided under Section 19 of
this Agreement, and the arbitrator will determine whether the activities in
which MR. KRETZER is engaging (or proposes to engage) are covered by Sections 10
or 11 and, if covered, whether they subject (or would subject) UNIFI to unfair
competition. If the arbitrator determines that the activities are covered and do
(or would) subject UNIFI to unfair competition, then such activities shall be
subject to the restrictions of Sections 10 and 11, and MR. KRETZER shall not
engage in such activities. If the arbitrator determines that the activities are
not covered or do not (or would not) subject UNIFI to unfair competition, then
such activities shall not be subject to the restrictions of Sections 10 and 11,
and MR. KRETZER shall be free to engage in such activities.

Section 12.       Consideration; Breach

(A) In consideration of MR. KRETZER's covenants with respect to the disclosure
of confidential information and noncompetition, as provided in Sections 10 and
11 of this Agreement, UNIFI agrees to pay MR. KRETZER the sum of One Million
Dollars ($1,000,000). This amount shall be paid in thirty-six (36) equal monthly
installments of $27,777 each on UNIFI's regular salaried payroll dates, with the
first monthly installment being due and payable on February 28, 1999 and a like
installment being due and payable on the same date of each calendar month
thereafter, to and including January 2002. These payments will be subject to all
applicable federal and state taxes. In the event of MR. KRETZER's death before
January 31, 2002, the payments thereafter becoming due under this Section 12(A)
will be paid to his estate. MR. KRETZER shall be entitled to the payments
provided for in this Section 12(A) even if he becomes employed by another
company.

(B) MR. KRETZER acknowledges that compliance with Sections 10 and 11 of this
Agreement is necessary to protect UNIFI's businesses and goodwill; a breach of
said Sections will do irreparable and continual damage to UNIFI and an award of
monetary damages would not be adequate to remedy such harm; therefore, in the
event he breaches or threatens to breach this Agreement, UNIFI shall be entitled
to both a preliminary and permanent injunction in order to prevent the
continuation of such harm and monetary damages, insofar as they can be
determined, including, without limitation, all reasonable costs and attorney's
fees incurred by UNIFI in enforcing the provisions of this Agreement. Nothing in
this Agreement, however, shall prohibit UNIFI from also pursuing any other
remedies.


(C) For purposes of this Section 12, MR. KRETZER shall be deemed to be in breach
of Sections 10 and/or 11 only if UNIFI first gives him written notice of the
conduct alleged to constitute a violation of Sections 10 and/or 11 and if,
within 30 days after receipt of such written notice, MR. KRETZER then fails
either to cease such conduct or to demand arbitration pursuant to the last
paragraph of Section 11 of this Agreement. If MR. KRETZER demands arbitration
and if the arbitrator determines that the conduct identified by UNIFI is covered
by Sections 10 or 11 and subjects UNIFI to unfair competition, then MR. KRETZER
shall be deemed to be in breach of Sections 10 and/or 11 only if such conduct
continues for more than 30 days following the decision of the arbitrator.

(D) Notwithstanding any breach of this Agreement by MR. KRETZER, UNIFI shall
continue to make the payments provided for in Section 1 of this Agreement and in
Section 12(A) of this Agreement, in each case without deduction or offset.

<PAGE>

Section 13. Releases and Waivers of Each Party

(A) MR. KRETZER hereby fully and unconditionally releases and discharges all
claims and causes of action which he or his heirs, personal representatives or
assigns ever had or now have or hereafter may have (based on events transpiring
on or before the date hereof) against UNIFI, its subsidiaries and their
respective officers, directors, employees, counsel and agents, in each case past
or present, of whatsoever kind and nature, in law, equity or otherwise, arising
out of or in any way connected with his employment, association or other
involvement with UNIFI.

(B) UNIFI hereby fully and unconditionally releases and discharges all claims
and causes of action which it ever had or now has or hereafter may have (based
on events transpiring on or before the date hereof) against MR. KRETZER, in each
case past or present, of whatsoever kind and nature, in law, equity or
otherwise, arising out of or in any way connected with his employment,
association or other involvement with UNIFI.

(C) The foregoing releases and waiver do not extend to rights, benefits,
obligations and claims that expressly accrue under and pursuant to the terms of
this Agreement or under and pursuant to the terms of the Split-Dollar Agreement
(as amended hereby), the Deferral Agreement (as amended hereby), the option
agreements (as amended hereby) and the Profit Sharing Plan (subject to the
provisions of Section 9 of this Agreement).


Section 14. Waiver of Rights - If, in one or more instances, either party fails
to insist that the other party perform any of the terms of this Agreement, such
failure shall not be construed as a waiver by such party of any past, present,
or future right granted under this Agreement, and the obligations of both
parties under this Agreement shall continue in full force and effect.

Section 15. Notices - Any notice required or permitted to be given under this
Agreement shall be sufficient, if in writing and if sent by registered or
certified mail, postage prepaid, or telecopier to:

William T. Kretzer
3039 Lake Forest Drive
Greensboro, NC  27408
Telecopier:  (336) _________

and to:

UNIFI, Inc.
Attn:  Willis C. Moore, III
7201 W. Friendly Avenue (27410)
P. O. Box 19109
Greensboro, NC  27419-9109
Telecopier:  (336) 294-4751

Section 16. Assignment - The rights and obligations of UNIFI under this
Agreement shall inure to the benefit of and be binding upon its successors and
assigns; provided, however, that this Agreement is not assignable by UNIFI.
UNIFI agrees that it will not merge into, consolidate with, or sell all or
substantially all of its assets to any other corporation or business
organization unless such successor or purchaser specifically agrees to assume
and be bound by all of the terms and conditions of this Agreement or
arrangements are made between UNIFI and MR. KRETZER


<PAGE>

to secure UNIFI's obligations under this Agreement. This Agreement may not be
assigned or otherwise transferred voluntarily or involuntarily by MR. KRETZER.

Section 17. Applicable Law - This Agreement shall be interpreted and construed
under the laws of North Carolina.

Section 18. Entire Agreement - This instrument contains the entire agreement of
the parties, except that MR. KRETZER acknowledges that he continues to be
subject to his Noncompetition Covenant with Parkdale America, LLC dated June 30,
1997. This Agreement may not be changed or altered, except by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.


Section 19. Arbitration - In the event of any differences of opinion or
disputes, between MR. KRETZER and UNIFI, with respect to the construction or
interpretation of this Agreement or the alleged breach thereof, which cannot be
settled amicably by agreement of the parties, such disputes shall be submitted
to and determined by arbitration by a single arbitrator in the City of
Greensboro, North Carolina, in accordance with the rules of the American
Arbitration Association and judgment upon the award shall be final, binding and
conclusive upon the parties and may be entered in the highest court, state or
federal, having jurisdiction.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement under their
respective hands and seals as of the day and year first above written.


WILLIAM T. KRETZER            (SEAL)
WILLIAM T. KRETZER

Witness:

W. C. MOORE III


UNIFI, INC.


By:    G. ALLEN MEBANE
       G. Allen Mebane, Chairman
       and Chief Executive Officer

Attest:

CLIFFORD FRAZIER, JR.
Clifford Frazier, Jr., Secretary

10


(Exhibit 10r)

SEVERANCE COMPENSATION AGREEMENT

THIS AGREEMENT ("Agreement") between UNIFI, INC., a New York corporation (the
"Company"), and BRIAN R. PARKE ("Executive") effective the 1st day of October,
1998.

                                 WITNESSETH:

WHEREAS, BRIAN R. PARKE is a Vice President of the Company and is President of
Unifi Textured Yarns Europe, Ltd. ("UTYE"), a wholly-owned subsidiary of the
Company located in Letterkenny, Ireland; he had been the General Manager of UTYE
for a number of years prior to becoming President in 1993, and is considered as
an integral part of the Company's Management; and

WHEREAS, the Company's Board of Directors considers the establishment and
maintenance of a sound and vital Management to be essential in protecting and
enhancing the best interests of the Company and its Shareholders, recognizes
that the possibility of a change in control exists and that such possibility,
and the uncertainty and questions which it may raise among Management, may
result in the departure or distraction of Management personnel to the detriment
of the Company and its Shareholders; and

WHEREAS, the Executive desires that in the event of any change in control he
will continue to have the responsibility and status he has earned; and

WHEREAS,
 the Company's Board of Directors has determined that it is appropriate
to reinforce and encourage the continued attention and dedication of the
Executive, as a member of the Company's Management, to his assigned duties
without distraction in potentially disturbing circumstances arising from the
possibility of a change in control of the Company.

NOW, THEREFORE, in order to induce the Executive to remain in the employment of
the Company and in consideration of the Executive agreeing to remain in the
employment of the Company, subject to the terms and conditions set out below,
the Company agrees it will pay such amount, as provided in Section 4 of this
Agreement, to the Executive, if the Executive's employment with the Company
terminates under one of the circumstances described herein following a change in
control of the Company, as herein defined.

Section 1. Term: This Agreement shall terminate, except to the extent that any
obligation of the Company hereunder remains unpaid as of such time, upon the
earliest of (i) July 20, 2001 if a Change in Control of the Company has not
occurred within such period; (ii) the termination of the Executive's employment
with the Company based on Death, Disability (as defined in Section 3(b),
Retirement (as defined in Section 3(c)), Cause (as defined in Section 3(d)) or
by the Executive other than for Good Reason (as defined in Section 3(e)); and
(iii) two years from the date of a Change in Control of the Company if the
Executive has not voluntarily terminated his employment for Good Reason as of
such time.

Section 2. Change in Control: No compensation shall be payable under this
Agreement unless and until (a) there shall have been a Change in Control of the
Company, while the Executive is still an employee of the Company and (b) the
Executive's employment by the Company thereafter shall have been terminated in
accordance with Section 3. For purposes of this Agreement, a Change in Control
of the Company shall be deemed to have occurred if:(i) there shall be
consummated (x) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
the Company's Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company; or (ii) the Shareholders of the Company approved
any plan or proposal for the liquidation or dissolution of


<PAGE>

the Company; or (iii) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")), shall become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of twenty percent (20%) or more of the Company's
outstanding Common Stock; or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constitute the entire Board of
Directors shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by the Company's Shareholders, of each
new Director was approved by a vote of at least two-thirds of the Directors then
still in office who were Directors at the beginning of the period.

Section 3. Termination Following Change in Control: (a) If a Change in Control
of the Company shall have occurred while the Executive is still an employee of
the Company, the Executive shall be entitled to the compensation provided in
Section 4 upon the subsequent termination of the Executive's employment with the
Company by the Executive voluntarily for Good Reason or by the Company unless
such termination by the Company is as a result of (i) the Executive's Death,
(ii) the Executive's Disability (as defined in Section (3)(b) below); (iii) the
Executive's Retirement (as defined in Section 3(c) below); (iv) the Executive's
termination by the Company for Cause(as defined in Section 3(d) below); or (v)
the Executive's decision to terminate employment other than for Good Reason (as
defined in Section 3(e) below).

(b) Disability: If, as a result of the Executive's incapacity due to physical or
mental illness, the Executive shall have been absent from his duties with the
Company on a full-time basis for six months (including months before and after
the change of control) and within 30 days after written notice of termination is
thereafter given by the Company the Executive shall not have returned to the
full- time performance of the Executive's duties, the Company may terminate this
Agreement for "Disability."

(c) Retirement: The term "Retirement" as used in this Agreement shall mean
termination in accordance with the Company's retirement policy or any
arrangement established with the consent of the Executive.

(d) Cause: The Company may terminate the Executive's employment for Cause. For
purposes of this Agreement only, the Company shall have "Cause" to terminate the
Executive's employment hereunder only on the basis of fraud, misappropriation or
embezzlement on the part of the Executive or malfeasance or misfeasance by said
Executive in performing the duties of his office, as determined by the Board of
Directors. Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause unless and until there shall have been a meeting
of the Company's Board of Directors (after reasonable notice to the Executive
and an opportunity for the Executive, together with the Executive's counsel, to
be heard before the Board), and the delivery to the Executive of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of said Board of Directors stating that in the good faith
opinion of the Board the Executive was guilty of conduct set forth in the second
sentence of this Section 3(d) and specifying the particulars thereof in detail.

(e) Good Reason: The Executive may terminate the Executive's employment for Good
Reason at any time during the term of this Agreement. For purposes of this
Agreement "Good Reason" shall mean any of the following (without the Executive's
express written consent): (i) the assignment to the Executive by the Company of
duties inconsistent with the Executive's position, duties, responsibilities and
status with the Company immediately prior to a Change in Control of the Company;
or a change in the Executive's titles or offices as in effect immediately prior
to a Change in Control of the Company; or any removal of the Executive from or
any failure to reelect the Executive to any of the positions held prior to the
change of control, except in connection with the termination of his employment
for Disability, Retirement, or Cause, or as a result of the Executive's Death;
or by the Executive other than for Good Reason;

<PAGE>

(ii) a reduction by the Company in the Executive's base salary as in effect on
the date hereof or as the same may be increased from time to time during the
term of this Agreement or the Company's failure to increase (within 12 months of
the Executive's last increase in base salary) the Executive's base salary after
a Change in Control of the Company in an amount which at least equals, on a
percentage basis, the average percentage increase in base salary for all
executive officers of the Company effected in the preceding 12 months;

(iii) any failure by the Company to continue in effect any benefit plan or
arrangement (including, without limitation, the Company's Profit Sharing Plan,
group life insurance plan and medical, dental, accident and disability plans) in
which the Executive is participating at the time of a Change in Control of the
Company (or any other plans providing the Executive with substantially similar
benefits) (hereinafter referred to as "Benefit Plans"), or the taking of any
action by the Company which would adversely affect the Executive's participation
in or materially reduce the Executive's benefits under any such Benefit Plan or
deprive the Executive of any material fringe benefit enjoyed by the Executive at
the time of a Change in Control of the Company;

(iv) any failure by the Company to continue in effect any plan or arrangement to
receive securities of the Company (including, without limitation, Stock Option
Plans or any other plan or arrangement to receive and exercise stock options,
restricted stock or grants thereof) in which the Executive is participating at
the time of a Change in Control of the Company (or plans or arrangements
providing him with substantially similar benefits) (hereinafter referred to as
"Securities Plans") and the taking of any action by the Company which would
adversely affect the Executive's participation in or materially reduce the
Executive's benefits under any such Securities Plan;

(v) any failure by the Company to continue in effect any bonus plan, automobile
allowance plan, or other incentive payment plan in which the Executive is
participating at the time of a Change in Control of the Company, or said
Executive had participated in during the previous calendar year;

(vi) a relocation of the Company's principal executive offices to a location
outside of North Carolina, or the Executive's relocation to any place other than
the location at which the Executive performed the Executive's duties prior to a
Change in Control of the Company, except for required travel by the Executive on
the Company's business to an extent substantially consistent with the
Executive's business travel obligations at the time of a Change in Control of
the Company;

(vii) any failure by the Company to provide the Executive with the number of
paid vacation days to which the Executive is entitled at the time of a Change in
Control of the Company;

(viii) any breach by the Company of any provision of this Agreement;


(ix) any failure by the Company to obtain the assumption of this Agreement by
any successor or assign of the Company; or

(x) any purported termination of the Executive's employment which is not made
pursuant to a Notice of Termination satisfying the requirements of Section 3(f).

(f) Notice of Termination: Any termination by the Company pursuant to Section
3(b), 3(c) or 3(d) shall be communicated by a Notice of Termination. For
purposes of this Agreement, a "Notice of Termination" shall mean a written
notice which shall indicate those specific


<PAGE>

termination provisions in this Agreement relied upon and which sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated. For
purposes of this Agreement, no such purported termination by the Company shall
be effective without such Notice of Termination.

(g) Date of Termination: "Date of Termination" shall mean (a) if Executive's
employment is terminated by the Company for Disability, 30 days after Notice of
Termination is given to the Executive (provided that the Executive shall not
have returned to the performance of the Executive's duties on a full-time basis
during such 30 day period) or (b) if the Executive's employment is terminated by
the Company for any other reason, the date on which a Notice of Termination is
given; provided that if within 30 days after any Notice of Termination is given
to the Executive by the Company the Executive notifies the Company that a
dispute exists concerning the termination, the Date of Termination shall be the
date the dispute is finally determined, whether by mutual agreement by the
parties or upon final judgment, order or decree of a court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected) or (c) the date the Executive notifies the Company in writing
that he is terminating his employment and setting forth the Good Reason (as
defined in Section 3(e)).

Section 4. Severance Compensation upon Termination of Employment. If the Company
shall terminate the Executive's employment other than pursuant to Section 3(b),
3(c) or 3(d) or if the Executive shall voluntarily terminate his employment for
Good Reason, then the Company shall pay to the Executive as severance pay in a
lump sum, in cash, on the fifth day following the Date of Termination, an amount
equal to 2.99 times the annualized aggregate annual compensation paid to the
Executive by the Company or any of its subsidiaries during the five calendar
years preceding the Change in Control of the Company; provided, however, that if
the lump sum severance payment under this Section 4, either alone or together
with other payments which the Executive has the right to receive from the
Company, would constitute a "parachute payment" (as defined in Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code")), such lump sum
severance payment shall be reduced to the largest amount as will result in no
portion of the lump sum severance payment under this Section 4 being subject to
the excise tax imposed by Section 4999 of the Code. The determination of any
reduction in the lump sum severance payment under this Section 4 pursuant to the
foregoing proviso shall be made by the Company's Independent Certified Public
Accountants, and their decision shall be conclusive and binding on the Company
and the Executive.

Section 5. No Obligation to Mitigate Damages; No Effect on Other Contractual
Rights: (a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by the Executive as the
result of employment by another employer after the Date of Termination, or
otherwise.

(b) The provisions of this Agreement, and any payment provided for hereunder,
shall not reduce any amounts otherwise payable, or in any way diminish the
Executive's rights under any employment agreement or other contract, plan or
employment arrangement with the Company.

(c) The Company shall, upon the termination of the Executive's employment other
than by Death, Disability (as defined in Section 3(b)), Retirement (as defined
in Section 3(c)) or Cause (as defined in Section 3(d)), or the termination of
the Executive's employment by the Executive without Good Reason, maintain in
full force and effect, for the Executive's continued benefit until the earlier
of (a) two years after the Date of Termination or (b) Executive's commencement
of full time employment with a new employer, all life insurance, medical, health
and accident, and


<PAGE>

disability plans, programs or arrangements in which he was entitled to
participate immediately prior to the Date of Termination, provided that his
continued participation is possible under the general terms and provisions of
such plans and programs. In the event the Executive is ineligible under the
terms of such plans or programs to continue to be so covered, the Company shall
provide substantially equivalent coverage through other sources.

(d) The Executive's account and rights in and under Unifi, Inc.'s Profit Sharing
Plan and Trust, Unifi, Inc.'s Retirement Savings Plan and any other retirement
benefit or incentive plans, shall remain subject to the terms and conditions of
the respective plans as they existed at the time of the termination of the
Executive's employment.

Section 6. Successor to the Company: (a) The Company will require any successor
or assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement expressly, absolutely and unconditionally to assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession or assignment
had taken place. Any failure of the Company to obtain such agreement prior to
the effectiveness of any such succession or assignment shall be a material
breach of this Agreement and shall entitle the Executive to terminate the
Executive's employment for Good Reason. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor or assign to
its business and/or assets as aforesaid which executes and delivers the
agreement provided for in this Section 6 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law. If at any time
during the term of this Agreement the Executive is employed by any corporation a
majority of the voting securities of which is then owned by the Company,
"Company" as used in Sections 3, 4 and 11 hereof shall in addition include such
employer. In such event, the Company agrees that it shall pay or shall cause
such employer to pay any amounts owed to the Executive pursuant to Section 4
hereof.

(b) If the Executive should die while any amounts are still payable to him
hereunder, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's legatee, or other
designee or, if there be no such designee, to the Executive's estate. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives or attorney-in-fact, executors or administrators, heirs,
distributees and legatees.

Section 7. Notice: For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:

If to the Company:

Unifi, Inc.
P. O. Box 19109
Greensboro, NC 27419-9109

ATTENTION:  Mr. William T. Kretzer
            President and Chief Executive Officer


If to the Executive:

Mr. BRIAN R. PARKE
Unifi Textured Yarns Europe, Ltd.
Letterkenny, County Donegal, Ireland

<PAGE>

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

Section 8. Miscellaneous: (a) The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.

(b) Any payment or delivery required under this Agreement shall be subject to
all requirements of the law with regard to withholding (including FICA tax),
filing, making of reports and the like, and Company shall use its best efforts
to satisfy promptly all such requirements.

(c) Prior to the Change in Control of the Company, as herein defined, this
Agreement shall terminate if Executive shall resign, retire, become permanently
and totally disabled, or die. This Agreement shall also terminate if Executive's
employment as an executive officer of the Company shall have been terminated for
any reason by the Board of Directors of the Company as constituted more than
three (3) months prior to any Change in Control of the Company, as defined in
Section 2 of this Agreement.

Section 9. Legal Fees and Expenses: The Company shall pay all legal fees and
expenses which the Executive may incur as a result of the Company's contesting
the validity, enforceability or the executive's interpretation of, or
determinations under, this Agreement.

Section 10. Confidentiality: The Executive shall retain in confidence any and
all confidential information known to the Executive concerning the Company and
its business so long as such information is not otherwise publicly disclosed.

         IN WITNESS WHEREOF, Unifi, Inc. has caused this Agreement to be signed
by a member of the Company's Compensation Committee who is an outside director
pursuant to resolutions duly adopted by the Board of Directors and its seal
affixed hereto and the Executive has hereunto affixed his hand and seal
effective as of the date first above written. UNIFI, INC.

BY: ROBERT A. WARD        (SEAL)
   Compensation Committee




BRIAN R. PARKE           (SEAL)
BRIAN R. PARKE
Vice President


(Exhibit 10s)

AGREEMENT



This AGREEMENT ("Agreement") effective as of the 1st day of February, 1999, by
and between UNIFI, INC., a New York corporation, with its executive offices in
Greensboro, North Carolina, (hereinafter referred to as "UNIFI" or "Company"),
and JERRY W. ELLER, of Yadkin County, North Carolina, (hereinafter referred to
as "MR. ELLER");

                                 R E C I T A L:

WHEREAS, MR. ELLER has been a director since 1985 and an executive officer of
UNIFI since 1981, and has headed up the designing and building of the Company's
plants and additions thereto, the installation, maintenance and operation of the
equipment, and other essential areas in relation to the manufacturing of the
Company's products, both domestic and international, and at the present time is
an Executive Vice President and a member of the Board of Directors; and

WHEREAS, MR. ELLER desires to reduce his workload and has discussed the matter
with management and management, realizing the expertise and ability of MR. ELLER
in the aforementioned areas, as well as the operations of UNIFI in general, deem
it in the best interest of UNIFI that MR. ELLER remain in its employment;

NOW, THEREFORE, in consideration of these presents and the mutual agreements
herein contained and intending
 to be legally bound thereby, the parties agree as
follows:

This Agreement, under Part A, covers the terms and conditions of MR. ELLER's
continued employment and, under Part B, sets out the conditions of UNIFI, its
successors and assigns, and MR. ELLER and his estate, as the case may be, upon
termination of MR. ELLER's employment with the Company (severance or
retirement), and Part C sets forth general provisions that apply to both MR.
ELLER's continued employment and retirement, and upon execution of this
Agreement, the provisions of Part A, Part B and Part C shall be legally binding
on UNIFI, its successors and assigns, and MR. ELLER and his estate.

                               PART A. EMPLOYMENT

Section 1. Employment - UNIFI hereby continues the employment of MR. ELLER and
MR. ELLER does hereby accept continued employment in an executive officer's
capacity, with such title as the Board of Directors may designate from time to
time.

Section 2. Term of Employment -

 (A) Term - The term of MR. ELLER's employment shall be for a period of two (2)
years, commencing on the first day of February, 1999, and terminating on
February 1, 2001 ("Termination Date"), unless earlier terminated as hereinafter
provided in this Part A.

(B) Acceleration - MR. ELLER's termination of employment with UNIFI can be
accelerated by MR. ELLER and UNIFI mutually consenting to the acceleration of
said Termination Date to such earlier date as agreed upon.

Section 3. Duties - MR. ELLER, during the continuation of his employment, shall
have such duties as assigned to him by the Chief Executive Officer and/or the
President and Chief Operating Officer in the areas of operation and management
in which he is presently engaged, or such duties as might be assigned to him by
the Board of Directors of UNIFI.

Section 4. Consideration - For services rendered by MR. ELLER during the term of
his continued employment, UNIFI agrees to pay to MR. ELLER the same base salary
he is receiving

<PAGE>

as of the date of this Agreement, subject to being changed from time to time by
the Board of Directors, payable in installments in the same frequency as other
executive officers are paid, plus such additional compensation and bonuses as
may be awarded from time to time to MR. ELLER by the Board of Directors.

Section 5. Fringe Benefits - This Agreement is not intended to and shall not be
deemed in lieu of any rights, benefits, and privileges to which MR. ELLER may be
entitled to as an employee of the Company under any retirement, profit sharing,
insurance, hospitalization or other plans which may now be in effect or which
may hereafter be adopted, it being understood that MR. ELLER shall have the same
rights and privileges to participate in any such plans and benefits provided for
other executive officers or key employees of UNIFI during this period of
employment.


MR. ELLER during the term of his employment shall be entitled to any other
benefits he was receiving as an employee and executive officer of the Company
prior to the effective date of this Agreement. Provided, however, MR. ELLER
agrees that he will not be entitled to and waives his right to share in the
contributions, if any, made to the Unifi, Inc. Profit Sharing Plan and Trust
("the Plan") for the fiscal year in which his employment terminates. MR. ELLER
hereby agrees to indemnify and hold harmless UNIFI, its directors, officers and
employees, as well the Plan, for any amounts that may be assessed against each
and every one of the foregoing for his not sharing in such contribution, if any,
as made to the Plan for fiscal year ended the year in which his employment
terminates.

Section 6. Disability and Death - In the event MR. ELLER becomes permanently
disabled as that term is defined in the Company's group disability insurance
policy covering MR. ELLER, or dies ("disability or death date") prior to
February 1, 2001, or the agreed upon date provided for in paragraph (B) of
Section 2 above, the date of disability or death shall be the Termination Date
of MR. ELLER's employment with the Company.

Section 7. Option Grants - Regarding option grants:

(A) MR. ELLER was granted options under the Unifi, Inc. 1992 Incentive Stock
Option Plan and the Unifi, Inc. 1996 Incentive Stock Option Plan. Stock option
agreements dated 10/27/92, 10/21/93, 9/22/94, 4/18/95, and 10/22/98 were entered
into in relation to the respective stock option grants. All options which have
not been exercised shall be canceled and the respective stock option agreements
terminated. New stock options will be granted to MR. ELLER under the Unifi, Inc.
1996 Non-Qualified Stock Option Plan for the number of unexercised shares, at
the purchase price per share, and terminating as set forth in the
above-referenced respective incentive stock option agreements, a copy of the new
Non-Qualified Stock Option Agreement being attached hereto as Exhibit "A".

(B) MR. ELLER was previously granted stock options under the Unifi, Inc. 1996
Non-Qualified Stock Option Plan and stock option agreements were entered into
with respect to said grants. The stock option agreements will be amended, with a
copy of said amendments being attached hereto as Exhibits "B-1" and "B-2".

                               PART B.  RETIREMENT

Section 1. Retirement - The parties hereto agree that upon the termination of
MR. ELLER's employment, as provided in Part A of this Agreement, the provisions
of this Part B are activated upon the Termination Date.

<PAGE>

Section 2. Consideration - UNIFI agrees to pay MR. ELLER the following amounts:

(A) The sum of One Hundred Twenty-Six Thousand Dollars and No/100 ($126,000.00)
within ten (10) days after termination of his employment with UNIFI, to wit:
February 1, 2001 or such earlier date as provided for in Part A above. This
amount shall be paid by check to MR. ELLER or wired to such account as MR. ELLER
directs from time to time. This payment will be subject to all applicable
federal and state taxes.


(B) In addition to the payment provided for under (A) above, UNIFI shall pay to
MR. ELLER the sum of One Million One Hundred Sixty Thousand Dollars and No/100
($1,160,000.00). This amount shall be paid in thirty-six (36) equal monthly
installments of $32,222.22 each on UNIFI's regular salaried payroll dates, with
the first monthly installment being due and payable on February 1, 2001, or the
first day of the month in which MR. ELLER's employment is terminated, as
provided in Part A of this Agreement, and a like installment being due and
payable on the same date of each calendar month thereafter, until the sum of
$1,160,000.00 has been paid in full. These payments will be subject to all
applicable federal and state taxes.

Section 3. Medical and Dental Insurance - UNIFI will continue to provide MR.
ELLER medical and dental coverage similar to medical and dental coverage
provided regular employees covered by the terms of the Unifi, Inc. Employee
Welfare Benefit Plan until the earliest to occur of the last day of the month in
which MR. ELLER attains the age of sixty-five (65) years or obtains employment
with another company. MR. ELLER shall be eligible to continue to receive medical
and dental benefits in order that he may obtain coverage for himself and for his
Dependents, as the term "Dependents" is defined in the Medical Plan, and so that
the following shall apply to coverage of MR. ELLER and his Dependents:

(A) As a condition of coverage of MR. ELLER, he must pay for each month of
coverage an amount equal to the premium paid for such month by an active
employee for coverage under the Medical Plan. During the time when the Severance
Payment installments are being made, such premiums shall be paid by deductions
from such installments unless UNIFI in its sole discretion agrees otherwise.
Thereafter, such premiums shall be due on the first day of the month to which
they apply, and the medical and dental coverage shall be terminated unless such
premiums are received when due, without any grace period.

(B) As a condition of coverage of a Dependent, MR. ELLER must pay for each month
of coverage an amount equal to the premium paid for such month by any active
employee for coverage of a Dependent under the Medical Plan. During the time
when the Severance Payment installments are being made, such premiums shall be
paid by deductions from such installments unless UNIFI in its sole discretion
agrees otherwise. Thereafter, such premiums shall be due on the first day of the
month to which they apply, and the medical and dental coverage shall be
terminated unless such premiums are received when due, without any grace period.


(C) The terms of medical and dental coverage for MR. ELLER and his Dependents at
any given time shall be the terms applicable to active employees and their
Dependents at such time. It is explicitly understood and agreed that any
amendments to or alteration of the Medical Plan (including any amendment
terminating the Medical Plan) may be applicable to MR. ELLER and his Dependents
without regard to whether the amendment or alteration was adopted or made before
or after the Effective Date, and/or the date MR. ELLER entered into this
Agreement


<PAGE>

and/or chose not to revoke this Agreement. It is explicitly understood and
agreed that a Dependent will lose medical and dental coverage as of the first
day of the month next following MR. ELLER's sixty-fifth (65) birthday,
regardless of the Dependent's age, unless the Dependent has lost coverage
earlier. It is explicitly understood and agreed that no benefits under the
Employee Welfare Plan will be provided (including, without limitation, benefits
under the portions of the Welfare Benefit Plan that provide benefits in the
event of disability, life insurance coverage, and accidental death and
dismemberment coverage) except as specifically provided herein.

Section 4. COBRA, etc. - It is understood that this Agreement does not waive or
abrogate MR. ELLER's entitlement to health insurance benefits under COBRA or to
vested retirement funds in UNIFI's retirement plan. Any retirement benefits to
which MR. ELLER is entitled shall be governed by the terms of the retirement
plan.

Section 5. Other Benefits - MR. ELLER agrees that no provision is granted for
continued vacation pay, automobile allowance, education renewal, tuition
reimbursement, or mobile telephone service after the Termination Date of his
employment, as provided in Part A of this Agreement, and that he will return to
UNIFI all company property, documents, notes, software, programs, data and any
other materials (including any copies thereof) in his possession.

Section 6. Split Dollar Insurance - MR. ELLER shall have the option to buy the
life insurance policy or policies on his life, currently owned or assigned by or
to UNIFI on a Split Dollar Arrangement, from UNIFI or have the respective policy
or policies continue in effect as follows:

(A) To purchase said policy or policies by paying the amount of the cash
surrender value of the same; or

(B) The amount of the premiums UNIFI has previously paid on said policy or
policies; or

(C) Have the policy or policies continue in effect under Section 9(b)(i) of the
Executive Split Dollar Life Insurance Agreement between UNIFI and MR. ELLER,
dated July 1, 1990, with UNIFI being obligated to continue paying the premiums
on said policy or policies, provided MR. ELLER continues to make the required
premium contributions until the Termination Date.

MR. ELLER must exercise one of the foregoing options by giving UNIFI written
notice thereof at or any time before the Termination Date of his employment, as
provided in Part A of this Agreement. In the event MR. ELLER elects either
option (A) or option (B), he shall make payment to UNIFI within three (3) months
after the termination of his employment, as provided in Part A of this
Agreement.


Section 7. Taxes - MR. ELLER will be responsible for any federal, state or local
taxes which may be owed by him by virtue of the receipt of any portion of the
consideration herein provided.

Section 8. Consents of MR. ELLER - MR. ELLER agrees that:

(A) The only type of insurance that UNIFI is to provide him is medical and
dental insurance, as provided in Section 2 of this Part B;

<PAGE>

(B) He is not entitled to and waives his right to share in the contribution, if
any, made to UNIFI's Profit Sharing Plan and Trust for the fiscal year in which
his employment under Part A terminates. MR. ELLER hereby agrees to indemnify and
hold harmless UNIFI, its directors, officers and employees, as well as UNIFI's
Profit Sharing Plan and Trust, for any amounts that may be assessed against each
and everyone of the foregoing for his not sharing in such contribution, if any,
made to the Profit Sharing Plan for the fiscal year in which his employment
under Part A terminates.

                             PART C.  MISCELLANEOUS

The provisions of this Part C are applicable during the continued employment of
MR. ELLER under Part A and his retirement under Part B of this Agreement.

Section 1. Disclosure of Confidential Information - MR. ELLER agrees that:

(A) For a period of five (5) years from the date of this Agreement, he will not
disclose or make available to any person or other entity any trade secrets,
confidential information, as hereinafter defined, or "know-how" relating to
UNIFI's, its affiliates' and subsidiaries', businesses without written authority
from UNIFI's President or Board of Directors, unless he is compelled to disclose
it by judicial process.

Confidential Information - shall mean all information about UNIFI, its
affiliates or subsidiaries, or relating to any of their products or any phase of
their operations, not generally known to their competitors or which is not
public information, which MR. ELLER knows or acquired knowledge of during the
term of his employment.

(B) Documents - under no circumstances shall MR. ELLER remove from UNIFI's
offices any of UNIFI's books, records, documents, customer lists, or any copies
of such documents without UNIFI's written consent, nor shall he make any copies
of UNIFI's books, records, documents, or customer lists for use outside of
UNIFI, except as specifically authorized in writing by the President or Board of
Directors of UNIFI.

Section 2. Non-Compete - MR. ELLER agrees that he will not directly or
indirectly, for a period of five (5) years from the date of this Agreement, own
any interest in, other than ownership of less than two percent (2%) of any class
of stock of a publicly held corporation, manage, operate, control, being
employed by, render advisory services to, act as a consultant to, participate
in, assessed or be connected with any competitor, as hereinafter defined, unless
approved by the President of UNIFI.

Competitor - shall mean any company engaged in the business of developing,
producing, or distributing a product similar to any product produced by UNIFI,
its affiliates or subsidiaries, prior to the date of this Agreement.

Section 3. Right of First Refusal - MR. ELLER agrees to provide UNIFI with a
written offer of First Right of Refusal of any product or technology developed
by him for a company he owns, has an interest in, or is employed by during the
five (5) year covenant not to compete period provided in Section 1 of this Part
C. UNIFI will, within fifteen (15) days after receipt of said offer, give MR.
ELLER written notice of its acceptance or counteroffer thereof.

Section 4. Breach - MR. ELLER acknowledges that compliance with Sections 1, 2
and 3 of this Part C is necessary to protect UNIFI's businesses and goodwill; a
breach of said paragraph will do irreparable and continual damage to UNIFI and
an award of monetary damages would not


<PAGE>

be adequate to remedy such harm; therefore, in the event he breaches or
threatens to breach this Agreement, UNIFI shall be entitled to both a
preliminary and permanent injunction in order to prevent the continuation of
such harm and monetary damages, in so far as they can be determined, including,
without limitation, all reasonable costs and attorneys fees, incurred by UNIFI
in enforcing the provisions of this Agreement. Provided, however, that MR. ELLER
shall have thirty (30) days within which to cure any breach of the provisions of
Sections 3 and 4 of this Part C. Nothing in this Agreement however, shall
prohibit UNIFI from also pursuing any other remedies.

Section 5. Releases and Waivers of Each Party - The parties hereto agree as
follows:

(A) MR. ELLER hereby fully and unconditionally releases and discharges all
claims and causes of action which he or his heirs, personal representatives or
assigns ever had, or now have, or hereafter may have (based on events
transpiring on or before the Termination Date set forth in Part A hereof)
against UNIFI, its subsidiaries and their respective officers, directors,
employees, counsel and agents, in each case past or present, of whatsoever kind
and nature, in law, equity or otherwise, arising out of or in any way connected
with his employment, association or other involvement with UNIFI; and

(B) UNIFI hereby fully and unconditionally releases and discharges all claims
and causes of action which it, its successors or assigns ever had, or now have,
or hereafter may have (based on events transpiring on or before the Termination
Date set forth in Part A hereof) against MR. ELLER, his heirs, personal
representatives or assigns, in each case past or present, of whatsoever kind and
nature, in law, equity or otherwise, arising out of or in any way connected with
his employment, association or other involvement with UNIFI.


Section 6. Waiver of Rights - If, in one or more instances, either party fails
to insist that the other party perform any of the terms of this Agreement, such
failure shall not be construed as a waiver by such party of any past, present,
or future right granted under this Agreement, and the obligations of both
parties under this Agreement shall continue in full force and effect.

Section 7. Termination - This Agreement shall terminate and UNIFI shall have no
further obligations or responsibility under this Agreement except as provided in
this section, upon the occurrence of any of the following events:

(A) UNIFI and MR. ELLER mutually agree in writing to terminate this Agreement.

(B) The death of MR. ELLER, subject to the payment of any sums due MR. ELLER at
the time of his death by UNIFI under Part A of this Agreement and the
outstanding amount payable to MR. ELLER or his estate under Section 2 of Part B,
and the payment of any sums due MR. ELLER's estate or other designated
beneficiaries under any life, disability or other insurance programs or policies
of UNIFI, covering MR. ELLER.

(C) UNIFI may terminate this Agreement immediately on MR. ELLER's breach of any
provisions of the disclosure of confidential information, documents, and
covenant not to compete, in Sections 1, 2 and 3 of this Part C.

Section 8. Survival - The obligations contained in Sections 1, 2, 3, and 4, of
this Part C shall survive the termination of this Agreement. In addition, the
termination of this Agreement shall not affect any of the rights or obligations
of either party arising prior to, or at the time of, the


<PAGE>

termination of this Agreement, or which may arise by any event causing the
termination of this Agreement.

Section 9. Notices - Any notice required or permitted to be given under this
Agreement shall be sufficient, if in writing and if sent by registered or
certified mail, postage prepaid, or telecopier to:

JERRY W. ELLER
2100 Maynard Road
Yadkinville, NC  27055

and to:

UNIFI, INC.
Attn: Willis C. Moore, III
7201 W. Friendly Avenue (27410)
P.O. Box 19109
Greensboro, NC  27419-9109
Fax: (910) 294-4751


Section 10. Assignment - The rights and obligations of UNIFI under this
Agreement shall inure to the benefit of and be binding upon its successors and
assigns; provided, however, that this Agreement is not assignable by UNIFI
except as part of a merger, consolidation or sale of all or substantially all of
UNIFI's assets as a going business to any other corporation or business
organization. UNIFI agrees that it will not merge into, consolidate with, or
sell all or substantially all of its assets to any other corporation or business
organization unless such successor or purchaser specifically agrees to assume
and be bound by all of the terms and conditions of this Agreement or
arrangements are made between UNIFI and MR. ELLER to secure UNIFI's obligations
under this Agreement.

This Agreement may not be assigned or otherwise transferred by MR. ELLER.

Section 11. Applicable Law - This Agreement shall be interpreted and construed
under the laws of North Carolina.

Section 12. Entire Agreement - This instrument contains the entire agreement of
the parties. It may not be changed or altered, except by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.

Section 13. Arbitration - In the event of any differences of opinion or
disputes, between MR. ELLER and UNIFI, with respect to the construction or
interpretation of this Agreement or the alleged breach thereof, which can not be
settled amicably by agreement of the parties, such disputes shall be submitted
to and determined by arbitration by a single arbitrator in the City of
Greensboro, North Carolina, in accordance with the rules of the American
Arbitration Association and judgment upon the award shall be final, binding and
conclusive upon the parties and may be entered in the highest court, state or
federal, having jurisdiction.


IN WITNESS WHEREOF, the parties hereto have executed this Agreement under their
respective hands and seals as of the day and year first above written.

<PAGE>

JERRY W. ELLER         (SEAL)
JERRY W. ELLER

Witness:




UNIFI, INC.


BY:  WILLIS C. MOORE, III

Attest:


CLIFFORD FRAZIER, JR.
Clifford Frazier, Jr.
Secretary




                             UNIFI, INC. Exhibit "A"

                    1998 NON-QUALIFIED STOCK OPTION AGREEMENT


THIS OPTION AGREEMENT, effective the 31st day of January, 1999, by and between
UNIFI, INC., a New York corporation (hereinafter called "Corporation"), and
JERRY W. ELLER, a Director and Executive Officer of the Corporation (hereinafter
called "Optionee").

The Board of Directors considers the Optionee to be eligible and it desirable
that he be granted an option to acquire shares of common stock of the
Corporation under the Unifi, Inc. 1996 Non-Qualified Stock Option Plan (the
"Plan"), adopted by the Board of Directors on April 18, 1996,


<PAGE>

and ratified and approved by the Shareholders of the Corporation at their Annual
Meeting held on October 24, 1996.

NOW, THEREFORE, in consideration of these premises, it is agreed as follows:

Section 1. Grant of Option. The Corporation hereby grants to Optionee the right,
privilege, and option to purchase 111,145 shares of its common stock in the
manner and subject to the conditions hereinafter set forth.

Section 2. Time of Exercise of Option. The Option granted under Section 1 of
this Agreement shall be in increments, at a purchase price, vest, exercisable
and expire as follows:

(A) 15,000 shares, at a purchase price of $24.667 per share, vest and are
exercisable immediately upon execution of this Agreement, subject to the
provisions of Section 5 hereof, and expire on October 27, 2002;

(B) 10,000 shares, at a purchase price of $24.375 per share, vest and are
exercisable immediately upon execution of this Agreement, subject to the
provisions of Section 5 hereof, and expire on October 21, 2003;

(C) 21,145 shares, at a purchase price of $23.875 per share, vest and are
exercisable immediately upon execution of this Agreement, subject to the
provisions of Section 5 hereof, and expire on September 22, 2004;

(D) 50,000 shares, at a purchase price of $25.25 per share, vest and are
exercisable immediately upon execution of this Agreement, subject to the
provisions of Section 5 hereof, and expire on April 18, 2005; and

(E) 15,000 shares, at a purchase price of $16.3125 per share, vest and are
exercisable immediately upon the execution of this Agreement, subject to the
provisions of Section 5 hereof, and expire on October 22, 2008.


Section 3. Method of Exercise. The Option shall be exercised by written notice
directed to Mr. Willis C. Moore, III, Senior Vice President and Chief Financial
Officer of the Corporation, or Mr. Robert A. Ward, or such other Officer as
hereafter designated by the Board of Directors ("Designated Officer") at the
Corporation's principal office in Greensboro, North Carolina, or at such other
office as the Corporation may designate. Such notice shall (a) set forth the
number of full shares which are being exercised, (b) be signed by the person
exercising the Option, (c) be accompanied by a certified or other check
acceptable to the Corporation made payable to the order of the Corporation for
the full purchase price of such shares or by a certificate or certificates of
Unifi, Inc. common stock, the fair market value of which on the New York Stock
Exchange at the close of business on the date said notice is received by the
Corporation, shall equal or exceed the Option price, said certificate or
certificates being duly endorsed, and (d) be accompanied by a signed investment
representation letter as provided in Section 8 hereof. Such exercise shall be
effective only when said properly executed notice accompanied by check or stock
certificates, as referred to above, are received by Mr. Moore, Mr. Ward, or such
other Designated Officer as the Corporation may from time to time designate for
such purpose. The certificate or certificates for the shares issued upon the
exercise of an Option or part thereof and any shares delivered to the
Corporation under subparagraph (c) of this Section 3, in excess of the Option
price shall be issued or reissued, as the case may be, in the name of the person
exercising the Option, and shall be


<PAGE>

delivered to such person. All shares issued as provided herein, will be fully
paid and non-assessable.

Section 4. Withholding. Optionee, upon the exercise of an Option granted to him
under this Agreement, shall pay to the Corporation in cash the amount of any tax
or other amount required by any governmental authority to be withheld and paid
over by the Corporation to such authority for the account of such Optionee.
Notwithstanding the foregoing, the Optionee may satisfy this obligation in whole
or in part, and any other local, state or federal income tax obligations
resulting from the exercise or the surrender of an Option, by electing to
deliver to the Corporation shares owned by the Optionee at the time of the
exercise or surrender, or to have the Corporation withhold shares from the
shares to which the Optionee is entitled. The number of shares to be delivered
or withheld shall have a fair market value as of the date the amount of tax to
be withheld is determined, those being withheld being as nearly equal to (but
not exceeding) the amount of such obligation being satisfied as possible.

Section 5. Termination of Option. Except as herein otherwise stated, the Option
to the extent not heretofore exercised shall terminate upon the first to occur
of the following dates:

(A) In the event of the death of the Optionee, the Administrator of the deceased
Optionee's estate, the Executor under his Last Will and Testament, or the person
or persons to whom the stock Option shall have been validly transferred by such
Executor or Administrator pursuant to the Last Will and Testament or the
Intestacy Succession Laws of North Carolina shall have the right within six (6)
months of the date of the Optionee's death, but not beyond the expiration date
of the Option, to exercise such Option to the extent exercisable by the Optionee
at the date of his death, except that the Board of Directors may, in its
discretion, accelerate the date for exercising all or any part of the Option
which was not otherwise exercisable on the Optionee's death or Termination Date;
and

(B) The expiration dates for the number of shares set forth in Sections 2(A),
(B), (C), (D) and (E) hereof.

Section 6. Reclassification, Consolidation, or Merger. If and to the extent that
the number of issued shares of common stock of the Corporation shall be
increased or reduced by change in par value, split up, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to option and the Option price per share shall be proportionately
adjusted.

If the Corporation is reorganized or consolidated or merged with another
corporation, Optionee shall be entitled to receive options covering shares of
such reorganized, consolidated, or merged company in the same proportion, at an
equivalent price, and subject to the same conditions. For purposes of the
preceding sentence, the excess of the aggregate fair market value of the shares
subject to the option immediately after the reorganization, consolidation, or
merger over the aggregate option price of such shares shall not be more than the
excess of the aggregate fair market value of all shares subject to the Option
immediately before such reorganization, consolidation, or merger over the
aggregate Option price of such shares, and the new option or assumption of the
old Option shall not give Optionee additional benefits which he did not have
under the old Option, or deprive him of benefits which he had under the old
Option.

Section 7. Restrictive Legend. The certificates issued under this Option, upon
exercise thereof by the Optionee, shall carry a restrictive legend as follows:

The shares evidenced by this certificate have not been registered under the
Federal Securities Act of 1933 ("the '33 Act"), as amended, and may not be
hypothecated, sold, transferred or otherwise


<PAGE>

disposed of in the absence of a registration under the '33 Act or an exemption
from registration under applicable security laws, including Rule 144 under the
'33 Act, or an opinion from counsel satisfactory to the Corporation prior to the
proposed transaction that registration is not required under the '33 Act.

Section 8. Purchase For Investment. By accepting this Option, the Optionee
agrees that any shares of common stock purchased upon the exercise of this
Option shall be acquired for investment and not for distribution, and that each
notice of the exercise of any portion of this Option shall be accompanied by the
following representation in writing signed by him or such other person as may be
exercising this Option under the provisions of paragraph (A) of Section 5
hereof:

I hereby warrant and represent that the shares being acquired by me pursuant
hereto are being acquired by me with my own funds for investment for my own
account and not with a view to offer for sale, or for sale in connection with
the distribution or transfer thereof. I further warrant and represent that I am
neither participating in or have a direct or indirect participation in the
distribution or transfer of such shares, nor am I participating in or have a
participation in the direct or indirect underwriting of any such distribution or
transfer of the shares.

Section 9. Listing of Shares. Although the shares reserved for issue under the
"Unifi, Inc. 1996 Non-Qualified Stock Option Plan", of which the Option shares
are a part, have been registered with the Securities and Exchange Commission and
listed on the New York Stock Exchange, the Optionee covenants, agrees, warrants
and represents that PRIOR to any proposed sale, pledge, hypothecation, gift or
transfer, for value or otherwise, of any or all of the shares or any interest
therein of any shares received upon exercising this Option (transfer), he shall:


(A) give written notice to the Corporation expressing his desires to effect a
transfer and describe in detail such proposed transfer;

(B) deliver to the Corporation such other information in relation to the
proposed transfer as the Corporation may request.

The Corporation thereafter, if, in the opinion of the Designated Officer or the
Corporation's counsel the transfer cannot be made without further registration
under the Act and/or applicable State Securities Laws, shall promptly notify
Optionee in writing, and the transfer shall not be made unless such registration
is then in effect.

The Corporation reserves the right to file such further registration of the
stock covered by the Plan as it deems necessary with the Securities and Exchange
Commission and New York Stock Exchange, and in connection therewith, to make any
changes to the provisions of this Agreement as necessary to affect such future
action.

Section 10. Rights Prior to Exercise of the Option. This Option is
nontransferable by the Optionee, except in the event of his death, as provided
in paragraph (A) of Section 5, and during his lifetime is exercisable only by
him. Optionee shall have no right as a Shareholder with respect to the Option
shares until payment of the Option price, and delivery to him of such shares as
herein provided.

Section 11. SEC Rules and Regulations. The Option granted to the Optionee, by
the Board of Directors under this Agreement, is intended to meet the eligibility
requirements of the Securities and Exchange Commission's ("SEC") proposed new
Rule 16b-3 issued October 1995, entitled


<PAGE>

"Transactions Between an Issuer and its Directors or Officers". Dependent upon
future actions of the SEC, the Option may not be exempt under Rule 16b-3 and,
therefore, may be subject to Rule 16b, the so-called "Short Swing Profit Rule",
which provides for the disgorgement of any profits realized by the Optionee, as
an insider, from the purchase and sale (or sale and purchase) of any of the
Corporation's common stock within a six month period. The Corporation recommends
that the Optionee consult with counsel, or Mr. Willis C. Moore, III, or Mr.
Robert A. Ward of the Corporation, prior to exercising an Option.

Section 12. Binding Effect. All rights of the Optionee hereunder are subject to
the terms and provisions of the Unifi, Inc. 1996 Non-Qualified Stock Option
Plan, and to such interpretive rules and regulations relating to the Plan as may
be prescribed from time to time by the Board of Directors of the Corporation.

IN WITNESS WHEREOF, the Corporation has caused this Agreement to be duly
executed by its Officers, and the Optionee has hereunto set his hand and seal.

UNIFI, INC.



BY:  WILLIS C. MOORE, III


Attest:


C. CLIFFORD FRAZIER, JR.
Secretary


JERRY W. ELLER
Optionee



<PAGE>

                            UNIFI, INC. Exhibit "B-1"

                    1996 NON-QUALIFIED STOCK OPTION AMENDMENT


THIS FIRST AMENDMENT, effective the 31st day of January, 1999, to the 1996
Non-Qualified Stock Option Agreement, effective April 18, 1996 ("Option
Agreement") by and between UNIFI, INC., a New York corporation (hereinafter
called "Corporation"), and JERRY W. ELLER, a Director and Executive Officer of
the Corporation (hereinafter called "Optionee");

                            W I T N E S S E T H:

WHEREAS, the Optionee was granted an option under the 1996 Non-Qualified Stock
Option Plan ("Plan"), as adopted by the shareholders of the Corporation, said
option being granted in the Option Agreement effective April 18, 1996, which is
being amended herein as follows: Section 4 of the Option Agreement effective
April 18, 1996 shall be deleted and rewritten as follows:

Section 4. Termination of Option. Except as herein otherwise stated, the Option
to the extent not heretofore exercised shall terminate upon the first to occur
of the following dates:

(a) In the event of the death of the Optionee, the Administrator of the deceased
Optionee's estate, the Executor under his Last Will and Testament, or the person
or persons to whom the stock Option shall have been validly transferred by such
Executor or Administrator pursuant to the Last Will and Testament or the
Intestacy Succession Laws of North Carolina shall have the right within six (6)
months of the date of the Optionee's death, but not beyond the expiration date
of the Option, to exercise such Option to the extent exercisable by the Optionee
at the date of his death, except that the Board of Directors may, in its
discretion, accelerate the date for exercising all or any part of the Option
which was not otherwise exercisable on the Optionee's death or Termination Date;
and

(b) April 17, 2006, being the expiration of ten (10) years from the effective
date of the option granted hereunder.



IN WITNESS WHEREOF, the Corporation has caused this First Amendment to be duly
executed by its Officers, and the Optionee has hereunto set his hand and seal.

UNIFI, INC.


BY: WILLIS C. MOORE, III



Attest:


C. CLIFFORD FRAZIER, JR.
Secretary


<PAGE>

JERRY W. ELLER      (SEAL)
Optionee




                            UNIFI, INC. Exhibit "B-2"

                    1996 NON-QUALIFIED STOCK OPTION AMENDMENT



THIS FIRST AMENDMENT, effective the 31st day of January, 1999, to the 1996
Non-Qualified Stock Option Agreement, effective April 17, 1997 ("Option
Agreement") by and between UNIFI, INC., a New York corporation (hereinafter
called "Corporation"), and JERRY W. ELLER, a Director and Executive Officer of
the Corporation (hereinafter called "Optionee");

                              W I T N E S S E T H:


WHEREAS, the Optionee was granted an option under the 1996 Non-Qualified Stock
Option Plan ("Plan"), as adopted by the shareholders of the Corporation, said
option being granted in the Option Agreement effective April 17, 1997, which is
being amended herein as follows; Section 5 of the Option Agreement effective
April 17, 1997 shall be deleted and rewritten as follows:

Section 5. Termination of Option. Except as herein otherwise stated, the Option
to the extent not heretofore exercised shall terminate upon the first to occur
of the following dates:

(a) In the event of the death of the Optionee, the Administrator of the deceased
Optionee's estate, the Executor under his Last Will and Testament, or the person
or persons to whom the stock Option shall have been validly transferred by such
Executor or Administrator pursuant to the Last Will and Testament or the
Intestacy Succession Laws of North Carolina shall have the right within six (6)
months of the date of the Optionee's death, but not beyond the expiration date
of the Option, to exercise such Option to the extent exercisable by the Optionee
at the date of his death, except that the Board of Directors may, in its
discretion, accelerate the date for exercising all or any part of the Option
which was not otherwise exercisable on the Optionee's death or Termination Date;
and

(b) April 17, 2007, being the expiration of ten (10) years from the effective
date of the option granted hereunder.




IN WITNESS WHEREOF, the Corporation has caused this First Amendment to be duly
executed by its Officers, and the Optionee has hereunto set his hand and seal.

UNIFI, INC.



<PAGE>

BY:  WILLIS C. MOORE, III


Attest:



C. CLIFFORD FRAZIER, JR.
Secretary


JERRY W. ELLER                      (SEAL)
Optionee


                                  (Exhibit 21)

                                   UNIFI, INC.

                                  SUBSIDIARIES

<TABLE>
<CAPTION>
<S>     <C>
Name                       Address                      Incorporation           Unifi Percentage of
                                                                                Voting Securities Owned

Unifi, FSC Ltd.            Agana, Guam                  Guam                    100%

Unifi Textured             Letterkenny, Ireland         United Kingdom          100%
Yarns Europe, Ltd.

Unifi International        Greensboro, NC               North Carolina          100%
Services, Inc.

Unifi Manufacturing,       Greensboro, NC               North Carolina          100%
Inc. ("UMI")

Unifi Sales &              Greensboro, NC               North Carolina          100%
Distribution, Inc.
("USD")

Unifi Manufacturing        Greensboro, NC               North Carolina           95%
Virginia, LLC                                                                   (5% - UMI)

Unifi Export Sales,        Greensboro, NC               North Carolina           95%
LLC                                                                             (5% - UMI)

Unifi Technology           Charlotte, NC                North Carolina           95.12%  USD
Group, LLC                                                                      4.88%Others

Unifi Textured             Greensboro, NC               North Carolina           85.42% - UMI
Polyester, LLC                                                                  (14.58% - Burlington
                                                                                Industries, Inc.)

Unifi do Brasil, LTDA      San Paulo, Brazil            Brazil                  100% 
Latda

Spanco Industries,         Greensboro, NC               North Carolina          100% - UMI
Inc.  ("SI")

[ SI owns:        100%     Spanco International, Inc., ("SII"), a North Carolina
                           corporation]

[SII owns:          83%    Spanco - Latin America, S.A., a Columbian sociedad anonime; the
                           remainder of Spanco Latin America is presently owned  by:
                           1%  Unifi designees
                           16% Spanco - Panama, S.A. ]
</TABLE>






                         Consent of Independent Auditors


We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-23201) pertaining to the Unifi, Inc. 1982 Incentive Stock Option Plan
and the 1987 Non-Qualified Stock Option Plan, and the Registration Statement
(Form S-8 No. 33-53799) pertaining to the Unifi, Inc. 1992 Incentive Stock
Option Plan and Unifi Spun Yarns, Inc. 1992 Employee Stock Option Plan, and
Registration Statement (Form S-8 No. 333-35001) pertaining to the Unifi, Inc.
1996 Incentive Stock Option Plan and the Unifi, Inc. 1996 Non-Qualified Stock
Option Plan of our report dated July 20, 1999, with respect to the consolidated
financial statements and schedule of Unifi, Inc. included in this Annual Report
(Form 10-K) for the year ended June 27, 1999.

/s/ ERNST & YOUNG LLP

Greensboro, North Carolina
September 20, 1999





<TABLE> <S> <C>

<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
ANNUAL REPORT FOR THE TWELVE MONTH PERIOD ENDED JUNE 27, 1999, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                                   12-MOS
<FISCAL-YEAR-END>                          JUN-27-1999
<PERIOD-END>                               JUN-27-1999
<CASH>                                          44,433
<SECURITIES>                                         0
<RECEIVABLES>                                  194,533
<ALLOWANCES>                                     8,749
<INVENTORY>                                    129,917
<CURRENT-ASSETS>                               362,149
<PP&E>                                       1,231,013
<DEPRECIATION>                                 541,275
<TOTAL-ASSETS>                               1,365,840
<CURRENT-LIABILITIES>                          145,252
<BONDS>                                        478,898
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                         5,955
<OTHER-SE>                                     640,183<F1>
<TOTAL-LIABILITY-AND-EQUITY>                 1,365,840
<SALES>                                      1,251,160
<TOTAL-REVENUES>                             1,251,160
<CGS>                                        1,076,610
<TOTAL-COSTS>                                1,076,610
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                 6,241
<INTEREST-EXPENSE>                              27,459
<INCOME-PRETAX>                                 87,396
<INCOME-TAX>                                    28,369
<INCOME-CONTINUING>                             59,027
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                        2,768
<NET-INCOME>                                    56,259
<EPS-BASIC>                                        .93
<EPS-DILUTED>                                      .93
<FN>
<F1>OTHER STOCKHOLDERS EQUITY OF $640,183 IS COMPRISED OF CAPITAL IN EXCESS OF PAR
VALUE OF $13, RETAINED EARNINGS OF $658,353 AND ACCUMULATED OTHER COMPREHENSIVE
LOSS OF $(18,183).
</FN>
        

</TABLE>