GLENOIT CORP, 10-K, 2000-04-17

GLENOIT CORP
10-K, 2000-04-17
KNITTING MILLS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDING JANUARY 1, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission file numbers 333-42411 and 333-42411-01
--------------------------------------------------

GLENOIT CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 13-3862561
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification Number)

GLENOIT ASSET CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 51-0343206
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification Number)

111 West 40th Street
New York, New York 10018
Telephone: (212) 391-3915
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

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

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 Section 13 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 [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regular 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. [ ]

None of the voting securities of Glenoit Corporation or Glenoit Asset
Corporation is held by non-affiliates.

As of January 1, 2000, there were 1,000 shares of Glenoit Corporation common
stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

<PAGE>

GLENOIT CORPORATION AND GLENOIT ASSET CORPORATION

FORM 10-K Annual Report Index

PART I

Item 1. Business, page 1.

Item 2. Properties, page 8.

Item 3. Legal Proceedings, page 8.

Item 4. Submission of Matters to a Vote of Security Holders, Page 8.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters,
page 8.

Item 6. Selected Financial Data, page 9.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations, page 11.

Item 8. Financial Statements and Supplementary Data, page 17.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure, page 17.

PART III

Item 10. Directors and Executive Officers of the Registrant, page 18.

Item 11. Executive Compensation, page 19.

Item 12. Security Ownership of Certain Beneficial Owners and Management,
page 21.

Item 13. Certain Relationships and Related Transactions, page 22.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K,
page 24.

<PAGE>

PART I

ITEM 1: BUSINESS

GENERAL

Glenoit Corporation (the "Company"), was founded in 1954 and became a
wholly-owned subsidiary of Glenoit Universal, Ltd. ("Holdings") during 1995. On
October 2, 1998, the Company acquired all the capital stock of American Pacific
Enterprises, Inc. ("APE"). On February 12, 1999, the Company acquired all the
outstanding shares of capital stock of Ex-Cell Home Fashions, Inc. ("Ex-Cell").
As a result of these recent acquisitions, the Company believes it has
transformed itself from a specialty textile manufacturer focused on profitable
niche segments to a diversified manufacturer and distributor of consumer goods,
with the majority of its revenues derived from the home textile market. The
Company has two operating segments: (i) the Decorative Home Furnishings Division
which designs, manufactures, imports and distributes decorative textile home
furnishings and (ii) the Fabric Division, which manufactures and markets
specialty fabrics, primarily for the apparel industry, known as "sliver-knit"
pile fabrics.

Decorative Home Furnishings Division

The Decorative Home Furnishings Division designs, manufactures, imports and
distributes a wide array of textile products for every room in the home. Its
products consist of decorative bedding accessories, quilts, duvet covers, window
treatments, kitchen rugs, shower curtains, table linens, area rugs and
decorative pillows. These products are manufactured domestically as well as
sourced from a wholly-owned foreign manufacturing facility or established,
independent contractors located primarily in China. Management believes the
multiple sourcing avenues available allow for the Company to compete with
low-cost, high quality goods produced overseas or with programs that demand
quick response from domestic manufacturing locations. The Company supplies
products across all distribution channels including the large national discount
retailers, specialty retailers and department stores.

The Company has experienced significant sales growth in the Decorative Home
Furnishings Division primarily as a result of the acquisitions of APE and
Ex-Cell. Net sales have increased from $43.6 million in 1995 to $221.8 million
in 1999. APE contributed $17.4 million of sales in 1998 while APE and Ex-Cell
combined for a total of $167.0 million of sales during 1999. The Company has
also benefited from the internally generated sales growth of consumer rugs.

Fabric Division

The Company developed fabrics to target the increasing consumer preference
towards more casual and comfortable dress and a growing emphasis on outdoor
activities and styling related to outdoor activities. Beginning with
Glenaura(TM) in 1993, the Company has introduced a series of branded,
performance-oriented fabrics which have transformed the Company's Fabric
Division from a traditional deep-pile fabric manufacturer dependent upon the
coat market into a diversified fabric producer serving a broader range of
end-use markets. In addition to performance-oriented sliver-knit fabrics, the
Company is a manufacturer and marketer of FAUX furs in the United States. FAUX
fur synthetically replicates animal fur such as mink, beaver and leopard and is
typically used in women's and children's coats. The Company also manufactures
fabrics used to cover audio speakers in certain models of automobiles, fireproof
fabric marketed under the Glentec(TM) name used by the United States Navy, and a
wide variety of other fabrics used in the manufacture of toys, golf club head
covers, powder puffs, case linings and other end-use products.

The Fabric Division's sales grew from $50.5 million in 1995 to $107.1
million in 1997. Sales remained flat at $106.7 million in 1998 but declined to
$74.6 million in 1999. Management believes as a result of continued unseasonably
warm weather which affected retailer demand for our high performance outerwear
fabrics and the influx of low priced apparel products, mostly from Asia, the
Fabric Division's sales have declined since 1997 levels. While the Company
continues to develop new and innovative fabrics, there has been an overall
decline in the sourcing of apparel fabric manufactured in the United States. As
a result, the Company took steps in 1999 to consolidate operations and eliminate
excess capacity. In connection with those actions, the Company closed its
Tennessee facility and relocated certain machinery and equipment necessary to
its North Carolina and Canadian facilities to support current and future sales
volumes. The Company has also begun marketing finished garments in 1999 made
from its apparel fabric to help further its product offerings and strengthen
sales in the Fabric Division.

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BUSINESS STRATEGY

Principal elements of the Company's strategy are:

LEVERAGE EXISTING DISTRIBUTION CHANNELS. The Company seeks to utilize its
strong distribution relationships with large national discount retailers such as
Wal-Mart, Kmart and Target to increase the distribution of its expanded home
furnishing products. Today, the Company primarily sells shower curtains, table
linens and kitchen rugs through this distribution channel; however, the Company
is planning to expand its distribution of additional products through this
channel. In addition, the Company intends to utilize APE's strong relationships
with certain specialty retailers to expand its distribution of the products
primarily sold to the discount retailers.

LEVERAGE FOREIGN SOURCING CAPABILITIES. As part of the acquisitions of APE
and Ex-Cell, Glenoit obtained the ability to source products beyond North
America. Glenoit intends to expand its ability to leverage the low-cost, high
quality overseas sourcing capabilities.

INCREASE PENETRATION OF HOME TEXTILE MARKET WITH INNOVATIVE NEW PRODUCTS.
The Company plans to continue to develop innovative fabric products for the home
textile market, a growing segment of the Fabric Division. The Company believes
that its micro-fiber fabrics are well suited for use in products for the home
textile market, and the Company has been selling its micro-fiber fabrics for use
in throws, covered pillows and comforters.

EXPAND OFFERING OF COMPLETED GARMENTS. During 1999, the Company began
producing, through outside contractors, and selling packaged garments utilizing
the Company's fabric. The Company believes this will allow for a greater
exposure its products and design flexibility as well as simplify its retail
customers' sourcing process.

BUILD BRAND AWARENESS. The Company has been building brand awareness for
its performance-oriented fabrics by promoting Glenoit's brand names through
garment hang-tags, a print advertising campaign undertaken jointly with its
supplier of acrylic micro-fiber and designers' advertisements and retailers'
catalogs which mention the Company's fabric by name.

PRODUCTS

DECORATIVE HOME FURNISHINGS DIVISION

The Company designs, manufactures, imports and markets an extensive product
line of textile home furnishings primarily for the bedroom, bathroom and
kitchen. The Company's fashion forward product offerings for the bedroom include
quilts, duvet covers, bedding skirts, dust ruffles, pillow shams and coordinated
window treatments. The primary products marketed by the Company in the bathroom
include shower curtains, window treatments, bath rugs and related accessories.
Through an exclusive licensing agreement, the Company has the right to use
designs created by Barth and Dreyfuss, Inc. ("B & D") for its kitchen rugs.
These kitchen rugs are marketed jointly with B & D's extensive product line of
kitchen towels and potholders. The Company also manufactures and distributes,
through Ex-Cell, table linens such as table cloths and placemats. In addition to
the above products, the Company also offers decorative pillows which can be used
to accentuate the bedroom and other living areas in a home.

FABRIC DIVISION

The Fabric Division manufactures a diverse line of sliver-knit pile fabrics
used in the manufacture of performance-oriented outerwear, sportswear, coats,
accessories, home textiles, automotive interiors, military clothing and other
products. The Company believes that its performance-oriented sliver-knit fabrics
offer apparel manufacturers greater design flexibility and superior performance
characteristics in comparison with competing fleece fabrics. These qualities
include the enhanced design and color capability of "Jacquard" knitting (which
allows the fabrics to have intricate and colorful designs knitted into the
fabric rather than printed onto the surface), added versatility in texture and
feel and greater warmth-to-weight ratios and the ability to promote the
evaporation of perspiration, thereby providing greater warmth to the wearer.
These fabrics are primarily used in the manufacture of outerwear, sportswear,
and accessories, including coats, pullovers, heavy shirts, hats, gloves,
scarves, robes and slippers, and are sold to manufacturers of sportswear
marketed under brand names such as Liz Claiborne, Jones New York, Ralph Lauren
and Anne Klein; manufacturers of outerwear marketed under brand names such as
L.L. Bean, Lands' End, Columbia, Woolrich and Bogner; and private label programs
for retailers such as Saks Fifth Avenue, Nordstrom, Lord & Taylor, Banana
Republic, Victoria's Secret and The Gap. In addition, the Company sells
micro-fiber fabrics in the home textile market for use in throws, covered
pillows and comforters.

The Fabric Division's second largest product category is FAUX fur which is
composed of fabrics with a heavier, deeper pile than performance-oriented
fabrics and is used in women's and children's coats and linings, which was the
Fabric Division's

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<PAGE>

principal business prior to 1993. FAUX fur is typically used to replicate
traditional animal fur such as mink, beaver, seal and leopard. The Company
believes that it is the leading domestic supplier of FAUX fur and sells its
fabrics to manufacturers of garments that are sold through retailers such as
Saks Fifth Avenue, Bloomingdale's, Nordstrom, Neiman Marcus, Kmart and JC
Penney.

In the automotive market, the Company's fabrics, which allow for greater
sound penetration than other knit or woven fabrics, are used to cover audio
speakers in the interiors of automobiles. The Company also sells fabric to the
U.S. Government, including a fireproof fabric marketed under the brand name
Glentec(TM), which is used by the United States Navy. In addition, the Company's
fabrics are used in the manufacture of toys, golf club head covers, powder
puffs, linings for golf bags and musical instrument cases and other end-use
products.

SALES AND MARKETING

DECORATIVE HOME FURNISHINGS DIVISION

The Company's products are marketed through a network of home textile
sales representatives, in-house sales force and the B & D sales force. These
groups are supported by customer service centers located in North Carolina and
Ohio which work closely with the various customers and production staff. The B &
D sales force, supervised by the Company's marketing management, acts as
representative agent for a large portion of the kitchen rug sales. In return,
the Company pays B & D a variable royalty in the sales of these printed rugs and
also contributes to the compensation of the B & D sales force.

In order to support its sales force and respond promptly to the
delivery requirements of its customers, the Company utilizes Electronic Data
Interchange ("EDI") with most of its principal customers. EDI minimizes the lead
time for customer orders, permits a more efficient, targeted manufacturing
schedule, and improves communication, planning and processing times at each
state of the production cycle. EDI, combined with the Company's manufacturing
and distribution capabilities, allows the customer to place an order and have
the products shipped within three to five days. This rapid order turn-around has
resulted in expanded relationships with the large national discount retailers.
Wal-Mart, KMart and Target collectively accounted for approximately 26.6% of
this division's 1999 sales.

FABRIC DIVISION

The Fabric Division's marketing efforts are handled by an in-house sales
force supported by a customer service department. The Fabric Division
supplements its sales coverage with several experienced commissioned, outside
sales organizations specializing in certain markets. The Fabric Division
maintains a showroom at the Company's headquarters in New York. The Fabric
Division has its own design and research and development departments that
develop exclusive designs for the Company and certain of the Company's
customers. No single customer accounted for more than 10% of the Fabric
Division's net sales in fiscal 1999, reflecting the diversity of its customer
base.

The Fabric Division principally manufactures fabrics on a made-to-order
basis, thereby minimizing its inventory. The Company's performance-oriented
fabrics are marketed principally under the brand names Berber by Glenoit(TM),
Glenaura(TM), Zendura(TM) and GlenPile(TM), and are being increasingly promoted
through garment hang-tags and through a print advertising campaign undertaken
jointly with the Company's supplier of Microsupreme micro-fiber. As a result of
growing consumer recognition of the Company's branded fabrics, designers and
retailers are increasingly using the Company's brand names in their advertising
and catalogs.

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MANUFACTURING FACILITIES AND OPERATIONS

The Company owns and leases several manufacturing facilities, distribution
warehouses and sales and design offices. In the opinion of management, the
Company's manufacturing capacity is sufficient to meet the Company's requirement
for the foreseeable future.

Decorative Home Furnishings Division

The following table sets forth certain information relating to the
Company's facilities in this segment:
<TABLE>
<CAPTION>
Location Description Approx.sq.feet Lease/Own Termination Date Annual Rent
- -------- ----------- -------------- --------- ---------------- -----------
<S> <C>
Tarboro, NC Manufacturing 281,000 Own N/A N/A
Goldsboro, NC Manufacturing 309,000 Own N/A N/A
Bentonville, Ark Manufacturing 135,000 Own N/A N/A
Miami, FL Manufacturing 60,000 Lease Jan. 2006 280,000
China Manufacturing 45,000 Lease Aug. 2008 59,000
Goldsboro, NC Warehouse 77,000 Own N/A N/A
Goldsboro, NC Warehouse 80,000 Own N/A N/A
Columbus, OH Warehouse 166,000 Lease Mar. 2001 429,000
Columbus, OH Warehouse 72,000 Lease Mar. 2001 198,000
Columbus, OH Warehouse 97,000 Lease June 2000 399,000
Goldsboro, NC Warehouse 90,000 Lease Mar. 2001 153,000
San Francisco, CA Design Office 14,000 Lease Jul. 2004 296,000
New York, NY Sales Office 23,000 Lease Dec. 2001 504,000
New York, NY Sales & Design 9,000 Lease Apr. 2002 290,000
New York, NY Showroom 4,000 Lease Jan. 2004 92,000
New York, NY Corporate HQ 10,000 Lease July 2006 323,000
</TABLE>

The Decorative Home Furnishings Division utilizes both domestic
manufacturing and foreign sourcing to produce its different products. Certain
products such as kitchen and area rugs are solely manufactured in the United
States while other products such as decorative pillows are produced both
domestically and internationally. APE utilizes offshore, independent
manufacturers located principally in China for the majority of its production
with the filling of certain products, such as quilts and decorative pillows,
performed domestically by contractors or in its leased facilities. Through a
subsidiary, APE oversees the foreign production as well as performs quality
control prior to the product being shipped to its Ohio distribution facilities.
Ex-Cell utilizes both domestic manufacturing capacity along with a wholly-owned
manufacturing facility in China to produce multiple household goods. Ex-Cell
also imports finished goods directly from independent contractors located in
Asia. Through its different production channels, the Company believes it is able
to match up the benefit of overseas, low-cost production with the
quick-turnaround ability of domestic manufacturing.

FABRIC DIVISION

The Company owns its two manufacturing facilities which consists of a
425,000 square foot facility in Tarboro, N. C. and a 135,000 square foot
facility located in Elmira, Canada. The Company also has a lease related to a
closed facility located in Jacksboro, TN which expires in 2007 with annual
payments of $580,000. The Company is a vertically integrated manufacturer
involved in all aspects of the sliver-knitting process including dyeing,
carding, knitting and finishing. Sliver-knit fabrics are produced using a
process in which the fabric is knit directly from loose fibers, in contrast with
the more traditional knitting process in which fibers are first spun into yarn
before being knit into fabric. In the sliver-knitting process, pile is
constructed by attaching loose fibers to a lightweight knit backing. Tufts of
fibers are caught in the tight loops of the knit, allowing their loose ends to
stand free from the backing to form the pile. Because the fibers are added
individually, various colors and types of fiber can be mixed. This allows for
versatility in fabric texture, appearance and technical features. In addition,
the Company's computer controlled sliver-knitting machines have the capability
of creating intricate "Jacquard" patterns by mixing various fibers and colors.
The Company's equipment also performs a number of finishing processes that
create different surface textures from sheared and velvet-like to curled
"sherpa" to "hi-low" patterns with a subtle embossed look. With the Company's
state-of-the-art equipment and experienced research and production personnel,
the Company manufactures a wide variety of fabrics that can be used in a range
of end-use products.

The sliver-knitting process begins with loose fibers that have been
selected for the aesthetic and technical qualities they will lend to the
finished fabric. Most of the fibers used by the Company are pre-dyed by the
supplier and then mixed to create the required shade. The loose fibers are blown
together in air chambers mixing their color and fiber type. The mixed fibers are

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subsequently sent through a series of carding machines that aligns them in the
same direction, producing a soft rope called "roving" or "sliver." The sliver is
fed into the sliver-knitting machine where portions of the fibers are blown by
small air jets into the high speed needles. As the needles knit the lightweight
but strong knit backing, the fibers are caught securely into each of the loops.
The high-speed, computerized needles can be programmed to knit a large variety
of patterns using multiple slivers simultaneously. After knitting, the pile
fabric is sent to the finishing area and sheared to the desired height. The
fabric is subsequently placed through a series of technical finishing processes
developed by the Company to control the weight, thickness and surface texture of
the final fabric. Since 1991, the Company has replaced or upgraded substantially
all of its knitting machines. In addition, the Company has replaced or upgraded
its blending and carding machines and made modifications to its dyeing and
finishing equipment.

LICENSES AND TRADEMARKS

Under an agreement with B&D, the Company has the exclusive right to use B&D
copyrighted designs on its printed kitchen rugs in all countries worldwide
except Canada. Under the licensing agreement, the Company is required to pay B&D
a variable royalty (subject to a $250,000 annual minimum) on all products
utilizing B&D designs. This agreement originally terminated in November 1999 and
was extended indefinitely at the Company's option in successive one-year periods
by giving written notice to B&D at least 90 days before the expiration of each
term. Under this agreement, the Company is required to maintain a high level of
quality and style and to comply with certain reporting obligations. B&D can
terminate the agreement in the event of a material default by the Company
(including a failure to pay the $250,000 minimum annual royalty).

The Company's key brands in Decorative Home Furnishings are American
Pacific, Match, Hawthorne Hill, Tucker Lane, Country Classics, Ex-Cell, Linde,
Kemp and Beatley, and Madison Landing. The Company also maintains licensing
agreements with Waverly, Nautica, Pfaltzgraff and Fieldcrest/Cannon. The
licensing agreements contain clauses that require variable royalty payments
based on sales and certain reporting requirements. Two agreements require
minimum royalty payments totaling $250,000 per year.

The Company's principal trademarks in the Fabric Division are Glenoit(TM),
Berber by Glenoit(TM), Glenaura(TM), Zendura(TM), GlenPile(TM) and Glentec(TM).

RAW MATERIALS AND SUPPLIERS

General

The Company sources a large portion of its home furnishings products from
overseas contractors principally located in China and purchases other raw
materials domestically for manufacturing product in North America. Although the
Company has always been able to obtain sufficient supplies of raw materials, any
shortage or interruption in the supply, variations in the quality or
fluctuations in the cost could have a material adverse effect on the Company's
business, financial condition or results of operations. The Company does not
speculate on the price of raw materials.

Decorative Home Furnishings

Excluding finished products imported from third parties, the Company's
principal raw materials include polypropylene, vinyl fabric, and other finished
fabrics purchased from third parties. These items are utilized in the
manufacturing or sourcing of production of the wide range of textile household
products such as quilts, shower curtains, decorative pillows and household rugs.
Certain finished fabrics are then further processed by outside contractors
located in North America into finished goods such as quilts, duvet covers and
other bedding accessories.

Fabric Division

The Company's principal raw materials are acrylic and polyester, which the
Company purchases from several large chemical companies. The Company's largest
supplier is Sterling Fibers, Inc., which is the exclusive supplier of acrylic
micro-fiber used in the Company's fabrics. The Company has entered into a supply
agreement dated February 1, 1997 by and between the Company and Sterling Fibers,
Inc. (the "Sterling Agreement"), pursuant to which the Company has the exclusive
right to purchase from Sterling (and the Company has agreed not to purchase from
any other supplier) colored micro-fiber for the purpose of manufacturing pile
knits (other than pile knits based on stretchable yarns such as spandex) in the
United States, Mexico and Canada, subject to the terms and conditions of the
Sterling Agreement. Under the Sterling Agreement, the Company has agreed to
purchase from Sterling certain minimum quantities of Sterling's Microsupreme(R)
micro-fiber, and Sterling and the Company have agreed to promote and advertise
micro-fiber and micro-fiber products. The Sterling Agreement had an initial term
which expired

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on February 1, 2000, but is automatically extended for successive one-year
periods unless either party gives written notice to other party at least one
year before the expiration of the current term. Either party may terminate the
Sterling Agreement in the event of a default by the other party which is not
cured within 30 days after notice.

COMPETITION

The textile industry is highly competitive, with no single company
dominating the industry. The Company's competitors range from large vertically
integrated textile mills producing a variety of goods to numerous smaller
companies which direct their efforts at niches in the textile market. Each of
these competitors seeks to set or anticipate consumer trends and respond quickly
to changes in style with new products. The primary competitive factors in the
textile industry are price, product-styling, quality, manufacturing flexibility,
delivery time and customer service. The Company's continued success will depend
on its ability to design and market innovative, quality products that satisfy
specific customer needs as well as its customers' ability to remain competitive.

The Decorative Home Furnishings Division competes with various major
domestic textile mills, rug manufacturers and selected niche importers. The
major textile firms are Springs Industries, Westpoint Stevens Inc., Dan River
Inc., Burlington Industries, Inc. and Mohawk Industries, Inc.

The Fabric Division competes directly with several small sliver-knit
manufacturers including Monterey Mills, Inc. and Tex-Tenn Corporation as well as
larger manufacturers of high-end fleece such as Malden Mills Distributors
Corporation and Dyesburg Corporation. In addition, imports of foreign made
apparel products are a significant source of competition for the domestic
manufacturers.

EMPLOYEES

The Company benefits from an experienced work force with which it maintains
good working relationships. As of January 1, 2000, the Company employed 1,660
employees, of whom 1,280 were hourly and 380 were salaried.

Of the Company's hourly employees, approximately 95 are represented by the
Union of Needletrades, Industrial Textile Employees and are located in Elmira,
Ontario. The Canadian agreement expires on December 25, 2002. The Company's
other facilities are non-unionized.

BACKLOG

The Company's order backlog, primarily related to APE and the Fabric
Division, was approximately $23.3 million at January 1, 2000 as compared to
approximately $17.1 million at January 2, 1999. Substantially all of the orders
outstanding at January 1, 2000 are expected to be filled within three months of
that date. Orders on hand are not necessarily indicative of total future sales.

ENVIRONMENTAL, SAFETY AND HEALTH REGULATION

The Company is subject to increasingly stringent federal, state and local
laws and regulations governing, among other things, the management of hazardous
substances, discharges to air and water, and occupational health and safety.
Such laws include the Federal Water Pollution Control Act, the Clean Air Act and
the Resource Conservation and Recovery Act. The Company's operations,
particularly its dyeing and finishing processes, result in the discharge of
substantial quantities of wastewater and hazardous air emissions. Operating
permits establishing discharge and emission limits for these processes are
subject to revocation, modification or renewal, and violations of such permits
may result in substantial fines and/or civil or criminal sanctions.

The Company may be subject to the requirements of the 1990 Amendments to
the Federal Clean Air Act, including those relating to emissions of hazardous
air pollutants. The Company believes that it will be able to achieve compliance
with such requirements at a cost which will not be material. However, the
Company cannot currently estimate with certainty the impact of future emissions
limitations or enforcement practices upon its operations.

The Company's operations also are governed by certain requirements under
the Occupational Safety and Health Act relating to workplace safety and worker
health which, among other things, establish permissible exposure limits for
cotton dust, formaldehyde, asbestos and noise. In addition, the Company may be
liable under environmental laws, particularly the Federal Comprehensive
Environmental Response, Compensation and Liability Act, for the cleanup of
contamination that occurs on or from the Company's properties, including
contamination that occurred prior to the Company's ownership or operation of the

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properties, or for cleanup of contamination on any off-site location to which
the Company shipped hazardous substances for disposal.

The Company believes that it is in compliance in all material respects with
all applicable environmental, health and safety requirements. However, there can
be no assurance that the costs or liabilities related to such requirements that
may be imposed in the future will not result in a material adverse effect on the
Company's business, financial condition and results of operations.

LEGAL PROCEEDINGS

The Company's state income tax returns for the years ended January 1, 1994
through January 3, 1998, have been examined by the New York Department of
Finance. In December 1999, the Company settled with the New York Department of
Finance and paid a total of $230,000 including tax and interest. These amounts
had been previously accrued for.

Holdings has an indemnification agreement with a shareholder with respect
to certain tax obligations. While tax obligations are the expense and liability
of the Company and Holdings, the indemnification agreement provides for an
additional contribution of capital to Holdings from this shareholder via
reductions of long-term obligations due the shareholder from Holdings.

APE is a party to a copyright infringement and unfair business practices
litigation with a competitor. On June 21, 1999, the competitor filed suit in the
United States District Court for the Northern District of California claiming
damages in excess of $8 million. The suit is in the early stages of discovery
and the potential liability, if any, to the Company cannot be determined.
Management believes that the competitor's case is without merit and intends to
vigorously contest this lawsuit. Accordingly, no provision for this matter has
been made in the Company's financial statements.

The Company is a party to various other litigation matters incidental to
the conduct of its business. After consultation with its legal counsel, the
Company does not believe that the outcome of any of these matters in which it is
currently involved will have a material adverse effect on the Company's
business, financial condition or results of operations.

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ITEM 2: PROPERTIES

For information concerning the principal physical properties of the Company
and subsidiaries, see "Item 1: BUSINESS -- Manufacturing Facilities and
Operations".
.
ITEM 3: LEGAL PROCEEDINGS

For information concerning any material pending legal proceedings the
Company or its subsidiaries are party to, see "Item 1: BUSINESS -- Legal
Proceedings".

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

None

PART II

ITEM 5:MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MEETINGS

Glenoit Corporation is a privately held company with no established public
trading market for its equity securities. The equity securities are held by
Glenoit Universal, Ltd. ("Holdings"). Glenoit Asset Corporation is a wholly
owned subsidiary of Glenoit Corporation.

Glenoit Corporation will be permitted (but will not be obligated) to make
certain payments to Holdings, including payments (i) in respect of principal and
interest of debt obligations of Holdings, (ii) to cover certain administrative
and operating expenses of Holdings and (iii) to cover certain tax liabilities
allocable to the Company, subject in each case to certain conditions and
restrictive covenants in the agreements governing the Company's credit facility
and 11% Senior Subordinated Notes.

During fiscal 1998 and 1997, the Company distributed $1.9 million and $7.3
million to Holdings respectively. No such distributions were made during fiscal
1999.

8
<PAGE>

ITEM 6: SELECTED FINANCIAL DATA

Set forth below are selected historical consolidated financial data of the
Company for the periods indicated. The historical consolidated financial data of
the Company prior to December 13, 1995 reflect the historical results of Glenoit
Mills, Inc. and subsidiary ("Mills"). The selected historical financial data of
the Company as of and for the years ended January 3, 1998, January 2, 1999 and
January 1, 2000 has been derived from the Consolidated Financial Statements of
the Company included elsewhere herein. The selected historical financial data of
the Company as of and for the years ended January 4, 1997 and December 30, 1995
has been derived from the Consolidated Financial Statements of the Company not
included herein. The selected consolidated financial data set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and related notes thereto included elsewhere in this Annual
Report.

FISCAL YEAR
-----------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------

(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME DATA:
Net sales ...................................... $ 93,840 $ 121,751 $ 146,921 $ 172,042 $ 294,725
Cost of sales .................................. 67,249 86,525 98,061 123,696 212,155
--------- --------- --------- --------- ---------
Gross profit ................................... 26,591 35,226 48,860 48,346 82,570
Operating expenses(d) .......................... 16,235 18,045 22,933 32,877 76,066
--------- --------- --------- --------- ---------
Income from operations ......................... 10,356 17,181 25,927 15,469 6,504
Interest expense, net .......................... 3,745 9,125 10,938 13,942 25,090
Other expense .................................. 166 589 733 838 733
Income tax expense (benefit) ................... 3,083 3,354 5,390 308 (6,031)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary loss ........ 3,362 4,113 8,866 381 (13,288)
Extraordinary loss, net of tax benefit ......... 2,407(a) -- 2,857(b) 117(c) --
--------- --------- --------- --------- ---------

Net income (loss) .............................. $ 955 $ 4,113 $ 6,009 $ 264 ($ 13,288)
========= ========= ========= ========= =========

OTHER DATA:
Depreciation and amortization .................. $ 1,946 $ 3,097 $ 3,862 $ 6,416 $ 12,278
Capital expenditures ........................... 5,239 1,704 19,606 17,902 7,530
Cash flows from (used in) operating activities . 181 6,429 23,706 17,789 (4,119)
Cash flows used in investing activities ........ (13,076) (1,388) (27,763) (73,518) (65,428)
Cash flows from (used in) financing activities . 13,533 (6,014) 5,080 54,996 71,222
EBITDA(e) ...................................... 12,136 19,689 29,056 21,047 18,050
Adjusted EBITDA(f) ............................. 12,136 20,990 29,056 27,935 33,366

BALANCE SHEET DATA:
Cash and cash equivalents ...................... $ 1,023 $ 49 $ 1,072 $ 340 $ 2,015
Working capital(g) ............................. 17,735 13,340 15,148 27,442 (176,668)
Total assets ................................... 50,946 49,497 75,230 144,699 216,945
Total liabilities .............................. 97,857 92,295 119,396 191,054 276,079
Stockholder's deficit .......................... (46,911) (42,798) (44,166) (46,355) (59,134)
</TABLE>

(a) During fiscal 1995, the Company recognized an extraordinary loss, net of
income tax benefit of $1,240,000, as a result of the early retirement of
the Company's debt obligations.
(b) During April 1997, the Company recognized an extraordinary loss, net of
income tax benefit of $1,527,000, as a result of the refinancing of the
Company's debt in connection with the Initial Offering. See Note 7 to the
Consolidated Financial Statements.
(c) During September 1998, the Company recognized an extraordinary loss, net of
a tax benefit of $67,000, related to the purchase of senior subordinated
notes with a face amount of $5 million. See Note 7 to the Consolidated
Financial Statements.
(d) During March 1999, the Company recorded a $13,100,000 restructuring charge
in connection with a plant closure in the Fabric Division. This charge is
reflected as an operating expense.
(e) EBITDA represents income (loss) before extraordinary loss plus income tax
expense (minus income tax benefit), interest expense (net), depreciation
and amortization. The Company believes that EBITDA provides useful
information regarding the Company's ability to service its debt; however,
EBITDA does not represent cash flow from operations, as defined by
generally accepted accounting principles and should not be considered as a
substitute for net income (loss) as an indicator of the Company's operating
performance or cash flow as a measure of liquidity. The definition of
EBITDA presented herein differs from the definition of EBITDA in the
Indenture. EBITDA has not been adjusted to reflect certain costs and
expenses payable to related parties prior to fiscal 1996, which were
substantially reduced as a result of the Recapitalization.

9
<PAGE>

(f) Adjusted EBITDA represents EBITDA (See Note (e) above), plus (i) for fiscal
1996, (A) moving expenses of approximately $320,000 incurred to relocate
the Company's Consumers Product Division and (B) fees of approximately
$980,000 for a consulting project related to process improvement and cash
flow management, (ii) for fiscal 1998 (A) non-cash, non-recurring charges
related to APE inventory sold during the fourth quarter that had been
written up by $3,367,000 at time of the acquisition in accordance with
generally accepted accounting principles and (B) $3,521,000 of compensation
expense recorded for amounts owed to employees of APE in connection with
incentive compensation arrangements entered into as part of the APE
acquisition and (iii) for fiscal 1999 (A) non-cash, non-recurring charges
related to Ex-Cell inventory sold subsequent to the acquisition that had
been written up by $2,216,000 as of February 12, 1999 in accordance with
generally accepted accounting principles and (B) $13,100,000 of
restructuring charges specific to the shutdown of the Fabric Division's
Tennessee manufacturing operations. Adjusted EBITDA is presented because
the Company believes that it provides useful information regarding the
Company's ability to incur and service debt; however, Adjusted EBITDA does
not represent cash flow from operations as defined by generally accepted
accounting principles and should not be considered as a substitute for net
income (loss) as an indicator of the Company's operating performance or
cash flow as a measure of liquidity.
(g) Working capital represents consolidated current assets less consolidated
current liabilities.

10
<PAGE>

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

OVERVIEW

On December 13,1995, Glenoit Universal, Ltd. ("Holdings") formed a wholly-
owned subsidiary, Glenoit Corporation (the Company), formerly Glenoit
Intermediate, Inc. and exchanged all of the issued and outstanding stock of
Glenoit Mills, Inc. and subsidiary ("Mills") for all of the issued and
outstanding shares of common stock of Glenoit Corporation. During 1997, Mills
was merged into the Company. The Company has two operating segments: (i)
Decorative Home Furnishings which manufactures, imports and distributes
decorative textile home furnishings and (ii) a domestic manufacturer and
marketer of specialty fabrics, primarily for the apparel industry, known as
"sliver-knit" pile fabrics ("Fabric Division"). The Company's two most recent
acquisitions, American Pacific Enterprises, Inc. and Ex-Cell Home Fashions,
Inc., are part of the Decorative Home Furnishings segment.

RECENT DEVELOPMENTS

On October 2, 1998, the Company acquired all the capital stock of American
Pacific Enterprises, Inc. ("APE") for approximately $39.1 million, including
fees and expenses, subject to post-closing adjustments. In addition,
approximately $16.6 million of indebtedness of APE was extinguished by the
Company in connection therewith. In addition, the Company paid the former
shareholders approximately $8.8 million and certain employees approximately $3.5
million during April 1999 in connection with the acquisition agreement. APE is a
leading designer, importer and marketer of decorative textile home furnishings,
principally quilts and decorative bedding items. On February 12, 1999, the
Company acquired all the outstanding shares of capital stock of Ex-Cell Home
Fashions, Inc. ("Ex-Cell") in a single transaction for approximately $44.1
million, subject to post-closing adjustments. In addition, approximately $6.8
million of debt of Ex-Cell was extinguished in connection therewith. Ex-Cell is
engaged in the design, manufacture, importation and distribution of textile home
furnishings, principally shower curtains, table linens, and decorative pillows.
The Company believes that these acquisitions will expand its current product
offerings to large retailers, further penetrate the specialty retailing segment
and diversify product sourcing capabilities beyond North America to include
Asia. As a result of these acquisitions, the Company believes it has transformed
itself from a specialty textile manufacturer focused on profitable niche
segments to a diversified manufacturer and distributor of consumer goods, with
the majority of its revenues derived from the home textile market. These
acquisitions have been accounted for as "purchases" under APB Opinion No. 16
and, accordingly, the financial statements reflect the results of operations
from the dates of purchase.

On February 25, 1999, the Company's Board of Directors approved a plan to
consolidate its manufacturing operations of the Fabric Division into its
facilities located in North Carolina and Canada. In connection with this
activity, the Company discontinued all operations at its leased Tennessee
facility and terminated substantially all of the associates at that facility.
During the first quarter of fiscal 1999, the Company recorded a restructuring
charge totaling $13.1 million to cover the estimated costs associated with the
closing of that facility including the cost of operating leases, the write-off
of the related goodwill, the write-down of machinery and equipment to fair
market value and severance and other personnel costs.

During September 1999, the Company's two Tarboro, North Carolina
facilities were temporarily shut down as a result of the extensive flooding
caused by Hurricane Floyd. While the facilities did not sustain significant
damage, the shortage of utilities and the dramatic impact to the local workforce
resulted in work stoppage and a delay in shipments for approximately ten days.
The Company continued to pay its effected employees during the shutdown.
Management estimates that the Company's operating losses exceeded anticipated
insurance recoveries by approximately $.8 million. Management has recorded a
receivable due from its insurance carrier of $600,000 which is the current
estimate of the insurance recoveries. The estimated proceeds have been reflected
as "other income".

11
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth selected results of operations expressed in
millions of dollars and as a percentage of total net sales for fiscal years
1997, 1998 and 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1998 1999
---- ---- ----
Net sales:
Decorative Home Furnishings $ 39.8 27.1% $ 65.3 38.0% $ 221.8 75.3%
Fabric Division ........... 107.1 72.9 106.7 62.0 74.6 25.3
Intercompany .............. 0 0 0 0 (1.7) (.6)
--------- -------- --------- -------- --------- --------
Total net sales ......... 146.9 100.0 172.0 100.0 294.7 100.0
Cost of sales ............... 98.1 66.8 123.7 71.9 212.1 72.0
--------- -------- --------- -------- --------- --------
Gross profit .............. 48.8 33.2 48.3 28.1 82.6 28.0
Operating expenses .......... 22.9 15.6 32.9 19.1 76.1 25.8
--------- -------- --------- -------- --------- --------
Income from operations .... 25.9 17.6 15.4 9.0 6.5 2.2
Interest expense, net ....... 10.9 7.4 13.9 8.1 25.1 8.5
Other expense ............... .7 0.5 .8 0.5 .7 .3
Income tax expense (benefit) 5.4 3.7 .3 0.2 (6.0) (2.0)
--------- -------- --------- -------- --------- --------
Income (loss)before
extraordinary loss ........ 8.9 6.0 .4 0.2 (13.3) (4.6)
Extraordinary loss .......... 2.9 2.0 .1 0.0 0.0 0.0
--------- -------- --------- -------- --------- --------

Net income (loss) ....... $ 6.0 4.0% $ .3 0.2% $ (13.3) (4.6)%
========= ======== ========= ======== ========= ========
</TABLE>

12
<PAGE>

FISCAL 1999 COMPARED TO FISCAL 1998

Net sales for the year ended January 1, 2000 increased to $294.7 million or
71.3% compared to $172.0 million for fiscal 1998. The increase in net sales
occurred in the Decorative Home Furnishings segment which increased 240% to
$221.8 million. This significant increase is attributable to the acquisitions of
APE and Ex-Cell which combined generated net sales of $167.0 million during
fiscal 1999 as compared to $17.4 million in the fourth quarter of 1998 related
to APE. The Decorative Home Furnishings segment also benefited from internal
sales growth of consumer rugs. The increase in sales of home furnishings items
was slightly offset by the decline in sales in the Fabric Division to $74.6
million from $106.7 million in fiscal 1998. This decrease was due to continued
softness in the product category as a result of unseasonably warm weather and
the influx of low-priced, apparel products, mainly from Asia.

Gross profit for fiscal 1999 increased to $82.6 million or 71% from $48.3
million in the prior year. The increase in gross profit was the result of the
large increase in sales in the Decorative Home Furnishings segment. Gross margin
was negatively impacted by $2.2 million related to the sale of Ex-Cell inventory
that had been written up at the time of acquisition in accordance with generally
accepted accounting principles. The Fabric Division's gross margin was
negatively impacted by the result of declining sales. However, the Fabric
Division did experience benefits from the previously discussed restructuring
efforts which reduced manufacturing overhead and streamlined operations.

Operating expenses for fiscal 1999 increased to $76.1 million or 25.8% of
net sales as compared to $32.9 million or 19.1% of net sales in fiscal 1998.
Included in fiscal 1999 operating expenses is a $13.1 million restructuring
charge recorded in the first quarter of 1999 associated with the previously
discussed consolidation of operations in the Fabric Division. Operating expenses
increased on a dollar basis as a result of the APE and Ex-Cell acquisitions.
Operating expenses also increased as a result of the amortization of goodwill
related to the acquisitions of APE and Ex-Cell which combined totaled $2.0
million in fiscal 1999 compared to $ .2 million in fiscal 1998. Fiscal 1998
operating expenses included $3.5 million related to compensation expenses
associated with the APE acquisition agreement. No such expenses were incurred
for the year ended January 1, 2000.

The Company's fiscal 1999 income from operations decreased to $6.5 million
from $15.4 million in fiscal 1998. This decline is the result of the factors
described above.

Interest expense increased to $25.1 million in fiscal 1999 as compared to
$13.9 million. Interest expense increased due to higher levels of debt as a
result of the APE and Ex-Cell acquisitions as well as to fund higher working
capital needs due to these new businesses.

The Company reported a net loss of $13.3 million for fiscal 1999 which is
net of a $6.0 million tax benefit. For fiscal 1998, the Company reported net
income of $ .3 million.

FISCAL 1998 COMPARED TO FISCAL 1997

Net sales for the year ended January 2, 1999 were $172.0 million compared
to $146.9 million for fiscal 1997. This increase of $25.1 million or 17.1% is
related to increased sales in the Decorative Home Furnishing segment. This
increase is primarily due to the purchase of APE which generated approximately
$17.4 million in sales subsequent to October 2, 1998 as well as increased sales
of household rugs. The Fabric Division sales for 1998 were down slightly to
$106.7 million from $107.1 million in fiscal 1997.

Gross profit for fiscal 1998 was $48.3 million or 28.1% of net sales
compared to $48.8 million or 33.2% of net sales for the prior year. This
decrease is attributable to lower operating results in the Fabric Division, as a
result of increased overhead costs including increased levels of depreciation
due to the Company's capital expenditure program. This decrease was partially
offset by operating improvements in the Home Furnishings Division. Subsequent to
October 2, 1998, APE contributed $3.2 million of gross profit which was
negatively impacted by approximately $3.4 million of costs associated with
inventory sold during the fourth quarter of 1998 that had been written up at
time of the acquisition in accordance with generally accepted accounting
principles.

Operating expenses for fiscal 1998 increased to $32.9 million from $22.9
million for the prior year. Of this $10.0 million increase, APE's operating
expenses totaled $8.0 million. APE's results include a $3.5 million charge for
incentive compensation expense related to employees of APE based on 1998
earnings as outlined in the acquisition agreement. Operating expenses increased
$ .8 million as a result of Glenoit Canada being included in a full year of
operations after being acquired in September 1997. Other increases were
primarily related to sales categories such as commissions and compensation
costs.

Operating income decreased to $15.4 million for fiscal 1998 from $25.9
million in fiscal 1997. The Fabric Division's operating income declined $6.7
million to $21.1 million due to unabsorbed overhead costs as previously
mentioned. The

13
<PAGE>

Decorative Home Furnishings Division operating income declined $4.4 million from
1997 levels. Since October 2, 1998, APE reported an operating loss of $4.8
million, due to the $6.9 million of charges described above.

Interest expense for fiscal 1998 was $13.9 million compared to $10.9
million for 1997. Interest expense has increased due to higher levels of debt
and a higher effective borrowing rate relating to senior subordinated debt
issued at the end of the first quarter of 1997 and the acquisition of APE during
October 1998.

The Company recognized a loss of approximately $ .1 million, net of an
income tax benefit, during September 1998 related to the purchase of Senior
Subordinated Notes with a face amount of $5 million. The Company recorded an
extraordinary loss on the early extingishment of debt of $2.9 million, net of an
income tax benefit, related to the refinancing of the Company's debt which took
place on April 1, 1997.

Net income for 1998 was $ .3 million compared to $6.0 million for the same
period in the prior year based on the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The Company relies on internally generated cash flow from operations,
supplemented by borrowings under its senior credit facility and vendor financing
to meet its debt service requirements, capital expenditures and working capital
needs. The Company is highly leveraged.

On April 1, 1997, the Company issued $100 million of senior subordinated
notes (the "Notes"). Concurrently with the issuance of the Notes, the Company
entered into a $70 million senior credit facility ("the New Credit Facility")
with a syndicate of lenders led by Banque National de Paris ("BNP"), pursuant to
which the Company obtained available credit (i) up to $45.0 million for working
capital and general corporate purposes (the "Working Capital Commitment"),
subject to a Borrowing Base, and (ii) up to $25.0 million for acquisitions (the
"Acquisition Commitment"). On October 2, 1998, the New Credit Facility was
amended to increase the Acquisition Commitment to $76 million. On October 2,
1998, the Company borrowed approximately $55.7 million under the Acquisition
Commitment in connection with the acquisition of APE. In connection with the
acquisition of Ex-Cell, the Company amended and restated the New Credit Facility
to increase its borrowing availability to $200 million. This additional
availability was reduced to $175 million in connection with the June, 1999
amendment discussed below and is currently comprised of (i) $65 million as the
Working Capital Commitment, subject to the Borrowing Base, as defined, (ii) $40
million Term A loan, and (iii) $70 million Term B loan. Principal payments under
the Term A and Term B loans began on September 30, 1999 at a total of $1.7
million per quarter and increase over the life of loans. Borrowings under the
Term A loan and Working Capital Commitment are required to be fully repaid by
December 31, 2003 and borrowings under the Term B loan are required to be fully
repaid by June 30, 2004. On the date of the Ex-Cell acquisition, both the Term A
and Term B loans were fully drawn. During November 1999, the Company prepaid a
total of approximately $1 million of loans outstanding under the Term A and Term
B facilities with excess cash proceeds from the sale of fixed assets related to
the previously discussed plant closure. At January 1, 2000, there were
borrowings of approximately $37.0 million under the Working Capital Commitment
and approximately $9.1 million available to borrow under the Working Capital
Commitment. A more detailed description of the senior subordinated notes and the
senior credit agreement may be found in the notes to consolidated financial
statements.

As of June 29, 1999, the Company's senior lenders waived the Company's
requirement to maintain and meet certain financial covenants contained in the
New Credit Facility for the period ending July 3, 1999. In connection with
obtaining the waiver, the Working Capital Commitment was reduced from $90
million to $65 million and certain financial covenants were amended including an
amendment to require monthly testing of the Company's total leverage and senior
leverage ratios. The Company was not in compliance with these ratios for the
month of July, 1999 and, accordingly, received a waiver with respect to such
non-compliance as well as amended the August, 1999 and September, 1999 covenants
on August 20, 1999. As a result of a temporary shut down of two facilities in
Tarboro, N. C. due to Hurricane Floyd during September, 1999, the Company was
not in compliance with the revised covenants as of October 2, 1999. The Company
received a waiver for such non-compliance as of October 29, 1999. On November
19, 1999, the Company received a waiver which eliminated the requirement to meet
certain financial covenants for the month of October and amended existing
covenants for November and December 1999 as well as created monthly covenants
for January and February 2000.

14
<PAGE>

negotiating mutually acceptable modifications to the facility prior to April 10,
2000. The Company and its lenders have been unable to negotiate such
modifications to date and, as of April 11, 2000, the Company was in default
under the New Credit Facility as a result of the termination of the above
waiver. In accordance with terms of the New Credit Facility, the Company's
lenders notified the Company on April 13, 2000 that such lenders were exercising
their election to prohibit the Company from making the interest payments of
approximately $5.3 million due under the Notes on April 15, 2000. Accordingly,
as of April 15, 2000, the Company will be in default under the terms of the
Notes due to its failure to make the April 15, 2000 interest payment. As a
result of the above defaults, all of the Company's borrowings under the Notes
and New Credit facility are classified as current liabilities.

It is anticipated that for the first quarter ended April 1, 2000, the
Company will be in default of certain financial covenants under the New Credit
Facility which had not previously been adjusted under the waivers and amendments
received prior to January 1, 2000. The Company is currently in negotiations with
its senior lenders to conform its financial covenants and borrowing needs to its
current business plan. Even though discussions are ongoing, there can be no
assurance that the Company will obtain the necessary amendments and waivers or
as to the terms thereof. The Company is currently reviewing alternative
financing and strategic options to attempt to address both the defaults
outstanding under the New Credit Facility and the Notes as well as reduce the
Company's overall leverage. The Company has until May 15, 2000 to make the
outstanding interest payment due under the Notes to cure the anticipated Event
of Default; however, the Company does not expect to make this payment on a
timely basis unless the Company's lenders rescind their election to prohibit
such payment and the Company has sufficient liquidity. The Notes also contain a
cross-acceleration clause under which they become due and payable in the event
that the Company's senior lenders demand payment of the New Credit Facility.

Barring an intervening acceleration of the indebtedness under the New
Credit Facility or an insolvency proceeding, the Company believes it has
sufficient liquidity to meet its current cash needs through approximately May
15, 2000 as a result of not paying the $5.3 million of outstanding interest due
on the Notes as of April 15, 2000. The Company's future operating performance
and ability to service or refinance the Notes and to extend or refinance its
other indebtedness will be subject to future economic conditions and to
financial, business and other factors beyond the Company's control.

Ex-Cell has a factoring arrangement whereby substantially all of its
accounts receivable are assigned and sold without recourse. During November
1999, the Company entered into a factoring agreement for its Fabric Division
whereby all pre-approved accounts are assigned without recourse. The Company
does retain credit risks on customer orders that were not approved by the
factor. As of January 1, 2000, the Company retained credit risk of approximately
$1.5 million related to accounts not factored under these two agreements.

Principal and interest payments in respect of the Notes and the New Credit
Facility represent significant liquidity requirements for the Company. In
addition, the Company will be permitted (but will not be obligated) to make
certain payments to Holdings, including payments (i) in respect of principal and
interest of the Seller Notes, (ii) to cover certain administrative and operating
expenses of Holdings and (iii) to cover certain tax liabilities allocable to the
Company, subject in each case to certain conditions as described in the Notes
and the New Credit Facility.

Holdings is a holding company and as a result does not have any substantive
assets or operations that generate revenues or cashflows. Accordingly, Holdings
relies on the Company's distribution of dividends to meet its obligations,
including interest and principal payments. As of January 1, 2000, Holdings has
obligations with a face amount of $32.6 million, bearing interest at stated
rates between 5% to 12.5%, to shareholders with principal due in 2004 and 2005.
For further discussion see Note 13 of the Consolidated Financial Statements.

In July 1998, Holdings settled a dispute regarding additional purchase
price owed to a shareholder associated with the recapitalization in December
1995 discussed in Note 2 to the Consolidated Financial Statements. Accordingly,
Holdings paid approximately $1.9 million to the shareholder during July 1998.
These funds were paid to Holdings by the Company as a dividend.

During September 1998, the Company acquired $5 million of the Notes in the
open market. These Notes were subsequently retired. In connection with this
transaction, the Company recorded an extraordinary loss of approximately
$117,000, net of a tax benefit, which consisted of the write off of a pro rata
share of deferred financing costs associated with the Notes.

15
<PAGE>

During June 1999, the Company entered into an interest rate cap agreement
which caps the maximum Eurodollar rate to be paid by the Company at 6.5% on an
$82.5 million notional amount. The Company paid approximately $820,000 to enter
into this agreement.

During fiscal 1999, net cash used in operations was $4.1 million which
includes the impact of Ex-Cell subsequent to February 12, 1999. Receivables
decreased by $4.2 million, primarily as a result of the new factoring agreement,
while inventories increased by $13.2 million to support the sales growth in the
Decorative Home Furnishings segment. Accrued expenses decreased $7.9 million due
to the payment of APE 1998 compensation arrangement and costs associated with
the restructuring charge. Accounts payable increased $2.1 million in connection
with the increase in inventories.

During fiscal 1998, net cash provided by operating activities was $17.8
million, which includes the impact of APE subsequent to October 2, 1998.
Receivables decreased by $6.1 million, inventories and other assets decreased by
$5.7 million. Accrued liabilities increased by $5.7 million, due primarily to
compensation related costs including the amounts owed to APE employees as
previously discussed. Accounts payable decreased by $4.4 million related to
decreased raw material purchases and tax related accruals decreased $0.9
million.

During fiscal 1997, net cash provided by operating activities was $23.7
million. Accounts and other receivables decreased by $ 1.0 million, inventories
and other current assets decreased by $2.1 million. Accrued liabilities
increased by $3.2 million, due primarily to accrued interest on senior
subordinated notes and profit related compensation plans. Accounts payable
increased by $2.1 million and "Due to Holdings" increased $ .9 million related
to accrued federal taxes.

CAPITAL IMPROVEMENTS

Capital expenditures totaled $7.5 million during the year ended January 1,
2000. These additions were primarily in the Decorative Home Furnishings Division
for advanced printing equipment, expanded manufacturing capacity and upgrades to
the management information systems. Capital expenditures for fiscal 1998 totaled
$17.9 million. These additions were primarily to increase capacity in the Fabric
Division. Expenditures were made for upgrades to Management Information System.
Capital expenditures for the year ended January 3, 1998 were $19.6 million.
These additions were primarily in the Fabric Division for additions of knitting
and blending equipment to increase capacity as well as a plant expansion in
Tarboro, N. C. Expenditures were also made for upgrades to management
information systems.

SEASONALITY

The Company's business is seasonal in nature. Generally, there is increased
retail demand for home furnishing products and garments during the fall
(back-to-school) and December holiday selling seasons. Consequently, demand for
the Company's products is generally higher during the Company's second and third
fiscal quarters when such products are produced for these selling seasons.

INFLATION

The Company believes that inflation has not had a material impact on its
results of operations for the three fiscal years ended January 1, 2000 due to
the relatively low rates of inflation during this period.

IMPACT OF YEAR 2000 COMPLIANCE

The Company has currently not experienced any significant systems or other
Year 2000 related problems. The Company substantially completed all the
conversions that were in progress to improve operating efficiencies in which
Year 2000 corrections were ancillary. The Company capitalized the costs
associated with these conversions in accordance with appropriate accounting
policies.

FORWARD-LOOKING STATEMENTS

This Form 10-K contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition, including in
particular, the likelihood of the Company's success in developing and expanding
its business and of maintaining financing on reasonable terms. These statements
are based upon a number of assumptions and estimates which are inherently
subject to significant uncertainties and contingencies, many of which are beyond
the control of the Company, and reflect future business decisions which are
subject to change. Some of these assumptions inevitably will not materialize,
and unanticipated events will occur which will affect the Company's results. The
forward looking statements in this

16
<PAGE>

Form 10-K are intended to be subject to the safe harbor protection provided by
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act
of 1934 (the "Safe Harbor Acts").

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's exposure to market risk relates to changes in interest rates
and foreign currency rates. During 1999, the Company entered into an interest
rate cap agreement which caps the maximum Eurodollar rate to be paid by the
Company at 6.5% on an $82.5 million notional amount. As of January 1, 2000, the
market value of this cap was approximately $1 million. The Company has not
utilized any other derivative financial instruments. The Company's borrowings
under its New Credit Facility bear interest rates based on either a floating
Base Rate or the Eurodollar Rate. As of January 1, 2000, the Company had $142.7
million outstanding under its New Credit Facility. The Company's other
borrowings consist of $95.0 million of senior subordinated debt due on April
2007 at a fixed rate of 11%. As of January 1, 2000, the average interest rate on
the borrowings under the New Credit Facility was 10.4%. The definitive extent of
the Company's interest rate risk under the New Credit Facility is not
quantifiable or predictable because of the variability of future interest rates
and borrowing requirements.

The Company is exposed to foreign currency risk by virtue of its Canadian
and Chinese operations. However, less than 10% of its annual revenues are
generated by these operations. Both China and Canada have traditionally had
relatively stable currencies and therefore the Company believes its exposure to
significant adjustments to be minimal. Additionally, the Company's consolidated
financial statements are denominated in U. S. dollars and, accordingly, changes
in the exchange rate between U. S. dollars and these currencies affect the
operating results as well as stockholder's deficit. These adjustments, to date,
have not been material to the Company's consolidated balance sheet.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the Consolidated Financial Statements of Glenoit Corporation and
Subsidiaries included herein and listed on the indices to the Consolidated
Financial Statements and Financial Statement Schedule as set forth in Item 14 of
this Form 10-K.

ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

17
<PAGE>

PART III

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the names, ages as of January 1, 2000, and a
brief account of the business experience of each director and executive officer
of the Company. Under the terms of the Stockholders Agreement (as defined), the
board of directors of Holdings will be the same as the board of directors of the
Company. See "Certain Relationships and Related Transactions--Stockholders
Agreement." The Company's By-laws, provide that each director shall hold office
for a term of one (1) year or until his or her successor is elected and
qualified.

NAME AGE POSITION
---- --- --------
Thomas J. O'Gorman.... 65 President, Chief Executive Officer and Director
Samuel Samelson....... 59 President - Ex-Cell Home Fashions, Inc.
Gregory D. Block...... 34 President - American Pacific Enterprises, Inc.
Kevin R. Kennedy...... 45 President--Consumer Rugs
Gary L. Mazzie........ 40 President - Fabric Division
Lester D. Sears....... 51 Executive Vice President and Chief Financial Officer
John Mowbray O'Mara... 71 Director
Saleem Muqaddam....... 52 Director
Isaac Schapira........ 46 Director
Joseph M. Silvestri... 37 Director

THOMAS J. O'GORMAN. Mr. O'Gorman has served as the President, Chief
Executive Officer and a Director of the Company since 1991. Mr. O'Gorman has
been in the textile industry since 1956 and has served as the General Manager of
the Menswear Business of Milliken & Co.; President of Knit-Away; and President
of the Denim, Corduroy and Blended Fabrics Divisions of Burlington Industries,
Inc., and Burlington's International Denim operations headquartered in London.
Subsequently, Mr. O'Gorman was the President and a Director of Greenwood Mills
Marketing Company, Inc. Mr. O'Gorman has served on the Market Committee of the
American Textile Manufacturers Institute and as a member of the Steering
Committee of Crafted With Pride in the U.S.A. Council.

GREGORY D. BLOCK. In connection with the acquisition of APE, Mr. Block
joined the Company in his current position. Prior to that date, Mr. Block was
part owner and served as Co-CEO of APE primarily responsible for product
development and merchandise sourcing. Mr. Block joined APE in 1991 after serving
two years in the U. S. Central Intelligence Agency.

SAMUEL SAMELSON. In connection with the acquisition of Ex-Cell, Mr.
Samelson joined the Company in his current position. Mr. Samelson has been with
Ex-Cell since 1965 serving in various positions including overall responsibility
for the manufacturing operations. Mr. Samelson was promoted to President of
Ex-Cell in 1987 and was a minority shareholder prior to the acquisition.

GARY J. MAZZIE. Mr. Mazzie was promoted to President of the Fabric Division
during 1999 after serving as the Fabric Division's Director of Operations and
two years as its Business Manager. Prior to joining the Company, Mr. Mazzie
served in various management positions with Inman Mills from 1986 to 1995.

KEVIN R. KENNEDY. Mr. Kennedy joined the Company in 1997 as President of
the consumer rug product group. Prior to that, Mr. Kennedy served in various
executive positions with Couristan, Inc., most recently as Executive Vice
President of Sales and Marketing. Mr. Kennedy was also employed by Abraham &
Strauss as a buyer for the area rug business and participated in A & S's
executive management training program.

LESTER D. SEARS. Mr. Sears joined the Company in 1996 as Executive Vice
President and Chief Financial Officer. From 1989 to 1996, Mr. Sears was the
Executive Vice President, Chief Financial Officer and an equity owner of Perfect
Fit Industries, Inc., a privately held company. Prior to 1989, Mr. Sears was
employed in various positions including as Controller of the Consumer Products
Division of Springs Industries, Inc.; Vice President and Controller of Mill
Fabrics, Inc.; and as a certified public accountant for Deloitte, Haskins and
Sells.

JOHN MOWBRAY O'MARA. Mr. O'Mara has been a management consultant and
private investor since January 1990. From July 1990 to May 1993, he served as
Chairman of the Executive Committee of Quality Care Systems, Inc., a provider of
computer-based "expert" medical cost containment systems. From August 1988
through December 1989, Mr. O'Mara served as Chairman of the Board and Chief
Executive Officer of Global Natural Resources, Inc. Prior to serving as Chairman
of Global Natural Resources, Inc., Mr. O'Mara spent 22 years as an investment
banker, serving most recently as Managing Director for Chase

18
<PAGE>

Securities Inc., a subsidiary of The Chase Manhattan Bank. Mr. O'Mara is a
director of Baldwin & Lyons, Inc., Plantronics, Inc. and The Midland Company.

SALEEM MUQADDAM. Mr. Muqaddam has served as a Vice President of Citicorp
Venture Capital, Ltd. ("CVC") and its affiliated investment companies since
1989. Previously he spent 15 years with Citibank, N.A. and its affiliates in
senior management positions. Mr. Muqaddam is a director of Pamida Holdings
Corporation, Plantronics, Inc., Chromcraft Remington Inc. and Fairwood
Corporation.

ISAAC SCHAPIRA. Mr. Schapira has served as a director of Stirling
Investment Holdings, Inc. since December 1994. In addition, Mr. Schapira is the
President of Glenoit (U.K.) Limited, and has been in this position for over 15
years.

JOSEPH M. SILVESTRI. Mr. Silvestri has been a director of the Company since
his appointment by CVC in 1995. Mr. Silvestri has been employed by CVC since
1990 and has been a Vice President since 1995. Mr. Silvestri served as Assistant
Vice President of CVC from 1990 to 1995. Mr. Silvestri serves on the Board of
Directors of International Media Group, Triumph Group, Polyfibron Technologies,
Inc., The GNI Group, ISG Resources, Inc. and Euramax International, Inc.

COMPENSATION OF DIRECTORS

The Company's Board of Directors receive no compensation for their service
as directors. Directors are reimbursed for their out-of-pocket expenses in
connection with their travel to and attendance at meetings of the Board of
Directors or committees thereof.

ITEM 11: EXECUTIVE COMPENSATION

The following table sets forth certain information for the fiscal year
ended January 1, 2000, concerning cash and non-cash compensation earned by the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company whose combined salary and bonus exceeded $100,000 during
such year.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM OTHER ANNUAL
--------- ------------
ANNUAL COMPENSATION COMPENSATION COMPENSATION
------------------- ------------ ------------

NAME PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) RESTRICTED STOCK ($)
---- ------------------ ----------- --------- -------- ---------------- ---
AWARD($)
--------
<S> <C> <C> <C>
Thomas J. O'Gorman........ Chief Executive Officer 1999 $400,000 $800,000 --
1998 400,000 800,000
1997 400,000 800,000 $182,787 (3)
Larry Levine (2).......... President - Fabric Division 1999 225,000 --
1998 300,000 25,125 33,333 (4)
1997 203,077 332,423
Samuel Samelson (5)....... President - Ex-Cell 1999 437,500 1,333,333
Lester D. Sears........... Executive Vice President & 1999 191,008 127,975
Chief Financial Officer 1998 181,912 116,078 33,333 (4)
1997 172,932 141,077
Kevin R. Kennedy(1) ...... President & Chief Operating 1999 208,000 37,500
Officer - Consumer Rugs 1998 200,000 150,000 33,333 (4)
1997 59,888
</TABLE>

(1) Employed as of September 1997.

(2) Mr. Levine resigned from the Company effective as of July 1, 1999.

(3) In August 1997, Mr. O'Gorman was granted 1,286.211 options for restricted
shares of Holdings' Class A common stock at an exercise price of $37,500.
Mr. O'Gorman exercised the shares immediately. At the time of exercise, the
Company estimated fair market value for the shares to be $220,287. See
"Item 12: Security Ownership of Certain Beneficial Owners and Management"
for total shares owned by Mr. O'Gorman.

(4) During June 1998, Holdings sold each of these three officers 285.82 shares
of Holdings' Class A Common Stock at an exercise price of $52,777. The
Company estimated the fair market value of each block of shares to be
$86,110.

(5) Employed as of February 12, 1999.

19
<PAGE>

DEFINED BENEFIT PLAN

The Company's retirement benefit, for employees hired prior to May 1, 1997,
provides a maximum monthly benefit regardless of the employees compensation
level of $2,000. The normal retirement benefit is 45% of the average final
compensation of the employee, reduced pro rata for each year of service less
than 25 years.

EMPLOYMENT AGREEMENTS

Mr. O'Gorman has an employment agreement (the "O'Gorman Agreement") with
the Company dated as of October 28, 1997, as amended, which expires on January
1, 2001. The O'Gorman Agreement provides for Mr. O'Gorman's employment as Chief
Executive Officer and President or Chairman, if so elected, of Holdings and the
Company at an annual salary of $400,000 and a bonus based on the financial
performance of the Company. Mr. O'Gorman's employment may be terminated by him
on 12-months' notice to the Company. In the event the Company were to terminate
Mr. O'Gorman for other than "Cause" (as defined therein), Mr. O'Gorman would be
entitled to severance payments consisting of a pro-rated portion of his annual
bonus for the year of termination and his annual salary and other benefits for
12 months following the date of such termination. The O'Gorman Agreement also
provides that he will not compete with the Company during the employment term
and for a period of 18 months following termination.

Mr. Samelson has an employment agreement (the "Samelson Agreement") with
Ex-Cell dated as of February 12, 1999 and expires on February 12, 2004 which
provides for an annual salary of $525,000 and an incentive bonus of $600,000.
Also, in connection with the acquisition, Mr. Samelson will be paid an
additional $1 million bonus or a total of $2 million if certain EBITDA targets
are met by Ex-Cell for fiscal 1999 and 2000. Mr. Samelson is entitled to all
benefits under the Samelson Agreement unless terminated for cause (as defined
thereon) or resigned for Good Reason (as defined therein).

In connection with the acquisition of APE, the Company entered into an
employment agreement with Mr. Block (the "Block Agreement") dated as of October
2, 1998 which expires on October 2, 2003. The Block Agreement provides for an
annual salary of $300,000 as well as the opportunity for Mr. Block to
participate in a Company sponsored incentive bonus plan beginning in fiscal year
2000. In the event Mr. Block's employment is terminated other than for "Cause"
(as defined therein) or Mr. Block terminates for "Good Reason" (as defined
therein), Mr. Block will be entitled to all salary and benefits outstanding and
not paid under the term of the Block Agreement.

Mr. Sears has an employment agreement (the "Sears Agreement") dated as of
August 5, 1996 which expires on December 31, 1999, subject to one year renewals
thereafter unless either party elects not to renew at least six months prior to
the termination date. The Sears Agreement provides for Mr. Sears' employment as
Executive Vice President and Chief Financial Officer of the Company at an annual
salary of $165,000 and a bonus of $50,000 for the year ended December 31, 1996.
The salary is subject to a minimum increase each year of 5% and future minimum
bonus payments will be the lesser of (x) 66.7% of Mr. Sear's base salary and (y)
a fixed percentage of the Company's EBITDA. The fixed percentage is calculated
by dividing $50,000 by the Company's EBITDA for the fiscal year ending December
31, 1995. In addition to the payments provided therein, Mr. Sears received an
initial cash payment of $35,000. Mr. Sears' employment may be terminated by him
or the Company at any time. In the event Mr. Sears' employment is terminated
other than for "Cause" (as defined therein) or Mr. Sears terminates his
employment for "Good Reason" (as defined therein), Mr. Sears will receive as a
severance payment a cash lump sum in the amount of (A) the base salary at its
then current annual rate and (B) the highest annual bonus paid to or accrued by
the Company for the term of the agreement.

20
<PAGE>

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Holdings owns 100% of the Company's common stock. The following table sets
forth, as of January 1, 2000, certain information with respect to each class of
Holdings Common Stock (as defined) beneficially owned by each director of the
Company, all officers and directors of the Company as a group, and each person
known to the Company to own beneficially more than 5% of Holdings Common Stock
of any such class. Unless otherwise noted, the individuals have sole voting and
investment power. As described under "Description of Capital Stock and
Indebtedness of Holdings," certain classes of Holdings Common Stock are
convertible into other classes of Holdings Common Stock. Except as noted in the
footnotes to the table, the information in the table assumes no such conversion.

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D CLASS E
------- ------- -------- ------- -------
NAME AND ADDRESS SHARES % SHARES % SHARES % SHARES % SHARES %
---------------- ------ -- ------ -- ------ -- ------ -- ------ --
<S> <C> <C> <C> <C>
Citicorp Venture Capital, Ltd. ..... 5,607 44.1% 16,901 78.5% -- -- -- -- -- --
399 Park Avenue
New York, New York 10043
Soannes Investment Corporation ..... 1,826 14.1 -- -- -- -- -- -- --
c/o Gratch Jacobs & Brozman
950 Third Avenue
New York, New York 10022
Isaac Schapira(a) .................. -- -- -- 3,579 100% -- -- -- --
c/o Gratch Jacobs & Brozman
950 Third Avenue
New York, New York 10022
Thomas J. O'Gorman ................. 3,112 24.5 -- -- -- -- -- -- -- --
111 West 40th Street
New York, New York 10018
The Equitable Life Assurance
Society of the United States ..... 2,412(b) 19.0 -- -- -- -- -- -- 2,412(b) 100%
c/o Alliance Corporate Finance
Group Incorporated
1345 Avenue of the Americas
New York, New York 10105
Banque Nationale de Paris .......... 1,715(c) 13.5 1,715(c) 7.3 -- -- -- -- -- --
499 Park Avenue
New York, New York 10022-1245
CCT Partners II, L.P.(d) ........... 997 7.9 3,005 13.8 -- -- -- -- -- --
399 Park Avenue
New York, New York 10043
Saleem Muqaddam(e) ................. 55 * 167 * -- -- -- -- -- --
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
Joseph Silvestri(e) ................ 1 * 3 * -- -- -- -- -- --
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, New York 10043
John Mowbray O'Mara ................ 42 -- 125 -- -- -- 20 100 -- --
623 Lake Avenue
Greenwich, Connecticut 06830
All officers and directors as a
group(e) (7 persons) ............... 4,067 31.3 295 1.4 3,579 100 20 100 -- --
</TABLE>

* Represents less than 1%

(a) Includes shares held by Stirling Investment Holdings, Inc., a British
Virgin Islands corporation (the "Seller"). Under Rule 13d-3 under the
Exchange Act, Mr. Schapira is deemed to beneficially own shares held by the
Seller.

(b) Includes a warrant to purchase 2,412 shares of Class A or Class E Stock
with an exercise price of $0.01 per share and an expiration date of
December 14, 2003.

(c) Includes a warrant to purchase 1,715 shares of Class A or Class B Stock
with an exercise price of $0.01 per share and an expiration date of
December 14, 2003.

(d) CCT Partners II, L.P. is a Delaware limited partnership, the limited
partners of which are employees of CVC.

(e) Does not include shares held by CVC or CCT Partners II, L.P. that may be
deemed to be beneficially owned by Messrs. Muqaddam and Silvestri. Messrs.
Muqaddam and Silvestri disclaim beneficial ownership of shares held by CVC
and CCT Partners II, L.P. Includes shares owned by Mr. Sears, and Mr.
Kennedy not reflected above.

Certain stockholders of the Company have entered into the Stockholders
Agreement, which contains certain agreements relating to the composition of the
board of directors of Holdings and its subsidiaries. See "Certain Relationships
and Related Transactions--Stockholders Agreement."

21
<PAGE>

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

INDEBTEDNESS OF MANAGEMENT

In connection with the O'Gorman Agreement, Mr. O'Gorman received a loan in
the amount of $300,000 from the Company. Pursuant to the O'Gorman Agreement, the
loan bears a simple interest rate equal to the lowest rate in effect pursuant to
the Treasury Regulations so as to preclude the loan from bearing imputed
interest. The loan shall be due on the last day of the Employment Period (as
defined therein) or shall be forgiven if Mr. O'Gorman is still employed by the
Company on December 31, 2003. During March 1998, Mr. O'Gorman received a loan in
the amount of $100,000 from the Company and created an unsecured note
receivable. The unsecured note bears an interest rate of 4%.

During June 1998, Holdings sold three officers of the Company a total of
857.46 shares of Holdings Class A common stock for approximately $158,000.
Holdings loaned the officers an amount equal to the shares price and created
full recourse notes receivable secured by the issued shares. During June 1999,
one officer resigned from the Company and the related shares and outstanding
note were cancelled.

STOCKHOLDERS AGREEMENT

Holdings is a party to a stockholders agreement dated December 14, 1995
(the "Stockholders Agreement") by and among Holdings, CVC, John Mowbray O'Mara
("O'Mara"), BNP, The Equitable Life Assurance Society of the United States
("Equitable"), the Seller, Soannes Investment Corp. ("Soannes"), Thomas J.
O'Gorman and certain other parties thereto (collectively, the "Stockholders"),
which contains certain agreements among the Stockholders relating to the
composition of the board of directors of Holdings and its subsidiaries and
limiting the manner and terms by which the Stockholders may transfer their
shares of Holdings Common Stock or warrants to purchase Holdings Common Stock.

Pursuant to the Stockholders Agreement, the Board of Directors of Holdings
will be composed at all times of five directors as follows: the Chief Executive
Officer of Holdings; two directors appointed by CVC; one director appointed by
O'Mara or the party that then holds the Holdings Common Stock owned by O'Mara on
the date of the execution of the Stockholders Agreement; one director appointed
by the Seller until such time as the Seller and Soannes together own less than
9.9% of the outstanding Holdings Common Stock, at which time the remaining
director shall be appointed by the holders of a majority of the shares of
Holdings Common Stock owned by the original parties to the Stockholders
Agreement. The composition of the boards of directors of the Company and its
subsidiaries shall be the same as the composition of the board of directors of
Holdings.

RIGHTS OFFERING. The Stockholders Agreement provides the stockholders with
the right to participate ratably, in accordance with their fully-diluted common
equity ownership, in all additional offerings of Holdings Common Stock or
preferred stock, if any, or of securities exercisable, convertible or
exchangeable for or into Holdings Common Stock (other than certain offerings
permitted by the Stockholders Agreement relating primarily to then outstanding
options and warrants and a public offering of Holdings Common Stock having an
aggregate value of at least $20 million).

RIGHT OF FIRST OFFER. If a Stockholder wishes to transfer any Holdings
Common Stock or if BNP or Equitable wish to transfer their warrants, Holdings
must first be given the opportunity to purchase all of Holdings Common Stock or
warrants offered (but not less than all) at the same price and on the same terms
as those proposed by the Stockholder transferee. Each other Stockholder may
elect to purchase its pro rata share (but not less than all of its pro rata
share) of Holdings Common Stock or warrants at the same price and on the same
terms, but only in the event that Holdings does not exercise its right to
purchase such Common Stock or warrants.

TAG ALONG RIGHTS. In the event that CVC proposes to sell Holdings Common
Stock which would result in CVC, O'Gorman and certain related investors
collectively owning less than 50% of the then outstanding Holdings Common Stock
(other than in a registered public offering or other permitted transaction), the
other Stockholders will have the option to participate in the proposed sale on
the same terms and conditions as CVC, with the participating Stockholders each
selling a pro rata number of shares.

SALE OF HOLDINGS. If the board of directors of Holdings and holders of a
majority of the Holdings Common Stock then outstanding approve the sale of
Holdings (an "Approved Sale"), each Stockholder has agreed to (i) consent to
such sale and raise no objections against it, (ii) waive any dissenter's rights
and other similar rights and (iii) if such Approved Sale includes the sale of
Holdings Common Stock, each Stockholder will sell all of such Stockholder's
Holdings Common Stock on the terms and conditions approved by the board of
directors of Holdings and holders of the majority of the Holdings Common Stock
then outstanding.

22
<PAGE>

REGISTRATION RIGHTS AGREEMENT

Holdings is a party to a registration rights agreement (the "Holdings
Registration Rights Agreement") by and among Holdings and the Stockholders.
Pursuant to the terms of the Holdings Registration Rights Agreement CVC, BNP and
Equitable have the right to require Holdings, at the sole expense of Holdings
and subject to certain limitations, to register under the Securities Act all or
part of the shares of Holdings Common Stock (the "Registrable Securities") held
by them. CVC is entitled to demand three long-form registrations and unlimited
short-form registrations, while BNP and Equitable are entitled to demand one
long-form registration and unlimited short-form registrations; PROVIDED,
HOWEVER, that no registration may be demanded within six months of the effective
date of a previous demand registration. Additionally, CVC is entitled to demand
one shelf registration.

All Stockholders are entitled to an unlimited number of "piggyback"
registrations, with Holdings paying all expenses of the offering, whenever
Holdings proposes to register its Common Stock under the Securities Act (except
in the case of an initial public offering).

Pursuant to the Holdings Registration Rights Agreement, Holdings has agreed
to indemnify all holders of Registrable Securities against certain liabilities,
including liabilities under the Securities Act.

TAX SHARING AGREEMENT

Holdings, the Company and its domestic subsidiaries will be included in the
consolidated United States federal income tax return of Holdings. Holdings, the
Company and its domestic subsidiaries have entered into a Tax Sharing Agreement
whereby the Company and its domestic subsidiaries will pay Holdings their
respective pro rata share of the total consolidated tax liability, as set forth
in the Tax Sharing Agreement. Under the Tax Sharing Agreement, the Company and
its domestic subsidiaries are treated as separate tax groups for purposes of the
agreement. The Tax Sharing Agreement provides that if the Company or its
domestic subsidiaries has losses that are absorbed by the rest of the
consolidated tax group, the Company, as the case may be, cannot carry those
losses forward to offset its own future taxable income. In the event that the
Company and its subsidiaries are included in a joint, combined, consolidated or
unitary state or local income or franchise tax return with Holdings, the Company
will make payments to Holdings in a manner consistent with that described above
for federal tax purposes. Under the Indenture, the Company will be permitted to
make payments to Holdings under the Tax Sharing Agreement; PROVIDED, HOWEVER,
that certain amendments to the Tax Sharing Agreement will be required if more
than a nominal amount of gross income is generated by Holdings or any subsidiary
of Holdings.

IMPORTANCE OF B&D LICENSE AGREEMENT; CVC'S INTEREST IN B&D; POSSIBLE SALE OF B&D

A substantial majority of the products sold by the Consumer Products
Division are manufactured, marketed and sold under a license agreement with B&D.
See "Business--Licenses and Trademarks." Although the Company has the right to
perpetually renew the license agreement for successive one-year terms (subject
to certain conditions), the loss of this license or a deterioration in B&D's
business could have a material adverse effect on the Company's business,
financial condition and results of operations.

CVC, the Company's largest shareholder, has an interest in B&D as a result
of CVC's purchase in 1991 of certain notes of Papercraft Corporation
("Papercraft"), the then-parent company of B&D, while Papercraft was the subject
of a bankruptcy proceeding in the Western District of Pennsylvania. During the
bankruptcy proceeding, a committee of certain other creditors of Papercraft (the
"Committee") sought to have CVC's claim equitably subordinated to the claims of
other creditors. This matter remains in dispute.

Nonetheless, the Company believes that its relationship with B&D is
excellent and has no reason to believe that the matters relating to CVC's
interest in BDK or any sale of BDK will have a material adverse effect on the
Company's business, financial condition or results of operations.

23
<PAGE>

PART IV:

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

(a) Financial Statements

The financial statements listed in the accompanying Index to Consolidated
Financial Statements are filed as part of this Annual Report on Form 10-K.

(b) Reports on Form 8-K

On February 26, 1999, the Company filed on Form 8-K information regarding
the acquisition of the capital stock of Ex-Cell Home Fashions, Inc. which
occurred on February 12, 1999. On April 27, 1999 the Company filed an
amendment to this Form 8-K to include required financial information related
to the acquisition.

3.1 Certificate of Incorporation of Glenoit Corporation is hereby
incorporated by reference to Exhibit 3.1 to Glenoit Corporation's
Registration Statement on Form S-4 (Registration No. 333-42411) filed
on December 16, 1997.

3.2 By-Laws of Glenoit Corporation are hereby incorporated by reference to
Exhibit 3.2 to Glenoit Corporation's Registration Statement on Form S-4
(Registration No. 333-42411) filed on December 16, 1997.

3.3 Certificate of Incorporation of Glenoit Asset Corporation is hereby
incorporated by reference to Exhibit 3.3 of Amendment No. 1 to Glenoit
Asset Corporation's Registration Statement of Form S-4 (Registration
No. 333-42411-01) filed February 4, 1998.

3.4 By-Laws of Glenoit Asset Corporation are hereby incorporated by
reference to Exhibit 3.4 of Amendment No. 1 to Glenoit Asset
Corporation's Registration Statement of Form S-4 (Registration No.
333-42411-01) filed February 4, 1998.

4.1 Indenture dated as of April 1, 1997 between Glenoit Corporation, the
Subsidiary Guarantors (as defined therein) and United States Trust
Company of New York is hereby incorporated by reference to Exhibit 4.1
to Glenoit Corporation's Registration Statement on Form S-4
(Registration No. 333-42411) filed on December 16, 1997.

4.2 Purchase Agreement dated as of March 26, 1997 among Glenoit
Corporation, the Subsidiary Guarantors (as defined therein), Salomon
Brothers Inc. and CIBC Wood Gundy Securities Corp. is hereby
incorporated by reference to Exhibit 4.2 to Glenoit Corporation's
Registration Statement on Form S-4 (Registration No. 333-42411) filed
on December 16, 1997.

4.3 Registration Agreement dated as of March 26, 1997 among Glenoit
Corporation, the Subsidiary Guarantors (as defined therein), Salomon
Brothers Inc. and CIBC Wood Gundy Securities Corp. is hereby
incorporated by reference to Exhibit 4.3 to Glenoit Corporation's
Registration Statement on Form S-4 (Registration No. 333-42411) filed
on December 16, 1997.

10.1 Second Amended and Restated Credit Agreement dated as of April 1, 1997
among Glenoit Corporation, the banks, financial institutions and other
institutional lenders listed on the signature pages thereto as the
Restatement Lenders, the Banque Nationale de Paris, as Administrative
Agent for the Lender Parties (as defined therein) is hereby
incorporated by reference to Exhibit 10.1 to Glenoit Corporation's
Registration Statement on Form S-4 (Registration No. 333-42411) filed
on December 16, 1997.

10.2 Supply Agreement dated February 1, 1997 by and between the Company and
Sterling Fibers, Inc. is hereby incorporated by reference to Exhibit
10.2 of Amendment No. 1 to Glenoit Corporation's Registration Statement
on Form S-4 (Registration No. 333-42411) filed on February 4, 1998.

10.3 Employment Agreement dated October 28, 1997 by and among the Company,
Glenoit Universal, Inc. and Thomas J. O'Gorman is hereby incorporated
to reference to Exhibit 10.3 of Amendment No. 1 to Glenoit
Corporation's Registration Statement on Form S-4 (Registration No.
333-42411) filed on February 4, 1998.

10.4 Employment Agreement dated August 5, 1996 by and between the Company
and Lester D. Sears is hereby incorporated by reference to Exhibit 10.4
of Amendment No. 1 to Glenoit Corporation's Registration Statement on
Form S-4 (Registration No. 333-42411) filed on February 4, 1998.

24
<PAGE>

10.5 Stockholders Agreement dated as of December 14, 1995 by and among
Glenoit Universal, Inc., Citicorp Venture Capital, John Mowbray O'Mara,
Banque Nationale de Paris, The Equitable Life Assurance Society of the
United States, the Seller, Soannes Investment Corporation, Thomas J.
O'Gorman and certain other parties thereto to is hereby incorporated by
reference to Exhibit 10.5 of Amendment No. 1 to Glenoit Corporation's
Registration Statement on Form S-4 (Registration No. 333-42411) filed
on February 4, 1998.

10.6 Second Amendment and Waiver to the Credit Agreement, dated October 2,
1998, among Glenoit Corporation, the banks, financial institutions and
other institutional lenders parties to the Credit Agreement and Banque
Nationale de Paris as Agent is hereby incorporated by reference to
Exhibit 4.1 of Glenoit Corporation's Form 8-K filed on October 16,
1998.

10.7 Stock Purchase Agreement dated October 2, 1998 among Glenoit
Corporation, American Pacific Enterprises, Inc., Steven J. Block,
Jeffrey J. Block and Gregory D. Block is hereby incorporated by
reference to Exhibit 2.1 of Glenoit Corporation's Form 8-K filed on
October 16, 1998

10.8 Third Amendment and Waiver to the Credit Agreement, dated October 30,
1998, among Glenoit Corporation, the banks, financial institutions and
other institutional lenders parties to the Credit Agreement and Banque
Nationale de Paris as Agent is incorporated by reference to Exhibit
10.8 of Glenoit Corporation's Form 10-K filed on April 1, 1999.

10.9 Third Amended and Restated Credit Agreement, dated February 12, 1999,
among Glenoit Corporation, the banks, financial institutions and other
institutional lenders parties to the Credit Agreement and Banque
Nationale de Paris as Agent is hereby incorporated by reference to
Exhibit 4.1 of Glenoit Corporation's Form 8-K filed on February 26,
1999.

10.10 Stock Purchase Agreement dated February 12, 1999, among Glenoit
Corporation, Ex-Cell Home Fashions, Inc., Arnold Angerman, Irving
Angerman, Samuel Samelson and two trusts is hereby incorporated by
reference to Exhibit 2.1 of Glenoit Corporation's Form 8-K filed on
February 26, 1999.

10.11 Amendment No. 2 to the Third Amended and Restated Credit Agreement,
dated as of June 29, 1999, among Glenoit Corporation, the banks,
financial institutions and other institutional lenders and Banque
Nationale de Paris as Agent is hereby incorporated by reference to
Exhibit 10.11 of Glenoit Corporation's Form 10-Q filed on August 24,
1999.

10.12 Amendment No. 3 to the Third Amended and Restated Credit Agreement,
dated as of August 20, 1999, among Glenoit Corporation, the banks,
financial institutions and other institutional lenders and Banque
Nationale de Paris as Agent is hereby incorporated by reference to
Exhibit 10.12 of Glenoit Corporation's Form 10-Q filed on August 24,
1999.

10.13 Amendment No. 4 to the Third Amended and Restated Credit Agreement,
dated as of October 29, 1999, among Glenoit Corporation, the banks,
financial institutions and other institutional lenders and Banque
Nationale de Paris as Agent is hereby incorporated by reference to
Exhibit 10.13 of Glenoit Corporation's Form 10-Q filed on November 23,
1999.

10.14 Amendment No. 5 to the Third Amended and Restated Credit Agreement,
dated as of November 19, 1999, among Glenoit Corporation, the banks,
financial institutions and other institutional lenders and Banque
Nationale de Paris as Agent is hereby incorporated by reference to
Exhibit 10.14 of Glenoit Corporation's Form 10-Q filed on November 23,
1999.

10.15 Amendment No. 6 to the Third Amended and Restated Credit Agreement,
dated as of March 16, 2000, among Glenoit Corporation, the banks,
financial institutions and other institutional lenders and Banque
Nationale de Paris as Agent.

21.1 Subsidiaries of Glenoit Corporation is hereby incorporated by reference
to Exhibit 21.1 to Glenoit Corporation's Registration Statement on Form
S-4 (Registration No. 333-42411) filed on December 16, 1997.

27.1 Financial Data Schedule.

(d) Schedules

Not applicable.

25
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the city of New
York, state of New York, on April 14, 2000.

GLENOIT CORPORATION

By /s/ THOMAS J. O'GORMAN
-----------------------------------------------
Thomas J. O'Gorman
President, Chief Executive Officer and Director
(principal executive officer)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas J. O'Gorman and Lester D. Sears his true
and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities (including his capacity as a director and/or officer of Glenoit
Corporation to sign any and all amendments (including post-effective amendments)
to this report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1934, this report and
power of attorney have been signed by the following persons on behalf of the
registrant on April 14, 2000 in the capacities indicated:

By /s/ THOMAS J. O'GORMAN
-----------------------------------------------
Thomas J. O'Gorman
President, Chief Executive Officer and Director
(principal executive officer)

By /s/ LESTER D. SEARS
-----------------------------------------------
Lester D. Sears
Executive Vice President and Chief Financial
Officer (principal financial and accounting
officer)

By /s/ JOHN MOWBRAY O'MARA
-----------------------------------------------
John Mowbray O'Mara
Director

By /s/ SALEEM MUQADDAM
-----------------------------------------------
Saleem Muqaddam
Director

By /s/ ISAAC SCHAPIRA
-----------------------------------------------
Isaac Schapira
Director

By /s/ JOSEPH M. SILVESTRI
-----------------------------------------------
Joseph M. Silvestri
Director

26
<PAGE>

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the city of New
York, state of New York, on April 14, 2000.

GLENOIT ASSET CORPORATION

By /s/ THOMAS J. O'GORMAN
-----------------------------------------------
Thomas J. O'Gorman
President, Chief Executive Officer and Director
(principal executive officer)

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1934, this Annual
Report and power of attorney have been signed by the following persons on behalf
of the registrant on April 14, 2000 in the capacities indicated:

By /s/ THOMAS J. O'GORMAN
--------------------------------------------------
Thomas J. O'Gorman
President, Chief Executive Officer and Director
(principal executive officer)

By /s/ PETER J. WINNINGTON
--------------------------------------------------
Peter J. Winnington
Secretary and Vice President

By /s/ WILLIAM S. RYMER
--------------------------------------------------
William S. Rymer
Treasurer

27
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants......................................................................... F-2

Consolidated Balance Sheets as of January 2, 1999 and January 1, 2000..................................... F-3

Consolidated Statements of Operations for the years ended January 3, 1998, January 2, 1999 and
January 1, 2000........................................................................................ F-5

Consolidated Statements of Stockholder's Deficit for the years ended January 3, 1998,
January 2, 1999 and January 1, 2000.................................................................... F-6

Consolidated Statements of Comprehensive Income (Loss) for the years ended January 3, 1998,
January 2, 1999 and January 1, 2000.................................................................... F-6

Consolidated Statements of Cash Flows for the years ended January 3, 1998,
January 2, 1999 and January 1, 2000....................................................................... F-7

Notes to Consolidated Financial Statements................................................................ F-8
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Shareholders of
Glenoit Corporation

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of comprehensive income (loss),
of stockholder's deficit, and of cash flows present fairly, in all material
respects, the financial position of Glenoit Corporation and its subsidiaries
(the "Company"), a wholly-owned subsidiary of Glenoit Universal, Ltd., as of
January 1, 2000 and January 2, 1999, and the results of their operations and
their cash flows for each of the three years in the period ended January 1,
2000, January 2, 1999 and January 3, 1998 in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Notes 1 and 7 to the
financial statements, the Company's violation of certain provisions of its debt
agreements raises substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Notes 1 and 7. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

PricewaterhouseCoopers LLP

Raleigh, North Carolina
March 21, 2000, except as to Notes 1 and 7 for which the date is April 14, 2000

F-2
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 2, JANUARY 1,
1999 2000
----- ----
ASSETS
Current assets:
Cash and cash equivalents ............................. $ 339,700 $ 2,015,080
Receivables:
Trade accounts receivable, net of allowance of
$2,360,000 and $5,470,000 as of January 2, 1999
and January 1, 2000, respectively ............. 29,666,112 27,639,925
Other receivables ................................ 364,996 2,396,339
Inventories .......................................... 19,734,042 50,974,925
Deferred tax asset ................................... 2,981,306 3,406,960
Prepaid expenses and other current assets ............ 816,173 1,012,441
------------- -------------
Total current assets ........................ 53,902,329 87,445,670
------------- -------------

Property, plant and equipment:
Land .................................................. 698,891 1,233,290
Buildings and improvements ............................ 10,619,144 14,677,246
Machinery and equipment ............................... 48,510,929 67,259,267
Computer equipment .................................... 4,207,744 7,617,064
Furniture and fixtures ................................ 940,409 1,728,944
Leasehold improvements ................................ 670,027 2,624,780
Construction-in-progress .............................. 3,276,432 1,055,176
------------- -------------
Total ....................................... 68,923,576 96,195,767
Less accumulated depreciation and amortization ........ (19,815,265) (28,494,090)
------------- -------------
Net property, plant and equipment ........... 49,108,311 67,701,677
------------- -------------
Other assets:
Notes receivable from related party ................... 266,821 246,810
Intangible assets, net of accumulated amortization of
$1,735,000 and $3,185,000 as of
January 2, 1999 and January 1, 2000,
respectively ....................................... 35,715,233 50,933,860
Deferred loan costs and other, net of accumulated
amortization of $1,181,000 and $2,836,000
as of January 2, 1999 and January 1, 2000,
respectively ....................................... 5,195,653 9,293,032
Other ................................................. 510,716 1,324,424
------------- -------------
Total assets ................................ $ 144,699,063 $ 216,945,473
============= =============
</TABLE>

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

F-3
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
JANUARY 2, JANUARY 1,
1999 2000
---- ----
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable ................................................ $ 2,888,602 $ 10,061,519
Accrued expenses ................................................ 5,389,816 6,408,338
Accrued compensation ............................................ 5,208,116 4,274,474
Accrued interest ................................................ 2,701,102 3,224,475
Current maturities of Long-term debt ............................ - 237,681,953
Payable to related party ........................................ 8,521,000 -
Due to Holdings ................................................. 1,752,143 2,462,933
------------- -------------
Total current liabilities ............................. 26,460,779 264,113,692

Long-term debt--less current maturities .............................. 160,707,499 -
Deferred income taxes ................................................ 3,382,058 5,840,012
Other ................................................................ 504,196 6,125,933
------------- -------------
Total liabilities ..................................... 191,054,532 276,079,637
------------- -------------

Commitments and contingencies

Stockholder's deficit:
Common stock, $.01 par value, 1,000 shares authorized, issued and
outstanding as of January 2, 1999
and January 1, 2000 .......................................... 10 10
Additional paid-in capital ...................................... 1,461,713 1,461,713
Accumulated deficit ............................................. (46,966,633) (60,255,036)
Accumulated other comprehensive loss ............................ (850,559) (340,851)
------------- -------------
Total stockholder's deficit ........................... (46,355,469) (59,134,164)
------------- -------------
Total liabilities and stockholder's deficit ........... $ 144,699,063 $ 216,945,473
============= =============
</TABLE>

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

F-4
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------------
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
----- ----- ----
<S> <C> <C> <C>
Net sales ............................. $ 146,920,759 $ 172,042,207 $ 294,724,697
Cost of sales ......................... 98,061,440 123,696,704 212,154,943
------------- ------------- -------------
Gross profit ................ 48,859,319 48,345,503 82,569,754
------------- ------------- -------------
Operating expenses:
Selling .......................... 12,309,451 15,024,758 23,837,975
Administrative ................... 8,780,595 16,115,200 35,057,507
Research and development ......... 1,842,639 1,736,106 4,070,252
Restructuring charge ............. -- -- 13,100,000
------------- ------------- -------------

Total operating expenses .... 22,932,685 32,876,064 76,065,734
------------- ------------- -------------
Income from operations ................ 25,926,634 15,469,439 6,504,020
------------- ------------- -------------
Other income (expense):
Interest expense, net ............ (10,938,341) (13,941,672) (25,089,954)
Amortization of deferred financing
costs ......................... (645,621) (690,656) (1,654,778)
Other ............................ (86,853) (147,624) 921,113
------------- ------------- -------------
Total other expense ......... (11,670,815) (14,779,952) (25,823,619)
------------- ------------- -------------
Income (loss) before income taxes and
extraordinary loss ................. 14,255,819 689,487 (19,319,599)
Income tax expense (benefit) .......... 5,390,412 307,915 (6,031,196)
------------- ------------- -------------

Income (loss) before extraordinary loss 8,865,407 381,572 (13,288,403)
Extraordinary loss on early
extinguishment of debt, net of tax
benefit of $1,527,000 for the year
ended January 3, 1998 and
$67,000 for the year ended
January 2, 1999 .................... 2,856,884 117,236 -
------------- ------------- -------------
Net income (loss) ..................... $ 6,008,523 $ 264,336 $ (13,288,403)
============= ============= =============
</TABLE>

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

F-5
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

CONSOLIDATED STATEMENTS OF STOCKHOLDER'S
DEFICIT FOR THE YEARS ENDED JANUARY 3, 1998, JANUARY 2,
1999 AND JANUARY 1, 2000

<TABLE>
<CAPTION>
ACCUMULATED
SHARES OF ADDITIONAL OTHER
COMMON COMMON PAID-IN ACCUMULATED COMPREHENSIVE
STOCK STOCK CAPITAL DEFICIT INCOME TOTAL
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 4, 1997 ........ 1,000 $ 10 $ 1,161,713 $(43,960,041) $ - $(42,798,318)
Net income ........................... 6,008,523 6,008,523
Dividends ............................ (7,343,581) (7,343,581)
Stock compensation ................... 200,000 200,000
Accumulated other comprehensive loss . (232,614) (232,614)
------------ ------------ ------------ ------------ ------------ ------------

Balance as of January 3, 1998 ........ 1,000 10 1,361,713 (45,295,099) (232,614) (44,165,990)
Net income ........................... 264,336 264,336
Dividends ............................ (1,935,870) (1,935,870)
Stock compensation ................... 100,000 100,000
Accumulated other comprehensive loss . (617,945) (617,945)
------------ ------------ ------------ ------------ ------------ ------------

Balance as of January 2, 1999 ........ 1,000 10 1,461,713 (46,966,633) (850,559) (46,355,469)
Net loss ............................. (13,288,403) (13,288,403)
Accumulated other comprehensive income 509,708 509,708
------------ ------------ ------------ ------------ ------------ ------------
Balance as of January 1, 2000 ........ 1,000 $ 10 $ 1,461,713 $(60,255,036) $ (340,851) $(59,134,164)
============ ============ ============ ============ ============ ============
</TABLE>

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

<TABLE>
<CAPTION>
Years Ended
-------------------------------------------------------
January 3, 1998 January 2, 1999 January 1, 2000
--------------- --------------- ---------------
<S> <C> <C> <C>
Net income (loss)................................ $6,008,523 $264,336 $(13,288,403)
Other comprehensive income (loss), net of tax:
Currency translation adjustment......... (147,710) (392,395) 323,665
--------- --------- ------------
Comprehensive income (loss)................ $5,860,813 $(128,059) $(12,964,738)
========== ========== =============

</TABLE>

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

F-6
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED
-----------
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ..................................... $ 6,008,523 $ 264,336 $ (13,288,403)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Loss on early extinguishment of debt .............. 4,383,884 184,624 -
Deferred income taxes ............................. (81,781) (753,382) (1,171,129)
Depreciation and amortization ..................... 3,861,613 6,415,650 12,278,527
Restructuring charge .............................. - - 13,100,000
Loss (gain) on sale of property and equipment ..... 234,020 19,497 (198,843)
Stock compensation ................................ 200,000 100,000 -
Effect of foreign currency exchange rate .......... (232,614) (617,945) 509,708
Changes in operating assets and liabilities, net of
acquired operating assets and liabilities:
Trade and other receivables ..................... 1,025,410 6,112,704 4,225,713
Inventories ..................................... 1,678,022 6,345,582 (13,202,475)
Prepaid expenses and other ...................... 443,589 (640,061) (1,296,249)
Due to Holdings ................................. 944,564 (926,444) 710,790
Accounts payable ................................ 2,079,009 (4,415,003) 2,079,071
Accrued expenses and other liabilities .......... 3,161,820 5,699,801 (7,865,271)
------------- ------------- -------------
Net cash provided by (used in) operating
activities .................................. 23,706,059 17,789,359 (4,118,561)
------------- ------------- -------------
Cash flows from investing activities:
Purchases of acquired businesses ...................... (8,209,333) (55,671,337) (59,649,243)
Purchases of and additions to property, plant and
equipment ........................................... (19,605,752) (17,901,934) (7,529,821)
Proceeds from sale of property and equipment and
refunds of deposits.................................. 52,300 55,542 1,750,706
------------- ------------- -------------
Net cash used in investing activities ......... (27,762,785) (73,517,729) (65,428,358)
------------- ------------- -------------
Cash flows from financing activities:
Payments on capital lease obligations ................. (625,821) (759,619) -
Proceeds from line of credit and issuance of debt ..... 124,600,000 80,707,499 181,583,168
Payments on line of credit and debt ................... (104,600,000) (17,000,000) (104,608,713)
Payments for financing costs .......................... (6,950,409) (987,121) (5,752,156)
Advances on notes receivable - related party ......... - (79,099) -
Dividends paid ........................................ (1,600,000) (1,935,870) -
Purchase of senior subordinated notes ................. - (4,950,000) -
Payment of note payable to related party .............. (5,743,581) - -
------------- ------------- -------------
Net cash provided by financing activities ..... 5,080,189 54,995,790 71,222,299
------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents ................................. 1,023,463 (732,580) 1,675,380
Cash and cash equivalents at beginning of year .......... 48,817 1,072,280 339,700
------------- ------------- -------------
Cash and cash equivalents at end of year ................ $ 1,072,280 $ 339,700 $ 2,015,080
============= ============= =============
</TABLE>

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

F-7
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

On December 13,1995, Glenoit Universal, Ltd. ("Holdings") formed a wholly
owned subsidiary, Glenoit Corporation (the Company), formerly Glenoit
Intermediate, Inc. and exchanged all of the issued and outstanding stock of
Glenoit Mills, Inc. and subsidiary ("Mills") for all of the issued and
outstanding shares of common stock of Glenoit Corporation. During 1997, Mills
was merged into the Company. The Company has two operating segments: (i)
Decorative Home Furnishings which designs, manufactures, imports and distributes
decorative textile home furnishings and (ii) a domestic manufacturer and
marketer of specialty fabrics, primarily for the apparel industry, known as
"sliver-knit" pile fabrics ("Fabric Division"). The Company's two most recent
acquisitions (see Note 3), American Pacific Enterprises, Inc. ("APE") and
Ex-Cell Home Fashions, Inc. ("Ex-Cell"), are part of the Decorative Home
Furnishings segment.

BASIS OF PRESENTATION

Subsequent to January 1, 2000, the Company was in violation of certain
covenants of its senior credit facility and senior subordinated notes (See Note
7). This matter raises substantial doubt about the Company's ability to continue
as a going concern. The Company is currently in negotiations with its senior
lenders and is reviewing alternative financing and strategic options to address
the defaults outstanding as well as reduce the Company's overall leverage. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

PRINCIPLES OF CONSOLIDATION

On October 2, 1998, the Company acquired all the capital stock of APE (see
Note 3). On February 12, 1999, the Company acquired all of the outstanding
shares of capital stock of Ex-Cell (see Note 3). Accordingly, as of January 1,
2000, the consolidated financial statements presented include the amounts of
Glenoit Corporation and its wholly-owned subsidiaries Glenoit Canada, Glenoit
Asset Corporation , APE and Ex-Cell.

All material intercompany accounts and transactions are eliminated. The
Company reports its operations on a fifty-two/fifty-three week fiscal year.

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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. An estimate
which could change by a material amount in the near term is the estimated
allowance for obsolescence and lower of cost or market for inventory.

CASH FLOW STATEMENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. During 1998, the
Company accrued approximately $8.5 million as additional purchase price of APE,
which is a non-cash investing activity. This amount was paid during April 1999.

INVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined
by the first-in, first-out (FIFO) method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost; property, plant and
equipment obtained through purchase business combinations is stated at estimated
fair value as of the date of acquisition. Property and equipment under capital
leases are initially recorded at the lower of the present value of the future
minimum lease payments or the fair value of the related equipment.

Expenditures for repairs and maintenance are charged to expense as
incurred. The costs of major renewals and betterments are capitalized and
depreciated over their estimated useful lives. Upon disposition, the asset and
related accumulated depreciation accounts are relieved and any related gain or
loss is credited or charged to other income (expense).

The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable, in accordance with the provisions of Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of. Accordingly, when indicators of
impairment are present, the Company evaluates the carrying value of property,
plant and equipment, and intangibles in relation to operating performance.

Depreciation is primarily computed using the straight-line method over the
related asset's estimated useful life as follows:

Buildings and improvements................................. 20 to 40 years
Machinery and equipment.................................... 5 to 12 years
Computer equipment......................................... 3 to 7 years
Furniture and equipment.................................... 3 to 12 years

F-8
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEFERRED LOAN COSTS

Deferred loan costs, primarily composed of loan origination costs and legal
fees, are amortized over the term of the related loan agreement using the
straight-line method.

INTANGIBLE ASSETS

Intangible assets principally represent the amount by which the costs of
acquired net assets exceeded their related fair value (goodwill) as of the date
of acquisition. Goodwill is being amortized on a straight-line basis over lives
of twenty to twenty-five years. The carrying value of goodwill will be reviewed
if the facts and circumstances suggest that it is impaired. If this review
indicates that goodwill will not be recoverable as determined based on the
undiscounted cash flows of the entity acquired over the remaining amortization
period, the Company will adjust the carrying value of goodwill.

NET SALES

The Company generally recognizes a sale when title passes to the customer
(usually at the date of shipment). Amounts which are determined to be
uncollectible are charged to operating expense. Sales returns and allowances are
recorded against sales based on management's estimates of sales returns. Where
the right of return exists under guaranteed sales arrangements, revenue is
recognized when the products are sold by the retailer. One customer for each of
the years ended January 2, 1999 and January 1, 2000 accounted for approximately
11% of consolidated net sales. One additional customer for the year ended
January 1, 2000 accounted for approximately 10% of consolidated net sales. No
single customer accounted for greater than 10% of consolidated net sales during
the year ended January 3, 1998.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to expense as incurred.

INCOME TAXES

The Company follows the asset and liability method of accounting for income
taxes pursuant to Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax basis of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.

CONCENTRATION OF CREDIT RISK

The Company's principal financial instruments subject to potential
concentration of credit risk are cash and cash equivalents and trade accounts
receivable. The Company places cash deposits with federally insured financial
institutions; however, at times deposits have exceeded the amounts insured by
the Federal Deposit Insurance Corporation. The concentration of credit risk with
respect to trade accounts receivable is limited due to the large number of
customers and their dispersion across different geographic locations. Although
the Company does not require collateral for unpaid balances, credit losses have
been within management's expectations.

F-9
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

FAIR VALUES OF FINANCIAL INSTRUMENTS

On January 1, 1995, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments" ("FAS No. 107"). The Company's primary financial
instruments subject to the provisions of FAS No. 107 are debt instruments. The
fair values of these instruments are based on market quotations and present
value calculations using market interest rates. As of January 2, 1999 and
January 1, 2000, the Company estimates the fair value of its debt instruments to
be approximately $155,000,000 and $178,000,000, respectively.

FOREIGN CURRENCY

Foreign currency activity is reported in accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation" ("FAS No.
52"). FAS No. 52 generally provides that the assets and liabilities of foreign
operations be translated at the current exchange rate as of the end of the
accounting period and that revenues and expenses be translated using average
exchange rates. The resulting translation adjustments arising from foreign
currency translations are accumulated as a separate component of stockholder's
deficit. Gains and losses resulting from foreign currency transactions are
recognized in income.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS No. 133"). FAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
The FASB recently delayed the required implementation of FAS No. 133 until
fiscal year 2000. During 1999, the Company entered into an interest rate hedge
agreement but does not expect the implementation of FAS No. 133 to have a
material impact on the Company's consolidated financial position, results of
operations, or cashflows.

2. RECAPITALIZATION

On December 13, 1995, Holdings completed a series of transactions in order
to consummate a leveraged recapitalization (the "Recapitalization"). The Company
obtained two new financing arrangements: an $80 million credit facility from a
financial institution and a $15 million note from another financial institution.
The Company used the proceeds from these borrowings to pay off all of the
Company's outstanding debt as of December 13, 1995 and to terminate the
Company's factor agreement. In addition, the Company paid a cash dividend of
$40,486,261 to Holdings.

3. ACQUISITIONS

Effective August 30, 1997, Glenoit Corporation through a wholly-owned
subsidiary, Glenoit Corporation of Canada ("Glenoit Canada"), acquired certain
assets and certain liabilities of Collins & Aikman Canada, Inc. for cash
consideration of approximately $8.2 million. The acquisition has been accounted
for as a purchase and, accordingly, the operating results of the acquired
business have been included in the results of operations since the acquisition
date. The purchase price allocation attributed approximately $3.4 million to net
working capital items, approximately $4.4 million to property, plant and
equipment and approximately $ .4 million to goodwill. For the year ended
December 28, 1996, the acquired business had sales of approximately $11.6
million. Net income for the periods presented in the accompanying consolidated
statements of income would not differ significantly on a pro forma basis
adjusted for this acquisition.

F-10
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. ACQUISITIONS (CONTINUED)

On October 2, 1998, the Company acquired all the capital stock of American
Pacific Enterprises, Inc. ("APE") for approximately $39.1 million, including
fees and expenses, subject to post-closing adjustment. In addition,
approximately $16.6 million of indebtedness of APE was extinguished by the
Company in connection therewith. The purchase agreement also includes additional
payments to the former owners of APE if certain earning targets for APE's
operations are met during 1998 and 1999. For fiscal 1998, approximately $12.3
million was paid to the former owners and current employees during April 1999.
Of this amount, approximately $3.5 million was paid to current employees and was
expensed during 1998. The remaining $8.8 million was recorded as additional
purchase price. Based on APE's operating results for 1999, there was no
additional compensation expense or purchase price recorded. APE is a leading
designer, importer and marketer of decorative textile home furnishings,
principally quilts and specialty decorative bedding items. The acquisition has
been accounted for as a purchase and, accordingly, the operating results of the
acquired business have been included in the results of operations since the
acquisition date. The purchase price allocation attributed approximately $31.8
million to net working capital items, approximately $1.3 million to property,
plant and equipment and approximately $31.4 million to goodwill. Goodwill is
being amortized on a straight-line basis over 25 years.

On February 12, 1999, the Company acquired all the outstanding shares of
capital stock of Ex-Cell Home Fashions, Inc. ("Ex-Cell") in a single transaction
for approximately $44.1 million, including fees and expenses, subject to
post-closing adjustments. In addition, approximately $6.8 million of debt of
Ex-Cell was extinguished by the Company in connection therewith. The acquisition
has been accounted for as a purchase and, accordingly, the operating results of
the acquired business have been included in the results of operations since the
acquisition date. Ex-Cell is engaged in the design, manufacture, importation and
distribution of textile home furnishings, principally shower curtains, table
linens and decorative pillows. The purchase price allocation attributed
approximately $15.1 million to net working capital items, approximately $22.8
million to property, plant and equipment, $7.1 million to long term liabilities
including deferred income taxes and approximately $20.1 million to goodwill.
Goodwill is being amortized on a straight-line basis over 25 years.

The following unaudited proforma summary of consolidated results of
operations have been prepared as if the acquisitions of APE and Ex-Cell occurred
at the beginning of the periods presented. In connection with the allocation of
APE's purchase price, the Company wrote up APE's inventory by an estimated $3.4
million. This write-up of inventory negatively impacted gross margin during the
Company's fourth quarter of 1998 as this inventory was sold. This one-time
nonrecurring adjustment of $2.0 million, net of tax, is not reflected in the
proforma results presented below. In connection with the allocation of Ex-Cell's
purchase price, the Company wrote up Ex-Cell's inventory by approximately $2.2
million. This write-up negatively impacted gross margin during the Company's
first nine months of 1999. The impact of this write-up is not reflected in the
proforma results presented below. Certain costs associated with the former
shareholders of Ex-Cell are also excluded from the proforma results.

YEARS ENDED
-----------
JANUARY 2, JANUARY 1,
1999 2000
------------ ------------
(Unaudited)

Net sales................................. $304,600,000 $303,500,000
============ ============
Net income (loss)......................... 4,900,000 (12,100,000)
============ ============

These unaudited pro forma results do not purport to be indicative of the
results that would have actually been obtained if APE and Ex-Cell had been
acquired as of January 4, 1998 or results of future periods.

F-11
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. INVENTORIES

Inventories are summarized as follows:

JANUARY 2, JANUARY 1,
1999 2000
----- ----

Raw materials.............................. $2,843,387 $9,269,434
Work-in-progress........................... 1,933,812 4,985,545
Finished goods............................. 14,956,843 36,719,946
---------- ----------
Total Inventories..................... $19,734,042 $50,974,925
=========== ===========

5. FACTOR AGREEMENTS

6. RESTRUCTURING CHARGE

On February 25, 1999, the Company's Board of Directors approved a plan to
close one of its manufacturing operations of the Fabric Division. In connection
with this activity, the Company discontinued operations at its leased Tennessee
facility and terminated substantially all of the associates at that facility.
The Company ceased substantially all operations in the facility on or about May
28, 1999. During the first quarter of fiscal 1999, the Company recorded a
restructuring charge totaling $13.1 million of which $3.2 million related to the
write-off of the goodwill, $1.8 million to cover the write-down of machinery and
equipment to fair market value and the remainder for the costs of operating
leases and severance and other personnel costs related to the termination of
approximately 225 associates. Management reviewed its original write-down of
fixed assets and compared the actual results of asset sales to original
appraised values as well as reviewed any remaining asset values. In connection
with this review, as of January 1, 2000, management determined that the write
down of machinery and equipment should be increased to $3.4 million. Management
also reviewed the anticipated requirements for operating leases and determined
this amount should decrease by $1.6 million as a result of certain leased
equipment being transferred to its other manufacturing facilities and placed in
service. The components of the reserves for this facility are as follows (in
thousands):

Original Reserve Usage Adjustment Remaining Reserve
---------------- ----- ---------- -----------------
<S> <C> <C> <C> <C>
Anticipated expenditures related to operating leases
For plant and equipment ................................. $ 7,323 $(1,348) $(1,586) $ 4,389
Anticipated severance benefits ............................... 850 (850) 0 0
------- ------- ------- -------
$ 8,173 $(2,198) $(1,586) $4,389
======= ======= ========= =======
</TABLE>

F-12
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. LONG-TERM DEBT

As of January 2, 1999 and January 1, 2000 long-term debt consisted of
the following:

<TABLE>
<CAPTION>
January 2, January 1,
1999 2000
----- ----

<S> <C> <C>
Senior credit facility........................... $ 65,707,499 $142,681,953
11% Senior subordinated notes ................... 95,000,000 95,000,000
----------- ----------
Total long-term debt........................ $160,707,499 $237,681,953
------------- ------------
Less current portion ............................ - 237,681,953
------------- ------------
$160,707,499 $ -
============ ============
</TABLE>

On April 1, 1997, the Company issued $100,000,000 of senior
subordinated notes (the "Senior Subordinated Notes") in a private placement bond
offering. The Senior Subordinated Notes bear interest at a fixed rate of 11% and
mature on April 15, 2007. The Company at its option, can prepay these notes at a
price of 105.5% of the original principal amount, beginning on April 15, 2002.
The premium declines by 1.833% thereafter each year beginning on April 15 until
reduced to the original principal amount. Additionally, prior to April 15, 2000,
the Company may redeem in the aggregate up to 25% of the original aggregate
principal amount with the proceeds of one or more Public Equity Offerings, as
defined in the Indenture governing the Senior Subordinated Notes, at a
redemption price of 110% of the original principal amount. Upon a Change of
Control of the Company, as defined in the Indenture governing the Senior
Subordinated Notes, the holder of a Senior Subordinated Note may require the
Company to redeem the note at a price of 101% of the principal amount. Interest
is payable semi-annually, and began on October 15, 1997.

During September 1998, the Company acquired $5 million of the Senior
Subordinated Notes in the open market. These notes were subsequently retired. In
connection with this transaction, the Company recorded an extraordinary loss of
approximately $117,000, net of a tax benefit, which consisted of the write off
of a pro rata share of deferred financing costs associated with the issuance of
the Senior Subordinated Notes.

On April 1, 1997, the Company also entered into a $70 million senior credit
facility (the "Facility") with a financial institution. Of the total commitment
of $70 million under the Facility, $25 million was designated as an Acquisition
Commitment and $45 million as a Working Capital Commitment, which is a revolving
credit facility limited to the Borrowing Base as defined in the Facility. On
October 2, 1998, the Facility was amended to increase the Acquisition Commitment
to $76 million. On October 2, 1998, in connection with the acquisition of APE,
discussed in Note 3, the Company borrowed approximately $55.7 million under the
Acquisition Commitment.

As further discussed in Note 3, the Company acquired all outstanding shares
of capital stock of Ex-Cell on February 12, 1999. In connection with that
acquisition, the Company amended and restated the Facility to increase the
borrowing availability to $200 million. The additional availability was reduced
to $175 million in connection with the June, 1999 amendment discussed below and
is currently comprised of (i) $65.0 million as the Working Capital Commitment,
subject to the Borrowing Base as defined, (ii) $40.0 million Term A loan and
(iii) $70.0 million Term B loan. The borrowings under both the Working Capital
Commitment and Term A loan, as amended, bear interest at the Base Rate plus
2.25% or the Eurodollar Rate plus 3.50%. Advances under the Term B loan bear
interest at the Base Rate plus 3.00% or the Eurodollar Rate plus 4.25%.

Beginning in July 1999, the interest rate charged on the Term A and Working
Capital Commitment borrowings could decrease by 1.0% if certain financial ratios
are met. Principal payments on the Term A and Term B loans began on September
30, 1999 at a total of $1.7 million per quarter and increase over the lives of
the loans. Borrowings under the Term A loan and Working Capital Commitment are
required to be fully repaid by December 31, 2003 and borrowings under the Term B
loan are required to be fully repaid by June 30, 2004. On the date of the
Ex-Cell acquisition, the Term A and Term B loans were fully drawn. The bank also
extended up to a total of $5.0 million in letters of credit to the Company;
however, the amount is limited to the amount of the unused Working Capital
Commitment. During November 1999, the Company prepaid a total of approximately
$1.0 million outstanding under the Term A and Term B loans with excess cash
proceeds from the sale of fixed assets related to the previously discussed plant
closure. At January 1, 2000, the Company had approximately $37.0 million
outstanding under the Working Capital Commitment, and approximately $9.1 million
available under the Working Capital Commitment.

F-13
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. LONG-TERM DEBT (CONTINUED)

The Facility and Senior Subordinated Notes have various covenants, as well
as cross-acceleration provisions, that require the Company to: maintain key
financial ratios, restrict corporate borrowings, limit the Company's ability to
pay dividends, limit the type and amount of certain investments which may be
undertaken by the Company, limit the Company's disposition of assets, limit the
Company's ability to enter into operating and capital leases, and restrict the
Company's ability to issue shares of its stock.

As of June 29, 1999, the Company's senior lenders waived the Company's
requirement to maintain and meet certain financial covenants contained in the
Facility for the period ending July 3, 1999. In connection with obtaining the
waiver, the Working Capital Commitment was reduced from $90 million to $65
million and certain financial covenants were amended including an amendment to
require monthly testing of the Company's total leverage and senior leverage
ratios. The Company was not in compliance with these ratios for the month of
July, 1999 and, accordingly, received a waiver for such non-compliance as well
as amended the August, 1999 and September, 1999 covenants on August 20, 1999. In
connection with these waivers and amendments, the Company paid a fee to the
banking group of $440,000. As a result of a temporary shutdown of two
facilities in Tarboro, N. C. caused by Hurricane Floyd during September, 1999,
the Company was not in compliance with the revised covenants as of October 2,
1999 and received a waiver for such non-compliance as of October 29, 1999. On
November 19, 1999, the Company received a waiver which eliminated the
requirement to meet certain financial covenants for the month of October and
amended existing covenants for November and December 1999 as well as created
monthly covenants for January and February 2000. The Company paid a fee to the
banking group of $440,000 in connection with obtaining these waivers and
amendments.

As of January 1, 2000, the Company was in compliance with its covenants
related to both the New Credit Facility and the Notes. On February 23, 2000, the
Company failed to repay approximately $2 million of borrowings outstanding under
the Working Capital Commitment that was required as a result of an insufficient
borrowing base which resulted in a default under the New Credit Facility. The
insufficient borrowing base was the result of missed shipments during the last
week of January 2000 as a result of a blizzard in Eastern North Carolina that
closed operating facilities and restricted shipments. On March 16, 2000, the
Company's lenders waived this default until April 10, 2000 and limited the
Company's availability under the Working Capital Commitment to approximately
$48.3 million, including $3.3 million specifically for letters of credit, with a
view towards negotiating mutually acceptable modifications to the facility prior
to April 10, 2000. The Company and its lenders have been unable to negotiate
such modifications to date and, as of April 11, 2000, the Company was in default
under the New Credit Facility as a result of the termination of the above
waiver. In accordance with terms of the New Credit Facility, the Company's
lenders notified the Company on April 13, 2000 that such lenders were exercising
their election to prohibit the Company from making the interest payments of
approximately $5.3 million due under the Senior Subordinated Notes on April 15,
2000. Accordingly, as of April 15, 2000, the Company will be in default under
the terms of the Senior Subordinated Notes due to its failure to make the April
15, 2000 interest payment. As a result of the above defaults, all of the
Company's borrowings under the Senior Subordinated Notes and New Credit Facility
are classified as current liabilities.

It is anticipated that for the first quarter ended April 1, 2000, the
Company will be in default of certain financial covenants under the New Credit
Facility which had not previously been adjusted under the waivers and amendments
received prior to January 1, 2000. The Company is currently in negotiations with
its senior lenders to conform its financial covenants and borrowing needs to its
current business plan. Even though discussions are ongoing, there can be no
assurance that the Company will obtain the necessary amendments and waivers or
as to the terms thereof. The Company is currently reviewing alternative
financing and strategic options to attempt to address both the defaults
outstanding under the New Credit Facility and the Senior Subordinated Notes as
well as reduce the Company's overall leverage. The Company has until May 15,
2000 to make the outstanding interest payment due under the Senior Subordinated
Notes to cure the anticipated Event of Default; however, the Company does not
expect to make this payment on a timely basis unless the Company's lenders
rescind their election to prohibit such payment and the Company has sufficient
liquidity. The Senior Subordinated Notes also contain a cross-acceleration
clause under which they become due and payable in the event that the Company's
senior lenders demand payment of the New Credit Facility.

F-14
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. LONG-TERM DEBT (CONTINUED)

Barring an intervening acceleration of the indebtedness under the New
Credit Facility or an insolvency proceeding, the Company believes it has
sufficient liquidity to meet its current cash needs through approximately May
15, 2000 as a result of not paying the $5.3 million of outstanding interest due
on the Senior Subordinated Notes as of April 15, 2000. The Company's future
operating performance and ability to service or refinance the Notes and to
extend or refinance its other indebtedness will be subject to future economic
conditions and to financial, business and other factors beyond the Company's
control.

Substantially all of the Company's assets and operations are pledged as
collateral for the New Credit Facility. Holdings and Glenoit Asset Corporation
have guaranteed the Company's obligations under the Facility. Holdings and
Glenoit Asset Corporation have no substantive assets or operations and rely on
the Company to fund their obligations.

The Senior Subordinated Notes are fully and unconditionally guaranteed, on
a joint and several basis, by Glenoit Asset Corporation, American Pacific
Enterprises, Inc. and, as of February 12, 1999, Ex-Cell (together the
"Subsidiary Guarantors"). Glenoit Asset Corporation's operations consist solely
of leasing certain trademarks and other intangibles to Glenoit Corporation.
Accordingly, Glenoit Asset Corporation's assets and operations consist primarily
of intercompany assets and operations with Glenoit Corporation. Glenoit Canada
has not guaranteed the Senior Subordinated Notes. The financial information of
the subsidiary guarantors for these periods has been excluded because management
believes that this information is not material to investors. Prior to the
acquisition discussed in Note 3, Glenoit Canada had no operations.

F-15
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. LONG TERM DEBT (CONTINUED)

The following tables present summarized balance sheet information of
Glenoit Corporation the Subsidiary Guarantors. and Glenoit Canada as of January
1, 2000 and the related summarized operating statement and cash flow statement
information for the period then ended. The Company believes that separate
financial statements and other disclosures regarding the Subsidary Guarantors,
are not material to investors.

Summarized balance sheet information, in thousands, as of January 1, 2000 is as
follows:

Glenoit Subsidiary Glenoit
Corporation Guarantors Eliminations Sub-total Canada Eliminations Consolidated
----------- ---------- ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents ......... $ 69 $ 1,744 $ 1,813 $ 202 $ 2,015
Accounts and other receivables, net 11,897 15,913 27,810 2,226 30,036
Inventories ....................... 9,128 40,916 50,044 931 50,975
Other current assets .............. 6,297 (1,896) 4,401 18 4,419
--------- --------- --------- --------- --------- --------- ---------
Total current assets ......... 27,391 56,677 84,068 3,377 87,445
Property, plant and equipment, net 33,785 24,185 57,970 9,732 67,702
Other assets ...................... 183,629 49,630 $(159,358) 73,901 789 $ (12,892) 61,798
--------- --------- --------- --------- --------- --------- ---------
Total assets ................. $ 244,805 $ 130,492 $(159,358) $ 215,939 $ 13,898 $ (12,892) $ 216,945
========= ========= ========= ========= ========= ========= =========

Accounts payable .................. $ 3,408 $ 5,947 $ 9,355 $ 706 $ 10,061
Accrued expenses .................. 235,976 17,462 253,438 615 254,053
--------- --------- --------- --------- --------- --------- ---------
Total current liabilities .... 239,384 23,409 262,793 1,321 264,114
Long-term debt .................... 59,624 $ (59,624) 3,118 $ (3,118)
Other long-term liabilities ....... 4,590 7,349 11,939 26 11,965
Stockholders equity (deficit) ..... (58,793) 99,734 (99,734) (58,793) 9,433 (9,774) (59,134)
--------- --------- --------- --------- --------- --------- ---------
Total liabilities and equity
(deficit) ................. $ 244,805 $ 130,492 $(159,358) $ 215,939 $ 13,898 $ (12,892) $ 216,945
========= ========= ========= ========= ========= ========= =========
</TABLE>

Summarized operating statements information, in thousands, for the year
ended January 1, 2000 is as follows:

<TABLE>
<CAPTION>
Glenoit Subsidiary Glenoit
Corporation Guarantors Eliminations Sub-Total Canada Eliminations Consolidated
----------- ---------- ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales .................................. 114,923 167,029 281,952 12,773 294,725
Cost of sales .............................. 85,625 116,200 0 201,825 10,330 0 212,155
-------- -------- -------- -------- -------- -------- --------
Gross profit ............................... 29,298 50,829 0 80,127 2,443 0 82,570
Operating expenses ......................... 37,436 37,443 74,879 1,187 76,066
Royalty income (expense) ................... (7,184) 7,184 0 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations .............. (15,322) 20,570 0 5,248 1,256 0 6,504
Interest expense (income) .................. 26,721 (1,875) 24,846 244 25,090
Other expense (income) ..................... (13,579) 1,979 11,706 106 (57) 684 733
Income tax expense (benefit) ............... (15,176) 8,760 - (6,416) 385 - (6,031)
-------- -------- -------- -------- -------- -------- --------

Net income (loss)...................... (13,288) 11,706 (11,706) (13,288) 684 (684) (13,288)
======== ======== ======== ======== ======== ======== ========
</TABLE>

Summarized cash flow statement information, in thousands, for the year ended
January 1, 2000 is as follows:

<TABLE>
<CAPTION>
Glenoit Subsidiary Glenoit
Corporation Guarantors Eliminations Sub-Total Canada Eliminations Consolidated
----------- ---------- ------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities ($ 19,278) $ 15,937 $ (3,341) $ (778) $ (4,119)

Cashflows used in investing
activities .................... (62,374) (2,909) (65,283) (145) (65,428)
Cash flows from (used in) financing
activities .................... 81,682 (11,463) 70,219 1,003 71,222
-------- -------- -------- -------- -------- -------- --------

Net increase (decrease) in cash .... 30 1,565 1,595 80 1,675

Cash at beginning of period ........ 39 179 218 122 340
-------- -------- -------- -------- -------- -------- --------

Cash at end of period .............. $ 69 $ 1,744 $ 1,813 $ 202 $ 2,015
======== ======== ======== ======== ======== ======== ========

</TABLE>
F-16
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. LONG TERM DEBT (CONTINUED)

Summarized balance sheet information, in thousands, as of January 2, 1999 is as
follows:

<TABLE>
<CAPTION>
Glenoit Subsidiary
Corporation Guarantors Eliminations Sub-total Canada Eliminations Consolidated
----------- ---------- ------------ --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents .......... $ 39 $ 179 $ 218 $ 122 $ 340
Accounts and other receivables, net 17,373 10,998 28,371 1,660 30,031
Inventories ........................ 5,766 13,307 19,073 661 19,734
Other current assets 3,588 163 3,751 46 3,797
--------- --------- --------- --------- ---------
Total current assets .......... 26,766 24,647 51,413 2,489 53,902
Property, plant and equipment, net . 39,800 1,189 40,989 8,119 49,108
Other assets ....................... 112,989 79,176 $(139,649) 52,516 378 (11,205) 41,689
--------- --------- --------- --------- --------- --------- ---------
Total assets .................. $ 179,555 $ 105,012 $(139,649) $ 144,918 $ 10,986 $ (11,205) $ 144,699
========= ========= ========= ========= ========= ========= =========
Accounts payable ................... 1,617 920 2,537 352 2,889
Other current liabilities .......... 10,713 12,605 23,318 254 23,572
--------- --------- --------- --------- ---------
Total current liabilities ..... 12,330 13,525 25,855 606 26,461
Long-term debt ..................... 208,869 5,393 $ (53,555) 160,707 2,115 (2,115) 160,707
Other long-term liabilities ........ 3,862 3,862 25 3,887
Stockholders equity (deficit) ...... (45,506) 86,094 (86,094) (45,506) 8,240 (9,090) (46,356)
--------- --------- --------- --------- --------- --------- ---------
Total liabilities and equity .. $ 179,555 $ 105,012 $(139,649) $ 144,918 $ 10,986 $ (11,205) $ 144,699
========= ========= ========= ========= ========= ========= =========
</TABLE>

Summarized operating statements information, in thousands, for the year
ended January 2, 1999 is as follows:

<TABLE>
<CAPTION>
Glenoit Subsidiary
Corporation Guarantors Eliminations Sub-total Canada Eliminations Consolidated
----------- ---------- ------------ --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales........................... $143,858 $17,423 $161,281 $10,761 $172,042
Cost of sales....................... 100,906 14,219 115,125 8,572 123,697
--------- --------- --------- --------- ---------
Gross profit........................ 42,952 3,204 46,156 2,189 48,345
Operating expenses.................. 23,991 7,772 31,763 1,113 32,876
Royalty income (expense)......... (9,155) 9,155 - - -
--------- --------- --------- --------- ---------
Income from operations.............. 9,806 4,587 14,393 1,076 15,469
Interest expense (income)........... 16,202 (2,394) 13,808 134 13,942
Other expense (income).............. (4,589) 236 $ 4,523 170 182 486 838
Income tax expense (benefit) ....... (2,188) 2,222 34 274 308
Extraordinary loss, net............. 117 - - 117 - - 117
--------- --------- --------- --------- --------- --------- ---------
Net income..................... $ 264 $ 4,523 $(4,523) 264 $ 486 $(486) $ 264
========= ========= ========= ========= ========= ========= =========
</TABLE>

Summarized cash flow statement information, in thousands, for the year
ended January 2, 1999 is as follows:

<TABLE>
<CAPTION>
Glenoit Subsidiary
Corporation Guarantors Eliminations Sub-total Canada Eliminations Consolidated
----------- ---------- ------------ --------- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cashflows from (used in) operating activities . $ (5,232) $ 22,211 $ 16,979 $ 810 $ 17,789
Cashflows used in investing
activities ............................... (70,358) (70,358) (3,160) (73,518)
Cashflows from (used in) financing activities . 74,978 (22,108) 52,870 2,127 54,997
-------- -------- -------- -------- --------
Net increase(decrease) in cash ................ (612) 103 (509) (223) (732)
Cash at beginning of period ................... 651 76 727 345 1,072
-------- -------- -------- -------- --------
Cash at end of period ......................... $ 39 $ 179 $ 218 $ 122 $ 340
======== ======== ======== ======== ========
</TABLE>

F-17
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. LONG TERM DEBT (CONTINUED)

On April 1, 1997, the Company utilized the proceeds from the 11% Senior
Subordinated Notes to retire the Company's existing debt with financial
institutions, which included the balance of an $80 million senior credit
facility (the Term A and B Notes and the working capital line of credit) (the
"Old Facility") and a $15 million 12.5% Senior Subordinated Note payable (the
$15 Million Senior Subordinated Note"). Additionally, on April 1, 1997, the
Company retired a note to a shareholder of Holdings in the amount of
approximately $5.8 million. As a result of the Company's payoff of these
obligations, the Company charged to earnings $2,884,000 of net deferred loan
costs and a $1,500,000 prepayment penalty related to the $15 million Senior
Subordinated Note. During the first quarter of 1997, the Company recognized an
extraordinary loss from the early extinguishment of debt of $2,857,000, which is
net of a tax benefit of $1,527,000 related to these charges.

During the years ended January 3, 1998, January 2, 1999 and January 1,
2000, the Company paid $9,017,000, $13,570,000, and $24,413,000 respectively, in
cash for interest.

8. LEASES

The Company leases certain equipment and facilities under operating leases
that expire through August 2008. Rent expense was $ 4,075,000, $4,410,000 and
$4,218,000 during the years ended January 3, 1998, January 2, 1999 and January
1, 2000, respectively.

As of January 1, 2000, future minimum rental payments required under
operating leases that have initial or remaining noncancelable terms in excess of
one year, including amounts reflected in the restructuring charge discussed in
Note 6, are as follows:

2000 ............................................ $ 6,428,000
2001 ............................................ 4,105,000
2002 ............................................ 2,697,000
2003 ............................................ 1,788,000
2004 ............................................ 1,499,000
Thereafter....................................... 2,672,000
---------
Total minimum lease payments................ $19,189,000
===========

F-18
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. INCOME TAXES

The provision, including tax benefits on extraordinary losses, for federal,
state and foreign income taxes consist of the following components:

JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
---------- ---------- -------
Current:
Federal ..................... $2,867,333 $1,157,800 $(4,706,766)
State ..................... 891,521 (412,308) ( 919,414)
Foreign ..................... 186,339 248,805 766,113
---------- ---------- -------
3,945,193 994,297 (4,860,067)
---------- ---------- -------
Deferred:
Federal ..................... 730,402 (483,903) (2,565,531)
State ..................... (812,183) (294,311) 1,392,924
Foreign ..................... - 24,832 1,478
---------- ---------- -------
( 81,781) (753,382) (1,171,129)
---------- ---------- -------
Total................... $3,863,412 $240,915 $(6,031,196)
========== ========== =======

The 1997 and 1998 provisions for federal and state income taxes has been
allocated to income before income taxes and extraordinary loss, and the
extraordinary loss on early extinguishment of debt. Included in income (loss)
before income taxes are foreign earnings of $517,000, $760,000 and $5,000,000 in
fiscal 1997, 1998 and 1999 respectively.

A reconciliation of the provision for income taxes to the federal statutory
rate of 34% is as follows:

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax expense (benefit) $3,356,000 $171,786 $(6,568,664)
State income taxes, net of federal benefit... 191,000 (466,368) ( 606,813)
Contingencies and nondeductible expenses..... 307,000 522,487 333,418
Increase in valuation allowance.............. - - 895,467
Other........................................ 9,412 13,010 ( 84,604)
---------- -------- ----------
Income tax expense (benefit)................. $3,863,412 $240,915 $(6,031,196)
========== ======== ==========
</TABLE>

Undistributed earnings of the Company's foreign subsidiary amounted to
approximately $8.2 million at January 1, 2000.

F-19
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. INCOME TAXES (CONTINUED)

Deferred income taxes reflect the tax effects of differences between the
carrying amounts of assets and liabilities for financial reporting and income
tax purposes. The significant components of the Company's deferred tax assets
and liabilities at January 2, 1999 and January 1, 2000 are as follows:

JANUARY 2, JANUARY 1,
1999 2000
------------ ------------
Deferred tax assets:
Capital loss carryforwards ......... $ 431,723 $ -
Accrued liabilities ................ 1,963,663 4,329,538
Asset valuation allowances ......... 221,132 162,803
Federal net operating losses ....... - 4,706,766
State net operating losses ......... 763,331 1,059,594
Inventory .......................... 562,810 1,424,068
Other .............................. 71,503 42,068
------------ ------------
Gross deferred assets .............. 4,014,162 11,724,837
Valuation allowance ................ (431,723) (895,468)
------------ ------------
Deferred tax assets ................ 3,582,439 10,829,369
Less: Noncurrent portion .......... (601,133) (7,422,409)
------------ ------------
Current deferred tax assets ........ $ 2,981,306 $ 3,406,960
============ ============
Deferred tax liabilities:
Depreciation and amortization ...... $ 3,926,856 $ 10,415,206
Unremitted foreign earnings ........ - 2,789,402
Other .............................. 56,335 57,813
------------ ------------
Deferred tax liabilities ........... 3,983,191 13,262,421
Less: Noncurrent deferred tax asset (601,133) (7,422,409)
------------ ------------
Noncurrent deferred tax liability .. $ 3,382,058 $ 5,840,012
============ ============

A deferred tax asset is required to be recognized for the tax benefit of
deductible temporary differences and net operating loss carryforwards. A
valuation allowance is recognized if it is more likely than not that some or all
of the deferred tax asset will not be realized. The valuation allowance was
provided for net operating losses generated in North Carolina and New York
which are not currently anticipated to be utilized.

The Company and Holdings have entered into a Tax Sharing Agreement whereby
the Company will pay Holdings its respective pro rata share of the total federal
consolidated tax liability or receive its respective pro rata share of the total
consolidated federal tax refund, as set forth in the Tax Sharing Agreement.
Under the Tax Sharing Agreement, the Company and Holdings are treated as
separate tax groups.

During 1998, the Company settled the previously outstanding examination and
assessment that resulted from the Internal Revenue Service's ("IRS") review of
the Company's and Holding's income tax returns for January 1, 1994 and December
31, 1994. The Company paid approximately $798,000 in tax, penalty and interest
in connection with this settlement. This amount had been previously accrued for.

The Company's state income tax returns for the years ended January 1, 1994
through January 3, 1998, have been examined by the New York Department of
Finance. In December 1999, the Company settled with the New York Department of
Finance and paid a total of approximately $230,000 including tax and interest.
This amount had been previously accrued for.

F-20
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. INCOME TAXES (CONTINUED)

During the years ended January 3, 1998, January 2, 1999 and January 1,
2000, the Company paid $2,033,000, $1,150,000, and $933,000 respectively, in
cash for taxes.

10. EMPLOYEE BENEFIT PLANS

The Company has a non-contributory defined benefit pension plan covering
substantially all employees located in its North Carolina and New York
operations hired prior to May 1, 1997. Glenoit Canada maintains a defined
benefit plan for substantially all of its hourly employees. The benefits for
both plans are based on years of service and the employee's compensation during
the years of credited service. The Company's policy is to contribute annually
the maximum amount that can be deducted for federal income tax purposes. Assets
of the plans are managed by a trustee and invested in marketable securities,
money market instruments and mutual funds.

<TABLE>
<CAPTION>
YEARS ENDED
JANUARY 2, JANUARY 1,
Change in Benefit Obligation: 1999 2000
---- ----
<S> <C> <C>
Benefit obligation at beginning of year ...... $ 11,931,128 $ 14,635,374
Service cost ................................. 679,609 728,728
Interest cost ................................ 894,151 972,007
Actuarial losses/(gains) ..................... 1,555,994 (1,377,741)
Benefits paid ................................ (425,508) (489,513)
------------ ------------
Benefit obligation at end of year ............ $ 14,635,374 $ 14,468,855
============ ============

Change in plan assets:
Fair value of plan assets at beginning of year $ 12,100,951 $ 13,437,670
Actual return on plan assets ................. 1,160,288 542,395
Company contributions ........................ 601,939 620,191
Benefits paid ................................ (425,508) (489,513)
------------ ------------
Fair value of plan assets at end of year ..... $ 13,437,670 $ 14,110,743
============ ============

Funded status of the plans:
Funded status at end of year ................. $ (1,197,704) $ (358,112)
Unrecognized transition asset ................ (96,504) --
Unrecognized prior service cost .............. 250,976 188,324
Unamortized net actuarial losses ............. 927,737 48,250
------------ ------------
Accrued benefit cost ......................... $ (115,495) $ (121,538)
============ ============
</TABLE>

F-21
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. EMPLOYEE BENEFIT PLANS (CONTINUED)

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 2, JANUARY 1,
1998 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Net pension cost includes the following components:
Service cost--benefits earned during the period ......... $ 512,293 $ 679,609 $ 728,728
Interest cost on projected benefit obligations .......... 757,142 894,151 972,007
Expected return on plan assets .......................... (757,907) (943,864) (1,043,820)
Net amortization and deferral of unrecognized net
gain (loss) .......................................... 37,410 (38,475) (30,681)
----------- ----------- -----------
Net periodic pension expense for year ................... $ 548,938 $ 591,421 $ 626,234
=========== =========== ===========
</TABLE>

A weighted average discount rate of 6.75% and 7.50% for 1998 and 1999,
respectively, and a 4.5% rate of increase in future compensation levels were
used in determining the actuarial present value of the projected benefit
obligations for both 1998 and 1999. The expected long-term rate of return of
pension plan assets was 8% for both 1998 and 1999.

In 1997, the Company established a defined contribution plan (the "1997
Plan") for all other domestic employees not covered by the Plan. Under the 1997
Plan, the Company matches contributions made by the employees up to 50% up to a
maximum of 3% of the employee's earnings. Contributions made by the company were
approximately $325,000 and $451,000 during 1998 and 1999, respectively. Amounts
contributed under the Plan and the 1997 Plan are invested by a trustee in a
variety of investment options, including marketable securities and mutual funds.
In connection with the acquisition of Glenoit Canada, the Company established a
defined contribution plan for salaried employees in which Company contributions
are based on years of service. Total contributions made by the Company were
approximately $35,000 and $39,000 during 1998 and 1999, respectively.

11. RELATED PARTY TRANSACTIONS

The Company has an unsecured 4% note receivable from an officer with a face
amount of $300,000. The note will be forgiven by the Company under certain
circumstances and, accordingly, the Company is recognizing compensation expense
over the term of the note, which is expected to be December 31, 2005. The
unamortized balance at January 2, 1999 and January 1, 2000 was $163,500 and
$139,500 respectively.

During the year ended January 2, 1999, the Company paid $200,000 to related
parties for management and consulting fees.

All expenses of the Company are reflected in the Consolidated Financial
Statements. No costs are incurred by Holdings on behalf of the Company. As
discussed in Note 9, the Company has a tax sharing agreement with Holdings
whereby the Company will pay Holdings its respective prorata share of the total
federal consolidated tax liability or receive its respective prorata share of
the total federal consolidated tax refund. The impact to the Company is recorded
in the "Due to Holdings" account.

On March 5, 1997, the Company declared a dividend and issued a note in the
amount of approximately $5.8 million to a shareholder of Holdings in
satisfaction of a contingent earnout obligation of Holdings related to the
Recapitalization discussed in Note 2. This note contained a mandatory prepayment
provision which required the Company to retire the Note and accrued interest as
of the date of a bond offering of the Company. On April 1, 1997, the Company
retired the Note with proceeds from the bond offering described in Note 7.

F-22
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. RELATED PARTY TRANSACTIONS (CONTINUED)

On June 14, 1997, the Company declared a dividend in the amount of $1.6
million to enable Holdings to exercise an option to repurchase shares of
Holdings' common stock and to repay a note due to a shareholder of Holdings.
This transaction was related to the Recapitalization discussed in Note 2.
Additionally, as part of the same transaction the Company made a loan of
$931,263 to an officer at an interest rate of prime plus .5%. The principal and
interest were repaid in full on August 12, 1997.

In August 1997, Holdings granted an officer of the Company 1,286.211
options for shares of Holdings' Class A common stock at an exercise price of
$37,500 in the aggregate. The officer exercised the options immediately;
however, the stock is restricted and subject to certain vesting requirements. On
December 30, 1997, Holdings removed all vesting requirements and the Company
recorded non-cash compensation expense of approximately $200,000 during the
fourth quarter of 1997.

In March 1998, the Company loaned an officer $100,000 and created an
unsecured note receivable. During June 1998, Holdings sold three officers of the
Company a total of 857.46 shares of Holdings' Class A common stock for
approximately $158,000. Holdings loaned the officers an amount equal to the
sales price and created full recourse notes receivable secured by the issued
shares. In connection with the stock issuance, the Company recorded non-cash
compensation expense of $100,000.

In July 1998, Holdings settled a dispute regarding additional purchase
price owed to a shareholder associated with the recapitalization in December
1995. Accordingly, Holdings paid approximately $1.9 million to the shareholder
during July 1998. These funds were paid to Holdings by the Company as a
dividend.

12. OPERATING SEGMENTS

DESCRIPTION OF SEGMENTS

The Company has two operating segments: (i) Decorative Home Furnishings
which designs, manufacturers, imports and distributes decorative textile home
furnishings and (ii) a domestic manufacturer and marketer of specialty fabrics,
primarily for the apparel industry, known as "sliver knit" pile fabrics ("Fabric
Division").

MEASUREMENT OF SEGMENT PROFIT

The Company evaluates performance and allocates resources based on
operating income of each division. The accounting policies of the reportable
segments are the same as described in Note 1 and exclude any costs associated
with the Company's corporate administrative and finance functions.

F-23
<PAGE>

GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

12. OPERATING SEGMENTS (CONTINUED)

FACTORS MANAGEMENT USED TO IDENTIFY THE REPORTABLE SEGMENTS

The Company's reportable segments are business units that offer different
products and each are managed separately. The following tables present operating
results and other financial information utilized by management in analyzing each
operating division. All amounts are in thousands.

Fiscal Years
1997 1998 1999
--------- --------- ---------
Net Sales
Decorative Home Furnishings $ 39,796 $ 65,363 $ 221,755
Fabric .................... 107,125 106,679 74,640
Intercompany .............. 0 0 (1,670)
--------- --------- ---------
Consolidated ......... $ 146,921 $ 172,042 $ 294,725
========= ========= =========

Operating income (loss)
Decorative Home Furnishings $ 6,751 $ 2,733 $ 19,519
Fabric .................... 27,815 21,162 (3,942)
Corporate/Other ........... (8,639) (8,426) (9,073)
--------- --------- ---------
Consolidated ......... $ 25,927 $ 15,469 $ 6,504
========= ========= =========

Depreciation and amortization
Decorative Home Furnishings $ 743 $ 1,174 $ 5,938
Fabric .................... 1,535 3,452 4,086
Corporate/Other ........... 1,584 1,790 2,254
--------- --------- ---------
Consolidated ......... $ 3,862 $ 6,416 $ 12,278
========= ========= =========

As of
January 2, January 1,
1999 2000
------- -------
Inventory and accounts receivable
Decorative Home Furnishings $35,900 $70,183
Fabric ..................... 13,500 8,432
------- -------
Consolidated .......... $49,400 $78,615
======= =======

Note 7 identifies sales and assets of the Company's Canadian operation.
There were no other material sales or assets outside of the United States.

MAJOR CUSTOMERS

During fiscal 1997, the top three customers of the Decorative Home
Furnishings segment accounted for approximately 26%, 19% and 12% of that
segment's net sales.

During 1998, the top three customers of the Decorative Home Furnishings
segment accounted for approximately 36%, 14% and 11% of that segment's net
sales.

During 1999, the top two customers both accounted for 14% of that segment's
net sales.

F-24
<PAGE>
GLENOIT CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF GLENOIT UNIVERSAL, LTD.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

13. COMMITMENTS AND CONTINGENCIES

As of January 1, 2000, Holdings has obligations with a face amount of
approximately $32.6 million, bearing interest at stated rates between 5% to
12.5%, to shareholders ("Shareholder Notes") with principal due in 2004 and
2005. These obligations are not reflected in the Company's accompanying balance
sheets or income statements. Subject to existing debt restrictions, Shareholder
Notes with a face amount of approximately $9.8 million contain certain
acceleration clauses. They include the sale of stock in a registered public
offering, certain mergers and certain changes of existing shareholder ownership.
At the option of Holdings, subject to the Company's existing debt restrictions
(Note 7), the interest may be paid by the issuance of additional notes or in
cash. However, Holdings must pay interest in cash on certain of the Shareholder
Notes if defined levels of consolidated cash flows of Holdings are attained.
Annual interest payments during the next five years are approximately $2.6
million per year, excluding interest on notes that may be issued to pay
interest. Assuming Holdings pays all interest payments related to the
Shareholder Notes with additional notes, the Company's ultimate distribution of
dividends in order for Holdings to meet its existing debt obligations is
expected to be approximately $63 million beginning December 2004 through
December 2005. However, the Company may be required to declare dividends in
order for Holdings to fund certain of its obligations in cash as discussed
above. Such amounts could approximate $3 million in the aggregate and are due
through December 2004, if the defined levels of consolidated cash flow of
Holdings are met.

APE is a party to a copyright infringement and unfair business practices
litigation with a competitor. The competitor has filed suit claiming damages in
excess of $8 million. The suit is in the early stages of discovery and the
potential liability, if any, to the Company cannot be determined. Management
believes that the competitor's case is without merit and intends to vigorously
contest this lawsuit. Accordingly, no provision has been made in the Company's
financial statements.

From time to time, the Company is involved in various other litigation
which arises in the ordinary course of business. After consultation with its
legal counsel, management believes the ultimate disposition of these matters
will not have a material adverse effect on the Company's consolidated financial
position or results of operations.

F-25

EXHIBIT 10.15

SIXTH AMENDMENT AND WAIVER TO THE
THIRD AMENDED AND RESTATED CREDIT AGREEMENT

Dated as of March 16, 2000

SIXTH AMENDMENT AND WAIVER TO THE THIRD AMENDED AND RESTATED
CREDIT AGREEMENT (this "Amendment and Waiver") among Glenoit Corporation (the
"Borrower"), the Lenders named in the Credit Agreement (defined below) (the
"Lenders"), Banque Nationale de Paris (the "Agent"), as Agent, Arranger, Issuing
Bank and Swing Line Bank, Fleet National Bank, as Syndication Agent, and LaSalle
National Bank, as Documentation Agent.

PRELIMINARY STATEMENTS:

(1) The Borrower, the Lenders, the Agent, the Arranger, the
Issuing Bank, the Swing Line Bank, the Syndication Agent and the Documentation
Agent have entered into a Third Amended and Restated Credit Agreement, dated as
of February 12, 1999 (as the same may be amended and modified from time to time,
the "Credit Agreement"). Capitalized terms not otherwise defined in this
Amendment and Waiver have the same meanings as specified in the Credit Agreement
as amended hereby.

(2) Section 2.06(b)(ii) of the Credit Agreement provides that
the Borrower is obligated to prepay an aggregate principal amount of Working
Capital Advances, Swing Line Advances and Letter of Credit Advances in an amount
by which such Advances plus the Available Amount of all Letters of Credit then
outstanding (together with such Advances, the "Outstanding Amount") exceeds the
Loan Value of Eligible Collateral, based upon the most recent Borrowing Base
Certificate.

(3) On February 23, 2000, Borrower delivered to the Agent a
Borrowing Base Certificate dated February 23, 2000 (the "February BB
Certificate") reflecting that the Outstanding Amount exceeded the Loan Value of
Eligible Collateral. The Borrower was then obligated under Section 2.06(b)(ii)
of the Credit Agreement to make a principal prepayment in the approximate amount
of $2,000,000, which the Borrower failed to make.

(4) The failure of the Borrower to make the principal
prepayment required by Section 2.06(b)(ii) of the Credit Agreement as aforesaid
constitutes on Event of Default under Section 6.01(a) of the Credit Agreement
(the "Section 2.06(b)(ii) Event of Default"), which the Borrower has
acknowledged by its letter to the Agent, dated February 23, 2000.

(5) The Lenders are prepared to waive the aforesaid Section
2.06(b)(ii) Event of Default on the conditions, for the limited period and for
the limited purposes hereinafter set forth.

SECTION 1. Waivers. Subject to the conditions precedent set
forth in Section 3 hereof, the Lenders hereby waive the Section 2.06(b)(ii)
Event of Default, solely for the purposes of Sections 6.01 and 3.02 of the
Credit Agreement, which waiver shall be effective only for the period beginning
on the date hereof and ending on April 10, 2000 (the "Waiver Period"); provided,
however, that (a) the aggregate Available Amount of all Letters of Credit then
<PAGE>
outstanding shall not at any time exceed an amount equal to $48.314 million less
the sum of (x) the Working Capital Advances, (y) the Swing Line Advances, and
(z) the Letter of Credit Advances at the time outstanding and (b) Working
Capital Advances shall not at any time exceed $45 million. The foregoing waiver
shall not be effective for purposes of any other provision of the Credit
Agreement or any other Default or Event of Default thereunder, now existing or
arising in the future, including, without limitation, any other payment at any
time due under Section 2.06(b)(ii) of the Credit Agreement, and the Borrower
concedes that, notwithstanding the effectiveness of this Amendment and Waiver,
after the Waiver Period, the Lenders remain under no obligation to make any
Advances by reason of the Section 2.06(b)(ii) Event of Default.

SECTION 2. Amendments.

(a) During the Waiver Period, Section 5.01(m) of the Credit
Agreement shall be amended by replacing all references to "15 days",
"30 days" and "60 days" therein to "10 days".

(b) During the Waiver Period, Section 2.01(e) shall be amended
by adding the following language at the end of such Section:

Anything to the contrary set forth in the Loan
Documents notwithstanding, (i) no Standby Letters of Credit
shall be issued hereunder and issuance of Letters of Credit
shall be limited solely to Trade Letters of Credit, and (ii)
two Business Days prior to the issuance of any Trade Letter of
Credit, the Borrower shall provide, with respect to such Trade
Letter of Credit, documentation to the Agent describing the
recipient, amount and purpose of such Trade Letter of Credit,
including, without limitation, the customer for whose benefit
the Inventory (the payment for which is to be secured by the
proposed Trade Letter of Credit) is being ordered.

SECTION 3. Conditions of Effectiveness of Amendment and
Waiver. This Amendment and Waiver shall become effective as of the date first
above written when, and only when, the following conditions precedent shall have
been satisfied:

(a) The Agent shall have received counterparts of this
Amendment and Waiver executed by the Borrower, the Agent and the
required number of Lenders.

(b) The Borrower shall have reimbursed or otherwise paid all
reasonable costs and expenses of the Agent paid or incurred in
connection with the Borrower or the Credit Agreement, including,
without limitation, in connection with the preparation, execution,
delivery and administration of this Amendment and Waiver (including,
without limitation, (a) all outstanding fees and disbursements of
Shearman & Sterling and Kramer Levin Naftalis & Frankel LLP in their
capacity as counsel to the Agent, and (b) a retainer in the amount of
[$75,000] to Zolfo Cooper LLP, in its capacity as consultant to the
Agent's counsel ("Zolfo Cooper")).

(c) The Borrower shall have agreed to be bound by the terms of
a retention agreement (the "Retention Agreement"), in form reasonably
satisfactory to the Agent,

-2-
<PAGE>
pursuant to which Zolfo Cooper shall be retained as consultant to the
Agent's counsel in respect of the Credit Agreement.

SECTION 4. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:

(a) Each Loan Party is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.

(b) The execution, delivery and performance by the Borrower of
this Amendment and Waiver and the Loan Documents, as amended hereby, to
which it is or is to be a party, is within the Borrower's corporate
powers, has been duly authorized by all necessary corporate action and
does not (i) contravene the Borrower's charter or by-laws, (ii) violate
any law (including, without limitation, the Securities Exchange Act of
1934, as amended, and the Racketeer Influenced and Corrupt
Organizations Chapter of the Organized Crime Control Act of 1970), rule
or regulation (including, without limitation, Regulation X of the Board
of Governors of the Federal Reserve System), or any order, writ,
judgment, injunction, decree, determination or award, binding on or
affecting the Borrower or any of its Subsidiaries or any of their
properties, (iii) conflict with or result in the breach of, or
constitute a default under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or
affecting the Borrower, any of its Subsidiaries or any of their
properties or (iv) except for the Liens created under the Loan
Documents, result in or require the creation or imposition of any Lien
upon or with respect to any of the properties of the Borrower or any of
its Subsidiaries.

(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery,
recordation, filing or performance by the Borrower of this Amendment
and Waiver or any of the Loan Documents, as amended hereby, to which it
is or is to be a party.

(d) With the exception of the Section 2.06(b)(ii) Event of
Default described herein, there are no other Defaults or Events of
Default by Borrower as of the date hereof.

(e) This Amendment and Waiver has been duly executed and
delivered by the Borrower. This Amendment and Waiver and each of the
Loan Documents, as amended hereby, to which the Borrower is a party are
legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or limiting
creditors' rights or by equitable principles generally.

(f) There is no action, suit, investigation, litigation or
proceeding affecting the Borrower or any of its Subsidiaries
(including, without limitation, any Environmental Action) pending or
threatened before any court, governmental agency or arbitrator that (i)
would be reasonably likely to have a Material Adverse Effect or (ii)
purports to affect

-3-
<PAGE>
the legality, validity or enforceability of this Amendment and Waiver
or any of the Loan Documents, as amended hereby.

SECTION 5. Covenants of the Borrower. In consideration of the
waiver granted hereby by the Lenders, the Borrower covenants and agrees as
follows:

(a) Both during and after the Waiver Period, the Borrower
shall, and shall cause each other Loan Party to, fully cooperate with
Zolfo Cooper in Zolfo Cooper's performance of its duties under the
Retention Agreement; offer Zolfo Cooper reasonable access to its
facilities, books and records; furnish promptly to Zolfo Cooper all
information concerning its business, properties, personnel and
financial performance as Zolfo Cooper shall reasonably request; and
make available to Zolfo Cooper such of its personnel and its
professional advisors as Zolfo Cooper shall reasonably request for the
understanding of the business, property, personnel and financial
performance of the Borrower and the other Loan Parties.

(b) During the Waiver Period, the Borrower shall, and shall
cause each other Loan Party to, conduct its business, only in the
regular and ordinary course of business consistent with past practice.

(c) Both during and after the Waiver Period, in addition to
any and all reporting by the Borrower required by the Loan Documents,
until otherwise directed by the Agent, the Borrower shall furnish to
the Agent as of the end of each calendar week not later than five
Business Days after the end of such calendar week, a summary of cash
disbursements and deposits for such week, as well as an accounts
receivable aging report as of the end of such week.

(d) The covenants contained in this Section 5 are in addition
to, and not in derogation or limitation of, any other covenants,
agreements or obligations of the Loan Parties under the Loan Documents.

SECTION 6. Reference to and Effect on the Credit Agreement and
the Loan Documents. (a) On and after the effectiveness of this Amendment and
Waiver, each reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Credit Agreement, and each
reference in the Notes and each of the other Loan Documents to "the Credit
Agreement", "thereunder", "thereof" or words of like import referring to the
Credit Agreement, shall mean and be a reference to the Credit Agreement, as
amended by this Amendment and Waiver.

(b) The Credit Agreement, the Notes and each of the other Loan
Documents, as specifically amended by this Amendment and Waiver, are
and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed. Without limiting the generality of the
foregoing, the Collateral Documents and all of the Collateral described
therein do and shall continue to secure the payment of all Obligations
of the Loan Parties under the Loan Documents, in each case as amended
by this Amendment and Waiver.

-4-
<PAGE>
(c) The Borrower hereby agrees that (i) the Borrower is truly
and justly indebted to the Secured Parties, without defense,
counterclaim or offset of any kind in the full amount of the Secured
Obligations and (ii) the Secured Obligations are secured by valid,
perfected, enforceable and unavoidable first priority Liens and
security interests upon the Collateral senior to all other security
interests and liens upon the Collateral (except as set forth in the
Third Amended and Restated Security Agreement and the Credit
Agreement), granted by the Loan Parties to the Agent for the ratable
benefit of the Secured Parties.

(d) The execution, delivery and effectiveness of this
Amendment and Waiver shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any Lender Party
or the Agent under any of the Loan Documents, nor constitute a waiver
of any provision of any of the Loan Documents.

SECTION 7. Fees; Costs and Expenses. The Borrower agrees to
pay on demand all reasonable costs and expenses of the Agent in connection with
the preparation, execution, delivery and administration, modification and
amendment of this Amendment and Waiver and the other instruments and documents
to be delivered hereunder (including, without limitation, the reasonable fees
and disbursements of counsel and financial advisor to the Agent) in accordance
with the terms of Section 8.04 of the Credit Agreement.

SECTION 8. Execution in Counterparts. This Amendment and
Waiver may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute but one and
the same agreement. Delivery of an executed counterpart of a signature page to
this Amendment and Waiver by telecopier shall be effective as delivery of a
manually executed counterpart of this Amendment and Waiver.

SECTION 9. Governing Law. This Amendment and Waiver shall be
governed by, and construed in accordance with, the laws of the State of New
York.

-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Waiver to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

GLENOIT CORPORATION

By s/s Thomas J. O'Gorman
------------------------------------------
Name: Thomas J. O'Gorman
Title: President and Chief Executive Officer

AGENT
-----

BANQUE NATIONALE DE PARIS,
as Agent and as a Lender

By s/s David A. Barcus
------------------------------------------
Name: David A. Barcus
Title: Director

By s/s Elie Doft
------------------------------------------
Name: Elie Doft
Title: Associate

LENDERS
-------

BOEING CAPITAL CORPORATION

By
Name:
Title:

CENTURA BANK

By s/s Lowry D. Perry
------------------------------------------
Name: Lowry D. Perry
Title: Bank Officer

-6-
<PAGE>
COMERICA

By s/s James A. Grossett
------------------------------------------
Name: James A. Grossett
Title: First Vice President

DEUTSCHE FINANCIAL SERVICES

By s/s Stephen D. Mitts
------------------------------------------
Name: Stephen D. Mitts
Title: Vice President

FIRST SOURCE FINANCIAL LLP,
By First Source Financial, Inc., as its
Agent/Manager

By s/s Robert M. Horak
------------------------------------------
Name: Robert M. Horak
Title: Vice President

FLEET BANK, N.A.

By s/s Paul Chau
------------------------------------------
Name: Paul Chau
Title: Senior Vice President

FLOATING RATE PORTFOLIO

INVESCO Senior Secured Management
Inc., as attorney in fact

By s/s Gregory Stoeckle
------------------------------------------
Name: Gregory Stoeckle
Title:

-7-
<PAGE>
LASALLE BANK NATIONAL ASSOCIATION

By s/s Kristen J. Lindberg
-------------------------------------
Name: Kristen J. Lindberg
Title: Corporate Banking Officer
Leveraged Finance

KZH ING-1 LLC

By
-------------------------------------
Name:
Title:

KZH ING-2 LLC

By
-------------------------------------
Name:
Title:

KHZ ING-3 LLC

By
-------------------------------------
Name:
Title:

METROPOLITAN LIFE
INSURANCE COMPANY

By
-------------------------------------
Name:
Title:

-8-
<PAGE>
VAN KAMPEN SENIOR FLOATING
RATE FUND

By
---------------------------------------
Name:
Title:

VAN KAMPEN PRIME RATE
INCOME TRUST

By
---------------------------------------
Name:
Title:

FLEET BUSINESS CREDIT CORPORATION

By s/s Mark Pickering
---------------------------------------
Name: Mark Pickering
Title: Vice President

-9-

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
for the year ending January 1, 2000, and such is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0001047368
<NAME> Glenoit Corporation and Subsidiaries
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 2,015
<SECURITIES> 0
<RECEIVABLES> 35,506
<ALLOWANCES> (5,470)
<INVENTORY> 50,975
<CURRENT-ASSETS> 87,446
<PP&E> 96,196
<DEPRECIATION> (28,494)
<TOTAL-ASSETS> 216,945
<CURRENT-LIABILITIES> 23,915
<BONDS> 237,682
0
0
<COMMON> 0
<OTHER-SE> (59,134)
<TOTAL-LIABILITY-AND-EQUITY> 216,945
<SALES> 294,725
<TOTAL-REVENUES> 294,725
<CGS> 212,155
<TOTAL-COSTS> 76,066
<OTHER-EXPENSES> 25,823
<LOSS-PROVISION> 1,000
<INTEREST-EXPENSE> 25,090
<INCOME-PRETAX> (19,320)
<INCOME-TAX> (6,031)
<INCOME-CONTINUING> (13,288)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,288)
<EPS-BASIC> (13.29)
<EPS-DILUTED> (13.29)

</TABLE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Glenoit
Asset Corporation's consolidated balance sheet and consolidated statement of
operations for the year ending January 1, 2000, and such is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001051260
<NAME> Glenoit Asset Corporation
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> JAN-01-2000
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,804
<CURRENT-LIABILITIES> 8,940
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,864
<TOTAL-LIABILITY-AND-EQUITY> 49,804
<SALES> 0
<TOTAL-REVENUES> 7,184
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,946)
<INCOME-PRETAX> 10,118
<INCOME-TAX> 3,543
<INCOME-CONTINUING> 6,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,575
<EPS-BASIC> 6.58
<EPS-DILUTED> 6.58

</TABLE>