Document:

<PAGE>
                                                                 EXECUTION COPY

                            INDEMNIFICATION AGREEMENT

                                      among

                       FINANCIAL SECURITY ASSURANCE INC.,

                    LONG BEACH ACCEPTANCE RECEIVABLES CORP.,

                         GREENWICH CAPITAL MARKETS, INC.

                                       and

                          CITIGROUP GLOBAL MARKETS INC.

                            Dated as of June 1, 2003

               Long Beach Acceptance Auto Receivables Trust 2003-B

                $48,000,000 0.990% Asset Backed Notes, Class A-1

                $84,200,000 1.114% Asset Backed Notes, Class A-2

                $44,000,000 1.575% Asset Backed Notes, Class A-3

                $73,800,000 2.178% Asset Backed Notes, Class A-4

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                        PAGE
<S>                                                                                  <C>

Section 1.   Definitions...................................................................1

Section 2.   Representations, Warranties and Agreements of Financial Security..............3

Section 3.   Representations, Warranties and Agreements of the Underwriters................6

Section 4.   Indemnification...............................................................6

Section 5.   Indemnification Procedures....................................................7

Section 6.   Contribution..................................................................8

Section 7.   Miscellaneous.................................................................9

EXHIBIT A - Opinion of Assistant General Counsel

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                                            i

<PAGE>

                            INDEMNIFICATION AGREEMENT

                  INDEMNIFICATION AGREEMENT, dated as of June 1, 2003, among
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), LONG BEACH ACCEPTANCE
RECEIVABLES CORP. (the "Company"), GREENWICH CAPITAL MARKETS, INC. ("RBS GC")
and CITIGROUP GLOBAL MARKETS INC., ("Citigroup" and, together with RBS GC, the
"Underwriters"):

                  Section 1.   Definitions.  For purposes of this Agreement,
the following terms shall have the meanings provided below:

                  "Agreement" means this Indemnification Agreement, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.

                  "Commission" means the Securities and Exchange Commission.

                  "Company Party" means any of the Company, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.

                  "Federal Securities Laws" means the Securities Act, the
Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment
Company Act of 1940, the Investment Advisers Act of 1940 and the Public Utility
Holding Company Act of 1935, each as amended from time to time, and the rules
and regulations in effect from time to time under such Acts.

                  "Financial Security Agreements" means this Agreement, the
Spread Account Agreement and the Insurance Agreement.

                  "Financial Security Information" has the meaning provided in
Section 2(g) hereof.

                  "Financial Security Party" means any of Financial Security,
its parent, subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.

                  "Indemnified Party" means any party entitled to any
indemnification pursuant to Section 4 hereof.

                  "Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.

                  "Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of June 1, 2003, among Financial Security, the Company and
LBAC, and Long

<PAGE>

Beach Acceptance Auto Receivables Trust 2003-B as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.

                  "LBAC" means Long Beach Acceptance Corp., a Delaware
Corporation.

                  "Losses" means (a) any actual out-of-pocket damages incurred
by the party entitled to indemnification or contribution hereunder, (b) any
actual out-of-pocket costs or expenses incurred by such party, including
reasonable fees or expenses of its counsel and other expenses incurred in
connection with investigating or defending any claim, action or other proceeding
which entitle such party to be indemnified hereunder (subject to the limitations
set forth in Section 5 hereof), to the extent not paid, satisfied or reimbursed
from funds provided by any other Person other than an affiliate of such party
(provided that the foregoing shall not create or imply any obligation to pursue
recourse against any such other Person), plus (c) interest on the amount paid by
the party entitled to indemnification or contribution from the date of such
payment to the date of payment by the party who is obligated to indemnify or
contribute hereunder at the statutory rate applicable to judgments for breach of
contract.

                  "Offering Document" means the Prospectus, Prospectus
Supplement and any other material or documents delivered by the Underwriters or
any Underwriter Party to any Person in connection with the offer or sale of the
Securities; provided, however, the Preliminary Computational Materials dated
June 19, 2003, in respect of the Securities shall not be included in this
definition of "Offering Document".

                  "Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, limited liability company,
limited liability partnership or other organization or entity (whether
governmental or private).

                  "Policy" means the financial guaranty insurance policy
delivered by Financial Security with respect to the Securities.

                  "Prospectus" means, collectively, the Prospectus relating to
the Securities dated January 18, 2002, and the Prospectus Supplement.

                  "Prospectus Supplement" means the Prospectus Supplement dated
June 25, 2003 relating to the Securities.

                  "Rating Agencies" has the meaning provided in the last
paragraph of Section 2 hereof.

                  "Representative" means Greenwich Capital Markets, Inc. as
representative of the Underwriters.

                  "Securities" means the Long Beach Acceptance Auto Receivables
Trust 2003-B $48,000,000 0.990% Asset Backed Notes, Class A-1, $84,200,000
1.114% Asset

                                   2

<PAGE>

Backed Notes, Class A-2, $44,000,000 1.575% Asset Backed Notes, Class A-3, and
$73,800,000 2.178% Asset Backed Notes, Class A-4, each as described in the
Prospectus Supplement and covered by the Policy.

                  "Securities Act" means the Securities Act of 1933, as amended
from time to time, and any rule or regulation in effect from time to time under
such Act.

                  "Spread Account Agreement" means the Master Spread Account
Agreement, dated as of June 1, 2003 among the Company, the Collateral Agent
specified therein, Financial Security and the Trustee specified therein, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.

                  "Underwriters" means Greenwich Capital Markets, Inc. and
Citigroup Global Markets Inc.

                  "Underwriter Information" has the meaning provided in Section
3(c) hereof.

                  "Underwriter Party" means any of the Underwriters, its
respective parent, subsidiaries and affiliates and any shareholder, director,
officer, employee, or agent of the "controlling person" (as such item is used in
the Securities Act) of any of the foregoing.

                  "Underwriting Agreement" means the Underwriting Agreement
dated as of June 20, 2003 among the Company, LBAC and the Underwriters with
respect to the offer and sale of the Securities, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.

                  Section 2.  Representations, Warranties and Agreements of
Financial Security. Financial Security represents, warrants and agrees with the
parties hereto as follows:

                 (a) Organization, Etc.  Financial Security is a stock insurance
company duly organized, validly existing and authorized to transact financial
guaranty insurance business under the laws of the State of New York.

                 (b) Authorization, Etc.  The Policy and the Financial Security
Agreements have been duly authorized, executed and delivered by Financial
Security.

                 (c) Validity, Etc. The Policy and the Financial Security
Agreements constitute valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their terms, subject,
as to the enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the enforceability
of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles of
equity and subject, in the case of this Agreement, to principles of

                                         3

<PAGE>

public policy limiting the right to enforce the indemnification provisions
contained herein.

                 (d) Exemption From Registration. The Policy is exempt from
registration under the Securities Act.

                 (e) No Conflicts. Neither the execution or delivery by
Financial Security of the Policy or the Financial Security Agreements, nor the
performance by Financial Security of its obligations thereunder, will conflict
with any provision of the certificate of incorporation or the bylaws of
Financial Security nor result in a breach of, or constitute a default under, any
material agreement or other instrument to which Financial Security is a party or
by which any of its property is bound nor violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that, in the published opinion of the Securities and Exchange
Commission, the indemnification provisions of this Agreement, insofar as they
relate to indemnification for liabilities arising under the Securities Act, are
against public policy as expressed in the Securities Act and are therefore
unenforceable).

                 (f) Financial Information. The consolidated balance sheets of
Financial Security as of December 31, 2002 and December 31, 2001 and the related
consolidated statements of income, changes in shareholder's equity and cash
flows for the fiscal years then ended, and the interim consolidated balance
sheet for Financial Security as of March 31, 2003, and the related statements of
income, changes in shareholders equity and cash flows for the interim period
then ended, furnished by Financial Security to the Underwriters fairly present
in all material respects the financial condition of Financial Security as of
such dates and for such periods in accordance with generally accepted accounting
principles consistently applied (subject as to interim statements to normal
year-end adjustments) and since the date of the most current interim
consolidated balance sheet referred to above there has been no change in the
financial condition of Financial Security which would materially and adversely
affect its ability to perform its obligations under the Policy.

                 (g) Financial Security Information. The information in the
Prospectus Supplement set forth under the caption "THE INSURER" (as revised from
time to time in accordance with the provisions hereof, the "Financial Security
Information") is limited and does not purport to provide the scope of disclosure
required to be included in a prospectus with respect to a registrant in
connection with the offer and sale of securities of such registrant registered
under the Securities Act. Within such limited scope of disclosure, however, as
of the date of the Prospectus Supplement and as of the date hereof, the
Financial Security Information does not contain any untrue statement of a
material fact, or omit to state a material fact necessary to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading.

                                       4
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                 (h) Additional Information. Financial Security will furnish to
the Underwriters or the Company, upon request of the Underwriters or the
Company, as the case may be, copies of Financial Security's most recent
financial statements (annual or interim, as the case may be) which fairly
present in all material respects the financial condition of Financial Security
as of the dates and for the periods indicated, in accordance with generally
accepted accounting principles consistently applied except as noted therein
(subject, as to interim statements, to normal year-end adjustments). In
addition, if the delivery of a Prospectus relating to the Securities is required
at any time prior to the expiration of nine months after the time of issuance of
the Prospectus in connection with the offering or sale of the Securities, the
Company or the Underwriters will notify Financial Security of such requirement
to deliver a Prospectus and Financial Security will promptly provide the
Underwriters and the Company with any revisions to the Financial Security
Information that are in the judgment of Financial Security reasonably necessary
to prepare a supplement to the Prospectus.

                 (i) Opinion of Counsel. Financial Security will furnish to the
Underwriters and the Company, on the closing date for the sale of the
Securities, an opinion of its Assistant General Counsel, to the effect set forth
in Exhibit A attached hereto, dated such closing date and addressed to the
Company and the Underwriters.

                 (j) Consents and Reports of Independent Accountants. Financial
Security will furnish to the Underwriters and the Company, upon request, as
comfort from its independent accountants in respect of its financial condition
(i) at the expense of the Person specified in the Insurance Agreement, a copy of
the Prospectus, including either a manually signed consent or a manually signed
report of Financial Security's independent accountants and (ii) the quarterly
review letter by Financial Security's independent accountants in respect of the
most recent interim financial statements of Financial Security.

Nothing in this Agreement shall be construed as a representation or warranty by
Financial Security concerning the rating of its insurance financial strength by
Moody's Investors Service, Inc. or its insurer financial strength by Standard &
Poor's Ratings Group, a division of The McGraw-Hill Companies, or any other
rating agency (collectively, the "Rating Agencies"). The Rating Agencies, in
assigning such ratings, take into account facts and assumptions not described in
the Prospectus and the facts and assumptions considered by the Rating Agencies,
and the ratings issued thereby, are subject to change over time.

                 Section 3. Representations, Warranties and Agreements of the
Underwriters. Each of the Underwriters represents, warrants and agrees with the
parties hereto as follows:

                 (a) Compliance With Laws. Such Underwriter will comply in all
material respects with all legal requirements in connection with offers and
sales of the Securities and make such offers and sales in the manner provided in
any Offering Memorandum.

                                       5

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                 (b) Offering Document. Such Underwriter will not use, or
distribute to other broker-dealers for use, any Offering Document in connection
with the offer and sale of the Securities unless such Offering Document includes
such information as has been furnished by Financial Security for inclusion
therein and the information therein concerning Financial Security has been
approved by Financial Security in writing. Financial Security hereby consents to
the information in respect of Financial Security included in the Prospectus
Supplement. Each Offering Document will include the following statement:

         "The Policy is not covered by the property/casualty insurance security
         fund specified in Article 76 of the New York Insurance Law".

         Each Offering Document including financial information (other than
financial information included in the Financial Security Information) with
respect to Financial Security prepared in accordance with generally accepted
accounting principles will include the following statement immediately preceding
such financial information:

         "The New York State Insurance Department recognizes only statutory
         accounting practices for determining and reporting the financial
         condition and results of operations of an insurance company, for
         determining its solvency under the New York Insurance Law, and for
         determining whether its financial condition warrants the payment of a
         dividend to its stockholders. No consideration is given by the New York
         State Insurance Department to financial statements prepared in
         accordance with generally accepted accounting principles in making such
         determinations."

                 (c) Underwriter Information. With respect to any Underwriter,
all material provided by such Underwriter for inclusion in any Offering Document
(as revised from time to time and certified by such Underwriter in writing to
constitute Underwriter Information, the "Underwriter Information"), insofar as
such information relates to such Underwriter, is true and correct in all
material respects. In respect of the Prospectus Supplement, the Underwriter
Information with respect to such Underwriter is limited to the information
relating to such Underwriter set forth (i) in the body of the Prospectus
Supplement under the caption "Underwriting" the first, second and last
paragraphs and (ii) any other information certified in writing by such
Underwriter to be Underwriter Information.

           Section 4. Indemnification.

                 (a) Financial Security agrees, upon the terms and subject to
the conditions provided herein, to indemnify, defend and hold harmless each
Company Party and each Underwriter Party against (i) any and all Losses incurred
by them with respect to the offer and sale of the Securities and resulting from
Financial Security's breach of any of its representations, warranties or
agreements set forth in Section 2 hereof and (ii) any and all Losses to which
any Company Party or Underwriter Party may become

                                       6
<PAGE>

subject, under the Securities Act or otherwise, insofar as such Losses arise out
of or result from an untrue statement of a material fact contained in any
Offering Document or the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
omission was made in the Financial Security Information included therein in
accordance with the provisions hereof.

                 (b) Each of the Underwriters agrees, severally and not jointly,
upon the terms and subject to the conditions provided herein, to indemnify,
defend and hold harmless each Financial Security Party against (i) any and all
Losses incurred by them with respect to the offer and sale of the Securities and
resulting from such Underwriter's breach of any of its representations,
warranties or agreements set forth in Section 3 hereof and (ii) any and all
Losses to which any Financial Security Party may become subject, under the
Securities Act or otherwise, insofar as such Losses arise out of or result from
an untrue statement of a material fact contained in any Offering Document or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or omission was made
in the Underwriter Information with respect to such Underwriter included
therein.

                 (c) Upon the incurrence of any Losses for which a party is
entitled to indemnification hereunder, the Indemnifying Party shall reimburse
the Indemnified Party promptly upon establishment by the Indemnified Party to
the Indemnifying Party of the Losses incurred.

         Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution, the indemnification provided herein by
an Indemnifying Party shall be the exclusive remedy of any and all Indemnified
Parties for the breach of a representation, warranty or agreement hereunder by
an Indemnifying Party; provided, however, that each Indemnified Party shall be
entitled to pursue any other remedy at law or in equity for any such breach so
long as the damages sought to be recovered shall not exceed the Losses incurred
thereby resulting from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle an Indemnified
Party to be indemnified under this Agreement, such party shall give the
Indemnifying Party written or telegraphic notice of such action or claim
reasonably promptly after receipt of written notice thereof. The Indemnifying
Party shall be entitled to participate in and, upon notice to the Indemnified
Party, assume the defense of any such action or claim in reasonable cooperation
with, and with the reasonable cooperation of, the Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof at the expense of the
Indemnified Party; provided, however, that the fees and expenses of such
separate counsel shall be at the expense of the Indemnifying Party if (i) the
Indemnifying Party has agreed to pay such fees and expenses, (ii) the
Indemnifying Party shall have failed to assume the defense of such action or
proceeding and employ counsel satisfactory to the Indemnified Party in any such
action or proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include

                                       7
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both the Indemnified Party and the Indemnifying Party, and the Indemnified Party
shall have been advised by counsel that (A) there may be one or more legal
defenses available to it which are different from or additional to those
available to the Indemnifying Party and (B) the representation of the
Indemnifying Party and the Indemnified Party by the same counsel would be
inappropriate or contrary to prudent practice, in which case, if the Indemnified
Party notifies the Indemnifying Party in writing that it elects to employ
separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, it being understood, however,
that the Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for all the Company Parties, one such
firm for all Underwriter Parties and one such firm for all Financial Security
Parties, as the case may be, which firm shall be designated in writing by the
Company in respect of the Company Parties, by the Representative in respect of
the Underwriter Parties and by Financial Security in respect of the Financial
Security Parties. The Indemnifying Party shall not be liable for any settlement
of any such claim or action unless the Indemnifying Party shall have consented
thereto or be in default in its obligations hereunder. Any failure by an
Indemnified Party to comply with the provisions of this Section shall relieve
the Indemnifying Party of liability only if such failure is prejudicial to the
position of the Indemnifying Party and then only to the extent of such
prejudice.

         Section 6. Contribution.

                 (a) To provide for just and equitable contribution if the
indemnification provided by any Indemnifying Party is determined to be
unavailable for any Indemnified Party (other than due to application of this
Section), each Indemnifying Party shall contribute to the Losses arising from
any breach of any of its representations, warranties or agreements contained in
this Agreement on the basis of the relative fault of each of the parties as set
forth in Section 6(b) below; provided, however, that an Indemnifying Party shall
in no event be required to contribute to all Indemnified Parties an aggregate
amount in excess of the Losses incurred by such Indemnified Parties resulting
from the breach of representations, warranties or agreements contained in this
Agreement.

                 (b) The relative fault of each Indemnifying Party, on the one
hand, and of each Indemnified Party, on the other, shall be determined by
reference to, among other things, whether the breach of, or alleged breach of,
any representations, warranties or agreements contained in this Agreement
relates to information supplied by, or action within the control of, the
Indemnifying Party or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.

                 (c) The parties agree that Financial Security shall be solely
responsible for the Financial Security Information, each Underwriter shall be
solely

                                       8
<PAGE>

responsible for the Underwriter Information with respect to such Underwriter and
that the balance of each Offering Document shall be the responsibility of LBAC
and the Company.

                 (d) Notwithstanding anything in this Section 6 to the contrary,
no Underwriter shall be required to contribute an amount in excess of the amount
by which the total principal balance of the Securities underwritten by such
Underwriter exceeds the amount of any damages that such Underwriter has
otherwise been required to pay in respect of any breach by such Underwriter of
its representations or warranties contained in Section 3 hereof.

                 (e) No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.

                 (f) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to the
contributor of the Losses incurred.

         Section 7. Miscellaneous.

                 (a) Notices. All notices and other communications provided for
under this Agreement shall be delivered to the address set forth below or to
such other address as shall be designated by the recipient in a written notice
to the other party or parties hereto:

         If to Financial Security:

                             Financial Security Assurance Inc.
                             350 Park Avenue
                             New York, NY 10022
                             Attention: Senior Vice President--Transaction
                             Oversight Department (with a copy to the Attention
                             of the General Counsel)

                             Re: Long Beach Acceptance Auto Receivables
                             Trust 2003-B
                             Policy No. 51422-N

                             Confirmation: (212) 826-0100
                             Facsimile Nos.: (212) 339-3518, (212) 339-3529 (in
                             each case in which notice or other communication
                             to Financial Security refers to an Event of
                             Default, a claim on the Policy or with respect to
                             which failure on the part of Financial Security to
                             respond shall be

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<PAGE>

                             deemed to constitute consent or acceptance,
                             then a copy of such notice or other communication
                             should also be sent to the attention of each of
                             the General Counsel and the Head-Financial
                             Guaranty Group and shall be marked to indicate
                             "URGENT MATERIAL ENCLOSED.")

         If to the Company:

                             Long Beach Acceptance Receivables Corp.
                             One Mack Centre Drive
                             Paramus, NJ  07652
                             Attention:  General Counsel
                             Facsimile No.: (201) 262-6868
                             Confirmation: (201) 262-5222

         If to the RBS GC:

                             Greenwich Capital Markets, Inc.
                             600 Steamboat Road
                             Greenwich, CT 06830
                             Attention: Asset-Backed Finance
                             Facsimile No:  (203) 618-2164
                             Confirm No:  (203) 622-5666

         If to the Citigroup:

                             Citigroup Global Markets Inc.
                             390 Greenwich Street
                             4th Floor
                             New York, NY 10013
                             Attention: Asset Backed Finance
                             Facsimile No:  (212) 723-8591
                             Confirm No:  (212) 723-9566

                 (b) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                 (c) Assignments. This Agreement may not be assigned by any
party without the express written consent of each other party. Any assignment
made in violation of this Agreement shall be null and void.

                 (d) Amendments. Amendments of this Agreement shall be in
writing signed by each party hereto.

                                       10
<PAGE>

                 (e) Survival, Etc. The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Indemnifying
Party, (ii) the issuance of the Securities or (iii) any termination of this
Agreement or the Policy. The indemnification provided in this Agreement will be
in addition to any liability which the parties may otherwise have and shall in
no way limit any obligations of LBAC or the Company under the Underwriting
Agreement or under the Insurance Agreement.

                 (f) Counterparts. This Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.

                     [Remainder of Page Intentionally Blank]

                                       11
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.

                                  FINANCIAL SECURITY ASSURANCE INC.

                                  By: _______________________________________
                                      Name:
                                      Title:

                                  LONG BEACH ACCEPTANCE RECEIVABLES CORP.

                                  By: _______________________________________
                                      Name:
                                      Title:

                                  GREENWICH CAPITAL MARKETS, INC.

                                  By: _______________________________________
                                      Name:
                                      Title:

                                  CITIGROUP GLOBAL MARKETS INC.

                                  By: ______________________________________
                                      Name:
                                      Title:

                                       12
<PAGE>

                                    EXHIBIT A

                      OPINION OF ASSISTANT GENERAL COUNSEL

            Based upon the foregoing, I am of the opinion that:

            1. Financial Security is a stock insurance company duly organized,
validly existing and authorized to transact financial guaranty insurance
business under the laws of the State of New York.

            2. The Policy, the Insurance Agreement and the Indemnification
Agreement been duly authorized, executed and delivered by Financial Security.

            3. The Policy, the Insurance Agreement and the Indemnification
Agreement constitute valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their terms, subject,
as to the enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the enforceability
of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles of
equity and subject, in the case of the Indemnification Agreement, to principles
of public policy limiting the right to enforce the indemnification provisions
contained therein insofar as they relate to indemnification for liabilities
arising under applicable securities laws.

            4. The Policy is exempt from registration under the Securities Act
of 1933, as amended (the "Act").

            5. Neither the execution or delivery by Financial Security of the
Policy or the Insurance Agreement or the Indemnification Agreement, nor the
performance by Financial Security of its obligations thereunder, will conflict
with any provision of the certificate of incorporation or the bylaws of
Financial Security or, to the best of my knowledge, result in a breach of, or
constitute a default under, any agreement or other instrument to which Financial
Security is a party or by which it or any of its property is bound or, to the
best of my knowledge, violate any judgment, order or decree applicable to
Financial Security of any governmental or regulatory body, administrative
agency, court or arbitrator having jurisdiction over Financial Security (except
that in the published opinion of the Securities and Exchange Commission the
indemnification provisions of the Indemnification Agreement, insofar as they
relate to indemnification for liabilities arising under the Act, are against
public policy as expressed in the Act and are therefore unenforceable).

            6. In addition, please be advised that I have reviewed the
description of Financial Security under the caption "THE INSURER" in the
Prospectus Supplement dated June 25, 2003, (the "Offering Document" of the
Company with respect to the Securities. The information provided in the Offering
Document with respect to Financial Security is limited and does not purport to
provide the scope of disclosure required to be

                                       13
<PAGE>

included in a prospectus with respect to a registrant under the Securities Act
of 1933, as amended, in connection with the public offer and sale of securities
of such registrant. Within such limited scope of disclosure, however, there has
not come to my attention any information which would cause me to believe that
the description of Financial Security referred to above, as of the date of the
Prospectus Supplement or the date hereof, contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except that no opinion is rendered with respect to any
financial statements or other financial information contained or referred to
therein).

                                       14<PAGE>

                                                                   EXHIBIT 10.40

                   THIRD AMENDED AND RESTATED CREDIT AGREEMENT

                                      among

                              AVONDALE MILLS, INC.

                             The Banks Listed Herein

                                       and

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                                    as Agent

                           Dated as of March 28, 2003

<PAGE>

                                TABLE OF CONTENTS

                                CREDIT AGREEMENT

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<S>                                                                                                                <C>
ARTICLE I             DEFINITIONS...............................................................................     1
         Section 1.01          Definitions......................................................................     1
         Section 1.02          Accounting Terms and Determinations..............................................    23
         Section 1.03          References.......................................................................    23
         Section 1.04          Use of Defined Terms.............................................................    23
         Section 1.05          Terminology......................................................................    23
ARTICLE II            THE CREDITS...............................................................................    23
         Section 2.01          Commitments to Lend..............................................................    23
         Section 2.02          Method of Borrowing..............................................................    25
         Section 2.03          Notes............................................................................    27
         Section 2.04          Maturity of Loans................................................................    28
         Section 2.05          Interest Rates...................................................................    28
         Section 2.06          Fees.............................................................................    30
         Section 2.07          Optional Termination or Reduction of Commitments.................................    31
         Section 2.08          Certain Mandatory Prepayments; Mandatory Reduction
                               and Termination of Commitments...................................................    31
         Section 2.09          Optional Prepayments.............................................................    32
         Section 2.10          Other Mandatory Prepayments on Revolver Loans....................................    32
         Section 2.11          General Provisions as to Payments................................................    32
         Section 2.12          Computation of Interest and Fees.................................................    37
         Section 2.13          Letter of Credit Provisions......................................................    37
         Section 2.14          No Novation......................................................................    42
ARTICLE III           CONDITIONS TO BORROWINGS..................................................................    42
         Section 3.01          Conditions to First Borrowing and Effectiveness of this
                               Agreement........................................................................    42
         Section 3.02          Conditions to All Borrowings.....................................................    46
ARTICLE IV            REPRESENTATIONS AND WARRANTIES............................................................    47
         Section 4.01          Corporate Existence and Power....................................................    47
         Section 4.02          Corporate and Governmental Authorization; No Contravention.......................    47
         Section 4.03          Binding Effect...................................................................    47
         Section 4.04          Financial Information............................................................    48
         Section 4.05          No Litigation....................................................................    48
         Section 4.06          Compliance with ERISA............................................................    48
         Section 4.07          Compliance with Laws; Payment of Taxes...........................................    49
         Section 4.08          Subsidiaries.....................................................................    49
         Section 4.09          Investment Company Act...........................................................    49
         Section 4.10          Public Utility Holding Company Act...............................................    49
         Section 4.11          Ownership of Property; Liens.....................................................    49
         Section 4.12          No Default.......................................................................    49
         Section 4.13          Full Disclosure..................................................................    50
         Section 4.14          Environmental Matters............................................................    50
</TABLE>

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<TABLE>
<S>                                                                                                                <C>
         Section 4.15          Capital Stock....................................................................    50
         Section 4.16          Margin Stock.....................................................................    51
         Section 4.17          Insolvency.......................................................................    51
ARTICLE V             COVENANTS.................................................................................    51
         Section 5.01          Information......................................................................    51
         Section 5.02          Inspection of Property, Books and Records; Field Audits; and
                               Appraisals.......................................................................    54
         Section 5.03          Fixed Charge Coverage Ratio......................................................    56
         Section 5.04          Minimum Consolidated Cash Flow...................................................    56
         Section 5.05          Intentionally Omitted............................................................    56
         Section 5.06          Total Debt to Cash Flow Ratio....................................................    56
         Section 5.07          Restricted Payments..............................................................    56
         Section 5.08          Senior Debt to Cash Flow.........................................................    57
         Section 5.09          Loans or Advances................................................................    57
         Section 5.10          Investments......................................................................    58
         Section 5.11          Negative Pledge..................................................................    58
         Section 5.12          Maintenance of Existence.........................................................    59
         Section 5.13          Dissolution......................................................................    59
         Section 5.14          Consolidations, Mergers and Sales of Assets......................................    59
         Section 5.15          Use of Proceeds..................................................................    60
         Section 5.16          Compliance with Laws; Payment of Taxes...........................................    60
         Section 5.17          Insurance........................................................................    60
         Section 5.18          Change in Fiscal Year............................................................    61
         Section 5.19          Maintenance of Property..........................................................    61
         Section 5.20          Environmental Notices............................................................    61
         Section 5.21          Environmental Matters............................................................    61
         Section 5.22          Environmental Release............................................................    61
         Section 5.23          Additional Consolidated Senior Debt; Debt of Receivables
                               Subsidiary.......................................................................    61
         Section 5.24          Transactions with Affiliates.....................................................    62
         Section 5.25          Collateral.......................................................................    62
         Section 5.26          Subordinated Debt................................................................    63
ARTICLE VI            DEFAULTS..................................................................................    64
         Section 6.01          Events of Default................................................................    64
         Section 6.02          Notice of Default................................................................    66
ARTICLE VII           THE AGENT.................................................................................    66
         Section 7.01          Appointment; Powers and Immunities...............................................    66
         Section 7.02          Reliance by Agent................................................................    67
         Section 7.03          Defaults.........................................................................    67
         Section 7.04          Rights of Agent as a Bank........................................................    67
         Section 7.05          Indemnification..................................................................    68
         Section 7.06          CONSEQUENTIAL DAMAGES............................................................    68
         Section 7.07          Payee of Note Treated as Owner...................................................    68
         Section 7.08          Nonreliance on Agent and Other Banks.............................................    68
         Section 7.09          Failure to Act...................................................................    69
         Section 7.10          Resignation or Removal of Agent..................................................    69
</TABLE>

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<TABLE>
<S>                                                                                                                <C>
ARTICLE VIII          CHANGE IN CIRCUMSTANCES; COMPENSATION.....................................................    69
         Section 8.01          Basis for Determining Interest Rate Inadequate or Unfair.........................    69
         Section 8.02          Illegality.......................................................................    70
         Section 8.03          Increased Cost and Reduced Return................................................    70
         Section 8.04          Base Rate Loans or Other Fixed Rate Loans Substituted for
                               Affected Fixed Rate Loans........................................................    72
         Section 8.05          Compensation.....................................................................    72
ARTICLE IX            MISCELLANEOUS.............................................................................    73
         Section 9.01          Notices..........................................................................    73
         Section 9.02          No Waivers.......................................................................    73
         Section 9.03          Expenses; Documentary Taxes......................................................    73
         Section 9.04          Indemnification..................................................................    73
         Section 9.05          Setoff; Sharing of Setoffs.......................................................    74
         Section 9.06          Amendments and Waivers...........................................................    75
         Section 9.07          No Margin Stock Collateral.......................................................    75
         Section 9.08          Successors and Assigns...........................................................    76
         Section 9.09          Confidentiality..................................................................    79
         Section 9.10          Representation by Banks..........................................................    79
         Section 9.11          Obligations Several..............................................................    79
         Section 9.12          Georgia Law......................................................................    79
         Section 9.13          Severability.....................................................................    79
         Section 9.14          Interest.........................................................................    79
         Section 9.15          Interpretation...................................................................    80
         Section 9.16          Waiver of Jury Trial; Consent to Jurisdiction....................................    80
         Section 9.17          Counterparts.....................................................................    80
         Section 9.18          Release of Receivables Program Assets............................................    80
</TABLE>

<TABLE>
<S>                        <C>
EXHIBIT A-1.......         Form of Revolver Loan Note
EXHIBIT A-2.......         Form of Swing Loan Note
EXHIBIT B-1.......         Form of Opinion of Georgia Counsel for the Borrower and the Parent
EXHIBIT B-2.......         Form of Local Counsel Opinion as to Mortgage
EXHIBIT C.........         Form of Opinion of Special Counsel for the Agent
EXHIBIT D.........         Form of Assignment and Acceptance
EXHIBIT E.........         Form of Notice of Borrowing
EXHIBIT F-1.......         Form of Compliance Certificate
EXHIBIT F-2.......         Form of Asset Coverage Base Certificate
EXHIBIT G.........         Form of Closing Certificate
EXHIBIT H.........         Form of Mortgage
EXHIBIT I.........         Form of Amended and Restated Parent Guaranty
EXHIBIT J.........         Form of Amended and Restated Security Agreement
EXHIBIT K.........         Intentionally Omitted
EXHIBIT L.........         Form of Amended and Restated Stock Pledge Agreement
EXHIBIT M.........         Form of Receivables Intercreditor Agreement
EXHIBIT N.........         Form of Borrower Pledge Agreement
EXHIBIT O.........         AMGF Guaranty
EXHIBIT P.........         Security Agreement (Avondale Mills Graniteville Fabrics, Inc.)
</TABLE>

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<TABLE>
<S>                        <C>
EXHIBIT Q.........         Mortgage and Assignment of Leases, Rents and Profits
EXHIBIT R.........         Form of Notice of Letter of Credit
EXHIBIT S.........         Form of Required Assignment and Assumption Agreement
EXHIBIT T.........         Form of Global Amendment Agreement
EXHIBIT U.........         Form of Contribution Agreement
Schedule 4.05.....         Litigation
Schedule 4.08.....         Subsidiaries
Schedule 4.14.....         Environmental Matters
Schedule 5.11.....         Existing Liens
Schedule 5.17.....         Description of Insurance
Schedule 5.25.....         Plants
</TABLE>

                                       iv

<PAGE>

                   THIRD AMENDED AND RESTATED CREDIT AGREEMENT

                  THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of March
28, 2003, among AVONDALE MILLS, INC., the BANKS listed on the signature pages
hereof, and WACHOVIA BANK, NATIONAL ASSOCIATION (successor by merger to Wachovia
Bank of Georgia, N.A., Wachovia Bank, N.A., First Union National Bank, and First
Union National Bank of Georgia), as Agent.

                  The Borrower has requested amendments to the Original Credit
Agreement in order, among other things, to extend the Termination Date as set
forth in the definition of "Termination Date," to provide for general working
capital needs and to provide for the refinancing of the Obligations outstanding
under the Original Credit Agreement through the amendment and restatement of the
Original Credit Agreement, and the Banks are willing to provide such financing
pursuant to the terms and conditions set forth in this Agreement, which is an
amendment and restatement of, and which replaces, the Original Credit Agreement.

                  The parties hereto agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

                  Section 1.01 Definitions. The terms as defined in this Section
1.01 shall, for all purposes of this Agreement and any amendment hereto (except
as herein otherwise expressly provided or unless the context otherwise
requires), have the meanings set forth herein:

                  "Acceptable Refinancing" means a refinancing of the 10.25%
Subordinated Notes which meets each of the following criteria:

                  (a)      The proceeds of such refinancing shall be sufficient
to repay all of the Borrower's then-outstanding obligations under the 10.25%
Subordinated Notes, and, upon consummation of such refinancing, all of such
obligations shall, in fact, be fully paid;

                  (b)      The earliest date of mandatory repayment of the
Borrower's obligations under such refinancing shall be September 22, 2006;

                  (c)      The Borrower's obligations under such refinancing
shall be subordinated to the Obligations pursuant to subordination terms not
materially less favorable to the Banks than the subordination terms provided in
the Indenture governing the 10.25% Subordinated Notes, and otherwise on terms
reasonably acceptable to the Agent and the Required Banks; and

                  (d)      The agreements, instruments, and other documents
evidencing such refinancing (i) do not contain terms or covenants materially
more restrictive than the agreements, instruments, and other documents
evidencing the 10.25% Subordinated Notes and (ii) are otherwise reasonably
acceptable to the Agent and the Required Banks.

                  "Accounts Receivable Collateral" has the meaning set forth in
the Security Agreement.

<PAGE>

                  "Adjusted London Interbank Offered Rate" has the meaning set
forth in Section 2.05(c).

                  "Affiliate" of any Person means (i) any Person that directly,
or indirectly through one or more intermediaries, controls such Person (a
"Controlling Person"), (ii) any other Person which is controlled by or is under
common control with such Person, or (iii) any other Person of which such Person
owns, directly or indirectly, 20% or more of the common stock or equivalent
equity interests. As used herein, the term "control" means possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.

                  "Agent" means Wachovia Bank, National Association (successor
by merger to Wachovia Bank of Georgia, N.A., Wachovia Bank, N.A., and First
Union National Bank, and First Union National Bank of Georgia), a national
banking association organized under the laws of the United States of America, in
its capacity as administrative and syndication agent for the Banks hereunder,
and its successors and permitted assigns in such capacity.

                  "Agent's Letter Agreement" means the letter agreement dated as
of February 12, 2003, between the Borrower, the Agent, and Wachovia Securities,
Inc., and any amendments, supplements, and modifications thereto.

                  "Aggregate Commitment" means the sum of all the Commitments.

                  "Aggregate Unused Commitment" means the sum of all the Unused
Commitments.

                  "Agreement" means this Third Amended and Restated Credit
Agreement (which amends, restates and replaces the Original Credit Agreement),
together with all amendments and supplements hereto.

                  "AMGF" means Avondale Mills Graniteville Fabrics, Inc., a
Delaware corporation which is a Wholly Owned Subsidiary and which formerly was
known as Camp Helen Co.

                  "AMGF Distribution Facility Lease" means the Lease Agreement
dated May 16, 1997, between Graniteville, L.L.C., as "Lessor", and AMGF, as
"Lessee", pursuant to which the "Lessor" will construct a 254,774 square foot
distribution facility on premises located on Bettis Academy Road, Sage Mill
Industrial Park, Aiken County, South Carolina, and AMGF will lease such
distribution facility for a term of 10 years, commencing November 15, 1997, for
a monthly base rent of $58,385 on a "triple net" basis.

                  "AMGF Documents" means the AMGF Guaranty, the AMGF Mortgage
and the AMGF Security Agreement, or any one, or more, or all of them, as the
context shall require.

                  "AMGF/Graniteville Transaction" means the transaction which
includes the following related events: (i) the transfer by the Borrower, as an
additional equity capital contribution, of the Graniteville Indigo Dyeing
Facility (having a book value of approximately $6,300,000) to AMGF; (ii) the
loan by the Borrower to AMGF of up to $40,000,000 (or such

                                       2

<PAGE>

amount in excess thereof as to which the consent of the Required Banks has been
obtained) to construct and equip a weave room addition to the Graniteville
Indigo Dyeing Facility and to equip the facility leased under the AMGF
Distribution Facility Lease; (iii) the release by the Agent of the Graniteville
Indigo and Dyeing Facility from the Mortgage and the Security Agreement; and
(iv) the execution and delivery by AMGF of the AMGF Documents pursuant to the
Second Amendment, as described in Section 5.25(e).

                  "AMGF Guaranty" means the Limited Guaranty Agreement dated as
of the date of the Second Amendment, substantially in the form of Exhibit O,
executed by AMGF in favor of the Agent, for the benefit of the Banks,
unconditionally Guaranteeing the payment of all of the Obligations, as amended
by the Global Amendment Agreement (which, among other things, deleted the
limitations on liability contained in Section 15 thereof, and deleted such
Section 15), together with all amendments and supplements thereto.

                  "AMGF Mortgage" means the Mortgage and Assignment of Leases,
Rents and Profits executed by AMGF dated as of the date of the Second Amendment,
substantially in the form of Exhibit Q, conveying a first priority security
title to and Lien on the real property and improvements at the AMGF Plant to the
Agent, for the benefit of the Banks, subject only to the Permitted Encumbrances
applicable thereto, as security for the obligations of AMGF pursuant to the AMGF
Guaranty, together with all amendments and supplements thereto.

                  "AMGF Plant" means the Graniteville Indigo Dyeing Facility and
all equipment now or hereafter located thereon or used in connection therewith,
including, without limitation, all property added in connection with the
construction of a weave room addition pursuant to the AMGF/Graniteville
Transaction, and all replacements thereof and substitutions therefor.

                  "AMGF Pledged Stock" means the capital stock in AMGF owned by
the Borrower and described in and pledged pursuant to the Borrower Pledge
Agreement.

                  "AMGF Security Agreement" means the Security Agreement
executed by AMGF dated as of August 29, 1997, substantially in the form of
Exhibit P, granting to the Agent, for the benefit of the Banks, a first priority
security interest in all accounts, inventory, general intangibles, documents and
equipment of AMGF, including without limitation, the personal property at the
AMGF Plant and at the facility leased under the AMGF Distribution Facility
Lease, together with all proceeds of all of the foregoing, subject only to the
Permitted Encumbrances, as amended by the Global Amendment Agreement, together
with all amendments and supplements thereto.

                  "Anniversary Date" means the last day of each 12 month period,
commencing on the Closing Date.

                  "Applicable Margin" has the meaning set forth in Section
2.05(a).

                  "Approved Equipment Financing" means the $20,000,000 equipment
financing provided to the Borrower by The CIT Group/Equipment Financing, Inc.,
pursuant to the terms of a Master Security Agreement by and between such parties
dated July 26, 2002, as the same may be amended, restated, supplemented, or
otherwise modified from time to time to the extent permitted under the terms of
the Approved Equipment Financing Intercreditor Agreement.

                                       3

<PAGE>

                  "Approved Equipment Financing Intercreditor Agreement" means
that certain Intercreditor Agreement by and among the Borrower, The CIT
Group/Equipment Financing, Inc., and Wachovia (as "Bank Agent" therein) dated as
of July 26, 2002, as the same may be amended, restated, supplemented, or
otherwise modified from time to time.

                  "Asset Coverage Base" means, at any given time, the sum of (a)
the book value of the Parent and its Consolidated Subsidiaries' inventory, times
0.40, plus (b) the lesser of (i) net book value (after depreciation) of the
Parent and its Consolidated Subsidiaries' plants, machinery, and equipment,
times 0.30, and (ii) $30,000,000, as duly reported in the most recently
delivered Asset Coverage Base Certificate; provided, however, that the Asset
Coverage Base for the period commencing on the Closing Date and ending upon
Agent's receipt of the first Asset Coverage Base Certificate after the Closing
Date shall be $66,344,000.

                  "Asset Coverage Base Certificate" has the meaning set forth in
Section 5.01(k).

                  "Assignee" has the meaning set forth in Section 9.08(c).

                  "Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 9.08(c) in the form attached hereto as
Exhibit D.

                  "Audit/Appraisal Right Event" has the meaning set forth in
Section 5.02(c).

                  "Authority" has the meaning set forth in Section 8.02.

                  "Bank" means each bank or commercial finance company listed on
the signature pages hereof as having a Commitment, and its successors and
assigns.

                  "Base Rate" means for any Base Rate Loan for any day, the rate
per annum equal to the higher as of such day of (i) the Prime Rate, and (ii)
one-half of one percent above the Federal Funds Rate. For purposes of
determining the Base Rate for any day, changes in the Prime Rate shall be
effective on the date of each such change.

                  "Base Rate Loan" means a Loan which bears or is to bear
interest at a rate based upon the Base Rate.

                  "Bill and Hold" means an arrangement confirmed in writing in
which the Borrower or its Subsidiary invoices the customer for goods but retains
possession of such goods for a period of time; provided, that all of the
following requirements are satisfied:

                  (a)      title to, and the risk of loss of, the goods is
         transferred to the customer, and the Borrower's or Subsidiary's
         inventory records are marked to indicate that title has passed;

                  (b)      the Borrower's or Subsidiary's records are adequate
         to enable the Borrower or Subsidiary or a third-party to identify the
         goods subject to such arrangement as separate from the Borrower's or
         Subsidiary's own inventory at any time; and

                                       4

<PAGE>

                  (c)      the related invoice is payable on the normal due date
         for similar Receivables of the Borrower or Subsidiary that do not arise
         from a Bill and Hold arrangement.

                  "Borrower" means Avondale Mills, Inc., an Alabama corporation,
and its successors and its permitted assigns.

                  "Borrower Pledge Agreement" means a Stock Pledge Agreement, in
substantially the form of Exhibit N, by the Borrower in favor of the Agent, for
the benefit of the Banks, pledging all of the Receivables Subsidiary Pledged
Stock to secure the payment of all of the Obligations, pursuant to the
provisions of Section 9.18, as amended by the Global Amendment Agreement (which,
among other things, includes the pledging of the AMGF Pledged Stock to secure
the payment of all of the Obligations), together with all amendments and
supplements thereto.

                  "Borrowing" means a borrowing hereunder consisting of Revolver
Loans or Swing Loans. A Borrowing is a "Domestic Borrowing" if such Loans are
Domestic Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans.
A Domestic Borrowing is a "Set Rate Borrowing" if such Domestic Loans are Set
Rate Loans or a "Base Rate Borrowing" if such Domestic Loans are Base Rate
Loans.

                  "Capital Expenditures" means for any period the sum of all
capital expenditures incurred during such period by the Parent and its
Consolidated Subsidiaries, as determined in accordance with GAAP, but in any
event including expenditures for assets acquired under Capitalized Leases.

                  "Capital Stock" means any nonredeemable capital stock of the
Parent or any Consolidated Subsidiary (to the extent issued to a Person other
than the Parent), whether common or preferred.

                  "Capitalized Lease" means any lease which is required to be
capitalized on a consolidated balance sheet of the lessee and its subsidiaries
in accordance with GAAP.

                  "Capitalized Rentals" of any Person means as of the date of
any determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such Person
in accordance with GAAP.

                  "Casualty" means any act or occurrence of any kind or nature
that results in damage, loss or destruction to the Collateral.

                  "CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. Section 9601 et. seq. and its
implementing regulations and amendments.

                  "CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Inventory System established pursuant to CERCLA.

                  "Change of Law" shall have the meaning set forth in Section
8.02.

                                       5

<PAGE>

                  "Closing Certificate" has the meaning set forth in Section
3.01(b)(ii).

                  "Closing Date" means March 28, 2003.

                  "Code" means the Internal Revenue Code of 1986, as amended, or
any successor Federal tax code.

                  "Collateral" means (i) the personal property in which the
Agent is granted a security interest pursuant to the Security Agreement and the
AMGF Security Agreement, respectively, (ii) the Plants and the AMGF Plant
conveyed to the Agent pursuant to the Operative Mortgages, (iii) the Pledged
Stock pledged to the Agent pursuant to the Pledge Agreement and (iv) the
Receivables Subsidiary Pledged Stock and the AMGF Pledged Stock pledged pursuant
to the Borrower Pledge Agreement; provided, however, that all references to
Collateral shall exclude the Receivables Program Assets, but shall include the
Receivables Subsidiary Pledged Stock and the Purchase Money Note.

                  "Commitment" refers to a commitment of a Bank to make Revolver
Loans and means, with respect to each Bank, the amount set forth opposite the
name of such Bank on the signature pages hereof, as such amount may be reduced
from time to time pursuant to Sections 2.07 and 2.08.

                  "Compliance Certificate" has the meaning set forth in Section
5.01(c).

                  "Condemnation" means any taking of title, of use, or of any
other property interest under the exercise of the power of eminent domain,
whether temporarily or permanently, by any governmental authority or by any
Person acting under governmental authority.

                  "Condemnation Awards" means any and all judgments, awards of
damages (including, but not limited to, severance and consequential damages),
payments, proceeds, settlements, amounts paid for a taking in lieu of
Condemnation, or other compensation, including interest thereon, and the right
to receive the same, as a result of, or in connection with, any Condemnation or
threatened Condemnation.

                  "Consolidated Cash Flow" means for any period, for the Parent
and its Consolidated Subsidiaries, determined on a consolidated basis in
accordance with GAAP, and calculated for the Fiscal Quarter just ended and the
immediately preceding 3 Fiscal Quarters, Consolidated Net Income, plus (i) Net
Interest Expense (including interest on the Subordinated Debt), plus (ii) income
taxes, plus (iii) depreciation, plus (iv) amortization, plus or minus, as the
case may be, (v) LIFO Adjustments and plus (vi) the amount of any non-cash
write-offs of obsolete or surplus equipment, spare parts or real property, up to
but not in excess of $10,000,000 during any period of 4 consecutive Fiscal
Quarters.

                  "Consolidated Net Income" means, for any period, the Net
Income of the Parent and its Consolidated Subsidiaries determined on a
consolidated basis, but excluding (i) extraordinary items and (ii) any equity
interests of the Parent or any Subsidiary in the unremitted earnings of any
Person that is not a Subsidiary. For purposes of clause (i), extraordinary items
shall include termination and severance payments to employees, and costs and
expenses incurred or accrued in connection with the closing of facilities,
relating to or as a result of the acquisition

                                       6

<PAGE>

of the Graniteville Assets, but, as to cash items, only to the extent of such
cash items which are paid or incurred prior to the end of the first Fiscal
Quarter of the 1997 Fiscal Year and in an aggregate amount not exceeding
$5,000,000.

                  "Consolidated Senior Debt" means Consolidated Total Funded
Debt, excluding, however, the Subordinated Debt.

                  "Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which, in accordance with GAAP, would be
consolidated with those of the Parent in its consolidated financial statements
as of such date.

                  "Consolidated Total Funded Debt" means at any date the Funded
Debt of the Parent and its Consolidated Subsidiaries, determined on a
consolidated basis as of such date.

                  "Contribution Agreement" means the Contribution Agreement of
         even date herewith in substantially the form of Exhibit U to be
         executed by the Parent, the Borrower and AMGF.

                  "Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Parent, are treated as a single employer
under Section 414 of the Code.

                  "Current Maturities of Long Term Debt" means all principal
payments in respect of Long Term Debt (other than the Working Capital
Obligations and payments under Subordinated Debt) that are required to be made
within one year from the date of determination, whether or not the obligation to
make such payments would constitute a current liability of the obligor under
GAAP.

                  "Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money (including, without
limitation, the Working Capital Obligations), (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee under Capitalized
Leases, (v) all obligations of such Person to reimburse any bank or other Person
in respect of amounts payable under a banker's acceptance, (vi) all Redeemable
Preferred Stock of such Person (in the event such Person is a corporation),
(vii) all obligations of such Person to reimburse any bank or other Person in
respect of amounts paid or to be paid under a letter of credit or similar
instrument (including, without limitation, all Letter of Credit Obligations),
(viii) all Debt of others secured by a Lien on any asset of such Person, whether
or not such Debt is assumed by such Person, (ix) all Debt of others Guaranteed
by such Person, (x) all principal amounts outstanding and owed to parties other
than the Borrower or any Subsidiary under the items described in clause (a) of
the definition of Receivables Program Obligations, and (xi) all amounts owing by
Borrower under or in connection with the Approved Equipment Financing; provided,
however, that the AMGF Distribution Facility Lease shall not constitute Debt for
any purpose under this Agreement.

                                       7

<PAGE>

                  "Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.

                  "Default Rate" means, with respect to any Loan, on any day,
the sum of (i) 2% plus (ii) the interest rate (including the Applicable Margin)
then in effect for such Loan; provided, however, that for any Fixed Rate Loan
the rate under this clause (ii) shall not be less than the rate for Base Rate
Loans after the end of the Interest Period applicable thereto.

                  "Departing Banks" means each of Bank of America, N.A., and
Branch Banking and Trust Company.

                  "Dividends" means any dividend or other distribution paid in
respect of any Capital Stock and Redeemable Preferred Stock (other than
dividends paid or payable in the form of additional Capital Stock or Redeemable
Preferred Stock).

                  "Dollars" or "$" means dollars in lawful currency of the
United States of America.

                  "Domestic Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in Georgia are authorized by law
to close.

                  "Domestic Loans" means Set Rate Loans or Base Rate Loans or
both, as the context shall require.

                  "Employee Restricted Stock" means the 179,026 shares of Class
A common stock of the Parent held by certain officers of the Parent and/or the
Borrower and subject to the terms of certain stock transfer and repurchase
agreements with such officers.

                  "Environmental Authority" means any foreign, federal, state,
local or regional government that exercises any form of jurisdiction or
authority under any Environmental Requirement.

                  "Environmental Authorizations" means all licenses, permits,
orders, approvals, notices, registrations or other legal prerequisites for
conducting the business of the Borrower or any Subsidiary required by any
Environmental Requirement.

                  "Environmental Judgments and Orders" means all judgments,
decrees or orders arising from or reasonably related to any Environmental
Requirements, whether or not entered upon consent, or written agreements with an
Environmental Authority or other entity arising from or reasonably related to
any Environmental Requirement, whether or not incorporated in a judgment, decree
or order.

                  "Environmental Liabilities" means any liabilities, whether
accrued, contingent or otherwise, arising from or reasonably related to any
Environmental Requirements.

                  "Environmental Notices" means written notice from any
Environmental Authority or by any other person or entity, of possible or alleged
noncompliance with or liability under any Environmental Requirement, including
without limitation any complaints, citations, written

                                       8

<PAGE>

demands or requests from any Environmental Authority or from any other person or
entity for correction of any violation of any Environmental Requirement or any
investigations concerning any violation of any Environmental Requirement.

                  "Environmental Proceedings" means any judicial or
administrative proceedings arising from or reasonably related to any
Environmental Requirement.

                  "Environmental Releases" means releases as defined in CERCLA
or under any applicable state or local environmental law or regulation.

                  "Environmental Requirements" means any legal requirement
relating to health, safety or the environment and applicable to the Parent, any
Subsidiary or the Properties, including but not limited to any such requirement
under CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs and decrees.

                  "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor law. Any reference to any
provision of ERISA shall also be deemed to be a reference to any successor
provision or provisions thereof.

                  "Euro-Dollar Business Day" means any Domestic Business Day on
which dealings in Dollar deposits are carried out in the London interbank
market.

                  "Euro-Dollar Loan" means a Loan to be made as a Euro-Dollar
Loan pursuant to the applicable Notice of Borrowing.

                  "Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.05(c).

                  "Event of Default" has the meaning set forth in Section 6.01.

                  "Excluded Receivables Assets" has the meaning set forth in the
Receivables Intercreditor Agreement.

                  "Facility Documents" means any one, or more, or all, as the
context shall require, of the Loan Documents, the Parent Documents and the AMGF
Documents.

                  "Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the next higher 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if the day for which
such rate is to be determined is not a Domestic Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Domestic Business Day as so published on the next succeeding Domestic Business
Day, and (ii) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to the Agent on such day on
such transactions, as determined by the Agent.

                  "Fiscal Quarter" means any fiscal quarter of the Parent.

                                       9

<PAGE>

                  "Fiscal Year" means any fiscal year of the Parent. Any
reference to Fiscal Year together with a specific year (e.g., "1996 Fiscal
Year") refers to the Fiscal Year ending on the last Friday of August in such
specific year.

                  "Fixed Charge Coverage Ratio" means, on a consolidated basis
for the Parent and its Consolidated Subsidiaries, the ratio of (i) Consolidated
Cash Flow, less Dividends paid and Capital Expenditures made, for the Fiscal
Quarter just ended and the immediately preceding 3 Fiscal Quarters, to (ii) the
sum of Net Interest Expense for the Fiscal Quarter just ended and the
immediately preceding 3 Fiscal Quarters and Current Maturities of Long Term
Debt, calculated at the end of the Fiscal Quarter just ended.

                  "Fixed Rate Borrowing" means a Set Rate Borrowing or a
Euro-Dollar Borrowing, or both, as the context shall require.

                  "Fixed Rate Loans" means Set Rate Loans or Euro-Dollar Loans,
or both, as the context shall require.

                  "Funded Debt" of any Person shall mean all Debt of such Person
of the types described in clauses (i) through (vi), inclusive, and clause (x) of
the definition of Debt, regardless of the maturity thereof.

                  "GAAP" means generally accepted accounting principles applied
on a basis consistent with those which, in accordance with Section 1.02, are to
be used in making the calculations for purposes of determining compliance with
the terms of this Agreement.

                  "Global Amendment Agreement" means a Global Amendment
Agreement by and among the Agent, the Parent, the Borrower, and AMGF,
substantially in the form of Exhibit T hereto and dated as of the Closing Date,
as the same may be amended, restated, supplemented, or otherwise modified from
time to time, which Global Amendment Agreement amends the AMGF Security
Agreement, the Borrower Pledge Agreement, the Pledge Agreement, the Security
Agreement and the AMGF Guaranty.

                  "Graniteville Assets" means the assets acquired by the
Borrower from Graniteville Company pursuant to the Graniteville Asset Purchase
Agreement, which included all of the "Assets," but exclude all of the "Excluded
Assets," as those terms were defined therein.

                  "Graniteville Asset Purchase Agreement" means the Asset
Purchase Agreement dated March 31, 1996, as amended or supplemented from time to
time prior to the Original Closing Date, by and among the Borrower, as
Purchaser, the Parent, Graniteville Company, a South Carolina corporation, as
Seller, and Triarc Companies, Inc., a Delaware corporation.

                  "Graniteville Indigo Dyeing Facility" means the approximately
130,000 square foot indigo dyeing facility of the Borrower located in
Graniteville, South Carolina, the real property on which it is located and all
personal property located thereon or used in connection therewith.

                  "Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person

                                       10

<PAGE>

and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay
(or advance or supply funds for the purchase or payment of) such Debt or other
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, to provide
collateral security, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in
part), provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.

                  "Hazardous Materials" includes, without limitation, (a) solid
or hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. Section 6901 et seq. and its implementing regulations and
amendments, or in any comparable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in
any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof,
or (d) pesticides, as defined in the Federal Insecticide, Fungicide, and
Rodenticide Act of 1975, or in any comparable state or local law or regulation,
as each such Act, statute or regulation may be amended from time to time.

                  "Interest Period" means:

                  (a)      with respect to each Euro-Dollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the first, second, third or sixth month thereafter, as the
Borrower may elect in the applicable Notice of Borrowing; provided that:

                           (i)      any Interest Period (subject to paragraph
(iii) below) which would otherwise end on a day which is not a Euro-Dollar
Business Day shall be extended to the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in which
case such Interest Period shall end on the next preceding Euro-Dollar Business
Day,

                           (ii)     any Interest Period which begins on the last
Euro-Dollar Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall, subject to paragraph (c) below, end on the last Euro-Dollar Business Day
of the appropriate subsequent calendar month, and

                           (iii)    no Interest Period may be selected which
begins before the Termination Date and would otherwise end after the Termination
Date; and

                  (b)      with respect to each Set Rate Borrowing, any period
not exceeding 30 days mutually agreeable to the Borrower and the Agent which
ends on or prior to the Termination Date.

                  "Interest Rate Protection Agreement" means an interest rate
hedging or protection agreement entered into by and between the Borrower and a
Bank or other financial institution,

                                       11

<PAGE>

together with all exhibits, schedules, extensions, renewals, amendments,
substitutions and replacements thereto and thereof.

                  "Investment" means any investment in any Person, whether by
means of purchase or acquisition of obligations, securities or a substantial
part of the assets of such Person, capital contribution to such Person, loan or
advance to such Person, making of a time deposit with such Person, Guarantee or
assumption of any obligation of such Person or otherwise.

                  "Knowledge" means, with reference to any Person, the knowledge
of such Person after due inquiry.

                  "Lending Office" means, as to each Bank, its office located at
its address set forth on the signature pages hereof (or identified on the
signature pages hereof as its Lending Office or such other office as such Bank
may hereafter designate as its Lending Office) by notice to the Borrower and the
Agent.

                  "Letter of Credit" means (i) letters of credit issued under
the Original Credit Agreement and (ii) any other letter of credit issued
pursuant to Section 2.13.

                  "Letter of Credit Application Agreement" means, with respect
to any Letter of Credit, such form of application therefor (whether in a single
or several documents) as the Agent may employ in the ordinary course of business
for its own account, whether or not providing for collateral security, with such
modifications thereto as may by agreed upon by the Agent and the Borrower and
are not materially adverse to the interests of the Banks; provided, however,
that in the event of any conflict between the terms of any Letter of Credit
Application Agreement and this Agreement, the terms of this Agreement shall
control.

                  "Letter of Credit Obligations" means, at any particular time,
the sum, without duplication, of (a) the Reimbursement Obligations at such time,
and (b) the aggregate maximum amount available for drawing under the Letters of
Credit at such time.

                  "Lien" means, with respect to any asset, any mortgage, deed to
secure debt, deed of trust, lien, pledge, charge, security interest, security
title, preferential arrangement which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law, or by
any agreement, contingent or otherwise, to provide any of the foregoing. For the
purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset; provided,
however, that the property leased by AMGF pursuant to the AMGF Distribution
Facility Lease shall not, solely by virtue of the AMGF Distribution Facility
Lease, constitute property of AMGF subject to a Lien for any purpose under this
Agreement.

                  "LIFO Adjustments" means adjustments to cost of goods sold
attributable to adjusting the carrying value of inventory under the last-in,
first-out method of accounting.

                                       12

<PAGE>

                  "Loan" means a Domestic Loan or a Euro-Dollar Loan or a Swing
Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Swing Loans, or
any or all of them, as the context shall require.

                  "Loan Documents" means this Agreement, the Notes, the Security
Agreement, the Mortgages, each Letter of Credit Application Agreement, the
Borrower Pledge Agreement, any other document evidencing, relating to or
securing the Loans, each Letter of Credit, and any other document or instrument
delivered from time to time in connection with this Agreement, the Notes, the
Loans, the Letters of Credit, each Letter of Credit Application Agreement, as
such documents and instruments may be amended or supplemented from time to time.

                  "London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).

                  "Long Term Debt" means at any date any Consolidated Total
Funded Debt which matures (or the maturity of which may at the option of the
Parent or any Consolidated Subsidiary be extended such that it matures) more
than one year after such date.

                  "Margin Stock" means "margin stock" as defined in Regulations
T, U or X.

                  "Material Adverse Effect" means, with respect to any event,
act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental investigation or
proceeding), whether singly or in conjunction with any other event or events,
act or acts, condition or conditions, occurrence or occurrences, whether or not
related, a material adverse change in, or a material adverse effect upon, any of
(a) the financial condition, operations or properties of the Parent and its
Consolidated Subsidiaries taken as a whole, (b) the rights and remedies of the
Agent or the Banks under the Principal Documents, the Parent Documents, or the
AMGF Documents, or the ability of the Borrower to perform its obligations under
the Principal Documents to which it is a party or the Parent to perform its
obligations under the Parent Documents, as applicable, or (c) the legality,
validity or enforceability of any Parent Document, Principal Document, or AMGF
Document.

                  "Material Subsidiary" means any Subsidiary which has, on the
date of determination, assets with a book value of $500,000 or more or which has
gross revenues in any year of $1,000,000 or more.

                  "Mortgage" means any one, or more, or all, as the context
shall require, of the Master Mortgage, Deed of Trust, Leasehold Deed of Trust,
Deed to Secure Debt, Leasehold Deed to Secure Debt, Uniform Commercial Code
Security Agreement and Assignment of Leases, Rents and Profits of the Borrower
substantially in the form of Exhibit H, conveying a first priority (except with
respect to certain Plants which, at the time the Agent's Lien attached, were
subject to other Liens referred to in the Original Credit Agreement but which
are no longer effective) security title to and Lien on the Plant or Plants
described therein (or, with respect to the Bon Air and Walton Plants, in the
Borrower's leasehold interests therein and option to acquire fee title thereto)
to the Agent, for the benefit of the Banks, subject only to the Permitted
Encumbrances applicable thereto, as security for payment of the Obligations,
together with all amendments and supplements thereto.

                                       13

<PAGE>

                  "MPPAA" means the Multiemployer Pension Plan Amendments Act of
1980, amending Title IV of ERISA.

                  "Multiemployer Plan" shall have the meaning set forth in
Section 4001(a)(3) of ERISA.

                  "Net Cash Proceeds" shall mean, in each case as set forth in a
statement in reasonable detail delivered to the Agent, with respect to the
disposition of assets (including any disposition pursuant to the Receivables
Securitization Program or by Casualty or Condemnation) by the Parent or any of
its Subsidiaries (other than the Receivables Subsidiary), the excess, if any, of
(i) the cash received in connection with such disposition over (ii) the sum of
(A) the principal amount of any Debt (other than the Obligations) which is
secured by such asset and which is required to be repaid in connection with the
disposition thereof, plus (B) the reasonable out-of-pocket expenses incurred by
the Parent or such Subsidiary, as the case may be, in connection with such
disposition, plus (C) provision for taxes, including income taxes, attributable
to the disposition of such asset.

                  "Net Income" means, as applied to any Person for any period,
the aggregate amount of net income of such Person, after taxes, for such period,
as determined in accordance with GAAP.

                  "Net Interest Expense" means, for any period, interest expense
(including capitalized interest, to the extent capitalized interest exceeds
$50,000 in any Fiscal Year, including interest, yield, discount or similar
amounts paid under the Receivables Securitization Program) in respect of Debt,
less interest income.

                  "Notes" means the Revolver Loan Notes and the Swing Loan Note,
or any one, or more, or all of them, as the context shall require, together with
all amendments, consolidations, modifications, renewals, and supplements
thereto.

                  "Notice of Borrowing" has the meaning set forth in Section
2.02.

                  "Obligations" means all indebtedness, liabilities and
obligations of the Borrower (i) to the Agent and the Banks incurred or arising
from time to time under this Agreement and each of the Principal Documents,
including principal, interest, fees, costs and indemnification amounts, and any
extensions or renewals thereof in whole or in part, (ii) to the Agent incurred
or arising from time to time under any Letter of Credit Application Agreement,
including all of the Reimbursement Obligations, and any extensions or renewals
thereof in whole or in part, and (iii) to any Bank or Affiliate thereof under
any Interest Rate Protection Agreement with any such Bank, limited, however, as
to this clause (iii), to a maximum aggregate principal amount of $3,000,000
(prorated among all Interest Rate Protection Agreements, if there are more than
one, based on the actual (as distinguished from notional) liability thereunder).

                  "Operative Mortgages" means each Mortgage and/or AMGF Mortgage
which the Agent has filed for record in the appropriate filing office pursuant
to the provisions of Section 5.25.

                                       14

<PAGE>

                  "Original Credit Agreement" means the Amended and Restated
Credit Agreement dated as of April 29, 1996 (which amended and restated the
Credit Agreement dated March 29, 1994, as amended prior to April 29, 1996), as
amended by First Amendment to Credit Agreement dated as of March 20, 1997,
Second Amendment to Credit Agreement dated as of August 29, 1997, Third
Amendment to Credit Agreement dated as of August 27, 1999, and Fourth Amendment
to Credit Agreement dated as of April 1, 2000, as amended and restated by Second
Amended and Restated Credit Agreement dated September 28, 2000, as amended by
First Amendment to Second Amended and Restated Credit Agreement dated August 30,
2001, Second Amendment to Second Amended and Restated Credit Agreement dated
February 6, 2002, Third Amendment to Second Amended and Restated Credit
Agreement dated May 1, 2002, Fourth Amendment to Second Amended and Restated
Credit Agreement dated May 24, 2002, and Fifth Amendment to Second Amended and
Restated Credit Agreement dated August 30, 2002, by and among the Borrower,
Wachovia Bank, N.A. (successor by merger to Wachovia Bank of Georgia, N.A.,
Wachovia Bank, N.A., First Union National Bank, and First Union National Bank of
Georgia), as Agent and as a Bank, Bank One, N.A. (formerly The First National
Bank of Chicago), as Documentation Agent and as a Bank, Bank of America, N.A.
(formerly NationsBank, N.A.), and Regions Bank (formerly First Alabama Bank).

                  "Original Closing Date" means April 29, 1996.

                  "Parent" means Avondale Incorporated, a Georgia corporation,
and its successors and permitted assigns.

                  "Parent Documents" means the Parent Guaranty and the Pledge
Agreement, or either of them, as the context shall require.

                  "Parent Guaranty" means the Amended and Restated Guaranty
Agreement dated as of even date herewith, substantially in the form of Exhibit
I, executed by the Parent in favor of the Agent, for the benefit of the Banks,
unconditionally Guaranteeing the payment of all of the Obligations.

                  "Participant" has the meaning set forth in Section 9.08(b).

                  "PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.

                  "Performance Pricing Determination Date" has the meaning set
forth in Section 2.05(a).

                  "Permitted Encumbrances" means, , (i) as to the Collateral
described in the Security Agreement and the AMGF Security Agreement, the
encumbrances expressly permitted by the Security Agreement (including, without
limitation, liens and encumbrances related to the Approved Equipment Financing
to the extent contemplated by the Approved Equipment Financing Intercreditor
Agreement) or the AMGF Security Agreement, as the case may be, and (ii) as to
each Plant and the AMGF Plant (including, without limitation, liens and
encumbrances related to the Approved Equipment Financing to the extent
contemplated by the Approved Equipment Financing Intercreditor Agreement), the
encumbrances expressly permitted by the

                                       15

<PAGE>

Mortgage and the AMGF Mortgage with respect to such Plant or the AMGF Plant, as
the case may be.

                  "Person" means an individual, a corporation, a limited
liability company, a partnership, an unincorporated association, a trust or any
other entity or organization, including, but not limited to, a government or
political subdivision or an agency or instrumentality thereof.

                  "Plan" means at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by a member
of the Controlled Group for employees of any member of the Controlled Group or
(ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding 5 plan years made contributions.

                  "Plants" means any one, or more, or all, as the context shall
require, of the Plants described in Schedule 5.25, as it may be supplemented
from time to time pursuant to Section 5.25, including as to each such Plant the
Property on which it is located and the buildings, fixtures and other
improvements located thereon.

                  "Pledge Agreement" means the Amended and Restated Stock Pledge
Agreement executed pursuant to the Original Credit Agreement, substantially in
the form of Exhibit L, executed by the Parent in favor of the Agent, for the
benefit of the Banks, pledging the Pledged Stock to secure the payment of all of
the Obligations, as amended by the Global Amendment Agreement, together with all
amendments and supplements thereto.

                  "Pledged Stock" means the capital stock in the Borrower owned
by the Parent and described in and pledged pursuant to the Pledge Agreement.

                  "Prime Rate" refers to that interest rate so denominated and
set by Wachovia from time to time as an interest rate basis for borrowings. The
Prime Rate is but one of several interest rate bases used by Wachovia. Wachovia
lends at interest rates above and below the Prime Rate.

                  "Principal Documents" means this Agreement, the Notes, each
Letter of Credit Application Agreement, the Security Agreement, the Operative
Mortgages and the Borrower Pledge Agreement.

                  "Properties" means all real property owned, leased or
otherwise used or occupied by the Borrower or any Subsidiary, wherever located.

                  "Purchase Money Note" means a promissory note evidencing the
obligation of the Receivables Subsidiary to pay to the Borrower or any of its
Subsidiaries the purchase price for Receivables in connection with the
Receivables Securitization Program, which note shall be repaid from cash
available to the Receivables Subsidiary, other than cash required to be held as
reserves pursuant to Receivables Documents, amounts paid in respect of interest,
principal and other amounts owing under Receivables Documents and amounts paid
in connection with the purchase of additional Receivables.

                                       16

<PAGE>

                  "Real Property Documentation" shall mean the instruments,
documents and agreements executed and/or delivered by Borrower or AMGF to the
Agent (if applicable) pursuant to Section 5.25 in connection with each Operative
Mortgage in order to convey to the Agent (or a trustee for the benefit of the
Agent with respect to property in North Carolina) for the benefit of the Banks a
first priority (except for certain Plants which, at the time the Agent's Lien
attached, were subject to other Liens referred to in the Original Credit
Agreement but which are no longer effective) security interest in, lien on and
security title (subject to Permitted Encumbrances) to the right, title and
interest of Borrower in the Plant or Plants described therein or in the AMGF
Plant, as the case may be, and other rights ancillary thereto, all in form and
substance reasonably satisfactory to the Agent, after consultation with the
Borrower or AMGF, as the case may be. The Real Property Documentation may
include, without limitation, the following as to each Plant or AMGF Plant and
the Property on which it is located:

                  (i)      an owner's/lessee's affidavit for each parcel or
                           tract of such Property;

                  (ii)     mortgagee title insurance binders and policies for
                           each tract or parcel of such Property;

                  (iii)    such consents, acknowledgments, intercreditor or
                           attornment and subordination agreements as the Agent
                           may require from any Third Parties with respect to
                           any portion of such Property;

                  (iv)     a current survey of each parcel or tract of such
                           Property;

                  (v)      a certificate as to the insurance required by the
                           related Mortgage or AMGF Mortgage, to the extent not
                           furnished pursuant to Section 5.17;

                  (vi)     a report of a licensed engineer detailing an
                           environmental inspection of such Property;

                  (vii)    an indemnification agreement regarding hazardous
                           materials for such Property;

                  (viii)   an appraisal of such Property, prepared by an
                           appraiser satisfactory to the Agent and engaged by
                           and on behalf of the Agent and the Banks;

                  (ix)     any revenue ruling or similar assurance from the
                           department or revenue or taxation requested by the
                           Agent with respect to any stamp, intangible or other
                           taxes payable in connection with the filing for
                           record of any of the Mortgages or the AMGF Mortgage,
                           as the case may be; and

                  (x)      with respect to the AMGF Plant, a sewer easement
                           satisfactory to the Agent pertaining to the adjacent
                           land owned by the Borrower.

                  "Receivables" means all rights of the Borrower or its
Subsidiary to payment, whether constituting an account, chattel paper,
instrument, general intangible or otherwise, arising from the sale of goods or
services (including rights under Bill and Hold arrangements) by

                                       17

<PAGE>

the Borrower or its Subsidiary (and including the right to payment of any
interest or finance charges and other obligations with respect thereto).

                  "Receivables Documents" means (x) a receivables purchase
agreement, pooling and servicing agreement, credit agreement, agreements to
acquire undivided interests or other agreement to transfer, or create a security
interest in, Receivables Program Assets, in each case as amended, modified,
supplemented or restated and in effect from time to time entered into by the
Borrower and/or its Subsidiaries (including the Receivables Subsidiary), and (y)
each other instrument, agreement and other document entered into by the Borrower
or its Subsidiaries (including the Receivables Subsidiary) relating to the
transactions contemplated by the items referred to in clause (x) above, in each
case as amended, modified, supplemented or restated and in effect from time to
time.

                  "Receivables Intercreditor Agreement" means the Intercreditor
Agreement substantially in the form of Exhibit M, between the Agent and the
Administrative Agent and Receivables Collateral Agent under the Receivables
Securitization Program described therein that replaced the initial Receivables
Securitization Program entered into pursuant to the Original Credit Agreement
or, in respect of any Replacement Program (as defined in Section 2.08(b)), any
other intercreditor agreement between an administrative agent, receivables
collateral agent, trustee or similar party and the Agent, in each case as
amended from time to time.

                  "Receivables Program Assets" means (a) all Receivables which
are described as being transferred by the Borrower or its Subsidiaries
(including the Receivables Subsidiary) pursuant to the Receivables Documents;
provided, however, that the term "Receivables" shall not include any Excluded
Receivables Assets, (b) all Receivables Related Assets, and (c) all collections
(including recoveries) and other proceeds of the assets described in the
foregoing clauses (a) and (b).

                  "Receivables Program Obligations" means (a) notes, trust
certificates, undivided interests, partnership interests or other interests
representing the right to be paid a specified principal amount from the
Receivables Program Assets, and (b) related obligations of the Borrower and/or
its Subsidiaries (including, without limitation, rights in respect of interest
or yield, breach of warranty claims and expense reimbursement and indemnity
provisions) and other Standard Securitization Undertakings.

                  "Receivables Related Assets" means (i) any rights arising
under the documentation governing or relating to Receivables (including rights
in respect of liens securing such Receivables and other credit support in
respect of such Receivables), (ii) any proceeds of such Receivables and any
lockboxes or accounts in which such proceeds are deposited, (iii) spread
accounts and other similar accounts (and any amount on deposit therein)
established in connection with the Receivables Securitization Program, (iv) any
warranty, indemnity, dilution and other intercompany claim arising out of
Receivables Documents and (v) all other property included in the definition of
"Specified Assets" contained in the Receivables Intercreditor Agreement;
provided, however, that the term "Receivables Related Assets" shall not include
any Excluded Receivables Assets.

                                       18

<PAGE>

                  "Receivables Securitization Program" means any transaction or
series of transactions that may be entered into by the Borrower and its
Subsidiaries pursuant to which the Borrower and/or its Subsidiaries may sell,
convey or otherwise transfer to the Receivables Subsidiary and (in the case of a
transfer by the Receivables Subsidiary) any other Person, or may grant a
security interest in, any Receivables Program Assets (whether now existing or
arising in the future); provided that:

                  (a)      no portion of the indebtedness or any other
obligations (contingent or otherwise) of a Receivables Subsidiary or Special
Purpose Vehicle (i) is guaranteed by the Borrower or its Subsidiaries (other
than the Receivables Subsidiary and excluding guarantees of obligations pursuant
to Standard Securitization Undertakings), (ii) is recourse to or obligates the
Borrower or its Subsidiaries (other than the Receivables Subsidiary) for payment
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of the Borrower or its Subsidiaries (other than the
Receivables Subsidiary), directly or indirectly, contingently or otherwise, to
the satisfaction of obligations incurred in such transactions, other than
pursuant to Standard Securitization Undertakings,

                  (b)      the Borrower and its Subsidiaries (other than the
Receivables Subsidiary) do not have any obligation to maintain or preserve the
financial condition of a Receivables Subsidiary or a Special Purpose Vehicle or
cause such entity to achieve certain levels of operating results, and

                  (c)      the scheduled maturity of any Receivables Program
Obligations of the type described in clause (a) of the definition of
"Receivables Program Obligations" is no earlier than November 15, 2002.

                  "Receivables Subsidiary" means a special purpose corporation
that is a Wholly Owned Subsidiary of the Borrower, created for the sole purpose
of, and whose only business shall be, acquisition of the Receivables Program
Assets pursuant to the Receivables Securitization Program and those activities
incidental to the Receivables Securitization Program.

                  "Receivables Subsidiary Pledged Stock" means the capital stock
in the Receivables Subsidiary owned by the Borrower and described in and pledged
pursuant to the Borrower Pledge Agreement.

                  "Redeemable Preferred Stock" of any Person means any preferred
stock issued by such Person which is either (i) mandatorily redeemable (by
sinking fund or similar payments or otherwise) or (ii) redeemable at the option
of the holder thereof.

                  "Refunding Loan" means a new Loan made on the day on which an
outstanding Loan is maturing or a Base Rate Borrowing for a Loan is being
converted to a Fixed Rate Borrowing, if and to the extent that the proceeds
thereof are used entirely for the purpose of paying such maturing Loan or Loan
being converted, excluding any difference between the amount of such maturing
Loan or Loan being converted and any greater amount being borrowed on such day
and actually either being made available to the Borrower pursuant to Section
2.02(c) or remitted to the Agent as provided in Section 2.11, in each case as
contemplated in Section 2.02(d).

                                       19

<PAGE>

                  "Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.

                  "Regulation T" means Regulation T of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.

                  "Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.

                  "Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.

                  "Register" has the meaning set forth in Section 9.08(c).

                  "Reimbursement Obligations" means the reimbursement or
repayment obligations of the Borrower to the Agent pursuant to Section 2.13 with
respect to any Letter of Credit.

                  "Required Assignment and Assumption Agreement" means an
Assignment and Assumption Agreement by and among the Banks, the Departing Banks,
the Agent, the Borrower, and the Parent, substantially in the form of Exhibit S
hereto and dated the Closing Date, as the same may be amended, restated,
supplemented, or otherwise modified from time to time.

                  "Required Banks" means at any time Banks having at least 66
2/3% of the aggregate amount of the sum of the Commitments or, if the
Commitments are no longer in effect, Banks holding at least 66 2/3% of the sum
of the aggregate outstanding principal amount of the Revolver Loan Notes.

                  "Restricted Payment" means (i) any Dividends paid by the
Parent and (ii) any payment on account of the purchase, redemption, retirement
or acquisition of (a) any Capital Stock (except shares acquired upon the
conversion thereof into other shares of Capital Stock) or (b) any option,
warrant or other right to acquire shares of Capital Stock, other than (i) up to
$5,000,000 in payments with respect to the Employee Restricted Stock and (ii)
any payments made in respect of shares of Capital Stock of the Parent owned by
G. Stephen Felker pursuant to an existing repurchase arrangement, to the extent
such payments are made from the proceeds of insurance on his life.

                  "Revolver Loan" means a Loan made at the same time by the
Banks as a Revolver Loan pursuant to Section 2.01(a) and the other applicable
provisions of Article II, which may be a Base Rate Loan or a Euro-Dollar Loan,
subject to the provisions of Article II.

                  "Revolver Loan Notes" means promissory notes of the Borrower,
substantially in the form of Exhibit A-1, evidencing the obligation of the
Borrower to repay the Revolver Loans, together with all amendments,
consolidations, modifications, renewals, and supplements thereto.

                                       20

<PAGE>

                  "Rolling Stock" means all tractors, trailers and other motor
vehicles of the Debtor, title to which is registered under the Alabama
Certificate of Title and Antitheft Act (Ala. Code 32-8-1, et seq.), which term
does not include any motor vehicles listed on Exhibit B to the Security
Agreement.

                  "Second Amendment and Restatement Effective Date" means
September 28, 2000.

                  "Security Agreement" means the Amended and Restated Security
Agreement executed pursuant to the Original Credit Agreement, substantially in
the form of Exhibit J, granting to the Agent, for the benefit of the Banks, a
first priority (except with respect to certain equipment which, at the time the
Agent's Lien attached, was subject to other Liens which are no longer effective)
security interest in the personal property described therein, subject only to
the Permitted Encumbrances, as amended in that certain Fourth Amendment to
Second Amended and Restated Credit Agreement described in the definition of
"Original Credit Agreement" and by the Global Amendment Agreement, together with
all amendments and supplements thereto.

                  "Senior Debt to Cash Flow Ratio" means the ratio of
Consolidated Senior Debt to Consolidated Cash Flow, calculated at the end of
each Fiscal Quarter.

                  "Set Rate" means a fixed rate per annum, for a specified
principal amount of the Swing Loans and for a specified Interest Period, set and
established from time to time by the Borrower and Wachovia pursuant to Section
2.01(b)(ii).

                  "Set Rate Loan" means a Loan to be made as a Set Rate Loan
pursuant to Section 2.01(b)(ii).

                  "Set Rate Request" has the meaning set forth in Section
2.01(b)(ii).

                  "Special Purpose Vehicle" means a trust, partnership or other
special purpose Person established by the Borrower to implement the Receivables
Securitization Program.

                  "Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Borrower or its
Subsidiaries (other than the Receivables Subsidiary) that are reasonably
customary in accounts receivable securitization transactions, as determined in
good faith by the Agent.

                  "Stockholders' Equity" means, at any time, the shareholders'
equity of the Parent and its Consolidated Subsidiaries, as set forth or
reflected on the most recent consolidated balance sheet of the Parent and its
Consolidated Subsidiaries prepared in accordance with GAAP, but excluding any
Redeemable Preferred Stock of the Parent or any of its Consolidated
Subsidiaries. Shareholders' equity generally would include, but not be limited
to (i) the par or stated value of all outstanding Capital Stock, (ii) capital
surplus, (iii) retained earnings, and (iv) various deductions such as (A)
purchases of treasury stock, (B) valuation allowances, (C) receivables due from
an employee stock ownership plan, (D) employee stock ownership plan debt
guarantees, and (E) translation adjustments for foreign currency transactions.

                                       21

<PAGE>

                  "Subordinated Debt" means (i) the 10.25% Subordinated Notes
and any Acceptable Refinancing which replaces them and (ii) any other Debt, the
payment of which has been expressly subordinated to payment of the Obligations
pursuant and subject to documents containing terms and conditions reasonably
satisfactory to the Agent and which has a maturity no earlier than September 29,
2006.

                  "Subsidiary" means any corporation or other entity (other than
a Special Purpose Vehicle) of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by the Parent.

                  "Swing Loan" means a Loan made by Wachovia pursuant to Section
2.01(b), which may be a Base Rate Loan or a Set Rate Loan, subject to the
provisions of Section 2.01(b)(ii).

                  "Swing Loan Note" means the promissory note of the Borrower,
substantially in the form of Exhibit A-2, evidencing the obligation of the
Borrower to repay the Swing Loans, together with all amendments, consolidations,
modifications, renewals, and supplements thereto.

                  "10.25% Subordinated Notes" means the Senior Subordinated
Notes due 2006, issued by the Borrower on the Original Closing Date, as amended,
modified, renewed or supplemented from time to time, subject to the provisions
of Section 5.26.

                  "Termination Date" means March 27, 2006; provided, however,
that if an Acceptable Refinancing is not consummated on or before November 1,
2005, the "Termination Date" shall automatically become November 1, 2005.

                  "Third Parties" means all mortgagees, lessees, sublessees,
tenants, licensees and other users of the Properties, excluding those users of
the Properties in the ordinary course of the Borrower's business and on a
temporary basis.

                  "Total Debt to Cash Flow Ratio" means the ratio of
Consolidated Total Funded Debt to Consolidated Cash Flow, calculated at the end
of each Fiscal Quarter.

                  "Transferor Certificate" means, (i) with respect to the
Receivables Securitization Program closed on the Original Closing Date, the
"Transferor Certificate" described in Section 4.1 of the Avondale Receivables
Master Trust Pooling and Servicing Agreement dated on or about the Original
Closing Date among the Receivables Subsidiary, the Borrower and Manufacturers
and Traders Trust Company, as trustee, and (ii) as to any other Receivables
Securitization Program, any similar instrument evidencing the interest of the
Receivables Subsidiary in respect of the Receivables transferred in the
Receivables Securitization Program.

                  "Transferee" has the meaning set forth in Section 9.08(d).

                  "Unused Commitment" means at any date, with respect to any
Bank, an amount equal to its Commitment less the aggregate outstanding principal
amount of its Loans, other than, with respect to Wachovia, the Swing Loan, and
less the amount of its share of risk in the Letter of Credit Obligations.

                                       22

<PAGE>

                  "Wachovia" means Wachovia Bank, National Association
(successor by merger to Wachovia Bank of Georgia, N.A., Wachovia Bank, N.A.,
First Union National Bank, and First Union National Bank of Georgia), a national
banking association, and its successors.

                  "Wholly Owned Subsidiary" means any Subsidiary all of the
shares of capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Parent.

                  "Working Capital Obligations" means the aggregate principal
amount of Revolver Loans and Swing Loans plus the amount of the Letter of Credit
Obligations outstanding at any time.

                  Section 1.02 Accounting Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared,
in accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Parent's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Parent and its Consolidated Subsidiaries delivered
to the Banks unless with respect to any such change concurred in by the Parent's
independent public accountants or required by GAAP, in determining compliance
with any of the provisions of this Agreement or any of the other Loan Documents:
(i) the Borrower shall have objected to determining such compliance on such
basis at the time of delivery of such financial statements, or (ii) the Required
Banks shall so object in writing within 30 days after the delivery of such
financial statements, in either of which events such calculations shall be made
on a basis consistent with those used in the preparation of the latest financial
statements as to which such objection shall not have been made (which, if
objection is made in respect of the first financial statements delivered under
Section 5.01 hereof, shall mean the financial statements referred to in Section
4.04).

                  Section 1.03 References. Unless otherwise indicated,
references in this Agreement to "Articles", "Exhibits", "Schedules", "Sections"
and other subdivisions are references to articles, exhibits, schedules, sections
and other subdivisions hereof.

                  Section 1.04 Use of Defined Terms. All terms defined in this
Agreement shall have the same defined meanings when used in any of the other
Loan Documents, unless otherwise defined therein or unless the context shall
require otherwise.

                  Section 1.05 Terminology. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the plural
shall include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement.

                                   ARTICLE II

                                   THE CREDITS

                  Section 2.01 Commitments to Lend.

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<PAGE>

                  (a)      Revolver Loans. Each Bank severally agrees, on the
terms and conditions set forth herein, to make Revolver Loans to the Borrower
from time to time before the Termination Date; provided that, immediately after
each such Revolver Loan is made, (i) the aggregate outstanding principal amount
of Revolver Loans made by such Bank shall not exceed the amount of its
Commitment and (ii) the Working Capital Obligations (plus, for purposes of this
calculation, the face amount of each Letter of Credit, the issuance of which has
been requested by the Borrower and authorized by the Agent but which has not
yet, in fact, been issued) shall not exceed the lesser of (A) the Aggregate
Commitment and (B) the Asset Coverage Base. Revolver Loans may be Base Rate
Loans or Euro-Dollar Loans. Each Revolver Loan Borrowing under this Section
2.01(a) shall be in an aggregate principal amount of $5,000,000 or any larger
multiple of $500,000 (except that any such Borrowing may be in the amount of the
Aggregate Unused Commitments) and shall be made from the several Banks ratably
in proportion to their respective Commitments. Within the foregoing limits, the
Borrower may borrow under this Section 2.01(a), repay or, to the extent
permitted by Section 2.09, prepay Revolver Loans and reborrow under this Section
2.01(a) at any time before the Termination Date.

                  (b)      Swing Loans.

                           (i)      In addition to the foregoing, Wachovia shall
         from time to time, upon the request of the Borrower, if the applicable
         conditions precedent in Article III have been satisfied, make Swing
         Loans to the Borrower in an aggregate principal amount at any time
         outstanding not exceeding $10,000,000; provided that, immediately after
         such Swing Loan is made, the Working Capital Obligations (plus, for
         purposes of this calculation, the face amount of each Letter of Credit,
         the issuance of which has been requested by the Borrower and authorized
         by the Agent but which has not yet, in fact, been issued) shall not
         exceed the lesser of (A) the Aggregate Commitment and (B) the Asset
         Coverage Base. Each Swing Loan Borrowing which is a Base Rate Borrowing
         under this Section 2.01(b)(i) shall be in an aggregate principal amount
         of $100,000 or any larger multiple of $25,000. Within the foregoing
         limits, the Borrower may borrow under this Section 2.01(b), prepay and
         reborrow under this Section 2.01(b) at any time before the Termination
         Date. Swing Loans shall be included in the calculation of "Working
         Capital Obligations" hereunder, but shall not be considered a
         utilization of the Commitment of Wachovia or any other Bank hereunder.
         All Swing Loans shall be made as Base Rate Loans, except that Swing
         Loans may be made as Set Rate Loans subject and pursuant to the
         provisions of clause (ii) below. At any time, upon the request of
         Wachovia, each Bank other than Wachovia shall, on the third Domestic
         Business Day after such request is made, purchase a participating
         interest in Swing Loans (including those that are Base Rate Loans and
         those that are Set Rate Loans) in an amount equal to its ratable share
         (based upon its respective Commitment) of such Swing Loans. On such
         third Domestic Business Day, each Bank will immediately transfer to
         Wachovia, in immediately available funds, the amount of its
         participation. Whenever, at any time after Wachovia has received from
         any such Bank its participating interest in a Swing Loan, the Agent
         receives any payment on account thereof, the Agent will distribute to
         such Bank its participating interest in such amount (appropriately
         adjusted, in the case of interest payments, to reflect the period of
         time during which such Bank's participating interest was outstanding
         and funded); provided, however, that in the event that such payment

                                       24

<PAGE>

         received by the Agent is required to be returned, such Bank will return
         to the Agent any portion thereof previously distributed by the Agent to
         it. Each Bank's obligation to purchase such participating interests
         shall be absolute and unconditional and shall not be affected by any
         circumstance, including, without limitation: (i) any set-off,
         counterclaim, recoupment, defense or other right which such Bank or any
         other Person may have against Wachovia requesting such purchase or any
         other Person for any reason whatsoever; (ii) the occurrence or
         continuance of a Default or an Event of Default or the termination of
         the Commitments; (iii) any adverse change in the condition (financial
         or otherwise) of the Borrower, the Parent or any other Person; (iv) any
         breach of this Agreement by the Borrower or any other Bank; or (v) any
         other circumstance, happening or event whatsoever, whether or not
         similar to any of the foregoing.

                           (ii)     Swing Loans may be Set Rate Loans, if the
         Agent shall have determined that such Set Rate Loan, including the
         principal amount thereof, the Interest Period and the Set Rate
         applicable thereto, has been expressly agreed to by the Borrower and
         Wachovia (such agreement may be obtained by telephone, confirmed
         promptly to the Agent in writing) pursuant to the following procedures.
         Each Swing Loan Borrowing which is a Set Rate Borrowing under this
         Section 2.01(b)(ii) shall be in an aggregate principal amount of
         $1,000,000 or any larger multiple of $100,000. No more than 2 Set Rate
         Loans may be outstanding at any one time. If the Borrower desires a Set
         Rate Loan, (aa) the Borrower shall provide the Agent and Wachovia with
         notice of a request (a "Set Rate Request") for a quote for a Set Rate
         Borrowing prior to 11:00 a.m. (Atlanta, Georgia time) 1 Domestic
         Business Day before the day of the proposed Set Rate Borrowing (which
         must be a Domestic Business Day), which Set Rate Request shall include
         the principal amount and proposed Interest Period of the relevant Set
         Rate Borrowing, (bb) prior to 2:30 p.m. (Atlanta, Georgia time) on the
         date on which Wachovia receives the Set Rate Request, Wachovia shall
         apprise the Agent and the Borrower of its rate quote (a "Set Rate
         Quote") via facsimile transmission, (cc) prior to 11:00 a.m. on the
         date of the proposed Set Rate Borrowing, the Borrower shall inform the
         Agent and Wachovia of its decision as to whether to accept a Set Rate
         Borrowing at such Set Rate (which may be done by telephone and promptly
         confirmed in writing), (dd) if the Borrower does desire a Set Rate
         Borrowing at such Set Rate, then by 1:00 p.m. (Atlanta, Georgia time)
         on the date of such decision, Wachovia shall make such Set Rate
         Borrowing, with interest accruing thereon at the Set Rate, available to
         the Borrower.

                  Section 2.02 Method of Borrowing. This Section 2.02 shall
apply to all Borrowings other than Set Rate Borrowings, as to which only Section
2.01(b)(ii) shall apply.

                  (a)      The Borrower shall give the Agent notice (a "Notice
of Borrowing"), which shall be substantially in the form of Exhibit E, prior to
11:00 a.m. (Atlanta, Georgia time) on the Domestic Business Day of a Base Rate
Borrowing and at least 3 Euro-Dollar Business Days before each Euro-Dollar
Borrowing, specifying:

                           (i)      the date of such Borrowing, which shall be a
Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing,

                                       25

<PAGE>

                           (ii)     the aggregate amount of such Borrowing,

                           (iii)    whether such Borrowing is to be a Swing Loan
Borrowing or a Revolver Loan Borrowing, and if a Revolver Loan Borrowing,
whether it is to be a Base Rate Borrowing or a Euro-Dollar Borrowing, and

                           (iv)     in the case of a Euro-Dollar Borrowing, the
duration of the Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period; provided, that if an Anniversary Date is
scheduled to occur during the Interest Period so selected, and as a result
thereof (but for this proviso) the Borrower shall become obligated to prepay or
repay all or any portion of the Loans of any type on such Anniversary Date
pursuant to Section 2.08(b), then a portion of such Euro-Dollar Borrowing which
is equal to the amount of the Loans of such type that would otherwise be so
prepaid or repaid on any such Anniversary Date either (A) shall have applicable
thereto an Interest Period or Interest Periods, as selected by the Borrower,
ending on or before the Anniversary Date on which Loans of such type
corresponding in amount to such portion would otherwise be prepaid or repaid, or
(B) shall instead be made as a Base Rate Borrowing.

                  (b)      Upon receipt of a Notice of Borrowing, the Agent
shall promptly notify each Bank of the contents thereof and of such Bank's
ratable share of such Borrowing (unless it is a Swing Loan Borrowing) and such
Notice of Borrowing shall not thereafter be revocable by the Borrower.

                  (c)      Not later than 11:00 a.m. (2:00 p.m. in the case of a
Base Rate Borrowing) (Atlanta, Georgia time) on the date of each Revolver Loan
Borrowing, each Bank shall (except as provided in paragraph (d) of this Section)
make available its ratable share of such Revolver Loan Borrowing, in Federal or
other funds immediately available in Atlanta, Georgia, to the Agent at its
address referred to in Section 9.01. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will make the funds so received from the Banks available to the Borrower at the
Agent's aforesaid address. Unless the Agent receives notice from a Bank, at the
Agent's address referred to in or specified pursuant to Section 9.01, no later
than 4:00 p.m. (local time at such address) on the Domestic Business Day before
the date of a Revolver Loan Borrowing stating that such Bank will not make a
Loan in connection with such Revolver Loan Borrowing, the Agent shall be
entitled to assume that such Bank will make a Loan in connection with such
Revolver Loan Borrowing and, in reliance on such assumption, the Agent may (but
shall not be obligated to) make available such Bank's ratable share of such
Revolver Loan Borrowing to the Borrower for the account of such Bank. If the
Agent makes such Bank's ratable share available to the Borrower and such Bank
does not in fact make its ratable share of such Revolver Loan Borrowing
available on such date, the Agent shall be entitled to recover such Bank's
ratable share from such Bank or the Borrower (and for such purpose shall be
entitled to charge such amount to any account of the Borrower maintained with
the Agent), together with interest thereon for each day during the period from
the date of such Revolver Loan Borrowing until such sum shall be paid in full at
a rate per annum equal to the rate at which the Agent determines that it
obtained (or could have obtained) overnight Federal funds to cover such amount
for each such day during such period, provided that any such payment by the
Borrower of such Bank's ratable share and interest thereon shall be without
prejudice to any rights that the Borrower may have against such Bank. If the
Agent does not

                                       26

<PAGE>

exercise its option to advance funds for the account of such Bank, it shall
forthwith notify the Borrower of such decision. Unless the Agent determines that
any applicable condition specified in Article III has not been satisfied,
Wachovia will make available to the Borrower at Wachovia's Lending Office the
amount of any such Borrowing which is a Swing Loan Borrowing.

                  (d)      If any Bank makes a new Revolver Loan hereunder on a
day on which the Borrower is to repay all or any part of an outstanding Revolver
Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make
such repayment as a Refunding Loan and only an amount equal to the difference
(if any) between the amount being borrowed and the amount of such Refunding Loan
shall be made available by such Bank to the Agent as provided in paragraph (c)
of this Section, or remitted by the Borrower to the Agent as provided in Section
2.11, as the case may be.

                  (e)      Notwithstanding anything to the contrary contained in
this Agreement, no Fixed Rate Borrowing may be made if there shall have occurred
a Default or an Event of Default, which Default or Event of Default shall not
have been cured or waived.

                  (f)      In the event that a Notice of Borrowing fails to
specify whether the Loans comprising such Borrowing are to be Base Rate Loans or
Euro-Dollar Loans, such Loans shall be made as Base Rate Loans. If the Borrower
is otherwise entitled under this Agreement to repay any Loans maturing at the
end of an Interest Period applicable thereto with the proceeds of a new
Borrowing, and the Borrower fails to repay such Loans using its own moneys and
fails to give a Notice of Borrowing in connection with such new Borrowing, a new
Borrowing shall be deemed to be made on the date such Loans mature in an amount
equal to the principal amount of the Loans so maturing, and the Loans comprising
such new Borrowing shall be Base Rate Loans.

                  (g)      Notwithstanding anything to the contrary contained
herein, there shall not be more than 10 Fixed Rate Loans outstanding at any
given time.

                  Section 2.03 Notes.

                  (a)      The Revolver Loans of each Bank shall be evidenced by
a single Revolver Loan Note payable to the order of such Bank for the account of
its Lending Office in an amount equal to the original principal amount of such
Bank's Commitment. The Swing Loans shall be evidenced by a single Swing Loan
Note payable to the order of Wachovia in the original principal amount of
$10,000,000.

                  (b)      Upon receipt of each Bank's Revolver Loan Note
pursuant to Section 3.01, the Agent shall deliver such Note to such Bank. Each
Bank (or Wachovia, with respect to the Swing Loan Note) shall record, and prior
to any transfer of its Note shall endorse on the schedule forming a part thereof
appropriate notations to evidence the date, amount and maturity of each Loan
made by it, the date and amount of each payment of principal made by the
Borrower with respect thereto and, with respect to a Revolver Loan, whether such
Loan is a Base Rate Loan or Euro-Dollar Loan (and as to Swing Loans, whether
such Loans are Base Rate Loans or Set Rate Loans), and such schedule shall
constitute rebuttable presumptive evidence of the principal amount owing and
unpaid on such Bank's (or Wachovia's) Notes; provided that the failure of any
Bank (or Wachovia) to make any such recordation or endorsement shall not affect
the obligation

                                       27

<PAGE>

of the Borrower hereunder or under the Notes or the ability of any Bank (or
Wachovia) to assign its Notes. Each Bank (and Wachovia) is hereby irrevocably
authorized by the Borrower so to endorse its Notes and to attach to and make a
part of any Note a continuation of any such schedule as and when required.

                  Section 2.04 Maturity of Loans.

                  (a)      Each Loan included in any Fixed Rate Borrowing shall
mature, and the principal amount thereof shall be due and payable, on the last
day of the Interest Period applicable to such Borrowing.

                  (b)      Notwithstanding the foregoing, the outstanding
principal amount of the Revolver Loans and Swing Loans, if any, together with
all accrued but unpaid interest thereon, if any, shall be due and payable on the
Termination Date.

                  Section 2.05 Interest Rates.

                  (a)      "Applicable Margin" means, from and after the Closing
Date (including for Loans outstanding on such date): (i) (A) until the first
Performance Pricing Determination Date, for any Revolver Loan which is a Base
Rate Loan, 1.250%, and for any Revolver Loan which is a Euro-Dollar Loan,
2.750%, and (B) thereafter, for any Revolver Loan which is a Base Rate Loan and
for any Revolver Loan which is a Euro-Dollar Loan, with respect to each
Performance Pricing Determination Date, the percentage determined as of the end
of the Fiscal Quarter or Fiscal Year just ended by reference to the percentage
shown in the following schedule for such type of Loan, depending on the level of
the Total Debt to Cash Flow Ratio as of the end of such Fiscal Quarter or Fiscal
Year, as determined pursuant hereto.

<TABLE>
<CAPTION>
                                 LEVEL I               LEVEL II                     LEVEL III              LEVEL IV
------------------------   --------------------  --------------------------    -------------------------  ---------------------
<S>                        <C>                   <C>                           <C>                        <C>
   Total Debt to Cash                            > then = to  2.00:1.00 but    > then = to 2.50:1.00 but
          Flow                 < 2.00:1.00               <2.50:1.00                    <3.00:1.00         > then = to 3.00:1.00
------------------------   --------------------  --------------------------    -------------------------  ---------------------
  Base Rate Applicable
         Margin                   0.750%                   1.000%                        1.250%                  1.500%
------------------------   --------------------  --------------------------    -------------------------  ---------------------
      Euro-Dollar
   Applicable Margin              2.250%                   2.500%                        2.750%                  3.000%
------------------------   --------------------  --------------------------    -------------------------  ---------------------
</TABLE>

                  In determining interest for purposes of this Section 2.05 and
fees pursuant to Section 2.06(a) (except for the period from the Closing Date
until the first Performance Pricing Determination Date), the Borrower and the
Banks shall refer to the Parent's most recent consolidated quarterly and annual
(as the case may be) financial statements delivered pursuant to Section 5.01(a)
or (b), as the case may be. If such financial statements require a change in
interest pursuant to this Section 2.05 or fees pursuant to Section 2.06(a), the
Borrower shall deliver to the Agent, along with such financial statements, a
notice to that effect, which notice shall set forth in reasonable detail the
calculations establishing the required change. Each date which is 10 Domestic
Business Days after receipt by the Agent of such financial statements and
notice, commencing with the financial statements for the second Fiscal Quarter
of the 2003 Fiscal Year, is a "Performance Pricing Determination Date." Any such
required change in interest and fees shall become effective on such Performance
Pricing Determination Date, and shall be in effect until the next Performance
Pricing Determination Date, provided, however,

                                       28

<PAGE>

that: (i) for Euro-Dollar Loans, changes in interest shall only be effective for
Interest Periods commencing on or after the Performance Pricing Determination
Date; and (ii) no interest or fees shall be decreased pursuant to this Section
2.05 or Section 2.06(a) if, on the Performance Pricing Determination Date, (A)
an Event of Default is in existence, or (B) a Default is in existence which on
such date is not an Event of Default but which becomes an Event of Default;
provided, however, that if an Event of Default exists on the Performance Pricing
Determination Date, or a Default exists and subsequently becomes an Event of
Default, any such decrease shall take effect upon the cure of any such Event of
Default.

                  (b)      Each Base Rate Loan shall bear interest on the
outstanding principal amount thereof, for each day from the date such Loan is
made until it becomes due, at a rate per annum equal to the Base Rate for such
day plus the Applicable Margin. Such interest shall be payable on the first day
of each calendar month, commencing April 1, 2003. Any overdue principal of and,
to the extent permitted by applicable law, overdue interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the Default Rate.

                  (c)      Each Euro-Dollar Loan and Set Rate Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to (i) as to Euro-Dollar Loans,
the sum of the Applicable Margin plus the applicable Adjusted London Interbank
Offered Rate for such Interest Period, and (ii) as to Set Rate Loans, the Set
Rate applicable thereto. Such interest shall be payable for each Interest Period
on the last day thereof and, if such Interest Period for Euro-Dollar Loans is
longer than 3 months, at intervals of 3 months after the first day thereof. Any
overdue principal of and, to the extent permitted by law, overdue interest on
any Euro-Dollar Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the Default Rate.

                  The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.

                  The "London Interbank Offered Rate" applicable to any
Euro-Dollar Loan means for the Interest Period of such Euro-Dollar Loan, the
rate per annum determined on the basis of the offered rate for deposits in
Dollars of amounts equal or comparable to the principal amount of such
Euro-Dollar Loan offered for a term comparable to such Interest Period, which
rates appear on the Telerate Screen Page 3750 as of 11:00 a.m., London time, 2
Euro-Dollar Business Days prior to the first day of such Interest Period,
provided that if no such offered rates appear on such page, the "London
Interbank Offered Rate" for such Interest Period will be the arithmetic average
(rounded upward, if necessary, to the next higher 1/100th of 1%) of rates quoted
by not less than 2 major banks in New York City, selected by the Agent, at
approximately 10:00 a.m., New York City time, 2 Euro-Dollar Business Days prior
to the first day of such Interest Period, for deposits in Dollars offered to
leading European banks for a period comparable to such Interest Period in an
amount comparable to the principal amount of such Euro-Dollar Loan.

                                       29

<PAGE>

                  "Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in respect of "Eurocurrency liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Euro-Dollar Loans is determined or any
category of extensions of credit or other assets which includes loans by a
non-United States office of any Bank to United States residents). The Adjusted
London Interbank Offered Rate shall be adjusted automatically on and as of the
effective date of any change in the Euro-Dollar Reserve Percentage.

                  (d)      The Agent shall determine each interest rate
applicable to the Loans hereunder. The Agent shall give prompt notice to the
Borrower and the Banks by telecopier of each rate of interest so determined, and
its determination thereof shall be conclusive in the absence of manifest error.

                  (e)      After the occurrence and during the continuance of an
Event of Default, the principal amount of the Loans (and, to the extent
permitted by applicable law, all accrued and past due interest thereon) may, at
the election of the Required Banks, bear interest at the Default Rate, effective
from and after the date such Event of Default occurred.

                  Section 2.06 Fees.

                  (a)      The Borrower shall pay to the Agent for the ratable
account of each Bank, a commitment fee, which shall accrue from and including
the Closing Date to but excluding the Termination Date and shall be payable on
each April 1, July 1, October 1 and January 1 and on the Termination Date,
commencing April 1, 2003, for the quarterly period ending immediately prior to
such date (except that the payment on April 1, 2003, shall be for the period
from the Closing Date through March 31, 2003, and the Borrower also shall pay on
such date the commitment fee payable under the Original Credit Agreement for the
period from January 1, 2003, through the Closing Date at the rate provided in
the Original Credit Agreement). The commitment fee shall be calculated on the
average daily principal amount of such Bank's Unused Commitment during such
period at the rate per annum (expressed below as a decimal) of: (A) until the
first Performance Pricing Determination Date, 0.500%, and (B) thereafter, with
respect to each Performance Pricing Determination Date, the percentage
determined as of the end of the Fiscal Quarter or Fiscal Year just ended by
reference to the percentage shown in the following schedule, depending on the
level of the Total Debt to Cash Flow Ratio as of the end of such Fiscal Quarter
or Fiscal Year, as determined pursuant hereto.

<TABLE>
<CAPTION>
                                LEVEL I                  LEVEL II                 LEVEL III              LEVEL IV
------------------------  --------------------  -------------------------  ----------------------  --------------------
<S>                       <S>                   <S>                        <S>                     <S>
   Total Debt to Cash                           > then = to 2.00:1.00 but  > then = 2.50:1.00 but
          Flow                < 2.00:1.00             <2.50:1.00                  <3.00:1.00        > then = 3.00:1.00
------------------------  --------------------  -------------------------  ----------------------  --------------------
     Commitment Fee              0.325%                  0.500%                     0.500%                0.500%
------------------------  --------------------  -------------------------  ----------------------  --------------------
</TABLE>

                  (b)      The Borrower shall pay to the Agent, for the account
and sole benefit of the Agent and Wachovia Securities, Inc., as applicable, such
fees and other amounts at such times as set forth in the Agent's Letter
Agreement.

                                       30

<PAGE>

                  Section 2.07 Optional Termination or Reduction of Commitments.
The Borrower may, upon at least 3 Domestic Business Days' notice to the Agent,
terminate at any time, or proportionately reduce the Unused Commitments from
time to time by an aggregate amount of at least $5,000,000 or any larger
multiple of $1,000,000. If the Commitments are terminated in their entirety, all
accrued fees (as provided under Section 2.06) shall be due and payable on the
effective date of such termination.

                  Section 2.08 Certain Mandatory Prepayments; Mandatory
Reduction and Termination of Commitments.

                  (a)      The Commitments shall terminate on the Termination
Date and any Loans then outstanding (together with accrued interest thereon)
shall be due and payable on such date.

                  (b)      The Borrower shall make mandatory prepayments from
the sources and in the amounts set forth below:

                           (i)      100% of the Net Cash Proceeds (rounded to
the nearest $500,000) of any sale, transfer, or other disposition disposition
(excluding any disposition by Casualty or Condemnation) of assets in excess of
$5,000,000 of any individual sale of assets, and in excess of $10,000,000 in the
aggregate for all sales of assets during any Fiscal Year, by the Parent or any
of the Subsidiaries, but excluding (A) sales of inventory in the ordinary course
of business, (B) sales of equipment in the ordinary course of business, if and
to the extent of Net Cash Proceeds used within a reasonable time to purchase
equipment in replacement thereof, (C) sales of Receivables pursuant to a
Receivables Securitization Program (which shall be subject to clause (ii)
below); and

                           (ii)     100% of the Net Cash Proceeds (rounded to
the nearest $500,000) of the initial sale of Receivables to the Receivables
Subsidiary pursuant to any Receivables Securitization Program implemented after
(but not on or before) the Original Closing Date, as in existence on the date of
implementation thereof, provided, that (1) with respect to any increase
(including, but not limited to a new series) in an existing Receivables
Securitization Program or any Receivables Securitization Program which is
additional to an existing Receivables Securitization Program (each an
"Incremental Program"), the foregoing shall apply only to the extent of the
amount of the Net Cash Proceeds from the initial sale under the Incremental
Program, and (2) with respect to any Receivables Securitization Program which is
a replacement (a "Replacement Program") for another Receivables Securitization
Program (a "Replaced Program"), the foregoing shall apply only to the extent of
the amount, if any, by which the Net Cash Proceeds from the initial sale under
the Replacement Program exceeds the Net Cash Proceeds from the initial sale
under the Replaced Program.

                  (c)      Each prepayment under this Section 2.08 shall be
applied in accordance with Section 2.11 and, to the extent any such prepayments
are applied to the Loans pursuant thereto, shall also reduce the Commitments of
the several Banks ratably. No optional reduction of the Aggregate Commitment
pursuant to Section 2.07 shall reduce the amount of any subsequent mandatory
prepayment pursuant to Section 2.08(b) or mandatory reduction pursuant to this
paragraph (c).

                                       31

<PAGE>

                  Section 2.09 Optional Prepayments.

                  (a)      The Borrower may, upon at least 1 Domestic Business
Days' notice to the Agent, prepay any Base Rate Borrowing in whole at any time,
or from time to time in part in amounts aggregating at least $5,000,000 and any
larger multiple of $500,000 (or $100,000 and any larger multiple of $25,000 as
to Swing Loans which are Base Rate Loans, and $1,000,000 and any larger multiple
of $100,000 as to Swing Loans which are Set Rate Loans), by paying the principal
amount to be prepaid. Each such optional prepayment shall be applied to prepay
ratably the Base Rate Loans of the several Banks (or of Wachovia, in the case of
Swing Loans) included in such Base Rate Borrowing.

                  (b)      The Borrower may, with 3 Euro-Dollar Business Days'
notice to the Agent, prepay any Fixed Rate Borrowing; provided, however, that
such prepayment shall be for all, but not less than all, of such Fixed Rate
Borrowing, all interest accrued thereon, and any amount due under Section 8.05).
Each such optional prepayment shall be applied to prepay ratably the Fixed Rate
Loans of the several Banks (or of Wachovia, in the case of Swing Loans) included
in such Fixed Rate Borrowing.

                  (c)      Upon receipt of a notice of prepayment pursuant to
this Section 2.09, the Agent shall promptly notify each Bank of the contents
thereof and of such Bank's ratable share of such prepayment and such notice
shall not thereafter be revocable by the Borrower.

                  Section 2.10 Other Mandatory Prepayments on Revolver Loans. In
addition to mandatory prepayments pursuant to Section 2.08(b):

                  (a)      On each date on which the Commitments are reduced
pursuant to Section 2.07 or Section 2.08, the Borrower shall repay or prepay
such principal amount of the outstanding Revolver Loans, first, and Swing Loans,
second (together, in each case, with interest accrued thereon and any amount due
under Section 8.05), as may be necessary so that after such payment the Working
Capital Obligations do not exceed the Aggregate Commitment as then reduced;
provided, however, that if, after paying all outstanding obligations with
respect to the Revolving Loans and Swing Loans, the Letter of Credit Obligations
remain in excess of the Aggregate Commitment, then the Borrower shall be
obligated to deposit with the Agent cash collateral in an amount equal to 100%
of such excess; and

                  (b)      On each date on which the Working Capital Obligations
exceed the Asset Coverage Base, the Borrower shall repay or prepay such
principal amount of the outstanding Loans (together, in each case, with interest
accrued thereon and any amount due under Section 8.05), as may be necessary so
that after such payment the Working Capital Obligations do not exceed the Asset
Coverage Base; provided, however, that if, after paying all outstanding
obligations with respect to the Loans, the Letter of Credit Obligations remain
in excess of the Asset Coverage Base, then the Borrower shall be obligated to
deposit with the Agent cash collateral in an amount equal to 100% of such
excess.

                  Section 2.11 General Provisions as to Payments.

                  (a)      The Borrower shall make each payment of principal of,
and interest on, the Loans and of fees hereunder, not later than 11:00 a.m.
(Atlanta, Georgia time) on the date

                                       32

<PAGE>

when due, in Federal or other funds immediately available, without setoff,
counterclaim or other deduction, in Atlanta, Georgia, to the Agent at its
address referred to in Section 9.01. The Agent will promptly distribute to
Wachovia each such payment received by the Agent on account of the Swing Loans,
and to each Bank its ratable share of each such payment received by the Agent
for the account of the Banks.

                  (b)      Whenever any payment of principal of, or interest on,
the Domestic Loans or of fees hereunder shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day.

                  (c)      All payments of principal, interest, fees and other
amounts to be made by the Borrower pursuant to this Agreement with respect to
any Loan or fee relating thereto shall be paid without deduction for, and free
from, any taxes, imposts, levies, deductions, or withholdings now or hereafter
imposed by any governmental authority or by any taxing authority thereof or
therein, excluding in the case of each Bank (1) any taxes imposed by the United
States or any political subdivision thereof on the effectively connected net
income of any Bank or any Bank's Lending Office or any franchise taxes imposed
by such jurisdiction, (2) taxes imposed on the net income of, or franchise taxes
imposed upon, any Bank by the jurisdiction under the laws of which such Bank is
organized or by any political subdivision thereof, (3) taxes imposed on the net
income of such Bank's Lending Office, and franchise taxes imposed on it, by the
jurisdiction of such Bank's Lending Office, or any political subdivision
thereof, (4) any taxes imposed on any Bank by Section 884(a) of the Internal
Revenue Code of 1986, as amended (and any successor statute to Section 884(a)),
and (5) any United States withholding tax payable with respect to any payments
to such Bank under the laws (including, without limitation, any treaty, ruling,
judicial or administrative determination or regulation) in effect on the
"Initial Date" (as hereinafter defined) or as a result of the Bank having
voluntarily changed the jurisdiction of its Lending Office from a jurisdiction
in which payments made to such Bank are exempt from United States withholding
tax to a jurisdiction in which such payments are not so exempt, but not
excluding any United States withholding tax payable or increased as a result of
any change in any law, treaty, ruling, judicial or administrative determination
or regulation, or interpretation thereof occurring after the Initial Date (all
such non-excluded taxes, levies, imposts, deductions, and withholdings
hereinafter referred to as "Taxes"). For purposes hereof, the term "Initial
Date" shall mean, in the case of each Bank party hereto on the date hereof, the
Closing Date, and in the case of each other Bank, the effective date of the
Assignment and Acceptance pursuant to which it became a Bank hereunder.

                  In the event that the Borrower is required by applicable law
to make any such withholding or deduction of Taxes with respect to any Loan or
fee or other amount, the Borrower shall pay such deduction or withholding to the
applicable taxing authority, shall promptly furnish to any Bank in respect of
which such deduction or withholding to the applicable taxing authority, shall
promptly furnish to any Bank in respect of which such deduction or withholding
is made all receipts and other documents evidencing such payment, and shall pay
to such Bank additional

                                       33

<PAGE>

amounts as may be necessary in order that the amount received by such Bank after
the required withholding or other payment shall equal the amount such Bank would
have received had no such withholding or other payment been made. If no
withholding or deduction of Taxes are payable in respect to any Loan or fee
relating thereto, the Borrower shall furnish any Bank, at such Bank's written
request, a certificate from each applicable taxing authority or an opinion of
counsel reasonably acceptable to such Bank, in either case stating that such
payments are exempt from or not subject to withholding or deduction of Taxes. If
the Borrower fails to provide such original or certified copy of a receipt
evidencing payment of Taxes or certificate(s) or opinion of counsel described in
the preceding sentence, the Borrower hereby agrees to compensate such Bank for,
and indemnify it with respect to, the tax consequences of the Borrower's failure
to provide evidence of tax payments or tax exemption; provided, however, that
the Borrower shall not be obligated to indemnify any party for penalties,
additions to tax, interest or expenses associated with the payment of Taxes if
the Bank's liability for such Taxes has arisen as a result of the fault of such
Bank; and provided, further, that the Borrower shall not be obligated to
indemnify any Bank for Taxes, penalties, additions to tax, interest or expenses
incurred as a result of such Bank having voluntarily changed its Lending Office
from a jurisdiction in which payments made to such Bank are exempt from United
States withholding tax to a jurisdiction in which such payments are not so
exempt. Such compensation or indemnification payment shall be made within 30
days from the date such Bank makes written request therefor. Any such request
shall be made within 90 days after the date on which such payment of Taxes was
made. Each such request shall be accompanied by a copy of the statement from the
taxing authority demanding payment by such Bank of such Taxes or by a
certificate from such Bank which certificate shall set forth in reasonable
detail the basis for any additional amount payable to such party under this
Section 2.11 (together with reasonable evidence of payment of such Taxes).

                  Any Bank entitled to claim any additional amounts payable
pursuant to this Section 2.11 shall use its best efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Lending Office if the making of such change would avoid the
need for, or reduce the amount of, any such additional amounts which may
thereafter accrue and the making of such a change would not, in the reasonable
judgment of such Bank, be otherwise materially disadvantageous to such Bank.

                  Each Bank agrees, as soon as practicable after receipt by it
of a request by the Borrower to do so, to file all appropriate forms and take
other appropriate action to obtain a certificate or other appropriate document
from the appropriate governmental authority in the jurisdiction imposing the
relevant taxes, establishing that it is entitled to receive payments of
principal and interest under this Agreement and the Notes without deduction and
free from withholding of any Taxes imposed by such jurisdiction; provided, that,
if it is unable, for any reason, to establish such exemption, or to file such
forms and, in any event, during such period of time as such request for
exemption is pending, the Borrower shall nonetheless remain obligated under the
terms of the immediately preceding paragraph.

                  In the event any Bank receives a refund of any Taxes paid by
the Borrower pursuant to this Section 2.11, it will pay to the Borrower the
amount of such refund promptly upon receipt thereof; provided, however, if at
any time thereafter it is required to return such refund, the Borrower shall
promptly repay to it the amount of such refund.

                                       34

<PAGE>

                  Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower and the
Banks contained in this Section 2.11 shall be applicable with respect to any
Assignee, and any calculations required by such provisions (i) shall be made
based upon the circumstances of such Assignee, and (ii) constitute a continuing
agreement and shall survive the termination of this Agreement and the payment in
full or cancellation of the Notes.

                  (d)      Prior to the existence of a Default or Event of
Default, unless some other application of such monies is specifically provided
for elsewhere in this Agreement, all monies to be applied to the Obligations,
whether such monies represent voluntary payments by the Borrower, Net Cash
Proceeds, or are received from any disposition of Collateral or for any other
reason, shall be allocated among the Agent and such of the Banks as are entitled
thereto (and, with respect to monies allocated to the Banks, pro rata according
to their respective Commitments, or if the Commitments have been terminated,
according to their respective shares in the outstanding Loans, unless otherwise
provided herein) in the following order (in each case, until all Obligations
within each category itemized in this paragraph (d) are fully paid):

                           (i)      first, to the Agent for the benefit of the
Banks in payment of accrued interest then due and payable in respect of the
Loans;

                           (ii)     second, to Wachovia toward payment of
principal of Swing Loans (to be shared with any Bank that has purchased a
participating interest therein pursuant to Section 2.01(b)(i));

                           (iii)    third, ratably, to payment of principal of
(A) the Revolving Loans and (B) the Reimbursement Obligations owing to the
Agent;

                           (iv)     fourth, to the Banks for any amounts owed
under indemnification obligations that they have paid to the Agent and for any
expenses that they have reimbursed to the Agent;

                           (v)      fifth, to the Agent to pay any amounts owed
under indemnification obligations that have not been paid to Agent by the Banks
or the Borrower, together with interest accrued thereon;

                           (vi)     sixth, to the Agent to pay any fees due and
payable to Agent;

                           (vii)    seventh, to the Agent first, and then to the
Banks, to pay the amount of expenses that have not been reimbursed,
respectively, to the Agent or the Banks by the Borrower (or the other Banks, as
applicable) in accordance with the terms of this Agreement, together with any
interest accrued thereon;

                           (viii)   eighth, to the payment of fees payable with
respect to any outstanding Letter of Credit Obligations then due and owing;

                           (ix)     ninth, to the Banks in payment of accrued
interest then due and payable in respect of any Obligations other than the Loans
then outstanding;

                                       35

<PAGE>

                           (x)      tenth, to any other Obligations then due and
payable, other than as provided in clauses (xi) and (xii) below;

                           (xi)     eleventh, as cash collateral for any
outstanding Letter of Credit Obligations equal to 105% of the undrawn amount
thereof; and

                           (xii)    lastly, to any obligations owing to any Bank
with respect to any Interest Rate Protection Agreements.

                  (e)      During the existence of a Default or Event of Default
and at all times after the Obligations have become due and payable, all monies
to be applied to the Obligations, whether such monies represent voluntary
payments by the Borrower, Net Cash Proceeds, or are received pursuant to
acceleration of the Loans, realized from any disposition of Collateral, or
received for any other reason, shall be allocated among the Agent and such of
the Banks as are entitled thereto (and, with respect to monies allocated to the
Banks, pro rata according to their respective Commitments (or if the Commitments
have been terminated, according to their respective shares in the outstanding
Loans), unless otherwise provided herein) in the following order (in each case,
until all Obligations within each category itemized in this paragraph (e) below
are fully paid):

                           (i)      first, to the Agent to pay principal and
accrued interest on any Reimbursement Obligations and any portion of the Loans
which Agent may have advanced on behalf of any Banks and for which Agent has not
been reimbursed by such Bank or the Borrower;

                           (ii)     second, to Wachovia to pay the principal and
accrued interest on any portion of the Swing Loans outstanding (to be shared
with any Bank that has purchased a participating interest therein pursuant to
Section 2.01(b)(i));

                           (iii)    third, to the Agent first, and then to the
Banks, to pay the amount of expenses that have not been reimbursed,
respectively, to the Agent or the Banks by the Borrower (or the other Banks, as
applicable) in accordance with the terms of this Agreement, together with any
interest accrued thereon;

                           (iv)     fourth, to the Agent to pay any amounts owed
under indemnification obligations that have not been paid to Agent by the Banks
or the Borrower, together with interest accrued thereon;

                           (v)      fifth, to the Agent to pay any fees due and
payable to Agent;

                           (vi)     sixth, to the Banks for any amounts owed
under indemnification obligations that they have paid to the Agent and for any
expenses that they have reimbursed to the Agent;

                           (vii)    seventh, to the payment of fees payable with
respect to Letter of Credit Obligations;

                                       36

<PAGE>

                           (viii)   eighth, as cash collateral for any Letter of
Credit Obligations equal to 105% of the undrawn amount thereof

                           (ix)     ninth, to the Banks in payment of accrued
interest then due and payable in respect of the Loans;

                           (x)      tenth, ratably, ratably, to payment of
principal of (A) the Revolving Loans, (B) the Reimbursement Obligations owing to
the Agent, and (C) any obligations owing to any Bank with respect to any
Interest Rate Protection Agreements, up to the limit set forth in clause (iii)
of the definition of "Obligations"; and

                           (xi)     lastly, to any other Obligations then due
and payable.

         The allocations set forth in this Section 2.11(e) are solely to
determine the rights and priorities of Agent and Banks as among themselves and
may be changed by Agent and Banks without notice to or the consent or approval
of the Borrower or any other Person.

                  Section 2.12 Computation of Interest and Fees. Interest on
Domestic Loans based on the Base Rate shall be computed on the basis of a year
of 360 days and paid for the actual number of days elapsed (including the first
day but excluding the last day). Interest on Domestic Loans based on the Set
Rate and interest on Euro-Dollar Loans shall be computed on the basis of a year
of 360 days and paid for the actual number of days elapsed, calculated as to
each Interest Period from and including the first day thereof to but excluding
the last day thereof. Commitment fees and any other fees payable hereunder shall
be computed on the basis of a year of 360 days and paid for the actual number of
days elapsed (including the first day but excluding the last day).

                  Section 2.13 Letter of Credit Provisions

                  (a)      Commitment to and Issuance of Letters of Credit.

                           (i)      Commitment to Issue Letters of Credit.
         Subject to the terms and conditions of this Agreement and of the
         applicable Letter of Credit Application Agreements, and in reliance
         upon the representations and warranties of the Borrower herein and
         therein set forth, the Agent shall issue for the account of the
         Borrower, one or more Letters of Credit denominated in Dollars, in
         accordance with this Section 2.13, from time to time during the period
         commencing on the Closing Date and ending on the Domestic Business Day
         30 days prior to the Termination Date.

                           (ii)     Types and Amounts. All Letters of Credit
         shall be standby (not trade or other commercial) letters of credit. The
         Agent shall have no obligation to issue any Letter of Credit at any
         time:

                                    (A)      if the aggregate maximum amount
                  then available for drawing under all Letters of Credit, after
                  giving effect to the issuance of the requested Letter of
                  Credit, shall exceed any limit imposed by law or regulation
                  upon the Agent;

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<PAGE>

                                    (B)      if, after giving effect to the
                  issuance of the requested Letter of Credit, (i) the aggregate
                  Letter of Credit Obligations would exceed $10,000,000, or (ii)
                  the Working Capital Obligations (plus, for purposes of this
                  calculation and without duplication, the face amount of each
                  Letter of Credit, the issuance of which has been requested by
                  the Borrower and authorized by the Agent but which has not
                  yet, in fact, been issued) would exceed the lesser of (1) the
                  Aggregate Commitment and (2) the Asset Coverage Base;

                                    (C)      which has an expiration date (i)
                  later than 13 months after the issuance date (but which may be
                  subject to an automatic renewal feature satisfactory to the
                  Agent); or (ii) after the Termination Date.

                           (iii)    Other Conditions. In addition to being
         subject to the satisfaction of the conditions contained in clause (ii)
         above and in Article III, the obligation of the Agent to issue any
         Letter of Credit is subject to the satisfaction in full of the
         following conditions:

                                    (A)      the Borrower shall have delivered
                  to the Agent at such times and in such manner as the Agent may
                  prescribe, an Letter of Credit Application Agreement and such
                  other documents and materials as may reasonably be required
                  pursuant to the terms thereof all reasonably satisfactory in
                  form and substance to the Agent and the terms of the proposed
                  Letter of Credit shall be reasonably satisfactory in form and
                  substance to the Agent;

                                    (B)      as of the date of issuance no
                  order, judgment or decree of any court, arbitrator or
                  Authority shall purport by its terms to enjoin or restrain the
                  Agent from issuing the Letter of Credit and no law, rule or
                  regulation applicable to the Agent and no request or directive
                  (whether or not having the force of law) from any Authority
                  with jurisdiction over the Agent shall prohibit or request
                  that the Agent refrain from the issuance of letters of credit
                  generally or the issuance of that Letter of Credit; and

                                    (C)      the Unused Commitment shall not be
                  less than the amount of the requested Letter of Credit.

                           (iv)     Issuance of Letters of Credit.

                                    (A)      Request for Issuance. At least 2
                  Domestic Business Days before the effective date for any
                  Letter of Credit, the Borrower shall give the Agent a written
                  notice containing the original signature of an authorized
                  officer or employee of the Borrower. Such notice shall be
                  irrevocable and shall specify the original face amount of the
                  Letter of Credit requested (which original face amount shall
                  not be less than $100,000), the effective date (which day
                  shall be a Domestic Business Day) of issuance of such
                  requested Letter of Credit, the date on which such requested
                  Letter of Credit is to expire, the amount of then outstanding
                  Letter of Credit Obligations, the purpose for which such
                  Letter of Credit is to be issued,

                                       38

<PAGE>

                  whether such Letter of Credit may be drawn in single or
                  partial draws and the person for whose benefit the requested
                  Letter of Credit is to be issued.

                                    (B)      Issuance; Notice of Issuance. If
                  the original face amount of the requested Letter of Credit is
                  less than or equal to the Unused Commitment at such time and
                  the other applicable conditions set forth in this Agreement
                  are satisfied, the Agent shall issue the requested Letter of
                  Credit. The Agent shall give each Bank written or telex notice
                  in substantially the form of Exhibit R, or telephonic notice
                  confirmed promptly thereafter in writing, of the issuance of
                  an Letter of Credit and shall deliver to each Bank in
                  connection with such notice a copy of the Letter of Credit
                  issued by the Agent.

                                    (C)      No Extension or Amendment. The
                  Agent shall not extend or amend any Letter of Credit if the
                  issuance of a new Letter of Credit having the same terms as
                  such Letter of Credit as so amended or extended would be
                  prohibited by clause (iii) of paragraph (a) of this Section
                  2.13.

                  (b)      Payment of Reimbursement Obligations by Revolver
Loans. Upon a draw under any Letter of Credit, the Reimbursement Obligations
arising therefrom shall be immediately payable in full by the Borrower, together
with interest until paid, at the same rate as Base Rate Loans determined
pursuant to Section 2.05 hereof, provided that unless the Agent is immediately
reimbursed by the Borrower or has previously submitted a Set Rate Loan Request
or Notice of Borrowing as contemplated in the immediately succeeding sentence,
the Borrower irrevocably authorizes the Agent to treat such draw as a Notice of
Borrowing and to cause Revolver Loans (or a Swing Loan, if the amount of such
draw, when added to the amount of Swing Loans then outstanding, would not exceed
the maximum amount of Swing Loans) to be made to pay such Reimbursement
Obligations, without regard to (i) requirements for funding of specified
multiple amounts in Section 2.01 or 2.02 or (ii) satisfaction or
non-satisfaction of the conditions set forth in Section 3.02. Such Revolver
Loans shall be made as Base Rate Loans, unless the Borrower has actually
submitted a Notice of Borrowing therefor within the time permitted by and
pursuant to Section 2.01(a) or 2.02, as applicable or unless a Set Rate Request
has been submitted for a Swing Loan at the Set Rate pursuant to Section
2.01(b)(ii) and a Set Rate has been established pursuant thereto. The Agent
shall notify the Banks of any such Revolver Loans and each Bank's share thereof
and each of the Banks shall make available its ratable share thereof pursuant to
Section 2.02(c). The amount of any Swing Loans or Revolver Loans made pursuant
hereto shall be applied by the Agent to repay such Reimbursement Obligations.

                  (c)      Duties of the Agent. Any action taken or omitted to
be taken by the Agent in connection with any Letter of Credit, if taken or
omitted in the absence of willful misconduct or gross negligence, shall not put
the Agent under any resulting liability to any Bank. In determining whether to
pay under any drawing under any Letter of Credit, the Agent shall have no
obligation relative to the Banks other than to confirm that any documents
required to have been delivered under such Letter of Credit appear to comply on
their face with the requirements of such Letter of Credit.

                                       39

<PAGE>

                  (d)      Purchase of Participations. Immediately upon issuance
by the Agent of any Letter of Credit in accordance with this Agreement, each
Bank shall be deemed to have irrevocably and unconditionally purchased and
received from the Agent, without recourse or warranty, an undivided interest and
participation, to the extent of such Bank's ratable share of the Aggregate
Commitment, in such Letter of Credit.

                  (e)      Sharing of Letter of Credit Payments. If for any
reason the Agent has not been reimbursed the amount of any Reimbursement
Obligation as required by paragraph (b) above and no Swing Loans or Revolver
Loans can be made with respect thereto pursuant to such paragraph, the Agent
shall promptly notify each Bank of such fact and each Bank shall make available
to the Agent its ratable share thereof in same day funds on the date of such
notice, if the Agent gives such notice prior to 2:00 P.M. (Atlanta, Georgia
time) on a Domestic Business Day, or on the next Domestic Business Day if such
notice is given after such time.

                  (f)      Intentionally Omitted.

                  (g)      Obligations Irrevocable. The obligations of the Banks
to make Revolver Loans for payment of Reimbursement Obligations arising with
respect to a Letter of Credit, and of the Borrower to repay such Revolver Loans,
shall be irrevocable, not subject to any qualification or exception whatsoever
and shall be made in accordance with, but not subject to, the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances:

                           (i)      any lack of validity or enforceability of
this Agreement or any of the other Facility Documents;

                           (ii)     the existence of any claim, set-off, defense
or other right which the Borrower may have at any time against any beneficiary
of any Letter of Credit or any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting) or against the Agent, any Bank or
any other Person, whether in connection with any of the Facility Documents or
the transactions contemplated herein or therein or any unrelated transactions;

                           (iii)    any draft, certificate or any other document
presented under any Letter of Credit proves to be forged, fraudulent or invalid
in any respect or any statement therein being untrue or inaccurate in any
respect;

                           (iv)     the surrender or impairment of any security
for the performance or observance of any of the terms of any of the Facility
Documents;

                           (v)      payment by the Agent under any Letter of
Credit against presentation of any draft or certificate that is insufficient or
otherwise does not comply with the terms of such Letter of Credit, except
payment resulting from the gross negligence or willful misconduct of the Agent;
or

                           (vi)     any other circumstances or happenings
whatsoever, whether or not similar to any of the foregoing, except circumstances
or happenings resulting from the gross negligence or willful misconduct of the
Agent.

                                       40

<PAGE>

                  (h)      Recovery or Avoidance of Payments. In the event any
payment by or on behalf of the Borrower received by the Agent with respect to
any Letter of Credit (including on account of any Revolver Loans made to pay the
resulting Reimbursement Obligations) and distributed by the Agent to the Banks
on account of their participations in such Letter of Credit is thereafter set
aside, avoided or recovered from the Agent in connection with any receivership,
liquidation or bankruptcy proceeding, each Bank that received such distribution
shall, upon demand by such Agent, contribute such Bank's ratable share of the
amount set aside, avoided or recovered together with interest at the rate
required to be paid by the Agent upon the amount required to be repaid by it.

                  (i)      Issuance Fee and Letter of Credit Fee. The Borrower
shall pay to the Agent with respect to each Letter of Credit (i) annually, on
the date of issuance of such Letter of Credit and on each anniversary thereof,
for its own account, a fronting fee in an amount equal to the product of (x) the
maximum aggregate amount available to be drawn under the terms of such Letter of
Credit on or after such date, multiplied by (y) one-eighth of one percent
(1/8%), multiplied by (z) a percentage equal to the ratable share of the
Aggregate Commitments held by Banks other than the Agent (in its capacity as a
Bank), and (ii) the date of issuance of each Letter of Credit, and quarterly
thereafter (or at some other interval agreed upon by the Borrower and the
Agent), a letter of credit fee for each Letter of Credit, for the ratable
account of the Banks, in each case in an amount equal to the Applicable Margin
for Euro-Dollar Loans (expressed as a percentage) times the maximum aggregate
amount available to be drawn under the terms of such Letter of Credit. Promptly
upon receipt of any Letter of Credit Fee, the Agent shall distribute to each
Bank its ratable share thereof.

                  (j)      Agent Charges. The Borrower shall pay to the Agent,
solely for its own account, the charges assessed by the Agent in connection with
(i) the issuance and payment of the Letter of Credit, which charges shall be
those set forth in the relevant Letter of Credit Application Agreement and (ii)
the amendment or cancellation of any Letter of Credit, which charges shall be
those typically charged by the Agent to its customers generally having credit
and other characteristics similar to the Borrower, as determined in good faith
by the Agent.

                  (k)      Intentionally Omitted.

                  (l)      Assumption of Risk by Borrower. As between the
Borrower, the Agent and the Bank, the Borrower assumes all risks of the acts and
omissions of, or misuse of any Letter of Credit by, the beneficiary of any
Letter of Credit. In furtherance and not in limitation of the foregoing, the
Agent and the Banks shall not be responsible for (i) the validity, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, inaccurate, fraudulent or
forged, (ii) the validity of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason, (iii) failure of the beneficiary of any
Letter of Credit to comply duly with conditions required in order to draw upon
such Letter of Credit, (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher, for errors in interpretation of
technical terms, (vi) any loss or delay in the transmission or otherwise of any
document required in order

                                       41

<PAGE>

to make a drawing under any Letter of Credit or of the proceeds thereof, (vii)
the misapplication by any beneficiary of any Letter of Credit of the proceeds of
any drawing under such Letter of Credit; and (viii) any consequences arising
from causes beyond the control of the Agent and the Banks.

                  (m)      Exoneration. In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth, any action taken or
omitted by the Agent under or in connection with the Letters of Credit or any
related certificates if taken or omitted in good faith and with reasonable care,
shall not put the Agent or any Bank under any resulting liability to the
Borrower or relieve the Borrower of any of its obligations hereunder to any such
Person.

                  Section 2.14 No Novation. Each of the Agent, the Banks, the
Borrower, and the Parent acknowledges and agrees that this Agreement is an
amendment and restatement of the Original Credit Agreement, and no novation of
any indebtedness and other obligations under the Original Credit Agreement is
intended, nor shall any such novation be deemed to have occurred.

                                  ARTICLE III

                            CONDITIONS TO BORROWINGS

                  Section 3.01 Conditions to First Borrowing and Effectiveness
of this Agreement.

                  (a)      Conditions to First Borrowing. The obligation of each
Bank to make a Loan on the occasion of the first Borrowing under the Original
Credit Agreement (or any amendment thereof, as applicable) was satisfied by the
satisfaction of each of the conditions set forth in Section 3.02 on the date of
such first Borrowing (or amendment) and receipt by the Agent of the documents
described below in this paragraph (a):

                           (i)      from each of the parties to the Original
Credit Agreement of either (1) a duly executed counterpart of the Original
Credit Agreement signed by such party or (2) a facsimile transmission of a duly
executed signature page of this Agreement (with the original thereof to be sent
by overnight courier to the counsel for the Agent), and a duly executed Consent
and Reaffirmation of Guarantors as attached hereto following the signatures of
the parties hereto, duly executed by the Guarantors;

                           (ii)     a duly executed Revolver Loan Note under the
Original Credit Agreement for the account of each Bank (which was in the amount
of each Bank's Commitment at the time of the Original Credit Agreement), and a
duly executed Swing Loan Note under the Original Credit Agreement (which was in
the amount of $5,000,000) for the account of Wachovia, in each case complying
with the provisions of Section 2.03;

                           (iii)    a duly executed Parent Guaranty, a duly
executed Pledge Agreement, a duly executed Security Agreement, duly executed
Mortgages (in such number of counterparts as the Agent may request), and duly
executed UCC-1 financing statements pertaining to the Security Agreement and the
Mortgages and UCC-2 Notices pertaining to the real property located in Georgia;

                                       42

<PAGE>

                           (iv)     a duly executed intercreditor agreement and
related documents which are no longer relevant;

                           (v)      such releases and termination statements as
the Agent may request from The CIT Group/Commercial Services, Inc., Wachovia
Bank of South Carolina, N.A. and First Union National Bank of Georgia as to the
Graniteville Assets and payment in full of all amounts payable to such lenders
and termination of the loan and security documents with them;

                           (vi)     lien and title searches satisfactory to the
Agent (1) pertaining to the Collateral described in the Security Agreement
(including, without limitation, the personal property portions of the
Graniteville Assets), indicating that, upon execution and delivery of this
Agreement and the Security Agreement, the filing of releases and termination
statements referred to in paragraph (e) above and of the UCC-1 financing
statements pertaining to such Collateral in the appropriate filing offices, and
the satisfaction of all other conditions in this Section 3.01, the Agent will
have a first priority (except with respect to certain equipment which, at the
time the Agent's Lien attached, was subject to other Liens which are no longer
effective) security interest in such Collateral, except for the Permitted
Encumbrances and (2) pertaining to the real property portions of the
Graniteville Assets, showing that there are no encumbrances on such property
other than Permitted Encumbrances;

                           (vii)    receipt by the Borrower of not less than
$39,000,000 in cash proceeds from the issuance of additional Capital Stock of
the Parent;

                           (viii)   an opinion letter (1) of King & Spalding,
counsel for the Borrower and the Parent, dated as of the Original Closing Date,
substantially in the form of Exhibit B-1, (2) of Bradley Arant Rose & White LLP,
Alabama counsel to the Borrower, addressing certain matters referred to in the
opinion of King & Spalding, and (3) of local counsel to the Agent in the States
of Alabama, North Carolina and South Carolina dated as of the Original Closing
Date, substantially in the form of Exhibit B-2 regarding the Mortgage as to any
Plant located in the state in which such counsel is located;

                           (ix)     an opinion of Jones, Day, Reavis & Pogue,
special counsel for the Agent, dated as of the Original Closing Date,
substantially in the form of Exhibit C;

                           (x)      a certificate substantially in the form of
Exhibit G), dated as of the Original Closing Date, signed by a principal
financial officer of the Borrower, to the effect that (1) no Default had
occurred and was continuing on the date of the first Borrowing and (2) the
representations and warranties of the Borrower contained in Article IV were true
on and as of the date of the first Borrowing under the Original Credit
Agreement;

                           (xi)     all documents which the Agent reasonably
requested relating to the existence of the Borrower and the Parent,
respectively, the corporate authority for and the validity of the Original
Credit Agreement and the other Loan Documents and the Parent Documents, and any
other matters relevant thereto, all in form and substance satisfactory to the
Agent, including, without limitation, a certificate of incumbency of the
Borrower and the Parent, respectively, signed by the Secretary or an Assistant
Secretary of the Borrower and the Parent, respectively, certifying as to the
names, true signatures and incumbency of the officer or officers

                                       43

<PAGE>

of the Borrower or the Parent, as applicable, authorized to execute and deliver
the Loan Documents or the Parent Documents, and certified copies of the
following items as to each of the Borrower and the Parent: (1) its Certificate
of Incorporation, (2) its Bylaws, (3) a certificate of the Secretary of State of
the State of Alabama (as to the Borrower) and Georgia (as to the Parent) as to
its good standing as an Alabama or Georgia corporation, respectively, together
with a certificate of good standing or valid existence from the Secretaries of
State of the States of North Carolina, South Carolina and Georgia as to the good
standing of the Borrower as a foreign corporation qualified to do business in
such States and (4) the action taken by its Board of Directors authorizing the
execution, delivery and performance of the Original Credit Agreement and the
other Loan Documents, or the Parent Documents, as applicable;

                           (xii)    a Notice of Borrowing;

                           (xiii)   receipt of the fees of the Agent pursuant to
Section 2.06(b) of the Original Credit Agreement;

                           (xiv)    receipt of a certified copy of the executed
Graniteville Asset Purchase Agreement, including any amendments or supplements
prior to the Original Closing Date with such different or additional material
terms or conditions were reasonably satisfactory to the Agent;

                           (xv)     closing of the purchase of the Graniteville
Assets pursuant to the Graniteville Asset Purchase Agreement and the Agent's
reasonable satisfaction with all material aspects of such purchase and the
Graniteville Assets acquired and liabilities assumed in connection therewith;

                           (xvi)    receipt of opinion letters (or reliance
letters with respect thereto) from counsel for Graniteville Company pertaining
to the closing of the purchase of the Graniteville Assets pursuant to the
Graniteville Asset Purchase Agreement and matters related thereto;

                           (xvii)   receipt of the audited balance sheet of the
Graniteville Assets as of January 2, 1994, January 1, 1995 and December 31, 1995
and any unaudited interim statements that were available for subsequent periods,
and audited statements of income, stockholders equity and cash flows with
respect to the Graniteville Assets for the 10 month period ended January 2, 1994
and the Fiscal years ended January 1, 1995 and December 31, 1995 and any
unaudited interim statements which were available for subsequent periods;

                           (xviii)  receipt of financial information reasonably
satisfactory to the Agent as to the Receivables to be transferred to the
Receivables Subsidiary pursuant to the Receivables Securitization Program to be
closed on the Original Closing Date.

                  (b)      Conditions to Effectiveness of this Agreement. The
effectiveness of this Agreement is subject to the satisfaction of the conditions
set forth below in this paragraph (b) (as to the items described in clauses (i),
(v) and (vi), in sufficient number of counterparts for delivery of a counterpart
to each Bank and retention of one counterpart by the Agent).

                                       44

<PAGE>

                           (i)      from each of the parties to this Agreement
and the Consent and Reaffirmation of Guarantors at the end hereof of either (A)
a duly executed counterpart of this Agreement and the Consent and Reaffirmation
of Guarantors, as applicable, signed by such party or (B) a facsimile
transmission of a duly executed signature page of this Agreement and the Consent
and Reaffirmation of Guarantors, as applicable (with the originals thereof to be
sent by overnight courier to the counsel for the Agent).

                           (ii)     a certificate (the "Closing Certificate")
substantially in the form of Exhibit G), dated as of the Closing Date, signed by
a principal financial officer of the Borrower, to the effect that (A) no Default
has occurred and is continuing on the Closing Date and (B) the representations
and warranties of the Borrower contained in Article IV are true on and as of the
Closing Date;

                           (iii)    all documents which the Agent may reasonably
request relating to the existence of the Borrower, the Parent and Avondale Mills
Graniteville Fabrics, Inc., respectively, the corporate authority for and the
validity of this Agreement and the other Loan Documents or the Consent and
Reaffirmation of Guarantors, as applicable, and any other matters relevant
hereto, all in form and substance satisfactory to the Agent, including, without
limitation, a certificate of incumbency of the Borrower, the Parent and Avondale
Mills Graniteville Fabrics, Inc., respectively, signed by the Secretary or an
Assistant Secretary of the Borrower, the Parent and Avondale Mills Graniteville
Fabrics, Inc., respectively, certifying as to the names, true signatures and
incumbency of the officer or officers of the Borrower, the Parent or Avondale
Mills Graniteville Fabrics, Inc., as applicable, authorized to execute and
deliver the Loan Documents, or the Consent and Reaffirmation of Guarantors, as
applicable, and certified copies of the following items as to each of the
Borrower, the Parent and Avondale Mills Graniteville Fabrics, Inc.: (A) any
amendments to its Certificate of Incorporation or its Bylaws since the Second
Amendment and Restatement Effective Date (or as to Avondale Mills Graniteville
Fabrics, Inc., since it became a Guarantor), (B) a certificate of the Secretary
of State of the State of Alabama (as to the Borrower), Georgia (as to the
Parent) and Delaware (as to Avondale Mills Graniteville Fabrics, Inc.) as to its
good standing as an Alabama, Georgia or Delaware corporation, respectively,
together with a certificate of good standing or valid existence from the
Secretaries of State of the States of North Carolina, South Carolina and Georgia
as to the good standing of the Borrower as a foreign corporation qualified to do
business in such States, and of South Carolina as to the good standing of
Avondale Mills Graniteville Fabrics, Inc. as a foreign corporation qualified to
do business in such State and (C) the action taken by its Board of Directors
authorizing the execution, delivery and performance of this Agreement and the
other Loan Documents, or the Consent and Reaffirmation of Guarantors, as
applicable;

                           (iv)     execution and delivery of any amendments to
the Facility Documents as may reasonably be requested by the Agent;

                           (v)      if requested by Agent, opinions of local
counsel in the states of Alabama, Georgia, North Carolina, and South Carolina in
the form of Exhibit B-2 to the Credit Agreement, as to the Mortgages, updating
the opinions of such type which were delivered on the Original Closing Date
(which opinions as to the Mortgages in Alabama and Georgia can be included in
the opinions described in clause (vi) below to be delivered by Bradley Arant
Rose & White LLP and King & Spalding LLP) to reflect, as reasonably necessary,
any amendments to

                                       45
<PAGE>

any Mortgage, as such Mortgage may have been amended since the date it was
executed and delivered to Agent;

                  (vi)     an opinion letter (A) of King & Spalding LLP, counsel
for the Parent, the Borrower, and the Guarantors, dated as of the Closing Date,
substantially in the form of Exhibit B-1, but updated and addressing only this
Agreement, the replacement Notes, the Consent and Reaffirmation of Guarantors at
the end hereof, any amendments to the Facility Documents (including, without
limitation, the Global Amendment Agreement), and covering such additional
matters relating to the transactions contemplated hereby as the Agent may
reasonably request and (B) of Bradley Arant Rose & White LLP, Alabama counsel to
the Borrower, addressing certain matters referred to in the opinion of King &
Spalding LLP, and in each case including customary opinions as to perfection of
personal property security interests pursuant to the Uniform Commercial Code;

                  (vii)    an opinion of Jones Day, special counsel for the
Agent, dated as of the Closing Date, substantially in the form of Exhibit C, but
updated and addressing only this Agreement and the replacement Notes, and
covering such additional matters relating to the transactions contemplated
hereby as the Agent may reasonably request;

                  (viii)   a duly executed replacement Revolver Loan Note for
the account of each Bank and a duly executed replacement Swing Loan Note;

                  (ix)     receipt by the Agent of a fully executed Required
Assignment and Assumption Agreement and the Global Amendment Agreement;

                  (x)      receipt by the Agent, for the ratable account of the
Banks, of an upfront fee in an amount equal to 0.25% of the Aggregate Commitment
as of the Closing Date; and

                  (xi)     payment of the fees payable on the Closing Date to
the Agent or Wachovia Securities, Inc., as applicable, pursuant to the Agent's
Letter Agreement, and payment of the Agent's reasonable costs and expenses for
the initial field audit conducted by the Agent prior to the Closing Date with
respect to the inventory of the Borrower and AMGF.

         Section 3.02 Conditions to All Borrowings. The obligation of the Agent
to issue a Letter of Credit and of each Bank to make a Loan on the occasion of
each Borrowing, other than a Borrowing which consists solely of a Refunding Loan
and other than as provided in Section 2.13 with respect to Borrowings to repay
Reimbursement Obligations, is subject to the satisfaction of the following
conditions:

         (a)      receipt by the Agent of a Notice of Borrowing or a Set Rate
Request;

         (b)      the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing;

         (c)      the fact that the representations and warranties of the
Borrower contained in Article IV of this Agreement shall be true on and as of
the date of such Borrowing, except for

                                       46

<PAGE>

events which have been disclosed in writing to the Banks and which are described
in any of Sections 4.04, 4.06(a), 4.07 (except the first sentence), 4.14(b) and
(c) or 4.15; and

         (d)      the fact that, immediately after such Borrowing, (i) the
Working Capital Obligations will not exceed the lesser of (A) the Aggregate
Commitment and (B) the Asset Coverage Base and (ii) with respect to any Letter
of Credit, the other conditions set forth in Section 2.13 have been satisfied.

Each Borrowing hereunder, other than a Borrowing which consists solely of a
Refunding Loan, shall be deemed to be a representation and warranty by the
Borrower on the date of such Borrowing as to the truth and accuracy of the facts
specified in paragraphs (b), (c) and (d) of this Section.

                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

         The Borrower and (by execution and delivery of the Parent Guaranty and
the Consent and Reaffirmation of the Guarantors at the end hereof) the Parent
represent and warrant that:

         Section 4.01 Corporate Existence and Power. Each of the Parent and the
Borrower is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, is duly qualified to
transact business in every jurisdiction where, by the nature of its business,
such qualification is necessary, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except for failures which have not had and
would not reasonably be expected to have or cause a Material Adverse Effect.

         Section 4.02 Corporate and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Notes, the Security Agreement, the Mortgages and the other Loan
Documents, by the Parent of the Parent Documents and by AMGF of the AMGF
Documents (i) are within the corporate powers of the Parent and the Borrower,
respectively, (ii) have been duly authorized by all necessary corporate action,
(iii) require no action by or in respect of or filing with, any governmental
body, agency or official, (iv) do not contravene, or constitute a default under,
any provision of applicable law or regulation or of the certificate of
incorporation or by-laws of the Borrower or the Parent of any material
agreement, judgment, injunction, order, decree or other instrument binding upon
the Parent, the Borrower or any of the Subsidiaries, and (v) do not result in
the creation or imposition of any Lien on any asset of the Parent, the Borrower
or any of the Subsidiaries, except in favor of the Agent.

         Section 4.03 Binding Effect. This Agreement constitutes a valid and
binding agreement of the Borrower enforceable in accordance with its terms, and
the Facility Documents, when executed and delivered in accordance with this
Agreement, will constitute valid and binding obligations of the Borrower, the
Parent and AMGF, as applicable, enforceable in accordance with their respective
terms, provided that the enforceability hereof and thereof is

                                       47

<PAGE>

subject in each case to general principles of equity and to bankruptcy,
insolvency and similar laws affecting the enforcement of creditors' rights
generally.

         Section 4.04 Financial Information.

         (a)      The consolidated balance sheet of the Parent and its
Consolidated Subsidiaries as of August 30, 2002, and the related consolidated
statements of income, shareholders' equity and cash flows for the Fiscal Year
then ended, reported on by Crisp Hughes Evans LLP, copies of which have been
delivered to each of the Banks, and the unaudited consolidated financial
statements (with consolidating schedule) of the Parent for the interim period
ended November 29, 2002, copies of which have been delivered to each of the
Banks, fairly present in all material respects, in conformity with GAAP (except
for customary exceptions for unaudited statements in accordance with the
Parent's practices existing on the Closing Date), the consolidated financial
position of the Parent and its Consolidated Subsidiaries as of such dates and
their consolidated results of operations and cash flows for such periods stated.

         (b)      Since August 30, 2002, there has been no event, act, condition
or occurrence having or which reasonably could be expected to have or cause a
Material Adverse Effect, except for matters disclosed in the financial
statements for the interim period ended November 29, 2002.

         Section 4.05 No Litigation. Except as described on Schedule 4.05 or
Schedule 4.14, there is no action, suit or proceeding pending, or to the
Knowledge of the officers of the Parent or the Borrower, overtly threatened,
against or affecting the Parent or the Borrower or any of the Subsidiaries or
with respect to which any of them may become subject as a result of the
acquisition of the Graniteville Assets, before any court or arbitrator or any
governmental body, agency or official which has not previously been disclosed
pursuant to Section 5.01(i) and which has or would reasonably be expected to
have or cause a Material Adverse Effect or which in any manner draws into
question the validity of or which has impaired or would reasonably be expected
to impair the ability of the Borrower or the Parent, respectively, to perform
its obligations under, this Agreement, or any of the other Facility Documents to
which it is a party.

         Section 4.06 Compliance with ERISA.

         (a)      The Borrower (i) terminated its only Plan on or about October
31, 1986 pursuant to the termination procedures under Section 4041 of ERISA and
received all necessary approvals for such termination; (ii) has distributed all
vested benefits under such Plan, and the assets of such Plan so distributed
exceeded the amount of such vested benefits; and (iii) is not required pursuant
to the terms of any applicable collective bargaining agreement to pay or accrue
any contributions with respect to any plan which is a Multiemployer Plan and
there has been no complete or partial withdrawal by the Borrower from any such
Multiemployer Plan as provided by MPPAA.

         (b)      No non-exempt "prohibited transaction" within the meaning of
Section 4975 of the Internal Revenue Code or Section 406 of ERISA has occurred
with respect to any

                                       48

<PAGE>

"employee benefit plan," as defined in Section 3 of ERISA, maintained by the
Borrower and which has had or would reasonably be expected to have or cause a
Material Adverse Effect.

         Section 4.07 Compliance with Laws; Payment of Taxes. The Parent, the
Borrower and the Material Subsidiaries are in compliance with all applicable
laws, regulations and similar requirements of governmental authorities, except
where such compliance is being contested in good faith through appropriate
proceedings or where failure to comply would not have or reasonably be expected
to have or cause a Material Adverse Effect. There have been filed on behalf of
the Parent, the Borrower and the Material Subsidiaries all Federal, state and
local income, excise, property and other tax returns which to the Knowledge of
its officers are required to be filed by them and all taxes due pursuant to such
returns or pursuant to any assessment received by or on behalf of the Parent,
the Borrower or any Material Subsidiary have been paid, except for taxes which
are being contested in good faith through appropriate proceedings and for which
reasonable reserves have been established in accordance with GAAP. The charges,
accruals and reserves on the books of the Parent, the Borrower and the Material
Subsidiaries in respect of taxes or other governmental charges are, in the
opinion of the Parent and Borrower, adequate. United States income tax returns
of the Parent, the Borrower and the Material Subsidiaries have been closed
through the 1999 Fiscal Year.

         Section 4.08 Subsidiaries. Each of the Material Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, is duly qualified to transact business in
every jurisdiction where, by the nature of its business, such qualification is
necessary, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except where failure of any of the foregoing would not have or
reasonably be expected to have or cause a Material Adverse Effect. The Parent
has no Subsidiaries except for the Borrower and those Subsidiaries listed on
Schedule 4.08, as such schedule is supplemented from time to time, which
accurately sets forth each such Subsidiary's complete name and jurisdiction of
incorporation.

         Section 4.09 Investment Company Act. Neither the Parent, the Borrower
nor any of the Material Subsidiaries is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.

         Section 4.10 Public Utility Holding Company Act. Neither the Parent,
the Borrower nor any of the Material Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.

         Section 4.11 Ownership of Property; Liens. Each of the Parent, the
Borrower and the Material Subsidiaries has title to its properties sufficient
for the conduct of its business, and none of such property is subject to any
Lien except as permitted in Section 5.11.

         Section 4.12 No Default. Neither the Parent, the Borrower nor any of
the Material Subsidiaries is, to the Knowledge of their respective officers, in
default under or with respect to any agreement, instrument or undertaking to
which it is a party or by which it or any of

                                       49

<PAGE>

its property is bound which has had or reasonably would be expected to have or
cause a Material Adverse Effect. No Default or Event of Default has occurred and
is continuing, except as previously disclosed pursuant to Section 5.01(e).

         Section 4.13 Full Disclosure. All information heretofore furnished by
the Parent and the Borrower to the Agent or any Bank for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Parent and the Borrower to the
Agent or any Bank will be, to the Knowledge of their respective officers, true,
accurate and complete in every material respect or based on reasonable estimates
on the date as of which such information is stated or certified. The Parent and
the Borrower have disclosed to the Banks in writing any and all facts which have
had or would reasonably be expected to have or cause a Material Adverse Effect.

         Section 4.14 Environmental Matters.

         (a)      Except as set forth on Schedule 4.14, or disclosed pursuant to
Section 5.01(j), to the Knowledge of their respective officers and Plant
managers, (i) neither the Parent, the Borrower nor any Material Subsidiary is
subject, or may become subject as a result of the acquisition of the
Graniteville Assets, to any Environmental Liability which has had or would
reasonably be expected to have or cause a Material Adverse Effect and neither
the Parent, the Borrower nor any Material Subsidiary has been designated as a
potentially responsible party under CERCLA or under any state statute similar to
CERCLA, and (ii) none of the Properties has been identified on any current or
proposed (A) National Priorities List under 40 C.F.R. Section 300, (B) CERCLIS
list or (C) any list arising from a state statute similar to CERCLA.

         (b)      To the Knowledge of their respective officers and Plant
managers of the Borrower, no Hazardous Materials have been or are being used,
produced, manufactured, processed, treated, recycled, generated, stored,
disposed of, managed or otherwise handled at, or shipped or transported to or
from the Properties or are otherwise present at, on, in or under the Properties
or the Graniteville Assets, or, at or from any adjacent site or facility (except
for Hazardous Materials, such as cleaning solvents, pesticides and other
materials used or otherwise handled in the ordinary course of business in
material compliance with all applicable Environmental Requirements) that would
reasonably be expected to lead to any material Environmental Liabilities.

         (c)      To the Knowledge of their respective officers and Plant
managers, the Parent, Borrower, and each of the Material Subsidiaries and their
respective Affiliates, has procured all Environmental Authorizations necessary
for the conduct of its business (after giving effect to the acquisition of the
Graniteville Assets), and is in material compliance with all Environmental
Requirements in connection with the operation of the Properties and their
respective businesses (after giving effect to the acquisition of the
Graniteville Assets), except where failure to so procure or comply would not
reasonably be expected to lead to any material Environmental Liabilities.

         Section 4.15 Capital Stock. All Capital Stock, debentures, bonds, notes
and all other securities of the Parent, the Borrower and the Material
Subsidiaries presently issued and outstanding are validly and properly issued in
all material respects in accordance with all

                                       50

<PAGE>

applicable laws, including, but not limited to, the "Blue Sky" laws of all
applicable states and the federal securities laws. The issued shares of capital
stock of the Wholly Owned Subsidiaries are owned by the Parent free and clear of
any Lien or adverse claim. At least a majority of the issued shares of capital
stock of each of the Parent's other Subsidiaries (other than Wholly Owned
Subsidiaries) is owned by the Parent free and clear of any Lien or adverse
claim, except any which are permitted under Section 5.11.

         Section 4.16 Margin Stock. Neither the Parent, the Borrower nor any of
the Subsidiaries is engaged principally, or as one of its important activities,
in the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan will be used to purchase or carry any Margin Stock or to
extend credit to others for the purpose of purchasing or carrying any Margin
Stock, or be used for any purpose which violates, or which is inconsistent with,
the provisions of Regulation X.

         Section 4.17 Insolvency. After giving effect to the execution and
delivery of the Facility Documents and the making of the Loans under this
Agreement, neither the Parent, the Borrower nor AMGF will be "insolvent," within
the meaning of such term as used in O.C.G.A. Section 18-2-22 or as defined in
Section 101 of Title 11 of the United States Code or Section 2 of the Uniform
Fraudulent Transfer Act, or any other applicable state law pertaining to
fraudulent transfers, as each may be amended from time to time, or be unable to
pay its debts generally as such debts become due, or have an unreasonably small
capital to engage in any business or transaction, whether current or
contemplated.

                                    ARTICLE V

                                    COVENANTS

         Each of the Borrower and (by execution and delivery of the Parent
Guaranty and the Consent and Reaffirmation of Guarantors at the end hereof) the
Parent agrees that, so long as any Bank has any Commitment hereunder or any
amount payable hereunder or under any Note remains unpaid:

         Section 5.01 Information. The Parent and the Borrower will deliver to
each of the Banks:

         (a)      (i)      as soon as available and in any event within 90 days
after the end of each Fiscal Year, a consolidated balance sheet of the Parent
and the Consolidated Subsidiaries as of the end of such Fiscal Year and the
related consolidated statements of income, shareholders' equity and cash flows
for such Fiscal Year, setting forth in each case in comparative form the figures
for the previous Fiscal Year, all certified by Crisp Hughes Evans LLP or other
independent public accountants of nationally recognized standing, with such
certification to be free of exceptions and qualifications not acceptable to the
Required Banks, together with unaudited consolidating statements for: (A) each
Material Subsidiary (other than the Borrower), except for any Material
Subsidiary as to which there has been no change in excess of $100,000 in its
assets, liabilities or shareholders' equity since the immediately preceding
Fiscal Quarter; and (B) the Parent during any period in which: (1) the Borrower
is not the sole direct Subsidiary of the Parent; (2) the Parent has assets
(other than the stock of the

                                       51

<PAGE>

Borrower) having a book value in excess of $1,000,000; or (3) the Parent has
direct Debt (other than in connection with (x) Guarantees of Debt of the
Borrower or a Subsidiary of the Borrower and (y) Debt to a Subsidiary) in excess
of $1,000,000; and

                  (ii)     at the written request of the Required Banks, as soon
as practicable, and in any event within 90 days after the end of each Fiscal
Year in which either (a) the assets of the Borrower and its consolidated
Subsidiaries comprise less than 90% of the consolidated assets of the Parent and
the Consolidated Subsidiaries as of the end of such Fiscal Year, or (b) the
consolidated revenues of the Borrower and its consolidated Subsidiaries comprise
less than 90% of the consolidated revenues of the Parent and the Consolidated
Subsidiaries, furnish to the Agent the annual consolidated audit report of the
Borrower and its consolidated Subsidiaries, including a balance sheet, income
statement and statement of cash flow, together with the certification of the
above-described accounting firm, with such certification to be free of
exceptions and qualifications not acceptable to the Required Banks, prepared in
accordance with the standards set forth above with respect to the audit report
of the Parent; and

         (b)      as soon as available and in any event within 45 days after the
end of each of the first 3 Fiscal Quarters of each Fiscal Year, a consolidated
balance sheet of the Parent and the Consolidated Subsidiaries as of the end of
such Fiscal Quarter and the related statement of income and statement of cash
flows for such Fiscal Quarter and for the portion of the Fiscal Year ended at
the end of such Fiscal Quarter, setting forth in each case in comparative form
the figures for the corresponding portion of the previous Fiscal Year, all
certified (subject to normal year-end adjustments) as to fairness of
presentation, GAAP and consistency by the chief financial officer or the chief
accounting officer of the Borrower, together with unaudited consolidating
statements for: (i) each Material Subsidiary (other than the Borrower), except
for any Material Subsidiary as to which there has been no change in excess of
$100,000 in its assets, liabilities or shareholders' equity since the
immediately preceding Fiscal Quarter; and (ii) the Parent during any period in
which: (A) the Borrower is not the sole direct Subsidiary of the Parent; (B) the
Parent has assets (other than the stock of the Borrower) having a book value in
excess of $1,000,000; or (C) the Parent has direct Debt in excess of $1,000,000
(other than Debt of the type excluded in Section 5.01(a)(i)(B)(3));

         (c)      simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate,
substantially in the form of Exhibit F-1 (a "Compliance Certificate"), of the
chief financial officer or the chief accounting officer (i) of the Parent,
setting forth in reasonable detail the calculations required to establish
whether there was compliance with the requirements of Sections 5.03, 5.04, and
5.06 through 5.11, inclusive, on the date of such financial statements as of the
end of the Fiscal Quarter most recently ended, (ii) of the Borrower, stating
whether, to the Knowledge of such officer, any Default exists on the date of
such certificate and, if any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or proposes to take with
respect thereto, (iii) identifying by name each Consolidated Subsidiary, and
(iv) identifying by name any Material Subsidiary (other than the Borrower) as to
which there has been a change in excess of $100,000 in its assets, liabilities
or shareholders' equity since the immediately preceding Fiscal Quarter;

                                       52

<PAGE>

         (d)      simultaneously with the delivery of each set of annual
financial statements referred to in paragraph (a) above, a statement of the firm
of independent public accountants which reported on such statements to the
effect that nothing has come to their attention to cause them to believe that
any Default existed on the date of such financial statements under any of
Sections 5.03, 5.04, and 5.06 through 5.09, inclusive;

         (e)      within 5 Domestic Business Days after any officer of the
Parent or the Borrower becomes aware of the occurrence of any Default, a
certificate of the chief financial officer or the chief accounting officer of
the Parent or the Borrower setting forth the details thereof and the action
which the Parent or the Borrower is taking or proposes to take with respect
thereto;

         (f)      promptly upon the mailing thereof to the shareholders of the
Parent generally, copies of all financial statements, reports and proxy
statements so mailed;

         (g)      promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equivalent) and annual, quarterly or monthly reports which the
Parent or the Borrower shall have filed with the Securities and Exchange
Commission;

         (h)      from and after the adoption of any Plan, if and when any
member of the Controlled Group (i) gives or is required to give notice to the
PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with
respect to any Plan which might constitute grounds for a termination of such
Plan under Title IV of ERISA, or knows that the plan administrator of any Plan
has given or is required to give notice of any such reportable event, a copy of
the notice of such reportable event given or required to be given to the PBGC;
(ii) receives notice of complete or partial withdrawal liability under Title IV
of ERISA, a copy of such notice; or (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice;

         (i)      within 5 Domestic Business Days after any officer of the
Parent or the Borrower becomes aware of any action, suit or proceeding pending
or overtly threatened, against or affecting the Parent or the Borrower or any of
the Subsidiaries or with respect to which any of them may become subject as a
result of the acquisition of the Graniteville Assets, before any court or
arbitrator or any governmental body, agency or official which has or would
reasonably be expected to have or cause a Material Adverse Effect or which in
any manner draws into question the validity of or which has impaired or would
reasonably be expected to impair the ability of the Borrower or the Parent,
respectively, to perform its obligations under this Agreement or any of the
other Facility Documents to which it is a party, a certificate of the chief
financial officer or the chief accounting officer of the Parent or the Borrower
setting forth the details thereof and the action which the Parent or the
Borrower is taking or proposes to take with respect thereto;

         (j)      within 5 Domestic Business Days after any officer of the
Parent or the Borrower becomes aware (1) of any Environmental Liability to which
the Parent, the Borrower or any Material Subsidiary is subject, or may become
subject as a result of the acquisition of the Graniteville Assets, which has had
or would reasonably be expected to have or cause a Material

                                       53

<PAGE>

Adverse Effect, or that the Parent, the Borrower or any Material Subsidiary has
been designated as a potentially responsible party under CERCLA or under any
state statute similar to CERCLA, a certificate of the chief financial officer or
the chief accounting officer of the Parent or the Borrower setting forth the
details thereof and the action which the Parent or the Borrower is taking or
proposes to take with respect thereto;

         (k)      simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, and within 20 Business
Days after the last day of any fiscal month if an Audit/Appraisal Right Event
occurs at any time during such fiscal month, a certificate substantially in the
form of Exhibit F-2 (an "Asset Coverage Base Certificate") of the chief
financial officer or the chief accounting officer (i) of the Parent, setting
forth in reasonable detail the calculations required to determine the Asset
Coverage Base as of the end of such Fiscal Quarter or fiscal month, as
applicable, and (ii) certifying as to the accuracy of the information used to
calculate the Asset Coverage Base; and

         (l)      from time to time such additional information regarding the
financial position or business of the Parent, the Borrower and the Subsidiaries
as the Agent, at the request of any Bank, may reasonably request.

         Section 5.02 Inspection of Property, Books and Records; Field Audits;
and Appraisals.

         (a)      The Parent and the Borrower will keep, and cause each
Subsidiary to keep, proper books of record and account in which full, true and
correct entries to permit preparation of financial statements in conformity with
GAAP shall be made of all dealings and transactions in relation to its business
and activities.

         (b)      The Parent and Borrower will permit, and cause each Subsidiary
to permit, the Agent or any Bank, or the agents of the Agent or any such Bank,
upon reasonable prior notice given by or through the Agent and with such
frequency as the Agent and the Banks may reasonably desire, to visit and conduct
reasonable inspections of any of their respective properties, to examine and
make abstracts from any of their respective books and records and to discuss
their respective affairs, finances and accounts with their respective officers,
and, in coordination with such officers, employees and independent public
accountants, to inspect any and all of the Collateral, and to conduct field
audits of the Borrower's, the Parent's, and their respective Subsidiaries'
inventory (and all books, records, journals, orders, receipts, correspondence,
and other data related thereto). Any such visitations, inspections and field
audits shall be conducted during normal business hours with due regard for
safety policies and practices of the Borrower and the security of all personnel
and facilities, and with minimum interruption and disruption of the operations
at such facilities.

         (c)      In addition to the rights granted to the Agent and the Banks
elsewhere in this Section 5.02, the Parent and the Borrower agree that, if: (1)
either the Working Capital Obligations ever exceed $40,000,000 or the Asset
Coverage Base is less than $25,000,000 for a period of 5 consecutive business
days (either such event being an "Audit/Appraisal Right Event"), or (2) an Event
of Default occurs and is continuing, the Agent shall (unless directed not to do
so by the Required Banks) conduct, or have conducted by agents or certified
public

                                       54

<PAGE>

accountants of the Agent's choosing, after consultation with the Borrower
and the Banks, but in the Agent's sole determination, an additional field audit
of the Parent's, the Borrower's, and their respective Subsidiaries' inventory
and all books, records, journals, orders, receipts, correspondence, and other
data related thereto; provided, however, that if an Audit/Appraisal Right Event
has occurred and, during a period of 60 consecutive days after the occurrence of
such Audit/Appraisal Right Event, the Working Capital Obligations at no time
exceed $40,000,000 and the Asset Coverage Base is at no time less than
$25,000,000, and so long as no Event of Default has occurred and is continuing,
the Agent shall have no further right to conduct such additional field audit
pursuant to this Section 5.02(c) as a result of such Audit/Appraisal Right Event
(but such rights are reserved with respect to any subsequent Audit/Appraisal
Right Event). The Borrower agrees to pay all reasonable out-of-pocket expenses
incurred by the Agent in connection with such additional field audit.

         (d)      In addition to the rights granted to the Agent and the Banks
elsewhere in this Section 5.02, the Parent and the Borrower agree that the
Borrower shall pay for all reasonable out-of-pocket expenses incurred by the
Agent in conducting, or having conducted by agents or certified public
accountants of the Agent's choosing, addressed to the Agent and upon which the
Agent is expressly entitled to rely, after consultation with the Borrower and
the Banks, but in the Agent's sole determination, any follow-on field audits of
inventory and all books, records, journals, orders, receipts, correspondence,
and other data related thereto, that the Agent reasonably deems necessary to
resolve material discrepancies or other material incongruent data (as compared
to the Borrower's representations to the Agent and the Banks as to the inventory
included in the Asset Coverage Base), whether such follow-on audit relates to
the initial field audit referred to in Section 3.01(b)(xi) or a field audit
conducted pursuant to Section 5.02(c).

         (e)      In addition to the rights granted to the Agent and the Banks
elsewhere in this Section 5.02, the Parent and the Borrower agree that, if
either an Audit/Appraisal Right Event occurs or an Event of Default occurs and
is continuing, the Agent shall (unless directed not to do so by the Required
Banks) conduct, or have conducted by a professional appraiser of the Agent's
choosing, after consultation with the Borrower and the Banks (which consultation
shall include the identity and order of properties to be appraised so as to
minimize the cost thereof), but in the Agent's sole determination, an appraisal,
addressed to the Agent and upon which the Agent is expressly entitled to rely,
of the Company's property, plant and equipment; provided, however, that if an
Audit/Appraisal Right Event has occurred, so long as an Event of Default has not
occurred and is continuing, such appraisal shall be limited to so much of the
Borrower's property, plant, and equipment as is necessary for the orderly
liquidation value of such assets (as determined by such appraiser) to equal
$30,000,000 (appraising the equipment first in order to determine whether such
threshold has been satisfied), and that the Borrower shall pay the Agent for all
reasonable out-of-pocket expenses incurred by the Agent on account of such
appraisal; and provided, further, however, that if an Audit/Appraisal Right
Event has occurred and, during a period of 60 consecutive days after the
occurrence of such Audit/Appraisal Right Event, the Working Capital Obligations
at no time exceed $40,000,000 and the Asset Coverage Base at no time is less
than $25,000,000, and so long as no Event of Default has occurred and is
continuing, the Agent shall have no further right to conduct such additional
appraisal pursuant to this Section 5.02(e) as a result of such Audit/Appraisal
Right Event (but such rights are reserved with respect to any subsequent
Audit/Appraisal Right Event).

                                       55

<PAGE>

The Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the
Agent in connection with such appraisal.

         (f)      Each of the Parent and the Borrower agrees to cooperate and
assist in any visits, inspections, field audits, and appraisals provided for
this Section 5.02, so that such visits, inspections, field audits, and
appraisals may be conducted and performed in accordance with the provisions of
Section 5.02(b) without unnecessary or unreasonable hindrance and delay. Nothing
contained in Sections 5.02(c), (d), or (e) shall prohibit the Agent or the Banks
from conducting inspections, field audits, or appraisals respecting the Parent,
the Borrower, or their respective Subsidiaries at their own expense and in
accordance with the provisions of Section 5.02(b). The Agent agrees to provide
the Borrower and the Banks a summary of all field audit reports and appraisals
conducted pursuant to Section 5.02(c), (d) and (e) promptly upon the Agent's
receipt or preparation thereof, as the case may be; provided, that the Agent
shall have no obligation to provide to the Borrower any summaries of such field
audits, reports and appraisals obtained by it during the existence of an Event
of Default.

         Section 5.03 Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio, calculated at the end of each Fiscal Quarter, shall not be less than (a)
if the average daily principal balance of the Working Capital Obligations during
such Fiscal Quarter equals or exceeds $10,000,000, 1.65 to 1.00, and (b) in all
other cases, 1.25 to 1.0.

         Section 5.04 Minimum Consolidated Cash Flow. Consolidated Cash Flow,
calculated at the end of each Fiscal Quarter, for the Fiscal Quarter just ended
and the immediately preceding 3 Fiscal Quarters, shall equal or exceed
$63,000,000.

         Section 5.05 Intentionally Omitted.

         Section 5.06 Total Debt to Cash Flow Ratio. The Total Debt to Cash Flow
Ratio, calculated at the end of each Fiscal Quarter, shall not be greater than
the ratio set forth below for such Fiscal Quarter:

<TABLE>
<CAPTION>
------------------------------------------------------
FOR FISCAL QUARTERS ENDING:                  RATIO
<S>                                       <C>
------------------------------------------------------
On or after the Closing Date, but on or   3.50 to 1.00
before August 27, 2004
------------------------------------------------------
On or after August 28, 2004, but on or    3.25 to 1.00
before August 26, 2005
------------------------------------------------------
On or after August 27, 2005               3.00 to 1.00
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</TABLE>

         Section 5.07 Restricted Payments.

         (a)      The Parent and the Borrower shall not make any Restricted
Payments, except that Parent and the Borrower may, subject to the provisions of
paragraphs (b) and (c), below, make Restricted Payments (i) during the Fiscal
Year ending August 29, 2003, in an

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aggregate amount not to exceed $12,000,000, and (ii) during each Fiscal Year
thereafter, in an aggregate amount for such Fiscal Year not to exceed
$12,000,000, plus the amount (if any) carried forward from the immediately
preceding Fiscal Year, as such amount carried forward is determined in
accordance with paragraph (b), below.

         (b)      The amount by which $12,000,000 exceeds the aggregate
Restricted Payments made by the Parent and the Borrower during one Fiscal Year
may be carried forward to the next succeeding Fiscal Year, but to no Fiscal
Years thereafter; provided, however, that the amount to be carried forward from
one Fiscal Year to the next shall not exceed $4,000,000. For purposes of
calculating any amount to be carried forward, all Restricted Payments made
during one Fiscal Year shall be first applied against the standard $12,000,000
limit applicable to such Fiscal Year.

         (c)      Any of the foregoing to the contrary notwithstanding, neither
the Borrower nor the Parent shall make any Restricted Payment if at the time
such Restricted Payment is to be made a Default shall have occurred and be
continuing or, after giving effect thereto, a Default shall occur.

         Section 5.08 Senior Debt to Cash Flow. The Senior Debt to Cash Flow
Ratio, calculated at the end of each Fiscal Quarter, shall not be greater than
2.00 to 1.00.

         Section 5.09 Loans or Advances. Neither the Parent, the Borrower nor
any of the Material Subsidiaries shall make loans or advances to any Person
except, so long as no Event of Default is in existence:

                  (A) (i) loans or advances to employees not exceeding
$2,000,000 in the aggregate principal amount outstanding at any time, in each
case made in the ordinary course of business and consistent with practices
existing on August 25, 1995; (ii) deposits required by government agencies or
public utilities; and (iii) loans or advances to Wholly Owned Subsidiaries
(other than from the Parent to the Borrower or as provided in Section 5.09(B) or
(C)) not exceeding $1,000,000 in the aggregate outstanding; provided that after
giving effect to the making of any loans, advances or deposits permitted by this
Section 5.09(A), the aggregate of all loans and advances permitted in this
Section 5.09(A) does not exceed $4,000,000;

                  (B) loans or advances from the Parent to the Borrower or from
the Borrower to the Parent, or from the Borrower to AMGF (i) pursuant to the
AMGF/Graniteville Transaction and within the limits contained in the definition
thereof and (ii) otherwise to fund the ongoing working capital needs and capital
expenditures of AMGF in the ordinary course of business;

                  (C) loans or advances to the Receivables Subsidiary evidenced
by a Purchase Money Note; and

                  (D) other loans or advances (not including any loans and
advances of the types described in clauses (A), (B) or (C) above) in an
aggregate amount, together with Investments permitted by clause (viii) of
Section 5.10, not exceeding the sum of $10,000,000.

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         Section 5.10 Investments. Neither the Parent, the Borrower nor any of
the Consolidated Subsidiaries shall make Investments in any Person except as
permitted by Section 5.09 and except Investments in (i) direct obligations of
the United States Government maturing within one year, (ii) certificates of
deposit issued by a commercial bank whose credit is satisfactory to the Agent,
(iii) commercial paper rated A1 or the equivalent thereof by Standard & Poor's
Corporation or P1 or the equivalent thereof by Moody's Investors Service, Inc.
and in either case maturing within 6 months after the date of acquisition, (iv)
tender bonds the payment of the principal of and interest on which is fully
supported by a letter of credit issued by a United States bank whose long-term
certificates of deposit are rated at least AA or the equivalent thereof by
Standard & Poor's Corporation and Aa or the equivalent thereof by Moody's
Investors Service, Inc., (v) Investments by Borrower in the Receivables
Subsidiary and obligations consisting of Standard Securitization Undertakings,
(vi) Investments by the Receivables Subsidiary in a Special Purpose Vehicle and
obligations consisting of Standard Securitization Undertakings, (vii) loans and
advances permitted by Section 5.09, and Investments in the Borrower and AMGF (x)
pursuant to the AMGF/Graniteville Transaction and within the limits contained in
the definition thereof and (y) otherwise to fund the ongoing working capital
needs and capital expenditures of AMGF in the ordinary course of business and
(viii) other Investments in an aggregate amount on and after the Closing Date,
together with Investments permitted by clause (D) of Section 5.09, not exceeding
the sum of $10,000,000.

         Section 5.11 Negative Pledge. Neither the Parent, the Borrower nor any
Consolidated Subsidiary will create, assume or suffer to exist any Lien on any
asset now owned or hereafter acquired by it, except: (i) as to the Collateral,
Liens securing the Obligations and the Permitted Encumbrances, and (ii) as to
other assets:

         (a)      Liens existing on the date of this Agreement securing Debt
outstanding on the Original Closing Date and described on Schedule 5.11;

         (b)      any Lien existing on any asset of any Person at the time such
Person becomes a Consolidated Subsidiary and not created in contemplation of
such event;

         (c)      any Lien on any asset securing Debt incurred or assumed for
the purpose of financing all or any part of the cost of acquiring or
constructing such asset, provided that such Lien attaches to such asset
concurrently with or within 18 months after the acquisition or completion of
construction thereof;

         (d)      any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a Consolidated
Subsidiary and not created in contemplation of such event;

         (e)      any Lien existing on any asset prior to the acquisition
thereof by the Borrower or a Consolidated Subsidiary and not created in
contemplation of such acquisition;

         (f)      Liens securing Debt owing by any Subsidiary to the Borrower;

         (g)      any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
paragraphs of this Section,

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provided that (i) such Debt is not secured by any additional assets, and (ii)
the amount of such Debt secured by any such Lien is not increased;

         (h)      Liens incidental to the conduct of its business or the
ownership of its assets which (i) do not secure Debt and (ii) do not in the
aggregate materially detract from the value of its assets or materially impair
the use thereof in the operation of its business;

         (i)      any Lien on Margin Stock;

         (j)      Liens on Receivables Program Assets pursuant to a Receivables
Securitization Program and Liens securing the Borrower's obligations respecting
an Approved Equipment Financing to the extent contemplated by the Approved
Equipment Financing Intercreditor Agreement; and

         (k)      Liens (other than on the Transferor Certificate) not otherwise
permitted by the foregoing paragraphs of this Section securing Debt (other than
indebtedness represented by the Notes) in an aggregate principal amount at any
time outstanding not to exceed $3,000,000;

Provided Liens permitted by the foregoing paragraphs (b) through (e) inclusive,
and (i) shall at no time secure Debt in an aggregate amount greater than
$4,000,000.

         Section 5.12 Maintenance of Existence. The Parent and the Borrower
shall, and shall cause each Material Subsidiary to, maintain its existence and
carry on its business in substantially the same manner and in substantially the
same fields as such business is now carried on and maintained, except as
permitted by Section 5.14.

         Section 5.13 Dissolution. Neither the Parent, the Borrower nor any of
the Material Subsidiaries shall suffer or permit dissolution or liquidation
either in whole or in part or redeem or retire any shares of its own stock or
that of any Subsidiary, except as permitted by Section 5.07 or through merger or
reorganization to the extent permitted by Section 5.14.

         Section 5.14 Consolidations, Mergers and Sales of Assets. The Parent
and the Borrower will not, nor will it permit any Subsidiary to, consolidate or
merge with or into, or sell, lease or otherwise transfer all or any substantial
part of its assets to, any other Person (including in a sale and leaseback
transaction, but excluding sales of inventory in the ordinary course of
business), or discontinue or eliminate any business line or segment, provided
that (a) the Borrower may merge with another Person if (i) such Person was
organized under the laws of the United States of America or one of its states,
(ii) the Borrower is the corporation surviving such merger and (iii) immediately
after giving effect to such merger, no Default shall have occurred and be
continuing, (b) Subsidiaries other than the Borrower may merge with one another,
or with and into the Parent, with the Parent being the surviving corporation,
and (c) the foregoing limitation on the sale, lease or other transfer of assets
and on the discontinuation or elimination of a business line or segment shall
not prohibit, (1) any transfers of Receivables Program Assets pursuant to a
Receivables Securitization Program prior to termination of such program, the
transfer of the Graniteville Indigo Dyeing Facility to AMGF pursuant to the
AMGF/Graniteville Transaction, or the transfer of raw materials, supplies,
inventory and similar production-related items between the Borrower and AMGF in
the ordinary course of business, or (2) during any Fiscal Year, any other
transfer of assets (other than the Transferor Certificate, which may not be

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transferred) for 100% cash consideration or the discontinuance or elimination of
a business line or segment (in a single transaction or in a series of related
transactions) unless the aggregate assets to be so transferred or utilized in a
business line or segment to be so discontinued, when combined with all other
assets transferred, and all other assets utilized in all other business lines or
segments discontinued, during such Fiscal Year exceeds $10,000,000, but in any
event subject to the provisions of Section 2.08(b)(i).

         Section 5.15 Use of Proceeds. The proceeds of the Loans will be used
(i) for working capital and general business purposes of the Parent, the
Borrower or, to the extent permitted herein, any Subsidiaries and (ii) to
refinance certain Obligations existing under the Original Credit Agreement
through the amendment and restatement of the Original Credit Agreement, but for
no other purpose. No portion of the proceeds of the Loans will be used by the
Borrower or any Subsidiary (A) in connection with, whether directly or
indirectly, any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other corporation,
except in a negotiated transaction, (B) directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any Margin
Stock, or (C) for any purpose in violation of any applicable law or regulation.

         Section 5.16 Compliance with Laws; Payment of Taxes. The Parent and the
Borrower will, and will cause each Subsidiary and each member of the Controlled
Group to, comply with applicable laws (including but not limited to, from and
after the adoption of a Plan, ERISA), regulations and similar requirements of
governmental authorities (including but not limited to PBGC), except where the
necessity of such compliance is being contested in good faith through
appropriate proceedings, or has not had and would not reasonably be expected to
have or cause of Material Adverse Effect. The Parent and the Borrower will, and
will cause each Subsidiary to, pay promptly when due all taxes, assessments,
governmental charges, claims for labor, supplies, rent and other obligations
which, if unpaid, would become a lien against the property of the Parent, the
Borrower or any Subsidiary, except liabilities being contested in good faith and
against which, if required, the Borrower will set up reserves in accordance with
GAAP.

         Section 5.17 Insurance.

         (a)      The Parent and the Borrower will maintain, and will cause each
Material Subsidiary to maintain (either in the name of the Parent or the
Borrower or in such Subsidiary's own name), with financially sound and reputable
insurance companies, insurance on all its property, or self insurance, in each
case consistent with practices existing on the Original Closing Date, all as
described on Schedule 5.17.

         (b)      Net Cash Proceeds received from any Casualty or Condemnation
must be applied to either (i) the payment of the Obligations (pursuant to
Section 2.11), or (ii) the repair, replacement, and/or restoration of the
Collateral as provided in this section. If an Event of Default has occurred and
is continuing, then, in such event, the Agent, at the direction of the Required
Banks (acting in their sole discretion), shall determine whether such Net Cash
Proceeds will be applied to the Obligations (pursuant to Section 2.11(e)) or the
repair, replacement, and/or restoration of the Collateral. If no Event of
Default has occurred, the Borrower shall determine whether such Net Cash
Proceeds will be applied to the Obligations (pursuant to Section 2.11(d)) or the
repair, replacement, and/or restoration of the Collateral.

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         Section 5.18 Change in Fiscal Year. The Parent and the Borrower will
not, and will not permit any Material Subsidiary to, change its Fiscal Year
without the consent of the Required Banks.

         Section 5.19 Maintenance of Property. The Parent and the Borrower
shall, and shall cause each Material Subsidiary to, maintain all of its
properties and assets in good condition, repair and working order, ordinary wear
and tear excepted and subject to prudent business practices.

         Section 5.20 Environmental Notices. The Parent and the Borrower shall
furnish to the Agent prompt written notice of all material Environmental
Liabilities, pending, threatened or anticipated Environmental Proceedings,
Environmental Notices, Environmental Judgments and Orders, and, to the Knowledge
of their respective officers and Plant managers, Environmental Releases at, on,
in, under or in any way affecting the Properties or any adjacent property, and
all facts, events, or conditions, that would reasonably be anticipated to lead
to any material Environmental Liabilities.

         Section 5.21 Environmental Matters. The Parent and the Borrower and its
Subsidiaries will not knowingly, and will not knowingly permit any Third Party
to, use, produce, manufacture, process, treat, recycle, generate, store, dispose
of, manage at, or otherwise handle, or ship or transport to or from the
Properties any Hazardous Materials (except for Hazardous Materials such as
cleaning solvents, pesticides and other similar materials used or otherwise
handled in the ordinary course of business in material compliance with all
applicable Environmental Requirements) that would reasonably be expected to lead
to any material Environmental Liabilities.

         Section 5.22 Environmental Release. Each of the Parent and the Borrower
agrees that upon the occurrence of any material Environmental Release known to
any of their respective officers or Plant managers at or on any of the
Properties it will act immediately to investigate the extent of, and to take
appropriate remedial action with respect to such Environmental Release, whether
or not ordered or otherwise directed to do so by any Environmental Authority.

         Section 5.23 Additional Consolidated Senior Debt; Debt of Receivables
Subsidiary. Neither the Parent nor the Borrower shall incur or permit to exist,
or permit any Consolidated Subsidiary other than the Receivables Subsidiary to
incur or permit to exist, any Consolidated Senior Debt not in existence on the
Original Closing Date, and extensions, renewals, refinancings or refundings
thereof (provided that the amount of such Consolidated Senior Debt is not
increased), other than (i) the Obligations; (ii) Debt permitted to be secured by
Liens permitted by Section 5.11; (iii) Debt of the types described in clause
(vii) of the definition of Debt which is incurred in the ordinary course of
business in connection with the sale or purchase of goods or to assure
performance of an obligation to a utility or a governmental entity or a worker's
compensation obligation; (iv) Receivables Program Obligations; (v) Debt
permitted by Section 5.09; and (vi) other Debt in an aggregate amount
outstanding at any time not exceeding $4,000,000. Nothing in the foregoing shall
prohibit the Borrower from incurring obligations incurred in connection with
Interest Rate Protection Agreements. The Borrower

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shall not permit the Receivables Subsidiary to incur any Debt or other
liabilities other than in connection with the Receivables Securitization
Program.

         Section 5.24 Transactions with Affiliates. Neither the Borrower nor any
of its Subsidiaries shall enter into, or be a party to, any transaction with any
Affiliate of the Borrower or such Subsidiary (which Affiliate is not the
Borrower, the Parent or a Subsidiary and in any event excluding the Receivables
Securitization Program), except as permitted by law and in the ordinary course
of business and pursuant to reasonable terms which are no less favorable to
Borrower, the Parent or such Subsidiary than would be obtained in a comparable
arm's length transaction with a Person which is not an Affiliate. Upon request
of the Agent, the Borrower shall fully disclose the terms of any such
transaction.

         Section 5.25 Collateral.

         (a)      All manufacturing plants of the Borrower are listed on
Schedule 5.25, which shows, as to each Plant: (i) the City, Town or other local
jurisdiction, and County and State of its location; (ii) whether the Property on
which such Plant is located is owned or leased by the Borrower, and if leased,
the name and address of the owner; (iii) all Liens (other than Permitted
Encumbrances) on the Property on which such Plant is located; and (iv) the name,
address and type of interest of any Third Party whose consent is required in
connection with the execution, delivery, recording and performance of a Mortgage
as to such Plant or related Property, and whether such consent has been
obtained. If the Borrower opens any additional manufacturing plants, it shall
promptly furnish to the Agent and the Banks a supplement to Schedule 5.25
including such additional plant and a Mortgage and appropriate UCC-1 financing
statements requested by the Agent with respect thereto.

         (b)      It is the intent of the parties hereto that the Obligations
shall be secured by the Collateral (including the Rolling Stock, if notice is
given by the Agent pursuant to the provisions of Section 9.7 of the Security
Agreement), subject to the provisions of Section 9.18 regarding the release of
the Receivables Program Assets. At the Original Closing Date, the Borrower and
the Parent, as applicable, executed and delivered to the Agent (i) the Security
Agreement and UCC-1 financing statements relating to the personal property
included in the Graniteville Assets, (ii) the Pledge Agreement, (iii) the
Mortgages (undated) and UCC-1 financing statements relating to the fixtures
located at the premises described therein and (iv) the Borrower Pledge
Agreement, the Receivables Subsidiary Pledged Stock and the Purchase Money Note,
and the Agent has released the Receivables Program Assets pursuant to such
Section 9.18. The Mortgages as to the Plants were dated on or about August 30,
2001, filed between September 10, 2001, and October 23, 2001, approximately, and
became Operative Mortgages, and UCC-1 financing statements related to the
fixtures located at the premises described therein were filed by the Agent in
accordance with revised Article 9 of the Uniform Commercial Code, as in effect
at the time of filing in the state where such premises are located. The Borrower
agrees that it shall, upon Agent's request, amend the Mortgages and financing
statements to the extent necessary to reflect any relevant amendments to the
Original Credit Agreement occurring since the Mortgages were executed and
delivered by the Borrower and re-execute such Mortgages. The Borrower shall pay
all recording fees and costs and stamp, intangible or other taxes payable in
connection with the filing for record of the Mortgages, the financing
statements, and any amendments thereto (collectively, the "Recording Expenses").

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         (c)      Following the recording of a Mortgage as to any Plant pursuant
to paragraph (b) above, the Borrower will, from time to time as to individual
Plants, at the request of the Agent, deliver to the Agent at the earliest
practicable time all of the Real Property Documentation relating to such Plant.

         (d)      As a condition to the effectiveness of the Second Amendment,
AMGF was required to execute and deliver to the Agent the AMGF Documents. For
all purposes under paragraphs (b) through (c), inclusive, of Section 5.25 (other
than the requirement for execution and delivery on the Original Closing Date),
and the rights of the Agent and the Banks thereunder: (i) the AMGF Security
Agreement shall be subject to the same terms and provisions thereof as apply to
the Security Agreement, as if it were the Security Agreement; (ii) the AMGF
Mortgage shall be subject to the same terms and provisions thereof as apply to
the Mortgages, as if it were a Mortgage; and (iii) the AMGF Plant shall be
subject to the same terms and provisions thereof as apply to the Plants, as if
it were a Plant. Pursuant to this Agreement and the Global Amendment Agreement,
the Borrower Pledge Agreement was amended to add the pledge of the AMGF Pledged
Stock.

         (e)      To the extent requested by the Agent after the Closing Date,
the Borrower agrees to (i) execute and deliver such amendments to the Mortgages
as the Agent may reasonably request to reflect the terms and conditions hereof,
and to pay the cost of recordation of any such amendments, and (ii) pay the
costs of title examinations of up to all parcels of real property that are
subject to the Lien of the Operative Mortgages, such examinations to be
performed by examiners selected by the Agent after consultation with the
Borrower.

         Section 5.26 Subordinated Debt.

         (a)      So long as any Obligations remain outstanding and the
Commitments have not been terminated, the Borrower will not, except in
connection with an Acceptable Refinancing: (i) make any prepayments (whether
optional or mandatory) of principal of or other amounts under the 10.25%
Subordinated Notes or any other obligations constituting Subordinated Debt, or
purchase or make any deposits for the defeasance of the 10.25% Subordinated
Notes or any other obligations constituting Subordinated Debt; or (ii) amend or
modify any of the documents pertaining to the Subordinated Debt to (1) shorten
the maturity thereof, (2) raise the interest rate, fees or other amounts payable
with respect thereto, (3) change any of the subordination provisions thereof or
(4) make any of the covenants contained therein more restrictive. The Agent
shall furnish to the Banks, promptly after receipt by the Agent, copies of any
drafts received by it of (A) any proposed amendments to the documents pertaining
to the 10.25% Subordinated Notes and (B) documents pertaining to any
Subordinated Debt proposed to be issued after the Closing Date.

         (b)      The Borrower agrees that, contemporaneously with the
consummation of any Acceptable Refinancing, (i) any and all of Borrower's
obligations related to such Acceptable Refinancing shall, regardless of the
terms thereof, constitute "Subordinated Debt" for all purposes of the Loan
Documents and (ii) the terms of Section 5.26(a) shall apply with equal force to
the Borrower's obligations under such Acceptable Refinancing, all to the same
extent such terms currently apply to the 10.25% Subordinated Notes.

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                                   ARTICLE VI

                                    DEFAULTS

         Section 6.01 Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:

         (a)      (i) the Borrower shall fail to pay when due any principal of
any Loan or Reimbursement Obligation or shall fail to pay any interest on any
Loan or Reimbursement Obligation within 5 Domestic Business Days after such
interest shall become due, or the Borrower, the Parent or AMGF shall fail to pay
any fee or other amount payable hereunder or under any of the other Facility
Documents to which it is a party within 5 Domestic Business Days after the later
of (A) the date such fee or other amount becomes due; or

         (b)      the Borrower or the Parent shall fail to observe or perform
any covenant contained in Sections 5.01(j), 5.02(b), 5.03, 5.04, 5.06 to 5.08,
inclusive, Sections 5.11 or 5.18; or

         (c)      any of the Borrower, the Parent, or AMGF, respectively, shall
fail to observe or perform any covenant or agreement contained in this Agreement
or any other Facility Document to which it is a party (other than those covered
by paragraph (a) or (b) above) and such failure shall not have been cured within
30 days after the earlier to occur of (i) written notice thereof has been given
to the Borrower by the Agent at the request of any Bank or (ii) an officer of
the Borrower, the Parent or AMGF otherwise becomes aware of any such failure; or

         (d)      any representation, warranty, certification or statement made
by the Borrower, the Parent, or AMGF, respectively, in Article IV of this
Agreement or in any other Facility Document to which it is a party, or in any
certificate, financial statement or other document delivered pursuant to this
Agreement or any other Facility Document shall prove to have been incorrect or
misleading in any material respect when made (or deemed made); or

         (e)      the Borrower or any Material Subsidiary shall fail to make any
payment in respect of Debt outstanding (other than the Notes) in an amount in
excess of $2,000,000 when due or within any applicable grace period; or

         (f)      any event or condition shall occur which results in the
acceleration of the maturity of Debt outstanding of the Parent, the Borrower or
any Material Subsidiary (including, without limitation, any required mandatory
prepayment or "put" of such Debt to the Parent, the Borrower or any Material
Subsidiary) or enables (or, with the giving of notice or lapse of time or both,
would enable) the holders of such Debt or any Person acting on such holders'
behalf to accelerate the maturity thereof (including, without limitation, any
required mandatory prepayment or "put" of such Debt to the Parent, the Borrower
or any Material Subsidiary, if in any of the foregoing events the amount of Debt
involved is in excess of $2,000,000; or

         (g)      the Parent, the Borrower or any Material Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar

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official of it or any substantial part of its property, or shall consent to any
such relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall make a
general assignment for the benefit of creditors, or shall fail generally to pay
its debts as they become due, or shall take any corporate action to authorize
any of the foregoing; or

         (h)      an involuntary case or other proceeding shall be commenced
against the Parent, the Borrower or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered against the Parent,
the Borrower or any Material Subsidiary under the federal bankruptcy laws as now
or hereafter in effect; or

         (i)      the Parent, the Borrower or any member of the Controlled Group
shall fail to pay when due any material amount which it shall have become liable
to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans shall be filed under Title IV of ERISA by the
Borrower, any member of the Controlled Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate or to cause a trustee to be appointed to
administer any such Plan or Plans or a proceeding shall be instituted by a
fiduciary of any such Plan or Plans to enforce Section 515 or 4219(c)(5) of
ERISA and such proceeding shall not have been dismissed within 30 days
thereafter; or a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any such Plan or Plans must be
terminated; provided, in each case, that the effect of any of the foregoing
would reasonably be expected to result in an unfunded liability in excess of
$2,000,000; or

         (j)      one or more judgments or orders for the payment of money in an
aggregate amount in excess of $1,000,000 (exclusive of amounts covered by
insurance) shall be rendered against the Parent, the Borrower or any Material
Subsidiary and such judgment or order shall continue unsatisfied and unstayed
for a period of 30 days; or

         (k)      a federal tax lien for an amount in excess of $2,000,000 shall
be filed against the Borrower or any Subsidiary under Section 6323 of the Code
or a lien of the PBGC shall be filed against the Borrower or any Subsidiary
under Section 4068 of ERISA and in either case such lien shall remain
undischarged for a period of 25 days after the date of filing; or

         (l)      G. Stephen Felker or his estate shall cease to maintain voting
control over more than 50% of the Capital Stock of the Parent, or the Borrower
shall cease to be a Wholly Owned Subsidiary; or

         (m)      the occurrence of any event, act, occurrence, or condition
which the Required Banks reasonably determine either has or is likely to have or
cause a Material Adverse Effect;

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         (n)      (i) the Security Agreement, the Pledge Agreement, any
Operative Mortgage, the Parent Guaranty, any of the AMGF Documents or the
Borrower Pledge Agreement, shall cease, for any reason, to be in full force and
effect or any party thereto (other than the Agent or the Banks) shall so assert
in writing; or (ii) the Security Agreement, the Pledge Agreement, any Operative
Mortgage, the AMGF Security Agreement or the Borrower Pledge Agreement shall
cease to be effective to grant a Lien on the Collateral described therein with
the priority purported to be created thereby;

Then, and in every such event, the Agent shall: (i) if requested by the Required
Banks, by notice to the Borrower terminate the Commitments and they shall
thereupon terminate; (ii) if requested by the Required Banks, by notice to the
Borrower declare the Revolver Loan Notes (together with accrued interest
thereon) to be, and the Notes (including the Swing Loan Note) shall thereupon
become, immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower
together with interest at the Default Rate accruing on the principal amount
thereof from and after the date of such Event of Default; provided that if any
Event of Default specified in paragraph (g) or (h) above occurs with respect to
the Borrower, without any notice to the Borrower or any other act by the Agent
or the Banks, the Commitments shall thereupon terminate and the Notes (together
with accrued interest thereon) shall become immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower together with interest thereon at the Default Rate
accruing on the principal amount thereof from and after the date of such Event
of Default; (iii) exercise any rights, powers or remedies under any one, or
more, or all of the Facility Documents. In addition to the foregoing, if an
Event of Default shall have occurred and be continuing, the Borrower shall be
obligated to deposit with the Agent cash collateral in an amount equal to 100%
of the Letter of Credit Obligations. Notwithstanding the foregoing, the Agent
shall have available to it all other remedies at law or equity, and shall
exercise any one or all of them at the request of the Required Banks.

         Section 6.02 Notice of Default. The Agent shall give notice to the
Borrower of any Default under Section 6.01(c) promptly upon being requested to
do so by any Bank and shall thereupon notify all the Banks thereof.

                                   ARTICLE VII

                                    THE AGENT

         Section 7.01 Appointment; Powers and Immunities. Each Bank hereby
irrevocably appoints and authorizes the Agent to act as its agent hereunder and
under the other Facility Documents, and as collateral agent under the Mortgage
and with respect to any Interest Rate Protection Agreement to which such Bank is
a party, with such powers as are specifically delegated to the Agent by the
terms hereof and thereof, together with such other powers as are reasonably
incidental thereto. The Agent: (a) shall have no duties or responsibilities
except as expressly set forth in this Agreement and the other Facility
Documents, and shall not by reason of this Agreement or any other Facility
Document be a trustee for any Bank; (b) shall not be responsible to the Banks
for any recitals, statements, representations or warranties contained in this
Agreement or any other Facility Document, or in any certificate or other
document referred to or provided for in, or received by any Bank under, this
Agreement or any other Facility

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Document, or for the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Facility Document or any other
document referred to or provided for herein or therein or for any failure by the
Borrower to perform any of its obligations hereunder or thereunder; (c) shall
not be required to initiate or conduct any litigation or collection proceedings
hereunder or under any other Facility Document except to the extent requested by
the Required Banks, and then only on terms and conditions satisfactory to the
Agent, and (d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Facility Document or any other document
or instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful
misconduct. The Agent may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The provisions of this
Article VII are solely for the benefit of the Agent and the Banks, and the
Borrower shall not have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement
and under the other Facility Documents, the Agent shall act solely as agent of
the Banks and does not assume and shall not be deemed to have assumed any
obligation towards or relationship of agency or trust with or for the Borrower.
The duties of the Agent shall be ministerial and administrative in nature, and
the Agent shall not have by reason of this Agreement or any other Facility
Document a fiduciary relationship in respect of any Bank.

         Section 7.02 Reliance by Agent. The Agent shall be entitled to rely
upon any certification, notice or other communication (including any thereof by
telephone, telefax, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants or
other experts selected by the Agent. As to any matters not expressly provided
for by this Agreement or any other Facility Document, the Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
thereunder in accordance with instructions signed by the Required Banks, and
such instructions of the Required Banks in any action taken or failure to act
pursuant thereto shall be binding on all of the Banks.

         Section 7.03 Defaults. The Agent shall not be deemed to have knowledge
of the occurrence of a Default or an Event of Default (other than the nonpayment
of principal of or interest on the Loans) unless the Agent has received notice
from a Bank or the Borrower specifying such Default or Event of Default and
stating that such notice is a "Notice of Default". In the event that the Agent
receives such a notice of the occurrence of a Default or an Event of Default,
the Agent shall give prompt notice thereof to the Banks. The Agent shall give
each Bank prompt notice of each nonpayment of principal of or interest on the
Loans whether or not it has received any notice of the occurrence of such
nonpayment. The Agent shall (subject to Section 9.06) take such action hereunder
with respect to such Default or Event of Default as shall be directed by the
Required Banks, provided that, unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Banks.

         Section 7.04 Rights of Agent as a Bank. With respect to the Loans made
by it, Wachovia, in its capacity as a Bank hereunder shall have the same rights
and powers hereunder as any other Bank and may exercise the same as though it
were not acting as the Agent, and the

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term "Bank" or "Banks" shall, unless the context otherwise indicates, include
Wachovia, in its individual capacity. The Agent may (without having to account
therefor to any Bank) accept deposits from, lend money to and generally engage
in any kind of banking, trust or other business with the Borrower (and any of
its Affiliates) as if it were not acting as the Agent, and the Agent may accept
fees and other consideration from the Borrower (in addition to any agency fees
and arrangement fees heretofore agreed to between the Borrower and the Agent)
for services in connection with this Agreement or any other Facility Document or
otherwise without having to account for the same to the Banks.

         Section 7.05 Indemnification. Each Bank severally agrees to indemnify
the Agent, to the extent the Agent shall not have been reimbursed by the
Borrower, ratably in accordance with its Commitment, for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including, without limitation, counsel fees and disbursements)
or disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or any other Facility Document or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (excluding, unless an Event of Default has
occurred and is continuing, the normal administrative costs and expenses
incident to the performance of its agency duties hereunder) or the enforcement
of any of the terms hereof or thereof or any such other documents; provided,
however that no Bank shall be liable for any of the foregoing to the extent they
arise from the gross negligence or wilful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished.

         Section 7.06 CONSEQUENTIAL DAMAGES. THE AGENT SHALL NOT BE RESPONSIBLE
OR LIABLE TO ANY BANK, THE BORROWER OR ANY OTHER PERSON OR ENTITY FOR ANY
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF
THIS AGREEMENT, THE OTHER FACILITY DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.

         Section 7.07 Payee of Note Treated as Owner. The Agent may deem and
treat each Person in whose name a Loan is registered as the owner thereof as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have been filed with the Agent and the
provisions of Section 9.08(c) have been satisfied. Any requests, authority or
consent of any Person who at the time of making such request or giving such
authority or consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of that Note or of any Note or
Notes issued in exchange therefor or replacement thereof.

         Section 7.08 Nonreliance on Agent and Other Banks. Each Bank agrees
that it has, independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed appropriate, made
its own credit analysis of the Borrower and decision to enter into this
Agreement and that it will, independently and without reliance upon the Agent or
any other Bank, and based on such documents and information as it

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shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or any of the
other Facility Documents. The Agent shall not be required to keep itself
informed as to the performance or observance by the Borrower of this Agreement
or any of the other Facility Documents or any other document referred to or
provided for herein or therein or to inspect the properties or books of the
Borrower or any other Person. Except for notices, reports and other documents
and information expressly required to be furnished to the Banks by the Agent
hereunder or under the other Facility Documents, the Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of the Borrower or any
other Person (or any of their Affiliates) which may come into the possession of
the Agent.

         Section 7.09 Failure to Act. Except for action expressly required of
the Agent hereunder or under the other Facility Documents, the Agent shall in
all cases be fully justified in failing or refusing to act hereunder and
thereunder unless it shall receive further assurances to its satisfaction by the
Banks of their indemnification obligations under Section 7.05 against any and
all liability and expense which may be incurred by the Agent by reason of
taking, continuing to take, or failing to take any such action.

         Section 7.10 Resignation or Removal of Agent. Subject to the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign at any time by giving notice thereof to the Banks and the Borrower and
the Agent may be removed at any time with or without cause by the Required
Banks. Upon any such resignation or removal, the Required Banks shall have the
right to appoint a successor Agent, provided that the Borrower shall have the
right to consent to any such successor Agent which is not a Bank, which consent
shall not be unreasonably withheld or delayed. If no successor Agent shall have
been so appointed by the Required Banks and shall have accepted such appointment
within 30 days after the retiring Agent's notice of resignation or the Required
Banks' removal of the retiring Agent, then the retiring Agent may, on behalf of
the Banks, appoint a successor Agent. Any successor Agent shall be a bank or
commercial finance company which has a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation or removal hereunder as Agent,
the provisions of this Article VII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent hereunder.

                                  ARTICLE VIII

                      CHANGE IN CIRCUMSTANCES; COMPENSATION

         Section 8.01 Basis for Determining Interest Rate Inadequate or Unfair.
If on or prior to the first day of any Interest Period:

         (a)      the Agent determines that deposits in Dollars (in the
applicable amounts) are not being offered in the relevant market for such
Interest Period, or

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         (b)      the Required Banks advise the Agent that the London Interbank
Offered Rate as determined by the Agent will not adequately and fairly reflect
the cost to such Banks of funding Euro-Dollar Loans for such Interest Period,

the Agent shall forthwith give notice thereof to the Borrower and the Banks,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
Euro-Dollar Loans shall be suspended. Unless the Borrower notifies the Agent at
least 2 Domestic Business Days before the date of any Borrowing of Euro-Dollar
Loans for which a Notice of Borrowing has previously been given that it elects
not to borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.

         Section 8.02 Illegality. If, after the date hereof, the adoption of any
applicable law, rule or regulation, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof (any such agency being referred to as an "Authority" and any such event
being referred to as a "Change of Law"), or compliance by any Bank (or its
Lending Office) with any request or directive issued after the date hereof
(whether or not having the force of law) of any Authority shall make it unlawful
or impossible for any Bank (or its Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Banks and the Borrower, whereupon
until such Bank notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Bank to
make Euro-Dollar Loans shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different Lending Office
if such designation will avoid the need for giving such notice and will not, in
the judgment of such Bank, be otherwise materially disadvantageous to such Bank.
If such Bank shall determine that it may not lawfully continue to maintain and
fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify
in such notice, the Borrower shall immediately prepay in full the then
outstanding principal amount of each Euro-Dollar Loan of such Bank, together
with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar
Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks), and
such Bank shall make such a Base Rate Loan.

         Section 8.03 Increased Cost and Reduced Return

         (a)      If after the date hereof, a Change of Law or compliance by any
Bank (or its Lending Office) with any request or directive issued after the date
hereof (whether or not having the force of law) of any Authority:

                  (i)      shall impose, modify or deem applicable any reserve,
special deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding, with respect to any Euro-Dollar Loan, any such requirement included
in an applicable Euro-Dollar Reserve Percentage) against letters of credit (or
risk participations therein) or assets of, deposits with or for the account of,
or credit extended by, any Bank (or its Lending Office); or

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                  (ii)     shall impose on any Bank (or its Lending Office) or
on the London interbank market any other condition affecting its Euro-Dollar
Loans, its Notes, its obligation to make Euro-Dollar Loans or its obligation to
maintain the Letter of Credit or its risk participation therein;

and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Fixed Rate Loan or maintaining
the Letter of Credit or its risk participation therein, or to reduce the amount
of any sum received or receivable by such Bank (or its Lending Office) under
this Agreement or under its Notes with respect thereto, by an amount deemed by
such Bank to be material, then, within 15 days after demand by such Bank (with a
copy to the Agent), the Borrower shall pay to such Bank such additional amount
or amounts as will compensate such Bank for such increased cost or reduction;
provided, that the Borrower shall have no liability hereunder for amounts which
were incurred or accrued prior to a date which is more than 180 days before the
Borrower's receipt of the notice pertaining thereto given pursuant to paragraph
(c) below.

         (b)      If any Bank shall have determined that after the date hereof
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof, or compliance by any Bank (or its Lending Office) with
any request or directive issued after the date hereof regarding capital adequacy
(whether or not having the force of law) of any Authority, has or would have the
effect of reducing the rate of return on such Bank's capital as a consequence of
its obligations hereunder to a level below that which such Bank could have
achieved but for such adoption, change or compliance (taking into consideration
such Bank's policies with respect to capital adequacy) by an amount deemed by
such Bank to be material, then from time to time, within 15 days after demand by
such Bank, the Borrower shall pay to such Bank such additional amount or amounts
as will compensate such Bank for such reduction; provided, that the Borrower
shall have no liability hereunder for amounts which were incurred or accrued
prior to a date which is more than 180 days before the Borrower's receipt of the
notice given pursuant to paragraph (c) below.

         (c)      Each Bank will promptly notify the Borrower and the Agent of
any event of which it has knowledge, occurring after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise materially disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder, containing in reasonable detail the
calculations therefor, shall be conclusive in the absence of manifest error. In
determining such amount, such Bank may use any reasonable averaging and
attribution methods generally employed in determining compensation of such type
with respect to its other borrowers.

         (d)      Notwithstanding the foregoing, in the event the Borrower is
required to pay any Bank amounts pursuant to Section 2.11(c) or to this Section
8.03 and the designation of a different Lending Office pursuant to Section
2.11(c) or Section 8.03(c) will not avoid the need for compensation to such Bank
(an "Affected Bank"), the Borrower may give notice to such Affected Bank (with
copies to the Agent) that it wishes to seek one or more assignees (which

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may be one or more of the Banks) to assume the Commitment of such Affected Bank
and to purchase its outstanding Loans and Notes; provided, that if there is more
than one Affected Bank which has requested substantially and proportionally
equal compensation hereunder, the Borrower shall elect to seek an assignee to
assume the Commitments of all such Affected Banks. Each Affected Bank agrees to
sell its Commitment, Loans, Notes and interest in this Agreement in accordance
with Section 9.08(c) to any such assignee for an amount equal to the sum of the
outstanding unpaid principal of and accrued interest on such Loans and Notes,
plus all other fees and amounts (including, without limitation, any compensation
claimed by such Affected Banks under Section 2.11(c) or this Section 8.03 due
such Affected Bank hereunder calculated, in each case, to the date such Loans,
Notes and interest are purchased. Upon such sale or prepayment, each such
Affected Bank shall have no further commitment or other obligation to the
Borrower hereunder or under any Note.

         (e)      Subject to Section 9.08(e), the provisions of this Section
8.03 shall be applicable with respect to any Transferee, and any calculations
required by such provisions shall be made based upon the circumstances of such
Transferee.

         Section 8.04 Base Rate Loans or Other Fixed Rate Loans Substituted for
Affected Fixed Rate Loans. If (i) the obligation of any Bank to make or maintain
any type of Fixed Rate Loans has been suspended pursuant to Section 8.02 or (ii)
any Bank has demanded compensation under Section 8.03, and the Borrower shall,
by at least 5 Euro-Dollar Business Days' prior notice to such Bank through the
Agent, have elected that the provisions of this Section shall apply to such
Bank, then, unless and until such Bank notifies the Borrower that the
circumstances giving rise to such suspension or demand for compensation no
longer apply:

         (a)      all Loans which would otherwise be made by such Bank as Set
Rate Loans or Euro-Dollar Loans, as the case may be, shall, subject to the terms
and conditions relating thereto, be made instead either (A) as Base Rate Loans,
or (B) if such demand for compensation relates to Set Rate Loans, but not
Euro-Dollar Loans, as Euro-Dollar Loans, as the Borrower may elect in the notice
to such Bank through the Agent referred to hereinabove (in all cases interest
and principal on such Loans shall be payable contemporaneously with the related
Fixed Rate Loans of the other Banks), and

         (b)      after each of its Set Rate Loans or Euro-Dollar Loans, as the
case may be, has been repaid, all payments of principal which would otherwise be
applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate
Loans instead.

         Section 8.05 Compensation. Upon the request of any Bank, delivered to
the Borrower and the Agent, the Borrower shall pay to such Bank such amount or
amounts as shall compensate such Bank for any loss, cost or expense incurred by
such Bank, as determined by it in good faith, using reasonable allocation and
attribution methods, as a result of:

         (a)      any payment or prepayment (pursuant to Section 2.09, 2.10,
6.01, 8.02 or otherwise) of a Fixed Rate Loan on a date other than the last day
of an Interest Period for such Fixed Rate Loan; or

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         (b)      any failure by the Borrower to borrow a Fixed Rate Loan on the
date for the Fixed Rate Borrowing of which such Fixed Rate Loan is a part
specified in the applicable Notice of Borrowing delivered pursuant to Section
2.02 or failure to borrow a Set Rate Borrowing pursuant to Section 2.01.

                                   ARTICLE IX

                                  MISCELLANEOUS

         Section 9.01 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth on the signature pages hereof or such other address or
telecopier number as such party may hereafter specify for the purpose by notice
to each other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section and the appropriate confirmation is
received, (ii) if given by mail, 3 Domestic Business Days after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Agent under
Article II or Article VIII shall not be effective until received.

         Section 9.02 No Waivers. No failure or delay by the Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note or other
Facility Document shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

         Section 9.03 Expenses; Documentary Taxes. The Borrower shall pay (i)
all out-of-pocket expenses of the Agent, including reasonable fees and
disbursements actually incurred of special counsel for the Agent, in connection
with the preparation of this Agreement and the other Facility Documents, any
waiver or consent hereunder or thereunder or any amendment hereof or thereof or
any Default or alleged Default hereunder or thereunder and (ii) if a Default
occurs, all reasonable out-of-pocket expenses actually incurred by the Agent and
the Banks, including reasonable fees and disbursements actually incurred of
counsel, in connection with such Default and collection and other enforcement
proceedings resulting therefrom, including reasonable out-of-pocket expenses
actually incurred in enforcing this Agreement and the other Facility Documents.
The Borrower shall indemnify the Agent and each Bank against any transfer taxes,
documentary taxes, assessments or charges made by any Authority by reason of the
execution and delivery of this Agreement or the other Facility Documents.

         Section 9.04 Indemnification. The Borrower shall indemnify the Agent
and the Banks and each affiliate thereof and their respective directors,
officers, employees and agents from, and hold each of them harmless against, any
and all losses, liabilities, claims or damages to which any of them may become
subject, insofar as such losses, liabilities, claims or damages arise out of or
result from any actual or proposed use by the Borrower of the proceeds of any
extension of credit by any Bank hereunder or breach by the Borrower of this
Agreement or any

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<PAGE>

other Facility Document or from any investigation, litigation or other
proceeding (including, without limitation, any threatened investigation or
proceeding) relating to the foregoing, and the Borrower shall reimburse the
Agent and each Bank, and each affiliate thereof and their respective directors,
officers, employees and agents, upon demand for any reasonable expenses
(including, without limitation, reasonable legal fees) actually incurred in
connection with any such investigation or proceeding; but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified.

         Section 9.05 Setoff; Sharing of Setoffs.

         (a)      The Borrower agrees that the Agent and each Bank, and Wachovia
as to the Swing Loan Note, shall have a lien for all indebtedness and
obligations owing to them from the Borrower upon, except to the extent any such
property is Receivables Program Assets, all deposits or deposit accounts, of any
kind, or any interest in any deposits or deposit accounts thereof, now or
hereafter pledged, mortgaged, transferred or assigned to the Agent or any such
Bank or otherwise in the possession or control of the Agent or any such Bank for
any purpose for the account or benefit of the Borrower and including any balance
of any deposit account or of any credit of the Borrower with the Agent or any
such Bank, whether now existing or hereafter established hereby authorizing the
Agent and each Bank at any time or times with or without prior notice to apply
such balances or any part thereof to such of the indebtedness and obligations
owing by the Borrower to the Banks and/or the Agent then past due and in such
amounts as they may elect, and whether or not the collateral, if any, or the
responsibility of other Persons primarily, secondarily or otherwise liable may
be deemed adequate. For the purposes of this paragraph, all remittances and
property shall be deemed to be in the possession of the Agent or any such Bank
as soon as the same may be put in transit to it by mail or carrier or by other
bailee.

         (b)      Each Bank agrees that if it shall, by exercising any right of
setoff or counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest owing with respect to the Revolver
Loan Note held by it which is greater than the proportion received by any other
Bank in respect of the aggregate amount of all principal and interest owing with
respect to the Revolver Loan Note held by such other Bank, the Bank receiving
such proportionately greater payment shall purchase such participations in the
Revolver Loan Notes held by the other Banks owing to such other Banks, and such
other adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to the Revolver Loan Notes held by the Banks
owing to such other Banks shall be shared by the Banks pro rata; provided that
(i) nothing in this Section shall impair the right of any Bank to exercise any
right of setoff or counterclaim it may have and to apply the amount subject to
such exercise to the payment of indebtedness of the Borrower other than its
indebtedness under the Revolver Loan Notes, and (ii) if all or any portion of
such payment received by the purchasing Bank is thereafter recovered from such
purchasing Bank, such purchase from each other Bank shall be rescinded and such
other Bank shall repay to the purchasing Bank the purchase price of such
participation to the extent of such recovery together with an amount equal to
such other Bank's ratable share (according to the proportion of (x) the amount
of such other Bank's required repayment to (y) the total amount so recovered
from the purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in

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respect of the total amount so recovered. The Borrower agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of setoff or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of the Borrower in the amount of such participation.

         Section 9.06 Amendments and Waivers.

         (a)      Any provision of this Agreement, the Notes or any other
Facility Documents may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Required Banks (and,
if the rights or duties of the Agent are affected thereby, by the Agent);
provided that, no such amendment or waiver shall, unless signed by all Banks,
(i) change the Commitment of any Bank or subject any Bank to any additional
obligation, (ii) change the principal of or rate of interest on any Loan or any
fees hereunder, (iii) change the Termination Date or the date fixed for any
payment of principal of or interest on any Loan or any fees hereunder, (iv)
change the amount of principal, interest or fees due on any date fixed for the
payment thereof, (v) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the percentage of Banks,
which shall be required for the Banks or any of them to take any action under
this Section or any other provision of this Agreement, (vi) change the manner of
application of any payments made under this Agreement or the Notes, (vii)
release or substitute all or any substantial part of the Collateral, except (A)
for the release of the Receivables Program Assets pursuant to Section 9.18 and
(B) that no consent shall be required for the sale or other disposition of
assets permitted under Section 5.14 and Agent shall release any Collateral so
sold or disposed without consent of any Banks, provided that any payment
required to be made to the Agent by Section 2.08(b)(i) has been made, (viii)
release any Guarantee given to support payment of the Loans, or (ix) amend this
Section 9.06(a).

         (b)      The Borrower will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of
this Agreement unless each Bank shall be informed thereof by the Borrower and
shall be afforded an opportunity of considering the same and shall be supplied
by the Borrower with sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct copies of any waiver
or consent effected pursuant to the provisions of this Agreement shall be
delivered to each Bank forthwith following the date on which the same shall have
been executed and delivered by the requisite percentage of Banks. The Borrower
will not, directly or indirectly, pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or otherwise, to any
Bank (in its capacity as such) as consideration for or as an inducement to the
entering into by such Bank of any waiver or amendment of any of the terms and
provisions of this Agreement unless such remuneration is concurrently paid, on
the same terms, ratably to all such Banks.

         Section 9.07 No Margin Stock Collateral. Each of the Banks represents
to the Agent and each of the other Banks that it in good faith is not, directly
or indirectly (by negative pledge or otherwise), relying upon any Margin Stock
as collateral in the extension or maintenance of the credit provided for in this
Agreement.

                                       75

<PAGE>

         Section 9.08 Successors and Assigns.

         (a)      The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby, except that the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Bank (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void). Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby
and, to the extent expressly contemplated hereby, the Related Parties of each of
the Agent and the Banks) any legal or equitable right, remedy or claim under or
by reason of this Agreement.

         (b)      Any Bank may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment of the entire remaining amount of the
assigning Bank's Commitment and the Loans at the time owing to it or in the case
of an assignment to a Bank or an Affiliate of a Bank or an Approved Fund with
respect to a Bank, the aggregate amount of the Commitment (which for this
purpose includes Loans outstanding thereunder) of the assigning Bank subject to
each such assignment (determined as of the date the Assignment and Acceptance
with respect to such assignment is delivered to the Agent) shall not be less
than $5,000,000, in the case of any assignment of a Revolving Loan, unless each
of the Agent and, so long as no Event of Default has occurred and is continuing,
the Borrower otherwise consent (each such consent not to be unreasonably
withheld or delayed), (ii) each partial assignment shall be made as an
assignment of a proportionate part of all the assigning Bank's rights and
obligations under this Agreement with respect to the Loan or the Commitment
assigned, except that this clause (ii) shall not prohibit any Bank from
assigning all or a portion of its rights and obligations pertaining to Revolver
Loans on a non-pro rata basis, (iii) the parties to each assignment shall
execute and deliver to the Agent an Assignment and Acceptance, together with a
processing and recordation fee of $3,500, and the Eligible Assignee, if it shall
not be a Bank, shall deliver to the Agent an administrative questionnaire in a
form supplied by the Agent, and (iv) each such Eligible Assignee agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Bank and
agrees to be bound by all of the terms and provisions of the Credit Agreement
(including, without limitation, the provision of Section 9.18) and the
Receivables Intercreditor Agreement (including, without limitation, the
obligations and agreements contained in Sections 2.19, 2.20, and 3.3 thereof).
Subject to acceptance and recording thereof by the Agent pursuant to paragraph
(c) of this Section, from and after the effective date specified in each
Assignment and Acceptance, the Eligible Assignee thereunder shall be a party
hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Bank under this Agreement, and
the assigning Bank thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Bank's rights and obligations under this Agreement and the other
Facility Documents, such Bank shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 8.03, 9.03 and 9.04). Any
assignment or transfer by a Bank of rights or obligations under this Agreement
that does not comply with this

                                       76

<PAGE>

paragraph shall be treated for purposes of this Agreement as a sale by such Bank
of a participation in such rights and obligations in accordance with paragraph
(d) of this Section.

         (c)      The Agent, acting solely for this purpose as an agent of the
Borrower, shall maintain at one of its offices in Georgia or North Carolina a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Banks, and the Commitments of, and
principal amount of the Loans owing to, each Bank pursuant to the terms hereof
from time to time (the "Register"). The entries in the Register shall be
conclusive, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register pursuant to the terms hereof as a Bank
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower and any
Bank, at any reasonable time and from time to time upon reasonable prior notice.

         (d)      Any Bank may, without the consent of, or notice to, the
Borrower or the Agent, sell participations to one or more banks or other
entities (a "Participant") in all or a portion of such Bank's rights and/or
obligations under this Agreement (including all or a portion of its Commitment
and/or the Loans owing to it); provided that (i) such Bank's obligations under
this Agreement shall remain unchanged, (ii) such Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Borrower, the Agent and the other Banks shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Bank sells such a participation shall provide that such Bank shall retain the
sole right to enforce this Agreement and to approve any amendment, modification
or waiver of any provision of this Agreement; provided that such agreement or
instrument may provide that such Bank will not, without the consent of the
Participant, agree to any amendment, modification or waiver which would (i)
change any date fixed for any scheduled payment of principal of or interest on
the related loan or loans, (ii) change the amount of any principal, interest or
fees due on any date fixed for the payment thereof with respect to the related
loan or loans, (iii) change the principal of the related loan or loans, (iv)
decrease the rate at which either interest is payable thereon or (if the
Participant is entitled to any part thereof) fee payable hereunder from the rate
at which the Participant is entitled to receive interest or fee (as the case may
be) in respect of such participation, (v) release or substitute all or any
substantial part of the Collateral, except the release of the Receivables
Program Assets pursuant to Section 9.18, or (vi) release the Parent Documents
that affects such Participant. Subject to paragraph (e) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.11(c) and Article VIII to the same extent as if it were a Bank and
had acquired its interest by assignment pursuant to paragraph (b) of this
Section. To the extent permitted by law, each Participant also shall be entitled
to the benefits of Section 9.05(a) as though it were a Bank, provided such
Participant agrees to be subject to Section 9.05(b) as though it were a Bank.

         (e)      A Participant shall not be entitled to receive any greater
payment under Section 2.11(c) or Article VIII than the applicable Bank would
have been entitled to receive with respect to the participation sold to such
Participant, unless the sale of the participation to such Participant is made
with the Borrower's prior written consent. A Participant that is not organized
under the laws of the United States of America or a state, territory or
possession thereof shall not be entitled to the benefits of Section 2.11(c)
unless the Borrower is notified of the participation

                                       77

<PAGE>

sold to such Participant and such Participant agrees, for the benefit of the
Borrower, to comply with the provisions of the fourth paragraph of Section
2.11(c) as though it were a Bank.

         (f)      Any Bank may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Bank, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided that no such pledge or
assignment of a security interest shall release a Bank from any of its
obligations hereunder or substitute any such pledgee or assignee for such Bank
as a party hereto.

         For purposes of this Section 9.08, the following terms have the
following meanings.

         "Eligible Assignee" means (a) a Bank; (b) an Affiliate of a Bank; (c)
an Approved Fund; and (d) any other Person (other than a natural Person)
approved by the Agent and, unless (x) such Person is taking delivery of an
assignment in connection with physical settlement of a credit derivatives
transaction or (y) an Event of Default has occurred and is continuing, the
Borrower (each such approval not to be unreasonably withheld or delayed). If the
consent of the Borrower to an assignment or to an Eligible Assignee is required
hereunder (including a consent to an assignment which does not meet the minimum
assignment thresholds specified in paragraph (b)(i) of this Section), the
Borrower shall be deemed to have given its consent five Business Days after the
date notice thereof has been delivered to the Borrower by the assigning Bank
(through the Agent) unless such consent is expressly refused by the Borrower
prior to such fifth Business Day.

         "Fund" means any Person (other than a natural Person) that is (or will
be) engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

         "Approved Fund" means any Fund that is administered or managed by (a) a
Bank, (b) an Affiliate of a Bank or (c) an entity or an Affiliate of an entity
that administers or manages a Bank.

                                       78

<PAGE>

         Section 9.09 Confidentiality. Each Bank agrees to exercise reasonable
efforts to keep any information delivered or made available by the Borrower to
it confidential from anyone other than persons employed or retained by such Bank
who are or are expected to become engaged in evaluating, approving, structuring
or administering the Loans; provided, however that nothing herein shall prevent
any Bank from disclosing such information (i) to any other Bank, (ii) upon the
order of any court or administrative agency, (iii) upon the request or demand of
any regulatory agency or authority having jurisdiction over such Bank, (iv)
which has been publicly disclosed by or on behalf of the Borrower, (v) to the
extent reasonably required in connection with any litigation to which the Agent,
any Bank or their respective Affiliates may be a party, (vi) to the extent
reasonably required in connection with the exercise of any remedy hereunder,
(vii) to such Bank's legal counsel and independent auditors and (viii) to any
actual or proposed Participant, Assignee or other Transferee of all or part of
its rights hereunder which has agreed in writing to be bound by the provisions
of this Section 9.09; provided, that, should disclosure of any such confidential
information be required by virtue of either clause (ii) or (iii) of the
immediately preceding sentence, any relevant Bank shall promptly notify the
Borrower of same so as to allow the Borrower to seek a protective order or to
take any other appropriate action; provided, further, that, no Bank shall be
required to delay compliance with any directive to disclose any such information
so as to allow the Borrower to effect any such action.

         Section 9.10 Representation by Banks. Each Bank hereby represents that
it is a commercial lender or financial institution which makes Loans in the
ordinary course of its business or a Related Fund and that it will make its
Loans hereunder for its own account in the ordinary course of such business;
provided, however that, subject to Section 9.08, the disposition of the Note or
Notes held by that Bank shall at all times be within its exclusive control.

         Section 9.11 Obligations Several. The obligations of each Bank
hereunder are several, and no Bank shall be responsible for the obligations or
commitment of any other Bank hereunder. Nothing contained in this Agreement and
no action taken by the Banks pursuant hereto shall be deemed to constitute the
Banks to be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Bank shall be a
separate and independent debt, and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement or any other Facility Document
and it shall not be necessary for any other Bank to be joined as an additional
party in any proceeding for such purpose.

         Section 9.12 Georgia Law. This Agreement and each Note shall be
construed in accordance with and governed by the law of the State of Georgia.

         Section 9.13 Severability. In case any one or more of the provisions
contained in this Agreement, the Notes or any of the other Facility Documents
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby and shall be
enforced to the greatest extent permitted by law.

         Section 9.14 Interest. In no event shall the amount of interest due or
payable hereunder or under the Notes exceed the maximum rate of interest allowed
by applicable law, and in the event any such payment is inadvertently made to
any Bank by the Borrower or inadvertently received by any Bank, then such excess
sum shall be credited as a payment of

                                       79

<PAGE>

principal, unless the Borrower shall notify such Bank in writing that it elects
to have such excess sum returned forthwith. It is the express intent hereof that
the Borrower not pay and the Banks not receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may legally be paid by the
Borrower under applicable law.

         Section 9.15 Interpretation. No provision of this Agreement or any of
the other Facility Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.

         Section 9.16 Waiver of Jury Trial; Consent to Jurisdiction. THE
BORROWER (A) AND EACH OF THE BANKS AND THE AGENT IRREVOCABLY WAIVES ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF THIS AGREEMENT,
ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY, (B) SUBMITS TO THE NONEXCLUSIVE PERSONAL JURISDICTION IN THE STATE
OF GEORGIA, THE COURTS THEREOF AND THE UNITED STATES DISTRICT COURTS SITTING
THEREIN, FOR THE ENFORCEMENT OF THIS AGREEMENT, THE NOTES AND THE OTHER LOAN
DOCUMENTS, (C) WAIVES ANY AND ALL PERSONAL RIGHTS UNDER THE LAW OF ANY
JURISDICTION TO OBJECT ON ANY BASIS (INCLUDING, WITHOUT LIMITATION,
INCONVENIENCE OF FORUM) TO JURISDICTION OR VENUE WITHIN THE STATE OF GEORGIA FOR
THE PURPOSE OF LITIGATION TO ENFORCE THIS AGREEMENT, THE NOTES OR THE OTHER LOAN
DOCUMENTS, AND (D) AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN THE
MANNER PRESCRIBED IN SECTION 9.01 FOR THE GIVING OF NOTICE TO THE BORROWER.
NOTHING HEREIN CONTAINED, HOWEVER, SHALL PREVENT THE AGENT FROM BRINGING ANY
ACTION OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST THE BORROWER
PERSONALLY, AND AGAINST ANY ASSETS OF THE BORROWER, WITHIN ANY OTHER STATE OR
JURISDICTION.

         Section 9.17 Counterparts. This Agreement may be signed in any number
of counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.

         Section 9.18 Release of Receivables Program Assets. Contemporaneously
with the closing of the Receivables Securitization Program described in Exhibit
M, upon the written request of the Borrower, the Agent shall execute and deliver
the Receivables Intercreditor Agreement (which releases the security interest in
Receivables Program Assets) and such other instruments as the Borrower or the
Administrative Agent or Receivables Collateral Agent under the Receivables
Program Documents reasonably request, releasing and terminating the security
interest in the Receivables Program Assets of the Agent pursuant to the Security
Agreement and the UCC-1 financing statements related thereto, and the Borrower
shall execute and deliver the Borrower Pledge Agreement; and deliver in pledge
to the Agent, for the ratable benefit of the Banks, all of the Receivables
Subsidiary Pledged Stock and any Purchase Money Note, to secure payment of the
Obligations. Each of the Banks hereby (a) authorizes the Agent to execute,
deliver and perform the Receivables Intercreditor Agreement and (b) agrees to be
bound by the terms and provisions thereof, including, without limitation, the
provisions of Sections 2.19, 2.20

                                       80

<PAGE>

and 3.3 thereof. The Borrower agrees that, so long as any Obligations or
Commitments remain outstanding, it will not exercise its right to continue to
make sales of Receivables under (i) the Purchase Agreement (as defined in the
Receivables Intercreditor Agreement) at a time when sales otherwise would
automatically terminate under Section 9.01 thereof, or (ii) under any comparable
agreement under any other Receivables Securitization Program under comparable
circumstances.

                       [SIGNATURES COMMENCE ON NEXT PAGE]

                                       81

<PAGE>

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

                                       AVONDALE MILLS, INC.              (SEAL)

                                       By: _____________________________________
                                           Title:
                                       Avondale Mills, Inc.
                                       506 South Broad Street
                                       Monroe, Georgia 30655
                                       Attention:  Vice Chairman and Chief
                                                   Financial Officer
                                       Telecopier number: 770-267-2543
                                       Confirmation number: 770-267-2226

                                       82

<PAGE>

COMMITMENTS                            WACHOVIA BANK, NATIONAL ASSOCIATION
                                       (successor by merger to Wachovia Bank of
$25,000,000                            Georgia, N.A., Wachovia Bank, N.A., First
                                       Union National Bank, and First Union
                                       National Bank of Georgia), as Agent and
                                       as a Bank                          (SEAL)

                                       By: _____________________________________
                                           Title:

                                       Lending Office
                                       Wachovia Bank, National Association
                                       301 South College Street
                                       Charlotte, North Carolina 28288
                                       Attention: David C. Hauglid
                                       Telecopier number: 704-374-6319
                                       Confirmation number: 704-383-3544

                                       83

<PAGE>

$25,000,000                            THE CIT GROUP/COMMERCIAL SERVICES, INC.
                                                                          (SEAL)

                                       By: _____________________________________
                                           Title:

                                       Lending Office
                                       The CIT Group/Commercial Services, Inc.
                                       Two Wachovia Center, 25th Floor
                                       301 South Tryon Street
                                       Charlotte, North Carolina 28202
                                       Attention: Regional Credit Manager
                                       Telecopier number: 704-339-2910
                                       Confirmation number: 704-339-2902

                                       84

<PAGE>

$12,000,000                            REGIONS BANK                       (SEAL)

                                       By: _____________________________________
                                           Title:

                                       Lending Office
                                       Regions Bank
                                       417 N. 20th Street
                                       Birmingham, Alabama  35203
                                       Attention: Mark Howze
                                       Telecopier number: 205-326-7739
                                       Confirmation number: 205-326-7193

TOTAL COMMITMENTS:

$62,000,000

                                       85

<PAGE>

                     CONSENT AND REAFFIRMATION OF GUARANTORS

         The undersigned (i) acknowledges receipt of the foregoing Third Amended
and Restated Credit Agreement (the "Amended Credit Agreement"), (ii) consents to
the execution and delivery of the Amended Credit Agreement by the parties
thereto and (iii) reaffirms all of its obligations and covenants under (as
applicable) the Amended and Restated Parent Guaranty dated as of April 29, 1996,
executed by Avondale Incorporated, and the AMGF Guaranty (as defined in the
Amended Credit Agreement, executed by Avondale Mills Graniteville Fabrics, Inc.,
and agrees that, except for the amendments to the AMGF Guaranty pursuant to the
Global Amendment Agreement (as defined in the Amended Credit Agreement) none of
such obligations and covenants shall be affected by the execution and delivery
of the Amended Credit Agreement.

AVONDALE INCORPORATED                  AVONDALE MILLS GRANITEVILLE FABRICS, INC.

By: ______________________________     By: _____________________________________
    Title:                                 Title:

                                       86

<PAGE>

                                                                     EXHIBIT A-1

                 SECOND AMENDED AND RESTATED REVOLVER LOAN NOTE

                                Atlanta, Georgia
                                 March 28, 2003

         For value received, AVONDALE MILLS, INC., an Alabama corporation (the
"Borrower"), promises to pay to the order of___________________________________,
a ____________________ (the "Bank"), for the account of its Lending Office, the
principal sum of ___________________________________ and No/100 Dollars
($________), or such lesser amount as shall equal the unpaid principal amount of
each Revolver Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates provided for in the
Credit Agreement. Interest on any overdue principal of and, to the extent
permitted by law, overdue interest on the principal amount hereof shall bear
interest at the Default Rate, as provided for in the Credit Agreement. All such
payments of principal and interest shall be made in lawful money of the United
States in Federal or other immediately available funds at the office of Wachovia
Bank, National Association, 301 South College Street, Charlotte, North Carolina
28288, or such other address as may be specified from time to time pursuant to
the Credit Agreement.

         All Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto, and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.

         This Second Amended and Restated Revolver Loan Note is one of the
Revolver Loan Notes referred to in the Third Amended and Restated Credit
Agreement dated March 28, 2003, among the Borrower, the Banks listed on the
signature pages thereof, and Wachovia Bank, National Association, as Agent (as
so amended, and as the same may hereafter be amended and modified from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the optional and mandatory prepayment and the repayment hereof
and the acceleration of the maturity hereof.

                                       87

<PAGE>

         IN WITNESS WHEREOF, the Borrower has caused this Second Amended and
Restated Revolver Loan Note to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.

                                       AVONDALE MILLS, INC.               (SEAL)

                                       By: ____________________________________
                                           Title:

                                       88

<PAGE>

             Second Amended and Restated Revolver Loan Note (cont'd)

                         LOANS AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
       Base Rate or   Amount   Amount of
       Euro-Dollar      of     Principal   Maturity   Notation
Date      Loan         Loan     Repaid       Date     Made By
<S>    <C>            <C>      <C>         <C>        <C>

--------------------------------------------------------------

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</TABLE>

                                       89

<PAGE>

                                                                     EXHIBIT A-2

                   SECOND AMENDED AND RESTATED SWING LOAN NOTE

                                Atlanta, Georgia
                                 March 28, 2003

         For value received, AVONDALE MILLS, INC., an Alabama corporation (the
"Borrower"), promises to pay to the order of WACHOVIA BANK, NATIONAL
ASSOCIATION, a national banking association (the "Bank"), for the account of its
Lending Office, the principal sum of Ten Million and No/100 Dollars
($10,000,000), or such lesser amount as shall equal the unpaid principal amount
of each Swing Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Swing Loan Note at the rate provided for Base Rate Loans or as
otherwise provided in the Credit Agreement, in all cases on the dates provided
for in the Credit Agreement. Interest on any overdue principal of and, to the
extent permitted by law, overdue interest on the principal amount hereof shall
bear interest at the Default Rate, as provided for in the Credit Agreement. All
such payments of principal and interest shall be made in lawful money of the
United States in Federal or other immediately available funds at the office of
Wachovia Bank, National Association, 301 South College Street, Charlotte, North
Carolina 28288, or such other address as may be specified from time to time
pursuant to the Credit Agreement.

         All Swing Loans made by the Bank, the respective maturities thereof,
and all repayments of the principal thereof shall be recorded by the Bank and,
prior to any transfer hereof, endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.

         This Second Amended and Restated Swing Loan Note is the Swing Loan Note
referred to in the Third Amended and Restated Credit Agreement dated March 28,
2003, among the Borrower, the Banks listed on the signature pages thereof, and
Wachovia Bank, National Association, as Agent (as so amended, and as the same
may hereafter be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
optional and mandatory prepayment and the repayment hereof and the acceleration
of the maturity hereof.

                                       90

<PAGE>

         IN WITNESS WHEREOF, the Borrower has caused this Second Amended and
Restated Swing Loan Note to be duly executed, under seal, by its duly authorized
officer as of the day and year first above written.

                                       AVONDALE MILLS, INC.               (SEAL)

                                       By: _____________________________________
                                           Title:

                                       91

<PAGE>

              Second Amended and Restated Swing Loan Note (cont'd)

                         LOANS AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
       Amount of   Base Rate or    Principal              Notation
Date     Loan      Set Rate Loan    Repaid     Maturity   Made By
<S>    <C>         <C>             <C>         <C>        <C>

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</TABLE>

                                       92

<PAGE>

                                                                     EXHIBIT B-1

                                   OPINION OF
                            COUNSEL FOR THE BORROWER

              [TO BE UPDATED, ADDRESSED TO WACHOVIA BANK, NATIONAL
                ASSOCIATION, AND REVISED TO DELETE REFERENCES TO
                 DOCUMENTATION AGENT AND ADDRESS ONLY THE THIRD
               AMENDED AND RESTATED CREDIT AGREEMENT, REPLACEMENT
               NOTES, CURRENT PERFECTION OF PERSONAL PROPERTY, AND
                     OTHER MATTERS REQUIRED BY SECTION 3.02]

                                 April 29, 1996

To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757

                  Re:      Amended and Restated Credit Agreement dated as of
                           April 29, 1996, Among Avondale Mills, Inc., the Banks
                           listed on the signature pages thereof, Wachovia Bank
                           of Georgia, N.A., as Agent for such Banks and The
                           First National Bank of Chicago, as Documentation
                           Agent (the "Credit Agreement")

         We have acted as Georgia counsel for Avondale Mills, Inc., an Alabama
corporation (the "Borrower"), in connection with the above-referenced Credit
Agreement. Capitalized terms used in this opinion letter and not otherwise
defined herein shall have the respective meanings assigned to such terms in the
Credit Agreement. We have also acted as Georgia counsel for the Parent, Avondale
Incorporated, a Georgia corporation, in connection with the Parent Guaranty and
Pledge Agreement.

         In connection with the opinions expressed in this letter, we have
examined each of the following documents dated as of April 29, 1996, as executed
by the Borrower and the Parent, as the case may be (collectively, the
"Transaction Documents"):

                  (1)      the Credit Agreement;

                  (2)      the Notes;

                  (3)      the Security Agreement;

                  (4)      the Mortgage;

                                       93

<PAGE>

                  (5)      the Borrower Pledge Agreement;

                  (6)      the Parent Guaranty; and

                  (7)      the Pledge Agreement.

The Transaction Documents described in items (1) through (5) above are herein
sometimes collectively referred to as the "Borrower Transaction Documents"; the
Transaction Documents described in items (6) and (7) above are herein sometimes
collectively referred to as the "Parent Transaction Documents."

         We have also reviewed such other documents and given consideration to
such matters of law and fact as we have deemed appropriate, in our professional
judgment, to render the opinions expressed in this letter. The documents so
reviewed have included the originals or copies, certified or otherwise
identified to our satisfaction, of certain corporate records and documents of
the Borrower and the Parent, the certificates delivered on behalf of the
Borrower and the Parent to you on this date pursuant to the requirements of the
Transaction Documents, and the certificate delivered on behalf of the Borrower
and the Parent to us on this date (the "Officer's Certificate"), and we have
relied on the accuracy and completeness of all factual matters set forth in such
corporate records, documents, and certificates, as well as the representations
and warranties as to factual matters set forth in the Transaction Documents. In
rendering the opinions set forth in paragraphs 1 and 2 below with respect to the
current status of the Borrower and the Parent in the specified jurisdictions, we
have relied solely on the certificates issued with respect to the Borrower or
the Parent, as the case may be, by the Secretary of State of the respective
jurisdictions, copies of which have been delivered to you, and we have assumed
that all such certificates were properly given and remain accurate as of the
date of this letter.

         For purposes of the opinions expressed herein, we have assumed (i) the
genuineness of all signatures (other than signatures on behalf of the Borrower
and the Parent) on all documents submitted to us as originals, (ii) the
authenticity of all documents submitted to us as originals and the conformity to
original documents of all documents submitted to us as copies, (iii) the absence
of duress, fraud, or mutual mistake of material facts on the part of the parties
to the Transaction Documents, (iv) that the Borrower has rights in or title to
the Collateral described in the Security Agreement and the Mortgage [and the
Borrower Pledge Agreement and is the sole legal and beneficial owner of the
Receivables Subsidiary Pledged Stock], and (v) that the Parent is the sole legal
and beneficial owner of the Pledged Stock.

         We have further assumed that (i) the Agent and the Banks have all
requisite power and authority to enter into and perform their respective
obligations under the Transaction Documents, (ii) the Credit Agreement, the
Security Agreement and the Pledge Agreement have been duly authorized, executed
and delivered by the Banks and the Agent, respectively, and constitute their
legal, valid and binding obligations, and (iii) to the extent applicable law
requires that the Banks or the Agent act in accordance with applicable duties of
good faith or fair dealing, in a commercially reasonable manner, or otherwise in
compliance with applicable legal requirements in exercising their respective
rights and remedies under the Transaction Documents, the Banks and the Agent
will fully comply with such legal requirements, notwithstanding any provisions
of the Transaction Documents that purport to grant the Banks or the Agent the
right to act or fail to

                                       94
<PAGE>

act in a manner contrary to such legal requirements, or based on its sole
judgment or in its sole discretion or provisions of similar import. We have also
assumed that under no circumstances, whether by reason of prepayment,
acceleration or otherwise, will the rate of interest payable by the Borrower or
the Parent, including without limitation, expenses of the Banks or the Agent
chargeable to the Borrower or the Parent, and other fees and charges for the use
of money, whether or not denominated as interest, exceed five percent (5%) per
month.

         We have further assumed, with your permission, the accuracy of each of
the matters set forth below, and we have made no independent inquiry or
investigation with respect thereto:

         (1)      That the Borrower is a corporation duly incorporated and
validly existing under the laws of the State of Alabama;

         (2)      That the Borrower has the corporate power and authority to
carry on its business as now conducted and to execute, deliver and perform its
obligations under the Borrower Transaction Documents;

         (3)      That the Borrower has taken all necessary corporate and
shareholder action to authorize the execution and delivery of, and performance
of its obligations under, the Borrower Transaction Documents; and

         (4)      That the execution, delivery and performance by the Borrower
of the Borrower Transaction Documents (i) require no approval, authorization,
consent, adjudication or order of any governmental authority of the State of
Alabama which has not been obtained, (ii) do not violate any provision of
applicable law or regulation of the State of Alabama, or of any judgment,
injunction, order, or decree issued by any judicial or administrative authority
of the State of Alabama which is binding on the Borrower, and (iii) do not
contravene or constitute a default under the articles of incorporation or
by-laws of the Borrower.

With respect to the matters described in paragraphs (1) through (4) above, we
understand that you have received the opinion of Bradley, Arant, Rose & White
dated April 29, 1996 (the "Bradley, Arant Opinion"). We know of no reason why
you and we would not be entitled to rely on the Bradley, Arant Opinion in
connection with the transactions contemplated by the Borrower Transaction
Documents.

         Whenever any opinion or confirmation of fact set forth in this letter
is qualified by the words "to our knowledge", "known to us" or other words of
similar meaning, such words mean the current actual knowledge of lawyers in the
Primary Lawyer Group (defined below) of factual matters such lawyers recognize
as being relevant to the opinion or confirmation so qualified. "Primary Lawyer
Group" means the lawyer who signs this opinion letter on behalf of this firm
and, solely as to information relevant to an opinion or confirmation issue
addressed herein, each lawyer in this firm who is primarily responsible for
providing the response concerning the particular issue. Except as may be
expressly described herein, we have not undertaken any investigation to
determine the existence or absence of facts and no inference as to our knowledge
of the existence or absence of facts should be drawn from our serving as counsel
for the Borrower or the Parent on other matters.

                                       95

<PAGE>

         The opinions expressed herein are limited to the laws of the State of
Georgia and applicable United States federal law, and we express no opinion as
to the laws of any other jurisdiction or the effect any such laws may have on
the matters set forth herein.

         Based on the foregoing, it is our opinion that:

1.       The Borrower is a corporation in corporate good standing under the laws
of the State of Alabama, and is in corporate good standing as a foreign
corporation qualified to do business in the States of Georgia, South Carolina,
and North Carolina.

2.       The Parent is a corporation duly incorporated, validly existing and in
corporate good standing under the laws of Georgia, and has all corporate power
required to carry on its business as now conducted.

3.       The execution, delivery and performance by the Borrower of the Borrower
Transaction Documents (i) require no approval, authorization, consent,
adjudication or order of any governmental authority of the State of Georgia or
of the United States of America which has not been obtained, (ii) do not violate
any law or regulation of the State of Georgia or the United States of America
binding on the Borrower that would (A) either prohibit performance by the
Borrower under the Borrower Transaction Documents or subject the Borrower to a
fine, penalty, or other similar sanction, and (B) which a lawyer, using
customary professional diligence, would reasonably recognize as applicable to
the Borrower and the transactions contemplated by the Borrower Transaction
Documents, (iii) insofar as is known to us, do not violate any order, writ,
judgment, injunction, decree or award binding on the Borrower or its properties,
(iv) will not breach or cause a default under any of the "material agreements"
identified as such in the Officer's Certificate, and (v) insofar as is known to
us, except as provided in the Borrower Transaction Documents, will not result in
the creation or imposition of any Lien on any assets of the Borrower or any of
its Subsidiaries.

4.       The execution, delivery and performance by the Parent of the Parent
Transaction Documents (i) are within the Parent's corporate powers, (ii) have
been duly authorized by all necessary corporate action, (iii) require no
approval, authorization, consent, adjudication or order of any governmental
authority of the State of Georgia or of the United States of America, which has
not been obtained, (iv) do not contravene any provision of the articles of
incorporation or by-laws of the Parent, (v) do not violate any law or regulation
of the State of Georgia or of the United States of America binding on the Parent
which (A) either prohibit performance by the Parent under the Parent Guaranty or
subject the Parent to a fine, penalty or other similar sanction, and (B) which a
lawyer, using customary professional diligence, would reasonably recognize as
applicable to the Parent in the transactions contemplated by the Parent
Guaranty, (vi) insofar as is known to us, do not violate any order, writ,
judgment, injunction, decree or award binding on the Parent or its properties,
(vii) will not breach or constitute a default under any of the "material
agreements" identified as such in the Officer's Certificate, and (viii) insofar
as is known to us, do not result in the creation or imposition of any Lien on
any assets of the Parent or any of its Subsidiaries.

                                       96

<PAGE>

5.       Each of the Transaction Documents has been duly executed and delivered
(in the case of the Mortgage, subject to the provisions of Section 5.25 of the
Credit Agreement) on behalf of the Borrower or the Parent, as the case may be.

6.       Each of the Transaction Documents other than the Mortgage constitutes,
and if on the date hereof the Mortgage had been duly and properly completed,
delivered, recorded (including payment of any applicable filing fees and
intangibles recording taxes), and indexed in the real estate records of the
Offices of the Clerks of the Superior Courts of Walton and Tift Counties,
Georgia (the "Georgia Filing Offices"), the Mortgage would constitute, the valid
and binding obligation of the Borrower or the Parent, as the case may be,
enforceable against it in accordance with its terms, except:

                  (a)      As enforceability thereof may be limited by the
         effect of (i) bankruptcy, insolvency, reorganization, moratorium and
         other similar laws affecting the rights and remedies of creditors
         (including, without limitation, matters of contract rejection,
         fraudulent conveyances and obligations, turn-over, preference,
         equitable subordination, automatic stay, and substantive consolidation
         under federal bankruptcy laws, as well as state laws regarding
         fraudulent transfers, obligations, and conveyances, and state
         receivership laws), and (ii) general principles of equity, whether
         applied by a court of law or equity (including, without limitation,
         principles governing the availability of specific performance,
         injunctive relief or other traditional equitable remedies, principles
         affording traditional equitable defenses such as waiver, laches and
         estoppel, and legal standards requiring reasonableness or materiality
         of breach for exercise of remedies or providing for defenses based on
         impracticability or impossibility of performance or on obstruction or
         failure to perform or otherwise act in accordance with an agreement by
         a party thereto other than the Borrower or the Parent);

                  (b)      That no opinion is expressed with respect to the
         validity, binding effect, or enforceability of:

                           (i)      those provisions of the Transaction
                  Documents requiring indemnification for, or providing
                  exculpation, release, or exemption from liability for, any
                  action or inaction by any other person or entity, to the
                  extent such action or inaction involves negligence or willful
                  misconduct on the part of any such person or entity or to the
                  extent otherwise contrary to public policy;

                           (ii)     those provisions of the Transaction
                  Documents providing for payment of interest on unpaid
                  interest, or imposing increased interest rates or late payment
                  charges upon delinquency in payment or other default or
                  providing for liquidated damages or for premiums on
                  prepayment, acceleration, or termination, to the extent any
                  such provisions may be deemed to be penalties or forfeitures;

                           (iii)    those provisions of the Transaction
                  Documents that have the effect of waiving the right of jury
                  trial, statutes of limitation, marshalling of assets or
                  similar requirements, or consenting or waiving objections to
                  the jurisdiction of certain courts or the venue or forum for
                  judicial actions;

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<PAGE>

                           (iv)     those provisions of the Transaction
                  Documents providing that waivers or consents by a party may
                  not be given effect unless in writing or in compliance with
                  particular requirements, or that a party's course of dealing,
                  course of performance, or the like or failure or delay in
                  taking action may not constitute a waiver of related rights or
                  provisions, or that one or more waivers may not under certain
                  circumstances constitute a waiver of other matters of the same
                  kind;

                           (v)      those provisions of the Transaction
                  Documents providing that a party has the right to pursue
                  multiple remedies without regard to other remedies elected or
                  that all remedies are cumulative;

                           (vi)     those provisions of the Transaction
                  Documents purporting to require payment by the Parent or the
                  Borrower of any Bank's or Agent's attorneys' fees without
                  compliance with the applicable requirements of O .C .G.A.
                  Section 13-1-11;

                           (vii)    those provisions of the Transaction
                  Documents providing that modifications to such documents may
                  only be made in writing or that the provisions of such
                  documents are severable;

                           (viii)   those provisions of the Transaction
                  Documents purporting to permit the exercise, under certain
                  circumstances, of rights or remedies without notice or without
                  providing opportunity to cure failures to perform;

                           (ix)     those provisions of the Transaction
                  Documents purporting to grant rights of setoff otherwise than
                  in accordance with applicable law;

                           (x)      those provisions of the Transaction
                  Documents purporting to require a waiver of defenses, setoffs,
                  or counterclaims against the Banks or the Agent;

                           (xi)     those provisions of the Security Agreement,
                  the Pledge Agreement, or the Mortgage with respect to the
                  Agent's or any Bank's right to collect a deficiency except
                  upon compliance with applicable law;

                           (xii)    Section 9.14 of the Credit Agreement;
                  Section 8.3 of the Security Agreement; the penultimate
                  sentence of Section 12(a) and Sections 22 and 23 of the Pledge
                  Agreement; and Sections 3.12 and 4.3 through 4.5 of the
                  Mortgage;

                           (xiii)   those provisions of the Transaction
                  Documents purporting to require the Borrower or the Parent to
                  waive various rights, claims, and defenses, or to provide
                  certain remedies in favor of the Agent or the Banks, to the
                  extent any such waivers or remedial provisions may not be
                  valid, binding or enforceable under applicable law; provided,
                  however, in our opinion, the inclusion of such waivers and
                  remedial provisions does not render any Transaction Document
                  invalid as a whole, and each Transaction Document otherwise
                  contains remedies adequate for the practical. realization of
                  the benefits intended to be provided

                                       98

<PAGE>

                  thereby assuming compliance by the Agent and the Banks with
                  applicable legal requirements and procedures of the State of
                  Georgia; or

                           (xiv)    those provisions of the Security Agreement
                  and the Mortgage providing for the exercise of rights or
                  remedies with respect to any portion of the "Collateral" as
                  described in the Security Agreement, or "Premises" as
                  described in the Mortgage, located outside the State of
                  Georgia; and

                  (c)      That no opinion is expressed herein with respect to
         any of the following matters:

                           (i)      the adequacy or sufficiency of any of the
                  legal descriptions of the "Premises" as defined in the
                  Mortgage;

                           (ii)     the status of the Borrower's or the Parent's
                  title to, or rights in, any of the "Collateral" as described
                  in the Security Agreement or the Pledge Agreement [or the
                  Borrower Pledge Agreement], or any of the "Premises" as
                  described in the Mortgage, or the perfection or priority of
                  any security interest or security title in and to any of such
                  "Collateral" pursuant to the Security Agreement or such
                  "Premises" pursuant to the Mortgage;

                           (iii)    with respect to the Mortgage, the effect on
                  the opinions rendered herein of the delay of the Mortgage
                  becoming an Operative Mortgage as provided in the Credit
                  Agreement and the delay in the recordation, indexing and
                  cross-indexing thereof in the Georgia Filing Offices;

                           (iv)     whether the Mortgage secures any
                  indebtedness, obligations, or liabilities of the Borrower
                  under an Interest Rate Protection Agreement that may
                  subsequently be in effect between the Borrower and any of the
                  Banks;

                           (v)      the validity of any security interest in any
                  portion of the "Collateral" as described in the Security
                  Agreement, or the "Premises" as described in the Mortgage,
                  that is or purports to be nonassignable or nontransferable;

                           (vi)     in the case of any property that becomes
                  collateral for the Obligations after the date hereof, the
                  effect that Section 552 of the Federal Bankruptcy Code would
                  have on the extent to which property acquired by a debtor
                  after the commencement of a case under the Federal Bankruptcy
                  Code may be subject to a security agreement entered into by
                  the debtor before the commencement of such case;

                           (vii)    the enforceability against the government of
                  the United States of any assignment or security interest in
                  any portion of the Collateral described in the Security
                  Agreement constituting accounts or other claims against the
                  government of the United States subject to the Federal
                  Assignment of Claims Act; or

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<PAGE>

                           (viii)   the validity of any conveyance of security
                  title or security interest in any of the Collateral described
                  in the Security Agreement or the Premises described in the
                  Mortgage to the extent that such matters are now or hereafter
                  governed by or subject to the law of any jurisdiction other
                  than the State of Georgia.

7.       Neither the Parent nor the Borrower is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.

8.       Neither the Parent nor the Borrower is a "holding company" or a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended.

9.       Insofar as is known to us, there is no action, suit or proceeding
pending or overtly threatened against or affecting the Parent, the Borrower, or
any other Subsidiaries of the Parent before any court or arbitrator or any
governmental body, agency or official in which (i) the monetary relief sought
against any of such parties is in excess of $500,000, or (ii) in any manner
questions the validity or enforceability of the Transaction Documents, except
for those actions, suits or proceedings listed on Schedule 4.05 to the Credit
Agreement.

         This opinion letter is provided to you for your exclusive use solely in
connection with the transactions contemplated by the Credit Agreement and may
not be relied upon by any other person or for any other purpose without our
prior written consent. The opinions and confirmation of facts expressed in this
letter are strictly limited to the matters stated in this letter as of the date
hereof, and no other opinions or confirmations of fact are to be implied or
inferred. We undertake no obligation to advise you or any other person or entity
of changes of law or fact that occur after the date of this letter, whether or
not such change may affect any of the opinions expressed herein.

                                        Yours very truly,

                                        KING & SPALDING LLP

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<PAGE>

                                                                     EXHIBIT B-2

[Subject to revision to comport with
law and practice in each location]

                            OPINION OF LOCAL COUNSEL
                               AS TO THE MORTGAGE

                                            [Dated as provided in
                                            Section 3.01 of the Credit
                                            Agreement]

To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn:

Dear Sirs:

                  We have acted as local counsel in the State of [Alabama]
[North Carolina] [South Carolina] (the "State") for Wachovia Bank of Georgia,
N.A., as Agent (the "Agent") in connection with the Amended and Restated Credit
Agreement (the "Credit Agreement") dated as of April 29, 1996, among Avondale
Mills, Inc., an Alabama corporation (the "Borrower"), the banks listed on the
signature pages thereof, the Agent and The First National Bank of Chicago, as
Documentation Agent. Terms defined in the Credit Agreement are used herein as
therein defined.

                  We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion. We have assumed for purposes of our opinions set
forth below that the execution and delivery of each Mortgage pertaining to a
Plant located in the State (each such Mortgage being a "State Mortgage") by the
Borrower has been duly authorized by the Borrower and that the execution and
delivery of the Credit Agreement by each Bank and by the Agent have been duly
authorized by each Bank and by the Agent.

                  Upon the basis of the foregoing, we are of the opinion that
each State Mortgage will create a valid and perfected [mortgage] [deed of trust]
Lien upon such of the "Premises" (as defined in the State Mortgage) as is
located in the State and constitutes real property under the law of the State
(the "State Real Property") in favor of the Agent for the ratable benefit of the
Banks and securing the "Secured Obligations" (as defined in the State Mortgage),
upon (i) the completion by the Agent of the acts described in clauses (i), (ii)
and (iii) of Section 5.25(d) of the

                                      101

<PAGE>

Credit Agreement, to the extent applicable, (ii) the proper filing, indexing and
recordation thereof in the real estate deed records (the "Real Estate Records")
maintained by and in the offices designated in Schedule A hereto and payment of
all fees, taxes and other charges payable in connection with recording the State
Mortgage, and (iii) the proper cross-indexing of the State Mortgage in the
Uniform Commercial Code filing offices designated in Schedule B hereto. The
filing of the State Mortgage in the offices designated in Schedule A and
Schedule B hereto are the only filings, recordings and registrations necessary
to perfect, publish notice of and preserve the Lien of and security interest in
the State Real Property created by the State Mortgage. The Liens created by the
State Mortgage on or in the State Real Property will validly secure the payment
of all future advances pursuant to the Credit Agreement, whether or not at the
time such advances are made an Event of Default or other event not within the
control of the Banks has relieved or may relieve the Banks from their
obligations to make such advances. The priority of the Liens created by the
State Mortgage will be the same with respect to (i) Loans made or deemed made
pursuant to the Credit Agreement and (ii) Obligations of the Borrower to any
Bank with respect to any Interest Rate Protection Agreement (up to the maximum
amount for all such Interest Rate Protection Agreements of $7,000,000) incurred
after the date hereof as with respect to any such Loans made or Obligations with
respect to such Interest Rate Protection Agreements incurred on the date hereof,
except to the extent that any priority may be affected by any Lien imposed by
law in favor of any government or governmental authority or agency.

                  We are qualified to practice in the State and do not purport
to be experts on any laws other than the laws of the United States and the State
and this opinion is rendered only with respect to such laws. We have made no
independent investigation of the laws of any other jurisdiction.

                  This opinion is delivered to you in connection with the
transaction referenced above and may only be relied upon by you, any Transferee
under the Credit Agreement, and Jones, Day, Reavis & Pogue without our prior
written consent.

                                      102

<PAGE>

                                                                       EXHIBIT C

                                   OPINION OF
                   JONES, DAY, REAVIS & POGUE, SPECIAL COUNSEL
                    FOR THE AGENT AND THE DOCUMENTATION AGENT

              [TO BE UPDATED, ADDRESSED TO WACHOVIA BANK, NATIONAL
                ASSOCIATION, AND REVISED TO DELETE REFERENCES TO
                 DOCUMENTATION AGENT AND ADDRESS ONLY THE THIRD
               AMENDED AND RESTATED CREDIT AGREEMENT, REPLACEMENT
             NOTES AND OTHER MATTERS AS MAY BE REQUIRED BY SECTION
                                     3.02]

                                                    [Dated as provided in
                                                    Section 3.01 of the Credit
                                                    Agreement]

To the Banks and the Agent
Referred to Below
c/o Wachovia Bank of Georgia, N.A.,
as Agent
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attn:

Dear Sirs:

                  We have participated in the preparation of the Amended and
Restated Credit Agreement (the "Credit Agreement") dated as of April 29, 1996,
among Avondale Mills, Inc., an Alabama corporation (the "Borrower"), the banks
listed on the signature pages thereof (the "Banks"), Wachovia Bank of Georgia,
N.A., as Agent (the "Agent") and The First National Bank of Chicago, as
Documentation Agent (the "Documentation Agent"), and have acted as special
counsel for the Agent for the purpose of rendering this opinion pursuant to
Section 3.01(d) of the Credit Agreement. Terms defined in the Credit Agreement
are used herein as therein defined.

                  This opinion letter is limited by, and is in accordance with,
the January 1, 1992 edition of the Interpretive Standards applicable to Legal
Opinions to Third Parties in Corporate Transactions adopted by the Legal Opinion
Committee of the Corporate and Banking Law Section of the State Bar of Georgia
which Interpretive Standards are incorporated herein by this reference.

                  We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.

                                      103

<PAGE>

                  Upon the basis of the foregoing, and assuming the due
authorization, execution and delivery of the Credit Agreement, the Security
Agreement and each of the Notes by or on behalf of the Borrower, we are of the
opinion that each of the Credit Agreement and the Security Agreement constitutes
a valid and binding agreement of the Borrower and each Note constitutes valid
and binding obligations of the Borrower, in each case enforceable in accordance
with its terms.

                  We express no opinion as to the effect of the compliance or
noncompliance of the Agent or any of the Banks with any state or federal laws or
regulations applicable to the Agent or any of the Banks by reason of the legal
or regulatory status or the nature of the business of the Agent or any of the
Banks.

                  This opinion is delivered to you in connection with the
transaction referenced above and may only be relied upon by you and any
Transferee under the Credit Agreement without our prior written consent.

                                      Very truly yours,

                                      104

<PAGE>

                                                                       EXHIBIT D

                            ASSIGNMENT AND ACCEPTANCE
                         Dated _____________ ___ , 200_

                  Reference is made to the Third Amended and Restated Credit
Agreement dated as of March 28, 2003 (together with all amendments and
modifications thereto, the "Credit Agreement"), among Avondale Mills, Inc., an
Alabama corporation (the "Borrower"), the Banks (as defined in the Credit
Agreement), and Wachovia Bank, National Association, as Agent (the "Agent").
Terms defined in the Credit Agreement are used herein with the same meaning.

                  _____________________________________ (the "Assignor") and
_____________________________________ (the "Assignee") agree as follows:

                  1.       The Assignor hereby sells and assigns to the
Assignee, without recourse to the Assignor, and the Assignee hereby purchases
and assumes from the Assignor, a _________% interest in and to all of the
Assignor's rights and obligations under the Credit Agreement as of the Effective
Date (as defined below) (including, without limitation, a __________% interest
(which on the Effective Date hereof is $__________) in the Assignor's Commitment
and a ________ interest (which on the Effective Date hereof is $__________) in
the Loans owing to the Assignor and a __________% interest in the Note[s] held
by the Assignor (which on the Effective Date hereof is $__________).

                  2.       The Assignor (i) makes no representation or warranty
and assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement or any other instrument or document furnished pursuant
thereto, other than that it is the legal and beneficial owner of the interest
being assigned by it hereunder, that such interest is free and clear of any
adverse claim and that as of the date hereof its Commitment (without giving
effect to assignments thereof which have not yet become effective) is
$__________ and the aggregate outstanding principal amount of Loans owing to it
(without giving effect to assignments thereof which have not yet become
effective) is $_______; (ii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Credit Agreement or any other instrument or document furnished pursuant thereto;
and (iii) attaches the Note[s] referred to in paragraph 1 above and requests
that the Agent exchange such Note[s] for [a new Note dated_______, ____ in
the principal amount of $__________ payable to the order of the Assignee] [new
Notes as follows: a Note dated_______, ____ in the principal amount of
$___________ payable to the order of the Assignor and a Note dated , in the
principal amount of $___________ payable to the order of the Assignee].

                  3.       The Assignee (i) confirms that it has received a copy
of the Credit Agreement, together with copies of the financial statements
referred to in Section 4.04(a) thereof (or any more recent financial statements
of the Borrower delivered pursuant to Section 5.01(a) or (b) thereof) and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (ii)
agrees that it

                                      105

<PAGE>

will, independently and without reliance upon the Agent, the Assignor or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iii) confirms that it is a bank,
financial institution or commercial finance company; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Credit Agreement as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
(v) agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank and agrees to be bound by all of the terms and
provisions of the Credit Agreement (including, without limitation, the
provisions of Section 9.18) and the Receivables Intercreditor Agreement
(including, without limitation, the obligations and agreements contained in
Sections 2.19, 2.20, and 3.3 thereof); (vi) specifies as its Lending Office (and
address for notices) the office set forth beneath its name on the signature
pages hereof, (vii) represents and warrants that the execution, delivery and
performance of this Assignment and Acceptance are within its corporate powers
and have been duly authorized by all necessary corporate action, (viii) attaches
the forms prescribed by the Internal Revenue Service of the United States
certifying as to the Assignee's status for purposes of confirming exemption from
United States withholding taxes with respect to all payments to be made to the
Assignee under the Credit Agreement and the Notes or such other documents as are
necessary to indicate that no such payments are subject to such taxes, and (ix)
represents and warrants that, as of the Effective Date, the Assignee is not
entitled to any compensation pursuant to Section 8.03 or entitled to any
suspension of its obligations to make Euro-Dollar Loans pursuant to Section
8.02.

                  4.       The Effective Date for this Assignment and Acceptance
shall be __________, 200__ (the "Effective Date"). Following the execution of
this Assignment and Acceptance, it will be delivered to the Agent for execution
and acceptance by the Agent and to the Borrower for execution by the Borrower.

                  5.       Upon such execution and acceptance by the Agent [and
execution by the Borrower if the Assignee is not a Bank prior to the Effective
Date], from and after the Effective Date, (i) the Assignee shall be a party to
the Credit Agreement and, to the extent rights and obligations have been
transferred to it by this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and (ii) the Assignor shall, to the extent its
rights and obligations have been transferred to the Assignee by this Assignment
and Acceptance, relinquish its rights (other than under Sections 8.03, 9.03 and
9.04 of the Credit Agreement) and be released from its obligations under the
Credit Agreement.

                  6.       Upon such execution and acceptance by the Agent [and
execution by the Borrower if the Assignee is not a Bank prior to the Effective
Date], from and after the Effective Date, the Agent shall make all payments in
respect of the interest assigned hereby to the Assignee. The Assignor and
Assignee shall make all appropriate adjustments in payments for periods prior to
such acceptance by the Agent directly between themselves.

                  7.       This Assignment and Acceptance shall be governed by,
and construed in accordance with, the laws of the State of Georgia.

                                      106

<PAGE>

                                     [NAME OF ASSIGNOR]

                                     By: _______________________________________
                                          Title:

                                     [NAME OF ASSIGNEE]

                                     By: _______________________________________
                                          Title:

                                     Lending Office:
                                     [Address]

                                     WACHOVIA BANK, NATIONAL
                                     ASSOCIATION, As Agent

                                     By: _______________________________________
                                          Title:

                                     AVONDALE MILLS, INC.

                                     If the Assignee is not a Bank or Affiliate
                                     thereof prior to the Effective Date
                                     and no Event of Default is in existence.

                                     By: _______________________________________
                                          Title:

                                      107

<PAGE>

                                                                       EXHIBIT E

                               NOTICE OF BORROWING

                     ______________________________, 200___

         Wachovia Bank, National Association, as Agent
         301 South College Street, Charlotte
         North Carolina 28288
         Attention:  David C. Hauglid

Re:      Third Amended and Restated Credit Agreement dated as of March 28, 2003
         (as the same may be amended, restated, supplemented, or otherwise
         modified from time to time, the "Credit Agreement"), by and among
         Avondale Mills, Inc., the Banks from time to time parties thereto, and
         Wachovia Bank, National Association, as Agent.

         Gentlemen:

                  Unless otherwise defined herein, capitalized terms used herein
         shall have the meanings attributable thereto in the Credit Agreement.

                  This Notice of Borrowing is delivered to you pursuant to
         Section 2.02 of the Credit Agreement.

                  The Borrower hereby requests a [Euro-Dollar Borrowing] [Base
         Rate Borrowing] [Swing Loan Borrowing] [which is a Revolver Loan
         Borrowing] in the aggregate principal amount of $_________ to be made
         on ________, 200__, and for interest to accrue thereon at the rate
         established by the Credit Agreement for [Euro-Dollar Loans] [Base Rate
         Loans].(1) [The duration of the Interest Period with respect thereto
         shall be] [1 month] [2 months] [3 months] [6 months].

                  The Borrower has caused this Notice of Borrowing to be
         executed and delivered by its duly authorized officer this _________
         day of ________, 200__.

                                             AVONDALE MILLS, INC.

                                             By: _______________________________

---------------------------
(1) Swing Loans must be Base Rate Loans.

                                      108

<PAGE>

                                                                     EXHIBIT F-1

                             COMPLIANCE CERTIFICATE

                  Reference is made to the Third Amended and Restated Credit
Agreement dated as of March 28, 2003 (as the same may be amended, restated,
supplemented, or otherwise modified from time to time, the "Credit Agreement"),
among Avondale Mills, Inc., the Banks from time to time parties thereto, and
Wachovia Bank, National Association, as Agent. Capitalized terms used herein
shall have the meanings ascribed thereto in the Credit Agreement.

                  Pursuant to Section 5.01(c) of the Credit Agreement, (i)
____________________, the duly authorized ____________________ of Avondale
Incorporated, hereby certifies to the Agent and the Banks that the information
contained in the Compliance Check List attached hereto is true, accurate and
complete as of _______________, ______, and (ii) ____________________, the duly
authorized ____________________ of Avondale Mills, Inc. hereby (A) certifies to
the Agent and the Banks that to the Knowledge of such officer, no Default is in
existence on and as of the date hereof and (B) restates and reaffirms that to
the Knowledge of such officer, the representations and warranties contained in
Article IV of the Credit Agreement are true on and as of the date hereof as
though restated on and as of this date, except for events which have been
disclosed in writing to the Banks and which are described in any of Sections
4.04, 4.06(a), 4.07 (except the first sentence), 4.14(b) and (c) or 4.15.

                  Dated: ____________, 200__.

                                     AVONDALE INCORPORATED

                                     By: _______________________________________
                                           Title:

                                     AVONDALE MILLS, INC.

                                     By: _______________________________________
                                           Title:

                                      109

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

1.       Fixed Charge Coverage Ratio (Section 5.03)

         The Fixed Charge Coverage Ratio, calculated at the end of each Fiscal
         Quarter, shall not be less than (a) if the average daily principal
         balance of the Working Capital Obligations during such Fiscal Quarter
         equals or exceeds $10,000,000, 1.65 to 1.00, and (b) in all other
         cases, 1.25 to 1.0.

         (a)      Consolidated Net Income--Schedule 1              $__________

         (b)      Net Interest Expense--Schedule 1                 $__________

         (c)      Income taxes--Schedule 1                         $__________

         (d)      Depreciation--Schedule 1                         $__________

         (e)      Amortization--Schedule 1                         $__________

         (f)      Dividends--Schedule 1                            $__________

         (g)      Capital Expenditures--Schedule 1                 $__________

         (h)      LIFO Adjustments--Schedule 1                     $__________

         (i)      Non-cash write-offs of obsolete or surplus       $__________
                  equipment, spare parts or real property Schedule
                  1(2)

         (j)      Sum of (a) plus (b) plus (c) plus (d) plus       $__________
                  (e) less (f) less (g), less or plus (h), as
                  applicable, plus (i)

         (k)      Current Maturities of Long Term Debt--Schedule 1 $__________

         (l)      Net Interest Expense                             $__________

         (m)      Sum of (k) plus (l)                              $__________

         (n)      Average daily principal balance of Working
                  Capital Obligations during the most recently

----------------------------------
(2)      Not to exceed $10,000,000 during any period of 4 consecutive Fiscal
         Quarter

                                      110

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

                  ended Fiscal Quarter:                            $__________

         Ratio of (j) to (m):                                      ___________

         Requirement:

         If (n) is greater than or equal to $10,000,000:           1.65 to 1.00

         If (n) is less than $10,000,000:                          1.25 to 1.00

                                      111

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

2.       Consolidated Cash Flow (Section 5.04)

         Consolidated Cash Flow, calculated at the end of each Fiscal Quarter,
         for the Fiscal Quarter just ended and the immediately preceding 3
         Fiscal Quarters, shall equal or exceed $63,000,000.

        (a)  Consolidated Cash Flow (from paragraph 1(j),     $__________
             above)

         Requirement:                                         > than = to
                                                              $63,000,000

3.       Total Debt to Cash Flow (Section 5.06)

                  Section 5.06 Total Debt to Cash Flow Ratio. The Total Debt to
Cash Flow Ratio, calculated at the end of each Fiscal Quarter, shall be less
than the ratio set forth below for such Fiscal Quarter:

<TABLE>
<CAPTION>
           FOR FISCAL QUARTERS ENDING:                               RATIO
--------------------------------------------------------------------------------
<S>                                                              <C>
On or after the Closing Date, but on or before
August 30, 2004                                                  3.50 to 1.00
--------------------------------------------------------------------------------
On or after September 1, 2004, but on or before
August 30, 2005                                                  3.25 to 1.00
--------------------------------------------------------------------------------
On or after September 1, 2005                                    3.00 to 1.00
--------------------------------------------------------------------------------
</TABLE>

         (a)      Consolidated Total Funded Debt--Schedule 2      $__________

         (b)      Consolidated Cash Flow (from paragraph 1(j),    $__________
                  above)

         Ratio of (a) to (b):                                     ___________

         Requirement:                                             <[3.50 to 1.0]
                                                                  <[3.25 to 1.0]
                                                                  <[3.00 to 1.0]

                                      112

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

4.       Restricted Payments (Section 5.07)

         (a)      The Parent and the Borrower shall not make any Restricted
Payments, except that Parent and the Borrower may, subject to the provisions of
paragraphs (b) and (c), below, make Restricted Payments (i) during the Fiscal
Year ending December 31, 2003, in an aggregate amount not to exceed $12,000,000,
and (ii) during each Fiscal Year thereafter, in an aggregate amount for such
Fiscal Year not to exceed $12,000,000, plus the amount (if any) carried forward
from the immediately preceding Fiscal Year, as such amount carried forward is
determined in accordance with paragraph (b), below.

         (b)      The amount by which $12,000,000 exceeds the aggregate
Restricted Payments made by the Parent and the Borrower during one Fiscal Year
may be carried forward to the next succeeding Fiscal Year, but to no Fiscal
Years thereafter; provided, however, that the amount to be carried forward from
one Fiscal Year to the next shall not exceed $4,000,000. For purposes of
calculating any amount to be carried forward, all Restricted Payments made
during one Fiscal Year shall be first applied against the standard $12,000,000
limit applicable to such Fiscal Year.

         (c)      Any of the foregoing to the contrary notwithstanding, neither
the Borrower nor the Parent shall make any Restricted Payment if at the time
such Restricted Payment is to be made a Default shall have occurred and be
continuing or, after giving effect thereto, a Default shall occur.

         (a)      $12,000,000                                    $12,000,000

         (b)      Amount of Restricted Payment availability      $__________
                  (if any) carried forward from Fiscal
                  Year [____](3)

         (c)      Sum of (a) and (b)                             $__________

         (d)      Aggregate Restricted Payments made during
                  Fiscal Year [____]                             $__________

         Limitation: (d) may not exceed (c)

5.       Senior Debt to Cash Flow Ratio (Section 5.08)

         The Senior Debt to Cash Flow Ratio, calculated at the end of each
         Fiscal Quarter, shall not be greater than 2.00 to 1.00.

         (a)      Consolidated Senior Debt--Schedule 2           $__________

         (b)      Consolidated Cash Flow (from paragraph
                  1(j), above)                                   $__________

---------------------------
(3)      Limited to $4,000,000 per Fiscal Year; there is no carry forward into
         Fiscal Year 2003

                                      113

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

                  above)

         Ratio of (a) to (b):                           _________________

         Requirement:                                   < than = to 2.00 to 1.00

6.       Loans and Advances (Section 5.09)

         Neither the Parent, the Borrower nor any of the Material Subsidiaries
         shall make loans or advances to any Person except, so long as no Event
         of Default is in existence:

                  (A)(i) loans or advances to employees not exceeding $2,000,000
         in the aggregate principal amount outstanding at any time, in each case
         made in the ordinary course of business and consistent with practices
         existing on August 25, 1995; (ii) deposits required by government
         agencies or public utilities; and (iii) loans or advances to Wholly
         Owned Subsidiaries (other than from the Parent to the Borrower or as
         provided in Section 5.09(C)) not exceeding $1,000,000 in the aggregate
         outstanding; provided that after giving effect to the making of any
         loans, advances or deposits permitted by this Section 5.09(A), the
         aggregate of all loans and advances permitted in this Section 5.09(A)
         does not exceed $4,000,000;

                  (B) loans or advances from the Parent to the Borrower or from
         the Borrower to the Parent, or from the Borrower to AMGF (i) pursuant
         to the AMGF/Graniteville Transaction and within the limits contained in
         the definition thereof and (ii) otherwise to fund the ongoing working
         capital needs and capital expenditures of AMGF in the ordinary course
         of business;

                  (C) loans or advances to the Receivables Subsidiary evidenced
         by a Purchase Money Note; and

                  (D) other loans or advances (not including any loans and
         advances of the types described in clauses (A), (B) or (C) above) in an
         aggregate amount, together with Investments permitted by clause (viii)
         of Section 5.10, not exceeding $10,000,000.

         Calculations with respect to Section 5.09(A):

         (a)      Loans and advances to employees                 $_________

                  Limitation:                                     $2,000,000

         (b)      Deposits required by government agencies or     $_________
                  public utilities

         (c)      Loans or advances to Wholly Owned Subsidiaries  $_________
                  (other than stated exceptions))

                                      114

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

                  Limitation:                                     $1,000,000

         (d)      Sum of (a) plus (b) plus (c)                    $_________

                  Limitation:                                     $4,000,000

         Calculations with respect to Section 5.09(D):

         (e)      Loans and advances not permitted by clauses     $__________
                  (A), (B) or (C)

         (f)      Sum of (e) and amount in paragraph 7(a)         $__________

         Limitation:  (f) may not exceed $10,000,000

7.       Investments (Section 5.10)

         Neither the Parent, the Borrower nor any of the Consolidated
         Subsidiaries shall make Investments in any Person except as permitted
         by Section 5.09 and except Investments in (i) direct obligations of the
         United States Government maturing within one year, (ii) certificates of
         deposit issued by a commercial bank whose credit is satisfactory to the
         Agent, (iii) commercial paper rated A1 or the equivalent thereof by
         Standard & Poor's Corporation or P1 or the equivalent thereof by
         Moody's Investors Service, Inc. and in either case maturing within 6
         months after the date of acquisition, (iv) tender bonds the payment of
         the principal of and interest on which is fully supported by a letter
         of credit issued by a United States bank whose long-term certificates
         of deposit are rated at least AA or the equivalent thereof by Standard
         & Poor's Corporation and Aa or the equivalent thereof by Moody's
         Investors Service, Inc., (v) Investments by Borrower in the Receivables
         Subsidiary and obligations consisting of Standard Securitization
         Undertakings, (vi) Investments by the Receivables Subsidiary in a
         Special Purpose Vehicle and obligations consisting of Standard
         Securitization Undertakings, (vii) loans and advances permitted by
         Section 5.09, and Investments in the Borrower and AMGF (x) pursuant to
         the AMGF/Graniteville Transaction and within the limits contained in
         the definition thereof and (y) otherwise to fund the ongoing working
         capital needs and capital expenditures of AMGF in the ordinary course
         of business, and (viii) other Investments in an aggregate amount on and
         after the Closing Date, together with Investments permitted by clause
         (D) of Section 5.09, not exceeding the sum of $10,000,000.

         (a)      Other Investments (not permitted by clauses (i) $__________
                  through (vii))

         (b)      Sum of (a) and paragraph 6(e)                   $__________

                  Limitation:  (b) may not exceed $10,000,000

                                      115

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

8.       Negative Pledge (Section 5.11)

         Amount of Debt secured by Liens described in Sections    $__________
         5.11(b) through 5.11(e), inclusive, and (i)--Schedule 3
         and Schedule 5.11 of the Credit Agreement

         Limitation:                                              $4,000,000

         Amount of Debt secured by all Liens not permitted by     $__________
         Section 5.11(a) through 5.11(k), inclusive (Schedule 3
         and Schedule 5.11 ofthe Credit Agreement)

         Limitation:                                              $4,000,000

9.       List of Consolidated Subsidiaries (Section 5.01(c)(iii))

         ________________________________

         ________________________________

         ________________________________

10.      List of Material Subsidiaries (other than the Borrower), if any, as to
         which there has been a change in excess of $100,000 in the assets,
         liabilities or shareholders' equity thereof since the immediately
         preceding Fiscal Quarter.

         ________________________________

         ________________________________

         ________________________________

                                      116

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

                                                                      Schedule 1

Consolidated Net Income for:

_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________

         Total                              $__________

Net Interest Expense for:

_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________

         Total                              $__________

Income Taxes for:

_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________

         Total                              $__________

Depreciation for:

_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________

         Total                              $__________

                                      117

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

Amortization for:

_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________

         Total                              $__________

LIFO adjustments for:

_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________

         Total                              $__________

Dividends for:

_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________

         Total                              $__________

Capital Expenditures for:

_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________

         Total                              $__________

Non-cash write-offs of obsolete or
surplus equipment, spare parts or
real property for:

_____ quarter 200___                        $__________

                                      118

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

_____ quarter 200___                        $__________
_____ quarter 200___                        $__________
_____ quarter 200___                        $__________

         Total                              $__________

Current Maturities of Long Term Debt for:

_____ quarter 200___                        $__________

         Total                              $__________

                                      119

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

                                                                      Schedule 2

Consolidated Senior Debt and Consolidated Total Funded Debt

                                         INTEREST
                                           RATE      MATURITY      TOTAL
Secured

_________________________________      $__________

_________________________________      $__________

_________________________________      $__________

_________________________________      $__________
     Total Secured                                              $__________

Unsecured (including Capitalized Leases)

     Total Unsecured                                            $__________

Redeemable Preferred Stock             $__________
     Total                                                      $__________

Receivable Securitization Program                               $__________

Other Consolidated Senior Debt

________________________________       $__________

________________________________       $__________

________________________________       $__________

Total Consolidated Senior Debt                                  $__________

Plus Subordinated Debt                                          $__________

Total Consolidated Total Funded Debt                            $__________

                                      120

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

                                                                      Schedule 3

                      Liens Securing Debt In The Principal
                       Amount of $50,000 or More which are
                 Not shown on Schedule 5.11 to Credit Agreement

                                               Relevant Provision
                                                of Section 5.11
Description of Lien   Amount of Debt Secured    Permitting Same

1. _____________      $_______                 __________

2. _____________      $_______                 __________

3. _____________      $_______                 __________

4. _____________      $_______                 __________

5. _____________      $_______                 __________

6. _____________      $_______                 __________

7. _____________      $_______                 __________

8. _____________      $_______                 __________

9. _____________      $_______                 __________

                                      121

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

                                                                     EXHIBIT F-2

                         ASSET COVERAGE BASE CERTIFICATE

                  Reference is made to the Third Amended and Restated Credit
Agreement dated as of March 28, 2003 (as the same may be amended, restated,
supplemented, or otherwise modified from time to time, the "Credit Agreement"),
among Avondale Mills, Inc., the Banks from time to time parties thereto, and
Wachovia Bank, National Association, as Agent. Capitalized terms used herein
shall have the meanings ascribed thereto in the Credit Agreement.

                  Pursuant to Section 5.01(k) of the Credit Agreement,
[_____________], the duly authorized [__________] of Avondale Incorporated,
hereby certifies to the Agent and the Banks that (i) the Asset Coverage Base for
the reporting period ending [_________ __], [20__], is $[_____________], as
calculated on Schedule I attached hereto; and (ii) the information utilized in
calculating and determining the Asset Coverage Base reported herein, including,
without limitation, the information set forth on Schedule I hereto, is true,
accurate, and complete in all material respects as of [___________ __], [20__].

                  Dated: ____________, 200__.

                                     AVONDALE INCORPORATED

                                     By: _______________________________________
                                         Title:

                                      122

<PAGE>

                              COMPLIANCE CHECK LIST

                              Avondale Incorporated

                               __________________

                            _________________, ______

                                   SCHEDULE I

                       TO ASSET COVERAGE BASE CERTIFICATE

                 For the period ending [___________ __], [20__]

         (a)      Book value of the Parent's consolidated
                  inventory:                                        $[_________]

         (b)      Line (a), times 0.40:                             $[_________]

         (c)      Net book value (after depreciation) of
                  Parent's consolidated plant, machinery, and
                  equipment:                                        $[_________]

         (d)      Line (c), times 0.30:                             $[_________]

         (e)      $30,000,000:                                      $30,000,000

         (f)      Lesser of lines (d) and (e):                      $[_________]

         (g)      Sum of lines (b) and (f), which amount
                  is the "Asset Coverage Base" for this
                  reporting period:                                 $[_________]

                                      123

<PAGE>

                                                                       EXHIBIT G

                              AVONDALE MILLS, INC.

                               CLOSING CERTIFICATE

         Reference is made to the Third Amended and Restated Credit Agreement
(the "Credit Agreement") dated as of March 28, 2003, among Avondale Mills, Inc.,
the Banks listed therein, and Wachovia Bank, National Association, as Agent.
Capitalized terms used herein have the meanings ascribed thereto in the Credit
Agreement.

         Pursuant to Section 3.01(b)(ii) of the Credit Agreement,____________,
the duly authorized _______________ of Avondale Mills, Inc., hereby certifies to
the Agent and the Banks that (i) to the Knowledge of the undersigned, no Default
has occurred and is continuing as of the date hereof, and (ii) the
representations and warranties contained in Article IV of the Credit Agreement
are true on and as of the date hereof.

         Certified as of March 28, 2003.

                                     By: _______________________________________

                                           Printed Name: _______________________

                                           Title: ______________________________

                                      124

<PAGE>

                                                                       EXHIBIT H

This Instrument Prepared By
and When Recorded Return to:

Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia  30308-3242
By:  Christopher L. Carson

                       MASTER MORTGAGE,LEASEHOLD MORTGAGE,
                       DEED OF TRUST, DEED TO SECURE DEBT,
                         LEASEHOLD DEED TO SECURE DEBT,
                   UNIFORM COMMERCIAL CODE SECURITY AGREEMENT,
                                       and
                     ASSIGNMENT OF LEASES, RENTS AND PROFITS
                                      among
                              AVONDALE MILLS, INC.,
                             as Borrower and grantor

                         WACHOVIA BANK OF GEORGIA, N.A.,
                                       as
                             Agent for certain banks
                                       and

                              ________________, as

                Trustee and grantee for the benefit of the Agent,
             as beneficiary for itself and the other Banks ratably,
                   with respect to the North Carolina Premises

------------
COLLATERAL IS OR INCLUDES FIXTURES.

THIS INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING STATEMENTS AS A
FIXTURE FILING IN ACCORDANCE WITH THE UNIFORM COMMERCIAL CODE, INCLUDING
SECTIONS 9-313 AND 9-402, AS ADOPTED IN ALABAMA, NORTH CAROLINA, SOUTH CAROLINA
AND GEORGIA.

THE NAMES OF THE DEBTOR AND THE SECURED PARTY, THE MAILING ADDRESS OF THE
SECURED PARTY FROM WHICH INFORMATION CONCERNING THE SECURITY INTEREST MAY BE
OBTAINED, THE MAILING ADDRESS OF THE DEBTOR AND A STATEMENT INDICATING THE
TYPES, OR DESCRIBING THE ITEMS, OF COLLATERAL, ARE AS DESCRIBED IN SUBSECTION
3.7.3 HEREOF.

THIS INSTRUMENT SECURES ANY CONTRACTUAL FUTURE ADVANCES HEREUNDER THAT MAY BE
MADE BY THE BANKS, AS DEFINED HEREIN, TO

                                      125

<PAGE>

BORROWER OR ANY CONTRACTUAL FUTURE OBLIGATIONS OF BORROWER TO THE "BANKS" AT ANY
TIME AND FROM TIME TO TIME DURING THE TERM HEREOF, NOT TO EXCEED, FOR PURPOSES
OF THE NORTH CAROLINA PREMISES AND THE SOUTH CAROLINA PREMISES ONLY, FIFTEEN
(15) YEARS (AS TO THE NORTH CAROLINA PREMISES) AND TEN (10) YEARS (AS TO THE
SOUTH CAROLINA PREMISES) IMMEDIATELY FOLLOWING THE DATE HEREOF, IN EACH CASE IN
AN AMOUNT NOT TO EXCEED AT ANY ONE TIME OUTSTANDING $225,000,000, PLUS INTEREST,
COSTS OF COLLECTION (INCLUDING, BUT NOT LIMITED TO REASONABLE ACTUAL ATTORNEYS
FEES, WHETHER OR NOT LITIGATION IS COMMENCED) AND SUMS ADVANCED TO PROTECT THE
SECURITY OF THIS INSTRUMENT.

NOTE:    INTEREST OR DISCOUNT MAY BE DEFERRED, ACCRUED OR CAPITALIZED BUT ONLY
         AT THE OPTION OF THE BANKS.

-------------
The amount of present obligations secured hereby is $____________,
and the maximum amount of present and future obligations is $225,000,000.

*FOR NORTH CAROLINA PURPOSES, THIS INSTRUMENT SHALL CONSTITUTE A DEED OF TRUST,
SECURITY AGREEMENT AND ASSIGNMENT OF LEASES, RENTS AND PROFITS AND SHALL BE
INDEXED IN THE NAME OF AVONDALE MILLS, INC., AS GRANTOR, ________________, AS
TRUSTEE, AND WACHOVIA BANK OF GEORGIA, N.A. AS BENEFICIARY.

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         THIS MASTER MORTGAGE, LEASEHOLD MORTGAGE, DEED OF TRUST, DEED TO SECURE
DEBT, LEASEHOLD DEED TO SECURE DEBT, UNIFORM COMMERCIAL CODE SECURITY AGREEMENT
AND ASSIGNMENT OF LEASES, RENTS AND PROFITS, including the cover sheet and table
of contents, made as of the __________ day of __________, 199__ by and between
AVONDALE MILLS, INC., as party of the first part; and WACHOVIA BANK OF GEORGIA,
N.A., as Agent for certain Banks (as hereafter defined), as party of the second
part and __________________ as party of the third part.

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

         WHEREAS, on April 29, 1996 party of the first part, party of the second
part and Banks entered into a certain Amended and Restated Credit Agreement
regarding certain obligations of the party of the first part owed to Agent and
Banks; and

         WHEREAS, to secure the repayment of such money and the performance of
certain obligations, party of the first part desires to convey, grant and assign
liens, security titles, security interests and collateral assignments in certain
property;

         NOW THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00), the mutual agreements contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and to secure the indebtedness hereinafter described, the parties
agree as follows:

                                   ARTICLE I.
                                   DEFINITIONS

         For the purpose of this Instrument, the following defined terms have
the meanings set forth in this Article I:

                  "Agent" means Wachovia Bank of Georgia, N.A., in its capacity
as agent for certain Banks as described in the Credit Agreement (hereinafter
defined), and its permitted successors and assigns.

                  "Alabama Lease" means that certain Lease Agreement, dated as
of April 1, 1992, by and between the Alabama Lessor and Borrower, as amended or
modified from time to time.

                  "Alabama Lessor" means The Industrial Development Board of the
Town of Bon Air.

                  "Alabama Tracts" means, individually and collectively, as the
context shall require, Borrower's leasehold estate created by the Alabama Lease
in that certain tract or parcel of land located in Bon Air, Talladega County,
Alabama and those certain other tracts or parcels of land located in Coosa
County, St. Clair County and Tallapoosa County, Alabama owned by Borrower in fee
simple, all of which tracts are more particularly described on Exhibit "A"
attached hereto and by this reference made a part hereof as the "Alabama
Tracts".

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                  "Bank" or "Banks" means Wachovia Bank of Georgia, N.A., a
national banking association, acting as Agent hereunder and each Bank and its
permitted successors and assigns as defined in the Credit Agreement.

                  "Borrower" means Avondale Mills, Inc., an Alabama corporation,
and its permitted successors and assigns.

                  "Credit Agreement" means the Amended and Restated Credit
Agreement dated April 29, 1996, by and between Borrower, Agent, The First
National Bank of Chicago, as Documentation Agent, and Banks, together with any
and all renewals, substitutions, modifications, amendments, consolidations and
extensions of the Credit Agreement.

                  "Default Condition" means any condition or event which
constitutes an Event of Default or which with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of Default.

                  "Easements and Appurtenances" means and include all easements,
rights-of-way, strips and gores of land, vaults, streets, ways, alleys,
passages, sewer rights, waters, water courses, water rights and powers,
minerals, flowers, shrubs, crops, trees, timber and other emblements now or
hereafter located on the Land or under or above the same or any part or parcel
thereof, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances, reversion and reversions, remainder
and remainders, whatsoever, in any way belonging, relating or appertaining to
the Premises or any part thereof, or which hereafter shall in any way belong,
relate or be appurtenant thereto, whether now owned or hereafter acquired by
Borrower.

                  "Event of Default" has the meaning set forth in Section 4.1
hereof.

                  "Fixtures" means any and all items included in Plant,
Equipment and Personal Property which constitute fixtures under the law of the
state in which the Premises of which they constitute a part are located and any
and all other items of personal property which are physically attached to Land
or buildings thereon and any and all replacements and substitutions of any of
the foregoing.

                  "Georgia Lease" means that certain Lease Agreement dated June
1, 1992 between the Georgia Lessor and Borrower recorded in Deed Book 411, page
42, Walton County, Georgia Records, as amended or modified from time to time.

                  "Georgia Lessor" means the Development Authority of Walton
County.

                  "Georgia Tracts" means, individually and collectively, as the
context shall require, Borrower's leasehold estate created by the Georgia Lease
in that certain tract or parcel of land located in Walton County, Georgia, and
those certain other tracts or parcels of land located in Tift County and
Richmond County, Georgia owned by Borrower in fee simple, all of which tracts
are more particularly described on Exhibit "A" attached hereto and by this
reference made a part hereof as the "Georgia Tracts."

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                  "Instrument" means this Master Mortgage, Deed of Trust, Deed
to Secure Debt, Uniform Commercial Code Security Agreement and Assignment of
Leases, Rents and Profits, together with any and all renewals, substitutions,
modifications, amendments, consolidations and extensions of this Instrument.

                  "Intercreditor Agreement" means the Amended and Restated
Intercreditor Agreement dated April 29, 1996 between Borrower, Agent and
SunTrust Bank, Atlanta, as amended or supplemented from time to time, pertaining
to the SunTrust Collateral Plants.

                  "Land" means, individually and collectively, as the context
shall require, the Georgia Tracts, the Alabama Tracts, the North Carolina Tracts
and the South Carolina Tracts.

                  "Leases and Rents" means and include all leases, subleases,
tenant contracts and rental agreements pertaining to the Premises whether now or
hereafter existing and including, without limitation, all income, rents, issues,
profits and revenues of the Premises at any time and from time to time now or
hereafter accruing (including, without limitation, all payments under leases or
tenancies, proceeds of insurance (including, without limitation, business
interruption insurance), condemnation payments with respect to such income,
rents, issues, profits and revenues, tenant security deposits, whether held by
Borrower or in a trust account, payments to Borrower in connection with any sale
of any Premises to a tenant or customer pursuant to the provisions of any lease
and escrow funds), and all the estate, right, title, interest, property,
possession, claim and demand whatsoever at law, as well as in equity, of
Borrower of, in and to the same whether now or hereafter existing.

                  "Notes" means, individually and collectively, as the context
shall require, the Revolver Loan Notes or the Swing Loan Note (as defined in the
Credit Agreement) dated April 29, 1996, made by Borrower and payable to the
order of a Bank, with the final payment being due April 28, 2001 (unless
extended by the Banks in their sole and absolute discretion), together with any
and all renewals, modifications, amendments, replacements and extensions
thereof.

                  "North Carolina Tracts" means, individually and collectively,
as the contract shall require, those certain tracts or parcels of land located
in Lee County and Yancey County, North Carolina being more particularly
described on Exhibit "A" attached hereto and by this reference made a part
hereof as the "North Carolina Tracts."

                  "Permitted Encumbrances" means, as to each of the Premises,
those matters identified as to such Premises on Exhibit "B", attached hereto and
by this reference made a part hereof and, subject to the provisions of Section
5.11 of the Credit Agreement, outstanding security interests in Plant, Equipment
and Personal Property.

                  "Plant, Equipment and Personal Property" means and include all
buildings, structures and improvements of every nature whatsoever now or
hereafter situated on the Land now or hereafter owned by Borrower or in which
Borrower now or hereafter has rights (to the extent of such rights), and all gas
and electric fixtures, radiators, heaters, engines and machinery, boilers,
ranges, elevators and motors, plumbing and heating fixtures, carpeting and other
floor coverings, fire extinguishers and any other safety equipment required by
governmental

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regulation or law, washers, dryers, water heaters, mirrors, mantels, air
conditioning apparatus, refrigerating plants, refrigerators, cooking apparatus
and appurtenances, window screens, awning and storm sashes now or hereafter
owned by Borrower, which are or shall be attached to said buildings, structures
or improvements and all other furnishings, furniture, fixtures, machinery,
equipment, appliances, racks, forklifts, building supplies and materials, books
and records, chattels, contract rights, and personal property (excluding any
Receivables Program Assets) of every kind and nature whatsoever now or hereafter
owned by Borrower or in which Borrower now or hereafter has rights (to the
extent of such rights) and now or hereafter located in, on or about, or used or
intended to be used with or in connection with the use, operation or enjoyment
of the Premises, including all extensions, additions, improvements, betterments,
after-acquired property, renewals, replacements and substitutions, or proceeds
from a sale of any of the foregoing; and all the right, title and interest of
Borrower now or hereafter in any such furnishings, furniture, fixtures,
machinery, equipment, appliances and personal property subject to or covered by
any prior or superior security agreement, conditional sales contract, chattel
mortgage or similar lien or claim, together with the benefit of any deposits or
payments now or hereafter made by Borrower or on behalf of Borrower; and all
personal property constituting proceeds hereafter acquired with cash proceeds of
any of the Plant, Equipment and Personal Property described hereinabove; all of
which are hereby declared and shall be deemed to be fixtures (except for the
purpose of the definition of "Fixtures" above), and accessions to the Land and a
part of the Premises as between the parties hereto and all persons claiming by,
through or under them, and which shall be deemed to be a portion of the security
for the Secured Obligations; provided, that the foregoing shall not include any
equipment described in Exhibit "B" to the "Security Agreement," as defined in
the Credit Agreement. The location of the Plant, Equipment and Personal Property
is also the location of the Land.

                  "Premises" means and includes, collectively, the related Land,
the Plant, Equipment and Personal Property, the Easements and Appurtenances and
the Leases and Rents. Whenever the word "Premises" is preceded by the name of a
state or city, for example, "Georgia Premises", such reference shall be deemed
to mean and include that portion of the Premises located in the identified state
or city.

                  "Required Banks" has the meaning set forth in the Credit
Agreement.

                  "Secured Obligations" means and includes the following
collectively:

                  (a)      Any and all indebtedness, obligations and liabilities
                           of Borrower to Agent and/or Banks now existing
                           pursuant to, or hereafter arising out of, or
                           otherwise relating to the any of the Transaction
                           Documents, including, without limitation, all
                           "Obligations", as that term is defined in the Credit
                           Agreement and including, to the extent provided in
                           such definition, indebtedness, obligation and
                           liabilities under "Interest Rate Protection
                           Agreements," as defined in the Credit Agreement, with
                           any of the Banks.

                  (b)      Any and all indebtedness, obligations and liabilities
                           of Borrower to Agent and/or Banks now existing or
                           hereafter arising, in either instance, under, by
                           virtue of or pursuant to this Instrument.

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                  (c)      Any and all advances hereafter made by Agent and/or
                           Banks at any time to protect or preserve the Premises
                           or the lien hereof on the Premises, or for taxes,
                           assessments, insurance premiums or other advances
                           authorized under the terms of this Instrument
                           (whether or not the original Borrower remains the
                           owner of the Premises at the time of any of such
                           advances).

                  (d)      Any and all other present and future indebtedness (i)
                           now owing or (ii) which may at any time and from time
                           to time hereafter be owing by Borrower to Agent
                           and/or Banks arising, in either instance, out of or
                           otherwise relating to the Credit Agreement or the
                           other Transaction Documents, now existing or
                           hereafter coming into existence, however and whenever
                           incurred or evidenced, whether express or implied,
                           direct or indirect, absolute or contingent, or due or
                           to become due, joint, several, joint and several, if
                           arising from, by virtue of, evidenced by or pursuant
                           to any of the Transaction Documents and all renewals,
                           substitutions, modifications, amendments,
                           consolidations and extensions and restatements
                           thereof.

                  "South Carolina Tracts" means, individually and collectively,
as the context shall require, those certain tracts or parcels of land located in
Oconee County, Aiken County and Edgefield County, South Carolina being more
particularly described on Exhibit "A" attached hereto and by this reference made
a part hereof as the "South Carolina Tracts."

                  "Tract or "Tracts" means, individually and collectively, as
the context shall require, any one or all of the Georgia Tracts, the Alabama
Tracts, the North Carolina Tracts and the South Carolina Tracts.

                  "Transaction Documents" means the Credit Agreement, the Notes,
this Instrument, the other "Loan Documents" (as defined in the Credit Agreement)
and any other instrument, document or other writing executed on or after the
date hereof on behalf of Borrower evidencing, securing or otherwise relating to
any of the Secured Obligations.

                  "SunTrust Collateral Plants" means the Premises identified as
the "SunTrust Collateral Plants" on Exhibit "A" attached hereto and by this
reference made a part hereof. The SunTrust Collateral Plants are located in
Walton County, Georgia, Lee County, North Carolina and the Town of Walhalla,
South Carolina.

                  "Trustee" means ____________, a resident of ____________
County, North Carolina with respect to the North Carolina Premises, together
with any successor Trustee appointed pursuant to the provisions of this
Instrument.

                                   ARTICLE II.
                                GRANTING CLAUSES

                  2.1      Granting Clause. In order to secure the full and
prompt payment when due, whether by acceleration or otherwise, and full and
prompt performance, of the Secured Obligations in such order of priority as
Agent may elect, Borrower hereby mortgages, grants,

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conveys and warrants the Premises (i) as to the North Carolina Premises, to the
Trustee, for the benefit of the Agent, as beneficiary, for itself and the other
Banks ratably, and (ii) as to all other Premises, to the Agent, for the ratable
benefit of the Banks, and grants (i) as to the North Carolina Premises, to the
Trustee, for the benefit of the Agent, as beneficiary, for itself and the other
Banks ratably, and (ii) as to all other Premises, to the Agent, for the ratable
benefit of the Banks, a security interest in the Premises as more particularly
set forth in this Article:

                           2.1.1 Alabama Premises. Borrower hereby does grant,
bargain, sell, assign and convey unto Agent for the ratable benefit of the
Banks, the successors, successors-in-title and assigns of Agent, for the benefit
of the Banks, the Alabama Tracts and all rights with respect thereto (including,
without limitation, any purchase or extension options Borrower may have under
the Alabama Lease including under Section 5.6 thereof), together with the Plant,
Equipment and Personal Property, the Easements and Appurtenances, and the Leases
and Rents pertaining to the Alabama Tract, to have and to hold forever.

                           2.1.2 Georgia Premises. Borrower hereby does grant,
bargain, sell, assign and convey unto Agent, the successors, successors-in-title
and assigns of Agent, for the benefit of the Banks, the Georgia Tracts and all
rights with respect thereto, (including, without limitation, any purchase or
extension options Borrower may have under the Georgia Lease including under
Section 5.6 thereof), together with the Plant, Equipment and Personal Property,
the Easements and Appurtenances and the Leases and Rents pertaining to each such
tract, to have and to hold in fee simple forever. With respect to the Georgia
Tracts, this Instrument is intended to operate and is to be construed as a deed
passing title to those tracts to Agent and not as a mortgage and is made under
those provisions of the existing laws of the State of Georgia relating to deeds
to secure debt.

                           2.1.3 North Carolina Premises. Borrower as grantor
hereby does irrevocably grant, bargain, sell, assign and convey unto Trustee in
trust with power of sale under and subject to the terms hereof, for the benefit
of the Agent, as beneficiary for itself and the other Banks ratably, the North
Carolina Tracts, together with the Plant, Equipment and Personal Property, the
Easements and Appurtenances, and the Leases and Rents pertaining to the North
Carolina Tracts, to have and hold forever.

                           2.1.4 South Carolina Premises. Borrower hereby does
grant, bargain, sell, alien, remise, release, assign, convey, transfer,
mortgage, hypothecate, pledge, deliver, set over, warrant and confirm into
Agent, for the benefit of the Banks and their successors or assigns, all right,
title and interest of Borrower in and to the South Carolina Tracts, together
with the Plant, Equipment and Personal Property, the Easements and
Appurtenances, and the Leases and Rents pertaining to the South Carolina Tracts,
to have and hold forever.

                  2.2      Warranty of Title. Borrower does warrant and will
forever defend the title to the Premises against the claims of all persons
whomsoever, except as to the Permitted Encumbrances. Borrower represents and
warrants that it is lawfully seized of the Land in fee simple absolute (except
for the Tracts which are leased pursuant to the Alabama Lease and the Georgia
Lease), that Borrower has good right and is lawfully authorized to sell, convey
or

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encumber the Premises and that the Premises are free and clear of all
encumbrances except liens for real property taxes not yet due and payable and
Permitted Encumbrances.

                  2.3      Defeasance. Should the Secured Obligations secured by
this Instrument be paid and satisfied according to the tenor and effect thereof
when the same shall become due and payable and the obligations of the Banks
under the Credit Agreement be terminated in writing, then this Instrument and
the conveyance effected and the liens and security interests granted hereby
shall be released and terminated and shall be cancelled and surrendered. Upon
payment and satisfaction of the Secured Obligations in full and the termination
of the obligations of the Banks and the Agent under the Credit Agreement, Agent
shall execute, in recordable form, and deliver to Borrower such instruments as
are required to release and terminate of record this Instrument.

                  2.4      Future Disbursements. This Instrument secures, among
other obligations, all present and future loan disbursements made by Agent
and/or Banks to Borrower which are included in the Secured Obligations. The
Notes evidence a revolving credit facility under the Credit Agreement and there
may be advances, repayment and disbursements or readvances of principal from
time to time. It is expressly agreed that the outstanding principal balance
under the Notes may, from time to time, be reduced to a zero balance without
such repayment operating to extinguish and release the lien, security title and
security interest created by this Instrument. This Instrument shall remain in
full force and effect as to any subsequent future advances made after such zero
balance without loss of priority until the Secured Obligations are paid in full
and satisfied and all agreements between Borrower and Banks for further advances
have been terminated. Borrower waives the operation of any applicable statute,
law or regulation having a contrary effect. For purposes of North Carolina law,
the amount of present obligations secured hereby is $____________. For purposes
of the North Carolina Premises and the South Carolina Premises only, the
aggregate outstanding principal amount of such loan disbursements secured by
this Instrument shall not exceed ___,000,000 and No/100 Dollars ($___,000,000);
provided, however, that said maximum amount may be increased as aforesaid and by
such additional sums and amounts as may be advanced by Agent and/or Banks
pursuant to the provisions of this Instrument for the protection and
preservation of the Premises, interest, attorneys' fees and court costs.

                                  ARTICLE III.
                              COVENANTS OF BORROWER

                  3.1      Payment of Indebtedness. Borrower will pay the
Secured Obligations according to the tenor thereof and all other sums now or
hereafter secured hereby promptly as the same shall become due.

                  3.2      Taxes, Liens and Other Charges.

                           3.2.1 In the event of the passage of any state,
federal, municipal or other governmental law, order, rule or regulation,
subsequent to the date hereof, in any manner changing or modifying the laws now
in force governing the taxation of debts secured by mortgages, deeds of trust or
deeds to secure debt (not including tax on interest or fee income

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associated with such debt) or the manner of collecting taxes so as to adversely
affect Agent or the Banks, Borrower will, subject to Subsection 3.2.5, promptly
pay any such additional tax, except to the extent this Instrument relates to any
of the SunTrust Collateral Plants.

                           3.2.2 Borrower will, subject to Subsection 3.2.5,
pay, before the same become delinquent, all taxes, liens, assessments and
charges of every character including all utility charges, whether public or
private, already levied or assessed or that may hereafter be levied or assessed
upon or against the Premises; and upon demand will furnish Agent receipted bills
evidencing such payment.

                           3.2.3 Borrower will not, subject to Subsection 3.2.5,
suffer any mechanic's, materialman's, laborer's, statutory or other lien to be
created and to remain outstanding upon all or any part of the Premises, except
for inchoate liens securing obligations not for borrowed money which are not yet
due and payable and except for the Permitted Encumbrances.

                           3.2.4 Borrower, to the full extent permitted by
applicable law, shall, subject to Subsection 3.2.5, indemnify and hold Agent and
Banks harmless from, or shall reimburse Agent and Banks for, any and all
intangible tax, documentary stamp tax, mortgage tax, note tax or other like or
similar tax (excluding income, franchise or capital taxes imposed on the income
of Agent or Banks) imposed with respect to this Instrument or under any power of
sale herein granted, any of the other Transaction Documents, or the Secured
Obligations, and from any interest, charges or penalties assessed with respect
thereto, except to the extent any of the foregoing relate to any of the SunTrust
Collateral Plants.

                           3.2.5 The Borrower shall have the right to contest by
appropriate proceedings any taxes, liens, assessments or other charges described
in Subsections 3.2.1 through 3.2.4, inclusive, provided that it has established
adequate reserves therefor.

                  3.3      Insurance.

                           3.3.1 So long as any portion of the Secured
Obligations remains unpaid, Borrower, at its expense, shall procure and maintain
for the benefit of Agent and Banks, insurance policies issued by such insurance
companies, and in such amounts as are required by Section 5.17 of the Credit
Agreement. All insurance required by this Subsection 3.3.1 which protect against
physical damage to the Plant, Equipment and Personal Property shall contain a
standard mortgagee clause (without contribution) in favor of Agent and Banks,
shall not be terminable without thirty (30) days' prior written notice to Agent,
and shall be evidenced by original policies or certified copies of policies
deposited with Agent, to be held by Agent until the Secured Obligations shall
have been fully paid and discharged. All other insurance policies, such as
general liability policies, required by the terms of this Instrument shall be
evidenced by certificates delivered to Agent and in case of cancellation, shall
provide for thirty (30) days' prior written notice to Agent.

                           3.3.2 Following the occurrence and during the
continuance of an Event of Default, Agent is hereby authorized and empowered, at
its option, to adjust or compromise

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any loss under any insurance policies maintained pursuant to this Section 3.3,
and to collect and receive the proceeds from any such policy or policies, and
each insurance company is hereby authorized and directed to make payment for all
such losses directly to Agent, for the ratable benefit of the Banks, instead of
to Borrower and Agent jointly. In the event any insurance company fails to
disburse directly and solely to Agent but disburses instead either solely to
Borrower or to Borrower and Agent jointly, Borrower agrees immediately to
endorse and transfer such proceeds to Agent. Upon the failure of Borrower to
endorse and transfer such proceeds as aforesaid, Agent may execute such
endorsements or transfers for and in the name of Borrower and Borrower hereby
irrevocably appoints Agent as Borrower's agent and attorney-in-fact so to do.
After deducting from said insurance proceeds all of its expenses incurred in the
collection and administration of such sums, including attorneys' fees, Agent may
apply the net proceeds or any part thereof, at its option, (i) to the payment of
the Secured Obligations, whether or not due and in whatever order the Required
Banks elect, (ii) to the repair and/or restoration of the Premises or (iii) for
any other purposes or objects for which Agent is entitled to advance funds under
this Instrument; all without affecting the lien of this Instrument. Agent shall
not be held responsible for any failure to collect any insurance proceeds due
under the terms of any policy regardless of the cause of such failure absent
gross negligence or willful misconduct. Reference is made to Subsection 3.5.3.

                           3.3.3 Not less than thirty (30) days prior to the
expiration date of each policy maintained pursuant to this Section 3.3, evidence
of a renewal or replacement thereof satisfactory to Agent shall be delivered to
Agent. At the request of Agent, Borrower shall deliver to Agent receipts
evidencing the payment for all such insurance policies and renewals or
replacements. In the event of the foreclosure of this Instrument or any other
transfer of title to any of the Premises in extinguishment, in whole or in part,
of the Secured Obligations, all right, title and interest of Borrower in and to
all insurance policies then in force with respect to such Premises shall pass to
the purchaser or grantee.

                           3.3.4 Any provision of this Instrument to the
contrary notwithstanding, this Section 3.3 and Section 3.4 and the rights and
obligations of Borrower and Agent hereunder with respect to insurance and
condemnation are in all respects subject to and subordinate to the Alabama
Lease, the Georgia Lease and any security agreements, mortgages, deeds of trust
or deeds to secure debt prior or superior to this Instrument and the rights of
the lessors thereunder or parties secured thereby relating to the collection and
disposition of insurance and condemnation proceeds.

                  3.4      Condemnation. Following the occurrence and during the
continuance of an Event of Default, if all or any material portion of the
Premises shall be damaged or taken through condemnation (the term "condemnation"
when used in this Instrument shall include any damage or taking by any
governmental or quasi-governmental authority and any transfer by private sale in
lieu thereof), either temporarily or permanently, then the Secured Obligations
shall, at the option of the Required Banks, become immediately due and payable,
and Agent, for the ratable benefit of the Banks, shall be entitled to receive
all compensation, awards and other payments or relief thereof. In such event,
Agent is hereby authorized, at its option, to commence, appear in and prosecute,
in its own or in Borrower's name, any action or proceeding relating to any
condemnation, and to settle or compromise any claim in connection therewith,

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and all such compensation, awards, damages, claims, rights of action and
proceeds and the right thereto are hereby assigned by Borrower to Agent, for the
ratable benefit of the Banks. After deducting from said condemnation proceeds
all of its expenses incurred in the collection and administration of such sums,
including attorney's fees, Agent may apply the net proceeds or any part thereof,
at the option of the Required Banks, (a) to the payment of the Secured
Obligations, whether or not due and in whatever order the Required Banks elect,
(b) to the repair and/or restoration of the Premises, or (c) for any other
purposes or objects for which Agent is entitled to advance funds under this
Instrument, all without affecting the lien of this Instrument; and any balance
of such moneys then remaining shall be paid to Borrower. Borrower agrees to
execute such further assignment of any compensation, awards, damages, claims,
rights of action and proceeds as Agent may require. If, prior to the receipt by
Agent of such award or proceeds, the Premises shall have been sold on
foreclosure of this Instrument, Agent, for the ratable benefit of the Bank,
shall have the right to receive such award or proceeds to the extent of any
unpaid Secured Obligations following such sale, with interest thereon at the
"Default Rate" (as defined in the Credit Agreement), whether or not a deficiency
judgment on this Instrument shall have been sought or recovered, and to the
extent of reasonable actual counsel fees, costs and disbursements incurred by
Agent in connection with the collection of such award or proceeds. Reference is
made to Subsections 3.3.4 and 3.5.3.

                  3.5      Care of Premises.

                           3.5.1 Borrower will keep the buildings, parking
areas, roads and walkways, recreational facilities, landscaping and all other
improvements of any kind now or hereafter erected on the Land or any part
thereof in good condition and repair, and in substantial compliance with all
applicable laws, except to the extent failure would not have a material adverse
effect on the usefulness or value of the Premises, and will not commit or suffer
any waste and will not do or suffer to be done anything (other than that which
is inherent in the ordinary course of Borrower's business operations) which will
unreasonably increase the risk of fire or other hazard to the Premises or any
part thereof.

                           3.5.2 Borrower will not remove or demolish nor
materially alter the structural character of any improvement located on the Land
without the written consent of the Agent (at the direction of the Required
Banks) except to the extent failure would not have a material adverse effect on
the usefulness or value of the Premises.

                           3.5.3 If the Premises or any part thereof is
materially damaged by fire or any other cause, or any material portion thereof
is taken by condemnation, Borrower will give immediate written notice thereof to
Agent. Borrower shall either (i) repair or restore such property to the extent
reasonably practical, and may use the proceeds of any insurance or condemnation
award for such purpose, with any amounts thereof not so used to be paid to the
Agent for application to the Secured Obligations, or (ii) treat such event as a
sale of assets for purposes of Sections 2.08(b) and 5.14 of the Credit
Agreement. The provisions of this Subsection 3.5.3 are subject to the provisions
of Subsection 3.3.2 (as to insurance) and Section 3.4 (as to condemnation) upon
the occurrence and during the continuance of an Event of Default.

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                  3.6      Leases, Contracts, Etc.

                           3.6.1 As additional collateral and further security
for the Secured Obligations, Borrower does hereby assign as a present and
absolute assignment (to the extent assignable pursuant to the terms thereof) to
Agent, for the benefit of Banks, all of Borrower's right, title and interest now
existing or hereafter arising in and to any and all Leases and Rents, franchise
agreements, management contracts, construction contracts, and other contracts
(not included in the definition of Leases and Rents), licenses and permits now
or hereafter affecting the Premises, or any part thereof, (reserving only to
Borrower the right to collect currently due and payable income, rents, issues,
profits, charges and revenues from the Premises until such time, if any, as an
Event of Default shall exist and be continuing). The foregoing is intended to be
a present and absolute assignment and not merely the passing of a security
interest. Borrower agrees to execute and deliver to Agent, such additional
instruments, in form and substance reasonably satisfactory to Agent, as may
hereafter be reasonably requested by Agent further to evidence and confirm said
assignment; provided, however, that acceptance of any such assignment shall not
be construed as a consent by Agent to any lease, tenant contract, rental
agreement, franchise agreement, management contract, construction contract, or
other contract, license or permit, or to impose upon Agent, any obligation with
respect thereto.

                           3.6.2 Borrower shall furnish to Agent, within twenty
(20) days after a receipt of a request by Agent to do so, such information as
Agent or any Bank from time to time may reasonably request concerning the
leases, tenant contracts and rental agreements.

                  3.7      Security Agreement.

                           3.7.1 PARTS OF THE PREMISES ARE, OR ARE TO BECOME,
FIXTURES ON THE LAND. Insofar as the Plant, Equipment and Personal Property and
the Leases and Rents are concerned, this Instrument is hereby made and declared
to be a security agreement, and a security interest is hereby granted by
Borrower to Agent, for the ratable benefit of Banks, encumbering each and every
item of Plant, Equipment and Personal Property and of Leases and Rents in
compliance with the provisions of the applicable Uniform Commercial Code. A
financing statement or statements reciting this Instrument to be a security
agreement, affecting all of said personal property aforementioned, shall be
executed by Borrower and Agent and appropriately filed. The remedies for any
violation of the covenants, terms and conditions of the security agreement
herein contained shall be (i) as prescribed herein, or (ii) as prescribed by
general law, or (iii) as prescribed by the specific statutory consequences now
or hereafter enacted and specified in the applicable Uniform Commercial Code,
all at Agent's sole election. Borrower and Agent agree that the filing of such
financing statement(s) in the records normally having to do with personal
property shall never be construed as in anywise derogating from or impairing
this declaration and hereby stated intention of Borrower and Agent that
everything used in connection with the production of income from the Premises
and/or adapted for use therein and which is described or reflected in this
Instrument as part of the Plant, Equipment or Personal Property, is, and at all
times and for all purposes and in all proceedings both legal or equitable shall
be, regarded as part of the real estate irrespective of whether (a) any such
item is physically attached to the improvements, (b) serial numbers are used for
the better identification of certain items capable of being thus identified in a
recital contained herein, or (c) any such item

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is referred to or reflected in any such financing statement(s) so filed at any
time. Similarly, the mention in any such financing statement(s) of the rights in
and to (aa) the proceeds of any fire and/or hazard insurance policy, or (bb) any
award in eminent domain proceedings for a taking or for loss of value, or (cc)
Borrower's interest as lessor in any present or future lease or rights to income
growing out of the use and/or occupancy of the Premises, whether pursuant to
lease or otherwise, shall never be construed as in anywise altering any of the
rights of Agent, Banks or Borrower as determined by this instrument or impugning
the priority of Agent's lien granted hereby or by any other recorded document,
but such mention in such financing statement(s) is declared to be for the
protection of Agent and Banks in the event any court shall at any time hold with
respect to the foregoing (aa), (bb) or (cc), that notice of Agent's priority of
interest to be effective against a particular class of persons, must be filed in
the Uniform Commercial Code records.

                           3.7.2 Borrower warrants that (i) Borrower's (that is,
"Debtor's") name, identity or corporate structure and residence or principal
place of business are as set forth in Subsection 3.7.3 hereof; (ii) Borrower
(that is, "Debtor") has been using or operating under said name, identity or
corporate structure without change for the time period set forth in Subsection
3.7.3 hereof; (iii) that Borrower is duly qualified to do business in each state
in which the Land is located; and (iv) the location of the Plant, Equipment and
Personal Property is upon the Land, except as permitted in the Security
Agreement. Borrower covenants and agrees that: (i) Borrower will furnish Agent
with notice of any change in the matters addressed by clauses (i) or (iii) of
this Subsection 3.7.2 within thirty (30) days of the effective date of any such
change; (ii) Borrower will promptly execute any financing statements or other
instruments deemed necessary by Agent to prevent any filed financing statement
from becoming misleading or losing its perfected status; and (iii) and that
Borrower will remain qualified to do business in each state in which the Land is
located.

                           3.7.3 Upon execution by Agent (where local practice
requires the same), this Instrument shall constitute a financing statement filed
as a fixture filing under the Uniform Commercial Code in the real estate records
of the county or city in which the Premises is located with respect to all
fixtures which are a part of the Premises and with respect to any goods or other
personal property that may now be or hereafter become a fixture. The information
contained in this Subsection 3.7.3 is provided in order that this Instrument
shall comply with the requirements of the applicable Uniform Commercial Code for
instruments to be filed as financing statements, to perfect the security
interests with respect to fixtures. The names of the "Debtor" and the "Secured
Party", the identity or corporate structure and residence or principal place of
business of "Debtor", and the time period for which "Debtor" has been using or
operating under said name and identity or corporate structure without change,
are as set forth in Exhibit "C", attached hereto and by this reference made a
part hereof; the mailing address of the "Secured Party" from which information
concerning the security interest may be obtained, and the mailing address of
Borrower (that is, "Debtor"), are as set forth in Section 5.5 of this
Instrument; and a statement indicating the types, or describing the items, of
collateral is set forth hereinabove.

                           3.7.4 Conflict with Security Agreement. To the extent
any of the provisions of this Instrument pertaining to Plant, Equipment and
Personal Property are in conflict

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with any provisions of the Security Agreement, the conflicting provisions of the
Security Agreement shall govern and control over the conflicting provisions of
this Instrument.

                  3.8      Further Assurances; After Acquired Property. At any
time, and from time to time, upon reasonable request by Agent, Borrower will
make, execute and deliver or cause to be made, executed and delivered, to Agent
and, where appropriate, cause to be recorded and/or filed and from time to time
thereafter to be re-recorded and/or refiled at such time and in such offices and
places as shall be deemed desirable by Agent, any and all such other and further
mortgages, deeds of trust, security agreements, financing statements,
continuation statements, instruments of further assurance, certificates and
other documents as may, in the opinion of Agent reasonably exercised, be
necessary or desirable in order to effectuate, complete, or perfect, or to
continue and preserve (a) the obligation of Borrower under the Secured
Obligations and under this Instrument and (b) the lien and security interests
granted by this Instrument as a first and prior lien (except for the Permitted
Encumbrances) upon and in and to all of the Premises, whether now owned or
hereafter acquired by Borrower, as well as any certificates, petitions or other
instruments reasonably requested by the Agent for allocation of stamp,
intangible, recording or similar tax liability relating to the filing of this
Instrument for record as to multiple Premises. Upon any failure by Borrower so
to do, Agent may make, execute, record, file, re-record and/or refile any and
all such mortgages, security agreements, deeds of trust, financing statements,
continuation statements, instruments, certificates and documents for and in the
name of Borrower and Borrower hereby irrevocably appoints Agent the agent and
attorney-in-fact of Borrower so to do. The lien of this Instrument and the
security interest created hereby will automatically attach, without further act,
to after-acquired personal property attached to, or located on, the Land and/or
used in connection with the operation of the Premises or any part thereof.

                  3.9      Expenses. Borrower will pay or reimburse Agent and
Banks, upon demand therefor, for all reasonable actual attorneys' fees, costs
and expenses incurred by Agent or any Bank in any suit, action, legal proceeding
or dispute of any kind in which Agent and/or Banks are made a party or appear as
party plaintiff or defendant, affecting the Secured Obligations secured hereby,
this Instrument or the interest created herein, or the Premises, including, but
not limited to, the exercise of the power of sale contained in this Instrument
or the foreclosure of this Instrument, any condemnation action involving the
Premises or any action to protect the security hereof; and any such amounts paid
by Agent or any Bank shall be included in the Secured Obligations secured by the
lien of this Instrument. Notwithstanding the foregoing, neither Agent nor any
Bank shall be entitled to recover any such expenses in any such suit by Agent or
such Bank against Borrower if such suit results in a judicial determination in
favor of Borrower with respect to the subject matter thereof or results in a
determination of liability against Agent or such Bank based on an act of gross
negligence or willful misconduct.

                  3.10     Subrogation. Agent shall be subrogated to all right,
title, equity liens and claims of all persons, firms or corporations to whom
Borrower has paid or pays, or to whom monies are paid, from the proceeds of the
Secured Obligations in the settlement of claims, liens or charges or for the
benefit of Borrower.

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                  3.11     Limit of Validity. If from any circumstances
whatsoever fulfillment of any provision of this Instrument, the Notes or any of
the other Transaction Documents (as defined in the Credit Agreement) at the time
performance of such provision shall be due, shall involve transcending the limit
of validity presently prescribed by any applicable usury statute or any other
applicable law, with regard to obligations of like character and amount, then
ipso facto the obligation to be fulfilled shall be reduced to the limit of such
validity, so that in no event shall any exaction be possible under this
Instrument that is in excess of the current limit of such validity, but such
obligation shall be fulfilled to the limit of such validity.

                  3.12     Junior Encumbrances. Borrower shall not further
mortgage, encumber or pledge all or any part of the Premises or of Borrower's
interest in the Premises or any part thereof, except for Permitted Encumbrances.

                  3.13     Ground Lease.

                           3.13.1 Borrower shall duly and punctually perform all
terms, covenants, conditions and agreements imposed on the tenant (or lessee) or
the Premises or any part thereof by the Alabama Lease and the Georgia Lease, and
will do all other things necessary to preserve and keep unimpaired the rights of
Borrower under the Alabama Lease and the Georgia Lease.

                           3.13.2 Borrower represents that the Alabama Lease and
the Georgia Lease are in full force and effect and there is no existing default
or event of default under the Alabama Lease or the Georgia Lease or in the
performance of any of the terms, covenants, conditions, or warranties thereof on
the part of tenant (or lessee) to be kept, performed and observed.

                           3.13.3 Borrower represents that it has heretofore
furnished Agent true and complete copies of the Alabama Lease and the Georgia
Lease and all amendments relating thereto, and all consents of third parties
required by the Alabama Lease and the Georgia Lease, or any other document or
instrument relating thereto, for the execution and delivery of this Instrument,
including the consents of the Alabama Lessor and the Georgia Lessor, if required
by the Alabama Lease and the Georgia Lease.

                           3.13.4 Borrower shall within three (3) days following
receipt by Borrower of any written notice from the landlord (or lessor) under
the Alabama Lease or the Georgia Lease, furnish a copy of such notice to Agent.
With respect to any default on the part of the Alabama Lessor or the Georgia
Lessor under the Alabama Lease or the Georgia Lease, as applicable, and of the
occurrence of any event which, with or without any notice or lapse of time or
both, would constitute a default on the part of the Alabama Lessor or the
Georgia Lessor under the Alabama Lease or the Georgia Lease, as applicable,
Borrower will (i) forward to Agent any written notice thereof by Borrower to the
Alabama Lessor or the Georgia Lessor, as applicable, simultaneously with the
delivery thereof to the Alabama Lessor or the Georgia Lessor, as applicable, and
(ii) promptly notify Agent of any other such occurrence or condition of which
Borrower has actual knowledge.

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                           3.13.5 Borrower shall not, without the express
written consent of and joinder by the Agent (at the direction of the Required
Banks), amend or modify in any material respect, supplement, surrender,
terminate, cancel or assign the Alabama Lease or the Georgia Lease or any option
to renew or extend the term thereof. Borrower hereby assigns to the Agent for
the benefit of the Banks all rights which Borrower may have now or in the future
to amend or modify in any material respect, supplement, surrender, terminate,
cancel or assign the Alabama Lease or the Georgia Lease. Any such amendment or
modification in any material respect, supplement, surrender, termination,
cancellation or assignment of the Alabama Lease or the Georgia Lease made,
suffered to be made or consented to by Borrower without the Agent's prior
written consent shall be void and of no force and effect.

                           3.13.6 So long as any Event of Default exists
hereunder, Borrower hereby authorizes Agent, and hereby appoints Agent its
attorney-in-fact (which appointment is coupled with an interest), to name any
arbitrators or appraisers which Borrower, as tenant (or lessee) under the
Alabama Lease or the Georgia Lease, has the right to appoint by virtue of the
Alabama Lease or the Georgia Lease.

                           3.13.7 Without limiting the generality of any other
provision of this Instrument, Borrower covenants and agrees (i) that the lien of
this Instrument shall automatically and without further action by Borrower,
Agent or the Lenders, extend and attach to any further or greater estate in and
to the Alabama Tract subject to the Alabama Lease or the Georgia Tract subject
to the Georgia Lease hereafter acquired by Borrower, in addition to remaining a
lien on the leasehold estate, (ii) that the acquisition by Borrower of any
further and greater estate in and to the Alabama Tract subject to the Alabama
Lease or the Georgia Tract subject to the Georgia Lease, shall not, without the
express written consent of and joinder by the Agent (acting at the direction of
the Required Banks), result in a merger of the leasehold estate under the
Alabama Lease or the Georgia Lease, as applicable, into such further and greater
estate, and (iii) that, in the event of acquisition of any such further or
greater estate, Borrower will execute and deliver to Agent for the benefit of
the Banks such supplemental mortgages, spreader agreements and other documents
as the Agent shall reasonably require in order to effectuate the foregoing.
Where the lien of this Instrument has been extended to cover any interest of
Borrower in the fee estate, in the event of any foreclosure sale under this
Mortgage, Agent will have the right to sell the leasehold estate and the fee
interest of Borrower separately or together at the election of the Required
Banks.

                           3.13.8 If, and to the extent, that compliance with
any term, provision, covenant or agreement contained in this Instrument would
constitute a breach of any term, provision, covenant or agreement contained in
the Alabama Lease or the Georgia Lease giving the landlord (or lessor)
thereunder the right to declare a default or event of default thereunder, then,
but only to such extent, compliance with such term, provision, covenant or
agreement contained in this Instrument shall not be required.

                           3.13.9 In the event of any failure by Borrower to
perform any covenant on the part of the tenant (or lessee) to be performed under
the Alabama Lease or the Georgia Lease after the giving of any applicable notice
to do so from the Agent or from the landlord (or lessor) under the Alabama Lease
or the Georgia Lease, as applicable, or upon receipt by Agent from the

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landlord (or lessor) under the Alabama Lease or the Georgia Lease of any written
notice of the occurrence of any default or event of default by the tenant (or
lessee) thereof, Agent may take any action reasonably deemed by Agent to be
necessary or advisable to prevent or to cure such default or event of default,
regardless of whether the existence of such default or event of default or the
nature thereof be questioned or denied by Borrower or by any party on behalf of
Borrower. Borrower hereby expressly grants to Agent, and agrees that Agent shall
have the absolute and immediate right to enter into and upon the Premises or any
part thereof to such extent and as often as Agent reasonably deems necessary or
desirable in order to cure any such default or event of default by the tenant
(or lessee) under the Alabama Lease or the Georgia Lease. Any and all costs and
expenses (including but not limited to legal fees and disbursements) incurred by
Agent in connection with any such actions will be immediately due and payable by
Borrower on demand and will bear interest at the "Default Rate" (as defined in
the Credit Agreement) from the time of advancement by Agent until repaid.

                           3.13.10 Borrower will not subordinate or consent to
the subordination to the Alabama Lease or the Georgia Lease to any mortgage,
security deed, deed of trust, lease or other interest on or in the landlord's
(or lessor's) interest in all or any part of the Alabama Tract subject to the
Alabama Lease or the Georgia Tract subject to the Georgia Lease, unless in each
case, the written joinder and consent of the Agent (acting at the direction of
the Required Banks shall have been first had and obtained).

                           3.13.11 Upon the Agent's written request, Borrower
will submit satisfactory evidence of payment of all of Borrower's monetary
obligations under the Alabama Lease and the Georgia Lease (including but not
limited to ground rent, taxes, assessments, insurance premiums and operating
expenses).

                           3.13.12 Agent will have the right to appear in and
participate in all proceedings, including any arbitration proceedings, which
could effect Agent's security or the provisions of the Alabama Lease or the
Georgia Lease or that which relates to the Tracts subject thereto. Borrower
agrees to pay promptly upon demand all reasonable costs and expenses of the
Agent (including, but not limited to, reasonable legal fees and disbursements)
actually incurred in any such proceedings.

                                  ARTICLEL IV.
                              DEFAULT AND REMEDIES

                  4.1      Events of Default. The terms "Default", "Event of
Default" or "Events of Default", wherever used in this Instrument, mean any
Event of Default as defined in the Credit Agreement.

                  4.2      Acceleration of Maturity. If an Event of Default
shall have occurred and be continuing and shall not have been expressly waived
in writing by Agent, then the Secured Obligations secured hereby shall, by
written notice as provided in the Credit Agreement, immediately become due and
payable without further notice or demand, time being of the essence of this
Instrument and the rate of interest with respect thereto shall be as provided in

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Section 2.05 of the Credit Agreement; and no omission on the part of Agent to
exercise such option when entitled to do so shall be construed as a waiver of
such right.

                  4.3      Agent's Right to Enter and Take Possession, Operate
and Apply Revenues.

                           4.3.1 If an Event of Default shall have occurred and
be continuing and shall not have been expressly waived in writing by Agent,
then, subject to the provisions of Section 5.16, Borrower, upon demand of Agent,
shall forthwith surrender to Agent the actual possession of the Premises and if,
and to the extent, permitted by law, Agent itself, or by such officers or agents
as it may appoint, may enter and take possession of all the Premises without the
appointment of a receiver, or an application therefor, and may exclude Borrower
and its agents and employees wholly therefrom, and may have access to the books,
papers and accounts of Borrower. Borrower waives the posting of any bond in the
event Agent elects to take possession.

                           4.3.2 If Borrower shall for any reason fail to
surrender or deliver the Premises or any part thereof after such demand by
Agent, Agent may obtain a judgment or decree conferring upon Agent the right to
immediate possession or requiring Borrower to deliver immediate possession of
the Premises to Agent, to the entry of which judgment or decree Borrower hereby
specifically consents. Borrower will pay to Agent, upon demand, all reasonable
actual expenses of obtaining such judgment or decree, including reasonable
actual compensation to Agent, its attorneys and agents; and all such expenses
and compensation shall, until paid, be secured by the lien of this Instrument.

                           4.3.3 Upon every such entering upon or taking of
possession, Agent may hold, store, use, operate, manage and control the Premises
and conduct the business thereof, and, from time to time (i) make all necessary
and proper maintenance, repairs, renewals, replacements, additions, betterments
and improvements thereto and thereon and purchase or otherwise acquire
additional fixtures, personalty and other property; (ii) insure or keep the
Premises insured; (iii) manage and operate the Premises and exercise all the
rights and powers of Borrower to the same extent as Borrower could in its own
name or otherwise with respect to the same; and (iv) enter into any and all
agreements with respect to the exercise by others of any of the powers herein
granted Agent, all as Agent from time to time may determine to be in its best
interest. Agent may collect and receive all the rents, issues, profits and
revenues from the Premises, including those past due as well as those accruing
thereafter, and, after deducting (aa) all reasonable actual expenses of taking,
holding, managing and operating the Premises (including reasonable actual
compensation for the services of all persons employed for such purposes); (bb)
the cost of all such maintenance, repairs, renewals, replacements, additions,
betterments, improvements, purchases and acquisitions; (cc) the cost of such
insurance; (dd) such taxes, assessments and other similar charges as Agent may
at its option pay; (ee) other proper charges upon the Premises or any part
thereof; and (ff) the reasonable actual compensation, expenses and disbursements
of the attorneys and agents of Agent, Agent shall apply the remainder of the
moneys and proceeds so received by Agent, first to the payment of accrued
interest; second, to the payment and satisfaction of the Secured Obligations
currently due (whether by acceleration or otherwise); and third, to the
Borrower.

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                           4.3.4 Whenever all that is due (whether by
acceleration or otherwise) upon such Secured Obligations and under any of the
terms, covenants, conditions and agreements of this Instrument, shall have been
paid and all Events of Default made good, Agent shall surrender possession of
the Premises to Borrower, its successors or assigns. The same right of taking
possession, however, shall exist if any subsequent Event of Default shall occur.

                  4.4      Performance by Agent of Defaults by Borrower. If
Borrower shall default in the payment, performance or observance of any term,
covenant or condition of this Instrument, Agent may, at its option and after
using best efforts to notify Borrower, pay, perform or observe the same, and all
payments made or costs or expenses incurred by Agent in connection therewith,
shall be secured hereby and shall be, without demand, immediately repaid by
Borrower to Agent with interest thereon at a rate per annum equal to the
"Default Rate" (as defined in the Credit Agreement) calculated on the basis set
forth in the Credit Agreement. Agent shall be the sole judge of the necessity
for any such actions and of the amounts to be paid, but shall exercise such
judgment reasonably and in good faith. Agent is hereby empowered to enter and to
authorize others to enter upon the Premises or any part thereof for the purpose
of performing or observing any such defaulted term, covenant or condition
without thereby becoming liable to Borrower or any person in possession holding
under Borrower except for gross negligence or willful misconduct.

                  4.5      Receiver. If an Event of Default shall have occurred
and be continuing and shall not have been expressly waived by Agent, then,
subject to the provisions of Section 5.16, Agent, upon application to a court of
competent jurisdiction, shall be entitled (except as to the South Carolina
Premises) as a matter of strict right without notice and without regard to the
occupancy or value of any security for the Secured Obligations secured hereby or
the adequacy or inadequacy of such security and without the requirement of any
bond or the solvency of any party bound for its payment and satisfaction, to the
appointment of a receiver to take possession of and to operate the Premises and
to collect and apply the rents, issues, profits and revenues thereof. As to the
South Carolina Premises, Agent may apply to a court of competent jurisdiction
pursuant to S.C. Code Ann. 15-65-10, et seq., as amended from time to time for
the appointment of a receiver to take possession of and to operate the South
Carolina Premises and to collect and apply the rents, issues, profits and
revenues thereof. As to the South Carolina Premises, Agent agrees to notify
Borrower of its application for the appointment of a receiver at least four (4)
days prior to such appointment, unless the court to which such application is
made prescribes a shorter time. The receiver shall have all of the rights and
powers permitted under the laws of the state wherein the Land is situated.
Borrower will pay to Agent upon demand all expenses, including receiver's fees,
reasonable actual attorneys' fees, costs and agent's compensation, incurred
pursuant to the provisions of this Section 4.5; and all such reasonable actual
expenses shall be secured by this Instrument.

                  4.6      Enforcement. If an Event of Default shall have
occurred and be continuing and shall not have been expressly waived by Agent,
concerning enforcement by judicial foreclosure or exercise of private power of
sale, Agent shall have the following options, subject to the provisions of
Section 5.16:

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                           4.6.1 With respect to the Alabama Premises, this
subsection shall apply. Agent, its agents or its attorneys, at its option, may
sell the Alabama Premises or any part of the Alabama Premises (including,
without limitation, all of the rights of Borrower under the Alabama Lease)
before the entrance of the courthouse in the county or counties where the
Alabama Premises is located, at public outcry for cash or credit, after first
giving notice of the time, place and terms of said sale by publication once a
week for three (3) successive weeks prior to said sale in the newspaper
customarily used for such notices published in said county and state in which
the Alabama Premises is located; and upon receipt of the purchase money, Agent,
its agents or its attorneys, or any person conducting said sale for it, is
authorized to execute to the purchaser at said sale a deed to the property so
purchased in the name of Borrower, and such purchaser shall not be held to
inquire as to the application of the proceeds of such sale. At said foreclosure
sale, the Alabama Premises may be offered for sale and sold as a whole or in
part as Agent may elect. The presence of any portion of the property
constituting the Alabama Premises at the place of sale is expressly waived.
Prior to any such sale, the Agent may, in its sole discretion, elect to exercise
all rights of the Borrower under the Alabama Lease, and notify the Alabama
Lessor of its intent to do so, whereupon the Alabama Lessor hereby is authorized
and directed by the Borrower to accept performance from the Agent.

                           4.6.2 With respect to the Georgia Premises, this
subsection shall apply. Agent, at its option, may sell the Georgia Premises or
any part of the Georgia Premises at public sale or sales before the door of the
courthouse of the county or counties in which the Georgia Premises or any part
of the Georgia Premises is situated, to the highest bidder for cash, in order to
pay the Secured Obligations secured hereby and accrued interest thereon and
insurance premiums, liens, assessments, taxes and charges, including utility
charges, if any, with accrued interest thereon, and all expenses of the sale and
of all proceedings in connection therewith, including reasonable actual
attorney's fees, if incurred, after advertising the time, place and terms of
sale once a week for four (4) weeks immediately preceding such sale (but without
regard to the number of days) in a newspaper in which Sheriff's sales are
advertised in said county or counties. At any such public sale, Agent may
execute and deliver to the purchaser a conveyance of the Georgia Premises or any
part of the Georgia Premises, with full warranties of title and to this end,
Borrower hereby constitutes and appoints Agent the agent and attorney-in-fact of
Borrower to make such sale and conveyance, and thereby to divest Borrower of all
right, title or equity that Borrower may have in and to the Georgia Premises and
to vest the same in the purchaser or purchasers at such sale or sales, and all
the acts and doings of said agent and attorney-in-fact are hereby ratified and
confirmed and any recitals in said conveyance or conveyances as to facts
essential to a valid sale shall be binding upon Borrower. Prior to any such
sale, the Agent may, in its sole discretion, elect to exercise all rights of the
Borrower under the Georgia Lease, and notify the Georgia Lessor of its intent to
do so, whereupon the Georgia Lessor hereby is authorized and directed by the
Borrower to accept performance from the Agent.

                           4.6.3 With respect to the North Carolina Premises,
this subsection shall apply. Should Agent elect to foreclose by exercise of the
power of sale herein contained, Agent shall notify Trustee and shall deposit
with Trustee copies of this Instrument, the Notes and such receipts and evidence
of expenditures made and secured hereby as Trustee may require.

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<PAGE>

                           Upon application of Agent, it shall be lawful for and
the duty of Trustee, and Trustee hereby is authorized and empowered to expose to
sale and to sell the North Carolina Premises (either as a whole or in separate
parcels and in such order as the Trustee shall determine) at public auction for
cash, after having first complied with all applicable requirements of North
Carolina law with respect to the exercise of powers of sale contained in deeds
of trust and upon such sale, Trustee shall convey title to the purchaser in fee
simple. After retaining from the proceeds all expenses incurred by Trustee,
including, without limitation, a Trustee's commission not exceeding five percent
of the bid and reasonable actual attorneys' fees for legal services actually
performed, Trustee shall apply the residue of the proceeds first to the payment
of all sums expended by Agent under the terms of this Instrument; second, to the
payment of the Secured Obligations and interest thereof secured hereby; and the
balance, if any, shall be paid to Borrower. Borrower agrees that in the event of
sale hereunder, Lender shall have the right to bid. Trustee may require the
successful bidder at any sale to deposit immediately with Trustee cash or
certified check in an amount not to exceed ten percent (10%) of the bid,
provided notice of such requirement is contained in the advertisement of the
sale. The bid may be rejected if the deposit is not immediately made and
thereupon the next highest bidder may be declared to be the purchaser. Such
deposit shall be refunded in case a resale is had; otherwise, it shall be
applied to the purchase price. If the Plant, Equipment and Personal Property is
sold hereunder, it need not be at the place of sale; the published notice,
however, shall state the time and place where such Plant, Equipment and Personal
Property may be inspected prior to sale. If a foreclosure proceeding is
commenced by the Trustee but not completed, the Trustee's fee will be 2% of the
fair market value of the North Carolina Premises involved in such foreclosure if
the termination occurs prior to the first public auction sale and not more than
3% of the fair market value of the North Carolina Premises involved in such
foreclosure if the termination occurs after the first public auction sale.

                           4.6.4 With respect to the South Carolina Premises,
this subsection shall apply. Agent, at its option, may (a) commence proceedings
to collect sums due hereunder, foreclose this Instrument and sell the real
property portion of the South Carolina Premises: At the foreclosure, Agent or
any Bank shall be entitled to bid and to purchase the real property portion of
the South Carolina Premises and shall be entitled to apply the Secured
Obligations, or any portion thereof, in payment for the real property portion of
the South Carolina Premises; (b) collect and receive all the rents, issues,
profits and revenues from the South Carolina Premises, including those past due
as well as those accruing thereafter; (c) with respect to the personalty that is
located on the South Carolina Premises, exercise all rights, remedies and powers
available to secured parties under the Uniform Commercial Code in force in the
State of South Carolina; and (d) exercise any other rights or remedies provided
in this Instrument or by law, all of which rights and remedies may be exercised
by Agent independently, simultaneously or consecutively in any order without
being deemed to have waived any right or remedy previously or not yet exercised.

                           Borrower agrees that, to the extent permitted by law,
legal process in connection with the foreclosure of the debt secured hereby may
be made by written notice to Agent pursuant to Section 5.5. To the extent
permitted by law, such process shall be deemed to be personally served on
Borrower as of the date of actual receipt thereof by the U.S. Mail. Such method
of service of process shall be in addition to all other methods permitted by
law.

                                       146

<PAGE>

                           4.6.5 Agent may, in addition to and not in abrogation
of the rights covered under this Section 4.6, either with or without entry or
taking possession as herein provided or otherwise, proceed by a suit or suits in
law or in equity or by any other appropriate proceeding or remedy granted or
conferred by applicable statutes (i) to enforce payment of the Secured
Obligations or the performance of any term, covenant, condition or agreement of
this Instrument or any other right, and (ii) to pursue any other remedy
available to it, all as Agent shall determine most effectual for such purposes.

                  4.7 Purchase by Agent or any Bank. Upon any foreclosure sale,
either judicially or by private power of sale, Agent, for the benefit of the
Banks ratably, or, to the extent permitted by applicable law, any Bank may bid
for and purchase the Premises and shall be entitled to apply all or any part of
the Secured Obligations as a credit to the purchase price.

                  4.8 Application of Proceeds of Sale. Except as in hereinabove
expressly set forth, in the event of a foreclosure sale of the Premises, either
judicially or by private power of sale, the proceeds of said sale shall be
applied, unless applicable statutes shall specify otherwise, first, to the
expenses of such sale and of all proceedings in connection therewith and the
reasonable actual expenses of foreclosing this Instrument, including reasonable
actual attorneys' and trustee's fees, then to payment of the Secured Obligations
in such order as the Required Banks shall elect, and finally the remainder, if
any, shall be paid as required by law, or in the absence of any provision
therefor in the law, shall be paid to the parties entitled thereto; provided,
however that as to such remainder, Agent shall not be bound by any inheritance,
devise, conveyance, assignment or lien of or upon Borrower's equity, without
actual notice thereof prior to distribution.

                  4.9 Borrower as Tenant Holding Over. In the event of any such
foreclosure sale by Agent or Trustee, as the case may be, Borrower shall be
deemed a tenant holding over and shall forthwith deliver possession to the
purchaser or purchasers at such sale or be summarily dispossessed according to
provisions of law applicable to tenants holding over.

                  4.10 Waiver of Appraisement, Valuation, Stay, Extension and
Redemption Laws. Borrower agrees to the full extent permitted by law, that in
case of a Default on the part of Borrower hereunder, neither Borrower nor anyone
claiming through or under it shall or will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension, homestead, exemption,
redemption or moratorium laws, statutory or otherwise now or hereafter in force,
in order to prevent or hinder the enforcement or foreclosure of this Instrument,
or the absolute sale of the Premises, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchasers thereat, and
Borrower, for itself and all who may at any time claim through or under it,
hereby waives to the full extent that it may lawfully so do, the benefit of all
such laws, and any and all right to have the assets comprised in the security
intended to be created hereby marshalled upon any foreclosure of the lien
hereof, provided, however, that nothing herein shall constitute a waiver of
Official Code of Georgia Annotated Section 44-14-161 or 45 O.S. 1981 Section 18
or any other provision requiring a valuation of property sold at a foreclosure
sale as a condition to the granting of a deficiency judgment.

                                      147

<PAGE>

                  4.11 Leases. Agent, at its option, is authorized to foreclose
or direct the Trustee to foreclose this Instrument subject to the rights of any
tenants of the Premises, and the failure to make any such tenants parties to any
such foreclosure proceedings and to foreclose their rights will not be, nor be
asserted to be by Borrower, a defense to any proceedings instituted by Agent to
collect the Secured Obligations secured hereby.

                  4.12 Discontinuance of Proceedings and Restoration of the
Parties. In case Agent shall have proceeded, or shall have instructed the
Trustee to proceed, to enforce any right, power or remedy under this Instrument
by foreclosure, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason, then and in every such case Borrower
and Agent shall be restored to their former positions and rights hereunder, and
all rights, powers and remedies of Agent and the Trustee shall continue as if no
such proceeding had been taken.

                  4.13 Remedies Cumulative. No right, power or remedy conferred
upon or reserved to Agent by this Instrument is intended to be exclusive of any
other right, power or remedy or exclusive of any other right, power or remedy
conferred by statute, but each and every such right, power and remedy shall be
cumulative and concurrent and shall be in addition to any other right, power and
remedy given hereunder or now or hereafter existing at law or in equity or by
statute.

                  4.14 Waiver.

                           4.14.1 No delay or omission of Agent to exercise any
right, power or remedy accruing upon any default or Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be a
waiver of any such default, or acquiescence therein; and every right, power and
remedy given by this Instrument to Agent or the Trustee may be exercised from
time to time and as often as may be deemed expedient by Agent. No consent or
waiver, expressed or implied, by Agent or Banks to or of any breach or default
by Borrower in the performance of the obligations hereunder or any Event of
Default shall be deemed or construed to be a consent or waiver to or of any
other breach or default in the performance of the same or any other obligations
of Borrower hereunder or any Event of Default. Failure on the part of Agent or
Banks to complain of any act or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall not constitute a
waiver by Agent or Banks of their rights hereunder or impair any rights, powers
or remedies consequent on any breach or default by Borrower. Agent or Banks may,
at any time, or from time to time, renew or extend this Instrument, or alter or
modify the same in any way, or waive any of the terms, covenants or conditions
hereof in whole or in part, and may release any portion of the Premises or any
other security, and grant such extensions and indulgences in relation to the
Secured Obligations as Agent may determine without the consent of any junior
lienor or encumbrancer and without any obligation to give notice of any kind
thereto and without in any manner affecting the priority of the lien hereof on
any part of the Premises.

                           4.14.2 If Agent or Banks, as applicable, (i) grant
forbearance or an extension of time for the payment or satisfaction of the
Secured Obligations; (ii) take other or additional security for the payment of
the Secured Obligations; (iii) waive or do not exercise any right granted herein
or in any of the Secured Obligations; (iv) release any part of the Premises

                                       148

<PAGE>

from the lien of this Instrument or otherwise changes any of the terms,
covenants, conditions or agreements of any of the Secured Obligations; (v)
consent to the filing of any map, plat or replat affecting the Premises; (vi)
consent to the granting of any easement or other right affecting the Premises;
or (vii) make or consent to any agreement subordinating the lien hereof, any
such act or omission shall not release, discharge, modify, change or affect the
original liability under any of the Secured Obligations or any other obligation
of Borrower or any subsequent purchaser of the Premises or any part thereof, or
any maker, co-signer, endorser, surety or guarantor; nor shall any such act or
omission preclude Agent from exercising any right, power or privilege herein
granted or intended to be granted in the event of any default then made or of
any subsequent default; nor, except as otherwise expressly provided in an
instrument or instruments executed by Agent (and the Banks, if required) shall
the lien of this Instrument be altered thereby. In the event of the sale or
transfer by operation of law or otherwise of all or any part of the Premises,
Agent, without notice, is hereby authorized and empowered to deal with any such
vendee or transferee with reference to the Premises or the Secured Obligations,
or with reference to any of the terms, covenants, conditions or agreements
hereof, as fully and to the same extent as it might deal with the original
parties hereto and without in any way releasing or discharging any liabilities,
obligations or undertakings.

                  4.15 Suits to Protect the Premises. Agent shall have power to
institute and maintain such suits and proceedings as it may reasonably deem
expedient (a) to prevent any impairment of the Premises by any acts which may be
unlawful or any violation of this Instrument, (b) to preserve or protect its
interest and those of the Trustee, as applicable, in the Premises and in the
rents, issues, profits and revenues arising therefrom, and (c) to restrain the
enforcement of or compliance with any legislation or other governmental
enactment, rule or order that Agent, in its reasonable judgment, believes to be
unconstitutional or otherwise invalid, if, and only to the extent, the
enforcement of or compliance with such enactment, rule or order would impair the
security hereunder or be prejudicial to the interest of Agent, hereunder or
under the other Transaction Documents.

                  4.16 Agent May File Proofs of Claim. In the case of any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Borrower, its creditors or its
property, Agent, to the extent permitted by law, shall be entitled to file such
proofs of claim and other documents as may be necessary or advisable in order to
have the claims of Agent allowed in such proceedings for the entire amount due
and payable by Borrower under this Instrument at the date of the institution of
such proceedings and for any additional amount which may become due and payable
by Borrower hereunder after such date.

                  4.17 Multiple Sales. To the extent permitted by law, in any
judicial proceedings to foreclose this Instrument or nonjudicial exercise of
power of sale or any other private or public sale, the Premises, at the option
of Agent or the Trustee, as applicable, may be sold in whole or in part and in
the event of such multiple sales, the Secured Obligations shall not be merged
into any foreclosure sale or foreclosure judgment so long as there shall remain
outstanding any amount secured by this Instrument. Such a foreclosure judgment
in any state in which the Land is located shall not operate, in and of itself,
as a release of the other property hereby secured or a waiver of Agent's right
to elect any other remedy available to it hereunder.

                                       149

<PAGE>

                                   ARTICLE V.
                            MISCELLANEOUS PROVISIONS

                  5.1 Successors and Assigns. This Instrument shall inure to the
benefit of and be binding upon Borrower, Agent and Trustee or their respective
legal representatives, permitted successors and assigns. Whenever a reference is
made in this Instrument to Borrower, Agent or Trustee such reference shall be
deemed to include a reference to the legal representatives, permitted successors
and assigns of Borrower, Agent or Trustee.

                  5.2 Terminology. All personal pronouns used in this Instrument
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and vice versa. Titles and
Articles are for convenience only and neither limit nor amplify the provisions
of this Instrument itself, and all references herein to Articles, Sections or
Subsections shall refer to the corresponding Articles, Sections or Subsections
of this Instrument unless specific reference is made to such Articles, Sections
or Subsections of another document or instrument.

                  5.3 Severability. If any provision of this Instrument or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Instrument and the
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.

                  5.4 Applicable Law. This Instrument and the obligations
created and secured hereby shall be interpreted, construed and enforced
according to the laws of the State of Georgia; except that, only for purposes of
determining (i) matters pertaining to real property, including the sufficiency
of the conveyance, warranties of title, perfection and the effect of
non-perfection and the foreclosure proceedings and remedies available to Agent
and Trustee, and (ii) perfection and the effect of non-perfection of personal
property, the provisions of the Instrument shall be construed in accordance with
the law of the state in which the Tract in question is located.

                  5.5 Notices. All notices, requests and demands to or upon the
respective parties hereto, and all responses thereto, shall be in writing and
shall be deemed to have been properly given or served when personally delivered
or deposited in the mail, certified mail, return receipt requested, postage
prepaid, or delivered to a nationally recognized overnight courier service, with
all delivery charges paid or provided for, addressed to the addresses set forth
below. All notices, requests and demands, and all responses thereto, shall be
effective upon receipt thereof. Rejection or other refusal to accept or the
inability to deliver because of changed address of which no notice was given
shall be deemed to be receipt of the notice, demand or request sent. By giving
at least 30 days written notice hereof, Borrower, Agent or Trustee shall have
the right from time to time and at any time during the term of this Agreement to
change their respective addresses and each shall have the right to specify as
its address any other address within the continental United States of America.
For the purpose of this Agreement, the following addresses apply:

                                       150

<PAGE>

                  Borrower:

                        Avondale Mills, Inc.
                        506 South Broad Street
                        Monroe, Georgia 30655
                        Attn: Chairman and Chief Executive Officer

                  Agent:

                        Wachovia Bank of Georgia, N.A.
                        191 Peachtree Street
                        Atlanta, Georgia 30303-1757
                        Attention: Commercial Group - GA212

                  Trustee:

                        ____________________________
                        ____________________________
                        ____________________________

                  5.6 Replacement of Documents. Upon receipt of evidence
reasonably satisfactory to Borrower or Agent of the loss, theft, destruction or
mutilation of any of the Transaction Documents and, in the case of any such
loss, theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory to Borrower or Agent or, in the case of any such mutilation, upon
surrender and cancellation of the appropriate document, the other party or
parties will execute and deliver, in lieu thereof, a replacement document or
instrument supplied by Borrower or Agent, identical in form and substance and
dated as of the date of the document being replaced and upon such execution and
delivery of such replacement document all references in this Instrument to the
document being replaced shall be deemed to refer to such replacement document.

                  5.7 Time of the Essence. Time is of the essence with respect
to each and every covenant, agreement and obligation of Borrower under each of
the Transaction Documents and any and all other instruments now or hereafter
evidencing, securing or otherwise relating to the Secured Obligations.

                  5.8 Counterparts. This Instrument may be executed in any
number of counterparts, each of which is deemed to be an original document, all
of which taken together shall constitute one and the same Instrument.

                  5.9 No Obligation to Marshal Assets. Notice is hereby given
that no holder of any mortgage, deed of trust, deed to secure debt, lien,
security interest or other encumbrance affecting all or any portion of the
Premises, which is inferior to the lien, security interest and security title of
the Instrument shall have the right or privilege to require Agent to marshal
assets.

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<PAGE>

                  5.10 Consent of Agent. Agent, by its acceptance of this
Instrument, agrees to be bound by the terms and conditions of this Instrument.

                  5.11 Appointment of Successor Trustee. Agent shall at any time
have the irrevocable right to remove Trustee with respect to the North Carolina
Premises herein named without notice or cause and to appoint a successor thereto
by an instrument in writing, duly acknowledged, in such form as to entitle such
written instrument to be recorded in North Carolina, and in the event of the
death or resignation of Trustee with respect to the North Carolina Premises
named herein, Agent shall have the right to appoint a successor thereto by such
written instrument, and any Trustee with respect to the North Carolina Premises
so appointed shall be vested with the title to the North Carolina premises and
shall possess all the powers, duties and obligations herein conferred on Trustee
with respect to the North Carolina Premises in the same manner and to the same
extent as though such were named herein as Trustee with respect to the North
Carolina Premises.

                  5.12 Trustee's Powers. At any time, or from time to time,
without liability therefor and without notice, upon written request of Agent and
presentation of copies of this instrument and the Notes secured hereby for
endorsement, and without affecting the personal liability of any person for
payment of the Secured Obligations or the effect of this Instrument upon the
remainder of said Premises, Trustee shall (i) reconvey any part of said
Premises, (ii) consent in writing to the making of any map or plat thereof,
(iii) join in granting any easement therein, or (iv) joint in any extension
agreement or any agreement subordinating the lien or charge hereof. The Trustee
shall not be liable for any error of judgment or act done by the Trustee, or be
otherwise responsible or accountable under any circumstances whatsoever. The
Trustee shall not be personally liable in case of entry by him/it or anyone
acting by virtue of the powers herein granted him/it upon the Premises for debts
contracted or liability or damages incurred in the management or operation of
the Premises. The Trustee shall have the right to rely on any instrument,
document or signature authorizing or supporting any action taken or proposed to
be genuine. The Trustee shall be entitled to reimbursement for expenses incurred
by him/it in the performance of his/its duties hereunder. The Borrower will on
demand reimburse the Trustee for and save and hold him/it harmless from and
against any and all loss, cost, liability, damage and expense whatsoever
incurred by him/it in the performance of his/its duties. Prior to undertaking
any action hereunder which shall obligate the Trustee to incur any obligation or
expense, the Trustee shall first be entitled to be indemnified to his/its
reasonable satisfaction against all such costs and expense.

                  5.13 Agent's Powers. Without affecting the liability of any
other person liable for the payment of any obligation herein mentioned, and
without affecting the lien or charge of this Instrument upon any portion of the
Premises not then or theretofore released as security for the full amount of all
unpaid obligations, Agent (and the Banks) may, from time to time and without
notice (i) release any person so liable, (ii) extend the maturity or alter any
of the terms of any such obligation, (iii) grant other indulgences, (iv) cause
to be released or reconveyed at any time at Agent's option, any parcel, portion
or all of the Premises, (v) take or release any other or additional security for
any obligation herein mentioned, or (vi) make compositions or other arrangements
with debtors in relation thereto.

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<PAGE>

                  5.14 Acceptance by Trustee. Trustee accepts this Trust when
this Instrument, duly executed and acknowledged, is made of public record as
provided by law.

                  5.15 No Liability or Obligation on Agent. Nothing in this
Instrument shall be construed to impose any obligation upon Agent to expend any
money or to take any other discretionary act herein permitted, and Agent shall
not have any liability or obligation for any delay or failure to take any
discretionary act in the absence of gross negligence or willful misconduct by
Agent.

                  5.16 Intercreditor Agreement. Notwithstanding any term or
provision hereof to the contrary, as to the SunTrust Collateral Plants, all
rights, powers and remedies hereunder are and shall be subject in all respects
to and shall be governed by the terms and provisions of the Intercreditor
Agreement.

                                       153

<PAGE>

                  IN WITNESS WHEREOF, Borrower has executed this instrument
under seal, as of the day and year first above written.

Signed, sealed and delivered                   "BORROWER"
in the presence of:
                                               AVONDALE MILLS, INC.

___________________________
Witness                                        By:_____________________________
                                                  Name:
                                                  Title:

___________________________
Witness
                                               Attest:_________________________
                                                      Name:
                                                      Title:

                                                      [CORPORATE SEAL]

                                       154

<PAGE>

STATE OF GEORGIA         )

                         )

COUNTY OF FULTON         )

                                 ACKNOWLEDGMENTS

         Before me this ____ day of ______, 1996 a Notary Public in and for
Georgia and a resident of _______ County, Georgia personally appeared
________________ residing in ________ County, Georgia and _________________
residing in _____________ and known to me to be the persons described in and who
executed the foregoing Instrument as (and acknowledged to me that they were)
______________ and ____________, respectively, of AVONDALE MILLS, INC., an
Alabama corporation, and acknowledged before me that they, after being informed
of the contents and for the purpose and consideration therein expressed,
executed the same as such officers and affixed the corporate seal in the name of
and on behalf of said corporation by authority of its board of directors and
said _____________ and ______________ acknowledged said Instrument to be the
free act and deed of said corporation.

         WITNESS my hand and official seal in the County and State aforesaid
this _____ day of ____________, ______, County and State aforesaid.

                                 ___________________________________________
                                 Notary Public

                                 Notarization Date: ________________, 19____.

                                 My Commission expires: ____________________

                                        [NOTARIAL SEAL]

                                      155

<PAGE>

         THIS INSTRUMENT PREPARED BY CHRISTOPHER L. CARSON, ATTORNEY AT LAW, OF
JONES, DAY, REAVIS & POGUE, 3500 ONE PEACHTREE CENTER, 303 PEACHTREE STREET,
N.E., ATLANTA, GEORGIA 30308-3242

                                      156

<PAGE>

                        ACKNOWLEDGMENT FOR NORTH CAROLINA

STATE OF GEORGIA         )

COUNTY OF FULTON         )

         I ____________________, a Notary Public of __________ County, State of
Georgia, certify that _______________________ personally came before me this day
and acknowledged that he/she is ___________ Secretary of AVONDALE MILLS, INC.,
an Alabama corporation, and that, by authority duly given and as the act of the
corporation, the foregoing instrument was signed in its name by its __________
President, sealed with its corporate seal, and attested by himself/herself as
its _______ Secretary.

         Witness my hand and official seal, this _____ day of __________, 19__.

My commission expires:                      __________________________________
                                            Notary Public
_____________, 19__.
                                            [Official Seal]

                                      157

<PAGE>

                         ALABAMA FORM OF ACKNOWLEDGMENT

(STATE OF ALABAMA        )

(__________ COUNTY       )

         I, the undersigned, a Notary Public in and for said State, hereby
certify that ______________________________, whose name as ___________________
________________ of Avondale Mills, Inc., an Alabama corporation, is signed to
the foregoing instrument, and who is known to me, acknowledged before me on this
day that, being informed of the contents of the instrument, he as such officer,
and with full authority, executed the same voluntarily for and as the act of
said corporation.

         Given under my hand and seal, this _____ day of __________, 1996.

                                        _______________________________________
                                        Notary Public

                                        My commission expires: _________________

                                      158

<PAGE>

STATE OF GEORGIA                  )
                                  )    PROBATE
COUNTY OF FULTON                  )

                  Before me, the undersigned notary public, personally appeared
the undersigned witness, who being duly sworn, deposed and said that s/he saw
Avondale Mills, Inc. by ______________________________, its ____________________
________________ sign, seal and deliver the foregoing Mortgage and Security
Agreement and Assignment of Rents and that s/he together with the other witness
whose signature appears above witnessed the execution thereof.

                                    ____________________________________________
                                                       Witness

SWORN TO and subscribed before
me this ____ day of April, 1996

__________________________________(SEAL)
Notary Public for Georgia

My Commission expires:___________________

                                      159

<PAGE>

STATE OF GEORGIA                  )
                                  )         SOUTH CAROLINA
COUNTY OF FULTON                  )         PROBATE

         BEFORE ME, the undersigned notary public, personally appeared
______________________________, who being duly sworn, deposed and said that he
saw _________________________ the _______________________ of Avondale Mills,
Inc., an Alabama corporation, sign, seal and deliver the foregoing Master
Mortgage, Deed to Secure Debt, Deed of Trust, Leasehold Mortgage, Leasehold Deed
to Secure Debt, and Leasehold Deed of Trust, Uniform Commercial Code Security
Agreement and Assignment of Leases, Rents and Profits on behalf of Avondale
Mills, Inc., an Alabama corporation, and he together with ______________________
__________, witnessed the execution thereof.

                                    ___________________________________________

SWORN TO and subscribed
before me this ___ day of
__________________, 1996.

____________________________
Notary Public

My Commission Expires: _____________

[NOTARIAL SEAL]

                                      160

<PAGE>

                                   EXHIBIT "B"

                             PERMITTED ENCUMBRANCES

                                      161

<PAGE>

                                   EXHIBIT "C"

                   Description of "Debtor" and "Secured Party"

A.       Debtor:

         1.       Name and Identity or Corporate Structure:

                  AVONDALE MILLS, INC., an Alabama corporation

         2.       a.       The principal place of business and chief executive
                           office of Debtor in Alabama is located at 900
                           Avondale Avenue, Sylacauga, Alabama 35140.

                  b.       The principal place of business and chief executive
                           office of Debtor in Georgia is located at 506 S.
                           Broad, Monroe, GA 30655.

         3.       Debtor has been using or operating under said name and
                  identity or corporate structure without change for the
                  following time period:

         Not less than six years.

B.       Secured Party:             Wachovia Bank of Georgia, N.A., a national
                                    banking association, in its capacity as
                                    Agent for certain banks

                                      162

<PAGE>

                                                                       EXHIBIT I

                      AMENDED AND RESTATED PARENT GUARANTY

                  THIS AMENDED AND RESTATED PARENT GUARANTY (this "Guaranty") is
made as of the 29th day of April, 1996, by Avondale Incorporated, a Georgia
corporation (the "Parent") in favor of the Agent, for the ratable benefit of the
Banks, under the Credit Agreement referred to below;

                               W I T N E S S E T H

                  WHEREAS, Avondale Mills, Inc., an Alabama corporation (the
"Borrower") and WACHOVIA BANK OF GEORGIA, N.A., as Agent (the "Agent"), and The
First National Bank of Chicago, as Documentation Agent, and certain other Banks
from time to time party thereto have entered into a certain Amended and Restated
Credit Agreement dated as of April 29, 1996 (as it may be amended or modified
from time to time, the "Credit Agreement"), providing, subject to the terms and
conditions thereof, for extensions of credit to be made by the Banks to the
Borrower for the benefit of the Borrower and of the Parent;

                  WHEREAS, the Parent executed a Parent Guaranty dated as of
March 29, 1994, in connection with the Original Credit Agreement (the "Original
Parent Guaranty");

                  WHEREAS, it is a condition precedent to the Agent and the
Banks executing the Credit Agreement that the Parent execute and deliver this
Guaranty whereby the Parent shall guarantee the payment when due of all
principal, interest and other amounts that shall be at any time payable by the
Borrower under the Credit Agreement, the Notes and the other Principal
Documents; and

                  WHEREAS, in consideration of the financial and other support
that the Borrower has provided, and such financial and other support as the
Borrower may in the future provide, to Parent, and in order to induce the Banks
and the Agent to enter into the Credit Agreement, the Parent is willing to
guarantee the obligations of the Borrower under the Credit Agreement, the Notes,
and the other Principal Documents;

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

                  SECTION 1. Definitions. Terms defined in the Credit Agreement
and not otherwise defined herein have, as used herein, the respective meanings
provided for therein.

                  SECTION 2. Representations, Warranties and Covenants. The
Parent incorporates herein by reference as fully as if set forth herein all of
the representations and warranties of the Parent contained in Article IV of the
Credit Agreement (which representations and warranties shall be deemed to have
been renewed by the Parent upon each Borrowing under the Credit Agreement to the
same extent and with the same effect as provided therein with

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respect to the renewal thereof by the Borrower) and all covenants of the Parent
contained in Article V of the Credit Agreement. In the event the Parent issues
any Capital Stock after the Closing Date, the Parent will make available to the
Borrower, by loan, equity contribution or other means, an amount equal to 100%
of the Net Cash Proceeds thereof, in order that the Borrower can comply, on a
timely basis, with the provisions of Section 2.08(b)(ii) of the Credit
Agreement.

                  SECTION 3. The Guaranty. The Parent hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by the Borrower pursuant to the Credit Agreement, and the full and punctual
payment of all other amounts payable by the Borrower under the Credit Agreement
and the other Principal Documents, including principal, interest, fees, costs
and indemnification amounts, and any extensions and renewals thereof in whole or
in part, and any other amounts constituting Obligations as defined in the Credit
Agreement (all of the foregoing obligations being referred to collectively as
the "Guaranteed Obligations"). Upon failure by the Borrower to pay punctually
any such amount, the Parent agrees that it shall forthwith on demand pay the
amount not so paid at the place and in the manner specified in the Credit
Agreement, the relevant Note or the relevant Principal Document, as the case may
be. This Guaranty is an amendment to and restatement of, and supersedes, the
Original Parent Guaranty.

                  SECTION 4. Guaranty Unconditional. The obligations of the
Parent hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:

                           (i)      any extension, renewal, settlement,
         compromise, waiver or release in respect of any obligation of the
         Borrower under the Credit Agreement, any Note, or any other Principal
         Document, by operation of law or otherwise or any obligation of any
         other guarantor of any of the Obligations;

                           (ii)     any modification or amendment of or
         supplement to the Credit Agreement, any Note, or any other Principal
         Document;

                           (iii)    any release, nonperfection or invalidity of
         any direct or indirect security for any obligation of the Borrower
         under the Credit Agreement, any Note, any Principal Document, or any
         obligations of any other guarantor of any of the Obligations;

                           (iv)     any change in the corporate existence,
         structure or ownership of the Borrower or any other guarantor of any of
         the Guaranteed Obligations, or any insolvency, bankruptcy,
         reorganization or other similar proceeding affecting the Borrower, or
         any other guarantor of the Guaranteed Obligations, or its assets or any
         resulting release or discharge of any obligation of the Borrower, or
         any other guarantor of any of the Guaranteed Obligations;

                           (v)      the existence of any claim, setoff or other
         rights which the Parent may have at any time against the Borrower, any
         other guarantor of any of the Guaranteed Obligations, the Agent, any
         Bank or any other Person, whether in connection herewith or

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         any unrelated transactions, provided that nothing herein shall prevent
         the assertion of any such claim by separate suit or compulsory
         counterclaim;

                           (vi)     any invalidity or unenforceability relating
         to or against the Borrower, or any other guarantor of any of the
         Guaranteed Obligations, for any reason related to the Credit Agreement,
         any other Principal Document, or any other guaranty, or any provision
         of applicable law or regulation purporting to prohibit the payment by
         the Borrower, or any other guarantor of the Guaranteed Obligations, of
         the principal of or interest on any Note or any other amount payable by
         the Borrower under the Credit Agreement, the Notes, or any other
         Principal Document; or

                           (vii)    any other act or omission to act or delay of
         any kind by the Borrower, any other guarantor of the Guaranteed
         Obligations, the Agent, any Bank or any other Person or any other
         circumstance whatsoever which might, but for the provisions of this
         paragraph, constitute a legal or equitable discharge of the Guarantor's
         obligations hereunder.

                  SECTION 5. Discharge Only Upon Payment In Full; Reinstatement
In Certain Circumstances. The Parent's obligations hereunder shall remain in
full force and effect until all Guaranteed Obligations shall have been paid in
full and the Commitments under the Credit Agreement shall have terminated or
expired. If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Borrower under the Credit Agreement or any
other Principal Document is rescinded or must be otherwise restored or returned
upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise,
the Parent's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.

                  SECTION 6. Waiver of Notice by the Parent. The Parent
irrevocably waives acceptance hereof, presentment, demand, protest and, to the
fullest extent permitted by law, any notice not provided for herein, as well as
any requirement that at any time any action be taken by any Person against the
Borrower, any other guarantor of the Guaranteed Obligations, or any other
Person.

                  SECTION 7. Other Waivers by the Parent. The Parent hereby
expressly waives, renounces, and agrees not to assert, any right, claim or cause
of action, including, without limitation, a claim for reimbursement,
subrogation, indemnification or otherwise, against the Borrower arising out of
or by reason of this Guaranty or the obligations of the Parent hereunder,
including, without limitation, the payment or securing or purchasing of any of
the Guaranteed Obligations by the Parent. The waiver, renunciation and agreement
contained in the immediately preceding sentence is for the benefit of the Agent
and the Banks and also for the benefit of the Borrower who may assert the
benefits thereof as a third-party beneficiary, and the Parent may be released
from such waiver, renunciation and agreement only by the execution and delivery,
by the Agent, the Required Banks and the Borrower, of an instrument expressly
releasing the Parent therefrom.

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                  SECTION 8. Stay of Acceleration. If acceleration of the time
for payment of any amount payable by the Borrower under the Credit Agreement,
any Note or any other Principal Document is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower, all such amounts otherwise subject
to acceleration under the terms of the Credit Agreement, any Note or any other
Principal Document shall nonetheless be payable by the Parent hereunder
forthwith on demand by the Agent made at the request of the Required Banks.

                  SECTION 9. Notices. All notices, requests and other
communications to any party hereunder shall be given or made by telecopier or
other writing and telecopied or mailed or delivered to the intended recipient at
its address or telecopier number set forth on the signature pages hereof or such
other address or telecopy number as such party may hereafter specify for such
purpose by notice to the Agent in accordance with the provisions of Section 9.01
of the Credit Agreement. Except as otherwise provided in this Guaranty, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice, 3
Domestic Business Days after such communication is deposited in the mails with
first class postage prepaid, in each case given or addressed as aforesaid.

                  SECTION 10. No Waivers. No failure or delay by the Agent or
any Banks in exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided in this Guaranty, the Credit
Agreement, the Notes, and the other Principal Documents shall be cumulative and
not exclusive of any rights or remedies provided by law.

                  SECTION 11. Successors and Assigns. This Guaranty is for the
benefit of the Agent and the Banks and their respective successors and assigns
and in the event of an assignment of any amounts payable under the Credit
Agreement, the Notes, or the other Principal Documents, the rights hereunder, to
the extent applicable to the indebtedness so assigned, may be transferred with
such indebtedness. This Guaranty may not be assigned by the Parent without the
prior written consent of the Agent and the Required Banks, and shall be binding
upon the Parent and its successors and permitted assigns.

                  SECTION 12. Changes in Writing. Neither this Guaranty nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Parent and the Agent with the consent of the
Required Banks.

                  SECTION 13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF GEORGIA. EACH OF THE PARENT AND THE AGENT HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT SITTING IN
ATLANTA, GEORGIA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE PARENT
IRREVOCABLY WAIVES, TO THE

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FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH ANY OF THEM MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARENT AND THE AGENT HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

                  SECTION 14. Taxes, etc. All payments required to be made by
the Parent hereunder shall be made without setoff or counterclaim and free and
clear of and without deduction or withholding for or on account of, any present
or future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any government or any political or taxing authority to the same
extent and with the same effect as provided in Section 2.11(c) of the Credit
Agreement with respect to payments made by the Borrower.

                  IN WITNESS WHEREOF, the Parent has caused this Guaranty to be
duly executed by its authorized officer as of the date first above written.

                                    AVONDALE INCORPORATED

                                    By: ________________________________________
                                         Title:

                                    Avondale Incorporated
                                    506 South Broad Street
                                    Monroe, Georgia 30655
                                    Attention: Chairman and
                                               Chief Executive Officer
                                    Telecopier number: 770-267-2543
                                    Telephone number: 770-267-2226

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                                                                       EXHIBIT J

                     AMENDED AND RESTATED SECURITY AGREEMENT

         THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "Agreement") is made
and entered into as of April 29, 1996 by and between AVONDALE MILLS, INC. (the
"Borrower") and WACHOVIA BANK OF GEORGIA, N.A. as agent for the Banks parties to
the "Credit Agreement" (as hereinafter defined) (the "Agent")

                              W I T N E S S E T H:

         WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of even date herewith, among Borrower, the Agent, The First
National Bank of Chicago, as Documentation Agent, and the Banks parties thereto
(as amended or modified from time to time, the "Credit Agreement"), the Borrower
is or may hereafter become indebted to the Banks and the Agent; and

         WHEREAS, the Borrower executed and delivered a Security Agreement dated
as of March 29, 1994 (the "Original Security Agreement" pursuant to a Credit
Agreement by and among the Borrower, the Agent and the Banks party thereto (the
"Original Credit Agreement"); and

         WHEREAS, in order to secure said indebtedness and to induce the Banks
and the Agent to execute and enter into the Credit Agreement, the Borrower has
agreed to execute and deliver this Agreement, granting a security interest in,
and lien upon, the Collateral to the Agent for the benefit of the Banks, and
continuing in effect the security interest in, and lien upon, the Collateral
granted to the Agent pursuant to the Original Security Agreement; and

         WHEREAS, it is the intent of the parties that this Agreement amend,
restate and supersede the Original Security Agreement, and continue in effect
the security interests and liens granted thereto without lapse or loss of
perfection, and that all UCC-1's filed in connection with the Original Security
Agreement continue to perfect the security interests and liens in the Collateral
granted and continued in effect pursuant hereto;

         NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged and Borrower and the Agent hereby covenant and agree as
follows:

         1.       DEFINITIONS. Unless otherwise defined herein, capitalized
terms used herein have the meanings set forth in the Credit Agreement. In
addition, the following terms have the meanings set forth below, unless the
context requires otherwise:

                           "Accounts Receivable Collateral" means all rights of
the Borrower to payment for goods sold or leased, or to be sold or to be leased,
or for services rendered or to be rendered, howsoever evidenced or incurred,
including, without limitation, all accounts, instruments, chattel paper and
general intangibles, all returned or repossessed goods and all

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books, records, computer tapes, programs and ledger books arising therefrom or
relating thereto, whether now owned or hereafter acquired or arising.

                           "Account Debtor" means the Person who is obligated
on any of the Accounts Receivable Collateral or otherwise is obligated as a
purchaser or lessee of any of the Inventory Collateral.

                           "Act" means the Uniform Commercial Code - Secured
Transactions of Georgia (O.C.G.A. Art. 11-9), and any act that may be
substituted therefor, as from time to time amended.

                           "Agreement" means this Agreement, together with all
exhibits, riders, supplements, addenda and additions now or hereafter attached
hereto or made a part hereof, and all amendments hereof.

                           "Collateral" means and includes all of the property
described in Paragraph 4 hereof, including all property of such type consisting
of the Graniteville Assets, but subject to the provisions of Section 11.8 as to
Receivables Program Assets.

                           "Collateral Locations" means those locations set
forth on Exhibit "A" attached hereto and by this reference
made a part hereof.

                           "Credit Agreement" has the meaning set forth in the
recitals hereto.

                           "Documentary Collateral" means all chattel paper,
instruments, documents or notes (excluding any of the foregoing arising out of
the sale or lease of goods or the furnishing of services) and all payments
thereunder and instruments and other property from time to time delivered in
respect thereof or in exchange therefor, and all bills of sale, bills of lading,
warehouse receipts, and other documents of title, whether now owned or hereafter
acquired or arising.

                           "Equipment Collateral" means all equipment of the
Borrower, or in which it has rights, whether now owned or hereafter acquired,
wherever located, including, without limitation, all machinery, furniture,
furnishings, leasehold improvements, motor vehicles, forklifts, rolling stock,
dies and tools used or useful in the Borrower's business but excluding, in any
event, (i) all fixtures, and (ii) all machinery and equipment listed on Exhibit
"B" attached hereto and by this reference made a part hereof.

                           "Intangibles Collateral" means all general
intangibles of the Borrower (excluding any general intangibles evidencing rights
of the Borrower to payment for goods sold or leased, or to be sold or leased, or
for services rendered or to be rendered), whether now existing or hereafter
acquired or arising, including, without limitation, all copyrights, royalties,
trademarks, trade names, tax refunds, rights to tax refunds, service marks,
patent and proprietary rights, blueprints, drawings, designs, trade secrets,
plans, diagrams, schematics and assembly and display materials relating thereto
and all customer lists.

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                           "Intercreditor Agreement" means the Amended and
Restated Intercreditor Agreement dated of even date herewith between the
Borrower, the Agent and SunTrust Bank, Atlanta, as amended or supplemented from
time to time.

                           "Inventory Collateral" means all inventory of the
Borrower, or in which it has rights, whether now owned or hereafter acquired,
wherever located, including, without limitation, all goods of the Borrower held
for sale or lease or furnished or to be furnished under contracts of service,
all goods held for display or demonstration, goods on lease or consignment,
returned and repossessed goods, all raw materials, work-in-process, finished
goods and supplies used or consumed in the Borrower's business, together with
all documents, documents of title, dock warrants, dock receipts, warehouse
receipts, bills of lading or orders for the delivery of all, or any portion, of
the foregoing.

                           "Permitted Liens" means the liens and encumbrances
pertaining to portions of the Collateral described on Exhibit "C" attached
hereto and by this reference made a part hereof.

                           In addition to and cumulative with such other
definitions and descriptions as herein may be provided therefor, the terms
"equipment", "inventory", "accounts", "general intangibles", "chattel paper",
"documents of title", "goods", "consumer goods" and "instruments", if and to the
extent used herein, shall have such meanings as may be respectively ascribed to
them in the Act as in existence on date hereof.

         6.       GRANT OF SECURITY INTEREST. As a general and continuing
collateral security for payment of the Obligations and the performance by
Borrower of all of the provisions of the Loan Documents, the Borrower hereby
grants to the Agent for the ratable benefit of the Banks a security interest in
and security title to all Collateral and the Borrower makes such further
agreements with the Agent in regard thereto as hereinafter set forth.

         7.       DESCRIPTION OF COLLATERAL.

                           The following described property, wherever located,
whether now existing or hereafter acquired or arising constitutes the Collateral
(subject to the provisions of Section 11.8):

                           (a)      the Accounts Receivable Collateral;

                           (b)      the Equipment Collateral;

                           (c)      the Intangibles Collateral;

                           (d)      the Inventory Collateral;

                           (e)      the Documentary Collateral;

                           (f)      the Purchase Money Note; and

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                           (g)      all products and proceeds of any and all of
the foregoing, including, without limitation, insurance or condemnation
proceeds, all property received wholly or partially in trade or exchange for any
of the foregoing, and all rents, revenues, issues, profits and proceeds arising
from the sale, lease, license, encumbrance, collection or any other temporary or
permanent disposition of any of the foregoing or any interest therein.

         8.       REPRESENTATIONS AND WARRANTIES.

                  8.1 The Borrower is, or, with respect to Collateral acquired
after the date hereof, will be, the owner of the Collateral free and clear from
any Lien, except for the Permitted Liens. No financing statement covering any of
the Collateral is on file in any public office other than any evidencing
Permitted Liens.

                  8.2 Location. As of the date hereof, the tangible portion of
the Collateral is situated only at one or more Collateral Locations, other than
as permitted by Section 5.6.

                  8.3 Name. The name of the Borrower is as set forth on the
signature page hereof and the Borrower has not conducted any business under any
other name during the past 6 years.

                  8.4 Right to Assign. Borrower has the full right, power and
authority to make this assignment of the Collateral.

                  8.5 Delivery. Borrower has delivered the Purchase Money Note
and all other agreements, letters of credit, promissory notes, chattel paper or
anything else the physical possession of which is necessary in order for Agent
to perfect or preserve the priority of its Lien in the Collateral.

                  8.6 Purchaser of Collateral. Except for the acquisition of
assets from Walton Monroe Mills, Inc., Macfield Spinning, Inc. and Graniteville
Company, during the past 6 years, Borrower has not purchased any of the
Collateral in a bulk transfer or in a transaction which was outside the ordinary
course of the business of Borrower's seller.

9.       GENERAL COVENANTS.

                  9.1 Liens. The Borrower shall keep the Collateral free and
clear of all Liens, except for the Permitted Liens

                  9.2 Casualty. The Borrower shall promptly notify the Agent of
any material loss of or damage to the Inventory Collateral or the Equipment
Collateral or any part thereof.

                  9.3 Use of Collateral. Until there occurs an Event of Default
the Borrower may, subject to the provisions of Paragraph 6 hereof, use the
Collateral in any lawful manner not inconsistent with this Agreement or with the
terms or conditions of any policy of insurance thereon.

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                  9.4 Disposition of Collateral. The Borrower may not sell,
lease, exchange or otherwise dispose of any of the Collateral except as
hereinafter specifically provided. Borrower may sell, lease, exchange or
otherwise dispose of any portion of the Inventory Collateral in the ordinary
course of business for cash or upon open account or on terms of payment
ordinarily extended to its customers. Upon the sale, exchange or other
disposition of the Inventory Collateral, the security interest created and
provided for herein shall continue in and attach to any proceeds thereof,
without break in continuity and without further formality or act, including,
without limitation, accounts, contract rights, shipping documents, documents of
title, bills of lading, warehouse receipts, dock warrants, dock receipts and
cash or non-cash proceeds, and in the event of any unauthorized sale, shall
continue in Inventory Collateral itself. Borrower may sell Equipment Collateral
pursuant and subject to the provisions of Sections 2.08(b)(i)(B) and 5.14 of the
Credit Agreement. In addition, Borrower may sell, exchange or otherwise dispose
of portions of the Equipment Collateral which are obsolete, worn-out or
unsuitable for continued use by Borrower if such Equipment Collateral is
replaced promptly upon its disposition with equipment constituting Equipment
Collateral having a market value equal or greater than the Equipment Collateral
so disposed of and in which Agent shall obtain and have a Lien pursuant hereto
of the same priority as in the Equipment Collateral so disposed of.

                  9.5 Insurance. The Borrower agrees that it will obtain and
maintain insurance on the Inventory Collateral and the Equipment Collateral as
required by Section 5.17 of the Credit Agreement, with loss payable to the Agent
as its interests may appear. Such insurance shall not be cancelable by the
Borrower, unless with the prior written consent of the Required Banks, or by the
Borrower's insurer, unless with at least 30 days advance written notice to the
Agent.

                  9.6 Location. The Borrower agrees not to locate the Inventory
Collateral or the Equipment Collateral (other than (i) Rolling Stock and other
goods which are covered by a certificate of title, as contemplated in section
11-9-103(3)(a) of the Act and (ii) other goods which are mobile and which are of
a type normally used in more than one jurisdiction and are not covered by a
certificate of title, as contemplated in Section 11-9-103(3)(a) of the Act) at
any location other than a Collateral Location without providing written notice
to the Agent no later than 30 days after such relocation; provided, however,
that nothing contained herein shall be deemed to prohibit the Borrower, without
notice to or the consent of the Agent, from transferring temporarily (for
periods not to exceed 3 months in any event) Inventory Collateral or Equipment
Collateral from a Collateral Location to another location at any time or from
time to time hereafter for the limited purpose of having work performed on such
Inventory Collateral or Equipment Collateral, or for temporary storage thereof
or for shipment thereof to a Collateral Location, if done in the ordinary course
of the Borrower's business. In addition, to the extent the Borrower should
warehouse any of the Inventory Collateral at any time hereafter at any location
other than a Collateral Location, the Borrower acknowledges and agrees that such
warehousing may be conducted only by warehousemen who have been pre-approved by
the Agent and who, in any event, shall issue non-negotiable warehouse receipts
in the Agent's name to evidence any such warehousing of goods constituting
Inventory Collateral. If the Borrower consigns any part of the Inventory
Collateral, it will comply with Section 2-326 of the Uniform Commercial Code of
any state where such Inventory Collateral is located with respect thereto, by
filing in the

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appropriate public office or offices UCC-1 financing statements showing the
Borrower as consignor and the Agent as assignee of consignor, and will furnish
copies thereof to the Agent.

                  9.7 The Borrower shall deliver to the Agent within 60 days
after receiving written notice from the Agent directing it to do so, the
original title certificates to all of the Rolling Stock, together with duly
executed applications in the appropriate form for new certificates of title
thereto showing thereon the Lien of the Agent pursuant to the Security
Agreement.

         10.      SPECIAL PROVISIONS REGARDING RECEIVABLES AND INVENTORY. Each
item of the Accounts Receivable Collateral arises or will arise under a contract
between the Borrower and an Account Debtor, or from the bona fide sale or
delivery of goods to or performance of services for, an Account Debtor. The
Borrower will promptly notify the Agent of all returns, repossessions and
recoveries which are reasonably expected to result in losses to the Borrower in
excess of $500,000 in any month. From and after the occurrence of any Event of
Default and during the continuation thereof, (i) the Agent may collect, realize,
sell or otherwise deal with the Accounts Receivable Collateral or any and all
sums owing or which may become due upon any items of the Inventory Collateral or
any part thereof in such manner, upon such terms and conditions and at such time
or times as may seem to it advisable and without notice to the Borrower, and
(ii) the Borrower hereby irrevocably designates and appoints the Agent its true
and lawful attorney either in the name of the Agent or the name of the Borrower
to take such actions and any other actions as the Agent may deem necessary or
desirable in order to realize upon the Inventory Collateral and the Accounts
Receivable Collateral, including, without limitation, power to endorse in the
name of Borrower, any checks, drafts, notes, or other instruments received in
payment of or on account of the Inventory Collateral or the Accounts Receivable
Collateral. The Agent shall not be liable or accountable for any failure to
collect, realize, sell or obtain payment of the Accounts Receivable Collateral
or any and all sums owing or which may become due upon any items of the
Inventory Collateral or any part thereof and shall not be bound to institute
proceedings for the purpose of collecting, realizing, or obtaining payment of
the same or for the purpose of preserving any rights of the Agent, the Borrower
or any other Person in respect of the same. From and after the occurrence of any
Event of Default and during the continuation thereof, (i) all moneys collected
or received by the Borrower in respect of the Accounts Receivable Collateral or
any and all sums owing or which may become due upon any items of the Inventory
Collateral shall be received as trustee in trust for the Agent for the ratable
benefit of the Banks and shall be forthwith paid over to the Agent for the
ratable benefit of the Banks at the Agent's request, and (ii) all moneys
collected or received by the Agent in respect of the Accounts Receivable
Collateral or any and all sums owing or which may become due upon any items of
the Inventory Collateral or other Collateral may be applied to the Obligations
in the order which the Required Banks deem best or, in the sole discretion of
the Required Banks, may be released to the Borrower, all without prejudice to
the liability of the Borrower or the Agent's right to hold and realize upon this
security.

         11.      PRESERVATION. The Borrower will take all reasonably necessary
and appropriate measures to obtain, maintain, protect and preserve any material
Intangibles Collateral including, without limitation, registration thereof with
the appropriate state or federal governmental agency or department.

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         12.      REMEDIES. Upon the occurrence and during the existence of any
Event of Default, the Agent for the ratable benefit of the Banks shall have all
of the rights and remedies described in Sections 8.1 through 8.5 inclusive, and
it may exercise any one, more, or all of such remedies, in its sole discretion,
without thereby waiving any of the others, subject, however, to the provisions
of Section 11.7.

                  12.1 General Remedies of a Secured Party. The Agent shall have
all the rights and remedies of a "secured party" under the Act (regardless of
whether the Act has been enacted in the jurisdiction where the rights or
remedies are asserted, including, without limitation, the right to take
possession of any of the Collateral or the proceeds thereof by such means
(without breach of the peace) and through agents or otherwise as it may elect,
the right to sell, lease, or otherwise dispose of the Collateral or any portion
thereof, the right to apply the proceeds derived therefrom to any and all of the
Obligations secured thereby in such order as the Agent may elect, and, for this
purpose, the right to sign in the name of the Borrower any transfer, conveyance,
or instrument necessary in the premises. Any such disposition of the Collateral
may be in its then condition or following any commercially reasonable
preparation or processing thereof, by public or private proceedings, by one or
more contracts, as a unit or in parcels, at any time or place and on any terms,
so long as the same are commercially reasonable.

                  12.2 Notice of Disposition. The Agent shall give the Borrower
written notice of the time and place of any public sale of the Collateral or the
time after which any other intended disposition thereof is to be made. The
requirement of sending reasonable notice shall be met if such notice is mailed
postage prepaid or otherwise given to the undersigned at its last address as
shown on the Agent's records at least 10 days before such disposition.

                  12.3 Receiver. In addition to the foregoing, the Agent, at the
direction of the Required Banks, may appoint any person to be a receiver (which
term shall include a receiver and manager) of the Collateral, including, without
limitation, any rents and profits thereof and may remove any receiver and
appoint another in its (his) stead, and such receiver so appointed shall have
power to take possession of the Collateral and to carry on or concur in carrying
on the business of the Borrower, and to dispose of or concur in the disposition
of the Collateral or any part thereof in the manner described hereinabove. Any
such receiver shall for all purposes be deemed to be the agent of the Borrower.
The Agent may from time to time fix the remuneration of such receiver. The Agent
and the Banks in appointing or refraining from appointment of such receiver
shall not incur any liability to the receiver, the Borrower or otherwise.

                  12.4 Assemblage. In facilitation of the foregoing, the Agent
may require that the Borrower assemble and make available all of or any portion
of the Collateral at a location reasonably designated by the Agent, all at the
expense of the Borrower.

                  12.5 Application of Proceeds. All moneys from time to time
received by the Agent from the disposition of Collateral shall be applied by the
Agent for the benefit of the Banks in the following manner: first, in discharge
of all reasonable expenses of re-taking, holding, preserving, preparing for sale
or lease, selling, leasing, and the like of the Collateral including, without
limitation, fees and expenses of any receivers and attorneys, insurance
premiums, tax payments and the like; secondly, to all outstanding fees and other
expenses owing

                                      174

<PAGE>

under the Credit Agreement or the other Loan Documents in such order as the
Required Banks shall elect; thirdly, ratably to accrued interest on the
Obligations; fourthly, ratably to the remaining balances of the Obligations then
outstanding; lastly, to the Borrower, any residue.

         13.      FURTHER ASSURANCES. The Borrower shall from time to time
forthwith on the Agent's reasonable request do, make and execute, and use
reasonable good faith efforts to cause to be done, made and executed, such
financing statements, certificates of title, landlord's and mortgagee's waivers,
estoppel certificates, further assignments, documents, acts, matters and things
as may be required by the Agent of or with respect to the Collateral or any part
thereof or as may be required to give effect to these presents, and the Borrower
hereby constitutes and appoints the Agent as the true and lawful attorney of the
undersigned irrevocably with full power of substitution to do, make, and execute
all such statements, assignments, documents, acts, matters, or things with the
right to use the name of the Borrower whenever and wherever it may be reasonably
deemed necessary or expedient.

         14.      DEALINGS. The Agent may grant extensions of time and other
indulgences, take and give up securities, accept compositions, grant releases
and discharges and otherwise deal with the Borrower, debtors of the Borrower,
sureties and others and with the Collateral and other securities as the Agent
may see fit without prejudice to the liability of the Borrower or the Agent's
right to hold and realize upon this security.

         15.      GENERAL.

                  15.1 Governing Laws. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Georgia.

                  15.2 Non-Exclusivity of Remedies. No remedy for the
enforcement of the rights of the Agent hereunder shall be exclusive of or
dependent on any other such remedy but any one or more of such remedies may from
time to time be exercised independently or in combination.

                  15.3 Waiver. Each and every right granted to the Agent under
this Agreement, under any other Loan Document or allowed to the Agent by law or
in equity, shall be cumulative and may be exercised from time to time by the
Agent in its sole discretion. No failure on the part of the Agent to exercise,
and no delay in exercising, any right shall operate as a waiver thereof, nor
shall any single or partial exercise by the Agent of any right preclude any
other or future exercise thereof or the exercise of any other right.

                  15.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which when fully executed shall be an original, and
all of said counterparts taken together shall be deemed to constitute one and
the same agreement.

                  15.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the permitted successors and assigns of the
parties hereto.

                  15.6 Reimbursement. If any taxes, fees or other costs shall be
payable on account of the execution, issuance, delivery, or recording of this
Agreement or any financing

                                      175

<PAGE>

statements, certificates, documents or instruments executed in connection
herewith, by reason of any existing or hereafter enacted federal, state, or
provincial statute, the Borrower will pay all such taxes, fees or other costs,
including any applicable interest and penalty, and will indemnify and hold the
Agent and the Banks harmless from and against liability in connection therewith.

                  15.7 SunTrust Intercreditor Agreement. Notwithstanding any
term or provision hereof to the contrary, as to the SunTrust Collateral Plants,
the rights, powers and remedies of the Agent hereunder are and shall be subject
to and shall be governed by the terms of the SunTrust Intercreditor Agreement.

                  15.8 Release of Receivable Program Assets. The security
interest of the Agent in the Accounts Receivable Collateral that is or becomes
Receivables Program Assets and any other Collateral that is or becomes
Receivables Program Assets, in each case other than Excluded Receivables Assets,
is subject to release under the circumstances, and subject to satisfaction of
the conditions, set forth in Section 9.18 of the Credit Agreement, and from and
after such release, the Collateral shall not include such Accounts Receivable
Collateral or such other Collateral and the provisions of this Agreement shall
be ignored and shall have no further force or effect with respect to such
Accounts Receivable Collateral or such other Collateral, except to the extent of
Excluded Receivables Assets.

                  IN WITNESS WHEREOF, the Borrower and the Agent have executed
this Agreement and affixed their respective seals thereto.

                                        AGENT:

                                        WACHOVIA BANK OF GEORGIA, N.A.,
                                        as Agent for the Banks            (SEAL)

                                        By:_____________________________________
                                            Title:

                                        BORROWER:

                                        AVONDALE MILLS, INC               (SEAL)

                                        By:_____________________________________
                                            Title:

                                        Attest:_________________________________
                                                Title:

                                      176

<PAGE>

                               SECURITY AGREEMENT
                                   EXHIBIT "A"

                     SCHEDULE OF OUTSIDE INVENTORY LOCATIONS

Fabrics Division:                   See attached List

Yarn Division:                      NDS Warehouse
                                    19801 South Santa Fe Avenue
                                    Rancho Dominguez, CA 90221

                                    Hickory Throwing Co.
                                    520 20th Street, S.E.
                                    Hickory, NC 28601

                                    Yarns Etc.
                                    1005 Gault Avenue North
                                    Ft. Payne, AL 35967

Walton Fabrics Division:            None

Cotton:                             Central Cotton Warehouse
                                    North Norton Avenue
                                    Sylacauga, AL  35150

                                    Sycamore Cotton Warehouse
                                    Avondale Mills
                                    L & N Station
                                    Sycamore, AL 35149

Other Raw Materials:                None

                                      177

<PAGE>

             OUTSIDE INVENTORY LOCATIONS: AVONDALE FABRICS DIVISION

<TABLE>
<CAPTION>
             NAME                        CITY               STATE       COUNTY
             ----                        ----               -----       ------
<S>                                 <C>                     <C>        <C>
THOMASTON BLEACHERY                 THOMASTON                 GA       UPSON
WESTPOINT STEVENS                   OPELIKA                   AL       LEE
CRANSTON PRINT WORKS                FLETCHER                  NC       HENDERSON
U.S. FINISHING                      GREENVILLE                SC       GREENVILLE
KING FINISHING                      DOVER                     GA       SCREVEN
BRITTANY DYEING & PRINTING          NEW BEDFORD               MA       BRISTOL
PRIORITY FINISHING                  FALL RIVER                MA       BRISTOL
PENN TRANSFER LTD.                  HAZELTON                  PA       LUZERNE
FACE MATE                           SOMERSWORTH               NH       STRAFFORD
NORTH CAROLINA FIN.                 SALISBURY                 NC       ROWAN
RUSSELL CORPORATION                 ALEXANDER CITY            AL       TALLAPOOSA
DELTA MILLS #3                      WALLACE                   SC       MARLBORO
MF&H TEXTILES                       BUTLER                    GA       TAYLOR
TEXPRINT                            MACON                     GA       BIBB
DELIA MILLS #2                      WALLACE                   SC       MARLBORO
SYLACAUGA FINISHING                 SYLACAUGA                 AL       TALLADEGA
GREENWOOD MILLS (SERVICE DEPT)      GREENWOOD                 SC       GREENWOOD
WALTON FABRICS                      MONROE                    GA       WALTON
INMAN MILLS-RAMEY PLANT             ENOREE                    SC       SPARTANBURG
OPP & MICOLAS                       OPP                       AL       CONVINGTON
GREENWOOD MILLS (HARRIS#6)          GREENWOOD                 SC       GREENWOOD
GREENWOOD MILLS (GREENWOOD#5)       GREENWOOD                 SC       GREENWOOD
INMAN MILLS-SAYBROOK PLANT          INMAN                     SC       SPARTANBURG
INMAN MILLS-MIN. SHOALS PLANT       ENOREE                    SC       SPARTANBURG
MAYFAIR MILLS                       STARR                     SC       ANDERSON
GREENWOOD MILLS (MATHEWS #3)        GREENWOOD                 SC       GREENWOOD
T.N.S. MILLS                        SPARTANBURG               SC       SPARTANBURG
FLINT RIVER TEXTILES                ALBANY                    GA       DOUGHERTY
ARKWRIGHT MILLS                     SPARTANBURG               SC       SPARTANBURG
T.N.S. MILLS                        GAFFNEY                   SC       CHEROKEE
GREENWOOD MILLS (LINER PLANT)       ORANGEBURG                SC       ORANGEBURG
ROOSTERHEAD WAREHOUSE               ROME                      GA       FLOYD
EASTERN DISTRIBUTION                GREENVILLE                SC       GREENVILLE
PIEDMONT DISTR. CTR. WHSE. #7       CHARLOTTE                 NC       MECKLENBURG
A.T.S. WAREHOUSE                    CHARLESTON                SC       CHARLESTON
BUNCH WAREHOUSE                     NORTH CHARLESTON          SC       CHARLESTON
INTERPORT SDS INC.                  OPELIKA                   AL       LEE
</TABLE>

                                      178

<PAGE>

                OUTSIDE INVENTORY LOCATIONS: GRANITEVILLE COMPANY

<TABLE>
<CAPTION>
               NAME                            CITY            STATE        COUNTY
               ----                            ----            -----        ------
<S>                                        <C>                 <C>       <C>
ELLIOTT WAREHOUSE                          DUNCAN                SC      SPARTANBURG
PIEDMONT DISTRIBUTION CENTER               CHARLOTTE             NC      MECKLENBURG
AMERICAN FAST PRINT                        SPARTANBURG           SC      SPARTANBURG
U.S. FINISHING                             GREENVILLE            SC      GREENVILLE
INMAN MILLS                                INMAN                 SC      SPARTANBURG
AVONDALE MILLS (WALTON MILLS)              MONROE                GA      WALTON
JOSHUA L. BAILY                            STARR                 SC      ANDERSON
JOSHUA L. BAILY (WAREHOUSE #93)            EASLEY                SC      PICKENS
JACKSON MILLS                              IVA                   SC      SPARTANBURG
CLINTON MILLS                              CLINTON               SC      LAURENS
TNS MILLS                                  GAFFNEY               SC      CHEROKEE
GREENWOOD MILLS (GREENWOOD #5)             GREENWOOD             SC      GREENWOOD
AVONDALE MILLS                             SYLACAUGA             AL      TALLADEGA
GREENWOOD MILLS (GREENWOOD #3)             GREENWOOD             SC      GREENWOOD
GREENWOOD MILLS (DURST #8)                 GREENWOOD             SC      GREENWOOD
INMAN MILLS (MOUNTAIN SHOALS)              ENOREE                SC      SPARTANBURG
INMAN MILLS (RAMEY)                        ENOREE                SC      SPARTANBURG
JACKSON MILLS                              WELLFORD              SC      ANDERSON
INMAN MILLS (SAYBROOK)                     INMAN                 SC      SPARTANBURG
J.P. STEVENS                               TAYLORS               SC      GREENVILLE
SCHNEIDER MILLS                            TAYLORSVILLE          NC      ALEXANDER
TNS MILLS                                  SPARTANBURG           SC      SPARTANBURG
COMMERCIAL BONDED WAREHOUSE, INC.          N. CHARLESTON         SC      CHARLESTON
SOUTH CAROLINA STATE PORTS AUTHORITY       CHARLESTON            SC      CHARLESTON
ATLANTIC TRANSPORTATION SERVICES, INC.     CHARLESTON            SC      CHARLESTON
MT. VERNON MILLS, INC.                     TALLASSEE             AL      TALLAPOOSA
MILLIKEN & CO.                             GREER                 SC      GREENVILLE/
                                                                         SPARTANBURG
KANEMATSU USA, INC.                        LOS ANGELS            CA      LOS ANGELES
SOUTHERN PHENIX TEXTILES, INC.             PHENIX CITY           AL      RUSSELL
RAMTEX, INC.                               RAMSEUR               NC      RANDOLPH
</TABLE>

                                      179

<PAGE>

                               SECURITY AGREEMENT
                                    EXHIBIT B
                               EXCLUDED EQUIPMENT

                           AVONDALE LIGHTWEIGHT TRUCKS
                                 AS OF 03/29/96

<TABLE>
<CAPTION>
    LOCATION                                 DESCRIPTION                   BOOK VALUE
    --------                                 -----------                   ----------
<S>                                 <C>                                    <C>
CORP OFFICE                         1985 CHEVROLET VAN                          0.00
                                    1991 FORD CLUB VAN                          0.00

COTTON DEPT.                        1989 CHEVROLET S-10 PU                      0.00
                                    1993 FORD AEROSTAR VAN                  4,846.50

SYCAMORE WHSE.                      1978 DODGE PU                               0.00

SUPPLY DIST. CENTER                 1995 FORD AEROSTAR VAN                  9,993.75
                                    1984 VOLVO TRUCK                            0.00

TRUCK DEPT.                         1989 CHEVROLET PU                           0.00
                                    1985 DODGE 4WD PU                           0.00

BEVELLE                             1976 CHEVROLET PU                           0.00
                                    1978 CHEVROLET                              0.00
                                    1989 CHEVROLET PU                           0.00

SYLACAUGA YARD                      1982 CHEVROLET PU                           0.00
                                    1974 CHEVROLET DUMP TRUCK                   0.00

WASTE WATER                         1977 FORD PU                                0.00
TREATMENT                           1973 FORD DUMP TRUCK                        0.00

EVA JANE                            1982 FORD PU                                0.00
                                    1984 CHEVROLET PU                           0.00
                                    1987 CHEVROLET PU                           0.00
                                    1990 FORD DUMP TRUCK                        0.00

BON AIR                             1989 CHEVROLET PU                           0.00

BURNSVILLE                          1984 CHEVROLET PU                           0.00

CATHERINE                           1981 CHEVROLET PU                           0.00
</TABLE>

                                      180

<PAGE>

<TABLE>
<S>                                 <C>                                    <C>
COOSA                               1988 CHEVROLET PU                           0.00

PELL CITY                           1995 CHEVROLET PU                      11,003.49

TIFTON                              1995 CHEVROLET PU                       8,629.78

WALHALLA                            1995 FORD PU                            7,575.32
                                    1974 CHEVROLET DUMP TRUCK                   0.00

SANFORD                             1989 CHEVROLET PU                           0.00

LEE                                 1989 CHEVROLET PU                           0.00

WALTON FABRICS                      1973 CHEVROLET FLATBED TRUCK                0.00
                                    1984 VOLVO TRUCK                            0.00
</TABLE>

                                      181

<PAGE>

                               SECURITY AGREEMENT
                              EXHIBIT "C" - PART 1

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
         SECURED PARTY                     JURISDICTION                    COLLATERAL
--------------------------------------------------------------------------------------------------
<S>                                    <C>                          <C>
AVONDALE MILLS, INC.
--------------------------------------------------------------------------------------------------
Xerox Corporation                      Date Filed: 04/10/96         Xerox Leased Equipment
                                       File number: 96-15376
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Val Tech Computer Systems              Date Filed: 03/06/96         Leased Equipment
(assignee Nat'l Bank of Commerce)      File number: 96-09326        Notice Filing
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Val Tech Computer Systems              Date Filed: 08/09/95         Leased Equipment
(assignee First Alabama Bank)          File number: 95-32698
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Val Tech Computer Systems              Date Filed: 05/24/95         Leased Equipment
(assignee First Alabama Bank)          File number: 95-21606
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 11/14/94         Equipment
                                       File number: 94-43091
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 11/14/94         Equipment
                                       File number: 94-43090
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 11/14/94         Equipment
                                       File number: 94-43089
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Val Tech Computer Systems              Date Filed: 06/09/94         Leased Equipment
                                       File number: 94-20960        Notice Filing
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
AT&T Credit Corporation                Date Filed: 05/02/94         Leased Equipment
                                       File number: 94-15516
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
</TABLE>

                                      182

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
         SECURED PARTY                       JURISDICTION                  COLLATERAL
--------------------------------------------------------------------------------------------------
<S>                                    <C>                          <C>
Wachovia Bank of Georgia, as Agent     Date Filed: 04/04/94         Blanket Lien
                                       File number: 94-11561
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Val Tech Computer Systems              Date Filed: 02/25/94         Leased Equipment
(assignee Nat'l Bank of Commerce       File number: 94-06560        Notice Filing
re-assigned 10/11/95 to Val Tech)      SOS Alabama
--------------------------------------------------------------------------------------------------
Pacific Atlantic Systems               Date Filed: 12/28/93         Leased Equipment
                                       File number: 93-44875        Notice Filing
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Val Tech Computer Systems              Date Filed: 12/20/93         Leased Equipment
(assignee Nat'l Bank of Commerce       File number: 93-43776        Notice Filing
re-assigned 10/11/95 to Val Tech)      SOS Alabama
--------------------------------------------------------------------------------------------------
Pacific Atlantic Systems               Date Filed: 09/30/93         Leased Equipment
                                       File number: 93-34411        Notice Filing
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Xerox Corporation                      Date Filed: 04/27/93         Xerox Leased Equipment
                                       File number: 93-14521
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Xerox Corporation                      Date Filed: 04/27/93         Xerox Leased Equipment
                                       File number: 93-14511
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Bell Atlantic Systems Leasing          Date Filed: 01/25/93         Leased Equipment
(assignee: COS Computer Systems)       File number: 93-02601        Notice Filing
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
SouthTrust Bank of Alabama             Date Filed: 01/14/93         Leased Equipment, Insurance,
                                       File number: 93-01620        Proceeds
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Trust Company Bank                     Date Filed: 04/30/92         IRB Project and Equipment
(co-debtor: Industrial Dev. Board      File number: 92-15816
Town on Bon Air)                       SOS Alabama
--------------------------------------------------------------------------------------------------
</TABLE>

                                      183

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
         SECURED PARTY                       JURISDICTION                  COLLATERAL
--------------------------------------------------------------------------------------------------
<S>                                    <C>                          <C>
SouthTrust Bank of Alabama             Date Filed: 02/10/92        Equipment, Insurance, Proceeds
                                       File number: 92-04907
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Mayer Electric Supply Co., Inc.        Date Filed: 04/18/91        Consignment of inventory to a
                                       File number: 91-14211        Systems Contracting Agreement
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
CIT Group/Equipment Financing, Inc.    Date Filed: 01/27/88        12 - Volvo Sleeper Tractors
                                       Continued:  08/04/92
                                       File number: A270067
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
CIT Group/Equipment Financing, Inc.    Date Filed: 08/17/87        1 - Volvo Sleeper Tractor
                                       Continued: 04/02/92
                                       File number: A253773
                                       SOS Alabama
--------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 02/16/95        Rieter Drawframe
                                       File number: 2046
                                       Coosa County, Alabama
--------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent     Date Filed: 04/07/94        Blanket Lien
                                       File number: 94-069505
                                       SOS California
--------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent     Date Filed: 04/05/94        Blanket Lien
                                       File number: 1052193
                                       SOS Connecticut
--------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent     Date Filed: 04/04/95        Blanket Lien
                                       File number: 33817
                                       Floyd County
--------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent     Date Filed: 04/04/95        Blanket Lien
                                       File number: 30395
                                       Walton County
--------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent     Date Filed: 04/04/95        Blanket Lien
                                       File number: 225684
                                       SOS Massachusetts
--------------------------------------------------------------------------------------------------
</TABLE>

                                      184

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
         SECURED PARTY                       JURISDICTION                  COLLATERAL
--------------------------------------------------------------------------------------------------
<S>                                    <C>                          <C>
Wachovia Bank of Georgia, as           Date Filed: 10/03/95         Property/items secured by
Trustee                                File number: 1269123         UCC-1 #0588793, filed 07/19/89
                                       SOS North Carolina           which has expired
--------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 02/16/95         Rieter Drawframe
                                       File number: 1162256
                                       SOS North Carolina
--------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 02/16/95         Rieter Drawframe
                                       File number: 1162255
                                       SOS North Carolina
--------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 02/16/95         Rieter Drawframe
                                       File number: 1162254
                                       SOS North Carolina
--------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent     Date Filed: 04/05/94         Blanket Lien
                                       File number: 1093872
                                       SOS North Carolina
--------------------------------------------------------------------------------------------------
Trust Company Bank of Georgia          Date Filed: 12/04/92         IRB Project and Equipment
                                       File number: 0947502
                                       SOS North Carolina
--------------------------------------------------------------------------------------------------
Trust Company Bank of Georgia          Date Filed: 12/03/92         IRB Project and Equipment
                                       File number: 0947094
                                       SOS North Carolina
--------------------------------------------------------------------------------------------------
Staunton Norris, as Deed of Trust      Date Filed: 07/08/88         IRB Project and Equipment
Trustee and Trust Company Bank         Continued:  06/30/93
and First Nat'l Bank of Atlanta,       File number: 0470504
as Indentured Trustee                  Continued:  0011832
                                       SOS North Carolina
--------------------------------------------------------------------------------------------------
Staunton Norris, as Deed of Trust      Date Filed: 07/19/89         IRB Project and Equipment
Trustee and Trust Company Bank and     File number: 0588793
First Nat'l Bank of Atlanta, as        SOS North Carolina
Indentured Trustee
--------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 11/18/94         Rieter Drawframe
                                       File number: 94-1512
                                       Lee County, North Carolina
--------------------------------------------------------------------------------------------------
</TABLE>

                                      185

<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
         SECURED PARTY                       JURISDICTION                           COLLATERAL
-----------------------------------------------------------------------------------------------------
<S>                                    <C>                                 <C>
Rieter Corporation                     Date Filed: 11/18/94                Rieter Drawframe
                                       File number: 94-1511
                                       Lee County, North Carolina
-----------------------------------------------------------------------------------------------------
Trust Company Bank / Wachovia          Date Filed: 12/02/92                IRB Project and Equipment
Bank of Georgia, NA                    File number: 92-1601
                                       Lee County, North Carolina
-----------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 11/07/94                Rieter Drawframe RSB 951
                                       File number: 94-203
                                       Yancey County, North Carolina
-----------------------------------------------------------------------------------------------------
Trust Company Bank                     Date Filed: 12/04/92                IRB Project and Equipment
                                       File number: 92-1976
                                       Yancey County, North Carolina
-----------------------------------------------------------------------------------------------------
Staunton Norris, as Deed of Trust      Date Filed: 07/08/88                IRB Project and Equipment
Trustee and Trust Company Bank and     Continued: 06/25/93
First Nat'l Bank of Atlanta, as        File number: 88-288
Indentured Trustee                     Continued as 93-103
                                       Yancey County, North Carolina
-----------------------------------------------------------------------------------------------------
Staunton Norris, as Deed of Trust      Date Filed: 07/13/89                IRB Project and Equipment
Trustee and Trust Company Bank and     File number: 89-256
First Nat'l Bank of Atlanta, as        Yancey County, North Carolina
Indentured Trustee
-----------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia               Date Filed: 04/12/94                Blanket Lien
                                       File number: 1563871
                                       SOS New Jersey
-----------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia               Date Filed: 04/06/94                Blanket Lien
                                       File number: 23000343
                                       SOS Pennsylvania
-----------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 11/10/94                Leased Equipment
                                       File number: 941110-
                                       103225A
                                       SOS South Carolina
-----------------------------------------------------------------------------------------------------
</TABLE>

                                      186

<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
         SECURED PARTY                       JURISDICTION                              COLLATERAL
---------------------------------------------------------------------------------------------------------
<S>                                    <C>                                      <C>
Wachovia Bank of Georgia               Date Filed: 04/05/94                     Blanket Lien
                                       File number: 940405-
                                       132723A
                                       SOS South Carolina
---------------------------------------------------------------------------------------------------------
Trust Company Bank                     Date Filed: 12/04/92                     IRB Project and Equipment
                                       File number: 921204-
                                       100723A
                                       SOS South Carolina
---------------------------------------------------------------------------------------------------------
Bell Atlantic Systems Leasing          Date Filed: 04/08/91                     Leased Equipment
                                       File number: 91-017594
                                       SOS South Carolina
---------------------------------------------------------------------------------------------------------
Trust Company Bank                     Date Filed: 01/04/91                     IRB Project and Equipment
                                       File number: 91-00010
                                       Oconee County, South Carolina
---------------------------------------------------------------------------------------------------------
Trust Company Bank                     Date Filed: 12/02/92                     IRB Project and Equipment
                                       File number: 92-00694
                                       Oconee County, South Carolina
---------------------------------------------------------------------------------------------------------
Rieter Corporation                     Date Filed: 11/09/94                     Rieter Drawframe
                                       File number: 94-00681
                                       Oconee County, South Carolina
---------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia               Date Filed: 04/05/94                     Blanket Lien
                                       File number: 94064691
                                       SOS Texas
---------------------------------------------------------------------------------------------------------
</TABLE>

                                      187

<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
             SECURED PARTY                           JURISDICTION                     COLLATERAL
-------------------------------------------------------------------------------------------------------
<S>                                              <C>                            <C>
GRANITEVILLE COMPANY
-------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                                Date Filed: 02/06/92           Equipment
                                                 File number: 92-005960
                                                 Secretary of State, SC
-------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                                Date Filed: 01/14/92           Equipment
                                                 File number: 92-002008/
                                                 92-002009
                                                 Secretary of State, SC
-------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                                Date Filed: 01/14/92           Equipment
                                                 File number: 92-002008
                                                 Secretary of State, SC
-------------------------------------------------------------------------------------------------------
Olin Corporation                                 Date Filed: 02/10/94           Leased Equipment
                                                 File number: 131059A
                                                 Secretary of State, SC
-------------------------------------------------------------------------------------------------------
Olin Corporation                                 Date Filed: 12/07/93           Leased Equipment
                                                 File number: 110634A
                                                 Secretary of State, SC
-------------------------------------------------------------------------------------------------------
BellSouth Financial Services Corporation         Secretary of State, SC
Amendment: 09/28/92, #134045A
-------------------------------------------------------------------------------------------------------
Pitney Bowes Credit Corporation                  Date Filed: 01/29/92           Equipment Informational
                                                 File number: 92004503/         Filing
                                                 92004504
                                                 Secretary of State, SC
-------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                                Date Filed: 08/19/91           3 - Rotor Autocoro
                                                 File number: 91-040929
                                                 Secretary of State, SC
-------------------------------------------------------------------------------------------------------
Pitney Bowes Credit Corporation                  Date Filed: 01/25/96           Leased Equipment
                                                 File number: 122033A
                                                 Secretary of State, SC
-------------------------------------------------------------------------------------------------------
</TABLE>

                                      188

<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
             SECURED PARTY                           JURISDICTION                     COLLATERAL
---------------------------------------------------------------------------------------------------------
<S>                                              <C>                            <C>
Primeco, Inc. d/b/a Prime Equipment              Date Filed: 09/13/94           1 - Scissor Lift
                                                 File number: 100644A
                                                 Secretary of State, SC
---------------------------------------------------------------------------------------------------------
E.I. DuPont De Nemours & Co. Separation          Date Filed: 12/27/91           Notice filing of a Service
Systems                                          File number: 91-061914         Agreement
                                                 Secretary of State, SC
---------------------------------------------------------------------------------------------------------
                                                 Date Filed: 01/12/93           Office Equipment
Canon Financial Services, Inc.                   File number: 145328A
                                                 Secretary of State, SC
---------------------------------------------------------------------------------------------------------
Primeco, Inc. d/b/a Prime  Equipment             Date Filed: 09/13/94           1 - Scissor Lift
                                                 File number: 1329
                                                 Aiken County, SC
---------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                                Date Filed: 02/06/92           Rotor Autocoro(s)
                                                 File number: 192
                                                 Aiken County, SC
---------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                                Date Filed: 01/15/92           Rotor Autocoro(s)
                                                 File number: 81
                                                 Aiken County, SC
---------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                                Date Filed: 01/15/92           Rotor Autocoro(s)
                                                 File number: 80
                                                 Aiken County, SC
---------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                                Date Filed: 08/20/91           Rotor Autocoro(s)
                                                 File number: 1335
                                                 Aiken County, SC
---------------------------------------------------------------------------------------------------------
First United Leasing Corporation                 Date Filed: 01/22/93           1/Panafax Facsimile
                                                 File number: 014679
                                                 SOS New York
---------------------------------------------------------------------------------------------------------
Pitney Bowes                                     Date Filed:                    Equipment Lease
                                                 File number: 960412-
                                                 131615A
                                                 SOS South Carolina
---------------------------------------------------------------------------------------------------------
WALTON MONROE MILLS, INC.
---------------------------------------------------------------------------------------------------------
</TABLE>

                                      189

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
             SECURED PARTY                           JURISDICTION                         COLLATERAL
--------------------------------------------------------------------------------------------------------------
<S>                                              <C>                            <C>
Trust Company Bank                               Date Filed: 06/15/92           IRB Project and Equipment
                                                 File number: 28353
                                                 Walton County, Georgia
--------------------------------------------------------------------------------------------------------------
Trust Company Bank                               Date Filed: 01/28/93           Partial Release - 5 Saurer
                                                 File number: 28353             Shutterless Weaving Machines,
                                                 Walton County, Georgia         Type 400
--------------------------------------------------------------------------------------------------------------
NCC Leasing                                      Date Filed: 07/25/91           NCR electronic data processing
                                                 File number: 27498             equipment
                                                 Walton County, Georgia
--------------------------------------------------------------------------------------------------------------
The CIT Group/Commercial Services, Inc.          N/A                            $260,000 cash deposit to
                                                                                secure certain reimbursement
                                                                                and indemnity obligations
--------------------------------------------------------------------------------------------------------------
NCC Leasing                                      Date Filed: 09/12/91           14 Terminal Green
                                                 File number: 27605             1010/keyboards
                                                 Walton County, Georgia
--------------------------------------------------------------------------------------------------------------
</TABLE>

                                      190

<PAGE>

                               SECURITY AGREEMENT

                               EXHIBIT C - PART 2

                    EXISTING ENCUMBRANCES IN CONNECTION WITH

                      INDUSTRIAL REVENUE BOND INDEBTEDNESS

                                                       Original Principal Amount
IRB Transaction                                           Outstanding on Bonds

1.       The Yancey County Industrial                               $10,000,000
         Facilities and Pollution Control
         Financing Authority Refunding
         Revenue Bonds (Avondale Mills,
         Inc. Project), Series 1988.

         Applicable Documents:

         a.       Deed of Trust and Security Agreement, dated as of July 1,
                  1988, from Avondale Mills, Inc. to Staunton Norris, as deed of
                  trust trustee, for the benefit of The First National Bank of
                  Atlanta, as trustee, and Trust Company Bank, as amended by
                  that First Amendment to Deed of Trust and Security Agreement,
                  to be dated on or about March 29, 1994.

         b.       Indenture of Trust, dated as of July 1, 1988, between The
                  Yancey County Industrial Facilities and Pollution Control
                  Financing Authority and The First National Bank of Atlanta, as
                  trustee.

         c.       Loan Agreement, dated as of July 1, 1988, between Avondale
                  Mills, Inc. and The Yancey County Industrial Facilities and
                  Pollution Control Financing Authority and related Promissory
                  Note.

         d.       Letter of Credit Agreement, dated as of July 1, 1988, between
                  Trust Company Bank and Avondale Mills, Inc., as amended
                  through the date hereof.

         e.       Security Agreement, dated as of December 2, 1992, from
                  Avondale Mills, Inc. to Trust Company Bank.

2.       The Lee County Industrial Facilities                        $5,000,000
         and Pollution Control Financing
         Authority Refunding Revenue Bonds
         (Avondale Mills, Inc. Project), Series 1989.

                                      191

<PAGE>

         Applicable Documents:

         a.       Indenture of Trust, dated as of June 1, 1989, between The Lee
                  County Industrial Facilities and Pollution Control Financing
                  Authority and The First National Bank of Atlanta, as trustee.

         b.       Loan Agreement, dated as of June 1, 1989, between The Lee
                  County Industrial Facilities and Pollution Control Financing
                  Authority and Avondale Mills, Inc. and related Promissory
                  Note.

         c.       Second Deed of Trust and Security Agreement, dated as of June
                  1, 1989, from Avondale Mills, Inc. to Staunton Norris, as deed
                  of trust trustee, for the benefit of The First National Bank
                  of Atlanta, as trustee, and Trust Company Bank.

         d.       Letter of Credit Agreement, dated as of June 1, 1989, between
                  Trust Company Bank and Avondale Mills, Inc., as amended
                  through the date hereof.

         e.       Deed of Trust and Security Agreement, dated as of December 2,
                  1992, from Avondale Mills, Inc. to Richard Love, as deed of
                  trust trustee, for the benefit of Wachovia Bank of Georgia,
                  N.A., as trustee, and Trust Company Bank, as amended by that
                  First Amendment to Deed of Trust and Security Agreement, to be
                  dated on or about March 29, 1994.

3.       Development Authority of Walton County                  $4,000,000
         Industrial Development Revenue Bonds                    (Series 1992A)
         (Walton Monroe Mills, Inc. Project),                    and
         Series 1992A and Series 1992B                           $2,000,000
                                                                 (Series 1992B)

         Applicable Documents:

         a.       Indenture of Trust, dated as of June 1, 1992, between
                  Development Authority of Walton County and Trust Company Bank,
                  as trustee.

         b.       Lease Agreement, dated as of June 1, 1992, between Development
                  Authority of Walton County and Walton Monroe Mills, Inc.

         c.       Security Deed and Security Agreement, dated as of June 1,
                  1992, among Development Authority of Walton County and Walton
                  Monroe Mills, Inc., as grantors, and Trust Company Bank, as
                  grantee, as amended by that First Amendment to Security Deed
                  and Security Agreement, to be dated on or about March 29,
                  1994.

         d.       Guaranty Agreement, dated as of June 1, 1992, from Walton
                  Monroe Mills, Inc. to Trust Company Bank, as trustee.

         e.       Letter of Credit Agreement, dated as of June 1, 1992, between
                  Trust Company Bank and Walton Monroe Mills, Inc., as amended
                  through the date hereof.

                                      192

<PAGE>

                                                                       EXHIBIT K

                             INTENTIONALLY OMITTED]

                                      193
<PAGE>

                                                                       EXHIBIT L

                   AMENDED AND RESTATED STOCK PLEDGE AGREEMENT

                  THIS AMENDED AND RESTATED STOCK PLEDGE AGREEMENT (this
"Agreement"), is made and entered into as of April 29, 1996, by and between
Wachovia Bank of Georgia, N.A., a national banking association, as agent for the
Banks parties to the "Credit Agreement" (as hereinafter defined)(the "Agent"),
and Avondale Incorporated, a Georgia corporation ("Pledgor");

                              W I T N E S S E T H:

         WHEREAS, the Pledgor executed and delivered a Stock Pledge Agreement
dated as of March 29, 1994 (the "Original Pledge Agreement" pursuant to a Credit
Agreement of even date therewith by and among the Borrower, the Agent and the
Banks party thereto (the "Original Credit Agreement"); and

         WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of even date herewith, among Borrower, the Agent, The First
National Bank of Chicago, as Documentation Agent, and the Banks parties thereto
(as amended or modified from time to time, the "Credit Agreement"), the Original
Credit Agreement has been amended and restated, and the Banks have made or will
make loans to the Borrower; and

         WHEREAS, the obligations of the Banks to extend financial
accommodations under the Credit Agreement is conditioned on, among other things,
the execution and delivery by Pledgor of the Parent Guaranty (as defined in the
Credit Agreement) and this Agreement in order to secure said indebtedness and to
induce the Banks and the Agent to execute and enter into the Credit Agreement,
the Borrower has agreed to execute and deliver this Agreement, granting a
security interest in, and lien upon, the Pledged Stock to the Agent for the
benefit of the Banks, and continuing in effect the security interest in, and
lien upon, the Pledged Stock granted to the Agent pursuant to the Original
Pledge Agreement; and

         WHEREAS, pursuant to the Parent Guaranty, Pledgor has guaranteed
payment of all of the Obligations; and

         WHEREAS, to induce the Banks to extend or to continue to extend
financial accommodations to the Borrower, Pledgor has agreed to enter into this
Agreement; and

         WHEREAS, Pledgor is the sole owner of 100% of the Capital Stock of the
Borrower and will be benefitted by such financial accommodations by the Banks to
the Borrower;

         WHEREAS, it is the intent of the parties that this Agreement amend,
restate and supersede the Original Pledge Agreement, and continue in effect the
security interests and liens granted thereto without lapse or loss of
perfection;

                                      194
<PAGE>

         NOW, THEREFORE, for the sum of $10 in hand paid and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and to induce the Banks to extend financial accommodations from
time to time to the Borrower, Pledgor and the Agent hereby agree as follows:

         1.       Defined Terms. Capitalized terms contained herein but not
defined herein shall have the meanings given them in the Credit Agreement.

         2.       Pledge of Collateral. Pledgor does hereby pledge, hypothecate,
assign, transfer, set over, deliver and grant a security interest in and to the
Agent in all that Capital Stock of Avondale Mills, Inc. set forth and described
on Exhibit "A" attached hereto and by reference made part hereof (which stock is
simultaneously herewith being delivered to the Agent, accompanied by blank stock
powers signed by Pledgor), together with any and all other securities, cash or
other property at any time and from time to time receivable or otherwise
distributed in respect of or in exchange for any or all of such pledged stock,
and together with the proceeds thereof (hereinafter said property being
collectively referred to as the "Collateral"), all as security for the payment
of all of the Obligations in existence from time to time.

         3.       Holding of Collateral and Rights. Pledgor acknowledges and
agrees that the Agent shall hold the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto
forever, subject, however, to the provisions of Sections 8 and 14 hereof and to
the return of the Collateral (or such portion thereof as may be existing from
time to time hereafter after giving effect to the terms hereof) by the Agent to
Pledgor pursuant to Section 4 hereof or upon the final and indefeasible payment
in full of all the Obligations and termination in writing of any and all credit
commitments with respect thereto.

         4.       Intentionally Omitted.

         5.       Representations and Warranties; Certain Covenants. The Parent
incorporates herein by reference as fully as if set forth herein all of the
representations and warranties of the Parent contained in Article IV of the
Credit Agreement (which representations and warranties shall be deemed to have
been renewed by Pledgor upon each Borrowing under the Credit Agreement to the
same extent and with the same effect as provided therein with respect to the
renewal thereof by the Borrower) and all covenants of Pledgor contained in
Article V of the Credit Agreement. In addition, Pledgor hereby represents and
warrants (which representations and warranties likewise shall be deemed to have
been renewed by Pledgor upon each Borrowing under the Credit Agreement) that:
(i) Pledgor has the complete and unconditional authority to pledge the
Collateral; (ii) Pledgor holds the Collateral free and clear of any and all
liens, charges, encumbrances and security interests thereon (other than in favor
of the Agent) and has good right, title and legal authority to pledge the
Collateral in the manner contemplated herein; (iii) all stock now owned or
hereafter owned by Pledgor and constituting or which will constitute Collateral
hereunder is, or will be on date of pledge thereof, validly issued, fully paid
and non-assessable; and (iv) no authorization, approval, or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required either (1) for the pledge by Pledgor of the Collateral pursuant to this
Agreement or for the execution, delivery or performance of this Agreement by
Pledgor or (2) for the exercise by Agent of the voting or other

                                      195
<PAGE>

rights provided for in this Agreement or the remedies in respect of the
Collateral pursuant to this Agreement (except as may be required in connection
with the exercise of such rights or remedies by laws affecting the voting,
offering and sale of securities generally).

         6.       Delivery of Additional Securities; Further Assurances. Pledgor
further covenants with the Agent that Pledgor will cause any additional
securities or other property issued to or received by Pledgor with respect to
any of the Collateral (except as provided in Section 8 below), whether for value
paid by Pledgor or otherwise, and including stock dividends, to be deposited
forthwith with the Agent and be pledged hereunder, in each case accompanied by
blank stock powers or other proper instruments of assignment duly executed by
Pledgor in such form as may be reasonably required by the Agent. Pledgor agrees
that at any time and from time to time, at the expense of Pledgor, Pledgor will
promptly execute and deliver all further instruments and documents, and take all
further action that the Agent may reasonably request, in other to perfect and
protect the security interest granted or purported to be granted hereby or to
enable the Agent to exercise and enforce its rights, powers and remedies
hereunder with respect to any Collateral.

         7.       Name in Which Collateral Held. Pledgor further acknowledges
and agrees that the Agent may hold any of the Collateral in its own name,
endorsed or assigned in blank or in the name of any nominee or nominees, and
that the Agent may deliver any or all of the Collateral to the issuer or issuers
thereof for the purpose of making denominational exchanges or registrations of
transfer or for such other purposes in furtherance of this Agreement as the
Agent may deem advisable.

         8.       Voting Rights; Dividends, Etc. (a) So long as no Event of
Default shall have occurred and be continuing and the Agent has not, subject to
the provisions of Section 14 hereof, delivered a notice to Pledgor of the
Agent's intention to exercise voting and other consensual rights pursuant to
this Section 8:

                  (i) Pledgor shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Collateral or any part thereof for
any purpose not prohibited by the terms of this Agreement, the Parent Guaranty,
the Credit Agreement or any other Loan Documents; provided, however, that the
Pledgor shall give the Agent at least 5 Domestic Business Days' prior written
notice of the manner in which it intends to exercise any right if such action
would have a material adverse effect on the value of the Collateral, and
following request therefor by the Agent, Pledgor shall not exercise or refrain
from exercising any such right; and

                  (ii) the Agent shall execute and deliver (or cause to be
executed and delivered) to Pledgor all such proxies and other instruments as
Pledgor may reasonably request for the purpose of enabling Pledgor to exercise
the voting and other rights which it is entitled to exercise pursuant to clause
(i) above.

                  (iii) Pledgor shall be entitled to receive and retain any
nonliquidating cash dividends, interest or any other distribution of property
paid, payable or otherwise distributed in cash in respect of the Collateral.

                                      196
<PAGE>

                  (b)      Subject to the provisions of Section 14 hereof, upon
the occurrence and during the continuance of an Event of Default, and with
respect to clause (i) below, the delivery of a notice to Pledgor of the Agent's
intention to exercise voting and other consensual rights pursuant thereto:

                           (i) All rights of Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to exercise
pursuant to Section 8(a) shall cease, and all such rights shall thereupon become
vested in the Agent who shall thereupon have the sole right to exercise such
voting and other consensual rights; provided, however, Pledgor shall continue to
have the rights to exercise such voting and other consensual rights
notwithstanding the occurrence and continuance of an Event of Default until the
Agent, subject to the provisions of Section 14 hereof, delivers a notice to
Pledgor of the Agent's intention to exercise such voting and other consensual
rights.

                           (ii) All rights of Pledgor to receive cash dividends,
interest, proceeds or other distributions in cash from the Collateral, which it
would otherwise be authorized to receive and retain pursuant to Section 8(a)
shall cease and all rights to dividends, interest, proceeds and other
distributions shall thereupon be vested in the Agent, who shall thereupon have
the sole right to receive and hold as Collateral such interest or other
distributions. All dividends, interest, proceeds and other distributions which
are received by Pledgor contrary to these provisions shall be received in trust
for the benefit of the Agent, shall be segregated from other property or funds
of Pledgor and shall be forthwith delivered to the Agent as Collateral in the
same form as so received (with any necessary endorsement).

         9.       Agent Appointed Attorney-in-Fact. Pledgor hereby irrevocably
appoints the Agent as Pledgor's attorney-in-fact, with full authority in the
place and stead of Pledgor and in the name of Pledgor or otherwise, from time to
time in the Agent's discretion, after the occurrence and during the continuance
of an Event of Default, and subject to the provisions of Section 14 hereof,
where applicable, to take any action and to execute any instrument which the
Agent may deem reasonably necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation, to receive, endorse and collect
all instruments made payable to Pledgor representing any dividend, principal
and/or interest payment or other distribution in respect of the Collateral or
any part thereof and to give full discharge for the same, when and to the extent
permitted by this Agreement.

         10.      The Agent May Perform. If Pledgor fails to perform any
agreement contained herein, the Agent may take reasonable action to perform, or
cause performance of, such agreement, and the reasonable expenses of the Agent
incurred in connection therewith shall be payable by Pledgor under Section 13;
provided, that, the Agent shall exercise commercially reasonable efforts to
notify Pledgor prior to taking any such action (although the failure to so
notify Agent shall not limit the Agent's rights hereunder).

         11.      Reasonable Care. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which the Agent accords the Agent's own property, it being understood that the
Agent shall not have responsibility for (i) ascertaining or taking action with

                                      197
<PAGE>

respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Collateral, whether or not the Agent has or is deemed to have
knowledge of such matters, unless reasonably requested to do so by Pledgor, or
(ii) taking any necessary steps to preserve rights against any parties with
respect to any Collateral.

         12.      Events of Default. The following shall constitute "Events of
Default" hereunder:

                  (a)      Should Pledgor assign, attempt to encumber, subject
to further pledge or security interest, sell, transfer or otherwise dispose of
any of the Collateral without the prior written consent of the Agent;

                  (b)      If an "Event of Default" occurs under any of the
Credit Agreement, the other Loan Documents or the Parent Guaranty; or

                  (c)      If any representations or warranties made herein by
Pledgor shall be untrue in any material respect when made or furnished.

         13.      Remedies. If any Event of Default shall have occurred and be
continuing:

                  (a)      Subject to the provisions of Section 14 hereof, the
Agent may exercise (in compliance with all applicable securities laws) in
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to them, all the rights and remedies of a secured
party on default under the Uniform Commercial Code in effect in the State of
Georgia at that time, and the Agent may also, without notice except as specified
below, sell (in compliance with all applicable securities laws) the Collateral
or any part thereof in one or more parcels at public or private sale, at any
exchange, over the counter or at any of the Agent's offices or elsewhere, for
cash, on credit or for future delivery, and at such price or prices and upon
such other terms as the Agent may deem commercially reasonable or otherwise in
such manner as necessary to comply with applicable federal and state securities
laws. The Agent shall be authorized at any such sale (if it deems it advisable
to do so) to restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Collateral for their own
account for investment and not with a view to the distribution or sale thereof,
and upon consummation of any such sale the Agent shall have the right to assign,
transfer and deliver to the purchaser or purchasers at any such sale and such
purchasers shall hold the property sold absolutely, free from any claim or right
on the part of Pledgor, and Pledgor hereby waives (to the extent permitted by
law) all rights of redemption, stay and/or appraisal which it now has or may at
any time in the future have under any rule of law or statute now existing or
hereafter enacted. Subject to the provisions of Section 14 hereof, the Agent
shall give Pledgor at least 10 days' notice of the time and place of any public
sale or the time after which any private sale is to be made , which Pledgor
agrees shall constitute reasonable notification. At any such sale, the Agent may
bid (which bid may be, in whole or in part, in the form of cancellation of
Obligations) for and purchase the whole or any part of the Collateral. The Agent
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned. If sale of all or any part of the Collateral is made on credit or for
future delivery,

                                      198
<PAGE>

the Collateral so sold may be retained by the Agent until the sale price is paid
by the purchaser or purchasers thereof, but the Agent shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Collateral so sold and, in case of any such failure, such Collateral may
be sold again upon like notice. Pledgor agrees that any sale of the Collateral
conducted by the Agent in accordance with the foregoing provisions of this
Section 13 shall be deemed to be a commercially reasonable sale under O.C.G.A.
Section 11-9-504 of the Georgia Uniform Commercial Code. As an alternative to
exercising the power of sale herein conferred upon them, the Agent may proceed
by a suit or suits at law or in equity to foreclose the security interest
granted under this Agreement and to sell the Collateral, or any portion thereof,
pursuant to a judgment or decree of a court or courts of competent jurisdiction.

                  (b)      Any cash held by the Agent as Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection from, or
other realization upon or any part of the Collateral following the occurrence of
an Event of Default shall be applied by the Agent for the benefit of the Banks
in the following manner: first, in discharge of all expenses incurred by the
Agent which Pledgor is obligated to reimburse the Agent pursuant to Section 15
hereof; secondly, to all outstanding fees and other expenses owing under the
Credit Agreement or the other Loan Documents in such order as the Required Banks
shall elect; thirdly, to accrued and unpaid interest on the Obligations in such
order as the Required Banks may elect; and lastly, to the principal balances of
any such Obligations then outstanding in such order as the Required Banks may
elect.

                  (c)      Any surplus of such cash or cash proceeds held by the
Agent and remaining after payment in full of all the Obligations shall be paid
over to Pledgor or to whomsoever may be lawfully entitled to receive such
surplus.

         14.      Standstill as to Certain Remedies. Notwithstanding any other
provision in this Agreement to the contrary, the right of the Agent with respect
to voting and other consensual rights pursuant to Section 8(b) hereof and with
respect to sale of the Collateral pursuant to Section 13(a) hereof shall not
vest and may not be exercised for a period of 90 days after whichever of the
following is applicable (the "Standstill Period"):

         (i) with respect to an Event of Default under Section 6.01(b) of the
Credit Agreement arising out of a breach of any of Sections 5.03 through 5.06,
inclusive, of the Credit Agreement, the earlier to occur of (x) written notice
thereof has been given to the Pledgor by the Agent, or (y) an officer of the
Pledgor otherwise becomes aware of any such breach, or (z) the date which is 30
days after the end of the Fiscal Quarter in which such breach occurs;

         (ii) with respect to any Event of Default under Section 6.01(m) of the
Credit Agreement, written notice thereof has been given to the Pledgor by the
Agent; and

         (iii) with respect to any other Event of Default, the date of
occurrence of such Event of Default,

in each case, unless a "Standstill Termination Event" occurs during the
Standstill Period, in which case such rights may be exercised by the Agent
immediately or at any time thereafter, so

                                      199
<PAGE>

long as such Event of Default continues. The term "Standstill Termination Event"
means the occurrence of any of the following events:

         (a) An Event of Default under Section 5.02(ii) of the Credit Agreement;

         (b) The Consolidated Cash Flow of the Pledgor and its Consolidated
Subsidiaries, determined on a consolidated basis in accordance with GAAP,
calculated for the fiscal month of the Pledgor just ended and the immediately
preceding 11 fiscal months of the Pledgor, is less than $55,000,000;

         (c) The Fixed Charge Coverage Ratio, calculated at the end of each
fiscal month of the Pledgor, is greater than 1.25 to 1.0;

         (d) The Borrower or the Pledgor shall create any Lien securing Debt in
excess of $1,000,000 on any of the Collateral or any Plant which is not
permitted by Section 5.11 of the Credit Agreement;

         (e) An Event of Default under Section 5.14 of the Credit Agreement, but
if such Event of Default relates to a sale of assets, only if the amount thereof
exceeds the amount permitted by Section 5.14 by $2,000,000;

         (f) The Borrower or the Pledgor shall incur any Debt of the types
described in clauses (i) or (ii) of the definition of Debt in the Credit
Agreement, or Debt of others of such type Guaranteed by the Borrower or the
Pledgor, in excess of $4,000,000, which is not permitted by Section 5.23 of the
Credit Agreement, or the Receivables Subsidiary shall incur any Debt or other
liabilities other than in connection with the Receivables Securitization
Program;

         (g) The Pledgor or any Subsidiary which is not a Wholly-Owned
Subsidiary shall make any Restricted Payments in any Fiscal Year in an amount in
excess of $2,000,000 over the maximum amount permitted by Section 5.07 of the
Credit Agreement;

         (h) An Event of Default occurs under Section 5.26 of the Credit
Agreement;

         (i) The Borrower shall fail to pay within 5 days of the date when due
(other than by reason of acceleration of maturity pursuant to Section 6.01 of
the Credit Agreement) any principal of any Loan, or shall fail to pay any
interest on any Loan within 10 Domestic Business Days after such interest shall
become due, or, if the Event of Default which commences the Standstill Period
arose from a failure to pay principal (other than by reason of acceleration of
maturity pursuant to Section 6.01 of the Credit Agreement) of or interest on the
Loans, such failure continues after the date such Event of Default occurred for
5 days, with respect to a principal payment failure, or 5 Domestic Business
Days, with respect to an interest payment failure;

         (j) An Event of Default occurs under any of Sections 6.01(g), (h) or
(l) of the Credit Agreement; or

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<PAGE>

         (k) The Pledgor fails to comply with the provisions of the last
sentence of this Section 14.

So long as the Event of Default which commenced the Standstill Period continues,
the Pledgor will furnish to the Agent, as soon as available and in any event,
within 21 days after the end of each fiscal month of the Pledgor, commencing
with the fiscal month in which such Event of Default occurs, the financial
statements required to be furnished by Section 5.01(b) of the Credit Agreement,
but on a monthly basis, for each fiscal month of the Parent and the portion of
the Fiscal Year ended at the end of such fiscal month, together with a statement
of the chief financial officer or the chief accounting officer of the Pledgor,
setting forth in reasonable detail the calculations required to establish
whether a Standstill Termination Event has occurred under paragraph (b) or (c)
above.

         15.      Expenses. Pledgor will, upon demand, pay to the Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel, actually incurred, and of any experts and agents, and
including any taxes or fees incurred on account of the execution, issuance,
delivery or recording of this Agreement or other documents executed in
connection herewith which the Agent may incur in connection with (i) the sale
of, collection from, or other realization upon, any of the Collateral, or (ii)
the exercise or enforcement of any of the rights of the Agent hereunder, or
(iii) the failure by Pledgor to perform or observe any of the provisions hereof.

         16.      Security Interest Absolute. All rights of the Agent hereunder,
the security interest granted to the Agent hereunder, and all obligations of
Pledgor hereunder, shall be absolute and unconditional irrespective of any of
the following, and Pledgor expressly consents to the occurrence of any of such
events and waives, in its capacity as Pledgor, to the extent permitted by law,
any defense arising therefrom:

                           (i) any lack of validity or enforceability of any of
the Loan Documents or any other agreement or instrument relating thereto;

                           (ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from any of the Loan
Documents;

                           (iii) any exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent to or
departure from any of the Loan Documents, including, without limitation, the
Security Agreement and any Operative Mortgages or any other guaranty for all or
any of the Obligations; or

                           (iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, Pledgor in respect of the
Obligations or in respect of this Agreement.

         17.      Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by Pledgor herefrom shall in any
event be effective unless the same

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<PAGE>

shall be in writing and signed by the Agent and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.

         18.      No Waiver; Cumulative Remedies. No failure on the part of the
Agent to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy by the Agent preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.

         19.      Severability. If any provision of this Agreement or the
application thereof to any party hereto or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to any other party thereto or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.

         20.      Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telecopier or similar
writing) and shall be given to such party at its address or telecopier number
set forth on the signature pages or at such other address or telecopier number
as such party may hereafter specify for the purpose by notice to each other
party. Each such notice, request or other communication shall be effective (i)
if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in this Section and the appropriate confirmation is received,
(ii) if given by mail, 3 Domestic Business Days after such communication is
deposited in the mail, with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when delivered at the address specified in
this Section 20.

         21.      Time is of the Essence. Time is of the essence in this
Agreement.

         22.      Interpretation. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or dictated such provision.

         23.      The Agent Not Joint Venturer. Neither this Agreement nor any
agreements, instruments, documents or transactions contemplated hereby shall in
any respect be interpreted, deemed or construed as making the Agent a partner or
joint venturer with Pledgor or as creating any similar relationship or entity,
and Pledgor agrees that it will not make any contrary assertion, contention,
claim or counterclaim in any action, suit or other legal proceeding involving
the Agent and Pledgor.

         24.      Jurisdiction. Pledgor agrees that any legal action or
proceeding with respect to this Agreement may be brought in the courts of the
State of Georgia or the United States of America for the Northern District of
Georgia, Atlanta Division, all as the Agent may elect. By execution of this
Agreement, Pledgor hereby submits to each such jurisdiction, hereby expressly
waiving whatever rights may correspond to it by reason of its present or future
domicile. Nothing herein shall affect the right of the Agent to commence legal
proceedings or otherwise

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<PAGE>

proceed against Pledgor in any other jurisdiction or to serve process in any
manner permitted or required by law.

         25.      Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia and shall inure to
the benefit of and be binding upon the successors and assigns of the parties
hereto.

         26.      Counterparts. This Agreement may be executed in two or more
counterparts, each of which when fully executed shall be an original, and all of
said counterparts taken together shall be deemed to constitute one and the same
agreement.

                         [Signatures on Following Page]

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<PAGE>

         IN WITNESS WHEREOF, Pledgor has caused this Agreement to be duly
executed under seal as of the date first above written.

                                             "PLEDGOR"

                                             AVONDALE INCORPORATED      (SEAL)

                                             By: _______________________________
                                                 Title:

                                             Avondale Incorporated
                                             506 South Broad Street
                                             Monroe, Georgia 30655
                                             Attention: Chairman and
                                             Chief Executive Officer
                                             Telecopier number: 770-267-2543
                                             Telephone number: 770-267-2226

ACCEPTED AND AGREED:

WACHOVIA BANK OF GEORGIA, N.A.,
in its capacity as Agent

By: ___________________________
    Title:
Wachovia Bank of Georgia, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Commercial Group
Telecopier number: 404-332-6220
Telephone number: 404-332-6094

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                        Exhibit A to Amended and Restated
                             Stock Pledge Agreement

            DESCRIPTION OF THE CAPITAL STOCK OF AVONDALE MILLS, INC.

       1,000 Shares, $1.00 Par Value Common Stock Evidenced by Certificate No. 1

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<PAGE>

                                                                       EXHIBIT M

                   FORM OF RECEIVABLES INTERCREDITOR AGREEMENT

                             INTERCREDITOR AGREEMENT

                           DATED AS OF AUGUST 30, 2002

                                  BY AND AMONG

                      GENERAL ELECTRIC CAPITAL CORPORATION,

            AS ADMINISTRATIVE AGENT AND RECEIVABLES COLLATERAL AGENT

                      WACHOVIA BANK, NATIONAL ASSOCIATION,

                                 as Banks' Agent

                             AVONDALE FUNDING, LLC,

                             AS RECEIVABLES SELLER,

                                       and

                              AVONDALE MILLS, INC.,

                                  as Originator

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<PAGE>

                  This INTERCREDITOR AGREEMENT dated as of August 30, 2002 (as
modified, amended, restated or supplemented from time to time, this
"AGREEMENT"), by and among GENERAL ELECTRIC CAPITAL CORPORATION, in its capacity
as administrative agent under the Receivables Purchase and Servicing Agreement
(as hereinafter defined) (the "ADMINISTRATIVE AGENT") and in its capacity as
collateral agent for the Receivables Purchasers (as defined below) (the
"RECEIVABLES COLLATERAL AGENT"), WACHOVIA BANK, NATIONAL ASSOCIATION (successor
by merger to Wachovia Bank of Georgia, N.A., Wachovia Bank, N.A. and First Union
National Bank), in its capacity as administrative agent on behalf of the Banks
(as defined below) (the "BANKS' AGENT"), AVONDALE FUNDING, LLC (the "RECEIVABLES
Seller"), and AVONDALE MILLS, INC. ("AVONDALE MILLS" or the "ORIGINATOR").

                                R E C I T A L S:

                  A.       The Originator has agreed to sell, transfer and
assign to the Receivables Seller, and the Receivables Seller has agreed to
purchase or otherwise acquire from the Originator, all of the right, title and
interest of the Originator in certain Receivables pursuant to a Sale and
Contribution Agreement (as amended, supplemented, modified or restated from time
to time, the "RECEIVABLES SALE AGREEMENT") dated as of August 30, 2002 among the
Originator, Avondale Incorporated and the Receivables Seller.

                  B.       The Receivables Seller, as seller, Avondale Mills in
its capacity as servicer (the "SERVICER"), the Administrative Agent, the
Receivables Collateral Agent and the Receivables Purchasers are parties to a
Receivables Purchase and Servicing Agreement dated as of August 30, 2002 (as
amended, supplemented, modified or restated from time to time, the "RECEIVABLES
PURCHASE AND SERVICING AGREEMENT") pursuant to which the Receivables Purchasers
have agreed, among other things, to purchase from the Receivables Seller from
time to time Receivables (or interests therein) purchased by or contributed to
the Receivables Seller pursuant to the Receivables Sale Agreement.

                  C.       The Receivables Sale Agreement and the Receivables
Purchase and Servicing Agreement provide for the filing of UCC financing
statements to perfect the ownership and security interest of the parties thereto
with respect to the property covered thereby.

                  D.       Avondale Mills as Borrower (in such capacity, the
"BORROWER"), the Banks' Agent and the financial institutions from time to time
party thereto (collectively, the "BANKS") are parties to that certain Second
Amended and Restated Credit Agreement dated as of September 28, 2000, (as
amended, supplemented, modified or restated from time to time, the "CREDIT
AGREEMENT").

                  E.       To secure the Borrower's obligations to the Banks and
Banks' Agent under the Credit Agreement and other Loan Documents, the Borrower
has granted to the Banks' Agent for the benefit of the Banks' Agent and the
Banks a lien over, substantially all of their assets, including certain
Receivables and certain inventory, and all proceeds of the foregoing.

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<PAGE>

                  F.       The parties hereto wish to set forth certain
agreements with respect to the Receivables Program Assets (as hereinafter
defined) and with respect to the Collateral (as hereinafter defined).

                  NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, and for other good and valuable
consideration, receipt of which is hereby acknowledged, it is hereby agreed as
follows:

                            ARTICLE 1. DEFINITIONS.

                  1.1.     Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):

                  "BANK CLAIM" means (i) all of the indebtedness, obligations
and other liabilities of the Borrower now or hereafter arising under, or in
connection with, the Loan Documents including, but not limited to, all sums now
or hereafter loaned or advanced to or for the benefit of the Borrower, all
reimbursement obligations of the Borrower with respect to letters of credit and
guarantees issued thereunder for its account, all guarantee obligations of the
Borrower, any interest thereon (including, without limitation, interest accruing
after the commencement of a bankruptcy, insolvency or similar proceeding
relating to the Borrower, whether or not such interest is an allowed claim in
any such proceeding), any reimbursement obligations, fees or expenses due
thereunder and (ii) any costs of collection or enforcement of any such
indebtedness, liabilities or obligations or in realizing on or protecting or
preserving any security therefor.

                  "BANK COLLATERAL" means all Collateral, including, without
limitation, all Excluded Receivables Assets, which does not constitute
Receivables Program Assets.

                  "BANK EVENT OF DEFAULT" has the meaning ascribed to the term
"Event of Default" in the Credit Agreement, as the same may be amended from time
to time.

                  "BANK INTEREST" means, with respect to any property or
interest in property, now owned or hereafter acquired or created, of the
Borrower, any lien, claim, encumbrance, security interest or other interest of
the Banks' Agent or the Banks in such property or interests in property.

                  "BANKRUPTCY EVENT" means the commencement of a case under 11
USCss.101, et seq. in which the Originator is the "debtor".

                  "BILL AND HOLD ARRANGEMENT" means an arrangement confirmed in
writing in which the Originator invoices the customer for goods but retains
possession of such goods for a period of time; provided, that all of the
following requirements are satisfied:

                           a.       title to, and the risk of loss of, the goods
                                    is transferred to the customer, and the
                                    Originator's records are marked to indicate
                                    that title has passed;

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<PAGE>

                           b.       the Originator's records are adequate to
                                    enable the Originator or a third-party to
                                    identify the goods subject to such
                                    arrangement as separate from the
                                    Originator's own inventory at any time; and

                           c.       the related invoice is payable on the normal
                                    due date for similar Receivables of the
                                    Originator that do not arise from a Bill and
                                    Hold Arrangement.

                  "BUSINESS DAY" has the meaning ascribed to such term in Annex
X to the Receivables Purchase and Servicing Agreement.

                  "CLAIM" means the Bank Claim or the Receivables Claim, as
applicable.

                  "COLLATERAL" means all property and interests in property, now
owned or hereafter acquired or created, of the Borrower in or upon which a Bank
Interest is granted or purported to be granted by the Borrower to the Banks or
the Banks' Agent under any of the Loan Documents.

                  "COLLECTIONS" means, with respect to any Receivable, all cash
collections and other proceeds of such Receivable (including late charges, fees
and interest arising thereon, and all recoveries with respect to Receivables
that have been written off as uncollectible) and any payments by the Originator,
the Seller or the Servicer in respect thereof pursuant to the terms of the
Receivables Documents but excluding, however, such proceeds received by the
Originator with respect to and as consideration for the sale of the Purchased
Receivables by the Originator to the Receivables Seller.

                  "COMPANY CLAIM" means all of the indebtedness, obligations and
other liabilities of the Receivables Seller to the Originator arising under, or
in connection with, the Receivables Documents, including, but not limited to,
obligations evidenced by any deferred purchase price note or other instrument,
and all costs of collection or enforcement thereof.

                  "CONCENTRATION ACCOUNT" has the meaning ascribed to such term
in the Annex X to the Receivables Purchase and Servicing Agreement, as the same
may be amended from time to time.

                  "CONTRACT" shall mean any agreement (including any invoice)
pursuant to, or under which, an Obligor shall be obligated to make payments with
respect to a Receivable.

                  "DISPOSITION" means, with respect to any assets of the
Originator, any liquidation of the Originator or the Originator's assets, the
establishment of any receivership for the Originator or the Originator's assets,
a bankruptcy proceeding of the Originator (either voluntary or involuntary), the
payment of any insurance, condemnation, confiscation, seizure or other claim
upon the condemnation, confiscation, seizure, loss or destruction thereof, or
damage to, or any other sale, transfer, assignment or other disposition of such
assets.

                  "ENFORCEMENT" means collectively or individually, for (a) any
of the Administrative Agent, the Receivables Collateral Agent or the Receivables
Purchasers to (i) declare the Facility Termination Date under the Receivables
Documents or (ii) commence the

                                      209
<PAGE>

judicial enforcement of any of the default rights and remedies under the
Receivables Documents upon the occurrence of a Termination Event, or the
nonjudicial enforcement of the rights, powers and remedies of the Administrative
Agent or Receivables Collateral Agent to foreclose or otherwise realize on the
Receivables Program Assets upon the occurrence of a Termination Event; or (b)
any of the Banks or the Banks' Agent after the occurrence and during the
continuance of a Bank Event of Default to demand payment in full of or
accelerate the indebtedness of the Borrower to the Banks and Banks' Agent or to
commence the judicial enforcement of any of the default rights and remedies
under the Loan Documents or nonjudicial enforcement of the rights, powers and
remedies of the Banks' Agent to foreclose or otherwise realize on the
Collateral.

                  "ENFORCEMENT NOTICE" means a written notice delivered in
accordance with Section 2.5 which notice shall (i) if delivered by the
Administrative Agent or the Receivables Collateral Agent, state that the
Facility Termination Date has occurred, specify the nature of the Termination
Event that has caused the declaration of such Facility Termination Date, and
state that an Enforcement Period has commenced and (ii) if delivered by the
Banks' Agent, state that a Bank Event of Default has occurred and that the
payment in full of the Bank Claim has been demanded or the indebtedness of the
Borrower to the Banks has been accelerated, specify the nature of the Bank Event
of Default that caused such demand and acceleration, and state that an
Enforcement Period has commenced.

                  "ENFORCEMENT PERIOD" means the period of time following the
receipt by either the Banks' Agent, on the one hand, or the Administrative Agent
or the Receivables Collateral Agent, on the other, of an Enforcement Notice
delivered by any of the others until the earliest of the following: (1) the
Receivables Claim has been satisfied in full, none of the Receivables Purchasers
have any further obligations under the Receivables Documents and the Receivables
Documents have been terminated in accordance with their terms; (2) the Bank
Claim has been satisfied in full, the Banks have no further obligations under
the Loan Documents and the Loan Documents have been terminated in accordance
with their terms; (3) the Termination Event or Bank Event of Default, as the
case may be, giving rise to such Enforcement Notice has been cured or waived or
no longer continues to exist and the occurrence of such cure, waiver or
discontinuation has been confirmed in writing to the others by the person that
gave the related Enforcement Notice (and each of the Banks' Agent, the
Administrative Agent and the Receivables Collateral Agent agrees that if it has
given an Enforcement Notice and the related Termination Event or Bank Event of
Default has been cured or waived or no longer continues to exist, it will
promptly confirm such cure, waiver or discontinuation by notice to the others),
and (4) the parties each hereto agree in writing to terminate the Enforcement
Period.

                  "EXCLUDED RECEIVABLES" means any Receivable that is not a
Purchased Receivable, including any Receivable: (a) that was generated by
Avondale Mills Graniteville Fabrics, Inc., a Delaware corporation, (b) the
Obligor with respect to which is: (i) an Obligor organized under the laws of any
jurisdiction outside of the United States of America (including the District of
Columbia but otherwise excluding its territories and possessions) or Canada or
(ii) any Obligor that is a Non-Domestic Person if such Non-Domestic Person both
(x) has been instructed to make payments on the Receivables owing by it to a
bank account other than a Lockbox Account or the Concentration Account and (y)
such Non-Domestic Person can be

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<PAGE>

reasonably expected to follow such instructions or (c) which arises out of the
provision of goods or merchandise which is being held by the Originator as
bailee for Key Industries, Inc..

                  "EXCLUDED RECEIVABLES ASSETS" means: (i) "Inventory
Collateral" (as that term is defined in the Security Agreement referred to in
the Credit Agreement), other than Purchased Assets Returned Goods; (ii) Excluded
Receivables; and (iii) any Receivables or other proceeds of Inventory Collateral
created or arising (x) after a Bankruptcy Event in which the Originator is the
debtor (other than proceeds of Purchased Assets Returned Goods), (y) after
termination of purchases under the Receivables Sale Agreement (other than
proceeds of Purchased Assets Returned Goods) or (z) from the sale or other
disposition of any of the Inventory Collateral (other than Purchased Assets
Returned Goods) by the Banks' Agent, as a secured party under the UCC.

                  "FACILITY TERMINATION DATE" has the meaning ascribed to such
term in Annex X to the Receivables Purchase and Servicing Agreement, as the same
may be amended from time to time (other than to change the Facility Termination
Date to a scheduled date earlier than November 15, 2002).

                  "GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.

                  "LOAN DOCUMENTS" has the meaning ascribed to such term in the
Credit Agreement.

                  "LOCKBOX" AND "LOCKBOX ACCOUNT" have the meaning ascribed to
such terms in the Annex X to the Receivables Purchase and Servicing Agreement,
as the same may be amended from time to time.

                  "NON-DOMESTIC PERSON" has the meaning ascribed to such term in
the Annex X to the Receivables Purchase and Servicing Agreement

                  "OBLIGOR" shall mean, with respect to any Receivable, the
Person obligated to make payments in respect of such Receivable; provided that
"Obligor" shall in no event include any person liable to any of the Banks or the
Banks' Agent for and solely to the extent of the purchase price of any Bank
Collateral sold to such person by the Banks' Agent or any Bank.

                  "OUTSTANDING BALANCE" has the meaning ascribed to such term in
Annex X to the Receivables Purchase and Servicing Agreement.

                  "PERSON" means any individual, sole proprietorship,
partnership, joint venture, unincorporated organization, trust, association,
corporation (including a business trust), limited liability company,
institution, public benefit corporation, joint stock company, Governmental
Authority or any other entity of whatever nature.

                  "PROCEEDS" has the meaning ascribed to such term in the UCC.

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<PAGE>

                  "PURCHASED ASSETS RETURNED GOODS" means all right, title and
interest of the Originator, the Receivables Seller, the Administrative Agent,
any Receivables Purchaser or the Receivables Collateral Agent, as applicable, in
and to returned, repossessed or foreclosed goods and/or merchandise (including
goods which are subject to a Bill and Hold Arrangement, the delivery of which is
cancelled for any reason whatsoever) the sale of which gave rise to a Purchased
Receivable, but only so long as the Originator has not made all of the cash
payments required to be made under the Receivables Documents with respect to any
nonpayment, dilution, reduction or other adjustment of the outstanding balance
of such Purchased Receivable.

                  "PURCHASED RECEIVABLES" means now owned or hereafter existing
Receivables sold, purported to be sold, transferred or contributed or purported
to be transferred or contributed by the Originator to the Receivables Seller
under the Receivables Sale Agreement.

                  "RECEIVABLE" means:

                  (a)      indebtedness of an Obligor (whether constituting an
account, chattel paper, document, instrument or general intangible) arising from
the provision of merchandise, goods or services to such Obligor (and expressly
including indebtedness arising out of a Bill and Hold Arrangement), including
the right to payment of any interest or finance charges and other obligations of
such Obligor with respect thereto;

                  (b)      all rights to returned merchandise or goods
(including goods which are subject to a Bill and Hold Arrangement, the delivery
of which is cancelled for any reason), the sale of which gave rise to such
indebtedness, and all security interests or liens and property subject thereto
from time to time securing or purporting to secure any such indebtedness of such
Obligor;

                  (c)      all of the Receivables Seller's credit balances due
from the Originator existing at any time;

                  (d)      all guarantees, indemnities and warranties, insurance
policies, financing statements and other agreements or arrangements of whatever
character from time to time supporting or securing payment of any such
indebtedness;

                  (e)      all Collections with respect to any of the foregoing;

                  (f)      all Lockboxes, Lockbox Accounts, the Concentration
Account into which any Collections are deposited and all funds on deposit
therein and all certificates and instruments, if any, from time to time
representing or evidencing any Lockbox, Lockbox Account or the Concentration
Account;

                  (g)      all notes, certificates of deposit and other
instruments from time to time delivered to or otherwise possessed by the
Receivables Seller or any assignee or agent on behalf of the Receivables Seller
in substitution for or in addition to any of the foregoing;

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<PAGE>

                  (h)      all interest, dividends, cash instruments, investment
property and other property from time to time received, receivable or otherwise
distributed with respect to or in exchange for any and all of the foregoing;

                  (i)      all Records with respect to any of the foregoing; and

                  (j)      all Proceeds (including returned goods) (whether
constituting accounts, deposit accounts, chattel paper, inventory, goods,
documents, instruments, supporting obligations, letter of credit rights,
investment property or general intangibles) with respect to the foregoing and
all accessions to, and substitutions and replacements for, all of the foregoing.

                  "RECEIVABLES CLAIM" means all indebtedness, obligations and
other liabilities of the Originator to the Receivables Seller and of the
Originator and the Receivables Seller to the Administrative Agent and the
Receivables Purchasers now or hereafter arising under, or in connection with,
the Receivables Documents, including, but not limited to, all sums or increases
now or hereafter advanced or made to or for the benefit of the Receivables
Seller thereunder as the purchase price paid for Purchased Receivables or
otherwise under the Receivables Purchase and Servicing Agreement, any yield
thereon (including, without limitation, yield accruing after the commencement of
a bankruptcy, insolvency or similar proceeding relating to the Originator,
whether or not such yield is an allowed claim in any such proceeding), any
repayment obligations, fees or expenses due thereunder, and any costs of
collection or enforcement of any such indebtedness, liabilities or obligations
or in realizing on or protecting or preserving any security therefor.

                  "RECEIVABLES DOCUMENTS" means the Receivables Sale Agreement,
the Receivables Purchase and Servicing Agreement and any other agreements,
instruments or documents (i) executed by the Originator and delivered to the
Receivables Seller or (ii) executed by the Receivables Seller and delivered to
the Administrative Agent and/or the Receivables Purchasers, in any case in
respect of the transactions contemplated by the Receivables Sales Agreement and
the Receivables Purchase and Servicing Agreement.

                  "RECEIVABLES INTEREST" means, with respect to any property or
interests in property, now owned or hereafter acquired or created, of the
Originator, any lien, claim, encumbrance, security interest or other interest of
the Receivables Seller, the Administrative Agent, any Receivables Purchaser
and/or the Receivables Collateral Agent in such property or interests in
property.

                  "RECEIVABLES PROGRAM ASSETS" means (i) the Purchased
Receivables, (ii) the Collections related to such Purchased Receivables, (iii)
Purchased Assets Returned Goods, and (iv) each deposit or other bank account to
which any Collections of such Purchased Receivables are deposited (but in no
event shall Receivables Program Assets include any Excluded Receivables Assets
or Collections or other monies deposited in such accounts which are not
Collections of Purchased Receivables).

                  "RECEIVABLES PURCHASER" means each Person from time to time
party to the Receivables Purchase and Servicing Agreement in the capacity of a
"Purchaser".

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<PAGE>

                  "RECORDS" means all Contracts and other documents, books,
records and other information (including computer programs, tapes, disks, data
processing software and related property and rights) maintained with respect to
Receivables, the Obligors thereunder and the Receivables Program Assets.

                  "SPECIFIED ASSETS" means the Receivables Program Assets.

                  "STOCK COLLATERAL" means the common stock of or membership
interests or other equity ownership interests in the Receivables Seller upon
which a Bank Interest is granted or purported to be granted by the Borrower or
any other owner thereof to the Banks or the Banks' Agent under any of the Loan
Documents.

                  "TERMINATION EVENT" has the meaning ascribed to such term in
Annex X to the Receivables Purchase and Servicing Agreement, as the same may be
amended from time to time.

                  "UCC" means the Uniform Commercial Code as from time to time
in effect in the applicable jurisdiction.

                  1.2.     References to Terms Defined in the Receivables
Documents and the Loan Documents. Whenever in Section 1.1 a term is defined by
reference to the meaning ascribed to such term in any of the Receivables
Documents or in any of the Loan Documents, then, unless otherwise specified
herein, such term shall have the meaning ascribed to such term in the
Receivables Documents or Loan Documents, respectively, as in existence on the
date hereof, without giving effect to any amendments of such term (or any
amendment of terms used in such term) as may hereafter be agreed to by the
parties to such documents, unless such amendments have been consented to in
writing by all of the parties hereto.

                      ARTICLE 2. INTERCREDITOR PROVISIONS.

                  2.1.     Priorities with Respect to Receivables Program
Assets. Notwithstanding any provision of the UCC, any applicable law or judicial
decision or any of the Loan Documents or the Receivables Documents, the Banks'
Agent (for itself and on behalf of each Bank) hereby agrees that, upon the sale,
purported sale, transfer or purported transfer of an interest in any Receivable
by the Originator to the Receivables Seller pursuant to the Receivables Sale
Agreement, any Bank Interest of the Banks or the Banks' Agent in such
Receivables Program Assets shall automatically and without further action cease
and be forever released and discharged and the Banks' Agent and the Banks shall
have no Bank Interest therein; provided, however, that nothing in this Section
2.1 shall be deemed to constitute a release by the Banks' Agent and the Banks
of: (i) any Bank Interest in the cash proceeds received by the Originator from
the Receivables Seller for the sale of Receivables pursuant to the Receivables
Sale Agreement; (ii) any Bank Interest or right the Banks or the Banks' Agent
have in any Excluded Receivables Assets and the proceeds thereof; and (iii) any
Bank Interest in any Company Claim and any Stock Collateral; provided further,
however, that any Bank Interest in any Purchased Assets Returned Goods shall be
junior and subject and subordinate to the Receivables Interest therein unless
and until the Originator shall have made all cash payments required to be made
under the Receivables Documents with respect to any nonpayment, dilution,
reduction or other

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adjustment of the outstanding balance of any Purchased Receivable related to
such Purchased Assets Returned Goods, and upon the making of such cash payments,
such Purchased Assets Returned Goods shall cease to constitute Purchased Assets
Returned Goods hereunder and the Receivables Interest therein shall terminate,
unless and until such goods or merchandise have been resold so as to give rise
to a Receivable and such Receivable has been sold or purported to be sold,
transferred or purported to be transferred to the Receivables Seller.

                  2.2.     Respective Interests in Receivables Program Assets
and Bank Collateral.

                  (a)      Except for all rights of access to and use of Records
granted to the Administrative Agent, the Receivables Purchasers and the
Receivables Collateral Agent pursuant to the Receivables Documents, each of the
Receivables Seller, the Administrative Agent (for itself and on behalf of each
Receivables Purchaser) and the Receivables Collateral Agent agrees that it does
not have and shall not have any Receivables Interest in the Bank Collateral.
Each of the Receivables Seller, the Administrative Agent (for itself and on
behalf of each Receivables Purchaser) and the Receivables Collateral Agent
agrees that it shall not request or accept, directly or indirectly (by
assignment or otherwise) from the Originator any collateral security for payment
of any Receivables Claim (other than Purchased Assets Returned Goods and the
right of access to and use of Records granted to the Administrative Agent, the
Collateral Agent and the Receivables Purchasers pursuant to the Receivables
Documents) and hereby releases and discharges any Receivables Interest in any
such collateral security.

                  (b)      Except for rights in Purchased Assets Returned Goods
granted to the Banks' Agent and the Banks pursuant to the Loan Documents, which
Bank Interest is junior and subordinate to any Receivables Interest therein to
the extent provided herein, the Banks' Agent (for itself and on behalf of each
Bank) agrees that neither the Banks' Agent nor the Banks have, nor shall they
have, any Bank Interest in the Receivables Program Assets.

                  2.3.     Distribution of Proceeds. At all times, all proceeds
of Bank Collateral and Receivables Program Assets received by the Banks' Agent
or by the Administrative Agent or Receivables Collateral Agent shall be
distributed by them in accordance with the following procedure:

                  (a)      (i) All proceeds of the Bank Collateral (including,
without limitation, the proceeds of any Disposition of Bank Collateral,
regardless of whether the Banks' Agent has a perfected and enforceable lien in
such Bank Collateral) shall be paid to the Banks' Agent either (x) for
application against the Bank Claim and other obligations and liabilities owing
under the Credit Agreement and other Loan Documents, in each case to the extent
then due and owing and unpaid, until the Bank Claim and such other obligations
and liabilities have been paid and satisfied in full in cash and the Credit
Agreement is terminated, or (y) for other disposition in accordance with the
Credit Agreement and the other Loan Documents, and (ii) any remaining proceeds
shall be paid to the Borrower or as otherwise required by applicable law, and
each of the Receivables Seller, the Administrative Agent (for itself and on
behalf of each Receivables Purchaser) and the Receivables Collateral Agent
agrees that none of the Receivables Seller, the Administrative Agent, the
Receivables Purchasers or the Receivables Collateral Agent have, nor shall they
have, any Receivables Interest in such remaining proceeds.

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                  (b)      (i) All proceeds of the Receivables Program Assets
(including, without limitation, the proceeds of any Disposition of Receivables
Program Assets, regardless of whether the Receivables Collateral Agent has a
perfected and enforceable lien in such Receivables Program Assets) shall be paid
to the Receivables Collateral Agent either (x) for application against the
Receivables Claim in accordance with the Receivables Documents until the
Receivables Claim has been paid and satisfied in full in cash and the
Receivables Documents have been terminated, or (y) for other disposition in
accordance with the Receivables Documents, (ii) any remaining proceeds of
Purchased Assets Returned Goods shall be paid to the Banks' Agent, as pledgee of
the equity interests of the Receivables Seller, for application or other
disposition as provided in Section 2.3(a) above, and (iii) any remaining
proceeds shall be paid to the Receivables Seller or as otherwise required by
applicable law, and the Banks' Agent (for itself and on behalf of each Bank)
agrees that neither the Banks' Agent nor the Banks have, nor shall they have,
any Bank Interest in such remaining proceeds, except to the extent of any Bank
Interest in the Company Claim and any Stock Collateral.

                  (c)      In the event that any of the Receivables Seller, the
Administrative Agent, the Receivables Purchasers or the Receivables Collateral
Agent now or hereafter obtains possession of any other Bank Collateral, it shall
immediately deliver such other Bank Collateral to the Banks' Agent or to such
other Person as the Banks' Agent shall specify in a written authorization for
delivery thereof (and until delivered to the Banks' Agent such Bank Collateral
shall be held in trust for the Banks' Agent). If at the time of such delivery
the Banks' Agent determines that, pursuant to the terms of the Loan Documents,
it is not entitled to retain possession of such other Bank Collateral (including
during the existence of a Bank Event of Default), the Banks' Agent shall
promptly deliver such other Bank Collateral to the Borrower.

                  (d)      In the event that the Borrower, the Banks or the
Banks' Agent now or hereafter obtains possession of any other Receivables
Program Assets, it shall immediately deliver such other Receivables Program
Assets to the Receivables Collateral Agent or to such other Person as the
Receivable Collateral Agent shall specify in a written authorization for
delivery thereof (and until delivered to the Receivables Collateral Agent such
Receivables Program Assets shall be held in trust for the Receivables Collateral
Agent). If at the time of such delivery the Receivables Collateral Agent
determines that, pursuant to the terms of the Receivables Documents, it is not
entitled to retain possession of such other Receivable Program Assets, the
Receivables Collateral Agent shall promptly deliver such other Receivable
Program Assets to the Borrower.

                  (e)      If any inventory of the Originator has been
commingled with Purchased Assets Returned Goods in which the Receivables
Interest continues as provided in Section 2.1 above, and the Banks' Agent or any
Bank receives any proceeds on account of such inventory (whether by reason of
sale or by reason of insurance payments on account thereof) prior to release of
such Receivables Interest, then the Banks' Agent and the Receivables Collateral
Agent shall, in good faith, cooperate with each other to separate the
Originator's inventory (and proceeds thereof) from such Purchased Assets
Returned Goods (and proceeds thereof); provided, however, that if such
separation is not possible, then the Banks' Agent and the Receivables Collateral
Agent agree to share such Inventory and Purchased Assets Returned Goods and
proceeds thereof proportionately which shall mean that (i) all proceeds of such
inventory shall be

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paid to the Banks' Agent and the Banks' Agent shall, immediately upon receipt of
such proceeds, pay to the Receivables Collateral Agent for application, payment
or other disposition as provided in Section 2.3(b) above, a share of such
proceeds equal to the dollar amount thereof multiplied by a fraction, the
numerator of which equals the book value of the Purchased Assets Returned Goods
in which the Receivables Interest continues as provided in Section 2.1 above and
the denominator of which equals the book value of all of the inventory on
account of which the Banks' Agent has received such cash proceeds; and (ii) any
remaining proceeds shall be paid to the Banks' Agent for application, holding
and/or payment as provided in Section 2.3(a) above.

                  2.4.     Excluded Receivables Assets.

                  (a)      The Receivables Seller, the Administrative Agent (for
itself and on behalf of each Receivables Purchaser) and the Receivables
Collateral Agent hereby acknowledge that the Banks' Agent on behalf of the Banks
and itself shall be entitled to the Bank Interest in all Excluded Receivable
Assets, including Collections of Excluded Receivables.

                  (b)      Each of the parties hereto hereby agrees that all
Collections received on account of Receivables Program Assets shall be paid or
delivered to the Receivables Collateral Agent for application, payment or other
disposition in accordance with Section 2.3(b) and all Collections received on
account of Excluded Receivables shall be paid or delivered to the Banks' Agent
for application, payment or other disposition in accordance with Section 2.3(a).
For the purpose of determining whether specific Collections have been received
on account of Receivables Program Assets or on account of Excluded Receivables,
the parties agree as follows:

                           (i)      All payments made by an Obligor which is
obligated to make payments on Purchased Receivables but is not obligated to make
any payments on Excluded Receivables shall be conclusively presumed to be
payments on account of Purchased Receivables and all payments made by an Obligor
which is obligated to make payments on Excluded Receivables but is not obligated
to make any payments on Purchased Receivables shall be conclusively presumed to
be payments on account of Excluded Receivables.

                           (ii)     All payments made by an Obligor which is
obligated to make payments with respect to both Purchased Receivables and
Excluded Receivables shall be applied against the specific Receivables, if any,
which are designated by such Obligor by reference to the applicable Contract (or
otherwise identified by such Obligor in a writing delivered with such payment)
as the Receivables with respect to which such payments should be applied;
provided that where any Obligor makes payment and designates the applicable
Contracts of a group of two or more Receivables to which such payment shall be
applied and such payment is in an amount less than the aggregate Outstanding
Balance of such Receivables, such payment shall be applied pro rata to all such
Receivables. In the absence of such designation after reasonable efforts by the
Originator to obtain such designation, such payments shall be applied against
the oldest outstanding Receivables or portion owed by such Obligor to the extent
such oldest Receivable or portion thereof is not in dispute.

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<PAGE>

                  (c)      The Banks' Agent agrees that it shall not exercise
any rights it may have under the Loan Documents to send any notices to Obligors
informing them of the Banks' interest in the Purchased Receivables or directing
such Obligors to make payments in any particular manner of any amounts due under
the Purchased Receivables prior to the latest of payment in full of the
Receivables Claim and the termination of the Receivables Documents, except that
the Banks' Agent may, subject to the provisions of the Loan Documents, inform
any Obligors of Excluded Receivables that such Excluded Receivables have been
assigned to the Banks' Agent so long as such notices expressly state that all
payments on account of such Excluded Receivables shall continue to be made as
otherwise required pursuant to the terms of the Receivables Documents. The
Banks' Agent further agrees that, prior to the latest of payment in full of the
Receivables Claim and the termination of the Receivables Documents, if it
receives payments directly from any Obligor on account of an Excluded
Receivable, it shall immediately forward such payment to the Administrative
Agent in order that such agent may determine whether such payment was, in fact,
properly allocated to such Excluded Receivable in accordance with the terms of
this Section 2.4 and, if necessary pursuant to the terms hereof, reallocate such
payment.

                  2.5.     Enforcement Actions. Each of the Banks' Agent, the
Administrative Agent and the Receivables Collateral Agent agrees to use
reasonable efforts to give an Enforcement Notice to the others prior to
commencement of Enforcement (but failure to do so shall not prevent such Person
from commencing Enforcement or affect its rights hereunder nor create any cause
of action or liability against such Person). Subject to the foregoing, each of
the parties hereto agrees that during an Enforcement Period:

                  (a)      Subject to any applicable restrictions in the
Receivables Documents, the Receivables Collateral Agent may at its option and
without the prior consent of the other parties hereto, take any action to (i)
accelerate payment of the Receivables Claim or any other obligations and
liabilities under any of the Receivables Documents and (ii) liquidate the
Receivables Program Assets or to foreclose or realize upon or enforce any of its
rights with respect to the Receivables Program Assets.

                  (b)      Subject to any applicable restrictions in the Loan
Documents, the Banks' Agent or the Banks may, at their option and without the
prior consent of the other parties hereto, take any action to accelerate payment
of the Bank Claim or any other obligation or liability arising under any of the
Loan Documents and to foreclose or realize upon or enforce any of their rights
with respect to the Bank Collateral or other collateral security, including with
respect to any Receivables Program Assets constituting Purchased Assets Returned
Goods that have been commingled with the Bank Collateral, or take any other
actions as they deem appropriate; provided, however, that the Banks' Agent shall
not otherwise take any action to foreclose or realize upon or to enforce any
rights it may have with respect to uncommingled Purchased Assets Returned Goods
in which the Receivables Interest continues as provided in Section 2.1 above or
the Stock Collateral without the Administrative Agent's and the Receivables
Collateral Agent's prior written consent unless the Receivables Claim or any
other obligation or liability arising under any of the Receivables Documents
shall have been first paid and satisfied in full and the Receivables Documents
have terminated.

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                  2.6.     Access to Records. Subject to any applicable
restrictions in the Receivables Documents, each of the Receivables Purchasers,
the Administrative Agent and the Receivables Collateral Agent may enter one or
more premises of the Originator, the Receivables Seller or their respective
affiliates, whether leased or owned, at any time during reasonable business
hours, without force or process of law and without obligation to pay rent or
compensation to the Originator, the Receivables Seller, such affiliates, the
Banks or the Banks' Agent, whether before, during or after an Enforcement
Period, and may have access to and use of all Records located thereon and may
have access to and use of any other property to which such access and use are
granted under the Receivables Documents, in each case provided that such use is
for the purpose of enforcing the Receivables Purchasers' and the Receivable
Collateral Agent's rights with respect to the Receivables Program Assets.

                  2.7.     Accountings. The Banks' Agent agrees to render
statements to the Administrative Agent upon reasonable request, which statements
shall identify in reasonable detail the Excluded Receivables and shall render an
account of the Bank Claim, giving effect to the application of proceeds of Bank
Collateral as hereinbefore provided. The Administrative Agent agrees to render
statements to the Banks' Agent upon reasonable request, which statements shall
identify in reasonable detail the Purchased Receivables and shall render an
account of the Receivables Claim, giving effect to the application of proceeds
of Receivables Program Assets as hereinbefore provided. The Banks' Agent and the
Administrative Agent shall bear no liability if their respective accounts are
incorrect.

                  2.8.     Agency for Perfection. The Receivables Collateral
Agent and the Banks' Agent hereby appoint each other as agent for purposes of
perfecting by possession their respective security interests and ownership
interests and liens on the Receivables Program Assets and the Bank Collateral
described hereunder. In the event that the Receivables Collateral Agent obtains
possession of any of the Bank Collateral, the Receivables Collateral Agent shall
notify the Banks' Agent of such fact, shall hold such Bank Collateral in trust
and shall deliver such Bank Collateral for application, payment or other
disposition as provided in Section 2.3(c) above. In the event that the Banks'
Agent obtains possession of any of the Receivables Program Assets, the Banks'
Agent shall notify the Receivables Collateral Agent and the Administrative Agent
of such fact, shall hold such Receivables Program Assets in trust and shall
deliver such Receivables Program Assets for application, payment or other
disposition as provided in Section 2.3(d) above.

                  2.9.     UCC Notices. In the event that any party hereto shall
be required by the UCC or any other applicable law to give notice to the other
of intended disposition of Receivables Program Assets or Bank Collateral,
respectively, such notice shall be given in accordance with Section 3.1 hereof
and ten (10) days' notice shall be deemed to be commercially reasonable.

                  2.10.    Independent Credit Investigations. Neither the
Receivables Purchasers, the Administrative Agent, the Receivables Collateral
Agent, the Banks' Agent nor the Banks nor any of their respective directors,
officers, agents or employees shall be responsible to the other or to any other
person, firm or corporation for the solvency, financial condition or ability of
the Originator, the Receivables Seller or the Borrower to repay the Receivables
Claim or the Bank

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Claim, or for the worth of the Receivables Program Assets or the Bank
Collateral, or for statements of the Originator, the Receivables Seller or the
Borrower, oral or written, or for the validity, sufficiency or enforceability of
the Receivables Claim, the Bank Claim, the Receivables Documents, the Loan
Documents, the Receivables Collateral Agent's interest in the Receivables
Program Assets or the Banks' or Banks' Agent's interest in the Bank Collateral.
The Banks and the Receivables Purchasers have entered into their respective
agreements with the Originator, the Receivables Seller or the Borrower, as
applicable, based upon their own independent investigations. None of the Banks,
the Administrative Agent or the Receivables Purchasers makes any warranty or
representation to the other nor does it rely upon any representation of the
other with respect to matters identified or referred to in this Section 2.10.

                  2.11.    Limitation on Liability of Parties to Each Other.
Except as provided in this Agreement, no party shall have any liability to any
other party except for liability arising from the gross negligence or willful
misconduct of such party or its representatives or a breach by such party or its
representatives of its obligations or agreements provided for herein.

                  2.12.    Amendments to Financing Arrangements or to this
Agreement. The Banks' Agent agrees to use reasonable efforts to give,
concurrently with any written amendment or modification in the Loan Documents
that: (i) purports to affect Receivables or any Bank Interest therein; or (ii)
modifies the definitions of Subsidiary or Receivables Securitization Program
contained in the Credit Agreement, or otherwise would require the Receivables
Subsidiary to be subject (directly or indirectly) to any of the representations,
warranties or covenants of Subsidiaries or Material Subsidiaries under the
Credit Agreement or to be obligated to pay any of the obligations to the Banks
or to the Banks' Agent under the Credit Agreement and other Loan Documents; or
(iii) would affect the ability of Avondale Mills to (a) transfer Receivables
(and expressly including indebtedness arising out of a Bill and Hold
Arrangement) and related assets to the Receivables Seller, (b) make capital
contributions to the Receivables Seller or (c) advance funds to the Receivables
Seller, prompt notice to the Administrative Agent and the Receivables Collateral
Agent of the same and the Administrative Agent agrees to use reasonable efforts
to, concurrently with any written amendment or modification in the Receivables
Documents, notify the Banks' Agent of the same; provided, however, that the
failure to do so shall not create a cause of action against any party failing to
give such notice or create any claim or right on behalf of any third party or
affect any such amendment or modification. Each party hereto shall, upon
reasonable request of any other party hereto, provide copies of all such
modifications or amendments and copies of all other documentation relevant to
the Receivables Program Assets or the Bank Collateral. All modifications or
amendments of this Agreement must be in writing and duly executed by an
authorized officer of each party hereto to be binding and enforceable.

                  2.13.    Marshalling of Assets. Nothing in this Agreement will
be deemed to require either the Receivables Collateral Agent or the Banks' Agent
(i) to proceed against certain property securing the Bank Claim (or any other
obligation or liability under the Credit Agreement or other Loan Documents) or
the Receivables Claim (or any other obligation or liability under the
Receivables Documents), as applicable, prior to proceeding against other
property securing such Claim or obligations or liabilities or against certain
persons guaranteeing any such obligations or (ii) to marshall the Bank
Collateral (or any other collateral) or the

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Receivables Program Assets (as applicable) upon the enforcement of the Banks'
Agent's or the Receivables Collateral Agent's remedies under the Loan Documents
or Receivables Documents, as applicable.

                  2.14.    Relative Rights.

                  (a)      The relative rights of the Banks, each as against the
other, shall be determined by agreement among such parties in accordance with
the terms of the Loan Documents. The Administrative Agent, the Receivables
Collateral Agent and the Receivables Purchasers shall be entitled to rely on the
power and authority of the Banks' Agent to act on behalf of all of the Banks to
the extent the provisions hereof have the Banks' Agent so act.

                  (b)      The Banks' Agent and Banks shall be entitled to rely
on the power and authority of the Receivables Collateral Agent and
Administrative Agent to act on behalf of the Receivables Purchasers to the
extent the provisions hereof have the Receivables Collateral Agent or the
Administrative Agent so act.

                  2.15.    Effect Upon Loan Documents and Receivables Documents.
By executing this Agreement, the Originator and the Receivables Seller agree to
be bound by the provisions hereof (i) as they relate to the relative rights of
the Banks and the Banks' Agent with respect to the property of the Originator;
and (ii) as they relate to the relative rights of the Originator and the
Receivables Purchasers as creditors of the Receivables Seller. The Borrower
acknowledges that the provisions of this Agreement shall not give the Borrower
any substantive rights as against the Banks' Agent or the Banks and that nothing
in this Agreement shall amend, modify, change or supersede the terms of the Loan
Documents as between the Borrower, the Banks' Agent and the Banks. The
Receivables Seller acknowledges that the provisions of this Agreement shall not
give the Receivables Seller any substantive rights as against the Administrative
Agent, the Receivables Collateral Agent or the Receivables Purchasers and that
nothing in this Agreement shall amend, modify, change or supersede the terms of
the Receivables Documents as among the Receivables Seller, the Administrative
Agent, the Receivables Collateral Agent or the Receivables Purchasers. The
Originator and the Receivables Seller further acknowledge that the provisions of
this Agreement shall not give any such party any substantive rights as against
the other and that nothing in this Agreement shall amend, modify, change or
supersede the terms of the Receivables Documents as between the Originator and
the Receivables Seller. Notwithstanding the foregoing, each of the
Administrative Agent (for itself and on behalf of each Receivables Purchaser),
the Receivables Collateral Agent and the Banks' Agent (for itself and on behalf
of each Bank) agrees, that, as between themselves, to the extent the terms and
provisions of the Loan Documents or the Receivables Documents are inconsistent
with the terms and provisions of this Agreement, the terms and provisions of
this Agreement shall control.

                  2.16.    Nature of the Bank Claim and Modification of Loan
Documents. Each of the Receivables Seller, the Administrative Agent (for itself
and on behalf of each Receivables Purchaser) and the Receivables Collateral
Agent acknowledges that the Bank Claim and other obligations and liabilities
owing under the Loan Documents are, in part, revolving in nature and that the
amount of such revolving indebtedness which may be outstanding at any time or
from

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time to time may be increased or reduced and subsequently reborrowed. Except as
expressly provided in Section 2.12, the terms of the Loan Documents may be
modified, extended or amended from time to time, and the amount thereof may be
increased or reduced, all without notice to or consent by any of the Receivables
Seller, the Administrative Agent, the Receivables Purchasers or the Receivables
Collateral Agent and without affecting the provisions of this Agreement. Without
in any way limiting the foregoing, each of the Receivables Seller, the
Administrative Agent (for itself and on behalf of each Receivables Purchaser) or
Receivables Collateral Agent hereby agrees that the maximum amount of Bank Claim
and other obligations and liabilities owing under the Loan Documents may be
increased at any time and from time to time to any amount.

                  2.17.    Nature of the Receivables Claim and Modification of
Receivables Documents. The Originator and the Banks' Agent (for itself and on
behalf of each Bank) acknowledges that the Receivables Claim and other
obligations and liabilities owing under the Receivables Documents are, in part,
revolving in nature and that the amount of such revolving obligations which may
be outstanding at any time or from time to time may be increased or reduced and
subsequently reincurred. The terms of the Receivables Documents may be modified,
extended or amended from time to time, and the amount thereof may be increased
or reduced, all without notice to or consent by any of the Banks or the Banks'
Agent and without affecting the provisions of this Agreement; provided, that (i)
the Originator will notify the Banks' Agent and the Banks of any such
modification, extension, amendment, increase or reduction, and (ii) it is
understood that neither the Banks' Agent nor any Bank waives any right or claim
it may have with respect to any such modification, extension, amendment,
increase or reduction that would cause any Receivables Document to fail to
satisfy the conditions set forth in the definition of Receivables Securitization
Program, as defined in the Credit Agreement. Without in any way limiting the
foregoing, the Banks' Agent (for itself and on behalf of each Bank) hereby
agrees that the maximum amount of Receivables Claim and other obligations and
liabilities owing under the Receivables Documents and the amount of Receivables
which may be purchased or otherwise financed pursuant to the Receivables
Documents may, in each case, be increased at any time and from time to time to
any amount.

                  2.18.    Further Assurances. Each of the parties agrees to
take such actions as may be reasonably requested by any other party, whether
before, during or after an Enforcement Period, in order to effect the rules of
distribution and allocation set forth above in this Article 2 and to otherwise
effectuate the agreements made in this Article.

                  2.19.    No Petition. To and until the date which is one year
and one day after the later of the date the Receivables Claim shall have been
paid in full and the Receivables Documents have been terminated in accordance
with their terms, each of the parties hereto (except for each Receivables
Purchaser and the Receivables Seller as to itself) agrees that it shall not
consent to or vote for the filing of any petition in bankruptcy for the
Receivables Seller or the Receivable Purchaser.

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                  2.20.    No Challenge to Transfers or Assertion of Substantive
Consolidation.

                  (a)      The Bank's Agent hereby agrees, on behalf of itself
and the Banks, that neither the Bank's Agent nor any Bank shall (i) challenge
the transfers of the Purchased Receivables and related assets from the
Originator to the Receivables Seller, whether on the grounds that such transfers
were disguised financings or fraudulent conveyances or otherwise, as long as
such transfers are carried out in all material respects in accordance with the
Receivables Documents or (ii) assert that the Originator and the Receivables
Seller should be substantively consolidated.

                  (b)      The Receivables Collateral Agent hereby agrees that
it shall not (i) challenge the transfers of any Bank Collateral from the
Borrower to the Bank's Agent, whether on the grounds that such transfers were
fraudulent conveyances or otherwise, as long as such transfers are carried out
in all material respects in accordance with the Loan Documents or (ii) assert
that the Borrower and the Receivables Seller should be substantively
consolidated.

                  2.21.    Receivables Seller Not Subject to Credit Agreement.
Each of the parties acknowledges and agrees that the Receivables Seller is not
and shall not become a party to or a guarantor of any obligations arising under
the Credit Agreement.

                           ARTICLE 3. MISCELLANEOUS.

                  3.1.     Notices. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telecommunications and communication by facsimile copy) and mailed,
telexed, transmitted or delivered, as to each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective upon receipt, or,
in the case of notice by mail, five (5) days after being deposited in the mails,
postage prepaid, or in the case of notice by telex, when telexed against receipt
of the answerback, or in the case of notice by facsimile copy, when verbal
confirmation of receipt is obtained, in each case addressed as aforesaid.

                  3.2.     Agreement Absolute. Each of the Administrative Agent,
the Receivables Collateral Agent and the Receivables Purchasers shall be deemed
to have entered into the Receivables Documents in express reliance upon this
Agreement and the Banks and the Banks' Agent shall be deemed to have entered
into the Loan Documents in express reliance upon this Agreement. This Agreement
shall be and remain absolute and unconditional under any and all circumstances,
and no acts or omissions on the part of any party to this Agreement shall affect
or impair the agreement of any party to this Agreement, unless otherwise agreed
to in writing by all of the parties hereto. This Agreement shall be applicable
both before and after the filing of any petition by or against the Originator or
the Receivables Seller under the U.S. Bankruptcy Code and all references herein
to the Originator or the Receivables Seller shall be deemed to apply to a
debtor-in-possession for such party and all allocations of payments between the
Banks, the Receivables Purchasers and the Receivables Collateral Agent shall,
subject to any court order to the contrary, continue to be made after the filing
of such petition on the same basis that the payments were to be applied prior to
the date of the petition.

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<PAGE>

                  3.3.     Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns. The successors and assigns for the Originator
and the Receivables Seller shall include a debtor-in-possession or trustee of or
for such party. The successors and assigns for the Banks, the Receivables
Purchasers, the Banks' Agent, the Administrative Agent and the Receivables
Collateral Agent, as the case may be, shall include any successor Banks,
Receivables Purchasers, Banks' Agent, Administrative Agent or Receivables
Collateral Agent, as the case may be, appointed under the terms of the Loan
Documents or the Receivables Documents, as applicable. Each of the Banks' Agent
(for itself and on behalf of each Bank), the Administrative Agent (for itself
and on behalf of each Receivables Purchaser) and the Receivables Collateral
Agent, as the case may be, agrees not to transfer any interest it may have in
the Loan Documents or the Receivables Documents unless such transferee has been
notified of the existence of this Agreement and has agreed to be bound hereby.
In the event that the financing provided under the Credit Agreement shall be
refinanced, replaced or refunded, the Originator, the Receivables Seller, the
Administrative Agent and the Receivables Collateral Agent hereby agree, at the
request of the agent or the lenders participating in such refinancing,
replacement or refunding of the Credit Agreement, to execute and deliver a new
intercreditor agreement with such agent and/or lenders on substantially the same
terms as herein provided. In the event that the financing provided under the
Receivables Documents shall be refinanced, replaced or refunded, the Banks'
Agent (for itself and on behalf of each Bank) hereby agrees that, at the request
of the agent or purchasers under the facility that so refinances, replaces or
refunds the financing under the Receivables Documents, to execute and deliver a
new intercreditor agreement with such agent and/or purchasers on substantially
the same terms as herein provided.

                  3.4.     Beneficiaries. The terms and provisions of this
Agreement shall be for the sole benefit of the parties hereto, the Banks and the
Receivables Purchasers and their respective successors and assigns, and no other
Person shall have any right, benefit, or priority by reason of this Agreement.

                  3.5.     GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK, BUT
OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PROVISIONS).

                  3.6.     Section Titles. The article and section headings
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.

                  3.7.     Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

                  3.8.     Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which

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when so executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same agreement.

                  3.9.     Pledge of Stock of Receivables Seller. The
Administrative Agent hereby agrees that, notwithstanding anything to the
contrary contained in the Receivables Documents, the Originator may pledge to
the Bank's Agent all of its right, title and interest in and to its equity
interest interests in the Receivables Seller, together with all dividends and
other rights relating thereto, pursuant to a Borrower Pledge Agreement in
substantially the form attached hereto as Exhibit A, and the Bank's Agent agrees
to furnish a copy of each such fully executed Borrower Pledge Agreement to the
Administrative Agent.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>

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

                                 GENERAL ELECTRIC CAPITAL
                                 CORPORATION,
                                   as Administrative Agent and as Receivables
                                   Collateral Agent

                                 By: __________________________________________
                                         Name:
                                         Title: Duly Authorized Signatory

                                 Address:   201 High Ridge Road
                                            Stamford, CT  06927
                                 Attention: Vice President-Portfolio/Avondale
                                            Mills
                                 Telecopy:  (203) 316-7821

                                 WACHOVIA BANK, NATIONAL
                                 ASSOCIATION(successor by merger to Wachovia
                                 Bank of Georgia, N.A.,
                                 Wachovia Bank, N.A. and First Union National
                                 Bank), as Banks' Agent

                                 By: __________________________________________
                                         Name:
                                         Title:

                                 Address:   NC0760, 5th Floor, 301 South College
                                            Street Charlotte, NC 28288-0760
                                 Attention: Roger Pelz
                                 Telecopy:  (704) 374-6319

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<PAGE>

                                 AVONDALE FUNDING, LLC,
                                   as Receivables Seller

                                 By: ___________________________________________
                                         Name:
                                         Title:

                                 Address:   133 Marshall Street
                                            Graniteville, South Carolina 29829
                                 Attention: President
                                 Telecopy:  (803) 663-2399

                                 AVONDALE MILLS, INC.,
                                   as the Originator, as Servicer and as
                                   Borrower

                                 By: ___________________________________________
                                         Name:
                                         Title:

                                 Address:   506 South Broad Street
                                            Monroe, Georgia 30655
                                 Attention: Vice Chairman and Chief
                                            Financial Officer
                                 Telecopy:  (770) 267-2543

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<PAGE>

                                                                       EXHIBIT N

                        FORM OF BORROWER PLEDGE AGREEMENT

         THIS BORROWER PLEDGE AGREEMENT (this "Agreement"), is made and entered
into as of August 30, 2002, by and between Wachovia Bank, National Association,
a national banking association, as agent for the Banks parties to the "Credit
Agreement" (as hereinafter defined)(the "Agent"), and Avondale Mills, Inc., an
Alabama corporation ("Borrower");

                              W I T N E S S E T H:

         WHEREAS, pursuant to that certain Second Amended and Restated Credit
Agreement, dated as of September 28, 2000, as amended by First Amendment to
Second Amended and Restated Credit Agreement dated as of August 30, 2001, Second
Amendment to Second Amended and Restated Credit Agreement dated as of February
6, 2002, Third Amendment to Second Amended and Restated Credit Agreement dated
as of March 1, 2002, Fourth Amendment to Second Amended and Restated Credit
Agreement dated as of May 24, 2002 and Fifth Amendment to Second Amended and
Restated Credit Agreement dated as of August 30, 2002 among Borrower, the Agent
and the Banks parties thereto (as amended or modified from time to time, the
"Credit Agreement"), the Banks have made and will make loans to the Borrower;
and

         WHEREAS, the obligations of the Banks to extend financial
accommodations under the Credit Agreement is conditioned on, among other things,
the execution and delivery by Borrower of this Agreement in order to secure all
of the Obligations of the Borrower under the Credit Agreement and to induce the
Banks and the Agent to execute and enter into the Credit Agreement, the Borrower
has agreed to execute and deliver this Agreement, granting a security interest
in, and lien upon, the Receivable Subsidiary Pledged Stock to the Agent for the
benefit of the Banks; and

         WHEREAS, to induce the Banks to extend or to continue to extend
financial accommodations to the Borrower, Borrower has agreed to enter into this
Agreement; and

         WHEREAS, Borrower is the sole owner of 100% of the membership interests
in Avondale Funding, LLC, which is a Receivables Subsidiary, as defined in the
Credit Agreement, and the "Receivables Seller" under the "Purchase Agreement"
described below in Section 14;

         NOW, THEREFORE, for the sum of $10 in hand paid and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and to induce the Banks to extend financial accommodations from
time to time to the Borrower, Borrower and the Agent hereby agree as follows:

         1.       Defined Terms. Capitalized terms contained herein but not
defined herein shall have the meanings given them in the Credit Agreement.

         2.       Pledge of Pledged Collateral. Borrower does hereby pledge,
hypothecate, assign, transfer, set over, deliver and grant a security interest
in and to the Agent in all membership

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<PAGE>

interests in Avondale Funding, LLC held by it (which the Borrower represents and
warrants constitutes 100% of the membership interests therein), which shall
constitute Receivables Subsidiary Pledged Stock, as defined in the Credit
Agreement, together with any and all other securities, cash or other property at
any time and from time to time receivable or otherwise distributed in respect of
or in exchange for any or all of such pledged stock, and together with the
proceeds thereof (hereinafter said property being collectively referred to as
the "Pledged Collateral"), all as security for the payment of all of the
Obligations in existence from time to time. In the event the Borrower receives
from the Receivables Subsidiary a Purchase Money Note, it will deliver such
Purchase Money Note to the Agent and it shall also constitute Pledged
Collateral.

         3.       Holding of Pledged Collateral and Rights. Borrower
acknowledges and agrees that the Agent shall hold the Pledged Collateral,
together with all right, title, interest, powers, privileges and preferences
pertaining or incidental thereto forever, subject, however, to the provisions of
Section 7 hereof and to the return of the Pledged Collateral (or such portion
thereof as may be existing from time to time hereafter after giving effect to
the terms hereof) by the Agent to Borrower upon the final and indefeasible
payment in full of all the Obligations and termination in writing of any and all
credit commitments with respect thereto.

         4.       Representations and Warranties; Certain Covenants. Borrower
hereby represents and warrants (which representations and warranties likewise
shall be deemed to have been renewed by Borrower upon each Borrowing under the
Credit Agreement) that: (i) Borrower has the complete and unconditional
authority to pledge the Pledged Collateral; (ii) Borrower holds the Pledged
Collateral free and clear of any and all liens, charges, encumbrances and
security interests thereon (other than in favor of the Agent) and has good
right, title and legal authority to pledge the Pledged Collateral in the manner
contemplated herein; (iii) all membership interests or stock now owned or
hereafter owned by Borrower and constituting or which will constitute Pledged
Collateral hereunder is, or will be on date of pledge thereof, validly issued,
fully paid and non-assessable; and (iv) no authorization, approval, or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (1) for the pledge by Borrower of the Pledged
Collateral pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by Borrower or (2) for the exercise by Agent of
the voting or other rights provided for in this Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Agreement (except as may be
required in connection with the exercise of such rights or remedies by laws
affecting the voting, offering and sale of securities generally).

         5.       Delivery of Additional Securities; Further Assurances.
Borrower further covenants with the Agent that Borrower will cause any
additional securities or other property issued to or received by Borrower with
respect to any of the Pledged Collateral (except as provided in Section 7
below), whether for value paid by Borrower or otherwise, and including stock
dividends or other distributions on account of the Pledged Collateral, to be
deposited forthwith with the Agent and be pledged hereunder, in each case
accompanied by blank stock powers or other proper instruments of assignment duly
executed by Borrower in such form as may be reasonably required by the Agent.
Borrower agrees that at any time and from time to time, at the expense of
Borrower, Borrower will promptly execute and deliver all further instruments and
documents, and take all further action that the Agent may reasonably request, in

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<PAGE>

other to perfect and protect the security interest granted or purported to be
granted hereby or to enable the Agent to exercise and enforce its rights, powers
and remedies hereunder with respect to any Pledged Collateral.

         6.       Name in Which Pledged Collateral Held. Borrower further
acknowledges and agrees that the Agent may hold any of the Pledged Collateral in
its own name, endorsed or assigned in blank or in the name of any nominee or
nominees, and that the Agent may deliver any or all of the Pledged Collateral to
the issuer or issuers thereof for the purpose of making denominational exchanges
or registrations of transfer or for such other purposes in furtherance of this
Agreement as the Agent may deem advisable.

         7.       Voting Rights; Dividends, Etc. (a) So long as no Event of
Default shall have occurred and be continuing and the Agent has not delivered a
notice to Borrower of the Agent's intention to exercise voting and other
consensual rights pursuant to this Section 7:

                  (i) Borrower shall be entitled to exercise any and all voting
and other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not prohibited by the terms of this Agreement, the
Parent Guaranty, the Credit Agreement or any other Loan Documents; provided,
however, that the Borrower shall give the Agent at least 5 Domestic Business
Days' prior written notice of the manner in which it intends to exercise any
right if such action would have a material adverse effect on the value of the
Pledged Collateral, and following request therefor by the Agent, Borrower shall
not exercise or refrain from exercising any such right; and

                  (ii) the Agent shall execute and deliver (or cause to be
executed and delivered) to Borrower all such proxies and other instruments as
Borrower may reasonably request for the purpose of enabling Borrower to exercise
the voting and other rights which it is entitled to exercise pursuant to clause
(i) above.

                  (iii) Borrower shall be entitled to receive and retain any
nonliquidating cash dividends, interest or any other distribution of property
paid, payable or otherwise distributed in cash in respect of the Pledged
Collateral.

         (b)      Upon the occurrence and during the continuance of an Event of
Default, and with respect to clause (i) below, the delivery of a notice to
Borrower of the Agent's intention to exercise voting and other consensual rights
pursuant thereto:

                  (i) All rights of Borrower to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
Section 7(a) shall cease, and all such rights shall thereupon become vested in
the Agent who shall thereupon have the sole right to exercise such voting and
other consensual rights; provided, however, Borrower shall continue to have the
rights to exercise such voting and other consensual rights notwithstanding the
occurrence and continuance of an Event of Default until the Agent delivers a
notice to Borrower of the Agent's intention to exercise such voting and other
consensual rights.

                  (ii) All rights of Borrower to receive cash dividends,
interest, proceeds or other distributions in cash from the Pledged Collateral,
which it would otherwise be authorized to

                                      230
<PAGE>

receive and retain pursuant to Section 7(a) shall cease and all rights to
dividends, interest, proceeds and other distributions shall thereupon be vested
in the Agent, who shall thereupon have the sole right to receive and hold as
Pledged Collateral such interest or other distributions. All dividends,
interest, proceeds and other distributions which are received by Borrower
contrary to these provisions shall be received in trust for the benefit of the
Agent, shall be segregated from other property or funds of Borrower and shall be
forthwith delivered to the Agent as Pledged Collateral in the same form as so
received (with any necessary endorsement).

         8.       Agent Appointed Attorney-in-Fact. Borrower hereby irrevocably
appoints the Agent as Borrower's attorney-in-fact, with full authority in the
place and stead of Borrower and in the name of Borrower or otherwise, from time
to time in the Agent's discretion, after the occurrence and during the
continuance of an Event of Default, to take any action and to execute any
instrument which the Agent may deem reasonably necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to Borrower
representing any dividend, principal and/or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same, when and to the extent permitted by this
Agreement.

         9.       The Agent May Perform. If Borrower fails to perform any
agreement contained herein, the Agent may take reasonable action to perform, or
cause performance of, such agreement, and the reasonable expenses of the Agent
incurred in connection therewith shall be payable by Borrower under Section 13;
provided, that, the Agent shall exercise commercially reasonable efforts to
notify Borrower prior to taking any such action (although the failure to so
notify Agent shall not limit the Agent's rights hereunder).

         10.      Reasonable Care. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Agent accords the Agent's own property, it being understood
that the Agent shall not have responsibility for (i) ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or
other matters relative to any Pledged Collateral, whether or not the Agent has
or is deemed to have knowledge of such matters, unless reasonably requested to
do so by Borrower, or (ii) taking any necessary steps to preserve rights against
any parties with respect to any Pledged Collateral.

         11.      Events of Default. The following shall constitute "Events of
Default" hereunder:

                  (a)      Should Borrower assign, attempt to encumber, subject
to further pledge or security interest, sell, transfer or otherwise dispose of
any of the Pledged Collateral without the prior written consent of the Agent;

                  (b)      If an "Event of Default" occurs under any of the
Credit Agreement, the other Loan Documents or the Parent Guaranty; or

                  (c)      If any representations or warranties made herein by
Borrower shall be untrue in any material respect when made or furnished.

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<PAGE>

         12.      Remedies. If any Event of Default shall have occurred and be
continuing, subject to the provisions of Section 14 hereof:

                  (a)      The Agent may exercise (in compliance with all
applicable securities laws) in respect of the Pledged Collateral, in addition to
other rights and remedies provided for herein or otherwise available to them,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code in effect in the State of Georgia at that time, and the Agent
may also, without notice except as specified below, sell (in compliance with all
applicable securities laws) the Pledged Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange, over the counter or at
any of the Agent's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the Agent may
deem commercially reasonable or otherwise in such manner as necessary to comply
with applicable federal and state securities laws. The Agent shall be authorized
at any such sale (if it deems it advisable to do so) to restrict the prospective
bidders or purchasers to persons who will represent and agree that they are
purchasing the Pledged Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers at any such sale and such purchasers shall hold the
property sold absolutely, free from any claim or right on the part of Borrower,
and Borrower hereby waives (to the extent permitted by law) all rights of
redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter enacted.
The Agent shall give Borrower at least 10 days' notice of the time and place of
any public sale or the time after which any private sale is to be made , which
Borrower agrees shall constitute reasonable notification. At any such sale, the
Agent may bid (which bid may be, in whole or in part, in the form of
cancellation of Obligations) for and purchase the whole or any part of the
Pledged Collateral. The Agent shall not be obligated to make any sale of Pledged
Collateral regardless of notice of sale having been given. The Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. If sale of all or any part of the
Pledged Collateral is made on credit or for future delivery, the Pledged
Collateral so sold may be retained by the Agent until the sale price is paid by
the purchaser or purchasers thereof, but the Agent shall not incur any liability
in case any such purchaser or purchasers shall fail to take up and pay for the
Pledged Collateral so sold and, in case of any such failure, such Pledged
Collateral may be sold again upon like notice. Borrower agrees that any sale of
the Pledged Collateral conducted by the Agent in accordance with the foregoing
provisions of this Section 12 shall be deemed to be a commercially reasonable
sale under O.C.G.A. Section 11-9-610 of the Georgia Uniform Commercial Code. As
an alternative to exercising the power of sale herein conferred upon them, the
Agent may proceed by a suit or suits at law or in equity to foreclose the
security interest granted under this Agreement and to sell the Pledged
Collateral, or any portion thereof, pursuant to a judgment or decree of a court
or courts of competent jurisdiction.

                  (b)      Any cash held by the Agent as Pledged Collateral and
all cash proceeds received by the Agent in respect of any sale of, collection
from, or other realization upon or any part of the Pledged Collateral following
the occurrence of an Event of Default shall be applied by the Agent for the
benefit of the Banks in the following manner: first, in discharge of all
expenses incurred by the Agent which Borrower is obligated to reimburse the
Agent pursuant to Section

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<PAGE>

13 hereof; secondly, to all outstanding fees and other expenses owing under the
Credit Agreement or the other Loan Documents in such order as the Required Banks
shall elect; thirdly, to accrued and unpaid interest on the Obligations in such
order as the Required Banks may elect; and lastly, to the principal balances of
any such Obligations then outstanding in such order as the Required Banks may
elect.

                  (c)      Any surplus of such cash or cash proceeds held by the
Agent and remaining after payment in full of all the Obligations shall be paid
over to Borrower or to whomsoever may be lawfully entitled to receive such
surplus.

         13.      Expenses. Borrower will, upon demand, pay to the Agent the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel, actually incurred, and of any experts and agents, and
including any taxes or fees incurred on account of the execution, issuance,
delivery or recording of this Agreement or other documents executed in
connection herewith which the Agent may incur in connection with (i) the sale
of, collection from, or other realization upon, any of the Pledged Collateral,
or (ii) the exercise or enforcement of any of the rights of the Agent hereunder,
or (iii) the failure by Borrower to perform or observe any of the provisions
hereof.

         14.      Pledged Shares; Limitation on Actions. The Parties hereto
acknowledge that the Receivables Subsidiary (as "Receivables Seller") and
Borrower have entered into a structured receivables financing transaction with
Redwood Receivables Corporation ("Redwood") and General Electric Capital
Corporation (the "Redwood Agent") pursuant to a Receivables Purchase and
Servicing Agreement (the "Purchase Agreement"). To induce Redwood and the
Redwood Agent to permit the pledge of the Pledged Collateral), the parties
hereto agree to the following limitations. Capitalized terms used in this
Section 14 and not otherwise defined herein shall have the meanings ascribed to
such terms in Annex X to the Purchase Agreement.

         (a)      Anything herein or in the Credit Agreement to the contrary
notwithstanding:

                  (i)      Until the date on which the Purchaser Interest and
                  all other amounts owed under the Related Documents have been
                  indefeasibly paid in full in cash in accordance with the terms
                  of the Related Documents, the Agent, for itself and as agent
                  for the Banks, agrees that, upon exercising its rights with
                  respect to the Pledged Collateral, it will not exercise any
                  rights to vote the Pledged Collateral or otherwise control the
                  actions and operations of the Receivables Subsidiary with
                  respect to any matters, except (i) to vote in favor of a
                  prepayment or termination of the Purchase Agreement in
                  accordance with its terms and (ii) to vote in favor of a
                  dividend or distribution, and, until the Purchaser Interest
                  and all other amounts owed under the Related Documents have
                  been indefeasibly paid as described above, the Agent's rights
                  will be limited to receiving any dividends and distributions
                  on the Pledged Collateral which, pursuant to the terms of the
                  Related Documents, are allowed to be distributed on account of
                  the Pledged Collateral. Without limiting the foregoing, the
                  Agent shall not vote the Pledged Collateral or otherwise
                  exercise control over the Receivables Subsidiary so as to
                  cause the Receivables Subsidiary: (A) to violate or breach any
                  term or provision in any

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<PAGE>

                  Related Documents, (B) to make dividends or distributions on
                  such Pledged Collateral except as described above, (C) to
                  amend or alter any of the Receivables Subsidiary's
                  organizational documents, or (D) to incur any debt other than
                  as expressly permitted under the Related Documents;

                  (ii)     In the event that the Agent receives any payments or
                  funds relating to the Receivables Program Assets (as defined
                  in the Intercreditor Agreement) (the "Receivables Program
                  Assets") prior to the date on which the Purchaser Interest and
                  all other amounts owed under the Related Documents have been
                  indefeasibly paid in full in cash in accordance with the terms
                  of the Related Documents, the Agent shall hold such payments
                  or funds in trust for the benefit of the Redwood Agent, and
                  shall promptly transfer such payments or funds to the Redwood
                  Agent;

                  (iii)    The provisions of this Section 14 shall continue to
                  be effective or be reinstated, as the case may be, if at any
                  time any payment of the Purchaser Interest or any other
                  amounts owed under the Related Documents is rescinded or must
                  otherwise be returned by the Redwood Agent or the Purchasers
                  upon the insolvency, bankruptcy or reorganization of the
                  Receivables Subsidiary or otherwise, all as though such
                  payment had not been made; and

                  (iv)     Prior to the date on which the Purchaser Interest and
                  all other amounts owed under the Related Documents have been
                  indefeasibly paid in full in cash in accordance with the terms
                  of the Related Documents, neither the Agent nor any Bank shall
                  object to or contest in any administrative, legal or equitable
                  action or proceeding (including, without limitation, any
                  insolvency, bankruptcy, receivership, liquidation,
                  reorganization, winding up, readjustment, composition or other
                  similar proceeding relating to the Borrower or the Receivables
                  Subsidiary or their respective property) or object to or
                  contest in any other manner (A) the interests of the
                  Receivables Subsidiary and its successors and assigns in any
                  of the Receivables Program Assets transferred by the Borrower
                  or its affiliates to the Receivables Subsidiary pursuant to
                  the Related Documents and/or (B) the interests of the Redwood
                  Agent or the Purchasers in the Receivables Program Assets.
                  Neither the Agent, nor any Bank shall object to or contest in
                  any manner the receipt of any payment by the Redwood Agent
                  and/or the Purchasers with respect to the Receivables Program
                  Assets for the satisfaction of the Purchaser Interest.

         (b)      The Redwood Agent shall be a third-party beneficiary with
respect to this Section 14.

         (c)      So long as the Purchaser Interest and all other amounts owed
under the Related Documents have not been indefeasibly paid in full in cash in
accordance with the terms of the Related Documents, this Section 14 shall not be
amended, modified or supplemented without the prior written consent of the
Redwood Agent, which consent shall be at the sole discretion of the Redwood
Agent, and the provisions of this Section 14 shall be contained in any agreement
that

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<PAGE>

amends and restates this Agreement. The Agent and the Banks agree that no such
party shall enter into any additional agreement that would adversely affect the
rights of the Redwood Agent as provided hereunder.

         15.      Security Interest Absolute. All rights of the Agent hereunder,
the security interest granted to the Agent hereunder, and all obligations of
Borrower hereunder, shall be absolute and unconditional irrespective of any of
the following, and Borrower expressly consents to the occurrence of any of such
events and waives, in its capacity as Borrower, to the extent permitted by law,
any defense arising therefrom:

                  (i) any lack of validity or enforceability of any of the Loan
Documents or any other agreement or instrument relating thereto;

                  (ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from any of the Loan Documents;

                  (iii) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to or departure
from any of the Loan Documents, including, without limitation, the Security
Agreement and any Operative Mortgages or any other guaranty for all or any of
the Obligations; or

                  (iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Borrower in respect of the Obligations
or in respect of this Agreement.

         16.      Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by Borrower herefrom shall in any
event be effective unless the same shall be in writing and signed by the Agent
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.

         17.      No Waiver; Cumulative Remedies. No failure on the part of the
Agent to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy by the Agent preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.

         18.      Severability. If any provision of this Agreement or the
application thereof to any party hereto or circumstances shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to any other party thereto or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.

         19.      Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including bank wire, telecopier or similar
writing) and shall be given to such party at its address or telecopier number
set forth on the signature pages or at such other address or telecopier number
as such party may hereafter specify for the purpose by notice to each other
party. Each such notice, request or other communication shall be effective (i)
if given by

                                      235
<PAGE>

telecopier, when such telecopy is transmitted to the telecopier number specified
in this Section and the appropriate confirmation is received, (ii) if given by
mail, 3 Domestic Business Days after such communication is deposited in the
mail, with first class postage prepaid, addressed as aforesaid or (iii) if given
by any other means, when delivered at the address specified in this Section 19.

         20.      Time is of the Essence. Time is of the essence in this
Agreement.

         21.      Interpretation. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party having
or being deemed to have structured or dictated such provision.

         22.      The Agent Not Joint Venturer. Neither this Agreement nor any
agreements, instruments, documents or transactions contemplated hereby shall in
any respect be interpreted, deemed or construed as making the Agent a partner or
joint venturer with Borrower or as creating any similar relationship or entity,
and Borrower agrees that it will not make any contrary assertion, contention,
claim or counterclaim in any action, suit or other legal proceeding involving
the Agent and Borrower.

         23.      Jurisdiction. Borrower agrees that any legal action or
proceeding with respect to this Agreement may be brought in the courts of the
State of Georgia or the United States of America for the Northern District of
Georgia, Atlanta Division, all as the Agent may elect. By execution of this
Agreement, Borrower hereby submits to each such jurisdiction, hereby expressly
waiving whatever rights may correspond to it by reason of its present or future
domicile. Nothing herein shall affect the right of the Agent to commence legal
proceedings or otherwise proceed against Borrower in any other jurisdiction or
to serve process in any manner permitted or required by law.

         24.      Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia and shall inure to
the benefit of and be binding upon the successors and assigns of the parties
hereto.

         25.      Counterparts. This Agreement may be executed in two or more
counterparts, each of which when fully executed shall be an original, and all of
said counterparts taken together shall be deemed to constitute one and the same
agreement.

                         [Signatures on Following Page]

                                      236
<PAGE>

         IN WITNESS WHEREOF, Borrower has caused this Agreement to be duly
executed under seal as of the date first above written.

"Borrower"

AVONDALE MILLS, INC.  (SEAL)

By: _______________________________
         Title:

Avondale Mills, Inc.
506 South Broad Street
Monroe, Georgia 30655
Attention: Vice Chairman and Chief Financial
Telecopier number: 770-267-2543
Confirmation number: 770-267-2226

ACCEPTED AND AGREED:

WACHOVIA BANK, NATIONAL ASSOCIATION,
in its capacity as Agent

By: _______________________________
         Title:

Wachovia Bank, National Association
NC0760, 5th Floor, 301 South College Street
Charlotte, NC 28288-0760
Attention: Roger Pelz
Telecopier number: 704-374-6319
Telephone number: 704-374-6060

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<PAGE>

                                    Exhibit A
                          To Borrower Pledge Agreement

                       Description of the Capital Stock of
                          Avondale Receivables Company

     500 Shares, $0.01 Par Value Common Stock Evidenced by Certificate No. 1

                       Description of the Capital Stock of
                    Avondale Mills Graniteville Fabric, Inc.

     1000 Shares, $1 Par Value Common Stock Evidenced by Certificate No. ___

                                      238
<PAGE>

                                                                       EXHIBIT O

                           LIMITED GUARANTY AGREEMENT

                  THIS LIMITED GUARANTY AGREEMENT (this "Guaranty") is made as
of August 29, 1997, by Avondale Mills Graniteville Fabrics, Inc., a Delaware
corporation (the "Subsidiary") in favor of the Agent, for the ratable benefit of
the Banks, under the Credit Agreement referred to below;

                               W I T N E S S E T H

                  WHEREAS, Avondale Mills, Inc., an Alabama corporation (the
"Borrower") and WACHOVIA BANK, N.A., as Agent (the "Agent"), and The First
National Bank of Chicago, as Documentation Agent, and certain other Banks from
time to time party thereto have entered into a certain Amended and Restated
Credit Agreement dated as of April 29, 1996, as amended by First Amendment to
Credit Agreement dated as of March 20, 1997 and Second Amendment to Credit
Agreement dated as of August 29, 1997 (as so amended, and as it may be amended
or modified from time to time, the "Credit Agreement"), providing, subject to
the terms and conditions thereof, for extensions of credit to be made by the
Banks to the Borrower for the benefit of the Borrower and of the Subsidiary;

                  WHEREAS, it is a condition precedent to the effectiveness of
the Second Amendment to Credit Agreement referred to above, and to the
acquisition by the Subsidiary of the AMGF Plant described therein, among other
things, that the Subsidiary execute and deliver this Guaranty whereby the
Subsidiary shall guarantee the payment when due of all principal, interest and
other amounts that shall be at any time payable by the Borrower under the Credit
Agreement, the Notes and the other Principal Documents, subject to the
limitation on liability provisions contained herein; and

                  WHEREAS, in consideration of the financial and other support
that the Borrower has provided, and such financial and other support as the
Borrower may in the future provide, to Subsidiary, and in order to induce the
Banks and the Agent to enter into the Second Amendment to Credit Agreement
referred to above, the Subsidiary is willing to guarantee the obligations of the
Borrower under the Credit Agreement, the Notes, and the other Principal
Documents, subject to the limitation of liability provisions contained in
Section 15 hereof;

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

                  SECTION 1. Definitions. Terms defined in the Credit Agreement
and not otherwise defined herein have, as used herein, the respective meanings
provided for therein.

                  SECTION 2. Representations, Warranties and Covenants. The
Subsidiary hereby represents and warrants that:

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<PAGE>

                  (a)      The Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, is duly qualified to transact business in every jurisdiction
where, by the nature of its business, such qualification is necessary, and has
all corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except for
failures which have not had and would not reasonably be expected to have or
cause a Material Adverse Effect.

                  (b)      The execution, delivery and performance by the
Subsidiary of this Guaranty, the AMGF Security Agreement and the AMGF Mortgage
(i) are within the corporate powers of the Subsidiary, (ii) have been duly
authorized by all necessary corporate action, (iii) require no action by or in
respect of or filing with, any governmental body, agency or official, (iv) do
not contravene, or constitute a default under, any provision of applicable law
or regulation or of the certificate of incorporation or by-laws of the
Subsidiary or any material agreement, judgment, injunction, order, decree or
other instrument binding upon the Subsidiary, and (v) do not result in the
creation or imposition of any Lien on any asset of the Subsidiary, except in
favor of the Agent.

                  (c)      This Guaranty constitutes a valid and binding
agreement of the Subsidiary enforceable in accordance with its terms, and the
AMGF Security Agreement and the AMGF Mortgage, when executed and delivered in
accordance with the Credit Agreement, will constitute valid and binding
obligations of the Subsidiary, enforceable in accordance with their respective
terms, provided that the enforceability hereof and thereof is subject in each
case to general principles of equity and to bankruptcy, insolvency and similar
laws affecting the enforcement of creditors' rights generally.

                  SECTION 3. The Guaranty. Subject to the provisions of Section
15, the Subsidiary hereby unconditionally guarantees the full and punctual
payment (whether at stated maturity, upon acceleration or otherwise) of the
principal of and interest on each Note issued by the Borrower pursuant to the
Credit Agreement, and the full and punctual payment of all other amounts payable
by the Borrower under the Credit Agreement and the other Principal Documents,
including principal, interest, fees, costs and indemnification amounts, and any
extensions and renewals thereof in whole or in part, and any other amounts
constituting Obligations as defined in the Credit Agreement (all of the
foregoing obligations being referred to collectively as the "Guaranteed
Obligations"). Upon failure by the Borrower to pay punctually any such amount,
the Subsidiary agrees that it shall forthwith on demand pay the amount not so
paid at the place and in the manner specified in the Credit Agreement, the
relevant Note or the relevant Principal Document, as the case may be.

                  SECTION 4. Guaranty Unconditional. Subject to Section 15, the
obligations of the Subsidiary hereunder shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:

                           (i)      any extension, renewal, settlement,
         compromise, waiver or release in respect of any obligation of the
         Borrower under the Credit Agreement, any Note, or any other Principal
         Document, by operation of law or otherwise or any obligation of any
         other guarantor of any of the Obligations;

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<PAGE>

                           (ii)     any modification or amendment of or
         supplement to the Credit Agreement, any Note, or any other Principal
         Document;

                           (iii)    any release, nonperfection or invalidity of
         any direct or indirect security for any obligation of the Borrower
         under the Credit Agreement, any Note, any Principal Document, or any
         obligations of any other guarantor of any of the Obligations;

                           (iv)     any change in the corporate existence,
         structure or ownership of the Borrower or any other guarantor of any of
         the Guaranteed Obligations, or any insolvency, bankruptcy,
         reorganization or other similar proceeding affecting the Borrower, or
         any other guarantor of the Guaranteed Obligations, or its assets or any
         resulting release or discharge of any obligation of the Borrower, or
         any other guarantor of any of the Guaranteed Obligations;

                           (v)      the existence of any claim, setoff or other
         rights which the Subsidiary may have at any time against the Borrower,
         any other guarantor of any of the Guaranteed Obligations, the Agent,
         any Bank or any other Person, whether in connection herewith or any
         unrelated transactions, provided that nothing herein shall prevent the
         assertion of any such claim by separate suit or compulsory
         counterclaim;

                           (vi)     any invalidity or unenforceability relating
         to or against the Borrower, or any other guarantor of any of the
         Guaranteed Obligations, for any reason related to the Credit Agreement,
         any other Principal Document, or any other guaranty, or any provision
         of applicable law or regulation purporting to prohibit the payment by
         the Borrower, or any other guarantor of the Guaranteed Obligations, of
         the principal of or interest on any Note or any other amount payable by
         the Borrower under the Credit Agreement, the Notes, or any other
         Principal Document; or

                           (vii)    any other act or omission to act or delay of
         any kind by the Borrower, any other guarantor of the Guaranteed
         Obligations, the Agent, any Bank or any other Person or any other
         circumstance whatsoever which might, but for the provisions of this
         paragraph, constitute a legal or equitable discharge of the Guarantor's
         obligations hereunder.

                  SECTION 5. Discharge Only Upon Payment In Full; Reinstatement
In Certain Circumstances. The Subsidiary's obligations hereunder shall remain in
full force and effect until all Guaranteed Obligations shall have been paid in
full and the Commitments under the Credit Agreement shall have terminated or
expired. If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Borrower under the Credit Agreement or any
other Principal Document is rescinded or must be otherwise restored or returned
upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise,
the Subsidiary's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time.

                  SECTION 6. Waiver of Notice by the Subsidiary. The Subsidiary
irrevocably waives acceptance hereof, presentment, demand, protest and, to the
fullest extent permitted by

                                      241
<PAGE>

law, any notice not provided for herein, as well as any requirement that at any
time any action be taken by any Person against the Borrower, any other guarantor
of the Guaranteed Obligations, or any other Person.

                  SECTION 7. Other Waivers by the Subsidiary. The Subsidiary
hereby expressly waives, renounces, and agrees not to assert, any right, claim
or cause of action, including, without limitation, a claim for reimbursement,
subrogation, indemnification or otherwise, against the Borrower arising out of
or by reason of this Guaranty or the obligations of the Subsidiary hereunder,
including, without limitation, the payment or securing or purchasing of any of
the Guaranteed Obligations by the Subsidiary. The waiver, renunciation and
agreement contained in the immediately preceding sentence is for the benefit of
the Agent and the Banks and also for the benefit of the Borrower who may assert
the benefits thereof as a third-party beneficiary, and the Subsidiary may be
released from such waiver, renunciation and agreement only by the execution and
delivery, by the Agent, the Required Banks and the Borrower, of an instrument
expressly releasing the Subsidiary therefrom.

                  SECTION 8. Stay of Acceleration. If acceleration of the time
for payment of any amount payable by the Borrower under the Credit Agreement,
any Note or any other Principal Document is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower, all such amounts otherwise subject
to acceleration under the terms of the Credit Agreement, any Note or any other
Principal Document shall nonetheless be payable by the Subsidiary hereunder
forthwith on demand by the Agent made at the request of the Required Banks.

                  SECTION 9. Notices. All notices, requests and other
communications to any party hereunder shall be given or made by telecopier or
other writing and telecopied or mailed or delivered to the intended recipient at
its address or telecopier number set forth on the signature pages hereof or such
other address or telecopy number as such party may hereafter specify for such
purpose by notice to the Agent in accordance with the provisions of Section 9.01
of the Credit Agreement. Except as otherwise provided in this Guaranty, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice, 3
Domestic Business Days after such communication is deposited in the mails with
first class postage prepaid, in each case given or addressed as aforesaid.

                  SECTION 10. No Waivers. No failure or delay by the Agent or
any Banks in exercising any right, power or privilege hereunder shall operate as
a waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies provided in this Guaranty, the Credit
Agreement, the Notes, and the other Principal Documents shall be cumulative and
not exclusive of any rights or remedies provided by law.

                  SECTION 11. Successors and Assigns. This Guaranty is for the
benefit of the Agent and the Banks and their respective successors and assigns
and in the event of an assignment of any amounts payable under the Credit
Agreement, the Notes, or the other Principal Documents, the rights hereunder, to
the extent applicable to the indebtedness so assigned, may be transferred with
such indebtedness. This Guaranty may not be assigned by the Subsidiary

                                      242
<PAGE>

without the prior written consent of the Agent and the Required Banks, and shall
be binding upon the Subsidiary and its successors and permitted assigns.

                  SECTION 12. Changes in Writing. Neither this Guaranty nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only in writing signed by the Subsidiary and the Agent with the consent of the
Required Banks.

                  SECTION 13. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF GEORGIA. EACH OF THE SUBSIDIARY AND THE AGENT
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF GEORGIA AND OF ANY GEORGIA STATE COURT
SITTING IN ATLANTA, GEORGIA AND FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING
OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE
SUBSIDIARY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH ANY OF THEM MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE
OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
EACH OF THE SUBSIDIARY AND THE AGENT HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.

                  SECTION 14. Taxes, etc. All payments required to be made by
the Subsidiary hereunder shall be made without setoff or counterclaim and free
and clear of and without deduction or withholding for or on account of, any
present or future taxes, levies, imposts, duties or other charges of whatsoever
nature imposed by any government or any political or taxing authority to the
same extent and with the same effect as provided in Section 2.11(c) of the
Credit Agreement with respect to payments made by the Borrower.

                  SECTION 15. Limitation of Liability. Any other provision of
this Guaranty, or the AMGF Documents to the contrary notwithstanding, the Agent
and the Banks, by acceptance hereof, expressly agree that the Subsidiary shall
not have any liability hereunder for an amount in excess of the sum of: (i) the
sum of (x) the aggregate principal amount of all loans, advances and other
financial accommodations made to the Subsidiary by the Borrower, directly or
indirectly, both prior to and after the date hereof (including, without
limitation, pursuant to the AMGF/Graniteville Transaction), less (y) all amounts
repaid by the Subsidiary thereon; plus (ii) interest on the amount determined
under clause (i) from the date due until the date paid at the Default Rate; plus
(iii) all costs of collection, including reasonable attorneys fees actually
incurred; plus (iv) all protective advances and (without duplication of
paragraph (iii) all costs and expenses incurred by the Agent pursuant to the
AMGF Mortgage or the AMGF Security Agreement; plus (v) the aggregate value of
all other assets transferred from time to time on and after the date hereof by
the Borrower to the Subsidiary (including, without limitation, pursuant to the
AMGF/Graniteville Transaction).

                                      243
<PAGE>

                  IN WITNESS WHEREOF, the Subsidiary has caused this Guaranty to
be duly executed by its authorized officer as of the date first above written.

                                       AVONDALE MILLS GRANITEVILLE FABRICS,
                                       INC.

                                       By: _____________________________________
                                           Title:

                                       Avondale Mills Graniteville Fabrics, Inc.
                                       _________________________________________
                                       _________________________________________
                                       Attention: Chairman and
                                       Chief Executive Officer
                                       Telecopier number: 770-267-2543
                                       Telephone number: 770-267-2226

                                      244

<PAGE>

                                                                       EXHIBIT P

                               SECURITY AGREEMENT
                   (Avondale Mills Graniteville Fabrics, Inc.)

                  THIS SECURITY AGREEMENT (this "Agreement") is made and entered
into as of August 29, 1997 by and between AVONDALE MILLS GRANITEVILLE FABRICS,
INC. (the "Guarantor") and WACHOVIA BANK, N.A., as agent for the Banks parties
to the "Credit Agreement" (as hereinafter defined) (the "Agent")

                               W I T N E S E T H:

                  WHEREAS, pursuant to that certain Amended and Restated Credit
Agreement, dated as of April 29, 1996, as amended by First Amendment to Credit
Agreement dated as of even date herewith, among Avondale Mills, Inc., the Agent,
The First National Bank of Chicago, as Documentation Agent, and the Banks
parties thereto (as so amended, and as hereafter amended or supplemented from
time to time, the "Credit Agreement", the Guarantor has executed and delivered
the a Limited Guaranty Agreement dated as of even date herewith in favor of the
Agent, for the benefit of the Banks, unconditionally Guaranteeing the payment of
all of the Obligations, subject to the limitation of liability provisions
contained therein; and

                  WHEREAS, in order to secure the indebtedness of the Guarantor
pursuant to the AMGF Guaranty and to induce the Banks and the Agent to execute
and enter into the Second Amendment to the Credit Agreement, the Guarantor has
agreed to execute and deliver this Agreement (which is the AMGF Security
Agreement referred to in the Credit Agreement), granting a security interest in,
and lien upon, the Collateral to the Agent for the benefit of the Banks;

                  NOW, THEREFORE, for and in consideration of the above premises
and other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged and Guarantor and the Agent hereby covenant and agree as
follows:

                  1.       DEFINITIONS. Unless otherwise defined herein,
capitalized terms used herein have the meanings set forth in the Credit
Agreement. In addition, the following terms have the meanings set forth below,
unless the context requires otherwise:

                  "Accounts Receivable Collateral" means all rights of the
Guarantor to payment for goods sold or leased, or to be sold or to be leased, or
for services rendered or to be rendered, howsoever evidenced or incurred,
including, without limitation, all accounts, instruments, chattel paper and
general intangibles, all returned or repossessed goods and all books, records,
computer tapes, programs and ledger books arising therefrom or relating thereto,
whether now owned or hereafter acquired or arising.

                                      245

<PAGE>

                  "Account Debtor" means the Person who is obligated on any of
the Accounts Receivable Collateral or otherwise is obligated as a purchaser or
lessee of any of the Inventory Collateral.

                  "Act" means the Uniform Commercial Code - Secured Transactions
of Georgia (O.C.G.A. Art. 11-9), and any act that may be substituted
therefor, as from time to time amended.

                  "Agreement" means this Agreement, together with all exhibits,
riders, supplements, addenda and additions now or hereafter attached hereto or
made a part hereof, and all amendments hereof.

                  "Collateral" means and includes all of the property described
in Paragraph 4 hereof.

                  "Collateral Locations" means those locations set forth on
Exhibit "A" attached hereto and by this reference made a part hereof.

                  "Credit Agreement" has the meaning set forth in the recitals
hereto.

                  "Documentary Collateral" means all chattel paper, instruments,
documents or notes of the Guarantor (excluding any of the foregoing arising out
of the sale or lease of goods or the furnishing of services) and all payments
thereunder and instruments and other property from time to time delivered in
respect thereof or in exchange therefor, and all bills of sale, bills of lading,
warehouse receipts, and other documents of title, whether now owned or hereafter
acquired or arising.

                  "Equipment Collateral" means all equipment of the Guarantor,
or in which it has rights, whether now owned or hereafter acquired, wherever
located, including, without limitation, all machinery, furniture, furnishings,
leasehold improvements, motor vehicles, forklifts, rolling stock, dies and tools
used or useful in the Guarantor's business but excluding, in any event, all
fixtures.

                  "Intangibles Collateral" means all general intangibles of the
Guarantor (excluding any general intangibles evidencing rights of the Guarantor
to payment for goods sold or leased, or to be sold or leased, or for services
rendered or to be rendered), whether now existing or hereafter acquired or
arising, including, without limitation, all copyrights, royalties, trademarks,
trade names, tax refunds, rights to tax refunds, service marks, patent and
proprietary rights, blueprints, drawings, designs, trade secrets, plans,
diagrams, schematics and assembly and display materials relating thereto and all
customer lists.

                  "Inventory Collateral" means all inventory of the Guarantor,
or in which it has rights, whether now owned or hereafter acquired, wherever
located, including, without limitation, all goods of the Guarantor held for sale
or lease or furnished or to be furnished under contracts of service, all goods
held for display or demonstration, goods on lease or consignment, returned and
repossessed goods, all raw materials, work-in-process, finished goods and
supplies used or consumed in the Guarantor's business, together with all
documents, documents of title,

                                      246

<PAGE>

dock warrants, dock receipts, warehouse receipts, bills of lading or orders for
the delivery of all, or any portion, of the foregoing.

                  "Secured Obligations" means and includes the following
collectively:

                  1.       Any and all indebtedness, obligations and liabilities
of the Guarantor to the Agent and/or the Banks now existing pursuant to, or
hereafter arising out of, or otherwise relating to the AMGF Guaranty, subject to
the limitation of liability provisions contained herein.

                  2.       Any and all indebtedness, obligations and liabilities
of the Guarantor to the Agent and/or the Banks now existing or hereafter
arising, in either instance, under, by virtue of or pursuant to this Agreement.

                  3.       Any and all advances hereafter made by the Agent
and/or the Banks at any time to protect or preserve the Collateral or the
security interest on the Collateral granted pursuant hereto, or for taxes,
assessments, insurance premiums or other advances authorized under the terms of
this Agreement (whether or not the original Guarantor remains the owner of the
Collateral at the time of any of such advances).

                  "Permitted Liens" means the liens and encumbrances pertaining
to portions of the Collateral described on Exhibit "B" attached hereto and by
this reference made a part hereof.

                  In addition to and cumulative with such other definitions and
descriptions as herein may be provided therefor, the terms "equipment",
"inventory", "accounts", "general intangibles", "chattel paper", "documents of
title", "goods", "consumer goods" and "instruments", if and to the extent used
herein, shall have such meanings as may be respectively ascribed to them in the
Act as in existence on date hereof.

                  3.       GRANT OF SECURITY INTEREST. As a general and
continuing collateral security for payment of the Guaranteed Obligations, the
Guarantor hereby grants to the Agent for the ratable benefit of the Banks a
security interest in and security title to all Collateral and the Guarantor
makes such further agreements with the Agent in regard thereto as hereinafter
set forth.

                  4.       DESCRIPTION OF COLLATERAL.

                  The following described property, wherever located, whether
now existing or hereafter acquired or arising constitutes the Collateral:

                           (a)      the Accounts Receivable Collateral;

                           (b)      the Equipment Collateral;

                           (c)      the Intangibles Collateral;

                           (d)      the Inventory Collateral;

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<PAGE>

                           (e)      the Documentary Collateral; and

                           (f)      all products and proceeds of any and all of
the foregoing, including, without limitation, insurance or condemnation
proceeds, all property received wholly or partially in trade or exchange for any
of the foregoing, and all rents, revenues, issues, profits and proceeds arising
from the sale, lease, license, encumbrance, collection or any other temporary or
permanent disposition of any of the foregoing or any interest therein.

                  5.       REPRESENTATIONS AND WARRANTIES.

                           5.1      The Guarantor is, or, with respect to
Collateral acquired after the date hereof, will be, the owner of the Collateral
free and clear from any Lien, except for the Permitted Liens. No financing
statement covering any of the Collateral is on file in any public office other
than any evidencing Permitted Liens.

                           5.2      Location. As of the date hereof, the
tangible portion of the Collateral is situated only at one or more Collateral
Locations, other than as permitted by Section 5.6.

                           5.3      Name. The name of the Guarantor is as set
forth on the signature page hereof and the Guarantor has not conducted any
business under any other name, other than its former name, "Camp Helen Company",
during the past 6 years.

                           5.4      Right to Assign. Guarantor has the full
right, power and authority to make this assignment of the Collateral.

                           5.5      Delivery. Guarantor has delivered all
agreements, letters of credit, promissory notes, chattel paper or anything else
the physical possession of which is necessary in order for Agent to perfect or
preserve the priority of its Lien in the Collateral.

                           5.6      Purchaser of Collateral. Except for the
acquisition of assets from the Borrower, during the past 6 years, Guarantor has
not purchased any of the Collateral in a bulk transfer or in a transaction which
was outside the ordinary course of the business of Guarantor's seller.

                  6.       GENERAL COVENANTS.

                           6.1      Liens. The Guarantor shall keep the
Collateral free and clear of all Liens, except for the Permitted Liens

                           6.2      Casualty. The Guarantor shall promptly
notify the Agent of any material loss of or damage to the Inventory Collateral
or the Equipment Collateral or any part thereof.

                           6.3      Use of Collateral. Until there occurs an
Event of Default the Guarantor may, subject to the provisions of Paragraph 6
hereof, use the Collateral in any lawful

                                      248

<PAGE>

manner not inconsistent with this Agreement or with the terms or conditions of
any policy of insurance thereon.

                           6.4      Disposition of Collateral. The Guarantor may
not sell, lease, exchange or otherwise dispose of any of the Collateral except
as hereinafter specifically provided. Guarantor may sell, lease, exchange or
otherwise dispose of any portion of the Inventory Collateral in the ordinary
course of business for cash or upon open account or on terms of payment
ordinarily extended to its customers. Upon the sale, exchange or other
disposition of the Inventory Collateral, the security interest created and
provided for herein shall continue in and attach to any proceeds thereof,
without break in continuity and without further formality or act, including,
without limitation, accounts, contract rights, shipping documents, documents of
title, bills of lading, warehouse receipts, dock warrants, dock receipts and
cash or non-cash proceeds, and in the event of any unauthorized sale, shall
continue in Inventory Collateral itself. Guarantor may sell Equipment Collateral
pursuant and subject to the provisions of Sections 2.08(b)(i)(B) and 5.14 of the
Credit Agreement. In addition, Guarantor may sell, exchange or otherwise dispose
of portions of the Equipment Collateral which are obsolete, worn-out or
unsuitable for continued use by Guarantor if such Equipment Collateral is
replaced promptly upon its disposition with equipment constituting Equipment
Collateral having a market value equal or greater than the Equipment Collateral
so disposed of and in which Agent shall obtain and have a Lien pursuant hereto
of the same priority as in the Equipment Collateral so disposed of.

                           6.5      Insurance. The Guarantor agrees that it will
obtain and maintain insurance on the Inventory Collateral and the Equipment
Collateral as required by Section 5.17 of the Credit Agreement, with loss
payable to the Agent as its interests may appear. Such insurance shall not be
cancelable by the Guarantor, unless with the prior written consent of the
Required Banks, or by the Guarantor's insurer, unless with at least 30 days
advance written notice to the Agent.

                           6.6      Location. The Guarantor agrees not to locate
the Inventory Collateral or the Equipment Collateral (other than (i)Rolling
Stock and other goods which are covered by a certificate of title, as
contemplated in section 11-9-103(3)(a) of the Act and (ii) other goods which are
mobile and which are of a type normally used in more than one jurisdiction and
are not covered by a certificate of title, as contemplated in Section
11-9-103(3)(a) of the Act) at any location other than a Collateral Location
without providing written notice to the Agent no later than 30 days after such
relocation; provided, however, that nothing contained herein shall be deemed to
prohibit the Guarantor, without notice to or the consent of the Agent, from
transferring temporarily (for periods not to exceed 3 months in any event)
Inventory Collateral or Equipment Collateral from a Collateral Location to
another location at any time or from time to time hereafter for the limited
purpose of having work performed on such Inventory Collateral or Equipment
Collateral, or for temporary storage thereof or for shipment thereof to a
Collateral Location, if done in the ordinary course of the Guarantor's business.
In addition, to the extent the Guarantor should warehouse any of the Inventory
Collateral at any time hereafter at any location other than a Collateral
Location, the Guarantor acknowledges and agrees that such warehousing may be
conducted only by warehousemen who have been pre-approved by the Agent and who,
in any event, shall issue non-negotiable

                                      249

<PAGE>

warehouse receipts in the Agent's name to evidence any such warehousing of goods
constituting Inventory Collateral. If the Guarantor consigns any part of the
Inventory Collateral, it will comply with Section 2-326 of the Uniform
Commercial Code of any state where such Inventory Collateral is located with
respect thereto, by filing in the appropriate public office or offices UCC-1
financing statements showing the Guarantor as consignor and the Agent as
assignee of consignor, and will furnish copies thereof to the Agent.

                           6.7      The Guarantor shall deliver to the Agent
within 60 days after receiving written notice from the Agent directing it to do
so, the original title certificates to all of the Rolling Stock, together with
duly executed applications in the appropriate form for new certificates of title
thereto showing thereon the Lien of the Agent pursuant to the Security
Agreement.

                  7.       SPECIAL PROVISIONS REGARDING RECEIVABLES AND
INVENTORY. Each item of the Accounts Receivable Collateral arises or will arise
under a contract between the Guarantor and an Account Debtor, or from the bona
fide sale or delivery of goods to or performance of services for, an Account
Debtor. The Guarantor will promptly notify the Agent of all returns,
repossessions and recoveries which are reasonably expected to result in losses
to the Guarantor in excess of $500,000 in any month. From and after the
occurrence of any Event of Default and during the continuation thereof, (i) the
Agent may collect, realize, sell or otherwise deal with the Accounts Receivable
Collateral or any and all sums owing or which may become due upon any items of
the Inventory Collateral or any part thereof in such manner, upon such terms and
conditions and at such time or times as may seem to it advisable and without
notice to the Guarantor, and (ii) the Guarantor hereby irrevocably designates
and appoints the Agent its true and lawful attorney either in the name of the
Agent or the name of the Guarantor to take such actions and any other actions as
the Agent may deem necessary or desirable in order to realize upon the Inventory
Collateral and the Accounts Receivable Collateral, including, without
limitation, power to endorse in the name of Guarantor, any checks, drafts,
notes, or other instruments received in payment of or on account of the
Inventory Collateral or the Accounts Receivable Collateral. The Agent shall not
be liable or accountable for any failure to collect, realize, sell or obtain
payment of the Accounts Receivable Collateral or any and all sums owing or which
may become due upon any items of the Inventory Collateral or any part thereof
and shall not be bound to institute proceedings for the purpose of collecting,
realizing, or obtaining payment of the same or for the purpose of preserving any
rights of the Agent, the Guarantor or any other Person in respect of the same.
From and after the occurrence of any Event of Default and during the
continuation thereof, (i) all moneys collected or received by the Guarantor in
respect of the Accounts Receivable Collateral or any and all sums owing or which
may become due upon any items of the Inventory Collateral shall be received as
trustee in trust for the Agent for the ratable benefit of the Banks and shall be
forthwith paid over to the Agent for the ratable benefit of the Banks at the
Agent's request, and (ii) all moneys collected or received by the Agent in
respect of the Accounts Receivable Collateral or any and all sums owing or which
may become due upon any items of the Inventory Collateral or other Collateral
may be applied to the Obligations in the order which the Required Banks deem
best or, in the sole discretion of the Required Banks, may be released to the
Guarantor, all without prejudice to the liability of the Guarantor or the
Agent's right to hold and realize upon this security.

                                      250

<PAGE>

                  8.       PRESERVATION. The Guarantor will take all reasonably
necessary and appropriate measures to obtain, maintain, protect and preserve any
material Intangibles Collateral including, without limitation, registration
thereof with the appropriate state or federal governmental agency or department.

                  9.       REMEDIES. Upon the occurrence and during the
existence of any Event of Default, the Agent for the ratable benefit of the
Banks shall have all of the rights and remedies described in Sections 8.1
through 8.5 inclusive, and it may exercise any one, more, or all of such
remedies, in its sole discretion, without thereby waiving any of the others.

                           9.1      General Remedies of a Secured Party. The
Agent shall have all the rights and remedies of a "secured party" under the Act
(regardless of whether the Act has been enacted in the jurisdiction where the
rights or remedies are asserted, including, without limitation, the right to
take possession of any of the Collateral or the proceeds thereof by such means
(without breach of the peace) and through agents or otherwise as it may elect,
the right to sell, lease, or otherwise dispose of the Collateral or any portion
thereof, the right to apply the proceeds derived therefrom to any and all of the
Obligations secured thereby in such order as the Agent may elect, and, for this
purpose, the right to sign in the name of the Guarantor any transfer,
conveyance, or instrument necessary in the premises. Any such disposition of the
Collateral may be in its then condition or following any commercially reasonable
preparation or processing thereof, by public or private proceedings, by one or
more contracts, as a unit or in parcels, at any time or place and on any terms,
so long as the same are commercially reasonable.

                           9.2      Notice of Disposition. The Agent shall give
the Guarantor written notice of the time and place of any public sale of the
Collateral or the time after which any other intended disposition thereof is to
be made. The requirement of sending reasonable notice shall be met if such
notice is mailed postage prepaid or otherwise given to the undersigned at its
last address as shown on the Agent's records at least 10 days before such
disposition.

                           9.3      Receiver. In addition to the foregoing, the
Agent, at the direction of the Required Banks, may appoint any person to be a
receiver (which term shall include a receiver and manager) of the Collateral,
including, without limitation, any rents and profits thereof and may remove any
receiver and appoint another in its (his) stead, and such receiver so appointed
shall have power to take possession of the Collateral and to carry on or concur
in carrying on the business of the Guarantor, and to dispose of or concur in the
disposition of the Collateral or any part thereof in the manner described
hereinabove. Any such receiver shall for all purposes be deemed to be the agent
of the Guarantor. The Agent may from time to time fix the remuneration of such
receiver. The Agent and the Banks in appointing or refraining from appointment
of such receiver shall not incur any liability to the receiver, the Guarantor or
otherwise.

                           9.4      Assemblage. In facilitation of the
foregoing, the Agent may require that the Guarantor assemble and make available
all of or any portion of the Collateral at a location reasonably designated by
the Agent, all at the expense of the Guarantor.

                                      251

<PAGE>

                           9.5      Application of Proceeds. All moneys from
time to time received by the Agent from the disposition of Collateral shall be
applied by the Agent for the benefit of the Banks in the following manner:
first, in discharge of all reasonable expenses of re-taking, holding,
preserving, preparing for sale or lease, selling, leasing, and the like of the
Collateral including, without limitation, fees and expenses of any receivers and
attorneys, insurance premiums, tax payments and the like; secondly, to all
outstanding fees and other expenses owing under the Credit Agreement or the
other Loan Documents in such order as the Required Banks shall elect; thirdly,
ratably to accrued interest on the Obligations; fourthly, ratably to the
remaining balances of the Obligations then outstanding; lastly, to the
Guarantor, any residue.

                  10.      FURTHER ASSURANCES. The Guarantor shall from time to
time forthwith on the Agent's reasonable request do, make and execute, and use
reasonable good faith efforts to cause to be done, made and executed, such
financing statements, certificates of title, landlord's and mortgagee's waivers,
estoppel certificates, further assignments, documents, acts, matters and things
as may be required by the Agent of or with respect to the Collateral or any part
thereof or as may be required to give effect to these presents, and the
Guarantor hereby constitutes and appoints the Agent as the true and lawful
attorney of the undersigned irrevocably with full power of substitution to do,
make, and execute all such statements, assignments, documents, acts, matters, or
things with the right to use the name of the Guarantor whenever and wherever it
may be reasonably deemed necessary or expedient.

                  11.      DEALINGS. The Agent may grant extensions of time and
other indulgences, take and give up securities, accept compositions, grant
releases and discharges and otherwise deal with the Guarantor, debtors of the
Guarantor, sureties and others and with the Collateral and other securities as
the Agent may see fit without prejudice to the liability of the Guarantor or the
Agent's right to hold and realize upon this security.

                  12.      GENERAL.

                           12.1     Governing Laws. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Georgia.

                           12.2     Non-Exclusivity of Remedies. No remedy for
the enforcement of the rights of the Agent hereunder shall be exclusive of or
dependent on any other such remedy but any one or more of such remedies may from
time to time be exercised independently or in combination.

                           12.3     Waiver. Each and every right granted to the
Agent under this Agreement, under any other Loan Document or allowed to the
Agent by law or in equity, shall be cumulative and may be exercised from time to
time by the Agent in its sole discretion. No failure on the part of the Agent to
exercise, and no delay in exercising, any right shall operate as a waiver
thereof, nor shall any single or partial exercise by the Agent of any right
preclude any other or future exercise thereof or the exercise of any other
right.

                                      252

<PAGE>

                           12.4     Counterparts. This Agreement may be executed
in two or more counterparts, each of which when fully executed shall be an
original, and all of said counterparts taken together shall be deemed to
constitute one and the same agreement.

                           12.5     Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the permitted successors and assigns
of the parties hereto.

                           12.6     Reimbursement. If any taxes, fees or other
costs shall be payable on account of the execution, issuance, delivery, or
recording of this Agreement or any financing statements, certificates, documents
or instruments executed in connection herewith, by reason of any existing or
hereafter enacted federal, state, or provincial statute, the Guarantor will pay
all such taxes, fees or other costs, including any applicable interest and
penalty, and will indemnify and hold the Agent and the Banks harmless from and
against liability in connection therewith.

                  IN WITNESS WHEREOF, the Guarantor and the Agent have executed
this Agreement and affixed their respective seals thereto.

                                    AGENT:

                                    WACHOVIA BANK, N.A.,
                                    as Agent for the Banks                (SEAL)

                                    By: ________________________________________
                                        Title:

                                    Guarantor:

                                    AVONDALE MILLS GRANITEVILLE FABRICS,
                                    INC             (SEAL)

                                    By: ________________________________________
                                        Title:

                                        Attest: ________________________________
                                                Title:

                               SECURITY AGREEMENT
                                   EXHIBIT "A"

                        SCHEDULE OF COLLATERAL LOCATIONS

                   Graniteville, Aiken County, South Carolina

                                      253

<PAGE>

                               SECURITY AGREEMENT
                                   EXHIBIT "B"

          [NOTE: THE ONES IN FAVOR OF SCHLAFHORST AND DUPONT HAVE BEEN
              DELETED. ARE THERE OTHERS WHICH SHOULD BE DELETED?]

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                SECURED PARTY                       JURISDICTION                        COLLATERAL
-------------------------------------------------------------------------------------------------------------
<S>                                             <C>                                  <C>
Olin Corporation                                Date Filed: 02/10/94                 Leased Equipment
                                                File Number 131059A
                                                Secretary of State, SC
-------------------------------------------------------------------------------------------------------------
Olin Corporation                                Date Filed: 12/07/93                 Leased Equipment
                                                File Number: 110634A
                                                Secretary of State, SC
-------------------------------------------------------------------------------------------------------------
BellSouth Financial Services Corporation        Secretary of State, SC
Amendment: 09/28/92, #134045A
-------------------------------------------------------------------------------------------------------------
Pitney Bowes Credit Corporation                 Date Filed: 01/29/92                 Equipment Informational
                                                File number: 92004503/               Filing
                                                             92004504
                                                Secretary of State, SC
-------------------------------------------------------------------------------------------------------------
Pitney Bowes Credit Corporation                 Date Filed: 01/25/96                 Leased Equipment
                                                File number: 122033A
                                                Secretary of State, SC
-------------------------------------------------------------------------------------------------------------
Primeco, Inc. d/b/a Prime Equipment             Date Filed: 09/13/94                 1 - Scissor Lift
                                                File number: 100644A
                                                Secretary of State, SC
-------------------------------------------------------------------------------------------------------------
Canon Financial Services, Inc.                  Date Filed: 01/12/93                 Office Equipment
                                                File number: 145328A
                                                Secretary of State, SC
-------------------------------------------------------------------------------------------------------------
Primeco, Inc. d/b/a Prime Equipment             Date Filed: 09/13/94                 1 - Scissor Lift
                                                File number: 1329
                                                Aiken County, SC
-------------------------------------------------------------------------------------------------------------
First United Leasing Corporation                Date Filed:  01/22/93                1/Panafax Facsimile
                                                File number: 014679
                                                SOS New York
-------------------------------------------------------------------------------------------------------------
</TABLE>

                                      254

<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
SECURED PARTY                                       JURISDICTION                       COLLATERAL
-------------------------------------------------------------------------------------------------------------
<S>                                             <C>                                  <C>
Pitney Bowes                                    Date Filed:                          Equipment Lease
                                                File number: 960412-
                                                             131615A
                                                SOS South Carolina
-------------------------------------------------------------------------------------------------------------
</TABLE>

                                      255

<PAGE>

                                                                       EXHIBIT Q

              MORTGAGE AND ASSIGNMENT OF LEASES, RENTS AND PROFITS

This Instrument Prepared By
and When Recorded Return to:

Jones, Day, Reavis & Pogue
3500 One Peachtree Center
303 Peachtree Street, N.E.
Atlanta, Georgia  30308-3242
By: Christopher L. Carson

                                    MORTGAGE,

                   UNIFORM COMMERCIAL CODE SECURITY AGREEMENT,

                                       and

                     ASSIGNMENT OF LEASES, RENTS AND PROFITS

                                      among

                    AVONDALE MILLS GRANITEVILLE FABRICS, INC.

                                  as Mortgagor

                                       and

                              WACHOVIA BANK, N.A.,

                                       as

                             Agent for certain banks

                                      256

<PAGE>

         COLLATERAL IS OR INCLUDES FIXTURES.

         THIS INSTRUMENT IS ALSO TO BE INDEXED IN THE INDEX OF FINANCING
STATEMENTS AS A FIXTURE FILING IN ACCORDANCE WITH THE UNIFORM COMMERCIAL CODE,
INCLUDING SECTIONS 9-313 AND 9-402, AS ADOPTED IN SOUTH CAROLINA.

         THE NAMES OF THE DEBTOR AND THE SECURED PARTY, THE MAILING ADDRESS OF
THE SECURED PARTY FROM WHICH INFORMATION CONCERNING THE SECURITY INTEREST MAY BE
OBTAINED, THE MAILING ADDRESS OF THE DEBTOR AND A STATEMENT INDICATING THE
TYPES, OR DESCRIBING THE ITEMS, OF COLLATERAL, ARE AS DESCRIBED IN SUBSection
3.7.3 HEREOF.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                PAGE
                                                                                ----
<S>                                                                             <C>
ARTICLE I         DEFINITIONS...............................................    252

ARTICLE II        GRANTING CLAUSES..........................................    262

                  2.1      Granting Clause..................................    262
                  2.2      Warranty of Title................................    262
                  2.3      Defeasance.......................................    263

ARTICLE III       COVENANTS OF BORROWER.....................................    263

                  3.1      Payment of Indebtedness..........................    263
                  3.2      Taxes, Liens and Other Charges...................    263
                  3.3      Insurance........................................    264
                  3.4      Condemnation.....................................    265
                  3.5      Care of Premises.................................    265
                  3.6      Leases, Contracts, Etc...........................    266
                  3.7      Security Agreement...............................    266
                  3.8      Further Assurances; After Acquired Property......    268
                  3.9      Expenses.........................................    268
                  3.10     Subrogation......................................    269
                  3.11     Limit of Validity................................    269
                  3.12     Junior Encumbrances..............................    269

ARTICLE IV        DEFAULT AND REMEDIES......................................    269

                  4.1      Events of Default................................    269
                  4.2      Acceleration of Maturity.........................    269
                  4.3      Agent's Right to Enter and Take Possession,
                           Operate and Apply Revenues.......................    270
</TABLE>

                                      257

<PAGE>

<TABLE>
<S>                                                                             <C>
                  4.4      Performance by Agent of Defaults by Mortgagor....    271
                  4.5      Receiver.........................................    271
                  4.6      Enforcement......................................    271
                  4.7      Purchase by Agent or any Bank....................    272
                  4.8      Application of Proceeds of Sale..................    272
                  4.9      Mortgagor as Tenant Holding Over.................    272
                  4.10     Waiver of Appraisement, Valuation, Stay,
                           Extension and Redemption Laws....................    272
                  4.11     Leases...........................................    272
                  4.12     Discontinuance of Proceedings and Restoration
                           of the Parties...................................    273
                  4.13     Remedies Cumulative..............................    273
                  4.14     Waiver...........................................    273
                  4.15     Suits to Protect the Premises....................    274
                  4.16     Agent May File Proofs of Claim...................    274
                  4.17     Multiple Sales...................................    274

ARTICLE V         MISCELLANEOUS PROVISIONS..................................    275

                  5.1      Successors and Assigns...........................    275
                  5.2      Terminology......................................    275
                  5.3      Severability.....................................    275
                  5.4      Applicable Law...................................    275
                  5.5      Notices..........................................    275
                  5.6      Replacement of Documents.........................    276
                  5.7      Time of the Essence..............................    276
                  5.8      Counterparts.....................................    276
                  5.9      No Obligation to Marshal Assets..................    276
                  5.10     Consent of Agent.................................    276
                  5.11     Agent's Powers...................................    276
                  5.12     No Liability or Obligation on Agent..............    277
</TABLE>

                                      258

<PAGE>

                  THIS MORTGAGE, UNIFORM COMMERCIAL CODE SECURITY AGREEMENT AND
ASSIGNMENT OF LEASES, RENTS AND PROFITS, including the cover sheet and table of
contents, made as of the__ day of _________, 199_ by and between AVONDALE MILLS
GRANITEVILLE FABRICS, INC. ("Mortgagor"), as party of the first part; and
WACHOVIA BANK, N.A., (f/k/a Wachovia Bank of Georgia, N.A.) as Agent for certain
Banks (as hereafter defined), as party of the second part.

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

                  WHEREAS, on April 29, 1996, Avondale Mills, Inc. ("Borrower"),
Agent, The First National Bank of Chicago, as Documentation Agent, and Banks
entered into a certain Amended and Restated Credit Agreement, as amended by
First Amendment to Credit Agreement dated as of March 20, 1997 and Second
Amendment to Credit Agreement dated of August 29, 1997 (as amended, the "Credit
Agreement") regarding certain obligations of Borrower owed to Agent and Banks;
and

                  WHEREAS, Mortgagor, as a wholly owned subsidiary of Borrower,
entered into that certain Limited Guaranty Agreement dated of even date herewith
in favor of Agent for the benefit of the Banks (the "Guaranty") to guarantee the
payment when due of all principal, interest and other amounts that shall be at
any time payable by Borrower under the Credit Agreement and other documents
relevant to therein, subject to the limitation of liability provisions contained
in the Guaranty; and

                  WHEREAS, to secure the repayment and the performance of the
obligations of Mortgagor under the Guaranty, Mortgagor desires to convey, grant
and assign liens, security titles, security interests and collateral assignments
in certain property as hereinafter more particularly described;

                  NOW THEREFORE, for and in consideration of the sum of Ten and
No/100 Dollars ($10.00), the mutual agreements contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and to secure the indebtedness hereinafter described, the parties
agree as follows:

                                    ARTICLE 1

                                   DEFINITIONS

                  For the purpose of this Instrument, the following defined
terms have the meanings set forth in this Article I:

                  "Agent" means Wachovia Bank, N.A., in its capacity as agent
for certain Banks as described in the Credit Agreement, and its permitted
successors and assigns.

                  "Bank" or "Banks" means Wachovia Bank, N.A., a national
banking association, acting as Agent hereunder and each Bank and its permitted
successors and assigns as defined in the Credit Agreement.

                                      259

<PAGE>

                  "Borrower" means Avondale Mills, Inc., an Alabama corporation,
and its permitted successors and assigns.

                  "Credit Agreement" means the Amended and Restated Credit
Agreement dated April 29, 1996, by and between Borrower, Agent, The First
National Bank of Chicago, as Documentation Agent, and Banks, as amended by First
Amendment to Credit Agreement dated as of March 20, 1997 and Second Amendment to
Credit Agreement dated as of even date herewith, together with any and all
renewals, substitutions, modifications, amendments, consolidations and
extensions of the Credit Agreement.

                  "Default Condition" means any condition or event which
constitutes an Event of Default or which with the giving of notice or lapse of
time or both would, unless cured or waived, become an Event of Default.

                  "Easements and Appurtenances" means and include all easements,
rights-of-way, strips and gores of land, vaults, streets, ways, alleys,
passages, sewer rights, waters, water courses, water rights and powers,
minerals, flowers, shrubs, crops, trees, timber and other emblements now or
hereafter located on the Land or under or above the same or any part or parcel
thereof, and all estates, rights, titles, interests, privileges, liberties,
tenements, hereditaments and appurtenances, reversion and reversions, remainder
and remainders, whatsoever, in any way belonging, relating or appertaining to
the Premises or any part thereof, or which hereafter shall in any way belong,
relate or be appurtenant thereto, whether now owned or hereafter acquired by
Mortgagor.

                  "Event of Default" has the meaning set forth in Section 4.1
hereof.

                  "Fixtures" means any and all items included in Plant,
Equipment and Personal Property which constitute fixtures under the law of the
state in which the Premises of which they constitute a part are located and any
and all other items of personal property which are physically attached to Land
or buildings thereon and any and all replacements and substitutions of any of
the foregoing.

                  "Guaranty" means the Limited Guaranty Agreement dated ___
July, 1997 from Mortgagor to Agent for the benefit of the Banks, as amended or
supplemented from time to time.

                  "Instrument" means this Mortgage, Uniform Commercial Code
Security Agreement and Assignment of Leases, Rents and Profits, together with
any and all renewals, substitutions, modifications, amendments, consolidations
and extensions of this Instrument.

                  "Land" means those certain tracts or parcels of land located
in Aiken County, South Carolina being more particularly described on Exhibit "A"
attached hereto and by this reference made a part hereof.

                  "Leases and Rents" means and include all leases, subleases,
tenant contracts and rental agreements pertaining to the Premises whether now or
hereafter existing and including, without limitation, all income, rents, issues,
profits and revenues of the Premises at any time and from time to time now or
hereafter accruing (including, without limitation, all payments under

                                      260

<PAGE>

leases or tenancies, proceeds of insurance (including, without limitation,
business interruption insurance), condemnation payments with respect to such
income, rents, issues, profits and revenues, tenant security deposits, whether
held by Mortgagor or in a trust account, payments to Mortgagor in connection
with any sale of any Premises to a tenant or customer pursuant to the provisions
of any lease and escrow funds), and all the estate, right, title, interest,
property, possession, claim and demand whatsoever at law, as well as in equity,
of Mortgagor of, in and to the same whether now or hereafter existing.

                  "Mortgagor" means Avondale Mills Graniteville Fabrics, Inc., a
Delaware corporation, and a wholly owned subsidiary of Borrower.

                  "Permitted Encumbrances" means those matters identified as to
such Premises on Exhibit "B", attached hereto and by this reference made a part
hereof and, subject to the provisions of Section 5.11 of the Credit Agreement,
outstanding security interests in Plant, Equipment and Personal Property.

                  "Plant, Equipment and Personal Property" means and include all
buildings, structures and improvements of every nature whatsoever now or
hereafter situated on the Land now or hereafter owned by Mortgagor or in which
Mortgagor now or hereafter has rights (to the extent of such rights), and all
gas and electric fixtures, radiators, heaters, engines and machinery, boilers,
ranges, elevators and motors, plumbing and heating fixtures, carpeting and other
floor coverings, fire extinguishers and any other safety equipment required by
governmental regulation or law, washers, dryers, water heaters, mirrors,
mantels, air conditioning apparatus, refrigerating plants, refrigerators,
cooking apparatus and appurtenances, window screens, awning and storm sashes now
or hereafter owned by Mortgagor, which are or shall be attached to said
buildings, structures or improvements and all other furnishings, furniture,
fixtures, machinery, equipment, appliances, racks, forklifts, building supplies
and materials, books and records, chattels, contract rights, and personal
property (excluding any Receivables Program Assets) of every kind and nature
whatsoever now or hereafter owned by Mortgagor or in which Mortgagor now or
hereafter has rights (to the extent of such rights) and now or hereafter located
in, on or about, or used or intended to be used with or in connection with the
use, operation or enjoyment of the Premises, including all extensions,
additions, improvements, betterments, after-acquired property, renewals,
replacements and substitutions, or proceeds from a sale of any of the foregoing;
and all the right, title and interest of Mortgagor now or hereafter in any such
furnishings, furniture, fixtures, machinery, equipment, appliances and personal
property subject to or covered by any prior or superior security agreement,
conditional sales contract, chattel mortgage or similar lien or claim, together
with the benefit of any deposits or payments now or hereafter made by Mortgagor
or on behalf of Mortgagor; and all personal property constituting proceeds
hereafter acquired with cash proceeds of any of the Plant, Equipment and
Personal Property described hereinabove; all of which are hereby declared and
shall be deemed to be fixtures (except for the purpose of the definition of
"Fixtures" above), and accessions to the Land and a part of the Premises as
between the parties hereto and all persons claiming by, through or under them,
and which shall be deemed to be a portion of the security for the Secured
Obligations; provided, that the foregoing shall not include any equipment
described in Exhibit "B" to the "AMGF Security Agreement," as defined in the
Credit Agreement. The location of the Plant, Equipment and Personal Property is
also the location of the Land.

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                  "Premises" means and includes, collectively, the related Land,
the Plant, Equipment and Personal Property, the Easements and Appurtenances and
the Leases and Rents.

                  "Required Banks" has the meaning set forth in the Credit
Agreement.

                  "Secured Obligations" means and includes the following
collectively:

                  (a)      Any and all indebtedness, obligations and liabilities
of Mortgagor to Agent and/or Banks now existing pursuant to, or hereafter
arising out of, or otherwise relating to the Guaranty, subject to the limitation
of liability provisions contained therein.

                  (b)      Any and all indebtedness, obligations and liabilities
of Mortgagor to Agent and/or Banks now existing or hereafter arising, in either
instance, under, by virtue of or pursuant to this Instrument.

                  (c)      Any and all advances hereafter made by Agent and/or
Banks at any time to protect or preserve the Premises or the lien hereof on the
Premises, or for taxes, assessments, insurance premiums or other advances
authorized under the terms of this Instrument (whether or not the original
Mortgagor remains the owner of the Premises at the time of any of such
advances).

                  "Transaction Documents" means the Credit Agreement, the
Guaranty, this Instrument, the "AMGF Documents" (as defined in the Credit
Agreement) and any other instrument, document or other writing executed on or
after the date hereof on behalf of Mortgagor evidencing, securing or otherwise
relating to any of the Secured Obligations.

                                   ARTICLE II

                                GRANTING CLAUSES

                  2.1      Granting Clause. In order to secure the full and
prompt payment when due, whether by acceleration or otherwise, and full and
prompt performance, of the Secured Obligations in such order of priority as
Agent may elect, Mortgagor hereby does grant, bargain, sell, alien, remise,
release, assign, convey, transfer, mortgage, hypothecate, pledge, deliver, set
over, warrant and confirm into Agent, for the benefit of the Banks and their
successors or assigns, all right, title and interest of Mortgagor in and to the
Land, together with the Plant, Equipment and Personal Property, the Easements
and Appurtenances, and the Leases and Rents pertaining to the Land, to have and
hold forever.

                  2.2      Warranty of Title. Mortgagor does warrant and will
forever defend the title to the Premises against the claims of all persons
whomsoever, except as to the Permitted Encumbrances. Mortgagor represents and
warrants that it is lawfully seized of the Land in fee simple absolute, that
Mortgagor has good right and is lawfully authorized to sell, convey or encumber
the Premises and that the Premises are free and clear of all encumbrances except
liens for real property taxes not yet due and payable and Permitted
Encumbrances.

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                  2.3      Defeasance. Should the Secured Obligations secured by
this Instrument be paid and satisfied or otherwise released according to the
tenor and effect thereof when the same shall become due and payable and the
obligations of the Banks under the Credit Agreement be terminated in writing,
then this Instrument and the conveyance effected and the liens and security
interests granted hereby shall be released and terminated and shall be cancelled
and surrendered. Upon payment and satisfaction of the Secured Obligations in
full and the termination of the obligations of the Banks and the Agent under the
Credit Agreement, Agent shall execute, in recordable form, and deliver to
Mortgagor such instruments as are required to release and terminate of record
this Instrument.

                                   ARTICLE III

                              COVENANTS OF BORROWER

                  3.1      Payment of Indebtedness. Mortgagor will pay the
Secured Obligations according to the tenor thereof and all other sums now or
hereafter secured hereby promptly as the same shall become due.

                  3.2      Taxes, Liens and Other Charges.

                           3.2.1    In the event of the passage of any state,
federal, municipal or other governmental law, order, rule or regulation,
subsequent to the date hereof, in any manner changing or modifying the laws now
in force governing the taxation of debts secured by mortgages, (not including
tax on interest or fee income associated with such debt) or the manner of
collecting taxes so as to adversely affect Agent or the Banks, Mortgagor will,
subject to Subsection 3.2.5, promptly pay any such additional tax.

                           3.2.2    Mortgagor will, subject to Subsection 3.2.5,
pay, before the same become delinquent, all taxes, liens, assessments and
charges of every character including all utility charges, whether public or
private, already levied or assessed or that may hereafter be levied or assessed
upon or against the Premises; and upon demand will furnish Agent receipted bills
evidencing such payment.

                           3.3.3    Mortgagor will not, subject to Subsection
3.2.5, suffer any mechanic's, materialman's, laborer's, statutory or other lien
to be created and to remain outstanding upon all or any part of the Premises,
except for inchoate liens securing obligations not for borrowed money which are
not yet due and payable and except for the Permitted Encumbrances.

                           3.3.4    Mortgagor, to the full extent permitted by
applicable law, shall, subject to Subsection 3.2.5, indemnify and hold Agent and
Banks harmless from, or shall reimburse Agent and Banks for, any and all
intangible tax, documentary stamp tax, mortgage tax, note tax or other like or
similar tax (excluding income, franchise or capital taxes imposed on the income
of Agent or Banks) imposed with respect to this Instrument or under any power of
sale herein granted, any of the other Transaction Documents, or the Secured
Obligations, and from any interest, charges or penalties assessed with respect
thereto.

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                           3.3.5    The Mortgagor shall have the right to
contest by appropriate proceedings any taxes, liens, assessments or other
charges described in Subsections 3.2.1 through 3.2.4, inclusive, provided that
it has established adequate reserves therefor.

                  3.3      Insurance.

                           3.3.1    So long as any portion of the Secured
Obligations remains unpaid, Mortgagor, at its expense, shall procure and
maintain for the benefit of Agent and Banks, insurance policies issued by such
insurance companies, and in such amounts as are required by Section 5.17 of the
Credit Agreement. All insurance required by this Subsection 3.3.1 which protect
against physical damage to the Plant, Equipment and Personal Property shall
contain a standard mortgagee clause (without contribution) in favor of Agent and
Banks, shall not be terminable without thirty (30) days' prior written notice to
Agent, and shall be evidenced by original policies or certified copies of
policies deposited with Agent, to be held by Agent until the Secured Obligations
shall have been fully paid and discharged. All other insurance policies, such as
general liability policies, required by the terms of this Instrument shall be
evidenced by certificates delivered to Agent and in case of cancellation, shall
provide for thirty (30) days' prior written notice to Agent.

                           3.3.2    Following the occurrence and during the
continuance of an Event of Default, Agent is hereby authorized and empowered, at
its option, to adjust or compromise any loss under any insurance policies
maintained pursuant to this Section 3.3, and to collect and receive the proceeds
from any such policy or policies, and each insurance company is hereby
authorized and directed to make payment for all such losses directly to Agent,
for the ratable benefit of the Banks, instead of to Mortgagor and Agent jointly.
In the event any insurance company fails to disburse directly and solely to
Agent but disburses instead either solely to Mortgagor or to Mortgagor and Agent
jointly, Mortgagor agrees immediately to endorse and transfer such proceeds to
Agent. Upon the failure of Mortgagor to endorse and transfer such proceeds as
aforesaid, Agent may execute such endorsements or transfers for and in the name
of Mortgagor and Mortgagor hereby irrevocably appoints Agent as Mortgagor's
agent and attorney-in-fact so to do. After deducting from said insurance
proceeds all of its expenses incurred in the collection and administration of
such sums, including attorneys' fees, Agent may apply the net proceeds or any
part thereof, at its option, (i) to the payment of the Secured Obligations,
whether or not due and in whatever order the Required Banks elect, (ii) to the
repair and/or restoration of the Premises or (iii) for any other purposes or
objects for which Agent is entitled to advance funds under this Instrument; all
without affecting the lien of this Instrument. Agent shall not be held
responsible for any failure to collect any insurance proceeds due under the
terms of any policy regardless of the cause of such failure absent gross
negligence or willful misconduct. Reference is made to Subsection 3.5.3.

                           3.3.3    Not less than thirty (30) days prior to the
expiration date of each policy maintained pursuant to this Section 3.3, evidence
of a renewal or replacement thereof satisfactory to Agent shall be delivered to
Agent. At the request of Agent, Mortgagor shall deliver to Agent receipts
evidencing the payment for all such insurance policies and renewals or
replacements. In the event of the foreclosure of this Instrument or any other
transfer of title to any of the Premises in extinguishment, in whole or in part,
of the Secured Obligations, all right,

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title and interest of Mortgagor in and to all insurance policies then in force
with respect to such Premises shall pass to the purchaser or grantee.

                           3.3.4    Any provision of this Instrument to the
contrary notwithstanding, this Section 3.3 and Section 3.4 and the rights and
obligations of Mortgagor and Agent hereunder with respect to insurance and
condemnation are in all respects subject to and subordinate to any security
agreements, mortgages, deeds of trust or deeds to secure debt prior or superior
to this Instrument and the rights of the lessors thereunder or parties secured
thereby relating to the collection and disposition of insurance and condemnation
proceeds.

                  3.4      Condemnation. Following the occurrence and during the
continuance of an Event of Default, if all or any material portion of the
Premises shall be damaged or taken through condemnation (the term "condemnation"
when used in this Instrument shall include any damage or taking by any
governmental or quasi-governmental authority and any transfer by private sale in
lieu thereof), either temporarily or permanently, then the Secured Obligations
shall, at the option of the Required Banks, become immediately due and payable,
and Agent, for the ratable benefit of the Banks, shall be entitled to receive
all compensation, awards and other payments or relief thereof. In such event,
Agent is hereby authorized, at its option, to commence, appear in and prosecute,
in its own or in Mortgagor's name, any action or proceeding relating to any
condemnation, and to settle or compromise any claim in connection therewith, and
all such compensation, awards, damages, claims, rights of action and proceeds
and the right thereto are hereby assigned by Mortgagor to Agent, for the ratable
benefit of the Banks. After deducting from said condemnation proceeds all of its
expenses incurred in the collection and administration of such sums, including
attorney's fees, Agent may apply the net proceeds or any part thereof, at the
option of the Required Banks, (a) to the payment of the Secured Obligations,
whether or not due and in whatever order the Required Banks elect, (b) to the
repair and/or restoration of the Premises, or (c) for any other purposes or
objects for which Agent is entitled to advance funds under this Instrument, all
without affecting the lien of this Instrument; and any balance of such moneys
then remaining shall be paid to Mortgagor. Mortgagor agrees to execute such
further assignment of any compensation, awards, damages, claims, rights of
action and proceeds as Agent may require. If, prior to the receipt by Agent of
such award or proceeds, the Premises shall have been sold on foreclosure of this
Instrument, Agent, for the ratable benefit of the Bank, shall have the right to
receive such award or proceeds to the extent of any unpaid Secured Obligations
following such sale, with interest thereon at the "Default Rate" (as defined in
the Credit Agreement), whether or not a deficiency judgment on this Instrument
shall have been sought or recovered, and to the extent of reasonable actual
counsel fees, costs and disbursements incurred by Agent in connection with the
collection of such award or proceeds. Reference is made to Subsections 3.3.4 and
3.5.3.

                  3.5      Care of Premises.

                           3.5.1    Mortgagor will keep the buildings, parking
areas, roads and walkways, recreational facilities, landscaping and all other
improvements of any kind now or hereafter erected on the Land or any part
thereof in good condition and repair, and in substantial compliance with all
applicable laws, except to the extent failure would not have a material adverse
effect on the usefulness or value of the Premises, and will not commit or suffer
any

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waste and will not do or suffer to be done anything (other than that which is
inherent in the ordinary course of Mortgagor's business operations) which will
unreasonably increase the risk of fire or other hazard to the Premises or any
part thereof.

                           3.5.2    Mortgagor will not remove or demolish nor
materially alter the structural character of any improvement located on the Land
without the written consent of the Agent (at the direction of the Required
Banks) except to the extent failure would not have a material adverse effect on
the usefulness or value of the Premises.

                           3.5.3    If the Premises or any part thereof is
materially damaged by fire or any other cause, or any material portion thereof
is taken by condemnation, Mortgagor will give immediate written notice thereof
to Agent. Mortgagor shall either (i) repair or restore such property to the
extent reasonably practical, and may use the proceeds of any insurance or
condemnation award for such purpose, with any amounts thereof not so used to be
paid to the Agent for application to the Secured Obligations, or (ii) treat such
event as a sale of assets for purposes of Sections 2.08(b) and 5.14 of the
Credit Agreement. The provisions of this Subsection 3.5.3 are subject to the
provisions of Subsection 3.3.2 (as to insurance) and Section 3.4 (as to
condemnation) upon the occurrence and during the continuance of an Event of
Default.

                  3.6      Leases, Contracts, Etc.

                           3.6.1    As additional collateral and further
security for the Secured Obligations, Mortgagor does hereby assign as a present
and absolute assignment (to the extent assignable pursuant to the terms thereof)
to Agent, for the benefit of Banks, all of Mortgagor's right, title and interest
now existing or hereafter arising in and to any and all Leases and Rents,
franchise agreements, management contracts, construction contracts, and other
contracts (not included in the definition of Leases and Rents), licenses and
permits now or hereafter affecting the Premises, or any part thereof, (reserving
only to Mortgagor the right to collect currently due and payable income, rents,
issues, profits, charges and revenues from the Premises until such time, if any,
as an Event of Default shall exist and be continuing). The foregoing is intended
to be a present and absolute assignment and not merely the passing of a security
interest. Mortgagor agrees to execute and deliver to Agent, such additional
instruments, in form and substance reasonably satisfactory to Agent, as may
hereafter be reasonably requested by Agent further to evidence and confirm said
assignment; provided, however, that acceptance of any such assignment shall not
be construed as a consent by Agent to any lease, tenant contract, rental
agreement, franchise agreement, management contract, construction contract, or
other contract, license or permit, or to impose upon Agent, any obligation with
respect thereto.

                           3.6.2    Mortgagor shall furnish to Agent, within
twenty (20) days after a receipt of a request by Agent to do so, such
information as Agent or any Bank from time to time may reasonably request
concerning the leases, tenant contracts and rental agreements.

                  3.7      Security Agreement.

                           3.7.1    Parts of the Premises are, or are to Become,
Fixtures on the Land. Insofar as the Plant, Equipment and Personal Property and
the Leases and Rents are concerned,

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this Instrument is hereby made and declared to be a security agreement, and a
security interest is hereby granted by Mortgagor to Agent, for the ratable
benefit of Banks, encumbering each and every item of Plant, Equipment and
Personal Property and of Leases and Rents in compliance with the provisions of
the Uniform Commercial Code. A financing statement or statements reciting this
Instrument to be a security agreement, affecting all of said personal property
aforementioned, shall be executed by Mortgagor and Agent and appropriately
filed. The remedies for any violation of the covenants, terms and conditions of
the security agreement herein contained shall be (i) as prescribed herein, or
(ii) as prescribed by general law, or (iii) as prescribed by the specific
statutory consequences now or hereafter enacted and specified in the Uniform
Commercial Code, all at Agent's sole election. Mortgagor and Agent agree that
the filing of such financing statement(s) in the records normally having to do
with personal property shall never be construed as in anywise derogating from or
impairing this declaration and hereby stated intention of Mortgagor and Agent
that everything used in connection with the production of income from the
Premises and/or adapted for use therein and which is described or reflected in
this Instrument as part of the Plant, Equipment or Personal Property, is, and at
all times and for all purposes and in all proceedings both legal or equitable
shall be, regarded as part of the real estate irrespective of whether (a) any
such item is physically attached to the improvements, (b) serial numbers are
used for the better identification of certain items capable of being thus
identified in a recital contained herein, or (c) any such item is referred to or
reflected in any such financing statement(s) so filed at any time. Similarly,
the mention in any such financing statement(s) of the rights in and to (aa) the
proceeds of any fire and/or hazard insurance policy, or (bb) any award in
eminent domain proceedings for a taking or for loss of value, or (cc)
Mortgagor's interest as lessor in any present or future lease or rights to
income growing out of the use and/or occupancy of the Premises, whether pursuant
to lease or otherwise, shall never be construed as in anywise altering any of
the rights of Agent, Banks or Mortgagor as determined by this instrument or
impugning the priority of Agent's lien granted hereby or by any other recorded
document, but such mention in such financing statement(s) is declared to be for
the protection of Agent and Banks in the event any court shall at any time hold
with respect to the foregoing (aa), (bb) or (cc), that notice of Agent's
priority of interest to be effective against a particular class of persons, must
be filed in the Uniform Commercial Code records.

                           3.7.2    Mortgagor warrants that (i) Mortgagor's
(that is, "Debtor's") name, identity or corporate structure and residence or
principal place of business are as set forth in Subsection 3.7.3 hereof; (ii)
Mortgagor (that is, "Debtor") has been using or operating under said name,
identity or corporate structure without change for the time period set forth in
Subsection 3.7.3 hereof; (iii) that Mortgagor is duly qualified to do business
in each state in which the Land is located; and (iv) the location of the Plant,
Equipment and Personal Property is upon the Land, except as permitted in the
Security Agreement. Mortgagor covenants and agrees that: (i) Mortgagor will
furnish Agent with notice of any change in the matters addressed by clauses (i)
or (iii) of this Subsection 3.7.2 within thirty (30) days of the effective date
of any such change; (ii) Mortgagor will promptly execute any financing
statements or other instruments deemed necessary by Agent to prevent any filed
financing statement from becoming misleading or losing its perfected status; and
(iii) and that Mortgagor will remain qualified to do business in each state in
which the Land is located.

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                           3.7.3    Upon execution by Agent (where local
practice requires the same), this Instrument shall constitute a financing
statement filed as a fixture filing under the Uniform Commercial Code in the
real estate records of the county or city in which the Premises is located with
respect to all fixtures which are a part of the Premises and with respect to any
goods or other personal property that may now be or hereafter become a fixture.
The information contained in this Subsection 3.7.3 is provided in order that
this Instrument shall comply with the requirements of the Uniform Commercial
Code for instruments to be filed as financing statements, to perfect the
security interests with respect to fixtures. The names of the "Debtor" and the
"Secured Party", the identity or corporate structure and residence or principal
place of business of "Debtor", and the time period for which "Debtor" has been
using or operating under said name and identity or corporate structure without
change, are as set forth in Exhibit "C", attached hereto and by this reference
made a part hereof; the mailing address of the "Secured Party" from which
information concerning the security interest may be obtained, and the mailing
address of Mortgagor (that is, "Debtor"), are as set forth in Section 5.5 of
this Instrument; and a statement indicating the types, or describing the items,
of collateral is set forth hereinabove.

                           3.7.4    Conflict with Security Agreement. To the
extent any of the provisions of this Instrument pertaining to Plant, Equipment
and Personal Property are in conflict with any provisions of the Security
Agreement, the conflicting provisions of the Security Agreement shall govern and
control over the conflicting provisions of this Instrument.

                  3.8      Further Assurances; After Acquired Property. At any
time, and from time to time, upon reasonable request by Agent, Mortgagor will
make, execute and deliver or cause to be made, executed and delivered, to Agent
and, where appropriate, cause to be recorded and/or filed and from time to time
thereafter to be re-recorded and/or refiled at such time and in such offices and
places as shall be deemed desirable by Agent, any and all such other and further
mortgages, deeds of trust, security agreements, financing statements,
continuation statements, instruments of further assurance, certificates and
other documents as may, in the opinion of Agent reasonably exercised, be
necessary or desirable in order to effectuate, complete, or perfect, or to
continue and preserve (a) the obligation of Mortgagor under the Secured
Obligations and under this Instrument and (b) the lien and security interests
granted by this Instrument as a first and prior lien (except for the Permitted
Encumbrances) upon and in and to all of the Premises, whether now owned or
hereafter acquired by Mortgagor, as well as any certificates, petitions or other
instruments reasonably requested by the Agent for allocation of stamp,
intangible, recording or similar tax liability relating to the filing of this
Instrument for record as to multiple Premises. Upon any failure by Mortgagor so
to do, Agent may make, execute, record, file, re-record and/or refile any and
all such mortgages, security agreements, deeds of trust, financing statements,
continuation statements, instruments, certificates and documents for and in the
name of Mortgagor and Mortgagor hereby irrevocably appoints Agent the agent and
attorney-in-fact of Mortgagor so to do. The lien of this Instrument and the
security interest created hereby will automatically attach, without further act,
to after-acquired personal property attached to, or located on, the Land and/or
used in connection with the operation of the Premises or any part thereof.

                  3.9      Expenses. Mortgagor will pay or reimburse Agent and
Banks, upon demand therefor, for all reasonable actual attorneys' fees, costs
and expenses incurred by Agent

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or any Bank in any suit, action, legal proceeding or dispute of any kind in
which Agent and/or Banks are made a party or appear as party plaintiff or
defendant, affecting the Secured Obligations secured hereby, this Instrument or
the interest created herein, or the Premises, including, but not limited to, the
exercise of the power of sale contained in this Instrument or the foreclosure of
this Instrument, any condemnation action involving the Premises or any action to
protect the security hereof; and any such amounts paid by Agent or any Bank
shall be included in the Secured Obligations secured by the lien of this
Instrument. Notwithstanding the foregoing, neither Agent nor any Bank shall be
entitled to recover any such expenses in any such suit by Agent or such Bank
against Mortgagor if such suit results in a judicial determination in favor of
Mortgagor with respect to the subject matter thereof or results in a
determination of liability against Agent or such Bank based on an act of gross
negligence or willful misconduct.

                  3.10     Subrogation. Agent shall be subrogated to all right,
title, equity liens and claims of all persons, firms or corporations to whom
Mortgagor has paid or pays, or to whom monies are paid, from the proceeds of the
Secured Obligations in the settlement of claims, liens or charges or for the
benefit of Mortgagor.

                  3.11     Limit of Validity. If from any circumstances
whatsoever fulfillment of any provision of this Instrument, the Guaranty or any
of the other Transaction Documents (as defined in the Credit Agreement) at the
time performance of such provision shall be due, shall involve transcending the
limit of validity presently prescribed by any applicable usury statute or any
other applicable law, with regard to obligations of like character and amount,
then ipso facto the obligation to be fulfilled shall be reduced to the limit of
such validity, so that in no event shall any exaction be possible under this
Instrument that is in excess of the current limit of such validity, but such
obligation shall be fulfilled to the limit of such validity.

                  3.12     Junior Encumbrances. Mortgagor shall not further
mortgage, encumber or pledge all or any part of the Premises or of Mortgagor's
interest in the Premises or any part thereof, except for Permitted Encumbrances.

                                   ARTICLE IV

                              DEFAULT AND REMEDIES

                  4.1      Events of Default. The terms "Default", "Event of
Default" or "Events of Default", wherever used in this Instrument, mean the
failure of the Mortgagor to pay upon demand in accordance with the terms of the
Guaranty the Guaranteed Obligations (as defined in the Guaranty).

                  4.2      Acceleration of Maturity. If an Event of Default
shall have occurred and be continuing and shall not have been expressly waived
in writing by Agent, then the Secured Obligations secured hereby shall, by
written notice as provided in the Credit Agreement, immediately become due and
payable without further notice or demand, time being of the essence of this
Instrument and the rate of interest with respect thereto shall be as provided in
Section 2.05 of the Credit Agreement; and no omission on the part of Agent to
exercise such option when entitled to do so shall be construed as a waiver of
such right.

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                  4.3      Agent's Right to Enter and Take Possession, Operate
and Apply Revenues.

                           4.3.1    If an Event of Default shall have occurred
and be continuing and shall not have been expressly waived in writing by Agent,
then, subject to the provisions of Section 5.16, Mortgagor, upon demand of
Agent, shall forthwith surrender to Agent the actual possession of the Premises
and if, and to the extent, permitted by law, Agent itself, or by such officers
or agents as it may appoint, may enter and take possession of all the Premises
without the appointment of a receiver, or an application therefor, and may
exclude Mortgagor and its agents and employees wholly therefrom, and may have
access to the books, papers and accounts of Mortgagor. Mortgagor waives the
posting of any bond in the event Agent elects to take possession.

                           4.3.2    If Mortgagor shall for any reason fail to
surrender or deliver the Premises or any part thereof after such demand by
Agent, Agent may obtain a judgment or decree conferring upon Agent the right to
immediate possession or requiring Mortgagor to deliver immediate possession of
the Premises to Agent, to the entry of which judgment or decree Mortgagor hereby
specifically consents. Mortgagor will pay to Agent, upon demand, all reasonable
actual expenses of obtaining such judgment or decree, including reasonable
actual compensation to Agent, its attorneys and agents; and all such expenses
and compensation shall, until paid, be secured by the lien of this Instrument.

                           4.3.3    Upon every such entering upon or taking of
possession, Agent may hold, store, use, operate, manage and control the Premises
and conduct the business thereof, and, from time to time (i) make all necessary
and proper maintenance, repairs, renewals, replacements, additions, betterments
and improvements thereto and thereon and purchase or otherwise acquire
additional fixtures, personalty and other property; (ii) insure or keep the
Premises insured; (iii) manage and operate the Premises and exercise all the
rights and powers of Mortgagor to the same extent as Mortgagor could in its own
name or otherwise with respect to the same; and (iv) enter into any and all
agreements with respect to the exercise by others of any of the powers herein
granted Agent, all as Agent from time to time may determine to be in its best
interest. Agent may collect and receive all the rents, issues, profits and
revenues from the Premises, including those past due as well as those accruing
thereafter, and, after deducting (aa) all reasonable actual expenses of taking,
holding, managing and operating the Premises (including reasonable actual
compensation for the services of all persons employed for such purposes); (bb)
the cost of all such maintenance, repairs, renewals, replacements, additions,
betterments, improvements, purchases and acquisitions; (cc) the cost of such
insurance; (dd) such taxes, assessments and other similar charges as Agent may
at its option pay; (ee) other proper charges upon the Premises or any part
thereof; and (ff) the reasonable actual compensation, expenses and disbursements
of the attorneys and agents of Agent, Agent shall apply the remainder of the
moneys and proceeds so received by Agent, first to the payment of accrued
interest; second, to the payment and satisfaction of the Secured Obligations
currently due (whether by acceleration or otherwise); and third, to the
Mortgagor.

                           4.3.4    Whenever all that is due (whether by
acceleration or otherwise) upon such Secured Obligations and under any of the
terms, covenants, conditions and agreements of this Instrument, shall have been
paid and all Events of Default made good, Agent

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<PAGE>

shall surrender possession of the Premises to Mortgagor, its successors or
assigns. The same right of taking possession, however, shall exist if any
subsequent Event of Default shall occur.

                  4.4      Performance by Agent of Defaults by Mortgagor. If
Mortgagor shall default in the payment, performance or observance of any term,
covenant or condition of this Instrument, Agent may, at its option and after
using best efforts to notify Mortgagor, pay, perform or observe the same, and
all payments made or costs or expenses incurred by Agent in connection
therewith, shall be secured hereby and shall be, without demand, immediately
repaid by Mortgagor to Agent with interest thereon at a rate per annum equal to
the "Default Rate" (as defined in the Credit Agreement) calculated on the basis
set forth in the Credit Agreement. Agent shall be the sole judge of the
necessity for any such actions and of the amounts to be paid, but shall exercise
such judgment reasonably and in good faith. Agent is hereby empowered to enter
and to authorize others to enter upon the Premises or any part thereof for the
purpose of performing or observing any such defaulted term, covenant or
condition without thereby becoming liable to Mortgagor or any person in
possession holding under Mortgagor except for gross negligence or willful
misconduct.

                  4.5      Receiver. If an Event of Default shall have occurred
and be continuing and shall not have been expressly waived by Agent, then, Agent
may apply to a court of competent jurisdiction pursuant to S.C. Code Ann.
15-65-10, et seq., as amended from time to time for the appointment of a
receiver to take possession of and to operate the Premises and to collect and
apply the rents, issues, profits and revenues thereof. Agent agrees to notify
Mortgagor of its application for the appointment of a receiver at least four (4)
days prior to such appointment, unless the court to which such application is
made prescribes a shorter time. The receiver shall have all of the rights and
powers permitted under the laws of the state wherein the Land is situated.
Mortgagor will pay to Agent upon demand all expenses, including receiver's fees,
reasonable actual attorneys' fees, costs and agent's compensation, incurred
pursuant to the provisions of this Section 4.5; and all such reasonable actual
expenses shall be secured by this Instrument.

                  4.6      Enforcement. If an Event of Default shall have
occurred and be continuing and shall not have been expressly waived by Agent,
concerning enforcement by judicial foreclosure or exercise of private power of
sale, Agent, at its option, may (a) commence proceedings to collect sums due
hereunder, foreclose this Instrument and sell the real property portion of the
Premises: At the foreclosure, Agent or any Bank shall be entitled to bid and to
purchase the real property portion of the Premises and shall be entitled to
apply the Secured Obligations, or any portion thereof, in payment for the real
property portion of the Premises; (b) collect and receive all the rents, issues,
profits and revenues from the Premises, including those past due as well as
those accruing thereafter; (c) with respect to the personalty that is located on
the Premises, exercise all rights, remedies and powers available to secured
parties under the Uniform Commercial Code in force in the State of South
Carolina; and (d) exercise any other rights or remedies provided in this
Instrument or by law, all of which rights and remedies may be exercised by Agent
independently, simultaneously or consecutively in any order without being deemed
to have waived any right or remedy previously or not yet exercised. Mortgagor
agrees that, to the extent permitted by law, legal process in connection with
the foreclosure of the debt secured hereby may be made by written notice to
Agent pursuant to Section 5.5. To the extent

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<PAGE>

permitted by law, such process shall be deemed to be personally served on
Mortgagor as of the date of actual receipt thereof by the U.S. Mail. Such method
of service of process shall be in addition to all other methods permitted by
law. Agent may, in addition to and not in abrogation of the rights covered under
this Section 4.6, either with or without entry or taking possession as herein
provided or otherwise, proceed by a suit or suits in law or in equity or by any
other appropriate proceeding or remedy granted or conferred by applicable
statutes (i) to enforce payment of the Secured Obligations or the performance of
any term, covenant, condition or agreement of this Instrument or any other
right, and (ii) to pursue any other remedy available to it, all as Agent shall
determine most effectual for such purposes.

                  4.7      Purchase by Agent or any Bank. Upon any foreclosure
sale, either judicially or by private power of sale, Agent, for the benefit of
the Banks ratably, or, to the extent permitted by applicable law, any Bank may
bid for and purchase the Premises and shall be entitled to apply all or any part
of the Secured Obligations as a credit to the purchase price.

                  4.8      Application of Proceeds of Sale. Except as in
hereinabove expressly set forth, in the event of a foreclosure sale of the
Premises, either judicially or by private power of sale, the proceeds of said
sale shall be applied, unless applicable statutes shall specify otherwise,
first, to the expenses of such sale and of all proceedings in connection
therewith and the reasonable actual expenses of foreclosing this Instrument,
including reasonable actual attorneys' fees, then to payment of the Secured
Obligations in such order as the Required Banks shall elect, and finally the
remainder, if any, shall be paid as required by law, or in the absence of any
provision therefor in the law, shall be paid to the parties entitled thereto;
provided, however that as to such remainder, Agent shall not be bound by any
inheritance, devise, conveyance, assignment or lien of or upon Mortgagor's
equity, without actual notice thereof prior to distribution.

                  4.9      Mortgagor as Tenant Holding Over. In the event of any
such foreclosure sale by Agent, Mortgagor shall be deemed a tenant holding over
and shall forthwith deliver possession to the purchaser or purchasers at such
sale or be summarily dispossessed according to provisions of law applicable to
tenants holding over.

                  4.10     Waiver of Appraisement, Valuation, Stay, Extension
and Redemption Laws. Mortgagor agrees to the full extent permitted by law, that
in case of a Default on the part of Mortgagor hereunder, neither Mortgagor nor
anyone claiming through or under it shall or will set up, claim or seek to take
advantage of any appraisement, valuation, stay, extension, homestead, exemption,
redemption or moratorium laws, statutory or otherwise now or hereafter in force,
in order to prevent or hinder the enforcement or foreclosure of this Instrument,
or the absolute sale of the Premises, or the final and absolute putting into
possession thereof, immediately after such sale, of the purchasers thereat, and
Mortgagor, for itself and all who may at any time claim through or under it,
hereby waives to the full extent that it may lawfully so do, the benefit of all
such laws, and any and all right to have the assets comprised in the security
intended to be created hereby marshalled upon any foreclosure of the lien
hereof.

                  4.11     Leases. Agent, at its option, is authorized to
foreclose this Instrument subject to the rights of any tenants of the Premises,
and the failure to make any such tenants

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<PAGE>

parties to any such foreclosure proceedings and to foreclose their rights will
not be, nor be asserted to be by Mortgagor, a defense to any proceedings
instituted by Agent to collect the Secured Obligations secured hereby.

                  4.12     Discontinuance of Proceedings and Restoration of the
Parties. In case Agent shall have proceeded to enforce any right, power or
remedy under this Instrument by foreclosure, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason, then and
in every such case Mortgagor and Agent shall be restored to their former
positions and rights hereunder, and all rights, powers and remedies of Agent
shall continue as if no such proceeding had been taken.

                  4.13     Remedies Cumulative. No right, power or remedy
conferred upon or reserved to Agent by this Instrument is intended to be
exclusive of any other right, power or remedy or exclusive of any other right,
power or remedy conferred by statute, but each and every such right, power and
remedy shall be cumulative and concurrent and shall be in addition to any other
right, power and remedy given hereunder or now or hereafter existing at law or
in equity or by statute.

                  4.14     Waiver.

                           4.14.1   No delay or omission of Agent to exercise
any right, power or remedy accruing upon any default or Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be a
waiver of any such default, or acquiescence therein; and every right, power and
remedy given by this Instrument to Agent may be exercised from time to time and
as often as may be deemed expedient by Agent. No consent or waiver, expressed or
implied, by Agent or Banks to or of any breach or default by Mortgagor in the
performance of the obligations hereunder or any Event of Default shall be deemed
or construed to be a consent or waiver to or of any other breach or default in
the performance of the same or any other obligations of Mortgagor hereunder or
any Event of Default. Failure on the part of Agent or Banks to complain of any
act or failure to act or to declare an Event of Default, irrespective of how
long such failure continues, shall not constitute a waiver by Agent or Banks of
their rights hereunder or impair any rights, powers or remedies consequent on
any breach or default by Mortgagor. Agent or Banks may, at any time, or from
time to time, renew or extend this Instrument, or alter or modify the same in
any way, or waive any of the terms, covenants or conditions hereof in whole or
in part, and may release any portion of the Premises or any other security, and
grant such extensions and indulgences in relation to the Secured Obligations as
Agent may determine without the consent of any junior lienor or encumbrancer and
without any obligation to give notice of any kind thereto and without in any
manner affecting the priority of the lien hereof on any part of the Premises.

                           4.14.2   If Agent or Banks, as applicable, (i) grant
forbearance or an extension of time for the payment or satisfaction of the
Secured Obligations; (ii) take other or additional security for the payment of
the Secured Obligations; (iii) waive or do not exercise any right granted herein
or in any of the Secured Obligations; (iv) release any part of the Premises from
the lien of this Instrument or otherwise changes any of the terms, covenants,
conditions or agreements of any of the Secured Obligations; (v) consent to the
filing of any map, plat or replat

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<PAGE>

affecting the Premises; (vi) consent to the granting of any easement or other
right affecting the Premises; or (vii) make or consent to any agreement
subordinating the lien hereof, any such act or omission shall not release,
discharge, modify, change or affect the original liability under any of the
Secured Obligations or any other obligation of Mortgagor or any subsequent
purchaser of the Premises or any part thereof, or any maker, co-signer,
endorser, surety or guarantor; nor shall any such act or omission preclude Agent
from exercising any right, power or privilege herein granted or intended to be
granted in the event of any default then made or of any subsequent default; nor,
except as otherwise expressly provided in an instrument or instruments executed
by Agent (and the Banks, if required) shall the lien of this Instrument be
altered thereby. In the event of the sale or transfer by operation of law or
otherwise of all or any part of the Premises, Agent, without notice, is hereby
authorized and empowered to deal with any such vendee or transferee with
reference to the Premises or the Secured Obligations, or with reference to any
of the terms, covenants, conditions or agreements hereof, as fully and to the
same extent as it might deal with the original parties hereto and without in any
way releasing or discharging any liabilities, obligations or undertakings.

                  4.15     Suits to Protect the Premises. Agent shall have power
to institute and maintain such suits and proceedings as it may reasonably deem
expedient (a) to prevent any impairment of the Premises by any acts which may be
unlawful or any violation of this Instrument, (b) to preserve or protect its
interest, in the Premises and in the rents, issues, profits and revenues arising
therefrom, and (c) to restrain the enforcement of or compliance with any
legislation or other governmental enactment, rule or order that Agent, in its
reasonable judgment, believes to be unconstitutional or otherwise invalid, if,
and only to the extent, the enforcement of or compliance with such enactment,
rule or order would impair the security hereunder or be prejudicial to the
interest of Agent, hereunder or under the other Transaction Documents.

                  4.16     Agent May File Proofs of Claim. In the case of any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Mortgagor, its creditors or its
property, Agent, to the extent permitted by law, shall be entitled to file such
proofs of claim and other documents as may be necessary or advisable in order to
have the claims of Agent allowed in such proceedings for the entire amount due
and payable by Mortgagor under this Instrument at the date of the institution of
such proceedings and for any additional amount which may become due and payable
by Mortgagor hereunder after such date.

                  4.17     Multiple Sales. To the extent permitted by law, in
any judicial proceedings to foreclose this Instrument or nonjudicial exercise of
power of sale or any other private or public sale, the Premises, at the option
of Agent, may be sold in whole or in part and in the event of such multiple
sales, the Secured Obligations shall not be merged into any foreclosure sale or
foreclosure judgment so long as there shall remain outstanding any amount
secured by this Instrument. Such a foreclosure judgment in any state in which
the Land is located shall not operate, in and of itself, as a release of the
other property hereby secured or a waiver of Agent's right to elect any other
remedy available to it hereunder.

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<PAGE>

                                    ARTICLE V

                            MISCELLANEOUS PROVISIONS

                  5.1      Successors and Assigns. This Instrument shall inure
to the benefit of and be binding upon Mortgagor and Agent or their respective
legal representatives, permitted successors and assigns. Whenever a reference is
made in this Instrument to Mortgagor or Agent such reference shall be deemed to
include a reference to the legal representatives, permitted successors and
assigns of Mortgagor or Agent.

                  5.2      Terminology. All personal pronouns used in this
Instrument whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and vice
versa. Titles and Articles are for convenience only and neither limit nor
amplify the provisions of this Instrument itself, and all references herein to
Articles, Sections or Subsections shall refer to the corresponding Articles,
Sections or Subsections of this Instrument unless specific reference is made to
such Articles, Sections or Subsections of another document or instrument.

                  5.3      Severability. If any provision of this Instrument or
the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Instrument and the
application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.

                  5.4      Applicable Law. This Instrument and the obligations
created and secured hereby shall be interpreted, construed and enforced
according to the laws of the State of Georgia; except that, only for purposes of
determining (i) matters pertaining to real property, including the sufficiency
of the conveyance, warranties of title, perfection and the effect of
non-perfection and the foreclosure proceedings and remedies available to Agent,
and (ii) perfection and the effect of non-perfection of personal property, the
provisions of the Instrument shall be construed in accordance with the law of
the state of South Carolina.

                  5.5      Notices. All notices, requests and demands to or upon
the respective parties hereto, and all responses thereto, shall be in writing
and shall be deemed to have been properly given or served when personally
delivered or deposited in the mail, certified mail, return receipt requested,
postage prepaid, or delivered to a nationally recognized overnight courier
service, with all delivery charges paid or provided for, addressed to the
addresses set forth below. All notices, requests and demands, and all responses
thereto, shall be effective upon receipt thereof. Rejection or other refusal to
accept or the inability to deliver because of changed address of which no notice
was given shall be deemed to be receipt of the notice, demand or request sent.
By giving at least 30 days written notice hereof, Mortgagor or Agent shall have
the right from time to time and at any time during the term of this Agreement to
change their respective addresses and each shall have the right to specify as
its address any other address within the continental United States of America.
For the purpose of this Agreement, the following addresses apply:

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<PAGE>

                  Mortgagor:

                                    Avondale Mills Graniteville Fabrics, Inc.
                                    506 South Broad Street
                                    Monroe, Georgia  30655
                                    Attn: Chairman and Chief Executive Officer

                  Agent:

                                    Wachovia Bank, N.A.
                                    191 Peachtree Street
                                    Atlanta, Georgia  30303-1757
                                    Attention: Commercial Group - GA212

                  5.6      Replacement of Documents. Upon receipt of evidence
reasonably satisfactory to Mortgagor or Agent of the loss, theft, destruction or
mutilation of any of the Transaction Documents and, in the case of any such
loss, theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory to Mortgagor or Agent or, in the case of any such mutilation, upon
surrender and cancellation of the appropriate document, the other party or
parties will execute and deliver, in lieu thereof, a replacement document or
instrument supplied by Mortgagor or Agent, identical in form and substance and
dated as of the date of the document being replaced and upon such execution and
delivery of such replacement document all references in this Instrument to the
document being replaced shall be deemed to refer to such replacement document.

                  5.7      Time of the Essence. Time is of the essence with
respect to each and every covenant, agreement and obligation of Mortgagor under
each of the Transaction Documents and any and all other instruments now or
hereafter evidencing, securing or otherwise relating to the Secured Obligations.

                  5.8      Counterparts. This Instrument may be executed in any
number of counterparts, each of which is deemed to be an original document, all
of which taken together shall constitute one and the same Instrument.

                  5.9      No Obligation to Marshal Assets. Notice is hereby
given that no holder of any mortgage, deed of trust, deed to secure debt, lien,
security interest or other encumbrance affecting all or any portion of the
Premises, which is inferior to the lien, security interest and security title of
the Instrument shall have the right or privilege to require Agent to marshal
assets.

                  5.10 Consent of Agent. Agent, by its acceptance of this
Instrument, agrees to be bound by the terms and conditions of this Instrument.

                  5.11     Agent's Powers. Without affecting the liability of
any other person liable for the payment of any obligation herein mentioned, and
without affecting the lien or charge of this Instrument upon any portion of the
Premises not then or theretofore released as security for the full amount of all
unpaid obligations, Agent (and the Banks) may, from time to time and

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<PAGE>

without notice (i) release any person so liable, (ii) extend the maturity or
alter any of the terms of any such obligation, (iii) grant other indulgences,
(iv) cause to be released or reconveyed at any time at Agent's option, any
parcel, portion or all of the Premises, (v) take or release any other or
additional security for any obligation herein mentioned, or (vi) make
compositions or other arrangements with debtors in relation thereto.

                  5.12     No Liability or Obligation on Agent. Nothing in this
Instrument shall be construed to impose any obligation upon Agent to expend any
money or to take any other discretionary act herein permitted, and Agent shall
not have any liability or obligation for any delay or failure to take any
discretionary act in the absence of gross negligence or willful misconduct by
Agent.

                  IN WITNESS WHEREOF, Mortgagor has executed this instrument
under seal, as of the day and year first above written.

                                       "Mortgagor"

Signed, sealed and delivered           AVONDALE MILLS GRANITEVILLE
in the presence of:                    FABRICS, INC.

___________________________________    By:  ____________________________________
 Witness                                    Name;
                                            Title:

___________________________________    Attest: _________________________________
 Witness                                       Name;
                                               Title:

                                                    [CORPORATE SEAL]

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<PAGE>

STATE OF SOUTH CAROLINA    )
                           )        SOUTH CAROLINA
COUNTY OF AIKEN            )        PROBATE

                  BEFORE ME, the undersigned notary public, personally appeared
_________________, who being duly sworn, deposed and said that he saw
________________________________, the ______________________________ of Avondale
Mills Graniteville Fabrics, Inc., a Delaware corporation, sign, seal and deliver
the foregoing Instrument on behalf of Avondale Mills Graniteville Fabrics, Inc.,
a Delaware corporation, and he together with ___________________, witnessed the
execution thereof.

                                             ___________________________________
                                             Witness

SWORN TO and subscribed
before me this _____ day of
_____________, 1997.

___________________________________
Notary Public

My Commission Expires:

[NOTARIAL SEAL]

                                   EXHIBIT "A"

                                    THE LAND

         Commencing from a Nail & Cap at the intersection of Whaley Pond Rd.
(S-2-780) & Bettis Academy Road (S-2-144). Thence continuing in a direction of N
0 50' 16" E for 584.37' to a #4 Rebar Set on the right of way of Bettis Academy
Rd, being known as the Point of Beginning. Thence S 76 20' 15" E for 776.98' to
a 1 1/2" open end Iron Pipe Set. Thence S 78 40'54" E for 1007.80' to a 3/4"
open end Iron Pipe Set. Thence S 13 14'31" E for 432.24' to a #4 Rebar Set.
Thence S 4 40'01" W for 563.65' to a #4 Rebar Set. Thence S 35 15'05" W for
151.22' to a #4 Rebar Set. Thence N 83 00'49" W for 102.41' to a #4 Rebar Set.
Thence N 78 12'34" W for 351.73' to a #4 Rebar Set. Thence N 9 51'29" E for
27.91' to a #4 Rebar Set. Thence N 78 32'05" W for 72.54' to a #4 Rebar Set.
Thence N 9 42'52" E for 33.29' to a #4 Rebar Set. Thence N 77 37' 57" W for
51.16' to a #4 Rebar Set. Thence S 9 35'06" W for 62.22' to a #4 Rebar Set.
Thence S 47 32'02" W for 54.39' to a #4 Rebar Set. Thence N 77 47'00" W for
84.21' to a #4 Rebar Set. Thence N 9 48'37" E for 43.87' to a #4 Rebar Set.
Thence N 78 21'46" W for 458.15' to a #4 Rebar Set. Thence S 11 35'47" W for
83.44' to a #4 Rebar Set. Thence N 78 00'24" W for 90.08' to a #4 Rebar Set.
Thence N 10 56'25" E for 96.44' to a #4 Rebar Set. Thence N 74 18'59" W for
451.61' to a #4 Rebar Set on the right of way of Bettis Academy Road. (S-2-144).
Thence N 2 24'21" W for 1169.88' along east right of way of Bettis Academy Road
(S-2-144) to #4 Rebar Set also known as the point of beginning. Having a total
Area of 45.27 Acres.

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<PAGE>

                                   EXHIBIT "B"

                             PERMITTED ENCUMBRANCES

                                      279

<PAGE>

                                   EXHIBIT "C"

                   Description of "Debtor" and "Secured Party"

A.       Debtor:

         1.       Name and Identity or Corporate Structure:

                  AVONDALE MILLS GRANITEVILLE FABRICS, INC., a Delaware
                  corporation

         2.       The principal place of business of Debtor in South Carolina is
                  in Graniteville, Aiken County, South Carolina, and its mailing
                  address and chief executive office is at 506 South Broad
                  Street, Monroe, Georgia 30655.

         3.       Debtor has been using or operating under said name (or its
                  former name, "Camp Helen Co.") and identity or corporate
                  structure without change for the following time period:

                  Not less than six years.

B.       Secured Party:             Wachovia Bank, N.A., a national banking
                                    association, in its capacity as Agent for
                                    certain banks

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<PAGE>

                                                                       EXHIBIT R

                                 FORM OF NOTICE

                IN RESPECT OF ISSUANCE OF OTHER LETTERS OF CREDIT

TO: The Banks parties to the Second Amended and Restated Credit Agreement dated
as of September 28, 2000, as amended and supplemented from time to time (the
"Credit Agreement") by and among Avondale Mills, Inc., as the Borrower, and
Wachovia Bank, National Association, as the Agent, and the Banks parties
thereto.

         Pursuant to Section 2.13(a)(iv)(B) of the Credit Agreement, the Agent
hereby certifies to the Banks that it has issued the following Letters of Credit
pursuant to Section 2.13 of the Credit Agreement:

<TABLE>
<CAPTION>
                  Face          Date of
Number            Amount        Issuance/Expiration      Beneficiary    Purpose
------            ------        -------------------      -----------    -------
<S>               <C>           <C>                      <C>            <C>
</TABLE>

         A copy of each of the Letters of Credit listed above has been attached
hereto.

         Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meaning in this notice.

Date: ___________, 200_.

                                     WACHOVIA BANK,. NATIONAL
                                     ASSOCIATION

                                     By: _____________________
                                         Name:
                                         Title:

Enclosures

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<PAGE>

                                                                       EXHIBIT S

                  REQUIRED ASSIGNMENT AND ASSUMPTION AGREEMENT

                  This Required Assignment and Assumption Agreement (this
"Assignment") is dated as of the Effective Time (as defined below) and is
entered into by and among AVONDALE MILLS, INC., an Alabama corporation (the
"Borrower"), BANK OF AMERICA, N.A. (formerly NationsBank, N.A.) ("BOA"), BRANCH
BANKING AND TRUST COMPANY ("BB&T"), REGIONS BANK(formerly First Alabama Bank)
("Regions"), THE CIT GROUP/COMMERCIAL SERVICES, INC. ("CIT") and WACHOVIA BANK,
NATIONAL ASSOCIATION (successor by merger to Wachovia Bank of Georgia, N.A.,
Wachovia Bank, N.A., First Union National Bank, and First Union National Bank of
Georgia), as a Bank ("WBNA") and as Agent (the "Agent").

                                    RECITALS:

                  A.       Reference is made to the Amended and Restated Credit
Agreement dated as of April 29, 1996 (which amended and restated the Credit
Agreement dated March 29, 1994, as amended prior to April 29, 1996), as amended
by First Amendment to Credit Agreement dated as of March 20, 1997, Second
Amendment to Credit Agreement dated as of August 29, 1997, Third Amendment to
Credit Agreement dated as of August 27, 1999, and Fourth Amendment to Credit
Agreement dated as of April 1, 2000, as amended and restated by Second Amended
and Restated Credit Agreement dated September 28, 2000, as amended by First
Amendment to Second Amended and Restated Credit Agreement dated August 30, 2001,
Second Amendment to Second Amended and Restated Credit Agreement dated February
6, 2002, Third Amendment to Second Amended and Restated Credit Agreement dated
May 1, 2002, Fourth Amendment to Second Amended and Restated Credit Agreement
dated May 24, 2002, and Fifth Amendment to Second Amended and Restated Credit
Agreement dated August 30, 2002 (collectively, the (the "Original Credit
Agreement") by and among the Borrower, Wachovia Bank, N.A. (successor by merger
to Wachovia Bank of Georgia, N.A., Wachovia Bank, N.A., First Union National
Bank, and First Union National Bank of Georgia), as Agent and as a Bank, Bank
One, N.A. (formerly The First National Bank of Chicago), as Documentation Agent
and as a Bank, Bank of America, N.A. (formerly NationsBank, N.A.), and Regions
Bank (formerly First Alabama Bank) (WBNA, BOA, BB&T and Regions are each
hereinafter referred to as an "Original Bank" and collectively as the "Original
Banks"). Terms defined in the Original Credit Agreement are used herein with the
same meaning.

                  B.       The respective Commitment of each Original Bank and
the pro-rata share of each Original Bank in and to all the rights and
obligations of the Original Banks under the Original Credit Agreement (with
respect to each Original Bank, its "Ratable Pre-Effective Share"), all as of the
Effective Time, are set forth on Schedule I attached hereto and by this
reference incorporated herein.

                  C.       The Borrower has requested amendments to the Original
Credit Agreement in order, among other things, to reduce the Aggregate
Commitment, to extend the Termination Date, to provide for general working
capital needs and to provide for the

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<PAGE>

refinancing of the Obligations outstanding under the Original Credit Agreement
through the amendment and restatement of the Original Credit Agreement, and the
Remaining Banks (as defined below) are willing to provide such financing
pursuant to the terms and conditions set forth in a Third Amendment and Restated
Credit Agreement (the "Third Amended and Restated Credit Agreement") to be
executed immediately following the execution and delivery of this Assignment,
which Third Amendment and Restated Credit Agreement will constitute an amendment
and restatement of, and which will replace, the Original Credit Agreement. The
Third Amended and Restated Credit Agreement will be by and among WBNA (as a Bank
and as Agent), Regions and CIT (each, a "Remaining Bank" and collectively, the
"Remaining Banks") and Borrower.

                  D.       Each of BOA and BB&T (each, a "Departing Bank" and
collectively, the "Departing Banks") desires to terminate its Commitment under
the Original Credit Agreement as of the Effective Time, and therefore intends to
sell and assign to CIT its interest in and to all of its rights and obligations
under the Original Credit Agreement and any other documents related thereto
(including any Letters of Credit) pursuant to the terms and conditions of this
Assignment.

                  E.       WBNA desires to sell and assign a portion of its
interest in and to its rights and obligations under the Original Credit
Agreement and any other documents related thereto (including any Letters of
Credit) to the Assignee Banks as of the Effective Time, pursuant to the terms
and conditions of this Assignment. BOA, BB&T and WBNA are hereinafter referred
to individually as an "Assignor Bank" and collectively as the "Assignor Banks".

                  F.       CIT desires to purchase and assume the interests of
BOA and BB&T, and a portion of the interest of WBNA, in and to their respective
rights and obligations under the Original Credit Agreement and any other
documents related thereto (including any Letters of Credit) as of the Effective
Time, pursuant to the terms of this Assignment.

                  G.       Regions desires to purchase and assume a portion of
the interest of WBNA in and to WBNA's rights and obligations under the Original
Credit Agreement and any other documents related thereto (including any Letters
of Credit) as of the Effective Time, pursuant to the terms of this Assignment.
CIT and Regions are hereinafter sometimes referred to individually as an
"Assignee Bank" and collectively as the "Assignee Banks."

                  H.       The respective Commitment of each Remaining Bank and
the pro-rata share of each Remaining Bank in and to all the rights and
obligations of the Remaining Banks under the Third Amended and Restated Credit
Agreement (with respect to each Remaining Bank, its "Ratable Post-Effective
Share"), all as of the Effective Time, are set forth on Schedule II attached
hereto and by this reference incorporated herein, and as of the Effective Time,
the Aggregate Commitment will be reduced from $75,000,000 to $62,000,000.

                                    AGREEMENT

                  NOW, THEREFORE, for and in consideration of the above premises
and other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the parties hereto hereby covenant
and agree as follows:

                                      283

<PAGE>

                  1.       BOA Assignment. BOA hereby sells and assigns to CIT,
without recourse to BOA, and CIT hereby purchases at par and assumes from BOA,
all of BOA's Ratable Pre-Effective Share (including, without limitation, a 100%
interest in BOA's Commitment, a 100% interest in the Loans owing to BOA, a 100%
interest in the Revolver Loan Note held by BOA and a 100% interest in all of
BOA's risk participation in any Swing Loans and in the Letters of Credit). The
purchase price for such payment is $3,600,000 principal.

                  2.       BB&T Assignment. BB&T hereby sells and assigns to
CIT, without recourse to BB&T, and CIT hereby purchases at par and assumes from
BB&T, all of BB&T's Ratable Pre-Effective Share (including, without limitation,
a 100% interest in BB&T's Commitment, a 100% interest in the Loans owing to
BB&T, a 100% interest in the Revolver Loan Note held by BB&T and a 100% interest
in all of BB&T's risk participation in any Swing Loans and in the Letters of
Credit). The purchase price for such payment is $600,000 principal.

                  3.       WBNA Assignment to CIT. WBNA hereby sells and assigns
to CIT, without recourse to WBNA, and CIT hereby purchases at par and assumes
from WBNA, 22.0046083% of WBNA's Ratable Pre-Effective Share (constituting a
12.322580645% portion of the aggregate Pre-Effective Share of all Original
Banks, and including, without limitation, a 22.0046083% interest in WBNA's
Commitment, a 22.0046083% interest in the Loans owing to WBNA, a 22.0046083%
interest in the Revolver Loan Note held by WBNA and a 22.0046083% interest in
all of WBNA's risk participation in any Swing Loans and in the Letters of
Credit). The purchase price for such payment is $1,848,387.10 principal.

                  4.       WBNA Assignment to Regions. WBNA hereby sells and
assigns to Regions, without recourse to WBNA, and Regions hereby purchases at
par and assumes from WBNA, 5.9907693% of WBNA's Ratable Pre-Effective Share
(constituting a 3.354830797% portion of the aggregate Pre-Effective Share of all
Original Banks, and including, without limitation, a 5.9907693% interest in
WBNA's Commitment, a 5.9907693% interest in the Loans owing to WBNA, a
5.9907693% interest in the Revolver Loan Note held by WBNA and a 5.9907693%
interest in all of WBNA's risk participation in any Swing Loans and in the
Letters of Credit). The purchase price for such payment is $503,225.81
principal.

                  5.       Commitment Reduction. The parties acknowledge and
agree that, as of the Effective Time, the Aggregate Commitment will be reduced
from $75,000,000 (as existing prior to the Effective Time) to $62,000,000 (as
will exist as of the Effective Time). The Ratable Post-Effective Share of each
Remaining Bank, as well as each Remaining Bank's Commitment under the Loans and
the Letters of Credit, shall be as set forth on Schedule II attached hereto.

                  6.       Representations and Warranties of Assignor Banks.
Each of the Assignor Banks (i) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Original Credit Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Original Credit Agreement or any other instrument or document furnished pursuant
thereto, other than that it is the legal and beneficial owner of the interest
being assigned by it hereunder, that such interest is free and clear of any
adverse claim and that as of immediately prior to the Effective Time its
Commitment, its Ratable Pre-Effective Share of the Loans and of its risk
participation in any Swing Loans and the Letters of Credit, and the aggregate
outstanding

                                      284

<PAGE>

principal amount of Revolver Loans held by it, is as set forth on Schedule I
attached hereto; (ii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower, the
Parent or AMGF or the performance or observance by the Borrower of any of its
obligations under the Original Credit Agreement or any other Loan Documents, or
the performance or observance by the Parent of any of its obligations under the
Parent Documents; or the performance or observance by AMGF of any of its
obligations under the AMGF Documents, and (iii) acknowledges and agrees that as
of the Effective Time, the Revolver Loan Note held by it shall be deemed
cancelled, superseded and of no further force or effect, and covenants and
agrees to deliver to the Borrower for cancellation its Revolver Loan Note issued
under the Original Credit Agreement no later than 3 Domestic Business Days
following the Effective Time. At the Effective Time, the Borrower shall execute
and deliver to the Agent, for distribution to the Remaining Banks, a new
Revolver Loan Note payable to each Remaining Bank, dated as of the Effective
Time in the principal amount of its Commitment set forth on Schedule II attached
hereto with respect to such Remaining Bank.

                  7.       Representations, Warranties and Covenants of Assignee
Banks. Each Assignee Bank (i) confirms that it has received a copy of the Third
Amended and Restated Credit Agreement, together with copies of the financial
statements referred to in Section 4.04(a) thereof (or any more recent financial
statements of the Borrower delivered pursuant to Section 5.01(a) or (b) thereof)
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment; (ii) agrees
that it will, independently and without reliance upon the Agent, the Assignor
Banks or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Third Amended and Restated Credit
Agreement; (iii) confirms that it is a bank, financial institution or commercial
finance company; (iv) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the Third Amended and
Restated Credit Agreement as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (v) agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Third Amended and Restated Credit Agreement required to be
performed by it as a Bank and agrees to be bound by all of the terms and
provisions of the Third Amended and Restated Credit Agreement (including,
without limitation, the provisions of Section 9.18) and the Receivables
Intercreditor Agreement (including, without limitation, the obligations and
agreements contained in Sections 2.19, 2.20, and 3.3 thereof); (vi) specifies as
its Lending Office (and address for notices) the office set forth beneath its
name on the signature pages hereof, (vii) represents and warrants that the
execution, delivery and performance of this Assignment are within its corporate
powers and have been duly authorized by all necessary corporate action, (viii)
attaches the forms prescribed by the Internal Revenue Service of the United
States certifying as to its status for purposes of confirming exemption from
United States withholding taxes with respect to all payments to be made to it
under the Third Amended and Restated Credit Agreement and the Revolver Loan Note
applicable to it or such other documents as are necessary to indicate that no
such payments are subject to such taxes, and (ix) represents and warrants that,
as of the Effective Time, it is not entitled to any compensation pursuant to
Section 8.03 or entitled to any suspension of its obligations to make
Euro-Dollar Loans pursuant to Section 8.02.

                                      285

<PAGE>

                  8.       Conditions Precedent. This Assignment shall become
effective only upon (i) execution and delivery of this Assignment by each of the
parties hereto, (ii) execution and delivery of the Third Amended and Restated
Credit Agreement by each of the parties thereto and (iii) payment by each of the
Assignee Banks to the Agent, for the account of the Assignor Banks, of the
purchase price for the respective interests being assigned pursuant hereto (the
date that each of such conditions has been satisfied, which is expected to occur
on March 28, 2003, is the "Effective Time").

                  9.       Status. Upon the execution of this Assignment by all
parties hereto, from and after the Amendment Effective Time, (i) each Assignee
Bank shall be a party to the Third Amended and Restated Credit Agreement and any
amendment thereof or replacement therefor and, to the extent rights and
obligations have been transferred to it by this Assignment, have the rights and
obligations of a Bank thereunder and (ii) each Assignor Bank shall relinquish
its rights (other than under Sections 8.03, 9.03 and 9.04 of the Original Credit
Agreement) and be released from its obligations under the Original Credit
Agreement, but only to the extent its rights and obligations have been
transferred to the Assignee Banks by this Assignment.

                  10.      Payments. From and after the Effective Time, the
Agent shall make all payments in respect of the interests assigned hereby to the
applicable Assignee Bank; provided, however, that (i) at the Effective Time, the
Agent, for the account of the Borrower, shall pay to the Original Banks accrued
and unpaid interest on the outstanding principal balance of their Loans
immediately prior to the Effective Time, and (ii) on May 31, 2003, when accrued
and unpaid Commitment Fees are paid, the ratable portion thereof that accrued as
of the Effective Time shall be paid to the Original Banks based on their
Commitments in effect immediately prior to the Effective Time.

                  11.      Governing Law. This Assignment shall be governed by,
and construed in accordance with, the laws of the State of Georgia.

                         [SIGNATURES BEGIN ON NEXT PAGE]

                                      286

<PAGE>

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

                                    AVONDALE MILLS, INC.                  (SEAL)

                                    By: ________________________________________
                                        Title:
                                    Avondale Mills, Inc.
                                    506 South Broad Street
                                    Monroe, Georgia 30655
                                    Attention: Vice Chairman and Chief
                                               Financial Officer
                                    Telecopier number: 770-267-2543
                                    Confirmation number: 770-267-2226

                                      287

<PAGE>

                                    WACHOVIA BANK, NATIONAL ASSOCIATION
                                    (successor by merger to Wachovia Bank of
                                    Georgia, N.A., Wachovia Bank, N.A.,
                                    First Union National Bank, and First Union
                                    National Bank of Georgia),
                                    as Agent and as a Bank                (SEAL)

                                    By: ________________________________________
                                        Title:

                                    Lending Office
                                    Wachovia Bank, National Association
                                    301 South College Street
                                    Charlotte, North Carolina 28288
                                    Attention: David C. Hauglid
                                    Telecopier number: 704-374-6319
                                    Confirmation number: 704-383-3544

                                      288

<PAGE>

                                    THE CIT GROUP/COMMERCIAL SERVICES,
                                    INC.                                  (SEAL)

                                    By: ________________________________________
                                        Title:

                                    Lending Office
                                    The CIT Group/Commercial Services, Inc.
                                    Two Wachovia Center, 25th Floor
                                    301 South Tryon Street
                                    Charlotte, North Carolina 28202
                                    Attention: Regional Credit Manager
                                    Telecopier number: 704-339-2910
                                    Confirmation number: 704-339-2902

                                      289

<PAGE>

                                    REGIONS BANK                          (SEAL)

                                    By: ________________________________________
                                        Title:

                                    Lending Office
                                    Regions Bank
                                    417 N. 20th Street
                                    Birmingham, Alabama  35203
                                    Attention: Mark Howze
                                    Telecopier number: 205-326-7739
                                    Confirmation number: 205-326-7193

                                      290

<PAGE>

                                    BANK OF AMERICA, N.A.                 (SEAL)

                                    By: ________________________________________
                                        Title:

                                      291

<PAGE>

                                    BRANCH BANKING AND TRUST COMPANY (SEAL)

                                    By: ________________________________________
                                        Title:

                                       292
<PAGE>

                                   SCHEDULE I

                             PRE-EFFECTIVE SCHEDULE

REVOLVING LINE OF CREDIT

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
                               RATABLE                 PRE-EFFECTIVE          PRE-EFFECTIVE LOAN
     BANK                PRE-EFFECTIVE SHARE             COMMITMENT                 BALANCE
------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                     <C>
Bank of America               24.00000000%            $ 18,000,000.00           $ 3,600,000.00
------------------------------------------------------------------------------------------------
BB&T                           4.00000000%            $  3,000,000.00           $   600,000.00
------------------------------------------------------------------------------------------------
Regions                       16.00000000%            $ 12,000,000.00           $ 2,400,000.00
------------------------------------------------------------------------------------------------
WBNA                          56.00000000%            $ 42,000,000.00           $ 8,400,000.00
------------------------------------------------------------------------------------------------
                           100.0000000000%            $ 75,000,000.00           $15,000,000.00
------------------------------------------------------------------------------------------------
</TABLE>

$650,000 LETTER OF CREDIT FACILITY

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                               RATABLE                 PRE-EFFECTIVE          PRE-EFFECTIVE LETTER OF
     BANK                PRE-EFFECTIVE SHARE             COMMITMENT              CREDIT BALANCE
-----------------------------------------------------------------------------------------------------
<S>                      <C>                           <C>                    <C>
Bank of America               24.00000000%              $156,000.00                 $156,000.00
-----------------------------------------------------------------------------------------------------
BB&T                           4.00000000%              $ 26,000.00                 $ 26,000.00
-----------------------------------------------------------------------------------------------------
Regions                       16.00000000%              $104,000.00                 $104,000.00
-----------------------------------------------------------------------------------------------------
WBNA                          56.00000000%              $364,000.00                 $364,000.00
-----------------------------------------------------------------------------------------------------
                           100.0000000000%              $650,000.00                 $650,000.00
-----------------------------------------------------------------------------------------------------
</TABLE>

$500,000 LETTER OF CREDIT

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                PRE-EFFECTIVE         PRE-EFFECTIVE LETTER OF
     BANK                PRE-EFFECTIVE SHARE            COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                   <C>
Bank of America               24.00000000%             $120,000.00                $120,000.00
---------------------------------------------------------------------------------------------------
BB&T                           4.00000000%             $ 20,000.00                $ 20,000.00
---------------------------------------------------------------------------------------------------
Regions                       16.00000000%             $ 80,000.00                $ 80,000.00
---------------------------------------------------------------------------------------------------
WBNA                          56.00000000%             $280,000.00                $280,000.00
---------------------------------------------------------------------------------------------------
                           100.0000000000%             $500,000.00                $500,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

$250,000 LETTER OF CREDIT

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                PRE-EFFECTIVE         PRE-EFFECTIVE LETTER OF
     BANK                PRE-EFFECTIVE SHARE            COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                   <C>
Bank of America               24.00000000%             $ 60,000.00                $ 60,000.00
---------------------------------------------------------------------------------------------------
BB&T                           4.00000000%             $ 10,000.00                $ 10,000.00
---------------------------------------------------------------------------------------------------
Regions                       16.00000000%             $ 40,000.00                $ 40,000.00
---------------------------------------------------------------------------------------------------
WBNA                          56.00000000%             $140,000.00                $140,000.00
---------------------------------------------------------------------------------------------------
                           100.0000000000%             $250,000.00                $250,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

                                      293

<PAGE>

                                   SCHEDULE II

                             POST-EFFECTIVE SCHEDULE

REVOLVING LINE OF CREDIT

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
                               RATABLE                POST-EFFECTIVE          POST-EFFECTIVE LOAN
 BANK                    POST-EFFECTIVE SHARE           COMMITMENT                  BALANCE
-------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                     <C>
Regions                     19.3548387097%            $12,000,000.00            $ 2,903,225.81
-------------------------------------------------------------------------------------------------
WBNA                        40.3225806452%            $25,000,000.00            $ 6,048,387.10
-------------------------------------------------------------------------------------------------
CIT                         40.3225806452%            $25,000,000.00            $ 6,048,387.10
-------------------------------------------------------------------------------------------------
                            100.000000000%            $62,000,000.00            $15,000,000.00
-------------------------------------------------------------------------------------------------
</TABLE>

$650,000 LETTER OF CREDIT FACILITY

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                POST-EFFECTIVE       POST-EFFECTIVE LETTER OF
 BANK                    POST-EFFECTIVE SHARE           COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                  <C>
Regions                     19.3548387097%             $ 125,806.45              $ 125,806.45
---------------------------------------------------------------------------------------------------
WBNA                        40.3225806452%             $ 262,096.77              $ 262,096.77
---------------------------------------------------------------------------------------------------
CIT                         40.3225806452%             $ 262,096.77              $ 262,096.77
---------------------------------------------------------------------------------------------------
                            100.000000000%             $ 650,000.00              $ 650,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

$500,000 LETTER OF CREDIT

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                POST-EFFECTIVE       POST-EFFECTIVE LETTER OF
 BANK                    POST-EFFECTIVE SHARE           COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                  <C>
Regions                     19.3548387097%              $ 96,774.19              $  96,774.19
---------------------------------------------------------------------------------------------------
WBNA                        40.3225806452%              $201,612.90              $ 201,612.90
---------------------------------------------------------------------------------------------------
CIT                         40.3225806452%              $201,612.90              $ 201,612.90
---------------------------------------------------------------------------------------------------
                            100.000000000%              $500,000.00              $ 500,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

$250,000 LETTER OF CREDIT

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                POST-EFFECTIVE       POST-EFFECTIVE LETTER OF
 BANK                    POST-EFFECTIVE SHARE           COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                  <C>
Regions                     19.3548387097%              $ 48,387.10              $ 48,387.10
---------------------------------------------------------------------------------------------------
WBNA                        40.3225806452%              $100,806.45              $ 100,806.45
---------------------------------------------------------------------------------------------------
CIT                         40.3225806452%              $100,806.45              $ 100,806.45
---------------------------------------------------------------------------------------------------
                            100.000000000%              $250,000.00              $ 250,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

                                      294

<PAGE>

                                                                       EXHIBIT T

                           GLOBAL AMENDMENT AGREEMENT

         THIS GLOBAL AMENDMENT AGREEMENT (this "Agreement") is dated as of March
28, 2003, by and among AVONDALE MILLS, INC., (the "Borrower"), AVONDALE
INCORPORATED (the "Parent"), AVONDALE MILLS GRANITEVILLE FABRICS, INC.,
("AMGF"), and WACHOVIA BANK, NATIONAL ASSOCIATION (successor by merger to
Wachovia Bank of Georgia, N.A., Wachovia Bank, N.A., First Union National Bank
and First Union National Bank of Georgia), as Agent (the "Agent").

                              W I T N E S S E T H:

         WHEREAS, the Borrower, the Agent and the Banks party thereto entered
into that certain Third Amended and Restated Credit Agreement dated as of March
28, 2003 (the "Credit Agreement");

         WHEREAS, the Borrower and the Agent entered into that certain Amended
and Restated Security Agreement dated as of April 29, 1996, as amended by that
certain Fourth Amendment to Second Amended and Restated Credit Agreement and
First Amendment to Security Agreement dated as of May 24, 2002 by and between
the Borrower, the Agent, and Banks listed therein (as so amended, the "Security
Agreement");

         WHEREAS, the Parent and the Agent entered into that certain Amended and
Restated Stock Pledge Agreement dated as of April 29, 1996 (the "Parent Pledge
Agreement");

         WHEREAS, the Borrower and the Agent entered into that certain Borrower
Pledge Agreement dated as of April 29, 1996 (the "Borrower Pledge Agreement");

         WHEREAS, AMGF and the Agent entered into that certain Security
Agreement dated as of August 29, 1997 (the "AMGF Security Agreement");

         WHEREAS, the Borrower, the Parent and AMGF have requested and the Agent
and the Banks have agreed to certain amendments to the Credit Agreement and
certain other Facility Documents, subject to the terms and conditions hereof;

         NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Parent, AMGF,
and the Agent hereby covenant and agree as follows:

         1. Definitions. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement.

         2. Amendments to Security Agreement.

<PAGE>

         (a) Amendment to Section 1. Section 1 of the Security Agreement hereby
is amended by deleting the initial two sentences thereof in their entirety and
substituting the following therefor:

                  Notwithstanding anything to the contrary contained in the
         Recitals to this Agreement, for all purposes herein (i) the term
         "Credit Agreement" shall mean that certain Third Amended and Restated
         Credit Agreement, dated as of March 28, 2003, among Borrower, the
         Agent, and the Banks parties thereto, as amended, modified and/or
         restated from time to time and (ii) references to "this Agreement"
         shall mean the "Original Security Agreement", as defined in and as
         amended by an Amended and Restated Security Agreement dated as of April
         29, 1996, as amended by Fourth Amendment to Second Amended and Restated
         Credit Agreement and First Amendment to Security Agreement dated as of
         May 24, 2002, and by Global Amendment Agreement dated as of March 28,
         2003 among Avondale Mills, Inc., Avondale Incorporated, Avondale Mills
         Graniteville Fabrics, Inc. and the Agent, and as thereafter amended,
         modified and/or restated from time to time. Unless otherwise defined
         herein, capitalized terms used herein have the meanings set forth in
         the Credit Agreement. In addition, the following terms have the
         meanings set forth below, unless the context requires otherwise:

         (b) Amendment to Section 9.5. Section 9.5 of the Security Agreement
hereby is deleted in its entirety and the following is substituted therefor:

                  9.5 Insurance. The Borrower agrees that it will obtain and
         maintain insurance on the Inventory Collateral and the Equipment
         Collateral as required by Section 5.17(a) of the Credit Agreement, with
         loss payable to the Agent as its interests may appear. Such insurance
         shall not be cancelable by the Borrower, unless with prior written
         consent of the Required Banks, or by the Borrower's insurer, unless
         with at least 30 days advance written notice to the Agent. All Net
         Casualty/Insurance Proceeds of any Collateral shall be applied as
         provided in Section 5.17(b) of the Credit Agreement.

         (c) Amendment to Section 12.5. Section 12.5 of the Security Agreement
hereby is deleted in its entirety and the following is substituted therefor:

                  12.5 Application of Proceeds. All moneys from time to time
         received by the Agent from the disposition of Collateral shall be
         applied by the Agent for the benefit of the Banks in the following
         manner: first, in discharge of all reasonable expenses of re-taking,
         holding, preserving, preparing for sale or lease, selling, leasing, and
         the like of the Collateral including, without limitation, fees and
         expenses of any receivers and attorneys, insurance premiums, tax
         payments and the like, and, secondly, as provided for in Section 2.11
         of the Credit Agreement.

3. Amendments to Parent Pledge Agreement.

                  (a) Amendment to Section 1. Section 1 of the Parent Pledge
         Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                           1.       Defined Terms. Notwithstanding anything to
                  the contrary contained in the Recitals to this Agreement, for
                  all purposes herein (i) the term "Credit Agreement" shall mean
                  that certain Third Amended and Restated Credit Agreement,
                  dated as of March 28, 2003, among Borrower, the Agent, and the
                  Banks parties thereto, as amended, modified and/or restated
                  from time to time and (ii) references to "this Agreement"
                  shall mean the "Original Pledge Agreement", as defined in and
                  as amended by an Amended and Restated Stock Pledge Agreement
                  dated as of April 29, 1996, as amended by Global Amendment
                  Agreement dated as of March 28, 2003 among Avondale Mills,
                  Inc., Avondale Incorporated, Avondale Mills Graniteville
                  Fabrics, Inc. and the Agent, and as thereafter amended,
                  modified and/or restated from time to time. Unless otherwise
                  defined herein, capitalized terms used herein have the
                  meanings set forth in the Credit Agreement.

<PAGE>

         (b) Amendment to Section 13(b). Section 13 (b) of the Parent Pledge
Agreement is hereby amended so that it reads, in its entirety, as follows:

                  (b) Any cash held by the Agent as Collateral and all cash
         proceeds received by the Agent in respect of any sale of, collection
         from, or other realization upon or any part of the Collateral following
         the occurrence of an Event of Default shall be applied by the Agent for
         the benefit of the Banks in the following manner: first, in discharge
         of all expenses incurred by the Agent which Pledgor is obligated to
         reimburse the Agent pursuant to Section 15 hereof, and, secondly, as
         provided for in Section 2.11 of the Credit Agreement.

4. Amendments to Borrower Pledge Agreement.

         (a) Amendment to Section 1. Section 1 of the Borrower Pledge Agreement
hereby is deleted in its entirety and the following is substituted therefor:

                  1.       Defined Terms. Notwithstanding anything to the
         contrary contained in the Recitals to this Agreement, for all purposes
         herein, (i) the term "Credit Agreement" shall mean that certain Third
         Amended and Restated Credit Agreement, dated as of March 28, 2003,
         among Borrower, the Agent, and the Banks parties thereto, as amended,
         modified and/or restated from time to time and (ii) references to "this
         Agreement" shall mean the Borrower Pledge Agreement dated as of April
         29, 1996, as amended by Global Amendment Agreement dated as of March
         28, 2003 among Avondale Mills, Inc., Avondale Incorporated, Avondale
         Mills Graniteville Fabrics, Inc. and the Agent, and as thereafter
         amended, modified and/or restated from time to time. Unless otherwise
         defined herein, capitalized terms used herein have the meanings set
         forth in the Credit Agreement.

         (b) Amendment to Section 2. Section 2 of the Borrower Pledge Agreement
hereby is deleted in its entirety and the following is substituted therefor:

                  2.       Pledge of Pledged Collateral. Borrower does hereby
         pledge, hypothecate, assign, transfer, set over, deliver and grant a
         security interest in and to the Agent in all membership interests in
         (i) Avondale Funding, LLC held by it (which the Borrower represents and
         warrants constitutes 100% of the membership interests therein), which
         shall constitute Receivables Subsidiary Pledged Stock, as defined in
         the Credit Agreement, together with any and all other securities, cash
         or other property at any time and from time to time receivable or
         otherwise distributed in respect of or in exchange for any or all of
         such pledged stock, and together with the proceeds thereof and (ii)
         Avondale Mills Graniteville Fabrics, Inc. (which the Borrower
         represents and warrants constitutes 100% of the membership interests
         therein), which shall constitute AMGF Pledged Stock, as defined in the
         Credit Agreement, together with any and all other securities, cash or
         other property at any time and from time to time receivable or
         otherwise distributed in respect of or in exchange for any or all of
         such pledged stock, and together with the proceeds thereof (hereinafter
         said property pertaining to the Receivables Subsidiary Pledged Stock
         and the AMGF Pledged Stock being individually or collectively, as the
         context shall required, referred to as the "Pledged Collateral";
         provided, that the term "Pledged Collateral", as used in Section 14
         hereof, shall refer only to Pledged Collateral pertaining to the
         Receivables Subsidiary Pledged Stock and not Pledged Collateral
         pertaining to the AMGF Pledged Stock), all as security for the payment
         of all of the Obligations in existence from time to time. In the event
         the Borrower receives from the Receivables Subsidiary a Purchase Money
         Note, it will deliver such Purchase Money Note to the Agent and it
         shall also constitute Pledged Collateral. On or before April 7, 2003,
         Borrower will deliver to the Agent the certificates evidencing the AMGF
         Pledged Stock, together with duly executed blank stock powers with
         respect thereto.

         (c) Amendment to Section 12(b). Section 12 (b) of the Borrower Pledge
Agreement hereby is deleted in its entirety and the following is substituted
therefor:

<PAGE>

                  (b) Any cash held by the Agent as Collateral and all cash
         proceeds received by the Agent in respect of any sale of, collection
         from, or other realization upon or any part of the Collateral following
         the occurrence of an Event of Default shall be applied by the Agent for
         the benefit of the Banks in the following manner: first, in discharge
         of all expenses incurred by the Agent which Pledgor is obligated to
         reimburse the Agent pursuant to Section 13 hereof, and, secondly, as
         provided for in Section 2.11 of the Credit Agreement.

         (d) Amendment to Exhibit A. Exhibit A of the Borrower Pledge Agreement
hereby is deleted in its entirety and the following is substituted therefor:

                                    Exhibit A
                          To Borrower Pledge Agreement

                       Description of the Capital Stock of
                          Avondale Receivables Company

     500 Shares, $0.01 Par Value Common Stock Evidenced by Certificate No. 1

                       Description of the Capital Stock of
                    Avondale Mills Graniteville Fabrics, Inc.

    ___ Shares, $_____ Par Value Common Stock Evidenced by Certificate No. __

5. Amendments to AMGF Security Agreement.

         (a) Amendment to Section 1. Section 1 of the AMGF Security Agreement
hereby is amended by deleting the initial two sentences thereof in their
entirety and substituting the following therefor:

                  Notwithstanding anything to the contrary contained in the
         Recitals to this Agreement, for all purposes herein (i) the term
         "Credit Agreement" shall mean that certain Third Amended and Restated
         Credit Agreement, dated as of March 28, 2003, among Borrower, the
         Agent, and the Banks parties thereto, as amended, modified and/or
         restated from time to time and (ii) references to "this Agreement"
         shall mean the Security Agreement (Avondale Mills Graniteville Fabrics,
         Inc.) dated as of August 29, 1997 by and between the Guarantor and the
         Agent, as amended by Global Amendment Agreement dated as of March 28,
         2003 among Avondale Mills, Inc., Avondale Incorporated, Avondale Mills
         Graniteville Fabrics, Inc. and the Agent, and as thereafter amended,
         modified and/or restated from time to time. Unless otherwise defined
         herein, capitalized terms used herein have the meanings set forth in
         the Credit Agreement. In addition, the following terms have the
         meanings set forth below, unless the context requires otherwise:

         (b) Additional Amendment to Section 1. Section 1 of the AMGF Security
Agreement hereby is further amended by relabeling the defined term "Secured
Obligations" as "Guaranteed Obligations", and relocating such definition to its
proper alphabetical position in Section 1, but leaving intact the rest of such
definition.

         (c) Amendment to Section 6.5. Section 6.5 of the AMGF Security
Agreement hereby is deleted in its entirety and the following is substituted
therefor:

                  6.5 Insurance. The Guarantor agrees that it will obtain and
         maintain insurance on the Inventory Collateral and the Equipment
         Collateral as required by Section 5.17(a) of the Credit

<PAGE>

         Agreement, with loss payable to the Agent as its interests may appear.
         Such insurance shall not be cancelable by the Guarantor, unless with
         prior written consent of the Required Banks, or by the Guarantor's
         insurer, unless with at least 30 days advance written notice to the
         Agent. All Net Casualty/Insurance Proceeds of any Collateral shall be
         applied as provided in Section 5.17(b) of the Credit Agreement.

         (d) Amendment to Section 9.5. Section 9.5 of the AMGF Security
Agreement hereby is deleted in its entirety and the following is substituted
therefor:

                  9.5 Application of Proceeds. All moneys from time to time
         received by the Agent from the disposition of Collateral shall be
         applied by the Agent for the benefit of the Banks in the following
         manner: first, in discharge of all reasonable expenses of re-taking,
         holding, preserving, preparing for sale or lease, selling, leasing, and
         the like of the Collateral including, without limitation, fees and
         expenses of any receivers and attorneys, insurance premiums, tax
         payments and the like, and, secondly, as provided for in Section 2.11
         of the Credit Agreement.

6. Amendments to AMGF Guaranty.

         (a)      Amendments to Title and Recitals.

                  The word "Limited" hereby is deleted from the title to and the
         recitals at the beginning of the AMGF Guaranty, and the words "subject
         to the limitation on liability provisions contained herein" and
         "subject to the limitation on liability provisions contained in Section
         15 hereof" in the recitals at the beginning of the AMGF Guaranty hereby
         are deleted.

         (b) Amendment to Section 1. Section 1 of the AMGF Guaranty hereby is
amended by deleting it in its entirety and substituting the following therefor:

                  Notwithstanding anything to the contrary contained in the
         Recitals to this Agreement, for all purposes herein (i) the term
         "Credit Agreement" shall mean that certain Third Amended and Restated
         Credit Agreement, dated as of March 28, 2003, among Borrower, the
         Agent, and the Banks parties thereto, as amended, modified and/or
         restated from time to time and (ii) references to "this Guaranty" shall
         mean the "Limited Guaranty Agreement" executed by the Subsidiary in
         favor of the Agent dated as of August 29, 1997, as amended by Global
         Amendment Agreement dated as of March 28, 2003, and as thereafter
         amended, modified and/or restated from time to time. Unless otherwise
         defined herein, capitalized terms used herein have the meanings set
         forth in the Credit Agreement.

         (c) Amendments to Section 3. Section 3 of the AMGF Guaranty hereby is
amended by deleting the phrase "Subject to the provisions of Section 15," at the
beginning thereof and capitalizing the word "the" which immediately follows such
phrase.

         (d) Amendments to Section 4. Section 4 of the AMGF Guaranty hereby is
amended by deleting the phrase "Subject to Section 15," at the beginning thereof
and capitalizing the word "the" which immediately follows such phrase.

         (d) Amendment to Section 15. Section 15 of the AMGF Guaranty hereby is
deleted in its entirety.

         7. Restatement of Representations and Warranties. Each of the Borrower,
the Parent and AMGF hereby restates and renews each and every representation and
warranty heretofore made

<PAGE>

by it in the Credit Agreement and the other Facility Documents to which it is a
party as fully as if made on the date hereof and with specific reference to this
Agreement and all other Facility Documents executed and/or delivered in
connection herewith, except where reference is made to a specific date.

         7. Effect of Amendment. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Facility Documents shall be and
remain in full force and effect, and shall constitute the legal, valid, binding
and enforceable obligations of the Borrower, the Parent and AMGF, as applicable.
The amendments contained herein shall be deemed to have prospective application
only, unless otherwise specifically stated herein.

         8. Ratification. Each of the Borrower, the Parent and AMGF hereby
restates, ratifies and reaffirms each and every term, covenant and condition set
forth in the Credit Agreement and the other Facility Documents to which it is a
party effective as of the date hereof.

         9. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which may be delivered by facsimile and which when so executed and delivered
(including counterparts delivered by facsimile) shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same instrument.

         10. Section References. Section titles and references used in this
Agreement shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.

         11. No Default. To induce the Agent and the Banks to enter into this
Agreement and to continue to make advances pursuant to the Credit Agreement, (i)
the Borrower hereby acknowledges and agrees that, as of the date hereof, and
after giving effect to the terms hereof, there exists (1) no Default or Event of
Default and (2) no right of offset, defense, counterclaim, claim or objection in
favor of the Borrower arising out of or with respect to any of the Loans or
other obligations of the Borrower owed to the Agent or the Banks under the
Credit Agreement and the other Loan Documents, (ii) the Parent hereby
acknowledges and agrees that, as of the date hereof, and after giving effect to
the terms hereof, there exists (1) no Default or Event of Default, and no breach
or default exists under the Parent Documents and (2) no right of offset,
defense, counterclaim, claim or objection in favor of the Parent arising out of
or with respect to any of the obligations of the Parent owed to the Agent or the
Banks under the Parent Documents and (iii) AMGF hereby acknowledges and agrees
that, as of the date hereof, and after giving effect to the terms hereof, there
exists (1) no breach or default exists under the AMGF Documents and (2) no right
of offset, defense, counterclaim, claim or objection in favor of AMGF arising
out of or with respect to any of the obligations of AMGF owed to the Agent or
the Banks under the AMGF Documents.

         12. Further Assurances. Each of the Borrower, the Parent and AMGF
agrees to take such further actions as the Agent shall reasonably request in
connection herewith to evidence the amendments herein contained to it.

<PAGE>

         13. Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with, the laws of the State of Georgia.

         14. Conditions Precedent. This Agreement shall become effective only
upon execution and delivery of this Agreement by each of the parties hereto.

<PAGE>

         IN WITNESS WHEREOF, the Borrower, the Parent, AMGF, and the Agent has
caused this Agreement to be duly executed, under seal, by its duly authorized
officer as of the day and year first above written.

                                             AVONDALE MILLS, INC.,
                                             as Borrower          (SEAL)

                                             By: ______________________
                                                   Title:

                                             AVONDALE INCORPORATED,
                                             as Parent           (SEAL)

                                             By: ______________________
                                                   Title:

                                             AVONDALE MILLS GRANITEVILLE
                                             FABRICS, INC.,
                                             as AMGF             (SEAL)

                                             By: ______________________
                                                   Title:

                                             WACHOVIA BANK, NATIONAL ASSOCIATION
                                             (successor by merger to Wachovia
                                             Bank of Georgia, N.A., Wachovia
                                             Bank, N.A., First Union National
                                             Bank and First Union National Bank
                                             of Georgia),
                                             as Agent            (SEAL)

                                             By: ______________________
                                                   Title:

<PAGE>

                                                                       EXHIBIT U

                         FORM OF CONTRIBUTION AGREEMENT

         THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of
March 28, 2003, by and among AVONDALE, INCORPORATED (the "Parent"), AVONDALE
MILLS, INC. (the "Borrower") and AVONDALE MILLS GRANITEVILLE FABRICS, INC. (the
"Subsidiary Guarantor"). The Parent and the Borrower are sometimes hereinafter
referred to individually as a "Contributing Party" and collectively as the
"Contributing Parties").

                              W I T N E S S E T H :

         WHEREAS, pursuant to that certain Third Amended and Restated Credit
Agreement dated as of even date herewith, among the Borrower, WACHOVIA BANK,
NATIONAL ASSOCIATION, as Agent for itself and the other Banks which are party
thereto from time to time (such agreement, as the same may from time to time be
amended, modified, restated or extended, being hereinafter referred to as the
"Credit Agreement"; unless otherwise provided herein, capitalized terms used in
this Agreement have the meanings set forth in the Credit Agreement), the Banks
have agreed to extend financial accommodations to the Borrower;

         WHEREAS, as a condition, among others, to the Agent's and the Banks'
willingness to enter into the Credit Agreement, the Banks have required that the
Subsidiary Guarantor amend the AMGF Guaranty to, among other things, remove the
limitations on liability set forth in Section 15 thereof, and delete such
Section 15; and

         WHEREAS, the Borrower is a wholly-owned direct subsidiary of the
Parent, and AMGF is a wholly-owned direct of the Borrower, and each of the
Contributing Parties will derive direct or indirect economic benefit from the
effectiveness and existence of the Credit Agreement;

         NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce the Subsidiary Guarantor to amend the AMGF
Guaranty as described above, it is agreed as follows:

         To the extent that the Subsidiary Guarantor shall make a payment (the
"Subsidiary Guarantor Payment") of a portion of the "Guaranteed Obligations" (as
defined in the AMGF Guaranty), then each Contributing Party, jointly and
severally, unconditionally agrees to contribute to and indemnify the Subsidiary
Guarantor the amount of Subsidiary Guarantor Payment.

         This Agreement is intended only to define the relative rights of the
Subsidiary Guarantor and the Contributing Parties, and nothing set forth in this
Agreement is intended to or shall impair the obligations of the Subsidiary
Guarantor to pay any amounts, as and when the same shall become due and payable
in accordance with the terms of the AMGF Guaranty.

         The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets in favor of the Subsidiary
Guarantor.

<PAGE>

         This Agreement shall become effective upon its execution by each of the
Contributing Parties and the Subsidiary Guarantor and shall continue in full
force and effect and may not be terminated or otherwise revoked by any
Contributing Party until all of the Obligations under and as defined in the
Credit Agreement shall have been indefeasibly paid in full (in lawful money of
the United States of America) and discharged and the Credit Agreement and
financing arrangements evidenced and governed by the Credit Agreement shall have
been terminated. Each Contributing Party agrees that if, notwithstanding the
foregoing, such Contributing Party shall have any right under applicable law to
terminate or revoke this Agreement, and such Contributing Party shall attempt to
exercise such right, then such termination or revocation shall not be effective
until a written notice of such revocation or termination, specifically referring
hereto and signed by such Contributing Party, is actually received by the other
Contributing Party, the Subsidiary Guarantor and by the Agent at its notice
address set forth in the Credit Agreement or the AMGF Guaranty, as the case may
be. Such notice shall not affect the right or power of the Subsidiary Guarantor
to enforce rights arising prior to receipt of such written notice by such
Contributing Party and the Agent. If any Bank grants additional loans to the
Borrower or takes other action giving rise to additional Obligations after any
Contributing Party has exercised any right to terminate or revoke this Agreement
but before the Agent receives such written notice, the rights of the Subsidiary
Guarantor to contribution and indemnification hereunder in connection with any
Subsidiary Guarantor Payments made with respect to such loans or Obligations
shall be the same as if such termination or revocation had not occurred.

         IN WITNESS WHEREOF, the Contributing Parties and the Subsidiary
Guarantor have each executed and delivered this Agreement as of the date first
above written.

                                             AVONDALE MILLS, INC.,
                                             as Borrower               (SEAL)

                                             By: ______________________
                                                   Title:

                                             AVONDALE INCORPORATED,
                                             as Parent                 (SEAL)

                                             By: ______________________
                                                   Title:

                                             AVONDALE MILLS GRANITEVILLE
                                             FABRICS, INC.,
                                             as Subsidiary Guarantor   (SEAL)

                                             By: ______________________
                                                   Title:

<PAGE>

                                  Schedule 4.05

                    CERTAIN PENDING AND THREATENED LITIGATION

AVONDALE MILLS, INC.

         On January 13, 2000, a case was filed in the Circuit Court of Jefferson
County, Alabama by Larry and Cynthia Locke and the owners of fourteen other
residences in the Raintree subdivision of Lake Martin, against Russell
Corporation, Alabama Power and Avondale Incorporated (the "Company"). The
complaint alleges that the Company, among others, negligently and/or wantonly
caused or permitted the discharge and disposal of sewage sludge and contaminants
into the lake adjacent to the plaintiffs' property, which allegedly interfered
with the plaintiffs' use of the property. As a result of the alleged actions,
the plaintiffs claim that the value of their property has been diminished and
that they suffered other damages. The complaint seeks compensatory and punitive
damages in an undisclosed amount. After an initial series of actions, the case
was stayed by the trial court pending resolution of an appeal in the case of
Sullivan versus Russell Corporation, the Company and others ("Sullivan case"),
which also involved the Raintree subdivision. On January 12, 2002, the Alabama
Supreme Court issued a final order in the Sullivan case rendering the case in
favor of the defendants. Subsequent to the Alabama Supreme Court's actions with
regard to the Sullivan case, plaintiff's counsel, which includes attorneys who
acted as co-plaintiff's counsel on the Sullivan case, presented arguments in a
hearing before the trial judge on May 4, 2001 based on a narrow legal theory
that the nuisance claimed in this action is sufficiently different from the
Sullivan case, and therefore, that this case should be allowed to proceed in
spite of the fact that the Sullivan case was ultimately decided in favor of the
defendants. The trial court allowed the case to proceed to the discovery phase.
On April 25, 2002, the trial court held a hearing on summary judgment motions
and, on May 22, 2002, entered judgment as a matter of law in the Company's favor
on all counts except the narrow legal theory involving public nuisance tort. A
trial on this single count is schedule to begin in October 2003. The Company
intents to vigorously defend this case and believes that it has a number of
defenses available to it. While the outcome of this case cannot be predicted
with certainty, based upon currently available information, the Company des not
believe that it will have a material adverse effect on the Company's financial
condition or results of operations.

<PAGE>

                                                                   Schedule 4.08

                                  SUBSIDIARIES

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
                                                 Owner of 100%                    Jurisdiction of
                Subsidiary                      of Common Stock                    Incorporation
-----------------------------------------------------------------------------------------------------
<S>                                           <C>                                 <C>
Avondale Mills Graniteville Fabrics, Inc.     Avondale Mills, Inc.                    Delaware
-----------------------------------------------------------------------------------------------------
Avondale Funding LLC                          Avondale Mills, Inc.                    Delaware
-----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                                                   Schedule 4.14

                          CERTAIN ENVIRONMENTAL MATTERS

                              AVONDALE MILLS, INC.

1.       In 1987, the South Carolina Department of Health and Environmental
         Control ("DHEC") notified Graniteville Company ("Graniteville") that
         DHEC had discovered certain contamination in a pond near Graniteville,
         South Carolina and that Graniteville may be one of the responsible
         parties. In 1990 and 1991, Graniteville provided reports to DHEC
         summarizing its required study and investigation of the alleged
         pollution and its sources which concluded that pond sediments should be
         left undisturbed and that other remediation alternatives either
         provided no significant benefit or themselves involved adverse effects.
         Since that time, Avondale Mills has performed sedimentation sampling
         and analysis, reporting the results to DHEC. At the present time,
         Avondale has been asked to perform no remedial work or further
         evaluative work at this site.

2.       Graniteville owned a nine acre property near Vaucluse in Aiken County,
         South Carolina which was operated jointly by Graniteville and Aiken
         County as a landfill from approximately 1950 through 1973. Pursuant to
         various site investigations performed by U.S. EPA, DHEC and
         Graniteville, DHEC asked Avondale Mills to prepare an evaluation of
         various remedial actions that might be appropriate for the site.
         Avondale Mills prepared and submitted such an evaluation, concluding
         that a simple earthen cover, specified institutional controls and
         specified periodic groundwater monitoring would be appropriate for this
         site. DHEC has not yet responded to the recommended measures.

3.       Litigation described in Schedule 4.05.

Avondale Mills does not now expect any of the foregoing to have or cause a
Material Adverse Effect, or to draw into question the validity of or impair the
ability of Avondale Mills to perform its obligations under the Credit Agreement,
the Notes, or any of the Loan Documents, or of Avondale Incorporated or Avondale
Mills Graniteville Fabrics to perform their respective obligations under the
Loan Documents to which they are parties.

<PAGE>

                                                                   Schedule 5.11

                       Existing Liens as of April 29, 1996

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
     SECURED PARTY                           JURISDICTION                                COLLATERAL
-------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
AVONDALE MILLS, INC.
-------------------------------------------------------------------------------------------------------------
Xerox Corporation                        Date Filed: 04/10/96                  Xerox Leased Equipment
                                         File number: 96-15376
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Val Tech Computer Systems                Date Filed: 03/06/96                  Leased Equipment Notice Filing
(assignee Nat'l Bank of Commerce)        File number: 96-09326
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Val Tech Computer Systems                Date Filed: 08/09/95                  Leased Equipment
(assignee First Alabama Bank)            File number: 95-32698
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Val Tech Computer Systems                Date Filed: 05/24/95                  Leased Equipment
(assignee First Alabama Bank)            File number: 95-21606
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 11/14/94                  Equipment
                                         File number: 94-43091
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 11/14/94                  Equipment
                                         File number: 94-43090
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 11/14/94                  Equipment
                                         File number: 94-43089
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Val Tech Computer Systems                Date Filed: 06/09/94                  Leased Equipment Notice Filing
                                         File number: 94-20960
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
AT&T Credit Corporation                  Date Filed: 05/02/94                  Leased Equipment
                                         File number: 94-15516
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
           SECURED PARTY                     JURISDICTION                                COLLATERAL
-------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
Wachovia Bank of Georgia, as Agent       Date Filed: 04/04/94                  Blanket Lien
                                         File number: 94-11561
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Val Tech Computer Systems                Date Filed: 02/25/94                  Leased Equipment Notice Filing
(assignee Nat'l Bank of Commerce         File number: 94-06560
re-assigned 10/11/95 to Val Tech)        SOS Alabama
-------------------------------------------------------------------------------------------------------------
Pacific Atlantic Systems                 Date Filed: 12/28/93                  Leased Equipment Notice Filing
                                         File number: 93-44875
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Val Tech Computer Systems                Date Filed: 12/20/93                  Leased Equipment Notice Filing
(assignee Nat'l Bank of Commerce         File number: 93-43776
re-assigned 10/11/95 to Val Tech)        SOS Alabama
-------------------------------------------------------------------------------------------------------------
Pacific Atlantic Systems                 Date Filed: 09/30/93                  Leased Equipment Notice Filing
                                         File number: 93-34411
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Xerox Corporation                        Date Filed: 04/27/93                  Xerox Leased Equipment
                                         File number: 93-14521
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Xerox Corporation                        Date Filed: 04/27/93                  Xerox Leased Equipment
                                         File number: 93-14511
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Bell Atlantic Systems Leasing            Date Filed: 01/25/93                  Leased Equipment Notice Filing
(assignee: COS Computer Systems)         File number: 93-02601
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
SouthTrust Bank of Alabama               Date Filed: 01/14/93                  Leased Equipment, Insurance,
                                         File number: 93-01620                 Proceeds
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Trust Company Bank                       Date Filed: 04/30/92                  IRB Project and Equipment
(co-debtor: Industrial Dev. Board Town   File number: 92-15816
on Bon Air)                              SOS Alabama
-------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
             SECURED PARTY                   JURISDICTION                                COLLATERAL
-------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
SouthTrust Bank of Alabama               Date Filed: 02/10/92                  Equipment, Insurance, Proceeds
                                         File number: 92-04907
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Mayer Electric Supply Co., Inc.          Date Filed: 04/18/91                  Consignment of inventory to a
                                         File number: 91-14211                 Systems Contracting Agreement
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
CIT Group/Equipment Financing, Inc.      Date Filed: 01/27/88                  12 - Volvo Sleeper Tractors
                                         Continued: 08/04/92
                                         File number: A270067
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
CIT Group/Equipment Financing, Inc.      Date Filed: 08/17/87                  1 - Volvo Sleeper Tractor
                                         Continued: 04/02/92
                                         File number: A253773
                                         SOS Alabama
-------------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 02/16/95                  Rieter Drawframe
                                         File number: 2046
                                         Coosa County, Alabama
-------------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent       Date Filed: 04/07/94                  Blanket Lien
                                         File number: 94-069505
                                         SOS California
-------------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent       Date Filed: 04/05/94                  Blanket Lien
                                         File number: 1052193
                                         SOS Connecticut
-------------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent       Date Filed: 04/04/95                  Blanket Lien
                                         File number: 33817
                                         Floyd County
-------------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent       Date Filed: 04/04/95                  Blanket Lien
                                         File number: 30395
                                         Walton County
-------------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent       Date Filed: 04/04/95                  Blanket Lien
                                         File number: 225684
                                         SOS Massachusetts
-------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
             SECURED PARTY                   JURISDICTION                                  COLLATERAL
-----------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
Wachovia Bank of Georgia, as Trustee     Date Filed: 10/03/95                  Property/items secured by UCC-1
                                         File number: 1269123                  #0588793, filed 07/19/89 which has
                                         SOS North Carolina                    expired
-----------------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 02/16/95                  Rieter Drawframe
                                         File number: 1162256
                                         SOS North Carolina
-----------------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 02/16/95                  Rieter Drawframe
                                         File number: 1162255
                                         SOS North Carolina
-----------------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 02/16/95                  Rieter Drawframe
                                         File number: 1162254
                                         SOS North Carolina
-----------------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia, as Agent       Date Filed: 04/05/94                  Blanket Lien
                                         File number: 1093872
                                         SOS North Carolina
-----------------------------------------------------------------------------------------------------------------
Trust Company Bank of Georgia            Date Filed: 12/04/92                  IRB Project and Equipment
                                         File number: 0947502
                                         SOS North Carolina
-----------------------------------------------------------------------------------------------------------------
Trust Company Bank of Georgia            Date Filed: 12/03/92                  IRB Project and Equipment
                                         File number: 0947094
                                         SOS North Carolina
-----------------------------------------------------------------------------------------------------------------
Staunton Norris, as Deed of Trust        Date Filed: 07/08/88                  IRB Project and Equipment
Trustee and Trust Company Bank and       Continued: 06/30/93
First Nat'l Bank of Atlanta, as          File number: 0470504
Indentured Trustee                       Continued: 0011832
                                         SOS North Carolina
-----------------------------------------------------------------------------------------------------------------
Staunton Norris, as Deed of Trust        Date Filed: 07/19/89                  IRB Project and Equipment
Trustee and Trust Company Bank and       File number: 0588793
First Nat'l Bank of Atlanta, as          SOS North Carolina
Indentured Trustee
-----------------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 11/18/94                  Rieter Drawframe
                                         File number: 94-1512
                                         Lee County, North Carolina
-----------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
             SECURED PARTY                   JURISDICTION                                 COLLATERAL
----------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
Rieter Corporation                       Date Filed: 11/18/94                  Rieter Drawframe
                                         File number: 94-1511
                                         Lee County, North Carolina
----------------------------------------------------------------------------------------------------------------
Trust Company Bank / Wachovia Bank of    Date Filed: 12/02/92                  IRB Project and Equipment
Georgia, NA                              File number: 92-1601
                                         Lee County, North Carolina
----------------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia                 Date Filed: 09/26/95                  Pertaining to UCC-1 #89-256 Filed
                                         File number: 95-182                   07/13/89 which has since expired
                                         Yancey County, North Carolina
----------------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 11/07/94                  Rieter Drawframe RSB 951
                                         File number: 94-203
                                         Yancey County, North Carolina
----------------------------------------------------------------------------------------------------------------
Trust Company Bank                       Date Filed: 12/04/92                  IRB Project and Equipment
                                         File number: 92-1976
                                         Yancey County, North Carolina
----------------------------------------------------------------------------------------------------------------
Staunton Norris, as Deed of Trust        Date Filed: 07/08/88                  IRB Project and Equipment
Trustee and Trust Company Bank and       Continued: 06/25/93
First Nat'l Bank of Atlanta, as          File number: 88-288
Indentured Trustee                       Continued as 93-103
                                         Yancey County, North Carolina
----------------------------------------------------------------------------------------------------------------
Staunton Norris, as Deed of Trust        Date Filed: 07/13/89                  IRB Project and Equipment
Trustee and Trust Company Bank and       File number: 89-256
First Nat'l Bank of Atlanta, as          Yancey County, North Carolina
Indentured Trustee
----------------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia                 Date Filed: 04/12/94                  Blanket Lien
                                         File number: 1563871
                                         SOS New Jersey
----------------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia                 Date Filed: 04/06/94                  Blanket Lien
                                         File number: 23000343
                                         SOS Pennsylvania
----------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
        SECURED PARTY                        JURISDICTION                            COLLATERAL
--------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
Rieter Corporation                       Date Filed: 11/10/94                  Leased Equipment
                                         File number: 941110-103225A
                                         SOS South Carolina
--------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia                 Date Filed: 04/05/94                  Blanket Lien
                                         File number: 940405-132723A
                                         SOS South Carolina
--------------------------------------------------------------------------------------------------------
Trust Company Bank                       Date Filed: 12/04/92                  IRB Project and Equipment
                                         File number: 921204-100723A
                                         SOS South Carolina
--------------------------------------------------------------------------------------------------------
Bell Atlantic Systems Leasing            Date Filed: 04/08/91                  Leased Equipment
                                         File number: 91-017594
                                         SOS South Carolina
--------------------------------------------------------------------------------------------------------
Trust Company Bank                       Date Filed: 01/04/91                  IRB Project and Equipment
                                         File number: 91-00010
                                         Oconee County, South Carolina
--------------------------------------------------------------------------------------------------------
Trust Company Bank                       Date Filed: 12/02/92                  IRB Project and Equipment
                                         File number: 92-00694
                                         Oconee County, South Carolina
--------------------------------------------------------------------------------------------------------
Rieter Corporation                       Date Filed: 11/09/94                  Rieter Drawframe
                                         File number: 94-00681
                                         Oconee County, South Carolina
--------------------------------------------------------------------------------------------------------
Wachovia Bank of Georgia                 Date Filed: 04/05/94                  Blanket Lien
                                         File number: 94064691
                                         SOS Texas
--------------------------------------------------------------------------------------------------------
GRANITEVILLE COMPANY
--------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                        Date Filed: 02/06/92                  Equipment
                                         File number: 92-005960
                                         Secretary of State, SC
--------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
         SECURED PARTY                       JURISDICTION                                   COLLATERAL
-------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
Schlafhorst, Inc.                        Date Filed: 01/14/92                  Equipment
                                         File number: 92-002008/92-002009
                                         Secretary of State, SC
-------------------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                        Date Filed: 01/14/92                  Equipment
                                         File number: 92-002008
                                         Secretary of State, SC
-------------------------------------------------------------------------------------------------------------------
Olin Corporation                         Date Filed: 02/10/94                  Leased Equipment
                                         File number: 131059A
                                         Secretary of State, SC
-------------------------------------------------------------------------------------------------------------------
Olin Corporation                         Date Filed: 12/07/93                  Leased Equipment
                                         File number: 110634A
                                         Secretary of State, SC
-------------------------------------------------------------------------------------------------------------------
BellSouth Financial Services             Secretary of State, SC
Corporation Amendment: 09/28/92,
#134045A
-------------------------------------------------------------------------------------------------------------------
Pitney Bowes Credit Corporation          Date Filed: 01/29/92                  Equipment Informational Filing
                                         File number: 92004503/92004504
                                         Secretary of State, SC
-------------------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                        Date Filed: 08/19/91                  3 - Rotor Autocoro
                                         File number: 91-040929
                                         Secretary of State, SC
-------------------------------------------------------------------------------------------------------------------
Pitney Bowes Credit Corporation          Date Filed: 01/25/96                  Leased Equipment
                                         File number: 122033A
                                         Secretary of State, SC
-------------------------------------------------------------------------------------------------------------------
Primeco, Inc. d/b/a Prime Equipment      Date Filed: 09/13/94                  1 - Scissor Lift
                                         File number: 100644A
                                         Secretary of State, SC
-------------------------------------------------------------------------------------------------------------------
E.I. DuPont De Nemours & Co.             Date Filed: 12/27/91                  Notice filing of a Service Agreement
Separation Systems                       File number: 91-061914
                                         Secretary of State, SC
-------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
           SECURED PARTY                     JURISDICTION                                  COLLATERAL
------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
Canon Financial Services, Inc.           Date Filed: 01/12/93                  Office Equipment
                                         File number: 145328A
                                         Secretary of State, SC
------------------------------------------------------------------------------------------------------------------
Primeco, Inc. d/b/a Prime Equipment      Date Filed: 09/13/94                  1 - Scissor Lift
                                         File number: 1329
                                         Aiken County, SC
------------------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                        Date Filed: 02/06/92                  Rotor Autocoro(s)
                                         File number: 192
                                         Aiken County, SC
------------------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                        Date Filed: 01/15/92                  Rotor Autocoro(s)
                                         File number: 81
                                         Aiken County, SC
------------------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                        Date Filed: 01/15/92                  Rotor Autocoro(s)
                                         File number: 80
                                         Aiken County, SC
------------------------------------------------------------------------------------------------------------------
Schlafhorst, Inc.                        Date Filed: 08/20/91
                                         File number: 1335
                                         Aiken County, SC                      Rotor Autocoro(s)
------------------------------------------------------------------------------------------------------------------
First United Leasing Corporation         Date Filed: 01/22/93                  1/Panafax Facsimile
                                         File number: 014679
                                         SOS New York
------------------------------------------------------------------------------------------------------------------
Pitney Bowes                             Date Filed:                           Equipment Lease
                                         File number: 960412-131615A
                                         SOS South Carolina
------------------------------------------------------------------------------------------------------------------
The CIT Group/Commercial Services,       N/A                                   $260,000 cash deposit to secure
Inc.,                                                                          certain reimbursement and indemnity
                                                                               obligations
------------------------------------------------------------------------------------------------------------------
Bank of New York                         N/A                                   Foreign Accounts Receivable per
(successor-in-interest to FNB                                                  Factoring Agreement
Financial Company)
------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
     SECURED PARTY                           JURISDICTION                                  COLLATERAL
------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
WALTON MONROE MILLS, INC.
------------------------------------------------------------------------------------------------------------------
Trust Company Bank                       Date Filed: 06/15/92                  IRB Project and Equipment
                                         File number: 28353
                                         Walton County, Georgia
------------------------------------------------------------------------------------------------------------------
Trust Company Bank                       Date Filed: 01/28/93                  Partial Release - 5 Saurer
                                         File number: 28353                    Shutterless Weaving Machines, Type
                                         Walton County, Georgia                400
------------------------------------------------------------------------------------------------------------------
NCC Leasing                              Date Filed: 07/25/91                  NCR electronic data processing
                                         File number: 27498                    equipment
                                         Walton County, Georgia
------------------------------------------------------------------------------------------------------------------
NCC Leasing                              Date Filed: 09/12/91                  14 Terminal Green 1010/keyboards
                                         File number: 27605
                                         Walton County, Georgia
------------------------------------------------------------------------------------------------------------------
</TABLE>

                                Subsequent Liens

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
             SECURED PARTY                   JURISDICTION                                  COLLATERAL
------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
AVONDALE MILLS, INC.
------------------------------------------------------------------------------------------------------------------
Lease Corporation of America             Date Filed: 03/22/99                  Specific equipment
                                         File number: 99-12446
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
Wachovia Bank, N.A.                      Date Filed: 09/19/01                  Blanket Lien
                                         File number: 2001-36546
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
Wachovia Bank, N.A.                      Date Filed: 10/01/01                  Blanket Lien
                                         File number: 2001-37829
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
The CIT Group/Commercial Services, Inc.  Date Filed: 11/13/01                  Notice Filing for Bailment of
                                         File number: 2001-43481               Inventory
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
             SECURED PARTY                   JURISDICTION                                  COLLATERAL
------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
Bankers/Softech Divisions of EAB         Date Filed: 03/14/02                  Lease property, goods, inventory
Leasing Corp.                            File number: 02-0146357               and equipment
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
Wachovia Bank, N.A.                      Date Filed: 05/31/02                  Blanket Lien
                                         File number: 02-0348739
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
Wachovia Bank, N.A.                      Date Filed: 05/31/02                  Blanket Lien
                                         File number: 02-0348745
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
The CIT Group/Equipment Financing, Inc.  Date Filed: 07/30/02                  All machinery, furniture, fixtures,
                                         File number: 02-0585932               tools and equipment described on
                                         SOS Alabama                           Exhibit attached to UCC filing
------------------------------------------------------------------------------------------------------------------
General Electric Capital Corporation     Date Filed: 08/27/02                  Blanket Lien on receivables sold
                                         File number: 02-0717903               pursuant to the Sale and
                                         SOS Alabama                           Contribution Agreement dated as of
                                                                               August 30, 2002 by and among
                                                                               Borrower, Avondale Incorporated and
                                                                               General Electric Capital Corporation
------------------------------------------------------------------------------------------------------------------
Toyota Motor Credit Corporation          Date Filed: 09/05/02                  Leased equipment
                                         File number: 02-07321711
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
US Bancorp                               Date Filed: 10/08/02                  Specific equipment - informational
                                         File number: 02-0825970               filing
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
First American Commercial Bancorp, Inc.  Date Filed: 12/05/02                  All equipment (collateral) now
                                         File number: 02-0975881               owned or hereafter acquired under
                                         SOS Alabama                           Master Lease
------------------------------------------------------------------------------------------------------------------
ePlus Group, inc.                        Date Filed: 02/18/03                  Leased equipment
                                         File number: 03-0144101
                                         SOS Alabama
------------------------------------------------------------------------------------------------------------------
AVONDALE MILLS GRANITEVILLE FABRICS,
INC
------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
             SECURED PARTY                   JURISDICTION                          COLLATERAL
---------------------------------------------------------------------------------------------------
<S>                                      <C>                                   <C>
Wachovia Bank, N.A.                      Date Filed: 09/11/01                  Real Property Filing
                                         File number: 1136899
                                         Secretary of State, DE
---------------------------------------------------------------------------------------------------
AVONDALE INCORPORATED
---------------------------------------------------------------------------------------------------
First American Commercial Bancorp, Inc.  Date Filed: 12/05/02                  Leased Equipment
                                         File number: 007-2002-012339
                                         Barrow County, GA
---------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

                                                                   Schedule 5.17

                            Description of Insurance

         $1,700,000,000 Property Damage Insurance Policy (Policy No. JC200),
   issued by Factory Mutual Insurance Company covering all real and personal
                   property of the Borrower, Parent and AMGF.

<PAGE>

                                                                   Schedule 5.25

                                     PLANTS

Avondale Mills, Inc. Plants

<TABLE>
<CAPTION>
                                                                                                     (iv) Third
                                                                 Owned/                                 Party
Plant Name                (i) City, State, County                Leased            (iii) Liens         Consent
----------                -----------------------                ------            -----------       ----------
<S>                       <C>                                    <C>               <C>               <C>
Bevelle                   Alexander City, AL                     Owned                               None
                          Tallapoosa

Alex City                 Alexander City, AL                     Owned                               None
                          Tallapoosa

Eva Jane                  Sylacauga, AL                          Owned                               None
                          Talladega

Sylacauga                 Sylacauga, AL                          Owned                               None
Finishing                 Talladega

Bon Air                   Bon Air, AL                            Owned                               None
                          Talladega

Walhalla                  Walhalla, SC                           Owned                               None
                          Oconee

Catherine                 Sylacauga, AL                          Owned                               None
                          Talladega

Coosa                     Rockford, AL                           Owned                               None
                          Coosa

Pell City                 Pell City, AL                          Owned                               None
                          St. Clair

Sanford                   Sanford, NC                            Owned                               None
                          Lee

Tifton                    Tifton, GA                             Owned                               None
                          Tift

Burnsville                Burnsville, NC                         Owned                               None
                          Yancey
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                                                     (iv) Third
                                                                 Owned/                                 Party
Plant Name                (i) City, State, County                Leased            (iii) Liens         Consent
----------                -----------------------                ------            -----------       ----------
<S>                       <C>                                    <C>               <C>               <C>
Walton                    Monroe, GA                             Leased                              None
</TABLE>

<TABLE>
<CAPTION>
                                                                                                     (iv) Third
                                                                 Owned/                                 Party
Plant Name                (i) City, State, County                Leased            (iii) Liens         Consent
----------                -----------------------                ------            -----------       ----------
<S>                       <C>                                    <C>               <C>               <C>
Gregg Dyeing              Graniteville, SC                       Owned                               None
and Finishing             Aiken

Hickman                   Graniteville, SC                       Owned                               None
                          Aiken

Sibley                    August, GA                             Owned                               None
                          Richmond

Sibley Dyeing             Augusta, GA                            Owned                               None
and Finishing             Richmond

Swint                     Graniteville, SC                       Owned                               None
                          Aiken

Townsend                  Graniteville, SC                       Owned                               None
                          Aiken

Warren Dyeing             Graniteville, SC                       Owned                               None
                          Aiken

Warren Garment            Graniteville, SC                       Owned                               None
Processing                Aiken

Woodhead                  Graniteville, SC                       Owned                               None
                          Aiken

Avondale Mills Graniteville Fabrics, Inc. Plant

Horse Creek               Graniteville, SC                       Owned                               None
                          Aiken
</TABLE>

<PAGE>

                 SECOND AMENDED AND RESTATED REVOLVER LOAN NOTE

                                Atlanta, Georgia
                                 March 28, 2003

                  For value received, AVONDALE MILLS, INC., an Alabama
corporation (the "Borrower"), promises to pay to the order of WACHOVIA BANK,
NATIONAL ASSOCIATION (the "Bank"), for the account of its Lending Office, the
principal sum of TWENTY-FIVE MILLION and No/100 Dollars ($25,000,000), or such
lesser amount as shall equal the unpaid principal amount of each Revolver Loan
made by the Bank to the Borrower pursuant to the Credit Agreement referred to
below, on the dates and in the amounts provided in the Credit Agreement. The
Borrower promises to pay interest on the unpaid principal amount of this Note on
the dates and at the rate or rates provided for in the Credit Agreement.
Interest on any overdue principal of and, to the extent permitted by law,
overdue interest on the principal amount hereof shall bear interest at the
Default Rate, as provided for in the Credit Agreement. All such payments of
principal and interest shall be made in lawful money of the United States in
Federal or other immediately available funds at the office of Wachovia Bank,
National Association, 301 South College Street, Charlotte, North Carolina 28288,
or such other address as may be specified from time to time pursuant to the
Credit Agreement.

                  All Loans made by the Bank, the respective maturities thereof,
the interest rates from time to time applicable thereto, and all repayments of
the principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.

                  This Second Amended and Restated Revolver Loan Note is one of
the Revolver Loan Notes referred to in the Third Amended and Restated Credit
Agreement dated March 21, 2003, among the Borrower, the Banks listed on the
signature pages thereof, and Wachovia Bank, National Association, as Agent (as
so amended, and as the same may hereafter be amended and modified from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the optional and mandatory prepayment and the repayment hereof
and the acceleration of the maturity hereof.

<PAGE>

                  IN WITNESS WHEREOF, the Borrower has caused this Second
Amended and Restated Revolver Loan Note to be duly executed, under seal, by its
duly authorized officer as of the day and year first above written.

                                   AVONDALE MILLS, INC.                   (SEAL)

                                   By: _____________________________________
                                       Title:

<PAGE>

             Second Amended and Restated Revolver Loan Note (cont'd)

                         LOANS AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
           Base Rate or     Amount    Amount of
           Euro-Dollar        of      Principal      Maturity    Notation
Date          Loan           Loan      Repaid          Date      Made By
-------------------------------------------------------------------------
<S>        <C>              <C>       <C>            <C>         <C>

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------
</TABLE>

<PAGE>

                 SECOND AMENDED AND RESTATED REVOLVER LOAN NOTE

                                Atlanta, Georgia
                                 March 28, 2003

                  For value received, AVONDALE MILLS, INC., an Alabama
corporation (the "Borrower"), promises to pay to the order of THE CIT
GROUP/COMMERCIAL SERVICES, INC. (the "Bank"), for the account of its Lending
Office, the principal sum of TWENTY-FIVE MILLION and No/100 Dollars
($25,000,000), or such lesser amount as shall equal the unpaid principal amount
of each Revolver Loan made by the Bank to the Borrower pursuant to the Credit
Agreement referred to below, on the dates and in the amounts provided in the
Credit Agreement. The Borrower promises to pay interest on the unpaid principal
amount of this Note on the dates and at the rate or rates provided for in the
Credit Agreement. Interest on any overdue principal of and, to the extent
permitted by law, overdue interest on the principal amount hereof shall bear
interest at the Default Rate, as provided for in the Credit Agreement. All such
payments of principal and interest shall be made in lawful money of the United
States in Federal or other immediately available funds at the office of Wachovia
Bank, National Association, 301 South College Street, Charlotte, North Carolina
28288, or such other address as may be specified from time to time pursuant to
the Credit Agreement.

                  All Loans made by the Bank, the respective maturities thereof,
the interest rates from time to time applicable thereto, and all repayments of
the principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.

                  This Second Amended and Restated Revolver Loan Note is one of
the Revolver Loan Notes referred to in the Third Amended and Restated Credit
Agreement dated March 21, 2003, among the Borrower, the Banks listed on the
signature pages thereof, and Wachovia Bank, National Association, as Agent (as
so amended, and as the same may hereafter be amended and modified from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the optional and mandatory prepayment and the repayment hereof
and the acceleration of the maturity hereof.

<PAGE>

                  IN WITNESS WHEREOF, the Borrower has caused this Second
Amended and Restated Revolver Loan Note to be duly executed, under seal, by its
duly authorized officer as of the day and year first above written.

                                   AVONDALE MILLS, INC.                   (SEAL)

                                   By: _____________________________________
                                       Title:

<PAGE>

             Second Amended and Restated Revolver Loan Note (cont'd)

                         LOANS AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
            Base Rate or     Amount    Amount of
            Euro-Dollar        of      Principal     Maturity    Notation
Date           Loan           Loan      Repaid         Date      Made By
<S>         <C>              <C>       <C>           <C>         <C>
-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------

-------------------------------------------------------------------------
</TABLE>

<PAGE>

                 SECOND AMENDED AND RESTATED REVOLVER LOAN NOTE

                                Atlanta, Georgia
                                 March 28, 2003

                  For value received, AVONDALE MILLS, INC., an Alabama
corporation (the "Borrower"), promises to pay to the order of REGIONS BANK (the
"Bank"), for the account of its Lending Office, the principal sum of TWELVE
MILLION and No/100 Dollars ($12,000,000), or such lesser amount as shall equal
the unpaid principal amount of each Revolver Loan made by the Bank to the
Borrower pursuant to the Credit Agreement referred to below, on the dates and in
the amounts provided in the Credit Agreement. The Borrower promises to pay
interest on the unpaid principal amount of this Note on the dates and at the
rate or rates provided for in the Credit Agreement. Interest on any overdue
principal of and, to the extent permitted by law, overdue interest on the
principal amount hereof shall bear interest at the Default Rate, as provided for
in the Credit Agreement. All such payments of principal and interest shall be
made in lawful money of the United States in Federal or other immediately
available funds at the office of Wachovia Bank, National Association, 301 South
College Street, Charlotte, North Carolina 28288, or such other address as may be
specified from time to time pursuant to the Credit Agreement.

                  All Loans made by the Bank, the respective maturities thereof,
the interest rates from time to time applicable thereto, and all repayments of
the principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
the failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.

                  This Second Amended and Restated Revolver Loan Note is one of
the Revolver Loan Notes referred to in the Third Amended and Restated Credit
Agreement dated March 21, 2003, among the Borrower, the Banks listed on the
signature pages thereof, and Wachovia Bank, National Association, as Agent (as
so amended, and as the same may hereafter be amended and modified from time to
time, the "Credit Agreement"). Terms defined in the Credit Agreement are used
herein with the same meanings. Reference is made to the Credit Agreement for
provisions for the optional and mandatory prepayment and the repayment hereof
and the acceleration of the maturity hereof.

<PAGE>

                  IN WITNESS WHEREOF, the Borrower has caused this Second
Amended and Restated Revolver Loan Note to be duly executed, under seal, by its
duly authorized officer as of the day and year first above written.

                                   AVONDALE MILLS, INC.                   (SEAL)

                                   By: _____________________________________
                                       Title:

<PAGE>

             Second Amended and Restated Revolver Loan Note (cont'd)

                         LOANS AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
           Base Rate or      Amount    Amount of
           Euro-Dollar         of      Principal       Maturity     Notation
Date          Loan            Loan      Repaid          Date        Made By
----------------------------------------------------------------------------
<S>        <C>               <C>       <C>             <C>          <C>

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------

----------------------------------------------------------------------------
</TABLE>

<PAGE>

                   SECOND AMENDED AND RESTATED SWING LOAN NOTE

                                Atlanta, Georgia
                                 March 28, 2003

                  For value received, AVONDALE MILLS, INC., an Alabama
corporation (the "Borrower"), promises to pay to the order of WACHOVIA BANK,
NATIONAL ASSOCIATION, a national banking association (the "Bank"), for the
account of its Lending Office, the principal sum of Ten Million and No/100
Dollars ($10,000,000), or such lesser amount as shall equal the unpaid principal
amount of each Swing Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below, on the dates and in the amounts provided in
the Credit Agreement. The Borrower promises to pay interest on the unpaid
principal amount of this Swing Loan Note at the rate provided for Base Rate
Loans or as otherwise provided in the Credit Agreement, in all cases on the
dates provided for in the Credit Agreement. Interest on any overdue principal of
and, to the extent permitted by law, overdue interest on the principal amount
hereof shall bear interest at the Default Rate, as provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of Wachovia Bank, National Association, 301 South College Street,
Charlotte, North Carolina 28288, or such other address as may be specified from
time to time pursuant to the Credit Agreement.

                  All Swing Loans made by the Bank, the respective maturities
thereof, and all repayments of the principal thereof shall be recorded by the
Bank and, prior to any transfer hereof, endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.

                  This Second Amended and Restated Swing Loan Note is the Swing
Loan Note referred to in the Third Amended and Restated Credit Agreement dated
March 21, 2003, among the Borrower, the Banks listed on the signature pages
thereof, and Wachovia Bank, National Association, as Agent (as so amended, and
as the same may hereafter be amended and modified from time to time, the "Credit
Agreement"). Terms defined in the Credit Agreement are used herein with the same
meanings. Reference is made to the Credit Agreement for provisions for the
optional and mandatory prepayment and the repayment hereof and the acceleration
of the maturity hereof.

<PAGE>

                  IN WITNESS WHEREOF, the Borrower has caused this Second
Amended and Restated Swing Loan Note to be duly executed, under seal, by its
duly authorized officer as of the day and year first above written.

                                   AVONDALE MILLS, INC.(SEAL)

                                   By: _____________________________________
                                       Title:

                                      332

<PAGE>

              Second Amended and Restated Swing Loan Note (cont'd)

                         LOANS AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
            Amount of    Base Rate or      Principal                 Notation
Date           Loan      Set Rate Loan      Repaid        Maturity    Made By
-----------------------------------------------------------------------------
<S>         <C>          <C>               <C>            <C>        <C>

-----------------------------------------------------------------------------

-----------------------------------------------------------------------------

-----------------------------------------------------------------------------

-----------------------------------------------------------------------------

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-----------------------------------------------------------------------------
</TABLE>

                                      333

<PAGE>

                             CONTRIBUTION AGREEMENT

         THIS CONTRIBUTION AGREEMENT (this "Agreement") is entered into as of
March 28, 2003, by and among AVONDALE, INCORPORATED (the "Parent"), AVONDALE
MILLS, INC. (the "Borrower") and AVONDALE MILLS GRANITEVILLE FABRICS, INC. (the
"Subsidiary Guarantor"). The Parent and the Borrower are sometimes hereinafter
referred to individually as a "Contributing Party" and collectively as the
"Contributing Parties").

                              W I T N E S S E T H :

         WHEREAS, pursuant to that certain Third Amended and Restated Credit
Agreement dated as of even date herewith, among the Borrower, WACHOVIA BANK,
NATIONAL ASSOCIATION, as Agent for itself and the other Banks which are party
thereto from time to time (such agreement, as the same may from time to time be
amended, modified, restated or extended, being hereinafter referred to as the
"Credit Agreement"; unless otherwise provided herein, capitalized terms used in
this Agreement have the meanings set forth in the Credit Agreement), the Banks
have agreed to extend financial accommodations to the Borrower;

         WHEREAS, as a condition, among others, to the Agent's and the Banks'
willingness to enter into the Credit Agreement, the Banks have required that the
Subsidiary Guarantor amend the AMGF Guaranty to, among other things, remove the
limitations on liability set forth in Section 15 thereof, and delete such
Section 15; and

         WHEREAS, the Borrower is a wholly-owned direct subsidiary of the
Parent, and AMGF is a wholly-owned direct of the Borrower, and each of the
Contributing Parties will derive direct or indirect economic benefit from the
effectiveness and existence of the Credit Agreement;

         NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce the Subsidiary Guarantor to amend the AMGF
Guaranty as described above, it is agreed as follows:

         To the extent that the Subsidiary Guarantor shall make a payment (the
"Subsidiary Guarantor Payment") of a portion of the "Guaranteed Obligations" (as
defined in the AMGF Guaranty), then each Contributing Party, jointly and
severally, unconditionally agrees to contribute to and indemnify the Subsidiary
Guarantor the amount of Subsidiary Guarantor Payment.

         This Agreement is intended only to define the relative rights of the
Subsidiary Guarantor and the Contributing Parties, and nothing set forth in this
Agreement is intended to or shall impair the obligations of the Subsidiary
Guarantor to pay any amounts, as and when the same shall become due and payable
in accordance with the terms of the AMGF Guaranty.

         The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets in favor of the Subsidiary
Guarantor.

                                      334

<PAGE>

         This Agreement shall become effective upon its execution by each of the
Contributing Parties and the Subsidiary Guarantor and shall continue in full
force and effect and may not be terminated or otherwise revoked by any
Contributing Party until all of the Obligations under and as defined in the
Credit Agreement shall have been indefeasibly paid in full (in lawful money of
the United States of America) and discharged and the Credit Agreement and
financing arrangements evidenced and governed by the Credit Agreement shall have
been terminated. Each Contributing Party agrees that if, notwithstanding the
foregoing, such Contributing Party shall have any right under applicable law to
terminate or revoke this Agreement, and such Contributing Party shall attempt to
exercise such right, then such termination or revocation shall not be effective
until a written notice of such revocation or termination, specifically referring
hereto and signed by such Contributing Party, is actually received by the other
Contributing Party, the Subsidiary Guarantor and by the Agent at its notice
address set forth in the Credit Agreement or the AMGF Guaranty, as the case may
be. Such notice shall not affect the right or power of the Subsidiary Guarantor
to enforce rights arising prior to receipt of such written notice by such
Contributing Party and the Agent. If any Bank grants additional loans to the
Borrower or takes other action giving rise to additional Obligations after any
Contributing Party has exercised any right to terminate or revoke this Agreement
but before the Agent receives such written notice, the rights of the Subsidiary
Guarantor to contribution and indemnification hereunder in connection with any
Subsidiary Guarantor Payments made with respect to such loans or Obligations
shall be the same as if such termination or revocation had not occurred.

                       [SIGNATURES COMMENCE ON NEXT PAGE]

                                      335

<PAGE>

         IN WITNESS WHEREOF, the Contributing Parties and the Subsidiary
Guarantor have each executed and delivered this Agreement as of the date first
above written.

                                   AVONDALE MILLS, INC.,
                                   as Borrower                     (SEAL)

                                   By: ______________________
                                         Title:

                                   AVONDALE INCORPORATED,
                                   as Parent                       (SEAL)

                                   By: ______________________
                                         Title:

                                   AVONDALE MILLS GRANITEVILLE FABRICS, INC.,
                                   as Subsidiary Guarantor         (SEAL)

                                   By: ______________________
                                         Title:

                                      336

<PAGE>

                  REQUIRED ASSIGNMENT AND ASSUMPTION AGREEMENT

                  This Required Assignment and Assumption Agreement (this
"Assignment") is dated as of the Effective Time (as defined below) and is
entered into by and among AVONDALE MILLS, INC., an Alabama corporation (the
"Borrower"), BANK OF AMERICA, N.A. (formerly NationsBank, N.A.) ("BOA"), BRANCH
BANKING AND TRUST COMPANY ("BB&T"), REGIONS BANK(formerly First Alabama Bank)
("Regions"), THE CIT GROUP/COMMERCIAL SERVICES, INC. ("CIT") and WACHOVIA BANK,
NATIONAL ASSOCIATION (successor by merger to Wachovia Bank of Georgia, N.A.,
Wachovia Bank, N.A., First Union National Bank, and First Union National Bank of
Georgia), as a Bank ("WBNA") and as Agent (the "Agent").

                                    RECITALS:

                  A.       Reference is made to the Amended and Restated Credit
Agreement dated as of April 29, 1996 (which amended and restated the Credit
Agreement dated March 29, 1994, as amended prior to April 29, 1996), as amended
by First Amendment to Credit Agreement dated as of March 20, 1997, Second
Amendment to Credit Agreement dated as of August 29, 1997, Third Amendment to
Credit Agreement dated as of August 27, 1999, and Fourth Amendment to Credit
Agreement dated as of April 1, 2000, as amended and restated by Second Amended
and Restated Credit Agreement dated September 28, 2000, as amended by First
Amendment to Second Amended and Restated Credit Agreement dated August 30, 2001,
Second Amendment to Second Amended and Restated Credit Agreement dated February
6, 2002, Third Amendment to Second Amended and Restated Credit Agreement dated
May 1, 2002, Fourth Amendment to Second Amended and Restated Credit Agreement
dated May 24, 2002, and Fifth Amendment to Second Amended and Restated Credit
Agreement dated August 30, 2002 (collectively, the (the "Original Credit
Agreement") by and among the Borrower, Wachovia Bank, N.A. (successor by merger
to Wachovia Bank of Georgia, N.A., Wachovia Bank, N.A., First Union National
Bank, and First Union National Bank of Georgia), as Agent and as a Bank, Bank
One, N.A. (formerly The First National Bank of Chicago), as Documentation Agent
and as a Bank, Bank of America, N.A. (formerly NationsBank, N.A.), and Regions
Bank (formerly First Alabama Bank) (WBNA, BOA, BB&T and Regions are each
hereinafter referred to as an "Original Bank" and collectively as the "Original
Banks"). Terms defined in the Original Credit Agreement are used herein with the
same meaning.

                  B.       The respective Commitment of each Original Bank and
the pro-rata share of each Original Bank in and to all the rights and
obligations of the Original Banks under the Original Credit Agreement (with
respect to each Original Bank, its "Ratable Pre-Effective Share"), all as of the
Effective Time, are set forth on Schedule I attached hereto and by this
reference incorporated herein.

                  C.       The Borrower has requested amendments to the Original
Credit Agreement in order, among other things, to reduce the Aggregate
Commitment, to extend the Termination Date, to provide for general working
capital needs and to provide for the refinancing of the Obligations outstanding
under the Original Credit Agreement through the amendment and restatement of the
Original Credit Agreement, and the Remaining Banks (as

                                      337

<PAGE>

defined below) are willing to provide such financing pursuant to the terms and
conditions set forth in a Third Amendment and Restated Credit Agreement (the
"Third Amended and Restated Credit Agreement") to be executed immediately
following the execution and delivery of this Assignment, which Third Amendment
and Restated Credit Agreement will constitute an amendment and restatement of,
and which will replace, the Original Credit Agreement. The Third Amended and
Restated Credit Agreement will be by and among WBNA (as a Bank and as Agent),
Regions and CIT (each, a "Remaining Bank" and collectively, the "Remaining
Banks") and Borrower.

                  D.       Each of BOA and BB&T (each, a "Departing Bank" and
collectively, the "Departing Banks") desires to terminate its Commitment under
the Original Credit Agreement as of the Effective Time, and therefore intends to
sell and assign to CIT its interest in and to all of its rights and obligations
under the Original Credit Agreement and any other documents related thereto
(including any Letters of Credit) pursuant to the terms and conditions of this
Assignment.

                  E.       WBNA desires to sell and assign a portion of its
interest in and to its rights and obligations under the Original Credit
Agreement and any other documents related thereto (including any Letters of
Credit) to the Assignee Banks as of the Effective Time, pursuant to the terms
and conditions of this Assignment. BOA, BB&T and WBNA are hereinafter referred
to individually as an "Assignor Bank" and collectively as the "Assignor Banks".

                  F.       CIT desires to purchase and assume the interests of
BOA and BB&T, and a portion of the interest of WBNA, in and to their respective
rights and obligations under the Original Credit Agreement and any other
documents related thereto (including any Letters of Credit) as of the Effective
Time, pursuant to the terms of this Assignment.

                  G.       Regions desires to purchase and assume a portion of
the interest of WBNA in and to WBNA's rights and obligations under the Original
Credit Agreement and any other documents related thereto (including any Letters
of Credit) as of the Effective Time, pursuant to the terms of this Assignment.
CIT and Regions are hereinafter sometimes referred to individually as an
"Assignee Bank" and collectively as the "Assignee Banks."

                  H.       The respective Commitment of each Remaining Bank and
the pro-rata share of each Remaining Bank in and to all the rights and
obligations of the Remaining Banks under the Third Amended and Restated Credit
Agreement (with respect to each Remaining Bank, its "Ratable Post-Effective
Share"), all as of the Effective Time, are set forth on Schedule II attached
hereto and by this reference incorporated herein, and as of the Effective Time,
the Aggregate Commitment will be reduced from $75,000,000 to $62,000,000.

                                    AGREEMENT

                  NOW, THEREFORE, for and in consideration of the above premises
and other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the parties hereto hereby covenant
and agree as follows:

                  1.       BOA Assignment. BOA hereby sells and assigns to CIT,
without recourse to BOA, and CIT hereby purchases at par and assumes from BOA,
all of BOA's Ratable Pre-Effective Share (including, without limitation, a 100%
interest in BOA's Commitment, a 100%

                                      338

<PAGE>

interest in the Loans owing to BOA, a 100% interest in the Revolver Loan Note
held by BOA and a 100% interest in all of BOA's risk participation in any Swing
Loans and in the Letters of Credit). The purchase price for such payment is
$2,640,000 principal.

                  2.       BB&T Assignment. BB&T hereby sells and assigns to
CIT, without recourse to BB&T, and CIT hereby purchases at par and assumes from
BB&T, all of BB&T's Ratable Pre-Effective Share (including, without limitation,
a 100% interest in BB&T's Commitment, a 100% interest in the Loans owing to
BB&T, a 100% interest in the Revolver Loan Note held by BB&T and a 100% interest
in all of BB&T's risk participation in any Swing Loans and in the Letters of
Credit). The purchase price for such payment is $440,000 principal.

                  3.       WBNA Assignment to CIT. WBNA hereby sells and assigns
to CIT, without recourse to WBNA, and CIT hereby purchases at par and assumes
from WBNA, 22.0046083% of WBNA's Ratable Pre-Effective Share (constituting a
12.322580645% portion of the aggregate Pre-Effective Share of all Original
Banks, and including, without limitation, a 22.0046083% interest in WBNA's
Commitment, a 22.0046083% interest in the Loans owing to WBNA, a 22.0046083%
interest in the Revolver Loan Note held by WBNA and a 22.0046083% interest in
all of WBNA's risk participation in any Swing Loans and in the Letters of
Credit). The purchase price for such payment is $1,355,483.87 principal.

                  4.       WBNA Assignment to Regions. WBNA hereby sells and
assigns to Regions, without recourse to WBNA, and Regions hereby purchases at
par and assumes from WBNA, 5.9907693% of WBNA's Ratable Pre-Effective Share
(constituting a 3.354830797% portion of the aggregate Pre-Effective Share of all
Original Banks, and including, without limitation, a 5.9907693% interest in
WBNA's Commitment, a 5.9907693% interest in the Loans owing to WBNA, a
5.9907693% interest in the Revolver Loan Note held by WBNA and a 5.9907693%
interest in all of WBNA's risk participation in any Swing Loans and in the
Letters of Credit). The purchase price for such payment is $369,032.26
principal.

                  5.       Commitment Reduction. The parties acknowledge and
agree that, as of the Effective Time, the Aggregate Commitment will be reduced
from $75,000,000 (as existing prior to the Effective Time) to $62,000,000 (as
will exist as of the Effective Time). The Ratable Post-Effective Share of each
Remaining Bank, as well as each Remaining Bank's Commitment under the Loans and
the Letters of Credit, shall be as set forth on Schedule II attached hereto.

                  6.       Representations and Warranties of Assignor Banks.
Each of the Assignor Banks (i) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Original Credit Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Original Credit Agreement or any other instrument or document furnished pursuant
thereto, other than that it is the legal and beneficial owner of the interest
being assigned by it hereunder, that such interest is free and clear of any
adverse claim and that as of immediately prior to the Effective Time its
Commitment, its Ratable Pre-Effective Share of the Loans and of its risk
participation in any Swing Loans and the Letters of Credit, and the aggregate
outstanding principal amount of Revolver Loans held by it, is as set forth on
Schedule I attached hereto; (ii) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower, the
Parent or AMGF or the performance or observance by

                                      339

<PAGE>

the Borrower of any of its obligations under the Original Credit Agreement or
any other Loan Documents, or the performance or observance by the Parent of any
of its obligations under the Parent Documents; or the performance or observance
by AMGF of any of its obligations under the AMGF Documents, and (iii)
acknowledges and agrees that as of the Effective Time, the Revolver Loan Note
held by it shall be deemed cancelled, superseded and of no further force or
effect, and covenants and agrees to deliver to the Borrower for cancellation its
Revolver Loan Note issued under the Original Credit Agreement no later than 3
Domestic Business Days following the Effective Time. At the Effective Time, the
Borrower shall execute and deliver to the Agent, for distribution to the
Remaining Banks, a new Revolver Loan Note payable to each Remaining Bank, dated
as of the Effective Time in the principal amount of its Commitment set forth on
Schedule II attached hereto with respect to such Remaining Bank.

                  7.       Representations, Warranties and Covenants of Assignee
Banks. Each Assignee Bank (i) confirms that it has received a copy of the Third
Amended and Restated Credit Agreement, together with copies of the financial
statements referred to in Section 4.04(a) thereof (or any more recent financial
statements of the Borrower delivered pursuant to Section 5.01(a) or (b) thereof)
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment; (ii) agrees
that it will, independently and without reliance upon the Agent, the Assignor
Banks or any other Bank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Third Amended and Restated Credit
Agreement; (iii) confirms that it is a bank, financial institution or commercial
finance company; (iv) appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under the Third Amended and
Restated Credit Agreement as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto; (v) agrees that
it will perform in accordance with their terms all of the obligations which by
the terms of the Third Amended and Restated Credit Agreement required to be
performed by it as a Bank and agrees to be bound by all of the terms and
provisions of the Third Amended and Restated Credit Agreement (including,
without limitation, the provisions of Section 9.18) and the Receivables
Intercreditor Agreement (including, without limitation, the obligations and
agreements contained in Sections 2.19, 2.20, and 3.3 thereof); (vi) specifies as
its Lending Office (and address for notices) the office set forth beneath its
name on the signature pages hereof, (vii) represents and warrants that the
execution, delivery and performance of this Assignment are within its corporate
powers and have been duly authorized by all necessary corporate action, (viii)
attaches the forms prescribed by the Internal Revenue Service of the United
States certifying as to its status for purposes of confirming exemption from
United States withholding taxes with respect to all payments to be made to it
under the Third Amended and Restated Credit Agreement and the Revolver Loan Note
applicable to it or such other documents as are necessary to indicate that no
such payments are subject to such taxes, and (ix) represents and warrants that,
as of the Effective Time, it is not entitled to any compensation pursuant to
Section 8.03 or entitled to any suspension of its obligations to make
Euro-Dollar Loans pursuant to Section 8.02.

                  8.       Conditions Precedent. This Assignment shall become
effective only upon (i) execution and delivery of this Assignment by each of the
parties hereto, (ii) execution and delivery of the Third Amended and Restated
Credit Agreement by each of the parties thereto and (iii) payment by each of the
Assignee Banks to the Agent, for the account of the Assignor Banks,

                                      340

<PAGE>

of the purchase price for the respective interests being assigned pursuant
hereto (the date that each of such conditions has been satisfied, which is
expected to occur on March 28, 2003, is the "Effective Time").

                  9.       Status. Upon the execution of this Assignment by all
parties hereto, from and after the Amendment Effective Time, (i) each Assignee
Bank shall be a party to the Third Amended and Restated Credit Agreement and any
amendment thereof or replacement therefor and, to the extent rights and
obligations have been transferred to it by this Assignment, have the rights and
obligations of a Bank thereunder and (ii) each Assignor Bank shall relinquish
its rights (other than under Sections 8.03, 9.03 and 9.04 of the Original Credit
Agreement) and be released from its obligations under the Original Credit
Agreement, but only to the extent its rights and obligations have been
transferred to the Assignee Banks by this Assignment.

                  10.      Payments. From and after the Effective Time, the
Agent shall make all payments in respect of the interests assigned hereby to the
applicable Assignee Bank; provided, however, that (i) at the Effective Time, the
Agent, for the account of the Borrower, shall pay to the Original Banks accrued
and unpaid interest on the outstanding principal balance of their Loans
immediately prior to the Effective Time, and (ii) on May 31, 2003, when accrued
and unpaid Commitment Fees are paid, the ratable portion thereof that accrued as
of the Effective Time shall be paid to the Original Banks based on their
Commitments in effect immediately prior to the Effective Time.

                  11.      Governing Law. This Assignment shall be governed by,
and construed in accordance with, the laws of the State of Georgia.

                         [SIGNATURES BEGIN ON NEXT PAGE]

                                      341

<PAGE>

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

                                   AVONDALE MILLS, INC.            (SEAL)

                                   By: ______________________________
                                       Title:
                                   Avondale Mills, Inc.
                                   506 South Broad Street
                                   Monroe, Georgia 30655
                                   Attention: Vice Chairman and Chief
                                              Financial Officer
                                   Telecopier number: 770-267-2543
                                   Confirmation number: 770-267-2226

                                      342

<PAGE>

                                   WACHOVIA BANK, NATIONAL ASSOCIATION
                                   (successor by merger to Wachovia Bank of
                                   Georgia, N.A., Wachovia Bank, N.A., First
                                   Union National Bank, and First Union National
                                   Bank of Georgia),
                                   as Agent and as a Bank          (SEAL)

                                   By: ________________________________
                                       Title:

                                   Lending Office
                                   Wachovia Bank, National Association
                                   301 South College Street
                                   Charlotte, North Carolina 28288
                                   Attention: David C. Hauglid
                                   Telecopier number: 704-374-6319
                                   Confirmation number: 704-383-3544

                                      343

<PAGE>

                                   THE CIT GROUP/COMMERCIAL SERVICES, INC.
                                                                   (SEAL)

                                   By: ___________________________________
                                       Title:

                                   Lending Office
                                   The CIT Group/Commercial Services, Inc.
                                   Two Wachovia Center, 25th Floor
                                   301 South Tryon Street
                                   Charlotte, North Carolina 28202
                                   Attention: Regional Credit Manager
                                   Telecopier number: 704-339-2910
                                   Confirmation number: 704-339-2902

                                      344

<PAGE>

                                   REGIONS BANK                    (SEAL)

                                   By: _______________________________
                                       Title:

                                   Lending Office
                                   Regions Bank
                                   417 N. 20th Street
                                   Birmingham, Alabama  35203
                                   Attention: Mark Howze
                                   Telecopier number: 205-326-7739
                                   Confirmation number: 205-326-7193

                                      345

<PAGE>

                                   BANK OF AMERICA, N.A.           (SEAL)

                                   By: ______________________________
                                       Title:

                                      346

<PAGE>

                                   BRANCH BANKING AND TRUST COMPANY
                                   (SEAL)

                                   By: _________________________________
                                       Title:

                                      347

<PAGE>

                                   SCHEDULE I

                             PRE-EFFECTIVE SCHEDULE

REVOLVING LINE OF CREDIT

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
                               RATABLE                 PRE-EFFECTIVE           PRE-EFFECTIVE LOAN
     BANK                PRE-EFFECTIVE SHARE             COMMITMENT                  BALANCE
-------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                     <C>
Bank of America               24.00000000%            $18,000,000.00             $ 2,640,000.00
-------------------------------------------------------------------------------------------------
BB&T                           4.00000000%            $ 3,000,000.00             $   440,000.00
-------------------------------------------------------------------------------------------------
Regions                       16.00000000%            $12,000,000.00             $ 1,760,000.00
-------------------------------------------------------------------------------------------------
WBNA                          56.00000000%            $42,000,000.00             $ 6,160,000.00
-------------------------------------------------------------------------------------------------
                           100.0000000000%            $75,000,000.00             $11,000,000.00
-------------------------------------------------------------------------------------------------
</TABLE>

$650,000 LETTER OF CREDIT FACILITY

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                PRE-EFFECTIVE         PRE-EFFECTIVE LETTER OF
     BANK                PRE-EFFECTIVE SHARE            COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                   <C>
Bank of America               24.00000000%             $156,000.00               $156,000.00
---------------------------------------------------------------------------------------------------
BB&T                           4.00000000%             $ 26,000.00                $26,000.00
---------------------------------------------------------------------------------------------------
Regions                       16.00000000%             $104,000.00               $104,000.00
---------------------------------------------------------------------------------------------------
WBNA                          56.00000000%             $364,000.00               $364,000.00
---------------------------------------------------------------------------------------------------
                           100.0000000000%             $650,000.00               $650,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

$500,000 LETTER OF CREDIT

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                PRE-EFFECTIVE         PRE-EFFECTIVE LETTER OF
     BANK                PRE-EFFECTIVE SHARE            COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                   <C>
Bank of America               24.00000000%             $120,000.00                $120,000.00
---------------------------------------------------------------------------------------------------
BB&T                           4.00000000%             $ 20,000.00                $ 20,000.00
---------------------------------------------------------------------------------------------------
Regions                       16.00000000%             $ 80,000.00                $ 80,000.00
---------------------------------------------------------------------------------------------------
WBNA                          56.00000000%             $280,000.00                $280,000.00
---------------------------------------------------------------------------------------------------
                           100.0000000000%             $500,000.00                $500,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

$250,000 LETTER OF CREDIT

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
                               RATABLE                PRE-EFFECTIVE         PRE-EFFECTIVE LETTER OF
     BANK                PRE-EFFECTIVE SHARE            COMMITMENT              CREDIT BALANCE
--------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                   <C>
Bank of America               24.00000000%             $ 60,000.00               $ 60,000.00
--------------------------------------------------------------------------------------------------
BB&T                           4.00000000%             $ 10,000.00               $ 10,000.00
--------------------------------------------------------------------------------------------------
Regions                       16.00000000%             $ 40,000.00               $ 40,000.00
--------------------------------------------------------------------------------------------------
WBNA                          56.00000000%             $140,000.00               $140,000.00
--------------------------------------------------------------------------------------------------
                           100.0000000000%             $250,000.00               $250,000.00
--------------------------------------------------------------------------------------------------
</TABLE>

                                      348

<PAGE>

                                   SCHEDULE II

                             POST-EFFECTIVE SCHEDULE

REVOLVING LINE OF CREDIT

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
                               RATABLE                POST-EFFECTIVE          POST-EFFECTIVE LOAN
     BANK                POST-EFFECTIVE SHARE           COMMITMENT                  BALANCE
-------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                     <C>
Regions                      19.3548387097%           $12,000,000.00             $ 2,129,032.26
-------------------------------------------------------------------------------------------------
WBNA                         40.3225806452%           $25,000,000.00             $ 4,435,483.87
-------------------------------------------------------------------------------------------------
CIT                          40.3225806452%           $25,000,000.00             $ 4,435,483.87
-------------------------------------------------------------------------------------------------
                             100.000000000%           $62,000,000.00             $11,000,000.00
-------------------------------------------------------------------------------------------------
</TABLE>

$650,000 LETTER OF CREDIT FACILITY

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                POST-EFFECTIVE       POST-EFFECTIVE LETTER OF
     BANK                POST-EFFECTIVE SHARE           COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                  <C>
Regions                      19.3548387097%             $125,806.45              $125,806.45
---------------------------------------------------------------------------------------------------
WBNA                         40.3225806452%             $262,096.77              $262,096.77
---------------------------------------------------------------------------------------------------
CIT                          40.3225806452%             $262,096.77              $262,096.77
---------------------------------------------------------------------------------------------------
                             100.000000000%             $650,000.00              $650,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

$500,000 LETTER OF CREDIT

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                POST-EFFECTIVE       POST-EFFECTIVE LETTER OF
     BANK                POST-EFFECTIVE SHARE           COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                  <C>
Regions                     19.3548387097%              $ 96,774.19               $ 96,774.19
---------------------------------------------------------------------------------------------------
WBNA                        40.3225806452%              $201,612.90               $201,612.90
---------------------------------------------------------------------------------------------------
CIT                         40.3225806452%              $201,612.90               $201,612.90
---------------------------------------------------------------------------------------------------
                            100.000000000%              $500,000.00               $500,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

$250,000 LETTER OF CREDIT

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
                               RATABLE                POST-EFFECTIVE       POST-EFFECTIVE LETTER OF
     BANK                POST-EFFECTIVE SHARE           COMMITMENT              CREDIT BALANCE
---------------------------------------------------------------------------------------------------
<S>                      <C>                          <C>                  <C>
Regions                     19.3548387097%             $ 48,387.10                $ 48,387.10
---------------------------------------------------------------------------------------------------
WBNA                        40.3225806452%             $100,806.45                $100,806.45
---------------------------------------------------------------------------------------------------
CIT                         40.3225806452%             $100,806.45                $100,806.45
---------------------------------------------------------------------------------------------------
                            100.000000000%             $250,000.00                $250,000.00
---------------------------------------------------------------------------------------------------
</TABLE>

                                      349

<PAGE>

                           GLOBAL AMENDMENT AGREEMENT

         THIS GLOBAL AMENDMENT AGREEMENT (this "Agreement") is dated as of March
28, 2003, by and among AVONDALE MILLS, INC., (the "Borrower"), AVONDALE
INCORPORATED (the "Parent"), AVONDALE MILLS GRANITEVILLE FABRICS, INC.,
("AMGF"), and WACHOVIA BANK, NATIONAL ASSOCIATION (successor by merger to
Wachovia Bank of Georgia, N.A., Wachovia Bank, N.A., First Union National Bank
and First Union National Bank of Georgia), as Agent (the "Agent").

                              W I T N E S S E T H:

         WHEREAS, the Borrower, the Agent and the Banks party thereto entered
into that certain Third Amended and Restated Credit Agreement dated as of March
21, 2003 (the "Credit Agreement");

         WHEREAS, the Borrower and the Agent entered into that certain Amended
and Restated Security Agreement dated as of April 29, 1996, as amended by that
certain Fourth Amendment to Second Amended and Restated Credit Agreement and
First Amendment to Security Agreement dated as of May 24, 2002 by and between
the Borrower, the Agent, and Banks listed therein (as so amended, the "Security
Agreement");

         WHEREAS, the Parent and the Agent entered into that certain Amended and
Restated Stock Pledge Agreement dated as of April 29, 1996 (the "Parent Pledge
Agreement");

         WHEREAS, the Borrower and the Agent entered into that certain Borrower
Pledge Agreement dated as of April 29, 1996 (the "Borrower Pledge Agreement");

         WHEREAS, AMGF and the Agent entered into that certain Security
Agreement dated as of August 29, 1997 (the "AMGF Security Agreement");

         WHEREAS, the Borrower, the Parent and AMGF have requested and the Agent
and the Banks have agreed to certain amendments to the Credit Agreement and
certain other Facility Documents, subject to the terms and conditions hereof;

         NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Parent, AMGF,
and the Agent hereby covenant and agree as follows:

         1. Definitions. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement.

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         2. Amendments to Security Agreement.

                  (a) Amendment to Section 1. Section 1 of the Security
         Agreement hereby is amended by deleting the initial two sentences
         thereof in their entirety and substituting the following therefor:

                           Notwithstanding anything to the contrary contained in
                  the Recitals to this Agreement, for all purposes herein (i)
                  the term "Credit Agreement" shall mean that certain Third
                  Amended and Restated Credit Agreement, dated as of March 21,
                  2003, among Borrower, the Agent, and the Banks parties
                  thereto, as amended, modified and/or restated from time to
                  time and (ii) references to "this Agreement" shall mean the
                  "Original Security Agreement", as defined in and as amended by
                  an Amended and Restated Security Agreement dated as of April
                  29, 1996, as amended by Fourth Amendment to Second Amended and
                  Restated Credit Agreement and First Amendment to Security
                  Agreement dated as of May 24, 2002, and by Global Amendment
                  Agreement dated as of March 21, 2003 among Avondale Mills,
                  Inc., Avondale Incorporated, Avondale Mills Graniteville
                  Fabrics, Inc. and the Agent, and as thereafter amended,
                  modified and/or restated from time to time. Unless otherwise
                  defined herein, capitalized terms used herein have the
                  meanings set forth in the Credit Agreement. In addition, the
                  following terms have the meanings set forth below, unless the
                  context requires otherwise:

                  (b) Amendment to Section 9.5. Section 9.5 of the Security
         Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                           9.5 Insurance. The Borrower agrees that it will
                  obtain and maintain insurance on the Inventory Collateral and
                  the Equipment Collateral as required by Section 5.17(a) of the
                  Credit Agreement, with loss payable to the Agent as its
                  interests may appear. Such insurance shall not be cancelable
                  by the Borrower, unless with prior written consent of the
                  Required Banks, or by the Borrower's insurer, unless with at
                  least 30 days advance written notice to the Agent. All Net
                  Casualty/Insurance Proceeds of any Collateral shall be applied
                  as provided in Section 5.17(b) of the Credit Agreement.

                  (c) Amendment to Section 12.5. Section 12.5 of the Security
         Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                           12.5 Application of Proceeds. All moneys from time to
                  time received by the Agent from the disposition of Collateral
                  shall be applied by the Agent for the benefit of the Banks in
                  the following manner: first, in discharge of all reasonable
                  expenses of re-taking, holding, preserving, preparing for sale
                  or lease, selling, leasing, and the like of the Collateral
                  including, without limitation, fees and expenses of any
                  receivers and attorneys, insurance premiums, tax payments and
                  the like, and, secondly, as provided for in Section 2.11 of
                  the Credit Agreement.

         3. Amendments to Parent Pledge Agreement.

                  (a) Amendment to Section 1. Section 1 of the Parent Pledge
         Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                           1.       Defined Terms. Notwithstanding anything to
                  the contrary contained in the Recitals to this Agreement, for
                  all purposes herein (i) the term "Credit Agreement" shall mean
                  that certain Third Amended and Restated Credit Agreement,
                  dated as of March 21, 2003, among Borrower, the Agent, and the
                  Banks parties thereto, as amended, modified and/or restated
                  from time to time and (ii) references to "this Agreement"
                  shall mean the "Original Pledge Agreement", as defined in and
                  as amended by an Amended and Restated Stock Pledge Agreement
                  dated as of April 29, 1996, as amended by Global Amendment
                  Agreement dated as of March 21, 2003 among

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                  Avondale Mills, Inc., Avondale Incorporated, Avondale Mills
                  Graniteville Fabrics, Inc. and the Agent, and as thereafter
                  amended, modified and/or restated from time to time. Unless
                  otherwise defined herein, capitalized terms used herein have
                  the meanings set forth in the Credit Agreement.

                  (b) Amendment to Section 13(b). Section 13 (b) of the Parent
         Pledge Agreement is hereby amended so that it reads, in its entirety,
         as follows:

                           (b) Any cash held by the Agent as Collateral and all
                  cash proceeds received by the Agent in respect of any sale of,
                  collection from, or other realization upon or any part of the
                  Collateral following the occurrence of an Event of Default
                  shall be applied by the Agent for the benefit of the Banks in
                  the following manner: first, in discharge of all expenses
                  incurred by the Agent which Pledgor is obligated to reimburse
                  the Agent pursuant to Section 15 hereof, and, secondly, as
                  provided for in Section 2.11 of the Credit Agreement.

         4. Amendments to Borrower Pledge Agreement.

                  (a) Amendment to Section 1. Section 1 of the Borrower Pledge
         Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                           1.       Defined Terms. Notwithstanding anything to
                  the contrary contained in the Recitals to this Agreement, for
                  all purposes herein, (i) the term "Credit Agreement" shall
                  mean that certain Third Amended and Restated Credit Agreement,
                  dated as of March 21, 2003, among Borrower, the Agent, and the
                  Banks parties thereto, as amended, modified and/or restated
                  from time to time and (ii) references to "this Agreement"
                  shall mean the Borrower Pledge Agreement dated as of April 29,
                  1996, as amended by Global Amendment Agreement dated as of
                  March 21, 2003 among Avondale Mills, Inc., Avondale
                  Incorporated, Avondale Mills Graniteville Fabrics, Inc. and
                  the Agent, and as thereafter amended, modified and/or restated
                  from time to time. Unless otherwise defined herein,
                  capitalized terms used herein have the meanings set forth in
                  the Credit Agreement.

                  (b) Amendment to Section 2. Section 2 of the Borrower Pledge
         Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                           2.       Pledge of Pledged Collateral. Borrower does
                  hereby pledge, hypothecate, assign, transfer, set over,
                  deliver and grant a security interest in and to the Agent in
                  all membership interests in (i) Avondale Funding, LLC held by
                  it (which the Borrower represents and warrants constitutes
                  100% of the membership interests therein), which shall
                  constitute Receivables Subsidiary Pledged Stock, as defined in
                  the Credit Agreement, together with any and all other
                  securities, cash or other property at any time and from time
                  to time receivable or otherwise distributed in respect of or
                  in exchange for any or all of such pledged stock, and together
                  with the proceeds thereof and (ii) Avondale Mills Graniteville
                  Fabrics, Inc. (which the Borrower represents and warrants
                  constitutes 100% of the membership interests therein), which
                  shall constitute AMGF Pledged Stock, as defined in the Credit
                  Agreement, together with any and all other securities, cash or
                  other property at any time and from time to time receivable or
                  otherwise distributed in respect of or in exchange for any or
                  all of such pledged stock, and together with the proceeds
                  thereof (hereinafter said property pertaining to the
                  Receivables Subsidiary Pledged Stock and the AMGF Pledged
                  Stock being individually or collectively, as the context shall
                  required, referred to as the "Pledged Collateral"; provided,
                  that the term "Pledged Collateral", as used in Section 14
                  hereof, shall refer only to Pledged Collateral pertaining to
                  the Receivables Subsidiary Pledged Stock and not Pledged
                  Collateral pertaining to the AMGF Pledged Stock), all as
                  security for the payment of all of the Obligations in
                  existence from time to time. In the event the Borrower
                  receives from the Receivables Subsidiary a Purchase Money
                  Note, it will deliver such Purchase Money Note to the Agent
                  and it shall also constitute Pledged Collateral. On or before
                  April 7, 2003, Borrower will

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                  deliver to the Agent the certificates evidencing the AMGF
                  Pledged Stock, together with duly executed blank stock powers
                  with respect thereto.

                  (c) Amendment to Section 12(b). Section 12 (b) of the Borrower
         Pledge Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                           (c)      Any cash held by the Agent as Collateral and
                                    all cash proceeds received by the Agent in
                                    respect of any sale of, collection from, or
                                    other realization upon or any part of the
                                    Collateral following the occurrence of an
                                    Event of Default shall be applied by the
                                    Agent for the benefit of the Banks in the
                                    following manner: first, in discharge of all
                                    expenses incurred by the Agent which Pledgor
                                    is obligated to reimburse the Agent pursuant
                                    to Section 13 hereof, and, secondly, as
                                    provided for in Section 2.11 of the Credit
                                    Agreement.

                  (d) Amendment to Exhibit A. Exhibit A of the Borrower Pledge
         Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                                    Exhibit A
                          To Borrower Pledge Agreement

                       Description of the Capital Stock of
                          Avondale Receivables Company

     500 Shares, $0.01 Par Value Common Stock Evidenced by Certificate No. 1

                       Description of the Capital Stock of
                    Avondale Mills Graniteville Fabrics, Inc.

    ___ Shares, $_____ Par Value Common Stock Evidenced by Certificate No. __

         5. Amendments to AMGF Security Agreement.

                  (a) Amendment to Section 1. Section 1 of the AMGF Security
         Agreement hereby is amended by deleting the initial two sentences
         thereof in their entirety and substituting the following therefor:

                           Notwithstanding anything to the contrary contained in
                  the Recitals to this Agreement, for all purposes herein (i)
                  the term "Credit Agreement" shall mean that certain Third
                  Amended and Restated Credit Agreement, dated as of March 21,
                  2003, among Borrower, the Agent, and the Banks parties
                  thereto, as amended, modified and/or restated from time to
                  time and (ii) references to "this Agreement" shall mean the
                  Security Agreement (Avondale Mills Graniteville Fabrics, Inc.)
                  dated as of August 29, 1997 by and between the Guarantor and
                  the Agent, as amended by Global Amendment Agreement dated as
                  of March 21, 2003 among Avondale Mills, Inc., Avondale
                  Incorporated, Avondale Mills Graniteville Fabrics, Inc. and
                  the Agent, and as thereafter amended, modified and/or restated
                  from time to time. Unless otherwise defined herein,
                  capitalized terms used herein have the meanings set forth in
                  the Credit Agreement. In addition, the following terms have
                  the meanings set forth below, unless the context requires
                  otherwise:

                  (b) Additional Amendment to Section 1. Section 1 of the AMGF
         Security Agreement hereby is further amended by relabeling the defined
         term "Secured

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         Obligations" as "Guaranteed Obligations", and relocating such
         definition to its proper alphabetical position in Section 1, but
         leaving intact the rest of such definition.

                  (c) Amendment to Section 6.5. Section 6.5 of the AMGF Security
         Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                           6.5 Insurance. The Guarantor agrees that it will
                  obtain and maintain insurance on the Inventory Collateral and
                  the Equipment Collateral as required by Section 5.17(a) of the
                  Credit Agreement, with loss payable to the Agent as its
                  interests may appear. Such insurance shall not be cancelable
                  by the Guarantor, unless with prior written consent of the
                  Required Banks, or by the Guarantor's insurer, unless with at
                  least 30 days advance written notice to the Agent. All Net
                  Casualty/Insurance Proceeds of any Collateral shall be applied
                  as provided in Section 5.17(b) of the Credit Agreement.

                  (d) Amendment to Section 9.5. Section 9.5 of the AMGF Security
         Agreement hereby is deleted in its entirety and the following is
         substituted therefor:

                           9.5 Application of Proceeds. All moneys from time to
                  time received by the Agent from the disposition of Collateral
                  shall be applied by the Agent for the benefit of the Banks in
                  the following manner: first, in discharge of all reasonable
                  expenses of re-taking, holding, preserving, preparing for sale
                  or lease, selling, leasing, and the like of the Collateral
                  including, without limitation, fees and expenses of any
                  receivers and attorneys, insurance premiums, tax payments and
                  the like, and, secondly, as provided for in Section 2.11 of
                  the Credit Agreement.

         6. Amendments to AMGF Guaranty.

                  (b)      Amendments to Title and Recitals.

                           The word "Limited" hereby is deleted from the title
                  to and the recitals at the beginning of the AMGF Guaranty, and
                  the words "subject to the limitation on liability provisions
                  contained herein" and "subject to the limitation on liability
                  provisions contained in Section 15 hereof" in the recitals at
                  the beginning of the AMGF Guaranty hereby are deleted.

                  (b) Amendment to Section 1. Section 1 of the AMGF Guaranty
         hereby is amended by deleting it in its entirety and substituting the
         following therefor:

                           Notwithstanding anything to the contrary contained in
                  the Recitals to this Agreement, for all purposes herein (i)
                  the term "Credit Agreement" shall mean that certain Third
                  Amended and Restated Credit Agreement, dated as of March 21,
                  2003, among Borrower, the Agent, and the Banks parties
                  thereto, as amended, modified and/or restated from time to
                  time and (ii) references to "this Guaranty" shall mean the
                  "Limited Guaranty Agreement" executed by the Subsidiary in
                  favor of the Agent dated as of August 29, 1997, as amended by
                  Global Amendment Agreement dated as of March 21, 2003, and as
                  thereafter amended, modified and/or restated from time to
                  time. Unless otherwise defined herein, capitalized terms used
                  herein have the meanings set forth in the Credit Agreement.

                  (c) Amendments to Section 3. Section 3 of the AMGF Guaranty
         hereby is amended by deleting the phrase "Subject to the provisions of
         Section 15," at the beginning thereof and capitalizing the word "the"
         which immediately follows such phrase.

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<PAGE>

                  (d) Amendments to Section 4. Section 4 of the AMGF Guaranty
         hereby is amended by deleting the phrase "Subject to Section 15," at
         the beginning thereof and capitalizing the word "the" which immediately
         follows such phrase.

                  (d) Amendment to Section 15. Section 15 of the AMGF Guaranty
         hereby is deleted in its entirety.

         7. Restatement of Representations and Warranties. Each of the Borrower,
the Parent and AMGF hereby restates and renews each and every representation and
warranty heretofore made by it in the Credit Agreement and the other Facility
Documents to which it is a party as fully as if made on the date hereof and with
specific reference to this Agreement and all other Facility Documents executed
and/or delivered in connection herewith, except where reference is made to a
specific date.

         7. Effect of Amendment. Except as set forth expressly hereinabove, all
terms of the Credit Agreement and the other Facility Documents shall be and
remain in full force and effect, and shall constitute the legal, valid, binding
and enforceable obligations of the Borrower, the Parent and AMGF, as applicable.
The amendments contained herein shall be deemed to have prospective application
only, unless otherwise specifically stated herein.

         8. Ratification. Each of the Borrower, the Parent and AMGF hereby
restates, ratifies and reaffirms each and every term, covenant and condition set
forth in the Credit Agreement and the other Facility Documents to which it is a
party effective as of the date hereof.

         9. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which may be delivered by facsimile and which when so executed and delivered
(including counterparts delivered by facsimile) shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same instrument.

         10. Section References. Section titles and references used in this
Agreement shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreements among the parties hereto evidenced hereby.

         11. No Default. To induce the Agent and the Banks to enter into this
Agreement and to continue to make advances pursuant to the Credit Agreement, (i)
the Borrower hereby acknowledges and agrees that, as of the date hereof, and
after giving effect to the terms hereof, there exists (1) no Default or Event of
Default and (2) no right of offset, defense, counterclaim, claim or objection in
favor of the Borrower arising out of or with respect to any of the Loans or
other obligations of the Borrower owed to the Agent or the Banks under the
Credit Agreement and the other Loan Documents, (ii) the Parent hereby
acknowledges and agrees that, as of the date hereof, and after giving effect to
the terms hereof, there exists (1) no Default or Event of Default, and no breach
or default exists under the Parent Documents and (2) no right of offset,
defense, counterclaim, claim or objection in favor of the Parent arising out of
or with respect to any of the obligations of the Parent owed to the Agent or the
Banks under the Parent Documents and (iii) AMGF hereby acknowledges and agrees
that, as of the date hereof, and after giving effect to the terms hereof, there
exists (1) no breach or default exists under the AMGF

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Documents and (2) no right of offset, defense, counterclaim, claim or objection
in favor of AMGF arising out of or with respect to any of the obligations of
AMGF owed to the Agent or the Banks under the AMGF Documents.

         12. Further Assurances. Each of the Borrower, the Parent and AMGF
agrees to take such further actions as the Agent shall reasonably request in
connection herewith to evidence the amendments herein contained to it.

         13. Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with, the laws of the State of Georgia.

         14. Conditions Precedent. This Agreement shall become effective only
upon execution and delivery of this Agreement by each of the parties hereto.

                       [SIGNATURES COMMENCE ON NEXT PAGE]

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         IN WITNESS WHEREOF, the Borrower, the Parent, AMGF, and the Agent has
caused this Agreement to be duly executed, under seal, by its duly authorized
officer as of the day and year first above written.

                                   AVONDALE MILLS, INC.,
                                   as Borrower                     (SEAL)

                                   By: ______________________
                                         Title:

                                   AVONDALE INCORPORATED,
                                   as Parent                       (SEAL)

                                   By: ______________________
                                         Title:

                                   AVONDALE MILLS GRANITEVILLE FABRICS, INC.,
                                   as AMGF                         (SEAL)

                                   By: ______________________
                                         Title:

                                   WACHOVIA BANK, NATIONAL ASSOCIATION
                                   (successor by merger to Wachovia Bank of
                                   Georgia, N.A., Wachovia Bank, N.A., First
                                   Union National Bank and First Union National
                                   Bank of Georgia),
                                   as Agent                        (SEAL)

                                   By: ______________________
                                         Title:

                                      357

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