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                                  Exhibit 4.18

                              AVONDALE MILLS, INC.,

                              AVONDALE INCORPORATED

                                       AND

                   AND THE HOLDERS LISTED IN EXHIBIT A HERETO

                      FORM OF REGISTRATION RIGHTS AGREEMENT

                         DATED AS OF ____________, 2005

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                          REGISTRATION RIGHTS AGREEMENT

      THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is entered into as
of ______________, 2005, by and among Avondale Mills, Inc., an Alabama
corporation (the "COMPANY"), Avondale Incorporated, a Georgia corporation (the
"GUARANTOR"), and each of the holders from time to time of the Company's
Floating Rate Notes due July 1, 2012 listed in Exhibit A hereto (the "NEW
NOTES"), as such Exhibit may be amended from time to time in accordance with the
terms of this Agreement (each a "HOLDER" and collectively, the "HOLDERS").

                                    RECITALS

      WHEREAS, pursuant to the terms of certain Exchange Agreements (the
"EXCHANGE AGREEMENTS"), the Holders agreed to exchange, for themselves or on
behalf of several managed accounts, outstanding 10-1/4% Senior Subordinated
Notes due 2013 of the Company for New Notes; and

      WHEREAS, pursuant to the Exchange Agreements the Company, the Guarantor
and the Holders desire to enter into this Agreement and agree that this
Agreement shall govern the rights of the Holders to cause the Company to
register New Notes held by the Holders and certain other matters as set forth
herein; and

      NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, representations and warranties contained in this
Agreement, the parties hereto hereby agree as follows:

      1.    DEFINITIONS. As used in this Agreement, the following terms shall
have the indicated meanings:

            "1934 ACT" means the Securities Exchange Act of 1934, as amended.

            "EXCHANGE AGREEMENTS" has the meaning set forth in the first WHEREAS
      clause hereto.

            "HOLDER" means any Holder, as defined in the Preamble to this
      Agreement, and any permitted assignee of any Holder to whom such rights
      have been duly assigned in accordance with Section 3.2 hereof, in each
      case that holds Registrable Securities that have not been sold in a public
      offering or pursuant to Rule 144.

            "INDEMNIFIED PARTY" means a party entitled to indemnity in
      accordance with Section 2.4.

            "INDEMNIFYING PARTY" means a party obligated to provide indemnity in
      accordance with Section 2.4.

            "INSPECTORS" has the meaning set forth in Section 2.2(h) hereof.

            "LOSSES" has the meaning set forth in Section 2.4(a) hereof.

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            "NEW NOTES" has the meaning specified in the Recitals to this
      Agreement and shall include any subsequently issued Floating Rate Notes
      due July 1, 2012 of the Company held by Persons becoming parties to this
      Agreement pursuant to the terms hereof.

            "PERSON" means an individual corporation, partnership, limited
      liability company or partnership, association, trust, joint venture or
      other entity.

            "PIGGYBACK REGISTRATION" has the meaning set forth in Section 2.1
      hereof.

            "RECORDS" has the meaning set forth in Section 2.2(h) hereof.

            "REGISTER," "REGISTERED," and "REGISTRATION" refers to a
      registration effected by preparing and filing a registration statement in
      compliance with the Securities Act, and the declaration or ordering of
      effectiveness by the SEC of such registration statement or document.

            "REGISTRABLE SECURITIES" means any New Notes; provided, however,
      that any New Notes shall cease to be Registrable Securities at such time
      as the Company's obligations with respect to such New Notes pursuant to
      Section 2.1 hereof terminate pursuant to the provisions hereof.
      Notwithstanding the foregoing, Registrable Securities shall exclude any
      New Notes sold by a Holder in a public offering or in a private
      transaction in which rights under Section 2 hereof are not assigned in
      accordance with this Agreement.

            "REGISTRATION EXPENSES" means all reasonable expenses incident to
      the Company's performance of or compliance with its obligations under this
      Agreement to effect the registration and sale of Registrable Securities
      under a registration statement filed with respect to a Piggyback
      Registration, including, without limitation, all registration, filing,
      word processing, duplicating and printing expenses, messenger and delivery
      expenses, road show expenses, the fees and disbursements of counsel for
      the Company and of its independent public accountants, including the
      expenses of any special audits or "cold comfort" letters required by or
      incident to such performance and compliance but excluding underwriting
      discounts and commissions and transfer taxes, if any, in respect of
      Registrable Securities, which shall be payable by each holder thereof
      included in such registration pro rata in proportion to the number of
      Registrable Securities of such holder included in such registration.

            "RULE 144" means Rule 144 of the Securities Act.

            "SEC" means the United States Securities and Exchange Commission.

            "SECURITIES ACT" means the Securities Act of 1933, as amended.

      2. REGISTRATION RIGHTS. The Company covenants and agrees as follows:

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      2.1.  PIGGYBACK REGISTRATIONS.

            (a) PIGGYBACK REGISTRATIONS. The Company shall notify all holders of
      New Notes in writing prior to filing any registration statement under the
      Securities Act for purposes of effecting a public offering of debt
      securities of the Company in an aggregate principal amount of $50,000,000
      or more (other than a registration statement on Form S-8 or other limited
      purpose form) (each a "PIGGYBACK REGISTRATION") and will afford each
      Holder of Registrable Securities the opportunity to include in such
      registration statement all or any part of the Registrable Securities then
      held by such Holder, provided that the Company is not required to include
      any Registrable Securities in a Registration Statement unless the Company
      receives written requests from Holders to register at least $25,000,000 in
      aggregate principal amount of New Notes. Each Holder desiring to include
      in any such registration statement all or any part of the Registrable
      Securities held by such Holder shall, within thirty (30) days after
      receipt of the above-described notice from the Company, so notify the
      Company in writing, and in such notice shall inform the Company of the
      number of Registrable Securities such Holder wishes to include in such
      registration statement.

            (a) UNDERWRITING. If a registration statement under which the
      Company gives notice under Section 2.1(a) is for an underwritten offering,
      then the Company shall so advise the Holders of Registrable Securities,
      and the Company will, subject to the provisions described below in Section
      2.1(c), use its commercially reasonable efforts to arrange for such
      underwriters to include the New Notes to be offered and sold by the
      applicable holders of the New Notes among the debt securities to be
      distributed by such underwriters. In such event, the right of any such
      Holder to have its Registrable Securities included in a registration
      pursuant to this Section 2.1 shall be conditioned upon such Holder's
      participation in such underwriting on the terms agreed to between the
      Company and the managing underwriter and the inclusion of such Holder's
      Registrable Securities in the underwriting to the extent provided herein.
      All Holders proposing to distribute their Registrable Securities through
      such underwriting shall enter into the form of underwriting agreement in
      customary form with the managing underwriter or underwriters selected for
      such underwriting by the Company. If any Holder so elects, such Holder may
      elect to withdraw from the underwriting therefrom by written notice to the
      Company and the underwriter, delivered at least ten (10) business days
      prior to the effective date of the registration statement. Any Registrable
      Securities excluded or withdrawn from such underwriting shall be excluded
      and withdrawn from the registration.

            (c) CUTBACK. If the managing underwriter with respect to a Piggyback
      Registration advises the Company and the participating Holders that, in
      its reasonable opinion, the number of securities requested to be included
      in such registration (including securities of the Company which are not
      New Notes) exceed the number which can be sold in such offering without a
      reduction in the anticipated number of, or in the selling price
      anticipated to be received for, the securities to be sold in such public
      offering, then:

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            (i) if such registration is a primary registration on behalf of the
      Company, such reduction will be pro rata among (x) the amount of
      securities to be included therein for the account of the Company and (y)
      the New Notes proposed to be included by the applicable Holders; and

            (ii) if such registration is an underwritten secondary registration
      on behalf of holders of debt securities of the Company, the Company will
      include therein: (x) first, up to the full amount of securities to be
      included therein for the account of the Company and the New Notes proposed
      to be included by the applicable Holders and (y) second, all other
      securities proposed to be sold by any other persons that, in the opinion
      of the managing underwriter, can be sold without adversely affecting the
      success of the offering. If any reduction is required in the number of
      securities to be registered by the Company and the applicable Holders as
      set forth in the preceding sentence, such reduction will be pro rata among
      (x) the amount of securities to be included therein for the account of the
      Company and (y) the New Notes proposed to be included by the applicable
      Holders.

      (d) DELAY OR WITHDRAWAL OF REGISTRATION. If, at any time after giving a
notice of registration and prior to the effective date of the registration
statement filed in connection with such registration, the Company determines for
any reason not to register or to delay registration of such debt securities, the
Company may, at its election, give prompt written notice of such determination
to each applicable Holder and, thereupon, (i) in the case of a determination not
to register, shall be relieved of its obligation to register any New Notes in
connection with such registration, but not in connection with any future
Piggyback Registration, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering New Notes for the same
period as the delay in registering such other securities.

      (e) HOLDBACK. Unless the managing underwriter agrees, upon notice from the
Company each Holder agrees that it will not make any direct or indirect purchase
or sale of debt securities of the Company (a) during the seven days prior to the
effective date of any registration statement filed by the Company in connection
with a public offering and (b) during the 120 days after the effective date of
any registration statement filed by the Company in connection with a public
offering, in either case except as part of such registration statement, whether
or not such Holder participates in such registration.

      (f) CESSATION OF SALES. Each Holder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 2.2(g)(ii) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the then current prospectus until (i) such
Holder is advised in writing by the Company that a new registration statement
covering the offer of Registrable Securities has become effective under the
Securities Act, (ii) such Holder receives copies of any required supplemented or
amended prospectus, or (iii) such Holder is advised in writing by the Company
that the use of the prospectus may be resumed; provided, however, that the
Company shall use its reasonable best efforts to cure any such misstatement,
omission

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      or event that is applicable to the registration statement as soon as
      reasonably practicable after delivery of such notice pursuant to Section
      2.2(g)(ii) hereof. Such periods of discontinued use of the registration
      statement shall not exceed 120 days in any 365-day period. If so directed
      in writing by the Company, on the happening of such event, each Holder
      will deliver to the Company (at the Company's expense) all copies, other
      than permanent file copies then in such Holder's possession, of the
      prospectus covering such Registrable Securities current at the time of
      receipt of such notice.

            (g) EXPENSES. The Company will pay all Registration Expenses
      incurred in connection with each Piggyback Registration undertaken
      pursuant to this Agreement. In connection with each Piggyback
      Registration, in addition to such Registration Expenses, the Company will
      reimburse the Holders of Registrable Securities covered by such
      registration for the reasonable fees and disbursements of one counsel
      chosen by the Holders of a majority of the Registrable Securities included
      in such registration.

            (h) NUMBER OF PIGGYBACK REGISTRATIONS. Except as otherwise provided
      herein, there shall be no limit on the number of times the Holders may
      request to participate in a registration initiated by the Company under
      this Section 2.1, provided that all conditions to the Company's
      obligations under Section 2.1 are satisfied.

      2.2. OBLIGATIONS OF THE COMPANY. Whenever required under this Section 2 to
effect the registration of any Registrable Securities, the Company shall use its
commercially reasonable efforts to, as promptly as reasonably possible:

            (a) REGISTRATION STATEMENT. Prepare and file with the SEC a
      registration statement on a form for which it is eligible with respect to
      such Registrable Securities and use its best efforts to cause such
      registration statement to become effective and to keep such registration
      statement effective for a period of up to ninety (90) days or until the
      distribution contemplated in the Registration Statement has been
      completed, whichever is shorter; provided, however, that such 90-day
      period shall be extended for a period of time equal to any periods the
      Holder refrains from selling any securities included in such registration
      at the request of the Company pursuant to Section 2.1(f); provided further
      that a registration statement registering the resale of the New Notes from
      time to time pursuant to Rule 415 under the Securities Act shall remain
      effective for any Registrable Securities included therein until such time
      as such New Notes are either sold pursuant to such registration statement
      or are eligible to be sold under Rule 144(k) under the Securities Act.

            (b) AMENDMENTS AND SUPPLEMENTS. Prepare and file with the SEC such
      amendments and supplements to such registration statement and the
      prospectus used in connection with such registration statement as may be
      necessary to comply with the provisions of the Securities Act with respect
      to the disposition of all securities covered by such registration
      statement.

            (c) PROSPECTUS. Furnish to the Holders such numbers of copies of a
      prospectus, including a preliminary prospectus, in conformity with the
      requirements of the Securities

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      Act, and such other documents as they may reasonably request in order to
      facilitate the disposition of Registrable Securities owned by them.

            (d) BLUE SKY. Use its commercially reasonable efforts to register
      and qualify the securities covered by such registration statement under
      such other securities or Blue Sky laws of such jurisdictions as shall be
      reasonably requested by the Holders; provided, that the Company shall not
      be required in connection therewith or as a condition thereto to qualify
      to do business or to file or execute a general consent to service of
      process in any such states or jurisdictions or to take any action that
      would subject the Company to service of process in suits or to taxation,
      other than as to matters in transactions relating to the registration
      statement, in any jurisdictions where it is not now subject.

            (e) UNDERWRITING. In the event of any underwritten public offering,
      enter into and perform its obligations under an underwriting agreement, in
      usual and customary form, with the managing underwriter of such offering.

            (f) NOTIFICATION. Notify each Holder participating in a Piggyback
      Registration and the managing underwriter, if any:

                  (i) when such registration statement or any prospectus used in
            connection therewith, or any amendment or supplement thereto, has
            been filed and, with respect to such registration statement or any
            post-effective amendment thereto, when the same has become
            effective;

                  (ii) of any written comments from the Commission with respect
            to any filing referred to in clause (i) and of any written request
            by the Commission for amendments or supplements to such registration
            statement or prospectus;

                  (iii) of the notification to the Company by the Commission of
            its initiation of any proceeding with respect to the issuance by the
            Commission of any stop order suspending the effectiveness of such
            registration statement; and

                  (iv) of the receipt by the Company of any notification with
            respect to the suspension of the effectiveness of such registration
            statement.

            (g) FURTHER NOTIFICATION. Notify each Holder covered by any
      registration statement filed pursuant to this Agreement, (i) at any time
      when a prospectus relating thereto is required to be delivered under the
      Securities Act, (ii) of the happening of any event as a result of which
      any prospectus included in such registration statement, as then in effect,
      includes an untrue statement of a material fact or omits to state any
      material fact required to be stated therein or necessary to make the
      statements therein, in the light of the circumstances under which they
      were made, not misleading and, (iii) at the request of any such Holder,
      promptly prepare and furnish to such Holder a reasonable number of copies
      of a supplement to or an amendment of such prospectus as may be necessary
      so that, as thereafter delivered to the purchasers of such securities,
      such prospectus shall not include an untrue statement of a material fact
      or omit to state a material fact required to

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      be stated therein or necessary to make the statements therein, in the
      light of the circumstances under which they were made, not misleading.

            (h) INSPECTION. Make available for inspection during reasonable
      business hours by any Holder covered by any registration statement filed
      pursuant to this Agreement, any underwriter participating in any
      disposition pursuant to such registration statement and any attorney,
      accountant or other agent retained by any such seller or underwriter
      (collectively, the "INSPECTORS"), all financial and other records,
      pertinent corporate documents and properties of the Company (collectively,
      the "RECORDS") as shall be reasonably necessary to enable them to exercise
      their due diligence responsibility, and cause the Company's officers,
      directors and employees to supply all information reasonably requested by
      any such Inspector in connection with such registration statement. Records
      which the Company determines, in good faith, to be confidential and which
      it notifies the Inspectors are confidential shall not be disclosed by the
      Inspectors unless (i) the disclosure of such Records is necessary to avoid
      or correct a misstatement or omission in the registration statement, (ii)
      the release of such Records is ordered pursuant to a subpoena or other
      order from a court of competent jurisdiction or (iii) the information in
      such Records has been made generally available to the public. Each Holder
      agrees by acquisition of its Registrable Securities that it will, upon
      learning that disclosure of such Records is sought in a court of competent
      jurisdiction, use reasonable efforts to give notice to the Company and
      allow the Company, at the Company's expense, to undertake appropriate
      action to prevent disclosure of the Records deemed confidential.

            (i) TRANSFER AGENT AND REGISTRAR. Provide a transfer agent and
      registrar for all Registrable Securities covered by any registration
      statement filed pursuant to this Agreement not later than the effective
      date of such registration statement.

            (j) STOP ORDER. Make every reasonable effort to prevent the issuance
      of any stop order suspending the effectiveness of any registration
      statement filed pursuant to this Agreement or of any order preventing or
      suspending the use of any preliminary prospectus and, if any such order is
      issued, to obtain the withdrawal of any such order at the earliest
      possible moment.

            (k) OPINION AND COMFORT LETTERS. Furnish, at the request of any
      Holder participating in a Piggyback Registration, on the date that such
      Registrable Securities are delivered to the underwriters for sale, if such
      securities are being sold through underwriters, or, if such securities are
      not being sold through underwriters, on the date that the registration
      statement with respect to such securities becomes effective, an opinion,
      dated as of such date, of counsel representing the Company for the purpose
      of such registration, in form and substance as is customarily given to
      underwriters in an underwritten public offering, addressed to the
      underwriters, if any, and to the Holders requesting registration of
      Registrable Securities. The Company will also use its reasonable best
      efforts to have any "cold comfort" letters issued to any underwriters in
      connection with an underwritten offering, from the independent certified
      public accountants of the Company, addressed to the Holders requesting
      registration of Registrable Securities.

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            (l) CUSIP NUMBER. Provide a CUSIP number for all such Registrable
      Securities no later than the effective date of such registration.

            (m) COMPLIANCE WITH SEC RULES AND EARNINGS STATEMENT. Otherwise
      comply with all applicable rules and regulations of the SEC, and make
      generally available to its security holders, as soon as practicable, a
      consolidated earnings statement meeting the requirements of Rule 158
      (which need not be audited) for the twelve-month period (A) commencing at
      the end of any fiscal quarter in which Registrable Securities are sold to
      underwriters in a firm or best efforts underwritten offering or (B) if not
      sold to underwriters in such an offering, beginning with the first month
      of the Company's first fiscal quarter commencing after the effective date
      of the registration statement;

            (n) INDENTURE; TRUST INDENTURE ACT. If registered and issued, the
      Registrable Securities or securities exchanged for the Registrable
      Securities will be issued pursuant to an indenture containing the material
      terms and other provisions contained in the New Notes and such other terms
      and provisions as are customary for a comparable indenture (the
      "INDENTURE"). The Indenture will be qualified under the Trust Indenture
      Act of 1939.

      2.3. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2.1 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as the Company shall reasonably request and as
shall be required to timely effect the registration of their Registrable
Securities.

      2.4. INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under this Section 2:

            (a) INDEMNIFICATION BY THE COMPANY. The Company shall, to the full
      extent permitted by law, indemnify and hold harmless each Holder who sells
      Registrable Securities pursuant to any registration statement filed in
      connection with a Piggyback Registration, its directors and officers, and
      each other Person, if any, who controls any such Holder within the meaning
      of the Securities Act, against any and all losses, claims, damages,
      expenses or liabilities (or actions in respect thereof), joint or several
      (together, "LOSSES"), to which such Holder or any such director or officer
      or controlling Person may become subject under the Securities Act or
      otherwise, insofar as such Losses (or actions or proceedings, whether
      commenced or threatened, or settlement of any litigation, in respect
      thereof) arise out of or are based upon (x) any untrue statement or
      alleged untrue statement of any material fact contained in any such
      registration statement, any preliminary prospectus, final prospectus or
      summary prospectus contained therein, or any amendment or supplement
      thereto, together with documents incorporated therein by reference, or any
      omission or alleged omission to state therein a material fact required to
      be stated therein or necessary to make the statements therein, in the
      light of the circumstances under which they were made, not misleading or
      (y) any violation or alleged violation by the Company of any federal,
      state or common law rule or regulation applicable to the Company and
      relating to action or inaction required of the Company in connection with
      any registration or qualification of Registrable Securities, and the

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      Company will reimburse such Holder and each such director, officer and
      controlling Person for any legal or any other expenses reasonably incurred
      by them, including any amounts paid in connection with any settlement
      effected with the consent of the Company, which consent will not be
      unreasonably withheld or delayed, in connection with investigating or
      defending any such Losses; provided that the Company shall not be liable
      in any such case to the extent that any such Losses arise out of or are
      based upon (A) an untrue statement or alleged untrue statement or omission
      or alleged omission made in any such registration statement, preliminary
      prospectus, final prospectus, summary prospectus, amendment or supplement
      in reliance upon and in conformity with information prepared and furnished
      to the Company by or on behalf of any Holder in an instrument duly
      executed by or on behalf of such Holder specifically identified for use
      therein or (B) any Holder's failure to send or give a copy of the final
      prospectus to the Persons asserting any untrue statement or alleged untrue
      statement or omission or alleged omission at or prior to the written
      confirmation of the sale of Registrable Securities to such Person if such
      statement or omission was corrected in such final prospectus. Such
      indemnity shall remain in full force and effect regardless of any
      investigation made by or on behalf of any Holder or any other person
      asserting the right to be indemnified, and shall survive the transfer of
      such securities by any Holder. In connection with an underwritten
      offering, the Company will indemnify such underwriters, their officers and
      directors and each Person who controls such underwriters (within the
      meaning of the Securities Act) to the same extent as provided above with
      respect to the indemnification of the holders of Registrable Securities.

            (b) INDEMNIFICATION BY THE HOLDERS. Each Holder holding Registrable
      Securities which are included or are to be included in any registration
      statement filed in connection with a Piggyback Registration, as a
      condition to including Registrable Securities in such registration
      statement, shall, to the full extent permitted by law, indemnify and hold
      harmless the Company, its directors and officers, and each other Person,
      if any, who controls the Company within the meaning of the Securities Act,
      against any Losses to which the Company or any such director or officer or
      controlling Person may become subject under the Securities Act or
      otherwise, insofar as such Losses (or actions or proceedings, whether
      commenced or threatened, or settlement of any litigation, in respect
      thereof) arise out of or are based upon any untrue statement or alleged
      untrue statement of any material fact contained in any such registration
      statement, any preliminary prospectus, final prospectus or summary
      prospectus contained therein, or any amendment or supplement thereto, or
      any omission or alleged omission to state therein a material fact required
      to be stated therein or necessary to make the statements therein, in the
      light of the circumstances under which they were made, not misleading, if
      such untrue statement or alleged untrue statement or omission or alleged
      omission was made in reliance upon and in conformity with written
      information prepared and furnished to the Company by or on behalf of such
      Holder in an instrument duly executed by or on behalf of such Holder
      specifically identified for use therein; and such Holder will reimburse
      the Company and each such director, officer and controlling Person for any
      legal or any other expenses reasonably incurred by them in connection with
      investigating or defending any such Losses; provided, however, that the
      obligation to indemnify will be individual (and not

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      joint and several) to each Holder and will be limited to the net amount of
      proceeds received by such holder from the sale of Registrable Securities
      pursuant to such registration statement. Such indemnity shall remain in
      full force and effect regardless of any investigation made by or on behalf
      of the Company or any other person asserting the right to be indemnified,
      and shall survive the transfer of Registrable Securities by such Holder.
      Each Holder shall also indemnify each other Person who participates
      (including as an underwriter) in the offering or sale of Registrable
      Securities, their officers and directors, employees, agents and partners,
      and each other Person, if any, who controls any such participating Person
      within the meaning of the Securities Act to the same extent as provided
      above with respect to the Company.

            (c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an Indemnified
      Party of notice of the commencement of any action or proceeding involving
      a claim referred to in the preceding paragraph (a) or (b) of this Section
      2.4, such Indemnified Party will, if a claim in respect thereof is to be
      made against an Indemnifying Party pursuant to such paragraphs, give
      written notice to the latter of the commencement of such action, provided
      that the failure of any Indemnified Party to give notice as provided
      herein shall not relieve the Indemnifying Party of its obligations under
      the preceding paragraphs of this Section 2.4, except to the extent that
      the Indemnifying Party is actually prejudiced by such failure to give
      notice. In case any such action is brought against an Indemnified Party,
      the Indemnifying Party shall be entitled to participate in and to assume
      the defense thereof, jointly with any other Indemnifying Party similarly
      notified to the extent that it may wish, with counsel reasonably
      satisfactory to such Indemnified Party, and after notice from the
      Indemnifying Party to such Indemnified Party of its election so to assume
      the defense thereof, the Indemnifying Party shall not be liable to such
      Indemnified Party for any legal or other expenses subsequently incurred by
      the latter in connection with the defense thereof other than reasonable
      costs of investigation; provided that the Indemnified Party may
      participate in such defense at the Indemnified Party's expense; and
      provided further that the Indemnified Party or Indemnified Parties shall
      have the right to employ one counsel to represent it or them if, in the
      written opinion of legal counsel to the Indemnified Party or Indemnified
      Parties, it is advisable for it or them to be represented by separate
      counsel by reason of having legal defenses which are different from or in
      addition to those available to the Indemnifying Party or there is some
      other conflict of interest between the Indemnifying Party and the
      Indemnified Party, and in that event the reasonable fees and expenses of
      such separate counsel to the Indemnified Parties shall be paid by the
      Indemnifying Party. If the Indemnifying Party is not entitled to, or
      elects not to, assume the defense of a claim, it will not be obligated to
      pay the fees and expenses of more than one counsel for the Indemnified
      Parties with respect to such claim, unless in the reasonable judgment of
      any Indemnified Party a conflict of interest may exist between such
      Indemnified Party and any other Indemnified Parties with respect to such
      claim, in which event the Indemnifying Party shall be obligated to pay the
      fees and expenses of such additional counsel for the Indemnified Parties
      or counsels. No Indemnifying Party shall consent to entry of any judgment
      or enter into any settlement without the consent of the Indemnified Party
      which does not include as an unconditional term thereof the giving by the
      claimant or plaintiff to such Indemnified Party of a release

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<PAGE>

      from all liability in respect to such claim or litigation. No Indemnifying
      Party shall be subject to any liability for any settlement made without
      its consent, which consent shall not be unreasonably withheld or delayed.
      Each Indemnified Party shall furnish such information regarding itself or
      the claim in question as the Indemnifying Party or Indemnifying Parties
      may reasonably request in writing and as shall be reasonably required in
      connection with defense of such claim and litigation resulting therefrom.

            (d) CONTRIBUTION. If the indemnity and reimbursement obligation
      provided for in any paragraph of this Section 2.4 is held by a court of
      competent jurisdiction to be unavailable or insufficient to hold harmless
      an Indemnified Party in respect of any Losses (or actions or proceedings
      in respect thereof), claims, damages or liabilities referred to therein,
      then the Indemnifying Party shall contribute to the amount paid or payable
      by the Indemnified Party as a result of such Losses (or actions or
      proceedings in respect thereof), claims, damages or liabilities in such
      proportion as is appropriate to reflect the relative benefits and the
      relative fault of the Indemnifying Party on the one hand and the
      Indemnified Party and any other sellers participating in the registration
      statement on the other hand in connection with statements or omissions
      which resulted in such Losses, as well as any other relevant equitable
      considerations. The relative benefits received by the Company on the one
      hand and the sellers of Registrable Securities and any other sellers
      participating in the registration statement on the other shall be deemed
      to be in the same proportion as the total net proceeds from the offering
      (before deducting expenses) to the Company bear to the total net proceeds
      from the offering (before deducting expenses) to the sellers of
      Registrable Securities and any other sellers participating in the
      registration statement. The relative fault shall be determined by
      reference to, among other things, whether the untrue or alleged untrue
      statement of a material fact or the omission or alleged omission to state
      a material fact relates to information supplied by the Indemnifying Party
      or the Indemnified Party and the parties' relative intent, knowledge,
      access to information and opportunity to correct or prevent such untrue
      statement or omission. The parties hereto agree that it would not be just
      and equitable if contributions pursuant to this paragraph were to be
      determined by pro rata allocation (even if the sellers of Registrable
      Securities were treated as one entity for this purpose) or by any other
      method of allocation which does not take account of the equitable
      considerations referred to in the first sentence of this paragraph. The
      amount paid by an Indemnified Party as a result of the Losses referred to
      in the first sentence of this paragraph shall be deemed to include any
      legal and other expenses reasonably incurred by such Indemnified Party in
      connection with investigating or defending any Loss which is the subject
      of this paragraph. Notwithstanding the provisions of this Section 2.4, no
      seller of Registrable Securities shall be required to contribute any
      amount in excess of the net proceeds received by such seller from the sale
      of Registrable Securities covered by the registration statement filed
      pursuant hereto. No Indemnified Party guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the Securities
      Act) shall be entitled to contribution from the Indemnifying Party if the
      Indemnifying Party was not guilty of such fraudulent misrepresentation.

                                      -11-
<PAGE>

            (e) INDEMNIFICATION PAYMENTS. The indemnification required by this
      Section 2.4 shall be made by periodic payments of the amount thereof
      during the course of the investigation or defense, as and when bills are
      received or Losses are incurred.

            (f) SURVIVAL. The obligations of the Company and Holders under this
      Section 2.4 shall survive the completion of any offering of Registrable
      Securities in a registration statement and the termination of this
      Agreement.

      3. MISCELLANEOUS.

      3.1. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York.

      3.2. SUCCESSORS AND ASSIGNS; ASSIGNMENT OF REGISTRATION RIGHTS. This
Agreement and the rights and obligations of the parties hereunder shall inure to
the benefit of, and be binding upon, their respective successors, assigns and
legal representatives. Neither the Company nor any Holder may Transfer their
rights and obligations under this Agreement; provided that a Holder may assign
its rights and obligations hereunder to any affiliate of, or any successor to,
such Holder to which such Holder transfers all or a portion of its Registrable
Securities; provided, further that any such assignee agrees in writing to be
bound by the provisions of this Agreement and any other agreements (including,
but not limited to, the Exchange Agreement) to which any Holder is a party which
affects the New Notes. The Holder shall provide the Company with written notice
of such assignment, setting forth the name and address of the transferee and
identifying the provisions of this Section 3.2 under which the rights under this
Agreement are being assigned.

      3.3. NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery.

      If to the Company or the Guarantor, at

      Avondale Mills, Inc.
      506 South Broad Street
      Monroe, Georgia 30655
      Attention:  Jack R. Altherr, Jr.
      Facsimile:  (770) 267-2543

      with a copy (which shall not constitute notice) to:

      King & Spalding LLP
      191 Peachtree Street
      Atlanta, Georgia 30303
      Attention:  Alan J. Prince, Esq.
      Facsimile:  (404) 572-5100

                                      -12-
<PAGE>

      If to a Holder:

      to the address set forth by each Holder's name on Exhibit A hereto.

      Any party may change or supplement the address to which notices, requests,
waivers or other communications hereunder are to be delivered, or designate
additional addresses, by giving the other parties written notice in the manner
set forth in this Section.

      3.4. ENTIRE AGREEMENT. This Agreement constitutes and contains the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting
the subject matter hereof.

      3.5. SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, then each such provision shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if each such provision were so excluded and shall be enforceable
in accordance with its terms.

      3.6. THIRD PARTIES. Nothing in this Agreement, express or implied, is
intended to confer upon any Person, other than the parties hereto and their
successors and permitted assigns, any rights or remedies under or by reason of
this Agreement.

      3.7. TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

      3.8. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
executed by facsimile signature.

      3.9. ADDITIONAL PARTIES. Notwithstanding anything to the contrary
contained herein, any holder of New Notes, may, upon agreement of the Company,
become a party to this Agreement and shall be deemed a Holder hereunder by
executing and delivering to the Company a counterpart signature page to this
Agreement. Upon the delivery of such signature page, Exhibit A hereto shall be
amended to reflect the addition of such new Holder.

      3.10. AMENDMENTS. Any term of this Agreement may be amended only with the
written agreement of the Company and Holders of the majority of the outstanding
Registrable Securities; provided, that no consent shall be necessary for any
amendment and/or restatement, the purpose of which is to include as "Holders"
any transferees of New Notes from the Holders or any such transferees. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon the Holders and the Company.

      3.11. DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party hereto, upon any breach or default of any
party hereto under this Agreement, shall impair any such right, power or remedy
of any party hereto nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of any

                                      -13-
<PAGE>

similar breach of default thereafter occurring; nor shall any waiver of any
other breach or default heretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party hereto of
any breach of default under this Agreement or any waiver on the part of any
party hereto of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any party hereto shall be cumulative and not alternative.

      3.12. TERMINATION AS TO A HOLDER. This Agreement shall terminate as to a
Holder at such times as such Holder ceases to hold any Registrable Securities.

                                      -14-
<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.

                                         AVONDALE MILLS, INC.

                                         By:___________________________________
                                             Name:
                                             Title:

                                         AVONDALE INCORPORATED

                                         By:___________________________________
                                             Name:
                                             Title:

                [COUNTERPART SIGNATURE PAGES BEGIN ON NEXT PAGE]

<PAGE>

                     Counterpart Signature Page For Holders

      The undersigned hereby agrees to become a party to that certain
Registration Rights Agreement, dated as of _____________, 2005 (the "AGREEMENT")
by and among Avondale Mills, Inc., an Alabama corporation (the "COMPANY"),
Avondale Incorporated, a Georgia corporation, and each holder of the Company's
Floating Rate Notes due July 1, 2012 (the "NEW NOTES") listed in Exhibit A
thereto, as such Exhibit may be amended from time to time in accordance with the
terms of the Agreement. From and after the undersigned's execution and delivery
and the Company's acceptance of this Counterpart Signature Page, the undersigned
shall be a party to the Agreement and the New Notes owned by the undersigned
shall be deemed to be subject to the terms and provisions of the Agreement.

                                              _________________________________
                                              Printed Name of Holder

                                              Signature of Holder

                                              Address:_________________________
                                              _________________________________
                                              _________________________________

                                              Date:____________________________
<PAGE>

                                 EXHIBIT A

Name and Address                 Aggregate Principal Amount of Floating Rate
                                    Notes due July 1, 2012 owned or represented<PAGE>
                                                                   EXHIBIT 10.55

                              AVONDALE INCORPORATED

                                STOCK OPTION PLAN

                           FOR NON-EMPLOYEE DIRECTORS

<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                            <C>
Section 1 PURPOSE.................................................................................................1

Section 2 DEFINITIONS.............................................................................................1
         2.1      Board...........................................................................................1
         2.2      Change in Control...............................................................................1
         2.3      Code............................................................................................2
         2.4      Company.........................................................................................2
         2.5      Director........................................................................................2
         2.6      Exchange Act....................................................................................2
         2.7      Fair Market Value...............................................................................2
         2.8      Option..........................................................................................3
         2.9      Option Certificate..............................................................................3
         2.10     Option Price....................................................................................3
         2.11     Plan............................................................................................3
         2.12     Rule 16b-3......................................................................................3
         2.13     Stock...........................................................................................3
         2.14     Stock Option Committee..........................................................................3

Section 3 SHARES RESERVED UNDER THE PLAN..........................................................................3

Section 4 EFFECTIVE DATE..........................................................................................4

Section 5 ADMINISTRATION..........................................................................................4

Section 6 ELIGIBILITY.............................................................................................4

Section 7 GRANT OF OPTIONS........................................................................................5

Section 8 OPTION PRICE............................................................................................5

Section 9 EXERCISE PERIOD.........................................................................................6

Section 10 NONTRANSFERABILITY.....................................................................................6

Section 11 SECURITIES REGISTRATION................................................................................6

Section 12 LIFE OF PLAN...........................................................................................7

Section 13 ADJUSTMENT.............................................................................................8

Section 14 SALE OR MERGER OR CHANGE IN CONTROL....................................................................8
           14.1     Sale or Merger................................................................................8
           14.2     Change in Control.............................................................................9
</Table>

<PAGE>

<Table>
<Caption>
                                                                                                               PAGE
                                                                                                               ----
<S>                                                                                                            <C>
Section 15 AMENDMENT OR TERMINATION..............................................................................10

Section 16 MISCELLANEOUS.........................................................................................10
           16.1     No Contract of Service.......................................................................11
           16.2     Other Conditions.............................................................................11
           16.3     Construction.................................................................................11
</Table>

                                      -ii-
<PAGE>

                              AVONDALE INCORPORATED

                                STOCK OPTION PLAN

                           FOR NON-EMPLOYEE DIRECTORS

                                      SECTION 1

                                     PURPOSE

         The purpose of this Plan is to promote the interest of the Company and
its shareholders by granting Options to purchase Stock to Directors in order (a)
to provide an additional incentive to each Director to increase the value of the
Company's Stock, and (b) to provide each Director with a stake in the future of
the Company which corresponds to the stake of each of the Company's
shareholders.

                                    SECTION 2

                                   DEFINITIONS

         Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.

         2.1 Board -- means the Board of Directors of the Company.

         2.2 Change in Control -- means (a) the acquisition of the power to
direct, or cause the direction of, the management and policies of the Company by
a person (not previously possessing such power), acting alone or in conjunction
with others, whether through the ownership of Stock, by contract or otherwise,
or (b) the acquisition, directly or indirectly, of the power to vote more than
50% of the outstanding voting power of the Stock by any person or by two or more
persons acting together, except an acquisition from the Company or by the
Company, the Company's management or a Company-sponsored employee benefit plan.
For

<PAGE>

purposes of this definition, (1) the term "person" means a natural person,
corporation, partnership, joint venture, trust, government or instrumentality of
a government, and (2) customary agreements with or between underwriters and
selling group members with respect to a bona fide public offering of Stock shall
be disregarded.

         2.3 Code -- means the Internal Revenue Code of 1986, as amended.

         2.4 Company -- means Avondale Incorporated, a Georgia corporation, and
any successor to such corporation.

         2.5 Director -- means any member of the Company's Board who is not also
an employee of the Company.

         2.6 Exchange Act -- means the Securities Exchange Act of 1934, as
amended.

         2.7 Fair Market Value -- means (a) the price which the Stock Option
Committee acting in good faith determines through any reasonable valuation
method that a share of Stock might change hands between a willing buyer and a
willing seller, neither being under any compulsion to buy or to sell and both
having reasonable knowledge of the relevant facts or (b) if the Stock is
publicly traded, (1) the closing price on any date for a share of Stock as
reported by The Wall Street Journal under the New York Stock Exchange Composite
Transactions quotation system (or under any successor quotation system) or, (2)
if the Stock is not traded on the New York Stock Exchange, under the quotation
system under which such closing price is reported or, (3) if The Wall Street
Journal does not report such closing price, such closing price as reported by a
newspaper or trade journal selected by the Stock Option Committee or, (4) if no
such closing price is available on such date, such closing price as so reported
or so quoted in accordance with Section 2.7(b)(1), (2) or (3) for the
immediately preceding business day, or, (5) if

                                      -2-
<PAGE>

(b)(1)(4) does not apply, the price determined by the Stock Option Committee
pursuant to Section 2.7(a).

         2.8 Option -- means an option granted under this Plan to purchase Stock

         2.9 Option Certificate -- means the written certificate or instrument
which sets forth the terms of an Option granted to a Director under this Plan.

         2.10 Option Price -- means the price which shall be paid to purchase
one share of Stock upon the exercise of an Option granted under this Plan.

         2.11 Plan -- means this Avondale Incorporated Stock Option Plan for
Non-Employee Directors, as amended from time to time.

         2.12 Rule 16b-3 -- means Rule 16b-3 under Section 16(b) of the Exchange
Act or any successor to such rule.

         2.13 Stock -- means $.01 par value Class A Common Stock of the Company.

         2.14 Stock Option Committee -- means the committee appointed by the
Board to administer this Plan which at all times shall consist of two or more
members of the Board who are employees of the Company; provided, however, that
at such time as the Company's Directors become subject to the reporting
requirements under Section 16(a) of the Exchange Act, the Plan shall be
administered by the Board and any reference to "Stock Option Committee" shall be
deemed to be a reference to the Board or the Board shall take such other action
as it deems appropriate to satisfy the exemptions.

                                    SECTION 3

                         SHARES RESERVED UNDER THE PLAN

         There shall be 150,000 shares of Stock reserved for use under this
Plan, and such shares of Stock shall be reserved to the extent that the Company
deems appropriate from authorized but

                                      -3-
<PAGE>

unissued shares of Stock and from shares of Stock which have been reacquired by
the Company. Furthermore, any shares of Stock subject to an Option which remain
unissued after the cancellation, expiration or exchange of such Option
thereafter shall again become available for use under this Plan.

                                    SECTION 4

                                 EFFECTIVE DATE

         The effective date of this Plan shall be November 18, 2004.

                                    SECTION 5

                                 ADMINISTRATION

         This Plan shall be administered by the Stock Option Committee. The
Board may from time to time remove members from, or add members to, the Stock
Option Committee. Vacancies on the Stock Option Committee shall be filled by the
Board. The Stock Option Committee shall select one of its members as Chairman
and shall hold meetings at such times and places as it may determine. The Stock
Option Committee acting in its absolute discretion shall exercise such powers
and take such action as expressly called for under this Plan and, further, the
Stock Option Committee shall have the power to interpret this Plan and (subject
to Rule 16b-3) to take such other action in the administration and operation of
this Plan as the Stock Option Committee deems equitable under the circumstances,
which action shall be binding on the Company, on each affected Director and on
each other person directly or indirectly affected by such action.

                                    SECTION 6

                                   ELIGIBILITY

         Only Directors shall be eligible for the grant of Options under this
Plan.

                                      -4-
<PAGE>

                                    SECTION 7

                                GRANT OF OPTIONS

         On the fifth business day after each annual shareholders' meeting, an
Option shall be granted under this Plan to each then serving Director to
purchase 2,000 shares of Stock. Each Option shall be fully vested and shall be
evidenced by an Option Certificate. The Option Certificate shall specify the
Option Price and incorporate such other terms and conditions as the Stock Option
Committee, acting in its absolute discretion, deems consistent with the terms of
this Plan.

                                    SECTION 8

                                  OPTION PRICE

         The Option Price for each share of Stock subject to an Option shall be
the Fair Market Value of a share of Stock on the date the Option is granted. The
Option Price shall be payable in full upon the exercise of any Option and, at
the discretion of the Stock Option Committee, an Option Certificate can provide
for the payment of the Option Price either in cash, by check, or in Stock which
has been held by the Director for at least 6 months and which is acceptable to
the Stock Option Committee, or in any combination of cash, check and such Stock.
Any payment made in Stock shall be treated as equal to the Fair Market Value of
such Stock on the date the properly endorsed certificate for such Stock is
delivered to the Stock Option Committee or its delegate.

                                      -5-
<PAGE>

                                    SECTION 9

                                 EXERCISE PERIOD

         Each Option granted under this Plan to a Director shall be exercisable
in whole or in part at such time or times as set forth in the related Option
Certificate, but no Option shall be exercisable after the earlier of

                  (a) the date such Option is exercised in full,

                  (b) the date which is the tenth anniversary of the date the
         Option is granted,

                  (c) the date which is 3 months after the date the Director's
         term as Director terminates for any reason other than the Director's
         death, or

                  (d) the date which is the one year anniversary of the
         Director's death, if the Director's term as Director terminates by
         reasons of the Director's death.

                                   SECTION 10

                               NONTRANSFERABILITY

         No Option granted under this Plan shall be transferable by a Director
other than by will or by the laws of descent and distribution, and such Option
shall be exercisable during the lifetime of a Director only by such Director.
The person or persons to whom an Option is transferred by will or by the laws of
descent and distribution thereafter shall be treated as the Director under this
Plan.

                                   SECTION 11

                             SECURITIES REGISTRATION

         Each Option Certificate shall provide that, upon the receipt of shares
of Stock as a result of the exercise of an Option, the Director shall, if so
requested by the Company, hold such shares of Stock for investment and not with
a view to resale or distribution to the public and, if so

                                      -6-
<PAGE>

requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Option Certificate also shall
provide that, if so requested by the Company, the Director shall make a written
representation to the Company that he or she will not sell or offer to sell any
of such Stock unless a registration statement shall be in effect with respect to
such Stock under the Securities Act of 1933, as amended ("1933 Act") and any
applicable state securities law or unless he or she shall have furnished to the
Company an opinion, in form and substance satisfactory to the Company, of legal
counsel acceptable to the Company, that such registration is not required.
Certificates representing the Stock transferred upon the exercise of an Option
granted under this Plan may at the discretion of the Company bear a legend to
the effect that such Stock has not been registered under the 1933 Act or any
applicable state securities law and that such Stock may not be sold or offered
for sale in the absence of an effective registration statement as to such Stock
under the 1933 Act and any applicable state securities law or an opinion, in
form and substance satisfactory to the Company, of legal counsel acceptable to
the Company, that such registration is not required.

                                   SECTION 12

                                  LIFE OF PLAN

         No Option shall be granted under this Plan on or after the earlier of

                           (a) the tenth anniversary of the effective date of
                  this Plan (as determined under Section 4 of this Plan) and,
                  after the tenth anniversary, this Plan thereafter shall
                  continue in effect until all outstanding Options have been
                  exercised in full or no longer are exercisable, or

                                      -7-
<PAGE>

                           (b) the date on which all of the Stock reserved under
                  Section 3 of this Plan has (as a result of the exercise of
                  Options granted under this Plan) been issued, in which event
                  this Plan also shall terminate on such date.

                                   SECTION 13

                                   ADJUSTMENT

         The number, kind or class of shares of Stock reserved under Section 3
of this Plan, the number, kind or class of shares of Stock subject to Options
granted under this Plan and the Option Price of such Options shall be adjusted
by the Stock Option Committee in an equitable manner to reflect any change in
the capitalization of the Company, including, but not limited to, such changes
resulting from stock dividends or stock splits. The Stock Option Committee shall
have the right to adjust the number, kind or class of shares of Stock reserved
under Section 3 of this Plan, the number, kind or class of shares of Stock
subject to Options granted under this Plan, and the Option Price of such Options
in the event of any corporate transaction in order to take into account on an
equitable basis the effect of such transaction. If any adjustment under this
Section 13 would create a fractional share of Stock or a right to acquire a
fractional share of Stock, such fractional share shall be disregarded and the
number of shares of Stock reserved under this Plan and the number subject to any
Options granted under this Plan shall be the next lower number of shares of
Stock, rounding all fractions downward.

                                   SECTION 14

                       SALE OR MERGER OR CHANGE IN CONTROL

         14.1 Sale or Merger. If the Company agrees to sell all or substantially
all of its assets for cash or property or for a combination of cash and property
or agrees to any merger, consolidation, reorganization, division or other
corporate transaction in which Stock is converted

                                      -8-
<PAGE>

into another security or into the right to receive securities or property and
such agreement does not provide for the assumption or substitution of the
Options granted under this Plan on a basis that is fair and equitable to holders
of such Options as determined by the Stock Option Committee, each Option granted
to a Director at the direction and discretion of the Stock Option Committee, (a)
may (subject to such conditions, if any, as the Stock Option Committee deems
appropriate under the circumstances) be canceled unilaterally by the Company in
exchange for a transfer to such Director of the number of whole shares of Stock,
if any, determined by the Stock Option Committee on a date set by the Stock
Option Committee for this purpose by dividing (i) the excess of the then Fair
Market Value of the Stock then subject to exercise under such Option over the
Option Price of such Stock by (ii) the then Fair Market Value of a share of such
Stock, (b) if the exchange described in Section 14.1(a) would result in a
violation of Section 16 of the Exchange Act for a Director, may (subject to such
conditions, if any, as the Stock Option Committee deems appropriate under the
circumstances) be canceled unilaterally by the Company after advance written
notice to such Director, or (c) may be canceled unilaterally by the Company if
the Option Price equals or exceeds the Fair Market Value of a share of Stock on
a date set by the Stock Option Committee for this purpose.

         14.2 Change in Control. If there is a Change in Control of the Company
or a tender or exchange offer is made for Stock other than by the Company, the
Stock Option Committee thereafter shall have the right to take such action with
respect to any unexercised Options granted to Directors, or all such Options, as
the Stock Option Committee deems appropriate under the circumstances to protect
the interest of the Company in maintaining the integrity of such grants under
this Plan, including following the procedures set forth in Section 14.1 for a
sale or merger of the Company with respect to such Options. The Stock Option
Committee shall have the right to take

                                      -9-
<PAGE>

different action under this Section 14.2 with respect to different Directors or
different groups of Directors, as the Stock Option Committee deems appropriate
under the circumstances.

                                   SECTION 15

                            AMENDMENT OR TERMINATION

         This Plan may be amended by the Stock Option Committee from time to
time to the extent that the Stock Option Committee deems necessary or
appropriate; provided, however, that at such time as the Company's Directors
become subject to the reporting requirements of Section 16(a) of the Exchange
Act, and to the extent Board approval is required in order for the exemption set
forth in Rule 16b-3 to be available in respect of Options granted pursuant to
this Plan, this Plan shall not be amended absent the approval of the Board in
accordance with Rule 16b-3. The Stock Option Committee also may suspend the
granting of Options under this Plan at any time and may terminate this Plan at
any time; provided, however, the Stock Option Committee shall not have the right
unilaterally to modify, amend or cancel any Option granted before such
suspension or termination unless (1) the Director consents in writing to such
modification, amendment or cancellation or (2) there is a dissolution or
liquidation of the Company or a transaction described in Section 13 or Section
14 of this Plan.

                                   SECTION 16

                                  MISCELLANEOUS

         No Shareholder Rights. No Director shall have any rights as a
shareholder of the Company as a result of the grant of an Option to him or to
her under this Plan or his or her exercise of such Option pending the actual
delivery of Stock subject to such Option to such Director.

                                      -10-
<PAGE>

         16.1 No Contract of Service. The grant of an Option to a Director under
this Plan shall not constitute a contract of employment or a right to continue
to serve on the Board and shall not confer on any Director any rights upon the
termination of such Director's term as a Director in addition to those rights,
if any, expressly set forth in the Option Certificate.

         16.2 Other Conditions. Each Option Certificate may require that a
Director (as a condition to the exercise of an Option) enter into any agreement
or make such representations prepared by the Company, including any agreement
which restricts the transfer of Stock acquired pursuant to the exercise of such
Option or provides for the repurchase of such Stock by the Company under certain
circumstances.

         16.3 Construction. This Plan shall be construed under the laws of the
State of Georgia.

         IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute this Plan this 18th day of November, 2004 to evidence its adoption of
this Plan.

                                            AVONDALE INCORPORATED

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

                                      -11-

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