Document:

<PAGE>
                                                                    Exhibit 10.1

                                                                  EXECUTION COPY

                                 AMENDMENT NO. 5

                          DATED AS OF JANUARY 25, 2006

                                       TO

                  RECEIVABLES PURCHASE AND SERVICING AGREEMENT

                           DATED AS OF AUGUST 30, 2002

          THIS AMENDMENT NO. 5 (this "AMENDMENT") is entered into as of January
25, 2006 by and among AVONDALE FUNDING, LLC ("FUNDING"), AVONDALE MILLS, INC.
(the "SERVICER") and GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation, in its separate capacities as a committed purchaser (the "COMMITTED
PURCHASER"), and as administrative agent (in such capacity, the "ADMINISTRATIVE
AGENT") under the Receivables Purchase and Servicing Agreement referred to
below. Capitalized terms used in this Amendment which are not otherwise defined
herein shall have the meanings given such terms in Annex X to the Receivables
Purchase and Servicing Agreement, as amended hereby.

                                    RECITALS:

          WHEREAS, Funding, the Servicer, the Committed Purchaser and the
Administrative Agent are parties to a Receivables Purchase and Servicing
Agreement dated as of August 30, 2002 (as amended, restated, supplemented or
otherwise modified from time to time, the "RECEIVABLES PURCHASE AND SERVICING
AGREEMENT"); and

          WHEREAS, Funding, the Servicer, the Committed Purchaser and the
Administrative Agent have agreed to amend the Receivables Purchase and Servicing
Agreement on the terms and conditions set forth herein;

          NOW, THEREFORE, in consideration of the premises set forth above, the
terms and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Funding, the Servicer, the Committed Purchaser and the Administrative Agent
hereby agree as follows.

          1. AMENDMENTS TO RECEIVABLES PURCHASE AND SERVICING AGREEMENT.
Effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 below, the Receivables Purchase and
Servicing Agreement is hereby amended as follows:

     (a) Section 4.01 of the Receivables Purchase and Servicing Agreement is
hereby amended to add the following clause (v) to the end of such section:

          (v) Approved Insurance Policies. Each Approved Insurance Policy
     insuring Transferred Receivables is in full force and effect and the
     Administrative Agent and the Committed Purchasers have been identified as
     loss payees

<PAGE>

     thereunder with respect to all of the applicable Transferred Receivables.
     No event or circumstance has occurred and is continuing which would impair
     any of the coverage of Transferred Receivables under any Approved Insurance
     Policy or would entitle any insurer to terminate any Approved Insurance
     Policy or any coverage of Transferred Receivables thereunder. All premiums
     due under all Approved Insurance Policies have been fully paid.

     (b) Section 5.01 of the Receivables Purchase and Servicing Agreement is
hereby amended to add the following clause (j) to the end of such section:

          (j) Approved Insurance Policies. The Seller shall, and shall cause the
     Originator to (i) maintain in full force and effect each Approved Insurance
     Policy and (ii) take all actions and execute all documents as the
     Administrative Agent or any Committed Purchaser may reasonably request in
     order to ensure that the Administrative Agent and the Committed Purchasers
     shall be loss payees under each Approved Insurance Policy. If on any date,
     the Seller, the Servicer or the Originator is or becomes entitled to assert
     a claim under any Approved Insurance Policy in respect of any Transferred
     Receivable, the Seller (i) shall take or cause to be taken on such date or
     as soon as practical thereafter (and in any event prior to the last day on
     which such claim can be asserted under such Approved Insurance Policy) all
     actions necessary or appropriate to assert such claim under and in
     accordance with the terms of such Approved Insurance Policy and (ii) on
     each day thereafter until such claim is paid in full, (x) use its
     reasonable efforts (and cause the Originator and the Servicer to use their
     reasonable efforts) to ensure that such claim is processed as soon as
     practical thereunder, including, without limitation, by taking all action
     that the applicable insurer or the Administrative Agent may reasonably
     request in connection with the submission or processing of such claim and
     (y) diligently enforce (and cause the Servicer and the Originator to
     diligently enforce) the right to receive payment of such claim in
     accordance with the terms thereof including, without limitation, by
     instituting such enforcement actions against the applicable insurer as the
     Administrative Agent may reasonably request in respect of such claim. The
     Seller shall promptly forward to the Administrative Agent all material
     notices that it or any of its Affiliates receives from the insurer of any
     Approved Insurance Policy relating to any Approved Insurance Policy. The
     Seller shall not cancel (and will cause the Originator not to cancel) any
     Approved Insurance Policy without providing at least 15 days' prior written
     notice thereof to the Administrative Agent. The Seller shall not amend any
     Approved Insurance Policy without the prior written consent of the
     Administrative Agent.

     (c) Section 7.07 of the Receivables Purchase and Servicing Agreement is
hereby amended to add the following clause (e) to the end of such section:

          (e) Approved Insurance Policies. The Servicer shall (i) maintain in
     full force and effect each Approved Insurance Policy and (ii) take all
     actions and execute all documents as the Administrative Agent or any
     Committed Purchaser may reasonably request in order to ensure that the
     Administrative Agent and the

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<PAGE>

     Committed Purchasers shall be loss payees under each Approved Insurance
     Policy. If on any date the Seller, the Servicer or the Originator is or
     becomes entitled to assert a claim under any Approved Insurance Policy in
     respect of any Transferred Receivable, the Servicer (i) shall take or cause
     to be taken on such date or as soon as practical thereafter (and in any
     event prior to the last day on which such claim can be asserted under such
     Approved Insurance Policy) all actions necessary or appropriate to assert
     such claim under and in accordance with the terms of such Approved
     Insurance Policy and (ii) on each day thereafter until such claim is paid
     in full, (x) use its reasonable efforts to ensure that such claim is
     processed as soon as practical thereunder, including, without limitation,
     by taking all action that the applicable insurer or the Administrative
     Agent may reasonably request in connection with the submission or
     processing of such claim and (y) diligently enforce the right to receive
     payment of such claim in accordance with the terms thereof including,
     without limitation, by instituting such enforcement actions against the
     insurer as the Administrative Agent may reasonably request in respect of
     such claim. The Servicer shall promptly forward to the Administrative Agent
     all material notices that it receives from the insurer of any Approved
     Insurance Policy relating to any Approved Insurance Policy.

     (d) The definition of "Activation Event" appearing in Annex X of the
Receivables Purchase and Servicing Agreement is hereby amended and restated in
its entirety to read as follows:

          "Activation Event" means, at any date, that Liquidity Availability is
     less than the Specified Amount at such date and the average Liquidity
     Availability during the four week period immediately preceding such date is
     the Specified Amount or less, with such Activation Event being deemed to
     exist thereafter until such time, if any, as a Deactivation Event shall
     occur.

     (e) The definition of "Availability Block" appearing in Annex X of the
Receivables Purchase and Servicing Agreement is hereby amended and restated in
its entirety to read as follows:

          "Availability Block" means (i) for the period from January 25, 2006
     until May 31, 2007, $0; provided, that, if an Insurance Event occurs during
     such period, the "Availability Block" shall mean $10,000,000, and (ii) at
     all times after May 31, 2007, $10,000,000.

     (f) The definition of "Deactivation Event" appearing in Annex X of the
Receivables Purchase and Servicing Agreement is hereby amended and restated in
its entirety to read as follows:

          "Deactivation Event" means, subsequent to any Activation Event, any
     period of 90 consecutive days during which Liquidity Availability at all
     times exceeds the Specified Amount and at the end of such 90-day period no
     Termination Event, Incipient Termination Event, Servicer Termination Event
     or Incipient Servicer Termination Event has occurred and is then
     continuing.

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<PAGE>

     (g) The definition of "Eligible Receivable" appearing in Annex X of the
Receivables Purchase and Servicing Agreement is hereby amended to amend and
restate clause (b) of such definition in its entirety as follows:

          (b) that is not a liability of an Obligor (i) 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 (ii) having its principal place of business outside of the
     United States of America (including the District of Columbia but otherwise
     excluding its territories and possessions) or Canada; provided, that a
     Transferred Receivable otherwise satisfying the requirements of "Eligible
     Receivable" but for this clause (b) may constitute an Eligible Receivable
     (x) if and solely to the extent that the payment thereof is (i) insured by
     an Approved Insurance Policy (without giving effect to any deductible
     applicable thereto) that is in full force and effect or (ii) supported by a
     letter of credit issued by a financial institution reasonably acceptable to
     the Administrative Agent and (y) if and solely to the extent that the
     Outstanding Balance of such Transferred Receivable, when added to the
     Outstanding Balance of all other Transferred Receivables then constituting
     "Eligible Receivables" by reason of this proviso, does not exceed an amount
     equal to $8,500,000; provided, further, that, a Transferred Receivable that
     constitutes an "Eligible Receivable" by reason of the preceding proviso
     shall not constitute an "Eligible Receivable" to the extent that the
     applicable insurer has denied that it is liable for the payment on such
     Transferred Receivable under the applicable Approved Insurance Policy;

     (h) The definition of "Maximum Purchase Limit" appearing in Annex X of the
Receivables Purchase and Servicing Agreement is hereby amended and restated in
its entirety to read as follows:

          "Maximum Purchase Limit" shall mean $50,000,000, as such amount may be
     reduced in accordance with Section 2.02(a) of the Purchase Agreement.

     (i) Clause (iii) of the definition of "Special Limit" appearing in Annex X
of the Receivables Purchase and Servicing Agreement is amended to delete the
reference to the percentage "10%" appearing in such clause and to replace such
percentage with the percentage "15%."

     (j) Annex X of the Receivables Purchase and Servicing Agreement is hereby
amended to add the following defined terms in the appropriate alphabetical
locations:

          "Approved Insurance Policy" means any credit insurance policy (i) of
     which the Administrative Agent and each Committed Purchaser has become a
     loss payee in respect of the Transferred Receivables covered under such
     credit insurance policy, (ii) underwritten by (A) Euler Hermes ACI (unless
     the Administrative Agent reasonably determines that the credit quality of
     Euler Hermes ACI has materially and adversely deteriorated since January 1,
     2006) or (B) another insurer approved in writing by the Administrative
     Agent in its sole

                                       4

<PAGE>

     discretion and (iii) satisfying such other criteria as the Administrative
     Agent deems to be relevant in the exercise of its reasonable credit
     judgment.

          "Insurance Event" means the receipt by Avondale Incorporated and its
     Subsidiaries from the insurance providers of Avondale Incorporated and its
     Subsidiaries, in connection with the train collision, train derailment,
     release of chlorine and other gases, and other events occurring because of
     the foregoing described train collision, train derailment and release of
     chlorine and other gases near the facilities of Avondale Incorporated and
     its Subsidiaries in Graniteville, South Carolina on January 6, 2005 (the
     "Derailment"), of an amount that is at least $60,000,000 more that the
     amounts actually paid by Avondale Incorporated and its Subsidiaries in
     connection with the chlorine abatement and rehabilitation of the chlorine
     damage in connection with the Derailment.

          "Specified Amount" means (i) for the period from January 20, 2006
     until May 31, 2007, (A) if no Insurance Event has occurred, $10,000,000 or
     (B) if an Insurance Event has occurred, $20,000,000 and (ii) at all times
     after May 31, 2007, $20,000,000.

     (k) Annex G to the Receivables Purchase and Servicing Agreement is hereby
amended to amend and restate paragraphs (a) and (b) of thereof in their entirety
as follows:

               (a) Minimum Fixed Charge Coverage Ratio. With respect to any
     Fiscal Quarter in which Liquidity Availability falls below the Specified
     Amount and average Liquidity Availability during the four calendar week
     period immediately preceding such date is the Specified Amount or less,
     Parent and its Subsidiaries shall have on a consolidated basis, as of the
     end of the most recent calendar month, a Fixed Charge Coverage Ratio for
     the 12-month period then ended of not less than 1.0 to 1.0.

               (b) Minimum EBITDA. With respect to any Fiscal Quarter in which
     Liquidity Availability falls below the Specified Amount and average
     Liquidity Availability during the four calendar week period immediately
     preceding such date is the Specified Amount or less, Parent and its
     Subsidiaries on a consolidated basis shall have, as of the end of the most
     recent calendar month, as set forth below, EBITDA for the 12-month period
     then ended of not less than $35,000,000.

          2. CONDITIONS OF EFFECTIVENESS OF THIS AMENDMENT. This Amendment shall
become effective as of the date hereof (the "EFFECTIVE DATE") when, and only
when, the Administrative Agent shall have received each of the following:

     (a) counterparts of this Amendment duly executed by each of Funding, the
Servicer, the Committed Purchaser, the Administrative Agent and the Collateral
Agent; and

     (b) evidence that each of the conditions precedent to the effectiveness of
that certain Amendment No. 4 to Credit Agreement among Avondale Mills, Inc.,
Avondale Mills

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Graniteville Fabrics, Inc. and General Electric Capital Corporation in its
respective capacities as Lender and as Agent have been satisfied.

          3. REPRESENTATIONS AND WARRANTIES.

          3.1 Upon the effectiveness of this Amendment, each of Funding and the
Servicer (a) hereby reaffirms all covenants, representations and warranties made
by it in the Receivables Purchase and Servicing Agreement and each other Related
Document to the extent the same are not amended hereby and except to the extent
the same expressly relates solely to an earlier date, (b) agrees that all such
covenants, representations and warranties shall be deemed to have been re-made
as of the Effective Date, (c) represents and warrants that, as of the Effective
Date and after giving effect hereto, no Termination Event, Incipient Termination
Event, Event of Servicer Termination or Incipient Servicer Termination Event has
occurred and is continuing and (d) represents and warrants that no event or
circumstance has occurred since the Closing Date that has resulted, or could
reasonably be expected to result in, a Material Adverse Effect.

          3.2 Each of Funding and the Servicer hereby represents and warrants
that this Amendment and each of the Receivables Purchase and Servicing
Agreement, as amended hereby, (i) are within the corporate or limited liability
company powers of such Person, (ii) have been duly authorized by all necessary
corporate or limited liability company action, (iii) have received all necessary
governmental approvals, (iv) do not and will not contravene or conflict with any
provision of law or the applicable charter, by-laws, operating agreement or
other organizational documents of such Person or any such Person and (v)
constitute legal, valid and binding obligations of such Person and are
enforceable against such Person in accordance with their respective terms.

          4. REFERENCE TO AND EFFECT ON RELATED DOCUMENTS.

          4.1 Upon the effectiveness of this Amendment pursuant to Section 2
hereof, on and after the Effective Date, each reference to Annex X and the
Receivables Purchase and Servicing Agreement in any of the Related Documents
shall mean and be a reference to Annex X or the Receivables Purchase and
Servicing Agreement, as the case may be, as amended hereby.

          4.2 Except as specifically set forth above, Annex X and the
Receivables Purchase and Servicing Agreement, and all other documents,
instruments and agreements executed and/or delivered in connection therewith,
shall remain in full force and effect, and are hereby ratified and confirmed.

          4.3 The execution, delivery and effectiveness of this Amendment shall
neither, except as expressly provided herein, operate as a waiver of any right,
power or remedy of Funding, the Committed Purchaser, the Administrative Agent or
the Collateral Agent, nor constitute a waiver of any provision of any of the
Related Documents, or any other documents, instruments and agreements executed
and/or delivered in connection therewith.

          4.4 Each party hereto agrees and acknowledges that this Amendment
constitutes a Related Document under and as defined in the Receivables Purchase
and Servicing Agreement.

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<PAGE>

          5. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.

          6. COUNTERPARTS. This Amendment may be executed by one or more of the
parties to this Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.

          7. ENTIRE AGREEMENT. This Amendment, taken together with the
Receivables Purchase and Servicing Agreement and all of the other Related
Documents, embodies the entire agreement and understanding of the parties hereto
and supersedes all prior agreements and understandings, written and oral,
relating to the subject matter hereof.

          8. GOVERNING LAW. THIS AMENDMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK BUT OTHERWISE WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES).

          9. NO COURSE OF DEALING. The Committed Purchaser and the
Administrative Agent have entered into this Amendment on the express
understanding with Funding and the Servicer that in entering into this Amendment
the Committed Purchaser and the Administrative Agent are not establishing any
course of dealing with Funding or the Servicer. The rights of the Committed
Purchaser and the Administrative Agent to require strict performance with all
the terms and conditions of the Receivables Purchase and Servicing Agreement as
amended by this Amendment and the other Related Documents shall not in any way
be impaired by the execution of this Amendment. Neither the Committed Purchaser
nor the Administrative Agent shall be obligated in any manner to execute any
further amendments or waivers, and if such waivers or amendments are requested
in the future, assuming the terms and conditions thereof are acceptable to them,
the Committed Purchaser and the Administrative Agent may require the payment of
fees in connection therewith.

          10. WAIVER OF CLAIMS. In consideration for the execution by the
Committed Purchaser and the Administrative Agent of this Amendment, each of
Funding and the Servicer hereby waives each and every claim, defense, demand,
action and suit of any kind or nature whatsoever against each of the Committed
Purchaser, the Administrative Agent, the Operating Agent, the Collateral Agent
and each other Affected Party arising on or prior to the date hereof in
connection with the Purchase Agreement, any of the Related Documents and the
transactions contemplated thereby.

          11. EXPENSES. In consideration for the execution by the Committed
Purchaser, the Administrative Agent and the Collateral Agent of this Amendment,
each of Funding and the Servicer severally agrees to promptly reimburse each of
the Committed Purchaser, the Administrative Agent and the Collateral Agent for
all of the reasonable out-of-pocket expenses, including, without limitation,
attorneys' and paralegals' fees and expenses, it

                                       7

<PAGE>

has heretofore or hereafter incurred or incurs in connection with the
preparation, negotiation and execution of this Amendment.

          12. SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon each
of Funding and the Servicer, the Committed Purchaser, the Administrative Agent
and the Collateral Agent and their respective successors and assigns and shall
inure to the benefit of each such Person.

          13. INTEGRATION. This Amendment contains the entire understanding of
the parties hereto with regard to the subject matter contained herein. This
Amendment supercedes all prior or contemporaneous negotiations, promises,
covenants, agreements and representations of every nature whatsoever with
respect to the matters contained in this Amendment, all of which have become
merged and finally integrated into this Amendment. Each of the parties hereto
understands that in the event of any subsequent litigation, controversy or
dispute concerning any of the terms, conditions or provisions of this Amendment,
no party shall be entitled to offer or introduce into evidence any oral promises
or oral agreements among the parties relating to the subject matter of this
Amendment not included or referred to herein and not reflected by a writing
included or referred to herein.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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<PAGE>

          IN WITNESS WHEREOF, this Amendment No. 5 has been duly executed as of
the day and year first above written.

                                        AVONDALE FUNDING, LLC

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

                                        AVONDALE MILLS, INC., as the Servicer

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

                                        GENERAL ELECTRIC CAPITAL CORPORATION,
                                        as Committed Purchaser

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title: Duly Authorized Signatory

                                        GENERAL ELECTRIC CAPITAL CORPORATION,
                                        as Administrative Agent

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title: Duly Authorized Signatory

Acknowledged and Agreed to as of the
date first written above:

GENERAL ELECTRIC CAPITAL CORPORATION,
as Collateral Agent

By:
    ---------------------------------
Name:
      -------------------------------
Title: Duly Authorized Signatory<PAGE>
                                                                    Exhibit 10.2

                                                                  EXECUTION COPY

                       AMENDMENT NO. 4 TO CREDIT AGREEMENT

          This AMENDMENT NO. 4 TO CREDIT AGREEMENT (the "AMENDMENT") is dated as
of January 25, 2006, by and among AVONDALE MILLS, INC., an Alabama corporation,
as the Borrower (in such capacity, the "BORROWER") and as a Credit Party;
AVONDALE MILLS GRANITEVILLE FABRICS, INC., a Delaware corporation, as a Credit
Party (together with Avondale Mills, Inc., the "CREDIT PARTIES" and each a
"CREDIT PARTY"), AVONDALE INCORPORATED, a Georgia corporation ("HOLDINGS") and
GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, as the sole Lender
(in such capacity, the "LENDER") and as agent (in such capacity, the "AGENT").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed to such terms in Annex A to the Credit Agreement referred to
below.

                                    RECITALS

          WHEREAS, the Borrower, the Credit Parties, the Lender and the Agent
are parties to a Credit Agreement dated as of November 7, 2003 (as amended,
restated, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"); and

          WHEREAS, the parties hereto have also agreed, on the terms and
conditions set forth below, to amend the Credit Agreement;

          NOW, THEREFORE, in consideration of the continued performance by
Borrower and each Credit Party of their respective promises and obligations
under the Credit Agreement and the other Loan Documents, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Credit Parties, Holdings, the Lender, and the
Agent hereby agree as follows:

          1. Amendments to Credit Agreement. Effective as of the date hereof and
subject to the satisfaction of the conditions precedent set forth in Section 2
below, the Credit Agreement is hereby amended as follows:

          (a) The definition of "Activation Event" appearing in Annex A of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

          "Activation Event" means, at any date, that Excess Availability is
     less than the Specified Amount at such date and the average Excess
     Availability during the four week period immediately preceding such date is
     the Specified Amount or less, with such Activation Event being deemed to
     exist thereafter until such time, if any, as a Deactivation Event shall
     occur.

<PAGE>

          (b) The definition of "Availability Block" appearing in Annex A of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

          "Availability Block" means (i) for the period from January 20, 2006
     until May 31, 2007, $0; provided, that, if an Insurance Event occurs during
     such period, the "Availability Block" shall mean $10,000,000, and (ii) at
     all times after May 31, 2007, $10,000,000.

          (c) The definition of "Deactivation Event" appearing in Annex A of the
Credit Agreement is hereby amended and restated in its entirety to read as
follows:

          "Deactivation Event" means, subsequent to any Activation Event, any
     period of 90 consecutive days during which Excess Availability at all times
     exceeds the Specified Amount and at the end of such 90-day period no
     Default or Event of Default has occurred and is then continuing.

          (d) Annex A to the Credit Agreement is hereby amended to add the
following defined terms in the appropriate alphabetical locations:

          "Insurance Event" means the receipt by Holdings and its Subsidiaries
     from the insurance providers of Holdings and its Subsidiaries, in
     connection with the train collision, train derailment, release of chlorine
     and other gases, and other events occurring because of the foregoing
     described train collision, train derailment and release of chlorine and
     other gases near the facilities of Holdings and its Subsidiaries in
     Graniteville, South Carolina on January 6, 2005 (the "Derailment"), of an
     amount that is at least $60,000,000 more that the amounts actually paid by
     Holdings and its Subsidiaries in connection with the chlorine abatement and
     rehabilitation of the chlorine damage in connection with the Derailment.

          "Specified Amount" means (i) for the period from January 25, 2006
     until May 31, 2007, (A) if no Insurance Event has occurred, $10,000,000 or
     (B) if an Insurance Event has occurred, $20,000,000 and (ii) at all times
     after May 31, 2007, $20,000,000.

          (e) Annex G to the Credit Agreement is hereby amended to amend and
restate paragraphs (a) and (b) of thereof in their entirety as follows:

               (a) Minimum Fixed Charge Coverage Ratio. With respect to any
     Fiscal Quarter in which Liquidity Availability falls below the Specified
     Amount and average Liquidity Availability during the four calendar week
     period immediately preceding such date is the Specified Amount or less,
     Parent and its Subsidiaries shall have on a consolidated basis, as of the
     end of the most recent calendar month, a Fixed Charge Coverage Ratio for
     the 12-month period then ended of not less than 1.0 to 1.0.

                                       2

<PAGE>

               (b) Minimum EBITDA. With respect to any Fiscal Quarter in which
     Liquidity Availability falls below the Specified Amount and average
     Liquidity Availability during the four calendar week period immediately
     preceding such date is the Specified Amount or less, Parent and its
     Subsidiaries on a consolidated basis shall have, as of the end of the most
     recent calendar month, as set forth below, EBITDA for the 12-month period
     then ended of not less than $35,000,000.

          2. Effectiveness of this Amendment; Conditions Precedent. The
provisions of Paragraph 1 of this Amendment shall be deemed to have become
effective as of the date of this Amendment, but such effectiveness shall be
expressly conditioned upon the Agent's receipt of each of the agreements,
certificates, opinion letters and other documents described on Schedule I
hereto.

          3. Miscellaneous.

          (a) Headings. The various headings of this Amendment are inserted for
convenience of reference only and shall not affect the meaning or interpretation
of this Amendment or any provisions hereof.

          (b) Counterparts. This Amendment may be executed by the parties hereto
in several counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument. Delivery of
an executed counterpart of a signature page to this Amendment by facsimile
transmission shall be effective as delivery of a manually executed counterpart
thereof.

          (c) Interpretation. No provision of this Amendment 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's having or
being deemed to have structured, drafted or dictated such provision.

          (d) Reaffirmation, Ratification and Acknowledgment; Reservation. Each
of the Borrower, the Credit Parties and Holdings hereby (a) ratifies and
reaffirms all of its payment and performance obligations, contingent or
otherwise, and each grant of security interests and liens in favor of the Agent
on behalf of the Lender, under each Loan Document to which it is a party, (b)
agrees and acknowledges that such ratification and reaffirmation is not a
condition to the continued effectiveness of such Loan Documents, and (c) agrees
that neither such ratification and reaffirmation, nor the Agent's, or the
Lender's solicitation of such ratification and reaffirmation, constitutes a
course of dealing giving rise to any obligation or condition requiring a similar
or any other ratification or reaffirmation from the Borrower, Holdings or such
Credit Party with respect to any subsequent modifications to the Credit
Agreement or the other Loan Documents. The Credit Agreement is in all respects
ratified and confirmed. Each of the Loan Documents shall remain in full force
and effect and are hereby ratified and confirmed. Neither delivery nor
effectiveness of this Amendment shall operate as a waiver of any right, power or
remedy of the Agent or the Lender, or of any Default or Event of Default
(whether or not known to the Agent or the Lender), under any of the Loan
Documents, all of which rights, powers and remedies, with respect to any such
Default or Event of Default or otherwise, are hereby expressly

                                       3

<PAGE>

reserved by the Agent and the Lender. This Amendment shall constitute a Loan
Document for purposes of the Credit Agreement.

          (e) Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF GEORGIA.

          (f) Effect. Upon the effectiveness of this Amendment, each reference
in the Credit Agreement to "this Amendment," "hereunder," "hereof" or words of
like import shall mean and be a reference to the Credit Agreement as amended
hereby and each reference in the other Loan Documents to the Credit Agreement,
"thereunder," "thereof," or words of like import shall mean and be a reference
to the Credit Agreement as amended hereby. Except as expressly provided in this
Amendment, all of the terms, conditions and provisions of the Credit Agreement
and the other Loan Documents shall remain the same. Each of the Borrower, the
Credit Parties and Holdings hereby represents and warrants to the Lender and the
Agent that all authorizations, consents and approvals of such Person's board of
directors and shareholders, and all other Persons, necessary to permit such
Person to execute and deliver this Amendment and to perform its obligations
hereunder and under the Credit Agreement as amended hereby, and to permit the
Lender and the Agent to enforce such obligations, have been obtained.

          (g) No Novation or Waiver. Except as specifically set forth in this
Amendment the execution, delivery and effectiveness of this Amendment shall not
(a) limit, impair, constitute a waiver by, or otherwise affect any right, power
or remedy of, the Agent or the Lender under the Credit Agreement or any other
Loan Document, (b) constitute a waiver of any provision in the Credit Agreement
or in any of the other Loan Documents or of any Default or Event of Default that
may have occurred and be continuing, or (c) alter, modify, amend or in any way
affect any of the terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or in any of the other Loan Documents, all of
which are ratified and affirmed in all respects and shall continue in full force
and effect.

          (h) Agent's Expenses. The Borrower hereby agrees to promptly reimburse
the Agent for all of the reasonable out-of-pocket expenses, including, without
limitation, attorneys' and paralegals' fees, it has heretofore or hereafter
incurred or incurs in connection with the preparation, negotiation and execution
of this Amendment.

                                     ******

                                       4

<PAGE>

          IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.

                                       GENERAL ELECTRIC CAPITAL CORPORATION,
                                       as Agent and the sole Lender

                                       By:
                                           -------------------------------------
                                       Name:
                                             -----------------------------------
                                       Title: Duly Authorized Signatory

                                       AVONDALE MILLS, INC., as the Borrower
                                       and as a Credit Party

                                       By:
                                           -------------------------------------
                                       Name: Jack R. Altherr, Jr.
                                       Title: Vice Chairman and
                                              Chief Financial Officer

                                       AVONDALE MILLS GRANITEVILLE FABRICS,
                                       INC., as a Credit Party

                                       By:
                                           -------------------------------------
                                       Name: Jack R. Altherr, Jr.
                                       Title: Vice Chairman and
                                              Chief Financial Officer

                                       AVONDALE INCORPORATED

                                       By:
                                           -------------------------------------
                                       Name: Jack R. Altherr, Jr.
                                       Title: Vice Chairman and
                                              Chief Financial Officer

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