EXHIBIT 10.1 SEVENTH AMENDMENT TO AND LIMITED WAIVER UNDER CREDIT AGREEMENT THIS SEVENTH AMENDMENT TO AND LIMITED WAIVER UNDER CREDIT AGREEMENT (this "Seventh Amendment") is dated as of October 31, 2001, among GUILFORD MILLS, INC. (the "Borrower"), WACHOVIA BANK, N.A., as Administrative Agent (the "Administrative Agent"), FIRST UNION NATIONAL BANK, as Syndication Agent (the "Syndication Agent"), BANK ONE, N.A., as Documentation Agent (the "Documentation Agent") and the Banks which are signatories hereto (collectively, the "Banks"). W I T N E S S E T H : WHEREAS, the Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent and the Banks executed and delivered that certain $130,000,000 Credit Agreement dated as of May 26, 2000 among the Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent, and the Banks, as amended by First Amendment to Credit Agreement dated as of November 6, 2000, Second Amendment to and Waiver under CreditAgreement dated as of May 15, 2001, Third Amendment to Credit Agreement dated as of June 29, 2001, Fourth Amendment to Credit Agreement dated as of July 31, 2001, Fifth Amendment to Credit Agreement dated as of August 7, 2001 and Sixth Amendment to Credit Agreement dated as of August 13, 2001 (the "Sixth Amendment") (as so amended, the "Credit Agreement"); WHEREAS, the Borrower has requested and the Administrative Agent and the Banks have agreed to certain amendments to the Credit Agreement, subject to the terms and conditions hereof; WHEREAS, pursuant to the terms of the Sixth Amendment, the Administrative Agent and the Banks agreed, among other things, to waive certain Events of Default, which waiver will expire on October 31, 2001, pursuant to the terms of the Sixth Amendment; and WHEREAS, the Borrower has requested that the Administrative Agent and the Banks extend such waiver, and the Administrative Agent and the Required Banks have agreed to such extension, subject to the terms and conditions hereof. NOW, THEREFORE, for and in consideration of the above premises and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged by the parties hereto, the Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent and the Banks hereby covenant and agree as follows: 1. Definitions. Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement" and each other similar reference contained in the Credit Agreement shall from and after the date hereof refer to the Credit Agreement as amended hereby. 2. Amendment to Section 1.01. Section 1.01 of the Credit Agreement is hereby amended by (i) amending the definitions of "Commitment Reduction Date" and "Reserved Asset Disposition Proceeds" by deleting the date "October 31, 2001" where such date appears therein and replacing such date with "December 17, 2001" and (ii) adding the following new definition in the appropriate alphabetical order: "Seventh Amendment Effective Date" means October 31, 2001. 3. Amendment to Section 2.08. Section 2.08 of the Credit Agreement is hereby amended by deleting the date "October 31, 2001" where such date appears in paragraph (b) thereof and replacing such date with "December 17, 2001". 4. Amendment to Section 5.15. Section 5.15 of the Credit Agreement is hereby amended by adding the following further proviso immediately prior to the period at the end of such Section: "; provided further, that from and after October 23, 2001, the Borrower and its Domestic Subsidiaries shall be prohibited from making Investments in any Foreign Subsidiary, including, without limitation, the transfer of any equipment, except that the Borrower may make Investments (which Investments shall not include the transfer of equipment) (A) pursuant to paragraph (xiii) above between October 1, 2001 and December 31, 2001 in an amount not to exceed $1,500,000, (B) between October 1, 2001 and December 31, 2001, for the sole purpose of funding capital expenditures of the joint venture, Altamira Servicios de Infraestructura S.A. de C.V., in an amount not to exceed $200,000, and (C) between October 1, 2001 and December 31, 2001 in Guilford de Altamira, S.A. de C.V. in an amount not to exceed $800,000 and in Altamira Servicios de Infraestructura S.A. de C.V., in an amount not to exceed $350,000, in each case for the sole purpose of funding working capital needs during such period." 5. Amendment to Section 5.16. Section 5.16 of the Credit Agreement is hereby amended by (i) deleting the word "and" at the end of paragraph (k) thereof, and (ii) deleting paragraph (l) thereof and substituting therefor the following paragraphs: "(l) Liens on assets of a UK Subsidiary in favor of one or more lenders in the United Kingdom (each a "UK Lender"), so long as (i) such Liens do not secure Debt in an aggregate amount in excess of 6,000,000 British pounds sterling for working capital and 12,000,000 British pounds sterling for factoring arrangements (so long as such factoring arrangements are otherwise permitted under the Credit Agreement) and (ii) the Borrower will use its best efforts to cause such UK Subsidiary to grant, a Lien on such assets to the Collateral Agent to secure the Secured Obligations, which Lien in favor of the Collateral Agent shall be granted pursuant to similar instruments and contain terms and provisions similar to those granting such Lien to each such UK Lender, other than terms and provisions specifically relating to the credit arrangements with each such UK Lender, and which shall be junior and subordinate to the Liens of each such UK Lender thereon and in the event the Borrower does not obtain such Lien in favor of the Collateral Agent as a result of the refusal by the UK Lender to allow such junior Lien or a significant adverse economic consequence that would result from such junior Lien, including without limitation, a tax consequence, it will provide to the Collateral Agent and each of the Secured Parties a reasonably detailed written explanation of the efforts expended by it and the reason for its inability to provide such Lien, it being agreed that in such instances, the best efforts requirement described above shall be deemed to be satisfied by delivery of such explanation, so long as such explanation is in form and substance reasonably satisfactory to the Collateral Agent and the Secured Parties, and (iii) each such UK Lender agrees to give to the Collateral Agent notice of the occurrence of any event of default under such credit arrangements, and permit the Secured Parties to cure any such event of default, all of the foregoing being pursuant to terms and conditions satisfactory to the Required Secured Parties; (m) Liens on assets of Grupo Ambar S.A. de C.V. and American Textil S.A. de C.V. (for purposes of this paragraph, each a "Mexican Subsidiary") in favor of one or more lenders in Mexico (for purposes of this paragraph, each a "Mexican Lender"), so long as (i) such Liens do not secure Debt in an aggregate amount in excess of the Mexican pesos equivalent of $12,000,000, calculated based on the exchange rate as of the Seventh Amendment Effective Date, for working capital, capital expenditures and loan repayments, and (ii) the Borrower will use its best efforts to cause such Mexican Subsidiary to grant, a Lien on such assets to the Collateral Agent to secure the Secured Obligations, which Lien in favor of the Collateral Agent shall be granted pursuant to similar instruments and contain terms and provisions similar to those granting such Lien to each such Mexican Lender, other than terms and provisions specifically relating to the credit arrangements with each such Mexican Lender, and which shall be junior and subordinate to the Liens of each such Mexican Lender thereon and in the event the Borrower does not obtain such Lien in favor of the Collateral Agent as a result of the refusal by the Mexican Lender to allow such junior Lien or a significant adverse economic consequence that would result from such junior Lien, including without limitation, a tax consequence, it will provide to the Collateral Agent and each of the Secured Parties a reasonably detailed written explanation of the efforts expended by it and the reason for its inability to provide such Lien, it being agreed that in such instances, the best efforts requirement described above shall be deemed to be satisfied by delivery of such explanation, so long as such explanation is in form and substance reasonably satisfactory to the Collateral Agent and the Secured Parties, and (iii) each such Mexican Lender agrees to give to the Collateral Agent notice of the occurrence of any event of default under such credit arrangements, and permit the Secured Parties to cure any such event of default, all of the foregoing being pursuant to terms and conditions satisfactory to the Required Secured Parties; and (n) Liens on assets of Guilford de Tamaulipas, S.A. de C.V. and Guilford de Altamira, S.A. de C.V. (for purposes of this paragraph, each a "Mexican Subsidiary") in favor of one or more lenders in Mexico (for purposes of this paragraph, each a "Mexican Lender"), so long as (i) such Liens do not secure Debt in an aggregate amount in excess of the Mexican pesos equivalent of $6,000,000, calculated based on the exchange rate as of the Seventh Amendment Effective Date, for working capital and the Mexican pesos equivalent of $10,000,000, calculated based on the exchange rate as of the Seventh Amendment Effective Date, for capital expenditures and loan repayment, and (ii) the Borrower will use its best efforts to cause such Mexican Subsidiary to grant a Lien on such assets to the Collateral Agent to secure the Secured Obligations, which Lien in favor of the Collateral Agent shall be granted pursuant to similar instruments and contain terms and provisions similar to those granting such Lien to each such Mexican Lender, other than terms and provisions specifically relating to the credit arrangements with each such Mexican Lender, and which shall be junior and subordinate to the Liens of each such Mexican Lender thereon and in the event the Borrower does not obtain such Lien in favor of the Collateral Agent as a result of the refusal by the Mexican Lender to allow such junior Lien or a significant adverse economic consequence that would result from such junior Lien, including without limitation, a tax consequence, it will provide to the Collateral Agent and each of the Secured Parties a reasonably detailed written explanation of the efforts expended by it and the reason for its inability to provide such Lien, it being agreed that in such instances, the best efforts requirement described above shall be deemed to be satisfied by delivery of such explanation, so long as such explanation is in form and substance reasonably satisfactory to the Collateral Agent and the Secured Parties, and (iii) such Mexican Lender agrees to give to the Collateral Agent notice of the occurrence of any event of default under such credit arrangements, and permit the Secured Parties to cure any such event of default, all of the foregoing being pursuant to terms and conditions satisfactory to the Required Secured Parties." 6. Amendment to Section 5.23. Section 5.23 of the Credit Agreement is hereby amended by deleting the dollar amount "$40,000,000" and inserting in lieu thereof the following: "(A) $40,000,000 with respect to the Borrower and all Subsidiaries other than UK Subsidiaries plus (B) (pound)12,000,000 with respect to the UK Subsidiaries" 7. Amendment to Section 5.24. Section 5.24 of the Credit Agreement is hereby amended by deleting paragraph (A) thereof and substituting therefor the following: "(A) Debt under credit facilities in Mexico in aggregate amounts not exceeding the Mexican pesos equivalent of (x) $12,000,000 for Grupo Ambar S.A. de C.V. and American Textil S.A. de C.V., and (y) $6,000,000 for working capital and $10,000,000 for capital expenditures and loan repayment for Guilford de Tamaulipas, S.A. de C.V. and Guilford de Altamira, S.A. de C.V., in each case calculated based on the exchange rate as of the Seventh Amendment Effective Date, debt under credit facilities in the United Kingdom in the aggregate amount not exceeding 6,000,000 British pounds sterling for working capital and 12,000,000 British pounds sterling for factoring arrangements (so long as such factoring arrangements are otherwise permitted hereunder), and term facilities in Portugal in the aggregate amount not exceeding the Dollar equivalent of 900,000,000 Portuguese escudos, calculated based on the exchange rate as of the Closing Date; and" 8. Amendment to Article V. Article V of the Credit Agreement is hereby amended by adding the following new Section 5.30: "SECTION 5.30 Assignments of Factoring Agreements. The Borrower and the Subsidiaries shall deliver by no later than December 1, 2001 collateral assignments in favor of the Collateral Agent with respect to the rights under all applicable agreements relating to factoring arrangements, which collateral assignments shall be in form and substance satisfactory to the Administrative Agent." 9. Limited Waiver. The provisions regarding a conditional waiver as set forth in sections 13 and 15 of the Sixth Amendment are deleted and of no force or effect. Notwithstanding the foregoing, subject to the terms and conditions set forth herein, the Administrative Agent and the Banks waive, for the period commencing on the Seventh Amendment Effective Date and ending on December 17, 2001 (the "Waiver Period") (i) the Borrower's non-compliance with the Fixed Charge Coverage Ratio covenant contained in Section 5.17 of the Credit Agreement for the Fiscal Quarters ended July 1, 2001 and September 30, 2001, (ii) the Borrower's non-compliance with the Leverage Ratio covenant contained in Section 5.19 of the Credit Agreement for the Fiscal Quarters ended July 1, 2001 and September 30, 2001, (iii) the Borrower's non-compliance with the Consolidated Total EBITDA covenant contained in Section 5.29 of the Credit Agreement for the Fiscal Quarters ended July 1, 2001 and September 30, 2001, (iv) the Borrower's non-compliance with the Consolidated Tangible Net Worth covenant contained in Section 5.20 of the Credit Agreement during the Fiscal Quarter ended September 30, 2001 and thereafter through the end of the Waiver Period, and (v) the Events of Default that have occurred and are continuing solely as a result of such non-compliance; provided that upon the expiration of the Waiver Period, the waivers provided for herein shall be immediately (without cure period or notice) and automatically terminated in their entirety and be of no force and effect as if the waivers had never been granted. 10. Restatement of Representations and Warranties. The Borrower hereby restates and renews each and every representation and warranty heretofore made by it in the Credit Agreement and the other Loan Documents as fully as if made on the date hereof (but after giving effect to the amendments and limited waiver contained herein) and with specific reference to this Seventh Amendment. 11. Effect of Amendments and Waiver. Except as set forth expressly hereinabove, all terms of the Credit Agreement and the other Loan Documents shall be and remain in full force and effect, and shall constitute the legal, valid, binding and enforceable obligations of the Borrower. 12. Reaffirmation; No Novation or Mutual Departure. The Borrower expressly acknowledges and agrees that: (i) there has not been, and this Seventh Amendment does not constitute or establish, a novation with respect to the Credit Agreement or any of the Loan Documents and (ii) nothing in this Seventh Amendment shall affect or limit the Administrative Agent's and the Banks' right to demand payment of liabilities owing from the Borrower to the Administrative Agent and the Banks under, or to demand strict performance of the terms, provisions and conditions of, the Credit Agreement and the other Loan Documents, to exercise any and all rights, powers and remedies under the Credit Agreement or the other Loan Documents or at law or in equity, or to do any and all of the foregoing, immediately at any time after the occurrence of a Default or an Event of Default which is not waived pursuant to the terms hereof, the Credit Agreement or the other Loan Documents. 13. Ratification. Except as expressly contemplated or provided herein, the Borrower hereby restates, ratifies and reaffirms each and every term, covenant and condition set forth in the Credit Agreement and the other Loan Documents effective as of the date hereof. 14. Counterparts. This Seventh Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts and transmitted by facsimile to the other parties, each of which when so executed and delivered by facsimile shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument. 15. Section References. Section titles and references used in this Seventh Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby. 16. No Default. To induce the Administrative Agent and the Required Banks to enter into this Seventh Amendment, the Borrower hereby acknowledges and agrees that, as of the date hereof, and after giving effect to the terms hereof, there exists (i) no Default or Event of Default and (ii) no right of offset, defense, counterclaim, claim or objection in favor of the Borrower arising out of or with respect to any of the Loans or other obligations of the Borrower owed to the Administrative Agent or the Banks under the Credit Agreement. 17. Further Assurances. The Borrower agrees to take such further actions as the Administrative Agent shall reasonably request in connection herewith to evidence the amendments and waivers herein contained. 18. Governing Law. This Seventh Amendment shall be governed by and construed and interpreted in accordance with, the laws of the State of New York. 19. Conditions Precedent. This Seventh Amendment shall become effective only upon: (i) execution and delivery (including by facsimile) of this Seventh Amendment by the Borrower, the Administrative Agent and the Required Banks; (ii) execution and delivery (including by facsimile) of the Consent and Reaffirmation of Guarantors at the end hereof by the Guarantors; (iii) receipt by the Administrative Agent of a copy of a similar amendment executed and delivered by the Majority Senior Note Holders (as defined in the Intercreditor Agreement); (iv) execution and delivery (including by facsimile) by the Required Secured Parties of the Sixth Amendment to Amended and Restated Intercreditor Agreement in substantially the form attached hereto as Annex 1, and of the Consent and Reaffirmation of the Company and the Guarantors at the end thereof by the Borrower and the Guarantors; (v) delivery to the Collateral Agent, with appropriate endorsement in form and substance satisfactory to the Collateral Agent, of the Intercompany Note dated July 1, 2001 made by Guilford de Tamaulipas in favor of the Borrower; and (vi) payment of outstanding professionals' fees and expenses of the Administrative Agent and Collateral Agent payable to FTI/Policano & Manzo. IN WITNESS WHEREOF, the Borrower, the Administrative Agent, the Syndication Agent, the Documentation Agent and each of the Required Banks has caused this Seventh Amendment to be duly executed, under seal, by its duly authorized officer as of the day and year first above written. GUILFORD MILLS, INC., as Borrower By: ___/s/ Kim A. Thompson Title: Vice President and Chief Financial Officer WACHOVIA BANK, N.A., as Administrative Agent and as a Bank By: /s/ Linda M. Harris Title: Senior Vice President FIRST UNION NATIONAL BANK, as Syndication Agent and as a Bank By: /s/ Colleen McCullum Title: Senior Vice President BANK ONE, N.A., as Documentation Agent and as a Bank By: _/s/ C. Dianne Wooley Title: First Vice President BRANCH BANKING AND TRUST COMPANY, as a Bank By: _/s/ Richard Spencer Title: Senior Vice President