MASTER LEASE AGREEMENT

(OFF BALANCE SHEET - SYNTHETIC)

THIS MASTER LEASE AGREEMENT, dated as of October 14, 2003 ("Agreement"), between
General Electric Capital Corporation, with an office at 1000 Windward Concourse,
Suite 403, Alpharetta, Georgia 30005  (hereinafter called, together with its
successors and assigns, if any, "Lessor"), and THE DIXIE GROUP, INC., a
Corporation organized and existing under the laws of the State of Tennessee 
(the "State") with its mailing address and chief place of business at 185 S.
Industrial Blvd.; Calhoun, Georgia 30701  (hereinafter called "Lessee").

WITNESSETH:

I. LEASING:

(a) Subject to the terms and conditions set forth below, Lessor agrees to lease
to Lessee, and Lessee agrees to lease from Lessor, the equipment and the
property ("Equipment") described in Annex A to any schedule hereto ("Schedule").
Terms defined in a Schedule and not otherwise defined herein shall have the
meanings ascribed to them in such Schedule.

(b) The obligation of Lessor to lease the Equipment to Lessee under any Schedule
shall be subject to receipt by Lessor, prior to the Lease Commencement Date
(with respect to such Equipment), of each of the following documents in form and
substance satisfactory to Lessor: (i) a Schedule relating to the Equipment then
to be leased hereunder, (ii) a evidence satisfactory to Lessor of ownership of
the Equipment, (iii) evidence of insurance which complies with the requirements
of Section X, and (iv) such other documents as Lessor may reasonably request. As
a further condition to such obligations of Lessor, Lessee shall execute and
deliver to Lessor a Certificate of Acceptance (in the form of Annex C to the
applicable Schedule) covering such Equipment Upon execution by Lessee of any
Certificate of Acceptance, the Equipment described thereon shall be deemed to
have been delivered to, and irrevocably accepted by, Lessee for lease hereunder.

II. TERM, RENT AND PAYMENT:

(a) The rent payable hereunder and Lessee's right to use the Equipment shall
commence on the date of execution by Lessee of the Certificate of Acceptance for
such Equipment ("Lease Commencement Date"). The term of this Agreement shall be
the period specified in the applicable Schedule. If any term is extended, the
word "term" shall be deemed to refer to all extended terms, and all provisions
of this Agreement shall apply during any extended terms, except as may be
otherwise specifically provided in writing.

(b) Rent shall be paid to Lessor at its address stated above, except as
otherwise directed by Lessor. Payments of rent shall be in the amount set forth
in, and due in accordance with, the provisions of the applicable Schedule. If
one or more Advance Rentals are payable, such Advance Rental shall be (i) set
forth on the applicable Schedule, (ii) due upon acceptance by Lessor of such
Schedule, and (iii) when received by Lessor, applied to the first rent payment
and the balance, if any, to the final rental payment(s) under such Schedule. In
no event shall any Advance Rental or any other rent payments be refunded to
Lessee. If rent is not paid within ten days of its due date, Lessee agrees to
pay a late charge of five cents ($0.05) per dollar on, and in addition to, the
amount of such delinquent rent but not exceeding the lawful maximum, if any.

III. Intentionally Deleted.

IV. TAXES: Lessee shall have no liability for taxes imposed by the United States
of America or any State or political subdivision thereof which are on or
measured by the net income of Lessor. Lessee shall report (to the extent that it
is legally permissible) and pay promptly all other taxes, fees and assessments
due, imposed, assessed or levied against any Equipment (or the purchase,
ownership, delivery, leasing, possession, use or operation thereof), this
Agreement (or any rentals or receipts hereunder), any Schedule, Lessor or Lessee
by any foreign, federal, state or local government or taxing authority during or
related to the term of this Agreement, including, without limitation, all
license and registration fees, and all sales, use, personal property, excise,
gross receipts, franchise, stamp or other taxes, imposts, duties and charges,
together with any penalties, fines or interest thereon (all hereinafter called
"Taxes"). Lessee shall (i) reimburse Lessor upon receipt of written request for
reimbursement for any Taxes charged to or assessed against Lessor, (ii) on
request of Lessor, submit to Lessor written evidence of Lessee's payment of
Taxes, (iii) on all reports or returns show the ownership of the Equipment by
Lessor, and (iv) send a copy thereof to Lessor.

V. REPORTS:

(a) Lessee will notify Lessor in writing, within ten days after any tax or other
lien shall attach to any Equipment, of the full particulars thereof and of the
location of such Equipment on the date of such notification.

(b) Lessee will within 95 days of the close of each fiscal year of Lessee,
deliver to Lessor, Lessee's balance sheet and profit and loss statement,
certified by a recognized firm of certified public accountants. Upon request
Lessee will deliver to Lessor quarterly, within 95 days of the close of each
fiscal quarter of Lessee, in reasonable detail, copies of Lessee's quarterly
financial report certified by the chief financial officer of Lessee. Lessee may
satisfy the foregoing obligations by providing copies of its filed Form 10-K and
Form 10-Q.

(c) Lessee will permit Lessor to inspect any Equipment during normal business
hours.

(d) Lessee will keep the Equipment at the Equipment Location (specified in the
applicable Schedule) and will promptly notify Lessor of any relocation of
Equipment. The foregoing notwithstanding, Lessee may relocate the Equipment to
other facilities operated by it or by its wholly-owned subsidiaries within the
continental United States; provided, Lessee (i) promptly notifies Lessor in
writing of the new location, (ii) delivers to Lessor prior to relocation any
instruments or documents reasonably required to protect the interest of Lessor
in the Equipment, including without limitation, UCC filings, and landlord or
mortgagee waivers with respect to the new location, and (iii) indemnifies and
holds harmless Lessor from any additional tax, fees or other charges resulting
from the relocation of the Equipment. Upon the written request of Lessor, Lessee
will notify Lessor forthwith in writing of the location of any Equipment as of
the date of such notification.

(e) Lessee will promptly and fully report to Lessor in writing if any Equipment
is lost or damaged (where the estimated repair costs would exceed 10% of its
then fair market value), or is otherwise involved in an accident causing
personal injury or property damage.

(f) Within 60 days after any request by Lessor, Lessee will furnish a
certificate of an authorized officer of Lessee stating that he has reviewed the
activities of Lessee and that, to the best of his knowledge, there exists no
default (as described in Section XIV) or event which with notice or lapse of
time (or both) would become such a default.

(g) Lessee will promptly notify Lessor of any change in Lessee's state of
incorporation or organization.

VI. CONTROL AND OPERATION:

(a) Lessee agrees that the Equipment will be used by Lessee solely in the
conduct of its business and in a manner complying with all applicable federal,
state, and local laws and regulations.

(b) EXCEPT AS PROVIDED IN SUBPARAGRAPH (1) BELOW, LESSEE SHALL NOT ASSIGN,
ENCUMBER OR TRANSFER, OR IN ANY WAY DISPOSE, THE EQUIPMENT OR OF ALL OR ANY PART
OF ITS RIGHTS OR OBLIGATIONS UNDER THIS LEASE OR ANY SCHEDULE OR ENTER INTO ANY
SUBLEASE OF ALL OR ANY PORTION OF ANY EQUIPMENT WITHOUT THE PRIOR WRITTEN
CONSENT OF LESSOR.

(1) Sublease. So long as (i) no Default or Event of Default shall have occurred
and be continuing, and (ii) Lessee complies with the provisions of this Section
VI (b), Lessee may sublease the Equipment to a wholly-owned subsidiary of Lessee
(a "Permitted Sublessee"), provided that each of the following conditions is
satisfied prior to any subleasing pursuant to this Section VI(b):

(i) a sublease to a Permitted Sublessee ("Permitted Sublease") shall (A) not
contain terms inconsistent with the terms of this Lease except that it may
impose additional or more stringent obligations on any Permitted Sublessee than
are imposed on Lessee under this Lease; (B) provide that no further subleases of
the Equipment by such Permitted Sublessee shall be permitted; (C) provide that
in no event shall the term of the Permitted Sublease extend beyond the
Expiration Date;

(ii) the Permitted Sublease shall provide that, (A) the Permitted Sublease is
subject and subordinate to this Agreement in all respects, and the rights of the
Permitted Sublessee under the Permitted Sublease are subject and subordinate in
all respects to the rights of Lessor under this Lease; (B) prior to delivery of
the Equipment to the Permitted Sublessee the Permitted Sublessee shall provide
an acknowledgement to Lessor in form and substance satisfactory to Lessor,
confirming its agreement to this Section VI(c) and confirming that its rights to
possession of the Equipment under the Permitted Sublease will terminate
immediately, and that it will redeliver the Equipment immediately to Lessor upon
notification from Lessor, that an Event of Default has occurred and is
continuing and that Lessor has, as a result thereof, terminated Lessee's right
to possession of the Equipment under this Lease (the "Subordination
Acknowledgement"); (C) Lessee may terminate such Permitted Sublease following
the occurrence of an Event of Default under this Lease where Lessor has
terminated the leasing of the Equipment under this Lease as a result thereof;
(D) upon notice by Lessor or Lessee to the Permitted Sublessee of an Event of
Default by Lessee under the Lease, all payments under the Permitted Sublease
shall be made to the Lessor;

(iii) Lessee shall grant to Lessor an assignment by way of security interest in
favor of Lessor in Lessee's right, title and interest under the Permitted
Sublease (and any security interest in the subleased Equipment granted to the
Lessee thereunder), in form and substance satisfactory to Lessor. Lessee shall
cause the Permitted Sublessee to deliver to Lessor an acknowledgment of such
security interest. Such acknowledgment shall be in form and substance acceptable
to Lessor;

(iv) Lessee shall remain primarily liable for the performance of its obligations
under this Lease to the same extent as if no Permitted Sublease had been entered
into; to the extent that the Permitted Sublessee properly (in the sole judgment
of the Lessor) performs a non-monetary obligation under the Permitted Sublease,
Lessor agrees that such performance shall discharge Lessee's corresponding
obligation under this Lease;

(v) Lessee and each Permitted Sublessee shall cooperate with Lessor in
connection with the execution and filing of any documents (including Uniform
Commercial Code financing statements naming permitted Sublessee, as debtor,
Lessee, as secured party, and Lessor, as assignee) required by Lessor to be
executed and filed from time to time with any governmental agency, registry or
authority in order to protect the interests of Lessor in the Equipment, this
Lease, any Permitted Sublease and/or to ensure the validity, enforceability or
priority thereof; Lessee shall be responsible for the costs of any such filings;

(vi) Lessee will pay to Lessor on demand all reasonable out of pocket expenses
payable or incurred by Lessor in connection with the review and approval of any
documentation required in connection with the subleasing of the Equipment; and

(vii) promptly after its execution, Lessee shall provide Lessor with the
executed original of the Permitted Sublease with constitutes the chattel paper
copy so that possession thereof perfects a security interest in such chattel
paper under the Uniform Commercial Code.

(c) Lessee will keep the Equipment free and clear of all liens and encumbrances
other than those which result from acts of Lessor.

VII. SERVICE:

(a) Lessee will, at its sole expense, maintain each unit of Equipment in good
operating order, repair, condition and appearance in accordance with
manufacturer's recommendations, normal wear and tear excepted. Lessee shall, if
at any time requested by Lessor, affix in a prominent position on each unit of
Equipment plates, tags or other identifying labels showing ownership thereof by
Lessor.

(b) Lessee will not, without the prior consent of Lessor, affix or install any
accessory, equipment or device on any Equipment if such addition will impair the
originally intended function or use of such Equipment. All additions, repairs,
parts, supplies, accessories, equipment, and devices furnished, attached or
affixed to any Equipment which are not readily removable shall be made only in
compliance with applicable law, including Internal Revenue Service guidelines,
and shall become the property of Lessor. Lessee will not, without the prior
written consent of Lessor and subject to such conditions as Lessor may impose
for its protection, affix or install any Equipment to or in any other personal
or real property.

(c) Any alterations or modifications to the Equipment that may, at any time
during the term of this Agreement, be required to comply with any applicable
law, rule or regulation shall be made at the expense of Lessee.

VIII. STIPULATED LOSS VALUE: Lessee shall promptly and fully notify Lessor in
writing if any unit of Equipment shall be or become worn out, lost, stolen,
destroyed, irreparably damaged in the reasonable determination of Lessee, or
permanently rendered unfit for use from any cause whatsoever (such occurrences
being hereinafter called "Casualty Occurrences"). On the rental payment date
next succeeding a Casualty Occurrence (the "Payment Date"), Lessee shall pay
Lessor the sum of (x) the Stipulated Loss Value of such unit calculated as of
the rental next preceding such Casualty Occurrence ("Calculation Date"); and (y)
all rental and other amounts which are due hereunder as of the Payment Date.
Upon payment of all sums due hereunder, the term of this lease as to such unit
shall terminate and , any right, title or interest of Lessor in and to such unit
shall be transferred to Lessee on an AS-IS WHERE IS basis without warranty, and
Lessee shall be entitled to all applicable insurance proceeds.

IX. LOSS OR DAMAGE: Lessee hereby assumes and shall bear the entire risk of any
loss, theft, damage to, or destruction of, any unit of Equipment from any cause
whatsoever.

X. INSURANCE: Lessee agrees, at its own expense, to keep all Equipment insured
for such amounts and against such hazards as Lessor may require, including, but
not limited to, insurance for damage to or loss of such Equipment and liability
coverage for personal injuries, death or property damage, with Lessor named as
additional insured and with a loss payable clause in favor of Lessor, as its
interest may appear, irrespective of any breach of warranty or other act or
omission of Lessee. All such policies shall be with companies, and on terms,
satisfactory to Lessor. Lessee agrees to deliver to Lessor evidence of insurance
satisfactory to Lessor. No insurance shall be subject to any co-insurance
clause. Physical damage insurance will have a $250,000.00 deductible, and Lessee
will consult with Lessor before any increase in such deductible amount. Lessee
hereby appoints Lessor as Lessee's attorney-in-fact to make proof of loss and
claim for insurance, and to make adjustments with insurers and to receive
payment of and execute or endorse all documents, checks or drafts in connection
with payments made as a result of such insurance policies. Any expense of Lessor
in adjusting or collecting insurance shall be borne by Lessee. Lessee will not
make adjustments with insurers except (i) with respect to claims for damage to
any unit of Equipment where the repair costs do not exceed 10% of such unit's
fair market value, or (ii) with Lessor's written consent. Said policies shall
provide that the insurance may not be altered or cancelled by the insurer until
after thirty (30) days written notice to Lessor. Provided no default has
occurred and is continuing, Lessee shall have the right to adjust all claims and
to deal with all carriers with respect to claims; Lessor may, at its option,
apply proceeds of insurance, in whole or in part, to (i) repair or replace
Equipment or any portion thereof, or (ii) to satisfy any obligation of Lessee to
Lessor hereunder.

XI. EARLY TERMINATION OPTION

So long as no default has occurred and is continuing hereunder, Lessee shall
have the right to terminate any Schedule to the Lease with respect to all but
not less than all of the Equipment on or after the First Termination Date
(specified in the applicable Schedule), as of a rent payment date ("Early
Termination Date") upon at least 90 days prior written notice to Lessor.. On the
Early Termination Date, Lessee shall pay to Lessor (a) the Prepayment Penalty
stipulated on the applicable Schedule, plus (b) the "Early Purchase Option
Price" which shall be equal to the Stipulated Loss Value corresponding to the
Early Termination Date times the Lessor's Capitalized Cost, plus (c) all Rent
for such Equipment due and unpaid as of, together with Rent accrued through, the
Early Termination Date, plus (d) all taxes, including, but not limited to, sales
and transfer taxes due in connection with such sale, plus (e) all other sums
then due and payable under the Lease by Lessee. (the total amounts in each event
shall be referred to as the "Early Termination Price"). Upon Lessor's receipt of
the Early Termination Price, the lease of such Equipment shall terminate and
Lessor, via a bill of sale and/or other reasonably necessary documentation,
shall transfer to Lessee all of Lessor's right, title and interest in and to
such Equipment. The transfer of Lessor's right, title and interest in and to
such Equipment to Lessee shall be on an "AS-IS, WHERE-IS" basis, and as except
as expressly provided herein, with no representations or warranties (express or
implied) as to any matter whatsoever. Anything in this Section XI
notwithstanding, if the Lessor does not receive the Early Termination Price on
the Early Termination Date according to the terms of this Section XI then this
Lease shall continue in effect according to its terms.

XII. END OF LEASE TERM OPTIONS

.

Unless Lessee has exercised its Early Termination Option pursuant to Section XI
hereof, upon the expiration of the term of this Agreement with respect to any
Schedule, Lessee must elect to do one of the following:

(a) Extension. Upon the expiration of the Basic Term of any Schedule, to renew
the Agreement with respect to all, but not less than all, of the Equipment
leased thereunder for an addition term of twelve (12) months (the "Renewal
Term") at a lease rate factor based on an interest rate per annum equal to 550
basis points over the then current yield to maturity of U.S. Treasury Notes
having a one year maturity. The equal monthly payment shall be sufficient to
fully repay any unpaid portion of the Capitalized Lessor's Cost in twelve
installments. At the end of the Renewal Term, provided that Lessee is not then
in default under this Agreement or any other agreement between Lessor and
Lessee, Lessee shall purchase all, and not less than all, of such Equipment for
$1.00 cash, together with all rent and other sums then due on such date, plus
all taxes and charges upon transfer and all other reasonable and documented
expenses incurred by Lessor in connection with such transfer. Upon satisfaction
of the conditions specified in this Paragraph (a), Lessor will transfer, on an
AS IS BASIS, without recourse or warranty, express or implied, of any kind
whatsoever, all of Lessor's interest in and to the Equipment. Lessor shall not
be required to make and may specifically disclaim any representation or warranty
as to the condition of the Equipment and any other matters.

(b) Return. Return all (but not less than all) of the Equipment, which has not
otherwise been terminated in accordance with the terms hereof, to Lessor upon
the following terms and conditions: (i) pay to Lessor on the last day of the
initial term of this Agreement with respect to an individual Schedule (in
addition to the scheduled rent due on such date and all other sums due
hereunder) a return fee equal to the Return Percentage as shown on the
applicable Schedule times Capitalized Lessor's Cost (as stated in such Schedule)
of such Equipment and (ii) return the Equipment to Lessor in accordance with the
terms of Section XIII hereof. Thereafter, Lessor and Lessee will arrange for the
commercially reasonable sale, scrap or other disposition of such Equipment. The
proceeds of any such sale or other disposition, if any, shall be paid directly
to the Lessor and applied as follows: (1) firstly, to pay all of Lessor's costs,
charges and expenses incurred in taking, removing, holding, repairing and
selling, leasing or otherwise disposing of Equipment; then, (2) secondly, to the
extent not previously paid by Lessee, to pay Lessor all sums due from Lessee
under (i) above; then (3) thirdly, to pay to Lessee the Guaranteed Residual
Amount of such Equipment, which shall be equal to the Guaranteed Residual
Percentage as shown in the applicable Schedule times the Capitalized Lessor's
Cost, then (4) any surplus remaining after deduction of (1), (2) and (3) shall
be paid to Lessee. Lessor shall promptly pay any deficiency resulting from the
difference between the remaining amount of the proceeds (after deduction of (1)
and (2)) and the Guaranteed Residual Amount. All calculations under this Section
XII hereof shall be made on an aggregate basis with respect of all of the
Equipment described on the applicable Schedule.

(c) Purchase. Purchase on an AS IS BASIS all (but not less than all) of the
Equipment, which has not otherwise been terminated in accordance with the terms
hereof, from Lessor for an amount equal to the Fixed Purchase Price determined
as hereinafter provided. The Fixed Purchase Price of the Equipment shall be an
amount equal to the Return Percentage as shown on the applicable Schedule times
the Capitalized Lessor's Cost of such Equipment (as specified on the applicable
Schedule); together with all rent and other sums due on such date, plus all
taxes and charges upon sale and all other reasonable expenses incurred by Lessor
in connection with such sale.

XIII. RETURN OF EQUIPMENT

(a) Should Lessee elect to return the Equipment to Lessor upon any expiration or
termination of this Agreement or any Schedule, Lessee shall promptly, at its own
cost and expense: (i) perform any testing and repairs required to place the
affected units of Equipment in the same condition and appearance as when
received by Lessee (reasonable wear and tear excepted) and in good working order
for their originally intended purpose; (ii) if deinstallation, disassembly or
crating is required, cause such units to be deinstalled, disassembled and crated
by an authorized manufacturer's representative or such other service person as
is satisfactory to Lessor; and (iii) return such units to a location within the
continental United States as Lessor shall direct.

(b) Until Lessee has fully complied with the requirements of Section XIII (a)
above, Lessee's rent payment obligation and all other obligations under this
Agreement shall continue from month to month notwithstanding any expiration or
termination of the lease term. Lessor may terminate such continued leasehold
interest upon ten (10) days notice to Lessee.

XIV. DEFAULT:

(a) Lessor may in writing declare this Agreement in default if: (i) Lessee
breaches its obligation to pay rent or any other sum when due and fails to cure
the breach within ten (10) days; (ii) Lessee breaches any of its insurance
obligations under Section X; (iii) Lessee breaches any of its other obligations
and fails to cure that breach within thirty (30) days after written notice from
Lessor; (iv) any representation or warranty made by Lessee in connection with
this Agreement shall be false or misleading in any material respect; (v) Lessee
or any guarantor or other obligor for the Lessee's obligations hereunder
("Guarantor") becomes insolvent or ceases to do business as a going concern;
(vi) any Equipment is illegally used; (vii) if Lessee or any Guarantor is a
natural person, any death or incompetency of Lessee or such Guarantor; (viii) a
petition is filed by or against Lessee or any Guarantor under any bankruptcy or
insolvency laws and in the event of an involuntary petition, the petition is not
dismissed within forty-five (45) days of the filing date; (ix) Lessee defaults
under any other material obligation for (A) borrowed money, (B) the deferred
purchase price of property, or (C) payments due under lease agreements; or (x)
there is any dissolution, termination of existence, merger, consolidation or
change in controlling ownership of Lessee or any Guarantor. The default
declaration shall apply to all Schedules unless specifically excepted by Lessor.

(b) After default, Lessee shall, within ten (10) days of written demand,
forthwith pay to Lessor (A) as liquidated damages for loss of a bargain and not
as a penalty, the Stipulated Loss Value of the Equipment (calculated as of the
rental next preceding the declaration of default), plus (B) all rentals and
other sums then due hereunder; and (C) the Prepayment Premium; and upon timely
payment in full of the foregoing sums, any right, title or interest of Lessor in
and to such unit shall be transferred to Lessee on an AS-IS WHERE IS basis
without warranty. If Lessee fails to pay the foregoing sums in full within the
time required above, (i) at the request of Lessor, Lessee shall comply with the
provisions of Section XIII (ii) Lessee hereby authorizes Lessor to enter, with
or without legal process, any premises where any Equipment is believed to be and
take possession thereof; and (iii) Lessor may, but shall not be required to,
sell Equipment at private or public sale, in bulk or in parcels, with or without
notice, and without having the Equipment present at the place of sale; or Lessor
may, but shall not be required to, lease, otherwise dispose of or keep idle all
or part of the Equipment; and Lessor may use Lessee's premises for any or all of
the foregoing without liability for rent, costs, damages or otherwise. The
proceeds of sale, lease or other disposition, if any, shall be applied in the
following order of priorities: (1) to pay all of Lessor's costs, charges and
expenses incurred in taking, removing, holding, repairing and selling, leasing
or otherwise disposing of Equipment; then, (2) to the extent not previously paid
by Lessee, to pay Lessor all sums due from Lessee hereunder; then (3) to
reimburse to Lessee any sums previously paid by Lessee as liquidated damages;
and (4) any surplus shall be retained by Lessor. Lessee shall pay any deficiency
in (1) and (2) forthwith.

(c) The foregoing remedies are cumulative, and any or all thereof may be
exercised in lieu of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition (and
the time and place thereof), and the manner and place of any advertising. Lessee
shall pay reasonable attorney's fees incurred by Lessor. Waiver of any default
shall not be a waiver of any other or subsequent default.

(d) Any default under the terms of this or any other agreement between Lessor
and Lessee may be declared by Lessor a default under this and any such other
agreement.

XV. ASSIGNMENT: Lessor may assign this Agreement or any Schedule. Lessee hereby
waives and agrees not to assert against any such assignee any defense, set-off,
recoupment claim or counterclaim which Lessee has or may at any time have
against Lessor for any reason whatsoever; however, no assignment shall waive,
release or terminate any then existing rights Lessee may have against Lessor.

XVI. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease. Lessee's
obligation to pay rent and other amounts due hereunder shall be absolute and
unconditional. Lessee shall not be entitled to any abatement or reductions of,
or set-offs against, said rent or other amounts, including, without limitation,
those arising or allegedly arising out of claims (present or future, alleged or
actual, and including claims arising out of strict tort or negligence of Lessor)
of Lessee against Lessor under this Agreement or otherwise. Nor shall this
Agreement terminate or the obligations of Lessee be affected by reason of any
defect in or damage to, or loss of possession, use or destruction of, any
Equipment from whatsoever cause. It is the intention of the parties that rents
and other amounts due hereunder shall continue to be payable in all events in
the manner and at the times set forth herein unless the obligation to do so
shall have been terminated pursuant to the express terms hereof.

XVII. INDEMNIFICATION:

(a) Lessee hereby agrees to indemnify, save and keep harmless Lessor, its
agents, employees, successors and assigns from and against any and all losses,
damages, penalties, injuries, claims, actions and suits, including legal
expenses, of whatsoever kind and nature, in contract or tort, whether caused by
the active or passive negligence of Lessor or otherwise, and including, but not
limited to, Lessor's strict liability in tort, arising out of (i) the selection,
manufacture, purchase, acceptance or rejection of Equipment, the ownership of
Equipment during the term of this Agreement, and the delivery, lease,
possession, maintenance, uses, condition, return or operation of Equipment
(including, without limitation, latent and other defects, whether or not
discoverable by Lessor or Lessee and any claim for patent, trademark or
copyright infringement) or (ii) the condition of Equipment sold or disposed of
after use by Lessee, any Sublessee or employees of Lessee. Lessee shall, upon
request, defend any actions based on, or arising out of, any of the foregoing.

(b) All of Lessor's rights, privileges and indemnities contained in this Section
XVII shall survive the expiration or other termination of this Agreement and the
rights, privileges and indemnities contained herein are expressly made for the
benefit of, and shall be enforceable by Lessor, its successors and assigns.

XVIII. DISCLAIMER: LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT
WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT
MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY
OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR
OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All
such risks, as between Lessor and Lessee, are to be borne by Lessee. Without
limiting the foregoing, Lessor shall have no responsibility or liability to
Lessee or any other person with respect to any of the following, regardless of
any negligence of Lessor (i) any liability, loss or damage caused or alleged to
be caused directly or indirectly by any Equipment, any inadequacy thereof, any
deficiency or defect (latent or otherwise) therein, or any other circumstance in
connection therewith; (ii) the use, operation or performance of any Equipment or
any risks relating thereto; (iii) any interruption of service, loss of business
or anticipated profits or consequential damages; or (iv) the delivery,
operation, servicing, maintenance, repair, improvement or replacement of any
Equipment. If, and so long as, no default exists under this Lease, Lessee shall
be, and hereby is, authorized during the term of this Lease to assert and
enforce, at Lessee's sole cost and expense, from time to time, in the name of
and for the account of Lessor and/or Lessee, as their interests may appear,
whatever claims and rights Lessor may have against any Supplier of the
Equipment.

XIX. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee hereby represents and
warrants to Lessor that on the date hereof and on the date of execution of each
Schedule:

(a) Lessee has adequate power and capacity to enter into, and perform under,
this Agreement and all related documents (together, the "Documents") and is duly
qualified to do business wherever necessary to carry on its present business and
operations, including the jurisdiction(s) where the Equipment is or is to be
located.

(b) The Documents have been duly authorized, executed and delivered by Lessee
and constitute valid, legal and binding agreements, enforceable in accordance
with their terms, except to the extent that the enforcement of remedies therein
provided may be limited under applicable bankruptcy and insolvency laws.

(c) No approval, consent or withholding of objections is required from any
governmental authority or instrumentality with respect to the entry into or
performance by Lessee of the Documents except such as have already been
obtained.

(d) The entry into and performance by Lessee of the Documents will not: (i)
violate any judgment, order, law or regulation applicable to Lessee or any
provision of Lessee's Certificate of Incorporation or By-Laws; or (ii) result in
any breach of, constitute a default under or result in the creation of any lien,
charge, security interest or other encumbrance upon any Equipment pursuant to
any indenture, mortgage, deed of trust, bank loan or credit agreement or other
instrument (other than this Agreement) to which Lessee is a party.

(e) There are no suits or proceedings pending or threatened in court or before
any commission, board or other administrative agency against or affecting
Lessee, which will have a material adverse effect on the ability of Lessee to
fulfill its obligations under this Agreement.

(f) The Equipment accepted under any Certificate of Acceptance is and will
remain tangible personal property.

(g) Each Balance Sheet and Statement of Income delivered to Lessor has been
prepared in accordance with generally accepted accounting principles, and since
the date of the most recent such Balance Sheet and Statement of Income, there
has been no material adverse change.

(h) Lessee's exact legal name is as set forth in the first sentence of this
Agreement and Lessee is and will be at all times validly existing and in good
standing under the laws of the State of its incorporation (specified in the
first sentence of this Agreement).

(i) The Equipment will at all times be used for commercial or business purposes
within the Continental United States.

(j) Lessee is and will remain in full compliance with all laws and regulations
applicable to it including, without limitation, (i) ensuring that no person who
owns a controlling interest in or otherwise controls Lessee is or shall be (Y)
listed on the Specially Designated Nationals and Blocked Person List maintained
by the Office of Foreign Assets Control ("OFAC"), Department of the Treasury,
and/or any other similar lists maintained by OFAC pursuant to any authorizing
statute, Executive Order or regulation or (Z) a person designated under Section
1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related
enabling legislation or any other similar Executive Orders, and (ii) compliance
with all applicable Bank Secrecy Act ("BSA") laws, regulations and government
guidance on BSA compliance and on the prevention and detection of money
laundering violations.

XX. OWNERSHIP FOR TAX PURPOSES, GRANT OF SECURITY INTEREST:

(a) For income tax purposes, the parties hereto agree that it is their mutual
intention that Lessee shall be considered the owner of the Equipment.
Accordingly, Lessor agrees (i) to treat Lessee as the owner of the Equipment on
its federal income tax return, (ii) not to take actions or positions
inconsistent with such treatment on or with respect to its federal income tax
return, and (iii) not to claim any tax benefits available to an owner of the
Equipment on or with respect to its federal income tax return. The foregoing
undertakings by Lessor shall not be violated by Lessor's taking a tax position
inconsistent with the foregoing sentence to the extent such position is required
by law or is taken through inadvertence so long as such inadvertent tax position
is reversed by Lessor promptly upon its discovery. Lessor shall in no event be
liable to Lessee if Lessee fails to secure any of the tax benefits available to
the owner of the Equipment.

(b) Lessor and Lessee hereby agree that the transaction contemplated herein is
intended as a lease; PROVIDED HOWEVER that, if it is determined for other
reasons that the lease so intended creates a security interest, Lessee shall
have been deemed to grant, effective as of each Lease Commencement Date, and
hereby grants, to Lessor the following security interests to secure the payment
and performance of all debts, obligations and liabilities of any kind whatsoever
of Lessee to Lessor, now existing or arising in the future under this Agreement
or any Schedules attached hereto, and any renewals, extensions and modifications
of such debts, obligations and liabilities:

(i) Lessee hereby grants to Lessor a first priority security interest in the
Equipment and all accessions, substitutions and replacements thereto and
therefore, and proceeds (cash and non-cash, including without limitation
insurance proceeds) thereof. In furtherance of the foregoing, Lessee shall (A)
execute and deliver to Lessor, to be recorded at Lessee's expense, Uniform
Commercial Code financing statements, statements of amendment and statements of
continuation as reasonably may be required by Lessor to perfect and maintain
perfected the first priority security interest granted by Lessee herein and (B)
execute and deliver, to be recorded at Lessee's expense, any such forms and
documents as reasonably may be required by Lessor to evidence Lessor's title to
and security interest in any item of Equipment which is covered by a certificate
of title issued under a statute of any applicable jurisdiction.

(ii) To the extent the Equipment may constitute or be deemed to be included as a
part of Lessee's inventory, as such term is defined in the Uniform Commercial
Code of any applicable jurisdiction (the "Inventory"), Lessee hereby grants to
Lessor a security interest in such Inventory, which shall mean all Equipment,
offered or furnished under any contract of service or intended for sale or
lease, any and all additions, attachments, accessories and accessions thereto,
any and all substitutions, replacements or exchanges therefore, any and all
leases, subleases, rentals, accounts and contracts with respect to the Equipment
which may now exist or hereafter arise, together with all rights thereunder and
all rental and other payments and purchase options due and to become due
thereunder, any and all sales proceeds payable for such property, all insurance,
bonds and/or other proceeds of the property and all returned or repossessed
Equipment now or at any time or times hereafter in the possession of under the
control of Lessee or Lessor; PROVIDED, HOWEVER, THAT LESSEE IS NOT AUTHORIZED TO
SELL THE EQUIPMENT OR THE INVENTORY.

(iii) Lessee also grants to Lessor a security interest in all accounts, as such
term is defined in the Uniform Commercial Code of any applicable jurisdiction,
now owned by Lessee or hereafter acquired or owned by Lessee that might arise or
result from any lease or other disposition of any of the Equipment or the
Inventory, including, but not limited to, any right of Lessee to payment for
Equipment sold or leased or for services rendered whether or not evidenced by an
instrument of chattel paper, and whether or not such right has been earned by
performance.

XXI. MISCELLANEOUS:

(a) Any cancellation or termination by Lessor, pursuant to the provision of this
Agreement, any Schedule, supplement or amendment hereto, or the lease of any
Equipment hereunder, shall not release Lessee from any then outstanding
obligations to Lessor hereunder. Except as provided in Section XX, all Equipment
shall at all times remain personal property of Lessor regardless of the degree
of its annexation to any real property and shall not by reason of any
installation in, or affixation to, real or personal property become a part
thereof.

(b) Time is of the essence of this Agreement. Lessor's failure at any time to
require strict performance by Lessee of any of the provisions hereof shall not
waive or diminish Lessor's right at any other time to demand strict compliance
with this Agreement. Lessee agrees, upon Lessor's request, to execute, or
otherwise authenticate, any document, record or instrument necessary or
expedient for filing, recording or perfecting the interest of Lessor or to carry
out the intent of this Agreement. In addition, Lessee hereby authorizes Lessor
to file a financing statement and amendments thereto describing the Equipment
described in any and all Schedules now and hereafter executed pursuant hereto
and adding any other collateral described therein and containing any other
information required by the applicable Uniform Commercial Code. Further, Lessee
irrevocably grants to Lessor the power to sign Lessee's name and generally to
act on behalf of Lessee to execute and file financing statements and other
documents pertaining to any or all of the Equipment. Lessee hereby ratifies its
prior authorization for Lessor to file financing statements and amendments
thereto describing the Equipment and containing any other information required
by any applicable law (including without limitation the Uniform Commercial Code)
if filed prior to the date hereof. All notices required to be given hereunder
shall be deemed adequately given if sent by registered or certified mail to the
addressee at its address stated herein, or at such other place as such addressee
may have specified in writing. This Agreement and any Schedule and Annexes
thereto constitute the entire agreement of the parties with respect to the
subject matter hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR ANY
WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN WRITING
AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.

(c) In case of a failure of Lessee to comply with any provision of this
Agreement, Lessor shall have the right, but shall not be obligated to, effect
such compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Lessor in effecting such compliance shall
constitute additional rent due to Lessor within five days after the date Lessor
sends notice to Lessee requesting payment. Lessor's effecting such compliance
shall not be a waiver of Lessee's default.

(d) Any rent or other amount not paid to Lessor when due hereunder shall bear
interest, both before and after any judgment or termination hereof, at the
lesser of twelve percent per annum or the maximum rate allowed by law. Any
provisions in this Agreement and any Schedule, which are in conflict with any
statute, law or applicable rule shall be deemed omitted, modified or altered to
conform thereto.

(e) LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS
LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND LESSOR
RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS,
AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. THE
SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES
THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR
TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION. IN THE EVENT OF LITIGATION, THIS LEASE MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.

(f) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF CONNECTICUT (WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT.

(g) To the extent that any Schedule would constitute chattel paper, as such term
is defined in the Uniform Commercial Code as in effect in any applicable
jurisdiction, no security interest therein may be created through the transfer
or possession of this Agreement in and of itself without the transfer or
possession of the original of a Schedule executed pursuant to this Agreement and
incorporating this Agreement by reference; and no security interest in this
Agreement and a Schedule may be created by the transfer or possession of any
counterpart of the Schedule other than the original thereof, which shall be
identified as the document marked "Original" and all other counterparts shall be
marked "Duplicate".

 

 

IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.

 

LESSOR:

LESSEE:

GENERAL ELECTRIC CAPITAL CORPORATION

THE DIXIE GROUP, INC.

   

By:    /s/ Allen Brown        
Title:   Senior Risk Analyst

By:   /s/ Gary A. Harmon       
Title:   Vice President and Chief
            Financial Officer