EXHIBIT 10.1

[ex101letterofamend071707002.gif] [ex101letterofamend071707002.gif]

July 16, 2007

The Dixie Group, Inc.

2208 South Hamilton Street

Dalton, Georgia 30721

Attention: President

Re:

Bank of America, N.A., as Agent -- The Dixie Group, Inc.

Ladies and Gentlemen:

Reference is hereby made to that certain Amended and Restated Loan and Security
Agreement dated April 14, 2004, as amended by that certain First Amendment to
Amended and Restated Loan and Security Agreement dated November 10, 2004, that
certain Second Amendment to Amended and Restated Loan and Security Agreement
dated July 27, 2005, that certain Third Amendment to Amended and Restated Loan
and Security Agreement dated May 3, 2006, and that certain Fourth Amendment to
Amended and Restated Loan and Security Agreement dated October 25, 2006 (as at
any time amended, restated, modified or supplemented, the "Loan Agreement"),
between The Dixie Group, Inc., a Tennessee corporation ("Borrower"); each of the
subsidiaries of Borrower as guarantors ("Guarantors"); Bank of America, N.A., a
national bank ("Agent"), in its capacity as collateral and administrative agent
for the Lenders (as defined in the Loan Agreement); and Lenders.  Capitalized
terms used herein, unless otherwise defined herein, shall have the meaning
ascribed to such terms in the Loan Agreement.  

The parties desire to amend the Loan Agreement as hereinafter set forth.

NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) in hand paid
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:

1.

Amendment to Loan Agreement.  The Loan Agreement is hereby amended as follows:

By deleting the reference to "$10,000,000" contained in the definition of
"Permitted Purchase Money Debt" set forth in Appendix A to the Loan Agreement
and by substituting a reference to "$20,000,000."

2.

Acknowledgements and Stipulations; Representation and Warranties. By its
signature below, each Obligor (a) acknowledges and stipulates that (i) the Loan
Agreement and the other Loan Documents executed by such Obligor are legal, valid
and binding obligations of such Obligor that are enforceable against such
Obligor in accordance with the terms thereof, (ii) all of the Obligations are
owing and payable without defense, offset or counterclaim (and to the extent
there exists any such defense, offset or counterclaim on the date hereof, the
same is  

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

July 16, 2007

Page 2

________________________

(ii) all of the Obligations are owing and payable without defense, offset or
counterclaim (and to the extent there exists any such defense, offset or
counterclaim on the date hereof, the same is hereby waived by such Obligor) and
(iii) the security interests and liens granted by such Obligor in favor of
Agent, for the benefit of itself and Lenders, are duly perfected, first priority
security interests and Liens; and (b) represents and warrants to Agent and
Lenders, to induce each of Agent and Lenders to enter into this letter
agreement, that (i) the execution, delivery and performance of this letter
agreement has been duly authorized by all requisite company action on the part
of such Obligor, and (ii) all of the representations and warranties made by such
Obligor in the Loan Agreement and the other Loan Documents are true and correct
on and as of the date hereof.

3.

No Novation.  Except as otherwise expressly provided in this letter agreement,
nothing herein shall be deemed to amend or modify any provision of the Loan
Agreement or any of the other Loan Documents, each of which shall remain in full
force and effect.  This letter agreement is not intended to be, nor shall it be
construed to create, a novation or accord and satisfaction, and the Loan
Agreement as herein modified shall continue in full force and effect.

4.

Miscellaneous.  This letter agreement shall be governed by and construed in
accordance with the internal laws of the State of Georgia.  This letter
agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  The parties acknowledge that this
letter agreement may be executed in any number of counterparts and by different
parties on separate counterparts, each of which, when so executed, shall be
deemed to be an original, but all such counterparts shall constitute one and the
same agreement.  Any signature delivered by a party by facsimile or portable
document file by electronic mail transmission shall be deemed to be an original
signature hereto.

Please confirm your agreement with all of the foregoing by signing in the space
provided below and return a copy of this letter to us.

[Remainder of page intentionally left blank;

signatures begin on following page]

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

July 16, 2007

Page 3

________________________

 

Very truly yours,

BANK OF AMERICA, N.A.,

as Agent and sole Lender

By: /s/ James C. Wells                       

Name:

James C. Wells                       

Title: Vice President

ACKNOWLEDGED AND AGREED:

THE DIXIE GROUP, INC.  ("Borrower")

By: /s/ Gary A. Harmon                     

Name:

Gary A. Harmon

Title: Vice President & CFO

 

FABRICA INTERNATIONAL, INC.,

formerly known as Fabrica International

("Guarantor")

By: /s/ Gary A. Harmon                     

Name:

Gary A. Harmon

Title: Vice President

 

BRETLIN, INC. ("Guarantor")

By: /s/ Gary A. Harmon                     

Name:

Gary A. Harmon

Title:  President

 

CANDLEWICK YARNS, INC.

("Guarantor")

By: /s/ Gary A. Harmon                     

Name:

Gary A. Harmon

Title: President

[Signatures continued on following page]

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

July 16, 2007

Page 4

________________________

DIXIE GROUP LOGISTICS, INC.

("Guarantor")

By: /s/ Gary A. Harmon                     

Name:

Gary A. Harmon

Title: President

 

MASLAND CARPETS, LLC

("Guarantor")

By: /s/ Gary A. Harmon                     

Name:

Gary A. Harmon

Title: Chief Manager