THE DIXIE GROUP, INC.
2001 LEADERSHIP & PERFORMANCE INCENTIVE AWARD PLAN

I.   OVERVIEW:

The Corporation reserves the sole right to select participants, levels of
participation, plan provisions, and performance criteria for the incentive plan.

Participation in the Plan should not be construed as a condition of employment,
nor should plan participation levels or provisions be considered as formal
policy of Dixie. The Plan is administered by the office of the Chairman and CEO
of Dixie.

II.  MANAGEMENT INCENTIVE PLAN PARTICIPATION:

Participating in the Plan for 2001 are Dixie officers and other leaders whose
duties and responsibilities provide an opportunity to significantly impact the
performance of Dixie. Participants, other than corporate officers, will be
approved annually by the Chairman and the President of the company.

In order to be eligible for participation, the participant must be identified as
an eligible participant as of the first day of the Bonus Year and the level of
participation shall be approved by the Compensation Committee or Chairman and
President as appropriate. In the case of an associate hired or promoted after
December 31, but before July 1, of the Bonus Year, who would otherwise have been
eligible to participate due to the level of the position, the Chairman and
President may approve an award under the Plan except in the case of officers who
shall be approved by the Compensation Committee. No commitment to the new
associate may be made until approved. Each such position will be judged
independently. Individuals hired or promoted after June 30th may participate in
the Plan for that year at the discretion of the Chairman and CEO of Dixie.

Participants who leave Dixie due to death, total disability or retirement under
a Dixie retirement plan shall receive an earned award from the Plan on the date
of disbursement. The award shall be prorated based on the length of service
during the fiscal year up until the date of separation.

Participants who leave Dixie before the end of the fiscal year due to reasons
other than those above and those who leave Dixie after the end of the fiscal
year but before distribution of awards shall not be eligible to receive any
bonus award.

III.   DEFINITIONS:

A.    BASE SALARY shall be the leader's annualized base pay before bonuses and
other compensation as of July 1 of the bonus year.

B.    BONUS YEAR shall mean the same as Dixie's year for financial reporting
purposes.

C.    NET INCOME shall mean the net after-tax income of The Dixie Group, Inc.
The net after-tax effects of unusual, extraordinary or non-recurring gains or
losses may be excluded from the calculation at the discretion of the
Compensation Committee. 90% of The Dixie Group's net income goal must be
achieved before any incentive payment can be made to Shared Service area
participants.

D.    COMPENSATION COMMITTEE shall mean the Compensation Committee of the Board
of Directors.

E.    DATE OF DISBURSEMENT shall be on or about March 1. At the discretion of
the Compensation Committee, disbursement may be set at an earlier date.

F.    LEVELS OF PARTICIPATION shall mean groupings of leaders who have
significant impact on company performance. The individual's level of
participation shall be approved by the President of The Dixie Group.

G.    EBIT (Earnings before interest and taxes) shall mean the business unit's
pre-tax earnings before deductions for interest expense allocations and
allocations for A/R financing costs. This shall also exclude results of
businesses which are acquired during the year, income realized through unplanned
divestitures, and (at the discretion of the Compensation Committee) certain
other non-recurring income or expenses items. 90% of a business unit's EBIT goal
is necessary to qualify for any incentive payment.

EBIT % excludes processing done for other Dixie business units.

H.    EBITDA (Earnings Before Interest, Taxes, Depreciation Expense and Goodwill
Amortization Expense)- This represents the business group pretax earnings before
deductions for interest expense allocations and allocations for A/R financing
costs plus an add back for depreciation expense and goodwill amortization
included in the group earnings.

I.    PARTICIPANTS shall mean those leaders of The Dixie Group, Inc., who are
determined to be eligible to participate in the Plan.

J.    NET WORKING CAPITAL - At the business unit level, this represents the sum
of trade accounts receivables (net of bad debt reserve) and FIFO inventories
minus trade accounts payable employed in the business group. At corporate, this
will be the aggregate of the business unit numbers.

K.    TOTAL DISABILITY shall mean the inability to perform each and every duty
of the participant's occupation. Furthermore, the participant shall not be
gainfully employed in any occupation.

L.    LEADERSHIP SUPPORT shall mean those definable actions which have been
taken by the associate or the business, which have caused leadership to be
practiced at all levels in the company. This shall include the support of QP3,
support of other businesses and demonstrates evidence that our leadership legacy
is reaching all levels of associates and is having a positive impact.

IV.   BONUS POTENTIAL AND PERFORMANCE THRESHOLDS:

Individual bonus potential and performance thresholds shall be discussed with
each participant by his/her company president or other appropriate corporate
officer or Shared Service head.

The upper end of the bonus percentages will be referred to as the bonus
"potential". It is not a maximum; i.e., if company/operating unit financial
performance exceeds the net income, sales growth % and EBIT% goals,
discretionary awards in excess of the "potential" may be awarded at the
discretion of the Compensation Committee. Meeting The Dixie Group net income,
net working capital and cash flow goals however, does not guarantee the maximum
payout. To achieve the maximum payout, all goals must be exceeded.

V.   ADMINISTRATIVE GUIDELINES:

The Plan shall be administered by the Chairman and the CEO of Dixie, whose
decisions shall be final.

The following administrative procedures shall govern:

A.  Awards to corporate officers shall be approved by the Compensation
Committee. Awards to other participants will be approved by the Chairman and the
President of the Corporation.

B.  All awards shall be made in cash.

C.  The CEO may delegate certain administrative responsibilities. The
Compensation Committee must, however, directly (1) approve any actions affecting
the elected officers of Dixie, (2) approve corporate bonus standards at the
beginning of the fiscal year, and (3) approve any substantive changes or
amendments to the Plan.

D.  Participation in the Plan shall be determined as outlined in Section II of
this document.

E.  Participation in the 2001 Plan shall not be construed as an agreement or
commitment to (1) continue employment of a participant for any fixed period of
time, (2) continue participation in future years, or (3) continue the Leadership
and Performance Incentive Award Plan beyond 2001.

F.  Company and individual goals are reflective of plans made at the beginning
of the plan year. Should The Dixie Group merge or acquire companies and those
actions dictate changes to business plans, goals may be changed.

G.  Participants desiring to defer portions of their incentive payments must
elect to do so each December. Appropriate forms and instructions will be
provided by the Corporate Human Resources Department.

INCENTIVE PLAN

2001 LEADERSHIP AND PERFORMANCE INCENTIVE

AWARD PLAN

 

A.  Overall Business Unit results represent 40% of your bonus opportunity.

 

Incentive Plan

Results

Sales Growth %

 

 

EBIT% (excludes internal processing)

 

 

Net Working Capital % of Sales

 

 

Support of Leadership/QP3/Creating Customer Value

 

Active Mutual Support

B.  Overall Dixie Group results represent 20% of your bonus opportunity.

 

Goal

Results

Dixie Group Net Income

 

 

Net Working Capital % of Sales

 

 

Cash Flow (EBITDA%)

 

 

 

C:  Results of your individual leadership and performance development goals
represent 40% of your bonus opportunity.

 

2001 Goal

2001 Results

Leadership Results

 

 

 

 

 

 

 

 

 

 

 

Performance Results

 

 

 

 

 

 

 

 

 

 

 

NOTE: To receive the maximum payout, the above goals must be exceeded.