Document:

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                                                                     EXHIBIT 4.2

                       THIRD AMENDMENT TO CREDIT AGREEMENT

         THIS THIRD AMENDMENT TO CREDIT AGREEMENT effective as of November 2,
2000 (this "Amendment"), by and among THE DIXIE GROUP, INC., a Tennessee
corporation (the "Borrower"), SUNTRUST BANK, formerly known as SunTrust Bank,
Atlanta, a Georgia banking corporation ("SunTrust"), the other banks and lending
institutions listed on the signature pages hereof, and any assignees of SunTrust
or such other banks and lending institutions which become "Lenders" as provided
herein (SunTrust, and such other banks, lending institutions, and assignees
referred to collectively as "Lenders"), SUNTRUST BANK, as administrative agent
for the Lenders (in such capacity, the "Administrative Agent") and BANK OF
AMERICA, N.A., formerly known as NationsBank, N.A., as documentation agent for
the Lenders (in such capacity, the "Documentation Agent").

                              W I T N E S S E T H :

         WHEREAS, Borrower, the Lenders, the Administrative Agent and the
Documentation Agent are parties to that certain Credit Agreement, dated as of
March 31, 1998, as amended by that certain First Amendment to Credit Agreement,
effective December 26, 1998, and as amended by that certain Second Amendment to
Credit Agreement, effective October 5, 2000 (as amended or modified, the "Credit
Agreement");

         WHEREAS, Borrower, the Lenders, the Administrative Agent and the
Documentation Agent have agreed to make certain modifications to the Credit
Agreement subject to the terms, conditions and requirements set forth in this
Amendment.

         NOW THEREFORE, in consideration of the terms and conditions contained
herein, the parties hereto, intending to be legally bound, hereby amend the
Credit Agreement as follows:

                  A. AMENDMENTS TO THE CREDIT AGREEMENT

         1.       Section 1.01 of the Credit Agreement is hereby amended by
replacing the definitions of "Agents", "Applicable Commitment Fee Percentage",
"Applicable Margin", "Credit Documents", "Debt", "EBIT", "EBITDA", "Interest
Coverage Ratio", "Interest Expense", "Material Subsidiary", "Maturity Date",
"Net Income", "Net Worth", "Revolving Loan Termination Date", "Securitization
Documents", "Securitization Program", "Subordinated Debt", "Subsidiary",
"Subsidiary Guaranty Agreement", and "Total Funded Debt" in their entirety with
the following:

                  "Agents" shall mean collectively, the Administrative Agent,
         the Collateral Agent and the Documentation Agent.

                  "Applicable Commitment Fee Percentage" shall mean, with
         respect to any calculation of the Revolving Loan Commitment Fee
         hereunder, (i) from the Third Amendment Effective Date through the date
         which is two days after the date that the Borrower is required to
         deliver its quarterly financial statements for the quarter ending March
         31, 2001, one-half of one percent (0.50%) per annum, and

<PAGE>   2

         (ii) thereafter, the applicable percentage determined from the chart
         set forth below based on Borrower's ratio of Total Funded Debt to
         EBITDA, as of the relevant date of determination,

<TABLE>
<CAPTION>
                                                       > 3.50 and     > 4.00 and      > 4.50 and
                  Total Funded Debt                    -              -               -
                     to EBITDA              < 3.50     < 4.00         < 4.50          < 5.00          > 5.00
                     ---------              ------     ----------     ----------      ----------      -----
                  <S>                       <C>         <C>           <C>             <C>             <C>
                  Applicable Commitment     .25%       .375%          .375%           .50%            .50%
                  Fee Percentage
</TABLE>

                  Each change in the Applicable Commitment Fee Percentage shall
         be effective from and after the date that any change in the Applicable
         Margin is effective.

                  "Applicable Margin" shall mean, with respect to all Loans, (i)
         from the Third Amendment Effective Date through the date which is two
         days after the date that the Borrower is required to deliver its
         quarterly financial statements for the quarter ending March 31, 2001,
         (A) two and three quarters percent (2.75%) per annum for all Revolving
         Loans that consist of Eurodollar Borrowings and (B) one and one-half of
         one percent (1.50%) per annum for all Loans that consist of Base Rate
         Borrowings, and (ii) thereafter, the applicable percentage determined
         from the chart set forth below based on Borrower's ratio of Total
         Funded Debt to EBITDA for the preceding four quarter period then
         ending, as determined quarterly based upon the financial statements
         delivered by the Borrower pursuant to this Agreement, with such
         Applicable Margin to be effective, with respect to calculations based
         upon the quarterly unaudited financial statements delivered pursuant to
         Section 7.07(b) of this Agreement, as of the second Business Day
         following the date the Administrative Agent receives the Borrower's
         applicable financial statements:

<TABLE>
<CAPTION>
                                                            > 3.50 and    > 4.00 and      > 4.50 and
                  Total Funded Debt                         -             -               -
                     to EBITDA                   < 3.50     < 4.00        < 4.50          < 5.00         > 5.00
                     ---------                   ------     ----------    ----------      ----------     ------
                  <S>                            <C>        <C>             <C>          <C>            <C>
                  Applicable Margin              1.75%       2.00%           2.25%        2.50%          2.75%
                  for Eurodollar Borrowings

                  Applicable Margin               .50%        .75%           1.00%        1.25%          1.50%
                  for Base Rate Borrowings
</TABLE>

                  "Credit Documents" shall mean and include, as the context
         requires, this Agreement, the Subsidiary Guaranty Agreement, the
         Masland Bonds, the Parent Guaranty, the Dixie Reimbursement Agreement,
         the Letters of Credit, the Security Documents and any and all other
         instruments, agreements, documents and writings contemplated hereby or
         executed in connection herewith.

                  "Debt" of any Person shall mean, without duplication, (i)
         obligations of such Person for borrowed money, (ii) obligations of such
         Person evidenced by bonds, debentures, notes or other similar
         instruments, (iii) obligations of such

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         Person in respect of the deferred purchase price of property or
         services (other than trade payables incurred in the ordinary course of
         business on terms customary in the trade), (iv) obligations of such
         Person under any conditional sale or other title retention agreement(s)
         relating to property acquired by such Person, (v) capitalized lease
         obligations of such Person, (vi) obligations, contingent or otherwise,
         of such Person in respect of letters of credit, acceptances or similar
         extensions of credit, (vii) guaranties by such Person of the type of
         indebtedness described in clauses (i) through (v) above, (viii) all
         indebtedness of a third party secured by any Lien on property owned by
         such Person, whether or not such indebtedness has been assumed by such
         Person, (ix) all obligations of such Person, contingent or otherwise,
         to purchase, redeem, retire or otherwise acquire for value any common
         stock of such Person, (x) off-balance sheet liability retained in
         connection with asset securitization programs, real estate synthetic
         leases, real estate sale and leaseback transactions or other similar
         obligations arising with respect to any other transaction which is the
         functional equivalent of or takes the place of borrowing but which does
         not constitute a liability on the consolidated balance sheet of such
         Person and its Subsidiaries, (xi) obligations under any Interest Rate
         Contracts and (xii) advances under any factoring arrangement pursuant
         to which such Person sells its accounts on a recourse or non-recourse
         basis; provided, however, that in no event shall Debt include any
         earnout obligations of the Borrower and its Subsidiaries incurred in
         connection with the acquisition of Fabrica International, Inc., Chroma
         Technologies, Inc. and Multitex, Inc.

                  "EBIT" shall mean, for the Borrower and its Subsidiaries for
         any period, an amount equal to the sum of (a) the Consolidated Net
         Income (Loss) of the Borrower and its Subsidiaries for such period,
         plus, (b) to the extent deducted in determining Net Income for such
         period, (i) Interest Expense of the Consolidated Companies for such
         period, (ii) income tax expense (whether paid or deferred) of the
         Consolidated Companies for such period determined in on a consolidated
         basis in accordance with GAAP, (iii) any other non-cash charges of the
         Consolidated Companies for such period determined in on a consolidated
         basis in accordance with GAAP and (iv) other non-recurring,
         non-operating consolidation expenses, not to exceed $7,553,000 in the
         aggregate so long as such expenses are incurred in the third and fourth
         fiscal quarters of the Borrower's fiscal year 2000, to the extent
         approved by the Administrative Agent in its sole discretion; provided,
         however, that with respect to any Person, or substantially all of the
         assets of a Person, that became a Subsidiary of, or was merged with or
         consolidated into, or acquired by, the Borrower or any of its
         Subsidiaries in accordance with the terms of this Agreement, during
         such period, "EBIT" shall also include the EBIT of such Person or the
         EBIT attributable to such assets during such period as if such Person
         or assets were acquired as of the first day of such period.

                  "EBITDA" shall mean, for the Borrower and its Subsidiaries for
         any period, an amount equal to (i) EBIT for such period, plus (ii) to
         the extent

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         subtracted in determining Consolidated Net Income (Loss) of the
         Borrower and its Subsidiaries for such period, the sum of (x)
         amortization expense and (y) depreciation expense of the Consolidated
         Companies, in each case, determined on a consolidated basis for such
         period in conformity with GAAP; provided, however, that with respect to
         any Person, or substantially all of the assets of a Person, that became
         a Subsidiary of, or was merged with or consolidated into, or acquired
         by, the Borrower or any of its Subsidiaries in accordance with the
         terms of this Agreement, during such period, "EBITDA" shall also
         include the EBITDA of such Person or the EBITDA attributable to such
         assets during such period as if such Person or assets were acquired as
         of the first day of such period.

                  "Interest Coverage Ratio" shall mean, as of any date, the
         ratio of (i) EBITDA for the twelve-month period ending on or
         immediately prior to such date to (ii) Interest Expense for the
         twelve-month period ending on or immediately prior to such date.

                  "Interest Expense" shall mean, for the Borrower and its
         Subsidiaries for any period determined on a consolidated basis in
         accordance with GAAP, the sum of (i) total interest expense, including
         without limitation the interest component of any payments in respect of
         capital leases capitalized or expensed during such period (whether or
         not actually paid during such period) plus (ii) the net amount payable
         (or minus the net amount receivable) under Currency Contracts during
         such period (whether or not actually paid or received during such
         period); provided, however, that with respect to any Person, or
         substantially all of the assets of a Person, that became a Subsidiary
         of, or was merged with or consolidated into, or acquired by, the
         Borrower or any of its Subsidiaries in accordance with the terms of
         this Agreement, during such period, "Interest Expense" shall also
         include the Interest Expense of such Person or the Interest Expense
         attributable to such assets during such period as if such Person or
         assets were acquired as of the first day of such period.

                  "Material Subsidiary" shall mean each Subsidiary of the
         Borrower, now existing or hereafter established or acquired, that at
         any time prior to the Maturity Date, has or acquires total assets in
         excess of $1,000,000, or that is otherwise material to the operations
         or business of the Borrower or another Material Subsidiary or that has
         guaranteed any Subordinated Debt; provided that, for so long as Dixie
         Funding II, Inc. holds no assets and undertakes no activities other
         than in connection with the Securitization Program, Dixie Funding II,
         Inc. shall not be deemed to be a Material Subsidiary of the Borrower.

                  "Maturity Date" shall mean the earlier of (i) March 31, 2003,
         and (ii) the date on which all amounts outstanding under this Agreement
         have been declared or have automatically become due and payable
         (whether by acceleration or otherwise).

                  "Net Income" shall mean, for any period, the net income (or
         loss) of the Borrower and its Subsidiaries for such period determined
         on a consolidated basis in

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<PAGE>   5

         accordance with GAAP, but excluding therefrom (to the extent otherwise
         included therein)(i) any extraordinary gains or losses and (ii) any
         gains attributable to write-ups of assets; provided, however, that to
         the extent during such period, the percentage of Chroma Technologies,
         Inc.'s net income (the "Net Income Percentage") actually distributed to
         the Borrower is less than 75% of Chroma Technologies, Inc.'s net income
         for such period, then "Net Income" for such period with respect to
         Chroma Technologies, Inc. shall only include an amount equal to the Net
         Income Percentage of Chroma Technologies, Inc.'s net income.

                  "Net Worth" shall mean, as of any date, (i) the total assets
         of the Borrower and its Subsidiaries that would be reflected on the
         Borrower's consolidated balance sheet as of such date prepared in
         accordance with GAAP, after eliminating all amounts properly
         attributable to minority interests, if any, in the stock and surplus of
         Subsidiaries, minus (ii) the sum of (A) the total liabilities of the
         Borrower and its Subsidiaries that would be reflected on the Borrower's
         consolidated balance sheet as of such date prepared in accordance with
         GAAP and (B) the amount of any write-up in the book value of any assets
         resulting from a revaluation thereof or any write-up in excess of the
         cost of such assets acquired reflected on the consolidated balance
         sheet of the Borrower as of such date prepared in accordance with GAAP.

                  "Revolving Loan Termination Date" shall mean the earlier of
         (i) March 31, 2003, and (ii) the date on which all amounts outstanding
         under this Agreement have been declared or have automatically become
         due and payable (whether by acceleration or otherwise).

                  "Securitization Documents" shall mean all documents from time
         to time executed in connection with the Securitization Program,
         including without limitation that certain Loan Agreement, dated as of
         June 23, 2000, among Dixie Funding II, Inc. as borrower, the Borrower,
         as Servicer, Three Pillars Funding Corporation, as lender and SunTrust
         Equitable Securities Corporation, the First Tier Purchase Agreement,
         dated as of June 23, 2000, between Borrower, Carriage Industries, Inc.,
         Bretlin, Inc., Candlewick Yarns, Inc. and Dixie Logistics, Inc., and
         that certain Receivables Purchase Agreement, dated as of June 23, 2000,
         between Dixie Funding II, Inc. and the Borrower, in each case as
         amended, modified or supplemented from time to time.

                  "Securitization Program" shall mean that certain accounts
         receivable purchase program established by the Borrower and its
         wholly-owned subsidiary, Dixie Funding II, Inc., for the sale of the
         accounts receivable of the Borrower and certain of its Subsidiaries to
         Dixie Funding II, Inc. for further transfer to a trust or series of
         trusts in return for certain interests in such trust or trusts with
         such interests in an aggregate amount not to exceed $60,000,000 to be
         sold to certain third party investors with all other interests in such
         trust or trusts to be retained by Dixie Funding II, Inc. or the
         Borrower.

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<PAGE>   6

                  "Subsidiary" shall mean, as applied to any Person, (a) any
         corporation of which more than fifty percent (50%) of the outstanding
         capital stock (other than directors' qualifying shares) having ordinary
         voting power to elect a majority of its board of directors, regardless
         of the existence at the time of a right of the holders of any class or
         classes of securities of such corporation to exercise such voting power
         by reason of the happening of any contingency, or any partnership of
         which more than fifty percent (50%) of the outstanding partnership
         interests is at the time owned by such Person, or by one or more
         Subsidiaries of such Person, or by such Person and one or more
         Subsidiaries of such Person, and (b) any other entity which is
         controlled or capable of being controlled by such Person, or by one or
         more Subsidiaries of such Person, or by such Person and one or more
         Subsidiaries of such Person.

                  "Subsidiary Guaranty Agreement" shall mean the Amended and
         Restated Subsidiary Guaranty Agreement executed by each of the Material
         Subsidiaries of the Borrower in favor of the Lenders and the
         Administrative Agent, substantially in the form of Exhibit C as the
         same may be amended, restated or supplemented from time to time.

                  "Subordinated Debt" shall mean any Debt of the Borrower or any
         Subsidiary (i) that is expressly subordinated to the Debt and other
         obligations arising under the Credit Documents on terms reasonably
         satisfactory to the Administrative Agent and the Required Lenders, (ii)
         that matures by its terms no earlier than six months after the later of
         the Revolving Loan Termination Date or the Maturity Date then in
         effect, and (iii) that is evidenced by an indenture or other similar
         agreement that is in a form satisfactory to the Administrative Agent
         and the Required Lenders.

                  "Total Funded Debt" shall mean, at any time, all then
         currently outstanding obligations, liabilities and indebtedness of the
         Borrower and its Subsidiaries on a consolidated basis of the types
         described in the definition of Debt (other than as described in
         subsections (vi) and (vii) thereof), including, but not limited to, all
         Loans and Letter of Credit Obligations under the Credit Documents.

         2.       Section 1.01 of the Credit Agreement is hereby amended by
adding the following definitions of "Carriage Pledge Agreement", "Collateral",
"Collateral Agent", "Collateral Assignments", "Copyright Security Agreement",
"Deed of Trust Properties", "Deeds of Trust", "Dixie Pledge Agreement",
"Environmental Indemnity", "Hazardous Materials", "Landlord Waiver", "Loans",
"Master Account Agreement", "Patent Security Agreement", "Perfection
Certificate", "Pledge Agreements", "Processor Agreements", "Real Estate", "Real
Estate Documents", "Security Agreement", "Security Documents", "SunTrust Note",
"Trademark Security Agreement" and "Third Amendment Effective Date" in the
appropriate alphabetical order:

                  "Carriage Pledge Agreement" shall mean that certain Pledge
         Agreement, dated as of the date hereof, executed by Carriage
         Industries, Inc. in favor of the

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<PAGE>   7

         Collateral Agent, for the benefit of the Lenders and SunTrust Bank
         individually, as amended, restated, supplemented or otherwise modified
         from time to time.

                  "Collateral" shall mean all tangible and intangible property,
         real and personal, of any Credit Party that is the subject of a Lien
         granted pursuant to a Security Document to the Administrative Agent for
         the benefit of the Lenders to secure the whole or any part of the
         Obligations or any guarantee thereof, and shall include, without
         limitation, all casualty insurance proceeds and condemnation awards
         with respect to any of the foregoing.

                  "Collateral Agent" shall mean SunTrust Bank, as Collateral
         Agent for the Lenders under the Credit Agreement and for itself (and
         its successors and assigns) as the lender under the SunTrust Note.

                  "Collateral Assignments" shall mean all collateral assignments
         of lease and collateral assignments of distribution agreements
         delivered by any Credit Party to the Collateral Agent, all in form and
         substance satisfactory to the Collateral Agent, as each may be amended,
         restated, modified or otherwise supplemented from time to time.

                  "Copyright Security Agreement" shall mean those Copyright
         Security Agreements, dated as of the date hereof, executed by the
         Borrower and any of its Subsidiaries in favor of the Collateral Agent,
         for the benefit of the Lenders and SunTrust Bank individually, as
         amended, restated, supplemented or otherwise modified from time to
         time.

                  "Deed of Trust Properties" shall mean, collectively, the Real
         Estate subject to the Deeds of Trust.

                  "Deeds of Trust" shall mean each of the deeds of trust,
         leasehold deeds of trust, mortgages, leasehold mortgages, deeds to
         secure debt, leasehold deeds to secure debt or other real estate
         security documents delivered by any Credit Party to the Collateral
         Agent, all in form and substance satisfactory to the Collateral Agent,
         as each may be amended, restated, modified or otherwise supplemented
         from time to time.

                  "Dixie Pledge Agreement" shall mean that certain Pledge
         Agreement, dated as of the date hereof, executed by the Borrower in
         favor of the Collateral Agent, for the benefit of the Lenders and
         SunTrust Bank individually, as amended, restated, supplemented or
         otherwise modified from time to time.

                  "Environmental Indemnity" shall mean the Environmental
         Indemnity, to be executed by the Borrower in favor of the Collateral
         Agent, for the benefit of the Lenders, as amended, restated,
         supplemented or otherwise modified from time to time.

                                      -7-
<PAGE>   8

                  "Hazardous Materials" shall mean all explosive or radioactive
         substances or wastes and all hazardous or toxic substances, wastes or
         other pollutants, including petroleum or petroleum distillates,
         asbestos or asbestos containing materials, polychlorinated biphenyls,
         radon gas, infectious or medical wastes and all other substances or
         wastes of any nature regulated pursuant to any Environmental Law.

                  "Landlord Waiver" shall mean any and all Landlord Waivers, by
         and among the Borrower, the Collateral Agent and the landlords at which
         the Borrower or any of the Material Subsidiaries leases Real Estate, as
         amended, restated, supplemented or otherwise modified from time to
         time.

                  "Loans" shall mean, collectively, the Revolving Loans, the
         Term Loans and the Swing Line Loans.

                  "Master Account Agreement" shall mean that certain Master
         Account Agreement, dated as the Third Amendment Effective Date, by and
         between the Borrower and the Collateral Agent, as amended, restated,
         supplemented or otherwise modified.

                  "Patent Security Agreement" shall mean those Collateral
         Assignment and Security Agreements (Patents), dated as of the date
         hereof, executed by the Borrower and any of its Subsidiaries in favor
         of the Collateral Agent, for the benefit of the Lenders and SunTrust
         Bank individually, as amended, restated, supplemented or otherwise
         modified from time to time.

                  "Perfection Certificate" shall have the meaning assigned to
         such term in the Security Agreement.

                  "Pledge Agreements" shall mean, collectively, the Carriage
         Pledge Agreement and the Dixie Pledge Agreement.

                  "Processor Agreements" shall mean all agreements entered into
         among the Credit Parties, the Collateral Agent and the third-party
         processors of inventory of the Credit Parties, all in form and
         substance satisfactory to the Collateral Agent, as each may be amended,
         restated, modified or otherwise supplemented from time to time.

                  "Real Estate" shall mean all real property owned or leased by
         the Borrower and its Subsidiaries listed on Schedule 1.1R.

                  "Real Estate Documents" shall mean collectively, the Deeds of
         Trust, the Environmental Indemnity, the Collateral Assignments, the
         Processor Agreements and all other documents, instruments, agreements
         and certificates executed and delivered by any Credit Party to the
         Collateral Agent in connection with the foregoing.

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<PAGE>   9

                  "Security Agreement" shall mean that certain Security
         Agreement, dated as of the Third Amendment Effective Date, executed by
         the Borrower and each Material Subsidiary in favor of the Collateral
         Agent for the benefit of the Lenders and SunTrust Bank individually, as
         amended, restated, supplemented or otherwise modified from time to
         time.

                  "Security Documents" shall mean, collectively, the Security
         Agreement, the Pledge Agreements, the Copyright Security Agreement, the
         Patent Security Agreement, the Trademark Security Agreement, the Deeds
         of Trust, the other Real Estate Documents, any Landlord Waivers, the
         Master Account Agreement, the Perfection Certificate, and all other
         instruments and agreements now or hereafter securing the whole or any
         part of the Obligations or any guarantee thereof, all UCC-1 financing
         statements, fixture financing statements, stock powers, and all other
         documents, instruments, agreements and certificates executed and
         delivered by any Credit Party to the Collateral Agent in connection
         with the foregoing.

                  "SunTrust Note" shall mean that certain Promissory Note, dated
         as of August 15, 2000, executed by the Borrower in favor of SunTrust
         Bank in the committed amount of $5,000,000, as amended or modified.

                  "Trademark Security Agreement" shall mean those certain
         Collateral Assignment and Security Agreements (Trademarks), dated as of
         the date hereof, executed by the Borrower and any of its Subsidiaries
         in favor of the Collateral Agent, for the benefit of the Lenders and
         SunTrust Bank individually, as amended, restated, supplemented or
         otherwise modified from time to time.

                  "Third Amendment Effective Date" shall mean November 2, 2000.

         3.       Section 2.02(b) of the Credit Agreement is hereby amended by
deleting the first sentence of said subsection and replacing it with the
following:

                  (b)      Each Revolving Loan shall, at the option of the
         Borrower, be made or continued as, or converted into, part of one of
         Borrowings that shall consist entirely of Base Rate Advances or
         Eurodollar Advances.

         4.       Section 3.01(b) of the Credit Agreement is hereby amended by
deleting the first two sentences of said subsection and replacing them with the
following

                  (b)      Each Term Loan shall, at the option of the Borrower,
         be made or continued as, or converted into, part of one of Borrowings
         that shall consist entirely of Base Rate Advances or Eurodollar
         Advances. The aggregate principal amount of each Borrowing of Term
         Loans consisting of Eurodollar Advances shall be not less than
         $5,000,000 or a greater integral multiple of $1,000,000 and the
         aggregate principal amount of each Borrowing of Term Loans consisting
         of

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<PAGE>   10

         Base Rate Advances shall not be less than $1,000,000 or greater
         integral multiple of $1,000,000.

         5.       Section 3.02(b) of the Credit Agreement is hereby amended by
deleting such section in its entirety and replacing such section with the
following:

                  (b)      The Borrower agrees to repay the Term Loans in
         consecutive quarterly installments, commencing on December 31, 2000,
         and continuing on the last day of each calendar quarter (each, a
         "Mandatory Reduction Date") in accordance with the chart set forth
         below:

<TABLE>
<CAPTION>
                  Date of Payment                      Quarterly Payment Amount
                  ---------------                      ------------------------
                  <S>                                  <C>
                  December 31, 2000                          $ 1,635,577
                  March 31, 2001                             $ 1,635,577
                  June 30, 2001                              $ 1,635,577
                  September 30, 2001                         $ 1,635,577
                  December 31, 2001                          $ 1,635,577
                  March 31, 2002                             $ 1,635,577
                  June 30, 2002                              $ 1,635,577
                  September 30, 2002                         $ 1,635,577
                  December 31, 2002                          $ 1,635,577
                  March 31, 2003                             $15,447,115
</TABLE>

                  Additionally, the Term Loans shall be repaid as required by
         Section 3.03 hereof. Any remaining principal and interest with respect
         to the Term Loans shall be due and payable in full on the Maturity
         Date.

         6.       Section 3.03(a) of the Credit Agreement is hereby amended by
deleting such section in its entirety and replacing such section with the
following:

                  (a)      No mandatory prepayment shall be required pursuant to
         this Section 3.03 except in connection with an Asset Disposition or
         series of related Asset Dispositions where the aggregate value of the
         assets subject to such Asset Disposition(s) exceeds $1,000,000 (based
         on the Asset Fair Market Values thereof); provided, that, regardless of
         the value of the assets disposed of, no mandatory prepayment shall be
         required with respect to (i) Asset Dispositions resulting from loss,
         damage, destruction, or taking where the proceeds thereof are utilized
         so as to be excluded from the definition of Net Proceeds, (ii) Asset
         Dispositions occurring as a part of any sale and leaseback transactions
         permitted pursuant to Section 8.07, (iii) the Tarboro Disposition, and
         (iv) Asset Dispositions in connection with off-balance sheet financings
         resulting in Deemed Debt hereunder. Whenever any Asset Disposition
         shall have occurred in which such Asset Fair Market Values shall have
         equaled or exceeded such amount, then within fifteen (15) Business Days
         after each date on which any Consolidated Company receives any Net
         Proceeds as a result of or in connection with an Asset Disposition by
         any Consolidated Company, the Term Loans shall be prepaid, or in the
         even that the Term Loans have been prepaid in full, the Total
         Commitments

                                      -10-
<PAGE>   11

         shall be reduced, on a pro rata basis by an amount equal to 50% the Net
         Proceeds of such Asset Disposition plus interest accrued and unpaid on
         the amount of such prepayment; provided that, in the event that the
         Borrower has invested or intends to reinvest the Net Proceeds of such
         Asset Disposition in other capital assets to be used in the business of
         the Borrower, the Borrower may deliver to the Administrative Agent a
         certificate of a Financial Officer (a "Reinvestment Certificate") of
         the Borrower indicating either that Borrower has reinvested or that
         Borrower intends to reinvest such Net Proceeds in capital assets to be
         used in Borrower's business within 180 days (or such longer period as
         may be allowed in the definition of Net Proceeds in the case of certain
         Asset Dispositions), then the application of the Net Proceeds of such
         Asset Disposition to repay the Term Loans or reduce the Total
         Commitments hereunder shall not be required. At the end of such 180 day
         period (or such longer period as may be specified in the applicable
         Reinvestment Certificate in the circumstances described above), 50% of
         the Net Proceeds of such Asset Disposition in excess of $100,000 which
         have not been used as set forth in the Reinvestment Certificate shall
         immediately be used to repay the Term Loans or, in the event that the
         Term Loans have been paid in full, to reduce the Total Commitments as
         provided herein.

         7.       Section 4.03(a) of the Credit Agreement is hereby amended by
adding the word "and" to the end of subsection (i), by deleting the word "and"
from the end of subsection (ii) and by deleting subsection (iii) thereto in its
entirety.

         8.       Sections 4.04(a) and (b) of the Credit Agreement are hereby
amended by replacing such subsections thereof with the following:

                  (a)      In connection with the making or continuation of, or
         conversion into, each Borrowing of Eurodollar Advances, the Borrower
         shall select an Interest Period to be applicable to such Eurodollar
         Advances, which Interest Period shall be either (i) a 1, 2, or 3 month
         period at any time during the one year period after the Third Amendment
         Effective Date or (ii) a 1, 2, 3 or 6 month period at any time at any
         time thereafter.

         9.       Section 7.07 of the Credit Agreement are hereby amended by
renumbering subsection (u) as subsection (v) and adding the following as a new
subsection (u) thereof:

                  (u)      promptly after the institution of, notice of any
         claim arising in tort with respect to which any Credit Party is the
         claimant and is alleging damages of at least $1,500,000;

         10.      Section 8.02 of the Credit Agreement is hereby amended by
replacing subsection (c) and (j) thereof in their entirety with the following:

                  (c)      (i) Debt owing to a Credit Party in the form of
         Intercompany Advances, payable on demand and (ii) Investments in
         Subsidiaries permitted by Section 8.03; provided that the aggregate
         amount of Intercompany Advances at

                                      -11-
<PAGE>   12

         any one time outstanding from the Borrower to its Subsidiaries
         (excluding amounts owed by Dixie Funding or Dixie Funding II to the
         Borrower in connection with the Securitization Program) shall not
         exceed $85,000,000 at any time outstanding; plus

                  (j)      Deemed Debt incurred in connection with the
         Securitization Program; plus

         11.      Section 8.06 of the Credit Agreement is hereby amended by
deleting such section in its entirety and replacing it with the following:

                  SECTION 8.06.     LEASE OBLIGATIONS. Create or suffer to exist
         any obligations for the payment of rent for any property under
         operating leases or agreements to lease (other than capital leases)
         which would cause the direct or contingent liabilities of the Borrower
         and its Subsidiaries, on a consolidated basis, to exceed $12,500,000
         payable in any period of twelve consecutive calendar months.

         12.      Section 8.07 of the Credit Agreement is hereby amended by
adding the following as a new clause (iii) at the end of such section:

         or (iii) in connection with the purchase of new equipment by the
         Borrower and its Subsidiaries which is sold and leased back by the
         Borrower or such Subsidiary within 45 days after such new equipment is
         purchased.

         13.      Section 8.11 of the Credit Agreement is hereby amended by
deleting such section in its entirety and replacing it with the following:

         SECTION 8.11. FINANCIAL COVENANTS. In the case of the Borrower, permit:

                  (a)      Total Funded Debt to EBITDA. Its ratio of (i) Total
         Funded Debt as of the last day of any fiscal quarter of the Borrower to
         (ii) EBITDA for the four fiscal quarter period ending on such date to
         be greater than the following levels for the following periods:

<TABLE>
<CAPTION>
                  Period:                                      Maximum Ratio:
                  ------                                       --------------
         <S>                                                   <C>
         Third fiscal quarter of the Borrower's
         fiscal year 2000 through and including
         the second fiscal quarter of fiscal year
         2001                                                     5.5:1.0

         Third fiscal quarter of the Borrower's
         fiscal year 2001                                         5.0:1.0

         Fourth fiscal quarter of the Borrower's
         fiscal year 2001                                         4.5:1.0

         Each fiscal quarter thereafter                           4.0.1.0
</TABLE>

                                      -12-

<PAGE>   13

                  (b)      Senior Funded Debt to EBITDA. Its ratio of (i) Senior
         Funded Debt as of the last day of any fiscal quarter of the Borrower to
         (ii) EBITDA for the four fiscal quarter period ending on such date to
         be greater than the following levels for the following periods:

<TABLE>
<CAPTION>
                  Period:                                      Maximum Ratio:
                  ------                                       --------------
         <S>                                                   <C>
         Third fiscal quarter and fourth fiscal
         quarter of the Borrower's fiscal year
         2000                                                     3.65:1.0

         First and second fiscal quarter of the
         Borrower's fiscal year 2001                               3.5:1.0

         Third fiscal quarter of the Borrower's
         fiscal year 2001                                          3.3:1.0

         Each fiscal quarter thereafter                            3.0.1.0
</TABLE>

                  (c)      Interest Coverage Ratio. Its Interest Coverage Ratio
         to be less than the following levels for the following periods, tested
         as of the last day of each fiscal month during the first twelve months
         ending after the Third Amendment Effective Date and as of the last day
         of each fiscal quarter thereafter:

<TABLE>
<CAPTION>
                  Period:                                      Maximum Ratio:
                  ------                                       --------------
         <S>                                                   <C>

         Fiscal month ending on or about October 31, 2000
         through and including the fiscal month ending
         on or about September 30, 2001                            2.5:1.0

         Fiscal quarter ending on or about December 31, 2001      2.75:1.0

         Each fiscal quarter thereafter                            3.0.1.0
</TABLE>

                  (d)      Consolidated Net Worth. Fail to maintain as of the
         last day of each fiscal quarter of Borrower, Net Worth equal to or
         greater than the Minimum Compliance Level plus 50% of the Net Income of
         the Borrower earned during the current fiscal year, calculated on a
         cumulative basis for such fiscal year; provided, however, in the event
         that the Consolidated Companies suffer a net loss for any year-to-date
         fiscal period, Net Income shall be deemed to be $0. The "Minimum
         Compliance Level" shall, as of any date of determination, be equal to
         the sum of

                                      -13-
<PAGE>   14

         (x) $103,000,000 plus (y) an additional amount calculated as of the
         last day of each fiscal year of Borrower, commencing with fiscal year
         2000 and added to the Minimum Compliance Level then in effect as of the
         last day of such fiscal year, equal to 50% of the Net Income for such
         fiscal year of Borrower then ending; provided, however, in the event
         that the Consolidated Companies suffer a net loss for any fiscal year,
         Net Income shall be deemed to be $0, and further provided that amounts
         calculated pursuant to clause (y) above shall be permanent increases in
         the Minimum Compliance Level so that in no event shall the Minimum
         Compliance Level at any date of determination be less than the amount
         required at any preceding date of determination.

         14.      Section 11.05 of the Credit Agreement is amended by replacing
all references contained therein to "the Administrative Agent" to "the
Administrative Agent and the Collateral Agent".

         15.      Section 11.17 of the Credit Agreement is amended by adding the
following as subsection (d) thereof:

                  (d)      release any guarantor or limit the liability of any
         such guarantor under any guaranty agreement, or release all or
         substantially all of the collateral securing any of the Obligations;

         16.      Article XI of the Credit Agreement is hereby amended by
inserting the provisions set forth on Exhibit A hereto at the end of such
Article. Each Lender hereby acknowledges and agrees that all Collateral secures,
on a pari passu basis, the Obligations and all obligations and indebtedness owed
to SunTrust Bank under the SunTrust Chattanooga Note, in an aggregate principal
amount of indebtedness not to exceed $5,000,000, and that the proceeds of any
Collateral realized upon the exercise of any remedies of the Collateral Agent or
the Lenders shall be applied in accordance with the specific terms of the
Security Documents.

         17.      Schedule 1.1R attached hereto is hereby added as Schedules
1.1R to the Credit Agreement.

         18.      Schedule 6.01 and Schedule 8.01 the Credit Agreement are
hereby amended by replacing such Schedules in their entirety with Schedule 6.01
and Schedule 8.01 to this Amendment.

         19.      Exhibit C to the Credit Agreement is hereby amended by
replacing such Exhibit in its entirety with Exhibit C to this Amendment.

         20.      All references to "Loan Document" or "Loan Documents"
contained in the Credit Agreement are hereby amended to refer to "Credit
Document" or "Credit Documents".

                                      -14-
<PAGE>   15

                            B. CONDITIONS PRECEDENT:

         This Amendment shall become effective, when and only when, the
following conditions have been fulfilled to the satisfaction of the
Administrative Agent:

         1.       The Administrative Agent shall have received the fee agreed to
by the parties in that certain Fee Letter, dated as of the date hereof, by and
between the Company and the Administrative Agent on behalf of the Lenders (the
"Third Amendment Fee"), to be distributed pro rata to the Lenders, together with
all other fees and other amounts due and payable on or prior to the Closing
Date, including reimbursement or payment of all out-of-pocket expenses
(including reasonable fees, charges and disbursements of counsel to the
Administrative Agent) required to be reimbursed or paid by the Borrowers
hereunder, under any other Credit Document and under any agreement with the
Administrative Agent.

         2.       Administrative Agent shall have received executed originals of
this Amendment and all of the following documents, each (unless otherwise
indicated) being dated the Third Amendment Effective Date, in form and substance
satisfactory to the Lenders:

                  (a)      the duly completed and executed Revolving Credit
Notes in favor of each Lender in the amount of its Revolving Commitment Amount;

                  (b)      the duly completed and executed Term Notes in favor
of each Lender in the amount of its Term Loan;

                  (c)      the duly executed Amended and Restated Guaranty,
executed by all Guarantors;

                  (d)      the duly executed Security Agreement and Master
Account Agreement, together with (A) UCC-1 financing statements and other
applicable documents under the laws of the jurisdictions with respect to the
perfection of the Liens granted under the Security Agreement, as requested by
the Administrative Agent in order to perfect such Liens, duly executed by the
Borrower and the other Credit Parties, and (B) a Perfection Certificate duly
completed and executed by the Borrower;

                  (e)      the duly executed Pledge Agreements, together with
(A) original stock certificates evidencing the issued and outstanding shares of
capital stock pledged to the Collateral Agent for the benefit of the Lenders
pursuant to the Pledge Agreements, and (B) stock powers or other appropriate
instruments of transfer executed in blank;

                  (f)      the duly executed Copyright Security Agreement,
Patent Security Agreement and the Trademark Security Agreement;

                  (g)      a certificate of a Secretary or Assistant Secretary
of each Credit Party, attaching and certifying copies of its Articles of
Incorporation, Bylaws and unanimous written consent of its board of directors,
authorizing the execution, delivery and performance of the

                                      -15-
<PAGE>   16

Security Documents to which it is a party and certifying the name, title and
true signature of each officer of such Credit Party executing the Credit
Documents to which it is a party;

                  (h)      a favorable written opinion of counsel to the Credit
Parties, addressed to the Collateral Agent and each of the Lenders, and covering
such matters relating to the Credit Parties, the Amendment, the Security
Documents and the transactions contemplated therein as the Collateral Agent or
the Required Lenders shall reasonably request;

                  (i)      certificates of insurance, in form and detail
acceptable to the Collateral Agent, describing the types and amounts of
insurance (property and liability) covering any of the tangible insurable
Collateral maintained by the Credit Parties in each case naming the Collateral
Agent as loss payee or additional insured, as the case may be, together with a
lender's loss payable endorsement in form and substance satisfactory to the
Collateral Agent; and

                  (j)      evidence that the ratio of Total Funded Debt as of
the Third Amendment Effective Date to EBITDA for the most recently ended four
fiscal quarter period does not exceed 5.5:1.0.

                            C. POST CLOSING COVENANT

         1.       The Borrower agrees to deliver, or cause to be delivered, to
the Administrative Agent no later than forty-five days after the Third Amendment
Effective Date:

                  (a)      the duly executed Deeds of Trust covering all of the
Real Estate owned or leased by the Borrower or any other Credit Party described
in Section A of Schedule 1.1R, the duly executed Collateral Assignments covering
all locations where the Borrower or any other Credit Party leases warehouse or
distribution space as described in Section B of Schedule 1.1R with landlord
consents (unless waived by the Administrative Agent after determining in its
sole discretion that the Credit Parties have unsuccessfully used their
commercially reasonable efforts to obtain such Collateral Assignments and
landlord consents), duly executed counterparts of Processor Agreements with all
third party processors of any Credit Party's inventory if the inventory located
with such processor has an aggregate value of $250,000 or more (unless waived by
the Administrative Agent after determining in its sole discretion that the
Credit Parties have unsuccessfully used their commercially reasonable efforts to
obtain such Processor Agreements), and the duly executed counterparts of the
other Real Estate Documents;

                  (b)      (i) title insurance policies (with endorsements as
required by the Administrative Agent), current as-built ALTA/ACSM Land Title
surveys certified to the Collateral Agent, and except to the extent waived by
the Administrative Agent in its sole discretion, zoning letters, building
permits and certificates of occupancy, in each case relating to the Real Estate
described in Section A of Schedule 1.1R, in form and substance satisfactory to
the Administrative Agent; (ii) evidence that counterparts of such Deeds of Trust
have been recorded in all places to the extent necessary or desirable, in the
judgment of Administrative Agent, to create a valid and enforceable first
priority lien (subject to Liens permitted pursuant to Section 8.01) on each such
Deed of Trust Property in favor of the Collateral Agent for the benefit of the
Lenders and SunTrust Bank (or in favor of such other trustee as may be required
or desired

                                      -16-
<PAGE>   17

under local law); and (iii) an opinion of counsel in each state in which the
Real Estate listed in Section A of Schedule 1.1R is located in form and
substance and from counsel satisfactory to the Administrative Agent; and

                  (c)      satisfactory field audits of all accounts receivable,
inventory and other personal property of the Credit Parties requested by the
Lenders.

         2.       The Borrower agrees to deliver, or cause to be delivered, to
the Administrative Agent no later than fifteen days after the Third Amendment
Effective Date, UCC, tax, judgment and fixture lien searches in all
jurisdictions and under all names that the Administrative Agent has requested,
showing no Liens of record other than Liens permitted under the Credit
Agreement.

         3.       The Borrower agrees to deliver, or cause to be delivered, to
the Administrative Agent no later than thirty days after the Third Amendment
Effective Date, certified articles of merger, assignments, releases of liens and
such other documents as the US Patent and Trademark Office shall require, or
otherwise, to evidence each Credit Party's patents, patent applications,
trademarks and trademark applications as being owned by such Credit Party under
its current name.

         4.       The Borrower acknowledges and agrees that the failure of the
Borrower to satisfy the foregoing conditions by the deadlines set forth above
shall constitute an Event of Default under the Credit Agreement.

                                  D. COLLATERAL

         1.       The Borrower agrees that it has or will, pursuant to Section
C(1) above, pledge and cause all of its Subsidiaries to pledge all of their real
and personal property as Collateral under the Security Documents for their
respective obligations under the Credit Documents and the Borrower's obligations
under the SunTrust Note, except that the Borrower and its Subsidiaries shall not
be obligated to pledge the following assets or property:

                  a.       All assets and property of Dixie Funding II, and all
         capital stock of Dixie Funding II;

                  b.       All assets of the Borrower and its Subsidiaries
         excluded from the definition of Collateral as defined in the Security
         Agreement, including without limitation, (i) all accounts receivable
         and related assets sold or contributed, or purported to be sold or
         contributed, directly or indirectly, to Dixie Funding II pursuant to
         the Borrower's asset securitization, (ii) all accounts receivable and
         related assets owed by account debtors located outside the United
         States to the extent factored by GE Factors or any third party and
         (iii) all accounts receivable of Fabrica International and related
         assets factored by SunTrust Bank so long as the proceeds thereof are
         deposited into bank accounts at SunTrust Bank subject to the Master
         Account Agreement;

                                      -17-
<PAGE>   18

                  c.       All equipment or related collateral owned by SAFECO
         Credit Company, Inc. and leased to The Dixie Group, Inc. pursuant to
         that certain Master Equipment Lease Agreement dated as of August 15,
         2000, and all subleases of such equipment;

                  d.       All capital stock of Chroma Technologies, Inc. and
         Fabrica International, Inc.;

                  e.       The Borrower's office at the Chattanooga, Tennessee
         airport, the Borrower's lease of (i) its New York show room located at
         295 Fifth Avenue, New York, New York 10016, (ii) its New York sales
         office located at 469 Seventh Avenue, New York, New York 10018, (iii)
         its Atlanta carpets show room located at 240 Peachtree Street, NW,
         Atlanta, GA 30305, (iii) its Chicago carpets show room located at 222
         Merchandise Mart Plaza, and (iv) its High Points, North Carolina
         carpets show room located at 305 West High Street, High Points, North
         Carolina 27260;

                  f.       The lots of real estate described, with their
         approximate value, on Exhibit B; and

                  g.       All trucks and other rolling stock of the Credit
         Parties.

         2.       The Borrower agrees that it will not permit the aggregate
amount of accounts receivable owed by accounts debtors located outside the
United States to exceed $5,000,000 at any time.

         3.       The Borrower agrees that it will not permit the aggregate
amount of property located at its warehouse in the Netherlands to exceed
$2,000,000 at any time.

                                E. MISCELLANEOUS

         1.       Except for the amendments and agreements expressly set forth
above, the Credit Agreement shall remain unchanged and in full force and effect.
The Borrower acknowledges and expressly agrees that the Lenders reserve the
right to, and do in fact, require strict compliance with the terms and
provisions of the Credit Agreement, as amended by this Amendment.

         2.       The Borrower hereby affirms and restates as of the date hereof
all covenants set forth in the Credit Agreement, as amended hereby, and such
covenants are incorporated by reference herein as if set forth herein directly.

         3.       To induce the Lenders to enter into this Amendment (A) the
Borrower hereby represents and warrants that the representations and warranties
set forth in Article VI of the Credit Agreement as amended hereby are true and
correct, (B) the Borrower hereby restates, ratifies and reaffirms each and every
term and condition set forth in the Credit Agreement, as amended hereby, and in
the Credit Documents, effective as of the date hereof; and (C) the Borrower
hereby certifies that no Event of Default has occurred and is continuing.

                                      -18-
<PAGE>   19

         4.       The Borrower agrees to pay all costs and expenses of the
Administrative Agent and the Lenders incurred in connection with the
preparation, execution, delivery and enforcement of this Amendment, including
the reasonable fees and out-of-pocket expenses of Administrative Agent's and
each Lender's counsel.

         5.       Except as expressly amended herein, all terms, covenants and
conditions of the Credit Agreement and all other Credit Documents shall remain
in full force and effect. The parties hereto do expressly ratify and confirm the
Credit Agreement as amended herein.

         6.       The Borrower hereby agrees that except as explicitly stated
herein nothing herein shall constitute a waiver by the Lenders of any Event of
Default, whether known or unknown, which may exist under the Credit Agreement.
The Borrower hereby further agrees that no action, inaction or agreement by the
Lenders, including, without limitation, any indulgence, waiver, consent or
agreement altering the provisions of the Credit Agreement which may have
occurred with respect to the non-payment of any obligation during the terms of
the Credit Agreement or any portion thereof, or any other matter relating to the
Credit Agreement, shall require or imply any future indulgence, waiver, or
agreement by the Lenders. In addition, the Borrower acknowledges and agrees that
it has no knowledge of any defenses, counterclaims, offsets or objections in its
favor against the Administrative Agent or any Lender with regard to any of the
obligations due under the terms of the Credit Agreement or any other Credit
Document as of the date of this Amendment.

         7.       This Amendment shall be binding upon and inure to the benefit
of the parties hereto, their respective successors, successors-in-titles, and
assigns.

         8.       This Amendment sets forth the entire understanding of the
parties with respect to the matters set forth herein, and shall supersede any
prior negotiations or agreements, whether written or oral, with respect thereto.

         9.       This Amendment shall be governed by and construed in
accordance with the laws of the State of Georgia.

         10.      This Amendment may be executed by one or more of the parties
hereto in any number of separate counterparts, each of which shall be deemed an
original and all of which, taken together, shall be deemed to constitute one and
the same instrument. Delivery of an executed counterpart of this Amendment by
facsimile transmission shall be as effective as delivery of a manually executed
counterpart hereof.

                                      -19-
<PAGE>   20

         IN WITNESS the hand and seal of the parties hereto through their duly
authorized officers, as of the date first above written.

                                  THE DIXIE GROUP, INC.

                                  By: /s/ Danie K. Frierson
                                      ------------------------------------------
                                      Daniel K. Fierson
                                      Chairman and CEO

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

                                  Attest: /s/ Starr T. Klein
                                          --------------------------------------
                                       Starr T. Klein
                                       Secretary

                                       [CORPORATE SEAL]

Address:
The Dixie Group, Inc.
1100 Watkins Street
Chattanooga, Tennessee 37404
Attn: Mr. Gary A. Harmon

Telephone: (423) 493-7241
Facsimile: (423) 493-7353

                      [SIGNATURE PAGE TO THIRD AMENDMENT]

<PAGE>   21

                                     SUNTRUST BANK, formerly known as
                                     SunTrust Bank, Atlanta, individually and as
                                     Administrative Agent

                                     By: /s/
                                        ----------------------------------------
                                        Title:

Address:
SunTrust Bank
303 Peachtree Street
Atlanta, Georgia 30308
Attn: Mr. Bradley J. Staples

Telephone: (404) 230-5099
Facsimile: (404) 575-2594

Payment Office:
25 Park Place, 23rd Floor
Atlanta, Georgia 30303

                      [SIGNATURE PAGE TO THIRD AMENDMENT]
<PAGE>   22

                                        BANK OF AMERICA, N.A., formerly known as
                                        Nationsbank, N.A., individually and as
                                        Documentation Agent

                                        By: /s/
                                           -------------------------------------
                                           Title:

Address:
100 North Tryon Street, 8th Floor
Charlotte, NC 28255
Attn: Mr. David Dinkins

Telephone: (704) 386-2951
Facsimile: (704) 386-1270

                      [SIGNATURE PAGE TO THIRD AMENDMENT]

<PAGE>   23

                                       SOUTHTRUST BANK, formerly known as
                                       SOUTHTRUST BANK, NATIONAL
                                       ASSOCIATION

                                       By:  /s/
                                          --------------------------------------
                                          Title:

Address:
230 Fourth Avenue, 8th Floor
Nashville, TN 37219
Attn: Mr. Bradford Vieira

Telephone: (615) 880-4115
Facsimile: (615) 880-4004

                      [SIGNATURE PAGE TO THIRD AMENDMENT]
<PAGE>   24

                                        FIRST UNION NATIONAL BANK

                                        By: /s/
                                           -------------------------------------
                                           Title:

Address:
201 South College Street, CP-6
Charlotte, NC 28288-0737
Attn: Mr. David Silander

Telephone: (704) 383-5124
Facsimile: (704) 374-4973

                      [SIGNATURE PAGE TO THIRD AMENDMENT]
<PAGE>   25

                                      THE CHASE MANHATTAN BANK

                                      By: /s/
                                         ---------------------------------------
                                         Title:

Address:
1411 Broadway, 5th Floor
New York, NY 10018
Attn: Mr. James A. Knight

Telephone: (212) 391-7679
Facsimile: (212) 391-2102

                      [SIGNATURE PAGE TO THIRD AMENDMENT]

<PAGE>   26

                                  SCHEDULE 1.1R

A.       REAL ESTATE LOCATIONS FOR DEEDS OF TRUST

Office Building - Held For Sale         (No title insurance, survey or other
1100 South Watkins Street               real estate diligence to be required on
Chattanooga, TN 37404                   this location)
(Hamilton County)

Bretlin, Inc.
380 S. Industrial Blvd.
Calhoun, GA 30701 (Gordon County)

Bretlin Recycling
1465 Shattuck Industrial Blvd.
Lafayette, GA 30728 (Walker County)

Bretlin - Needlepunch - Dalton
1627 Abutment Road
Dalton, GA 30720 (Whitfield County)

Bretlin - Colormaster
200 Fair Street Extension
Calhoun, GA 30701 (Gordon County)

Candlewick Yarns
1529 Waring Rd.
Dalton, GA 30720 (Whitfield County)

Candlewick Calhoun Yarn Plant
185 South Industrial Blvd.
Calhoun, GA  30701 (Gordon County)

Candlewick Extrusion
246 Old Dalton Road
Calhoun, GA 30701 (Gordon County)

Candlewick Hurst Plant
716 Industrial Blvd
Ringgold, GA 30736 (Catoosa County)

Candlewick Lemoore Plant
711 Cinnamon Drive
Lemoore, CA 93245 (Kings County)

<PAGE>   27

Candlewick Roanoke Plant
1130 Lafayette Rd.
Roanoke, AL 36274 (Randolph County)

Carriage Industries, Inc.
185 South Industrial Blvd., SW
Calhoun, GA  30701 (Gordon County)

Carriage Keystone Building
185 South Industrial Blvd., SW
Calhoun, GA  30701 (Gordon County)

Colorworks
341 Beamer Rd.
Calhoun, GA 30701 (Gordon County)

Carriage Distribution Center
843 Union Grove Rd.
Calhoun, GA 30701 (Gordon County)

Dixie Logistics Truck Shop
South Industrial Blvd., SW
Calhoun, GA  30701 (Gordon County)

Masland Carpets
716 Bill Myles Drive
Saraland, AL 36571 (Mobile County)

Masland Carpets
209 Carpet Dr.
Atmore, AL 36502 (Escambia County)

Fabrica (Manufacturing Facility) - Leased
2801 Pullman Street
Santa Ana, CA 92705

Fabrica
Catalina Island Condominium
89 Gaviota
Avalon, CA

Carriage Indiana Warehouse
24127 County Rd. #6

<PAGE>   28

Elkhart, IN 46514 (Elkhart County)

Dixie Group
2626 York Road #01 098 049 00 000 ($74,800) [Dixie leases this property to
H&S Homes, LLC w/ option to purchase] and
2618 York Road #01 098 050 00 000 ($51,000)
Gaston County, NC

Dixie Group
Hope Mills (21.08 acres) #0414-67-1635 ($87,617) Hope Mills (67.15 acres Mill
land including 20.72 acres Hope Mills Lake) #0414-69-9200 ($127,172)
Cumberland County, NC

Golf Course and tracts of land in Lupton City, Tennessee

<PAGE>   29

B.       LEASED LOCATIONS FOR COLLATERAL ASSIGNMENTS OF LEASE OR COLLATERAL
         ASSIGNMENTS OF DISTRIBUTION AGREEMENTS

Bretlin Tufting - Leased
3515 Corporate Drive
Dalton, GA 30720 (Whitfield County)

Bretlin - Sales - Dalton - Leased
3352 Blake Drive
Dalton, GA 30720 (Whitfield County)

Bretlin Tufting - Leased
75C Lowy Drive
Chatsworth, GA 30705 (Murray County)

Bretlin Mauldin Warehouse - Leased
1147 Mauldin Road
Calhoun, GA 30701(Gordon County)

Bretlin Samples - Leased
150 Connector 3
Dalton, GA 30722 (Whitfield County)

Bretlin Raw Material Warehouse - Leased
Brookhollow Industrial Park Boulevard
Dalton, GA  30722 (Whitfield County)

Candlewick West Coast Sales Office and Warehouse - Leased
13930 Mica Street
Santa Fe Springs, CA 90670 (Los Angeles County)

Candlewick Raw Material Warehouse - Leased
2363 HWY 41
Calhoun, GA (Gordon County)

Candlewick Raw Material Warehouse - Leased
210 Second Street
Ft. Oglethorpe, GA 30742

Carriage Warehousing - Distribution Agreement
1201 South 2nd Ave.
Mansfield, TX 76063

Carriage Warehousing - Distribution Agreement

<PAGE>   30

101 S. Evans
Newton, KS 37114

Carriage Warehousing - Distribution Agreement
3033 Industrial Way, N.E.
Salem, OR 97303

Carriage Warehousing - Distribution Agreement
5882 E. Berry St.
Ft. Worth, TX 76119

Dixie Logistics Office - Leased
South Industrial Blvd.
Calhoun, GA 30701 (Gordon County)

Fabrica
1895 South Standard Avenue
Santa Ana, CA 92705

<PAGE>   31

                                    EXHIBIT A

            ADDITIONAL AGENCY PROVISIONS RELATING TO COLLATERAL AGENT

         SECTION 10.09. COLLATERAL AGENT PROVISIONS. (a) Each Lender hereby
designates SunTrust Bank as Collateral Agent to act as specified in this
Agreement and in the Security Documents. Each Lender hereby irrevocably
authorizes, and each holder of any Note by the acceptance of a Note shall be
deemed irrevocably to authorize, the Collateral Agent to take such action on its
behalf under the provisions of this Agreement and any other instruments and
agreements referred to herein, and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required of
the Collateral Agent by the terms hereof and thereof and such other powers as
are reasonably incidental thereto. The Collateral Agent may perform any of its
duties hereunder by or through its agents or employees.

         (b)      The Collateral Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement. Neither the Collateral Agent
nor any of its officers, directors, employees or agents shall be liable for any
action taken or omitted by it as such hereunder or in connection herewith,
unless caused by its or their gross negligence or willful misconduct. The
Collateral Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender; and nothing in this Agreement, expressed
or implied, is intended to or shall be so construed as to impose upon the
Collateral Agent any obligations in respect of this Agreement except as
expressly set forth herein.

         (c)      (i)      Each Lender agrees that, independently and without
reliance upon the Collateral Agent, or the directors, officers, agents or
employees of the Collateral Agent or of any other Lender, each Lender, to the
extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of the Borrower
and its Subsidiaries in connection with the taking or not taking of any action
in connection with this Agreement and the other Credit Documents, including the
decision to enter into this Agreement and to purchase the participation in the
Masland Bonds, and (ii) its own appraisal of the creditworthiness of the
Borrower and its Subsidiaries, and, except as expressly provided in this
Agreement, the Collateral Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information with respect thereto, whether coming into its possession
before the making of any Advance or at any time or times thereafter.

                  (ii) The Collateral Agent shall not be responsible to any
Lender for any recitals, statements, information, representations or warranties
herein or in any document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness, validity,
enforceability, collectibility, priority or sufficiency of this Agreement or the
Notes or the Masland Bonds or the financial condition of the Borrower or its
Subsidiaries or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or the Notes or the Masland Bonds, or the financial

<PAGE>   32

condition of the Borrower or its Subsidiaries, or the existence or possible
existence of any Default or Event of Default.

         (d)      If the Collateral Agent shall request instructions from the
Required Lenders with respect to any act or action (including the failure to
act) in connection with this Agreement or the Security Documents, the Collateral
Agent shall be entitled to refrain from such act or taking such action unless
and until the Collateral Agent shall have received instructions from the
Required Lenders and the Collateral Agent shall not incur liability to any
Person by reason of so refraining. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the Collateral Administrative
Agent as a result of the Collateral Agent acting or refraining from acting
hereunder in accordance with the instructions of the Required Lenders; provided,
however, that the Collateral Agent shall not be required to act or not act in
accordance with any instructions of the Required Lenders if to do so would
expose the Collateral Agent to personal liability or would be contrary to any
Credit Document or to applicable law.

         (e)      The Collateral Agent may assume that no Event of Default has
occurred and is continuing, unless the Collateral Agent has received notice from
the Borrower stating the nature of the Event of Default, or has received notice
from a Lender stating the nature of the Event of Default and that such Lender
considers the Event of Default to have occurred and to be continuing.

         (f)      Neither the Collateral Agent nor any of its directors,
officers, agents, or employees shall be liable for any action taken or not taken
by them in such capacity under or in connection with the Credit Documents,
except for their own gross negligence or willful misconduct. Without limitation
on the foregoing, the Collateral Agent and their respective directors, officers,
agents, and employees:

                  (i) may treat the payee of any Note as the holder thereof
         until the Administrative Agent receives notice of the assignment or
         transfer thereof in form satisfactory to the Administrative Agent,
         signed by the payee and may treat each Lender as the owner of that
         Lender's interest in the obligations due to the Lender for all purposes
         of this Agreement until the Administrative Agent receives notice of the
         assignment or transfer thereof, in form satisfactory to the
         Administrative Agent, signed by that Lender;

                  (ii) may consult with legal counsel, in-house legal counsel,
         independent public accountants, in-house accountants and other
         professionals, or other experts selected by it with reasonable care, or
         with legal counsel, independent public accountants, or other experts
         for the Borrower, and shall not be liable for any action taken or not
         taken by it or them in good faith in accordance with the advice of such
         legal counsel, independent public accountants, or experts;

                  (iii) will not be responsible to any Lender for any statement,
         warranty, or representation made in any of the Credit Documents or in
         any notice, certificate, report, request, or other statement (written
         or oral) in connection with any of the Credit Documents;

<PAGE>   33

                  (iv) except to the extent expressly set forth in the Credit
         Documents, will have no duty to ascertain or inquire as to the
         performance or observance by the Borrower or any other Person of any of
         the terms, conditions, or covenants of any of the Credit Documents or
         to inspect the property, books, or records of the Borrower or any
         Subsidiary or other Person;

                  (v) will not be responsible to any Lender for the due
         execution, legality, validity, enforceability, genuineness,
         effectiveness, sufficiency, or value of any Credit Document, any other
         instrument or writing furnished pursuant thereto or in connection
         therewith;

                  (vi) will not incur any liability by acting or not acting in
         reliance upon any Credit Document, notice, consent, certificate,
         document, statement, telex, telecopier message or other instrument or
         writing believed by it or them to be genuine and to have been signed,
         sent or made by the proper Person; and

                  (vii) will not incur any liability for any arithmetical error
         in computing any amount payable to or receivable from any Lender
         hereunder, including, without limitation, payment of principal and
         interest on the Notes, Advances, and other amounts; provided that
         promptly upon discovery of such an error in computation, the Collateral
         Agent, the Lender, and (to the extent applicable) the Borrower shall
         make such adjustments as are necessary to correct such error and to
         restore the parties to the position that they would have occupied had
         the error not occurred.

         (g)      Each Lender and SunTrust Bank, individually, shall, ratably in
accordance with the respective outstanding principal amount of its Advances with
respect to any Lender and in accordance with the outstanding principal amount
under the SunTrust Chattanooga Note, indemnify and hold the Collateral Agent and
its directors, officers, agents, and employees harmless against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements of any kind or nature whatsoever (including,
without limitation, attorneys' fees and disbursements) that may be imposed on,
incurred by, or asserted against it or them in any way relating to or arising
out of the Credit Documents (other than losses incurred by reason of the failure
by the Borrower to pay the obligations due to the Lenders hereunder or under the
Notes) or any action taken or not taken by it as Collateral Agent thereunder,
except for the gross negligence or willful misconduct of such party. Without
limitation of the foregoing, each Lender shall reimburse the Collateral Agent
upon demand for that Lender's ratable share of any cost or expense incurred by
the Collateral Agent in connection with the negotiation, preparation, execution,
delivery, administration, amendment, waiver, refinancing, restructuring,
reorganization (including a bankruptcy reorganization), or enforcement of the
Credit Documents, to the extent that the Borrower is required to pay that cost
or expense but fails to do so upon demand.

         (h)      SunTrust Bank (and each successor Collateral Agent) has the
same rights and powers under the Credit Documents as any other Lender and may
exercise the same as though it

<PAGE>   34

were not the Collateral Agent and the term "the Lenders" or "Lender" includes
SunTrust Bank in its individual capacity. SunTrust Bank (and each successor
Collateral Agent), and its Affiliates may accept deposits from, lend money to,
and generally engage in any kind of banking, trust or other business with the
Borrower and any Affiliate or Subsidiary of the Borrower, as if it were not the
Collateral Agent and without any duty to account therefor to the Lenders.
SunTrust Bank (and each successor Collateral Agent) need not account to any
other Lender for any monies received by it for reimbursement of its costs,
expenses and fees as the Collateral Agent hereunder, or for any monies received
by it in its capacity as a Lender hereunder, except as otherwise provided
herein. This Agreement shall not be deemed to constitute a joint venture or
partnership among the Lenders.

         (i)      The Collateral Agent may resign as such at any time by written
notice to the Borrower and the Lenders, to be effective upon a successor's
acceptance of appointment as Collateral Agent. In such event, subject to the
approval of the Borrower, the Required Lenders shall appoint a successor
Collateral Agent, who must be from among the Lenders; provided, that the
Collateral Agent shall be entitled to appoint a successor Collateral Agent from
among the Lenders, subject to acceptance of appointment by that successor
Collateral Agent and subject to the approval of the Borrower, if the Required
Lenders have not appointed a successor Collateral Agent within thirty (30)
calendar days after the date the Collateral Agent gave notice of resignation or
was removed. Upon a successor's acceptance of appointment as Collateral Agent,
the successor will thereupon succeed to and become vested with all the rights,
powers, privileges, and duties of the Collateral Agent under the Credit
Documents, and the resigning Collateral Agent will thereupon be discharged from
its duties and obligations thereafter arising under the Credit Documents.

<PAGE>   35

                                    EXHIBIT B

                                   EXTRA LOTS

Lupton City, TN:

Lot 126 Lupton City  ($1,250)
Lot 85 Lupton City ($1,625)
Lot 128 Lupton City ($800)
Lot 127 Lupton City ($1,175)

Gaston County, NC:

May Street  #01 041 063 00 000  ($6,500)
S. York Road #01 098 051 00 000  ($4,600)
S. York Road #01 098 052 00 000  ($17,500)
S. York Road #01 098 53 00 000   ($17,400)
York Road #01 098 054 00 000  ($16, 300)
Myers Street #10 063B 016 00 000  ($600)
Bush Street #10 063B 095 00 000  ($700)
Hwy 321 #10 063C 008 00 000   ($3,400)
Meadow Street #10 063C 009 00 000   ($3,400)
Meadow Street #10 063C 010 00 000 ($3,000)
Meadow Street #10 063C 011 00 000   ($3,000)
Meadow Street #10 063C 012 00 000 ($5,100)
Meadow Street #10, 063C 013 00 000 ($3,000)
Meadow Street #10 063C 014 00 000 ($3,000)
Meadow Street #10 063C 015 00 000 ($3,000)
Meadow Street #10 063C 016 00 000 ($14,800)
Myers Street #10 063C 017 00 000 ($3,900)
Myers Street #10 063C 018 00 000 ($3,200)
Myers Street #10 063C 019 00 000 ($3,200)
Myers Street #10 063C 020 00 000 ($3,100)
Myers Street #10 063C 021 00 000 ($1,900)
Myers Street #10 063C 022 00 000 ($2,300)
Myers Street #10 063C 023 00 000 ($3,100)
Myers Street #10 063C 024 00 000 ($3,100)
Myers Street #10 063C 025 00 000 ($3,100)
Myers Street #10 063C 026 00 000 ($3,100)
Westview St. #10 063C 074 00 000 ($7,000)
Goble Street #10 070 002 00 000 ($4,200)
Goble Street #10 070 0002 06 000 ($1,100)
Davis Park Road #10 070A 043 00 000 ($3,600)
York Road #10 070A 051 00 000 ($9,300)

<PAGE>   36

York Road #10 070A 054 00 000 ($9,900)
York Road #10 070A 055 00 000 ($10,100)
York Road #10 070A 056 00 000 ($10,300)
York Road #10 070A 057 00 000 ($8,600)
York Road #10 070A 058 00 000 ($7,100)
Howard Street (Mt. Holly) #15 019B 119 00 000 ($2,000)
Howard Street (Mt. Holly #15 019B 120 00 000 ($1,900)
8210 Catawba Cove Road (New Hope) #15 124 019 00 912 ($3,300)

Cumberland County, NC:

Hope Mills (9.8 acres) #0414-78-2197 ($35,535)
Hope Mills (.60 acres) #0414-68-0527 ($5,250)
Hope Mills (.65 Bluff Mill Tract) #0405-40-4596) ($2,750)
Hope Mills (7.51 acres Rockfish Creek between Lakeview Dr. and Legion Rd)
  #0414-64-9011 ($9,578)
Hope Mills (lot 24 Courthouse Acres) #0405-45-7138 ($8,000)
Hope Mills (Lot 23 Courthouse Acres) #0405-45-6137 ($8,000)
Hope Mills (Lot 22 Courthouse Acres) #0405-45-5147 ($8,000)
Hope Mills Lot 21 Courthouse Acres) #0405-45-4136 ($8,000)

Warehouse leased in the Netherlands

<PAGE>   37

                       THIRD AMENDMENT TO CREDIT AGREEMENT

                                  SCHEDULE 6.01

                                  SUBSIDIARIES

Material Subsidiaries:

<TABLE>
<CAPTION>
      Company                   Jurisdiction     Parent
      -------                   ------------     ------
<S>                             <C>              <C>
Amtex, Inc.                       Tennessee      The Dixie Group, Inc.
Bretlin, Inc.                     Georgia        Carriage Industries, Inc.
Candlewick Yarns, Inc.            Tennessee      Carriage Industries, Inc.
Carriage Industries, Inc.         Georgia        The Dixie Group, Inc.
Chroma Technologies, Inc.         California     The Dixie Group, Inc.
Dixie Funding, Inc.               Tennessee      The Dixie Group, Inc.
Dixie Group Logistics, Inc.       Georgia        Carriage Industries, Inc.
Fabrica International             California     The Dixie Group, Inc.

Other Subsidiaries:

<CAPTION>

      Company                   Jurisdiction      Parent
      -------                   ------------      ------
<S>                             <C>              <C>
C-Knit Apparel, Inc.              Tennessee       The Dixie Group, Inc.
Dixie Export, Inc.                U.S.V.I         The Dixie Group, Inc.
Dixie Funding II, Inc.            Tennessee       The Dixie Group, Inc.
Wingate Carpets, Inc.             Georgia         Carriage Industries, Inc.
</TABLE>

<PAGE>   38

                       THIRD AMENDMENT TO CREDIT AGREEMENT

                                  SCHEDULE 8.01

                                      LIENS

(i)      Specific Assets

a.       All equipment or related collateral owned by or pledged to SAFECO
         Credit Company, Inc. and leased to The Dixie Group, Inc. pursuant to
         that certain Master Equipment Lease Agreement dated as of August 15,
         2000; and all subleases of such equipment;

b.       Real property located in Calhoun, Georgia is subject to a Deed to
         Secure Debt dated August 4, 1993, in the amount of $544,156.20 incurred
         upon the purchase of the property. A Carriage Industries distribution
         center is now under construction on the property.

c.       The Borrower and its Subsidiaries have recorded UCC Financing
         Statements to effect the sale of its Accounts in connection with the
         Loan Agreement, dated as of June 23, 2000 among the Borrower, Dixie
         Funding II, Three Pillars Funding Corporation and SunTrust Equitable
         Securities Corporation.

d.       Liens on the shares of stock of Fabrica International and Chroma
         Technologies, Inc. pledged to the former owners to the extent that such
         shares of stock secure the contingent deferred purchase price owed to
         the former owners.

 (ii) Miscellaneous

a.       All locations: security interests have been granted in connection with
         various copiers, computers and miscellaneous office equipment.

b.       All locations: security interests in accounts receivables have been
         granted in connection with various factoring contracts.

c.       All locations; security interests have been granted in the ordinary
         course of business in connection with various automobiles, trucks,
         tractor and trailers and operating leases.<PAGE>   1
                                                                     EXHIBIT 4.3

                                PLEDGE AGREEMENT

         THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT"), executed by THE DIXIE
GROUP, INC., a Tennessee corporation (the "PLEDGOR") in favor of SUNTRUST BANK,
a Georgia banking corporation, in its capacity as Collateral Agent (the
"COLLATERAL AGENT") for itself and other lending institutions (the "LENDERS")
that are signatories to the Credit Agreement (as defined below).

                                   WITNESSETH:

         WHEREAS, the Pledgor, the Lenders, SunTrust Bank, as Administrative
Agent, and Bank of America, N.A., as the Documentation Agent are parties to that
Credit Agreement, dated as of March 31, 1998, as amended by that certain First
Amendment to Credit Agreement, effective December 26, 1998, as amended by that
certain Second Amendment to Credit Agreement, effective October 5, 2000 and by
that certain Third Amendment to Credit Agreement, effective November 2, 2000 (as
amended or modified, the "CREDIT AGREEMENT");

         WHEREAS, the Pledgor has executed that certain Promissory Note in the
amount of $5,000,000 in favor of SunTrust Bank, formerly known as SunTrust Bank,
Chattanooga, ("SUNTRUST") (as amended or modified, the "SUNTRUST NOTE");

         WHEREAS, it is a condition to the obligations of the Administrative
Agent and the Lenders under the Credit Agreement and the obligations of SunTrust
under the SunTrust Note that Pledgor grant to the Collateral Agent a security
interest in all of its Pledged Collateral as defined below, and Pledgor wishes
to fulfill said condition;

         WHEREAS, Pledgor is the record and beneficial owner of the issued and
outstanding shares of common stock of those companies listed on Schedule I
attached hereto (the "PLEDGED SHARES").

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

         1.       Defined Terms. All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Credit Agreement.

         2.       Pledge. Pledgor hereby pledges to the Collateral Agent, for
its benefit in such capacity, for its benefit as lender under the SunTrust Note
and for the benefit of the Lenders (the Collateral Agent, SunTrust and Lenders
referred to herein as the "SECURED PARTIES" and each a "SECURED PARTY") and
grants to the Collateral Agent, for its benefit and the benefit of the Secured
Parties, a security interest in all of Pledgor's rights, title and interests in,
to and under the following property, whether now owned by or owing to, or
hereafter acquired by or arising in favor of Pledgor (collectively, the "PLEDGED
COLLATERAL"):

<PAGE>   2

                  (a)      the Pledged Shares and the certificates representing
         the Pledged Shares, and all dividends, cash, instruments and other
         property or proceeds from time to time received, receivable or
         otherwise distributed in respect of or in exchange for any or all of
         the Pledged Shares so that the Collateral Agent maintains at all times
         under this Pledge Agreement a pledge of and security interest in and to
         all shares of the authorized and issued and outstanding capital stock
         of those companies listed on Schedule I now or hereafter owned by the
         Pledgor;

                  (b)      Any stock or other securities acquired by the Pledgor
         or the Pledgor's designees with respect to, incident to or in lieu of
         the Pledged Shares or with respect to, incident to or in lieu of the
         Pledged Collateral (x) due to any dividend, stock-split, stock dividend
         or distribution on dissolution, on partial or total liquidation, or for
         any other reason, (y) in connection with a reduction of capital,
         capital surplus or paid-in-surplus or (z) in connection with any
         spin-off, split-off, reclassification, readjustment, merger,
         consolidation, sale of assets, combination of shares or any other plan
         of distribution affecting those companies listed on Schedule I;

                  (c)      Any subscription or other rights or options issued in
         connection with the Pledged Shares, and, if exercised by the Pledgor,
         all new shares or other securities so acquired by the Pledgor, which
         shall immediately be assigned and delivered to the Collateral Agent and
         held under the terms of this Pledge Agreement in the same manner as the
         Pledged Shares originally pledged hereunder; and

                  (d)      Any and all proceeds, monies, income and benefits
         arising from or by virtue of, and all dividends and distributions (cash
         or otherwise) payable and/or distributable with respect to, all or any
         of the Pledged Shares or other securities and rights and interests
         described in this Section 2.

         3.       Security For Secured Obligations. This Pledge Agreement and
the Pledged Collateral secure the prompt payment, in full when due, whether at
stated maturity, or by acceleration or otherwise, and performance of all
Obligations of any kind under or in connection with the Credit Agreement and the
other Credit Documents, the payment in full when due and performance of all
obligations under or in connection with the SunTrust Note and all obligations of
Pledgor now or hereafter existing under this Pledge Agreement (collectively, the
"SECURED OBLIGATIONS"). Such Secured Obligations include, without limitation,
all interest, charges, expenses, fees, attorneys' fees and other sums required
to be paid by Pledgor under the Credit Agreement, under the SunTrust Note, under
this Pledge Agreement or under any of the other Credit Documents.

         4.       Delivery Of Pledged Collateral. All certificates representing
or evidencing the Pledged Shares shall be delivered to and held by or on behalf
of the Collateral Agent pursuant hereto, and shall be accompanied by duly
executed, undated instruments of transfer or assignment endorsed in blank, all
in form and substance satisfactory to the Collateral Agent and, if the
Collateral Agent so requests, with signatures guaranteed by a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. or by a commercial bank or trust company having an
office or correspondent in the United States. After

                                       2
<PAGE>   3

the occurrence and during the continuation of an Event of Default, the
Collateral Agent shall have the right, at any time in its discretion and without
notice to Pledgor, to transfer to or to register in the name of the Collateral
Agent or any of its nominees any or all of the Pledged Shares. In addition, the
Collateral Agent shall have the right at any time to exchange certificates or
instruments representing or evidencing Pledged Shares for certificates or
instruments of smaller or larger denominations.

         5.       Representations and Warranties. Pledgor represents and
warrants to the Secured Parties as follows:

                  (a)      the Pledged Shares represent, all of the issued and
         outstanding shares of the voting capital stock of those companies
         listed on Schedule I owned by the Pledgor.

                  (b)      Pledgor is, and at the time of delivery of the
         Pledged Shares to the Collateral Agent pursuant to Section 4 hereof
         will be, the sole holder of record and the sole beneficial owner of the
         Pledged Shares, free and clear of any Lien thereon or affecting the
         title thereto except for the Lien created by this Pledge Agreement.

                  (c)      All of the Pledged Shares have been duly authorized,
         validly issued and are fully paid and non-assessable and all
         documentary, stamp, or other taxes or fees owing in connection with the
         issuance, transfer and/or pledge thereof hereunder have been paid and
         will be hereafter paid by the Pledgor as same becomes due and payable.

                  (d)      No dispute, counterclaim or defense exists with
         respect to all or any part of the Pledged Collateral.

                  (e)      Pledgor has the requisite corporate authority to
         pledge, assign, transfer, deliver, deposit and set over its Pledged
         Collateral to the Collateral Agent as provided herein.

                  (f)      There are no restrictions upon the transfer,
         hypothecation or pledge of any of the Pledged Collateral.

                  (g)      None of the Pledged Shares has been issued or
         transferred in violation of the securities registration, securities
         disclosure or similar laws of any jurisdiction to which such issuance
         or transfer may be subject.

                  (h)      Schedule I hereto lists the authorized shares of
         common stock, the par value thereof and the number of issued and
         outstanding shares of common stock of each issuer of Pledged Shares. As
         of the date hereof, (i) no subscription, warrant, option or other
         rights to purchase or acquire any shares of any class of capital stock
         of any issuer of Pledged Shares is authorized and outstanding, and (ii)
         there is no commitment by any issuer of Pledged Shares to issue any
         such shares, warrants, options or other such rights or securities.

                                       3
<PAGE>   4

                  (i)      The pledge by Pledgor of its Pledged Collateral is
         not in contravention of any law or of any agreement to which Pledgor is
         party or by which Pledgor is otherwise bound, and no consent, approval,
         authorization or other order of, or other action by, any Person or
         notice to or filing with, any Person is required (x) for the pledge by
         Pledgor of the Pledged Collateral pursuant to this Pledge Agreement or
         for the execution, delivery or performance of this Pledge Agreement by
         Pledgor or (y) for the exercise by the Collateral Agent of the voting
         or other rights provided for in this Pledge Agreement or the remedies
         in respect of the Pledged Collateral pursuant to this Pledge Agreement
         (except as may be required in connection with any disposition of any
         portion of the Pledged Collateral by laws affecting the offering and
         sale of securities generally).

                  (j)      The pledge, assignment and delivery of the Pledged
         Collateral together with duly executed, undated instruments of transfer
         or assignment endorsed in blank pursuant to this Pledge Agreement will
         create a valid first priority Lien on and a first priority perfected
         security interest in the Pledged Collateral and the proceeds thereof,
         securing the payment of the Secured Obligations and no filing or other
         action is necessary to perfect or protect such security interest,
         except that (i) the filing of a financing statement, the taking of
         possession or some other action may be required under Section 9-306 of
         the Uniform Commercial Code as in effect in the State of Georgia (the
         "U.C.C.") to perfect a security interest in certain proceeds of the
         Pledged Collateral that do not constitute Pledged Shares or other
         securities or instruments and (ii) the filing of a financing statement
         under Section 9-115(4)(b) of the U.C.C. may be required to perfect a
         security interest in any Pledged Collateral that constitutes
         "investment property" (other than the Pledged Shares) with respect to
         which the Collateral Agent does not have "control" (as such terms are
         defined in the U.C.C.).

                  (k)      All of the representations and warranties contained
         in the Credit Agreement, the SunTrust Note and the other Credit
         Documents are true and correct in all material respects, are
         incorporated herein by this reference and are reaffirmed and deemed
         made herein by Pledgor for purposes of this Pledge Agreement.

         The representations and warranties set forth in this Section 5 shall
survive the execution and delivery of this Pledge Agreement.

         6.       Covenants. Pledgor covenants and agrees that from and after
the date of this Pledge Agreement and until all Commitments have been terminated
and all Secured Obligations, other than Secured Obligations in respect of
indemnification that are not yet due and payable and other similar contingent
obligations which are not yet due and payable and survive the termination of
this Agreement, have been paid in full:

                  (a)      Pledgor will not sell, assign, transfer, pledge, or
otherwise encumber any of its rights in or to the Pledged Collateral or any
unpaid dividends or other distributions or payments with respect to the Pledged
Collateral or grant a Lien in the Pledged Collateral, except pursuant to this
Pledge Agreement.

                                       4
<PAGE>   5

                  (b)      Pledgor will not cause any issuer of Pledged Shares
to issue or grant any warrants, stock options of any nature or other instruments
convertible into shares of any class of capital stock or issue any additional
shares of capital stock or sell or transfer any treasury stock.

                  (c)      Pledgor will, at its own cost and expense, promptly
execute, acknowledge and deliver all such instruments and take all such action
as the Collateral Agent from time to time may request in order to perfect and
protect the Lien granted or purported to be granted hereby or to enable the
Collateral Agent to exercise and enforce its rights and remedies hereunder with
respect to the Pledged Collateral.

                  (d)      Pledgor has and will, at its own cost and expense,
defend the title to its Pledged Collateral and the Liens of the Collateral Agent
thereon against the claim of any Person and will maintain and preserve such
Liens until the payment and performance, in full, of all Secured Obligations;
including the filing of any necessary financing statements, which may be filed
by Collateral Agent with or (to the extent permitted by law) without the
signature of Pledgor, and will cooperate with Collateral Agent, at Pledgor's
expense, in obtaining all necessary approvals and making all necessary filings
under federal, state, local or foreign law in connection with such Liens or any
sale or transfer of the Pledged Collateral;.

                  (e)      Pledgor will pay all taxes, assessments and charges
levied, assessed or imposed upon its Pledged Collateral before the same become
delinquent or become Liens upon any of its Pledged Collateral except where the
same may be contested in good faith by appropriate proceedings and as to which
adequate reserves have been provided.

         7.       Adjustments and Distributions Concerning Pledged Collateral.
Should the Pledged Collateral, or any part thereof, ever be converted in any
manner into another type of property or any money or other proceeds ever be paid
or delivered to Pledgor as a result of Pledgor's rights in the Pledged
Collateral, then in any such event (except as expressly provided in Section 8
hereof), all such property, money and other proceeds shall immediately be and
become part of the Pledged Collateral, and the Pledgor covenants and agrees to
forthwith pay and deliver all money so received to the Collateral Agent; and, if
the Collateral Agent deems it necessary and so requests, to properly endorse,
assign or transfer any and all such other proceeds to the Collateral Agent and
to deliver to the Collateral Agent any and all such other proceeds which require
perfection by possession under the U.C.C. With respect to any of such property
of a kind requiring an additional security agreement, financing statement or
other writing to perfect a security interest therein in favor of the Collateral
Agent, the Pledgor will forthwith execute and deliver to the Collateral Agent
whatever the Collateral Agent shall deem necessary or proper for such purposes.

         8.       Pledgor's Rights; Termination Of Rights.

                  (a)      As long as no Event of Default (as defined in Section
         9 hereof) shall have occurred and be continuing:

                           (i)      Pledgor shall have the right, from time to
                  time, to vote and give consents with respect to its Pledged
                  Collateral or any part thereof for all

                                       5
<PAGE>   6

                  purposes permitted by the Credit Agreement and not
                  inconsistent with the provisions of this Pledge Agreement, the
                  Credit Agreement or any other Credit Documents; provided,
                  that, without limitation of the foregoing, no vote shall be
                  cast, and no consent shall be given or action taken by
                  Pledgor, which would have the effect of impairing the position
                  of the Collateral Agent hereunder or which would authorize or
                  effect (except if and to the extent expressly permitted by the
                  Credit Agreement): (A) the dissolution or liquidation, in
                  whole or in part, of any issuer of the Pledged Collateral, (B)
                  the consolidation or merger of any issuer of the Pledged
                  Collateral with any other Person (other than Pledgor), (C) the
                  sale, disposition or encumbrance of any portion of the assets
                  of any issuer of the Pledged Collateral or any business or
                  division thereof, (D) any change in the authorized number of
                  shares, the stated capital or the authorized shares of any
                  issuer of the Pledged Collateral or the issuance of any
                  additional shares of capital stock thereof, or (E) the
                  alteration of the voting rights with respect to the capital
                  stock of any issuer of the Pledged Collateral;

                           (ii)     Pledgor shall be entitled, from time to
                  time, to collect and receive for its own use all dividends
                  paid in respect of its Pledged Shares to the extent not in
                  violation of the Credit Agreement other than any and all: (A)
                  dividends paid or payable other than in cash in respect of,
                  and instruments and other property received, receivable or
                  otherwise distributed in respect of, or in exchange for, any
                  of its Pledged Collateral, (B) dividends and other
                  distributions paid or payable in cash in respect of any of its
                  Pledged Collateral in connection with a partial or total
                  liquidation or dissolution, and (C) cash paid, payable or
                  otherwise distributed in redemption of, or in exchange for,
                  any of its Pledged Collateral; provided, that until actually
                  paid all rights to such dividends shall remain subject to the
                  Lien created by this Pledge Agreement.

                           (b)      All dividends (other than such cash
         dividends as are permitted to be paid to Pledgor in accordance with
         Section 8(a)(ii) above) and all other distributions in respect of any
         of the Pledged Shares, whenever paid or made, shall be delivered to the
         Collateral Agent to hold as Pledged Collateral and shall, if received
         by Pledgor, be received in trust for the benefit of the Collateral
         Agent, be segregated from the other property or funds of Pledgor, and
         be forthwith delivered to the Collateral Agent as Pledged Collateral of
         Pledgor in the same form as so received (with any necessary endorsement
         or assignment).

                           (c)      Upon the occurrence of an Event of Default
         and during the continuation thereof, all of Pledgor's rights to
         exercise voting and other consensual rights pursuant to Section 8(a)(i)
         hereof and all of Pledgor's rights to receive any cash dividends
         pursuant to Section 8(a)(ii) hereof shall cease and all such rights
         shall thereupon become vested in the Collateral Agent, for the benefit
         of the Secured Parties, who shall have the sole and exclusive right to
         exercise the voting and other consensual rights which Pledgor would
         otherwise be authorized to exercise pursuant to Section 8(a)(i) hereof
         and to receive and retain the dividends which Pledgor would otherwise
         be authorized to receive and retain pursuant to Section 8(a)(ii)
         hereof. Upon the occurrence

                                       6
<PAGE>   7

         of an Event of Default (as defined in Section 9 hereof) and during the
         continuation thereof, Pledgor shall pay over to the Collateral Agent,
         for the benefit of the Secured Parties, any dividends received by
         Pledgor with respect to its Pledged Collateral and any and all money
         and other property paid over to or received by the Collateral Agent
         shall be retained by the Collateral Agent, for the benefit of the
         Secured Parties, as Pledged Collateral hereunder and shall be applied
         in accordance with the provisions hereof.

         9.       Default. The Pledgor shall be in default under this Pledge
Agreement upon the happening of any of the following events or conditions
(hereinafter referred to as an "EVENT OF DEFAULT"):

                  (a)      The occurrence of a "Default" or an "Event of
         Default" as defined in the Credit Agreement;

                  (b)      The occurrence of a default or event of default under
        or in connection with the SunTrust Note;

                  (c)      The filing of any financing statement with regard to
         the Pledged Collateral, other than relating to or permitted by this
         Pledge Agreement, or the attachment of any additional lien or security
         interest to any portion of the Pledged Collateral, for the benefit of
         any Person other than the Collateral Agent; and

                  (d)      Failure of Pledgor to observe any of its respective
         covenants set forth in this Pledge Agreement;

         10.      Remedies Upon An Event Of Default.

                  (a)      Upon the occurrence of an Event of Default and during
         the continuation thereof, the Collateral Agent may exercise all rights
         of a secured party under the U.C.C. (whether or not the U.C.C. applies
         to the affected collateral). In addition, the Collateral Agent is
         hereby authorized and empowered to transfer and register in its name or
         in the name of its nominee the whole or any part of the Pledged
         Collateral, exercise the voting rights with respect thereto, collect
         and receive all cash dividends and other distributions made thereon,
         sell in one or more sales after ten (10) days' notice of the time and
         place of any public sale or of the time after which a private sale is
         to take place (which notice Pledgor agrees is commercially reasonable),
         but without any previous notice or advertisement, the whole or any part
         of the Pledged Collateral and otherwise act with respect to the Pledged
         Collateral as though the Collateral Agent was the legal and record
         owner thereof. Pledgor hereby irrevocably constitutes and appoints the
         Collateral Agent, for the benefit of the Secured Parties, as the proxy
         and attorney-in-fact of Pledgor, with full power of substitution to
         exercise any of the rights provided in the preceding sentence;
         provided, that the Collateral Agent shall not have any duty to exercise
         any such right or to preserve the same and shall not be liable for any
         failure to do so or for any delay in doing so. Any sale shall be made
         at a public or private sale at the Collateral Agent's offices or
         elsewhere to be named in the notice of sale, either for cash or upon
         credit or for future delivery at such price as the Collateral Agent may
         deem fair, and any

                                       7
<PAGE>   8

         Secured Party may be the purchaser of the whole or any part of the
         Pledged Collateral so sold and hold the same thereafter in its own
         right free from any claim of Pledgor or any right of redemption, which
         Pledgor hereby waives to the extent permitted by applicable law. Each
         sale shall be made to the highest bidder, but the Collateral Agent
         reserves the right to reject any and all bids at such sale which, in
         its discretion, it shall deem inadequate. Demands of performance,
         except as otherwise herein specifically provided for, notices of sale,
         advertisements and the presence of property at sale are hereby waived
         and any sale hereunder may be conducted by an auctioneer or any officer
         or agent of the Collateral Agent.

                  (b)      If, at the original time or times appointed for the
         sale of the whole or any part of the Pledged Collateral, the highest
         bid, if there be but one sale, shall be inadequate to discharge in full
         all the Secured Obligations, or if the Pledged Collateral be offered
         for sale in lots, if at any of such sales, the highest bid for the lot
         offered for sale would indicate to the Collateral Agent, in its
         discretion, the unlikelihood of the proceeds of the sales of the whole
         of the Pledged Collateral being sufficient to discharge all the Secured
         Obligations, the Collateral Agent may, on one or more occasions and in
         its discretion, postpone any of said sales by public announcement at
         the time of sale or the time of previous postponement of sale, and no
         other notice of such postponement or postponements of sale need be
         given, any other notice being hereby waived; provided, that any sale or
         sales made after such postponement shall be after ten (10) days' notice
         from the Collateral Agent to the Pledgor.

                  (c)      If, at any time that the Collateral Agent shall
         determine to exercise its rights to sell the whole or any part of the
         Pledged Collateral hereunder, such Pledged Collateral or the part
         thereof to be sold shall not, for any reason whatsoever, be effectively
         registered under the Securities Act of 1933, as amended (the "Act"),
         the Collateral Agent may, in its discretion (subject only to applicable
         requirements of law), sell such Pledged Collateral or part thereof by
         private sale in such manner and under such circumstances as the
         Collateral Agent may deem necessary or advisable, but subject to the
         other requirements of this Section 10, and shall not be required to
         effect such registration or to cause the same to be effected. Without
         limiting the generality of the foregoing, in any such event the
         Collateral Agent in its discretion (i) may, in accordance with
         applicable securities laws, proceed to make such private sale
         notwithstanding that a registration statement for the purpose of
         registering such Pledged Collateral or part thereof could be or shall
         have been filed under said Act (or similar statute), (ii) may approach
         and negotiate with a single possible purchaser to effect such sale,
         (iii) may restrict such sale to a purchaser who will represent and
         agree that such purchaser is purchasing for its own account, for
         investment and not with a view to the distribution or sale of such
         Pledged Collateral or part thereof, and (iv) may place all or any part
         of the Pledged Collateral with an investment banking firm for private
         placement, which firm shall be entitled to purchase all or any part of
         the Pledged Collateral for its own account. If any of the Pledged
         Collateral shall not be freely distributable to the public without
         registration under the Act (or similar statute), then the Collateral
         Agent shall not be required to effect such registration or cause the
         same to be effected but, in its discretion (subject only to applicable
         requirements of law), may require that any sale hereunder

                                       8
<PAGE>   9

         (including a sale at auction) be conducted subject to restrictions (i)
         as to the financial sophistication and ability of any Person permitted
         to bid or purchase at any such sale, (ii) as to the content of legends
         to be placed upon any certificates representing the Pledged Collateral
         sold in such sale, including restrictions on future transfer thereof,
         (iii) as to the representations required to be made by each Person
         bidding or purchasing at such sale relating to that Person's access to
         financial information about Pledgor or any of its subsidiaries so sold
         and such Person's intentions as to the holding of the Pledged
         Collateral so sold for investment, for its own account, and not with a
         view to the distribution thereof, and (iv) as to such other matters as
         the Collateral Agent may, in its discretion, deem necessary or
         appropriate in order that such sale (notwithstanding any failure so to
         register) may be effected in compliance with the U.C.C. and other laws
         affecting the enforcement of creditors' rights and the Act and all
         applicable state securities laws.

                  (d)      Pledgor acknowledges that, notwithstanding the legal
         availability of a private sale or a sale subject to the restrictions
         described above in paragraph (c), the Collateral Agent may, in its
         discretion, elect to register any or all the Pledged Collateral under
         the Act (or any applicable state securities law). Pledgor, however,
         recognizes that the Collateral Agent may be unable to effect a public
         sale of any or all the Pledged Collateral and may be compelled to
         resort to one or more private sales thereof. Pledgor also acknowledges
         that any such private sale may result in prices and other terms less
         favorable to the seller than if such sale were a public sale and,
         notwithstanding such circumstances, agrees that any such private sale
         shall be deemed to have been made in a commercially reasonable manner.
         The Collateral Agent shall be under no obligation to delay a sale of
         any of the Pledged Collateral for the period of time necessary to
         permit the registrant to register such securities for public sale under
         the Act, or under applicable state securities laws, even if Pledgor
         would agree to do so.

                  (e)      Any cash held by the Collateral Agent as Pledged
         Collateral and all cash proceeds received by the Collateral Agent in
         respect of any sale of, collection from, or other realization upon all
         or any part of the Pledged Collateral may, in the discretion of the
         Collateral Agent, be held by the Collateral Agent as collateral for,
         and/or then or at any time thereafter be applied (after payment of any
         amounts payable to the Collateral Agent pursuant to Section 13 hereof)
         in whole or in part by the Collateral Agent for the benefit of the
         Secured Parties in their individual and various agency capacities and
         any other holder of any Secured Obligations against, all or any part of
         the Secured Obligations in accordance with the terms hereof. Any
         surplus of such cash or cash proceeds held by the Collateral Agent and
         remaining after payment in full of all the Secured Obligations shall be
         paid over to Pledgor or to whomsoever may be lawfully entitled to
         receive such surplus.

                  (f)      Pledgor agrees that following the occurrence and
         during the continuation of an Event of Default it will not at any time
         plead, claim or take the benefit of any appraisal, valuation, stay,
         extension, moratorium or redemption law now or hereafter in force in
         order to prevent or delay the enforcement of this Pledge Agreement, or
         the absolute sale of the whole or any part of the Pledged Collateral or
         the possession

                                       9
<PAGE>   10

         thereof by any purchaser at any sale hereunder, and Pledgor waives the
         benefit of all such laws to the extent it lawfully may do so. Pledgor
         agrees that it will not interfere with any right, power and remedy of
         the Collateral Agent provided for in this Pledge Agreement or now or
         hereafter existing at law or in equity or by statute or otherwise, or
         the exercise or beginning of the exercise by the Collateral Agent of
         any one or more of such rights, powers, or remedies. No failure or
         delay on the part of the Collateral Agent to exercise any such right,
         power or remedy and no notice or demand which may be given to or made
         upon Pledgor by the Collateral Agent with respect to any such remedies
         shall operate as a waiver thereof, or limit or impair the Collateral
         Agent's right to take any action or to exercise any power or remedy
         hereunder, without notice or demand, or prejudice its rights as against
         Pledgor in any respect. Pledgor waives all claims, damages and demands
         against the Collateral Agent arising out of the repossession, retention
         or sale of the Pledged Collateral.

         11.      Power Of Attorney. Pledgor appoints the Collateral Agent, or
any other Person whom the Collateral Agent may designate, as Pledgor's true and
lawful attorney-in-fact, with power to endorse Pledgor's name on any checks,
notes, acceptances, money orders, drafts or other form of payment or security
representing a portion of the Pledged Collateral that may come into the
Collateral Agent's possession and to do all things necessary to carry out the
terms of this Pledge Agreement. Pledgor ratifies and approves all such acts of
such attorney-in-fact. Neither the Collateral Agent nor any other Person
designated by the Collateral Agent as attorney-in-fact hereunder will be liable
for any acts or omissions, nor for any errors of judgment or mistakes of fact or
law. This power, coupled with an interest, is irrevocable until all Commitments
have been terminated and all Secured Obligations, other than Secured Obligations
in respect of indemnification that are not yet due and payable and other similar
contingent obligations which are no yet due and payable and survive the
termination of this Agreement, have been paid in full.

         12.      Collateral Agent's Right To Take Action. In the event that
Pledgor fails or refuses promptly to perform any of its obligations set forth
herein, including, without limitation, its obligation pursuant to Section 6(e)
hereof to pay taxes, assessments and other charges levied, assessed or imposed
on the Pledged Collateral, or otherwise fails or refuses to pay any amount
necessary for the preservation and protection of the Pledged Collateral, the
Collateral Agent shall have the right, without obligation, to do all things it
deems necessary or advisable to discharge the same (including, without
limitation, to pay any such taxes, assessments, charges or other sums, together
with interest and penalties thereon) and any sums paid by the Collateral Agent,
or the cost thereof, including, without limitation, attorneys' fees, shall be
reimbursed by Pledgor, to the Collateral Agent on demand and, until so
reimbursed, shall bear interest at the highest rate chargeable under Section
4.03(c) of the Credit Agreement.

         13.      Expenses.

                  (a)      The Pledgor shall pay (i) all reasonable,
         out-of-pocket costs and expenses of the Collateral Agent, its
         Affiliates and the lenders, including the reasonable fees, charges and
         disbursements of counsel for the Collateral Agent and its Affiliates
         (but not the other Secured Parties), in connection with the preparation
         and administration of

                                       10
<PAGE>   11

         this Pledge Agreement and any amendments, modifications or waivers
         thereof (whether or not the transactions contemplated in this Pledge
         Agreement or any other Credit Document shall be consummated), and (ii)
         all out-of-pocket costs and expenses (including, without limitation,
         the reasonable fees, charges and disbursements of outside counsel and
         the allocated cost of inside counsel) incurred by the Collateral Agent
         or any Secured Party in connection with the enforcement or protection
         of its rights in connection with this Pledge Agreement, including its
         rights under this Section, including all such out-of-pocket expenses
         incurred during any workout, restructuring or negotiations.

                  (b)      The Pledgor shall pay, and hold the Collateral Agent
         and each of the Secured Parties harmless from and against, any and all
         present and future stamp, documentary, and other similar taxes with
         respect to this Pledge Agreement and any other Credit Documents, any
         collateral described therein, or any payments due thereunder, and save
         the Collateral Agent and each Secured Party harmless from and against
         any and all liabilities with respect to or resulting from any delay or
         omission to pay such taxes.

                  (c)      To the extent that the Pledgor fails to pay any
         amount required to be paid to the Collateral Agent under clauses (a) or
         (b) hereof, each Secured Party severally agrees to pay to the
         Collateral Agent such Secured Party's pro rata share (determined as of
         the time that the unreimbursed expense or indemnity payment is sought)
         of such unpaid amount; provided, that the unreimbursed expense or
         indemnified payment, claim, damage, liability or related expense, as
         the case may be, was incurred by or asserted against the Collateral
         Agent in its capacity as such.

                  (d)      All amounts due under this Section shall be payable
         promptly after written demand therefor.

         14.      Indemnity. Pledgor will indemnify and hold harmless each of
the Secured Parties and each of their respective employees, representatives,
officers and directors from and against any and all claims, liabilities,
investigations, losses, damages, actions, and demands by any party against the
Secured Parties or any of them resulting from any breach or alleged breach by
Pledgor of any representation or warranty made hereunder, or otherwise arising
out of this Pledge Agreement, unless, with respect to any of the above, any of
the Secured Parties are finally judicially determined to have acted or failed to
act with gross negligence or wilful misconduct. This Section 14 shall survive
termination of this Pledge Agreement.

         15.      Limitation On the Collateral Agent's Duty In Respect Of
Pledged Collateral. The Collateral Agent shall use reasonable care with respect
to the Pledged Collateral in its possession or under its control. The powers
conferred on the Collateral Agent hereunder are solely to protect its interest
in the Pledged Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Pledged Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Collateral Agent shall have no duty as to any Pledged Collateral or any income
thereon, as to ascertaining or taking action with respect to calls, conversions,
exchanges, maturities, tenders or other matters relative to any Pledged
Collateral, whether or not the Collateral Agent, or any other Secured Party has
or is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve

                                       11
<PAGE>   12

rights against any parties or any other rights pertaining to any Pledged
Collateral. The Collateral Agent shall be deemed to have exercised reasonable
care in the custody and preservation of any Pledged Collateral in its possession
if such Pledged Collateral is accorded treatment substantially equal to that
which the Collateral Agent accords its own property.

         16.      Security Interest Absolute. All rights of the Collateral Agent
and security interests hereunder, and all obligations of Pledgor hereunder,
shall be absolute and unconditional irrespective of:

                  (a)      any lack of validity or enforceability of the Credit
         Documents or the SunTrust Note;

                  (b)      any change in the time, manner or place of payment
         of, or in any other term of, all or any of the Secured Obligations, or
         any other amendment or waiver of or any consent to any departure from
         the Credit Documents including, without limitation, any increase in the
         Secured Obligations resulting from the extension of additional credit
         to Pledgor or any of its Subsidiaries or otherwise;

                  (c)      any taking, exchange, release or non-perfection of
         any other collateral, or any taking, release or amendment or waiver of
         or consent to departure from any guaranty, for all or any of the
         Secured Obligations;

                  (d)      any manner of application of collateral, or proceeds
         thereof, to all or any of the Secured Obligations, or any manner of
         sale or other disposition of any collateral for all or any part of the
         Secured Obligations or any other assets of Pledgor or any of its
         Subsidiaries;

                  (e)      any change, restructuring or termination of the
         corporate structure or existence of Pledgor or any of its Subsidiaries;
         or

                  (f)      any other circumstance which might otherwise
         constitute a defense available to, or a discharge of, Pledgor or a
         third party pledgor.

         17.      Reinstatement. This Pledge Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against Pledgor for liquidation or reorganization, should Pledgor become
insolvent or make an assignment for the benefit of any creditor or creditors or
should a receiver or trustee be appointed for all or any significant part of
Pledgor's assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a "voidable preference," "fraudulent conveyance,"
"fraudulent transfer" or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Secured Obligations shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

                                       12
<PAGE>   13

         18.      Successors And Assigns. This Pledge Agreement and all
obligations of Pledgor hereunder shall be binding upon the successors and
assigns of Pledgor (including any debtor-in-possession on behalf of Pledgor) and
shall, together with the rights and remedies of the Collateral Agent, for the
benefit of the Secured Parties, hereunder, inure to the benefit of the
Collateral Agent, Secured Parties, all future holders of any instrument
evidencing any of the Secured Obligations and their respective successors and
assigns. No sales of participations, other sales, assignments, transfers or
other dispositions of any agreement governing or instrument evidencing the
Secured Obligations or any portion thereof or interest therein shall in any
manner affect the Lien granted to the Collateral Agent, for the benefit of the
Secured Parties, hereunder. Pledgor may not assign, sell, hypothecate or
otherwise transfer any interest in or obligation under this Pledge Agreement.

         19.      Waivers. The rights and remedies of the Secured Parties under
this Pledge Agreement shall be cumulative and not exclusive of any rights or
remedies which they would otherwise have. No failure or delay by any Secured
Party in exercising any right shall operate as a waiver of such right. The
Secured Parties expressly reserve the right to require strict compliance with
the terms of this Pledge Agreement. Any waiver or indulgence granted by any
Secured Party shall not constitute a modification of this Pledge Agreement,
except to the extent expressly provided in such waiver or indulgence, or
constitute a course of dealing by any Secured Party at variance with the terms
of this Pledge Agreement such as to require further notice by the them or their
intent to require strict adherence to the terms of this Pledge Agreement in the
future. Any such actions shall not in any way affect the ability of the Secured
Parties, in their discretion, to exercise any rights available to them under
this Pledge Agreement.

         20.      Remedies. The rights and remedies of the Secured Parties under
this Pledge Agreement shall be cumulative and nonexclusive of any other rights
and remedies which any Secured Party may have under any other agreement,
including the Credit Documents, or by operation of law or otherwise. Recourse to
the Pledged Collateral shall not be required.

         21.      Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof in that jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.

         22.      Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other party any communication with respect to this Pledge
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and given in the manner, and deemed
received in the manner provided for in of the Credit Agreement or the SunTrust
Note, as the case may be.

         23.      Limitation By Law. All rights, remedies and powers provided in
this Pledge Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Pledge Agreement are intended to be subject to all applicable mandatory
provisions of law that may be controlling and to be limited to

                                       13
<PAGE>   14

the extent necessary so that they shall not render this Pledge Agreement
invalid, unenforceable, in whole or in part, or not entitled to be recorded,
registered or filed under the provisions of any applicable law.

         24.      Headings. Headings used in this Pledge Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.

         25.      Counterparts. This Pledge Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
such separate counterparts shall together constitute but one and the same
instrument.

         26.      Time Of The Essence. TIME IS OF THE ESSENCE OF THIS PLEDGE
AGREEMENT.

         27.      Governing Law; Submission to Jurisdiction.

                  (i)      THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
         PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
         BY THE LAW (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
         THEREOF) OF THE STATE OF GEORGIA.

                  (ii)     ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
         AGREEMENT MAY BE BROUGHT IN ANY COURT OF THE STATE OF GEORGIA OR IN ANY
         COURT OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF
         GEORGIA, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR
         HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
         UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE PARTIES
         HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE PLEDGOR HEREBY
         IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
         OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
         CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
         SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.

                  (iii)    PLEDGOR IRREVOCABLY CONSENTS TO THE SERVICE OF
         PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
         PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED
         MAIL, POSTAGE PREPAID, TO PLEDGOR AT ITS SAID ADDRESS, SUCH SERVICE TO
         BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING.

         28.      No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Pledge Agreement. In the event
an ambiguity or question of intent or interpretation arises, this Pledge
Agreement shall be construed as if drafted jointly by the parties

                                       14
<PAGE>   15

hereto and no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any provisions of this Pledge
Agreement.

         29.      Benefit of Secured Parties. All Liens granted or contemplated
hereby shall be for the benefit of the Secured Parties and all proceeds or
payments realized from Pledged Collateral in accordance herewith shall be
applied to the Secured Obligations in accordance with the terms hereof.

         30.      Termination of this Pledge Agreement. No termination or
cancellation (regardless of cause or procedure) of the Credit Agreement shall in
any way affect or impair the powers, obligations, duties, rights and liabilities
of the parties hereto in any way with respect to any transaction or event
occurring prior to such termination or cancellation. This Pledge Agreement shall
not terminate until all Commitments have been terminated and all Secured
Obligations, other than Secured Obligations in respect of indemnification that
are not yet due and payable and other similar contingent obligations which are
no yet due and payable and survive the termination of this Agreement, have been
paid in full.

                                       15
<PAGE>   16

         IN WITNESS WHEREOF, Pledgor has caused this Pledge Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.

                                                THE DIXIE GROUP, INC.

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

         Acknowledged and Agreed to :

         SUNTRUST BANK, as Collateral Agent

         By: /s/
             -------------------------
             Name:
             Title:

                     [SIGNATURE PLAGE TO PLEDGE AGREEMENT]

<PAGE>   17

                                  Schedule I to
                                Pledge Agreement

<TABLE>
<CAPTION>
                             Place of               Percentage of Shares                    Shares Issued
Name of Corporation          Incorporation          Issued and Outstanding    Par/No Par    And Outstanding
-------------------          -------------          ----------------------    ----------    ---------------

<S>                          <C>                    <C>                       <C>           <C>
Carriage Industries, Inc.    Georgia                   100%                     $0.02         2,015,932

Dixie Export, Inc.           U.S. Virgin Islands       100%                      no par             100

Amtex, Inc.                  Tennessee                 100%                      no par             113

C-Knit Apparel, Inc.         Tennessee                 100%                      no par           1,000

Dixie Funding, Inc.          Tennessee                 100%                      $0.01              100
</TABLE>

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